DIVERSIFIED
INVESTORS
VARIABLE FUNDS
1995 ANNUAL REPORT
INTERNATIONAL EQUITY SERIES
CALVERT SERIES
SPECIAL EQUITY SERIES
EQUITY GROWTH SERIES
GROWTH & INCOME SERIES
EQUITY INCOME SERIES
BALANCED SERIES
GOVERNMENT/CORPORATE BOND SERIES
[LOGO]
INTERMEDIATE GOVERNMENT BOND SERIES
DIVERSIFIED
MONEY MARKET SERIES INVESTMENT
ADVISORS
<PAGE>
This report is not to be construed as an offering for sale of any
contracts participating in the Subaccounts (Series) of Diversified
Investors Variable Funds, or as a solicitation as an offer to buy any
contracts unless preceded by or accompanied by a current prospectus
which contains the complete information of charges and expenses.
<PAGE>
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE><CAPTION>
DIVERSIFIED INVESTORS PORTFOLIOS
-------------------------------------------------------------------------------------------
INTERMEDIATE GOVERNMENT/
MONEY GOVERNMENT CORPORATE EQUITY GROWTH & EQUITY
MARKET BOND BOND BALANCED INCOME INCOME GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ------------ ----------- ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in the Funds, at value
(Notes 1 and 2).................. $14,658,170 $ 18,159,152 $12,515,927 $63,882,239 $190,338,686 $5,140,543 $113,978,053
Receivable for subscription of
units........................... 36,423 21,780 30,925 202,472 245,668 31,447 224,121
----------- ------------ ----------- ----------- ------------ ---------- ------------
Total assets................ 14,694,593 18,180,932 12,546,852 64,084,711 190,584,354 5,171,990 114,202,174
----------- ------------ ----------- ----------- ------------ ---------- ------------
LIABILITIES:
Payable for redemption of units... 0 1,380 3,376 28,438 79,151 974 48,391
Accrued expenses.................. 8,803 12,876 8,772 44,960 101,589 3,341 59,827
----------- ------------ ----------- ----------- ------------ ---------- ------------
Total liabilities........... 8,803 14,256 12,148 73,398 180,740 4,315 108,218
----------- ------------ ----------- ----------- ------------ ---------- ------------
Net assets attributable to
annuity contractholders... $14,685,790 $ 18,166,676 $12,534,704 $64,011,313 $190,403,614 $5,167,675 $114,093,956
----------- ------------ ----------- ----------- ------------ ---------- ------------
----------- ------------ ----------- ----------- ------------ ---------- ------------
Accumulation units................ 1,023,590 1,313,065 638,648 3,011,719 8,469,952 388,800 4,460,273
----------- ------------ ----------- ----------- ------------ ---------- ------------
----------- ------------ ----------- ----------- ------------ ---------- ------------
Unit value........................ $ 14.35 $ 13.84 $ 19.63 $ 21.25 $ 22.48 $ 13.29 $ 25.58
----------- ------------ ----------- ----------- ------------ ---------- ------------
----------- ------------ ----------- ----------- ------------ ---------- ------------
<CAPTION>
SCUDDER
SPECIAL INTERNATIONAL
EQUITY CALVERT EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- -------------
<S> <C> <C> <C>
ASSETS:
Investments in the Funds, at value
(Notes 1 and 2).................. $10,825,872 $17,707,211 $ 6,456,425
Receivable for subscription of
units........................... 56,821 51,126 47,794
----------- ----------- -------------
Total assets................ 10,882,693 17,758,337 6,504,219
----------- ----------- -------------
LIABILITIES:
Payable for redemption of units... 889 149 486
Accrued expenses.................. 7,161 12,407 4,392
----------- ----------- -------------
Total liabilities........... 8,050 12,556 4,878
----------- ----------- -------------
Net assets attributable to
annuity contractholders... $10,874,643 $17,745,781 $ 6,499,341
----------- ----------- -------------
----------- ----------- -------------
Accumulation units................ 730,748 1,052,208 617,428
----------- ----------- -------------
----------- ----------- -------------
Unit value........................ $ 14.88 $ 16.87 $ 10.53
----------- ----------- -------------
----------- ----------- -------------
</TABLE>
See notes to financial statements.
1
<PAGE>
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE><CAPTION>
DIVERSIFIED INVESTORS PORTFOLIOS
----------------------------------------------------------------------------------------------
INTERMEDIATE GOVERNMENT/
MONEY GOVERNMENT CORPORATE EQUITY GROWTH & EQUITY
MARKET BOND BOND BALANCED INCOME INCOME GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ------------ ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Allocated income from
Diversified Investors
Portfolios (Note 2)........... $ 688,543 $ 890,335 $ 623,403 $ 1,951,016 $ 5,209,350 $ 31,950 $ 501,142
Dividend income (Note 2)........ 0 0 0 0 0 0 0
---------- ------------ ----------- ----------- ----------- ---------- -----------
Total investment income...... 688,543 890,335 623,403 1,951,016 5,209,350 31,950 501,142
---------- ------------ ----------- ----------- ----------- ---------- -----------
Expenses (Note 3):
Mortality and expense risk... 108,605 143,713 89,245 442,768 1,376,390 20,964 825,151
Less expenses reimbursed by
AUSA....................... 23,601 0 0 0 75,741 0 227,156
---------- ------------ ----------- ----------- ----------- ---------- -----------
Net expenses................. 85,004 143,713 89,245 442,768 1,300,649 20,964 597,995
---------- ------------ ----------- ----------- ----------- ---------- -----------
Net investment income (loss).... 603,539 746,622 534,158 1,508,248 3,908,701 10,986 (96,853)
---------- ------------ ----------- ----------- ----------- ---------- -----------
Realized and unrealized gains
(losses) on investments (Note 2):
Net realized gains (losses)
on investments............. (339) 77,297 50,050 4,286,978 2,577,701 685,410 2,442,805
Net increase (decrease) in
unrealized appreciation on
investments.............. 0 1,119,694 996,478 5,671,255 37,923,714 (79,577) 12,687,743
---------- ------------ ----------- ----------- ----------- ---------- -----------
Net realized and unrealized
gains (losses) on investments (339) 1,196,991 1,046,528 9,958,233 40,501,415 605,833 15,130,548
---------- ------------ ----------- ----------- ----------- ---------- -----------
Net increase in net assets
resulting from operations..... $ 603,200 $ 1,943,613 $ 1,580,686 $11,466,481 $44,410,116 $ 616,819 $15,033,695
---------- ------------ ----------- ----------- ----------- ---------- -----------
---------- ------------ ----------- ----------- ----------- ---------- -----------
<CAPTION>
SCUDDER
SPECIAL INTERNATIONAL
EQUITY CALVERT EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- -------------
<S> <C> <C> <C>
Investment income:
Allocated income from
Diversified Investors
Portfolios (Note 2)........... $ 12,984 $ 0 $ 0
Dividend income (Note 2)........ 0 1,066,091 2,542
---------- ---------- -------------
Total investment income...... 12,984 1,066,091 2,542
---------- ---------- -------------
Expenses (Note 3):
Mortality and expense risk... 40,010 119,492 34,386
Less expenses reimbursed by
AUSA....................... 0 0 0
---------- ---------- -------------
Net expenses................. 40,010 119,492 34,386
---------- ---------- -------------
Net investment income (loss).... (27,026) 946,599 (31,844)
---------- ---------- -------------
Realized and unrealized gains
(losses) on investments (Note 2):
Net realized gains (losses)
on investments............. 850,109 756,235 6,827
Net increase (decrease) in
unrealized appreciation on
investments.............. 705,769 1,631,822 422,407
---------- ---------- -------------
Net realized and unrealized
gains (losses) on investments 1,555,878 2,388,057 429,234
---------- ---------- -------------
Net increase in net assets
resulting from operations..... $1,528,852 $3,334,656 $ 397,390
---------- ---------- -------------
---------- ---------- -------------
</TABLE>
See notes to financial statements.
2
<PAGE>
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE><CAPTION>
DIVERSIFIED INVESTORS PORTFOLIOS
-------------------------------------------------------------------------------------------------
INTERMEDIATE GOVERNMENT/
MONEY GOVERNMENT CORPORATE EQUITY GROWTH & EQUITY
MARKET BOND BOND BALANCED INCOME INCOME GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ------------ ----------- ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
From operations:
Net investment income
(loss).............. $ 603,539 $ 746,622 $ 534,158 $ 1,508,248 $ 3,908,701 $ 10,986 $ (96,853)
Net realized gains
(losses) on
investments......... (339) 77,297 50,050 4,286,978 2,577,701 685,410 2,442,805
Net increase
(decrease) in
unrealized
appreciation on
investments....... 0 1,119,694 996,478 5,671,255 37,923,714 (79,577) 12,687,743
----------- ------------ ----------- ----------- ------------ ---------- ------------
Net increase in net
assets resulting
from operations... 603,200 1,943,613 1,580,686 11,466,481 44,410,116 616,819 15,033,695
----------- ------------ ----------- ----------- ------------ ---------- ------------
From unit transactions
(Note 4):
Net proceeds from the
issuance of units.... 12,706,887 11,817,737 6,353,831 32,300,710 61,691,825 4,932,557 53,802,815
Net asset value of
units redeemed...... (6,640,069) (2,696,134) (1,845,514) (8,928,089) (22,667,336) (680,846) (15,634,374)
----------- ------------ ----------- ----------- ------------ ---------- ------------
Net increase in net
assets from unit
transactions...... 6,066,818 9,121,603 4,508,317 23,372,621 39,024,489 4,251,711 38,168,441
----------- ------------ ----------- ----------- ------------ ---------- ------------
Net increase in net
assets................. 6,670,018 11,065,216 6,089,003 34,839,102 83,434,605 4,868,530 53,202,136
Net assets:
Beginning of year..... 8,015,772 7,101,460 6,445,701 29,172,211 106,969,009 299,145 60,891,820
----------- ------------ ----------- ----------- ------------ ---------- ------------
End of year........... $14,685,790 $ 18,166,676 $12,534,704 $64,011,313 $190,403,614 $5,167,675 $114,093,956
----------- ------------ ----------- ----------- ------------ ---------- ------------
----------- ------------ ----------- ----------- ------------ ---------- ------------
Units outstanding
beginning of year...... 587,295 580,105 385,881 1,750,876 6,344,534 29,489 2,812,266
Units issued during
year................... 911,106 938,737 352,907 1,728,730 3,297,278 415,475 2,313,863
Units redeemed during
year................... (474,811) (205,777) (100,140) (467,887) (1,171,860) (56,164) (665,856)
----------- ------------ ----------- ----------- ------------ ---------- ------------
Units outstanding end of
year................... 1,023,590 1,313,065 638,648 3,011,719 8,469,952 388,800 4,460,273
----------- ------------ ----------- ----------- ------------ ---------- ------------
----------- ------------ ----------- ----------- ------------ ---------- ------------
<CAPTION>
SCUDDER
SPECIAL INTERNATIONAL
EQUITY CALVERT EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- -------------
<S> <C> <C> <C>
From operations:
Net investment income
(loss).............. $ (27,026) $ 946,599 $ (31,844)
Net realized gains
(losses) on
investments..... 850,109 756,235 6,827
Net increase
(decrease) in
unrealized
appreciation on
investments....... 705,769 1,631,822 422,407
----------- ----------- -------------
Net increase in net
assets resulting
from operations... 1,528,852 3,334,656 397,390
----------- ----------- -------------
From unit transactions
(Note 4):
Net proceeds from the
issuance of units... 9,355,594 9,140,477 5,377,149
Net asset value of
units redeemed...... (897,441) (2,268,091) (826,569)
----------- ----------- -------------
Net increase in net
assets from unit
transactions..... 8,458,153 6,872,386 4,550,580
----------- ----------- -------------
Net increase in net
assets................. 9,987,005 10,207,042 4,947,970
Net assets:
Beginning of year..... 887,638 7,538,739 1,551,371
----------- ----------- -------------
End of year........... $10,874,643 $17,745,781 $ 6,499,341
----------- ----------- -------------
----------- ----------- -------------
Units outstanding
beginning of year...... 83,503 575,200 162,316
Units issued during
year................... 711,286 626,721 537,369
Units redeemed during
year................... (64,041) (149,713) (82,257)
----------- ----------- -------------
Units outstanding end of
year................... 730,748 1,052,208 617,428
----------- ----------- -------------
----------- ----------- -------------
</TABLE>
See notes to financial statements.
3
<PAGE>
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
DIVERSIFIED INVESTORS PORTFOLIOS
----------------------------------------------------------------------------------------------
FOR THE PERIOD
AUGUST 24, 1994*
THROUGH DECEMBER
31, 1994
FOR THE PERIOD AUGUST 18, 1994* THROUGH DECEMBER 31,1994 ----------------
---------------------------------------------------------------------------
MONEY INTERMEDIATE GOVERNMENT/ EQUITY GROWTH &
MARKET GOVERNMENT BOND CORPORATE BALANCED INCOME INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT BOND SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- --------------- --------------- ----------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
From operations:
Net investment income
(loss)..................... $ 75,083 $ 79,574 $ 69,464 $ 204,439 $ 669,293 $ 391
Net realized gains (losses)
on investments............. (113) 689 (56,967) 14,307 7,264 (680)
Net increase (decrease) in
unrealized appreciation on
investments............... 0 (76,469) 42,725 (436,273) (3,423,467) 2,190
---------- --------------- --------------- ----------- ------------ ------
Net increase (decrease) in
net assets resulting from
operations................ 74,970 3,794 55,222 (217,527) (2,746,910) 1,901
---------- --------------- --------------- ----------- ------------ ------
From unit transactions:
Net proceeds from the
issuance of units......... 8,312,365 7,527,162 6,737,812 31,111,015 113,434,098 308,974
Net asset value of units
redeemed................... (371,563) (429,496) (347,333) (1,721,277) (3,718,179) (11,730)
---------- --------------- --------------- ----------- ------------ ------
Net increase in net assets
from unit transactions...... 7,940,802 7,097,666 6,390,479 29,389,738 109,715,919 297,244
---------- --------------- --------------- ----------- ------------ ------
Net assets end of period........ $8,015,772 $ 7,101,460 $ 6,445,701 $29,172,211 $106,969,009 $299,145
---------- --------------- --------------- ----------- ------------ ------
---------- --------------- --------------- ----------- ------------ ------
Units issued during the
period........................ 614,681 615,322 406,852 1,854,069 6,563,713 30,644
Units redeemed during the
period........................ (27,386) (35,217) (20,971) (103,193) (219,179) (1,155)
---------- --------------- --------------- ----------- ------------ ------
Units outstanding end of
period........................ 587,295 580,105 385,881 1,750,876 6,344,534 29,489
---------- --------------- --------------- ----------- ------------ ------
---------- --------------- --------------- ----------- ------------ ------
<CAPTION>
AUGUST 18, 1994* AUGUST 24, 1994* AUGUST 18, 1994* AUGUST 24, 1994*
SCUDDER
EQUITY SPECIAL INTERNATIONAL
GROWTH EQUITY CALVERT EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
From operations:
Net investment income
(loss)..................... ($ 33,159) $ 64 $ 219,472 ($ 1,923)
Net realized gains (losses)
on investments............. (651,406) 8,817 (954) (24)
Net increase (decrease) in
unrealized appreciation on
investments................ 288,214 2,163 (266,714) (50,808)
-------- ------ -------- --------
Net increase (decrease) in
net assets resulting from
operations................ (396,351) 11,044 (48,196) (52,755)
-------- ------ -------- --------
From unit transactions:
Net proceeds from the
issuance of units.......... 63,704,643 890,956 8,000,765 1,640,352
Net asset value of units
redeemed................... (2,416,472) (14,362) (413,830) (36,226)
-------- ------ -------- --------
Net increase in net assets
from unit transactions..... 61,288,171 876,594 7,586,935 1,604,126
-------- ------ -------- --------
Net assets end of period........ $ 60,891,820 $887,638 $7,538,739 $1,551,371
-------- ------ -------- --------
-------- ------ -------- --------
Units issued during the
period........................ 2,925,280 84,857 606,742 166,014
Units redeemed during the
period........................ (113,014) (1,354) (31,542) (3,698)
-------- ------ -------- --------
Units outstanding end of
period........................ 2,812,266 83,503 575,200 162,316
-------- ------ -------- --------
-------- ------ -------- --------
</TABLE>
- ------------
* commencement of operations.
