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<PAGE>
------------------------------------------------------------------
[LOGO] The Legends Fund, Inc.
Semi-Annual Report
December 31, 1998
<PAGE>
The Legends Fund, Inc.
Semi-Annual Report
December 31, 1998
Contents
<TABLE>
<S> <C>
President's Letter..................................................1
Financial Statements, Financial Highlights, and Schedules of
Investments:
Harris Bretall Sullivan & Smith Equity Growth Portfolio.......2
Scudder Kemper Value Portfolio................................6
Zweig Asset Allocation Portfolio.............................11
Zweig Equity (Small Cap) Portfolio...........................17
Notes to Financial Statements......................................25
</TABLE>
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>
THE LEGENDS FUND, INC.
- ------------------------------------------------------------------------------
This 1998 Semi-Annual Report highlights the most recent reporting periods for
the Legends Fund, Inc. (the "Fund"). I'd like to personally thank all of our
investors and extend a welcome to those who have joined us since the previous
report.
Total returns for each of the Fund's portfolios for the six months and year
ended December 31, 1998, respectively, are listed below:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
Portfolio December 31, 1998 December 31, 1998
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Harris Bretall Sullivan & Smith Equity Growth 16.89% 35.65%
Scudder Kemper Value 7.65% 18.41%
Zweig Asset Allocation (8.69%) (2.05%)
Zweig Equity (Small Cap) (8.19%) (0.61%)
</TABLE>
In addition, we hope you'll find the detailed information on the holdings of
each portfolio in the other enclosed financial information helpful.
As you know, 1998 proved to be a challenging year in some segments of the
investment world. While the evening news tends to focus on the short-term,
the portfolios in the Fund span a spectrum of choices intended for use in
your long-term planning. We are confident that the portfolios available will
continue to be valuable tools to help you meet your objectives.
Thank you for your continued confidence. If you have any questions, please
feel free to contact us at your convenience.
Sincerely,
/s/ Edward J. Haines
Edward J. Haines
President
The Legends Fund, Inc
1
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Statement of Assets and Liabilities
December 31, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $24,773,617)--See accompanying schedule $45,417,792
Dividends and interest receivable 16,284
Receivable for capital shares sold 147,372
-----------
Total assets 45,581,448
LIABILITIES
Accounts payable and accrued expenses 37,858
Payable for repurchased capital stock 372
-----------
Total liabilities 38,230
-----------
NET ASSETS $45,543,218
-----------
-----------
Net Assets consist of:
Paid-in capital $25,998,336
Accumulated undistributed net realized loss on investments (1,099,293)
Net unrealized appreciation on investment securities 20,644,175
-----------
NET ASSETS, for 2,026,078 shares outstanding $45,543,218
-----------
-----------
NET ASSET VALUE, offering and redemption price per share $ 22.48
-----------
-----------
Statement of Operations
Six Months Ended December 31, 1998 (Unaudited)
INVESTMENT INCOME
Dividends $ 126,356
Interest 19,932
-----------
Total investment income 146,288
EXPENSES
Investment advisory and management fees 120,701
Custody and accounting fees 51,120
Professional fees 4,109
Directors' fees and expenses 2,469
Other expenses 4,408
-----------
Total expenses 182,807
-----------
Net investment loss (36,519)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments (861,003)
Change in unrealized appreciation on investment securities 7,553,506
-----------
Net gain on investments 6,692,503
-----------
Net increase in net assets resulting from operations $6,655,984
-----------
-----------
</TABLE>
SEE ACCOMPANYING NOTES
2
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
1998 YEAR ENDED
(UNAUDITED) JUNE 30, 1998
-----------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment $ (36,519) $ (3,025)
Net realized gain (loss) on investments (861,003) 3,870,031
Change in net unrealized appreciation 7,553,506 4,234,149
-------------------------------
Net increase in net assets resulting from operations 6,655,984 8,101,155
Distributions to shareholders from:
Net investment income - (35,592)
Net realized gain (4,108,321) (2,143,586)
-------------------------------
Total distributions to shareholders (4,108,321) (2,179,178)
Capital share transactions:
Proceeds from sales of shares 5,065,793 12,618,333
Proceeds from reinvested distributions 4,108,321 2,179,178
Cost of shares redeemed (3,840,447) (11,872,273)
-------------------------------
Net increase in net assets resulting from share
transactions 5,333,667 2,925,238
-------------------------------
Total increase in net assets 7,881,330 8,847,215
NET ASSETS
Beginning of period 37,661,888 28,814,673
-------------------------------
End of period $45,543,218 $ 37,661,888
-------------------------------
-------------------------------
OTHER INFORMATION
Shares:
Sold 251,312 650,111
Issued through reinvestment of distributions 180,671 118,950
Redeemed (189,898) (629,133)
-------------------------------
Net increase 242,085 139,928
-------------------------------
-------------------------------
SEE ACCOMPANYING NOTES
</TABLE>
3
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
1998 ------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning
of period $ 21.11 $ 17.53 $ 14.49 $ 12.85 $ 9.36 $ 9.71
Income from investment operations:
Net investment income (loss) (0.02) --(a) 0.02 --(a) 0.01 (0.02)(b)
Net realized and unrealized
gain (loss) on investments 3.61 4.90 4.13 1.74 3.48 (0.33)
------------------------------------------------------------
Total from investment operations 3.59 4.90 4.15 1.74 3.49 (0.35)
Less distributions:
From net investment income -- (0.02) --(a) (0.01) -- --
From net realized gain (2.22) (1.30) (1.11) (0.09) -- --
------------------------------------------------------------
Total distributions (2.22) (1.32) (1.11) (0.10) -- --
------------------------------------------------------------
Net asset value, end of period $ 22.48 $ 21.11 $ 17.53 $ 14.49 $ 12.85 9.36
------------------------------------------------------------
------------------------------------------------------------
TOTAL RETURN 16.89% (c) 29.11% 30.23% 13.59% 37.29% (3.60%)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $37,510 $37,662 $28,815 $23,810 $16,393 $10,693
Ratio of expenses to average
net assets 0.97% (d) 0.95% 1.03% 1.04% 1.05% 1.29%
Ratio of net investment income
(loss) to average net assets (0.19%)(d) (0.01%) 0.14% 0.03% 0.13% (0.17%)
Portfolio turnover rate 15% (c) 57% 46% 58% 31% 38%
</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) Not annualized.
(d) Annualized.
4
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Schedule of Investments
December 31, 1998
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- -----------
<S> <C> <C>
COMMON STOCKS (99.7%)
BASIC CHEMICAL PLASTICS & SYNTHETICS (16.8%)
Abbot Laboratories 20,400 $ 999,600
Bristol-Meyers Squibb Company 7,300 976,831
Colgate-Palmolive Company 9,300 863,738
Gillette Company 18,700 903,444
Merck & Co., Inc. 6,700 989,506
Pfizer, Inc. 7,800 978,413
Schering-Plough 19,400 1,071,850
The Proctor & Gamble Company 8,900 812,681
-----------
7,596,063
BUSINESS SERVICES (14.4%)
America Online, Inc. 14,800 2,142,300
Autodesk, Inc. 19,000 810,469
Automatic Data Processing, Inc. 11,500 922,156
Microsoft Corporation* 11,000 1,523,844
The Interpublic Group of Companies, Inc. 13,800 1,100,550
-----------
6,499,319
COMMUNICATIONS (2.5%)
MCI WorldCom, Inc.* 16,000 1,148,500
DEPOSITORY INSTITUTIONS (4.6%)
BankAmerica Corporation 10,071 605,519
Citigroup, Inc. 13,750 680,625
Wells Fargo Company 21,000 838,687
-----------
2,124,831
ELECTRICAL & ELECTRONIC MACHINERY (8.1%)
General Electric Company 13,900 1,418,669
Intel Corporation 11,300 1,339,403
Lucent Technologies, Inc. 8,500 935,000
-----------
3,693,072
FABRICATED METAL PRODUCTS (1.8%)
Illinois Tool Works, Inc. 14,400 835,200
FOOD & KINDRED PRODUCTS (1.8%)
The Coca-Cola Company 12,500 835,937
GENERAL MERCHANDISE STORES (5.2%)
Dayton Hudson Corporation 19,700 1,068,725
Wal-Mart Stores, Inc. 16,100 1,311,144
-----------
2,379,869
INDUSTRIAL MACHINERY & EQUIPMENT (12.1%)
Applied Materials, Inc.* 26,700 1,140,591
Cisco Systems, Inc.* 15,750 1,462,289
Compaq Computer Corporation 29,900 1,253,931
Dell Computer Corporation* 12,000 878,625
EMC Corporation* 9,000 765,000
-----------
5,500,436
INSTRUMENTS & RELATED PRODUCTS (2.2%)
Medtronic, Inc. 13,600 1,009,800
INSURANCE CARRIERS (2.0%)
American International Group, Inc. 9,187 887,694
<CAPTION>
NUMBER
OF SHARES VALUE
--------- -----------
<S> <C> <C>
COMMON STOCK (continued)
MISC. MANUFACTURING INDUSTRIES (3.5%)
Mattel, Inc. 20,800 $ 474,500
Tyco International Ltd. 14,500 1,093,844
-----------
1,568,344
MOTION PICTURES (1.3%)
The Walt Disney Company 18,900 567,000
PRINTING & PUBLISHING (2.4%)
Time Warner, Inc. 17,600 1,092,300
RETAIL-BUILDING MATERIAL HARDWARE (3.0%)
The Home Depot, Inc. 22,000 1,346,125
RETAIL-FOOD STORES (4.4%)
Starbucks Corporation* 17,800 996,800
The Kroger Co.* 16,600 1,004,300
-----------
2,001,100
SECURITY & COMMODITY BROKERS (7.6%)
Merrill Lynch & Co., Inc. 9,100 607,425
Morgan Stanley, Dean Witter,
Discover and Company 13,800 979,800
The Charles Schwab Corporation 33,000 1,854,188
-----------
3,441,413
TRANSPORTATION BY AIR (1.4%)
AMR Corporation* 10,300 611,562
WHOLESALE TRADE-DURABLE GOODS (2.0%)
Johnson & Johnson 11,100 931,012
WHOLESALE TRADE-NONDURABLE GOODS (2.6%)
Safeway, Inc.* 19,600 1,194,374
-----------
TOTAL COMMON STOCKS (Cost $24,619,776) 45,263,951
SHORT-TERM SECURITIES (0.3%)
Principal
Amount
---------
Repurchase Agreement (0.3%)
State Street Bank, 3.50%, due 1/4/1999
(Dated 12/31/1998, collateralized by U.S.
