<PAGE>
AETNA MUTUAL FUNDS
SMART SOLUT!ONS
FROM AETNA
AETNA
GROWTH &
INCOME
FUNDS
[GRAPHIC]
Annual Report
October 31, 2000
ENGINEERING BETTER INVESTMENTS
<PAGE>
PRESIDENT'S LETTER
Dear Fellow Shareholder,
October 31, 2000
Thank you for investing in the Aetna Series Fund, Inc. With nearly 8,000 mutual
funds available in today's market, we appreciate your confidence in us.
The twelve months ended October, 2000 witnessed much volatility in the U.S.
stock markets. For the past ten months, the major stock markets have all
declined: S&P 500 Index, off 1.8%; NASDAQ Composite Index, down 17.2%; Dow
Jones Industrial Average, minus 3.4%. Technology stocks in particular were hit
with a sharp decline in the latter part of this 12-month period. Still, each of
the indices remained in positive territory for the 12-month period, due to the
exceptionally strong performance during the last two months of 1999.
Over the course of the year, the Federal Reserve (the "Fed") continued a series
of rate increases that resulted in the Fed funds rate climbing from 5.45% to
6.5% as of October 31, 2000. The impact of rising interest rates and oil prices
was reflected in the U.S. Gross Domestic Product, which slowed from an 8.3%
annual rate in the last quarter of 1999 to an estimated 2.7% in the third
quarter of 2000. International investing was negatively affected by the spike
in oil prices and the strength of the U.S. dollar versus the Euro.
Nevertheless, U.S. economic and corporate earnings outlooks remained robust as
this report period closed, and market breadth, i.e. the number of stocks
advancing versus declining, has improved. Thus it appears that the Fed has been
able to slow the economy to a sustainable growth rate.
The Fund and its advisor, Aeltus Investment Management, Inc., continuously
strive to improve products and services for the benefit of the shareholders.
Here are some highlights of our recent efforts:
. AETNA PRINCIPAL PROTECTION FUNDS II, III AND IV enjoyed successful
offerings, as investors committed more than $450 million to the funds.
AETNA INDEX PLUS PROTECTION FUND (offering a lower minimum investment of
$5,000) is in its offering period until November 30, 2000. These funds are
designed to appeal to a broad range of investors seeking downside
protection with upside market potential.
.
On December 22, 1999, Aeltus acquired a minority equity interest in ELIJAH
ASSET MANAGEMENT, LLC (EAM), a skilled manager of specialized growth and
technology funds.
. AETNA TECHNOLOGY FUND was launched on March 1, 2000. Sub-advised by EAM,
the fund seeks long-term capital appreciation by investing primarily in
technology-sector stocks.
Following approval of shareholders and your Board of Directors, four funds
(Aetna Mid Cap Fund, Aetna Real Estate Securities Fund, Aetna High Yield Fund
and Aetna Index Plus Bond Fund) were liquidated on August 25, 2000, due to low
investor interest and resultant high fund expenses.
As 2000 draws to an end, we want to reaffirm our commitment to bring you the
best of products and services. Again, we greatly appreciate and value your
continued confidence in our funds and in Aeltus.
Sincerely,
<TABLE>
<CAPTION>
<S><C>
LOGO
J. Scott Fox
President
Aetna Series Fund, Inc.
</TABLE>
A prospectus containing more complete information including charges and
expenses is available from your financial advisor, at www.aetnafunds.com, or by
calling
800-238-6263, option 2. Read the prospectus carefully before investing.
i
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S><C>
President's Letter.....................................................i
GROWTH & INCOME FUNDS:
Investment Review......................................................1
Portfolios of Investments:
Aetna Balanced Fund...................................................10
Aetna Growth and Income Fund..........................................20
Statements of Assets and Liabilities...................................27
Statements of Operations...............................................29
Statements of Changes in Net Assets....................................30
Notes to Financial Statements..........................................34
Additional Information.................................................40
Financial Highlights...................................................42
Independent Auditors' Report...........................................50
</TABLE>
<PAGE>
LOGO
<TABLE>
<CAPTION>
Page # Jan-92 Dec-92 Dec-93
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Balanced
Fund (Class I) 1 10,000 10,020 10,309 10,459 10,669 10,989 11,119 11,449 11,709 11,398 11,268 11,531
S&P 500 Index 1 10,000 9,747 9,932 10,245 10,760 11,231 11,286 11,577 11,845 11,396 11,444 12,004
Lehman Brothers
Aggregate Bond
Index 1 10,000 9,872 10,271 10,712 10,741 11,185 11,481 11,781 11,788 11,450 11,332 11,401
60% S&P 500/40%
Lehman Aggregate
Bond Index 1 10,000 9,797 10,068 10,433 10,758 11,219 11,373 11,668 11,833 11,429 11,412 11,775
<CAPTION>
Page # Dec-94 Dec-95 Oct-96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Balanced
Fund (Class I) 1 11,509 12,053 13,078 13,890 14,522 14,907 15,460 16,066 16,394 17,289 17,040 19,685
S&P 500 Index 1 12,002 13,170 14,428 15,575 16,513 17,400 18,181 18,743 19,260 21,575 22,095 26,439
Lehman Brothers
Aggregate Bond
Index 1 11,444 12,021 12,753 13,003 13,557 13,317 13,393 13,641 13,944 14,094 14,182 14,877
60% S&P 500/40%
Lehman Aggregate
Bond Index 1 11,794 12,720 13,758 14,520 15,294 15,671 16,129 16,555 16,975 18,264 18,580 21,107
<CAPTION>
Page # Oct-97 Oct-98 Oct-99 Oct-00
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Balanced
Fund (Class I) 1 19,602 20,417 22,145 22,211 21,711 24,175 24,588 24,522 24,922 25,719 26,943 27,081 27,178
S&P 500 Index 1 25,447 27,384 31,174 31,542 31,047 36,281 37,975 37,915 39,014 40,032 41,818 29,703 30,084
Lehman Brothers
Aggregate Bond
Index 1 15,183 15,604 15,725 16,043 16,598 16,862 16,712 16,433 16,686 16,551 16,923 41,312 41,386
60% S&P 500/40%
Lehman Aggregate
Bond Index 1 20,813 21,991 23,865 24,230 24,441 27,029 27,689 27,497 28,155 28,523 29,570 17,424 17,905
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Average Annual Total Returns
for the period ended October 31, 2000*
--------------------------------------------
--------------------------------------------
Class I 9.04% 14.30% 11.99%
--------------------------------------------
Class A:
POP (1) 2.55% 12.44% 10.57%
NAV (2) 8.81% 13.78% 11.31%
--------------------------------------------
Class B:
w/CDSC (3) 3.01% 12.94% 10.89%
NAV 8.01% 13.18% 10.89%
--------------------------------------------
Class C:
w/CDSC (4) 6.95% 13.17% 10.88%
NAV 7.95% 13.17% 10.88%
--------------------------------------------
</TABLE>
*Total Return is calculated including reinvestment of income and capital gain
distributions. For periods prior to the inception of Class A, Class B and Class
C, the performance of each class is calculated by using the performance of Class
I since its inception date (01/03/92), adjusted for fees and expenses charged to
the appropriate class. Class I, Class A, Class B and Class C shares participate
in the same portfolio of securities. Past performance is no guarantee of future
results. Investment return and principal of an investment will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than the original
cost.
AETNA BALANCED FUND
HOW DID THE FUND PERFORM DURING THE PERIOD?
The Aetna Balanced Fund Class I shares generated a 9.04% total return, net of
fund expenses, for the year ended October 31, 2000. The benchmark, 60% Standard
& Poor's (S&P) 500 Index(a)/40% Lehman Brothers Aggregate Bond Index(b),
returned 6.85% for the same period.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE FUND?
Equity:
While U.S. equity returns were positive during the period, mid and small cap
stocks significantly outperformed large cap stocks. ("Market cap", or market
capitalization, is the value of a company based on the aggregate market value of
its stock.
See Definition of
Terms. 1
<PAGE>
Market cap is calculated by multiplying the number of shares outstanding by the
current price of a single share.) The S&P 500 Index returned 6.09%, the S&P
MidCap 400 Index(c) returned 31.65%, and the S&P SmallCap 600 Index(d) returned
25.27% during the period. The relative underperformance of the S&P 500 was
principally due to poor performance from the technology sector. Large cap
technology stocks had been taken to extreme values in late 1999 as measured by
their price-to-earnings (P/E) ratios. (The Price/Earnings multiple, or P/E, is
calculated by dividing the price of one share by the earnings per share
generated by the firm. A measure of the attractiveness of a particular
security, the P/E ratio gives investors an idea of how much they are paying for
earning power.)
In 2000, however, investors became markedly less willing to support those high
values as they grew concerned about whether the aggressive earnings growth rates
assumed for technology stocks can be realized, given the adverse economic impact
of the Federal Reserve's (the Fed's) restrictive monetary policy. In this less
optimistic environment, extreme volatility and sharp corrections have marked the
large cap market. Mid and small cap stocks did not reach such extreme values in
1999. Thus, they have benefited from their relative attractiveness as investors
have reduced their allocations to large cap stocks.
The themes behind the differences in equity returns by market cap have also been
responsible for the differences in equity returns between growth and value
stocks. While growth stocks sharply outperformed value stocks in late 1999,
value stocks significantly outperformed growth stocks (except within the mid cap
market) thus far in 2000. While growth stocks typically perform well during
economic downturns as investors seek companies with reliable earnings, the
extremely rich values placed on growth stocks in 1999 hampered their performance
this year.
Fixed Income:
Growth, as measured by Gross Domestic Product (GDP), has moderated over the past
twelve months from 8.3% in the fourth quarter of 1999 to an estimated 2.7% in
the third quarter of 2000. However, the growth trend appears strong as
consumption shows little sign of slowing. Much of this third quarter slowing is
attributable to a temporary reduction in government spending.
During the year, the Fed increased the Fed Funds rate by 100 basis points to
6.50%. (One basis point is equal to one hundredth of a percent, or 0.01%.) These
tightenings increased short-term Treasury yields, while longer-term yields were
held down by reduced Treasury supply. For the year, two-year Treasuries
increased in yield by 14 basis points, while thirty-year Treasuries declined in
yield by 38 basis points due to reduced supply. Inflation remains tame at the
consumer level. However, with tight labor markets, the Fed will be watching wage
inflation closely. Of particular concern is the impact that slowing growth could
have on productivity, and hence wage inflation. The employment cost index has
increased in the past year, particularly the benefits component. With the
moderating economy and a tempered outlook for investment spending, the Fed is
most likely to be on the sidelines in the near term.
Spreads in most sectors have widened due to concerns about credit quality. For
the year, investment grade corporates underperformed Treasuries of similar
duration by nearly 300 basis points, while high yield corporates underperformed
by more than 900 basis points due to increased default levels. One bright spot
was emerging markets. Due to improving economies (driven by oil) and recovery of
spreads from distressed levels, emerging market securities outperformed
Treasuries by over 900 basis points. The U.S. dollar continued to be strong,
appreciating versus the Euro despite its good fundamental value. This will most
likely continue until there are signs that U.S. stock market returns revert to
more historical levels, European economies show stronger growth, and capital
flows into the U.S. rather than out. For the year, the dollar appreciated from
1.05 dollars/Euro to 0.85.
WHAT INVESTMENTS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST TWELVE MONTHS?
Large Cap Stocks:
. This portion of the Fund outperformed the S&P 500 Index during the period. The
quantitative model used to manage this fund provided good discrimination
between stocks with high relative returns and those with low relative returns.
The model's factors relating to equity analyst earnings estimates and price
momentum were particularly effective in the first half of the period. In the
latter half, the model's value factor - the P/E factor - performed well.
. The Fund's outperformance was also due to individual security selection,
particularly in the communication services and technology sectors. Within
communication services, the Fund benefited from its underweights in AT&T and
Worldcom. Within the technology sector, the Fund benefited from overweights in
Cisco, Nortel, and Texas Instruments, and from its
2 See Definition of Terms.
<PAGE>
underweight in Lucent. The Fund was hurt by its overweight in Intel and its
underweight in Dell.
. As the period progressed, based on our model's individual ranking of each
stock in the S&P 500, the Fund's weightings in technology and consumer
cyclicals were reduced in favor of increased positions in consumer staples and
energy.
Mid and Small Cap Stocks:
. In the first six months of the year, the Fund saw strong performance primarily
in two sectors: health care and technology. Energy stocks were also strong.
. In health care (principally biotechnology), the Fund benefited from our
decision to overweight the biotech stocks early in the fiscal year. Stock
selection in this area was also strong as the Fund had six holdings which all
advanced over 200% in the second fiscal quarter. In technology, our largest
holding Interleaf, advanced over 125% in the first half.
. In the second half of the fiscal year, rising interest rates, employment
costs, and oil prices dampened the market's enthusiasm for high P/E multiple
stocks. Combined with some earnings disappointments, technology stocks were
mostly lower in the second half. On the other hand, our selected health care
stocks (HMOs, biotechs and pharmaceuticals) have held up well as most
companies have announced positive developments.
Fixed Income:
. Performance of the Fund was negatively impacted by exposure to non-dollar
assets, specifically Euro-denominated government bonds, as the strong dollar
continued despite our expectations that this trend would begin to reverse.
With weaker domestic stock markets and much of the Euro depreciation due to
capital inflows into the U.S., we continue to expect these flows to reverse,
with the uncertainty being the timing.
. Also having a negative impact on performance was our duration posture, as our
expectation that rates would increase due to Fed tightening was not realized
despite strong growth in consumption and tight labor markets. The impact of
reduced Treasury supply offset much of the expected increase in yields.
However, we continue to believe the economy has underlying strength, which
could lead to increasing inflation and higher yields.
. We have correctly forecasted the deterioration in credit quality, and have
been underweight in corporates through most of the year. While our high yield
exposure has been low, we were negatively impacted at the security level by
some telecommunications issues that deteriorated.
WHAT IS YOUR OUTLOOK GOING FORWARD?
Equity:
Recent equity market performance has reduced the significant valuation gap that
existed between the very high P/E's in the technology sector and the rest of the
market. This has diminished a large risk facing the market. The other
significant macroeconomic risk facing equity markets, the risk of a severe
economic downturn, also appears also to have been mitigated by the Fed's success
in slowing the economy to a sustainable growth rate. Their success makes future
interest rate increases less likely. Thus, the overall outlook for equities has
become more positive as the year 2000 comes to a close.
Fixed Income:
We believe that credit quality will continue to deteriorate, and expect to
maintain an underweight position in investment grade corporates and only a
modest exposure to high yield bonds. However, spreads are more attractive than a
year ago, and at some point when pricing dictates, we expect to reverse our
stance on credit. Also, we remain more comfortable in the other investment grade
sectors - mortgage-backed securities, particularly - due to their attractive
valuations and strong credit quality versus corporates.
We continue to believe we are near the peak of dollar strength versus the Euro,
and with moderations in the stock market, we believe we could see the Euro
strengthen as European economies strengthen relative to the U.S. and capital
flows reverse. We also expect to remain short duration, as we think the current
level of yields underestimates the true strength in the domestic economy and the
inflation risks.
See Definition of
Terms. 3
<PAGE>
<TABLE>
<CAPTION>
% OF EQUITY % OF OVER/(UNDER)
EQUITY PORTFOLIO SECTOR BREAKDOWN INVESTMENTS S&P 500 WEIGHTING
<S> <C> <C> <C>
Basic Materials 2.0% 2.0% --
Capital Goods 8.9% 8.8% 0.1 %
Communication Services 4.1% 6.1% (2.0)%
Consumer Cyclicals 7.0% 6.8% 0.2 %
Consumer Staples 8.8% 10.8% (2.0)%
Energy 7.2% 6.0% 1.2 %
Financials 15.9% 15.7% 0.2 %
Health Care 14.1% 12.0% 2.1 %
Technology 27.8% 27.8% --
Transportation 0.6% 0.6% --
Utilities 3.6% 3.4% 0.2 %
</TABLE>
<TABLE>
<CAPTION>
% OF NET
TOP FIVE EQUITY HOLDINGS ASSETS
<S> <C>
General Electric Co. 2.1%
Exxon Mobil Corp. 1.8%
Cisco Systems, Inc. 1.5%
Microsoft Corp. 1.4%
Pfizer, Inc. 1.3%
</TABLE>
<TABLE>
<CAPTION>
% OF NET
TOP FIVE FIXED INCOME HOLDINGS ASSETS
<S> <C>
U.S. Treasury Note, 6.75%, 05/15/05 2.1%
Federal National Mortgage Association, 7.00%, 12/15/29 2.1%
U.S. Treasury Note, 5.50%, 07/31/01 1.6%
Federal Home Loan Mortgage Association, 6.88%, 09/15/10 1.4%
U.S. Treasury Note, 6.13%, 08/15/29 1.2%
</TABLE>
The opinions expressed reflect those of the portfolio manager only through
October 31, 2000. The manager's opinions are subject to change at any time based
on market and other conditions. The composition, industries and holdings of the
Fund are subject to change.
4 See Definition of Terms.
<PAGE>
LOGO
<TABLE>
<CAPTION>
Page # Jan-92 Dec-92 Dec-93
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Growth
and Income
Fund (Class I) 5 10,000 9,940 9,940 10,299 10,779 11,060 10,929 11,199 11,489 11,149 11,093 11,413
S&P 500 Index 5 10,000 9,747 9,932 10,245 10,760 11,231 11,286 11,577 11,845 11,396 11,444 12,004
<CAPTION>
Page # Dec-94 Dec-95 Oct-96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Growth
and Income
Fund (Class I) 5 11,449 12,127 13,225 14,350 15,056 15,884 16,701 17,397 17,955 20,306 20,225 24,486
S&P 500 Index 5 12,002 13,170 14,428 15,575 16,513 17,400 18,181 18,743 19,260 21,575 22,095 26,439
<CAPTION>
Page # Oct-97 Oct-98 Oct-99 Oct-00
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Growth
and Income
Fund (Class I) 5 24,677 25,126 28,458 27,667 25,619 30,374 30,599 31,267 31,511 32,626 34,160 32,875 32,691
S&P 500 Index 5 25,447 27,384 31,174 31,542 31,047 36,281 37,975 37,915 39,014 40,032 41,818 41,312 41,386
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
for the period ended October 31, 2000*
--------------------------------------------
<S> <C> <C> <C>
--------------------------------------------
Class I 3.76% 18.01% 14.36%
--------------------------------------------
Class A:
POP (1) -2.45% 16.07% 12.96%
NAV (2) 3.50% 17.45% 13.72%
--------------------------------------------
Class B:
w/CDSC (3) -1.51% 16.61% 13.21%
NAV 2.72% 16.82% 13.21%
--------------------------------------------
Class C:
w/CDSC (4) 1.87% 16.83% 13.22%
NAV 2.72% 16.83% 13.22%
--------------------------------------------
</TABLE>
*Total Return is calculated including reinvestment of income and capital gain
distributions. For periods prior to the inception of Class A, Class B and Class
C, the performance of each class is calculated by using the performance of Class
I since its inception date (01/03/92), adjusted for fees and expenses charged to
the appropriate class. Class I, Class A, Class B and Class C shares participate
in the same portfolio of securities. Past performance is no guarantee of future
results. Investment return and principal of an investment will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than the original
cost.
AETNA GROWTH AND INCOME FUND
HOW DID THE FUND PERFORM DURING THE PERIOD?
The Aetna Growth and Income Fund Class I shares generated a 3.76% total return,
net of fund expenses, for the year ended October 31, 2000. The benchmark,
Standard & Poor's (S&P) 500 Index(a), returned 6.09% for the same period.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE FUND?
Over the past year, U.S. equity markets have experienced significant volatility.
Although major stock markets were up for the one-year period, positive returns
were driven by strong performance during the last two months of 1999. For the
first ten months of 2000, the S&P 500 Index, NASDAQ Composite Index(e), and Dow
Jones Industrial Average(f) declined 1.8%, 17.2%, and 3.4%, respectively.
See Definition of
Terms. 5
<PAGE>
Earnings growth, driven by an accelerating U.S. economy (as measured by Gross
Domestic Product or GDP), was the primary driver of stock price performance
early in the fiscal year. The economy expanded at an 8.3% annual pace in the
fourth quarter of 1999 and continued to grow at a healthy pace in the first and
second quarters of 2000 (4.8% and 5.6%, respectively). However, following six
Federal Open Market Committee (FOMC) interest rate hikes beginning in June 1999,
the economy started to show signs of slowing in May 2000. By the end of the
third quarter, the impact of rising interest rates and oil prices were reflected
in a less robust GDP growth figure of 2.7%. Investor concerns over this slowdown
were reflected in a shift away from some of the more richly valued growth stocks
and into value stocks.
