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Previous: CONSECO FINANCE CORP, 424B3, 2000-02-25 |
Next: PACIFIC CORINTHIAN VAR SEP ACCT OF PACIFIC LIFE INSURANCE CO, NSAR-U, 2000-02-25 |
<PAGE>
The Legends Fund, Inc.
Semi-Annual Report
December 31, 1999
Contents
President's Letter............................................................ 1
Financial Statements, Financial Highlights, and Schedules of
Investments:
Harris Bretall Sullivan & Smith Equity Growth Portfolio................ 2
Scudder Kemper Value Portfolio......................................... 6
Zweig Asset Allocation Portfolio.......................................11
Zweig Equity (Small Cap) Portfolio.....................................17
Notes to Financial Statements.................................................23
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE
GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED
OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. NEITHER THE FUND NOR ARM SECURITIES
CORPORATION, THE PRINCIPAL UNDERWRITER FOR FUND SHARES, IS A BANK AND FUND
SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED BY THE FEDERAL
DEPOSITORY INSURANCE CORPORATION.
<PAGE>
We are pleased to present the 1999 Semi-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 six months and year
ended December 31, 1999, respectively, are listed below:
<TABLE>
<CAPTION>
PORTFOLIO SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, 1999 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Harris Bretall Sullivan & Smith Equity Growth 17.16% 35.51%
Scudder Kemper Value (19.90%) (12.14%)
Zweig Asset Allocation 0.24% 5.68%
Zweig Equity (Small Cap) (1.45%) (2.57%)
</TABLE>
Included in this Semi-Annual Report is detailed information of the investment
holdings of each portfolio as of December 31, 1999, 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>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Statement of Assets and Liabilities
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at value (cost $28,276,886)--See accompanying schedule $ 54,202,397
Cash 30,461
Dividends and interest receivable 8,939
Receivable for capital shares sold 25,247
-------------------
Total assets 54,267,044
LIABILITIES
Accounts payable and accrued expenses 65,524
-------------------
NET ASSETS $ 54,201,520
-------------------
-------------------
Net Assets consist of:
Paid-in capital 20,847,664
Accumulated undistributed net realized gain on investments 7,428,345
Net unrealized appreciation on investments 25,925,511
-------------------
NET ASSETS, for 1,818,148 shares outstanding $ 54,201,520
-------------------
-------------------
NET ASSET VALUE, offering and redemption price per share $ 29.81
-------------------
-------------------
</TABLE>
Statement of Operations
Six Months Ended December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Dividends $ 143,513
Interest 15,908
-------------------
Total investment income 159,421
EXPENSES
Investment advisory and management fees 167,790
Custody and accounting fees 69,697
Professional fees 5,940
Directors' fees and expenses 3,448
Other expenses 4,989
-------------------
Total expenses 251,864
-------------------
Net investment loss (92,443)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 7,660,186
Net unrealized appreciation during the period on investments 14,772
-------------------
Net realized and unrealized gain on investments 7,674,958
-------------------
Net increase in net assets resulting from operations $ 7,582,515
-------------------
-------------------
</TABLE>
SEE ACCOMPANYING NOTES.
2
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31,
1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
---------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment loss $ (92,443) $ (126,103)
Net realized gain on investments 7,660,186 1,150,781
Net unrealized appreciation during the period on investments 14,772 12,820,070
---------------------------------------
Net increase in net assets resulting from operations 7,582,515 13,844,748
Distributions to shareholders from:
Net investment income - -
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 6,886,607 13,015,410
Proceeds from reinvested distributions 1,073,245 4,108,321
Cost of shares redeemed (15,695,971) (9,093,677)
---------------------------------------
Net increase (decrease) in net assets resulting from share transactions (7,736,119) 8,030,054
---------------------------------------
Total increase (decrease) in net assets (1,226,849) 17,766,481
NET ASSETS
Beginning of period 55,428,369 37,661,888
---------------------------------------
End of period $ 54,201,520 $ 55,428,369
---------------------------------------
---------------------------------------
OTHER INFORMATION
Shares:
Sold 263,507 575,275
Issued through reinvestment of distributions 44,729 180,671
Redeemed (622,324) (407,703)
---------------------------------------
Net increase (decrease) (314,088) 348,243
---------------------------------------
---------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31,
1999 YEAR ENDED JUNE 30,
-------------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------
<S> <C> <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 $ 9.36
Income from investment operations:
Net investment income (loss) (0.05) (0.06) -(a) 0.02 -(a) 0.01
Net realized and unrealized
gain on investments 4.39 7.17 4.90 4.13 1.74 3.48
--------------------------------------------------------------------------------------
Total from investment
operations 4.34 7.11 4.90 4.15 1.74 3.49
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 $ 29.81 $ 26.00 $ 21.11 $ 17.53 $ 14.49 $ 12.85
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
TOTAL RETURN 17.16%(B) 35.19% 29.11% 30.23% 13.59% 37.29%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $ 54,202 $ 55,428 $ 37,662 $ 28,815 $ 23,810 $ 16,393
Ratio of expenses to average
net assets 0.98%(C) 0.96% 0.95% 1.03% 1.04% 1.05%
Ratio of net investment income
(loss) to average net assets (0.36%)(C) (0.29%) (0.01%) 0.14% 0.03% 0.13%
Portfolio turnover rate 17%(B) 27% 57% 46% 58% 31%
</TABLE>
(a) Less than $0.01 per share.
(b) Not annualized.
(c) Annualized.
4
<PAGE>
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Schedule of Investments
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Number
COMMON STOCKS (96.4%) of Shares Value
---------- -----------
<S> <C> <C>
BASIC CHEMICAL PLASTICS & SYNTHETICS (16.3%)
Abbott Laboratories 26,000 $ 944,125
Bristol-Myers Squibb Company 13,100 840,856
Colgate-Palmolive Company 20,000 1,300,000
Genentech, Inc. (a) 11,000 1,479,500
Pfizer, Inc. 32,000 1,038,000
Schering-Plough 21,400 902,812
The Proctor & Gamble Company 10,600 1,161,362
Warner-Lambert Company 14,500 1,188,094
-----------
8,854,749
BUSINESS SERVICES (15.4%)
America Online, Inc. (a) 17,200 1,297,525
Microsoft Corporation (a) 19,000 2,217,656
Sun Microsystems, Inc. (a) 21,800 1,687,456
The Interpublic Group of Companies, Inc. 24,800 1,430,650
Yahoo! Inc. (a) 4,000 1,730,875
-----------
8,364,162
COMMUNICATIONS (3.0%)
MCI WorldCom, Inc. (a) 21,300 1,129,566
SBC Communications, Inc. 10,000 487,500
-----------
1,617,066
DEPOSITORY INSTITUTIONS (5.5%)
Bank of America Corporation 16,000 803,000
Citigroup, Inc. 22,900 1,272,381
Wells Fargo Company 21,600 873,450
-----------
2,948,831
ELECTRICAL & ELECTRONIC MACHINERY (9.9%)
General Electric Company 12,800 1,980,800
Intel Corporation 15,600 1,283,587
Lucent Technologies, Inc. 14,200 1,062,338
Texas Instruments, Inc. 10,900 1,055,938
-----------
5,382,663
FABRICATED METAL PRODUCTS (1.8%)
Illinois Tool Works, Inc. 14,400 972,900
GENERAL MERCHANDISE STORES (4.6%)
Dayton Hudson Corporation 15,500 1,138,281
Wal-Mart Stores, Inc. 19,300 1,334,113
-----------
2,472,394
INDUSTRIAL MACHINERY & EQUIPMENT (12.7%)
Applied Materials, Inc. (a) 10,500 1,329,891
Cisco Systems, Inc. (a) 18,700 2,002,653
Dell Computer Corporation (a) 21,100 1,075,441
EMC Corporation (a) 14,300 1,562,275
International Business Machines Corporation 8,500 918,000
-----------
6,888,260
INSTRUMENTS & RELATED PRODUCTS (2.4%)
JDS Uniphase Corporation (a) 8,000 1,290,500
<CAPTION>
Number
COMMON STOCKS (CONTINUED) of Shares Value
---------- -----------
<S> <C> <C>
INSURANCE CARRIERS (2.4%)
American International Group, Inc. 11,483 $ 1,241,599
PRINTING & PUBLISHING (2.0%)
Time Warner, Inc. 15,300 1,108,293
RETAIL-BUILDING MATERIAL HARDWARE (3.0%)
The Home Depot, Inc. 24,000 1,645,500
RETAIL - MISCELLANEOUS (4.7%)
Costco Wholesale Corporation (a) 15,000 1,368,281
Walgreen Company 41,000 1,199,250
-----------
2,567,531
SECURITY & COMMODITY BROKERS (7.9%)
Morgan Stanley, Dean Witter ,
Discover and Company 11,200 1,598,800
The Charles Schwab Corporation 28,400 1,089,850
The Goldman Sachs Group, Inc. 17,000 1,601,188
-----------
4,289,838
WATER TRANSPORTATION (1.9%)
Carnival Corporation 22,000 1,051,875
WHOLESALE TRADE-DURABLE GOODS (1.6%)
Johnson & Johnson 9,500 884,688
WHOLESALE TRADE-NONDURABLE GOODS (1.3%)
Safeway, Inc. (a) 19,600 697,025
-----------
TOTAL COMMON STOCKS (Cost $26,352,363) 52,277,874
Principal
SHORT-TERM SECURITIES (3.6%) Amount
----------
REPURCHASE AGREEMENT (3.6%)
State Street Bank, 2.50%, due 1/3/2000
(Dated 12/31/1999, collateralized by
U.S. Treasury Note, 7.25%, due
8/15/2022, value $1,964,738) $1,924,523 1,924,523
-----------
TOTAL SHORT -TERM SECURITIES (Cost $1,924,523) 1,924,523
-----------
TOTAL INVESTMENTS (100.0%) (Cost $28,276,886) $54,202,397
-----------
-----------
</TABLE>
(a) Non-income producing.
