<PAGE> 1
HOMESTEAD FUNDS
[PHOTO]
ANNUAL REPORT
DECEMBER 31, 1999
- Daily Income
- Short-Term Government Securities
- Short-Term Bond
- Stock Index
- Value
- Small Company Stock
[HOMESTEAD FUNDS LOGO]
<PAGE> 2
[PHOTO]
TABLE OF CONTENTS
PERFORMANCE EVALUATION
Daily Income 5-6
Short-Term Government Securities 7-8
Short-Term Bond 9-10
Stock Index 11-12
Value 13-14
Small Company Stock 15-16
PORTFOLIO OF INVESTMENTS
Daily Income 18-21
Short-Term Government Securites 22-23
Short-Term Bond 24-33
Stock Index 34
Value 35-38
Small Company Stock 39-41
FINANCIAL STATEMENTS 42-47
FINANCIAL HIGHLIGHTS 48-53
NOTES TO FINANCIAL STATEMENTS 54-56
REPORT OF INDEPENDENT AUDITORS 57
APPENDIX A - Equity 500 Index Portfolio ii-xxi
2
<PAGE> 3
LETTER FROM THE INVESTMENT MANAGER
Dear Shareholder:
This report details Homestead Funds' performance for the 12 months ending
December 31, 1999. As a preface to our discussion of markets and strategies, I'd
like to use our unique vantage point--looking back at the end of a year, a
decade and a century--to put the stock market's recent performance in
perspective and remind all investors of the tenets of a sound investment
program.
During the past 10 years, the financial markets have responded to the ushering
in of the Digital Age. Technology-related businesses are now powering the stock
market in the same way the big industrial giants did at the start of the
century. Certainly, the Internet and other technological advances can offer
great benefits: time savings, productivity enhancement, expanded work force
automation. But stock prices for many of these companies have been driven to
exorbitant levels. Yahoo!, for example, recently traded at a P/E of over 700.
(The price/earnings ratio is an expression of how much investors are willing to
pay for a share in the company's earnings. The higher the P/E, the more
expensive the earnings power.) The Standard & Poor's 500 was recently trading at
31 times earnings, nearly double its average for the past 10 years. In the
1920s, we saw a similar bidding up of shares, particularly in a new technology
called radio.
Homestead's Value and Small Company Fund managers have continued to focus on
solid businesses whose stock is trading at low prices and poised for a
turnaround. As you'll read in the pages that follow, our approach did not do as
well in 1999 as just following the herd into technology stocks. While we are
dismayed by the results, we want our shareholders to know that our strategy has
even more merit now given the risky overvaluations in the technology arena and
the tremendous buying opportunities in other sectors. Anyone who believes new
technologies permanently change the role of the economy or push aside the need
for a disciplined approach to determining stock valuations has only to look at
the past. The recent extraordinary gains among technology stocks are an
indication that the bull market is running on speculative fumes, not realistic
expectations.
Equity investors are also likely to remember the '90s as a decade of very
generous stock market returns. In general, broad market indexes provided annual
returns that were at least double stocks' historical average of between 10% and
11%. For the last five consecutive years, the Dow Jones Industrial Average, the
NASDAQ Composite and the Standard & Poor's 500 Stock Index all posted
double-digit positive returns. In 1999, the NASDAQ Composite's return was a
phenomenal 85.6%. Never before has any one index advanced so strongly in a
single year. Index returns don't fully explain the stock market's behavior. In
1999, returns were driven primarily by the exceptional performance of just a
handful of stocks. For the S&P 500, half of its 21.0% return was attributable to
just seven stocks, one hundred percent of the return was attributable to 30
stocks and over half of the stocks included in the Index declined in value. In
general, the more expensive the stock was, the better it performed; the less
expensive the stock was, the worse it performed.
continued
3
<PAGE> 4
In addition, today's market is considerably more volatile. Even with stock
indexes at all-time highs, investors are pumping money into the market via
mutual funds, IRAs and 401(k)s. Today, about half of all households own stocks.
On the whole, strong demand, a broader base of ownership and widespread use of
long-term accounts are positive for stocks. However, it remains to be seen
whether these investors have prepared themselves for the possibility of a market
downturn. Day trading--another '90s phenomenon--could also exacerbate the
market's gyrations if this group proves not to have the stomach for the big
losses that will inevitably snare (either frequently or infrequently) those
chasing the big gains.
Undoubtedly, the economy is in fine shape. Budget deficits have turned to
surpluses, increased energy efficiency has reduced dependence on oil from 9% of
GDP to about 3% and the government appears better able to deal with the sudden
and unanticipated shocks which can hurt the economy. The Fed acted quickly, and
in retrospect properly, in cutting interest rates after the 1987 stock market
crash and during the 1998 Asian financial crisis. Ironically, this protracted
period of economic prosperity has led to unreasonable performance expectations,
and the economy's ability to sustain its growth may now be overly dependent on
the stock market's ability to post further gains.
Trends that emerged in the '90s helped to spur on this remarkable bull
market and may well continue to fuel a market advance. However, they also give
us some reasons for caution. We encourage you to revisit your portfolio to make
sure your investments are in line with your time horizon and risk tolerance. Let
your financial objectives drive your investment selection, and, once you've
determined a sound course, stick it out. Diversifying your portfolio by
spreading your money across different types of securities can help you earn
competitive returns while still protecting your investment from the full impact
of a set back in any one security, sector or industry. This is not a glitzy
approach and it will not make you a millionaire overnight (no prudent approach
will). But it can help diligent investors achieve reasonable financial goals.
All of us at Homestead Funds send our best wishes for a happy new year and
sincere appreciation for your business. Thank you for investing with us.
Sincerely,
/s/ PETER R. MORRIS
Peter R. Morris
Director of Investments
January 14, 2000
4
<PAGE> 5
DAILY INCOME FUND
ECONOMIC TRENDS
Before we address the economy and interest rate trends, we want to offer some
background information so you can better understand how the Federal Reserve's
policy making decisions impact your Fund's yield. Yields on money market
securities are driven by the level of interest rates at the very short end of
the interest rate curve. These very short-term rates typically respond to
changes in one economic indicator: a change in the federal funds rate. The
federal funds rate is, in turn, set by the Fed and is influenced by this group's
outlook for the economy.
For the first six months of 1999, the Fed left the federal funds rate unchanged.
As a result, money market security yields averaged under 5.0% in the first half,
reflecting the 0.75% federal funds rate decrease implemented by the Fed late in
1998 when foreign markets stumbled. As 1999 progressed, foreign markets began to
rebound and the U.S. economy showed signs of strength. This caused the Fed to
become concerned about excess liquidity and the possibility of inflation in the
U.S. Accordingly, in June, August and November, the Fed raised rates by a total
of 0.75%. By the end of 1999, therefore, the Fed had completely reversed the
prior year's interest rate decreases.
FUND PERFORMANCE AND STRATEGY
A rising interest rate environment benefits money market investors. Since money
market securities mature faster than other fixed-income instruments, the
proceeds can be more quickly reinvested in higher yielding instruments. The
reverse is also true: in a falling interest rate environment, proceeds from
maturing securities are more quickly reinvested in lower yielding instruments.
The Homestead Daily Income Fund generated a total return of 4.56% in 1999. This
was slightly lower than its 4.91% return for the prior year. The Fund's 1999
performance reflects the interest rate environments in both 1998 and 1999. In
the first half of the year, as a result of the Fed's 0.75% rate decreases late
in 1998, maturing money market securities were reinvested in lower yielding
securities. This lowered the Fund's yield relative to 1998. But in the second
half of 1999, the Fed raised interest rates, which in turn allowed the Fund to
reinvest maturing money market securities in higher yielding issues. The net
effect was a lower 1999 return.
OUTLOOK
We expect the fed to continue to monitor the U.S. Economy closely, looking for
any signs of inflation. Should signs of inflation or an overheating economy
appear, then we would expect the Fed to raise interest rates. Any rise in rates
would be quickly reflected in the Fund's yield.
5
<PAGE> 6
DAILY INCOME FUND
PORTFOLIO COMPOSITION
SECURITY DIVERSIFICATION
<TABLE>
<CAPTION>
on 6/30/99 on 12/31/99
- --------------------------------------------------------------------------------
<S> <C> <C>
Commercial paper 66.7% 56.3%
- --------------------------------------------------------------------------------
Corporate bonds 27.6% 34.4%
- --------------------------------------------------------------------------------
U.S. Government obligations 5.4% 5.4%
- --------------------------------------------------------------------------------
Cash equivalents .3% 3.9%
- --------------------------------------------------------------------------------
Total 100% 100%
================================================================================
</TABLE>
<TABLE>
<CAPTION>
on 6/30/99 on 12/31/99
- --------------------------------------------------------------------------------
<S> <C> <C>
AVERAGE WEIGHTED MATURITY 44 days 55 days
- --------------------------------------------------------------------------------
</TABLE>
YIELD
<TABLE>
<S> <C>
Annualized 7-day compound yield (quoted 12/31/99) 5.37%
- --------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
periods ended 12/31/99
<TABLE>
<CAPTION>
Since
Inception
1 Year 5 Year (11/90)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Daily Income Fund 4.6% 4.9% 4.5%
- --------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance.
6
<PAGE> 7
SHORT-TERM GOVERNMENT SECURITIES FUND
MARKET CONDITIONS
It was thought that U.S. economic growth would be weak in 1999, as world
economies continued to deal with the effects of the Asian financial crisis which
began in 1998. In fact, foreign economies rebounded and U.S. Gross Domestic
Product grew at a 4% annual rate, considerably above the 2.5% to 3% many believe
to be consistent with non-inflationary growth.
The Federal Reserve cut interest rates in 1998 to support the flagging foreign
economies and to restore liquidity to world markets. In early 1999, the Fed
adopted a neutral bias, indicating they were inclined to leave rates alone for
the time being. However, by mid-year, the Fed had become increasingly concerned
about the strength of the economy and the possibility of higher inflation. In
the last half of 1999, they issued three separate interest rate increases,
effectively taking back their 1998 decreases.
Inflation, the Fed's enemy, was supposed to be dormant in 1999, and according to
the Consumer Price Index it was. Its 2.7% annualized increase was the slowest in
34 years. Other data, however, paints a different picture and suggests that the
economy's growth did need to be checked. For example, the unemployment rate is a
very low 4.1%. With labor scarce, wages could be expected to rise.
FUND PERFORMANCE AND STRATEGY
Your Fund returned 2.88% in 1999. As you'll remember, returns on fixed-income
securities are made up of two components: interest income and price change. As
rates rose, we were able to invest in higher yielding securities and the Fund
earned enough interest income to offset the corresponding decline in the value
of portfolio securities. Our 30-day annualized yield on December 31, 1999 was
5.75%, compared to 4.41% at the close of 1998.
This Fund maintains very high credit quality standards, limiting investment to
those securities backed by the U.S. government. In 1998 and early 1999,
investors sought shelter from the currency melt-down touched off in Asia and
favored government-issued Treasury securities. The strong demand kept prices on
Treasuries high, relative to other types of fixed-income instruments. After the
first quarter of 1999, Treasury prices returned to more normal levels. We
avoided Treasuries during the period of extreme credit sensitivity and instead
bought better-value agency and mortgage-backed issues. We moved back into
Treasuries later in the year.
OUTLOOK
Comparing the short-term bond investor's position one year ago to today, we
would say the outlook has improved. A number of rate hikes are behind us, and
the extremely wide credit spreads and dislocations in security prices that
resulted from the foreign currency crisis have passed. Should rates continue to
trend higher, your Fund's short maturity will help reduce the impact of higher
rates on the Fund's net asset value.
7
<PAGE> 8
SHORT-TERM GOVERNMENT SECURITIES FUND
PORTFOLIO COMPOSITION
SECURITY DIVERSIFICATION
<TABLE>
<CAPTION>
on 6/30/99 on 12/31/99
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasuries 57.2% 59.6%
- --------------------------------------------------------------------------------
Government-guaranteed agencies 32.7% 19.5%
- --------------------------------------------------------------------------------
Mortgage-backed securities 9.1% 16.0%
- --------------------------------------------------------------------------------
Cash equivalents 1.0% 4.9%
- --------------------------------------------------------------------------------
Total 100% 100%
================================================================================
<CAPTION>
on 6/30/99 on 12/31/99
- --------------------------------------------------------------------------------
<S> <C> <C>
AVERAGE WEIGHTED MATURITY 2.29 years 2.83 years
- --------------------------------------------------------------------------------
</TABLE>
YIELD
<TABLE>
<S> <C>
Annualized 30-day SEC yield (quoted 12/31/99) 5.75%
- --------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
periods ended 12/31/99
<TABLE>
<CAPTION>
Since
Inception
1 Year (5/95)
- --------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Government Securities Fund 2.9% 5.1%
- --------------------------------------------------------------------------------
Merrill Lynch 1-4.99 Year U.S. Treasury Index 2.0% 6.2%
- --------------------------------------------------------------------------------
</TABLE>
PERFORMANCE COMPARISON
(000)
[LINE GRAPH]
<TABLE>
<CAPTION>
Homestead
Merrill Lynch Short-Term
1-4.99 Year Government
U.S. Treasury Securities
Index Fund
<S> <C> <C>
May 95 $10,000 $10,000
Dec 95 10,544 10,757
Dec 96 11,014 11,238
Dec 97 11,645 12,037
Dec 98 12,286 12,970
Dec 99 12,640 13,234
</TABLE>
Comparison of the change in value of a $10,000 investment in the Fund at
inception and the Merrill Lynch 1-4.99 Year U.S. Treasury Index. Past
performance is not predictive of future performance. The Short-Term Government
Securities Fund average annual total returns are net of any fee waivers and
reimbursements.
8
<PAGE> 9
SHORT-TERM BOND FUND
MARKET CONDITIONS
The U.S. economy was expected to slow down this past year. Economists reasoned
that it would take time for stability and liquidity to return to the foreign,
especially Asian, economies upset by the currency crisis that began in 1998. In
the meantime, it was thought that weakness abroad would act as a drag on the
domestic economy. But in a surprising show of strength, U.S. Gross Domestic
Product grew at a 4% annual rate in 1999.
Despite the strong growth, consumer prices did not appear to be rising at a
rapid pace. The Consumer Price Index's 2.7% annualized increase was the slowest
in 34 years. But beyond this measure of pricing pressures there were other
reasons for concern. 1) Unemployment dropped from an already low 4.30% to 4.17%,
causing many to wonder if an increase in wages would be far behind. 2) Oil
prices rose, which will trickle down to consumers in the form of higher gas
prices, airline costs and home heating bills. 3) The Treasury's benchmark
30-year inflation-indexed bond declined in value, reflecting investors'
inflation fears. 4) The Federal Reserve and other market watchers are not
convinced the much touted productivity gains credited to new technologies and
the Internet will be permanent.
Given these signs of a strengthening economy, the Fed decided the extra
liquidity they had pumped into the market with their 1998 rate decreases was no
longer needed. The Fed shifted gears and brought about three rate increases in
1999, for a total .75% increase in the federal funds rate. This effectively
canceled out the .75% decrease from 1998.
FUND PERFORMANCE AND STRATEGY
Your Fund returned 3.21% in 1999. In the second half of the year, rates rose,
which caused the value of the securities in the Fund's portfolio to decline.
However, because we were able to invest in higher yielding securities, the Fund
earned a greater level of interest income. This pushed our return to the
positive side. Our 30-day annualized yield on December 31, 1999 was 6.01%,
compared to 5.38% at the close of 1998.
During the year, we took advantage of the very wide credit spreads that
developed as a result of the foreign currency crisis. Toward the end of 1998 and
the beginning of 1999, investors flocked to safe-haven Treasuries. We bucked the
trend and took advantage of the higher yields available on comparable-maturity,
non-Treasury securities. Our holdings of corporate bonds, asset-backed
securities and mortgage-backed securities boosted the Fund's yield.
OUTLOOK
Comparing the short-term bond investor's position one year ago to today, we
would say the outlook has improved. A number of rate hikes are behind us, and
the extremely wide credit spreads and dislocations in security prices that
resulted from the foreign currency crisis have passed. Should rates continue to
trend higher, your Fund's short maturity will help reduce the impact of higher
rates on the Fund's net asset value.
9
<PAGE> 10
SHORT-TERM BOND FUND
PORTFOLIO COMPOSITION
SECURITY DIVERSIFICATION
<TABLE>
<CAPTION>
on 6/30/99 on 12/31/99
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Corporate bonds 45.0% 42.9%
- ------------------------------------------------------------------------------------------
Mortgage-backed securities 23.4% 24.9%
- ------------------------------------------------------------------------------------------
Asset-backed securities 19.1% 19.5%
- ------------------------------------------------------------------------------------------
U.S. Government obligations 10.3% 11.5%
- ------------------------------------------------------------------------------------------
Commercial paper 2.1% 0.0%
- ------------------------------------------------------------------------------------------
Cash equivalents .1% 1.2%
- ------------------------------------------------------------------------------------------
Total 100% 100%
==========================================================================================
<CAPTION>
on 6/30/99 on 12/31/99
- ------------------------------------------------------------------------------------------
AVERAGE WEIGHTED MATURITY 2.82 years 2.91 years
- ------------------------------------------------------------------------------------------
</TABLE>
YIELD
<TABLE>
<S> <C>
Annualized 30-day SEC yield (quoted 12/31/99) 6.01%
- --------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
periods ended 12/31/99
<TABLE>
<CAPTION>
Since
Inception
1 Year 5 Year (11/91)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Bond Fund 3.2% 6.4% 5.8%
- ----------------------------------------------------------------------------------------
Merrill Lynch 1-4.99 Year Corp./Gov. Index 2.2% 6.9% 6.2%
- ----------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE COMPARISON
(000)
[LINE GRAPH]
<TABLE>
<CAPTION>
Merrill Lynch Homestead
1-4.99 Year Short-Term
Corp./Gov. Bond
Index Fund
<S> <C> <C>
Nov 91 $10,000 $10,000
Dec 92 11,007 10,842
Dec 93 11,792 11,560
Dec 94 11,727 11,570
Dec 95 13,247 12,820
Dec 96 13,858 13,482
Dec 97 14,850 14,374
Dec 98 15,990 15,294
Dec 99 16,341 15,785
</TABLE>
Comparison of the change in value of a $10,000 investment in the Fund at
inception and the Merrill Lynch 1-4.99 Year Corp./Gov. Index. Past performance
is not predictive of future performance. The Short-Term Bond Fund average annual
total returns are net of any fee waivers and reimbursements.
10
<PAGE> 11
STOCK INDEX FUND
The Stock Index Fund began operations on October 28, 1999. As this is the first
report to shareholders, we want to take a minute to welcome you to the Fund and
remind you of its investment objective and strategy. This Fund is managed to
track the performance of the Standard & Poor's 500 Stock Index. In stock
selections, security weightings and industry weightings, the Fund's manager will
attempt to mirror the Index as closely as possible. Over long time periods, we
expect the Fund's return will be at least 98% of the Index's.
Indexing means following your benchmark through all market cycles--both up and
down. The Fund is attempting to match its market proxy, not beat it. This is a
very different goal than that of Homestead's other stock funds, the Value Fund
or the Small Company Stock Fund.
MARKET CONDITIONS
The S&P 500 continued to amaze investors in 1999. It closed the year at an
all-time high of 1469.25 points and returned a whopping 21.04% for the year.
This was the fifth consecutive year the Index has posted a return greater than
20%. Quite an impressive feat, especially considering that before this current
bull market the Index had never achieved more than two consecutive years of
returns at this level.
For the first half of the year, investors threw off fears of rising interest
rates and pushed the market ahead for a six-month gain of 12.39%. Stocks
reversed course in the third quarter, with the Index declining 6.24%. The fourth
quarter brought relief, with large-capitalization growth stocks, especially
those in the technology sector, rallying strongly and helping the Index post its
very robust 12-month return.
INDEX PERFORMANCE
If there was a theme to the story of investing in 1999, it would have to be the
dominance of large-capitalization, technology stocks. The S&P technology sector
was up 75% in 1999, even after experiencing a 72% rise the year before. This
group was responsible for roughly 70% of the Index's performance. In fact, if we
took the technology sector out of the Index, the Index's 1999 return would have
been just 7.5%. Because of the rising prices for these stocks, this sector now
represents nearly 30% of the Index's total market capitalization. (Market
capitalization is a measure of size and is determined by multiplying share price
by the number of shares outstanding.)
The year will also be remembered as one of the narrowest bull markets in recent
history. Fully 50% of the market's return was attributable to the performance of
just seven stocks. In order of their performance contribution, these top seven
were Microsoft, Cisco, General Electric, Wal-Mart, Oracle, Nortel and Qualcomm.
As further proof that size mattered in 1999, the S&P 500 Equal Weighted Index
trailed the S&P 500 (which is weighted by market capitalization) with a return
of 11.88%.
FUND TRACKING
The Stock Index fund returned 9.65% in the period from its inception through the
close of the year. The S&P 500 Stock index returned 9.69% for the same period.
We were pleased with the Fund's ability to closely track the Index.
11
<PAGE> 12
STOCK INDEX FUND
PORTFOLIO COMPOSITION
TOP HOLDINGS ON 12/31/99
<TABLE>
<CAPTION>
% of total
Industry market value
- ------------------------------------------------------------------------------------
<S> <C> <C>
Microsoft Corp. Computers (Software & Services) 4.8%
- ------------------------------------------------------------------------------------
General Electric Co. Electric Equipment 4.0%
- ------------------------------------------------------------------------------------
Cisco Systems, Inc. Computers (Networking) 2.8%
- ------------------------------------------------------------------------------------
Wal-Mart Stores Inc. Retail 2.4%
- ------------------------------------------------------------------------------------
Exxon Mobil Corp. Oil 2.2%
- ------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURNS
periods ended 12/31/99
<TABLE>
<CAPTION>
Since
Inception
(10/99)
- ----------------------------------------------------------------------------
<S> <C>
Stock Index Fund 9.7%
- ----------------------------------------------------------------------------
S&P 500 Index 9.7%
- ----------------------------------------------------------------------------
</TABLE>
PERFORMANCE COMPARISON
(000)
[LINE GRAPH]
<TABLE>
<CAPTION>
Standard & Poor's Homestead
500 Stock Index Stock Index Fund
<S> <C> <C>
Oct 99 $10,000 $10,000
Dec 99 10,969 10,965
</TABLE>
Comparison of the change in value of a $10,000 investment in the Fund at
inception and the S&P 500 Index. Past performance is not predictive of future
performance. The Stock Index Fund average annual total returns are net of any
fee waivers and reimbursements.