See notes to financial statements.
4
<PAGE>
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Diversified Investors Variable Funds ("DIVF") is a separate investment
account established on November 30, 1993 by AUSA Life Insurance Company, Inc.
("AUSA") under the laws of the State of New York.
DIVF operates as a unit investment trust under the Investment Company Act of
1940, as amended (the "1940 Act"). DIVF holds assets that are segregated from
all of AUSA's other assets and, at present, is used as an investment vehicle
under certain tax-deferred annuity contracts issued by AUSA to fund retirement
plans maintained by certain not-for-profit and other organizations ("Group
Plans"). AUSA is the legal owner of the assets in DIVF.
DIVF had no assets or operations until August 18, 1994 (commencement of
operations). There are currently ten subaccounts within DIVF which are available
to contractholders of Group Plans, and each invests only in a corresponding
portfolio of Diversified Investors Portfolios (the "Portfolios"), the Calvert
Responsibly Invested Balanced Portfolio, a Series of Acacia Capital Corporation
("Calvert") or the International Portfolio of the Scudder Variable Life
Investment Fund ("Scudder") (collectively referred to as the "Funds"). The
respective financial statements of the Funds are contained elsewhere in this
report. Three additional subaccounts of DIVF have been established and
registered under the 1940 Act but have not commenced operations, i.e., the High
Quality Bond, High Yield Bond and International Equity Subaccounts.
At December 31, 1995, each DIVF Subaccount's investment in the corresponding
Portfolios was as follows:
<TABLE><CAPTION>
SUBACCOUNT PERCENTAGE INVESTMENT IN PORTFOLIO
---------- ----------------------------------
<S> <C>
Money Market................................... 10.35%
Intermediate Government Bond................... 21.12
Government/Corporate Bond...................... 3.72
Balanced....................................... 38.25
Equity Income.................................. 24.90
Growth & Income................................ 4.12
Equity Growth.................................. 51.26
Special Equity................................. 3.43
</TABLE>
2. SIGNIFICANT ACCOUNTING POLICIES
A. INVESTMENTS:
The investment by DIVF in the Portfolios reflects DIVF's proportionate
interest in the net assets of the Portfolios. The investment in shares of
Calvert and Scudder is stated at net asset value. DIVF subaccounts which invest
in Calvert and Scudder record their security transactions at the prior day's
ending net asset value per share. Valuation of securities held in each of the
Portfolios is discussed in Note 2A of the Portfolios' Notes to Financial
Statements which are included elsewhere in this report. A description of
portfolio valuation accounting policies for Calvert and Scudder can be found in
Note A of their financial statements contained elsewhere in this report.
B. INVESTMENT INCOME:
Each DIVF subaccount earns income, net of expenses, daily on its investment
in the corresponding Portfolio. All of the net investment income and realized
and unrealized gains and losses from the security transactions of the
corresponding Portfolios are allocated pro rata among the investors at the time
of such determination. Dividend income is recorded on the ex-dividend date.
Realized gains and losses from the sale of investments are determined on the
basis of identified cost.
5
<PAGE>
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
C. FEDERAL INCOME TAXES:
The operations of DIVF form a part of, and are taxed with, the operations of
AUSA. AUSA does not expect, based upon current tax law, to incur any income tax
upon the earnings or realized capital gains attributed to DIVF. Based upon this
expectation, no charges are currently being deducted from DIVF for federal
income tax purposes.
D. OTHER:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
3. FEES AND TRANSACTIONS WITH AFFILIATES
Certain subaccounts of DIVF purchase interests in the Portfolios; therefore,
the net assets of those DIVF Subaccounts reflect the investment management fees
charged by Diversified Investment Advisors, Inc. (an affiliate of AUSA), the
investment advisor, which provides investment advice and related services for
the Portfolios.
AUSA has voluntarily undertaken to reimburse certain subaccounts, a portion
of the expenses that the Portfolios incurred in the determination of net
investment income allocable to the subaccounts. In accordance with the above
undertaking, AUSA has determined to limit all such expenses of the Money Market,
Equity Income, Equity Growth and Scudder International Equity Subaccounts to
0.10%, 0.46%. 0.50% and 1.02%, respectively, of average net assets. As a result
of the above, AUSA reimbursed fees of $23,601, $75,741, and $227,156 for the
Money Market, Equity Income and Equity Growth Subaccounts, respectively.
In addition, AUSA charges a daily mortality and risk fee computed at 0.90%
of average net assets, however, AUSA reserves the right to charge a maximum rate
of 1.25% upon written notice. Although annuity payments differ according to the
investments performance of the DIVF Subaccounts, they are not affected by
mortality and expense risk because AUSA assumes the mortality and risk expense
under the contract.
4. GROUP PLAN ASSUMPTIONS
On December 31, 1993, AUSA entered into an agreement with The Mutual Life
Insurance Company of New York ("MONY") pursuant to which certain contracts
issued by MONY to Group Plans may be transferred through assumption reinsurance
to AUSA subject to receipt of any necessary state insurance department approvals
and authorizations. The assumption reinsurance of any Group Plan to AUSA will
result in the transfer of the applicable assets out of a corresponding MONY
separate account and into DIVF. Assets transferred from MONY pursuant to this
assumption reinsurance transaction for the years ended December 31, 1995 and
1994, were as follows:
1995 1994
SUBACCOUNTS AMOUNT AMOUNT
----------- ----------- ------------
Money Market................................... $ 1,867,363 $ 7,329,470
Intermediate Government Bond................... 8,782,763 7,009,246
Government/Corporate Bond...................... 1,841,524 6,122,972
Balanced....................................... 11,617,343 28,079,379
Equity Income.................................. 29,614,226 108,398,220
Equity Growth.................................. 19,543,177 57,640,191
Calvert........................................ 3,908,172 7,327,885
----------- ------------
$77,174,568 $221,907,363
----------- ------------
----------- ------------
The amounts related to these assumptions are included as proceeds from the
issuance of units in the Statements of Changes in Net Assets.
6
<PAGE>
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. FINANCIAL HIGHLIGHTS
For one Accumulation Unit outstanding throughout the period:
<TABLE><CAPTION>
INTERMEDIATE GROWTH
GOVERNMENT GOVERNMENT/ &
MONEY MARKET BOND CORPORATE BOND BALANCED EQUITY INCOME INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- ---------------- ---------------- ---------------- ---------------- ------
1995 1994* 1995 1994* 1995 1994* 1995 1994* 1995 1994* 1995
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............ $13.65 $13.44 $12.24 $12.33 $16.70 $16.76 $16.66 $16.85 $16.86 $17.21 $10.14
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from
investment
operations:
Net investment
income............ 0.59 0.22 0.57 0.24 0.84 0.32 0.50 0.20 0.46 0.18 0.03
Net realized and
unrealized gains
(losses) on
investments....... 0.11 (0.01) 1.03 (0.33) 2.09 (0.38) 4.09 (0.39) 5.16 (0.53) 3.12
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations........ 0.70 0.21 1.60 (0.09) 2.93 (0.06) 4.59 (0.19) 5.62 (0.35) 3.15
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of period......... $14.35 $13.65 $13.84 $12.24 $19.63 $16.70 $21.25 $16.66 $22.48 $16.86 $13.29
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Ratio of net
investment income
to average net
assets (net of
reimbursements)***(1).. 5.05% 4.65% 4.81% 5.64% 5.41% 5.64% 3.09% 3.47% 2.55% 3.09% 0.47%
Ratio of expenses to
average net assets
(net of
reinbursements)***(1).. 0.71% 0.73% 0.93% 0.95% 0.90% 0.94% 9.10% 0.95% 0.85% 0.95% 0.89%
Ratio of net
investment income
to average net
assets***......... 4.85% 4.43% 4.81% 5.64% 5.41% 5.64% 3.09% 3.47% 2.50% 30.9% 0.47%
Ratio of expenses to
average net
assets***......... 0.91% 0.94% 0.93% 0.95% 0.90% 0.94% 0.91% 0.95% 0.90% 0.95% 0.89%
<CAPTION>
SCUDDER
EQUITY SPECIAL INTERNATIONAL
GROWTH EQUITY CALVERT EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- ---------------- ---------------- ----------------
1994** 1995 1994* 1995 1994** 1995 1994* 1995 1994**
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............ $10.31 $21.65 $20.67 $10.63 $10.47 $13.11 $13.28 $ 9.56 $10.18
------ ------ ------ ------ ------ ------ ------ ------ ------
Income from
investment
operations:
Net investment
income............ 0.03 (0.02) (0.02) (0.04) -- 0.90 0.66 (0.05) (0.03)
Net realized and
unrealized gains
(losses) on
investments....... (0.20) 3.95 1.00 4.29 0.16 2.86 (0.83) 1.02 (0.59)
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations........ (0.17) 3.93 0.98 4.25 0.16 3.76 (0.17) (0.62) 0.97
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of period......... $10.14 $25.58 $21.65 $14.88 $10.63 $16.87 $13.11 $10.53 $ 9.56
------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------
Ratio of net
investment income
to average net
assets (net of
reimbursements)***(1 0.85% -0.11% -0.27% -0.59% 0.05% 7.00% 11.76% -0.83% -0.81%
Ratio of expenses to
average net assets
(net of
reinbursements)***(1 0.80% 0.66% 0.93% 0.87% 0.80% 0.88% 0.76% 0.90% 0.81%
Ratio of net
investment income
to average net
assets***......... 0.85% -0.36% -0.27% -0.59% 0.05% 7.00% 11.76% -0.83% -0.81%
Ratio of expenses to
average net
assets***......... 0.80% 0.91% 0.93% 0.87% 0.80% 0.88% 0.76% 0.90% 0.81%
</TABLE>
- ------------
* For the period August 18, 1994 (commencement of operations) to December 31,
1994
** For the period August 24, 1994 (commencement of operations) to December 31,
1994
*** All ratios for 1994 are annualized
(1) See Note 4
7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of the
AUSA Life Insurance Company, Inc. and the
Contractholders of Diversified Investors Variable Funds:
We have audited the accompanying statements of assets and liabilities of
Diversified Investors Variable Funds (comprising, respectively, the Money
Market, Intermediate Government Bond, Government/Corporate Bond, Balanced,
Equity Income, Growth Income, Equity Growth, Special Equity, Calvert and Scudder
International Equity Subaccounts) as of December 31, 1995, and the related
statements of operations and changes in net assets, and the financial highlights
for each period presented. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodians. 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 respective subaccounts constituting Diversified Investors Variable
Funds as of December 31, 1995, the results of their operations, the changes in
their net assets, and the financial highlights for the periods referred to above
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
February 13, 1996
8
<PAGE>
ECONOMIC AND MARKET REVIEW
The fourth quarter of 1995 was the grand finale to a year that displayed
extraordinary performance in the financial markets despite a slowing economic
tempo. The stock market, as measured by the S&P 500 Index, had a banner year by
posting a total return of 37.5%, its best return since 1958. Likewise, the bond
market, as measured by the Lehman Brothers Government/Corporate Index, enjoyed
its best return since 1985 by exhibiting a 19.3% return. This was in sharp
contrast to 1994, when the bond market suffered its worst return since 1969.
The catalyst which propelled the financial markets to new heights was
primarily an economy that did not grow rapidly, but rather at a modest pace,
which kept inflationary pressures minimal as measured by the Consumer Price and
Producer Price Indices. This "soft landing" scenario enabled interest rates to
fall throughout the yield curve. In fact, the yield on the 30 year Treasury Bond
fell 1.93% from 7.88% in December 1994 to 5.95% in December 1995. 1995 saw the
Federal Reserve change gears on its monetary policy from a tightening stance to
an easing as it reduced rates by 25 basis points in July and December. The stock
market took the lead from the bond market and reached new highs. Stocks were
also helped by very strong corporate earnings reports, based substantially on
productivity gains, and by a record year of mergers and acquisitions.
The only phenomenon to repeat from 1994 was the underperformance of the
small company stocks relative to their brethren large company stocks. This was
due to two factors. First, investors favored large multi-national corporations,
which benefited from a favorable currency scenario during the earlier part of
the year. Second, investors took a defensive posture toward the end of the year,
as they became concerned that the economy was slowing faster than anticipated
and that strong corporate earnings would not be sustained in the upcoming
quarters.
Finance was the best performing sector during the year. Falling interest
rates and significant consolidation were the primary reasons for the gains. For
the second year in a row, the consumer non-cyclical sector excelled as investors
favored drug stocks. The performance of these stocks was attributable to
strategic alliances and mergers, an abundance of new products in development,
and their ability to deliver consistent profits in an uncertain economic
environment.
Two sectors are worth noting. Technology, went from being the best performer
in the first three quarters, as earnings surged, to the worst performer in the
fourth quarter as disappointments mounted. Energy, is the other notable sector,
and it followed the exact opposite trend. A cold fall, early winter and higher
oil prices boosted this sector's results late in the year.
MONEY MARKET PORTFOLIO
The Federal Reserve successfully achieved its soft landing-slow growth goals
in 1995. Its proactive moves in 1994 to stem inflation were successful and
created a strong level of confidence in the Fed's ability to keep inflation
under control. This created an atmosphere that allowed long term interest rates
to drop. And, as the Fed became comfortable that balance was achieved, it
reduced the Fed Fund rate from 6.0% to 5.75%, signaling a more neutral policy.
As the end of 1995 approached, economic signs pointed to a sluggish economy and
the Federal Reserve eased rates another 25 basis points in December to end the
year with a Fed Funds rate of 5.50%.
From slow Christmas sales and other generally sluggish economic indicators,
it appears that 1996 will be at the slower end of the slow growth goal, making
it likely that the Federal Reserve will continue to ease short-term interest
rates in 1996. We expect the economy to continue to appear sluggish in 1996, and
for the Fed to continue easing interest rates through the end of the year. By
the end of 1996, interest rates could be as low as 4.50%.
The interest rate curve remains inverted with one month maturity investments
yielding more than the six month investments. The fear of interest rate
reductions creates the need to manage the Portfolio on a balanced basis. Short
maturity investments take advantage of current higher interest rates, while
1
<PAGE>
longer term investments, when not fully pricing in anticipated Fed easing, are
purchased to protect against interest rates falling even more precipitously. The
average maturity of the Portfolio has lengthened to 48.6 days as of December 29,
1995.
The Portfolio continues to be invested in high quality short-term
instruments, principally commercial paper. Our investment strategy is to
emphasize purchases of 30-90 day maturities to provide flexibility to respond to
any changes in the market place without sacrificing current income. The 30-day
and 7-day current yields of the Portfolio were 5.56% and 5.56%, respectively, as
of December 29, 1995.
HIGH QUALITY BOND PORTFOLIO
The last quarter of 1995 was indicative of what transpired for the year
ended 1995. The 30 year Treasury bond returned almost 9% and 33.5% for the
quarter and year, respectively, while the 90 day Treasury bill returned 1.4% and
almost 6% for the quarter and year, respectively. This is quite a difference
from year end 1994, which was the worst bond market since 1969.
The fourth quarter of 1995 was overshadowed by the balanced budget debate
between the White House and Congress. Although this was temporarily resolved
during November, the debate resurfaced in the later part of December. Despite
this, the Federal Open Market Committee (FOMC) met on December 19, and decided
to lower the Federal Funds rate by 25 basis points, to 5.50%. Federal Reserve
Chairman Greenspan stated that inflation has been somewhat more favorable than
originally anticipated. Economic indicators continued to show low inflation,
weakness in the housing, manufacturing, and retail sectors. Weak employment
reports also drove the actions by the Federal Reserve Board.
Throughout the fourth quarter, Treasury yields were driven lower across the
entire maturity spectrum. However, in November, the yield curve experienced a
slight inversion in the short end of the yield curve. At the end of the year,
the yield curve still remained inverted, with the one month maturity investments
yielding more than the six month.
