|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous: TAURUS MUNINEWYORK HOLDINGS INC, N-30D, 1994-06-08 |
Next: COLUMBIA HCA HEALTHCARE CORP/, 424B1, 1994-06-08 |
<PAGE> 1
CHAIRMAN'S LETTER
DEAR PLANHOLDER:
Both the bond and the stock market reversed direction during the six months
ended March 31, the first half of the 1994 fiscal year for Vanguard Variable
Insurance Fund. The two prior fiscal years had been characterized by declining
interest rates and gradually ascending stock prices. However, beginning in
October 1993, long-term bond yields began to rise from historically low levels,
pushing bond prices lower. Stock prices continued to move upwards, reaching a
new high on February 2, 1994, before beginning to fall. From their respective
peaks, long-term bond prices have declined approximately -16% and stock prices
have declined -8%.
* INVESTMENT PERFORMANCE
Our stock and bond Portfolios, of course, were not exempted from the impact of
falling financial asset prices. However, our Money Market Portfolio proved its
worth as a store of value and actually benefited as short-term interest rates
began to rise late in the period. The table below shows our usual comparison of
the total returns (capital change plus income)--for the six-month and one-year
time frames--of each Portfolio with the returns of the standard of comparison
we think is the most appropriate objective measure of the Portfolio's relative
performance.
<TABLE>
<CAPTION>
Total Returns
- - --------------------------------------------------------------------------------------------------------
Periods Ended March 31, 1994
------------------------------------
Six Months One Year
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C>
MONEY MARKET PORTFOLIO +1.5% +3.0%
AVERAGE MONEY MARKET FUND +1.3 +2.6
- - --------------------------------------------------------------------------------------------------------
HIGH-GRADE BOND PORTFOLIO -2.9% +2.3%
LEHMAN AGGREGATE BOND INDEX -2.8 +2.4
- - --------------------------------------------------------------------------------------------------------
BALANCED PORTFOLIO -2.1% +3.3%
COMPOSITE INDEX* -2.9 +1.8
- - --------------------------------------------------------------------------------------------------------
EQUITY INDEX PORTFOLIO -1.7% +1.2%
STANDARD & POOR'S 500 STOCK INDEX -1.6 +1.5
- - --------------------------------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO -7.7% -1.4%**
GROWTH PORTFOLIO +0.3 +2.9**
STANDARD & POOR'S 500 STOCK INDEX -1.6 +1.8**
- - ---------------------------------------------------------------------------------------------------------
</TABLE>
*65% S&P 500 Index, 35% Salomon High-Grade Bond Index.
**Since inception, June 7, 1993.
Each Portfolio's total return reflects the change in net asset value plus the
reinvestment of any distributions. As you know, returns actually earned by
holders of the Vanguard Variable Annuity Plan are somewhat lower as a result of
insurance-policy-related charges totaling 0.53% annually. The returns of the
Plan are shown in the table on page 3.
* FINANCIAL MARKETS REVIEW
The most important development in the financial markets during the past six
months was undoubtedly the abrupt about-face in the course of interest rates.
After more than three years of steadily falling yields, fostered by very low
inflation and accommodative Federal Reserve monetary policy, bond yields
reached low levels not seen since the early 1970s. But in October 1993, with
concerns about strengthening economic growth and increasing inflation,
long-term bond yields began to retrace their steps. From a low of 5.9% in
October, the yield on the U.S Treasury bond rose to 6.4% by December 31, 1993.
The rout in bonds worsened during the first quarter of 1994 with the
decision by the Federal Reserve Board, put into effect in early February and
repeated in late March, to increase short-term interest rates. The rise in
short-term rates was relatively mild, as Treasury bill yields increased from
3.0% in October to 3.6% at the end of March 1994. Nevertheless, bond market
participants took the Federal Reserve's actions as a sign that there were more
"tightening" steps ahead, and long-term interest rates rose sharply, to 7.1% on
March 31, 1994.
The increase in long-term interest rates had a severe impact on bond
prices as well as on the prices of "interest-rate- sensitive" stocks, in
particular utility stocks. The 30-year U.S. Treasury bond price declined by
more than -14% over the six months and provided a total return (including
income) of -10%. Our HIGH-GRADE BOND PORTFOLIO fared substantially better as a
result of its more moderate maturity, but nevertheless posted a negative total
return over the period. Worse hit, however, was our EQUITY INCOME PORTFOLIO
which, although fully
1
<PAGE> 2
invested in stocks, has a substantial commitment to utility stocks and other
interest-rate-sensitive issues.
In spite of the turmoil in the bond market, the stock market generally
continued to rise through late January and, in fact, hit new highs. The
increase in rates finally captured the market's attention when the change in
Federal Reserve policy was disclosed. Since then, the market has demonstrated
considerable downside volatility. For the full six months, the Standard &
Poor's 500 Index showed a modest decline of -1.6%. Our EQUITY INDEX PORTFOLIO,
as expected, provided almost identical results. Growth stocks, after lagging
"value" stocks for several years, performed a little better than the overall
market during the past six months; so, our GROWTH PORTFOLIO actually eked out a
modestly positive return.
Our BALANCED PORTFOLIO naturally was impacted by the declines in both
stocks and bonds, and its return fell predictably between the returns of the
two markets. The only "safe" place to be in the period was the money market.
Here, the returns were positive if modest in the extreme. Our MONEY MARKET
PORTFOLIO'S yield was a beneficiary of the rise in rates, increasing over the
period from 3.0% at the beginning to 3.3% at the end.
* THE OUTLOOK
In my Chairman's letter in our Annual Report six months ago I concluded that
"with interest rates at lows not seen since 1973, and stocks again at valuation
levels that are high by most historical standards, one cannot help but conclude
that long-term financial assets may be vulnerable to a correction." While these
words proved prescient, I make no claims to forecasting aptitude. It seems
likely that the financial markets will continue to be quite volatile as
participants adjust their expectations about stocks and bonds in light of news
on both the economic growth and inflation fronts. But that is "par for the
course," as they say, a natural component of securities market investing. The
tranquility of the 1991 to 1993 period was unusual, as asset prices fluctuated
in a narrow range and then mostly upwards.
For long-term investors, the best advice I can offer is to "batten down
the hatches," primarily the mental ones required to keep a steady course. In a
basically sound economy, with little prospect, we think, for runaway inflation,
stocks and bonds still appear to be the assets of choice for the long-term
investor willing to accept some interim price volatility. So, our prescription
remains: set an asset mix of stocks, bonds, and short-term reserves that makes
sense for your time horizon and risk tolerance, and "stay the course."
* VANGUARD OFFERS A NEW PORTFOLIO
We are pleased to announce the addition of a new Portfolio to Vanguard Variable
Insurance Fund, the International Portfolio. The Portfolio, which we expect to
commence operations in early June, will be managed by Schroder Capital
Management International, which has managed Vanguard's International Growth
Portfolio for more than ten years. The Portfolio is designed to be a near
"clone" of the International Growth Portfolio and will invest in a diversified
portfolio of international stocks, primarily in the more developed markets, but
with a smaller participation in some of the faster growing, less-developed
markets.
Sincerely,
/S/ JOHN C. BOGLE
- - -----------------
John C. Bogle
Chairman of the Board April 14, 1994
Note: Mutual fund data from Lipper Analytical Services, Inc.
2
<PAGE> 3
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
VANGUARD VARIABLE INSURANCE FUND VANGUARD VARIABLE ANNUITY PLAN
- - ----------------------------------------------------------------------------------------------------------------------------------
SEC SEC
Total Return 30-Day Total Return 30-Day
Six Months Ended Annualized Accumulated Six Months Ended Annualized
PORTFOLIO (INCEPTION) MARCH 31, 1994 YIELD* UNIT VALUE MARCH 31, 1994 YIELD*
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MONEY MARKET (5/2/91) + 1.5% 3.25% $ 1.10 + 1.3% 2.72%
HIGH-GRADE BOND (4/29/91) - 2.9 6.14 12.33 - 3.1 5.61
BALANCED (5/23/91) - 2.1 4.34 12.43 - 2.4 3.81
EQUITY INDEX (4/29/91) - 1.7 2.63 12.62 - 2.0 2.10
EQUITY INCOME (6/7/93) - 7.7 4.83 9.82 - 7.9 4.30
GROWTH (6/7/93) + 0.3 1.45 10.23 - 0.1 0.92
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Yield for Money Market Portfolio is a 7-day yield.
3
<PAGE> 4
REPORT FROM VANGUARD FIXED INCOME GROUP
* MONEY MARKET PORTFOLIO
During the six-month period ended March 31, 1994, short-term interest rates
rose as the Federal Reserve (the "Fed") tightened monetary policy. In doing so,
the Fed raised the Federal Funds rate (the rate at which banks borrow and lend
amongst themselves for short periods) in order to increase the cost of
borrowing for businesses and consumers, and control the growth rate of the
economy. The Fed acted in response to evidence of the gathering strength of
the U.S. economy, particularly in the housing and auto sectors. Typically, an
economic resurgence will generate inflationary pressures as progressively
tighter plant and equipment capacity is put into use. However, once inflation
starts, it is not easily controlled by the Fed. This is due to the significant
and varying time lags with which monetary policy changes affect the economy.
Thus, while current inflation statistics are very well behaved, the Fed has
raised short-term rates moderately in hopes of controlling inflation before it
becomes a threat that requires more drastic measures later.
In response to the Fed's actions, interest rates on money market
securities increased. Yields on 3-month domestic certificates of deposit rose
from 3.25% on September 30, 1993, to 3.80% on March 31, 1994, and 3-month
Treasury bill yields climbed from 3.00% to 3.55% over the same period.
As in the past, we continue to manage the Money Market Portfolio at a very
high level of credit quality. Throughout the period, our average credit
quality, based on long-term credit ratings, has been "AA," and all holdings
have the highest short-term credit ratings. We have reduced the Portfolio's
average maturity from 60 days to approximately 40 days so holdings will roll
over more frequently, and the proceeds will be more quickly reinvested at
higher market rates.
* HIGH-GRADE BOND PORTFOLIO
Over the last six months the bond market has experienced a significant backup
in rates. For the six-month period, short-term yields increased between 0.5%
and 0.8%, while 2-year, 5-year, 10-year, and 30-year Treasury rates rose 1.3%,
1.5%, 1.3%, and 1.1%, respectively. This rate increase has been in response to:
(1) the greater credit demands associated with a stronger economy, (2) a
restrictive Federal Reserve monetary policy, and (3) increased inflation fears.
The performance of the various sectors of the Lehman Aggregate Bond Index
for the six months ended March 31, 1994, are as follows:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------
Total Return
Six Months Ended
March 31, 1994
- - -----------------------------------------------------------------------------------------------
<S> <C>
LEHMAN AGGREGATE BOND INDEX -2.81%
- - -----------------------------------------------------------------------------------------------
GOVERNMENT SECTOR -3.34%
CORPORATE SECTOR -3.66
MORTGAGE-BACKED SECURITIES SECTOR -1.44
- - -----------------------------------------------------------------------------------------------
</TABLE>
The best-performing category for the six months was the mortgage sector, with a
return of -1.44%. The recent mortgage refinancing waves have kept the average
maturity of this sector relatively short, resulting in lower interest-rate risk
and therefore a lower price decline during the rising-rate environment.
The High-Grade Bond Portfolio is designed to closely replicate the
performance of the Lehman Aggregate Bond Index. For the past six months the
Portfolio achieved a return of -2.9%, nearly matching the Index. Of course, the
Portfolio must incur the "real world" of operating expenses and transaction
costs (neither of which affect the theoretical Index), so we are pleased with
the results.
As of March 31, 1994, the Portfolio was composed of 35% government bonds,
31% corporate bonds, 2% foreign bonds (dollar denominated), and 32%
mortgage-backed securities.
Respectfully,
John W. Hollyer, Assistant Vice President
Money Market Portfolio
Kenneth E. Volpert, Assistant Vice President
High-Grade Bond Portfolio
Vanguard Fixed Income Group April 12, 1994
4
<PAGE> 5
REPORT FROM WELLINGTON MANAGEMENT COMPANY
Since our last report to shareholders of Vanguard Variable Insurance Fund, net
assets of the Balanced Portfolio have grown to $226 million. The Portfolio has
maintained its balanced investment approach, allocating approximately 60% of
assets to equity investments and the remainder to long-term, investment-grade
fixed-income securities. Over the first half of the Fund's fiscal year, the
Portfolio declined in value by -2.1%. (See Chairman's letter for details.)
The Balanced Portfolio is broadly diversified. Within the Portfolio's
equity component, we continue to follow a strategy that emphasizes four major
sectors of the marketplace. In our view, business conditions are quite
favorable today, and we believe the economy is poised for continued growth. The
Portfolio is structured to take advantage of this fundamentally positive
environment.
The basic industry sector of the equity market, which composes
approximately 32% of the Portfolio's equities (excluding energy stocks), is our
primary area of emphasis. With continued growth both in the U.S. and abroad, we
expect rising capacity utilization rates and improved pricing for materials and
manufacturing companies, which should spur corporate profits.
A second area of concentration, representing 19% of equities, is the
finance sector, which is comprised largely of banks. Bank stocks have been
under pressure in recent months as bond prices have declined (given rising
interest rates). We view this as a "knee-jerk" response by the market and
continue to hold a positive outlook for the Portfolio's bank stocks, whose
earnings and dividend prospects remain bright, especially as loan growth picks
up with economic improvement. These stocks continue to sell at attractive
price-to-earnings ratios.
Energy, at 15% of equities, is the third primary focus of the Portfolio.
In this area, our stocks have outperformed the market despite overall weakness
in oil prices. We think oil prices are headed higher with an acceleration in
economic growth and expect earnings growth consistent with this improvement.
Finally, the health care sector now comprises approximately 12% of
Portfolio equities. Given the environment of health-care reform, we favor
well-positioned and innovative product producers that we project will grow at
above-average rates into the future. The uncertainty surrounding this industry
has allowed us to purchase these stocks at particularly favorable valuation
levels.
The Portfolio's bond component remains focused on long-term securities
with a high quality profile. Typically, at least 80% of the bond portion of the
Portfolio is invested in securities rated "A" or better. The current maturity
of the Portfolio's bond component, at 16.6 years, was shortened modestly over
the past year as we believed that the decline in interest rates was coming to
an end.
The table below provides a summary of the Portfolio's holdings on March 31,
1994.
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------
Percentage of
Net Assets
- - ---------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS
BASIC INDUSTRY 19%
FINANCE 11
APPLIED SCIENCE 10
ENERGY 9
CONSUMER 8
UTILITIES 3
- - ---------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 60%
- - ---------------------------------------------------------------------------------------------
FIXED-INCOME SECURITIES 39%
- - ---------------------------------------------------------------------------------------------
CASH 1%
- - ---------------------------------------------------------------------------------------------
TOTAL PORTFOLIO 100%
- - ---------------------------------------------------------------------------------------------
</TABLE>
We believe that the Portfolio is well-positioned to take advantage of an
improving economic climate. For well-managed enterprises, this improvement
means opportunities for growth and investment well into the future.