OTHER INFORMATION:
Cost of purchases and proceeds from sales of securities, excluding
short-term securities, for the six months ended December 31, 1999,
aggregated $8,411,950 and $17,908,329, respectively. At December 31,
1999, net unrealized appreciation for tax purposes aggregated
$25,925,511, of which $26,157,682 related to appreciated investments and
$232,171 related to depreciated investments. The aggregate cost of
securities is the same for book and tax purposes.
SEE ACCOMPANYING NOTES.
5
<PAGE>
Scudder Kemper Value Portfolio
Statement of Assets and Liabilities
December 31, 1999 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value (cost $31,380,883)--See accompanying schedule $ 28,323,473
Cash 38,223
Dividends and interest receivable 60,509
Receivable for capital shares sold 8,330
--------------------
Total assets 28,430,535
LIABILITIES
Accounts payable and accrued expenses 44,682
Redemptions payable 5,849
--------------------
Total liabilities 50,531
--------------------
NET ASSETS $ 28,380,004
--------------------
--------------------
Net Assets consist of:
Paid-in capital 29,229,841
Undistributed net investment income 354,678
Accumulated undistributed net realized gain on investments 1,852,895
Net unrealized depreciation on investments (3,057,410)
--------------------
NET ASSETS, for 1,931,155 shares outstanding $ 28,380,004
--------------------
--------------------
NET ASSET VALUE, offering and redemption price per share $ 14.70
--------------------
--------------------
</TABLE>
Statement of Operations
Six Months Ended December 31, 1999 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign tax withheld of $2,158) $ 535,319
Interest 22,300
--------------------
Total investment income 557,619
EXPENSES
Investment advisory and management fees 133,189
Custody and accounting fees 55,325
Professional fees 5,662
Directors' fees and expenses 3,448
Other expenses 5,317
--------------------
Total expenses 202,941
--------------------
Net investment income 354,678
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments 1,852,895
Net unrealized depreciation during the period on investments (11,482,660)
--------------------
Net realized and unrealized loss on investments (9,629,765)
--------------------
Net decrease in net assets resulting from operations $ (9,275,087)
--------------------
--------------------
</TABLE>
SEE ACCOMPANYING NOTES.
6
<PAGE>
Scudder Kemper Value Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31,
1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
---------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 354,678 $ 723,270
Net realized gain on investments 1,852,895 6,626,918
Net unrealized appreciation (depreciation) during the period on investments (11,482,660) 407,796
---------------------------------------
Net increase (decrease) in net assets resulting from operations (9,275,087) 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 2,509,652 13,300,551
Proceeds from reinvested distributions 7,350,188 5,297,991
Cost of shares redeemed (15,023,966) (17,325,011)
---------------------------------------
Net increase (decrease) in net assets resulting from share transactions (5,164,126) 1,273,531
---------------------------------------
Total increase (decrease) in net assets (21,789,401) 3,733,523
NET ASSETS
Beginning of period 50,169,405 46,435,882
---------------------------------------
End of period (including undistributed net investment income of $354,678
and $723,270, respectively) $ 28,380,004 $ 50,169,405
---------------------------------------
---------------------------------------
OTHER INFORMATION
Shares:
Sold 129,183 641,261
Issued through reinvestment of distributions 442,031 264,302
Redeemed (914,779) (840,192)
---------------------------------------
Net increase (decrease) (343,565) 65,371
---------------------------------------
---------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
7
<PAGE>
Scudder Kemper Value Portfolio
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
1999 ---------------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------
<S> <C> <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 $ 10.66
Income from investment operations:
Net investment income 0.20 0.33 0.26 0.26 0.18 0.26
Net realized and unrealized
gain (loss) on investments (4.20) 3.22 4.08 5.04 3.70 1.85
--------------------------------------------------------------------------------------
Total from investment
operations (4.00) 3.55 4.34 5.30 3.88 2.11
Less distributions:
From net investment income (0.33) (0.28) (0.26) (0.19) (0.19) (0.14)
From net realized gain (3.03) (2.23) (3.69) (0.65) (0.11) (0.04)
--------------------------------------------------------------------------------------
Total distributions (3.36) (2.51) (3.95) (0.84) (0.30) (0.18)
--------------------------------------------------------------------------------------
Net asset value, end of period $ 14.70 $ 22.06 $ 21.02 $ 20.63 $ 16.17 $ 12.59
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
TOTAL RETURN (19.90%)(a) 18.09% 23.36% 33.78% 31.22% 19.98%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $28,380 $50,169 $ 46,436 $ 30,930 $ 19,705 $10,877
Ratio of expenses to average
net assets 1.00%(b) 0.96% 0.94% 1.05% 1.06% 1.13%
Ratio of expenses to average net
assets before voluntary
expense reimbursement 1.00%(b) 0.96% 0.94% 1.05% 1.07% 1.13%
Ratio of net investment income
to average net assets 1.73%(b) 1.56% 1.58% 1.62% 1.65% 1.98%
Ratio of net investment income
to average net assets before
voluntary expense
reimbursement 1.73%(b) 1.56% 1.58% 1.62% 1.64% 1.98%
Portfolio turnover rate 23%(a) 50% 57% 88% 18% 29%
</TABLE>
(a) Not annualized.
(b) Annualized.
8
<PAGE>
Scudder Kemper Value Portfolio
Schedule of Investments
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Number
COMMON STOCKS (99.2%) of Shares Value
---------- ----------
<S> <C> <C>
APPAREL & OTHER FINISHED PRODUCTS (2.7%)
VF Corporation 25,800 $ 774,000
BASIC CHEMICAL PLASTICS & SYNTHETICS (8.9%)
Air Products and Chemicals, Inc. 26,300 882,694
Abbott Laboratories 22,200 806,137
American Home Products Corporation 7,500 295,781
International Flavors & Fragrances, Inc. 8,900 335,975
Praxair, Inc. 3,700 186,156
----------
2,506,743
BUSINESS SERVICES (2.4%)
Equifax, Inc. 29,000 683,312
DEPOSITORY INSTITUTIONS (15.0%)
Bank of America Corporation 18,616 934,291
First Union Corporation 26,900 882,656
KeyCorp 30,500 674,812
PNC Bank Corporation 15,010 667,945
Washington Mutual, Inc. 25,388 660,088
Wells Fargo Company 10,500 424,594
----------
4,244,386
ELECTRICAL & ELECTRONIC MACHINERY (3.1%)
Emerson Electric Company 11,000 631,125
Thomas & Betts Corporation 7,700 245,438
----------
876,563
FOOD AND KINDRED PRODUCTS (5.8%)
Campbell Soup Company 9,500 367,531
H.J. Heinz Company 8,400 334,425
Hershey Foods Corporation 7,400 351,500
Unilever N V 11,000 598,813
----------
1,652,269
FORESTRY (1.3%)
Georgia Pacific Timber Group 15,200 374,300
FURNITURE AND FIXTURES (2.2%)
Newell Rubbermaid, Inc. 21,700 629,300
GENERAL MERCHANDISE STORES (6.5%)
J. C. Penney Company, Inc. 20,300 404,731
May Department Stores Company 24,000 774,000
Sears, Roebuck and Company 21,300 648,319
----------
1,827,050
HEALTHCARE SERVICES (0.5%)
Healthsouth Corporation (a) 27,300 146,738
<CAPTION>
Number
COMMON STOCKS (CONTINUED) of Shares Value
---------- ----------
<S> <C> <C>
INDUSTRIAL MACHINERY & EQUIPMENT (8.5%)
Diebold, Inc. 35,000 $ 822,500
Minnesota Mining and
Manufacturing Co. 6,100 597,037
Pitney Bowes, Inc. 7,500 362,344
United Technologies Corporation 9,800 637,000
----------
2,418,881
INSTRUMENTS & RELATED PRODUCTS (3.6%)
Becton Dickinson & Company 13,700 366,475
Raytheon Company 11,200 297,500
Xerox Corporation 16,100 365,269
----------
1,029,244
INSURANCE CARRIERS (7.5%)
American General Corporation 11,800 895,325
The Allstate Corporation 20,400 489,600
The Chubb Corporation 12,900 726,431
----------
2,111,356
LUMBER &WOOD PRODUCTS (2.3%)
Louisiana-Pacific Corporation 46,700 665,475
NONDEPOSITORY INSTITUTIONS (9.1%)
Fannie Mae 20,600 1,286,213
Freddie Mac 27,300 1,284,806
----------
2,571,019
PAPER & ALLIED PRODUCTS (3.3%)
Sonoco Products Company 40,700 925,925
PETROLEUM & COAL PRODUCTS (4.1%)
BP Amoco PLC 6,456 382,921
Exxon Mobil Corporation 7,500 604,219
Texaco, Inc. 3,300 179,231
----------
1,166,371
RAILROAD TRANSPORTATION (2.6%)
Burlington Northern Santa Fe Corp. 17,900 434,075
CSX Corporation 9,300 291,788
----------
725,863
RETAIL-FOOD STORES (0.9%)
Albertson's Inc. 7,500 241,875
TEXTILE MILL PRODUCTS (1.8%)
Sara Lee Corporation 22,500 496,406
TOBACCO MANUFACTURERS-CIGAR (3.7%)
Philip Morris Companies, Inc. 45,800 1,061,988
TRANSPORTATION EQUIPMENT (3.4%)
Ford Motor Company 18,000 961,875
-----------
TOTAL COMMON STOCKS (COST $31,148,349) 28,090,939
</TABLE>
9
<PAGE>
Scudder Kemper Value Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
Principal
SHORT-TERM SECURITIES (0.8%) Amount Value
--------- -----------
<S> <C> <C>
REPURCHASE AGREEMENT (0.8%)
State Street Bank, 2.50%, due 1/3/2000
(Dated 12/31/1999, collateralized by
U.S Treasury Note, 7.25%, due 8/15/2022,
value $238,150) $ 232,534 $ 232,534
-----------
TOTAL SHORT-TERM SECURITIES (Cost $232,534)
232,534
-----------
TOTAL INVESTMENTS (100.0%) (Cost $ 31,380,883) $28,323,473
-----------
-----------
</TABLE>
(a) Non-income producing.
