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VANGUARD VARIABLE
INSURANCE FUND
Semiannual Report March 31, 1999
Vanguard Money Market Portfolio
Vanguard Short-Term Corporate Portfolio
Vanguard High-Grade Bond Portfolio
Vanguard High Yield Bond Portfolio
Vanguard Balanced Portfolio
Vanguard Equity Income Portfolio
Vanguard Diversified Value Portfolio
Vanguard Equity Index Portfolio
Vanguard Mid-Cap Index Portfolio
Vanguard Growth Portfolio
Vanguard Small Company Growth Portfolio
Vanguard International Portfolio
Vanguard REIT Index Portfolio
[PHOTO]
[THE VANGUARD GROUP LOGO]
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AT VANGUARD, WE BELIEVE
THAT TRADITION MATTERS
Our 8,000 crew members embrace the traditional values on which our success is
built, including integrity, hard work, thrift, teamwork, and fair dealing on
behalf of our clients. Our report cover pays homage to three anniversaries,
each of great significance to The Vanguard Group:
- - The 200th anniversary of the Battle of the Nile, which commenced on August 1,
1798. HMS Vanguard, the victorious British flagship at the Nile, is our
namesake. And its motto-- "Leading the way"--serves as a guiding principle
for our company.
- - The 100th birthday, on July 23, 1998, of Walter L. Morgan, founder of
Wellington Fund, the oldest member of what became The Vanguard Group. Mr.
Morgan was friend and mentor to Vanguard founder John C. Bogle, and helped to
shape the standards and business principles that Mr. Bogle laid down for
Vanguard at its beginning nearly 25 years ago: a stress on balanced,
diversified investments; insistence on fair dealing and candor with clients;
and a focus on long-term investing. To our great regret, Mr. Morgan died on
September 2, 1998.
- - The 70th anniversary, on December 28, 1998, of the incorporation of Vanguard
Wellington Fund. It is the nation's oldest balanced mutual fund, and one of
only a handful of funds created in the 1920s that are still in operation.
Although Vanguard constantly tackles new challenges, adopts new technology, and
develops new services, we treasure the traditions and values that set us apart
in a crowded, competitive industry. And we salute our shareholders, whose
support and trust we strive to earn each and every day.
CONTENTS
A MESSAGE TO
OUR SHAREHOLDERS
1
THE MARKETS IN
PERSPECTIVE
6
REPORTS FROM
THE ADVISERS
8
PERFORMANCE SUMMARIES
19
PORTFOLIO PROFILES
25
FINANCIAL STATEMENTS
41
All comparative mutual fund data
are from Lipper or Morningstar,
unless otherwise noted.
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DEAR SHAREHOLDER,
[PHOTO]
During the first six months of Vanguard Variable Insurance Fund's 1999 fiscal
year, U.S. and international stocks rose while long-term bond prices fell as
interest rates climbed.
For the six months ended March 31, 1999, the returns of our portfolios
varied considerably, ranging from a spectacular +29.8% for our Growth Portfolio
to a lackluster -0.1% for our High-Grade Bond Portfolio. Just as our absolute
performances were mixed, so too were our results relative to similar mutual
funds. Of the nine portfolios in existence during the entire six months, five
outpaced their average peers, while four fell short.
Throughout this report we present the six-month total returns (capital
change plus reinvested dividends) for our portfolios, along with the results of
their average comparative standards. The total return figures reflect the
change in net asset value for each portfolio, adjusted to include the
reinvestment of any income or capital gains distributions. Performance
Summaries for the portfolios, including a breakdown of each fiscal year return
into its income and capital components, are presented on pages 19-24. We point
out that the returns for the portfolios of the Vanguard Variable Insurance Fund
are higher than those of the portfolios in the Vanguard Variable Annuity Plan,
which take into account the administrative and insurance expenses associated
with the plan.
We also present the initial results of the four portfolios that we
introduced to the Vanguard Variable Insurance Fund lineup in February: the
Short-Term Corporate, Diversified Value, Mid-Cap Index, and REIT Index
Portfolios.
THE PERIOD IN REVIEW
During the six months ended March 31, the U.S. stock market rebounded in a big
way from 1998's midyear slump, when most benchmarks declined -20% or more. The
entire U.S. stock market, as measured by the Wilshire 5000 Equity Index, rose
+26.1% during the first half of our fiscal year, setting record highs along the
way. Large-capitalization stocks, as measured by the Standard & Poor's 500
Composite Stock Price Index, were up even more strongly, at +27.3%. Meanwhile,
the Russell 2000 Index of small-cap stocks gained +10.0%, a six-month
performance that was superb by historical standards but subpar in comparison
with larger stocks.
The stock market's gains were far from evenly distributed. The return for
the growth stocks within the S&P 500 Index was an amazing +33.1%, compared with
+20.8% for the value stocks. Among smaller stocks, the growth/value split was
even more striking: a +21.6% return for growth issues versus a decline of -1.5%
for value stocks.
The stock market's generally strong performance came despite two factors
that might have daunted investors: First, corporate earnings declined slightly
in 1998 and were expected to rise less than 3% during early 1999. Second,
interest rates rose, which often is a negative signal for stocks. The rise was
steeper for securities with longer maturities. The yield of the benchmark
30-year U.S. Treasury bond rose 65 basis points (0.65 percentage point), from
4.98% when the fiscal year began to 5.63% as of March 31. At the shorter end of
the spectrum, the yield of 3-month Treasury bills rose 12 basis points to
4.48%. Bond prices, which move in the opposite direction from interest rates,
declined during the half-year, subtracting -3.2% from the return of the Lehman
Brothers
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Aggregate Bond Index, a proxy for the taxable bond market. This price
decline more than offset interest income, resulting in a -0.2% total return for
the index. Generally, the interest rate increase was caused by fear that
inflation cannot remain dormant forever, together with signs that the global
economic crisis is easing. Both factors cooled interest in Treasury securities
over the past several months.
On the international scene, results from European markets were excellent,
but returns from the Pacific region and the emerging markets were better still.
Europe's return of +16.3% in U.S. dollars during the six months--a terrific
half-year return--paled in comparison with the +40.1% return (in U.S. dollars)
from the Pacific region and the +30.5% return (also in dollars) from the
emerging markets. Generally, the returns from the Pacific region and emerging
markets represented rebounds from lows hit last fall during the global economic
crisis. Overall, solid returns from the Pacific and emerging markets were
augmented by a decline in the value of the U.S. dollar versus other currencies,
particularly the Japanese yen. In Europe, the dollar generally strengthened,
diminishing returns for U.S. investors in those markets. A summary of the
half-year results of each of our portfolios follows.
FIXED-INCOME PORTFOLIOS
The MONEY MARKET PORTFOLIO earned +2.5% during the six months, ahead of the
+2.2% return of the average money market mutual fund. Short-term interest rates
rose slightly during the period. At the beginning of the half-year on October 1,
the yield of the 3-month T-bill stood at a twelve-month low of 4.36%, but by
March 31 had edged up to 4.48%. Our performance margin over our average peer
essentially comes down to cost. Our annualized expense ratio (expenses as a
percentage of average net assets) is 0.21%, or $2.10 per $1,000 invested--far
below the 0.82%, or $8.20 per $1,000, charged by the average money market mutual
fund.
<TABLE>
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TOTAL RETURNS
SIX MONTHS ENDED
MARCH 31, 1999
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<S> <C>
MONEY MARKET PORTFOLIO* +2.5%
(SEC 7-Day Annualized Yield: 4.81%)
Average Money Market Fund +2.2
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index +2.3
- ------------------------------------------------------------------------------------
HIGH-GRADE BOND PORTFOLIO -0.1%
Average Intermediate-Term
U.S. Government Fund -0.9
Lehman Aggregate Bond Index -0.2
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HIGH YIELD BOND PORTFOLIO +4.6%
Average High Yield Bond Fund +5.7
Lehman High Yield Bond Index +4.0
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</TABLE>
*An investment in a money market portfolio is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the portfolio seeks to preserve the value of your investment at $1 per share,
it is possible to lose money by investing in the portfolio.
Our HIGH-GRADE BOND PORTFOLIO provided the lowest return of the nine
portfolios in existence during the entire half-year. Its return of -0.1% was
slightly better than the -0.9% return of its average peer. The prices of our
bonds declined because of higher interest rates, more than offsetting the
interest income earned during the period. Our return was a bit better than the
- -0.2% return of our target Lehman Aggregate Bond Index.
The HIGH YIELD BOND PORTFOLIO'S six-month return of +4.6% measured up well
versus its unmanaged index but fell short of the +5.7% return of the
portfolio's average competitor. Our shortfall versus our peers owed to our more
conservative stance of holding higher-quality--and thus less-risky--securities.
Investors willing to accept the higher risk of lower-quality bonds in exchange
for higher interest income were rewarded during the six months, when strong
economic growth increased the likelihood that borrowers would be able to repay
their debts.
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BALANCED PORTFOLIO
Our BALANCED PORTFOLIO earned a +7.4% return during the six months, reflecting
both the excellent gains by large-cap stocks and the negative returns from
long-term bonds. Our return fell well short of the +12.6% return of the average
balanced fund and was less than half the +16.4% return of our unmanaged
benchmark--a composite index weighted 65% in the S&P 500 Index and 35% in
high-quality, long-term bonds. Our shortfall can be largely explained by two
factors: our emphasis on value stocks, which significantly underperformed
growth stocks during the half-year, and our focus on longer-term bonds, which
suffered most from the increase in interest rates.
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TOTAL RETURNS
SIX MONTHS ENDED
MARCH 31, 1999
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<S> <C>
BALANCED PORTFOLIO + 7.4%
Average Balanced Fund +12.6
Composite Stock/Bond Index* +16.4
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</TABLE>
*65% S&P 500 Index, 35% Lehman Long Corporate AA or Better Bond Index.
DOMESTIC EQUITY PORTFOLIOS
The +10.8% return of our EQUITY INCOME PORTFOLIO, while solid on an absolute
basis, was subpar in comparison with our average peer and the powerful S&P 500
Index. The high-yielding stocks we emphasize trailed growth stocks badly during
the six months. The portfolio was significantly underweighted in the
half-year's two best-performing sectors: technology and consumer discretionary
(mainly retailers). Many stocks in these groups don't fit our investment
criteria because their dividend payments are low or nonexistent. Also, we
maintained our customary heavy commitment to the utilities sector (about 26% for
our portfolio during the six months versus 12% for the index) because of the
attractive dividend income those stocks typically provide. However, the utility
group's biggest gains came from telecommunications equipment stocks, many of
which pay little or no dividends and therefore do not fit the profile for stocks
we seek.
<TABLE>
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TOTAL RETURNS
SIX MONTHS ENDED
MARCH 31, 1999
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<S> <C>
EQUITY INCOME PORTFOLIO +10.8%
Average Equity Income Fund +13.2
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EQUITY INDEX PORTFOLIO +27.5%
Average General Equity Fund +21.7
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GROWTH PORTFOLIO +29.8%
Average Growth Fund +28.2
- ------------------------------------------------------------------------------------
S&P 500 Index +27.3%
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SMALL COMPANY GROWTH PORTFOLIO +14.4%
Average Small Company Growth Fund +13.1
Russell 2000 Index +10.0
Small Company Growth Fund Stock Index +11.7
- ------------------------------------------------------------------------------------
</TABLE>
The EQUITY INDEX PORTFOLIO provided a stupendous return of +27.5% for the
half-year, outpacing the average general equity mutual fund by 5.8 percentage
points and even besting the +27.3% return of the unmanaged S&P 500 Index. Our
significant margin over our average peer was primarily the result of the
market's extreme bias toward stocks of large companies. Our performance
advantage over the S&P 500 is a notable feat because the index exists only "on
paper" and bears none of the operating expenses or transaction costs incurred by
actual investment portfolios. Our low expense ratio, which at 0.19% of average
net assets is more than a full percentage point lower than that of our average
peer, helps us to closely track the index and provides a significant head start
versus competing funds.
Stocks of large growth companies continued to soar during the half-year, and
our GROWTH PORTFOLIO participated in the rise. Our six-month return of +29.8%
topped both
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the +28.2% return of the average growth mutual fund and the +27.3% return of
the S&P 500 Index. However, we fell short of the +33.1% return of the S&P 500
Index's growth component, which is a good measure of the large-cap growth
stocks we emphasize. Earning a six-month return that nearly equals three years'
worth of "normal" stock market gains is quite an accomplishment, but one that
is not likely to be repeated often.
During a six-month period when small stocks were left in the dust by large
stocks, our SMALL COMPANY GROWTH PORTFOLIO turned in a solid performance, both
on an absolute basis and relative to its peer mutual funds. Our +14.4% return
was 1.3 percentage points higher than the return of the average small company
growth fund and 2.7 percentage points ahead of the +11.7% return of the Small
Company Growth Fund Index, an unmanaged index we use to evaluate our
performance.
INTERNATIONAL PORTFOLIO
Our INTERNATIONAL PORTFOLIO provided a solid return of +16.7% for the
half-year, but one that was somewhat disappointing relative to its comparative
standards. Our return was 1.5 percentage points below the +18.2% return of the
average international mutual fund and nearly six percentage points lower than
the +22.5% return of the Morgan Stanley Capital International Europe,
Australasia, Far East (EAFE) Index. Gen-erally, our relative performance was
hindered by our bigger stake in Europe, which lagged Asia and the emerging
markets. Both of these markets turned in excellent performances for the six
months, rebounding from lows reached last summer after big declines in 1997 and
early 1998.
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TOTAL RETURNS
SIX MONTHS ENDED
MARCH 31, 1999
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<S> <C>
INTERNATIONAL PORTFOLIO +16.7%
Average International Stock Fund +18.2
MSCI EAFE Index +22.5
- -----------------------------------------------------------------------------------
</TABLE>
OUR NEW PORTFOLIOS
Our four new portfolios, which fill several niches in our lineup, began
investment operations in early February. For the record, we present their
performance during their first seven weeks of existence. But we emphasize that
results over such a brief period are hardly meaningful. Any long-term
investment, particularly that of a variable insurance contract, must be judged
over periods of years and decades, not days, weeks, or even months. We are
confident that over long periods, the results of our funds will be fully
competitive with those of similar investments. A big reason for our confidence
is the simple fact that our much lower operating expenses give us a weighty
advantage over our competitors, year after year.
<TABLE>
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TOTAL RETURNS
SINCE INCEPTIONS*
THROUGH MARCH 31, 1999
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<S> <C>
SHORT-TERM CORPORATE PORTFOLIO +0.2%
Average Short-Term Corporate Fund +0.1
Lehman 1-5 Year Investment
Grade Index +0.6
- ------------------------------------------------------------------------------------
DIVERSIFIED VALUE PORTFOLIO +2.4%
Average Value Fund +4.4
S&P 500 Index +3.6
- ------------------------------------------------------------------------------------
MID-CAP INDEX PORTFOLIO +1.5%
Average Mid-Cap Fund +3.6
S&P MidCap 400 Index +1.4
- ------------------------------------------------------------------------------------
REIT INDEX PORTFOLIO -2.5%
Average Real Estate Fund -2.7
Morgan Stanley REIT Index -2.5
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</TABLE>
* For Short-Term Corporate and Diversified Value Portfolios, February 8, 1999;
for Mid-Cap Index and REIT Index Portfolios, February 9, 1999.
IN SUMMARY
As the returns from the financial markets demonstrated during the past six
months, unpredictability is a hallmark of investing--especially over short time
periods. Because
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8
the market's leaders and laggards will trade places time and again, we believe
a balanced approach to investing is the prudent way to reap the rewards of the
financial markets while helping to limit some of the risks.
The low-cost portfolios of Vanguard Variable Insurance Fund provide an
excellent opportunity to create a diversified investment program through a
tax-advantaged variable annuity or variable life insurance plan. Such a
balanced program helps investors to "stay the course" through the markets' ups
and downs by combating the tendency to become overly optimistic during upturns
or overly pessimistic during downturns. In short, our counsel is to have a plan
and stick with it.
We look forward to reporting to you on the full fiscal year six months
hence.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Senior Chairman Chairman and
Chief Executive Officer
April 19, 1999
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[PHOTO]
THE MARKETS IN PERSPECTIVE
SIX MONTHS ENDED MARCH 31, 1999
Stock markets worldwide provided solid gains during the six months ended March
31, 1999, as they recovered from a sharp slide in midsummer 1998. Central banks
around the world helped by easing monetary policy and lowering short-term
interest rates.
A remarkably robust performance by the U.S. economy was a key factor in the
global recovery. Indeed, the United States was the only major economy in which
policymakers and bondholders had to ponder whether growth was too rapid.
Concern about a potential inflationary surge was one reason that longer-term
interest rates rose modestly and bond prices generally slipped in the United
States.
U.S. STOCK MARKETS
The surge in U.S. stocks during the half-year reflected both the strength of
the domestic economy and the confidence of investors in future corporate and
economic prospects. The overall market, as measured by the Wilshire 5000 Equity
Index, gained 26.1%. The S&P 500 Index, which is dominated by
large-capitalization stocks, advanced 27.3%. Small-cap stocks, which have
consistently underperformed large-cap stocks in recent years, gained 10.0%, as
measured by the Russell 2000 index.
There was also a striking disparity in returns from growth and value
stocks; the growth-stock segment of the S&P 500 Index gained 33.1%, while the
value-stock segment rose 20.8%.
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TOTAL RETURNS
PERIODS ENDED MARCH 31, 1999
-----------------------------------------
6 MONTHS 1 YEAR 5 YEARS*
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<S> <C> <C> <C>
STOCKS
S&P 500 Index 27.3% 18.5% 26.2%
Russell 2000 Index 10.0 -16.3 11.2
Wilshire 5000 Index 26.1 13.1 23.6
MSCI EAFE Index 22.5 6.4 9.1
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BONDS
Lehman Aggregate Bond Index -0.2% 6.5% 7.8%
Lehman 10-Year Municipal Bond Index 1.2 6.3 7.7
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 2.3 4.9 5.2
- ------------------------------------------------------------------------------------------------
OTHER
Consumer Price Index 0.9% 1.7% 2.3%
- ------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
Investors in U.S. stocks seemed to have forgotten the jitters that sent
market indexes plummeting by 20% or more during the summer of 1998. Nor did
they appear to care that corporate earnings were flat to slightly lower during
the half-year. Investors focused more on the potential for future earnings than
on near-term disappointments. Interest rate reductions by central banks,
including three separate quarter-percentage-point cuts during autumn 1998 by
the U.S. Federal Reserve Board, lessened fears that the major economies would
be dragged down by the economic and currency troubles still afflicting much of
Asia, Russia, and Latin America. There was certainly little fear among U.S.
consumers, who were encouraged by low unemployment, rising wages, and low
inflation to spend freely. Their spending propelled the economy to a 6%
annualized growth rate during the first quarter of our fiscal year.
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With consumer spending so strong, it is no surprise that retailers and
other companies in the consumer-discretionary sector were the stock market's
leaders during the fiscal half-year, rising 49% on average. Technology stocks
were a close second, gaining 48%. Optimism--some would say overoptimism--was
especially evident in Internet stocks.
The market's laggards were energy stocks (integrated-oil companies were up
a relatively paltry 6%; "other energy" rose about 14%) and the consumer-staples
and materials & processing groups (each up about 10%). Energy stocks lagged
because prices for oil and natural gas were weak, despite upticks late in the
period. Several large makers of consumer staples, such as beverages and
tobacco, reported disappointing overseas profits.
U.S. BOND MARKETS
Early in the fiscal year, long-term interest rates fell to 30-year lows as a
result of the favorable inflationary environment and heavy demand from
investors who sought the perceived safety of U.S. Treasury bonds amid overseas
economic turmoil. The yield of the 30-year Treasury began the period at 4.98%
and fell to a low of 4.72% on October 5. However, as prices of stocks and
riskier bonds rebounded from their summertime lows, Treasury bond prices began
to fall and their yields began to rise. By March 31, the yield on the 30-year
Treasury was at 5.63%, up 65 basis points (0.65 percentage point) for the
half-year. The Lehman Brothers Long U.S. Treasury Bond Index declined -5.2%
during the half-year. The overall U.S. taxable bond market, as measured by the
Lehman Aggregate Bond Index, which has an intermediate-term average maturity,
had a negative return of -0.2%. High-yield bonds, which had suffered along with
other risky assets during last summer's slump in financial markets, produced
positive returns during the half-year.
Short-term interest rates, which were most directly affected by the Federal
Reserve Board's reductions, rose only slightly. Yields on 3-month Treasury
bills began the half-year at 4.36% but fell as low as 3.62% in mid-October. By
March 31, the 3-month T-bill was yielding 4.48%, only 12 basis points higher
than the rate when the period began.
INTERNATIONAL STOCK MARKETS
International stock markets, heartened by Wall Street's strong rally and easier
monetary policy, rallied during the half-year. Overall, the Morgan Stanley
Capital International Europe, Australasia, Far East (EAFE) Index gained 22.5%
in U.S. dollars. The gains were due, in part, to interest rate cuts by monetary
authorities in Japan, Europe, and Latin America. Investors also were heartened
by an increase in corporate restructuring and merger activity in Europe and
recession-wracked Japan.
The biggest gains overseas were for those bourses hit hardest during 1997
and 1998: emerging markets (the MSCI Select Emerging Markets Free Index rose
30.5% during the six months) and the Pacific region (up 40.1%). Further
boosting returns for U.S. investors was a weakening of the U.S. dollar against
the Japanese yen. In a turnabout, Europe's developed stock markets--which
account for some 70% of the EAFE Index--were the laggards, although they
performed well on balance, providing an aggregate return of 16.3% for U.S.
investors. While the U.S. dollar was weakening against the Japanese yen, and
thus boosting returns from the Pacific region for U.S. investors by more than
12 percentage points, it was gaining against most European currencies, cutting
U.S. investors' returns on European stocks by about 5 percentage points.
In some emerging markets where stocks had plummeted in 1997 and 1998, the
six-month gains were spectacular: about 130% in U.S.-dollar terms in South
Korea, 115% in Indonesia, 69% in Malaysia, 66% in the Philippines, and 43% in
Mexico.
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[PHOTO]
REPORT FROM VANGUARD
FIXED INCOME GROUP
MONEY MARKET, SHORT-TERM CORPORATE,
AND HIGH-GRADE BOND PORTFOLIOS
THE INVESTING ENVIRONMENT
The semiannual period ended March 31, 1999, will be remembered for its
roller-coaster qualities. Interest rates first experienced deep dips brought on
by the turmoil in Asia, Russia, and Brazil, as yields on long-term Treasury
securities dropped so far that they were half-a-percentage point below
short-term rates. Subsequently, as investors realized that the U.S. economy
remained on its growth track, long-term rates snapped back to where they
exceeded short-term rates by nearly 1 percentage point. So despite confronting
sharp curves, where we were uncertain what was around the bend (such as when
Russia defaulted on its debt), the market's thrill ride took us safely back to
where we began the period. The U.S. economy is still growing strongly, as the
gross domestic product expanded at an annual pace of 6% during the final
quarter of 1998 and the unemployment rate continued to shrink, ending the
half-year at 4.2%. Inflation remains subdued, allowing money market investors
to enjoy substantial real, or inflation-adjusted, returns.
The period's volatile ride began with heightened concerns that
deteriorating financial conditions in Asia could trigger a global economic
slowdown. These concerns peaked when Russia devalued its currency and defaulted
on its debt, steps that sent investors around the globe scurrying for the "safe
haven" of U.S. Treasury securities. The desire to own Uncle Sam's debt was so
strong that corporate issuers faced a marketplace reluctant to purchase their
debt, which added to the instability and illiquidity in our markets. In
response to these destabilizing forces, the Federal Reserve Board lowered
interest rates on three occasions during autumn 1998, ultimately bringing the
federal funds rate down from 5.50% to 4.75%. The Fed's action helped restore
order in the financial markets, and by first-quarter 1999 the spreads between
yields on different types of fixed-income securities had returned to more
normal relationships.
For most of the half-year, the yield curve for Treasury securities remained
relatively flat, indicating that market participants were inclined to believe
the Fed would lower interest rates further. The market remained focused on the
potential impact to our economy of the trouble overseas, until a string of
positive surprises in the number of new jobs reminded the
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market that the U.S. economy had retained its forward momentum. Continued
strength in retail sales plus record-setting sales of new homes provided ample
evidence of the benefits to the economy of lower interest rates, higher wages,
and low inflation. The fears that the global crisis would severely crimp our
forward momentum never materialized. Neither did the anticipated damage to U.S.
companies from a flood of cheap overseas products from countries that had
devalued their currencies. Near the end of the six-month period, speculation
that the Fed would need to lower interest rates further to spur the economy
shifted to expectations that interest rates would need to be raised to restrain
the economy's expansion.
MONEY MARKET PORTFOLIO
The Money Market Portfolio earned a 2.5% return during the half-year,
surpassing the 2.2% return of our average peer. In managing the portfolio, we
maintained a longer-than-usual average maturity, a stance that allowed us to
capture yields that reflected the market's expectations of higher interest
rates in the future. We expect the Fed to maintain short-term interest rates at
their present level for the near term. We continue our long-standing practice
of investing only in issues with high credit quality. Because our portfolio's
expense ratio is significantly lower than that of the average money market
mutual fund, we are able to achieve superior investment returns while
maintaining high quality standards.
SHORT-TERM CORPORATE PORTFOLIO
After less than two months of operations--the portfolio commenced investing on
February 8--there is little to say about the performance of the portfolio. For
the record, it earned 0.2%, a fraction above the return of the average
short-term corporate bond fund. Although interest rates and bond returns will
fluctuate from period to period, investors in the portfolio can count on
stability in terms of our management of their assets. We will invest in
high-quality corporate securities and maintain an average weighted maturity
within a range of 1 to 3 years. When we believe we can add value, we will
adjust the maturity of the portfolio's holdings within that range. Also, we
constantly analyze the relative values of individual securities and sectors
within the fixed-income market, and will emphasize those that appear to us to
offer good value.
HIGH-GRADE BOND PORTFOLIO
As you know, the High-Grade Bond Portfolio is designed to closely replicate the
performance of the Lehman Aggregate Bond Index. For the 6- and 12-month periods
ended March 31, 1999, the portfolio's total returns were -0.1% and 6.5%,
respectively, compared with the index's posted returns of -0.2% and 6.5%. When
the fund's returns are adjusted for expenses and transaction costs (neither of
which affects the index), the fund outpaced the index by 0.3 percentage point
for the half-year and 0.5 percentage point for the 12 months ended March 31.
Our total return for the half-year was 0.8 percentage point ahead of the
average fund in our peer group. The performance of the various sectors of the
Lehman Aggregate Bond Index for the 6- and 12-month periods ended March 31,
1999, is shown at left.
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<CAPTION>
- --------------------------------------------------------------------------------------
PERIODS ENDED MARCH 31, 1999
--------------------------------
SIX-MONTH TWELVE-MONTH
TOTAL RETURNS TOTAL RETURNS
- --------------------------------------------------------------------------------------
<S> <C> <C>
Lehman Aggregate Bond Index -0.16% 6.49%
Government Sector -1.51 6.68
Corporate Sector 0.11 6.18
Mortgage-Backed Securities Sector 1.79 6.27
- --------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 12
The best-performing category--by a significant margin--during the period
was the mortgage sector. The higher yield and shorter average life of
mortgage-backed securities combined to protect this sector during this period
of rising interest rates. The spreads between yields of corporate bonds and
those of Treasury bonds narrowed as fears about the global financial and
economic crisis eased. This resulted in corporate bonds outperforming
government bonds during the half-year, although over the last 12 months,
government bonds performed slightly better than corporate or mortgage-backed
securities.
As of March 31, the portfolio comprised 26% government bonds, 37% corporate
bonds, 4% foreign bonds (denominated in U.S. dollars), and 33% mortgage-backed
securities.
Robert F. Auwaerter, Principal
David R. Glocke, Principal
Kenneth E. Volpert, Principal
April 20, 1999
INVESTMENT PHILOSOPHIES
MONEY MARKET PORTFOLIO
The adviser believes a portfolio can provide the highest level of current
income consistent with capital preservation and liquidity by holding
high-quality money market instruments issued by financial institutions,
nonfinancial corporations, and the U.S. government.
SHORT-TERM CORPORATE
PORTFOLIO
The adviser believes a portfolio can provide relatively high levels of current
income with only modest share-price fluctuation by holding high-quality
corporate bonds with short- and intermediate-term maturities.
HIGH-GRADE BOND PORTFOLIO
The adviser believes a portfolio can provide sustainable, high levels of
current income by holding an extremely well-diversified group of U.S.
government, corporate, and mortgage-backed bonds that parallels the performance
of the Lehman Brothers Aggregate Bond Index.
10
<PAGE> 13
REPORT FROM WELLINGTON
MANAGEMENT COMPANY, LLP
HIGH YIELD BOND PORTFOLIO
For the 6- and 12-month periods ended March 31, 1999, the High Yield Bond
Portfolio provided total returns of 4.6% and 2.8%, respectively.
As we have noted before, the direction of interest rates--which is the
primary short-term driver of performance in the overall bond market--is not
always the determining factor in the behavior of the high-yield market. For
example, yields on 10-year U.S. Treasury securities rose 82 basis points
between September 30, 1998, and March 31, 1999, resulting in sharp price
declines for longer-term Treasuries (the Lehman Long U.S. Treasury Index had a
capital return of -8.1% and a total return of -5.2% for the six months).
However, high-yield bonds experienced, on average, only slight price declines
(the Lehman High Yield Index had a capital return of -0.6% and a positive total
return of 4.0% for the half-year).
In short, the below-investment-grade, or high-yield, bond market continues
to be a hybrid one. Under some market conditions, it follows the direction of
the stock market; at other times, it behaves similarly to the bond market. When
the stock market is very volatile, as it has been during the past year or so,
below-investment-grade bonds usually perform in the same direction as stocks.
But when the stock and bond markets are reasonably stable, high-yield bonds
tend to trade more like investment-grade bonds.
Currently, with concerns about an economic slowdown fading, together with
an easing in the "flight to quality" that occurred during summer 1998, the
high-yield market should perform well. Investors will increase their tolerance
for risk as companies' profits remain strong, issuers' ability to repay their
debts increases, and rating agencies upgrade their outlook for the individual
companies. The market still has not recovered completely from the turmoil that
affected global financial markets late last summer. Given that fears of a
credit contraction have receded, we are somewhat surprised that the risk
premium--the yield differential between high-yield bonds and bonds of higher
credit quality--is still so high.
We remain very selective with respect to credit quality as we examine the
large number of new high-yield bond issues continuing to come to market. We are
avoiding the smaller start-up companies and continuing to emphasize the
higher-quality end of the spectrum of below-investment-grade bonds.
We perform in-depth credit research on a company-by-company basis, and we
emphasize diversification. The portfolio owns issues representing a broad range
of industries and companies. Our holdings continue to be predominantly
cash-paying issues rated B or better.
Earl E. McEvoy, Senior Vice President
and Portfolio Manager
April 14, 1999
INVESTMENT PHILOSOPHY
The adviser believes a diversified group of high-yielding, medium- and
low-quality corporate bonds--selected after rigorous credit assessment--can
provide sustainable, high current income as well as some potential for capital
growth.
11
<PAGE> 14
REPORT FROM WELLINGTON
MANAGEMENT COMPANY, LLP
BALANCED PORTFOLIO
The Balanced Portfolio provided a return of 7.4% during the six months ended
March 31, 1999, versus 12.6% for the average balanced fund and 16.4% for our
composite stock/bond index, weighted 65% in the S&P 500 Index and 35% in
long-term, high-quality corporate bonds. The portfolio's stocks, representing
about 65% of assets as of March 31, appreciated 13.6%. The stock market gained
27.3% during this period, boosted by three successive reductions in short-term
interest rates by the Federal Reserve Board. Lower rates particularly benefit
growth stocks, which, led by the technology sector, did extremely well. Our
focus on companies with low price/earnings ratios and above-average dividends
hurt our relative performance. The portfolio's bond segment, representing about
35% of assets, declined -2.2% during the six-month period, as a result of
rising interest rates.
We continued to make moderate changes to the equity holdings in the
portfolio, but maintained our emphasis on the financial-services, materials,
industrial, health-care, and energy sectors. The annualized dividend yield on
the portfolio's stocks was 2.3% as of March 31, compared with 1.3% for the S&P
500 Index. New names among our holdings during the last six months include
Delphi Automotive Systems, which was spun off by General Motors, and
Schlumberger, the leading oil-service company.
The "value" orientation of the portfolio's stocks has been a handicap in
our relative performance in a market that has embraced a narrow group of
low-yielding growth stocks. We believe that world economic growth, which has
been held back by economic problems in Asia and South America, will recover
late in 1999 and that this will benefit the more cyclical value stocks that
traditionally make up a large part of our holdings.
In the fixed-income portion of the portfolio, corporate bonds did well
relative to U.S. Treasury securities, which helped our performance. We saw a
partial reversal of the flight of investors to Treasury securities that
occurred in summer 1998, when Treasuries benefited from fears about the
financial situation in South America, Russia, and Asia. We do not expect
interest rates to decline from current levels, in view of the global economic
recovery that we anticipate.
As of now, investors continue to favor a narrow group of growth stocks,
particularly those related to technology and telecommunications. We believe
that at some point other market sectors will more fully participate in the
market's advance, especially given an environment of stronger world economic
growth combined with stable interest rates. We believe your portfolio is well
positioned for such an outlook.
Ernst H. von Metzsch, Senior Vice President
and Portfolio Manager
Paul D. Kaplan, Senior Vice President
and Portfolio Manager
April 14, 1999
INVESTMENT PHILOSOPHY
The adviser believes that a reasonable level of current income and long-term
growth in capital can be achieved without undue risk by holding 60% to 70% of
assets in common stocks and the balance in fixed-income securities. Consistent
with this approach, dividend-paying stocks dominate the equity segment of the
portfolio, while long-term, high-quality corporate, U.S. Treasury, and
mortgage-backed securities make up the bond segment.
12
<PAGE> 15
REPORT FROM NEWELL ASSOCIATES
EQUITY INCOME PORTFOLIO
The Equity Income Portfolio rose 10.8% during the six months ended March 31,
1999, well behind the 27.3% return of the S&P 500 Index. The important story
behind the market rise is not its strength but the degree to which
large-capitalization growth stocks outperformed other large companies.
Some observers have noted that the superior performance of growth stocks
represents a major change in investor sentiment--that is, investors are
abandoning the search for good companies at attractive prices and are merely
chasing stocks with strong upward price momentum, regardless of valuation or
degree of risk. The fact that only a few large companies are driving the major
indexes magnifies the effect of this change, highlighting the market's apparent
casino mentality. One effect of this momentum-investing phenomenon is the
enormous spread during the past six months between the performance of the
technology-dominated S&P 500 Index and that of the average equity income fund,
which gained 13.2%.
Value portfolios offered few bright spots during the period to counter the
blazing performance of tech companies. Drug stocks retained some excitement,
but outside of technology and a few other large growth stocks, investors had
little enthusiasm for the bulk of corporate America.
The current bull market has long since shattered the historical limit of
every traditional measure of stock valuation, so there is no credible ceiling
on the extent of the excess this market could achieve. It takes only one
success, the story goes, to achieve instant wealth, just as it takes only one
winning lottery ticket to make up for all those that didn't win. In such an
environment, it is no wonder that some managers foresake fundamental analysis
and long-followed investment disciplines to simply follow fads.
The problem with abandoning discipline is that investing is not just a
performance game for speculators, but serious work for millions of people whose
retirement years will be shaped by their investment efforts. For a retirement
system to work, it must not resemble a lottery, with a few big winners and lots
of losers; virtually everybody needs to be at least a modest winner. And for
that to happen, most investors must eschew the temptation to gamble on the big
win and must exercise prudence, settling for a more modest return in exchange
for lower risk.
Judge Samuel Putnam, who authored the "prudent man rule" in a court opinion
in 1830, advised investors to exercise judgment and care "not in regard to
speculation but in regard to the permanent disposition of their funds,
considering the probable income as well as the probable safety of their
capital." His prescription may not get investors to their financial goals in
spectacular style, but it will move them steadily toward those ends with some
confidence that they will actually be achieved.
Roger D. Newell, Chairman
April 14, 1999
INVESTMENT PHILOSOPHY
The adviser believes that a portfolio made up of undervalued stocks, whose
dividend yields compared to the overall market are above-average, both
currently and in relation to historical norms, can provide a high level of
current income, the potential for capital appreciation, and below-average price
volatility for a stock mutual fund.
13
<PAGE> 16
REPORT FROM BARROW, HANLEY,
MEWHINNEY & STRAUSS, INC.
DIVERSIFIED VALUE PORTFOLIO
The Dow Jones Industrial Average is above 10,000, as of this writing. Such a
level for the stock market was unimaginable ten years ago. We were propelled to
this lofty place by a robust economy (the strongest on earth), low interest
rates (the best since the 1960s), a federal budget surplus (the first
back-to-back surpluses since the 1950s), and low inflation.
Cash flows into stocks have been very strong, in large measure due to
individual retirement accounts and other retirement-savings vehicles. So long
as corporate earnings are good, confidence in the economy and government is
high, and inflation is under control, prices can hold at current levels and
even improve.
This is our first semiannual letter to investors in Vanguard Variable
Insurance Fund. As you know, the Diversified Value Portfolio has been in
operation for only a fraction of the semiannual period. In fact, the 51-day
period since the portfolio's inception (through March 31, l999) is so short
that investment returns are not very meaningful.
We feel it's important for this letter to discuss what you can expect the
portfolio to look like in the future. Additional funds will generally be
invested in our existing holdings. We are value investors, and while most
organizations lay claim to that description, we believe that we are more
dedicated to its pursuit than many practitioners. We define value stocks as
those with low price/earnings and price/book ratios and high current dividend
yields. Most of the portfolio's individual stocks will have these
characteristics, and the portfolio as a whole certainly will have them. As a
guideline, expect the portfolio's average P/E ratio to be 70%-80% of the
average P/E of the S&P 500 Index. Likewise, the price/book ratio of our
holdings will be about 70% of the market average. And the current dividend
yield, before expenses, will be 140%-180% of the yield of the S&P 500.
Investment turnover for the portfolio should average 25%-30% annually,
indicating that we will hold our average security for three to four years. No
individual stock should represent more than 5% of the portfolio's total assets.
We are not likely to have large cash reserves, since we do not hold ourselves
out as market-timers.
We, like many professional investors, are concerned with the price level of
Internet stocks, and worry that the speculators driving up these stocks could
trigger a panic. While we are unlikely to invest in small initial public
offerings or stocks with no earnings, a sharp decline in those types of
securities could spill over into our investment arena and spoil the party. We
would hope the defensive nature of this portfolio would serve us well should
such an event occur, but it certainly would not make us immune to a general
market decline.
James P. Barrow
April 12, 1999
INVESTMENT PHILOSOPHY
The adviser believes that superior long-term investment results can be achieved
by holding a diversified portfolio of out-of-favor stocks that have
above-average dividend yields, below-average prices in relation to earnings,
sales, and book value, and the prospect of above-average total return.
14
<PAGE> 17
REPORT FROM LINCOLN CAPITAL
MANAGEMENT COMPANY
GROWTH PORTFOLIO
The stock market sagged during the six months ended September 30, 1998. The
ensuing six months, were gangbusters, with the S&P 500 Index up 27.3%. It's
hard to remember another such dramatic turnaround.