Respectfully,
Vincent Bajakian, Senior Vice President
Portfolio Manager
Wellington Management Company
April 15, 1994
5
<PAGE> 6
REPORT FROM VANGUARD CORE MANAGEMENT GROUP
* EQUITY INDEX PORTFOLIO
The stock market, as measured by the unmanaged Standard & Poor's 500, declined
- - -1.6% during Vanguard Variable Insurance Fund's semi- annual period ended March
31, 1994. From an historical perspective of the past 20 years, the current
six-month return, while not favorable, is certainly not bad. Of the 40
semi-annual periods in the last 20 years, eight provided worse returns than the
current period, and five of those were substantially worse, with total returns
ranging from -5.1% to -30.7%.
The market's relatively benign return actually conceals two different
environments. Long-term interest rates, which had been a driving force behind
the rising stock market for the past decade, bottomed at 5.9%, as measured by
the 30-year U.S. Treasury bond, in mid-October. Then rates drifted higher as
signs of a strengthening U.S. economy began to appear, and by the end of
January the long-term rate was 6.3%. During that period, the stock market
ignored the deleterious effects of the rise in rates, as recent corporate
earnings and the prospect for future corporate earnings improved significantly.
The S&P 500's total return of +5.8% provided a strong opening to our fiscal
year.
In February and March, with the economy continuing to strengthen--as
evidenced by the 7% increase in fourth-quarter gross domestic product,
continuing improvement in consumer confidence, retail sales, automobile sales,
factory orders, and most other economic indicators--the Federal Reserve made a
preemptive strike against inflation by tightening monetary policy in the form
of two 0.25% increases in short-term interest rates. The bond market
immediately reacted, and the resulting climb in interest rates finally impacted
the stock market. During the last two months of the period, the total return of
the S&P 500 Index was -6.9%.
With $175 million in total net assets, the Portfolio is now of sufficient
size to closely mirror the performance of the S&P 500 Index. During the
semi-annual period, the Portfolio provided a total return of -1.7%, or 0.13%
less than the Index. Excluding expenses for the six-month period, then, the
Portfolio virtually matched the performance of the Index. (See Chairman's
letter for details.)
Respectfully,
George U. Sauter
Vice President
Vanguard Core Management Group
April 14, 1994
6
<PAGE> 7
REPORT FROM NEWELL ASSOCIATES
Investment results for the Vanguard Variable Insurance Fund--Equity Income
Portfolio in the six-month period ended March 31, 1994, reversed course sharply
from the Fund's June 7, 1993, inception date through September 30, 1993. In our
initial first four months, the Portfolio outperformed the unmanaged Standard &
Poor's 500 Stock Index by 3.4%, but in the most recent six months it has given
up 6.1% versus the Index. The Portfolio also underperformed the average equity
income fund by 5.2% in the most recent six-month period.
* PANIC AMONGST THE DERIVATIVES MANAGERS
It appears to us that the process of this reversal began with the so-called
"asset allocators" in the third quarter of 1993. Prior to that time many such
advisers, who manage by rotating funds between sectors and classes of assets,
had been favorably disposed toward bonds and high-yield common stocks. In
October of last year, however, many of these asset allocators began to fear a
stronger economy and rising interest rates. They proceeded to "dump" (their
term) bonds and high-yield stocks and to buy assets which they thought would
fare better during the expected economic strength. This rotation contributed to
the rise in interest rates, which ultimately forced highly leveraged hedge fund
and derivatives managers (who had been betting on lower rather than higher
rates) to sell bonds at distressed prices in order to protect their
positions--and the panic was on.
* ROUND UP THE USUAL SUSPECTS
The selling of electric utility and telephone stocks is the usual knee-jerk
reaction to higher interest rates, and caused most of the underperformance of
the Portfolio in the last six months. While it is true that these groups are
subject to poor performance during periods of very high inflation, a return to
that kind of environment seems very unlikely under present world economic and
political conditions, which are much more conducive to low rather than high
inflation.
Moreover, even including the period of runaway inflation and interest
rates in the late 1970s, over the last 20 years the electric utility and
telephone stocks have outperformed the S&P 500 by a significant margin on a
total return basis. This out- performance is in spite of the fact that they
have usually been viewed as dull companies. Their hidden power lies in their
dividends. Large upfront dividends compound rapidly, making these stocks
formidable investments when they are given the opportunity to demonstrate their
power over longer spans of time.
* A TRADITIONAL LOW-RISK EQUITY INCOME PORTFOLIO
Many equity income funds have deviated from traditional equity income
investment practices in recent years. Our relative yield approach has not
deviated, and continues to be a low-risk, high-yield, all-common-stock
strategy. This means that we may not track the results of the equity income
group in the short run--as certainly happened with a vengeance during the past
six months. However, we are confident that the Strategy will continue to
produce competitive returns in the long run. Moreover, just as the
outperformance of the Portfolio in the middle of 1993 proved to be something of
a "bubble", we believe the underperformance of the last six months will not
last, and the Portfolio will go back to a more normal relationship to the
market.
Respectfully,
Roger D. Newell, Chairman
Newell Associates
April 13, 1994
7
<PAGE> 8
REPORT FROM LINCOLN CAPITAL MANAGEMENT COMPANY
Your Portfolio, which holds mostly larger-sized, relatively mature domestic
growth companies, generated, by a whisker, a positive return during the six
months ended March 31, 1994. This was a bit better than similarly-styled growth
index portfolios and the broad stock market.
Your interest in this growth option of the Vanguard Variable Annuity Plan
was reflected by a doubling of Portfolio assets, from $36 million to nearly $70
million. The number of issues held in the Portfolio rose from 54 to 56. The
proportions of the Portfolio invested in the consumer area rose by 7% and
communications/technology by 8%, both funded principally by a reduction in
short-term reserves. The largest ten commitments, noted below, represent 42% of
net assets. Gillette and Coca-Cola are new to this list.
<TABLE>
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
1. MCDONALD'S #1 FAST FOOD CHAIN
2. GENERAL ELECTRIC DIVERSIFIED MANUFACTURER
(#1 IN MOST SEGMENTS)
3. WAL-MART STORES #1 RETAILER
4. FANNIE MAE #1 MORTGAGE FINANCING COMPANY
5. PEPSICO #1 SNACK FOODS, #2 SOFT DRINKS
6. AUTOMATIC DATA #1 PAYROLL SERVICES
PROCESSING
7. GILLETTE #1 MANUFACTURER OF RAZORS
AND BLADES
8. FREDDIE MAC MORTGAGE INSURANCE AND
FINANCING AGENCY
9. AMERICAN INT'L GROUP #1 U.S. OVERSEAS INSURER
10. COCA-COLA #1 SOFT DRINK COMPANY
- - ----------------------------------------------------------------------------
</TABLE>
Lincoln's experienced research analysts forecast longer-term earnings
growth--averaging 13% annually--for these fine companies. This rate is perhaps
twice the expectation for corporate America in general. Despite this favorable
comparison, these ten stocks (and the estimated overall portfolio) sell at only
about 15 times earnings, a slight discount to the market. This valuation
anomaly provides a degree of optimism as we look ahead.
Sincerely,
J. Parker Hall III, President
Lincoln Capital Management Company
April 13, 1994
8
<PAGE> 9
STATEMENT OF NET ASSETS FINANCIAL STATEMENTS (unaudited)
March 31, 1994
<TABLE>
<CAPTION>
Face Market
Amount Value
MONEY MARKET PORTFOLIO (000) (000)+
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS (7.8%)
- - ----------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.
3.21%-3.45%, 6/8/94-8/23/94 $10,575 $10,469
U.S. Treasury Note
12.625%, 8/15/94 1,000 1,034
- - ----------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS (Cost $11,503) 11,503
- - ----------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (76.5%)
- - ----------------------------------------------------------------------------------------------------------
BANK HOLDING COMPANY (6.8%)
Bankers Trust New York Corp.
3.7%, 6/3/94 2,000 1,987
J.P. Morgan & Co., Inc.
3.46%-3.48%, 4/6/94-4/7/94 4,000 3,998
Nations Bank Corp.
3.13%, 4/27/94 1,000 998
Norwest Corp.
3.11%-3.73%, 4/25/94-5/31/94 3,000 2,989
--------
GROUP TOTAL 9,972
--------
- - ----------------------------------------------------------------------------------------------------------
FINANCE--AUTO (1.4%)
Ford Credit Receivables Funding
3.46%-3.72%, 4/18/94-5/19/94 2,000 1,993
--------
- - ----------------------------------------------------------------------------------------------------------
FINANCE--SECURITIES DEALERS (4.0%)
Bear Stearns Co.
3.73%, 5/16/94 1,000 995
Merrill Lynch & Co.
3.14%-3.61%, 4/6/94-4/8/94 2,950 2,948
Morgan Stanley Co.
3.59%-3.77%, 4/7/94-5/27/94 2,000 1,994
--------
GROUP TOTAL 5,937
--------
- - ----------------------------------------------------------------------------------------------------------
FINANCE--OTHER (16.7%)
AI Credit Corp.
3.67%, 5/9/94 1,000 996
Asset Securitization Cooperative Corp.
3.66%, 5/4/94 2,000 1,993
Associates Corp.
3.77%, 6/14/94 1,000 992
Banc One Diversified Services Corp.
3.64%-3.7%, 5/6/94-5/27/94 4,000 3,982
Barclays U.S. Funding Corp.
3.2%, 5/4/94 1,000 997
CIT Group Holdings Inc.
3.14%-3.69%, 4/21/94-5/17/94 3,000 2,989
Ciesco L.P.
3.12%-3.77%, 4/18/94-5/11/94 2,800 2,791
Corporate Asset Funding Corp.
3.67%, 5/5/94-5/13/94 3,000 2,988
General Electric Capital Corp.
3.19%-3.805%, 4/20/94-6/23/94 3,965 3,942
MCA Funding Corp.
3.11%-3.54%, 4/8/94-4/20/94 2,000 1,998
Matterhorn Capital Corp.
3.52%, 4/15/94 1,000 999
--------
GROUP TOTAL 24,667
--------
- - ----------------------------------------------------------------------------------------------------------
INDUSTRIAL (15.9%)
Ameritech
3.64%, 5/13/94 3,000 2,987
Cargill Inc.
3.51%, 4/14/94 2,000 1,997
Daimler-Benz N.A. Co.
3.12%-3.41%, 4/18/94-5/9/94 3,000 2,994
Emerson Electric Co.
3.513%, 4/11/94 2,000 1,998
Merck & Co.
3.4%, 5/23/94 1,000 995
Mobil Australia Finance
3.56%-3.7%, 4/21/94-5/31/94 4,376 4,362
Norfolk & Southern Corp.
3.72%, 5/2/94 1,000 997
Procter & Gamble
3.6%, 4/5/94 1,184 1,184
Raytheon Co.
3.52%, 4/26/94 2,000 1,995
Schering Corp.
3.67%, 5/4/94 2,000 1,993
Texaco
3.67%, 5/16/94 2,000 1,991
--------
GROUP TOTAL 23,493
--------
- - ----------------------------------------------------------------------------------------------------------
INSURANCE (7.9%)
AIG Funding Inc.
3.67%, 5/20/94 2,000 1,990
Met Life Funding Inc.
3.14%-3.67%, 4/18/94-5/26/94 4,750 4,734
Safeco Credit Corp.
3.8%, 6/13/94 1,000 992
USAA Capital Corp.
3.1%-3.67%, 4/8/94-5/19/94 4,000 3,986
--------
GROUP TOTAL 11,702
--------
- - ----------------------------------------------------------------------------------------------------------
UTILITY (3.6%)
BellSouth
3.67%, 5/4/94 1,400 1,395
Citizens Utility
3.68%, 5/18/94 1,000 995
GTE-California
3.52%-3.54%, 4/14/94 3,000 2,996
--------
GROUP TOTAL 5,386
--------
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
OTHER (1.3%)
Stanford Univ. Board of Trustees
3.17%, 5/20/94 $2,000 $ 1,991
--------
- - ----------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT (11.4%)
Province of Alberta
3.28%, 5/9/94 1,000 997
Province of British Columbia
3.28%-3.82%, 4/11/94-6/27/94 3,000 2,989
Canadian Wheat Board
3.25%-3.52%, 4/5/94-4/18/94 1,100 1,099
New South Wales Treasury Corp.
3.3%, 7/8/94 750 743
Province of Ontario
3.79%, 6/9/94 2,000 1,986
Kingdom of Sweden
3.4%, 5/6/94 1,000 997
Western Australia Treasury Corp.
3.44%-3.88%, 4/12/94-6/21/94 4,000 3,979
Wool International Corp.
3.12%-3.47%, 4/15/94-4/28/94 4,000 3,993
--------
GROUP TOTAL 16,783
--------
- - ----------------------------------------------------------------------------------------------------------
FOREIGN--OTHER (7.5%)
BASF Corp.
3.81%-3.83%, 6/21/94-6/27/94 3,000 2,974
Bayerische Landesbank
3.11%, 4/25/94 1,000 998
British Telecommunications Inc.
3.44%, 4/12/94 2,185 2,183
Ciba Geigy
3.88%, 6/7/94 2,000 1,986
Electricite de France
3.26%, 6/1/94 1,000 995
Rabobank Nederlanden
3.34%, 6/10/94 1,000 994
Siemens Corp.
3.753%, 5/27/94 1,000 994
--------
GROUP TOTAL 11,124
--------
- - ----------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(COST $113,048) 113,048
- - ----------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT (5.4%)
- - ----------------------------------------------------------------------------------------------------------
YANKEE CERTIFICATES OF DEPOSIT--U.S. BRANCHES
Commerzbank
3.26%, 4/25/94 1,000 1,000
Credit Suisse
3.2%, 4/12/94 1,000 1,000
Lloyds Bank
3.25%, 4/4/94 2,000 2,000
Rabobank Nederlanden
3.34%, 4/15/94 1,000 1,000
Societe Generale
3.8%, 6/8/94 1,000 1,000
Westdeutsche Landesbank
3.23%, 6/10/94 2,000 2,000
- - ----------------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(COST $8,000) 8,000
- - ----------------------------------------------------------------------------------------------------------
EURODOLLAR CERTIFICATES OF DEPOSIT (4.1%)
- - ----------------------------------------------------------------------------------------------------------
ABN AMRO
3.45%, 4/13/94 1,000 1,000
Dresdner Bank
3.21%-3.76%, 4/5/94-7/1/94 5,000 5,000
- - ----------------------------------------------------------------------------------------------------------
TOTAL EURODOLLAR CERTIFICATES
OF DEPOSIT (COST $6,000) 6,000
- - ----------------------------------------------------------------------------------------------------------
BANK NOTE (.7%)
- - ----------------------------------------------------------------------------------------------------------
State Street Bank & Trust
3.66%, 4/19/94
(Cost $1,000) 1,000 1,000
- - ----------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.7%)
- - ----------------------------------------------------------------------------------------------------------
Nations Bank
3.625%, 4/4/94
(Collateralized by U.S.
