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VANGUARD(R) VARIABLE
INSURANCE FUND
March 31, 2000
semiannual
MONEY MARKET PORTFOLIO
SHORT-TERM
CORPORATE PORTFOLIO
HIGH-GRADE BOND PORTFOLIO
HIGH YIELD BOND PORTFOLIO
BALANCED PORTFOLIO
EQUITY INCOME PORTFOLIO
DIVERSIFIED VALUE PORTFOLIO
EQUITY INDEX PORTFOLIO
MID-CAP INDEX PORTFOLIO
GROWTH PORTFOLIO
SMALL COMPANY
GROWTH PORTFOLIO
INTERNATIONAL PORTFOLIO
REIT INDEX PORTFOLIO
[PHOTO]
[THE VANGUARD GROUP LOGO]
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HAVE THE PRINCIPLES OF INVESTING CHANGED?
In a world of frenetic change in business, technology, and the financial
markets, it is natural to wonder whether the basic principles of investing have
changed.
We don't think so.
The most successful investors over the coming decade will be those who
began the new century with a fundamental understanding of risk and who had the
discipline to stick with long-term investment programs.
Certainly, investors today confront a challenging, even unprecedented,
environment. Valuations of market indexes are at or near historic highs. The
strength and duration of the bull market in U.S. stocks have inflated people's
expectations and diminished their recognition of the market's considerable
risks. And the incredible divergence in stock returns--many technology-related
stocks gained 100% or more in 1999, yet prices fell for more than half of all
stocks--has made some investors question the idea of diversification.
And then there is the Internet. Undeniably, it is a powerful medium for
communications and transacting business. For investors, the Internet is a vast
source of information about investments, and online trading has made it
inexpensive and convenient to trade stocks and invest in mutual funds.
However, new tools do not guarantee good workmanship. Information is not
the same as wisdom. Indeed, much of the information, opinion, and rumor that
swirl about financial markets each day amounts to "noise" of no lasting
significance. And the fact that rapid-fire trading is easy does not make it
beneficial. Frequent trading is almost always counterproductive because
costs--even at low commission rates--and taxes detract from the returns that the
markets provide. Sadly, many investors jump into a "hot" mutual fund just in
time to see it cool off. Meanwhile, long-term fund investors are hurt by
speculative trading activity because they bear part of the costs involved in
accommodating purchases and redemptions.
Vanguard believes that intelligent investors should resist short-term
thinking and focus instead on a few time-tested principles:
- Invest for the long term. Pursuing your long-term investment goals is
more like a marathon than a sprint.
- Diversify your investments with holdings in stocks, bonds, and cash
investments. Remember that, at any moment, some part of a diversified portfolio
will lag other parts, and be wary of taking on more risk by "piling onto" the
best-performing part of your holdings. Today's leader could well be tomorrow's
laggard.
- Step back from the daily frenzy of the markets; focus on your overall
asset allocation.
- Capture as much of the market's return as possible by minimizing costs
and taxes.
Costs and taxes diminish long-term returns while doing nothing to reduce the
risks you incur as an investor.
CONTENTS
REPORT FROM THE CHAIRMAN ............................1
THE MARKETS IN PERSPECTIVE ..........................7
REPORTS FROM THE ADVISERS ...........................9
PERFORMANCE SUMMARIES ..............................21
PORTFOLIO PROFILES .................................27
FINANCIAL STATEMENTS ...............................43
All comparative mutual fund data are from Lipper Inc. or Morningstar, Inc.,
unless otherwise noted.
"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> 3
REPORT FROM THE CHAIRMAN
[PHOTO]
JOHN J. BRENNAN
Stock prices soared and bond prices slipped during the eventful first half of
Vanguard Variable Insurance Fund's 2000 fiscal year.
For the six months ended March 31, 2000, the returns of our 13
portfolios ranged from an astounding 70.8% for our Small-Company Growth
Portfolio to a disappointing -6.4% for our Diversified Value Portfolio. Though
several of our portfolios registered terrific absolute gains, our overall
performance relative to our competitors was a bit lacking. Only five of our
portfolios--and just two of our eight equity funds--earned returns that topped
the results of their average peers.
This report presents the six-month total returns (capital change plus
reinvested dividends) for our portfolios, along with the results for their
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 21-26. The returns for the portfolios of 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.
THE PERIOD IN REVIEW
During the half-year ended March 31, the remarkably vibrant U.S. economy
completed its 108th month of uninterrupted expansion--a record nine full years
without a recession. For the last quarter of 1999, the economy grew at an
astounding 7.3% rate.
This overall economic strength--and the rosy outlook it engendered among
investors--helped drive stocks higher. The U.S. stock market, as measured by the
Wilshire 5000 Total Market Index, rose an impressive 23.2% for the six months.
However, returns were wildly disparate within the market. Small- and
mid- capitalization stocks far outpaced large-cap companies. The Wilshire 4500
Completion Index--essentially the total U.S. market minus the large-cap Standard
& Poor's 500 Index--had a total return of 42.6% for the period. And despite a
brief rally of "old economy" stocks in late March, it was the "new economy"
(i.e., technology, media, and telecommunications) stocks that dominated the
market, as they did in 1999. The growth component of the S&P 500 Index--made up
of stocks with above-average prices in relation to such measures as earnings and
book value--gained 24.7%, while the value component returned 9.2%. The
tech-heavy Nasdaq Composite Index rose 67.3% for the period.
Meanwhile, after years of mostly nominal inflation, the cost of living
seemed to be on the rise, though much of the increase stemmed from a sharp hike
in oil prices that many analysts regarded as temporary. In March, the Consumer
Price Index was 3.7% above its level of a year earlier.
The Federal Reserve Board--fearing that the rapidly growing economy
would spur rising prices--took action March 21, raising short-term interest
rates by 25 basis points (0.25 percentage point) for the fifth time in nine
months. The Fed's action, together with
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the U.S. Treasury's announced plans to buy back some of its long-term debt,
caused a relatively rare "inversion of the yield curve"--a situation in which
yields of short-term debt exceed those of long-term bonds. During the six
months, the 30-year Treasury bond's yield declined 22 basis points (0.22
percentage point) to 5.83%, while the yield of a 3-month Treasury bill rose 102
basis points to 5.87%. The Lehman Brothers Aggregate Bond Index, a proxy for the
entire taxable bond market, returned 2.1% for the six months.
International markets generally performed well, though returns among
countries and industries varied widely, as they often do. The Morgan Stanley
Capital International Europe, Australasia, Far East (EAFE) Index returned 22.5%
in local currency for the six months and 17.0% in U.S. dollars. Several markets
produced outstanding total returns during the period, including Finland (135% in
local currency), Sweden (82%), Canada (46%), and Germany (48%). Overall, the
gains around the world were led, not surprisingly, by strong advances among
technology shares, particularly telecommunications and media companies.
A summary of the half-year results of each of our portfolios follows.
(Note: All comparative fund group returns are derived from data provided by
Lipper Inc.)
FIXED-INCOME PORTFOLIOS
Our MONEY MARKET PORTFOLIO earned a return of 2.9% during the six months,
outpacing the 2.5% return of the average money market mutual fund and the 2.6%
return of an unmanaged index of 3-month U.S. Treasury bills. As always, our
performance margin over our competitors was directly tied to our much lower
costs. Our annualized expense ratio (expenses as a percentage of average net
assets) is 0.18%, or $1.80 per $1,000 invested--just a fraction of the 0.83%, or
$8.30 per $1,000, charged by the average money market mutual fund.
<TABLE>
<CAPTION>
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TOTAL RETURNS
SIX MONTHS ENDED
MARCH 31, 2000
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<S> <C>
MONEY MARKET PORTFOLIO* 2.9%
(SEC 7-Day Annualized
Yield: 5.81%)
Average Money Market Fund 2.5
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 2.6
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SHORT-TERM CORPORATE PORTFOLIO 2.4%
Average 1-5 Year Investment Grade Fund 1.8
Lehman 1-5 Year Investment Grade Index 1.8
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HIGH-GRADE BOND PORTFOLIO 2.3%
Average Intermediate
Government Fund 1.5
Lehman Aggregate Bond Index 2.1
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HIGH YIELD BOND PORTFOLIO 0.7%
Average High Current Yield Fund 1.1
Lehman High Yield Index -0.7
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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 SHORT-TERM CORPORATE PORTFOLIO returned 2.4%, topping the 1.8%
return of both our average peer and an unmanaged index of short-term securities.
Our HIGH-GRADE BOND PORTFOLIO returned 2.3% for the half-year, ahead of
the 1.5% return of our average peer and the 2.1% gain of our benchmark, the
Lehman Aggregate Bond Index.
During a difficult period for lower-quality bonds, our HIGH YIELD BOND
PORTFOLIO earned a total return of 0.7%-- a result that was 0.4 percentage point
behind that of its average competitor but ahead of the -0.7% return of the
Lehman High Yield Index. Generally, our portfolio invests in bonds that, while
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they are below investment-grade, still have higher credit quality--and thus
lower credit risk--than those owned by competing funds. Over the past two years,
higher-yielding securities have suffered from lackluster demand, apparently the
result of the above-average returns generated by stocks (which have lured
investors from high-yielding bonds to equities) and concern about the safety of
lower-quality bonds.
BALANCED PORTFOLIO
Our BALANCED PORTFOLIO returned 0.9% during the six months, well below the 10.5%
return of the average balanced fund. Our return was also well behind the 11.8%
return of our unmanaged benchmark, a composite index weighted 65% in the S&P 500
Index and 35% in high-quality, long-term bonds. In both cases, our shortfall can
be traced to the relatively weak performance of value-oriented stocks, which our
fund emphasizes.
<TABLE>
<CAPTION>
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TOTAL RETURNS
SIX MONTHS ENDED
MARCH 31, 2000
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<S> <C>
BALANCED PORTFOLIO 0.9%
Average Balanced Fund 10.5
Composite Stock/Bond Index* 11.8
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</TABLE>
*65% S&P 500 Index, 35% Lehman Long Corporate AA or Better Bond Index.
It's important to note that the Board of Trustees recently approved a
change in the benchmark for the portfolio's bond segment, effective April 1,
2000. The change to the new benchmark--the Lehman Corporate A or Better
Index--will significantly reduce the bond segment's duration, and thus its
sensitivity to interest rate changes, and will slightly lower its credit
quality. We do not expect the shift to significantly affect the portfolio's
long-term returns; however, it will decrease the volatility of the bond holdings
and will expand the number of high-quality investment-grade bonds available to
the portfolio.
DOMESTIC EQUITY PORTFOLIOS
Our EQUITY INCOME PORTFOLIO provided a negative total return of -3.6% for the
six months, reflecting the relatively poor performance of petroleum-related
stocks and other higher-yielding issues that the portfolio emphasizes. A major
portion of our shortfall compared with our benchmarks resulted from our
avoidance of the technology sector, which includes many companies that do not
pay dividends or that pay very little. These companies, which accounted for
almost 80% of the return of the S&P 500 Index during the six months are, of
course, not candidates for inclusion in a portfolio for which income is a
primary objective.
Our DIVERSIFIED VALUE PORTFOLIO earned the lowest return among our 13
portfolios, registering a total return of -6.4%. The fund's average competitor
earned 9.8%, while the Russell 1000 Value Index--a good measure of large value
stocks--gained 5.9%. Quite simply, several of our portfolio's stocks performed
horribly during the first five months of the period, producing a return of
-18.5%. But then our results turned around dramatically as value stocks returned
to favor. Essentially the same group of stocks advanced an amazing 15% in March
alone, helping to make up some of the earlier shortfall.
The EQUITY INDEX PORTFOLIO booked a six-month return of 17.5%, exactly
matching the return of its target benchmark, the S&P 500 Index. Relative to
other large-cap stock mutual funds, our performance was subpar. The reason was
that the index and our portfolio held smaller stakes in the high-flying
technology sector.
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<TABLE>
<CAPTION>
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TOTAL RETURNS
SIX MONTHS ENDED
MARCH 31, 2000
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<S> <C>
EQUITY INCOME PORTFOLIO -3.6%
Average Equity Income Fund 3.0
S&P 500 Index 17.5
Russell 1000 Value Index 5.9
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DIVERSIFIED VALUE PORTFOLIO -6.4%
Average Large-Cap Value Fund 9.8
S&P 500 Index 17.5
Russell 1000 Value Index 5.9
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EQUITY INDEX PORTFOLIO 17.5%
Average General Equity Fund 29.1
S&P 500 Index 17.5
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MID-CAP INDEX PORTFOLIO 32.5%
Average Mid-Cap Core Fund 49.0
S&P MidCap 400 Index 32.1
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GROWTH PORTFOLIO 26.6%
Average Large-Cap Growth Fund 37.6
S&P 500 Index 17.5
Russell 1000 Growth Index 34.1
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SMALL COMPANY GROWTH PORTFOLIO 70.8%
Average Small-Cap Growth Fund 65.4
Russell 2000 Index 26.8
Small Company Growth Fund
Stock Index* 38.7
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REIT INDEX PORTFOLIO 1.9%
Average Real Estate Fund 2.0
Morgan Stanley REIT Index 1.9
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</TABLE>
*Provided by Vestek Systems; tracks the stocks held by the 25 largest small-cap
mutual funds.
A relatively light commitment to technology shares also explained the
comparatively poor results of our MID-CAP INDEX PORTFOLIO, which earned an
excellent absolute return of 32.5% for the six months, but trailed the average
return of actively managed mid-cap mutual funds by nearly 17 percentage points.
Large-cap growth companies continued their impressive surge during the
six months, helping to propel our GROWTH PORTFOLIO to an advance of 26.6%. Here
too, however, a return that is impressive in absolute terms was disappointing
when compared with the results of similar funds. We fell 11 percentage points
short of the average large-cap growth fund's return and 7.5 percentage points
short of the return of the Russell 1000 Growth Index, a good measure of the
types of stocks that our portfolio emphasizes. As with the Mid-Cap Index
Portfolio, our return suffered from a lighter commitment to some of the
fastest-growing--and most speculative--technology companies.
Our SMALL COMPANY GROWTH PORTFOLIO earned the highest return among our
13 portfolios, recording a stunning six-month gain of 70.8%. Our terrific return
(the equivalent of about six years worth of average stock-market gains) resulted
from the nearly unprecedented performance of tech stocks and health-care--mainly
biotech--issues. The portfolio's tech stocks, which made up about 30% of its
assets, soared 178% during the six months, and its health-care stocks (about 25%
of assets) climbed 170%. Our average peer also benefited from the tech advances,
returning 65.4% for the period.
Our REIT INDEX PORTFOLIO earned a six-month return of 1.9%, right in
line with other real-estate funds and our target index. REIT funds fell victim
to a combination of two factors: higher interest rates, which can inflict a
double-whammy of higher borrowing costs and increased investment competition
from bonds; and a slightly higher supply of REIT issues, which lowered prices.
INTERNATIONAL PORTFOLIO
Our INTERNATIONAL PORTFOLIO earned a terrific six-month return of 29.2%, ahead
of the 17.0% return of the Morgan Stanley Capital International Europe,
Australasia, Far East (EAFE) Index, and the 27.0% return of the average
international fund.
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On March 31, one of the fund's largest commitments to a single country was its
nearly 20% stake in Japan, where stocks gained 12% in yen and 17% in U.S.
dollars. (For U.S. investors, a strong dollar diminishes the returns from
international investments while a weaker dollar augments international returns.)
Overall, our portfolio benefited from its solid exposure to technology, media,
and telecommunications companies.
<TABLE>
<CAPTION>
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TOTAL RETURNS
SIX MONTHS ENDED
MARCH 31, 2000
----------------------------------------------------------
<S> <C>
INTERNATIONAL PORTFOLIO 29.2%
Average International Fund 27.0
MSCI EAFE Index 17.0
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</TABLE>
IN SUMMARY
In the first two weeks of April, just after the end of this reporting period,
U.S. technology stocks plummeted and their returns slipped into negative
territory for the calendar year, while value stocks registered modest gains.
This episode served to show how quickly and unpredictably market sectors can
move into and out of favor.
Because the financial markets are ever-unpredictable, we advocate the
time-tested strategy of diversification and investing for the long run. Holding
well-diversified stock funds, as well as bond and money market funds, gives you
exposure to the major asset classes and can help you to maintain your balance in
turbulent times. We urge investors to base their investment program on their own
goals, time horizon, and risk tolerance--and to stick with their plan over the
long haul.
For their part, the low-cost portfolios of Vanguard Variable Insurance
Fund can help investors diversify their holdings while taking advantage of the
tax benefits available through a variable annuity or variable life insurance
plan.
/s/ JOHN J. BRENNAN
John J. Brennan
Chairman and Chief Executive Officer
April 20, 2000
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NOTICE TO SHAREHOLDERS
CHANGE IN BENCHMARK FOR SMALL COMPANY GROWTH PORTFOLIO
The Board of Trustees of Vanguard Variable Insurance Fund has approved a change
in the investment benchmark for the Small Company Growth Portfolio. On June
30, 2000, the portfolio's benchmark will change from the Small Company Growth
Fund Stock Index to the Russell 2000 Growth Index. The new benchmark will be
cited in fund reports to help investors evaluate our relative performance, and
it will help determine the compensation paid to the portfolio's investment
adviser, Granahan Investment Management, Inc. Because the two indexes'
characteristics are broadly similar, the change will have no effect on the
portfolio's composition, investment policies, strategies, or risk level.
THE REASON FOR THE CHANGE
The Small Company Growth Fund Stock Index, which has been the portfolio's
benchmark since late 1997, is made up of the stocks held by the 25 largest
small- capitalization mutual funds. (The index is adjusted annually according
to Lipper Inc.'s classification of small-cap funds.) While this index has been
a suitable benchmark for the Small Company Growth Portfolio, the Russell 2000
Growth Index is equally suitable and is a more widely recognized measure of
the performance of small-cap growth stocks. The Trustees believe that the
Russell index will be easier for investors to understand and follow.
AMENDING THE ADVISORY CONTRACT
Compensation for the portfolio's investment adviser, Granahan Investment
Management, Inc., is tied to the portfolio's performance relative to that of
its unmanaged index benchmark. Accordingly, the fund's advisory contract will
be amended to adopt the new benchmark for determining compensation after June
30, 2000. All other terms of the advisory contract will remain the same.
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THE MARKETS IN PERSPECTIVE
SIX MONTHS ENDED MARCH 31, 2000
A strong economy and an extraordinary run-up in prices for technology stocks
carried broad market indexes higher during a volatile but generally rewarding
six months ended March 31, 2000.
The rise in stocks was surprising in light of higher inflation and
rising interest rates, both of which did some damage to bond prices. For stock
investors, however, worries about inflation and interest rates did little to
dampen enthusiasm for technology, telecommunications, and media companies.
The U.S. economy continued its rapid growth during the semiannual
period. Gross domestic product, an estimate of total economic output, increased
at a 7.3% pace, even after inflation, during the final three months of 1999. The
economy expanded by more than 4% during 1999, which is a brisk clip for a large
economy, especially one that in March completed a record 108 consecutive months
without a recession.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
TOTAL RETURNS
PERIODS ENDED MARCH 31, 2000
-------------------------------------
6 MONTHS 1 YEAR 5 YEARS*
-------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS
S&P 500 Index 17.5% 17.9% 26.8%
Russell 2000 Index 26.8 37.3 17.2
Wilshire 5000 Index 23.2 24.0 25.9
MSCI EAFE Index 17.0 25.4 12.7
-------------------------------------------------------------------------------
BONDS
Lehman Aggregate Bond Index 2.1% 1.9% 7.1%
Lehman 10 Year Municipal Bond Index 2.2 0.5 6.2
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 2.6 5.0 5.2
-------------------------------------------------------------------------------
OTHER
Consumer Price Index 1.9% 3.7% 2.5%
-------------------------------------------------------------------------------
</TABLE>
*Annualized.
Inflation measures sent mixed messages. Higher oil prices did cause the
Consumer Price Index to increase by 1.9% and 3.7% for the six- and twelve-month
periods ended March 31. But if energy and food prices were factored out,
inflation remained tame. Nonetheless, the Federal Reserve Board, concerned that
rapid growth and low unemployment (around 4% of the workforce) would cause
inflation to build momentum, continued the efforts it began in June 1999 to slow
the economy. The Fed raised its target for short-term interest rates by 0.25
percentage point on three occasions during the six months, bringing the federal
funds rate to 6.0%.
U.S. STOCK MARKETS
The technology sector continued to dominate the stock market during the
half-year, although it suffered some setbacks. Over a five-week period from
March 10 through April 14, technology stocks fell sharply and the Nasdaq
Composite Index, which is dominated by large tech issues, declined -34%.
However, for the six months ended March 31, the Nasdaq Composite registered an
incredible 67.3% return.
The overall stock market, as measured by the Wilshire 5000 Index, posted
a 23.2% gain. Large-capitalization stocks didn't do quite as well--the S&P 500
Index returned 17.5%. The small-cap Russell 2000 Index gained 26.8%.
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Computer software and hardware companies, semiconductor makers, and an
array of Internet-related companies powered the advance on Wall Street. Indeed,
one-third of the 57 companies in the S&P 500's tech group gained more than 100%
during the six months. A number of tech-related companies within the
producer-durables and utility groups also posted impressive gains. For the
half-year, technology stocks, which accounted for one-quarter of the total
market capitalization of the S&P 500 Index, gained 53%. Producer-durables
companies returned 36%. The oil-drilling and services companies in the "other
energy" category benefited from higher oil prices and returned about 30% for the
six months.
Despite the impressive gains for the market averages, many individual
stocks declined. The market's worst-performing sectors were consumer staples
(-14%), including large food, beverage, supermarket, and tobacco stocks, and
the materials & processing group (-6%), which was hurt by higher energy prices,
competitive pressure from imports, and higher interest rates.
With demand for stocks high, Wall Street came up with new supply: During
the first three months of 2000, a record $75 billion in new stock was issued
through underwriters.
U.S. BOND MARKETS
The step-by-step increases in short-term interest rates by the Federal Reserve
did succeed in elevating other short-term rates. For example, yields of 3-month
U.S. Treasury bills rose by 102 basis points (about 1 percentage point) during
the half-year, from 4.85% on September 30 to 5.87% on March 31. Yields on 3-year
Treasury notes rose about 75 basis points, in line with the Fed's actions.
But for long-term Treasury bonds, interest rates fell during the period.
This was due primarily to the federal government's budget surplus, which
resulted in reduced issuance of new bonds and steps by the Treasury to buy back
some of its existing long-term securities. This reduced supply of long-term
bonds caused the yield on the 30-year Treasury to fall 22 basis points--from
6.05% to 5.83%--during the half-year. Yields of 10-year Treasury securities rose
only 12 basis points to 6.00% as of March 31.
Higher short-term rates and lower or relatively stable long-term rates
resulted in an inversion in the yield curve. Instead of the usual upward sloping
curve--with yields rising along with the maturity of Treasury securities--yields
were lower for long-term bonds.
Outside of the Treasury market, yields rose and prices fell for most
intermediate-to long-term corporate and municipal bonds. The overall bond
market, as measured by the Lehman Aggregate Bond Index, posted a 2.1% return, as
an average price decline of -1.3% offset much of the 3.4% income provided by
the market.
INTERNATIONAL STOCK MARKETS
Stock markets in Europe, Asia, and many emerging markets produced double-digit
gains during the half-year as investors responded to improving global economic
growth and a rise in corporate merger and acquisition activity. The overall
return from developed foreign markets was an excellent 17.0%, as measured by the
Morgan Stanley Capital International Europe, Australasia, Far East (EAFE) Index.
In Europe, an average return of 27.7% in local-currency terms was
reduced to 17.6% for U.S. investors because of the U.S. dollar's gains against
European currencies. (Returns from abroad are diminished when the dollar rises
in value against other currencies, and increased when the dollar falls.) Stocks
in the Pacific region, which is dominated by Japan, returned 15.6% in dollars
and 12.8% in local-currency terms. The Select Emerging Markets Free Index soared
26.2% in dollars, led by big gains in Turkey (111%) and Brazil (60%).
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REPORT FROM VANGUARD FIXED INCOME GROUP
MONEY MARKET, SHORT-TERM CORPORATE,
AND HIGH-GRADE BOND PORTFOLIOS
During the first half of our fiscal year, the Federal Reserve raised its target
for the federal funds rate--the rate banks charge each other for overnight
loans--by a total of 0.75 percentage point. In the marketplace, short-term rates
rose further--generally by more than 1 percentage point--reflecting expectations
that the Fed would raise interest rates again. Long-term rates did not rise as
much, and for U.S. Treasury securities, yields actually inverted: When the
semiannual period ended on March 31, 2000, longer-term interest rates were lower
than those on short-term issues.
Between June 30, 1999, and the end of our fiscal half-year, the Fed
raised interest rates five times for a total of 1.25 percentage points. The
first three reductions reversed cuts that the Fed had made in autumn 1998 to
increase liquidity in the markets, which were reacting to deteriorating
financial conditions in Asia and Russia. The two most recent increases reflect
the Fed's concern that demand for goods and services is outstripping the
available supply, which could cause inflation to worsen. Fed Chairman Alan
Greenspan has repeatedly identified the rise in stock prices as one source of
excess demand in the economy. He has said that the "wealth effect" from the bull
market is fueling an unsustainable pace of demand and has implied that the Fed
will continue to tighten monetary policy until demand moderates.
Critics of the Fed's rate boosts have pointed to recent economic reports
suggesting that core measures of inflation remain subdued. However, officials
can identify a wide array of economic statistics to bolster their argument that
demand is growing too fast. Ordinarily, the effect of higher interest rates is
most evident in such interest-rate-sensitive sectors as housing and autos. But
so far, the effect on the housing market has been muted: Single-family housing
starts are down only slightly from their pace in 1999 and are at high levels by
past standards. So far in 2000, auto sales have been occurring at an annual rate
of more than 18 million units, so there's little evidence of slowing due to
higher interest rates.
Growth in total economic output--the inflation-adjusted gross domestic
product--spurted to a 7.3% annual rate in the fourth quarter of 1999, reflecting
an insatiable appetite for goods and services by consumers. This high demand has
left employers scrambling for the means to satisfy it. Initial claims for
unemployment insurance keep trending lower, indicating that the pool of
available workers is shallow--a potentially difficult problem for employers.
There have been some
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<PAGE> 12
signs of upward pressure on wages, although unit-labor-cost increases have
remained relatively low because of gains in productivity.
Adding to the difficulty of the Fed's effort to slow the economy is that
long-term interest rates, in particular those that affect the housing market,
have declined recently. Corporate bond yields have been relatively stable, but
have come down a bit from their recent peaks. Without more evidence that
economic momentum is weakening, officials at the Fed are likely to further
tighten monetary policy.
MONEY MARKET PORTFOLIO
Rising short-term rates were a boon to the Money Market Portfolio, which
returned 2.9% during the first half of fiscal 2000. This brought the portfolio's
twelve-month return to 5.4%. In managing the portfolio, we have kept its average
maturity somewhat shorter than usual so that its return will more quickly
reflect changes in interest rates. This stance is based on our view that the Fed
is likely to raise interest rates again. As in the past, we purchase only
high-quality securities, and we maintain one of the lowest expense ratios in the
industry. The combination allows us to outperform the vast majority of our
competitors while remaining conservative in terms of the superior credit quality
of our holdings.
SHORT-TERM CORPORATE PORTFOLIO
The 2.4% return of the Short-Term Corporate Portfolio during the semiannual
period surpassed the 1.8% total return for both our average mutual fund
competitor and our index benchmark.
Over the last six months, bond investors have been paid a substantial
yield premium relative to Treasuries for assuming the higher credit risk of
corporate securities. In part, this higher premium has stemmed from the
anticipation that continuing federal budget surpluses will permit the government
to substantially reduce--or eventually even to eliminate--the Treasury debt held
in the market. However, even after allowing for this factor, we believed that
yields for corporate securities were attractive in light of our positive outlook
for the economy and corporate earnings. Therefore, to maximize the portfolio's
income, we focused our buying on debt from issuers with A and BBB credit
ratings. As with every security we purchase, our team of credit analysts made an
independent assessment of each issuer's ongoing creditworthiness.
Because we expect the Fed to keep raising interest rates, we reduced the
average maturity of the portfolio's holdings, thus reducing its price
sensitivity to changes in rates. This tactical decision cushioned the effect of
higher rates on the portfolio's share price during the fiscal half-year and
helped us to outperform our comparative benchmarks.
HIGH-GRADE BOND PORTFOLIO
As we noted above, interest rates have risen in the overall bond market, except
for long-term U.S. Treasury bonds. Yields on shorter-term Treasury
securities--with maturities ranging from 3 months to 2 years--rose by 1 to 1.1
percentage points during the half-year, largely in response to the Fed's rate
increases. However, for longer-term Treasuries, the Fed's efforts have been
blunted somewhat by the federal budget surplus, which has reduced issuance and
prompted the Treasury to begin repurchasing some long-term bonds. Yields on
10-year Treasury securities rose by less than 0.15 percentage point, and the
yield of the 30-year Treasury bond declined by 0.22 percentage point.
10
<PAGE> 13
The adjacent table shows how various sectors of the Lehman Aggregate
Bond Index performed recently. Government bonds were the best-performing
category by a significant margin over the last six months, and by a smaller
margin for the twelve-month period. The relative strength of these securities is
due to concern about both their relative scarcity and the possible impact of
further interest rate increases by the Fed.
<TABLE>
<CAPTION>
---------------------------------------------------------
TOTAL RETURNS
PERIODS ENDED MARCH 31, 2000
---------------------------------------------------------
6 MONTHS 12 MONTHS
---------------------------------------------------------
<S> <C> <C>
Lehman Aggregate Bond Index 2.08% 1.87%
Government Sector 2.70 2.50
Corporate Sector 1.46 0.16
Mortgage-Backed
Securities Sector 1.77 2.25
---------------------------------------------------------
</TABLE>
The High-Grade Bond Portfolio aims to closely track the performance of
the Lehman Aggregate Bond Index. We're pleased that the portfolio has done a bit
better than that for both the six-month and twelve-month periods ended March 31.
For the half-year, the portfolio returned 2.34% versus 2.08% for the index; for
the full year, the respective results were 1.95% and 1.87%. Given that the
portfolio has operating and transaction costs that the theoretical index does
not incur, the portfolio's performance before costs exceeded the index returns
by about 0.5 percentage point in each period.
As of March 31, the portfolio's assets were allocated 24% to government
bonds, 36% to corporate bonds, 6% to dollar-denominated foreign bonds, and 34%
to mortgage-backed securities.
Ian A. MacKinnon, Managing Director
Robert F. Auwaerter, Principal
David R. Glocke, Principal
Kenneth E. Volpert, Principal
April 13, 2000
INVESTMENT PHILOSOPHY
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.
11
<PAGE> 14
REPORT FROM WELLINGTON
MANAGEMENT COMPANY, LLP
HIGH YIELD BOND PORTFOLIO
The High Yield Bond Portfolio returned a disappointing 0.7% and -1.1%,
respectively, for the six- and twelve-month periods ended March 31, 2000.
The past year has been a generally difficult period for bonds. The yield
on 10-year U.S. Treasury bonds rose only 12 basis points (0.12 percentage point)
between September 30 and March 31, but it has increased 76 basis points since a
year ago. As we have stated often, the direction of interest rates doesn't
necessarily determine how high-yield bonds behave. Trends in the market for
these below-investment-grade issues are difficult to anticipate. Under some
conditions, high-yield bonds follow the direction of the stock market. At other
times--typically when both the stock and bond markets are reasonably
stable--high-yield bonds tend to behave like other bonds. And sometimes the
high-yield market does not take its cue from either of the other major capital
markets. This is what we've witnessed very recently.
In 1998, investment-grade bond prices rose while yields declined, yet
high-yield bonds labored. Over the last twelve months, stocks soared, and
high-yield bonds struggled. However, total returns on high-yield issues were
only slightly negative, even though interest rates on intermediate-term bonds
have risen noticeably and a record $23 billion worth of high-yield bonds
defaulted in 1999 ($5 billion more than the record set in 1991). The large
yields available in the below-investment-grade market sheltered it against very
negative forces. Also, the vibrant domestic economy and the bullish stock market
softened the blow of rising interest rates and defaults.
With the Federal Reserve raising short-term interest rates--and thus
implicitly restricting credit--the high-yield market could be fighting a
headwind for another six months. When credit is rationed, the marginal borrower
or lower-rated issuer must pay higher interest rates to obtain credit. We have
begun to see this phenomenon. Investors will decrease their tolerance for risk
if the economy's growth rate begins to slow, as the Fed apparently would prefer.
We remain very selective with respect to credit quality, and we exercise
in-depth research on every company whose securities we consider. To decrease
risk, we diversify holdings by purchasing securities from a number of issuers in
different industries. We are avoiding smaller, start-up companies. We continue
to emphasize the higher-quality spectrum of the below-investment-grade market,
focusing on cash-paying issues rated "B" or better. We do not hold preferred
stocks or debt from emerging markets.
Earl E. McEvoy, Senior Vice President and
Portfolio Manager
April 12, 2000
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.
12
<PAGE> 15
REPORT FROM WELLINGTON
MANAGEMENT COMPANY, LLP
BALANCED PORTFOLIO
During the six months ended March 31, the Balanced Portfolio returned 0.9%.
The equity portion of the portfolio, which at the end of March was about
two-thirds of assets, returned 0.6%, well behind the 17.5% gain of the S&P 500
Index. Through the first five months of the period, most of the stock market's
gains were made by securities in the technology sector. On average, other
sectors were essentially flat. The Balanced Portfolio continues to emphasize
companies that have low price/earnings ratios and dividend yields above the
market's average. As a result, we have only modest representation in the tech
sector, where valuations are quite high and few stocks pay dividends. The
portfolio's bond sector, which accounted for nearly one-third of assets on March
31, returned 1.6% during the six months.
We acknowledge that our "value" approach to investing has not been in
favor in the last two years. But we are confident that investors' interest in
high-quality securities that sell at relatively low valuations will return in
the future. Economic conditions are improving in many areas of the world,
especially in Asia after the financial crises of 1998. This bodes well for
market sectors in which the portfolio has meaningful exposure, such as basic
materials, industrial, and energy. We also maintain large exposure to
transportation, finance, and health-care stocks.
Among the stocks added to the portfolio during the half-year were
Gillette and Raytheon. Both of these stocks came under pressure as a result of
earnings disappointments that we think are temporary.
U.S. Treasury bond prices have been held up--and yields held down--by
investors' realization that the growing federal budget surplus will result in a
shrinking supply of government debt securities. As a result, corporate bonds
have lagged Treasuries during most of the semiannual period. This was
surprising, given that the U.S. economy has been quite strong and corporate bond
issuers are generally in good financial health. Transaction activity in the bond
portion of the fund has focused recently on reducing the average duration in
line with the new bond benchmark, the Lehman Corporate A or Better Index.
We are disappointed about the fund's six-month return, and we certainly
expect better results going forward. We hope that the extreme valuations in the
technology sector will be corrected without a serious impact on the overall
market. In March, the market's behavior in this respect was quite encouraging.
Ernst H. von Metzsch, Senior Vice President and
Portfolio Manager
Paul D. Kaplan, Senior Vice President and
Portfolio Manager
April 13, 2000
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.
13
<PAGE> 16
REPORT FROM NEWELL ASSOCIATES
EQUITY INCOME PORTFOLIO
During the first six months of the Equity Income Portfolio's 2000 fiscal year,
the world of common stocks split in two: the old world of companies governed by
traditional rules of valuation and the new world of technology companies driven
by euphoric expectations and stock-price momentum. The new-world stocks were
caught up in an ebullient bull market while the old-world stocks were caught in
the quicksand of an old-fashioned bear market. The technology-heavy Nasdaq
Composite Index rose a stunning 67% in the period, while the Equity Income
Portfolio returned -3.6%.
These new-world stocks seem to be turning up everywhere. Even many of
the supposedly conservative, yield-seeking funds that make up Lipper Inc.'s
equity income category now include a healthy dose of tech stocks. For example,
funds in the category hold an average of 9% of their assets in technology, with
some holding 36% in tech. The presence of these stocks explains the group's 3.0%
return for the fiscal half-year.
Many observers believe that much of the huge divergence in performance
among segments of the equity markets has been caused by the widespread movement
of money from traditional value investments to much more aggressive offerings.
Those who manage value-oriented investments have been forced to sell stocks that
they believe are cheap, driving prices down on stocks that have already low
expectations. On the other hand, those who manage more aggressive portfolios are
forced to buy popular, fast-growing stocks in order to keep up with the crowd,
even though they may believe that these stocks are ridiculously expensive.
This process considerably heightens the risk attached to the popular
technology and Internet stocks. The reality is that few of these favorites will
be able to earn enough money to justify their high price/earnings ratios. For
large companies, out-of-line P/E ratios are usually corrected by large price
declines. In the early 1970s, a group of "one-decision" stocks known as the
Nifty Fifty soared in price, sending P/E ratios to unprecedented levels. In the
two-year decline that followed, the prices of these stocks dropped an average of
55%, and they took an average of nine years to recover.
After a nearly 20-year run of rising stock prices--a stretch that has
produced record-high valuations--selling the stocks of safe and sane companies
to buy into the riskiest market sectors is exactly the opposite of what
conservative investors should be doing. In the bear market of 1973-1974,
investors learned that there was no such thing as a one-decision stock. We
believe that investors will eventually realize that there is only one investment
world. In the end, the rules of valuation for new-world and old-world companies
will have to come together, as they finally did for the Nifty Fifty.
Roger D. Newell, Chairman
April 12, 2000
INVESTMENT PHILOSOPHY
The adviser believes that a portfolio made up of undervalued stocks, whose
dividend yields are high both in relation to current market averages and 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.
14
<PAGE> 17
REPORT FROM BARROW, HANLEY,
MEWHINNEY & STRAUSS, INC.
DIVERSIFIED VALUE PORTFOLIO
As the U.S. economy enters its record tenth year of expansion, there is good
reason to be optimistic: Signs of an imminent recession are absent, inflation
remains reasonably low, and corporate profits for the first quarter of 2000 are
estimated to be 18% higher than for the same quarter last year. On the negative
side, the Federal Reserve has raised interest rates five times since last June
and is likely to do so again when it meets on May 16. While rates on longer-term
U.S. Treasury bonds have fallen by roughly 25 basis points (in part because of
shrinking supply) during the past six months, shorter-term rates have risen by
more than 100 basis points. Moreover, the spread between yields on
investment-grade corporate bonds and yields on Treasuries is the widest it has
been since the "Asian contagion" crisis in fall 1998.