The Growth Portfolio's 29.8% return was a bit ahead of both the S&P 500 and
the average growth mutual fund (up 28.2%). However, it lagged by 3 to 5
percentage points representative large-capitalization growth stock indexes. We
trailed those indexes because we were underweighted in some of the technology
stocks that led the market's surge--including some of the largest tech stocks
and those associated with the Internet. The fact that your portfolio did not
own America Online and had some unproductive holdings in enterprise software
issues caused this sector of the portfolio to fall behind the indexes. This
six-month shortfall was sufficient to cause returns for the Growth Portfolio to
lag the large-cap growth indexes slightly over the one-, three- and five-year
periods ended March 31, although our returns still exceeded those of the S&P
500 Index and most growth mutual funds.
Major portfolio purchases during the past six months were new positions in
IBM and Nokia, plus additions to our holdings of Merck, Intel, and Procter &
Gamble. Sales included elimination of our stakes in Compaq, Carnival, Lowe's,
and Household International (completed in early April) and a trimming of our
Microsoft position. The total number of issues held rose from 75 to 79. Our ten
largest holdings account for about 40% of assets. Three of the top ten are new
to the list: Lucent, Dell, and Bristol-Myers Squibb. Coca-Cola, Monsanto, and
Philip Morris dropped from the list. The main change in our industry weightings
was an increase in technology holdings, from 21% of assets to 26%, mostly as a
result of this group's superior performance. New purchases among tech stocks
reflect our view that the sector still possesses attractive longer-term
potential.
During the period, our big winners were Microsoft, Cisco, General Electric,
Chase Manhattan, and Wal-Mart. Losers included Philip Morris and Monsanto.
We thought you might like our opinion on the Internet. This has been an
extraordinarily productive area for investment in the past year or so,
especially for America Online, which is the largest-cap Internet firm and--you
may not believe it--the 13th-largest stock in the S&P 500 by market cap. We
have struggled with both valuations and business models in such a dynamic
environment. We don't view valuations of many Internet stocks as absurd. Their
high prices reflect expectations of very high growth and of limited
capital-spending needs after several years. We have underestimated these
evolving expectations for growth and capital productivity, and we'll continue
wrestling with this segment of the growth market.
David Fowler, Portfolio Manager
Parker Hall, Portfolio Manager
April 13, 1999
INVESTMENT PHILOSOPHY
The adviser believes that superior long-term investment results can be achieved
by emphasizing investments in high-quality, established growth companies whose
stocks sell at reasonable prices considering their expected earnings and
compared to values in the broad stock market.
15
<PAGE> 18
REPORT FROM GRANAHAN INVESTMENT
MANAGEMENT, INC.
SMALL COMPANY GROWTH PORTFOLIO
The Small Company Growth Portfolio generated a gain of 14.4% during the six
months ended March 31, 1999, a period that included a strong small-cap rally
near the end of 1998. In the final months of our fiscal half-year, however,
small-cap stocks, with some exceptions, reverted to underperforming larger
stocks. The portfolio's results for the six- and 12-month periods ended March 31
are shown to the left, along with results for our index benchmark.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Total Returns: Periods
Ended March 31, 1999
---------------------------
6 Months 12 Months
- -------------------------------------------------------------------------
<S> <C> <C>
Small Company Growth Portfolio 14.4% -11.3%
Small Company Growth
Fund Stock Index 11.7 -18.7
- -------------------------------------------------------------------------
</TABLE>
During the half-year, positive contributions to our performance came from
holdings in the technology, consumer-discretionary, and health-care sectors,
which together accounted for more than half the portfolio's assets. Very strong
performers among our technology holdings included RealNetworks (Internet
streaming media for video and audio), BroadVision (website customer profiling),
and Exchange Applications (database analysis software). In the health-care
sector, good performers included Biogen (excellent results continue with Avonex
for treating multiple sclerosis), Genzyme, and Abgenix. Ames Department Stores
(we see large potential in its acquisition of Hills Stores) and CEC
Entertainment (an innovative restaurant chain with good margins) contributed
significantly in the consumer sector.
Several holdings hurt our performance. In the financial-services group (13%
of assets during the period), for example, Fidelity National Financial (hurt by
rising mortgage rates) was a drag on our returns. So were companies like
American Homestar and Nobility Homes in the producer-durables sector, and
General Cable in the materials & processing sector. The lesson here is to be
more sensitive to selling when dealing with above-"trend line" earnings that
appear cheap.
STRATEGY AND OUTLOOK
We continue to see good earnings from most of our companies, though the growth
rate has moderated from about 20% in our last report to about 15% currently.
This pace still compares favorably with overall growth in corporate profits.
Many companies undoubtedly face a greater challenge in achieving revenue
growth, given tough pricing pressures. In addition, costs of readying computer
systems for Year 2000 are causing spending delays for some. Although the Y2K
effect is presumably temporary, its passing may not prompt companies to
automatically restore earlier spending patterns. Therefore, we look for
companies
16
<PAGE> 19
that offer solutions for revenue enhancement to their customers, such as the
technology firms BroadVision, Acxiom, and Exchange Applications. Overall,
technology stocks now represent about 25% of the portfolio. Health-care stocks,
at 14% of assets, and consumer-discretionary holdings, at 25% of assets, are
other important commitments emphasizing companies with proprietary market
positions.
Overall, stock valuations are high, although the average P/E
(price/earnings) ratio of 19.5 for our holdings pales in comparison with P/Es
of some larger companies. For example, the S&P 500 Index now has an average P/E
of 32. As noted, our companies are still showing relatively strong earnings
growth of about 15%, well above the trend for overall corporate profits. To be
sure, our P/E of 19.5, when compared with our 15% earnings growth rate,
represents a relatively high ratio by past standards. Our focus in adding new
names to the portfolio is on companies that are showing accelerating growth in
earnings.
John J. Granahan, Portfolio Manager
Gary C. Hatton, Assistant Portfolio Manager
Jane M. White, Assistant Portfolio Manager
April 14, 1999
INVESTMENT PHILOSOPHY
The adviser believes that superior long-term investment results can be achieved
by emphasizing stocks of small and emerging companies (market capitalizations
of up to $1 billion) with favorable prospects for price appreciation. While
most of the companies have records of growth and strong market positions, the
portfolio also invests in companies that are pioneering new technologies or
appear to be undervalued.
17
<PAGE> 20
REPORT FROM SCHRODER CAPITAL
MANAGEMENT INTERNATIONAL
INTERNATIONAL PORTFOLIO
The International Portfolio rose 16.7% over the six months ended March 31,
1999. Over the same period, the MSCI EAFE Index of developed international
stock markets gained 22.5% and the average international equity mutual fund
advanced 18.2%.
Much has changed since my letter to you six months ago. Most important, the
developed world's central banks have dramatically relaxed monetary policy,
which unleashed the sharp rise in global stock markets that is reflected in the
performance of both the EAFE Index and, to a lesser extent, the portfolio. Your
portfolio was too defensively invested for this surge in stocks. Also, more
recently, cyclical stocks have been stronger than the growth stocks that your
portfolio emphasizes.
In many stock markets, a significant easing of monetary policy usually
presages a pronounced period of rising share prices. However, in Europe as
opposed to Asia, this rise has already occurred, although to a lesser extent in
the United Kingdom than in the rest of Europe. In Asia, the Japanese economy
remains mired in recession after five consecutive quarters of falling economic
output. The issue to be resolved in Japan is whether sufficient action will be
taken by companies to improve profit margins, at a time of falling sales, to
support rising share prices. In my opinion, the outlook for the rest of Asia is
tied to the outlook for Japan, the world's second-largest economy (after the
United States).
Against this background, I have added significantly to the portfolio's
exposure to United Kingdom stocks, which now account for 19% of our assets. The
U.K. economy is very sensitive to movements in interest rates, and the
cumulative reduction of 2.25 percentage points in short-term rates over the
past six months has boosted by 7% a typical household's disposable income after
housing finance costs. Accordingly, we have bought into companies that will
benefit from the likely pickup in consumer spending.
The portfolio's largest exposure remains in continental Europe, where 58%
of assets are invested. The launch of a single currency, the euro, for most of
Europe has created more competitive business conditions, adding urgency to the
restructuring of companies and to the ongoing wave of mergers and acquisitions.
In this respect, the environment in continental Europe resembles that of the
United States in the early 1980s; our optimism is based on expectations of
strong corporate profit growth for several years.
The portfolio's 13% commitment to Japanese stocks reflects a cautious view
of that market. We have selected 15 companies, of which the 3 largest holdings
represent more than half of our exposure. In addition to taking this highly
selective stance, we have hedged much of the related currency exposure back to
U.S. dollars to protect against anticipated weakness in the yen.
Richard Foulkes
April 15, 1999
INVESTMENT PHILOSOPHY
The adviser believes that an international stock portfolio can achieve superior
long-term investment results by holding the stocks of non-U.S. companies with
the potential for above-average earnings growth. Particular emphasis is placed
on companies in countries with favorable business and market environments.
18
<PAGE> 21
PERFORMANCE SUMMARIES
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the portfolios. Note, too,
that returns can fluctuate widely, so investments in the portfolios could lose
money. An investment in a money market portfolio is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
Although the portfolio seeks to preserve the value of your investment at $1 per
share, it is possible to lose money by investing in the portfolio.
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
TOTAL INVESTMENT RETURNS: MAY 2, 1991-MARCH 31, 1999
- --------------------------------------------------------------------------
MONEY MARKET PORTFOLIO AVERAGE
FUND*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1991 0.0% 2.3% 2.3% 2.3%
1992 0.0 4.1 4.1 3.8
1993 0.0 3.1 3.1 2.6
1994 0.0 3.6 3.6 3.1
1995 0.0 5.8 5.8 5.3
1996 0.0 5.5 5.5 4.9
1997 0.0 5.5 5.5 4.9
1998 0.0 5.6 5.6 4.9
1999** 0.0 2.5 2.5 2.2
- --------------------------------------------------------------------------
</TABLE>
SEC 7-Day Annualized Yield (3/31/1999): 4.81%
- ---------------------------------------------
* Average Money Market Fund.
**Six months ended March 31, 1999.
See Financial Highlights table on page 52 for dividend information for the past
five years.
<TABLE>
<CAPTION>
SHORT-TERM CORPORATE PORTFOLIO
TOTAL INVESTMENT RETURNS:
FEBRUARY 8, 1999-MARCH 31, 1999
- --------------------------------------------------------------------------------
SHORT-TERM CORPORATE PORTFOLIO LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
PERIOD RETURN RETURN RETURN** RETURN
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 -0.5% 0.7% 0.2% 0.6%
- --------------------------------------------------------------------------------
</TABLE>
* Lehman 1-5 Year Investment Grade Index.
**Since inception.
See Financial Highlights table on page 53 for dividend information since the
portfolio's inception.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 1999
- ------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ---------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Money Market Portfolio 5/2/1991 5.35% 5.40% 0.00% 4.81% 4.81%
Short-Term Corporate Portfolio 2/8/1999 -- -- -0.50 0.72 0.22
- ------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 22
PERFORMANCE SUMMARIES (continued)
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the portfolios. Note, too,
that both share price and returns can fluctuate widely, so an investment in the
portfolios could lose money.
<TABLE>
<CAPTION>
HIGH-GRADE BOND PORTFOLIO
TOTAL INVESTMENT RETURNS: APRIL 29, 1991-MARCH 31, 1999
- ----------------------------------------------------------------------
HIGH-GRADE BOND PORTFOLIO LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1991 2.4% 3.1% 5.5% 6.2%
1992 4.2 7.3 11.5 12.6
1993 3.3 6.3 9.6 10.0
1994 -8.9 5.6 -3.3 -3.2
1995 6.6 7.2 13.8 14.1
1996 -1.7 6.5 4.8 4.9
1997 2.7 6.9 9.6 9.7
1998 4.7 6.7 11.4 11.5
1999** -3.0 2.9 -0.1 -0.2
- ----------------------------------------------------------------------
</TABLE>
* Lehman Aggregate Bond Index.
**Six months ended March 31, 1999.
See Financial Highlights table on page 53 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
HIGH YIELD BOND PORTFOLIO
TOTAL INVESTMENT RETURNS: JUNE 3, 1996-MARCH 31, 1999
- ----------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 1.5% 3.1% 4.6% 3.7%
1997 4.4 9.7 14.1 14.5
1998 -4.6% 8.5% 3.9% 1.7%
1999** 0.3 4.3 4.6 4.0
- ----------------------------------------------------------------------
</TABLE>
* Lehman High Yield Bond Index.
**Six months ended March 31, 1999.
See Financial Highlights table on page 54 for dividend and capital gains
information since the portfolio's inception.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 1999
- -----------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ----------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
High-Grade Bond Portfolio 4/29/1991 6.53% 7.68% 1.18% 6.62% 7.80%
High Yield Bond Portfolio 6/3/1996 2.85 -- 0.50 9.11 9.61
- -----------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 23
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the portfolios. Note, too,
that both share price and returns can fluctuate widely, so an investment in the
portfolios could lose money.
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
TOTAL INVESTMENT RETURNS: MAY 23, 1991-MARCH 31, 1999
- -------------------------------------------------------
BALANCED PORTFOLIO COMPOSITE
INDEX*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -------------------------------------------------------
<S> <C> <C> <C> <C>
1991 2.5% 0.0% 2.5% 2.8%
1992 5.7 4.6 10.3 12.3
1993 7.2 6.9 14.1 13.7
1994 -0.8 3.5 2.7 -0.4
1995 18.5 5.2 23.7 26.6
1996 11.1 4.2 15.3 14.3
1997 26.0 1.6 27.6 30.2
1998 3.7 3.6 7.3 11.5
1999** 3.8 3.6 7.4 16.4
- -------------------------------------------------------
</TABLE>
* 65% S&P 500 Index, 35% Lehman Long Corporate AA or Better Bond Index.
**Six months ended March 31, 1999.
See Financial Highlights table on page 54 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
EQUITY INCOME PORTFOLIO
TOTAL INVESTMENT RETURNS: JUNE 7, 1993-MARCH 31, 1999
- -------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO S&P 500
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993 5.7% 1.1% 6.8% 3.4%
1994 -4.8 3.2 -1.6 3.7
1995 20.0 5.7 25.7 29.7
1996 14.8 4.3 19.1 20.3
1997 36.6 1.5 38.1 40.4
1998 8.7 2.5 11.2 9.0
1999* 8.2 2.6 10.8 27.3
- -------------------------------------------------------------------------
</TABLE>
*Six months ended March 31, 1999.
See Financial Highlights table on page 55 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 1999
- ---------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION -----------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balanced Portfolio 5/23/1991 3.91% 17.07% 9.62% 4.26% 13.88%
Equity Income Portfolio 6/7/1993 35.27 22.09 14.77 3.67 18.44
- ---------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 24
PERFORMANCE SUMMARIES (continued)
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the portfolios. Note, too,
that both share price and returns can fluctuate widely, so an investment in the
portfolios could lose money.
<TABLE>
<CAPTION>
DIVERSIFIED VALUE PORTFOLIO
TOTAL INVESTMENT RETURNS:
FEBRUARY 8, 1999-MARCH 31, 1999
- -------------------------------------------------------------------------
DIVERSIFIED VALUE PORTFOLIO S&P 500
FISCAL CAPITAL INCOME TOTAL TOTAL
PERIOD RETURN RETURN RETURN* RETURN
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 2.4% 0.0% 2.4% 3.6%
- ------------------------------------------------------------------------
</TABLE>
*Since inception.
<TABLE>
<CAPTION>
EQUITY INDEX PORTFOLIO
TOTAL INVESTMENT RETURNS: APRIL 29, 1991-MARCH 31, 1999
- -------------------------------------------------------------------------
EQUITY INDEX PORTFOLIO S&P 500
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1991 4.5% 0.0% 4.5% 5.4%
1992 8.3 2.4 10.7 11.1
1993 9.5 3.2 12.7 13.0
1994 0.8 2.7 3.5 3.7
1995 26.6 2.9 29.5 29.7
1996 17.8 2.4 20.2 20.3
1997 38.9 1.4 40.3 40.4
1998 7.5 1.5 9.0 9.0
1999* 25.8 1.7 27.5 27.3
- -------------------------------------------------------------------------
</TABLE>
*Six months ended March 31, 1999.
See Financial Highlights table on page 56 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 1999
- ----------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Diversified Value Portfolio 2/8/1999 -- -- 2.40% 0.00% 2.40%
Equity Index Portfolio 4/29/1991 18.57% 26.15% 17.13 2.35 19.48
- ----------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 25
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the portfolios. Note, too,
that both share price and returns can fluctuate widely, so an investment in the
portfolios could lose money.
<TABLE>
<CAPTION>
MID-CAP INDEX PORTFOLIO
TOTAL INVESTMENT RETURNS:
FEBRUARY 9, 1999-MARCH 31, 1999
- ----------------------------------------------------------------------------
MID-CAP INDEX PORTFOLIO S&P*
FISCAL CAPITAL INCOME TOTAL TOTAL
PERIOD RETURN RETURN RETURN** RETURN
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 1.5% 0.0% 1.5% 1.4%
- ----------------------------------------------------------------------------
</TABLE>
*S&P MidCap 400 Index.
**Since inception.
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
TOTAL INVESTMENT RETURNS: JUNE 7, 1993-MARCH 31, 1999
- -----------------------------------------------------------------------
GROWTH PORTFOLIO S&P 500
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993 2.6% 0.0% 2.6% 3.4%
1994 5.2 0.7 5.9 3.7
1995 30.7 1.3 32.0 29.7
1996 26.4 1.4 27.8 20.3
1997 27.4 1.4 28.8 40.4
1998 16.3 1.1 17.4 9.0
1999* 29.0 0.8 29.8 27.3
- -----------------------------------------------------------------------
</TABLE>
*Six months ended March 31, 1999.
See Financial Highlights table on page 57 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 1999
- ------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ----------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mid-Cap Index Portfolio 2/9/1999 -- -- 1.50% 0.00% 1.50%
Growth Portfolio 6/7/1993 26.55% 28.45% 23.46 1.16 24.62
- ------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 26
PERFORMANCE SUMMARIES (continued)
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the portfolios. Note, too,
that both share price and returns can fluctuate widely, so an investment in the
portfolios could lose money.
<TABLE>
SMALL COMPANY GROWTH PORTFOLIO
TOTAL INVESTMENT RETURNS: JUNE 3, 1996-MARCH 31, 1999
- ------------------------------------------------------------------------
SMALL COMPANY RUSSELL
GROWTH PORTFOLIO 2000
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 -1.6% 0.0% -1.6% -4.4%
1997 21.6 0.6 22.2 33.2
1998 -20.4 0.3 -20.1 -19.0
1999* 13.8 0.6 14.4 10.0
- ------------------------------------------------------------------------
</TABLE>
*Six months ended March 31, 1999.
See Financial Highlights table on page 57 for dividend and capital gains
information since the portfolio's inception.
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
TOTAL INVESTMENT RETURNS: JUNE 3, 1994-MARCH 31, 1999
- ------------------------------------------------------------------------
INTERNATIONAL PORTFOLIO MSCI EAFE
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 3.1% 0.0% 3.1% 0.1%
1995 10.6 0.6 11.2 6.1
1996 11.8 1.6 13.4 8.9
1997 17.2 1.4 18.6 12.5
1998 -10.0 1.3 -8.7 -8.1
1999* 15.0 1.7 16.7 22.5
- ------------------------------------------------------------------------
</TABLE>
*Six months ended March 31, 1999.
See Financial Highlights table on page 58 for dividend and capital gains
information since the portfolio's inception.
<TABLE>
<CAPTION>
REIT INDEX PORTFOLIO
TOTAL INVESTMENT RETURNS:
FEBRUARY 9, 1999-MARCH 31, 1999
- ---------------------------------------------------------------------------
REIT INDEX PORTFOLIO MORGAN STANLEY
REIT INDEX
FISCAL CAPITAL INCOME TOTAL TOTAL
PERIOD RETURN RETURN RETURN* RETURN
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 -2.5% 0.0% -2.5% -2.5%
- ---------------------------------------------------------------------------
</TABLE>
*Since inception.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 1999
- ----------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ----------------------------------------
DATE 1 YEAR CAPITAL INCOME TOTAL
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Small Company Growth Portfolio 6/3/1996 -11.27% 2.90% 0.50% 3.40%
International Portfolio 6/3/1994 4.04 9.46 1.36 10.82
REIT Index Portfolio 2/9/1999 -- -2.50 0.00 -2.50
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 27
PORTFOLIO PROFILE
MONEY MARKET PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 1999. Key elements of this Profile are defined below and on page 26.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ---------------------------------------
<S> <C>
Yield 4.8%
Average Maturity 79 Days
Average Quality Aa1
Expense Ratio 0.21%*
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- --------------------------------------------------
<S> <C>
Treasury/Agency 22.7%
Aaa 11.7
Aa 51.4
A 14.2
Baa 0.0
Ba 0.0
B 0.0
Not Rated 0.0
- --------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER (% OF PORTFOLIO)
- -----------------------------------------------------
<S> <C>
Certificates of Deposit 29.8%
Commercial Paper 41.7
Treasury/Agency 22.7
Other 5.8
- -----------------------------------------------------
Total 100.0%
</TABLE>
AVERAGE COUPON. The average interest rate paid on the securities held by a
portfolio. It is expressed as a percentage of face value.
AVERAGE DURATION. An estimate of how much a bond portfolio's share price will
fluctuate in response to a change in interest rates. To see how the price could
shift, multiply the portfolio's duration by the change in rates. If interest
rates rise by one percentage point, the share price of a portfolio with an
average duration of five years would decline by about 5%. If rates decrease by
a percentage point, the portfolio's share price would rise by 5%.
AVERAGE MATURITY. The average length of time until bonds held by a portfolio
reach maturity (or are called) and are repaid. In general, the longer the
average maturity, the more a portfolio's share price will fluctuate in response
to changes in market interest rates.
AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the
ratings assigned to a portfolio's securities holdings by credit-rating
agencies. The agencies make their judgment after appraising an issuer's ability
to meet its obligations. Quality is graded on a scale, with Aaa or AAA
indicating the most creditworthy bond issuers and A-1 or MIG-1 indicating the
most creditworthy issuers of money market securities. U.S. Treasury securities
are considered to have the highest credit quality.
BETA. A measure of the magnitude of a portfolio's past share-price fluctuations
in relation to the ups and downs of the overall market (or appropriate market
index). The market (or index) is assigned a beta of 1.00, so a portfolio with a
beta of 1.20 would have seen its share price rise or fall by 12% when the
overall market rose or fell by 10%.
CASH RESERVES. The percentage of a portfolio's net assets invested in "cash
equivalents"--highly liquid, short-term, interest-bearing instruments. This
figure does not include cash invested in futures contracts to simulate stock or
bond investment.
25
<PAGE> 28
COUNTRY DIVERSIFICATION. The percentages of a portfolio's common stock invested
in securities of various countries.
DISTRIBUTION BY CREDIT QUALITY. This breakdown of a portfolio's securities by
credit rating can help in gauging the risk that returns could be affected by
defaults or other credit problems.
DISTRIBUTION BY ISSUER. A breakdown of a portfolio's holdings by type of issuer
or type of instrument.
DISTRIBUTION BY MATURITY. An indicator of interest-rate risk. In general, the
higher the concentration of longer-maturity issues, the more a portfolio's share
price will fluctuate in response to changes in interest rates.
EARNINGS GROWTH RATE. The average annual rate of growth in earnings over the
past five years for the stocks now in a portfolio.
EXPENSE RATIO. The percentage of a portfolio's average net assets used to pay
its annual administrative and advisory expenses. These expenses directly reduce
returns to investors.
FOREIGN HOLDINGS. The percentage of a portfolio's equity assets represented by
stocks or American Depositary Receipts of companies based outside the United
States.
INVESTMENT FOCUS. This grid indicates the focus of a portfolio in terms of two
attributes. For equity portfolios, the attributes are market capitalization
(large, medium, or small) and relative valuation (growth, value, or a blend).
For fixed-income portfolios, the attributes are average maturity (short, medium,
or long) and average credit quality (Treasury/agency, investment-grade
corporate, or below investment-grade).
MEDIAN MARKET CAP. An indicator of the size of companies in which a portfolio
invests; the midpoint of market capitalization (market price x shares
outstanding) of a portfolio's stocks, weighted by the proportion of the
portfolio's assets invested in each stock. Stocks representing half of the
portfolio's assets have market capitalizations above the median, and the rest
are below it.
PORTFOLIO ASSET ALLOCATION. This chart shows the proportions of a portfolio's
holdings allocated to different types of assets.
PRICE/BOOK RATIO. The share price of a stock divided by its net worth, or book
value, per share. For a portfolio, the weighted average price/book ratio of the
stocks it holds.
PRICE/EARNINGS RATIO. The ratio of a stock's current price to its per-share
earnings over the past year. For a portfolio, the weighted average P/E of the
stocks it holds. P/E is an indicator of market expectations about corporate
prospects; the higher the P/E, the greater the expectations for a company's
future growth.
R-SQUARED. A measure of how much of a portfolio's past returns can be explained
by the returns from the overall market (or its benchmark index). If a
portfolio's total return were precisely synchronized with the overall market's
return, its R-squared would be 1.00. If a portfolio's returns bore no
relationship to the market's returns, its R-squared would be 0.
RETURN ON EQUITY. The annual average rate of return generated by a company
during the past five years for each dollar of shareholder's equity (net income
divided by shareholder's equity). For a portfolio, the weighted average return
on equity for the companies whose stocks it holds.
SECTOR DIVERSIFICATION. The percentages of a portfolio's common stocks that come
from each of the major industry groups that compose the stock market.
TURNOVER RATE. An indication of trading activity during the period. Portfolios
with high turnover rates incur higher transaction costs and are more likely to
distribute capital gains (which are taxable to investors).
YIELD. A snapshot of a portfolio's income from interest and dividends. The
yield, expressed as a percentage of the portfolio's net asset value, is based on
income earned over the past 30 days (7 days for money market portfolios) and is
annualized, or projected forward for the coming year.
26
<PAGE> 29
PORTFOLIO PROFILE
SHORT-TERM CORPORATE PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 25 and 26.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ------------------------------------------------------
SHORT-TERM LEHMAN
CORPORATE INDEX*
- ------------------------------------------------------
<S> <C> <C>
Number of Issues 37 7,422
Yield 5.5% 6.6%
Yield to Maturity 5.7% 6.1%
Average Coupon 6.1% 6.8%
Average Maturity 2.8 years 8.9 years
Average Quality Aa3 Aaa
Average Duration 2.3 years 4.7 years
Expense Ratio 0.30%** --
Cash Reserves 12.5% --
</TABLE>
*Lehman Aggregate Bond Index.
**Annualized.
INVESTMENT FOCUS
- ------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- ------------------------------------------------------
<S> <C>
Under 1 Year 10.4%
1-3 Years 55.6
3-5 Years 26.3
Over 5 Years 7.7
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- ------------------------------------------------------
<S> <C>
Treasury/Agency 10.8%
Aaa 23.2
Aa 17.3
A 22.6
Baa 26.1
Ba 0.0
B 0.0
Not Rated 0.0
- ------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER (% OF PORTFOLIO)
- ------------------------------------------------------
<S> <C>
Asset-Backed 14.8%
Commercial Mortgage-Backed 0.0
Finance 26.0
Foreign 3.4
Government Mortgage-Backed 0.0
Industrial 31.7
Treasury/Agency 10.8
Utilities 13.3
- ------------------------------------------------------
Total 100.0%
</TABLE>
27
<PAGE> 30
PORTFOLIO PROFILE
HIGH-GRADE BOND PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 25 and 26.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ---------------------------------------------------------
HIGH-GRADE LEHMAN
BOND INDEX*
- ---------------------------------------------------------
<S> <C> <C>
Number of Issues 341 7,422
Yield 5.9% 6.6%
Yield to Maturity 5.9% 6.1%
Average Coupon 7.3% 6.8%
Average Maturity 8.8 years 8.9 years
Average Quality Aa1 Aaa
Average Duration 4.7 years 4.7 years
Expense Ratio 0.28%** --
Cash Reserves 1.1% --
</TABLE>
*Lehman Aggregate Bond Index.
**Annualized.
INVESTMENT FOCUS
- ----------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ----------------------------------------------------------
HIGH-GRADE LEHMAN
BOND INDEX*
- ----------------------------------------------------------
<S> <C> <C>
R-Squared 0.99 1.00
Beta 0.98 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------------------------
<S> <C>
Treasury/Agency 26.1%
Aaa 39.7
Aa 8.3
A 12.3
Baa 13.6
Ba 0.0
B 0.0
Not Rated 0.0
- -----------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- -----------------------------------------------------------
<S> <C>
Under 1 Year 2.7%
1-5 Years 36.5
5-10 Years 39.5
10-20 Years 5.4
20-30 Years 14.8
Over 30 Years 1.1
- -----------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER (% OF PORTFOLIO)
- -----------------------------------------------------------
<S> <C>
Asset-Backed 5.4%
Commercial Mortgage-Backed 0.0
Finance 14.5
Foreign 4.4
Government Mortgage-Backed 32.7
Industrial 10.9
Treasury/Agency 26.1
Utilities 6.0
- -----------------------------------------------------------
Total 100.0%
</TABLE>
28
<PAGE> 31
PORTFOLIO PROFILE
HIGH YIELD BOND PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 25 and 26.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ----------------------------------------------------------
HIGH YIELD LEHMAN
BOND INDEX*
- ----------------------------------------------------------
<S> <C> <C>
Number of Issues 179 7,422
Yield 8.7% 6.6%
Yield to Maturity 8.6% 6.1%
Average Coupon 8.8% 6.8%
Average Maturity 7.1 years 8.9 years
Average Quality Ba3 Aaa
Average Duration 5.0 years 4.7 years
Expense Ratio 0.31%** --
Cash Reserves 6.4% --
</TABLE>
*Lehman Aggregate Bond Index.
**Annualized.
INVESTMENT FOCUS
- ------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -------------------------------------------------------
<S> <C>
Treasury/Agency 0.0%
Aaa 0.0
Aa 0.0
A 0.8
Baa 3.9
Ba 41.2
B 53.5
Not Rated 0.6
- -------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- -------------------------------------------------------
<S> <C> <C>
Under 1 Year 0.0%
1-5 Years 15.7
5-10 Years 78.0
10-20 Years 5.3
20-30 Years 1.0
Over 30 Years 0.0
- -------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER (% OF PORTFOLIO)
- --------------------------------------------------------
<S> <C>
Asset-Backed 0.0%
Commercial Mortgage-Backed 0.0
Finance 3.1
Foreign 0.0
Government Mortgage-Backed 0.0
Industrial 90.4
Treasury/Agency 0.0
Utilities 6.5
- --------------------------------------------------------
Total 100.0%
</TABLE>
<PAGE> 32
PORTFOLIO PROFILE
BALANCED PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 25 and 26.
<TABLE>
<CAPTION>
TOTAL PORTFOLIO CHARACTERISTICS
- -----------------------------------------------------
<S> <C>
Yield 3.6%
Turnover Rate 23%*
Expense Ratio 0.31%*
Cash Reserves 0.8%
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
PORTFOLIO ASSET ALLOCATION
- ----------------------------------------------------------
<S> <C>
STOCKS 65%
BONDS 34%
CASH RESERVES 1%
</TABLE>
<TABLE>
<CAPTION>
TOTAL PORTFOLIO VOLATILITY MEASURES
- ----------------------------------------------------------
BALANCED S&P 500
- ----------------------------------------------------------
<S> <C> <C>
R-Squared 0.87 1.00
Beta 0.58 1.00
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST STOCKS (% OF EQUITIES)
- ---------------------------------------------------------
<S> <C>
Citigroup, Inc. 3.2%
Pharmacia & Upjohn, Inc. 2.9
Xerox Corp. 2.5
Ford Motor Co. 2.4
Motorola, Inc. 2.4
CIGNA Corp. 2.4
International Business Machines Corp. 2.2
Johnson & Johnson 2.0
Union Pacific Corp. 2.0
General Motors Corp. 2.0
- ---------------------------------------------------------
Top Ten 24.0%
- ---------------------------------------------------------
Top Ten as % of Total Net Assets 15.7%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
- ---------------------------------------------------------------------------------------------------------------------
MARCH 31, 1998 MARCH 31, 1999
-------------------------------------------------------------
BALANCED BALANCED S&P 500
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Auto & Transportation 8.8% 11.2% 2.5%
Consumer Discretionary 4.3 6.7 13.2
Consumer Staples 2.8 2.5 8.4
Financial Services 19.7 16.7 16.7
Health Care 12.4 10.8 12.4
Integrated Oils 9.1 10.6 5.1
Other Energy 0.6 2.1 1.1
Materials & Processing 16.9 14.3 3.3
Producer Durables 10.0 7.8 3.1
Technology 1.0 5.6 17.3
Utilities 9.1 8.7 11.1
Other 5.3 3.0 5.8
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE> 33
BALANCED PORTFOLIO PROFILE (continued)
<TABLE>
<CAPTION>
EQUITY CHARACTERISTICS
- ----------------------------------------------------------
BALANCED S&P 500
- ----------------------------------------------------------
<S> <C> <C>
Number of Stocks 105 500
Median Market Cap $20.6B $64.6B
Price/Earnings Ratio 22.5x 29.1x
Price/Book Ratio 2.8x 5.1x
Dividend Yield 2.3% 1.3%
Return on Equity 19.1% 22.5%
Earnings Growth Rate 12.2% 16.8%
Foreign Holdings 12.5% 1.5%
</TABLE>
EQUITY INVESTMENT FOCUS
- ---------------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
FIXED-INCOME CHARACTERISTICS
- ---------------------------------------------------------------
LEHMAN
BALANCED INDEX*
- ---------------------------------------------------------------
<S> <C> <C>
Number of Bonds 120 7,422
Yield to Maturity 6.6% 6.1%
Average Coupon 7.0% 6.8%
Average Maturity 17.7 years 8.9 years
Average Quality Aa3 Aaa
Average Duration 9.0 years 4.7 years
</TABLE>
*Lehman Aggregate Bond Index.
FIXED-INCOME INVESTMENT FOCUS
- ----------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF BONDS)
- ------------------------------------------------------
<S> <C>
Treasury/Agency 12.7%
Aaa 8.8
Aa 23.7
A 37.9
Baa 16.9
Ba 0.0
B 0.0
Not Rated 0.0
- ------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER (% OF BONDS)
- ------------------------------------------------------
<S> <C>
Asset-Backed 0.0%
Commercial Mortgage-Backed 1.0
Finance 23.1
Foreign 6.1
Government Mortgage-Backed 2.4
Industrial 33.8
Treasury/Agency 12.7
Utilities 20.9
- ------------------------------------------------------
Total 100.0%
</TABLE>
31
<PAGE> 34
PORTFOLIO PROFILE
EQUITY INCOME PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 25 and 26.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- ----------------------------------------------------------
EQUITY INCOME S&P 500
- ----------------------------------------------------------
<S> <C> <C>
Number of Stocks 113 500
Median Market Cap $31.6B $64.6B
Price/Earnings Ratio 23.2x 29.1x
Price/Book Ratio 3.5x 5.1x
Yield 2.5% 1.3%
Return on Equity 20.6% 22.5%
Earnings Growth Rate 7.9% 16.8%
Foreign Holdings 6.0% 1.5%
Turnover Rate 4%* --
Expense Ratio 0.36%* --
Cash Reserves 1.0% --
</TABLE>
*Annualized.
INVESTMENT FOCUS
- ----------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ----------------------------------------------------------
EQUITY INCOME S&P 500
- ----------------------------------------------------------
<S> <C> <C>
R-Squared 0.87 1.00
Beta 0.69 1.00
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- --------------------------------------------------------
<S> <C>
Bell Atlantic Corp. 3.2%
Bristol-Myers Squibb Co. 3.1
American Home Products Corp. 3.0
AT&T Corp. 3.0
Exxon Corp. 2.8
Pharmacia & Upjohn, Inc. 2.7
Mobil Corp. 2.7
BP Amoco PLC ADR 2.6
Chevron Corp. 2.5
Ameritech Corp. 2.3
- --------------------------------------------------------
Top Ten 27.9%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
- --------------------------------------------------------------------------------------------------------------------
MARCH 31, 1998 MARCH 31, 1999
-----------------------------------------------------------
EQUITY INCOME EQUITY INCOME S&P 500
-----------------------------------------------------------
<S> <C> <C> <C>
Auto & Transportation 3.1% 2.8% 2.5%
Consumer Discretionary 5.6 5.3 13.2
Consumer Staples 8.2 8.6 8.4
Financial Services 19.7 19.4 16.7
Health Care 11.5 14.1 12.4
Integrated Oils 16.3 17.0 5.1
Other Energy 0.0 0.7 1.1
Materials & Processing 4.6 4.3 3.3
Producer Durables 1.8 2.4 3.1
Technology 0.0 0.0 17.3
Utilities 26.7 23.4 11.1
Other 2.5 2.0 5.8
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 35
PORTFOLIO PROFILE
DIVERSIFIED VALUE PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 25 and 26.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- ----------------------------------------------------------
DIVERSIFIED S&P
VALUE 500
- ----------------------------------------------------------
<S> <C> <C>
Number of Stocks 46 500
Median Market Cap $19.8B $64.6B
Price/Earnings Ratio 17.8x 29.1x
Price/Book Ratio 2.7x 5.1x
Yield 2.4% 1.3%
Return on Equity 17.9% 22.5%
Earnings Growth Rate 12.4% 16.8%
Foreign Holdings 2.4% 1.5%
Turnover Rate 1%* --
Expense Ratio 0.40%* --
Cash Reserves 5.7% --
</TABLE>
*Annualized.
INVESTMENT FOCUS
- --------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- --------------------------------------------------------
<S> <C>
The Chase Manhattan Corp. 3.5%
Honeywell, Inc. 3.4
U S WEST, Inc. 3.4
First Union Corp. 3.2
Waste Management, Inc. 3.0
Williams Cos., Inc. 3.0
Kmart Corp. 3.0
Allstate Corp. 3.0
Bankers Trust Corp. 2.9
Anheuser-Busch Cos., Inc. 2.9
- --------------------------------------------------------
Top Ten 31.3%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
- ------------------------------------------------------------------------------------------------------
MARCH 31, 1999
-------------------------------------------
DIVERSIFIED VALUE S&P 500
-------------------------------------------
<S> <C> <C>
Auto & Transportation 3.6% 2.5%
Consumer Discretionary 11.2 13.2
Consumer Staples 6.2 8.4
Financial Services 30.7 16.7
Health Care 0.0 12.4
Integrated Oils 2.4 5.1
Other Energy 10.0 1.1
Materials & Processing 5.5 3.3
Producer Durables 6.2 3.1
Technology 0.0 17.3
Utilities 15.2 11.1
Other 9.0 5.8
- ------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 36
PORTFOLIO PROFILE
EQUITY INDEX PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 1999, compared where appropriate to its unmanaged target index. Key elements
of this Profile are defined on pages 25 and 26.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- -----------------------------------------------------------
EQUITY INDEX S&P 500
- -----------------------------------------------------------
<S> <C> <C>
Number of Stocks 506 500
Median Market Cap $64.6B $64.6B
Price/Earnings Ratio 29.1x 29.1x
Price/Book Ratio 5.1x 5.1x
Yield 1.1% 1.3%
Return on Equity 22.5% 22.5%
Earnings Growth Rate 16.8% 16.8%
Foreign Holdings 1.5% 1.5%
Turnover Rate 5%* --
Expense Ratio 0.19%* --
Cash Reserves 0.0% --
</TABLE>
*Annualized.
