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<PAGE>
[LOGO] THE LEGENDS FUND, INC.
SEMI-ANNUAL REPORT
DECEMBER 31, 1996
<PAGE>
The Legends Fund, Inc.
Semi-Annual Report (Unaudited)
December 31, 1996
Contents
President's Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Financial Statements, Financial Highlights, and Schedules of
Investments:
Renaissance Balanced Portfolio . . . . . . . . . . . . . . . . . . . . . .2
Zweig Asset Allocation Portfolio . . . . . . . . . . . . . . . . . . . . 10
Nicholas-Applegate Balanced Portfolio. . . . . . . . . . . . . . . . . . 27
Harris Bretall Sullivan & Smith Equity Growth Portfolio. . . . . . . . . 39
Dreman Value Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . 48
Zweig Equity (Small Cap) Portfolio . . . . . . . . . . . . . . . . . . . 61
Pinnacle Fixed Income Portfolio. . . . . . . . . . . . . . . . . . . . . 90
ARM Capital Advisors Money Market Portfolio. . . . . . . . . . . . . . . 99
Morgan Stanley Asian Growth Portfolio. . . . . . . . . . . . . . . . . .105
Morgan Stanley Worldwide High Income Portfolio . . . . . . . . . . . . .116
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . .126
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 ARM SECURITIES
CORPORATION, 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>
This 1996 Semi-Annual Report highlights a fine period for The Legends Fund, Inc.
(the "Fund"). We thank all of our current investors and wish to extend a special
welcome to all new investors who have joined us during the period.
Total returns for each of the Fund's portfolios for the six months and for the
year ended December 31, 1996 are listed below:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1996* DECEMBER 31, 1996
-----------------------------------------
<S> <C> <C>
Renaissance Balanced 6.84% 9.43%
Zweig Asset Allocation 10.03% 14.83%
Nicholas-Applegate Balanced 7.50% 15.45%
Harris Bretall Sullivan & Smith Equity Growth 7.50% 13.95%
Dreman Value 15.04% 24.51%
Zweig Equity (Small Cap) 9.91% 18.54%
Pinnacle Fixed Income (managed by J.P. Morgan
Investment Management) 4.42% 1.84%
ARM Capital Advisors Money Market 2.19% 4.40%
Morgan Stanley Asian Growth (0.55)% 5.58%
Morgan Stanley Worldwide High Income 15.86% 24.50%
</TABLE>
* Total returns are not annualized.
Included in this Semi-Annual Report is detailed information of the investment
holdings of each portfolio as of December 31, 1996, as well as other financial
information.
In general, 1996 was an overall strong year in the markets. The investment
disciplines available within the Fund span a broad spectrum, providing you with
the choices and flexibility to plan for the long-term. Be assured that the Fund
is committed to assisting you in achieving your individual investment goals.
We appreciate your continued confidence. Should you have any questions or
comments, we always welcome your inquiries.
Sincerely,
/s/ Edward J. Haines
Edward J. Haines
President
The Legends Fund, Inc.
1
<PAGE>
Renaissance Balanced Portfolio
Statement of Assets and Liabilities
December 31, 1996 (Unaudited)
ASSETS
Investment in securities, at value (cost $24,913,423)
-See accompanying schedule $ 27,185,745
Receivable for investment securities sold 691,555
Dividends and interest receivable 156,591
-------------
TOTAL ASSETS 28,033,891
LIABILITIES
Payable for investment securities purchased 555,450
Accounts payable and accrued expenses 39,218
-------------
TOTAL LIABILITIES 594,668
-------------
NET ASSETS $ 27,439,223
-------------
-------------
Net Assets consist of:
Paid-in capital $ 24,335,826
Undistributed net investment income 441,089
Accumulated undistributed net realized gain on investments 389,986
Net unrealized appreciation on investment securities 2,272,322
-------------
NET ASSETS, for 2,316,469 shares outstanding $ 27,439,223
-------------
-------------
NET ASSET VALUE, offering and redemption price per share $ 11.85
-------------
-------------
SEE ACCOMPANYING NOTES.
2
<PAGE>
Renaissance Balanced Portfolio
Statement of Operations
Six Months Ended December 31, 1996 (Unaudited)
INVESTMENT INCOME
Dividends $ 79,947
Interest 502,316
-------------
Total investment income 582,263
EXPENSES
Investment advisory and management fees 89,149
Custody and accounting fees 37,031
Professional fees 8,691
Directors' fees and expenses 3,034
Other expenses 3,269
-------------
Total expenses 141,174
-------------
Net investment income 441,089
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 389,986
Change in unrealized appreciation on investment securities 1,004,121
-------------
Net gain on investments 1,394,107
-------------
Net increase in net assets resulting from operations $ 1,835,196
-------------
-------------
SEE ACCOMPANYING NOTES.
3
<PAGE>
Renaissance Balanced Portfolio
Statement of Changes in Net Assets
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED
1996 JUNE 30,
(UNAUDITED) 1996
----------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 441,089 $ 758,801
Net realized gain on investments 389,986 2,972,263
Change in net unrealized appreciation 1,004,121 (423,724)
----------------------------
Net increase in net assets resulting
from operations 1,835,196 3,307,340
Distributions to shareholders from:
Net investment income (758,801) (914,654)
Net realized gain (2,673,112) -
----------------------------
Total distributions to shareholders (3,431,913) (914,654)
Capital share transactions:
Proceeds from sales of shares 1,674,164 3,559,180
Proceeds from reinvested distributions 3,431,913 914,654
Cost of shares redeemed (3,173,490) (6,795,362)
----------------------------
Net increase (decrease) in net assets
resulting from share transactions 1,932,587 (2,321,528)
----------------------------
Total increase in net assets 335,870 71,158
NET ASSETS
Beginning of period 27,103,353 27,032,195
----------------------------
End of period (including undistributed net
investment income of $441,089 and
$758,801, respectively) $ 27,439,223 $ 27,103,353
----------------------------
----------------------------
OTHER INFORMATION
Shares:
Sold 134,677 286,131
Issued through reinvestment of distributions 291,594 74,583
Redeemed (249,402) (548,725)
----------------------------
Net increase (decrease) 176,869 (188,011)
----------------------------
----------------------------
SEE ACCOMPANYING NOTES.
4
<PAGE>
Renaissance Balanced Portfolio
Financial Highlights
<TABLE>
<CAPTION>
DECEMBER 14,
SIX MONTHS 1992
ENDED (COMMENCEMENT
DECEMBER 31, YEAR ENDED JUNE 30, OF OPERATIONS)
1996 ----------------------------------- THROUGH JUNE 30,
(UNAUDITED) 1996 1995 1994 1993
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 12.67 $ 11.61 $ 10.40 $ 10.42 $ 10.00
Income from investment operations:
Net investment income 0.21 0.36 0.42 0.20 0.13
Net realized and unrealized gain
(loss) on investments 0.65 1.10 0.99 (0.11) 0.29
--------------------------------------------------------------------
Total from investment operations 0.86 1.46 1.41 0.09 0.42
Less distributions:
From net investment income (0.37) (0.40) (.17) (0.11) -
From net realized gain (1.31) - (.03) - -
--------------------------------------------------------------------
Total distributions (1.68) (0.40) (.20) (0.11) -
--------------------------------------------------------------------
Net asset value, end of period $ 11.85 $ 12.67 $ 11.61 $ 10.40 $ 10.42
--------------------------------------------------------------------
--------------------------------------------------------------------
TOTAL RETURN (a) 6.84% 12.68% 13.71% 0.73% 7.70%
RATIOS AND SUPPLEMENTAL DATA (b)
Net assets, end of period (in thousands) $ 27,439 $ 27,103 $ 27,032 $ 25,046 $ 7,799
Ratio of expenses to average net
assets (c) 1.03% 1.01% 0.96% 1.06% 1.24%
Ratio of net investment income to
average net assets (c) 3.22% 2.69% 3.53% 2.72% 2.36%
Portfolio turnover rate 45% 107% 71% 85% 29%
Average commission paid per equity
share traded $ .0600(d)
</TABLE>
(a) Total returns for periods of less than one year 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.
(d) Disclosure required for fiscal years beginning after September 1, 1995.
5
<PAGE>
Renaissance Balanced Portfolio
Schedule of Investments (Unaudited)
December 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------------------------------------
<S> <C> <C>
COMMON STOCKS (41.0%)
APPAREL & OTHER TEXTILE PRODUCTS (2.2%)
Liz Claiborne, Inc. 15,300 $ 590,961
BUSINESS SERVICES (3.4%)
Computer Associates International, Inc. 9,000 447,750
HBO & Company 8,000 475,000
---------
922,750
CHEMICALS & ALLIED PRODUCTS (2.3%)
Bristol-Meyers Squibb Company 5,700 619,875
DEPOSITORY INSTITUTIONS (2.3%)
First Chicago NBD Corporation 11,985 644,194
ELECTRIC, GAS & SANITARY SERVICES (2.3%)
Williams Companies, Inc. 16,950 635,625
ELECTRONIC & OTHER ELECTRIC EQUIPMENT (1.9%)
Atmel Corporation* 15,500 515,375
FOOD & KINDRED PRODUCTS (2.0%)
Ralston-Ralston Purina Group 7,500 555,450
FORESTRY (1.9%)
Georgia-Pacific Corporation 7,100 511,200
FURNITURE & FIXTURES (2.5%)
Leggett & Platt, Inc. 19,300 668,263
</TABLE>
6
<PAGE>
Renaissance Balanced Portfolio
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
HOTELS & OTHER LODGING PLACES (1.9%)
Hilton Hotels Corporation 19,600 $ 512,050
INDUSTRIAL MACHINERY & EQUIPMENT (3.8%)
Gateway 2000, Inc.* 9,300 498,131
Ingersoll-Rand Company 11,800 525,100
-------------
1,023,231
INSURANCE CARRIERS (4.6%)
Lowes Corporation 7,000 659,750
Travelers Group, Inc. 12,966 588,332
-------------
1,248,082
MISCELLANEOUS RETAIL (1.9%)
Staples, Inc.* 28,000 505,750
PAPER & ALLIED PRODUCTS (2.1%)
Mead Corporation 10,000 581,250
PETROLEUM & COAL PRODUCTS (2.1%)
Phillips Petroleum Company 13,300 588,525
RUBBER & MISCELLANEOUS PLASTIC PRODUCTS (2.0%)
Nike, Inc. 9,200 549,700
TRANSPORTATION BY AIR (1.8%)
Northwest Airlines Corporation* 12,200 477,325
-------------
TOTAL COMMON STOCKS (Cost $9,120,528 ) 11,149,606
</TABLE>
7
<PAGE>
Renaissance Balanced Portfolio
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES (50.2%)
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (15.3%)
Federal National Mortgage Association, 6.41%,
due 3/8/2006 $3,200,000 $3,137,984
Federal National Mortgage Association, 7.04%,
due 11/1/2006 1,000,000 1,015,000
-----------
4,152,984
U.S. GOVERNMENT OBLIGATIONS (34.9%)
U.S. Treasury Note, 6.125%, due 12/31/2001 2,690,000 2,679,913
U.S. Treasury Note, 6.500%, due 5/15/2005 700,000 704,704
U.S. Treasury Note, 6.875%, due 5/15/2006 3,350,000 3,452,075
U.S. Treasury Note, 7.000%, due 7/15/2006 575,000 597,373
U.S. Treasury Note, 7.250%, due 5/15/2004 1,700,000 1,788,723
U.S. Treasury Note, 7.875%, due 11/15/2004 245,000 267,356
-----------
9,490,144
-----------
TOTAL LONG-TERM DEBT SECURITIES (Cost $13,399,884 ) 13,643,128
SHORT-TERM SECURITIES (8.8%)
U.S. GOVERNMENT OBLIGATIONS (8.7%)
Federal Farm Credit Discount Note, 5.27%, due
2/24/1997 1,365,000 1,354,210
Federal Home Loan Bank Discount Note, 8.95%,
due 6/10/1997 860,000 999,851
-------------
2,354,061
</TABLE>
8
<PAGE>
Renaissance Balanced Portfolio
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------
<S> <C> <C>
SHORT-TERM SECURITIES (CONTINUED)
REPURCHASE AGREEMENT (0.1%)
State Street Bank, 4.00%, due 1/2/1997
(Dated 12/31/1996, collateralized by U.S. Treasury
Bill, due 6/26/1997, value $39,096) $ 38,950 $ 38,950
-------------
TOTAL SHORT-TERM SECURITIES (Cost $2,393,011) 2,393,011
-------------
TOTAL INVESTMENTS (100.0%) (Cost $24,913,423) $27,185,745
-------------
-------------
</TABLE>
* Non-income producing
OTHER INFORMATION:
Purchases and sales of securities excluding short-term securities, for the
six months ended December 31, 1996, aggregated $11,699,303 and $10,054,582,
respectively. Net unrealized appreciation for tax purposes aggregated
$2,272,322, of which $2,565,601 related to appreciated investment
securities and $293,279 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
December 31, 1996 (Unaudited)
ASSETS
Investment in securities, at value (cost $35,671,783)
-See accompanying schedule $42,063,168
Cash 450,313
Dividends, interest and other receivables 257,599
-----------
TOTAL ASSETS 42,771,080
LIABILITIES
Accounts payable and accrued expenses 61,118
-----------
TOTAL LIABILITIES 61,118
-----------
NET ASSETS $42,709,962
-----------
-----------
Net Assets consist of:
Paid-in capital $35,977,789
Undistributed net investment income 259,507
Accumulated undistributed net realized gain on investment
securities and futures contracts 168,047
Net unrealized appreciation on investment securities and
futures contracts 6,304,619
-----------
NET ASSETS, for 3,146,290 shares outstanding $42,709,962
-----------
-----------
NET ASSET VALUE, offering and redemption price per share $ 13.57
-----------
-----------
SEE ACCOMPANYING NOTES.
10
<PAGE>
Zweig Asset Allocation Portfolio
Statement of Operations
Six Months Ended December 31, 1996 (Unaudited)
INVESTMENT INCOME
Dividends $ 415,178
Interest 102,466
-----------
Total investment income 517,644
EXPENSES
Investment advisory and management fees 182,524
Custody and accounting fees 54,757
Professional fees 8,691
Directors' fees and expenses 3,034
Other expenses 9,131
-----------
Total expenses 258,137
-----------
Net investment income 259,507
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Investment securities 1,399,298
Futures contracts (1,149,822)
-----------
Net realized gain 249,476
Change in unrealized appreciation (depreciation) on:
Investment securities 3,410,494
Futures contracts (5,338)
-----------
Change in unrealized appreciation 3,405,156
-----------
Net gain on investments 3,654,632
-----------
Net increase in net assets resulting from operations $ 3,914,139
-----------
SEE ACCOMPANYING NOTES.
11
<PAGE>
Zweig Asset Allocation Portfolio
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED
1996 JUNE 30,
(UNAUDITED) 1996
---------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 259,507 $ 610,426
Net realized gain on investments 249,476 4,692,015
Change in net unrealized appreciation 3,405,156 (1,281,343)
---------------------------------
Net increase in net assets resulting from operations 3,914,139 4,021,098
Distributions to shareholders from:
Net investment income (610,426) (946,985)
Net realized gain (4,529,338) -
---------------------------------
Total distributions to shareholders (5,139,764) (946,985)
Capital share transactions:
Proceeds from sales of shares 2,142,785 4,764,144
Proceeds from reinvested distributions 5,139,764 946,985
Cost of shares redeemed (3,568,860) (5,299,505)
---------------------------------
Net increase in net assets resulting from share
transactions 3,713,689 411,624
---------------------------------
Total increase in net assets 2,488,064 3,485,737
NET ASSETS
Beginning of period 40,221,898 36,736,161
---------------------------------
End of period (including undistributed net investment
income of $259,507 and $610,426, respectively) $ 42,709,962 $ 40,221,898
---------------------------------
---------------------------------
OTHER INFORMATION
Shares:
Sold 155,001 345,159
Issued through reinvestment of distributions 396,247 71,107
Redeemed (254,966) (386,701)
---------------------------------
Net increase 296,282 29,565
---------------------------------
---------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
12
<PAGE>
Zweig Asset Allocation Portfolio
Financial Highlights
<TABLE>
<CAPTION>
DECEMBER 14,
SIX MONTHS 1992
ENDED (COMMENCEMENT
DECEMBER 31, YEAR ENDED JUNE 30, OF OPERATIONS)
1996 ----------------------------------------- THROUGH JUNE 30,
(UNAUDITED) 1996 1995 1994 1993
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of
period $ 14.11 $ 13.02 $ 11.44 $ 10.81 $ 10.00
Income from investment operations:
Net investment income 0.09 0.21 0.33 0.10 0.08
Net realized and unrealized gain
on investments 1.24 1.21 1.33 0.58 0.73
-----------------------------------------------------------------------
Total from investment operations 1.33 1.42 1.66 0.68 0.81
Less distributions:
From net investment income (0.22) (0.33) (0.08) (0.05) -
From net realized gain (1.65) - - - -
-----------------------------------------------------------------------
Total distributions (1.87) (0.33) (0.08) (0.05) -
-----------------------------------------------------------------------
Net asset value, end of period $ 13.57 $ 14.11 $ 13.02 $ 11.44 $ 10.81
-----------------------------------------------------------------------
-----------------------------------------------------------------------
TOTAL RETURN (a) 10.03% 11.06% 14.57% 6.27% 14.86%
RATIOS AND SUPPLEMENTAL DATA (b)
Net assets, end of period (in
thousands) $ 42,710 $ 40,222 $ 36,736 $ 31,563 $ 3,856
Ratio of expenses to average net
assets (c) 1.27% 1.25% 1.20% 1.39% 1.51%
Ratio of net investment income to
average net assets (c) 1.28% 1.55% 2.73% 1.67% 1.40%
Portfolio turnover rate 55% 105% 45% 101 12%
Average commission paid per
equity share traded $ .0286 (d
</TABLE>
(a) Total returns for periods of less than one year 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.
(d) Disclosure required for fiscal years beginning after September 1, 1995.