During the January-March quarter, the negative impact of rising interest
rates more than offset the favorable profits outlook, and stocks were generally
flat to down. Exceptions were the utilities sector (which did well because of
its defensive qualities) and the technology sector (which was widely perceived
as impervious to an economic slowdown). Because the Nasdaq Composite Index is
dominated by technology stocks, it was up about 15% through February, even as
the broad market declined. But midway through March, a powerful shift in the
market sent the Nasdaq plummeting and the S&P 500 Index--and value-oriented
stocks in particular--soaring.
In this climate, your portfolio had a disappointing six months and
returned -6.4%. In our letter six months ago, we talked about how painful the
market's focus on growth stocks had been for value investors. Our relative
returns had been quite poor, as the market in 1999 favored only those issues
that seemed to promise high growth. However, this mindset seems to have changed
dramatically. Stocks that achieved prices that were silly have retreated. Some
of these companies will never make a profit and are down 60%-90%, on the way to
becoming worthless. At the same time, value stocks have risen. As of this
writing, your fund is up for the calendar year, and significantly ahead of the
S&P 500 and other indexes, so we feel more credible in challenging the premise
that "value is dead--buy growth at any price."
The financial media love simplistic characterizations that make good
sound bites but don't necessarily depict the real world. The current distinction
between the "old economy" and the "new economy" is a perfect example, with the
former class of companies assumed to be like buggy-whip manufacturers early in
the automobile age. It's a false analogy. Although most of the companies we
currently invest in would not be called "new economy" stocks, virtually every
one is very much involved in using technology and telecommunications
breakthroughs to increase sales opportunities and to lower costs.
We are confident that this portfolio will be resistant to declines and
has significant upside potential.
James P. Barrow
April 12, 2000
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.
15
<PAGE> 18
REPORT FROM LINCOLN CAPITAL
MANAGEMENT COMPANY
GROWTH PORTFOLIO
In each of the past two fiscal years, your Growth Portfolio's return was very
high (over 20%) in the first half and slightly negative in the second half. The
first half of the present fiscal year generated a 26.6% return. It would be nice
if, for a change, the six months ahead were positive as well!
A return of nearly 27% for just six months is extraordinary.
Nevertheless, some large-cap growth benchmarks generated even higher returns.
The Russell 1000 Growth Index and many mutual funds in the large-cap growth
category have a significant sprinkling of mid-cap technology issues, which were
red-hot during the half-year. We fell about 7 to 10 percentage points short of
these benchmarks. Our return did exceed that of the S&P 500/BARRA Growth Index
and, thanks to a strong growth tailwind, we outpaced the S&P 500 Index by 9.1
percentage points.
When a portfolio posts a high return, you're certain to find some big
winners. Our five largest winners, all tech stocks, generated about three-fifths
of the portfolio's return: Cisco Systems, Nokia, Intel, EMC, and Applied
Materials. Yes, we had some losers: Procter & Gamble and its earnings shortfall
cost the portfolio just over 1 percentage point.
In comparison with the Russell 1000 Growth Index, the portfolio's tech
holdings lagged by 3 percentage points, and our communications stocks lagged by
about 2 points. Lincoln normally does not heavily overweight or underweight
industry sectors in comparison with growth indexes. For example, on March 31
technology stocks, as we categorize them, constituted 51% of the portfolio and
about 46% of the Russell 1000 Growth Index. Except for cyclical growth
companies, a group that includes the mega-cap General Electric, no other sector
has a weight over 10%. Reflecting the dramatic transformation that
technology-related stocks have wrought in the market, the Growth Portfolio's
tech-sector weighting has nearly doubled in the past year. Eight of the
portfolio's ten largest holdings are technology stocks. The others are General
Electric and Warner-Lambert (which is being acquired by Pfizer). Three of the
tech stocks are new to the top ten: America Online, Texas Instruments, and Sun
Microsystems.
As noted in our letter six months ago, Lincoln has responded to the
market's extraordinary changes by adding an experienced telecommunications
analyst to its staff. We also are planning to add another tech-stock researcher
and have moved from two analysts to one in the consumer nondurables area. Stock
markets both at home and abroad are being transformed by the surge in technology
innovation and a powerful desire by investors to participate. We believe we have
responded appropriately by repositioning the portfolio, by adapting our
investment process, and by expanding our investment coverage. We will continue
to provide whatever resources are necessary to do the job for you.
John Cole, Portfolio Manager
David Fowler, Portfolio Manager
Parker Hall, Portfolio Manager
April 13, 2000
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.
16
<PAGE> 19
REPORT FROM GRANAHAN INVESTMENT
MANAGEMENT, INC.
SMALL COMPANY GROWTH PORTFOLIO
The Small Company Growth Portfolio gained 70.8% for the six months ended March
31, 2000, well above the returns for both our index benchmark and the average
small-capitalization growth fund.
A renewal of interest in small companies with high growth potential
began in earnest during the second half of calendar 1999, although this interest
was narrowly focused on technology and biotechnology stocks. Internet
infrastructure-building drove up many technology stocks, and progress in
biotechnology, especially the prospect of sequencing the human genome,
heightened interest in this group.
As we noted in our last report, technology and health care are two
important sectors in our portfolio. Together, they represented 47% of assets at
the start of the current fiscal year. During the six months ended March 31, nine
of our top 15 performers were technology companies and six were in health care.
The former included SeaChange (video-on-demand servers and software),
MicroStrategy (marketing software), Macrovision (software copy protection), and
Exchange Applications (marketing software). Among the latter were Medarex
(pharmaceuticals), PE Celera (genomic mapping), and Abgenix (antibody research).
Other important contributors to performance included AstroPower
(photovoltaic electric power), Learning Tree (information-technology training),
and Mettler-Toledo (scales and analytical instruments).
Holdings that hurt our relative performance included Adaptive Broadband
(wireless communications), BSQUARE (software and services for intelligent
computing devices), Isis Pharmaceuticals, and Insight Communications (cable
company).
Near the end of the half-year, the market drew back from the stocks that
had been leading the way, and this is continuing as we write. After valuations
rose to exceptionally high levels during the period, we reduced our holdings in
many stocks from the technology and health-care groups. At the peak, these two
sectors represented 55% of the portfolio, but by March 31, we had cut their
combined weighting to about 42%.
We increased our sector weightings in energy and financial-services
stocks and are looking to do the same in consumer stocks. We raised some cash in
the process of adjusting our holdings, and as of March 31 we had about 15% of
the portfolio's assets in cash investments, providing flexibility to accumulate
stocks at more reasonable prices. Stocks new to the portfolio during the
half-year included Core Labs and Hanover Compressor in energy; the brokerages
Dain Rauscher and Jefferies; and Clayton Homes (manufactured housing), Regis
(hair salons), and ValueVision (TV home shopping) in the consumer group. We see
some interesting opportunities in the trucking area, because higher fuel costs
and driver shortages have reduced stock prices in this group to attractive
levels.
17
<PAGE> 20
Companies we hold are showing earnings acceleration, from a growth rate
of about 15% last September to about 32% currently. We believe the portfolio's
emphasis on companies with high potential for earnings growth positions it well
for the long term.
John J. Granahan, Portfolio Manager
Gary C. Hatton, Assistant Portfolio Manager
Jane M. White, Assistant Portfolio Manager
April 11, 2000
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.
18
<PAGE> 21
REPORT FROM SCHRODER INVESTMENT
MANAGEMENT NORTH AMERICA INC.
INTERNATIONAL PORTFOLIO
The International Portfolio returned 29.2% during the six months ended March 31,
2000. This was ahead of the 17.0% return of the MSCI EAFE Index and the average
return of 27.0% for international stock mutual funds.
The portfolio's exposure to technology, media, and telecommunications
companies--the market's hottest sectors--has been the most important factor in
its performance over the past six months. This is in contrast to the usual
pattern, whereby country exposures have been the most important. Overall, about
43% of the portfolio's investments are in these three sectors: 23% in
technology, 5% in media, and 15% in telecommunications. The EAFE Index has about
32% in the same industries.
The performance of these sectors is being driven by dramatic
technological advances rather than by macroeconomic factors. However, it is
encouraging to note that macroeconomic factors are also supportive of non-U.S.
stock prices at this point. That should help if the "new economy" stocks falter.
Continental Europe is in the sweet spot of the economic cycle. Growth
has broadened to encompass all the major countries. In addition, corporations
are restructuring aggressively, and hostile takeover bids are becoming a feature
of a region that historically had shunned them. About 43% of the portfolio is
invested in Continental Europe, and the outlook seems encouraging.
Some 18% of the portfolio is invested in Japan. We recently have
increased the spread of our holdings there, which had been focused on a small
number of world-class companies. Thanks to another massive wave of government
spending, economic growth in Japan may broaden to domestic companies and rise to
1.5% this year. An expanding economy is the best backdrop for pushing through
the reforms that are desperately needed, but neither the government nor Japanese
companies generally show much real enthusiasm for change. Accordingly, despite
having a more positive near-term view, I remain cautious for the outlook after
this year. Most of our Japanese yen exposure is currently hedged back to U.S.
dollars.
The portfolio has 19% of assets invested in the United Kingdom. Nearly
one-quarter of this is represented by Vodafone, resulting from its successful
bid for Mannesmann. The remainder is invested predominantly in mid-sized
companies that represent outstanding value.
Finally, 16% of the portfolio is invested in the smaller Asian countries
and in Latin America. The former are tremendous beneficiaries of global economic
growth and, particularly, of demand for high-tech products. Most of our holdings
are exporting companies that should prosper if world trade remains buoyant this
year, as we expect. Latin America depends on foreign
19
<PAGE> 22
capital inflows, and our 3% stake there reflects a balance between risk and a
positive near-term outlook.
As I write, markets are volatile. Despite its bias toward "new economy"
companies, the portfolio is diversified. However, there is only modest
protection in the portfolio against a major market swing back to value stocks.
Richard Foulkes
April 17, 2000
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.
20
<PAGE> 23
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. 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 Money Market
Portfolio seeks to preserve the value of your investment at $1 per share, it is
possible to lose money by investing in the portfolio. Note that income returns
can fluctuate, as can the share price of the Short-Term Corporate Portfolio. An
investor's shares in this portfolio, when redeemed, could be worth more or less
that their original cost.
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
TOTAL INVESTMENT RETURNS: MAY 2, 1991-MARCH 31, 2000
---------------------------------------------------------
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 5.1 5.1 4.4
2000** 0.0 2.9 2.9 2.5
---------------------------------------------------------
</TABLE>
* Average Money Market Fund; derived from data provided by Lipper Inc.
**Six months ended March 31, 2000.
See Financial Highlights table on page 54 for dividend information for the past
five years.
SEC 7-Day Annualized Yield (3/31/2000): 5.81%
<TABLE>
<CAPTION>
SHORT-TERM CORPORATE PORTFOLIO
TOTAL INVESTMENT RETURNS: FEBRUARY 8, 1999-MARCH 31, 2000
---------------------------------------------------------------
SHORT-TERM CORPORATE PORTFOLIO LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
---------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 -2.5% 3.6% 1.1% 0.9%
2000** -0.8 3.2 2.4 1.8
---------------------------------------------------------------
</TABLE>
* Lehman 1-5 Year Investment Grade Index.
**Six months ended March 31, 2000.
See Financial Highlights table on page 55 for dividend information since the
portfolio's inception.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 2000
---------------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ----------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Money Market Portfolio 5/2/1991 5.42% 5.51% 0.00% 4.88% 4.88%
Short-Term Corporate Portfolio 2/8/1999 3.24 -- -2.90 5.94 3.04
---------------------------------------------------------------------------------------------------------------------------
</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 return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
HIGH-GRADE BOND PORTFOLIO
TOTAL INVESTMENT RETURNS: APRIL 29, 1991-MARCH 31, 2000
-----------------------------------------------------------
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 -6.3 5.8 -0.5 -0.4
2000** -1.0 3.3 2.3 2.1
-----------------------------------------------------------
</TABLE>
* Lehman Aggregate Bond Index.
**Six months ended March 31, 2000.
See Financial Highlights table on page 55 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, 2000
-----------------------------------------------------------
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 -5.7 8.4 2.7 2.9
2000** -3.7 4.4 0.7 -0.7
-----------------------------------------------------------
</TABLE>
* Lehman High Yield Index.
**Six months ended March 31, 2000.
See Financial Highlights table on page 56 for dividend and capital gains
information since the portfolio's inception.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 2000
----------------------------------------------------------------------------------------------------------------------------
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 1.95% 7.07% 0.54% 6.59% 7.13%
High Yield Bond Portfolio 6/3/1996 -1.10 -- -2.19 8.89 6.70
----------------------------------------------------------------------------------------------------------------------------
</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 return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
TOTAL INVESTMENT RETURNS: MAY 23, 1991-MARCH 31, 2000
----------------------------------------------------------
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 5.8 3.6 9.4 15.4
2000** -2.7 3.6 0.9 11.8
----------------------------------------------------------
</TABLE>
* 65% S&P 500 Index, 35% Lehman Long Corporate AA or Better Bond Index.
**Six months ended March 31, 2000.
See Financial Highlights table on page 56 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
EQUITY INCOME PORTFOLIO
TOTAL INVESTMENT RETURNS: JUNE 7, 1993-MARCH 31, 2000
---------------------------------------------------------
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 7.7 2.7 10.4 27.8
2000* -5.9 2.3 -3.6 17.5
---------------------------------------------------------
</TABLE>
*Six months ended March 31, 2000.
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, 2000
-----------------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ------------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balanced Portfolio 5/23/1991 2.79% 15.06% 8.37% 4.19% 12.56%
Equity Income Portfolio 6/7/1993 -4.04 17.56 11.41 3.42 14.83
-----------------------------------------------------------------------------------------------------------------------------
</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 return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
DIVERSIFIED VALUE PORTFOLIO
TOTAL INVESTMENT RETURNS: FEBRUARY 8, 1999-MARCH 31, 2000
-------------------------------------------------------------
DIVERSIFIED VALUE PORTFOLIO S&P 500
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
-------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 -6.9% 0.0% -6.9% 4.0%
2000* -7.6 1.2 -6.4 17.5
-------------------------------------------------------------
</TABLE>
*Six months ended March 31, 2000.
See Financial Highlights table on page 57 for dividend information since the
portfolio's inception.
<TABLE>
<CAPTION>
EQUITY INDEX PORTFOLIO
TOTAL INVESTMENT RETURNS: APRIL 29, 1991-MARCH 31, 2000
------------------------------------------------------------
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 26.2 1.6 27.8 27.8
2000* 16.3 1.2 17.5 17.5
-------------------------------------------------------------
</TABLE>
*Six months ended March 31, 2000.
See Financial Highlights table on page 58 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 2000
----------------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION -----------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Diversified Value Portfolio 2/8/1999 -14.92% -- -12.37% 1.00% -11.37%
Equity Index Portfolio 4/29/1991 17.88 26.67% 17.07 2.23 19.30
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 27
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 return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
MID-CAP INDEX PORTFOLIO
TOTAL INVESTMENT RETURNS: FEBRUARY 9, 1999-MARCH 31, 2000
-------------------------------------------------------------
MID-CAP INDEX PORTFOLIO S&P*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
-------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 6.5% 0.0% 6.5% 6.0%
2000** 31.9 0.6 32.5 32.1
-------------------------------------------------------------
</TABLE>
* S&P MidCap 400 Index.
**Six months ended March 31, 2000.
See Financial Highlights table on page 58 for dividend and capital gains
information since the portfolio's inception.
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
TOTAL INVESTMENT RETURNS: JUNE 7, 1993-MARCH 31, 2000
------------------------------------------------------------
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 26.5 0.8 27.3 27.8
2000* 25.9 0.7 26.6 17.5
------------------------------------------------------------
</TABLE>
*Six months ended March 31, 2000.
See Financial Highlights table on page 59 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 2000
-----------------------------------------------------------------------------------------------------------------------------
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 39.06% -- 34.80% 0.54% 35.34%
Growth Portfolio 6/7/1993 24.13 29.86% 23.46 1.08 24.54
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 28
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 return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
<TABLE>
<CAPTION>
SMALL COMPANY GROWTH PORTFOLIO
TOTAL INVESTMENT RETURNS: JUNE 3, 1996-MARCH 31, 2000
----------------------------------------------------------
SMALL COMPANY GROWTH PORTFOLIO RUSSELL
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 35.2 0.8 36.0 19.1
2000* 69.9 0.9 70.8 26.8
----------------------------------------------------------
</TABLE>
*Six months ended March 31, 2000.
See Financial Highlights table on page 59 for dividend and capital gains
information since the portfolio's inception.
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
TOTAL INVESTMENT RETURNS: JUNE 3, 1994-MARCH 31, 2000
----------------------------------------------------------
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 20.2 1.8 22.0 31.3
2000* 27.5 1.7 29.2 17.0
----------------------------------------------------------
</TABLE>
*Six months ended March 31, 2000.
See Financial Highlights table on page 60 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
REIT INDEX PORTFOLIO
TOTAL INVESTMENT RETURNS: FEBRUARY 9, 1999-MARCH 31, 2000
-------------------------------------------------------------
REIT INDEX PORTFOLIO REIT INDEX*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
-------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 -1.5% 0.0% -1.5% -1.5%
2000** -0.5 2.4 1.9 1.9
-------------------------------------------------------------
</TABLE>
* Morgan Stanley REIT Index.
**Six months ended March 31, 2000.
See Financial Highlights table on page 60 for dividend and capital gains
information since the portfolio's inception.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 2000
-----------------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION ------------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Small Company Growth Portfolio 6/3/1996 102.98% -- 22.73% 0.61% 23.34%
International Portfolio 6/3/1994 35.03 16.93% 13.22 1.42 14.64
REIT Index Portfolio 2/9/1999 2.90 -- -1.76 2.05 0.29
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 29
PORTFOLIO PROFILE
MONEY MARKET PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 2000. Key elements of this Profile are defined below and on page 28.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
--------------------------------------------------------------
<S> <C>
Yield 5.8%
Average Maturity 57 days
Average Quality Aa1
Expense Ratio 0.18%*
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY
(% OF PORTFOLIO)
---------------------------------------------------------
<S> <C>
Treasury/Agency 17.5%
Aaa 11.9
Aa 51.3
A 19.3
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 28.9%
Commercial Paper 47.8
Treasury/Agency 17.5
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.
27
<PAGE> 30
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.
28
<PAGE> 31
PORTFOLIO PROFILE
SHORT-TERM CORPORATE PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 2000, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 27 and 28.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
-------------------------------------------------------------
SHORT-TERM LEHMAN
CORPORATE INDEX*
-------------------------------------------------------------
<S> <C> <C>
Number of Issues 167 5,566
Yield 7.2% 6.9%
Yield to Maturity 7.5% 7.2%
Average Coupon 6.9% 6.8%
Average Maturity 2.4 years 8.9 years
Average Quality A2 Aaa
Average Duration 2.1 years 4.9 years
Expense Ratio 0.26%** --
Cash Reserves 3.2% --
</TABLE>
* Lehman Aggregate Bond Index.
**Annualized.
<TABLE>
<CAPTION>
INVESTMENT FOCUS
--------------------------------------------------------
<S> <C>
AVERAGE MATURITY Short
CREDIT QUALITY Investment-Grade Corporate
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY
(% OF PORTFOLIO)
---------------------------------------------------------
<S> <C>
Under 1 Year 15.6%
1-3 Years 42.4
3-5 Years 29.3
Over 5 Years 12.7
---------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY
(% OF PORTFOLIO)
---------------------------------------------------------
<S> <C>
Treasury/Agency 3.6%
Aaa 18.8
Aa 11.5
A 35.5
Baa 30.6
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 18.2%
Commercial Mortgage-Backed 0.0
Finance 25.2
Foreign 9.7
Government Mortgage-Backed 0.0
Industrial 26.0
Treasury/Agency 3.6
Utilities 16.8
Other 0.5
-----------------------------------------------------------
Total 100.0%
</TABLE>
29
<PAGE> 32
PORTFOLIO PROFILE
HIGH-GRADE BOND PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 2000, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 27 and 28.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
-------------------------------------------------------------
HIGH-GRADE LEHMAN
BOND INDEX*
-------------------------------------------------------------
<S> <C> <C>
Number of Issues 334 5,566
Yield 7.2% 6.9%
Yield to Maturity 7.2% 7.2%
Average Coupon 7.2% 6.8%
Average Maturity 9.2 years 8.9 years
Average Quality Aa1 Aaa
Average Duration 4.9 years 4.9 years
Expense Ratio 0.20%** --
Cash Reserves 1.2% --
</TABLE>
* Lehman Aggregate Bond Index.
**Annualized.
<TABLE>
<CAPTION>
INVESTMENT FOCUS
-------------------------------------------------------------
<S> <C>
AVERAGE MATURITY Medium
CREDIT QUALITY Treasury/Agency
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
-------------------------------------------------------------
HIGH-GRADE LEHMAN
BOND INDEX*
-------------------------------------------------------------
<S> <C> <C>
R-Squared 0.99 1.00
Beta 1.00 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY
(% OF PORTFOLIO)
----------------------------------------------------------
<S> <C>
Treasury/Agency 23.6%
Aaa 41.7
Aa 7.0
A 12.5
Baa 15.2
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 2.8%
1-5 Years 31.4
5-10 Years 45.6
10-20 Years 6.6
20-30 Years 12.7
Over 30 Years 0.9
----------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER
(% OF PORTFOLIO)
----------------------------------------------------------
<S> <C>
Asset-Backed 5.8%
Commercial Mortgage-Backed 0.0
Finance 12.7
Foreign 5.5
Government Mortgage-Backed 34.5
Industrial 11.7
Treasury/Agency 23.6
Utilities 6.2
----------------------------------------------------------
Total 100.0%
</TABLE>
30
<PAGE> 33
PORTFOLIO PROFILE
HIGH YIELD BOND PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 2000, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 27 and 28.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
---------------------------------------------------------------
HIGH YIELD LEHMAN
BOND INDEX*
---------------------------------------------------------------
<S> <C> <C>
Number of Issues 176 5,566
Yield 10.1% 6.9%
Yield to Maturity 10.5% 7.2%
Average Coupon 9.1% 6.8%
Average Maturity 7.4 years 8.9 years
Average Quality Ba3 Aaa
Average Duration 4.0 years 4.9 years
Expense Ratio 0.26%** --
Cash Reserves 4.0% --
</TABLE>
* Lehman Aggregate Bond Index.
**Annualized.
<TABLE>
<CAPTION>
INVESTMENT FOCUS
----------------------------------------------------------
<S> <C>
AVERAGE MATURITY Medium
CREDIT QUALITY Below Investment Grade
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
------------------------------------------------------------
HIGH YIELD LEHMAN
BOND INDEX*
------------------------------------------------------------
<S> <C> <C>
R-Squared 0.11 1.00
Beta 0.51 1.00
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY
(% OF PORTFOLIO)
----------------------------------------------------------
<S> <C>
Treasury/Agency 0.0%
Aaa 0.0
Aa 0.0
A 0.0
Baa 8.7
Ba 38.4
B 52.8
Caa 0.1
Not Rated 0.0
----------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY
(% OF PORTFOLIO)
----------------------------------------------------------
<S> <C>
Under 1 Year 1.5%
1-5 Years 8.5
5-10 Years 86.7
10-20 Years 3.3
20-30 Years 0.0
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 3.9
Foreign 0.0
Government Mortgage-Backed 0.0
Industrial 90.8
Treasury/Agency 0.0
Utilities 5.3
----------------------------------------------------------
Total 100.0%
</TABLE>
31
<PAGE> 34
PORTFOLIO PROFILE
BALANCED PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 2000, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 27 and 28.
<TABLE>
<CAPTION>
TOTAL PORTFOLIO CHARACTERISTICS
----------------------------------------------------------
<S> <C>
Yield 4.0%
Turnover Rate 24%*
Expense Ratio 0.26%*
Cash Reserves 1.8%
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
PORTFOLIO ASSET ALLOCATION
----------------------------------------------------------
<S> <C>
STOCKS 68%
BONDS 30%
CASH RESERVES 2%
</TABLE>
<TABLE>
<CAPTION>
TOTAL PORTFOLIO
VOLATILITY MEASURES
------------------------------------------------------------
BALANCED S&P 500
------------------------------------------------------------
<S> <C> <C>
R-Squared 0.79 1.00
Beta 0.60 1.00
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST STOCKS
(% OF EQUITIES)
----------------------------------------------------------
<S> <C>
Citigroup, Inc. 3.2%
Pharmacia & Upjohn, Inc. 3.2
Alcoa Inc. 3.2
International Business Machines Corp. 2.6
Marsh & McLennan Cos., Inc. 2.4
CIGNA Corp. 2.3
Hewlett-Packard Co. 2.2
Dow Chemical Co. 2.1
Kimberly-Clark Corp. 2.0
Bell Atlantic Corp. 2.0
----------------------------------------------------------
Top Ten 25.2%
----------------------------------------------------------
Top Ten as % of Total Net Assets 17.1%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
--------------------------------------------------------------------------------------------------
MARCH 31, 1999 MARCH 31, 2000
------------------------------------------------------------
BALANCED BALANCED S&P 500
------------------------------------------------------------
<S> <C> <C> <C>
Auto & Transportation ............... 11.2% 9.2% 1.9%
Consumer Discretionary .............. 6.7 6.8 12.5
Consumer Staples .................... 2.5 2.8 5.0
Financial Services .................. 16.7 17.8 13.5
Health Care ......................... 10.8 9.6 9.0
Integrated Oils ..................... 10.6 9.8 4.6
Other Energy ........................ 2.1 2.3 1.7
Materials & Processing .............. 14.3 13.6 2.5
Producer Durables ................... 7.8 8.5 4.0
Technology .......................... 5.6 6.6 29.4
Utilities ........................... 8.7 8.1 9.7
Other ............................... 3.0 4.9 6.2
--------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 35
PORTFOLIO PROFILE (continued)
<TABLE>
<CAPTION>
EQUITY CHARACTERISTICS
-------------------------------------------------------------
BALANCED S&P 500
-------------------------------------------------------------
<S> <C> <C>
Number of Stocks 102 500
Median Market Cap $25.3B $94.4B
Price/Earnings Ratio 17.7x 28.7x
Price/Book Ratio 2.5x 5.7x
Dividend Yield 2.6% 1.1%
Return on Equity 18.7% 24.2%
Earnings Growth Rate 10.4% 16.4%
Foreign Holdings 12.3% 1.2%
</TABLE>
<TABLE>
<CAPTION>
EQUITY INVESTMENT FOCUS
----------------------------------------------------------
<S> <C>
STYLE Value
MARKET CAP Large
</TABLE>
<TABLE>
<CAPTION>
FIXED-INCOME CHARACTERISTICS
-------------------------------------------------------------
LEHMAN
BALANCED INDEX*
-------------------------------------------------------------
<S> <C> <C>
Number of Bonds 101 5,566
Yield to Maturity 7.6% 7.2%
Average Coupon 7.0% 6.8%
Average Maturity 12.5 years 8.9 years
Average Quality A1 Aaa
Average Duration 6.7 years 4.9 years
</TABLE>
*Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
FIXED-INCOME INVESTMENT FOCUS
----------------------------------------------------------
<S> <C>
AVERAGE MATURITY Long
CREDIT QUALITY Investment-Grade Corporate
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY ISSUER
(% OF BONDS)
----------------------------------------------------------
<S> <C>
Asset-Backed 0.0%
Commercial Mortgage-Backed 1.2
Finance 27.1
Foreign 9.1
Government Mortgage-Backed 0.0
Industrial 33.1
Treasury/Agency 8.0
Utilities 21.5
----------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY
(% OF BONDS)
----------------------------------------------------------
<S> <C>
Treasury/Agency 8.0%
Aaa 9.0
Aa 21.7
A 43.7
Baa 16.7
Ba 0.9
B 0.0
Not Rated 0.0
----------------------------------------------------------
Total 100.0%
</TABLE>
33
<PAGE> 36
PORTFOLIO PROFILE
EQUITY INCOME PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 2000, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 27 and 28.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
------------------------------------------------------------
EQUITY INCOME S&P 500
------------------------------------------------------------
<S> <C> <C>
Number of Stocks 112 500
Median Market Cap $42.0B $94.4B
Price/Earnings Ratio 19.2x 28.7x
Price/Book Ratio 3.5x 5.7x
Yield 2.6% 1.1%
Return on Equity 22.5% 24.2%
Earnings Growth Rate 7.4% 16.4%
Foreign Holdings 7.0% 1.2%
Turnover Rate 12%* --
Expense Ratio 0.30%* --
Cash Reserves 1.0% --
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
INVESTMENT FOCUS
------------------------------------------------------------
<S> <C>
STYLE Value
MARKET CAP Large
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
-------------------------------------------------------------
EQUITY INCOME S&P 500
-------------------------------------------------------------
<S> <C> <C>
R-Squared 0.72 1.00
Beta 0.75 1.00
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS
(% OF TOTAL NET ASSETS)
------------------------------------------------------------
<S> <C>
Exxon Mobil Corp. 5.5%
Bristol-Myers Squibb Co. 3.6
SBC Communications Inc. 3.4
Bell Atlantic Corp. 3.3
AT&T Corp. 3.3
American Home Products Corp. 2.8
Pharmacia & Upjohn, Inc. 2.5
BP Amoco PLC ADR 2.5
Bank of America Corp. 2.4
Chevron Corp. 2.2
------------------------------------------------------------
Top Ten 31.5%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
--------------------------------------------------------------------------------------------------
MARCH 31, 1999 MARCH 31, 2000
----------------------------------------------------------
EQUITY INCOME EQUITY INCOME S&P 500
----------------------------------------------------------
<S> <C> <C> <C>
Auto & Transportation ............... 2.8% 2.7% 1.9%
Consumer Discretionary .............. 5.3 5.5 12.5
Consumer Staples .................... 8.6 9.9 5.0
Financial Services .................. 19.4 17.5 13.5
Health Care ......................... 14.1 16.0 9.0
Integrated Oils ..................... 17.0 16.1 4.6
Other Energy ........................ 0.7 1.0 1.7
Materials & Processing .............. 4.3 4.4 2.5
Producer Durables ................... 2.4 3.2 4.0
Technology .......................... 0.0 0.0 29.4
Utilities ........................... 23.4 19.9 9.7
Other ............................... 2.0 3.8 6.2
--------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE> 37
PORTFOLIO PROFILE
DIVERSIFIED VALUE PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 2000, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 27 and 28.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
---------------------------------------------------------------
DIVERSIFIED S&P
VALUE 500
---------------------------------------------------------------
<S> <C> <C>
Number of Stocks 48 500
Median Market Cap $10.9B $94.4B
Price/Earnings Ratio 14.4x 28.7x
Price/Book Ratio 2.0x 5.7x
Yield 2.6% 1.1%
Return on Equity 16.2% 24.2%
Earnings Growth Rate 8.8% 16.4%
Foreign Holdings 1.3% 1.2%
Turnover Rate 19%* --
Expense Ratio 0.39%* --
Cash Reserves 6.2% --
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
INVESTMENT FOCUS
------------------------------------------------------------
<S> <C>
STYLE Value
MARKET CAP Large
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS
(% OF TOTAL NET ASSETS)
------------------------------------------------------------
<S> <C>
Baker Hughes, Inc. 4.2%
Schlumberger Ltd. 3.9
Williams Cos., Inc. 3.6
The Chase Manhattan Corp. 3.4
XL Capital Ltd. Class A 3.1
Occidental Petroleum Corp. 3.1
Allstate Corp. 3.0
Honeywell International Inc. 3.0
GTE Corp. 3.0
Atlantic Richfield Co. 3.0
------------------------------------------------------------
Top Ten 33.3%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
---------------------------------------------------------------------------------------------------------------------
MARCH 31, 1999 MARCH 31, 2000
-----------------------------------------------------------
DIVERSIFIED VALUE DIVERSIFIED VALUE S&P 500
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Auto & Transportation 3.6% 3.4% 1.9%
Consumer Discretionary 11.2 12.6 12.5
Consumer Staples 6.2 2.0 5.0
Financial Services 30.7 26.6 13.5
Health Care 0.0 0.7 9.0
Integrated Oils 2.4 9.5 4.6
Other Energy 10.0 14.8 1.7
Materials & Processing 4.5 8.7 2.5
Producer Durables 6.2 0.0 4.0
Technology 0.0 0.0 29.4
Utilities 15.2 15.6 9.7
Other 10.0 6.1 6.2
---------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 38
PORTFOLIO PROFILE
EQUITY INDEX PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 2000, compared where appropriate to its unmanaged target index. Key elements
of this Profile are defined on pages 27 and 28.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
----------------------------------------------------------
EQUITY INDEX S&P 500
----------------------------------------------------------
<S> <C> <C>
Number of Stocks 509 500
Median Market Cap $94.4B $94.4B
Price/Earnings Ratio 28.7x 28.7x
Price/Book Ratio 5.7x 5.7x
Yield 1.0% 1.1%
Return on Equity 24.2% 24.2%
Earnings Growth Rate 16.4% 16.4%
Foreign Holdings 1.2% 1.2%
Turnover Rate 12%* --
Expense Ratio 0.17%* --
Cash Reserves 0.0% --
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
INVESTMENT FOCUS
-------------------------------------
<S> <C>
STYLE Blend
MARKET CAP Large
</TABLE>
<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%
Cisco Systems, Inc. 4.1
General Electric Co. 4.0
Intel Corp. 3.5
Exxon Mobil Corp. 2.1
Wal-Mart Stores, Inc. 1.9
Oracle Corp. 1.7
International Business Machines Corp. 1.7
Citigroup, Inc. 1.6
Lucent Technologies, Inc. 1.5
-------------------------------------------------------
Top Ten 26.4%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
--------------------------------------------------------------------------------
MARCH 31, 1999 MARCH 31, 2000
-------------------------------------------------
EQUITY INDEX EQUITY INDEX S&P 500
-------------------------------------------------
<S> <C> <C> <C>
Auto & Transportation 2.5% 1.9% 1.9%
Consumer Discretionary 13.2 12.5 12.5
Consumer Staples 8.3 5.0 5.0
Financial Services 16.7 13.5 13.5
Health Care 12.4 9.0 9.0
Integrated Oils 5.1 4.6 4.6
Other Energy 1.1 1.7 1.7
Materials & Processing 3.3 2.6 2.5
Producer Durables 3.1 4.0 4.0
Technology 17.3 29.3 29.4
Utilities 11.1 9.7 9.7
Other 5.9 6.2 6.2
</TABLE>
--------------------------------------------------------------------------------
36
<PAGE> 39
PORTFOLIO PROFILE
MID-CAP INDEX PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 2000, compared where appropriate to its unmanaged target index. Key elements
of this Profile are defined on pages 27 and 28.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
----------------------------------------------------------
MID-CAP INDEX S&P*
----------------------------------------------------------
<S> <C> <C>
Number of Stocks 403 400
Median Market Cap $3.6B $3.6B
Price/Earnings Ratio 22.6x 22.6x
Price/Book Ratio 3.3x 3.3x
Yield 0.6% 1.0%
Return on Equity 16.7% 16.7%
Earnings Growth Rate 16.3% 16.3%
Foreign Holdings 0.0% 0.0%
Turnover Rate 52%** --
Expense Ratio 0.36%** --
Cash Reserves 0.0% --
</TABLE>
*S&P MidCap 400 Index.
