ALAMEDA CONTRA-COSTA MEDICAL ASSOCIATION
COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
FINANCIAL STATEMENTS
for the years ended December 31, 1997 and 1996
PAGE
<PAGE>
Firm: Coopers & Lybrand LLP
A Professional Services Firm
Report of Independent Auditors
To the Unitholders and Supervisory Committee of
Alameda-Contra Costa Medical Association Collective
Investment Trust for Retirement Plans:
We have audited the accompanying statements of assets and liabilities
of the funds comprising Alameda-Contra Costa Medical Association
Collective Investment Trust for Retirement Plans, including each
Fund's schedule of investments as of December 31, 1997, and the
related statements of operations for the year then ended, and the
statements of changes in net assets and the financial highlights
for each of the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned as of
December 31, 1997 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of each of the funds comprising Alameda-Contra
Costa Medical Association Collective Investment Trust for
Retirement Plans as of December 31, 1997, the results of their
operations for the year then ended, and the changes in their net
assets and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting
principles.
Coopers & Lybrand LLP
San Francisco, California
February 13, 1998
<PAGE>
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<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
<CAPTION>
ASSETS International Growth Value Balanced Long- Short-
Value Equity Equity Equity Intermediate Intermediate Short-Term
Fixed Income Fixed Income Income Fund
<S> <C> <C> <C> <C> <C> <C> <C>
Investments, at cost 1,604,837 3,086,877 22,632,206 3,895,535 3,932,027 4,178,661 3,526,057
Investments, at value 1,928,396 3,975,011 29,108,676 5,673,524 4,087,721 4,209,279 3,531,204
Receivable-units sold 2,319 14,434 185,623 12,909 100,633 1,927 17,696
Receivable-securities sold 0 0 105,007 510,554 0 0 0
Accrued dividends
and interest receivable 4,221 2,734 30,724 27,011 43,103 48,889 37,798
_________ _________ __________ _________ _________ _________ _________
Total assets 1,934,936 3,992,179 29,430,030 6,223,998 4,231,157 4,260,095 3,586,698
LIABILITIES AND
NET ASSETS
Accrued expenses:
Administration fees 2,706 5,872 42,983 9,116 6,128 6,373 5,158
Professional fees 5,675 11,650 80,997 20,847 16,559 17,442 13,858
Payable-security purchases 0 0 140,541 0 0 0 0
Payable-redemption of units 201,728 77,207 844,763 1,202,861 199,876 88,375 606,132
_________ _________ __________ _________ _________ _________ _________
Total liabilities 210,109 94,729 1,109,284 1,232,824 222,563 112,190 625,148
Net assets 1,724,827 3,897,450 28,320,746 4,991,174 4,008,594 4,147,905 2,961,550
Units outstanding 131,348 198,119 1,009,578 375,688 354,699 380,095 277,601
Net asset value per unit 13.13 19.67 14.90 13.29 11.30 10.91 10.67
NET ASSETS COMPOSED OF:
Paid-in capital 1,377,747 1,887,218 8,009,236 2,035,791 1,605,454 2,044,400 1,479,920
Accumulated undistributed
net investment income
(loss) 17,855 (138,669) 1,306,822 619,624 1,954,495 2,000,977 1,539,128
Accumulated undistributed
net realized gains
(losses) 5,666 1,260,767 12,528,218 557,770 293,551 71,910 (62,645)
Unrealized appreciation
(depreciation) on
investments 323,559 888,134 6,476,470 1,777,989 155,394 30,618 5,147
_________ _________ __________ _________ _________ _________ _________
Net assets at value 1,724,827 3,897,450 28,320,746 4,991,174 4,008,594 4,147,905 2,961,550
</TABLE>
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<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
SCHEDULE OF INVESTMENTS
December 31, 1997
<CAPTION>
Shares/
INTERNATIONAL EQUITY PORTFOLIO Face Value Value
<S> <C> <C>
Cash and Cash Equivalents (7.78%)
Wells Fargo Bank Deposit Account 149,984 149,984
(cost 149,984)
American Depository Receipts (92.22%):
Consumer Staples (19.12%):
Allied Domecq 4,150 37,558
BAT Industries 3,200 60,000
Cadbury Schweppes 950 39,306
Compagnie General Des Eaux 2,100 58,645
Diageo Plc 1,500 56,812
Heineken 100 17,413
Nestle 790 59,282
Unilever 1,150 39,675
_______
Health (7.74%): 368,691
Astra 2,333 38,494
Novartis 683 55,490
Rhone Poulenc 1,250 55,235
_______
Consumer Durables (4.91%): 149,219
Daimler Benz 530 38,293
Fiat 7,455 56,382 <F1>
______
Process Industry (3.00%): 94,675
Hoechst 1,650 57,854
Consumer Discretionary (6.68%):
Aktiebolaget Electrolux 450 31,050
Nintendo Ltd 3,150 38,764
Sony Corp 650 58,987
_______
Technology (2.13%): 128,801
Matsushita Elec Indl 270 41,040
PAGE
<PAGE>
SCHEDULE OF INVESTMENTS, continued
December 31, 1997
INTERNATIONAL EQUITY PORTFOLIO, continued
American Depository Receipts (92.22%) continued
Producer/Manufacturing (5.04%):
General Electric 5,550 36,436
Mannesmann 120 60,666
______
Energy (12.13%): 97,102
British Petroleum 700 55,782
ELF Aquitaine 1,030 60,384
ENI Spa 1,020 58,204
Royal Dutch Petroleum 1,100 59,607
_______
Telecommunications (5.05%): 233,977
Alcatel Alsthom 2,250 56,954
Ricoh Ltd 650 40,494
______
Financial (20.37%): 97,448
ABN AMRO Holdings 1,900 37,050
AXA-UAP 1,500 58,500
Den Danske Bank 300 40,002
Deutsche Bank 870 61,449
HSBC Holdings 155 38,209
Mitsui Marine & Fire Ins Ltd 760 38,929
Societe Generale Paris 2,080 56,703
Zurich Insurance Co 650 62,034
_______
Utilities (6.05%): 392,876
Endesa S A 3,150 57,292
National Power Plc 1,500 59,437
_______
116,729
Total American Depository Receipts 1,778,412
(cost 1,454,853) _________
Total Investments held (cost 1,604,837) 1,928,396
<FN>
<F1>
non income producing security
</FN>
</TABLE>
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<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
SCHEDULE OF INVESTMENTS, continued
December 31,1997
<CAPTION>
Shares/
GROWTH EQUITY PORTFOLIO Face Value Value
<S> <C> <C>
Cash and Cash Equivalents (4.46%)
Wells Fargo Bank Deposit Account 177,243 177,243
(cost 177,243)
Common Stocks (95.54%):
Automotive & Transport (6.83%):
Magna International Inc 1,850 116,204
Southwest Airlines 6,300 155,138
_______
Healthcare (13.92%): 271,342
Biochem Pharma Inc 5,100 106,462 <F1>
Elan PLC ADR 3,000 153,564 <F1>
Forest Labs Inc 2,200 108,489 <F1>
Shared Medical Systems Corp 2,800 184,800
_______
Consumer Discretionary (12.50%): 553,315
Callaway Golf Co 3,350 95,686
Circus Circus Enterprise Inc 3,475 71,238 <F1>
Cognizant Corp 3,300 147,263
Manpower Inc 2,800 98,700
Petsmart Inc 11,600 84,100 <F1>
_______
Technology (21.59%): 496,987
Andrew Corp 4,100 98,400 <F1>
E M C Corp MASS 5,400 148,165 <F1>
Mentor Graphics Corp 9,900 95,911 <F1>
Newbridge Networks Corp 2,400 83,700 <F1>
Nokia Corp 1,550 107,725
Scientific Atlanta Inc 5,500 92,125
Symbol Technologies 3,525 133,069
Texas Instruments Inc 2,200 99,000
_______
Other Energy (3.37%): 858,095
Readings & Bates Corp 3,200 134,000 <F1>
<PAGE>
<PAGE>
SCHEDULE OF INVESTMENTS, continued
December 31, 1997
GROWTH EQUITY PORTFOLIO, continued
Common Stocks (95.54%), continued
Producer Durables (13.66%):
American Power Conversion Corp 4,800 113,400 <F1>
Lexmark International Group Inc 3,600 136,800 <F1>
Novellus Systems Inc 2,200 71,089 <F1>
Sensormatic Electrics Corp 6,205 101,998
Solectron Corp 2,880 119,701 <F1>
_______
Financial Services (16.61%): 542,988
Equitable Companies Inc 3,300 164,175
Green Tree Financial 3,380 88,515
MBIA Inc 2,100 140,307
MBNA Corp 5,070 138,477
Policy Management Systems Corp 1,850 128,692 <F1>
_______
Utilities (7.06%): 660,166
LCI International Inc 5,500 169,125 <F1>
Telephone and Data Sysyems Inc 2,400 111,750
_________
280,875
Total Common Stocks (cost 2,909,634) 3,797,768
_________
Total investments held (cost 3,086,877) 3,975,011
<FN>
<F1>
non income producing security
</FN>
</TABLE>
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<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
SCHEDULE OF INVESTMENTS, continued
December 31, 1997
<CAPTION>
Shares/
VALUE EQUITY PORTFOLIO Face Value Value
<S> <C> <C>
Cash and Cash Equivalents (0.84%)
Wells Fargo Bank Deposit Account 245,254 245,254
(cost 245,254)
Common Stocks (99.16)%:
Energy Minerals (4.61%):
Ashland Inc 4,100 220,121
Sun Company Inc 5,300 222,934
Tosco Corp 6,000 226,878
Ultramar Diamond Shamrock 6,700 213,563
Unocal Corp 11,800 457,993
_________
Industrial (3.08%): 1,341,489
Global Marine Inc 22,900 562,493 <F1>
Jacobs Engineering Group Inc 7,600 192,850 <F1>
Pride International Inc 5,600 141,400 <F1>
_______
Producer Manufacturing (6.15%): 896,743
Coltec Industries Inc 31,600 732,741 <F1>
U S Industries Inc 20,550 619,069
Westinghouse Air Brake Co 6,000 153,750
Whitman Corp 10,900 284,087
_________
Process Industries (2.36%): 1,789,647
Burlington Industries Inc 14,700 203,051 <F1>
Fort James Corp 3,400 130,050
International Specialty Products Inc 9,200 137,430 <F1>
Terra Industries Inc 16,500 215,539
_______
Non-Energy Minerals (2.43%): 686,070
Lafarge Corp 23,900 706,556
Health Tecnology (1.21%):
Biomet Inc 13,700 351,062
<PAGE>
<PAGE>
SCHEDULE OF INVESTMENTS, continued
December 31, 1997
VALUE EQUITY PORTFOLIO, continued
Common Stocks (99.16%), continued