13
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (Unaudited)
December 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------------------------------------
<S> <C> <C>
COMMON STOCKS (87.8%)
AGRICULTURAL PRODUCTION-CROPS (0.8%)
RJR Nabisco Holdings Corporation 10,400 $ 353,600
AMUSEMENT & RECREATION SERVICES (0.6%)
King World Productions, Inc. 6,600 243,375
APPAREL & ACCESSORY STORES (1.3%)
Ross Stores, Inc. 11,200 558,600
AUTO REPAIR, SERVICES & PARKING (0.5%)
PHH Corporation 5,100 219,300
BUSINESS SERVICES (0.8%)
Comdisco, Inc. 10,400 330,200
Radius, Inc.* 45 23
-----------
330,223
CHEMICALS & ALLIED PRODUCTS (2.3%)
Cytec Industries, Inc.* 6,600 268,125
Desc S.A. de C.V. 11,900 261,800
Icn Pharmaceuticals, Inc. 8,200 160,925
International Specialty Products, Inc.* 8,100 99,225
Terra Industries, Inc. 11,700 172,575
-----------
962,650
COMMUNICATIONS (2.8%)
British Telecommunications Plc 3,400 233,325
Philippine Long Distance Telephone Company 3,500 178,500
</TABLE>
14
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
------------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
COMMUNICATIONS (2.8%) (CONTINUED)
Tele Danmark 6,800 $ 185,300
Telefonica De Espana 5,300 367,025
Telefonos De Mexico 7,000 231,000
------------
1,195,150
DEPOSITORY INSTITUTIONS (8.8%)
Astoria Financial Corporation 3,500 129,281
Bankamerica Corporation 4,200 418,949
Bankunited Financial Corporation* 5,200 52,325
Banponce Corporation 5,300 178,213
Cal Fed Bancorp, Inc.* 13,000 318,499
Charter One Financial, Inc. 5,040 212,310
Chase Manhattan Corporation 4 357
City National Corporation 19,700 426,012
Coast Savings Financial* 1,500 54,938
Golden West Financial Corporation 1,700 107,313
Imperial Bancorp* 12,000 288,000
Nationsbank Corporation 1,800 175,950
North Fork Bancorporation 5,600 199,500
Peoples Heritage Financial Group, Inc. 7,900 220,213
RCSB Financial, Inc. 8,000 231,000
Republic New York Corporation 2,700 220,388
Riggs National Corporation 13,300 230,256
T R Financial Corporation 6,100 217,313
-------------
3,680,817
EATING & DRINKING PLACES (0.5%)
Foodmaker, Inc.* 23,100 205,013
</TABLE>
15
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
ELECTRIC GAS & SANITARY SERVICES (18.8%)
Allegheny Power System, Inc. 5,400 $ 164,025
Baltimore Gas & Electric 6,500 173,875
Centerior Energy Corporation 16,800 180,600
Central Maine Power Company 4,500 52,313
CMS Energy Corporation 10,000 336,249
Columbia Gas System 10,500 668,062
Commonwealth Energy System Companies 4,100 96,350
Eastern Enterprises 4,500 159,188
Edison International 17,200 341,850
Enersis S.A. 4,600 127,650
Entergy Corporation 12,800 355,200
GPU, Inc. 10,100 339,613
Huaneng Power International, Inc. 7,800 175,500
Illinova Corporation 10,900 299,750
IPALCO Enterprises, Inc. 11,000 299,750
Korea Electric Power Corporation 1,400 28,700
Long Island Lighting Company 10,800 238,950
MidAmerican Energy Company 18,500 293,688
National Fuel Gas Company 4,800 198,000
New York State Electric & Gas 8,700 188,138
Noram Energy Corporation 15,700 241,388
Oklahoma Gas & Electric 2,800 116,900
P P & L Resources, Inc. 9,100 209,300
Pacific Gas & Electric 6,300 132,300
Peoples Energy Corporation 9,300 315,038
Pinnacle West Corporation 21,400 679,449
Portland General Corporation 4,900 205,800
</TABLE>
16
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
ELECTRIC GAS & SANITARY SERVICES (18.8%) (CONTINUED)
Public Service Enterprises Group 7,100 $ 193,475
Texas Utilities Company 7,000 285,250
United Illuminating Company 4,500 141,188
Utilicorp United, Inc. 10,300 278,100
Washington Gas Light Company 10,300 233,037
Washington Water Power Company 1,900 35,387
Westcoast Energy, Inc. 9,300 155,775
------------
7,939,838
ELECTRONIC & OTHER ELECTRIC EQUIPMENT (1.2%)
Electro Scientific Industries, Inc.* 4,100 107,368
Hadco Corporation* 8,200 400,263
-------------
507,631
FOOD & KINDRED PRODUCTS (0.2%)
Adolph Coors Company 3,400 65,024
FOOD STORES (0.4%)
Great Atlantic & Pacific Tea Company 5,400 172,124
FORESTRY (0.3%)
Rayonier, Inc. 3,600 138,150
FURNITURE & FIXTURES (0.4%)
Johnson Controls, Inc. 1,900 157,463
</TABLE>
17
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
GENERAL BUILDING CONTRACTORS (0.5%)
Centex Corporation 3,300 $ 124,163
U.S. Home Corporation* 3,600 93,600
---------
217,763
GENERAL MERCHANDISE STORES (3.2%)
Carson Pirie Scott & Company* 1,000 25,250
Dayton-Hudson Corporation 6,600 259,050
Federated Department Stores 6,800 232,050
Fred Meyer, Inc. 4,600 163,300
Mercantile Stores Company, Inc. 3,200 158,000
Shopko Stores, Inc. 2,800 42,000
Waban, Inc.* 7,600 197,600
Woolworth Corporation 12,700 277,813
------------
1,355,063
HEALTH SERVICES (0.4%)
Sun Healthcare Group, Inc. 7,300 98,550
Universal Health Services* 2,000 57,250
------------
155,800
HOLDING & OTHER INVESTMENT OFFICES (0.6%)
General Growth Properties 2,800 90,300
Thornburg Mortgage Asset Corporation 6,800 145,350
-----------
235,650
</TABLE>
18
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
INDUSTRIAL MACHINERY & EQUIPMENT (4.9%)
Camco International, Inc. 2,000 $ 92,250
Caterpillar, Inc. 1,900 142,975
Data General Corporation* 11,100 160,950
Harris Corporation 4,100 281,363
Innovex, Inc. 24,400 660,324
Kaydon Corporation 3,000 141,375
Storage Technolgy Corporation 7,300 347,663
Tecumseh Products Company 800 45,900
Timken Company 2,500 114,688
Toro Company 1,700 62,050
----------
2,049,538
INSTRUMENTS & RELATED PRODUCTS (0.4%)
Measurex Corporation 6,700 160,799
INSURANCE AGENTS, BROKERS & SERVICE (0.0%)
Willis Corroon Group Plc 1,600 18,400
INSURANCE CARRIERS (6.7%)
Allmerica Financial Corporation 2,200 73,700
Ambac, Inc. 4,600 305,325
American Bankers Insurance Group, Inc. 4,900 249,900
Capital Re Corporation 600 27,975
Delphi Financial Group, Inc.* 6,960 205,320
Equitable Companies, Inc. 12,300 302,888
Equitable of Iowa Companies 1,600 73,400
Fremont General Corporation 7,100 220,100
</TABLE>
19
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
-------------------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
INSURANCE CARRIERS (6.7%) (CONTINUED)
Loews Corporation 5,900 $ 556,075
Old Republic International Corporation 5,100 136,425
Pioneer Financial Services, Inc. 600 15,000
Presidential Life Corporation 6,700 81,238
Providian Corporation 4,000 205,500
Reliance Group Holdings, Inc. 23,000 209,874
Reliastar Financial Corporation 900 51,975
Twentieth Century Industries 1,400 23,625
USLife Corporation 1,900 63,175
----------
2,801,495
METAL MINING (0.5%)
Free State Consolidated Gold Mines, Ltd. 14,400 103,500
Kloof Gold Mining Company, Ltd. 15,100 119,384
----------
222,884
NONDEPOSITORY INSTITUTIONS (0.8%)
Countrywide Credit Industries, Inc. 7,600 217,550
Olympic Financial, Ltd. 8,800 126,500
----------
344,050
OIL & GAS EXTRACTION (5.4%)
Amerada Hess Corporation 2,800 162,050
Benton Oil & Gas Company 11,400 255,075
</TABLE>
20
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
-------------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
OIL & GAS EXTRACTION (5.4%) (CONTINUED)
BJ Services Company Warrants 340 $ 9,138
Enserch Exploration, Inc. 4,400 51,700
Helmerich & Payne, Inc. 7,500 390,937
Kerr-McGee Corporation 3,400 244,800
Oryx Energy Company 11,800 292,050
Parker & Parsley Petroleum Company 3,300 121,275
Santa Fe Energy Resources, Inc. 9,600 133,200
Tuboscope Vetco International Corporation 10,100 155,919
USX-Marathon Group, Inc. 7,600 181,450
YPE Sociedad Anonima 10,500 265,125
-------------
2,262,719
PAPER & ALLIED PRODUCTS (0.9%)
Mead Corporation 3,100 180,188
Westvaco Corporation 6,400 184,000
-------------
364,188
PETROLEUM & COAL PRODUCTS (3.2%)
Coastal Corporation 9,100 444,763
Elf Aquitaine 5,700 257,925
Phillips Petroleum Company 3,300 146,025
Tesoro Petroleum Corporation* 5,800 81,200
Texaco, Inc. 2,000 196,250
Unocal Corporation 5,600 227,500
--------------
1,353,663
</TABLE>
21
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
-------------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
PRIMARY METAL INDUSTRIES (2.0%)
AK Steel Holding Corporation 3,600 $ 142,650
Alumax, Inc.* 5,000 166,875
British Steel Plc 9,000 247,500
Mueller Industries, Inc.* 800 30,800
Pohang Iron & Steel, Ltd. 6,900 139,725
Quanex Corporation 3,600 98,550
-------------
826,100
RAILROAD TRANSPORTATION (1.3%)
Canadian Pacific, Ltd. 12,900 341,850
CSX Corporation 4,500 190,125
-------------
531,975
SECURITY & COMMODITY BROKERS (6.3%)
A.G. Edwards, Inc. 6,000 201,750
Alex Brown, Inc. 5,800 420,500
Bear Stearns Companies, Inc. 12,215 340,493
BHC Financial, Inc. 8,100 129,094
Donaldson Lufkin & Jenrette, Inc. 900 32,400
Lehman Brothers Holdings 14,000 439,249
Merrill Lynch & Company 4,300 350,450
Paine Webber Group, Inc. 10,100 284,063
Quick & Reilly Group, Inc. 5,000 149,375
Salomon, Inc. 7,400 348,725
-------------
2,696,099
</TABLE>
22
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
-------------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
STONE, CLAY, & GLASS PRODUCTS (0.9%)
LaFarge Corporation 800 $ 16,100
Lone Star Industries 3,300 121,687
Owens - Illinois, Inc.* 5,200 118,300
USG Corporation 3,500 118,563
---------
374,650
TEXTILE MILL PRODUCTS (0.2%)
Mohawk Industries, Inc. 3,500 77,875
TRANSPORTATION BY AIR (3.8%)
AMR Corporation* 3,400 299,625
Alaska Airgroup, Inc.* 9,100 191,100
British Airways Plc 1,700 174,675
KLM Royal Dutch Air 5,939 165,550
UAL Corporation 6,100 381,250
USAir Group, Inc.* 16,100 376,337
----------
1,588,537
TRANSPORTATION EQUIPMENT (3.7%)
Chrysler Corporation 8,502 280,566
Ford Motor Company 5,500 175,313
General Motors Corporation 5,400 301,049
JLG Industries 10,900 174,400
Paccar, Inc. 4,700 319,600
Trinity Industries 8,000 300,000
Volvo AB 600 13,088
------------
1,564,016
</TABLE>
23
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
------------------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
WATER TRANSPORTATION (0.04%)
Alexander & Baldwin, Inc. 600 $14,888
WHOLESALE TRADE-NONDURABLE GOODS (2.4%)
Arcadian Corporation 2,300 60,950
Caraustar Industies, Inc. 10,000 331,250
Pennzoil Company 3,900 220,350
Schuller Corporation 20,600 218,875
Universal Corporation 5,200 167,050
------------
998,475
------------
TOTAL COMMON STOCKS (Cost $30,552,200) 36,943,585
SHORT-TERM SECURITIES (12.2%)
U.S. GOVERNMENT AGENCY (4.1%)
Federal National Mortgage Assoc. Discount Note,
5.25%, due 2/3/1997 $1,750,000 1,741,578
U.S. GOVERNMENT AGENCY- COLLATERALIZED MORTGAGE
OBLIGATIONS (6.0%)
Fed. Home Loan Mort. Corp., 5.28%, due 1/14/1997 2,500,000 2,495,234
U.S. GOVERNMENT OBLIGATIONS (1.4%)
U.S. Treasury Bills, 4.94%, due 1/16/1997 50,000 49,897
</TABLE>
24
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-------------------------------------
<S> <C> <C>
SHORT-TERM SECURITIES (CONTINUED)
U.S. GOVERNMENT OBLIGATIONS (1.4%) (CONTINUED)
U.S. Treasury Bills, 4.975%, due 1/16/1997 $ 300,000 $ 299,378
U.S. Treasury Bills, 4.98%, due 1/16/1997 250,000 249,481
------------
598,756
REPURCHASE AGREEMENT (0.7%)
State Street Bank, 4.00%, due 1/2/1997
(Dated 12/31/1996, collateralized by U.S. Treasury
Bond, 7.125%, due 2/15/2023, value $292,275) 284,015 284,015
------------
TOTAL SHORT-TERM SECURITIES (Cost $5,119,583) 5,119,583
-------------
TOTAL INVESTMENTS (100.0%) (Cost $35,671,783) $ 42,063,168
-------------
-------------
</TABLE>
25
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
FUTURES CONTRACTS
CONTRACT
EXPIRATION AMOUNT AT UNREALIZED
DATE VALUE LOSS
---------------------------------------------------------
<S> <C> <C> <C>
33 Mid-Cap S&P 500
Futures Contracts-Short ** 3/21/97 $ 4,233,900 $ (24,316)
20 S&P 500
Futures Contracts-Short ** 3/21/97 7,445,000 (62,450)
-------------------------------------
$ 11,678,900 $ (86,766)
-------------------------------------
-------------------------------------
</TABLE>
* Non-income producing
** These futures contracts are collateralized by a U.S. Treasury Bill at
$300,000 par value, due 1/16/97, a U.S. Treasury Bill at $250,000 par
value, due 1/16/97 and a U.S. Treasury Bill at $50,000 par value, due
1/16/97.
OTHER INFORMATION:
Purchases and sales of securities excluding short-term securities, for the
six months ended December 31, 1996, aggregated $20,126,393 and $23,305,253,
respectively. Net unrealized appreciation for tax purposes aggregated
$6,391,345, of which $6,892,350 related to appreciated investment
securities and $501,005 related to depreciated investment securities.
The aggregate cost of securities is $35,671,822 for tax purposes.
SEE ACCOMPANYING NOTES.
26
<PAGE>
Nicholas-Applegate Balanced Portfolio
Statement of Assets and Liabilities
December 31, 1996 (Unaudited)
ASSETS
Investment in securities, at value (cost $44,838,208)
-See accompanying schedule $ 51,583,536
Receivable for investment securities sold 308,100
Dividends, interest and other receivables 329,356
---------------
TOTAL ASSETS 52,220,992
LIABILITIES
Cash overdraft 162,609
Payable for investment securities purchased 1,014,694
Accounts payable and accrued expenses 61,472
---------------
TOTAL LIABILITIES 1,238,775
---------------
NET ASSETS $ 50,982,217
---------------
---------------
Net Assets consist of:
Paid-in capital $ 42,612,048
Undistributed net investment income 379,827
Accumulated undistributed net realized gain on investments 1,245,014
Net unrealized appreciation on investment securities 6,745,328
---------------
NET ASSETS, for 3,611,630 shares outstanding $ 50,982,217
---------------
---------------
NET ASSET VALUE, offering and redemption price per share $ 14.12
---------------
---------------
SEE ACCOMPANYING NOTES.
27
<PAGE>
Nicholas-Applegate Balanced Portfolio
Statement of Operations
Six Months Ended December 31, 1996 (Unaudited)
INVESTMENT INCOME
Dividends $ 72,801
Interest 551,417
---------------
Total investment income 624,218
EXPENSES
Investment advisory and management fees 160,863
Custody and accounting fees 66,820
Professional fees 8,691
Directors' fees and expenses 3,034
Other expenses 4,983
---------------
Total expenses 244,391
---------------
Net investment income 379,827
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 1,245,014
Change in unrealized appreciation on investment securities 1,750,503
---------------
Net gain on investments 2,995,517
---------------
Net increase in net assets resulting from operations $ 3,375,344
---------------
---------------
SEE ACCOMPANYING NOTES.
28
<PAGE>
Nicholas-Applegate Balanced Portfolio
Statement of Changes in Net Assets
SIX MONTHS
ENDED YEAR ENDED
DECEMBER 31, 1996 JUNE 30,
(UNAUDITED) 1996
------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 379,827 $ 924,428
Net realized gain on investments 1,245,014 6,092,935
Change in net unrealized appreciation 1,750,503 (1,004,611)
------------------------------
Net increase in net assets resulting
from operations 3,375,344 6,012,752
Distributions to shareholders from:
Net investment income (924,428) (935,896)
Net realized gain (4,473,680) -
------------------------------
Total distributions to shareholders (5,398,108) (935,896)
Capital share transactions:
Proceeds from sales of shares 3,993,879 5,298,577
Proceeds from reinvested distributions 5,398,108 935,896
Cost of shares redeemed (5,849,783) (7,629,163)
------------------------------
Net increase (decrease) in net assets
resulting from share transactions 3,542,204 (1,394,690)
------------------------------
Total increase in net assets 1,519,440 3,682,166
NET ASSETS
Beginning of period 49,462,777 45,780,611
------------------------------
End of period (including undistributed net
investment income of $379,827 and
$924,428, respectively) $ 50,982,217 $ 49,462,777
------------------------------
------------------------------
OTHER INFORMATION
Shares:
Sold 267,847 380,150
Issued through reinvestment of distributions 380,650 68,284
Redeemed (410,881) (550,111)
------------------------------
Net increase (decrease) 237,616 (101,677)
------------------------------
------------------------------
SEE ACCOMPANYING NOTES.
29
<PAGE>
Nicholas-Applegate Balanced Portfolio
Financial Highlights
<TABLE>
<CAPTION>
DECEMBER 3,
SIX MONTHS 1992
ENDED (COMMENCEMENT
DECEMBER 31, YEAR ENDED JUNE 30, OF OPERATIONS)
1996 ---------------------------------- THROUGH JUNE 30,
(UNAUDITED) 1996 1995 1994 1993
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period
$ 14.66 $ 13.17 $ 11.27 $ 11.50 $ 10.00
Income from investment operations:
Net investment income 0.11 0.27 0.27 0.09 0.11
Net realized and unrealized gain
(loss) on investments 0.99 1.49 1.74 (0.29) 1.39
----------------------------------------------------------------
Total from investment operations 1.10 1.76 2.01 (0.20) 1.50
Less distributions:
From net investment income (0.28) (0.27) (0.11) (0.03) -
From net realized gains (1.36) - - - -
----------------------------------------------------------------
Total distributions (1.64) (0.27) (0.11) (0.03) -
----------------------------------------------------------------
Net asset value, end of period $ 14.12 $ 14.66 $ 13.17 $ 11.27 $ 11.50
----------------------------------------------------------------
----------------------------------------------------------------
TOTAL RETURN (a) 7.50% 13.53% 17.92% (1.70%) 26.07%
RATIOS AND SUPPLEMENTAL DATA (b)
Net Assets, end of period (in thousands) $ 50,982 $ 49,463 $ 45,781 $ 39,358 $ 5,567
Ratio of expenses to average net assets (c) .99% 0.98% 0.94% 1.03% 1.25%
Ratio of net investment income to
average net assets (c) 1.53% 1.92% 2.20% 1.69% 1.70%
Portfolio turnover rate 51% 127% 108% 56% 21%
Average commission paid per
equity share traded $ .0600 (d)
</TABLE>
(a) Total returns for periods less than one year 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.
(d) Disclosure required for fiscal years beginning after September 1, 1995.