Assets with longer-term maturities continued to outperform the shorter-term
maturities. Overall, corporates outperformed Treasuries and mortgages followed
by Yankees and asset-backed securities.
Looking forward to 1996, Merganser is expecting a sluggish economy with
gross domestic product (GDP) between 2%-2.5%. We even may see a slight downward
turn in the first quarter GDP due to the inclement weather and the partial
Government shutdown. CPI and PPI continue to indicate that inflation is
non-existent. It is anticipated that the Fed will ease again in the near term.
It will be hard to determine the Fed's next move utilizing economic data. Due to
the partial Government shutdown, economic data is simply not available.
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
The fourth quarter of 1995 saw a continuation of above average returns for
securities in this sector of the bond market. The Lehman Brothers Intermediate
Government Bond Index posted a 3.3% return for the three month period ended
December 31. 1995's performance of 14.4% represents the highest calendar
performance in 10 years.
During the quarter, the Federal Reserve once again cut short-term interest
rates citing minimal inflationary pressures in the economy as well as a slowing
in real business activity. Consumer Price Index and Producer Price Index reports
released during the period confirmed that prices were not trending higher. At
the same time, industrial production and capacity utilization levels fell, autos
were selling far slower than had been anticipated and retailers generally
reported sales levels well below what they had hoped for.
2
<PAGE>
The on-going budget debate in Washington resulted in a partial shutdown and
reopening of government functions in November and another partial shutdown in
December. A compromise that includes real deficit reduction through reduced
government spending would be a positive for bondholders. Less government
issuance would not only decrease supply in the marketplace but may also help to
keep inflation at acceptable levels.
For most of the quarter the Portfolio was slightly longer in duration than
its benchmark, the Lehman Brothers Intermediate Index. As the year ended, it was
being managed closer to that of the Index and will be kept there until
negotiations in Washington are completed. Although returns for the coming
quarters may not be as high as those of 1995, the outlook for bonds remains
positive.
GOVERNMENT/CORPORATE BOND PORTFOLIO
The rally in bonds that began in November 1994 remained intact through the
final quarter of 1995. Bonds, as measured by the Lehman Brothers Government/
Corporate Index, returned 4.7% for the quarter. This brought the total return
for 1995 to 19.2 %, the strongest calendar year performance since 1985.
Favorable conditions in bonds remained in place during the most recent
quarter. Evidence of a slowing economy and little sign of inflationary pressure
caused rates to be pushed lower, especially for securities with longer
maturities. As measured by the Consumer Price Index, prices paid by consumers
increased roughly 2% for the year, while producers paid just under 2% more for
their raw materials. Meanwhile, although some sectors of the economy showed some
signs of life at year-end, most sectors pointed toward slower growth in the
months ahead. For example, retail sales were much softer than had been
anticipated, especially during the holiday season. Auto sales were weaker than
expected and industrial production levels fell as manufacturers were operating
below full capacity. The Federal Reserve lowered the Fed Funds rate by 25 basis
points on December 18, as it acknowledged the slowdown in economic growth
coupled with minimal inflationary pressures.
The budget debate between the White House and the Republican controlled
Congress also received a lot of attention from the bond market. Early signs that
an agreement would be reached caused traders to push bond prices higher.
However, the negotiations broke down leading to the furlough of "non-essential"
government workers in November and December. The December shutdown stopped the
release of most of the government supplied economic data that traders use to
gauge the direction of the economy. Until the flow of this data resumes, traders
may be less likely to push bond prices higher.
The Portfolio was longer in duration than its benchmark, the Lehman Brothers
Government/ Corporate Index, when the quarter began. However, as the year ended
it was managed down to a duration closer to the Index. It will be kept there
until events settle in Washington and new trends are identified.
BALANCED PORTFOLIO
The stock and bond markets continued their advance in the fourth quarter as
the S&P 500 and the Lehman Government/Corporate Bond Indices returned 6.0% and
4.7%, respectively. These returns capped off a year that was one of the best in
recent history for the financial markets. For the year, the S&P 500 Index
returned 37.5%, its best year since 1958, while the 19.2% return for the Lehman
Index was its best since 1985. For the fourth quarter, the key drivers of the
financial markets were optimism for a budget resolution, lower interest rates,
and earnings reports that were, on balance, better than expected.
Asset allocation, bond return, and stock return were the major determinants
of fourth quarter performance for the Balanced Portfolio. Throughout most of the
quarter, the Portfolio continued to maintain a conservative asset allocation
relative to its benchmark. The equity exposure of the Portfolio averaged about
3% less than that of the benchmark, which detracted from total return in an
3
<PAGE>
environment where stocks continued to outperform bonds. Moreover, the
conservative posture of the Portfolio's fixed income segment was a slight
detractor from performance. The Portfolio's emphasis on safety and quality
during a period where riskier issues generally outperformed was the key factor.
The equity segment of the Portfolio, which had been particularly strong all
year, posted mixed results for the fourth quarter. The best performing groups
were finance and non-cyclical issues. Finance stocks benefited from lower
interest rates and continued merger activity while non-cyclical stocks moved
higher as investors sought out companies whose earnings are largely isolated
from the effects of a slowing economy.
EQUITY INCOME PORTFOLIO
The broad equity market, as measured by the S&P 500 Index, finished the
fourth quarter with a total return of about 6%. This brought to a close one of
the best years in recent history for stock investors as the market posted its
best annual return since the 1950's. Income oriented stock investors also fared
quite well. The Lipper Equity Income Fund Index returned about 5.2% in the
fourth quarter, bringing its 1995 performance to nearly 30%. This was the best
return for this index in its eleven year history. The key catalysts behind the
market's advance in the fourth quarter were optimism for a budget resolution,
lower interest rates, and earnings reports that were, on balance, better than
expected.
The Equity Income Fund posted strong results in the fourth quarter due to
its positions in the more defensive sectors of the market. Sectors such as
utilities and non-cyclicals are viewed as more defensive because these types of
companies have revenue streams which are, to a large extent, isolated from the
effects of a slowing economy. These were the two best performing sectors of the
Portfolio for the fourth quarter.
The utility sector of the Portfolio provided better than market returns due
to an emphasis on electric and telephone companies. Electric utility stocks
offered investors very attractive dividend yields relative to Treasury bonds and
the broad equity market as a whole. The relative safety of these dividend
oriented issues proved to be particularly attractive to investors who sought to
lock in profits for the year and reduce levels of portfolio risk. The
non-cyclical stocks in the Portfolio excelled last quarter after being fairly
strong all year. This group was led by positions in several drug companies which
all moved sharply higher. The key factors behind the advance were new product
offerings, earnings consistency, and merger activity throughout the industry.
GROWTH & INCOME PORTFOLIO
The broad stock market, as measured by the S&P 500 Index, returned 6.0% for
the fourth quarter, capping a banner year for the Index with a return of 37.5%.
This was the Index's best year since 1958, when it posted a return of 43.4%. The
fourth quarter's result was attributable to generally better than expected
earnings reports, a continued slowing of the economy, low interest rates and
moderate inflation. In an effort to boost economic growth, the Federal Reserve
lowered the Fed Funds Rate by 25 basis points in December, adding another spark
to stock returns.
Strong stock selection in the basic industry sector of the Portfolio caused
it to outperform the Index's respective sector's result by approximately 19% for
the quarter. This result was largely attributable to a significant
underweighting in paper, metal and chemical companies which have underperformed
due to minimal inflation pressures and the sluggish demand due to a slowing
economy. The Portfolio was helped by Avery Dennison Corp., Kimberly Clark Corp.
and Praxair, Inc. The main catalyst propelling these stocks was record third
quarter earnings reports.
The consumer cyclical sector also contributed positively to the Portfolio's
result led by Carnival Corp., McDonald's Corp., Rite Aid Corp. and Walgreen Co.
The common element which contributed positively were better than expected
earnings reports. Rite Aid Corp. also benefited from the company announcing that
it will acquire the Revco drug store chain. The Portfolio's underweighting in
retail
4
<PAGE>
related stocks helped its relative performance, as the retail sector has been
under pressure due to the extremely competitive environment combined with a
slowdown in consumer spending.
The Portfolio was also helped by outperformances from the consumer
non-cyclical and finance sectors. With the economy showing signs of slowing
down, investors became bearish about the upcoming earnings reports and rotated
into the companies whose earnings are not closely tied to movements of the
economy. As a result, drug, health care and consumer staples stocks outperformed
for the quarter. The finance sector was helped by falling interest rates, which
should continue to bode well for profits.
EQUITY GROWTH PORTFOLIO
Growth investing, as defined by the Russell 1000 Growth Index, posted its
best result in four years with a total return of 37.2%. However, in the fourth
quarter this Index lagged both the Russell Value and the S&P 500 Indices. In
addition, there were disparities within the growth discipline itself as more
aggressive strategies generally lagged the more conservative. For example, the
Lipper Growth and Capital Appreciation Indices lagged the Russell Growth by
about 3% in the fourth quarter as they are indicative of somewhat more
aggressive growth strategies. The Growth Portfolio's strong bias towards
companies with high revenue and earnings growth over the long-term was not
particularly well suited for this type of environment.
The sectors which most influenced the Growth Portfolio's fourth quarter
result were technology and non-cyclicals. Technology remains the largest sector
allocation in the Portfolio due to wireless communications and computer software
and networking investment themes. These issues met with selling pressure in the
fourth quarter due to warnings by management at bellwether companies such as
Nokia, IBM, and Motorola that slowing sales may lead to lower than expected
earnings in the near-term. These announcements created negative sentiment which
affected the entire technology sector. However, the long term prospects for
these industries remain quite favorable as they are still among the fastest
growing industries in the U.S.
The Portfolio's non-cyclical stocks were by far the best performing issues.
This group's relative strength arose from HMO companies, which posted large
gains in reaction to particularly strong earnings. This group also benefited
from market sentiment. In an environment where investors are concerned about a
slowing economy, these types of companies are attractive as the demand for their
products and services is relatively unaffected by macroeconomic factors.
SPECIAL EQUITY PORTFOLIO
Small company stocks, as measured by the Russell 2000 Index, returned 2.2%,
underperforming their brethren large company stocks, which returned 6.0%, as
measured by the S&P 500 Index, for the fourth quarter. This was primarily due to
investors flocking toward the larger, more stable earning companies in the wake
of an uncertain economic and profit outlook for the upcoming quarters. Moreover,
1995 was the second year in a row in which the small company stocks underscored
the larger companies.
The Special Equity Portfolio continued to demonstrate superior results
relative to its peers for both the fourth quarter and 1995 as a whole. The
Portfolio's strong stock selection among the consumer non-cyclical, finance and
industrial sectors were the primary drivers for the quarter's strong result.
The Consumer non-cyclical sector was the Portfolio's best performer during
the quarter by exceeding the Index's respective sector by approximately 10%.
Health care and consumer stocks were the primary catalysts for the strong
result. These stocks not only benefited from company specific events, but from
growing investor sentiment regarding anticipation of an economic slowdown.
Investors flocked to these stocks primarily because they tend to display
consistent earnings despite a slowdown in economic growth.
5
<PAGE>
The finance stocks did well because of a falling interest rate environment,
which bodes well for their earnings, and because of the continued consolidation
among banking stocks. The Portfolio was a benefactor of this merger activity as
Charter One Financial, Inc. merged with Firstfed of Michigan Corp., creating the
largest thrift in the Midwest. In addition, Premier Bancorp Inc. was purchased
by Banc One. Also, a potentially favorable tax change in the Congressional
budget, which could save substantial money for the savings and thrift industry,
helped returns of these companies as they become even more attractive as
takeover candidates.
HIGH YIELD BOND PORTFOLIO
The high yield bond market returned 3.1% in the fourth quarter, bringing
full year returns to 19.2%. 1995 represented the third best annual period for
the high yield sector since the inception of market indices in the early 1980's.
Falling interest rates, rising stock prices, and heavy investor demand provided
a steady backwind to the high yield market during the fourth quarter. With both
the S&P 500 and the 10-year Treasury Bond up nearly 6%, and high yield mutual
fund inflows crossing the $2.5B mark, the high yield sector returned a healthy
3.1% (about the same as third quarter). Consistent with the pattern throughout
the year, top rated BB issues outperformed all other quality tiers, returning
4.4% vs. 2.4% for B rated issues and 0.7% for the CCCs. By virtue of their
higher credit quality and longer average duration, BBs enjoyed greater interest
sensitivity and outperformed in synch with treasuries.
With surging debt and equity markets as a backdrop, high yield returns in
1995 were the best since 1991, and the third best ever. While 1996 broad market
returns are likely to prove subdued in comparison, the outlook for the high
yield sector remains positive, particularly relative to other fixed income
alternatives. Moderating economic growth and little inflationary pressure argue
for stable long-term interest rates, which means that returns will consist
principally of income. Given this scenario, the high yield sector should
outperform due to its significant yield advantage over similar duration
instruments.
INTERNATIONAL EQUITY PORTFOLIO
For the fourth quarter, the world's stock markets continued to show strength
as they had for the majority of the year. Whether measured in local currency or
U.S. dollars, 17 of the largest 22 markets were higher. The MSCI EAFE GDP Index
returned 3.50% for the quarter, and 11.62% for the year ending 1995.
Common themes for most of the world's markets during the fourth quarter:
slow economy, little or no concerns about inflation, and a declining interest
rate environment. Gross domestic product (GDP) growth measured against the
previous quarter was lower by about .5% in each of the major areas (USA, Japan,
and Major Europe).
Interest rates around the world continued to decline which, for the year as
a whole, has brought the yields on 10-year governments down by 100 to 200 basis
points. For the fourth quarter, the decline in interest rates was typically
about 50 to 100 basis points, except in Japan, which posted a rise of 22 basis
points.
The dollar was mixed against most major currencies during the fourth
quarter. The dollar gained against the Deutsch mark and yen. For the month of
December, however, the dollar generally declined. Concerns arising out of the
inconclusive budget debate in Washington was the major factor behind the
decline.
The Japanese market finished 1995 on a strong note, even though there were
very few economic statistics to prove that a recovery had actually commenced. In
fact, nominal GDP growth is weaker than at any time since 1931. The logical
explanation for the stock market's strength is a highly stimulative monetary and
fiscal policy which has been pursued since last summer. This may be a turning
point for
6
<PAGE>
Japan. The market history of the past 15 years suggests that the strong stock
market may be the best predictor of the economy.
In Europe, economic developments in the fourth quarter were mostly downbeat.
Manufacturing activity contracted, excess inventories having accumulated in the
United Kingdom (UK) and in Germany. The strikes in France during December will
have long-term effects there and in other neighboring countries. Investors in
Europe, however, were obviously focusing on prospects for 1996. Lower interest
rates were an important expectation. In the UK, forward rates were pricing in
additional rate cuts of about 75 basis points by mid-1996. Inflation data are
sufficiently good in Germany that investors widely expect the Bundesbank to
continue permitting small intermittent rate cuts.
