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Previous: FIRST TRUST SPECIAL SIT TRUST SER 38 NW UTIL INC TR SER 1, 485BPOS, 1995-08-31 |
Next: MITCHELL HUTCHINS KIDDER PEABODY INVESTMENT TRUST II, 497, 1995-08-31 |
JUNE 30, 1995
ANNUAL REPORT
THE LEGENDS FUND, INC.
PRINCIPAL OFFICE LOCATED AT:
200 EAST WILSON BRIDGE ROAD
WORTHINGTON, OHIO 43085
<PAGE>
The Legends Fund, Inc.
Annual Report
June 30, 1995
CONTENTS
President's Letter.............................................................1
Report of Independent Auditors.................................................2
Financial Statements, Financial Highlights, and Schedules of
Investments:
Renaissance Balanced Portfolio............................................3
Zweig Asset Allocation Portfolio.........................................10
Nicholas-Applegate Balanced Portfolio....................................24
Harris Bretall Sullivan & Smith Equity Growth Portfolio..................33
Dreman Value Portfolio...................................................41
Zweig Equity (Small Cap) Portfolio.......................................49
Mitchell Hutchins Fixed Income Portfolio.................................73
Mitchell Hutchins Money Market Portfolio.................................80
Morgan Stanley Asian Growth Portfolio....................................87
Morgan Stanley Worldwide High Income Portfolio...........................96
Notes to Financial Statements................................................103
Portfolio Performance........................................................110
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE
GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED
OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. NEITHER THE FUND NOR INTEGRITY
FINANCIAL SERVICES, INC., THE PRINCIPAL UNDERWRITER FOR FUND SHARES, IS A BANK
AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED BY THE
FEDERAL DEPOSITORY INSURANCE CORPORATION.
<PAGE>
THE LEGENDS FUND, INC.
This Annual Report marks another year of successful operations for The Legends
Fund, Inc. (the "Fund"). We welcome the new investors who joined us during this
year and we thank all of our investors for their interest and support.
The Fund consists of the Renaissance Balanced Portfolio, the Zweig Asset
Allocation Portfolio, the Nicholas-Applegate Balanced Portfolio, the Harris
Bretall Sullivan & Smith Equity Growth Portfolio, the Dreman Value Portfolio,
the Zweig Equity (Small Cap) Portfolio, the Mitchell Hutchins Fixed Income
Portfolio, the Mitchell Hutchins Money Market Portfolio, the Morgan Stanley
Asian Growth Portfolio, and the Morgan Stanley Worldwide High Income Portfolio.
Included in this Annual Report is a discussion of each Portfolio's performance
(with the exception of the Mitchell Hutchins Money Market Portfolio) for the
fiscal year ended June 30, 1995. You will also find detailed information of the
holdings of each Portfolio as of June 30, 1995, as well as other important
financial information.
The investment disciplines of the Portfolios within the Fund strive to meet
their objectives to support your investment goals. We appreciate your confidence
and should you desire additional information, we would welcome your inquiries.
Sincerely,
/s/ Edward J. Haines
Edward J. Haines
President
The Legends Fund, Inc.
1
<PAGE>
Report of Independent Auditors
The Shareholders and Board of Directors
The Legends Fund, Inc.
We have audited the accompanying statements of assets and liabilities of The
Legends Fund, Inc. (the "Fund") (comprised of the Renaissance Balanced, Zweig
Asset Allocation, Nicholas-Applegate Balanced, Harris Bretall Sullivan & Smith
Equity Growth, Dreman Value, Zweig Equity (Small Cap), Mitchell Hutchins Fixed
Income, Mitchell Hutchins Money Market, Morgan Stanley Asian Growth and Morgan
Stanley Worldwide High Income portfolios), including the schedules of
investments, as of June 30, 1995, the related statements of operations for the
year then ended and statements of changes in net assets and financial highlights
for the periods indicated therein and financial highlights for fiscal periods
since 1993. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The financial highlights for the period ended June 30, 1993, were audited
by other auditors whose report thereon dated August 30, 1993, expressed an
unqualified opinion.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at June 30,
1995, by correspondence with the custodian. As to uncompleted securities
transactions, we performed other 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 for the years
ended June 30, 1995 and 1994, referred to above present fairly, in all material
respects, the financial position of each of the portfolios constituting The
Legends Fund, Inc. at June 30, 1995, and the results of their operations,
changes in their net assets, and financial highlights for the periods since June
30, 1993, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Kansas City, Missouri
August 14, 1995
2
<PAGE>
Renaissance Balanced Portfolio
Statement of Assets and Liabilities
June 30, 1995
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value (cost $23,959,147)
(NOTE 1)-See accompanying schedule $ 25,651,072
Cash 5,235
Receivable for investment securities sold 1,167,555
Dividends, interest and other receivables 238,247
------------
TOTAL ASSETS 27,062,109
LIABILITIES
Accounts payable and accrued expenses 29,914
------------
TOTAL LIABILITIES 29,914
------------
NET ASSETS $ 27,032,195
============
Net Assets consist of:
Paid-in capital $ 24,724,767
Undistributed net investment income 914,654
Undistributed net realized loss on investments (299,151)
Net unrealized appreciation on investment securities 1,691,925
------------
NET ASSETS, for 2,327,611 shares outstanding $ 27,032,195
============
NET ASSET VALUE, offering and redemption price per share $ 11.61
============
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
Renaissance Balanced Portfolio
Statement of Operations
Year Ended June 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 201,586
Interest 963,029
----------
Total investment income 1,164,615
EXPENSES (NOTE 2)
Investment advisory and management fees 167,365
Custody and accounting fees 57,934
Professional fees 14,202
Directors' fees and expenses 4,950
Other expenses 4,556
----------
Total expenses 249,007
----------
Net investment income 915,608
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 1)
Net realized loss on investments (299,151)
Change in unrealized appreciation on investment securities 2,638,834
----------
Net realized and unrealized gain on investments 2,339,683
----------
Net increase in net assets resulting from operations $3,255,291
==========
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
Renaissance Balanced Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1995 1994
--------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 915,608 $ 478,067
Net realized gain (loss) on investments (299,151) 150,527
Net unrealized appreciation (depreciation) 2,638,834 (1,119,019)
--------------------------------
Net increase (decrease) in net assets resulting from
operations 3,255,291 (490,425)
Distributions to shareholders from:
Net investment income (423,397) (164,000)
Net realized gain (82,603) -
--------------------------------
Total distributions to shareholders (506,000) (164,000)
Capital share transactions:
Proceeds from sales of shares 6,487,456 19,755,941
Proceeds from reinvested distributions 506,000 164,000
Cost of shares redeemed (7,756,946) (2,017,794)
--------------------------------
Net increase (decrease) in net assets resulting from
share transactions (763,490) 17,902,147
--------------------------------
Total increase in net assets 1,985,801 17,247,722
NET ASSETS
Beginning of year 25,046,394 7,798,672
--------------------------------
End of year (including undistributed net investment income of
$914,654 and $353,424, respectively) $27,032,195 $25,046,394
================================
OTHER INFORMATION
Shares:
Sold 603,427 1,835,792
Issued through reinvestment of distributions 47,019 14,925
Redeemed (731,529) (190,244)
--------------------------------
Net increase (decrease) (81,083) 1,660,473
================================
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
Renaissance Balanced Portfolio
Financial Highlights
<TABLE>
<CAPTION>
DECEMBER 14,
1992
(COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS)
JUNE 30, JUNE 30, THROUGH JUNE 30,
1995 1994 1993(B)
-----------------------------------------------------------
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.40 $ 10.42 $ 10.00
Income from investment operations:
Net investment income 0.42 0.20 0.13
Net realized and unrealized gain
(loss) on investments .99 (0.11) 0.29
-----------------------------------------------------------
Total from investment operations 1.41 0.09 0.42
Less distributions:
From net investment income (.17) (0.11) -
From net realized gain (.03) - -
-----------------------------------------------------------
Total distributions (.20) (0.11) -
-----------------------------------------------------------
Net asset value, end of period $ 11.61 $ 10.40 $ 10.42
===========================================================
TOTAL RETURN(A) 13.71% 0.73% 7.70%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $27,032,195 $ 25,046,394 $ 7,798,672
Ratio of expenses to average net
assets(C) 0.96% 1.06% 1.24%
Ratio of net investment income to
average net assets(C) 3.53% 2.72% 2.36%
Portfolio turnover rate 71% 85% 29%
</TABLE>
(A) Total returns are not annualized.
(B) Data expressed as a percentage are annualized as appropriate.
(C) The ratios of expenses and net investment income to average net assets
before voluntary expense reimbursement were 2.95% and 0.65%, respectively,
for the period December 14, 1992 (commencement of operations) through June
30, 1993. (NOTE 2)
6
<PAGE>
Renaissance Balanced Portfolio
Schedule of Investments
June 30, 1995
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------------------------------
<S> <C> <C>
COMMON STOCKS (43.5%)
APPAREL AND OTHER TEXTILE PRODUCTS (2.4%)
Nike, Inc. 7,200 $ 604,800
CHEMICAL AND ALLIED PRODUCTS (4.2%)
Eastman Chemical Company 9,000 535,500
Praxair, Inc. 22,000 550,000
----------
1,085,500
DEPOSITORY INSTITUTIONS (2.1%)
NBD Bancorp, Inc. 16,500 528,000
ELECTRONIC AND OTHER ELECTRICAL EQUIPMENT (4.3%)
General Instrument Corporation* 18,200 698,425
Maytag Corporation 25,500 408,000
----------
1,106,425
FOOD AND KINDRED PRODUCTS (4.3%)
Archer Daniels Midland 28,900 538,261
Conagra, Inc. 15,900 554,512
----------
1,092,773
FURNITURE AND HOME FURNISHINGS STORES (2.7%)
Circuit City Stores, Inc. 21,600 683,100
HEALTH SERVICES (2.2%)
Columbia/HCA Healthcare Corporation 13,100 566,575
INDUSTRIAL MACHINERY AND EQUIPMENT (2.3%)
Dell Computer Corporation* 9,600 577,800
INSTRUMENTS AND RELATED PRODUCTS (2.4%)
Medtronic, Inc. 8,000 617,000
INSURANCE CARRIERS (3.8%)
Loews Corporation 5,350 647,350
US Healthcare, Inc. 11,000 338,250
----------
985,600
</TABLE>
7
<PAGE>
Renaissance Balanced Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
MOTION PICTURES (2.0%)
Walt Disney Company 9,600 $ 534,000
NONDEPOSITORY INSTITUTION (2.2%)
First USA, Inc. 12,900 572,438
OIL AND GAS EXTRACTION (4.0%)
Exxon Corporation 7,700 543,813
Halliburton Company 13,700 489,775
-----------
1,033,588
RAILROAD TRANSPORTATION (2.1%)
Illinois Central Corporation 15,500 534,750
RUBBER AND MISCELLANEOUS PLASTICS PRODUCTS (2.5%)
Illinois Tool Works, Inc. 11,500 632,500
-----------
TOTAL COMMON STOCKS (Cost $9,701,192) 11,154,849
LONG-TERM DEBT SECURITIES (49.8%)
U.S. GOVERNMENT OBLIGATIONS (36.6%)
U.S. Treasury Notes, 7.875%, due 11/15/2004 $ 745,000 829,744
U.S. Treasury Notes, 7.25%, due 8/15/2004 2,475,000 2,644,760
U.S. Treasury Notes, 7.25%, due 5/15/2004 1,835,000 1,959,156
U.S. Treasury Notes, 5.875%, due 2/15/2004 1,035,000 1,009,611
U.S. Treasury Notes, 5.75%, due 8/15/2003 735,000 712,605
U.S. Treasury Notes, 6.25%, due 2/15/2003 2,227,042 2,236,086
-----------
9,391,962
U.S. GOVERNMENT AGENCY-COLLATERALIZED MORTGAGE OBLIGATIONS
(13.2%)
Fed. Home Loan Mort. Corp., Var. Rate 4.75% (effective
6/30/95), due 10/4/96 3,400,000 3,378,886
-----------
TOTAL LONG-TERM DEBT SECURITIES (Cost $12,532,580) 12,770,848
</TABLE>
8
<PAGE>
Renaissance Balanced Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------------
<S> <C> <C>
SHORT-TERM SECURITIES (6.7%)
TIME DEPOSITS (6.7%)
State Street Bank, 4.90%, due 7/3/95 $ 1,725,375 $ 1,725,375
------------
TOTAL SHORT-TERM SECURITIES (Cost $1,725,375)
1,725,375
------------
TOTAL INVESTMENTS (100.0%) (Cost $23,959,147) $ 25,651,072
============
</TABLE>
* Non-income producing
OTHER INFORMATION:
Purchases and sales of securities, excluding short-term securities, for the
year ended June 30, 1995, aggregated $17,145,871 and $19,088,119,
respectively. Net unrealized appreciation for tax purposes aggregated
$1,691,925, of which $1,915,475 related to appreciated investment securities
and $223,550 related to depreciated investment securities. The aggregate cost
of securities is the same for book and tax purposes.
SEE ACCOMPANYING NOTES.
9
<PAGE>
Zweig Asset Allocation Portfolio
Statement of Assets and Liabilities
June 30, 1995
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value (cost $32,587,902)
(NOTE 1)-See accompanying schedule $ 36,764,428
Dividends, interest and other receivables 32,148
-------------
TOTAL ASSETS 36,796,576
LIABILITIES
Cash overdraft 16,812
Accounts payable and accrued expenses 43,603
-------------
TOTAL LIABILITIES 60,415
-------------
NET ASSETS $ 36,736,161
=============
Net Assets consist of:
Paid-in capital $ 31,852,476
Undistributed net investment income 946,985
Undistributed net realized loss on investments (244,106)
Net unrealized appreciation on investment securities and futures
contracts 4,180,806
-------------
NET ASSETS, for 2,820,443 shares outstanding $ 36,736,161
=============
NET ASSET VALUE, offering and redemption price per share $ 13.02
=============
</TABLE>
SEE ACCOMPANYING NOTES.
10
<PAGE>
Zweig Asset Allocation Portfolio
Statement of Operations
Year Ended June 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 340,252
Interest 1,021,521
----------
Total investment income 1,361,773
EXPENSES (NOTE 2)
Investment advisory and management fees 312,227
Custody and accounting fees 78,057
Professional fees 14,202
Directors' fees and expenses 4,950
Other expenses 5,186
----------
Total expenses 414,622
----------
Net investment income 947,151
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 1)
Net realized gain (loss) on:
Investment securities 241,845
Futures and options contracts (322,322)
----------
Net realized loss (80,477)
Change in unrealized appreciation (depreciation) on:
Investment securities 3,988,636
Futures contracts (44,095)
----------
Change in unrealized appreciation (depreciation) 3,944,541
----------
Net realized and unrealized gain on investments 3,864,064
----------
Net increase in net assets resulting from operations $4,811,215
==========
</TABLE>
SEE ACCOMPANYING NOTES.
11
<PAGE>
Zweig Asset Allocation Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1995 1994
-----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 947,151 $ 298,043
Net realized loss on investments (80,477) (161,851)
Net unrealized appreciation 3,944,541 85,735
-----------------------------
Net increase in net assets resulting from operations
4,811,215 221,927
Distributions to shareholders from:
Net investment income (248,100) (64,000)
Capital share transactions:
Proceeds from sales of shares 7,443,090 29,026,779
Proceeds from reinvested dividends 248,100 64,000
Cost of shares redeemed (7,081,317) (1,541,077)
-----------------------------
Net increase in net assets resulting from share
transactions 609,873 27,549,702
-----------------------------
Total increase in net assets 5,172,988 27,707,629
NET ASSETS
Beginning of year 31,563,173 3,855,544
-----------------------------
End of year (including undistributed net investment income of
$946,985 and $247,934, respectively) $36,736,161 $31,563,173
=============================
OTHER INFORMATION
Shares:
Sold 640,047 2,528,990
Issued through reinvestment of dividends 21,399 5,620
Redeemed (598,871) (133,338)
-----------------------------
Net increase 62,575 2,401,272
=============================
</TABLE>
SEE ACCOMPANYING NOTES.
12
<PAGE>
Zweig Asset Allocation Portfolio
Financial Highlights
<TABLE>
<CAPTION>
DECEMBER 14,
1992
(COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS)
JUNE 30, JUNE 30, THROUGH JUNE 30,
1995 1994 1993(B)
------------------------------------------------------------
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.44 $ 10.81 $ 10.00
Income from investment operations:
Net investment income 0.33 0.10 0.08
Net realized and unrealized gain on
investments 1.33 0.58 0.73
------------------------------------------------------------
Total from investment operations 1.66 0.68 0.81
Less distributions:
From net investment income (0.08) (0.05) -
------------------------------------------------------------
Net asset value, end of period $ 13.02 $ 11.44 $ 10.81
============================================================
TOTAL RETURN(A) 14.57% 6.27% 14.86%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $36,736,161 $ 31,563,173 $ 3,855,544
Ratio of expenses to average net
assets(C) 1.20% 1.39% 1.51%
Ratio of net investment income to
average net assets(C) 2.73% 1.67% 1.40%
Portfolio turnover rate 45% 101% 12%
</TABLE>
(A) Total returns are not annualized.
(B) Data expressed as a percentage are annualized as appropriate.