Treasury Note, 5.250%, due 1/31/2001, value
$159,650) $153,841 153,841
-----------
TOTAL SHORT TERM SECURITIES (Cost $153,841) 153,841
-----------
TOTAL INVESTMENTS (100.0%) (Cost $24,773,617) $45,417,792
-----------
-----------
</TABLE>
*Non-income producing.
OTHER INFORMATION:
Purchases and sales of securities, excluding short-term securities, for the
six months ended December 31, 1998, aggregated $6,797,299 and $5,413,058,
respectively. At December 31, 1998, net unrealized appreciation for tax
purposes aggregated $20,644,175, of which $20,983,680 related to appreciated
investment securities and $339,505 related to depreciated investment
securities. The aggregate cost of securities is the same for book and tax
purposes.
5
<PAGE>
Scudder Kemper Value Portfolio
Statement of Assets and Liabilities
December 31, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value (cost $40,069,565)--See accompanying schedule $48,760,787
Dividends and interest receivable 60,975
Receivable for capital shares sold 27,652
-----------
Total assets 48,849,414
LIABILITIES
Payable for investment securities purchased 946,082
Accounts payable and accrued expenses 42,589
-----------
Total liabilities 988,671
-----------
NET ASSETS $47,860,743
-----------
-----------
Net Assets consist of:
Paid-in capital $36,469,887
Undistributed net investment income 359,968
Accumulated undistributed net realized gain on investments 2,339,666
Net unrealized appreciation on investment securities 8,691,222
-----------
NET ASSETS, for 2,379,765 shares outstanding $47,860,743
-----------
-----------
NET ASSET VALUE, offering and redemption price per share $ 20.11
-----------
-----------
Statement of Operations
Six Months Ended December 31, 1998 (Unaudited)
INVESTMENT INCOME
Dividends $ 489,962
Interest 84,622
-----------
Total investment income 574,584
EXPENSES
Investment advisory and management fees 143,284
Custody and accounting fees 60,726
Professional fees 3,730
Directors' fees and expenses 2,469
Other expenses 4,408
-----------
Total expenses 214,617
-----------
Net investment income 359,967
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 2,339,666
Change in unrealized appreciation on investment securities 673,768
-----------
Net gain on investments 3,013,434
-----------
Net increase in net assets resulting from operations $ 3,373,401
-----------
-----------
</TABLE>
SEE ACCOMPANYING NOTES.
6
<PAGE>
Scudder Kemper Value Portfolio
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31,
1998 YEAR ENDED
(UNAUDITED) JUNE 30, 1998
------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 359,967 $ 591,315
Net realized gain on investments 2,339,666 4,706,677
Change in net unrealized appreciation 673,768 2,439,355
----------------------------
Net increase in net assets resulting from operations 3,373,401 7,737,347
Distributions to shareholders from:
Net investment income (591,314) (408,549)
Net realized gain (4,706,677) (5,723,007)
----------------------------
Total distributions to shareholders (5,297,991) (6,131,556)
Capital share transactions:
Proceeds from sales of shares 9,343,463 16,280,118
Proceeds from reinvested distributions 5,297,991 6,131,556
Cost of shares redeemed (11,292,003) (8,512,037)
----------------------------
Net increase in net assets resulting from share
transactions 3,349,451 13,899,637
----------------------------
Total increase in net assets 1,424,861 15,505,428
NET ASSETS
Beginning of period 46,435,882 30,930,454
----------------------------
End of period (including undistributed net
investment income of $359,968 and $591,315,
respectively) $ 47,860,743 $46,435,882
----------------------------
----------------------------
OTHER INFORMATION
Shares:
Sold 450,731 798,312
Issued through reinvestment of distributions 264,302 327,252
Redeemed (544,617) (415,791)
----------------------------
Net increase 170,416 709,773
----------------------------
----------------------------
</TABLE>
SEE ACCOMPANYING NOTES
7
<PAGE>
Scudder Kemper Value Portfolio
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
1998 ------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning
of period $ 21.02 $ 20.63 $ 16.17 $ 12.59 $ 10.66 $10.45
Income from investment operations:
Net investment income 0.16 0.26 0.26 0.18 0.26 0.12
Net realized and unrealized
gain (loss) on investments 1.44 4.08 5.04 3.70 1.85 0.17
-----------------------------------------------------------------------
Total from investment
operations 1.60 4.34 5.30 3.88 2.11 0.29
Less distributions:
From net investment income (0.28) (0.26) (0.19) (0.19) (0.14) (0.08)
From net realized gain (2.23) (3.69) (0.65) (0.11) (0.04) --
-----------------------------------------------------------------------
Total distributions (2.51) (3.95) (0.84) (0.30) (0.18) (0.08)
-----------------------------------------------------------------------
Net asset value, end of period $ 20.11 $ 21.02 $ 20.63 $ 16.17 $ 12.59 $10.66
-----------------------------------------------------------------------
-----------------------------------------------------------------------
TOTAL RETURN 7.65%(a) 23.36% 33.78% 31.22% 19.98% 2.80%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $47,861 $46,436 $30,930 $19,705 $10,877 $8,952
Ratio of expenses to average
net assets 0.96%(b) 0.94% 1.05% 1.06% 1.13% 1.40%
Ratio of net investment income
to average net assets 1.60%(b) 1.58% 1.62% 1.65% 1.98% 1.98%
Ratio of expenses to average net
assets before voluntary
expense reimbursement 0.96%(b) 0.94% 1.05% 1.07% 1.13% 1.61%
Ratio of net investment income
to average net assets before
voluntary expense
reimbursement 1.60%(b) 1.58% 1.62% 1.64% 1.98% 1.76%
Portfolio turnover rate 15%(a) 57% 88% 18% 29% 9%
</TABLE>
(a) Not annualized.
(b) Annualized.
8
<PAGE>
Scudder Kemper Value Portfolio
Schedule of Investments
December 31, 1998
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS (92.3%) OF SHARES VALUE
--------- -----
<S> <C> <C>
APPAREL & OTHER FINISHED PRODUCTS (2.5%)
VF Corporation 25,600 $ 1,200,000
BASIC CHEMICAL PLASTICS & SYNTHETICS (4.4%)
Dow Chemical Company 5,500 500,156
Eastman Chemical Company 5,600 250,600
International Flavors & Fragrances, Inc. 11,000 486,063
Praxair, Inc. 26,000 916,500
-----------
2,153,319
COMMUNICATIONS (1.0%)
GTE Corporation 7,400 481,000
DEPOSITORY INSTITUTIONS (14.7%)
BankAmerica Corporation 25,616 1,540,162
Bankers Trust Corporation 10,000 854,375
First Union Corporation 20,300 1,234,494
J.P. Morgan & Company, Inc. 1,700 178,606
PNC Bank Corporation 19,210 1,039,741
Washington Mutual, Inc. 35,388 1,351,379
Wells Fargo Company 24,300 970,481
-----------
7,169,238
EATING & DRINKING PLACES (3.5%)
McDonald's Corporation 5,000 383,125
Wendy's International, Inc. 60,000 1,308,750
-----------
1,691,875
ELECTRICAL & ELECTRONIC MACHINERY (2.7%)
AMP, Inc. 25,500 1,327,594
FABRICATED METAL PRODUCTS (1.0%)
Crown Cork & Seal Company, Inc. 16,000 493,000
FORESTRY (3.4%)
Georgia Pacific Timber Group 60,000 1,428,750
Georgia Pacific Group 4,000 234,250
-----------
1,663,000
GENERAL MERCHANDISE STORES (1.9%)
J. C. Penney Company, Inc. 9,800 459,375
Sears, Roebuck and Company 11,000 467,500
-----------
926,875
INDUSTRIAL MACHINERY & EQUIPMENT (7.7%)
Diebold, Inc. 39,000 1,391,813
Hewlett-Packard Company 12,900 881,231
Minnesota Mining and Manufacturing Co. 10,900 775,262
Pitney Bowes, Inc. 10,500 693,656
-----------
3,741,962
NUMBER
COMMON STOCKS (CONTINUED) OF SHARES VALUE
--------- -----
INSTRUMENTS & RELATED PRODUCTS (5.4%)
Baxter International, Inc. 8,600 $ 553,087
C. R. Bard, Inc. 15,800 782,100
Raytheon Company 15,000 798,750
Xerox Corporation 4,000 472,000
-----------
2,605,937
INSURANCE CARRIERS (2.6%)
American General Corporation 16,500 1,287,000
LUMBER & WOOD PRODUCTS (2.1%)
Louisiana-Pacific Corporation 56,700 1,038,319
NONDEPOSITORY INSTITUTIONS (9.8%)
Fannie Mae 31,600 2,338,400
Freddie Mac 37,800 2,435,738
-----------
4,774,138
OIL & GAS EXTRACTION (4.1%)
Atlantic Richfield Company (ARCO) 20,000 1,305,000
Burlington Resources, Inc. 20,000 716,250
-----------
2,021,250
PAPER & ALLIED PRODUCTS (4.1%)
Sonoco Products Company 38,500 1,140,563
Union Camp Corporation 13,000 877,500
-----------
2,018,063
PETROLEUM & COAL PRODUCTS (8.5%)
Amoco Corporation 37,600 2,270,100
Chevron Corporation 11,400 945,487
Exxon Corporation 12,700 928,688
-----------
4,144,275
PRIMARY METAL INDUSTRIES (2.4%)
Nucor Corporation 27,000 1,167,750
RAILROAD TRANSPORTATION (0.9%)
Burlington Northern Santa Fe Corp. 12,600 425,250
TOBACCO MANUFACTURERS OR CIGAR (4.4%)
Philip Morris Companies, Inc. 39,800 2,129,300
TRANSPORTATION BY AIR (1.3%)
FDX Corporation* 7,200 640,800
TRANSPORTATION EQUIPMENT (3.0%)
Ford Motor Company 25,000 1,467,188
WHOLESALE-TRADE-NONDURABLE GOODS (0.9%)
Du Pont (E.I.) de Nemours and Co. 8,400 445,725
-----------
TOTAL COMMON STOCKS (Cost $36,321,636) 45,012,858
</TABLE>
9
<PAGE>
Scudder Kemper Value Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------ -----
<S> <C> <C>
SHORT-TERM SECURITIES (7.7%)
Repurchase Agreement (7.7%)
State Street Bank, 3.50%, due 1/4/1999
(Dated 12/31/1998, collateralized by U.S.