OTHER INFORMATION:
Cost of purchases and proceeds from sales of securities, excluding
short-term securities, for the six months ended December 31, 1999,
aggregated $8,866,455 and $17,290,431, respectively. At December 31,
1999, net unrealized depreciation for tax purposes aggregated $3,057,410
of which $2,544,690 related to appreciated investments and $5,602,100
related to depreciated investments. The aggregate cost of securities was
the same for book and tax purposes.
SEE ACCOMPANYING NOTES.
10
<PAGE>
Zweig Asset Allocation Portfolio
Statement of Assets and Liabilities
December 31, 1999 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value (cost $17,200,688)--See accompanying schedule $ 18,392,181
Cash 21,373
Dividends and interest receivable 11,436
--------------------
Total assets 18,424,990
LIABILITIES
Accounts payable and accrued expenses 40,937
Redemptions payable 681
--------------------
Total liabilities 41,618
--------------------
NET ASSETS $ 18,383,372
--------------------
--------------------
Net Assets consist of:
Paid-in capital 16,266,284
Undistributed net investment income 218,289
Accumulated undistributed net realized gain on investments 707,306
Net unrealized appreciation on investments 1,191,493
--------------------
NET ASSETS, for 1,740,026 shares outstanding $ 18,383,372
--------------------
--------------------
NET ASSET VALUE, offering and redemption price per share $ 10.56
--------------------
--------------------
</TABLE>
Statement of Operations
Six Months Ended December 31, 1999 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 105,582
Interest 270,060
-------------------
Total investment income 375,642
EXPENSES
Investment advisory and management fees 109,684
Custody and accounting fees 32,905
Professional fees 4,947
Directors' fees and expenses 3,448
Other expenses 6,369
-------------------
Total expenses 157,353
-------------------
Net investment income 218,289
REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS
Net realized gain on:
Investments 627,435
Futures contracts 91,268
-------------------
Net realized gain 718,703
Net unrealized depreciation during the period on:
Investment securities (1,457,363)
Futures contracts (11,396)
-------------------
Net unrealized depreciation during the period (1,468,759)
-------------------
Net realized and unrealized loss on investments (750,056)
-------------------
Net decrease in net assets resulting from operations $ (531,767)
-------------------
-------------------
</TABLE>
SEE ACCOMPANYING NOTES.
11
<PAGE>
Zweig Asset Allocation Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31,
1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
---------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 218,289 $ 411,239
Net realized gain on investments 718,703 5,955,028
Net unrealized depreciation during the period (1,468,759) (8,938,463)
---------------------------------------
Net decrease in net assets resulting from operations (531,767) (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 542,897 1,260,662
Proceeds from reinvested distributions 6,421,964 6,413,638
Cost of shares redeemed (12,637,328) (15,129,106)
---------------------------------------
Net decrease in net assets resulting from share transactions (5,672,467) (7,454,806)
---------------------------------------
Total decrease in net assets (12,626,198) (16,440,640)
NET ASSETS
Beginning of period 31,009,570 47,450,210
---------------------------------------
End of period (including undistributed net investment income
of $218,289 and $411,239, respectively) $ 18,383,372 $ 31,009,570
---------------------------------------
---------------------------------------
OTHER INFORMATION
Shares:
Sold 46,249 84,700
Issued through reinvestment of distributions 637,277 488,856
Redeemed (1,160,483) (1,059,406)
---------------------------------------
Net decrease (476,957) (485,850)
---------------------------------------
---------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
12
<PAGE>
Zweig Asset Allocation Portfolio
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31,
1999 YEAR ENDED JUNE 30,
---------------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning
of period $ 13.99 $ 17.56 $ 14.63 $ 14.11 $ 13.02 $ 11.44
Income (loss) from investment operations:
Net investment income 0.15 0.21 0.14 0.19 0.21 0.33
Net realized and unrealized
gain (loss) on investments (0.29) (1.04) 2.97 2.20 1.21 1.33
--------------------------------------------------------------------------------------
Total from investment
operations (0.14) (0.83) 3.11 2.39 1.42 1.66
Less distributions:
From net investment income (0.21) (0.16) (0.18) (0.22) (0.33) (0.08)
From net realized gain (3.08) (2.58) - (1.65) - -
--------------------------------------------------------------------------------------
Total distributions (3.29) (2.74) (0.18) (1.87) (0.33) (0.08)
--------------------------------------------------------------------------------------
Net asset value, end of period $ 10.56 $ 13.99 $ 17.56 $ 14.63 $ 14.11 $ 13.02
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
TOTAL RETURN 0.24%(a) (3.73%) 21.38% 18.63% 11.06% 14.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $ 18,383 $ 1,010 $ 47,450 $ 42,848 $ 40,222 $36,736
Ratio of expenses to average
net assets 1.29%(b) 1.23% 1.18% 1.28% 1.25% 1.20%
Ratio of net investment income
to average net assets 1.79%(b) 1.13% 0.80% 1.29% 1.55% 2.73%
Portfolio turnover rate 75%(a) 109% 65% 89% 105% 45%
</TABLE>
(a) Not annualized.
(b) Annualized.