Commercial Services (1.26%):
Fleming Companies Inc 10,300 138,411
Sysco Corp 5,000 227,815
_______
Technology (2.75%): 366,226
Avnet 2,100 138,600
Ingram Micro Inc Cl A 22,700 661,138 <F1>
_______
Consumer (1.87%): 799,738
Darden Restaurants 12,800 160,000
Tele-Comm Liberty Media 10,600 384,250 <F1>
_______
Retail (15.98%): 544,250
American Stores 23,800 489,399
BJs Wholesale Club Inc 3,500 109,812 <F1>
Burlington Coat Factory Wharehouse 8,040 132,161
Charming Shoppes Inc 14,700 68,914 <F1>
Costco Companies Inc 10,000 446,250 <F1>
Dayton Hudson Corp 9,100 614,250
Fingerhut Companies Inc 15,800 337,725
General Nutrition Companies Inc 26,200 890,800 <F1>
K Mart Corp 20,500 235,750 <F1>
Kroger Co 10,000 367,500 <F1>
Meyer Fred Inc 7,200 261,900 <F1>
Officemax Inc 9,800 139,650 <F1>
Pier 1 Imports Inc 9,600 217,200
Sports Authority Inc 4,400 64,900 <F1>
TJX Companies Inc 8,000 275,000
_________
4,651,211
Health Services (1.97%):
Novacare Inc 11,100 145,687 <F1>
Tenet Healthcare Corp 12,900 427,313 <F1>
_______
573,000
PAGE
<PAGE>
SCHEDULE OF INVESTMENTS, continued
December 31, 1997
VALUE EQUITY PORTFOLIO, continued
Common Stocks (99.16%), continued
Transportation (4.47%):
Illinois Central Corp 6,900 235,035
United Airlines 2,000 185,000 <F1>
U S Air Group Inc 11,900 743,750 <F1>
Yellow Corp 5,500 138,188 <F1>
_________
Finance (21.58%): 1,301,973
American Financial Group Holdings 3,300 133,033
Bank New York Inc 7,600 439,379
Bear Stearns Companies Inc 6,770 321,575
City National Corp 7,600 280,729
Comdisco Inc 3,400 113,689
Countrywide Industries Inc 4,100 175,788
Dime Bancorp Inc 9,000 272,250
Federal Home Loan Mortgage Corp 12,200 511,644
First Security Corp 10,300 431,312
Fremont General Corp 6,900 377,775
Hibernia Corp Cl A 20,100 379,388
Huntington Bancshares Inc 2,530 91,080
Lehman Bros Holding Co 5,500 280,500
Old Republic International Corp 12,500 464,850
Paine Webber Group Inc 21,000 725,823
Popular Inc 5,000 198,440
Raymond James Financial Inc 1,800 89,100
Riggs National Corp Washington DC 4,500 120,937
Ryder Systems Inc 11,000 360,250
USF&G Corp 23,300 514,068
_________
Utilities (6.31%): 6,281,610
Citizens Utilities Co 10,058 96,808 <F1>
Edison International 26,900 731,357
Midamerican Energy Holdings Co 9,900 217,800
NGC Corp 12,800 224,000
Pacificorp 10,500 286,786
Utilicorp Unlimited Inc 3,600 139,727
Washington Water Power Co 5,800 141,015
_________
1,837,493
PAGE
<PAGE>
SCHEDULE OF INVESTMENTS, continued
December 31, 1997
VALUE EQUITY PORTFOLIO, continued
Common Stocks (99.16%), continued
Electronic Technology (4.47%):
Data General Corp 14,500 252,851 <F1>
Gencorp Inc 9,500 237,500
Mitel Corp 16,200 125,550 <F1>
National Semiconductor Corp 5,400 140,057 <F1>
Quantum Corp 9,700 194,611 <F1>
Western Digital Corp 21,900 350,400 <F1>
_________
Consumer Durables (8.31%): 1,300,969
Chrysler Corp 14,200 499,670
Ford Motor Co 9,800 475,917
Furniture Brands International Inc 4,000 82,000 <F1>
Hasbro Inc 15,600 491,400
International Game Tech 12,300 310,575
Maytag Corp 10,400 388,055
Volvo Aktiebolaget ADR B 6,400 172,800
_________
Consumer Non-Durables (10.35%): 2,420,417
Campbell Soup Co 13,500 784,687
Coca Cola Enterprises Inc 29,400 1,045,552
Coors Adolph Co Cl B 5,500 182,875
IBP Inc 23,600 494,137
Reebok International Limited 9,200 265,080 <F1>
Universal Corp 5,900 242,637
_________
3,014,968
Total Common Stocks (cost 22,386,952) 28,863,422
__________
Total investments held (cost 22,632,206) 29,108,676
<FN>
<F1>
non income producing security
</FN>
</TABLE>
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<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
SCHEDULE OF INVESTMENTS, continued
December 31, 1997
<CAPTION>
Shares/
BALANCED PORTFOLIO Face Value Value
<S> <C> <C>
Cash and Cash Equivalents (11.55%)
Wells Fargo Bank Deposit Account 655,276 655,276
(cost 655,276)
Common Stocks (62.99%):
Automotive (1.42%):
Ford Motor 1,000 48,563
General Motors 500 30,375
Raytheon 32 1,574
______
Basic Industry (3.54%): 80,512
Caterpiller Inc 2,000 97,000
Champion International 1,000 45,313
Deere & Co 1,000 58,250
_______
Capital Goods (5.41%): 200,563
Black & Decker 2,000 78,126
General Electric 2,000 146,750
Minnesota Mining 1,000 82,063
_______
Chemical (1.06%): 306,939
E I Dupont 1,000 60,063
Consumer (7.17%):
Coca Cola 500 33,344
Gillette 1,000 100,438
H J Heinz 1,500 76,220
McDonalds 1,000 47,750
Pepsico 1,000 36,250
Sara Lee 2,000 112,626
_______
Entertainment and Leisure (1.74%): 406,628
Walt Disney 1,000 99,000
<PAGE>
<PAGE>
SCHEDULE OF INVESTMENTS, continued
December 31, 1997
BALANCED PORTFOLIO, continued
Common Stocks (62.99%), continued
Energy (6.32%):
Chevron 1,000 77,000
Diamond Offshore 500 24,063
Exxon 1,000 61,188
Mobil Oil Corp 600 43,313
Noble Drilling 2,000 61,250 <F1>
Norfolk & Southern 3,000 91,500
_______
Healthcare (7.11%): 358,314
American Home Products 1,000 76,500
Amgen 2,000 108,250
Bristol Myers 1,000 94,625
Warner Lambert 1,000 124,188
_______
Finance/Insurance (9.58%): 403,563
Aetna Life 1,000 70,563
American Express 2,000 178,500
Bank America Corp 2,000 146,000
Federal National 1,000 57,063
Travelers Group 1,695 91,318
_______
Retailers (3.90%): 543,444
Costco 1,000 44,619 <F1>
GAP Inc 3,000 106,314
Nike Inc 1,000 39,063
Toys-R-Us 1,000 31,438 <F1>
_______
Technology (9.21%): 221,434
Bay Networks 1,000 25,625 <F1>
EMC Corp 4,000 109,752 <F1>
Hewlett Packard 1,000 62,375
Intel 2,000 140,500
Silicon Graphics 2,000 24,626 <F1>
Sun Microsystems 4,000 159,500 <F1>
_______
522,378
<PAGE>
<PAGE>
SCHEDULE OF INVESTMENTS, continued
December 31, 1997
BALANCED PORTFOLIO, continued
Common Stocks (62.99%), continued
Transportation (2.11%):
Boeing 1,500 73,407
United Airlines Corp 500 46,250 <F1>
_______
Utility (4.42%): 119,657
AT&T 1,000 61,313
Bell Atlantic 1,000 91,000
Lucent Technologies 324 25,880
SBC Communications 1,000 73,250
_______
251,443
Total Common Stocks (cost 1,834,670) 3,573,936
_________
Corporate Debt Securities (16.39%):
Financial (5.47%):
Ameritech Cap, 6.125%, due 10-15-01 100,000 100,133
Merrill Lynch, 8.300%, due 11-01-02 100,000 108,139
Morgan Stanley, 7.115%, due 08-06-12 100,000 102,168
_______
Industrial (7.27%): 310,440
BP Amer, 9.375%, due 11-01-00 100,000 108,340
GTE Southwest, 6.000%, due 01-15-06 100,000 97,252
IBM, 7.250%, due 11-01-02 100,000 104,425
North Telecom, 6.875%, due 10-01-02 100,000 102,445
_______
International (3.65%): 412,462
ELF Aquitaine, 7.750%, due 05-01-99 100,000 102,170
Quebec Province, 7.500%, due 07-15-02 100,000 104,643
_______
206,813
Total Corporate Debt Securities
(cost 906,462) 929,715
_______
<PAGE>
<PAGE>
SCHEDULE OF INVESTMENTS, continued
December 31, 1997
BALANCED PORTFOLIO, continued
U.S. Gov't & Agency Obligations (9.07%):
U.S. Treasury Notes:
6.500%, due 05-31-02 200,000 205,876
5.875%, due 11-30-01 100,000 100,469
6.500%, due 08-15-05 100,000 104,344
7.750%, due 12-31-99 100,000 103,906
_________
Total U. S. Government (cost 499,127) 514,595
_________
Total investments held (cost 3,895,535) 5,673,524
<FN>
<F1>
non income producing security
</FN>
</TABLE>
PAGE
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<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
SCHEDULE OF INVESTMENTS, continued
December 31, 1997
<CAPTION>
Shares/
LONG-INTERMEDIATE FIXED INCOME PORTFOLIO Face Value Value
<S> <C> <C>
Cash and Cash Equivalents (12.33%)
Money Market Account (2.79%):
Wells Fargo Bank Deposit Account 114,114 114,114
Commercial Paper (9.54%):
Ford Motor, 5.950%, due 01-05-98 190,000 190,000
GE Capital, 5.850%, due 01-20-98 200,000 200,000
_______
390,000
Total Cash & Cash Equivalents
(cost 504,114) 504,114
Corporate Debt Securities (29.76%):
Financial (7.56%):
Associates Corp, 6.000%, due 12-01-02 100,000 98,983
Banc One Corp, 7.625%, due 10-15-26 100,000 109,319
Discover Credit, 9.000%, due 04-01-98 100,000 100,734
_______
Industrial (19.52%): 309,036
Atlantic Richfield, 8.550%, due 03-01-12 150,000 177,989
Barrick Gold Corp, 7.500%, due 05-01-07 100,000 105,157
Caterpillar, 8.100%, due 01-15-04 100,000 108,627
GMAC, 6.869%, due 01-15-07 80,000 80,675
Transocean Offshore, 8.000%, due 04-15-27 100,000 113,100
Westvaco Corp, 7.650%, due 03-15-27 100,000 106,584
Xerox, 8.000%, due 02-01-27 100,000 105,874
_______
Retail (2.68%): 798,006
Penney J C, 7.400%, due 04-01-37 100,000 109,555
Total Corporate Debt Securities
(cost 1,140,477) 1,216,597
_________
<PAGE>
<PAGE>
SCHEDULE OF INVESTMENTS, continued
December 31, 1997
LONG-INTERMEDIATE FIXED INCOME PORTFOLIO,
continued
U.S. Gov't & Agency Obligations (57.91%):
U.S. Treasury Obligations (42.19%)
Bonds:
zero coupon, due 05-15-05 90,000 52,612
7.250%, due 05-15-16 200,000 227,688
Notes:
6.500%, due 05-31-01 700,000 716,625
7.000%, due 07-15-06 120,000 129,563
6.500%, due 05-31-02 100,000 102,938
5.000%, due 02-15-99 200,000 198,562
5.750%, due 08-15-03 115,000 115,108
6.250%, due 10-31-01 75,000 76,312
6.500%, due 05-15-05 80,000 83,400
7.250%, due 08-15-04 20,000 21,619
_________
Federal Home Loan Mortgage Notes (0.05%): 1,724,427
8.000%, due 03-15-20 395 394
