<PAGE>
[LOGO] THE LEGENDS FUND, INC.
ANNUAL REPORT
JUNE 30, 2000
<PAGE>
The Legends Fund, Inc.
Annual Report
June 30, 2000
Contents
<TABLE>
<S> <C>
President's Letter............................................................ 1
Report of Independent Auditors................................................ 2
Financial Statements, Financial Highlights, and Schedules of
Investments:
Harris Bretall Sullivan & Smith Equity Growth Portfolio.................. 3
Scudder Kemper Value Portfolio........................................... 7
Zweig Asset Allocation Portfolio.........................................12
Zweig Equity (Small Cap) Portfolio.......................................17
Notes to Financial Statements.................................................25
Portfolio Performance.........................................................37
</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 TOUCHSTONE
SECURITIES, INC., THE PRINCIPAL UNDERWRITER FOR FUND SHARES, IS A BANK AND FUND
SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED BY THE FEDERAL
DEPOSITORY INSURANCE CORPORATION.
<PAGE>
THE LEGENDS FUND, INC.
--------------------------------------------------------------------------------
We are pleased to present the 2000 Annual Report for The Legends Fund, Inc. (the
"Fund"). Thanks to all of our current investors and we 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 fiscal years ended June
30, 2000 and 1999, respectively, are listed below:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------
PORTFOLIO 2000 1999
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Harris Bretall Sullivan & Smith Equity Growth 18.89% 35.19%
Scudder Kemper Value (23.88%) 18.09%
Zweig Asset Allocation (0.52%) (3.73%)
Zweig Equity (Small Cap) (3.52%) (9.24%)
</TABLE>
Included in this Annual Report is detailed information of the investment
holdings of each portfolio as of June 30, 2000, as well as other financial
information.
The investment disciplines available within the Fund span a broad spectrum,
providing you with the choices and flexibility to plan for the long-term. The
Fund exists for the sole purpose of helping to provide you with valuable tools
for meeting your investment objectives.
If you have any questions or comments, please feel free to contact us at your
convenience.
Sincerely,
/s/Edward J. Haines
Edward J. Haines
President
The Legends Fund, Inc.
1
<PAGE>
Report of Independent Auditors
The Shareholders and Board of Directors
The Legends Fund, Inc.
We have audited the accompanying statements of assets and liabilities of The
Legends Fund, Inc. (the Fund) (comprised of the Harris Bretall Sullivan & Smith
Equity Growth, Scudder Kemper Value, Zweig Asset Allocation and Zweig Equity
(Small Cap) portfolios), including the schedules of investments, as of June 30,
2000, and the related statements of operations for the year then ended and
statements of changes in net assets for each of the two years in the period then
ended and financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned at June 30, 2000, by correspondence with the
custodian and brokers. As to certain securities relating to uncompleted
transactions, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the portfolios of the Fund at June 30, 2000, and the results of their
operations for the year then ended, changes in their net assets for each of the
two years in the period then ended, and financial highlights for each of the
five years in the period then ended in conformity with accounting principles
generally accepted in the United States.
/s/Ernst & Young LLP
Kansas City, Missouri
August 9, 2000
2
<PAGE>
HARRIS BRETALL SULLIVAN & SMITH EQUITY GROWTH PORTFOLIO
Statement of Assets and Liabilities
June 30, 2000
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value (cost $32,210,052)--See accompanying schedule $ 57,187,855
Dividends and interest receivable 10,749
------------------
Total assets 57,198,604
LIABILITIES
Accounts payable and accrued expenses 45,254
Redemptions payable 273,874
------------------
Total liabilities 319,128
------------------
NET ASSETS $ 56,879,476
==================
Net Assets consist of:
Paid-in capital $ 22,929,994
Accumulated undistributed net realized gain on investments 8,971,679
Net unrealized appreciation on investments 24,977,803
------------------
NET ASSETS, for 1,880,597 shares outstanding $ 56,879,476
------------------
------------------
NET ASSET VALUE, offering and redemption price per share $ 30.25
------------------
------------------
</TABLE>
Statement of Operations
Year Ended June 30, 2000
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Dividends $ 266,021
Interest 63,058
------------------
Total investment income 329,079
EXPENSES
Investment advisory and management fees 348,422
Custody and accounting fees 144,729
Professional fees 21,911
Directors' fees and expenses 12,249
Other expenses 13,121
------------------
Total expenses 540,432
------------------
Net investment loss (211,353)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments 9,414,873
Net unrealized depreciation for the year on investments (932,936)
------------------
Net realized and unrealized gain on investments 8,481,937
------------------
Net increase in net assets resulting from operations $ 8,270,584
------------------
------------------
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
HARRIS BRETALL SULLIVAN & SMITH EQUITY GROWTH PORTFOLIO
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
2000 1999
--------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment loss $ (211,353) $ (126,103)
Net realized gain on investments 9,414,873 1,150,781
Net unrealized appreciation (depreciation) for the year on investments (932,936) 12,820,070
--------------------------------------
Net increase in net assets resulting from operations 8,270,584 13,844,748
Distributions to shareholders from:
Net realized gain (1,073,245) (4,108,321)
--------------------------------------
Total distributions to shareholders (1,073,245) (4,108,321)
Capital share transactions:
Proceeds from sales of shares 15,302,142 13,015,410
Proceeds from reinvested distributions 1,073,245 4,108,321
Cost of shares redeemed (22,121,619) (9,093,677)
--------------------------------------
Net increase (decrease) in net assets resulting from share transactions (5,746,232) 8,030,054
--------------------------------------
Total increase in net assets 1,451,107 17,766,481
NET ASSETS
Beginning of period 55,428,369 37,661,888
--------------------------------------
End of period $ 56,879,476 $ 55,428,369
--------------------------------------
--------------------------------------
OTHER INFORMATION
Shares:
Sold 545,381 575,275
Issued through reinvestment of distributions 44,729 180,671
Redeemed (841,749) (407,703)
--------------------------------------
Net increase (decrease) (251,639) 348,243
--------------------------------------
--------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------------------------------
2000 (b) 1999 1998 1997 1996
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning
of period $ 26.00 $ 21.11 $ 17.53 $ 14.49 $ 12.85
Income from investment operations:
Net investment income (loss) (0.05) (0.06) - (a) 0.02 - (a)
Net realized and unrealized
gain on investments 4.83 7.17 4.90 4.13 1.74
-----------------------------------------------------------------------------------
Total from investment
operations 4.78 7.11 4.90 4.15 1.74
Less distributions:
From net investment income - - (0.02) - (a) (0.01)
From net realized gain (0.53) (2.22) (1.30) (1.11) (0.09)
-----------------------------------------------------------------------------------
Total distributions (0.53) (2.22) (1.32) (1.11) (0.10)
-----------------------------------------------------------------------------------
Net asset value, end of period $ 30.25 $ 26.00 $ 21.11 $ 17.53 $ 14.49
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
TOTAL RETURN 18.89% 35.19% 29.11% 30.23% 13.59%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $56,879 $55,428 $ 37,662 $ 28,815 $ 23,810
Ratio of expenses to average
net assets 1.01% 0.96% 0.95% 1.03% 1.04%
Ratio of net investment income
(loss) to average net assets (0.39%) (0.29%) (0.01%) 0.14% 0.03%
Portfolio turnover rate 40% 27% 57% 46% 58%
</TABLE>
(a) Less than $0.01 per share.
(b) Effective March 3, 2000, Touchstone Advisors, Inc. replaced Integrity
Capital Advisors, Inc. as investment adviser for the Fund.
5
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Schedule of Investments
June 30, 2000
<TABLE>
<CAPTION>
COMMON STOCKS (97.5%) Number
of Shares Value
--------------- ---------------
<S> <C> <C>
BASIC CHEMICAL, PLASTICS & SYNTHETICS (10.5%)
Bristol-Myers Squibb Company 13,100 $ 763,075
Colgate-Palmolive Company 20,000 1,197,500
Genentech, Inc. (a) 8,100 1,393,200
Pfizer, Inc. 32,000 1,536,000
Schering-Plough Corporation 21,400 1,080,700
---------------
5,970,475
BUSINESS SERVICES (12.8%)
America Online, Inc. (a) 21,900 1,155,225
Broadvision, Inc. (a) 26,800 1,359,261
Interpublic Group Companies, Inc. 24,800 1,066,400
Microsoft Corporation (a) 19,000 1,519,406
Sun Microsystems, Inc. (a) 12,000 1,091,625
Yahoo, Inc. (a) 9,300 1,152,328
---------------
7,344,245
COMMUNICATIONS (4.8%)
Qwest Communications (a) 23,000 1,142,813
SBC Communications, Inc. 15,000 648,750
Worldcom, Inc. (a) 21,300 977,803
---------------
2,769,366
DEPOSITORY INSTITUTIONS (3.9%)
Citigroup, Inc. 22,900 1,379,725
Wells Fargo Company 21,600 837,000
---------------
2,216,725
ELECTRICAL & ELECTRONIC MACHINERY (14.3%)
General Electric Company 44,400 2,353,200
Intel Corporation 15,600 2,085,038
Lucent Technologies, Inc. 16,700 989,475
PMC Sierra, Inc. (a) 7,000 1,243,594
Texas Instruments, Inc. 21,800 1,497,388
---------------
8,168,695
FABRICATED METAL PRODUCTS (1.4%)
Illinois Tool Works, Inc. 14,400 820,800
FOOD AND KINDRED PRODUCTS (2.4%)
Coca-Cola Company 23,800 1,367,013
GENERAL MERCHANDISE STORES (3.5%)
Target Corporation 15,500 899,000
Wal-Mart Stores, Inc. 19,300 1,112,163
---------------
2,011,163
INDUSTRIAL MACHINERY & EQUIPMENT (17.0%)
Applied Materials, Inc. (a) 18,000 1,631,813
Cisco Systems, Inc. (a) 37,400 2,376,067
Dell Computer Corporation (a) 23,000 1,134,906
EMC Corporation (a) 28,600 2,200,411
International Business Machines Corporation 8,500 931,281
Network Appliance, Inc. (a) 18,000 1,448,438
---------------
9,722,916
INSTRUMENTS & RELATED PRODUCTS (3.4%)
JDS Uniphase Corporation (a) 16,000 1,917,500
<CAPTION>
COMMON STOCKS (continued) Number
of Shares Value
--------------- ---------------
<S> <C> <C>
INSURANCE CARRIERS (2.4%)
American International Group, Inc. 11,483 $ 1,349,253
MOTION PICTURES (2.0%)
Walt Disney Company 30,000 1,164,375
OIL & GAS EXTRACTION (2.0%)
Schlumberger Ltd. 15,000 1,119,375
RETAIL-BUILDING MATERIAL HARDWARE (2.1%)
The Home Depot, Inc. 24,000 1,198,500
RETAIL - MISCELLANEOUS (4.0%)
Costco Wholesale Corporation (a) 30,000 990,938
Walgreen Company 41,000 1,319,688
---------------
2,310,626
SECURITY & COMMODITY BROKERS (7.0%)
The Goldman Sachs Group, Inc. 12,600 1,195,425
Morgan Stanley, Dean Witter & Co. 16,600 1,381,950
The Charles Schwab Corporation 42,600 1,432,425
---------------
4,009,800
SERVICES-ENGINEERING, ACCOUNTING,
RESEARCH, MANAGEMENT (2.3%)
Halliburton Company 28,000 1,321,250
WHOLESALE TRADE-DURABLE GOODS (1.7%)
Johnson & Johnson, Inc. 9,500 967,813
---------------
TOTAL COMMON STOCKS (Cost $30,772,087) 55,749,890
<CAPTION>
Principal
SHORT-TERM SECURITIES (2.5%) Amount
REPURCHASE AGREEMENT (2.5%) -------------
State Street Bank, 3.50%, due 7/3/2000
(Collateralized by U.S. Treasury Note
5.125%, due 8/31/2000, value
$1,479,000) $1,437,965 1,437,965
---------------
TOTAL SHORT -TERM SECURITIES (Cost $1,437,965) 1,437,965
---------------
TOTAL INVESTMENTS (100.0%) (Cost $32,210,052) $ 57,187,855
---------------
---------------
</TABLE>
(a) Non-income producing.