Leading the decline in GDP were slower investment and government spending, and a
decline in capital goods orders. In our opinion, concerns over continued slowing
in capital expenditures were largely responsible for the sharp decline in many
technology shares during the latter part of the fiscal year. Investor concerns
that slower economic growth would result in reduced technology spending by U.S.
corporations led to a shift into less economically sensitive sectors such as
healthcare and consumer staples.
The energy sector performed very well for much of the year, propelled by rising
crude, natural gas, and electricity prices. More recently, however, concerns
over low inventories and the related threat of shortages of home heating oil led
the Clinton administration to authorize the release of crude oil from the
Strategic Petroleum Reserve. In September, Saudi Arabia broke ranks with OPEC in
a pledge to pump whatever was necessary to bring the energy market into better
balance at a more modest price level. These moves put a damper on most energy
stocks during the third quarter. However, late in October, Iraq threatened to
cut off its oil exports if the United Nations failed to approve a plan to pay in
Euros, not dollars. The outcome is yet to be resolved.
The FOMC has remained on hold since its May meeting as it evaluates the impact
of earlier rate hikes upon the economy. Inflation data remains tame, as the
employment cost index came in at 0.9% for the third quarter compared to a 1%
increase in the second quarter. Productivity continued to outpace the economic
cost index, keeping unit labor costs at deflation levels. The GDP deflator also
grew slower in the third quarter compared to the second quarter at 2% versus
2.4%, respectively, but still outpaces the fourth quarter of 1999 which was
growing at a 1.3% rate.
WHAT INVESTMENTS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST TWELVE MONTHS?
Stock selection, particularly in the consumer staples and energy sectors, was
the primary cause of the Fund's underperformance for the past twelve months. In
the consumer staples group, performance suffered as a result of our holdings in
CVS Corp., AT&T Liberty Media Group and Procter & Gamble. Although CVS
experienced strong returns in September and October, the stock's volatility in
June and July prompted us to reduce our position. AT&T Liberty Media Group and
Procter & Gamble both experienced losses of over 30% during the period. The
Procter & Gamble loss is mainly attributed to a 31% drop after their
announcement in early March that fiscal third quarter profit would fall because
of a rise in raw materials costs. Fund performance in the energy sector lagged
because we did not own Exxon Mobil during the first three months of the period,
when it was up over 12%.
With the international MSCI EAFE Index(g) down 2.66% for the period, the Fund's
exposure to international stocks also had a negative impact on performance. On
the other hand, the Fund did benefit from its exposure to small and mid cap
stocks, which had returns of 17.41% and 23.73%, respectively.
Stock selection in the technology sector had a positive impact on performance.
For example, we benefited from underweight positions in Yahoo and Applied
Materials, both of which were down significantly for the period. We also
benefited from owning the internet software company BEA Systems and from
overweighting VERITAS Software.
6 See Definition of Terms.
<PAGE>
The asset allocation breakdown is as follows:
<TABLE>
<CAPTION>
ASSET CLASS BENCHMARK INDEX INDEX RETURN
<S> <C> <C>
Large Company Stocks S&P 500 Index (a) 6.09%
Mid Company Stocks S&P MidCap 400 Index (c) 31.65%
Small Company Stocks Russell 2000 Index (h) 17.41%
International Stocks MSCI EAFE Index (g) -2.66%
Real Estate Stocks NAREIT Equity Index (i) 18.28%
Domestic Bonds Salomon Broad Index (j) 7.28%
Cash Equivalents U.S. 90 Day T-Bill (k) 5.74%
</TABLE>
WHAT IS YOUR OUTLOOK GOING FORWARD?
Caution continues to be our outlook going into the final two months of 2000.
Throughout September and October of 2000, expectations of favorable earnings
reports began to unravel as well respected technology companies, the leaders of
the "new economy," began alluding to shortfalls in revenues and earnings due to
weaker demand in the U.S. and abroad. High oil prices, low unemployment and
strong consumer spending continue to threaten our low inflation environment.
While the most recent top line growth number for the economy, third quarter GDP
at 2.7% showed slowing growth, the data suggests a mixed economic picture as we
move toward the end of 2000.
We will continue to look for clarification on a number of issues, including the
presidential election, oil prices, the weak Euro and consumer spending. In this
uncertain environment, our focus continues to be on stocks displaying strong and
improving business fundamentals.
<TABLE>
<CAPTION>
ECONOMIC EXPOSURE*
ASSET ALLOCATION 10/31/00 10/31/99
<S> <C> <C>
Large Cap Stocks 77% 80%
Mid Cap Stocks 11% 2%
Small Cap Stocks 4% --
International Stocks 2% 5%
Real Estate Stocks -- 3%
Convertible Securities -- 1%
Special Situations** -- 3%
Cash Equivalents 6% 6%
-------------- ------
100% 100%
============== ======
</TABLE>
* Economic exposure reflects the Fund's exposure to both changes in the value of
the portfolio of investments as well as the financial instruments underlying the
options and futures positions, if any.
** The special situations category was created to take advantage of investment
opportunities which are "special" in the sense that they do not fit well into
our normal valuation and modeling framework. The largest category within this
group is initial public offerings, but other categories include spin-offs, newly
created securities, and stocks of companies which derive their value from
something other than current assets, earnings and dividends.
See Definition of
Terms. 7
<PAGE>
<TABLE>
<CAPTION>
% OF EQUITY % OF OVER/(UNDER)
DOMESTIC EQUITY SECTOR BREAKDOWN INVESTMENTS S&P 500 WEIGHTING
<S> <C> <C> <C>
Basic Materials 0.4% 2.0% (1.6)%
Capital Goods 7.9% 8.8% (0.9)%
Communication Services 6.2% 6.1% 0.1%
Consumer Cyclicals 5.3% 6.8% (1.5)%
Consumer Staples 7.4% 10.8% (3.4)%
Energy 5.3% 6.0% (0.7)%
Financials 17.0% 15.7% 1.3%
Health Care 14.2% 12.0% 2.2%
Technology 31.5% 27.8% 3.7%
Transportation 0.9% 0.6% 0.3%
Utilities 3.9% 3.4% 0.5%
</TABLE>
<TABLE>
<CAPTION>
% OF NET
TOP FIVE EQUITY HOLDINGS ASSETS
<S> <C>
General Electric Co. 4.1%
Cisco Systems, Inc. 2.9%
Exxon Mobil Corp. 2.4%
Intel Corp. 2.2%
Microsoft Corp. 2.1%
</TABLE>
The opinions expressed reflect those of the portfolio manager only through
October 31, 2000. The manager's opinions are subject to change at any time based
on market and other conditions. The composition, industries and holdings of the
Fund are subject to change.
8 See Definition of Terms.
<PAGE>
<TABLE>
<CAPTION>
DEFINITION OF TERMS
<S><C>
(1)
On February 2, 1998, the Funds redesignated Adviser Class shares as Class A
shares. For periods prior to that date, Class A performance is calculated by
using the performance of Class I shares and deducting the Class A front-end
load and internal fees and expenses applicable to the Class A shares. The
maximum load for the Funds is 5.75%. The POP (public offering price) returns
reflect this maximum load.
(2)NAV (net asset value) returns are net of Fund expenses only and do not
reflect the deduction of a front-end load or contingent deferred sales
charges. This charge, if reflected, would reduce the performance results
shown.
(3)
The Funds began offering Class B shares on March 1, 1999. For periods prior
to that date, Class B performance is calculated using the performance of
Class I shares and deducting the internal fees and expenses applicable to the
Class B shares. Class B share returns with CDSC (contingent deferred sales
charge) reflect the deduction of a maximum CDSC, assuming full redemption at
the end of the period. The CDSC applies for all shares redeemed prior to the
end of the first six years of ownership. The CDSC charges are as follows:
Year 1 - 5%, Year 2 - 4%, Year 3 - 3%, Year 4 - 3%, Year 5 - 2%, Year 6 - 1%.
(4)
The Funds began offering Class C shares on June 30, 1998. For periods prior
to that date, Class C performance is calculated using the performance of
Class I shares and deducting the internal fees and expenses applicable to the
Class C shares. Class C share returns for periods less than 18 months reflect
the deduction of the contingent deferred sales charge of 1%.
(a)
The S&P 500 is the Standard & Poor's 500 Index. Performance is calculated on
a total return basis and dividends are reinvested, as reported by Frank
Russell Company.
(b)The Lehman Brothers Aggregate Bond Index is an unmanaged index and is
composed of securities from Lehman Brothers Government/Corporate Bond Index,
Mortgage-Backed Securities Index and the Asset-Backed Securities Index.
(c)
The Standard & Poor's MidCap 400 Index is an unmanaged index used to measure
stock market performance composed of companies with a weighted average market
value of $3.6 billion. Performance is calculated on a total return basis and
dividends are reinvested, as reported by Frank Russell Company.
(d)
The Standard & Poor's (S&P) SmallCap 600 Index is an unmanaged index used to
measure stock market performance composed of companies with a weighted
average market value of $903 million. Performance is calculated on a total
return basis and dividends are reinvested, as reported by Frank Russell
Company.
(e)NASDAQ Composite Index is an unmanaged index of the National Market System
which includes over 5,000 stocks traded only over-the-counter and not on an
exchange.
(f)
The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip
stocks that are generally the leaders in their industry. It has been a widely
followed indicator of the stock market since October 1, 1928.
(g)
The MSCI EAFE Index (Morgan Stanley Capital International-Europe, Australia
and Far East) is a market value-weighted average of the performance of more
than 900 securities listed on the stock exchanges of countries in Europe,
Australia and the Far East. Performance is calculated on a total return
basis, as reported by Frank Russell Company.
(h)The Russell 2000 Index consists of the smallest 2,000 of the 3,000 largest
companies, based on market capitalization.
(i)The NAREIT Equity REIT Index is a market weighted total return of all
tax-qualified REITs listed on the New York Stock Exchange, American Stock
Exchange and the NASDAQ National Market System as reported by Frank Russell
Company.
(j)
Salomon Smith Barney Broad Investment-Grade Bond (Salomon Broad) Index is an
unmanaged, market-weighted index that contains approximately 4,700
individually priced investment-grade bonds rated BBB or better. The index
includes U.S. Treasury/Agency issues, mortgage pass-through securities, and
corporate issues.
(k)Three-month Treasury bills are backed by full faith and credit of the U.S.
Government, short-term investments are equivalent to cash because their
maturity is only three months.
The unmanaged indices described above are not available for individual
investment.
</TABLE>
9
<PAGE>
GROWTH & INCOME FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 2000
BALANCED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
NUMBER OF SHARES MARKET VALUE
---------------------- ---------------
COMMON STOCKS (59.7%)
AEROSPACE/DEFENSE (0.6%)
Alliant Techsystems Inc. + ... 1,800 161,887
Boeing Co. ................... 7,000 474,687
General Dynamics Corp. ....... 1,000 71,563
Goodrich (B.F.) Co. .......... 200 8,188
Lockheed Martin Corp. ........ 3,200 114,720
Northrop Grumman Corp. ....... 400 33,600
864,645
---------------
AGRICULTURE (0.1%)
Archer-Daniels-Midland Co. ... 3,302 36,322
Delta and Pine Land Co. ...... 2,400 58,650
94,972
---------------
AIR FREIGHT (0.1%)
FedEx Corp. + ................ 1,500 70,290
---------------
AIRLINES (0.2%)
America West Holdings Corp. + 14,100 140,119
AMR Corp. + .................. 1,100 36,025
Delta Air Lines, Inc. ........ 300 14,175
Southwest Airlines Co. ....... 3,075 87,637
277,956
---------------
ALUMINUM (0.1%)
Alcoa Inc. ................... 4,648 133,340
---------------
AUTO PARTS & EQUIPMENT (0.1%)
Dana Corp. ................... 700 15,531
Delphi Automotive Systems
Corp......................... 3,144 49,322
Genuine Parts Co. ............ 1,300 27,706
Goodyear Tire & Rubber Co.
(The)........................ 500 9,250
Snap-On, Inc. ................ 300 7,669
TRW, Inc. .................... 400 16,800
Visteon Corp. + .............. 981 17,351
143,629
---------------
AUTOMOBILES (0.3%)
Ford Motor Co. ............... 11,500 300,437
General Motors Corp. + ....... 1,400 86,975
387,412
---------------
BANKS - REGIONAL (0.3%)
Banknorth Group, Inc. ........ 11,400 206,625
East West Bancorp, Inc. ...... 8,100 153,394
360,019
---------------
BANKS - MAJOR REGIONAL (1.7%)
AmSouth Bancorporation ....... 2,000 27,875
Bank of New York Co., Inc. ... 4,700 270,544
Bank One Corp. ............... 5,366 195,859
BB&T Corp. ................... 1,800 57,375
Comerica, Inc. ............... 850 51,266
Fifth Third Bancorp .......... 2,700 138,712
Firstar Corp. ................ 4,681 92,157
Fleet Boston Financial Corp. . 4,395 167,010
Huntington Bancshares Inc. ... 1,488 21,390
KeyCorp ...................... 2,200 54,313
NUMBER OF SHARES MARKET VALUE
---------------------- ---------------
BANKS - MAJOR REGIONAL (CONTINUED)
Mellon Financial Corp. ....... 2,600 125,450
National City Corp. .......... 2,900 61,988
Northern Trust Corp. ......... 1,100 93,912
Old Kent Financial Corp. ..... 630 17,443
PNC Financial Services Group . 1,400 93,625
Regions Financial Corp. ...... 700 16,494
SouthTrust Corp. ............. 1,000 32,375
State Street Corp. ........... 1,100 137,214
Summit Bancorp ............... 1,000 37,500
Suntrust Banks, Inc. ......... 1,600 78,100
Synovus Financial Corp. ...... 1,600 34,500
U.S. Bancorp ................. 3,400 82,237
Union Planters Corp. ......... 700 23,669
Wachovia Corp. ............... 900 48,600
Wells Fargo & Co. ............ 7,800 361,237
2,320,845
---------------
BANKS - MONEY CENTER (0.7%)
Bank of America Corp. ........ 7,900 379,694
Chase Manhattan Corp. (The) .. 6,150 279,825
First Union Corp. ............ 4,500 136,406
J.P. Morgan & Co. ............ 1,000 165,500
961,425
---------------
BEVERAGES - ALCOHOLIC (0.2%)
Anheuser-Busch Co., Inc. ..... 4,200 192,150
Brown-Forman Corp. + ......... 500 30,438
Coors (Adolph) Co. ........... 300 19,106
241,694
---------------
BEVERAGES - NON-ALCOHOLIC (0.6%)
Coca-Cola Co. (The) .......... 12,200 736,575
Coca-Cola Enterprises Inc. ... 1,000 18,375
754,950
---------------
BIOTECHNOLOGY (1.3%)
Alliance Pharmaceutical Corp.
+............................ 8,300 117,238
Amgen, Inc. + ................ 4,800 278,100
Biogen, Inc. + ............... 400 24,075
Cambridge Antibody Technology
Group Plc + ................. 700 43,454
Coulter Pharmaceutical, Inc. + 3,400 130,263
Enzon, Inc. + ................ 1,400 99,750
Immunomedics, Inc. + ......... 9,300 215,062
Invitrogen Corp. + ........... 4,400 334,675
MedImmune, Inc. + ............ 1,400 91,525
NPS Pharmaceuticals, Inc. + .. 5,000 214,375
Protein Design Labs, Inc. + .. 1,400 189,109
1,737,626
---------------
BROADCASTING - TV, RADIO & CABLE (0.4%)
Citadel Communications Corp. + 12,700 153,987
Clear Channel Communications,
Inc. + ...................... 2,700 162,169
Comcast Corp. - Class A
Special + ................... 4,200 171,150
487,306
---------------
BUILDING MATERIALS GROUP (0.0%)
Armstrong Holdings, Inc. ..... 300 863
NUMBER OF SHARES MARKET VALUE
---------------------- ---------------
BUILDING MATERIALS GROUP (CONTINUED)
Masco Corp. .................. 1,200 22,425
23,288
---------------
CELLULAR/WIRELESS TELECOMMUNICATIONS (0.2%)
Nextel Communications, Inc. + 1,900 73,031
Sprint Corp. (PCS Group) + ... 5,200 198,250
271,281
---------------
CHEMICALS (0.3%)
Air Products and Chemicals,
Inc.......................... 1,300 48,506
Du Pont (E.I.) de Nemours .... 5,200 235,950
Praxair, Inc. ................ 900 33,525
Rohm & Haas Co. .............. 1,100 33,069
Union Carbide Corp. .......... 700 30,100
381,150
---------------
CHEMICALS - DIVERSIFIED (0.0%)
Engelhard Corp. .............. 700 14,613
FMC Corp. + .................. 200 15,200
29,813
---------------
CHEMICALS - SPECIALITY (0.4%)
Cambrex Corp. ................ 5,000 199,687
Ecolab, Inc. ................. 1,000 39,188
Grace (W.R.) & Co. + ......... 500 1,906
Great Lakes Chemical Corp. ... 300 10,013
Hercules, Inc. ............... 500 9,156
International Flavors &
Fragrances, Inc. ............ 600 10,050
Millennium Chemicals, Inc. ... 12,500 201,562
Sigma-Aldrich Corp. .......... 700 25,025
496,587
---------------
COMMUNICATIONS EQUIPMENT (1.5%)
ADC Telecommunications, Inc. + 5,800 123,975
CommScope, Inc. + ............ 4,000 101,250
Comverse Technology, Inc. + .. 800 89,400
Corning, Inc. ................ 6,800 520,200
Nortel Networks Corp. ........ 14,800 673,400
QUALCOMM Inc. + .............. 3,600 234,394
Scientific-Atlanta, Inc. ..... 1,400 95,812
Tellabs, Inc. + .............. 2,000 99,875
1,938,306
---------------
COMPUTERS - HARDWARE (3.0%)
Apple Computer, Inc. + ....... 2,400 46,950
Compaq Computer Corp. ........ 8,300 252,403
Dell Computer Corp. + ........ 13,400 395,300
Electronics for Imaging, Inc.