Treasury Note 4.125%,
5/31/95)
(Cost $2,500) 2,500 2,500
- - ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (96.2%)
(Cost $142,051) 142,051
- - ----------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (3.8%)
Other Assets--Note C 6,622
Liabilities (968)
--------
5,654
- - ----------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- - ----------------------------------------------------------------------------------------------------------
Applicable to 147,706,467 outstanding
shares of beneficial interest
(unlimited authorization--no
par value) $147,705
- - ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $1.00
==========================================================================================================
* See Note A to Financial Statements.
- - ----------------------------------------------------------------------------------------------------------
AT MARCH 31, 1994, NET ASSETS CONSISTED OF:
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Amount Per
(000) Share
-------- ------
<S> <C> <C>
Paid in Capital $147,706 $1.00
Undistributed Net
Investment Income -- --
Accumulated Net Realized Losses (1) --
Unrealized Appreciation of
Investments -- --
- - ----------------------------------------------------------------------------------------------------------
NET ASSETS $147,705 $1.00
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Face Market
Amount Value
HIGH-GRADE BOND PORTFOLIO (000) (000)
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (33.9%)
- - ----------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds
7.875%, 2/15/21 $2,065 $ 2,209
8.0%, 11/15/21 265 289
8.125%, 8/15/19-8/15/21 2,490 2,731
8.5%, 2/15/20 1,370 1,562
8.875%, 8/15/17-2/15/19 1,785 2,106
10.375%, 11/15/12 150 192
10.75%, 8/15/05 400 519
11.625%, 11/15/02 1,000 1,316
14.0%, 11/15/11 2,390 3,768
U.S. Treasury Notes
6.25%, 2/15/03 185 178
6.375%, 1/15/00 200 200
7.0%, 4/15/99 2,385 2,458
7.5%, 1/31/96-5/15/02 1,765 1,845
7.75%, 2/15/01 400 425
7.875%, 2/15/96-4/15/98 2,195 2,330
8.0%, 8/15/99-5/15/01 440 474
8.25%, 7/15/98 1,685 1,818
8.5%, 2/15/00-11/15/00 780 860
8.75%, 8/15/00 125 140
8.875%, 7/15/95-2/15/99 2,325 2,491
9.0%, 5/15/98 475 525
9.25%, 1/15/96 200 214
9.5%, 10/15/94 125 128
- - ----------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $29,504) 28,778
- - ----------------------------------------------------------------------------------------------------------
MORTGAGE SECURITIES (31.2%)
- - ----------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT (30.0%)
Federal Home Loan Mortgage Corp.
5.5%, 12/1/98 97 96
6.0%, 7/1/98-1/1/24 864 820
6.5%, 4/1/98-3/1/24 1,710 1,633
7.0%, 1/1/98-1/1/24 1,606 1,573
7.5%, 4/1/98-9/1/23 1,289 1,290
8.0%, 6/1/96-6/1/23 1,135 1,153
8.5%, 3/1/96-8/1/23 575 592
9.0%, 11/1/05-6/1/22 983 1,027
9.5%, 12/1/05 102 107
10.0%, 3/1/17-11/1/19 242 260
Federal National Mortgage Assn.
5.5%, 3/1/01 100 95
6.0%, 8/1/00-1/1/09 479 455
6.5%, 3/1/00-2/1/24 1,462 1,390
7.0%, 5/1/00-1/1/24 2,149 2,091
7.5%, 1/1/07-9/1/23 1,469 1,462
8.0%, 2/1/00-7/1/23 1,340 1,360
8.5%, 11/1/06-3/1/23 702 724
9.0%, 3/1/20-7/1/22 471 494
9.5%, 6/1/01-9/1/19 421 446
10.0%, 8/1/20-8/1/21 334 362
10.5%, 8/1/20 90 99
Government National Mortgage Assn.
6.0%, 3/15/09-1/15/24 204 187
6.5%, 10/15/08-3/15/24 455 424
7.0%, 7/1/23-3/15/24 1,097 1,047
7.5%, 5/15/08-12/15/23 1,231 1,214
8.0%, 3/15/08-5/15/23 1,322 1,337
8.5%, 12/15/16-2/15/22 670 692
9.0%, 4/15/16-8/15/21 1,675 1,754
9.5%, 4/15/17-3/15/20 572 605
10.0%, 5/15/20-8/15/20 280 303
10.5%, 5/15/19 87 97
11.0%, 10/15/15 69 78
11.5%, 2/15/13 145 165
--------
GROUP TOTAL 25,432
--------
- - ----------------------------------------------------------------------------------------------------------
PRIVATE (1.2%)
American Housing Trust
7.6%, 10/25/05 200 198
Resolution Trust Corp.
7.75%-10.4%, 12/25/18-8/25/21 763 777
--------
GROUP TOTAL 975
--------
- - ----------------------------------------------------------------------------------------------------------
TOTAL MORTGAGE SECURITIES
(Cost $27,170) 26,407
- - ----------------------------------------------------------------------------------------------------------
CORPORATE BONDS (30.8%)
- - ----------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (4.9%)
Chase Manhattan Credit Card Trust
8.75%, 8/15/99 300 318
7.4%, 5/15/00 300 310
First Chicago Master Trust
6.25%, 8/15/97 450 451
8.4%, 6/15/98 450 474
MBNA Credit Card Trust
6.2%, 8/31/97 450 450
7.75%, 10/15/98 300 312
Sears, Roebuck & Co.
Credit Card Account Trust
7.75%, 9/15/98 300 312
5.9%, 11/15/98 300 302
Standard Trust Credit Card Trust
9.375%, 8/10/96 300 314
8.5%, 8/7/97 450 475
8.0%, 10/7/97 450 469
--------
GROUP TOTAL 4,187
--------
- - ----------------------------------------------------------------------------------------------------------
FINANCE (12.4%)
American General Finance
9.25%, 7/1/94 300 304
Associates Corp.
8.75%, 9/4/96 600 635
</TABLE>
11
<PAGE> 12
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
AVCO Financial Services
8.85%, 2/1/96 $ 420 $ 443
7.5%, 11/15/96 200 207
Bank of America
10.0%, 2/1/03 200 231
Bankers Trust New York Corp.
8.25%, 7/2/96 400 420
Bear Stearns
6.625%, 1/15/04 200 187
CIT Group Holdings
8.6%, 12/1/94 300 307
5.65%, 11/15/95 450 452
Chase Manhattan Corp.
8.5%, 3/1/96 500 525
Chemical Banking Corp.
7.375%, 6/15/97 300 310
6.625%, 1/15/98 250 251
Commercial Credit Corp.
6.75%, 1/15/97 450 457
Countrywide Funding Corp.
7.31%, 8/28/00 600 606
Dean Witter Discover & Co.
6.0%, 3/1/98 510 498
Ford Motor Credit Corp.
8.25%, 7/15/96 300 315
7.875%, 1/15/97 450 469
Household Finance Corp.
9.25%, 2/15/95 450 466
International Lease Finance
7.9%, 10/1/96 600 624
Mellon Finance
6.125%, 11/15/95 400 404
7.625%, 11/15/99 200 206
Merrill Lynch & Co., Inc.
7.25%, 5/15/97 400 410
Morgan Stanley Group Inc.
9.25%, 3/1/98 200 217
NationsBank Inc.
5.375%, 12/1/95 425 424
NCNB Corp.
9.5%, 6/1/04 150 171
Norwest Finance
7.1%, 11/15/96 450 462
Paine Webber Inc.
7.0%, 3/1/00 150 146
Transamerica Financial Corp.
8.375%, 2/15/98 325 345
--------
GROUP TOTAL 10,492
--------
- - ----------------------------------------------------------------------------------------------------------
INDUSTRIAL (7.9%)
American Brands Inc.
7.875%, 1/15/23 100 98
Anheuser-Busch Co., Inc.
8.625%, 12/1/16 150 159
7.375%, 7/1/23 75 71
Archer-Daniels-Midland Co.
8.875%, 4/15/11 60 67
8.125%, 6/1/12 125 131
Auburn Hills
12.375%, 5/1/20 115 164
British Petroleum
7.875%, 5/15/02 200 207
Boeing Co.
8.375%, 3/1/96 450 472
CSX Corp.
8.4%, 8/1/96 150 157
8.25%, 11/1/96 350 368
8.875%, 5/15/22 50 54
Conagra, Inc.
9.75%, 11/1/97 150 165
9.875%, 11/15/05 120 139
Conrail Corp.
9.75%, 6/15/20 100 120
Deere & Co.
8.5%, 1/9/22 100 106
Ford Capital Corp.
9.0%, 6/1/96 225 239
Ford Motor Corp.
9.95%, 2/15/32 65 80
Grand Metropolitan Corp.
9.0%, 8/15/11 150 167
ITT Corp.
7.25%, 11/15/96 450 463
International Paper Co.
7.625%, 1/15/07 100 98
May Department Stores Co.
9.75%, 2/15/21 100 116
McDonald's Corp.
6.75%, 2/15/03 230 222
Mobil Corp.
7.625%, 2/23/33 200 193
PepsiCo Inc.
5.0%, 2/24/97 500 487
6.125%, 1/15/98 200 198
Philip Morris Co., Inc.
8.25%, 10/15/03 150 156
Phillips Petroleum
7.92%, 4/15/23 225 216
Texaco Capital Corp.
8.875%, 9/1/21 150 167
Union Carbide
7.875%, 4/1/23 125 118
Union Oil of California
9.25%, 2/1/03 80 88
9.125%, 2/15/06 115 127
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Union Pacific
8.625%, 5/15/22 $ 175 $ 187
Waste Management, Inc.
7.875%, 8/15/96 275 286
Whirlpool Corp.
9.0%, 3/1/03 150 163
Xerox Corp.
9.625%, 10/15/00 400 422
--------
GROUP TOTAL 6,671
--------
- - ----------------------------------------------------------------------------------------------------------
UTILITY (5.6%)
Alabama Power Co.
8.75%, 12/1/21 129 132
Arizona Public Service
8.0%, 2/1/25 150 146
Carolina Power & Light
6.875%, 8/15/23 175 154
Enron Corp.
9.65%, 5/15/01 450 510
Georgia Power Co.
9.23%, 12/1/19 125 124
Houston Lighting & Power Co.
8.75%, 3/1/22 100 106
MCI Communications
7.5%, 8/20/04 250 252
Michigan Bell Telephone
7.5%, 2/15/23 175 169
New York Telephone
7.0%, 8/15/25 175 154
Niagra Mohawk Power Co.
9.5%, 3/1/21 175 185
7.875%, 4/1/24 75 69
Pacific Bell Corp.
7.25%, 7/1/02 225 226
Southern Bell Telephone Co.
7.625%, 3/15/13 450 439
Southwestern Bell Corp.
7.625%, 10/1/13 125 124
7.625%, 3/1/23 300 286
Tele-Communication Inc.
8.25%, 1/15/03 200 199
Texas Utilities Corp.
7.125%, 6/1/97 600 613
7.875%, 3/1/23 110 106
U.S. West Financial Corp.
8.85%, 9/20/99 500 543
Virginia Electric Power
6.625%, 4/1/03 200 192
--------
GROUP TOTAL 4,729
--------
- - ----------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $26,722) 26,079
- - ----------------------------------------------------------------------------------------------------------
FOREIGN BONDS (2.4%)
- - ----------------------------------------------------------------------------------------------------------
CANADA (1.3%)
Province of Alberta
9.25%, 4/1/00 365 409
Province of British Columbia
7.0%, 1/15/03 170 168
Province of Manitoba
9.5%, 10/1/00 130 147
9.25%, 4/1/20 120 137
Province of Ontario
7.75%, 6/4/02 200 204
7.375%, 1/27/03 110 110
--------
GROUP TOTAL 1,175
--------
- - ----------------------------------------------------------------------------------------------------------
WORLD BANKS (.7%)
European Investment Bank
8.875%, 3/1/01 225 250
InterAmerican Development Bank
8.5%, 3/15/11 130 143
International Bank for Reconstruction
and Development
12.375%, 10/15/02 175 234
--------
GROUP TOTAL 627
--------
- - ----------------------------------------------------------------------------------------------------------
OTHER (.4%)
Korean Development Bank
7.9%, 2/1/02 100 101
New Zealand Government
9.875%, 1/15/11 175 210
--------
GROUP TOTAL 311
--------
- - ----------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS
(Cost $2,217) 2,113
- - ----------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (.8%)
- - ----------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled Cash
Account, 3.49%, 4/4/94
(Cost $644) 644 644
- - ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.1%)
(Cost $86,257) 84,021
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Market
Value
(000)*
- - ----------------------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (.9%)
- - ----------------------------------------------------------------------------------------------------------
Other Assets--Note C $ 2,926
Liabilities (2,198)
--------
728
- - ----------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- - ----------------------------------------------------------------------------------------------------------
Applicable to 8,319,397 outstanding
shares of beneficial interest
(unlimited authorization--no par value) $ 84,749
==========================================================================================================
NET ASSET VALUE PER SHARE $ 10.19
==========================================================================================================
* See Note A to Financial Statements.