OTHER INFORMATION:
Cost of purchases and proceeds from sales of securities, excluding short-term
securities, for the year ended June 30, 2000 aggregated $20,716,382 and
$27,320,639, respectively. At June 30, 2000, net unrealized appreciation for
tax purposes aggregated $24,940,218, of which $25,479,100 related to
appreciated investments and $538,882 related to depreciated investments. The
aggregate cost of securities was for $32,247,637 for tax purposes.
SEE ACCOMPANYING NOTES.
6
<PAGE>
Scudder Kemper Value Portfolio
Statement of Assets and Liabilities
June 30, 2000
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investment in securities, at value (cost $24,722,985)--See accompanying schedule $ 21,125,080
Dividends and interest receivable 43,458
Receivable for capital shares sold 18,535
---------------
Total assets 21,187,073
LIABILITIES
Payable for investments purchased 171,182
Accounts payable and accrued expenses 21,388
Redemptions payable 614
---------------
Total liabilities 193,184
---------------
NET ASSETS $ 20,993,889
---------------
---------------
Net Assets consist of:
Paid-in capital $ 23,382,568
Undistributed net investment income 575,556
Accumulated undistributed net realized gain on investments 633,670
Net unrealized depreciation on investments (3,597,905)
---------------
NET ASSETS, for 1,502,925 shares outstanding $ 20,993,889
---------------
---------------
NET ASSET VALUE, offering and redemption price per share $ 13.97
---------------
---------------
</TABLE>
Statement of Operations
Year Ended June 30, 2000
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Dividends $ 886,043
Interest 33,300
---------------
Total investment income 919,343
EXPENSES
Investment advisory and management fees 207,748
Custody and accounting fees 86,295
Professional fees 21,911
Directors' fees and expenses 12,249
Other expenses 15,584
---------------
Total expenses 343,787
---------------
Net investment income 575,556
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments 633,670
Net unrealized depreciation for the year on investments (12,023,155)
---------------
Net realized and unrealized loss on investments (11,389,485)
---------------
Net decrease in net assets resulting from operations $ (10,813,929)
===============
</TABLE>
SEE ACCOMPANYING NOTES.
7
<PAGE>
Scudder Kemper Value Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
2000 1999
---------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 575,556 $ 723,270
Net realized gain on investments 633,670 6,626,918
Net unrealized appreciation (depreciation) for the year on investments (12,023,155) 407,796
---------------------------------
Net increase (decrease) in net assets resulting from operations (10,813,929) 7,757,984
Distributions to shareholders from:
Net investment income (723,270) (591,315)
Net realized gain (6,626,918) (4,706,677)
---------------------------------
Total distributions to shareholders (7,350,188) (5,297,992)
Capital share transactions:
Proceeds from sales of shares 5,703,152 13,300,551
Proceeds from reinvested distributions 7,350,188 5,297,991
Cost of shares redeemed (24,064,739) (17,325,011)
---------------------------------
Net increase (decrease) in net assets resulting from share transactions (11,011,399) 1,273,531
---------------------------------
Total increase (decrease) in net assets (29,175,516) 3,733,523
NET ASSETS
Beginning of period 50,169,405 46,435,882
---------------------------------
End of period (including undistributed net investment income of $575,556
and $723,270, respectively) $ 20,993,889 $ 50,169,405
---------------------------------
---------------------------------
OTHER INFORMATION
Shares:
Sold 265,906 641,261
Issued through reinvestment of distributions 526,288 264,302
Redeemed (1,563,989) (840,192)
---------------------------------
Net increase (decrease) (771,795) 65,371
---------------------------------
---------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
8
<PAGE>
Scudder Kemper Value Portfolio
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------------------------------
2000 (a) 1999 1998 1997 1996
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning
of period $ 22.06 $ 21.02 $ 20.63 $ 16.17 $ 12.59
Income from investment operations:
Net investment income 0.39 0.33 0.26 0.26 0.18
Net realized and unrealized
gain (loss) on investments (5.12) 3.22 4.08 5.04 3.70
-----------------------------------------------------------------------------------
Total from investment
operations (4.73) 3.55 4.34 5.30 3.88
Less distributions:
From net investment income (0.33) (0.28) (0.26) (0.19) (0.19)
From net realized gain (3.03) (2.23) (3.69) (0.65) (0.11)
-----------------------------------------------------------------------------------
Total distributions (3.36) (2.51) (3.95) (0.84) (0.30)
-----------------------------------------------------------------------------------
Net asset value, end of period $ 13.97 $ 22.06 $ 21.02 $ 20.63 $ 16.17
===================================================================================
TOTAL RETURN (23.88%) 18.09% 23.36% 33.78% 31.22%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $ 20,994 $ 50,169 $ 46,436 $ 30,930 $ 19,705
Ratio of expenses to average
net assets 1.08% 0.96% 0.94% 1.05% 1.06%
Ratio of expenses to average net
assets before voluntary
expense reimbursement 1.08% 0.96% 0.94% 1.05% 1.07%
Ratio of net investment income
to average net assets 1.80% 1.56% 1.58% 1.62% 1.65%
Ratio of net investment income
to average net assets before
voluntary expense
reimbursement 1.80% 1.56% 1.58% 1.62% 1.64%
Portfolio turnover rate 42% 50% 57% 88% 18%
</TABLE>
(a) Effective March 3, 2000, Touchstone Advisors, Inc. replaced Integrity
Capital Advisors, Inc. as investment adviser for the Fund.
9
<PAGE>
SCUDDER KEMPER VALUE PORTFOLIO
Schedule of Investments
June 30, 2000
<TABLE>
<CAPTION>
COMMON STOCKS (91.5%) Number
of Shares Value
------------ ----------
<S> <C> <C>
APPAREL & OTHER FINISHED PRODUCTS (1.8%)
VF Corporation 16,400 $ 390,525
BASIC CHEMICAL, PLASTICS & SYNTHETICS (10.6%)
Abbott Laboratories 17,200 766,475
Air Products and Chemicals, Inc 12,300 378,992
Bristol Myers Squibb Company 8,100 471,825
International Flavors & Fragrances, Inc. 7,500 226,406
Merck & Co., Inc. 3,400 260,525
Praxair, Inc. 3,700 138,519
------------
2,242,742
BUSINESS SERVICES (4.4%)
Computer Associates International, Inc. 6,200 317,363
Equifax, Inc. 23,100 606,375
------------
923,738
DEPOSITORY INSTITUTIONS (10.2%)
Bank of America Corporation 8,116 348,986
First Union Corporation 16,200 401,963
KeyCorp 22,900 403,613
PNC Bank Corporation 6,010 281,719
Wachovia Corporation 4,300 233,275
Washington Mutual, Inc. 17,088 493,414
------------
2,162,970
ELECTRICAL & ELECTRONIC MACHINERY (2.8%)
Emerson Electric Company 7,000 422,625
Thomas & Betts Corporation 9,300 177,863
------------
600,488
FOOD AND KINDRED PRODUCTS (5.2%)
H.J. Heinz Company 12,600 551,250
Sara Lee Corporation 28,600 552,338
------------
1,103,588
GENERAL MERCHANDISE STORES (5.4%)
May Department Stores Company 17,700 424,800
J. C. Penney Company, Inc. 17,200 317,125
Sears, Roebuck and Company 12,000 391,500
------------
1,133,425
INDUSTRIAL MACHINERY & EQUIPMENT (8.6%)
Diebold, Inc. 17,900 498,963
Minnesota Mining and Manufacturing Co. 3,700 305,250
Pitney Bowes, Inc. 13,700 548,000
United Technologies Corporation 7,900 465,113
------------
1,817,326
INSTRUMENTS & RELATED PRODUCTS (5.4%)
Becton Dickinson & Company 23,000 659,813
Raytheon Company 9,200 177,100
Xerox Corporation 14,400 298,800
------------
1,135,713
<CAPTION>
Number
of Shares Value
------------ ----------
COMMON STOCKS (CONTINUED)
<S> <C> <C>
INSURANCE CARRIERS (1.5%)
The Allstate Corporation 14,600 $ 324,850
LUMBER &WOOD PRODUCTS (1.4%)
Louisiana-Pacific Corporation 28,000 304,500
NONDEPOSITORY INSTITUTIONS (8.0%)
Federal Home Mortgage Corporation 21,000 850,500
Federal National Mortgage Corporation 16,000 835,000
------------
1,685,500
PAPER & ALLIED PRODUCTS (2.8%)
Sonoco Products Company 28,500 586,031
PETROLEUM & COAL PRODUCTS (6.0%)
BP Amoco PLC 5,256 297,293
Exxon Mobil Corporation 6,000 471,000
Texaco, Inc. 9,400 500,550
------------
1,268,843
RAILROAD TRANSPORTATION (2.5%)
Burlington Northern Santa Fe Corp. 12,900 295,894
CSX Corporation 10,600 224,588
------------
520,482
RETAIL-FOOD STORES (1.5%)
Albertson's, Inc. 9,700 322,525
RETAIL-MISCELLANEOUS (1.8%)
Newell Rubbermaid, Inc. 15,000 386,250
TOBACCO MANUFACTURERS OR CIGARETTES (3.7%)
Philip Morris Companies, Inc. 29,300 778,281
TRANSPORTATION BY AIR (1.2%)
Fedex Corporation (a) 6,600 250,800
TRANSPORTATION EQUIPMENT (2.2%)
Dana Corporation 7,300 154,669
Ford Motor Company 7,200 309,600
------------
464,269
WHOLESALE TRADE - DURABLE GOODS (4.5%)
Johnson & Johnson, Inc. 2,300 234,313
Du Pont E I DE Nemours & Company 6,600 288,750
Unilever N V 9,200 395,600
Visteon Corporation 942 11,428
------------
930,091
------------
TOTAL COMMON STOCKS (COST $22,930,842) $ 19,332,937
</TABLE>
10
<PAGE>
SCUDDER KEMPER VALUE PORTFOLIO
Schedule of Investments (continued)
<TABLE>
<CAPTION>
SHORT-TERM SECURITIES (8.5%) Principal
Amount Value
----------- -----------
REPURCHASE AGREEMENT (8.5%)
<S> <C> <C>
State Street Bank, 3.50%, due 7/3/2000
(Collateralized by U.S. Treasury Note
5.50%, due 3/31/2003, value $1,826,550) $ 1,792,143 $ 1,792,143
--------------
TOTAL SHORT-TERM SECURITIES (Cost $1,792,143) 1,792,143
--------------
TOTAL INVESTMENTS (100.0%) (Cost $ 24,722,985) $ 21,125,080
==============
</TABLE>
(a) Non-income producing.
OTHER INFORMATION:
Cost of purchases and proceeds from sales of securities, excluding
short-term securities, for the year ended June 30, 2000, aggregated
$13,176,777 and $30,829,444 respectively. At June 30, 2000, net unrealized
depreciation for tax purposes aggregated $4,890,302 of which $944,699
related to appreciated investments and $5,835,001 related to depreciated
investments. The aggregate cost of securities was $26,015,382 for tax
purposes.
SEE ACCOMPANYING NOTES.
11
<PAGE>
ZWEIG ASSET ALLOCATION PORTFOLIO
Statement of Assets and Liabilities
June 30, 2000
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investment in securities, at value (cost $13,909,803)--See accompanying schedule $ 14,286,162
Receivable for investments sold 13,665
Dividends and interest receivable 8,093
-----------------
Total assets 14,307,920
LIABILITIES
Cash overdraft 13,665
Accounts payable and accrued expenses 17,774
Redemptions payable 870
-----------------
Total liabilities 32,309
-----------------
NET ASSETS $ 14,275,611
=================
Net Assets consist of:
Paid-in capital $ 12,359,932
Undistributed net investment income 342,115
Accumulated undistributed net realized gain on investments 1,189,480
Net unrealized appreciation on investments and futures contracts 384,084
-----------------
NET ASSETS, for 1,360,383 shares outstanding $ 14,275,611
=================
NET ASSET VALUE, offering and redemption price per share $ 10.49
=================
</TABLE>
Statement of Operations
Year Ended June 30, 2000
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Dividends $ 153,491
Interest 466,661
-----------------
Total investment income 620,152
EXPENSES
Investment advisory and management fees 177,505
Custody and accounting fees 53,252
Professional fees 21,910
Directors' fees and expenses 12,249
Other expenses 13,121
-----------------
Total expenses 278,037
-----------------
Net investment income 342,115
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on:
Investments 1,072,376
Futures contracts 128,501
-----------------
Net realized gain 1,200,877
Net unrealized depreciation for the year on:
Investments (2,272,496)
Futures contracts (3,672)
-----------------
Net unrealized depreciation for the year (2,276,168)
-----------------
Net realized and unrealized loss on investments (1,075,291)
-----------------
Net decrease in net assets resulting from operations $ (733,176)
=================
</TABLE>
SEE ACCOMPANYING NOTES.