+............................ 6,900 106,950
Gateway, Inc. + .............. 1,600 82,576
Hewlett-Packard Co. .......... 12,800 594,400
International Business
Machines Corp. .............. 8,900 876,650
MRV Communications, Inc. + ... 2,800 110,600
Palm, Inc. + ................. 3,286 176,006
Sun Microsystems, Inc. + ..... 12,100 1,341,588
3,983,423
---------------
COMPUTERS - NETWORKING (1.7%)
Avaya Inc. ................... 633 8,506
NUMBER OF SHARES MARKET VALUE
---------------------- ---------------
COMPUTERS - NETWORKING (CONTINUED)
Cabletron Systems, Inc. + ... 1,300 35,262
Cisco Systems, Inc. + ........ 36,400 1,961,050
Network Appliance, Inc. + .... 2,300 273,700
2,278,518
---------------
COMPUTERS - PERIPHERALS (1.5%)
EMC Corp. + .................. 16,700 1,487,344
Lexmark International Group,
Inc. + ...................... 600 24,600
Oak Technology, Inc. + ....... 9,500 266,594
Seagate Technology, Inc. + ... 1,300 90,837
Storage Technology Corp. + ... 7,800 76,050
1,945,425
---------------
COMPUTERS SOFTWARE/SERVICES (4.1%)
Adobe Systems, Inc. .......... 1,600 121,700
America Online, Inc. + ....... 11,400 574,902
Autodesk, Inc. ............... 400 8,825
BMC Software, Inc. + ......... 1,200 24,375
Citrix Systems, Inc. + ....... 1,000 22,125
Entrust Technologies, Inc. + . 3,600 110,475
InfoSpace.com, Inc. + ........ 5,824 117,208
Mercury Interactive Corp. + .. 500 55,500
Microsoft Corp. + ............ 26,900 1,852,738
Novell, Inc. + ............... 1,800 16,200
Oracle Corp. + ............... 43,000 1,419,000
Parametric Technology Co. + .. 1,300 16,006
PeopleSoft, Inc. + ........... 1,600 69,825
Pharmacopeia, Inc. + ......... 10,200 186,150
Siebel Systems, Inc. + ....... 3,100 325,306
Unisys Corp. + ............... 700 8,925
VERITAS Software Corp. + ..... 3,100 437,148
Yahoo! Inc. + ................ 2,700 158,288
5,524,696
---------------
CONSTRUCTION (0.0%)
Vulcan Materials Co. ......... 600 25,200
---------------
CONSUMER FINANCE (0.5%)
Capital One Financial Corp. .. 1,200 75,750
Countrywide Credit Industries,
Inc.......................... 800 29,950
Household International, Inc. 3,000 150,938
MBNA Corp. ................... 5,350 200,959
Metris Companies, Inc. ....... 3,150 101,981
Providian Financial Corp. .... 650 67,600
627,178
---------------
CONTAINERS - METAL & GLASS (0.0%)
Crown Cork & Seal Co., Inc. .. 800 7,300
Owens-Illinois, Inc. + ....... 800 4,750
12,050
---------------
CONTAINERS/PACKAGING - PAPER (0.0%)
Temple-Inland Inc. ........... 400 17,900
---------------
DISTRIBUTORS - FOOD & HEALTH (0.2%)
Cardinal Health, Inc. ........ 1,400 132,650
McKesson HBOC, Inc. .......... 1,400 39,288
SUPERVALU, Inc. .............. 1,400 21,525
NUMBER OF SHARES MARKET VALUE
---------------------- ---------------
DISTRIBUTORS - FOOD & HEALTH (CONTINUED)
Sysco Corp. .................. 1,600 83,500
276,963
---------------
ELECTRIC COMPANIES (1.3%)
Alliant Energy Corp. ......... 5,100 154,594
Ameren Corp. ................. 700 27,825
American Electric Power Co.,
Inc.......................... 1,400 58,100
Cinergy Corp. ................ 700 21,438
CMS Energy Corp. ............. 700 18,900
Consolidated Edison, Inc. .... 1,100 38,706
Constellation Energy Group ... 1,300 54,194
CP&L, Inc. ................... 500 20,156
Dominion Resources, Inc. ..... 1,604 95,538
DTE Energy Co. ............... 800 28,900
Duke Energy Corp. ............ 2,100 181,519
Edison International Inc. .... 1,500 35,813
Entergy Corp. ................ 1,700 65,131
Exelon Corp. ................. 1,800 108,225
FirstEnergy Corp. ............ 1,500 38,813
FPL Group, Inc. .............. 800 52,800
GPU, Inc. .................... 900 29,756
IDACORP, Inc. ................ 3,300 162,731
Independent Energy Holdings
Plc + + ..................... 14,900 104
PG&E Corp. ................... 2,000 53,875
Pinnacle West Capital Corp. .. 400 17,375
PPL Corp. .................... 1,200 49,425
Public Service Enterprise
Group, Inc. ................. 1,600 66,400
Reliant Energy Inc. .......... 1,800 74,362
Southern Co. ................. 2,900 85,187
TXU Corp. .................... 1,200 44,475
Western Resources, Inc. ..... 6,000 128,250
Xcel Energy, Inc. ............ 2,200 56,238
1,768,830
---------------
ELECTRICAL EQUIPMENT (3.1%)
ACT Manufacturing, Inc. + .... 2,300 75,613
American Power Conversion
Corp. + ..................... 900 11,644
Benchmark Electronics, Inc. + 2,300 92,575
C&D Technologies, Inc. ....... 4,700 277,887
Cooper Industries, Inc. ...... 700 26,775
Emerson Electric Co. ......... 2,200 161,562
General Electric Co. ......... 50,300 2,757,069
Littlefuse, Inc. + .......... 5,500 159,500
Molex, Inc. .................. 1,100 59,400
Power-One, Inc. + ............ 400 28,375
Rockwell International Corp. . 900 35,381
Sanmina Corp. + .............. 700 80,019
Sensormatic Electronics Corp.
+............................ 11,300 203,400
Solectron Corp. + ............ 2,800 123,200
Thomas & Betts Corp. ......... 400 6,050
4,098,450
---------------
ELECTRONICS - COMPONENT DIST. (0.0%)
Grainger (W.W.), Inc. ........ 500 15,969
---------------
NUMBER OF SHARES MARKET VALUE
---------------------- ---------------
ELECTRONICS - DEFENSE (0.1%)
Mercury Computer Systems, Inc. 4,400 136,400
+............................
---------------
ELECTRONICS - INSTRUMENTS (0.2%)
Agilent Technologies, Inc. + . 2,402 111,243
Alpha Industries, Inc. + ..... 3,700 147,537
Perkin Elmer, Inc. ........... 300 35,850
Zygo Corp. ................... 200 9,900
304,530
---------------
ELECTRONICS - SEMICONDUCTORS (3.2%)
Adaptec, Inc. + .............. 900 14,231
Advanced Micro Devices, Inc. + 2,400 54,300
Altera Corp. + ............... 3,000 122,813
Analog Devices, Inc. + ....... 2,400 156,000
Broadcom Corp. - Class A + ... 1,200 266,850
Conexant Systems, Inc. + ..... 600 15,788
Cree, Inc. + ................. 3,100 307,675
Intel Corp. .................. 34,400 1,548,000
JDS Uniphase Corp. + ......... 4,800 390,600
Linear Technology Corp. ...... 2,400 154,950
LSI Logic Corp. + ............ 1,400 46,025
Maxim Integrated Products,
Inc. + ...................... 1,900 125,994
Micron Technology, Inc. + .... 3,500 121,625
National Semiconductor Corp. + 1,100 28,600
REMEC, Inc. + ................ 7,700 229,556
Texas Instruments, Inc. ...... 8,900 436,656
Xilinx, Inc. + ............... 2,600 188,337
4,208,000
---------------
ENGINEERING & CONSTRUCTION (0.2%)
Dycom Industries, Inc. + ..... 2,400 90,300
Fluor Corp. .................. 500 17,500
Jacobs Engineering Group, Inc.
+............................ 4,800 198,600
306,400
---------------
ENTERTAINMENT (1.0%)
Time Warner, Inc. ............ 6,700 508,597
Viacom, Inc. - Class B + ..... 7,200 409,500
Walt Disney Co. (The) + ...... 10,200 365,287
1,283,384
---------------
EQUIPMENT - SEMICONDUCTORS (0.6%)
Applied Materials, Inc. + .... 4,100 217,812
Asyst Technologies, Inc. + ... 11,500 172,500
EMCORE Corp. + ............... 2,200 90,200
KLA-Tencor Corp. + ........... 1,200 40,575
Novellus Systems, Inc. + ..... 600 24,563
Teradyne, Inc. + ............. 1,200 37,500
Veeco Instruments Inc. + ..... 3,000 198,609
781,759
---------------
FINANCIAL - DIVERSIFIED (2.3%)
American Express Co. ......... 8,500 510,000
Associates First Capital Corp. 3,504 130,086
Citigroup Inc. ............... 23,098 1,215,532
Fannie Mae.................... 4,900 377,300
Freddie Mac .................. 1,600 96,000
NUMBER OF SHARES MARKET VALUE
---------------------- ---------------
FINANCIAL - DIVERSIFIED (CONTINUED)
Morgan Stanley Dean Witter &
Co........................... 5,800 465,812
Mutual Risk Management Ltd. .. 14,700 266,438
USA Education Inc. ........... 800 44,700
3,105,868
---------------
FOODS (1.3%)
Campbell Soup Co. ............ 2,200 64,350
ConAgra Foods, Inc. .......... 2,700 57,713
General Mills, Inc. .......... 1,600 66,800
Heinz (H.J.) Co. ............. 1,700 71,294
Hershey Foods Corp. .......... 700 38,019
Kellogg Co. .................. 1,000 25,375
Nabisco Group Holdings Corp. . 2,300 66,412
PepsiCo, Inc. ................ 11,000 532,812
Quaker Oats Co. .............. 700 57,094
Ralston Purina Group ......... 1,800 43,650
Sara Lee Corp. ............... 4,400 94,875
Suiza Foods Corp. + .......... 3,800 175,987
Unilever NV .................. 2,857 145,171
Universal Foods Corp. ........ 10,100 199,475
Wrigley (Wm.) Jr. Co. + ...... 600 47,513
1,686,540
---------------
FOOTWEAR (0.2%)
NIKE, Inc. - Class B ......... 1,500 59,906
Reebok International Ltd. + .. 11,400 245,813
305,719
---------------
GAMING, LOTTERY, & PARI-MUTUEL (0.0%)
Harrah's Entertainment, Inc. + 800 22,900
---------------
GOLD/PRECIOUS METALS MINING (0.0%)
Newmont Mining Corp. ......... 900 12,206
---------------
HARDWARE & TOOLS (0.0%)
Black & Decker Corp. ......... 700 26,338
Stanley Works (The) .......... 400 10,650
36,988
---------------
HEALTH CARE - DRUGS (0.1%)
Alza Corp. + ................. 500 40,469
Medicis Pharmaceutical Corp. + 1,500 110,437
Watson Pharmaceuticals, Inc. + 600 37,538
188,444
---------------
HEALTH CARE - DRUGS/PHARMACUETICALS (3.7%)
Alkermes Inc. ................ 4,500 166,781
Allergan, Inc. ............... 600 50,438
Catalytica, Inc. + ........... 20,200 271,437
Eli Lilly & Co. .............. 5,800 518,375
Genelabs Technologies, Inc. + 6,300 32,878
Guilford Pharmaceuticals Inc.
+............................ 7,000 172,813
Keryx Biopharmaceuticals, Inc.
+............................ 3,400 47,600
King Pharmaceuticals, Inc. + . 1,300 58,256
Merck & Co., Inc. ............ 11,200 1,007,300
Pfizer, Inc. ................. 40,500 1,749,094
Pharmacia Corp. .............. 6,394 351,670
Schering-Plough Corp. ........ 7,500 387,656
NUMBER OF SHARES MARKET VALUE
---------------------- ---------------
HEALTH CARE - DRUGS/PHARMACUETICALS (CONTINUED)
United Therapeutics Corp. + .. 1,500 80,250
4,894,548
---------------
HEALTH CARE - HOSPITAL MANAGEMENT (0.1%)
HCA - The Healthcare Corp. ... 2,600 103,838
Tenet Healthcare Corp. + ..... 2,400 94,350
198,188
---------------
HEALTH CARE - MANAGED CARE (0.5%)
First Health Group Corp. + ... 5,100 198,900
Foundation Health Systems,
Inc. + ...................... 10,900 220,044
UnitedHealth Group Inc. ...... 1,300 142,187
Wellpoint Health Networks,
Inc. + ...................... 400 46,775
607,906
---------------
HEALTH CARE - MEDICAL PRODUCTS/SUPPLIES (0.6%)
Bard (C.R.) Inc. ............. 300 12,563
Bausch & Lomb, Inc. .......... 300 11,569
Baxter International, Inc. ... 1,500 123,281
Becton, Dickinson & Co. ...... 1,200 40,200
Biomet, Inc. ................. 900 32,569
Boston Scientific Corp. + .... 1,900 30,281
Guidant Corp. + .............. 1,500 79,406
Medtronic, Inc. + ............ 6,200 336,737
PE Corp-PE Biosystems Group .. 1,500 175,500
St. Jude Medical, Inc. + ..... 500 27,500
869,606
---------------
HEALTH CARE - SPECIAL SERVICES (0.4%)
Applied Molecular Evolution + 3,300 71,775
CuraGen Corp. + .............. 1,800 116,325
FuelCell Energy, Inc. + ...... 1,200 91,875
HEALTHSOUTH Corp. + .......... 2,100 25,200
Renal Care Group, Inc. + ..... 10,200 239,700
544,875
---------------
HEALTH CARE DIVERSIFIED (1.6%)
Abbott Laboratories .......... 7,900 417,219
American Home Products Corp. . 6,300 400,050
Bristol-Myers Squibb Co. ..... 10,100 615,469
Johnson & Johnson ............ 6,900 635,662
2,068,400
---------------
HOMEBUILDING (0.0%)
Centex Corp. ................. 600 22,200
---------------
HOUSEHOLD FURNISHINGS & APPLIANCES (0.2%)
Ethan Allen Interiors, Inc. .. 6,500 190,125
Leggett & Platt, Inc. ........ 900 14,738
Maytag Corp. ................. 400 11,450
Whirlpool Corp. .............. 500 21,750
238,063
---------------
HOUSEHOLD PRODUCTS - NON-DURABLE (0.5%)
Clorox Co. ................... 600 26,775
Colgate-Palmolive Co. ........ 2,800 164,528
Fort James Corp. ............. 700 23,056
Kimberly-Clark Corp. ......... 2,900 191,400
NUMBER OF SHARES MARKET VALUE
---------------------- ---------------
HOUSEHOLD PRODUCTS - NON-DURABLE (CONTINUED)
Procter & Gamble Co. ......... 3,400 242,888
648,647
---------------
HOUSEWARES (0.0%)
Fortune Brands, Inc. ......... 600 17,662
Newell Rubbermaid Inc. ....... 900 17,269
34,931
---------------
INSURANCE - LIFE/HEALTH (0.3%)
AFLAC, Inc. .................. 1,900 138,819
American General Corp. ....... 1,300 104,650
Jefferson-Pilot Corp. ........ 750 51,562
Lincoln National Corp. ....... 1,000 48,375
Torchmark Corp. .............. 800 26,650
UnumProvident Corp. .......... 800 22,600
392,656
---------------
INSURANCE - MULTI-LINE (1.3%)
American International Group,
Inc.......................... 14,840 1,454,320
CIGNA Corp. .................. 1,200 146,340
Hartford Financial Services
Group, Inc. ................. 1,400 104,213
1,704,873
---------------
INSURANCE - PROPERTY/CASUALTY (0.6%)
Allstate Corp. (The) ......... 3,600 144,900
Chubb Corp. .................. 1,100 92,881
Cincinnati Financial Corp. ... 1,000 36,750
Horace Mann Educators Corp. .. 9,700 163,081
MBIA, Inc. ................... 800 58,150
MGIC Investment Corp. ........ 800 54,500
Progressive Corp. ............ 200 19,650
Radian Group Inc. ............ 2,700 191,362
St. Paul Co., Inc. ........... 850 43,563
804,837
---------------
INSURANCE BROKERS (0.4%)
Aon Corp. .................... 1,200 49,725
Gallagher (Arthur J.) & Co. .. 4,600 290,375
Marsh & McLennan Co., Inc. ... 1,400 183,050
523,150
---------------
INVESTMENT BANKING/BROKERAGE (0.6%)
Bear Stearns Co., Inc. (The) . 600 36,375
Charles Schwab Corp. ......... 6,800 238,850
Lehman Brothers Holdings Inc. 2,000 129,000
Merrill Lynch & Co., Inc. .... 4,200 294,000
Paine Webber Group Inc. ...... 800 57,000
755,225
---------------
INVESTMENT MANAGEMENT (0.3%)
Franklin Resources, Inc. ..... 1,300 55,692
Stilwell Financial, Inc. ..... 1,200 53,775
T. Rowe Price & Associates ... 4,900 229,381
338,848
---------------
LEISURE TIME - PRODUCTS (0.2%)
Brunswick Corp. .............. 600 11,663
Harley-Davidson, Inc. ........ 2,300 110,831
Hasbro, Inc. ................. 1,350 14,512
NUMBER OF SHARES MARKET VALUE
---------------------- ---------------
LEISURE TIME - PRODUCTS (CONTINUED)
Mattel, Inc. ................. 1,000 12,938
Six Flags, Inc. + ............ 7,800 121,875
271,819
---------------
LODGING - HOTELS (0.0%)
Hilton Hotels Corp. .......... 1,300 12,350
Marriott International, Inc. . 900 36,450
48,800
---------------
MACHINERY - DIVERSIFIED (0.2%)
Caterpillar, Inc. ............ 1,700 59,606
Deere & Co. .................. 1,300 47,856
Dover Corp. .................. 1,300 55,169
Ingersoll-Rand Co. ........... 1,200 45,300
207,931
---------------
MANUFACTURING - DIVERSIFIED (0.9%)
Danaher Corp. ................ 900 56,812
Eaton Corp. .................. 400 27,225
Honeywell International Inc. . 3,725 200,452
Illinois Tool Works, Inc. .... 800 44,450
ITT Industries, Inc. ......... 800 26,050
Johnson Controls, Inc. ....... 600 35,775
Minnesota Mining and
Manufacturing Co. (3M) ...... 1,800 173,925
National Service Industries,
Inc.......................... 200 4,088
Parker-Hannifin Corp. ........ 600 24,825
PPG Industries Inc. .......... 1,000 44,625
Textron, Inc. ................ 700 35,306
Thermo Electron Corp. + ...... 900 26,100
Tyco International Ltd. ...... 8,567 485,662
1,185,295
---------------
MANUFACTURING - SPECIALIZED (0.2%)
Avery Dennison Corp. ......... 900 45,450
Pall Corp. ................... 500 10,781
Sealed Air Corp. + ........... 568 27,335
United Technologies Corp. .... 3,000 209,438
293,004
---------------
METALS MINING (0.0%)
Freeport-McMoRan Copper &
Gold, Inc. + ................ 1,600 12,700
Phelps Dodge Corp. ........... 400 18,700
31,400
---------------
MISCELLANEOUS METALS (0.0%)
Barrick Gold Corp. ........... 1,700 22,737
Inco Ltd. + .................. 1,000 15,438
38,175
---------------
NATURAL GAS - DISTRIBUTION - PIPE LINE (0.7%)
Coastal Corp. (The) .......... 1,000 75,438
Dynegy Inc. .................. 2,400 111,150
El Paso Energy Corp. ......... 1,200 75,225
Enron Corp. .................. 4,800 393,900
Sempra Energy ................ 800 16,550
Southwest Gas Corp. .......... 7,800 162,825
Williams Co., Inc. (The) ..... 2,200 91,987
927,075
---------------
NUMBER OF SHARES MARKET VALUE
---------------------- ---------------
OFFICE EQUIPMENT & SUPPLIES (0.0%)
Pitney Bowes, Inc. ........... 700 20,781
---------------
OIL (0.6%)
Royal Dutch Petroleum Co. .... 13,700 813,437
---------------
OIL & GAS - DRILLING & EQUIPMENT (0.6%)
Baker Hughes Inc. ............ 1,700 58,438
BJ Services Co. + ............ 2,500 131,094
Halliburton Co. .............. 2,200 81,538
Marine Drilling Companies,
Inc. + ...................... 8,900 212,487
Nabors Industries, Inc. + .... 800 40,720
Schlumberger, Ltd. ........... 3,700 281,662
Transocean Sedco Forex Inc. .. 1,000 53,000
858,939
---------------
OIL & GAS - EXPLORATION/PRODUCTION (0.6%)
Anadarko Petroleum Corp. ..... 1,618 103,633
Apache Corp. ................. 600 33,187
Burlington Resources, Inc. ... 1,200 43,200
Devon Energy Corp. ........... 600 30,240
Kerr-McGee Corp. ............. 400 26,125
St. Mary Land & Exploration
Co........................... 3,200 75,000
Triton Energy Ltd. + ......... 7,000 215,250
Unocal Corp. ................. 1,600 54,600
Vintage Petroleum, Inc. + .... 8,200 173,225
754,460
---------------
OIL & GAS - REFINING & MARKETING (0.2%)
Ashland Oil Inc. ............. 500 16,375
Tosco Corp. .................. 900 25,763
Valero Energy Corp. .......... 5,200 171,925
214,063
---------------
OIL - DOMESTIC INTEGRATED (0.2%)
Amerada Hess Corp. ........... 600 37,200
Conoco Inc. - Class B ........ 3,000 81,563
Occidental Petroleum Corp. ... 2,600 51,675
Phillips Petroleum Co. ....... 1,700 104,975
USX-Marathon Group ........... 1,600 43,500
318,913
---------------
OIL - INTERNATIONAL INTEGRATED (2.1%)
Chevron Corp. ................ 3,000 246,375
Exxon Mobil Corp. ............ 26,744 2,385,230
Texaco, Inc. ................. 2,600 153,563
2,785,168
---------------
PAPER & FOREST PRODUCTS (0.2%)
Boise Cascade Corp. .......... 500 14,344
Louisiana-Pacific Corp. ...... 9,700 82,450
Mead Corp. ................... 500 14,469
Westvaco Corp. ............... 400 11,400
Weyerhaeuser Co. ............. 1,100 51,631
Willamette Industries, Inc. .. 900 32,681
206,975
---------------
PERSONAL CARE (0.1%)
Avon Products, Inc. .......... 600 29,100
NUMBER OF SHARES MARKET VALUE
---------------------- ---------------
PERSONAL CARE (CONTINUED)
Gillette Co. ................. 2,600 90,675
119,775
---------------
PHOTOGRAPHY/IMAGING (0.1%)
Eastman Kodak Co. ............ 800 35,900
Infocus Corp. + .............. 2,900 128,144
164,044
---------------
POWER PRODUCERS - INDEPENDENT (0.1%)
AES Corp. + .................. 2,300 129,950
---------------
PUBLISHING (0.0%)
Harcourt General, Inc. ....... 300 16,815
McGraw-Hill Co., Inc. (The) .. 1,000 64,188
Meredith Corp. ............... 300 9,525
90,528
---------------
PUBLISHING - NEWSPAPERS (0.2%)
Dow Jones & Co., Inc. ........ 500 29,438
Gannett Co., Inc. ............ 1,300 75,400
Knight-Ridder, Inc. .......... 500 25,125
New York Times Co. ........... 800 29,400
Tribune Co. .................. 1,300 48,181
207,544
---------------
RAILROADS (0.1%)
Burlington Northern Santa Fe
Corp......................... 2,600 69,062
Norfolk Southern Corp. ....... 1,300 18,363
87,425
---------------
RESTAURANTS (0.4%)
Brinker International, Inc. + 6,000 235,500
CBRL Group, Inc. ............. 4,900 87,587
Darden Restaurants, Inc. ..... 900 20,250
McDonald's Corp. ............. 3,400 105,400
Starbucks Corp. + ............ 900 40,219
Tricon Global Restaurants,
Inc. + ...................... 380 11,400
Wendy's International, Inc. .. 900 19,575
519,931
---------------
RETAIL - BUILDING SUPPLIES (0.4%)
Home Depot, Inc. ............. 11,950 513,850
Sherwin-Williams Co. ......... 1,000 21,687
535,537
---------------
RETAIL - COMPUTERS & ELECTRONICS (0.2%)
Best Buy Co., Inc. + ......... 1,300 65,244
Circuit City Stores - Circuit
City Group .................. 1,100 14,575
RadioShack Corp. ............. 900 53,662
Tweeter Home Entertainment
Group, Inc. + ............... 3,900 93,844
227,325
---------------
RETAIL - DEPARTMENT STORES (0.2%)
Dillards, Inc. ............... 600 6,300
Federated Department Stores,
Inc. + ...................... 1,400 45,588
J.C. Penney Co., Inc. ........ 900 10,519
Kohl's Corp. + ............... 1,500 81,281
Nordstrom, Inc. .............. 400 6,575
Sears, Roebuck & Co. ......... 2,000 59,460
209,723
---------------
NUMBER OF SHARES MARKET VALUE
---------------------- ---------------
RETAIL - DISCOUNTERS (0.0%)
Consolidated Stores Corp. + .. 700 8,313
---------------
RETAIL - GENERAL MERCHANDISE CHAIN (0.9%)
Costco Wholesale Corp. + ..... 2,000 73,250
Kmart Corp. + ................ 3,600 21,375
Target Corp. ................. 4,600 127,075
Wal-Mart Stores, Inc. ........ 22,800 1,034,550
1,256,250
---------------
RETAIL - HOME SHOPPING (0.2%)
ValueVision International, 10,500 212,625
Inc. + ......................