30
<PAGE>
Nicholas-Applegate Balanced Portfolio
Schedule of Investments (Unaudited)
December 31, 1996
NUMBER
OF SHARES VALUE
------------------------
COMMON STOCKS (62.0%)
AMUSEMENT & RECREATION SERVICES (0.2%)
Speedway Motorsports, Inc. 5,200 $ 109,200
APPAREL & ACCESSORY STORES (1.3%)
Gap, Inc. 7,400 222,925
Ross Stores, Inc. 9,200 458,850
----------
681,775
APPAREL & OTHER TEXTILE PRODUCTS (1.2%)
Jones Apparel Group, Inc. 10,200 381,225
Liz Claiborne, Inc. 6,300 243,338
----------
624,563
BUSINESS SERVICES (12.2%)
3Com Corporation 4,400 322,574
Affiliated Computer Services, Inc. 3,700 108,687
BMC Software, Inc.* 11,600 482,124
Cadence Design Systems, Inc. 11,550 459,113
Catalina Marketing Corporation 6,300 347,288
Computer Associates International, Inc. 8,640 429,840
Compuware Corporation 7,900 395,988
Equifax 10,700 327,688
Gartner Group, Inc.* 7,200 280,350
HBO & Company 7,400 439,375
Mcafee Associated, Inc.* 13,950 611,184
Oracle Corporation 3,300 137,569
Parametric Technology Company* 6,700 344,631
Peoplesoft* 12,000 575,250
PMT Services, Inc. 5,800 101,138
31
<PAGE>
Nicholas-Applegate Balanced Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
------------------------
COMMON STOCKS (CONTINUED)
BUSINESS SERVICES (12.2%) (CONTINUED)
Rational Software Corporation* 11,400 $ 451,012
Sun Microsystems, Inc.* 4,200 107,888
Total System Services, Inc. 12,700 341,313
----------
6,263,012
CHEMICALS & ALLIED PRODUCTS (3.0%)
Cytec Industries, Inc. 8,400 341,250
Dura Pharmaceuticals, Inc. 11,500 549,124
Jones Medical Industries, Inc. 8,850 322,472
Medeva Plc 18,500 312,188
----------
1,525,034
COMMUNICATIONS (0.1%)
LCI International, Inc.* 2,600 55,900
DEPOSITORY INSTITUTIONS (1.4%)
Magna Group, Inc. 11,600 342,200
MBNA Corporation 3,500 145,250
TCF Financial Corporation 1,600 69,600
Zions Bancorporation 1,800 186,750
----------
743,800
EATING & DRINKING PLACES (0.7%)
Papa John's International, Inc. 10,500 356,344
ELECTRICAL & OTHER ELECTRONIC EQUIPMENT (4.8%)
Ascend Communications, Inc. 8,800 546,700
32
<PAGE>
Nicholas-Applegate Balanced Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
------------------------
COMMON STOCKS (CONTINUED)
ELECTRICAL & OTHER ELECTRONIC EQUIPMENT (4.8%)(CONTINUED)
Cascade Communications Corporation 9,400 $ 519,350
DSP Communications, Inc. 7,600 146,775
Intel Corporation 3,300 432,094
PairGain Technologies, Inc.* 18,600 566,137
Tellabs, Inc. 7,600 286,425
----------
2,497,481
ELECTRIC GAS & SANITARY SERVICES (0.9%)
Sonat, Inc. 6,400 329,600
USA Waste Services, Inc.* 4,900 156,188
----------
485,788
ENGINEERING & MANAGEMENT SERVICES (1.8%)
Corrections Corporation of America* 9,900 303,188
Paychex, Inc. 6,200 318,912
Quintiles Transnational Corporation* 4,300 283,263
----------
905,363
FOOD & KINDRED PRODUCTS (0.7%)
Interstate Bakeries Corporation 7,600 373,350
FOOD STORES (1.0%)
Vons Companies, Inc.* 8,400 502,950
FURNITURE & FIXTURES (1.0%)
Herman Miller, Inc. 9,400 530,513
33
<PAGE>
Nicholas-Applegate Balanced Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
------------------------
COMMON STOCKS (CONTINUED)
FURNITURE & HOMEFURNISHINGS STORES (0.7%)
CompUSA, Inc.* 17,000 $ 350,625
GENERAL MERCHANDISE STORES (1.4%)
TJX Companies, Inc. 8,900 421,637
Woolworth Corporation 14,500 317,188
----------
738,825
HEALTH SERVICES (0.2%)
Health Management Associates, Inc. 3,800 85,500
HOLDING & OTHER INVESTMENT OFFICES (0.6%)
Conseco, Inc. 4,800 306,000
HOTELS & OTHER LODGING PLACES (1.8%)
HFS, Inc.* 7,200 430,200
Hilton Hotels Corporation* 8,800 229,900
Marriott International, Inc. 2,200 121,550
MGM Grand, Inc. 4,100 142,988
----------
924,638
INDUSTRIAL MACHINERY & EQUIPMENT (8.0%)
Cisco Systems, Inc.* 9,000 573,188
Compaq Computer Corporation 4,500 334,125
Comverse Technology, Inc. 7,900 298,719
Dell Computer Corporation 9,800 521,238
Gateway 2000, Inc. 7,100 380,294
Kaydon Corporation 6,200 292,175
34
<PAGE>
Nicholas-Applegate Balanced Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
------------------------
COMMON STOCKS (CONTINUED)
INDUSTRIAL MACHINERY & EQUIPMENT (8.0%) (CONTINUED)
Smith International, Inc. 9,300 $ 417,337
Storage Technology Corporation 8,000 381,000
U.S. Filter Corporation 10,100 320,675
Western Digital Corporation* 10,800 614,249
----------
1,733,261
INSTRUMENTS & RELATED PRODUCTS (1.4%)
Guidant Corporation 5,600 319,200
Sci Systems, Inc.* 9,400 420,650
----------
739,850
INSURANCE CARRIERS (2.9%)
Loews Corporation 3,600 339,300
Oxford Health Plans* 6,700 392,368
Providian Corporation 6,900 354,488
Travelers Group, Inc. 8,666 393,220
----------
1,479,376
METAL MINING (0.4%)
Getchell Gold Corporation* 5,300 203,388
MISCELLANOUS MANUFACTURING INDUSTRIES (0.7%)
Callaway Golf Company 11,800 339,250
MISCELLANEOUS RETAIL (2.0%)
Amway Asia Pacific, Ltd. 9,300 394,088
Bed Bath & Beyond, Inc.* 1,900 46,194
35
<PAGE>
Nicholas-Applegate Balanced Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
------------------------
COMMON STOCKS (CONTINUED)
MISCELLANEOUS RETAIL (2.0%) (CONTINUED)
Borders Group, Inc. 6,400 $ 229,599
Tech Data Corporation 12,500 342,188
----------
1,012,069
NONDEPOSITORY INSTITUTITIONS (0.9%)
Green Tree Financial Corporation 9,800 378,525
The Money Store, Inc. 3,900 108,225
----------
486,750
OIL & GAS EXTRACTION (5.3%)
Global Marine, Inc. 17,900 369,188
Marine Drilling Companies, Inc. 17,800 350,437
Nuevo Energy Company 6,600 343,200
Parker & Parsley Petroleum Company 8,600 316,050
Reading & Bates Corporation* 24,700 654,550
Rowan Companies, Inc. 14,300 323,538
United Meridian Corporation 7,200 372,600
----------
2,729,563
PETROLEUM & COAL PRODUCTS (0.7%)
Phillips Petroleum Company 7,800 345,150
RAILROAD TRANSPORTATION (0.6%)
Canadian Pacific, Ltd. 12,300 325,949
36
<PAGE>
Nicholas-Applegate Balanced Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
------------------------
COMMON STOCKS (CONTINUED)
RUBBER & MISCELLANEOUS PLASTICS PRODUCTS (1.6%)
Fila Holding SpA 3,600 $ 209,250
Nike, Inc. 5,400 322,650
Premark International, Inc. 13,700 304,825
----------
836,725
SECURITY & COMMODITY BROKERS (0.3%)
Paine Webber Group, Inc. 4,800 135,000
TRANSPORTATION EQUIPMENT (0.6%)
Chrysler Corporation 9,800 323,398
WHOLESALE TRADE - DURABLE GOODS (0.7%)
Sybron International Corporation 11,000 363,000
WHOLESALE TRADE - NONDURABLE GOODS (0.9%)
Herbalife International, Inc. 13,900 452,618
----------
TOTAL COMMON STOCKS (Cost $25,346,959) 2,110,741
LONG-TERM DEBT SECURITIES (33.7%)
U.S. GOVERNMENT OBLIGATIONS (33.7%)
U.S. Treasury Bond, 7.50%, due 5/15/2002 $ 3,910,000 4,134,199
U.S. Treasury Bond, 8.25%, due 7/15/1998 4,120,000 4,266,754
U.S. Treasury Note, 6.25%, due 2/15/2003 1,890,000 1,887,638
U.S. Treasury Note, 7.00%, due 7/15/2006 1,850,000 1,921,984
37
<PAGE>
Nicholas-Applegate Balanced Portfolio
Schedule of Investments (Unaudited) (continued)
PRINCIPAL
AMOUNT VALUE
------------------------
LONG-TERM DEBT SECURITIES (CONTINUED)
U.S. GOVERNMENT OBLIGATIONS (33.7%) (CONTINUED)
U.S. Treasury Note, 7.250%, due 5/15/2004 $ 1,800,000 $ 1,893,942
U.S. Treasury Strips, 0.00%, due 5/15/2006** 3,000,000 3,283,560
-----------
17,388,077
-----------
TOTAL LONG-TERM DEBT SECURITIES (Cost $17,261,537) 17,388,077
SHORT-TERM SECURITIES (4.3%)
REPURCHASE AGREEMENT (4.3%)
State Street Bank, 4.00%, due 1/2/1997
(Dated 12/31/1996, collateralized by U.S. Treasury
Bond, 7.125%, due 2/15/2023, value $2,278,663) 2,229,712 2,229,712
------------
TOTAL SHORT-TERM SECURITIES (Cost $2,229,712) 2,229,712
------------
TOTAL INVESTMENTS (100.0%) (Cost $44,838,208) $ 51,583,536
------------
------------
* Non-income producing
** Prestripped zero-coupon bond; direct obligation of the U.S. Treasury.
OTHER INFORMATION:
Purchases and sales of securities excluding short-term securities, for the six
months ended December 31, 1996, aggregated $24,162,582 and $25,465,226,
respectively. Net unrealized appreciation for tax purposes aggregated
$6,745,328, of which $7,234,605 related to appreciated investment securities
and $489,277 related to depreciated investment securities. The aggregate cost
of securities is the same for book and tax purposes.
SEE ACCOMPANYING NOTES.
38
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Statement of Assets and Liabilities
December 31, 1996 (Unaudited)
ASSETS
Investment in securities, at value (cost $18,548,063)
-See accompanying schedule $ 24,205,010
Dividends and interest receivable 25,378
--------------
TOTAL ASSETS 24,230,388
LIABILITIES
Cash overdraft 158,024
Accounts payable and accrued expenses 34,805
--------------
TOTAL LIABILITIES 192,829
--------------
NET ASSETS $ 24,037,559
--------------
--------------
Net Assets consist of:
Undistributed net investment income $ 21,047
Accumulated undistributed net realized gain on investments 333,969
Net unrealized appreciation on investment securities 5,656,947
Paid-in capital 18,025,596
--------------
NET ASSETS, for 1,660,826 shares outstanding $ 24,037,559
--------------
--------------
NET ASSET VALUE, offering and redemption price per share $ 14.47
--------------
--------------
SEE ACCOMPANYING NOTES.
39
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Statement of Operations
Six Months Ended December 31, 1996 (Unaudited)
INVESTMENT INCOME
Dividends $ 124,943
Interest 17,881
--------------
Total investment income 142,824
EXPENSES
Investment advisory and management fees 75,816
Custody and accounting fees 31,493
Professional fees 8,691
Directors' fees and expenses 3,034
Other expenses 2,743
--------------
Total expenses 121,777
--------------
Net investment income 21,047
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 333,969
Change in unrealized appreciation on investment securities 1,207,389
--------------
Net gain on investments 1,541,358
--------------
Net increase in net assets resulting from operations $ 1,562,405
--------------
--------------
SEE ACCOMPANYING NOTES.
40
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
DECEMBER 31, ENDED
1996 JUNE 30,
(UNAUDITED) 1996
---------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 21,047 $ 5,649
Net realized gain on investments 333,969 1,737,610
Change in net unrealized appreciation 1,207,389 778,867
---------------------------------
Net increase in net assets resulting from operations 1,562,405 2,522,126
Distributions to shareholders from:
Net investment income (5,649) (17,603)
Net realized gain (1,737,610) (152,435)
---------------------------------
Total distributions to shareholders (1,743,259) (170,038)
Capital share transactions:
Proceeds from sales of shares 4,154,525 10,057,765
Proceeds from reinvested distributions 1,743,259 170,038
Cost of shares redeemed (5,489,780) (5,162,758)
---------------------------------
Net increase in net assets resulting from share
Transactions 408,004 5,065,045
---------------------------------
Total increase in net assets 227,150 7,417,133
NET ASSETS
Beginning of period 23,810,409 16,393,276
---------------------------------
End of period (including undistributed net investment
income of $21,047 and $5,649, respectively) $ 24,037,559 $ 23,810,409
---------------------------------
---------------------------------
OTHER INFORMATION
Shares:
Sold 283,681 726,912
Issued through reinvestment of distributions 119,672 12,192
Redeemed (385,764) (371,133)
---------------------------------
Net increase 17,589 367,971
---------------------------------
---------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
41
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Financial Highlights
<TABLE>
<CAPTION>
DECEMBER 8,
SIX 1992
MONTHS ENDED (COMMENCEMENT
DECEMBER 31, YEAR ENDED JUNE 30, OF OPERATIONS)
1996 ----------------------------------------- THROUGH
(UNAUDITED) 1996 1995 1994 JUNE 30, 1993
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 14.49 $ 12.85 $ 9.36 $ 9.71 $ 10.00
Income from investment operations:
Net investment income (loss) 0.01 - (a) 0.01 (0.02)(b) -
Net realized and unrealized gain
(loss) on investments 1.08 1.74 3.48 (0.33) (0.29)
-------------------------------------------------------------------------
Total from investment operations 1.09 1.74 3.49 (0.35) (0.29)
Less distributions:
From net investment income - (a) (0.01) - - -
From net realized gain (1.11) (0.09) - - -
-------------------------------------------------------------------------
Total distributions (1.11) (0.10) - - -
-------------------------------------------------------------------------
Net asset value, end of period $ 14.47 $ 14.49 $ 12.85 $ 9.36 $ 9.71
-------------------------------------------------------------------------
-------------------------------------------------------------------------
TOTAL RETURN (c) 7.50% 13.59% 37.29% (3.60%) (5.16%)
RATIOS AND SUPPLEMENTAL DATA (d)
Net assets, end of period (in thousands)$ 24,038 $ 23,810 $ 16,393 $ 10,693 $ 5,143
Ratio of expenses to average net
assets (e) 1.04% 1.04% 1.05% 1.29% 1.34%
Ratio of net investment income
(loss) to average net assets (e) 0.18% 0.03% 0.13% (0.17%) (0.06%)
Portfolio turnover rate 18% 58% 31% 38% 6%
Average commission paid per equity
share traded $ .0580 (f)
</TABLE>
(a) Less than $0.01 per share.
(b) Net investment loss per share has been calculated using the weighted
monthly average number of shares outstanding.
(c) Total returns for periods of less than one year are not annualized.
(d) Data expressed as a percentage are annualized as appropriate.
(e) 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.
(f) Disclosure required for fiscal years beginning after September 1, 1995.
42
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Schedule of Investments (Unaudited)
December 31, 1996
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (99.0%)
BUILDING MATERIALS & GARDEN SUPPLIES (1.8%)
Home Depot, Inc. 8,500 $ 426,063
BUSINESS SERVICES (17.5%)
Adobe Systems, Inc. 9,700 363,144
Autodesk, Inc. 17,000 478,125
Automatic Data Processing 11,500 493,063
Electronic Arts* 13,800 413,138
Electronic Data Systems Corporation 8,100 350,325
First Data Corporation 12,400 452,600
Informix Corporation 6,800 138,975
Interpublic Group of Companies, Inc. 10,000 475,000
Microsoft Corporation* 7,800 644,962
Oracle Corporation* 10,550 439,802
-----------
4,249,134
CHEMICALS & ALLIED PRODUCTS (14.9%)
Abbott Laboratories 10,000 507,500
American Home Products Corporation 7,500 439,687
Amgen, Inc.* 8,700 473,606
Colgate-Palmolive Company 5,900 544,275
Du Pont (E.I.) De Nemours 5,900 556,813
Merck & Company, Inc. 7,500 594,375
Pfizer Inc. 6,000 497,250
-----------
3,613,506
43
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
DEPOSITORY INSTITUTIONS (8.7%)
Bankamerica Corporation 6,000 $ 598,500
Citicorp 4,500 463,500
Norwest Corporation 12,000 522,000
Wells Fargo & Company 1,933 521,427
-----------
2,105,427
ELECTRONIC & OTHER ELECTRIC EQUIPMENT (10.0%)
General Electric Company 6,000 593,250
Intel Corporation 6,500 851,093
Linear Technology Corporation 8,500 372,938
Lucent Technologies, Inc. 13,000 601,250
-----------
2,418,531
ENGINEERING & MANAGEMENT SERVICES (1.9%)
Fluor Corporation 7,500 470,625
FABRICATED METAL PRODUCTS (2.5%)
Illinois Tool Works, Inc. 7,500 599,063
FOOD AND KINDRED PRODUCTS (4.2%)
General Mills, Inc. 8,500 538,688
Pepsico, Inc. 16,000 468,000
-----------
1,006,688
FURNITURE & HOMEFURNISHINGS STORES (1.7%)
Circuit City Stores, Inc. 14,000 421,750
44
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
GENERAL MERCHANDISE STORES (1.9%)
Wal-Mart Stores, Inc. 19,600 $ 448,350
HOTELS & OTHER LODGING PLACES (2.0%)
Circus Circus Enterprises* 14,000 481,250
INDUSTRIAL MACHINERY AND EQUIPMENT (6.0%)
Applied Materials, Inc.* 10,500 377,344
Cisco Systems, Inc.* 9,000 573,187
Hewlett-Packard Company 10,000 502,500
-----------
1,453,031
INSURANCE CARRIERS (4.4%)
American International Group 5,150 557,488
United Healthcare Corporation 11,500 517,500
-----------
1,074,988
MISCELLANEOUS MANUFACTURING INDUSTRIES (4.3%)
Mattel, Inc. 17,500 485,625
Tyco International, Ltd. 10,500 555,188
-----------
1,040,813
MOTION PICTURES (2.2%)
Walt Disney Company 7,800 543,075
OIL AND GAS EXTRACTION (2.3%)
Schlumberger, Ltd. 5,600 559,300
45
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
PRIMARY METAL INDUSTRIES (2.0%)
Nucor Corporation 9,500 $ 484,499
RAILROAD TRANSPORTATION (2.2%)
Union Pacific Corporation 8,700 523,087
SECURITY AND COMMODITY BROKERS (2.5%)
Charles Schwab Corporation 19,000 608,000
WHOLESALE TRADE - DURABLE GOODS (2.1%)
Johnson & Johnson 10,000 497,500
WHOLESALE TRADE - NONDURABLE GOODS (3.9%)
Gillette Company 7,000 544,250
Sysco Corporation 12,000 391,500
-----------
935,750
-----------
TOTAL COMMON STOCK (Cost $18,303,483) 23,960,430
46
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Schedule of Investments (Unaudited) (continued)
PRINCIPAL
AMOUNT VALUE
--------------------------
SHORT-TERM SECURITIES (1.0%)
REPURCHASE AGREEMENT (1.0%)
State Street Bank, 4.00%, due 1/2/1997
(Dated 12/31/1996, collateralized by U.S.
Treasury Bond, 7.125%, due 2/15/2023, value
$254,388) $ 244,580 $ 244,580
-----------
TOTAL SHORT-TERM SECURITIES (Cost $244,580) 244,580
-----------
TOTAL INVESTMENTS (100.0%) (Cost $18,548,063) $24,205,010
-----------
-----------
* Non-income producing
OTHER INFORMATION:
Purchases and sales of securities excluding short-term securities, for the
six months ended December 31, 1996, aggregated $4,023,986 and $5,027,650,
respectively. Net unrealized appreciation for tax purposes aggregated
$5,656,947, of which $6,007,338 related to appreciated investment securities
and $350,391 related to depreciated investment securities. The aggregate
cost of securities is the same for book and tax purposes.
SEE ACCOMPANYING NOTES.
47
<PAGE>
Dreman Value Portfolio
Statement of Assets and Liabilities
December 31, 1996 (Unaudited)
ASSETS
Investment in securities, at value (cost $21,100,214)
-See accompanying schedule $ 26,553,375
Dividends, interest and other receivables 37,681
------------
TOTAL ASSETS 26,591,056
LIABILITIES
Cash overdraft 117,902
Payable for investment securities purchased 555,375
Accounts payable and accrued expenses 35,991
------------
TOTAL LIABILITIES 709,268
------------
NET ASSETS $ 25,881,788
------------
------------
Net Assets consist of:
Paid-in capital $ 18,393,770
Undistributed net investment income 136,732
Accumulated undistributed net realized gain on investments 1,898,125
Net unrealized appreciation on investment securities 5,453,161
------------
NET ASSETS, for 1,459,121 shares outstanding $ 25,881,788
------------
------------
NET ASSET VALUE, offering and redemption price per share $ 17.74
------------
------------
SEE ACCOMPANYING NOTES.
48
<PAGE>
Dreman Value Portfolio
Statement of Operations
Six Months Ended December 31, 1996 (Unaudited)
INVESTMENT INCOME
Dividends $ 235,998
Interest 22,033
------------
Total investment income 258,031
EXPENSES
Investment advisory and management fees 73,663
Custody and accounting fees 30,598
Professional fees 8,691
Directors' fees and expenses 3,034
Foreign tax expense 1,309
Other expenses 4,004
------------
Total expenses 121,299
------------
Net investment income 136,732
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 1,898,125
Change in unrealized appreciation on investment securities 1,195,091
------------
Net gain on investments 3,093,216
------------
Net increase in net assets resulting from operations $ 3,229,948
------------
------------
SEE ACCOMPANYING NOTES.
49
<PAGE>
Dreman Value Portfolio
Statement of Changes in Net Assets
SIX MONTHS
ENDED YEAR
DECEMBER 31, ENDED
1996 JUNE 30,
(UNAUDITED) 1996
----------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 136,732 $ 252,188
Net realized gain on investments 1,898,125 862,820
Change in net unrealized appreciation 1,195,091 2,857,141
----------------------------
Net increase in net assets resulting
from operations 3,229,948 3,972,149
Distributions to shareholders from:
Net investment income (252,188) (190,236)
Net realized gain (862,820) (110,864)
----------------------------
Total distributions to shareholders (1,115,008) (301,100)
Capital share transactions:
Proceeds from sales of shares 5,895,682 7,569,421
Proceeds from reinvested distributions 1,115,008 301,100
Cost of shares redeemed (2,948,552) (2,713,770)
----------------------------
Net increase in net assets resulting
from share transactions 4,062,138 5,156,751
----------------------------
Total increase in net assets 6,177,078 8,827,800
NET ASSETS
Beginning of period 19,704,710 10,876,910
----------------------------
End of period (including undistributed net
investment income of $136,732 and
$252,188, respectively) $ 25,881,788 $ 19,704,710
----------------------------
----------------------------
OTHER INFORMATION
Shares:
Sold 349,006 517,405
Issued through reinvestment of distributions 64,391 21,840
Redeemed (172,602) (184,651)
----------------------------
Net increase 240,795 354,594
----------------------------
----------------------------
SEE ACCOMPANYING NOTES.