(C) The ratios of expenses and net investment income to average net assets
before voluntary expense reimbursement were 4.87% and (1.17%), respectively,
for the period December 14, 1992 (commencement of operations) through June
30, 1993. (NOTE 2)
13
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments
June 30, 1995
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------------------------------
<S> <C> <C>
COMMON STOCKS (68.2%)
AMUSEMENT AND RECREATION SERVICES (0.7%)
Grand Casinos, Inc.* 3,800 $ 134,425
Players International* 5,750 115,719
----------
250,144
AUTO REPAIR, SERVICES, AND PARKING (0.3%)
Ryder System, Inc. 4,700 112,213
BUSINESS SERVICES (0.7%)
Filenet Corporation* 2,100 84,788
Pitson Services Group 2,800 67,200
Sun Microsystems, Inc.* 1,900 92,269
----------
244,257
CHEMICALS AND ALLIED PRODUCTS (3.4%)
Cabot Corporation 3,300 174,075
Cytec Industries, Inc.* 2,200 89,925
First Mississippi Corporation 2,800 95,550
Geon Company 4,800 138,000
Georgia Gulf Corporation 900 29,363
IMC Global Inc. 2,800 151,550
Methanex Corporation* 1,800 15,075
Monsanto Company 900 81,113
Norsk Hydro 4,400 183,700
Olin Corporation 2,000 103,000
Sterling Chemicals, Inc. 2,600 30,225
Union Carbide Corporation 5,000 166,875
----------
1,258,451
COMMUNICATIONS (0.03%)
Telefonica de Espana 300 11,625
DEPOSITORY INSTITUTIONS (10.9%)
Bank of Boston Corporation 8,000 299,500
Bank of New York Company, Inc. 9,000 363,350
Bankamerica Corporation 2,100 110,513
Baybanks, Inc. 2,500 198,438
</TABLE>
14
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
DEPOSITORY INSTITUTIONS (10.9%) (CONTINUED)
Boatmen's Bancshares, Inc. 2,400 $ 84,450
Chase Manhattan Corporation 2,300 108,100
Chemical Banking Corporation 5,104 241,164
Comerica, Inc. 4,500 144,563
Crestar Financial Corporation 1,800 88,200
Dime Bancorp, Inc.* 1,500 15,000
First American Corp-Tennessee* 3,300 118,594
First Bank System, Inc. 4,300 176,300
First Chicago Corporation 2,600 155,675
First Fidelity Bancorp 100 5,900
First Interstate Bancorp 3,000 240,750
First of America Bankcorp 1,900 70,538
First Tennessee National Corporation 700 32,419
First Union Corporation 4,600 208,150
Fleet Financial Group, Inc. 5,300 196,763
Hibernia Corporation 14,200 126,025
Michigan National Corporation 920 97,750
Midatlantic Corporation, Inc. 5,500 219,313
Nationsbank Corporation 1,000 53,625
NBD Bancorp, Inc. 3,400 108,800
Republic New York Corporation 2,600 145,600
Southtrust Corporation 2,000 46,500
Standard Federal Bancorp 5,400 181,575
UJB Financial Corporation 1,700 51,638
Wells Fargo & Company 500 90,125
West One Bankcorp 400 13,300
----------
3,992,618
ELECTRIC, GAS AND SANITARY SERVICE (5.8%)
American Electric Power 2,700 94,838
Baltimore Gas & Electric 3,000 75,000
Centerior Energy Corporation 11,100 106,838
Coastal Corporation 5,400 164,025
Columbia Gas System* 7,500 238,125
Illinova Corporation 5,700 144,638
New England Electric System 1,900 65,550
</TABLE>
15
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
ELECTRIC, GAS AND SANITARY SERVICE (5.8%) (CONTINUED)
Niagra Mohawk Power Corporation 9,900 $ 146,025
Northeast Utilities 3,000 67,500
Pacific Enterprises 5,300 129,850
Pacific Gas & Electric 4,900 142,100
Pinnacle West Corporation 13,000 318,500
Portland General Corporation 3,100 68,588
Scecorp 7,900 135,288
Unicom Corporation 5,000 133,125
Western Resource 3,000 92,625
----------
2,122,615
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT (8.6%)
Advanced Micro Devices* 6,100 221,888
Cypress Semiconductor Corporation* 2,500 101,250
Electro Scientific Industries, Inc.* 4,100 136,838
Integrated Device Tech, Inc.* 2,200 101,613
LSI Logic Corporation* 8,600 336,475
Maytag Corporation 5,700 91,200
Micron Technology, Inc. 11,900 653,013
National Semiconductor Corporation* 10,600 294,150
OPTI, Inc.* 8,100 185,288
Philips Electronics 11,200 478,800
Standard Microsystems Corporation* 5,700 87,281
Texas Instruments, Inc. 2,400 321,300
Vishay Intertechnology* 926 33,452
Zitel Corporation* 11,400 127,538
----------
3,170,086
FABRICATED METAL (1.0%)
Ball Corporation 3,000 104,625
Parker-Hannifin Corporation 2,850 103,313
Phelps Dodge 2,400 141,600
----------
349,538
FOOD AND KINDRED PRODUCTS (1.6%)
Archer Daniels Midland 6,850 127,581
IBP, Inc. 9,000 391,500
Smithfield Foods, Inc.* 3,700 78,856
----------
597,937
FOOD STORES (0.3%)
Kroger Company* 800 21,500
Safeway, Inc.* 2,200 82,225
----------
103,725
</TABLE>
16
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
HEALTH SERVICES (1.0%)
Maxicare Health Plans, Inc.* 7,600 $ 116,850
Ornda Healthcorp.* 7,600 130,625
Sun Healthcare Group, Inc.* 6,800 107,100
----------
354,575
HOLDING COMPANIES AND OTHER INVESTMENT OFFICES (1.3%)
Citicorp 8,500 491,938
INDUSTRIAL MACHINERY AND EQUIPMENT (7.7%)
AGCO Corporation 4,350 163,125
Amdahl Corporation 9,300 103,463
Apple Computer 700 32,550
BJ Services Company-WTS 340 1,445
Black & Decker Corporation 3,800 117,325
Briggs & Stratton 3,300 113,850
Compaq Computer Corporation* 3,700 167,888
Cummins Engine Company, Inc. 5,300 231,213
Deere & Company 1,000 85,625
Dell Computer Corporation* 2,200 132,413
Digital Equipment* 2,500 101,875
Dynatech Corporation* 5,900 112,100
Exabyte Corporation* 900 12,431
Harris Corporation 3,900 201,338
International Business Machines Corporation 3,000 288,000
Kulicke and Soffa Industries* 500 33,188
Novellus Systems, Inc.* 600 40,650
Printronix, Inc.* 3,400 94,350
Proxima Corporation* 4,200 100,800
Quantum Corporation* 4,200 96,600
Seagate Technology, Inc.* 5,300 208,025
Sequent Computer, Inc.* 1,700 30,281
Smith International, Inc.* 3,600 60,300
Tandem Computers, Inc.* 9,200 148,350
Tecumseh Products Company 800 35,000
Western Digital Corporation* 7,200 125,100
----------
2,837,285
</TABLE>
17
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
INSTRUMENTS AND RELATED PRODUCTS (2.4%)
General Motors 6,200 $ 244,900
Johnson Controls, Inc. 700 39,550
Loral Corporation 3,300 170,775
Sci Systems, Inc.* 5,400 134,663
Tektronix, Inc. 3,900 192,075
Teradyne, Inc.* 1,600 104,600
----------
886,563
INSURANCE CARRIERS (3.4%)
Aetna Life & Casualty Company 2,000 125,750
Allstate Corporation 4,400 130,350
AMBAC, Inc. 2,500 100,313
Cigna Corporation 1,800 139,725
Exel Limited 1,600 83,200
Loews Corporation 1,100 133,100
Old Republic International Corporation 400 10,450
Partnerre Holdings 5,700 148,556
Reliastar Financial Corporation 700 26,775
St. Paul Companies 2,700 132,975
United Companies Financial Corporation 990 44,426
USLife Corporation 1,900 76,475
USF&G Corporation 6,500 105,625
----------
1,257,720
LUMBER AND WOOD PRODUCTS (0.5%)
Georgia -Pacific Corporation 400 34,700
Willamette Industries 2,600 143,650
----------
178,350
METAL MINING (0.7%)
Asaro, Inc. 2,600 79,300
Cyprus Amax Minerals Company 2,400 68,400
Magma Copper Company* 7,400 120,250
----------
267,950
MISCELLANEOUS MANUFACTURING INDUSTRIES (0.7%)
Cobra Golf, Inc.* 4,200 132,825
First Team Sports* 4,700 108,981
----------
241,806
</TABLE>
18
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
MISCELLANEOUS RETAIL (1.1%)
Federated Department Stores* 4,600 $ 118,450
Good Guys, Inc.* 5,400 59,738
Sears Roebuck and Company 2,400 143,700
Waban, Inc.* 5,700 84,788
----------
406,676
NONDEPOSITORY INSTITUTIONS (2.5%)
American Express Company 1,100 38,638
Astoria Financial Corporation* 3,800 136,325
Bay Ridge Bancorp, Inc.* 7,200 149,850
Finova Group 300 10,500
Green Tree Financial Corporation 1,000 44,375
Greenpoint Financial Corporation 4,000 94,500
Household International, Inc. 4,200 207,900
Sunamerica, Inc. 1,000 51,000
Transamerica Corporation 2,000 116,500
Travelers, Inc. 1,600 70,000
----------
919,588
NONDURABLE GOODS WHOLESALE (0.4%)
Terra Industries, Inc. 11,500 139,438
NONMETALLIC MINERALS (0.4%)
Potash Corporation Sask, Inc. 2,500 139,688
OIL AND GAS EXTRACTION (0.1%)
Chesapeake Energy Corporation* 600 15,450
Petroleum Geo-Services* 1,300 37,375
----------
52,825
PAPER AND ALLIED PRODUCTS (3.2%)
Boise Cascade Corporation 3,300 133,650
Bowater, Inc. 3,100 139,113
Champion International Corporation 2,300 119,888
Chesapeake Corporation 3,300 102,713
Federal Paper Board Company 3,500 123,813
International Paper Company 1,700 145,775
James River Corporation of Virginia 3,700 102,213
</TABLE>
19
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
PAPER AND ALLIED PRODUCTS (3.2%) (CONTINUED)
Mead Corporation 3,500 $ 207,813
Premark International, Inc. 2,000 103,750
----------
1,178,728
PETROLEUM AND COAL PRODUCTS (0.3%)
British Petroleum 1,100 94,188
PRIMARY METAL INDUSTRIES (1.4%)
Alcan Aluminum Ltd. 3,500 105,875
Alumax, Inc.* 4,800 149,400
Aluminum Company of America 800 40,100
LTV Corporation* 4,900 71,663
USX-U.S. Steel Company 2,500 85,938
WHX Corporation* 6,200 72,850
----------
525,826
PRINTING AND PUBLISHING (0.2%)
Reynolds & Reynolds 2,600 76,700
RAILROAD TRANSPORTATION (0.7%)
Burlington Northern, Inc. 700 44,363
Conrail, Inc. 2,500 139,063
Santa Fe Pacific Corporation 2,786 71,043
----------
254,469
RUBBER AND MISCELLANEOUS PLASTICS PRODUCTS (0.3%)
Goodyear Tire & Rubber Company 2,802 115,583
STONE, CLAY, GLASS, AND CONCRETE PRODUCTS (0.8%)
Lafarge Corporation 2,900 54,375
National Gypsum* 2,300 120,463
USG Corporation* 5,500 130,625
----------
305,463
</TABLE>
20
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
TEXTILE MILL PRODUCTS (0.1%)
Fieldcrest Cannon* 1,800 $ 38,925
TRANSPORTATION BY AIR (1.6%)
AMR Corporation* 1,600 119,400
British Airways 600 40,350
Delta Air Lines, Inc. 2,100 154,875
Federal Express Corporation* 4,300 261,225
-----------
575,850
TRANSPORTATION EQUIPMENT (4.1%)
Chrysler Corporation 2,500 119,688
Dana Corporation 1,400 40,075
Ford Motor Company 9,000 267,750
Magna International, Inc. 1,300 57,363
McDonnell Douglas Corporation 5,300 406,775
Navistar International* 7,900 119,488
Northrop Grumman Corporation 2,600 135,525
Paccar, Inc. 2,900 135,575
Teledyne, Inc. 5,000 122,500
Textron, Inc. 1,500 87,188
-----------
1,491,927
TOTAL COMMON STOCKS (Cost $20,869,300) 25,045,270
PREFERRED STOCKS (0.002%)
TRANSPORTATION EQUIPMENT (0.002%)
Teledyne, Inc. 38 556
-----------
TOTAL PREFERRED STOCKS (Cost $0) 556
</TABLE>
21
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------------------------------
<S> <C> <C>
SHORT-TERM SECURITIES (31.8%)
U.S. GOVERNMENT AGENCY DISCOUNT NOTES (29.6%)
Federal National Mortgage Assoc., 5.88%, due 7/3/95 $ 2,800,000 $ 2,799,085
Federal National Mortgage Assoc., 5.87%, due 7/10/95 2,500,000 2,496,344
Federal National Mortgage Assoc., 5.87%, due 7/14/95 2,000,000 1,995,761
Federal National Mortgage Assoc., 5.84%, due 7/19/95 2,000,000 1,994,160
Federal National Mortgage Assoc. 5.85%, due 7/28/95 1,000,000 995,612
Federal National Mortgage Assoc., 5.86%, due 7/31/95 600,000 597,070
------------
10,878,032
U.S. GOVERNMENT OBLIGATIONS (1.3%)
U.S. Treasury Bills, 5.37%, due 9/21/95 500,000 493,884
TIME DEPOSITS (0.9%)
State Street Bank, 4.90%, due 7/3/95 346,686 346,686
------------
TOTAL SHORT-TERM SECURITIES (Cost $11,718,602) 11,718,602
------------
TOTAL INVESTMENTS (100.0%) (Cost $32,587,902) $ 36,764,428
============
</TABLE>
FUTURES CONTRACTS
<TABLE>
<CAPTION>
CONTRACT
COLLATERAL EXPIRATION AMOUNT UNREALIZED
(PAR VALUE) DATE AT VALUE GAIN
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
3 S&P 500 Futures U.S. Treasury
Contracts-Long Bill: $500,000,
due 9/21/95 9/15/95 $ 820,725 $ 4,280
=============================
</TABLE>
* Non-income producing
22
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (continued)
OTHER INFORMATION:
Purchases and sales of securities, excluding short-term securities, for the
year ended June 30, 1995, aggregated $15,133,567 and $7,265,527,
respectively. Net unrealized appreciation for tax purposes aggregated
$4,176,526, of which $4,495,866 related to appreciated investment securities
and $319,340 related to depreciated investment securities. The aggregate cost
of securities is the same for book and tax purposes.
SEE ACCOMPANYING NOTES.
23
<PAGE>
Nicholas-Applegate Balanced Portfolio
Statement of Assets and Liabilities
June 30, 1995
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value (cost $39,943,879)
(NOTE 1)-See accompanying schedule $ 45,943,315
Receivable for investment securities sold 613,413
Dividends, interest and other receivables 246,412
-------------
TOTAL ASSETS 46,803,140
LIABILITIES
Payable for investment securities purchased 963,210
Cash overdraft 16,762
Accounts payable and accrued expenses 42,557
-------------
TOTAL LIABILITIES 1,022,529
-------------
NET ASSETS $ 45,780,611
=============
Net Assets consist of:
Paid-in capital $ 40,464,534
Undistributed net investment income 935,896
Undistributed net realized loss on investments (1,619,255)
Net unrealized appreciation on investment securities 5,999,436
-------------
NET ASSETS, for 3,475,691 shares outstanding $ 45,780,611
=============
NET ASSET VALUE, offering and redemption price per share $ 13.17
=============
</TABLE>
SEE ACCOMPANYING NOTES.
24
<PAGE>
Nicholas-Applegate Balanced Portfolio
Statement of Operations
Year Ended June 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 337,189
Interest 998,730
----------
Total investment income 1,335,919
EXPENSES (NOTE 2)
Investment advisory and management fees 276,766
Custody and accounting fees 95,804
Professional fees 14,202
Directors' fees and expenses 4,950
Other expenses 7,631
----------
Total expenses 399,353
----------
Net investment income 936,566
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 1)
Net realized loss on investments (283,310)
Change in unrealized appreciation on investment securities 6,479,460
----------
Net realized and unrealized gain on investments 6,196,150
----------
Net increase in net assets resulting from operations $7,132,716
==========
</TABLE>
SEE ACCOMPANYING NOTES.
25
<PAGE>
Nicholas-Applegate Balanced Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1995 1994
-----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 936,566 $ 428,990
Net realized loss on investments (283,310) (1,298,166)
Net unrealized appreciation (depreciation) 6,479,460 (848,815)
----------------------------
Net increase (decrease) in net assets resulting from
operations 7,132,716 (1,717,991)
Distributions to shareholders from:
Net investment income (386,000) (67,000)
Capital share transactions:
Proceeds from sales of shares 7,522,637 38,482,355
Proceeds from reinvested dividends 386,000 67,000
Cost of shares redeemed (8,232,738) (2,973,632)
----------------------------
Net increase (decrease) in net assets resulting from
share transactions (324,101) 35,575,723
----------------------------
Total increase in net assets 6,422,615 33,790,732
NET ASSETS
Beginning of year 39,357,996 5,567,264
----------------------------
End of year (including undistributed net investment income of
$935,896 and $385,330, respectively) $45,780,611 $39,357,996
============================
OTHER INFORMATION
Shares:
Sold 641,113 3,254,137
Issued through reinvestment of dividends 32,590 5,700
Redeemed (689,568) (252,432)
----------------------------
Net increase (decrease) (15,865) 3,007,405
============================
</TABLE>
SEE ACCOMPANYING NOTES.
26
<PAGE>
Nicholas-Applegate Balanced Portfolio
Financial Highlights
<TABLE>
<CAPTION>
DECEMBER 3,
1992
(COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS)
JUNE 30, JUNE 30, THROUGH JUNE 30,
1995 1994 1993(B)
--------------------------------------------------------------
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.27 $ 11.50 $ 10.00
Income from investment operations:
Net investment income 0.27 0.09 0.11
Net realized and unrealized gain (loss)
on investments 1.74 (0.29) 1.39
--------------------------------------------------------------
Total from investment operations 2.01 (0.20) 1.50
Less distributions:
From net investment income (0.11) (0.03) -
--------------------------------------------------------------
Net asset value, end of period $ 13.17 $ 11.27 $ 11.50
==============================================================
TOTAL RETURN(A) 17.92% (1.70%) 26.07%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, end of period $45,780,611 $ 39,357,996 $ 5,567,264
Ratio of expenses to average net
assets(C) 0.94% 1.03% 1.25%
Ratio of net investment income to
average net assets (C) 2.20% 1.69% 1.70%
Portfolio turnover rate 108% 56% 21%
</TABLE>
(A) Total returns are not annualized.
(B) Data expressed as a percentage are annualized as appropriate.
(C) The ratios of expenses and net investment income to average net assets
before voluntary expense reimbursement were 3.87% and (0.72%), respectively,
for the period December 3, 1992 (commencement of operations) through June
30, 1993. (NOTE 2)
27
<PAGE>
Nicholas-Applegate Balanced Portfolio
Schedule of Investments
June 30, 1995
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------------------------------
<S> <C> <C>
COMMON STOCKS (62.5%)
APPAREL AND ACCESSORY STORES (0.5%)
Nike, Inc. 2,900 $ 243,600
BUSINESS SERVICES (8.2%)
3Com Corporation* 13,800 924,600
Adaptec Inc.* 7,200 265,500
BMC Software, Inc.* 4,700 361,900
Broderbund Software, Inc.* 4,200 267,225
Computer Associates International, Inc. 12,240 829,260
Gartner Group, Inc.* 10,800 311,850
Healthcare Compare Corporation* 6,900 207,000
Manpower, Inc. 16,900 430,950
Medaphis Corporation* 7,400 159,100
----------
3,757,385
CHEMICALS AND ALLIED PRODUCTS (6.1%)
Amgen, Inc.* 3,300 265,238
Eastman Chemical Company 7,200 428,400
FMC Corporation* 3,700 248,825
Geon Company 12,000 345,000
Lyondell Petrochemical 12,800 328,000
Mylan Laboratories 7,500 230,625
Olin Corporation 6,600 339,900
Sterling Chemicals, Inc. 15,800 183,675
Union Carbide Corporation 13,400 447,225
----------
2,816,888
COMMUNICATIONS (1.0%)
Infinity Broadcasting* 7,400 246,975
King World Productions, Inc.* 5,600 226,800
----------
473,775
DEPOSITORY INSTITUTIONS (0.7%)
Union Bank San Francisco 7,500 314,063
ELECTRIC, GAS AND SANITARY SERVICE (1.2%)
Boston Scientific Corporation* 17,100 545,063
Citizens Utility Company* 268 3,188
----------
548,251
</TABLE>
28
<PAGE>
Nicholas-Applegate Balanced Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
ELECTRONICS, AND OTHER ELECTRICAL EQUIPMENT (7.9%)
Intel Corporation 4,800 $ 303,900
KLA Instruments Corporation* 10,500 812,438
Matsushita Electric Industrial 1,300 201,500
Micron Technology, Inc. 12,600 691,425
Tencor Instrument 5,700 239,400
Texas Instruments, Inc. 4,600 615,825
Varian Associates, Inc. 9,800 541,450
Xilinx 2,500 241,875
----------
3,647,813
FOOD AND KINDRED PRODUCTS (1.5%)
Archer Daniels Midland 10,300 191,838
Coca Cola Enterprises, Inc. 11,200 245,000
IBP, Inc. 6,000 261,000
----------
697,838
FOOD STORES (1.2%)
Safeway, Inc.* 15,300 571,838
GENERAL MERCHANDISE STORES (0.5%)
Sears Roebuck and Company 4,100 245,488
INDUSTRIAL MACHINERY AND EQUIPMENT (4.7%)
Altera Corporation* 6,600 286,275
Amdahl Corporation 8,400 93,450
Bay Networks, Inc.* 5,900 243,375
Cummins Engine Company, Inc. 4,600 200,675
Dell Computer Corporation* 5,200 312,975
Digital Equipment* 5,300 215,975
International Business Machines Corporation 2,800 268,800
Sun Microsystems, Inc.* 6,200 301,088
US Robotics Corporations 2,500 241,875
----------
2,164,488
</TABLE>
29
<PAGE>
Nicholas-Applegate Balanced Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
INSTRUMENTS AND RELATED PRODUCTS (1.3%)
Teradyne, Inc.* 4,900 $ 320,338
Vishay Intertechnology* 7,600 274,550
----------
594,888
INSURANCE CARRIERS (5.2%)
Ace Limited 8,900 258,100
American National Insurance 7,260 440,138
Cigna Corporation 3,000 232,875
Exel Limited 4,900 254,800
Loews Corporation 2,000 242,000
Old Republic International Corporation 9,000 235,125
Oxford Health Plans* 5,000 235,000
Pacificare Health Systems, Inc.* 5,300 266,988
St. Paul Companies 4,700 231,475
----------
2,396,501
LUMBER AND WOOD PRODUCTS (0.6%)
Weyenhaeuser Company 5,600 263,900
METAL MINING (0.9%)
Asarco, Inc. 14,300 436,150
NONDURABLE GOODS, WHOLESALE (0.9%)
Bergen Brunswig Corporation 9,000 205,875
Fleming Companies, Inc. 8,700 230,550
----------
436,425
NONMETALLIC MINERALS (1.5%)
Potash Corporation Sask, Inc. 12,000 670,500
OIL AND GAS EXTRACTION (4.0%)
Atlantic Richfield Company 2,000 219,500
Exxon Corporation 3,400 240,125
Louisiana Land & Exploration 5,800 231,275
Mobil Corporation 2,600 249,600
Occidental Petroleum Corporation 9,700 221,888
Oryx Energy Company 16,600 228,250
Sonat Offshore Drilling, Inc. 8,100 232,875
Union Texas Petro Holdings, Inc. 10,200 215,475
----------
1,838,988
</TABLE>
30
<PAGE>
Nicholas-Applegate Balanced Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
PAPER AND ALLIED PRODUCTS (6.3%)
Boise Cascade Corporation 13,000 $ 526,500
Bowater, Inc. 8,000 359,000
Champion International Corporation 6,100 317,963
Chesapeake Corporation 6,000 186,750
Jefferson Smurfit Corporation* 12,400 162,750
Potlatch Corporation 5,500 229,625
Scott Paper Company 12,000 594,000
Union Camp Corporation 4,500 260,438
Westvaco Corporation 6,000 265,500
-----------
2,902,526
PETROLEUM AND COAL INDUSTRIES (0.5%)
USX-Marathon Group 12,200 240,950
PRIMARY METAL INDUSTRIES (4.1%)
Alcan Aluminum Limited 8,000 242,000
Alumax, Inc.* 12,300 382,828
Aluminum Company of America 5,000 250,625
Crane Company 7,800 282,750
Phelps Dodge 6,200 365,800
Reynolds Metals Company 7,100 367,425
-----------
1,891,428
SECURITY AND COMMODITY BROKERS (1.1%)
Bear Stearns Companies, Inc. 11,500 245,813
Lehman Brothers Holdings 11,000 239,250
-----------
485,063
TOBACCO PRODUCTS (0.6%)
Philip Morris Company, Inc. 3,700 275,188
TRANSPORTATION EQUIPMENT (1.7%)
Breed Technologies 10,300 247,200
Harsco Corporation 4,600 242,650
McDonnell Douglas Corporation 3,900 299,325
-----------
789,175
-----------
TOTAL COMMON STOCKS (Cost $23,608,368) 28,703,109
</TABLE>
31
<PAGE>
Nicholas-Applegate Balanced Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------------------------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES (29.6%)
U.S. GOVERNMENT OBLIGATIONS (29.6%)
U.S. Treasury Notes, 0%, due 11/15/2004 $ 2,300,000 $ 1,274,844
U.S. Treasury Notes, 6.5%, due 5/15/97 750,000 758,558
U.S. Treasury Notes, 7.5%, due 5/15/2002 750,000 807,420
U.S. Treasury Notes, 9.25%, due 1/15/96 1,850,000 1,882,949
U.S. Treasury Notes, 6.25%, due 2/15/2003 750,000 751,995
U.S. Treasury Notes, 7.25%, due 5/15/2004 3,850,000 4,110,491
U.S. Treasury Notes, 7.875%, due 11/15/2004 3,600,000 4,009,500
------------
TOTAL LONG-TERM DEBT SECURITIES
(Cost $12,696,648) 13,595,757
SHORT-TERM SECURITIES (7.9%)
U.S. GOVERNMENT OBLIGATIONS (7.9%)
U.S. Treasury Notes, 8.625%, due 10/15/95 1,850,000 1,864,449
TIME DEPOSITS
State Street Bank, 4.90%, due 7/3/95 1,780,000
------------
TOTAL SHORT-TERM SECURITIES
(Cost $3,638,863) 3,644,449
------------
TOTAL INVESTMENTS (100.0%) (Cost $39,943,879) $ 45,943,315
============
</TABLE>
* Non-income producing
OTHER INFORMATION:
Purchases and sales of securities, excluding short-term securities, for the
year ended June 30, 1995, aggregated $44,663,577 and $45,029,278,
respectively. Net unrealized appreciation for tax purposes aggregated
$5,999,436, of which $6,698,745 related to appreciated investment securities
and $699,309 related to depreciated investment securities. The aggregate cost
of securities is the same for book and tax purposes.
SEE ACCOMPANYING NOTES.
32
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Statement of Assets and Liabilities
June 30, 1995
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value (cost $12,423,742)
(NOTE 1)-See accompanying schedule $16,094,433
Cash 308,901
Dividends, interest and other receivables 12,026
-----------
TOTAL ASSETS 16,415,360
LIABILITIES
Accounts payable and accrued expenses 22,084
-----------
TOTAL LIABILITIES 22,084
-----------
NET ASSETS $16,393,276
===========
Net Assets consist of:
Paid-in capital $12,552,547
Undistributed net investment income 17,603
Undistributed net realized gain on investments 152,435
Net unrealized appreciation on investment securities 3,670,691
-----------
NET ASSETS, for 1,275,266 shares outstanding $16,393,276
===========
NET ASSET VALUE, offering and redemption price per share $ 12.85
===========
</TABLE>
SEE ACCOMPANYING NOTES.
33
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Statement of Operations
Year Ended June 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 118,410
Interest 39,734
----------
Total investment income 158,144
EXPENSES (NOTE 2)
Investment advisory and management fees 86,434
Custody and accounting fees 29,920
Professional fees 14,202
Directors' fees and expenses 4,950
Other expenses 5,035
----------
Total expenses 140,541
----------
Net investment income 17,603
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 1)
Net realized gain on investments 311,876
Change in unrealized appreciation on investment securities 3,972,691
----------
Net realized and unrealized gain on investments 4,284,567
----------
Net increase in net assets resulting from operations $4,302,170
==========
</TABLE>
SEE ACCOMPANYING NOTES.