12
<PAGE> 13
VALUE FUND
MARKET CONDITIONS
The U.S. economy continued to expand in 1999, prompting the Federal Reserve to
step in at mid-year with a series of three interest rate hikes. Higher interest
rates trickle down to consumers in the form of higher borrowing costs, and in
this way help slow the pace of economic growth. The Fed's fear is that an overly
robust economy would trigger higher inflation.
Rising interest rates usually throw the brakes on the stock market, but this
year the investor's appetite for technology stocks was not affected by the key
rate changes announced. The Standard & Poor's 500 Stock Index, a measure of the
broad stock market and this Fund's competitive benchmark, advanced 21.04% for
the year, its fifth consecutive year of double-digit gains.
FUND PERFORMANCE AND STRATEGY
Your Fund did not keep pace with the Index. Our 12-month return was -3.21%.
To understand the reason for our poor relative showing, one has to look beyond
the S&P 500's return to see which stocks and sectors were responsible for the
Index's phenomenal gain. Almost exclusively, it was the technology stocks. The
S&P's technology component had an astounding 75% return in 1999, leaving all
other industry classifications in the dust. Returns for a number of these
companies were in the triple, even quadruple digits. Qualcomm was the S&P's top
technology performer with a more than 2,600% gain.
The reason we don't own these stocks is that they are not appropriate for our
investment approach. We look for stocks of established well financed companies
that are currently trading at low prices. Our investment approach was out of
favor this year, as investors focused solely on opportunities in the technology
arena. By our valuation measures, there are no bargains to be had in this group.
Even companies that have never shown a profit are trading at very high earnings
multiples.
This was a frustrating year for our shareholders, for us and for most other
conservative equity investors. But we remain confident in our approach. In fact,
we believe a value strategy has even more appeal now. The bubble created by this
technology frenzy will eventually burst, and the fact that we didn't jump on the
bandwagon may spare us from the full effects of a setback. Also, in their haste
to own shares of technology companies, investors have left some terrific
bargains on the table. We're buying shares of companies we like at very
attractive prices. Wendy's, Chase Manhattan and Southwest Airlines are a few of
our most promising selections. Once investors return to their senses, we expect
prices will rise substantially.
OUTLOOK
No one can say for sure when a value approach will be met with a more favorable
market environment. We do note that times are getting tougher for the
high-flying technology stocks. Given expectations for further hikes in interest
rates, investors (especially large institutions) could be looking to take some
money off the table. They might look to reduce their exposure to the technology
group first, since they've already benefited from a strong advance and this
sector has become even more volatile.
When listening to the nightly news or hearing other reports on the performance
of the overall stock market, investors should be mindful that the dramatic
increases in technology stock prices that occurred this past year and in 1998
have modified the composition of index's determined by market capitalization.
(Market capitalization is a measure of size that is calculated by multiplying
share price by the number of shares outstanding.) Our benchmark, the S&P 500 is
now heavily invested in technology companies because the Index keeps its
weightings proportional to a company's market capitalization. As was the case
this year, investors will need to look beyond the return--whether it's positive
or negative--to see how your portfolio is faring.
13
<PAGE> 14
VALUE FUND
PORTFOLIO COMPOSITION
TOP HOLDINGS ON 12/31/99
<TABLE>
<CAPTION>
% of total
Industry market value
- -----------------------------------------------------------------------------------
<S> <C> <C>
Avery Dennison Corp. Chemicals 3.4%
- -----------------------------------------------------------------------------------
Southwest Airlines Airlines 3.2%
- -----------------------------------------------------------------------------------
Bemis Company Packaging/Containers 3.2%
- -----------------------------------------------------------------------------------
Citigroup Inc. Banks 3.1%
- -----------------------------------------------------------------------------------
BellSouth Corp. Telephone 2.9%
- -----------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
periods ended 12/31/99
<TABLE>
<CAPTION>
Since
Inception
1 Year 5 Year (11/90)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Value Fund -3.2% 16.0% 14.2%
- ---------------------------------------------------------------------------------
S&P 500 Index 21.0% 28.5% 21.1%
- ---------------------------------------------------------------------------------
</TABLE>
PERFORMANCE COMPARISON
(000)
[LINE GRAPH]
<TABLE>
<CAPTION>
Standard & Poor's Homestead
500 Index Value Fund
<S> <C> <C>
Nov 90 $10,000 $10,000
Dec 91 13,403 11,784
Dec 92 14,423 13,161
Dec 93 15,807 15,639
Dec 94 16,079 16,029
Dec 95 22,115 21,444
Dec 96 27,189 25,292
Dec 97 36,257 32,044
Dec 98 46,618 34,708
Dec 99 56,606 33,595
</TABLE>
Comparison of the change in value of a $10,000 investment in the Fund at
inception and the S&P 500 Index. Past performance is not predictive of future
performance. The Value Fund average annual total returns are net of any fee
waivers and reimbursements.
14
<PAGE> 15
SMALL COMPANY STOCK FUND
MARKET CONDITIONS
Higher interest rates were not enough to stop this very powerful bull market in
1999. The Standard & Poor's 500 Stock Index, a measure of the broad market's
performance, posted its fifth consecutive year of double-digit gains with a
return of 21.04%. Such robust returns were not broadly based, however. The best
performing issues came almost without exception from the Index's technology
group. On an issue-by-issue basis, there were more declining issues than
advancing issues.
FUND PERFORMANCE AND STRATEGY
At mid-year, we were hopeful that small-company value stocks were experiencing a
turnaround. This Fund was up 15.71% on the strength of a nearly 22%
second-quarter return. But we watched gains erode in the second half of the year
as investors turned to smaller companies to satisfy their appetite for tech
stocks.
The Fund generated a -.55% return for the year. The Russell 2000 Value Index
suffered a similar fate with a return of -1.49%. The full Russell 2000 Index
returned 21.35% for the year, and like the S&P 500 owes most of its gains to its
technology issues. This Russell category advanced 101% for he year.
The reason for the Fund's underperformance is our value strategy. We seek stocks
we believe are trading below true worth and poised for a turnaround. Most of the
technology stocks that drove market performance in 1999 are extremely overvalued
and we have steered clear. Importantly, we think it is this same strategy that
will help us outperform should the tech bubble burst.
OUTLOOK
Shareholders are understandably disappointed with the Fund's results. We want
you to know that we are working diligently to identify the most promising
investment opportunities, reviewing our portfolio daily to make sure we are
fully confident with the positions we have and sticking with our value approach.
Also remember that a value approach demands patience. We have to be willing to
stick with our purchases during troubling times so we can participate in what we
expect will be a rise in share prices down the road.
15
<PAGE> 16
SMALL COMPANY STOCK FUND
PORTFOLIO COMPOSITION
TOP HOLDINGS ON 12/31/99
<TABLE>
<CAPTION>
% of total
Industry market value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Charming Shoppes, Inc. Retail 5.6%
- ---------------------------------------------------------------------------------------------
Claire's Stores, Inc. Retail 4.8%
- ---------------------------------------------------------------------------------------------
Banta Corp. Consumer Printing 4.4%
- ---------------------------------------------------------------------------------------------
CLARCOR, Inc. Manufacturing 4.3%
- ---------------------------------------------------------------------------------------------
Ruddick Corp. Retail 4.2%
- ---------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
periods ended 12/31/99
<TABLE>
<CAPTION>
Since
Inception
1 Year (3/98)
- --------------------------------------------------------------------------------
<S> <C> <C>
Small Company Stock Fund -.6% -6.5%
- --------------------------------------------------------------------------------
Russell 2000 Index 21.4% 6.3%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Homestead Small
Russell 2000 Index Company Stock Fund
<S> <C> <C>
Mar 98 $10,000 $10,000
Dec 98 9,080 8,898
Dec 99 11,992 8,849
</TABLE>
Comparison of the change in value of a $10,000 investment in the Fund at
inception and the Russell 2000 Index. Past performance is not predictive of
future performance. The Small Company Stock Fund average annual total returns
are net of any fee waivers and reimbursements.
16
<PAGE> 17
FINANCIALS
[PHOTO]
<PAGE> 18
DAILY INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTEREST MATURITY FACE
RATE DATE AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (56.3% of portfolio)
A.I. Credit Corp. .................................... 5.82 % 01/19/00 $ 500,000 $ 498,545
A.I. Credit Corp. .................................... 5.83 01/20/00 1,000,000 996,923
A.I. Credit Corp. .................................... 5.82 01/28/00 600,000 597,381
American General Finance Corp. ....................... 6.28 02/08/00 600,000 596,023
Baltimore Gas & Electric Co. ......................... 6.45 01/10/00 600,000 599,033
Baltimore Gas & Electric Co. ......................... 5.88 01/14/00 500,000 498,938
Baltimore Gas & Electric Co. ......................... 6.13 01/21/00 1,000,000 996,594
Chevron USA. Inc. .................................... 5.75 01/11/00 1,000,000 998,403
Chevron USA. Inc. .................................... 5.80 01/12/00 1,000,000 998,228
Chevron USA. Inc. .................................... 5.85 01/31/00 1,000,000 995,125
CIT Group, Inc. ...................................... 5.92 01/07/00 180,000 179,822
CIT Group, Inc. ...................................... 6.20 01/31/00 830,000 825,712
CITICORP, Inc. ....................................... 5.95 01/26/00 1,000,000 995,868
Coca-Cola Co. ........................................ 5.78 01/13/00 805,000 803,449
Coca-Cola Co. ........................................ 5.78 01/14/00 500,000 498,956
Coca-Cola Co. ........................................ 5.85 01/19/00 200,000 199,415
Coca-Cola Co. ........................................ 5.82 01/24/00 520,000 518,067
Consolidated Natural Gas Co. ......................... 6.00 01/26/00 500,000 497,917
Consolidated Natural Gas Co. ......................... 6.07 01/31/00 400,000 397,977
Consolidated Natural Gas Co. ......................... 6.07 02/09/00 500,000 496,712
Consolidated Natural Gas Co. ......................... 6.03 02/23/00 570,000 564,940
Consolidated Natural Gas Co. ......................... 6.00 02/25/00 580,000 574,683
Consolidated Natural Gas Co. ......................... 6.00 02/29/00 480,000 475,280
E.I. Dupont de Nemours & Co. ......................... 5.82 01/18/00 300,000 299,176
E.I. Dupont de Nemours & Co. ......................... 5.78 01/25/00 1,000,000 996,147
Exxon Asset Management Co. ........................... 6.00 01/04/00 1,000,000 999,500
Ford Motor Credit Co. ................................ 5.70 01/03/00 340,000 339,892
Ford Motor Credit Co. ................................ 5.71 01/03/00 650,000 649,794
Ford Motor Credit Co. ................................ 6.02 01/04/00 450,000 449,774
General Electric Capital Corp. ....................... 6.25 01/13/00 106,000 105,779
General Electric Capital Corp. ....................... 5.92 01/28/00 285,000 283,735
General Electric Capital Corp. ....................... 6.15 02/11/00 113,000 112,208
General Electric Capital Corp. ....................... 6.00 02/15/00 208,000 206,440
General Electric Capital Corp. ....................... 6.10 02/16/00 150,000 148,831
General Electric Capital Corp. ....................... 6.28 02/17/00 549,000 544,499
General Electric Capital Corp. ....................... 6.00 03/22/00 550,000 542,575
General Motors Acceptance Corp. ...................... 6.60 01/07/00 172,000 171,811
General Motors Acceptance Corp. ...................... 6.00 01/18/00 135,000 134,617
IBM Credit Corp. ..................................... 5.82 01/18/00 1,040,000 1,037,142
John Deere Capital Corp. ............................. 5.72 01/05/00 1,000,000 999,364
John Deere Capital Corp. ............................. 5.75 01/06/00 480,000 479,617
John Deere Capital Corp. ............................. 5.75 01/07/00 600,000 599,425
</TABLE>
18
<PAGE> 19
DAILY INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTEREST MATURITY FACE
RATE DATE AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER - CONTINUED
Merrill Lynch & Co., Inc. ............................ 5.90 % 02/29/00 $ 875,000 $ 866,539
Northern Illinois Gas Co. ............................ 5.85 01/19/00 1,000,000 997,075
Northern Illinois Gas Co. ............................ 5.95 01/20/00 1,000,000 996,860
Northern Illinois Gas Co. ............................ 5.85 01/24/00 1,000,000 996,262
Norwest Financial, Inc. .............................. 5.85 01/18/00 200,000 199,447
Norwest Financial, Inc. .............................. 6.35 02/04/00 650,000 646,102
Norwest Financial, Inc. .............................. 5.87 02/23/00 330,000 327,148
Pacific Gas & Electric Co. ........................... 6.40 01/27/00 500,000 497,689
Pacific Gas & Electric Co. ........................... 5.89 02/09/00 1,000,000 993,619
Pacific Gas & Electric Co. ........................... 5.89 02/10/00 1,000,000 993,456
Prudential Funding Corp. ............................. 5.95 01/12/00 700,000 698,727
Prudential Funding Corp. ............................. 5.99 01/27/00 800,000 796,539
Schering Corp. ....................................... 6.30 01/11/00 400,000 399,300
Texaco Capital, Inc. ................................. 6.30 01/06/00 600,000 599,475
Texaco Capital, Inc. ................................. 5.82 01/10/00 340,000 339,505
Transamerica Finance Corp. ........................... 5.92 01/26/00 300,000 298,767
Transamerica Finance Corp. ........................... 6.18 01/26/00 1,000,000 995,708
- ---------------------------------------------------------------------------------------------------------------------------------
Total Commercial Paper (Cost $35,546,535)............................................................. 35,546,535
- ---------------------------------------------------------------------------------------------------------------------------------
CORPORATE NOTES (34.4% of portfolio)
American Express Credit Corp. ........................ 6.13 06/15/00 575,000 575,133
American Express Credit Corp. ........................ 6.50 08/01/00 105,000 105,124
American General Finance Corp. ....................... 8.00 02/15/00 795,000 796,558
American General Finance Corp. ....................... 7.76 03/14/00 150,000 150,451
American General Finance Corp. ....................... 6.52 06/23/00 50,000 50,014
American General Finance Corp. ....................... 6.13 09/15/00 360,000 359,569
Associates Corp. of North America. ................... 6.00 03/15/00 70,000 69,988
Associates Corp. of North America. ................... 5.25 03/30/00 35,000 34,927
Associates Corp. of North America. ................... 6.00 06/15/00 75,000 74,912
Beneficial Corp. ..................................... 6.45 06/19/00 305,000 305,665
CIT Group, Inc. ...................................... 6.80 04/17/00 1,000,000 1,001,298
CITICORP, Inc. ....................................... 6.65 05/15/00 500,000 500,893
CITICORP, Inc. ....................................... 6.60 08/01/00 300,000 300,807
Commercial Credit Co. ................................ 6.13 03/01/00 25,000 24,992
Eli Lilly & Co. ...................................... 8.13 02/07/00 785,000 786,488
Ford Motor Credit Co. ................................ 8.75 01/10/00 40,000 40,029
Ford Motor Credit Co. ................................ 7.45 04/13/00 100,000 100,396
Ford Motor Credit Co. ................................ 6.38 04/15/00 125,000 124,945
General Motors Acceptance Corp. ...................... 8.63 01/10/00 20,000 20,012
General Motors Acceptance Corp. ...................... 5.70 02/23/00 450,000 449,568
General Motors Acceptance Corp. ...................... 7.00 03/01/00 570,000 570,642
General Motors Acceptance Corp. ...................... 5.85 04/20/00 405,000 404,771
</TABLE>
19
<PAGE> 20
DAILY INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTEREST MATURITY FACE
RATE DATE AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE NOTES - CONTINUED
General Motors Acceptance Corp. ...................... 9.63 % 05/15/00 $ 210,000 $ 212,510
General Motors Acceptance Corp. ...................... 6.65 05/24/00 7,000 7,010
General Motors Acceptance Corp. ...................... 6.38 06/06/00 177,000 176,892
General Motors Acceptance Corp. ...................... 6.90 06/06/00 200,000 200,427
General Motors Acceptance Corp. ...................... 6.38 06/27/00 150,000 150,242
General Motors Acceptance Corp. ...................... 7.50 07/24/00 250,000 251,486
Household Finance Corp. .............................. 5.92 03/13/00 5,000 4,995
Household Finance Corp. .............................. 6.75 06/01/00 100,000 100,266
Household Finance Corp. .............................. 6.38 06/30/00 600,000 600,704
IBM Credit Corp. ..................................... 5.70 03/10/00 950,000 949,278
John Deere Capital Corp. ............................. 6.15 08/01/00 500,000 499,692
John Deere Capital Corp. ............................. 5.73 07/13/00 100,000 99,725
Merrill Lynch & Co., Inc. ............................ 6.62 06/06/00 20,000 20,026
Merrill Lynch & Co., Inc. ............................ 8.38 02/09/00 106,000 106,189
Merrill Lynch & Co., Inc. ............................ 6.60 05/30/00 25,000 25,034
Merrill Lynch & Co., Inc. ............................ 6.38 07/18/00 200,000 200,098
Morgan Stanley Dean Witter & Co. ..................... 5.94 02/28/00 1,710,000 1,709,659
Morgan Stanley Dean Witter & Co. ..................... 5.89 03/20/00 1,300,000 1,299,754
Norwest Financial Inc. ............................... 6.88 06/15/00 675,000 677,119
Norwest Financial Inc. ............................... 7.25 03/15/00 1,125,000 1,127,219
Pacific Gas & Electric Co. ........................... 6.63 06/01/00 62,000 62,000
PepsiCo, Inc. ........................................ 6.80 05/15/00 400,000 401,010
PepsiCo, Inc. ........................................ 5.88 06/01/00 48,000 47,843
Phillip Morris Cos., Inc. ............................ 9.25 02/15/00 2,645,000 2,653,138
Sara Lee Corp. ....................................... 5.70 07/14/00 1,135,000 1,132,120
Texaco Capital Inc. .................................. 9.45 03/01/00 100,000 100,531
Texaco Capital Inc. .................................. 5.11 05/03/00 1,000,000 997,009
Wal-Mart Stores, Inc. ................................ 5.65 02/01/00 1,075,000 1,074,780
- ---------------------------------------------------------------------------------------------------------------------------------
Total Corporate Notes (Cost $21,733,938)............................................................... 21,733,938
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (5.4% of portfolio)
Federal Farm Credit Bank.............................. 5.20 01/14/00 50,000 49,986
Federal Farm Credit Bank.............................. 5.25 01/18/00 52,000 51,984
Federal Farm Credit Bank.............................. 6.23 03/13/00 20,000 20,013
Federal Home Loan Bank................................ 5.00 01/05/00 130,000 129,982
Federal Home Loan Bank................................ 4.81 01/11/00 50,000 49,985
Federal Home Loan Bank................................ 4.92 01/13/00 100,000 99,963
Federal Home Loan Bank................................ 4.93 01/13/00 250,000 249,916
Federal Home Loan Bank................................ 4.93 01/20/00 35,000 34,979
Federal Home Loan Bank................................ 8.60 01/25/00 135,000 135,216
Federal Home Loan Bank................................ 4.85 01/27/00 50,000 49,963
Federal Home Loan Bank................................ 5.45 02/25/00 100,000 99,875
</TABLE>
20
<PAGE> 21
DAILY INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTEREST MATURITY FACE
RATE DATE AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Federal Home Loan Bank......................................... 5.10 % 03/03/00 $ 10,000 $ 9,982
Federal Home Loan Bank......................................... 7.20 03/03/00 10,000 10,021
Federal Home Loan Bank......................................... 5.15 03/08/00 20,000 19,961
Federal Home Loan Bank......................................... 5.08 03/15/00 20,000 19,957
Federal Home Loan Bank......................................... 5.23 03/17/00 20,000 19,956
Federal Home Loan Bank......................................... 5.61 03/23/00 20,000 19,988
Federal Home Loan Bank......................................... 5.59 03/27/00 20,000 19,974
Federal Home Loan Bank......................................... 5.66 03/30/00 25,000 24,971
Federal Home Loan Bank......................................... 5.00 04/05/00 60,000 59,801
Federal Home Loan Bank......................................... 4.97 04/20/00 30,000 29,885
Federal Home Loan Bank......................................... 7.01 04/20/00 25,000 25,053
Federal Home Loan Mortgage Corp................................ 7.90 01/27/00 60,000 60,080
Federal Home Loan Mortgage Corp................................ 6.44 01/28/00 210,000 210,101
Federal Home Loan Mortgage Corp................................ 5.88 03/22/00 70,000 69,947
Federal National Mortgage Association.......................... 4.83 01/11/00 74,000 73,973
Federal National Mortgage Association.......................... 5.60 01/12/00 45,000 44,993
Federal National Mortgage Association.......................... 5.44 01/14/00 75,000 74,983
Federal National Mortgage Association.......................... 8.01 01/18/00 40,000 40,038
Federal National Mortgage Association.......................... 5.34 01/24/00 500,000 499,818
Federal National Mortgage Association.......................... 6.10 02/10/00 270,000 269,917
Federal National Mortgage Association.......................... 6.25 03/20/00 19,000 19,004
Federal National Mortgage Association.......................... 4.98 03/24/00 30,000 29,917
Federal National Mortgage Association.......................... 7.06 03/28/00 100,000 100,196
Federal National Mortgage Association.......................... 9.05 04/10/00 191,000 192,421
Federal National Mortgage Association.......................... 4.97 04/12/00 291,000 289,954
Federal National Mortgage Association.......................... 5.64 04/20/00 10,000 9,981
Federal National Mortgage Association 5.65 04/28/00 219,000 218,575
- ------------------------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency Obligations (Cost $3,435,309) ......................................... 3,435,309
- ------------------------------------------------------------------------------------------------------------------------------
CORPORATE MASTER NOTE (3.9% of portfolio)
Associates Corp. of North America 5.07 (a) 2,470,000 2,470,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Corporate Master Note (Cost $2,470,000)....................................................... 2,470,000
- ------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET ACCOUNT
State Street Bank and Trust SSgA Fund 5.35 (b) 1,276
- ------------------------------------------------------------------------------------------------------------------------------
Total Money Market Account (Cost $1,276)............................................................ 1,276
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $63,187,058) - 100%................................................. $63,187,058
==============================================================================================================================
</TABLE>
(a) Variable coupon rate as of December 31, 1999.