12
<PAGE>
ZWEIG ASSET ALLOCATION PORTFOLIO
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
2000 1999
-------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income $ 342,115 $ 411,239
Net realized gain on investments 1,200,877 5,955,028
Net unrealized depreciation for the year on investments (2,276,168) (8,938,463)
-------------------------------------------
Net decrease in net assets resulting from operations (733,176) (2,572,196)
Distributions to shareholders from:
Net investment income (411,239) (365,323)
Net realized gain (6,010,725) (6,048,315)
-------------------------------------------
Total distributions to shareholders (6,421,964) (6,413,638)
Capital share transactions:
Proceeds from sales of shares 2,825,128 1,260,662
Proceeds from reinvested distributions 6,421,964 6,413,638
Cost of shares redeemed (18,825,911) (15,129,106)
-------------------------------------------
Net decrease in net assets resulting from share transactions (9,578,819) (7,454,806)
-------------------------------------------
Total decrease in net assets (16,733,959) (16,440,640)
NET ASSETS
Beginning of period 31,009,570 47,450,210
-------------------------------------------
End of period (including undistributed net investment income
of $342,115 and $411,239, respectively) $ 14,275,611 $ 31,009,570
===========================================
OTHER INFORMATION
Shares:
Sold 287,813 84,700
Issued through reinvestment of distributions 611,977 488,856
Redeemed (1,756,390) (1,059,406)
-------------------------------------------
Net decrease (856,600) (485,850)
===========================================
</TABLE>
SEE ACCOMPANYING NOTES.
13
<PAGE>
ZWEIG ASSET ALLOCATION PORTFOLIO
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------------------
2000 (a) 1999 1998 1997 1996
----------------------------------------------------------------------------
SELECTED PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 13.99 $ 17.56 $ 14.63 $ 14.11 $ 13.02
Income (loss) from investment operations:
Net investment income 0.28 0.21 0.14 0.19 0.21
Net realized and unrealized
gain (loss) on investments (0.49) (1.04) 2.97 2.20 1.21
----------------------------------------------------------------------------
Total from investment
operations (0.21) (0.83) 3.11 2.39 1.42
Less distributions:
From net investment income (0.21) (0.16) (0.18) (0.22) (0.33)
From net realized gain (3.08) (2.58) -- (1.65) --
----------------------------------------------------------------------------
Total distributions (3.29) (2.74) (0.18) (1.87) (0.33)
----------------------------------------------------------------------------
Net asset value, end of period $ 10.49 $ 13.99 $ 17.56 $ 14.63 $ 14.11
============================================================================
TOTAL RETURN (0.52%) (3.73%) 21.38% 18.63% 11.06%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $ 14,276 $ 31,010 $ 47,450 $ 42,848 $ 40,222
Ratio of expenses to average
net assets 1.41% 1.23% 1.18% 1.28% 1.25%
Ratio of net investment income
to average net assets 1.73% 1.13% 0.80% 1.29% 1.55%
Portfolio turnover rate 207% 109% 65% 89% 105%
</TABLE>
(a) Effective March 3, 2000, Touchstone Advisors, Inc. replaced Integrity
Capital Advisors, Inc. as investment adviser for the Fund.
14
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments
June 30, 2000
<TABLE>
<CAPTION>
Number
COMMON STOCKS (68.8%) of Shares Value
----------- ----------
<S> <C> <C>
BASIC CHEMICAL, PLASTICS & SYNTHETICS (7.5%)
Abbott Laboratories 1,600 $ 71,300
Amgen, Inc. (a) 700 49,197
Biogen, Inc. (a) 800 51,575
Chiron Corporation (a) 2,000 95,000
Clorox Company 1,600 71,700
Colgate Company 400 23,950
Merck & Company, Inc. 3,700 283,513
Occidental Petroleum Corporation 1,900 40,019
Pfizer, Inc. 2,200 105,600
Procter & Gamble Company 1,600 91,600
Schering-Plough Corporation 3,700 186,850
----------
1,070,304
BUSINESS SERVICES (7.1%)
Adobe Systems, Inc. 1,000 129,906
Citrix Systems, Inc. (a) 700 13,278
Ebay, Inc. (a) 1,200 65,138
Electronic Data Systems Corporation 100 4,125
First Data Corporation 1,000 49,625
Interpublic Group of Companies, Inc. 800 34,400
Microsoft Corporation (a) 2,300 183,928
Oracle Corporation (a) 1,500 126,047
Siebel Systems, Inc. (a) 300 49,078
Sun Microsystems, Inc. (a) 1,800 163,744
Yahoo, Inc. (a) 600 74,344
3Com Corporation (a) 2,000 115,188
----------
1,008,801
COMMUNICATIONS (6.2%)
AT & T Corporation (a) 2,600 82,225
AT & T Wireless Group 200 5,575
Bell Atlantic Corporation (a) 1,400 71,138
BellSouth Corporation 3,400 144,925
Comcast Corporation (a) 700 28,372
Infinity Broadcasting Corporation (a) 900 32,794
SBC Communications, Inc. 4,100 177,325
U S West, Inc. 1,800 154,350
United States Cellular Corporation (a) 900 56,700
Worldcom, Inc. (a) 2,900 133,128
----------
886,532
DEPOSITORY INSTITUTIONS (4.8%)
Chase Manhattan Corporation 1,350 62,184
Citigroup, Inc. 3,150 189,788
Firstar Corporation 3,700 77,931
FleetBoston Financial Corporation 2,600 88,400
J P Morgan & Co., Inc. 200 22,025
PNC Bank Corporation 2,600 121,875
Providian Financial Corporation 1,300 117,000
----------
679,203
EATING & DRINKING PLACES (0.3%)
Darden Restaurants, Inc. 700 11,375
Tricon Global Restaurants, Inc. (a) 1,000 28,250
----------
39,625
ELECTRIC GAS & SANITARY SERVICE (0.8%)
Edison International 1,900 38,950
Entergy Corporation 1,500 40,781
Public Service Enterprise Group Corporation Inc 1,000 34,625
----------
114,356
<CAPTION>
Number
COMMON STOCKS (CONTINUED) of Shares Value
----------- ----------
<S> <C> <C>
ELECTRICAL & ELECTRONIC MACHINERY (12.8%)
ADC Telecommunications, Inc. (a) 1,900 $ 159,303
Analog Devices, Inc. (a) 2,000 152,000
Cisco Systems, Inc. (a) 3,000 190,594
Compaq Computer Corporation 2,600 66,463
Dell Computer Corporation (a) 2,900 143,097
General Electric Company 4,900 259,700
Intel Corporation 1,200 160,388
International Business Machines 700 76,694
Lucent Technologies, Inc. 2,900 171,825
Motorola, Inc. 2,900 84,281
Qualcomm, Inc. (a) 1,300 77,959
Seagate Corporation (a) 2,100 115,500
Sycamore Networks, Inc. (a) 200 22,081
Tellabs, Inc. (a) 900 61,622
Texas Instruments, Inc. 1,200 82,425
----------
1,823,932
FABRICATED METAL PRODUCTS (0.3%)
Cooper Industries, Inc. 1,200 39,075
FOOD & KINDRED PRODUCTS (2.0%)
Adolph Coors Company 600 36,300
ConAgra 3,200 61,000
Pepsico, Inc. 4,400 195,525
----------
292,825
FORESTRY (0.4%)
Georgia Pacific Company 2,300 60,375
GENERAL MERCHANDISE STORES (1.0%)
Wal-Mart Stores, Inc. 2,400 138,300
INDUSTRIAL MACHINERY & EQUIPMENT (3.6%)
Applied Materials, Inc. (a) 1,800 163,181
Dover Corporation 200 8,113
EMC Corporation (a) 2,600 200,038
Ingersoll Rand Company 700 28,175
Network Appliance, Inc. (a) 700 56,328
Solectron Corporation (a) 1,500 62,813
----------
518,648
INSTRUMENTS & RELATED PRODUCTS (1.7%)
Baxter International, Inc. 600 42,188
KLA Tencor Corporation (a) 1,100 64,453
Northrop Grumman Corporation 800 53,000
Teradyne, Inc. (a) 1,200 88,200
----------
247,841
INSURANCE CARRIERS (2.1%)
Aetna, Inc. 1,000 64,188
AXA Financial, Inc. 1,600 54,400
Cigna Corporation 1,100 102,850
MGIC Investment Corporation 700 31,850
United Health Group, Inc. 500 42,875
----------
296,163
METAL MINING (0.3%)
Barrick Gold Corporation 2,700 49,106
MISC. MANUFACTURING INDUSTRIES (1.2%)
Tyco International LTD 3,600 170,550
</TABLE>
15
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
Number
COMMON STOCKS (CONTINUED) of Shares Value
----------- ----------
<S> <C> <C>
MOTION PICTURES (0.4%)
Walt Disney Company 1,300 $ 50,456
NONDEPOSITORY INSTITUTIONS (1.6%)
Federal National Mortgage Association 1,400 73,063
Household International, Inc. 1,600 66,500
MBNA Corporation 3,400 92,225
----------
231,788
OIL AND GAS EXTRACTION (2.6%)
Diamond Offshore Drilling, Inc. 3,000 105,375
Enron Corporation 1,000 64,500
Transocean Sedco Forex, Inc. 1,900 101,531
USX-Marathon Group, Inc. 4,100 102,756
----------
374,162
PAPER & ALLIED PRODUCTS (0.7%)
Kimberly-Clark Corporation 1,700 97,538
Temple-Inland, Inc. 100 4,200
----------
101,738
PETROLEUM & COAL PRODUCTS (2.2%)
Chevron Corporation 500 42,406
Coastal Corporation 2,300 140,013
Exxon Mobil Corporation 824 64,684
Texaco, Inc. 1,200 63,900
----------
311,003
PRIMARY METAL INDUSTRIES (0.4%)
ALCOA, Inc. 1,800 52,200
RAILROAD TRANSPORTATION (0.1%)
Burlington Northern Santa Fe 900 20,643
RETAIL-APPAREL & ACCESSORIES (0.2%)
The TJX Companies, Inc. 1,900 35,624
RETAIL-BUILDING MATERIALS (0.9%)
The Home Depot, Inc. 2,500 124,843
RETAIL-FURNITURE HOME FURNISHINGS (0.7%)
Best Buy Co., Inc. (a) 1,500 94,874
RUBBER & MISC. PLASTICS PRODUCTS (0.5%)
Nike, Inc. 1,000 39,813
Tupperware Corporation 1,500 33,000
----------
72,813
SECURITY & COMMODITY BROKERS (0.7%)
Lehman Brothers Holdings, Inc. 500 47,281
Merrill Lynch & Co., Inc. 400 46,000
----------
93,281
SERVICES-HEALTH SERVICES (0.2%)
Tenet Healthcare Corporation (a) 1,300 35,099
STONE CLAY & GLASS PRODUCTS (0.1%)
USG Corporation 400 12,149
TOBACCO MANUFACTURERS OR CIGARETTES (0.6%)
Philip Morris Companies, Inc. 3,300 87,655
<CAPTION>
Number
COMMON STOCKS (CONTINUED) of Shares Value
----------- ----------
<S> <C> <C>
TRANSPORTATION EQUIPMENT (2.9%)
Boeing Company 4,000 $ 167,250
Eaton Corporation 1,100 73,700
FMC Corporation (a) 1,800 104,400
Ford Motor Company 300 12,900
General Motors Corporation 1,000 58,063
----------
416,313
WHOLESALE TRADE-DURABLE GOODS (1.9%)
Cardinal Health, Inc. 2,200 162,800
Johnson & Johnson, Inc. 1,100 112,063
Visteon Corporation 39 476
----------
275,339
TOTAL COMMON STOCKS (Cost $9,449,257) 9,825,616
Principal
SHORT-TERM SECURITIES (31.2%) Amount
------------
U.S. GOVERNMENT AGENCY (27.2%)
Federal Home Loan Mortgage
Discount Note, 6.40%, due 7/11/2000 $ 800,000 798,578
Federal Home Loan Mortgage
Discount Note, 6.40%, due 7/18/2000 1,500,000 1,495,467
Federal National Mortgage
Discount Note, 6.40%, Due 7/26/2000 1,600,000 1,592,889
------------
3,886,934
U.S. GOVERNMENT OBLIGATIONS (0.7%)
U.S. Treasury Bills, 5.51%, due 8/17/2000 (b) 100,000 99,281
REPURCHASE AGREEMENT (3.3%)
State Street Bank, 3.50%, due 7/3/2000
(Collateralized by U.S. Treasury Note, 9.00%
due 11/15/2018, value $484,700) 474,331 474,331
------------
TOTAL SHORT-TERM SECURITIES (Cost $4,460,546) 4,460,546
------------
TOTAL INVESTMENTS (100.0%) (Cost $13,909,803) $14,286,162
============
</TABLE>
(a) Non-income producing.