50
<PAGE>
Dreman Value Portfolio
Financial Highlights
<TABLE>
<CAPTION>
DECEMBER 14,
SIX 1992
MONTHS ENDED (COMMENCEMENT
DECEMBER 31, YEAR ENDED JUNE 30, OF OPERATIONS)
1996 --------------------------------- THROUGH
(UNAUDITED) 1996 1995 1994 JUNE 30, 1993
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 16.17 $ 12.59 $ 10.66 $ 10.45 $ 10.00
Income from investment operations:
Net investment income 0.08 0.18 0.26 0.12 0.11
Net realized and unrealized gain on
investments 2.33 3.70 1.85 0.17 0.34
----------------------------------------------------------
Total from investment operations 2.41 3.88 2.11 0.29 0.45
Less distributions:
From net investment income (0.19) (0.19) (0.14) (0.08) -
From net realized gain (0.65) (0.11) (0.04) - -
----------------------------------------------------------
Total distributions (0.84) (0.30) (0.18) (0.08) -
----------------------------------------------------------
Net asset value, end of period $ 17.74 $ 16.17 $ 12.59 $ 10.66 $ 10.45
----------------------------------------------------------
----------------------------------------------------------
TOTAL RETURN (a) 15.04% 31.22% 19.98% 2.80% 8.25%
RATIOS AND SUPPLEMENTAL DATA (b)
Net assets, end of period (in thousands)$ 25,882 $ 19,705 $ 10,877 $ 8,952 $ 1,671
Ratio of expenses to average net assets 1.07% 1.06% 1.13% 1.40% 1.24%
Ratio of net investment income to
average net assets 1.21% 1.65% 1.98% 1.98% 2.00%
Ratio of expenses to average net
assets before voluntary expense
reimbursement 1.07% 1.07% 1.13% 1.61 8.43
Ratio of net investment income to
average net assets before voluntary
expense reimbursement 1.21% 1.64% 1.98% 1.76 (1.49%)
Portfolio turnover rate 28% 18% 29% 9% 5%
Average commission paid per equity
share traded $ .0525 (c)
</TABLE>
(a) Total returns for periods less than one year are not annualized.
(b) Data expressed as a percentage are annualized as appropriate.
(c) Disclosure required for fiscal years beginning after September 1, 1995.
51
<PAGE>
Dreman Value Portfolio
Schedule of Investments (Unaudited)
December 31, 1996
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (91.0%)
APPAREL & ACCESSORY STORES (1.1%)
Cato Corporation 3,400 $ 17,425
J. Baker, Inc. 7,300 38,781
Payless Shoesource, Inc.* 6,560 246,000
------------
302,206
APPAREL & OTHER TEXTILE PRODUCTS (2.8%)
Haggar Corporation 4,300 69,069
Liz Claiborne, Inc. 3,400 131,325
VF Corporation 8,200 553,500
------------
753,894
AUTO REPAIR, SERVICES & PARKING (1.4%)
PHH Corporation 8,600 369,800
BUSINESS SERVICES (0.9%)
Insurance Auto Auctions, Inc.* 6,000 57,000
Pitney Bowes, Inc. 3,400 185,300
------------
242,300
CHEMICALS & ALLIED PRODUCTS (2.6%)
Bristol-Meyers Squibb Company 1,000 108,750
Glaxo Holdings 8,200 260,349
Jean Philippe Fragrances* 8,500 54,188
Pharmacia & Upjohn, Inc. 4,265 169,001
Rexene Corporation 6,800 92,650
------------
684,938
52
<PAGE>
Dreman Value Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
---------------------------
COMMON STOCKS (CONTINUED)
COMMUNICATIONS (2.2%)
Atlantic Tele-Network, Inc.* 6,500 $ 99,938
GTE Corporation 10,600 482,300
------------
582,238
DEPOSITORY INSTITUTIONS (18.7%)
Ahmanson (H.F.) & Company 10,000 325,000
Bankamerica Corporation 4,000 399,000
Bankers Trust New York Corporation 5,300 457,124
Citicorp 3,000 309,000
Compass Bancshares, Inc. 2,500 99,844
Cullen/Frost Bankers, Inc. 1,600 53,000
First Chicago NBD Corporation 8,326 447,523
First Commerce Corporation 1,800 69,750
First Financial Corporation 2,250 55,125
First Union Corporation 3,800 281,200
Fleet Financial Group, Inc. 1,700 84,788
Great Western Financial Corporation 11,000 319,000
J.P. Morgan & Company 3,500 341,687
Keycorp 6,000 303,000
Liberty Bancorp, Inc. 1,400 69,825
Long Island Bancorp, Inc. 3,000 105,000
Nationsbank Corporation 2,500 244,375
PNC Bank Corporation 16,510 621,188
Roosevelt Financial Group, Inc. 3,700 77,238
TR Financial Corporation 2,300 81,938
Wells Fargo & Company 900 242,775
------------
4,987,380
53
<PAGE>
Dreman Value Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
---------------------------
COMMON STOCKS (CONTINUED)
ELECTRIC GAS & SANITARY SERVICES (3.5%)
Columbia Gas System 6,600 $ 419,925
Enron Global Power & Pipelines LLC 1,700 45,900
KCS Energy, Inc. 4,300 153,725
Southern Company 13,400 303,175
------------
922,725
ELECTRONIC & OTHER ELECTRIC EQUIPMENT (7.1%)
Burr-Brown Corporation* 2,000 51,500
Exar Corporation* 5,500 86,625
General Electric Company 7,400 731,675
Pacific Scientific Company 3,000 33,750
Phillips Electronics 13,000 520,000
Read-Rite Corporation* 4,100 103,013
Scientific-Atlanta, Inc. 2,900 43,500
Texas Instruments, Inc. 5,100 325,125
------------
1,895,188
ENGINEERING & MANAGEMENT SERVICES (1.0%)
Blount International, Inc. 6,700 257,112
FOOD & KINDRED PRODUCTS (1.2%)
Nestle SA 6,000 320,625
FOOD STORES (0.4%)
Giant Food, Inc. 3,000 103,500
54
<PAGE>
Dreman Value Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
---------------------------
COMMON STOCKS (CONTINUED)
FORESTRY (0.7%)
Georgia-Pacific Corporation 2,700 $ 194,400
GENERAL BUILDING CONTRACTORS (0.3%)
Del E. Webb Corporation 5,300 86,787
GENERAL MERCHANDISE STORES (3.3%)
Dayton-Hudson Corporation 18,000 706,500
May Department Stores Company 3,500 163,625
------------
870,125
HEALTH SERVICES (2.8%)
Tenet Health Care* 33,400 730,624
HOTELS & OTHER LODGING PLACES (0.6%)
Hilton Hotels Corporation 5,700 148,912
INDUSTRIAL MACHINERY & EQUIPMENT (2.2%)
Apple Computer 5,300 110,306
Diamond Multimedia Systems* 2,300 26,881
Fedders Corporation 6,000 37,500
Global Industrial Technologies, Inc. 6,300 139,387
Proxima Corporation* 4,900 62,475
Stewart & Stevenson 3,700 107,763
Walbro Corporation 2,900 53,288
Western Digital Corporation* 600 34,125
------------
571,725
55
<PAGE>
Dreman Value Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
---------------------------
COMMON STOCKS (CONTINUED)
INSTRUMENTS & RELATED PRODUCTS (5.3%)
Allegiance Corporation 300 $ 8,288
Bard (C.R.), Inc. 9,100 254,800
Baxter International, Inc. 1,500 61,500
Becton Dickinson & Company 5,000 216,875
Electroglas, Inc.* 4,400 70,400
Raytheon Company 4,000 192,500
Tech-Sym Corporation* 2,900 86,275
Watts Industries, Inc. 1,300 31,038
Xerox Corporation 9,300 489,412
------------
1,411,088
INSURANCE CARRIERS (4.3%)
Aetna, Inc. 3,751 300,079
American General Corporation 6,800 277,950
American International Group 2,250 243,563
Arbatax International, Inc.* 3,650 24,809
Guaranty National Corporation 1,091 18,274
Integon Corporation 3,800 67,450
Lawyers Title Corporation 5,100 100,088
Travelers Group, Inc. 2,400 108,900
------------
1,141,113
LUMBER & WOOD PRODUCTS (0.9%)
Louisiana-Pacific Corporation 10,800 228,150
56
<PAGE>
Dreman Value Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
---------------------------
COMMON STOCKS (CONTINUED)
MISCELLANEOUS RETAIL (0.2%)
Sports & Recreation, Inc.* 6,400 $ 49,599
NONDEPOSITORY INSTITUTIONS (7.5%)
Federal Home Loan Mortgage Corporation 3,100 341,387
Federal National Mortgage Association 21,800 812,050
First Financial Caribbean Corporation 3,700 104,063
Imperial Credit Industries* 8,800 184,800
Student Loan Marketing Association 6,000 558,750
------------
2,001,050
NONMETALLIC MINERALS, EXCEPT FUELS (0.2%)
Amcol International Corporation 3,500 54,688
OIL & GAS EXTRACTION (1.3%)
Atlantic Richfield Company 1,500 198,750
Giant Industries, Inc. 5,200 72,800
Seitel, Inc.* 2,000 80,000
------------
351,550
PAPER & ALLIED PRODUCTS (1.0%)
Mercer International, Inc.* 7,300 73,913
Union Camp Corporation 4,100 195,775
------------
269,688
57
<PAGE>
Dreman Value Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
---------------------------
COMMON STOCKS (CONTINUED)
PETROLEUM & COAL PRODUCTS (2.5%)
Amoco Corporation 3,500 $ 281,750
Chevron Corporation 4,000 260,000
Tesoro Petroleum Corporation* 7,900 110,600
------------
652,350
PRIMARY METAL INDUSTRIES (1.1%)
AK Steel Holding Corporation 2,100 83,213
Mueller Industries, Inc.* 2,900 111,650
Quanex Corporation 4,000 109,500
------------
304,363
RAILROAD TRANSPORTATION (0.6%)
Burlington Northern Santa Fe 1,900 164,113
STONE, CLAY, AND GLASS PRODUCTS (0.4%)
Hanson Plc 10,000 67,500
Intermet Corporation 3,200 51,000
------------
118,500
TEXTILE MILL PRODUCTS (2.7%)
Fruit of the Loom, Inc.* 19,000 719,624
TOBACCO PRODUCTS (4.9%)
Phillip Morris Company, Inc. 10,200 1,148,775
UST, Inc. 4,400 142,450
------------
1,291,225
58
<PAGE>
Dreman Value Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
---------------------------
COMMON STOCKS (CONTINUED)
TRANSPORTATION BY AIR (2.0%)
Airborne Freight Corporation 3,200 $ 74,800
Federal Express Corporation* 10,200 453,900
------------
528,700
TRANSPORTATION EQUIPMENT (3.0%)
Fleetwood Enterprises 4,000 110,000
Ford Motor Company 19,900 634,313
Simpson Industries 4,600 50,600
------------
794,913
WHOLESALE TRADE - DURABLE GOODS (0.3%)
Heilig-Meyers Company 4,400 71,500
------------
TOTAL COMMON STOCKS (Cost $18,731,745) 1,395,113
PREFERRED STOCKS (0.2%)
INSURANCE CARRIERS
Aetna Inc. 584 46,355
------------
TOTAL PREFERRED STOCKS (Cost $38,142) 46,355
59
<PAGE>
Dreman Value Portfolio
Schedule of Investments (Unaudited) (continued)
PRINCIPAL
AMOUNT VALUE
--------------------------
SHORT-TERM SECURITIES (8.8%)
REPURCHASE AGREEMENT (8.8%)
State Street Bank, 4.00%, due 1/2/1997
(Dated 12/31/1996, collateralized by U.S. Treasury
Bond, 7.125%, due 2/15/2023, value $2,381,500) $2,330,327 2,330,327
------------
TOTAL SHORT-TERM SECURITIES (Cost $2,330,327) 2,330,327
------------
TOTAL INVESTMENTS (100.0%) (Cost $21,100,214) $ 26,553,375
------------
------------
* Non-income producing
OTHER INFORMATION:
Purchases and sales of securities excluding short-term securities, for the six
months ended December 31, 1996, aggregated $7,783,779 and $6,117,324,
respectively. Net unrealized appreciation for tax purposes aggregated
$5,453,158, of which $5,863,909 related to appreciated investment securities
and $410,751 related to depreciated investment securities. The aggregate cost
of securities is $21,100,217 for tax purposes.
SEE ACCOMPANYING NOTES.
60
<PAGE>
Zweig Equity (Small Cap) Portfolio
Statement of Assets and Liabilities
December 31, 1996 (Unaudited)
ASSETS
Investment in securities, at value (cost $8,591,190)
-See accompanying schedule $ 10,698,874
Dividends, interest and other receivables 78,329
-------------
TOTAL ASSETS 10,777,203
LIABILITIES
Accounts payable and accrued expenses 25,921
-------------
TOTAL LIABILITIES 25,921
-------------
NET ASSETS $ 10,751,282
-------------
-------------
Net Assets consist of:
Paid-in capital $ 8,458,313
Undistributed net investment income 51,357
Accumulated undistributed net realized gain on investment
securities and futures contracts 158,990
Net unrealized appreciation on investment securities and
futures contracts 2,082,622
-------------
NET ASSETS, for 793,069 shares outstanding $ 10,751,282
-------------
-------------
NET ASSET VALUE, offering and redemption price per share $ 13.56
-------------
-------------
SEE ACCOMPANYING NOTES.
61
<PAGE>
Zweig Equity (Small Cap) Portfolio
Statement of Operations
Six Months Ended December 31, 1996 (Unaudited)
INVESTMENT INCOME
Dividends $ 87,972
Interest 47,814
----------
Total investment income 135,786
EXPENSES
Investment advisory and management fees 57,193
Custody and accounting fees 25,221
Professional fees 8,691
Directors' fees and expenses 3,034
Other expenses 3,360
----------
Total expenses before reimbursement 97,499
Less: expense reimbursement (13,070)
----------
Net expenses 84,429
----------
Net investment income 51,357
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Investment securities 285,428
Futures contracts (149,496)
----------
Net realized gain 135,932
Change in unrealized appreciation (depreciation) on:
Investment securities 775,227
Futures contracts (2,004)
----------
Change in unrealized appreciation 773,223
----------
Net gain on investments 909,155
----------
Net increase in net assets resulting from operations $ 960,512
----------
----------
SEE ACCOMPANYING NOTES.
62
<PAGE>
Zweig Equity (Small Cap) Portfolio
Statement of Changes in Net Assets
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED
1996 JUNE 30,
(UNAUDITED) 1996
-------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 51,357 $ 103,880
Net realized gain on investments 135,932 1,345,302
Change in net unrealized appreciation 773,223 190,585
-------------------------------
Net increase in net assets resulting from
operations 960,512 1,639,767
Distributions to shareholders from:
Net investment income (103,880) (119,225)
Net realized gains (861,194) -
-------------------------------
Total distributions to shareholders (965,074) (119,225)
Capital share transactions:
Proceeds from sales of shares 1,848,628 4,407,015
Proceeds from reinvested distributions 965,074 119,225
Cost of shares redeemed (3,755,977) (2,382,455)
-------------------------------
Net increase (decrease) in net assets
resulting from share transactions (942,275) 2,143,785
-------------------------------
Total increase (decrease) in net assets (946,837) 3,664,327
NET ASSETS
Beginning of period 11,698,119 8,033,792
-------------------------------
End of period (including undistributed net
investment income of $51,357 and $103,880,
respectively) $ 10,751,282 $ 11,698,119
-------------------------------
-------------------------------
OTHER INFORMATION
Shares:
Sold 136,281 343,946
Issued through reinvestment of distributions 74,878 9,733
Redeemed (277,498) (185,655)
-------------------------------
Net increase (decrease) (66,339) 168,024
-------------------------------
-------------------------------
SEE ACCOMPANYING NOTES.
63
<PAGE>
Zweig Equity (Small Cap) Portfolio
Financial Highlights
<TABLE>
<CAPTION>
DECEMBER 14,
SIX MONTHS 1992
ENDED (COMMENCEMENT
DECEMBER 31, YEAR ENDED JUNE 30, OF OPERATIONS)
1996 -------------------------------- THROUGH JUNE 30,
(UNAUDITED) 1996 1995 1994 1993
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 13.61 $ 11.62 $ 10.65 $ 10.11 $ 10.00
Income from investment operations:
Net investment income 0.08 0.11 0.17 0.15 0.05
Net realized and unrealized gain
on investments 1.20 2.04 0.93 0.50 0.06
----------------------------------------------------------------
Total from investment operations 1.28 2.15 1.10 0.65 0.11
Less distributions:
From net investment income (0.14) (0.16) (0.06) (0.11) -
From net realized gain (1.19) - (0.07) - -
----------------------------------------------------------------
Total distributions (1.33) (0.16) (0.13) (0.11) -
----------------------------------------------------------------
Net asset value, end of period $ 13.56 $ 13.61 $ 11.62 $ 10.65 $ 10.11
----------------------------------------------------------------
----------------------------------------------------------------
TOTAL RETURN (a) 9.91% 18.69% 10.39% 6.53% 2.02%
RATIOS AND SUPPLEMENTAL DATA (b)
Net assets, end of period (in thousands) $ 10,751 $ 11,698 $ 8,034 $ 7,591 $ 2,116
Ratio of expenses to average net assets 1.55% 1.55% 1.55% 1.72% 1.61%
Ratio of net investment income to
average net assets 0.94% 1.06% 1.54% 1.75% 0.84%
Ratio of expenses to average net
assets before voluntary expense
reimbursement 1.79% 1.83% 1.59% 2.14% 7.29%
Ratio of net investment income (loss) to
average net assets before voluntary
expense reimbursement 0.70% 0.78% 1.50% 1.32% (1.80%)
Portfolio turnover rate 33% 101% 67% 249% 15%
Average commission paid per
equity share traded $ .0297 (c)
</TABLE>
(a) Total returns for periods less than one year are not annualized.
(b) Data expressed as a percentage are annualized as appropriate.
(c) Disclosure required for fiscal years beginning after September 1, 1995.