(b) One day yield at December 31, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
21
<PAGE> 22
SHORT-TERM GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTEREST MATURITY FACE
RATE DATE AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSET BACKED SECURITIES (11.0% of portfolio)
Government Export Trust 93-1......................................... 6.00 % 03/15/05 $ 437,500 $ 430,553
Guaranteed Export Certificates 93-C.................................. 5.20 10/15/04 1,090,222 1,053,967
Guaranteed Export Certificates 93-D.................................. 5.23 05/15/05 421,277 404,544
Guaranteed Export Certificates 95-B.................................. 6.13 06/15/04 158,823 152,572
Guaranteed Trade Trust 92-A.......................................... 7.02 09/01/04 270,833 271,402
Small Business Administration 92-10 A................................ 6.70 01/01/02 45,712 45,496
Small Business Administration 92-10 C................................ 7.15 09/01/02 13,380 13,378
Small Business Investment Companies 95-10............................ 6.88 09/10/05 436,280 429,326
Small Business Investment Companies 99-10............................ 6.24 03/01/09 1,000,000 947,380
- ----------------------------------------------------------------------------------------------------------------------------------
Total Asset Backed Securities (Cost $3,835,589).............................................................. 3,748,618
- ----------------------------------------------------------------------------------------------------------------------------------
MORTGAGE BACKED SECURITIES (16.0% of portfolio)
GNMA #1928 ......................................................... 7.00 11/20/09 86,461 84,894
GNMA #780336......................................................... 6.50 02/15/11 153,656 149,094
GNMA #8215 ......................................................... 6.38 (c) 04/20/17 88,825 89,436
GNMA #8423 ......................................................... 6.38 (c) 05/20/24 165,346 166,276
GNMA #8877 ......................................................... 6.38 (c) 05/20/26 124,847 126,174
GNMA 94-1 ......................................................... 7.63 08/16/23 99,000 96,910
GNMA 96-6 ......................................................... 6.50 10/16/08 185,765 185,455
GNMA 97-18 ......................................................... 6.90 02/20/23 241,065 236,974
GNMA 97-4 B ......................................................... 7.00 08/20/26 131,279 122,781
GNMA 97-4 N ......................................................... 7.50 02/16/27 8,102 8,095
GNMA 97-8 ......................................................... 7.00 05/16/23 500,000 495,994
GNMA 98-1 ......................................................... 7.00 05/20/25 172,585 168,529
GNMA 99-27 ......................................................... 7.50 08/16/27 1,148,343 1,142,073
Vendee Mortgage Trust 92-2........................................... 7.00 05/15/08 1,000,000 990,540
Vendee Mortgage Trust 93-3........................................... 5.75 06/15/13 537,046 533,518
Vendee Mortgage Trust 96-2........................................... 6.75 09/15/09 54,316 54,181
Vendee Mortgage Trust 97-1........................................... 7.50 09/15/17 500,000 502,645
Vendee Mortgage Trust 97-2........................................... 7.50 01/15/13 86,915 87,004
Vendee Mortgage Trust 99-2........................................... 6.50 04/15/14 225,281 222,556
- ----------------------------------------------------------------------------------------------------------------------------------
Total Mortgage Backed Securities (Cost $5,534,968)........................................................... 5,463,129
- ----------------------------------------------------------------------------------------------------------------------------------
U. S. GOVERNMENT AND AGENCY OBLIGATIONS (67.2% of portfolio)
Banco Centroamericano Promissory Note................................ 5.78 05/30/01 172,566 170,945
Interlake Steamship Co............................................... 5.45 07/15/01 298,000 298,015
Nafinsa Export/Import Trust (a)...................................... 6.79 08/01/04 250,000 249,153
PEFCO Finance Corp. (a).............................................. 5.31 11/15/03 1,000,000 944,680
Private Export Funding Corp.......................................... 7.30 01/31/02 325,000 328,809
Private Export Funding Corp.......................................... 5.48 09/15/03 400,000 384,000
Private Export Funding Corp.......................................... 8.35 01/31/01 50,000 50,937
U.S. Department of Housing and Urban Development..................... 6.36 08/01/04 30,000 29,356
</TABLE>
22
<PAGE> 23
SHORT-TERM GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTEREST MATURITY FACE
RATE DATE AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U. S. GOVERNMENT AND AGENCY OBLIGATIONS - CONTINUED
U.S. Treasury Note................................................... 6.38 % 05/15/00 $5,300,000 $ 5,313,603
U.S. Treasury Note................................................... 5.50 05/31/00 500,000 499,484
U.S. Treasury Note................................................... 5.75 10/31/00 2,350,000 2,343,440
U.S. Treasury Note................................................... 5.75 11/15/00 3,750,000 3,739,402
U.S. Treasury Note................................................... 4.88 03/31/01 1,250,000 1,230,662
U.S. Treasury Note................................................... 6.38 03/31/01 50,000 50,114
U.S. Treasury Note................................................... 5.88 11/30/01 2,600,000 2,582,547
U.S. Treasury Note................................................... 6.13 12/31/01 1,000,000 997,501
U.S. Treasury Note................................................... 6.63 04/30/02 3,000,000 3,021,712
U.S. Treasury Note................................................... 6.00 07/31/02 100,000 99,406
U.S. Treasury Note................................................... 5.50 01/31/03 500,000 488,400
Victoria Steamship Corp.............................................. 6.85 11/15/03 167,464 166,561
- ----------------------------------------------------------------------------------------------------------------------------------
Total U.S. Government and Agency Obligations (Cost $23,237,936).............................................. 22,988,727
- ----------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (0.9% of portfolio)
Albany NY Industrial Development Authority........................... 7.29 08/01/04 160,000 160,688
Fairfax County VA Redevelopment & Housing Authority.................. 7.29 08/01/04 155,000 155,667
- ----------------------------------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost $318,187)........................................................................ 316,355
- ----------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET ACCOUNT (4.9% of portfolio)
Vanguard Money Market Reserves U.S. Treasury......................... 4.96 (b) 1,660,851
- ----------------------------------------------------------------------------------------------------------------------------------
Total Money Market Account (Cost $1,660,851)................................................................. 1,660,851
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $34,587,531) - 100%.......................................................... $34,177,680
==================================================================================================================================
</TABLE>
(a) 144A security
(b) One day yield at December 31, 1999.
(c) Variable coupon rate as of December 31, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
23
<PAGE> 24
SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTEREST MATURITY FACE
RATE DATE AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (42.7% of portfolio)
BASIC INDUSTRIES - 9.2%
Archer Daniels Midland Co. .............................. 0.00 % (a) 05/01/02 $ 225,000 $ 191,531
Armstrong World Industries, Inc.......................... 6.35 08/15/03 500,000 480,625
Caterpillar, Inc......................................... 7.98 01/14/02 800,000 811,000
Corning Glassworks, Inc. ................................ 7.10 08/14/00 100,000 100,375
Corning, Inc............................................. 8.25 03/15/02 250,000 255,450
Corning, Inc............................................. 6.00 08/15/03 500,000 481,875
Dow Chemical Co.......................................... 9.35 03/15/02 1,138,000 1,141,364
Dow Chemical Co.......................................... 8.63 04/01/06 150,000 159,308
Eastman Kodak Co......................................... 9.38 03/15/03 250,000 263,620
General Foods Corp....................................... 6.00 06/15/01 374,000 366,987
General Motors Corp...................................... 9.13 07/15/01 200,000 206,250
Honeywell International, Inc............................. 0.00 (a) 08/15/00 1,528,000 1,464,130
Honeywell International, Inc............................. 0.00 (a) 08/01/01 490,000 440,387
Honeywell International, Inc............................. 9.88 06/01/02 150,000 159,375
McKesson Corp............................................ 4.50 03/01/04 345,000 293,250
Monsanto Co. (b)......................................... 5.38 12/01/01 500,000 486,250
Nabisco, Inc............................................. 8.00 01/15/00 338,000 338,000
Occidental Petroleum Corp................................ 6.50 04/01/05 500,000 477,245
Occidental Petroleum Corp................................ 6.75 11/15/02 1,000,000 981,960
PHH Corp. ............................................... 7.02 11/09/01 1,250,000 1,250,440
Phillip Morris, Inc. .................................... 6.00 07/15/01 2,375,000 2,327,500
Rohm & Haas Co. ......................................... 9.88 09/01/00 195,000 198,656
Ryder System, Inc........................................ 7.56 08/15/00 85,000 85,319
TRW Inc. ............................................... 6.50 06/01/02 1,000,000 981,184
United Technologies Corp. ............................... 6.40 09/15/01 500,000 497,277
Xerox Corp............................................... 6.60 (c) 10/23/01 1,250,000 1,253,565
- ------------------------------------------------------------------------------------------------------------------------------
Total Basic Industries................................................................................. 15,692,923
- ------------------------------------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLE GOODS - 2.9%
Auto Parts
Cooper Tire & Rubber Co.................................. 7.25 12/16/02 1,000,000 988,750
Beverages
Anheuser-Busch Cos., Inc................................. 6.90 10/01/02 1,717,000 1,706,818
Recreation
Walt Disney Co. (b)...................................... 4.20 03/15/01 1,250,000 1,216,736
Retail
Sears Roebuck Acceptance Corp............................ 8.17 01/14/02 100,000 101,625
Sears Roebuck Acceptance Corp............................ 6.80 10/09/02 900,000 880,875
- ------------------------------------------------------------------------------------------------------------------------------
Total Consumer Non-Durable Goods....................................................................... 4,894,804
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 25
SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTEREST MATURITY FACE
RATE DATE AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONSUMER SERVICES - 0.6%
Healthcare
American Hospital Supply Finance Corp. ................... 0.00% (a) 08/15/00 $1,030,000 $ 985,607
- ------------------------------------------------------------------------------------------------------------------------------
Total Consumer Services .................................................................................. 985,607
- ------------------------------------------------------------------------------------------------------------------------------
FINANCE - 16.0%
Banks
BankAmerica Corp. ........................................ 8.13 08/15/04 537,000 537,671
Barclays N.A. Capital Corp................................ 9.75 05/15/21 306,000 328,185
Chemical New York Corp.................................... 0.00 (a) 02/16/00 100,000 99,159
CITICORP ................................................ 6.50 09/16/01 75,000 74,573
Deutsche Bank Financial................................... 0.00 (a) 02/01/00 449,000 446,755
First Chicago Corp. ...................................... 6.33 (c) 07/28/03 175,000 174,537
Irving Bank Corp. ........................................ 8.50 06/01/02 60,000 60,054
National City Bank of Cleveland........................... 7.10 09/25/12 800,000 754,393
Financial Services
American Express Credit Corp. ............................ 0.00 (a) 12/12/00 465,000 436,699
American Express Credit Corp. ............................ 6.25 08/10/05 1,100,000 1,094,721
Associates Corp. of North America......................... 6.00 06/15/01 1,995,000 1,972,556
AT&T Capital Corp. ....................................... 7.50 11/15/00 1,000,000 1,006,962
Bell Atlantic Financial Services, Inc. ................... 6.53 02/22/00 1,250,000 1,249,828
Beneficial Corp. ......................................... 9.50 03/08/01 450,000 461,812
CIT Group, Inc. .......................................... 5.50 10/15/01 1,250,000 1,216,858
CM International.......................................... 0.00 (a) 09/11/00 1,925,000 1,844,496
Capital One Bank.......................................... 7.00 04/30/01 200,000 199,000
First Interstate Bancorp. ................................ 10.83 03/19/01 725,000 756,417
GATX Capital Corp. ....................................... 6.36 12/16/02 450,000 433,125
General Electric Capital Corp. ........................... 5.50 11/01/01 153,000 149,557
General Motors Acceptance Corp. .......................... 6.50 (c) 12/03/01 1,250,000 1,254,855
General Motors Acceptance Corp. .......................... 5.50 01/14/02 500,000 485,000
Goldman Sachs Group....................................... 5.90 01/15/03 1,000,000 960,000
Heller Financial, Inc. ................................... 6.51 (c) 09/25/00 1,000,000 1,001,675
Household Finance Corp. .................................. 6.36 (c) 08/01/01 1,000,000 1,000,068
Household Finance Corp. .................................. 6.13 07/15/12 315,000 306,583
Household Finance Corp. .................................... 6.08 03/08/06 422,500 405,904
Merrill Lynch & Co. ...................................... 5.71 01/15/02 1,250,000 1,218,750
NationsBank Corp. ........................................ 7.23 08/15/12 200,000 189,741
NationsBank Corp. ........................................ 6.83 11/10/05 1,000,000 972,500
Norwest Financial Inc. ................................... 5.50 03/19/01 1,000,000 983,321
Salomon, Inc. ............................................ 7.30 05/15/02 400,000 402,000
Transamerica Financial Corp. ............................. 7.68 03/16/00 500,000 501,594
Transamerica Financial Corp. ............................. 6.60 03/20/01 250,000 248,477
</TABLE>
25
<PAGE> 26
SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTEREST MATURITY FACE
RATE DATE AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Services - continued
Transamerica Financial Corp. ............................. 6.13 % 11/01/01 $ 750,000 $ 737,475
Xtra, Inc. ............................................... 7.80 02/03/03 500,000 497,500
Insurance
Liberty Mutual Capital Corp. (b).......................... 7.98 12/01/02 500,000 508,595
Liberty Mutual Capital Corp. (b).......................... 8.10 01/14/05 1,250,000 1,265,625
St. Paul Co., Inc. ....................................... 6.40 08/18/03 500,000 485,000
Security & Commodity Brokers
Lehman Brothers, Inc. .................................... 6.00 02/26/01 500,000 494,375
- ------------------------------------------------------------------------------------------------------------------------------
Total Finance...................................................................................... 27,216,396
- ------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 5.0%
Airlines
Delta Airlines, Inc. ..................................... 9.60 05/26/00 50,000 50,491
Railroad
Burlington Northern & Santa Fe Railway.................... 5.51 05/01/01 1,000,000 979,061
Consolidated Rail Corp. .................................. 6.89 07/01/00 100,000 100,250
CSX Corp. ................................................ 9.50 08/01/00 500,000 507,500
CSX Corp. ................................................ 5.45 04/15/01 1,250,000 1,227,354
Norfolk & Western Railway................................. 8.13 11/15/00 100,000 100,852
Norfolk Southern Corp. ................................... 6.40 06/15/01 500,000 495,184
Norfolk Southern Corp. ................................... 5.37 07/15/04 900,000 825,750
Union Pacific Co. ........................................ 9.95 11/01/00 291,000 297,547
Union Pacific Co. ........................................ 6.12 02/01/04 125,000 117,721
Union Pacific Railroad Co. ............................... 7.06 05/15/03 1,400,000 1,387,750
Union Tank Car Co. ....................................... 6.00 03/15/02 1,500,000 1,465,995
Union Tank Car Co. ....................................... 6.63 10/03/04 1,000,000 967,636
- ------------------------------------------------------------------------------------------------------------------------------
Total Transportation................................................................................ 8,523,091
- ------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 9.0%
Electric & Gas
Cleveland Electric Illuminating Co. ...................... 7.63 08/01/02 100,000 100,140
DTE Capital Corp. (b)..................................... 6.17 06/15/38 915,000 879,776
Duke Capital Corp. ....................................... 7.25 10/01/04 1,000,000 993,750
Duquesne Light Co. ....................................... 6.63 06/15/04 32,000 31,960
Duquesne Light Co. ....................................... 6.63 06/15/04 150,000 149,438
Energy Acquisition Corp. ................................. 6.15 03/01/02 1,000,000 981,250
Florida Power and Light Co. .............................. 6.63 02/01/03 200,000 196,986
Idaho Power Co. .......................................... 8.65 01/01/00 300,000 300,000
Michigan Consolidated Gas Co. ............................ 5.75 05/01/01 1,301,000 1,284,372
New Orleans Public Service Co. ........................... 7.00 03/01/03 500,000 509,375
</TABLE>
26
<PAGE> 27
SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTEREST MATURITY FACE
RATE DATE AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Electric & Gas - continued
Northern Indiana Public Service Co..............................7.50 % 04/01/02 $ 858,000 $ 864,015
Northern Indiana Public Service Co..............................7.53 07/08/15 500,000 474,695
Niagara Mohawk Power Corp.......................................5.88 09/01/02 1,000,000 971,460
Pacific Gas & Electric Co.......................................6.63 06/01/00 310,000 309,612
Pacific Gas & Electric Co.......................................6.75 12/01/00 626,000 629,130
Potomac Electric Power Co.......................................6.00 04/01/04 1,500,000 1,426,371
Public Service Electric & Gas Co................................6.00 05/01/00 682,000 680,295
Telephone
AT&T Corp.......................................................8.25 01/11/00 100,000 100,026
AT&T Corp.......................................................8.20 02/15/05 1,037,000 1,039,593
NYNEX Corp......................................................9.55 05/01/10 159,372 170,942
Pacific Telephone & Telegraph Co................................4.63 05/01/00 228,000 226,575
Pacific Telephone & Telegraph Co................................6.00 11/01/02 676,000 656,565
Pacific Telephone & Telegraph Co................................6.50 07/01/03 1,414,000 1,378,650
Southwestern Bell Telephone Co..................................5.88 06/01/03 500,000 481,875
Southwestern Bell Telephone Co. ................................5.75 09/01/04 500,000 473,045
- -----------------------------------------------------------------------------------------------------------------------------
Total Utilities ............................................................................................15,309,896
- -----------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (Cost $73,709,057) ...................................................................72,622,717
- -----------------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS (0.2% of portfolio)
Hydro-Quebec......................................................6.50 07/16/03 100,000 97,679
Hydro-Quebec......................................................6.27 01/03/26 80,000 77,900
Trans-Canada Pipelines ...........................................6.77 04/30/01 150,000 149,063
- -----------------------------------------------------------------------------------------------------------------------------
Total Foreign Bonds (Cost $325,637) ...........................................................................324,642
- -----------------------------------------------------------------------------------------------------------------------------
ASSET BACKED SECURITIES (19.5% of portfolio)
American Express Master Trust 93-1................................5.38 07/15/01 570,000 566,345
Americredit Automobile Receivables Trust 98-B.....................6.06 12/12/02 500,000 490,270
Americredit Automobile Receivables Trust 99-A.....................5.88 12/05/05 1,850,000 1,807,357
Arcadia Automobile Receivables Trust 97-C.........................6.55 06/15/05 440,000 430,596
Arcadia Automobile Receivables Trust 98-B A3......................5.95 11/15/02 200,000 199,032
Arcadia Automobile Receivables Trust 98-B A4......................6.00 11/15/03 1,250,000 1,231,575
Arcadia Automobile Receivables Trust 99-A A5......................6.12 12/15/06 1,500,000 1,455,090
Auto Leasing Investors 97-A5 (b)..................................6.08 02/13/04 725,000 693,281
Banc One Auto Grantor Trust 97-A..................................6.27 11/20/03 136,855 136,520
Capital Auto Receivables Asset Trust 99-1.........................5.58 06/15/02 625,000 618,002
Centerior Energy Receivables Master Trust 96-1....................7.20 04/15/02 90,000 90,503
Champion Auto Trust 98-A..........................................6.11 10/15/02 649,638 649,638
Chase Manhattan Auto Owner Trust 97-B.............................6.35 02/15/01 14,943 14,906
Chase Manhattan Grantor Trust 92-4 A1 ............................5.80 02/17/03 100,000 97,650
</TABLE>
27
<PAGE> 28
SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTEREST MATURITY FACE
RATE DATE AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSET BACKED SECURITIES - CONTINUED
CIT RV Trust 94-A.................................................4.90 % 07/15/09 $ 72,102 $ 69,874
Citibank Credit Card Master Trust 96-1............................0.00 (a) 02/07/03 340,000 315,776
Citibank Credit Card Master Trust 97-3............................6.84 02/10/04 800,000 799,024