- - ----------------------------------------------------------------------------------------------------------
AT MARCH 31, 1994, NET ASSETS CONSISTED OF:
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Amount Per
(000) Share
------- ------
<S> <C> <C>
Paid in Capital $87,131 $10.47
Undistributed Net Investment
Income -- --
Accumulated Net Realized Losses (146) (.01)
Unrealized Depreciation of
Investments--Note E (2,236) (.27)
- - ----------------------------------------------------------------------------------------------------------
NET ASSETS $84,749 $10.19
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Market
Value
BALANCED PORTFOLIO Shares (000)*
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (59.7%)
- - ----------------------------------------------------------------------------------------------------------
APPLIED SCIENCE & RESEARCH (9.9%)
- - ----------------------------------------------------------------------------------------------------------
DEFENSE ELECTRONICS & AEROSPACE (1.4%)
Northrop Corp. 62,500 $ 2,492
United Technologies Corp. 12,800 795
MEDICAL PRODUCTS & SERVICES (7.2%)
Abbott Laboratories, Inc. 73,600 1,960
American Home Products Corp.42,0002,436
Baxter International, Inc. 98,100 2,219
Bristol-Myers Squibb Co. 41,200 2,127
Johnson & Johnson 63,000 2,378
Pfizer, Inc. 75,500 4,077
Zeneca Group 34,399 1,101
OFFICE EQUIPMENT (1.3%)
Xerox Corp. 30,000 2,865
--------
GROUP TOTAL 22,450
--------
- - ----------------------------------------------------------------------------------------------------------
BASIC INDUSTRY (28.2%)
- - ----------------------------------------------------------------------------------------------------------
CHEMICALS (3.8%)
Cabot Corp. 12,300 664
Dow Chemical Co. 39,000 2,345
E.I. du Pont de Nemours & Co. 56,300 2,984
Imperial Chemical Industries PLC ADR 9,800 450
PPG Industries, Inc. 21,100 1,569
Witco Chemical Corp. 20,000 620
ENERGY (9.2%)
Amerada Hess Corp. 42,000 1,880
Amoco Corp. 11,400 606
Ashland Oil, Inc. 16,400 668
Atlantic Richfield Co. 14,000 1,330
Chevron Corp. 11,300 952
Exxon Corp. 46,300 2,911
Imperial Oil Ltd. 3,200 104
Kerr-McGee Corp. 22,200 921
Mobil Corp. 35,900 2,670
Norsk Hydro AS ADR 22,900 713
Pennzoil Co. 10,700 535
Phillips Petroleum Co. 34,800 927
Repsol SA ADR 45,400 1,339
Royal Dutch Petroleum Co. 14,700 1,461
Texaco, Inc. 28,000 1,764
USX-Marathon Group 25,200 416
Unocal Corp. 56,500 1,427
MANUFACTURING (5.6%)
Cooper Industries, Inc. 15,200 562
Emerson Electric Co. 12,400 736
General Electric Co. 39,800 3,965
Hanson PLC ADR 108,000 2,146
Honeywell, Inc. 75,800 2,549
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Minnesota Mining & Manufacturing Co. 14,200 $ 1,408
Thomas & Betts Corp. 20,200 1,252
METAL (2.9%)
Aluminum Co. of America 35,300 2,528
British Steel PLC ADR 64,400 1,312
J & L Specialty Steel Inc. 42,000 578
Reynolds Metals Co. 24,700 1,133
USX-U.S. Steel Group 27,900 1,036
PAPER (3.3%)
Georgia-Pacific Corp. 28,200 1,805
International Paper Co. 25,500 1,737
Temple-Inland Inc. 39,000 1,784
Westvaco Corp. 34,300 1,093
Willamette Industries, Inc. 22,400 1,058
TRANSPORTATION & OTHER SERVICES (3.4%)
British Airways PLC 32,250 1,935
Canadian Pacific Ltd. 140,500 2,210
Norfolk Southern Corp. 17,400 1,124
Union Pacific Corp. 27,800 1,578
WMX Technologies Inc. 37,000 879
--------
GROUP TOTAL 63,664
--------
- - ----------------------------------------------------------------------------------------------------------
CONSUMER & SERVICES (7.8%)
- - ----------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS & SERVICES (4.3%)
Brunswick Corp. 8,700 184
The Dun & Bradstreet Corp. 20,000 1,175
* Eastman Chemical 6,025 243
Eastman Kodak Co. 25,100 1,114
Ford Motor Co. 23,000 1,351
General Motors Corp. 51,000 2,754
Kimberly-Clark Corp. 48,600 2,570
Sara Lee Corp. 13,800 300
RETAIL (3.5%)
May Department Stores Co. 39,800 1,657
J.C. Penney Co., Inc. 32,000 1,692
Sears, Roebuck & Co. 33,600 1,445
SuperValu, Inc. 50,900 1,762
Woolworth Corp. 87,500 1,323
--------
GROUP TOTAL 17,570
--------
- - ----------------------------------------------------------------------------------------------------------
FINANCE (11.3%)
- - ----------------------------------------------------------------------------------------------------------
BANKS AND FINANCE (8.7%)
Banc One Corp. 115,247 3,803
The Bank of New York Co., Inc. 61,700 3,147
Citicorp 3,000 113
CoreStates Financial Corp. 74,702 1,942
First Bank System, Inc. 90,000 2,880
First Union Corp. 28,442 1,184
Keycorp 53,136 1,594
Norwest Corp. 117,600 2,808
Wachovia Corp. 66,800 2,121
INSURANCE & SERVICES (2.6%)
Allstate Corp. 87,000 2,088
Aon Corp. 8,300 398
CIGNA Corp. 3,000 178
Exel Ltd. 3,000 120
General Re Corp. 29,700 3,189
--------
GROUP TOTAL 25,565
--------
- - ----------------------------------------------------------------------------------------------------------
UTILITIES (2.5%)
- - ----------------------------------------------------------------------------------------------------------
ELECTRIC (.5%)
Entergy Corp. 13,000 413
Peco Energy Corp. 28,100 780
TELEPHONE (2.0%)
Bell Atlantic Corp. 11,000 569
NYNEX Corp. 19,600 676
Pacific Telesis Group 14,300 753
Southwestern Bell Corp. 32,200 1,300
U.S. West Corp. 27,100 1,104
--------
GROUP TOTAL 5,595
--------
- - ----------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $132,667) 134,844
- - ----------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS (2.3%)
- - ----------------------------------------------------------------------------------------------------------
Alumax Inc. $4.00 6,333 693
Bethlehem Steel Corp. $3.50 10,000 570
Cooper Industries Inc. $1.60 17,900 425
Cyprus Amax $4.00 13,666 926
Ford Motor Co. 8.40% 7,900 770
Norwest Corp. $3.50 13,500 959
Reynolds Metals $3.31 11,100 544
Sears Roebuck & Co. Inc.
PERCS $3.75 5,200 273
- - ----------------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $4,525) 5,160
- - ----------------------------------------------------------------------------------------------------------
CORPORATE BONDS (23.0%)
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Face Amount
(000)
-----------
<S> <C> <C>
ASSET-BACKED (.4%)
Sears Roebuck & Co.
8.6%, 5/15/98 $ 822 867
Banks & Finance (6.1%)
American Express Credit
5.375%, 7/16/01 1,000 919
Associates Corp.
5.25%, 9/1/98 1,000 943
Bank America Corp.
7.2%, 4/15/06 1,000 971
Chase Manhattan Corp.
7.75%, 11/1/99 1,000 1,029
Chemical Bank
8.625%, 5/1/02 1,000 1,069
</TABLE>
15
<PAGE> 16
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Countrywide MTN
5.14%, 11/1/23 $ 1,000 $ 991
Dean Witter Discover
5.0%, 4/1/96 1,000 985
Exxon Capital Corp.
6.0%, 7/1/05 1,000 911
Ford Motor Credit Co. MTN
6.15%, 12/15/95 1,000 1,011
General Motors Acceptance Corp. MTN
4.75%, 12/1/95 1,000 985
8.5%, 1/1/03 1,000 1,049
International Lease Finance
5.75%, 1/15/96 1,000 1,001
Salomon Inc. MTN
6.55%, 12/26/95 1,000 1,014
Union Electric Co.
7.375%, 12/15/04 1,000 1,001
INDUSTRIAL (11.6%)
British Petroleum
7.875%, 5/15/02 1,000 1,034
Baxter International
9.25%, 9/15/96 1,000 1,068
Boeing Co.
6.35%, 6/15/03 1,000 943
Coca-Cola Enterprise
8.5%, 2/1/22 1,000 1,062
Georgia Pacific
9.625%, 3/15/22 1,000 1,097
Harsco Corp.
8.75%, 5/15/96 1,000 1,055
International Business Machines Corp.
6.375%, 11/1/97 1,000 996
International Paper Co.
6.125%, 11/1/03 1,000 910
May Department Store
10.25%, 1/1/21 1,000 1,237
McDonnell Douglas
8.625%, 4/1/97 1,000 1,051
Occidental Petroleum
11.75%, 3/15/11 1,000 1,141
J.C. Penney Co.
5.375%, 11/15/98 1,000 951
Philip Morris
8.25%, 10/15/03 1,000 1,043
Procter & Gamble
9.36%, 1/1/21 1,000 1,163
Sears, Roebuck & Co.
9.375%, 11/1/11 1,000 1,132
TRW Inc.
9.375%, 4/15/21 1,000 1,148
Temple Inland
9.0%, 5/1/01 1,000 1,089
United Parcel Service
8.375%, 4/1/20 2,000 2,179
WMX Technologies
4.875%, 6/15/96 1,000 981
6.375%, 12/1/03 1,000 933
Wal-Mart Stores
7.25%, 6/1/13 1,000 965
Wells Fargo & Co.
6.125%, 11/1/03 1,000 901
RAILROAD (.4%)
Consolidated Rail
7.875%, 5/15/43 1,000 988
TELEPHONE (1.6%)
BellSouth Telecommunications
7.5%, 6/15/33 1,000 947
Illinois Bell Telephone Co.
6.625%, 2/1/25 1,000 870
New York Telephone
7.25%, 2/15/24 1,000 905
US West Communications
6.875%, 9/15/33 1,000 865
UTILITIES (2.9%)
Baltimore Gas & Electric
5.5%, 4/15/04 1,000 878
Carolina Power & Light
6.75%, 10/1/02 1,000 971
Duke Power Co.
7.0%, 7/1/33 1,000 896
Hydro-Quebec
8.4%, 1/15/22 1,000 1,022
Korea Electric Power
6.375%, 12/1/03 1,000 888
Pacific Gas & Electric
6.25%, 8/1/03 1,000 938
Southern California Gas
5.75%, 11/15/03 1,000 900
Virginia Electric & Power
8.0%, 3/1/04 1,000 1,030
Wisconsin Electric Power
7.7%, 12/15/27 1,000 962
- - ----------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $53,419) 51,885
- - ----------------------------------------------------------------------------------------------------------
FOREIGN BONDS (1.7%)
- - ----------------------------------------------------------------------------------------------------------
Italy Global Bond
6.75%, 9/27/23 1,000 871
Province of British Columbia
7.0%, 1/15/03 1,000 989
Province of Ontario
7.375%, 1/27/03 1,000 999
Toronto Dominion Bank
6.45%, 1/15/09 1,000 904
- - ----------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS (Cost $3,897) 3,763
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCY
OBLIGATIONS (11.7%)
- - ----------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.
8.0%, 5/1/16-2/1/23 $ 1,823 $ 1,844
Government National Mortgage Assn.
6.5%, 9/15/23 1,000 921
9.5%, 12/15/19 281 297
U.S. Treasury Bonds
7.125%, 2/15/23 11,000 10,869
6.25%, 8/15/23 5,000 4,476
U.S. Treasury Notes
4.25%, 7/31/95 7,000 6,948
7.5%, 11/15/01 1,000 1,048
- - ----------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS (Cost $27,829) 26,403
- - ----------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (2.1%)
- - ----------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account, 3.49%, 4/4/94
(Cost $4,833) 4,833 4,833
- - ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.5%)
(Cost $227,170) 226,888
- - ----------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-.5%)
- - ----------------------------------------------------------------------------------------------------------
Other Assets--Notes C and F 18,204
Liabilities--Note F (19,307)
--------
(1,103)
- - ----------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- - ----------------------------------------------------------------------------------------------------------
Applicable to 20,677,254 outstanding
shares of beneficial interest
(unlimited authorization--no par value) $225,785
- - ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $10.92
==========================================================================================================
+ See Note A to Financial Statements.
* Non-Income Producing Security.
MTN--Medium-Term Note.
</TABLE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------
AT MARCH 31, 1994, NET ASSETS CONSISTED OF:
- - ----------------------------------------------------------------------------------------------------------
Amount Per
(000) Share
-------- ------
<S> <C> <C>
Paid in Capital $224,792 $10.87
Undistributed Net Investment
Income 103 --
Accumulated Net Realized Gains 1,172 .06
Unrealized Depreciation of
Investments--Note E (282) (.01)
- - ----------------------------------------------------------------------------------------------------------
NET ASSETS $225,785 $10.92
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Market
Value
EQUITY INDEX PORTFOLIO Shares (000)+
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (100.0%)(1)
- - ----------------------------------------------------------------------------------------------------------
General Electric Co. 47,556 $4,738
Exxon Corp. 69,194 4,351
American Telephone &
Telegraph Co. 75,387 3,863
Wal-Mart Stores, Inc. 128,134 3,315
Royal Dutch Petroleum Co. 29,873 2,969
The Coca-Cola Co. 72,374 2,940
Philip Morris Cos., Inc. 48,852 2,479
General Motors Corp. 39,601 2,138
Merck & Co., Inc. 71,425 2,125
Procter & Gamble Co. 38,086 2,042
E.I. du Pont de Nemours & Co. 37,742 2,000
International Business
Machines Corp. 32,243 1,757
Mobil Corp. 22,304 1,659
GTE Corp. 52,739 1,635
Ford Motor Co. 27,734 1,629
PepsiCo, Inc. 44,476 1,629
BellSouth Corp. 27,665 1,598
Motorola, Inc. 15,528 1,572
Intel Corp. 23,100 1,553
Chevron Corp. 18,107 1,526
American International Group, Inc. 17,687 1,488
Amoco Corp. 27,710 1,472
Bristol-Myers Squibb Co. 28,252 1,458
Southwestern Bell Corp. 33,400 1,349
Johnson & Johnson 35,734 1,349
The Walt Disney Co. 29,940 1,254
Pacific Telesis Group 23,498 1,237
Bell Atlantic Corp. 23,886 1,236
Abbott Laboratories, Inc. 45,816 1,220
Federal National Mortgage Assn. 15,247 1,185
Minnesota Mining &
Manufacturing Co. 11,941 1,184
Ameritech Corp. 30,156 1,150
Hewlett-Packard Co. 13,895 1,141
McDonald's Corp. 19,718 1,121
Chrysler Corp. 19,750 1,020
Home Depot, Inc. 25,012 1,019
American Home Products Corp. 17,328 1,005
U.S. West Corp. 24,530 1,000
Pfizer, Inc. 17,361 937
Unilever NV 8,920 934
Dow Chemical Co. 15,040 904
Texaco, Inc. 14,217 896
The Boeing Co. 18,587 834
Atlantic Richfield Co. 8,723 829
Sears, Roebuck & Co. 19,187 825
* Citicorp 21,565 809
Time Warner, Inc. 20,760 804
Eastman Kodak Co. 18,049 801
</TABLE>
17
<PAGE> 18
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Eli Lilly & Co. 16,087 $ 800
Anheuser-Busch Co., Inc. 14,964 793
NYNEX Corp. 22,898 790
Gillette Co. 12,336 780
BankAmerica Corp. 19,541 769
Columbia/HCA Healthcare Corp. 18,800 757
American Express Co. 27,273 753
Emerson Electric Co. 12,547 745
Schlumberger Ltd. 13,577 718
MCI Communications Corp. 30,112 704
Pacific Gas & Electric Co. 23,943 697
Banc One Corp. 20,936 691
J.C. Penney Co., Inc. 13,066 691
NationsBank, Inc. 14,819 678
J.P. Morgan & Co., Inc. 10,806 677
Southern Co. 35,064 671
Sprint Corp. 19,129 655
Kellogg Co. 12,682 647
Union Pacific Corp. 11,400 647
WMX Technologies Inc. 26,975 641
Caterpillar, Inc. 5,702 641
Travelers Inc. 17,913 629
Capital Cities/ABC, Inc. 894 611
Schering-Plough Corp. 10,754 605
The Dun & Bradstreet Corp. 9,858 579
May Department Stores Co. 13,892 578
The Seagram Co. Ltd. 20,752 576
Sara Lee Corp. 26,224 570
Allied-Signal, Inc. 15,540 569
* McCaw Cellular Communications, Inc. 11,500 566
Campbell Soup Co. 14,006 558
Xerox Corp. 5,785 552
ITT Corp. 6,429 551
* Toys R Us, Inc. 15,776 548
* Tele-Communications, Inc. Class A 25,113 518
Monsanto Co. 6,653 517
* Oracle Systems Corp. 16,136 516
Chemical Banking Corp. 14,024 510
Federal Home Loan Mortgage Corp. 10,000 508
General Re Corp. 4,675 502
Tenneco, Inc. 9,447 498
Weyerhaeuser Co. 11,403 493
Norfolk Southern Corp. 7,615 492
Raytheon Co. 7,562 489
Colgate-Palmolive Co. 8,366 484
* Cisco Systems, Inc. 14,200 483