(b) Security pledged to cover margin requirements for futures contracts. At
period end the value of the security pledged amounted to $99,281.
<TABLE>
<CAPTION>
FUTURES CONTRACTS
Expiration Contract Unrealized
Date Amount Gain
------------ ------------ ------------
<S> <C> <C> <C>
1 S & P 500
Futures Contract-Short Sept. 2000 $ 367,025 $ 7,725
</TABLE>
OTHER INFORMATION:
Cost of purchases and proceeds from sales of securities, excluding short-term
securities, for the year ended June 30, 2000, aggregated $23,368,098 and
$38,935,384, respectively. At June 30, 2000, net unrealized appreciation for tax
purposes aggregated $185,606, of which $728,601 related to appreciated
investments and $542,995 related to depreciated investments. The aggregate cost
of securities was $14,100,556 for book and tax purposes.
SEE ACCOMPANYING NOTES.
16
<PAGE>
Zweig Equity (Small Cap) Portfolio
Statement of Assets and Liabilities
June 30, 2000
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $5,561,934)--See accompanying schedule $ 5,756,449
Dividends, interest and other receivables 2,822
Receivable for investments sold 478,263
Due from investment advisor 21,211
--------------
Total assets 6,258,745
LIABILITIES
Payable for investments purchased 341,771
Redemptions payable 242
--------------
Total liabilities 342,013
NET ASSETS $ 5,916,732
==============
Net Assets consist of:
Paid-in capital $ 5,793,739
Undistributed net investment income 107,049
Accumulated net realized loss on investments (178,571)
Net unrealized appreciation on investments 194,515
--------------
NET ASSETS, for 508,224 shares outstanding $ 5,916,732
==============
NET ASSET VALUE, offering and redemption price per share $ 11.64
==============
Statement of Operations
Year Ended June 30, 2000
<CAPTION>
INVESTMENT INCOME
Dividends $ 45,335
Interest 186,387
--------------
Total investment income 231,722
EXPENSES
Investment advisory and management fees 84,455
Custody and accounting fees 49,610
Professional fees 21,910
Directors' fees and expenses 12,249
Other expenses 13,121
--------------
Total expenses before reimbursement 181,345
Less: expense reimbursement (56,672)
--------------
Net expenses 124,673
--------------
Net investment income 107,049
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Investments 74,581
Futures contracts (8,872)
--------------
Net realized gain 65,709
Net unrealized depreciation for the year on:
Investments (591,427)
Futures contracts (140)
--------------
Net unrealized depreciation for the year (591,567)
--------------
Net realized and unrealized loss on investments (525,858)
--------------
Net decrease in net assets resulting from operations $ (418,809)
==============
</TABLE>
SEE ACCOMPANYING NOTES.
17
<PAGE>
Zweig Equity (Small Cap) Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------
2000 1999
--------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 107,049 $ 87,679
Net realized gain (loss) on investments 65,709 (244,210)
Net unrealized depreciation on investments for the year (591,567) (1,560,773)
--------------------------------
Net decrease in net assets resulting from operations (418,809) (1,717,304)
Distributions to shareholders from:
Net investment income (87,679) (34,791)
Net realized gain -- (3,046,182)
--------------------------------
Total distributions to shareholders (87,679) (3,080,973)
Capital share transactions:
Proceeds from sales of shares 1,323,230 2,936,546
Proceeds from reinvested distributions 87,679 3,080,973
Cost of shares redeemed (5,982,065) (4,913,316)
--------------------------------
Net increase (decrease) in net assets resulting from share transactions (4,571,156) 1,104,203
--------------------------------
Total decrease in net assets (5,077,644) (3,694,074)
NET ASSETS
Beginning of period 10,994,376 14,688,450
--------------------------------
End of period (including undistributed net investment income of $107,049
and $87,679, respectively) $ 5,916,732 $ 10,994,376
================================
OTHER INFORMATION
Shares:
Sold 112,694 192,871
Issued through reinvestment of distributions 7,408 257,324
Redeemed (515,074) (382,755)
--------------------------------
Net increase (decrease) (394,972) 67,440
================================
</TABLE>
SEE ACCOMPANYING NOTES.
18
<PAGE>
Zweig Equity (Small Cap) Portfolio
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------
2000 (a) 1999 1998 1997 1996
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning
of period $ 12.17 $ 17.58 $ 14.85 $ 13.61 $ 11.62
Income from investment operations:
Net investment income 0.21 0.10 0.04 0.16 0.11
Net realized and unrealized
gain (loss) on investments (0.64) (1.80) 3.48 2.41 2.04
---------------------------------------------------------
Total from investment operations (0.43) (1.70) 3.52 2.57 2.15
Less distributions:
From net investment income (0.10) (0.04) (0.14) (0.14) (0.16)
From net realized gain -- (3.67) (0.65) (1.19) --
---------------------------------------------------------
Total distributions (0.10) (3.71) (0.79) (1.33) (0.16)
---------------------------------------------------------
Net asset value, end of period $ 11.64 $ 12.17 $ 17.58 $ 14.85 $ 13.61
=========================================================
TOTAL RETURN (3.52%) (9.24%) 23.72% 20.37% 18.69%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $5,917 $10,994 $14,688 $11,161 $11,698
Ratio of expenses to average net assets 1.55% 1.54% 1.52% 1.55% 1.55%
Ratio of expenses to average net assets
before voluntary expense
reimbursement 2.25% 1.64% 1.56% 1.82% 1.83%
Ratio of net investment income
to average net assets 1.33% 0.71% 0.26% 0.97% 1.06%
Ratio of net investment income to
average net assets before voluntary
expense reimbursement 0.63% 0.61% 0.22% 0.70% 0.78%
Portfolio turnover rate 224% 76% 113% 59% 101%
</TABLE>
(a) Effective March 3, 2000, Touchstone Advisors, Inc. replaced Integrity
Capital Advisors, Inc. as investment adviser for the Fund.
19
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments
June 30, 2000
<TABLE>
<CAPTION>
Number
COMMON STOCKS (67.0%) of Shares Value
------------ ----------
<S> <C> <C>
APPAREL & OTHER FINISHED PRODUCTS (0.1%)
Guess, Inc. (a) 100 $ 1,400
Oshkosh B'Gosh, Inc. (a) 300 4,950
----------
6,350
BASIC CHEMICAL, PLASTICS & SYNTHETICS (2.6%)
Accredo Health, Inc. (a) 400 13,813
Albany Molecular Research, Inc. (a) 100 5,441
Aphton Corporation (a) 100 2,578
Capital Automotive Reit 800 11,200
Church & Dwight, Inc. 500 9,000
Dura Pharmaceuticals, Inc. (a) 600 8,588
Elan Corporation, PLC (a) 500 266
Genta, Inc. (a) 100 644
Georgia Gulf Corporation 500 10,405
Ivax Corporation (a) 200 8,300
Jones Pharma, Inc. 200 7,980
Martek Biosciences Corporation (a) 100 1,859
NABI, Inc. (a) 400 2,919
NBTY, Inc. (a) 1,200 7,613
Noven Pharmaceuticals, Inc. (a) 600 18,038
Perrigo Company (a) 1,100 7,030
Sciclone Pharmaceuticals, Inc. (a) 400 5,188
Shire Pharmaceuticals Group (a) 442 22,956
Sicor, Inc. (a) 1,000 8,000
Techniclone International Corporation (a) 100 400
Texas Biotechnology Corporation (a) 100 1,810
Valentis, Inc. (a) 100 1,172
----------
155,200
BUSINESS SERVICES (9.7%)
Actuate Corporation (a) 300 16,003
Advent Software, Inc. (a) 200 12,955
Agency Com LTD (a) 500 8,891
APAC Teleservices, Inc. (a) 600 6,656
Avant Corporation (a) 600 11,213
Barra, Inc. (a) 200 9,919
Broadvision, Inc. (a) 600 30,431
B-Square Corporation (a) 400 8,963
Cerner Corporaton (a) 500 13,608
Cognex Corporation (a) 200 10,344
Dendrite International, Inc. (a) 550 18,338
e-Loyalty Corporation (a) 800 10,150
Entrust Technologies, Inc. (a) 100 8,294
Filenet Corporation (a) 400 7,338
I2 Technologies, Inc. (a) 110 11,471
Incorporatedyte Genomics, Inc. (a) 200 16,431
Informix Corporaton (a) 500 3,734
Interim Services, Inc. (a) 900 15,975
ISS Group, Inc. (a) 200 19,744
JDA Software Group, Inc. (a) 700 13,409
Keane, Inc. (a) 1,000 21,647
Lante Corporation (a) 100 2,041
Looksmart LTD (a) 400 7,413
Manhattan Associates, Inc. (a) 200 4,975
Mentor Graphics Corporation (a) 1,000 19,813
Micromuse, Inc. (a) 100 16,547
Microstrategy, Inc. (a) 400 11,938
NCO Group, Inc. (a) 300 6,947
<CAPTION>
Number
COMMON STOCKS (continued) of Shares Value
------------ ----------
<S> <C> <C>
Business Services (continued)
Netegrity, Inc. (a) 200 15,067
Onyx Software (a) 400 11,871
Orbotech Ltd. (a) 50 4,645
Peregrine Systems, Inc. (a) 75 2,611
Phoenix Technology LTD (a) 500 8,141
Pittston Brinks Group 400 5,475
Pivotal Corporation (a) 200 4,750
Predictive Systems, Inc. (a) 200 7,181
Progress Software Corporation (a) 600 10,988
Quantum Corporation (a) 600 6,638
Razorfish, Inc. (a) 200 3,206
Remedy Corporation (a) 300 16,734
Rent-A-Center, Inc. (a) 300 6,722
RSA Security, Inc. (a) 100 6,944
Sensormatic Electronics Corporation (a) 900 14,231
Serena Software, Inc. (a) 300 13,613
Sitel Corporation (a) 5,000 24,688
Superior Energy Services, Inc. (a) 100 1,041
Sybase, Inc. (a) 1,000 23,031
Sykes Enterprises, Inc. (a) 300 3,872
Teletech Holdings, Inc. (a) 200 6,206
Webtrends Corporation (a) 200 7,706
West Teleservices Corporation (a) 200 5,069
----------
555,618
COAL MINING (0.2%)
CONSOL Energy, Inc. 900 13,714
COMMUNICATIONS (0.9%)
Adtran, Inc. (a) 200 11,969
Audiovox Corporation (a) 100 2,203
Brightpoint, Inc. (a) 1,000 8,640
Globalstar LP LTD (a) 400 3,575
Intermedia Communications, Inc. (a) 300 8,906
Perusahaan Perseroan Indo Satellite Corp. 300 3,413
Primus Telecommunications Group, Inc. (a) 200 4,988
Voicestream Wireless Corporation (a) 91 10,584
----------
54,278
DEPOSITORY INSTITUTIONS (2.8%)
Banco de Galicia Y Buenos Aire (a) 400 5,938
Bancwest Corporation 400 6,096
Capitol Federal Financial 3,900 43,266
Cathay Bancorporation, Inc. 100 4,588
City National Corporation 600 20,850
Colonial Banc Group, Inc. 1,000 9,625
Downey Financial Corporation 500 14,500
Greater Bay Bancorporation 100 4,678
Investors Financial Services Corporation 400 15,888
Republic Bancorporation, Inc. 407 3,574
Silicon Valley Bancshares (a) 300 12,797