INVESTMENT FOCUS
- ----------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ----------------------------------------------------------
EQUITY INDEX S&P 500
- ----------------------------------------------------------
<S> <C> <C>
R-Squared 1.00 1.00
Beta 1.00 1.00
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- --------------------------------------------------------
<S> <C>
Microsoft Corp. 4.3%
General Electric Co. 3.4
Wal-Mart Stores, Inc. 1.9
Intel Corp. 1.9
Merck & Co., Inc. 1.8
Pfizer, Inc. 1.7
Cisco Systems, Inc. 1.6
Exxon Corp. 1.6
AT&T Corp. 1.6
International Business Machines Corp. 1.5
- ------------------------------------------------------
Top Ten 21.3%
</TABLE>
<TABLE>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
- ------------------------------------------------------------------------------------------------------------------
MARCH 31, 1998 MARCH 31, 1999
-------------------------------------------------------
EQUITY INDEX EQUITY INDEX S&P 500
-------------------------------------------------------
<S> <C> <C> <C>
Auto & Transportation 3.6% 2.5% 2.5%
Consumer Discretionary 10.0 13.2 13.2
Consumer Staples 10.9 8.3 8.4
Financial Services 17.9 16.7 16.7
Health Care 11.7 12.4 12.4
Integrated Oils 6.7 5.1 5.1
Other Energy 1.2 1.1 1.1
Materials & Processing 5.6 3.3 3.3
Producer Durables 4.1 3.1 3.1
Technology 12.0 17.3 17.3
Utilities 10.7 11.1 11.1
Other 5.6 5.9 5.8
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE> 37
PORTFOLIO PROFILE
MID-CAP INDEX PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 1999, compared where appropriate to its unmanaged target index. Key elements
of this Profile are defined on pages 25 and 26.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- ------------------------------------------
MID-CAP INDEX S&P*
- ------------------------------------------
<S> <C> <C>
Number of Stocks 402 400
Median Market Cap $2.9B $2.9B
Price/Earnings Ratio 19.8x 19.8x
Price/Book Ratio 2.9x 2.9x
Yield 1.1% 1.3%
Return on Equity 16.9% 16.8%
Earnings Growth Rate 18.0% 17.9%
Foreign Holdings 0.0% 0.0%
Turnover Rate 50%** --
Expense Ratio 0.25%** --
Cash Reserves 0.2% --
</TABLE>
*S&P MidCap 400 Index.
**Annualized.
INVESTMENT FOCUS
- --------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------
<S> <C>
AFLAC, Inc. 1.8%
Best Buy Co., Inc. 1.3
QUALCOMM, Inc. 1.1
Office Depot, Inc. 1.1
Harley-Davidson, Inc. 1.1
Biogen, Inc. 1.0
Linear Technology Corp. 1.0
Maxim Integrated Products, Inc. 0.9
Lexmark International Group, Inc. Class A 0.9
E*TRADE Group, Inc. 0.8
- --------------------------------------------------------------------
Top Ten 11.0%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
- --------------------------------------------------------------------------------------------------------------
MARCH 31, 1999
-------------------------------------------------
MID-CAP INDEX S&P MIDCAP 400
-------------------------------------------------
<S> <C> <C>
Auto & Transportation 4.8% 4.6%
Consumer Discretionary 17.2 17.6
Consumer Staples 4.3 4.2
Financial Services 17.4 17.2
Health Care 9.9 9.5
Integrated Oils 0.5 0.7
Other Energy 4.3 3.8
Materials & Processing 6.7 6.9
Producer Durables 6.3 6.5
Technology 14.1 14.8
Utilities 12.4 12.7
Other 2.1 1.5
- --------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 38
PORTFOLIO PROFILE
GROWTH PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 25 and 26.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- ----------------------------------------------------------
GROWTH S&P 500
- ----------------------------------------------------------
<S> <C> <C>
Number of Stocks 79 500
Median Market Cap $104.0B $64.6B
Price/Earnings Ratio 40.4x 29.1x
Price/Book Ratio 9.8x 5.1x
Yield 0.5% 1.3%
Return on Equity 29.2% 22.5%
Earnings Growth Rate 23.6% 16.8%
Foreign Holdings 2.8% 1.5%
Turnover Rate 44%* --
Expense Ratio 0.39%* --
Cash Reserves 1.3% --
</TABLE>
*Annualized.
INVESTMENT FOCUS
- ----------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ----------------------------------------------------------
GROWTH S&P 500
- ----------------------------------------------------------
<S> <C> <C>
R-Squared 0.94 1.00
Beta 1.01 1.00
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- ------------------------------------------------------
<S> <C>
Microsoft Corp. 6.0%
General Electric Co. 5.5
Cisco Systems, Inc. 5.0
Merck & Co., Inc. 4.6
Intel Corp. 4.4
Procter & Gamble Co. 4.0
Pfizer, Inc. 3.4
Lucent Technologies, Inc. 2.9
Dell Computer Corp. 2.7
Bristol-Myers Squibb Co. 2.5
- ------------------------------------------------------
Top Ten 41.0%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
- ----------------------------------------------------------------------------------------------------------------
MARCH 31, 1998 MARCH 31, 1999
----------------------------------------------------
GROWTH GROWTH S&P 500
----------------------------------------------------
<S> <C> <C> <C>
Auto & Transportation 0.0% 0.0% 2.5%
Consumer Discretionary 11.3 11.8 13.2
Consumer Staples 19.2 14.2 8.4
Financial Services 12.2 12.1 16.7
Health Care 21.8 23.4 12.4
Integrated Oils 0.0 0.0 5.1
Other Energy 0.2 0.0 1.1
Materials & Processing 9.4 0.7 3.3
Producer Durables 2.0 2.8 3.1
Technology 18.6 26.2 17.3
Utilities 0.0 0.0 11.1
Other 5.3 8.8 5.8
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 39
PORTFOLIO PROFILE
SMALL COMPANY GROWTH PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 25 and 26.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- -----------------------------------------------------------
SMALL COMPANY RUSSELL
GROWTH 2000
- -----------------------------------------------------------
<S> <C> <C>
Number of Stocks 117 1,883
Median Market Cap $ 0.5B $ 0.7B
Price/Earnings Ratio 19.5x 17.7x
Price/Book Ratio 2.9x 2.4x
Yield 0.5% 1.5%
Return on Equity 16.5% 14.5%
Earnings Growth Rate 14.8% 16.6%
Foreign Holdings 1.0% 0.0%
Turnover Rate 78%* --
Expense Ratio 0.51%* --
Cash Reserves 3.2% --
</TABLE>
*Annualized.
INVESTMENT FOCUS
- --------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- -------------------------------------------------------
<S> <C>
Mettler-Toledo International Inc. 2.5%
Acxiom Corp. 2.2
Investment Technology Group, Inc. 2.0
RealNetworks, Inc. 2.0
Exchange Applications, Inc. 1.9
CEC Entertainment Inc. 1.8
DENTSPLY International Inc. 1.8
Biogen, Inc. 1.8
Sun Communities, Inc. REIT 1.7
Ames Department Stores, Inc. 1.6
- -------------------------------------------------------
Top Ten 19.3%
</TABLE>
INVESTMENT FOCUS
- -------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
- --------------------------------------------------------------------------------------------------------------------
MARCH 31, 1998 MARCH 31, 1999
--------------------------------------------------------
SMALL COMPANY SMALL COMPANY RUSSELL
GROWTH GROWTH 2000
--------------------------------------------------------
<S> <C> <C> <C>
Auto & Transportation 5.6% 5.2% 4.1%
Consumer Discretionary 23.5 26.0 18.9
Consumer Staples 0.8 1.1 2.6
Financial Services 14.4 9.4 23.3
Health Care 16.9 14.2 9.5
Integrated Oils 0.0 0.0 0.3
Other Energy 0.2 2.2 2.3
Materials & Processing 7.7 4.0 8.4
Producer Durables 11.7 8.8 6.5
Technology 16.6 25.8 14.7
Utilities 0.9 2.9 8.6
Other 1.7 0.4 0.8
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 40
PORTFOLIO PROFILE
INTERNATIONAL PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 25 and 26.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- -----------------------------------------------------------
INTERNATIONAL MSCI EAFE
- -----------------------------------------------------------
<S> <C> <C>
Number of Stocks 118 1,028
Turnover Rate 28%* --
Expense Ratio 0.49%* --
Cash Reserves 2.0% --
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
PORTFOLIO ALLOCATION
- -----------------------------
<S> <C>
EUROPE 78%
PACIFIC 18%
EMERGING MARKETS 4%
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- -----------------------------------------------------------
INTERNATIONAL MSCI EAFE
- -----------------------------------------------------------
<S> <C> <C>
R-Squared 0.92 1.00
Beta 0.99 1.00
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- -----------------------------------------------------------
<S> <C>
ING Groep NV 3.8%
Endesa SA 3.7
Novartis AG (Registered) 3.5
Fuji Photo Film Co., Ltd. 3.1
Vivendi 3.0
UBS AG 2.8
Suez Lyonnaise des Eaux 2.8
Elf Aquitaine SA 2.6
Philips Electronics NV 2.6
Mannesmann AG 2.5
- -----------------------------------------------------------
Top Ten 30.4%
</TABLE>
38
<PAGE> 41
<TABLE>
<CAPTION>
COUNTRY DIVERSIFICATION (% OF COMMON STOCKS)
- -------------------------------------------------------------------------------------------------------------------
MARCH 31, 1998 MARCH 31, 1999
-------------------------------------------------------
INTERNATIONAL INTERNATIONAL MSCI EAFE
-------------------------------------------------------
<S> <C> <C> <C>
Argentina 0.2% 0.2% 0.0%
Australia 0.0 1.8 2.8
Austria 0.0 0.0 0.3
Belgium 1.0 1.6 1.6
Brazil 2.2 0.7 0.0
Chile 0.2 0.0 0.0
Denmark 0.9 0.7 0.8
Finland 0.0 0.0 1.8
France 9.0 14.5 9.3
Germany 8.4 5.1 9.5
Hong Kong 4.9 0.8 2.1
Indonesia 0.2 0.0 0.0
Ireland 0.4 1.6 0.5
Italy 4.3 9.7 5.0
Japan 16.6 13.6 23.1
Malaysia 1.5 0.4 0.0
Mexico 0.6 0.8 0.0
Netherlands 14.5 10.2 5.9
New Zealand 0.0 0.0 0.2
Norway 0.0 0.0 0.4
Philippines 0.9 0.7 0.0
Portugal 0.0 0.0 0.6
Singapore 1.6 1.1 0.7
South Korea 0.8 1.6 0.0
Spain 2.1 3.8 3.1
Sweden 2.7 2.9 2.7
Switzerland 14.3 9.2 7.3
Thailand 0.1 0.0 0.0
United Kingdom 12.6 19.0 22.3
- -------------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE> 42
PORTFOLIO PROFILE
REIT INDEX PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 25 and 26.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- ----------------------------------------------------------
REIT INDEX S&P 500
- ----------------------------------------------------------
<S> <C> <C>
Number of Stocks 131 500
Median Market Cap $1.5B $64.6B
Price/Earnings Ratio 16.7x 29.1x
Price/Book Ratio 1.4x 5.1x
Dividend Yield 7.8%* 1.3%
Return on Equity 10.0% 22.5%
Earnings Growth Rate 28.1% 16.8%
Foreign Holdings 0.0% 1.5%
Turnover Rate 23%** --
Expense Ratio 0.30%** --
Cash Reserves 3.6% --
</TABLE>
* This dividend yield includes some payments that represent a return of capital
by the underlying REITs. The amount of such return of capital is only
determined by each REIT after its fiscal year-end.
** Annualized.
INVESTMENT FOCUS
- --------------------------
[GRAPH]
<TABLE>
<CAPTION>
PORTFOLIO ALLOCATION BY REIT TYPE
- -------------------------------------------------------
<S> <C>
Retail 22%
Apartments 21
Office 20
Industrial 16
Diversified 13
Hotels 8
- -------------------------------------------------------
Total 100%
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS (% OF TOTAL NET ASSETS)
- -------------------------------------------------------
<S> <C>
Equity Office Properties Trust REIT 5.7%
Equity Residential Properties Trust REIT 4.2
Simon Property Group, Inc. REIT 3.9
Public Storage, Inc. REIT 2.9
Vornado Realty Trust REIT 2.5
Archstone Communities Trust REIT 2.5
Crescent Real Estate, Inc. REIT 2.3
ProLogis Trust REIT 2.2
Host Marriott Corp. REIT 2.0
Spieker Properties, Inc. REIT 2.0
- -------------------------------------------------------
Top Ten 30.2%
</TABLE>
40
<PAGE> 43
FINANCIAL STATEMENTS
MARCH 31, 1999 (UNAUDITED)
The Statements of Net Assets, integral parts of the Financial Statements for
each of the Vanguard Variable Insurance Fund portfolios, are included as an
insert to this report.
STATEMENT OF OPERATIONS
This Statement shows dividend and interest income earned by each portfolio
during the reporting period, and details the operating expenses charged to the
portfolio. This Statement also shows any Net Gain (Loss) realized on the sale of
investments, and the increase or decrease in the Unrealized Appreciation
(Depreciation) on investments during the period. If a portfolio invested in
futures contracts during the period, the results of these investments are shown
separately. The International Portfolio's realized and unrealized gains (losses)
on investment securities include the effect of foreign currency movements on
security values. Currency gains (losses) on the translation of other assets and
liabilities, combined with the results of any investments in forward currency
contracts during the period, are shown separately.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
MONEY SHORT-TERM HIGH-GRADE HIGH YIELD
MARKET CORPORATE BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------------------------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED FEB. 8* TO ENDED ENDED
MAR. 31, 1999 MAR. 31, 1999 MAR. 31, 1999 MAR. 31, 1999
---------------------------------------------------------------------
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends -- -- -- --
Interest $15,274 $79 $ 10,427 $6,259
Security Lending -- -- 3 5
---------------------------------------------------------------------
Total Income 15,274 79 10,430 6,264
---------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee 33 -- 18 44
Performance Adjustment -- -- -- --
The Vanguard Group--Note C
Management and Administrative 463 4 386 151
Marketing and Distribution 83 -- 24 12
Custodian Fees 17 -- 28 4
Auditing Fees 4 -- 4 3
Shareholders' Reports 11 -- 9 5
Trustees' Fees and Expenses -- -- -- --
---------------------------------------------------------------------
Total Expenses 611 4 469 219
Expenses Paid Indirectly--Note D -- -- (4) --
---------------------------------------------------------------------
Net Expenses 611 4 465 219
- ------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 14,663 75 9,965 6,045
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
- ------------------------------------------------------------------------------------------------------------------------
Investment Securities Sold -- (20) 751 (2,935)
Futures Contracts -- -- -- --
Foreign Currencies and Forward Currency Contracts -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) -- (20) 751 (2,935)
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities -- (19) (11,298) 3,653
Futures Contracts -- 1 -- --
Foreign Currencies and Forward Currency Contracts -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) -- (18) (11,298) 3,653
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $14,663 $37 $ (582) $6,763
========================================================================================================================
</TABLE>
*Commencement of operations.
41
<PAGE> 44
STATEMENT OF OPERATIONS (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
EQUITY DIVERSIFIED EQUITY
BALANCED INCOME VALUE INDEX
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------------------------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED FEB. 8* TO ENDED
MAR. 31, 1999 MAR. 31, 1999 MAR. 31, 1999 MAR. 31, 1999
---------------------------------------------------------------------
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends $ 4,332 $ 5,808 $ 31 $ 7,486
Interest 6,955 66 21 271
Security Lending 33 1 -- 9
---------------------------------------------------------------------
Total Income 11,320 5,875 52 7,766
---------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee 275 211 2 45
Performance Adjustment (44) -- -- --
The Vanguard Group--Note C
Management and Administrative 622 476 5 917
Marketing and Distribution 43 31 -- 78
Custodian Fees 3 9 -- 9
Auditing Fees 4 4 -- 5
Shareholders' Reports 17 15 -- 24
Trustees' Fees and Expenses 1 -- -- 1
---------------------------------------------------------------------
Total Expenses 921 746 7 1,079
Expenses Paid Indirectly--Note D (17) -- -- --
---------------------------------------------------------------------
Net Expenses 904 746 7 1,079
- ------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 10,416 5,129 45 6,687
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold 11,304 1,651 -- 4,991
Futures Contracts -- -- -- 2,770
Foreign Currencies and Forward Currency Contracts -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) 11,304 1,651 -- 7,761
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)
Investment Securities 19,984 34,246 176 244,372
Futures Contracts -- -- -- (259)
Foreign Currencies and Forward Currency Contracts -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) 19,984 34,246 176 244,113
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $41,704 $41,026 $221 $258,561
========================================================================================================================
</TABLE>
*Commencement of operations.
42
<PAGE> 45
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SMALL
MID-CAP COMPANY
INDEX GROWTH GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------------------------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
FEB. 8* TO ENDED ENDED ENDED
MAR. 31, 1999 MAR. 31, 1999 MAR. 31, 1999 MAR. 31, 1999
---------------------------------------------------------------------
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends** $ 23 $ 3,309 $ 452 $ 977
Interest 5 734 205 415
Security Lending -- 1 66 47
---------------------------------------------------------------------
Total Income 28 4,044 723 1,439
---------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee -- 636 103 153
Performance Adjustment -- -- 9 26
The Vanguard Group--Note C
Management and Administrative 4 861 203 313
Marketing and Distribution -- 54 11 19
Custodian Fees -- 6 4 67
Auditing Fees -- 5 3 4
Shareholders' Reports -- 21 9 13
Trustees' Fees and Expenses -- 1 -- --
---------------------------------------------------------------------
Total Expenses 4 1,584 342 595
Expenses Paid Indirectly--Note D -- -- -- --
---------------------------------------------------------------------
Net Expenses 4 1,584 342 595
- ------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 24 2,460 381 844
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold (3) 25,433 (2,320) 93
Futures Contracts -- -- -- --
Foreign Currencies and Forward Currency Contracts -- -- -- (97)
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) (3) 25,433 (2,320) (4)
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)
Investment Securities 180 168,943 18,641 35,194
Futures Contracts -- -- -- --
Foreign Currencies and Forward Currency Contracts -- -- -- (270)
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) 180 168,943 18,641 34,924
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $201 $196,836 $16,702 $35,764
========================================================================================================================
</TABLE>
*Commencement of operations.
**Dividends for the International Portfolio are net of foreign withholding taxes
of $114,000.
43
<PAGE> 46
STATEMENT OF OPERATIONS (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
REIT INDEX
PORTFOLIO
-------------
FEB. 8* TO
MAR. 31, 1999
-------------
(000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
INCOME
Dividends $ 85
Interest 3
Security Lending --
-------
Total Income 88
-------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee --
Performance Adjustment --
The Vanguard Group--Note C
Management and Administrative 3
Marketing and Distribution --
Custodian Fees --
Auditing Fees --
Shareholders' Reports --
Trustees' Fees and Expenses --
-------
Total Expenses 3
Expenses Paid Indirectly--Note D --
-------
Net Expenses 3
- ------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 85
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold (14)
Futures Contracts --
Foreign Currencies and Forward Currency Contracts --
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) (14)
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities (209)
Futures Contracts --
Foreign Currencies and Forward Currency Contracts --
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) (209)
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(138)
========================================================================================================================
</TABLE>
*Commencement of operations.
44
<PAGE> 47
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how each portfolio's total net assets changed during the
two most recent reporting periods. The Operations section summarizes
information detailed in the Statement of Operations. Because the Money Market,
Short-Term Corporate, High-Grade Bond, and High Yield Bond Portfolios
distribute their income to shareholders each day, the amounts of
Distributions--Net Investment Income generally equal the net income earned as
shown under the Operations section. The other portfolios' amounts of
Distributions--Net Investment Income, and all portfolios' amounts of
Distributions--Realized Capital Gain, may not match the amounts shown in the
Operations section, because distributions are determined on a tax basis and may
be made in a period different from the one in which the income was earned or
the gains were realized on the financial statements. The Capital Share
Transactions section shows the amount shareholders invested in the portfolio,
either by purchasing shares or by reinvesting distributions, as well as the
amounts redeemed. The corresponding numbers of Shares Issued and Redeemed are
shown at the end of the Statement.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
MONEY MARKET SHORT-TERM
PORTFOLIO CORPORATE PORTFOLIO
--------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED FEB. 8* TO
MAR. 31, 1999 SEP. 30, 1998 MAR. 31, 1999
(000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 14,663 $ 24,820 $ 75
Realized Net Gain (Loss) -- (9) (20)
Change in Unrealized Appreciation (Depreciation) -- -- (18)
--------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 14,663 24,811 37
--------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (14,663) (24,820) (75)
Realized Capital Gain -- -- --
--------------------------------------------------------------
Total Distributions (14,663) (24,820) (75)
--------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 358,482 1,061,400 14,591
Issued in Lieu of Cash Distributions 14,663 24,820 75
Redeemed (351,689) (888,628) (1,174)
--------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 21,456 197,592 13,492
- ----------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 21,456 197,583 13,454
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 590,182 392,599 --
--------------------------------------------------------------
End of Period $611,638 $590,182 $13,454
======================================================================================================================
(1)Shares Issued (Redeemed)
Issued 358,482 1,061,400 1,463
Issued in Lieu of Cash Distributions 14,663 24,820 8
Redeemed (351,689) (888,628) (119)
--------------------------------------------------------------
Net Increase (Decrease) in
Shares Outstanding 21,456 197,592 1,352
======================================================================================================================
</TABLE>
*Commencement of operations.
45
<PAGE> 48
STATEMENT OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPITON>
- ------------------------------------------------------------------------------------------------------------------------
HIGH-GRADE HIGH YIELD
BOND PORTFOLIO BOND PORTFOLIO
---------------------------------- -------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAR. 31, 1999 SEP. 30, 1998 MAR. 31, 1999 SEP. 30, 1998
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 9,965 $ 14,610 $ 6,045 $ 10,286
Realized Net Gain (Loss) 751 1,652 (2,935) 214
Change in Unrealized Appreciation (Depreciation) (11,298) 10,148 3,653 (7,370)
----------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (582) 26,410 6,763 3,130
----------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (9,965) (14,610) (6,045) (10,286)
Realized Capital Gain (909) -- (227) (124)
----------------------------------------------------------------
Total Distributions (10,874) (14,610) (6,272) (10,410)
----------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 107,950 167,673 65,655 112,906
Issued in Lieu of Cash Distributions 10,874 14,610 6,272 10,410
Redeemed (72,512) (59,504) (47,223) (69,715)
----------------------------------------------------------------
Net Increase (Decrease) from Capital
Share Transactions 46,312 122,779 24,704 53,601
- ------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 34,856 134,579 25,195 46,321
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 322,469 187,890 131,208 84,887
----------------------------------------------------------------
End of Period $357,325 $322,469 $156,403 $131,208
========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 9,907 15,547 6,568 10,663
Issued in Lieu of Cash Distributions 1,002 1,356 623 990
Redeemed (6,672) (5,533) (4,706) (6,666)
----------------------------------------------------------------
Net Increase (Decrease) in
Shares Outstanding 4,237 11,370 2,485 4,987
========================================================================================================================
</TABLE>
46
<PAGE> 49
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
BALANCED EQUITY INCOME
PORTFOLIO PORTFOLIO
---------------------------------------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAR. 31, 1999 SEP. 30, 1998 MAR. 31, 1999 SEP. 30, 1998
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 10,416 $ 19,575 $ 5,129 $ 9,417
Realized Net Gain (Loss) 11,304 39,951 1,651 2,103
Change in Unrealized Appreciation (Depreciation) 19,984 (25,475) 34,246 21,179
----------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 41,704 34,051 41,026 32,699
----------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (19,489) (15,774) (9,370) (6,052)
Realized Capital Gain (40,236) (21,821) (2,103) (5,674)
----------------------------------------------------------------
Total Distributions (59,725) (37,595) (11,473) (11,726)
----------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 71,906 145,644 71,479 174,388
Issued in Lieu of Cash Distributions 59,725 37,595 11,473 11,726
Redeemed (67,133) (94,318) (58,535) (103,350)
----------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 64,498 88,921 24,417 82,764
- ------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 46,477 85,377 53,970 103,737
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 553,156 467,779 374,946 271,209
----------------------------------------------------------------
End of Period $599,633 $553,156 $428,916 $374,946
========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 4,187 8,177 3,425 8,961
Issued in Lieu of Cash Distributions 3,600 2,290 570 677
Redeemed (3,915) (5,299) (2,796) (5,252)
----------------------------------------------------------------
Net Increase (Decrease) in
Shares Outstanding 3,872 5,168 1,199 4,386
========================================================================================================================
</TABLE>
47
<PAGE> 50
STATEMENT OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED EQUITY INDEX
VALUE PORTFOLIO PORTFOLIO
----------------------------------------------------------------
SIX MONTHS YEAR
FEB 8* TO ENDED ENDED
MAR. 31, 1999 MAR. 31, 1999 SEP. 30, 1998
(000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 45 $ 6,687 $ 12,763
Realized Net Gain (Loss) -- 7,761 4,510
Change in Unrealized Appreciation (Depreciation) 176 244,113 43,795
----------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 221 258,561 61,068
----------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income -- (12,731) (9,840)
Realized Capital Gain -- (4,474) (6,946)
----------------------------------------------------------------
Total Distributions -- (17,205) (16,786)
----------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 16,367 216,024 343,912
Issued in Lieu of Cash Distributions -- 17,205 16,786
Redeemed (864) (132,619) (202,406)
----------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 15,503 100,610 158,292
- ------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 15,724 341,966 202,574
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period -- 920,245 717,671
----------------------------------------------------------------
End of Period $15,724 $1,262,211 $920,245
========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 1,619 6,932 12,480
Issued in Lieu of Cash Distributions -- 601 699
Redeemed (84) (4,292) (7,370)
----------------------------------------------------------------
Net Increase (Decrease) in
Shares Outstanding 1,535 3,241 5,809
========================================================================================================================
</TABLE>
48
<PAGE> 51
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
MID-CAP INDEX GROWTH
PORTFOLIO PORTFOLIO
----------------------------------------------------------------
SIX MONTHS YEAR
FEB. 8* TO ENDED ENDED
MAR. 31, 1999 MAR. 31, 1999 SEP. 30, 1998
(000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 24 $ 2,460 $ 4,147
Realized Net Gain (Loss) (3) 25,433 39,532
Change in Unrealized Appreciation (Depreciation) 180 168,943 32,038
----------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 201 196,836 75,717
----------------------------------------------------------
DISTRIBUTIONS
Net Investment Income -- (4,170) (4,303)
Realized Capital Gain -- (39,875) (12,264)
----------------------------------------------------------
Total Distributions -- (44,045) (16,567)
----------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 15,247 224,044 235,489
Issued in Lieu of Cash Distributions -- 44,045 16,567
Redeemed (937) (89,001) (140,467)
----------------------------------------------------------
Net Increase (Decrease) from Capital
Share Transactions 14,310 179,088 111,589
- ------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 14,511 331,879 170,739
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period -- 631,058 460,319
----------------------------------------------------------
End of Period $14,511 $962,937 $631,058
========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 1,522 8,169 9,602
Issued in Lieu of Cash Distributions -- 1,805 810
Redeemed (93) (3,303) (5,871)
----------------------------------------------------------
Net Increase (Decrease) in
Shares Outstanding 1,429 6,671 4,541
========================================================================================================================
</TABLE>
*Commencement of operations.
49
<PAGE> 52
STATEMENT OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SMALL COMPANY INTERNATIONAL
GROWTH PORTFOLIO PORTFOLIO
-----------------------------------------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAR. 31, 1999 SEP. 30, 1998 MAR. 31, 1999 SEP. 30, 1998
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 381 $ 699 $ 844 $ 3,438
Realized Net Gain (Loss) (2,320) (1,648) (4) (2,868)
Change in Unrealized Appreciation (Depreciation) 18,641 (28,021) 34,924 (24,519)
--------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 16,702 (28,970) 35,764 (23,949)
--------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (731) (483) (3,272) (3,015)
Realized Capital Gain (122) -- -- (2,345)
--------------------------------------------------------------------
Total Distributions (853) (483) (3,272) (5,360)
--------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 38,917 84,575 37,818 94,146
Issued in Lieu of Cash Distributions 853 483 3,272 5,360
Redeemed (37,562) (77,871) (42,288) (99,247)
--------------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 2,208 7,187 (1,198) 259
- ------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 18,057 (22,266) 31,294 (29,050)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 110,856 133,122 217,066 246,116
--------------------------------------------------------------------
End of Period $128,913 $110,856 $248,360 $217,066
========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 3,670 7,534 2,598 6,672
Issued in Lieu of Cash Distributions 84 42 242 412
Redeemed (3,480) (7,065) (2,932) (7,246)
--------------------------------------------------------------------
Net Increase (Decrease) in
Shares Outstanding 274 511 (92) (162)
========================================================================================================================
</TABLE>
50
<PAGE> 53
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
REIT INDEX
PORTFOLIO
----------------------
FEB. 8* TO
MAR. 31, 1999
(000)
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 85
Realized Net Gain (Loss) (14)
Change in Unrealized Appreciation (Depreciation) (209)
----------------------
Net Increase (Decrease) in Net Assets Resulting from Operations (138)
----------------------
DISTRIBUTIONS
Net Investment Income --
Realized Capital Gain --
----------------------
Total Distributions --
----------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 8,742
Issued in Lieu of Cash Distributions --
Redeemed (464)
----------------------
Net Increase (Decrease) from Capital Share Transactions 8,278
- ------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 8,140
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period --
----------------------
End of Period $8,140
==================================================================================================================
(1)Shares Issued (Redeemed)
Issued 883
Issued in Lieu of Cash Distributions --
Redeemed (48)
----------------------
Net Increase (Decrease) in Shares Outstanding 835
==================================================================================================================
</TABLE>
*Commencement of operations.
51
<PAGE> 54
FINANCIAL HIGHLIGHTS
This table summarizes each portfolio's investment results and distributions to
shareholders on a per-share basis. It also presents the portfolio's Total Return
and shows net investment income and expenses as percentages of average net
assets. These data will help you assess: the variability of the portfolio's net
income and total returns from year to year; the relative contributions of net
income and capital gains to the portfolio's total return; and how much it costs
to operate the portfolio. The table also shows the Portfolio Turnover Rate, a
measure of trading activity. A turnover rate of 100% means that the average
security is held in the portfolio for one year. Money market portfolios are not
required to report a Portfolio Turnover Rate.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
YEAR ENDED SEPTEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -----------------------------------------------------------
THROUGHOUT EACH PERIOD MARCH 31, 1999 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .025 .055 .054 .054 .056 .035
Net Realized and Unrealized Gain (Loss)
on Investments -- -- -- -- -- --
----------------------------------------------------------------------
Total from Investment Operations .025 .055 .054 .054 .056 .035
----------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.025) (.055) (.054) (.054) (.056) (.035)
Distributions from Realized Capital Gains -- -- -- -- -- --
----------------------------------------------------------------------
Total Distributions (.025) (.055) (.054) (.054) (.056) (.035)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=========================================================================================================================
TOTAL RETURN 2.54% 5.60% 5.48% 5.49% 5.77% 3.63%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $612 $590 $393 $285 $218 $171
Ratio of Total Expenses to
Average Net Assets 0.21%* 0.20% 0.21% 0.19% 0.23% 0.23%
Ratio of Net Investment Income to
Average Net Assets 5.04%* 5.46% 5.36% 5.36% 5.66% 3.66%
=========================================================================================================================
</TABLE>
*Annualized.
52
<PAGE> 55
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE PORTFOLIO
------------------------------
FEB. 8* TO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD MAR. 31, 1999
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .072
Net Realized and Unrealized Gain (Loss) on Investments (.050)
-----------
Total from Investment Operations .022
-----------
DISTRIBUTIONS
Dividends from Net Investment Income (.072)
Distributions from Realized Capital Gains --
-----------
Total Distributions (.072)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.95
=====================================================================================================================
TOTAL RETURN 0.22%
=====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $13
Ratio of Total Expenses to Average Net Assets 0.30%**
Ratio of Net Investment Income to Average Net Assets 5.25%**
Portfolio Turnover Rate 85%
=====================================================================================================================
</TABLE>
*Inception.
**Annualized
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
HIGH-GRADE BOND PORTFOLIO
YEAR ENDED SEPTEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -----------------------------------------------------------
THROUGHOUT EACH PERIOD MARCH 31, 1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.07 $10.57 $10.29 $10.47 $ 9.82 $ 10.94
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .318 .663 .678 .670 .663 .619
Net Realized and Unrealized Gain (Loss)
on Investments (.330) .500 .280 (.180) .650 (.966)
------------------------------------------------------------------------
Total from Investment Operations (.012) 1.163 .958 .490 1.313 (.347)
------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.318) (.663) (.678) (.670) (.663) (.619)
Distributions from Realized Capital Gains (.030) -- -- -- -- (.154)
------------------------------------------------------------------------
Total Distributions (.348) (.663) (.678) (.670) (.663) (.773)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.71 $11.07 $10.57 $10.29 $10.47 $ 9.82
========================================================================================================================
TOTAL RETURN -0.10% 11.36% 9.60% 4.80% 13.83% -3.31%
========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $357 $322 $188 $139 $120 $80
Ratio of Total Expenses to
Average Net Assets 0.28%* 0.28% 0.29% 0.25% 0.29% 0.24%
Ratio of Net Investment Income to
Average Net Assets 5.88%* 6.16% 6.51% 6.43% 6.58% 5.98%
Portfolio Turnover Rate 68%* 65% 40% 56% 29% 46%
========================================================================================================================
</TABLE>
*Annualized.
53
<PAGE> 56
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
YEAR ENDED SEP. 30,
SIX MONTHS ENDED ---------------------- JUN. 3* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD MAR. 31, 1999 1998 1997 SEP. 30, 1996
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.09 $10.59 $10.15 $10.00
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .424 .895 .922 .299
Net Realized and Unrealized Gain (Loss) on Investments .027 (.485) .450 .150
----------------------------------------------
Total from Investment Operations .451 .410 1.372 .449
----------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.424) (.895) (.922) (.299)
Distributions from Realized Capital Gains (.017) (.015) (.010) --
----------------------------------------------
Total Distributions (.441) (.910) (.932) (.299)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.10 $10.09 $10.59 $10.15
========================================================================================================================
TOTAL RETURN 4.57% 3.85% 14.12% 4.56%
========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $156 $131 $85 $22
Ratio of Total Expenses to Average Net Assets 0.31%** 0.31% 0.31% 0.32%**
Ratio of Net Investment Income to Average Net Assets 8.46%** 8.45% 8.88% 9.29%**
Portfolio Turnover Rate 30%** 38% 30% 8%
========================================================================================================================
</TABLE>
*Inception.
**Annualized.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
BALANCED PORTFOLIO
YEAR ENDED SEPTEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ------------------------------------------------------------
THROUGHOUT EACH PERIOD MARCH 31, 1999 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $17.73 $17.97 $14.81 $13.33 $11.33 $11.58
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .29 .63 .60 .565 .51 .46
Net Realized and Unrealized Gain (Loss)
on Investments .97 .56 3.31 1.420 2.07 (.16)
-----------------------------------------------------------------------
Total from Investment Operations 1.26 1.19 3.91 1.985 2.58 .30
-----------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.62) (.60) (.19) (.505) (.50) (.39)
Distributions from Realized Capital Gains (1.28) (.83) (.56) -- (.08) (.16)
-----------------------------------------------------------------------
Total Distributions (1.90) (1.43) (.75) (.505) (.58) (.55)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $17.09 $17.73 $17.97 $14.81 $13.33 $11.33
========================================================================================================================
TOTAL RETURN 7.43% 7.26% 27.60% 15.26% 23.65% 2.67%
========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $600 $553 $468 $330 $280 $230
Ratio of Total Expenses to
Average Net Assets 0.31%* 0.31% 0.32% 0.31% 0.36% 0.34%
Ratio of Net Investment Income to
Average Net Assets 3.52%* 3.72% 3.96% 4.04% 4.25% 4.11%
Portfolio Turnover Rate 23%* 31% 25% 36% 26% 42%
========================================================================================================================
</TABLE>
*Annualized.
54
<PAGE> 57
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO
YEAR ENDED SEPTEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ------------------------------------------------------------
THROUGHOUT EACH PERIOD MARCH 31, 1999 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $19.69 $18.50 $13.71 $12.00 $10.05 $10.57
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .25 .490 .42 .48 .46 .45
Net Realized and Unrealized Gain (Loss)
on Investments 1.85 1.475 4.69 1.75 2.02 (.63)
-------------------------------------------------------------------------
Total from Investment Operations 2.10 1.965 5.11 2.23 2.48 (.18)
-------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.49) (.400) (.15) (.46) (.48) (.33)
Distributions from Realized Capital Gains (.11) (.375) (.17) (.06) (.05) (.01)
-------------------------------------------------------------------------
Total Distributions (.60) (.775) (.32) (.52) (.53) (.34)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $21.19 $19.69 $18.50 $13.71 $12.00 $10.05
=========================================================================================================================
TOTAL RETURN 10.83% 11.19% 38.05% 19.07% 25.69% -1.64%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $429 $375 $271 $142 $91 $68
Ratio of Total Expenses to
Average Net Assets 0.36%* 0.36% 0.37% 0.35% 0.39% 0.34%
Ratio of Net Investment Income to
Average Net Assets 2.47%* 2.69% 3.11% 3.69% 4.28% 4.57%
Portfolio Turnover Rate 4%* 6% 8% 8% 10% 18%
=========================================================================================================================
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED VALUE PORTFOLIO
---------------------------
FEB. 8* TO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD MAR. 31, 1999
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .03
Net Realized and Unrealized Gain (Loss) on Investments .21
----------
Total from Investment Operations .24
----------
DISTRIBUTIONS
Dividends from Net Investment Income --
Distributions from Realized Capital Gains --
----------
Total Distributions --
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.24
========================================================================================================================
TOTAL RETURN 2.40%
========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $16
Ratio of Total Expenses to Average Net Assets 0.40%**
Ratio of Net Investment Income to Average Net Assets 2.70%**
Portfolio Turnover Rate 1%**
========================================================================================================================
</TABLE>
*Inception.