General Mills, Inc. 8,630 480
Rockwell International Corp. 12,073 480
CSX Corp. 5,797 475
International Paper Co. 6,919 471
Texas Utilities Co. 12,499 467
Warner-Lambert Co. 7,469 462
Kimberly-Clark Corp. 8,720 461
H.J. Heinz Co. 13,714 459
PPG Industries, Inc. 5,912 440
* Compaq Computer Corp. 4,471 437
Merrill Lynch & Co., Inc. 11,702 436
Archer-Daniels-Midland Co. 18,110 435
Wells Fargo & Co. 3,103 432
Gannett Co., Inc. 8,120 427
United Technologies Corp. 6,843 425
The Limited, Inc. 20,221 422
Norwest Corp. 17,234 411
Albertson's, Inc. 14,136 406
Duke Power Co. 11,205 405
SCE Corp. 24,474 404
Entergy Corp. 12,676 402
Kmart Corp. 22,100 401
Deere & Co. 4,752 399
Enron Corp. 13,004 397
Automatic Data Processing, Inc. 7,678 393
Texas Instruments, Inc. 5,064 391
American Barrick Resources 15,400 391
Phillips Petroleum Co. 14,619 389
CPC International, Inc. 8,102 384
First Union Corp. 9,218 384
Northern Telecom Ltd. 13,587 380
Corning, Inc. 11,670 378
Consolidated Edison Co. of New York, Inc. 12,957 377
Keycorp 12,501 375
Dominion Resources, Inc. 9,309 372
Public Service Enterprise Group Inc. 13,136 366
Conagra, Inc. 13,417 359
Pitney Bowes, Inc. 8,814 358
The Chubb Corp. 4,864 356
The Gap, Inc. 7,884 350
AMP, Inc. 5,812 350
Baxter International, Inc. 15,372 348
PNC Bank Corp. 13,080 348
Marsh & McLennan, Inc. 4,147 345
Peco Energy Corp. 12,331 342
Aluminum Co. of America 4,770 342
First Interstate Bancorp. 4,624 339
FPL Group, Inc. 10,216 338
American Brands, Inc. 11,097 336
Wm. Wrigley, Jr. Co. 6,534 332
Unocal Corp. 13,069 330
The Goodyear Tire & Rubber Co. 8,134 329
The Chase Manhattan Corp. 10,081 326
Aetna Life and Casualty Co. 6,122 325
Bankers Trust New York Corp. 4,562 323
American General Corp. 11,676 322
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Placer Dome Group, Inc. 13,073 $ 322
Georgia-Pacific Corp. 4,974 318
Blockbuster Entertainment Corp. 12,304 311
American Electric Power Co., Inc. 10,069 310
Dean Witter Discover and Co. 9,408 307
Burlington Resources, Inc. 7,200 306
* Novell, Inc. 17,000 306
Suntrust Banks, Inc. 6,754 301
Commonwealth Edison Co. 11,925 300
Wachovia Corp. 9,300 295
Salomon, Inc. 6,022 291
Nucor Corp. 4,772 289
Burlington Northern, Inc. 4,852 289
Dayton-Hudson Corp. 3,942 288
Computer Associates
International, Inc. 9,265 286
UST, Inc. 11,528 285
Great Lakes Chemical Corp. 4,000 282
Air Products & Chemicals, Inc. 6,224 278
Pacificorp 15,606 275
Walgreen Co. 6,846 275
Occidental Petroleum Corp. 16,991 274
* Amgen, Inc. 7,200 274
Browning-Ferris Industries, Inc. 10,706 270
Morton International, Inc. 2,696 269
Masco Corp. 8,496 268
Alcan Aluminium Ltd. 12,048 265
USX-Marathon Group 16,009 264
Textron, Inc. 4,871 263
Hercules, Inc. 2,294 263
Upjohn Co. 9,654 262
Lowes Cos., Inc. 4,046 261
Central & South West Corp. 10,476 259
Medtronic, Inc. 3,220 258
Sysco Corp. 10,070 258
Fleet Financial Group, Inc. 7,319 257
Ralston-Ralston Purina Group 5,623 256
H & R Block, Inc. 5,912 254
CBS, Inc. 826 253
NBD Bancorp, Inc. 8,919 252
R.R. Donnelley & Sons Co. 8,810 248
Houston Industries, Inc. 6,956 247
Conrail, Inc. 4,262 246
Illinois Tool Works, Inc. 6,020 244
Rubbermaid, Inc. 8,920 243
Barnett Banks of Florida, Inc. 5,427 239
Whirlpool Corp. 3,939 239
Honeywell, Inc. 7,084 238
Westinghouse Electric Corp. 19,683 236
Santa Fe Pacific Corp. 10,345 235
TRW, Inc. 3,422 234
McDonnell Douglas Corp. 2,177 234
Cooper Industries, Inc. 6,319 234
Eaton Corp. 4,036 234
First Chicago Corp. 4,832 232
UNUM Corp. 4,400 232
Genuine Parts Co. 6,629 232
* AMR Corp. 4,035 230
Quaker Oats Co. 3,652 229
CIGNA Corp. 3,844 228
International Flavors &
Fragrances, Inc. 6,228 227
Mattel, Inc. 8,978 226
Hershey Foods Corp. 4,881 226
* Digital Equipment Corp. 7,644 225
Martin Marietta Corp. 5,096 224
Fluor Corp. 4,461 223
American Cyanamid Co. 4,790 223
Carolina Power & Light Co. 8,522 222
Amerada Hess Corp. 4,962 222
Nike, Inc. Class B 4,150 220
Winn Dixie Stores, Inc. 3,955 217
* Promus Co. Inc. 5,509 217
The Times Mirror Co. Class A 6,957 217
Apple Computer, Inc. 6,534 216
Transamerica Corp. 4,253 215
Avon Products, Inc. 3,814 215
Louisiana-Pacific Corp. 5,916 214
Melville Corp. 5,606 214
Lockheed Corp. 3,326 214
Ingersoll-Rand Co. 5,708 213
* Price/Costco Inc. 11,856 213
Lincoln National Corp. 5,266 212
The Tribune Co. 3,528 210
Newmont Mining Corp. 3,635 209
Dow Jones & Co., Inc. 5,502 209
* Federal Express Corp. 3,107 208
Dresser Industries, Inc. 9,768 208
Detroit Edison Co. 7,794 207
First Fidelity Bancorp. 4,619 205
W.R. Grace & Co. 4,972 205
Dillard Department Stores Class A 6,022 202
American Stores Co. 3,938 202
Consolidated Natural Gas Co. 4,972 199
Rohm & Haas Co. 3,633 198
Phelps Dodge Corp. 3,738 195
Union Electric Corp. 5,500 194
Mellon Bank Corp. 3,388 190
CoreStates Financial Corp. 7,218 188
* Crown Cork & Seal Co., Inc. 4,774 187
Dover Corp. 3,122 187
Sun Co., Inc. 5,713 185
Union Carbide Corp. 8,152 183
Baltimore Gas & Electric Co. 7,850 181
</TABLE>
19
<PAGE> 20
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Eastman Chemical 4,412 $ 178
St. Paul Cos., Inc. 2,284 178
Marriott International 6,287 177
VF Corp. 3,514 176
McGraw-Hill, Inc. 2,698 176
* Lotus Development Corp. 2,485 175
Safeco Corp. 3,326 175
Halliburton Co. 6,014 175
Loral Corp. 4,602 173
Nordstrom, Inc. 4,364 173
* UAL Corp. 1,347 172
W.W. Grainger, Inc. 2,708 172
MBNA Corp. 8,100 171
Coastal Corp. 5,607 171
Capital Holding Corp. 5,380 170
Newell Co. 4,319 170
Scott Paper Co. 4,047 169
Boatmen's Bancshares, Inc. 5,650 167
Knight-Ridder, Inc. 2,899 166
Hasbro, Inc. 4,769 166
Union Camp Corp. 3,737 165
Homestake Mining Co. 7,298 164
Syntex Corp. 11,649 162
Reebok International Ltd. 4,681 160
Torchmark Corp. 3,954 159
Ohio Edison Co. 8,305 158
Pioneer Hi Bred International 4,800 157
New York Times Co. Class A 5,652 155
Sherwin-Williams Co. 4,873 155
Inco Ltd. 6,209 154
Dana Corp. 2,682 154
* Advanced Micro Devices, Inc. 4,965 153
Roadway Services, Inc. 2,277 153
* DSC Communications Corp. 2,981 150
Household International, Inc. 5,042 149
Becton, Dickinson & Co. 3,952 148
Hilton Hotels Corp. 2,595 148
Northern States Power Co. of
Minnesota 3,625 148
National Medical Enterprises, Inc. 9,118 147
Bausch & Lomb, Inc. 3,118 146
Clorox Co. 2,908 146
Alco Standard Corp. 2,782 146
Cyprus Amax 5,015 145
USX-U.S. Steel Group 3,901 145
* Sun Microsystems, Inc. 5,400 145
Reynolds Metals Co. 3,119 143
* The Kroger Co. 5,972 143
General Dynamics Corp. 1,683 143
Champion International Corp. 4,886 142
Englehard Corp. 4,999 139
Deluxe Corp. 4,469 138
Baker Hughes, Inc. 7,775 138
Harcourt General, Inc. 4,139 137
Niagara Mohawk Power Corp. 7,672 137
SuperValu, Inc. 3,951 137
Comcast Corp. Class A 7,531 136
U.S. Bancorp 5,331 135
Ashland Oil, Inc. 3,315 135
Panhandle Eastern Corp. 6,380 134
Temple-Inland Inc. 2,910 133
Mallinckrodt Group, Inc. 4,150 133
Sonat, Inc. 4,772 132
Nalco Chemical, Inc. 3,838 131
* Unisys Corp. 8,724 130
Williams Cos., Inc. 5,366 129
McKesson Corp. 2,176 129
Bank of Boston Corp. 5,448 129
Golden West Financial Corp. 3,327 128
The Mead Corp. 3,117 128
Praxair, Inc. 7,252 126
Tandy Corp. 3,475 126
Brown-Forman Corp. Class B 1,455 125
Pennzoil Co. 2,480 124
Tyco International Ltd. 2,494 124
Jefferson-Pilot Corp. 2,605 123
Delta Air Lines, Inc. 2,699 122
* National Semiconductor Corp. 5,807 122
Grumman Corp. 1,866 121
Premark International, Inc. 1,661 120
Johnson Controls, Inc. 2,179 120
Westvaco Corp. 3,731 119
Interpublic Group of Cos., Inc. 4,000 119
Gerber Products Co. 3,850 118
* Bethlehem Steel Corp. 5,852 117
Great Western Financial Corp. 7,257 116
Kerr-McGee Corp. 2,798 116
Cooper Tire & Rubber Co. 4,464 114
Service Corp. International 4,436 112
Maytag Corp. 5,912 111
Northrop Corp. 2,794 111
Woolworth Corp. 7,259 110
H.F. Ahmanson & Co. 6,433 108
Paccar, Inc. 2,148 108
The Dial Corp. 2,579 108
Armstrong World Industries Inc. 1,974 106
American Greetings Corp. Class A 4,026 106
Brunswick Corp. 4,877 103
Pet, Inc. 5,706 103
Harris Corp. 2,178 103
* Computer Sciences Corp. 2,796 102
TJX Cos., Inc. 3,840 101
Cummins Engine Co., Inc. 2,060 101
Moore Corp. Ltd. 5,392 100
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Borden, Inc. 7,495 $ 100
Shawmut National Corp. 4,953 100
Circuit City Stores, Inc. 4,984 99
Beneficial Corp. 2,704 99
Liz Claiborne, Inc. 4,170 99
Pall Corp. 5,962 99
Wendys International, Inc. 5,694 98
* Western Atlas Inc. 2,384 98
Ryder System, Inc. 3,947 98
* Varity Corp. 2,349 98
Worthington Industries, Inc. 4,877 95
Black & Decker Corp. 4,623 95
Pacific Enterprises 4,641 94
Comcast Corp. Class A Special 5,215 92
* ALZA Corp. 4,030 92
Echlin, Inc. 3,112 92
* Navistar International Corp. 4,080 91
Pep Boys (Manny, Moe & Jack) 3,211 91
* Tandem Computers, Inc. 6,413 91
The Stanley Works 2,284 90
Avery Dennison Corp. 3,224 90
Rite Aid Corp. 4,666 89
* FMC Corp. 1,870 89
Whitman Corp. 5,806 88
Oryx Energy Co. 5,459 88
General Signal Corp. 2,678 88
Parker Hannifin Corp. 2,496 88
Snap-On Tools Corp. 2,183 87
Manor Care Inc. 3,114 85
Foster Wheeler Corp. 2,071 83
James River Corp. 4,563 83
Perkin-Elmer Corp. 2,466 82
Raychem Corp. 2,175 81
Echo Bay Mines Ltd. 6,098 81
* Owens-Corning Fiberglas Corp. 2,281 80
Polaroid Corp. 2,500 80
Autodesk, Inc. 1,349 78
E-Systems, Inc. 1,762 77
Allergan, Inc. 3,700 75
NICOR, Inc. 2,916 74
PSI Resources, Inc. 3,109 73
Mercantile Stores Co., Inc. 1,874 72
St. Jude Medical, Inc. 2,594 71
* King World Productions, Inc. 1,876 70
Thomas & Betts Corp. 1,134 70
Millipore Corp. 1,556 70
Giant Food, Inc. Class A 3,118 70
Ecolab, Inc. 3,294 68
* Columbia Gas Systems, Inc. 2,601 68
Russell Corp. 2,381 68
Charming Shoppes, Inc. 5,600 67
Louisiana Land & Exploration Co. 1,856 67
C.R. Bard, Inc. 2,706 66
* Stone Container Corp. 4,954 66
* Inland Steel Industries, Inc. 2,162 65
Potlatch Corp. 1,558 65
* Biomet, Inc. 6,224 64
Continental Corp. 2,809 64
National Service Industries, Inc. 2,499 63
The BF Goodrich Co. 1,451 62
Briggs & Stratton Corp. 729 61
Bemis Co., Inc. 2,702 59
McDermott International, Inc. 2,888 58
USF&G Corp. 4,368 57
Tektronix, Inc. 1,858 57
Scientific-Atlanta, Inc. 2,067 57
Trinova Corp. 1,656 57
United States Surgical Corp. 3,100 56
* Beverly Enterprises Inc. 4,246 56
* Clark Equipment Co. 935 55
Great Atlantic & Pacific Tea Co., Inc. 2,176 53
* Ceridian Corp. 2,285 53
EG & G, Inc. 3,212 53
* Consolidated Freightways, Inc. 1,970 52
USLIFE Corp. 1,346 52
Ogden Corp. 2,285 51
Centex Corp. 1,660 51
Fleetwood Enterprises, Inc. 2,488 51
The Timkin Co. 1,559 51
Boise Cascade Corp. 2,176 50
Teledyne Inc. 2,911 50
Morrison-Knudsen Co., Inc. 1,846 50
Arkla, Inc. 7,130 48
Peoples Energy Corp. 1,766 48
Asarco, Inc. 2,082 47
Federal Paper Board Co., Inc. 2,080 47
Pittston Services Group 2,075 46
Fleming Cos., Inc. 1,861 46
ENSERCH Corp. 3,430 45
Giddings & Lewis, Inc. 1,800 45
Jostens Inc. 2,581 44
Crane Co. 1,763 44
Amdahl Corp. 6,720 44
Community Psychiatric Centers 2,594 42
* Shoney's Inc. 1,977 42
Pulte Corp. 1,447 42
Alexander & Alexander Services, Inc. 2,381 42
Cincinnati Milacron, Inc. 1,755 41
Stride Rite Corp. 2,802 41
Longs Drug Stores, Inc. 1,240 41
* Andrew Corp. 1,257 40
Ball Corp. 1,544 40
* Cray Research, Inc. 1,453 40
Bruno's Inc. 5,150 40
Safety-Kleen Corp. 2,812 39
</TABLE>
21
<PAGE> 22
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Adolph Coors Co. Class B 2,075 $ 38
Santa Fe Energy Resources Inc. 4,428 38
Kaufman & Broad Home Corp. 1,855 37
John H. Harland Co. 1,675 37
Yellow Corp. 1,456 35
Meredith Corp. 834 35
Helmerich & Payne, Inc. 1,349 35
* Rowan Cos., Inc. 5,045 35
Alberto-Culver Co. Class B 1,657 34
Luby's Cafeterias, Inc. 1,455 34
Eastern Enterprises 1,245 33
Shared Medical Systems Corp. 1,245 33
Harnischfeger Industries Inc. 1,463 31
Brown Group, Inc. 835 31
* Maxus Energy Corp. 6,800 30
Springs Industries Inc. Class A 835 29
Transco Energy Co. 1,861 27
* Intergraph Corp. 2,796 25
Outboard Marine Corp. 1,239 24
* Ryan's Family Steak Houses, Inc. 3,205 24
* USAir Group, Inc. 2,890 23
* Zenith Electronics Corp. 2,358 23
* Armco, Inc. 4,877 23
NACCO Industries, Inc. Class A 418 21
Oneok, Inc. 1,253 21
* Bally Manufacturing Corp. 2,861 20
* Data General Corp. 2,361 19
Bassett Furniture Industries, Inc. 652 18
Handleman Co. 1,466 16
Zurn Industries, Inc. 625 15
First Mississippi Corp. 1,039 15
Rollins Environmental Services, Inc. 2,720 13
* National Intergroup, Inc. 744 12
* Fedders Corp. 1,537 12
Skyline Corp. 622 12
* Hartmarx Corp. 1,740 11
Oshkosh B Gosh, Inc. Class A 729 11
* M/A-Com, Inc. 1,648 10
Pactel Corp. 500 10
SPX Corp. 528 8
* National Education Corp. 959 6
* Genesco, Inc. 1,345 6
JWP, Inc. 1,876 2
- - ----------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $166,834) 175,281
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- - ----------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (.4%)
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY BILL--NOTE E
3.465%, 6/23/94 $200 198
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled Cash
Account, 3.49%, 4/4/94 523 523
- - ----------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $721) 721
- - ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.4%)
(Cost $167,555) 176,002
- - ----------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-.4%)
- - ----------------------------------------------------------------------------------------------------------
Other Assets--Notes C and F 921
Liabilities--Note F (1,644)
-------
(723)
- - ----------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- - ----------------------------------------------------------------------------------------------------------
Applicable to 14,737,058 outstanding
shares of beneficial interest
(unlimited authorization--
no par value) $175,279
- - ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $11.89
==========================================================================================================
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
(1) The combined market value of common stocks and Standard & Poor's 500 Stock
Index futures contracts represents 100.8% of net assets.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------
AT MARCH 31, 1994, NET ASSETS CONSISTED OF:
- - ----------------------------------------------------------------------------------------------------------
Amount Per
(000) Share
-------- ------
<S> <C> <C>
Paid in Capital $166,310 $11.28
Undistributed Net Investment
Income 350 .02
Accumulated Net Realized Gains 238 .02
Unrealized Appreciation of
Investments--Note E 8,381 .57
- - ----------------------------------------------------------------------------------------------------------
NET ASSETS $175,279 $11.89
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
Market
Value
EQUITY INCOME PORTFOLIO Shares (000)+