Treasury Note, 10.375% due 11/15/2009,
value $3,824,850) $3,747,929 3,747,929
-----------
TOTAL SHORT-TERM SECURITIES (Cost $3,747,929) 3,747,929
-----------
TOTAL INVESTMENTS (100.0%) (Cost $40,069,565) $48,760,787
-----------
-----------
</TABLE>
* Non-income producing.
OTHER INFORMATION:
Purchases and sales of securities, excluding short-term securities, for the six
months ended December 31, 1998, aggregated $6,719,798 and $6,257,738
respectively. At December 31, 1998, net unrealized appreciation for tax
purposes aggregated $8,691,222 of which $9,942,960 related to appreciated
investment securities and $1,251,738 related to depreciated investment
securities. The aggregate cost of securities is the same for book and tax
purposes.
SEE ACCOMPANYING NOTES.
10
<PAGE>
Zweig Asset Allocation Portfolio
Statement of Assets and Liabilities
December 31, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value (cost $34,618,295)--
See accompanying schedule $37,824,961
Dividends and interest receivable 63,498
Receivable for investment securities sold 2,707,280
-----------
Total assets 40,595,739
LIABILITIES
Payable for investment securities purchased 3,004,285
Cash overdraft 1,062
Accounts payable and accrued expenses 52,802
Payable for repurchased capital stock 27,811
-----------
Total liabilities 3,085,960
-----------
NET ASSETS $37,509,779
-----------
-----------
Net Assets consist of:
Paid-in capital $30,180,198
Undistributed net investment income 227,034
Accumulated undistributed net realized gain on investments 3,844,637
Net unrealized appreciation on investment securities 3,257,910
-----------
NET ASSETS, for 2,827,906 shares outstanding $37,509,779
-----------
-----------
NET ASSET VALUE, offering and redemption price per share $ 13.26
-----------
-----------
Statement of Operations
Six Months Ended December 31, 1998 (Unaudited)
INVESTMENT INCOME
Dividends (net foreign taxes withheld of $6,486) $ 301,562
Interest 164,271
-----------
Total investment income 465,833
EXPENSES
Investment advisory and management fees 174,158
Custody and accounting fees 53,128
Professional fees 4,635
Directors' fees and expenses 2,469
Other expenses 4,409
-----------
Total expenses 238,799
-----------
Net investment income 227,034
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on:
Investments securities 3,206,753
Futures contracts 593,584
-----------
Net realized gain 3,800,337
Change in unrealized appreciation (depreciation) on:
Investment securities (8,436,348)
Futures contracts 95,543
-----------
Net unrealized depreciation (8,340,805)
-----------
Net loss on investments (4,540,468)
-----------
Net decrease in net assets resulting from operations $(4,313,434)
-----------
-----------
</TABLE>
SEE ACCOMPANYING NOTES
11
<PAGE>
Zweig Asset Allocation Portfolio
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31,
1998 YEAR ENDED
(UNAUDITED) JUNE 30, 1998
----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 227,034 $ 365,323
Net realized gain on investments 3,800,337 6,354,477
Change in net unrealized appreciation (depreciation) (8,340,805) 1,999,669
----------------------------
Net increase (decrease) in net assets resulting
from operations (4,313,434) 8,719,469
Distributions to shareholders from:
Net investment income (365,323) (529,058)
Net realized gain (6,048,315) --
----------------------------
Total distributions to shareholders (6,413,638) (529,058)
Capital share transactions:
Proceeds from sales of shares 932,523 4,280,221
Proceeds from reinvested distributions 6,413,638 529,058
Cost of shares redeemed (6,559,520) (8,397,497)
----------------------------
Net increase (decrease) in net assets resulting
from share transactions 786,641 (3,588,218)
----------------------------
Total increase (decrease) in net assets (9,940,431) 4,602,193
NET ASSETS
Beginning of period 47,450,210 42,848,017
----------------------------
End of period (including undistributed net investment
income of $227,034 and $365,323, respectively) $37,509,779 $47,450,210
----------------------------
----------------------------
OTHER INFORMATION
Shares:
Sold 60,364 258,491
Issued through reinvestment of distributions 488,855 32,534
Redeemed (424,146) (517,480)
----------------------------
Net increase (decrease) 125,073 (226,455)
----------------------------
----------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
12
<PAGE>
Zweig Asset Allocation Portfolio
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
1998 -------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------
SELECTED PER-SHARE DATA
Net asset value, beginning
of period $ 17.56 $ 14.63 $ 14.11 $ 13.02 $ 11.44 $ 10.81
Income (loss) from investment operations:
Net investment income 0.11 0.14 0.19 0.21 0.33 0.10
Net realized and unrealized
gain (loss) on investments (1.67) 2.97 2.20 1.21 1.33 0.58
-----------------------------------------------------------------------
Total from investment
operations (1.56) 3.11 2.39 1.42 1.66 0.68
Less distributions:
From net investment income (0.16) (0.18) (0.22) (0.33) (0.08) (0.05)
From net realized gain (2.58) -- (1.65) -- -- --
-----------------------------------------------------------------------
Total distributions (2.74) (0.18) (1.87) (0.33) (0.08) (0.05)
-----------------------------------------------------------------------
Net asset value, end of period $ 13.26 $ 17.56 $ 14.63 $ 14.11 $ 13.02 $ 11.44
-----------------------------------------------------------------------
-----------------------------------------------------------------------
TOTAL RETURN (8.69%)(a) 21.38% 18.63% 11.06% 14.57% 6.27%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $37,510 $47,450 $42,848 $40,222 $36,736 $31,563
Ratio of expenses to average
net assets 1.25%(b) 1.18% 1.28% 1.25% 1.20% 1.39%
Ratio of net investment income
to average net assets 1.16%(b) 0.80% 1.29% 1.55% 2.73% 1.67%
Portfolio turnover rate 65%(a) 65% 89% 105% 45% 101%
</TABLE>
(a) Not annualized.
(b) Annualized.