Southwest Bancorp (a) 400 8,325
Sovereign Bancorporation, Inc. 1,300 9,161
----------
159,286
</TABLE>
20
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
Number
COMMON STOCKS (CONTINUED) of Shares Value
------------ ----------
<S> <C> <C>
EATING & DRINKING PLACES (2.0%)
Brinker International, Inc. (a) 600 $ 17,550
Buffets, Inc. (a) 900 11,447
CBRL Group, Inc. 1,900 27,966
Cheesecake Factory (a) 350 9,614
Jack in the Box, Inc. (a) 600 14,775
Papa Johns International, Inc. (a) 400 9,813
Ruby Tuesday, Inc. 2,100 26,381
----------
117,546
ELECTRIC GAS & SANITARY SERVICES (0.9%)
AGL Resources, Inc. 100 1,594
Cleco Corporation 100 3,350
CMP Group, Inc. 300 8,794
Empire District Electric Company 300 6,619
Idacorp, Inc. 300 9,675
Independent Energy Holdings PLC (a) 500 4,172
Rare Medium Group, Inc. (a) 300 4,753
Western Gas Resources, Inc. 400 8,400
WPS Resources Corporation 100 3,006
----------
50,363
ELECTRICAL & ELECTRONICS MACHINERY (8.4%)
Actel Corporation (a) 400 18,238
Advanced Fibre Communications (a) 200 9,056
Amkor Technology, Inc. (a) 200 7,056
Amphenol Corporation (a) 200 13,238
Anadigics, Inc. (a) 250 8,523
Andrew Corporation (a) 200 6,719
Aspect Communications, Inc. (a) 100 3,928
ATMI, Inc. (a) 200 9,294
Burr-Brown Corporation (a) 50 4,333
C Cor Net Corporation (a) 200 5,393
C & D Technologies 400 22,600
Cable Design Technologies Corporation (a) 400 13,400
Carrier Access Corporation (a) 100 5,291
Cree, Inc. (a) 100 13,369
Cypress Semiconductor Corporation (a) 100 4,225
Dallas Semiconductor Corporation 100 4,075
Digital Lightwave, Inc. (a) 100 10,059
Digital Microwave Corporation (a) 100 3,809
ESS Technology, Inc. (a) 600 8,681
Excel Technology, Inc. (a) 500 25,104
General Semiconductor, Inc. (a) 600 8,850
Glenayre Technologies, Inc. (a) 500 5,266
Harmonic, Inc. (a) 208 5,168
Helix Technology Corporation 200 7,794
Integrated Silicon Solution (a) 300 11,391
International Rectifier Corporation (a) 300 16,800
Kemet Corporation (a) 400 10,020
Kopin Corporation (a) 100 6,922
Mercury Computer Systems, Inc. (a) 300 9,713
Methode Elctronics, Inc. (a) 200 7,731
Mitel Corporation 800 16,800
MRV Communications, Inc. (a) 300 20,184
Plexus Corporation (a) 100 11,303
Polycom, Inc. (a) 100 9,406
Power One, Inc. 150 17,086
Powerwave Technologies, Inc. 200 8,800
Semtech Corporation 200 15,150
Silicon Laboratories 100 5,344
Silicon Valley Group, Inc. 800 20,650
<CAPTION>
Number
COMMON STOCKS (CONTINUED) of Shares Value
------------ ----------
<S> <C> <C>
Electrical & Electronics Machinery (continued)
Tekelec, Inc. (a) 100 4,822
Terayon Communication Systems (a) 100 6,422
Titan Corporation (a) 200 8,950
Transwitch Corporation (a) 200 15,444
Triquint Semiconductor, Inc. (a) 100 9,566
Varian Semiconductor Equipment, Inc. (a) 300 18,853
Westell Technologies (a) 400 5,988
----------
480,814
FABRICATED METAL PRODUCTS (0.3%)
NCI Building Systems, Inc. (a) 500 10,125
Tower Automotive, Inc. (a) 600 7,500
----------
17,625
FOOD & KINDRED PRODUCTS (1.7%)
Canandaigua Brands, Inc. (a) 100 5,044
Cott Corporation (a) 2,100 12,567
Del Monte Foods Company (a) 300 2,044
Dreyers Grand Ice Cream, Inc. 600 12,560
International Home Foods, Inc. (a) 500 10,469
McCormick & Co., Inc. 800 26,000
Topps, Inc. (a) 2,600 29,656
----------
98,340
FURNITURE & FIXTURES (0.1%)
La-Z-Boy, Inc. 400 5,600
GENERAL BUILDING CONTRACTORS (0.7%)
D.R. Horton, Inc. 600 8,138
Lennar Corporation 800 16,200
Standard Pacific Corporation 800 8,000
Toll Brothers, Inc. (a) 300 6,150
----------
38,488
GENERAL MERCHANDISE STORES (0.1%)
Grupo Eledtras A De C V 400 4,100
HOLDING & OTHER INVESTMENTS OFFICES (3.9%)
Affiliated Managers Group, Inc. (a) 200 9,100
Bedford Property Investors, Inc. 500 9,281
Boston Properties, Inc. 400 15,450
Brandywine Realty Trust 100 1,913
CBL & Associates Properties, Inc. 300 7,481
Crescent Real Estate Equities 1,300 26,650
Essex Property Trust, Inc. 100 4,200
Glimcher Realty Trust 1,200 17,250
Hibernia Corporation 1,400 15,225
Home Properties N Y, Inc. 600 18,000
Koger Equity, Inc. 200 3,375
Mills Corporation 300 5,644
Pacific Gulf Properties, Inc. 200 5,013
Reckson Associates Realty Corporation 1,100 26,120
Taubman Centers, Inc. 200 2,200
United Dominion Realty Trust, Inc. 5,000 55,000
----------
221,902
HOTELS & OTHER LODGING (1.5%)
Aztar Corporation (a) 2,100 32,550
Boyd Gaming Corporation (a) 1,000 5,563
Extended Stay America, Inc. (a) 1,800 16,650
Isle Capri Casinos, Inc. (a) 600 8,156
Mandalay Resort Group (a) 300 6,000
Station Casinos, Inc. (a) 400 10,000
Trendwest Resorts, Inc. (a) 300 4,828
----------
83,747
</TABLE>
21
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
Number
COMMON STOCKS (CONTINUED) of Shares Value
------------ ----------
<S> <C> <C>
INDUSTRIAL MACHINERY & EQUIPMENT (3.5%)
Advanced Digital Information (a) 400 $ 6,363
Asystemst Technologies, Inc. (a) 200 6,813
Cirrus Logic, Inc. (a) 500 8,016
Cybex Computer Products Corporation (a) 300 12,647
Donaldson Company, Inc. 900 17,775
Electro Scientific Industries, Inc. (a) 300 13,209
Emulex Corporation (a) 100 6,566
Graco, Inc. 100 3,250
Infocus Corporation (a) 400 12,850
Iomega Corporation (a) 4,300 17,200
Lam Research Corporation (a) 500 18,766
Manitowoc Company, Inc. 425 11,369
Maxtor Corporation (a) 800 8,425
Micrel, Inc. (a) 200 8,694
Micron Electronics, Inc. (a) 1,600 20,050
Micros Systems, Inc. (a) 200 3,719
PRI Automation, Inc. (a) 100 6,556
Timken Company 800 14,900
Watsco, Inc. 300 3,849
----------
201,017
INSTRUMENTS & RELATED PRODUCTS (2.7%)
Adac Laboratories (a) 100 2,403
Coherent, Inc. (a) 200 16,756
Concord Camera Corporation (a) 200 4,163
Credence Systems Corporation (a) 100 5,516
Cymer, Inc. (a) 300 14,288
Fossil, Inc. (a) 375 7,102
LTX Corporation (a) 300 10,491
Mentor Corporation 300 8,147
Novoste Corporation (a) 100 6,100
Oakley, Inc. (a) 2,100 24,150
Pinnacle Systems, Inc. (a) 300 6,797
Robotic Vision Systems, Inc. (a) 400 7,313
Thermo Cardiosystems, Inc. (a) 100 1,000
Thermo Instruments Systems, Inc. (a) 300 5,625
Trimble Navigation LTD (a) 300 14,653
Varian, Inc. (a) 500 23,047
----------
157,551
INSURANCE CARRIERS (1.4%)
Advance Paradiam, Inc. (a) 300 6,084
Annuity and Life Re Holdings 100 2,422
Commerce Group, Inc. Mass 100 2,950
First American Financial Corporation 400 5,725
Mid Atlantic Medical Services, Inc. (a) 1,900 25,650
Nationwide Financial Services, Inc. 200 6,575
Old Republic International Corporation 600 9,900
Oxford Health Plans, Inc. (a) 400 9,525
Stancorporation Financial Group, Inc. 300 9,638
Triad Hospitals, Inc. (a) 200 4,856
----------
83,325
LEATHER & LEATHER PRODUCTS (0.3%)
Justin Industries, Inc. 400 8,738
Wolverine Worldwide, Inc. 700 6,913
----------
15,651
METAL MINING (0.2%)
Freeport McMoran Copper & Gold (a) 700 6,475
Still Water Mining Company (a) 200 5,575
----------
12,050
<CAPTION>
Number
Common Stocks (continued) of Shares Value
------------ ----------
<S> <C> <C>
MINING QUARRYING OF NONMETALLIC MINERAL (0.1%)
Amcol International Corporation 400 6,600
MISC. MANUFACTURING INDUSTRIES (0.7%)
Callaway Golf Company 800 13,050
Johns Manville Corporation 1,100 14,506
Polymer Group, Inc. 300 2,775
Zomax Optical Media, Inc. (a) 600 7,856
----------
38,187
NONDEPOSITORY INSTITUTIONS (0.8%)
AmeriCredit Corporation (a) 1,000 17,000
Doral Financial Corporation 1,400 15,969
Indy Mac Mortgage Holdings, Inc. (a) 400 5,425
Metris Companies, Inc. 350 8,794
----------
47,188
OIL & GAS EXTRACTION (2.6%)
Atwood Oceanics, Inc. (a) 200 8,875
Chesapeake Energy Corporation (a) 1,500 11,625
Cross Timbers Oil Company 600 13,275
Grey Wolf, Inc. (a) 1,400 7,000
Helmerich and Payne, Inc. 400 14,950
Mitchell Energy & Development Corporation 200 6,425
Ocean Energy, Inc. Tex (a) 800 11,350
Patterson Energy, Inc. (a) 200 5,694
Pioneer Natural Resources Company (a) 100 1,275
Pogo Producing Company 500 11,063
Ranger Oil LTD (a) 5,000 27,500
Santa Fe Snyder Corporation (a) 1,600 18,200
Vintage Petroleum, Inc. 600 13,538
----------
150,770
PAPER & ALLIED PRODUCTS (0.3%)
Buckeye Technologies, Inc. (a) 300 6,581
Longview Fibre Co. 800 8,850
----------
15,431
PETROLEUM & COAL PRODUCTS (0.9%)
Tesoro Petroleum Corporation (a) 300 3,038
Ultramar Diamond Shamrock 1,200 29,775
Valero Energy Corporation 600 19,050
----------
51,863
PRIMARY METAL PRODUCTS (0.9%)
CommScope, Inc. (a) 200 8,200
Mueller Industries, Inc. (a) 400 11,200
Texas Industries, Inc. 100 2,888
Tubos de Acero de Mexico S A 600 8,325
Worthington Industries, Inc. 1,900 19,950
----------
50,563
PRINTING & PUBLISHING (0.2%)
Mail-Well Holdings, Inc. (a) 900 7,763
Quebeccor World, Inc. 183 4,438
----------
12,201
REAL ESTATE (0.5%)
LNR Property Corporation 400 7,800
Stewart Enterprises, Inc. 5,300 18,467
----------
26,267
RETAIL-APPAREL & ACCESSORIES (1.0%)
Ann Taylor Stores Corporation (a) 300 9,938
Chicos Fas, Inc. (a) 100 1,988
Dress Barn, Inc. (a) 600 13,256
Stein Mart, Inc. (a) 800 8,075
Venator Group, Inc. (a) 2,200 25,046
----------
58,303
</TABLE>
22
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
Number
COMMON STOCKS (CONTINUED) of Shares Value
------------ ----------
<S> <C> <C>
RETAIL - AUTOMOTIVE DEALERS & GAS STATIONS (0.4%)
Copart, Inc. (a) 600 $ 9,544
O'Reilly Automotive, Inc. (a) 900 12,403
----------
21,947
RETAIL - BUILDING MATERIALS (0.2%)
Charming Shoppes, Inc. (a) 2,800 14,263
RETAIL - FOOD STORES (0.3%)
Casey's General Stores, Inc. 1,100 11,447
Delhaize America, Inc. 400 7,075
----------
18,522
RETAIL - FURNITURE, HOME FURNISHINGS (0.3%)
Pier 1 Imports, Inc. 1,800 17,550
Tuesday Morning Corporation (a) 200 2,056
----------
19,606
RETAIL-MISCELLANEOUS (0.7%)
Barnes & Noble, Inc. (a) 400 8,900
Buy.Com, Inc. (a) 400 2,006
Michaels Stores, Inc. (a) 300 13,753
PC Connection, Inc. (a) 100 5,697
Petsmart, Inc. (a) 1,900 6,353
Zale Corporation (a) 100 3,650
----------
40,359
RUBBER & MISC PLASTICS PRODUCTS (0.2%)
Spartech Corporation 500 13,500
SECURITY & COMMODITY BROKERS (1.6%)
Eaton Vance Corporation 200 9,250