Citibank Credit Card Master Trust 97-7............................6.35 08/15/02 110,000 109,934
Copelco Capital Funding Corp. 96-A................................6.34 07/20/04 71,068 70,996
Copelco Capital Funding Corp. 97-A................................6.47 04/20/05 300,000 298,379
CPS Auto Trust 97-2...............................................6.65 10/15/02 100,365 100,314
CPS Auto Trust 98-1...............................................6.00 08/15/03 1,772,852 1,754,872
CPS Auto Trust 96-1...............................................6.40 08/15/01 788,773 787,321
CTB Auto Grantor Trust 97-A (b)...................................6.50 09/15/03 68,328 68,285
Discover Card Trust 97-2..........................................6.79 04/16/10 1,250,000 1,230,700
Discover Card Trust 99-2..........................................5.90 10/15/04 1,500,000 1,468,050
First Bank Corporate Card Master Trust 97-1.......................6.40 02/15/03 70,000 69,315
Felco Funding II LLC 98-1 A1 (b)..................................5.97 10/15/00 89,341 89,344
Felco Funding II LLC 98-1 A2 (b)..................................5.98 09/15/01 300,000 299,073
First Chicago Master Trust 97-T...................................6.53 (c) 10/15/02 260,000 260,263
First Merchants Auto Trust 96-C...................................6.15 07/15/01 76,466 76,430
First Security Auto Grantor Trust 97-B............................6.10 04/15/03 193,002 192,562
First Security Auto Grantor Trust 98-A............................5.97 04/15/04 647,284 646,126
First Security Auto Grantor Trust 99-1............................5.58 06/15/03 440,000 430,157
Ford Credit Auto Owner Trust 98-A.................................5.65 10/15/01 49,654 49,573
Franklin Auto Trust 98-1..........................................5.65 01/17/06 1,000,000 984,400
Green Tree Lease Finance 97-1.....................................6.17 09/20/05 394,501 394,079
Green Tree Lease Finance 98-1.....................................5.60 07/20/02 370,000 366,529
Heller Equipment Asset Recievables Trust 97-1.....................6.39 05/25/05 228,094 227,658
Honda Auto Receivables Grantor Trust 97-A.........................5.85 02/15/03 284,164 281,590
Honda Auto Receivables Grantor Trust 97-B.........................5.95 05/15/03 379,328 378,632
Household Affinity Credit Card Master Trust 93-2..................5.60 05/15/02 91,667 91,406
Hyundai Auto Receivables Trust 98-A A2............................6.05 07/15/04 200,000 195,661
J.C. Penney Master Credit Card Trust C............................9.63 06/15/00 750,000 758,052
John Deere Owner Trust 99-A.......................................5.94 10/15/02 2,500,000 2,465,525
Key Auto Finance Trust 97-2.......................................6.15 10/15/01 491,471 491,535
Metlife Capital Equipment Loan Trust 97-A.........................6.85 05/20/08 2,800,000 2,780,428
Metris Master Trust 97-1..........................................6.87 10/20/05 1,505,000 1,506,881
Navistar Financial Corp. Owner Trust 96-A.........................6.35 11/15/02 87,400 87,354
New Court Equipment Trust Securities 98-1.........................5.24 12/20/02 465,000 459,904
Nissan Auto Receivables Grantor Trust 97-A........................6.15 02/15/03 106,592 107,597
Olympic Automobile Receivables Trust 95-C.........................6.20 01/15/02 46,396 46,315
Olympic Automobile Receivables Trust 95-D.........................6.15 07/15/01 100,378 100,380
Olympic Automobile Receivables Trust 96-A.........................5.85 07/15/01 151,828 151,769
Olympic Automobile Receivables Trust 96-C.........................6.80 03/15/02 472,600 473,583
Onyx Acceptance Grantor Trust 96-1 ...............................5.40 05/15/01 29,704 29,658
</TABLE>
28
<PAGE> 29
SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTEREST MATURITY FACE
RATE DATE AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSET BACKED SECURITIES - CONTINUED
Onyx Acceptance Grantor Trust 98-A................................5.85 % 08/15/02 $ 595,605 $ 593,652
Onyx Acceptance Auto Trust Ser. 97-4..............................6.30 05/15/04 94,033 93,573
PNC Student Loan Trust I 97-2.....................................6.45 01/25/02 290,000 288,605
PNC Student Loan Trust I 97-C.....................................6.57 01/25/04 125,000 121,022
Pemex Finance LTD (b).............................................6.13 11/15/03 500,000 487,710
Premier Auto Trust 96-2...........................................6.58 10/06/00 11,219 11,220
Railcar Trust 92-1................................................7.75 06/01/04 65,382 66,477
Sears Credit Account Master Trust 98-1............................5.80 08/15/05 450,000 444,685
Spiegel Master Trust 94-B.........................................8.15 06/15/04 100,000 100,530
Union Acceptance Corp. 95-C.......................................6.40 10/10/02 115,606 115,280
Union Acceptance Corp. 95-D.......................................5.97 01/07/03 97,148 96,631
Union Acceptance Corp. 98-D A3....................................5.75 06/09/03 100,000 97,549
Union Acceptance Corp. 98-D A4....................................5.81 03/08/04 450,000 439,470
Western Financial Grantor Trust 95-4..............................6.20 02/01/02 131,432 131,425
WFS Financial Owner Trust 97-D ...................................6.25 03/20/02 75,775 75,784
- -----------------------------------------------------------------------------------------------------------------------------
Total Asset Backed Securities (Cost $33,600,126) ...........................................................33,209,682
- -----------------------------------------------------------------------------------------------------------------------------
MORTGAGE BACKED SECURITIES (24.9% of portfolio)
Aames Mortgage Trust 98-A.........................................6.65 (c) 03/15/28 527,776 528,462
Advanta Home Equity Loan Trust 92-3...............................6.05 09/25/08 97,039 94,396
Advanta Home Equity Loan Trust 92-4...............................7.20 11/25/08 56,328 55,906
Advanta Home Equity Loan Trust 93-2...............................6.15 10/25/09 56,250 55,312
Advanta Mortgage Loan Trust 93-3 A1..............................4.90 01/25/10 48,842 47,707
Advanta Mortgage Loan Trust 93-3 A3...............................4.75 02/25/10 116,839 115,562
Advanta Mortgage Loan Trust 93-4..................................5.70 03/25/25 189,959 181,992
Advanta Mortgage Loan Trust 94-1 A1...............................6.30 07/25/25 324,586 317,302
Advanta Mortgage Loan Trust 94-1 A2...............................6.30 07/25/25 499,341 490,173
AFC Home Equity Loan Trust 92-4...................................6.20 10/11/07 34,969 34,570
American Business Financial Services 96-2.........................7.53 02/15/28 316,412 315,975
Amresco Residential Securities Mortgage Loan Trust 96-3...........7.55 02/25/23 92,003 92,347
Bear Stearns Secured Investors Trust 87-2.........................9.95 10/20/18 80,940 85,487
Chase Mortgage Finance Corp. 93-G.................................7.00 04/25/01 20,198 20,123
Chase Mortgage Finance Corp. 93-N.................................6.75 11/25/24 260,453 256,588
Chase Mortgage Finance Corp. 94-B.................................6.75 02/25/25 255,235 253,671
Chase Mortgage Finance Corp. 94-L.................................7.50 11/25/10 250,000 249,558
Chase Mortgage Finance Corp. 98-S4................................6.90 08/25/28 691,099 609,991
Chemical Mortgage Acceptance Corp. 88-2...........................6.66 (c) 05/25/18 205,666 204,576
Citibank N.A. 86-4...............................................10.00 11/25/16 81,390 81,688
CITICORP Mortgage Securities, Inc. 88-11..........................6.44 (c) 08/25/18 526,652 517,261
CITICORP Mortgage Securities, Inc. 88-17..........................6.73 (c) 11/25/18 564,771 560,766
CITICORP Mortgage Securities, Inc. 92-16..........................7.50 09/25/22 28,874 28,422
CITICORP Mortgage Securities, Inc. 98-6 ..........................6.80 07/25/28 173,944 163,489
</TABLE>
29
<PAGE> 30
SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTEREST MATURITY FACE
RATE DATE AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MORTGAGE BACKED SECURITIES - CONTINUED
CITICORP Mortgage Securities, Inc. 97-3...........................7.00 % 08/25/27 $ 933,631 $ 931,026
CITICORP Mortgage Trust 3.........................................9.00 01/25/20 100,000 99,587
CMC Securities Corp. 92-D.........................................7.80 (c) 12/25/23 17,433 17,597
CMC Securities Corp. 93-E.........................................6.50 11/25/08 903,683 874,503
CMO Trust 15......................................................5.00 03/20/18 40,891 38,902
CMO Trust 17......................................................7.25 04/20/18 32,891 32,801
CMO Trust 27......................................................7.25 04/23/17 163,624 160,272
Corestates Home Equity Trust 94-1.................................6.65 05/15/09 220,766 218,364
Countrywide Asset-Backed Certificates 96-1........................6.53 02/25/14 19,189 19,105
Countrywide Funding Corp. 87-2....................................7.14 (c) 02/25/18 196,645 196,445
Countrywide Home Loans 97-1.......................................7.50 03/25/27 2,860,667 2,857,068
CS First Boston Mortgage Securities Corp. 96-2....................6.62 02/25/18 139,497 135,399
DLJ Mortgage Acceptance Corp. 91-3................................6.59 (c) 02/20/21 678,793 671,990
DLJ Mortgage Acceptance Corp. 95-8................................7.25 11/25/25 101,508 101,110
Equivantage Home Equity Loan Trust 95-2...........................6.85 05/25/22 256,573 255,264
Federal Deposit Insurance Credit Corp. 96-C1......................6.75 05/25/26 382,881 376,794
FHLMC 135 .......................................................8.75 05/15/00 3,210 3,194
FHLMC 144 .......................................................8.75 06/15/00 2,205 2,194
FHLMC 1574 .......................................................6.50 09/15/22 25,225 24,865
FHLMC 1662 .......................................................6.25 01/15/09 46,396 46,102
FHLMC 1663 .......................................................7.00 07/15/23 27,256 26,650
FHLMC 1714 .......................................................7.00 10/15/22 77,429 75,725
FHLMC 2035 .......................................................6.85 12/25/27 55,216 50,575
FHLMC 218209......................................................8.50 06/01/02 33,071 33,784
FNMA G92-44 D.....................................................8.00 12/25/20 58,014 57,797
FNMA REMIC 92-203.................................................6.50 11/25/07 40,987 40,595
FNMA REMIC 93-140.................................................7.00 07/25/12 53,854 52,998
FNMA REMIC 93-68..................................................6.00 05/25/08 50,721 46,885
FNMA REMIC 94-4...................................................6.50 12/25/06 69,227 68,991
Federal National Mortgage Association 99-8........................6.50 11/25/19 686,123 634,980
First Alliance Mortgage Loan Trust 94-1...........................5.85 04/25/25 340,608 322,180
First Alliance Mortgage Loan Trust 94-3...........................7.83 10/25/25 54,241 54,308
First Greensboro Home Equity Loan Trust 98-1......................6.55 12/25/29 1,000,401 977,622
First Plus Home Loan Trust 97-1...................................6.60 07/10/10 51,377 51,399
First Plus Home Loan Trust 97-2...................................6.82 04/10/23 89,997 89,861
First Plus Home Loan Trust 97-3...................................7.22 11/10/20 1,000,000 993,930
First Plus Home Loan Trust 98-1...................................6.04 10/10/13 395,252 394,097
First Plus Home Loan Trust 98-2...................................6.32 11/10/13 531,238 529,448
First Plus Home Loan Trust 98-4...................................6.51 (c) 01/10/11 19,592 19,604
First Plus Home Loan Trust 97-3...................................6.86 10/10/13 800,000 797,967
First Plus Home Loan Trust 97-4...................................6.82 10/10/18 200,000 192,624
Fleetwood Credit Corp. Grantor Trust 93-A ........................6.00 01/15/08 146,314 143,754
</TABLE>
30
<PAGE> 31
SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTEREST MATURITY FACE
RATE DATE AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MORTGAGE BACKED SECURITIES - CONTINUED
Fremont Home Loan Owners Trust 99-2...............................7.28 % 06/25/29 $1,382,090 $1,378,234
Fund America Investors Corp. 91-1.................................7.95 10/20/21 393,200 392,726
GE Capital Mortgage Services, Inc. 94-1...........................6.50 03/25/24 125,000 122,920
GE Capital Mortgage Services, Inc. 94-13..........................6.50 04/25/24 599,028 592,580
GE Capital Mortgage Services, Inc. 97-4...........................7.50 05/25/27 500,000 500,100
GE Capital Mortgage Services, Inc. 98-8...........................6.20 04/25/28 1,000,000 943,400
GMBS Certificates 89-1............................................9.50 12/25/19 82,844 82,504
GNMA 99-27 .......................................................7.50 08/16/27 2,296,686 2,284,146
GNMA 97-18 .......................................................6.90 02/20/23 662,928 651,678
Green Tree Financial Corp. 97-6...................................6.47 01/15/29 1,835,732 1,822,674
Green Tree Financial Corp. 95-7...................................6.70 11/15/26 85,273 85,309
Green Tree Home Equity Loan Trust 98-C............................6.03 07/15/29 152,111 151,873
Housing Securities Inc. 94-1......................................7.50 03/25/09 137,449 138,188
Housing Securities Inc. 92-EA.....................................7.50 10/25/07 451,000 451,848
Housing Securities Inc. 94-2......................................6.50 07/25/09 136,511 132,899
ICI Funding Secured Assets Corp. 97-2.............................7.85 07/25/28 72,977 72,634
Independent National Mortgage Corp. 96-E..........................6.93 05/25/26 216,750 215,552
Master Financial Asset Securitization Trust 98-2..................6.34 10/20/12 1,000,000 990,300
Mego Mortgage Home Loan Trust 97-4................................6.77 09/25/23 833,246 827,777
Merrill Lynch Mortgage Investors, Inc. 94-A.......................6.36 (c) 02/15/09 94,159 92,059
Mid State Trust 3 A...............................................7.63 04/01/22 61,865 61,932
Morgan Stanley Capital I 97-ALIC A1B..............................6.44 11/15/02 423,393 418,325
Morgan Stanley Capital I 97-ALIC A2...............................5.99 03/15/05 306,952 295,742
Mortgage Obligation Structured Trust 93-1.........................6.85 10/25/18 182,160 181,564
New Century Home Equity Loan Trust 97-NC6.........................7.01 05/25/26 165,000 162,230
Nomura Asset Securities Corp. 94-4B...............................8.30 09/25/24 19,583 19,759
Norwest Asset Securities Corp. 97-10..............................7.00 08/25/27 489,130 465,165
Norwest Asset Securities Corp. 98-2...............................6.50 02/25/28 335,710 318,833
Oakwood Mortgage Investors, Inc. 96-B.............................7.10 10/15/26 798,393 799,117
Prudential Home Mortgage Securities 91-9..........................7.23 (c) 08/25/21 1,380 1,373
Prudential Home Mortgage Securities 93-9..........................7.05 03/25/08 156,495 156,062
Prudential Home Mortgage Securities 93-29.........................6.75 08/25/08 13,071 13,023
Prudential Home Mortgage Securities 93-41.........................6.00 10/25/00 14,034 13,938
Residential Asset Securities Corp. 98-KS2.........................6.24 02/25/17 325,000 319,673
Residential Funding Mortgage Securities I 93-S25..................6.50 07/25/08 14,628 14,567
Residential Funding Mortgage Securities I 97-S13..................7.25 09/25/27 115,463 115,232
Resolution Trust Corp. 92-2.......................................7.89 (c) 08/25/21 133,953 133,415
Ryland Mortgage Securities Corp. 93-4.............................7.50 08/25/24 70,173 69,558
Salomon Brothers Mortgage Securities 96-LB2.......................7.25 10/25/26 60,518 60,327
Salomon Brothers Mortgage Securities 97-LB2.......................6.82 12/25/27 165,000 162,159
Saxon Asset Securities Trust 98-3.................................6.37 07/25/13 784,381 781,195
Saxon Asset Securities Trust 98-2 ................................6.22 03/25/18 168,881 167,704
</TABLE>
31
<PAGE> 32
SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTEREST MATURITY FACE
RATE DATE AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MORTGAGE BACKED SECURITIES - CONTINUED
Securitized Asset Sales, Inc. 93-8................................7.29 % (c) 12/26/23 $ 112,857 $ 110,659
Southern Pacific Secured Assets Corp. 98-1........................6.27 02/25/18 450,000 444,861
Southern Pacific Secured Assets Corp. 98-H1.......................6.41 01/25/29 1,250,000 1,237,463
Structured Mortgage Asset Residential Trust 93-5..................6.57 (c) 06/25/24 44,516 42,125
TMS Home Equity Trust 93-C........................................5.75 10/15/22 60,031 58,915
TMS Home Equity Trust 93-D........................................5.68 02/15/09 53,209 51,368
TMS Home Equity Trust 94-D........................................8.93 06/15/22 393,000 401,995
TMS Home Equity Trust 96-B A7.....................................7.55 02/15/20 360,000 362,951
TMS Home Equity Trust 96-B A10....................................6.78 (c) 10/15/27 180,722 180,152
TMS Home Equity Trust 96-C........................................7.69 05/15/24 394,000 390,687
TMS Home Equity Trust 97-A........................................7.24 05/15/28 263,000 259,218
TMS Home Equity Trust 97-C........................................6.59 02/15/15 541,000 538,740
UCFC Home Equity Loan 95-A1.......................................8.55 01/10/20 550,000 554,147
UCFC Home Equity Loan 96-C1.......................................7.15 12/15/13 90,195 89,965
UCFC Home Equity Loan 96-C1.......................................7.83 01/15/28 405,000 396,288
UCFC Home Equity Loan 98-C1.......................................5.96 05/15/20 400,000 382,672
UCFC Home Equity Loan 98-A........................................6.49 04/15/24 484,000 474,291
UCFC Home Equity Loan 98-B........................................6.27 11/15/24 500,000 480,590
UCFC Manufactured Housing Contract 98-2...........................6.16 08/15/19 1,000,000 950,720
UCFC Manufactured Housing Contract 97-3...........................6.36 02/15/11 110,356 109,974
Vanderbilt Mortgage Finance 95-B..................................6.68 05/07/06 88,335 87,140
Zions Home Refinance Loan Trust 93-1 .............................5.15 09/25/03 20,976 20,329
- -----------------------------------------------------------------------------------------------------------------------------
Total Mortgage Backed Securities (Cost $42,926,775) ........................................................42,365,224
- -----------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (10.8% of portfolio)
Banco Centroamericano Promissory Note.............................5.78 05/30/01 588,900 583,367
Chattanooga Valley Corp...........................................0.00 (a) 01/01/01 256,000 240,000
Chattanooga Valley Corp...........................................0.00 (a) 07/01/01 204,000 184,224
Federal Farm Credit Bank..........................................5.90 08/06/01 1,000,000 990,105
Federal Home Loan Bank............................................6.81 09/27/04 1,000,000 987,128
Federal Home Loan Mortgage Corp...................................5.87 07/16/01 2,000,000 1,979,935
Federal Home Loan Mortgage Corp...................................6.00 01/12/04 1,250,000 1,208,891
Federal Home Loan Mortgage Corp...................................6.82 07/06/04 1,000,000 982,314
Federal National Mortgage Assn....................................5.95 03/13/02 1,500,000 1,477,875
Federal National Mortgage Assn....................................6.20 07/07/03 1,250,000 1,214,838
Federal National Mortgage Assn....................................6.00 03/01/04 500,000 482,335
Federal National Mortgage Assn....................................6.07 05/05/04 1,750,000 1,689,621
Government Export Trust 93-1......................................6.00 03/15/05 306,250 301,387
Small Business Administration 92-10...............................7.15 09/01/02 22,300 22,297
U.S. Treasury Note................................................7.13 02/29/00 250,000 250,814
U.S. Treasury Note................................................6.38 05/15/00 800,000 802,053
U.S. Treasury Note ...............................................5.75 10/31/00 2,250,000 2,243,719
</TABLE>
32
<PAGE> 33
SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTEREST MATURITY FACE
RATE DATE AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - CONTINUED
U.S. Treasury Note................................................6.38 % 03/31/01 $ 500,000 $ 501,146
U.S. Treasury Note................................................5.88 11/30/01 1,750,000 1,738,253
U.S. Treasury Note ...............................................6.00 07/31/02 500,000 497,031
- -----------------------------------------------------------------------------------------------------------------------------
Total U.S. Government and Agency Obligations (Cost $18,610,535) ............................................18,377,333
- -----------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (0.7% of portfolio)
Rhode Island Housing & Mortgage Finance Corp......................6.62 04/01/02 55,000 54,381
Westmoreland County, PA ..........................................0.00 (a) 08/15/00 1,200,000 1,151,820
- -----------------------------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost $1,207,476) .....................................................................1,206,201
- -----------------------------------------------------------------------------------------------------------------------------
CORPORATE MASTER NOTE (1.2% of portfolio)
Associates Corp. of North America ................................5.07 (c) 2,060,000 2,060,000
- -----------------------------------------------------------------------------------------------------------------------------
Total Corporate Master Note (Cost $2,060,000) ...............................................................2,060,000
- -----------------------------------------------------------------------------------------------------------------------------
MONEY MARKET ACCOUNT
State Street Bank & Trust SSgA Fund ..............................5.35 (d) 4,530
- -----------------------------------------------------------------------------------------------------------------------------
Total Money Market Account (Cost $4,530) ........................................................................4,530
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $172,444,136) - 100% ...............................................$170,170,329
=============================================================================================================================
</TABLE>
(a) Zero coupon security, purchased at a discount.
(b) 144A security.
(c) Variable coupon rate as of December 31, 1999.