13
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments
December 31, 1998
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS (83.6%) OF SHARES VALUE
--------- -----
<S> <C> <C>
APPARELL & OTHER FINISHED PRODUCTS (0.9%)
Tommy Hilfiger Corporation (a) 3,300 $198,000
VF Corporation 3,400 159,375
-----------
357,375
BASIC CHEMICAL PLASTICS & SYNTHETIC (1.6%)
Amgen, Inc. (a) 3,200 334,400
Eil Lilly and Company 700 62,212
The B.F. Goodrich Company 4,000 143,500
The Estee Lauder Companies, Inc. 800 68,400
-----------
608,512
BUSINESS SERVICES (4.5%)
Affiliated Computer Services, Inc. (a) 1,400 63,000
America Online, Inc. 1,800 260,550
American Management Systems, Inc. (a) 1,700 68,106
Check Point Software Technologies Ltd. 1,500 68,578
Citrix Systems, Inc. (a) 700 67,922
Comdisco, Inc. 3,500 59,062
Computer Associates International, Inc. 1,300 55,412
Compuware Corporation (a) 900 70,284
HBO & Company 2,300 66,053
Legato Systems, Inc. (a) 1,100 72,497
Microsoft Corporation (a) 400 55,413
Oracle Corporation (a) 10,100 435,878
Rational Software Corporation (a) 2,400 63,600
Sterling Software, Inc. (a) 9,400 254,388
VERITAS Software Corporation (a) 900 53,888
-----------
1,714,631
COMMUNICATIONS (2.5%)
AT & T Corporation 3,500 263,375
Century Telephone Enterprises, Inc. 1,000 67,500
Sprint Corporation (FON Group) 3,600 302,850
Tele Danmark A/S 1,000 67,875
Telefonos de Mexico SA 5,100 248,306
-----------
949,906
DEPOSITORY INSTITUTIONS (2.4%)
Coast Federal (a) 1,000 6,594
Golden State Bancorp, Inc. (a) 5,500 24,922
Golden West Financial Corporation 2,800 256,725
GreenPoint Financial Corporation 4,400 154,550
Old Kent Financial Corporation 1,400 65,100
Pacific Century Financial Corporation 2,700 65,812
Providian Financial Corporation 900 67,500
The Chase Manhattan Corporation 3,600 245,025
UnionBanCal 1,000 34,125
-----------
920,353
EATING & DRINKING PLACES (2.0%)
Brinker International, Inc. (a) 13,500 389,813
Darden Restaurants, Inc. 12,300 221,400
Foodmaker, Inc. (a) 6,000 132,375
-----------
743,588
ELECTRIC GAS & SANITARY SERVICE (8.1%)
Allegheny Energy, Inc. 1,000 34,500
Ameren Corporation 800 34,150
BEC Energy 4,300 177,106
Baltimore Gas and Electric Company 4,600 142,025
Central & South West Corporation 6,500 178,344
Consolidated Edison, Inc. 700 37,012
DTE Energy Company 7,700 330,137
NUMBER
COMMON STOCKS (CONTINUED) OF SHARES VALUE
--------- -----
ELECTRIC GAS & SANITARY SERVICE (CONTINUED)
Edison International 9,200 $ 256,450
Energy East Corporation 1,400 79,100
Entergy Corporation 1,100 34,237
FPL Group, Inc. 3,300 203,362
Florida Progress Corporation 800 35,850
GPU, Inc. 6,800 300,475
Gener S.A. 1,400 22,400
Houston Industries, Inc. 3,900 125,288
IPALCO Enterprises, Inc. 1,600 88,700
MidAmerican Energy Holdings Co. 2,700 72,563
Minnesota Power, Inc. 2,900 127,600
Montana Power Company 700 39,594
OGE Energy Corp 1,300 37,700
PECO Energy Company 4,100 170,663
PG&E Corporation 3,900 122,850
PP&L Resources, Inc. 2,777 77,409
Public Service Enterprise Group Corp., Inc. 2,300 92,000
Unicom Corporation 900 34,706
UtiliCorp United, Inc. 3,400 124,738
Westcoast Energy, Inc. 3,600 71,550
-----------
3,050,509
ELECTRICAL & ELECTRONIC MACHINERY (3.6%)
AMP, Inc. 1,200 62,475
American Power Conversion Corp. (a) 1,400 67,769
Flextronics International Ltd. (a) 800 68,650
Intel Corporation 2,600 308,181
Lucent Technologies, Inc. 1,400 154,000
Maytag Corporation 1,000 62,250
Nokia Oyj-Sponsored ADR 2,600 313,137
Sanmina Corporation (a) 1,100 68,613
Tellabs, Inc. (a) 900 61,706
Whirlpool Corporation 3,500 193,813
-----------
1,360,594
FABRICATED METAL PRODUCTS (0.2%)
Ball Corporation 1,400 64,050
FOOD & KINDRED PRODUCTS (2.8%)
Adolph Coors Company 5,500 310,578
Anheuser-Busch Companies, Inc. 6,300 413,438
Flowers Industries, Inc. 6,400 153,200
The Earthgrains Company 6,300 194,906
-----------
1,072,122
FURNITURE & FIXTURES (0.8%)
Furniture Brands International, Inc. (a) 10,700 291,575
GENERAL BUILDING CONTRACTORS (1.7%)
Centex Corporation 14,000 630,875
GENERAL MERCHANDISE STORES (3.6%)
Dillard's, Inc. 5,900 167,413
Dollar Tree Stores, Inc. (a) 3,600 157,163
Federated Department Stores, Inc. (a) 11,300 492,256
Kmart Corporation (a) 15,700 240,406
Wal-Mart Stores, Inc. 3,900 317,606
-----------
1,374,844
</TABLE>
14
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (Continued)
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS (CONTINUED) OF SHARES VALUE
--------- -----
<S> <C> <C>
HEAVY CONSTRUCTION CONTRACTORS (0.6%)
McDermott International, Inc. 9,600 $ 237,000
HOLDING & OTHER INVESTMENT OFFICES (2.3%)
Apartment Investment & Management Co. 4,000 148,750
CarrAmerica Realty Corporation 4,800 115,200
Duke Realty Investments, Inc. 3,400 79,050
Equity Office Properties Trust 2,400 57,600
FelCor Lodging Trust, Inc. 200 4,612
General Growth Properties 1,600 60,600
Kimco Realty Corporation 3,800 150,813
Liberty Property Trust 7,300 179,763
ProLogis Trust 2,700 56,025
-----------
852,413
HOTELS & OTHER LODGING PLACES (0.1%)
Sun International Hotels Ltd. (a) 1,100 49,981
INDUSTRIAL MACHINERY & EQUIPMENT (2.6%)
Adaptec, Inc. (a) 3,000 52,594
Apple Computer (a) 5,800 237,619
Dell Computer Corporation (a) 3,500 256,266
EMC Corporation (a) 700 59,500
Ingersoll-Rand Company 2,600 122,037
Lexmark International Group, Inc. (a) 700 70,350
Network Appliance, Inc. (a) 1,600 71,600
Symbol Technologies, Inc. 1,100 70,331
YORK International Corporation 1,400 57,137
-----------
997,434
INSTRUMENTS & RELATED PRODUCTS (1.4%)
Medtronic, Inc. 5,500 408,375
Northrop Grumman Corporation 800 58,500
Waters Corporation (a) 700 61,075
-----------
527,950
INSURANCE CARRIERS (7.1%)
AFLAC, Inc. 1,500 66,000
Ambac Financial Group, Inc. 4,200 252,787
CIGNA Corporation 3,200 247,400
Conseco, Inc. 2,700 82,519
Delphi Financial Group, Inc. 3,262 171,051
Everest Reinsurance Holdings, Inc. 6,100 237,519
Financial Security Assurance Holding Ltd. 1,200 65,100
Fremont General Corporation 15,000 371,250
Liberty Financial Companies, Inc. 4,800 129,600
Loews Corporation 2,100 206,325
MBIA, Inc. 2,300 150,794
Old Republic International Corporation 8,850 199,125
The Allstate Corporation 6,100 235,612
The PMI Group, Inc. 3,100 153,062
The Progressive Corporation 400 67,750
UNUM Corporation 1,100 64,213
-----------
2,700,107
METAL MINING (0.3%)
Barrick Gold Corporation 3,200 62,400
Placer Dome, Inc. 4,300 49,450
-----------
111,850
MISC. MANUFACTURING INDUSTRIES (0.9%)
Tyco International Ltd. 4,400 331,925
NUMBER
COMMON STOCKS (CONTINUED) OF SHARES VALUE
--------- -----
NONDEPSITORY INSTITUTIONS (1.9%)
Countrywide Credit Industries, Inc. 3,100 $ 155,581
Fannie Mae 3,400 251,600
Freddie Mac 5,000 322,188
-----------
729,369
PETROLEUM & COAL PRODUCTS (1.4%)
Ashland, Inc. 4,000 193,500
The Coastal Corporation 9,800 342,388
-----------
535,888
PRIMARY METAL INDUSTRIES (0.6%)
Pohang Iron & Steel Company Ltd. 10,900 183,938
Reynolds Metals Company 1,100 57,956
-----------
241,894
PRINTING & PUBLISHING (0.7%)
American Greetings Corporation 3,700 151,931
Deluxe Corporation 1,600 58,500
Knight Ridder, Inc. 1,100 56,238
-----------
266,669
RAILROAD TRANSPORTATION (1.2%)
Burlington Northern Santa Fe Corp. 5,900 199,125
Canadian Pacific Ltd. 12,600 237,825
-----------
436,950
RETAIL-APPAREL & ACCESSORIES (3.2%)
Ross Stores, Inc. 20,200 794,744
The Gap, Inc. 6,000 337,500
The TJX Companies, Inc. 2,300 66,700
-----------
1,198,944
RETAIL-BUILDING MATERIALS (1.5%)
Lowe's Companies, Inc. 6,400 327,600
The Home Depot, Inc. 4,200 256,988
-----------
584,588
RETAIL-MISCELLANEOUS (0.6%)
CDW Computer Centers, Inc. (a) 600 58,088
Longs Drug Stores Corporation 4,200 157,500
-----------
215,588
RUBBER & MISC. PLASTICS PRODUCTS (0.7%)
Armstrong World Industries, Inc. 900 54,281
Premark International, Inc. 6,000 207,750
-----------
262,031
SECURITY & COMMODITY (0.1%)
A.G. Edwards, Inc. 1,350 50,287
SERVICES-AUTO REPAIR GARAGES (0.3%)
Ryder System, Inc. 4,900 127,400
SERVICES-ENGINEERING ACCOUNTING (0.5%)
Fluor Corporation 4,600 195,787
SERVICES-HEALTH SERVICES (0.2)
Lincare Holdings, Inc. (a) 1,800 72,956
STONE CLAY & GLASS PRODUCTS (2.9%)
Hanson Plc 3,700 144,300
Lafarge Corporation 4,000 162,000
Lone Star Industries, Inc. 1,900 69,944
Southdown, Inc. 6,000 355,125
USG Corporation 7,200 366,750
-----------
1,098,119
</TABLE>
15
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (Continued)
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS (CONTINUED) OF SHARES VALUE
--------- -----
<S> <C> <C>
TEXTILE MILL PRODUCTS (0.9%)
Mohawk Industries, Inc. (a) 7,950 $ 334,397
TRANSPORTATION BY AIR (6.7%)
AMR Corporation (a) 9,800 581,875
Airborne Freight Corporation 18,700 674,369
COMAIR Holdings, Inc. 2,000 67,312
Continental Airlines, Inc. (a) 7,000 234,500
Delta Air Lines, Inc. 4,400 228,800
KLM Royal Dutch Airlines NV 9,334 280,020
Southwest Airlines Company 20,000 448,750
-----------
2,515,626
TRANSPORTATION EQUIPMENT (7.6%)
Brunswick Corporation 13,200 326,700
Cordant Technologies, Inc. 6,800 255,000
DaimlerChrysler AG 1 48
Ford Motor Company 10,300 604,481
General Dynamics Corporation 1,000 58,625
General Motors Corporation 900 64,406
Honda Motor Co., Ltd. 300 20,025
Navistar International Corporation (a) 20,300 578,550
PACCAR, Inc. 12,800 524,800
Trinity Industries, Inc. 11,300 435,050
-----------
2,867,685
TRANSPORTATION SERVICES (0.7%)
GATX Corporation 6,800 257,935
WATER TRANSPORTATION (0.6%)
Royal Caribbean Cruises Ltd. 6,200 229,400
WHOLESALE TRADE-DURABLE GOODS (0.2%)
Crane Company 2,000 60,375
WHOLESALE TRADE-NONDURABLE GOODS (1.1%)
Bergen Brunswig Corporation 1,900 66,262
Boise Cascade Corporation 5,200 161,200
SUPERVALU, Inc. 5,500 154,000
-----------
381,462
TOTAL COMMON STOCKS (COSTS $28,404,278) 31,610,944
PRINCIPAL
AMOUNT
------
SHORT-TERM SECURITIES (16.4%)
U.S. GOVERNMENT AGENCY (14.9%)
Federal Home Loan Mortgage Corporation
Discount Note, 5.08%, due 1/14/1999 $1,970,000 $ 1,966,386
Federal National Mortgage Association
Discount Note, 5.06%, due 2/5/1999 3,700,000 3,681,798
-----------
5,648,184
U.S. GOVERNMENT OBLIGATIONS (0.7%)
U.S. Treasury Bills, 3.830% due 1/21/1999 (b) 150,000 149,681
U.S. Treasury Bills, 3.850% due 1/21/1999 (b) 50,000 49,893
U.S. Treasury Bills, 4.250% due 1/21/1999 (b) 50,000 49,882
-----------
249,456
REPURCHASE AGREEMENT (0.8%)
State Street Bank, 3.50%, due 1/4/1999
(Dated 12/31/98, collateralized by U.S. Treasury 316,377 316,377
Note, 5.750%, due 4/3/2003, value $325,500)
-----------
TOTAL SHORT-TERM SECURITIES (Cost $6,214,017) 6,214,017
-----------
-----------
SHORT-TERM SECURITIES (CONTINUED) VALUE
------
TOTAL INVESTMENTS (100.0%) (Cost $34,618,295) $37,824,961
-----------
-----------
(a) Non-income producing.