---------------
RETAIL - SPECIALITY (0.2%)
AutoZone, Inc. + ............. 1,000 26,813
Bed Bath & Beyond, Inc. + .... 1,300 33,556
Casey's General Stores, Inc. . 12,600 157,500
Office Depot, Inc. + ......... 100 831
Staples, Inc. + .............. 2,400 34,200
Tiffany & Co. ................ 1,000 42,687
Toys "R" Us, Inc. + .......... 1,600 27,500
323,087
---------------
RETAIL SPECIALITY - APPAREL (0.3%)
Abercrombie & Fitch Co. -
Class A + ................... 13,700 322,806
The Limited, Inc. ............ 1,000 25,250
TJX Companies, Inc. .......... 1,600 43,600
391,656
---------------
RETAIL STORES - DRUG STORE (0.3%)
CVS Corp. .................... 2,000 105,875
Walgreen Co. ................. 5,300 241,812
347,687
---------------
RETAIL STORES - FOOD CHAINS (0.2%)
Albertson's, Inc. ............ 2,300 54,481
Kroger Co. (The) + ........... 4,100 92,507
Safeway, Inc. + .............. 2,400 131,250
Winn-Dixie Stores, Inc. ...... 800 15,400
293,638
---------------
SAVINGS & LOAN COMPANIES (0.5%)
Astoria Financial Corp. ...... 5,300 198,750
FirstFed Financial Corp. + ... 8,300 211,650
Golden West Financial Corp. .. 800 44,850
Roslyn Bancorp, Inc. ......... 3,600 78,075
Washington Mutual Financial
Corp......................... 2,598 114,312
647,637
---------------
SERVICES - ADVERTISING/MARKETING (0.2%)
ACNielsen Corp. + ............ 3,300 78,994
Interpublic Group of Co., Inc.
(The)........................ 800 34,350
Omnicom Group, Inc. .......... 1,000 92,250
205,594
---------------
SERVICES - COMMERCIAL & CONSUMER (0.4%)
Chinadotcom Corp. ............ 12,100 122,512
Convergys Corp. + ............ 700 30,494
Getty Images, Inc. + ......... 7,300 231,775
H&R Block, Inc. .............. 500 17,844
IMS Health, Inc. ............. 1,000 23,625
NUMBER OF SHARES MARKET VALUE
---------------------- ---------------
SERVICES - COMMERCIAL & CONSUMER (CONTINUED)
Sunrise Assisted Living, Inc.
+............................ 3,500 81,812
508,062
---------------
SERVICES - COMPUTER SYSTEMS (0.2%)
Computer Sciences Corp. + .... 1,000 63,000
Electronic Data Systems Corp. 2,300 107,956
Sabre Holdings Corp. ......... 505 16,886
Sapient Corp. + .............. 800 28,450
216,292
---------------
SERVICES - DATA PROCESSING (0.3%)
Automatic Data Processing,
Inc.......................... 2,900 189,406
Ceridian Corp. + ............. 900 22,500
Equifax, Inc. ................ 1,100 37,950
First Data Corp. ............. 2,100 105,263
Paychex, Inc. ................ 1,925 109,123
464,242
---------------
SERVICES - FACILITIES/ENVIRONMENTAL (0.1%)
Tetra Technologies Inc. + .... 2,300 79,925
---------------
SPECIALITY PRINTING (0.0%)
Deluxe Corp. ................. 500 11,281
RR Donnelley & Sons Co. ...... 1,000 21,500
32,781
---------------
STEEL (0.0%)
Allegheny Technologies Inc. .. 600 12,150
Nucor Corp. .................. 700 24,281
USX-US Steel Group, Inc. ..... 600 9,563
Worthington Industries ....... 300 2,869
48,863
---------------
TELEPHONE (1.6%)
BellSouth Corp. .............. 9,700 468,631
CenturyTel, Inc. ............. 700 26,950
Qwest Communications
International Inc. + ........ 4,265 207,386
SBC Communications, Inc. ..... 17,427 1,005,320
Verizon Communications ....... 7,034 406,653
2,114,940
---------------
TELEPHONE LONG DISTANCE (0.7%)
AT&T Corp. ................... 19,243 446,197
CapRock Communications Corp. + 21,800 155,325
Global Crossing Ltd. + ....... 4,400 103,950
WorldCom, Inc. + ............. 7,037 167,129
872,601
---------------
TEXTILES - APPAREL (0.0%)
Liz Claiborne, Inc. .......... 500 21,250
VF Corp. ..................... 700 19,119
40,369
---------------
TOBACCO (0.3%)
Philip Morris Co. Inc. ....... 11,100 406,537
UST, Inc. .................... 900 22,725
429,262
---------------
TRUCKS & PARTS (0.0%)
Cummins Engine Co., Inc. ..... 200 6,800
NUMBER OF SHARES MARKET VALUE
---------------------- ---------------
TRUCKS & PARTS (CONTINUED)
PACCAR, Inc. ................. 700 29,444
36,244
---------------
WASTE MANAGEMENT (0.0%)
Waste Management, Inc. ....... 3,000 60,000
TOTAL COMMON STOCKS (COST 79,435,312
$58,931,594)
---------------
PREFERRED STOCKS (0.1%)
Seagram Co. Ltd.
(Entertainment) * ........... 2,100 119,963
TOTAL PREFERRED STOCKS (COST 119,963
$119,112)
---------------
NUMBER OF CONTRACTS
----------------------
CALL OPTIONS (0.0%)
Euro Currency Option Callable
.8925,02/05/01............... 3,871 5,024
Euro Currency Option Callable
.9025,02/05/01............... 6,149 6,932
Euro Currency Option Callable
.8490,03/05/01............... 3,876 12,293
Euro Currency Option Callable
.8609,03/05/01............... 4,497 12,120
TOTAL CALL OPTIONS (COST 36,369
$66,155)
---------------
PUT OPTIONS (0.0%)
U.S. Treasury Option Put
6.38%,01/05/01............... 3,320 1,816
U.S. Treasury Option Put
6.75%,01/05/01............... 1,675 4,711
U.S. Treasury Option Put
6.25%,02/05/01............... 690 836
Venezuela DCB Option Put
83.75,02/05/01............... 173 4,226
Venezuela DCB Option Put 173 4,725
84.50,02/05/01...............
---------------
TOTAL PUT OPTIONS (COST 16,314
$47,472)
---------------
PRINCIPAL
AMOUNT
---------------
LONG-TERM BONDS AND NOTES (34.0%)
CORPORATE BONDS (14.1%)
AT&T Canada Inc.,Zero
Coupon,06/15/08.............. $ 205,000 164,035
Baker Hughes
Inc.,6.25%,01/15/09.......... 25,000 23,603
Bank One Corp.,7.88%,08/01/10 165,000 165,681
Boeing Capital
Corp.,7.38%,09/27/10......... 170,000 172,292
Bombardier Capital
Inc.,7.50%,10/17/05.......... 85,000 84,856
CIT Group, Inc.
(The),7.63%,08/16/05......... 190,000 189,802
Citigroup Inc.,7.25%,10/01/10 170,000 168,917
ConAgra Foods,
Inc.,7.50%,09/15/05.......... 220,000 222,103
Cox Communications
Inc.,6.85%,01/15/18.......... 190,000 171,950
DaimlerChrysler NA Holdings
Inc.,
7.20%,09/01/09 .............. 110,000 106,500
Diageo Capital
Plc,7.25%,11/01/09........... 115,000 111,588
Dominion Resources,
Inc.,8.13%,06/15/10.......... 170,000 175,280
Duke Energy Field Services,
Inc.,7.88%,08/16/10.......... 190,000 193,646
Edison International
Inc.,6.88%,09/15/04.......... 75,000 72,950
ERAC USA Finance
Co.,6.95%,03/01/04 ++ ....... 115,000 111,460
First Union
Corp.,7.55%,08/18/05......... 160,000 160,861
Ford Motor Credit
Corp.,7.60%,08/01/05......... 680,000 683,604
Ford Motor Credit
Corp.,7.88%,06/15/10......... 250,000 250,693
General Electric Capital
Corp.,8.30%,09/20/09......... 75,000 81,635
PRINCIPAL MARKET
AMOUNT VALUE
--------------- ---------------
CORPORATE BONDS (CONTINUED)
General Motors Acceptance
Corp.,
7.50%,07/15/05 .............. $ 165,000 $ 166,482
Hilton Hotel
Corp.,7.35%,01/03/01......... 3,000,000 2,963,880
Houston Industries
Finance,6.95%,01/10/01 * .... 3,000,000 2,960,850
Hyperion Telecom Corp.,Zero
Coupon,04/15/03.............. 55,000 42,900
Pacific Gas & Electric
Co.,7.38%,11/01/05........... 205,000 204,645
PP&L Transition Bond Co.
LLC,7.05%,06/25/09........... 340,000 341,380
Qwest Capital Funding
Inc.,7.75%,08/15/06 ++ ...... 165,000 167,957
Qwest Capital Funding
Inc.,7.90%,08/15/10.......... 100,000 101,441
Raytheon Co.,6.15%,11/01/08 .. 165,000 151,034
Repsol International
Finance,7.45%,07/15/05....... 266,000 267,346
RSL Communications
Plc,10.50%,11/15/08.......... 105,000 14,700
Southern Energy,7.90%,07/15/09 165,000 157,862
Telephonica Europe
BV,7.75%,09/15/10............ 180,000 180,221
Tennessee Gas
Pipeline,7.00%,10/15/28...... 190,000 169,896
Time Warner
Ent.,6.66%,11/13/00.......... 4,000,000 3,991,120
TRW, Inc.,6.45%,06/15/01 ..... 3,000,000 2,985,000
Tyco International Group
SA,5.88%,11/01/04............ 125,000 118,984
Unilever Capital
Corp.,6.88%,11/01/05......... 170,000 168,778
Vodafone AirTouch
Plc,7.75%,02/15/10 ++ ....... 165,000 168,034
WestPoint Stevens
Inc.,7.88%,06/15/05.......... 170,000 127,500
WestPoint Stevens
Inc.,7.88%,06/15/08.......... 35,000 24,150
TOTAL CORPORATE BONDS 18,785,616
---------------
FOREIGN OBLIGATIONS (1.9%)
Bundesrepub.
Deutschland,5.23%,01/04/11... 400,000 339,786
Bundesschatzanweisungen,4.50%,0 670,000 563,235
French Treasury
Note,5.50%,04/25/10.......... 1,855,000 1,588,336
IMPSAT Fiber Networks
Inc.,13.75%,02/15/05......... 98,000 79,870
TOTAL FOREIGN OBLIGATIONS 2,571,227
---------------
NON-AGENCY MORTGAGE-BACKED SECURITIES (0.2%)
DLJ Mortgage Acceptance 350,000 313,961
Corp.,8.10%,06/18/04.........
---------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
(10.1%)
Federal Home Loan Mortgage
Corp.,6.88%,09/15/10......... 1,917,000 1,941,557
Federal Home Loan Mortgage
Corp.,7.00%,12/15/29 # ...... 1,300,000 1,274,403
Federal Home Loan Mortgage
Corp.,7.50%,12/01/11......... 178,280 179,782
Federal Home Loan Mortgage
Corp.,7.50%,12/15/30 #....... 600,000 599,628
Federal Home Loan Mortgage
Corp.,8.00%,11/15/30 #....... 140,000 141,882
Federal National Mortgage
Assoc.,6.50%,11/15/15 #...... 400,000 391,752
Federal National Mortgage
Assoc.,6.50%,11/01/28........ 95,272 91,728
Federal National Mortgage
Assoc.,7.00%,12/15/29 #...... 2,810,000 2,752,929
Federal National Mortgage
Assoc.,7.50%,07/01/11........ 102,693 103,527
Federal National Mortgage
Assoc.,7.50%,10/01/30........ 295,000 294,537
PRINCIPAL MARKET
AMOUNT VALUE
--------------- ---------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
(CONTINUED)
Federal National Mortgage
Assoc.,8.00%,12/15/30 #...... $ 600,000 $ 607,314
Federal National Mortgage
Assoc.,8.50%,11/01/23........ 256,862 263,363
Federal National Mortgage
Assoc.,8.50%,01/01/25........ 741,549 759,969
Federal National Mortgage
Assoc.,9.50%,10/01/16........ 451,921 474,209
Government National Mortgage
Assoc.,6.38%,04/20/28........ 175,888 176,904
Government National Mortgage
Assoc.,7.50%,12/15/23........ 1,557,690 1,567,426
Government National Mortgage
Assoc.,7.50%,11/15/30 #...... 500,000 500,000
Government National Mortgage
Assoc.,8.00%,12/15/23........ 597,238 608,436
Government National Mortgage
Assoc.,8.00%,07/15/24........ 708,686 721,308
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED 13,450,654
SECURITIES
---------------
U.S. GOVERNMENT OBLIGATIONS (7.7%)
Treasury Inflation
Index,3.38%,01/15/07......... 420,000 445,858
Treasury Inflation
Index,4.25%,01/15/10......... 588,000 621,948
U.S. Treasury
Bond,6.13%,08/15/29 * ....... 1,588,000 1,644,564
U.S. Treasury
Bond,6.25%,02/15/07.......... 299,000 304,980
U.S. Treasury
Bond,8.13%,05/15/21.......... 415,000 517,646
U.S. Treasury
Note,5.50%,07/31/01 * ....... 2,093,000 2,079,584
U.S. Treasury
Note,5.75%,11/30/02 * ....... 250,000 248,945
U.S. Treasury
Note,5.75%,08/15/03.......... 200,000 199,250
U.S. Treasury
Note,5.75%,08/15/10.......... 116,000 115,891
U.S. Treasury
Note,5.88%,11/15/04.......... 45,000 45,042
U.S. Treasury
Note,6.25%,05/15/30.......... 272,000 289,680
U.S. Treasury
Note,6.75%,05/15/05.......... 2,758,000 2,859,274
U.S. Treasury
Note,7.00%,07/15/06.......... 260,000 273,975
U.S. Treasury
Note,8.13%,08/15/21.......... 415,000 518,360
TOTAL U.S. GOVERNMENT OBLIGATIONS 10,164,997
---------------
TOTAL LONG-TERM BONDS AND
NOTES 45,286,455
(COST $45,477,697)
---------------
SHORT-TERM INVESTMENTS (13.1%)
Cox Communications
Inc.,6.72%,11/27/00 * ....... 4,000,000 3,980,587
MCN Energy Enterprises
Inc.,7.10%,11/01/00.......... 2,565,000 2,565,000
Sears Roebuck Acceptance
Corp.,6.80%,11/07/00......... 4,000,000 3,995,467
U.S. Treasury
Bill,6.14%,11/09/00 @ ....... 300,000 299,591
U.S. Treasury
Note,4.63%,12/31/00.......... 550,000 548,025
Viacom International
Inc.,6.70%,11/14/00.......... 4,000,000 3,990,322
Whirlpool Corp.,6.67%,11/13/00 2,000,000 1,995,553
TOTAL SHORT-TERM INVESTMENTS 17,374,545
(COST $17,374,877)
---------------
MARKET VALUE
---------------
TOTAL INVESTMENTS (COST
$122,016,907)(A) $142,268,958
OTHER ASSETS LESS LIABILITIES (9,240,696)
---------------
TOTAL NET ASSETS $133,028,262
---------------
</TABLE>
10 See Notes to Portfolio of Investments.
<PAGE>
See Notes to Portfolio of Investments. 11
<PAGE>
GROWTH & INCOME FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 2000
BALANCED (CONTINUED)
12 See Notes to Portfolio of Investments.
<PAGE>
See Notes to Portfolio of Investments. 13
<PAGE>
GROWTH & INCOME FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 2000
BALANCED (CONTINUED)
14 See Notes to Portfolio of Investments.
<PAGE>
See Notes to Portfolio of Investments. 15
<PAGE>
GROWTH & INCOME FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 2000
BALANCED (CONTINUED)
16 See Notes to Portfolio of Investments.
<PAGE>
See Notes to Portfolio of Investments. 17
<PAGE>
GROWTH & INCOME FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 2000
BALANCED (CONTINUED)
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal tax purposes amounts to $123,001,378.
Unrealized gains and losses, based on identified tax cost at October 31,
2000, are as follows:
<TABLE>
<S> <C>
Unrealized gains.............................$23,605,925
Unrealized losses............................ (4,338,345)
-----------
Net unrealized gain.......................$19,267,580
===========
</TABLE>
Information concerning open futures contracts at October 31, 2000 is shown
below:
<TABLE>
<CAPTION>
NOTIONAL
NO. OF MARKET EXPIRATION UNREALIZED
CONTRACTS VALUE DATE GAIN/(LOSS)
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Long Contracts
--------------
Russell 2000 Index
Futures............... 7 $ 1,751,750 Dec 00 $(158,030)
=========== ========
Short Contracts
---------------
U.S. 2 Yr. Treasury
Bond.................. 4 $ (800,500) Dec 00 $ (4,082)
U.S. 10 Yr. Treasury
Bond.................. 11 (1,107,734) Dec 00 (11,719)
----------- --------
$(1,908,234) $ (15,801)
=========== ========
</TABLE>
+ Non-income producing security.
++ Restricted security. This security has been determined to be illiquid under
guidelines established by the Board of Directors.
* Segregated securities for purchases of delayed delivery or when-issued
securities held at October 31, 2000.
# When-issued or delayed delivery security.
@ Security pledged to cover initial margin requirements on open futures
contracts at October 31, 2000.
+ + Securities that may be resold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to section 4(2) of the Securities
Act of 1933, as amended. These securities have been determined to be liquid
under guidelines established by the Board of Directors.
18 See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
Acquisition date and cost of illiquid securities at October 31, 2000 is shown
below:
ACQUISITION
DATE COST
-------------------- -------------------
<S> <C> <C>
Independent Energy Holdings Plc..... 07/24/98 $138,523
=============
</TABLE>
The market value of the total illiquid securities above is $104 which represents
0.00% of the total net assets.