34
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1995 1994
-----------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $ 17,603 $ (15,087)
Net realized gain (loss) on investments 311,876 (144,782)
Net unrealized appreciation (depreciation) 3,972,691 (261,470)
---------------------------
Net increase (decrease) in net assets resulting from
operations 4,302,170 (421,339)
Capital share transactions:
Proceeds from sales of shares 5,228,036 8,728,014
Cost of shares redeemed (3,829,957) (2,757,013)
---------------------------
Net increase in net assets resulting from share
transactions 1,398,079 5,971,001
---------------------------
Total increase in net assets 5,700,249 5,549,662
NET ASSETS
Beginning of year 10,693,027 5,143,365
---------------------------
End of year (including undistributed net investment income of
$17,603 in 1995) $16,393,276 $10,693,027
===========================
OTHER INFORMATION
Shares:
Sold 485,092 887,285
Redeemed (352,447) (274,544)
---------------------------
Net increase 132,645 612,741
===========================
</TABLE>
SEE ACCOMPANYING NOTES.
35
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Financial Highlights
<TABLE>
<CAPTION>
DECEMBER 8,
1992
(COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS)
JUNE 30, JUNE 30, THROUGH JUNE 30,
1995 1994 1993(B)
-------------------------------------------------------------
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.36 $ 9.71 $ 10.00
Income from investment operations:
Net investment income (loss) 0.01 (0.02)(C) -
Net realized and unrealized gain (loss)
on investments 3.48 (0.33) (0.29)
-------------------------------------------------------------
Total from investment operations 3.49 (0.35) (0.29)
-------------------------------------------------------------
Net asset value, end of period $ 12.85 $ 9.36 $ 9.71
=============================================================
TOTAL RETURN(A) 37.29% (3.60%) (5.16%)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, end of period $16,393,276 $ 10,693,027 $ 5,143,365
Ratio of expenses to average net
assets(D) 1.05% 1.29% 1.34%
Ratio of net investment income (loss)
to average net assets(D) 0.13% (0.17%) (0.06%)
Portfolio turnover rate 31% 38% 6%
</TABLE>
(A) Total returns are not annualized.
(B) Data expressed as a percentage are annualized as appropriate.
(C) Net investment loss per share has been calculated using the weighted monthly
average number of shares outstanding.
(D) The ratios of expenses and net investment income to average net assets
before voluntary expense reimbursement were 3.52% and (1.94%), respectively,
for the period ended December 8, 1992 (commencement of operations) through
June 30, 1993. (NOTE 2)
36
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Schedule of Investments
June 30, 1995
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (99.6%)
APPAREL AND ACCESSORY STORES (2.2%)
Gap, Inc. 9,800 $ 341,775
BUILDING MATERIAL AND GARDEN SUPPLIES (2.1%)
Home Depot, Inc. 8,133 330,403
BUSINESS SERVICES (25.8%)
Adobe Systems, Inc. 6,400 372,800
Autodesk, Inc. 9,600 410,400
Automatic Data Processing 5,200 326,950
Cabletron Systems* 7,000 372,750
Cisco Systems, Inc.* 8,300 419,669
Electronic Arts, Inc.* 13,000 353,438
Equifax 9,800 327,075
First Financial Management Corporation 4,900 418,950
Microsoft Corporation* 4,700 425,056
Silicon Graphics, Inc.* 10,200 406,725
Sybase, Inc.* 11,100 322,594
----------
4,156,407
CHEMICALS AND ALLIED PRODUCTS (10.8%)
Amgen, Inc.* 4,700 377,763
Genzyme Corporation* 8,400 337,050
Great Lakes Chemical Corporation 5,800 349,450
Merck & Company, Inc. 7,300 357,700
Morton International, Inc. 10,800 315,900
----------
1,737,863
COMMUNICATIONS (2.4%)
Capital Cities/ABC, Inc. 3,550 383,400
DEPOSITORY INSTITUTIONS (4.5%)
Bankamerica Corporation 7,100 373,638
Nationsbank Corporation 6,500 348,563
----------
722,201
EATING AND DRINKING PLACES (2.0%)
Brinker International, Inc.* 19,000 327,750
</TABLE>
37
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
ELECTRONIC AND OTHER ELECTRICAL EQUIPMENT (9.6%)
American Power Conversion* 16,950 $ 388,791
Intel Corporation 6,200 392,534
Motorola, Inc. 5,900 396,038
Sensormatic Electronics Corporation 10,500 372,750
-----------
1,550,113
FURNITURE AND HOME FURNISHINGS STORES (2.4%)
Circuit City Stores, Inc. 12,000 379,500
GENERAL MERCHANDISE STORES (2.0%)
Albertson's, Inc. 10,600 315,350
HOLDING COMPANIES AND OTHER INVESTMENT OFFICES (2.3%)
Norwest Corporation 12,800 368,000
INDUSTRIAL MACHINERY AND COMPUTER EQUIPMENT (9.7%)
Apple Computer 7,300 339,450
Applied Materials, Inc.* 4,950 428,175
Hewlett-Packard Company 6,200 461,900
Tyco International Limited 6,250 337,500
-----------
1,567,025
INSURANCE CARRIERS (4.5%)
American International Group 3,200 364,800
United Healthcare Corporation 8,800 364,100
-----------
728,900
MISCELLANEOUS RETAIL (4.1%)
Office Depot, Inc.* 13,500 379,688
Toys R Us, Inc.* 9,600 280,800
-----------
660,488
MOTION PICTURES (2.1%)
Walt Disney Company 6,200 344,875
NONDEPOSITORY INSTITUTION (2.2%)
Dean Witter Discover & Company 7,600 357,200
</TABLE>
38
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
NONDURABLE GOODS, WHOLESALE (2.4%)
Staples, Inc.* 13,500 $ 390,656
PRINTING AND PUBLISHING (4.2%)
Gannett Company 6,300 341,775
Tribune Company 5,500 337,563
-----------
679,338
SECURITY AND COMMODITY BROKERS (2.3%)
Charles Schwab Corporation 8,350 362,181
TRANSPORTATION EQUIPMENT (2.0%)
General Electric Company 5,700 321,338
-----------
TOTAL COMMON STOCKS (Cost $12,354,072) 16,024,763
SHORT-TERM SECURITIES (0.4%)
TIME DEPOSITS (0.4%)
State Street Bank, 4.90%, due 7/3/95 $ 69,670 69,670
-----------
TOTAL SHORT-TERM SECURITIES (Cost $69,670) 69,670
-----------
TOTAL INVESTMENTS (100.0%) (Cost $12,423,742) $16,094,433
===========
</TABLE>
* Non-income producing
39
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Schedule of Investments (continued)
OTHER INFORMATION:
Purchases and sales of securities, excluding short-term securities, for the
year ended June 30, 1995, aggregated $5,726,616 and $3,896,340, respectively.
Net unrealized appreciation for tax purposes aggregated $3,670,691, of which
$3,851,706 related to appreciated investment securities and $181,015 related
to depreciated investment securities. The aggregate cost of securities is the
same for book and tax purposes.
SEE ACCOMPANYING NOTES.
40
<PAGE>
Dreman Value Portfolio
Statement of Assets and Liabilities
June 30, 1995
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value (cost $9,456,354)
(NOTE 1)-See accompanying schedule $ 10,857,283
Cash 16,062
Dividends, interest and other receivables 21,503
-------------
TOTAL ASSETS 10,894,848
LIABILITIES
Accounts payable and accrued expenses 17,938
-------------
TOTAL LIABILITIES 17,938
-------------
NET ASSETS $ 10,876,910
=============
Net Assets consist of:
Paid-in capital $ 9,174,881
Undistributed net investment income 190,236
Undistributed net realized gain on investments 110,864
Net unrealized appreciation on investment securities 1,400,929
-------------
NET ASSETS, for 863,732 shares outstanding $ 10,876,910
=============
NET ASSET VALUE, offering and redemption price per share $ 12.59
=============
</TABLE>
SEE ACCOMPANYING NOTES.
41
<PAGE>
Dreman Value Portfolio
Statement of Operations
Year Ended June 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 288,949
Interest 10,105
----------
Total investment income 299,054
EXPENSES (NOTE 2)
Investment advisory and management fees 62,310
Custody and accounting fees 21,569
Professional fees 14,202
Directors' fees and expenses 4,950
Other expenses 5,505
----------
Total expenses 108,536
----------
Net investment income 190,518
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 1)
Net realized gain on investments 110,922
Change in unrealized appreciation on investment securities 1,497,538
----------
Net realized and unrealized gain on investments 1,608,460
----------
Net increase in net assets resulting from operations $1,798,978
==========
</TABLE>
SEE ACCOMPANYING NOTES.
42
<PAGE>
Dreman Value Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1995 1994
-----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 190,518 $ 123,355
Net realized gain on investments 110,922 62,521
Net unrealized appreciation (depreciation) 1,497,538 (121,663)
----------------------------
Net increase in net assets resulting from operations 1,798,978 64,213
Distributions to shareholders from:
Net investment income (115,316) (45,000)
Net realized gain (33,184) -
----------------------------
Total distributions to shareholders (148,500) (45,000)
Capital share transactions:
Proceeds from sales of shares 2,443,372 8,184,724
Proceeds from reinvested distributions 148,500 45,000
Cost of shares redeemed (2,317,614) (967,983)
----------------------------
Net increase in net assets resulting from share
transactions 274,258 7,261,741
----------------------------
Total increase in net assets 1,924,736 7,280,954
NET ASSETS
Beginning of year 8,952,174 1,671,220
----------------------------
End of year (including undistributed net investment income
$190,236 and $87,937, respectively) $10,876,910 $8,952,174
============================
OTHER INFORMATION
Shares:
Sold 218,818 764,808
Issued through reinvestment of distributions 13,171 4,223
Redeemed (208,122) (89,144)
----------------------------
Net increase 23,867 679,887
============================
</TABLE>
SEE ACCOMPANYING NOTES.
43
<PAGE>
Dreman Value Portfolio
Financial Highlights
<TABLE>
<CAPTION>
DECEMBER 14,
1992
(COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS)
JUNE 30, JUNE 30, THROUGH JUNE 30,
1995 1994 1993(B)
-------------------------------------------------------------
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.66 $ 10.45 $ 10.00
Income from investment operations:
Net investment income 0.26 0.12 0.11
Net realized and unrealized gain on
investments 1.85 0.17 0.34
-------------------------------------------------------------
Total from investment operations 2.11 0.29 0.45
Less distributions:
From net investment income (.14) (0.08) -
From net realized gain (.04) - -
-------------------------------------------------------------
Total distributions (0.18) (0.08) -
-------------------------------------------------------------
Net asset value, end of period $ 12.59 $ 10.66 $ 10.45
=============================================================
TOTAL RETURN(A) 19.98% 2.80% 8.25%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $10,876,910 $ 8,952,174 $ 1,671,220
Ratio of expenses to average net
assets(C) 1.13% 1.40% 1.24%
Ratio of net investment income to
average net assets(C) 1.98% 1.98% 2.00%
Portfolio turnover rate 29% 9% 5%
</TABLE>
(A) Total returns are not annualized.
(B) Data expressed as a percentage are annualized as appropriate.
(C) The ratios of expenses and net investment income to average net assets
before voluntary expense reimbursement were 1.61% and 1.76%, respectively,
for the year ended June 30, 1994 and were 8.43% and (1.49%), respectively,
for the period December 14, 1992 (commencement of operations) through June
30, 1993. (NOTE 2)
44
<PAGE>
Dreman Value Portfolio
Schedule of Investments
June 30, 1995
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------------------------------
<S> <C> <C>
COMMON STOCKS (99.4%)
APPAREL AND ACCESSORY STORES (0.8%)
Burlington Coat Factory Warehouse* 8,500 $ 88,184
APPAREL AND OTHER TEXTILE PRODUCTS (3.8%)
Liz Claiborne, Inc. 11,400 242,250
VF Corporation 3,100 166,625
----------
408,875
CHEMICALS AND ALLIED PRODUCTS (10.4%)
Bristol-Myers Squibb Company 2,200 149,875
Eli Lilly & Company 3,800 298,300
Glaxo Holdings PLC 5,200 126,750
Marion Merrell Dow, Inc. 5,300 135,150
Merck & Company Inc. 4,100 200,900
Upjohn Company 5,700 215,888
----------
1,126,863
DEPOSITORY INSTITUTIONS (19.9%)
Ahmanson (H.F.) & Company 10,000 220,000
Bankamerica Corporation 4,000 210,500
Barnett Banks, Inc. 4,800 246,000
First Chicago Corporation 4,600 275,425
First Union Corporation 3,800 171,950
Fleet Financial Group, Inc. 1,700 63,113
Great Western Financial 11,000 226,875
J.P. Morgan & Company 1,500 105,188
Midatlantic Corporation, Inc. 4,200 167,475
Nationsbank Corporation 2,500 134,063
PNC Bank Corporation 6,800 179,350
Wells Fargo & Company 900 162,225
----------
2,162,164
ELECTRIC, GAS AND SANITARY SERVICE (5.3%)
Columbia Gas System* 18,100 574,675
FOOD AND KINDRED PRODUCTS (2.3%)
Nestle SA 4,700 244,988
</TABLE>
45
<PAGE>
Dreman Value Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
FOOD STORES (1.6%)
Giant Food, Inc. 6,000 $ 170,250
GENERAL MERCHANDISE STORES (4.9%)
Dayton-Hudson Corporation 5,000 358,750
TJX Companies, Inc. 13,300 176,225
----------
534,975
HEALTH SERVICES (1.3%)
Tenet Health Care* 9,500 136,563
HOLDING COMPANIES AND OTHER INVESTMENT OFFICES (3.1%)
Bankers Trust New York Corporation 5,300 328,600
U.S. Industries, Inc.* 450 6,131
----------
334,731
INDUSTRIAL MACHINERY AND COMPUTER EQUIPMENT (6.2%)
Apple Computer 5,300 246,450
Compaq Computer Corporation* 4,200 190,575
Hewlett-Packard Company 3,200 238,400
----------
675,425
INSTRUMENTS AND RELATED PRODUCTS (3.3%)
Baxter International, Inc. 3,000 109,125
Becton Dickinson & Company 2,500 145,625
US Surgical Corporation 5,000 104,375
----------
359,125
INSURANCE CARRIERS (6.2%)
American General Corporation 6,800 229,500
American International Group 1,500 171,000
Kemper Corporation 4,000 186,500
Ohio Casualty Corporation 3,000 95,250
----------
682,250
</TABLE>
46
<PAGE>
Dreman Value Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
--------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
LUMBER AND WOOD PRODUCTS (2.5%)
Louisiana-Pacific Corporation 10,200 $ 267,750
NONDEPOSITORY INSTITUTION (10.3%)
Federal National Mortgage Association 5,400 509,625
Federal Home Loan Mortgage Corporation 8,200 563,750
Travelers, Inc. 1,200 52,500
-----------
1,125,875
STONE, CLAY, GLASS, AND CONCRETE PRODUCTS (1.5%)
Hanson PLC 9,000 158,625
TEXTILE MILL PRODUCTS (1.5%)
Fruit of the Loom, Inc.* 7,500 158,438
TOBACCO PRODUCTS (4.9%)
Philip Morris Company, Inc. 7,200 535,500
TRANSPORTATION EQUIPMENT (9.6%)
Boeing Company 700 43,838
Ford Motor Company 19,900 592,025
General Electric Company 7,200 405,900
-----------
1,041,763
-----------
TOTAL COMMON STOCKS (Cost $9,386,090) 10,787,019
SHORT-TERM SECURITIES (0.6%)
TIME DEPOSITS (0.6%)
State Street Bank, 4.90%, due 7/3/95 $ 70,264 70,264
-----------
TOTAL SHORT-TERM SECURITIES (Cost $70,264) 70,264
-----------
TOTAL INVESTMENTS (100.0%) (Cost $9,456,354) $10,857,283
===========
</TABLE>
* Non-income producing
47
<PAGE>
Dreman Value Portfolio
Schedule of Investments (continued)
OTHER INFORMATION:
Purchases and sales of securities, excluding short-term securities, for the
year ended June 30, 1995, aggregated $2,963,897 and $2,710,082, respectively.
Net unrealized appreciation for tax purposes aggregated $1,400,929, of which
$1,672,314 related to appreciated investment securities and $271,385 related
to depreciated investment securities. The aggregate cost of securities is the
same for book and tax purposes.
SEE ACCOMPANYING NOTES.
48
<PAGE>
Zweig Equity (Small Cap) Portfolio
Statement of Assets and Liabilities
June 30, 1995
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value (cost $6,888,020)
(NOTE 1)-See accompanying schedule $ 8,022,663
Cash 14,483
Dividends, interest and other receivables 14,935
------------
TOTAL ASSETS 8,052,081
LIABILITIES
Accounts payable and accrued expenses 18,289
------------
TOTAL LIABILITIES 18,289
------------
NET ASSETS $ 8,033,792
============
Net Assets consist of:
Paid-in capital $ 7,256,655
Undistributed net investment income 119,325
Undistributed net realized loss on investment securities, and futures and
options contracts (461,002)
Net unrealized appreciation on investment securities and futures
contracts 1,118,814
------------
NET ASSETS, for 691,384 shares outstanding $ 8,033,792
============
NET ASSET VALUE, offering and redemption price per share $ 11.62
============
</TABLE>
SEE ACCOMPANYING NOTES.
49
<PAGE>
Zweig Equity (Small Cap) Portfolio
Statement of Operations
Year Ended June 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 105,415
Interest 134,610
-------------
Total investment income 240,025
EXPENSES (NOTE 2)
Investment advisory and management fees 81,405
Custody and accounting fees 17,444
Professional fees 14,202
Directors' fees and expenses 4,950
Other expenses 5,373
-------------
Total expenses before reimbursement 123,374
Less: expense reimbursement (Note 2) (2,773)
-------------
Net expenses 120,601
-------------
Net investment income 119,424
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 1)
Net realized loss on:
Investment securities (101,145)
Futures and options contracts (288,630)
-------------
Net realized loss (389,775)
Change in unrealized appreciation (depreciation) on:
Investment securities 1,130,943
Futures contracts (87,154)
-------------
Change in unrealized appreciation (depreciation) 1,043,789
-------------
Net realized and unrealized gain on investments 654,014
-------------
Net increase in net assets resulting from operations $ 773,438
=============
</TABLE>
SEE ACCOMPANYING NOTES.
50
<PAGE>
Zweig Equity (Small Cap) Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1995 1994
-----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 119,424 $ 94,020
Net realized loss on investments (389,775) (33,622)
Net unrealized appreciation 1,043,789 75,374
----------------------------
Net increase in net assets resulting from operations 773,438 135,772
Distributions to shareholders from:
Net investment income (40,100) (55,000)
Net realized gains (50,400) -
----------------------------
Total distributions to shareholders (90,500) (55,000)
Capital share transactions:
Proceeds from sales of shares 1,913,641 6,145,556
Proceeds from reinvested distributions 90,500 55,000
Cost of shares redeemed (2,244,234) (806,015)
----------------------------
Net increase (decrease) in net assets resulting from
share transactions (240,093) 5,394,541
----------------------------
Total increase in net assets 442,845 5,475,313
NET ASSETS
Beginning of year 7,590,947 2,115,634
----------------------------
End of year (including undistributed net investment income of
$119,325 and $44,194, respectively) $ 8,033,792 $ 7,590,947
============================
OTHER INFORMATION
Shares:
Sold 178,821 572,867
Issued through reinvestment of distributions 8,378 5,123
Redeemed (208,320) (74,812)
----------------------------
Net increase (decrease) (21,121) 503,178
============================
</TABLE>
SEE ACCOMPANYING NOTES.
51
<PAGE>
Zweig Equity (Small Cap) Portfolio
Financial Highlights
<TABLE>
<CAPTION>
DECEMBER 14,
1992
(COMMENCEMENT
YEAR ENDED YEAR ENDED OF OPERATIONS)
JUNE 30, JUNE 30, THROUGH JUNE 30,
1995 1994 1993(B)
---------------------------------------------------------------
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.65 $ 10.11 $ 10.00
Income from investment operations:
Net investment income 0.17 0.15 0.05
Net realized and unrealized gain on
investments 0.93 0.50 0.06
---------------------------------------------------------------
Total from investment operations 1.10 0.65 0.11
Less distributions:
From net investment income (0.06) (0.11) -
From net realized gain (0.07) - -
---------------------------------------------------------------
Total distributions (0.13) (0.11) -
---------------------------------------------------------------
Net asset value, end of period $ 11.62 $ 10.65 $ 10.11
===============================================================
TOTAL RETURN(A) 10.39% 6.53% 2.02%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 8,033,792 $ 7,590,947 $ 2,115,634
Ratio of expenses to average net assets 1.55% 1.72% 1.61%
Ratio of net investment income to
average net assets 1.54% 1.75% 0.84%
Ratio of expenses to average net assets
before voluntary expense
reimbursement (NOTE 2) 1.59% 2.14% 7.29%
Ratio of net investment income (loss)
to average net assets before
voluntary expense reimbursement
(NOTE 2) 1.50% 1.32% (1.80%)
Portfolio turnover rate 67% 249% 15%
</TABLE>
(A) Total returns are not annualized.
(B) Data expressed as a percentage are annualized as appropriate.