**Annualized.
55
<PAGE> 58
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (continued)
- -------------------------------------------------------------------------------------------------------------------------
EQUITY INDEX PORTFOLIO
YEAR ENDED SEPTEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -----------------------------------------------------------
THROUGHOUT EACH PERIOD MARCH 31, 1999 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $26.94 $25.32 $18.32 $15.69 $12.47 $12.37
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .17 .37 .34 .34 .33 .31
Net Realized and Unrealized Gain (Loss)
on Investments 7.14 1.83 6.94 2.75 3.26 .12
------------------------------------------------------------------------
Total from Investment Operations 7.31 2.20 7.28 3.09 3.59 .43
------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.37) (.34) (.19) (.33) (.29) (.23)
Distributions from Realized Capital Gains (.13) (.24) (.09) (.13) (.08) (.10)
------------------------------------------------------------------------
Total Distributions (.50) (.58) (.28) (.46) (.37) (.33)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $33.75 $26.94 $25.32 $18.32 $15.69 $12.47
=========================================================================================================================
TOTAL RETURN 27.46% 8.97% 40.31% 20.19% 29.51% 3.53%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,262 $920 $718 $406 $276 $186
Ratio of Total Expenses to
Average Net Assets 0.19%* 0.20% 0.23% 0.22% 0.28% 0.24%
Ratio of Net Investment Income to
Average Net Assets 1.19%* 1.48% 1.78% 2.13% 2.53% 2.60%
Portfolio Turnover Rate 5%* 1% 1% 2% 2% 7%
=========================================================================================================================
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
MID-CAP INDEX PORTFOLIO
-----------------------
FEB. 8* TO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD MAR. 31, 1999
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .02
Net Realized and Unrealized Gain (Loss) on Investments .13
--------
Total from Investment Operations .15
--------
DISTRIBUTIONS
Dividends from Net Investment Income --
Distributions from Realized Capital Gains --
--------
Total Distributions --
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.15
========================================================================================================================
TOTAL RETURN 1.50%
========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $15
Ratio of Total Expenses to Average Net Assets 0.25%**
Ratio of Net Investment Income to Average Net Assets 1.42%**
Portfolio Turnover Rate 50%**
========================================================================================================================
</TABLE>
*Initial share purchase date. All assets were held in money market instruments
until February 9, 1999, when performance measurement begins.
**Annualized.
56
<PAGE> 59
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO
YEAR ENDED SEPTEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -----------------------------------------------------------
THROUGHOUT EACH PERIOD MARCH 31, 1999 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $24.33 $21.51 $17.58 $14.10 $10.79 $10.26
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .08 .16 .190 .18 .16 .14
Net Realized and Unrealized Gain (Loss)
on Investments 6.81 3.43 4.615 3.65 3.26 .46
-------------------------------------------------------------------------
Total from Investment Operations 6.89 3.59 4.805 3.83 3.42 .60
-------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.16) (.20) (.180) (.16) (.11) (.07)
Distributions from Realized Capital Gains (1.53) (.57) (.695) (.19) -- --
-------------------------------------------------------------------------
Total Distributions (1.69) (.77) (.875) (.35) (.11) (.07)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $29.53 $24.33 $21.51 $17.58 $14.10 $10.79
==========================================================================================================================
TOTAL RETURN 29.78% 17.37% 28.76% 27.79% 32.02% 5.87%
==========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $963 $631 $460 $276 $162 $82
Ratio of Total Expenses to
Average Net Assets 0.39%* 0.39% 0.38% 0.39% 0.47% 0.38%
Ratio of Net Investment Income to
Average Net Assets 0.60%* 0.74% 1.12% 1.29% 1.64% 1.55%
Portfolio Turnover Rate 44%* 48% 38% 42% 32% 34%
=========================================================================================================================
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
SMALL COMPANY GROWTH PORTFOLIO
YEAR ENDED SEP. 30,
SIX MONTHS ENDED --------------------- JUN. 3* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD MAR. 31, 1999 1998 1997 SEP. 30, 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.53 $11.97 $ 9.84 $10.00
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .03 .06 .04 .04
Net Realized and Unrealized Gain (Loss) on Investments 1.34 (2.46) 2.13 (.20)
-------------------------------------------------
Total from Investment Operations 1.37 (2.40) 2.17 (.16)
-------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.06) (.04) (.04) --
Distributions from Realized Capital Gains (.01) -- -- --
-------------------------------------------------
Total Distributions (.07) (.04) (.04) --
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.83 $ 9.53 $11.97 $ 9.84
=========================================================================================================================
TOTAL RETURN 14.43% -20.10% 22.16% -1.60%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $129 $111 $133 $44
Ratio of Total Expenses to Average Net Assets 0.51%** 0.42% 0.39% 0.45%**
Ratio of Net Investment Income to Average Net Assets 0.57%** 0.54% 0.67% 1.42%**
Portfolio Turnover Rate 78%** 106% 72% 18%
=========================================================================================================================
</TABLE>
*Inception.
**Annualized.
57
<PAGE> 60
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL PORTFOLIO
YEAR ENDED SEPTEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ---------------------------------------------- JUN. 3* TO
THROUGHOUT EACH PERIOD MARCH 31, 1999 1998 1997 1996 1995 SEP. 30, 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.96 $14.55 $12.74 $11.40 $10.31 $10.00
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .06 .21 .17 .14 .16 .05
Net Realized and Unrealized Gain (Loss)
on Investments 2.09 (1.48) 2.10 1.36 .99 .26
------------------------------------------------------------------------
Total from Investment Operations 2.15 (1.27) 2.27 1.50 1.15 .31
------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.20) (.18) (.14) (.16) (.06) --
Distributions from Realized Capital Gains -- (.14) (.32) -- -- --
------------------------------------------------------------------------
Total Distributions (.20) (.32) (.46) (.16) (.06) --
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $14.91 $12.96 $14.55 $12.74 $11.40 $10.31
========================================================================================================================
TOTAL RETURN 16.72% -8.74% 18.55% 13.36% 11.21% 3.10%
========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $248 $217 $246 $162 $90 $63
Ratio of Total Expenses to
Average Net Assets 0.49%** 0.48% 0.46% 0.49% 0.54% 0.30%**
Ratio of Net Investment Income to
Average Net Assets 0.70%** 1.48% 1.43% 1.42% 1.67% 1.91%**
Portfolio Turnover Rate 28%** 38% 22% 19% 27% 0%
========================================================================================================================
</TABLE>
*Inception.
**Annualized.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
REIT INDEX PORTFOLIO
--------------------
FEB 8.* TO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD MAR. 31, 1999
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .10
Net Realized and Unrealized Gain (Loss) on Investments (.35)
------------
Total from Investment Operations (.25)
------------
DISTRIBUTIONS
Dividends from Net Investment Income --
Distributions from Realized Capital Gains --
------------
Total Distributions --
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.75
=========================================================================================================================
TOTAL RETURN -2.50%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $8
Ratio of Total Expenses to Average Net Assets 0.30%**
Ratio of Net Investment Income to Average Net Assets 6.48%**
Portfolio Turnover Rate 23%**
=========================================================================================================================
</TABLE>
*Initial share purchase date. All assets were held in money market instruments
until February 9, 1999, when performance measurement begins.
**Annualized.
58
<PAGE> 61
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 comprises the Money
Market, Short-Term Corporate, High-Grade Bond, High Yield Bond, Balanced, Equity
Income, Diversified Value, Equity Index, Mid-Cap Index, Growth, Small Company
Growth, International, and REIT Index Portfolios. Each portfolio's shares are
only available for purchase by separate accounts of insurance companies as
investments for variable annuity plans or variable life insurance contracts.
Certain investments of the Money Market, Short-Term Corporate, High-Grade
Bond, High Yield 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. The International
Portfolio invests in securities of foreign issuers, which may subject the
portfolio to investment risks not normally associated with investing in
securities of U.S. corporations.
A. The following significant accounting policies conform to generally accepted
accounting principles for mutual funds. The fund consistently follows such
policies in preparing its financial statements.
1. SECURITY VALUATION: Money Market Portfolio: Investment securities are
valued at amortized cost, which approximates market value. Other portfolios:
Equity securities are valued at the latest quoted sales prices as of the close
of trading on the New York Stock Exchange (generally 4:00 p.m. Eastern time) on
the valuation date; such securities not traded on the valuation date are valued
at the mean of the latest quoted bid and asked prices. Prices are taken from the
primary market in which each security trades. Bonds, and temporary cash
investments acquired over 60 days to maturity, are valued using the latest bid
prices or using valuations based on a matrix system (which considers such
factors as security prices, yields, maturities, and ratings), both as furnished
by independent pricing services. Other temporary cash investments are valued at
amortized cost, which approximates market value. Securities for which market
quotations are not readily available are valued by methods deemed by the Board
of Trustees to represent fair value.
2. FOREIGN CURRENCY: Securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
exchange rates on the valuation date as employed by Morgan Stanley Capital
International in the calculation of its indexes.
Realized gains (losses) and unrealized appreciation (depreciation) on
investment securities include the effects of changes in exchange rates since the
securities were purchased, combined with the effects of changes in security
prices. Fluctuations in the value of other assets and liabilities resulting from
changes in exchange rates are recorded as unrealized foreign currency gains
(losses) until the asset or liability is settled in cash, when they are recorded
as realized foreign currency gains (losses).
3. FUTURES AND FORWARD CURRENCY CONTRACTS: The Equity Index Portfolio uses
S&P 500 Index futures contracts to a limited extent, with the objectives of
maintaining full exposure to the stock market, enhancing returns, maintaining
liquidity, and minimizing transaction costs. The portfolio may purchase futures
contracts to immediately invest incoming cash in the market, or sell futures in
response to cash outflows, thereby simulating a fully invested position in the
underlying index while maintaining a cash balance for liquidity. The portfolio
may seek to enhance returns by using futures contracts instead of the underlying
securities when futures are believed to be priced more attractively than the
underlying securities. The primary risks associated with the use of futures
contracts are imperfect correlation between changes in market values of stocks
held by the portfolio and the prices of futures contracts, and the possibility
of an illiquid market.
The Short-Term Corporate Portfolio may use Municipal Bond Index, U.S.
Treasury Bond, and U.S. Treasury Note futures contracts, with the objectives of
enhancing returns, managing interest-rate risk, maintaining liquidity,
diversifying credit risk, and minimizing transaction costs. The portfolio may
purchase or sell futures contracts instead of bonds to take advantage of pricing
differentials between the futures contracts and the underlying bonds. The
portfolio may also seek to take advantage of price differences among bond market
sectors by simultaneously buying futures
59
<PAGE> 62
NOTES TO FINANCIAL STATEMENTS (continued)
(or bonds) of one market sector and selling futures (or bonds) of another
sector. Futures contracts may also be used to simulate a fully invested position
in the underlying bonds while maintaining a cash balance for liquidity. The
primary risks associated with the use of futures contracts are imperfect
correlation between changes in market values of bonds held by the portfolio and
the prices of futures contracts, and the possibility of an illiquid market.
The International Portfolio enters into forward currency contracts to
protect the value of securities and related receivables and payables against
changes in foreign exchange rates. The portfolio's risks in using these
contracts include movement in the values of the foreign currencies relative to
the U.S. dollar and the ability of the counterparties to fulfill their
obligations under the contracts.
Futures and forward currency contracts are valued at their quoted daily
settlement prices. The aggregate principal amounts of the contracts are not
recorded in the financial statements. Fluctuations in the value of the contracts
are recorded in the Statement of Net Assets as an asset (liability) and in the
Statement of Operations as unrealized appreciation (depreciation) until the
contracts are closed, when they are recorded as realized gains (losses) on
futures or forward currency contracts.
4. FEDERAL INCOME TAXES: Each portfolio 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.
5. REPURCHASE AGREEMENTS: The Money Market Portfolio may invest in
repurchase agreements secured by U.S. government obligations. The other
portfolios, along with other members of The Vanguard Group, transfer uninvested
cash balances to a Pooled Cash Account, which is invested in repurchase
agreements secured by U.S. government securities.
Securities pledged as collateral for repurchase agreements are held by a
custodian bank until the agreements mature. Each agreement requires that the
market value of the collateral be sufficient to cover payments of interest and
principal; however, in the event of default or bankruptcy by the other party to
the agreement, retention of the collateral may be subject to legal proceedings.
6. DISTRIBUTIONS: Distributions of net investment income to shareholders
of the Money Market, Short-Term Corporate, High-Grade Bond, and High Yield Bond
Portfolios are declared daily and paid on the first business day of the
following month. Annual distributions of net investment income to shareholders
of the Balanced, Equity Income, Diversified Value, Equity Index, Mid-Cap Index,
Growth, Small Company Growth, International, and REIT Index Portfolios are
recorded on the ex-dividend date. Annual distributions from realized capital
gains, if any, are recorded on the ex-dividend date.
7. OTHER: Dividend income is recorded on the ex-dividend date. The REIT
Index Portfolio's dividend income includes some payments that represent a return
of capital from its REIT investments. The amount of such return of capital is
only determined by each REIT after its fiscal year ends. No estimate of return
of capital distributions has been recorded in the financial statements. Security
transactions are accounted for on the date the securities are bought or sold.
Costs used to determine realized gains (losses) on the sale of investment
securities are those of the specific securities sold. Premiums and discounts on
debt securities purchased are amortized and accreted, respectively, to interest
income over the lives of the securities.
B. The Vanguard Group furnishes investment advisory services to the Money
Market, Short-Term Corporate, High-Grade Bond, Equity Index, Mid-Cap Index, and
REIT Index Portfolios on an at-cost basis.
Wellington Management Company, LLP; Newell Associates; Barrow, Hanley,
Mewhinney & Strauss, Inc.; and Lincoln Capital Management Company provide
investment advisory services to the High Yield Bond, Equity Income, Diversified
Value, and Growth Portfolios, respectively. For the period ended March 31, 1999,
the investment advisory fees of the High Yield Bond, Equity Income, Diversified
Value, and Growth Portfolios represented effective annual rates of 0.06%, 0.10%,
0.125%, and 0.15%, respectively, of average net assets.
60
<PAGE> 63
Wellington Management Company, LLP provides investment advisory services
to the Balanced Portfolio for a fee calculated at an annual percentage rate of
average net assets. The basic fee is subject to quarterly adjustments based on
performance for the preceding three years relative to a combined index composed
of the S&P 500 Index and the Lehman Long Corporate AA or Better Bond Index. For
the six months ended March 31, 1999, the investment advisory fee represented an
effective annual basic rate of 0.09% of the portfolio's average net assets
before a decrease of $44,000 (0.01%) based on performance.
Granahan Investment Management, Inc., provides investment advisory
services to the Small Company Growth Portfolio for a fee calculated at an annual
percentage rate of average net assets. The basic fee is subject to quarterly
adjustments based on performance relative to the Russell 2000 Index and,
beginning January 1, 1998, an index of the stocks held by the largest small
capitalization stock mutual funds. For the six months ended March 31, 1999, the
investment advisory fee represented an effective annual basic rate of 0.15% of
the portfolio's average net assets before an increase of $9,000 (0.01%) based on
performance.
Schroder Capital Management International, Inc., provides investment
advisory services to the International Portfolio for a fee calculated at an
annual percentage rate of average net assets. The basic fee is subject to
quarterly adjustments based on performance for the preceding three years
relative to the Morgan Stanley Capital International Europe, Australasia, Far
East Index. For the six months ended March 31, 1999, the investment advisory fee
represented an effective annual basic rate of 0.13% of the portfolio's average
net assets before an increase of $26,000 (0.02%) based on performance.
C. The Vanguard Group furnishes at cost corporate management, administrative,
marketing, and distribution services. The costs of such services are allocated
to each portfolio under methods approved by the Board of Trustees. Each
portfolio has committed to provide up to 0.40% of its net assets in capital
contributions to Vanguard. At March 31, 1999, the portfolios had contributed
capital to Vanguard (included in Other Assets) of:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
CAPITAL CONTRIBUTED PERCENTAGE PERCENTAGE
TO VANGUARD OF PORTFOLIO OF VANGUARD'S
PORTFOLIO (000) NET ASSETS CAPITALIZATION
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market $ 98 0.02% 0.14%
High-Grade Bond 56 0.02 0.08
High Yield Bond 28 0.02 0.04
Balanced 98 0.02 0.14
Equity Income 70 0.02 0.10
Equity Index 203 0.02 0.29
Growth 154 0.02 0.22
Small Company Growth 21 0.02 0.03
International 42 0.02 0.06
- ---------------------------------------------------------------------------------------------
</TABLE>
The portfolios' Trustees and officers are also Directors and officers of
Vanguard.
61
<PAGE> 64
NOTES TO FINANCIAL STATEMENTS (continued)
D. Vanguard has asked the portfolios' investment advisers to direct certain
portfolio trades, subject to obtaining the best price and execution, to brokers
who have agreed to rebate to the portfolios part of the commissions generated.
Such rebates are used solely to reduce the portfolios' administrative expenses.
The portfolios' custodian banks have also agreed to reduce their fees when a
portfolio maintains cash on deposit in the non-interest-bearing custody account.
For the six months ended March 31, 1999, directed brokerage and custodian fee
offset arrangements reduced expenses by:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
EXPENSE REDUCTION
(000) TOTAL EXPENSE
--------------------------- REDUCTION AS A
DIRECTED CUSTODIAN PERCENTAGE OF AVERAGE
PORTFOLIO BROKERAGE FEES NET ASSETS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
High-Grade Bond -- $4 --
Balanced $17 -- 0.01%
- --------------------------------------------------------------------------------------------------
</TABLE>
E. During the period ended March 31, 1999, purchases and sales of investment
securities other than temporary cash investments were:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES OTHER INVESTMENT SECURITIES
(000) (000)
---------------------------------------------------------------------
PORTFOLIO PURCHASES SALES PURCHASES SALES
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term Corporate $ 6,690 $ 5,398 $ 10,925 $ 400
High-Grade Bond 132,454 100,900 44,634 13,651
High Yield Bond -- -- 40,786 20,782
Balanced 12,264 15,301 73,706 52,542
Equity Income -- -- 25,325 8,422
Diversified Value -- -- 14,661 12
Equity Index -- -- 110,076 28,853
Mid-Cap Index -- -- 15,024 726
Growth -- -- 321,433 176,290
Small Company Growth -- -- 53,753 48,922
International -- -- 46,124 32,362
REIT Index -- -- 8,250 183
- ---------------------------------------------------------------------------------------------
</TABLE>
At September 30, 1998, the following portfolios had available realized
capital losses to offset future taxable capital gains through the following
fiscal year-ends:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
EXPIRATION LOSS
FISCAL YEARS ENDING AMOUNT
PORTFOLIO SEPTEMBER 30, (000)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Small Company Growth 2007 $(2,485)
International 2006-2007 (2,735)
- --------------------------------------------------------------------------------------------
</TABLE>
During the six months ended March 31, 1999, the International Portfolio
realized net foreign currency losses of $97,000, which decreased distributable
net income for tax purposes; accordingly, such losses have been reclassified
from accumulated net realized losses to undistributed net investment income.
62
<PAGE> 65
F. At March 31, 1999, net 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>
Short-Term Corporate $ 13 $ (32) $ (19)
High-Grade Bond 4,666 (1,882) 2,784
High Yield Bond 2,329 (3,677) (1,348)
Balanced 132,444 (15,663) 116,781
Equity Income 138,307 (6,270) 132,037
Diversified Value 649 (473) 176
Equity Index 590,256 (18,555) 571,701
Mid-Cap Index 914 (734) 180
Growth 353,678 (6,152) 347,526
Small Company Growth 23,542 (11,975) 11,567
International 64,715 (8,408) 56,307
REIT Index 60 (269) (209)
- -----------------------------------------------------------------------------------------------
</TABLE>
At March 31, 1999, the aggregate settlement value of open futures
contracts expiring in June 1999 and the related unrealized appreciation
(depreciation) were:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
(000)
-------------------------------------
NUMBER OF AGGREGATE UNREALIZED
PORTFOLIO/ LONG (SHORT) SETTLEMENT APPRECIATION
FUTURES CONTRACTS CONTRACTS VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Corporate
5-Year U.S. Treasury Note (4) $ 446 $ 1
Equity Index/
S&P 500 Index 39 12,610 (260)
- ------------------------------------------------------------------------------------------------
</TABLE>
At March 31, 1999, the International Portfolio had open forward currency
contracts to deliver foreign currency in exchange for U.S. dollars as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
(000)
------------------------------------------------------------------------
CONTRACT AMOUNT
--------------------------- NET
CONTRACT FOREIGN U.S. MARKET VALUE IN UNREALIZED
SETTLEMENT DATE CURRENCY DOLLARS U.S. DOLLARS DEPRECIATION
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Deliver:
5/18/1999 JPY 3,287,324 $27,864 $27,926 $(62)
- -------------------------------------------------------------------------------------------------
</TABLE>
JPY-Japanese Yen.
The International Portfolio had net unrealized foreign currency losses of
$191,000 resulting from the translation of other assets and liabilities at March
31, 1999.
63
<PAGE> 66
NOTES TO FINANCIAL STATEMENTS (continued)
G. The market value of securities on loan to broker/dealers at March 31, 1999,
and collateral received with respect to such loans were:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
(000)
------------------------------------------------------------
COLLATERAL RECEIVED
---------------------------------
MARKET VALUE MARKET VALUE OF
OF LOANED U.S. TREASURY
PORTFOLIO SECURITIES CASH SECURITIES
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced $ 8,586 $ 4,346 $4,519
Growth 1,195 1,270 --
Small Company Growth 7,644 8,480 --
International 27,459 29,215 --
- ------------------------------------------------------------------------------------------------
</TABLE>
Cash collateral received is invested in repurchase agreements. 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, retention of the collateral may
be subject to legal proceedings.
64
<PAGE> 67
TRUSTEES AND OFFICERS
JOHN C. BOGLE
Founder, Senior Chairman of the Board, and Director/Trustee of The Vanguard
Group, Inc., and each of the investment companies in The Vanguard Group.
JOHN J. BRENNAN
Chairman of the Board, Chief Executive Officer, and Director/Trustee of The
Vanguard Group, Inc., and each of the investment companies in The Vanguard
Group.
JOANN HEFFERNAN HEISEN
Vice President, Chief Information Officer, and a member of the Executive
Committee of Johnson & Johnson; Director of Johnson & Johnson-Merck Consumer
Pharmaceuticals Co., Women First HealthCare, Inc., Recording for the Blind and
Dyslexic, The Medical Center at Princeton, and Women's Research and Education
Institute.
BRUCE K. MacLAURY
President Emeritus of The Brookings Institution; Director of American Express
Bank Ltd., The St. Paul Companies, Inc., and National Steel Corp.
BURTON G. MALKIEL
Chemical Bank Chairman's Professor of Economics, Princeton University; Director
of Prudential Insurance Co. of America, Banco Bilbao Gestinova, Baker Fentress &
Co., The Jeffrey Co., and Southern New England Telecommunications Co.
ALFRED M. RANKIN, JR.
Chairman, President, and Chief Executive Officer of NACCO Industries, Inc.;
Director of NACCO Industries, The BFGoodrich Co., and The Standard Products Co.
JOHN C. SAWHILL
President and Chief Executive Officer of The Nature Conservancy; formerly,
Director and Senior Partner of McKinsey & Co. and President of New York
University; Director of Pacific Gas and Electric Co., Procter & Gamble Co.,
NACCO Industries, and Newfield Exploration Co.
JAMES O. WELCH, JR.
Retired Chairman of Nabisco Brands, Inc.; retired Vice Chairman and Director of
RJR Nabisco; Director of TECO Energy, Inc., and Kmart Corp.
J. LAWRENCE WILSON
Chairman and Chief Executive Officer of Rohm & Haas Co.; Director of Cummins
Engine Co. and The Mead Corp.; Trustee of Vanderbilt University.
OTHER FUND OFFICERS
RAYMOND J. KLAPINSKY
Secretary; Managing Director and Secretary of The Vanguard Group, Inc.;
Secretary of each of the investment companies in The Vanguard Group.
THOMAS J. HIGGINS
Treasurer; Principal of The Vanguard Group, Inc.; Treasurer of each of the
investment companies in The Vanguard Group.
OTHER VANGUARD OFFICERS
R. GREGORY BARTON
Managing Director, Legal Department.
ROBERT A. DiSTEFANO
Managing Director, Information Technology.
JAMES H. GATELY
Managing Director, Individual Investor Group.
KATHLEEN C. GUBANICH
Managing Director, Human Resources.
IAN A. MacKINNON
Managing Director, Fixed Income Group.
F. WILLIAM McNABB, III
Managing Director, Institutional Investor Group.
MICHAEL S. MILLER
Managing Director, Planning and Development.
RALPH K. PACKARD
Managing Director and Chief Financial Officer.
GEORGE U. SAUTER
Managing Director, Core Management Group.
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc. Frank Russell Company is
the owner of trademarks and copyrights relating to the Russell Indexes.
"Wilshire 4500" and "Wilshire 5000" are trademarks of Wilshire Associates.
<PAGE> 68
VANGUARD
MILESTONES
[GRAPHIC]
The Vanguard Group is
named for HMS Vanguard,
Admiral Horatio Nelson's flagship
at the Battle of the Nile on
August 1, 1798. Our founder,
John C. Bogle, chose the name
after reading Nelson's inspiring
tribute to his fleet: "Nothing could
withstand the squadron . . .
with the judgment of the captains,
together with their valour, and that
of the officers and men of every
description, it was absolutely irresistible."
[GRAPHIC]
Walter L. Morgan, founder of
Wellington Fund, the nation's
oldest balanced mutual fund
and forerunner of today's family
of some 100 Vanguard funds,
celebrated his 100th birthday on
July 23, 1998. Mr. Morgan,
a true investment pioneer, died
six weeks later on September 2.
[GRAPHIC]
Wellington Fund,
The Vanguard Group's oldest fund,
was incorporated by Mr. Morgan
70 years ago, on December 28, 1928.
The fund was named after
the Duke of Wellington,
whose forces defeated
Napoleon Bonaparte at the
Battle of Waterloo in 1815.
[THE VANGUARD GROUP LOGO]
Post Office Box 2600
Valley Forge, Pennsylvania 19482
FUND INFORMATION
1-800-662-7447
INDIVIDUAL ACCOUNT SERVICES
1-800-662-2739
INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036
www.vanguard.com
All Vanguard funds are offered by prospectus only. Prospectuses contain more
complete information on advisory fees, distribution charges, and other expenses
and should be read carefully before you invest or send money. Prospectuses can
be obtained directly from The Vanguard Group.
Q642-05/25/1999
(C) 1999 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing
Corporation, Distributor.
<PAGE> 69
VANGUARD VARIABLE INSURANCE FUND
FINANCIAL STATEMENTS
MARCH 31, 1999 (UNAUDITED)
The Statement of Net Assets should be read in conjunction with the Statement of
Operations, Statement of Changes in Net Assets, Financial Highlights, and Notes
to Financial Statements, all of which appear in the accompanying report.
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each portfolio's holdings, including
each security's market value on the last day of the reporting period. Securities
are grouped and subtotaled by asset type (common stocks, U.S. government and
agency issues, corporate bonds, etc.) and by industry sector or, for
international securities, by country. (The Equity Index Portfolio's S&P 500
Index securities are listed in descending market value order.) Other assets are
added to, and liabilities are subtracted from, the value of Total Investments to
calculate the portfolio's Net Assets. Finally, Net Assets are divided by the
outstanding shares of the portfolio to arrive at its share price, or Net Asset
Value (NAV) Per Share. The NAV is the price used for portfolio share
transactions with separate accounts of insurance companies, and differs from the
accumulated value of units in their variable annuity plans or variable life
insurance contracts.
At the end of the Statement of Net Assets, you will find a table
displaying the composition of the portfolio's net assets on both a dollar and
per-share basis. Because all income and any realized gains must be distributed
to shareholders each year, the bulk of net assets consists of Paid in Capital
(money invested by shareholders). The amounts shown for Undistributed Net
Investment Income and Accumulated Net Realized Gains usually approximate the
sums the portfolio had available to distribute to shareholders as income
dividends or capital gains as of the statement date; portfolios that distribute
net income to shareholders as a dividend each day usually have no Undistributed
Net Investment Income. Any Accumulated Net Realized Losses, and any cumulative
excess of distributions over net income or net realized gains, will appear as
negative balances. Unrealized Appreciation (Depreciation) is the difference
between the market value of the portfolio's investments and their cost, and
reflects the gains (losses) that would be realized if the portfolio were to sell
all of its investments at their statement-date values.
CONTENTS
<TABLE>
<S> <C>
Money Market Portfolio .............. 1
Short-Term Corporate Portfolio ...... 5
High-Grade Bond Portfolio ........... 7
High Yield Bond Portfolio ...........14
Balanced Portfolio ..................19
Equity Income Portfolio .............23
Diversified Value Portfolio .........25
Equity Index Portfolio ..............26
Mid-Cap Index Portfolio .............31
Growth Portfolio ....................35
Small Company Growth Portfolio ......37
International Portfolio .............39
REIT Index Portfolio ................41
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (22.5%)
- -------------------------------------------------------------------------------------------------------------------------
AGENCY BONDS & NOTES (22.4%)
Federal Home Loan Bank 4.793% 6/4/1999 (1) $15,000 $14,998
Federal Home Loan Bank 5.026% 4/11/1999 (1) 10,000 9,995
Federal Home Loan Mortgage Corp. 5.003% 1/10/2000 1,000 962
Federal Home Loan Mortgage Corp. 7.125% 7/21/1999 6,000 6,039
Federal National Mortgage Assn. 4.722% 4/28/1999 (1) 10,000 9,997
Federal National Mortgage Assn. 4.724% 4/23/1999 (1) 10,000 9,998
Federal National Mortgage Assn. 4.747% 4/24/1999 (1) 10,000 9,993
Federal National Mortgage Assn. 4.751% 4/15/1999 (1) 15,000 14,992
</TABLE>
1
<PAGE> 70
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal National Mortgage Assn. 4.76% 6/15/1999 (1) $15,000 $ 14,997
Federal National Mortgage Assn. 4.78% 5/28/1999 (1) 15,000 14,998
Federal National Mortgage Assn. 4.78% 11/30/1999 9,000 9,000
Federal National Mortgage Assn. 4.82% 6/17/1999 (1) 15,000 14,996
Federal National Mortgage Assn. 5.45% 4/15/1999 6,000 5,999
---------
136,964
---------
U.S. GOVERNMENT SECURITY (0.1%)
U.S. Treasury Note 6.375% 1/15/2000 1,000 1,011
---------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $137,975) 137,975
- -------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (41.4%)
- -------------------------------------------------------------------------------------------------------------------------
BANK HOLDING COMPANY (0.7%)
Bank One Corp. 4.879% 5/24/1999 4,387 4,356
---------
FINANCE--AUTOMOBILES (5.6%)
BMW US Capital Corp. 4.878% 5/17/1999 5,897 5,861
Chrysler Financial Corp. 4.858% 4/29/1999 11,000 10,959
Ford Motor Credit Co. 4.847% 4/6/1999 4,141 4,138
Ford Motor Credit Co. 4.895% 4/12/1999 7,500 7,489
General Motors Acceptance Corp. 4.86% 4/29/1999 3,000 2,989
General Motors Acceptance Corp. 4.88% 4/26/1999 2,600 2,591
---------
34,027
---------
FINANCE--OTHER (14.1%)
Associates Corp. of North America 4.969% 6/7/1999 8,500 8,422
CIT Group Holdings Inc. 4.887% 6/22/1999 5,000 4,945
Commercial Credit Co. 4.882% 4/27/1999 1,847 1,840
Delaware Funding 4.907% 5/11/1999 4,624 4,599
Delaware Funding 4.921% 5/6/1999 1,043 1,038
Enterprise Funding Corp. 4.893% 4/8/1999 5,430 5,425
Enterprise Funding Corp. 4.901% 4/27/1999 6,500 6,477
General Electric Capital Corp. 4.89% 4/12/1999 2,840 2,836
General Electric Capital Corp. 4.912% 8/6/1999 7,500 7,374
General Electric Capital Corp. 4.943% 8/31/1999 6,000 5,879
General Electric Capital Corp. 4.95% 9/29/1999 4,600 4,488
General Electric Capital Corp. 5.019% 6/16/1999 6,421 6,357
New Center Asset Trust 4.902% 5/17/1999 10,000 9,938
Preferred Receivables Funding Co. 4.912% 5/12/1999 1,000 994
Private Export Funding Corp. 4.867% 6/28/1999 3,400 3,360
Triple A One Funding Corp. 4.889% 5/13/1999 6,200 6,165
Triple A One Funding Corp. 4.914% 4/13/1999 2,400 2,396
Triple A One Funding Corp. 4.937% 5/14/1999 3,531 3,510
---------
86,043
---------
INDUSTRIAL (7.4%)
Bayer Corp. 4.87% 5/25/1999 5,000 4,964
Bayer Corp. 4.871% 4/27/1999 5,000 4,983
Campbell Soup Co. 4.881% 6/10/1999 5,000 4,953
Chevron Transport Co. 4.90% 6/8/1999 10,000 9,909
Deere & Co. 4.884% 5/7/1999 4,300 4,279
Deere & Co. 4.902% 6/7/1999 4,000 3,964
International Business Machines Corp. 4.879% 5/24/1999 10,000 9,929
The Procter & Gamble Co. 4.884% 4/19/1999 1,500 1,496
Shell Oil 5.03% 4/1/1999 1,108 1,108
---------
45,585
---------
INSURANCE (1.1%)
General RE Corp. 4.863% 4/30/1999 1,534 1,528
USAA Capital Corp. 6.75% 12/15/1999 5,000 5,061
---------
6,589
---------
</TABLE>
2
<PAGE> 71
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOREIGN BANKS (4.4%)
ABN-AMRO North America Finance Inc. 5.066% 6/30/1999 $ 1,250 $ 1,235
Cregem North America Inc. 4.886% 5/11/1999 9,300 9,250
Cregem North America Inc. 4.892% 4/19/1999 2,000 1,995
Cregem North America Inc. 4.963% 9/10/1999 2,000 1,956
Halifax PLC 4.867% 4/6/1999 899 898
Halifax PLC 4.901% 7/1/1999 10,000 9,878
Oesterreichische Kontrollbank 4.847% 4/6/1999 900 899
Oesterreichische Kontrollbank 4.907% 6/11/1999 850 842
---------
26,953
---------
FOREIGN GOVERNMENT (3.5%)
Caisse d'Amortissement de la Dette Sociale 4.846% 7/12/1999 5,000 4,933
KFW International Finance Inc. 5.016% 5/26/1999 4,560 4,526
KFW International Finance Inc. 5.016% 5/28/1999 12,000 11,907
---------
21,366
---------
FOREIGN INDUSTRIAL (1.6%)
Glaxo Wellcome PLC 4.88% 5/27/1999 5,380 5,340
Glaxo Wellcome PLC 4.889% 6/24/1999 4,700 4,647
---------
9,987
---------
FOREIGN UTILITIES (3.0%)
France Telecom 4.883% 4/6/1999 3,440 3,438
Telstra Corp. Ltd. 4.893% 6/22/1999 2,371 2,345
Telstra Corp. Ltd. 4.913% 6/21/1999 2,500 2,473
Telstra Corp. Ltd. 4.92% 7/9/1999 10,000 9,867
---------
18,123
---------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $253,029) 253,029
- -------------------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT (17.0%)
- -------------------------------------------------------------------------------------------------------------------------
U.S. BANKS (3.4%)
Chase Manhattan Bank 5.70% 7/2/1999 1,000 1,001
Chase Manhattan Bank 5.745% 5/10/1999 500 500
Nationsbank 4.90% 10/9/1999 3,000 3,000
Nationsbank 4.99% 1/11/1999 3,000 3,001
Wachovia Bank 4.948% 4/26/1999 (1) 13,000 12,998
---------
20,500
---------
YANKEE CERTIFICATES OF DEPOSIT--U.S. BRANCHES (13.6%)
ABN-AMRO Bank 4.96% 11/16/1999 5,000 4,999
Bank of Montreal 4.86% 4/29/1999 10,000 10,000
Barclays Bank PLC 4.827% 4/2/1999 (1) 5,000 4,999
Bayerische Landesbank Girozentrale 5.72% 5/6/1999 4,000 4,002
Credit Agricole Indosuez 5.75% 4/16/1999 6,000 6,001
Lloyds Bank 4.97% 6/11/1999 4,200 4,200
National Westminster Bank PLC 4.98% 1/10/2000 13,000 12,995
National Westminster Bank PLC 5.705% 4/16/1999 1,000 1,000
Rabobank Nederlanden 4.83% 10/6/1999 3,000 3,000
Rabobank Nederlanden 5.68% 5/28/1999 3,000 3,000
Swiss Bank Corp. 5.68% 6/3/1999 3,000 3,000
Swiss Bank Corp. 5.73% 5/19/1999 4,000 4,000
Swiss Bank Corp. 5.74% 6/11/1999 2,000 2,002
Swiss Bank Corp. 5.75% 5/7/1999 3,000 3,000
Toronto Dominion Bank 5.64% 7/14/1999 3,000 3,007
UBS AG 5.20% 2/29/2000 5,000 4,999
Westdeutsche Landesbank 4.90% 5/19/1999 9,000 9,000
---------
83,204
---------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(COST $103,704) 103,704
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 72
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO YIELD** DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
EURODOLLAR CERTIFICATES OF DEPOSIT (12.6%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Barclays Bank PLC 5.70% 4/7/1999 $10,000 $ 10,000
Bayerische Hypo und Vereinsbank AG 4.90% 5/18/1999 11,000 11,000
Credit Agricole Indosuez 5.05% 9/7/1999 4,000 4,001
Deutsche Bank AG 5.08% 4/5/1999 3,000 3,000
Dresdner Bank AG 4.88% 4/22/1999 11,000 11,000
Landesbank Hessen-Thueringen 5.00% 8/18/1999 10,000 10,000
National Australia Bank 4.88% 5/5/1999 10,000 10,000
Rabobank Nederlanden 4.88% 5/3/1999 5,000 5,000
Westdeutsche Landesbank 4.86% 4/28/1999 2,000 2,000
Westpac Banking Corp. 4.895% 5/24/1999 11,000 11,000
- -------------------------------------------------------------------------------------------------------------------------
TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT
(COST $77,001) 77,001
- -------------------------------------------------------------------------------------------------------------------------
OTHER NOTES (5.8%)
- -------------------------------------------------------------------------------------------------------------------------
Abbey National Treasury Services 5.25% 3/1/2000 10,000 9,995
Associates Corp. of North America 4.816% 4/20/1999 (1) 9,500 9,494
Bank of America N.T.S.A. 4.823% 5/1/1999 (1) 6,000 5,999
First National Bank of Chicago 5.13% 4/4/2000 5,000 4,998
LaSalle National Bank 5.03% 2/7/2000 5,000 4,999
- -------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER NOTES
(COST $35,485) 35,485
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.3%)
(COST $607,194) 607,194
- -------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.7%)
- -------------------------------------------------------------------------------------------------------------------------
Other Assets--Note C 11,555
Liabilities (7,111)
---------
4,444
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------------------------------------
Applicable to 611,649,294 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $611,638
=========================================================================================================================
NET ASSET VALUE PER SHARE $1.00
=========================================================================================================================
</TABLE>
* See Note A in Notes to Financial Statements.
** Represents annualized yield at date of purchase for discount securities, and
coupon for coupon-bearing securities.