10.500%, due 02-01-01 1,597 1,695
_____
Federal National Mortgage Association 2,089
Pooled Notes (3.37%):
9.000%, due 11-01-04 11,237 11,740
6.500%, due 12-01-27 80,000 79,000
7.950%, due 12-25-19 46,242 46,906
_______
Government National Mortgage 137,646
Association Pooled Notes (12.30%):
7.500%, due 05-15-07 45,581 46,677
7.500%, due 07-15-07 30,507 31,241
11.000%, due 07-15-15 10,505 11,651
12.000%, due 06-15-15 982 1,119
9.500%, due 09-15-19 28,164 30,469
9.000%, due 12-15-19 26,853 28,716
7.500%, due 05-15-26 198,001 202,826
8.500%, due 08-15-27 142,671 149,849
_______
502,548
Total U.S. Government (cost 2,287,436) 2,366,710
_________
Total investments held (cost 3,932,027) 4,087,421
</TABLE>
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<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
SCHEDULE OF INVESTMENTS, continued
December 31, 1997
<CAPTION>
Shares/
SHORT-INTERMEDIATE FIXED INCOME PORTFOLIO Face Value Value
<S> <C> <C>
Cash and Cash Equivalents (2.12%)
Wells Fargo Bank Deposit Account 89,358 89,358
(cost 89,358)
Corporate Debt Securities (33,87%):
Financial (25.98%):
Associates Corp, 7.300%, due 06-28-99 150,000 153,108
Bank America, 7.400%, due 10-25-27 98,596 99,543
Chase Manhattan, 7.750%, due 11-01-99 150,000 154,121
Chrysler Fin, 6.375%, due 01-28-00 100,000 100,479
Equity Residential, 6.550%, due 11-15-01 100,000 100,055
Ford Cap, 9.125%, due 05-01-98 100,000 100,992
GE Cap, 7.200%, due 08-25-27 89,468 90,180
Int'l Lease, 6.375%, due 02-15-02 100,000 100,200
Residential Fndg, 7.100%, due 09-25-27 90,723 91,253
USL Cap, 8.125%, due 02-15-00 100,000 103,782
_________
Retail (6.69%): 1,093,713
Coca Cola, 7.000%, due 11-15-99 75,000 76,254
Penney J C, 7.250%, due 04-01-02 100,000 103,528
Sears, 6.860%, due 08-06-01 100,000 101,900
_______
Utilities (1.20%): 281,682
Consol. Edison, 6.250%, due 04-01-98 50,000 50,039
Total Corporate Debt Securities
(cost 1,423,554) 1,425,434
_________
U.S. Gov't & Agency Obligations (64.01%):
U.S. Treasury Notes (48.11%):
5.000%, due 02-15-99 100,000 99,281
5.125%, due 12-31-98 350,000 348,359
5.750%, due 08-15-03 400,000 400,376
6.125%, due 07-31-00 210,000 212,100
6.125%, due 12-31-01 100,000 101,344
6.375%, due 03-31-01 100,000 101,875
6.750%, due 06-30-99 250,000 253,907
6.250%, due 04-30-01 500,000 507,815
_________
2,025,057
PAGE
<PAGE>
SCHEDULE OF INVESTMENTS, continued
December 31, 1997
SHORT-INTERMEDIATE FIXED INCOME PORTFOLIO,
continued
U.S. Gov't & Agency Obligations (64.01%):
continued
Federal Home Loan Mortgage Notes (2.01%):
8.000%, due 03-15-20 198 197
7.000%, due 09-01-99 83,811 84,384
_______
Federal National Mortgage Association 84,581
Pooled Notes (9.79%):
6.500%, due 10-01-10 216,297 216,430
6.167%, due 08-01-29 195,690 195,629
_______
Government National Mortgage Association 412,059
Pooled Notes (4.01%):
10.000%, due 02-15-25 155,378 172,790
Total U.S. Government (cost 2,665,749) 2,694,487
_________
Total investments held (cost 4,178,661) 4,209,279
</TABLE>
<PAGE>
<PAGE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
SCHEDULE OF INVESTMENTS, continued
December 31, 1997
<CAPTION>
Shares/
SHORT-TERM INCOME FUND Face Value Value
<S> <C> <C>
Cash and Cash Equivalents (28.79%)
Money Market Account (2.59$):
Wells Fargo Bank Deposit Account 91,753 91,753
Commercial Paper (26.20%):
American Express, 6.000%, due 01-12-98 165,000 165,000
American General, 5.830%, due 01-16-98 165,000 165,000
CIT Group, 5.850%, due 01-20-98 165,000 165,000
General Electric, 5.740%, due 01-20-98 165,000 165,000
John Deere, 5.950%, due 01-12-98 165,000 165,000
Prudential, 5.800%, due 01-07-98 100,000 100,000
_______
925,000
Total Cash & Cash Equivalents
(cost 1,016,753) 1,016,753
Corporate Debt Securities (33.37%):
Financial (29.12%):
Chrysler Finl, 6.500%, due 06-15-98 150,000 150,320
Dean Witter, 6.000%, due 03-01-98 150,000 150,034
Discover Credit, 9.000%, due 04-01-98 150,000 151,101
First Union, 6.750%, due 01-15-98 175,000 175,026
Ford Cap, 9.125%, due 05-01-98 100,000 100,992
GMAC, 7.050%, due 02-02-98 150,000 150,104
Intl Lease, 7.000%, due 06-01-98 150,000 150,613
_________
Utilities (4.25%): 1,028,190
Consol Edison, 6.250%, due 04-01-98 150,000 150,119
Total Corporate Debt Securities
(cost 1,183,061) 1,178,309
U.S. Gov't & Agency Obligations (37.84%):
U.S. Treasury Notes (11.32%):
5.125%, due 04-30-98 400,000 399,625
PAGE
<PAGE>
SCHEDULE OF INVESTMENTS, continued
December 31, 1997
SHORT TERM INCOME FUND,
continued
U.S. Gov't & Agency Obligations (37.84%):
continued
Federal Home Loan Mortgage Notes (26.52%):
5.760%, due 07-08-98 425,000 425,132
zero coupon, due 03-11-98 325,000 321,626
zero coupon, due 03-18-98 192,000 189,759
_______
936,517
Total U.S. Government (cost 1,326,243) 1,336,142
_________
Total investments held (cost 3,526,057) 3,531,204
</TABLE>
PAGE
<PAGE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
STATEMENTS OF OPERATIONS
December 31, 1997
<CAPTION>
International Growth Value Balanced Long- Short-
Value Equity Equity Equity Intermediate Intermediate Short-Term
Fixed Income Fixed Income Income
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest income 5,811 5,612 87,960 126,922 279,494 284,278 197,432
Dividend income 29,123 <F1> 18,246 341,233 48,569 0 0 0
_______ _______ _________ _________ _______ _______ _______
Total investment income 34,934 23,858 429,193 175,491 279,494 284,278 197,432
Expenses:
Investment advisory fees 14,834 30,892 210,061 34,791 16,175 17,259 13,800
Administration fees 7,285 19,793 125,993 26,414 20,483 21,854 16,934
Consulting fees 2,460 6,764 43,042 9,223 3,679 3,889 2,943
Custodian fees 2,035 5,262 34,232 7,156 5,388 5,736 4,718
Legal fees 2,629 7,461 46,295 9,642 7,864 8,354 6,422
Audit fees 635 1,737 11,011 2,307 1,802 1,922 1,489
Insurance 203 902 5,578 1,001 1,136 1,491 836
Printing 79 230 1,364 297 263 285 217
_______ _______ _________ _________ _______ _______ _______
Total expenses 30,160 73,041 477,576 90,831 56,790 60,790 47,359
Reimbursed/waived fees (757) (2,145) (12,836) (2,749) (2,242) (2,404) (1,895)
_______ _______ _________ _________ _______ _______ _______
29,403 70,896 464,740 88,082 54,548 58,386 45,464
Fees paid indirectly (1,873) (4,550) (31,913) (848) 0 0 0
_______ _______ _________ _________ _______ _______ _______
Net expenses 27,530 66,346 432,827 87,234 54,548 58,386 45,464
_______ _______ _________ _________ _______ _______ _______
Net investment income
(loss) 7,404 (42,488) (3,634) 88,257 224,946 225,892 151,968
Realized and unrealized
gain (loss) on investments
Net realized gain (loss)
on securities sold (1,505) 813,505 3,915,104 305,456 76,090 (21,572) (5,347)
Unrealized appreciation
(depreciation) on
investments 228,583 (78,654) 3,169,127 675,645 31,828 63,074 15,117
_______ _______ _________ _________ _______ _______ _______
Net realized and unrealized
gain on investments 227,078 734,851 7,084,231 981,101 107,918 41,502 9,770
_______ ______ _________ _________ _______ _______ _______
Net increase in
net assets resulting
from operations 234,482 692,363 7,080,597 1,069,358 332,864 267,394 161,738
<FN>
<F1>
Net of foreign taxes withheld in the amount of $4,528
</FN>
</TABLE>
<PAGE>
<PAGE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
STATEMENT OF CHANGES IN NET ASSETS
for the years ended December 31, 1997 and 1996
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO 1997 1996
<S> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income 7,404 10,117
Net realized gain (loss) (1,505) 7,171
Net unrealized appreciation 228,583 88,295
_________ _________
Net increase in net assets
resulting from operations 234,482 105,583
Increase in net assets from unitholder
activity 335,969 243,435
_________ _________
Total increase in net assets 570,451 349,018
Net assets, beginning of year 1,154,376 805,358
_________ _________
Net assets, end of year 1,724,827 1,154,376
Undistributed net investment income included
in net assets:
Beginning of period 10,451 334
End of period 17,855 10,451
</TABLE>
<PAGE>
<PAGE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
STATEMENT OF CHANGES IN NET ASSETS
for the years ended December 31, 1997 and 1996
<CAPTION>
GROWTH EQUITY PORTFOLIO 1997 1996
<S> <C> <C>
Increase (decrease) in net assets from operations:
Net investment loss (42,488) (36,937)
Net realized gain 813,505 147,020
Net unrealized appreciation (depreciation) (78,654) 468,911
_________ _________
Net increase in net assets
resulting from operations 692,363 578,994
Increase (decrease) in net assets from unitholder
activity (948,883) 213,779
_________ _________
Total increase (decrease) in net assets (256,520) 792,773
Net assets, beginning of year 4,153,970 3,361,197
_________ _________
Net assets, end of year 3,897,450 4,153,970
Undistributed net investment loss included
in net assets:
Beginning of year (96,181) (59,244)
End of year (138,669) (96,181)
</TABLE>
PAGE
<PAGE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
STATEMENT OF CHANGES IN NET ASSETS
for the years ended December 31, 1997 and 1996
<CAPTION>
VALUE EQUITY PORTFOLIO 1997 1996