Category percentages are based on net assets.
See Notes to Financial Statements. 19
<PAGE>
GROWTH & INCOME FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 2000
GROWTH AND INCOME
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
NUMBER OF MARKET VALUE
SHARES
------------- --------------
COMMON STOCKS (94.2%)
UNITED STATES (92.2%)
AEROSPACE/DEFENSE (0.6%)
Boeing Co. ............................. 40,200 $ 2,726,063
General Dynamics Corp. ................. 13,300 951,781
3,677,844
--------------
AGRICULTURE (0.0%)
Delta and Pine Land Co. ................ 2,800 68,425
--------------
AIR FREIGHT (0.3%)
FedEx Corp. + .......................... 39,900 1,869,714
--------------
AIRLINES (0.5%)
America West Holdings Corp. + .......... 11,600 115,275
AMR Corp. .............................. 67,300 2,204,075
Delta Air Lines, Inc. .................. 16,600 784,350
3,103,700
--------------
ALUMINUM (0.1%)
Alcoa Inc. ............................. 18,200 522,113
--------------
AUTO PARTS & EQUIPMENT (0.0%)
Cooper Tire & Rubber Co. ............... 13,200 144,375
Tower Automotive, Inc. + ............... 11,100 122,100
266,475
--------------
AUTOMOBILES (0.4%)
Ford Motor Co. ......................... 54,851 1,432,982
General Motors Corp. + ................. 17,600 1,093,400
2,526,382
--------------
AUTOMOTIVE (0.2%)
General Motors Corp. - Class H + ....... 30,600 991,440
--------------
BANKS - REGIONAL (0.1%)
Silicon Valley Bancshares + ............ 7,400 342,250
--------------
BANKS - MAJOR REGIONAL (2.4%)
Bank of New York Co., Inc. ............. 50,000 2,878,125
Fifth Third Bancorp .................... 19,350 994,106
Firstar Corp. .......................... 42,100 828,844
Fleet Boston Financial Corp. ........... 39,900 1,516,200
Mellon Financial Corp. ................. 21,800 1,051,850
Northern Trust Corp. ................... 14,500 1,237,937
PNC Bank Corp. ......................... 12,700 849,313
State Street Corp. ..................... 7,100 885,654
Wells Fargo & Co. ...................... 71,700 3,320,606
13,562,635
--------------
BANKS - MONEY CENTER (1.3%)
Bank of America Corp. .................. 72,000 3,460,500
Chase Manhattan Corp. (The) ............ 43,400 1,974,700
J.P. Morgan & Co. ...................... 12,700 2,101,850
7,537,050
--------------
BEVERAGES - ALCOHOLIC (0.3%)
Anheuser-Busch Co., Inc. ............... 39,200 1,793,400
--------------
BEVERAGES - NON-ALCOHOLIC (1.2%)
Coca-Cola Co. (The) .................... 88,400 5,337,150
Pepsi Bottling Group, Inc. (The) ....... 40,700 1,409,237
6,746,387
--------------
NUMBER OF MARKET VALUE
SHARES
------------- --------------
UNITED STATES (CONTINUED)
BIOTECHNOLOGY (1.6%)
Alliance Pharmaceutical Corp. + ........ 9,100 $ 128,538
Amgen, Inc. + .......................... 45,400 2,630,362
Coulter Pharmaceutical, Inc. + ......... 3,700 141,756
Enzon, Inc. + .......................... 2,700 192,375
Genzyme Corp. + ........................ 28,200 2,002,200
Gilead Sciences, Inc. + ................ 12,400 1,066,400
Immunomedics, Inc. + ................... 9,400 217,375
Invitrogen Corp. + ..................... 4,100 311,856
NPS Pharmaceuticals, Inc. + ............ 5,200 222,950
Vertex Pharmaceutical, Inc. + .......... 22,500 2,094,961
9,008,773
--------------
BROADCASTING - TV, RADIO & CABLE (0.6%)
AT&T Corp. - Liberty Media Corp. - Class
A + ................................... 111,000 1,998,000
Clear Channel Communications, Inc. + ... 20,400 1,225,275
3,223,275
--------------
CELLULAR/WIRELESS TELECOMMUNICATIONS
(0.6%)
AT&T Wireless Group + .................. 15,500 386,531
Nextel Communications, Inc. + .......... 26,800 1,030,125
Sprint Corp. (PCS Group) + ............. 17,800 678,625
VoiceStream Wireless Corp. + ........... 9,200 1,209,800
3,305,081
--------------
CHEMICALS (0.0%)
Dow Chemical Co. ....................... 4,000 122,500
--------------
CHEMICALS - SPECIALITY (0.1%)
Cambrex Corp. .......................... 5,300 211,669
Millennium Chemicals, Inc. ............. 13,300 214,470
426,139
--------------
COMMUNICATIONS EQUIPMENT (2.2%)
ADC Telecommunications, Inc. + ......... 30,500 651,938
CIENA Corp. + .......................... 14,200 1,492,775
Comverse Technology, Inc. + ............ 9,500 1,061,625
Corning, Inc. .......................... 49,800 3,809,700
Metromedia Fiber Network, Inc. + ....... 15,400 292,600
Motorola, Inc. ......................... 96,700 2,411,456
QUALCOMM Inc. + ........................ 29,300 1,907,705
Sycamore Networks, Inc. + .............. 3,900 246,675
Tellabs, Inc. + ........................ 15,000 749,062
12,623,536
--------------
COMPUTERS - HARDWARE (4.8%)
Apple Computer, Inc. + ................. 14,100 275,831
Brocade Communications Systems, Inc. + . 8,300 1,887,213
Compaq Computer Corp. .................. 75,100 2,283,791
Dell Computer Corp. + .................. 94,400 2,784,800
Gateway, Inc. + ........................ 8,100 418,041
International Business Machines Corp. .. 75,700 7,456,450
Juniper Networks, Inc. + ............... 12,100 2,359,500
MRV Communications, Inc. + ............. 4,300 169,850
Sun Microsystems, Inc. + ............... 87,700 9,723,737
27,359,213
--------------
NUMBER OF MARKET VALUE
SHARES
------------- --------------
UNITED STATES (CONTINUED)
COMPUTERS - NETWORKING (3.3%)
3Com Corp. + ........................... 15,300 $ 271,575
Avocent Corp. .......................... 6,300 446,906
Cisco Systems, Inc. + .................. 308,200 16,604,275
Network Appliance, Inc. + .............. 13,400 1,594,600
18,917,356
--------------
COMPUTERS - PERIPHERALS (1.9%)
EMC Corp. + ............................ 110,300 9,823,594
Oak Technology, Inc. + ................. 9,900 277,819
Seagate Technology, Inc. + ............. 10,100 705,737
Storage Technology Corp. + ............. 6,400 62,400
Xircom, Inc. + ......................... 4,700 66,387
10,935,937
--------------
COMPUTERS SOFTWARE/SERVICES (7.6%)
Adobe Systems, Inc. .................... 13,200 1,004,025
America Online, Inc. + ................. 146,800 7,403,124
BEA Systems, Inc. + .................... 24,500 1,757,875
Dendrite International, Inc. + ......... 8,400 182,700
eBay Inc. + ............................ 5,200 267,800
Exodus Communications, Inc. + .......... 18,300 614,194
i2 Technologies, Inc. + ................ 7,200 1,224,000
InfoSpace.com, Inc. + .................. 7,098 142,847
Mercury Interactive Corp. + ............ 16,600 1,842,600
Microsoft Corp. + ...................... 172,900 11,908,487
Oracle Corp. + ......................... 189,800 6,263,400
Pharmacopeia, Inc. + ................... 8,000 146,000
Siebel Systems, Inc. + ................. 13,800 1,448,138
Sybase, Inc. + ......................... 66,500 1,392,344
Symantec Corp. + ....................... 49,800 1,945,313
TIBCO Software Inc. + .................. 6,700 422,100
VeriSign, Inc. + ....................... 8,399 1,108,668
VERITAS Software Corp. + ............... 26,400 3,722,812
WorldGate Communications, Inc. + ....... 4,800 89,700
Yahoo! Inc. + .......................... 10,800 633,150
43,519,277
--------------
CONSTRUCTION (0.0%)
Texas Industries, Inc. ................. 5,600 130,550
--------------
CONSUMER FINANCE (0.9%)
Capital One Financial Corp. ............ 7,000 441,875
Household International, Inc. .......... 20,600 1,036,437
MBNA Corp. ............................. 30,800 1,156,925
Metris Companies, Inc. ................. 3,300 106,838
PMI Group, Inc. (The) .................. 26,600 1,965,075
Providian Financial Corp. .............. 6,600 686,400
5,393,550
--------------
DISTRIBUTORS - FOOD & HEALTH (0.4%)
Cardinal Health, Inc. .................. 15,300 1,449,675
Sysco Corp. ............................ 14,800 772,375
2,222,050
--------------
ELECTRIC COMPANIES (2.0%)
Duke Energy Corp. ...................... 20,300 1,754,681
NUMBER OF MARKET VALUE
SHARES
------------- --------------
UNITED STATES (CONTINUED)
ELECTRIC COMPANIES (CONTINUED)
FirstEnergy Corp. ...................... 70,700 $ 1,829,363
FPL Group, Inc. ........................ 33,200 2,191,200
IDACORP, Inc. .......................... 2,500 123,281
NSTAR Corp.............................. 25,600 990,400
PG&E Corp. ............................. 87,500 2,357,031
PPL Corp. .............................. 29,900 1,231,506
Southern Co. ........................... 28,700 843,063
Western Resources, Inc. ............... 5,600 119,700
11,440,225
--------------
ELECTRICAL EQUIPMENT (5.4%)
ACT Manufacturing, Inc. + .............. 3,600 118,350
AVX Corp. .............................. 53,200 1,522,850
Benchmark Electronics, Inc. + .......... 2,700 108,675
Emerson Electric Co. ................... 18,900 1,387,969
General Electric Co. ................... 428,000 23,459,750
Littlefuse, Inc. + .................... 6,300 182,700
Rockwell International Corp. ........... 44,800 1,761,200
Sensormatic Electronics Corp. + ........ 11,800 212,400
Solectron Corp. + ...................... 29,400 1,293,600
Vishay Intertechnology, Inc. + ......... 36,600 1,098,000
31,145,494
--------------
ELECTRONICS - COMPONENT DIST. (0.2%)
Arrow Electronics, Inc. + .............. 40,100 1,283,200
--------------
ELECTRONICS - DEFENSE (0.0%)
Mercury Computer Systems, Inc. + ....... 4,800 148,800
--------------
ELECTRONICS - INSTRUMENTS (0.9%)
Credence Systems Corp. + ............... 36,500 684,375
Perkin Elmer, Inc. ..................... 19,900 2,378,050
Tektronix, Inc. ........................ 26,600 1,895,250
Therma-Wave Inc. + ..................... 5,200 106,600
5,064,275
--------------
ELECTRONICS - SEMICONDUCTORS (6.1%)
Altera Corp. + ......................... 17,200 704,125
ANADIGICS, Inc. + ...................... 6,250 139,844
Analog Devices, Inc. + ................. 15,700 1,020,500
Applied Micro Circuits Corp. + ......... 27,200 2,067,200
Broadcom Corp. - Class A + ............. 8,200 1,823,475
C-Cube Microsystems Inc. ............... 3,800 74,100
Cypress Semiconductor Corp. + .......... 15,700 587,769
Integrated Device Technology, Inc. + ... 26,600 1,497,912
Intel Corp. ............................ 283,800 12,771,000
International Rectifier Corp. + ........ 19,900 888,038
JDS Uniphase Corp. + ................... 33,700 2,742,337
Linear Technology Corp. ................ 13,600 878,050
LSI Logic Corp. + ...................... 9,300 305,738
Maxim Integrated Products, Inc. + ...... 15,300 1,014,581
Micron Technology, Inc. + .............. 20,800 722,800
PMC Sierra Inc. + ...................... 6,400 1,084,800
REMEC, Inc. + .......................... 8,000 238,500
SDL, Inc. + ............................ 3,400 881,450
NUMBER OF MARKET VALUE
SHARES
------------- --------------
UNITED STATES (CONTINUED)
ELECTRONICS - SEMICONDUCTORS (CONTINUED)
Silicon Storage Technology, Inc. + ..... 58,100 $ 1,321,775
Texas Instruments, Inc. ................ 72,400 3,552,125
Xilinx, Inc. + ......................... 12,300 890,981
35,207,100
--------------
ENGINEERING & CONSTRUCTION (0.0%)
Jacobs Engineering Group, Inc. + ....... 5,900 244,113
--------------
ENTERTAINMENT (1.3%)
Time Warner, Inc. ...................... 19,500 1,480,245
Viacom, Inc. - Class B + ............... 46,942 2,669,826
Walt Disney Co. (The) + ................ 90,700 3,248,194
7,398,265
--------------
EQUIPMENT - SEMICONDUCTORS (0.5%)
Applied Materials, Inc. + .............. 35,100 1,864,688
Asyst Technologies, Inc. + ............. 12,600 189,000
EMCORE Corp. + ......................... 2,400 98,400
Teradyne, Inc. + ....................... 8,800 275,000
Veeco Instruments Inc. + ............... 2,900 191,989
2,619,077
--------------
FINANCIAL - DIVERSIFIED (4.8%)
American Express Co. ................... 65,200 3,912,000
Associates First Capital Corp. ......... 42,000 1,559,250
Citigroup Inc. ......................... 220,000 11,577,500
Fannie Mae.............................. 45,200 3,480,400
Freddie Mac ............................ 30,900 1,854,000
Morgan Stanley Dean Witter & Co. ....... 62,100 4,987,406
Mutual Risk Management Ltd. ............ 16,600 300,875
27,671,431
--------------
FOODS (1.0%)
ConAgra Foods, Inc. .................... 67,300 1,438,537
Dean Foods Co. ......................... 14,700 470,400
PepsiCo, Inc. .......................... 63,700 3,085,469
Sara Lee Corp. ......................... 19,200 414,000
Suiza Foods Corp. + .................... 5,100 236,194
Universal Foods Corp. .................. 10,900 215,275
5,859,875
--------------
FOOTWEAR (0.1%)
Reebok International Ltd. + ............ 10,600 228,563
Timberland Co. (The) + ................. 5,000 258,125
486,688
--------------
GAMING, LOTTERY, & PARI-MUTUEL (0.5%)
International Game Technology + ........ 11,300 413,863
Mandaley Resort Group + ................ 67,300 1,400,681
MGM Mirage Inc. + ...................... 16,600 573,738
Pinnacle Entertainment, Inc. + ......... 14,100 321,656
2,709,938
--------------
HEALTH CARE - DRUGS (0.0%)
Medicis Pharmaceutical Corp. + ......... 2,200 161,975
--------------
HEALTH CARE - DRUGS/PHARMACUETICALS
(5.8%)
Catalytica, Inc. + ..................... 20,000 268,750
Eli Lilly & Co. ........................ 41,300 3,691,188
NUMBER OF MARKET VALUE
SHARES
------------- --------------
UNITED STATES (CONTINUED)
HEALTH CARE - DRUGS/PHARMACUETICALS
(CONTINUED)
Genentech, Inc. + ...................... 5,200 $ 429,000
Guilford Pharmaceuticals Inc. + ........ 7,300 180,219
Merck & Co., Inc. ...................... 112,400 10,108,975
Pfizer, Inc. ........................... 273,500 11,811,781
Pharmacia Corp. ........................ 63,396 3,486,780
Schering-Plough Corp. .................. 64,700 3,344,181
United Therapeutics Corp. + ............ 1,700 90,950
33,411,824
--------------
HEALTH CARE - HOSPITAL MANAGEMENT (0.3%)
HCA - The Healthcare Corp. ............. 36,700 1,465,706
LifePoint Hospitals, Inc. + ............ 3,400 131,750
1,597,456
--------------
HEALTH CARE - MANAGED CARE (0.7%)
Foundation Health Systems, Inc. + ...... 11,700 236,194
Oxford Health Plans, Inc. + ............ 33,200 1,120,500
Trigon Healthcare, Inc. + .............. 33,200 2,380,025
UnitedHealth Group Inc. ................ 5,300 579,687
4,316,406
--------------
HEALTH CARE - MEDICAL PRODUCTS/SUPPLIES
(0.8%)
Baxter International, Inc. ............. 16,900 1,388,969
Guidant Corp. + ........................ 12,300 651,131
Medtronic, Inc. + ...................... 51,900 2,818,819
4,858,919
--------------
HEALTH CARE - SPECIAL SERVICES (0.3%)
Applied Molecular Evolution + .......... 3,000 65,250
CuraGen Corp. + ........................ 1,600 103,400
FuelCell Energy, Inc. + ................ 1,300 99,531
Quest Diagnostics Inc. + ............... 15,500 1,491,875
Renal Care Group, Inc. + ............... 5,800 136,300
1,896,356
--------------
HEALTH CARE DIVERSIFIED (3.4%)
Abbott Laboratories .................... 68,500 3,617,656
American Home Products Corp. ........... 53,000 3,365,500
Bristol-Myers Squibb Co. ............... 87,200 5,313,750
IVAX Corp. + ........................... 32,500 1,413,750
Johnson & Johnson ...................... 61,400 5,656,475
19,367,131
--------------
HOMEBUILDING (0.0%)
Kaufman & Broad Home Corp. ............. 3,100 92,225
Pulte Corp. ............................ 3,200 106,600
198,825
--------------
HOUSEHOLD FURNISHINGS & APPLIANCES
(0.0%)
Ethan Allen Interiors, Inc. ............ 6,300 184,275
--------------
HOUSEHOLD PRODUCTS - NON-DURABLE (1.1%)
Church & Dwight Co., Inc. .............. 11,600 229,100
Colgate-Palmolive Co. .................. 25,300 1,486,628
Kimberly-Clark Corp. ................... 23,000 1,518,000
Procter & Gamble Co. ................... 43,000 3,071,812
6,305,540
--------------
NUMBER OF MARKET VALUE
SHARES
------------- --------------
UNITED STATES (CONTINUED)
INSURANCE - LIFE/HEALTH (0.4%)
AFLAC, Inc. ............................ 11,800 $ 862,137
American General Corp. ................. 10,800 869,400
The MONY Group Inc. .................... 14,900 612,763
2,344,300
--------------
INSURANCE - MULTI-LINE (2.2%)
American International Group, Inc. ..... 88,200 8,643,600
CIGNA Corp. ............................ 11,900 1,451,205
Loews Corp. ............................ 26,600 2,418,937
12,513,742
--------------
INSURANCE - PROPERTY/CASUALTY (0.9%)
Horace Mann Educators Corp. ............ 11,100 186,619
MGIC Investment Corp. .................. 33,700 2,295,812
Old Republic International Corp. ....... 39,900 1,037,400
Radian Group Inc. ...................... 26,600 1,885,275
5,405,106
--------------
INSURANCE BROKERS (0.3%)
Marsh & McLennan Co., Inc. ............. 11,900 1,555,925
--------------
INVESTMENT BANKING/BROKERAGE (1.5%)
Bear Stearns Co., Inc. (The) ........... 26,600 1,612,625
Charles Schwab Corp. ................... 46,000 1,615,750
Goldman Sachs Group, Inc. (The) ........ 7,100 708,669
Lehman Brothers Holdings Inc. .......... 38,000 2,451,000
Merrill Lynch & Co., Inc. .............. 33,800 2,366,000
8,754,044
--------------
LEISURE TIME - PRODUCTS (0.1%)
Brunswick Corp. ........................ 36,500 709,469
--------------
MACHINERY - DIVERSIFIED (0.0%)
Tecumseh Products Co. - Class A ........ 3,000 119,625
--------------
MANUFACTURING - DIVERSIFIED (0.8%)
American Standard Companies, Inc. + .... 21,400 981,725
Graco, Inc. ............................ 8,400 301,875
Illinois Tool Works, Inc. .............. 10,800 600,075
ITT Industries, Inc. ................... 33,200 1,081,075
Minnesota Mining and Manufacturing Co.