52
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments
June 30, 1995
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------------------------------
<S> <C> <C>
COMMON STOCKS (87.2%)
AMUSEMENT AND RECREATION SERVICES (0.4%)
Grand Casinos, Inc.* 200 $ 7,075
Players International* 1,350 27,169
--------
34,244
APPAREL AND ACCESSORY STORES (0.1%)
Weyco Group, Inc. 200 7,200
APPAREL AND OTHER TEXTILE PRODUCTS (0.3%)
Hartmarx Corporation* 1,000 5,000
Quiksilver, Inc.* 600 15,750
--------
20,750
BUSINESS SERVICES (4.1%)
ADT, Limited* 1,400 16,450
American List Corporation 660 19,470
Amplicon, Inc. 500 8,000
CDI Corporation* 200 4,100
Comdisco, Inc. 300 9,113
Computer Language Research 2,000 19,500
Computer Task Group, Inc. 200 2,800
Computervision Corporation 1,300 8,613
Electro Rent Corporation* 1,200 27,300
Heritage Media Corporation* 100 2,888
Innerdyne* 1,900 5,344
McGrath Rentcorp 1,000 17,125
Norstan, Inc.* 1,000 23,750
Orbotech Limited 700 8,619
Phoenix Technologies* 2,500 26,875
Pitson Services Group 500 12,000
Proteon, Inc.* 1,200 7,125
Regis Corporation* 400 7,550
Sterling Software, Inc.* 200 7,700
Sun Microsystems, Inc.* 900 43,706
</TABLE>
53
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
BUSINESS SERVICES (4.1%) (CONTINUED)
Triad Systems Corporation* 2,800 $ 20,125
Union Corporation* 300 4,763
Volt Info Sciences, Inc.* 300 9,000
Xtra Corporation 300 13,875
---------
325,791
CHEMICALS AND ALLIED PRODUCTS (3.3%)
Akzo Nobel NV 300 17,925
Cabot Corporation 200 10,550
Cambrex Corporation 200 6,750
Cytec Industries, Inc.* 200 8,175
Electrochemical Industries* 400 1,550
First Mississippi Corporation 800 27,300
Geon Company 300 8,625
Georgia Gulf Corporation 300 9,788
IMC Global, Inc. 200 10,825
Lilly Industries, Inc. 600 7,200
MacDermid, Inc. 300 13,650
Methanex Corporation* 700 5,863
Monsanto Company 100 9,013
Norsk Hydro 1,000 41,750
Nova Corporation 3,400 28,900
Olin Corporation 200 10,300
Rexene Corporation* 700 8,663
Sterling Chemicals, Inc. 800 9,300
Union Carbide Corporation 800 26,700
Virgoro Corporation 100 4,150
---------
266,977
COMMUNICATIONS (0.6%)
Komag, Inc.* 300 15,638
Telefonica de Espana 400 15,500
US Long Distance Corporation* 200 3,238
Vtel Corporation* 800 10,600
---------
44,976
</TABLE>
54
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
DEPOSITORY INSTITUTIONS (12.0%)
Bank of Boston Corporation 1,100 $ 41,181
Bank of New York Company, Inc. 900 36,338
Bankamerica Corporation 600 31,575
Barclays PLC 400 17,400
Barnett Banks, Inc. 700 35,875
Baybanks, Inc. 200 15,875
Boatmen's Bancshares, Inc. 900 31,669
Centura Banks, Inc. 300 8,363
Charter One Financial, Inc. 300 7,369
Chase Manhattan Corporation 600 28,200
Chemical Banking Corporation 900 42,525
City National Corporation 900 10,238
Comerica, Inc. 1,200 38,550
Commerce Bancshares, Inc. 600 18,750
Crestar Financial Corporation 300 14,700
Cullen/Frost Bankers, Inc. 100 4,063
CVB Financial Corporation 121 1,543
Deposit Guaranty Corporation 300 11,625
Dime Bancorp, Inc.* 500 5,000
Eagle Financial Corporation 210 4,568
First American Corporation-Tennessee* 200 7,188
First Bank System, Inc. 400 16,400
First Chicago Corporation 600 35,925
First Empire State Corporation 100 17,150
First Fidelity Bancorp 300 17,700
First Interstate Bancorp 400 32,100
First Tennessee National Corporation 100 4,631
First Union Corporation 300 13,575
Firstier Financial, Inc. 150 5,569
Fleet Financial Group, Inc. 500 18,563
Hibernia Corporation 1,200 10,650
Hubco, Inc. 450 8,016
Liberty Bankcorp., Inc. -Oklahoma 300 9,750
Magna Group, Inc. 500 11,063
Mercantile Bancorp 300 13,463
Michigan National Corporation 115 12,219
Mid-America Bancorp 212 3,578
</TABLE>
55
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
DEPOSITORY INSTITUTIONS (12.0%) (CONTINUED)
Midatlantic Corporation, Inc. 600 $ 23,925
National City Corporation 500 14,688
Nationsbank Corporation 400 21,450
National Westminster Bank 700 36,575
NBD Bancorp, Inc. 1,100 35,200
North Fork Bancorporation 746 13,521
Premier Bancorp* 300 5,400
Republic New York Corporation 700 39,200
Riggs National Corporation Washington, D.C.* 1,100 10,863
Southern National Corporation 300 7,200
Standard Federal Bancorp 400 13,450
Star Banc Corporation 200 9,200
TCF Financial Corporation 300 14,250
UJB Financial Corporation 600 18,225
Wells Fargo & Company 100 18,025
Westamerica Bancorporation 100 3,725
Westcorp 435 6,797
Westpac Banking 1,200 22,050
Zions Bancorporation 100 4,975
---------
961,666
DURABLE GOODS, WHOLESALE (1.6%)
Barnes Group, Inc. 100 4,025
Bearings, Inc.-Ohio 200 6,125
Bell Industries, Inc.* 553 11,820
Castle (A.M.) & Company 500 9,063
Commercial Metals Company 33 891
Envirosource, Inc.* 1,900 8,550
Hughes Supply, Inc. 400 8,800
Noland Company 400 8,150
Owens & Minor, Inc. Holding Company 500 6,250
Pioneer Standard Electronics 1,050 25,988
Rexel, Inc.* 1,500 14,250
Shelter Components Corporation 1,250 14,688
Software Spectrum, Inc.* 300 6,225
---------
124,825
</TABLE>
56
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
ELECTRIC, GAS AND SANITARY SERVICE (4.7%)
AEP Industries, Inc. 900 $ 19,238
American Electric Power 400 14,050
Baltimore Gas & Electric 700 17,500
Boston Edison Company 200 5,225
Centerior Energy Corporation 900 8,663
Central Maine Power Company 700 8,313
CMS Energy Corporation 400 9,850
Coastal Corporation 1,000 30,375
Columbia Gas System* 200 6,350
DQE, Inc. 100 2,350
Illinova Corporation 300 7,613
Laidlaw, Inc. 1,500 14,438
New England Electric System 200 6,900
Niagra Mohawk Power Corporation 600 8,850
Northeast Utilities 700 15,750
Northern States Power 300 13,838
Northwest Natural Gas Company 101 3,137
Pacific Enterprises 1 25
Pacific Gas & Electric 900 26,100
Pacificorp 800 15,000
Pinnacle West Corporation 300 7,350
Portland General Corporation 200 4,425
Public Service Company of New Mexico* 600 8,550
Republic Waste Industries* 400 5,200
Rochester Gas & Electric 400 8,500
Scecorp 1,500 25,688
Sierra Pacific Resources 500 10,875
Southern Union Company* 100 1,813
St. Joseph Light & Power 300 8,475
Unicom Corporation 900 23,963
Upper Peninsula Energy Corporation 300 4,950
Westcoast Energy, Inc. 800 11,800
Western Waste Industries* 800 16,100
Williams Companies, Inc. 206 7,184
----------
378,438
</TABLE>
57
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
ELECTRONIC AND OTHER ELECTRICAL EQUIPMENT (8.5%)
Acme Cleveland Corporation 600 $ 14,175
Advance Circuits, Inc.* 300 5,363
Advanced Micro Devices* 1,200 43,650
Altron, Inc.* 1,500 36,188
Applied Power, Inc. 200 5,775
Boston Acoustics, Inc. 400 7,550
Burr-Brown Corporation* 450 12,150
Charter Power Systems 600 14,400
Computer Products, Inc.* 2,400 14,850
CTS Corporation 100 3,050
Cypress Semiconductor Corporation* 300 12,150
Dynamics Corporation of America 100 2,288
Electro Scientific Industries, Inc.* 300 10,013
Electrolux AB 200 9,100
Electromagnetic Sciences, Inc.* 700 10,675
Franklin Electronic Publishers, Inc.* 200 5,125
Genlyte Group, Inc.* 1,300 7,638
Hadco Corporation* 700 17,325
Harmon International 300 12,150
Helen of Troy Limited* 500 10,313
Integrated Device Technology, Inc.* 400 18,475
Intel Corporation 600 37,988
International Jensen, Inc.* 700 4,988
International Rectifier Corporation* 700 22,750
Lamson & Sessions Company* 400 2,300
LSI Logic Corporation* 1,200 46,950
Maytag Corporation 900 14,400
Microcom, Inc.* 700 10,588
Micron Technology, Inc. 700 38,413
National Semiconductor Corporation* 800 22,200
Opti, Inc.* 500 11,438
Park Electrochemical Corporation 300 15,188
Philips Electronics 1,000 42,750
Recoton Corporation* 199 3,806
Rogers Corporation* 300 16,613
Siliconix, Inc.* 1,500 28,500
Standard Microsystems Corporation* 700 10,719
Standard Motor Products 400 8,100
</TABLE>
58
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
ELECTRONIC AND OTHER ELECTRICAL EQUIPMENT (8.5%) (CONTINUED)
Technitrol, Inc. 500 $ 7,125
Texas Instruments, Inc. 300 40,163
Thomas Industries, Inc. 300 4,913
Windmere Corporation 1,100 9,075
Zitel Corporation* 700 7,831
--------
679,201
FABRICATED METAL (2.9%)
Alltrista Corporation* 700 13,563
Amcast Industrial Corporation 500 9,500
Armco, Inc.* 1,300 8,775
Ball Corporation 200 6,975
Blount, Inc. 400 17,850
BMC Industries, Inc. 600 15,075
Brenco, Inc. 700 8,444
Brush Wellman, Inc. 800 17,100
Central Sprinkler Corporation* 400 9,600
Cleveland-Cliffs, Inc. 200 7,700
Comico Limited 300 5,513
Continental Can, Inc.* 300 7,238
Douglas & Lomason Company 300 4,350
Elco Industries, Inc. 200 3,750
Griffon Corporation* 1,000 8,000
International Aluminum Company 100 3,175
Mueller Industries, Inc.* 200 9,850
Parker-Hannifin Corporation 300 10,875
Phelps Dodge 300 17,700
Pitt-Des Moines, Inc. 100 3,388
SPS Technologies, Inc.* 300 11,288
Synalloy Corporation 450 8,578
Timken Company 200 9,225
U.S. Can Corporation* 400 6,250
United Dominion Industries 100 2,250
Valmont Industries 300 6,356
--------
232,368
FOOD AND KINDRED PRODUCTS (2.2%)
American Maize-Products 300 10,163
Archer Daniels Midland 1,900 35,388
</TABLE>
59
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
FOOD AND KINDRED PRODUCTS (2.2%) (CONTINUED)
Chock Full O Nuts Corporation* 1,200 $ 8,250
Coca Cola Enterprises, Inc. 1,600 35,000
Goodmark Foods 1,300 20,475
Hudson Foods, Inc. 1,200 16,650
IBP, Inc. 400 17,400
International Multifoods Corporation 400 9,000
Morningstar Group, Inc.* 600 4,200
Orange Company, Inc.* 300 1,875
Seneca Foods Corporation* 200 7,150
Smithfield Foods, Inc.* 100 2,131
WLR Foods, Inc. 900 12,769
--------
180,451
FOOD STORES (0.9%)
Great Atlantic & Pacific Tea Company 300 7,913
Kroger Company* 600 16,125
Riser Foods, Inc.* 800 8,100
Safeway, Inc.* 1,000 37,375
Smith's Food and Drug Centers 300 5,925
--------
75,438
FURNITURE AND FIXTURES (0.6%)
Bush Industries 1,125 12,656
Chromcraft Revington, Inc.* 500 10,375
Falcon Products, Inc. 600 7,425
Kinetic Concepts 1,100 7,700
Lear Seating Corporation* 400 9,150
--------
47,306
GENERAL BUILDING CONTRACTORS (0.3%)
Del E. Webb Corporation 300 6,975
MDC Holdings, Inc. 1,800 11,250
US Home Corporation* 400 9,200
--------
27,425
GENERAL MERCHANDISE STORES (0.1%)
Waban, Inc.* 500 7,438
</TABLE>
60
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
HEALTH SERVICES (0.4%)
Maxicare Health Plans, Inc.* 500 $ 7,688
Ornda Healthcorp.* 400 6,875
Sun Healthcare Group, Inc.* 100 1,575
Universal Health Services* 500 14,500
--------
30,638
HEAVY CONSTRUCTION EXCEPT BUILDING CONSTRUCTION (0.1%)
Granite Construction, Inc. 500 11,188
HOLDING COMPANIES AND OTHER INVESTMENT OFFICES (1.6%)
Banponce Corporation 500 17,813
Citicorp 700 40,513
Comdata Holdings Corporation* 800 12,400
CV Reit, Inc. 400 3,600
CWM Mortgage Holdings, Inc. 800 10,200
HRE Properties 100 1,350
Mesa Royalty Trust 200 7,950
Norwest Corporation 600 17,250
Penn Virginia Corporation 200 5,675
Storage Equities, Inc. 500 8,188
--------
124,939
HOTELS AND OTHER LODGING PLACES (0.1%)
Club Med, Inc. 100 3,188
Prime Hospitality Corporation* 600 5,925
--------
9,113
INDUSTRIAL MACHINERY AND EQUIPMENT (8.5%)
AGCO Corporation 600 22,500
Amdahl Corporation 1,500 16,688
Ampco-Pittsburgh 400 3,650
Apertus Technologies, Inc.* 900 7,819
Apple Computer 700 32,550
</TABLE>
61
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
INDUSTRIAL MACHINERY AND EQUIPMENT (8.5%) (CONTINUED)
BHA Group, Inc. 600 $ 7,875
BJ Service Company 120 510
Black & Decker Corporation 300 9,263
Briggs & Stratton 400 13,800
Cascade Corporation 500 7,938
Case Corporation 100 2,975
Caterpillar, Inc. 200 12,850
Commercial Intertech Corporation 300 4,800
Compaq Computer Corporation* 400 18,150
Cummins Engine Company, Inc. 200 8,725
Deere and Company 200 17,125
Dell Computer Corporation* 100 6,019
Digital Equipment* 400 16,300
Dynatech Corporation* 400 7,600
Esterline Technologies Corporation* 1,000 22,625
Exabyte Corporation* 500 6,906
Fedders Corporation 2,750 15,194
Gardner Denver Machinery, Inc.* 500 8,750
Gleason Corporation 300 6,638
Graco, Inc. 300 8,063
Harris Corporation 100 5,163
Indresco* 1,000 15,500
International Business Machines Corporation 400 38,400
JLG Industries 1,000 26,125
Kulicke & Soffa Industries* 500 33,188
Kysor Industrial Corporation 400 8,300
Mestek, Inc.* 400 5,075
Nacco Industries 200 11,975
Nortek, Inc.* 500 4,313
Novellus Systems, Inc.* 200 13,550
Outboard Marine Corporation 900 17,663
Pacific Scientific Companies 100 1,788
Photronics, Inc.* 900 27,450
Printronix, Inc.* 500 13,875
Proxima Corporation* 300 7,200
Quantum Corporation* 400 9,200
</TABLE>
62
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
INDUSTRIAL MACHINERY AND EQUIPMENT (8.5%) (CONTINUED)
Regal Beloit 800 $ 12,400
Robbins & Meyers, Inc. 100 2,738
Seagate Technology, Inc.* 400 15,700
Sequent Computer, Inc.* 600 10,688
Smith International, Inc.* 1,100 18,425
Standex International Corporation 300 9,450
Tandem Computers, Inc.* 1,000 16,125
Tandy Corporation 300 15,563
Tecumseh Products Company 400 17,500
Toro Company 500 14,000
Twin Disc, Inc. 100 2,500
Western Digital Corporation* 1,000 17,375
Wynn's International, Inc. 350 8,138
---------
684,680
INSTRUMENTS AND RELATED PRODUCTS (2.5%)
Allied Healthcare Products 600 9,488
Bio-Rad Laboratories* 300 10,800
Coherent, Inc.* 400 11,800
General Motors Corporation 500 19,750
Loral Corporation 500 25,875
LTX Corporation* 300 2,681
Medrad, Inc.* 500 8,438
Mentor Corporation/Minnesota 1,000 27,750
Newport Corporation 900 8,269
Optical Coating Laboratories 2,700 24,638
Sci Systems, Inc.* 300 7,481
Tech-Sym Corporation* 300 8,213
Tektronix, Inc. 400 19,700
Watkins-Johnson Company 300 13,350
---------
198,233
INSURANCE AGENTS, BROKERS AND SERVICE (0.2%)
Poe & Brown, Inc. 600 14,325
</TABLE>
63
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
INSURANCE CARRIERS (5.2%)
Aegon NV 750 $ 26,156
Aetna Life & Casualty Co. 400 25,150
Allstate Corporation 800 23,700
Ambac, Inc. 200 8,025
American National Insurance 100 6,063
American Re Corporation 200 7,450
Avemco Corporation 100 1,738
Cigna Corporation 500 38,813
CNA Financial Corporation 200 17,275
Equitable Companies, Inc. 700 14,613
Exel Limited 200 10,400
Guaranty National Corporation 400 7,400
Loews Corporation 200 24,200
MBIA, Inc. 200 13,300
Meridian Insurance Group, Inc. 700 9,144
NAC Re Corporation 100 3,113
National Re Corporation 300 10,050
Old Republic International Corporation 400 10,450
Partnerre Holdings 300 7,819
Pioneer Financial Services, Inc. 700 10,325
Protective Life Corporation 200 5,450
Pxre Corporation 300 7,069
Reliastar Financial Corporation 414 15,836
RLI Corporation 375 8,531
Selective Insurance Group 300 9,825
St. Paul Companies 700 34,475
Transatlantic Holdings, Inc. 100 6,500
United Companies Financial Corporation 165 7,404
USF&G Corporation 1,100 17,875
USLife Corporation 200 8,050
Washington National Corporation 500 10,313
Western National Corporation 600 7,425
---------
413,937
LEATHER AND LEATHER PRODUCTS (0.2%)
Vista Resources, Inc.* 700 14,175
</TABLE>
64
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
LUMBER AND WOOD PRODUCTS (1.0%)
Butler Manufacturing Company 100 $ 4,188
Champion Enterprises, Inc.* 400 6,350
Georgia-Pacific Corporation 300 26,025
Macmillian Bloedel Limited 600 8,438
Rayonier, Inc. 200 7,100
Willamette Industries 500 27,625
--------
79,726
METAL MINING (0.7%)
Asarco, Inc. 300 9,150
Cyprus Amax Minerals Companies 1,100 31,350
Magma Copper Company* 1,000 16,250
--------
56,750
MISCELLANEOUS MANUFACTURING INDUSTRIES (0.4%)
Cobra Golf, Inc.* 300 9,488
First Team Sports* 400 9,275
Fuji Photo Film 200 9,463
Stephan Company 400 6,850
--------
35,076
MISCELLANEOUS RETAIL (1.6%)
Big B, Inc. 1,000 14,000
Bon-Ton Stores* 800 8,400
Fabri-Centers of America* 400 8,300
Fay's, Inc. 500 3,813
Federated Department Stores* 900 23,175
Good Guys, Inc.* 1,200 13,275
Intertan, Inc.* 500 3,750
Oneida Limited 600 8,850
Pier 1 Imports, Inc. 900 8,325
Proffitt's, Inc.* 100 2,950
Sears Roebuck & Company 400 23,950
Trak Auto Corporation* 400 6,750
--------
125,538
</TABLE>
65
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
NONDEPOSITORY INSTITUTION (2.8%)
American Annuity Group, Inc. 200 $ 1,975
American Express Company 1,000 35,125
Astoria Financial Corporation* 200 7,175
Bay Ridge Bancorp, Inc.* 400 8,325
Dean Witter Discover & Company 400 18,800
Finova Group 200 7,000
Foothill Group, Inc. 1,000 25,500
Greenpoint Financial Corporation 300 7,088
Household International, Inc. 700 34,650
Midland Company 200 8,750
The Money Store, Inc. 500 17,938
Transamerica Corporation 500 29,125
Travelers, Inc. 400 17,500
White River Corporation* 200 6,800
--------
225,751
NONDURABLE GOODS, WHOLESALE (0.9%)
Bindley Western Industries 500 7,938
Hawkins Chemical, Inc. 346 2,336
International Recovery Corporation 450 6,638
Super Food Services, Inc. 1,000 11,875
Super Rite Corporation* 1,200 26,175
Terra Industries, Inc. 1,600 19,400
--------
74,362
NONMETALLIC MINING (0.1%)
Potash Corporation Sask, Inc. 200 11,175
OIL AND GAS EXTRACTION (1.0%)
Atwood Oceanics* 1,500 24,188
Chesapeake Energy Corporation* 700 18,025
Crystal Oil Company* 200 6,150
International Petroleum Corporation* 4,600 15,094
Petroleum Geo-Services* 400 11,500
Pride Petroleum Services, Inc.* 900 6,694
--------
81,651
</TABLE>
66
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
PAPER AND ALLIED PRODUCTS (3.0%)
ACX Technologies, Inc.* 100 $ 4,138
American Israeli Paper Mills 200 10,600
American Filtrona Corporation 300 9,000
Boise Cascade Corporation 300 12,150
Bowater, Inc. 500 22,438
Champion International Corporation 800 41,700
Chesapeake Corporation 300 9,338
Domtar, Inc.* 700 6,650
Federal Paper Board Company 300 10,613
International Paper Company 300 25,725
James River Corporation of Virginia 300 8,288
Manville Corporation* 900 12,375
Mead Corporation 400 23,750
Mercer International, Inc.* 700 14,744
Mosinee Paper Corporation 100 2,200
Premark International, Inc. 300 15,563
Republic Gypsum Company 500 5,000
Westavco Corporation 100 4,425
--------
238,697
PETROLEUM AND COAL INDUSTRIES (0.9%)
Ashland Oil, Inc. 300 8,025
Diamond Shamrock, Inc. 400 10,300
Fina, Inc. 200 9,325
British Petroleum 400 34,250
USX Marathon Group 700 13,825
--------
75,725
PRIMARY METAL INDUSTRIES (2.0%)
AK Steel Holding Corporation* 100 2,725
Alcan Aluminum, Limited 600 18,150
Alumax, Inc.* 300 9,338
Aluminum Company of America 700 35,088
Carpenter Technology 300 20,438
LTV Corporation* 900 13,163
</TABLE>
67
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
PRIMARY METAL INDUSTRIES (2.0%) (CONTINUED)
National Steel Corporation* 600 $ 9,300
Quanex Corporation 100 2,475
Roanoke Electric Corporation 900 10,350
Steel of West Virginia, Inc.* 400 4,600
Texas Industries, Inc. 300 11,663
USX-U.S.Steel Company 400 13,750
WHX Corporation* 600 7,050
--------
158,090
PRINTING AND PUBLISHING (0.6%)
Devon Group, Inc.* 200 5,850
Graphic Industries 1,400 14,088
Media General, Inc. 300 9,150
Plenum Publishing Corporation 200 7,075
Reynolds & Reynolds 400 11,800
--------
47,963
RAILROAD TRANSPORTATION (0.6%)
Conrail, Inc. 500 27,813
CSX Corporation 200 15,025
Santa Fe Pacific Corporation 305 7,778
--------
50,616
REAL ESTATE (0.2%)
Centerpoint Properties Corporation 400 8,250
Patten Corporation* 2,192 7,124
--------
15,374
RUBBER AND MISCELLANEOUS PLASTICS PRODUCTS (1.1%)
ESSEF Corporation* 700 11,200
Furon Company* 900 19,800
Goodyear Tire & Rubber Co. 800 33,000
O'Sullivan Corporation 300 3,450
Tredegar Industries, Inc. 400 9,950
Tuscarora, Inc. 400 9,425
--------
86,825
</TABLE>
68
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
SECURITY AND COMMODITY BROKERS (0.6%)
Alex Brown, Inc. 100 $ 4,150
Eaton Vance Corporation 600 19,575
Jefferies Group 200 7,375
Quick & Reilly Group, Inc. 315 11,419
Sherwood Group, Inc.* 400 3,300
--------
45,819
SPECIAL TRADE CONTRACTORS (0.1%)
Anthony Industries, Inc. 225 4,134
STONE, CLAY, GLASS AND CONCRETE PRODUCTS (1.0%)
A.P. Green Industries, Inc. 400 7,800
Donnelly Corporation 100 1,613
Florida Rock Industries 200 5,675
Lafarge Corporation 400 7,500
Medusa Corporation 700 17,413
National Gypsum* 400 20,950
Puerto Rican Cement Company, Inc. 400 12,200
Southdown, Inc.* 100 1,913
USG Corporation* 300 7,125
--------
82,189
TEXTILE MILL PRODUCTS (0.5%)
Crown Crafts, Inc. 300 4,950
Culp, Inc. 1,187 9,644
Fieldcrest Cannon* 600 12,975
Guilford Mills, Inc. 300 7,313
Springs Industries, Inc. 200 7,450
--------
42,332
TRANSPORTATION BY AIR (1.9%)
AMR Corporation* 500 37,313
British Airways 400 26,900
Delta Air Lines, Inc. 600 44,250
Federal Express Corporation* 500 30,375
KLM Royal Dutch Air* 400 13,050
--------
151,888
</TABLE>
69
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
TRANSPORTATION EQUIPMENT (3.7%)
A.O. Smith Corporation 100 $ 2,350
Chrysler Corporation 400 19,150
Coachmen Industries, Inc. 500 7,625
Dana Corporation 500 14,313
Durakon Industries, Inc.* 800 12,300
Ford Motor Company 1,200 35,700
Gencorp., Inc. 600 6,450
Magna International, Inc.* 100 4,413
McDonnell Douglas Corporation 500 38,310
Navistar International* 300 4,538
Northrop Grumman Corporation 200 10,425
Oshkosh Truck Corporation 1,200 14,850
Paccar, Inc. 200 9,350
RPC Energy Services, Inc.* 400 3,625
Simpson Industries 1,900 21,138
Teledyne, Inc. 300 7,350
Textron, Inc. 200 11,625
Thor Industries, Inc. 300 5,925
United Technologies Corporation 200 15,625
Varlen Corporation 385 8,951
Volvo AB Sweden 1,700 32,300
Winnebago Industries 1,600 14,000
--------
300,313
TRANSPORTATION SERVICES (0.2%)
Ryder System, Inc. 700 16,713
TRUCKING AND WAREHOUSING (0.5%)
Builders Transport, Inc.* 400 4,550
Gatx Corporation 300 14,138
Matlack Systems, Inc.* 600 6,000
TNT Freightways Corporation 600 12,000
--------
36,688
</TABLE>
70
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER OF
SHARES
OR PRINCIPAL
AMOUNT VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
WATER TRANSPORTATION (0.4%)
International Shipholding Corporation 300 $ 6,263
Oglebay Norton Company 500 16,938
Stolt-Nielsen S.A. 300 8,569
----------
31,770
----------
TOTAL COMMON STOCKS (Cost $5,856,388) 6,990,887
PREFERRED STOCKS (0.05%)
PRINTING AND PUBLISHING (0.05%)
News Corporation Limited 200 4,000
----------
TOTAL PREFERRED STOCKS (Cost $3,856) 4,000
SHORT-TERM SECURITIES (12.8%)
U.S. GOVERNMENT AGENCY (7.5%)
Federal National Mortgage Assoc. Discount Note, 5.88%, due 7/6/95 $ 600,000 599,510
U.S. GOVERNMENT OBLIGATIONS (1.8%)
U.S. Treasury Bills, 5.37%, due 9/12/95 50,000 49,389
U.S. Treasury Bills, 5.57%, due 7/20/95 100,000 99,706
----------
149,095
TIME DEPOSITS (3.5%)
State Street Bank, 4.90%, due 7/3/95 279,171 279,171
----------
TOTAL SHORT-TERM SECURITIES
(Cost $1,027,776) 1,027,776
----------
TOTAL INVESTMENTS (100.0%) (Cost $6,888,020) $8,022,663
==========
</TABLE>
71
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
FUTURES CONTRACTS
<TABLE>
<CAPTION>
CONTRACT
EXPIRATION AMOUNT UNREALIZED
DATE AT VALUE LOSS
--------------------------------------------------
<S> <C> <C> <C>
4 Mid-Cap S&P 500
Futures Contracts-Short + 9/15/95 $ 399,100 $ (8,458)
4 S&P 500
Futures Contracts-Short + 9/15/95 1,094,300 (7,371)
----------------------------------
$1,493,400 $ (15,829)
==================================
</TABLE>
+ The above futures contracts are collateralized by a U.S. Treasury Bill at
$50,000 par value, due 9/21/95 and a U.S. Treasury Bill at $100,000 par
value, due 7/20/95.