(1) Adjustable Rate Note.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AT MARCH 31, 1999, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $611,650 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (12) --
Unrealized Appreciation -- --
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS $611,638 $1.00
=========================================================================================================================
</TABLE>
4
<PAGE> 73
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM CORPORATE PORTFOLIO COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (75.1%)
- -------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (12.9%)
ARG Funding Corp. 5.88% 5/20/2003 (1)(2) $ 250 $ 250
Advanta Mortgage Loan Trust 5.98% 3/1/2014 (1) 250 248
Citibank Credit Card Trust I 5.55% 1/9/2006 (1) 300 294
PECO Energy Transition Trust 6.05% 3/1/2009 (1) 250 248
Residential Asset Securities Corp. 6.00% 5/25/2020 (1) 350 350
UAC Securitization Corp. 5.57% 9/8/2003 (1) 350 350
---------
1,740
---------
FINANCE (22.8%)
CIT Group Holdings 6.25% 3/28/2001 200 202
Capital One Bank 6.58% 4/17/2001 250 251
ERAC USA Finance Co. 6.35% 1/15/2001 (2) 200 201
Ford Motor Credit Co. 5.75% 2/23/2004 400 396
Morgan Stanley, Dean Witter & Co. 5.625% 1/20/2004 400 395
Newcourt Credit Group 6.875% 2/16/2005 (2) 300 305
Norwest Corp. 6.125% 10/15/2000 425 429
Oasis Residential Inc. 6.75% 11/15/2001 250 248
Reckson Operating Partnership L.P. 7.40% 3/15/2004 125 124
Sears Roebuck Acceptance Corp. 6.69% 4/30/2001 400 406
Summit Bancorp 8.625% 12/10/2002 100 108
---------
3,065
---------
INDUSTRIAL (27.7%)
CABLE (4.9%)
Cox Communications, Inc. 6.50% 11/15/2002 250 255
Telecommunications Inc. 6.375% 5/1/2003 400 406
ENERGY & RELATED GOODS & SERVICES (3.1%)
BP America, Inc. 9.375% 11/1/2000 400 423
FOOD & LODGING (1.8%)
Philip Morris Cos. Inc. 9.00% 1/1/2001 235 247
GENERAL (2.6%)
Parker Retirement Savings Plan Trust 6.34% 7/15/2008 (1)(2) 350 350
HEALTH CARE (3.0%)
Upjohn Co. 5.875% 4/15/2000 400 402
OTHER (7.5%)
Finova Capital Corp. 6.11% 2/18/2003 400 398
Raytheon Co. 5.95% 3/15/2001 300 301
WMX Technologies Inc. 7.00% 10/15/2006 300 311
TECHNOLOGY & RELATED (2.3%)
CSC Enterprises 6.50% 11/15/2001 (2) 300 304
TRANSPORTATION (2.5%)
Delta Air Lines 6.65% 3/15/2004 100 100
Norfolk Southern Corp. 6.70% 5/1/2000 230 233
---------
3,730
---------
UTILITIES (11.7%)
Arizona Public Service 5.875% 2/15/2004 (3) 400 398
CMS Panhandle Holding Co. 6.125% 3/15/2004 (2) 250 249
Duquesne Light Co. 6.10% 5/10/2000 400 402
KN Energy Inc. 6.45% 11/30/2001 150 152
Nevada Power Co. 6.20% 4/15/2004 (2) 150 150
Texas Utilities Co. 7.375% 8/1/2001 209 216
---------
1,567
---------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $10,121) 10,102
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 74
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM CORPORATE PORTFOLIO COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITY (9.4%)
- -------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Note
(COST $1,270) 4.625% 12/31/2000 $ 1,275 $ 1,267
- -------------------------------------------------------------------------------------------------------------------------
FOREIGN BOND (U.S. DOLLAR-DENOMINATED)(3.0%)
- -------------------------------------------------------------------------------------------------------------------------
Pemex Finance Ltd. Notes
(COST $400) 6.125% 11/15/2003 (1)(2) 400 403
- -------------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (10.3%)
- -------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government Obligations in a
Pooled Cash Account
(COST $1,386) 4.94% 4/1/1999 1,386 1,386
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (97.8%)
(COST $13,177) 13,158
- -------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (2.2%)
- -------------------------------------------------------------------------------------------------------------------------
Other Assets 313
Liabilities (17)
---------
296
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------------------------------------
Applicable to 1,352,412 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $13,454
=========================================================================================================================
NET ASSET VALUE PER SHARE $9.95
=========================================================================================================================
</TABLE>
* See Note A in Notes to Financial Statements.
(1) The average maturity is shorter than the final maturity shown due to
scheduled interim principal payments.
(2) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from
registration, normally to qualified institutional buyers. At March 31,
1999, the aggregate value of these securities was $2,212,000, representing
16.4% of net assets.
(3) Security segregated as initial margin for open futures contracts.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
AT MARCH 31, 1999, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
<S> <C> <C>
Paid in Capital $13,492 $9.98
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (20) (.02)
Unrealized Appreciation (Depreciation)--Note F
Investment Securities (19) (.01)
Futures Contracts 1 --
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS $13,454 $9.95
=======================================================================================================================
</TABLE>
6
<PAGE> 75
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
HIGH-GRADE BOND PORTFOLIO COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (58.3%)
- -------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (20.0%)
U.S. Treasury Bond 7.625% 11/15/2022 $ 50 $ 61
U.S. Treasury Bond 7.875% 2/15/2021 740 916
U.S. Treasury Bond 8.00% 11/15/2021 4,585 5,764
U.S. Treasury Bond 8.125% 8/15/2019 10,535 13,266
U.S. Treasury Bond 8.125% 5/15/2021 1,610 2,045
U.S. Treasury Bond 8.125% 8/15/2021 7,225 9,183
U.S. Treasury Bond 8.50% 2/15/2020 1,870 2,444
U.S. Treasury Bond 8.75% 5/15/2017 3,705 4,886
U.S. Treasury Bond 8.75% 5/15/2020 900 1,205
U.S. Treasury Bond 8.75% 8/15/2020 675 905
U.S. Treasury Bond 8.875% 8/15/2017 1,300 1,731
U.S. Treasury Bond 8.875% 2/15/2019 1,010 1,357
U.S. Treasury Bond 9.125% 5/15/2018 510 697
U.S. Treasury Bond 10.00% 5/15/2010 400 491
U.S. Treasury Bond 10.375% 11/15/2009 8,495 10,463
U.S. Treasury Bond 10.375% 11/15/2012 2,065 2,725
U.S. Treasury Bond 10.75% 5/15/2003 1,425 1,709
U.S. Treasury Bond 11.625% 11/15/2002 3,700 4,465
U.S. Treasury Bond 11.875% 11/15/2003 450 569
U.S. Treasury Bond 12.75% 11/15/2010 1,775 2,476
U.S. Treasury Bond 14.00% 11/15/2011 1,065 1,616
U.S. Treasury Note 5.50% 3/31/2003 300 303
U.S. Treasury Note 6.50% 8/15/2005 1,365 1,447
U.S. Treasury Note 7.00% 7/15/2006 575 629
---------
71,353
---------
AGENCY BONDS & NOTES (5.9%)
Federal Farm Credit Bank 4.80% 11/6/2003 2,500 2,423
Federal Home Loan Bank 5.575% 9/2/2003 1,900 1,902
Federal Home Loan Bank 5.675% 8/18/2003 2,000 2,008
Federal Home Loan Bank 5.80% 9/2/2008 2,400 2,382
Federal Home Loan Bank 5.865% 9/2/2008 1,300 1,295
Federal Home Loan Bank 5.88% 11/25/2008 530 518
Federal Home Loan Mortgage Corp. 7.09% 6/1/2005 200 203
Federal National Mortgage Assoc. 5.64% 12/10/2008 1,500 1,444
Federal National Mortgage Assoc. 5.75% 4/15/2003 1,090 1,099
Federal National Mortgage Assoc. 5.90% 7/9/2003 1,500 1,502
Federal National Mortgage Assoc. 5.91% 8/25/2003 650 650
Federal National Mortgage Assoc. 5.96% 4/23/2003 300 301
Federal National Mortgage Assoc. 5.97% 7/3/2003 1,000 1,000
Federal National Mortgage Assoc. 6.56% 4/23/2008 1,250 1,252
Federal National Mortgage Assoc. 6.57% 8/22/2007 1,250 1,305
Federal National Mortgage Assoc. 6.58% 8/20/2007 1,350 1,410
Federal National Mortgage Assoc. 7.55% 6/10/2004 350 351
---------
21,045
---------
MORTGAGE-BACKED SECURITIES (32.4%)
Federal Home Loan Mortgage Corp. 5.50% 11/1/2008-3/1/2014 (1) 1,801 1,757
Federal Home Loan Mortgage Corp. 6.00% 7/1/2000-3/1/2029 (1) 11,574 11,374
Federal Home Loan Mortgage Corp. 6.50% 9/1/2000-3/1/2029 (1) 16,219 16,250
Federal Home Loan Mortgage Corp. 7.00% 12/1/1999-11/1/2028 (1) 14,493 14,732
Federal Home Loan Mortgage Corp. 7.50% 3/1/2000-4/1/2028 (1) 8,347 8,589
Federal Home Loan Mortgage Corp. 8.00% 10/1/2009-3/1/2028 (1) 4,553 4,741
Federal Home Loan Mortgage Corp. 8.50% 5/1/2006-5/1/2027 (1) 840 884
Federal Home Loan Mortgage Corp. 9.00% 11/1/2005-5/1/2027 (1) 203 215
Federal Home Loan Mortgage Corp. 9.50% 1/1/2025-2/1/2025 (1) 104 111
Federal Home Loan Mortgage Corp. 10.00% 3/1/2017-11/1/2019 (1) 60 65
Federal National Mortgage Assn. 5.50% 3/1/2001 (1) 45 45
Federal National Mortgage Assn. 6.00% 8/1/2000-1/1/2029 (1) 5,085 4,985
Federal National Mortgage Assn. 6.50% 3/1/2000-10/1/2028 (1) 8,206 8,184
Federal National Mortgage Assn. 7.00% 5/1/2000-3/1/2028 (1) 5,833 5,924
Federal National Mortgage Assn. 7.50% 4/1/1999-5/1/2027 (1) 2,453 2,523
</TABLE>
7
<PAGE> 76
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
HIGH-GRADE BOND PORTFOLIO COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal National Mortgage Assn. 8.00% 2/1/2000-9/1/2027 (1) $ 1,264 $ 1,313
Federal National Mortgage Assn. 8.50% 10/1/2004-12/1/2026 (1) 571 600
Federal National Mortgage Assn. 9.00% 3/1/2020-4/1/2025 (1) 290 309
Federal National Mortgage Assn. 9.50% 6/1/2001-2/1/2025 (1) 176 188
Federal National Mortgage Assn. 10.00% 8/1/2020-8/1/2021 (1) 92 100
Federal National Mortgage Assn. 10.50% 8/1/2020 (1) 23 25
Government National Mortgage Assn. 6.00% 3/15/2009-3/15/2029 (1) 2,088 2,037
Government National Mortgage Assn. 6.50% 10/15/2008-3/15/2029 (1) 9,860 9,834
Government National Mortgage Assn. 7.00% 10/15/2008-7/15/2028 (1) 8,077 8,217
Government National Mortgage Assn. 7.50% 5/15/2008-2/15/2028 (1) 5,163 5,325
Government National Mortgage Assn. 8.00% 3/15/2008-1/15/2028 (1) 4,657 4,848
Government National Mortgage Assn. 8.50% 7/15/2009-4/15/2027 (1) 1,100 1,166
Government National Mortgage Assn. 9.00% 4/15/2016-10/15/2026 (1) 682 733
Government National Mortgage Assn. 9.50% 4/15/2017-2/15/2025 (1) 354 385
Government National Mortgage Assn. 10.00% 5/15/2020-1/15/2025 (1) 136 149
Government National Mortgage Assn. 10.50% 5/15/2019 (1) 28 31
Government National Mortgage Assn. 11.00% 10/15/2015 (1) 27 30
Government National Mortgage Assn. 11.50% 2/15/2013 (1) 20 23
Resolution Trust Corp. Collateralized Mortgage Obligations 10.35% 8/25/2021 (1) 68 68
---------
115,760
---------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $205,895) 208,158
- -------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (36.3%)
- -------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (5.3%)
ARG Funding Corp. 5.88% 5/20/2003 (1)(2) 1,350 1,348
Advanta Credit Card Master Trust 6.05% 8/1/2003 (1) 1,250 1,264
Advanta Mortgage Loan Trust 6.21% 11/25/2016 (1) 1,000 996
American Express Credit Card Master Trust 6.80% 12/15/2003 (1) 1,250 1,281
California Infrastructure & Economic Development
Bank SP Trust PG&E 6.16% 6/25/2003 (1) 250 253
California Infrastructure & Economic Development
Bank SP Trust PG&E 6.42% 9/25/2008 (1) 375 386
Chase Manhattan Credit Card Master Trust 6.30% 4/15/2003 (1) 1,000 1,014
Chemical Credit Card Master Trust I 5.55% 4/15/2003 (1) 1,250 1,249
Discover Card Master Trust 5.40% 11/16/2001 (1) 233 233
First USA Credit Card Master Trust 6.42% 3/17/2005 (1) 1,250 1,279
Ford Credit Auto Loan Master Trust 6.50% 8/15/2002 (1) 1,000 1,015
PECO Energy Transition Trust 5.63% 6/26/2006 (1) 1,900 1,894
PECO Energy Transition Trust 6.05% 3/1/2009 (1) 225 223
Premier Auto Trust 5.69% 6/8/2002 (1) 1,700 1,708
Sears Credit Account Master Trust 5.80% 8/15/2005 (1) 1,500 1,509
Sears Credit Account Master Trust 8.10% 6/15/2004 (1) 1,283 1,317
Toyota Auto Lease Trust 5.35% 7/25/2002 (1) 1,850 1,837
Toyota Auto Lease Trust 6.35% 4/26/2004 (1) 250 252
---------
19,058
---------
FINANCE (14.3%)
American General Finance Corp. 8.00% 2/15/2000 900 918
Associates Corp. 5.875% 5/16/2001 1,100 1,102
Associates Corp. 6.375% 8/15/2000 1,000 1,012
Associates Corp. 6.50% 10/15/2002 650 663
Associates Corp. 6.68% 9/17/1999 700 704
Associates Corp. 7.50% 4/15/2002 600 627
Avalon Properties Inc. 6.875% 12/15/2007 450 442
BT Capital Trust B 7.90% 1/15/2027 200 203
Bank of New York Capital I 7.97% 12/31/2026 400 418
BankAmerica Corp. 9.625% 2/13/2001 500 535
BankAmerica Corp. 10.00% 2/1/2003 200 227
Bear, Stearns & Co., Inc. 6.625% 1/15/2004 200 203
Bear, Stearns & Co., Inc. 7.625% 4/15/2000 250 255
CIT Group Holdings 5.875% 10/15/2008 700 679
CIT Group Holdings 6.625% 6/15/2005 400 408
CNA Financial Corp. 6.45% 1/15/2008 300 291
</TABLE>
8
<PAGE> 77
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CNA Financial Corp 6.50% 4/15/2005 $ 525 $ 515
Case Credit Corp. 6.15% 3/1/2002 2,250 2,264
Chase Capital I 7.67% 12/1/2026 400 408
Chase Manhattan Corp. 6.00% 11/1/2005 575 568
Chase Manhattan Corp. 6.50% 8/1/2005 175 177
Chrysler Financial Corp. 5.25% 10/19/2000 2,000 1,993
Chrysler Financial Corp. 5.875% 2/7/2001 500 503
Chrysler Financial Corp. 6.28% 6/21/1999 800 802
CIGNA Corp. 7.875% 5/15/2027 450 477
Citicorp Capital II 8.015% 2/15/2027 500 520
CoreStates Capital Corp. 9.375% 4/15/2003 250 280
Countrywide Funding 7.31% 8/28/2000 600 611
Donaldson Lufkin & Jenrette, Inc. 6.00% 12/1/2001 3,000 3,003
Equitable Companies Inc. 7.00% 4/1/2028 140 141
Equity Residential Properties 6.55% 11/15/2001 550 553
Finova Capital Corp 5.875% 10/15/2001 750 748
First Chicago Corp. 11.25% 2/20/2001 300 330
First Interstate Bancorp 8.625% 4/1/1999 500 500
Fleet Capital Trust II 7.92% 12/11/2026 400 415
Ford Motor Credit Co. 5.125% 10/15/2001 2,100 2,073
Ford Motor Credit Co. 6.375% 2/1/2029 500 468
Ford Motor Credit Co. 7.00% 9/25/2001 400 412
General Electric Capital Corp. 5.77% 8/27/2001 2,000 2,011
General Motors Acceptance Corp. 5.50% 12/15/2001 750 739
General Motors Acceptance Corp. 5.85% 4/6/2000 1,200 1,204
General Motors Acceptance Corp. 7.125% 5/1/2001 1,200 1,233
Great Western Finance 6.375% 7/1/2000 900 908
HRPT Properties Trust 6.75% 12/18/2002 750 725
Household Finance Corp. 5.875% 2/1/2009 300 287
Household Finance Corp. 7.65% 5/15/2007 400 431
JDN Realty Corp. 6.80% 8/1/2004 350 334
Lehman Brothers Holdings Inc. 6.25% 4/1/2003 850 838
Lehman Brothers Holdings Inc. 6.375% 10/23/2000 750 751
Lehman Brothers Holdings Inc. 6.625% 2/5/2006 450 443
Lehman Brothers Holdings Inc. 6.90% 1/29/2001 1,000 1,009
Mellon Financial Corp. 7.625% 11/15/1999 200 203
Merrill Lynch & Co., Inc. 6.38% 7/18/2000 500 505
Merrill Lynch & Co., Inc. 6.50% 4/1/2001 1,000 1,015
Morgan Stanley, Dean Witter, Discover & Co. 5.89% 3/20/2000 1,500 1,506
NB Capital Trust IV 8.25% 4/15/2027 200 213
NCNB Corp. 9.50% 6/1/2004 150 172
National Rural Utilities 6.42% 5/1/2008 100 102
NationsBank Corp. 5.75% 3/15/2001 500 501
NationsBank Corp. 7.00% 9/15/2001 200 206
NationsBank Corp. 7.75% 8/15/2004 500 538
Norwest Corp. 6.125% 10/15/2000 1,000 1,009
PaineWebber Group, Inc. 7.00% 3/1/2000 450 454
Reckson Operating Partnership LP 7.75% 3/15/2009 500 495
Salomon, Inc. 6.50% 3/1/2000 650 655
Salomon, Inc. 6.65% 7/15/2001 750 762
Salomon Smith Barney Holdings Inc. 5.875% 2/1/2001 400 400
Salomon Smith Barney Holdings Inc. 7.98% 3/1/2000 700 715
Security Capital Pacific Trust 8.05% 4/1/2017 150 142
Simon DeBartolo Group, Inc. 6.75% 7/15/2004 250 248
Summit Properties Inc. 6.95% 8/15/2004 700 682
Susa Partnership 7.50% 12/1/2027 175 158
Swiss Bank Corp. 7.00% 10/15/2015 500 501
Swiss Bank Corp.-New York 7.375% 6/15/2017 100 104
Toyota Motor Credit Corp. 5.50% 9/17/2001 1,750 1,744
Travelers Property Casualty Corp. 7.75% 4/15/2026 275 296
Wells Fargo Capital I 7.96% 12/15/2026 400 420
---------
51,107
---------
</TABLE>
9
<PAGE> 78
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
HIGH-GRADE BOND PORTFOLIO COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL (10.8%)
Allied Signal Inc. 6.20% 2/1/2008 $ 500 $ 496
American Stores Co. 8.00% 6/1/2026 300 338
Anheuser-Busch Cos., Inc. 7.10% 6/15/2007 450 473
Anheuser-Busch Cos., Inc. 7.125% 7/1/2017 150 154
Anheuser-Busch Cos., Inc. 7.375% 7/1/2023 75 78
Applied Materials, Inc. 8.00% 9/1/2004 100 107
Archer-Daniels-Midland Co. 8.875% 4/15/2011 180 219
Auburn Hills 12.00% 5/1/2020 115 183
C.R. Bard, Inc. 6.70% 12/1/2026 450 465
Bayer Corp. 6.65% 2/15/2028 (2) 350 347
Black & Decker Corp. 6.625% 11/15/2000 1,000 1,011
Black & Decker Corp. 7.50% 4/1/2003 500 521
The Boeing Co. 6.625% 2/15/2038 400 379
Burlington Northern Santa Fe Corp. 6.375% 12/15/2005 100 101
Burlington Northern Santa Fe Corp. 6.75% 3/15/2029 250 245
Burlington Northern Santa Fe Corp. 6.875% 2/15/2016 300 303
Burlington Northern Santa Fe Corp. 7.00% 12/15/2025 200 202
CSX Corp. 8.10% 9/15/2022 150 167
CSX Corp. 8.625% 5/15/2022 50 59
Caterpillar Co. 7.375% 3/1/2097 300 306
Chrysler Corp. 7.45% 2/1/2097 100 107
Comcast Cablevision 8.375% 5/1/2007 400 450
Comcast Cablevision 8.875% 5/1/2017 350 421
Conrail Corp. 9.75% 6/15/2020 100 126
Continental Airlines, Inc. (Equipment Trust Certificates) 6.648% 3/15/2019 386 385
WCyprus Minerals 6.625% 10/15/2005 400 367
Dayton Hudson Corp. 6.65% 8/1/2028 400 389
Dayton Hudson Corp. 6.75% 1/1/2028 250 247
Deere & Co. 8.50% 1/9/2022 100 117
Delta Airlines, Inc. (Equipment Trust Certificates) 8.54% 1/2/2007 183 197
Dillard's Department Stores 7.75% 5/15/2027 250 258
Dillard's Department Stores 7.85% 10/1/2012 300 319
Eastman Chemical Co. 6.375% 1/15/2004 400 398
Eastman Chemical Co. 7.25% 1/15/2024 100 98
Federated Department Stores, Inc. 7.00% 2/15/2028 100 99
First Data Corp. 6.625% 4/1/2003 125 128
Ford Capital BV 9.875% 5/15/2002 400 443
Ford Holdings 9.25% 3/1/2000 300 309
Ford Motor Co. 8.90% 1/15/2032 500 618
Ford Motor Co. 9.98% 2/15/2047 65 91
Fortune Brands 7.875% 1/15/2023 100 113
General Motors Corp. 9.125% 7/15/2001 400 428
International Business Machines Corp. 7.125% 12/1/2096 450 463
International Paper Co. 7.875% 8/1/2006 100 107
KN Energy, Inc. 6.45% 3/1/2003 250 251
Kroger Co. 6.375% 3/1/2008 300 299
Kroger Co. 7.65% 4/15/2007 350 377
Lockheed Martin Corp. 6.85% 5/15/2001 2,000 2,041
Mack-Cali Realty 7.00% 3/15/2004 1,000 994
May Department Stores Co. 9.75% 2/15/2021 100 129
McDonald's Corp. 6.75% 2/15/2003 230 233
Mobil Corp. 7.625% 2/23/2033 200 208
Monsanto Co. 5.75% 12/1/2005 (2) 1,000 977
News America Holdings Inc. 8.50% 2/15/2005 300 329
Norfolk Southern Corp. 6.875% 5/1/2001 1,125 1,150
Norfolk Southern Corp. 7.40% 9/15/2006 270 286
Norfolk Southern Corp. 7.70% 5/15/2017 50 55
Norfolk Southern Corp. 7.90% 5/15/2097 50 55
Northrop Grumman Corp. 9.375% 10/15/2024 400 446
Occidental Petroleum Corp. 8.50% 11/9/2001 750 782
</TABLE>
10
<PAGE> 79
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
J.C. Penney & Co., Inc. 6.875% 6/15/1999 $ 500 $ 501
Philip Morris Cos., Inc. 7.00% 7/15/2005 150 154
Philip Morris Cos., Inc. 8.25% 10/15/2003 150 162
Phillips Petroleum Co. 9.00% 6/1/2001 600 638
Praxair, Inc. 6.70% 4/15/2001 1,175 1,188
Praxair, Inc. 6.75% 3/1/2003 500 506
Raytheon Co. 6.30% 8/15/2000 1,500 1,513
Raytheon Co. 6.50% 7/15/2005 1,100 1,116
Safeway Inc. 6.85% 9/15/2004 700 720
Safeway Inc. 7.00% 9/15/2007 550 574
Sears, Roebuck & Co. Acceptance Corp. 6.75% 9/15/2005 150 152
TCI Communications, Inc. 7.25% 8/1/2005 725 764
Telecommunications Inc. 6.375% 5/1/2003 1,050 1,067
Tenneco, Inc. 10.075% 2/1/2001 200 214
Texaco Capital Corp. 8.875% 9/1/2021 150 186
Time Warner Inc. 7.75% 6/15/2005 1,250 1,340
Time Warner Inc. 8.18% 8/15/2007 250 280
Time Warner Entertainment 8.375% 3/15/2023 350 405
Tosco Corp. 7.00% 7/15/2000 1,000 1,011
Tyco International Group SA 6.875% 1/15/2029 500 490
Union Carbide Corp. 6.75% 4/1/2003 200 201
Union Carbide Corp. 7.75% 10/1/2096 125 123
Union Carbide Corp. 7.875% 4/1/2023 125 129
Union Oil of California 6.375% 2/1/2004 200 200
Union Pacific Corp. 6.625% 2/1/2029 500 469
Union Pacific Corp. 8.625% 5/15/2022 175 189
United Technologies Corp. 6.70% 8/1/2028 550 550
WMX Technologies Inc. 6.25% 10/15/2000 1,500 1,511
WMX Technologies Inc. 7.65% 3/15/2011 550 597
Whirlpool Corp. 9.00% 3/1/2003 150 163
---------
38,557
---------
UTILITIES (5.9%)
AT&T Corp. 8.35% 1/15/2025 140 154
Ameritech Capital Funding 6.15% 1/15/2008 775 782
Ameritech Capital Funding 7.50% 4/1/2005 300 323
Baltimore Gas & Electric Co. 8.375% 8/15/2001 500 528
CMS Panhandle Holding Co. 6.125% 3/15/2004 (2) 100 100
CMS Panhandle Holding Co. 6.50% 7/15/2009 300 298
CMS Panhandle Holding Co. 7.00% 7/15/2029 200 195
Carolina Power & Light Co. 6.875% 8/15/2023 175 172
Coastal Corp. 7.42% 2/15/2037 175 178
Coastal Corp. 7.75% 10/15/2035 250 265
Commonwealth Edison 6.50% 4/15/2000 1,000 1,009
Commonwealth Edison 7.375% 9/15/2002 1,000 1,056
Commonwealth Edison 7.50% 7/1/2013 250 277
Enron Corp. 6.40% 7/15/2006 250 248
Enron Corp. 7.125% 5/15/2007 150 155
Enron Corp. 9.125% 4/1/2003 500 548
Enron Corp. 9.65% 5/15/2001 450 480
GTE Corp. 8.75% 11/1/2021 500 607
GTE South Inc. 6.125% 6/15/2007 500 502
Houston Lighting & Power Co. 8.75% 3/1/2022 100 110
KN Energy Inc. 7.45% 3/1/2098 100 100
MCI Communications Corp. 6.50% 4/15/2010 200 203
MCI Communications Corp. 7.50% 8/20/2004 250 266
MCI Communications Corp. 7.75% 3/23/2025 250 257
Michigan Bell Telephone Co. 7.50% 2/15/2023 175 176
Midamerican Funding LLC 5.85% 3/1/2001 (2) 1,200 1,201
National Rural Utility Co. 5.00% 10/1/2002 500 489
National Rural Utility Co. 6.20% 2/1/2008 650 659
New England Telephone & Telegraph Co. 7.875% 11/15/2029 500 575
</TABLE>
11
<PAGE> 80
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
HIGH-GRADE BOND PORTFOLIO COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York Telephone Co. 6.125% 1/15/2010 $ 750 $ 749
New York Telephone Co. 7.00% 8/15/2025 175 171
Pacific Bell Telephone Co. 7.25% 7/1/2002 225 235
Southern California Edison Co. 6.375% 1/15/2006 650 661
Southern California Edison Co. 6.75% 1/15/2000 500 505
Southwestern Bell Telephone Co. 7.625% 3/1/2023 475 486
Texas Utilities Co. 7.17% 8/1/2007 850 904
Texas Utilities Co. 7.375% 8/1/2001 250 258
Texas Utilities Co. 7.875% 3/1/2023 110 112
Texas Utilities Co. 8.25% 4/1/2004 100 110
US West Capital Funding, Inc. 6.125% 7/15/2002 1,000 1,008
Virginia Electric & Power Co. 6.625% 4/1/2003 200 205
Virginia Electric & Power Co. 6.75% 10/1/2023 500 480
Worldcom Inc. 6.125% 8/15/2001 1,250 1,260
Worldcom Inc. 6.25% 8/15/2003 2,000 2,020
---------
21,077
---------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $129,457) 129,799
- -------------------------------------------------------------------------------------------------------------------------
FOREIGN AND INTERNATIONAL AGENCY BONDS (U.S. DOLLAR-DENOMINATED)(4.3%)
- -------------------------------------------------------------------------------------------------------------------------
Province of British Columbia 7.00% 1/15/2003 170 177
Canadian Imperial Bank of Commerce (NY) 6.20% 8/1/2000 1,800 1,817
Canadian National Railway Co. 6.80% 7/15/2018 450 447
Canadian National Railway Co. 6.90% 7/15/2028 200 199
Embotelladora Andina SA 7.875% 10/1/2097 350 272
Republic of Finland 7.875% 7/28/2004 350 381
Grand Metropolitan Investment Corp. 9.00% 8/15/2011 400 484
Hanson Overseas 7.375% 1/15/2003 400 416
Inter-American Development Bank 8.50% 3/15/2011 130 158
Israel Electric Corp. 7.75% 3/1/2009 (2) 450 461
KFW International Finance, Inc. 7.625% 2/15/2004 300 322
KFW International Finance, Inc. 8.85% 6/15/1999 425 428
KFW International Finance, Inc. 9.125% 5/15/2001 200 214
Korea Electric Power 7.00% 2/1/2007 275 256
Korea Electric Power 7.75% 4/1/2013 600 566
Province of Manitoba 8.75% 5/15/2001 500 531
Province of Manitoba 9.25% 4/1/2020 120 157
Province of Manitoba 9.50% 10/1/2000 130 137
Province of Manitoba 9.625% 12/1/2018 100 134
National Australia Bank 6.60% 12/10/2007 400 405
National Westminster Bancorp Inc. 9.375% 11/15/2003 350 395
Province of New Brunswick 8.75% 5/1/2022 200 253
Province of New Brunswick 9.75% 5/15/2020 500 687
Province of Newfoundland 7.32% 10/13/2023 350 369
Province of Newfoundland 9.00% 6/1/2019 300 370
Noranda, Inc. 8.625% 7/15/2002 370 383
Northern Telecom Ltd. 6.875% 9/1/2023 250 249
Province of Ontario 7.375% 1/27/2003 110 116
Province of Ontario 7.75% 6/4/2002 200 212
Province of Ontario 8.00% 10/17/2001 1,500 1,582
Pemex Finance Ltd. 6.125% 11/15/2003 (2) 550 554
Petro Geo-Services 7.125% 3/30/2028 430 400
Petro Geo-Services 7.50% 3/31/2007 250 257
Republic of Portugal 5.75% 10/8/2003 650 649
Province of Saskatchewan 7.125% 3/15/2008 200 215
Province of Saskatchewan 8.00% 7/15/2004 550 604
TPSA Finance BV 7.75% 12/10/2008 (2) 290 282
- -------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN AND INTERNATIONAL AGENCY BONDS
(COST $15,360) 15,539
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 81
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEMPORARY CASH INVESTMENT (1.1%)
- -------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government Obligations in a
Pooled Cash Account
(COST $3,709) 4.94% 4/1/1999 $ 3,709 $ 3,709
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(COST $354,421) 357,205
- -------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------------------------------------------------
Other Assets--Note C 6,763
Liabilities (6,643)
---------
120
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------------------------------------
Applicable to 33,378,332 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $357,325
=========================================================================================================================
NET ASSET VALUE PER SHARE $10.71
=========================================================================================================================
</TABLE>
* See Note A in Notes to Financial Statements.
(1) The average maturity is shorter than the final maturity shown due to
scheduled interim principal payments.
(2) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. At March 31, 1999, the aggregate
value of these securities was $5,270,000, representing 1.5% of net assets.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AT MARCH 31, 1999, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $353,812 $10.60
Undistributed Net Investment Income -- --
Accumulated Net Realized Gains 729 .02
Unrealized Appreciation--Note F 2,784 .09
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS $357,325 $10.71
=========================================================================================================================
</TABLE>
13
<PAGE> 82
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
HIGH YIELD BOND PORTFOLIO COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (93.6%)
- -------------------------------------------------------------------------------------------------------------------------
FINANCE (2.9%)
Bank United Corp. 8.875% 5/1/2007 $ 750 $ 766
Chevy Chase Savings Bank 9.25% 12/1/2008 750 750
ContiFinancial Corp. 8.125% 4/1/2008 490 363
Imperial Credit Industries, Inc. 9.875% 1/15/2007 700 546
Navistar Financial Corp. 9.00% 6/1/2002 1,000 1,043
Olympic Financial Ltd. 11.50% 3/15/2007 370 292
Western Financial Savings Bank 8.50% 7/1/2003 1,000 830
---------
4,590
---------
INDUSTRIAL (84.6%)
AEROSPACE & DEFENSE (1.6%)
Argo-Tech Corp. 8.625% 10/1/2007 750 712
K & F Industries, Inc. 9.25% 10/15/2007 500 515
L-3 Communications Corp. 10.375% 5/1/2007 500 551
Newport News Shipbuilding Inc. 8.625% 12/1/2006 750 810
AUTOMOTIVE (3.6%)
Accuride Corp. 9.25% 2/1/2008 1,000 1,010
Delco Remy International Inc. 10.625% 8/1/2006 750 802
Federal-Mogul Corp. 8.80% 4/15/2007 1,000 1,062
Hayes Wheels International, Inc. 11.00% 7/15/2006 500 552
Johnstown America Industries, Inc. 11.75% 8/15/2005 750 814
LDM Technologies Inc. 10.75% 1/15/2007 500 511
Lear Corp. 9.50% 7/15/2006 750 795
Walbro Corp. 10.125% 12/15/2007 65 67
BASIC INDUSTRIES (8.4%)
Allied Waste North America Inc. 7.625% 1/1/2006 1,000 979
Anchor Glass Container Corp. 11.25% 4/1/2005 500 518
Coltec Industries Inc. 7.50% 4/15/2008 1,000 1,017
Consumers International 10.25% 4/1/2005 1,000 1,050
Grove Worldwide LLC 9.25% 5/1/2008 750 615
Henry Co. 10.00% 4/15/2008 1,000 1,010
Idex Corp. 6.875% 2/15/2008 1,500 1,417
International Wire Group 11.75% 6/1/2005 500 529
Mastec, Inc. 7.75% 2/1/2008 1,250 1,206
Neenah Corp. 11.125% 5/1/2007 750 789
Neenah Corp. 11.125% 5/1/2007 (1) 285 300
Numatics Inc. 9.625% 4/1/2008 1,000 892
Park-Ohio Industries, Inc. 9.25% 12/1/2007 1,000 1,030
Roller Bearing Co. of America Inc. 9.625% 6/15/2007 500 475
Scotsman Group Inc. 8.625% 12/15/2007 415 413
Terex Corp. 8.875% 4/1/2008 750 728
Westinghouse Air Brake Corp. 9.375% 6/15/2005 (1) 205 211
BUILDING MATERIALS (2.0%)
American Standard Cos. Inc. 7.375% 2/1/2008 1,500 1,464
Falcon Building Products, Inc. 9.50% 6/15/2007 1,000 920
Nortek, Inc. 9.25% 3/15/2007 750 778
CABLE (9.1%)
Adelphia Communications Corp. 8.375% 2/1/2008 (1) 1,500 1,533
Bresnan Communications Group 8.00% 2/1/2009 (1) 1,000 1,020
CSC Holdings, Inc. 8.125% 8/15/2009 750 807
CSC Holdings, Inc. 9.25% 11/1/2005 500 536
Century Communications Inc. 8.875% 1/15/2007 770 810
Classic Cable Inc. 9.875% 8/1/2008 (1) 1,000 1,060
Comcast Corp. 9.125% 10/15/2006 1,500 1,624
Falcon Holdings Group LP 8.375% 4/15/2010 1,000 1,005
</TABLE>
14
<PAGE> 83
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jones Intercable Inc. 7.625% 4/15/2008 $ 1,000 $ 1,052
Lenfest Communications, Inc. 8.375% 11/1/2005 1,500 1,598
Rifkin Acquisition Partners LLP 11.125% 1/15/2006 1,250 1,406
Rogers Cablesystem Ltd. 9.625% 8/1/2002 220 236
USA Networks Inc. 6.75% 11/15/2005 (1) 1,500 1,486
CHEMICALS (4.4%)
ARCO Chemical Co. 9.80% 2/1/2020 1,500 1,490
Acetex Corp. 9.75% 10/1/2003 750 705
Buckeye Cellulose Corp. 8.50% 12/15/2005 750 769
Huntsman Corp. 9.50% 7/1/2007 (1) 750 742
LaRoche Industries, Inc. 9.50% 9/15/2007 750 563
Lilly Industries, Inc. 7.75% 12/1/2007 1,250 1,254
Pioneer Americas Acquisition Corp. 9.25% 6/15/2007 1,000 825
Sovereign Specialty Chemicals, Inc. 9.50% 8/1/2007 500 516
CONSUMER GOODS & SERVICES (1.5%)
Revlon Consumer Products 8.625% 2/1/2008 910 833
Scotts Co. 8.625% 1/15/2009 (1) 500 516
Sealy Mattress, Inc. 9.875% 12/15/2007 960 953
CONTAINERS (2.3%)
BWAY Corp. 10.25% 4/15/2007 1,000 1,060
Owens-Illinois, Inc. 8.10% 5/15/2007 1,500 1,539
Silgan Holding Inc. 9.00% 6/1/2009 1,000 1,033
ENERGY & RELATED GOODS & SERVICES (6.9%)
AmeriGas Partners, LP Series B 10.125% 4/15/2007 600 624
Clark Refining & Marketing, Inc. 8.375% 11/15/2007 750 667
Cross Timbers Oil Co. 9.25% 4/1/2007 900 855
Energy Corp. of America 9.50% 5/15/2007 750 705
Newfield Exploration Co. 7.45% 10/15/2007 750 707
Newpark Resources, Inc. 8.625% 12/15/2007 1,000 955
Oryx Energy Co. 8.125% 10/15/2005 1,000 1,064
P & L Coal Holdings Corp. 8.875% 5/15/2008 1,500 1,568
Plains Resources, Inc. 10.25% 3/15/2006 750 750
Pride Petroleum Services, Inc. 9.375% 5/1/2007 750 716
RBF Finance Co. 11.00% 3/15/2006 (1) 465 489
Tesoro Petroleum Corp. 9.00% 7/1/2008 1,000 993
Tuboscope Inc. 7.50% 2/15/2008 750 672
FOOD & LODGING (3.1%)
Aurora Foods Inc. 8.75% 7/1/2008 750 782
B & G Foods, Inc. 9.625% 8/1/2007 500 494
Nash Finch Co. 8.50% 5/1/2008 750 668
New World Pasta Co. 9.25% 2/15/2009 (1) 1,000 1,010
Purina Mills Inc. 9.00% 3/15/2010 1,000 840
Tricon Global Restaurants, Inc. 7.65% 5/15/2008 1,000 1,037
HEALTH CARE (2.6%)
Beverly Enterprises Inc. 9.00% 2/15/2006 500 483
Columbia/HCA Healthcare Corp. 7.25% 5/20/2008 1,000 916
Integrated Health Services, Inc. 9.50% 9/15/2007 500 327
Kinetic Concepts, Inc. 9.625% 11/1/2007 325 314
Leiner Health Products, Inc. 9.625% 7/1/2007 435 435
Owens & Minor, Inc. 10.875% 6/1/2006 500 546
Tenet Healthcare Corp. 8.125% 12/1/2008 (1) 1,000 985
HOME BUILDING & REAL ESTATE (3.0%)
CapStar Hotel Co. 8.75% 8/15/2007 1,000 960
Kaufman & Broad Home Corp. 7.75% 10/15/2004 750 739
</TABLE>
15
<PAGE> 84
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
HIGH YIELD BOND PORTFOLIO COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Standard Pacific Corp. 8.50% 6/15/2007 $ 1,000 $ 975
Toll Corp. 7.75% 9/15/2007 1,000 980
Del E. Webb Corp. 10.25% 2/15/2010 1,000 998
MEDIA & ENTERTAINMENT (11.3%)
AMC Entertainment Inc. 9.50% 2/1/2011 (1) 1,000 950
Big Flower Press Holdings 8.875% 7/1/2007 750 761
CBS Corp. 7.15% 5/20/2005 1,000 1,023
Chancellor Media Corp. 9.375% 10/1/2004 750 782
Citadel Broadcasting Co. 9.25% 11/15/2008 1,000 1,067
EchoStar DBS Corp. 9.375% 2/1/2009 (1) 1,000 1,037
Emmis Communications Corp. 8.125% 3/15/2009 (1) 1,500 1,496
Fox/Liberty Networks LLC 8.875% 8/15/2007 1,000 1,035
JCAC, Inc. 10.125% 6/15/2006 85 93
Lin Television Corp. 8.375% 3/1/2008 500 496
Loews Cineplex Entertainment 8.875% 8/1/2008 1,500 1,496
Mail-Well Corp. 8.75% 12/15/2008 (1) 1,435 1,471
Outdoor Systems Inc. 9.375% 10/15/2006 260 282
PRIMEDIA, Inc. 7.625% 4/1/2008 1,000 1,000
RCN Corp. 10.00% 10/15/2007 1,500 1,530
TV Guide Inc. 8.125% 3/1/2009 (1) 1,000 1,013
Von Hoffman Press Inc. 10.875% 5/15/2007 (1) 405 419
World Color Press, Inc. 8.375% 11/15/2008 (1) 1,000 1,017
Young Broadcasting Inc. 9.00% 1/15/2006 750 769
METAL (2.6%)
AK Steel Corp. 9.125% 12/15/2006 500 529
AmeriSteel Corp. 8.75% 4/15/2008 500 500
Armco, Inc. 9.00% 9/15/2007 500 517
Bethlehem Steel Corp. 10.375% 9/1/2003 400 430
LTV Corp. 8.20% 9/15/2007 500 471
National Steel Corp. 9.875% 3/1/2009 (1) 330 339
Ryerson Tull, Inc. 9.125% 7/15/2006 500 538
Weirton Steel Corp. 10.75% 6/1/2005 500 463
Wells Aluminum Corp. 10.125% 6/1/2005 250 249
PAPER & PACKAGING (5.7%)
Ball Corp. 7.75% 8/1/2006 1,000 1,033
Boise Cascade Co. 9.45% 11/1/2009 1,000 1,110
Container Corp. of America 9.75% 4/1/2003 700 737
Doman Industries, Ltd. 8.75% 3/15/2004 750 480
Domtar Inc. 8.75% 8/1/2006 200 210
Domtar Inc. 9.50% 8/1/2016 1,250 1,344
Fonda Group Inc. 9.50% 3/1/2007 500 418
NoramPac Inc. 9.50% 2/1/2008 500 517
Paperboard Industries International Inc. 8.375% 9/15/2007 1,000 960
Repap New Brunswick, Inc. 9.00% 6/1/2004 750 729
Tembec Finance Corp. 9.875% 9/30/2005 500 529
Tembec Industries Inc. 8.625% 6/30/2009 125 127
U.S. Timberlands LLC 9.625% 11/15/2007 750 758
RETAIL (1.2%)
Boise Cascade Office Products Corp. 7.05% 5/15/2005 965 923
Fred Meyer, Inc. 7.375% 3/1/2005 1,000 1,039
TECHNOLOGY & RELATED (6.3%)
Advanced Micro Devices, Inc. 11.00% 8/1/2003 325 336
Amphenol Corp. 9.875% 5/15/2007 500 516
Beckman Instruments, Inc. 7.45% 3/4/2008 750 736
Fairchild Semiconductor Corp. 10.125% 3/15/2007 475 478
Fisher Scientific International Inc. 9.00% 2/1/2008 1,000 1,010
</TABLE>
16
<PAGE> 85
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Iron Mountain, Inc. 10.125% 10/1/2006 $ 1,000 $ 1,084
Pierce Leahy Corp. 9.125% 7/15/2007 1,000 1,040
PSINet Inc. 10.00% 2/15/2005 1,500 1,605
Telecommunication Techniques Co. 9.75% 5/15/2008 900 909
Unisys Corp. 7.875% 4/1/2008 1,000 1,040
Wesco Distribution Inc. 9.125% 6/1/2008 1,000 1,035
TELECOMMUNICATIONS (7.6%)
Comcast Cellular Holdings, Inc. 9.50% 5/1/2007 1,000 1,135
GCI, Inc. 9.75% 8/1/2007 1,000 1,000
ITC DeltaCom, Inc. 9.75% 11/15/2008 275 290
ITC DeltaCom, Inc. 11.00% 6/1/2007 620 677
Intermedia Communications Inc. 8.875% 11/1/2007 1,000 1,018
Level 3 Communications, Inc. 9.125% 5/1/2008 1,500 1,508
MJD Communications Inc. 9.50% 5/1/2008 1,000 1,010
McLeodUSA Inc. 9.25% 7/15/2007 1,000 1,050
Paging Network, Inc. 10.125% 8/1/2007 500 423
Qwest Communications International Inc. 7.50% 11/1/2008 (1) 1,500 1,553
Rogers Cantel, Inc. 8.30% 10/1/2007 1,500 1,564
Verio Inc. 11.25% 12/1/2008 (1) 605 682
TEXTILES & RELATED (0.9%)
Pillowtex Corp. 9.00% 12/15/2007 375 379
Westpoint Stevens Inc. 7.875% 6/15/2005 1,000 1,025
OTHER (0.5%)
Packaging Corporation of America 9.625% 4/1/2009 (1) 705 723
---------
132,280
---------
UTILITIES (6.1%)
AES Corp. 8.375% 8/15/2007 500 490
CMS Energy Corp. 7.50% 1/15/2009 350 350
CMS Energy Corp. 8.125% 5/15/2002 750 773
CalEnergy Co., Inc. 7.52% 9/15/2008 500 528
CalEnergy Co., Inc. 9.50% 9/15/2006 250 279
Calpine Corp. 7.625% 4/15/2006 665 665
Calpine Corp. 7.875% 4/1/2008 810 814
Cleveland Electric Illuminating Co. 7.43% 11/1/2009 750 794
El Paso Electric Co. Series D 8.90% 2/1/2006 1,000 1,119
Nextel Communications Inc. 12.00% 11/1/2008 (1) 860 988
Niagara Mohawk Power Corp. 7.75% 10/1/2008 1,500 1,610
Public Service Co. of New Mexico 7.50% 8/1/2018 1,000 968
Texas-New Mexico Power Co. 10.75% 9/15/2003 200 212
---------
9,590
---------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $147,808) 146,460
- -------------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (4.7%)
- -------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government Obligations in a
Pooled Cash Account
(COST $7,292) 4.94% 4/1/1999 7,292 7,292
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.3%)
(COST $155,100) 153,752
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 86
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
HIGH YIELD BOND PORTFOLIO (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (1.7%)
- -------------------------------------------------------------------------------------------------------------------------
Other Assets--Note C $ 4,434
Liabilities (1,783)
-----------
2,651
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------------------------------------
Applicable to 15,489,548 outstanding $.001 par value shares
of beneficial interest (unlimited authorization) $156,403
=========================================================================================================================
NET ASSET VALUE PER SHARE $10.10
=========================================================================================================================
</TABLE>
* See Note A in Notes to Financial Statements.