13
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Number
COMMON STOCKS (56.5%) of Shares Value
---------- ----------
<S> <C> <C>
APPAREL & OTHER FINISHED PRODUCTS (0.2%)
Tommy Hilfiger Corporation (a) 700 $ 16,319
Jones Apparel Group, Inc. (a) 500 13,562
----------
29,881
BASIC CHEMICAL PLASTICS & SYNTHETIC (0.7%)
Biogen, Inc. (a) 100 8,447
Chiron Corporation (a) 600 25,406
Dow Chemical Company 200 26,725
Occidental Petroleum Corporation 600 12,975
Schering-Plough Corporation 1,200 50,625
The Valspar Corporation 100 4,188
----------
128,366
BUSINESS SERVICES (2.0%)
Adobe Systems, Inc. 1,600 107,600
American Management Systems, Inc. (a) 300 9,384
American Online, Inc. (a) 1,000 75,438
Compuware Corporation (a) 700 26,053
DST Systems, Inc. (a) 300 22,894
First Data Corporation 500 24,656
Interpublic Group of Companies, Inc. 700 40,381
Microsoft Corporation (a) 100 11,672
Sun Microsystems, Inc. (a) 400 30,962
Tech Data Corporation (a) 900 24,441
----------
373,481
COMMUNICATIONS (1.7%)
BellSouth Corporation 800 37,450
Telefonica SA (a) 510 40,194
Telefonos de Mexico SA 2,100 236,250
----------
313,894
DEPOSITORY INSTITUTIONS (2.4%)
Astoria Financial Corporation 600 18,319
BB&T Corporation 300 8,213
Banco Santander Central Hispano SA 1,200 14,025
Bank United Corporation 200 5,394
Citigroup, Inc. 2,550 141,684
Coast Federal (a) 1,000 1,516
Firstar Corporation 1,300 27,463
FleetBoston Financial Corporation 636 22,141
Golden State Bancorp, Inc. (a) 500 8,625
Golden State Bancorp, Inc. (a) 5,500 4,984
Golden West Financial Corporation 600 20,100
Greenpoint Financial Corporation 200 4,763
PNC Bank Corporation 600 26,700
Providian Financial Corporation 500 45,531
The Chase Manhattan Corporation 800 62,150
SunTrust Banks, Inc. 300 20,644
Synovus Financial Corporation 700 13,913
----------
446,165
EATING & DRINKING PLACES (0.7%)
Brinker International, Inc. (a) 2,300 55,200
Darden Restaurants, Inc. 4,100 74,313
----------
129,513
ELECTRIC GAS & SANITARY SERVICE (4.6%)
Allegheny Energy, Inc. 500 13,469
DTE Energy Company 3,000 94,125
Dominion Resources, Inc. 100 3,925
Edison International 4,100 107,369
Florida Progress Corporation 1,200 50,775
GPU, Inc. 1,800 53,888
OGE Energy Corporation 200 3,800
PP&L Resources, Inc. 577 13,199
Public Service Enterprise Group
Corporation, Inc. 4,400 153,175
<CAPTION>
Number
COMMON STOCKS (CONTINUED) of Shares Value
---------- ----------
<S> <C> <C>
ELECTRIC GAS & SANITARY SERVICE (CONTINUED)
Reliant Energy, Inc. 400 $ 9,150
Southern Co. 1,400 32,900
Texas Utilities Company 500 17,781
The AES Corporation (a) 1,000 74,750
Unicom Corporation 5,600 187,600
UtiliCorp United, Inc. 1,300 25,269
----------
841,175
ELECTRICAL & ELECTRONIC MACHINERY (5.1%)
Analog Devices, Inc. (a) 600 55,800
Emerson Electric Company 400 22,950
Koninklijke Philips Electronics NV 400 54,000
Lucent Technologies, Inc. 1,000 74,812
Motorola, Inc. 400 58,900
Nokia Oyj-Sponsored ADR 600 114,000
Nortel Networks Corporation 1,500 151,500
Qualcomm, Inc. (a) 800 140,875
Scientific-Atlanta, Inc. 100 5,563
STMicroelectronics NV 100 15,144
Taiwan Semiconductor Mfg
Company (a) 1,000 45,000
Texas Instruments, Inc. 1,900 184,062
Whirlpool Corporation 200 13,012
Xilinx, Inc. (a) 200 9,094
----------
944,712
FABRICATED METAL PRODUCTS (0.3%)
Ball Corporation 1,400 55,125
FOOD & KINDRED PRODUCTS (1.6%)
Adolph Coors Company 3,300 173,250
Anheuser-Busch Companies, Inc. 500 35,437
ConAgra, Inc. 1,400 31,588
Hormel Foods Corporation 400 16,251
Quaker Oats Company 600 39,375
----------
295,901
FORESTRY (0.6%)
Georgia Pacific Company 1,200 60,900
Weyerhaeuser Company 700 50,269
----------
111,169
FURNITURE & FIXTURES (0.2%)
Furniture Brands International,
Inc. (a) 500 11,000
Johnson Controls, Inc. 500 28,438
Lear Corporation (a) 200 6,400
----------
45,838
GENERAL BUILDING CONTRACTORS (0.5%)
Lennar Corporation 900 14,625
Pulte Corporation 3,700 83,250
----------
97,875
GENERAL MERCHANDISE STORES (3.0%)
Dayton Hudson Corporation 2,700 198,281
Federated Department Stores, Inc. (a) 300 15,169
Wal-Mart Stores, Inc. 4,900 338,712
----------
552,162
HOLDING & OTHER INVESTMENT OFFICES (0.4%)
Duke-Weeks Realty Corporation 300 5,850
Equity Office Properties Trust 1,700 41,863
Equity Residential Properties Trust 200 8,537
Liberty Property Trust 300 7,275
NStar, Inc. 200 8,100
----------
71,625
</TABLE>
14
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
Number
COMMON STOCKS (CONTINUED) of Shares Value
---------- ----------
<S> <C> <C>
INDUSTRIAL MACHINERY & EQUIPMENT (3.3%)
Black & Decker Corporation 200 $ 10,450
Briggs & Stratton Corporation 200 10,725
CNH Global NV 1,000 13,313
Dover Corporation 200 9,075
EMC Corporation (a) 1,900 207,575
Gateway, Inc. (a) 400 28,825
Lexmark International Group, Inc. (a) 2,200 199,100
Minnesota Mining and Manufacturing
Co. 400 39,150
Pall Corporation 300 6,469
Solectron Corporation (a) 400 38,050
United Technologies Corporation 600 39,000
----------
601,732
INSTRUMENTS & RELATED PRODUCTS (0.7%)
Baxter International, Inc. 500 31,406
C.R. Bard, Inc. 500 26,500
Danaher Corporation 200 9,650
Eastman Kodak Company 100 6,625
Mallinckrodt, Inc. 800 25,450
Northrop Grumman Corporation 200 10,813
Waters Corporation (a) 200 10,600
----------
121,044
INSURANCE CARRIERS (3.1%)
Aetna, Inc. 800 44,650
Aflac, Inc. 600 28,313
Allmerica Financial Corporation 100 5,562
Ambac Financial Group, Inc. 1,800 93,937
American General Corporation 500 37,938
AXA Financial, Inc. 5,300 179,537
Cigna Corporation 100 8,056
Financial Security Assurance Holding Ltd. 1,200 62,550
Nationwide Financial Services, Inc. 100 2,794
PacifiCare Health Systems, Inc. (a) 1,300 68,941
The PMI Group, Inc. 200 9,763
Trigon Healthcare, Inc. 400 11,800
United HealthCare Corporation 400 21,250
----------
575,091
LUMBER & WOOD PRODUCTS (0.1%)
Louisiana-Pacific Corporation 600 8,550
MISC. MANUFACTURING INDUSTRIES (0.7%)
Tiffany & Company 1,400 124,950
NONDEPOSITORY INSTITUTIONS (1.8%)
Capital One Financial Corporation 500 24,094
Fannie Mae 1,600 99,900
Freddie Mac 2,600 122,362
Household International, Inc. 800 29,800
MBNA Corporation 1,600 43,600
The CIT Group, Inc. 500 10,563
The FINOVA Group, Inc. 300 10,650
----------
340,969
OIL AND GAS EXTRACTION (0.5%)
Amerada Hess Corporation 300 17,025
Apache Corporation 500 18,469
Atlantic Richfield Company 300 25,950
Kerr McGee Corporation 300 18,600
USX-Marathon Group, Inc. 500 12,344
----------
92,388
<CAPTION>
Number
COMMON STOCKS (CONTINUED) of Shares Value
---------- ----------
<S> <C> <C>
PAPER & ALLIED PRODUCTS (1.3%)
International Paper Company 2,200 $ 124,162
Kimberly-Clark Corporation 1,300 84,825
Temple-Inland, Inc. 200 13,188
Westvaco Corporation 300 9,788
Willamette Industries, Inc. 300 13,931
----------
245,894
PETROLEUM & COAL PRODUCTS (3.2%)
BP Amoco PLC 1,600 94,900
Chevron Corporation 1,800 155,925
Exxon Mobil Corporation 1,224 98,608
Murphy Oil Corporation 100 5,738
Shell Transport & Trading Co. 2,600 128,050
The Coastal Corporation 2,900 102,769
----------
585,990
PRIMARY METAL INDUSTRIES (0.3%)
ALCOA, Inc. 500 41,500
CommScope, Inc. (a) 200 8,062
----------
49,562
PRINTING & PUBLISHING (1.1%)
Gannett Company, Inc. 500 40,781
Knight Ridder, Inc. 1,000 59,500
Quebecor Printing, Inc. 1,649 36,690