Espeed, Inc. (a) 100 4,347
Federated Investors, Inc. 500 17,531
Investment Technology Group (a) 200 8,513
Morgan Keegan, Inc. 800 11,800
National Discount Brokers Group (a) 300 9,563
Raymond James Financial, Inc. 700 15,750
Waddell & Reed Financial, Inc. 400 13,125
----------
89,879
SERVICES AMUSEMENT EXCL MOTION PICTURES (0.3%)
Argosy Gaming Corporation (a) 600 8,625
Pinnacle Entertainment, Inc. (a) 300 5,831
----------
14,456
SERVICES-AUTO REPAIR GARAGES (0.3%)
Amerco (a) 500 9,906
Dollar Thrifty Automotive Group (a) 300 5,531
Rollins Truck Leasing Corporation 600 4,163
----------
19,600
SERVICES-EDUCATIONAL (0.3%)
ITT Educational Services, Inc. (a) 500 8,781
SERVICES-ENGINEERING ACCOUNTING (1.0%)
Celgene Corporation (a) 200 11,781
Cephalon, Inc. (a) 100 6,081
Digitas, Inc. (a) 400 6,550
Management Network Group, Inc. (a) 300 10,509
Perkinelmer, Inc. 100 6,613
Tetra Tech, Inc. (a) 300 6,872
US Oncology, Inc. (a) 2,200 10,863
----------
59,269
SERVICES-HEALTH SERVICES (1.6%)
Caremark RX, Inc, (a) 1,500 10,219
Covance, Inc. (a) 500 4,406
Enzon, Inc. (a) 200 8,494
Express Scripts, Inc. (a) 100 6,172
Hooper Holmes, Inc. 900 7,200
Laboratory Corporation American Holdings (a) 230 17,739
Orthodontic Centers of America, Inc. (a) 700 15,838
Quorum Health Group, Inc. (a) 1,000 10,344
Rehabcare Group, Inc. (a) 200 5,450
Total Renal Care Holdings, Inc. (a) 1,000 5,958
----------
91,820
SPECIAL TRADE CONTRACTORS (0.5%)
Dycom Industries, Inc. (a) 250 11,500
Insituform Technologies, Inc. (a) 400 10,938
Quanta Services, Inc. (a) 100 5,500
----------
27,938
STONE CLAY & GLASS PRODUCTS (0.2%)
Centex Construction Products, Inc. 400 9,075
TRANSPORTATION EQUIPMENT (0.9%)
Brunswick Corporation 500 8,281
Cheap Tickets, Inc. (a) 600 7,181
Expeditores International Wash, Inc. 300 14,184
Monaco Coach Corporation (a) 400 5,450
Thor Industires, Inc. 200 4,200
Winnebago Industries 600 7,838
Travelocity.com, Inc. (a) 400 6,488
----------
53,622
TRUCKING & WAREHOUSING (0.4%)
American Freightways Corporation (a) 500 7,328
Roadway Express, Inc. 200 4,650
Yellow Corporation (a) 700 10,303
----------
22,281
WATER TRANSPORTATION (0.1%)
Alexander & Baldwin, Inc. 300 6,628
WHOLESALE TRADE - DURABLE GOOD (3.5%)
Commercial Metals Company 300 8,250
Cytyc Corporation (a) 300 16,003
Emachines, Inc. (a) 303 819
Engelhard Corporation 1,000 17,063
Fisher Scientific International, Inc. (a) 100 2,475
Ikon Office Solutions, Inc. 900 3,488
Ingram Micro, Inc.(a) 700 12,206
Insight Enterprises, Inc.(a) 375 22,254
Kent Electronics Corporation (a) 600 17,888
Masisa S A 400 4,725
Owens & Minor, Inc. 2,100 36,092
Paxar Corporation (a) 800 9,550
Pioneer Std Electronics, Inc. 700 10,281
PSS World Med, Inc. (a) 800 5,350
Reliance Steel and Aluminum Company 700 13,388
Stewart & Stevenson Services, Inc. 1,400 21,175
----------
201,007
</TABLE>
23
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
Number
COMMON STOCKS (CONTINUED) of Shares Value
------------ ----------
<S> <C> <C>
WHOLESALE TRADE - NONDURABLE GOOD (2.3%)
Airgas, Inc. (a) 400 $ 2,275
Amerisource Health Corporation (a) 700 21,700
Bindley Western Industries, Inc. 700 18,506
Burlington Coat Factory Warehouse 200 2,163
Cambrex Corporation 200 9,000
Delta & Pine Land Company 300 7,519
Hain Celestial Group, Inc. (a) 300 11,016
Handleman Company (a) 500 6,250
The Men's Wearhouse, Inc. (a) 400 8,913
Nova Chemicals Corporation 300 6,450
Priority Healthcare Corporation (a) 200 14,831
Stride Rite Corporation 1,200 7,350
United Stationers, Inc. (a) 500 16,203
----------
132,176
TOTAL COMMON STOCKS (Cost $3,660,152) 3,854,667
Principal
Amount
--------------
SHORT-TERM SECURITIES (33.0%)
U.S. GOVERNMENT AGENCY (26.6%)
Federal Home Loan Mortgage,
Discount Note, 6.40%, due 7/18/2000 $ 1,000,000 996,978
Federal National Mortgage Association
Discount Note, 6.40%, due 7/26/2000 535,000 532,622
----------
1,529,600
U.S. GOVERNMENT OBLIGATION (0.9%)
U.S. Treasury Bills, 5.51%, due 8/17/2000 50,000 49,640
REPURCHASE AGREEMENT (5.6%)
State Street Bank, 3.50%, due 7/3/2000
(Collateralized by U.S. Treasury Note,
5.125%, due 8/31/2000, value $331,500) 322,542 322,542
----------
TOTAL SHORT-TERM SECURITIES (Cost $1,901,782) 1,901,782
----------
TOTAL INVESTMENTS (100.0%) (Cost $5,561,934) $ 5,756,449
----------
----------
</TABLE>
(a) Non-income producing.
OTHER INFORMATION:
Cost of purchases and proceeds from sales of securities, excluding short-term
securities, for the year ended June 30, 2000, aggregated $9,201,445 and
$13,919,669, respectively. At June 30, 2000, net unrealized appreciation for
tax purposes aggregated $149,404, of which $429,263 related to appreciated
investment securities and $279,859 related to depreciated investment
securities. The aggregate cost of securities was $5,607,045 for tax purposes.
24
<PAGE>
The Legends Fund, Inc.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
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 of the series type. The Fund currently
consists of four investment portfolios (the "Portfolios"): Harris Bretall
Sullivan & Smith Equity Growth, Scudder Kemper Value, Zweig Asset Allocation,
and Zweig Equity (Small Cap). Each portfolio, in effect, represents a separate
fund. The Fund is required to account for the assets of each portfolio
separately and to allocate general liabilities of the Fund to each portfolio
based on the net asset value of each portfolio.
Effective March 3, 2000, Touchstone Securities, Inc. ("Touchstone Securities"),
a registered broker-dealer under the Securities Exchange Act of 1934 and a
member of the National Association of Securities Dealers, Inc., became the
principal underwriter of shares of the Fund which are distributed 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"). Touchstone Advisors, Inc. ("Touchstone Advisors"),
registered with the Securities and Exchange Commission as an investment adviser,
provides management services to the Fund. The Western and Southern Life
Insurance Company ("W&S") is the ultimate parent of Touchstone Securities,
Touchstone Advisors, Integrity and National Integrity. Prior to March 3, 2000,
ARM Financial Group, Inc. ("ARM") was the parent of Integrity and National
Integrity and ARM Securities Corporation and Integrity Capital Advisors, Inc.
were the principal underwriter and investment adviser to the Fund, respectively.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States.
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 maturities of 61 days or more for which reliable
quotations are readily available are valued at current market quotations.
Short-term investments with 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 traded on a commodities exchange or board
of trade are valued at the closing settlement price. 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. 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 complies 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. As of June 30, 2000, the
Zweig Equity (Small Cap) Portfolio had a capital loss carryforward of $133,460,
which expires in 2007 and 2008.
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 accounting principles generally accepted
in the United States. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for futures
transactions, post-October 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 future
contracts shown in the Schedule of Investments reflects each contract's value at
June 30, 2000.
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 that arises from any changes in
contract values.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with institutions that the Fund's
investment manager, Touchstone 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 accounting principles
generally accepted in the United States 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
Touchstone Advisors, the Fund's investment adviser since March 3, 2000, has
entered into a sub-advisory agreement with a registered investment adviser
("Sub-Adviser") for each of the Portfolios. Touchstone 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 daily 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, Touchstone Advisors provides certain management
services to the Fund, and the Fund is responsible for certain of its direct
operating expenses. Touchstone Advisors has voluntarily agreed to reimburse each
of the Portfolios for operating expenses (excluding management fees) above an
annual rate of 0.50% of average daily net assets. Touchstone 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 Touchstone
Securities, Touchstone Advisors, Integrity, and National Integrity. The Fund
does not pay any amounts to compensate these individuals.
3. CAPITAL SHARES
At June 30, 2000, 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 June 30, 2000, 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 June 30, 2000, 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.
4. EVENTS RELATING TO ARM, INTEGRITY AND NATIONAL INTEGRITY
On July 29, 1999, ARM announced that it was restructuring its institutional
business and positioning its retail business and technology operations for the
sale of ARM or its businesses or its assets.
28
<PAGE>
The Legend Funds, Inc.
Notes to Financial Statements (Continued)
4. EVENTS RELATING TO ARM, INTEGRITY AND NATIONAL INTEGRITY (CONTINUED)
On December 17, 1999 ARM announced that it had entered into a purchase agreement
whereby W&S would acquire ARM's insurance subsidiaries, Integrity and National
Integrity. The transaction was approved on March 2, 2000 and closed on March 3,
2000. ARM Securities Corporation and Integrity Capital Advisors ceased to be
affiliated with Integrity and National Integrity subsequent to March 3, 2000. In
conjunction with the acquisition, Touchstone Securities became the principal
underwriter of variable annuities for both Integrity and National Integrity and
Touchstone Advisors became the investment adviser for the Fund.