<S> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) (3,634) 179,491
Net realized gain 3,915,104 2,583,986
Net unrealized appreciation 3,169,127 852,756
__________ __________
Net increase in net assets
resulting from operations 7,080,597 3,616,233
Decrease in net assets from unitholder
activity (2,110,434) (546,063)
__________ __________
Total increase in net assets 4,970,163 3,070,170
Net assets, beginning of year 23,350,583 20,280,413
__________ __________
Net assets, end of year 28,320,746 23,350,583
Undistributed net investment income included
in net assets:
Beginning of year 1,310,456 1,130,965
End of year 1,306,822 1,310,456
</TABLE>
PAGE
<PAGE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
STATEMENT OF CHANGES IN NET ASSETS
for the years ended December 31, 1997 and 1996
<CAPTION>
BALANCED PORTFOLIO 1997 1996
<S> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income 88,257 75,021
Net realized gain 305,456 35,993
Net unrealized appreciation 675,645 448,358
_________ _________
Net increase in net assets
resulting from operations 1,069,358 559,372
Increase (decrease) in net assets from unitholder
activity (686,802) 559,754
_________ _________
Total increase in net assets 382,556 1,119,126
Net assets, beginning of year 4,608,618 3,489,492
_________ _________
Net assets, end of year 4,991,174 4,608,618
Undistributed net investment income included
in net assets:
Beginning of year 531,367 456,346
End of year 619,624 531,367
</TABLE>
PAGE
<PAGE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
STATEMENT OF CHANGES IN NET ASSETS
for the years ended December 31, 1997 and 1996
<CAPTION>
LONG-INTERMEDIATE FIXED INCOME PORTFOLIO 1997 1996
<S> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income 224,946 258,487
Net realized gain 76,090 53,493
Net unrealized appreciation (depreciation) 31,828 (238,190)
__________ _________
Net increase in net assets
resulting from operations 332,864 73,790
Decrease in net assets from unitholder
activity (1,057,034) (63,438)
__________ _________
Total increase (decrease) in net assets (724,170) 10,352
Net assets, beginning of year 4,732,764 4,722,412
__________ _________
Net assets, end of year 4,008,594 4,732,764
Undistributed net investment income included
in net assets:
Beginning of year 1,729,249 1,470,762
End of year 1,954,195 1,729,249
</TABLE>
PAGE
<PAGE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
STATEMENT OF CHANGES IN NET ASSETS
for the years ended December 31, 1997 and 1996
<CAPTION>
SHORT-INTERMEDIATE FIXED INCOME PORTFOLIO 1997 1996
<S> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income 225,892 241,563
Net realized gain (loss) (21,572) 23,613
Net unrealized appreciation (depreciation) 63,074 (104,511)
________ __________
Net increase in net assets
resulting from operations 267,394 160,665
Decrease in net assets from unitholder
activity (614,359) (1,738,311)
________ __________
Total decrease in net assets (346,965) (1,577,646)
Net assets, beginning of year 4,494,870 6,072,516
__________ __________
Net assets, end of year 4,147,905 4,494,870
Undistributed net investment income included
in net assets:
Beginning of year 1,775,085 1,533,522
End of year 2,000,977 1,775,085
</TABLE>
PAGE
<PAGE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
STATEMENT OF CHANGES IN NET ASSETS
for the years ended December 31, 1997 and 1996
<CAPTION>
SHORT-TERM INCOME FUND 1997 1996
<S> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income 151,968 113,080
Net realized gain (loss) (5,347) 4,012
Net unrealized appreciation (depreciation) 15,117 (17,432)
_________ _________
Net increase in net assets
resulting from operations 161,738 99,660
Increase (decrease) in net assets from unitholder
activity (772,304) 906,691
_________ _________
Total increase (decrease) in net assets (610,566) 1,006,351
Net assets, beginning of year 3,572,116 2,565,765
_________ _________
Net assets, end of year 2,961,550 3,572,116
Undistributed net investment income included
in net assets:
Beginning of year 1,387,160 1,274,080
End of year 1,539,128 1,387,160
</TABLE>
PAGE
<PAGE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT
TRUST FOR RETIREMENT PLANS
NOTES TO FINANCIAL STATEMENTS
1. Organization:
The Alameda-Contra Costa Medical Association Collective
Investment Trust for Retirement Plans (the Trust) is a collective
investment trust which was established under the laws of the
State of California by the Alameda-Contra Costa Medical
Association (the Associaton) to be managed by a supervisory
comittee with Wells Fargo Bank, National Assocation (Wells
Fargo), acting as the custodial trustee (the Custodial Trustee)
under a Declaration of Trust dated February 9, 1990. The
Association is also administrator of the Trust pursuant to an
Administrative Services agreement between the Trust and the
Association. The Trust is registered with the Securities and
Exchange Commission as an open-end diversified management
investment company. Units of beneficial interest in the
Portfolios (the Units) are sold without a sales charge and are
available only to Retirement Plans.
The Trust offers seven investment Portfolios, each with a
different investment objective, for the investment of funds held
in retirement plans. The Prospectus for the Trust includes
certain investment restrictions that cannot be changed for any
portfolios without the approval of a majority of the outstanding
units of that portfolio. The investment objectives of the Portfolios
are as follows:
<TABLE>
<CAPTION>
Capital Growth Growth and Income Fixed Income
<S> <C> <C>
International Value Equity Value Equity Long-Intermediate Fixed Income
Growth Equity Balanced Short-Intermediate Fixed Income
Short-Term Income
</TABLE>
2. Summary of Significant Accounting Policies:
Security Valuation:
Investments for which market quotations are readily available are
stated at market value, which is determined using the last
reported closing price. Securities traded over-the-counter are
stated at the last reported bid price or last current sales
price, as applicable. United States government and agency
obligations are valued at bid quotations from the Federal Reserve
Bank for identical or similar obligations. Short-term money
market instruments are valued at bid quotations or by
reference to bid quotations for similar instruments of issuers
with similar credit ratings. Debt securities with remaining
maturities of 60 days or less are stated at amortized cost which
approximates market value.
PAGE
<PAGE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT
TRUST FOR RETIREMENT PLANS
NOTES TO FINANCIAL STATEMENTS, continued
2. Summary of Significant Accounting Policies: continued
Security Transactions and Related Investment Income:
Security transactions are accounted for on the trade date (date
the order to buy or sell is executed) and dividend income is
recorded on the ex-dividend date. Interest income is recorded on
the accrual basis. The cost of securities sold is computed on an
average cost basis.
Distributions:
The Trust does not declare and pay dividends on its investment
income or distribute its realized gains. Income earned on assets
in the portfolio is included in the total value of assets of that
portfolio as are realized gains or losses from security
transactions and unrealized appreciation or depreciation on
securities held.
Fund Valuation:
The value of participating units, upon admission to or withdrawal
from the Trust, is based upon the net asset value as of the
current month end date. There are no transaction fees charged.
Taxation:
As a group trust organized for the collective investment of the
assets of Retirement Plans, the Trust is exempt from income tax
pursuant to Revenue Ruling 81-100 of the Internal Revenue
Service.
Accounting Estimates:
The preparation of the financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the amounts
of income and expense during the reporting period. Actual results
could differ from those estimates.
Expense Allocation:
Common expenses are allocated among the Portfolios based on the ratio
of net assets of each Portfolio to the combined net assets. In all
other respects, expenses are charged directly to the Portfolios to
which they relate.
PAGE
<PAGE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT
TRUST FOR RETIREMENT PLANS
NOTES TO FINANCIAL STATEMENTS, continued
3. Investment Management and Administration:
Under the terms of the Declaration of Trust, the custodial
trustee will maintain possession of the assets of the portfolios
and perform certain other services. The custodial trustee will
be paid a quarterly fee for these services as specified in the
Declaration of Trust.
The Association will provide certain administrative and
accounting services to the Trust in accordance with the terms of
the Administrative Services Agreement. As compensation for its
services, the Association is paid a quarterly fee at the annual
rate of 45/100 of 1% of the aggregate fair market value of the
assets of the combined portfolios determined as of the last
business day of each calendar quarter, plus an additional $1,000
per month.