Tribune Company 500 27,531
Viacom, Inc. (a) 700 42,307
----------
206,809
RAILROAD TRANSPORTATION (0.3%)
Kansas City Southern
Industries, Inc. 100 7,462
Union Pacific Corporation 1,000 43,625
----------
51,087
RETAIL-APPAREL & ACCESSORIES (2.0%)
American Eagle Outfitters, Inc. (a) 500 22,500
AnnTaylor Stores Corporation (a) 500 17,219
Claire's Stores, Inc. 1,500 33,562
Limited, Inc. 200 8,662
Ross Stores, Inc. 12,100 218,556
The Gap, Inc. 950 43,700
The TJX Companies, Inc. 1,400 28,612
----------
372,811
RETAIL-BUILDING MATERIALS (1.8%)
Lowe's Companies, Inc. 800 47,800
The Home Depot, Inc. 4,050 277,678
----------
325,478
RETAIL-FURNITURE HOME FURNISH (1.0%)
Best Buy Co., Inc. (a) 400 20,075
Circuit City Stores, Inc. 2,700 121,669
Tandy Corporation 800 39,350
----------
181,094
RETAIL-MISCELLANEOUS (0.3%)
CDW Computer Centers, Inc. (a) 100 7,859
Toys `R' Us, Inc. (a) 600 8,587
Zale Corporation (a) 700 33,862
----------
50,308
RUBBER & MISC. PLASTICS PRODUCTS (0.1%)
Armstrong World Industries, Inc. 300 10,012
Cooper Tire & Rubber Company 400 6,225
Tupperware Corporation 200 3,387
----------
19,624
</TABLE>
15
<PAGE>
Zweig Asset Allocation Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
Number
COMMON STOCKS (CONTINUED) Of Shares Value
---------- ----------
SECURITY & COMMODITY BROKERS (3.1%)
<S> <C> <C>
A.G. Edwards, Inc. 1,550 $ 49,697
Lehman Brothers Holdings, Inc. 700 59,281
Merrill Lynch & Co., Inc. 1,300 108,550
Morgan Stanley, Dean Witter,
Discover and Company 2,200 314,050
Paine Webber Group, Inc. 700 27,169
T. Rowe Price Associates, Inc. 300 11,062
----------
569,809
SERVICES-AMUSEMENT (0.1%)
Harrah's Entertainment, Inc. (a) 500 13,219
SERVICES-HEALTH SERVICES (0.4%)
Columbia/HCA Healthcare Corporation 1,400 41,037
Lincare Holdings, Inc. (a) 800 27,775
----------
68,812
STONE CLAY & GLASS PRODUCTS (0.9%)
Lafarge Corporation 1,300 35,912
USG Corporation 2,900 136,662
----------
172,574
TEXTILE MILL PRODUCTS (1.0%)
BJ's Wholesale Club, Inc. (a) 200 7,300
Mohawk Industries, Inc. (a) 3,150 83,081
Sara Lee Corporation 3,900 86,044
----------
176,425
TRANSIT & PASSENGER TRANSPORTATION (0.5%)
Canadian National Railway Company 3,600 94,725
TRANSPORTATION EQUIPMENT (3.5%)
Arvin Industries 1,700 48,237
Brunswick Corporation 400 8,900
Cordant Technologies, Inc. 2,200 72,600
FMC Corporation (a) 200 11,462
Ford Motor Company 3,700 197,719
General Dynamics Corporation 900 47,475
General Motors Corporation 900 65,419
PACCAR, Inc. 100 4,428
Textron, Inc. 300 23,006
The Boeing Company 1,100 45,719
Trinity Industries, Inc. 3,300 93,844
TRW Inc. 500 25,969
----------
644,778
WATER TRANSPORTATION (0.2%)
Carnival Corporation 700 33,469
Perusahaan Telekomunikiasi Ind. 800 8,800
----------
42,269
WHOLESALE TRADE-DURABLE GOODS (0.3%)
Borg-Warner Automotive, Inc. 400 16,200
Johnson & Johnson, Inc. 400 37,250
----------
53,450
WHOLESALE TRADE-NONDURABLE GOODS (0.9%)
Boise Cascade Corporation 600 24,300
Cardinal Health, Inc. 200 9,575
SUPERVALU, Inc. 4,300 86,000
Sysco 900 35,606
Univeral Corporation 200 4,562
----------
160,043
----------
TOTAL COMMON STOCKS (Cost $9,194,874) 10,386,367
<CAPTION>
Principal
SHORT-TERM SECURITIES (43.5%) Amount Value
---------- ----------
U.S. GOVERNMENT AGENCY (41.7%)
<S> <C> <C>
Federal Farm Credit Bank
Discount Note, 5.77%, due 2/23/2000 $ 500,000 $ 495,753
Federal Home Loan Bank Consolidation
Discount Note, 5.73%, due 1/26/2000 500,000 498,010
Federal Home Loan Mortgage
Discount Note, 5.62%, due 1/20/2000 500,000 498,517
Federal Home Loan Mortgage
Discount Note, 5.73%, due 1/27/2000 500,000 497,931
Federal Home Loan Mortgage
Discount Note, 5.77%, due 2/11/2000 500,000 496,714
Federal National Mortgage
Association Discount Note, 5.65%,
due 1/10/2000 1,000,000 998,588
Federal National Mortgage
Association Discount Note, 5.62%,
due 1/14/2000 500,000 498,985
Federal National Mortgage
Association Discount Note, 5.68%,
due 1/18/2000 1,000,000 997,318
Federal National Mortgage
Association Discount Note, 5.59%,
due 1/19/2000 1,800,000 1,794,969
Federal National Mortgage
Association Discount Note, 5.73%,
due 1/19/2000 900,000 897,422
-----------
7,674,207
U.S. GOVERNMENT OBLIGATIONS (0.5%)
U.S. Treasury Bills, 5.08%, due 3/2/2000 100,000 99,139
REPURCHASE AGREEMENT (1.3%)
State Street Bank, 2.50%, due 1/3/2000 (Dated
12/31/1999, collateralized by U.S. Treasury
Note, 7.25%, due 8/15/2022, value $238,150) 232,468 232,468
-----------
TOTAL SHORT-TERM SECURITIES (Cost $ 8,005,814) 8,005,814
-----------
TOTAL INVESTMENTS (100.0%) (Cost $17,200,688) $18,392,181
-----------
-----------
</TABLE>
(a) Non-income producing.
OTHER INFORMATION:
Cost of purchases and proceeds from sales of securities, excluding
short-term securities, for the period ended December 31, 1999, aggregated
$10,374,963 and $16,501,709, respectively. At December 31, 1999, net
unrealized appreciation for tax purposes aggregated $1,191,493, of which
$1,777,204 related to appreciated investments and $585,711 related to
depreciated investments. The aggregate cost of securities was the same
for book and tax purposes.
SEE ACCOMPANYING NOTES.
16
<PAGE>
Zweig Equity (Small Cap) Portfolio
Statement of Assets and Liabilities
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at value (cost $6,774,531)--See accompanying schedule $ 7,286,181
Cash 40,535
Dividends, interest and other receivables 5,142
Receivable for investments sold 106,929
Receivable for capital shares sold 2,523
-------------------
Total assets 7,441,310
LIABILITIES
Redemptions payable 64
Accounts payable and accrued expenses 21,239
-------------------
Total liabilities 21,303
-------------------
NET ASSETS $ 7,420,007
-------------------
-------------------
Net Assets consist of:
Paid-in capital 7,108,479
Undistributed net investment income 61,570
Accumulated net realized loss on investments (261,692)
Net unrealized appreciation on investments 511,650
-------------------
NET ASSETS, for 624,130 shares outstanding $ 7,420,007
-------------------
-------------------
NET ASSET VALUE, offering and redemption price per share $ 11.89
-------------------
-------------------
</TABLE>
Statement of Operations
Six Months Ended December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Dividends $ 30,971
Interest 104,096
-------------------
Total investment income 135,067
EXPENSES
Investment advisory and management fees 49,788
Custody and accounting fees 25,080
Professional fees 6,474
Directors' fees and expenses 3,448
Other expenses 4,989
-------------------
Total expenses before reimbursement 89,779
Less: expense reimbursement (16,282)
-------------------
Net expenses 73,497
-------------------
Net investment income 61,570
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Investments (30,130)
Futures contracts 12,718
-------------------
Net realized loss (17,412)
Net unrealized depreciation during the period on investment securities:
Investments (274,293)
Futures contracts (139)
-------------------
Net unrealized depreciation during the period (274,432)
-------------------
Net realized and unrealized loss on investments (291,844)
-------------------
Net decrease in net assets resulting from operations $ (230,274)
-------------------
-------------------
</TABLE>
SEE ACCOMPANYING NOTES.