64
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited)
December 31, 1996
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (93.4%)
AGRICULTURAL PRODUCTION - CROPS (0.5%)
RJR Nabisco Holdings Corporation 1,600 $ 54,400
AGRICULTURAL PRODUCTION - LIVESTOCK (0.1%)
Golden Poultry Company, Inc. 1,100 12,169
AMUSEMENT & RECREATIONAL SERVICES (0.1%)
King World Productions, Inc. 300 11,063
APPAREL & ACCESSORY STORES (0.6%)
Genesco, Inc. 1,800 16,650
Ross Stores, Inc. 800 39,900
Wet Seal, Inc. 400 8,475
----------
65,025
AUTO REPAIR, SERVICES, & PARKING (0.3%)
Amerco 100 3,475
PHH Corporation 600 25,800
----------
29,275
BUILDING MATERIALS & GARDEN SUPPLIES (0.1%)
Shelter Components Corporation 1,087 13,316
BUSINESS SERVICES (1.2%)
Advanced Technology Labs, Inc.* 500 15,313
Comdisco, Inc. 950 30,163
Computer Data Systems, Inc. 500 15,344
Electro Rent Corporation* 2,100 51,450
65
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
BUSINESS SERVICES (1.2%) (CONTINUED)
Orbotech Ltd.* 300 $ 4,331
Pinkertons, Inc. 100 2,513
Platinum Software Corporation* 1,100 13,131
----------
132,245
CHEMICALS & ALLIED PRODUCTS (2.5%)
Akzo Nobel 200 13,538
Bio-Rad Laboratories * 850 25,500
Collagen Corporation 100 1,838
Cytec Industries, Inc.* 600 24,375
Desc. S.A. de C.V.* 1,300 28,600
Icn Pharmaceuticals, Inc. 500 9,813
International Specialty Products, Inc.* 2,200 26,950
Macdermaid, Inc. 900 25,425
Occidental Petroleum Corporation 1,000 23,375
Rohm & Haas Company 600 48,975
Shanghai Petrochemical Company, Ltd. 600 17,625
Stepan Company 100 2,038
Terra Industries, Inc. 1,600 23,600
----------
271,652
COAL MINING (0.1%)
Zeigler Coal Holding Company 700 14,963
COMMUNICATIONS (2.3%)
Atlantic Tele-Network, Inc.* 1,000 15,375
British Telecommunications Plc 400 27,450
66
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
COMMUNICATIONS (2.3%) (CONTINUED)
Citizens Utilities Company* 1,321 $ 14,694
Tele Danmark A/S 1,800 49,050
Telefonica De Espana 1,500 103,875
Telefonos De Mexico 1,100 36,300
----------
246,744
DEPOSITORY INSTITUTIONS (11.8%)
Allied Irish Banks 400 15,700
Astoria Financial Corporation 400 14,775
Bank of Montreal 1,600 51,000
Bankamerica Corporation 600 59,850
Banponce Corporation 1,700 57,163
Barclays Plc 500 34,375
Cal Fed Bancorp, Inc.* 2,100 51,450
Chase Manhattan Corporation 12 1,071
City National Corporation 1,500 32,438
Coast Savings Financial, Inc.* 500 18,313
Colonial Bancgroup, Inc. 300 12,000
Commercial Federal Corporation 300 14,400
Community First Bankshares, Inc. 600 16,650
Corus Bankshares, Inc. 300 9,788
Cullen/Frost Bankers, Inc. 200 6,625
CVB Financial Corporation 2 42
Dime Bancorp, Inc. 200 2,950
Eagle Financial Corporation 210 6,458
First American Corporation 300 17,325
First Citizens Bancshares, Inc. 200 15,450
67
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
DEPOSITORY INSTITUTIONS (11.8%) (CONTINUED)
First Empire State Corporation 100 $ 28,800
First Union Corporation 141 10,434
Firstbank Puerto Rico 800 20,800
FirstFed Financial Corporation 400 8,800
FNB Corporation 100 2,338
Imperial Bancorp* 648 15,552
Investors Financial Services Corporation 32 884
MAF Bancorp, Inc. 400 13,800
National Westminster Bank Plc 900 62,550
Nationsbank Corporation 600 58,650
New York Bancorp, Inc. 800 31,000
North Fork Bancorporation 1,346 47,951
Peoples Heritage Financial Group, Inc. 800 22,300
Provident Bancorp, Inc. 225 7,594
Provident Bankshares Corporation 400 15,725
RCSB Financial, Inc. 700 20,213
Republic New York Corporation 1,200 97,950
Riggs National Corporation 2,700 46,744
Santa Monica Bank 900 15,300
Security Capital Corporation 100 7,350
Silicon Valley Bancshares* 800 25,900
Sovereign Bancorp, Inc. 1,300 16,981
Sterling Bancorp-NY 1,400 20,650
Sumitomo Bank of California 300 7,725
T R Financial Corporation 800 28,500
Trust Company of New Jersey 300 4,219
UMB Financial Corporation 210 8,636
68
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
DEPOSITORY INSTITUTIONS (11.8%) (CONTINUED)
Unionbancal Corporation 800 $ 42,500
UST Corporation 1,700 34,850
Washington Mutual, Inc. 400 17,325
Westamerica Bancorporation 200 11,625
Westcorp 561 12,272
Westpac Banking 2,100 59,850
----------
1,263,591
EATING & DRINKING PLACES (0.5%)
CKE Restaurants, Inc. 600 21,600
Foodmaker, Inc.* 3,000 26,625
----------
48,225
EDUCATIONAL SERVICES (0.0%)
Berlitz International, Inc. 200 4,175
ELECTRIC, GAS & SANITARY SERVICES (9.6%)
Allegheny Power System, Inc. 400 12,150
Aquila Gas Pipeline Corporation 700 11,113
Baltimore Gas & Electric 800 21,400
Boston Edison Company 500 13,438
California Water Service Company 100 4,200
Centerior Energy Corporation 1,400 15,050
Central Maine Power Company 700 8,138
CMS Energy Corporation 500 16,813
Columbia Gas System 600 38,175
69
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
ELECTRIC, GAS & SANITARY SERVICES (9.6%) (CONTINUED)
Commonwealth Energy System 1,000 $ 23,500
Destec Energy, Inc. 900 14,063
DQE, Inc. 200 5,800
Eastern Enterprises 500 17,688
Edison International 3,500 69,563
El Paso Natural Gas Company 400 20,200
Empresa Nacional De Electridad 100 7,000
Enersis S.A. 800 22,200
Entergy Corporation 2,800 77,700
Huaneng Power International, Inc. 800 18,000
Illinova Corporation 800 22,000
Interstate Power Company 400 11,600
Ipalco Enterprises, Inc. 900 24,525
Korea Electric Power Corporation 500 10,250
KU Energy Corporation 400 12,000
Laclede Gas Company 700 16,888
Long Island Lighting Company 1,100 24,338
Midamerican Energy Company 1,200 19,050
National Fuel Gas Company 700 28,875
New England Electric System 400 13,950
New York State Electric & Gas 700 15,138
Noram Energy Corporation 1,300 19,988
NUI Corporation 1,200 27,150
P P & L Resources, Inc. 700 16,100
Pacificorp 600 12,300
70
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
ELECTRIC, GAS & SANITARY SERVICES (9.6%) (CONTINUED)
Peoples Energy Corporation 600 $ 20,325
Pinnacle West Corporation 1,300 41,275
Portland General Corporation 700 29,400
Powergen PLC 400 15,800
Public Service Enterprises Group 500 13,625
Shandong Huaneng Power 2,800 27,300
Sierra Pacific Resources 500 14,375
Texas Utilities Company 600 24,450
TNP Enterprises, Inc. 1,600 43,800
United Illuminating Company 600 18,825
Washington Gas Light Company 1,200 27,150
Washington Water Power Company 900 16,763
Westcoast Energy, Inc. 800 13,400
Williams Companies, Inc. 300 11,250
WPL Holdings, Inc. 700 19,688
York Research Corporation* 1,200 11,250
----------
1,039,019
ELECTRIC & OTHER ELECTRIC EQUIPMENT (4.3%)
Bairnco Corporation 1,000 6,625
Bel Fuse, Inc.* 600 8,363
Chips & Technologies, Inc.* 1,100 19,938
Computer Products, Inc.* 1,600 31,300
CTS Corporation 400 17,100
Electro Scientific Industries, Inc.* 300 7,856
Electrolux AB 900 51,863
Genlyte Group, Inc.* 2,200 27,913
71
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
ELECTRIC & OTHER ELECTRIC EQUIPMENT (4.3%) (CONTINUED)
Hadco Corporation* 1,000 $ 48,813
Harmon International 15 834
Helen of Troy, Ltd. 1,600 35,000
Kollmorgen Corporation 700 7,700
Kuhlman Corporation 800 15,500
Lamson & Sessions Company* 2,100 15,225
Moog, Inc.* 500 11,688
Portugal Telecom S.A. 1,400 39,550
Powell Industries, Inc.* 300 4,200
Siliconix, Inc.* 600 13,800
Sony Corporation 200 13,125
Standard Micosystems Corporation* 200 1,875
Tadiran, Ltd. 900 25,313
Technitrol, Inc. 900 34,538
Thomas Industries, Inc. 400 8,350
Xicor, Inc.* 1,400 14,350
----------
460,819
FABRICATED METAL PRODUCTS (0.8%)
Ameron International Corporation 500 25,813
NCI Building Systems, Inc. 400 13,725
Nortek, Inc.* 800 16,000
Shiloh Industries, Inc.* 800 12,800
Wyman-Gordon Company* 1,000 22,188
----------
90,526
72
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
FOOD & KINDRED PRODUCTS (0.2%)
Morningstar Group, Inc.* 500 $ 9,875
Orange Company, Inc. 1,100 8,525
---------
18,400
FOOD STORES (0.8%)
Great Atlantic & Pacific Tea Company 700 22,313
Riser Foods, Inc. 2,000 63,500
---------
85,813
FORESTRY (0.2%)
Rayonier, Inc. 500 19,188
FUNITURE & FIXTURES (0.6%)
Bush Industries 600 11,550
Chromcraft Revington, Inc.* 100 2,775
Ethan Allen Interiors, Inc. 400 15,400
Furniture Brands International, Inc. 1,000 14,000
Johnson Controls, Inc. 200 16,575
---------
60,300
FURNITURE & HOME FURNISHINGS STORES (0.2%)
Inacom Corporation* 600 24,000
GENERAL BUILDING CONTRACTORS (0.6%)
Centex Corporation 500 18,813
Continental Homes Holding Corporation 900 19,125
MDC Holdings, Inc. 1,400 12,075
73
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
GENERAL BUILDING CONTRACTORS (0.6%) (CONTINUED)
Southern Energy Homes, Inc. 200 $ 2,288
U.S. Home Corporation* 600 15,600
---------
67,901
GENERAL MERCHANDISE STORES (1.3%)
Carson Pirie Scott & Company* 500 12,625
Dayton-Hudson Corporation 400 15,700
Federated Department Stores 600 20,475
Fred Meyer, Inc. 500 17,750
Mercantile Stores Company, Inc. 300 14,813
Shopko Stores, Inc. 1,600 24,000
Waban, Inc.* 700 18,200
Woolworth Corporation 500 10,938
---------
134,501
HEALTH SERVICES (0.4%)
Health Images, Inc. 900 14,963
Ornda Healthcorp* 300 8,775
Universal Health Services* 500 14,313
---------
38,051
HEAVY CONSTRUCTION, EXCEPT BUILDING (0.1%)
Granite Construction, Inc. 750 14,625
HOLDING & OTHER INVESTMENT OFFICES (0.9%)
Asset Investors Corporation 4,100 14,863
General Growth Properties 500 16,125
74
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
HOLDING & OTHER INVESTMENT OFFICES (0.9%) (CONTINUED)
Koger Equity, Inc. 1,500 $ 28,125
MGI Properties, Inc. 500 11,000
Thornburg Mortgage Asset Corporation 1,300 27,788
---------
97,901
HOTELS & OTHER LODGING PLACES (0.0%)
MGM Grand, Inc. 100 3,488
INDUSTRIAL MACHINERY & EQUIPMENT (6.4%)
Advanced Logic Research, Inc.* 1,600 19,500
Ampco-Pittsburgh 1,200 14,400
Applied Magnetics Corporation* 500 14,938
Applied Power, Inc. 400 15,850
BHA Group, Inc. 560 9,170
Cascade Corporation 700 11,244
Caterpillar, Inc. 300 22,575
Data General Corporation* 800 11,600
Deere & Company 200 8,125
Gardner Denver Machinery Inc.* 700 24,150
Gleason Corporation 600 19,875
Global Industrial Technologies, Inc.* 700 15,488
Graco, Inc. 600 14,700
Harris Corporation 100 6,863
Hitachi Limited 100 9,250
Innovex, Inc. 2,000 54,125
International Business Machines Corporation 700 105,638
Jabil Circuit, Inc. 400 16,025
75
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
INDUSTRIAL MACHINERY & EQUIPMENT (6.4%) (CONTINUED)
Katy Industries 400 $ 5,800
Kaydon Corporation 500 23,563
Kysor Industrial Corporation 500 16,313
Lincoln Electric Company 100 3,263
Lindsay Manufacturing Company 300 13,838
Lufkin Industries, Inc. 900 22,500
Manitowoc Company, Inc. 200 8,100
Mestek, Inc.* 700 11,550
Met-Pro Corporation 150 2,006
Robbins & Meyers, Inc. 1,200 30,450
Scotsman Industries, Inc. 300 7,088
SPS Technologies, Inc.* 600 38,550
Storage Technolgy Corporation 400 19,050
Tandem Computers, Inc. 1,000 13,750
Tecumseh Products Company 300 17,213
Timken Company 400 18,350
Toro Company 800 29,200
Twin Disc, Inc. 100 2,163
Valmont Industries 300 12,300
---------
688,563
INSTRUMENTS & RELATED PRODUCTS (1.3%)
Coherent, Inc.* 300 12,825
Cole National Corporation 100 2,625
Cooper Companies, Inc.* 1,400 24,150
Core Industries, Inc. 300 4,950
Esterline Technologies Corporation* 1,400 36,575
76
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
INSTRUMENTS & RELATED PRODUCTS (1.3%) (CONTINUED)
Fluke Corporation 300 $ 13,388
Galileo Electro-Optics Corporation* 1,300 32,581
LTX Corporation* 300 1,753
Measurex Corporation 400 9,600
Starrett (L.S.) Company 200 5,675
---------
144,122
INSURANCE CARRIERS (8.4%)
Ace, Ltd. 400 24,050
Allmerica Financial Corporation 400 13,400
Ambac, Inc. 500 33,188
American Annuity Group, Inc. 1,920 27,120
American Bankers Insurance Group, Inc. 400 20,400
Arbatax International, Inc.* 500 3,398
Bankers Life Holding Corporation 1,200 30,000
Capital Re Corporation 500 23,313
Citizens Corporation 200 4,500
CNA Financial Corporation* 200 21,400
Delphi Financial Group, Inc. 500 14,750
Enhance Financial Services Group, Inc. 600 21,900
Equitable of Iowa Companies 700 32,113
Exel Limited 1,000 37,875
First American Financial Corporation 800 32,900
Fremont General Corporation 800 24,800
Liberty Financial Companies, Inc. 800 31,100
Life Re Corporation 600 23,175
Loews Corporation 900 84,825
77
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
INSURANCE CARRIERS (8.4%) (CONTINUED)
MMI Companies, Inc. 800 $ 25,800
NAC Re Corporation 100 3,388
National Western Life Insurance Company 100 8,813
Nymagic, Inc. 200 3,600
Old Republic International Corporation 1,900 50,825
Orion Capital Corporation 200 12,225
Penncorp Financial Group, Inc. 500 18,000
Pioneer Financial Services, Inc. 1,200 30,000
Presidential Life Corporation 600 7,275
Providian Corporation 800 41,100
Reliance Group Holdings, Inc. 4,600 41,975
Reliastar Financial Corporation 314 18,134
TIG Holdings, Inc. 400 13,550
Transatlantic Holdings, Inc. 300 24,150
Travelers Group, Inc. 1,800 81,675
USLife Corporation 400 13,300
---------
898,017
LEATHER & LEATHER PRODUCTS (0.1%)
Weyco Group, Inc. 200 8,325
LUMBER & WOOD PRODUCTS (0.8%)
Champion Enterprises, Inc.* 1,492 29,094
Fibreboard Corporation 400 13,500
Macmillan Bloedel, Ltd. 1,600 21,000
Skyline Corporation 700 17,325
---------
80,919
78
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
METAL MINING (0.3%)
Cleveland-Cliffs, Inc. 600 $ 27,225
MISCELLANEOUS MANUFACTURING INDUSTRIES (0.8%)
Oneida, Ltd. 1,100 19,800
Russ Berrie & Company, Inc. 600 10,800
Schuller Corporation 1,300 13,813
Syratech Corporation 400 12,600
Tyco Toys, Inc. 2,000 23,500
---------
80,513
MISCELLANEOUS RETAIL (0.2%)
World Fuel Services Corporation 350 7,788
Zale Corporation 700 13,388
---------
21,176
NONDEPOSITORY INSTITUTIONS (0.5%)
Aames Financial Corporation 450 16,144
AmeriCredit Corporation 700 14,350
Credicorp, Ltd. 800 14,800
Olympic Financial, Ltd. 300 4,313
---------
49,607
NONMETALLIC MINERALS, EXCEPT FUELS (0.4%)
Florida Rock Industries 400 13,100
Vulcan Materials Company 400 24,350
---------
37,450
79
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
OIL & GAS EXTRACTION (4.2%)
Amerada Hess Corporation 400 $ 23,150
Basic Petroleum International, Ltd. 300 9,769
Belden & Blake Corporation* 1,000 25,625
Benton Oil & Gas Company 700 15,663
BJ Services Company Warrants 120 3,225
Cliffs Drilling Company* 1,000 62,875
Cross Timbers Oil Company 100 2,513
Helmerich & Payne, Inc. 300 15,638
Kerr-McGee Corporation 200 14,400
Mitchell Energy & Development Corporation 1,000 22,375
Oryx Energy Company 700 17,325
Parker & Parsley Petroleum Company 600 22,050
Plains Resources, Inc.* 1,000 15,625
RPC Energy Services, Inc.* 700 10,500
Santa Fe Energy Resources, Inc. 900 12,488
Tetra Technologies, Inc.* 400 10,175
Tuboscope Vetco International Corporation* 1,100 16,981
Union Texas Petro Holdings, Inc. 600 13,425
USX-Marathon Group, Inc. 1,400 33,425
Veritas DGC, Inc. 2,300 42,550
Vintage Petroleum, Inc. 500 17,250
YPE Sociedad Anonima 1,600 40,400
---------
447,427
PAPER & ALLIED PRODUCTS (1.9%)
Bowater, Inc. 500 18,813
Grupo Indus Durango 1,200 12,750
80
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
PAPER & ALLIED PRODUCTS (1.9%) (CONTINUED)
International Paper Company 407 $ 16,433
Interpool, Inc. 1,100 25,713
James River Corporation of Virgina 500 16,563
Mosinee Paper Corporation 533 18,855
Potlatch Corporation 500 21,500
Republic Gypsum Company 800 12,500
Rock-Tenn Company 440 8,690
Westvaco Corporation 1,950 56,063
---------
207,880
PERSONAL SERVICES (0.0%)
Jenny Craig, Inc.* 100 888
PETROLEUM & COAL PRODUCTS (3.1%)
Coastal Corporation 1,800 87,975
Elf Aquitaine 900 40,725
Ente Nazionale Idrocarburi SpA 300 15,488
Fina, Inc. 500 24,125
Holly Corporation 100 2,675
Murphy Oil Corporation 300 16,688
Phillips Petroleum Company 900 39,825
Repsol S.A. 700 26,688
Tesoro Petroleum Corporation* 1,800 25,200
Texaco, Inc. 300 29,438
Unocal Corporation 500 20,313
---------
329,140
81
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
PRIMARY METAL INDUSTRIES (5.1%)
AK Steel Holding Corporation 500 $ 19,813
Alumax, Inc.* 600 20,025
British Steel Plc 2,400 66,000
Chaparral Steel Company 1,600 19,400
Gibraltar Steel Corporation 500 13,000
Lone Star Technologies* 1,500 25,313
Mueller Industries, Inc.* 1,100 42,350
Oregon Metallurgical Corporation 400 12,850
Oregon Steel Mills, Inc. 800 13,400
Pitt-Des Moines, Inc. 100 4,163
Pohang Iron & Steel, Ltd. 2,000 40,500
Quanex Corporation 900 24,638
RMI Titanium Company* 1,300 36,563
Roanoke Electric Steel Corporation 1,300 21,531
Texas Industries, Inc. 900 45,563
Tredegar Industries, Inc. 1,550 62,194
Tremont Corporation* 600 21,675
Tubos De Acero De Mexico* 3,500 55,563
---------
544,541
PRINTING & PUBLISHING (0.7%)
Gibson Greetings, Inc. 1,000 19,500
Graphic Industries 1,600 15,600
Media General, Inc. 500 15,125
Quebecor, Inc. 800 13,400
Standard Register Company 200 6,500
---------
70,125
82
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
RAILROAD TRANSPORTATION (0.7%)
Canadian Pacific, Ltd. 1,900 $ 50,350
CSX Corporation 500 21,125
---------
71,475
REAL ESTATE (0.1%)
Forest City Enterprises, Inc. 200 12,100
RUBBER & MISCELLANEOUS PLASTICS PRODUCTS (0.8%)
AEP Industries, Inc. 180 9,720
American Filtrona Corporation 300 12,713
Furon Company 800 17,000
Goodyear Tire & Rubber Company 300 15,413
Gundle/SLT Environmental, Inc.* 500 3,313
Spartech Corporation 2,400 26,700
Vans, Inc. 200 2,463
---------
87,322
SECURITY & COMMODITY BROKERS (4.2%)
A.G. Edwards, Inc. 900 30,263
Alex Brown, Inc. 400 29,000
Atlanta Sosnoff Capital 100 888
Bear Stearns Companies, Inc. 1,130 31,499
Donaldson Lufkin & Jenrette, Inc. 500 18,000
Fahnestock Viner Holdings, Inc. 1,200 17,400
Inter-Regional Financial Group 700 24,675
Jefferies Group, Inc. 1,100 44,413
Legg Mason, Inc. 400 15,400
83
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
SECURITY & COMMODITY BROKERS (4.2%) (CONTINUED)
Lehman Brothers Holdings, Inc. 1,300 $ 40,788
McDonald & Company Investments 500 17,375
Merrill Lynch & Company 400 32,600
Paine Webber Group, Inc. 200 5,625
Quick & Reilly Group, Inc. 1,272 38,001
Raymond James Financial, Inc. 1,100 33,138
Salomon, Inc. 1,400 65,975
Value Line, Inc. 200 9,100
---------
454,140
SPECIAL TRADE CONTRACTORS (0.3%)
Apogee Enterprises, Inc. 500 19,813
Layne, Inc.* 800 11,900
---------
31,713
STONE, CLAY, & GLASS PRODUCTS (2.4%)
Centex Construction Products, Inc. 1,600 28,800
Intermet Corporation 2,900 46,219
LaFarge Corporation 900 18,113
Lone Star Industries 1,300 47,938
Medusa Corporation 1,100 37,813
Owens-Illinois, Inc.* 600 13,650
Puerto Rican Cement Company, Inc. 500 15,625
Southdown, Inc. 1,100 34,238
USG Corporation 500 16,938
---------
259,334
84
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
TEXTILE MILL PRODUCTS (0.6%)
Chemfab Corporation* 900 $ 12,319
Culp, Inc. 987 15,175
Guilford Mills, Inc. 600 15,975
Springs Industries, Inc. 400 17,200
---------
60,669
TRANSPORTAION BY AIR (3.3%)
Alaska Airgroup, Inc.* 1,300 27,300
AMR Corporation* 1,000 88,125
British Airways 900 92,475
Delta Air Lines, Inc. 1,100 77,963
KLM Royal Dutch Airlines 839 23,387
UAL Corporation 300 18,750
USAir Group, Inc.* 1,000 23,375
---------
351,375
TRANSPORTATION EQUIPMENT (2.7%)
A.O. Smith Corporation 200 5,975
Arvin Industries, Inc. 600 14,850
Avondale Industries, Inc.* 1,000 21,438
Chrysler Corporation 1,500 49,500
Coachmen Industries, Inc. 2,500 70,938
Dana Corporation 500 16,313
Greenbrier Companies, Inc. 600 6,225
Harsco Corporation 200 13,700
Oshkosh Truck Corporation 100 1,038
85
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
TRANSPORTATION EQUIPMENT (2.7%) (CONTINUED)
Sequa Corporation* 800 $ 31,400
Transtechnology Corporation 600 11,775
Trinity Industries 400 15,000
Volvo AB 1,400 30,538
---------
288,690
TRANSPORTATION SERVICES (0.3%)
Gatx Corporation 300 14,550
PS Group Holdings, Inc. 1,200 16,200
---------
30,750
WATER TRANSPORTATION (0.4%)
Oglebay Norton Company 500 22,188
OMI Corporation 1,300 11,375
Stolt-Nielsen, S.A. 300 5,606
---------
39,169
WHOLESALE TRADE-DURABLE GOODS (2.5%)
Barnes Group, Inc. 400 24,000
Bearings, Inc. 600 16,725
Borg-Warner Automotive, Inc. 100 3,850
Castle (A.M.) & Company* 450 8,663
Commercial Metals Company 133 4,007
General Motors Corporation 700 39,025
Hughes Supply, Inc. 1,200 51,750
Reliance Steel & Aluminum Company 700 24,500
Rexel, Inc.* 1,700 26,988
86
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
WHOLESALE TRADE-DURABLE GOODS (2.5%) (CONTINUED)
Specialty Equipment Companies, Inc. 500 $ 6,344
United Industrial Corporation 500 2,938
Universal Forest Products 500 6,563
Wynn's International, Inc. 1,575 49,809
---------
265,162
WHOLESALE TRADE-NONDURABLE GOODS (0.8%)
Caraustar Industies, Inc. 900 29,813
Cardinal Health, Inc. 54 3,146
Howell Corporation 100 1,494
Pennzoil Company 300 16,950
United Stationers, Inc.* 700 14,350
Universal Corporation 500 16,063
---------
81,816
---------
TOTAL COMMON STOCKS (Cost $7,883,324) 9,991,008
87
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
PRINCIPAL
AMOUNT VALUE
--------------------------
SHORT-TERM SECURITIES (6.6%)
U.S. GOVERNMENT OBLIGATIONS (1.2%)
U.S. Treasury Bills, 4.80%, due 2/6/1997 $ 10,000 $ 9,952
U.S. Treasury Bills, 4.975%, due 1/16/1997 125,000 124,741
-----------
134,693
REPURCHASE AGREEMENT (5.4%)
State Street Bank, 4.00%, due 1/2/1997
(Dated 12/31/1996, collateralized by U.S.