For the year ended December 31, 1997, administration expenses of
$20,028 have been waived and legal expenses of $5,000 have been
reimbursed.
Portfolio management services are provided by various
Investment Managers. Information regarding the Investment
Managers is as follows:
Lazard Freres Asset Management: Lazard is responsible for the overall
management of the International Value Equity Portfolio and is paid a
quarterly management investment fee for its services to such Portfolio
at the annual rate of 1.0% of the aggregate fair market value of the
first $1,000,000 of the average monthly assets of such Portfolio and
.75 of 1.0% of such assets in excess of $1,000,000, determined as of
the last business day of each month.
The Burridge Group LLC: Burridge is responsible for overall
management of the Growth Equity Portfolio and is paid a quarterly
management investment fee for its services to such Portfolio at the
annual rate of .75 of 1.0% of the aggregate fair market value of the
first 10,000,000 of the average monthly assets of such Portfolio, .625
of 1.0% of the next 10,000,000, .50 of 1.0% of the next 20,000,000,
.375 of 1.0% of the next 20,000,000 and .25 of 1.0% of the next
40,000,000 determined as of the last business day of each month.
Towneley Capital Management, Inc: Towneley is responsible for
overall management of the Value Equity Portfolio and is paid a
quarterly investment management fee for its services to such Portfolio
at the annual rate of 1.0% of the aggregate fair market value of the
first 10,000,000, .75 of 1.0% of the next 10,000,000 and .55 of 1.0%
of the balance of the average monthly assets of such Portfolio. The
asset value is determined as of the last business day of each month.
PAGE
<PAGE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT
TRUST FOR RETIREMENT PLANS
NOTES TO FINANCIAL STATEMENTS, continued
3. Investment Management and Administration: continued
Guardian Investment Management: Guardian is responsible for overall
management of the Balanced Portfolio and is paid a quarterly investment
management fee for its services to the Balanced Portfolio at the annual
rate of 1.0% of the aggregate fair market value of the first $250,000
of the average monthly assets of such Portfolio and .60 of 1.0% of
such assets in excess of $250,000, determined as of the last business
day of each month.
Scudder Kemper Investments: Scudder is responsible for overall
management of the Long-Intermediate Fixed Income Portfolio, the Short-
Intermediate Fixed Income Portfolio and the Short-Term Income Fund and
is paid a quarterly investment management fee for its services to these
three Portfolios at the annual rate of .50 of 1.0% of the aggregate fair
market value of the average monthly assets in these Portfolios,
determined as of the last business day of the month.
4. Brokerage Commissions Paid to Affiliated Brokers:
During the year ended December 31, 1997, the International Value
Equity, Growth Equity, Value Equity and Balanced Portfolios paid
$3,877, $9,080, $63,823 and $1,695, respectively to Paine Webber for
commissions. A broker for Paine Webber is a consultant for the Trust.
5. Expense Offset Arrangements:
For the year ended December 31, 1997, consulting expense amounts
include a total of $39,184 that has been paid indirectly with
brokerage commission dollars.
<TABLE>
6. Purchases and Sales of Investment Securities:
The aggregate cost of purchases and proceeds form sales of investments (excluding short-term and U.S. government
securities) for the year ended December 31, 1997, were as follows:
<CAPTION>
Long- Short-
International Growth Value Intermediate Intermediate Short-Term
Equity Equity Equity Balanced Fixed Income Fixed Income Income Fund
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases 762,158 1,177,883 15,553,247 651,901 1,434,418 1,641,718 0
Proceeds 249,339 2,099,894 16,769,071 153,627 905,886 465,250 0
</TABLE>
PAGE
<PAGE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
NOTES TO FINANCIAL STATEMENTS, continued
6. Purchases and Sales of Investment Securities: continued
The aggregate cost of purchases and proceeds from sales of U.S. government securities for the year ended December 31,
1997 were as follows:
<CAPTION>
Long- Short-
International Growth Value Intermediate Intermediate Short-Term
Equity Equity Equity Balanced Fixed Income Fixed Income Income Fund
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases 0 0 0 201,340 4,006,580 1,451,250 3,183,326
Proceeds 0 0 0 302,219 5,367,798 2,742,810 5,260,269
</TABLE>
<TABLE>
7. Unit Activity:
At December 31, 1997, there was an unlimited number of no par value units authorized for the portfolios of the Trust.
Transactions in Trust units for the year ended December 31, 1997, are as follows:
<CAPTION>
Long-
Intermediate
International Equity Growth Equity Value Equity Balanced Fixed Income
Units Amount Units Amount Units Amount Units Amount Units Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales 2,463 31,100 5,942 110,406 72,980 986,085 29,856 377,543 3,625 39,589
Transfers from
other portfolios 77,091 956,276 22,755 446,649 116,242 1,536,159 38,332 451,343 23,374 256,922
Redemptions (38,162) (493,904) (23,605) (439,545) (157,516) (2,134,511) (106,032) (1,395,859) (101,053) (1,090,082)
Transfers to
other portfolios (13,177) (157,503) (55,668) (1,066,393) (189,907) (2,498,167) (10,307) (119,829) (25,178) (263,463)
_______ ________ _______ __________ ________ __________ ________ __________ ________ __________
Net increase
(decrease) 28,215 335,969 (50,576) (948,883) (158,201) (2,110,434) (48,151) (686,802) (99,232) (1,057,034)
</TABLE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
NOTES TO FINANCIAL STATEMENTS, continued
7. Unit Activity:, continued
At December 31, 1997, there was an unlimited number of no par value units authorized for the portfolios of the Trust.
Transactions in Trust units for the year ended December 31, 1997, are as follows:
<CAPTION>
Short-
Intermediate
Fixed Income Short-Term Income
Units Amount Units Amount
<S> <C> <C> <C> <C>
Sales 4,184 44,070 32,443 338,182
Transfers from
other portfolios 97,069 1,012,776 75,166 789,377
Redemptions (84,260) (893,825) (126,260) (1,333,094)
Transfers to
other portfolios (73,781) (777,380) (54,103) (566,769)
_______ _________ ________ __________
Net increase (decrease) (56,788) (614,359) (72,754) (772,304)
</TABLE>
PAGE
<PAGE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
NOTES TO FINANCIAL STATEMENTS, continued
8. Unit Activity:
At December 31, 1996, there was an unlimited number of no par value units authorized for the portfolios of the Trust.
Transactions in Trust units for the year ended December 31, 1996, are as follows:
<CAPTION>
Long-
Intermediate
International Equity Growth Equity Value Equity Balanced Fixed Income
Units Amount Units Amount Units Amount Units Amount Units Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales 4,862 50,296 11,537 179,702 62,757 638,900 26,755 274,491 5,446 54,793
Transfers from
other portfolios 30,083 317,000 22,975 366,834 21,550 212,854 36,994 374,542 48,060 495,000
Redemptions (1,286) (14,345) (9,054) (148,174) (66,409) (707,360) (8,306) (89,279) (37,932) (393,650)
Transfers to
other portfolios (10,350) (109,516) (12,316) (184,583) (66,434) (690,457) 0 0 (21,484) (219,581)
______ _______ _______ ________ _______ ________ ______ ________ ______ _______
Net increase
(decrease) 23,309 243,435 13,142 213,779 (48,536) (546,063) 55,443 559,754 (5,910) (63,438)
</TABLE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
NOTES TO FINANCIAL STATEMENTS, continued
8. Unit Activity:, continued
At December 31, 1996, there was an unlimited number of no par value units authorized for the portfolios of the Trust.
Transactions in Trust units for the year ended December 31, 1996, are as follows:
<CAPTION>
Short-
Intermediate
Fixed Income Short-Term Income
Units Amount Units Amount
<S> <C> <C> <C> <C>
Sales 8,209 82,714 33,054 331,027
Transfers from
other portfolios 499 5,000 88,529 898,245
Redemptions (43,071) (432,411) (25,213) (250,857)
Transfers to
other portfolios (137,620) (1,393,614) (7,188) (71,724)
_______ _________ _______ ________
Net increase (decrease) (171,983) (1,738,311) 89,182 906,691
</TABLE>
PAGE
<PAGE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
NOTES TO FINANCIAL STATEMENTS, continued
9. Financial Highlights:
Financial highlights for each unit outstanding for the years ended
December 31, 1997, 1996 and the period December 1, 1995 (inception)
through December 31, 1995, is as follows:
NOTE: Net investment income per share was determined by using
average shares outstanding.
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO 1997 1996 1995
<S> <C> <C> <C>
Net asset value, beginning of period 11.19 10.09 10.00
Net investment income .06 .10 0
Net realized and unrealized gain 1.88 1.00 .09
_____ _____ _____
Total from investment operations 1.94 1.10 .09
Net asset value, end of period 13.13 11.19 10.09
Total Return 17.34% 10.90% 0.90%
Ratios and Supplemental Data
Ratio of net investment income to
average net assets 0.48% 1.01% 0.04%
Portfolio turnover rate 18.05% 40.54% 0%
Average commission rate per share 0.2179 0.0909 0.0600
Net assets at end of period (in 000's) 1,725 1,154 805
Ratio of expenses to average net assets 1.92% <F1> 2.02% <F1> 0.11%
Ratio of net expenses to average
net assets 1.80% <F2> 1.94% <F2> 0.11%
<FN>
<F1>
Ratio has been calculated using the expense amount which excludes reimbursed
and waived expenses and includes fees paid indirectly. If including all
expenses, the ratio would be 1.97% for 1997 and remain unchanged for 1996.
<F2>
Ratio has been calculated using the net expense amount which excludes
reimbursed and waived expenses and fees paid indirectly.
</FN>
</TABLE>
PAGE
<PAGE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
NOTES TO FINANCIAL STATEMENTS, continued
9. Financial Highlights:
Financial highlights for each unit outstanding for each of the five years
in the period ended December 31, 1997, are as follows:
NOTE: Net investment income per share was determined by using
average shares outstanding.