(1) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. At March 31, 1999, the aggregate
value of these securities was $21,040,000, representing 13.5% of net assets.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AT MARCH 31, 1999, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $160,699 $10.38
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (2,948) (.19)
Unrealized Depreciation--Note F (1,348) (.09)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS $156,403 $10.10
=========================================================================================================================
</TABLE>
18
<PAGE> 87
<TABLE>
<CAPTION>
- ----------------------------------------------------------
MARKET
VALUE*
BALANCED PORTFOLIO SHARES (000)
- ----------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (65.2%)
- ----------------------------------------------------------
AUTO & TRANSPORTATION (7.3%)
Ford Motor Co. 166,531 $ 9,451
Union Pacific Corp. 146,800 7,845
General Motors Corp. 90,139 7,831
KLM Royal Dutch Air Lines
NV ADR 122,095 3,388
Norfolk Southern Corp. 118,200 3,118
TRW, Inc. 64,700 2,944
Canadian National Railway Co. 52,500 2,920
CSX Corp. 70,000 2,726
- - Delphi Automotive Systems Corp. 139,000 2,467
British Airways PLC 15,000 1,029
-----------
43,719
-----------
CONSUMER DISCRETIONARY (4.4%)
Kimberly-Clark Corp. 132,300 6,342
Sears, Roebuck & Co. 87,052 3,934
Eastman Kodak Co. 50,400 3,219
May Department Stores Co. 82,200 3,216
Whirlpool Corp. 56,500 3,072
Gillette Co. 38,000 2,259
J.C. Penney Co., Inc. 54,500 2,207
Black & Decker Corp. 35,000 1,940
-----------
26,189
-----------
CONSUMER STAPLES (1.6%)
Philip Morris Cos., Inc. 118,000 4,152
H.J. Heinz Co. 71,000 3,364
Bestfoods 44,000 2,068
-----------
9,584
-----------
FINANCIAL SERVICES (10.9%)
Citigroup, Inc. 194,250 12,408
CIGNA Corp. 112,300 9,412
Wachovia Corp. 93,300 7,575
U.S. Bancorp 199,200 6,785
Marsh & McLennan Cos., Inc. 82,000 6,083
Fannie Mae 65,000 4,501
BankAmerica Corp. 50,106 3,539
Jefferson-Pilot Corp. 46,250 3,133
Ace, Ltd. 95,000 2,963
MBIA, Inc. 40,000 2,320
Spieker Properties, Inc. REIT 48,000 1,692
Equity Office Properties
Trust REIT 59,000 1,501
Archstone Communities
Trust REIT 71,000 1,429
Equity Residential Properties
Trust REIT 31,000 1,279
Starwood Hotels & Resorts
Worldwide, Inc. 26,000 743
-----------
65,363
-----------
HEALTH CARE (7.0%)
Pharmacia & Upjohn, Inc. 184,500 11,508
Johnson & Johnson 85,000 7,963
Abbott Laboratories 128,200 6,001
Bristol-Myers Squibb Co. 88,800 5,711
Baxter International, Inc. 76,100 5,023
American Home Products Corp. 59,000 3,850
Columbia/HCA Healthcare Corp. 118,000 2,235
-----------
42,291
-----------
INTEGRATED OILS (6.9%)
Royal Dutch Petroleum Co. ADR 128,300 6,672
BP AMOCO PLC ADR 63,064 6,366
Repsol SA ADR 83,400 4,274
Chevron Corp. 47,600 4,210
Total SA ADR 60,056 3,663
USX-Marathon Group 118,200 3,250
Unocal Corp. 72,587 2,672
Texaco Inc. 45,000 2,554
Phillips Petroleum Co. 51,800 2,448
Sunoco, Inc. 61,545 2,219
Exxon Corp. 23,700 1,672
Equitable Resources, Inc. 48,000 1,251
Ashland, Inc. 9,600 393
-----------
41,644
-----------
OTHER ENERGY (1.4%)
Schlumberger Ltd. 71,000 4,273
Halliburton Co. 59,000 2,272
Baker Hughes, Inc. 71,000 1,726
-----------
8,271
-----------
MATERIALS & PROCESSING (9.3%)
E.I. du Pont de Nemours & Co. 122,100 7,089
Alcoa Inc. 170,000 7,002
Dow Chemical Co. 74,100 6,905
Phelps Dodge Corp. 90,200 4,442
Norsk Hydro AS ADR 83,400 3,367
Rhone-Poulenc SA ADR 73,782 3,246
Temple-Inland Inc. 47,000 2,949
British Steel PLC ADR 140,900 2,844
Willamette Industries, Inc. 72,800 2,748
PPG Industries, Inc. 52,200 2,675
BOC Group PLC ADR 94,000 2,573
Imperial Chemical Industries
PLC ADR 59,000 2,113
Reynolds Metals Co. 38,262 1,849
International Paper Co. 35,500 1,498
Lubrizol Corp. 59,000 1,327
Weyerhaeuser Co. 20,000 1,110
Cabot Corp. 51,200 1,088
Witco Chemical Corp. 64,500 818
Westvaco Corp. 13,500 284
-----------
55,927
-----------
PRODUCER DURABLES (5.1%)
Xerox Corp. 183,000 9,768
Northrop Grumman Corp. 71,000 4,251
Caterpillar, Inc. 88,000 4,043
United Technologies Corp. 23,600 3,196
Alcatel SA ADR 139,000 3,171
Thomas & Betts Corp. 54,000 2,028
Pall Corp. 85,500 1,416
Parker Hannifin Corp. 38,100 1,305
Emerson Electric Co. 24,000 1,270
-----------
30,448
-----------
TECHNOLOGY (3.6%)
Motorola, Inc. 129,000 9,449
International Business
Machines Corp. 48,000 8,508
Hewlett-Packard Co. 57,000 3,865
-----------
21,822
-----------
</TABLE>
19
<PAGE> 88
<TABLE>
<CAPTION>
- ----------------------------------------------------------
MARKET
VALUE*
BALANCED PORTFOLIO SHARES (000)
- ----------------------------------------------------------
<S> <C> <C>
UTILITIES (5.7%)
AT&T Corp. 78,500 $ 6,265
Bell Atlantic Corp. 97,712 5,050
ALLTEL Corp. 65,000 4,054
Duke Energy Corp. 59,000 3,223
SBC Communications Inc. 68,000 3,205
Texas Utilities Co. 58,700 2,447
Cinergy Corp. 74,000 2,035
BellSouth Corp. 47,200 1,891
Carolina Power & Light Co. 47,500 1,796
Pinnacle West Capital Corp. 42,000 1,528
PacifiCorp 75,000 1,294
U S WEST, Inc. 23,100 1,272
-----------
34,060
-----------
OTHER (2.0%)
Cooper Industries, Inc. 121,000 5,158
Minnesota Mining &
Manufacturing Co. 47,400 3,354
Canadian Pacific Ltd. 165,000 3,207
-----------
11,719
-----------
- ----------------------------------------------------------
TOTAL COMMON STOCKS
(COST $280,333) 391,037
- ----------------------------------------------------------
FACE
AMOUNT
(000)
- ----------------------------------------------------------
CORPORATE BONDS (26.8%)
- ----------------------------------------------------------
COMMERCIAL MORTGAGE-BACKED
SECURITY (0.3%)
Asset Securitization Corp.
(3) 6.75%, 2/14/2041 $2,000 2,037
----------
FINANCE (7.9%)
Allstate Corp.
6.75%, 5/15/2018 2,000 1,996
BB&T Corp.
7.25%, 6/15/2007 2,000 2,101
BankAmerica Corp.
7.20%, 4/15/2006 1,000 1,047
BankBoston NA
6.375%, 3/25/2008 2,000 1,992
Chubb Corp.
6.15%, 8/15/2005 1,000 1,007
6.60%, 8/15/2018 1,000 987
CIGNA Corp.
7.875%, 5/15/2027 2,000 2,119
Citicorp
7.625%, 5/1/2005 1,000 1,068
Citigroup, Inc.
6.625%, 1/15/2028 2,000 1,915
Comerica, Inc.
7.25%, 8/1/2007 1,500 1,586
Dean Witter, Discover & Co.
6.75%, 10/15/2013 1,000 1,000
Exxon Capital Corp.
6.00%, 7/1/2005 1,000 1,004
First Union Corp.
7.50%, 4/15/2035 1,000 1,067
Ford Motor Credit Co.
6.25%, 12/8/2005 1,000 1,002
- ----------------------------------------------------------
FACE MARKET
AMOUNT VALUE*
(000) (000)
- ----------------------------------------------------------
General Electric Global
Insurance Holdings Corp.
7.00%, 2/15/2026 $2,000 $ 2,069
John Hancock Mutual
Life Insurance Co.
(1) 7.375%, 2/15/2024 2,000 2,095
Jackson National Life Insurance Co.
(1) 8.15%, 3/15/2027 1,500 1,628
Lumbermens Mutual Casualty Co.
(1) 9.15%, 7/1/2026 1,000 1,112
NBD Bancorp, Inc.
7.125%, 5/15/2007 1,500 1,576
NationsBank Corp.
7.80%, 9/15/2016 2,000 2,196
Ohio National Life Insurance
(1) 8.50%, 5/15/2026 2,000 2,188
Provident Cos., Inc.
7.25%, 3/15/2028 2,000 2,044
Frank Russell Co.
(1) 5.625%, 1/15/2009 2,000 1,931
Security Benefit Life Insurance Co.
(1) 8.75%, 5/15/2016 1,500 1,573
SunTrust Bank Atlanta
7.25%, 9/15/2006 1,000 1,061
Toyota Motor Credit Corp.
5.50%, 12/15/2008 2,000 1,913
UNUM Corp.
6.75%, 12/15/2028 2,000 1,933
US Bank NA Minnesota
5.625%, 11/30/2005 2,000 1,935
Wachovia Corp.
5.625%, 12/15/2008 2,000 1,917
----------
47,062
----------
INDUSTRIAL (11.5%)
Abbott Laboratories
6.80%, 5/15/2005 1,000 1,048
Airtouch Communications Inc.
6.65%, 5/1/2008 2,000 2,055
Amoco Corp.
6.50%, 8/1/2007 1,500 1,559
Archer-Daniels-Midland Co.
7.50%, 3/15/2027 1,500 1,653
Autozone Inc.
6.50%, 7/15/2008 2,000 1,987
Baxter International, Inc.
7.65%, 2/1/2027 2,100 2,260
Becton, Dickinson & Co.
7.00%, 8/1/2027 2,000 2,062
The Boeing Co.
8.75%, 8/15/2021 1,500 1,810
Bristol-Myers Squibb Co.
6.80%, 11/15/2026 1,500 1,553
CPC International, Inc.
7.25%, 12/15/2026 1,000 1,069
Coca-Cola Enterprises, Inc.
8.50%, 2/1/2022 1,000 1,184
Dean Foods Co.
6.90%, 10/15/2017 2,000 2,017
Diageo PLC
6.125%, 8/15/2005 2,000 1,997
</TABLE>
20
<PAGE> 89
<TABLE>
<CAPTION>
- ----------------------------------------------------------
FACE MARKET
AMOUNT VALUE*
(000) (000)
- ----------------------------------------------------------
<S> <C> <C>
Dover Corp.
6.65%, 6/1/2028 $2,000 $ 1,987
E.I. du Pont de Nemours & Co.
6.50%, 1/15/2028 2,000 1,951
Englehard Corp.
6.95%, 6/1/2028 2,000 1,801
Federal Express Corp.
6.72%, 1/15/2022 1,999 2,022
Fluor Corp.
6.95%, 3/1/2007 1,500 1,530
Georgia-Pacific Corp.
9.625%, 3/15/2022 1,000 1,123
International Business
Machines Corp.
7.00%, 10/30/2025 2,000 2,076
Johnson Controls, Inc.
7.125%, 7/15/2017 1,200 1,213
KN Energy, Inc.
7.25%, 3/1/2028 2,000 2,044
Eli Lilly & Co.
7.125%, 6/1/2025 2,000 2,132
Lockheed Martin Corp.
7.65%, 5/1/2016 1,000 1,074
Mattel Inc.
6.125%, 7/15/2005 2,000 1,979
McDonald's Corp.
6.375%, 1/8/2028 1,000 972
7.375%, 7/15/2033 1,000 1,019
Merck & Co.
6.40%, 3/1/2028 2,000 1,974
Minnesota Mining &
Manufacturing Corp.
6.375%, 2/15/2028 2,000 1,942
Norfolk Southern Corp.
7.70%, 5/15/2017 1,500 1,644
J.C. Penney Co., Inc.
7.95%, 4/1/2017 675 702
Procter & Gamble Co. ESOP
9.36%, 1/1/2021 1,000 1,273
Raytheon Co.
7.20%, 8/15/2027 1,500 1,548
Sears, Roebuck & Co.
9.375%, 11/1/2011 1,000 1,225
Stanford Univ.
7.65%, 6/15/2026 1,000 1,136
TRW, Inc.
9.375%, 4/15/2021 1,000 1,198
Tosco Corp.
7.80%, 1/1/2027 1,500 1,548
Tyco International Group
7.00%, 6/15/2028 2,000 1,990
USA Waste Services Inc.
7.00%, 7/15/2028 2,000 1,987
Ultramar Diamond Shamrock
7.20%, 10/15/2017 2,000 1,976
United Technologies Corp.
8.75%, 3/1/2021 1,000 1,234
Wal-Mart Stores, Inc.
7.25%, 6/1/2013 1,000 1,103
Weyerhaeuser Co.
6.95%, 8/1/2017 1,500 1,501
----------
69,158
----------
UTILITIES (7.1%)
AT&T Corp.
6.50%, 3/15/2029 2,000 1,959
7.75%, 3/1/2007 1,000 1,108
Ameritech Capital Funding
6.875%, 10/15/2027 2,000 2,052
Atlantic City Electric Co.
(2) 7.00%, 9/1/2023 1,000 988
Baltimore Gas & Electric Co.
5.50%, 4/15/2004 1,000 988
BellSouth Telecommunications
7.50%, 6/15/2033 1,000 1,030
Central Illinois Public Service
6.125%, 12/15/2028 1,000 930
Central Power & Light Co.
6.625%, 7/1/2005 1,000 1,034
Cincinnati Bell, Inc.
6.30%, 12/1/2028 2,000 1,892
Duke Energy Corp.
6.00%, 12/1/2028 1,000 913
7.00%, 7/1/2033 1,000 954
El Paso Natural Gas Co.
7.50%, 11/15/2026 1,500 1,581
Florida Power & Light Co.
7.00%, 9/1/2025 2,000 1,960
Florida Power Corp.
6.75%, 2/1/2028 1,790 1,779
6.875%, 2/1/2008 1,850 1,953
GTE Southwest, Inc.
6.00%, 1/15/2006 1,000 996
Illinois Bell Telephone Co.
6.625%, 2/1/2025 1,000 942
Indiana Bell Telephone Co., Inc.
7.30%, 8/15/2026 1,000 1,085
National Rural Utilities
5.75%, 12/1/2008 2,000 1,951
New Jersey Bell Telephone Co.
8.00%, 6/1/2022 1,000 1,149
New York Telephone Co.
7.25%, 2/15/2024 1,000 1,009
Northern Natural Gas Co.
(1) 6.75%, 9/15/2008 2,000 2,042
Pacific Bell
7.125%, 3/15/2026 1,000 1,053
PacifiCorp
6.625%, 6/1/2007 1,000 1,026
Sprint Capital Corp.
6.125%, 11/15/2008 2,000 1,966
Tennessee Gas Pipeline Co.
7.50%, 4/1/2017 1,500 1,581
U S WEST Communications Group
6.875%, 9/15/2033 1,000 956
Union Electric Co.
7.375%, 12/15/2004 1,000 1,068
</TABLE>
21
<PAGE> 90
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
FACE MARKET
AMOUNT VALUE*
BALANCED PORTFOLIO (000) (000)
- ----------------------------------------------------------------
<S> <C> <C>
Washington Gas Light Co.
6.15%, 1/26/2026 $1,500 $ 1,523
Wisconsin Electric Power Co.
7.70%, 12/15/2027 1,000 1,015
WorldCom Inc.
6.40%, 8/15/2005 2,000 2,022
----------
42,505
- ----------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $157,036) 160,762
- ----------------------------------------------------------------
FOREIGN BONDS (U.S. DOLLAR-DENOMINATED)(2.1%)
- ----------------------------------------------------------------
Banque Nationale de Paris-NY
7.20%, 1/15/2007 1,500 1,566
Banque Paribas NY
6.95%, 7/22/2013 2,000 2,000
Husky Oil Ltd.
7.55%, 11/15/2016 1,000 925
KFW International Finance, Inc.
7.20%, 3/15/2014 2,000 2,183
Metropolitano de Lisboa
(1) 7.42%, 10/15/2016 1,000 1,066
Petro-Canada
7.875%, 6/15/2026 1,000 1,023
Southern Investments UK PLC
6.80%, 12/1/2006 1,500 1,527
Toronto Dominion Bank-NY
6.45%, 1/15/2009 1,000 1,004
Zeneca Wilmington Inc.
7.00%, 11/15/2023 1,000 1,040
- ----------------------------------------------------------------
TOTAL FOREIGN BONDS
(Cost $11,832) 12,334
- ----------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (5.1%)
- ----------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (3.8%)
U.S. Treasury Bonds
7.25%, 5/15/2016 4,500 5,172
7.50%, 11/15/2016 3,000 3,533
U.S. Treasury Notes
5.625%, 5/15/2008 3,000 3,053
6.50%, 8/15/2005 6,400 6,785
6.625%, 5/15/2007 4,000 4,310
----------
22,853
----------
AGENCY BONDS & NOTES (0.5%)
Federal Home Loan Bank
5.24%, 12/18/2008 2,000 1,895
7.66%, 7/20/2004 1,000 1,091
----------
2,986
----------
MORTGAGED-BACKED SECURITY (0.8%)
Government National Mortgage Assn.
(3) 6.00%, 12/15/2028 5,033 4,892
----------
- ----------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $28,882) 30,731
- ----------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (1.1%)
- ----------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
4.94%, 4/1/1999 2,085 2,085
4.97%, 4/1/1999--Note G 4,346 4,346
- ----------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $6,431) 6,431
- ----------------------------------------------------------------
TOTAL INVESTMENTS (100.3%)
(COST $484,514) 601,295
- ----------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.3%)
- ----------------------------------------------------------------
Other Assets--Note C 6,131
Liabilities--Note G (7,793)
----------
(1,662)
- ----------------------------------------------------------------
NET ASSETS (100%)
- ----------------------------------------------------------------
Applicable to 35,076,950 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization) $599,633
================================================================
NET ASSET VALUE PER SHARE $17.09
================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
- -Non-Income-Producing Security.
(1)Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from
registration, normally to qualified institutional buyers. At March 31,
1999, the aggregate value of these securities was $13,635,000,
representing 2.3% of net assets.
(2)Scheduled principal and interest payments are guaranteed by MBIA
(Municipal Bond Insurance Association).
(3)The average maturity is shorter than the final maturity shown due to
scheduled interim principal payments.
ADR--American Depositary Receipt.
REIT--Real Estate Investment Trust.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
AT MARCH 31, 1999, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -----------------------------------------------------------------
<S> <C> <C>
Paid in Capital $461,655 $13.16
Undistributed Net
Investment Income 10,220 .29
Accumulated Net Realized Gains 10,977 .31
Unrealized Appreciation--Note F 116,781 3.33
- -----------------------------------------------------------------
NET ASSETS $599,633 $17.09
=================================================================
</TABLE>
22
<PAGE> 91
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
VALUE*
EQUITY INCOME PORTFOLIO SHARES (000)
- ----------------------------------------------------------------
COMMON STOCKS (99.0%)
- ----------------------------------------------------------------
<S> <C> <C>
AUTO & TRANSPORTATION (2.8%)
Ford Motor Co. 60,600 $ 3,439
Union Pacific Corp. 49,000 2,618
Genuine Parts Co. 83,150 2,396
Norfolk Southern Corp. 73,600 1,941
CSX Corp. 41,500 1,616
----------
12,010
----------
CONSUMER DISCRETIONARY (5.2%)
May Department Stores Co. 131,800 5,157
J.C. Penney Co., Inc. 101,900 4,127
Fortune Brands, Inc. 67,900 2,627
Eastman Kodak Co. 38,600 2,466
The McGraw-Hill Cos., Inc. 43,600 2,376
Kimberly-Clark Corp. 45,700 2,191
Whirlpool Corp. 23,100 1,256
Newell Rubbermaid, Inc. 24,800 1,178
Avon Products, Inc. 14,700 692
Sears, Roebuck & Co. 5,300 240
----------
22,310
----------
CONSUMER STAPLES (8.6%)
Philip Morris Cos., Inc. 236,300 8,315
Anheuser-Busch Cos., Inc. 66,400 5,059
General Mills, Inc. 45,300 3,423
H.J. Heinz Co. 66,250 3,139
The Quaker Oats Co. 47,100 2,947
Kellogg Co. 79,700 2,695
The Clorox Co. 22,400 2,625
Sara Lee Corp. 66,600 1,648
Campbell Soup Co. 37,600 1,530
UST, Inc. 55,400 1,447
International Flavors &
Fragrances, Inc. 38,000 1,427
Gallaher Group PLC ADR 44,700 1,050
Hershey Foods Corp. 11,400 638
Bestfoods 11,900 559
Rite Aid Corp. 8,900 223
----------
36,725
----------
FINANCIAL SERVICES (19.2%)
BankAmerica Corp. 126,150 8,909
Bank One Corp. 158,840 8,746
First Union Corp. 144,876 7,742
J.P. Morgan & Co., Inc. 39,300 4,849
Marsh & McLennan Cos., Inc. 65,350 4,848
Lincoln National Corp. 45,900 4,538
Washington Mutual, Inc. 99,280 4,058
PNC Bank Corp. 69,500 3,862
Bankers Trust Corp. 40,400 3,565
American General Corp. 50,200 3,539
Mellon Bank Corp. 45,800 3,223
Fleet Financial Group, Inc. 83,000 3,123
Wachovia Corp. 37,200 3,020
SAFECO Corp. 68,400 2,766
KeyCorp 83,300 2,525
St. Paul Cos., Inc. 76,300 2,370
Merrill Lynch & Co., Inc. 26,400 2,335
The Chase Manhattan Corp. 28,100 2,285
U.S. Bancorp 60,954 2,076
Dun & Bradstreet Corp. 47,900 1,706
The Chubb Corp. 24,000 1,406
Wells Fargo Co. 22,900 803
----------
82,294
----------
HEALTH CARE (13.9%)
Bristol-Myers Squibb Co. 210,000 13,506
American Home Products Corp. 200,300 13,070
Pharmacia & Upjohn, Inc. 185,450 11,567
Merck & Co., Inc. 96,400 7,730
Glaxo Wellcome PLC ADR 108,200 7,243
Eli Lilly & Co. 46,200 3,921
Baxter International, Inc. 40,700 2,686
----------
59,723
----------
INTEGRATED OILS (16.8%)
Exxon Corp. 167,800 11,840
Mobil Corp. 130,500 11,484
BP Amoco PLC ADR 110,564 11,160
Chevron Corp. 122,000 10,789
Texaco Inc. 138,200 7,843
Atlantic Richfield Co. 107,300 7,833
Royal Dutch Petroleum Co. ADR 112,000 5,824
Phillips Petroleum Co. 57,500 2,717
USX-Marathon Group 77,800 2,140
Unocal Corp. 11,900 438
----------
72,068
----------
OTHER ENERGY (0.7%)
Schlumberger Ltd. 25,200 1,517
Baker Hughes, Inc. 52,600 1,279
----------
2,796
----------
MATERIALS & PROCESSING (4.3%)
Dow Chemical Co. 68,400 6,374
E.I. du Pont de Nemours & Co. 67,600 3,925
Weyerhaeuser Co. 53,500 2,969
International Paper Co. 56,700 2,392
Union Camp Corp. 25,200 1,692
Potlatch Corp. 28,000 950
----------
18,302
----------
PRODUCER DURABLES (2.3%)
Pitney Bowes, Inc. 51,900 3,309
Emerson Electric Co. 46,200 2,446
Thomas & Betts Corp. 36,700 1,379
Caterpillar, Inc. 20,400 937
Honeywell, Inc. 12,200 925
The Boeing Co. 16,800 573
Deere & Co. 13,200 510
----------
10,079
----------
UTILITIES (23.1%)
Bell Atlantic Corp. 264,584 13,676
AT&T Corp. 161,900 12,922
Ameritech Corp. 166,900 9,659
GTE Corp. 150,200 9,087
U S WEST, Inc. 131,000 7,213
SBC Communications Inc. 115,936 5,463
BellSouth Corp. 118,200 4,735
Duke Energy Corp. 65,300 3,567
Consolidated Natural Gas Co. 72,100 3,510
Southern Co. 133,600 3,115
Edison International 137,000 3,048
PacifiCorp 174,600 3,012
Texas Utilities Co. 63,415 2,644
</TABLE>
23
<PAGE> 92
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
VALUE*
EQUITY INCOME PORTFOLIO SHARES (000)
- ----------------------------------------------------------------
<S> <C> <C>
Dominion Resources, Inc. 47,000 $ 1,736
FPL Group, Inc. 32,000 1,704
Consolidated Edison Inc. 35,100 1,590
Allegheny Energy, Inc. 50,200 1,481
Central & South West Corp. 61,400 1,439
Baltimore Gas & Electric Co. 55,700 1,413
Ameren Corp. 38,600 1,397
Northern States Power Co. 59,400 1,377
Wisconsin Energy Corp. 47,200 1,233
TECO Energy, Inc. 56,000 1,113
SCANA Corp. 42,700 926
Public Service Enterprise
Group, Inc. 23,500 897
NICOR, Inc. 22,600 812
Sempra Energy 26,882 516
---------
99,285
---------
OTHER (2.1%)
Minnesota Mining &
Manufacturing Co. 71,900 5,087
General Electric Co. 35,600 3,938
---------
9,025
---------
- ----------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $292,580) 424,617
- ----------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------
FACE
AMOUNT
(000)
- ----------------------------------------------------------------
TEMPORARY CASH INVESTMENT (0.9%)
- ----------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
4.94%, 4/1/1999
(COST $3,899) $3,899 3,899
- ----------------------------------------------------------------
TOTAL INVESTMENTS (99.9%)
(COST $296,479) 428,516
- ----------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.1%)
- ----------------------------------------------------------------
Other Assets--Note C 1,499
Liabilities (1,099)
---------
400
- ----------------------------------------------------------------
NET ASSETS (100%)
- ----------------------------------------------------------------
Applicable to 20,245,619 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization) $428,916
================================================================
NET ASSET VALUE PER SHARE $21.19
================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
ADR--American Depositary Receipt.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ----------------------------------------------------------------
AT MARCH 31, 1999, NET ASSETS CONSISTED OF:
- ----------------------------------------------------------------
<S> <C> <C>
Paid in Capital $290,276 $14.34
Undistributed Net
Investment Income 5,024 .25
Accumulated Net Realized Gains 1,579 .08
Unrealized Appreciation--Note F 132,037 6.52
- ----------------------------------------------------------------
NET ASSETS $428,916 $21.19
================================================================
</TABLE>
24
<PAGE> 93
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
VALUE*
DIVERSIFIED VALUE PORTFOLIO SHARES (000)
- ----------------------------------------------------------------
COMMON STOCKS (94.3%)
- ----------------------------------------------------------------
<S> <C> <C>
AUTO & TRANSPORTATION (3.4%)
Ford Motor Co. 6,000 $ 340
General Motors Corp. 2,300 200
---------
540
---------
CONSUMER DISCRETIONARY (10.6%)
Waste Management, Inc. 10,800 479
- - Kmart Corp. 27,800 467
Service Corp. International 24,000 342
Sears, Roebuck & Co. 4,700 212
J.C. Penney Co., Inc. 4,100 166
---------
1,666
---------
CONSUMER STAPLES (5.8%)
Anheuser-Busch Cos., Inc. 6,000 457
Philip Morris Cos., Inc. 7,200 253
Imperial Tobacco Group ADR 10,000 202
---------
912
---------
FINANCIAL SERVICES (29.0%)
BANKS--NEW YORK CITY (6.4%)
The Chase Manhattan Corp. 6,800 553
Bankers Trust Corp. 5,200 459
BANKS--OUTSIDE NEW YORK CITY (10.7%)
First Union Corp. 9,500 508
BankAmerica Corp. 6,400 452
Bank One Corp. 8,000 441
PNC Bank Corp. 5,000 278
DIVERSIFIED FINANCIAL SERVICES (3.9%)
Citigroup, Inc. 7,000 447
American Express Co. 1,400 165
INSURANCE--MULTI-LINE (5.1%)
Allstate Corp. 12,600 467
Aon Corp. 5,200 329
SAVINGS & LOAN (2.9%)
Washington Mutual, Inc. 11,000 450
---------
4,549
---------
INTEGRATED OIL (2.3%)
Phillips Petroleum Co. 7,600 359
---------
OTHER ENERGY (9.4%)
Williams Cos., Inc. 12,000 474
Halliburton Co. 8,500 327
Occidental Petroleum Corp. 14,300 257
Schlumberger Ltd. 3,800 229
Baker Hughes, Inc. 7,900 192
---------
1,479
---------
MATERIALS & PROCESSING (5.2%)
Fort James Corp. 12,200 387
Millennium Chemicals, Inc. 8,800 175
Hanson PLC ADR 3,600 158
Witco Chemical Corp. 8,000 102
---------
822
---------
PRODUCER DURABLES (5.8%)
Honeywell, Inc. 7,000 531
Xerox Corp. 7,200 384
---------
915
---------
UTILITIES (14.3%)
U S WEST, Inc. 9,600 529
Reliant Energy, Inc. 10,900 284
SBC Communications Inc. 5,500 259
FirstEnergy Corp. 9,000 251
Entergy Corp. 9,000 248
GTE Corp. 3,800 230
American Electric Power Co., Inc. 5,300 210
Central & South West Corp. 7,200 169
Public Service Enterprise
Group, Inc. 1,800 69
---------
2,249
---------
OTHER (8.5%)
Raytheon Co. Class B 7,400 434
Allied Signal Inc. 7,000 344
ITT Industries, Inc. 7,900 279
Tenneco, Inc. 9,900 277
---------
1,334
---------
- ----------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $14,649) 14,825
- ----------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------
FACE
AMOUNT
(000)
- ----------------------------------------------------------------
TEMPORARY CASH INVESTMENT (6.0%)
- ----------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
4.94%, 4/1/1999
(COST $945) $945 945
- ----------------------------------------------------------------
TOTAL INVESTMENTS (100.3%)
(COST $15,594) 15,770
- ----------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.3%)
- ----------------------------------------------------------------
Other Assets 213
Liabilities (259)
---------
(46)
- ----------------------------------------------------------------
NET ASSETS (100%)
- ----------------------------------------------------------------
Applicable to 1,535,180 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization) $15,724
================================================================
NET ASSET VALUE PER SHARE $10.24
================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
- -Non-Income-Producing Security.