(3M)................................... 17,600 1,700,600
4,665,350
--------------
MANUFACTURING - SPECIALIZED (0.3%)
CTS Corp. .............................. 3,000 128,813
United Technologies Corp. .............. 18,900 1,319,456
1,448,269
--------------
NATURAL GAS - DISTRIBUTION - PIPE LINE
(1.2%)
Coastal Corp. (The) .................... 8,500 641,219
Enron Corp. ............................ 42,900 3,520,481
KeySpan Energy Corp. ................... 23,300 819,869
Sempra Energy .......................... 39,900 825,431
Williams Co., Inc. (The) ............... 26,900 1,124,756
6,931,756
--------------
OIL & GAS - DRILLING & EQUIPMENT (0.7%)
Halliburton Co. ........................ 31,600 1,171,175
Noble Drilling Corp. + ................. 46,500 1,932,656
NUMBER OF MARKET VALUE
SHARES
------------- --------------
UNITED STATES (CONTINUED)
OIL & GAS - DRILLING & EQUIPMENT
(CONTINUED)
Schlumberger, Ltd. ..................... 10,800 $ 822,150
3,925,981
--------------
OIL & GAS - EXPLORATION/PRODUCTION
(0.1%)
St. Mary Land & Exploration Co. ........ 2,900 67,969
Triton Energy Ltd. + ................... 8,000 246,000
Vintage Petroleum, Inc. + .............. 10,100 213,362
527,331
--------------
OIL & GAS - REFINING & MARKETING (0.1%)
Ultramar Diamond Shamrock Corp. ........ 19,900 522,375
--------------
OIL - DOMESTIC INTEGRATED (1.1%)
Amerada Hess Corp. ..................... 24,900 1,543,800
Conoco Inc. - Class B .................. 27,100 736,781
Occidental Petroleum Corp. ............. 59,800 1,188,525
Phillips Petroleum Co. ................. 14,300 883,025
USX-Marathon Group ..................... 67,300 1,829,719
6,181,850
--------------
OIL - INTERNATIONAL INTEGRATED (3.1%)
Chevron Corp. .......................... 28,900 2,373,413
Exxon Mobil Corp. ...................... 154,300 13,761,631
Tesoro Petroleum Corp. + ............... 22,800 236,550
Texaco, Inc. ........................... 24,500 1,447,031
17,818,625
--------------
PAPER & FOREST PRODUCTS (0.1%)
Louisiana-Pacific Corp. ................ 39,500 335,750
--------------
PHOTOGRAPHY/IMAGING (0.1%)
Eastman Kodak Co. ...................... 7,400 332,075
Infocus Corp. + ........................ 6,400 282,800
Zebra Technologies, Inc. + ............. 3,200 140,200
755,075
--------------
POWER PRODUCERS - INDEPENDENT (0.5%)
AES Corp. + ............................ 14,200 802,300
Calpine Corp. + ........................ 23,300 1,839,244
2,641,544
--------------
PUBLISHING - NEWSPAPERS (0.3%)
Dow Jones & Co., Inc. .................. 16,600 977,325
Gannett Co., Inc. ...................... 11,600 672,800
1,650,125
--------------
REIT DIVERSIFIED (0.3%)
Simon Property Group, Inc. ............. 20,000 446,250
Starwood Hotels & Resorts Worldwide,
Inc.................................... 34,600 1,025,025
1,471,275
--------------
RESTAURANTS (0.3%)
CBRL Group, Inc. ....................... 4,900 87,588
Darden Restaurants, Inc. ............... 49,800 1,120,500
Sonic Corp. + .......................... 6,500 237,250
1,445,338
--------------
RETAIL - BUILDING SUPPLIES (0.9%)
Home Depot, Inc. ....................... 102,099 4,390,257
Lowe's Co., Inc. ....................... 12,900 589,369
4,979,626
--------------
NUMBER OF MARKET VALUE
SHARES
------------- --------------
UNITED STATES (CONTINUED)
RETAIL - COMPUTERS & ELECTRONICS (0.1%)
Best Buy Co., Inc. + ................... 7,400 $ 371,388
--------------
RETAIL - DEPARTMENT STORES (0.2%)
Kohl's Corp. + ......................... 12,900 699,019
Sears, Roebuck & Co. ................... 14,300 425,139
1,124,158
--------------
RETAIL - GENERAL MERCHANDISE CHAIN
(1.2%)
Costco Wholesale Corp. + ............... 19,700 721,512
Target Corp. ........................... 27,200 751,400
Wal-Mart Stores, Inc. .................. 120,600 5,472,225
6,945,137
--------------
RETAIL - HOME SHOPPING (0.0%)
ValueVision International, Inc. + ...... 11,300 228,825
--------------
RETAIL - SPECIALITY (0.3%)
AutoZone, Inc. + ....................... 26,600 713,212
Casey's General Stores, Inc. ........... 12,800 160,000
CSK Auto Corp. + ....................... 9,900 34,650
Payless ShoeSource, Inc. + ............. 5,000 289,688
Zale Corp. + ........................... 8,600 291,325
1,488,875
--------------
RETAIL SPECIALITY - APPAREL (0.1%)
Abercrombie & Fitch Co. - Class A + .... 14,300 336,944
--------------
RETAIL STORES - DRUG STORE (0.4%)
CVS Corp. .............................. 8,900 471,144
Walgreen Co. ........................... 44,600 2,034,875
2,506,019
--------------
RETAIL STORES - FOOD CHAINS (0.3%)
Kroger Co. (The) + ..................... 36,800 830,300
Safeway, Inc. + ........................ 20,200 1,104,688
1,934,988
--------------
SAVINGS & LOAN COMPANIES (0.8%)
Astoria Financial Corp. ................ 15,400 577,500
Dime Bancorp, Inc. ..................... 19,900 486,306
FirstFed Financial Corp. + ............. 9,100 232,050
Golden State Bancorp, Inc. + ........... 39,900 1,042,388
GreenPoint Financial Corp. ............. 36,500 1,085,875
Roslyn Bancorp, Inc. ................... 3,600 78,075
Sovereign Bancorp, Inc. ................ 33,700 280,131
Washington Mutual Fin. Corp. ........... 23,800 1,047,200
4,829,525
--------------
SERVICES - ADVERTISING/MARKETING (0.3%)
ACNielsen Corp. + ...................... 3,700 88,569
Acxiom Corp. + ......................... 16,600 668,150
Omnicom Group, Inc. .................... 7,700 710,325
1,467,044
--------------
SERVICES - COMMERCIAL & CONSUMER (0.1%)
Computer Learning Centers, Inc. + ...... 1,313 1,067
United Rentals, Inc. + ................. 23,300 500,950
502,017
--------------
SERVICES - COMPUTER SYSTEMS (0.2%)
Computer Sciences Corp. + .............. 7,000 441,000
NUMBER OF MARKET VALUE
SHARES
------------- --------------
UNITED STATES (CONTINUED)
SERVICES - COMPUTER SYSTEMS (CONTINUED)
Electronic Data Systems Corp. .......... 17,900 $ 840,181
1,281,181
--------------
SERVICES - DATA PROCESSING (1.0%)
Automatic Data Processing, Inc. ........ 27,700 1,809,156
DST Systems, Inc. + .................... 33,200 2,045,950
First Data Corp. ....................... 18,300 917,287
Paychex, Inc. .......................... 14,600 827,638
5,600,031
--------------
SERVICES - FACILITIES/ENVIRONMENTAL
(0.0%)
Tetra Technologies Inc. + .............. 2,300 79,925
--------------
TELEPHONE (3.8%)
ALLTEL Corp. ........................... 14,000 902,125
BellSouth Corp. ........................ 83,100 4,014,769
Qwest Communications International Inc.
+...................................... 43,333 2,107,067
SBC Communications, Inc. ............... 147,600 8,514,675
Telephone & Data Systems, Inc. ......... 13,300 1,403,150
Verizon Communications ................. 88,672 5,126,350
22,068,136
--------------
TELEPHONE LONG DISTANCE (0.9%)
AT&T Corp. ............................. 95,984 2,225,629
CapRock Communications Corp. + ......... 5,000 35,625
Level 3 Communications, Inc. + ......... 6,400 305,200
Sprint Corp. ........................... 26,400 673,200
WorldCom, Inc. + ....................... 93,300 2,215,875
5,455,529
--------------
TOBACCO (0.6%)
Philip Morris Co. Inc. ................. 97,000 3,552,625
TOTAL UNITED STATES (COST $463,396,953) 530,247,068
--------------
FOREIGN COMMON STOCKS (2.0%)
CANADA (0.1%)
C-MAC Industries Inc.
(Electronics - Semiconductors) + ...... 900 49,950
Celestica Inc. (Electronics -
Semiconductors)........................ 4,600 330,625
Nortel Networks Corp.
(Communications Equipment) ............ 5,400 244,313
TOTAL CANADA 624,888
--------------
DENMARK (0.1%)
Novo Nordisk A/S
(Health Care - Drugs/Pharmacueticals) . 1,700 360,092
Vestas Wind Systems A/S (Electrical
Equipment)............................. 7,100 384,063
TOTAL DENMARK 744,155
--------------
FINLAND (0.2%)
Comptel Oyj (Data & Imaging Services) + 20,000 276,317
Elisa Communications Oyj
(Telephone Long Distance) ............. 4,700 130,268
Nokia Oyj, ADR (Communications
Equipment)............................. 12,400 530,100
Perlos Oyj (Electronics - Component
Dist.)................................. 2,700 57,442
Tecnomen Oyj (Communications Equipment) 11,300 78,060
TOTAL FINLAND 1,072,187
--------------
NUMBER OF MARKET VALUE
SHARES
------------- --------------
FRANCE (0.1%)
Alcatel (Communications Equipment) ..... 1,400 $ 85,319
Genset (Biotechnology & Medical
Products) + ........................... 8,700 142,462
STMicroelectronics NV
(Electronics - Semiconductors) ........ 8,100 408,158
TOTAL FRANCE 635,939
--------------
HONG KONG (0.0%)
China Mobile (Hong Kong) Ltd., ADR
(Cellular/Wireless Telecommunications) 6,000 183,750
+......................................
--------------
IRELAND (0.1%)
CRH Plc (Construction) ................. 24,400 374,334
--------------
ISRAEL (0.0%)
Orbotech Ltd. (Semiconductors & 2,250 119,109
Electronics) + ........................
--------------
ITALY (0.1%)
Banca Nazionale del Lavoro (Banks &
Thrifts) + ............................ 60,600 196,213
Telecom Italia SpA (Other
Telecommunications).................... 26,900 228,460
TOTAL ITALY 424,673
--------------
JAPAN (0.3%)
Canon, Inc. (Electrical Machinery &
Instruments)........................... 9,000 356,901
Crayfish Co., Ltd. (Data & Imaging
Services) + ........................... 6,800 10,625
Murata Manufacturing Co., Ltd.
(Electronics - Component Dist.) ....... 2,000 239,216
NTT DoCoMo, Inc.
(Other Telecommunications) + .......... 11 270,996
Softbank Corp. (Semiconductors &
Electronics)........................... 2,700 161,965
Sony Corp. (Semiconductors &
Electronics)........................... 4,100 327,429
Takefuji Corp. (Consumer Finance) ...... 2,000 197,820
TOTAL JAPAN 1,564,952
--------------
NETHERLANDS (0.3%)
Crucell NV (Biotechnology &
Medical Products) + ................... 7,700 98,877
ING Groep NV (Financial - Diversified) . 6,080 417,014
Koninklijke (Royal) Philips Electronics
NV (Electronics - Component Dist.) .... 16,296 639,656
Koninklijke Ahold NV (Food & Drug
Retail)................................ 3,838 111,353
United Pan-Europe Communications NV
(Other Telecommunications) + .......... 17,300 302,801
TOTAL NETHERLANDS 1,569,701
--------------
SOUTH KOREA (0.0%)
Samsung Electronics 6,300 205,538
(Electronics - Component Dist.) .......
--------------
SPAIN (0.1%)
Telefonica Publicidad e Informacion, SA
(Services - Advertising/Marketing) .... 19,400 131,548
Telefonica SA (Other Telecommunications)
+...................................... 16,573 315,642
TOTAL SPAIN 447,190
--------------
SWEDEN (0.1%)
Adcore AB (Semiconductors & Electronics)
+...................................... 22,800 93,521
HiQ International AB
(Services - Data Processing) .......... 30,000 242,515
NUMBER OF MARKET VALUE
SHARES
------------- --------------
SWEDEN (CONTINUED)
Telefonaktiebolaget LM Ericsson AB, ADR
(Semiconductors & Electronics) ........ 14,700 $ 203,962
Telelogic AB (Semiconductors &
Electronics) + ........................ 25,000 164,671
TOTAL SWEDEN 704,669
--------------
SWITZERLAND (0.1%)
Fantastic Corp. (Data & Imaging
Services) + ........................... 7,800 20,495
Gretag Imaging Group (Producer Goods) + 1,200 215,563
Swatch Group AG (The) (Consumer
Specialties)........................... 100 132,363
TOTAL SWITZERLAND 368,421
--------------
TAIWAN (0.0%)
Taiwan Semiconductor Manufacturing Co., 10,200 231,413
Ltd. (Electronics - Semiconductors) + .
--------------
UNITED KINGDOM (0.4%)
Bookham Technology Plc
(Electronics - Semiconductors) + ...... 4,100 138,119
Cable & Wireless Plc
(Other Telecommunications) + .......... 13,300 188,301
Celltech Group Plc
(Biotechnology & Medical Products) + .. 10,000 198,938
Celltech Group Plc, ADR
(Biotechnology & Medical Products) + .. 2,700 107,831
Shire Pharmaceuticals Group Plc (Drugs)
+...................................... 5,800 364,675
Viatel, Inc. (Other Telecommunications)
+...................................... 38,000 365,750
Vodafone AirTouch Plc
(Cellular/Wireless Telecommunications) 137,597 572,940
WPP Group Plc (Commercial Services) .... 26,200 351,917
TOTAL UNITED KINGDOM 2,288,471
--------------
TOTAL FOREIGN COMMON STOCKS
(COST $10,515,913) 11,559,390
TOTAL COMMON STOCKS 541,806,458
(COST $473,912,866)
--------------
PREFERRED STOCKS (0.0%)
UNITED STATES (0.0%)
Merrill CBR (Investment
Banking/Brokerage)..................... 1,300 19,175
TOTAL PREFERRED STOCKS (COST $70,362) 19,175
--------------
PRINCIPAL
AMOUNT
-------------
LONG-TERM BONDS AND NOTES (1.6%)
CORPORATE BONDS (1.6%)
Devon Energy Corp.,4.90%,08/15/08 ...... $ 39,000 36,477
Hilton Hotel Corp.,7.35%,01/03/01 ...... 3,000,000 2,963,880
Houston Industries
Finance,6.95%,01/10/01................. 3,000,000 2,960,850
Kerr-McGee Corp.,7.50%,05/15/14 ........ 45,000 44,156
Raytheon Co.,5.95%,03/15/01 ............ 3,000,000 2,981,250
TALK.com Inc.,5.00%,12/15/04 ........... 100,000 48,625
Vantive Corp. (The),4.75%,09/01/02 ..... 70,000 72,450
TOTAL CORPORATE BONDS 9,107,688
--------------
TOTAL LONG-TERM BONDS AND NOTES 9,107,688
(COST $9,145,154)
--------------
PRINCIPAL MARKET VALUE
AMOUNT
------------- --------------
SHORT-TERM INVESTMENTS (4.0%)
Cox Communications Inc.,6.72%,11/27/00 . $ 4,000,000 $ 3,980,587
Federal National Mortgage
Assoc.,6.43%,11/02/00.................. 5,000,000 4,999,107
MCN Energy Enterprises
Inc.,7.10%,11/01/00.................... 9,000,000 9,000,000
Reliant Energy Resources,7.25%,11/01/00 5,300,000 5,300,000
TOTAL SHORT-TERM INVESTMENTS 23,279,694
(COST $23,279,694)
--------------
TOTAL INVESTMENTS
(COST $506,408,076)(A) 574,213,015
OTHER ASSETS LESS LIABILITIES 1,146,682
--------------
TOTAL NET ASSETS $575,359,697
--------------
</TABLE>
20 See Notes to Portfolio of Investments.
<PAGE>
See Notes to Portfolio of Investments. 21
<PAGE>
GROWTH & INCOME FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 2000
GROWTH AND INCOME (CONTINUED)
22 See Notes to Portfolio of Investments.
<PAGE>
See Notes to Portfolio of Investments. 23
<PAGE>
GROWTH & INCOME FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 2000
GROWTH AND INCOME (CONTINUED)
24 See Notes to Portfolio of Investments.
<PAGE>
See Notes to Portfolio of Investments. 25
<PAGE>
GROWTH & INCOME FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 2000
GROWTH AND INCOME (CONTINUED)
<TABLE>
<CAPTION>
NOTES TO PORTFOLIO OF INVESTMENTS
<S> <C>
(a) The cost of investments for federal income tax purposes amounts to
$514,757,556. Unrealized gains and losses, based on identified tax cost at
October 31, 2000, are as follows:
Unrealized gains............................ $ 94,321,458
Unrealized losses........................... (34,865,999)
-----------------------
Net unrealized gain........................ $ 59,455,459
=======================
</TABLE>
+ Non-income producing security.
ADR - American Depositary Receipt
Category percentages are based on net assets.
26 See Notes to Financial Statements.
<PAGE>
GROWTH & INCOME FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 2000
<TABLE>
<CAPTION>
BALANCED GROWTH AND INCOME
------------- --------------------
<S> <C> <C> <C>
ASSETS:
Investments, at market value ........ $142,268,958 $574,213,015
Cash ................................ 821 637
Cash denominated in foreign
currencies......................... 301 1,423,728
Receivable for:
Dividends and interest ............. 547,135 368,208
Investments sold ................... 2,235,091 111,147
Fund shares sold ................... 33,914 15,046
Recoverable foreign taxes .......... -- 15,555
Variation margin ................... 50,103 --
Prepaid expenses .................... 1,417 6,136
------------ ------------
Total assets ................... 145,137,740 576,153,472
------------ ------------
LIABILITIES:
Payable for:
Investments purchased .............. 11,942,753 273,310
Fund shares redeemed ............... 40,445 84,306
Other liabilities ................... 126,280 436,159
------------ ------------
Total liabilities .............. 12,109,478 793,775
------------ ------------
NET ASSETS ..................... $133,028,262 $575,359,697
============ ============
NET ASSETS REPRESENTED BY:
Paid-in capital ..................... $101,535,854 $486,108,719
Net unrealized gain on investments,
open futures and options contracts. 20,075,589 67,772,400
Undistributed net investment income . 1,224,982 767,370
Accumulated net realized gain on
investments........................ 10,191,837 20,711,208
------------ ------------
NET ASSETS ..................... $133,028,262 $575,359,697
============ ============
Cost of investments ................. $122,016,907 $506,408,076
Cost of cash denominated in foreign
currencies......................... $ 294 $ 1,450,767
CAPITAL SHARES, $.001 PAR VALUE:
Class I:
Outstanding ........................ 6,675,388 33,654,596
Net Assets ......................... $ 94,149,250 $479,822,967
Net Asset Value, offering and
redemption price per share (net
assets divided by shares
outstanding)....................... $ 14.10 $ 14.26
Class A:
Outstanding ........................ 2,525,613 6,517,343
Net Assets ......................... $ 35,564,305 $ 92,407,143
Net Asset Value and redemption price
per share (net assets divided by
shares outstanding) ................ $ 14.08 $ 14.18
Offering price (net asset value
divided by 1 minus maximum sales
load).............................. $ 14.94 $ 15.05
Class B:
Outstanding ........................ 80,608 65,199
Net Assets ......................... $ 1,129,736 $ 920,203
Net Asset Value, offering and
redemption price per share (net
assets divided by shares
outstanding)....................... $ 14.02 $ 14.11
Class C:
Outstanding ........................ 156,523 157,331
Net Assets ......................... $ 2,184,971 $ 2,209,384
Net Asset Value, offering and
redemption price per share (net
assets divided by shares
outstanding)....................... $ 13.96 $ 14.04
</TABLE>
See Notes to Financial Statements. 27
<PAGE>
GROWTH & INCOME FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 2000 (CONTINUED)