17
<PAGE>
Zweig Equity (Small Cap) Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31,
1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
---------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 61,570 $ 87,679
Net realized loss on investments (17,412) (244,210)
Net unrealized depreciation during the period (274,432) (1,560,773)
---------------------------------------
Net decrease in net assets resulting from operations (230,274) (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 518,083 2,936,546
Proceeds from reinvested distributions 87,679 3,080,973
Cost of shares redeemed (3,862,178) (4,913,316)
---------------------------------------
Net increase (decrease) in net assets resulting from share transactions (3,256,416) 1,104,203
---------------------------------------
Total decrease in net assets (3,574,369) (3,694,074)
NET ASSETS
Beginning of period 10,994,376 14,688,450
---------------------------------------
End of period (including undistributed net investment income of $61,570
and $87,679, respectively) $ 7,420,007 $10,994,376
---------------------------------------
---------------------------------------
OTHER INFORMATION
Shares:
Sold 43,251 192,871
Issued through reinvestment of distributions 7,408 257,324
Redeemed (329,725) (382,755)
---------------------------------------
Net increase (decrease) (279,066) 67,440
---------------------------------------
---------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
18
<PAGE>
Zweig Equity (Small Cap) Portfolio
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
1999 ---------------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning $ 12.17 $ 17.58 $ 14.85 $ 13.61 $ 11.62 $ 10.65
of period
Income from investment operations:
Net investment income 0.10 0.10 0.04 0.16 0.11 0.17
Net realized and unrealized
gain (loss) on investments (0.28) (1.80) 3.48 2.41 2.04 0.93
--------------------------------------------------------------------------------------
Total from investment operations (0.18) (1.70) 3.52 2.57 2.15 1.10
Less distributions:
From net investment income (0.10) (0.04) (0.14) (0.14) (0.16) (0.06)
From net realized gain - (3.67) (0.65) (1.19) - (0.07)
--------------------------------------------------------------------------------------
Total distributions (0.10) (3.71) (0.79) (1.33) (0.16) (0.13)
--------------------------------------------------------------------------------------
Net asset value, end of period $ 11.89 $ 12.17 $ 17.58 $ 14.85 $ 13.61 $ 11.62
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
TOTAL RETURN (1.45%)(a) (9.24%) 23.72% 20.37% 18.69% 10.39%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $7,420 $10,994 $ 14,688 $11,161 $ 11,698 $ 8,034
Ratio of expenses to average net assets 1.55%(b) 1.54% 1.52% 1.55% 1.55% 1.55%
Ratio of expenses to average net assets
before voluntary expense
reimbursement 1.89%(b) 1.64% 1.56% 1.82% 1.83% 1.59%
Ratio of net investment income
to average net assets 1.30%(b) 0.71% 0.26% 0.97% 1.06% 1.54%
Ratio of net investment income to
average net assets before voluntary
expense reimbursement 0.96%(b) 0.61% 0.22% 0.70% 0.78% 1.50%
Portfolio turnover rate 46%(a) 76% 113% 59% 101% 67%
</TABLE>
(a) Not annualized.
(b) Annualized.
19
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Number
COMMON STOCKS (58.4%) of Shares Value
---------- ----------
<S> <C> <C>
AGRICULTURAL SERVICES (0.3%)
Veterinary Centers of America, Inc. (a) 1,400 $ 18,200
APPAREL & OTHER FINISHED PRODUCTS (0.3%)
Oshkosh B'Gosh, Inc. 600 12,169
Quiksilver, Inc. (a) 500 7,750
Tarrant Apparel Group (a) 300 2,925
----------
22,844
BASIC CHEMICAL PLASTICS & SYNTHETICS (1.0%)
Albemarle Corporation 500 9,594
Church & Dwight, Inc. 700 18,681
Geon Company 200 6,500
H. B. Fuller Company 300 16,828
Lubrizol Corporation 400 12,350
The Scotts Company (a) 200 8,050
----------
72,003
BUSINESS SERVICES (5.8%)
American Management Systems, Inc. (a) 1,000 31,281
Dendrite International, Inc. (a) 150 5,053
Interim Services, Inc. (a) 1,500 37,125
Lason, Inc. (a) 800 8,775
National Computer Systems, Inc. 800 30,050
NCO Group, Inc. (a) 600 17,906
Orbotech Ltd. (a) 1,050 81,572
Progress Software Corporation (a) 1,200 67,950
Rent-A-Center, Inc. (a) 600 12,019
Sybase, Inc. (a) 1,000 16,969
Symantec Corporation (a) 1,600 93,950
Tech Data Corporation (a) 400 10,862
United Rentals, Inc. (a) 600 10,275
----------
423,787
DEPOSITORY INSTITUTIONS (2.4%)
Bank United Corporation 400 10,788
Coast Federal (a) 300 455
Dime Community Bancshares 400 7,412
Flagstar Bancorp, Inc. 400 6,888
Harbor Florida Bancorp, Inc. 300 3,871
MAF Bancorp, Inc. 1,275 26,735
Queens County Bancorp, Inc. 500 13,516
Republic Bancorp, Inc. 2,008 24,529
Roslyn Bancorp, Inc. 3,860 71,048
Webster Financial Corporation 500 11,797
----------
177,039
EATING & DRINKING PLACES (2.3%)
Applebee's International, Inc. 300 8,841
Brinker International, Inc. (a) 1,600 38,400
CEC Entertainment, Inc. (a) 1,100 31,212
Jack in the Box, Inc. (a) 2,600 53,787
Ruby Tuesday, Inc. 1,300 23,644
Ryan's Family Steak Houses, Inc. (a) 1,400 11,878
----------
167,762
ELECTRIC GAS & SANITARY SERVICES (1.6%)
Calpine Corporation (a) 1,400 89,600
Idacorp, Inc. 200 5,363
Minnesota Power & Light Company 1,200 20,325
----------
115,288
<CAPTION>
Number
COMMON STOCKS (CONTINUED) of Shares Value
---------- ----------
<S> <C> <C>
ELECTRICAL & ELECTRONICS MACHINERY (3.1%)
Burr-Brown Corporation (a) 150 $ 5,409
Cable Design Technologies Corporation (a) 500 11,500
CTS Corporation 1,400 105,525
Genlyte Group, Inc. (a) 1,200 25,725
Polycom, Inc. (a) 400 25,537
Vishay Intertechnology, Inc. (a) 1,700 53,763
----------
227,459
FABRICATED METAL PRODUCTS (1.8%)
Ball Corporation 1,300 51,187
Mark IV Industries, Inc. 200 3,538
NCI Building Systems, Inc. (a) 600 11,100
Nortek, Inc. (a) 400 11,200
Tower Automotive, Inc. (a) 2,400 37,050
United Dominion Industries Ltd. 800 15,950
----------
130,025
FOOD & KINDRED PRODUCTS (1.9%)
Adolph Coors Company - Class B 400 21,000
Canandaigua Brands, Inc. (a) 1,000 51,000
Corn Products International, Inc. 200 6,550
IBP, Inc. 1,400 25,200
International Home Foods, Inc. (a) 100 1,738
Smithfield Foods, Inc. (a) 1,400 33,600
----------
139,088
FURNITURE & FIXTURES (1.7%)
BE Aerospace, Inc.(a) 700 5,950
Ethan Allen Interiors, Inc. 1,750 56,109
Furniture Brands International, Inc. (a) 2,400 52,800
Herman Miller, Inc. 100 2,297
La-Z-Boy, Inc. 200 3,363
O'Sullivan Industries Holdings, Inc. (a) 200 103
----------
120,622
GENERAL BUILDING CONTRACTORS (2.1%)
Crossman Communities, Inc. (a) 600 9,244
Del Webb Corporation (a) 700 17,456
Fairfield Communities, Inc. (a) 200 2,150
Lennar Corporation 600 9,750
M.D.C. Holdings, Inc. 300 4,706
McGrath Rentcorp 100 1,787
NVR, Inc. (a) 100 4,775
Pulte Corporation 2,700 60,750
Standard Pacific Corporation 1,300 14,300
The Ryland Group, Inc. 400 9,225
Toll Brothers, Inc. (a) 600 11,175
U.S. Home Corporation (a) 300 7,669
----------
152,987
GENERAL MERCHANDISE STORES (0.4%)
Ames Department Stores, Inc. (a) 1,100 31,659
</TABLE>
20
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
Number