**Annualized.
<TABLE>
<CAPTION>
INVESTMENT FOCUS
--------------------------------
<S> <C>
STYLE Blend
MARKET CAP Medium
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS
(% OF TOTAL NET ASSETS)
-------------------------------------------------------
<S> <C>
Siebel Systems, Inc. 2.4%
Maxim Integrated Products, Inc. 2.1
Altera Corp. 1.9
Vitesse Semiconductor Corp. 1.6
MedImmune Inc. 1.2
Univision Communications Inc. 1.2
Atmel Corp. 1.2
Intuit, Inc. 1.1
QLogic Corp. 1.0
Chiron Corp. 0.9
-------------------------------------------------------
Top Ten 14.6%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
--------------------------------------------------------------------------------
MARCH 31, 1999 MARCH 31, 2000
---------------------------------------------------
MID-CAP INDEX MID-CAP INDEX S&P MIDCAP 400
--------------------------------------------------
<S> <C> <C> <C>
Auto & Transportation 4.8% 2.2% 2.1%
Consumer Discretionary 17.2 17.0 16.0
Consumer Staples 4.3 3.1 2.9
Financial Services 17.4 13.8 12.9
Health Care 9.9 9.9 9.2
Integrated Oils 0.5 0.3 0.3
Other Energy 4.3 7.2 6.8
Materials & Processing 6.7 5.6 5.3
Producer Durables 6.3 4.8 4.4
Technology 14.1 25.2 30.2
Utilities 12.4 9.8 9.1
Other 2.1 1.1 0.8
--------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 40
PORTFOLIO PROFILE
GROWTH PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 2000, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 27 and 28.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
-----------------------------------------------------------
GROWTH S&P 500
-----------------------------------------------------------
<S> <C> <C>
Number of Stocks 67 500
Median Market Cap $128.6B $94.4B
Price/Earnings Ratio 51.6x 28.7x
Price/Book Ratio 12.7x 5.7x
Yield 0.2% 1.1%
Return on Equity 28.7% 24.2%
Earnings Growth Rate 22.1% 16.4%
Foreign Holdings 2.6% 1.2%
Turnover Rate 65%* --
Expense Ratio 0.32%* --
Cash Reserves 0.6% --
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
INVESTMENT FOCUS
---------------------------------------
<S> <C>
STYLE Growth
MARKET CAP Large
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
----------------------------------------------------------
GROWTH S&P 500
----------------------------------------------------------
<S> <C> <C>
R-Squared 0.91 1.00
Beta 1.00 1.00
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS
(% OF TOTAL NET ASSETS)
-------------------------------------------------------
<S> <C>
Cisco Systems, Inc. 9.3%
General Electric Co. 6.0
Microsoft Corp. 5.2
Intel Corp. 3.8
EMC Corp. 3.6
America Online, Inc. 3.4
Texas Instruments, Inc. 3.0
Lucent Technologies, Inc. 3.0
Warner-Lambert Co. 2.9
Sun Microsystems, Inc. 2.8
-------------------------------------------------------
Top Ten 43.0%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
--------------------------------------------------------------------------------
MARCH 31, 1999 MARCH 31, 2000
----------------------------------------------------
GROWTH GROWTH S&P 500
----------------------------------------------------
<S> <C> <C> <C>
Auto & Transportation 0.0% 0.0% 1.9%
Consumer Discretionary 11.8 11.6 12.5
Consumer Staples 14.2 7.6 5.0
Financial Services 12.1 8.2 13.5
Health Care 23.4 9.3 9.0
Integrated Oils 0.0 0.0 4.6
Other Energy 0.0 0.0 1.7
Materials & Processing 0.7 0.6 2.5
Producer Durables 2.8 4.8 4.0
Technology 26.2 43.4 29.4
Utilities 0.0 3.8 9.7
Other 8.8 10.7 6.2
</TABLE>
38
<PAGE> 41
PORTFOLIO PROFILE
SMALL COMPANY GROWTH PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 2000, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 27 and 28.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
----------------------------------------------------------
SMALL COMPANY RUSSELL
GROWTH 2000
----------------------------------------------------------
<S> <C> <C>
Number of Stocks 145 1,802
Median Market Cap $1.2B $1.0B
Price/Earnings Ratio 26.2x 18.5x
Price/Book Ratio 4.2x 2.8x
Yield 0.9% 1.2%
Return on Equity 13.5% 13.2%
Earnings Growth Rate 21.3% 12.8%
Foreign Holdings 1.6% 0.0%
Turnover Rate 157%* --
Expense Ratio 0.49%* --
Cash Reserves 14.8% --
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
INVESTMENT FOCUS
--------------------------------------
<S> <C>
STYLE Growth
MARKET CAP Small
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
-----------------------------------------------------------
SMALL COMPANY
GROWTH S&P 500
-----------------------------------------------------------
<S> <C> <C>
R-Squared 0.35 1.00
Beta 0.84 1.00
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS
(% OF TOTAL NET ASSETS)
-------------------------------------------------------
<S> <C>
Burr-Brown Corp. 2.1%
Linens 'n Things, Inc. 1.8
Investment Technology Group, Inc. 1.5
Equity Residential Properties Trust REIT 1.5
Mettler-Toledo International Inc. 1.4
Core Laboratories N.V. 1.4
SeaChange International, Inc. 1.3
Macrovision Corp. 1.3
Vertex Pharmaceuticals, Inc. 1.3
Sun Communities, Inc. REIT 1.3
-------------------------------------------------------
Top Ten 14.9%
</TABLE>
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
--------------------------------------------------------------------------------
MARCH 31, 1999 MARCH 31, 2000
---------------------------------------------------
SMALL COMPANY SMALL COMPANY RUSSELL
GROWTH GROWTH 2000
---------------------------------------------------
<S> <C> <C> <C>
Auto & Transportation 5.2% 4.9% 2.8%
Consumer Discretionary 26.0 17.5 14.6
Consumer Staples 1.1 1.6 1.9
Financial Services 9.4 10.5 15.6
Health Care 14.2 18.1 11.0
Integrated Oils 0.0 0.0 0.0
Other Energy 2.2 5.3 3.6
Materials & Processing 4.0 3.1 7.1
Producer Durables 9.7 12.5 9.5
Technology 24.9 26.5 27.5
Utilities 2.9 0.0 5.7
Other 0.4 0.0 0.7
--------------------------------------------------------------------------------
</TABLE>
39
<PAGE> 42
PORTFOLIO PROFILE
INTERNATIONAL PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 2000, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 27 and 28.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
----------------------------------------------------------
INTERNATIONAL MSCI EAFE
----------------------------------------------------------
<S> <C> <C>
Number of Stocks 143 967
Turnover Rate 36%* --
Expense Ratio 0.42%* --
Cash Reserves 4.2% --
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
PORTFOLIO ALLOCATION
-----------------------------------
<S> <C>
EUROPE 64%
EMERGING MARKETS 13%
PACIFIC 23%
</TABLE>
<TABLE>
<CAPTION>
VOLATILITY MEASURES
----------------------------------------------------------
INTERNATIONAL MSCI EAFE
----------------------------------------------------------
<S> <C> <C>
R-Squared 0.90 1.00
Beta 1.00 1.00
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS
(% OF TOTAL NET ASSETS)
-------------------------------------------------------
<S> <C>
Vodafone Airtouch PLC 4.3%
Murata Manufacturing Co., Ltd. 3.5
Samsung Electronics Co., Ltd. 3.3
Philips Electronics NV 3.2
Total Fina SA B Shares 3.0
Vivendi 2.8
ING Groep NV 2.6
Fuji Photo Film Co., Ltd. 2.5
Takeda Chemical Industries Ltd. 2.1
Nokia Oyj 2.0
-------------------------------------------------------
Top Ten 29.3%
</TABLE>
40
<PAGE> 43
PORTFOLIO PROFILE (continued)
<TABLE>
<CAPTION>
COUNTRY DIVERSIFICATION (% OF COMMON STOCKS)
--------------------------------------------------------------------------------
MARCH 31, 1999 MARCH 31, 2000
-----------------------------------------------------------
INTERNATIONAL INTERNATIONAL MSCI EAFE
-----------------------------------------------------------
<S> <C> <C> <C>
Argentina 0.2% 0.0% 0.0%
Australia 1.8 0.2 2.3
Austria 0.0 0.0 0.2
Belgium 1.6 0.0 0.7
Brazil 0.7 2.0 0.0
Denmark 0.7 0.4 0.8
Finland 0.0 2.1 3.3
France 14.5 14.9 10.6
Germany 5.1 3.4 9.5
Hong Kong 0.8 2.5 2.3
Ireland 1.6 1.4 0.4
Italy 9.7 4.8 4.1
Japan 13.6 18.8 27.9
Malaysia 0.4 1.3 0.0
Mexico 0.8 1.5 0.0
Netherlands 10.2 9.5 5.0
New Zealand 0.0 0.0 0.1
Norway 0.0 0.0 0.3
Philippines 0.7 0.0 0.0
Portugal 0.0 0.0 0.5
Singapore 1.1 1.7 0.8
South Korea 1.6 4.6 0.0
Spain 3.8 1.0 2.8
Sweden 2.9 3.5 3.2
Switzerland 9.2 3.6 5.3
Taiwan 0.0 3.5 0.0
United Kingdom 19.0 19.3 19.9
--------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0%
--------------------------------------------------------------------------------
</TABLE>
41
<PAGE> 44
PORTFOLIO PROFILE
REIT INDEX PORTFOLIO
This Profile provides a snapshot of the portfolio's characteristics as of March
31, 2000, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on pages 27 and 28.
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
----------------------------------------------------------
REIT INDEX S&P 500
----------------------------------------------------------
<S> <C> <C>
Number of Stocks 130 500
Median Market Cap $1.6B $94.4B
Price/Earnings Ratio 13.9x 28.7x
Price/Book Ratio 1.2x 5.7x
Dividend Yield 8.3%* 1.1%
Return on Equity 12.2% 24.2%
Earnings Growth Rate 16.2% 16.4%
Foreign Holdings 0.0% 1.2%
Turnover Rate 6%** --
Expense Ratio 0.40%** --
Cash Reserves 2.8% --
</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.
<TABLE>
<CAPTION>
INVESTMENT FOCUS
----------------------------------------
<S> <C>
STYLE Value
MARKET Small
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO ALLOCATION
BY REIT TYPE
-------------------------------------------------------
<S> <C>
Retail 21.6%
Apartments 21.4
Office 20.4
Industrial 16.2
Diversified 12.6
Hotels 7.8
-------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS
(% OF TOTAL NET ASSETS)
-------------------------------------------------------
<S> <C>
Equity Office Properties Trust REIT 5.6%
Equity Residential Properties Trust REIT 4.5
Simon Property Group, Inc. REIT 3.7
ProLogis Trust REIT 2.8
Spieker Properties, Inc. REIT 2.6
Public Storage, Inc. REIT 2.6
Vornado Realty Trust REIT 2.5
Archstone Communities Trust REIT 2.5
Apartment Investment & Management
Co. Class A REIT 2.2
Duke Realty Investments, Inc. REIT 2.1
-------------------------------------------------------
Top Ten 31.1%
</TABLE>
42
<PAGE> 45
FINANCIAL STATEMENTS
MARCH 31, 2000 (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 ENDED MARCH 31, 2000
--------------------------------------------------------------------
(000) (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends -- -- -- --
Interest $21,648 $1,228 $11,148 $6,580
Security Lending -- 2 1 5
--------------------------------------------------------------------
Total Income 21,648 1,230 11,149 6,585
--------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee 42 2 19 43
Performance Adjustment -- -- -- --
The Vanguard Group--Note C
Management and Administrative 526 38 250 126
Marketing and Distribution 68 2 20 10
Custodian Fees 13 2 24 1
Auditing Fees 5 4 5 5
Shareholders' Reports 7 1 6 3
Trustees' Fees and Expenses -- -- -- --
--------------------------------------------------------------------
Total Expenses 661 49 324 188
Expenses Paid Indirectly--Note D (2) -- -- (1)
--------------------------------------------------------------------
Net Expenses 659 49 324 187
------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 20,989 1,181 10,825 6,398
------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold 5 (78) (1,864) (1,823)
Futures Contracts -- 59 -- --
Foreign Currencies and Forward Currency Contracts -- -- -- --
------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) 5 (19) (1,864) (1,823)
------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities -- (183) (1,475) (3,348)
Futures Contracts -- (87) -- --
Foreign Currencies and Forward Currency Contracts -- -- -- --
------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) -- (270) (1,475) (3,348)
------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $20,994 $ 892 $ 7,486 $1,227
========================================================================================================================
</TABLE>
43
<PAGE> 46
STATEMENT OF OPERATIONS (continued)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
EQUITY DIVERSIFIED EQUITY
BALANCED INCOME VALUE INDEX
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31, 2000
--------------------------------------------------------------------
(000) (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends $ 5,200 $ 5,324 $ 472 $ 8,764
Interest 7,100 59 37 183
Security Lending 56 1 -- 14
--------------------------------------------------------------------
Total Income 12,356 5,384 509 8,961
--------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee 265 193 20 17
Performance Adjustment (52) --- (3) --
The Vanguard Group--Note C
Management and Administrative 456 345 32 1,118
Marketing and Distribution 33 26 3 82
Custodian Fees 5 18 8 19
Auditing Fees 5 5 5 6
Shareholders' Reports 10 9 1 16
Trustees' Fees and Expenses -- -- -- 1
--------------------------------------------------------------------
Total Expenses 722 596 66 1,259
Expenses Paid Indirectly--Note D (3) -- -- --
--------------------------------------------------------------------
Net Expenses 719 596 66 1,259
------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 11,637 4,788 443 7,702
------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold 10,609 6,508 (4,279) (6,911)
Futures Contracts -- -- -- 1,462
Foreign Currencies and Forward Currency Contracts -- -- -- --
------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) 10,609 6,508 (4,279) (5,449)
------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)
Investment Securities (17,738) (27,138) 1,380 237,890
Futures Contracts -- -- -- 53
Foreign Currencies and Forward Currency Contracts -- -- -- --
------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) (17,738) (27,138) 1,380 237,943
------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 4,508 $(15,842) $(2,456) $240,196
========================================================================================================================
</TABLE>
44
<PAGE> 47
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
SMALL
MID-CAP COMPANY
INDEX GROWTH GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31, 2000
--------------------------------------------------------------------
(000) (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends $ 440 $ 2,983 $ 791 $ 1,675*
Interest 16 560 1,101 459
Security Lending 1 1 113 28
--------------------------------------------------------------------
Total Income 457 3,544 2,005 2,162
--------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee 11 856 241 218
Performance Adjustment -- -- 55 --
The Vanguard Group--Note C
Management and Administrative 106 828 412 363
Marketing and Distribution 4 59 11 16
Custodian Fees 11 9 7 106
Auditing Fees 4 6 5 5
Shareholders' Reports 2 14 5 8
Trustees' Fees and Expenses -- 1 -- --
--------------------------------------------------------------------
Total Expenses 138 1,773 736 716
Expenses Paid Indirectly--Note D -- -- -- --
--------------------------------------------------------------------
Net Expenses 138 1,773 736 716
------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 319 1,771 1,269 1,446
------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold 6,247 68,343 92,271 5,173
Futures Contracts 29 -- -- --
Foreign Currencies and Forward Currency Contracts -- -- -- (952)
------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) 6,276 68,343 92,271 4,221
------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)
Investment Securities 15,621 187,196 38,627 80,712
Futures Contracts 30 -- -- --
Foreign Currencies and Forward Currency Contracts -- -- -- (2,122)
------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) 15,651 187,196 38,627 78,590
------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $22,246 $257,310 $132,167 $84,257
========================================================================================================================
</TABLE>
*Dividends are net of foreign withholding taxes of $162,000.
45
<PAGE> 48
STATEMENT OF OPERATIONS (continued)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
REIT INDEX
PORTFOLIO
SIX MONTHS ENDED MARCH 31, 2000
(000)
--------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
INCOME
Dividends $841
Interest 14
Security Lending 1
------
Total Income 856
------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee 11
Performance Adjustment --
The Vanguard Group--Note C
Management and Administrative 28
Marketing and Distribution 1
Custodian Fees 2
Auditing Fees 4
Shareholders' Reports 1
Trustees' Fees and Expenses --
------
Total Expenses 47
Expenses Paid Indirectly--Note D --
------
Net Expenses 47
--------------------------------------------------------------------------------
NET INVESTMENT INCOME 809
--------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold 82
Futures Contracts --
Foreign Currencies and Forward Currency Contracts --
--------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) 82
--------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities (330)
Futures Contracts --
Foreign Currencies and Forward Currency Contracts --
--------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) (330)
--------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $561
================================================================================
</TABLE>
46
<PAGE> 49
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
Coporate, 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 SIX MONTHS
ENDED ENDED ENDED FEB. 8* TO
MAR. 31, 2000 SEP. 30, 1999 MAR. 31, 2000 SEP. 30, 1999
(000) (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 20,989 $ 30,807 $ 1,181 $ 695
Realized Net Gain (Loss) 5 (7) (19) (15)
Change in Unrealized Appreciation (Depreciation) -- -- (270) (400)
----------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 20,994 30,800 892 280
----------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (20,989) (30,807) (1,181) (695)
Realized Capital Gain -- -- -- --
----------------------------------------------------------------------
Total Distributions (20,989) (30,807) (1,181) (695)
----------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 508,943 725,646 27,933 36,778
Issued in Lieu of Cash Distributions 20,989 30,807 1,181 695
Redeemed (449,794) (624,080) (10,143) (8,139)
----------------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 80,138 132,373 18,971 29,334
------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 80,143 132,366 18,682 28,919
------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 722,548 590,182 28,919 --
----------------------------------------------------------------------
End of Period $802,691 $722,548 $47,601 $28,919
========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 508,943 725,646 2,882 3,721
Issued in Lieu of Cash Distributions 20,989 30,807 122 71
Redeemed (449,794) (624,080) (1,047) (827)
----------------------------------------------------------------------
Net Increase (Decrease) in
Shares Outstanding 80,138 132,373 1,957 2,965
========================================================================================================================
</TABLE>
*Commencement of operations.
47
<PAGE> 50
STATEMENT OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
HIGH-GRADE HIGH YIELD
BOND PORTFOLIO BOND PORTFOLIO
-------------------------------- ------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAR. 31, 2000 SEP. 30, 1999 MAR. 31, 2000 SEP. 30, 1999
(000) (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 10,825 $ 20,683 $ 6,398 $ 12,653
Realized Net Gain (Loss) (1,864) (1,277) (1,823) (5,546)
Change in Unrealized Appreciation (Depreciation) (1,475) (21,106) (3,348) (3,123)
---------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 7,486 (1,700) 1,227 3,984
---------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (10,825) (20,683) (6,398) (12,653)
Realized Capital Gain -- (909) -- (227)
---------------------------------------------------------------------
Total Distributions (10,825) (21,592) (6,398) (12,880)
---------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 45,161 163,151 22,014 97,568
Issued in Lieu of Cash Distributions 10,825 21,592 6,398 12,880
Redeemed (68,181) (147,350) (33,218) (86,553)
---------------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions (12,195) 37,393 (4,806) 23,895
------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) (15,534) 14,101 (9,977) 14,999
------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 336,570 322,469 146,207 131,208
---------------------------------------------------------------------
End of Period $321,036 $336,570 $136,230 $146,207
========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 4,428 15,167 2,330 9,786
Issued in Lieu of Cash Distributions 1,060 2,029 681 1,299
Redeemed (6,698) (13,789) (3,519) (8,695)
---------------------------------------------------------------------
Net Increase (Decrease) in
Shares Outstanding (1,210) 3,407 (508) 2,390
========================================================================================================================
</TABLE>
48
<PAGE> 51
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
BALANCED EQUITY INCOME
PORTFOLIO PORTFOLIO
------------------------------- ------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAR. 31, 2000 SEP. 30, 1999 MAR. 31, 2000 SEP. 30, 1999
(000) (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 11,637 $ 21,744 $ 4,788 $ 10,524
Realized Net Gain (Loss) 10,609 27,783 6,508 2,990
Change in Unrealized Appreciation (Depreciation) (17,738) 3,466 (27,138) 25,354
--------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 4,508 52,993 (15,842) 38,868
--------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (21,917) (19,489) (10,516) (9,370)
Realized Capital Gain (27,737) (40,236) (3,034) (2,104)
--------------------------------------------------------------------
Total Distributions (49,654) (59,725) (13,550) (11,474)
--------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 37,454 130,611 49,995 132,042
Issued in Lieu of Cash Distributions 49,654 59,725 13,550 11,474
Redeemed (115,397) (138,248) (124,699) (116,547)
--------------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions (28,289) 52,088 (61,154) 26,969
------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) (73,435) 45,356 (90,546) 54,363
------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 598,512 553,156 429,309 374,946
--------------------------------------------------------------------
End of Period $525,077 $598,512 $338,763 $429,309
========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 2,322 7,415 2,481 6,116
Issued in Lieu of Cash Distributions 3,052 3,600 630 570
Redeemed (7,211) (7,837) (6,284) (5,384)
--------------------------------------------------------------------
Net Increase (Decrease) in
Shares Outstanding (1,837) 3,178 (3,173) 1,302
========================================================================================================================
</TABLE>
49
<PAGE> 52
STATEMENT OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED EQUITY INDEX
VALUE PORTFOLIO PORTFOLIO
------------------------------- -------------------------------
SIX MONTHS SIX MONTHS YEAR
ENDED FEB. 8* TO ENDED ENDED
MAR. 31, 2000 SEP. 30, 1999 MAR. 31, 2000 SEP. 30, 1999
(000) (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 443 $ 518 $ 7,702 $ 15,053
Realized Net Gain (Loss) (4,279) (444) (5,449) 13,947
Change in Unrealized Appreciation (Depreciation) 1,380 (6,880) 237,943 229,030
--------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (2,456) (6,806) 240,196 258,030
--------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (537) -- (15,526) (12,732)
Realized Capital Gain -- -- (13,484) (4,473)
--------------------------------------------------------------------
Total Distributions (537) -- (29,010) (17,205)
--------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 15,430 69,125 260,985 450,504
Issued in Lieu of Cash Distributions 537 -- 29,010 17,205
Redeemed (24,424) (20,045) (288,624) (263,396)
--------------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions (8,457) 49,080 1,371 204,313
------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) (11,450) 42,274 212,557 445,138
------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 42,274 -- 1,365,383 920,245
--------------------------------------------------------------------
End of Period $30,824 $42,274 $1,577,940 $1,365,383
========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 1,831 6,450 7,196 13,596
Issued in Lieu of Cash Distributions 58 -- 822 600
Redeemed (2,849) (1,908) (7,889) (8,019)
--------------------------------------------------------------------
Net Increase (Decrease) in
Shares Outstanding (960) 4,542 129 6,177
========================================================================================================================
</TABLE>
*Commencement of operations.
50
<PAGE> 53
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
MID-CAP INDEX GROWTH
PORTFOLIO PORTFOLIO
------------------------------- ------------------------------
SIX MONTHS SIX MONTHS YEAR
ENDED FEB. 8* TO ENDED ENDED
MAR. 31, 2000 SEP. 30, 1999 MAR. 31, 2000 SEP. 30, 1999
(000) (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 319 $ 211 $ 1,771 $ 5,222
Realized Net Gain (Loss) 6,276 1,028 68,343 51,155
Change in Unrealized Appreciation (Depreciation) 15,651 (2,433) 187,196 121,304
--------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 22,246 (1,194) 257,310 177,681
--------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (267) -- (5,305) (4,170)
Realized Capital Gain (1,068) -- (50,896) (39,875)
--------------------------------------------------------------------
Total Distributions (1,335) -- (56,201) (44,045)
--------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 58,025 64,212 225,123 375,784
Issued in Lieu of Cash Distributions 1,335 -- 56,201 44,045
Redeemed (21,021) (9,332) (193,831) (231,886)
--------------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 38,339 54,880 87,493 187,943
------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 59,250 53,686 288,602 321,579
------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 53,686 -- 952,637 631,058
--------------------------------------------------------------------
End of Period $112,936 $53,686 $1,241,239 $952,637
========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 4,766 5,885 7,094 13,290
Issued in Lieu of Cash Distributions 122 -- 1,888 1,805
Redeemed (1,741) (846) (6,080) (8,142)
--------------------------------------------------------------------
Net Increase (Decrease) in
Shares Outstanding 3,147 5,039 2,902 6,953
========================================================================================================================
</TABLE>
*Commencement of operations.
51
<PAGE> 54
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, 2000 SEP. 30, 1999 MAR. 31, 2000 SEP. 30, 1999
(000) (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 1,269 $ 840 $ 1,446 $ 3,806
Realized Net Gain (Loss) 92,271 2,020 4,221 10,847
Change in Unrealized Appreciation (Depreciation) 38,627 37,771 78,590 32,232
--------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 132,167 40,631 84,257 46,885
--------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (928) (731) (3,703) (3,272)
Realized Capital Gain -- (122) (8,110) --
--------------------------------------------------------------------
Total Distributions (928) (853) (11,813) (3,272)
--------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 230,000 85,183 134,263 89,926
Issued in Lieu of Cash Distributions 928 853 11,813 3,272
Redeemed (86,039) (69,143) (75,992) (82,080)
--------------------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 144,889 16,893 70,084 11,118
------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 276,128 56,671 142,528 54,731
------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 167,527 110,856 271,797 217,066
--------------------------------------------------------------------
End of Period $443,655 $167,527 $414,325 $271,797
========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 11,565 7,414 7,561 5,936
Issued in Lieu of Cash Distributions 68 84 771 242
Redeemed (4,363) (6,113) (4,292) (5,482)
--------------------------------------------------------------------
Net Increase (Decrease) in
Shares Outstanding 7,270 1,385 4,040 696
========================================================================================================================
</TABLE>
52
<PAGE> 55
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
REIT INDEX
PORTFOLIO
---------------------------------
SIX MONTHS
ENDED FEB. 8* TO
MAR. 31, 2000 SEP. 30, 1999
(000) (000)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income 809 596
Realized Net Gain (Loss) 82 (28)
Change in Unrealized Appreciation (Depreciation) (330) (1,448)
---------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations 561 (880)
---------------------------------
DISTRIBUTIONS
Net Investment Income (617) --
Realized Capital Gain (27) --
---------------------------------
Total Distributions (644) --
---------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 11,919 25,811
Issued in Lieu of Cash Distributions 644 --
Redeemed (5,875) (4,371)
---------------------------------
Net Increase (Decrease) from Capital Share Transactions 6,688 21,440
------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 6,605 20,560
------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 20,560 --
---------------------------------
End of Period $27,165 $20,560
========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 1,236 2,510
Issued in Lieu of Cash Distributions 67 --
Redeemed (616) (422)
---------------------------------
Net Increase (Decrease) in Shares Outstanding 687 2,088
========================================================================================================================
</TABLE>
*Commencement of operations.
53
<PAGE> 56
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, 2000 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------
<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 .028 .050 .055 .054 .054 .056
Net Realized and Unrealized Gain (Loss)
on Investments -- -- -- -- -- --
------------------------------------------------------------------------
Total from Investment Operations .028 .050 .055 .054 .054 .056
------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.028) (.050) (.055) (.054) (.054) (.056)
Distributions from Realized Capital Gains -- -- -- -- -- --
------------------------------------------------------------------------
Total Distributions (.028) (.050) (.055) (.054) (.054) (.056)
------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
========================================================================================================================
TOTAL RETURN 2.86% 5.09% 5.60% 5.48% 5.49% 5.77%
========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $803 $723 $590 $393 $285 $218
Ratio of Total Expenses to
Average Net Assets 0.18%* 0.20% 0.20% 0.21% 0.19% 0.23%
Ratio of Net Investment Income to
Average Net Assets 5.65%* 4.98% 5.46% 5.36% 5.36% 5.66%
========================================================================================================================
</TABLE>
*Annualized.
54
<PAGE> 57
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE PORTFOLIO
SIX MONTHS ENDED FEB. 8* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD MAR. 31, 2000 SEP. 30, 1999
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.75 $10.00
------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .307 .355
Net Realized and Unrealized Gain (Loss) on Investments (.080) (.250)
----------------------
Total from Investment Operations .227 .105
----------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.307) (.355)
Distributions from Realized Capital Gains -- --
----------------------
Total Distributions (.307) (.355)
------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.67 $ 9.75
========================================================================================================================
TOTAL RETURN 2.37% 1.08%
========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $48 $29
Ratio of Total Expenses to Average Net Assets 0.26%** 0.27%**
Ratio of Net Investment Income to Average Net Assets 6.35%** 5.74%**
Portfolio Turnover Rate 29%** 39%
========================================================================================================================
</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, 2000 1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.34 $11.07 $10.57 $10.29 $10.47 $ 9.82
---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .336 .646 .663 .678 .670 .663
Net Realized and Unrealized Gain (Loss)
on Investments (.100) (.700) .500 .280 (.180) .650
------------------------------------------------------------------------
Total from Investment Operations .236 (.054) 1.163 .958 .490 1.313
------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.336) (.646) (.663) (.678) (.670) (.663)
Distributions from Realized Capital Gains -- (.030) -- -- -- --
------------------------------------------------------------------------
Total Distributions (.336) (.676) (.663) (.678) (.670) (.663)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.24 $10.34 $11.07 $10.57 $10.29 $10.47
=================================================================================================================================
TOTAL RETURN 2.34% -0.49% 11.36% 9.60% 4.80% 13.83%
=================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $321 $337 $322 $188 $139 $120
Ratio of Total Expenses to
Average Net Assets 0.20%* 0.23% 0.28% 0.29% 0.25% 0.29%
Ratio of Net Investment Income to
Average Net Assets 6.56%* 6.06% 6.16% 6.51% 6.43% 6.58%
Portfolio Turnover Rate 57%* 69% 65% 40% 56% 29%
=================================================================================================================================
</TABLE>
*Annualized.
55
<PAGE> 58
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
YEAR ENDED SEPTEMBER 30,
------------------------------------
SIX MONTHS ENDED JUN. 3* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD MAR. 31, 2000 1999 1998 1997 SEP. 30, 1996
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.50 $10.09 $10.59 $10.15 $10.00
-----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .422 .847 .895 .922 .299
Net Realized and Unrealized Gain (Loss) on Investments (.350) (.573) (.485) .450 .150
------------------------------------------------------------
Total from Investment Operations .072 .274 .410 1.372 .449
------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.422) (.847) (.895) (.922) (.299)
Distributions from Realized Capital Gains -- (.017) (.015) (.010) --
------------------------------------------------------------
Total Distributions (.422) (.864) (.910) (.932) (.299)
-----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.15 $ 9.50 $10.09 $10.59 $10.15
===================================================================================================================================
TOTAL RETURN 0.72% 2.68% 3.85% 14.12% 4.56%
===================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $136 $146 $131 $85 $22
Ratio of Total Expenses to Average Net Assets 0.26%** 0.29% 0.31% 0.31% 0.32%**
Ratio of Net Investment Income to Average Net Assets 8.90%** 8.51% 8.45% 8.88% 9.29%**
Portfolio Turnover Rate 31%** 31% 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, 2000 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $17.41 $17.73 $17.97 $14.81 $13.33 $11.33
------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .36 .63 .63 .60 .565 .51
Net Realized and Unrealized Gain (Loss)
on Investments (.19) .95 .56 3.31 1.420 2.07
------------------------------------------------------------------------
Total from Investment Operations .17 1.58 1.19 3.91 1.985 2.58
------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.64) (.62) (.60) (.19) (.505) (.50)
Distributions from Realized Capital Gains (.81) (1.28) (.83) (.56) -- (.08)
------------------------------------------------------------------------
Total Distributions (1.45) (1.90) (1.43) (.75) (.505) (.58)
------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $16.13 $17.41 $17.73 $17.97 $14.81 $13.33
==============================================================================================================================
TOTAL RETURN 0.90% 9.44% 7.26% 27.60% 15.26% 23.65%
==============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $525 $599 $553 $468 $330 $280
Ratio of Total Expenses to
Average Net Assets 0.26%* 0.29% 0.31% 0.32% 0.31% 0.36%
Ratio of Net Investment Income to
Average Net Assets 4.11%* 3.58% 3.72% 3.96% 4.04% 4.25%
Portfolio Turnover Rate 24%* 24% 31% 25% 36% 26%
==============================================================================================================================
</TABLE>
*Annualized.
56
<PAGE> 59
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------
FOR A SHARE OUTSTANDING SIX MONTHS ENDED
THROUGHOUT EACH PERIOD MARCH 31, 2000 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $21.10 $19.69 $18.50 $13.71 $12.00 $10.05
-------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .28 .51 .490 .42 .48 .46
Net Realized and Unrealized Gain (Loss)
on Investments (.99) 1.50 1.475 4.69 1.75 2.02
----------------------------------------------------------------------
Total from Investment Operations (.71) 2.01 1.965 5.11 2.23 2.48
----------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.52) (.49) (.400) (.15) (.46) (.48)
Distributions from Realized Capital Gains (.15) (.11) (.375) (.17) (.06) (.05)
----------------------------------------------------------------------
Total Distributions (.67) (.60) (.775) (.32) (.52) (.53)
-------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $19.72 $21.10 $19.69 $18.50 $13.71 $12.00
===============================================================================================================================
TOTAL RETURN -3.63% 10.36% 11.19% 38.05% 19.07% 25.69%
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $339 $429 $375 $271 $142 $91
Ratio of Total Expenses to
Average Net Assets 0.30%* 0.33% 0.36% 0.37% 0.35% 0.39%
Ratio of Net Investment Income to
Average Net Assets 2.45%* 2.44% 2.69% 3.11% 3.69% 4.28%
Portfolio Turnover Rate 12%* 6% 6% 8% 8% 10%
===============================================================================================================================
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED VALUE PORTFOLIO
SIX MONTHS ENDED FEB. 8* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD MAR. 31, 2000 SEP. 30, 1999
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.31 $10.00
-------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .13 .11
Net Realized and Unrealized Gain (Loss) on Investments (.72) (.80)
-------------------------
Total from Investment Operations (.59) (.69)
-------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.12) --
Distributions from Realized Capital Gains -- --
-------------------------
Total Distributions (.12) --
-------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $8.60 $ 9.31
===============================================================================================================================
TOTAL RETURN -6.42% -6.90%
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $31 $42
Ratio of Total Expenses to Average Net Assets 0.39%** 0.37%**
Ratio of Net Investment Income to Average Net Assets 2.61%** 2.38%**
Portfolio Turnover Rate 19%** 18%
===============================================================================================================================
</TABLE>
*Inception.
**Annualized.
57
<PAGE> 60
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
EQUITY INDEX PORTFOLIO
YEAR ENDED SEPTEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -------------------------------------------------------------
THROUGHOUT EACH PERIOD MARCH 31, 2000 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $33.85 $26.94 $25.32 $18.32 $15.69 $12.47
-------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .18 .37 .37 .34 .34 .33
Net Realized and Unrealized Gain (Loss)
on Investments 5.68 7.04 1.83 6.94 2.75 3.26
----------------------------------------------------------------------------
Total from Investment Operations 5.86 7.41 2.20 7.28 3.09 3.59
----------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.38) (.37) (.34) (.19) (.33) (.29)
Distributions from Realized Capital Gains (.33) (.13) (.24) (.09) (.13) (.08)
----------------------------------------------------------------------------
Total Distributions (.71) (.50) (.58) (.28) (.46) (.37)
-------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $39.00 $33.85 $26.94 $25.32 $18.32 $15.69
===============================================================================================================================
TOTAL RETURN 17.53% 27.84% 8.97% 40.31% 20.19% 29.51%
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,578 $1,365 $920 $718 $406 $276
Ratio of Total Expenses to
Average Net Assets 0.17%* 0.18% 0.20% 0.23% 0.22% 0.28%
Ratio of Net Investment Income to
Average Net Assets 1.03%* 1.21% 1.48% 1.78% 2.13% 2.53%
Portfolio Turnover Rate 12%* 4% 1% 1% 2% 2%
===============================================================================================================================
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
MID-CAP INDEX PORTFOLIO
SIX MONTHS ENDED FEB. 8* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD MAR. 31, 2000 SEP. 30, 1999
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.65 $10.00
--------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .04 .04
Net Realized and Unrealized Gain (Loss) on Investments 3.36 .61
-------------------------
Total from Investment Operations 3.40 .65
-------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.05) --
Distributions from Realized Capital Gains (.20) --
-------------------------
Total Distributions (.25) --
--------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.80 $10.65
==========================================================================================================================
Total Return 32.54% 6.50%
==========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $113 $54
Ratio of Total Expenses to Average Net Assets 0.36%** 0.24%**
Ratio of Net Investment Income to Average Net Assets 0.82%** 1.03%**
Portfolio Turnover Rate 52%** 24%
==========================================================================================================================
</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
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO
YEAR ENDED SEPTEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ------------------------------------------------------------
THROUGHOUT EACH PERIOD MARCH 31, 2000 1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $28.96 $24.33 $21.51 $17.58 $14.10 $10.79
--------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .050 .16 .16 .190 .18 .16
Net Realized and Unrealized Gain (Loss)
on Investments 7.365 6.16 3.43 4.615 3.65 3.26
--------------------------------------------------------------------------
Total from Investment Operations 7.415 6.32 3.59 4.805 3.83 3.42
--------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.160) (.16) (.20) (.180) (.16) (.11)
Distributions from Realized Capital Gains (1.535) (1.53) (.57) (.695) (.19) --
--------------------------------------------------------------------------
Total Distributions (1.695) (1.69) (.77) (.875) (.35) (.11)
--------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $34.68 $28.96 $24.33 $21.51 $17.58 $14.10
==========================================================================================================================
TOTAL RETURN 26.57% 27.27% 17.37% 28.76% 27.79% 32.02%
==========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,241 $953 $631 $460 $276 $162
Ratio of Total Expenses to
Average Net Assets 0.32%* 0.35% 0.39% 0.38% 0.39% 0.47%
Ratio of Net Investment Income to
Average Net Assets 0.32%* 0.59% 0.74% 1.12% 1.29% 1.64%
Portfolio Turnover Rate 65%* 50% 48% 38% 42% 32%
==========================================================================================================================
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
SMALL COMPANY GROWTH PORTFOLIO
YEAR ENDED SEPTEMBER 30,
SIX MONTHS ENDED ---------------------------------- JUN. 3* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD MAR. 31, 2000 1999 1998 1997 SEP. 30, 1996
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.87 $ 9.53 $11.97 $ 9.84 $10.00
--------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .06 .06 .06 .04 .04
Net Realized and Unrealized Gain (Loss) on Investments 9.01 3.35 (2.46) 2.13 (.20)
------------------------------------------------------------
Total from Investment Operations 9.07 3.41 (2.40) 2.17 (.16)
------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.07) (.06) (.04) (.04) --
Distributions from Realized Capital Gains -- (.01) -- -- --
------------------------------------------------------------
Total Distributions (.07) (.07) (.04) (.04) --
--------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $21.87 $12.87 $ 9.53 $11.97 $ 9.84
==========================================================================================================================
Total Return 70.80% 35.98% -20.10% 22.16% -1.60%
==========================================================================================================================
Ratios/Supplemental Data
Net Assets, End of Period (Millions) $444 $168 $111 $133 $44
Ratio of Total Expenses to Average Net Assets 0.49%** 0.49% 0.42% 0.39% 0.45%**
Ratio of Net Investment Income to Average Net Assets 0.85%** 0.58% 0.54% 0.67% 1.42%**
Portfolio Turnover Rate 157%** 85% 106% 72% 18%
==========================================================================================================================
</TABLE>
*Inception.
**Annualized.
59
<PAGE> 62
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL PORTFOLIO
YEAR ENDED SEPTEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ------------------------------------------------------------
THROUGHOUT EACH PERIOD MARCH 31, 2000 1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $15.58 $12.96 $14.55 $12.74 $11.40 $10.31
--------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .07 .23 .21 .17 .14 .16
Net Realized and Unrealized Gain (Loss)
on Investments 4.31 2.59 (1.48) 2.10 1.36 .99
-------------------------------------------------------------------------
Total from Investment Operations 4.38 2.82 (1.27) 2.27 1.50 1.15
-------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.21) (.20) (.18) (.14) (.16) (.06)
Distributions from Realized Capital Gains (.46) -- (.14) (.32) -- --
-------------------------------------------------------------------------
Total Distributions (.67) (.20) (.32) (.46) (.16) (.06)
--------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $19.29 $15.58 $12.96 $14.55 $12.74 $11.40
==========================================================================================================================
TOTAL RETURN 29.23% 21.97% -8.74% 18.55% 13.36% 11.21%
==========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $414 $272 $217 $246 $162 $90
Ratio of Total Expenses to
Average Net Assets 0.42%* 0.46% 0.48% 0.46% 0.49% 0.54%
Ratio of Net Investment Income to
Average Net Assets 0.86%* 1.51% 1.48% 1.43% 1.42% 1.67%
Portfolio Turnover Rate 36%* 39% 38% 22% 19% 27%
==========================================================================================================================
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
REIT INDEX PORTFOLIO
SIX MONTHS ENDED FEB. 8* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD MAR. 31, 2000 SEP. 30, 1999
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.85 $10.00
---------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .23 .28
Net Realized and Unrealized Gain (Loss) on Investments (.05) (.43)
-----------------------
Total from Investment Operations .18 (.15)
-----------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.23) --
Distributions from Realized Capital Gains (.01) --
-----------------------
Total Distributions (.24) --
--------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.79 $ 9.85
==========================================================================================================================
TOTAL RETURN 1.86% -1.50%
==========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $27 $21
Ratio of Total Expenses to Average Net Assets 0.40%** 0.27%**
Ratio of Net Investment Income to Average Net Assets 6.91%** 6.26%**
Portfolio Turnover Rate 6%** 4%
==========================================================================================================================
</TABLE>
*Initial share purchase date. All assets were held in money market instruments
until February 9, 1999, when performance measurement begins.