7
<PAGE>
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE><CAPTION>
INTERMEDIATE GOVERNMENT/
HIGH GOVERNMENT CORPORATE
MONEY MARKET QUALITY BOND BOND BOND BALANCED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at cost............... $141,642,545 $164,768,936 $ 94,192,491 $341,805,334 $198,158,473
------------ ------------ ------------ ------------ ------------
Investments, at market............. $141,642,545 $166,373,100 $ 95,259,796 $357,816,218 $212,478,597
Repurchase agreement, at value..... 56,639 4,459,931 82,793 86,916 5,702,169
Cash............................... 2,636 0 0 1,054 0
Receivable from custodian.......... 0 0 0 0 0
Foreign currency holdings, at value
(cost $693,265)................... 0 0 0 0 0
Receivable for securities sold..... 0 133,800 0 0 837,128
Interest receivable................ 0 2,097,824 761,765 4,277,561 989,678
Dividends receivable............... 0 0 0 0 147,754
Receivable from securities
lending............................ 0 0 2,307 6,231 10,650
Receivable for forward currency
contracts.......................... 0 0 0 0 0
Reimbursement from advisor......... 3,211 532 14,093 1,417 25,732
------------ ------------ ------------ ------------ ------------
Total assets.................. 141,705,031 173,065,187 96,120,754 362,189,397 220,191,708
------------ ------------ ------------ ------------ ------------
LIABILITIES:
Deposit for securities loaned...... 0 0 10,071,250 25,518,850 45,257,850
Payable for securities purchased... 0 453,494 338 0 7,806,862
Payable for forward currency
contracts.......................... 0 0 0 0 0
Accrued expenses:
Investment advisory fees.......... 29,753 48,735 25,897 90,155 60,959
Custody fees...................... 5,633 6,931 5,266 10,998 6,224
Professional fees................. 21,664 21,937 20,085 19,574 20,181
Printing fees..................... 2,971 1,961 998 3,253 1,115
Miscellaneous fees................ 6,762 6,026 5,306 7,157 5,562
------------ ------------ ------------ ------------ ------------
Total liabilities............. 66,783 539,084 10,129,140 25,649,987 53,158,753
------------ ------------ ------------ ------------ ------------
Net assets......................... $141,638,248 $172,526,103 $ 85,991,614 $336,539,410 $167,032,955
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Net assets consist of:
Paid-in capital................... $141,638,248 $170,921,939 $ 84,924,309 $320,528,526 $152,712,831
Net unrealized appreciation on
investments, and translation of
assets and liabilities in
foreign currencies................. 0 1,604,164 1,067,305 16,010,884 14,320,124
------------ ------------ ------------ ------------ ------------
Net assets.................... $141,638,248 $172,526,103 $ 85,991,614 $336,539,410 $167,032,955
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
<TABLE><CAPTION>
EQUITY GROWTH & EQUITY SPECIAL HIGH INTERNATIONAL
INCOME INCOME GROWTH EQUITY YIELD BOND EQUITY
- ------------ ------------ ------------ ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
$660,136,580 $108,334,032 $216,333,251 $275,177,944 $8,056,922 $ 78,000,625
- ------------ ------------ ------------ ------------ ---------- -------------
$805,216,482 $116,524,886 $255,883,019 $320,663,277 $8,218,968 $ 79,175,541
52,740 18,370,832 9,713,052 21,477,900 0 0
341 0 0 0 818,124 4,575,760
0 0 117,734 0 0 0
0 0 0 0 0 687,767
0 708,217 0 2,909,595 0 162,684
0 0 0 0 186,824 35,859
1,486,610 139,049 98,460 234,431 0 72,106
3,223 1,470 19,961 6,894 0 0
0 0 0 0 0 190,253
2,387 2,967 (1,228) 18,641 10,320 6,191
- ------------ ------------ ------------ ------------ ---------- -------------
806,761,783 135,747,421 265,830,998 345,310,738 9,234,236 84,906,161
- ------------ ------------ ------------ ------------ ---------- -------------
40,890,000 8,425,791 43,316,000 25,513,600 0 0
1,217,191 2,424,207 0 4,096,494 211,375 1,261,434
0 0 0 0 0 29,556
269,680 58,059 121,159 194,740 2,835 143,910
33,745 5,296 6,921 22,690 4,507 11,973
33,478 17,704 18,688 18,458 9,897 7,675
5,904 352 555 1,062 636 1,459
9,255 4,281 5,285 5,469 7,391 3,839
- ------------ ------------ ------------ ------------ ---------- -------------
42,459,253 10,935,690 43,468,608 29,852,513 236,641 1,459,846
- ------------ ------------ ------------ ------------ ---------- -------------
$764,302,530 $124,811,731 $222,362,390 $315,458,225 $8,997,595 $ 83,446,315
- ------------ ------------ ------------ ------------ ---------- -------------
- ------------ ------------ ------------ ------------ ---------- -------------
$619,222,628 $116,620,877 $182,812,622 $269,972,892 $8,835,549 $ 82,111,576
145,079,902 8,190,854 39,549,768 45,485,333 162,046 1,334,739
- ------------ ------------ ------------ ------------ ---------- -------------
$764,302,530 $124,811,731 $222,362,390 $315,458,225 $8,997,595 $ 83,446,315
- ------------ ------------ ------------ ------------ ---------- -------------
- ------------ ------------ ------------ ------------ ---------- -------------
</TABLE>
9
<PAGE>
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE><CAPTION>
INTERMEDIATE GOVERNMENT/
MONEY HIGH GOVERNMENT CORPORATE
MARKET QUALITY BOND BOND BOND BALANCED
---------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment income:
Dividend income........................ $ 0 $ 0 $ 0 $ 0 $ 1,737,553
Interest income........................ 9,420,480 10,560,001 4,881,454 19,315,534 4,608,571
---------- ------------ ------------ ----------- -----------
Total income....................... 9,420,480 10,560,001 4,881,454 19,315,534 6,346,124
---------- ------------ ------------ ----------- -----------
Expenses:
Investment advisory fees............... 391,657 562,958 286,019 1,011,116 639,345
Custody fees........................... 48,971 42,976 38,278 68,817 54,977
Professional fees...................... 25,341 25,441 22,529 25,811 24,073
Printing fees.......................... 3,953 2,942 1,979 4,234 2,096
Miscellaneous fees..................... 22,990 21,477 19,071 23,609 18,621
---------- ------------ ------------ ----------- -----------
Total Expenses..................... 492,912 655,794 367,876 1,133,587 739,112
Expenses waived by the investment
advisor................................. 22,086 9,897 44,808 0 51,146
---------- ------------ ------------ ----------- -----------
Net expenses....................... 470,826 645,897 323,068 1,133,587 687,966
---------- ------------ ------------ ----------- -----------
Net investment income................... 8,949,654 9,914,104 4,558,386 18,181,947 5,658,158
---------- ------------ ------------ ----------- -----------
Net realized and unrealized gains
(losses) on investments:
Net realized gains (losses) on
investments............................. (4,226) (634,835) 379,479 1,365,500 11,609,960
Net realized gains (losses) on foreign
currency transactions................ 0 0 0 0 0
Net unrealized appreciation on
investments............................. 0 7,048,911 5,777,385 29,472,541 17,788,835
Net increase in unrealized appreciation
on translation of assets and
liabilities in foreign currencies.... 0 0 0 0 0
---------- ------------ ------------ ----------- -----------
Net realized and unrealized gains
(losses) on investments................ (4,226) 6,414,076 6,156,864 30,838,041 29,398,795
---------- ------------ ------------ ----------- -----------
Net increase in net assets resulting
from operations........................ $8,945,428 $ 16,328,180 $ 10,715,250 $49,019,988 $35,056,953
---------- ------------ ------------ ----------- -----------
---------- ------------ ------------ ----------- -----------
</TABLE>
- ------------
* August 22, 1995, Commencement of Operations
** September 29, 1995, Commencement of Operations
# Net of withholding taxes of $25,308
See Notes to Financial Statements.
10
<PAGE>
<TABLE><CAPTION>
EQUITY GROWTH & EQUITY SPECIAL HIGH INTERNATIONAL
INCOME INCOME GROWTH EQUITY YIELD BOND * EQUITY **
- ------------ ----------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
$ 20,486,295 $ 1,626,970 $ 421,856 $ 1,688,432 $ 0 $ 198,388#
4,278,028 624,447 1,810,218 1,232,053 240,742 66,670
- ------------ ----------- ----------- ----------- ------------ -------------
24,764,323 2,251,417 2,232,074 2,920,485 240,742 265,058
- ------------ ----------- ----------- ----------- ------------ -------------
2,878,308 639,911 1,272,213 2,018,861 11,146 143,910
170,931 42,763 49,087 175,111 9,060 11,973
40,231 20,681 21,131 22,446 9,897 7,675
6,885 1,333 1,536 2,043 636 1,459
32,710 18,191 19,476 20,993 7,390 3,838
- ------------ ----------- ----------- ----------- ------------ -------------
3,129,065 722,879 1,363,443 2,239,454 38,129 168,855
0 28,140 0 82,511 20,785 6,191
- ------------ ----------- ----------- ----------- ------------ -------------
3,129,065 694,739 1,363,443 2,156,943 17,344 162,664
- ------------ ----------- ----------- ----------- ------------ -------------
21,635,258 1,556,678 868,631 763,542 223,398 102,394
- ------------ ----------- ----------- ----------- ------------ -------------
9,847,566 19,009,812 4,768,375 45,159,729 6,659 16,793
0 0 0 0 0 (8,241)
158,219,366 9,319,254 24,304,762 40,748,255 162,046 1,174,916
0 0 0 0 0 159,823
- ------------ ----------- ----------- ----------- ------------ -------------
168,066,932 28,329,066 29,073,137 85,907,984 168,705 1,343,291
- ------------ ----------- ----------- ----------- ------------ -------------
$189,702,190 $29,885,744 $29,941,768 $86,671,526 $392,103 $ 1,445,685
- ------------ ----------- ----------- ----------- ------------ -------------
- ------------ ----------- ----------- ----------- ------------ -------------
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE><CAPTION>
INTERMEDIATE GOVERNMENT/
HIGH GOVERNMENT CORPORATE
MONEY MARKET QUALITY BOND BOND BOND BALANCED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
From operations:
Net investment income...... $ 8,949,654 $ 9,914,104 $ 4,558,386 $ 18,181,947 $ 5,658,158
Net realized gains (losses)
on investments........... (4,226) (634,835) 379,479 1,365,500 11,609,960
Net realized gains (losses)
on foreign currency
transactions................ 0 0 0 0 0
Net unrealized appreciation
on investments........... 0 7,048,911 5,777,385 29,472,541 17,788,835
Net increase in unrealized
appreciation on
translation of assets and
liabilities in foreign
currencies.................. 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations... 8,945,428 16,328,180 10,715,250 49,019,988 35,056,953
------------ ------------ ------------ ------------ ------------
From capital transactions:
Proceeds from capital
invested.................... 393,166,782 141,659,639 38,046,469 151,446,357 80,590,418
Value of capital
withdrawn................... 421,983,754 129,457,932 49,408,845 110,912,327 74,123,531
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
net assets resulting from
capital transactions....... (28,816,972) 12,201,707 (11,362,376) 40,534,030 6,466,887
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
net assets................. (19,871,544) 28,529,887 (647,126) 89,554,018 41,523,840
Net assets:
Beginning of year.......... 161,509,792 143,996,216 86,638,740 246,985,392 125,509,115
------------ ------------ ------------ ------------ ------------
End of year................ $141,638,248 $172,526,103 $ 85,991,614 $336,539,410 $167,032,955
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
- ------------
* August 22, 1995 Commencement of Operations
** September 29, 1995 Commencement of Operations
See notes to financial statements.
12
<PAGE>
<TABLE><CAPTION>
EQUITY GROWTH & EQUITY SPECIAL HIGH INTERNATIONAL
INCOME INCOME GROWTH EQUITY YIELD BOND * EQUITY **
- ------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
$ 21,635,258 $ 1,556,678 $ 868,631 $ 763,542 $ 223,398 $ 102,394
9,847,566 19,009,812 4,768,375 45,159,729 6,659 16,793
0 0 0 0 0 (8,241)
158,219,366 9,319,254 24,304,762 40,748,255 162,046 1,174,916
0 0 0 0 0 159,823
- ------------ ------------ ------------ ------------ ------------ -------------
189,702,190 29,885,744 29,941,768 86,671,526 392,103 1,445,685
- ------------ ------------ ------------ ------------ ------------ -------------
231,491,356 93,751,429 93,276,744 113,103,544 9,081,530 86,991,521
245,585,114 93,408,742 49,673,952 101,988,710 476,038 4,990,891
- ------------ ------------ ------------ ------------ ------------ -------------
)
(14,093,758 342,687 43,602,792 11,114,834 8,605,492 82,000,630
- ------------ ------------ ------------ ------------ ------------ -------------
175,608,432 30,228,431 73,544,560 97,786,360 8,997,595 83,446,315
588,694,098 94,583,300 148,817,830 217,671,865 0 0
- ------------ ------------ ------------ ------------ ------------ -------------
$764,302,530 $124,811,731 $222,362,390 $315,458,225 $ 8,997,595 $ 83,446,315
- ------------ ------------ ------------ ------------ ------------ -------------
- ------------ ------------ ------------ ------------ ------------ -------------
</TABLE>
13
<PAGE>
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE><CAPTION>
MONEY HIGH INTERMEDIATE GOVERNMENT/
MARKET QUALITY BOND GOVERNMENT BOND CORPORATE BOND BALANCED
------------ ------------ --------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
From operations:
Net investment income.......... $ 5,160,230 $ 10,028,083 $ 4,037,896 $ 12,824,729 $ 3,614,958
Net realized gains (losses) on
investments....................... (9,238) (2,474,325) (286,190) (5,306,941) 425,349
Net increase (decrease) in
unrealized appreciation on
investments....................... 0 (5,444,747) (4,710,080) (13,461,657) (3,468,711)
------------ ------------ --------------- -------------- ------------
Net increase in net assets
resulting from operations.... 5,150,992 2,109,011 (958,374) (5,943,869) 571,596
------------ ------------ --------------- -------------- ------------
From Capital Transactions:
Proceeds from capital
invested.......................... 439,406,062 324,614,137 118,805,465 292,110,188 212,140,323
Value of capital withdrawn..... (283,047,262) (182,726,932) (31,208,351) (39,180,927) (87,202,804)
------------ ------------ --------------- -------------- ------------
Net increase in net assets
resulting from capital
transactions...................... 156,358,800 141,887,205 87,597,114 252,929,261 124,937,519
------------ ------------ --------------- -------------- ------------
Net increase in net assets..... 161,509,792 143,996,216 86,638,740 246,985,392 125,509,115
Net Assets:
Beginning of period............ -- -- -- -- --
------------ ------------ --------------- -------------- ------------
End of period.................. $161,509,792 $143,996,216 $86,638,740 $ 246,985,392 $125,509,115
------------ ------------ --------------- -------------- ------------
------------ ------------ --------------- -------------- ------------
</TABLE>
See notes to financial statements.