Treasury Bond, 7.125%, due 2/15/2023, value
$589,963) 573,173 573,173
-----------
TOTAL SHORT-TERM SECURITIES (Cost $707,866) 707,866
-----------
TOTAL INVESTMENTS (100.0%) (Cost $8,591,190) $10,698,874
-----------
-----------
88
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (Unaudited) (continued)
FUTURES CONTRACTS
CONTRACT
EXPIRATION AMOUNT AT UNREALIZED
DATE VALUE LOSS
-----------------------------------------
8 Mid-Cap S&P 500
Futures Contracts-Short ** 3/21/97 $ 1,026,400 $ (7,058)
7 S&P 500
Futures Contracts-Short ** 3/21/97 2,605,750 (18,004)
--------------------------
$ 3,632,150 $ (25,062)
--------------------------
--------------------------
* Non-income producing
** These futures contracts are collateralized by a U.S. Treasury Bill at
$125,000 par value, due 1/16/97 and a U.S. Treasury Bill at $10,000 par
value, due 2/6/97.
OTHER INFORMATION:
Purchases and sales of securities excluding short-term securities, for the
six months ended December 31, 1996, aggregated $2,999,022 and $3,863,092,
respectively. Net unrealized appreciation for tax purposes aggregated
$2,107,364, of which $2,174,768 related to appreciated investment securities
and $67,404 related to depreciated investment securities. The aggregate cost
of securities is $8,591,510 for tax purposes.
SEE ACCOMPANYING NOTES.
89
<PAGE>
Pinnacle Fixed Income Portfolio
Statement of Assets and Liabilities
December 31, 1996 (Unaudited)
ASSETS
Investment in securities, at value (cost $9,860,645)
-See accompanying schedule $ 9,953,132
Receivable for investment securities sold 285,088
Interest and other receivables 91,740
--------------
TOTAL ASSETS 10,329,960
LIABILITIES
Payable for investment securities purchased 444,794
Accounts payable and accrued expenses 19,314
--------------
TOTAL LIABILITIES 464,108
--------------
NET ASSETS $ 9,865,852
--------------
--------------
Net Assets consist of:
Paid-in capital $ 9,603,346
Undistributed net investment income 281,315
Accumulated undistributed net realized loss on investments (111,296)
Net unrealized appreciation on investment securities 92,487
--------------
NET ASSETS, for 915,770 shares outstanding $ 9,865,852
--------------
--------------
NET ASSET VALUE, offering and redemption price per share $ 10.77
--------------
--------------
SEE ACCOMPANYING NOTES.
90
<PAGE>
Pinnacle Fixed Income Portfolio
Statement of Operations
Six Months Ended December 31, 1996 (Unaudited)
INVESTMENT INCOME
Interest $ 341,569
EXPENSES
Investment advisory and management fees 35,224
Custody and accounting fees 25,138
Professional fees 8,691
Directors' fees and expenses 3,034
Other expenses 2,510
--------------
Total expenses before reimbursement 74,597
Less: expense reimbursement (14,343)
--------------
Net expenses 60,254
--------------
Net investment income 281,315
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments (12,823)
Change in unrealized appreciation on investment securities 168,854
--------------
Net gain on investments 156,031
--------------
Net increase in net assets resulting from operations $ 437,346
--------------
--------------
SEE ACCOMPANYING NOTES.
91
<PAGE>
Pinnacle Fixed Income Portfolio
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED
1996 JUNE 30,
(UNAUDITED) 1996
---------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 281,315 $ 331,808
Net realized gain (loss) on investments (12,823) 39,828
Change in net unrealized appreciation (depreciation) 168,854 (188,379)
---------------------------------
Net increase in net assets resulting from operations 437,346 183,257
Distributions to shareholders from:
Net investment income (328,028) (268,795)
Capital share transactions:
Proceeds from sales of shares 421,405 5,775,502
Proceeds from reinvested dividends 328,028 268,795
Cost of shares redeemed (1,021,021) (1,346,134)
---------------------------------
Net increase (decrease) in net assets resulting from
share transactions (271,588) 4,698,163
---------------------------------
Total increase (decrease) in net assets (162,270) 4,612,625
NET ASSETS
Beginning of period 10,028,122 5,415,497
---------------------------------
End of period (including undistributed net investment
income of $281,315 and $328,028, respectively) $ 9,865,852 $ 10,028,122
---------------------------------
---------------------------------
OTHER INFORMATION
Shares:
Sold 39,126 541,094
Issued through reinvestment of dividends 30,407 25,172
Redeemed (94,530) (123,043)
---------------------------------
Net increase (decrease) (24,997) 443,223
---------------------------------
---------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
92
<PAGE>
Pinnacle Fixed Income Portfolio
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS JANUARY 5, 1993
ENDED (COMMENCEMENT OF
DECEMBER 31, YEAR ENDED JUNE 30, OPERATIONS)
1996 ----------------------------------- THROUGH JUNE 30,
(UNAUDITED) 1996 1995 1994 1993
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of
period $ 10.66 $ 10.88 $ 10.00 $ 10.43 $ 10.00
Income from investment operations:
Net investment income 0.31 0.39 0.56 0.20 0.19
Net realized and unrealized gain
(loss) on investments 0.16 (0.03) 0.53 (0.52) 0.24
----------------------------------------------------------------
Total from investment operations 0.47 0.36 1.09 (0.32) 0.43
Less distributions:
From net investment income (0.36) (0.58) (0.21) (0.11) -
----------------------------------------------------------------
Net asset value, end of period $ 10.77 $ 10.66 $ 10.88 $ 10.00 $ 10.43
----------------------------------------------------------------
----------------------------------------------------------------
TOTAL RETURN (a) 4.42% 3.29% 11.08% (3.06%) 8.67%
RATIOS AND SUPPLEMENTAL DATA (b)
Net assets, end of period
(in thousands) $ 9,866 $ 10,028 $ 5,415 $ 4,861 $ 906
Ratio of expenses to average
net assets 1.20% 1.32% 1.40% 1.56% 1.56%
Ratio of net investment income
to average net assets 5.59% 5.18% 5.41% 3.62% 3.86%
Ratio of expenses to average net
assets before voluntary expense
reimbursement 1.48% 1.94% 1.59% 2.49% 15.72%
Ratio of net investment income
(loss) to average net assets before
voluntary expense reimbursement 5.31% 4.56% 5.22% 2.68% (1.64%)
Portfolio turnover rate 70% 392% 432% 527% 103%
</TABLE>
(a) Total returns for periods less than one year are not annualized.
(b) Data expressed as a percentage are annualized as appropriate.
93
<PAGE>
Pinnacle Fixed Income Portfolio
Schedule of Investments (Unaudited)
December 31, 1996
PRINCIPAL
AMOUNT VALUE
---------------------
CORPORATE BONDS (40.8%)
AUTO REPAIR, SERVICES, & PARKING (3.0%)
World Omni Automobile Lease Securitization Trust,
Series 96-A, Class 1A, 6.30%, due 6/25/2002 $ 200,000 $ 200,000
World Omni Automobile Lease Securitization Trust,
Series 96-b, Class A1, 5.95%, due 11/15/2002 100,000 100,078
----------
300,078
COMMUNICATIONS (0.5%)
TCI Communications, Inc., 7.875%, due 2/15/2026 60,000 53,667
DEPOSITORY INSTITUTIONS (9.6%)
ABN AMRO BK NV (Chicago), 7.55%, due
6/28/2006 200,000 207,074
Banc One Corporation, 7.625%, due 10/15/2026 100,000 100,835
Midland Bank PLC, 7.625%, due 6/15/2006 200,000 207,092
Nationsbank Corporation, 5.75%, due 1/25/2001 200,000 193,882
Nationsbank Corporation, 7.25%, due 10/15/2025 100,000 96,106
Trans Financial Bank N.A., 6.32%, due 10/17/1997 150,000 150,621
----------
955,610
ELECTRIC GAS & SANITARY SERVICES (4.1%)
Columbia Gas System, 7.62%, due 11/28/2025 200,000 194,458
Hydro Quebec, 9.50%, due 11/15/2030 175,000 213,628
----------
408,086
NONDEPOSITORY INSTITUTIONS (17.1%)
Caterpillar Financial Asset Trust, Series 96, Class A3,
6.30%, due 5/25/2002 250,000 248,438
94
<PAGE>
Pinnacle Fixed Income Portfolio
Schedule of Investments (Unaudited)
PRINCIPAL
AMOUNT VALUE
---------------------
CORPORATE BONDS (CONTINUED)
NONDEPOSITORY INSTITUTIONS (17.1%) (CONTINUED)
Chase Manhattan Credit Card Master Trust, Series
96-3, Class A, 7.04%, Due 2/15/2005 $ 200,000 $ 204,562
First Omni Bank Credit Card Master Trust 96, Class A,
6.65%, due 9/15/2003 200,000 201,686
Ford Motor Credit Corporation, 5.75%, due 1/25/2001 135,000 130,688
Ford Motor Credit Corporation, 7.47%, due 7/29/1999 300,000 307,965
General Motors Acceptance Corporation, 6.70%, due
6/24/1999 300,000 302,583
NGC Corporation, 7.625%, due 10/15/2026 100,000 101,495
Sears Credit Account Master Trust, Series 96, Class A,
6.50%, due 10/15/2003 200,000 200,125
----------
1,697,542
TRANSPORTATION EQUIPMENT (6.5%)
Nationsbank Auto Owner Trust, 6.125%, due
7/15/1999 300,000 300,561
Premier Auto Trust 95, Class A5, 6.15%, due
3/06/2000 350,000 350,756
----------
651,317
----------
TOTAL CORPORATE BONDS (Cost $4,027,268 ) 4,066,300
GOVERNMENT SECURITIES (56.5%)
U. S. GOVERNMENT AGENCY - COLLATERALIZED MORTGAGE
OBLIGATIONS (9.9%)
Fed. Home Loan Mort. Corp., Gold, 6.00%, due 4/1/2011 147,211 141,921
95
<PAGE>
Pinnacle Fixed Income Portfolio
Schedule of Investments (Unaudited) (continued)
PRINCIPAL
AMOUNT VALUE
---------------------
GOVERNMENT SECURITIES (CONTINUED)
U. S. GOVERNMENT AGENCY - COLLATERALIZED MORTGAGE
OBLIGATIONS (9.9%) (CONTINUED)
Fed. Home Loan Mort. Corp., Remic Series 1694,
6.50%, due 9/15/2023 $ 310,000 $ 302,537
Fed. Home Loan Mort. Corp., Gold, 6.50%, due 3/1/2026 199,622 191,077
Fed. Home Loan Mort. Corp., Gold, 7.00%, due 1/1/2026* 145,000 141,783
Fed. Home Loan Mort. Corp., Gold, 7.00%, due 4/1/2026 4,332 4,251
Fed. Home Loan Mort. Corp., 8.00%, due 5/1/2014 898 924
Fed. Home Loan Mort. Corp., Gold, 8.50%, due 8/1/2026 191,425 198,542
----------
981,035
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES (31.2%)
Federal National Mortgage Assoc., 6.00%, due 4/1/2026 200,085 186,017
Federal National Mortgage Assoc., Class G, 6.50%,
due 11/25/2007 300,000 296,250
Federal National Mortgage Assoc., 7.00%, due 1/1/2026 343,364 335,958
Federal National Mortgage Assoc., 7.00%, due 4/1/2026 136,761 133,983
Federal National Mortgage Assoc., 7.00%, due 4/1/2026 391,476 382,789
Federal National Mortgage Assoc., 7.50%, due 7/1/2026 168,427 168,584
Federal National Mortgage Assoc., 8.00%, due 4/1/2026 140,960 143,736
Federal National Mortgage Assoc., 8.50%, due 5/1/2009 119,420 122,555
Federal National Mortgage Assoc., 9.00%, due 5/1/2025 174,765 184,650
Govt. National Mortgage Assoc., 7.00%, due 3/15/2026 197,851 193,522
Govt. National Mortgage Assoc., 7.50%, due 1/15/2026 251,597 251,675
Govt. National Mortgage Assoc., 7.50%, due 11/15/2025 45,449 45,492
Govt. National Mortgage Assoc., 8.00%, due 7/15/2005 20,191 20,871
Govt. National Mortgage Assoc., 8.00%, due 4/15/2022 241,708 248,355
96
<PAGE>
Pinnacle Fixed Income Portfolio
Schedule of Investments (Unaudited) (continued)
PRINCIPAL
AMOUNT VALUE
---------------------
GOVERNMENT SECURITIES (CONTINUED)
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES (31.2%) (CONTINUED)
Govt. National Mortgage Assoc., 8.00%, due 8/15/2026 $ 197,118 $ 201,060
Govt. National Mortgage Assoc., 8.00%, due 11/15/2006 29,329 30,438
Govt. National Mortgage Assoc., Commitment, 9.00%,
due 11/01/2016* 150,000 160,875
----------
3,106,810
U.S. GOVERNMENT OBLIGATIONS (14.4%)
U.S. Treasury Bond, 6.75%, due 8/15/2026 323,000 325,423
U.S. Treasury Bond, 7.125%, due 2/15/2023 75,000 78,305
U.S. Treasury Bond, 7.50%, due 2/15/2005 100,000 106,953
U.S. Treasury Note, 5.625%, due 1/31/1998 75,000 74,965
U.S. Treasury Note, 5.875%, due 11/15/2005 100,000 96,422
U.S. Treasury Note, 6.25%, due 4/30/2001 170,000 170,372
U.S. Treasury Note, 6.37%, due 3/31/2001 240,000 241,613
U.S. Treasury Note, 6.625%, due 6/30/2001 94,000 95,512
U.S. Treasury Note, 6.625%, due 7/31/2001 100,000 101,594
U.S. Treasury Note, 6.875%, due 5/15/2006 35,000 36,066
U.S. Treasury Note, 7.25%, due 5/15/2004 100,000 105,219
----------
1,432,444
FOREIGN GOVERNMENT OBLIGATIONS (1.0%)
Republic of Italy, 6.875%, due 9/27/2023 100,000 95,097
----------
TOTAL GOVERNMENT SECURITIES (Cost $5,561,931) 5,615,386
97
<PAGE>
Pinnacle Fixed Income Portfolio
Schedule of Investments (Unaudited) (continued)
PRINCIPAL
AMOUNT VALUE
---------------------
SHORT-TERM SECURITIES (2.7%)
REPURCHASE AGREEMENT (2.7%)
State Street Bank, 4.00%, due 1/2/1997
(Dated 12/31/1996, collateralized by U.S. Treasury
Bond, 7.125%, due 2/15/2023, value $281,450) $ 271,446 $ 271,446
----------
TOTAL SHORT-TERM SECURITIES (Cost $271,446) 271,446
----------
TOTAL INVESTMENTS (100.0%) (Cost $9,860,645) $9,953,132
----------
----------
* Security purchased on a delayed delivery basis.
OTHER INFORMATION:
Purchases and sales of securities excluding short-term securities, for the six
months ended December 31, 1996, aggregated $6,510,126 and $6,763,656,
respectively. Net unrealized appreciation for tax purposes aggregated $92,310,
of which $104,170 related to appreciated investment securities and $11,860
related to depreciated investment securities. The aggregate cost of
securities is $9,860,822 for tax purposes.
SEE ACCOMPANYING NOTES.
98
<PAGE>
ARM Capital Advisors Money Market Portfolio
Statement of Assets and Liabilities
December 31, 1996 (Unaudited)
ASSETS
Investment in securities, at amortized cost
-See accompanying schedule $ 5,496,431
Interest and other receivables 29,321
------------
TOTAL ASSETS 5,525,752
LIABILITIES
Cash overdraft 21,934
Accounts payable and accrued expenses 15,982
------------
TOTAL LIABILITIES 37,916
------------
NET ASSETS, for 5,487,836 shares outstanding $ 5,487,836
------------
------------
NET ASSET VALUE, offering and redemption price per share $ 1.00
------------
------------
SEE ACCOMPANYING NOTES.