(d) One day yield at December 31, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
33
<PAGE> 34
STOCK INDEX FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
EQUITY 500 INDEX PORTFOLIO
<TABLE>
<CAPTION>
COST VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock (97.4%)...................................................... $4,809,122,710 $7,953,572,107
Short-Term Instruments (2.5%)............................................. 200,811,727 200,810,636
- -----------------------------------------------------------------------------------------------------------------------------
Total Investments in Securities (99.9%)............................. 5,009,934,437 8,154,382,743
- -----------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities (0.1%) ...................................................................... 10,714,139
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100.0%) ................................................................................. $8,165,096,882
- -----------------------------------------------------------------------------------------------------------------------------
STOCK INDEX FUND TOTAL INVESTMENTS IN
SECURITIES (0.102% OF PORTFOLIO).......................................... $7,941,582 $8,303,439
=============================================================================================================================
</TABLE>
The Stock Index Fund's ownership interest in the Equity 500 Index Portfolio as
of December 31, 1999 was 0.102%. Complete details relating to the investments of
the Equity 500 Index Portfolio, along with the Portfolio's audited financial
statements, can be found in Appendix A and should be considered an integral part
of these financial statements.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
34
<PAGE> 35
VALUE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARE VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (94.9% of portfolio)
BASIC INDUSTRIES - 15.7%
Aluminum
Alcan Aluminum Ltd. .................................................... 231,200 $ 9,522,550
Chemicals
Avery Dennison Corp. ................................................... 187,600 13,671,350
Forest Products
Pope & Talbot, Inc. .................................................... 140,500 2,248,000
Weyerhaeuser Co. ....................................................... 96,500 6,929,906
Packaging/Containers
Bemis Co., Inc. ........................................................ 374,800 13,071,150
Pactiv Corp. (a) ....................................................... 301,200 3,200,250
Paper
Champion International Corp. ........................................... 114,000 7,060,875
International Paper Co.................................................. 142,000 8,014,125
- -----------------------------------------------------------------------------------------------------------------------------
Total Basic Industries .............................................................................. 63,718,206
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS - 5.8%
Construction Supplies & Fixtures
Hughes Supply, Inc. .................................................... 356,800 7,693,500
Industrial Machinery
Applied Industrial Technologies, Inc. .................................. 541,700 9,005,762
Parker-Hannifin Corp.................................................... 132,975 6,823,280
- -----------------------------------------------------------------------------------------------------------------------------
Total Capital Goods ................................................................................. 23,522,542
- -----------------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLE GOODS - 9.7%
Auto Parts
Cooper Tire & Rubber Co. ............................................... 507,000 7,890,187
Genuine Parts Co. ...................................................... 325,300 8,071,506
Tenneco Automotive, Inc. ............................................... 117,740 1,096,454
Household Appliances & Furnishings
Juno Lighting, Inc. (a) ................................................ 21,435 222,388
Maytag Corp. ........................................................... 241,400 11,587,200
Housewares
Oneida Ltd.............................................................. 491,700 10,694,475
- -----------------------------------------------------------------------------------------------------------------------------
Total Consumer Durable Goods ........................................................................ 39,562,210
- -----------------------------------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLE GOODS - 17.7%
Drugs & Health Care
American Home Products Corp. ........................................... 120,000 4,732,500
Pharmacia & Upjohn, Inc. ............................................... 145,000 6,525,000
SmithKline Beecham Plc. ................................................ 86,000 5,541,625
</TABLE>
35
<PAGE> 36
VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARE VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER NON-DURABLE GOODS - continued
Food Processing
J.M. Smucker Co. (Class B) ............................................. 472,700 $ 7,681,375
Photography
Eastman Kodak Co. ...................................................... 104,500 6,923,125
Retail
Dillards Department Stores, Inc. ....................................... 478,000 9,649,625
K Mart Corp. (a) ....................................................... 605,700 6,094,856
Longs Drug Stores Corp. ................................................ 276,700 7,142,319
May Department Stores Co. .............................................. 256,250 8,264,063
Ruddick Corp............................................................ 609,200 9,442,600
- -----------------------------------------------------------------------------------------------------------------------------
Total Consumer Non-Durable Goods .................................................................... 71,997,088
- -----------------------------------------------------------------------------------------------------------------------------
CONSUMER SERVICES - 4.3%
Restaurants
Brinker International, Inc. (a) ........................................ 317,800 7,627,200
Wendy's International, Inc.............................................. 470,200 9,697,875
- -----------------------------------------------------------------------------------------------------------------------------
Total Consumer Services ............................................................................. 17,325,075
- -----------------------------------------------------------------------------------------------------------------------------
ENERGY - 8.3%
Domestic Oil
Atlantic Richfield Co. ................................................. 61,800 5,345,700
International Oil
Chevron Corp. .......................................................... 55,000 4,764,375
Texaco, Inc. ........................................................... 83,400 4,529,663
Oil Well Services & Equipment
Baker Hughes, Inc. ..................................................... 365,000 7,687,813
Halliburton Co.......................................................... 283,000 11,390,750
- -----------------------------------------------------------------------------------------------------------------------------
Total Energy ........................................................................................ 33,718,301
- -----------------------------------------------------------------------------------------------------------------------------
FINANCE - 18.2%
Banks
Bank One Corp. ......................................................... 279,180 8,951,209
Bank of America Corp. .................................................. 195,100 9,791,581
BB&T Corp. ............................................................. 124,800 3,416,400
Chase Manhattan Corp. .................................................. 128,400 9,975,075
Citigroup, Inc. ........................................................ 226,875 12,605,742
Commerce Bancshares, Inc. .............................................. 306,598 10,386,007
</TABLE>
36
<PAGE> 37
VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES/
FACE AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE - continued
Insurance
Allstate Corp. ......................................................... 382,000shs. $ 9,168,000
Chubb Corp. ............................................................ 111,000 6,250,687
Ohio Casualty Corp...................................................... 230,400 3,700,800
- -----------------------------------------------------------------------------------------------------------------------------
Total Finance ................................................................................. 74,245,501
- -----------------------------------------------------------------------------------------------------------------------------
GENERAL BUSINESS - 3.9%
Business Services
Deluxe Corp. ........................................................... 196,100 5,380,494
Donnelley, R.R. & Sons Co............................................... 414,300 10,279,819
- -----------------------------------------------------------------------------------------------------------------------------
Total General Business............................................................................... 15,660,313
- -----------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY - 1.3%
Computers & Business Equipment
Xerox Corp.............................................................. 231,000 5,240,813
- -----------------------------------------------------------------------------------------------------------------------------
Total Technology ................................................................................. 5,240,813
- -----------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 3.2%
Air Travel
Southwest Airlines Co................................................... 807,600 13,073,025
- -----------------------------------------------------------------------------------------------------------------------------
Total Transportation................................................................................. 13,073,025
- -----------------------------------------------------------------------------------------------------------------------------
UTILITIES - 6.8%
Gas & Pipeline
Questar Corp. .......................................................... 516,600 7,749,000
El Paso Energy Corp. ................................................... 213,000 8,267,062
Telephone
BellSouth Corp.......................................................... 252,000 11,796,750
- -----------------------------------------------------------------------------------------------------------------------------
Total Utilities ..................................................................................... 27,812,812
- -----------------------------------------------------------------------------------------------------------------------------
Total Common Stock (Cost $308,238,925) .............................................................. 385,875,886
- -----------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS (0.3% of portfolio)
K Mart Corp., 7.75% Convertible Preferred................................. 25,200 1,102,500
- -----------------------------------------------------------------------------------------------------------------------------
Total Preferred Stocks (Cost $1,281,750) ............................................................ 1,102,500
- -----------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (1.2% of portfolio)
Merrill Lynch, 6.05%, due 01/20/00........................................ $5,000,000 4,984,035
- -----------------------------------------------------------------------------------------------------------------------------
Total Commercial Paper (Cost $4,984,035) ............................................................ 4,984,035
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 38
VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
FACE AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE MASTER NOTE (3.6% of portfolio)
Associates Corp. of North America, 5.07% (b).............................. $14,660,000 $ 14,660,000
- -----------------------------------------------------------------------------------------------------------------------------
Total Corporate Master Note (Cost $14,660,000) ...................................................... 14,660,000
- -----------------------------------------------------------------------------------------------------------------------------
MONEY MARKET ACCOUNT
State Street Bank and Trust SSgA Fund, 5.35% (c)........................................................... 5,399
- -----------------------------------------------------------------------------------------------------------------------------
Total Money Market Account (Cost $5,399) ............................................................ 5,399
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $329,170,109) - 100% ................................................ $406,627,820
=============================================================================================================================
</TABLE>
(a) Non-income producing.
(b) Variable coupon rate at December 31, 1999.
(c) One day yield at December 31, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
38
<PAGE> 39
SMALL COMPANY STOCK FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARE VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (97.4% of portfolio)
BASIC INDUSTRIES - 1.3%
Forest Products
Pope & Talbot, Inc...................................................... 8,500 $ 136,000
- -----------------------------------------------------------------------------------------------------------------------------
Total Basic Industries .............................................................................. 136,000
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS - 31.7%
Construction Supplies & Fixtures
Chicago Bridge & Iron Co. .............................................. 29,200 401,500
Hughes Supply, Inc. .................................................... 18,200 392,437
Industrial Machinery
Applied Industrial Technologies, Inc. .................................. 22,200 369,076
Flowserve Corp. ........................................................ 17,500 297,500
Manitowoc Co., Inc. .................................................... 12,000 408,000
Regal-Beloit Corp. ..................................................... 18,000 371,250
Manufacturing-Diverse
CLARCOR, Inc. .......................................................... 25,100 451,800
Lydall, Inc. (a) ....................................................... 36,900 244,463
Standex International Corp.............................................. 19,500 408,281
- -----------------------------------------------------------------------------------------------------------------------------
Total Capital Goods ................................................................................. 3,344,307
- -----------------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLE GOODS - 7.2%
Auto Parts
Cooper Tire & Rubber Co................................................. 20,800 323,700
Household Appliances & Furnishings
Juno Lighting, Inc. (a) ................................................ 886 9,192
Housewares
Oneida Ltd.............................................................. 19,900 432,825
- -----------------------------------------------------------------------------------------------------------------------------
Total Consumer Durable Goods ........................................................................ 765,717
- -----------------------------------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLE GOODS - 25.9%
Cosmetics & Toiletries
Alberto Culver Co. (Class A) ........................................... 20,000 435,000
Food Processing
J.M. Smucker Co. (Class B) ............................................. 23,500 381,875
Retail
Charming Shoppes, Inc. (a) ............................................. 86,000 569,750
Claire's Stores, Inc. .................................................. 22,500 503,437
Longs Drug Stores, Corp. ............................................... 15,900 410,419
Ruddick Corp............................................................ 28,400 440,200
- -----------------------------------------------------------------------------------------------------------------------------
Total Consumer Non-Durable Goods .................................................................... 2,740,681
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE> 40
SMALL COMPANY STOCK FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARE VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES - 3.2%
Restaurants
CBRL Group, Inc......................................................... 34,500 $ 334,758
- -----------------------------------------------------------------------------------------------------------------------------
Total Consumer Services.............................................................................. 334,758
- -----------------------------------------------------------------------------------------------------------------------------
ENERGY - 3.4%
Oil Well Services & Equipment
Helmerich & Payne, Inc.................................................. 16,700 364,269
- -----------------------------------------------------------------------------------------------------------------------------
Total Energy ................................................................................. 364,269
- -----------------------------------------------------------------------------------------------------------------------------
FINANCE - 10.2%
Banks
UMB Financial Corp. .................................................... 11,330 427,707
Valley National Bancorp ................................................ 8,000 224,000
Insurance
Ohio Casualty Corp...................................................... 26,200 420,837
- -----------------------------------------------------------------------------------------------------------------------------
Total Finance ................................................................................. 1,072,544
- -----------------------------------------------------------------------------------------------------------------------------
GENERAL BUSINESS - 7.5%
Commercial Printing
Banta Corp. ............................................................ 20,500 462,531
Linen Supply
Superior Uniform Group, Inc............................................. 36,400 327,600
- -----------------------------------------------------------------------------------------------------------------------------
Total General Business............................................................................... 790,131
- -----------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 3.6%
Railroad
Wisconsin Central Transportation Corp. (a).............................. 28,500 382,969
- -----------------------------------------------------------------------------------------------------------------------------
Total Transportation................................................................................. 382,969
- -----------------------------------------------------------------------------------------------------------------------------
UTILITIES - 3.4%
Gas & Pipeline
Questar Corp............................................................ 23,700 355,500
- -----------------------------------------------------------------------------------------------------------------------------
Total Utilities ..................................................................................... 355,500
- -----------------------------------------------------------------------------------------------------------------------------
Total Common Stock (Cost $11,685,431) ............................................................... 10,286,876
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE> 41
SMALL COMPANY STOCK FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
FACE AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE MASTER NOTE (2.6% of portfolio)
Associates Corp. of North America, 5.07% (b).............................. $ 275,000 $ 275,000
- -----------------------------------------------------------------------------------------------------------------------------
Total Corporate Master Note (Cost $275,000) ......................................................... 275,000
- -----------------------------------------------------------------------------------------------------------------------------
MONEY MARKET ACCOUNT
State Street Bank & Trust SSgA Fund, 5.35% (c)............................................................. 3,897
- -----------------------------------------------------------------------------------------------------------------------------
Total Money Market Account (Cost $3,897) ............................................................ 3,897
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $11,964,328) - 100% ................................................. $ 10,565,773
=============================================================================================================================
</TABLE>
(a) Non-income producing.
(b) Variable coupon rate at December 31, 1999.
(c) One day yield at December 31, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
41
<PAGE> 42
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHORT-TERM
DAILY INCOME GOVERNMENT SHORT-TERM
FUND SECURITIES FUND BOND FUND
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at value (cost:
$63,187,058; $34,587,531; $172,444,136) ...................... $63,187,058 $34,177,680 $170,170,329
Receivables
Investment securities sold ................................... -- -- --
Dividends and interest ....................................... 548,896 319,509 1,797,837
Capital shares sold .......................................... 77,054 304 520
Prepaid expenses ................................................ 14,430 11,462 20,759
- -------------------------------------------------------------------------------------------------------------------------------
Total assets .................................................... 63,827,438 34,508,955 171,989,445
- -------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payables
Investment securities purchased .............................. -- -- 28,725
Accrued expenses ............................................. 49,384 24,678 118,418
Due to RE Advisers ........................................... 32,206 18,018 81,475
Capital shares redeemed ...................................... -- -- 25,652
Dividends .................................................... 11,862 6,764 41,529
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities ............................................... 93,452 49,460 295,799
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ...................................................... $63,733,986 $34,459,495 $171,693,646
===============================================================================================================================
NET ASSETS CONSIST OF:
Unrealized appreciation (depreciation) of investments ........... $ -- $ (409,851) $(2,273,807)
Accumulated net realized loss from investments and
futures transactions ......................................... -- -- --
Paid-in-capital applicable to outstanding shares of
63,733,986 of Daily Income Fund, 6,896,277 of
Short-Term Government Securities Fund, and
33,712,494 of Short-Term Bond Fund ........................... 63,733,986 34,869,346 173,967,453
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ...................................................... $63,733,986 $34,459,495 $171,693,646
===============================================================================================================================
NET ASSET VALUE PER SHARE ....................................... $1.00 $5.00 $5.09
===============================================================================================================================
</TABLE>
42
<PAGE> 43
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SMALL
STOCK INDEX VALUE COMPANY
FUND FUND STOCK FUND
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at value (cost: $7,941,582;
$329,170,109; $11,964,328) ................................... $ 8,303,439 $406,627,820 $ 10,565,773
Receivables
Investment securities sold ................................... -- -- 89,922
Dividends and interest ....................................... -- 595,912 9,737
Capital shares sold .......................................... 12,925 127,537 229
Prepaid expenses ................................................ 396 33,533 8,577
- -------------------------------------------------------------------------------------------------------------------------------
Total assets .................................................... 8,316,760 407,384,802 10,674,238
- -------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payables
Investment securities purchased .............................. -- -- --
Accrued expenses ............................................. 2,917 168,051 20,661
Due to RE Advisers ........................................... 2,382 205,691 8,137
Capital shares redeemed ...................................... -- 124,260 --
Dividends .................................................... -- 584,705 8,348
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities ............................................... 5,299 1,082,707 37,146
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ...................................................... $ 8,311,461 $406,302,095 $ 10,637,092
===============================================================================================================================
NET ASSETS CONSIST OF:
Unrealized appreciation (depreciation) of investments ........... $ 361,857 $ 77,457,711 $(1,398,555)
Accumulated net realized loss from investments and
futures transactions ......................................... (2,987) -- --
Paid-in-capital applicable to outstanding shares of
758,542 of Stock Index Fund,17,270,349 of Value
Fund, and 1,278,057 of Small Company Stock Fund .............. 7,952,591 328,844,384 12,035,647
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ...................................................... $ 8,311,461 $406,302,095 $ 10,637,092
===============================================================================================================================
NET ASSET VALUE PER SHARE ....................................... $10.96 $23.53 $8.32
===============================================================================================================================
</TABLE>
43
<PAGE> 44
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHORT-TERM
DAILY INCOME GOVERNMENT SHORT-TERM
FUND SECURITIES FUND BOND FUND
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest ..................................................... $ 3,391,771 $ 1,668,992 $10,281,998
Dividends .................................................... -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total income .................................................... 3,391,771 1,668,992 10,281,998
- -------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees .............................................. 321,654 139,966 991,245
Custodian and accounting fees ................................ 101,244 50,120 172,858
Shareholder servicing ........................................ 54,364 34,850 79,704
Communication ................................................ 18,092 7,990 30,086
Registration expense ......................................... 24,416 21,611 33,006
Legal and audit fees ......................................... 7,853 4,192 20,675
Printing ..................................................... 6,033 2,908 14,403
Insurance .................................................... 3,441 1,545 9,025
Other expenses ............................................... 3,553 1,869 7,179
Directors fees ............................................... 2,193 1,034 5,487
Administration fees .......................................... -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total expenses .................................................. 542,843 266,085 1,363,668
- -------------------------------------------------------------------------------------------------------------------------------
Less fees waived by RE Advisers ................................. (28,196) (33,139) (125,597)
- -------------------------------------------------------------------------------------------------------------------------------
Net expenses .................................................... 514,647 232,946 1,238,071
- -------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ........................................... 2,877,124 1,436,046 9,043,927
- -------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments ......................... -- 7,990 41,847
Net change in unrealized appreciation (depreciation) ............ -- (569,413) (3,686,363)
- -------------------------------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS .................................. -- (561,423) (3,644,516)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ...................... $ 2,877,124 $ 874,623 $ 5,399,411
===============================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
44
<PAGE> 45
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SMALL
STOCK INDEX VALUE COMPANY
FUND FUND STOCK FUND
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest ..................................................... $ -- $ 1,473,650 $ 27,438
Dividends .................................................... 9,651 8,566,694 184,937
- -------------------------------------------------------------------------------------------------------------------------------
Total income .................................................... 9,651 10,040,344 212,375
- -------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees .............................................. 610 2,518,296 83,106
Custodian and accounting fees ................................ -- 242,650 48,772
Shareholder servicing ........................................ 1,466 296,088 36,497
Communication ................................................ 279 128,176 10,035
Registration expense ......................................... 22 39,648 15,764
Legal and audit fees ......................................... 635 50,253 1,591
Printing ..................................................... 502 38,411 1,627
Insurance .................................................... 11 25,860 416
Other expenses ............................................... 83 19,540 1,297
Directors fees ............................................... 34 14,590 339
Administration fees .......................................... 1,871 -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total expenses .................................................. 5,513 3,373,512 199,444
- -------------------------------------------------------------------------------------------------------------------------------
Less fees waived by RE Advisers ................................. -- -- (51,178)
- -------------------------------------------------------------------------------------------------------------------------------
Net expenses .................................................... 5,513 3,373,512 148,266
- -------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ........................................... 4,138 6,666,832 64,109
- -------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments ......................... (2,987) 27,761,410 520,344
Net change in unrealized appreciation (depreciation) ............ 361,857 (48,332,822) (856,439)
- -------------------------------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS .................................. 358,870 (20,571,412) (336,095)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ........... $ 363,008 $(13,904,580) $ (271,986)
===============================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
45
<PAGE> 46
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
SHORT-TERM
GOVERNMENT SHORT-TERM
DAILY INCOME FUND SECURITIES FUND BOND FUND
- -------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net investment income ........... $ 2,877,124 $ 2,657,794 $ 1,436,046 $ 1,000,283 $ 9,043,927 $ 7,117,514
Net realized gain (loss)
on investments ............... -- -- 7,990 7,472 41,847 141,690
Net change in unrealized
appreciation (depreciation) .. -- -- (569,413) 86,126 (3,686,363) 603,728
- -------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net
assets from operations ....... 2,877,124 2,657,794 874,623 1,093,881 5,399,411 7,862,932
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ........... (2,877,124) (2,657,794) (1,436,046) (1,000,283) (9,043,927) (7,117,514)
Net realized gain
on investments ............... -- -- (7,990) (7,472) (41,847) (141,690)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions
to shareholders .............. (2,877,124) (2,657,794) (1,444,036) (1,007,755) (9,085,774) (7,259,204)
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS, NET.. 5,156,838 5,543,754 11,098,783 7,657,272 29,029,639 36,848,869
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE
IN NET ASSETS ................ 5,156,838 5,543,754 10,529,370 7,743,398 25,343,276 37,452,597
NET ASSETS
Beginning of year ............... 58,577,148 53,033,394 23,930,125 16,186,727 146,350,370 108,897,773
- -------------------------------------------------------------------------------------------------------------------------------
END OF YEAR ..................... $63,733,986 $58,577,148 $34,459,495 $23,930,125 $171,693,646 $146,350,370
===============================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
46
<PAGE> 47
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
STOCK INDEX SNALL COMPANY
FUND VALUE FUND STOCK FUND
- -------------------------------------------------------------------------------------------------------------------------------
1999* 1999 1998 1999 1998**
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income .................. $ 4,138 $ 6,666,832 $ 6,538,859 $ 64,109 $ 39,002
Net realized gain (loss)
on investments ...................... (2,987) 27,761,410 11,857,449 520,344 (1,709)
Net change in unrealized
appreciation (depreciation) ......... 361,857 (48,332,822) 12,942,414 (856,439) (542,116)
- -------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net
assets from operations .............. 363,008 (13,904,580) 31,338,722 (271,986) (504,823)
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income .................. (4,138) (6,666,832) (6,538,859) (64,109) (39,002)
Net realized gain on investments ...... -- (27,761,410) (11,857,449) (518,635) --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders .... (4,138) (34,428,242) (18,396,308) (582,744) (39,002)
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS, NET ........ 7,952,591 5,632,971 57,438,372 3,929,793 8,105,854
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS ....................... 8,311,461 (42,699,851) 70,380,786 3,075,063 7,562,029
NET ASSETS
Beginning of year ...................... -- 449,001,946 378,621,160 7,562,029 --
- -------------------------------------------------------------------------------------------------------------------------------
END OF YEAR ............................ $ 8,311,461 $406,302,095 $ 449,001,946 $ 10,637,092 $ 7,562,029
===============================================================================================================================
</TABLE>
* For the period beginning October 28, 1999 (inception date) to December 31,
1999.