28 See Notes to Financial Statements.
<PAGE>
GROWTH & INCOME FUNDS
STATEMENTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 2000
<TABLE>
<CAPTION>
BALANCED GROWTH AND INCOME
------------ -------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends .................................. $ 747,907 $ 5,513,768
Interest ................................... 3,609,437 1,250,088
----------- -----------
4,357,344 6,763,856
Foreign taxes withheld on dividends ........ (3,615) (16,484)
----------- -----------
Total investment income ................. 4,353,729 6,747,372
----------- -----------
INVESTMENT EXPENSES:
Investment advisory fees ................... 1,054,126 4,091,885
Administrative services fees ............... 131,766 614,699
Distribution plan fees - Class A ........... 84,638 214,142
Distribution plan fees - Class B ........... 6,068 5,816
Distribution plan fees - Class C ........... 13,476 16,408
Shareholder services fees - Class B ........ 2,023 1,939
Shareholder services fees - Class C ........ 4,492 5,469
Printing and postage fees .................. 12,961 54,996
Custody fees ............................... 53,138 76,879
Transfer agent fees ........................ 96,123 145,639
Audit fees ................................. 24,233 28,212
Directors' fees ............................ 3,286 15,504
Registration fees .......................... 15,655 35,339
Miscellaneous expenses ..................... 6,501 26,309
----------- -----------
Total investment expenses ............... 1,508,486 5,333,236
----------- -----------
Net investment income ...................... 2,845,243 1,414,136
----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ............................... 10,453,886 25,185,831
Options Written ........................... 33,602 (264,480)
Futures and forward foreign currency
exchange contracts ........................ 173,698 (178,829)
Foreign currency related transactions ..... (238,649) (253,971)
----------- -----------
Net realized gain on investments ...... 10,422,537 24,488,551
----------- -----------
Net change in unrealized gain or loss on:
Investments ............................... (2,038,473) (95,113)
Options Written ........................... -- (815,487)
Futures and forward foreign currency
exchange contracts ........................ (126,983) 101,879
Foreign currency related transactions ..... (3,785) 4,673
----------- -----------
Net change in unrealized gain or loss
on investments ........................ (2,169,241) (804,048)
----------- -----------
Net realized and change in unrealized gain
or loss on investments .................... 8,253,296 23,684,503
----------- -----------
Net increase in net assets resulting from
operations ................................ $11,098,539 $25,098,639
=========== ===========
</TABLE>
See Notes to Financial Statements. 29
<PAGE>
GROWTH & INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BALANCED
----------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
---------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ................... $ 2,845,243 $ 3,026,171
Net realized gain on investments......... 10,422,537 4,603,655
Net change in unrealized gain or loss on
investments............................. (2,169,241) 9,923,300
------------ ------------
Net increase in net assets resulting
from operations......................... 11,098,539 17,553,126
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Class I:
From net investment income.............. (2,030,213) (2,952,877)
From net realized gains................. (3,587,037) (5,225,035)
Class A:
From net investment income.............. (595,472) (233,379)
From net realized gains................. (1,116,230) (374,055)
Class B:
From net investment income.............. (11,081) (1,449)
From net realized gains................. (29,173) --
Class C:
From net investment income.............. (23,399) (12,315)
From net realized gains................. (65,438) (16,008)
------------ ------------
Decrease in net assets from
distributions to shareholders........... (7,458,043) (8,815,118)
------------ ------------
FUND SHARE TRANSACTIONS:
Class I:
Proceeds from shares sold............... 11,281,711 31,653,601
Net asset value of shares issued upon
reinvestment of distributions.......... 5,555,798 8,105,087
Payments for shares redeemed............ (24,099,888) (60,750,795)
Class A:
Proceeds from shares sold............... 22,276,880 22,679,325
Net asset value of shares issued upon
reinvestment of distributions.......... 1,683,307 547,198
Payments for shares redeemed............ (16,654,695) (4,299,124)
Class B:
Proceeds from shares sold............... 1,025,359 862,814
Net asset value of shares issued upon
reinvestment of distributions.......... 40,239 1,442
Payments for shares redeemed............ (687,895) (131,198)
Class C:
Proceeds from shares sold............... 1,114,653 1,471,222
Net asset value of shares issued upon
reinvestment of distributions.......... 87,632 22,343
Payments for shares redeemed............ (637,961) (144,640)
------------ ------------
Net increase in net assets from fund
share transactions...................... 985,140 17,275
------------ ------------
Net change in net assets................. 4,625,636 8,755,283
NET ASSETS:
Beginning of period...................... 128,402,626 119,647,343
------------ ------------
End of period............................ $133,028,262 $128,402,626
============ ============
End of period net assets includes
undistributed net investment income..... $ 1,224,982 $ 1,287,245
============ ============
SHARE TRANSACTIONS:
Class I:
Number of shares sold................... 797,859 2,351,174
Number of shares issued upon
reinvestment of distributions.......... 411,757 614,812
Number of shares redeemed............... (1,717,169) (4,494,555)
------------ ------------
Net decrease............................ (507,553) (1,528,569)
============ ============
Class A:
Number of shares sold................... 1,614,631 1,680,939
Number of shares issued upon
reinvestment of distributions.......... 124,852 41,455
Number of shares redeemed............... (1,205,847) (318,457)
------------ ------------
Net increase............................ 533,636 1,403,937
============ ============
Class B:
Number of shares sold................... 73,561 63,888
Number of shares issued upon
reinvestment of distributions.......... 2,992 106
Number of shares redeemed............... (50,343) (9,596)
------------ ------------
Net increase............................ 26,210 54,398
============ ============
Class C:
Number of shares sold................... 79,373 109,885
Number of shares issued upon
reinvestment of distributions.......... 6,546 1,688
Number of shares redeemed............... (46,906) (10,928)
------------ ------------
Net increase............................ 39,013 100,645
============ ============
</TABLE>
30 See Notes to Financial Statements.
<PAGE>
See Notes to Financial Statements. 31
<PAGE>
GROWTH & INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
GROWTH AND INCOME
----------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
---------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ................... $ 1,414,136 $ 3,555,067
Net realized gain on investments......... 24,488,551 115,171,781
Net change in unrealized gain or loss on
investments............................. (804,048) 19,244,965
------------- -------------
Net increase in net assets resulting
from operations......................... 25,098,639 137,971,813
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Class I:
From net investment income.............. (1,625,611) (5,474,676)
From net realized gains................. (96,505,087) (66,695,846)
Class A:
From net investment income.............. (149,768) (228,923)
From net realized gains................. (13,899,232) (3,028,420)
Class B:
From net investment income.............. -- (175)
From net realized gains................. (84,146) --
Class C:
From net investment income.............. -- (3,664)
From net realized gains................. (323,862) (97,390)
------------- -------------
Decrease in net assets from
distributions to shareholders........... (112,587,706) (75,529,094)
------------- -------------
FUND SHARE TRANSACTIONS:
Class I:
Proceeds from shares sold............... 48,090,350 60,294,167
Net asset value of shares issued upon
reinvestment of distributions.......... 97,997,116 72,076,178
Payments for shares redeemed............ (149,509,295) (246,966,753)
Class A:
Proceeds from shares sold............... 112,352,787 280,148,875
Net asset value of shares issued upon
reinvestment of distributions.......... 13,172,999 3,188,356
Payments for shares redeemed............ (94,469,161) (237,476,255)
Class B:
Proceeds from shares sold............... 671,344 644,427
Net asset value of shares issued upon
reinvestment of distributions.......... 83,693 154
Payments for shares redeemed............ (239,502) (171,249)
Class C:
Proceeds from shares sold............... 1,103,488 1,338,716
Net asset value of shares issued upon
reinvestment of distributions.......... 253,370 90,440
Payments for shares redeemed............ (641,246) (291,726)
------------- -------------
Net increase (decrease) in net assets
from fund share transactions............ 28,865,943 (67,124,670)
------------- -------------
Net change in net assets................. (58,623,124) (4,681,951)
NET ASSETS:
Beginning of period...................... 633,982,821 638,664,772
------------- -------------
End of period............................ $ 575,359,697 $ 633,982,821
============= =============
End of period net assets includes
undistributed net investment income..... $ 767,370 $ 1,343,913
============= =============
SHARE TRANSACTIONS:
Class I:
Number of shares sold................... 3,236,489 3,734,927
Number of shares issued upon
reinvestment of distributions.......... 6,948,160 4,651,596
Number of shares redeemed............... (9,925,487) (15,249,779)
------------- -------------
Net increase (decrease)................. 259,162 (6,863,256)
============= =============
Class A:
Number of shares sold................... 7,447,795 17,371,212
Number of shares issued upon
reinvestment of distributions.......... 937,254 206,126
Number of shares redeemed............... (6,232,063) (14,763,571)
------------- -------------
Net increase............................ 2,152,986 2,813,767
============= =============
Class B:
Number of shares sold................... 45,699 39,992
Number of shares issued upon
reinvestment of distributions.......... 5,941 9
Number of shares redeemed............... (16,049) (10,393)
------------- -------------
Net increase............................ 35,591 29,608
============= =============
Class C:
Number of shares sold................... 75,787 82,403
Number of shares issued upon
reinvestment of distributions.......... 18,079 5,862
Number of shares redeemed............... (44,242) (17,940)
------------- -------------
Net increase............................ 49,624 70,325
============= =============
</TABLE>
32 See Notes to Financial Statements.
<PAGE>
See Notes to Financial Statements. 33
<PAGE>
GROWTH & INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2000
1. ORGANIZATION
Aetna Series Fund, Inc. (Company) is registered under the Investment Company Act
of 1940 (the Act) as an open-end management investment company. It was
incorporated under the laws of Maryland on June 17, 1991. The Articles of
Incorporation permit the Company to offer separate funds, each of which has its
own investment objective, policies and restrictions.
This report covers two funds, (each a Fund; collectively, the Funds), Aetna
Balanced Fund (Balanced) and Aetna Growth and Income Fund (Growth and Income).
The Funds are authorized to offer four classes of shares, Class I, Class A,
Class B and Class C. Class I is offered principally to institutions. Information
regarding sales charges and fees pursuant to Rule 12b-1 of the Act are as
follows:
CLASS I: No sales charges or distribution fees.
CLASS A: Generally, subject to a front-end sales charge; distribution fees of
0.25% (of average net assets of the class per year).
CLASS B: No front-end sales charge; contingent deferred sales charge (CDSC)
applies if you sell your shares within six years of purchase;
distribution fees of 0.75%; service fees of 0.25%; automatic conversion
to Class A shares after eight years.
CLASS C: No front-end sales charge; CDSC on redemptions made within 18 months
of purchase; distribution fees of 0.75%; service fees of 0.25%.
Shares in each Class were first made available to the public on the following
dates:
<TABLE>
<CAPTION>
CLASS I CLASS A CLASS B CLASS C
------- ------- ------- -------
<S> <C> <C> <C> <C>
BALANCED December 27, 1991 April 15, 1994 March 1, 1999 June 30, 1998
GROWTH AND INCOME December 27, 1991 April 15, 1994 March 1, 1999 June 30, 1998
</TABLE>
The following is each Fund's investment objective:
BALANCED seeks to maximize total return with reasonable safety of principal by
investing in a diversified portfolio of stocks, bonds and money market
instruments.
GROWTH AND INCOME seeks long-term growth of capital and income through
investment in a diversified portfolio consisting primarily of common stocks
and securities convertible into common stock believed to offer above-average
growth potential.
Aeltus Investment Management, Inc. (Aeltus) serves as the investment adviser to
each Fund. Aeltus Capital, Inc. (ACI) is each Fund's principal underwriter.
Aeltus and ACI are indirect wholly owned subsidiaries of Aetna Inc. (Aetna).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the Funds have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of financial statements requires management to make
estimates and assumptions that affect amounts reported therein. Actual results
could differ from these estimates.
34
<PAGE>
A. VALUATION OF INVESTMENTS
Exchange traded equity investments are stated at market values based upon prices
furnished by external pricing sources as reported on national securities
exchanges. Over-the-counter securities are stated at the last sale price, or if
there has been no sale that day, at the mean of the bid and asked prices. Fixed
income securities, with the exception of high yield securities, maturing in more
than sixty days for which market quotations are readily available are valued at
the mean of the last bid and asked price. High yield securities are priced at
bid by external pricing sources or brokers making a market in the security.
Short-term investments maturing in sixty days or less are valued at amortized
cost, which when combined with accrued interest, approximates market value.
Equity and fixed income investments for which market quotations are not
considered to be readily available are valued using methods approved by the
Board of Directors (Board).
The accounting records of the Funds are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in foreign currencies
are translated into U.S. dollars at the prevailing rates of exchange at the end
of each day. Purchases and sales of securities, income receipts, and expense
payments are translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions. The Funds do not isolate the portion of
the results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in their market prices.
Such fluctuations are included in net realized and unrealized gain or loss on
investments.
B. OPTIONS CONTRACTS
The Funds may purchase put and call options and may write (sell) put options and
covered call options. The Funds may engage in option transactions as a hedge
against adverse movements in the value of portfolio holdings or to increase
market exposure.
Option contracts are valued daily and unrealized gains or losses are recorded
based upon the last sales price on the principal exchange on which the options
are traded. The Funds will realize a gain or loss upon the expiration or closing
of the option contract. When an option is exercised, the proceeds on sales of
the underlying security for a written call option, the purchase cost of the
security for a written put option, or the cost of the security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Realized and unrealized gains or losses on option contracts are reflected in the
accompanying financial statements.
The risk in writing a call option is that the Funds give up the opportunity for
profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Funds may incur a loss
if the market price of the security decreases and the option is exercised. The
risk in buying an option is that the Funds pay a premium whether or not the
option is exercised. Risks may also arise from an illiquid secondary market or
from the inability of counterparties to meet the terms of the contract.
C. SWAP CONTRACTS
Balanced may enter into interest rate swaps, currency swaps and other types of
swap agreements, including swaps on securities and indices. A swap is an
agreement between two parties pursuant to which each party agrees to make one or
more payments to the other on regularly scheduled dates over a stated term,
based on different interest rates, currency exchange rates, security prices, the
prices or rates of other types of financial instruments or assets or the levels
of specified indices. During the term of the swap, changes in the value of the
swap are recognized as unrealized gains or losses by marking-to-market to
reflect the market value of the swap. When the swap is terminated, the Fund will
record a realized gain or loss. As of October 31, 2000, Balanced had no
outstanding swap agreements.
35
<PAGE>
GROWTH & INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2000
D. FUTURES AND FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
specific amount of a commodity, security or financial instrument, including an
index of stocks, at a set price on a future date. The Funds may invest in
financial futures contracts as a hedge against their existing portfolio
securities, to manage the risk of changes in interest rates, equity prices,
currency exchange rates or in anticipation of future purchases and sales of
portfolio securities.
Upon entering into a futures contract, the Funds are required to deposit with a
broker an amount (initial margin) equal to a percentage of the purchase price
indicated by the futures contract. Subsequent deposits (variation margin) are
received or paid each day by the Funds equal to the daily fluctuations in the
market value of the contract. These amounts are recorded by the Funds as
unrealized gains or losses. When a contract is closed, the Funds record a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. Generally,
futures contracts held by the Funds are closed prior to expiration.
A forward foreign currency exchange contract is an agreement to pay or receive
specific amounts of a currency at a future date in exchange for another currency
at an agreed upon exchange rate. The Funds, where authorized, may use forward
foreign currency exchange contracts to hedge against foreign currency exchange
rate risks on its non-U.S. dollar denominated portfolio securities. Contracts
are recorded at market value and marked-to-market daily.
The risks associated with futures and forward foreign currency exchange
contracts may arise from an imperfect correlation between the change in market
value of the securities held by the Funds and the price of the contracts. Risks
may also arise from an illiquid secondary market or from the inability of
counterparties to meet the terms of the contracts.
Realized and unrealized gains or losses on financial futures and forward foreign
currency exchange contracts are reflected in the accompanying financial
statements. The amounts at risk under such futures and forward foreign currency
exchange contracts may exceed the amounts reflected in the financial statements.
The notional amounts (economic exposure) of these contracts are disclosed in the
Portfolios of Investments and elsewhere in the Notes to Financial Statements.
For federal income tax purposes, any futures and forward foreign currency
exchange contracts which remain open at the end of the fiscal year are
marked-to-market and the resultant net gain or loss is reported to shareholders
as federal taxable income.
E. ILLIQUID AND RESTRICTED SECURITIES
Illiquid securities are not readily marketable. Disposing of illiquid
investments may involve time-consuming negotiation and legal expenses, and it
may be difficult or impossible for the Funds to sell them promptly at an
acceptable price. Restricted securities are those sold under Rule 144A of the
Securities Act of 1933 (1933 Act) or are securities offered pursuant to Section
4(2) of the 1933 Act, and are subject to legal or contractual restrictions on
resale and may not be publicly sold without registration under the 1933 Act.
Illiquid and restricted securities are valued using market quotations when
readily available. In the absence of market quotations, the securities are
valued based upon their fair value determined under procedures approved by the
Board. The Funds will not pay the costs of disposition of restricted securities
other than ordinary brokerage fees, if any.
F. DELAYED DELIVERY TRANSACTIONS
The Funds may purchase or sell securities on a when-issued or forward commitment
basis. The price of the underlying securities and date when the securities will
be delivered and paid for are fixed at the time the transaction is negotiated.
The market value of the securities purchased or sold are identified in the
Funds' Portfolio of Investments. Losses may arise due to changes in the market
value of the securities or from the inability of counterparties to meet the
terms of the contract. In connection with such purchases, the Funds are required
to hold liquid assets as collateral with the Funds' custodian sufficient to
cover the purchase price.
36
<PAGE>
G. FEDERAL INCOME TAXES
Each Fund intends to meet the requirements to be taxed as a regulated investment
company for the current year. As such, each Fund is relieved of federal income
taxes by distributing all of its net taxable investment income and capital
gains, if any, in compliance with the applicable provisions of the Internal
Revenue Code (Code). Furthermore, by declaring such distributions during the
calendar year, each Fund will avoid federal excise taxes in accordance with the
applicable provisions of the Code. Thus, the financial statements contain no
provision for federal income taxes.
H. DISTRIBUTIONS
Distributions are recorded on the ex-dividend date. Income and capital gain
distributions are determined in accordance with income tax regulations which may
differ from accounting principles generally accepted in the United States of
America. These differences are primarily due to differing treatments for foreign
currency transactions, certain futures contracts, certain investments in foreign
equity securities and repurchases of certain securities sold at a loss. In
addition, distributions of realized gains from sales of securities held one year
or less are taxable to shareholders at ordinary income tax rates rather than
preferred capital gain tax rates in accordance with the applicable provisions of
the Code.
I. LINE OF CREDIT
Certain series of the Company (including the Funds), certain portfolios of Aetna
Variable Portfolios, Inc., Aetna Generation Portfolios, Inc., Aetna Balanced VP,
Inc., Aetna Variable Fund, Aetna Income Shares and certain series of Aetna GET
Fund, collectively Aetna Mutual Funds, have entered into a revolving credit
facility, of up to $300,000,000, with a syndicate of banks led by Citibank, N.A.
The revolving credit facility requires the payment of an annual commitment fee
of 0.09% based on the average daily unutilized amount of the credit facility.
Each of the Funds will pay its pro rata share of both the agent fee and
commitment fee. Generally, borrowings under the facility accrue interest at the
Federal Funds Rate plus a specified margin. Repayments generally must be made
within 30 days after the date of a revolving credit advance. No borrowings from
the line of credit have been made as of October 31, 2000.
J. OTHER
Investment transactions are accounted for on the day following trade date,
except same day settlements which are accounted for on the trade date. Interest
income is recorded on an accrual basis. Discounts and premiums on securities
purchased are accreted or amortized, respectively, using an effective yield
method over the life of the security. Dividend income and stock splits are
recorded on the ex-dividend date. Realized gains and losses from investment
transactions are determined on an identified cost basis.
3. INVESTMENT ADVISORY, SHAREHOLDER SERVICES AND DISTRIBUTION FEES
Each Fund pays Aeltus an investment advisory fee expressed as a percentage of
each Fund's average daily net assets. As the Funds' net assets exceed
predetermined thresholds, lower advisory fees apply. Below are the Funds' annual
investment advisory fee ranges and the annual effective rates before waivers as
of October 31, 2000:
<TABLE>
<CAPTION>
FEE EFFECTIVE
RANGE RATE
----- ---------
<S> <C> <C>
Balanced 0.80% - 0.65% 0.80%
Growth and Income 0.70% - 0.55% 0.63%
</TABLE>
The Company and Aeltus have entered into an Administrative Services Agreement
under which Aeltus acts as administrator and provides certain administrative and
shareholder services and is responsible for the supervision of other service
providers
37
<PAGE>
GROWTH & INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2000
for each Fund. Each Fund pays Aeltus an administrative services fee at an annual
rate of 0.10% of its average daily net assets.
Aeltus has entered into a Service Agreement with Aetna Life Insurance and
Annuity Company (ALIAC) under which ALIAC will provide various administrative
and shareholder services to certain Class I shareholders or the Funds that
purchased their shares through ALIAC. In exchange for these services, Aeltus
pays ALIAC a fee of up to 0.40% of the average daily net assets associated with
those shares. For the period November 1, 1999 through October 31, 2000, Aeltus
paid ALIAC $2,152,026.