<CAPTION>
GROWTH EQUITY PORTFOLIO 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year 16.70 14.27 12.12 13.01 11.74
Net investment loss (.19) (.14) (.07) (.11) (.07)
Net realized and unrealized gain (loss) 3.16 2.57 2.22 (.78) 1.34
_____ _____ _____ _____ _____
Total from investment operations 2.97 2.43 2.15 (.89) 1.27
Net asset value, end of year 19.67 16.70 14.27 12.12 13.01
Total Return 17.78% 17.03% 17.74% (6.84)% 10.82%
Ratios and Supplemental Data
Ratio of net investment income (loss)
to average net assets (1.04)% (.99)% (.68)% (.72)% (.68)%
Portfolio turnover rate 28.84% 28.97% 33.63% 52.49% 38.58%
Average commission rate per share 0.0802 0.0741 0.1339
Net assets at end of year (in 000's) 3,897 4,154 3,361 2,539 3,242
Ratio of expenses to average net assets 1.73% <F1> 1.84% <F1> 1.67% 1.86% 1.79%
Ratio of net expenses to average
net assets 1.62% <F2> 1.77% <F2> 1.67% 1.86% 1.79%
<FN>
<F1>
Ratio has been calculated using the expense amount which excludes reimbursed
and waived expenses and includes fees paid indirectly. If including all
expenses, the ratio would be 1.79% for 1997 and remain unchanged for 1996.
<F2>
Ratio has been calculated using the net expense amount which excludes
reimbursed and waived expenses and fees paid indirectly.
</FN>
</TABLE>
PAGE
<PAGE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
NOTES TO FINANCIAL STATEMENTS, continued
9. Financial Highlights:
Financial highlights for each unit outstanding for each of the five years
in the period ended December 31, 1997, are as follows:
NOTE: Net investment income per share was determined by using
average shares outstanding.
<CAPTION>
VALUE EQUITY PORTFOLIO 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year 11.34 9.62 7.66 7.74 6.71
Net investment income (loss) .00 .10 .12 .02 .06
Net realized and unrealized gain (loss) 3.56 1.62 1.84 (.10) .97
_____ _____ ______ _____ _____
Total from investment operations 3.56 1.72 1.96 (.08) 1.03
Net asset value, end of year 14.90 11.34 9.62 7.66 7.74
Total Return 31.39% 17.88% 25.57% (.99)% 15.37%
Ratios and Supplemental Data
Ratio of net investment income (loss)
to average net assets (.01)% .84% 1.15% .70% 1.18%
Portfolio turnover rate 63.25% 98.50% 103.58% 116.01% 65.85%
Average commission rate per share 0.0601 0.0601 0.1486
Net assets at end of year (in 000's) 28,321 23,351 20,280 16,825 15,518
Ratio of expenses to average net assets 1.78% <F1> 1.98% <F1> 1.82% 1.99% 1.99%
Ratio of net expenses to average
net assets 1.66% <F2> 1.78% <F2> 1.82% 1.99% 1.99%
<FN>
<F1>
Ratio has been calculated using the expense amount which excludes reimbursed
and waived expenses and includes fees paid indirectly. If including all
expenses, the ratio would be 1.83% for 1997 and remain unchanged for 1996.
<F2>
Ratio has been calculated using the net expense amount which excludes
reimbursed and waived expenses and fees paid indirectly.
</FN>
</TABLE>
PAGE
<PAGE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
NOTES TO FINANCIAL STATEMENTS, continued
9. Financial Highlights:
Financial highlights for each unit outstanding for each of the five years
in the period ended December 31, 1997, are as follows:
NOTE: Net investment income per share was determined by using
average shares outstanding.
<CAPTION>
BALANCED PORTFOLIO 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year 10.87 9.47 7.64 7.64 7.05
Net investment income .20 .02 .08 .34 .32
Net realized and unrealized gain (loss) 2.22 1.38 1.75 (.34) .27
_____ _____ _____ _____ _____
Total from investment operations 2.42 1.40 1.83 0 .59
Net asset value, end of year 13.29 10.87 9.47 7.64 7.64
Total Return 22.26% 14.78% 23.91% .03% 8.34%
Ratios and Supplemental Data
Ratio of net investment income to
average net assets 1.63% 1.88% 2.68% 3.09% 2.57%
Portfolio turnover rate 9.16% 7.67% 6.30% 5.18% 4.75%
Average commission rate per share 0.1087 0.0825 0.1872
Net assets at end of year (in 000's) 4,991 4,609 3,489 2,486 2,854
Ratio of expenses to average net assets 1.62% <F1> 1.68% <F1> 1.47% 1.63% 1.63%
Ratio of net expenses to average
net assets 1.61% <F2> 1.66% <F2> 1.47% 1.63% 1.63%
<FN>
<F1>
Ratio has been calculated using the expense amount which excludes reimbursed
and waived expenses and includes fees paid indirectly. If including all
expenses, the ratio would be 1.67% for 1997 and remain unchanged for 1996.
<F2>
Ratio has been calculated using the net expense amount which excludes
reimbursed and waived expenses and fees paid indirectly.
</FN>
</TABLE>
PAGE
<PAGE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
NOTES TO FINANCIAL STATEMENTS, continued
9. Financial Highlights:
Financial highlights for each unit outstanding for each of the five years
in the period ended December 31, 1997, are as follows:
NOTE: Net investment income per share was determined by using
average shares outstanding.
<CAPTION>
LONG-INTERMEDIATE FIXED INCOME PORTFOLIO 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year 10.43 10.27 8.71 9.16 8.39
Net investment income .57 .61 .34 1.08 .53
Net realized and unrealized gain (loss) .30 (.45) 1.22 (1.53) .24
_____ _____ _____ _____ _____
Total from investment operations .87 .16 1.56 (.45) .77
Net asset value, end of year 11.30 10.43 10.27 8.71 9.16
Total Return 8.34% 1.56% 17.93% (4.93)% 9.19%
Ratios and Supplemental Data
Ratio of net investment income to
average net assets 5.28% 5.29% 5.53% 5.64% 5.44%
Portfolio turnover rate 160.81% 17.30% 5.95% 0% 10.68%
Net assets at end of year (in 000's) 4,009 4,733 4,722 3,763 5,156
Ratio of expenses to average net assets 1.28% <F1> 1.44% 1.35% 1.49% 1.49%
<FN>
<F1>
Ratio has been calculated using the expense amount which excludes reimbursed
and waived expenses. If including all expenses, the ratio would be 1.33%.
</FN>
</TABLE>
PAGE
<PAGE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
NOTES TO FINANCIAL STATEMENTS, continued
9. Financial Highlights:
Financial highlights for each unit outstanding for each of the five years
in the period ended December 31, 1997, are as follows:
NOTE: Net investment income per share was determined by using
average shares outstanding.
<CAPTION>
SHORT-INTERMEDIATE FIXED INCOME PORTFOLIO 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year 10.29 9.97 8.99 9.23 8.68
Net investment income .53 .49 .71 .69 .37
Net realized and unrealized gain (loss) .09 (.17) .27 (.93) .18
_____ _____ _____ _____ _____
Total from investment operations .62 .32 .98 (.24) .55
Net asset value, end of year 10.91 10.29 9.97 8.99 9.23
Total Return 6.03% 3.21% 10.88% (2.58)% 6.38%
Ratios and Supplemental Data
Ratio of net investment income to
average net assets 4.98% 4.63% 4.76% 4.78% 4.75%
Portfolio turnover rate 69.25% 31.68% 19.21% 0% 25.60%
Net assets at end of year (in 000's) 4,148 4,495 6,073 6,182 7,575
Ratio of expenses to average net assets 1.29% <F1> 1.47% 1.37% 1.51% 1.47%
<FN>
<F1>
Ratio has been calculated using the expense amount which excludes reimbursed
and waived expenses. If including all expenses, the ratio would be 1.34%.
</FN>
</TABLE>
PAGE
<PAGE>
<TABLE>
ALAMEDA-CONTRA COSTA MEDICAL ASSOCIATION COLLECTIVE INVESTMENT TRUST FOR RETIREMENT PLANS
NOTES TO FINANCIAL STATEMENTS, continued
9. Financial Highlights:
Financial highlights for each unit outstanding for each of the five years
in the period ended December 31, 1997, are as follows:
NOTE: Net investment income per share was determined by using
average shares outstanding.
<CAPTION>
SHORT-TERM INCOME FUND 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year 10.20 9.82 9.33 9.10 8.91
Net investment income .45 .40 .39 .26 .32
Net realized and unrealized gain (loss) .02 (.02) .10 (.03) (.13)
_____ _____ _____ _____ _____
Total from investment operations .47 .38 .49 .23 .19
Net asset value, end of year 10.67 10.20 9.82 9.33 9.10
Total Return 4.61% 3.87% 5.33% 2.50% 2.10%
Ratios and Supplemental Data
Ratio of net investment income to
average net assets 4.34% 4.03% 4.11% 2.87% 3.60%
Portfolio turnover rate 40.97% 0%
Net assets at end of year (in 000's) 2,962 3,572 2,566 2,716 2,120
Ratio of expenses to average net assets 1.30% <F1> 1.39% 1.38% 1.50% 1.59%
<FN>
<F1>
Ratio has been calculated using the expense amount which excludes reimbursed
and waived expenses. If including all expenses, the ratio would be 1.35%.
</FN>
</TABLE>
PAGE
<PAGE>
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
The International Value Equity Portfolio
The Investment Manager of the International Value Equity
Portfolio is Lazard Freres Asset Management. John R. Reinsberg
is the Managing Director responsible for all International/Global
investments. Prior to joining Lazard Freres Asset Management in
1991, Mr. Reinsberg was an Executive Vice President in charge of
Global/International Investments at General Electric Investment
Corporation. Mr. Reinsberg has a B.A. from the University of
Pennsylvania, and an MBA from Columbia University.
Ronald J. Saba is the Portfolio Manager/Analyst responsible for
the day-to-day management of the International Value Equity
Portfolio. Prior to joining Lazard Freres Asset Management in
1996, Mr. Saba was s Senior Vice President, Portfolio
Manager/Analyst for Brandes Investment Partners, Inc. Mr. Saba
has a Bachelor of Commerce degree from McGill University, and an
MBA from the University of Chicago.
<TABLE>
The line graph below compares the performance of the
International Value Equity Portfolio with the MSCI EAFE Index
since the portfolio's inception. The chart assumes a $10,000
investment in the portfolio and charts that performance over each
year since inception. Unlike the International Value Equity
Portfolio, the MSCI EAFE Index is unmanaged and does not incur
any operating expenses. If such expenses had been applied to the
index, its performance would have been lower than that which is
reflected in the graph.
NOTE: Past performance is not predictive of future performance.