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (98.4%)
- - ----------------------------------------------------------------------------------------------------------
BANKS--NEW YORK (2.0%)
Bankers Trust New York Corp. 10,100 $ 716
J.P. Morgan & Co., Inc. 9,500 595
--------
GROUP TOTAL 1,311
--------
- - ----------------------------------------------------------------------------------------------------------
BANKS--REGIONAL (2.6%)
Barnett Banks of Florida, Inc. 3,700 163
Boatmen's Bancshares, Inc. 10,500 311
CoreStates Financial Corp. 12,500 325
First Union Corp. 2,600 108
PNC Bank Corp. 25,300 674
Wachovia Corp. 5,000 159
--------
GROUP TOTAL 1,740
--------
- - ----------------------------------------------------------------------------------------------------------
CHEMICAL--BASIC (6.1%)
ARCO Chemical Co. 25,900 1,150
Dow Chemical Co. 23,600 1,419
E.I. du Pont de Nemours & Co. 13,100 694
Monsanto Co. 8,800 684
Union Carbide Corp. 5,700 128
--------
GROUP TOTAL 4,075
--------
- - ----------------------------------------------------------------------------------------------------------
CHEMICAL--DIVERSIFIED (.1%)
Minnesota Mining &
Manufacturing Co. 1,000 99
--------
- - ----------------------------------------------------------------------------------------------------------
COMPUTERS & OFFICE EQUIPMENT (1.9%)
International Business
Machines Corp. 23,500 1,281
--------
- - ----------------------------------------------------------------------------------------------------------
CONGLOMERATE (3.3%)
Hanson PLC ADR 53,600 1,065
Ogden Corp. 50,600 1,126
--------
GROUP TOTAL 2,191
--------
- - ----------------------------------------------------------------------------------------------------------
DRUGS (9.9%)
American Home Products Corp. 26,000 1,508
Bristol-Myers Squibb Co. 36,800 1,900
Eli Lilly & Co. 31,400 1,562
Merck & Co., Inc. 4,600 137
Upjohn Co. 42,500 1,153
Warner-Lambert Co. 5,700 352
--------
GROUP TOTAL 6,612
--------
- - ----------------------------------------------------------------------------------------------------------
ELECTRIC--UTILITY (14.9%)
Allegheny Power System, Inc. 26,600 605
Baltimore Gas & Electric Co. 23,700 548
Consolidated Edison Co. of New York, Inc. 19,100 556
FPL Group, Inc. 36,600 1,212
Northern States Power Co. of Minnesota 10,100 413
Oklahoma Gas & Electric Co. 20,300 703
Pacificorp 65,400 1,153
Pennsylvania Power and Light Co. 14,700 338
Potomac Electric Power Co. 26,300 579
Public Service Enterprise Group Inc. 40,100 1,118
SCE Corp. 63,200 1,043
Scana Corp. 7,700 351
Texas Utilities Co. 26,200 979
Union Electric Corp. 9,700 342
--------
GROUP TOTAL 9,940
--------
- - ----------------------------------------------------------------------------------------------------------
ELECTRIC EQUIPMENT (.1%) Westinghouse Electric Corp. 5,100 61
--------
- - ----------------------------------------------------------------------------------------------------------
ELECTRIC INSTRUMENTS (.7%)
Thomas & Betts Corp. 7,900 490
--------
- - ----------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES (3.7%)
H.F. Ahmanson & Co. 43,900 741
American Express Co. 28,500 787
Great Western Financial Corp. 58,900 942
--------
GROUP TOTAL 2,470
--------
- - ----------------------------------------------------------------------------------------------------------
FOOD--PACKAGED (.5%)
Borden, Inc. 8,000 107
H.J. Heinz Co. 6,600 221
--------
GROUP TOTAL 328
--------
- - ----------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (.6%)
Clorox Co. 8,300 416
--------
- - ----------------------------------------------------------------------------------------------------------
INSURANCE--DIVERSIFIED (4.2%)
Aetna Life & Casualty Co. 16,700 887
American General Corp. 18,800 519
CIGNA Corp. 23,100 1,372
--------
GROUP TOTAL 2,778
--------
- - ----------------------------------------------------------------------------------------------------------
INSURANCE--PROPERTY & CASUALTY (.9%)
Continental Corp. 25,600 579
--------
- - ----------------------------------------------------------------------------------------------------------
MEDICAL SUPPLIES (.2%)
Baxter International, Inc. 6,100 138
--------
- - ----------------------------------------------------------------------------------------------------------
NATURAL GAS--DIVERSIFIED (2.8%)
Arkla, Inc. 34,400 232
Consolidated Natural Gas Co. 24,000 960
NICOR, Inc. 11,300 288
Pacific Enterprises 19,300 391
--------
GROUP TOTAL 1,871
--------
- - ----------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS (.8%)
Union Camp Corp. 8,100 359
Weyerhaeuser Co. 3,800 164
--------
GROUP TOTAL 523
--------
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 24
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Market
Value
Shares (000)+
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
PETROLEUM--DOMESTIC (5.0%)
Amoco Corp. 13,400 $ 712
Atlantic Richfield Co. 15,700 1,491
Sun Co., Inc. 15,500 502
USX-Marathon Group 37,000 611
--------
GROUP TOTAL 3,316
--------
- - ----------------------------------------------------------------------------------------------------------
PETROLEUM--INTERNATIONAL (10.8%)
Chevron Corp. 17,800 1,500
Exxon Corp. 23,300 1,465
Mobil Corp. 23,700 1,763
Royal Dutch Petroleum Co. 7,000 695
Texaco, Inc. 29,000 1,827
--------
GROUP TOTAL 7,250
--------
- - ----------------------------------------------------------------------------------------------------------
PHOTOGRAPHY (1.9%)
Eastman Kodak Co. 29,300 1,300
--------
- - ----------------------------------------------------------------------------------------------------------
PUBLISHING (2.7%)
The Dun & Bradstreet Corp. 19,900 1,169
John H. Harland Co. 16,200 363
McGraw-Hill, Inc. 4,700 307
--------
GROUP TOTAL 1,839
--------
- - ----------------------------------------------------------------------------------------------------------
RETAIL--GENERAL MERCHANDISE (3.6%)
Kmart Corp. 76,100 1,379
J.C. Penney Co., Inc. 5,200 275
Sears, Roebuck & Co. 3,700 159
Woolworth Corp. 37,300 564
--------
GROUP TOTAL 2,377
--------
- - ----------------------------------------------------------------------------------------------------------
RETAIL--SPECIAL LINES (.2%)
McKesson Corp. 2,600 155
--------
- - ----------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (14.3%)
Ameritech Corp. 39,400 1,502
Bell Atlantic Corp. 27,000 1,397
BellSouth Corp. 25,800 1,490
GTE Corp. 53,300 1,652
NYNEX Corp. 43,600 1,504
Pacific Telesis Group 13,700 721
U.S. West Corp. 32,700 1,333
--------
GROUP TOTAL 9,599
--------
- - ----------------------------------------------------------------------------------------------------------
TOBACCO (4.1%)
American Brands, Inc. 42,500 1,286
Philip Morris Cos., Inc. 29,100 1,477
--------
GROUP TOTAL 2,763
--------
- - ----------------------------------------------------------------------------------------------------------
TOILETRY & COSMETICS (.5%)
Tambrands, Inc. 8,900 343
--------
- - ----------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $71,189) 65,845
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Face Market
Amount Value
(000) (000)+
- - ----------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (3.0%)
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account 3.49%, 4/4/94
(Cost $1,998) $1,998 $1,998
- - ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.4%)
(Cost $73,187) 67,843
- - ----------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-1.4%)
- - ----------------------------------------------------------------------------------------------------------
Other Assets--Note C 600
Liabilities (1,535)
--------
(935)
- - ----------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- - ----------------------------------------------------------------------------------------------------------
Applicable to 7,013,148 outstanding
shares of beneficial interest
(unlimited authorization--
no par value) $66,908
- - ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $9.54
==========================================================================================================
</TABLE>
+ See Note A to Financial Statements.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------
AT MARCH 31, 1994, NET ASSETS CONSISTED OF:
- - ----------------------------------------------------------------------------------------------------------
Amount Per
(000) Share
------- ------
<S> <C> <C>
Paid in Capital $71,767 $10.23
Undistributed Net Investment
Income 227 .03
Accumulated Net Realized Gains 258 .04
Unrealized Depreciation of
Investments--Note E (5,344) (.76)
- - ----------------------------------------------------------------------------------------------------------
NET ASSETS $66,908 $9.54
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 25
<TABLE>
<CAPTION>
Market
Value
GROWTH PORTFOLIO Shares (000)+
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (90.2%)
- - ----------------------------------------------------------------------------------------------------------
CONSUMER (27.5%)
* Caesars World, Inc. 5,300 $ 237
Campbell Soup Co. 4,800 191
Carnival Cruise Lines, Inc. 11,300 501
* Circus Circus Enterprises Inc. 5,500 177
The Coca-Cola Co. 53,500 2,173
The Walt Disney Co. 16,300 683
Duracell International, Inc. 31,000 1,232
General Mills, Inc. 11,000 612
Gillette Co. 42,100 2,663
McDonald's Corp. 58,900 3,350
* Mirage Resorts Inc. 12,000 252
PepsiCo, Inc. 79,400 2,908
* Perrigo 10,200 224
Polygram NV ADR 3,800 151
Procter & Gamble Co. 39,300 2,107
* Promus Co. Inc. 6,500 256
Rubbermaid, Inc. 11,400 311
Unilever NV 3,600 377
--------
GROUP TOTAL 18,405
--------
- - ----------------------------------------------------------------------------------------------------------
FINANCE & INSURANCE (16.2%)
AMBAC, Inc. 5,300 196
American International Group, Inc. 29,500 2,482
Chemical Banking Corp. 48,900 1,779
Countrywide Credit Industries, Inc. 14,000 336
Federal Home Loan Mortgage Corp. 49,500 2,512
Federal National Mortgage Assn. 37,900 2,947
Norwest Corp. 14,800 353
TIG Holdings, Inc. 10,200 196
--------
GROUP TOTAL 10,801
--------
- - ----------------------------------------------------------------------------------------------------------
HEALTH CARE (7.5%)
Abbott Laboratories, Inc. 38,500 1,025
Mallinckrodt Group, Inc. 25,400 813
Medtronic, Inc. 6,500 520
Merck & Co., Inc. 19,700 586
Pfizer, Inc. 34,100 1,841
Wellcome PLC ADR 30,300 250
--------
GROUP TOTAL 5,035
--------
- - ----------------------------------------------------------------------------------------------------------
MEDIA (1.3%)
Reuters Holdings PLC 9,900 853
--------
- - ----------------------------------------------------------------------------------------------------------
RETAIL & DISTRIBUTION (11.1%)
Home Depot, Inc. 28,000 1,141
TJX Cos., Inc. 12,800 338
* Toys R Us, Inc. 54,200 1,883
Wal-Mart Stores, Inc. 122,100 3,159
Walgreen Co. 23,000 923
--------
GROUP TOTAL 7,444
--------
- - ----------------------------------------------------------------------------------------------------------
TECHNOLOGY (10.0%)
American Telephone & Telegraph Co. 21,300 1,092
AMP, Inc. 14,100 850
* Cisco Systems, Inc. 10,600 360
Intel Corp. 24,100 1,621
* Microsoft Corp. 18,000 1,526
* Novell, Inc. 20,200 364
* Oracle Systems Corp. 18,000 576
* Pactel Corp. 15,700 324
--------
GROUP TOTAL 6,713
--------
- - ----------------------------------------------------------------------------------------------------------
OTHER (16.6%)
Automatic Data Processing, Inc. 55,900 2,865
First Data Corp. 8,300 350
First Financial Management 7,400 400
General Electric Co. 32,900 3,278
General Motors Corp. Class E 58,100 1,990
Great Lakes Chemical Corp. 5,400 381
Minnesota Mining &
Manufacturing Co. 6,100 605
Morton International, Inc. 5,600 559
* Renaissance Energy Ltd. 23,700 476
* Tarragon Oil & Gas Ltd. 14,900 168
--------
GROUP TOTAL 11,072
--------
- - ----------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $60,959) 60,323
- - ----------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (10.9%)
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Face Amount
(000)
-----------
<S> <C> <C>
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account 3.49%, 4/4/94
(Cost $7,259) $7,259 7,259
- - ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.1%)
(Cost $68,218) 67,582
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 26
STATEMENT OF NET ASSETS (continued)
<TABLE>
<CAPTION>
Market
Value
(000)+
- - ----------------------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-1.1%)
- - ----------------------------------------------------------------------------------------------------------
Other Assets--Notes C and F $ 1,429
Liabilities--Note F (2,167)
---------
(738)
- - ----------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- - ----------------------------------------------------------------------------------------------------------
Applicable to 6,544,043 outstanding
shares of beneficial interest
(unlimited authorization--no par value) $66,844
- - ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $10.21
==========================================================================================================
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------
AT MARCH 31, 1994, NET ASSETS CONSISTED OF:
- - ----------------------------------------------------------------------------------------------------------
Amount Per
(000) Share
------- ------
<S> <C> <C>
Paid in Capital $67,450 $10.30
Undistributed Net Investment
Income 183 .03
Accumulated Net Realized Losses (153) (.02)
Unrealized Depreciation of
Investments--Note E (636) (.10)
- - ----------------------------------------------------------------------------------------------------------
NET ASSETS $66,844 $10.21
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 27
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MONEY HIGH-GRADE
MARKET BOND BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
- - -------------------------------------------------------------------------------------------------------------------------
Six Months Ended Six Months Ended Six Months Ended
March 31, 1994 March 31, 1994 March 31, 1994
(000) (000) (000)
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends . . . . . . . . . . . . . . . . . . . . . -- -- $2,168
Interest . . . . . . . . . . . . . . . . . . . . . $2,057 $2,526 2,463
- - -------------------------------------------------------------------------------------------------------------------------
Total Income . . . . . . . . . . . . . . . . . . 2,057 2,526 4,631
- - -------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees . . . . . . . . . . . . . . . . . . . 5 4 111
Performance Adjustments . . . . . . . . . . . . -- -- --
The Vanguard Group--Note C . . . . . . . . . . . .