14
<PAGE>
EQUITY GROWTH & EQUITY SPECIAL
INCOME INCOME GROWTH EQUITY
- ------------ ------------ ------------ ------------
$ 18,966,219 $ 1,333,425 $ 105,785 $ 607,963
(3,691,850) (3,271,268) (3,498,589) (4,329,355)
(13,139,464) (1,128,400) 15,245,006 4,737,078
- ------------ ------------ ------------ ------------
2,134,905 (3,066,243) 11,852,202 1,015,686
- ------------ ------------ ------------ ------------
672,360,914 138,102,752 256,748,572 320,045,388
(85,801,721) (40,453,209) (119,782,944) (103,389,209)
- ------------ ------------ ------------ ------------
586,559,193 97,649,543 136,965,628 216,656,179
- ------------ ------------ ------------ ------------
588,694,098 94,583,300 148,817,830 217,671,865
-- -- -- --
- ------------ ------------ ------------ ------------
$588,694,098 $ 94,583,300 $148,817,830 $217,671,865
- ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------
15
<PAGE>
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ------------ ------------ ----------
<C> <S> <C> <C>
COMMERCIAL PAPER
$ 1,000,000 American Express Credit Corp, 5.60%, Due 02/02/96.... $ 994,711
1,000,000 American Express Credit Corp, 5.45%, Due 03/26/96.... 986,829
800,000 Associates Corp of North America, 5.71%, Due
01/22/96............................................. 797,081
2,000,000 Avco Financial Services Canada, 5.76%, Due 01/05/96.. 1,998,080
4,000,000 Avco Financial Services Canada, 5.60%, Due 03/06/96.. 3,958,311
5,000,000 Banco Real SA, 5.62%, Due 04/15/96................... 4,916,481
2,000,000 Bank of New York, 5.83%, Due 01/22/96................ 1,992,551
1,500,000 Bell South Telecom, 5.75%, Due 01/09/96.............. 1,497,605
3,500,000 CIT Group Holdings Inc, 5.80%, Due 01/31/96.......... 3,481,956
3,400,000 CIT Group Holdings Inc, 5.70%, Due 02/09/96.......... 3,377,928
2,000,000 Canadian Imperial Bank, 5.60%, Due 02/20/96.......... 1,983,822
5,000,000 Chevron UK Inc, 5.78%, Due 01/26/96.................. 4,978,325
5,000,000 Colonial Pipeline Company, 5.70%, Due 01/26/96....... 4,978,625
700,000 Colonial Pipeline Company, 5.67%, Due 02/16/96....... 694,708
700,000 Colonial Pipeline Company, 5.62%, Due 02/28/96....... 693,443
6,000,000 Commercial Credit Company, 5.76%, Due 01/16/96....... 5,983,680
3,900,000 Consolidation Coal Company, 5.70%, Due 01/12/96...... 3,891,973
1,300,000 Consolidation Coal Company, 5.79%, Due 01/08/96...... 1,298,118
1,900,000 Cooperative Finance Corp, 5.63%, Due 02/27/96........ 1,882,469
2,100,000 Cooperative Finance Corp, 5.50%, Due 02/27/96........ 2,081,071
4,300,000 Copley Financing Corporation, 5.75%, Due 01/24/96.... 4,282,830
3,092,000 Enterprise Funding Corporation, 5.78%, Due 01/10/96.. 3,086,539
3,000,000 Enterprise Funding Corporation, 5.78%, Due 01/12/96.. 2,993,738
1,000,000 Ford Motor Credit Corporation, 5.75%, Due 01/18/96... 996,965
2,400,000 Ford Motor Credit Corporation, 5.75%, Due 01/18/96... 2,392,716
700,000 Ford Motor Credit Corporation, 5.77%, Due 01/05/96... 699,327
3,200,000 General Electric Capital Corp, 5.75%, Due 01/19/96... 3,189,778
6,000,000 General Motors Acceptance Corp, 5.70%, Due 01/09/96.. 5,990,500
1,100,000 Household Finance Corp, 5.75%, Due 01/12/96.......... 1,097,716
200,000 Household Finance Corp, 5.77%, Due 01/26/96.......... 199,135
1,000,000 Household Finance Corp, 5.71%, Due 01/29/96.......... 995,242
4,000,000 Household Finance Corp--Canada, 5.75%, Due 01/03/96.. 3,997,444
2,800,000 JHM Funding Inc, 5.75%, Due 01/11/96................. 2,794,633
4,000,000 JHM Funding Inc, 5.73%, Due 01/23/96................. 3,984,720
5,000,000 Merrill Lynch and Company Inc, 5.75%, Due 01/24/96... 4,980,035
925,000 Midwest Funding Corp, 5.83%, Due 07/01/22 (a)........ 929,298
2,800,000 Morgan JP & Company, 5.77%, Due 01/08/96............. 2,795,961
5,000,000 National Westminster Bank Plc, 5.73%, Due 01/08/96... 4,992,837
3,600,000 Norwest Corp, 5.72%, Due 01/26/96.................... 3,584,556
6,000,000 Olympic, 5.825%, Due 12/15/96........................ 6,022,981
1,100,000 PHH Corp, 5.74%, Due 01/19/96........................ 1,096,492
1,200,000 PHH Corp, 5.75%, Due 01/23/96........................ 1,195,400
500,000 Rockwell International Corp, 5.70%, Due 01/26/96..... 497,863
1,000,000 Royal Bank of Canada, 5.70%, Due 01/29/96............ 995,250
</TABLE>
See notes to financial statements.
16
<PAGE>
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ------------ ------------ ----------
COMMERCIAL PAPER--(CONTINUED)
<CAPTION>
<C> <S> <C> <C>
$ 6,000,000 Seagram Joseph and Sons Inc, 5.70%, Due 01/18/96..... $ 5,981,950
500,000 Sears Roebuck Acceptance Corp, 5.70%, Due 01/16/96... 498,654
700,000 Sears Roebuck Acceptance Corp, 5.70%, Due 01/29/96... 696,676
3,200,000 Sears Roebuck Acceptance Corp, 5.70%, Due 02/02/96... 3,182,773
2,605,000 Toronto Dominion Bank, 5.68%, Due 01/08/96........... 2,601,301
400,000 Toronto Dominion Bank, 5.97%, Due 01/08/96........... 399,403
6,000,000 Transamerica Commercial Finance--Canada, 5.77%, Due
01/04/96............................................. 5,995,191
5,000,000 Wachovia Bank of N. Carolina, 5.75%, Due 01/11/96.... 5,031,943
------------
Total Commercial Paper (Cost $140,647,614)....... 140,647,614 99.30%
------------ ----------
BANKERS ACCEPTANCES
1,000,000 Republic National Bank New York NY, 5.53%,
Due 02/01/96 (cost $994,931)....................... 994,931 0.70%
------------ ----------
Total Securities (cost $141,642,545)................. 141,642,545 100.00%
------------ ----------
REPURCHASE AGREEMENT
56,630 Repurchase Agreement with Morgan Stanley,
dated 12/29/95, 5.65%, proceeds at maturity
$56,665, due 01/02/96. (Collateralized by US
Treasury Note, 7.25%, due 08/15/04 with a market
value of $57,874) (cost $56,639)................... 56,639 .04%
------------ ----------
Total Investments (cost $141,699,184)................ $141,699,184 100.04%
Liabilities Less Other Assets........................ (60,936) (.04)
------------ ----------
Net Assets........................................... $141,638,248 100.00%
------------ ----------
------------ ----------
</TABLE>
- ---------
<TABLE>
<S> <C>
(a) This interest rate is subject to change periodically based on the greater of the 30 or
90 day Federal composite rate. This instrument resets on a weekly basis. The rate shown
was in effect as of December 31, 1995.
</TABLE>
See notes to financial statements.
17
<PAGE>
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ------------ ------------ -----------
<C> <S> <C> <C>
CORPORATE BONDS AND NOTES
AUTO
$ 655,159 Chrysler Financial Corp 8.65% Due 10/15/96.............. $ 656,640
2,863,011 Ford Motor Company 6.27% Due 01/02/00................... 2,863,808
1,000,000 Ford Motor Credit 7.15% Due 01/26/00.................... 1,045,390
1,010,792 General Motors Acceptance Corp, Grantor Trust 1995-A
7.15% Due 03/15/00.................................... 1,029,401
------------
Total Auto.......................................... 5,595,239 3.24%
------------ -----------
BANKING
1,000,000 Banque National of Paris 9.875% Due 05/25/98............ 1,081,561
5,000,000 Discover Card Master Trust I 93-2A 5.40% Due 11/16/01... 4,989,646
1,000,000 European Investment Bank 6.60% Due 05/15/97............. 1,017,390
3,000,000 First Hawaiian Bank Medium Term Note 7.50%
Due 11/20/96.......................................... 3,038,605
3,523,095 Fleet Finance 1191-A 8.45% Due 04/15/06................. 3,630,089
2,000,000 Korean Development Bank 8.90% Due 03/12/96.............. 2,012,155
3,000,000 Korean Development Bank 7.73% Due 05/05/97.............. 3,072,088
98,730 Rochester Community Savings Bank Grantor Trust 1991-B
6.70% Due 04/15/97.................................... 98,792
391,458 Security Pacific Home Equity Loan 1991-2 8.10%
Due 06/15/20.......................................... 407,277
295,531 Shawmut REMIC Trust 6.40% Due 09/15/96.................. 294,879
2,887,902 Western Finance Grantor Trust 4.60% Due 04/01/99........ 2,859,339
4,000,000 Western Finance Grantor Trust 5.875% Due 03/01/02....... 4,021,237
------------
Total Banking....................................... 26,523,058 15.37%
------------ -----------
BUSINESS MACHINES
3,408,769 IBM Credit Receivable Lease Asset Master Trust 93-1A
4.55% Due 11/15/00.................................... 3,382,488
1,537,529 IBM Credit Receivable Lease Asset Master Trust 6.55%
Due 07/16/01.......................................... 1,567,403
------------
Total Business Machines............................. 4,949,891 2.87%
------------ -----------
CONSTRUCTION
3,655,000 Case Equipment Loan Trust 1194-C A2, 8.10%
Due 06/15/01.......................................... 3,814,575 2.21%
------------ -----------
CREDIT CARDS
2,540,000 First Chicago Master Trust 6.25% Due 08/15/99........... 2.567,888
1,000,000 Household Affinity Credit Card Master Trust 7.00%
Due 12/15/99.......................................... 1,026,650
1,000,000 Maryland Bank of North America Master Credit Card
Trust 1993-3A 5.40% Due 09/15/00...................... 996,190
6,000,000 National Credit Card Trust 1989 9.45% Due 12/31/97...... 6,094,735
5,000,000 Peoples' Bank Credit Card Trust Series 1993-1 4.80%
Due 12/15/99.......................................... 4,986,395
7,000,000 Private Label Credit Card Master Trust 7.15%
Due 06/20/01.......................................... 7,101,074
------------
Total Credit Cards.................................. 22,772,932 13.20%
------------ -----------
</TABLE>
See notes to financial statements.
18
<PAGE>
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ------------ ------------ -----------
<C> <S> <C> <C>
FINANCE
$ 1,250,000 Associates Corp of North America 8.89% Due 04/12/98..... $ 1,337,287
2,000,000 Associates Corp of North America 6.46% Due 09/18/00..... 2,047,959
4,000,000 Associates Corp of North America 5.99% Due 12/15/00..... 4,017,317
5,000,000 Carco 1994-3 8.125% Due 10/15/99........................ 5,209,375
1,000,000 British Gas Finance Inc. 8.75% Due 09/15/98............. 1,063,288
1,774,000 General Electric Capital Corp 9.375% Due 06/08/96....... 1,800,610
5,000,000 Lehman Brothers Inc. 7.625% Due 08/01/98................ 5,191,900
725,000 Lehman Medium Term Note 6.08% Due 07/08/98.............. 723,978
595,696 Merrill Lynch Mortgage Investors 10.10% Due 11/15/07.... 647,730
1,045,443 Merrill Lynch Mortgage Investors 10.35% Due 05/15/09.... 1,185,407
645,941 Merrill Lynch Mortgage Investors 9.40% Due 09/15/09..... 715,309
1,560,647 Merrill Lynch Mortgage Investors 9.00% Due 07/15/11..... 1,650,898
4,000,000 Navistar Finance 6.55% Due 11/20/01..................... 4,054,956
1,000,000 Norwest Financial 6.00% Due 08/15/97.................... 1,006,692
3,595,252 Resolution Trust Corp. 7.00% Due 02/15/04............... 3,612,487
2,347,954 Resolution Trust Corp. 6.77% Due 07/25/25............... 2,390,020
1,000,000 Signet Medium Term Note 1993-1A 5.20% Due 02/15/02...... 993,079
5,000,000 Salomon Brothers Medium Term Note 6.42% 01/15/96........ 5,001,740
------------
Total Finance....................................... 42,650,032 24.72%
------------ -----------
HOME EQUITY
74,262 First Interstate of California 8.90% Due 11/15/97....... 74,108 0.04%
------------ -----------
INSURANCE
38,892 Central Life Assurance Company 9.00% Due 11/01/96....... 39,091 0.02%
------------ -----------
MANUFACTURING
853,242 Chemical Financial Acceptance Corp. 90-1 9.40%
Due 03/17/97.......................................... 861,544
3,075,914 Chemical Financial Acceptance Corp. 9.25% Due 05/15/98 3,267,080
------------
Total Manufacturing................................. 4,128,624 2.39%
------------ -----------
REAL ESTATE
913,992 Daiwa Home Equity Loans 7.875% Due 11/25/19............. 924,658
4,295,583 Travelers Mortgage 12.00% Due 03/01/14.................. 4,822,604
103,337 US Home Equity Loan 9.25% Due 01/15/21.................. 103,124
789,634 US Home Equity Loan 8.50% Due 04/15/21.................. 810,329
------------
Total Real Estate................................... 6,660,715 3.86%
------------ -----------
RETAIL
2,750,000 Sears Credit Account 5.90% Due 11/16/98................. 2,756,295 1.60%
------------ -----------
SECURITY & COMMODITY BROKERS/DEALERS
6,250,000 Bear Stearns 7.625% Due 09/15/99........................ 6,602,406
5,000,000 Morgan Stanley 7.32% Due 01/15/97....................... 5,085,775
------------
Total Security & Commodity Brokers/Dealers.......... 11,688,181 6.78%
------------ -----------
Total Corporate Bonds and Notes (cost
$131,817,332)........................................... 131,652,741 76.31%
------------ -----------
FOREIGN GOVERNMENT DEBT
1,000,000 Kingdom of Denmark 7.75% Due 12/15/96................... 1,021,555
1,379,151 Pemex Exp Grantor Trust 7.66% Due 08/15/01.............. 1,447,055
7,000,000 Province of Ontario 7.75% Due 06/04/02.................. 7,681,233
5,000,000 Province of Quebec 9.125% Due 08/22/01.................. 5,665,625
------------
Total Foreign Government Debt (cost $15,265,413).... 15,815,468 9.17%
------------ -----------
</TABLE>
See notes to financial statements.
19
<PAGE>
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ------------ ------------ -----------
<C> <S> <C> <C>
U.S. GOVERNMENT SECURITY
$ 4,250,000 Midstate Trust II A3 9.35% Due 04/01/98
(cost $4,339,597)..................................... $ 4,555,745 2.64%
------------ -----------
U.S. GOVERNMENT AGENCY
17,148 Federal Home Loan Mortgage Corp. 5.25% Due 07/01/97..... 15,670
3,202,226 Federal Home Loan Mortgage Corp. 9.00% Due 10/01/05..... 3,328,326
847,965 Federal Home Loan Mortgage Corp. REMIC Series MH-1
10.15% Due 04/15/06................................... 867,408
1,474,068 Federal Home Loan Mortgage Corp. 7.50% Due 03/01/08..... 1,504,654
585,098 Federal Home Loan Mortgage Corp. 6.50% Due 03/01/13..... 582,494
908,800 Federal Home Loan Mortgage Corp. 7.00% Due 01/01/18..... 919,714
1,779,984 Federal National Mortgage Association 8.00%
Due 07/25/97.......................................... 1,805,756
855,524 Federal National Mortgage Association 6.75%
Due 02/01/03.......................................... 856,267
418,353 Federal National Mortgage Association 7.00%
Due 04/01/04.......................................... 421,210
1,200,000 Guaranteed Export Certificates 4.61% Due 09/01/98....... 1,183,103
2,873,555 Guaranteed Export Certificates 4.813% Due 12/15/98...... 2,864,544
------------
Total U.S. Government Agency (cost $13,346,594)..... 14,349,146 8.32%
------------ -----------
Total Securities (cost $164,768,936).................... 166,373,100 96.43%
------------ -----------
REPURCHASE AGREEMENT
4,459,231 Repurchase Agreement with Morgan Stanley, dated
12/29/95, 5.65%, proceeds at maturity $4,461,992, due
01/02/96 (Collateralized by US Treasury Note, 7.25%,
due 08/15/04, with a market value of $4,557,181) (cost
$4,459,931)............................................. 4,459,931 2.59%
------------ -----------
Total Investments (cost $169,228,867)................... 170,833,081 99.02%
Other Assets Less Liabilities........................... 1,693,072 .98%
------------ -----------
Net Assets.............................................. $172,526,103 100.00%
------------ -----------
------------ -----------
The aggregate cost of securities for federal income tax purposes at December 31, 1995
is $169,228,867.
The following amount is based on costs for federal income tax purposes:
Gross unrealized appreciation........................... $ 2,205,913
Gross unrealized depreciation........................... (601,749)
------------
Net unrealized appreciation............................. $ 1,604,164
------------
------------
</TABLE>
See notes to financial statements.