**Annualized.
60
<PAGE> 63
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 and Mid-Cap
Index Portfolios use S&P 500 Index and S&P MidCap 400 Index futures contracts,
respectively, to a limited extent, with the objectives of maintaining full
exposure to the stock market, enhancing returns, maintaining liquidity, and
minimizing transaction costs. The portfolios 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 portfolios 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
portfolios 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
portfolios may also seek to take advantage of price differences among bond
market sectors by simultaneously buying futures
61
<PAGE> 64
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 is recorded at management's estimate of the
income included in distributions received from the REIT investments.
Distributions received in excess of this estimated amount are recorded as a
reduction of the cost of investments. The actual amounts of income and return of
capital are only determined by each REIT after its fiscal year-end, and may
differ from the estimated amounts. 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; and Lincoln
Capital Management Company provide investment advisory services to the High
Yield Bond, Equity Income, and Growth Portfolios, respectively. For the six
months ended March 31, 2000, the investment advisory fees of the High Yield
Bond, Equity Income, and Growth Portfolios represented effective annual rates of
0.06%, 0.10%, and 0.15%, respectively, of average net assets.
62
<PAGE> 65
Barrow, Hanley, Mewhinney & Strauss, Inc., provides investment advisory
services to the Diversified Value 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 Standard & Poor's 500/BARRA
Value Index. For the six months ended March 31, 2000, the investment advisory
fee represented an effective annual basic rate of 0.125% of the portfolio's
average net assets before a decrease of $3,000 based on performance.
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, 2000, the investment advisory fee represented an
effective annual basic rate of 0.09% of the portfolio's average net assets
before a decrease of $52,000 (0.02%) 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 an index
of the stocks held by the largest small-capitalization stock mutual funds. For
the six months ended March 31, 2000, the investment advisory fee represented an
effective annual basic rate of 0.15% of the portfolio's average net assets
before an increase of $55,000 (0.04%) based on performance.
Schroder Investment Management North America 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, 2000, the investment advisory fee
represented an effective annual basic rate of 0.125% of the portfolio's average
net assets, with no performance adjustment required.
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, 2000, 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 $161 0.02% 0.16%
Short-Term Corporate 9 0.02 0.01
High-Grade Bond 64 0.02 0.06
High Yield Bond 28 0.02 0.03
Balanced 101 0.02 0.10
Equity Income 63 0.02 0.06
Diversified Value 5 0.02 0.01
Equity Index 293 0.02 0.29
Mid-Cap Index 18 0.02 0.02
Growth 230 0.02 0.23
Small Company Growth 93 0.02 0.09
International 79 0.02 0.08
REIT Index 5 0.02 0.01
-------------------------------------------------------------------------------------------------------
</TABLE>
The portfolios' Trustees and officers are also Directors and officers of
Vanguard.
63
<PAGE> 66
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
D. The portfolios have asked their investment advisers to direct certain
security 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' management and
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, 2000,
these arrangements reduced expenses by:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
EXPENSE REDUCTION
(000)
--------------------------------------------
MANAGEMENT AND CUSTODIAN
PORTFOLIO ADMINISTRATIVE FEES
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market -- $2
High Yield Bond -- 1
Balanced $2 1
---------------------------------------------------------------------------------------------------------
</TABLE>
E. During the six months ended March 31, 2000, 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 $ 1,935 $ 1,545 $ 21,448 $ 3,669
High-Grade Bond 73,173 84,642 19,881 14,016
High Yield Bond -- -- 18,293 19,274
Balanced 21,536 35,496 44,857 99,775
Equity Income -- -- 23,822 95,857
Diversified Value -- -- 3,162 11,970
Equity Index -- -- 90,163 104,702
Mid-Cap Index -- -- 58,180 20,230
Growth -- -- 396,297 359,658
Small Company Growth -- -- 289,801 204,195
International -- -- 111,632 58,248
REIT Index -- -- 7,226 631
---------------------------------------------------------------------------------------------------------
</TABLE>
At September 30, 1999, 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>
Money Market 2001-2008 $ 19
Short-Term Corporate 2008 31
High-Grade Bond 2008 1,292
High Yield Bond 2007-2008 5,546
Diversified Value 2008 444
Small Company Growth 2007 821
REIT Index 2008 28
---------------------------------------------------------------------------------------------------------
</TABLE>
64
<PAGE> 67
During the six months ended March 31, 2000, the International Portfolio
realized net foreign currency losses of $89,000, which decreased distributable
net income for tax purposes; accordingly, such losses have been reclassified
from accumulated net realized gains to undistributed net investment income.
F. At March 31, 2000, 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 $ 94 $ (660) $ (566)
High-Grade Bond 2,624 (11,123) (8,499)
High Yield Bond 324 (11,796) (11,472)
Balanced 116,424 (33,899) 82,525
Equity Income 112,738 (16,731) 96,007
Diversified Value 1,716 (7,216) (5,500)
Equity Index 839,066 (44,732) 794,334
Mid-Cap Index 20,963 (7,775) 13,188
Growth 508,779 (21,696) 487,083
Small Company Growth 91,250 (21,926) 69,324
International 148,906 (14,522) 134,384
REIT Index 472 (2,250) (1,778)
------------------------------------------------------------------------------------------------------------
</TABLE>
At March 31, 2000, the aggregate settlement value of open futures
contracts expiring in June 2000 and the related unrealized appreciation
(depreciation) were:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
(000)
--------------------------------------------------------------
NUMBER OF AGGREGATE NET UNREALIZED
PORTFOLIO/ LONG (SHORT) SETTLEMENT APPRECIATION
FUTURES CONTRACTS CONTRACTS VALUE (DEPRECIATION)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Corporate/
U.S. Treasury Note (13) $1,275 $(47)
5-Year U.S. Treasury Note (29) 2,857 (57)
Equity Index/
S&P 500 Index 9 3,409 (33)
Mid-Cap Index/
S&P MidCap 400 Index 2 505 30
------------------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE> 68
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At March 31, 2000, 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 UREALIZED
SETTLEMENT DATE CURRENCY DOLLARS U.S. DOLLARS DEPRECIATION
--------------------------------------------------------------------------------------------------------------
Deliver:
<S> <C> <C> <C> <C> <C>
7/12/2000 JPY 5,857,157 $55,704 $58,078 $(2,374)
--------------------------------------------------------------------------------------------------------------
</TABLE>
JPY--Japanese Yen.
Malaysian securities purchased after February 14, 1999, are subject to a 10%
levy on realized gains upon sale and conversion of proceeds from Malaysian
ringgits to another currency. At March 31, 2000, the International Portfolio had
recorded a liability (included in unrealized foreign currency losses) of
$28,000, representing the levy that would be assessed if all subject Malaysian
holdings were sold at their current values and the proceeds repatriated.
The International Portfolio had net unrealized foreign currency losses of
$30,000 resulting from the translation of other assets and liabilities at March
31, 2000.
G. The market value of securities on loan to broker/dealers at March 31, 2000,
and collateral received with respect to such loans were:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
(000)
---------------------------------------------------------------
COLLATERAL RECEIVED
-------------------------------------
MARKET VALUE
OF LOANED U.S. TREASURY
PORTFOLIO SECURITIES CASH SECURITIES
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
High-Grade Bond $ 974 $ 990 --
High Yield Bond 806 870 --
Balanced 14,209 7,549 7,144
Growth 3,483 3,591 --
Small Company Growth 15,708 16,195 --
International 40,540 43,004 --
------------------------------------------------------------------------------------------------------------
</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.
66
<PAGE> 69
THE VANGUARD(R) FAMILY OF FUNDS
STOCK FUNDS
500 Index Fund
Aggressive Growth Fund
Capital Opportunity Fund
Convertible Securities Fund
Emerging Markets Stock
Index Fund
Energy Fund
Equity Income Fund
European Stock Index Fund
Explorer(TM) Fund
Extended Market Index Fund*
Global Equity Fund
Gold and Precious Metals Fund
Growth and Income Fund
Growth Index Fund*
Health Care Fund
Institutional Index Fund*
International Growth Fund
International Value Fund
Mid-Cap Index Fund*
Morgan(TM) Growth Fund
Pacific Stock Index Fund
PRIMECAP Fund
REIT Index Fund
Selected Value Fund
Small-Cap Growth Index Fund*
Small-Cap Index Fund*
Small-Cap Value Index Fund*
Tax-Managed Capital
Appreciation Fund*
Tax-Managed Growth and
Income Fund*
Tax-Managed International Fund*
Tax-Managed Small-Cap Fund*
Total International Stock
Index Fund
Total Stock Market Index Fund*
U.S. Growth Fund
Utilities Income Fund
Value Index Fund*
Windsor(TM) Fund
Windsor(TM) II Fund
BALANCED FUNDS
Asset Allocation Fund
Balanced Index Fund
Global Asset Allocation Fund
LifeStrategy(R) Conservative
Growth Fund
LifeStrategy(R) Growth Fund
LifeStrategy(R) Income Fund
LifeStrategy(R) Moderate
Growth Fund
STAR(TM) Fund
Tax-Managed Balanced Fund
Wellesley(R) Income Fund
Wellington(TM) Fund
BOND FUNDS
Admiral(TM) Intermediate-Term
Treasury Fund
Admiral(TM) Long-Term Treasury Fund
Admiral(TM) Short-Term Treasury Fund
GNMA Fund
High-Yield Corporate Fund
High-Yield Tax-Exempt Fund
Insured Long-Term Tax-Exempt Fund
Intermediate-Term Bond
Index Fund
Intermediate-Term Corporate Fund
Intermediate-Term Tax-Exempt Fund
Intermediate-Term Treasury Fund
Limited-Term Tax-Exempt Fund
Long-Term Bond Index Fund
Long-Term Corporate Fund
Long-Term Tax-Exempt Fund
Long-Term Treasury Fund
Preferred Stock Fund
Short-Term Bond Index Fund
Short-Term Corporate Fund*
Short-Term Federal Fund
Short-Term Tax-Exempt Fund
Short-Term Treasury Fund
State Tax-Exempt Bond Funds
(California, Florida,
Massachusetts, New Jersey,
New York, Ohio, Pennsylvania)
Total Bond Market Index Fund*
MONEY MARKET FUNDS
Admiral(TM) Treasury Money
Market Fund
Federal Money Market Fund
Prime Money Market Fund*
State Tax-Exempt Money Market
Funds (California, New Jersey,
New York, Ohio, Pennsylvania)
Tax-Exempt Money Market Fund
Treasury Money Market Fund
VARIABLE ANNUITY PLAN
Balanced Portfolio
Diversified Value Portfolio
Equity Income Portfolio
Equity Index Portfolio
Growth Portfolio
High-Grade Bond Portfolio
High Yield Bond Portfolio
International Portfolio
Mid-Cap Index Portfolio
Money Market Portfolio
REIT Index Portfolio
Short-Term Corporate Portfolio
Small Company Growth Portfolio
*Offers Institutional Shares.
For information about Vanguard funds and our variable annuity plan, including
charges and expenses, obtain a prospectus from The Vanguard Group, P.O. Box
2600, Valley Forge, PA 19482-2600.
Read it carefully before you invest or send money.
67
<PAGE> 70
THE PEOPLE WHO GOVERN YOUR FUND
The Trustees of your mutual fund are there to see that the fund is operated and
managed in your best interests since, as a shareholder, you are part owner of
the fund. Your fund Trustees also serve on the Board of Directors of The
Vanguard Group, which is owned by the funds and exists solely to provide
services to them on an at-cost basis.
Seven of Vanguard's eight board members are independent, meaning that
they have no affiliation with Vanguard or the funds they oversee, apart from the
sizable personal investments they have made as private individuals. They bring
distinguished backgrounds in business, academia, and public service to their
task of working with Vanguard officers to establish the policies and oversee the
activities of the funds.
Among board members' responsibilities are selecting investment advisers
for the funds; monitoring fund operations, performance, and costs; reviewing
contracts; nominating and selecting new Trustees/Directors; and electing
Vanguard officers.
The list below provides a brief description of each Trustee's
professional affiliations. Noted in parentheses is the year in which the Trustee
joined the Vanguard Board.
TRUSTEES
JOHN J. BRENNAN - (1987) 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 - (1998) Vice President, Chief Information Officer, and a
member of the Executive Committee of Johnson & Johnson; Director of Johnson &
JohnsonoMerck Consumer Pharmaceuticals Co., The Medical Center at Princeton, and
Women's Research and Education Institute.
BRUCE K. MACLAURY - (1990) President Emeritus of The Brookings Institution;
Director of American Express Bank Ltd., The St. Paul Companies, Inc., and
National Steel Corp.
BURTON G. MALKIEL - (1977) 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 Select Sector SPDR
Trust.
ALFRED M. RANKIN, JR. - (1993) Chairman, President, Chief Executive Officer, and
Director of NACCO Industries, Inc.; Director of The BFGoodrich Co.
JOHN C. SAWHILL - (1991) 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. - (1971) 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 - (1985) Retired Chairman of Rohm & Haas Co.; Director of
AmeriSource Health Corporation, 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.
VANGUARD MANAGING DIRECTORS
R. GREGORY BARTON - Legal Department.
ROBERT A. DISTEFANO - Information Technology.
JAMES H. GATELY - Individual Investor Group.
KATHLEEN C. GUBANICH - Human Resources.
IAN A. MACKINNON - Fixed Income Group.
F. WILLIAM MCNABB, III - Institutional Investor Group.
MICHAEL S. MILLER - Planning and Development.
RALPH K. PACKARD - Chief Financial Officer.
GEORGE U. SAUTER - Quantitative Equity Group.
<PAGE> 71
ABOUT OUR COVER
Our cover art, depicting HMS Vanguard at sea, is a reproduction of Leading the
Way, a 1984 work created and copyrighted by noted naval artist Tom Freeman, of
Forest Hill, Maryland.
[THE VANGUARD GROUP LOGO]
Post Office Box 2600
Valley Forge, Pennsylvania 19482-2600
WORLD WIDE WEB
www.vanguard.com
FUND INFORMATION
1-800-662-7447
INDIVIDUAL ACCOUNT SERVICES
1-800-662-2739
INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036
This report is intended for the fund's shareholders. It may not be distributed
to prospective investors unless it is preceded or accompanied by the current
fund prospectus.
Q642-052000
(C) 2000 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing
Corporation, Distributor.
<PAGE> 72
VANGUARD VARIABLE INSURANCE FUND
STATEMENT OF NET ASSETS - MARCH 31, 2000 (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.
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 and Mid-Cap Index
Portfolios' 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.
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Money Market Portfolio 1
Short-Term Corporate Portfolio 5
High-Grade Bond Portfolio 10
High Yield Bond Portfolio 17
Balanced Portfolio 22
Equity Income Portfolio 26
Diversified Value Portfolio 28
Equity Index Portfolio 29
Mid-Cap Index Portfolio 34
Growth Portfolio 38
Small Company Growth Portfolio 40
International Portfolio 42
REIT Index Portfolio 45
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO YIELD** DATE (000) (000)
--------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (17.5%)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Home Loan Bank 5.818% 4/12/2000 (1) $ 15,000 $ 14,998
Federal Home Loan Bank 5.873% 5/12/2000 (1) 10,000 9,999
Federal Home Loan Bank 5.948% 4/28/2000 (1) 7,000 6,999
Federal Home Loan Bank 6.03% 5/19/2000 3,913 3,882
Federal Home Loan Bank 6.12% 4/4/2000 (1) 25,000 24,994
Federal Home Loan Bank 6.13% 4/4/2000 (1) 25,000 24,991
Federal Home Loan Mortgage Corp. 5.876% 4/18/2000 (1) 10,000 9,999
Federal Home Loan Mortgage Corp. 5.938% 5/4/2000 (1) 4,241 4,218
Federal National Mortgage Assn. 5.914% 4/21/2000 (1) 20,000 19,996
Federal National Mortgage Assn. 5.942% 4/26/2000 (1) 20,000 19,996
--------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $140,072) 140,072
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE> 73
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO YIELD** DATE (000) (000)
--------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (47.6%)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCE--AUTOMOBILES (8.0%)
DaimlerChrysler North America Holding Corp. 5.923% 4/17/2000 $ 13,850 $ 13,814
Ford Motor Credit Co. 5.981% 5/4/2000 10,000 9,946
General Motors Acceptance Corp. 6.111% 5/19/2000 16,000 15,871
General Motors Acceptance Corp. 6.144% 5/22/2000 1,800 1,784
New Center Asset Trust 5.974% 5/2/2000 15,000 14,924
Toyota Motor Credit Corp. 6.084% 5/10/2000 8,000 7,948
----------
64,287
----------
FINANCE--OTHER (18.5%)
Asset Securitization Cooperative Co. 5.974% 5/1/2000 10,000 9,951
Asset Securitization Cooperative Co. 5.989% 5/8/2000 1,370 1,362
Associates Corp. of North America 6.121% 5/17/2000 10,000 9,922
CIT Group Holdings Inc. 5.993% 5/8/2000 10,000 9,939
CIT Group Holdings Inc. 6.10% 5/15/2000 3,800 3,772
Ciesco LP 6.052% 5/1/2000 15,000 14,925
Dakota Certificates (CitiBank Credit Card Master Trust) 6.055% 5/8/2000 16,000 15,901
Delaware Funding 5.968% 4/26/2000 2,928 2,916
Delaware Funding 6.116% 5/11/2000 7,064 7,016
Delaware Funding 6.145% 5/22/2000 1,984 1,967
Enterprise Funding Corp. 6.103% 5/8/2000 6,300 6,260
Enterprise Funding Corp. 6.145% 5/22/2000 1,266 1,255
Enterprise Funding Corp. 6.173% 5/30/2000 5,247 5,195
International Business Machines Credit 6.039% 5/3/2000 2,000 1,989
Intrepid Funding 6.131% 5/18/2000 10,500 10,417
Park Avenue Receivable Corp. 6.099% 4/6/2000 5,000 4,996
Preferred Receivables Funding Co. 6.102% 4/28/2000 6,550 6,520
Preferred Receivables Funding Co. 6.116% 5/15/2000 1,837 1,823
Preferred Receivables Funding Co. 6.125% 5/10/2000 1,100 1,093
Private Export Funding Corp. 5.92% 5/8/2000 7,901 7,853
Private Export Funding Corp. 6.003% 5/23/2000 2,400 2,379
Private Export Funding Corp. 6.008% 5/25/2000 1,469 1,456
Riverwoods Funding Corp. 6.195% 6/19/2000 10,953 10,806
Variable Funding Capital Corp. 6.073% 5/8/2000 8,990 8,934
----------
148,647
----------
INDUSTRIAL (7.4%)
Chevron Transport Co. 5.925% 4/18/2000 5,000 4,986
Coca-Cola Co. 5.94% 5/18/2000 15,000 14,885
Coca-Cola Co. 6.179% 6/7/2000 900 890
Equilon Enterprises LLC 5.982% 5/16/2000 4,550 4,516
H.J. Heinz Co. 6.07% 5/2/2000 5,000 4,974
Minnesota Mining & Manufacturing Co. 6.005% 5/9/2000 3,991 3,966
Procter & Gamble Corp. 6.009% 5/3/2000 20,000 19,894
WalMart Stores Inc. 6.081% 5/9/2000 5,554 5,519
----------
59,630
----------
INSURANCE (3.2%)
Aegon Funding Corp. 5.966% 5/2/2000 3,000 2,985
Aegon Funding Corp. 5.988% 5/23/2000 12,056 11,950
John Hancock Capital Corp. 5.958% 5/8/2000 11,090 11,023
----------
25,958
----------
UTILITIES (2.7%)
SBC Communications Inc. 6.00% 5/4/2000 5,816 5,784
SBC Communications Inc. 6.036% 5/10/2000 10,000 9,935
Tampa Electric 5.995% 4/28/2000 5,564 5,539
----------
21,258
----------
FOREIGN GOVERNMENT (2.4%)
KFW International Finance Inc. 6.006% 5/9/2000 12,800 12,720
Oesterreichishce Kontrollbank 6.087% 6/15/2000 2,200 2,173
Reseau Ferre de France 6.082% 5/30/2000 4,400 4,356
----------
19,249
----------
</TABLE>
2
<PAGE> 74
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
YIELD** DATE (000) (000)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOREIGN INDUSTRIAL (0.8%)
Diageo Capital PLC 5.971% 5/11/2000 $ 6,225 $ 6,184
----------
FOREIGN UTILITIES (4.6%)
British Telecommunications PLC 5.90% 5/3/2000 5,000 4,975
British Telecommunications PLC 5.904% 4/7/2000 5,000 4,995
British Telecommunications PLC 6.029% 4/25/2000 6,650 6,624
British Telecommunications PLC 6.238% 8/2/2000 1,800 1,763
France Telecom 5.961% 5/8/2000 4,100 4,075
France Telecom 5.997% 5/3/2000 4,000 3,979
France Telecom 6.144% 5/9/2000 707 702
Telstra Corp. 5.972% 4/4/2000 10,000 9,995
----------
37,108
----------
TOTAL COMMERCIAL PAPER
(COST $382,321) 382,321
--------------------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT (19.2%)
--------------------------------------------------------------------------------------------------------------------------
U.S. BANKS (2.5%)
Suntrust Banks Inc. 5.98% 5/16/2000 10,000 10,000
U.S. Bank N.A. 6.14% 4/4/2000 5,000 5,000
U.S. Bank N.A. 6.20% 4/4/2000 5,000 5,000
----------
20,000
----------
YANKEE CERTIFICATES OF DEPOSIT--U.S. BRANCHES (16.7%)
ABN-AMRO Bank NV 6.195% 4/4/2000 5,500 5,499
ABN-AMRO Bank NV 6.47% 1/18/2001 7,500 7,497
ABN-AMRO BANK NV 6.69% 2/7/2001 5,000 4,998
Bank of Montreal 5.91% 4/10/2000 3,000 3,000
Bayerische Landesbank Girozentrale 5.95% 5/4/2000 5,000 5,000
Credit Agricole Indosuez 5.92% 4/26/2000 10,000 10,000
Deutsche Bank AG 5.93% 4/28/2000 3,000 3,000
Deutsche Bank AG 5.96% 5/1/2000 12,950 12,950
Lloyds Bank 6.67% 2/8/2001 10,000 9,996
Lloyds Bank 6.87% 4/2/2001 5,000 4,999
National Westminster Bank PLC 5.98% 5/17/2000 10,000 10,000
Rabobank Nederlanden 5.08% 4/12/2000 3,000 3,000
Rabobank Nederlanden 5.29% 5/19/2000 10,000 9,999
Rabobank Nederlanden 6.66% 2/5/2001 18,000 17,993
UBS AG 6.53% 1/18/2001 19,100 19,092
Westdeutsche Landesbank 6.19% 6/19/2000 7,000 7,000
----------
134,023
----------
--------------------------------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(COST $154,023) 154,023
--------------------------------------------------------------------------------------------------------------------------
EURODOLLAR CERTIFICATES OF DEPOSIT (9.6%)
--------------------------------------------------------------------------------------------------------------------------
Barclays Bank PLC 5.24% 5/15/2000 18,000 17,983
Bayerische Landesbank Girozentrale 5.94% 4/28/2000 13,000 13,000
Credit Agricole Indosuez 6.04% 5/4/2000 10,000 10,000
Landesbank Hesson-Thueringen 6.01% 4/27/2000 5,000 5,000
Halifax PLC 5.12% 4/10/2000 5,000 5,000
Halifax PLC 6.01% 5/2/2000 13,000 13,000
Westdeutsche Landesbank 5.94% 4/20/2000 13,000 13,000
--------------------------------------------------------------------------------------------------------------------------
TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT
(COST $76,983) 76,983
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 75
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO YIELD** DATE (000) (000)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OTHER NOTES (5.7%)
--------------------------------------------------------------------------------------------------------------------------
Abbey National Treasury Services 5.14% 4/25/2000 $ 5,000 $ 5,000
Abbey National Treasury Services 6.48% 1/18/2001 3,000 2,999
Associates Corp. of North America 6.06% 4/29/2000 (1) 10,000 9,999
Bank of America N.A. 6.30% 10/10/2000 5,000 4,996
Bank of America N.A. 6.72% 2/5/2001 4,500 4,500
First National Bank of Chicago 5.13% 4/4/2000 5,000 5,000
General Electric Capital Corp. 5.976% 4/12/2000 (1) 9,600 9,600
LaSalle National Bank 5.17% 4/20/2000 4,000 4,000
--------------------------------------------------------------------------------------------------------------------------
TOTAL NOTES
(COST $46,094) 46,094
--------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.6%)
(COST $799,493) 799,493
--------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.4%)
--------------------------------------------------------------------------------------------------------------------------
Other Assets--Note C 8,007
Liabilities (4,809)
----------
3,198
--------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
--------------------------------------------------------------------------------------------------------------------------
Applicable to 802,705,134 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $802,691
==========================================================================================================================
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, 2000, NET ASSETS CONSISTED OF:
--------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $802,705 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (14) --
Unrealized Appreciation -- --
--------------------------------------------------------------------------------------------------------------------------
NET ASSETS $802,691 $1.00
==========================================================================================================================
</TABLE>
4
<PAGE> 76
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM CORPORATE PORTFOLIO COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (83.4%)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSET-BACKED SECURITIES (17.6%)
ANRC Auto Owner Trust 6.75% 12/15/2003 (1) $ 250 $ 249
ARG Funding Corp. 5.88% 5/20/2003 (1)(2) 250 244
Advanta Mortgage Loan Trust 5.98% 6/25/2014 (1) 250 244
American Express Credit Account Master Trust 5.85% 11/15/2006 (1) 200 189
BMW Vehicle Owner Trust 6.41% 4/25/2003 (1) 250 249
California Infrastructure & Econ. Dev. Bank SP Trust PG&E 6.32% 9/25/2005 (1) 225 220
Citibank Credit Card Master Trust 5.55% 1/9/2006 (1) 300 281
Citibank Credit Card Master Trust 5.80% 2/7/2005 (1) 100 96
Citibank Credit Card Master Trust 6.55% 2/15/2004 (1) 200 198
Citicorp Lease Pass-Through Trust 7.22% 6/15/2005 (1)(2) 250 247
Countrywide Asset-Backed Certificates 6.24% 9/25/2018 (1) 300 291
DaimlerChrysler Auto Trust 7.09% 9/15/2002 (1) 650 650
EQCC Home Equity Loan Trust 6.223% 6/25/2011 (1) 350 342
First Bank Corp. Card Master Trust 6.40% 2/15/2003 (1) 575 567
Green Tree Home Equity Loan Trust 7.05% 9/15/2030 (1) 250 250
Honda Auto Lease Trust 6.45% 9/15/2002 (1) 400 396
MBNA Master Credit Card Trust 6.70% 1/18/2005 (1) 200 198
Mellon Residential Funding Corp. Mortgage
Pass-Through Certificates 6.832% 2/25/2030 (1) 300 296
Navistar Financial Corp. Owner Trust 5.95% 4/15/2003 (1) 350 346
Navistar Financial Corp. Owner Trust 7.47% 2/15/2007 (1) 250 250
Nissan Auto Receivables Trust 7.01% 9/15/2003 (1) 250 249
Onyx Acceptance Owner Trust 6.82% 11/15/2003 (1) 225 224
Option One Mortgage Loan Trust 5.92% 5/25/2029 (1) 300 293
PECO Energy Transition Trust 5.63% 3/1/2005 (1) 321 311
PECO Energy Transition Trust 6.05% 3/1/2009 (1) 125 117
PP&L Transition Bond 6.41% 12/26/2003 (1) 400 397
PP&L Transition Bond 7.05% 6/25/2009 (1) 125 124
Residential Asset Securities Corp. 6.00% 5/25/2020 (1) 350 343
UAC Securitization Corp. 5.57% 9/8/2003 (1) 350 347
UAC Securitization Corp. 6.31% 12/8/2006 (1) 175 170
----------
8,378
----------
FINANCE (24.3%)
American Express Credit Corp. 6.125% 11/15/2001 66 65
CIT Group Holdings 6.25% 3/28/2001 200 198
Cabot Industrial Properties LP 7.125% 5/1/2004 330 314
Capital One Bank 6.58% 4/17/2001 250 248
Charles Schwab Corp. 8.05% 3/1/2010 250 254
Chelsea GCA Realty 7.75% 1/26/2001 150 149
Colonial Realty LP 6.96% 7/26/2004 200 187
Comdisco Inc. 7.25% 9/20/2001 275 273
Conseco Inc. 8.50% 10/15/2002 200 198
DR Investments 7.45% 5/15/2007 (2) 100 98
Dime Bancorp Inc. 6.375% 1/30/2001 150 148
Dime Bancorp Inc. 7.00% 7/25/2001 100 99
Donaldson Lufkin & Jenrette, Inc. 8.00% 3/1/2005 600 605
Finova Capital Corp. 6.11% 2/18/2003 400 377
First Industrial LP 7.15% 5/15/2027 250 245
Ford Motor Credit Co. 5.75% 2/23/2004 400 376
International Business Machines Credit Corp. 6.64% 10/29/2001 95 94
Lehman Brothers Holdings Inc. 6.25% 4/1/2003 200 193
MBNA Corp. 6.875% 6/1/2005 200 193
MONY Group Inc. 8.35% 3/15/2010 250 252
Mercantile Bancorp 6.80% 6/15/2001 300 298
Morgan Stanley, Dean Witter & Co. 5.625% 1/20/2004 400 377
Morgan Stanley, Dean Witter & Co. 7.125% 1/15/2003 330 329
Morgan Stanley, Dean Witter & Co. 7.375% 4/15/2003 100 100
</TABLE>
5
<PAGE> 77
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM CORPORATE PORTFOLIO COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Newcourt Credit Group 6.875% 2/16/2005 $ 300 $ 292
Norwest Corp. 6.125% 10/15/2000 425 423
Oasis Residential Inc. 6.75% 11/15/2001 250 244
PNC Funding Corp. 9.875% 3/1/2001 291 298
PaineWebber Group Inc. 6.45% 12/1/2003 402 386
Popular Inc. 6.20% 4/30/2001 300 296
Provident Bank of Ohio 6.125% 12/15/2000 340 337
Prudential Insurance Co. of America 6.375% 7/23/2006 (2) 200 185
Reckson Operating Partnership LP 7.40% 3/15/2004 125 119
Regency Centers LP 7.40% 10/1/2003 100 95
Salomon Smith Barney Holdings Inc. 7.30% 5/15/2002 350 350
Sears Roebuck Acceptance Corp. 6.69% 4/30/2001 400 397
Southern National Corp. 7.05% 5/23/2003 500 490
Summit Bancorp 8.625% 12/10/2002 230 235
USAA Capital Corp. 7.54% 3/30/2005 (2) 500 510
US Bancorp 6.875% 12/1/2004 350 342
U S WEST Capital Funding, Inc. 6.875% 8/15/2001 500 497
Wachovia Corp. 6.70% 6/21/2004 450 440
----------
11,606
----------
INDUSTRIAL (25.2%)
AEROSPACE & DEFENSE (1.7%)
Lockheed Martin Corp. 6.50% 4/15/2003 200 192
Lockheed Martin Corp. 7.95% 12/1/2005 100 99
Raytheon Co. 5.95% 3/15/2001 300 296
Raytheon Co. 7.90% 3/1/2003 (2) 250 250
AUTOMOTIVE (1.5%)
Cooper Tire & Rubber Co. 7.25% 12/16/2002 125 124
Daimler-Chrysler North America Holding Corp. 6.84% 10/15/2002 100 99
Daimler-Chrysler North America Holding Corp. 6.90% 9/1/2004 500 491
CABLE (1.3%)
Cox Communications, Inc. 6.50% 11/15/2002 250 243
TCI Communications Inc. 6.375% 5/1/2003 400 389
CHEMICALS (2.9%)
E.I. du Pont de Nemours & Co. 6.75% 10/15/2004 500 492
Monsanto Co. 5.625% 12/1/2001 250 243
Praxair, Inc. 6.70% 4/15/2001 635 632
CONSUMERS GOODS & SERVICES (1.6%)
Procter & Gamble Co. 6.60% 12/15/2004 400 391
VF Corp. 7.60% 4/1/2004 365 358
ENERGY & RELATED GOODS & SERVICES (4.4%)
Apache Corp. 9.25% 6/1/2002 375 386
BP America, Inc. 9.375% 11/1/2000 400 406
Baker Hughes, Inc. 5.80% 2/15/2003 150 143
Coastal Corp. 6.50% 5/15/2006 250 234
Enterprise Products 8.25% 3/15/2005 350 351
Phillips Petroleum Co. 9.00% 6/1/2001 585 596
GAMING (0.9%)
Harrah's Operating Co., Inc. 7.50% 1/15/2009 200 185
Park Place Entertainment 7.95% 8/1/2003 250 244
GENERAL (0.6%)
Parker Retirement Savings Plan Trust 6.34% 8/19/2004 (1)(2) 312 292
</TABLE>
6
<PAGE> 78
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GROCERY STORES (1.5%)
American Stores Co. 7.40% 5/15/2005 $ 300 $ 296
Kroger Co. 6.34% 6/1/2001 425 419
HEALTH CARE (1.3%)
Boston Scientific Corp. 6.625% 3/15/2005 210 196
Upjohn Co. 5.875% 4/15/2000 400 400
OTHER (1.1%)
International Speedway Corp. 7.875% 10/15/2004 250 246
WMX Technologies Inc. 7.00% 10/15/2006 300 260
PAPER & PACKAGING (0.7%)
International Paper Co. 6.125% 11/1/2003 350 336
TECHNOLOGY & RELATED (2.3%)
CSC Enterprises 6.50% 11/15/2001 (2) 700 689
Texas Instruments Inc. 7.00% 8/15/2004 400 395
TRANSPORTATION (3.4%)
Continental Airlines Pass Through Trust 7.434% 3/15/2006 (1) 300 293
Delta Air Lines Inc. 6.65% 3/15/2004 100 94
Delta Air Lines Inc. 7.70% 12/15/2005 125 121
ERAC USA Finance Co. 6.35% 1/15/2001 (2) 200 198
Federal Express Corp. 9.875% 4/1/2002 65 67
Hertz Corp. 7.375% 6/15/2001 350 349
Norfolk Southern Corp. 6.70% 5/1/2000 230 230
TTX Co. 7.02% 11/15/2001 (2) 250 247
----------
11,972
----------
UTILITIES (16.3%)
Arizona Public Service Co. 5.875% 2/15/2004 (3) 400 375
Boston Edison Co. 6.80% 3/15/2003 300 295
Cinergy Corp. 6.125% 4/15/2004 150 141
Detroit Edison Co. 6.56% 5/1/2001 250 248
Duquesne Light Co. 6.10% 5/10/2000 400 400
East Coast Power 6.737% 2/24/2005 138 128
Edison International 6.875% 9/15/2004 315 306
FPL Group Capital Inc. 7.625% 9/15/2006 300 299
KN Energy Inc. 6.45% 11/30/2001 410 402
Kern River Funding Corp. 6.72% 9/30/2001 (2) 400 394
LG&E Capital Corp. 6.205% 5/1/2004 (2) 300 282
Limestone Electron Trust 8.625% 3/15/2003 500 502
MidAmerican Funding LLC 5.85% 3/1/2001 250 247
Niagara Mohawk Power Corp. 6.625% 7/1/2005 200 189
NRG Northeast Generating LLC 8.065% 5/5/2002 (2) 500 499
NRG South Central Generating LLC 8.962% 3/15/2016 (2) 500 512
Nynex Corp. 9.55% 2/25/2005 600 647
Osprey Trust 8.31% 1/15/2003 (2) 125 125
PPL Capital Funding 7.75% 4/15/2005 200 199
Potomac Capital Investment Corp. 7.55% 11/19/2001 (2) 150 149
Texas Utilities Co. 7.375% 8/1/2001 269 269
Tosco Trust 8.58% 3/1/2010 (2) 250 254
Transcontinental Gas Pipeline 8.875% 9/15/2002 300 307
Virginia Electric Power 6.30% 6/21/2001 250 248
Worldcom Inc. 6.125% 8/15/2001 250 247
Yosemite Security Trust 8.25% 11/15/2004 (2) 100 99
----------
7,763
----------
--------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $40,272) 39,719
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 79
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
SHORT-TERM CORPORATE PORTFOLIO COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES (3.5%)
--------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Note 4.625% 12/31/2000 $ 1,275 $ 1,259
U.S. Treasury Note 5.875% 11/15/2004 400 393
--------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES
(COST $1,661) 1,652
--------------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS (U.S. DOLLAR-DENOMINATED)(9.4%)
--------------------------------------------------------------------------------------------------------------------------
Amvescap PLC 6.375% 5/15/2003 250 240
Amvescap PLC 6.60% 5/15/2005 100 95
BCH Cayman Islands Ltd. 6.50% 2/15/2006 200 190
Banco Santiago SA 7.00% 7/18/2007 100 91
Bank of Tokyo-Mitsubishi 8.40% 4/15/2010 300 304
Canadian Imperial Bank of Commerce (NY) 6.20% 8/1/2000 450 449
The Development Bank of Singapore Ltd. 7.875% 8/10/2009 (2) 50 50
Israel Electric Corp. 7.25% 12/15/2006 (2) 150 145
Israel Electric Corp. 7.75% 3/1/2009 (2) 125 124
Kimberly-Clark de Mexico 8.875% 8/1/2009 (2) 50 52
Korea Electric Power 10.00% 4/1/2001 (2) 150 153
Korean Development Bank 7.125% 4/22/2004 150 145
National Westminster Bancorp Inc. 9.45% 5/1/2001 150 153
Noranda, Inc. 8.625% 7/15/2002 75 76
Pemex Finance Ltd. 6.125% 11/15/2003 (1) 400 391
Pemex Finance Ltd. 9.14% 5/15/2003 400 408
Petro Geo-Services 6.25% 11/19/2003 105 100
Petroliam Nasional Bhd. 7.125% 10/18/2006 (2) 100 95
Pohang Iron & Steel Co. Ltd. 6.625% 7/1/2003 100 96
Republic of Argentina 0.00% 10/15/2001 100 86
Republic of South Africa 9.125% 5/19/2009 125 127
Samsung Electronics America 9.75% 5/1/2003 (2) 175 182
Stagecoach Holdings PLC 8.625% 11/15/2009 100 98
The State of Qatar 9.50% 5/21/2009 (2) 100 106
United Mexican States 9.875% 2/1/2010 163 170
Vodafone AirTouch PLC 7.625% 2/15/2005 (2) 350 353
--------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS
(COST $4,483) 4,479
--------------------------------------------------------------------------------------------------------------------------
TAXABLE MUNICIPAL BOND (0.5%)
--------------------------------------------------------------------------------------------------------------------------
NY State Power Auth.