(b) Portion of the security was pledged to cover margin requirements for
futures contracts. At the period end, the value of the security pledged
amounted to $249,456.
FUTURES CONTRACTS
EXPIRATION CONTRACT UNREALIZED
DATE AMOUNT GAIN
---- ------ ----
4 S&P 500
Futures Contracts-Long March 1999 $1,245,500 $51,244
</TABLE>
OTHER INFORMATION:
Purchases and sales of securities, excluding short-term securities, for the
six months ended December 31, 1998, aggregated $21,620,837 and $25,887,354,
respectively. At December 31, 1998, net unrealized appreciation for tax
purposes aggregated $3,206,666, of which $4,216,264 related to appreciated
investment securities and $1,009,598 related to depreciated investment
securities. The aggregate cost of securities is the same for book and tax
purposes.
SEE ACCOMPANYING NOTES.
16
<PAGE>
Zweig Equity (Small Cap) Portfolio
Statement of Assets and Liabilities
December 31, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $12,259,003)--See accompanying schedule $13,374,746
Dividends, interest and other receivables 13,426
Receivable for investment securities sold 10,520
Receivable for capital shares sold 25,352
-----------
Total assets 13,424,044
LIABILITIES
Cash overdraft 2,131
Accounts payable and accrued expenses 8,207
Payable for repurchased capital stock 112
-----------
Total liabilities 10,450
-----------
NET ASSETS $13,413,594
-----------
-----------
Net Assets consist of:
Paid-in capital $12,489,343
Undistributed net investment income 52,969
Accumulated undistributed net realized loss on investments (244,461)
Net unrealized appreciation on investment securities 1,115,743
-----------
NET ASSETS, for 1,089,585 shares outstanding $13,413,594
-----------
-----------
NET ASSET VALUE, offering and redemption price per share $ 12.31
-----------
-----------
Statement of Operations
Six Months Ended December 31, 1998 (Unaudited)
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $128) $ 79,631
Interest 77,805
-----------
Total investment income 157,436
EXPENSES
Investment advisory and management fees 70,047
Custody and accounting fees 25,483
Professional fees 4,836
Directors' fees and expenses 2,469
Other expenses 4,409
-----------
Total expenses before reimbursement 107,244
Less: expense reimbursement (2,777)
-----------
Net expenses 104,467
-----------
Net investment income 52,969
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on:
Investment securities (202,342)
Futures contracts (42,049)
-----------
Net realized loss (244,391)
Change in unrealized depreciation on investment securities (1,231,112)
-----------
Net loss on investments (1,475,503)
-----------
Net decrease in net assets resulting from operations $(1,422,534)
-----------
-----------
</TABLE>
SEE ACCOMPANYING NOTES
17
<PAGE>
Zweig Equity (Small Cap) Portfolio
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
1998 YEAR ENDED
(UNAUDITED) JUNE 30, 1998
------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 52,969 $ 34,791
Net realized gain (loss) on investments (244,391) 3,021,050
Change in net unrealized depreciation (1,231,112) (316,405)
------------------------------------
Net increase (decrease) in net assets resulting from
operations (1,422,534) 2,739,436
Distributions to shareholders from:
Net investment income (34,791) (103,886)
Net realized gain (3,046,182) (473,364)
------------------------------------
Total distributions to shareholders (3,080,973) (577,250)
Capital share transactions:
Proceeds from sales of shares 2,359,692 4,519,161
Proceeds from reinvested distributions 3,080,973 577,250
Cost of shares redeemed (2,212,014) (3,731,320)
------------------------------------
Net increase in net assets resulting from share
transactions 3,228,651 1,365,091
------------------------------------
Total increase (decrease) in net assets (1,274,856) 3,527,277
NET ASSETS
Beginning of period 14,688,450 11,161,173
------------------------------------
End of period (including undistributed net investment
income of $52,969 and $34,791, respectively) $13,413,594 $14,688,450
------------------------------------
------------------------------------
OTHER INFORMATION
Shares:
Sold 143,687 281,798
Issued through reinvestment of distributions 257,325 35,368
Redeemed (147,183) (233,008)
------------------------------------
Net increase 253,829 84,158
------------------------------------
------------------------------------
SEE ACCOMPANYING NOTES
</TABLE>
18
<PAGE>
Zweig Equity (Small Cap) Portfolio
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
1998 -------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $17.58 $14.85 $13.61 $11.62 $10.65 $10.11
Income from investment operations:
Net investment income 0.05 0.04 0.16 0.11 0.17 0.15
Net realized and unrealized
gain (loss) on investments (1.61) 3.48 2.41 2.04 0.93 0.50
----------------------------------------------------------
Total from investment operations (1.56) 3.52 2.57 2.15 1.10 0.65
Less distributions:
From net investment income (0.04) (0.14) (0.14) (0.16) (0.06) (0.11)
From net realized gain (3.67) (0.65) (1.19) -- (0.07) --
----------------------------------------------------------
Total distributions (3.71) (0.79) (1.33) (0.16) (0.13) (0.11)
----------------------------------------------------------
Net asset value, end of period $12.31 $17.58 $14.85 $13.61 $11.62 $10.65
----------------------------------------------------------
----------------------------------------------------------
TOTAL RETURN (8.19%)(a) 23.72% 20.37% 18.69% 10.39% 6.53%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $13,379 $14,688 $11,161 $11,698 $8,034 $7,591
Ratio of expenses to average net assets 1.55%(b) 1.52% 1.55% 1.55% 1.55% 1.72%
Ratio of net investment income
to average net assets 0.79%(b) 0.26% 0.97% 1.06% 1.54% 1.75%
Ratio of expenses to average net assets
before voluntary expense reimbursement 1.59%(b) 1.56% 1.82% 1.83% 1.59% 2.14%
Ratio of net investment income to
average net assets before voluntary
expense reimbursement 0.75%(b) 0.22% 0.70% 0.78% 1.50% 1.32%
Portfolio turnover rate 40%(a) 113% 59% 101% 67% 249%
(a) Not annualized.
(b) Annualized.