* Non-income producing
OTHER INFORMATION:
Purchases and sales of securities, excluding short-term securities, for the
year ended June 30, 1995, aggregated $4,742,902 and $3,510,411, respectively.
Net unrealized appreciation for tax purposes aggregated $1,134,347, of which
$1,225,951 related to appreciated investment securities and $91,605 related
to depreciated investment securities. The aggregate cost of securities for
tax purposes is $6,888,316.
SEE ACCOMPANYING NOTES.
72
<PAGE>
Mitchell Hutchins Fixed Income Portfolio
Statement of Assets and Liabilities
June 30, 1995
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value (cost $5,735,468)
(NOTE 1)-See accompanying schedule $ 5,847,480
Receivable for investment securities sold 235,634
Dividends, interest and other receivables 309,737
------------
TOTAL ASSETS 6,392,851
LIABILITIES
Payable for investment securities purchased 955,582
Cash overdraft 6,282
Accounts payable and accrued expenses 15,490
------------
TOTAL LIABILITIES 977,354
------------
NET ASSETS $ 5,415,497
============
Net Assets consist of:
Paid-in capital $ 5,176,771
Undistributed net investment income 268,795
Undistributed net realized loss on investments (142,081)
Net unrealized appreciation on investment securities 112,012
------------
NET ASSETS, for 497,544 shares outstanding $ 5,415,497
============
NET ASSET VALUE, offering and redemption price per share $ 10.88
============
</TABLE>
SEE ACCOMPANYING NOTES.
73
<PAGE>
Mitchell Hutchins Fixed Income Portfolio
Statement of Operations
Year Ended June 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 342,900
EXPENSES (NOTE 2)
Investment advisory and management fees 45,180
Custody and accounting fees 11,295
Professional fees 14,202
Directors' fees and expenses 4,950
Other expenses 4,586
----------
Total expenses before reimbursement 80,213
Less: expense reimbursement (NOTE 2) (9,482)
----------
Net expenses 70,731
----------
Net investment income 272,169
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 1)
Net realized gain on investments 32,319
Change in unrealized appreciation on investment securities 253,467
----------
Net realized and unrealized gain on investments 285,786
----------
Net increase in net assets resulting from operations $ 557,955
==========
</TABLE>
SEE ACCOMPANYING NOTES.
74
<PAGE>
Mitchell Hutchins Fixed Income Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1995 1994
-----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 272,169 $ 111,168
Net realized gain (loss) on investments 32,319 (172,426)
Net unrealized appreciation (depreciation) 253,467 (150,618)
----------------------------
Net increase (decrease) in net assets resulting from
operations 557,955 (211,876)
Distributions to shareholders from:
Net investment income (98,000) (29,000)
Capital share transactions:
Proceeds from sales of shares 2,673,991 4,925,555
Proceeds from reinvested dividends 98,000 29,000
Cost of shares redeemed (2,676,948) (759,016)
----------------------------
Net increase in net assets resulting from share
transactions 95,043 4,195,539
----------------------------
Total increase in net assets 554,998 3,954,663
NET ASSETS
Beginning of year 4,860,499 905,836
----------------------------
End of year (including undistributed net investment income of
$268,795 and $91,264, respectively) $ 5,415,497 $4,860,499
============================
OTHER INFORMATION
Shares:
Sold 263,300 470,254
Issued through reinvestment of dividends 9,744 2,756
Redeemed (261,523) (73,851)
----------------------------
Net increase 11,521 399,159
============================
</TABLE>
SEE ACCOMPANYING NOTES.
75
<PAGE>
Mitchell Hutchins Fixed Income Portfolio
Financial Highlights
<TABLE>
<CAPTION>
JANUARY 5, 1993
(COMMENCEMENT
YEAR ENDED YEAR ENDED OF OPERATIONS)
JUNE 30, JUNE 30, THROUGH JUNE 30,
1995 1994 1993(B)
--------------------------------------------------------------
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.00 $ 10.43 $ 10.00
Income from investment operations:
Net investment income 0.56 0.20 0.19
Net realized and unrealized gain (loss)
on investments 0.53 (0.52) 0.24
--------------------------------------------------------------
Total from investment operations 1.09 (0.32) 0.43
Less distributions:
From net investment income (0.21) (0.11) -
--------------------------------------------------------------
Net asset value, end of period $ 10.88 $ 10.00 $ 10.43
==============================================================
TOTAL RETURN(A) 11.08% (3.06%) 8.67%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 5,415,497 $ 4,860,499 $ 905,836
Ratio of expenses to average net assets 1.40% 1.56% 1.56%
Ratio of net investment income to
average net assets 5.41% 3.62% 3.86%
Ratio of expenses to average net assets
before voluntary expense
reimbursement (NOTE 2) 1.59% 2.49% 15.72%
Ratio of net investment income (loss)
to average net assets before
voluntary expense reimbursement
(NOTE 2) 5.22% 2.68% (1.64%)
Portfolio turnover rate 432% 527% 103%
</TABLE>
(A) Total returns are not annualized.
(B) Data expressed as a percentage are annualized as appropriate.
76
<PAGE>
Mitchell Hutchins Fixed Income Portfolio
Schedule of Investments
June 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------------------------------
<S> <C> <C>
CORPORATE BONDS (23.8%)
COMMUNICATIONS (1.2%)
Consolidated Edison Company, 6.625%, due 7/1/2005 $ 70,000 $ 69,131
DEPOSITORY INSTITUTIONS (7.3%)
Bankamerica Corporation, 7.5%, due 10/15/2002 100,000 102,936
Citicorp, 8%, due 02/01/2003 35,000 37,212
Great Western Bank, 9.875%, due 6/15/2001 70,000 79,087
Mellon Financial Bank, 6.875%, due 03/01/2003 40,000 39,862
Midland Bank PLC, 7.65%, due 5/01/2025 40,000 42,281
National Westminster Bank, 9.375%, due 11/15/2003 110,000 126,339
----------
427,717
DURABLE GOODS, WHOLESALE (2.1%)
News America Corporation, 8.625%, due 2/1/2003 115,000 124,030
ELECTRIC, GAS AND SANITARY SERVICE (1.8%)
Citizen Utility Company, 7.6%, due 6/1/2006 100,000 106,126
ELECTRONIC AND OTHER ELECTRICAL EQUIPMENT (4.2%)
AT&T Corporation M-T-N, 6.3%, due 7/25/96 140,000 140,493
Phillips Electric Nv, 7.125%, due 5/15/2025 100,000 102,669
----------
243,162
NONDEPOSITORY INSTITUTION (4.7%)
American General Finance, 7.25%, due 4/15/2000 125,000 128,738
Ford Motor Credit, 8%, due 12/1/97 140,000 145,081
----------
273,819
SECURITY AND COMMODITY BROKERS (2.3%)
Chase Manhattan, 7.5%, due 12/01/97 100,000 102,075
Salomon CMO Series 93-C1 Class A1, 6.4%, due 1/18/2023 32,983 32,818
----------
134,893
TRANSPORTATION BY AIR (0.2%)
Southwest Air, 9.4%, due 7/1/2001 10,000 11,224
----------
TOTAL CORPORATE BONDS (Cost $1,350,631) 1,390,102
</TABLE>
77
<PAGE>
Mitchell Hutchins Fixed Income Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------------------------------
<S> <C> <C>
GOVERNMENT DEBT SECURITIES (67.5%)
U.S. GOVERNMENT AGENCY-COLLATERALIZED MORTGAGE OBLIGATIONS (5.4%)
Fed. Home Loan Mort. Corp., 7.83%, due 8/11/2004 $ 100,000 $ 102,227
Fed. Home Loan Mort. Corp., 8%, due 5/1/2014 78,412 79,999
Fed. Home Loan Mort. Corp., 8.585%, due 10/15/2006 50,000 54,938
Resolution Trust Corp. Series 95-C1, Class A-2B, 6.55%, due
2/25/2027 50,000 49,375
Resolution Trust Corp. Series 95-C1, Class A-4B, 6.65%, due
2/25/2027 30,000 29,644
----------
316,183
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (21.7%)
Federal National Mortgage Assoc., 5.85%, due 2/2/1998 120,000 119,612
Federal National Mortgage Assoc., 7%, due 6/10/2002* 120,000 117,900
Federal National Mortgage Assoc., 7.5%, due 7/25/2025* 230,000 230,575
Federal National Mortgage Assoc., 8%, due 11/1/2023* 193,000 196,558
Federal National Mortgage Assoc., 8.4%, due 2/25/2009 40,000 43,375
Federal National Mortgage Assoc., 8.5%, due 5/01/2009 168,019 174,109
Gover. National Mortgage Assoc., 8%, due 4/15/2022 315,001 322,482
Gover. National Mortgage Assoc., 8%, due 11/15/2006 25,432 26,188
Gover. National Mortgage Assoc., 8%, due 11/15/2006 35,646 36,748
----------
1,267,547
U.S. GOVERNMENT OBLIGATIONS (40.4%)
FDIC Series 94 Class, 7.85%, due 9/25/2025 51,000 52,482
U.S. Treasury Notes, 4.75%, due 8/31/1998 200,000 193,124
U.S. Treasury Notes, 5.625%, due 1/31/1998 10,000 9,933
U.S. Treasury Notes, 6.375%, due 8/15/2002 160,000 161,899
U.S. Treasury Notes, 6.5%, due 11/30/1996 140,000 141,291
U.S. Treasury Notes, 6.5%, due 5/15/2005 110,000 112,372
U.S. Treasury Notes, 6.75%, due 5/31/1999 455,000 466,944
U.S. Treasury Notes, 7.125%, due 2/15/2023 490,000 516,259
U.S. Treasury Notes, 7.25%, due 5/15/2004 100,000 106,766
U.S. Treasury Notes, 7.5%, due 2/15/2005 102,000 111,069
U.S. Treasury Notes, 7.5%, due 5/15/2002 225,000 242,226
</TABLE>
78
<PAGE>
Mitchell Hutchins Fixed Income Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------------------------------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (40.4%) (CONTINUED)
U.S. Treasury Notes, 7.625%, due 2/15/2025 $ 80,000 $ 90,350
U.S. Treasury Notes, 12%, due 8/15/2013 110,000 162,250
----------
2,366,965
----------
TOTAL GOVERNMENT DEBT SECURITIES
(Cost $3,878,154) 3,950,695
SHORT-TERM SECURITIES (8.7%)
U.S. GOVERNMENT OBLIGATIONS (6.8%)
U.S. Treasury Bills, 5.11%, due 7/20/95 400,000 398,957
TIME DEPOSITS (1.9%)
State Street Bank, 4.90%, due 7/31/95 107,726 107,726
----------
TOTAL SHORT-TERM SECURITIES
(Cost $506,683) 506,683
----------
TOTAL INVESTMENTS (100.0%) (Cost $5,735,468) $5,847,480
==========
</TABLE>
* Security purchased on a delayed delivery basis. (NOTE 1)
OTHER INFORMATION:
Purchases and sales of securities, excluding short-term securities, for the
year ended June 30, 1995, aggregated $21,083,997 and $19,820,738,
respectively. Net unrealized appreciation for tax purposes aggregated
$74,149, of which $84,228 related to appreciated investment securities and
$10,079 related to depreciated investment securities. The aggregate cost of
securities for tax purposes is $5,773,331.
SEE ACCOMPANYING NOTES.
79
<PAGE>
Mitchell Hutchins Money Market Portfolio
Statement of Assets and Liabilities
June 30, 1995
<TABLE>
<S> <C>
ASSETS
Investment in securities, at amortized cost
(NOTE 1)-See accompanying schedule $ 6,768,830
Dividends, interest and other receivables 6,639
------------
TOTAL ASSETS 6,775,469
LIABILITIES
Cash overdraft 7,100
Accounts payable and accrued expenses 15,274
------------
TOTAL LIABILITIES 22,374
------------
NET ASSETS, for 6,753,095 shares outstanding $ 6,753,095
============
NET ASSET VALUE, offering and redemption price per share $ 1.00
============
</TABLE>
SEE ACCOMPANYING NOTES.
80
<PAGE>
Mitchell Hutchins Money Market Portfolio
Statement of Operations
Year Ended June 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 339,821
EXPENSES (NOTE 2)
Investment advisory and management fees 40,612
Custody and accounting fees 14,058
Professional fees 14,202
Directors' fees and expenses 4,946
Other expenses 5,001
----------
Total expenses before reimbursement 78,819
Less: expense reimbursement (NOTE 2) (6,639)
----------
Net expenses 72,180
----------
Net investment income 267,641
----------
Net increase in net assets resulting from operations $ 267,641
==========
</TABLE>
SEE ACCOMPANYING NOTES.
81
<PAGE>
Mitchell Hutchins Money Market Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1995 1994
-----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 267,641 $ 74,688
Distributions to shareholders from:
Net investment income (267,641) (74,688)
Capital share transactions:
Proceeds from sales of shares 11,346,439 8,424,833
Proceeds from reinvested dividends 267,641 74,688
Cost of shares redeemed (10,313,402) (3,800,689)
----------------------------
Net increase in net assets resulting from share
transactions 1,300,678 4,698,832
----------------------------
Total increase in net assets 1,300,678 4,698,832
NET ASSETS
Beginning of year 5,452,417 753,585
----------------------------
End of year $ 6,753,095 $ 5,452,417
============================
OTHER INFORMATION
Shares:
Sold 11,346,439 8,424,833
Issued through reinvestment of dividends 267,641 74,688
Redeemed (10,313,402) (3,800,689)
----------------------------
Net increase 1,300,678 4,698,832
============================
</TABLE>
SEE ACCOMPANYING NOTES.
82
<PAGE>
Mitchell Hutchins Money Market Portfolio
Financial Highlights
<TABLE>
<CAPTION>
JANUARY 12, 1993
(COMMENCEMENT
YEAR ENDED YEAR ENDED OF OPERATIONS)
JUNE 30, JUNE 30, THROUGH JUNE 30,
1995 1994 1993(B)
-------------------------------------------------------------
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income 0.04 0.02 0.01
Less distributions:
From net investment income (0.04) (0.02) (0.01)
-------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
=============================================================
TOTAL RETURN(A) 4.30% 2.04% 1.66%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, end of period $ 6,753,095 $ 5,452,417 $ 753,585
Ratio of expenses to average net assets 1.15% 1.29% 1.34%
Ratio of net investment income to
average net assets 4.31% 2.19% 1.67%
Ratio of expenses to average net assets
before voluntary expense
reimbursement (NOTE 2) 1.27% 2.08% 22.41%
Ratio of net investment income (loss)
to average net assets before
voluntary expense reimbursement
(NOTE 2) 4.20% 1.40% (2.05%)
</TABLE>
(A) Total returns are not annualized.
(B) Data expressed as a percentage are annualized.
83
<PAGE>
Mitchell Hutchins Money Market Portfolio
Schedule of Investments
June 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------------------------------
<S> <C> <C>
SHORT-TERM SECURITIES (100.0%)
CORPORATE BONDS (90.1%)
APPAREL AND ACCESSSORIES (2.2%)
Melville Corporation, 6.19%, due 12/7/95 $ 150,000 $ 145,899
AUTO REPAIR, SERVICES AND PARKING (3.0%)
PHH Corp., 5.90%, due 7/7/95 200,000 199,803
CHEMICALS AND ALLIED PRODUCTS (8.7%)
Eli Lilly Company, 5.93%, due 7/19/95 200,000 199,407
SmithKline Beechum Corporation, 5.90%, due 7/12/95 200,000 199,639
Warner Lambert, 6.15%, due7/3/95 192,000 191,934
------------
590,980
COMMUNICATIONS (5.9%)
Ameritech Corporation, 5.93%, due 7/6/95 200,000 199,835
Bellsouth Telecommunications, 5.90%, due 7/13/95 200,000 199,607
------------
399,442
DEPOSITORY INSTITUTIONS (5.9%)
Barclays U.S Funding, 5.90%, due 7/11/95 200,000 199,672
CS First Boston, 5.90%, due 7/17/95 200,000 199,476
------------
399,148
DURABLE GOODS, WHOLESALE (6.0%)
Daimler Benz N.A. Corporation, 6%, due 1/13/95 200,000 199,123
Siemens Corporation, 6.20%, due 7/28/95 210,000 209,928
------------
409,051
ELECTRONIC AND OTHER ELECTRICAL EQUIPMENT (5.9%)
Emerson Electronics, 6.00%, due 7/28/95 200,000 199,100
Rockwell International, 5.97%, due 1/9/95 200,000 199,570
------------
398,670
FOOD AND KINDRED PRODUCTS (6.7%)
Coca Cola Company, 5.94%, due 7/27/95 256,000 254,902
Unilever Capital Corporation, 5.92, due 7/6/95 200,000 199,836
------------
454,738
</TABLE>
84
<PAGE>
Mitchell Hutchins Money Market Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------------------------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
GENERAL MERCHANDISE STORES (2.9%)
WalMart Stores, Inc., 5.92%, due 8/1/95 $ 200,000 $ 198,980
HOLDING AND OTHER INVESTMENT OFFICES (4.9%)
BTR Dunlop, 6.16%, due 8/21/95 150,000 148,691
Preferred Receivables, 5.90%, due 7/5/95 180,000 179,882
-------------
328,573
INSURANCE CARRIERS (5.4%)
Metlife Funding, Inc., 5.92%, due 7/14/95 200,000 199,572
USAA Capital Corporation, 5.94%, due 7/27/95 165,000 164,292
-------------
363,864
MISCELLANEOUS RETAIL (2.9%)
Toys R Us, 5.94%, due 7/17/95 200,000 199,472
NONDEPOSITORY INSTITUTION (23.9%)
AT&T Capital Corp., 5.93%, due 7/27/95 200,000 199,143
Delaware Funding Corporation, 5.96%, due 7/25/95 200,000 199,205
JC Penney Funding Corporation, 5.85%, due 7/14/95 200,000 199,578
Merrill Lynch, 5.93%, due 7/14/95 200,000 199,572
Motorola Credit Corporation, 5.90%, due 7/12/95 200,000 199,639
MPS U.S. Commercial Paper, 5.98%, due 7/24/95 250,000 249,045
Pitney Bowes Credit Corporation, 6%, due 7/17/95 200,000 199,474
Toyota Motor Credit Corporation, 6.30%, due 11/13/95 175,000 170,866
-------------
1,616,522
NONDURABLE GOODS, WHOLESALE (2.9%)
Nestle Capital Corporation, 5.72, due 10/23/95 200,000 196,377
SECURITY AND COMMODITY BROKERS (2.9%)
Goldman Sachs Group, 5.90%, due 7/18/95 200,000 199,443
-------------
</TABLE>
85
<PAGE>
Mitchell Hutchins Money Market Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------------------------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
TOTAL CORPORATE BONDS (Cost $6,100,962) $ 6,100,962
GOVERNMENT DEBT SECURITIES (9.9%)
U.S. GOVERNMENT AND GOVERNMENT AGENCIES (9.9%)
Federal Farm Credit Bank Discount Note, 5.88%, due 8/7/95 $ 140,000 139,154
Federal National Mortgage Assoc., Discount Note, 5.87%,
due 7/21/95 200,000 199,348
Federal National Mortgage Assoc., Discount Note, 5.87%,
due 7/10/95 250,000 249,633
U.S. Treasury Bills, 6.325%, due 7/20/95 80,000 79,733
------------
TOTAL GOVERNMENT DEBT SECURITIES
(Cost $667,868) 667,868
------------
TOTAL SHORT-TERM SECURITIES
(Cost $6,768,830) 6,768,830
------------
TOTAL INVESTMENTS (100.0%) (Cost $6,768,830) $ 6,768,830
============
</TABLE>
SEE ACCOMPANYING NOTES.