20
<PAGE>
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
BANK NOTES
$4,000,000 Republic New York Securities Corp 6.15%
Due 2/12/96 (d)(g) (cost $4,000,636).................. $ 4,000,647 4.65%
----------- ----------
COMMERCIAL PAPER
4,000,000 Lehman Brothers Holdings, Inc. 4.90%
Due 04/25/96 (d)(g) (cost $4,000,636)................. 4,000,636 4.65%
----------- ----------
TIME DEPOSITS
413,885 First National Bank of Boston, Nassau 4.81%
Due 01/02/96 (d)(g)................................... 413,940
657,365 First Union Bank, Nassau 5.8125%
Due 01/02/96 (d)...................................... 657,470
1,000,000 Harris Bank and Trust, Nassau 5.8125%
Due 01/19/96 (d)...................................... 1,000,159
-----------
Total Time Deposits (cost $2,071,580)............... 2,071,569 2.41%
----------- ----------
SHORT-TERM OBLIGATIONS
100,000 Federal National Mortgage Association 5.57%
Due 01/03/96.......................................... 99,938
200,000 Federal National Mortgage Association 5.67%
Due 01/09/96.......................................... 199,685
2,700,000 Federal National Mortgage Association 5.45%
Due 01/12/96.......................................... 2,694,686
600,000 Federal National Mortgage Association 5.58%
Due 01/25/96.......................................... 597,582
300,000 Federal National Mortgage Association 5.59%
Due 01/29/96.......................................... 298,602
200,000 Federal National Mortgage Association 5.55%
Due 02/16/96.......................................... 198,520
2,300,000 Federal Home Loan Mortgage Corp. 5.57%
Due 01/05/96.......................................... 2,297,865
200,000 Federal Home Loan Mortgage Corp. 5.60%
Due 01/08/96.......................................... 199,720
200,000 Federal Home Loan Mortgage Corp. 5.60%
Due 01/16/96.......................................... 199,471
200,000 Federal Home Loan Mortgage Corp. 5.65%
Due 01/16/96.......................................... 199,466
900,000 Federal Home Loan Mortgage Corp. 5.64%
Due 01/16/96.......................................... 897,603
3,500,000 Federal Home Loan Mortgage Corp. 5.65%
Due 01/16/96.......................................... 3,490,662
300,000 Federal Home Loan Mortgage Corp. 5.55%
Due 01/16/96.......................................... 299,214
3,900,000 Federal Home Loan Mortgage Corp. 5.54%
Due 02/20/96.......................................... 3,868,791
200,000 Federal Home Loan Mortgage Corp. 5.67%
Due 01/22/96.......................................... 199,276
1,500,000 Federal Home Loan Mortgage Corp. 5.65%
Due 01/22/96.......................................... 1,494,585
500,000 Federal Home Loan Mortgage Corp. 5.45%
Due 01/22/96.......................................... 498,259
</TABLE>
See notes to financial statements.
21
<PAGE>
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ---------- ----------- ----------
<S> <C> <C> <C>
$ 500,000 Federal Home Loan Mortgage Corp. 5.55%
Due 01/24/96.......................................... $ 498,073
2,100,000 Federal Home Loan Mortgage Corp. 5.53%
Due 02/26/96.......................................... 2,081,290
-----------
Total Short-term Obligations (cost $20,313,288)..... 20,313,288 23.62%
----------- ----------
U.S. GOVERNMENT SECURITIES
5,000,000 U.S. Treasury Note 5.125%
Due 3/31/96........................................... 4,998,430
7,000,000 U.S. Treasury Note 7.75%
Due 12/31/99 (a)...................................... 7,599,375
5,500,000 U.S. Treasury Note 8.875%
Due 05/15/00.......................................... 6,245,938
6,000,000 U.S. Treasury Note 8.50%
Due 11/15/00.......................................... 6,796,865
2,000,000 U.S. Treasury Note 5.625%
Due 11/30/00(a)....................................... 2,020,000
-----------
Total U.S. Government Securities (cost
$29,473,700)............................................ 27,660,608 32.17%
----------- ----------
U.S. GOVERNMENT AGENCY
2,000,000 Student Loan Mortgage Association 6.52%
Due 09/26/00.......................................... 2,029,798
5,000,000 Federal Home Loan Bank 7.39%
Due 08/22/01.......................................... 5,402,410
3,000,000 Federal Home Loan Mortgage Corp 6.50%
Due 02/15/21.......................................... 3,036,837
5,300,000 Federal Home Loan Mortgage Corp 7.00%
Due 06/15/22.......................................... 5,492,597
1,627,397 Federal Home Loan Mortgage Corp 6.28%
Due 08/25/23 (f)...................................... 1,620,170
2,000,000 Federal Home Loan Mortgage Corp 6.50%
Due 02/15/24 (f)...................................... 2,005,238
2,000,000 Federal National Mortgage Assn 7.00%
Due 01/25/03.......................................... 2,059,658
3,000,000 Federal National Mortgage Assn 6.44%
Due 06/21/05.......................................... 3,120,687
12,481 Government National Mortgage Assn 7.50%
Due 04/15/02.......................................... 12,906
39,284 Government National Mortgage Assn 7.50%
Due 06/15/07.......................................... 40,622
14,393 Government National Mortgage Assn 7.50%
Due 07/15/07.......................................... 14,883
3,802,084 Government National Mortgage Assn 7.50%
Due 08/15/07.......................................... 3,931,592
1,672,796 Government National Mortgage Assn 7.50%
Due 09/15/07.......................................... 1,729,775
240,134 Government National Mortgage Assn 6.50%
Due 09/15/08.......................................... 242,386
1,344,200 Government National Mortgage Assn 6.50%
Due 10/15/08.......................................... 1,356,802
2,100,134 Government National Mortgage Assn 6.50%
Due 11/15/08.......................................... 2,119,822
</TABLE>
See notes to financial statements.
22
<PAGE>
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ---------- ----------- ----------
<C> <S> <C> <C>
$ 415,316 Government National Mortgage Assn 7.00%
Due 11/15/08.......................................... $ 419,210
2,500,000 Tennesee Valley Authority 6.375%
Due 06/15/05.......................................... 2,577,655
-----------
Total U.S. Government Agency (cost $34,332,651)..... 37,213,048 43.27%
----------- ----------
Total Securities (cost $94,192,491)..................... 95,259,796 110.77%
----------- ----------
REPURCHASE AGREEMENT
82,780 Repurchase agreement with Morgan Stanley, dated
12/29/95 5.65%, proceeds at maturity $82,831, due
01/02/96 (Collateralized by US Treasury Note, 7.25%,
Due 08/15/04, with a market value of $84,598) (cost
$82,793)................................................ 82,793 0.10%
----------- ----------
Total Investments (cost $94,275,284).................... $95,342,589 110.87%
Liabilities Less Other Assets........................... (9,350,975) (10.87)%
----------- ----------
Net Assets.............................................. $85,991,614 100.00%
----------- ----------
----------- ----------
The aggregate cost of securities for federal income tax purposes at December 31, 1995 is
$94,275,284.
The following amount is based on costs for federal income tax purposes:
Aggregate gross unrealized appreciation................. $ 1,222,622
Aggregate gross unrealized depreciation................. (155,317)
-----------
Net unrealized appreciation............................. $ 1,067,305
-----------
-----------
</TABLE>
- ------------
<TABLE>
<C> <S>
(a) All or part of this security is on loan.
(d) Collateral for securities on loan.
(f) This interest rate is reset on a monthly basis. The rate shown was in effect as of
December 31, 1995.
(g) This interest rate is reset on a daily basis. The rate shown was in effect as of
December 31, 1995.
</TABLE>
See notes to financial statements.
23
<PAGE>
GOVERNMENT/CORPORATE BOND FUND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ----------- ------------ -------------
<C> <S> <C> <C>
BANK NOTES
$ 4,000,000 Republic New York Securities Corp, 6.15%
Due 02/12/96 (d)(g) (cost $4,000,638)............. $ 4,000,649 1.19%
------------ -------------
TIME DEPOSITS
9,853,197 First National Bank of Boston, Nassau, 4.81%
Due 01/02/96 (d)(g)............................... 9,854,757
1,665,653 First Union Bank, Nassau, 5.8125%
Due 01/02/96 (d).................................. 1,665,919
10,000,000 Fleet Bank, Rhode Island, Cayman, 5.8125%
Due 01/31/96 (d).................................. 10,001,595
------------
Total Time Deposits (cost $21,522,282).......... 21,522,271 6.40%
------------ -------------
COMMERCIAL PAPER
4,000,000 American Express Credit Corp 5.45% Due 03/26/96..... 3,947,317
1,200,000 Associates Corp of North America 5.68%
Due 01/10/96...................................... 1,197,917
1,700,000 Associates Corp of North America 5.71%
Due 01/22/96...................................... 1,693,799
3,500,000 Avco Financial Services Canada 5.76% Due 01/05/96... 3,496,640
2,000,000 Avco Financial Services Canada 5.60% Due 03/06/96... 1,979,156
2,600,000 Avco Financial Services Canada 5.80% Due 01/12/96... 2,594,554
3,000,000 Bank of New York 5.73% Due 01/19/96................. 2,990,450
600,000 Bell South Telecom Inc 5.75% Due 01/09/96........... 599,042
1,900,000 Chevron UK Inc 5.60% Due 03/25/96................... 1,874,582
950,000 Colonial Pipeline Co 5.67% Due 02/16/96............. 942,818
300,000 Colonial Pipeline Co 5.62% Due 02/28/96............. 297,190
1,100,000 Commercial Credit Company 5.72% Due 01/17/96........ 1,096,854
1,100,000 Consolidation Coal Co 5.70% Due 01/12/96............ 1,097,736
1,300,000 Consolidation Coal Co 5.76% Due 01/04/96............ 1,298,960
1,800,000 Copley Financing Corp 5.78% Due 01/02/96............ 1,799,133
5,800,000 Dupont EI De Nemours & Co 5.67% Due 01/26/96........ 5,775,336
2,300,000 Enterprise Funding Corp 5.73% Due 01/26/96.......... 2,290,116
2,000,000 Ford Motor Credit Corp 5.75% Due 01/18/96........... 1,993,930
600,000 Ford Motor Credit Corp 5.77% Due 01/05/96........... 599,423
3,500,000 General Electric Capital Corp 5.63% Due 02/14/96.... 3,474,821
1,050,000 General Motors 5.83% Due 01/26/96................... 1,045,409
2,200,000 Goldman Sachs Group 5.75% Due 01/10/96.............. 2,196,134
1,200,000 Goldman Sachs Group 5.58% Due 01/19/96.............. 1,196,280
1,200,000 JHM Funding Inc 5.75% Due 01/12/96.................. 1,197,508
3,300,000 Merrill Lynch and Co Inc 5.73% Due 01/31/96......... 3,283,192
1,200,000 Cooperative Finance Corp 5.63% Due 02/27/96......... 1,188,928
2,100,000 Cooperative Finance Corp 5.50% Due 02/27/96......... 2,081,071
1,000,000 Norwest Corp 5.72% Due 01/26/96..................... 995,710
2,000,000 PHH Corp 5.68% Due 01/19/96......................... 1,993,689
400,000 PHH Corp 5.75% Due 01/23/96......................... 398,467
100,000 Prudential Funding Corp 5.78% Due 01/12/96.......... 99,791
300,000 Prudential Funding Corp 5.82% Due 01/02/96.......... 299,855
1,000,000 Royal Bank of Canada 5.70% Due 01/29/96............. 995,249
</TABLE>
See notes to financial statements.
24
<PAGE>
GOVERNMENT/CORPORATE BOND FUND PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ----------- ----- -------------
<C> <S> <C> <C>
$ 1,000,000 Seagram Joseph and Sons Inc 5.70% Due 01/18/96...... $ 996,991
300,000 Sears Roebuck Acceptance Corp 5.70% Due 01/16/96.... 299,193
900,000 Sears Roebuck Acceptance Corp 5.70% Due 02/02/96.... 895,155
1,000,000 Transamerica Commercial Finance--Canada 5.77% Due
01/04/96............................................ 999,199
5,000,000 Xerox Credit Corp 5.67% Due 01/19/96................ 4,984,250
1,000,000 Xerox Credit Corp 5.65% Due 02/26/96................ 990,898
------------
Total Commercial Paper
(cost $67,176,743)............................ 67,176,743 19.96%
------------ -------------
SHORT TERM FLOATING RATE CORPORATE NOTE
142,000 Midwest Funding Corp, 5.83%, Due 07/01/22........... 142,660
1,000,000 Olympic, 5.825%, Due 12/15/96....................... 1,003,830
------------
Total Short Term Floating Rate Corporate Note
(cost $1,146,490)............................. 1,146,490 0.34%
------------ -------------
CORPORATE BONDS AND NOTES
AEROSPACE PRODUCTS
4,000,000 BF Goodrich 8.65% Due 04/15/25...................... 4,815,796
5,000,000 Boeing Company 8.625% Due 11/15/31.................. 6,404,210
------------
Total Aerospace Products........................ 11,220,006 3.33%
------------ -------------
BANKING
4,000,000 Bank Of New York 6.50% Due 12/01/03................. 4,074,108
5,000,000 Chase Manhattan Co 8.00% Due 05/01/05............... 5,241,120
5,000,000 Chase Manhattan Co 1995-1 6.00% Due 05/15/00 (f).... 4,997,995
5,000,000 International Bank Recon & Dev, 8.875%
Due 03/01/26...................................... 6,593,765
6,000,000 Swiss Bank Corp--NY 7.50% Due 07/15/25.............. 6,515,088
------------
Total Banking................................... 27,422,076 8.15%
------------ -------------
BEVERAGES
5,000,000 Seagrams (Joseph E.) & Sons 9.65% Due 08/15/18...... 6,742,045 2.00%
------------ -------------
CIGARETTES
5,000,000 American Brands 9.125% Due 03/01/16................. 5,245,220
5,000,000 RJR Nabisco Inc. 8.75% Due 04/15/04................. 5,131,805
------------
Total Cigarettes................................ 10,377,025 3.08%
------------ -------------
CONSUMER GOODS & SERVICES
5,200,000 Proctor & Gamble 9.36% Due 01/01/21................. 6,815,744 2.03%
------------ -------------
ELECTRICAL EQUIPMENT
5,000,000 Legrand 8.50% Due 02/15/25.......................... 5,998,615 1.78%
------------ -------------
FINANCE
5,000,000 Advanta Credit Card 6.12% Due 02/10/01 (f).......... 5,019,695
7,040,000 Discover Card Master Trust 1994--2A, 6.05%
Due 10/16/04 (e).................................. 7,087,654
6,000,000 Dow Capital BV 9.20% Due 06/01/10................... 7,318,182
5,000,000 General Electric Capital Corp 8.50% Due 07/24/08.... 5,978,205
6,000,000 Nationsbank Card Master Trust 6.45%
Due 04/15/03 (a).................................. 6,184,554
</TABLE>
See notes to financial statements.