</TABLE>
19
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments
December 31, 1998
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS (86.7%) OF SHARES VALUE
--------- -----
<S> <C> <C>
AGRICULTURAL SERVICES (0.1%)
Veterinary Centers of America, Inc. (a) 700 $ 13,978
APPAREL & OTHER FINISHED PRODUCTS (0.7%)
Kellwood Company 500 12,500
Nautica Enterprises, Inc. (a) 1,600 23,850
Oshkosh B'Gosh, Inc. 900 18,169
Phillips-Van Heusen Corporation 1,900 13,656
Pillowtex Corporation 1,200 32,100
--------
100,275
BASIC CHEMICAL PLASTICS & SYNTHETICS (1.6%)
A. Schulman, Inc. 1,300 29,372
Albemarle Corporation 2,300 54,625
Ethyl Corporation 3,800 22,088
International Specialty Projects, Inc. (a) 4,500 61,031
Methanex Corporation (a) 900 4,584
Roberts Pharmaceutical Corporation (a) 1,200 26,100
W.R. Grace & Co. (a) 1,400 21,963
--------
219,763
BUSINESS SERVICES (4.2%)
ADVO, Inc. (a) 1,100 29,013
Affiliated Computer Services, Inc. (a) 700 31,500
American Management Systems, Inc. (a) 600 24,038
Avant! Corporation (a) 1,800 28,683
Boole & Babbage, Inc. (a) 900 26,438
Check Point Software Technologies Ltd. (a) 700 32,000
Computer Horizons Corporation (a) 1,200 31,875
Computer Task Group, Inc. 1,400 37,975
Electro Rent Corporation (a) 1,900 30,519
GTECH Holdings Corporation (a) 1,100 28,188
Interim Services Inc. (a) 1,900 44,413
MAPICS, Inc.(a) 1,700 28,369
Mercury Interactive Corporation (a) 500 31,598
New Dimension Software Ltd. (a) 200 9,681
Orbotech Ltd. (a) 600 28,294
Personnel Group of America, Inc. (a) 1,500 26,250
Platinum Software Corporation (a) 400 5,100
Renters Services, Inc. (a) 1,000 15,688
Romac International, Inc. (a) 1,100 24,406
Symantec Corporation (a) 2,400 52,050
--------
566,078
DEPOSITORY INSTITUTIONS (3.1%)
Anchor Bancorp Wisconsin, Inc. 400 9,450
BancWest Corporation 600 28,800
CVB Financial Corporation 3 74
Carolina First Corporation 400 10,125
Coast Federal (a) 300 1,978
Dime Community Bancshares 600 12,469
First Republic Bank (a) 200 5,013
FirstFed Financial Corporation (a) 3,100 55,410
Flagstar Bancorp, Inc. 1,300 34,694
GBC Bancorp 1,200 30,788
Harbor Florida Bancorp, Inc. 1,400 15,706
MAF Bancorp, Inc. 1,275 33,708
Mid-America Bancorp 206 5,588
NBT Bancorp, Inc. 315 7,403
Oriental Financial Group, Inc. 600 18,788
NUMBER
COMMON STOCKS (CONTINUED) OF SHARES VALUE
--------- -----
DEPOSITORY INSTITUTIONS (CONTINUED)
PFF Bancorp, Inc.(a) 800 $ 12,650
Pacific Century Financial Corporation 1,200 29,250
Republic Bancorp Inc. 2,625 35,930
Roslyn Bancorp, Inc. 1,500 32,109
Sterling Bancorp 1,400 31,938
T R Financial Corporation 3,300 129,628
--------
541,499
EATING & DRINKING PLACES (2.5%)
Bob Evans Farms, Inc. 900 23,428
Brinker International, Inc. (a) 1,400 40,425
CEC Entertainment, Inc. (a) 2,800 77,700
Foodmaker, Inc. (a) 4,200 92,663
Ruby Tuesday, Inc. 2,500 53,124
Ryan's Family Steak Houses, Inc. (a) 1,700 21,144
Sonic Corporation (a) 900 21,600
--------
330,084
ELECTRIC GAS & SANITARY SERVICES (3.6%)
Aqua Alliance, Inc. (a) 5,400 11,138
Calpine Corporation (a) 1,200 30,300
El Paso Electric Company (a) 7,100 62,125
Empire District Electric Company 1,200 29,700
Hawaiian Electric Industries, Inc. 600 24,150
MDU Resources Group, Inc. 1,700 44,730
Minnesota Power, Inc. 1,500 66,000
Public Service Company of New Mexico 1,500 30,656
Rochester Gas & Electric Corporation 1,800 56,250
Sierra Pacific Resources 1,400 53,200
Southwest Gas Corporation 2,000 53,750
TNP Enterprises, Inc. 500 18,969
--------
480,968
ELECTRICAL & ELECTRONICS MACHINERY (3.3%)
C&D Technologies, Inc. 1,400 38,500
CTS Corporation 1,700 73,950
Cable Design Technologies Corporation (a) 1,700 31,450
Flextronics International Ltd. (a) 300 25,744
Genlyte Group, Inc. (a) 3,000 56,719
Kuhlman Corporation 1,400 53,025
Level One Communications, Inc. (a) 600 21,319
Moog, Inc. (a) 500 19,563
Standard Motor Products 800 19,400
Tekelec (a) 1,900 31,528
Thomas Industries, Inc. 2,150 42,194
Triumph Group, Inc. (a) 900 28,800
--------
442,192
FABRICATED METAL PRODUCTS (2.0%)
Ball Corporation 1,500 68,625
Mark IV Industries, Inc. 1,400 18,200
NCI Building Systems, Inc. (a) 1,900 53,438
Nortek, Inc. (a) 1,000 27,625
The Shaw Group, Inc. (a) 700 5,600
Tower Automotive, Inc. (a) 2,300 57,355
United Dominion Industries Limited 1,600 32,600
--------
263,443
FISHING, HUNTING & TRAPPING (0.1%)
Zapata Corporation 800 9,800
</TABLE>
20
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS (CONTINUED) OF SHARES VALUE
--------- -----
<S> <C> <C>
FOOD & KINDRED PRODUCTS (1.6%)
Canandaigua Brands, Inc. (a) 1,400 $ 80,938
Imperial Holly Corporation 1 5
Smithfield Foods, Inc. (a) 800 27,100
The Earthgrains Company 2,400 74,250
The Robert Mondavi Corporation (a) 700 28,656
--------
210,949
FURNITURE & FIXTURES (1.3%)
BE Aerospace, Inc.(a) 1,000 20,969
Furniture Brands International, Inc. (a) 3,400 92,650
Knoll, Inc. (a) 1,000 29,625
La-Z-Boy, Inc. 1,500 26,719
--------
169,963
GENERAL BUILDING CONTRACTORS (3.8%)
American Homestar Corporation (a) 1,600 24,100
Crossman Communities, Inc. (a) 600 16,575
D.R. Horton, Inc. 2,400 55,200
Del Webb Corporation 1,500 41,344
Fairfield Communities, Inc. (a) 1,200 13,275
Kaufman & Broad Home Corporation 2,100 60,375
M.D.C. Holdings, Inc. 1,000 21,375
McGrath Rentcorp 400 8,700
NVR, Inc. (a) 700 33,380
Pulte Corporation 2,000 55,625
Standard Pacific Corp. 3,300 46,613
The Ryland Group, Inc. 1,400 40,425
Toll Brothers, Inc. (a) 2,200 49,638
U.S. Home Corporation (a) 1,100 36,575
--------
503,200
GENERAL MERCHANDISE STORES (0.8%)
Ames Department Stores, Inc. (a) 3,800 102,363
The Neiman Marcus Groups, Inc. (a) 300 7,481
--------
109,844
HEAVY CONSTRUCTION CONTRACTORS (0.5%)
McDermott International, Inc. 1,200 29,625
Morrison Knudsen Corporation (a) 2,100 20,475
--------
50,100
HOLDING & OTHER INVESTMENTS OFFICES (4.8%)
Apartment Investment & Management Co. 800 29,750
Bradley Real Estates, Inc. 1,200 24,600
Brandywine Realty Trust 1,400 25,025
CBL & Associates Properties, Inc. 1,300 33,555
CarrAmerica Realty Corporation 1,100 26,400
Developers Diversified Realty Corporation 1,000 17,750
Elron Electronic Industries Ltd. 1,600 25,250
Equity Inns, Inc. 4,000 38,500
Essex Property Trust, Inc. 1,100 32,725
Felcor Lodging Trust, Inc. 1,685 38,860
General Growth Properties 1,300 49,238
Glenbourough Realty Trust, Inc. 700 14,263
Health Care REIT, Inc. 1,000 25,875
Highwoods Properties, Inc. 900 23,175
Innkeepers USA Trust 1,700 20,081
Irvine Apartment Communities, Inc. 800 25,500
Liberty Property Trust 1,800 44,325
MGI Properties, Inc. 700 19,556
Pacific Gulf Properties, Inc. 1,000 20,063
Pan Pacific Retail Properties, Inc. 800 15,950
Prentiss Properties Trust 1,100 24,544
RFS Hotel Investors, Inc. 2,900 35,525
Reckson Associates Realty Corporation 1,200 26,625
NUMBER
COMMON STOCKS (CONTINUED) OF SHARES VALUE
--------- -----
HOLDING & OTHER INVESTMENT OFFICES(CONTINUED)
Sunstone Hotel Investors, Inc. 500 $ 4,719
--------
641,854
HOTELS & OTHER LODGING (0.5%)
Harveys Casino Resorts 800 22,150
Prime Hospitality Corporation (a) 1,300 13,731
Sun International Hotels Ltd. (a) 800 36,350
--------
72,231
INDUSTRIAL MACHINERY & EQUIPMENT (4.5%)
Ampco-Pittsburgh Corporation 1,200 13,050
Astec Industries, Inc. (a) 500 27,812
Briggs & Stratton Corporation 500 24,938
Chart Industries, Inc. 900 6,863
Cirrus Logis, Inc. (a) 2,300 22,497
Gardner Denver, Inc. (a) 3,650 53,838
Gleason Corporation 2,100 38,063
International Comfort Products Corporation (a) 1,300 10,400
Lincoln Electric Holdings 200 4,488
Lufkin Industries, Inc. 400 7,400
Mestek, Inc. (a) 700 14,000
Modine Manufacturing Company 400 14,475
Pentair, Inc. 200 7,963
SPS Technologies, Inc. (a) 2,000 113,250
Schawk, Inc. 2,500 34,688
Tecumseh Products Company 300 13,931
Terex Corporation (a) 2,700 77,119
The Manitowoc Company, Inc. 1,850 82,090
The Timken Company 600 11,325
YORK International Corporation 700 28,569
--------
606,759
INSTRUMENTS & RELATED PRODUCTS (3.1%)
Bacou USA, Inc. (a) 1,600 34,400
Canadian Marconi Company 1,400 16,800
Dionex Corporation 600 22,125
Esterline Technologies Corporation (a) 3,100 67,425
Fossil, Inc. (a) 2,050 58,680
GenRad, Inc. (a) 1,500 23,625
MTS Systems Corporation 200 2,675
Mine Safety Appliances Company 600 40,800
The Cooper Companies, Inc. (a) 1,400 28,963
VISX, Inc. (a) 1,300 113,791
Watts Industries, Inc.-Class A 700 11,638
--------
420,922
INSURANCE CARRIERS (7.1%)
Alfa Corporation 1,700 41,013
American Annuity Group, Inc. 3,520 80,960
Amerin Corporation (a) 1,100 26,881
CMAC Investment Corporation 800 36,750
Chartwell Re Corporation 300 7,125
Commerce Group, Inc. 900 31,894
Delphi Financial Group, Inc. 1,144 59,989
Enhance Financial Services Group Inc. 2,500 75,000
FBL Financial Group, Inc. 1,700 41,225
Fidelity National Financial, Inc. 1,694 51,667
Financial Security Assurance Holding Ltd. 1,000 54,250
Fremont General Corporation 2,800 69,300