Management and Administrative . . . . . . . . . 136 86 265
Marketing and Distribution . . . . . . . . . . . 17 7 17
Custodian's Fees . . . . . . . . . . . . . . . . . 8 11 1
Auditing Fees . . . . . . . . . . . . . . . . . . . 5 5 5
Shareholders' Reports . . . . . . . . . . . . . . . 4 8 18
Annual Meeting and Proxy Costs . . . . . . . . . . -- 1 2
- - -------------------------------------------------------------------------------------------------------------------------
Total Expenses . . . . . . . . . . . . . . . . 175 122 419
- - -------------------------------------------------------------------------------------------------------------------------
Net Investment Income . . . . . . . . . . . 1,882 2,404 4,212
- - -------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) . . . . . . . . . . . . . . . .
Investment Securities Sold . . . . . . . . . . . . (1) (43) 2,190
Futures Contracts . . . . . . . . . . . . . . . . . -- -- --
- - -------------------------------------------------------------------------------------------------------------------------
Realized Net Gain (Loss) . . . . . . . . . (1) (43) 2,190
- - -------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)
Investment Securities . . . . . . . . . . . . . . . -- (4,990) (12,253)
Futures Contracts . . . . . . . . . . . . . . . . . -- -- --
- - -------------------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation
(Depreciation) . . . . . . . . . . . . . -- (4,990) (12,253)
- - -------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations . . . . . . . . $1,881 $(2,629) $(5,851)
=========================================================================================================================
</TABLE>
27
<PAGE> 28
STATEMENT OF NET OPERATIONS (continued)
<TABLE>
<CAPTION>
EQUITY EQUITY
INDEX INCOME GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- - -------------------------------------------------------------------------------------------------------------------------
Six Months Ended Six Months Ended Six Months Ended
March 31, 1994 March 31, 1994 March 31, 1994
(000) (000) (000)
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends . . . . . . . . . . . . . . . . . . . . . $2,332 $1,540 $377
Interest . . . . . . . . . . . . . . . . . . . . . 47 47 122
- - -------------------------------------------------------------------------------------------------------------------------
Total Income . . . . . . . . . . . . . . . . . . 2,379 1,587 499
- - -------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees . . . . . . . . . . . . . . . . . . . 26 35 42
Performance Adjustments . . . . . . . . . . . . -- -- --
The Vanguard Group--Note C
Management and Administrative . . . . . . . . . 181 72 64
Marketing and Distribution . . . . . . . . . . . 15 2 1
Custodian's Fees . . . . . . . . . . . . . . . . . 2 4 4
Auditing Fees . . . . . . . . . . . . . . . . . . . 5 5 5
Shareholders' Reports . . . . . . . . . . . . . . . 18 12 2
Annual Meeting and Proxy Costs . . . . . . . . . . 2 -- 1
- - -------------------------------------------------------------------------------------------------------------------------
Total Expenses . . . . . . . . . . . . . . . . 249 130 119
- - -------------------------------------------------------------------------------------------------------------------------
Net Investment Income . . . . . . . . . . . 2,130 1,457 380
- - -------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold . . . . . . . . . . . . 254 250 (32)
Futures Contracts . . . . . . . . . . . . . . . . . 8 -- --
- - -------------------------------------------------------------------------------------------------------------------------
Realized Net Gain (Loss) . . . . . . . . . 262 250 (32)
- - -------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)
Investment Securities . . . . . . . . . . . . . . . (5,714) (7,202) (1,216)
Futures Contracts . . . . . . . . . . . . . . . . . (63) -- --
- - -------------------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation
(Depreciation) . . . . . . . . . . . . . (5,777) (7,202) (1,216)
- - -------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations . . . . . . . . $(3,385) $(5,495) $(868)
=========================================================================================================================
</TABLE>
28
<PAGE> 29
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY HIGH-GRADE
MARKET BOND BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
- - -------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED Year Ended ENDED Year Ended ENDED Year Ended
MARCH 31, Sept. 30, MARCH 31, Sept. 30, MARCH 31, Sept. 30,
1994 1993 1994 1993 1994 1993
(000) (000) (000) (000) (000) (000)
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income . . . . . . . . . $1,882 $2,738 $2,404 $3,799 $4,212 $5,966
Realized Net Gain (Loss) . . . . . . . . (1) -- (43) 1,224 2,190 1,727
Change in Unrealized Appreciation
(Depreciation) . . . . . . . . . . . -- -- (4,990) 1,046 (12,253) 9,903
- - -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations . . . 1,881 2,738 (2,629) 6,069 (5,851) 17,596
- - -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (1)
Net Investment Income . . . . . . . . . (1,882) (2,738) (2,404) (3,799) (5,119) (7,655)
Realized Net Gain . . . . . . . . . . . -- -- (1,239) (231) (2,895) (263)
- - -------------------------------------------------------------------------------------------------------------------------------
Total Distributions . . . . . . . . (1,882) (2,738) (3,643) (4,030) (8,014) (7,918)
- - -------------------------------------------------------------------------------------------------------------------------------
NET EQUALIZATION CREDITS--NOTE A . . . . . -- -- -- -- 238 793
- - -------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (2)
Issued --Regular . . . . . . . . . . . 202,581 335,904 27,492 58,665 68,941 129,863
--In Lieu of Cash Distributions 1,882 2,738 3,643 4,030 8,014 7,895
Redeemed . . . . . . . . . . . . . . . . (170,379) (295,669) (25,331) (31,160) (28,840) (33,283)
- - -------------------------------------------------------------------------------------------------------------------------------
Net Increase from
Capital Share Transactions . . . 34,084 42,973 5,804 31,535 48,115 104,475
- - -------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) . . . 34,083 42,973 (468) 33,574 34,488 114,946
- - -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period . . . . . . . . . . 113,622 70,649 85,217 51,643 191,297 76,351
- - -------------------------------------------------------------------------------------------------------------------------------
End of Period (3) . . . . . . . . . . . $147,705 $113,622 $84,749 $85,217 $225,785 $191,297
===============================================================================================================================
(1) Distributions Per Share
Net Investment Income . . . . . . . $.015 $.030 $.295 $.636 $.27 $.69
Realized Net Gain . . . . . . . . . -- -- $.154 $.049 $.16 $.03
- - -------------------------------------------------------------------------------------------------------------------------------
(2) Shares Issued and Redeemed
Issued . . . . . . . . . . . . . . 202,581 335,904 2,570 5,483 5,980 11,742
Issued in Lieu of Cash Distributions 1,882 2,738 343 378706 717
Redeemed . . . . . . . . . . . . . (170,379) (295,669) (2,380) (2,928) (2,528) (2,988)
- - -------------------------------------------------------------------------------------------------------------------------------
34,084 42,973 533 2,933 4,158 9,471
- - -------------------------------------------------------------------------------------------------------------------------------
(3) Undistributed Net
Investment Income . . . . . . . -- -- -- -- $103 $772
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 30
STATEMENTS OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
EQUITY EQUITY
INDEX INCOME GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- - -------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED Year Ended ENDED June 7 to ENDED June 7 to
MARCH 31, Sept. 30, MARCH 31, Sept. 30, MARCH 31, Sept. 30,
1994 1993 1994 1993 1994 1993
(000) (000) (000) (000) (000) (000)
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income . . . . . . . . . $2,130 $3,578 $1,457 $429 $380 $144
Realized Net Gain (Loss) . . . . . . . . 262 1,361 250 73 (32) (121)
Change in Unrealized Appreciation
(Depreciation) . . . . . . . . . . . (5,777) 10,457 (7,202) 1,858 (1,216) 580
- - -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations . . . (3,385) 15,396 (5,495) 2,360 (868) (603)
- - -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (1)
Net Investment Income . . . . . . . . . (2,538) (3,537) (1,494) (477) (341) --
Realized Net Gain . . . . . . . . . . . (1,384) (189) (65) -- -- --
- - -------------------------------------------------------------------------------------------------------------------------------
Total Distributions . . . . . . . . (3,922) (3,726) (1,559) (477) (341) --
- - -------------------------------------------------------------------------------------------------------------------------------
NET EQUALIZATION CREDITS--NOTE A . . . . . -- -- 136 176 -- --
- - -------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (2)
Issued --Regular . . . . . . . . . . . 39,516 117,081 45,179 49,746 43,461 38,418
--In Lieu of Cash Distributions 3,922 3,726 1,558 476 341--
Redeemed . . . . . . . . . . . . . . . . (25,768) (52,710) (22,486) (2,706) (11,477) (3,293)
- - -------------------------------------------------------------------------------------------------------------------------------
Net Increase from
Capital Share Transactions . . . 17,670 68,097 24,251 47,516 32,325 35,125
- - -------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) . . . 10,363 79,767 17,333 49,575 31,116 35,728
- - -------------------------------------------------------------------------------------------------------------------------------
Net Assets
Beginning of Period . . . . . . . . . . 164,916 85,149 49,575 -- 35,728 --
- - -------------------------------------------------------------------------------------------------------------------------------
End of Period (3) . . . . . . . . . . . $175,279 $164,916 $66,908 $49,575 $66,844 $35,728
===============================================================================================================================
(1) Distributions Per Share
Net Investment Income . . . . . . . $.18 $.34 $.22 $.11 $.07 --
Realized Net Gain . . . . . . . . . $.10 $.02 $.01 -- -- --
- - -------------------------------------------------------------------------------------------------------------------------------
(2) Shares Issued and Redeemed
Issued . . . . . . . . . . . . . . 3,156 9,884 4,387 4,908 4,117 3,806
Issued in Lieu of Cash Distributions 318 317 155 46 33 --
Redeemed . . . . . . . . . . . . . (2,066) (4,393) (2,220) (262) (1,089) (323)
- - -------------------------------------------------------------------------------------------------------------------------------
1,408 5,808 2,322 4,692 3,061 3,483
- - -------------------------------------------------------------------------------------------------------------------------------
(3) Undistributed Net
Investment Income . . . . . . . $350 $758 $227 $128 $183 $144
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE> 31
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
- - --------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED Year Ended Year Ended May 2 to
MARCH 31, Sept. 30, Sept. 30, Sept. 30,
For a Share Outstanding Throughout Each Period 1994 1993 1992 1991
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . $1.00 $1.00 $1.00 $1.00
----- ----- ----- -----
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . .015 .030 .040 .023
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . . -- -- -- --
----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS . . . .015 .030 .040 .023
- - ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . . (.015) (.030) (.040) (.023)
Distributions from Realized Capital Gains . . . -- -- -- --
----- ----- ----- -----
TOTAL DISTRIBUTIONS . . . . . . . . . . (.015) (.030) (.040) (.023)
- - -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . $1.00 $1.00 $1.00 $1.00
======================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . . . +1.52% +3.05% +4.11% +2.35%
- - ----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- - ------------------------
Net Assets, End of Period (Millions) . . . . . . . $148 $114 $71 $27
Ratio of Expenses to Average Net Assets . . . . . . .28%* .29% .33% .34%*
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . 3.03%* 3.00% 3.90% 5.50%*
Portfolio Turnover Rate . . . . . . . . . . . . . . N/A N/A N/A N/A
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
+ Commencement of Operations.