(COST $246) 6.05% 11/15/2001 250 246
--------------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (2.0%)
--------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government Obligations in a
Pooled Cash Account
(COST $946) 6.12% 4/3/2000 946 946
--------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.8%)
(COST $47,608) 47,042
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 80
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
(000)
--------------------------------------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (1.2%)
--------------------------------------------------------------------------------------------------------------------------
Other Assets $ 801
Liabilities (242)
----------
559
--------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
--------------------------------------------------------------------------------------------------------------------------
Applicable TO 4,922,118 Outstanding $.001 Par Value Shares of Beneficial Interest
(Unlimited Authorization) $47,601
==========================================================================================================================
NET ASSET VALUE PER SHARE $9.67
==========================================================================================================================
</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, 2000, the aggregate
value of these securities was $6,534,000, representing 13.7% of net assets.
(3) Security segregated as intial margin for open futures contracts.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
AT MARCH 31, 2000, NET ASSETS CONSISTED OF:
--------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $48,305 $9.81
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (34) (.01)
Unrealized Depreciation--Note F
Investment Securities (566) (.11)
Futures Contracts (104) (.02)
--------------------------------------------------------------------------------------------------------------------------
NET ASSETS $47,601 $9.67
==========================================================================================================================
</TABLE>
9
<PAGE> 81
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
HIGH-GRADE BOND PORTFOLIO COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (57.4%)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES (17.7%)
U.S. Treasury Bond 5.50% 5/15/2009 $ 2,960 $ 2,820
U.S. Treasury Bond 6.75% 8/15/2026 5,700 6,197
U.S. Treasury Bond 7.125% 2/15/2023 3,085 3,451
U.S. Treasury Bond 7.50% 11/15/2024 725 851
U.S. Treasury Bond 7.625% 11/15/2022 4,875 5,744
U.S. Treasury Bond 7.875% 2/15/2021 115 138
U.S. Treasury Bond 8.00% 11/15/2021 1,680 2,046
U.S. Treasury Bond 8.125% 8/15/2019 5,015 6,097
U.S. Treasury Bond 8.125% 8/15/2021 3,215 3,953
U.S. Treasury Bond 8.50% 2/15/2020 1,570 1,980
U.S. Treasury Bond 8.75% 5/15/2017 535 676
U.S. Treasury Bond 8.75% 5/15/2020 960 1,239
U.S. Treasury Bond 8.75% 8/15/2020 420 543
U.S. Treasury Bond 8.875% 8/15/2017 1,300 1,662
U.S. Treasury Bond 8.875% 2/15/2019 790 1,022
U.S. Treasury Bond 9.375% 2/15/2006 995 1,140
U.S. Treasury Bond 10.00% 5/15/2010 125 143
U.S. Treasury Bond 10.375% 11/15/2009 150 172
U.S. Treasury Bond 10.375% 11/15/2012 6,445 7,933
U.S. Treasury Bond 12.75% 11/15/2010 1,775 2,283
U.S. Treasury Bond 13.25% 5/15/2014 670 979
U.S. Treasury Bond 14.00% 11/15/2011 1,065 1,488
U.S. Treasury Note 7.25% 5/15/2004 4,150 4,277
----------
56,834
----------
AGENCY BONDS & NOTES (5.6%)
Federal Farm Credit Bank 4.80% 11/6/2003 2,500 2,325
Federal Home Loan Bank 5.575% 9/2/2003 1,900 1,817
Federal Home Loan Bank 5.675% 8/18/2003 2,000 1,919
Federal Home Loan Bank 5.865% 9/2/2008 1,300 1,181
Federal Home Loan Bank 5.88% 11/25/2008 530 486
Federal Home Loan Bank 6.50% 8/15/2007 1,450 1,397
Federal Home Loan Mortgage Corp. 7.09% 6/1/2005 200 197
Federal National Mortgage Assn. 5.64% 12/10/2008 1,500 1,356
Federal National Mortgage Assn. 5.75% 4/15/2003 1,090 1,056
Federal National Mortgage Assn. 5.90% 7/9/2003 1,500 1,450
Federal National Mortgage Assn. 5.91% 8/25/2003 650 628
Federal National Mortgage Assn. 5.96% 4/23/2003 300 291
Federal National Mortgage Assn. 5.97% 7/3/2003 1,000 968
Federal National Mortgage Assn. 6.40% 5/14/2009 2,000 1,854
Federal National Mortgage Assn. 6.56% 4/23/2008 1,250 1,188
----------
18,113
----------
MORTGAGE-BACKED SECURITIES (34.1%)
Federal Home Loan Mortgage Corp. 5.50% 11/1/2008-3/1/2014 (1) 1,662 1,534
Federal Home Loan Mortgage Corp. 6.00% 4/1/2003-5/1/2029 (1) 11,754 10,905
Federal Home Loan Mortgage Corp. 6.50% 9/1/2000-7/1/2029 (1) 18,765 17,801
Federal Home Loan Mortgage Corp. 7.00% 4/1/2000-9/1/2029 (1) 13,017 12,617
Federal Home Loan Mortgage Corp. 7.50% 1/1/2007-4/1/2028 (1) 6,225 6,176
Federal Home Loan Mortgage Corp. 8.00% 10/1/2009-12/1/2027 (1) 3,414 3,443
Federal Home Loan Mortgage Corp. 8.50% 5/1/2006-5/1/2027 (1) 625 642
Federal Home Loan Mortgage Corp. 9.00% 11/1/2005-5/1/2027 (1) 117 122
Federal Home Loan Mortgage Corp. 9.50% 1/1/2025-2/1/2025 (1) 64 69
Federal Home Loan Mortgage Corp. 10.00% 3/1/2017-11/1/2019 (1) 38 42
Federal National Mortgage Assn. 5.50% 3/1/2001 (1) 32 31
Federal National Mortgage Assn. 6.00% 8/1/2000-3/1/2029 (1) 5,108 4,733
Federal National Mortgage Assn. 6.50% 9/1/2001-8/1/2029 (1) 8,859 8,375
Federal National Mortgage Assn. 7.00% 5/1/2000-11/1/2029 (1) 6,930 6,699
Federal National Mortgage Assn. 7.50% 7/1/2001-3/1/2030 (1) 4,660 4,604
Federal National Mortgage Assn. 8.00% 7/1/2007-9/1/2027 (1) 916 930
</TABLE>
10
<PAGE> 82
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal National Mortgage Assn. 8.50% 11/1/2006-12/1/2026 (1) $ 413 $ 426
Federal National Mortgage Assn. 9.00% 3/1/2020-4/1/2025 (1) 210 219
Federal National Mortgage Assn. 9.50% 6/1/2001-2/1/2025 (1) 109 118
Federal National Mortgage Assn. 10.00% 8/1/2020-8/1/2021 (1) 65 71
Federal National Mortgage Assn. 10.50% 8/1/2020 (1) 17 18
Government National Mortgage Assn. 6.00% 3/15/2009-7/15/2029 (1) 2,739 2,528
Government National Mortgage Assn. 6.50% 10/15/2008-7/15/2029 (1) 10,005 9,468
Government National Mortgage Assn. 7.00% 10/15/2008-10/15/2029 (1) 8,110 7,905
Government National Mortgage Assn. 7.50% 5/15/2008-11/15/2029 (1) 4,704 4,692
Government National Mortgage Assn. 8.00% 3/15/2008-11/15/2029 (1) 3,330 3,396
Government National Mortgage Assn. 8.50% 7/15/2009-4/15/2027 (1) 818 847
Government National Mortgage Assn. 9.00% 4/15/2016-10/15/2026 (1) 482 507
Government National Mortgage Assn. 9.50% 4/15/2017-2/15/2025 (1) 221 234
Government National Mortgage Assn. 10.00% 5/15/2020-1/15/2025 (1) 91 99
Government National Mortgage Assn. 10.50% 5/15/2019 (1) 28 30
Government National Mortgage Assn. 11.00% 10/15/2015 (1) 19 21
Government National Mortgage Assn. 11.50% 2/15/2013 (1) 15 17
Resolution Trust Corp. Collateralized Mortgage Obligations 10.35% 8/25/2021 (1) 49 49
----------
109,368
----------
--------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $188,104) 184,315
------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (35.9%)
------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (5.7%)
ARG Funding Corp. 5.88% 5/20/2003 (1)(2) 1,350 1,316
Advanta Credit Card Master Trust 6.05% 8/1/2003 (1) 1,250 1,247
Advanta Mortgage Loan Trust 6.21% 11/25/2016 (1) 1,000 978
American Express Credit Card Master Trust 6.80% 12/15/2003 (1) 1,250 1,248
CIT RV Trust 5.78% 7/15/2008 (1) 500 495
CIT RV Trust 5.96% 4/15/2011 (1) 450 441
California Infrastructure & Econ. Dev. Bank SP Trust PG&E 6.16% 6/25/2003 (1) 250 249
California Infrastructure & Econ. Dev. Bank SP Trust PG&E 6.42% 9/25/2008 (1) 375 362
Chemical Master Credit Card Trust I 5.55% 4/15/2003 (1) 1,250 1,239
Citicorp Lease Pass-Through Trust 7.22% 6/15/2005 (1)(2 ) 175 173
Citicorp Lease Pass-Through Trust 8.04% 12/15/2019 (1) 500 510
Discover Card Master Trust 5.65% 11/15/2004 (1) 200 194
First USA Credit Card Master Trust 6.42% 3/17/2005 (1) 1,250 1,233
MMCA Automobile Trust 6.80% 8/15/2003 (1) 800 795
PECO Energy Transition Trust 5.63% 3/1/2005 (1) 1,900 1,840
PECO Energy Transition Trust 6.05% 3/1/2009 (1) 225 211
Premier Auto Trust 5.69% 6/8/2002 (1) 1,700 1,688
Sears Credit Account Master Trust 5.80% 8/15/2005 (1) 1,500 1,487
Sears Credit Account Master Trust 8.10% 6/15/2004 (1) 583 587
Toyota Auto Lease Trust 5.35% 7/25/2002 (1) 1,850 1,834
Toyota Auto Lease Trust 6.35% 4/26/2004 (1) 250 249
----------
18,376
----------
FINANCE (12.6%)
Allstate Corp. 7.20% 12/1/2009 300 287
Associates Corp. 5.875% 5/16/2001 1,100 1,083
Associates Corp. 6.50% 10/15/2002 650 637
Associates Corp. 7.50% 4/15/2002 600 601
Avalon Properties Inc. 6.875% 12/15/2007 450 427
BT Capital Trust B 7.90% 1/15/2027 200 185
BankAmerica Corp. 9.375% 9/15/2009 500 559
BankAmerica Corp. 10.00% 2/1/2003 200 213
Bank of New York Capital 7.97% 12/31/2026 400 379
Bear, Stearns & Co., Inc. 6.625% 1/15/2004 200 193
CIGNA Corp. 7.875% 5/15/2027 450 428
CIT Group Inc. 7.375% 3/15/2003 1,000 1,001
CNA Financial Corp. 6.50% 4/15/2005 525 482
</TABLE>
11
<PAGE> 83
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
HIGH-GRADE BOND PORTFOLIO COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Case Credit Corp. 6.15% 3/1/2002 $ 2,250 $ 2,183
Chase Capital I 7.67% 12/1/2026 400 370
The Chase Manhattan Corp. 6.00% 11/1/2005 575 539
The Chase Manhattan Corp. 6.50% 8/1/2005 175 168
Citicorp 7.625% 5/1/2005 300 303
Citicorp Capital II 8.015% 2/15/2027 500 478
Conseco Inc. 9.00% 10/15/2006 500 491
CoreStates Capital Corp. 9.375% 4/15/2003 250 263
Donaldson Lufkin & Jenrette, Inc. 6.00% 12/1/2001 3,000 2,922
ERAC USA Finance Co. 7.95% 12/15/2009 (2) 400 395
Equitable Companies Inc. 7.00% 4/1/2028 140 124
Equity Residential Properties 6.55% 11/15/2001 550 540
Finova Capital Corp. 5.875% 10/15/2001 750 726
Finova Capital Corp. 7.25% 11/8/2004 750 718
First Chicago Corp. 11.25% 2/20/2001 300 310
Fleet Capital Trust II 7.92% 12/11/2026 400 375
Ford Motor Credit Co. 5.125% 10/15/2001 2,100 2,041
Ford Motor Credit Co. 6.375% 2/1/2029 500 422
Ford Motor Credit Co. 7.00% 9/25/2001 400 399
Ford Motor Credit Co. 7.375% 10/28/2009 300 294
General Electric Capital Corp. 5.77% 8/27/2001 2,000 1,968
General Motors Acceptance Corp. 5.50% 12/15/2001 750 731
General Motors Acceptance Corp. 7.125% 5/1/2001 1,200 1,201
HRPT Properties Trust 6.75% 12/18/2002 750 706
Household Finance Corp. 6.40% 6/17/2008 125 115
Household Finance Corp. 7.65% 5/15/2007 400 404
JDN Realty Corp. 6.80% 8/1/2004 350 325
Lehman Brothers Holdings Inc. 6.25% 4/1/2003 850 818
Lehman Brothers Holdings Inc. 6.625% 2/5/2006 250 236
Lehman Brothers Holdings Inc. 7.50% 9/1/2006 250 246
Mack-Cali Realty 7.00% 3/15/2004 1,000 957
MONY Group Inc. 8.35% 3/15/2010 900 907
Morgan Stanley, Dean Witter & Co. 7.125% 1/15/2003 2,200 2,190
NB Capital Trust IV 8.25% 4/15/2027 200 194
NCNB Corp. 9.50% 6/1/2004 150 160
NationsBank Corp. 7.00% 9/15/2001 200 199
NationsBank Corp. 7.75% 8/15/2004 500 506
PEFCO 7.20% 11/15/2010 600 598
Popular Inc. 7.375% 9/15/2001 775 772
Reckson Operating Partnership LP 7.75% 3/15/2009 500 467
Salomon, Inc. 6.65% 7/15/2001 750 745
Security Capital Pacific Trust 8.05% 4/1/2017 150 138
Simon DeBartolo Group, Inc. 6.75% 7/15/2004 250 235
Summit Properties Inc. 6.95% 8/15/2004 700 653
Susa Partnership 7.50% 12/1/2027 175 153
Toyota Motor Credit Corp. 5.50% 9/17/2001 1,750 1,712
Travelers Property Casualty Corp. 7.75% 4/15/2026 275 267
U S WEST Capital Funding, Inc. 6.875% 8/15/2001 750 745
Wells Fargo & Co. 6.50% 9/3/2002 1,100 1,080
Wells Fargo Capital I 7.96% 12/15/2026 400 378
----------
40,342
----------
INDUSTRIAL (11.5%)
Allied Signal Inc. 6.20% 2/1/2008 500 467
American Airlines ETC-A 6.855% 4/15/2009 400 392
American Airlines ETC-A 7.024% 10/15/2009 200 192
Anadarko Petroleum Corp. 7.20% 3/15/2029 500 446
Anheuser-Busch Cos., Inc. 7.10% 6/15/2007 450 442
Anheuser-Busch Cos., Inc. 7.125% 7/1/2017 150 141
Anheuser-Busch Cos., Inc. 7.375% 7/1/2023 75 71
Applied Materials, Inc. 8.00% 9/1/2004 100 102
</TABLE>
12
<PAGE> 84
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Archer-Daniels-Midland Co. 8.875% 4/15/2011 $ 180 $ 198
Auburn Hills 12.00% 5/1/2020 115 167
Bayer Corp. 6.65% 2/15/2028 (2) 350 314
Black & Decker Corp. 7.50% 4/1/2003 500 497
The Boeing Co. 6.625% 2/15/2038 400 343
Burlington Northern Santa Fe Corp. 6.375% 12/15/2005 100 95
Burlington Northern Santa Fe Corp. 6.75% 3/15/2029 250 217
Burlington Northern Santa Fe Corp. 6.875% 2/15/2016 300 272
Burlington Northern Santa Fe Corp. 7.00% 12/15/2025 200 179
C.R. Bard, Inc. 6.70% 12/1/2026 450 426
CSX Corp. 8.10% 9/15/2022 150 149
CSX Corp. 8.625% 5/15/2022 50 52
Caterpillar Co. 7.375% 3/1/2097 300 271
Chrysler Corp. 7.45% 2/1/2097 100 94
Coastal Corp. 6.50% 5/15/2006 250 234
Comcast Cablevision 8.375% 5/1/2007 400 409
Comcast Cablevision 8.875% 5/1/2017 350 374
Conrail Corp. 9.75% 6/15/2020 100 116
Continental Airlines, Inc. (Equipment Trust Certificates) 6.648% 3/15/2019 375 345
Cyprus Minerals 6.625% 10/15/2005 400 368
Daimler-Chrysler North America Holding Corp. 6.90% 9/1/2004 1,000 982
Dayton Hudson Corp. 6.65% 8/1/2028 400 349
Dayton Hudson Corp. 6.75% 1/1/2028 250 221
Deere & Co. 8.50% 1/9/2022 100 107
Delta Air Lines Inc. 8.30% 12/15/2029 500 460
Delta Air Lines, Inc. (Equipment Trust Certificates) 8.54% 1/2/2007 (1) 172 169
Dillard's Department Stores 7.75% 5/15/2027 250 216
Dillard's Department Stores 7.85% 10/1/2012 300 272
E.I. du Pont de Nemours & Co. 6.75% 10/15/2004 400 394
E.I. du Pont de Nemours & Co. 6.875% 10/15/2009 100 97
Eastman Chemical Co. 6.375% 1/15/2004 400 384
Eastman Chemical Co. 7.25% 1/15/2024 100 91
Enterprise Products 8.25% 3/15/2005 2,100 2,108
Federated Department Stores, Inc. 7.00% 2/15/2028 100 87
First Data Corp. 6.625% 4/1/2003 125 123
Ford Capital BV 9.875% 5/15/2002 400 418
Ford Motor Co. 8.90% 1/15/2032 500 563
Ford Motor Co. 9.98% 2/15/2047 65 82
General Motors Corp. 9.125% 7/15/2001 400 409
Georgia-Pacific Corp. 7.75% 11/15/2029 250 234
Harrah's Operating Co., Inc. 7.50% 1/15/2009 300 277
International Business Machines Corp. 7.125% 12/1/2096 450 414
International Paper Co. 7.875% 8/1/2006 100 101
Kroger Co. 7.625% 9/15/2006 300 294
Kroger Co. 7.65% 4/15/2007 350 345
Kroger Co. 8.00% 9/15/2029 125 120
Lockheed Martin Corp. 6.85% 5/15/2001 2,000 1,979
May Department Stores Co. 9.75% 2/15/2021 100 115
McDonald's Corp. 6.75% 2/15/2003 230 227
Mobil Corp. 7.625% 2/23/2033 200 192
Monsanto Co. 6.00% 12/1/2005 1,000 926
News America Holdings Inc. 8.50% 2/15/2005 300 308
Norfolk Southern Corp. 6.875% 5/1/2001 1,125 1,120
Norfolk Southern Corp. 7.40% 9/15/2006 270 268
Norfolk Southern Corp. 7.90% 5/15/2097 50 47
Northrop Grumman Corp. 9.375% 10/15/2024 400 406
Occidental Petroleum Corp. 8.50% 11/9/2001 750 757
Philip Morris Cos., Inc. 7.00% 7/15/2005 150 137
Philip Morris Cos., Inc. 8.25% 10/15/2003 150 147
Phillips Petroleum Co. 9.00% 6/1/2001 600 611
Praxair, Inc. 6.75% 3/1/2003 500 488
</TABLE>
13
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<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
HIGH-GRADE BOND PORTFOLIO COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Raytheon Co. 6.50% 7/15/2005 $ 1,100 $ 1,038
Raytheon Co. 7.90% 3/1/2003 (2) 500 501
Rohm & Haas Co. 6.95% 7/15/2004 200 198
Rohm & Haas Co. 7.40% 7/15/2009 100 100
Rohm & Haas Co. 7.85% 7/15/2029 325 330
Safeway Inc. 6.85% 9/15/2004 700 681
Safeway Inc. 7.00% 9/15/2007 550 528
Sears Roebuck Acceptance Corp. 6.75% 9/15/2005 150 143
Sprint Capital Corp. 6.50% 11/15/2001 1,800 1,780
TCI Communications Inc. 6.375% 5/1/2003 1,050 1,021
Texaco Capital Corp. 8.875% 9/1/2021 150 170
Time Warner Inc. 7.75% 6/15/2005 1,250 1,253
Time Warner Inc. 8.18% 8/15/2007 250 256
Time Warner Entertainment 8.375% 3/15/2023 350 361
Tyco International Group 6.875% 9/5/2002 (2) 500 492
Tyco International Group 6.875% 1/15/2029 500 428
Union Carbide Corp. 6.75% 4/1/2003 200 197
Union Carbide Corp. 7.75% 10/1/2096 125 116
Union Carbide Corp. 7.875% 4/1/2023 125 126
Union Oil of California 6.375% 2/1/2004 200 192
Union Pacific Corp. 6.625% 2/1/2029 500 417
Viacom Inc. 7.75% 6/1/2005 1,000 1,007
Westvaco Corp. 8.20% 1/15/2030 500 514
Yosemite Security Trust 8.25% 11/15/2004 (2) 775 770
----------
37,037
----------
UTILITIES (6.1%)
AT&T Corp. 8.35% 1/15/2025 140 141
Ameritech Capital Funding 6.15% 1/15/2008 775 724
Ameritech Capital Funding 7.50% 4/1/2005 300 305
Baltimore Gas & Electric Co. 8.375% 8/15/2001 500 506
CMS Panhandle Holding Co. 6.125% 3/15/2004 100 95
CMS Panhandle Holding Co. 6.50% 7/15/2009 300 271
CMS Panhandle Holding Co. 7.00% 7/15/2029 200 178
Coastal Corp. 6.50% 6/1/2008 100 92
Coastal Corp. 7.42% 2/15/2037 175 169
Coastal Corp. 7.75% 10/15/2035 250 251
Commonwealth Edison 7.375% 9/15/2002 1,000 999
Commonwealth Edison 7.50% 7/1/2013 250 248
Edison International 6.875% 9/15/2004 900 875
El Paso Energy Corp. 6.75% 5/15/2009 1,000 934
Enron Corp. 6.40% 7/15/2006 250 234
Enron Corp. 6.75% 8/1/2009 450 419
Enron Corp. 7.125% 5/15/2007 150 146
Enron Corp. 9.125% 4/1/2003 500 518
Enron Corp. 9.65% 5/15/2001 450 461
GTE South Inc. 6.125% 6/15/2007 500 457
KN Energy, Inc. 6.45% 3/1/2003 250 241
MCI Communications Corp. 6.50% 4/15/2010 200 186
MCI Communications Corp. 7.50% 8/20/2004 250 252
Michigan Bell Telephone Co. 7.50% 2/15/2023 175 168
National Rural Utility Co. 5.00% 10/1/2002 500 475
National Rural Utility Co. 6.20% 2/1/2008 650 605
New England Telephone & Telegraph Co. 6.875% 10/1/2023 175 153
New England Telephone & Telegraph Co. 7.875% 11/15/2029 500 507
New York Telephone Co. 6.125% 1/15/2010 750 676
Pacific Bell Telephone Co. 7.25% 7/1/2002 225 226
Southern California Edison Co. 6.375% 1/15/2006 650 624
Southwestern Bell Telephone Co. 7.625% 3/1/2023 475 448
Texas Utilities Co. 7.17% 8/1/2007 850 810
Texas Utilities Co. 7.375% 8/1/2001 250 250
</TABLE>
14
<PAGE> 86
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Texas Utilities Co. 7.875% 3/1/2023 $ 110 $ 107
Texas Utilities Co. 8.25% 4/1/2004 100 102
U S WEST Capital Funding, Inc. 6.125% 7/15/2002 1,000 973
U S WEST Communications Inc. 7.20% 11/1/2004 (2) 1,000 991
Virginia Electric & Power Co. 6.625% 4/1/2003 200 197
Virginia Electric & Power Co. 6.75% 10/1/2023 500 453
WorldCom Inc. 6.125% 8/15/2001 1,250 1,235
WorldCom Inc. 6.25% 8/15/2003 2,000 1,940
----------
19,642
----------
--------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $119,646) 115,397
--------------------------------------------------------------------------------------------------------------------------
FOREIGN AND INTERNATIONAL AGENCY BONDS (U.S. DOLLAR-DENOMINATED)(5.5%)
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
Abbey National PLC 7.95% 10/26/2029 700 712
Canadian National Railway Co. 6.80% 7/15/2018 450 407
Canadian National Railway Co. 6.90% 7/15/2028 200 178
China Telecom 7.875% 11/2/2004 1,100 1,106
Embotelladora Andina SA 7.875% 10/1/2097 350 279
Grand Metropolitan Investment Corp. 9.00% 8/15/2011 400 450
Hanson Overseas 7.375% 1/15/2003 400 396
Inter-American Development Bank 8.50% 3/15/2011 130 142
Israel Electric Corp. 7.75% 3/1/2009 (2) 450 445
KFW International Finance, Inc. 7.625% 2/15/2004 300 305
KFW International Finance, Inc. 9.125% 5/15/2001 200 204
Korea Electric Power 7.00% 2/1/2007 275 256
Korea Electric Power 7.75% 4/1/2013 600 564
Korean Development Bank 7.125% 4/22/2004 1,100 1,064
Kowloon-Canton Railway 8.00% 3/15/2010 100 98
National Australia Bank 6.60% 12/10/2007 400 381
National Westminster Bancorp Inc. 9.375% 11/15/2003 350 374
Noranda, Inc. 8.625% 7/15/2002 370 375
Northern Telecom Ltd. 6.875% 9/1/2023 250 228
Pemex Finance Ltd. 6.125% 2/15/2002 550 538
Petro Geo-Services 7.125% 3/30/2028 430 376
Petro Geo-Services 7.50% 3/31/2007 250 245
Petroliam Nasional Bhd. 8.875% 8/1/2004 (2) 700 717
Province of British Columbia 7.00% 1/15/2003 170 168
Province of Manitoba 8.75% 5/15/2001 500 507
Province of Manitoba 9.25% 4/1/2020 120 142
Province of Manitoba 9.625% 12/1/2018 100 122
Province of New Brunswick 8.75% 5/1/2022 200 227
Province of New Brunswick 9.75% 5/15/2020 500 615
Province of Newfoundland 7.32% 10/13/2023 350 338
Province of Newfoundland 9.00% 6/1/2019 300 344
Province of Ontario 7.375% 1/27/2003 110 110
Province of Ontario 7.75% 6/4/2002 200 202
Province of Ontario 8.00% 10/17/2001 1,500 1,517
Province of Saskatchewan 7.125% 3/15/2008 200 198
Province of Saskatchewan 8.00% 7/15/2004 550 565
Republic of Finland 7.875% 7/28/2004 350 362
Republic of Portugal 5.75% 10/8/2003 650 627
TPSA Finance BV 7.75% 12/10/2008 (2) 290 283
Swiss Bank Corp.-New York 7.00% 10/15/2015 500 474
Swiss Bank Corp.-New York 7.375% 6/15/2017 100 98
The State of Qatar 9.50% 5/21/2009 (2) 550 582
United Mexican States 11.375% 9/15/2016 200 235
--------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN AND INTERNATIONAL AGENCY BONDS
(COST $18,017) 17,556
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 87
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
HIGH-GRADE BOND PORTFOLIO COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEMPORARY CASH INVESTMENTS (1.7%)
--------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government Obligations
in a Pooled Cash Account 6.12% 4/3/2000 $ 4,489 $ 4,489
Collateralized by U.S. Government Obligations
in a Pooled Cash Account--Note G 6.14% 4/3/2000 990 990
--------------------------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $5,479) 5,479
--------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.5%)
(COST $331,246) 322,747
--------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.5%)
--------------------------------------------------------------------------------------------------------------------------
Other Assets--Note C 4,884
Liabilities--Note G (6,595)
----------
(1,711)
--------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
--------------------------------------------------------------------------------------------------------------------------
Applicable to 31,337,989 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $321,036
==========================================================================================================================
NET ASSET VALUE PER SHARE $10.24
==========================================================================================================================
</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, 2000, the aggregate
value of these securities was $6,979,000, representing 2.2% of net assets.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
AT MARCH 31, 2000, NET ASSETS CONSISTED OF:
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AMOUNT PER
(000) SHARE
---------------------------------------------------------------------------------------------------------------------------
Paid in Capital $332,698 $10.61
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (3,163) (.10)
Unrealized Depreciation--Note F (8,499) (.27)
---------------------------------------------------------------------------------------------------------------------------
NET ASSETS $321,036 $10.24
===========================================================================================================================
</TABLE>
16
<PAGE> 88
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
HIGH YIELD BOND PORTFOLIO COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (96.0%)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCE (3.8%)
Bank United Corp. 8.875% 5/1/2007 $ 750 $ 708
Chevy Chase Savings Bank 9.25% 12/1/2008 1,250 1,197
Imperial Credit Industries, Inc. 9.875% 1/15/2007 700 518
Navistar Financial Corp. 9.00% 6/1/2002 1,000 998
Olympic Financial Ltd. 11.50% 3/15/2007 290 307
Sovereign Bancorp, Inc. 10.50% 11/15/2006 500 510
Western Financial Savings Bank 8.50% 7/1/2003 1,000 915
----------
5,153
----------
INDUSTRIAL (87.1%)
AEROSPACE & DEFENSE (1.5%)
Argo-Tech Corp. 8.625% 10/1/2007 250 190
K & F Industries, Inc. 9.25% 10/15/2007 750 692
L-3 Communications Corp. 10.375% 5/1/2007 500 496
Newport News Shipbuilding Inc. 8.625% 12/1/2006 750 733
AUTOMOTIVE (4.5%)
Accuride Corp. 9.25% 2/1/2008 1,000 850
Delco Remy International Inc. 10.625% 8/1/2006 750 742
Dura Operating Corp. 9.00% 5/1/2009 500 447
Federal-Mogul Corp. 8.80% 4/15/2007 1,000 867
Hayes Wheels International, Inc. 11.00% 7/15/2006 500 490
LDM Technologies Inc. 10.75% 1/15/2007 500 375
Lear Corp. 7.96% 5/15/2005 1,000 933
Tenneco Automotive Inc. 11.625% 10/15/2009 1,500 1,455
BUILDING MATERIALS (2.4%)
American Standard Cos. Inc. 7.375% 2/1/2008 2,250 2,042
Nortek, Inc. 9.25% 3/15/2007 750 690
Werner Holdings Co., Inc. 10.00% 11/15/2007 650 608
CABLE (9.9%)
Adelphia Communications Corp. 8.375% 2/1/2008 1,000 890
CSC Holdings, Inc. 7.875% 12/15/2007 750 734
CSC Holdings, Inc. 8.125% 8/15/2009 750 744
CSC Holdings, Inc. 9.25% 11/1/2005 500 500
CSC Holdings, Inc. 9.875% 2/15/2013 1,000 1,020
Century Communications Inc. 8.875% 1/15/2007 1,000 915
Charter Communications Holdings LLC 8.625% 4/1/2009 2,000 1,750
Classic Cable, Inc. 10.50% 3/1/2010 (1) 750 741
Insight Midwest 9.75% 10/1/2009 (1) 725 721
Jones Intercable Inc. 7.625% 4/15/2008 1,000 982
Lenfest Communications, Inc. 8.375% 11/1/2005 1,500 1,536
NTL Inc. 10.00% 2/15/2007 750 728
Telewest Communication 9.875% 2/1/2010 (1) 750 743
USA Networks Inc. 6.75% 11/15/2005 1,500 1,438
CHEMICALS (3.6%)
ARCO Chemical Co. 9.80% 2/1/2020 1,500 1,365
Acetex Corp. 9.75% 10/1/2003 750 682
Buckeye Cellulose Corp. 8.50% 12/15/2005 500 480
Georgia Gulf Corp. 10.375% 11/1/2007 (1) 100 100
Huntsman Corp. 9.50% 7/1/2007 (1) 750 679
Lilly Industries, Inc. 7.75% 12/1/2007 1,250 1,163
Lyondell Chemical Co. 9.625% 5/1/2007 250 238
Sovereign Speciality Chemicals, Inc. 11.875% 3/15/2010 (1) 250 248
</TABLE>
17
<PAGE> 89
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
HIGH YIELD BOND PORTFOLIO COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONSUMER GOODS & SERVICES (1.7%)
Scotts Co. 8.625% 1/15/2009 (1) $ 500 $ 465
Sealy Mattress, Inc. 9.875% 12/15/2007 1,000 960
True Temper Sports, Inc. 10.875% 12/1/2008 1,000 950
CONTAINERS (2.1%)
BWAY Corp. 10.25% 4/15/2007 500 437
Owens-Illinois, Inc. 8.10% 5/15/2007 1,500 1,426
Silgan Holding Inc. 9.00% 6/1/2009 1,000 930
ENERGY & RELATED GOODS & SERVICES (5.7%)
AmeriGas Partners, LP 10.125% 4/15/2007 600 600
Clark Refining & Marketing, Inc. 8.375% 11/15/2007 500 365
Cross Timbers Oil Co. 9.25% 4/1/2007 400 386
Newfield Exploration Co. 7.45% 10/15/2007 750 695
Newpark Resources, Inc. 8.625% 12/15/2007 500 430
Oryx Energy Co. 8.125% 10/15/2005 500 508
P & L Coal Holdings Corp. 8.875% 5/15/2008 1,500 1,354
Plains Resources, Inc. 10.25% 3/15/2006 500 488
Pride Petroleum Services, Inc. 9.375% 5/1/2007 750 720
RBF Finance Co. 11.00% 3/15/2006 1,000 1,045
Tesoro Petroleum Corp. 9.00% 7/1/2008 500 468
Tuboscope Inc. 7.50% 2/15/2008 750 667
FOOD & LODGING (1.8%)
Aurora Foods Inc. 8.75% 7/1/2008 500 190
B & G Foods, Inc. 9.625% 8/1/2007 500 409
Nash Finch Co. 8.50% 5/1/2008 670 546
New World Pasta Co. 9.25% 2/15/2009 1,000 840
Tricon Global Restaurants, Inc. 7.65% 5/15/2008 500 477
GENERAL INDUSTRIAL (6.8%)
Allied Waste North America Inc. 7.625% 1/1/2006 1,500 1,222
Consumers International 10.25% 4/1/2005 1,000 650
Idex Corp. 6.875% 2/15/2008 1,500 1,330
International Wire Group 11.75% 6/1/2005 500 505
Mastec, Inc. 7.75% 2/1/2008 1,250 1,150
Neenah Corp. 11.125% 5/1/2007 1,035 890
Numatics Inc. 9.625% 4/1/2008 365 290
Park-Ohio Industries, Inc. 9.25% 12/1/2007 750 645
Roller Bearing Co. of America Inc. 9.625% 6/15/2007 500 458
Royster-Clark Inc. 10.25% 4/1/2009 455 384
Terex Corp. 8.875% 4/1/2008 500 438
Waste Management, Inc. 6.875% 5/15/2009 1,500 1,261
HEALTH CARE (4.8%)
Beverly Enterprises Inc. 9.00% 2/15/2006 500 429
Columbia/HCA Healthcare Corp. 7.25% 5/20/2008 1,000 887
Leiner Health Products, Inc. 9.625% 7/1/2007 365 273
Lifepoint Hospitals Holding Corp. 10.75% 5/15/2009 500 495
Owens & Minor, Inc. 10.875% 6/1/2006 500 513
Tenet Healthcare Corp. 8.125% 12/1/2008 1,750 1,601
Tenet Healthcare Corp. 8.625% 1/15/2007 1,000 945
Triad Hospitals Holdings, Inc. 11.00% 5/15/2009 640 637
Warner Chilcott Inc. 12.625% 2/15/2008 (1) 750 743
HOME BUILDING & REAL ESTATE (2.2%)
CapStar Hotel Co. 8.75% 8/15/2007 500 432
Kaufman & Broad Home Corp. 7.75% 10/15/2004 500 452
</TABLE>
18
<PAGE> 90
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Standard Pacific Corp. 8.50% 6/15/2007 $ 500 $ 445
Toll Corp. 7.75% 9/15/2007 1,000 865
Del E. Webb Corp. 10.25% 2/15/2010 1,000 830
MEDIA & ENTERTAINMENT (9.4%)
AMC Entertainment Inc. 9.50% 2/1/2011 500 260
Chancellor Media Corp. 8.125% 12/15/2007 35 34
Chancellor Media Corp. 8.75% 6/15/2007 250 246
Citadel Broadcasting Co. 9.25% 11/15/2008 500 475
EchoStar DBS Corp. 9.375% 2/1/2009 2,525 2,449
Emmis Communications Corp. 8.125% 3/15/2009 700 651
Fox/Liberty Networks LLC 8.875% 8/15/2007 1,000 1,002
Lin Television Corp. 8.375% 3/1/2008 500 438
Loews Cineplex Entertainment 8.875% 8/1/2008 1,500 938
Mail-Well Corp. 8.75% 12/15/2008 1,435 1,263
PRIMEDIA, Inc. 7.625% 4/1/2008 1,000 900
RCN Corp. 10.00% 10/15/2007 750 675
TV Guide, Inc. 8.125% 3/1/2009 1,500 1,493
Von Hoffman Press Inc. 10.375% 5/15/2007 (1) 405 379
World Color Press, Inc. 8.375% 11/15/2008 1,000 973
Young Broadcasting Inc. 9.00% 1/15/2006 750 668
METAL (4.1%)
AK Steel Corp. 7.875% 2/15/2009 1,000 905
AK Steel Corp. 9.125% 12/15/2006 1,000 977
Armco, Inc. 9.00% 9/15/2007 500 475
Bethlehem Steel Corp. 10.375% 9/1/2003 400 396
LTV Corp. 8.20% 9/15/2007 500 416
LTV Corp. 11.75% 11/15/2009 (1) 1,000 970
National Steel Corp. 9.875% 3/1/2009 500 489
Ryerson Tull, Inc. 9.125% 7/15/2006 500 515
Weirton Steel Corp. 10.75% 6/1/2005 500 500
PAPER & PACKAGING (5.1%)
Ball Corp. 7.75% 8/1/2006 1,000 937
Boise Cascade Co. 9.45% 11/1/2009 500 539
Container Corp. of America 9.75% 4/1/2003 500 497
Domtar Inc. 8.75% 8/1/2006 200 204
Domtar Inc. 9.50% 8/1/2016 500 520
Fonda Group Inc. 9.50% 3/1/2007 500 415
NoramPac Inc. 9.50% 2/1/2008 500 490
Packaging Corp. of America 9.625% 4/1/2009 1,000 985
Paperboard Industries International Inc. 8.375% 9/15/2007 1,000 880
Repap New Brunswick, Inc. 9.00% 6/1/2004 500 478
Tembec Finance Corp. 9.875% 9/30/2005 205 204
Tembec Industries Inc. 8.625% 6/30/2009 125 118
U.S. Timberlands LLC 9.625% 11/15/2007 750 645
RETAIL (0.3%)
Boise Cascade Office Products Corp. 7.05% 5/15/2005 465 445
TECHNOLOGY & RELATED (7.7%)
Amphenol Corp. 9.875% 5/15/2007 300 305
Beckman Instruments, Inc. 7.45% 3/4/2008 750 692
Celestica International, Inc. 10.50% 12/31/2006 65 68
Fairchild Semiconductor Corp. 10.125% 3/15/2007 475 462
Fisher Scientific International Inc. 9.00% 2/1/2008 1,000 905
Iron Mountain, Inc. 10.125% 10/1/2006 1,000 970
Pierce Leahy Corp. 9.125% 7/15/2007 800 744
</TABLE>
19
<PAGE> 91
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
HIGH YIELD BOND PORTFOLIO COUPON DATE (000) (000)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PSINet Inc. 10.00% 2/15/2005 $2,300 $2,185
SCG Holding & Semiconductor Co. Corp. 12.00% 8/1/2009 1,500 1,605
Telecommunication Techniques Co. 9.75% 5/15/2008 750 684
Unisys Corp. 7.875% 4/1/2008 1,000 940
Wesco Distribution Inc. 9.125% 6/1/2008 1,000 875
TELECOMMUNICATIONS (12.7%)
Covad Communications 12.00% 2/15/2010 (1) 750 660
Crown Castle International Corp. 9.00% 5/15/2011 1,350 1,201
Flag Limited Inc. 8.25% 1/30/2008 1,500 1,335
GCI, Inc. 9.75% 8/1/2007 1,000 930
Global Crossing Holding Ltd. 9.125% 11/15/2006 (1) 1,000 957
ITC DeltaCom, Inc. 9.75% 11/15/2008 500 480
ITC DeltaCom, Inc. 11.00% 6/1/2007 620 614
Intermedia Communications Inc. 8.875% 11/1/2007 1,000 907
Level 3 Communications, Inc. 9.125% 5/1/2008 2,250 1,935
MJD Communications Inc. 9.50% 5/1/2008 1,000 950
McLeodUSA Inc. 9.25% 7/15/2007 1,000 945
Nextel Communications Inc. 9.375% 11/15/2009 1,000 918
Nextel Communications Inc. 12.00% 11/1/2008 1,350 1,431
NEXTLINK Communications, Inc. 10.75% 11/15/2008 1,000 978
Qwest Communications International Inc. 7.50% 11/1/2008 1,000 970
Rogers Cantel, Inc. 8.30% 10/1/2007 700 693
Verio Inc. 11.25% 12/1/2008 605 602
Voicestream Wireless Corp. 10.375% 11/15/2009 (1) 750 746
TEXTILES & RELATED (0.2%)
Westpoint Stevens Inc. 7.875% 6/15/2005 340 275
TRANSPORTATION (0.6%)
Budget Group Inc. 9.125% 4/1/2006 1,000 805
----------
118,744
----------
UTILITIES (5.1%)
AES Corp. 8.375% 8/15/2007 500 435
Azurix Corp. 10.375% 2/15/2007 (1) 625 625
CMS Energy Corp. 7.50% 1/15/2009 350 312
CMS Energy Corp. 8.125% 5/15/2002 750 736
Caithness Coso Fund Corp. 9.05% 12/15/2009 500 475
Calpine Corp. 7.625% 4/15/2006 1,000 925
Cleveland Electric Illuminating Co. 7.43% 11/1/2009 750 723
El Paso Electric Co. Series D 8.90% 2/1/2006 1,000 1,049
Niagara Mohawk Power Corp. 7.75% 10/1/2008 500 490
Public Service Co. of New Mexico 7.50% 8/1/2018 1,000 954
Texas-New Mexico Power Co. 10.75% 9/15/2003 200 202
----------
6,926
----------
--------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $142,295) 130,823
--------------------------------------------------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (2.6%)
--------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government Obligations
in a Pooled Cash Account 6.12% 4/3/2000 2,618 2,618
Collateralized by U.S. Government Obligations
in a Pooled Cash Account--Note G 6.14% 4/3/2000 870 870
--------------------------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $3,488) 3,488
--------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.6%)
(COST $145,783) 134,311
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 92
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
(000)
--------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.4%)
--------------------------------------------------------------------------------------------------------------------------
<S> <C>
Other Assets--Note C $ 6,288
Liabilities--Note G (4,369)
----------
1,919
--------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
--------------------------------------------------------------------------------------------------------------------------
Applicable to 14,887,334 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $136,230
==========================================================================================================================
NET ASSET VALUE PER SHARE $9.15
==========================================================================================================================
</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, 2000, the aggregate
value of these securities was $8,777,000, representing 6.4% of net assets.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
AT MARCH 31, 2000, NET ASSETS CONSISTED OF:
--------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $155,084 $10.42
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (7,382) (.50)
Unrealized Depreciation--Note F (11,472) (.77)
--------------------------------------------------------------------------------------------------------------------------
NET ASSETS $136,230 $ 9.15
==========================================================================================================================
</TABLE>
21
<PAGE> 93
<TABLE>
<CAPTION>
------------------------------------------------------------------------
MARKET
VALUE*
BALANCED PORTFOLIO SHARES (000)
------------------------------------------------------------------------
COMMON STOCK (67.7%)
------------------------------------------------------------------------
<S> <C> <C>
AUTO & TRANSPORTATION (6.2%)
Ford Motor Co. 153,031 $ 7,030
Union Pacific Corp. 140,300 5,489
General Motors Corp. 64,139 5,312
British Airways PLC ADR 59,100 3,176
Delphi Automotive Systems Corp. 198,301 3,173
Canadian National Railway Co. 100,500 2,682
KLM Royal Dutch Air Lines
NV ADR 90,421 1,899
Norfolk Southern Corp. 126,200 1,814
CSX Corp. 69,000 1,621
Genuine Parts Co. 22,000 525
-------
32,721
-------
CONSUMER DISCRETIONARY (4.6%)
Kimberly-Clark Corp. 128,300 7,185
Gillette Co. 102,000 3,844
Whirlpool Corp. 61,500 3,605
Black & Decker Corp. 79,500 2,986
May Department Stores Co. 79,700 2,271
Sears, Roebuck & Co. 69,052 2,132
Eastman Kodak Co. 36,400 1,977
J.C. Penney Co., Inc. 5,400 80
-------
24,080
-------
CONSUMER STAPLES (1.9%)
Albertson's, Inc. 91,000 2,821
H.J. Heinz Co. 70,000 2,441
Philip Morris Cos., Inc. 115,500 2,440
Bestfoods 46,000 2,153
-------
9,855
-------
FINANCIAL SERVICES (12.1%)
Citigroup, Inc. 193,875 11,499
Marsh & McLennan Cos., Inc. 78,500 8,660
CIGNA Corp. 109,300 8,279
Wachovia Corp. 91,300 6,168
U.S. Bancorp 192,200 4,204
Fannie Mae 68,700 3,877
MBIA, Inc. 60,900 3,171
Bank of America Corp. 48,106 2,522
Bank One Corp. 69,000 2,372
Equity Office Properties Trust REIT 92,000 2,312
Jefferson-Pilot Corp. 33,250 2,213
Ace, Ltd. 93,000 2,127
Spieker Properties, Inc. REIT 46,000 2,047
Archstone Communities Trust REIT 70,000 1,395
Equity Residential Properties
Trust REIT 31,000 1,246
Starwood Hotels & Resorts
Worldwide, Inc. 26,000 683
Kimco Realty Corp. REIT 18,000 675
-------
63,450
-------
HEALTH CARE (6.5%)
Pharmacia & Upjohn, Inc. 190,500 11,287
Baxter International, Inc. 88,100 5,522
American Home Products Corp. 96,000 5,148
Johnson & Johnson 71,000 4,974
Abbott Laboratories 136,200 4,793
Aventis SA ADR 45,782 2,472
-------
34,196
-------
INTEGRATED OILS (6.7%)
Royal Dutch Petroleum Co. ADR 92,900 5,348
BP Amoco PLC ADR 91,128 4,835
Repsol SA ADR 206,200 4,395
Chevron Corp. 45,600 4,215
Conoco Inc. Class B 131,791 3,377
Total Fina Elf SA ADR 45,356 3,339
Texaco Inc. 56,500 3,030
USX-Marathon Group 114,200 2,976
Phillips Petroleum Co. 46,800 2,165
Unocal Corp. 44,587 1,326
-------
35,006
-------
OTHER ENERGY (1.5%)
Schlumberger Ltd. 46,000 3,519
Halliburton Co. 64,500 2,645
Sunoco, Inc. 68,545 1,876
-------
8,040
-------
MATERIALS & PROCESSING (9.2%)
Alcoa Inc. 159,500 11,205
Dow Chemical Co. 65,100 7,421
Phelps Dodge Corp. 82,200 3,905
PPG Industries, Inc. 62,200 3,254
E.I. du Pont de Nemours & Co. 61,086 3,230
Alcan Aluminium Ltd. 91,100 3,086
Willamette Industries, Inc. 71,800 2,881
International Paper Co. 57,000 2,437
Corus Group PLC ADR 136,900 2,293
Temple-Inland Inc. 46,000 2,291
Imperial Chemical Industries
PLC ADR 58,000 1,870
Cabot Corp. 51,200 1,561
Lubrizol Corp. 46,000 1,325
Weyerhaeuser Co. 20,000 1,140
CK Witco Corp. 57,762 588
-------
48,487
-------
PRODUCER DURABLES (5.7%)
Alcatel SA ADR 113,500 4,973
Xerox Corp. 178,000 4,628
Northrop Grumman Corp. 80,500 4,261
Emerson Electric Co. 69,000 3,648
Caterpillar, Inc. 69,000 2,721
Pall Corp. 113,500 2,547
United Technologies Corp. 34,200 2,161
Pitney Bowes, Inc. 46,000 2,056
Parker Hannifin Corp. 39,100 1,615
Thomas & Betts Corp. 52,000 1,469
-------
30,079
-------
TECHNOLOGY (4.5%)
International Business
Machines Corp. 77,500 9,145
Hewlett-Packard Co. 58,500 7,755
Motorola, Inc. 45,600 6,492
-------
23,392
-------
UTILITIES (5.5%)
Bell Atlantic Corp. 116,712 7,134
Duke Energy Corp. 91,500 4,804
ALLTEL Corp. 58,000 3,657
SBC Communications Inc. 69,000 2,898
Unicom Corp. 68,800 2,511
</TABLE>
22
<PAGE> 94
<TABLE>
<CAPTION>
------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
------------------------------------------------------------------------
<S> <C> <C>
Cinergy Corp. 97,900 $ 2,105
Texas Utilities Co. 56,700 1,683
Carolina Power & Light Co. 49,500 1,606
Pinnacle West Capital Corp. 51,500 1,452
FPL Group, Inc. 22,000 1,013
-------
28,863
-------
OTHER (3.3%)
Cooper Industries, Inc. 116,000 4,060
Minnesota Mining &
Manufacturing Co. 45,400 4,021
Canadian Pacific Ltd. 160,000 3,580
Norsk Hydro AS ADR 71,400 2,718
Raytheon Co. Class A 102,500 1,928
Honeywell International Inc. 23,000 1,212
-------
17,519
-------
------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $265,380) 355,688
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
FACE
AMOUNT
(000)
------------------------------------------------------------------------
CORPORATE BONDS (25.4%)
------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE-BACKED SECURITIES (0.4%)
Asset Securitization Corp.