Land America Financial Group, Inc. 800 44,650
Liberty Financial Companies, Inc. 2,700 72,900
Medical Assurance, Inc. 693 22,912
NAC Re Corp. 200 9,388
National Western Life Insurance Company (a) 300 35,175
</TABLE>
21
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS (CONTINUED) OF SHARES VALUE
--------- -----
<S> <C> <C>
INSURANCE CARRIERS (CONTINUED)
Presidential Life Corporation 2,000 $ 39,563
Reliance Group Holdings, Inc. 1,500 19,313
RenaissanceRe Holdings Ltd. 500 18,310
State Auto Financial Corporation 400 4,975
Stewart Information Services Corporation 500 29,000
Terra Nova (Bermuda) Holdings Limited 500 12,625
The PMI Group, Inc. 700 34,563
Triad Guaranty Inc. (a) 1,400 31,019
-----------
950,447
LEATHER & LEATHER PRODUCTS (0.3%)
The Timberland Company 400 18,225
Weyco Group, Inc 600 15,375
-----------
33,600
LIVESTOCK (0.8%)
Michael Foods, Inc. 1,700 51,000
Pilgrim's Pride Corporation 2,800 55,825
-----------
106,825
LUMBER & WOOD PRODUCTS (0.7%)
Champion Enteprises, Inc. (a) 900 24,638
MacMillan Bloedel Ltd. 1,400 13,820
Premdor, Inc. (a) 900 8,948
TJ International, Inc. 1,600 41,100
-----------
88,506
METAL MINING (0.5%)
Echo Bay Mines Ltd. (a) 9,200 16,100
Stillwater Mining Company (a) 700 28,700
-----------
44,800
MINING QUARRYING OF NONMETAL (0.4%)
Florida Rock Industries, Inc. 200 6,200
Sociedad Quimica y Minera de Chile SA. 800 26,950
-----------
33,150
MISC. MANUFACTURING INDUSTRIES (0.5%)
NACCO Industries, Inc. 300 27,600
Radica Games Ltd. (a) 1,300 18,119
Valmet Oyj 300 7,894
Velcro Industries, N.V. 100 14,825
-----------
68,438
MOTION PICTURES (0.4%)
Avid Technology, Inc. (a) 500 11,719
Hollywood Entertainment Corporation (a) 1,000 27,156
-----------
38,875
NONCLASSIFIED ESTABLISHMENTS (0.2%)
Cristalerias de Chile 600 7,875
PetroFina SA 500 3,750
-----------
11,625
NONDEPOSITORY INSTITUTIONS (2.1%)
AmeriCredit Corporation (a) 2,900 40,055
Doral Financial Corporation 4,300 96,213
Healthcare Financial Partners, Inc. 800 31,750
Indymac Mortgage Holdings, Inc. 1,000 10,563
Resource Banchares Mortgage Group, Inc. 4,000 65,500
Xtra Corporation 900 37,238
-----------
281,319
OIL & GAS EXTRACTION (0.9%)
Atwood Oceanics, Inc. (a) 100 1,700
Chesapeake Corporation 700 25,813
Coflexip SA 300 9,750
Domtar, Inc. 100 588
Equitable Resources, Inc. 700 20,388
Pool Energy Services Company (a) 700 7,569
NUMBER
COMMON STOCKS (CONTINUED) OF SHARES VALUE
--------- -----
OIL & GAS EXTRACTION (CONTINUED)
SEACOR SMIT, Inc. (a) 1,100 $ 54,380
-----------
120,188
PAPER & ALLIED PRODUCTS(0.3%)
Shorewood Packaging Corporation (a) 1,300 26,650
Wausau-Mosinee Paper Corporation 1 10
-----------
26,660
PETROLEUM & COAL PRODUCTS (0.3%)
Elcor Corporation 700 22,619
PRIMARY METAL PRODUCTS (3.1%)
AFC Cable Systems, Inc. (a) 1,400 46,987
Ak Steel Holding Corporation 1,500 35,250
Bethlehem Steel Corporation (a) 4,700 39,363
Curtiss-Wright Corporation 800 30,500
Internet Corporation 2,800 36,574
Precision Castparts Corporation 800 35,400
RTI International Metals, Inc. (a) 2,300 32,200
Roanoke Electric Steel Corporation 1,350 19,448
Superior TeleCom, Inc. 700 33,075
Tredegar Industries, Inc. 4,650 104,625
-----------
413,422
PRINTING & PUBLISHING (1.4%)
Big Flower Holdings, Inc. (a) 1,100 24,269
Consolidated Graphics (a) 500 33,781
Merrill Corporation 2,000 36,625
New England Business Service, Inc. 700 27,388
Quebecor, Inc. 900 19,313
Quebecor Printing, Inc. 300 6,506
World Color Press, Inc. (a) 1,300 39,569
-----------
189,451
RAILROAD TRANSPORTATION (0.2%)
Florida East Coast Industries, Inc. 400 14,075
REAL ESTATE (0.7%)
Castle & Cooke, Inc. (a) 1,000 14,750
Catellus Development Corporation (a) 1,800 25,762
Price Enterprises, Inc. 3,000 15,844
Price Enterprises, Inc. Pfd. Ser. A 1,200 16,650
U.S. Restaurant Properties, Inc. 1,100 26,744
-----------
99,750
RETAIL-APPAREL & ACCESSORIES (1.1%)
American Eagle Outfitters, Inc. (a) 400 26,662
Ann Taylor Stores Corporation (a) 1,300 51,269
The Buckle, Inc. (a) 1,650 39,600
The Cato Corporation 3,100 30,516
-----------
148,047
RETAIL-BUILDING MATERIALS HARDWARE (0.2%)
Eagle Hardware & Garden, Inc. (a) 1,000 32,500
RETAIL-FOOD STORES (0.1%)
The Great Atlantic & Pacific Tea Co., Inc. 600 17,775
RETAIL-FURNITURE HOME FURNISH (1.1%)
Inacom Corporation (a) 900 13,387
Musicland Stores Corporation (a) 3,800 56,763
Trans World Entertainment Corporation (a) 4,000 76,125
-----------
146,275
RETAIL-MISCELLANEOUS (0.9%)
Fingerhut Companies, Inc. 2,600 40,137
Michaels Stores, Inc. (a) 1,000 18,094
Zale Corporation (a) 2,000 64,500
-----------
122,731
</TABLE>
22
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS (CONTINUED) OF SHARES VALUE
--------- -----
<S> <C> <C>
RUBBER & MISC PLASTICS PRODUCTS (0.6%)
First Brands Corporation 600 $ 23,663
Spartech Corporation 2,400 52,800
-----------
76,463
SECURITY & COMMODITY BROKERS (0.1%)
Raymond James Financial, Inc. 900 19,013
SERVICES AMUSEMENT EXCL MOTION (0.2%)
Anchor Gaming (a) 500 28,281
SERVICES-AUTO REPAIR GARAGES(0.6%)
Avis Rent A Car, Inc. (a) 1,200 29,025
Rollins Truck Leasing Corporation 3,700 54,575
-----------
83,600
SERVICES-ENGINEERING ACCOUNTING (0.7%)
Jacobs Engineering Group, Inc. (a) 700 28,525
Sylvan Learning Systems, Inc. (a) 800 24,425
URS Corporation (a) 1,500 35,063
-----------
88,013
SERVICES-HEALTH SERVICES (0.5%)
Hooper Holmes, Inc. 1,200 34,800
Universal Health Services, Inc. (a) 500 25,938
-----------
60,738
SPECIAL TRADE CONTRACTORS (0.2%)
Dycom Industries, Inc. (a) 500 28,563
STONE CLAY & GLASS PRODUCTS (1.8%)
Centex Construction Products, Inc. 2,900 117,813
Lone Star Industries, Inc. 3,200 117,800
-----------
235,613
TEXTILE MILL PRODUCTS (0.5%)
Burlington Industries, Inc. (a) 1,800 19,800
Chemfab Corporation (a) 900 18,619
Interface, Inc. 3,400 31,556
-----------
69,975
TRANSIT & PASSENGER TRANSPORTATION (0.1%)
Greyhound Lines, Inc. (a) 2,600 15,438
TRANSPORTATION BY AIR (2.2%)
Airborne Freight Corporation 1,700 61,306
Alaska Air Group, Inc. (a) 2,000 88,500
America West Holdings Corporation (a) 1,700 28,900
Midwest Express Holdings, Inc. (a) 350 9,209
Sky West, Inc. 3,400 111,138
-----------
299,053
TRANSPORTATION EQUIPMENT (5.9%)
A.O. Smith Corporation 1,050 25,790
AAR Corporation 1,100 26,260
Arvin Industries, Inc. 2,000 83,372
Avondale Industries, Inc. (a) 2,800 81,288
Coachmen Industries, Inc. 1,900 49,875
Cordant Technologies, Inc. 1,700 63,750
Fleetwood Enterprises, Inc. 1,400 48,650
MotivePower Industries, Inc. (a) 2,600 83,688
Navistar International Corporation (a) 2,500 71,250
Polaris Industries, Inc. 800 31,350
Sequa Corporation (a) 1,500 89,813
Thor Industires, Inc. 400 10,200
TransTechnology Corporation 400 8,300
Trinity Industries, Inc. 1,100 42,350
Varlen Corporation 1,850 42,608
Winnebago Industries 2,200 33,275
-----------
791,819
NUMBER
COMMON STOCKS (CONTINUED) OF SHARES VALUE
--------- -----
TRANSPORTATION SERVICES (0.3%)
GATX Corporation 1,100 $ 41,663
TRUCKING & WAREHOUSING (1.7%)
J.B. Hunt Transport Services, Inc. 1,700 39,047
M.S. Carriers, Inc. (a) 2,600 84,825
US Freightways Corporation 2,400 69,900
Werner Enterprises, Inc. 2,125 37,586
-----------
231,358
WATER TRANSPORTATION (0.3%)
Sea Containers, Ltd. 1,500 44,906
WHOLESALE TRADE-DURABLE GOODS (4.2%)
Aviall, Inc. (a) 1,300 15,274
Barnes Group, Inc. 2,300 67,563
Borg-Warner Automotive, Inc. 600 33,488
CHS Electronics, Inc. (a) 1,900 32,181
HA-LO Industries, Inc. (a) 800 30,100
Hughes Supply, Inc. 200 5,850
Insight Enterprises, Inc. (a) 2,250 114,609
Owens & Minor, Inc. 1,700 26,775
Reliance Steel & Aluminum Co. 2,150 59,394
Simpson Manufacturing Co., Inc. (a) 600 22,463
Specialty Equipment Companies, Inc. (a) 500 13,531
United Industrial Corporation 500 4,906
-----------
426,134
WHOLESALE TRADE-NONDURABLE (2.2%)
Fresh Del Monte Produce, Inc. (a) 1,500 32,531
Handleman Company (a) 2,500 35,156
Myers Industries, Inc. 1,500 42,938
Stride Rite Corporation 1,800 15,750
United Stationers, Inc. (a) 3,500 94,281
Universal Corporation 1,900 66,738
Valhi, Inc. 800 9,100
-----------
296,494
-----------
TOTAL COMMON STOCKS (Cost $10,486,361) 11,602,104
</TABLE>
23
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------ -----
<S> <C> <C>
SHORT-TERM SECURITIES (13.3%)
U.S. GOVERNMENT OBLIGATIONS (11.8%)
U.S. Treasury Bill, 3.700%, due 1/14/1999 (b) $ 100,000 $ 99,866
Federal Home Loan Mtg. Disc notes, 5.080%,
due 1/14/1999 (b) 1,280,000 1,277,652
Federal Home Loan Mtg. Disc notes, 5.070%
due 1/15/1999 (b) 200,000 199,606
-----------
1,577,124
REPURCHASE AGREEMENT (1.5%)
State Street Bank, 3.50%, due 1/4/1999 (Dated
12/31/1998, collateralized by U.S. Treasury
Note, 5.250%, due 1/31/2001, value $200,850) 195,518 195,518
-----------
TOTAL SHORT-TERM SECURITIES (Cost $1,772,642) 1,772,642
-----------
TOTAL INVESTMENTS (100.0% ) (Cost $12,259,003) $13,374,746
-----------
-----------
</TABLE>
(a) Non-income producing.