ADR--American Depositary Receipt.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
AT MARCH 31, 1999, NET ASSETS CONSISTED OF:
- ----------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ----------------------------------------------------------------
<S> <C> <C>
Paid in Capital $15,503 $10.10
Undistributed Net
Investment Income 45 .03
Accumulated Net Realized Gains -- --
Unrealized Appreciation--Note F 176 .11
- ----------------------------------------------------------------
NET ASSETS $15,724 $10.24
================================================================
</TABLE>
25
<PAGE> 94
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
VALUE*
EQUITY INDEX PORTFOLIO SHARES (000)
- ----------------------------------------------------------------
COMMON STOCKS (99.1%)(1)
- ----------------------------------------------------------------
<S> <C> <C>
- - Microsoft Corp. 600,400 $ 53,811
General Electric Co. 389,736 43,115
Wal-Mart Stores, Inc. 266,242 24,544
Intel Corp. 198,228 23,564
Merck & Co., Inc. 283,356 22,722
Pfizer, Inc. 154,436 21,428
- - Cisco Systems, Inc. 187,783 20,574
Exxon Corp. 289,130 20,402
AT&T Corp. 249,562 19,918
International Business
Machines Corp. 110,332 19,556
- - MCI WorldCom, Inc. 218,057 19,312
The Coca-Cola Co. 293,162 17,993
- - America Online, Inc. 122,190 17,840
American International
Group, Inc. 146,094 17,623
Citigroup, Inc. 268,584 17,156
Lucent Technologies, Inc. 157,242 16,943
Procter & Gamble Co. 157,944 15,469
Bristol-Myers Squibb Co. 236,400 15,204
Johnson & Johnson 159,954 14,986
BankAmerica Corp. 205,913 14,543
Royal Dutch Petroleum
Co. ADR 254,780 13,249
- - Dell Computer Corp. 302,600 12,369
Eli Lilly & Co. 130,804 11,102
SBC Communications Inc. 232,380 10,951
Home Depot, Inc. 175,390 10,918
Time Warner, Inc. 145,802 10,361
American Home Products Corp. 156,800 10,231
Philip Morris Cos., Inc. 289,269 10,179
Schering-Plough Corp. 174,788 9,668
Bell Atlantic Corp. 184,682 9,546
BellSouth Corp. 232,008 9,295
Fannie Mae 123,396 8,545
Abbott Laboratories 180,256 8,438
Hewlett-Packard Co. 122,148 8,283
The Chase Manhattan Corp. 100,474 8,170
Ford Motor Co. 143,958 8,170
Mobil Corp. 92,798 8,166
Gillette Co. 132,056 7,849
E.I. du Pont de Nemours & Co. 133,740 7,765
Bank One Corp. 139,668 7,691
The Walt Disney Co. 244,630 7,614
- - EMC Corp. 59,600 7,614
Ameritech Corp. 130,772 7,569
McDonald's Corp. 161,086 7,299
GTE Corp. 114,835 6,948
Morgan Stanley Dean
Witter & Co. 68,809 6,877
Chevron Corp. 77,630 6,866
Wells Fargo Co. 195,340 6,849
PepsiCo, Inc. 174,604 6,842
General Motors Corp. 77,882 6,766
- - AirTouch Communications, Inc. 68,116 6,582
Warner-Lambert Co. 97,762 6,471
Compaq Computer Corp. 200,190 6,344
American Express Co. 53,757 6,317
First Union Corp. 117,864 6,298
- - Sun Microsystems, Inc. 45,800 5,722
Tyco International Ltd. 77,514 5,562
Motorola, Inc. 71,356 5,227
Sprint Corp. 53,213 5,222
Unilever NV ADR 75,956 5,046
Medtronic, Inc. 69,327 4,974
Northern Telecom Ltd. 78,956 4,905
Freddie Mac 80,956 4,625
Texas Instruments, Inc. 46,322 4,598
The Gap, Inc. 68,253 4,594
- - MediaOne Group, Inc. 72,029 4,574
Charles Schwab Corp. 47,550 4,571
- - Oracle Corp. 172,931 4,561
- - Amgen, Inc. 60,798 4,552
Anheuser-Busch Cos., Inc. 56,770 4,325
Xerox Corp. 78,094 4,168
The Boeing Co. 118,693 4,050
Associates First Capital Corp. 86,656 3,900
Schlumberger Ltd. 64,726 3,896
Pharmacia & Upjohn, Inc. 60,289 3,761
Merrill Lynch & Co., Inc. 42,100 3,723
United Technologies Corp. 26,824 3,633
Allstate Corp. 97,616 3,618
Texaco Inc. 63,600 3,609
Carnival Corp. 73,000 3,545
Dayton Hudson Corp. 52,316 3,486
- - CBS Corp. 83,700 3,426
Monsanto Co. 74,305 3,413
- - Viacom Inc. Class B 40,267 3,380
Minnesota Mining &
Manufacturing Co. 47,709 3,375
Walgreen Co. 118,612 3,351
U S WEST, Inc. 59,804 3,293
AlliedSignal Inc. 66,312 3,262
The Bank of New York Co., Inc. 90,596 3,256
Colgate-Palmolive Co. 34,818 3,203
Waste Management, Inc. 70,861 3,144
Kimberly-Clark Corp. 64,288 3,082
Automatic Data Processing, Inc. 73,272 3,032
- - Safeway, Inc. 57,700 2,961
U.S. Bancorp 86,742 2,955
Washington Mutual, Inc. 70,527 2,883
Electronic Data Systems Corp. 58,400 2,843
Atlantic Richfield Co. 38,738 2,828
Emerson Electric Co. 52,380 2,773
- - Applied Materials, Inc. 43,744 2,698
Sara Lee Corp. 107,908 2,671
Household International, Inc. 57,260 2,612
National City Corp. 39,178 2,600
J.P. Morgan & Co., Inc. 20,843 2,572
Fleet Financial Group, Inc. 67,640 2,545
Enron Corp. 39,259 2,522
Lowe's Cos., Inc. 41,270 2,497
Eastman Kodak Co. 38,506 2,460
Dow Chemical Co. 26,277 2,449
Firstar Corp. 27,300 2,443
Duke Energy Corp. 43,373 2,369
- - Costco Cos., Inc. 25,818 2,364
The Seagram Co. Ltd. 47,219 2,361
SunTrust Banks, Inc. 37,918 2,360
- - Sprint PCS 52,106 2,309
</TABLE>
26
<PAGE> 95
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ----------------------------------------------------------------
<S> <C> <C>
Computer Associates
International, Inc. 64,691 $ 2,301
MBNA Corp. 95,110 2,271
Marsh & Mclennan Cos., Inc. 30,485 2,262
First Data Corp. 52,664 2,251
- - Tellabs, Inc. 22,996 2,248
Baxter International, Inc. 33,921 2,239
CVS Corp. 46,104 2,190
Mellon Bank Corp. 30,960 2,179
McKesson HBOC, Inc. 32,803 2,165
Guidant Corp. 35,700 2,160
- - Ascend Communications, Inc. 25,725 2,153
Campbell Soup Co. 52,874 2,151
Cardinal Health, Inc. 32,181 2,124
American General Corp. 30,011 2,116
Gannett Co., Inc. 33,392 2,104
- - Clear Channel
Communications, Inc. 31,300 2,099
Fifth Third Bancorp 31,700 2,090
Pitney Bowes, Inc. 32,354 2,063
Sears, Roebuck & Co. 45,607 2,061
CIGNA Corp. 24,567 2,059
H.J. Heinz Co. 43,111 2,042
ALLTEL Corp. 32,596 2,033
Halliburton Co. 52,291 2,013
Williams Cos., Inc. 50,829 2,008
PNC Bank Corp. 35,757 1,987
Caterpillar, Inc. 42,566 1,955
Wachovia Corp. 24,049 1,952
NIKE, Inc. Class B 33,580 1,937
Raytheon Co. Class B 32,960 1,932
Southern Co. 82,325 1,919
- - Boston Scientific Corp. 46,684 1,894
Providian Financial Corp. 16,912 1,860
Illinois Tool Works, Inc. 29,616 1,832
Burlington Northern
Santa Fe Corp. 55,598 1,828
Comcast Corp. Class A Special 28,929 1,821
- - The Kroger Co. 30,402 1,820
- - Staples, Inc. 54,800 1,802
Alcoa Inc. 43,586 1,795
Lockheed Martin Corp. 46,496 1,752
May Department Stores Co. 42,204 1,651
Corning, Inc. 27,348 1,641
The Clorox Co. 13,913 1,630
KeyCorp 53,616 1,625
Kellogg Co. 47,958 1,622
- - FDX Corp. 17,444 1,619
- - Cendant Corp. 102,772 1,619
Omnicom Group Inc. 20,000 1,599
Bestfoods 33,898 1,593
Albertson's, Inc. 29,199 1,586
Newell Rubbermaid, Inc. 33,375 1,585
The Hartford Financial
Services Group Inc. 27,676 1,572
Union Pacific Corp. 29,398 1,571
State Street Corp. 18,900 1,553
International Paper Co. 36,574 1,543
BankBoston Corp. 35,152 1,523
ConAgra, Inc. 58,002 1,483
Textron, Inc. 19,120 1,479
Avon Products, Inc. 31,288 1,472
- - Solectron Corp. 29,800 1,447
Columbia/HCA Healthcare Corp. 75,957 1,438
Coca-Cola Enterprises, Inc. 47,400 1,434
Phillips Petroleum Co. 30,209 1,427
- - Micron Technology, Inc. 29,397 1,418
PG&E Corp. 45,205 1,404
Aetna Inc. 16,875 1,401
AMP, Inc. 26,079 1,400
Texas Utilities Co. 33,274 1,387
General Mills, Inc. 18,267 1,380
BB&T Corp. 36,890 1,335
Weyerhaeuser Co. 23,802 1,321
- - Kohl's Corp. 18,600 1,318
TJX Cos., Inc. 38,444 1,307
Interpublic Group of Cos., Inc. 16,449 1,281
- - Gateway 2000, Inc. 18,600 1,275
The McGraw-Hill Cos., Inc. 23,368 1,274
- - AMR Corp. 21,686 1,270
Aon Corp. 20,000 1,265
J.C. Penney Co., Inc. 31,156 1,262
- - NEXTEL Communications, Inc. 34,400 1,260
- - Tricon Global Restaurants, Inc. 17,930 1,260
Consolidated Edison Inc. 27,455 1,244
IMS Health, Inc. 37,468 1,241
Progressive Corp. of Ohio 8,600 1,234
Wrigley, (Wm.) Jr. Co. 13,629 1,233
PECO Energy Corp. 26,585 1,230
Southwest Airlines Co. 39,523 1,196
Norfolk Southern Corp. 45,089 1,189
Lincoln National Corp. 11,987 1,185
Delta Air Lines, Inc. 16,942 1,177
Northern Trust Corp. 13,204 1,173
Conseco Inc. 37,938 1,171
Capital One Financial Corp. 7,700 1,163
United Healthcare Corp. 21,988 1,157
Comerica, Inc. 18,350 1,146
Masco Corp. 40,358 1,140
The Chubb Corp. 19,418 1,137
Becton, Dickinson & Co. 29,620 1,135
FPL Group, Inc. 21,246 1,131
Honeywell, Inc. 14,816 1,123
Deere & Co. 28,238 1,091
- - Fred Meyer Inc. 18,400 1,083
PPG Industries, Inc. 20,925 1,072
Frontier Corp. 20,600 1,069
American Stores Co. 32,360 1,068
Pioneer Hi-Bred
International, Inc. 28,341 1,066
The Limited, Inc. 26,886 1,065
Unocal Corp. 28,899 1,064
- - Novell, Inc. 42,045 1,059
Sysco Corp. 40,080 1,055
Transamerica Corp. 14,676 1,042
- - Computer Sciences Corp. 18,864 1,041
- - Compuware Corp. 43,600 1,041
Ralston-Ralston Purina Group 38,892 1,038
Archer-Daniels-Midland Co. 70,467 1,035
Public Service Enterprise
Group, Inc. 26,768 1,022
The Quaker Oats Co. 16,259 1,017
</TABLE>
27
<PAGE> 96
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
VALUE*
EQUITY INDEX PORTFOLIO SHARES (000)
- ----------------------------------------------------------------
<S> <C> <C>
Loews Corp. 13,600 $ 1,015
CSX Corp. 25,708 1,001
- - 3Com Corp. 42,800 998
- - BMC Software, Inc. 26,883 996
Marriott International, Inc. Class A 29,606 996
- - Federated Department Stores, Inc. 24,800 995
USX-Marathon Group 36,119 993
Bankers Trust Corp. 11,228 991
Rockwell International Corp. 23,109 981
General Dynamics Corp. 15,160 974
- - Kmart Corp. 57,753 971
Ingersoll-Rand Co. 19,300 958
RJR Nabisco Holdings Corp. 38,200 955
Circuit City Stores, Inc. 12,312 943
Baker Hughes, Inc. 38,726 942
Hershey Foods Corp. 16,790 940
Air Products & Chemicals, Inc. 27,406 939
Unicom Corp. 25,554 934
Edison International 41,894 932
Tribune Co. 14,202 929
The Goodyear Tire & Rubber Co. 18,649 929
Paychex, Inc. 19,400 920
Comcast Corp. Class A 14,931 918
Regions Financial Corp. 26,000 900
Reliant Energy, Inc. 34,386 896
American Electric Power Co., Inc. 22,400 889
Mercantile Bancorp, Inc. 18,615 884
Dover Corp. 26,760 880
St. Paul Cos., Inc. 28,196 876
- - Seagate Technology 28,900 854
- - Unisys Corp. 30,805 853
Mattel, Inc. 34,222 851
Jefferson-Pilot Corp. 12,558 851
Dominion Resources, Inc. 22,896 846
Lehman Brothers Holdings, Inc. 14,100 842
Coastal Corp. 25,526 842
- - AES Corp. 22,400 834
Franklin Resources Corp. 29,600 833
Georgia Pacific Group 11,182 830
Burlington Resources, Inc. 20,711 827
Danaher Corp. 15,700 820
Fort James Corp. 25,841 819
SLM Holding Corp. 19,400 810
Summit Bancorp 20,600 803
Rite Aid Corp. 32,104 803
Entergy Corp. 28,950 796
Browning-Ferris Industries, Inc. 20,329 784
Avery Dennison Corp. 13,610 783
FirstEnergy Corp. 27,773 776
Fortune Brands, Inc. 20,039 775
UNUM Corp. 16,294 775
Huntington Bancshares Inc. 25,008 774
SouthTrust Corp. 20,000 746
Tandy Corp. 11,694 746
Barrick Gold Corp. 43,601 744
Nordstrom, Inc. 18,186 743
Occidental Petroleum Corp. 41,069 739
Dana Corp. 19,426 738
Dollar General Corp. 21,600 734
Union Carbide Corp. 16,218 733
Cincinnati Financial Corp. 20,000 729
Union Planters Corp. 16,300 716
- - Tenet Healthcare Corp. 37,097 703
Dun & Bradstreet Corp. 19,534 696
MBIA, Inc. 11,900 690
VF Corp. 14,560 687
Alcan Aluminium Ltd. 26,512 684
Carolina Power & Light Co. 17,953 679
SAFECO Corp. 16,780 679
Allergan, Inc. 7,718 678
Hasbro, Inc. 23,300 674
Winn-Dixie Stores, Inc. 18,026 674
Rohm & Haas Co. 19,989 671
DTE Energy Co. 17,386 668
Century Telephone Enterprises, Inc. 9,500 667
Praxair, Inc. 18,421 664
Golden West Financial Corp. 6,926 661
Maytag Corp. 10,778 651
- - Parametric Technology Corp. 32,900 650
Synovus Financial Corp. 31,750 649
TRW, Inc. 14,186 645
Johnson Controls, Inc. 10,236 638
AmSouth Bancorp 14,000 637
- - Ceridian Corp. 17,080 624
Genuine Parts Co. 21,269 613
Equifax, Inc. 17,800 612
PacifiCorp 35,372 610
Bear Stearns Co., Inc. 13,650 610
New York Times Co. Class A 21,364 609
- - General Instrument Corp. 19,900 603
Eaton Corp. 8,400 601
- - LSI Logic Corp. 19,200 599
Central & South West Corp. 25,426 596
Ameren Corp. 16,455 595
H & R Block, Inc. 12,468 591
- - Apple Computer, Inc. 16,246 584
Black & Decker Corp. 10,512 583
Republic New York Corp. 12,556 579
- - Toys R Us, Inc. 30,518 574
Perkin-Elmer Corp. 5,908 573
GPU, Inc. 15,292 571
Sherwin-Williams Co. 20,124 566
- - AutoZone Inc. 18,600 565
UST, Inc. 21,593 564
Biomet, Inc. 13,419 563
Union Camp Corp. 8,375 562
Tenneco, Inc. 19,961 558
Provident Cos., Inc. 16,100 556
Sempra Energy 28,914 555
Cooper Industries, Inc. 12,784 545
- - US Airways Group, Inc. 11,101 542
Consolidated Natural Gas Co. 11,088 540
Amerada Hess Corp. 10,678 537
Anadarko Petroleum Corp. 14,100 532
Ecolab, Inc. 14,926 530
Columbia Energy Group 10,109 528
Torchmark Corp. 16,694 528
Cinergy Corp. 19,173 527
The Times Mirror Co. Class A 9,738 526
Morton International, Inc. 14,291 525
- - KLA-Tencor Corp. 10,800 524
Dow Jones & Co., Inc. 11,031 521
</TABLE>
28
<PAGE> 97
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ----------------------------------------------------------------
<S> <C> <C>
R.R. Donnelley & Sons Co. 16,127 $ 519
- - HEALTHSOUTH Corp. 48,927 508
Whirlpool Corp. 9,290 505
- - Sealed Air Corp. 10,145 499
Willamette Industries, Inc. 13,174 497
Northrop Grumman Corp. 8,162 489
Countrywide Credit
Industries, Inc. 13,000 488
Knight Ridder 9,636 482
W.W. Grainger, Inc. 11,160 481
Brown-Forman Corp. Class B 8,299 478
Adobe Systems, Inc. 8,300 471
Service Corp. International 32,724 466
Champion International Corp. 11,204 460
ITT Industries, Inc. 12,988 459
- - Mirage Resorts, Inc. 21,600 459
International Flavors &
Fragrances, Inc. 12,207 459
PP&L Resources Inc. 18,491 458
- - Owens-Illinois, Inc. 18,250 456
MGIC Investment Corp. 13,000 456
- - ALZA Corp. 11,809 452
Nucor Corp. 10,269 452
Baltimore Gas & Electric Co. 17,751 450
New Century Energies, Inc. 13,200 450
Parker Hannifin Corp. 13,042 447
Hilton Hotels Corp. 31,157 438
Allegheny Teledyne Inc. 22,932 434
Bausch & Lomb, Inc. 6,616 430
Wendy's International, Inc. 14,941 425
Northern States Power Co. 18,008 418
Crown Cork & Seal Co., Inc. 14,480 414
Temple-Inland Inc. 6,501 408
Sunoco, Inc. 11,105 400
- - PeopleSoft, Inc. 27,300 399
- - Consolidated Stores, Inc. 13,028 395
Eastman Chemical Co. 9,294 391
Raytheon Co. Class A 6,777 391
- - Silicon Graphics, Inc. 23,439 391
Reynolds Metals Co. 7,833 378
PACCAR, Inc. 9,160 377
Sonat, Inc. 12,566 377
The Mead Corp. 12,116 373
Phelps Dodge Corp. 7,374 363
Ashland, Inc. 8,826 361
Harcourt General, Inc. 8,085 358
Darden Restaurants Inc. 17,067 352
Placer Dome, Inc. 31,383 351
Union Pacific Resources
Group, Inc. 29,316 348
Sigma-Aldrich Corp. 11,838 346
Newmont Mining Corp. 19,555 342
- - Humana, Inc. 19,600 338
Kerr-McGee Corp. 10,205 335
Apache Corp. 12,600 328
Dillard's Inc. 12,606 320
- - Navistar International Corp. 7,835 315
C.R. Bard, Inc. 6,183 312
- - HCR Manor Care, Inc. 13,026 297
The BFGoodrich Co. 8,658 297
- - Niagara Mohawk Holdings Inc. 22,062 296
Hercules, Inc. 11,578 292
SuperValu Inc. 14,076 290
Engelhard Corp. 16,733 283
Inco Ltd. 21,107 281
- - Harrah's Entertainment, Inc. 14,557 277
Deluxe Corp. 9,449 275
Homestake Mining Co. 30,767 265
Harris Corp. 9,220 264
- - Advanced Micro Devices, Inc. 16,816 261
The Stanley Works 10,170 261
- - Thermo Electron Corp. 19,100 259
Great Lakes Chemical Corp. 6,925 254
Westvaco Corp. 11,940 251
Thomas & Betts Corp. 6,602 248
- - King World Productions, Inc. 8,002 245
USX-U.S. Steel Group 10,378 244
- - St. Jude Medical, Inc. 9,988 243
Fluor Corp. 8,942 241
Pall Corp. 14,556 241
Autodesk, Inc. 5,960 241
Louisiana-Pacific Corp. 12,882 240
Scientific-Atlanta, Inc. 8,795 240
Liz Claiborne, Inc. 7,324 239
Centex Corp. 7,114 237
Adolph Coors Co. Class B 4,305 232
Mallinckrodt, Inc. 8,610 229
Laidlaw, Inc. 38,742 225
Ryder System, Inc. 8,115 224
Brunswick Corp. 11,702 223
IKON Office Solutions, Inc. 17,238 221
Boise Cascade Corp. 6,836 220
Raychem Corp. 9,648 218
NICOR, Inc. 5,889 212
Case Corp. 8,200 208
American Greetings Corp. Class A 7,978 202
Freeport-McMoRan Copper &
Gold Inc. Class B 18,600 202
Nalco Chemical Co. 7,569 201
Armstrong World Industries Inc. 4,401 199
Cummins Engine Co., Inc. 5,499 196
- - FMC Corp. 3,894 192
Owens Corning 5,953 189
- - National Semiconductor Corp. 20,254 189
Snap-On Inc. 6,478 188
Bemis Co., Inc. 5,877 183
Meredith Corp. 5,822 183
Crane Co. 7,498 181
Ball Corp. 3,846 181
Aeroquip-Vickers Inc. 3,054 175
National Service Industries, Inc. 4,963 169
McDermott International, Inc. 6,671 169
- - Cabletron Systems, Inc. 20,386 167
Kansas City Southern
Industries, Inc. 2,900 165
Shared Medical Systems Corp. 2,923 163
Tektronix, Inc. 6,052 153
Cooper Tire & Rubber Co. 8,248 152
Alberto-Culver Co. Class B 6,202 145
Helmerich & Payne, Inc. 6,366 144
Longs Drug Stores, Inc. 4,520 138
EG&G, Inc. 5,193 137
</TABLE>
29
<PAGE> 98
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
VALUE*
EQUITY INDEX PORTFOLIO SHARES (000)
- ----------------------------------------------------------------
<S> <C> <C>
- - Bethlehem Steel Corp. 15,463 $ 128
Cyprus Amax Minerals Co. 10,530 128
Great Atlantic & Pacific
Tea Co., Inc. 4,206 126
- - Rowan Cos., Inc. 9,931 126
Peoples Energy Corp. 3,885 126
Millipore Corp. 5,165 125
Worthington Industries, Inc. 10,586 124
Briggs & Stratton Corp. 2,491 123
Tupperware Corp. 6,829 123
Kaufman & Broad Home Corp. 5,265 119
- - Andrew Corp. 9,211 113
The Timken Co. 6,830 111
Fleetwood Enterprises, Inc. 3,844 110
Polaroid Corp. 5,353 107
Potlatch Corp. 3,157 107
Eastern Enterprises 2,713 99
- - Reebok International Ltd. 6,186 98
Pulte Corp. 4,678 97
Moore Corp. Ltd. 9,730 96
The Pep Boys
(Manny, Moe & Jack) 6,264 96
- - W.R. Grace & Co. 7,492 91
- - Viacom Inc. Class A 1,056 88
Jostens Inc. 3,912 83
- - Fruit of The Loom Inc. Class A 7,658 79
ONEOK, Inc. 3,145 78
Battle Mountain Gold Co. Class A 27,824 77
ASARCO, Inc. 5,325 73
Russell Corp. 3,514 71
NACCO Industries, Inc. Class A 925 69
Milacron Inc. 3,870 61
- - Data General Corp. 5,587 57
Springs Industries Inc. Class A 1,803 49
Foster Wheeler Corp. 3,893 47
Harnischfeger Industries Inc. 5,019 29
Freeport-McMoRan Copper &
Gold, Inc. Class A 1,600 16
- ----------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $678,900) 1,250,601
- ----------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------
FACE
AMOUNT
(000)
- ----------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (1.1%)(1)
- ----------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY BILLS
(2)4.35%, 4/1/1999 $ 500 500
(2)4.41%, 4/29/1999 200 199
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
4.94%, 4/1/1999 13,678 13,678
- ----------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $14,377) 14,377
- ----------------------------------------------------------------
TOTAL INVESTMENTS (100.2%)
(COST $693,277) 1,264,978
- ----------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------
MARKET
VALUE*
(000)
- ----------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.2%)
- ----------------------------------------------------------------
Other Assets--Note C $ 2,738
Liabilities (5,505)
----------
(2,767)
- ----------------------------------------------------------------
NET ASSETS (100%)
- ----------------------------------------------------------------
Applicable to 37,397,103 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization) $1,262,211
================================================================
NET ASSET VALUE PER SHARE $33.75
================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
- -Non-Income-Producing Security.
(1) The portfolio invests a portion of its cash reserves in equity markets
through the use of index futures contracts. After giving effect to futures
investments, the portfolio's effective common stock and temporary cash
investment positions represent 100.1% and 0.1%, respectively, of net
assets. See Note F in Notes to Financial Statements.
(2) Security segregated as initial margin for open futures contracts.
ADR--American Depositary Receipt.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
AT MARCH 31, 1999, NET ASSETS CONSISTED OF:
- ----------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ----------------------------------------------------------------
<S> <C> <C>
Paid in Capital $ 677,301 $18.11
Undistributed Net
Investment Income 6,439 .17
Accumulated Net Realized Gains 7,030 .19
Unrealized Appreciation
(Depreciation)--Note F
Investment Securities 571,701 15.29
Futures Contracts (260) (.01)
- ----------------------------------------------------------------
NET ASSETS $1,262,211 $33.75
================================================================
</TABLE>
30
<PAGE> 99
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
VALUE*
MID-CAP INDEX PORTFOLIO SHARES (000)
- ----------------------------------------------------------------
COMMON STOCKS (99.8%)
- ----------------------------------------------------------------
<S> <C> <C>
AFLAC, Inc. 4,730 $ 257
- - Best Buy Co., Inc. 3,660 190
- - QUALCOMM, Inc. 1,270 158
- - Office Depot, Inc. 4,210 155
Harley-Davidson, Inc. 2,680 154
- - Biogen, Inc. 1,320 151
Linear Technology Corp. 2,760 141
- - Maxim Integrated Products, Inc. 2,440 132
- - Lexmark International Group,
Inc. Class A 1,120 125
- - E*TRADE Group, Inc. 2,100 122
Cintas Corp. 1,860 122
Marshall & Ilsley Corp. 1,970 109
- - ADC Telecommunications, Inc. 2,290 109
Kansas City Southern
Industries, Inc. 1,910 109
- - Xilinx, Inc. 2,680 109
- - Intuit, Inc. 1,050 107
- - Cadence Design Systems, Inc. 3,890 100
- - Altera Corp. 1,670 99
PaineWebber Group, Inc. 2,480 99
- - U.S. Filter Corp. 3,100 95
- - Starbucks Corp. 3,360 94
Zions Bancorp 1,360 90
First Tennessee National Corp. 2,410 88
Charter One Financial 3,050 88
- - Bed Bath & Beyond, Inc. 2,330 85
- - NCR Corp. 1,680 84
Tyson Foods, Inc. 4,050 84
Stryker Corp. 1,660 84
- - Analog Devices, Inc. 2,810 84
- - Abercrombie & Fitch Co. 870 80
Molex, Inc. 2,720 80
- - Forest Laboratories, Inc. 1,400 79
- - SunGard Data Systems, Inc. 1,960 78
- - Teradyne, Inc. 1,430 78
- - Fiserv, Inc. 1,400 75
Old Kent Financial Corp. 1,760 74
Montana Power Co. 1,010 74
El Paso Energy Corp. 2,230 73
T. Rowe Price 2,120 73
- - Watson Pharmaceuticals, Inc. 1,650 73
- - Synopsys, Inc. 1,340 72
First Security Corp. 3,680 71
Vulcan Materials Co. 1,710 71
- - Siebel Systems, Inc. 1,480 70
- - Genzyme Corp. 1,390 70
CMS Energy Corp. 1,740 70
Sundstrand Corp. 1,000 70
Mylan Laboratories, Inc. 2,520 69
Reliastar Financial Corp. 1,610 69
- - Network Associates, Inc. 2,230 68
Washington Post Co. Class B 130 68
Leggett & Platt, Inc. 3,370 67
- - Comverse Technology, Inc. 790 67
Tosco Corp. 2,690 67
Family Dollar Stores, Inc. 2,900 67
- - Chiron Corp. 2,970 65
- - Saks Inc. 2,470 64
KeySpan Energy Corp. 2,550 64
Green Point Financial Corp. 1,840 64
Allegheny Energy, Inc. 2,150 63
AMBAC Financial Group Inc. 1,170 63
Florida Progress Corp. 1,670 63
NIPSCO Industries, Inc. 2,300 62
- - Quintiles Transnational Corp. 1,610 61
Telephone & Data Systems, Inc. 1,070 60
- - Concord EFS, Inc. 2,180 60
Dial Corp. 1,740 60
- - Citrix Systems, Inc. 1,540 59
Energy East Corp. 1,100 58
Federal-Mogul Corp. 1,340 58
FINOVA Group, Inc. 1,110 58
- - Sepracor Inc. 510 57
- - Lear Corp. 1,340 57
Transocean Offshore, Inc. 1,910 55
- - PacifiCare Health Systems,
Inc. Class B 800 55
Cincinnati Bell, Inc. 2,400 54
A.G. Edwards & Sons, Inc. 1,640 54
Hubbell Inc. Class B 1,330 53
- - Robert Half International, Inc. 1,610 53
Hillenbrand Industries, Inc. 1,140 53
- - Promus Hotel Corp. 1,440 52
North Fork Bancorp, Inc. 2,470 52
- - Gulfstream Aerospace Corp. 1,200 52
- - Health Management Associates
Class A 4,270 52
Pinnacle West Capital Corp. 1,430 52
- - Quantum Corp. 2,860 51
Wisconsin Energy Corp. 1,970 51
New England Electric System 1,060 51
- - Electronic Arts Inc. 1,070 51
Viad Corp. 1,800 50
Protective Life Corp. 1,310 50
- - Sterling Commerce, Inc. 1,610 50
- - Jones Apparel Group, Inc. 1,760 49
- - American Standard Cos., Inc. 1,380 47
- - Storage Technology Corp. 1,700 47
Symbol Technologies, Inc. 1,050 47
TECO Energy, Inc. 2,350 47
Hormel Foods Corp. 1,310 47
Potomac Electric Power Co. 2,010 47
LG&E Energy Corp. 2,230 46
Martin Marietta Materials, Inc. 810 46
IMC Global Inc. 2,260 46
Comdisco, Inc. 2,580 46
- - Litton Industries, Inc. 800 46
- - Convergys Corp. 2,680 46
DPL Inc. 2,780 46
TCF Financial Corp. 1,760 46
Dime Bancorp, Inc. 1,960 45
- - Shaw Industries, Inc. 2,450 45
- - Sybron International Corp. 1,810 45
Astoria Financial Corp. 900 45
- - American Power Conversion Corp. 1,660 45
- - PLATINUM Technology
International, Inc. 1,750 45
Flowers Industries, Inc. 1,800 44
Tiffany & Co. 590 44
</TABLE>
31
<PAGE> 100
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
VALUE*
MID-CAP INDEX PORTFOLIO SHARES (000)
- ----------------------------------------------------------------
<S> <C> <C>
Mercantile Bankshares Corp. 1,190 $ 44
Old Republic International Corp. 2,400 44
- - Barnes & Noble, Inc. 1,360 44
- - Centocor, Inc. 1,180 44
- - Weatherford International, Inc. 1,670 44
- - Allied Waste Industries, Inc. 3,020 44
- - Outback Steakhouse 1,310 43
- - U.S. Foodservice 920 43
Conectiv, Inc. 2,180 42
Sonoco Products Co. 1,820 42
- - Rational Software Corp. 1,530 41
McCormick & Co., Inc. 1,400 41
American Water Works Co., Inc. 1,390 40
- - Apollo Group, Inc. Class A 1,350 40
SCANA Corp. 1,840 40
Comair Holdings, Inc. 1,650 39
- - Noble Drilling Corp. 2,250 39
Solutia, Inc. 2,240 39
First Virginia Banks, Inc. 850 39
- - STERIS Corp. 1,450 39
Bergen Brunswig Corp. Class A 1,910 38
Hibernia Corp. Class A 2,820 37
TCA Cable TV, Inc. 850 37
- - Global Marine, Inc. 3,110 37
IBP, Inc. 1,920 36
Bowater Inc. 900 36
Consolidated Papers 1,500 35
A. H. Belo Corp. Class A 1,930 35
CCB Financial Corp. 650 35
- - Nabors Industries, Inc. 1,910 35
- - FORE Systems, Inc. 1,820 34
American Financial Group, Inc. 970 34
The Timber Co. 1,520 34
ICN Pharmaceuticals, Inc. 1,340 34
Sotheby's Holdings Class A 1,030 33
Southdown, Inc. 620 33
- - Smith International, Inc. 830 33
Murphy Oil Corp. 800 33
Interstate Energy Corp. 1,250 33
- - BJ's Wholesale Club, Inc. 1,240 33
- - Sterling Software, Inc. 1,380 33
UtiliCorp United, Inc. 1,440 33
Wilmington Trust Corp. 570 33
- - Dollar Tree Stores, Inc. 1,050 32
Premark International, Inc. 980 32
ENSCO International, Inc. 2,420 32
Associated Banc-Corp. 1,000 32
Ultramar Diamond Shamrock Corp. 1,470 32
Ross Stores, Inc. 720 32
- - Legato Systems, Inc. 610 31
Sovereign Bancorp, Inc. 2,560 31
- - Nova Corp. (Georgia) 1,190 31
IPALCO Enterprises, Inc. 1,400 31
Puget Sound Energy Inc. 1,330 31
- - Agouron Pharmaceuticals, Inc. 540 31
- - BJ Services Co. 1,300 30
Hannaford Brothers Co. 670 30
- - Microchip Technology, Inc. 870 30
Noble Affiliates, Inc. 1,030 30
- - Northeast Utilities 2,140 30
Manpower Inc. 1,270 30
- - MedImmune Inc. 500 30
Provident Financial Group, Inc. 770 30
- - Snyder Communications, Inc. 1,060 30
OGE Energy Corp. 1,290 29
Stewart Enterprises, Inc. Class A 1,810 29
- - Circus Circus Enterprises Inc. 1,650 29
Claire's Stores, Inc. 960 29
Pacific Century Financial Corp. 1,380 29
- - SCI Systems, Inc. 960 28
Dole Food Co. 950 28
- - Westpoint Stevens, Inc. 1,020 28
Keystone Financial, Inc. 870 28
- - ACNielson Corp. 1,030 28
Whitman Corp. 1,610 28
GATX Corp. 840 28
CNF Transportation, Inc. 730 28
- - Foundation Health Systems Class A 2,250 27
- - SPX Corp. 540 27
- - MidAmerican Energy Holdings Co. 960 27
Tidewater Inc. 1,030 27
Kansas City Power & Light Co. 1,080 27
Clayton Homes Inc. 2,400 27
Everest Reinsurance Holdings, Inc. 850 27
- - Payless ShoeSource, Inc. 570 27
Omnicare, Inc. 1,390 27
Herman Miller, Inc. 1,450 26
- - Lincare Holdings, Inc. 940 26
- - Trigon Healthcare, Inc. 770 26
- - Brinker International, Inc. 1,020 26
- - Chris-Craft Industries, Inc. 577 26
The Warnaco Group, Inc. Class A 1,060 26
York International Corp. 740 26
- - Covance, Inc. 1,040 26
Dean Foods Corp. 730 26
Reynolds & Reynolds Class A 1,360 26
Interstate Bakeries Corp. 1,190 26
Questar Corp. 1,510 26
RPM Inc. 1,920 26
COMSAT Corp. 880 25
Diebold, Inc. 1,060 25
Valero Energy Corp. 1,020 25
International Game Technology 1,740 25
Illinova Corp. 1,190 25
City National Corp. 810 25
Houghton Mifflin Co. 530 25
Carlisle Co., Inc. 530 25
- - Arrow Electronics, Inc. 1,650 25
Cabot Corp. 1,160 25
The PMI Group Inc. 530 25
National Fuel Gas Co. 620 24
- - Atmel Corp. 1,600 24
Aliant Communications, Inc. 590 24
Cordant Technologies, Inc. 600 24
Minnesota Power, Inc. 1,200 24
HON Industries, Inc. 1,080 24
AK Steel Corp. 1,050 24
- - Furniture Brands International Inc. 1,070 24
- - IVAX Corp. 1,990 24
Media General, Inc. Class A 500 23
- - Alaska Air Group, Inc. 490 23
</TABLE>
32
<PAGE> 101
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- ----------------------------------------------------------------
<S> <C> <C>
KN Energy, Inc. 1,160 $ 23
- - Keane, Inc. 1,080 23
Trinity Industries, Inc. 780 23
Lee Enterprises, Inc. 790 23
Beckman Coulter, Inc. 520 23
Lubrizol Corp. 1,010 23
Airborne Freight Corp. 730 23
- - Informix Corp. 3,000 22
- - Papa John's International, Inc. 500 22
- - Tech Data Corp. 960 22
MCN Energy Group Inc. 1,370 22
Borg-Warner Automotive, Inc. 460 22
Avnet, Inc. 600 22
Fastenal Co. 620 22
- - Oxford Health Plan 1,390 22
Nevada Power Co. 870 22
Pentair, Inc. 620 21
Teleflex Inc. 610 21
H.B. Fuller Co. 350 21
Lancaster Colony Corp. 770 21
DENTSPLY International Inc. 880 20
Rayonier Inc. 510 20
- - Borders Group, Inc. 1,450 20
Crompton & Knowles Corp. 1,290 20
Ogden Corp. 840 20
- - Quorum Health Group, Inc. 2,000 20
Harsco Corp. 790 20
- - Suiza Foods Corp. 590 20
Lyondell Chemical Co. 1,450 20
Universal Foods Corp. 960 20
Kelly Services, Inc. Class A 710 20
- - Total Renal Care Holdings, Inc. 1,790 20
- - OfficeMax, Inc. 2,280 20
Meritor Automotive, Inc. 1,260 20
Pioneer Natural Resources Co. 2,510 19
- - Vanguard Cellular Systems,
Inc. Class A 710 19
HSB Group Inc. 520 19
Hawaiian Electric Industries Inc. 550 19
CBRL Group, Inc. 1,070 19
- - Structural Dynamics
Research Corp. 1,000 19
- - Jacobs Engineering Group Inc. 480 19
Precision Castparts Corp. 470 19
- - Symantec Corp. 1,110 19
- - First Health Group Corp. 1,170 19
Unifi, Inc. 1,470 19
Newport News Shipbuilding Inc. 590 19
- - GTech Holdings Corp. 760 19
- - Cypress Semiconductor Corp. 2,050 18
- - Policy Management Systems Corp. 600 18
- - Lands' End, Inc. 530 18
- - Vishay Intertechnology, Inc. 1,250 18
Washington Gas Light Corp. 800 18
AGL Resources Inc. 1,030 18
Pennzoil-Quaker State Co. 1,460 18
Public Service Co. of New Mexico 1,060 18
- - Wisconsin Central
Transportation Corp. 1,360 18
IDACORP, Inc. 610 18
- - Varco International, Inc. 1,610 18
Horace Mann Educators Corp. 770 18
- - Ocean Energy, Inc. 2,620 18
Ruddick Corp. 910 18
- - Concentra Managed Care 1,220 18
Dexter Corp. 560 18
Pittston Brink's Group 750 18
- - General Nutrition Cos., Inc. 1,250 18
- - Modis Professional Services Inc. 1,930 17
Alexander & Baldwin, Inc. 890 17
- - Cytec Industries, Inc. 780 17
- - Sensormatic Electronics Corp. 1,830 17
Ametek Aerospace Products Inc. 950 17
- - Imation Corp. 1,050 17
M.A. Hanna Co. 1,350 17
Albemarle Corp. 820 17
Universal Corp. 670 17
Ferro Corp. 690 17
Bob Evans Farms, Inc. 850 17
Longview Fibre Co. 1,470 17
- - UCAR International, Inc. 1,200 17
- - Vlasic Foods International, Inc. 1,300 17
Tecumseh Products Co. Class A 330 17
Donaldson Co., Inc. 930 17
Federal Signal Corp. 800 17
- - Nine West Group, Inc. 670 17
- - Mentor Graphics Corp. 1,220 16
Granite Construction Co. 700 16
Minerals Technologies, Inc. 340 16
Carter-Wallace, Inc. 900 16
Superior Industries
International, Inc. 700 16
Cleco Corp. 550 16
J.M. Smucker Co. Class A 720 16
Kaydon Corp. 550 16
Flowserve Corp. 1,020 16
Arvin Industries, Inc. 470 16
- - Airgas, Inc. 1,880 16
- - PSS World Medical, Inc. 1,780 16
Nordson Corp. 280 16
GenCorp, Inc. 860 15
Wallace Computer Services, Inc. 780 15
Bandag, Inc. 540 15
Modine Manufacturing Co. 530 15
The Standard Register Co. 500 15
- - Perrigo Co. 2,010 15
Callaway Golf Co. 1,430 15
J.B. Hunt Transport Services, Inc. 690 14
Witco Chemical Corp. 1,140 14
Wausau-Mosinee Paper Corp. 1,000 14
- - Scholastic Corp. 280 14
- - Cambridge Technology Partners 950 13
Mark IV Industries, Inc. 1,000 13
Church & Dwight, Inc. 310 13
- - Vitesse Semiconductor Corp. 200 10
- - Pharmaceutical Markets 500 8
- - CompUSA, Inc. 1,040 7
- - Apria Healthcare 570 7
CMP Group Inc. 360 7
Chesapeake Corp. of Virginia 240 7
- - Albany International Corp. 340 6
- - Micro Warehouse Inc. 390 6
</TABLE>
33
<PAGE> 102
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
VALUE*
MID-CAP INDEX PORTFOLIO SHARES (000)
- ----------------------------------------------------------------
<S> <C> <C>
Indiana Energy, Inc. 330 $ 6
Carpenter Technology Corp. 240 6
- - Sbarro, Inc. 230 6
Banta Corp. 320 6
- - Beverly Enterprises, Inc. 1,130 6
Kennametal, Inc. 330 6
Rollins, Inc. 340 6
Olsten Corp. 900 6
- - Ranger Oil Ltd. 1,390 6
- - Sequa Corp. Class A 110 6
Unisource Worldwide, Inc. 770 5
Lance, Inc. 330 5
Olin Corp. 520 5
P.H. Glatfelter Co. 460 5
USG Corp. 100 5
Black Hills Corp. 240 5
A. Schulman Inc. 370 5
- - Buffets Inc. 500 5
- - Integrated Device Technology Inc. 910 5
International Multifoods Corp. 210 5
Ocean Energy, Inc. 700 5
Overseas Shipholding Group Inc. 410 5
- - Acuson Corp. 300 4
- - Cirrus Logic 700 4
- - Lone Star Steakhouse &
Saloon, Inc. 430 4
- - Sequent Computer Systems, Inc. 480 4
AGCO Corp. 660 4
- - Burlington Industries, Inc. 640 4
Arnold Industries, Inc. 280 4
Cleveland-Cliffs Iron Co. 120 4
Watts Industries Class A 300 4
- - Maxxam Inc. 80 4
Ethyl Corp. 920 4
Dreyer's Grand Ice Cream, Inc. 300 4
Georgia Gulf Corp. 340 4
Ryerson Tull, Inc. 240 4
Heilig-Meyers Co. 660 3
Enesco Group, Inc. 180 3
Wellman, Inc. 350 3
- - Parker Drilling Co. 850 3
- - Magnatek 350 3
Oregon Steel Mills, Inc. 280 3
NCH Corp. 60 3
Lawter International Inc. 360 3
Stewart & Stevenson Services, Inc. 310 2
Calgon Carbon Corp. 430 2
- - Information Resources, Inc. 310 2
OEA, Inc. 230 2
- ----------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $14,295) 14,475
- ----------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------
FACE MARKET
AMOUNT VALUE*
(000) (000)
- ----------------------------------------------------------------
TEMPORARY CASH INVESTMENT (1.3%)
- ----------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
4.94%, 4/1/1999
(COST $195) $195 195
- ----------------------------------------------------------------
TOTAL INVESTMENTS (101.1%)
(COST $14,490) 14,670
- ----------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-1.1%)
- ----------------------------------------------------------------
Other Assets 158
Liabilities (317)
-------
(159)
- ----------------------------------------------------------------
NET ASSETS (100%)
- ----------------------------------------------------------------
Applicable to 1,429,454 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization) $14,511
================================================================
NET ASSET VALUE PER SHARE $10.15
================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
- -Non-Income-Producing Security.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
AT MARCH 31, 1999, NET ASSETS CONSISTED OF:
- ----------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ----------------------------------------------------------------
<S> <C> <C>
Paid in Capital $14,310 $10.01
Undistributed Net
Investment Income 24 .02
Accumulated Net Realized Losses (3) --
Unrealized Appreciation--Note F 180 .12
- ----------------------------------------------------------------
NET ASSETS $14,511 $10.15
================================================================
</TABLE>
34
<PAGE> 103
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
VALUE*
GROWTH PORTFOLIO SHARES (000)
- ----------------------------------------------------------------
COMMON STOCKS (98.1%)
- ----------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY (11.6%)
Wal-Mart Stores, Inc. 198,100 $ 18,262
Gillette Co. 261,200 15,525
Time Warner, Inc. 176,500 12,543
Home Depot, Inc. 153,600 9,562
McDonald's Corp. 190,600 8,637
- - Costco Cos., Inc. 83,900 7,682
TJX Cos., Inc. 195,600 6,650
- - Fred Meyer Inc. 94,900 5,587
Avon Products, Inc. 109,700 5,163
- - Mirage Resorts, Inc. 232,000 4,930
- - Bed Bath & Beyond, Inc. 126,400 4,614
May Department Stores Co. 107,550 4,208
Abercrombie & Fitch Co. 42,400 3,901
Dayton Hudson Corp. 43,800 2,918
Mattel, Inc. 43,100 1,072
--------
111,254
--------
CONSUMER STAPLES (14.0%)
Procter & Gamble Co. 390,700 38,264
The Coca-Cola Co. 313,600 19,247
CVS Corp. 366,400 17,404
Philip Morris Cos., Inc. 380,700 13,396
Colgate-Palmolive Co. 130,300 11,988
PepsiCo, Inc. 251,700 9,863
General Mills, Inc. 88,200 6,665
Unilever NV ADR 65,600 4,358
Rite Aid Corp. 130,900 3,272
- - Safeway, Inc. 56,500 2,899
The Quaker Oats Co. 43,200 2,703
Coca-Cola Enterprises, Inc. 83,600 2,529
- - The Kroger Co. 31,700 1,898
--------
134,486
--------
FINANCIAL SERVICES (11.8%)
American International
Group, Inc. 157,500 18,998
The Chase Manhattan Corp. 203,600 16,555
Automatic Data Processing, Inc. 332,200 13,745
Wells Fargo Co. 315,400 11,059
MBNA Corp. 375,000 8,953
Fannie Mae 119,800 8,296
Paychex, Inc. 168,700 8,003
Associates First Capital Corp. 165,200 7,434
U.S. Bancorp 207,000 7,051
First Data Corp. 122,600 5,241
Capital One Financial Corp. 25,000 3,775
Charles Schwab Corp. 37,300 3,585
Household International, Inc. 27,600 1,259
--------
113,954
--------
HEALTH CARE (23.0%)
Merck & Co., Inc. 549,100 44,031
Pfizer, Inc. 239,300 33,203
Bristol-Myers Squibb Co. 381,300 24,522
American Home Products Corp. 296,800 19,366
Schering-Plough Corp. 276,500 15,294
- - Amgen, Inc. 199,400 14,930
Johnson & Johnson 149,600 14,016
Warner-Lambert Co. 192,300 12,728
Pharmacia & Upjohn, Inc. 144,600 9,019
Eli Lilly & Co. 85,700 7,274
- - ALZA Corp. 183,400 7,015
Cardinal Health, Inc. 99,500 6,567
- - Quintiles Transnational Corp. 148,200 5,595
Zeneca Group PLC ADR 111,200 5,233
Medtronic, Inc. 22,400 1,607
Astra AB ADR 49,300 1,131
--------
221,531
--------
MATERIALS & PROCESSING (0.6%)
- - Sealed Air Corp. 87,800 4,319
- - W.R. Grace & Co. 161,800 1,962
--------
6,281
--------
PRODUCER DURABLES (2.7%)
Nokia Corp. A ADR 101,800 15,855
Xerox Corp. 198,600 10,600
--------
26,455
--------
TECHNOLOGY (25.7%)
COMMUNICATIONS TECHNOLOGY (3.3%)
Lucent Technologies, Inc. 261,800 28,209
- - 3Com Corp. 159,900 3,728
COMPUTER SERVICES SOFTWARE & SYSTEMS (7.6%)
- - Microsoft Corp. 644,800 57,790
- - Oracle Corp. 251,500 6,633
- - BMC Software, Inc. 160,300 5,941
- - Learning Co., Inc. 90,300 2,619
COMPUTER TECHNOLOGY (9.9%)
- - Cisco Systems, Inc. 439,000 48,098
- - Dell Computer Corp. 639,200 26,127
International Business
Machines Corp. 79,400 14,074
- - EMC Corp. 54,000 6,899
ELECTRONICS--SEMICONDUCTORS/COMPONENTS (4.9%)
Intel Corp. 358,600 42,629
Linear Technology Corp. 43,200 2,214
- - Maxim Integrated Products, Inc. 40,500 2,192
--------
247,153
--------
OTHER (8.7%)
General Electric Co. 479,900 53,089
Monsanto Co. 278,200 12,780
Tyco International Ltd. 152,700 10,956
Illinois Tool Works, Inc. 112,600 6,967
--------
83,792
--------
- ----------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $598,274) 944,906
- ----------------------------------------------------------------
</TABLE>
35
<PAGE> 104
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
VALUE*
GROWTH PORTFOLIO SHARES (000)
- ----------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK (0.6%)
- ----------------------------------------------------------------
<S> <C> <C>
Sealed Air Corp. $ 2.00 Cvt. Pfd.