<CAPTION>
Date MSCI EAFE Index Growth Equity Portfolio
<S> <C> <C>
12/01/95 10,000 10,000
12/31/95 10,405 10,090
12/31/96 11,067 11,190
12/31/97 11,264 13,134
</TABLE>
<TABLE>
The annualized total returns for the International Value Equity
Portfolio are shown below:
<CAPTION>
Period Return
<S> <C>
One Year 17.34%
Since inception 13.99%
</TABLE>
The continuing financial crisis in Asia dominated world economic
news this past quarter. Currency devalution and sharp market
declines contributed to negative U.S. dollar returns of over -60% in
several Asian emerging markets during the period. The crisis also
affected developed equity markets, with the largest drops seen in
Hong Kong and Japan which produced negative U.S. dollar returns of
- -20% and -30% respectively. U.S. and European markets fared much
better, though the crisis did affect those markets. As a result, the
MSCI EAFE index of international returns was down sharply during the
quarter. However our International ADR portfolio defended very well
and soundly outperformed the index during the period. For the full
year 1997, our International ADR portfolio strongly outperformed the
MSCI EAFE index and produced a very solid return in absolute terms
as well. The major contributors to our good performance were
the lack of emerging market investments, few investments in Japan,
and strong bottom-up stock selection.
It is also noteworthy that we achieved this solid performance with
an annual portfolio turnover of approximately 16%. This low turnover
is evidence of our strict adherence to the investment philosophy of
purchasing financially productive businesses at inexpensive valuations.
By investing our clients' capital in high conviction, long-term value
investments, we hope to achieve solid long-term returns. The resulting
low turnover also has the added benefit of minimizing the tax impact
for taxable accounts.
In all likelihood, the unfolding situation in Asia will continue to
overshadow world equity markets over the near term. What we are now
seeing is the culmination of a period of excess in the banking and capital
markets in that region. Over the past few years, high levels of
economic growth attracted large capital inflows. Unfortunately, the
result was imprudent bank lending, excessive capital spending, excess
capacity, and a glut of real estate and overvaluation of financial assets
in the region. Compounding this were structural issues of less than truly
transparent and equitable economic systems, or to coin the term, the
existence of "crony capitalist", and inappropriate monetary policies.
Accordingly, this pattern of uneconomic allocation of resources and capital
destruction has resulted in bankruptcies, local banks being saddled
with bad debts and major drops in equity prices and currencies in the
emerging markets of Asia. Most observers, such as the OECD, are
predicting that the Asian crisis will impact world economic growth in
the near term. It is also likely that the crisis and resulting effect
on Asian imports and exports will have a varying near-term impact
on a wide variety of businesses around the world.
As long-term, bottom-up value investors, we do not base our investment
decisions on macroeconomic predictions. However it is safe to say that
with the potential for a slowing in world growth, pricing flexibility
and the ability to produce unit growth may prove more difficult for
businesses around the world in the next twelve months. Nonetheless,
efficiently run, sound businesses that create a good return on
capital, without the benefit of strong top-line growth, should continue
to prosper. At Lazard we have all along been investing in such value
creating businesses at inexpensive valuations. We are confident that
the consistent application of this investment philosophy will result
in good investment returns to our clients over the long-term.
The Growth Equity Portfolio
The Burridge Group LLC, is the Investment Manager of the Growth
Equity Portfolio. Christopher Fleming is the individual charged
with day-to-day management. Mr. Fleming has been managing the
Growth Equity Portfolio since 1994. Mr. Fleming has fifteen
years of experience as a security analyst and portfolio manager.
With generalist analyst experience, Mr. Fleming has a depth of
knowledge and experience in the capital goods, finance, consumer
non-durable, insurance, recreation and energy industries.
Immediately prior to joining The Burridge Group, LLC, Mr. Fleming
spent five years as co-manager of the Institutional Equities
Group of Harris Associated, L.P., in Chicago. Mr. Fleming
conducted research and shared responsibility for the management
of $800 million in institutional equity portfolios. Mr. Fleming
also spent three years at Oppenheimer Capital, L.P., New York, as
a member of the Investment Committee and Equity Research
Committee with portfolio management responsibility for
institutional and high net worth accounts. He started his career
at the United Bank of Denver, where he was an analyst and
portfolio manager. Mr. Fleming's education includes: a Juris
Doctorate; a Master's degree in Business Administration; and a
Bachelor's degree in Finance from the University of Denver. He
also received a Master's degree of Science from the London School
of Economics and is a Chartered Financial Analyst.
<TABLE>
The line graph below compares the performance of the Growth
Equity Portfolio with the S&P 500 Index since the portfolio's
inception. The chart assumes a $10,000 investment in the
portfolio and charts that performance over each year since
inception. Unlike the Growth Equity Portfolio, the S&P 500 Index
is unmanaged and does not incur any operating expenses. If such
expenses had been applied to the index, its performance would
have been lower than that which is reflected in the graph.
NOTE: Past performance is not predictive of future performance.
<CAPTION>
Date S&P 500 Index Growth Equity Portfolio
<S> <C> <C>
9/30/92 10,000 10,000
12/31/92 10,510 11,741
12/31/93 11,560 13,007
12/31/94 11,711 12,120
12/31/95 16,095 14,268
12/31/96 19,808 16,703
12/31/97 26,416 19,672
</TABLE>
<TABLE>
The annualized total returns for the Growth Equity Portfolio are
shown below:
<CAPTION>
Period Return
<S> <C>
One Year 17.78%
Since inception 13.75%
</TABLE>
1997 was a frustrating year for small and mid cap managers. After
a slow start both small and mid cap managers experienced outstanding
results from May through September. In our own case we not only
made up all of the lost ground from earlier in the year, but by
September 30, our equity results were ahead of our benchmarks, the
Russell Midcap Growth Index, and the S & P 500 made up primarily
of large cap issues. However, when the Asia crisis burst
upon the scene, investors immediately retreated back to large cap
issues at the expense of small and mid cap issues. Thus we, as well
as other small and mid cap managers, gave back significant performance
in the fourth quarter.
In terms of earnings, 1997 was a strong year for small and mid cap
companies. In contrast to a modest slowdown in the rate of earnings
increases for large cap companies, mid and small caps enjoyed
continued strong earnings growth of 15% to 20% or more for most
companies. In the third quarter, 84% of our companies met or exceeded
the consensus estimates of Wall Street analysts. Going into 1998 the
outlook for mid and small cap stocks remains favorable as the stocks are
generally selling at discounts to their growth rates and are less
exposed to southeast Asia and other currency problems. In other words,
once investor concerns over southeast Asia subside, investors should
look to buying the best values in the market, as was the case in May
through September.
The Value Equity Portfolio
The Investment Manager of the Value Equity Portfolio is Towneley
Capital Management, Inc. Wesley G. McCain, Towneley Capital
Management's chairman, directs the investment of the Value Equity
Portfolio in collaboration with a staff of 25 professional and
administrative personnel. Dr. McCain, who holds a doctoral
degree from Stanford University and Master's degree from Columbia
and Stanford, was formerly on the faculty of the Graduate School
of Business of Columbia University. He is also a Chartered
Financial Analyst. Dr. McCain founded Towneley Capital
Management in 1971 and has managed the Value Equity Portfolio
since July of 1990.
Kathy A. O'Connor, Vice President and Portfolio Manager, has been
working closely with Dr. McCain in managing the portfolio. Ms.
O'Connor, who has been an analyst and portfolio manager with
Towneley Capital Management, Inc. since 1987, holds a Master's
degree in Business Administration from Babson College, a
Bachelor's degree in Business from the University of
Massachusetts, and is a Chartered Financial Analyst.
<TABLE>
The line graph below compares the performance of the Value Equity
Portfolio with the S&P 500 Index since the portfolio's inception.
The chart assumes a $10,000 investment in the portfolio and
charts that performance over each year since inception. Unlike
the Value Equity Portfolio, the S&P 500 Index is unmanaged and
does not incur any operating expenses. If such expenses had been
applied to the index, its performance would have been lower than
that which is reflected in the graph.
NOTE: Past performance is not predictive of future performance.
<CAPTION>
Date S&P 500 Index Value Equity Portfolio
<S> <C> <C>
7/31/90 10,000 10,000
12/31/90 9,424 9,618
12/31/91 12,303 11,660
12/31/92 13,246 13,162
12/31/93 14,570 15,183
12/31/94 14,760 15,032
12/31/95 20,285 18,875
12/31/96 24,965 22,244
12/31/97 33,293 29,227
</TABLE>
<TABLE>
The annualized total returns for the Value Equity Portfolio are
shown below:
<CAPTION>
Period Return
<S> <C>
One Year 31.39%
Five Years 17.29%
Since inception 15.57%
</TABLE>
Towneley Capital Management pursued its strategy of selecting
individual stocks based on their rank in the firm's quantitative
comparative valuation model. In this process, exposure to
industry sectors is a result of purchases and sales of positions
in specific companies rather than a planned approach driven by
economic forecast. Nevertheless, some degree of industry
concentration may occur. In 1997, the market, as measured by
most equity market indexes, had strong returns. The equity
market strength was due, in large part, to extreme performance in
a few sectors, notably technology and finance. We are value
equity managers and, therefore, we rebalance into undervalued
securities when market momentum creates extreme valuations in
some sectors. We continue to have a significant weight in the
finance, retail trade and consumer non-durable sectors. The
finance sector continues to benefit from low interest rates and
technological improvements. During the year, we reduced our
weight in the energy minerals sector as the market created extreme
valuations.
The Balanced Portfolio
The Investment Manager of the Balanced Portfolio is Guardian
Investment Management. The individuals charged with the
responsibility of managing the portfolio are Robert M. Tomasello
and Donald L. Hansen, who are partners of the firm. Both
partners were Investment Managers from the Bank of America prior
to forming the firm in 1976. Mr. Tomasello holds a Bachelor's
degree in Finance from the University of San Francisco and an
Master's degree in Business Administration from Golden Gate
University. Mr. Hansen has his bachelor's degree from the
University of Iowa and attended the Harvard Management Workshop.
Mr. Tomasello is primarily involved with equity selection of the
portfolio while Mr. Hansen is involved with the fixed income
selections. Both partners share equal responsibility for sector
weightings and place emphasis in this analysis when deciding
equity and fixed income decisions.
<TABLE>
The line graph below compares the performance of the Balanced
Portfolio with the S&P 500 Index and the Merrill Lynch 3-5 Year
Treasuries Index since the portfolio's inception. The chart
assumes a $10,000 investment in the portfolio and charts that
performance over each year since inception. Unlike the Balanced
Portfolio, the S&P 500 Index and the Merrill Lynch 3-5 Year
Treasuries Index are unmanaged and do not incur any operating
expenses. If such expenses had been applied to the indices,
their performance would have been lower than that which is
reflected in the graph.