99
<PAGE>
ARM Capital Advisors Money Market Portfolio
Statement of Operations
Six Months Ended December 31, 1996 (Unaudited)
INVESTMENT INCOME
Interest $ 263,546
EXPENSES
Investment advisory and management fees 24,763
Custody and accounting fees 25,122
Professional fees 8,691
Directors' fees and expenses 3,034
Other expenses 2,572
------------
Total expenses before reimbursement 64,182
Less: expense reimbursement (14,656)
------------
Net expenses 49,526
------------
Net investment income 214,020
------------
Net increase in net assets resulting from operations $ 214,020
------------
------------
SEE ACCOMPANYING NOTES.
100
<PAGE>
ARM Capital Advisors Money Market Portfolio
Statement of Changes in Net Assets
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED
1996 JUNE 30,
(UNAUDITED) 1996
------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 214,020 $ 407,014
Distributions to shareholders from:
Net investment income (214,020) (407,014)
Capital share transactions at net asset value
of $1.00 per share:
Proceeds from sales of shares 11,569,081 18,569,332
Proceeds from reinvested distributions 214,505 407,014
Cost of shares redeemed (15,151,597) (16,873,594)
------------------------------
Net increase (decrease) in net assets
resulting from share transactions (3,368,011) 2,102,752
------------------------------
Total increase (decrease) in net assets (3,368,011) 2,102,752
NET ASSETS
Beginning of period 8,855,847 6,753,095
------------------------------
End of period $ 5,487,836 $ 8,855,847
------------------------------
------------------------------
SEE ACCOMPANYING NOTES.
101
<PAGE>
ARM Capital Advisors Money Market Portfolio
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS JANUARY 12, 1993
ENDED (COMMENCEMENT OF
DECEMBER 31, YEAR ENDED JUNE 30, OPERATIONS)
1966 --------------------------- THROUGH JUNE 30,
(UNAUDITED) 1996 1995 1994 1993
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income 0.02 0.05 0.04 0.02 0.01
Less distributions:
From net investment income (0.02) (0.05) (0.04) (0.02) (0.01)
----------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------------------------------------------------------------
----------------------------------------------------------------
TOTAL RETURN (a) 2.19% 4.55% 4.30% 2.04% 1.66%
RATIOS AND SUPPLEMENTAL DATA (b)
Net Assets, end of period (in
thousands) $ 5,488 $ 8,856 $ 6,753 $ 5,452 $ 754
Ratio of expenses to average
net assets 1.00% 1.12% 1.15% 1.29% 1.34%
Ratio of net investment income
to average net assets 4.32% 4.67% 4.31% 2.19% 1.67%
Ratio of expenses to average net
assets before voluntary expense
reimbursement 1.30% 1.46% 1.27% 2.08% 22.41%
Ratio of net investment income
(loss) to average net assets before
voluntary expense reimbursement 4.02% 4.33% 4.20% 1.40% (2.05%)
</TABLE>
(a) Total returns for periods less than one year are not annualized.
(b) Data expressed as a percentage are annualized as appropriate.
102
<PAGE>
ARM Capital Advisors Money Market Portfolio
Schedule of Investments (Unaudited)
December 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-------------------------------------
<S> <C> <C>
SHORT-TERM SECURITIES (100.0%)
CORPORATE BONDS (92.5%)
DEPOSITORY INSTITUTIONS (4.5%)
Wachovia Bank & Trust, 5.4375%, due 1/3/1997* $ 250,000 $ 249,998
INSURANCE CARRIERS (6.7%)
American General Finance Life, 5.39%, due 1/22/1997 370,000 368,837
NONDEPOSITORY INSTITUTIONS (81.3%)
American Express, 5.33%, due 1/8/1997 384,000 383,603
Associate Corporation, 5.35%, due 1/31/1997 349,000 347,444
Avco Financial Service, Inc., 5.32%, due 1/21/1997 420,000 418,759
Beneficial Corporation, 5.42%, due 1/16/1997 370,000 369,164
Chevron Corporation, 5.50%, due 1/9/1997 274,000 273,665
Cit Group Holdings, 5.39%, due 1/10/1997 349,000 348,530
Ford Motor Credit Corporation, 5.38%, due 1/6/1997 349,000 348,739
General Electric Capital Corporation, 5.50%, due
1/14/1997 200,000 199,603
Household Finance Corporation, 5.39%, due
1/13/1997 370,000 369,335
IBM Credit Corporation, 5.38%, due 1/14/1997 186,000 185,639
John Deere Capital Corportation, 5.37%, due
1/24/1997 349,000 347,803
Morgan Guaranty Trust Company, 5.25%, due
1/15/1997 200,000 200,007
</TABLE>
103
<PAGE>
ARM Capital Advisors Money Market Portfolio
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-------------------------------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
NONDEPOSITORY INSTITUTIONS (81.3%) (CONTINUED)
Northwest Bankcorp, 7.875%, due 1/30/1997 $ 400,000 $ 400,798
Sears Roebuck Acceptance, 5.75%, due 1/7/1997 274,000 273,737
-----------
4,466,826
-----------
TOTAL CORPORATE BONDS (COST $5,085,661) 5,085,661
GOVERNMENT SECURITIES (7.3%)
U.S. GOVERNMENT OBLIGATIONS (7.3%)
U.S. Treasury Bills, 5.03%, due 1/23/1997 400,000 398,770
-----------
TOTAL GOVERNMENT SECURITIES (Cost $398,770) 398,770
OTHER SHORT-TERM SECURITIES (0.2%)
REPURCHASE AGREEMENT (0.2%)
State Street Bank, 4.00%, due 1/2/1997
(Dated 12/31/1996, collateralized by U.S. Treasury
Bill, due 6/26/1997, value $12,294) 12,000 12,000
-----------
TOTAL OTHER SHORT-TERM SECURITIES (Cost $12,000) 12,000
-----------
TOTAL SHORT-TERM SECURITIES (100.0%) (Cost $5,496,431) $ 5,496,431
-----------
-----------
</TABLE>
* Variable rate note or floating note; rate shown effective at 12/31/96.
SEE ACCOMPANYING NOTES.
104
<PAGE>
Morgan Stanley Asian Growth Portfolio
Statement of Assets and Liabilities
December 31, 1996 (Unaudited)
ASSETS
Investment in securities, at value (cost $12,793,668)
-See accompanying schedule
$ 13,724,943
Receivable for investment securities sold 53,701
Dividends, interest and other receivables 92,449
-------------
TOTAL ASSETS 13,871,093
LIABILITIES
Cash overdraft 22,426
Payable for investment securities purchased 8,752
Accounts payable and accrued expenses 40,484
-------------
TOTAL LIABILITIES 71,662
-------------
NET ASSETS $ 13,799,431
-------------
-------------
Net Assets consist of:
Paid-in capital $ 12,909,091
Accumulated undistributed net realized loss on
investments and foreign currency transactions (40,935)
Net unrealized appreciation on investments and
assets and liabilities in foreign currencies 931,275
-------------
NET ASSETS, for 1,274,833 shares outstanding $ 13,799,431
-------------
-------------
NET ASSET VALUE, offering and redemption price per share $ 10.82
-------------
-------------
SEE ACCOMPANYING NOTES.
105
<PAGE>
Morgan Stanley Asian Growth Portfolio
Statement of Operations
Six Months Ended December 31, 1996 (Unaudited)
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $14,159) $ 95,949
Interest 20,178
---------
Total investment income 116,127
EXPENSES
Investment advisory and management fees 70,653
Custody and accounting fees 95,020
Professional fees 8,685
Directors' fees and expenses 3,034
Other expenses 3,810
---------
Total expenses before reimbursement 181,202
Less: expense reimbursement (54,054)
---------
Net expenses 127,148
---------
Net investment loss (11,021)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY
Net realized gain (loss) on:
Investment securities 41,508
Foreign currency transactions (4,195)
---------
Net realized gain 37,313
Change in unrealized appreciation on investment securities (119,118)
---------
Net loss on investments and foreign currencies (81,805)
---------
Net decrease in net assets resulting from operations $ (92,826)
---------
SEE ACCOMPANYING NOTES.
106
<PAGE>
Morgan Stanley Asian Growth Portfolio
Statement of Changes in Net Assets
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED
1996 JUNE 30,
(UNAUDITED) 1996
--------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment loss $ (11,021) $ (16,890)
Net realized gain (loss) on investments and
foreign currency transactions 37,313 (28,598)
Change in net unrealized appreciation on
investments and translation of assets and
liabilities in foreign currency (119,118) 832,114
--------------------------
Net increase (decrease) in net assets
resulting from operations (92,826) 786,626
Distributions to shareholders from:
Net investment income - (46,376)
Net realized gain on investments - (14,536)
--------------------------
Total distributions - (60,912)
Capital share transactions:
Proceeds from sales of shares 1,014,194 5,146,338
Proceeds from reinvested distributions - 60,912
Cost of shares redeemed (2,074,032) (3,805,532)
--------------------------
Net increase (decrease) in net assets
resulting from share transactions (1,059,838) 1,401,718
--------------------------
Total increase (decrease) in net assets (1,152,664) 2,127,432
NET ASSETS
Beginning of period 14,952,095 12,824,663
--------------------------
End of period (including undistributed net
investment income of $41,334 at June 30, 1996) $13,799,431 $14,952,095
--------------------------
--------------------------
OTHER INFORMATION
Shares:
Sold 96,799 482,863
Issued through reinvestment of distributions - 6,543
Redeemed (199,211) (371,590)
--------------------------
Net increase (102,412) 117,816
--------------------------
--------------------------
SEE ACCOMPANYING NOTES.
107
<PAGE>
Morgan Stanley Asian Growth Portfolio
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS JUNE 15, 1994
ENDED (COMMENCEMENT
DECEMBER 31, YEAR ENDED JUNE 30, OF OPERATIONS)
1996 ----------------------- THROUGH JUNE 30,
(UNAUDITED) 1996 1995 1994
-------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.86 $ 10.18 $ 10.00 $ 10.00
Income from investment operations:
Net investment income (loss) (0.01) (0.01) 0.01 0.00(a)
Net realized and unrealized gain (loss)
on investments (0.03) 0.74 0.17 -
-------------------------------------------------------
Total from investment operations (0.04) 0.73 0.18 -
Less distributions:
From net investment income - (0.04) (0.00)(a) -
From net realized gain - (0.01) - -
-------------------------------------------------------
Total distributions - (0.05) - -
-------------------------------------------------------
Net asset value, end of period $ 10.82 $ 10.86 $ 10.18 $ 10.00
-------------------------------------------------------
-------------------------------------------------------
TOTAL RETURN (b) (0.55%) 7.19% 1.80% 0.52%
RATIOS AND SUPPLEMENTAL DATA (c)
Net assets, end of period (in thousands) $ 13,799 $ 14,952 $ 12,825 $ 1,905
Ratio of expenses to average net assets 2.00% 2.00% 1.92% 0.75%
Ratio of net investment income (loss) to
average net assets (0.16%) (0.13%) 0.76% 0.59%
Ratio of expenses to average net assets
before voluntary expense reimbursement 2.77% 2.21% 1.92% 9.79%
Ratio of net investment income (loss) to
average net assets before voluntary
expense reimbursement (0.93%) (0.34%) 0.76% (8.44%)
Portfolio turnover rate 30% 51% 30% -
Average commission paid per equity
share traded $ .0106(d)
</TABLE>
(a) Less than $0.01 per share.
(b) Total returns for periods less than one year are not annualized.
(c) Data expressed as a percentage are annualized as appropriate.
(d) Disclosure required for fiscal years beginning after September 1, 1995.
108
<PAGE>
Morgan Stanley Asian Growth Portfolio
Schedule of Investments (Unaudited)
December 31, 1996
NUMBER
OF SHARES VALUE
-------------------------
COMMON STOCKS (98.4%)
CHINA (0.1%)
Yizheng Chemical Fibre Company, Ltd. 52,000 $ 12,639
HONG KONG (32.8%)
Asia Satellite Telecommunications Holdings, Ltd.* 9,000 20,887
CDL Hotels International, Ltd. 67,000 38,332
Changchai Company, Ltd.* 54,000 46,917
Cheung Kong Holdings, Ltd. 74,000 657,767
Cheung Kong Infrastructure Holdings* 22,000 58,310
China Resources Beijing Land 86,000 54,483
China Resources Enterprise, Ltd.* 84,000 188,971
Citic Pacific, Ltd. 68,000 394,751
Edaran Otomobil Nasional 22,000 219,956
Great Eagle Holdings, Ltd. 4,000 16,498
Guangshen Railway Company, Ltd. 82,000 35,516
Hang Seng Bank, Ltd. 11,400 138,548
Hong Kong Telecom 298,200 480,004
HSBC Holdings Plc 22,655 484,763
Jurong Shipyard, Ltd. 13,000 65,488
New World Infrastructure, Ltd. 70,000 472,881
Petronas Gas Berhad 68,000 282,716
PT Hanjaya Mandala Sampoerna 26,000 138,696
Shanghai Industrial Holdings, Ltd.* 13,000 47,398
Sun Hung Kai Properties 28,000 343,009
Swire Pacific, Ltd. 33,000 314,662
-----------
4,500,553
109
<PAGE>
Morgan Stanley Asian Growth Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
-------------------------
COMMON STOCKS (CONTINUED)
INDIA (0.7%)
Dialog Group Berhad 4,000 $ 57,018
Hindalco Industries, Ltd. 500 9,935
State Bank of India, Ltd.* 2,000 35,000
-----------
101,953
INDONESIA (9.0%)
Cosco Pacific, Ltd. 26,000 30,254
Hicom Holdings Berhad 25,000 71,768
Keppel Corporation, Ltd. 38,000 295,963
PT Astra International 25,000 68,798
PT Bank International Indonesia 60,906 59,952
PT Daya Guna Samudera* 236,500 275,349
PT Gudang Garam 17,000 73,412
PT Indah Kiat Pulp & Paper Corporation 80,750 58,973
PT Telekomunikasi Indonesia 172,500 297,603
-----------
1,232,072
MALAYSIA (20.9%)
Development Bank of Singapore 22,000 297,106
Genting Berhad 58,000 399,605
IJM Corporation Berhad 29,000 68,323
Industrial Oxygen Incorporated Berhad 16,000 24,581
Kerry Properties, Ltd. 50,000 137,048
Leader Universal Holdings Berhad 27,000 56,662
Mahindra & Mahindra, Ltd. 4,000 47,000
Malayan Banking Berhad 39,000 432,390
Malaysian International Shipping Berhad 50,000 148,485
Public Bank Berhad 1 1
110
<PAGE>
Morgan Stanley Asian Growth Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
-------------------------
COMMON STOCKS (CONTINUED)
MALAYSIA (20.9%) (CONTINUED)
Renong Berhad 99,000 $ 175,617
Resorts World Berhad 53,000 241,338
Sime Darby Berhad 108,000 425,500
Telekom Malaysia 37,000 329,639
United Engineers, Ltd. 9,500 85,764
-----------
2,869,059
PHILIPPINES (4.5%)
Ayala Land, Incorporated 50,900 58,061
Digital Telecom Philippines, Incorporated* 490,000 40,989
DMCI Holdings, Incorporated* 63,300 41,518
JG Summit Holdings 585,600 164,771
Manila Electric Company 13,450 109,952
Petron Corporation 214,275 72,511
Philippine Long Distance Tel 1,030 56,591
SM Prime Holdings, Ltd. 280,160 72,437
-----------
616,830
SINGAPORE (16.5%)
C.K. Tang, Ltd. 17,000 20,650
Comfort Group, Ltd. 75,000 66,452
Commerce Asset Holdings 18,000 135,419
Electronic Resources, Ltd. 68,000 80,171
Fraser & Neave, Ltd. 3,200 32,926
Henderson Land Development Company, Ltd. 11,000 110,932
Hong Kong Ferry Holdings 11,000 21,475
Hutchison Whampoa 75,000 589,081
Natsteel Broadway, Ltd.* 90,000 63,900
Overseas Chinese Banking 23,300 289,689
111
<PAGE>
Morgan Stanley Asian Growth Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
-------------------------
COMMON STOCKS (CONTINUED)
SINGAPORE (16.5%) (CONTINUED)
Parkway Holdings, Ltd. 18,000 $ 70,740
Phantra Thanakit Plc 11,000 31,301
PT Sorini Corporation 38,000 17,697
Sembawamg Corporation, Ltd. 15,000 79,314
Singapore Press Holdings 7,200 141,994
Straits Steamship Land 42,000 134,448
Straits Steamship Land Warrants 44,250 47,744
Straits Trading Company 20,000 48,589
United Overseas Bank 25,000 278,671
-----------
2,261,193
SOUTH KOREA (2.9%)
Guangshen Railway* 1,000 20,625
Kookmin Bank* 1,000 18,175
Korea Electric Power Corporation 3,000 61,500
Korea Mobile Telecom 9,167 118,026
Pohang Iron & Steel, Ltd. 2,500 50,625
Samsung Electronics* 687 27,909
Samsung Electronics New* 2,641 107,290
-----------
404,150
TAIWAN (2.2%)
Want Want Holdings 40,000 105,200
Wharf Holdings, Ltd. 40,000 199,625
-----------
304,825
112
<PAGE>
Morgan Stanley Asian Growth Portfolio
Schedule of Investments (Unaudited) (continued)
NUMBER
OF SHARES VALUE
-------------------------
COMMON STOCKS (CONTINUED)
THAILAND (8.5%)
Advanced Information Service 12,600 $ 107,071
Advanced Information Service Plc 2,100 17,845
Bangkok Bank Company, Ltd. 23,700 229,110
Finance One Company, Ltd. 33,400 67,701
National Finance and Securities Company, Ltd. 33,200 62,443
Shinawatra Computer Company Plc 13,300 160,717
Shinawatra Computer Company Plc 2,100 25,376
Siam Commercial Bank Company 24,900 180,533
Singapore Airlines, Ltd. 11,000 99,821
Thai Farmers Bank Company, Ltd. 27,300 170,266
Thai Farmers Bank Company, Ltd.-Warrants 3,412 3,225
United Communication Industry 6,400 43,408
-----------
1,167,516
UNITED STATES (0.3%)
Hongkong Land Holdings, Ltd. 14,000 38,920
-----------
TOTAL COMMON STOCKS (Cost $12,578,435) 13,509,710
113
<PAGE>
Morgan Stanley Asian Growth Portfolio
Schedule of Investments (Unaudited) (continued)
PRINCIPAL
AMOUNT VALUE
-------------------------
SHORT-TERM SECURITIES (1.6%)
REPURCHASE AGREEMENT (1.6%)
State Street Bank, 4.00%, due 1/2/1997
(Dated 12/31/1996, collateralized by U.S.
Treasury Bond 7.125%, due 2/15/2023,
value $221,913) $ 215,233 $ 215,233
-----------
TOTAL SHORT-TERM SECURITIES (Cost $215,233) 215,233
-----------
TOTAL INVESTMENTS (100.0%) (Cost $12,793,668) $13,724,943
-----------
-----------
* Non-income producing
OTHER INFORMATION:
Purchases and sales of securities excluding short-term securities, for the
six months ended December 31, 1996, aggregated $3,926,685 and $3,966,552,
respectively. Net unrealized appreciation for tax purposes aggregated
$930,422, of which $2,281,045 related to appreciated investment securities
and $1,350,623 related to depreciated investment securities. The aggregate
cost of securities $12,794,521 for tax purposes.
SEE ACCOMPANYING NOTES.
114
<PAGE>
Morgan Stanley Asian Growth Portfolio
Schedule of Investments (Unaudited) (continued)
As of December 31,1996, the Portfolio had investments in the following
industries.
PERCENT OF
TOTAL
INVESTMENTS
-------------
INDUSTRY
Agricultural Services 0.2%
Amusement & Recreation Services 2.9
Automotive Dealers 0.5
Chemicals & Allied Products 0.1
Communications 13.2
Depository Institutions 20.5
Electric, Gas, & Sanitary Services 1.8
Electronic & Other Electric Equipment 4.2
Fabricated Metal Products 0.5
Fishing, Hunting, & Trapping 2.0
Food & Kindred Products 1.1
General Building Contractors 0.5
General Merchandise Stores 0.2
Heavy Construction Contractors 1.2
Holding & Other Investment Offices 0.8
Hotels & Other Lodging Places 3.2
Industrial Machinery & Equipment 1.4
Miscellaneous Manufacturing Industries 0.3
Nondepository Institutions 0.2
Oil & Gas Extraction 2.5
Paper & Allied Products 0.4
Primary Metal Industries 0.8
Printing & Publishing 1.0
Railroad Transportation 0.4
Real Estate 25.8
Repurchase Agreements 1.6
Securities & Commodity Brokers 0.5
Tobacco Products 1.5
Transportation by Air 3.0
Transportation Equipment 3.6
Water Transportation 1.1
Wholesale Trade - Durable Goods 3.0
-------------
100.0%
-------------
-------------
SEE ACCOMPANYING NOTES.