86
<PAGE>
Morgan Stanley Asian Growth Portfolio
Statement of Assets and Liabilities
June 30, 1995
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value (cost $12,945,471)
(NOTE 1)-See accompanying schedule $ 13,163,401
Dividends, interest and other receivables 48,716
Deferred organization costs (NOTE 1) 9,032
-------------
TOTAL ASSETS 13,221,149
LIABILITIES
Cash overdraft 141,547
Payable for investment securities purchased 225,024
Accounts payable and accrued expenses 29,915
-------------
TOTAL LIABILITIES 396,486
-------------
NET ASSETS $ 12,824,663
=============
Net Assets consist of:
Paid-in capital $ 12,633,934
Undistributed net investment income 14,748
Undistributed net realized loss on investments and foreign currency
transactions (42,298)
Net unrealized appreciation (depreciation) on investments and assets and
liabilities in foreign currencies 218,279
-------------
NET ASSETS, for 1,259,429 shares outstanding $ 12,824,663
=============
NET ASSET VALUE, offering and redemption price per share $ 10.18
=============
</TABLE>
SEE ACCOMPANYING NOTES.
87
<PAGE>
Morgan Stanley Asian Growth Portfolio
Statement of Operations
Year Ended June 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $4,837) $ 163,806
Interest 93,141
---------------
Total investment income 256,947
EXPENSES (NOTE 2)
Investment advisory and management fees 97,281
Custody and accounting fees 54,890
Professional fees 16,703
Directors' fees and expenses 4,950
Regulatory fees 4,657
Amortization of deferred costs 2,279
Other expenses 3,650
---------------
Total expenses 184,410
---------------
Net investment income 72,537
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY (NOTE 1)
Net realized loss on:
Investment securities (42,299)
Foreign currency transactions (57,753)
---------------
Net realized loss (100,052)
Change in unrealized appreciation on:
Investment securities 217,930
Translation of assets and liabilities in foreign currencies 349
---------------
Change in unrealized appreciation 218,279
---------------
Net realized and unrealized gain on investments 118,227
---------------
Net increase in net assets resulting from operations $ 190,764
===============
</TABLE>
SEE ACCOMPANYING NOTES.
88
<PAGE>
Morgan Stanley Asian Growth Portfolio
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
JUNE 15, 1994
(COMMENCEMENT
YEAR ENDED OF OPERATIONS)
JUNE 30, THROUGH JUNE 30,
1995 1994
--------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 72,537 $ 465
Net realized loss on investments and foreign currency
transactions (100,052) -
Net unrealized appreciation on investments and translation
of assets and liabilities in foreign currency 218,279 -
---------------------------------
Net increase in net assets resulting from operations 190,764 465
Distributions to shareholders from:
Net investment income (500) -
Capital share transactions:
Proceeds from sales of shares 12,547,902 1,904,892
Proceeds from reinvested dividends 500 -
Cost of shares redeemed (1,819,360) -
---------------------------------
Net increase in net assets resulting from share
transactions 10,729,042 1,904,892
---------------------------------
Total increase in net assets 10,919,306 1,905,357
NET ASSETS
Beginning of period 1,905,357 -
---------------------------------
End of period (including undistributed net investment income of
$14,748 and $465, respectively) $12,824,663 $1,905,357
=================================
OTHER INFORMATION
Shares:
Sold 1,262,727 190,495
Issued through reinvestment of dividends 49 -
Redeemed (193,842) -
---------------------------------
Net increase 1,068,934 190,495
=================================
</TABLE>
SEE ACCOMPANYING NOTES.
89
<PAGE>
Morgan Stanley Asian Growth Portfolio
Financial Highlights
<TABLE>
<CAPTION>
JUNE 15, 1994
(COMMENCEMENT
YEAR ENDED OF OPERATIONS)
JUNE 30, THROUGH JUNE 30,
1995 1994(B)
-----------------------------------
<S> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.00 $ 10.00
Income from investment operations:
Net investment income 0.01 0.00(C)
Net realized and unrealized gain on
investments 0.17 -
--------------------------------
Total from investment operations 0.18 0.00
Less distributions:
From net investment income 0.00(C) -
--------------------------------
Net asset value, end of period $ 10.18 $ 10.00
================================
TOTAL RETURN(A) 1.80% 0.52%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 12,824,663 $ 1,905,357
Ratio of expenses to average net
assets(D) 1.92% 0.75%
Ratio of net investment income to
average net assets(D) .76% 0.59%
Portfolio turnover rate 30% -
</TABLE>
(A) Total returns are not annualized.
(B) Data expressed as a percentage are annualized as appropriate.
(C) Less than $0.01 per share.
(D) The ratios of expenses and net investment income to average net assets
before voluntary expense reimbursement were 9.79% and (8.44%), respectively,
for the period June 15, 1994 (commencement of operations) through June 30,
1994. (NOTE 2)
90
<PAGE>
Morgan Stanley Asian Growth Portfolio
Schedule of Investments
June 30, 1995
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------------------------------
<S> <C> <C>
COMMON STOCKS (93.6%)
AUSTRALIA (0.1%)
Odin Mining & Investment 1,250 $ 382
HONG KONG (26.6%)
Cheung Kong Holdings, Ltd. 105,000 519,728
Citic Pacific Limited 71,000 178,470
CP Pokphand 168,000 59,165
Guangdong Investments 600,000 327,617
Harbin Power Equipment Company* 205,000 65,572
Hong Kong Telecom 257,000 508,174
Hopewell Holdings 200,000 169,301
HSBC Holdings 24,640 316,053
Hutchison Whampoa 89,000 430,180
Maanshan Iron & Steel 102,000 21,355
New World Development Company 91,000 302,835
Shenzhen North Jianshe 50,000 24,232
Sun Hung Kai Properties 25,000 184,971
Swire Pacific Limited 45,000 343,125
Yizheng Chemical Fibre Company 150,000 52,341
----------
3,503,119
INDONESIA (7.4%)
Asiana Imi Industry* 10,000 4,266
Bimantara Citra 230,000 129,097
Duta Pertiwi Realty 35,000 36,147
Keramika Indonesia Assos 32,500 43,781
Ometraco Finance -Rights 32,000 -
Ometraco Finance 80,000 57,476
Private Bank International Indo* 26,000 80,265
Private Charoen Pokphand Indo* 30,000 65,335
Private Indocement Tunggal Prakarsa 20,000 78,581
Private Indonesia Satellite 3,200 122,400
Private Indosat 25,000 95,420
Private Kalbe Farma* 20,000 91,603
Private Sorini Corp 20,000 95,644
Private United Tractors 35,000 74,652
----------
974,667
</TABLE>
91
<PAGE>
Morgan Stanley Asian Growth Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
MALAYSIA (20.6%)
Bandar Raya Developments 15,000 $ 32,609
Genting Berhad 37,000 365,751
Land & General Berhad 37,500 125,359
Magnum Corporation Berhad 18,000 42,084
Malayan Banking Berhad 59,000 467,063
Malaysian International Ship 34,000 99,713
Malaysian Resources Corporation 39,000 68,786
Mulpha International Berhad 20,000 24,282
Renong Berhad 100,000 186,216
Resorts World Berhad 54,000 316,735
Sime Darby Berhad 48,000 133,880
Tan & Tan Development 60,000 74,815
Technology Resources* 22,000 63,167
Telekom Malaysia Berhad 40,000 303,527
Tenaga Nasional Berhad 52,000 212,223
Time Engineering Berhad 13,000 43,724
United Engineers, Ltd 24,000 152,584
----------
2,712,518
PAKISTAN (0.2%)
Pakistan Telecom, Ltd.* 300 30,450
PHILIPPINES (6.1%)
Aboitiz Equity Ventures* 465,600 94,797
Ayala Land, Inc 55,000 63,528
Benpres Holding Corporation* 5,500 45,375
JG Summit Holdings 395,000 114,448
Manila Electric Company 15,000 120,399
Petron Corporation 197,500 129,527
Philipino Telephone Corporation 8,000 6,265
Philippine Long Distance 900 64,311
San Miguel Corporation 15,600 64,746
SM Prime Holdings, Ltd.* 241,800 66,273
Universal Robina Corporation 73,200 37,259
----------
806,928
</TABLE>
92
<PAGE>
Morgan Stanley Asian Growth Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
SINGAPORE (14.8%)
British American Tobacco 10,000 $ 45,634
City Developments, Ltd 32,000 195,848
DBS Land, Ltd. 56,000 175,576
Development of Bank Singapore 19,000 216,249
Fraser & Neave, Ltd. 10,000 115,247
Keppel Corporation, Ltd. 22,000 179,528
Overseas Chinese Banking 20,000 221,904
Overseas Union Bank 10,000 62,992
Sembawamg Corporation, Ltd. 18,000 109,520
Singapore Press Holdings 7,200 107,717
Singapore Technologies 110,000 166,929
Straits Steamship Land, Ltd. 22,000 76,220
Straits Trading Company 20,000 50,107
United Overseas Bank 24,000 226,772
----------
1,950,243
SOUTH KOREA (3.2%)
Pohang Iron & Steel 2,500 73,750
Samsung Electronics 2,794 148,781
Samsung Electronics New 2,000 192,500
----------
415,031
THAILAND (14.5%)
Advanced Information Service 4,600 67,458
Bangkok Bank Company, Ltd. 25,000 275,471
Charoen Pokphand Feedmill 9,000 53,595
Finance One Company, Ltd. 29,600 218,238
National Finance & Security 8,400 41,175
National Finance & Security Warrants 7,800 -
Phatra Thanakit Company, Ltd. 13,500 112,660
</TABLE>
93
<PAGE>
Morgan Stanley Asian Growth Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
---------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
THAILAND (14.5%) (CONTINUED)
Shinawatra Computer Co 5,700 $ 137,160
Siam Cement Company 2,700 172,380
Siam Commercial Bank Company 13,000 124,288
Telecomasia Corporation* 67,000 248,349
Thai Farmers Bank, Ltd. 27,000 258,132
Thai Telephone & Telecom* 17,000 140,490
United Communication 4,000 60,280
-----------
1,909,676
UNITED STATES (0.1%)
Jilin Chemical Industrial Company* 1,200 23,100
-----------
TOTAL COMMON STOCKS (Cost $12,108,184) 12,326,114
SHORT-TERM SECURITIES (6.4%)
TIME DEPOSITS (6.4%)
State Street Bank, 4.90%, due 7/3/95 $ 837,287 837,287
-----------
TOTAL SHORT-TERM SECURITIES (Cost $837,287) 837,287
-----------
TOTAL INVESTMENTS (100.0%) (Cost $12,945,471) $13,163,401
===========
</TABLE>
* Non-income producing
OTHER INFORMATION:
Purchases and sales of securities excluding short-term securities, for the
year ended June 30, 1995, aggregated $14,759,349 and $2,657,683,
respectively. Net unrealized appreciation for tax purposes aggregated
$217,930, of which $727,184 related to appreciated investment securities and
$509,254 related to depreciated investment securities. The aggregate cost of
securities is the same for book and tax purposes.
SEE ACCOMPANYING NOTES.
94
<PAGE>
Morgan Stanley Asian Growth Portfolio
Schedule of Investments (continued)
As of June 30, 1995, the Portfolio had investments in the following industries.
The allocation is based on the percentage of total Portfolio investments.
<TABLE>
<CAPTION>
PERCENT OF
TOTAL
INVESTMENTS
-----------
<S> <C>
INDUSTRY
Amusement and Recreation Services 5.5%
Business Services 3.8
Chemicals and Allied Products 1.3
Communications 13.5
Depository Institutions 16.5
Durable Goods, Wholesale 0.2
Electric, Gas and Sanitary Services 2.5
Electronic and Other Electric Equipment 3.1
Engineering and Management Services 2.4
Fabricated Metal Products 0.2
Food and Kindred Products 3.7
Forestry 1.0
Government 6.2
Holding and Other Investment Offices 19.0
Industrial Machinery and Equipment 1.6
Miscellaneous Holdings 0.2
Nondepository Institutions 1.3
Petroleum and Coal Products 1.0
Primary Metal Industries 1.0
Printing and Publishing 0.8
Real Estate 6.8
Securities Brokers and Dealers 0.3
Stone, Clay and Glass Products 2.2
Transportation by Air 2.6
Transportation Equipment 2.2
Tobacco Products 0.3
Water Transportation 0.8
-------
100.0%
=======
</TABLE>
SEE ACCOMPANYING NOTES.
95
<PAGE>
Morgan Stanley Worldwide High Income Portfolio
Statement of Assets and Liabilities
June 30, 1995
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value (cost $7,299,960)
(NOTE 1)-See accompanying schedule $ 7,032,585
Cash 3,768
Receivable for investment securities sold 404,905
Dividends, interest and other receivables 135,469
Deferred organization costs (NOTE 1) 9,125
------------
TOTAL ASSETS 7,585,852
LIABILITIES
Payable for investment securities purchased 1,322,888
Accounts payable and accrued expenses 21,067
------------
TOTAL LIABILITIES 1,343,955
------------
NET ASSETS $ 6,241,897
============
Net Assets consist of:
Paid-in capital $ 6,059,757
Undistributed net investment income 532,957
Undistributed net realized loss on investments (83,442)
Net unrealized depreciation on investment securities (267,375)
------------
NET ASSETS, for 600,165 shares outstanding $ 6,241,897
============
NET ASSET VALUE, offering and redemption price per share $ 10.40
============
</TABLE>
SEE ACCOMPANYING NOTES.
96
<PAGE>
Morgan Stanley Worldwide High Income Portfolio
Statement of Operations
Year Ended June 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 624,658
EXPENSES (NOTE 2)
Investment advisory and management fees 48,816
Custody and accounting fees 13,202
Professional fees 16,703
Directors' fees and expenses 4,950
Amortization of deferred costs 2,185
Other expenses 5,770
------------
Total expenses 91,626
------------
Net investment income 533,032
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTE 1)
Net realized loss on investments (83,442)
Change in unrealized depreciation on investment securities (267,375)
------------
Net realized and unrealized loss on investments (350,817)
------------
Net increase in net assets resulting from operations $ 182,215
============
</TABLE>
SEE ACCOMPANYING NOTES.
97
<PAGE>
Morgan Stanley Worldwide High Income Portfolio
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
JUNE 15, 1994
(COMMENCEMENT
YEAR ENDED OF OPERATIONS)
JUNE 30, THROUGH
1995 JUNE 30, 1994
--------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 533,032 $ 225
Net realized loss on investments (83,442) -
Net unrealized depreciation (267,375) -
--------------------------------
Net increase in net assets resulting from operations 182,215 225
Distributions to shareholders from:
Net investment income (300) -
Capital share transactions:
Proceeds from sales of shares 9,617,478 687,259
Proceeds from reinvested dividends 300 -
Cost of shares redeemed (4,245,280) -
--------------------------------
Net increase in net assets from share transactions 5,372,498 687,259
--------------------------------
Total increase in net assets 5,554,413 687,484
NET ASSETS
Beginning of period 687,484 -
--------------------------------
End of period (including undistributed net investment income
of $532,957 and $225, respectively) $ 6,241,897 $687,484
================================
OTHER INFORMATION
Shares:
Sold 966,462 68,726
Issued through reinvestment of dividends 30 -
Redeemed (435,053) -
--------------------------------
Net increase 531,439 68,726
================================
</TABLE>
SEE ACCOMPANYING NOTES.
98
<PAGE>
Morgan Stanley Worldwide High Income Portfolio
Financial Highlights
<TABLE>
<CAPTION>
JUNE 15, 1994
(COMMENCEMENT
YEAR ENDED OF OPERATIONS)
JUNE 30, THROUGH
1995 JUNE 30, 1994(B)
-------------------------------------
<S> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.00 $ 10.00
Income from investment operations:
Net investment income 0.89 0.00(C)
Net realized and unrealized loss on
investments (0.49) -
----------------------------------
Total from investment operations 0.40 0.00
Less distributions:
From net investment income 0.00(C) -
----------------------------------
Net asset value, end of period $ 10.40 $ 10.00
==================================
TOTAL RETURN(A) 4.00% 0.79%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 6,241,897 $ 687,484
Ratio of expenses to average net
assets(D) 1.61% 0.85%
Ratio of net investment income to
average net assets(D) 9.28% 0.80%
Portfolio turnover rate 142% -
</TABLE>
(A) Total returns are not annualized.
(B) Data expressed as a percentage are annualized as appropriate.
(C) Less than $0.01 per share.
(D) The ratios of expenses and net investment income to average net assets
before voluntary expense reimbursement were 24.78% and (23.13%),
respectively, for the period June 15, 1994 (commencement of operations)
through June 30, 1994. (NOTE 2)
99
<PAGE>
Morgan Stanley Worldwide High Income Portfolio
Schedule of Investments
June 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------------------------------
<S> <C> <C>
CORPORATE BONDS (61.3%)
ARGENTINA (6.8%)
Banco de Galicia, 9%, due 11/1/2003 $ 300,000 $ 211,500
Transport De Gas Del Sur,7.75%, due 12/23/98 (a) 300,000 264,750
----------
476,250
BRAZIL (19.5%)
Compania Brasil, 12.5%, due 12/22/97 (a) 330,000 320,925
Iochpe-Maxion 12.375%, due 11/8/2002 500,000 440,000
Iochpe-Maxion S.A., 12.375%, due 11/8/2002 (a) 250,000 220,000
Klabin Fabric, 11%, due 4/15/98 400,000 392,000
----------
1,372,925
CANADA (8.9%)
Algoma Steel, Inc., 12.375%, due 7/15/2005 250,000 225,385
Rogers Cablesystems, Inc., 10% due 3/15/2005 (a) 150,000 154,125
Sherritt, Inc., 10.5%, due 3/31/2014 250,000 244,375
----------
623,885
MEXICO (4.9%)
Banco Nacional Com Ext, 7.25%, due 2/2/2004 150,000 108,000
Cemex SA de C.V., 9.5%, due 9/20/2001 (a) 300,000 234,000
----------
342,000
NIGERIA (4.7%)
Central Bank of Nigeria, 6.25%, due 11/15/2020 750,000 331,875
Central Bank of Nigeria-Warrants 750 -
----------
331,875
UNITED STATES (16.5%)
AES Corporation, 9.75%, due 6/15/2000 250,000 253,125
Continental Cablevision, 8.875%, due 9/15/2005 200,000 204,000
Pronet, Inc., 11.875%, due 6/15/2005 (a) 150,000 150,750
Six Flags Theme Parks, 12.25%, due 6/15/2005 (a), (b) 100,000 72,000
Viacom International, 8%, due 7/7/2006 250,000 243,438
Westpoint Stevens, 9.375%, due 12/15/2005 250,000 240,625
----------
1,163,938
----------
</TABLE>
100
<PAGE>
Morgan Stanley Worldwide High Income Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------------------------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
TOTAL CORPORATE BONDS (Cost $4,370,176) $ 4,310,873
GOVERNMENT BONDS (29.0%)
BRAZIL (7.9%)
Brazil Federated Republic, 7.3125%, due 4/15/2009 $ 500,000 269,375
Minas Gerais XWB, 8.25%, due 2/10/2000 370,000 288,600
-----------
557,975
BULGARIA (1.5%)
Bulgaria Federated Republic, 7.5625%, due 7/28/2011 (c) 240,000 101,400
ECUADOR (3.5%)
Ecuador - Discount, 7.25%, due 2/28/2025 (c) 500,000 248,750
MEXICO (9.9%)
Mexico Government Par, 6.25%, due 12/31/2019 750,000 457,500
Mexico Bond Warrants 750,000 -
Petro Mexicanos, 8.625%, due 12/1/2023 (a) 350,000 238,000
-----------
695,500
PANAMA (2.7%)
Republic of Panama, 7.25%, due 5/10/2002 (c) 250,000 192,500
VENEZUELA (3.5%)
Venezuela Debt Convertible Bonds - Floating, 8.812%, due
12/18/2007 (c) 500,000 246,875
-----------
TOTAL GOVERNMENT BONDS (Cost $2,251,072) 2,043,000
SHORT-TERM SECURITIES (9.7%)
TIME DEPOSITS (9.7%)
State Street Bank, 4.90%, due 7/3/95 678,712 678,712
-----------
TOTAL SHORT-TERM SECURITIES (Cost $678,712) 678,712
-----------
TOTAL INVESTMENTS (100.0%) (Cost $7,299,960) $ 7,032,585
===========
</TABLE>
101
<PAGE>
Morgan Stanley Worldwide High Income Portfolio
Schedule of Investments (continued)
OTHER INFORMATION:
Purchases and sales of securities excluding short-term securities, for the
year ended June 30, 1995, aggregated $14,399,071 and $7,773,317,
respectively. Net unrealized depreciation for tax purposes aggregated
$269,706, of which $366,689 related to depreciated investment securities and
$96,983 related to appreciated investment securities. The aggregate cost of
securities for tax purposes is $7,302,291.
As of June 30, 1995, the Portfolio had investments in the following industries.
The allocation is based on the percentage of total Portfolio investments.
<TABLE>
<CAPTION>
PERCENT OF
TOTAL
INVESTMENTS
-----------
<S> <C>
INDUSTRY
Amusement and Recreation Services 1.0%
Apparel and Other Finished Products 3.4%
Chemicals and Allied Products 3.5%
Communications 8.5%
Depository Institutions 9.3%
Durable Goods, Wholesale 3.8%
Electric, Gas and Sanitary Services 3.6%
General Building Contractors 4.6%
Governments 35.3%
Industrial Machinery and Equipment 11.5%
Petroleum and Coal Products 3.4%
Primary Metal Industries 3.2%
Stone, Clay and Glass Products 3.3%
Textile Mill Products 5.6%
---------
100.0%
=========
</TABLE>
(a) Security exempt from registration under Rule 144a of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(b) Deferred interest obligation; currently zero coupon under terms of the
initial offering.
(c) Variable rate note or floating rate note, rate shown effective at 6/30/95.
SEE ACCOMPANYING NOTES.
102
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements
June 30, 1995
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Legends Fund, Inc. (the "Fund") was formed as a Maryland corporation on July
22, 1992. The Fund is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Fund has ten
investment portfolios (the "Portfolios")-Renaissance Balanced, Zweig Asset
Allocation, Nicholas-Applegate Balanced, Harris Bretall Sullivan & Smith Equity
Growth, Dreman Value, Zweig Equity (Small Cap), Mitchell Hutchins Fixed Income,
Mitchell Hutchins Money Market, Morgan Stanley Asian Growth and Morgan Stanley
Worldwide High Income. Integrity Financial Services, Inc. ("IFS"), a registered
broker-dealer with the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc., distributes shares of the Fund
to the separate accounts of Integrity Life Insurance Company ("Integrity") and
its wholly owned subsidiary, National Integrity Life Insurance Company
("National Integrity").
ARM Financial Group, Inc. ("ARM") is the ultimate parent of Integrity, National
Integrity, and IFS. ARM is a financial services company providing retail and
institutional products and services to the long-term savings and retirement
market. At June 30, 1995, ARM had approximately $4.8 billion of policyholder
deposits and funds under management.
ARM was organized in July 1993 by the Morgan Stanley Leveraged Equity Fund II,
L.P. ("MSLEF II") and Analytical Risk Management, Ltd. (now known as Oldarm,
L.P.). MSLEF II, and investment fund sponsored by Morgan Stanley & Co.