(3) 6.75%, 2/14/2041 $2,000 1,902
-------
FINANCE (8.3%)
Ace Ina Holdings Inc.
8.20%, 8/15/2004 1,000 1,001
Allstate Corp.
6.75%, 5/15/2018 1,000 884
Aon Corp.
6.90%, 7/1/2004 2,000 1,953
BB&T Corp.
7.25%, 6/15/2007 2,000 1,945
Banc One Corp.
6.875%, 8/1/2006 2,000 1,927
Bank of America Corp.
7.80%, 2/15/2010 1,000 1,009
BankAmerica Corp.
7.20%, 4/15/2006 1,000 978
BankBoston NA
6.375%, 3/25/2008 2,000 1,848
Cincinnati Financial Corp.
6.90%, 5/15/2028 1,750 1,514
Citicorp
7.625%, 5/1/2005 1,000 1,011
Comerica, Inc.
7.25%, 8/1/2007 1,500 1,462
Dean Witter, Discover & Co.
6.75%, 10/15/2013 1,000 928
Exxon Capital Corp.
6.00%, 7/1/2005 1,000 953
First Union Corp.
7.50%, 4/15/2035 1,000 995
Ford Motor Credit Co.
6.25%, 12/8/2005 1,000 940
Frank Russell Co.
(1) 5.625%, 1/15/2009 2,000 1,765
Jackson National Life Insurance Co.
(1) 8.15%, 3/15/2027 770 760
Lumbermens Mutual Casualty Co.
(1) 9.15%, 7/1/2026 1,000 987
NBD Bancorp, Inc.
7.125%, 5/15/2007 1,500 1,457
NationsBank Corp.
7.80%, 9/15/2016 2,000 1,995
Northern Trust Corp.
6.65%, 11/9/2004 1,000 970
Ohio National Life Insurance
(1) 8.50%, 5/15/2026 2,000 2,052
Provident Cos., Inc.
7.25%, 3/15/2028 2,000 1,706
Security Benefit Life Insurance Co.
(1) 8.75%, 5/15/2016 1,500 1,437
SunTrust Bank Atlanta
7.25%, 9/15/2006 1,000 976
Toyota Motor Credit Corp.
5.50%, 12/15/2008 2,000 1,786
UNUM Corp.
6.75%, 12/15/2028 2,000 1,598
US Bank NA Minnesota
5.625%, 11/30/2005 2,000 1,829
Wachovia Corp.
5.625%, 12/15/2008 2,000 1,758
Washington Mutual, Inc.
7.50%, 8/15/2006 3,000 2,958
--------
43,382
--------
INDUSTRIAL (10.1%)
Abbott Laboratories
6.80%, 5/15/2005 1,000 991
Airtouch Communications Inc.
6.65%, 5/1/2008 2,000 1,890
American General Financial
7.45%, 1/15/2005 2,000 1,987
Amoco Corp.
6.50%, 8/1/2007 1,500 1,451
Autozone Inc.
6.50%, 7/15/2008 2,000 1,812
The Boeing Co.
8.75%, 8/15/2021 1,500 1,668
Bristol-Myers Squibb Co.
6.80%, 11/15/2026 1,500 1,400
CPC International, Inc.
7.25%, 12/15/2026 445 424
Continental Airlines, Inc.
6.90%, 7/12/2019 1,903 1,780
Cox Communications, Inc.
7.75%, 8/15/2006 1,296 1,290
DaimlerChrysler North America
Holding Corp.
7.40%, 1/20/2005 2,000 1,997
Dean Foods Co.
6.90%, 10/15/2017 2,000 1,818
Diageo PLC
6.125%, 8/15/2005 2,000 1,890
Federal Express Corp.
6.72%, 1/15/2022 1,961 1,844
Fluor Corp.
6.95%, 3/1/2007 1,500 1,429
Georgia-Pacific Corp.
9.625%, 3/15/2022 1,000 1,050
Honeywell International Inc.
7.50%, 3/1/2010 2,000 2,024
Johnson Controls, Inc.
7.125%, 7/15/2017 2,200 2,063
</TABLE>
23
<PAGE> 95
<TABLE>
<CAPTION>
------------------------------------------------------------------------
FACE MARKET
AMOUNT VALUE*
BALANCED PORTFOLIO (000) (000)
------------------------------------------------------------------------
<S> <C> <C>
Joseph Seagram & Sons, Inc.
7.50%, 12/15/2018 $ 2,000 $ 1,877
Lockheed Martin Corp.
7.65%, 5/1/2016 1,000 933
Mattel Inc.
6.125%, 7/15/2005 2,000 1,791
McDonald's Corp.
7.375%, 7/15/2033 1,000 936
Merck & Co.
6.40%, 3/1/2028 2,000 1,779
Norfolk Southern Corp.
7.70%, 5/15/2017 1,500 1,448
Procter & Gamble Co. ESOP
9.36%, 1/1/2021 2,000 2,321
Raytheon Co.
(1) 8.20%, 3/1/2006 1,378 1,394
Rohm & Haas Co.
7.40%, 7/15/2009 2,000 2,000
Stanford Univ.
7.65%, 6/15/2026 1,000 1,006
Target Corp.
7.50%, 2/15/2005 2,000 2,017
Tosco Corp.
7.80%, 1/1/2027 1,500 1,426
USA Waste Services Inc.
7.00%, 7/15/2028 2,000 1,500
Ultramar Diamond Shamrock
7.20%, 10/15/2017 2,000 1,799
Walt Disney Co.
7.30%, 2/8/2005 2,000 2,004
--------
53,039
UTILITIES (6.6%)
AT&T Corp.
6.50%, 3/15/2029 2,000 1,739
7.75%, 3/1/2007 1,000 1,020
Atlantic City Electric Co.
(2) 7.00%, 9/1/2023 1,000 888
Baltimore Gas & Electric Co.
5.50%, 4/15/2004 1,000 940
Carolina Power & Light Co.
5.95%, 3/1/2009 2,000 1,810
Central Illinois Public Service
6.125%, 12/15/2028 1,000 863
Central Power & Light Co.
6.625%, 7/1/2005 1,000 969
Cincinnati Bell, Inc.
6.30%, 12/1/2028 2,000 1,460
Duke Energy Corp.
7.00%, 7/1/2033 1,000 887
El Paso Natural Gas Co.
7.50%, 11/15/2026 1,500 1,414
Florida Power & Light Co.
7.00%, 9/1/2025 2,000 1,819
Florida Power Corp.
6.875%, 2/1/2008 1,850 1,824
GTE Southwest, Inc.
6.00%, 1/15/2006 1,000 938
Illinois Bell Telephone Co.
6.625%, 2/1/2025 1,000 879
Indiana Michigan Power Co.
6.875%, 7/1/2004 2,000 1,934
National Rural Utilities
5.75%, 12/1/2008 2,000 1,794
New Jersey Bell Telephone Co.
8.00%, 6/1/2022 1,000 1,026
New York Telephone Co.
7.25%, 2/15/2024 1,000 903
Northern Natural Gas Co.
(1) 6.75%, 9/15/2008 2,000 1,895
PacifiCorp
6.625%, 6/1/2007 1,000 951
Sprint Capital Corp.
6.125%, 11/15/2008 2,000 1,819
Tennessee Gas Pipeline Co.
7.50%, 4/1/2017 1,500 1,457
U S WEST Communications Group
6.875%, 9/15/2033 1,000 862
Union Electric Co.
7.375%, 12/15/2004 1,000 1,005
Washington Gas Light Co.
6.15%, 1/26/2026 1,500 1,434
WorldCom Inc.
6.40%, 8/15/2005 2,000 1,916
--------
34,446
--------
------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $140,273) 132,769
------------------------------------------------------------------------
FOREIGN BONDS (U.S. DOLLAR-DENOMINATED)(2.8%)
------------------------------------------------------------------------
Banque Nationale de Paris-NY
7.20%, 1/15/2007 1,500 1,484
Banque Paribas NY
6.95%, 7/22/2013 2,000 1,852
The Development
Bank of Singapore Ltd.
(1) 7.875%, 8/10/2009 1,580 1,574
Inter-American Dev. Bank
8.875%, 6/1/2009 3,045 3,385
KFW International Finance, Inc.
7.20%, 3/15/2014 2,000 2,008
Metropolitano de Lisboa
(1) 7.42%, 10/15/2016 1,000 1,000
Southern Investments UK PLC
6.80%, 12/1/2006 1,500 1,417
Toronto Dominion Bank-NY
6.45%, 1/15/2009 1,000 939
Zeneca Wilmington Inc.
7.00%, 11/15/2023 1,000 942
------------------------------------------------------------------------
TOTAL FOREIGN BONDS
(COST $14,894) 14,601
------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS(2.4%)
------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (2.4%)
U.S. Treasury Notes
5.625%, 12/31/2002 6,000 5,873
6.00%, 8/15/2004 7,000 6,909
------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $12,768) 12,782
------------------------------------------------------------------------
</TABLE>
24
<PAGE> 96
<TABLE>
<CAPTION>
------------------------------------------------------------------------
FACE MARKET
AMOUNT VALUE*
(000) (000)
------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (2.3%)
------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
6.12%, 4/3/2000 $ 4,839 $ 4,839
6.14%, 4/3/2000--Note G 7,549 7,549
------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $12,388) 12,388
------------------------------------------------------------------------
TOTAL INVESTMENTS (100.6%)
(COST $445,703) 528,228
------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.6%)
------------------------------------------------------------------------
Other Assets--Note C 6,311
Liabilities--Note G (9,462)
---------
(3,151)
------------------------------------------------------------------------
NET ASSETS (100%)
------------------------------------------------------------------------
Applicable to 32,545,341 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization) $525,077
========================================================================
NET ASSET VALUE PER SHARE $16.13
========================================================================
</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, 2000, the aggregate
value of these securities was $12,864,000, representing 2.4% of net assets.
(2) Scheduled principal and interest payments are guaranteed by MBIA (Municipal
Bond Issuance 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>
------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
------------------------------------------------------------------------
AT MARCH 31, 2000, NET ASSETS CONSISTED OF:
------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $420,956 $12.93
Undistributed Net
Investment Income 11,268 .35
Accumulated Net
Realized Gains 10,328 .32
Unrealized Appreciation--Note F 82,525 2.53
------------------------------------------------------------------------
NET ASSETS $525,077 $16.13
========================================================================
</TABLE>
25
<PAGE> 97
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
MARKET
VALUE*
EQUITY INCOME PORTFOLIO SHARES (000)
-----------------------------------------------------------------------
COMMON STOCKS (99.0%)
-----------------------------------------------------------------------
<S> <C> <C>
AUTO & TRANSPORTATION (2.7%)
Ford Motor Co. 70,100 $ 3,220
Union Pacific Corp. 38,400 1,502
Genuine Parts Co. 62,350 1,489
The Goodyear Tire & Rubber Co. 43,800 1,021
Norfolk Southern Corp. 67,000 963
CSX Corp. 38,200 898
-------
9,093
-------
CONSUMER DISCRETIONARY (5.4%)
May Department Stores Co. 112,000 3,192
Gillette Co. 78,400 2,955
Kimberly-Clark Corp. 43,700 2,447
Eastman Kodak Co. 33,000 1,792
Avon Products, Inc. 50,700 1,473
The McGraw-Hill Cos., Inc. 31,500 1,433
J.C. Penney Co., Inc. 82,000 1,220
Sears, Roebuck & Co. 37,100 1,145
Whirlpool Corp. 15,500 909
International Flavors &
Fragrances, Inc. 25,900 908
Newell Rubbermaid, Inc. 34,400 854
-------
18,328
-------
CONSUMER STAPLES (9.8%)
Philip Morris Cos., Inc. 197,600 4,174
Procter & Gamble Co. 61,700 3,471
Anheuser-Busch Cos., Inc. 51,300 3,193
PepsiCo, Inc. 77,000 2,661
The Coca-Cola Co. 47,900 2,248
General Mills, Inc. 59,000 2,135
The Quaker Oats Co. 32,300 1,958
H.J. Heinz Co. 51,650 1,801
Sara Lee Corp. 97,400 1,753
Kellogg Co. 63,800 1,635
Albertson's, Inc. 52,700 1,634
Bestfoods 27,700 1,297
The Clorox Co. 36,700 1,193
Campbell Soup Co. 38,000 1,168
Hershey Foods Corp. 21,200 1,034
ConAgra, Inc. 47,900 868
UST, Inc. 35,500 555
Ralston-Ralston Purina Group 19,500 534
-------
33,312
-------
FINANCIAL SERVICES (17.3%)
Bank of America Corp. 153,850 8,067
Marsh & McLennan Cos., Inc. 42,850 4,727
First Union Corp. 126,576 4,715
Bank One Corp. 135,040 4,642
J.P. Morgan & Co., Inc. 31,100 4,097
FleetBoston Financial Corp. 71,400 2,606
Lincoln National Corp. 76,200 2,553
American General Corp. 42,900 2,408
PNC Financial Services Group 53,200 2,397
The Chase Manhattan Corp. 26,700 2,328
Merrill Lynch & Co., Inc. 21,600 2,268
Washington Mutual, Inc. 83,780 2,220
Wachovia Corp. 32,800 2,216
Mellon Financial Corp. 74,100 2,186
St. Paul Cos., Inc. 56,000 1,911
U.S. Bancorp 82,454 1,804
The Chubb Corp. 24,100 1,628
Fannie Mae 26,700 1,507
SAFECO Corp. 52,700 1,400
KeyCorp 70,800 1,345
Wells Fargo Co. 28,800 1,179
Dun & Bradstreet Corp. 17,200 492
-------
58,696
-------
HEALTH CARE (15.9%)
Bristol-Myers Squibb Co. 213,800 12,347
American Home Products Corp. 177,900 9,540
Pharmacia & Upjohn, Inc. 143,350 8,493
Merck & Co., Inc. 110,500 6,865
Glaxo Wellcome PLC ADR 98,100 5,622
Eli Lilly & Co. 38,700 2,438
Baxter International, Inc. 38,300 2,401
SmithKline Beecham PLC ADR 28,800 1,903
Abbott Laboratories 52,200 1,837
Johnson & Johnson 18,200 1,275
Schering-Plough Corp. 26,600 978
-------
53,699
-------
INTEGRATED OILS (15.9%)
Exxon Mobil Corp. 237,941 18,515
BP Amoco PLC ADR 159,928 8,486
Chevron Corp. 82,300 7,608
Atlantic Richfield Co. 68,700 5,839
Royal Dutch Petroleum Co. ADR 98,000 5,641
Texaco Inc. 87,300 4,681
Phillips Petroleum Co. 32,500 1,503
USX-Marathon Group 46,800 1,220
Unocal Corp. 11,900 354
-------
53,847
-------
OTHER ENERGY (1.0%)
Schlumberger Ltd. 22,200 1,698
Baker Hughes, Inc. 51,200 1,549
-------
3,247
-------
MATERIALS & PROCESSING (4.4%)
Dow Chemical Co. 54,400 6,202
International Paper Co. 76,227 3,259
E.I. du Pont de Nemours & Co. 55,841 2,953
Weyerhaeuser Co. 41,900 2,388
-------
14,802
-------
PRODUCER DURABLES (3.1%)
Emerson Electric Co. 39,500 2,089
Caterpillar, Inc. 45,400 1,790
Pitney Bowes, Inc. 38,300 1,712
Xerox Corp. 52,600 1,368
The Boeing Co. 31,900 1,210
Deere & Co. 24,500 931
Lockheed Martin Corp. 45,100 922
Thomas & Betts Corp. 20,900 590
-------
10,612
-------
UTILITIES (19.6%)
SBC Communications Inc. 273,276 11,478
Bell Atlantic Corp. 183,284 11,203
AT&T Corp. 197,150 11,090
GTE Corp. 105,800 7,512
U S WEST, Inc. 69,100 5,018
BellSouth Corp. 105,500 4,958
Duke Energy Corp. 45,500 2,389
Southern Co. 103,400 2,249
</TABLE>
26
<PAGE> 98
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
-----------------------------------------------------------------------
<S> <C> <C>
Dominion Resources, Inc. 53,108 $ 2,041
Scottish Power PLC ADR 56,610 1,794
Edison International 97,500 1,615
Texas Utilities Co. 47,115 1,399
FPL Group, Inc. 22,500 1,036
Central & South West Corp. 47,800 816
Northern States Power Co. 41,000 815
TECO Energy, Inc. 40,600 789
Sempra Energy 21,882 367
-------
66,569
-------
OTHER (3.9%)
General Electric Co. 41,200 6,394
Minnesota Mining &
Manufacturing Co. 52,000 4,605
Honeywell International Inc. 20,275 1,068
Fortune Brands, Inc. 39,900 998
-------
13,065
-------
-----------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $239,263) 335,270
-----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
-----------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (0.6%)
-----------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
6.12%, 4/3/2000
(COST $2,012) $2,012 2,012
-----------------------------------------------------------------------
TOTAL INVESTMENTS (99.6%)
(COST $241,275) 337,282
-----------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.4%)
-----------------------------------------------------------------------
Other Assets--Note C 2,727
Liabilities (1,246)
-------
1,481
-----------------------------------------------------------------------
NET ASSETS (100.0%)
-----------------------------------------------------------------------
Applicable to 17,175,043 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization) $338,763
=======================================================================
NET ASSET VALUE PER SHARE $19.72
=======================================================================
</TABLE>
* See Note A in Notes to Financial Statements.
ADR--American Depositary Receipt.
<TABLE>
<CAPTION>
------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
-----------------------------------------------------------------------
AT MARCH 31, 2000, NET ASSETS CONSISTED OF:
-----------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $231,674 $13.49
Undistributed Net
Investment Income 4,691 .27
Accumulated Net Realized Gains 6,391 .37
Unrealized Appreciation--Note F 96,007 5.59
-----------------------------------------------------------------------
NET ASSETS $338,763 $19.72
=======================================================================
</TABLE>
27
<PAGE> 99
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
MARKET
VALUE*
DIVERSIFIED VALUE PORTFOLIO SHARES (000)
-----------------------------------------------------------------------
COMMON STOCKS (93.8%)
-----------------------------------------------------------------------
<S> <C> <C>
AUTO & TRANSPORTATION (3.2%)
General Motors Corp. 7,700 $ 638
Ford Motor Co. 7,800 358
------
996
------
CONSUMER DISCRETIONARY (11.8%)
- Kmart Corp. 88,900 861
- Toys R Us, Inc. 54,900 813
Sears, Roebuck & Co. 25,600 790
Waste Management, Inc. 46,500 636
- Cendant Corp. 19,700 364
Service Corp. International 42,800 128
Newell Rubbermaid, Inc. 2,100 52
------
3,644
------
CONSUMER STAPLES (1.9%)
Imperial Tobacco Group ADR 23,700 387
Philip Morris Cos., Inc. 9,000 190
------
577
------
FINANCIAL SERVICES (24.9%)
The Chase Manhattan Corp. 11,900 1,038
XL Capital Ltd. Class A 17,100 947
Allstate Corp. 39,200 933
First Union Corp. 20,500 764
Citigroup, Inc. 12,000 712
Bank of America Corp. 13,400 703
Washington Mutual, Inc. 25,000 663
The CIT Group, Inc. 22,900 447
Bank One Corp. 12,800 440
Aon Corp. 13,600 439
Crescent Real Estate, Inc. REIT 15,100 264
PNC Financial Services Group 5,300 239
- John Hancock Financial
Services, Inc. 6,000 108
------
7,697
------
HEALTH CARE (0.7%)
- Watson Pharmaceuticals, Inc. 5,300 210
------
INTEGRATED OILS (8.9%)
Occidental Petroleum Corp. 45,400 942
Atlantic Richfield Co. 10,800 918
Phillips Petroleum Co. 19,000 879
------
2,739
------
OTHER ENERGY (13.9%)
Baker Hughes, Inc. 43,200 1,307
Schlumberger Ltd. 15,600 1,193
Williams Cos., Inc. 25,200 1,107
Halliburton Co. 12,500 513
Transocean Sedco Forex Inc. 3,020 155
------
4,275
------
MATERIALS & PROCESSING (8.2%)
Lyondell Chemical Co. 55,000 811
Fort James Corp. 27,300 601
CK Witco Corp. 47,384 483
Millennium Chemicals, Inc. 21,700 434
- Pactiv Corp. 22,200 194
------
2,523
------
UTILITIES (14.6%)
GTE Corp. 13,000 923
Northeast Utilities 36,700 789
SBC Communications Inc. 17,100 718
Entergy Corp. 35,000 706
FirstEnergy Corp. 23,900 493
Central & South West Corp. 26,900 459
Reliant Energy, Inc. 17,900 420
------
4,508
------
OTHER (5.7%)
Honeywell International Inc. 17,625 929
ITT Industries, Inc 25,600 795
Tenneco Automotive, Inc. 4,460 35
------
1,759
------
-----------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $34,428) 28,928
-----------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (6.5%)
-----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
FACE
AMOUNT
(000)
-----------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
6.12%, 4/3/2000
(COST $1,983) $1,983 1,983
-----------------------------------------------------------------------
TOTAL INVESTMENTS (100.3%)
(COST $36,411) 30,911
-----------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.3%)
-----------------------------------------------------------------------
Other Assets--Note C 215
Liabilities (302)
------
(87)
-----------------------------------------------------------------------
NET ASSETS (100%)
-----------------------------------------------------------------------
Applicable to 3,582,782 outstanding
$.001 par value shares of beneficial
interest(unlimited authorization) $30,824
=======================================================================
NET ASSET VALUE PER SHARE $8.60
=======================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
-Non-Income-Producing Security.