115
<PAGE>
Morgan Stanley Worldwide High Income Portfolio
Statement of Assets and Liabilities
December 31, 1996 (Unaudited)
ASSETS
Investment in securities, at value (cost $6,384,634)
- -See accompanying schedule $ 6,806,700
Cash 899,082
Receivable for investment securities sold 43,981
Interest and other assets 127,744
------------
TOTAL ASSETS 7,877,507
------------
LIABILITIES
Payable for investment securities purchased 899,360
Accounts payable and accrued expenses 22,594
------------
TOTAL LIABILITIES 921,954
------------
NET ASSETS $ 6,955,553
------------
------------
Net Assets consist of:
Paid-in capital $ 6,043,057
Undistributed net investment income 292,501
Accumulated undistributed net realized gain on investments 197,929
Net unrealized appreciation on investment securities 422,066
------------
NET ASSETS, for 592,279 shares outstanding $ 6,955,553
------------
------------
NET ASSET VALUE, offering and redemption price per share $ 11.74
------------
------------
SEE ACCOMPANYING NOTES.
116
<PAGE>
Morgan Stanley Worldwide High Income Portfolio
Statement of Operations
Six Months Ended December 31, 1996 (Unaudited)
INVESTMENT INCOME
Dividends $ 2,308
Interest 331,306
-----------
Total investment income 333,614
EXPENSES
Investment advisory and management fees 26,198
Custody and accounting fees 25,092
Professional fees 8,685
Directors' fees and expenses 3,034
Other expenses 3,777
-----------
Total expenses before reimbursement 66,786
Less: expense reimbursement (9,767)
-----------
Net expense 57,019
-----------
Net investment income 276,595
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 197,929
Change in unrealized appreciation on investment securities 412,788
-----------
Net gain on investments 610,717
-----------
Net increase in net assets resulting from operations $ 887,312
-----------
-----------
SEE ACCOMPANYING NOTES.
117
<PAGE>
Morgan Stanley Worldwide High Income Portfolio
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED
1996 JUNE 30,
(UNAUDITED) 1996
--------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 276,595 $ 616,219
Net realized gain on investments 197,929 142,020
Change in net unrealized appreciation (depreciation) 412,788 276,653
--------------------------
Net increase in net assets resulting from operations 887,312 1,034,892
Distributions to shareholders from:
Net investment income (599,736) (532,957)
Net realized gain on investments (52,530) (6,625)
--------------------------
Total distributions (652,266) (539,582)
Capital share transactions:
Proceeds from sales of shares 1,810,209 1,113,906
Proceeds from reinvested distributions 652,266 539,582
Cost of shares redeemed (1,531,436) (2,601,227)
--------------------------
Net increase (decrease) in net assets from share transactions 931,039 (947,739)
--------------------------
Total increase (decrease) in net assets 1,166,085 (452,429)
NET ASSETS
Beginning of period 5,789,468 6,241,897
--------------------------
End of period (including undistributed net investment
income of $292,501 and $615,642, respectively) $ 6,955,553 $ 5,789,468
--------------------------
--------------------------
OTHER INFORMATION
Shares:
Sold 148,879 103,380
Issued through reinvestment of distributions 56,848 54,452
Redeemed (128,457) (242,988)
--------------------------
Net increase (decrease) 77,270 (85,156)
--------------------------
--------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
118
<PAGE>
Morgan Stanley Worldwide High Income Portfolio
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS JUNE 15, 1994
ENDED (COMMENCEMENT
DECEMBER 31, YEAR ENDED JUNE 30, OF OPERATIONS)
1996 ------------------------- THROUGH JUNE 30,
(UNAUDITED) 1996 1995 1994
------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.24 $ 10.40 $ 10.00 $ 10.00
Income from investment operations:
Net investment income 0.35 1.25 0.89 0.00 (a)
Net realized and unrealized gain (loss) on investments 1.33 0.54 (0.49) -
------------------------------------------------------------
Total from investment operations 1.68 1.79 0.40 -
Less distributions:
From net investment income (1.08) (0.94) (0.00) (a) -
From net realized gain on investments (0.10) (0.01) - -
------------------------------------------------------------
Total distributions (1.18) (0.95) - -
------------------------------------------------------------
Net asset value, end of period $ 11.74 $ 11.24 $ 10.40 $ 10.00
------------------------------------------------------------
------------------------------------------------------------
TOTAL RETURN (b) 15.86 18.41 4.00% 0.79%
RATIOS AND SUPPLEMENTAL DATA (c)
Net assets, end of period
(in thousands) $ 6,956 $ 5,789 $ 6,242 $ 687
Ratio of expenses to average
net assets 1.85 1.85 1.61% 0.85%
Ratio of net investment income
to average net assets 8.97 10.04 9.28% 0.80%
Ratio of expenses to average net
assets before voluntary expense reimbursement 2.16 2.06 1.61% 24.78%
Ratio of net investment income (loss)
to average net assets before voluntary expense reimbursement 8.66 9.83 9.28% (23.13%)
Portfolio turnover rate 43 122 142% -
</TABLE>
(a) Less than $0.01 per share.
(b) Total returns for periods less than one year are not annualized.
(c) Data expressed as a percentage are annualized as appropriate.
119
<PAGE>
Morgan Stanley Worldwide High Income Portfolio
Schedule of Investments (Unaudited)
December 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------ ------------
<S> <C> <C>
CORPORATE BONDS (86.2%)
ARGENTINA (10.0%)
Industrias Metallurgicas Pescarmona S. A.,
11.75%, due 3/27/1998 $ 250,000 $ 258,125
Republic of Argentina, 6.625%, due 3/31/2005 490,000 425,840
------------
683,965
BRAZIL (16.9%)
Iochpe-Maxion S.A., 12.375%, due 11/8/2002 500,000 495,000
Iochpe-Maxion S.A., 12.375%, due 11/8/2002 (a) 250,000 247,500
Republic of Brazil, 4.50%, due 4/15/2004 550,685 405,266
------------
1,147,766
COLUMBIA (0.7%)
Occidente Y Caribe Cel, 0.00%, due 3/15/2004 (c) 85,000 49,938
MEXICO (4.5%)
Cemex SA de C.V., 9.50%, due 9/20/2001 300,000 306,375
PHILIPPINES (0.3%)
Philippine Long Dist Telephone, 9.25%, due 6/30/2006 20,000 21,378
RUSSIA (14.6%)
Ministry Finance Russia, 3.00%, due 5/14/2003 (a) 1,620,000 991,237
UNITED KINGDOM (0.8%)
Telewest Plc, 0.00%, due 10/1/2007 (c) 75,000 52,312
</TABLE>
120
<PAGE>
Morgan Stanley Worldwide High Income Portfolio
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------ ------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
UNITED STATES (38.4%)
Advanced Micro Devices, Inc.,
11.00%, due 8/1/2003 $ 55,000 $ 59,675
Aircraft Lease Portfolio Securitization, Series 96
Class D, 12.75%, due 6/15/2006 49,962 51,836
Boyd Gaming Corporation, 9.25%, due 10/1/2003 50,000 48,875
Brooks Fiber Properties, 0.00%, due 11/1/2001 (a), (c) 50,000 31,844
Cablevision Systems Corporation,
9.25%, due 11/1/2005 30,000 29,700
Cablevision Systems, 9.875%, due 5/15/2006 55,000 56,374
Cleveland Electric Illuminating Company,
8.375%, due 12/1/2011 45,000 47,447
Cole National Group, 9.875%, due 12/31/2006 60,000 61,500
Comcast Cellular, 0.00%, due 3/5/2000 (b) 85,000 61,200
Comcast Corporation, 9.375%, due 5/15/2005 65,000 67,438
Comcast Corporation, 9.175%, due 10/15/2006 25,000 25,594
Courtyard By Marriott, 10.75%, due 2/1/2008 50,000 52,750
Digital Equipment, 8.625%, due 11/1/2012 15,000 14,535
Dr. Structured Finance, 7.60%, due 8/15/2007 89,619 80,342
Echostar Satellite Broadcasting,
13.125%, due 3/15/2000 (c) 125,000 94,375
Ecuador-Global Bearer-PDI, 7.25%, due 2/27/2015 105,739 64,995
First Nationwide Escrow, 10.625%, due 10/1/2003 (a) 30,000 32,400
First Nationwide Holdings, 9.125%, due 1/15/2003 35,000 35,700
Flores & Rucks Incorporated, 9.50%, due 10/1/2006 35,000 37,100
Gaylord Container, 11.50%, due 5/15/2001 75,000 81,000
Gaylord Container, 12.75%, due 5/15/1998 (c) 15,000 16,575
</TABLE>
121
<PAGE>
Morgan Stanley Worldwide High Income Portfolio
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------ ------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
UNITED STATES (38.4%) (CONTINUED)
Grand Casinos, Inc., 10.125%, due 12/1/2003 $ 60,000 $ 60,300
HMC Acquisition Propreties, 9.00%, due 12/15/2007 35,000 35,525
Home Holdings, 8.625%, due 12/15/2003 30,000 6,535
Homeside, Inc., 11.25%, due 5/15/2003 (a) 15,000 16,725
Host Mar Travel Plaza, 9.50%, due 5/15/2005 50,000 52,188
International Home Foods, 10.375%, due 11/1/2006 15,000 15,525
ISP Holdings, Inc., 9.00%, due 10/15/2003 (a) 50,000 50,625
Ivaco, Inc., 11.50%, due 9/15/2005 10,000 9,975
IXC Communications, Inc., 12.50%, due 10/1/2005 40,000 43,800
Lenfest Communications, 8.375%, due 11/1/2005 45,000 43,481
Marcus Cable Company, 14.25%, due 12/15/2005 (c) 85,000 60,031
Maxxam Group Holdings, Inc., 12.00%, due 8/1/2003 25,000 25,406
MFS Communications Company, Inc.,
8.875%, due 1/15/2001 (c) 125,000 90,938
Midland Cogeneration Vent, 10.33%, due 7/23/2002 23,275 24,787
Midland Cogeneration Vent, 10.33%, due 7/23/2002 7,205 7,655
Midland Funding II, 11.75%, due 7/23/2005 15,000 16,607
Nextel Communications, 9.75%, due 8/15/2004 (c) 175,000 119,437
Norcal Waste Systems, 13.00%, due 11/15/2005 (c) 85,000 93,925
Nuevo Energy Company, 9.50%, due 4/15/2006 35,000 37,188
Owens-Illinois, Inc., 11.00%, due 12/1/2003 55,000 61,188
Paging Network, 10.00%, due 10/15/2008 (a) 35,000 35,306
Paging Network, 10.125%, due 8/1/2007 20,000 20,400
Parker Drilling Corporation, 9.75%, due 11/15/2006 20,000 20,825
Quest Diagnostic, Inc., 10.75%, due 12/15/2006 10,000 10,500
Revlon Worldwide, 0.00%, due 3/15/1998 (b) 70,000 60,200
</TABLE>
122
<PAGE>
Morgan Stanley Worldwide High Income Portfolio
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
------------ ------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
UNITED STATES (38.4%) (CONTINUED)
Rogers Cablesystems, 10.00%, due 3/15/2005 $ 70,000 $ 74,550
Rogers Communications, Inc., 9.125%, due 1/15/2006 15,000 14,775
SD Warren Company, 12.00%, due 12/15/2004 65,000 70,200
Southland Corporation, 5.00%, due 12/15/2003 80,000 65,600
Station Casinos, Inc., 9.625%, due 6/1/2003 15,000 14,925
Stone Container, 11.5%, due 8/15/2006 (a) 20,000 20,625
TCI Communications, Inc., 7.875%, due 2/15/2026 45,000 40,251
Teleport Communications, 0.00%, due 7/1/2001 (c) 50,000 34,438
TLC Beatrice International Holdings,
11.50%, due 10/1/2005 45,000 47,813
United States Can Corporation,
10.125%, due 10/15/2006 40,000 42,050
Viacom International, 8.00%, due 7/7/2006 125,000 120,937
------------
2,616,491
TOTAL CORPORATE BONDS (Cost $5,455,548) 5,869,462
PREFERRED STOCKS (2.6%)
UNITED STATES (2.6%)
Fresenius Medical Care Cap, 9.00%, due 12/1/2006 35 35,613
TCI Communications, Inc., 5.00%, due 7/31/2006 355 32,749
Time Warner, 10.25%, due 7/1/2016 99 107,020
------------
175,382
TOTAL PREFERRED STOCKS (Cost $167,230) 175,382
</TABLE>
123
<PAGE>
Morgan Stanley Worldwide High Income Portfolio
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------ ------------
<S> <C> <C>
SHORT-TERM SECURITIES (11.2%)
REPURCHASE AGREEMENT (11.2%)
State Street Bank, 4.00%, due 1/2/1997
(Dated 12/31/1996, collateralized by U.S. Treasury
Bond, 7.125%, due 2/15/2023, value $779,400) $ 761,856 $ 761,856
------------
TOTAL SHORT-TERM SECURITIES (Cost $761,856) 761,856
------------
TOTAL INVESTMENTS (100.0%) (Cost $6,384,634) $6,806,700
------------
------------
</TABLE>
OTHER INFORMATION:
Purchases and sales of securities excluding short-term securities, for the
six months ended December 31, 1996, aggregated $2,675,085 and $2,332,711,
respectively. Net unrealized appreciation for tax purposes aggregated
$420,927, of which $453,155 related to appreciated investment securities
and $32,228 related to depreciated investment securities. The aggregate
cost of securities is $6,385,773 for tax purposes.
(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 initial
offering.
(c) Variable rate note or floating note; rate shown effective at 12/31/96.
124
<PAGE>
Morgan Stanley Worldwide High Income Portfolio
Schedule of Investments (Unaudited) (continued)
As of December 31, 1996, the Portfolio had investments in the following
industries.
PERCENT OF
TOTAL
INVESTMENTS
-----------
INDUSTRY
Amusement & Recreation Services 0.9%
Chemicals & Allied Products 0.9
Communications 16.0
Electric, Gas, & Sanitary Services 2.6
Electronic & Other Electric Equipment 2.7
Fabricated Metal Products 0.6
Finance, Taxation & Monetary Policy 14.6
Food & Kindred Products 0.2
Food Stores 1.0
Government 13.2
Health Services 0.2
Holding & Other Investment Offices 1.5
Hotels & Other Lodging Places 3.0
Industrial Machinery & Equipment 11.1
Instruments & Related Products 0.9
Insurance Carriers 0.6
Miscellaneous Manufacturing Industries 0.7
Motion Pictures 1.6
Nondepository Institutions 2.7
Oil & Gas Extraction 1.4
Paper & Allied Products 1.3
Primary Metal Industries 0.5
Repurchase Agreements 11.2
Stone, Clay, & Glass Products 5.4
Wholesale Trade - Durable Goods 3.8
Wholesale Trade - Nondurable Goods 1.4
-------
100.0%
-------
-------
SEE ACCOMPANYING NOTES.
125
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements
December 31, 1996 (Unaudited)
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), Pinnacle Fixed Income, ARM
Capital Advisors Money Market, Morgan Stanley Asian Growth and Morgan Stanley
Worldwide High Income. ARM Securities Corporation ("ARM Securities"), formerly
known as SBM Financial Services, Inc., a registered broker-dealer under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc., distributes shares of the Fund to the variable annuity
separate accounts of Integrity Life Insurance Company ("Integrity") and its
wholly owned subsidiary, National Integrity Life Insurance Company ("National
Integrity"). ARM Capital Advisors, Inc. ("ARM Capital Advisors"), a SEC-
registered investment adviser, provides management services to the Fund pursuant
to a Management Agreement (the "Management Agreement") effective February 1,
1996.
ARM Financial Group, Inc. ("ARM") is the ultimate parent of ARM Capital
Advisors, Integrity, National Integrity, and ARM Securities. ARM specializes in
the asset accumulation business, providing retail and institutional customers
with products designed to serve the growing retirement and long-term savings
markets as well as providing other asset management services. At December 31,
1996, ARM had approximately $7.6 billion of assets under management.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for investment companies.
126
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 ARM Capital Advisors Money Market Portfolio ("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 Board of
Directors.
SECURITY TRANSACTIONS
Securities transactions are accounted for as of 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 effective interest method. Realized gains and
losses on sales of investments are determined on the basis of nearest average
for all of the portfolios except Zweig Asset Allocation Portfolio, which uses
the first-in first-out method.
127
<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 December 31, 1996, the Pinnacle Fixed Income Portfolio had
segregated specific assets to be utilized to settle its outstanding commitments
related to securities purchased on a delayed-delivery basis.
FEDERAL INCOME TAX MATTERS
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.
At December 31, 1996, the Pinnacle Fixed Income Portfolio and the Morgan Stanley
Asian Growth Portfolio have accumulated net realized capital loss carryovers of
$96,149 (expiring in 2003 and 2004) and $78,248 (expiring in 2004),
respectively.
DIVIDEND DISTRIBUTIONS
Dividends from net investment income and distributions from net realized gains
are declared and distributed annually, except that the 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.
128
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FUTURES CONTRACTS
Certain Portfolios may enter into futures contracts to protect 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 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
December 31, 1996.
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 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 Pinnacle Fixed Income Portfolios may engage in forward 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.
129
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
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
December 31, 1996, all shares of the Portfolio held by Integrity for its own
account were redeemed.
On April 2, 1996, Integrity purchased for its own account approximately 479,000
shares of the Pinnacle Fixed Income Portfolio, at the net asset value on such
date, for an aggregate purchase price of $5.1 million. As of December 31, 1996,
approximately 454,000 shares, having a fair value of approximately $4.9 million
and constituting 49.6% of the outstanding shares of the Portfolio were held by
Integrity for its own account.
2. INVESTMENT ADVISORY AGREEMENTS AND PAYMENTS TO RELATED PARTIES
ARM Capital Advisors has entered into a sub-advisory agreement with a registered
investment adviser ("Sub-Adviser") for each of the Portfolios except the Money
Market Portfolio. ARM Capital Advisors, not the Fund, pays the sub-advisory fee
to each of the Sub-Advisers.
130
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (continued)
2. INVESTMENT ADVISORY AGREEMENTS AND PAYMENTS TO RELATED PARTIES (CONTINUED)
Listed below are management and sub-advisory fees payable as a percentage of
average net assets:
MANAGEMENT SUB-ADVISORY
PORTFOLIO FEE FEE
- --------------------------------------------------------------------------------
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
Pinnacle Fixed Income 0.70 0.50
ARM Capital Advisors Money Market 0.50 N/A
Morgan Stanley Asian Growth 1.00 0.85
Morgan Stanley Worldwide High Income 0.85 0.70
Under the Management Agreement, ARM Capital Advisors provides certain management
services to the Fund, and the Fund is responsible for certain of its direct
operating expenses. ARM Capital Advisors has voluntarily agreed to reimburse
each of the Portfolios for operating expenses (excluding management fees) above
an annual rate of 0.5% 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. ARM Capital Advisors
has reserved the right to withdraw or modify its policy of expense reimbursement
for the Portfolios.
The Zweig Asset Allocation, 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 $41,000 in the
aggregate during the six months ended December 31, 1996.
Certain officers and directors of the Fund are also officers of ARM, ARM
Securities, ARM Capital Advisors, Integrity and National Integrity. The Fund
does not pay any amounts to compensate these individuals.
131
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (continued)
3. CAPITAL SHARES
At December 31, 1996, 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), Pinnacle Fixed Income, Morgan Stanley Asian Growth, and
Morgan Stanley Worldwide High Income Portfolios and 100,000,000 shares for the
Money Market Portfolio.
At December 31, 1996, Integrity, through its Separate Account II, and National
Integrity, through its Separate Account II, were the record owners of all the
outstanding shares of the Fund.
132
<PAGE>
BULK RATE
U.S. POSTAGE
PAID
Berwyn, IL
Permit No. 73
THIS SEMI-ANNUAL REPORT IS NOT TO BE CONSTRUED AS AN OFFERING FOR SALE DIRECTLY
OR INDIRECTLY OF ANY INTEREST IN THE FUND. NO OFFERING IS MADE EXCEPT IN
CONJUNCTION WITH A PROSPECTUS WHICH MUST PRECEDE OR ACCOMPANY THIS REPORT.
[LOGO] Principal offices located at:
200 EAST WILSON BRIDGE ROAD
WORTHINGTON, OHIO 43085 Catalog #001914 (2/97)
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