Incorporated ("Morgan Stanley"), and, as a result of an additional investment,
certain other private equity funds managed by Morgan Stanley own approximately
91% of the outstanding shares of voting stock of ARM. Oldarm, L.P., New ARM, LLC
and certain employees, management and independent directors of ARM and its
subsidiaries own in the aggregate approximately 9% of the voting stock of ARM.
On June 14, ARM completed the acquisition of substantially all of the assets and
business operations of SBM Company ("SBM"), including all of the issued and
outstanding capital stock of SBM's subsidiaries, State Bond and Mortgage Life
Insurance Company ("SBM Life") and SBM Financial Services, Inc. ("SBM Financial
services"), and SBM's management contracts with the State Bond group of mutual
funds.
103
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for investment companies.
SECURITY VALUATION
Stocks that are traded on a national exchange are valued at the last sale price
on the exchange on which they are primarily traded, or, if there is no sale, at
the mean between the current bid and asked prices. Over-the-counter securities
for which market quotations are readily available are valued at the mean of the
current bid and asked prices.
Short-term debt securities with remaining maturities of 61 days or more for
which reliable quotations are readily available are valued at current market
quotations. Short-term investments with remaining maturities of 60 days or less
are valued using the amortized cost method of valuation, which approximates
market value. For the Mitchell Hutchins Money Market Portfolio, portfolio
securities are valued using the amortized cost method of valuation. Bonds and
other fixed-income securities (other than short-term securities described above)
are valued using market quotations provided by a pricing service under
procedures approved by the Fund's Board of Directors.
Futures contracts and options thereon and option contracts traded on a
commodities exchange or board of trade are valued at the closing settlement
price. Futures and option positions or any other securities or assets for which
reliable market quotations are not readily available or for which valuation
cannot be provided by a pricing service approved by the Board of Directors of
the Fund are valued at "fair value" as determined in good faith by the Valuation
Committee of the Board of Directors.
SECURITY TRANSACTIONS
Securities transactions are recorded on the trade date net of brokerage fees,
commissions, and transfer fees. Interest income is accrued daily. Dividend
income is recorded on the ex-dividend date. Premiums and discounts on securities
purchased are amortized using the interest method. Realized gains and losses on
the sale of investments are determined on the basis of nearest average.
104
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities purchased on a when-issued or delayed-delivery basis may be settled a
month or more after the trade date. Securities purchased on a when-issued basis
are included in the portfolio and are subject to market value fluctuations
during the period. At June 30, 1995, the Mitchell Hutchins Fixed Income
Portfolio had segregated specific assets to be utilized to settle its
outstanding commitments related to delayed-delivery.
INCOME TAX STATUS
The Fund complied with the requirements of the Internal Revenue Code applicable
to regulated investment companies and distributed its taxable net investment
income and net realized gains. Therefore, no provision for federal or state
income tax is required.
DIVIDEND DISTRIBUTIONS
Dividends from net investment income and distributions from net realized gains
are declared and distributed annually, except that the Mitchell Hutchins Money
Market Portfolio declares dividends from net investment income each business day
and distributes them monthly. Dividends and distributions are recorded on the
ex-dividend date. All dividends are reinvested in additional full and fractional
shares of the related Portfolios.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences, which may result in distribution reclassifications, are
primarily due to differing treatments for foreign currency transactions, futures
transactions, passive foreign investment companies, capital losses, and losses
deferred due to wash sales.
FUTURES CONTRACTS
Certain Portfolios may enter into futures contracts to provide against adverse
movement in the price of securities in the Portfolio or to enhance investment
performance. When entering into a futures contract, changes in the market price
of the contracts are recognized as unrealized gains or losses by marking each
contract to market at the end of
105
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
each trading day through a variation margin account. When a futures contract is
closed, the Portfolios record a 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. The face amount of the futures contracts shown in the Schedule of
Investments reflects each contract's value at June 30, 1995.
The use of futures contracts involves, to varying degrees, elements of market
risk in excess of the amount recognized in the statement of assets and
liabilities. The contract amounts of the futures contracts reflect the extent of
the Portfolios' exposure to off-balance sheet risk. The Portfolios bear the
market risk which arises from any changes in contract values.
FOREIGN CURRENCY TRANSLATION
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars based upon current exchange rates at
year end. Purchases and sales of securities, income receipts, and expense
payments are translated into U.S. dollars at the prevailing rate on the
respective dates of the transactions. The effects of changes in foreign currency
exchange rates on investments in securities are included in net realized and
unrealized gain or loss on investments in the Statement of Operations.
The Morgan Stanley Asian Growth, the Morgan Stanley Worldwide High Income, and
the Mitchell Hutchins Fixed Income Portfolios may engage in foreign currency
exchange transactions in connection with the purchase and sale of portfolio
securities, and to protect the value of specific portfolio positions. Forward
foreign currency exchange contracts involve elements of market risk in excess of
the amount reflected in the Statement of Assets and Liabilities. The Portfolios
bear the risk of an unfavorable change in the foreign exchange rate underlying
the forward contract. Additionally, losses may arise if the counterparties do
not perform under the contracts' terms.
106
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Morgan Stanley Asian Growth Portfolio has an open forward foreign exchange
contract at June 30, 1995 to hedge against changes in the foreign currency
exchange rates between the trade and settlement dates. The contract terms at
June 30, 1995, were as follows:
<TABLE>
<CAPTION>
CURRENCY TO BE U.S. DOLLAR VALUE AS CURRENCY TO BE UNREALIZED
SETTLEMENT DATE DELIVERED OF 6/30/95 RECEIVED LOSS
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
July 3, 1995 548,609 $ 225,024 225,098 $ (747)
Malaysian Ringget U.S. Dollars
</TABLE>
The Morgan Stanley Asian Growth and Morgan Stanley Worldwide High Income
Portfolios have relatively large investments in countries with limited or
developing capital markets that may involve greater risk than investments in
more developed markets and as a result the prices of such investments may be
volatile. The consequences of political, social, or economic changes in these
markets may have disruptive effects on the market prices of the Portfolios'
investments and the income they generate.
OTHER
Organization costs of $11,416 were deferred and are being amortized over five
years by both the Morgan Stanley Asian Growth and Morgan Stanley Worldwide High
Income Portfolios.
On August 25, 1994, Integrity purchased for its own account approximately
450,000 shares of the Morgan Stanley Worldwide High Income Portfolio, at the net
asset value on such date, for an aggregate purchase price of $4.5 million. As of
June 30, 1995, approximately 162,926 shares, having a fair value of $1.7 million
and constituting 27.2% of the outstanding shares of the Portfolio, were held by
Integrity for its own account.
107
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (continued)
2. INVESTMENT ADVISORY AGREEMENTS AND PAYMENTS TO RELATED PARTIES
Integrity is the investment manager for the Fund pursuant to a Management
Agreement (the "Management Agreement") between the Fund and Integrity. Integrity
has entered into a sub-advisory agreement with a registered investment adviser
("Sub-Adviser") for each of the Portfolios. Integrity, not the Fund, pays the
sub-advisory fee to each of the Sub-Advisers. The fees payable to Integrity
under the Management Agreement, and by Integrity to each Sub-Adviser, as a
percentage of average net assets are as follows:
<TABLE>
<CAPTION>
MANAGEMENT SUB-ADVISORY
PORTFOLIO FEE FEE
--------------------------------------------------------------------------------
<S> <C> <C>
Renaissance Balanced 0.65% 0.50%
Zweig Asset Allocation 0.90 0.75
Nicholas-Applegate Balanced 0.65 0.50
Harris Bretall Sullivan & Smith Equity Growth 0.65 0.50
Dreman Value 0.65 0.50
Zweig Equity (Small Cap) 1.05 0.90
Mitchell Hutchins Fixed Income 0.90 0.75
Mitchell Hutchins Money Market 0.65 0.50
Morgan Stanley Asian Growth 1.00 0.85
Morgan Stanley Worldwide High Income 0.85 0.70
</TABLE>
Under the Management Agreement, Integrity provides certain management services
to the Fund, and the Fund is responsible for certain of its direct operating
expenses. Integrity has voluntarily agreed to reimburse each of the Portfolios
for operating expenses (excluding management fees) above an annual rate of 0.5%
(0.7% prior to May 1, 1994) of average net assets, with the exception of the two
Morgan Stanley Portfolios, for which the annual voluntary expense limitation
(excluding management fees) is 1.0% of average net assets. Integrity has
reserved the right to withdraw or modify its policy of expense reimbursement for
the Portfolios.
108
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (continued)
2. INVESTMENT ADVISORY AGREEMENTS AND PAYMENTS TO RELATED PARTIES (CONTINUED)
The Renaissance Balanced, Zweig Asset Allocation, Nicholas-Applegate Balanced,
Harris Bretall Sullivan & Smith Equity Growth, Dreman Value, Morgan Stanley
Asian Growth and Zweig Equity (Small Cap) Portfolios placed a portion of their
transactions with brokerage firms which may be considered affiliates of the Fund
under the Investment Company Act of 1940. The commissions paid to these firms
were approximately $71,000 in the aggregate during the fiscal year ended June
30, 1995.
Certain officers and directors of the Fund are also officers of ARM, IFS,
Integrity and National Integrity. The Fund does not pay any amounts to
compensate these individuals.
3. CAPITAL SHARES
At June 30, 1995, the Fund had authority to issue one billion (1,000,000,000)
shares of common stock, $.001 par value each, in any class or classes as
determined by the Board of Directors. At such date, the Board of Directors had
authorized ten classes of shares, as follows: 55,000,000 shares each for the
Renaissance Balanced, Zweig Asset Allocation, Nicholas-Applegate Balanced,
Harris Bretall Sullivan & Smith Equity Growth, Dreman Value, Zweig Equity (Small
Cap), Mitchell Hutchins Fixed Income, Morgan Stanley Asian Growth, and Morgan
Stanley Worldwide High Income Portfolios and 100,000,000 shares for the Mitchell
Hutchins Money Market Portfolio.
At June 30, 1995, Integrity, through its Separate Account II (previously named
Separate Account SF), and National Integrity, through its Separate Account II
(previously named Separate Account SFN), were the record owners of all the
outstanding shares of the Fund.
109
<PAGE>
The Legends Fund, Inc.
Portfolio Performance
June 30, 1995
The Fund has entered into sub-advisory agreements with a professional manager
for investment of the assets of each of the Portfolios. Set forth below is a
discussion of the factors, including relevant market conditions and the
investment strategies and techniques pursued by the respective Sub-Advisers,
that materially affected the performance of each Portfolio (other than Mitchell
Hutchins Money Market Portfolio) during the fiscal year ended June 30, 1995. The
discussion was, in each case, provided by the respective Portfolio's
Sub-Adviser. The performance information and graphs contained in such
discussions do not include the expenses and fees of the separate accounts of
Integrity or National Integrity, whichever is applicable, that invest in the
Portfolios.
<TABLE>
RENAISSANCE BALANCED PORTFOLIO
Comparison of Change in Value of $10,000 Investment in
Renaissance Balanced Portfolio, the S&P 500, and a composite index
consisting of 60% of the S&P 500, 30% of Lehman Brothers
Government/Corporate Bond Index, and 10% of 90-Day Treasury Bill Yield
[The following chart is presented to illustrate performance graph data which
appears in the paper copy of The Legends Fund, Inc. Annual Report. This chart
represents the performance history of the three indices indicated below.]
<CAPTION>
60% OF THE S&P 500, 30% OF
LEHMAN BROTHERS
RENAISSANCE GOVERNMENT/CORPORATE BOND INDEX,
BALANCED AND 10% OF 90-DAY TREASURY BILL
DATE PORTFOLIO YIELD S&P 500
--------------------------------------------------------------------------
<S> <C> <C> <C>
12/14/92 $10,000 $10,000 $10,000
Dec 92 $9,930 $10,085 $10,088
Jun 93 $10,420 $10,629 $10,579
Dec 93 $10,880 $11,058 $11,102
Jun 94 $10,400 $10,709 $10,727
Dec 94 $10,502 $11,076 $11,248
Jun 95 $11,826 $12,832 $13,519
</TABLE>
110
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
June 30, 1995
RENAISSANCE BALANCED PORTFOLIO (CONTINUED)
o Average annual total return since inception: 6.82%
o Total return for the fiscal year ended June 30, 1995: 13.71%
o Performance relates to the Portfolio and does not reflect separate account
charges applicable to variable annuity certificates.
o Portfolio commenced operations on December 14, 1992. Index performances for
the month of December 1992 have been prorated to conform to the
commencement date of the Portfolio (except for the S&P 500).
o Past performance is not predictive of future performance.
Returns from both stocks and bonds have been well above their average over the
past six months. After suffering through one of the worst years of performance
in history in 1994, the U.S. bond market has staged a robust rally thus far in
1995, with yields on longer-term U.S. Treasury bonds falling to 15 month lows by
late June. The stock market has staged an equally strong rally after a
disappointing 1994, as growth in corporate earnings and falling interest rates
combined to push stock prices higher.
Our analysis of relative values between stocks, bonds, and cash equivalents led
us last year to significantly increase our position in bonds in our Portfolio.
From a low of less than 30% at the beginning of 1994, we built our positions in
U.S. Treasury bonds to approximately 40% by the fall of 1994, and were well
positioned for the subsequent rally in bond prices. The strongest returns in the
bond market over the past twelve months have been in Treasury issues of ten
years or more in maturity (our bond positions are primarily ten year maturity
Treasuries).
As interest rates rose during the last half of 1994, the level of the stock
market risk increased, and we reduced our positions in stocks to approximately
40% by mid-year, while increasing our bond positions. Our stock position
participated in the general increase in stock prices over the past year, with
particularly strong results turned in by investment positions in the Basic
Materials, Industrials, and Finance areas. Within the stock market as a whole,
leadership over the past twelve months has primarily been provided by Technology
and Financial issues.
By late in the second quarter of 1995, the rally in the bond market had resulted
in very low bond yields relative to those available from cash equivalents. We
reduced our bond positions to roughly 35% of the Portfolio by the end of March
1995, and increased our cash equivalent positions further to approximately 23%.
Given further declines in interest rates or a pullback in stock prices, we would
anticipate increasing our position in stocks. However, given current levels of
interest rates and stock prices, the level of risk in the stock market remains
somewhat above average. At June 30, 1995 the Portfolio was invested
approximately 43% in stocks, 50% in bonds, and 7% in cash equivalents.
111
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
June 30, 1995
<TABLE>
ZWEIG ASSET ALLOCATION PORTFOLIO
Comparison of Change in Value of $10,000 Investment in
Zweig Asset Allocation Portfolio and the S&P 500
[The following chart is presented to illustrate performance graph data which
appears in the paper copy of The Legends Fund, Inc. Annual Report. This chart
represents the performance history of the two indices indicated below.]
<CAPTION>
ZWEIG ASSET ALLOCATION
DATE PORTFOLIO S&P 500
---------------------------------------------------------
<S> <C> <C>
12/14/92 $10,000 $10,000
Dec 92 $10,000 $10,088
Jun 93 $10,810 $10,579
Dec 93 $11,450 $11,102
Jun 94 $11,444 $10,727
Dec 94 $10,491 $11,248
Jun 95 $13,112 $13,519
</TABLE>
o Average annual total return since inception: 11.24%
o Total return for the fiscal year ended June 30, 1995: 14.57%
o Performance relates to the Portfolio and does not reflect separate account
charges applicable to variable annuity certificates.
o Portfolio commenced operations on December 14, 1992.
o Past performance is not predictive of future performance.
The Portfolio was up 14.57% during the twelve months ended June 30, 1995. This
compares to the Portfolio's benchmark, the S&P 500, which was up 26.03% during
the same period. The average effective investment exposure of the Portfolio
during the period was 45%.
Though the Portfolio participated in the market's advance during the twelve
months, it lagged its benchmark primarily due to significant cash levels held
during the year. During the last six months of 1994, investment exposure ranged
between 30% and 40% as all three components of our asset allocation model -
monetary, sentiment, and momentum - showed above-average risk levels in the
market. We gradually increased investment exposure to 70% during the first six
months of 1995
112
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
June 30, 1995
ZWEIG ASSET ALLOCATION PORTFOLIO (CONTINUED)
largely due to three factors. First, bonds rallied, improving our monetary
indicators. Second, an increase in corporate share buybacks and takeover
activity coupled with moderate levels of new offerings provided a favorable
supply/demand situation for stocks, improving our sentiment indicators. Third,
the market's strength caused our momentum indicators to uptick.
Stock selections added value during the fiscal year ended June 30, 1995,
principally during the final six months of the fiscal year. Emphasis on
semiconductor, aerospace, and bank issues were largely responsible.
<TABLE>
NICHOLAS-APPLEGATE BALANCED PORTFOLIO
Comparison of Change in Value of $10,000 Investment in
Nicholas-Applegate Balanced Portfolio, the S&P 500, and a composite index consisting of
60% of the S&P 500 and 40% of Lehman Brothers Intermediate Treasury Bond Index
[The following chart is presented to illustrate performance graph data which
appears in the paper copy of The Legends Fund, Inc. Annual Report. This chart
represents the performance history of the three indices indicated below.]
<CAPTION>
60% OF THE S&P 500 AND 40%
OF LEHMAN BROTHERS
NICHOLAS-APPLEGATE BALANCED INTERMEDIATE TREASURY BOND
DATE PORTFOLIO INDEX S&P 500
----------------------------------------------------------------------------------
<S> <C> <C> <C>
12/3/92 $10,000 $10,000 $10,000
Dec 92 $10,300 $10,143 $10,157
Jun 93 $11,500 $10,676 $10,651
Dec 93 $11,740 $11,089 $11,178
Jun 94 $11,270 $10,723 $10,800
Dec 94 $11,706 $11,063 $11,325
Jun 95 $13,290 $12,795 $13,611
</TABLE>
113
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
June 30, 1995
NICHOLAS-APPLEGATE BALANCED PORTFOLIO (CONTINUED)
o Average annual total return since inception: 11.69%
o Total return for the fiscal year ended June 30, 1995: 17.92%
o Performance relates to the Portfolio and does not reflect separate account
charges applicable to variable annuity certificates.
o Portfolio commenced operations on December 3, 1992. Index performances for
the month of December 1992 have been prorated to conform to the
commencement date of the Portfolio (except for the S&P 500).
o Past performance is not predictive of future performance.
In contrast to the difficult environment for equities and bonds in 1994, this
year has been one of solid growth. During 1994, interest rates placed a cloud
over future earnings growth and those companies with strong earnings growth were
not rewarded by equity markets. This year has witnessed a renewed focus by
investors on the strength of earnings growth.
U.S. stock and bond markets continued to rally in the second quarter of 1995 as
strength in corporate earnings pushed stock prices higher and a slowing national
economy spurred bond investors to bid up prices and drive down yields on
fixed-income securities. The strong demand for stocks and bonds was due in part
to foreign central banks investing their recently purchased U.S. dollars into
U.S. Treasury securities and by continued strong cash inflows into equity mutual
funds. Those funds topped $1 trillion in assets in May 1995, less than two and a
half years after topping the $500 billion mark, and signaled to many a newfound
seriousness on the part of aging baby-boom investors to make up for lost time.
Additionally, many long-time bears advised investors to add equities to their
portfolios.
Large-company stocks, as represented by the S&P 500 Index, returned 9.53% for
the quarter ended June 30 and 26.03% for the twelve months ended June 30, 1995.
Technology issues logged the best returns for the quarter on the strength of
gains by electronics components and microcomputer manufacturers.
Semiconductor manufacturers in particular continued to enjoy strong share-price
growth on the strength of expectations for a continuation of the industry's rise
in earnings. For example, the Portfolio benefited from holding Micron Technology
shares, which rose strongly from April through June on the strength of a 105%
improvement in earnings. The Portfolio performance was affected by declines in
several health care companies, particularly health maintenance organizations.
For example, the Portfolio sold positions in U.S. Healthcare due to declining
earnings caused by rising medical costs.
114
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
June 30, 1995
NICHOLAS-APPLEGATE BALANCED PORTFOLIO (CONTINUED)
The bond market continued its upward rise as domestic investors lined up with
foreign central bankers to buy U.S. Treasury Bonds amid signs of continued
economic slowing. We remain concerned, however, about a number of economic
factors that could dampen the return of bonds. Inflation, as measured by the
intermediate producer price index, continued to rise and mortgage applications
accelerated. Consumer confidence and personal income are high, suggesting
consumers have the resources to resume their spending habits at any time. These
factors could lift the economy from its recent slump and reverse the course of
declining interest rates. We remain positioned with a shorter than market
duration with our bond holdings.
This year's developments have been encouraging. Capital markets once again
provided the greatest rewards to companies with strong earnings growth and the
Portfolio recorded solid performance as a result. In any economic or market
environment, however, we will hold fast to the disciplined style that has
brought competitive returns to Nicholas-Applegate investors for more than a
decade. Identifying companies that are adapting positively to the environment
around them and as a result, are growing their earnings and their share prices.
<TABLE>
HARRIS BRETALL SULLIVAN & SMITH EQUITY GROWTH PORTFOLIO
Comparison of Change in Value of $10,000 Investment in
Harris Bretall Sullivan & Smith Equity Growth Portfolio and the S&P 500
[The following chart is presented to illustrate performance graph data which
appears in the paper copy of The Legends Fund, Inc. Annual Report. This chart
represents the performance history of the two indices indicated below.]
<CAPTION>
HARRIS BRETALL SULLIVAN &
DATE SMITH EQUITY GROWTH PORTFOLIO S&P 500
-----------------------------------------------------------
<S> <C> <C>
12/8/92 $10,000 $10,000
Dec 92 $10,050 $9,992
Jun 93 $9,710 $10,478
Dec 93 $10,050 $10,997
Jun 94 $9,360 $10,625
Dec 94 $10,460 $11,141
Jun 95 $12,850 $13,391
</TABLE>
115
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
June 30, 1995
HARRIS BRETALL SULLIVAN & SMITH EQUITY GROWTH PORTFOLIO (CONTINUED)
o Average annual total return since inception: 10.30%
o Total return for the fiscal year ended June 30, 1995: 37.29%
o Performance relates to the Portfolio and does not reflect separate account
charges applicable to variable annuity certificates.
o Portfolio commenced operations on December 8, 1992.
o Past performance is not predictive of future performance.
For the fiscal year ended June 30, 1995, the Portfolio finished up 37.29%. This
return is primarily the result of good fundamentals underlying our positions in
technology, information processing, and interest rate sensitive stocks. The
Portfolio finished the fiscal year significantly ahead of the S&P 500 index,
which was up 26.03%.
Not very many investment portfolios have been able to beat the S&P 500 index
this fiscal year. We believe that our superior performance was obtained by
sticking to our time-tested investment disciplines: selecting high-quality
growth companies, focusing on consistent earnings growth, and knowing that price
will follow earnings.
Back in late 1993 we introduced the concept of the "Virtuous Cycle," a period of
time when interest rates are stable or declining, earnings are rising, and
price/earnings ratios are expanding. In the past, when the stock market has been
blessed by such a "Virtuous Cycle," returns have been very compelling, exceeding
20% annualized. Our analysis leads us to believe that we could be at the
beginning of this same kind of multi-year bull market. The economic conditions
we see today of moderate economic growth, low inflation, and low interest rates
remind us of the 1950's and early 1960's, one of the best periods in history to
be an equity investor.