** For the period beginning March 4, 1998 (inception date) to December 31,
1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
47
<PAGE> 48
DAILY INCOME FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ............ $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income (a) .................. 0.04 0.05 0.05 0.05 0.05
Net realized and unrealized gain on
investments .............................. 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations ........... 0.04 0.05 0.05 0.05 0.05
- ------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income ...................... (0.04) (0.05) (0.05) (0.05) (0.05)
Net realized gain .......................... 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------
Total distributions ...................... (0.04) (0.05) (0.05) (0.05) (0.05)
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR .................. $1.00 $1.00 $1.00 $1.00 $1.00
==================================================================================================================
TOTAL RETURN .................................. 4.56% 4.91% 4.92% 4.81% 5.38%
==================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (thousands) ........... $63,734 $58,577 $53,033 $57,871 $52,699
Ratio of gross expenses before
voluntary expense limitation to
average net assets ......................... 0.84% 0.87% 0.83% 0.81% 0.87%
Ratio of net investment income to
average net assets (a) ..................... 4.47% 4.80% 4.80% 4.71% 5.25%
Ratio of expenses to average net
assets (a) ................................. 0.80% 0.80% 0.80% 0.76% 0.75%
</TABLE>
- ------------------------
(a) Excludes excess investment management fees and other expenses in accordance
with the Expense Limitation Agreement with RE Advisers.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
48
<PAGE> 49
SHORT-TERM GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
MAY 1, 1995
(INCEPTION DATE)
YEAR ENDED DECEMBER 31, TO DECEMBER 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR .............. $5.09 $5.07 $5.05 $5.09 $5.00
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income (a) .................... 0.23 0.25 0.26 0.26 0.18
Net realized and unrealized gain (loss)
on investments ............................. (0.09) 0.02 0.02 (0.04) 0.09
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ............. 0.14 0.27 0.28 0.22 0.27
- -------------------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income ........................ (0.23) (0.25) (0.26) (0.26) (0.18)
Net realized gain ............................ 0.00 0.00 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions .......................... (0.23) (0.25) (0.26) (0.26) (0.18)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR .................... $5.00 $5.09 $5.07 $5.05 $5.09
===============================================================================================================================
TOTAL RETURN .................................... 2.88% 5.51% 5.73% 4.46% 5.44%(b)
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (thousands) ............. $34,459 $23,930 $16,187 $7,692 $2,658
Ratio of gross expenses before voluntary expense
limitation to average net assets ............. 0.86% 1.03% 1.27% 2.30% 6.21%(c)
Ratio of net investment income to
average net assets (a) ....................... 4.63% 5.00% 5.19% 5.16% 5.18%(c)
Ratio of expenses to average net assets (a) ..... 0.75% 0.75% 0.75% 0.75% 0.75%(c)
Portfolio turnover rate ......................... 9% 57% 12% 21% 11%(c)
</TABLE>
- --------------------------
(a) Excludes excess investment management fees and other expenses in accordance
with the Expense Limitation Agreement with RE~Advisers.
(b) Aggregate total return for the year.
(c) Annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
49
<PAGE> 50
SHORT-TERM BOND FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR............... $5.21 $5.18 $5.15 $5.19 $4.95
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income (a).................... 0.28 0.29 0.30 0.29 0.28
Net realized and unrealized gain (loss)
on investments............................. (0.12) 0.03 0.03 (0.04) 0.24
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations............. 0.16 0.32 0.33 0.25 0.52
- -------------------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income........................ (0.28) (0.29) (0.30) (0.29) (0.28)
Net realized gain............................ 0.00 0.00 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions.......................... (0.28) (0.29) (0.30) (0.29) (0.28)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR.................... $5.09 $5.21 $5.18 $5.15 $5.19
===============================================================================================================================
TOTAL RETURN................................... 3.21% 6.40% 6.62% 5.16% 10.81%
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (thousands)............ $171,694 $146,350 $108,898 $81,470 $62,125
Ratio of gross expenses before voluntary expense
limitation to average net assets............ 0.83% 0.84% 0.87% 0.76% 0.86%
Ratio of net investment income to
average net assets (a)...................... 5.48% 5.53% 5.75% 5.72% 5.49%
Ratio of expenses to average net assets (a).... 0.75% 0.75% 0.75% 0.75% 0.75%
Portfolio turnover rate........................ 37% 62% 55% 49% 35%
</TABLE>
- -----------------------------
(a) Excludes excess investment management fees and other expenses in accordance
with the Expense Limitation Agreement with RE Advisers.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
50
<PAGE> 51
STOCK INDEX FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
OCTOBER 28, 1999
(INCEPTION DATE)
TO DECEMBER 31,
1999
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........................................................................ $10.00
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income (a) ................................................................................ 0.01
Net realized and unrealized gain
on investments ......................................................................................... 0.96
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ........................................................................ 0.97
- -------------------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income .................................................................................... (0.01)
Net realized gain ........................................................................................ 0.00
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions ...................................................................................... (0.01)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ................................................................................ $10.96
===============================================================================================================================
TOTAL RETURN ................................................................................................ 9.65%(b)
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (thousands) ......................................................................... $8,311
Ratio of gross expenses before voluntary expense
limitation to average net assets ......................................................................... n/a
Ratio of net investment income to
average net assets (a) ................................................................................... 0.54%(c)
Ratio of expenses to average net assets (a) ................................................................. 0.72%(c)
Portfolio turnover rate ..................................................................................... n/a
</TABLE>
- --------------------------
(a) Excludes excess administrative fees and other expenses in accordance with
the Expense Limitation Agreement with RE Advisers.
(b) Aggregate total return for the period.
(c) Annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
51
<PAGE> 52
VALUE FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $26.50 $25.50 $20.99 $18.44 $14.50
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income (a).................... 0.41 0.40 0.37 0.39 0.41
Net realized and unrealized gain
on investments............................. (1.23) 1.72 5.22 2.91 4.47
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations............. (0.82) 2.12 5.59 3.30 4.88
- -------------------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income........................ (0.41) (0.40) (0.37) (0.39) (0.41)
Net realized gain............................ (1.74) (0.72) (0.71) (0.36) (0.53)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions.......................... (2.15) (1.12) (1.08) (0.75) (0.94)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR.................... $23.53 $26.50 $25.50 $20.99 $18.44
===============================================================================================================================
TOTAL RETURN.................................... (3.21)% 8.31% 26.70% 17.94% 33.78%
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (thousands)............. $406,302 $449,002 $378,621 $238,550 $147,506
Ratio of gross expenses before
voluntary expense limitation to
average net assets........................... n/a n/a n/a n/a n/a
Ratio of net investment income to
average net assets (a)....................... 1.47% 1.52% 1.59% 2.08% 2.50%
Ratio of expenses to average net
assets (a)................................... 0.74% 0.72% 0.79% 0.73% 0.84%
Portfolio turnover rate......................... 17% 10% 6% 5% 10%
</TABLE>
- --------------------------
(a) Excludes excess investment management fees and other expenses in accordance
with the Expense Limitation Agreement with RE Advisers.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
52
<PAGE> 53
SMALL COMPANY STOCK FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
MARCH 4, 1998
YEAR ENDED (INCEPTION DATE)
DECEMBER 31, TO DECEMBER 31,
1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $8.85 $10.00
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income (a) 0.05 0.05
Net realized and unrealized gain (loss)
on investments (0.10) (1.15)
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.05) (1.10)
- -------------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.05) (0.05)
Net realized gain (0.43) 0.00
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (0.48) (0.05)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $8.32 $8.85
===============================================================================================================================
TOTAL RETURN (0.55)% (11.02)%(b)
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (thousands) $10,637 $7,562
Ratio of gross expenses before voluntary expense
limitation to average net assets 2.02% 3.11%(c)
Ratio of net investment income to
average net assets (a) 0.65% 1.04%(c)
Ratio of expenses to average net assets (a) 1.50% 1.50%(c)
Portfolio turnover rate 23% 20%(C)
</TABLE>
- --------------------------
(a) Excludes excess investment management fees and other expenses in accordance
with the Expense Limitation Agreement with RE Advisers.
(b) Aggregate total return for the year.
(c) Annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
53
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Homestead Funds, Inc. (Homestead Funds) is a Maryland corporation registered
with the Securities and Exchange Commission under the Investment Company Act of
1940 (the Act) as a no-load, open-end diversified management investment company.
Homestead Funds (the Fund) currently consists of six funds: Daily Income Fund,
Short-Term Government Securities Fund, Short-Term Bond Fund, Stock Index Fund,
Value Fund, and Small Company Stock Fund. The Stock Index Fund commenced
operations on October 28, 1999.
Each Fund is a separate investment portfolio with distinct investment
objectives, investment programs, policies and restrictions. The investment
objectives of the Fund as well as the nature and risks of the investment
activities of each Fund are set forth more fully in the Homestead Funds'
Prospectus and Statement of Additional Information.
The Stock Index Fund seeks to achieve its investment objective by investing
substantially all of its assets in the Equity 500 Index Portfolio (the
Portfolio), which is registered under the Act as an open-end management
investment company advised by Bankers Trust Company and is designed to replicate
the broad diversification and returns of the S&P 500 Index. At December 31,
1999, the Stock Index Fund's investment was 0.102% of the Portfolio. The
financial statements of the Portfolio are contained in Appendix A of this report
and should be read in conjunction with the Stock Index Fund's financial
statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Security valuation: The Daily Income Fund values all money market instruments on
an amortized cost basis, which approximates market value. Under the amortized
cost method, discounts and premiums on securities purchased are amortized over
the life of the respective securities.
The Short-Term Government Securities Fund, the Short-Term Bond Fund, the Value
Fund and the Small Company Stock Fund value investments in common stocks,
preferred stocks, and convertible preferred stocks traded on national securities
exchanges and certain over-the-counter securities at the last quoted sale price
at the close of the New York Stock Exchange. Short-term debt instruments with a
remaining maturity of more than 60 days, intermediate and long-term bonds,
convertible bonds, and other debt securities are generally valued at market
prices furnished by an independent pricing service. Over-the-counter issues not
quoted on the NASDAQ system, other equity securities and debt instruments for
which a sale price is not available are valued at the mean of the closing bid
and asked prices, or the last available sale price may be used for
exchange-traded debt securities. Securities with a maturity of 60 days or less
are valued on an amortized cost basis, which approximates market value.
The Stock Index Fund records its investment in the Portfolio at value, which
reflects its proportionate interest in the net assets of the Portfolio.
Valuation of the securities held by the Portfolio is discussed in the notes to
the Portfolio's financial statements included in Appendix A of this report.
Distributions to shareholders: Dividends to shareholders are recorded on the
ex-dividend date. Income dividends for the Daily Income Fund, the Short-Term
Government Securities Fund and the Short-Term Bond Fund are declared daily and
paid monthly. Income dividends for the Stock Index Fund are declared and paid
quarterly. Income dividends for the Value Fund are declared and paid
semi-annually. Income dividends for the Small Company Stock Fund are declared
and paid annually. Capital gains dividends, if any, are declared and paid at the
end of each fiscal year.
Use of estimates in the preparation of financial statements: The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Other: Dividend income is recorded on the ex-dividend date. Interest income and
expenses are recorded on the accrual basis. Investment transactions are recorded
on the trade date. Realized gains and losses from investment transactions are
reported on the identified cost basis.
The Stock Index Fund records its pro rata share of the Portfolio's income,
expenses, and realized and unrealized gains and losses in addition to the fund's
own expenses which are accrued daily.
3. FEDERAL INCOME TAXES
The Homestead Funds comply with the provisions of Subchapter M of the Internal
Revenue Code that are applicable to regulated investment companies and
distribute all of their taxable income to their shareholders. Therefore, no
provision for federal income or excise tax is required.
At December 31, 1999, the aggregate costs of investments for the Daily Income
Fund, the Short-Term Government Securities Fund, the Short-Term Bond Fund, the
Stock Index Fund, the Value Fund and the Small Company Stock Fund for federal
income tax is the same as for financial reporting purposes.
54
<PAGE> 55
NOTES TO FINANCIAL STATEMENTS
At December 31, 1999, the Stock Index Fund has a capital loss carryforward of
$2,987, which expires on December 31, 2007.
At December 31, 1999, net unrealized appreciation (depreciation) consisted of
the following:
<TABLE>
<CAPTION>
Gross Gross Unrealized
Unrealized Unrealized Appreciation
Appreciation Depreciation (Depreciation)
------------ ------------ --------------
<S> <C> <C> <C>
Short-Term
Government
Securities Fund $ 4,547 $ 414,398 ($ 409,851)
Short-Term
Bond Fund $ 112,708 $ 2,386,515 ($ 2,273,807)
Stock Index Fund $ 386,243 $ 24,386 $ 361,857
Value Fund $101,627,164 $24,169,453 $ 77,457,711
Small Company
Stock Fund $ 475,667 $ 1,874,222 ($ 1,398,555)
</TABLE>
4. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term and U.S.
Government securities, for the year ended December 31, 1999, were as follows:
<TABLE>
<CAPTION>
Proceeds
Purchases from sales
--------- ----------
<S> <C> <C>
Short-Term
Government
Securities Fund $ 8,930,321 $ 670,734
Short-Term
Bond Fund $99,869,049 $54,981,022
Value Fund $71,710,790 $85,575,203
Small Company
Stock Fund $ 6,042,367 $ 2,100,496
</TABLE>
Purchases and proceeds from sales of long-term U.S. Government securities, for
the year ended December 31, 1999, were as follows:
<TABLE>
<CAPTION>
Proceeds
Purchases from sales
--------- ----------
<S> <C> <C>
Short-Term
Government
Securities Fund $11,900,358 $1,752,599
Short-Term
Bond Fund $ 3,250,000 $3,314,746
</TABLE>
5. INVESTMENT MANAGER
The investment management agreements between Homestead Funds, with respect to
each Fund, and RE Advisers Corporation (Manager), an indirect, wholly-owned
subsidiary of National Rural Electric Cooperative Association (NRECA), provide
for an annual investment management fee, computed daily and paid monthly, based
on each Fund's average daily net assets. The annualized management fee rates
are: with respect to the Daily Income Fund, .50% of average daily net assets;
with respect to the Short-Term Government Securities Fund, .45% of average daily
net assets; with respect to the Short-Term Bond Fund, .60% of average daily net
assets; with respect to the Value Fund, .65% of average daily net assets up to
$200 million, .50% of average daily net assets up to the next $200 million, .40%
of average daily net assets in excess of $400 million; with respect to the Small
Company Stock Fund, .85% of average daily net assets up to $200 million and .75%
of average daily net assets in excess of $200 million.
With respect to the Stock Index Fund, an Administrative Services Agreement with
RE Advisers Corporation has been contracted. Pursuant to this agreement, RE
Advisers Corporation receives a fee of 0.25% of the Fund's average daily net
assets. Under a Third Party Feeder Agreement between the Stock Index Fund, RE
Advisers Corporation and Bankers Trust, Bankers Trust receives a fee of 0.08% of
the Stock Index Fund's average daily net assets.
RE Advisers has agreed, as part of the Expense Limitation Agreements entered
into with Homestead Funds, with respect to each Fund, to waive its management
fee and/or reimburse for all Fund operating expenses, excluding certain
non-recurring expenses, which in any year exceed .80% of the average daily net
assets of the Daily Income Fund, .75% of the average daily net assets of the
Short-Term Government Securities Fund and the Short-Term Bond Fund, .75% of the
average daily net assets of the Stock Index Fund, 1.25% of the average daily net
assets of the Value Fund and 1.50% of the average daily net assets of the Small
Company Stock Fund.
Pursuant to the Expense Limitation Agreements, management fees waived for the
year ended December 31, 1999 amounted to $28,196 for the Daily Income Fund,
$33,139 for the Short-Term Government Securities Fund, $125,597 for the
Short-Term Bond Fund and $51,178 for the Small Company Stock Fund.
At December 31, 1999 certain officers and directors of the Homestead Funds, and
NRECA and its affiliates owned 8% of the Stock Index Fund shares outstanding, 5%
of the Daily Income Fund and Small Company Stock Fund shares outstanding, 1% of
the Value Fund shares outstanding, and less than 1% of the Short-Term Government
Securities Fund and the Short-Term Bond Fund shares outstanding.
55
<PAGE> 56
NOTES TO FINANCIAL STATEMENTS
6. CAPITAL SHARE TRANSACTIONS
As of December 31, 1999, 300 million shares of $.01 par value capital shares are
authorized for the Daily Income Fund, 200 million shares for the Short-Term Bond
Fund and the Value Fund, and 100 million shares for the Short-Term Government
Securities Fund, the Stock Index Fund and the Small Company Stock Fund.
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
SHARES ISSUED TOTAL TOTAL
SHARES IN REINVESTMENT SHARES SHARES NET
SOLD OF DIVIDENDS ISSUED REDEEMED INCREASE
------------ --------------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
In Dollars
Daily Income Fund ............... $98,168,759 $2,725,187 $100,893,946 ($95,737,108) $5,156,838
Short-Term Government
Securities Fund ............... $17,447,442 $1,356,069 $18,803,511 ($7,704,728) $11,098,783
Short-Term Bond Fund ............ $71,000,149 $8,483,858 $79,484,007 ($50,454,368) $29,029,639
Stock Index Fund * .............. $8,029,448 $3,936 $8,033,384 ($80,793) $7,952,591
Value Fund ...................... $149,227,975 $33,774,869 $183,002,844 ($177,369,873) $5,632,971
Small Company Stock Fund ........ $6,185,800 $574,045 $6,759,845 ($2,830,052) $3,929,793
In Shares
Daily Income Fund ............... 98,168,759 2,725,187 100,893,946 (95,737,108) 5,156,838
Short-Term Government
Securities Fund ............... 3,456,514 269,455 3,725,969 (1,530,213) 2,195,756
Short-Term Bond Fund ............ 13,754,138 1,649,586 15,403,724 (9,796,530) 5,607,194
Stock Index Fund * .............. 765,672 359 766,031 (7,489) 758,542
Value Fund ...................... 5,410,019 1,405,465 6,815,484 (6,486,098) 329,386
Small Company Stock Fund ........ 671,623 68,995 740,618 (317,218) 423,400
YEAR ENDED DECEMBER 31, 1998
In Dollars
Daily Income Fund ............... $50,754,909 $2,545,721 $53,300,630 ($47,756,876) $5,543,754
Short-Term Government
Securities Fund ................. $13,125,555 $936,286 $14,061,841 ($6,404,569) $7,657,272
Short-Term Bond Fund ............ $63,541,739 $6,831,113 $70,372,852 ($33,523,983) $36,848,869
Value Fund ...................... $136,947,678 $18,005,072 $154,952,750 ($97,514,378) $57,438,372
Small Company Stock Fund ** ..... $8,897,919 $39,024 $8,936,943 ($831,089) $8,105,854
In Shares
Daily Income Fund ............... 50,754,909 2,545,721 53,300,630 (47,756,876) 5,543,754
Short-Term Government
Securities Fund ................. 2,582,187 184,187 2,766,374 (1,259,834) 1,506,540
Short-Term Bond Fund ............ 12,219,972 1,313,728 13,533,700 (6,449,494) 7,084,206
Value Fund ...................... 5,106,585 674,375 5,780,960 (3,686,922) 2,094,038
Small Company Stock Fund ** ..... 941,021 4,410 945,431 (90,774) 854,657
</TABLE>
- ----------------
* For the period beginning October 28, 1999 (commencement of operations) to
December 31, 1999.
** For the period beginning March 4, 1998 (commencement of operations) to
December 31, 1998.
56
<PAGE> 57
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of Homestead Funds, Inc.:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of the Daily Income, Short-Term Bond, Short-Term
Government Securities, and Value Funds of the Homestead Funds, Inc. (the
"Funds") as of December 31, 1999, and the related statements of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
three years in the period then ended. We have audited the statement of assets
and liabilities of the Small Company Stock Fund of the Homestead Funds, Inc.,
including the portfolio of investments, as of December 31, 1999, and the related
statement of operations for the year then ended, and the statements of changes
in net assets and financial highlights for the year then ended and for the
period March 4, 1998 (inception date) to December 31, 1998. We have also audited
the statement of assets and liabilities of the Stock Index Fund of the Homestead
Funds, Inc., including the portfolio of investments, as of December 31, 1999,
and the related statements of operations, changes in net assets and financial
highlights for the period October 29, 1999 (inception date) to December 31,
1999. These financial statements and financial highlights are the responsibility
of the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights of the Homestead Funds, Inc. for each of the periods in the two year
period ended December 31, 1996 were audited by other auditors whose report,
dated January 29, 1997, expressed an unqualified opinion on those financial
statements and financial highlights.