COMMON STOCKS (CONTINUED) of Shares Value
---------- ----------
<S> <C> <C>
HOLDING & OTHER INVESTMENTS OFFICES (2.9%)
Brandywine Realty Trust 500 $ 8,187
CarrAmerica Realty Corporation 400 8,450
CBL & Associates Properties, Inc. 2,400 49,500
Cornerstone Properties, Inc. 400 5,850
Essex Property Trust, Inc. 200 6,800
Federal Realty Investment Trust 300 5,644
General Growth Properties 1,000 28,000
Health Care REIT, Inc. 400 6,050
Liberty Property Trust 2,500 60,625
Pacific Gulf Properties, Inc. 100 2,025
Pan Pacific Retail Properties, Inc. 800 13,050
Reckson Associates Realty Corporation 300 6,150
Urban Shopping Centers, Inc. 100 2,713
----------
203,044
HOTELS & OTHER LODGING (0.5%)
Extended Stay America, Inc. (a) 800 6,100
Mandalay Resort Group (a) 900 18,113
Station Casinos, Inc. (a) 400 8,975
----------
33,188
INDUSTRIAL MACHINERY & EQUIPMENT (3.6%)
Anixter Industries, Inc. (a) 400 8,250
Astec Industries, Inc. (a) 800 15,075
Briggs & Stratton Corporation 800 42,900
Cybex Computer Products Corporation (a) 200 8,175
Donaldson Company, Inc. 200 4,812
Graco, Inc. 100 3,588
Manitowoc Company, Inc. 1,125 38,250
Tecumseh Products Company 300 14,147
Terex Corporation (a) 700 19,425
Xircom, Inc. (a) 1,200 90,000
Zebra Technologies Corporation (a) 300 17,409
----------
262,031
INSTRUMENTS & RELATED PRODUCTS (1.2%)
Fossil, Inc. (a) 2,375 54,996
Pinnacle Systems, Inc. (a) 800 32,425
----------
87,421
INSURANCE CARRIERS (3.7%)
Alleghany Corporation (a) 100 18,550
Delphi Financial Group, Inc. (a) 306 9,180
FBL Financial Group, Inc. 200 4,000
Financial Security Assurance Holding Ltd. 1,100 57,337
Liberty Financial Companies, Inc. 200 4,588
Medical Assurance, Inc. (a) 193 4,089
Nationwide Financial Services, Inc. 300 8,381
PMI Group, Inc. 1,100 53,694
Radian Group, Inc. 1,333 63,651
Triad Guaranty, Inc. (a) 1,200 27,262
Trigon Healthcare, Inc. (a) 700 20,650
----------
271,382
LIVESTOCK (0.1%)
Michael Foods, Inc. 400 9,875
LUMBER & WOOD PRODUCTS (0.7%)
TJ International, Inc. 1,300 54,559
<CAPTION>
Number
COMMON STOCKS (CONTINUED) of Shares Value
---------- ----------
<S> <C> <C>
NONDEPOSITORY INSTITUTIONS (1.5%)
AmeriCredit Corporation (a) 1,500 $ 27,750
Doral Financial Corporation 3,600 44,325
Metris Companies, Inc. 900 32,119
Starwood Financial, Inc. 230 3,896
----------
108,090
OIL & GAS EXTRACTION (0.5%)
Equitable Resources, Inc. 800 26,700
Pioneer Natural Resources Company (a) 200 1,788
Vintage Petroleum, Inc. 500 6,031
----------
34,519
PETROLEUM & COAL PRODUCTS (0.4%)
Elcor Corporation 450 13,556
Murphy Oil Corporation 300 17,213
----------
30,769
PHARMACEUTICALS (0.4%)
Shire Pharmaceuticals Group PLC (a) 1,043 30,173
PRIMARY METAL PRODUCTS (1.3%)
CommScope, Inc. (a) 1,300 52,406
Curtiss-Wright Corporation 100 3,687
Intermet Corporation 800 9,350
Mueller Industries, Inc. (a) 400 14,500
Roanoke Electric Steel Corporation 50 822
Worthington Industries, Inc. 700 11,572
----------
92,337
PRINTING & PUBLISHING (0.9%)
Mail-Well, Inc. (a) 1,100 14,850
Quebecor Printing, Inc. 2,283 50,797
----------
65,647
REAL ESTATE (0.2%)
Catellus Development Corporation (a) 1,000 12,813
RETAIL-APPAREL & ACCESSORIES (2.2%)
American Eagle Outfitters, Inc. (a) 1,400 63,000
Ann Taylor Stores Corporation (a) 1,400 48,213
The Cato Corporation 1,600 20,050
Pacific Sunwear of California, Inc. (a) 800 25,475
Sunglass Hut International, Inc. (a) 100 1,131
----------
157,869
RETAIL - FURNITURE, HOME FURNISHINGS (0.4%)
Linens `N Things, Inc. (a) 100 2,962
Trans World Entertainment Corporation (a) 2,500 26,094
----------
29,056
RETAIL-MISCELLANEOUS (1.1%)
Michaels Stores (a) 200 5,669
Zale Corporation (a) 1,600 77,400
----------
83,069
RUBBER & MISC PLASTICS PRODUCTS (0.6%)
Spartech Corporation 1,100 35,475
Tupperware Corporation 300 5,081
----------
40,556
SERVICES AMUSEMENT EXCL MOTION (0.4%)
Bally Total Fitness Holding
Corporation (a) 1,200 32,025
SERVICES-AUTO REPAIR GARAGES (0.7%)
Avis Rent A Car, Inc. (a) 1,600 40,900
Rollins Truck Leasing Corporation 1,100 13,131
----------
54,031
SERVICES-ENGINEERING ACCOUNTING (0.1%)
URS Corporation (a) 200 4,338
</TABLE>
21
<PAGE>
Zweig Equity (Small Cap) Portfolio
Schedule of Investments (continued)
<TABLE>
<CAPTION>
Number
COMMON STOCKS (CONTINUED) of Shares Value
---------- ----------
<S> <C> <C>
SERVICES-HEALTH SERVICES (0.3%)
Hooper Holmes, Inc. 800 $ 20,600
Lincare Holdings, Inc. (a) 100 3,472
----------
24,072
SPECIAL TRADE CONTRACTORS (0.4%)
Dycom Industries, Inc. (a) 800 35,250
STONE CLAY & GLASS PRODUCTS (0.9%)
Centex Construction Products, Inc. 1,700 66,300
TEXTILE MILL PRODUCTS (0.1%)
Mohawk Industries, Inc. (a) 200 5,275
TRANSPORTATION BY AIR (1.2%)
America West Holdings Corporation (a) 2,800 58,100
Sky West, Inc. 1,100 30,938
----------
89,038
TRANSPORTATION EQUIPMENT (2.1%)
Arvin Industries, Inc. 1,600 45,400
Cordant Technologies, Inc. 1,500 49,500
JLG Industries, Inc. 400 6,375
Monaco Coach Corporation (a) 400 10,225
Newport News Shipbuilding Inc. 300 8,250
Superior Industries International, Inc. 200 5,363
Thor Industires, Inc. 300 9,131
Trinity Industries, Inc. 300 8,531
Winnebago Industries 600 12,038
----------
154,813
TRUCKING & WAREHOUSING (2.1%)
Landstar Systems, Inc. (a) 100 4,197
M.S. Carriers, Inc. (a) 2,400 56,850
Swift Transportation Company, Inc. (a) 300 5,297
US Freightways Corporation 1,400 66,675
Werner Enterprises, Inc. 1,225 17,111
----------
150,130
WATER TRANSPORTATION (0.5%)
Alexander & Baldwin, Inc. 1,600 36,400
WHOLESALE TRADE - DURABLE GOOD (1.4%)
Insight Enterprises, Inc. (a) 1,775 71,832
Patterson Dental Company (a) 400 17,025
Reliance Steel and Aluminum Company 700 16,405
----------
105,262
WHOLESALE TRADE - NONDURABLE GOOD (1.3%)
Handleman Company (a) 800 10,700
The Men's Wearhouse, Inc. (a) 200 5,888
United Stationers, Inc. (a) 2,000 57,312
Universal Corporation 800 18,250
Valhi, Inc. 100 1,050
----------
93,200
TOTAL COMMON STOCKS (Cost $3,743,646) 4,255,295
<CAPTION>
Principal
Amount Value
---------- ----------
<S> <C> <C>
SHORT-TERM SECURITIES (41.6%)
U.S. GOVERNMENT AGENCY (36.9%)
Federal Farm Credit Bank
Discount Note, 5.73%, due 1/19/2000 400,000 $ 398,854
Federal Farm Credit Bank
Discount Note, 5.77%, due 2/23/2000 250,000 247,876
Federal Home Loan Mortgage,
Discount Note, 5.50%, due 1/5/2000 600,000 599,633
Federal Home Loan Mortgage,
Discount Note, 5.62%, due 1/20/2000 400,000 398,813
Federal Home Loan Mortgage,
Discount Note, 5.73%, due 1/27/2000 400,000 398,345
Federal Home Loan Mortgage,
Discount Note, 5.77%, due 2/11/2000 250,000 248,357
Federal National Mortgage Association
Discount Note, 5.62%, due 1/14/2000 400,000 399,189
----------
2,691,067
U.S. GOVERNMENT OBLIGATION (0.7%)
U.S. Treasury Bill, 5.01%, due 1/20/2000 50,000 49,869
REPURCHASE AGREEMENT (4.0%)
State Street Bank, 2.50%, due 1/3/2000 (Dated
12/31/1999, collateralized by U.S. Treasury
Note, 7.25%, due 8/15/2022, value $297,688) 289,950 289,950
----------
TOTAL SHORT-TERM SECURITIES (Cost $3,030,885) 3,030,886
----------
TOTAL INVESTMENTS (100.0% ) (Cost $6,774,531) $7,286,181
----------
----------
</TABLE>
(a) Non-income producing.