25
<PAGE>
GOVERNMENT/CORPORATE BOND FUND PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ----------- ------------ -------------
<C> <S> <C> <C>
$ 5,000,000 Paccar Financial Corp 5.52% Due 09/03/96............ $ 4,999,645
3,000,000 Standard Credit Card Master Trust 95-11, 6.00%
Due 11/15/00 (e).................................. 2,995,347
------------
Total Finance................................... 39,583,282 11.76%
------------ -------------
FOREIGN GOVERNMENT
5,000,000 Province of Quebec 7.50% Due 7/15/23................ 5,266,045 1.57%
------------ -------------
HOTELS
5,000,000 Marriott International Inc 7.875% Due 4/15/05....... 5,428,865 1.61%
------------ -------------
INSURANCE
5,000,000 Prudential Insurance 8.10% Due 7/15/15.............. 5,348,445 1.59%
------------ -------------
MEDICAL & OTHER HEALTH SERVICE
5,000,000 Columbia Healthcare 7.50% Due 12/15/23.............. 5,389,690 1.60%
------------ -------------
MOTOR VEHICLES & EQUIPMENT
5,000,000 Ford Holdings 9.375% Due 03/01/20................... 6,392,125
5,000,000 General Motors Acceptance Corp 8.40% Due 10/15/99... 5,352,775
5,000,000 General Motors Acceptance Corp 8.80% Due 03/01/21... 6,267,795
------------
Total Motor Vehicles & Equipment................ 18,012,695 5.35%
------------ -------------
OIL & GAS
5,000,000 Atlantic Richfield 9.00% Due 05/01/31 (a)........... 6,522,885
5,000,000 Occidental Petroleum 10.125% Due 09/15/09........... 6,490,545
4,000,000 Texaco Capital 9.75 Due 03/15/20.................... 5,464,416
------------
Total Oil & Gas................................. 18,477,846 5.49%
------------ -------------
PAPER & FOREST PRODUCTS
7,500,000 Westvaco 10.125% Due 06/01/19....................... 8,842,485 2.63%
------------ -------------
UTILITIES--ELECTRIC
3,000,000 Commonwealth Edison 7.00% Due 07/01/05.............. 3,111,426
10,000,000 Commonwealth Edison 8.125% Due 01/15/07............. 10,316,470
5,000,000 Hydro-Quebec 8.50% Due 12/01/29..................... 5,864,445
5,000,000 Texas Utilities Electric 7.875% Due 04/01/24........ 5,378,405
------------
Total Utilities--Electric....................... 24,670,746 7.33%
------------ -------------
Total Corporate Bonds and Notes
(cost $184,336,220)........................... 199,595,610 59.30%
------------ -------------
U.S. GOVERNMENT SECURITIES
5,000,000 U.S. Treasury Note 5.625% Due 11/30/00 (a).......... 5,050,000
10,000,000 U.S. Treasury Note 7.75% Due 12/31/99 (a)........... 10,856,250
------------
Total U.S. Government Securities
(cost $15,687,254)............................ 15,906,250 4.73%
------------ -------------
U.S. GOVERNMENT AGENCY
4,446,610 Federal Home Loan Mortgage Corp, 6.50%
Due 09/15/07 (f).................................. 4,474,401
5,000,000 Federal Home Loan Mortgage Corp, 6.00%,
Due 12/15/19...................................... 4,948,045
</TABLE>
See notes to financial statements.
26
<PAGE>
GOVERNMENT/CORPORATE BOND FUND PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ----------- ------------ -------------
<C> <S> <C> <C>
$ 4,882,190 Federal Home Loan Mortgage Corp, 6.28%
Due 08/25/23 (f).................................. $ 4,860,509
6,345,486 Federal Home Loan Mortgage Corp, 6.50%
Due 02/15/24 (f).................................. 6,362,105
2,167,448 Federal National Mortgage Association, Strip P/O Due
12/25/18............................................ 2,137,189
2,773,885 Federal National Mortgage Association, Strip P/O
Due 08/25/23...................................... 2,661,014
2,697,297 Federal National Mortgage Association, 7.00%,
Due 12/01/25...................................... 2,718,364
986,958 Federal National Mortgage Association, 7.00%,
Due 10/01/25...................................... 994,668
1,945,480 Federal National Mortgage Association, 7.00%,
Due 08/01/25...................................... 1,960,678
201,418 Federal National Mortgage Association, 7.00%,
Due 09/01/25...................................... 202,992
3,968,852 Federal National Mortgage Association, 7.00%,
Due 11/01/25...................................... 3,999,857
17,187 Government National Mortgage Association, 8.00%, Due
01/01/24............................................ 17,897
23,569 Government National Mortgage Association, 8.00%, Due
03/01/24............................................ 24,541
445,051 Government National Mortgage Association, 8.00%, Due
04/01/24............................................ 463,409
1,517,910 Government National Mortgage Association, 8.00%, Due
06/01/24............................................ 1,580,523
398,824 Government National Mortgage Association, 8.00%, Due
07/01/24............................................ 415,276
579,120 Government National Mortgage Association, 8.00%, Due
08/01/24............................................ 603,009
557,429 Government National Mortgage Association, 8.00%, Due
09/01/24............................................ 580,423
399,700 Government National Mortgage Association, 8.00%, Due
10/01/24............................................ 416,188
403,353 Government National Mortgage Association, 8.00%, Due
02/01/25............................................ 419,991
557,857 Government National Mortgage Association, 8.00%, Due
09/01/25............................................ 580,869
3,000,000 Student Loan Mortgage Association 6.52%
Due 09/26/00...................................... 3,044,697
5,000,000 Student Loan Mortgage Association 4.40%
Due 05/25/04 (a)(f)............................... 5,001,560
------------
Total U.S. Government Agency
(cost $47,935,707)............................ 48,468,205 14.40%
------------ -------------
Total Securities (cost $341,805,334)............ 357,816,218 106.32%
------------ -------------
</TABLE>
See notes to financial statements.
27
<PAGE>
GOVERNMENT/CORPORATE BOND FUND PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ----------- ------------ -------------
<C> <S> <C> <C>
REPURCHASE AGREEMENT
$ 86,902 Repurchase Agreement with Morgan Stanley, dated
12/29/95 5.65%, proceeds at maturity $86,956, due
01/02/96 (Collateralized by US Treasury Note,
7.25%, due 08/15/04, with a market value of
$88,811) (cost $86,916)............................. $ 86,916 0.03%
------------ -------------
Total Investments (cost $341,892,250)............... $357,903,134 106.35%
Liabilities Less Other Assets....................... (21,363,724) (6.35)%
------------ -------------
Net Assets.......................................... $336,539,410 100.00%
------------ -------------
------------ -------------
The aggregate cost of securities for federal income tax purposes at December 31, 1995
is $341,892,250.
The following amount is based on costs for federal income tax purposes:
Gross unrealized appreciation....................... $ 16,047,094
Gross unrealized depreciation....................... (36,210)
------------
Net unrealized appreciation......................... $ 16,010,884
------------
------------
</TABLE>
- ------------
(a) All or part of this security is on loan.
(d) Collateral for securities on loan.
(e) Zero coupon bond.
(f) This interest rate is reset on a monthly basis. The rate shown was in
effect as of December 31, 1995.
(g) This interest rate is reset on a daily basis. The rate shown was in effect
as of December 31, 1995.
See notes to financial statements.
28
<PAGE>
BALANCED FUND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ------------ ---------------- -----------
<S> <C> <C> <C>
BANK NOTES
$ 10,000,000 Republic New York Securities Corp, 6.15%
Due 2/12/96 (d)(g) (cost $10,001,591).......... $ 10,001,619 5.99%
---------------- -----------
TIME DEPOSITS
7,422,703 First National Bank of Boston, Nassau, 4.81%
Due 01/02/96 (d)(g)............................ 7,423,856
2,954,047 First Union Bank, Nassau, 5.8125%
Due 01/02/96 (d)............................... 2,954,517
381,100 Fleet Bank, Massachusetts, Nassau, 5.84375%
Due 01/05/96 (d)............................... 381,160
10,500,000 Fleet Bank, Rhode Island, Cayman, 5.8125%
Due 01/31/96 (d)............................... 10,501,670
4,000,000 Harris Bank and Trust, Nassau, 5.8125%
Due 01/19/96 (d)............................... 4,000,636
----------------
Total Time Deposits (cost $25,261,867)...... 25,261,839 15.12%
---------------- -----------
COMMERCIAL PAPER
2,000,000 Dupont EI De Nemours, 5.69% Due 01/16/96......... 1,994,626
1,500,000 Ford Motor Credit, 5.52% Due 03/01/96............ 1,485,740
10,000,000 Lehman Brothers Holdings, Inc., 4.90%
Due 04/25/96 (d)(g)............................ 10,001,591
----------------
Total Commercial Paper
(cost $13,481,957)........................ 13,481,957 8.07%
---------------- -----------
U.S. GOVERNMENT SECURITIES
6,950,000 U.S. Treasury Note 6.875% Due 03/31/97 (a)....... 7,089,000
7,900,000 U.S. Treasury Note 6.375% Due 07/15/99........... 8,164,144
5,600,000 U.S. Treasury Note 8.50% Due 02/15/00............ 6,244,000
4,525,000 U.S. Treasury Note 7.50% Due 11/15/01............ 4,987,392
9,850,000 U.S. Treasury Note 5.75% Due 08/15/03 (a)........ 9,970,032
16,550,000 U.S. Treasury Note 7.875% Due 11/15/04 (a)....... 19,166,969
6,200,000 U.S. Treasury Note 6.50% Due 05/15/05 (a)........ 6,606,875
----------------
Total U.S. Government Securities
(cost $58,765,441)........................ 62,228,412 37.26%
---------------- -----------
<CAPTION>
SHARES COMMON STOCK
- ------------ ------------
<S> <C> <C> <C>
AIRCRAFT & PARTS
20,100 McDonnell Douglas................................ 1,849,200 1.11%
---------------- -----------
BROADCASTING
22,900 Capital Cities/ABC Inc........................... 2,825,288 1.69%
---------------- -----------
BUSINESS MACHINES
30,100 International Business Machines.................. 2,761,675
43,300 Silicon Graphics (c)............................. 1,190,750
34,600 Texas Instruments................................ 1,790,550
----------------
Total Business Machines..................... 5,742,975 3.44%
---------------- -----------
CHEMICALS & ALLIED PRODUCTS
22,750 Hoechst AG ADR................................... 3,091,554 1.85%
---------------- -----------
</TABLE>
See notes to financial statements.
29
<PAGE>
BALANCED FUND PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ------------ ---------------- -----------
<C> <C> <C>
COMMERCIAL BANKING
39,200 Bankamerica Corp................................. $ 2,538,200
37,700 Citicorp......................................... 2,535,325
39,300 Key Corp (new) (a)............................... 1,424,625
----------------
Total Commercial Banking.................... 6,498,150 3.89%
---------------- -----------
COMMUNICATIONS
27,500 I T T Corp. (new) (c)............................ 1,457,500
23,350 Motorola Inc. ................................... 1,330,950
38,000 Tele Danmark ADR................................. 1,049,750
----------------
Total Communications........................ 3,838,200 2.30%
---------------- -----------
DRUGS
19,550 American Home Products Corp. .................... 1,896,350
71,100 Ciba-Geigy Corp ADR (a).......................... 3,135,894
----------------
Total Drugs................................. 5,032,244 3.01%
---------------- -----------
FOOD AND BEVERAGE
29,350 Pepsico Inc. .................................... 1,639,931
35,800 Philip Morris Companies Inc ..................... 3,239,900
91,300 Sara Lee Corp.................................... 2,910,188
----------------
Total Food and Beverage..................... 7,790,019 4.67%
---------------- -----------
HOTELS
39,700 Carnival Corp. Cl A (a).......................... 967,688
36,600 Circus Circus Enterprises (c).................... 1,020,225
----------------
Total Hotels................................ 1,987,913 1.19%
---------------- -----------
INDUSTRIAL CHEMICALS
23,150 Dow Chemical Company............................. 1,629,181
38,150 E. I. Dupont de Nemours & Co. ................... 2,665,731
----------------
Total Industrial Chemicals.................. 4,294,912 2.57%
---------------- -----------
INDUSTRIAL MACHINERY
43,350 Deere & Co. ..................................... 1,528,088 0.91%
---------------- -----------
INSURANCE
66,350 Allstate Corp. .................................. 2,728,644
26,800 Transamerica Corp................................ 1,953,050
48,500 Travelers Inc. .................................. 3,049,438
----------------
Total Insurance............................. 7,731,132 4.63%
---------------- -----------
MANUFACTURING
23,600 American Standard Companies (c).................. 660,800
94,500 Philips Electronics N.V. ADR..................... 3,390,188
----------------
Total Manufacturing......................... 4,050,988 2.43%
---------------- -----------
MEDICAL & OTHER HEALTH SERVICES
63,600 Abbott Laboratories.............................. 2,655,300
49,300 Tenet Healthcare Corporation..................... 1,022,975
----------------
Total Medical & Other Health Service........ 3,678,275 2.20%
---------------- -----------
</TABLE>
See notes to financial statements.
30
<PAGE>
BALANCED FUND PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ------------ ---------------- -----------
<S> <C> <C> <C>
MISCELLANEOUS
98,300 Canadian Pacific (a)............................. $ 1,781,688
24,700 ITT Industries Inc............................... 592,800
24,700 Unilever ADR (a)................................. 3,476,525
----------------
Total Miscellaneous......................... 5,851,013 3.50%
---------------- -----------
OIL & GAS
29,850 Amoco Corp. ..................................... 2,145,468
21,950 Atlantic Richfield Co. .......................... 2,430,962
19,850 Mobil Corp. ..................................... 2,223,200
----------------
Total Oil & Gas............................. 6,799,630 4.07%
---------------- -----------
PAPER & FOREST PRODUCTS
76,400 International Paper Co. ......................... 2,893,650
51,800 Weyerhaeuser Company............................. 2,240,350
----------------
Total Paper & Forest Products............... 5,134,000 3.07%
---------------- -----------
PERSONAL COMPUTERS
34,300 Compaq Computers (c)............................. 1,646,400 0.99%
---------------- -----------
PRINTING & PUBLISHING
46,450 Dun & Bradstreet Corp. .......................... 3,007,637
160,100 The News Corporation ADR (a)..................... 3,081,925
74,600 Time Warner Inc. ................................ 2,825,475
----------------
Total Printing & Publishing................. 8,915,037 5.34%
---------------- -----------
RAILROAD
31,450 Burlington Northern Santa Fe (a)................. 2,453,100
33,950 Union Pacific Corp (a)........................... 2,240,700
----------------
Total Railroad.............................. 4,693,800 2.81%
---------------- -----------
RETAIL SALES
15,600 Circuit City Stores Inc. ........................ 430,950
61,100 Federated Department Stores (a)(c)............... 1,680,250
----------------
Total Retail Sales.......................... 2,111,200 1.26%
---------------- -----------
TOYS
28,268 Mattel........................................... 869,240 0.52%
---------------- -----------
WASTE MANAGEMENT
89,300 WMX Technologies................................. 2,667,837 1.60%
---------------- -----------
Total Common Stock (cost $87,770,805)....... 98,627,095 59.05%
---------------- -----------
PREFERRED STOCK
-------------------------------------------------
CIGARETTES
451,400 RJR Nabisco Holdings CV, 9.25%, Series C
(cost $2,876,812).............................. 2,877,675 1.72%
---------------- -----------
Total Securities (cost $198,158,473)........ 212,478,597 127.21%
---------------- -----------
</TABLE>
See notes to financial statements.
31
<PAGE>
BALANCED FUND PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ------------ ---------------- -----------
<S> <C> <C> <C>
REPURCHASE AGREEMENT
$ 5,701,274 Repurchase Agreement with Morgan Stanley dated
12/29/95 5.65%, proceeds at maturity
$5,704,853, due 01/02/96 (Collateralized by
US Treasury Note, 7.25%, due 08/15/04 with a
market value of $5,826,506)
(cost $5,702,169).............................. $ 5,702,169 3.41%
---------------- -----------
Total Investments (cost $203,860,642)............ $ 218,180,766 130.62%
Liabilities Less Other Assets.................... (51,147,811) (30.62)%
---------------- -----------
Net Assets....................................... $ 167,032,955 100.00%
---------------- -----------
---------------- -----------
The aggregate cost of securities for federal income tax purposes at December 31, 1995
is $203,942,187. The following amount is based on costs for federal income tax purposes:
Gross unrealized appreciation.................... $ 15,170,091
Gross unrealized depreciation.................... (931,512)
----------------
Net unrealized appreciation...................... $ 14,238,579
----------------
----------------
</TABLE>
- ---------------
(a) All or part of this security is on loan.
(c) Non-income producing security.
(d) Collateral for securities on loan.
(g) This interest rate resets on a daily basis. The rate shown was in effect
as of December 31, 1995.
See notes to financial statements.