ADR--American Depositary Receipt.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
AT MARCH 31, 2000, NET ASSETS CONSISTED OF:
-----------------------------------------------------------------------
AMOUNT PER
(000) SHARE
-----------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $40,623 $11.34
Undistributed Net
Investment Income 424 .12
Accumulated Net
Realized Losses (4,723) (1.32)
Unrealized Depreciation--Note F (5,500) (1.54)
-----------------------------------------------------------------------
NET ASSETS $30,824 $ 8.60
=======================================================================
</TABLE>
28
<PAGE> 100
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
MARKET
VALUE*
EQUITY INDEX PORTFOLIO SHARES (000)
-----------------------------------------------------------------------
COMMON STOCKS (99.9%)(1)
-----------------------------------------------------------------------
<S> <C> <C>
- Microsoft Corp. 643,700 $ 68,393
- Cisco Systems, Inc. 846,232 65,424
General Electric Co. 405,736 62,965
Intel Corp. 413,156 54,511
Exxon Mobil Corp. 427,102 33,234
Wal-Mart Stores, Inc. 550,784 30,569
- Oracle Corp. 348,962 27,241
International Business
Machines Corp. 222,964 26,310
Citigroup, Inc. 416,976 24,732
Lucent Technologies, Inc. 391,530 23,785
Nortel Networks Corp. 178,212 22,455
AT&T Corp. 395,143 22,227
American International
Group, Inc. 191,492 20,968
- America Online, Inc. 280,480 18,862
Home Depot, Inc. 284,735 18,365
- Sun Microsystems, Inc. 194,600 18,235
Merck & Co., Inc. 289,056 17,958
SBC Communications Inc. 421,846 17,718
Pfizer, Inc. 478,808 17,506
- Dell Computer Corp. 317,500 17,125
Hewlett-Packard Co. 124,248 16,471
Texas Instruments, Inc. 99,944 15,991
Time Warner, Inc. 159,102 15,910
- MCI WorldCom, Inc. 351,035 15,906
- EMC Corp. 125,808 15,726
Royal Dutch Petroleum Co. ADR 265,180 15,264
The Coca-Cola Co. 305,462 14,338
Bristol-Myers Squibb Co. 245,300 14,166
- QUALCOMM, Inc. 89,900 13,423
Motorola, Inc. 87,751 12,494
Johnson & Johnson 172,054 12,055
Bell Atlantic Corp. 192,082 11,741
Morgan Stanley Dean Witter & Co. 140,118 11,428
- Yahoo!, Inc. 65,100 11,157
Bank of America Corp. 211,113 11,070
BellSouth Corp. 232,808 10,942
The Walt Disney Co. 256,030 10,593
Tyco International Ltd. 209,130 10,430
Warner-Lambert Co. 106,162 10,351
Procter & Gamble Co. 162,744 9,154
The Chase Manhattan Corp. 101,974 8,891
- Applied Materials, Inc. 94,288 8,887
American Home Products Corp. 161,500 8,661
GTE Corp. 120,135 8,530
Eli Lilly & Co. 134,904 8,499
Wells Fargo Co. 204,240 8,361
American Express Co. 55,357 8,245
- Amgen, Inc. 126,296 7,751
Medtronic, Inc. 147,752 7,600
Chevron Corp. 81,130 7,499
Fannie Mae 126,796 7,156
- Sprint PCS 106,612 6,963
Ford Motor Co. 149,358 6,861
E.I. du Pont de Nemours & Co. 129,155 6,829
Sprint Corp. 107,726 6,787
Abbott Laboratories 190,156 6,691
- NEXTEL Communications, Inc. 45,100 6,686
Schering-Plough Corp. 181,688 6,677
Enron Corp. 88,518 6,628
Corning, Inc. 34,078 6,611
General Motors Corp. 79,182 6,557
McDonald's Corp. 167,486 6,291
PepsiCo, Inc. 180,004 6,221
Philip Morris Cos., Inc. 292,669 6,183
- MediaOne Group, Inc. 75,729 6,134
Charles Schwab Corp. 101,400 5,761
Compaq Computer Corp. 209,490 5,578
- CBS Corp. 94,653 5,360
The Gap, Inc. 105,680 5,264
Schlumberger Ltd. 68,026 5,204
- Veritas Software Corp. 39,600 5,188
Honeywell International Inc. 97,867 5,156
Gillette Co. 133,056 5,015
Bank One Corp. 142,268 4,890
Merrill Lynch & Co., Inc. 45,800 4,809
First Union Corp. 122,564 4,566
U S WEST, Inc. 62,804 4,561
- Viacom Inc. Class B 84,134 4,438
Minnesota Mining &
Manufacturing Co. 49,309 4,367
- Comcast Corp.-Special Class A 99,189 4,302
- Micron Technology, Inc. 33,397 4,208
- Computer Associates
International, Inc. 70,391 4,166
FleetBoston Financial Corp. 113,135 4,129
The Boeing Co. 107,893 4,093
Colgate-Palmolive Co. 72,236 4,072
Target Corp. 54,216 4,053
Monsanto Co. 78,405 4,038
- Global Crossing Ltd. 95,550 3,912
Kimberly-Clark Corp. 68,288 3,824
Freddie Mac 86,156 3,807
Pharmacia & Upjohn, Inc. 64,089 3,797
The Bank of New York Co., Inc. 90,996 3,782
Electronic Data Systems Corp. 58,400 3,749
Automatic Data Processing, Inc. 77,672 3,748
United Technologies Corp. 59,127 3,736
Texaco Inc. 68,400 3,668
Marsh & McLennan Cos., Inc. 32,785 3,617
Anheuser-Busch Cos., Inc. 57,670 3,590
- Analog Devices, Inc. 43,300 3,488
Unilever NV ADR 70,849 3,410
Atlantic Richfield Co. 39,938 3,395
- Xilinx, Inc. 39,800 3,296
Walgreen Co. 124,012 3,193
The Seagram Co. Ltd. 53,619 3,190
Alcoa Inc. 45,286 3,181
- Tellabs, Inc. 49,592 3,124
Dow Chemical Co. 26,977 3,075
- Network Appliance, Inc. 37,000 3,062
- Solectron Corp. 72,900 2,921
- Costco Wholesale Corp. 55,336 2,909
- Clear Channel
Communications, Inc. 41,810 2,888
- Safeway, Inc. 63,500 2,873
Emerson Electric Co. 53,480 2,828
J.P. Morgan & Co., Inc. 21,443 2,825
Firstar Corp. 121,269 2,782
</TABLE>
29
<PAGE> 101
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
MARKET
VALUE*
EQUITY INDEX PORTFOLIO SHARES (000)
-----------------------------------------------------------------------
<S> <C> <C>
Lowe's Cos., Inc. 47,578 $ 2,777
- Apple Computer, Inc. 20,046 2,723
- LSI Logic Corp. 36,800 2,673
MBNA Corp. 99,810 2,545
PE Corp. - PE Biosystems Group 25,632 2,473
Gannett Co., Inc. 34,692 2,441
ALLTEL Corp. 38,696 2,440
Fifth Third Bancorp 38,477 2,424
Duke Energy Corp. 45,573 2,393
Allstate Corp. 100,316 2,389
Williams Cos., Inc. 54,129 2,378
- 3Com Corp. 42,300 2,353
First Data Corp. 52,264 2,313
SunTrust Banks, Inc. 39,818 2,299
Baxter International, Inc. 36,221 2,271
Halliburton Co. 54,891 2,251
- Guidant Corp. 38,000 2,235
International Paper Co. 51,612 2,206
Household International, Inc. 58,460 2,181
- Best Buy Co., Inc. 25,100 2,159
Eastman Kodak Co. 39,406 2,140
Xerox Corp. 81,694 2,124
- Gateway, Inc. 39,500 2,094
- Seagate Technology Inc. 34,500 2,079
Illinois Tool Works, Inc. 37,493 2,071
Omnicom Group Inc. 22,100 2,065
- Kohl's Corp. 19,900 2,040
Sara Lee Corp. 113,008 2,034
- AES Corp. 25,400 2,000
U.S. Bancorp 91,342 1,998
- ADC Telecommunications, Inc. 36,700 1,977
Conoco Inc. Class B 76,696 1,965
Associates First Capital Corp. 89,556 1,920
Carnival Corp. 76,300 1,893
State Street Corp. 19,500 1,889
Washington Mutual, Inc. 70,827 1,877
Mellon Financial Corp. 63,120 1,862
- KLA-Tencor Corp. 22,100 1,862
- Conexant Systems, Inc. 26,000 1,846
Northern Trust Corp. 27,108 1,831
- The Kroger Co. 102,804 1,806
Southern Co. 82,825 1,801
CVS Corp. 47,804 1,796
- Comverse Technology, Inc. 9,400 1,777
Columbia/HCA Healthcare Corp. 68,957 1,745
- Teradyne, Inc. 21,100 1,735
Caterpillar, Inc. 43,566 1,718
American General Corp. 30,211 1,696
Wachovia Corp. 24,849 1,679
PNC Financial Services Group 36,857 1,661
- Lexmark International Group,
Inc. Class A 15,700 1,660
Weyerhaeuser Co. 28,714 1,637
Adobe Systems, Inc. 14,700 1,636
Interpublic Group of Cos., Inc. 34,398 1,625
Computer Sciences Corp. 20,464 1,619
- Cendant Corp. 87,172 1,613
Campbell Soup Co. 52,274 1,607
Albertson's, Inc. 51,456 1,595
Bestfoods 33,998 1,592
CIGNA Corp. 20,967 1,588
Paychex, Inc. 30,150 1,579
National City Corp. 76,256 1,573
Cardinal Health, Inc. 34,280 1,573
H.J. Heinz Co. 43,711 1,524
Circuit City Stores, Inc. 24,924 1,517
Linear Technology Corp. 27,400 1,507
AFLAC, Inc. 32,900 1,499
Providian Financial Corp. 17,212 1,491
Harley-Davidson, Inc. 18,700 1,484
The Chubb Corp. 21,818 1,474
- Citrix Systems, Inc. 22,100 1,464
- BMC Software, Inc. 29,583 1,461
Sysco Corp. 40,780 1,455
Pitney Bowes, Inc. 32,454 1,450
Phillips Petroleum Co. 31,309 1,448
The Hartford Financial
Services Group Inc. 27,376 1,444
Sears, Roebuck & Co. 46,707 1,442
Lehman Brothers Holdings, Inc. 14,800 1,436
Dominion Resources, Inc. 37,142 1,428
Molex, Inc. 24,250 1,425
FedEx Corp. 35,888 1,400
General Mills, Inc. 37,434 1,355
NIKE, Inc. Class B 34,180 1,354
Transocean Sedco Forex Inc. 26,100 1,339
Southwest Airlines Co. 63,584 1,323
- National Semiconductor Corp. 21,254 1,289
Kellogg Co. 50,158 1,285
- Biogen, Inc. 18,200 1,272
Baker Hughes, Inc. 41,526 1,256
United Healthcare Corp. 20,988 1,251
Burlington Northern
Santa Fe Corp. 56,498 1,250
Coastal Corp. 26,926 1,239
Tandy Corp. 24,388 1,238
General Dynamics Corp. 24,860 1,237
Scientific-Atlanta, Inc. 19,190 1,217
BB&T Corp. 43,114 1,210
Dover Corp. 25,160 1,205
Union Pacific Corp. 30,698 1,201
Rohm & Haas Co. 26,901 1,200
Capital One Financial Corp. 24,900 1,194
- Staples, Inc. 58,800 1,176
May Department Stores Co. 41,104 1,171
Kansas City Southern
Industries, Inc. 13,600 1,169
El Paso Energy Corp. 28,766 1,161
- Novell, Inc. 40,345 1,155
Delphi Automotive Systems Corp. 71,360 1,142
Coca-Cola Enterprises, Inc. 52,600 1,134
Masco Corp. 55,258 1,133
ConAgra, Inc. 62,302 1,129
Wrigley, (Wm.) Jr. Co. 14,629 1,124
Deere & Co. 29,538 1,122
Textron, Inc. 18,420 1,121
PPG Industries, Inc. 21,425 1,121
- Boston Scientific Corp. 51,884 1,106
The McGraw-Hill Cos., Inc. 24,268 1,104
The Limited, Inc. 26,192 1,103
</TABLE>
30
<PAGE> 102
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
-----------------------------------------------------------------------
<S> <C> <C>
Tribune Co. 29,404 $ 1,075
KeyCorp 56,516 1,074
- Federated Department Stores, Inc. 25,400 1,060
Waste Management, Inc. 76,661 1,049
FPL Group, Inc. 22,546 1,039
Ralston-Ralston Purina Group 37,692 1,032
Franklin Resources Corp. 30,800 1,030
The Quaker Oats Co. 16,859 1,022
Lockheed Martin Corp. 49,896 1,020
PG&E Corp. 48,405 1,017
Texas Utilities Co. 34,174 1,015
- Advanced Micro Devices, Inc. 17,716 1,011
Rockwell International Corp. 24,009 1,004
Unicom Corp. 27,454 1,002
- Unisys Corp. 39,205 1,000
Aon Corp. 30,800 993
Aetna Inc. 17,775 990
USX-Marathon Group 37,519 978
St. Paul Cos., Inc. 28,596 976
The Clorox Co. 29,926 973
Burlington Resources, Inc. 26,211 970
Marriott International, Inc. Class A 30,406 958
Union Carbide Corp. 16,418 957
- Compuware Corp. 45,100 950
Alcan Aluminium Ltd. 27,712 939
Occidental Petroleum Corp. 44,969 933
Unocal Corp. 30,499 907
New York Times Co. Class A 20,964 900
Danaher Corp. 17,500 893
Newell Rubbermaid, Inc. 35,574 883
Ingersoll-Rand Co. 19,900 881
Tenet Healthcare Corp. 37,397 860
Avon Products, Inc. 29,588 860
TRW, Inc. 14,686 859
Dollar General Corp. 31,800 855
Georgia Pacific Group 21,464 849
Delta Air Lines, Inc. 15,942 849
Avery Dennison Corp. 13,810 843
PECO Energy Corp. 22,785 840
TJX Cos., Inc. 37,844 840
Reliant Energy, Inc. 35,586 834
Jefferson-Pilot Corp. 12,457 829
Allergan, Inc. 16,536 827
Hershey Foods Corp. 16,690 814
Becton, Dickinson & Co. 30,620 806
Praxair, Inc. 19,321 804
Air Products & Chemicals, Inc. 28,106 799
Public Service Enterprise
Group, Inc. 26,668 790
Comerica, Inc. 18,750 785
Lincoln National Corp. 23,374 783
Dow Jones & Co., Inc. 10,731 771
Consolidated Edison Inc. 26,555 770
Archer-Daniels-Midland Co. 74,155 769
PaineWebber Group, Inc. 17,200 757
Barrick Gold Corp. 48,201 756
Cincinnati Financial Corp. 19,500 734
Eaton Corp. 9,400 733
Edison International 43,894 727
AmSouth Bancorp 47,742 713
McKesson HBOC, Inc. 33,603 706
Apache Corp. 14,100 702
Amerada Hess Corp. 10,778 697
- Parametric Technology Corp. 32,900 693
American Electric Power Co., Inc. 23,200 692
The Times Mirror Co. Class A 7,438 691
- Bed Bath & Beyond, Inc. 17,400 685
Progressive Corp. of Ohio 9,000 685
- PeopleSoft, Inc. 33,800 676
- Cabletron Systems, Inc. 22,886 671
Norfolk Southern Corp. 46,389 667
SLM Holding Corp. 19,800 660
Loews Corp. 13,100 655
Synovus Financial Corp. 34,650 654
Huntington Bancshares Inc. 29,138 652
Bear Stearns Co., Inc. 14,207 648
Carolina Power & Light Co. 19,775 641
Kerr-McGee Corp. 11,105 641
MBIA, Inc. 12,300 640
IMS Health, Inc. 37,568 636
Golden West Financial Corp. 19,978 623
Champion International Corp. 11,604 618
Entergy Corp. 30,550 617
Regions Financial Corp. 27,000 616
- Comcast Corp. Class A 14,931 616
CenturyTel, Inc. 16,550 614
Raytheon Co. Class B 34,460 612
Anadarko Petroleum Corp. 15,800 611
CSX Corp. 25,908 609
Sabre Holdings Corp. 16,403 606
- AMR Corp. 18,686 596
FirstEnergy Corp. 28,773 593
Columbia Energy Group 10,009 593
W.W. Grainger, Inc. 10,860 589
Fort James Corp. 26,741 588
Constellation Energy Group 18,451 588
Ecolab, Inc. 16,026 588
- Kmart Corp. 60,253 584
Dana Corp. 20,326 573
MGIC Investment Corp. 13,100 571
Dun & Bradstreet Corp. 19,934 571
Johnson Controls, Inc. 10,536 570
Vulcan Materials Co. 12,400 568
Summit Bancorp 21,600 567
- Sealed Air Corp. 10,345 562
- Tricon Global Restaurants, Inc. 18,030 560
T. Rowe Price 14,000 553
Willamette Industries, Inc. 13,774 553
- Wellpoint Health Networks Inc.
Class A 7,900 552
Mattel, Inc. 52,042 543
Parker Hannifin Corp. 13,142 543
Nucor Corp. 10,769 538
Union Planters Corp. 17,400 536
Florida Progress Corp. 11,600 532
Biomet, Inc. 14,619 532
SouthTrust Corp. 20,800 529
UnumProvident Corp. 31,123 529
Ameren Corp. 16,955 525
Reynolds Metals Co. 7,833 524
</TABLE>
31
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<TABLE>
<CAPTION>
-----------------------------------------------------------------------
MARKET
VALUE*
EQUITY INDEX PORTFOLIO SHARES (000)
-----------------------------------------------------------------------
<S> <C> <C>
Leggett & Platt, Inc. 24,300 $ 522
Tosco Corp. 16,900 514
H & R Block, Inc. 11,468 513
Whirlpool Corp. 8,690 509
Nabisco Group Holdings Corp. 42,400 509
Fortune Brands, Inc. 20,339 508
PACCAR, Inc. 10,160 508
Knight Ridder 9,836 501
DTE Energy Co. 17,086 495
- Adaptec, Inc. 12,800 494
Old Kent Financial Corp. 15,300 494
Genuine Parts Co. 20,669 493
Nordstrom, Inc. 16,686 492
- Watson Pharmaceuticals, Inc. 12,400 492
- Mirage Resorts, Inc. 25,100 486
- Office Depot, Inc. 41,900 484
Brown-Forman Corp. Class B 8,899 484
J.C. Penney Co., Inc. 32,256 480
Phelps Dodge Corp. 10,059 478
- NCR Corp. 11,900 477
- AutoZone Inc. 17,200 477
- ALZA Corp. 12,609 474
Union Pacific Resources
Group, Inc. 32,616 473
Sherwin-Williams Co. 21,524 472
The Goodyear Tire & Rubber Co. 20,249 472
Central & South West Corp. 27,626 471
The Mead Corp. 13,316 465
Equifax, Inc. 18,300 462
Eastman Chemical Co. 10,094 459
- Inco Ltd. 25,007 458
International Flavors &
Fragrances, Inc. 13,007 456
Conseco Inc. 39,838 456
Northrop Grumman Corp. 8,562 453
New Century Energies, Inc. 15,000 451
SAFECO Corp. 16,880 448
Cinergy Corp. 20,573 442
GPU, Inc. 16,092 441
- Toys R Us, Inc. 29,718 440
Newmont Mining Corp. 19,555 439
Westvaco Corp. 13,040 435
Cooper Industries, Inc. 12,284 430
Black & Decker Corp. 11,412 429
Young & Rubicam Inc. 9,000 423
- Thermo Electron Corp. 20,500 418
The BFGoodrich Co. 14,358 412
Countrywide Credit Industries, Inc. 14,700 401
Torchmark Corp. 17,294 400
PerkinElmer, Inc. 5,993 399
Northern States Power Co. 20,008 398
Hasbro, Inc. 24,000 396
PPL Corp. 18,791 393
Bausch & Lomb, Inc. 7,416 387
Winn-Dixie Stores, Inc. 19,326 376
Hilton Hotels Corp. 48,357 375
VF Corp. 15,560 374
Temple-Inland Inc. 7,301 364
Maytag Corp. 10,978 364
- Ceridian Corp. 18,780 360
Pall Corp. 16,056 360
ITT Industries, Inc. 11,488 357
Liz Claiborne, Inc. 7,724 354
Sigma-Aldrich Corp. 13,138 353
Autodesk, Inc. 7,660 349
- Rowan Cos., Inc. 11,831 348
UST, Inc. 22,193 347
SuperValu Inc. 18,276 346
R.R. Donnelley & Sons Co. 16,527 346
Harcourt General, Inc. 9,285 346
Placer Dome, Inc. 42,388 344
Sempra Energy 20,459 343
Tektronix, Inc. 6,052 339
- Navistar International Corp. 8,235 330
- Owens-Illinois, Inc. 19,550 330
- Niagara Mohawk Holdings Inc. 24,362 329
Sunoco, Inc. 11,905 326
Millipore Corp. 5,765 325
Wendy's International, Inc. 15,641 316
Ashland, Inc. 9,426 315
- Harrah's Entertainment, Inc. 16,757 311
The Stanley Works 11,670 308
Pinnacle West Capital Corp. 10,900 307
Fluor Corp. 9,842 305
Darden Restaurants Inc. 17,067 304
USX-U.S. Steel Group 11,578 289
- St. Jude Medical, Inc. 10,988 284
- HEALTHSOUTH Corp. 50,227 279
CMS Energy Corp. 15,100 274
Crown Cork & Seal Co., Inc. 16,780 268
Boise Cascade Corp. 7,536 262
- US Airways Group, Inc. 9,401 261
Mallinckrodt, Inc. 9,010 259
C.R. Bard, Inc. 6,683 259
- Quintiles Transnational Corp. 15,100 258
Engelhard Corp. 16,733 253
Deluxe Corp. 9,549 253
Great Lakes Chemical Corp. 7,425 252
Bemis Co., Inc. 6,777 250
- Silicon Graphics, Inc. 23,639 250
Allegheny Technologies Inc. 12,366 248
- Andrew Corp. 10,711 245
- Freeport-McMoRan Copper &
Gold Inc. Class B 19,600 236
- FMC Corp. 4,094 231
Brunswick Corp. 12,102 229
Dillard's Inc. 13,906 229
Adolph Coors Co. Class B 4,705 225
Hercules, Inc. 13,878 224
Eastern Enterprises 3,513 210
Thomas & Betts Corp. 7,402 209
Crane Co. 8,798 207
Cummins Engine Co., Inc. 5,499 207
NICOR, Inc. 6,189 204
Homestake Mining Co. 33,867 203
Snap-On Inc. 7,678 201
- Pactiv Corp. 22,361 196
Louisiana-Pacific Corp. 13,982 194
Ryder System, Inc. 8,315 189
Rite Aid Corp. 33,904 186
</TABLE>
32
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<TABLE>
<CAPTION>
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MARKET
VALUE*
SHARES (000)
-----------------------------------------------------------------------
<S> <C> <C>
Meredith Corp. 6,722 $ 186
Centex Corp. 7,714 184
Shared Medical Systems Corp. 3,523 183
- Manor Care, Inc. 13,426 181
Alberto-Culver Co. Class B 7,302 174
- Consolidated Stores, Inc. 14,828 169
- Humana, Inc. 21,700 159
Potlatch Corp. 3,657 157
- Allied Waste Industries, Inc. 23,800 156
American Greetings Corp. Class A 8,378 153
Worthington Industries, Inc. 11,886 147
Polaroid Corp. 5,853 139
Owens Corning 7,153 139
Ball Corp. 3,846 133
Kaufman & Broad Home Corp. 6,165 132
Raytheon Co. Class A 6,777 127
The Timken Co. 7,830 127
Briggs & Stratton Corp. 3,091 127
Cooper Tire & Rubber Co. 9,848 124
Peoples Energy Corp. 4,485 123
IKON Office Solutions, Inc. 19,438 120
Tupperware Corp. 7,529 119
Longs Drug Stores, Inc. 5,120 116
Pulte Corp. 5,578 116
- Viacom Inc. Class A 2,112 113
- W.R. Grace & Co. 8,892 113
National Service Industries, Inc. 5,263 111
Jostens Inc. 4,412 108
ONEOK, Inc. 4,145 104
- Bethlehem Steel Corp. 17,063 102
Great Atlantic & Pacific
Tea Co., Inc. 4,906 96
Armstrong World Industries Inc. 5,201 93
Springs Industries Inc. Class A 2,303 88
- Sterling Software, Inc. 2,500 76
Milacron Inc. 4,770 69
McDermott International, Inc. 7,471 69
- Reebok International Ltd. 7,286 67
Russell Corp. 4,414 63
NACCO Industries, Inc. Class A 925 44
Service Corp. International 9,824 29
The Pep Boys
(Manny, Moe & Jack) 3,464 21
- Freeport-McMoRan Copper &
Gold, Inc. Class A 1,600 18
Arch Coal, Inc. 1,320 9
-----------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $782,376) 1,576,710
-----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
FACE MARKET
AMOUNT VALUE*
(000) (000)
------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (0.5%)(1)
------------------------------------------------------------------------
<S> <C> <C>
FEDERAL HOME LOAN MORTGAGE CORP.
(2) 5.86%, 5/11/2000 $ 500 $ 497
(2) 5.93%, 5/4/2000 500 497
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
6.12%, 4/3/2000 7,142 7,142
------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $8,136) 8,136
------------------------------------------------------------------------
TOTAL INVESTMENTS (100.4%)
(COST $790,512) 1,584,846
------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.4%)
------------------------------------------------------------------------
Other Assets--Note C 2,484
Liabilities (9,390)
-----------
(6,906)
------------------------------------------------------------------------
NET ASSETS (100%)
------------------------------------------------------------------------
Applicable to 40,462,289 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization) $1,577,940
========================================================================
NET ASSET VALUE PER SHARE $39.00
========================================================================
</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 0.3%, respectively, of net assets.
See Note F in Notes to Financial Statements.
(2) Securities segregated as initial margin for open futures contracts.
ADR--American Depositary Receipt.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
AT MARCH 31, 2000, NET ASSETS CONSISTED OF:
-----------------------------------------------------------------------
AMOUNT PER
(000) SHARE
-----------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $ 782,375 $19.34
Undistributed Net
Investment Income 6,980 .17
Accumulated Net
Realized Losses (5,716) (.14)
Unrealized Appreciation
(Depreciation)--Note F
Investment Securities 794,334 19.63
Futures Contracts (33) --
-----------------------------------------------------------------------
NET ASSETS $1,577,940 $39.00
=======================================================================
</TABLE>
33
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<TABLE>
<CAPTION>
-----------------------------------------------------------------------
MARKET
VALUE*
MID-CAP INDEX PORTFOLIO SHARES (000)
-----------------------------------------------------------------------
COMMON STOCKS (100.6%)(1)
-----------------------------------------------------------------------
<S> <C> <C>
- Siebel Systems, Inc. 22,660 $ 2,706
- Maxim Integrated Products, Inc. 32,680 2,322
- Altera Corp. 23,440 2,092
- Vitesse Semiconductor Corp. 18,500 1,781
- MedImmune Inc. 7,900 1,376
- Univision Communications Inc. 12,000 1,356
- Atmel Corp. 25,900 1,337
- Intuit, Inc. 22,950 1,248
- QLogic Corp. 8,600 1,165
- Chiron Corp. 21,370 1,066
Dynegy, Inc. 16,390 1,028
- E*TRADE Group, Inc. 33,955 1,023
- Sanmina Corp. 14,950 1,010
- American Power Conversion Corp. 22,620 970
- Starbucks Corp. 21,560 966
BroadWing Inc. 25,400 945
- SCI Systems, Inc. 17,020 916
- Jabil Circuit, Inc. 19,800 856
Symbol Technologies, Inc. 10,375 854
- Forest Laboratories, Inc. 9,900 837
Montana Power Co. 12,920 827
Telephone & Data Systems, Inc. 7,270 807
- Rational Software Corp. 10,430 798
Comdisco, Inc. 17,980 793
Stryker Corp. 11,360 792
- Novellus Systems, Inc. 13,800 774
Cintas Corp. 19,640 770
Weatherford International, Inc. 12,670 747
Marshall & Ilsley Corp. 12,570 726
- Hispanic Broadcasting Corp. 6,400 725
Tiffany & Co. 8,480 709
- Calpine Corp. 7,400 696
- Waters Corp. 7,300 695
- Convergys Corp. 17,980 694
- Millennium Pharmaceuticals, Inc. 5,200 675
- BJ Services Co. 9,000 665
- Noble Drilling Corp. 15,450 640
- Cypress Semiconductor Corp. 12,850 634
- Nabors Industries, Inc. 16,285 632
- Cadence Design Systems, Inc. 28,590 593
- Microchip Technology, Inc. 9,005 592
ENSCO International, Inc. 16,120 582
- Sepracor Inc. 7,820 569
- SunGard Data Systems, Inc. 15,060 568
- Concord EFS, Inc. 24,220 556
- Vishay Intertechnology, Inc. 9,937 553
Washington Post Co. Class B 1,000 541
- Electronic Arts Inc. 7,570 539
- Fiserv, Inc. 14,400 535
- Informix Corp. 31,600 535
- Network Associates, Inc. 16,330 527
- Symantec Corp. 7,010 527
Charter One Financial 24,956 524
- Macromedia, Inc. 5,800 524
- Global Marine, Inc. 20,510 520
- IVAX Corp. 18,635 508
- Robert Half International, Inc. 10,510 499
- Genzyme Corp. 9,890 496
Devon Energy Corp. 10,118 491
- DST Systems, Inc. 7,500 487
- MiniMed, Inc. 3,700 479
- Westwood One, Inc. 13,000 471
- Jones Apparel Group, Inc. 14,446 460
Kinder Morgan, Inc. 13,260 457
- CheckFree Holdings Corp. 6,400 451
- Legato Systems, Inc. 10,020 447
- Smith International, Inc. 5,730 444
Reader's Digest Assn., Inc.
Class A 12,500 442
- TranSwitch Corp. 4,600 442
- Integrated Device Technology Inc. 11,010 436
KeySpan Corp. 15,750 435
- CDW Computer Centers, Inc. 5,100 431
Family Dollar Stores, Inc. 20,300 422
Zions Bancorp 10,060 419
Mylan Laboratories, Inc. 15,220 419
A.G. Edwards & Sons, Inc. 10,440 418
- SPX Corp. 3,640 415
- Park Place Entertainment Corp. 35,800 414
AMBAC Financial Group Inc. 8,170 412
Consolidated Papers, Inc. 10,700 411
DQE Inc. 8,900 405
- Health Management Associates
Class A 28,370 404
- Synopsys, Inc. 8,140 397
- Arrow Electronics, Inc. 11,250 397
- Dollar Tree Stores, Inc. 7,250 378
North Fork Bancorp, Inc. 20,770 371
Hannaford Brothers Co. 4,970 366
Northeast Utilities 16,840 362
Allegheny Energy, Inc. 12,950 357
- Sybron International Corp. 12,210 354
Reliastar Financial Corp. 10,410 353
LG&E Energy Corp. 15,230 348
DPL Inc. 15,680 348
- Acxiom Corp. 10,200 339
- BJ's Wholesale Club, Inc. 8,640 334
Unitrin, Inc. 8,300 330
- Gilead Sciences, Inc. 5,200 330
Avnet, Inc. 5,200 328
Allmerica Financial Corp. 6,400 326
Bowater Inc. 6,100 326
- TriQuint Semiconductor, Inc. 4,400 323
Manpower Inc. 8,870 315
Potomac Electric Power Co. 13,910 315
First Tennessee National Corp. 15,310 311
- Polycom, Inc. 3,900 309
- U.S. Foodservice 11,940 307
- American Standard Cos., Inc. 8,280 306
Murphy Oil Corp. 5,300 305
- NVIDIA Corp. 3,600 304
- Powerwave Technologies, Inc. 2,400 300
SCANA Corp. 12,208 300
NSTAR 7,100 298
- CSG Systems International, Inc. 6,100 298
Tyson Foods, Inc. 26,650 296
TECO Energy, Inc. 15,250 296
Legg Mason Inc. 6,800 294
Energy East Corp. 14,600 289
- Outback Steakhouse 8,810 282
</TABLE>
34
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<TABLE>
<CAPTION>
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MARKET
VALUE*
SHARES (000)
-----------------------------------------------------------------------
<S> <C> <C>
Sonoco Products Co. 12,020 $ 282
- Ocean Energy, Inc. 19,620 282
Alliant Energy Corp. 9,250 282
Harris Corp. 8,100 280
International Speedway Corp. 6,200 279
Wisconsin Energy Corp. 13,870 277
Hormel Foods Corp. 16,820 276
First Security Corp. 22,980 276
- Adtran, Inc. 4,600 273
American Water Works Co., Inc. 11,390 271
McCormick & Co., Inc. 8,300 268
Compass Bancshares Inc. 13,400 267
- Sawtek Inc. 5,000 263
Martin Marietta Materials, Inc. 5,510 262
- Chris-Craft Industries, Inc. 4,083 260
Herman Miller, Inc. 9,250 259
Ultramar Diamond Shamrock Corp. 10,170 258
Viad Corp. 11,200 256
- Pacificare Health Systems, Inc. 5,100 254
- Nova Corp. (Georgia) 8,690 253
Hillenbrand Industries, Inc. 7,440 253
- Apollo Group, Inc. Class A 8,950 252
ICN Pharmaceuticals, Inc. 9,240 252
MCN Energy Group Inc. 10,070 252
Ross Stores, Inc. 10,440 251
- Devry, Inc. 8,200 250
NiSource, Inc. 14,800 250
The Timber Co. 9,720 249
A. H. Belo Corp. Class A 13,930 249
Southdown, Inc. 4,220 249
The PMI Group Inc. 5,245 249
Green Point Financial Corp. 12,640 248
Mercantile Bankshares Corp. 8,090 247
- Saks Inc. 16,870 245
Dime Bancorp, Inc. 13,160 243
USG Corp. 5,800 243
Cordant Technologies, Inc. 4,300 243
Reynolds & Reynolds Class A 8,960 242
Protective Life Corp. 7,610 242
Cabot Corp. 7,860 240
Shaw Industries, Inc. 15,750 239
- Litton Industries, Inc. 5,400 239
National Community Bancorp 12,700 235
TCF Financial Corp. 9,760 232
Whitman Corp. 16,610 231
Associated Banc-Corp. 7,700 230
- Quantum Corp.- DLT & Storage
Systems 19,060 228
- Brinker International, Inc. 7,620 226
- Lear Corp. 8,040 226
GATX Corp. 5,840 222
Diebold, Inc. 8,060 222
R.J. Reynolds Tobacco
Holdings, Inc. 13,000 221
Noble Affiliates, Inc. 6,730 221
- Affiliated Computer Services, Inc.
Class A 5,800 220
Puget Sound Energy Inc. 9,930 220
- Valassis Communications, Inc. 6,600 220
First Virginia Banks, Inc. 5,850 220
Beckman Coulter, Inc. 3,420 220
- Lands' End, Inc. 3,530 217
Fastenal Co. 4,420 212
- Keane, Inc. 8,380 212
Kansas City Power & Light Co. 7,280 211
CCB Financial Corp. 4,750 210
Hubbell Inc. Class B 7,630 209
- Santa Fe Snyder Corp. 21,700 209
- American Eagle Outfitters, Inc. 5,500 209
Pentair, Inc. 5,620 208
Tidewater Inc. 6,530 208
- Williams Sonoma, Inc. 6,700 208
- Sensormatic Electronics Corp. 9,230 207
National Fuel Gas Co. 4,620 206
Lyondell Chemical Co. 13,850 204
Old Republic International Corp. 14,800 203
Hibernia Corp. Class A 19,320 203
- L-3 Communications Holdings, Inc. 3,900 203
- Tech Data Corp. 6,160 203
Valero Energy Corp. 6,520 200
IMC Global Inc. 13,460 198
UtiliCorp United, Inc. 10,940 198
IBP, Inc. 12,520 197
IPALCO Enterprises, Inc. 10,100 197
American Financial Group, Inc. 6,870 197
Sovereign Bancorp, Inc. 25,860 196
FirstMerit Corp. 10,600 195
- Sybase, Inc. 9,600 195
- Hanover Compressor Co. 3,400 193
- Premier Parks Inc. 9,200 193
Provident Financial Group, Inc. 5,670 193
Conectiv, Inc. 10,958 192
- International Game Technology 8,828 191
Pacific Century Financial Corp. 9,380 191
- Barnes & Noble, Inc. 8,260 190
- Express Scripts, Inc. 4,500 189
City National Corp. 5,610 189
Wilmington Trust Corp. 3,870 188
- Storage Technology Corp. 11,800 188
- Abercrombie & Fitch Co. 11,640 186
- Payless ShoeSource, Inc. 3,570 185
Lubrizol Corp. 6,410 185
Harte-Hanks, Inc. 8,100 184
- First Health Group Corp. 5,770 182
Questar Corp. 9,810 182
Astoria Financial Corp. 6,400 182
Everest Re Group, Ltd. 5,550 181
C.H. Robinson Worldwide, Inc. 4,830 180
- Lincare Holdings, Inc. 6,340 180
Helmerich & Payne, Inc. 5,800 180
HON Industries, Inc. 6,980 180
- Mandalay Resort Group 10,650 180
OGE Energy Corp. 9,190 176
DENTSPLY International Inc. 6,180 175
Flowers Industries, Inc. 11,500 175
Solutia, Inc. 12,940 173
Dial Corp. 12,340 170
Clayton Homes Inc. 16,700 169
- Trigon Healthcare, Inc. 4,570 163
Media General, Inc. Class A 3,100 162
</TABLE>
35
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<TABLE>
<CAPTION>
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MARKET
VALUE*
MID-CAP INDEX PORTFOLIO SHARES (000)
-----------------------------------------------------------------------
<S> <C> <C>
Teleflex Inc. 4,510 $ 160
CNF Transportation, Inc. 5,730 159
- Mohawk Industries, Inc. 7,100 159
- INCYTE Pharmaceuticals, Inc. 1,800 157
Rayonier Inc. 3,210 156
- Blyth Industries, Inc. 5,700 156
- Borders Group, Inc. 9,050 156
Houghton Mifflin Co. 3,630 154
- ACNielson Corp. 6,830 154
IDACORP, Inc. 4,410 153
- Suiza Foods Corp. 3,790 153
- Cytec Industries, Inc. 4,980 153
- Swift Transportation Co., Inc. 7,300 150
Washington Gas Light Corp. 5,500 150
Minnesota Power, Inc. 8,800 146
- Oxford Health Plan 9,590 146
Federal-Mogul Corp. 8,640 144
RPM Inc. (Ohio) 13,020 143
Lancaster Colony Corp. 4,670 143
- Cirrus Logic 7,800 142
CK Witco Corp. 13,954 142
Carlisle Co., Inc. 3,530 141
Dexter Corp. 2,660 141
- Modis Professional Services Inc. 11,330 140
- VISIX Inc. 7,600 139
Harsco Corp. 4,790 139
AK Steel Corp. 13,353 139
Callaway Golf Co. 8,930 138
Airborne Freight Corp. 5,730 138
Lee Enterprises, Inc. 5,190 136
- Investment Technology Group, Inc. 3,800 134
Dole Food Co. 6,750 131
Omnicare, Inc. 10,690 129
Sotheby's Holdings Class A 6,930 128
COMSAT Corp. 6,180 127
Ohio Casualty Corp. 7,100 127
- Pioneer Natural Resources Co. 11,810 125
Universal Foods Corp. 5,860 125
AGL Resources Inc. 6,730 124
FINOVA Group, Inc. 7,310 123
Donaldson Co., Inc. 5,430 123
WestAmerica Bancorporation 4,400 122
- Papa John's International, Inc. 3,700 122
Webster Financial Corp. 5,300 122
Claire's Stores, Inc. 6,060 122
Borg-Warner Automotive, Inc. 3,060 120
Hawaiian Electric Industries Inc. 3,750 119
Albemarle Corp. 5,720 119
Newport News Shipbuilding Inc. 3,890 118
Indiana Energy, Inc. 6,030 118
- Foundation Health Systems
Class A 14,650 117
- Mentor Graphics Corp. 7,720 117
Meritor Automotive, Inc. 7,360 116
Westpoint Stevens, Inc. 6,120 116
- Imation Corp. 4,350 116
Dean Foods Corp. 4,330 116
- Transaction Systems
Architects, Inc. 4,000 115
Sierra Pacific Resources 9,210 115
Mark IV Industries, Inc. 5,200 115
Interstate Bakeries Corp. 7,990 114
CMP Group Inc. 3,860 112
Kennametal, Inc. 3,730 112
- Furniture Brands International Inc. 5,870 110
Minerals Technologies, Inc. 2,440 109
York International Corp. 4,640 108
Precision Castparts Corp. 2,970 108
Keystone Financial, Inc. 5,870 108
- Gartner Group, Inc. Class B 8,100 108
- Scholastic Corp. 1,980 107
Bergen Brunswig Corp. Class A 15,805 107
Alexander & Baldwin, Inc. 5,090 105
Trinity Industries, Inc. 4,380 104
Tecumseh Products Co. Class A 2,330 103
Federal Signal Corp. 5,600 101
Kaydon Corp. 3,650 100
- Cambridge Technology Partners 7,350 100
- Jacobs Engineering Group Inc. 3,080 99
- Sykes Enterprises, Inc. 5,200 99
HSB Group Inc. 3,420 99
Kelly Services, Inc. Class A 4,110 98
Superior Industries
International, Inc. 3,100 98
Olin Corp. 5,520 98
Carter-Wallace, Inc. 5,200 97
Pittston Brink's Group 5,728 97
Georgia Gulf Corp. 3,740 97
- Sylvan Learning Systems, Inc. 6,000 96
Longview Fibre Co. 6,370 94
- Varco International, Inc. 7,410 94
Pennzoil-Quaker State Co. 8,960 94
- NCO Group, Inc. 2,900 93
Overseas Shipholding Group Inc. 4,010 92
Cleco Corp. 2,750 91
Nordson Corp. 1,980 91
- Alaska Air Group, Inc. 2,990 90
Horace Mann Educators Corp. 4,870 90
- Apria Healthcare Group Inc. 6,170 89
- Quorum Health Group, Inc. 8,600 87
Granite Construction Co. 3,200 86
Modine Manufacturing Co. 3,430 86
- OfficeMax, Inc. 13,080 85
Dreyer's Grand Ice Cream, Inc. 3,300 85
- The Neiman Marcus Group, Inc.
Class B 3,000 83
- STERIS Corp. 7,950 81
AGCO Corp. 7,060 80
Wellman, Inc. 3,950 78
Public Service Co. of New Mexico 4,960 78
- The Neiman Marcus Group, Inc.