(b) A portion of the security was pledged to cover margin requirements for
futures contracts. At the period end, the value of the securities pledged
amounted to $1,577,124.
FUTURES CONTRACTS
<TABLE>
<CAPTION>
EXPIRATION CONTRACT UNREALIZED
DATE AMOUNT GAIN
---------- -------- ----------
<S> <C> <C> <C>
3 S&P 500
Futures Contracts-Long 3/20/1999 $734,325 $2,738
</TABLE>
OTHER INFORMATION:
Purchases and sales of securities, excluding short-term securities, for the
six months ended December 31, 1998, aggregated $4,278,831 and $3,591,891,
respectively. At December 31, 1998, net unrealized appreciation for tax
purposes aggregated $1,115,743, of which $1,740,265 related to appreciated
investment securities and $624,522 related to depreciated investment
securities. The aggregate cost of securities is the same for book and tax
purposes.
SEE ACCOMPANYING NOTES.
24
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements
December 31, 1998
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Legends Fund, Inc. (the "Fund") was formed on July 22, 1992. The Fund is
registered under the Investment Company Act of 1940 (the "1940 Act"), as an
open-end management investment company. As of December 31, 1998, the Fund had
four investment portfolios (the "Portfolios"): Harris Bretall Sullivan &
Smith Equity Growth, Scudder Kemper Value, Zweig Asset Allocation, and Zweig
Equity (Small Cap). ARM Securities Corporation ("ARM Securities"), 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 a variable annuity separate account of both Integrity
Life Insurance Company ("Integrity") and its wholly owned subsidiary,
National Integrity Life Insurance Company ("National Integrity"). Integrity
Capital Advisors, Inc. ("Integrity Capital Advisors"), registered with the
Securities and Exchange Commission as an investment adviser, provides
management services to the Fund pursuant to a management agreement (the
"Management Agreement") effective July 10, 1998.
ARM Financial Group, Inc. ("ARM") is the ultimate parent of Integrity Capital
Advisors, Integrity, National Integrity, and ARM Securities. ARM specializes
in the growing asset accumulation business with particular emphasis on
retirement savings and investment products. At December 31, 1998, ARM had
approximately $9.9 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.
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.
25
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. 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 the trade date net of
brokerage fees, commissions and transfer fees. Interest income is accrued
daily. Dividend income is recorded on the ex-dividend date. Premiums and
discounts on securities purchased are amortized using the 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, which uses the first-in, first-out method.
FEDERAL INCOME TAX MATTERS
The Fund complied with the requirements of the Internal Revenue Code
applicable to regulated investment companies and distributes its taxable net
investment income and net realized gains sufficient to relieve it from all,
or substantially all, federal income, excise and state income taxes.
Therefore, no provision for federal or state income tax is required.
DIVIDEND DISTRIBUTIONS
Dividends from net investment income and distributions from net realized
gains are declared and distributed annually. 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 futures
transactions, passive foreign investment companies, capital losses, and
losses deferred due to wash sales.
26
<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, 1998.
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.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with institutions that the
Fund's investment manager, Integrity Capital Advisors, has determined are
creditworthy pursuant to criteria adopted by the Board of Directors. Each
repurchase agreement is recorded at cost. The Fund requires that the
securities purchased in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the Fund to obtain those
securities in the event of a default under the repurchase agreement. The
value of the securities transferred is monitored daily to ensure that the
value, including accrued interest, of the securities under each repurchase
agreement is equal to or greater than amounts owed to the Fund under each
repurchase agreement.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could
differ from those estimates.
27
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (continued)
2. INVESTMENT ADVISORY AGREEMENTS AND PAYMENTS TO RELATED PARTIES
Integrity Capital Advisors, the Fund's investment adviser, has entered into a
sub-advisory agreement with a registered investment adviser ("Sub-Adviser")
for each of the Portfolios. Integrity Capital Advisors, not the Fund, pays
the sub-advisory fee to each of the Sub-Advisers.
Listed below are management and sub-advisory fees payable as a percentage of
average net assets:
<TABLE>
<CAPTION>
PORTFOLIO MANAGEMENT FEE SUB-ADVISORY FEE
-------------------------------------------------------------------------------
<S> <C> <C>
Harris Bretall Sullivan & Smith Equity Growth 0.65% 0.40%
Scudder Kemper Value 0.65 0.40
Zweig Asset Allocation 0.90 0.65
Zweig Equity (Small Cap) 1.05 0.80
</TABLE>
Under the Management Agreement, Integrity Capital Advisors provides certain
management services to the Fund, and the Fund is responsible for certain of
its direct operating expenses. Integrity 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.
Integrity Capital Advisors has reserved the right to withdraw or modify its
policy of expense reimbursement for the Portfolios.
Certain officers and directors of the Fund are also officers of ARM, ARM
Securities, Integrity Capital Advisors, Integrity, and National Integrity.
The Fund does not pay any amounts to compensate these individuals.
3. CAPITAL SHARES
At December 31, 1998, 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, four classes
of shares authorized by the Board of Directors were being offered as follows:
55,000,000 shares each for Harris Bretall Sullivan & Smith Equity Growth,
Scudder Kemper Value, Zweig Asset Allocation, and Zweig Equity (Small Cap).
At December 31, 1998, Integrity, through its variable annuity Separate
Account II, and National Integrity, through its variable annuity Separate
Account II, were the record owners of all the outstanding shares of the Fund.
28
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (continued)
4. SHAREHOLDER MEETINGS
On July 10, 1998, a Special Meeting of Shareholders of the Fund was held to
consider: (1) approval of a new investment management agreement between the
Fund and Integrity Capital Advisors; (2) approval of new sub-advisory
agreements pertaining to (a) Harris Bretall Sullivan and Smith Equity Growth
Portfolio, (b) Scudder Kemper Value Portfolio, (c) Zweig Asset Allocation
Portfolio, and (d) Zweig Equity (Small Cap) Portfolio; and (3) approval of
interim investment advisory agreements pertaining to (a) Harris Bretall
Sullivan and Smith Equity Growth Portfolio, (b) Scudder Kemper Value
Portfolio, (c) Zweig Asset Allocation Portfolio, and (d) Zweig Equity (Small
Cap) Portfolio. With respect to item (1), 6,806,221.482 shares voted for
approval, 67,083.488 shares voted against approval, and 499,342.477 shares
abstained. With respect to item (2)(a), 1,602,908.025 shares voted for
approval, 9,942.933 shares voted against approval, and 171,452.143 shares
abstained. With respect to item (2)(b), 1,924,209.620 shares voted for
approval, 9,691.203 shares voted against approval, and 115,533.059 shares
abstained. With respect to (2)(c), 2,544,605.829 shares voted for approval,
59,241.330 shares voted against approval, and 110,011.792 shares abstained.
With respect to item (2)(d), 759,303.326 shares voted for approval, 3,356.386
shares voted against approval, and 62,391.800 shares abstained. With respect
to item (3)(a), 1,614,127.405 shares voted for approval, 10,437.963 shares
voted against approval, and 159,737.733 shares abstained. With respect to
item (3)(b), 1,923,871.399 shares voted for approval, 12,073.474 shares voted
against approval, and 113,489.009 shares abstained. With respect to item
(3)(c), 2,555,463.060 shares voted for approval, 40,690.083 shares voted
against approval, and 117,705.807 shares abstained. With respect to item
(3)(d), 758,422.630 shares voted for approval, 3,356.386 shares voted against
approval, and 63,272.496 shares abstained. Accordingly, all matters
considered were approved.
On November 20, 1998, a Special Meeting of Shareholders of the Scudder Kemper
Value Portfolio was held to consider approval of a new sub-advisory agreement
relating to the portfolio. With respect to this proposal, 1,718,603.79 shares
voted for approval, 56,075.25 shares voted against approval, and 309,441.919
shares abstained. Accordingly, the new sub-advisory agreement was approved.
29
<PAGE>
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.
Principal offices located at:
[LOGO]-R- 515 West Market Street
Louisville, Kentucky 40202 Catalog #001728 (2/99)
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