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, 1999, 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 the
Daily Income, Short-Term Bond, Short-Term Government Securities, Value, Small
Company Stock, and Stock Index Funds of the Homestead Funds, Inc. as of December
31, 1999, the results of their operations, the changes in their net assets and
their financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
February 11, 2000
57
<PAGE> 58
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 59
APPENDIX A
EQUITY 500 INDEX PORTFOLIO
TABLE OF CONTENTS
ii. Schedule of Portfolio Investments
xv. Statement of Assets and Liabilities
xvi. Statement of Operations
xvii. Statement of Changes in Net Assets
xviii. Financial Highlights
xix. Notes to Financial Statements
xxi. Report of Independent Accountants
<PAGE> 60
EQUITY 500 INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
COMMON STOCKS (97.4% of net assets)
<S> <C> <C>
3Com Corp. (a) ..................................................... 223,300 $ 10,495,100
Abbott Laboratories ................................................ 994,844 36,125,273
Adaptec, Inc. (a) .................................................. 66,100 3,296,737
ADC Telecommunications, Inc. (a) ................................... 85,700 6,218,606
Adobe Systems Inc. ................................................. 76,200 5,124,450
Adolph Coors Co. (Class B) ......................................... 22,868 1,200,570
Advanced Micro Devices, Inc. ....................................... 113,241 3,276,911
AES Corp. (a) ...................................................... 134,700 10,068,825
Aetna, Inc. ........................................................ 90,059 5,026,418
Aflac, Inc. ........................................................ 166,300 7,847,281
Air Products and Chemicals, Inc. ................................... 144,608 4,853,406
Alberto-Culver Co. (Class B) ....................................... 17,998 464,573
Albertson's, Inc. .................................................. 286,623 9,243,592
Alcan Aluminum, Ltd. ............................................... 136,636 5,627,695
Alcoa, Inc. ........................................................ 237,100 19,679,300
Allegheny Technologies ............................................. 63,297 1,420,226
Allergan, Inc. ..................................................... 88,402 4,397,999
Allied Waste Inds., Inc. (a) ....................................... 110,600 974,662
Allstate Corp. ..................................................... 555,598 13,334,352
Alltel Corp. ....................................................... 203,100 16,793,831
ALZA Corp. (a) ..................................................... 62,634 2,168,702
Amerada Hess Corp. ................................................. 61,093 3,467,028
Ameren Corp. ....................................................... 82,720 2,709,080
America Online, Inc. (a) ........................................... 1,450,000 109,384,375
American Electric Power Co. ........................................ 129,910 4,173,359
American Express Co. ............................................... 295,616 49,146,160
American General Corp. ............................................. 158,537 12,028,995
American Greetings Corp. (Class A) ................................. 56,014 1,323,331
American Home Products Corp. ....................................... 839,092 33,091,691
American International Group, Inc. ................................. 994,881 107,571,508
Amgen, Inc. (a) .................................................... 661,560 39,734,947
AMR Corp. (a) ...................................................... 97,004 6,499,268
Amsouth Bancorporation ............................................. 228,550 4,413,872
Anadarko Petroleum Corp. ........................................... 92,300 3,149,737
Analog Devices, Inc. (a) ........................................... 119,600 11,122,800
Andrew Corp. (a) ................................................... 50,276 952,102
Anheuser Busch Co., Inc. ........................................... 302,180 21,417,007
AON Corp. .......................................................... 154,375 6,175,000
Apache Corp. ....................................................... 73,700 2,722,294
Apple Computer, Inc. (a) ........................................... 110,342 11,344,537
Applied Materials, Inc. (a) ........................................ 237,200 30,050,275
Archer-Daniels-Midland Co. ......................................... 393,659 4,797,719
Armstrong World Inds. Inc. ......................................... 26,183 873,858
</TABLE>
ii
<PAGE> 61
EQUITY 500 INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - continued
Ashland, Inc. ...................................................... 32,287 $ 1,063,453
Associates First Capital Corp. (Class A) ........................... 474,522 13,019,697
AT&T Corp. ......................................................... 2,053,306 104,205,279
Atlantic Richfield Co. ............................................. 204,550 17,693,575
Autodesk, Inc. ..................................................... 43,114 1,455,097
Automatic Data Processing, Inc. .................................... 412,824 22,240,893
Autozone, Inc. (a) ................................................. 94,500 3,053,531
Avery Dennison Corp. ............................................... 72,830 5,307,486
Avon Products, Inc. ................................................ 167,556 5,529,348
Baker Hughes, Inc. ................................................. 237,813 5,008,936
Ball Corp. ......................................................... 18,354 722,689
Bank Of America Corp. .............................................. 1,113,739 55,895,776
Bank of New York Co., Inc. ......................................... 481,200 19,248,000
Bank One Corp. ..................................................... 736,948 23,628,395
Barrick Gold Corp. ................................................. 269,400 4,765,012
Bausch & Lomb, Inc. ................................................ 40,823 2,793,824
Baxter International, Inc. ......................................... 184,263 11,574,020
BB&T Corp. ......................................................... 173,000 4,735,875
Bear Stearns Co., Inc. ............................................. 86,199 3,685,007
Becton, Dickinson & Co. ............................................ 161,464 4,319,162
Bed, Bath & Beyond, Inc. (a) ....................................... 104,500 3,631,375
Bell Atlantic Corp. ................................................ 997,780 61,425,831
BellSouth Corp. .................................................... 1,208,664 56,580,583
Bemis Co., Inc. .................................................... 24,831 865,981
Best Buy, Inc. (a) ................................................. 132,400 6,644,825
Bestfoods .......................................................... 182,660 9,601,066
Bethlehem Steel Corp. (a) .......................................... 87,049 729,035
Biomet, Inc. ....................................................... 70,550 2,822,000
Black & Decker Corp. ............................................... 56,271 2,940,160
BMC Software, Inc. (a) ............................................. 149,000 11,910,687
Boeing Co. ......................................................... 607,246 25,238,662
Boise Cascade Corp. ................................................ 37,503 1,518,871
Boston Scientific Corp. (a) ........................................ 245,100 5,361,562
Briggs & Stratton Corp. ............................................ 15,282 819,497
Bristol-Myers Squibb Co. ........................................... 1,294,056 83,062,219
Brown-Forman Corp. (Class B) ....................................... 29,319 1,678,513
Brunswick Corp. .................................................... 57,542 1,280,309
Burlington Northern Santa Fe Corp. ................................. 310,336 7,525,648
Burlington Resources, Inc. ......................................... 123,439 4,081,202
C. R. Bard, Inc. ................................................... 53,677 2,844,881
Cabletron Systems, Inc. (a) ........................................ 116,000 3,016,000
Campbell Soup Co. .................................................. 268,154 10,374,208
Capital One Financial Corp. ........................................ 123,300 5,941,519
</TABLE>
iii
<PAGE> 62
EQUITY 500 INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - continued
Cardinal Health, Inc. .............................................. 166,197 $ 7,956,681
Carnival Corp. (Class A) ........................................... 396,400 18,952,875
Carolina Power & Light Co. ......................................... 75,928 2,311,058
Caterpillar, Inc. .................................................. 230,064 10,827,387
CBS Corp. (a) ...................................................... 491,503 31,425,473
Cendant Corp. (a) .................................................. 475,610 12,633,391
Centex Corp. ....................................................... 37,280 920,350
Central & South West Corp. ......................................... 133,630 2,672,600
Centurytel Inc. .................................................... 92,900 4,401,137
Ceridian Corp. (a) ................................................. 86,104 1,856,617
Champion International Corp. ....................................... 65,728 4,071,028
Charles Schwab Corp. ............................................... 519,500 19,935,812
Chase Manhattan Corp. .............................................. 541,264 42,049,447
Chevron Corp. ...................................................... 412,666 35,747,192
Chubb Corp. ........................................................ 111,172 6,260,373
CIGNA Corp. ........................................................ 120,299 9,691,588
Cincinnati Financial Corp. ......................................... 94,500 2,947,219
Cinergy Corp. ...................................................... 106,322 2,565,018
Circuit City Stores, Inc. .......................................... 136,692 6,159,683
Cisco Systems, Inc. (a) ............................................ 2,105,950 225,599,894
Citigroup, Inc. .................................................... 2,166,624 120,383,046
Citrix Systems, Inc. (a) ........................................... 57,700 7,097,100
Clear Channel Communications, Inc. (a) ............................. 202,500 18,073,125
Clorox Co. ......................................................... 152,008 7,657,403
CMS Energy Corp. ................................................... 72,600 2,264,212
Coastal Corp. ...................................................... 146,132 5,178,553
Coca-Cola Co. ...................................................... 1,590,442 92,643,246
Coca-Cola Enterprises, Inc. ........................................ 258,400 5,200,300
Colgate-Palmolive Co. .............................................. 367,004 23,855,260
Columbia Energy Group .............................................. 65,002 4,111,376
Columbia/HCA Healthcare Corp. ...................................... 359,922 10,550,214
Comcast Corp. (Special Class A) .................................... 486,424 24,442,806
Comerica, Inc. ..................................................... 98,660 4,606,189
Compaq Computer Corp. .............................................. 1,105,184 29,909,042
Computer Associates International, Inc. ............................ 349,875 24,469,383
Computer Sciences Corp. (a) ........................................ 100,372 9,497,700
Compuware Corp. (a) ................................................ 233,000 8,679,250
Comverse Technology, Inc. (a) ...................................... 45,800 6,629,550
ConAgra, Inc. ...................................................... 301,932 6,812,341
Conoco, Inc. (Class B) ............................................. 433,351 10,779,606
Conseco, Inc. ...................................................... 222,768 3,981,978
Consolidated Edison, Inc. .......................................... 146,436 5,052,042
Consolidated Natural Gas Co. ....................................... 60,005 3,896,575
</TABLE>
iv
<PAGE> 63
EQUITY 500 INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - continued
Consolidated Stores Corp. (a) ...................................... 69,000 $ 1,121,250
Constellation Energy Group, Inc. ................................... 86,825 2,517,925
Cooper Inds., Inc. ................................................. 59,848 2,420,103
Cooper Tire & Rubber Co. ........................................... 52,751 820,937
Corning, Inc. ...................................................... 159,814 20,606,018
Costco Wholesale Corp. (a) ......................................... 143,499 13,094,284
Countrywide Credit Inds., Inc. ..................................... 73,200 1,848,300
Crane Co. .......................................................... 42,349 841,686
Crown Cork & Seal Co., Inc. ........................................ 105,850 2,368,394
CSX Corp. .......................................................... 151,732 4,760,591
Cummins Engine Co., Inc. ........................................... 19,834 958,230
CVS Corp. .......................................................... 243,088 9,708,327
Dana Corp. ......................................................... 104,847 3,138,857
Danaher Corp. ...................................................... 92,600 4,467,950
Darden Restaurants, Inc. ........................................... 86,319 1,564,532
Dayton Hudson Corp. ................................................ 287,516 21,114,456
Deere & Co. ........................................................ 150,523 6,528,935
Dell Computer Corp. (a) ............................................ 1,632,700 83,267,700
Delphi Automotive Systems .......................................... 357,037 5,623,333
Delta Air Lines, Inc. .............................................. 88,798 4,423,250
Deluxe Corp. ....................................................... 50,391 1,382,603
Dillard Department Stores, Inc. (Class A) .......................... 63,597 1,283,864
Dollar General Corp. ............................................... 148,006 3,367,136
Dominion Resources, Inc. ........................................... 131,406 5,157,685
Dover Corp. ........................................................ 130,808 5,935,413
Dow Chemical Co. ................................................... 140,876 18,824,555
Dow Jones & Co., Inc. .............................................. 47,072 3,200,896
DTE Energy Co. ..................................................... 102,576 3,218,322
Du Pont (E.I.) de Nemours & Co. .................................... 671,710 44,248,896
Duke Power Co. ..................................................... 242,195 12,140,024
Dun & Bradstreet Corp. ............................................. 103,579 3,055,580
Eastern Enterprises ................................................ 15,342 881,206
Eastman Chemical Co. ............................................... 61,381 2,927,106
Eastman Kodak Co. .................................................. 204,126 13,523,347
Eaton Corp. ........................................................ 51,182 3,717,093
Ecolab, Inc. ....................................................... 72,200 2,824,825
Edison International, Inc. ......................................... 223,070 5,841,646
El Paso Energy Corp. ............................................... 182,310 7,075,907
Electronic Data Systems Corp. ...................................... 304,600 20,389,162
Eli Lilly & Co. .................................................... 705,640 46,925,060
EMC Corp. (a) ...................................................... 659,025 71,998,481
Emerson Electric Co. ............................................... 288,300 16,541,212
Engelhard Corp. .................................................... 82,408 1,555,451
</TABLE>
v
<PAGE> 64
EQUITY 500 INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - continued
Enron Corp. ........................................................ 454,632 $ 20,174,295
Entergy Corp. ...................................................... 154,907 3,988,855
Equifax, Inc. ...................................................... 88,800 2,092,350
Exxon Mobil Corp. .................................................. 2,219,195 178,783,897
Fannie Mae ......................................................... 662,814 41,384,449
FDX Corp. (a) ...................................................... 193,210 7,909,534
Federated Department Stores, Inc. (a) .............................. 138,000 6,977,625
Fifth Third Bancorp ................................................ 209,567 15,376,979
First Data Corp. ................................................... 277,600 13,689,150
First Union Corp. .................................................. 611,585 20,067,633
Firstar Corp. ...................................................... 666,181 14,073,074
FirstEnergy Corp. .................................................. 148,984 3,380,074
Fleet Boston Financial Corp. ....................................... 595,303 20,723,986
Fleetwood Enterprises, Inc. ........................................ 21,906 451,811
Florida Progress Corp. ............................................. 61,300 2,593,756
Fluor Corp. ........................................................ 47,881 2,196,541
FMC Corp. (a) ...................................................... 20,350 1,166,309
Ford Motor Co. ..................................................... 791,244 42,282,101
Fort James Corp. ................................................... 141,885 3,884,102
Fortune Brands, Inc. ............................................... 109,074 3,606,259
Foster Wheeler Corp. ............................................... 30,038 266,587
FPL Group, Inc. .................................................... 128,794 5,513,993
Franklin Resources, Inc. ........................................... 168,320 5,396,760
Freddie Mac ........................................................ 449,814 21,169,371
Freeport-McMoRan Copper & Gold, Inc. (Class B) (a) ................. 77,900 1,645,637
Gannett Comp., Inc. ................................................ 176,592 14,403,285
Gap, Inc. .......................................................... 558,134 25,674,164
Gateway, Inc. (a) .................................................. 197,200 14,210,725
General Dynamics Corp. ............................................. 125,844 6,638,271
General Electric Co. ............................................... 2,126,144 329,020,784
General Instrument Corp. (a) ....................................... 111,800 9,503,000
General Mills, Inc. ................................................ 198,338 7,090,583
General Motors Corp. ............................................... 410,234 29,818,884
Genuine Parts Co. .................................................. 112,626 2,794,533
Georgia-Pacific Corp. .............................................. 110,302 5,597,826
Gillette Co. ....................................................... 702,016 28,914,284
Global Crossing, Ltd. (a) .......................................... 491,079 24,553,950
Golden West Financial Corp. ........................................ 109,551 3,669,958
Goodrich (B.F.) Co. ................................................ 46,652 1,282,930
Goodyear Tire & Rubber Co. ......................................... 98,536 2,777,483
GPU, Inc. .......................................................... 63,000 1,886,062
Great Atlantic & Pacific Tea Co., Inc. ............................. 24,025 669,697
Great Lakes Chemical Corp. ......................................... 36,996 1,412,785
</TABLE>
vi
<PAGE> 65
EQUITY 500 INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - continued
GTE Corp. .......................................................... 635,636 $ 44,852,065
Guidant Corp. (a) .................................................. 197,500 9,282,500
H & R Block, Inc. .................................................. 68,135 2,980,906
H.J. Heinz Co. ..................................................... 253,725 10,101,427
Halliburton Comp ................................................... 278,362 11,204,071
Harcourt General, Inc. ............................................. 55,639 2,239,470
Harrah's Entertainment, Inc. (a) ................................... 71,215 1,882,747
Hartford Financial Services Group, Inc. ............................ 143,246 6,786,279
Hasbro, Inc. ....................................................... 138,970 2,649,116
HEALTHSOUTH Corp. (a) .............................................. 322,800 1,735,050
Hercules, Inc. ..................................................... 68,914 1,920,978
Hershey Foods Corp. ................................................ 80,094 3,804,465
Hewlett-Packard Co. ................................................ 654,740 74,599,439
Hilton Hotels Corp. ................................................ 162,841 1,567,345
Home Depot, Inc. ................................................... 1,479,378 101,429,854
Homestake Mining Co. ............................................... 146,043 1,140,961
Honeywell International, Inc. ...................................... 513,285 29,610,128
Household International, Inc. ...................................... 308,485 11,491,066
Humana, Inc. (a) ................................................... 102,700 840,856
Huntington Bancshares, Inc. ........................................ 145,277 3,468,488
Huttig Building Products, Inc. (a) ................................. 17,589 86,844
Ikon Office Solutions, Inc. ........................................ 79,362 540,654
Illinois Tool Works, Inc. .......................................... 192,892 13,032,266
IMS Health, Inc. ................................................... 197,858 5,379,264
Inco, Ltd. ......................................................... 108,366 2,546,601
Ingersoll-Rand Co. ................................................. 104,846 5,773,083
Intel Corp. ........................................................ 2,146,856 176,713,085
International Business Machines Corp. .............................. 1,158,364 125,103,312
International Flavors & Fragrances, Inc. ........................... 63,787 2,407,959
International Paper Co. ............................................ 287,874 16,246,889
Interpublic Group of Co., Inc. ..................................... 163,020 9,404,216
ITT Inds., Inc. .................................................... 58,123 1,943,488
J.C. Penney Co., Inc. .............................................. 165,750 3,304,641
Jefferson-Pilot Corp. .............................................. 66,465 4,536,236
Johnson & Johnson .................................................. 900,196 83,830,753
Johnson Controls, Inc. ............................................. 46,054 2,619,321
Jostens, Inc. ...................................................... 7,639 185,723
Kansas City Southern Inds .......................................... 68,800 5,134,200
Kaufman & Broad Home Corp. ......................................... 28,445 688,013
Kellogg Co. ........................................................ 261,314 8,051,738
Kerr-McGee Corp. ................................................... 60,531 3,752,922
KeyCorp ............................................................ 287,400 6,358,725
Kimberly Clark Corp. ............................................... 349,806 22,824,842
</TABLE>
vii
<PAGE> 66
EQUITY 500 INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - continued
KLA/Tencor Corp. (a) ............................................... 60,300 $ 6,715,913
Kmart Corp. (a) .................................................... 308,503 3,104,311
Knight-Ridder, Inc. ................................................ 57,526 3,422,797
Kohl's Corp. (a) ................................................... 108,100 7,803,469
Kroger Co. (a) ..................................................... 570,940 10,776,493
Leggett & Platt, Inc. .............................................. 125,100 2,681,831
Lehman Brothers, Inc. .............................................. 77,900 6,597,156
Lexmark International Group, Inc. (Class A) (a) .................... 84,300 7,629,150
Limited, Inc. ...................................................... 130,741 5,662,720
Lincoln National Corp. ............................................. 136,920 5,476,800
Liz Claiborne, Inc. ................................................ 56,103 2,110,875
Lockheed Martin Corp. .............................................. 246,010 5,381,469
Loew's Corp. ....................................................... 61,900 3,756,556
Long's Drug Stores, Inc. ........................................... 24,326 627,915
Louisiana-Pacific Corp. ............................................ 73,258 1,043,927
Lowes Co., Inc. .................................................... 247,888 14,811,308
LSI Logic Corp. (a) ................................................ 95,600 6,453,000
Lucent Technologies, Inc. .......................................... 2,041,521 152,731,290
Mallinckrodt Group, Inc. ........................................... 48,602 1,546,151
Manor Care, Inc. (a) ............................................... 67,400 1,078,400
Marriott International, Inc. ....................................... 152,180 4,803,181
Marsh and McLennan ................................................. 171,386 16,399,498
Masco Corp. ........................................................ 283,322 7,189,296
Mattel, Inc. ....................................................... 261,265 3,429,103
May Department Stores Co. .......................................... 211,647 6,825,616
Maytag Corp. ....................................................... 57,512 2,760,576
MBIA, Inc. ......................................................... 62,300 3,290,219
MBNA Corp. ......................................................... 518,837 14,138,308
McDermott International, Inc. ...................................... 43,087 390,476
McDonald's Corp. ................................................... 876,228 35,322,941
McGraw-Hill, Inc. .................................................. 126,860 7,817,748
MCI WorldCom, Inc. (a) ............................................. 1,843,370 97,813,794
McKesson HBOC, Inc. ................................................ 182,073 4,108,022
Mead Corp. ......................................................... 64,402 2,797,462
MediaOne Group (a) ................................................. 396,028 30,419,901
Medtronic, Inc. .................................................... 768,008 27,984,292
Mellon Financial Corp. ............................................. 366,548 12,485,541
Merck & Co., Inc. .................................................. 1,501,994 100,727,473
Meredith Corp. ..................................................... 39,872 1,662,164
Merrill Lynch & Co., Inc. .......................................... 230,076 19,211,346
MGIC Investment Corp. .............................................. 73,600 4,429,800
Micron Technology, Inc. (a) ........................................ 169,300 13,163,075
Microsoft Corp. (a) ................................................ 3,339,000 389,828,250
</TABLE>
viii
<PAGE> 67
EQUITY 500 INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - continued
Milacron, Inc. ..................................................... 19,047 $ 292,848
Millipore Corp. .................................................... 27,892 1,077,329
Minnesota Mining & Manufacturing Co. ............................... 254,378 24,897,247
Mirage Resorts, Inc. (a) ........................................... 154,900 2,371,906
Molex, Inc. ........................................................ 96,000 5,442,000
Monsanto Co. ....................................................... 411,920 14,674,650
Morgan Stanley Dean Witter Discover & Co. .......................... 360,433 51,451,811
Morgan, (J.P.) & Co., Inc. ......................................... 112,060 14,189,598
Motorola, Inc. ..................................................... 400,342 58,950,360
Nabisco Group Holdings Corp. ....................................... 206,300 2,191,938
NACCO Inds., Inc. (Class A) ........................................ 3,727 207,081
National City Corp. ................................................ 411,800 9,754,513
National Semiconductor Corp. (a) ................................... 110,226 4,719,051
National Service Inds., Inc. ....................................... 31,126 918,217
Navistar International Corp. (a) ................................... 41,758 1,978,285
Network Appliance, Inc. (a) ........................................ 95,900 7,965,694
New Century Energies, Inc. ......................................... 69,400 2,108,025
New York Times Co. (Class A) ....................................... 113,268 5,564,291
Newell Rubbermaid, Inc. ............................................ 178,996 5,190,884
Newmont Mining Corp. ............................................... 116,210 2,847,145
Nextel Communications, Inc. (Class A) (a) .......................... 230,200 23,739,375
Niagara Mohawk Power Corp. (a) ..................................... 147,042 2,049,398
NICOR, Inc. ........................................................ 35,069 1,139,743
Nike, Inc. ......................................................... 182,048 9,022,754
Nordstrom, Inc. .................................................... 92,458 2,421,244
Norfolk Southern Corp. ............................................. 238,553 4,890,337
Nortel Networks Corp. .............................................. 858,224 86,680,624
Northern States Power Co. .......................................... 75,388 1,470,066
Northern Trust Corp. ............................................... 143,800 7,621,400
Northrop Grumman Corp. ............................................. 51,479 2,783,083