Class A 2,800 78
Church & Dwight, Inc. 4,520 78
Wausau-Mosinee Paper Corp. 6,000 78
Ferro Corp. 4,290 76
- GTech Holdings Corp. 4,060 75
- Wisconsin Central
Transportation Corp. 6,060 74
The Warnaco Group, Inc. Class A 6,260 74
- UCAR International, Inc. 5,500 73
- Covance, Inc. 6,740 72
Ametek Aerospace Products Inc. 3,750 72
</TABLE>
36
<PAGE> 108
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
-----------------------------------------------------------------------
<S> <C> <C>
- Airgas, Inc. 8,580 $ 71
H.B. Fuller Co. 1,750 70
Ogden Corp. 5,840 70
CBRL Group, Inc. 6,970 70
M.A. Hanna Co. 6,050 68
- Perrigo Co. 8,610 65
Arvin Industries, Inc. 2,870 65
J.M. Smucker Co. Class A 3,520 65
Bandag, Inc. 2,740 63
Stewart Enterprises, Inc. Class A 12,610 62
Banta Corp. 3,320 61
- Unifi, Inc. 6,770 60
Ruddick Corp. 5,410 59
Universal Corp. 3,870 58
- PSS World Medical, Inc. 8,580 58
Bob Evans Farms, Inc. 4,650 58
Wallace Computer Services, Inc. 4,880 58
Chesapeake Corp. of Virginia 1,940 57
Flowserve Corp. 4,420 57
- Policy Management Systems Corp. 4,600 55
P.H. Glatfelter Co. 5,160 55
J.B. Hunt Transport Services, Inc. 3,990 55
Black Hills Corp. 2,440 54
Rollins, Inc. 3,540 53
- Structural Dynamics
Research Corp. 3,900 53
A. Schulman Inc. 3,770 50
- Navigant Consulting, Inc. 4,500 49
- Acuson Corp. 3,300 49
- Albany International Corp. 3,288 49
Carpenter Technology Corp. 2,340 49
The Standard Register Co. 3,600 46
- Buffets Inc. 5,000 45
- Lone Star Steakhouse
& Saloon, Inc. 4,330 44
- Sequa Corp. Class A 1,110 44
- Beverly Enterprises, Inc. 11,630 43
Gartner Group, Inc. Class A 2,600 41
Ryerson Tull, Inc. 2,640 41
Lance, Inc. 3,830 41
Stewart & Stevenson Services, Inc. 3,610 41
Arnold Industries, Inc. 3,080 39
Cleveland-Cliffs Iron Co. 1,420 34
International Multifoods Corp. 2,410 32
Ethyl Corp. 10,320 32
- Burlington Industries, Inc. 6,840 30
NCH Corp. 660 30
- MagnaTek, Inc. 3,150 29
Heilig-Meyers Co. 7,060 28
- Total Renal Care Holdings, Inc. 7,790 24
- Maxxam Inc. 780 22
SIG Corp. 600 15
-----------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $100,504) 113,692
-----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
FACE MARKET
AMOUNT VALUE*
(000) (000)
-----------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (0.5%)(1)
-----------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY BILL
(2) 5.70%, 4/27/2000 $ 50 $ 50
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled Cash Account
6.12%, 4/3/2000 471 471
-----------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $521) 521
-----------------------------------------------------------------------
TOTAL INVESTMENTS (101.1%)
(COST $101,025) 114,213
-----------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES--NET (-1.1%) (1,277)
-----------------------------------------------------------------------
NET ASSETS (100%)
-----------------------------------------------------------------------
Applicable to 8,185,998 outstanding
$0.001 par value shares of beneficial
interest (unlimited authorization) $112,936
=======================================================================
NET ASSET VALUE PER SHARE $13.80
=======================================================================
</TABLE>
* See Note A in Notes to Financial Statements.
- Non-Income-Producing Security.
(1) The fund invests a portion of its cash reserves in equity markets through
the use of index futures contracts. After giving effect to futures
investments, the fund's effective common stock and temporary cash investment
positions represent 101.1% and 0.0%, respectively, of net assets. See Note F
in Notes to Financial Statements.
(2) Security segregated as initial margin for open futures contracts.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
-----------------------------------------------------------------------
<S> <C>
ASSETS
Investments in Securities, at Value $114,213
Receivables for Investment Securities Sold 7,733
Other Assets--Note C 393
-------
Total Assets 122,339
-------
LIABILITIES
Payables for Investment Securities Purchased (9,004)
Other Liabilities (399)
-------
Total Liabilities (9,403)
-------
-----------------------------------------------------------------------
NET ASSETS (100%) $112,936
=======================================================================
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
AT MARCH 31, 2000, NET ASSETS CONSISTED OF:
-----------------------------------------------------------------------
AMOUNT PER
(000) SHARE
-----------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $ 93,219 $11.39
Undistributed Net
Investment Income 263 .03
Accumulated Net Realized Gains 6,236 .76
Unrealized Appreciation--Note F
Investment Securities 13,188 1.61
Futures Contracts 30 .01
-----------------------------------------------------------------------
NET ASSETS $112,936 $13.80
=======================================================================
</TABLE>
37
<PAGE> 109
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
MARKET
VALUE*
GROWTH PORTFOLIO SHARES (000)
-----------------------------------------------------------------------
COMMON STOCKS (99.0%)
-----------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY (11.5%)
- America Online, Inc. 635,100 $ 42,710
Wal-Mart Stores, Inc. 435,600 24,176
Home Depot, Inc. 366,900 23,665
Time Warner, Inc. 176,500 17,650
Gillette Co. 341,600 12,874
The Walt Disney Co. 177,500 7,344
- Bed Bath & Beyond, Inc. 139,600 5,497
- Amazon.com, Inc. 80,800 5,414
- Clear Channel
Communications, Inc. 45,900 3,170
----------
142,500
----------
CONSUMER STAPLES (7.5%)
Procter & Gamble Co. 390,200 21,949
The Coca-Cola Co. 465,700 21,859
PepsiCo, Inc. 407,400 14,081
CVS Corp. 374,800 14,078
Colgate-Palmolive Co. 208,600 11,760
Walgreen Co. 292,600 7,534
- The Kroger Co. 134,100 2,355
----------
93,616
----------
FINANCIAL SERVICES (8.1%)
American Express Co. 104,200 15,519
American International
Group, Inc. 141,000 15,439
MBNA Corp. 580,300 14,798
State Street Corp. 139,100 13,475
Capital One Financial Corp. 251,000 12,032
Automatic Data Processing, Inc. 248,800 12,005
Paychex, Inc. 165,600 8,673
Charles Schwab Corp. 90,700 5,153
- Concord EFS, Inc. 180,950 4,151
----------
101,245
----------
HEALTH CARE (9.2%)
Warner-Lambert Co. 366,600 35,744
Eli Lilly & Co. 341,700 21,527
American Home Products Corp. 294,200 15,776
Schering-Plough Corp. 315,500 11,595
- Amgen, Inc. 179,200 10,998
AstraZeneca Group PLC ADR 173,900 7,043
Johnson & Johnson 89,200 6,250
- Genentech, Inc. 31,900 4,849
----------
113,782
----------
MATERIALS & PROCESSING (0.6%)
- Sealed Air Corp. 99,000 5,377
- W.R. Grace & Co. 161,800 2,053
----------
7,430
----------
PRODUCER DURABLES (4.8%)
- Applied Materials, Inc. 368,800 34,759
Nokia Corp. ADR 113,500 24,658
----------
59,417
----------
TECHNOLOGY (43.0%)
COMMUNICATIONS TECHNOLOGY (18.2%)
- Cisco Systems, Inc. 1,491,000 115,273
Lucent Technologies, Inc. 610,500 37,088
Corning, Inc. 72,800 14,123
- QUALCOMM, Inc. 92,600 13,826
- JDS Uniphase Corp. 90,800 10,947
- Juniper Networks, Inc. 31,500 8,302
- Inktomi Corp. 40,300 7,859
- CIENA Corp. 37,900 4,780
- Brocade Communications
Systems, Inc. 24,700 4,429
- Redback Networks Inc. 14,400 4,319
- Sycamore Networks, Inc. 33,300 4,296
Computer Services
SOFTWARE & SYSTEMS (8.3%)
- Microsoft Corp. 606,300 64,419
- Oracle Corp. 327,700 25,581
- Veritas Software Corp. 98,200 12,864
COMPUTER TECHNOLOGY (7.9%)
- EMC Corp. 352,800 44,100
- Sun Microsystems, Inc. 373,900 35,036
- Dell Computer Corp. 353,200 19,051
ELECTRONICS--SEMICONDUCTORS/COMPONENTS (7.8%)
Intel Corp. 358,000 47,234
Texas Instruments, Inc. 232,400 37,184
- Broadcom Corp. 49,300 11,974
ELECTRONICS--TECHNOLOGY (0.8%)
- Solectron Corp. 262,800 10,528
----------
533,213
----------
UTILITIES (3.7%)
- MCI WORLDCOM, INC. 378,600 17,155
SBC Communications Inc. 267,900 11,252
- Comcast Corp.-Special Class A 257,100 11,152
- Level 3 Communications, Inc. 63,400 6,705
----------
46,264
----------
OTHER (10.6%)
General Electric Co. 478,100 74,195
Monsanto Co. 586,200 30,189
Tyco International Ltd. 364,600 18,184
Illinois Tool Works, Inc. 167,500 9,254
----------
131,822
----------
-----------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $743,351) 1,229,289
-----------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK (0.4%)
-----------------------------------------------------------------------
Sealed Air Corp. $2.00 Cvt. Pfd.
(COST $3,779) 94,800 4,924
-----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
FACE
AMOUNT
(000)
-----------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (1.5%)
-----------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
6.12%, 4/3/2000 $14,944 14,944
6.14%, 4/3/2000--Note G 3,591 3,591
-----------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $18,535) 18,535
-----------------------------------------------------------------------
TOTAL INVESTMENTS (100.9%)
(COST $765,665) 1,252,748
-----------------------------------------------------------------------
</TABLE>
38
<PAGE> 110
<TABLE>
<CAPTION>
---------------------------------------------------------
MARKET
VALUE*
(000)
---------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.9%)
---------------------------------------------------------
<S> <C>
Other Assets--Note C $ 5,483
Liabilities--Note G (16,992)
--------
(11,509)
---------------------------------------------------------
NET ASSETS (100%)
---------------------------------------------------------
Applicable to 35,792,589 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization) $1,241,239
=========================================================
NET ASSET VALUE PER SHARE $34.68
=========================================================
</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, 2000, NET ASSETS CONSISTED OF:
------------------------------------------------------
<S> <C> <C>
Paid in Capital $ 684,573 $19.13
Undistributed Net
Investment Income 1,398 .04
Accumulated Net Realized Gains 68,185 1.90
Unrealized Appreciation--Note F 487,083 13.61
------------------------------------------------------
NET ASSETS $1,241,239 $34.86
======================================================
</TABLE>
39
<PAGE> 111
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
MARKET
SMALL COMPANY VALUE*
GROWTH PORTFOLIO SHARES (000)
-------------------------------------------------------------------------------
COMMON STOCKS (85.2%)
-------------------------------------------------------------------------------
AUTO & TRANSPORTATION (4.2%)
<S> <C> <C>
Tidewater Inc. 106,000 $ 3,372
Oshkosh Truck Corp. 78,500 2,438
Wabash National Corp. 170,000 2,369
- Heartland Express, Inc. 160,750 2,258
- Covenant Transport, Inc. 119,500 1,897
C.H. Robinson Worldwide, Inc. 37,000 1,378
- M.S. Carriers, Inc. 57,000 1,339
- Swift Transportation Co., Inc. 61,250 1,256
Polaris Industries, Inc. 30,000 904
Werner Enterprises, Inc. 44,000 748
- Knight Transportation, Inc. 35,000 612
--------
18,571
--------
CONSUMER DISCRETIONARY (14.9%)
- Linens 'n Things, Inc. 234,000 8,014
- Jones Apparel Group, Inc. 169,000 5,387
- Latitude Communications, Inc. 148,000 3,885
- Learning Tree International,
Inc. 104,500 3,710
Regis Corp. 237,000 3,511
- Williams Sonoma, Inc. 106,200 3,292
- ValueVision International, Inc.
Class A 76,000 3,145
- The Corporate Executive
Board Co. 61,000 3,096
- Nautica Enterprises, Inc. 225,000 2,644
- MP3.com, Inc. 125,800 2,642
- NCO Group, Inc. 74,000 2,363
- Championship Auto Racing
Teams, Inc. 100,000 2,200
- Ames Department Stores, Inc. 89,500 2,198
- Vans, Inc. 135,000 2,177
- Insight Communications Co., Inc. 100,000 2,063
- BJ's Wholesale Club, Inc. 44,500 1,719
- Wink Communications, Inc. 50,000 1,669
- Collectors Universe, Inc. 230,000 1,495
Dover Downs Entertainment, Inc. 117,000 1,492
- New Horizons Worldwide, Inc. 76,500 1,358
- Brightpoint, Inc. 110,000 1,347
- DAMARK International, Inc. 35,000 1,334
- Rent-A-Center, Inc. 76,000 1,140
- Too Inc. 31,000 978
- eMerge Interactive, Inc. 28,000 843
Oneida Ltd. 43,000 833
Tupperware Corp. 34,000 538
- On Command Corp. 35,000 525
- ShopKo Stores, Inc. 25,000 444
--------
66,042
--------
CONSUMER STAPLES (1.3%)
- Rexall Sundown, Inc. 358,500 5,064
Fleming Cos., Inc. 63,000 949
--------
6,013
--------
ENERGY (4.5%)
- Core Laboratories N.V. 210,000 6,103
- Hanover Compressor Co. 85,400 4,857
- Marine Drilling Co., Inc. 133,500 3,663
- Chieftain International, Inc. 135,000 2,717
St. Mary Land & Exploration Co. 62,500 1,867
Carbo Ceramics Inc. 30,000 844
--------
20,051
--------
FINANCIAL SERVICES (9.0%)
- Investment Technology
Group, Inc. 193,554 6,823
Equity Residential Properties
Trust REIT 167,000 6,711
Sun Communities, Inc. REIT 196,300 5,668
- Concord EFS, Inc. 204,561 4,692
Dain Rauscher Corp. 52,000 3,429
Manufactured Home
Communities, Inc. REIT 112,000 2,590
Jefferies Group, Inc. 106,000 2,425
Federal Realty Investment
Trust REIT 112,500 2,173
Saul Centers, Inc. REIT 124,900 2,014
First Washington Realty
Trust, Inc. REIT 106,700 1,981
Fidelity National Financial, Inc. 91,400 1,262
--------
39,768
--------
HEALTH CARE (15.4%)
- Vertex Pharmaceuticals, Inc. 125,000 5,852
- Chiron Corp. 90,000 4,489
- Forest Laboratories, Inc. 53,000 4,478
- BioChem Pharma Inc. 200,000 4,425
- Regeneron
Pharmaceuticals, Inc. 122,000 3,607
- Cytyc Corp. 74,000 3,570
- United Therapeutics Corp. 45,500 3,538
- Genzyme Corp. 69,500 3,484
Arrow International, Inc. 107,000 3,357
DENTSPLY International Inc. 115,000 3,263
- Medarex, Inc. 64,500 3,241
- Millennium Pharmaceuticals, Inc. 21,132 2,745
- Abgenix, Inc. 19,800 2,735
- Human Genome Sciences, Inc. 31,200 2,591
- Cell Genesys, Inc. 114,850 2,448
- PE Corp. - Celera
Genomics Group 25,900 2,371
- Cubist Pharmaceuticals, Inc. 51,000 2,136
- Acuson Corp. 110,000 1,629
- Isis Pharmaceuticals, Inc. 106,000 1,491
- Transkaryotic Therapies, Inc. 25,000 1,391
- Protein Design Labs, Inc. 16,500 1,312
- Cephalon, Inc. 32,000 1,200
- Onyx Pharmaceuticals, Inc. 85,000 1,185
Bindly Western Industries, Inc. 81,000 1,098
- Ribozyme Pharmaceuticals, Inc. 10,500 266
- Beverly Enterprises, Inc. 60,000 221
- Orapharma Inc. 6,600 122
- Patterson Dental Co. 100 4
--------
68,249
--------
MATERIALS & PROCESSING (2.6%)
- Trex Co., Inc. 90,000 3,443
- AG Services of America, Inc. 100,000 2,425
- U.S. Plastic Lumber Corp. 261,000 2,414
Polymer Group, Inc. 163,500 2,085
- Uniroyal Technology Corp. 30,000 1,410
--------
11,777
--------
</TABLE>
40
<PAGE> 112
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
-------------------------------------------------------------------------------
PRODUCER DURABLES (10.7%)
<S> <C> <C>
- Mettler-Toledo International
Inc. 155,100 $ 6,349
- AstroPower, Inc. 162,000 5,235
- Waters Corp. 52,000 4,953
- Zygo Corp. 78,700 3,797
- American Power Conversion Corp. 88,000 3,773
- Plantronics, Inc. 39,700 3,700
- Polycom, Inc. 39,000 3,088
Clayton Homes Inc. 299,000 3,027
- Adaptive Broadband Corp. 48,000 2,568
- SpectraLink Corp. 135,000 2,430
- MKS Instruments, Inc. 46,000 2,323
Cohu, Inc. 51,500 2,147
- Palm Harbor Homes, Inc. 103,953 1,598
Lindsay Manufacturing Co. 70,050 1,200
- Rayovac Corp. 46,000 1,070
--------
47,258
--------
TECHNOLOGY (22.6%)
- Burr-Brown Corp. 170,250 9,257
- SeaChange International, Inc. 95,600 5,891
- Macrovision Corp. 68,000 5,856
- Remedy Corp. 130,000 5,476
- Internet Pictures Corp. 156,000 5,294
- Sybase, Inc. 236,500 4,804
- Marimba, Inc. 103,000 4,545
- Entrust Technologies, Inc. 51,000 4,339
- Oak Technology, Inc. 205,500 3,956
- Western Digital Corp. 525,000 3,905
- Acxiom Corp. 97,500 3,242
- Exchange Applications, Inc. 60,000 3,175
Keithley Instruments Inc. 65,000 3,096
- Moldflow Corp. 167,000 2,829
- CAIS Internet, Inc. 110,000 2,661
- Saga Systems, Inc. 74,000 2,646
- Verity, Inc. 64,500 2,628
- Maxtor Corp. 200,000 2,587
- ISS Group, Inc. 21,700 2,528
- Aspect Development, Inc. 35,500 2,285
- Quantum Corp.-Hard Disk Drive 200,000 2,250
- Internet.com Corp. 45,000 1,884
- iVillage Inc. 115,000 1,802
- Optimal Robotics Corp. 33,000 1,551
- AVANT! CORP. 119,500 1,494
- BSQUARE Corp. 58,800 1,301
- Trimble Navigation Ltd. 49,600 1,277
- DSET Corp. 68,500 1,263
- Hutchinson Technology, Inc. 70,000 1,234
- RealNetworks, Inc. 20,000 1,139
- Del Global Technologies Corp. 120,000 1,020
- Diversinet Corp. 50,000 894
BEI Technologies, Inc. 48,800 863
- QAD Inc. 62,000 550
- RSA Security Inc. 6,500 337
- Net Perceptions, Inc. 5,100 188
- Maxwell Technologies, Inc. 13,500 186
- White Pine Software, Inc. 3,000 108
--------
100,341
--------
-------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $308,746) 378,070
-------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE*
(000) (000)
-------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (17.4%)
-------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled Cash Account
<S> <C> <C>
6.12%, 4/3/2000 $61,180 $61,180
6.14%, 4/3/2000--Note G 16,195 16,195
-------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $77,375) 77,375
-------------------------------------------------------------------------------
TOTAL INVESTMENTS (102.6%)
(COST $386,121) 455,445
-------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-2.6%)
-------------------------------------------------------------------------------
Other Assets--Note C 10,448
Security Lending Collateral
Payable to Brokers--Note G (16,195)
Other Liabilities (6,043)
--------
(11,790)
-------------------------------------------------------------------------------
NET ASSETS (100%)
-------------------------------------------------------------------------------
Applicable to 20,284,823 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization) $443,655
===============================================================================
NET ASSET VALUE PER SHARE $21.87
-------------------------------------------------------------------------------
*See Note A in Notes to Financial Statements.
-Non-Income-Producing Security.
REIT--Real Estate Investment Trust.
-------------------------------------------------------------------------------
AT MARCH 31, 2000, NET ASSETS CONSISTED OF:
-------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
-------------------------------------------------------------------------------
Paid in Capital $281,823 $13.89
Undistributed Net
Investment Income 1,113 .05
Accumulated Net
Realized Gains 91,395 4.51
Unrealized Appreciation--Note F 69,324 3.42
-------------------------------------------------------------------------------
NET ASSETS $443,655 $21.87
===============================================================================
</TABLE>
41
<PAGE> 113
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
MARKET
VALUE*
INTERNATIONAL PORTFOLIO SHARES (000)
-------------------------------------------------------------------------------
COMMON STOCKS (95.8%)
-------------------------------------------------------------------------------
<S> <C> <C>
AUSTRALIA (0.2%)
Broken Hill Proprietary Co. Ltd. 66,000 $ 715
--------
BRAZIL (1.9%)
- Telecomunicacoes de
Sao Paulo SA 82,000 2,434
Tele Celular Sul
Participacoes ADR 38,000 1,900
Tele Centro Sul
Participacoes ADR 20,600 1,669
Petroleo Brasileiro SA Pfd. 4,550,000 1,237
Telesp Participacoes SA Pfd. 22,481,795 663
--------
7,903
--------
DENMARK (0.4%)
Den Danske Bank A/S 16,000 1,676
--------
FINLAND (2.0%)
Nokia Oyj 39,000 8,247
--------
FRANCE (14.3%)
Total Fina SA B Shares 84,148 12,601
Vivendi 100,000 11,530
Suez Lyonnaise des Eaux 45,600 7,837
Canal Plus SA 32,000 7,043
Alcatel 29,000 6,363
Thomson-CSF SA 130,000 5,287
Bouygues SA 3,470 2,749
Aventis SA 31,507 1,715
AXA 11,473 1,626
Accor SA 36,000 1,412
STMicroelectronics 5,500 1,010
- Vivendi Warrants Exp. 2/5/2001 18,200 98
--------
59,271
--------
GERMANY (3.2%)
SAP AG Pfd. 7,000 4,983
Deutsche Telekom AG 51,000 4,099
Viag AG 124,800 2,515
Muenchener
Rueckversicherungs-
Gesellschaft AG (Registered) 3,000 933
Buderus AG 39,000 657
- Infineon Technologies AG 2,500 136
--------
13,323
--------
HONG KONG (2.4%)
- China Telecom (Hong Kong) Ltd. 400,000 3,506
Hutchison Whampoa Ltd. 158,000 2,851
Cheung Kong Holdings Ltd. 105,000 1,571
Swire Pacific Ltd. A Shares 248,500 1,283
Sun Hung Kai Properties Ltd. 66,000 572
Johnson Electric Holdings Ltd. 45,500 311
- Sunevision Holdings Ltd. 471 1
--------
10,095
--------
IRELAND (1.3%)
- Elan Corp. PLC ADR 77,000 3,658
Bank of Ireland PLC 250,000 1,770
--------
5,428
--------
ITALY (4.6%)
- Olivetti SpA 1,954,080 7,012
Telecom Italia Mobile SpA 550,000 6,747
Banca di Roma SpA 2,080,000 2,295
Fiat SpA 57,800 1,524
- Tecnost SpA 347,580 1,314
--------
18,892
--------
JAPAN (18.0%)
MURATA MANUFACTURING CO., LTD. 60,000 14,596
Fuji Photo Film Co., Ltd. 231,000 10,180
Takeda Chemical Industries Ltd. 124,000 8,826
Nippon Telegraph and
Telephone Corp. 384 6,103
Matsushita Electric
Industrial Co., Ltd. 159,000 4,759
Mabuchi Motor Co. 32,000 3,401
Tokyo Electron Ltd. 19,599 2,962
Nippon Television Network Corp. 3,700 2,630
Sumitomo Electric Industries
Ltd. 180,000 2,539
Mitsui & Co., Ltd. 280,000 2,266
Toho Co., Ltd. 8,200 2,203
East Japan Railway Co. 355 1,841
TDK Corp. 13,000 1,772
Mitsubishi Corp. 192,000 1,743
Yamanouchi
Pharmaceuticals Co., Ltd. 27,000 1,479
Sony Corp. 10,000 1,414
Fujitsu Ltd. 44,000 1,351
- Dowa Fire & Marine
Insurance Co. 500,000 1,292
Tokio Marine & Fire
Insurance Co. 90,000 926
Hirose Electric Co., Ltd. 5,700 805
- Yasuda Fire & Marine
Insurance Co. 143,000 648
Toppan Printing Co., Ltd. 57,000 639
Kuraray Co., Ltd. 36,000 329
--------
74,704
--------
MALAYSIA (1.2%)
Tenaga Nasional Bhd. 596,041 2,008
Genting Bhd. 317,700 1,321
Malayan Banking Bhd. 211,000 927
Telekom Malaysia Bhd. 207,500 852
--------
5,108
--------
MEXICO (1.5%)
- Telefonos de Mexico SA
Class L ADR 39,000 2,613
- Grupo Televisa SA GDR 22,900 1,557
- Cemex SA de CV ADR 37,504 849
Fomento Economico
Mexicano SA de CV 182,000 817
- Grupo Bimbo SA 98,500 164
- Cemex SA de CV ADR Warrants
Exp. 12/13/2002 2,344 8
--------
6,008
--------
NETHERLANDS (9.1%)
Philips Electronics NV 79,260 13,318
ING Groep NV 197,099 10,675
- Getronics NV 65,283 4,991
TNT Post Group NV 108,000 2,425
</TABLE>
42
<PAGE> 114
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
-------------------------------------------------------------------------------
Verenigde Nederlandse
Uitgeversbedrijven Verenigd
<S> <C> <C>
Bezit NV 41,000 2,415
Heineken NV 40,300 2,154
- Equant NV 10,900 904
Oce NV 33,000 448
- Versatel Telecom
International NV 7,000 324
--------
37,654
--------
SINGAPORE (1.7%)
- DBS Group Holdings Ltd. 148,864 1,967
United Overseas Bank Ltd. 249,216 1,530
City Developments Ltd. 334,000 1,513
Singapore Press Holdings Ltd. 81,138 1,295
Singapore Airlines Ltd. 57,000 533
--------
6,838
--------
SOUTH KOREA (4.4%)
Samsung Electronics Co., Ltd. 45,617 13,826
Korea Electric Power Corp. 72,700 2,072
- Korea Telephone Warrants
Exp. 5/22/2000 8,500 753
Kookmin Bank 69,500 704
Shinhan Bank Co. 47,500 509
- Korea Telecom Corp. ADR 7,400 324
--------
18,188
--------
SPAIN (1.0%)
Bankinter SA 30,000 1,892
Endesa SA 72,000 1,651
Altadis SA 38,000 502
--------
4,045
--------
SWEDEN (3.3%)
- LM Ericsson Telephone
AB B Shares 60,000 5,271
Skandia Forsakrings AB 87,000 4,118
Svenska Handelsbanken
A Shares 210,000 2,589
Investor AB 120,000 1,875
--------
13,853
--------
SWITZERLAND (3.5%)
ABB Ltd. 49,000 5,629
Novartis AG (Registered) 2,640 3,611
UBS AG 11,400 2,996
Compagnie Financiere
Richemont AG 570 1,448
Clariant AG 1,800 678
--------
14,362
--------
TAIWAN (3.3%)
- United Microelectronics
Warrants Exp. 2/12/2001 1,011,000 3,913
- Asustek Computer Inc.
Warrants Exp. 2/12/2001 150,000 1,874
- Taiwan Semiconductor
Manufacturing Co. Warrants
Exp. 1/29/2001 255,000 1,715
- Taiwan Semiconductor
Manufacturing Co. Warrants
Exp. 4/25/2000 179,129 1,481
- Honhai Precision Warrants
Exp. 2/15/2001 117,000 1,354
- Honhai Precision Warrants
Exp. 3/5/2001 94,000 1,090
- Far East Textiles Warrants
Exp. 8/11/2000 482,000 998
- Honhai Precision Warrants
Exp. 8/11/2000 54,000 625
- Taiwan Semiconductor
Manufacturing Co. Warrants
Exp. 2/15/2001 75,000 504
- Asustek Computer Inc. Warrants
Exp. 6/21/2000 24,000 300
--------
13,854
--------
UNITED KINGDOM (18.5%)
Vodafone Airtouch PLC 3,189,500 17,732
Standard Chartered PLC 372,500 5,078
Kingfisher PLC 569,030 4,675
Bass PLC 337,000 4,242
Tesco PLC 1,210,000 4,029
- British Sky Broadcasting
Group PLC 151,000 3,999
New Dixons Group PLC 816,000 3,778
Centrica PLC 934,000 3,568
British Telecommunications PLC 189,000 3,543
Rolls-Royce PLC 902,000 2,925
Allied Zurich PLC 232,000 2,548
Boots Co. PLC 265,000 2,271
United News & Media PLC 157,000 2,065
Scottish & Newcastle PLC 264,000 1,844
BP Amoco PLC 192,000 1,757
Electrocomponents PLC 166,000 1,683
Reckitt Benckiser PLC 174,000 1,655
Provident Financial PLC 167,000 1,485
Cable and Wireless PLC 78,000 1,466
Airtours PLC 203,300 1,092
Marconi PLC 81,000 968
Tomkins PLC 296,000 946
IMI PLC 244,000 884
- Telewest Communications PLC 112,560 865
- Arm Holdings PLC 12,000 725
Bodycote International PLC 191,000 662
Johnson Matthey PLC 28,000 320
--------
76,805
--------
-------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $262,585) 396,969
-------------------------------------------------------------------------------
FACE
AMOUNT
(000)
-------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (14.8%)
-------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
COLLATERALIZED BY U.S. GOVERNMENT
Obligations in a Pooled
Cash Account
6.12%, 4/3/2000 $18,355 $18,355
6.14%, 4/3/2000--Note G 43,004 43,004
-------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $61,359) 61,359
-------------------------------------------------------------------------------
TOTAL INVESTMENTS (110.6%)
(COST $323,944) 458,328
-------------------------------------------------------------------------------
</TABLE>
43
<PAGE> 115
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
MARKET
VALUE*
INTERNATIONAL PORTFOLIO (000)
-------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-10.6%)
-------------------------------------------------------------------------------
<S> <C>
Other Assets--Note C $ 2,959
Security Lending Collateral
Payable to Brokers--Note G (43,004)
Other Liabilities (3,958)
--------
(44,003)
-------------------------------------------------------------------------------
NET ASSETS (100%)
-------------------------------------------------------------------------------
Applicable to 21,482,950 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $414,325
===============================================================================
NET ASSET VALUE PER SHARE $19.29
===============================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
-Non-Income-Producing Security.
ADR--American Depositary Receipt.
GDR--Global Depositary Receipt.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
-------------------------------------------------------------------------------
AT MARCH 31, 2000, NET ASSETS CONSISTED OF:
-------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $276,894 $12.89
Undistributed Net
Investment Income--Note E 1,010 .05
Accumulated Net
Realized Gains--Note E 4,469 .21
Unrealized Appreciation
(Depreciation)--Note F
Investment Securities 134,384 6.25
Foreign Currencies and
Forward Currency Contracts (2,432) (.11)
-------------------------------------------------------------------------------
NET ASSETS $414,325 $19.29
===============================================================================
</TABLE>
44
<PAGE> 116
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
MARKET
VALUE*
REIT INDEX PORTFOLIO SHARES (000)
-------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (97.2%)
-------------------------------------------------------------------------------
<S> <C> <C>
Equity Office Properties Trust
REIT 60,710 1,525
Equity Residential Properties
Trust REIT 30,544 1,227
Simon Property Group, Inc. REIT 41,890 1,005
ProLogis Trust REIT 39,110 753
Spieker Properties, Inc. REIT 15,600 694
Public Storage, Inc. REIT 33,046 694
Vornado Realty Trust REIT 20,590 690
Archstone Communities Trust REIT 33,510 668
Apartment Investment &
Management Co. Class A REIT 15,970 610
Duke Realty
Investments, Inc. REIT 30,378 581
Avalonbay
Communities, Inc. REIT 15,700 575
Kimco Realty Corp. REIT 14,560 546
Cornerstone Properties, Inc. REIT 31,170 544
Boston Properties, Inc. REIT 16,200 515
Crescent Real Estate, Inc. REIT 28,800 504
Host Marriott Corp. REIT 54,900 487
AMB Property Corp. REIT 21,000 452
Liberty Property Trust REIT 16,300 390
Post Properties, Inc. REIT 9,400 379
General Growth Properties
Inc. REIT 12,300 374
Rouse Co. REIT 17,350 367
Mack-Cali Realty Corp. REIT 13,950 356
CarrAmerica Realty Corp. REIT 16,150 341
Arden Realty Group, Inc. REIT 15,350 321
Highwood Properties, Inc. REIT 14,810 315
Franchise Finance Corp. of
America REIT 13,400 312
New Plan Excel Realty Trust REIT 21,300 293
Cousins Properties, Inc. REIT 7,900 291
Regency Realty Corp. REIT 14,400 284
FelCor Lodging Trust, Inc. REIT 16,000 283
HRPT Properties Trust REIT 31,900 277
BRE PROPERTIES INC. CLASS A REIT 10,600 274
Hospitality Properties Trust REIT 13,400 271
Camden Property Trust REIT 9,500 257
United Dominion Realty Trust REIT 24,700 249
First Industrial Realty Trust REIT 9,100 248
Westfield America, Inc. REIT 17,580 238
Weingarten Realty Investors REIT 6,400 235
Storage USA, Inc. REIT 6,600 202
Prentiss Properties Trust REIT 9,000 201
Reckson Associates Realty
Corp. REIT 10,700 201
Developers Diversified Realty
Corp. REIT 14,350 199
MeriStar Hospitality Corp. REIT 11,400 199
Federal Realty Investment
Trust REIT 9,900 191
Shurgard Storage Centers, Inc.
Class A REIT 7,200 188
Cabot Industrial Trust REIT 10,000 186
CenterPoint Properties Corp. REIT 5,000 182
Chateau Communities, Inc. REIT 6,900 176
Charles E. Smith Residential
Realty, Inc. REIT 4,840 175
The Macerich Co. REIT 8,100 167
Essex Property Trust, Inc. REIT 4,500 162
Brandywine Realty Trust REIT 9,300 159
Taubman Co. REIT 13,200 147
Kilroy Realty Corp. REIT 6,770 143
SL Green Realty Corp. REIT 5,900 140
Gables Residential Trust REIT 6,100 137
Manufactured Home
Communities, Inc. REIT 5,800 134
Colonial Properties Trust REIT 5,500 131
Summit Properties, Inc. REIT 6,800 130
Urban Shopping Centers, Inc. REIT 4,400 128
Realty Income Corp. REIT 6,600 127
Washington REIT 8,300 125
Sun Communities, Inc. REIT 4,300 124
Home Properties of
New York, Inc. REIT 4,600 123
PS Business Parks, Inc. REIT 5,800 118
CBL & Associates
Properties, Inc. REIT 5,710 117
Chelsea GCA Realty, Inc. REIT 4,000 116
Glenborough Realty Trust, Inc. REIT 7,700 112
Koger Equity, Inc. REIT 6,200 107
Mills Corp. REIT 5,900 106
Cornerstone Realty Income
Trust, Inc. REIT 9,800 106
Mid-America Apartment
Communities, Inc. REIT 4,500 101
Bradley Real Estate Inc. REIT 5,800 99
Pan Pacific Retail
Properties, Inc. REIT 5,300 98
Alexandria Real Estate
Equities, Inc. REIT 3,200 96
Pacific Gulf Properties, Inc. REIT 4,700 92
Bedford Property
Investors, Inc. REIT 5,700 92
JDN Realty Corp. REIT 8,600 89
AMLI Residential
Properties Trust REIT 4,300 88
EastGroup Properties, Inc. REIT 3,900 84
Glimcher Realty Trust REIT 6,000 81
Commercial Net Lease Realty REIT 7,600 79
Innkeepers USA Trust REIT 8,900 72
Parkway Properties Inc. REIT 2,400 71
JP Realty Inc. REIT 3,900 69
Equity Inns, Inc. REIT 9,700 66
Prison Realty Trust, Inc. REIT 22,700 65
Capital Automotive REIT 5,400 65
IRT Property Co. REIT 7,900 63
Sovran Self Storage, Inc. REIT 3,100 63
RFS Hotel Investors, Inc. REIT 5,800 62
Town & Country Trust REIT 3,700 62
American Industrial
Properties REIT 5,000 59
National Golf Properties, Inc. REIT 2,800 59
Great Lakes, Inc. REIT 3,700 56
Prime Group Realty Trust REIT 3,900 56
Boykin Lodging Co. REIT 4,500 53
Pennsylvania REIT 3,200 52
Burnham Pacific
Properties, Inc. REIT 7,300 52
</TABLE>
45
<PAGE> 117
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
MARKET
VALUE*
REIT INDEX PORTFOLIO SHARES (000)
-------------------------------------------------------------------------------
<S> <C> <C>
Saul Centers, Inc. REIT 3,100 50
Entertainment Properties Trust
REIT 3,600 47
Lexington Corporate Properties
Trust REIT 4,310 44
U.S. Restaurant Properties,
Inc. REIT 3,400 44
LaSalle Hotel Properties REIT 3,500 44
Konover Property Trust, Inc. REIT 7,800 43
Center Trust, Inc. REIT 6,600 42
Investors Real Estate Trust REIT 5,300 42
Associated Estates Realty
Corp. REIT 5,200 42
First Washington Realty
Trust, Inc. REIT 2,200 41
Tanger Factory Outlet
Centers, Inc. REIT 2,100 40
Western Properties Trust REIT 3,900 40
Mission West Properties
Inc. REIT 4,400 38
Crown American Realty
Trust REIT 6,950 37
Reckson Associates Realty
Corp. Class B REIT 1,756 36
Mid Atlantic Realty Trust REIT 3,500 32
Corporate Office Properties
Trust, Inc. REIT 3,900 32
Winston Hotels, Inc. REIT 4,100 32
Grove Property Trust REIT 2,100 27
Golf Trust of America, Inc. REIT 1,630 27
Phillips International Realty
Corp. REIT 1,600 27
Equity One, Inc. REIT 2,600 24
Ramco-Gershenson Properties
Trust REIT 1,600 23
Captec Net Lease Realty, Inc. REIT 2,700 23
Prime Retail, Inc. REIT 8,900 19
Correctional Properties Trust REIT 1,600 19
Jameson Inns, Inc. REIT 2,700 18
Kranzco Realty Trust REIT 2,000 17
Public Storage, Inc. REIT-
Depositary Shares A 849 17
TARRAGON REALTY INVESTORS INC.
REIT 1,600 16
- Interstate Hotels Corp. REIT 876 3
-------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(COST $28,192) 26,414
-------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
FACE MARKET
AMOUNT VALUE*
(000) (000)
-------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENT (2.7%)
-------------------------------------------------------------------------------
REPURCHASE AGREEMENT
<S> <C> <C>
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
6.12%, 4/3/2000
(COST $718) $718 718
-------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.9%)
(COST $28,910) 27,132
-------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.1%)
-------------------------------------------------------------------------------
Other Assets--Note C 277
Liabilities (244)
--------
33
-------------------------------------------------------------------------------
NET ASSETS (100%)
-------------------------------------------------------------------------------
Applicable to 2,775,685 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $27,165
===============================================================================
NET ASSET VALUE PER SHARE $9.79
===============================================================================
* See Note A in Notes to Financial Statements.
- Non-Income-Producing Security.
REIT--Real Estate Investment Trust.
-------------------------------------------------------------------------------
AT MARCH 31, 2000, NET ASSETS CONSISTED OF:
-------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
-------------------------------------------------------------------------------
Paid in Capital $28,128 $10.14
Undistributed Net
Investment Income 788 .28
Accumulated Net Realized Gains 27 .01
Unrealized Depreciation--Note F (1,778) (.64)
-------------------------------------------------------------------------------
NET ASSETS $27,165 $ 9.79
===============================================================================
</TABLE>
46
<PAGE> 118
F642-052000
(C) 2000 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing
Corporation, Distributor.
48