Series A
(COST $4,165) 102,200 $ 5,059
- ----------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------
FACE
AMOUNT
(000)
- ----------------------------------------------------------------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS (1.3%)
- ----------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
4.94%, 4/1/1999 $11,124 11,124
4.97%, 4/1/1999--Note G 1,270 1,270
- ----------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $12,394) 12,394
- ----------------------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(COST $614,833) 962,359
- ----------------------------------------------------------------
OTHER ASSETS AND LIABILITIES
- ----------------------------------------------------------------
Other Assets--Note C 7,756
Liabilities--Note G (7,178)
--------
578
- ----------------------------------------------------------------
NET ASSETS (100%)
- ----------------------------------------------------------------
Applicable to 32,609,382 outstanding
$.001 par value Shares Of Beneficial
interest (unlimited authorization) $962,937
================================================================
NET ASSET VALUE PER SHARE $29.53
================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
- -Non-Income-Producing Security.
ADR--American Depositary Receipt.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ----------------------------------------------------------------
AT MARCH 31, 1999, NET ASSETS CONSISTED OF:
- ----------------------------------------------------------------
- ----------------------------------------------------------------
<S> <C> <C>
Paid in Capital $588,225 $18.04
Undistributed Net
Investment Income 2,170 .07
Accumulated Net Realized Gains 25,016 .77
Unrealized Appreciation--Note F 347,526 10.65
- ----------------------------------------------------------------
NET ASSETS $962,937 $29.53
================================================================
</TABLE>
36
<PAGE> 105
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
SMALL COMPANY VALUE*
GROWTH PORTFOLIO SHARES (000)
- ----------------------------------------------------------------
COMMON STOCKS (96.8%)
- ----------------------------------------------------------------
<S> <C> <C>
AUTO & TRANSPORTATION (5.1%)
- - Heartland Express, Inc. 120,750 $ 1,834
- - Covenant Transport, Inc. 101,000 1,502
- - M.S. Carriers, Inc. 52,000 1,375
Tidewater Inc. 41,000 1,061
C.H. Robinson Worldwide, Inc. 29,000 738
--------
6,510
--------
CONSUMER DISCRETIONARY (25.1%)
CASINOS & GAMBLING (1.5%)
Dover Downs Entertainment, Inc. 127,000 1,969
COMMERCIAL INFORMATION SERVICES (1.1%)
- - QRS Corp. 23,000 1,439
CONSUMER ELECTRONICS (3.5%)
- - Object Design, Inc. 327,000 1,676
- - ITI Technologies, Inc. 34,500 1,035
- - Plantronics, Inc. 14,700 920
- - Recoton Corp. 42,500 595
- - LoJack Corp. 35,000 269
CONSUMER PRODUCTS (1.6%)
Movado Group, Inc. 47,000 1,175
Tupperware Corp. 45,500 819
ELECTRICAL--HOUSEHOLD APPLIANCES (0.8%)
- - REX Stores Corp. 93,400 1,080
HOTEL/MOTEL (0.3%)
The Marcus Corp. 36,000 432
HOUSEHOLD FURNISHINGS (1.8%)
Haverty Furniture Cos., Inc. 72,000 1,827
Oneida Ltd. 28,000 476
LEISURE TIME (4.4%)
- - Action Performance Cos., Inc. 55,500 1,672
- - Vistana, Inc. 97,200 1,361
- - Trendwest Resorts, Inc. 91,800 1,297
- - Family Golf Centers, Inc. 102,000 759
- - Championship Auto Racing
Teams, Inc. 20,000 583
RESTAURANTS (1.8%)
- - CEC Entertainment Inc. 65,800 2,361
RETAIL (5.5%)
- - Ames Department Stores, Inc. 57,000 2,116
- - BJ's Wholesale Club, Inc. 77,300 2,044
- - Petco Animal Supplies, Inc. 93,400 934
- - Lands' End, Inc. 21,500 744
- - Gymboree Corp. 45,000 402
Russ Berrie and Co., Inc. 12,400 324
- - The Dress Barn, Inc. 20,500 284
- - MSC Industrial Direct Co.,
Inc. Class A 12,500 213
SERVICES--COMMERCIAL (0.6%)
- - Pegasus Systems Inc. 20,000 798
SHOES (1.7%)
- - Shoe Carnival, Inc. 136,200 1,702
The Stride Rite Corp. 40,000 490
TOYS (0.5%)
- - Play By Play Toys &
Novelties, Inc. 100,000 625
--------
32,421
--------
CONSUMER STAPLES (1.0%)
- - American Italian Pasta Co. 53,700 1,342
--------
FINANCIAL SERVICES (9.1%)
- - Investment Technology
Group, Inc. 51,700 2,624
Sun Communities, Inc. REIT 69,000 2,191
- - Concord EFS, Inc. 71,374 1,967
First Washington Realty
Trust, Inc. REIT 86,700 1,859
Saul Centers, Inc. REIT 124,900 1,827
Fidelity National Financial, Inc. 70,900 1,064
- - Advent Software, Inc. 4,000 200
--------
11,732
--------
HEALTH CARE (13.7%)
DENTSPLY International Inc. 100,000 2,325
- - Biogen, Inc. 20,000 2,286
- - Forest Laboratories, Inc. 29,000 1,635
- - Patterson Dental Co. 30,950 1,339
Arrow International, Inc. 61,300 1,322
- - Centocor, Inc. 35,000 1,295
- - Genzyme Corp. 23,000 1,160
- - Abgenix, Inc. 70,000 1,059
- - Spacelabs Medical, Inc. 59,500 1,000
- - Medarex, Inc. 300,000 956
- - The Liposome Co., Inc. 70,000 941
- - Cell Genesys, Inc. 152,600 753
United Wisconsin Services, Inc. 84,000 614
- - MacroChem Corp. 50,000 469
- - PathoGenesis Corp. 22,800 304
- - Matrix Pharmaceutical, Inc. 100,000 209
Medtronic, Inc. 314 23
--------
17,690
--------
OTHER ENERGY (2.1%)
- - Core Laboratories NV 74,500 1,308
St. Mary Land & Exploration Co. 52,500 912
- - Chieftain International, Inc. 42,000 514
--------
2,734
--------
MATERIALS & PROCESSING (3.8%)
Elcor Corp. 45,000 1,583
- - Corrpro Cos., Inc. 100,000 1,137
General Cable Corp. 60,000 634
Optical Coating Laboratory, Inc. 10,000 480
- - Service Experts, Inc. 31,100 420
- - U.S. Can Corp. 28,100 414
- - Fairfield Communities, Inc. 30,000 268
--------
4,936
--------
</TABLE>
37
<PAGE> 106
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
SMALL COMPANY VALUE*
GROWTH PORTFOLIO SHARES (000)
- ----------------------------------------------------------------
<S> <C>
PRODUCER DURABLES (8.5%)
- - Mettler-Toledo International Inc. 128,700 $ 3,185
- - Jason Inc. 147,500 1,254
- - American Power
Conversion Corp. 44,000 1,188
- - Palm Harbor Homes, Inc. 53,953 1,173
SL Industries, Inc. 80,000 940
OmniQuip International, Inc. 70,000 822
- - CUNO Inc. 55,000 770
- - Rayovac Corp. 15,500 427
TransTechnology Corp. 25,000 412
- - Nobility Homes, Inc. 41,200 379
Lindsay Manufacturing Co. 10,950 218
- - American Homestar Corp. 20,000 146
- - Vivid Technologies, Inc. 25,000 100
--------
11,014
--------
TECHNOLOGY (25.1%)
COMMUNICATIONS TECHNOLOGY (5.5%)
- - RealNetworks, Inc. 21,400 2,615
- - Pairgain Technologies, Inc. 134,000 1,306
- - GeoTel Communications Corp. 25,000 1,147
- - SeaChange International, Inc. 118,500 1,015
- - Melita International Corp. 45,300 589
- - CSG Systems International, Inc. 11,000 434
COMPUTER SERVICES SOFTWARE & SYSTEM (14.3%)
- - Acxiom Corp. 107,000 2,835
- - Exchange Applications, Inc. 97,000 2,437
- - Macrovision Corp. 44,500 1,646
- - BroadVision, Inc. 26,500 1,583
- - Aspect Development, Inc. 67,000 1,558
- - Remedy Corp. 110,000 1,540
- - Pinnacle Systems, Inc. 32,500 1,479
- - Avant! Corp. 80,000 1,420
- - Genesys Telecommunications
Laboratories, Inc. 75,000 1,130
- - MicroStrategy Inc. 51,000 982
- - Caere Corp. 70,000 735
- - AXENT Technologies, Inc. 28,000 673
- - Aware, Inc. 7,500 353
- - Viasoft, Inc. 4,300 18
COMPUTER TECHNOLOGY (2.5%)
- - Synopsys, Inc. 27,341 1,470
- - Computer Network
Technology Corp. 80,000 1,290
- - MTI Technology Corp. 79,500 440
ELECTRICAL & ELECTRONICS (0.1%)
- - InVision Technologies, Inc. 15,000 79
ELECTRONICS (1.2%)
BEI Technologies, Inc. 70,000 752
- - Del Global Technologies Corp. 85,500 737
ELECTRONICS--SEMICONDUCTORS/COMPONENTS (1.5%)
- - The Cherry Corp. Class A 82,200 1,110
- - Oak Technology, Inc. 265,500 813
--------
32,186
--------
UTILITIES (2.8%)
Montana Power Co. 20,000 1,471
TCA Cable TV, Inc. 26,000 1,131
- - SkyTel Communications, Inc. 37,000 615
- - Paging Network, Inc. 85,000 398
--------
3,615
--------
OTHER (0.5%)
Teleflex Inc. 19,000 647
- ----------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $113,260) 124,827
- ----------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (11.9%)
- ----------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------
FACE
AMOUT
(000)
- ----------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
4.94%, 4/1/1999 $6,820 6,820
4.97%, 4/1/1999--Note G 8,480 8,480
- ----------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $15,300) 15,300
- ----------------------------------------------------------------
TOTAL INVESTMENTS (108.7%)
(COST $128,560) 140,127
- ----------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-8.7%)
- ----------------------------------------------------------------
Other Assets--Note C 422
Security Lending Collateral
Payable to Brokers--Note G (8,480)
Other Liabilities (3,156)
--------
(11,214)
- ----------------------------------------------------------------
NET ASSETS (100%)
- ----------------------------------------------------------------
Applicable to 11,904,319 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization) $128,913
================================================================
NET ASSET VALUE PER SHARE $10.83
================================================================
*See Note A in Notes to Financial Statements.
- -Non-Income-Producing Security.
REIT--Real Estate Investment Trust.
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
AT MARCH 31, 1999, NET ASSETS CONSISTED OF:
- ----------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ----------------------------------------------------------------
<S> <C> <C>
Paid in Capital $122,249 $10.27
Undistributed Net
Investment Income 313 .03
Accumulated Net Realized Losses (5,216) (.44)
Unrealized Appreciation--Note F 11,567 .97
================================================================
NET ASSETS $128,913 $10.83
================================================================
</TABLE>
38
<PAGE> 107
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
VALUE*
INTERNATIONAL PORTFOLIO SHARES (000)
- ----------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (98.0%)
ARGENTINA (0.2%)
YPF SA ADR 15,000 $ 473
--------
AUSTRALIA (1.8%)
Westpac Banking Corp., Ltd. 613,000 4,452
--------
BELGIUM (1.6%)
Dexia Belgium (Credit Communal) 15,500 2,421
Fortis AG (B) 23,058 851
Algemene Maatschappij
voor Nijverheidskredit NV 9,092 630
- - Fortis AG-CVG 2,562 12
--------
3,914
--------
BRAZIL (0.7%)
Telesp Participacoes SA Pfd. 36,000,000 752
- - Tele Celular Sul
Participacoes ADR 38,000 727
Cia Vale Do Rio Pfd. A 10,000 147
--------
1,626
--------
DENMARK (0.7%)
Den Danske Bank A/S 16,000 1,681
--------
FRANCE (14.2%)
Vivendi 30,300 7,455
Suez Lyonnaise des Eaux 37,430 6,926
Elf Aquitaine SA 48,000 6,519
Alcatel 24,800 2,851
AXA 17,800 2,360
Bouygues SA 8,000 2,220
Total SA B Shares 18,000 2,217
Canal Plus SA 7,200 2,110
Accor SA 4,800 1,192
Societe National d'Exploitation
Industrielle des Tabacs et
Allumettes SA 12,000 816
Compagnie des Gaz de Petrole
Primagaz SA 6,900 536
- - Vivendi Warrants Exp. 2/5/2001 18,200 45
--------
35,247
--------
GERMANY (5.0%)
Mannesmann AG 49,200 6,215
Hoechst AG 42,000 1,821
Bayerische Hypo- und
Vereinsbank AG 23,000 1,368
SAP AG Pfd. 3,450 1,106
Viag AG 1,200 652
RWE AG 14,000 617
Buderus AG 1,500 484
Allianz AG 890 269
--------
12,532
--------
HONG KONG (0.7%)
Swire Pacific Ltd. A Shares 233,000 1,082
SmarTone Telecommunications
Ltd. 160,000 464
Sun Hung Kai Properties Ltd. 40,000 299
--------
1,845
--------
IRELAND (1.5%)
- - Elan Corp. PLC ADR 40,100 2,797
Bank of Ireland PLC 48,532 1,016
--------
3,813
--------
ITALY (9.5%)
Telecom Italia SpA 579,300 6,154
Assicurazioni Generali Spa 133,700 5,355
- - Olivetti SpA 1,357,000 4,248
Telecom Italia Mobile SpA 509,000 3,423
- - Banca di Roma 1,890,800 3,062
Ente Nazionale Idrocarburi SpA 231,350 1,474
--------
23,716
--------
JAPAN (13.3%)
Fuji Photo Film Co., Ltd. 206,000 7,793
Murata Manufacturing Co., Ltd. 101,000 5,373
Takeda Chemical Industries Ltd. 125,000 4,845
Matsushita Electric Industrial
Co., Ltd. 145,000 2,828
Mabuchi Motor Co. 24,000 1,787
Dowa Fire & Marine
Insurance Co. 500,000 1,710
Toppan Printing Co., Ltd. 103,000 1,349
Tokyo Electron Ltd. 23,599 1,222
East Japan Railway Co. 195 1,159
Toho Co., Ltd. 8,200 1,111
Hirose Electric Co., Ltd. 10,500 878
Nippon Television Network 2,160 832
Yasuda Fire & Marine
Insurance Co. 143,000 722
Mitsui Fudosan Co., Ltd. 80,000 721
Kuraray Co., Ltd. 62,000 673
--------
33,003
--------
MALAYSIA (0.4%)
Telekom Malaysia Bhd. 207,500 418
Genting Bhd. 117,700 263
Tenaga Nasional Bhd. 162,041 239
--------
920
--------
MEXICO (0.8%)
Cementos de Mexico SA de
CV ADR 150,000 1,219
- - Grupo Televisa SA GDR 22,900 718
--------
1,937
--------
NETHERLANDS (10.0%)
ING Groep NV 172,000 9,479
Philips Electronics NV 78,000 6,353
- - Heineken NV 57,000 2,874
Getronics NV 64,862 2,395
Oce NV 64,776 1,608
Verenigde Nederlandse
Uitgeversbedrijven
Verenigd Bezit 41,000 1,598
- - Equant NV 5,090 387
- - United Pan-Europe
Communications NV 1,753 69
--------
24,763
--------
</TABLE>
39
<PAGE> 108
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
VALUE*
INTERNATIONAL PORTFOLIO SHARES (000)
- ----------------------------------------------------------------
<S> <C> <C>
PHILIPPINES (0.7%)
Ayala Land, Inc. 3,330,811 $ 967
Philippine Long Distance
Telephone Co. 17,000 447
Manila Electric Co. 118,300 391
---------
1,805
---------
SINGAPORE (1.1%)
United Overseas Bank Ltd.
(Foreign) 157,000 981
Singapore Press Holdings Ltd. 81,138 896
City Developments Ltd. 156,000 812
Development Bank of Singapore
Ltd. (Foreign) 10,000 76
---------
2,765
---------
SOUTH KOREA (1.5%)
Samsung Electronics Co., Ltd. 24,789 1,919
Korea Electric Power Corp. 49,000 1,182
- - SK Telecom Co. Ltd. ADR 23,850 291
SK Telecom Co. Ltd. 280 246
Pohang Iron & Steel Co., Ltd. 2,540 157
---------
3,795
---------
SPAIN (3.7%)
Endesa SA 364,400 9,198
---------
SWEDEN (2.9%)
LM Ericsson Telephone
AB B Shares 103,000 2,505
Svenska Handelsbanken
AB A Shares 70,000 2,439
Skandia Forsakrings AB 115,500 2,149
---------
7,093
---------
SWITZERLAND (9.0%)
Novartis AG (Registered) 5,400 8,760
- - UBS AG 22,400 7,037
Roche Holdings AG
(Dividend-Right Certificates) 295 3,597
ABB AG (Bearer) 1,450 1,918
Nestle SA (Registered) 600 1,090
---------
22,402
---------
UNITED KINGDOM (18.7%)
Glaxo Wellcome PLC 185,000 6,191
BP Amoco PLC 229,123 3,906
- - Allied Zurich PLC 220,000 2,965
Bass PLC 195,000 2,649
British Telecommunications PLC 159,000 2,595
- - Rolls-Royce PLC 572,300 2,421
Tesco PLC 915,000 2,419
Cable and Wireless PLC 186,000 2,324
British Sky Broadcasting
Group PLC 235,000 2,016
Standard Chartered PLC 140,800 1,990
Scottish & Newcastle PLC 173,000 1,861
Boots Co., PLC 119,000 1,718
Great Universal Stores PLC 144,000 1,569
LucasVarity PLC 320,000 1,483
Daily Mail & General Trust
PLC Class A 30,000 1,455
EMI Group PLC 180,000 1,285
Granada Group PLC 63,000 1,276
Asda Group PLC 502,000 1,224
Airtours PLC 138,300 1,005
United News & Media PLC 98,000 933
British Airways PLC 119,000 825
Tarmac PLC 451,000 766
British Land Co., PLC 84,000 721
Reckitt & Colman PLC 63,000 682
Marks & Spencer PLC 17,000 112
Garban PLC 9,800 38
---------
46,429
---------
- ----------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $187,102) 243,409
- ----------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------
FACE
AMOUNT
(000)
- ----------------------------------------------------------------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS (13.8%)
- ----------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
4.94%, 4/1/1999 $ 5,065 5,065
4.97%, 4/1/1999--Note G 29,215 29,215
- ----------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $34,280) 34,280
- ----------------------------------------------------------------
TOTAL INVESTMENTS (111.8%)
(COST $221,382) 277,689
- ----------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-11.8%)
- ----------------------------------------------------------------
Other Assets--Note C 1,461
Security Lending Collateral
Payable to Brokers--Note G (29,215)
Other Liabilities (1,575)
---------
(29,329)
- ----------------------------------------------------------------
NET ASSETS (100%)
- ----------------------------------------------------------------
Applicable to 16,654,968 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization) $248,360
================================================================
NET ASSET VALUE PER SHARE $14.91
================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
- -Non-Income-Producing Security.
ADR--American Depositary Receipt.
GDR--Global Depositary Receipt.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
AT MARCH 31, 1999, NET ASSETS CONSISTED OF:
- ----------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ----------------------------------------------------------------
<S> <C> <C>
Paid in Capital $194,494 $11.68
Undistributed Net
Investment Income--Note E 527 .03
Accumulated Net
Realized Losses--Note E (2,715) (.16)
Unrealized Appreciation
(Depreciation)--Note F
Investment Securities 56,307 3.38
Foreign Currencies and
Forward Currency Contracts (253) (.02)
- ----------------------------------------------------------------
NET ASSETS $248,360 $14.91
================================================================
</TABLE>
40
<PAGE> 109
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
VALUE*
REIT INDEX PORTFOLIO SHARES (000)
- ----------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (96.4%)
- ----------------------------------------------------------------
<S> <C> <C>
Equity Office Properties Trust REIT 18,210 $ 463
Equity Residential Properties
Trust REIT 8,250 340
Simon Property Group, Inc. REIT 11,690 321
Public Storage, Inc. REIT 9,546 239
Vornado Realty Trust REIT 5,990 207
Archstone Communities Trust REIT 10,210 205
Crescent Real Estate, Inc. REIT 8,600 185
ProLogis Trust REIT 8,800 180
Host Marriott Corp. REIT 14,700 163
Spieker Properties, Inc. REIT 4,500 159
Kimco Realty Corp. REIT 3,960 146
Avalonbay Communities, Inc. REIT 4,300 136
Boston Properties, Inc. Reit 4,300 136
Apartment Investment &
Management Co. Class A REIT 3,670 133
Duke Realty Investments, Inc. REIT 6,100 131
AMB Property Corp. REIT 6,200 129
Cornerstone Properties, Inc. REIT 8,770 128
New Plan Excel Realty Trust REIT 6,300 121
Mack-Cali Realty Corp. REIT 3,950 116
Prison Realty Corp. REIT 6,600 115
FelCor Lodging Trust, Inc. REIT 4,800 111
Rouse Co. REIT 4,950 110
CarrAmerica Realty Corp. REIT 4,650 103
Arden Realty Group, Inc. REIT 4,350 97
Highwood Properties, Inc. REIT 4,110 97
Post Properties, Inc. REIT 2,700 97
Liberty Property Trust REIT 4,500 93
Westfield America, Inc. REIT 5,180 90
Franchise Finance Corp. of
America REIT 4,100 86
General Growth Properties
Inc. REIT 2,600 84
Camden Property Trust REIT 3,300 82
Hospitality Properties Trust REIT 3,000 81
Weingarten Realty Investors REIT 1,900 75
United Dominion Realty Trust REIT 7,100 73
Cousins Properties, Inc. REIT 2,300 67
BRE Properties Inc. Class A REIT 2,900 66
First Industrial Realty Trust REIT 2,700 65
Patriot American Hospitality,
Inc. REIT 12,500 64
Developers Diversified Realty
Corp. REIT 4,350 62
Reckson Associates Realty
Corp. REIT 3,000 62
MeriStar Hospitality Corp. REIT 3,100 56
Federal Realty Investment
Trust REIT 2,600 55
Meridian Industrial Trust, Inc. REIT 2,100 52
Storage USA, Inc. REIT 1,800 51
Chateau Communities, Inc. REIT 1,800 49
The Macerich Co. REIT 2,100 48
Shurgard Storage Centers, Inc.
Class A REIT 1,900 48
Prentiss Properties Trust REIT 2,500 47
Colonial Properties Trust REIT 1,800 46
Trinet Corporate Realty
Trust, Inc. REIT 1,800 46
Brandywine Realty Trust REIT 2,700 44
CenterPoint Properties Corp. REIT 1,400 44
Irvine Apartment Communities,
Inc. REIT 1,300 43
CBL & Associates Properties,
Inc. REIT 1,810 42
Glenborough Realty Trust, Inc. REIT 2,500 42
JDN Realty Corp. REIT 2,100 42
Kilroy Realty Corp. REIT 2,070 42
PS Business Parks, Inc. REIT 1,900 42
Taubman Co. REIT 3,400 42
Washington REIT 2,600 42
Manufactured Home Communities,
Inc. REIT 1,700 41
Charles E. Smith Residential Realty,
Inc. REIT 1,340 41
Sun Communities, Inc. REIT 1,300 41
Realty Income Corp. REIT 1,800 38
Gables Residential Trust REIT 1,700 37
Regency Realty Corp. REIT 2,000 37
Urban Shopping Centers, Inc. REIT 1,300 37
Weeks Corp. REIT 1,200 34
Chelsea GCA Realty, Inc. REIT 1,200 33
Berkshire Realty Co., Inc. REIT 2,600 29
Cornerstone Realty Income Trust,
Inc. REIT 2,700 29
Essex Property Trust, Inc. REIT 1,100 29
SL Green Realty Corp. REIT 1,500 28
Mills Corp. REIT 1,500 27
Summit Properties, Inc. REIT 1,600 27
AMLI Residential Properties
Trust REIT 1,200 25
Bradley Real Estate Inc. REIT 1,400 25
Home Properties of New York,
Inc. REIT 1,100 25
Pan Pacific Retail Properties,
Inc. REIT 1,400 25
Prime Retail, Inc. REIT 2,900 25
Alexandria Real Estate Equities,
Inc. REIT 900 24
JP Realty Inc. REIT 1,200 24
Koger Equity, Inc. REIT 1,800 24
Bedford Property Investors,
Inc. REIT 1,600 23
Burnham Pacific Properties,
Inc. REIT 2,200 23
Cabot Industrial Trust REIT 1,200 23
Centertrust Retail Properties,
Inc. REIT 2,000 23
Glimcher Realty Trust REIT 1,600 23
Mid-America Apartment
Communities, Inc. REIT 1,100 23
Pacific Gulf Properties, Inc. REIT 1,300 23
Parkway Properties Inc. REIT 800 23
Tower Realty Trust, Inc. REIT 1,200 23
Walden Residential Properties,
Inc. REIT 1,300 23
Capital Automotive REIT 1,800 22
Commercial Net Lease Realty REIT 2,000 22
RFS Hotel Investors, Inc. REIT 1,900 22
Entertainment Properties Trust REIT 1,200 21
IRT Property Co. REIT 2,400 21
</TABLE>
41
<PAGE> 110
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET
VALUE*
REIT INDEX PORTFOLIO SHARES (000)
- ----------------------------------------------------------------
<S> <C> <C>
Innkeepers USA Trust REIT 2,300 $ 21
Sovran Self Storage, Inc. REIT 900 21
U.S. Restaurant Properties,
Inc. REIT 1,100 21
Equity Inns, Inc. REIT 2,400 20
Great Lakes, Inc. REIT 1,400 20
National Golf Properties, Inc. REIT 900 20
Town & Country Trust REIT 1,300 20
American Industrial Properties REIT 1,600 19
Associated Estates Realty
Corp. REIT 1,800 19
EastGroup Properties, Inc. REIT 1,200 19
LaSalle Hotel Properties REIT 1,400 19
Pennsylvania REIT 1,000 19
Boykin Lodging Co. REIT 1,500 18
Konover Property Trust, Inc. REIT 3,000 18
Lexington Corporate Properties
Trust REIT 1,610 18
Saul Centers, Inc. REIT 1,200 18
Crown American Realty Trust REIT 2,550 17
Western Investment Real Estate
Trust REIT 1,600 17
Golf Trust of America, Inc. REIT 730 16
First Washington Realty Trust,
Inc. REIT 700 15
Prime Group Realty Trust REIT 1,100 15
Sunstone Hotel Investors, Inc. REIT 1,900 14
Lexford Residential Trust REIT 400 7
Mid Atlantic Realty Trust REIT 600 6
Tanger Factory Outlet Centers,
Inc. REIT 300 6
Captec Net Lease Realty, Inc. REIT 400 5
- - First Union Real Estate REIT 1,200 5
Kranzco Realty Trust REIT 400 5
Ramco-Gershenson Properties
Trust REIT 300 5
Winston Hotels, Inc. REIT 600 5
Correctional Properties Trust REIT 300 4
Jameson Inns, Inc. REIT 400 4
Phillips International Realty
Corp. REIT 300 4
- ----------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(COST $8,053) 7,844
- ----------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------
FACE
AMOUNT
(000)
- ----------------------------------------------------------------
TEMPORARY CASH INVESTMENT (6.4%)
- ----------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
4.94%, 4/1/1999
(COST $523) $523 523
- ----------------------------------------------------------------
TOTAL INVESTMENTS (102.8%)
(COST $8,576) 8,367
- ----------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-2.8%)
- ----------------------------------------------------------------
Other Assets 225
Payable for Investment Securities Purchased (444)
Other Liabilities (8)
---------
(227)
- ----------------------------------------------------------------
NET ASSETS (100%)
- ----------------------------------------------------------------
Applicable to 835,123 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization) $8,140
================================================================
NET ASSET VALUE PER SHARE $9.75
================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
- -Non-Income-Producing Security.
REIT--Real Estate Investment Trust.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
AT MARCH 31, 1999, NET ASSETS CONSISTED OF:
- ----------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ----------------------------------------------------------------
<S> <C> <C>
Paid In Capital $8,278 $9.91
Undistributed Net
Investment Income 85 .10
Accumulated Net Realized Losses (14) (.01)
Unrealized Depreciation--Note F (209) (.25)
- ----------------------------------------------------------------
NET ASSETS $8,140 $9.75
================================================================
</TABLE>
42