We remain bullish and fully invested in growth companies. Our work on valuation
indicates that the market, despite the strong advance over the last twelve
months, is still fairly valued. Last year, we predicted that "...growth stocks
are poised to outperform the market again." While that has certainly occurred
for investors in the Portfolio, historically these periods of good performance
run longer than just one year. Hence, we plan to use minor, technical
corrections as buying opportunities in this "Virtuous Cycle" for growth stocks.
116
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
June 30, 1995
<TABLE>
DREMAN VALUE PORTFOLIO
Comparison of Change in Value of $10,000 Investment in
Dreman Value Portfolio and the S&P 500
[The following chart is presented to illustrate performance graph data which
appears in the paper copy of The Legends Fund, Inc. Annual Report. This chart
represents the performance history of the two indices indicated below.]
<CAPTION>
DREMAN VALUE
DATE PORTFOLIO S&P 500
--------------------------------------------------------
<S> <C> <C>
12/14/92 $10,000 $10,000
Dec 92 $10,180 $10,088
Jun 93 $10,450 $10,579
Dec 93 $10,740 $11,102
Jun 94 $10,660 $10,727
Dec 94 $10,657 $11,248
Jun 95 $12,790 $13,519
</TABLE>
o Average annual total return since inception: 10.16%
o Total return for the fiscal year ended June 30, 1995: 19.98%
o Performance relates to the Portfolio and does not reflect separate account
charges applicable to variable annuity certificates.
o Portfolio commenced operations on December 14, 1992.
o Past performance is not predictive of future performance.
The Portfolio has shown excellent strength during the fiscal year ending June
30, 1995, increasing 19.98%. The past twelve months have been a tale of two
completely different markets. Throughout 1994 interest rates were on the rise,
there were numerous mishaps in the world financial markets and returns on
financial investments were among the worst in recent memory. Since January 1,
1995 the opposite has taken place, with both stocks and bonds yielding
exceptional six month returns.
117
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
June 30, 1995
DREMAN VALUE PORTFOLIO (CONTINUED)
Returns for the first half of 1995 were influenced by excellent corporate
profits and lower interest rates. With respect to the former, close to 80% of
U.S. corporations have reported earnings in excess of Wall Street estimates in
the first two quarters. While a majority of positive surprises is not unusual,
the extent of the plurality is astonishing in light of the gloom overhanging the
market just six months ago. While the Federal Reserve has only lowered the
Federal Funds target 1/4 of 1% during the first part of July 1995, the market,
the true determinant of rates, had already readjusted rates downward even
further, in anticipation of slower economic growth. The rapidity with which
rates have risen and fallen over the past three years has caught many investors
off-guard. We would not bet against another reversal of interest rates if
economic activity picks up later this year.
After being knocked down sharply in the fourth quarter of 1994, both by the
fears of higher interest rates and an overreaction to derivative write-offs, the
financial service stocks achieved solid results so far in 1995. Following the
steep rise of interest rates in 1994, the decline in recent months was embraced
by investors. In fact, the 30-year Treasury yield is now back to the levels of
second quarter 1994. Both the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation posted solid earnings gains despite a
slowing new housing market and minimal refinancing. We view this to be extremely
positive for these firms as a "pick up" in either area would be a further
windfall to earnings.
Bank earnings were strong despite the contractions of net interest margins. We
are particularly bullish on the two California Savings and Loan holdings, Great
Western Financial and Ahmanson. Each has been hampered by the rough West Coast
economy but will benefit as their adjustable rate mortgages ("ARMs") begin to
earn at higher interest rates. During the rapid rise in rates last year the ARMs
yields did not advance as quickly as the cost of funds for these institutions. A
catch-up phase is now in place with the impact of improving the interest rate
spread and earnings per share.
The second quarter of 1995 returns in the Portfolio were led by the three
technology stocks, Apple Computer, Compaq and Hewlett-Packard, rising 30% on
average. All were swept along in Wall Street's clamoring into technology stocks
that has accelerated in the past two months. We think this new frenzy is a
dangerous area of the market and have been slowly selling into this 12-month
technology surge. Our holdings remain first-rate values selling at 11-16 times
earnings, in a sector replete with companies priced at outlandish multiples and
having very questionable market liquidity.
118
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
June 30, 1995
<TABLE>
ZWEIG EQUITY (SMALL CAP) PORTFOLIO
Comparison of Change in Value of $10,000 Investment in
Zweig Equity (Small Cap) Portfolio and the Value Line Geometric Index
[The following chart is presented to illustrate performance graph data which
appears in the paper copy of The Legends Fund, Inc. Annual Report. This chart
represents the performance history of the two indices indicated below.]
<CAPTION>
ZWEIG EQUITY (SMALL VALUE LINE GEOMETRIC
DATE CAP) PORTFOLIO INDEX
---------------------------------------------------------------------
<S> <C> <C>
12/14/92 $10,000 $10,000
Dec 92 $10,000 $10,106
Jun 93 $10,110 $10,611
Dec 93 $10,750 $11,260
Jun 94 $10,650 $10,482
Dec 94 $10,684 $10,582
Jun 95 $11,757 $11,862
</TABLE>
o Average annual total return since inception: 6.57%
o Total return for the fiscal year ended June 30, 1995: 10.39%
o Performance relates to the Portfolio and does not reflect separate account
charges applicable to variable annuity certificates.
o Portfolio commenced operations on December 14, 1992. Index performance for
the month of December 1992 has been prorated to conform to the commencement
date of the Portfolio.
o Past performance is not predictive of future performance.
The Portfolio was up 10.39% during the year, while its benchmark, the Value Line
Geometric Index, was up 13.17%. The average effective investment exposure of the
Portfolio during the period was 45%.
119
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
June 30, 1995
ZWEIG EQUITY (SMALL CAP) PORTFOLIO (CONTINUED)
Though the Portfolio participated in the market's advance during the twelve
months, the Portfolio lagged its benchmark primarily due to significant cash
levels held during the year. During the last six months of 1994, investment
exposure ranged between 30% and 40% as all three components of our asset
allocation model - monetary, sentiment, and momentum - showed above-average risk
levels in the market. We gradually increased investment exposure to 70% during
the first six months of 1995 largely due to the three factors. First, bonds
rallied, improving our monetary indicators. Second, an increase in corporate
share buybacks and takeover activity coupled with moderate levels of new
offerings provided a favorable supply/demand situation for stocks, improving our
sentiment indicators. Third, the market's strength caused our momentum
indicators to uptick.
Stock selection added value during the fiscal year ended June 30, 1995,
principally during the final six months of the period. Emphasis on
semiconductor, aerospace, and bank issues were largely responsible.
<TABLE>
MITCHELL HUTCHINS FIXED INCOME PORTFOLIO
Comparison of Change in Value of $10,000 Investment in
Mitchell Hutchins Fixed Income Portfolio and the Salomon
Brothers Broad Investment-Grade Bond Index
[The following chart is presented to illustrate performance graph data which
appears in the paper copy of The Legends Fund, Inc. Annual Report. This chart
represents the performance history of the two indices indicated below.]
<CAPTION>
MITCHELL HUTCHINS SALOMON BROTHERS BROAD
FIXED INCOME INVESTMENT-GRADE
DATE PORTFOLIO BOND INDEX
----------------------------------------------------------------------
<S> <C> <C>
1/5/93 $10,000 $10,000
Jun 93 $10,430 $10,695
Dec 93 $10,450 $10,979
Jun 94 $10,000 $10,568
Dec 94 $10,047 $10,667
Jun 95 $11,108 $11,894
</TABLE>
120
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
June 30, 1995
MITCHELL HUTCHINS FIXED INCOME PORTFOLIO (CONTINUED)
o Average annual total return since inception: 4.33%
o Total return for the fiscal year ended June 30, 1995: 11.08%
o Performance relates to the Portfolio and does not reflect separate account
charges applicable to variable annuity certificates.
o Portfolio commenced operations on January 5, 1993. Index performance has
been prorated to conform to the commencement date of the Portfolio.
o Past performance is not predictive of future performance.
For the fiscal year ended June 30, 1995, the Portfolio, net of fees and
expenses, underperformed the Salomon Brothers Broad Investment-Grade Index by
147 basis points. The small size of the Portfolio still adversely affects
portfolio performance as trading in non-round-lot sizes incurs higher
transaction costs. The following is a discussion of market conditions and
investment strategies which materially affected the performance during this
period.
The six month period ended December 31, 1994 was characterized by strong
economic growth (4.0% and 5.1% GDP growth in the third and fourth quarters of
1994, respectively) and a restrictive Federal Reserve that raised the federal
funds rate by 300 basis points from February 1994 to February 1995. This
environment produced a significant decline in bond prices as interest rates
increased roughly 50 basis points as measured by the ten year U.S. Treasury
note. Relative Portfolio performance benefited from this backup in rates, as the
Portfolio duration averaged six months shorter than the benchmark during this
period. An overweighing in corporate securities, primarily in the short end of
the yield curve, added to performance as that sector outperformed the index as a
whole. The return of the Portfolio's mortgage-backed securities holdings kept
pace with the mortgage component of the index and a position in callable
government agencies vis-a-vis U.S. Treasuries added to total return.
Over the three months ended March 31, 1995, the bond market reversed course and
saw a 60 basis point decline in ten year maturity yields. In February 1995, the
Federal Reserve seemingly ended their tightening of monetary policy and economic
growth showed signs of slowing down from its brisk pace in 1994. As we entered
the year, our fundamental analysis produced a belief that economic growth would
remain above the "non-inflationary" potential growth rate of 2.5%, causing
inflation fears and further tightening from the Fed. This, combined with a
weakening dollar versus the German Deutschemark and Japanese Yen, convinced us
to leave the portfolio duration short relative to the benchmark to take
advantage of a further increase in rates. Unfortunately, we did not foresee
three positive technical aspects that produced higher bond prices. These factors
included (1) a "flight to quality" resulting from problems in emerging markets,
specifically Mexico, (2) heavy foreign investor and central bank buying, and (3)
a growing belief among market participants,
121
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
June 30, 1995
MITCHELL HUTCHINS FIXED INCOME PORTFOLIO (CONTINUED)
observing slower growth in the housing and retail sectors, that the Fed was
successfully engineering a "soft-landing" in the economy. Consequently, a short
relative portfolio duration in the rallying bond market resulted in relative
underperformance.
As we entered the final three months ended June 30, 1995, we rebalanced the
portfolio duration to index neutral and pared back the corporate sector
allocation in response to these technical factors and early signs that second
quarter growth might be slowing. We did not believe lengthening duration above
the benchmark was warranted, given the dramatic runup in the first quarter and
still no confirmation that economic growth was indeed slowing significantly with
a declining dollar. We soon saw with April and May employment figures that the
economy was looking at very low growth in the second quarter and market
sentiment turned to the likelihood of an easing in interest rates by the Fed.
With a duration and sector allocation roughly neutral to the index, portfolio
performance, before fees and expenses, was slightly higher than the benchmark
for the last three months of the year.
<TABLE>
MORGAN STANLEY ASIAN GROWTH PORTFOLIO
Comparison of Change in Value of $10,000 Investment in
Morgan Stanley Asian Growth Portfolio and the MSCI Combined
Far East Free Ex-Japan Index
[The following chart is presented to illustrate performance graph data which
appears in the paper copy of The Legends Fund, Inc. Annual Report. This chart
represents the performance history of the two indices indicated below.]
<CAPTION>
MORGAN STANLEY ASIAN MSCI COMBINED FAR EAST
DATE GROWTH PORTFOLIO FREE EX-JAPAN INDEX
----------------------------------------------------------------
<S> <C> <C>
6/15/94 $10,000 $10,000
Jun 94 $10,000 $9,754
Sep 94 $9,990 $11,106
Dec 94 $9,280 $9,772
Mar 95 $9,230 $9,599
Jun 95 $10,180 $10,456
</TABLE>
122
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
June 30, 1995
MORGAN STANLEY ASIAN GROWTH PORTFOLIO (CONTINUED)
o Average annual total return since inception: 1.73%
o Total return for the fiscal year ended June 30, 1995: 1.80%
o Performance relates to the Portfolio and does not reflect separate account
charges applicable to variable annuity certificates.
o Portfolio commenced operations on June 15, 1994.
o Past performance is not predictive of future performance.
The investment objective of the Portfolio is to achieve long-term capital
appreciation through investments in the stock markets of Asia, excluding Japan.
For the fiscal year ended June 30,1995 the total return of the Portfolio was
1.80%. By comparison, the benchmark index, the Morgan Stanley Capital
International ("MSCI") Combined Far East Free Ex-Japan Index, registered a gain
of 7.19% over the same period.
Underperformance for the fiscal year 1995 stems entirely from the first quarter
of the Portfolio's existence. After a spectacular rise in 1993, Asian markets
corrected sharply in 1994. Asian markets did stage one extended rally during
1994, however, and that was during the third quarter of the year, which
coincided with the Portfolio's launch. The Portfolio missed most of the rally.
Through the first three months of 1995, the Index returned 13.86%, whereas the
Portfolio lost 0.11%.
For the period from inception on June 15, 1994 through September 30, 1994, the
Portfolio was being invested, up to 76.6% at September 30. Over time, the
Portfolio became more fully invested to its present level of 96%. For much of
the year, the Portfolio maintained higher than normal cash balances, which
served the Portfolio well during volatile periods, such as the Asian aftermath
to the Mexican peso crisis.
The investment manager pursues a disciplined value oriented philosophy by which
the manager seeks to identify and invest in undervalued companies. Once
purchased, stocks are not sold unless they become expensive relative to what the
manager quantifies as their intrinsic value or another company becomes more
attractive. We have not deviated from this long-term value oriented strategy as
illustrated in the Portfolio's relatively low turnover rate.
123
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
June 30, 1995
MORGAN STANLEY ASIAN GROWTH PORTFOLIO (CONTINUED)
During 1995, Hong Kong garnered top honors as Asia's top performing market,
returning 10.9% despite uncertainty surrounding interest rates and the worsening
of relations between the U.S. and China over arms sales and the recent visit to
the U.S. by Taiwan's President. Tied to U.S. interest rates via the exchange
rate peg, Hong Kong benefitted from the dramatic drop in U.S. bond yields. At 11
times 1995 estimated earnings, we believe Hong Kong is still Asia's cheapest
market.
Malaysia rivaled Hong Kong as one of Asia's best performing markets, gaining
10.2% over the last six months. In January and February the market reeled as
investors feared that the ringgit would be devalued given the country's large
current account deficit. Eventually market sentiment improved as investors
recognized that because of Malaysia's strong external reserves position, low
debt service ratio and basic account surplus, the Central Bank was well armed to
defend the ringgit. The market snapped back to life in the last three months as
foreign investors returned in droves with the fall in U.S. bond yields and as
fears abated that tough anti-inflationary measures would be enacted. At 21 times
1995 estimated earnings, we believe Malaysia is fully valued.
The Thai market posted modest gains of 3.3% over the last two quarters of 1994.
The third quarter was particularly trying for the Thai market as it was viewed
by foreign institutional investors as a submerging market whose currency (the
baht), like the Mexican peso several months before, was overvalued and due for
an adjustment. Fearing the worst, foreign institutions reacted impulsively,
selling indiscriminately. The market's liquid bluechips were the hardest hit.
After the initial wave of panic selling, however, the market traded sideways on
thin volume for several months. With the dramatic drop in U.S. bond yields in
May and the extended rally in U.S. markets, however, foreign investors returned
to the market in force, buying aggressively in Thailand's most interest rate
sensitive sectors--banks, finance companies, and property developers--which
would benefit from the wider margins.
Looking ahead in Asia, excluding Japan, we are relatively neutral about the
Asian markets. We expect to aim for a market weighted in Malaysia, Singapore,
Thailand, and Indonesia, while being overweighted in the Philippines and
underweighted in Hong Kong and Korea.
124
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
June 30, 1995
<TABLE>
MORGAN STANLEY WORLDWIDE HIGH INCOME PORTFOLIO
Comparison of Change in Value of $10,000 Investment in
Morgan Stanley Worldwide High Income Portfolio, the J.P. Morgan Emerging Market Bond
Index, and a composite index consisting of 50% of the J.P. Morgan Emerging Market
Bond Index and 50% of Lehman Brothers Aggregate Bond Index
[The following chart is presented to illustrate performance graph data which
appears in the paper copy of The Legends Fund, Inc. Annual Report. This chart
represents the performance history of the three indices indicated below.]
<CAPTION>
50% JP MORGAN EMERGING
MORGAN STANLEY MARKET BOND INDEX AND
WORLDWIDE HIGH INCOME JP MORGAN EMERGING 50% OF LEHMAN BROTHERS
DATE PORTFOLIO MARKET BOND INDEX AGGREGATE BOND INDEX
- - --------------------------------------------------------------------------------------
<S> <C> <C> <C>
6/15/94 $10,000 $10,000 $10,000
Jun 94 $10,000 $9,580 $9,784
Sep 94 $10,010 $10,620 $10,335
Dec 94 $9,503 $9,731 $9,909
Mar 95 $9,130 $8,653 $9,625
Jun 95 $10,400 $10,628 $10,935
</TABLE>
o Average annual total return since inception: 3.84%
o Total return for the fiscal year ended June 30, 1995: 4.00%
o Performance relates to the Portfolio and does not reflect separate account
charges applicable to variable annuity certificates.
o Portfolio commenced operations on June 15, 1994. Index performances for the
month of June 1994 have been prorated to conform to the commencement date
of the Portfolio.
o Past performance is not predictive of future performance.
The last twelve months in the bond markets have been tumultuous. Both emerging
markets and the U.S. bond market witnessed inflection points during the period.
In the U.S., inflationary fears and high growth drove up nominal bond yields to
8.20%. Changes in the bond markets of G-7 countries had an effect in emerging
markets. In emerging markets, political turbulence, elections in Mexico,
euphoria and leverage proved to be unsettling. The Mexican devaluation led to
widespread re-
125
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
June 30, 1995
MORGAN STANLEY WORLDWIDE HIGH INCOME PORTFOLIO (CONTINUED)
thinking of the emerging market phenomenon. However, policy responses and
economic performances since the crash of 1994 should allay the most seasoned
skeptics.
The Portfolio benefited from the hybrid nature of its investments. Tactical
shifts out of and into emerging markets had a positive impact on performance. We
increased the allocation to emerging markets in the third quarter of calendar
1994, decreased it in the first quarter of calendar 1995 and increased it again
during the second quarter of calendar 1995.
During the first two quarters of calendar 1995 we increased our exposure to
emerging markets debt, as these markets returned to normalcy and offered higher
yields and prospective returns than the U.S. high yield market. Currently our
relative allocation stands at 65:35 in favor of emerging markets debt.
Historically the Portfolio has held a higher proportion of its holdings in the
larger Latin American countries, with smaller holdings in countries such as the
Philippines, Indonesia and Hungary for diversification. During 1995 we reduced
our holdings outside Latin America to capture much greater value and potential
for capital appreciation than in Mexico, Argentina and Brazil, countries which
had witnessed a larger increase in spreads in the wake of Mexico's devaluation.
Our country allocations have remained stable except for changes in Mexico,
Venezuela and Russia. We had relatively small exposure to Mexico in 1994 as
Mexican bonds seemed rich compared to others in Latin America, and concerns over
political stability and the conduct of monetary policy prompted us to be
relatively underweight in Mexico. Following the devaluation and the collapse in
prices of Eurobonds in the first quarter of 1995, we increased our exposure to
Mexico to 16% of the Portfolio.
The Zedillo administration's orthodox program of tight fiscal and monetary
policy proved effective at reversing the trade accounts from deficit to surplus
and at keeping the inflation bubble sparked by the devaluation from spiraling
out of control. The peso rose 8% from the first quarter of 1995 level as foreign
capital flows resumed; however, the peso is down 31% since January 1, 1995. The
peso stabilized as the funding from the U.S. and the International Monetary Fund
allowed it to manage through the potential liquidity crisis. Through the end of
June, due to the success of the stabilization effort, Mexico had drawn on
substantially less funding than originally committed from the U.S. Treasury
Emerging Stabilization Fund (approximately $12.5 billion out of $20 billion) and
had rebuilt international reserves to $10.8 billion.
126
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
June 30, 1995
MORGAN STANLEY WORLDWIDE HIGH INCOME PORTFOLIO (CONTINUED)
Venezuela's economic performance in 1995 has continued to deteriorate and, as a
result, we reduced our exposure to that country to approximately 3.5%, because
of continued inaction of the government to tackle the economy's problems of high
fiscal deficits and the liquidity overhang in the banking system. A continued
reliance on price and exchange controls has not resulted in bringing down
inflation and has negatively impacted growth prospects.
Argentine assets rallied strongly in anticipation of the first round victory for
President Menem, who had campaigned on a platform which stressed continuity of
economic policy by commitment to the Convertibility Plan. Asset prices
encountered profit taking in the post election euphoria as signs of a dramatic
slowdown in the economy emerged. The strait jacket of the Convertibility Plan
presents a policy dilemma as it leaves deflation as the only way out of a
slowdown in economic activity. We reduced our exposure to Argentina in June to
6.8% of the Portfolio from the 8% level we had maintained for some time.
Brazil remains our largest position at around 27% of the Portfolio. Brazil has
the strongest economy in the region and has embarked on a long and tortuous task
of amending the constitution in order to de-regulate the economy and stabilize
the economy in the long run. The reform agenda is ambitious and the legislative
sessions are likely to be noisy, with vested interest groups vying to make the
outcome more acceptable to their constituencies. We are confident that when all
is said and done Brazil will emerge as the strongest credit in the region.
Emerging markets debt continues to offer attractive yields. Positive total
returns should result from continued improvement in perceived credit quality.
Reaffirmed commitments to orthodox economic policies in the post devaluation
world should bolster confidence in this asset class.
The second half of the calendar year 1994 was weak for the domestic fixed income
market on the heels of rising interest rates and a slowing U.S. economy. The
U.S. High Yield market was strong in the first half of calendar 1995 reflecting
the 162 basis point decline in government bond yields and the strong rally in
the equity markets. Towards the end of the period, however, the market paused as
investors feared that the economy was slowing at a potentially dangerous pace
for high yield investors. The Fed shared this concern and lowered short term
interest rates 25 basis points near the end of the second calendar quarter. This
stabilized the high yield market somewhat, although government bonds began to
deteriorate shortly after the Fed easing.
127
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
June 30, 1995
MORGAN STANLEY WORLDWIDE HIGH INCOME PORTFOLIO (CONTINUED)
We were fairly active in the high yield portion of the Portfolio. We sold five
issues and added seven issues. Several issues were added when the market for new
issues turned soft and buyers were hesitant to add new names to their
Portfolios. During this period we believe we picked up a couple of very good
values for the Portfolio. Also, during the first half of calendar 1995, the
quality spreads within the high yield market widened. We sold a few holdings
where earnings disappointed us and we felt trouble may come in the future.
The high yield portion of the Portfolio is well balanced with a healthy portion
of high quality cable television issues that have the potential to be upgraded,
in some cases to investment grade, along with a few cyclical credits that have
good market positions that we feel we bought at very attractive prices. The high
yield portion of the Portfolio appears well positioned in the current market
environment.
128
<PAGE>
JUNE 30, 1995
ANNUAL REPORT
THE LEGENDS FUND, INC.
BULK RATE
Mailing Address: U.S. POSTAGE
P.O. Box 182080 PAID
Columbus, Ohio 43218 CHICAGO, IL
PERMIT NO. 1612
Address Correction Requested
Return Postage Guaranteed
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