OTHER INFORMATION:
Cost of purchases and proceeds from sales of securities, excluding
short-term securities, for the period ended December 31, 1999, aggregated
$2,061,174 and $3,657,690, respectively. At December 31, 1999, net
unrealized appreciation for tax purposes aggregated $511,650, of which
$813,632 related to appreciated investment securities and $301,982
related to depreciated investment securities. The aggregate cost of
securities is the same for book and tax investments.
SEE ACCOMPANYING NOTES.
22
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements
December 31, 1999 (Unaudited)
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 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. ARM Securities Corporation ("ARM Securities"), a registered
broker-dealer under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc., distributes shares of the Fund
to a variable annuity separate account of both Integrity Life Insurance Company
("Integrity") and its wholly owned subsidiary, National Integrity Life Insurance
Company ("National Integrity"). Integrity Capital Advisors, Inc. ("Integrity
Capital Advisors"), registered with the Securities and Exchange Commission as an
investment adviser, provides management services to the Fund pursuant to a
management agreement (the "Management Agreement") effective July 10, 1998.
ARM Financial Group, Inc. ("ARM") is the ultimate parent of Integrity Capital
Advisors, Integrity, National Integrity, and ARM Securities. ARM provides
retirement savings and investment products through its insurance subsidiaries.
At December 31, 1999, ARM had approximately $4.8 billion of assets under
management.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") for investment companies.
SECURITY VALUATION
Stocks that are traded on a national exchange are valued at the last sale price
on the exchange on which they are primarily traded, or, if there is no sale, at
the mean between the current bid and asked prices. Over-the-counter securities
for which market quotations are readily available are valued at the mean of the
current bid and asked prices.
23
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Short-term debt securities with remaining maturities of 61 days or more for
which reliable quotations are readily available are valued at current market
quotations. Short-term investments with remaining maturities of 60 days or less
are valued using the amortized cost method of valuation, which approximates
market value. Bonds and other fixed-income securities (other than short-term
securities described above) are valued using market quotations provided by a
pricing service under procedures approved by the Fund's Board of Directors.
Futures contracts and options thereon traded on a commodities exchange or board
of trade are valued at the closing settlement price. Futures and option
positions or any other securities or assets for which reliable market quotations
are not readily available or for which valuation cannot be provided by a pricing
service approved by the Board of Directors of the Fund are valued at fair value
as determined in good faith by the Board of Directors.
SECURITY TRANSACTIONS
Securities transactions are accounted for as of the trade date. Interest income
is accrued daily. Dividend income is recorded on the ex-dividend date. Premiums
and discounts on securities purchased are amortized using the effective interest
method. Realized gains and losses on sales of investments are determined on the
basis of nearest average for all of the Portfolios except Zweig Asset
Allocation, which uses the first-in, first-out method.
FEDERAL INCOME TAX MATTERS
The Fund complied with the requirements of the Internal Revenue Code applicable
to regulated investment companies and distributes its taxable net investment
income and net realized gains sufficient to relieve it from all, or
substantially all, federal income, excise and state income taxes. Therefore, no
provision for federal or state income tax is required. As of June 30, 1999, the
Zweig Equity (Small Cap) Portfolio had a capital loss carryforward of $239,894,
which expires in 2007.
DIVIDEND DISTRIBUTIONS
Dividends from net investment income and distributions from net realized gains
are declared and distributed annually. Dividends and distributions are recorded
on the ex-dividend date. All dividends are reinvested in additional full and
fractional shares of the related Portfolios.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences, which may result in distribution reclassifications, are
primarily due to
24
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DIVIDEND DISTRIBUTIONS (CONTINUED)
differing treatments for futures transactions, passive foreign investment
companies, capital losses, and losses deferred due to wash sales.
FUTURES CONTRACTS
Certain Portfolios may enter into futures contracts to 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 Portfolios did not hold any
open future contracts as of December 31, 1999.
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, Integrity Capital Advisors, has determined are creditworthy
pursuant to criteria adopted by the Board of Directors. Each repurchase
agreement is recorded at cost. The Fund requires that the securities purchased
in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable the Fund to obtain those securities in the event of a
default under the repurchase agreement. The value of the securities transferred
is monitored daily to ensure that the value, including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to the Fund under each repurchase agreement.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.
25
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (continued)
2. INVESTMENT ADVISORY AGREEMENTS AND PAYMENTS TO RELATED PARTIES
Integrity Capital Advisors, the Fund's investment adviser, has entered into a
sub-advisory agreement with a registered investment adviser ("Sub-Adviser") for
each of the Portfolios. Integrity Capital Advisors, not the Fund, pays the
sub-advisory fee to each of the Sub-Advisers. Listed below are management and
sub-advisory fees payable as a percentage of average 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, Integrity Capital Advisors provides certain
management services to the Fund, and the Fund is responsible for certain of its
direct operating expenses. Integrity Capital Advisors has voluntarily agreed to
reimburse each of the Portfolios for operating expenses (excluding management
fees) above an annual rate of 0.5% of average daily net assets. Integrity
Capital Advisors has reserved the right to withdraw or modify its policy of
expense reimbursement for the Portfolios.
Certain officers and directors of the Fund are also officers of ARM, ARM
Securities, Integrity Capital Advisors, Integrity, and National Integrity. The
Fund does not pay any amounts to compensate these individuals.
3. CAPITAL SHARES
At December 31, 1999, the Fund had authority to issue one billion
(1,000,000,000) shares of common stock, $.001 par value each, in any class or
classes as determined by the Board of Directors. At such date, four classes of
shares authorized by the Board of Directors were being offered as follows:
55,000,000 shares each for Harris Bretall Sullivan & Smith Equity Growth,
Scudder Kemper Value, Zweig Asset Allocation, and Zweig Equity (Small Cap).
At December 31, 1999, 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.
26
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (continued)
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. Following the July 29, 1999
announcement, the ratings of ARM and Integrity were significantly lowered
several times by four major rating agencies, materially and adversely affecting
Integrity's ability to market and maintain persistency of retail products. As a
result, ARM sought protection with respect to its insurance subsidiary,
Integrity, from the Ohio Department of Insurance. Integrity is domiciled in
Ohio. On August 20, 1999, Integrity consented to a Supervision Order issued by
the Ohio Department of Insurance, which remains in effect. Unless the Ohio
Department of Insurance begins proceedings for the appointment of a
rehabilitator or liquidator, the Supervision Order will automatically be
extended for successive 60-day periods until written notice is given to
Integrity ending the supervision.
This regulatory action is intended to ensure an orderly process for addressing
the financial obligations of Integrity and to protect the interests of its
individual policyholders. Integrity will continue payments of death benefits,
previously scheduled systematic withdrawals, previously scheduled immediate
annuity payments, and agent commissions, but must receive written consent from
the Ohio Department of Insurance for other payments. In particular, the
Supervision Order suspends the processing of surrenders of fixed annuity
policies except in cases of approved hardship. The Supervision Order does not
affect the surrender of variable annuity contracts, including the contracts
through which the Portfolios of the Fund are offered.
On December 17, 1999 ARM announced that it had signed a definitive agreement
whereby Western and Southern Life Insurance Company ("Western and Southern")
would acquire ARM's insurance subsidiaries, Integrity and National Integrity
Life Insurance Company.
Western and Southern is part of the Western-Southern Enterprise, a financial
services group which also includes Western-Southern Life Assurance Company,
Columbus Life Insurance Company, Touchstone Advisors, 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 exceed $20 billion. Western and Southern
is rated A++ (Superior) by A.M. Best, AAA (Highest) by Duff & Phelps, AAA
(Extremely Strong) by Standard & Poor's, and Aa2 (Excellent) by Moody's.
The acquisition of the insurance companies by Western and Southern is being
implemented in a chapter 11 case filed by ARM under the U.S. Bankruptcy Code.
27
<PAGE>
The Legends Fund, Inc.
Notes to Financial Statements (continued)
4. EVENTS RELATING TO ARM, INTEGRITY AND NATIONAL INTEGRITY (CONTINUED)
The closing of the transaction is subject to the approval of the Ohio Department
of Insurance, the New York Department of Insurance, and the Bankruptcy Court, as
well as to other customary conditions to closing. The transaction is expected to
close late in the first quarter of 2000; however, there can be no assurance as
to obtaining the required approvals or the timing of the closing of the
transaction.
Integrity Capital will not be acquired by Western and Southern. Accordingly, it
is contemplated that Integrity Capital will assign the current management
agreement between Integrity Capital and the Fund to Touchstone Advisers, Inc.,
an indirect wholly-owned subsidiary of Western and Southern. The assignment of
the management agreement will automatically terminate the agreement, and will
also terminate the current sub-advisory agreements between the Fund and each of
the Sub-Advisers.
The Board of Directors of the Fund will be asked to approve new management and
sub-advisory agreements and a distribution agreement for the Fund. These new
agreements will be subject to shareholder approval. The new management and
sub-advisory agreements are expected to contain the same material terms as the
current management and sub-advisory agreements. It is anticipated that the
shareholders meeting will occur early in the second quarter of 2000.
28
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