W&S is part of the Western-Southern Enterprise, a financial services group that
also includes Western-Southern Life Assurance Company, Columbus Life Insurance
Company, Touchstone Advisors, Inc., Touchstones Securities, Inc., Fort
Washington Investment Advisors, Inc., Todd Investment Advisors, Inc.,
Countrywide Financial Services, Capital Analysts Incorporated and Eagle Realty
Group, Inc. Assets owned or under management by the group is approximately $25
billion. W&S is rated A++ (Superior) by A.M. Best, AAA (Highest) by Duff and
Phelps, AAA (Extremely Strong) by Standard & Poor's, and Aa2 (Excellent) by
Moody's.
5. SHAREHOLDER MEETINGS (UNAUDITED)
A Special Meeting of Shareholders of the Harris Bretall Sullivan & Smith Equity
Growth Portfolio, Scudder Kemper Value Portfolio, Zweig Asset Allocation
Portfolio and Zweig Equity (Small Cap) Portfolio was held on April 4, 2000. Each
matter voted upon at that meeting as well as the number of votes cast for,
against or withheld, the number of abstentions, and the number of broker
non-votes with respect to such matters. Abstentions have the effect of a
negative vote on a proposal. The results are set forth below:
1. (a) The Harris Bretall Sullivan & Smith Equity Growth Portfolio
Shareholders approved a new investment management agreement (the "New
Management Agreement") between the Fund and Touchstone Advisors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C>
1,467,074.265 40,650.858 63,670.845 -
</TABLE>
(b) Scudder Kemper Value Portfolio approved the New Management Agreement
between the Fund and Touchstone Advisors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C>
1,001,833.218 19,800.297 38,329.363 -
</TABLE>
29
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (Continued)
5. SHAREHOLDER MEETINGS (UNAUDITED) (CONTINUED)
(c) The Zweig Asset Allocation Portfolio Shareholders approved the New
Management Agreement between the Fund and Touchstone Advisors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
827,207.722 - 36,668.816 -
</TABLE>
(d) The Zweig Equity (Small Cap) Portfolio Shareholders approved the New
Management Agreement between the Fund and Touchstone Advisors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
401,939.331 5,863.872 3,980.314 -
</TABLE>
2. (a) The Harris Bretall Sullivan & Smith Growth Portfolio Shareholders
approved a new sub-advisory agreement between Harris Bretall Sullivan &
Smith, LLC ("HBSS") and Touchstone Advisors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
1,452,106.676 27,505.719 91,783.573 -
</TABLE>
(b) The Scudder Kemper Value Portfolio Shareholders approved a new
sub-advisory agreement between Scudder Kemper Investments, Inc.
("SKI") and Touchstone Advisors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
1,001,841.441 20,433.446 37,687.992 -
</TABLE>
(c) The Zweig Asset Allocation Portfolio Shareholders approved a new
sub-advisory agreement between Zweig/Glaser Advisers, LLC
("Zweig/Glaser") and Touchstone Advisors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
810,303.954 5,301.909 48,270.675 -
</TABLE>
30
<PAGE>
The Legend Funds, Inc.
Notes to Financial Statements (Continued)
5. SHAREHOLDER MEETINGS (UNAUDITED) (CONTINUED)
(d) The Zweig Equity (Small Cap) Portfolio Shareholders approved a new
sub-advisory agreement between Zweig/Glaser and Touchstone Advisors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
396,915.453 6,288.720 8,579.344 -
</TABLE>
3. (a) The Zweig Asset Allocation Portfolio Shareholders approved a
sub-advisory servicing agreement by and among Zweig/Glaser, certain of
its affiliates and Zweig Consulting LLC.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
801,500.650 14,105.213 48,270.675 -
</TABLE>
(b) The Zweig Equity (Small Cap) Portfolio Shareholders approved a
sub-advisory servicing agreement by and among Zweig/Glaser, certain of
its affiliates and Zweig Consulting LLC.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
385,421.015 16,577.539 9,784.963 -
</TABLE>
4. (a) The Harris Bretall Sullivan & Smith Equity Growth Portfolio
Shareholders elected John R. Lindholm to the Fund's Board of Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
1,544,972.368 26,423.600 - -
</TABLE>
(b) Scudder Kemper Value Portfolio Shareholders elected John R. Lindholm
to the Fund's Board of Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
1,037,784.030 22,178.849 - -
</TABLE>
31
<PAGE>
The Legend Funds, Inc.
Notes to Financial Statements (Continued)
5. SHAREHOLDER MEETINGS (UNAUDITED) (CONTINUED)
(c) The Zweig Asset Allocation Portfolio Shareholders elected John R.
Lindholm to the Fund's Board of Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
850,614.406 13,262.132 - -
</TABLE>
(d) The Zweig Equity (Small Cap) Portfolio Shareholders elected John R.
Lindholm to the Fund's Board of Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
405,783.809 5,999.708 - -
</TABLE>
5. (a) The Harris Bretall Sullivan & Smith Equity Growth Portfolio
Shareholders elected Chris LaVictoire Mahai to the Fund's Board of
Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
1,531,684.435 39,711.533 - -
</TABLE>
(b) Scudder Kemper Value Portfolio Shareholders elected Chris LaVictoire
Mahai to the Fund's Board of Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
1,026,987.605 32,685.291 - -
</TABLE>
(c) The Zweig Asset Allocation Portfolio Shareholders elected Chris
LaVictoire Mahai to the Fund's Board of Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
841,811.102 8,803.304 - -
</TABLE>
32
<PAGE>
The Legend Funds, Inc.
Notes to Financial Statements (Continued)
5. SHAREHOLDER MEETINGS (UNAUDITED) (CONTINUED)
(d) The Zweig Equity (Small Cap) Portfolio Shareholders elected Chris
LaVictoire Mahai to the Fund's Board of Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
395,494.990 16,288.527 - -
</TABLE>
6. (a) The Harris Bretall Sullivan & Smith Equity Growth Portfolio
Shareholders elected William B. Faulkner to the Fund's Board of
Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
1,545,500.526 25,895.442 - -
</TABLE>
(b) Scudder Kemper Value Portfolio Shareholders elected William B.
Faulkner to the Fund's Board of Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
1,038,787.201 21,175.678 - -
</TABLE>
(c) The Zweig Asset Allocation Portfolio Shareholders elected William B.
Faulkner to the Fund's Board of Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
850,614.406 13,262.132 - -
</TABLE>
(d) The Zweig Equity (Small Cap) Portfolio Shareholders elected William B.
Faulkner to the Fund's Board of Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
403,443.779 8,339.738 - -
</TABLE>
33
<PAGE>
The Legend Funds, Inc.
Notes to Financial Statements (Continued)
5. SHAREHOLDER MEETINGS (UNAUDITED) (CONTINUED)
7. (a) The Harris Bretall Sullivan & Smith Equity Growth Portfolio
Shareholders elected John Katz to the Fund's Board of Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
1,545,500.526 25,895.442 - -
</TABLE>
(b) Scudder Kemper Value Portfolio Shareholders elected John Katz to the
Fund's Board of Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
1,038,787.201 21,175.678 - -
</TABLE>
(c) The Zweig Asset Allocation Portfolio Shareholders elected John Katz to
the Fund's Board of Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
850,614.406 13,262.132 - -
</TABLE>
(d) The Zweig Equity (Small Cap) Portfolio Shareholders elected Katz to
the Fund's Board of Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
405,783.809 5,999.708 - -
</TABLE>
8. (a) The Harris Bretall Sullivan & Smith Equity Growth Portfolio
Shareholders elected Irvin W. Quesenberry, Jr. to the Fund's Board of
Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
1,544,642.720 26,753.248 - -
</TABLE>
34
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements(Continued)
5. SHAREHOLDER MEETINGS (UNAUDITED)(CONTINUED)
(b) Scudder Kemper Value Portfolio Shareholders elected Irvin W.
Quesenberry, Jr. to the Fund's Board of Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
1,038,787.201 21,175.678 - -
</TABLE>
(c) The Zweig Asset Allocation Portfolio Shareholders elected
Irvin W. Quesenberry, Jr. to the Fund's Board of Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
850,614.406 13,262.132 - -
</TABLE>
(d) The Zweig Equity (Small Cap) Portfolio Shareholders elected
Irvin W. Quesenberry, Jr. to the Fund's Board of Directors.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
405,783.809 5,999.708 - -
</TABLE>
9. (a) The Harris Bretall Sullivan & Smith Equity Growth Portfolio
Shareholders ratified the selection of Ernst & Young LLP as the
Fund's independent accountants for the fiscal year ending
June 30, 2000.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
1,478,191.016 29,040.181 64,164.771 -
</TABLE>
(b) Scudder Kemper Value Portfolio Shareholders ratified the selection of
Ernst & Young LLP as the Fund's independent accountants for the fiscal
year ending June 30, 2000.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
1,003,470.769 15,787.612 40,704.498 -
</TABLE>
35
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements(Continued)
5. SHAREHOLDER MEETINGS (UNAUDITED)(CONTINUED)
(c) The Zweig Asset Allocation Portfolio Shareholders ratified the
selection of Ernst & Young LLP as the Fund's independent accountants
for the fiscal year ending June 30, 2000.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
846,789.446 - 17,087.092 -
</TABLE>
(d) The Zweig Equity (Small Cap) Portfolio Shareholders ratified the
selection of Ernst & Young LLP as the Fund's independent accountants
for the fiscal year ending June 30, 2000.
<TABLE>
<CAPTION>
Shares Shares Broker
Voted "For" Voted "Against" Abstentions Non-Votes
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
386,574.824 18,546.194 6,662.499 -
</TABLE>
36
<PAGE>
The Legends Fund, Inc.
Portfolio Performance
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Comparison of the change in value of $10,000 invested in the
Harris Bretall Sullivan & Smith Equity Growth Portfolio and the S&P 500 Index
[CHART]
<TABLE>
<CAPTION>
Harris Bretall Sullivan & Smith
Date Equity Growth Portfolio S&P 500 Index
<S> <C> <C>
12/8/92 $10,000 $10,000
Dec 92 $10,050 $10,088
Jun 93 $9,710 $10,579
Dec 93 $10,050 $11,102
Jun 94 $9,360 $10,727
Dec 94 $10,460 $11,248
Jun 95 $12,850 $13,519
Dec 95 $13,771 $15,471
Jun 96 $14,597 $17,032
Dec 96 $15,692 $19,021
Jun 97 $19,010 $22,939
Dec 97 $21,149 $25,142
Jun 98 $24,544 $29,593
Dec 98 $28,690 $32,327
Jun 99 $33,182 $36,328
Dec 99 $38,877 $39,129
Jun 00 $39,450 $38,962
</TABLE>
- Average annual total return since inception: 19.91%
- Total return for the year ended June 30, 2000: 18.89%
- Average annual return for the five year period ended June 30, 2000: 22.00%
- Performance relates to the Portfolio and does not reflect separate
account charges applicable to variable annuity contracts.
- Portfolio commenced operations on December 8, 1992.
- Past performance is not predictive of future performance.
37
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
HARRIS BRETALL SULLIVAN & SMITH EQUITY GROWTH PORTFOLIO (CONTINUED)
SUB-ADVISER'S DISCUSSION
The Harris Bretall Sullivan & Smith Equity Growth Fund experienced another
favorable return for the last 12-month period, beating the bench mark S&P 500
index return of 7.25%.
While we feel the long-term outlook for U.S. financial assets remains positive,
history says it is hard for markets to fight the Federal Reserve. In the face
of a rising Fed Funds rate, the stock market has corrected from the higher
levels reached in mid-March. From those highs, the Dow Jones Industrial Average
sold off approximately 9%, the S&P 500 Index declined 10% and the NASDAQ
composite collapsed nearly 40%.
Fortunately, the lows reached in late May were followed by a strong rally in
June. During the last month of the quarter, the equity markets erased most of
the losses of the previous ten weeks. The Harris Bretall Model Equity Composite
was off for the quarter, but still positive on the fiscal year and calendar
year-to-date basis.