31
<PAGE> 32
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
HIGH-GRADE BOND PORTFOLIO
- - ----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED Year Ended Year Ended April 29 to
MARCH 31, Sept. 30, Sept. 30, Sept. 30,
For a Share Outstanding Throughout Each Period 1994 1993 1992 1991
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . $10.94 $10.64 $10.24 $10.00
------ ------ ------ ------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . .295 .636 .705 .299
Net Realized and Unrealized Gain (Loss) on
Investments . . . . . . . . . . . . . . . . (.596) .349 .427 .240
------- ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS . . . (.301) .985 1.132 .539
- - ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . . (.295) (.636) (.705) (.299)
Distributions from Realized Capital Gains . . . (.154) (.049) (.027) --
------- ------- ------- ------
TOTAL DISTRIBUTIONS . . . . . . . . . . . . (.449) (.685) (.732) (.299)
- - -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . $10.19 $10.94 $10.64 $10.24
======================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . . . -2.85% +9.64% +11.47% +5.48%
- - ----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- - ------------------------
Net Assets, End of Period (Millions) . . . . . . . $85 $85 $52 $16
Ratio of Expenses to Average Net Assets . . . . . . .28%* .29% .32% .40%*
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . . 5.51%* 5.92% 6.66% 6.89%*
Portfolio Turnover Rate . . . . . . . . . . . . . . 50%* 73% 31% 9%
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
+ Commencement of Operations.
32
<PAGE> 33
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
- - -----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED Year Ended Year Ended May 23 to
MARCH 31, Sept. 30, Sept. 30, Sept. 30,
For a Share Outstanding Throughout Each Period 1994 1993 1992 1991
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . $11.58 $10.83 $10.25 $10.00
------ ------ ------ ------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . .22 .50 .51 .19
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . . (.45) .97 .52 .06
------- ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS . . . (.23) 1.47 1.03 .25
- - ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . . (.27) (.69) (.45) --
Distributions from Realized Capital Gains . . . (.16) (.03) -- --
------- ------- ------ ------
TOTAL DISTRIBUTIONS . . . . . . . . . . (.43) (.72) (.45) --
- - ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . $10.92 $11.58 $10.83 $10.25
======================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . . . -2.14% +14.10% +10.29% +2.50%
- - ----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- - ------------------------
Net Assets, End of Period (Millions) . . . . . . . $226 $191 $76 $13
Ratio of Expenses to Average Net Assets . . . . . . .38%* .39% .42% .51%*
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . . 3.89%* 4.45% 4.77% 5.24%*
Portfolio Turnover Rate . . . . . . . . . . . . . . 49%* 41% 15% 3%
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
+ Commencement of Operations.
33
<PAGE> 34
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
EQUITY INDEX PORTFOLIO
- - -----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED Year Ended Year Ended April 29 to
MARCH 31, Sept. 30, Sept. 30, Sept. 30,
For a Share Outstanding Throughout Each Period 1994 1993 1992 1991
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . $12.37 $11.32 $10.45 $10.00
------ ------ ------ ------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . .15 .34 .26 .08
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . . (.35) 1.07 .85 .37
------- ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS . . . (.20) 1.41 1.11 .45
- - ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . . (.18) (.34) (.24) --
Distributions from Realized Capital Gains . . . (.10) (.02) -- --
------- ------- ------ ------
TOTAL DISTRIBUTIONS . . . . . . . . . . (.28) (.36) (.24) --
- - ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . $11.89 $12.37 $11.32 $10.45
======================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . . . -1.69% +12.68% +10.74% +4.50%
- - ----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- - ------------------------
Net Assets, End of Period (Millions) . . . . . . . $175 $165 $85 $24
Ratio of Expenses to Average Net Assets . . . . . . .28%* .29% .32% .45%*
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . . 2.44%* 2.63% 2.84% 3.22%*
Portfolio Turnover Rate . . . . . . . . . . . . . . 2%* 16% 1% 5%
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
+ Commencement of Operations.
34
<PAGE> 35
<TABLE>
<CAPTION>
EQUITY INCOME PORTFOLIO
- - ---------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED June 7+ to
MARCH 31, Sept. 30,
For a Share Outstanding Throughout Each Period 1994 1993
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . $10.57 $10.00
------ ------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . .23 .14
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . . (1.03) .54
------- ------
TOTAL FROM INVESTMENT OPERATIONS . . . (.80) .68
- - ----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . . (.22) (.11)
Distributions from Realized Capital Gains . . . (.01) --
------- ------
TOTAL DISTRIBUTIONS . . . . . . . . . . (.23) (.11)
- - -----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . $9.54 $10.57
================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . . . -7.67% +6.81%
- - ----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- - ------------------------
Net Assets, End of Period (Millions) . . . . . . . $67 $50
Ratio of Expenses to Average Net Assets . . . . . . .39%* .39%*
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . . 4.46%* 4.30%*
Portfolio Turnover Rate . . . . . . . . . . . . . . 17%* 2%
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
+ Commencement of Operations.
35
<PAGE> 36
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
- - -----------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED June 7 to
MARCH 31, Sept. 30,
For a Share Outstanding Throughout Each Period 1994 1993
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . $10.26 $10.00
------ ------
INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . .06 .04
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . . (.04) .22
------ ------
TOTAL FROM INVESTMENT OPERATIONS . . . .02 .26
- - -----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income . . . . . . . (.07) --
Distributions from Realized Capital Gains . . . . . -- --
------ ------
TOTAL DISTRIBUTIONS . . . . . . . . . . (.07) --
- - -----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . $10.21 $10.26
=================================================================================================================
TOTAL RETURN . . . . . . . . . . . . . . . . . . . +.28% +2.60%
- - -----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- - ------------------------
Net Assets, End of Period (Millions) . . . . . . . $67 $36
Ratio of Expenses to Average Net Assets . . . . . . .44%* .43%*
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . . . . . 1.42%* 1.63%*
Portfolio Turnover Rate . . . . . . . . . . . . . . 27%* 10%
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
+ Commencement of Operations.
36
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS
Vanguard Variable Insurance Fund is registered under the Investment Company Act
of 1940 as a diversified open-end investment company and consists of the Money
Market, High-Grade Bond, Balanced, Equity Index, Equity Income and Growth
Portfolios. Certain investments of the Money Market, High-Grade Bond and
Balanced Portfolios are in corporate debt instruments; the issuers' abilities
to meet their obligations may be affected by economic developments in their
respective industries. Shares of the Fund are currently offered only to
National Home Life Assurance Company Separate Account IV and Separate Account B
for the Vanguard Variable Annuity Plan Contract.
* A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such
policies are consistently followed by the Fund in the preparation of
financial statements.
1. SECURITY VALUATION: Money Market Portfolio: securities are stated at
amortized cost which approximates market value. Other Portfolios: common
stocks listed on an exchange are valued at the latest quoted sales
prices as of 4:00 PM on the valuation date; such securities not traded
are valued at the mean of the latest quoted bid and asked prices; those
securities not listed are valued at the latest quoted bid prices. Bonds
are valued utilizing the latest bid prices and on the basis of a matrix
system (which considers such factors as security prices, yields,
maturities and ratings), both as furnished by independent pricing
services. Temporary cash investments are valued at amortized cost, which
approximates market value.
2. FEDERAL INCOME TAXES: Each Portfolio of the Fund intends to continue to
qualify as a regulated investment company and distribute all of its
taxable income. Accordingly, no provision for Federal income taxes is
required in the financial statements.
3. EQUALIZATION: The Balanced and Equity Income Portfolios follow the
accounting practice known as "equalization," under which a portion of
the price of capital shares issued and redeemed, equivalent to
undistributed net investment income per share on the date of the
transaction, is credited or charged to undistributed income. As a
result, undistributed income per share is unaffected by Portfolio share
sales or redemptions.
4. REPURCHASE AGREEMENTS: The Fund, along with other members of The
Vanguard Group of Investment Companies, transfers uninvested cash
balances into a Pooled Cash Account, the daily aggregate of which is
invested in repurchase agreements secured by U.S. Government
obligations. Securities pledged as collateral for repurchase agreements
are held by the Fund's custodian bank until maturity of each repurchase
agreement. Provisions of the agreement ensure that the market value of
the collateral is sufficient in the event of default; however, in the
event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral may be subject to legal
proceedings.
5. FUTURES: The Equity Index Portfolio utilizes futures contracts to a
limited extent. The primary risks associated with the use of futures
contracts are imperfect correlation between the change in market value
of the securities held by the Portfolio and the prices of futures
contracts, and the possibility of an illiquid market. Futures contracts
are valued based upon their quoted daily settlement prices; changes in
initial settlement value are accounted for as unrealized appreciation
(depreciation) until the contracts are terminated, at which time
realized gains (losses) are recognized. Unrealized appreciation
(depreciation) related to open futures contracts is required to be
treated as realized gain (loss) for federal income tax purposes.
6. OTHER: Security transactions are accounted for on the date the
securities are purchased or sold. Costs used in determining realized
gains and losses on sale of investment securities are those of specific
securities sold. Discounts and premiums on securities purchased are
amortized to interest income over the lives of the respective
securities. Distributions to shareholders of the Money
37
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS (continued)
Market and High-Grade Bond Portfolios are declared on a daily basis
payable on the first business day of the following month. Dividend
income and distributions to shareholders of the Balanced, Equity Index,
Equity Income and Growth Portfolios are recorded on the ex-dividend
date.
* B. Under the terms of advisory contracts, investment advisory fee payments
are calculated at an annual percentage rate of average net assets of the
following Portfolios:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------
Contract
Investment Expiration
Portfolio Adviser Date
- - ------------------------------------------------------------------------------------
<S> <C> <C>
BALANCED WELLINGTON MANAGEMENT APRIL 30, 1995
COMPANY
EQUITY INCOME NEWELL ASSOCIATES MAY 31, 1995
GROWTH LINCOLN CAPITAL MAY 31, 1995
MANAGEMENT COMPANY
- - ------------------------------------------------------------------------------------
</TABLE>
The basic fee thus computed for the Balanced Portfolio is subject to
quarterly adjustments based on performance relative to a combined index
comprised of the Standard & Poor's 500 Stock Index and the Salomon Brothers
High Grade Corporate Bond Index. For the six months ended March 31, 1994,
the investment advisory fee of the Balanced Portfolio represented an
effective annual rate of .10 of 1% of average net assets. No performance
adjustment was required during the period. The advisory fees of the Equity
Income and Growth Portfolios represented effective annual rates of .11 of 1%
and .16 of 1%, respectively, of average net assets.
The Vanguard Group, Inc. furnishes investment advisory services to the Money
Market, High-Grade Bond and Equity Index Portfolios on an at-cost basis.
* C. The Vanguard Group, Inc. furnishes at cost corporate management,
administrative, marketing and distribution services. The costs of such
services are allocated to each Portfolio of the Fund under methods approved
by the Board of Trustees. At March 31, 1994, the Fund had contributed
capital of $122,000 to Vanguard (included in Other Assets), representing .6%
of Vanguard's capitalization. The Fund's trustees and officers are also
directors and officers of Vanguard.
* D. During the six months ended March 31, 1994, purchases and sales of
investment securities, other than U.S. Government securities and temporary
cash investments, were:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------
(000)
-------------------------------
Portfolio Purchases Sales
- - --------------------------------------------------------------------------------------
<S> <C> <C>
HIGH-GRADE BOND $ 6,682 $ 569
BALANCED 72,840 17,905
EQUITY INDEX 19,405 2,026
EQUITY INCOME 30,770 5,523
GROWTH 39,384 6,336
- - --------------------------------------------------------------------------------------
</TABLE>
Purchases and sales of U.S. Government securities were:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------
(000)
-------------------------------
Portfolio Purchases Sales
- - --------------------------------------------------------------------------------------
<S> <C> <C>
HIGH-GRADE BOND $24,702 $20,929
BALANCED 26,196 33,927
- - --------------------------------------------------------------------------------------
</TABLE>
At September 30, 1993, the Growth Portfolio had available a capital loss
carryforward of $121,000 to offset future net capital gains through September
30, 2001.
* E. At March 31, 1994, unrealized appreciation (depreciation) of investment
securities for financial reporting and federal income tax purposes was:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------
(000)
-----------------------------------------------------
Net
Unrealized
Appreciated Depreciated Appreciation
Portfolio Securities Securities (Depreciation)
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HIGH-GRADE BOND $ 332 $ (2,568) $(2,236)
BALANCED 9,666 (9,948) (282)
EQUITY INDEX 18,954 (10,507) 8,447
EQUITY INCOME 907 (6,251) (5,344)
GROWTH 1,547 (2,183) (636)
- - -----------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE> 39
At March 31, 1994, the aggregate settlement value of open Standard & Poor's 500
Index futures contracts expiring in June 1994, held by the Equity Index
Portfolio, the related unrealized depreciation, and the market value of
securities deposited as initial margin for such contracts were $1,340,000,
$66,000, and $198,000, respectively.
* F. The market value of securities on loan to broker/dealers at March 31,
1994, and collateral received with respect to such loans were:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------
(000)
-------------------------------------------------------
Collateral Received
---------------------------------
Market Value Market Value of
of Loaned U.S. Treasury
Securities Cash Securities
- - ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCED $12,986 $2,850 $10,598
EQUITY INDEX 56 102 --
GROWTH 827 854 --
- - ----------------------------------------------------------------------------------------------------
</TABLE>
Security loans are required to be secured at all times by collateral at least
equal to the market value of securities loaned; however, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings.
39
<PAGE> 40
THE VANGUARD FAMILY OF FUNDS
MONEY MARKET FUNDS
Vanguard Money Market Reserves
TAX-EXEMPT MONEY MARKET FUNDS
Vanguard Municipal Bond Fund-Money
Market Portfolio Vanguard State
Tax-Free Funds (CA, NJ, OH, PA)
TAX-EXEMPT INCOME FUNDS
Vanguard Municipal Bond Fund
Vanguard State Tax-Free Funds (CA, FL, NJ, NY, OH, PA)
FIXED INCOME FUNDS
Vanguard Admiral Funds
Vanguard Bond Index Fund
Vanguard Fixed Income Securities Fund
Vanguard Preferred Stock Fund
BALANCED FUNDS
Vanguard Asset Allocation Fund
Vanguard Balanced Index Fund
Vanguard STAR Fund
Vanguard/Wellesley Income Fund
Vanguard/Wellington Fund
EQUITY FUNDS
GROWTH AND INCOME FUNDS
Vanguard Convertible Securities Fund
Vanguard Equity Income Fund
Vanguard Index Trust
Vanguard Quantitative Portfolios
Vanguard/Trustees' Equity Fund-U.S. Portfolio
Vanguard/Windsor Fund
Vanguard/Windsor II
GROWTH FUNDS
Vanguard/Morgan Growth Fund
Vanguard/PRIMECAP Fund
Vanguard U.S. Growth Portfolio
AGGRESSIVE GROWTH FUNDS
Vanguard Explorer Fund
Vanguard Specialized Portfolios
INTERNATIONAL FUNDS
Vanguard International Equity Index Fund
Vanguard International Growth Portfolio
Vanguard/Trustees' Equity Fund-International Portfolio
VARIABLE ANNUITY
Vanguard Variable Insurance Fund
The Vanguard Group * Vanguard Financial Center
Valley Forge, PA 19482
New Account Information: 1-(800) 662-7447
Shareholder Account Services: 1-(800) 662-2739
This Report has been prepared for shareholders
and may be distributed to others only if preceded
or accompanied by a current prospectus.
All Funds in the Vanguard Family are offered by prospectus only.
Q642-03/94
VANGUARD
VARIABLE
INSURANCE FUND
[PHOTO]
SEMI-ANNUAL REPORT
MARCH 31, 1994
40
|
|