NOTE: Past performance is not predictive of future performance.
<CAPTION>
Date Merrill Lynch 3-5 Year S&P 500 Balanced
Treasury Index Index Portfolio
<S> <C> <C> <C>
7/31/90 10,000 10,000 10,000
12/31/90 10,516 9,424 9,468
12/31/91 12,110 12,303 11,211
12/31/92 13,006 13,246 11,803
12/31/93 14,178 14,570 12,785
12/31/94 13,790 14,760 12,790
12/31/95 16,013 20,285 15,848
12/31/96 16,583 24,966 18,192
12/31/97 17,914 33,294 22,242
</TABLE>
<TABLE>
The annualized total returns for the Balanced Portfolio are shown
below:
<CAPTION>
Period Return
<S> <C>
One Year 22.26%
Five Years 13.52%
Since inception 11.37%
</TABLE>
The objective of the Balanced Portfolio is to be invested in a
weighting of a maximum of 60% to 65% in equities and 35% to 40%
in fixed income investments. Cash instruments are included in
the fixed income allocation. However, maximum cash reserves are
to be 10% at any one time of the fixed portion of the portfolio.
Because of strict parameters for the Balanced Portfolio, the
Investment Manager attempts to achieve the highest rate of return
for the least amount of risk. The equity portion of the
portfolio is well diversified in every sector of the S&P 500
Index. Guardian's approach to outperforming the S&P 500 Index is
centered on over-weighting sectors of the market that have higher
earnings growth potential or equities that represent significant
value given their current market valuation. The fixed income
strategy is to own bonds that have maturities less than ten years
with ratings of A or better by the major services.
The 1997 performance was again, as in 1996, competitive with the
indexes because of a large weighting in financial stocks and good
results in technology holdings. The financial sector was 15% of
the equity account. The portfolio turnover was, by all fund
standards, extremely low averaging around 10% for the year.
Fixed income maturities stayed within 10 years and performed
equally to the bond indexes. Equities stayed at about 65% of the
portfolio, which is within the parameters of the fund.
The Long-Intermediate Fixed Income Portfolio
The Investment Manager of the Long-Intermediate Fixed Income
Portfolio is Scudder Kemper Investments, Inc. Kristin L. Bradbury
has been charged with the day-to-day management of the portfolio.
Ms. Bradbury is a Vice President of Scudder Kemper Investments
and has been associated with the firm since July of 1993.
She is a Chartered Financial Analyst with more than ten years of
investment industry experience.
<TABLE>
The line graph below compares the performance of the Long-
Intermediate Fixed Income Portfolio with the Lehman Aggregate
Index since the portfolio's inception. The chart assumes a
$10,000 investment in the portfolio and charts that performance
over each year since inception. Unlike the Long-Intermediate
Fixed Income Portfolio, the Lehman Aggregate Index is unmanaged
and does not incur any operating expenses. If such expenses had
been applied to the index, its performance would have been lower
than that which is reflected in the graph.
NOTE: Past performance is not predictive of future performance.
<CAPTION>
Lehman Aggregate Long-Intermediate
Date Bond Index Fixed Income Portfolio
<S> <C> <C>
7/31/90 10,000 10,000
12/31/90 10,451 10,450
12/31/91 12,123 11,996
12/31/92 13,020 12,763
12/31/93 14,290 13,936
12/31/94 13,872 13,249
12/31/95 16,436 15,624
12/31/96 17,029 15,862
12/31/97 18,673 17,185
</TABLE>
<TABLE>
The annualized total returns for the Long-Intermediate Fixed
Income Portfolio are shown below:
<CAPTION>
Period Return
<S> <C>
One Year 8.34%
Five Years 6.14%
Since inception 7.58%
</TABLE>
The portfolio's guidelines stipulate that all securities must be
rated A or better, the maximum allowable investment per issuer
(other than Government-related issues) is 5%, the weighted
average maturity must be between 7 and 12 years, and
collateralized mortgage obligations are limited to 15% of the
total portfolio.
1997 was an excellent year for the U.S. bond market. Despite
strong economic growth, inflation remained benign throughout
the year. After raising the Federal Funds rate by 25 basis
points in March, the Federal Reserve found it unnecessary to
pursue further interest rate hikes for the remainder of the
year.
During the second half of the year, economic woes in Southeast
Asia began to take center stage. As these woes deteriorated,
investors favored the "safe haven" of U.S. Treasury securities.
Corporate bonds were unable to keep pace with the strong price
gains of Treasuries. In addition, longer maturity securities
outperformed shorter maturity securities.
The Long-Intermediate Fixed Income Portfolio began the year with
an average maturity of 9.0 years which was shortened to 8.3 years
by the close of 1997. It is slightly shorter than the Index,
which has an average maturity of 8.7 years.
The Portfolio is well diversified across U.S. Treasuries,
corporate and mortgage backed securities. As of December 31,
1997, investments in U.S. Treasury securities totaled 42% of the
Portfolio, while corporate bonds and mortgage-related securities
comprised nearly 28% and 18% respectively, of the portfolio.
In order to accommodate potential cash outflows, approximately
12% of the Portfolio was invested in cash
equivalent securities.
The interest rate decline in 1997 reduced the portfolio's yield to
maturity to 6.2% at year-end, comparedto 6.6% at the start of the
year. The Average quality of the portfolio was AA+ at year end.
The Short-Intermediate Fixed Income Portfolio
The Investment Manager of the Short-Intermediate Fixed Income
Portfolio is Scudder Kemper Investments, Inc. Kristin L. Bradbury
has been charged with the day-to-day management of the portfolio.
Ms. Bradbury is a Vice President at Scudder Kemper Investments
and has been associated with the firm since July of 1993.
She is a Chartered Financial Analyst with more than ten years of
investment industry experience.
<TABLE>
The line graph below compares the performance of the Short-
Intermediate Fixed Income Portfolio with the Merrill Lynch 1-5
Year Government/Corporate Bond Index since the portfolio's
inception. The chart assumes a $10,000 investment in the
portfolio and charts that performance over each year since
inception. Unlike the Short-Intermediate Fixed Income Portfolio,
the Merrill Lynch 1-5 Year Government/Corporate Bond Index is
unmanaged and does not incur any operating expenses. If such
expenses had been applied to the index, its performance would
have been lower than that which is reflected in the graph.
NOTE: Past performance is not predictive of future performance.
<CAPTION>
Merrill Lynch 1-5 Year Short-Intermediate
Government/Corporate Fixed Income
Date Bond Index Portfolio
<S> <C> <C>
7/31/90 10,000 10,000
12/31/90 10,463 10,382
12/31/91 11,818 11,583
12/31/92 12,626 12,285
12/31/93 13,519 13,069
12/31/94 13,441 12,735
12/31/95 15,174 14,120
12/31/96 15,871 14,566
12/31/97 17,007 15,444
</TABLE>
<TABLE>
The annualized total returns for the Short-Intermediate Fixed
Income Portfolio are shown below:
<CAPTION>
Period Return
<S> <C>
One Year 6.03%
Five Years 4.68%
Since inception 6.04%
</TABLE>
The investment objective for the Short-Intermediate Fixed Income
Portfolio is to provide current income. The Portfolio operates under
similar guidelines as the Long-Intermediate Fixed Income
Portfolio, the main exception being that the allowable weighted
average maturity is between 2 and 5 years. The shorter maturity
results in less volatility over extended time periods, relative
to the Long-Intermediate Fixed Income Portfolio. This is
illustrated by the difference in returns between the two
portfolios in 1997. The average maturity of the Portfolio was
3.0 years as of December 31, 1997, up slightly from 2.9 years at
the beginning of the year.
The yield to maturity of the Portfolio increased to 6.0% as of
December 31, 1997, down from 6.1 at the beginning of the year.
Despite the decline in interest rates, portfolio yield
maintained roughly the same level due to an increased allocation
to corporate bonds. Corporate bonds comprised 27% of the
portfolio at year-end, compared to 10% at the beginning of the year.
As of December 31, 1997, cash reserves represented 2% of the
Portfolio. Short-term U.S. Treasury securities supplement the
cash position in order to provide for potential cash outflows.
U.S. Treasury holdings comprise nearly 50% of the portfolio.
Portfolio quality remained AAA throughout the year.
The Short-Term Income Fund
The Investment Manager of the Short-Term Income Fund is Scudder
Kemper Investments, Inc. Kristin L. Bradbury has been charged with
the day-to-day management of the portfolio. Ms. Bradbury is a
Vice President of Scudder Kemper Investments and has been
associated with the firm since July of 1993. She is a Chartered
Financial Analyst with more than ten years of investment industry
experience.
<TABLE>
The line graph below compares the performance of the Short-
Term Income Fund with the Merrill Lynch 182 Day Treasury Bill
Index since the portfolio's inception. The chart assumes a
$10,000 investment in the portfolio and charts that performance
over each year since inception. Unlike the Short-Term Income
Fund, the Merrill Lynch 182 Day Treasury Bill Index is unmanaged
and does not incur any operating expenses. If such expenses had
been applied to the index, its performance would have been lower
than that which is reflected in the graph.
NOTE: Past performance is not predictive of future performance.
<CAPTION>
Merrill Lynch 182 Day Short-Term
Date Treasury Bill Index Income Fund
<S> <C> <C>
7/31/90 10,000 10,000
12/31/90 10,357 10,294
12/31/91 11,101 10,821
12/31/92 11,575 11,180
12/31/93 11,968 11,414
12/31/94 12,433 11,700
12/31/95 13,246 12,324
12/31/96 13,949 12,790
12/31/97 14,726 13,380
</TABLE>
<TABLE>
The annualized total returns for the Short-Term Income Fund are
shown below:
<CAPTION>
Period Return
<S> <C>
One Year 4.61%
Five Years 3.67%
Since inception 4.01%
</TABLE>
The Portfolio's guidelines stipulate that, under normal
circumstances, at least 80% of the investments will have a stated
maturity of 13 months or less. All securities must be rate A or
better. The stated objective of this Portfolio is to provide a
high level of current income with equal emphasis on stability and
liquidity of principal.
To this end, 38% of the Portfolio was invested in U.S. Treasury
securities as of December 31, 1997. 29% was held in cash
equivalents to accommodate potential cash flows. Highly
rated corporate bonds represented the remaining third of the
portfolio. The yield-to-maturity was 5.8% and the weighted
average maturity was just under 2 1/2 months.