In the early 1990's, when technology holdings were less than 15% of the
typical investor's portfolio, the volatility of the Nasdaq was little more
than a statistical curiosity. Today, with technology stocks representing
one-third of the S&P 500 Index and over one-half of the Russell Growth Index,
the rapidly changing fortunes of the over-the-counter marketplace reach
everyone. Even though the Portfolio's holdings remained heavy in the technology
area, we chose not to correct this position, as we feared being left behind by
a surge of technology growth more than the temporary pain of a Nasdaq decline.
This strategy proved itself again this quarter, when in June technology stocks
led the market higher when most forecasted a continued sell-off in the sector.
Those who sold in March and April were left on the sideline as the market
rallied in June.
While technology stock investing has always been challenging, the volatility of
recent years has raised the stakes for investors. Technology stocks command
premium multiples due not only to their extraordinary revenue and earnings
growth potential, but also to extraordinary momentum. During the past few
months, investors saw the downside of momentum investing. Harris Bretall
believes that technology companies need to be judged utilizing a combination of
fundamental analysis, and an evaluation of catalysts that can move the stocks
near term.
38
<PAGE>
The Legends Fund, Inc.
Portfolio Performance (continued)
SCUDDER KEMPER VALUE PORTFOLIO
Comparison of the change in value of $10,000 invested in
Scudder Kemper Value Portfolio and the S&P 500 Index
[CHART]
<TABLE>
<CAPTION>
Date Scudder Kemper Value Portfolio S&P 500 Index
<S> <C> <C>
12/14/92 $10,000 $10,000
Dec 92 $10,180 $10,088
Jun 93 $10,450 $10,579
Dec 93 $10,820 $11,102
Jun 94 $10,740 $10,727
Dec 94 $10,736 $11,248
Jun 95 $12,886 $13,519
Dec 95 $15,622 $15,471
Jun 96 $16,909 $17,032
Dec 96 $19,452 $19,021
Jun 97 $22,621 $22,939
Dec 97 $25,369 $25,142
Jun 98 $27,905 $29,593
Dec 98 $30,039 $32,327
Jun 99 $32,952 $36,328
Dec 99 $26,392 $39,129
Jun 00 $25,083 $38,962
</TABLE>
- Average annual total return since inception: 12.95%
- Total return for the year ended June 30, 2000: (23.88%)
- Average annual return for the five year period ended June 30, 1999: 14.05%
- Performance relates to the Portfolio and does not reflect separate
account charges applicable to variable annuity contracts.
- Portfolio commenced operations on December 14, 1992.
- Past performance is not predictive of future performance.
39
<PAGE>
The Legends Fund, Inc.
PORTFOLIO PERFORMANCE (CONTINUED)
SCUDDER KEMPER VALUE PORTFOLIO (CONTINUED)
SUB-ADVISER'S DISCUSSION
The second quarter of 2000 was volatile. All major market indices saw price
declines despite the June rally and an unusual markup of selected indices on the
last day of the quarter. In essence there were few havens in this period as
growth, value, "new" and "old" economy stocks faltered. Indeed, there has been
significant weakness in the "new economy" and IPO leaders of last year.
Reviewing the quarter, only four of the eleven S&P sectors experienced
positive rates of return.
The fourth quarter of 1999 experienced the extremes of the two tier market,
in effect a bear market for most stocks while the indices were making new
highs led by technology, telecommunications and large cap "index" leaders.
The money flow to these issues was so extreme that it blurred the broad
weakness in the breadth of the market. The designation "old economy"
justified buying glamour issues regardless of valuation. This has been a
watershed period not unlike the two tier market of 1972, the energy market of
1980, the technology (personal computer) market of 1983 and Japan of 1989.
In effect the leaders became too high priced in relation to a generally weak
market. As before, there is a reversion to the mean, which should bring prices
and valuations back in line with fundamental reality and reasonable
expectations regarding the future.
Despite record mutual fund cash flow to the aggressive growth and growth
mutual funds, it appears this area may have begun to falter. Conversely,
despite substantive outflows from traditional value mutual funds, this area
may be stabilizing as perhaps the valuation disparities in the market relative
to realistic fundamentals and expectations have begun to take hold. Value
indices have actually out performed growth indices in four of the last six
months and breadth of the market did improve modestly in the second quarter,
despite the weakness in the market average. this, along with the substantive
weakness in many of last year's leaders, may be a sign of a turn. The turn may
not be as much "growth" versus "value" as it may be in favor of securities
with rationale valuations in relation to their long-term fundamentals.
There is a volatile trading pattern for the indices with sharp and severe
group rotation underlying the market. The most extreme valuation disparities
appear to be in those "old economy" companies, which are deemed to be economy
sensitive or are early cycle stocks. These securities have traded materially
lower in the last twelve months. We will be looking to these areas in the
months ahead to perhaps emerge as market leaders.
We continued to follow our time tested discipline of buying companies with
earnings and dividend growth that is faster than the market, which sell at
discount price earnings ratios and have above market dividend yields. In
viewing the risk rewards of the Portfolio in the context of history, we find
the most compelling parameters seen in a decade. We are pleased that we began
to see some reflection of these facts in the relatively good investment
results of the second quarter.
40
<PAGE>
The Legends Fund, Inc.
Portfolio Performance
June 30, 2000
Zweig Asset Allocation Portfolio
Comparison of the change in value of $10,000 invested in the
Zweig Asset Allocation Portfolio and the S&P 500 Index
[GRAPH]
<TABLE>
<CAPTION>
Date Zweig Asset Allocation Portfolio S&P 500 Index
<S> <C> <C>
12/14/92 $10,000 $10,000
Dec 92 $10,000 $10,088
Jun 93 $10,810 $10,579
Dec 93 $11,495 $11,102
Jun 94 $11,485 $10,727
Dec 94 $11,536 $11,248
Jun 95 $13,164 $13,519
Dec 95 $14,009 $15,471
Jun 96 $14,620 $17,032
Dec 96 $16,087 $19,021
Jun 97 $17,343 $22,939
Dec 97 $19,625 $25,142
Jun 98 $21,052 $29,593
Dec 98 $19,223 $32,327
Jun 99 $20,266 $36,328
Dec 99 $20,315 $39,129
Jun 00 $20,161 $38,962
</TABLE>
- Average annual total return since inception: 9.73%
- Total return for the year ended June 30, 2000: (0.52)%
- Average annual return for the five year period ended June 30, 2000: 7.81%
- Performance relates to the Portfolio and does not reflect separate
account charges applicable to variable annuity contracts.
- Portfolio commenced operations on December 14, 1992.
- Past performance is not predictive of future performance.
41
<PAGE>
THE LEGENDS FUND, INC.
PORTFOLIO PERFORMANCE (CONTINUED)
JUNE 30, 2000
ZWEIG ASSET ALLOCATION PORTFOLIO(CONTINUED)
SUB-ADVISER'S DISCUSSION
The Zweig Asset Allocation Portfolio's -0.52% return for the twelve months
ended June 30, 2000 lagged the benchmark S&P 500's return of 7.25% for the
same period.
The continued rise in bond yields in December, coupled with three increases
in short-term rates by the Federal Reserve, led us to maintain a cautious
approach through the Fund's June 30, 2000 fiscal year end. These two factors,
which historically have been extremely bearish for the market, couldn't slow
down the public's enthusiasm for stocks - especially high-flying technology
stocks. After struggling for the three months ended September 30, 1999, the
S&P 500 surged for the three months ended December 31, 1999. It was during
these three months that virtually the entire Portfolio's underperformance for
the fiscal year ended June 30, 2000 occurred.
During 2000, we have remained cautiously positioned in response to three
further rate increases by the Federal Reserve. In addition, there were
increasing signs of investor optimism (which is viewed as a negative) in
March and April. A conservative approach has paid off so far in 2000. The S&P
500 reached its peak on March 24, 2000, only to decline in the following
three weeks. The Nasdaq Index, which is heavily weighted toward technology
stocks, gave back some of its phenomenal 1999 returns, declining more than
37% from March to May. Since this correction, the market has not advanced or
declined significantly.
Recently, the Fund's equity exposure was increased to a level considered to
be neutral. There are optimistic signs of an economic slowdown combined with
a downward move long-term interest rates. In addition, the second half of
Presidential election years tend to be strong, as incumbents vote for
increased spending to help their re-election campaigns. In spite of this, a
cautious approach must be maintained because the specter of more rate
increases by the Federal Reserve must be removed before the market can rally
significantly.
On January 3, 2000, a portfolio management team, led by Carlton Neel, assumed
the day to day running of the Portfolio. The new analysis team seeks to
highlight Dr. Zewig's asset allocation by creating a portfolio with
characteristics more similar to those of the S&P 5000. We feel this approach
may better allow the shareholders to benefit from our asset allocation
strategy without undue exposure to stock selection risk.
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THE LEGENDS FUND, INC.
PORTFOLIO PERFORMANCE
JUNE 30, 2000
ZWEIG EQUITY (SMALL CAP) PORTFOLIO
Comparison of the change in value of $10,000 invested in the
Zweig Equity (Small Cap) Portfolio and the Value Line Geometric Index
[GRAPH]
<TABLE>
<CAPTION>
Date Zweig Equity (Small Cap) Portfolio Value Line Geometric Index
<S> <C> <C>
12/14/92 $10,000 $10,000
Dec 92 $10,000 $10,106
Jun 93 $10,110 $10,611
Dec 93 $10,864 $11,260
Jun 94 $10,763 $10,482
Dec 94 $10,797 $10,582
Jun 95 $11,881 $11,862
Dec 95 $13,076 $12,624
Jun 96 $14,102 $13,509
Dec 96 $15,500 $14,311
Jun 97 $16,975 $16,010
Dec 97 $19,388 $17,326
Jun 98 $20,989 $18,778
Dec 98 $19,270 $16,670
Jun 99 $19,051 $17,761
Dec 99 $18,775 $20,177
Jun 00 $18,380 $19,049
</TABLE>
- Average annual total return since inception: 8.40%
- Total return for the year ended June 30, 2000: (3.52)%
- Average annual return for the five year period ended June 30, 2000: 9.23%
- Performance relates to the Portfolio and does not reflect separate
account charges applicable to variable annuity contracts.
- Portfolio commenced operations on December 14, 1992.
- Past performance is not predictive of future performance.
43
<PAGE>
THE LEGENDS FUND, INC.
PORTFOLIO PERFORMANCE (CONTINUED)
JUNE 30, 2000
ZWEIG EQUITY (SMALL CAP) PORTFOLIO(CONTINUED)
SUB-ADVISER'S DISCUSSION
For the twelve months ended June 30, 2000, the Zweig Equity (Small Cap)
Portfolio was down -3.52% while its benchmark, the Value Line Index fell as
well with a -12.43% return. The Russell 2000 Index rose 14.48% due primarily
to a large technology weighting. However, the annual numbers mask an
improvement in performance during the last six months as the benefits of good
asset allocation decisions and carefully researched industry and quantitative
equity analysis began to make a positive impact.
The goal of the Zweig Equity (Small Cap) Fund is to provide investors with
the growth potential of small capitalization stocks with less risk and
volatility than the market. With the benefit of the Zweig market analysis,
equity exposure is reduced as market risk rises and is gradually increased as
market risk declines. The objective is to participate solidly during rising
markets and substantially protect the bulk of those gains from major market
declines.
At the beginning of the fiscal year, July 1st, 1999, the Portfolio had an
equity exposure of 56% with the remaining 44% invested in cash. This date was
also the start of the first of six Fed Fund rate adjustments throughout the
year. The rates have increased by 1.75% during the year, as the Fed has
continued to be vigilant in containing inflation in the face of very robust
economic growth. With interest rates rising and inflation threatening, the
Portfolio's monetary model signaled caution for most of this period, which
proved to be warranted. Additionally, the Federal Reserve has been warning
investors of high equity valuations and their concerns of stocks purchased on
margin.
While our conservative stance hindered performance for the six months ending
December 31, 1999 it began to payoff in the most recent six months, as the
equity market started to absorb the impact of the Federal Reserve's actions.
Most recently our models became slightly more positive as the year ended.
Monitoring market conditions through evaluating model outputs and responding
to the changing macroeconomic environment by investing the funds
conservatively should help continue this positive trend.
44
<PAGE>
THIS 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] 515 WEST MARKET STREET
LOUISVILLE, KENTUCKY 40202
Catalog #001914 (8/00)