The Company has adopted a Shareholder Services Plan for the Class B and Class C
shares. Under the Shareholder Services Plan, ACI is paid a service fee at an
annual rate of 0.25% of the average daily net assets of Class B and Class C
shares. This fee is used as compensation for expenses incurred in servicing
shareholders' accounts.
The Company has adopted a Distribution Plan pursuant to Rule 12b-1 under the Act
for the Class A, Class B and Class C shares. The Distribution Plan provides for
payments to ACI at an annual rate of 0.25% of the average daily net assets of
Class A shares of each Fund and 0.75% of the average daily net assets of Class B
and Class C shares of each Fund. Amounts paid by the Funds are used to pay
expenses incurred by ACI in promoting the sale of Class A, Class B and Class C
shares. Presently, the Funds' class-specific expenses are limited to
distribution fees incurred by Class A, Class B and Class C shares and service
fees incurred by Class B and Class C shares.
4. PURCHASES AND SALES OF INVESTMENT SECURITIES
Purchases and sales of investment securities, excluding short-term investments,
for the year ended October 31, 2000 were:
<TABLE>
<CAPTION>
COST OF PURCHASES PROCEEDS FROM SALES
----------------- -------------------
<S> <C> <C>
Balanced $284,308,363 $299,882,516
Growth and Income 988,969,846 1,085,733,241
</TABLE>
5. OPTIONS
For the year ended October 31, 2000, the following reflects the written option
activity:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CALL OPTIONS WRITTEN
-------------------------------------------------------
BALANCED NUMBER OF PREMIUM REALIZED
CONTRACTS RECEIVED GAIN (LOSS)
-------------------------------------------------------
Outstanding October -- $-- $--
31, 1999
Written 45,195 66,708 --
Exercised -- -- --
Expired -- -- --
Closed (45,195) (66,708) 33,602
-------------------------------------------------------
Outstanding October -- $-- $33,602
31, 2000
-------------------------------------------------------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CALL OPTIONS WRITTEN
--------------------------------------------------------
GROWTH AND INCOME NUMBER OF PREMIUM REALIZED
CONTRACTS RECEIVED GAIN (LOSS)
--------------------------------------------------------
Outstanding October 558 $1,111,889 $--
31, 1999
Written -- -- --
Exercised -- -- --
Expired -- -- --
Closed (558) (1,111,889) (539,515)
--------------------------------------------------------
Outstanding October -- $-- $(539,515)
31, 2000
--------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PUT OPTIONS WRITTEN
-------------------------------------------------------
GROWTH AND INCOME NUMBER OF PREMIUM REALIZED
CONTRACTS RECEIVED GAIN (LOSS)
-------------------------------------------------------
Outstanding October 152 $275,035 $--
31, 1999
Written -- -- --
Exercised -- -- --
Expired (152) (275,035) 275,035
Closed -- -- --
--------- ----------------- ----------------
Outstanding October -- $-- $275,035
31, 2000
-------------------------------------------------------
</TABLE>
6. AUTHORIZED CAPITAL SHARES
The Company is authorized to issue a total of 15 billion shares. Of those 15
billion shares, each of the Funds have been allocated 100 million shares each of
Class I, Class A, Class B and Class C. As of October 31, 2000, the following
shares of the Funds were owned by ALIAC and its affiliates:
<TABLE>
<CAPTION>
CLASS I
-------
<S> <C>
Balanced 1,840,998
Growth and Income 5,374,048
</TABLE>
39
<PAGE>
GROWTH & INCOME FUNDS
ADDTIONAL INFORMATION
OCTOBER 31, 2000
1. FUND CLOSURE (UNAUDITED)
On March 1, 2000, the Board of Directors considered and agreed to submit to
shareholders a proposal by Aeltus to liquidate Aetna Real Estate Securities Fund
(Real Estate). The Fund was closed to new direct investors on March 6, 2000 and
to new retirement plan investors on May 15, 2000. Shareholders approved the
proposal on July 28, 2000 and Real Estate was liquidated on August 25, 2000.
Below are the results of the shareholder vote:
<TABLE>
<CAPTION>
NUMBER OF % OF VOTES
--------------------------------------------
SHARES VOTING CAST FOR CAST AGAINST ABSTAIN
--------------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Real Estate
437,056 84.7% 11.5% 3.8%
</TABLE>
2. FEDERAL TAX STATUS OF DIVIDENDS DECLARED DURING THE FISCAL YEAR (UNAUDITED)
In accordance with federal tax authorities, certain portions of the dividends
taxable as ordinary income qualify for the corporate dividends received
deduction. The following percentages reflect the portions of such dividends
paid:
<TABLE>
<CAPTION>
<S> <C>
Balanced 17.00%
Growth and Income 8.39%
</TABLE>
In accordance with federal tax authorities, the Funds paid the following amounts
of dividends, which qualify to be taxed at long-term capital gain rates:
<TABLE>
<CAPTION>
AGGREGATE PER SHARE
--------- ---------
<S> <C> <C>
Balanced $4,237,218 $0.4734
Growth and Income 46,049,145 1.2425
</TABLE>
3. SHAREHOLDER MEETING (UNAUDITED)
The shareholders of Aetna Inc. (Aetna), of which Aeltus was an indirect
wholly-owned subsidiary, voted in favor of a proposal to sell certain of Aetna's
businesses, including Aeltus, to ING Groep N.V. (ING), an integrated financial
services provider. Consummation of the transaction has resulted in Aeltus
becoming an indirect wholly-owned subsidiary of ING in December 2000.
Under the Act, the transaction resulted in a change in control of Aeltus and
therefore, constituted an assignment of the Company's investment advisory
agreements. Consequently, Aeltus received approval of new investment advisory
agreements from the Board and the shareholders of each Fund. The results of the
shareholder meeting held on November 22, 2000, are as follows:
A. ELECTION OF DIRECTORS
The following individuals were elected to serve as Directors of the Company.
Every individual named served as a Director prior to this election and there are
no other individuals currently serving as Directors of the Company.
40
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF % OF VOTES
-------------------------
SHARES VOTING CAST FOR WITHHELD
----------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Albert E. DePrince Jr.
695,450,143.647 95.737% 4.263%
Maria T. Fighetti
695,450,143.647 95.658% 4.342%
J. Scott Fox
695,450,143.647 95.644% 4.356%
David L. Grove
695,450,143.647 95.539% 4.461%
John Y. Kim
695,450,143.647 95.641% 4.359%
Sidney Koch
695,450,143.647 95.652% 4.348%
Corine T. Norgaard
695,450,143.647 95.628% 4.372%
Richard G. Scheide
695,450,143.647 95.610% 4.390%
</TABLE>
B. APPROVAL OF INVESTMENT ADVISORY AGREEMENTS
Shareholders in each Fund voted to approve a new Investment Advisory Agreement
(Agreement) between each Fund and Aeltus. The Agreement reflects the acquisition
of the financial services and international businesses of Aetna, of which Aeltus
is an indirect wholly-owned subsidiary, by ING, with no change in advisory fees
payable to Aeltus.
<TABLE>
<CAPTION>
NUMBER OF % OF VOTES
--------------------------------------------
SHARES VOTING CAST FOR CAST AGAINST ABSTAIN
---------------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balanced
5,168,895.483 95.183% 1.184% 3.633%
Growth and Income
25,943,852.946 94.760% 4.313% 0.927%
</TABLE>
C. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Shareholders of all the Funds of the Company approved the selection of KPMG LLP
as independent auditors for all of the Funds for the fiscal year ending October
31, 2001.
<TABLE>
<CAPTION>
NUMBER OF % OF VOTES
--------------------------------------------
SHARES VOTING CAST FOR CAST AGAINST ABSTAIN
----------------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
KPMG LLP
695,450,143.647 94.875% 1.199% 3.926%
</TABLE>
41
<PAGE>
GROWTH & INCOME FUNDS
FINANCIAL HIGHLIGHTS
BALANCED
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
CLASS I 2000 1999 1998 1997 1996
---------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period . $ 13.74 $ 12.84 $ 14.09 $ 13.52 $ 12.36
------- ------- -------- -------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.30++ 0.32+ 0.33+ 0.33+ 0.31+
Net realized and
change in unrealized
gain or loss on
investments.......... 0.90 1.53 1.02 2.04 1.77
------- ------- -------- -------- -------
Total income from
investment
operations........ 1.20 1.85 1.35 2.37 2.08
------- ------- -------- -------- -------
LESS DISTRIBUTIONS:
From net investment
income............... (0.30) (0.34) (0.32) (0.30) (0.35)
From net realized
gains on investments (0.54) (0.61) (2.28) (1.50) (0.57)
------- ------- -------- -------- -------
Total distributions (0.84) (0.95) (2.60) (1.80) (0.92)
------- ------- -------- -------- -------
Net asset value, end
of period ........... $ 14.10 $ 13.74 $ 12.84 $ 14.09 $ 13.52
======= ======= ======== ======== =======
Total return ......... 9.04% 14.79% 10.81% 19.57% 17.63%
Net assets, end of
period (000's) ...... $94,149 $98,717 $111,887 $105,813 $88,625
Ratio of total
investment expenses
to average net assets 1.06% 1.11% 1.12% 1.24% 1.31%
Ratio of net
investment income to
average net assets .. 2.24% 2.38% 2.54% 2.43% 2.42%
Portfolio turnover
rate................. 241.99% 127.46% 84.55% 116.69% 117.88%
</TABLE>
++ Per share data calculated using the SEC method.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
42 See Notes to Financial Statements.
<PAGE>
BALANCED
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
CLASS A 2000 1999 1998 1997 1996
---------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period . $ 13.72 $ 12.83 $14.05 $ 13.49 $ 12.34
------- ------- ------ ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.35++ 0.29+ 0.29+ 0.23+ 0.20+
Net realized and
change in unrealized
gain or loss on
investments.......... 0.82 1.52 1.01 2.03 1.79
------- ------- ------ ------- -------
Total income from
investment
operations........ 1.17 1.81 1.30 2.26 1.99
------- ------- ------ ------- -------
LESS DISTRIBUTIONS:
From net investment
income............... (0.27) (0.31) (0.24) (0.20) (0.27)
From net realized
gains on investments (0.54) (0.61) (2.28) (1.50) (0.57)
------- ------- ------ ------- -------
Total distributions (0.81) (0.92) (2.52) (1.70) (0.84)
------- ------- ------ ------- -------
Net asset value, end
of period ........... $ 14.08 $ 13.72 $12.83 $ 14.05 $ 13.49
======= ======= ====== ======= =======
Total return ......... 8.81% 14.48% 10.44% 18.64% 16.83%
Net assets, end of
period (000's) ...... $35,564 $27,339 $7,544 $ 6,289 $ 3,783
Ratio of total
investment expenses
to average net assets 1.31% 1.36% 1.44% 1.99% 2.07%
Ratio of net
investment income to
average net assets .. 1.99% 2.13% 2.22% 1.68% 1.60%
Portfolio turnover
rate................. 241.99% 127.46% 84.55% 116.69% 117.88%
</TABLE>
++ Per share data calculated using the SEC method.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements. 43
<PAGE>
GROWTH & INCOME FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
BALANCED
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 1, 1999
YEAR ENDED (DATE OF INITIAL
OCTOBER 31, PUBLIC OFFERING)
CLASS B 2000 TO OCTOBER 31, 1999
------------------------------------------- ----------- -------------------
<S> <C> <C>
Net asset value, beginning of period ...... $ 13.69 $ 13.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................... 0.27++ 0.13+
Net realized and change in unrealized gain
or loss on investments ................... 0.80 0.65
------- -------
Total income from investment operations 1.07 0.78
------- -------
LESS DISTRIBUTIONS:
From net investment income ............... (0.20) (0.09)
From net realized gains on investments ... (0.54) --
------- -------
Total distributions .................... (0.74) (0.09)
------- -------
Net asset value, end of period ............ $ 14.02 $ 13.69
======= =======
Total return .............................. 8.01% 6.02%
Net assets, end of period (000's) ......... $ 1,130 $ 745
Ratio of total investment expenses to
average net assets ....................... 2.06% 2.11%(1)
Ratio of net investment income to average
net assets ............................... 1.24% 1.38%(1)
Portfolio turnover rate ................... 241.99% 127.46%
</TABLE>
(1) Annualized.
++ Per share data calculated using the SEC method.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
44 See Notes to Financial Statements.
<PAGE>
BALANCED
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 30, 1998
YEAR ENDED YEAR ENDED (DATE OF INITIAL
OCTOBER 31, OCTOBER 31, PUBLIC OFFERING)
CLASS C 2000 1999 TO OCTOBER 31, 1998
------------------------------ ----------- ----------- -------------------
<S> <C> <C> <C>
Net asset value, beginning of
period....................... $ 13.63 $ 12.80 $13.27
------- ------- ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ....... 0.24++ 0.19+ 0.07+
Net realized and change in
unrealized gain or loss on
investments.................. 0.81 1.52 (0.54)
------- ------- ------
Total income from
investment operations .... 1.05 1.71 (0.47)
------- ------- ------
LESS DISTRIBUTIONS:
From net investment income .. (0.18) (0.27) --
From net realized gains on
investments.................. (0.54) (0.61) --
------- ------- ------
Total distributions ....... (0.72) (0.88) --
------- ------- ------
Net asset value, end of period $ 13.96 $ 13.63 $12.80
======= ======= ======
Total return ................. 7.95% 13.64% (3.54)%
Net assets, end of period
(000's)...................... $ 2,185 $ 1,601 $ 216
Ratio of total investment
expenses to average net
assets....................... 2.06% 2.11% 2.11%(1)
Ratio of net investment income
to average net assets ....... 1.24% 1.38% 1.55%(1)
Portfolio turnover rate ...... 241.99% 127.46% 84.55%
</TABLE>
(1) Annualized.
++ Per share data calculated using the SEC method.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements. 45
<PAGE>
GROWTH & INCOME FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
GROWTH AND INCOME
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
CLASS I 2000 1999 1998 1997 1996
---------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period . $ 16.74 $ 15.26 $ 18.08 $ 15.74 $ 13.46
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.05++ 0.09+ 0.12+ 0.15+ 0.19+
Net realized and
change in unrealized
gain or loss on
investments.......... 0.52 3.26 0.51 5.00 3.09
-------- -------- -------- -------- --------
Total income from
investment
operations........ 0.57 3.35 0.63 5.15 3.28
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment
income............... (0.05) (0.14) (0.13) (0.21) (0.24)
From net realized
gains on investments (3.00) (1.73) (3.32) (2.60) (0.76)
-------- -------- -------- -------- --------
Total distributions (3.05) (1.87) (3.45) (2.81) (1.00)
-------- -------- -------- -------- --------
Net asset value, end
of period ........... $ 14.26 $ 16.74 $ 15.26 $ 18.08 $ 15.74
======== ======== ======== ======== ========
Total return ......... 3.76% 23.00% 3.80% 37.44% 25.69%
Net assets, end of
period (000's) ...... $479,823 $558,913 $614,493 $595,969 $377,784
Ratio of total
investment expenses
to average net assets 0.83% 0.86% 0.88% 1.00% 1.08%
Ratio of net
investment income to
average net assets .. 0.33% 0.56% 0.71% 0.93% 1.35%
Portfolio turnover
rate................. 167.45% 121.99% 160.48% 157.92% 106.09%
</TABLE>
++ Per share data calculated using the SEC method.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
46 See Notes to Financial Statements.
<PAGE>
GROWTH AND INCOME
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
CLASS A 2000 1999 1998 1997 1996
---------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period . $ 16.68 $ 15.22 $ 18.01 $ 15.69 $ 13.43
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.04++ 0.05+ 0.06+ 0.03+ 0.08+
Net realized and
change in unrealized
gain or loss on
investments.......... 0.49 3.25 0.51 4.99 3.08
------- ------- ------- ------- -------
Total income from
investment
operations........ 0.53 3.30 0.57 5.02 3.16
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment
income............... (0.03) (0.11) (0.04) (0.10) (0.14)
From net realized
gains on investments (3.00) (1.73) (3.32) (2.60) (0.76)
------- ------- ------- ------- -------
Total distributions (3.03) (1.84) (3.36) (2.70) (0.90)
------- ------- ------- ------- -------
Net asset value, end
of period ........... $ 14.18 $ 16.68 $ 15.22 $ 18.01 $ 15.69
======= ======= ======= ======= =======
Total return ......... 3.50% 22.67% 3.42% 36.49% 24.70%
Net assets, end of
period (000's) ...... $92,407 $72,789 $23,603 $15,955 $ 6,638
Ratio of total
investment expenses
to average net assets 1.08% 1.11% 1.20% 1.75% 1.83%
Ratio of net
investment income to
average net assets .. 0.08% 0.31% 0.39% 0.18% 0.55%
Portfolio turnover
rate................. 167.45% 121.99% 160.48% 157.92% 106.09%
</TABLE>
++ Per share data calculated using the SEC method.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements. 47
<PAGE>
GROWTH & INCOME FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
GROWTH AND INCOME
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 1, 1999
YEAR ENDED (DATE OF INITIAL
OCTOBER 31, PUBLIC OFFERING)
CLASS B 2000 TO OCTOBER 31, 1999
------------------------------------------- ----------- -------------------
<S> <C> <C>
Net asset value, beginning of period ...... $ 16.66 $ 15.41
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................... 0.01++ (0.05)+
Net realized and change in unrealized gain
or loss on investments ................... 0.41 1.31
------- -------
Total income from investment operations 0.42 1.26
------- -------
LESS DISTRIBUTIONS:
From net investment income ............... -- (0.01)
From net realized gains on investments ... (2.97) --
------- -------
Total distributions .................... (2.97) (0.01)
------- -------
Net asset value, end of period ............ $ 14.11 $ 16.66
======= =======
Total return .............................. 2.72% 8.17%
Net assets, end of period (000's) ......... $ 920 $ 493
Ratio of total investment expenses to
average net assets ....................... 1.83% 1.86%(1)
Ratio of net investment income to average
net assets ............................... (0.67)% (0.44)%(1)
Portfolio turnover rate ................... 167.45% 121.99%
</TABLE>
(1) Annualized.
++ Per share data calculated using the SEC method.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
48 See Notes to Financial Statements.
<PAGE>
GROWTH AND INCOME
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 30, 1998
YEAR ENDED YEAR ENDED (DATE OF INITIAL
OCTOBER 31, OCTOBER 31, PUBLIC OFFERING)
CLASS C 2000 1999 TO OCTOBER 31, 1998
------------------------------ ----------- ----------- -------------------
<S> <C> <C> <C>
Net asset value, beginning of
period....................... $ 16.59 $ 15.22 $ 16.92
------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ....... 0.01++ (0.07)+ (0.01)+
Net realized and change in
unrealized gain or loss on
investments.................. 0.41 3.24 (1.69)
------- ------- -------
Total income from
investment operations .... 0.42 3.17 (1.70)
------- ------- -------
LESS DISTRIBUTIONS:
From net investment income .. -- (0.07) --
From net realized gains on
investments.................. (2.97) (1.73) --
------- ------- -------
Total distributions ....... (2.97) (1.80) --
------- ------- -------
Net asset value, end of period $ 14.04 $ 16.59 $ 15.22
======= ======= =======
Total return ................. 2.72% 21.68% (10.05)%
Net assets, end of period
(000's)...................... $ 2,209 $ 1,787 $ 569
Ratio of total investment
expenses to average net
assets....................... 1.83% 1.86% 1.86%(1)
Ratio of net investment income
to average net assets ....... (0.67)% (0.44)% (0.27)%(1)
Portfolio turnover rate ...... 167.45% 121.99% 160.48%
</TABLE>
(1) Annualized.
++ Per share data calculated using the SEC method.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements. 49
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Aetna Series Fund, Inc.:
We have audited the accompanying statements of assets and liabilities of Aetna
Balanced Fund and Aetna Growth and Income Fund, each a series of Aetna Series
Fund, Inc. (collectively the Growth and Income Funds), including the portfolios
of investments as of October 31, 2000, and the related statements of operations
for the year then ended, statements of changes in net assets for each of the
years in the two-year period then ended and financial highlights for each of the
years or periods in the five-year period then ended. These financial statements
and financial highlights are the responsibility of the Growth and Income Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 October 31, 2000 by correspondence with the custodian.
As to securities purchased or sold but not yet received or delivered, we
performed other appropriate auditing procedures. 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
Growth and Income Funds as of October 31, 2000, the results of their operations
for the year then ended, changes in their net assets for each of the years in
the two-year period then ended and the financial highlights for each of the
years or periods in the five-year period then ended, in conformity with
accounting principles generally accepted in the United States of America.
Hartford, Connecticut
December 8, 2000
50
<PAGE>
P167ANN (10/00)