Novell, Inc. (a) ................................................... 217,092 8,670,112
Nucor Corp. ........................................................ 55,794 3,058,209
Occidental Petroleum Corp. ......................................... 250,714 5,421,690
Office Depot, Inc. (a) ............................................. 213,000 2,329,688
Old Kent Financial Corp. ........................................... 78,000 2,759,250
Omnicom Group, Inc. ................................................ 114,000 11,400,000
Oneok, Inc. ........................................................ 17,391 436,949
Oracle Corp. (a) ................................................... 914,784 102,512,982
Owens Corning ...................................................... 33,950 655,659
Owens-Illinois, Inc. (a) ........................................... 95,300 2,388,456
P P & L Resources, Inc. ............................................ 81,907 1,873,623
Paccar, Inc. ....................................................... 62,580 2,773,076
Pactiv Corp. (a) ................................................... 115,634 1,228,611
</TABLE>
ix
<PAGE> 68
EQUITY 500 INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - continued
Paine Webber Group Inc. ............................................ 108,000 $ 4,191,750
Pall Corp. ......................................................... 78,364 1,689,724
Parametric Technology Corp. (a) .................................... 182,800 4,947,025
Parker-Hannifin Corp. .............................................. 71,914 3,690,087
Paychex, Inc. ...................................................... 172,150 6,886,000
PE Corp. - PE Biosystems Group ..................................... 69,050 8,307,578
PECO Energy Co. .................................................... 120,184 4,176,394
People's Energy Corp. .............................................. 22,155 742,193
Peoplesoft, Inc. (a) ............................................... 164,700 3,510,169
Pep Boys (Manny, Moe & Jack) ....................................... 32,912 300,322
PepsiCo, Inc. ...................................................... 941,994 33,205,289
Perkin Elmer, Inc. ................................................. 30,425 1,268,342
Pfizer, Inc. ....................................................... 2,520,184 81,748,469
PG&E Corp. ......................................................... 251,605 5,157,903
Pharmacia & Upjohn, Inc. ........................................... 337,132 15,170,940
Phelps Dodge Corp. ................................................. 48,965 3,286,776
Philip Morris Co. .................................................. 1,531,098 35,502,335
Phillips Petroleum Co. ............................................. 158,406 7,445,082
Pinnacle West Capital Corp. ........................................ 55,500 1,696,219
Pitney Bowes, Inc. ................................................. 185,196 8,947,282
Placer Dome, Inc. .................................................. 191,404 2,057,593
PNC Bank Corp. ..................................................... 192,033 8,545,469
Polaroid Corp. ..................................................... 38,682 727,705
Potlatch Corp. ..................................................... 18,101 807,757
PPG Inds., Inc. .................................................... 109,842 6,871,990
Praxair, Inc. ...................................................... 121,315 6,103,661
Procter & Gamble Co. ............................................... 845,640 92,650,433
Progressive Corp. of Ohio .......................................... 45,450 3,323,531
Providian Financial Corp. .......................................... 92,097 8,386,583
Public Service Enterprise Group .................................... 140,094 4,877,022
Pulte Corp. ........................................................ 29,132 655,470
Quaker Oats Co. .................................................... 85,984 5,642,700
Qualcomm, Inc. (a) ................................................. 426,400 75,099,700
Quintiles Transnational Corp. (a) .................................. 70,300 1,313,731
R.R. Donnelley & Sons Co. .......................................... 84,152 2,088,022
Ralston Purina Group ............................................... 203,215 5,664,618
Raytheon Co. (Class B) ............................................. 212,314 5,639,591
Reebok International, Ltd. (a) ..................................... 34,329 281,069
Regions Financial Corp. ............................................ 133,170 3,345,896
Reliant Energy, Inc. ............................................... 165,792 3,792,492
Republic New York Corp. ............................................ 67,800 4,881,600
Reynolds Metals Co. ................................................ 48,149 3,689,417
Rite Aid Corp. ..................................................... 179,402 2,007,060
</TABLE>
x
<PAGE> 69
EQUITY 500 INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - continued
Rockwell International Corp. ....................................... 132,424 $ 6,339,799
Rohm & Haas Co. .................................................... 155,291 6,318,403
Rowan Companies, Inc. (a) .......................................... 50,500 1,095,219
Royal Dutch Petroleum Co. .......................................... 1,380,704 83,446,298
Russell Corp. ...................................................... 22,611 378,734
Ryder Systems, Inc. ................................................ 45,017 1,100,103
Safeco Corp. ....................................................... 84,102 2,092,037
Safeway, Inc. (a) .................................................. 329,200 11,707,175
Sara Lee Corp. ..................................................... 571,054 12,598,879
SBC Communications, Inc. ........................................... 2,192,069 106,863,364
Schering-Plough Corp. .............................................. 944,032 39,826,350
Schlumberger, Ltd. ................................................. 355,362 19,989,113
Scientific-Atlanta, Inc. ........................................... 47,338 2,633,176
Seagate Technology, Inc. (a) ....................................... 134,800 6,276,625
Seagram Co., Ltd. .................................................. 280,337 12,597,644
Sealed Air Corp. (a) ............................................... 52,405 2,715,234
Sears, Roebuck & Co. ............................................... 240,709 7,326,580
Sempra Energy ...................................................... 129,514 2,250,306
Service Corp. International ........................................ 185,692 1,288,238
Shared Medical Systems Corp. ....................................... 16,674 849,332
Sherwin-Williams Co. ............................................... 112,874 2,370,354
Sigma Aldrich Corp. ................................................ 64,100 1,927,006
Silicon Graphics, Inc. (a) ......................................... 116,515 1,143,303
SLM Holding Corp. .................................................. 103,300 4,364,425
Snap-On Tools Corp. ................................................ 40,194 1,067,653
Solectron Corp. (a) ................................................ 180,500 17,170,063
Southern Co. ....................................................... 473,558 11,128,613
Southtrust Corp. ................................................... 115,600 4,371,125
Southwest Airlines Co. ............................................. 316,500 5,123,344
Springs Inds., Inc. (Class A) ...................................... 6,904 275,729
Sprint Corp. ....................................................... 561,564 37,800,277
Sprint Corp. (PCS Group) (a) ....................................... 278,891 28,586,328
St. Jude Medical, Inc. (a) ......................................... 49,488 1,518,663
St. Paul Companies, Inc. ........................................... 147,828 4,979,956
Stanley Works ...................................................... 54,330 1,636,691
Staples, Inc. (a) .................................................. 307,200 6,374,400
State Street Corp. ................................................. 100,400 7,335,475
Summit Bancorp ..................................................... 116,400 3,564,750
Sun Microsystems, Inc. (a) ......................................... 1,004,224 77,764,596
Sunoco, Inc. ....................................................... 61,345 1,441,608
Suntrust Banks, Inc. ............................................... 200,860 13,821,679
SuperValu, Inc. .................................................... 97,040 1,940,800
Synovus Financial Corp. ............................................ 143,650 2,855,044
</TABLE>
xi
<PAGE> 70
EQUITY 500 INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - continued
Sysco Corp. ........................................................ 219,020 $ 8,664,979
T. Rowe Price Associates, Inc. ..................................... 72,200 2,666,888
Tandy Corp. ........................................................ 131,732 6,479,568
Tektronix, Inc. .................................................... 29,507 1,147,085
Teledyne Technologies, Inc. (a) .................................... 18,084 170,668
Tellabs, Inc. (a) .................................................. 252,050 16,178,459
Temple Inland, Inc. ................................................ 35,922 2,368,607
Tenet Healthcare Corp. (a) ......................................... 189,110 4,444,085
Teradyne, Inc. (a) ................................................. 105,000 6,930,000
Texaco, Inc. ....................................................... 353,522 19,200,664
Texas Instruments, Inc. ............................................ 515,412 49,930,538
Texas Utilities Co. ................................................ 178,027 6,331,085
Textron, Inc. ...................................................... 98,306 7,538,841
Thermo Electron Corp. (a) .......................................... 141,100 2,116,500
Thomas & Betts Corp. ............................................... 38,500 1,227,188
Time Warner, Inc. .................................................. 844,130 61,146,667
Times Mirror Co. (Class A) ......................................... 39,429 2,641,743
Timken Co. ......................................................... 34,596 707,056
TJX Co., Inc. ...................................................... 211,016 4,312,640
Torchmark Corp. .................................................... 85,168 2,475,195
Tosco Corp. ........................................................ 130,800 3,556,125
Toys 'R' Us, Inc. (a) .............................................. 164,418 2,353,233
Transocean Sedco Forex, Inc. ....................................... 134,198 4,520,798
Tribune Co. ........................................................ 149,592 8,236,910
Tricon Global Restaurants, Inc. .................................... 99,799 3,854,736
TRW, Inc. .......................................................... 75,072 3,899,052
Tupperware Corp. ................................................... 36,096 611,376
Tyco International, Ltd. ........................................... 1,087,838 42,289,702
U.S. Bancorp ....................................................... 466,037 11,097,506
U.S. West Inc. ..................................................... 324,855 23,389,560
Unicom Corp. ....................................................... 139,725 4,680,788
Unilever NV ........................................................ 373,346 20,324,023
Union Carbide Corp. ................................................ 83,252 5,557,071
Union Pacific Corp. ................................................ 155,247 6,772,650
Union Pacific Resources Group, Inc. ................................ 191,348 2,439,687
Union Planters Corp. ............................................... 81,300 3,206,269
Unisys Corp. (a) ................................................... 207,699 6,633,387
United Healthcare Corp. ............................................ 112,700 5,987,188
United Technologies Corp. .......................................... 306,624 19,930,560
Unocal Corp. ....................................................... 152,937 5,132,948
Unumprovident Corp. ................................................ 149,034 4,778,403
US Airways Group, Inc. (a) ......................................... 47,615 1,526,656
UST, Inc. .......................................................... 120,607 3,037,789
</TABLE>
xii
<PAGE> 71
EQUITY 500 INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - continued
USX - U.S. Steel Group ............................................. 57,177 $ 1,886,841
USX Marathon Group ................................................. 200,564 4,951,424
V.F. Corp. ......................................................... 75,230 2,256,900
Viacom, Inc. (Class B) (a) ......................................... 440,798 26,640,729
Vulcan Materials Co. ............................................... 63,600 2,540,025
W.R. Grace & Co. (a) ............................................... 46,049 638,930
W.W. Grainger, Inc. ................................................ 60,130 2,874,966
Wachovia Corp. ..................................................... 128,210 8,718,280
Wal-Mart Stores, Inc. .............................................. 2,859,596 197,669,574
Walgreen Co. ....................................................... 667,636 19,528,353
Walt Disney Co. .................................................... 1,334,471 39,033,277
Warner-Lambert Co. ................................................. 555,658 45,529,227
Washington Mutual, Inc. ............................................ 379,272 9,861,072
Waste Management, Inc. ............................................. 422,351 7,259,158
Water Pik Technologies, Inc. (a) ................................... 6,329 60,521
Watson Pharmaceuticals, Inc. (a) ................................... 67,400 2,413,763
Wellpoint Health Networks, Inc. (a) ................................ 46,100 3,039,719
Wells Fargo Co. .................................................... 1,062,736 42,974,387
Wendy's International, Inc. ........................................ 82,762 1,706,966
Westvaco Corp. ..................................................... 61,360 2,001,870
Weyerhaeuser Co. ................................................... 143,494 10,304,663
Whirlpool Corp. .................................................... 48,139 3,132,044
Willamette Inds., Inc. ............................................. 63,600 2,953,425
Williams Co., Inc. ................................................. 281,236 8,595,275
Winn Dixie Stores, Inc. ............................................ 75,180 1,799,621
Wm. Wrigley, Jr. Co. ............................................... 72,692 6,028,893
Worthington Inds., Inc. ............................................ 55,279 915,558
Xerox Corp. ........................................................ 426,870 9,684,613
Xilinx, Inc. (a) ................................................... 202,000 9,184,688
Yahoo!, Inc. (a) .................................................. 169,700 73,427,069
- ---------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK (COST $4,809,122,710) ........................................... $7,953,572,107
=========================================================================================================
</TABLE>
xiii
<PAGE> 72
EQUITY 500 INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INSTRUMENTS (2.5% of net assets)
MUTUAL FUNDS - 2.3%
Institutional Cash Management Fund ................................. 188,890,907 $ 188,890,907
- ---------------------------------------------------------------------------------------------------------
Total Mutual Funds .............................................. 188,890,907
- ---------------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS - 0.2%
U.S. Treasury Bill, 5.02%, 3/2/00 (b) .............................. $ 12,020,000 11,919,729
- ---------------------------------------------------------------------------------------------------------
Total U.S. Treasury Bills ....................................... 11,919,729
- ---------------------------------------------------------------------------------------------------------
Total Short Term Instruments (Cost $200,811,727) ................ 200,810,636
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $5,009,934,437) - 99.9% .................... $8,154,382,743
=========================================================================================================
Other Assets in Excess of Liabilities - 0.1% ....................... 10,714,139
- ---------------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% ................................................ $8,165,096,882
=========================================================================================================
</TABLE>
(a) Non-income producing security.
(b) Held as collateral for futures contracts.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
xiv
<PAGE> 73
EQUITY 500 INDEX PORTFOLIO
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1999
- --------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments at Value (Cost of $5,009,934,437)................. $ 8,154,382,743
Receivable for Shares of Beneficial
Interest Subscribed ........................................ 4,508,155
Receivable for Securities Sold ............................... 657,504
Variation Margin Receivable .................................. 461,689
Dividend Receivable .......................................... 7,787,458
- --------------------------------------------------------------------------------------
Total Assets ................................................. 8,167,797,549
======================================================================================
LIABILITIES
Payable Securities Purchased ................................. 2,154,113
Due to Bankers Trust ......................................... 532,871
Accrued Expenses ............................................. 13,683
- --------------------------------------------------------------------------------------
Total Liabilities ............................................ 2,700,667
- --------------------------------------------------------------------------------------
NET ASSETS ................................................... $8,165,096,882
======================================================================================
COMPOSITION OF NET ASSETS
Paid-in Capital .............................................. $5,016,704,839
Net Unrealized Appreciation on
Investments and Futures Contracts .......................... 3,148,392,043
- --------------------------------------------------------------------------------------
NET ASSETS ................................................... $8,165,096,882
======================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
xv
<PAGE> 74
EQUITY 500 INDEX PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1999
- ----------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding tax of $1,063,834) .............. $ 97,913,346
Interest .............................................................. 513,602
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME ................................................. 98,426,948
====================================================================================================
EXPENSES
Advisory Fees ......................................................... 5,134,906
Administration and Service Fees ....................................... 344,960
Professional Fees ..................................................... 34,598
Trustees Fees ......................................................... 3,252
Miscellaneous ......................................................... 1,643
- ----------------------------------------------------------------------------------------------------
Total Expenses .......................................................... 5,519,359
- ----------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ................................................... 92,907,589
====================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FUTURES CONTRACTS
Net Realized Loss from Investment Transactions .......................... (44,432,856)
Net Realized Gain from Futures Transactions ............................. 17,684,084
Net Change in Unrealized Appreciation/Depreciation
on Investments and Futures Contracts .................................. 1,245,281,501
- ----------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain on
Investments and Futures Contracts ..................................... 1,218,532,729
- ----------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS .............................. $ 1,311,440,318
====================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
xvi
<PAGE> 75
EQUITY 500 INDEX PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------------------
1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net Investment Income .................................. $ 92,907,589 $ 58,364,731
Net Realized Gain (Loss) from
Investment and Futures Transactions .................. (26,748,772) 35,274,688
Net Change In Unrealized Appreciation on
Investment and Futures Contracts ..................... 1,245,281,501 895,089,518
- -----------------------------------------------------------------------------------------------------
Net Increase in Net Assets from Operations............ 1,311,440,318 988,728,937
- -----------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS
Proceeds from Capital Invested ......................... 4,399,103,297 2,853,940,069
Value of Capital Withdrawn ............................. (2,745,951,143) (1,445,251,067)
- -----------------------------------------------------------------------------------------------------
Net Increase in Net Assets
from Capital Transactions ............................ 1,653,152,154 1,408,689,002
- -----------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS ........................... 2,964,592,472 2,397,417,939
=====================================================================================================
NET ASSETS
Beginning of Year ...................................... 5,200,504,410 2,803,086,471
- -----------------------------------------------------------------------------------------------------
END OF YEAR ............................................ $ 8,165,096,882 $ 5,200,504,410
=====================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
xvii
<PAGE> 76
EQUITY 500 INDEX PORTFOLIO
FINANCIAL HIGHLIGHTS
Contained below are selected supplemental data and ratios to average net assets
for the years indicated for the Equity 500 Index Portfolio.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA AND RATIOS:
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Assets, End of Year (000s omitted)... $8,165,097 $5,200,504 $2,803,086 $1,925,224 $1,080,736
Ratios to Average Net Assets:
Net Investment Income ................. 1.35% 1.50% 1.76% 2.20% 2.52%
Expenses After Waivers ................ 0.08% 0.08%(a) 0.08 0.10% 0.10%
Expenses Before Waivers ............... 0.08% 0.10% 0.15% 0.15% 0.15%
Decrease reflected in above expenses.....
Ratios Due to Fee Waivers
or Expense Reimbursements ........... 0.00%(b) 0.02% 0.07% 0.05% 0.05%
Portfolio Turnover Rate ................. 13% 4% 19% 15% 6%
</TABLE>
- --------------
(a) Effective May 6, 1998, Bankers Trust contractually agreed to receive fees
from the portfolio only to the extent of the lesser of .005% or the amount
that brings the total annual operating expenses as a percentage of the
portfolio's average daily net assets up to 0.08%.
(b) Less than 0.01%
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
xviii
<PAGE> 77
EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1. ORGANIZATION AND SIGNIFICANT
ACCOUNTING POLICIES
A. Organization
The Equity 500 Index Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940 (the "Act"), as amended, as an open-end
management investment company. The Portfolio was organized on December 11, 1991
as an unincorporated trust under the laws of New York and began operations on
December 31, 1992. The Declaration of Trust permits the Board of Trustees (the
"Trustees") to issue beneficial interests in the Portfolio.
B. Security Valuation
The Portfolio's investments are valued each business day by an independent
pricing service approved by the Trustees. Securities traded on national
exchanges or traded in the NASDAQ National Market System are valued at the last
sales prices reported at the close of business each day. Over-the-counter
securities not included in the NASDAQ National Market System and listed
securities for which no sale was reported are valued at the mean of the bid and
asked prices. Short-term obligations with remaining maturities of 60 days or
less are valued at amortized cost that, with accrued interest, approximates
value. Securities for which quotations are not available are stated at fair
value as determined by the Trustees.
C. Security Transactions and Interest Income
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Interest income is recorded on the accrual
basis and includes amortization of premium and accretion of discount on
investments. Realized gains and losses from securities transactions are recorded
on the identified cost basis.
All of the net investment income and realized and unrealized gains and losses
from the security transactions of the Portfolio are allocated pro rata among the
investors in the Portfolio at the time of such determination.
D. Futures Contracts
The Portfolio may enter into financial futures contracts, which are contracts to
buy a standard quantity of securities at a specified price on a future date. The
Portfolio is required to deposit either cash or securities in an amount equal to
a certain percentage of the contract amount. Variation margin payments are made
or received by the Portfolio each day, dependent on the daily fluctuations in
the value of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Portfolio.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
E. Federal Income Taxes
The Portfolio is considered a partnership under the Internal Revenue Code.
Therefore, no federal income tax provision is required.
F. Other
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
NOTE 2. FEES AND TRANSACTIONS
WITH AFFILIATES
The Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"), an indirect wholly owned subsidiary of
Deutsche Bank AG. The agreement provides for the Portfolio to pay Bankers Trust
a fee, accrued daily and paid monthly, computed as a percentage of the average
daily net assets of the Portfolio which on an annual basis is equal to the
lesser of (1) 0.005%, or (2) the amount that brings the total annual operating
expenses as a percentage of the Portfolio's average daily net assets up to
0.08%.
The Portfolio has entered into an Advisory Agreement with Bankers Trust. Under
this agreement, the Portfolio pays Bankers Trust a fee computed daily and paid
monthly at an annual rate of .075% of the Portfolio's average daily net assets.
The Portfolio may invest in the Institutional Cash Management Fund (the "Cash
Management Fund"), an open-end management investment company managed by Bankers
Trust Company. The Cash Management Fund is offered as a cash management option
to the Portfolio and other accounts managed by Bankers Trust. Distributions from
the Cash Management Fund to the Portfolio for the year ended December 31, 1999
amounted to $7,493,519 and are included in dividend income.
At December 31, 1999, the Portfolio was a participant with other affiliated
entities in a revolving credit facility in the amount of $150,000,000, which
expires April 29, 2000. A commitment fee of .10% per annum on the average daily
amount of the available commitment is payable on a quarterly basis and
apportioned equally among all participants. No amounts were drawn down or
outstanding for this fund under the credit facility for the year ended December
31, 1999.
xix
<PAGE> 78
EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. PURCHASES AND SALES
OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the year ended December 31, 1999, were
$2,458,853,481 and $886,448,613, respectively. For federal income tax purposes,
the tax basis of investments held at December 31, 1999 was $5,091,039,735. The
aggregate gross unrealized appreciation was $3,275,257,510, and the aggregate
gross unrealized depreciation was $211,914,502 for all investments as of
December 31, 1999.
NOTE 4. FUTURES CONTRACTS
A summary of obligations under these financial instruments at December 31, 1999
is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Type of Unrealized
Future Expiration Contracts Position Market Value Appreciation
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
S&P 500
Index
Futures March 2000 547 Long $203,331,050 $3,943,738
- -------------------------------------------------------------------------------------
</TABLE>
At December 31, 1999, the Portfolio segregated securities with a value of
approximately $11,919,729 to cover margin requirements on open futures
contracts.
xx
<PAGE> 79
EQUITY 500 INDEX PORTFOLIO
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Holders of Beneficial Interest of Equity 500 Index Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Equity 500 Index Portfolio
(hereafter referred to as the "Portfolio") at December 31, 1999, and the results
of its operations, the changes in its net assets and the financial highlights
for each of the fiscal periods presented, in conformity with accounting
principles generally accepted in the United States. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Portfolio's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 11, 2000
xxi
<PAGE> 80
Homestead Funds, Inc.
c/o PFPC, Inc.
P.O. Box 8987
Wilmington, DE 19899
1-800-258-3030
This report is authorized for distribution to shareholders and others who have
received a copy of the prospectus.
Distributor: RE Investment Corporation