32
<PAGE>
EQUITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ------------ ------------ ----------
<C> <S> <C> <C>
TIME DEPOSITS
$ 29,950,949 First National Bank of Boston, Nassau, 4.81%
Due 01/02/96 (d)(g)................................ $ 29,955,665
2,668,951 First Union Bank, Nassau, 5.8125%,
Due 01/02/96 (d)................................... 2,669,371
3,270,100 Fleet Bank, Massachusetts, Nassau, 5.84375%,
Due 01/05/96 (d)................................... 3,270,615
------------
Total Time Deposits (cost $35,895,651)........... 35,895,651 4.70%
------------ ----------
COMMERCIAL PAPER
1,000,000 Avco Financial Services Canada, 5.76%, Due 01/05/96.. 999,040
2,000,000 Avco Financial Services Canada, 5.83%, Due 01/19/96.. 1,993,522
1,600,000 Bank One Corp, 5.72%, Due 01/12/96................... 1,596,695
6,000,000 Bank of New York, 5.73%, Due 01/19/96................ 5,980,900
100,000 Bank of New York, 5.85%, Due 01/19/96................ 99,675
2,000,000 Barclay's Bank PLC, 5.75%, Due 01/17/96.............. 2,012,778
1,500,000 Barclay's Bank PLC, 5.77%, Due 01/12/96.............. 1,496,875
1,200,000 British Columbia (Province), 5.72%, Due 01/12/96..... 1,197,522
2,400,000 British Columbia (Province), 5.67%, Due 02/01/96..... 2,387,526
3,000,000 Canadian Imperial Bank, 5.60%, Due 02/20/96.......... 2,975,733
800,000 Chevron UK Inc, 5.60%, Due 03/25/96.................. 789,298
2,600,000 Chevron Corp, 5.75%, Due 01/12/96.................... 2,594,601
1,750,000 Colonial Pipeline Co, 5.62%, Due 02/28/96............ 1,733,608
5,200,000 Commercial Credit Company, 5.72%, Due 01/17/96....... 5,185,128
1,000,000 Consolidation Coal Co, 5.70%, Due 01/12/96........... 997,941
7,300,000 Copley Financing Corporation, 5.82%, Due 01/19/96.... 7,276,397
700,000 Copley Financing Corporation, 5.75%, Due 01/24/96.... 697,205
1,482,000 Copley Financing Corporation, 5.78%, Due 01/02/96.... 1,481,286
2,300,000 Dupont EI De Nemours & Co, 5.67%, Due 01/26/96....... 2,290,219
2,700,000 Enterprise Funding Corp, 5.78%, Due 01/12/96......... 2,694,365
1,000,000 Enterprise Funding Corp, 5.73%, Due 01/26/96......... 995,702
2,000,000 Ford Motor Credit Corp, 5.75%, Due 01/18/96.......... 1,993,931
600,000 Ford Motor Credit Corp, 5.75%, Due 01/18/96.......... 598,179
1,600,000 Ford Motor Credit Corp, 5.92%, Due 01/02/96.......... 1,599,210
1,300,000 Ford Motor Credit Corp, 5.77%, Due 01/05/96.......... 1,298,750
200,000 General Motors Corp, 5.83%, Due 01/26/96............. 199,125
1,200,000 Goldman Sachs Group, 5.75%, Due 01/10/96............. 1,197,891
2,500,000 Goldman Sachs Group, 5.68%, Due 01/12/96............. 2,494,871
1,000,000 Household Finance Corp--Canada, 5.77%,
Due 01/26/96....................................... 995,672
1,000,000 Household Finance Corp--Canada, 5.75%,
Due 01/03/96....................................... 999,361
1,000,000 JHM Funding Inc, 5.75%, Due 01/11/96................. 998,083
1,400,000 JHM Funding Inc, 5.75%, Due 01/12/96................. 1,397,093
2,000,000 JHM Funding Inc, 5.73%, Due 01/23/96................. 1,992,360
5,000,000 Lehman Brothers Holdings, Inc, 4.90%,
Due 04/25/96 (d)(g)................................ 5,000,787
1,000,000 Merrill Lynch and Co Inc, 5.73%, Due 01/31/96........ 994,907
</TABLE>
See notes to financial statements.
33
<PAGE>
EQUITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ------------ ------------ ----------
COMMERCIAL PAPER--(CONTINUED)
<C> <S> <C> <C>
$ 4,200,000 JP Morgan & Co, 5.77%, Due 01/08/96.................. $ 4,193,942
2,600,000 PHH Corp, 5.68%, Due 01/19/96........................ 2,591,795
720,000 Paccar Financial Group, 5.63%, Due 02/27/96.......... 713,357
800,000 Prudential Funding Corp, 5.78%, Due 01/12/96......... 798,330
1,900,000 Prudential Funding Corp, 5.82%, Due 01/02/96......... 1,899,079
2,700,000 Prudential Insurance Corp, 5.75%, Due 01/16/96....... 2,692,669
5,000,000 Royal Bank of Canada, 5.70%, Due 01/29/96............ 4,976,250
1,600,000 Sears Roebuck Acceptance Corp, 5.70%, Due 02/02/96... 1,591,387
5,300,000 Toronto Dominion Bank, 5.68%, Due 01/08/96........... 5,292,474
995,000 Toronto Dominion Bank, 5.68%, Due 01/08/96........... 993,587
3,900,000 Transamerica Corp, 5.75%, Due 01/12/96............... 3,891,902
3,500,000 Transamerica Finance Group Inc, 5.71%, Due 01/25/96.. 3,485,567
5,000,000 Xerox Corp, 5.67%, Due 01/19/96...................... 4,984,251
------------
Total Commercial Paper (cost $107,340,826)....... 107,340,826 14.04%
------------ ----------
BANKERS ACCEPTANCES
2,000,000 Republic National Bank New York, 5.53%
Due 02/01/96 (cost $1,989,861)..................... 1,989,861 0.26%
------------ ----------
CONVERTIBLE BOND
----------------
COMMUNICATIONS EQUIPMENT
2,000,000 Motorola Inc., Lyon, Zero Coupon, Due 09/07/09 (e)
(cost $1,710,000).................................... 2,100,000 0.27%
------------ ----------
<CAPTION>
SHARES COMMON STOCK
- ------------ ------------
<C> <S> <C> <C>
AIRCRAFT & PARTS
185,000 General Electric..................................... 13,320,000
120,000 Northrop Grumman Corp................................ 7,680,000
100,000 Textron Inc.......................................... 6,750,000
90,000 United Technologies.................................. 8,538,750
------------
Total Aircraft & Parts........................... 36,288,750 4.75%
------------ ----------
AUTOMOBILE MAKER
85,000 Chrysler Corp........................................ 4,706,875 0.62%
------------ ----------
CHEMICALS & ALLIED PRODUCTS
70,000 Monsanto Company..................................... 8,575,000
30,000 Olin Corp............................................ 2,227,500
------------
Total Chemicals & Allied Products................ 10,802,500 1.41%
------------ ----------
CIGARETTES
110,000 American Brands Inc.................................. 4,908,750 0.64%
------------ ----------
COMMERCIAL BANKING
120,000 Banc One Corp........................................ 4,530,000
100,000 BankAmerica Corp..................................... 6,475,000
140,000 Bank of New York (a)................................. 6,825,000
70,000 Chase Manhattan Corp................................. 4,243,750
70,000 Chemical Banking Corp................................ 4,112,500
55,000 First Interstate Bancorp............................. 7,507,500
</TABLE>
See notes to financial statements.
34
<PAGE>
EQUITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ------------ ------------ ----------
<C> <S> <C> <C>
COMMERCIAL BANKING--(CONTINUED)
80,000 First Union Corp..................................... 4,450,000
50,000 NationsBank Corporation.............................. $ 3,481,250
------------
Total Commercial Banking......................... 41,625,000 5.45%
------------ ----------
COMMUNICATIONS EQUIPMENT
170,000 GTE Corp............................................. 7,480,000 0.98%
------------ ----------
CONSTRUCTION
80,000 Halliburton Company.................................. 4,050,000 0.53%
------------ ----------
COSMETICS
84,000 Avon Products Inc.................................... 6,331,500 0.83%
------------ ----------
DRUGS
90,000 American Home Products............................... 8,730,000
80,000 Bristol-Myers Squibb Company......................... 6,870,000
140,000 Grace W.R. & Company................................. 8,277,500
150,000 Merck & Company Inc.................................. 9,862,500
150,000 Pfizer Inc........................................... 9,450,000
180,000 Schering-Plough Corp................................. 9,855,000
140,000 Smithkline Beecham ADR (a)........................... 7,770,000
150,000 Pharmacia & Upjohn Inc............................... 5,812,500
80,000 Warner Lambert Company............................... 7,770,000
------------
Total Drugs...................................... 74,397,500 9.73%
------------ ----------
ELECTRICAL EQUIPMENT
60,000 AMP Inc.............................................. 2,302,500
110,000 Emerson Electric..................................... 8,992,500
150,000 General Signal....................................... 4,856,250
20,000 Hubbell Inc Cl B..................................... 1,315,000
100,000 Thomas & Betts Corp. (a)............................. 7,375,000
------------
Total Electrical Equipment....................... 24,841,250 3.25%
------------ ----------
FINANCE
100,000 GATX Corporation..................................... 4,862,500 0.64%
------------ ----------
FINANCIAL SERVICES
160,000 American Express Company............................. 6,620,000 0.87%
------------ ----------
FOOD AND BEVERAGE
120,000 Philip Morris Companies Inc.......................... 10,860,000
15,000 General Mills Co..................................... 866,250
------------
Total Food and Beverage.......................... 11,726,250 1.53%
------------ ----------
INDUSTRIAL CHEMICALS
30,000 Dow Chemical Company................................. 2,111,250
100,000 DuPont E.I. de Nemours & Co.......................... 6,987,500
100,000 Witco Corporation.................................... 2,925,000
------------
Total Industrial Chemicals....................... 12,023,750 1.57%
------------ ----------
INDUSTRIAL MACHINERY
140,000 Carpenter Technology................................. 5,757,500
</TABLE>
See notes to financial statements.
35
<PAGE>
EQUITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ------------ ------------ ----------
<C> <S> <C> <C>
INDUSTRIAL MACHINERY--(CONTINUED)
225,000 Deere & Co........................................... 7,931,250
160,000 Goulds Pumps......................................... $ 4,000,000
110,000 Harsco Corp.......................................... 6,393,750
------------
Total Industrial Machinery....................... 24,082,500 3.15%
------------ ----------
INSURANCE
130,000 Aetna Life & Casualty................................ 9,002,500
110,000 Allstate Corp........................................ 4,523,750
90,000 CIGNA Corp........................................... 9,292,500
150,000 Lincoln National Corp................................ 8,062,500
------------
Total Insurance.................................. 30,881,250 4.04%
------------ ----------
MACHINERY AND INDUSTRIAL EQUIPMENT
120,000 Cooper Industries Inc................................ 4,410,000 0.58%
------------ ----------
MEDICAL & OTHER HEALTH SERVICE
160,000 Baxter International, Inc............................ 6,700,000
130,000 U.S. Healthcare Inc. ................................ 6,045,000
Total Medical & Other Health Service............. 12,745,000 1.67%
------------ ----------
METAL MINING
180,000 Freeport McMoran Copper&Gold (a)..................... 5,040,000 0.66%
------------ ----------
MOTOR VEHICLES & EQUIPMENT
270,000 Dana Corp............................................ 7,897,500
200,000 Ford Motor........................................... 5,800,000
------------
Total Motor Vehicles & Equipment................. 13,697,500 1.79%
------------ ----------
OFFICE & BUSINESS EQUIPMENT
100,000 Harris Corp Inc...................................... 5,462,500
120,000 Honeywell Inc........................................ 5,835,000
100,000 Pitney Bowes Inc..................................... 4,700,000
85,000 Xerox Corp........................................... 11,645,000
------------
Total Office & Business Equipment................ 27,642,500 3.62%
------------ ----------
OIL & GAS
80,000 Amoco Corp........................................... 5,750,000
50,000 Atlantic Richfield................................... 5,537,500
50,000 British Petroleum PLC ADR............................ 5,106,281
130,000 Chevron Corp......................................... 6,825,000
90,000 Exxon Corp........................................... 7,211,250
100,000 Occidental Petroleum................................. 2,137,500
60,000 Royal Dutch Petroleum--NY Reg ADR (a)................ 8,467,500
150,000 Tenneco Inc.......................................... 7,443,750
85,000 Texaco Inc........................................... 6,672,500
------------
Total Oil & Gas.................................. 55,151,281 7.22%
------------ ----------
OIL AND GAS FIELD SERVICES
140,000 Dresser Industries Inc............................... 3,412,500
100,000 McDermott International Inc.......................... 2,200,000
</TABLE>
See notes to financial statements.
36
<PAGE>
EQUITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ------------ ------------ ----------
<C> <S> <C> <C>
OIL AND GAS FIELD SERVICES--(CONTINUED)
70,000 Mobil Corp........................................... $ 7,840,000
190,000 Williams Companies Inc............................... 8,336,250
------------
Total Oil And Gas Field Services................. 21,788,750 2.85%
------------ ----------
PAPER & FOREST PRODUCTS
130,000 Federal Paper Board Inc.............................. 6,743,750
110,000 Minnesota Mining & Manufacturing..................... 7,287,500
80,000 Union Camp Corp. (a)................................. 3,810,000
140,000 Weyerhaeuser Company................................. 6,055,000
------------
Total Paper & Forrest Products................... 23,896,250 3.13%
------------ ----------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES
130,000 Eastman Kodak Company................................ 8,710,000 1.14%
------------ ----------
PRINTING & PUBLISHING
120,000 Dun & Bradstreet Corp................................ 7,770,000
120,000 McGraw-Hill Inc...................................... 10,455,000
125,000 Readers Digest Association Inc....................... 6,406,250
------------
Total Printing & Publishing...................... 24,631,250 3.22%
------------ ----------
RAILROADS
85,000 Conrail Inc.......................................... 5,950,000
110,000 Norfolk Southern Corp................................ 8,731,250
------------
Total Railroads.................................. 14,681,250 1.92%
------------ ----------
REAL ESTATE/INVESTMENT TRUSTS
59,000 Avalon Properties Inc................................ 1,268,500
70,000 Bay Apartment Communities............................ 1,697,500
65,000 Developers Diversified Realty Corp................... 1,950,000
60,000 Equity Residential Properties........................ 1,837,500
64,000 Felcor Suite Hotels Inc.............................. 1,776,000
193,300 Health Care Property Invest Inc...................... 6,789,663
80,000 Healthcare Realty Trust.............................. 1,840,000
100,000 Irvine Apartment Communities......................... 1,925,000
40,000 Redwood Trust Co..................................... 730,000
------------
Total Real Estate/ Investment Trusts............. 19,814,163 2.59%
------------ ----------
REFINING OF NONFERROUS MATERIALS
133,100 Timken Company....................................... 5,091,075 0.67%
------------ ----------
RESIDENTIAL MORTGAGES
100,000 Federal National Mortgage Assoc...................... 12,412,500 1.62%
------------ ----------
RETAIL SALES
60,000 J.C. Penney & Co..................................... 2,857,500
50,000 May Dept Stores...................................... 2,112,500
50,000 Sears Roebuck........................................ 1,950,000
------------
Total Retail Sales............................... 6,920,000 0.91%
------------ ----------
</TABLE>
See notes to financial statements.
37
<PAGE>
EQUITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ------------ ------------ ----------
<C> <S> <C> <C>
SAVINGS & LOAN HOLDING COMPANIES
290,000 Great Western Financial.............................. $ 7,395,000
270,000 Ahmanson H F & Co.................................... 7,155,000
------------
Total Savings and Loan Holding Cos............... 14,550,000 1.90%
------------ ----------
TELECOMMUNICATIONS
101,000 Ameritech Corp....................................... 5,959,000
100,000 Bell Atlantic Corp. (a).............................. 6,687,500
180,000 Bellsouth Corp....................................... 7,830,000
100,000 NYNEX Corp........................................... 5,400,000
170,000 Pacific Telesis Group................................ 5,716,250
120,000 SBC Communications................................... 6,900,000
150,000 Sprint Corp.......................................... 5,981,250
180,000 US West Inc.......................................... 6,435,000
150,000 US West Media Group (c).............................. 2,850,000
------------
Total Telecommunications......................... 53,759,000 7.03%
------------ ----------
UTILITIES--ELECTRIC
125,000 American Electric Power Inc.......................... 5,062,500
150,000 Carolina Power & Light Co............................ 5,175,000
120,000 FPL Group Inc........................................ 5,565,000
190,000 Southern Company..................................... 4,678,750
------------
Total Utilities--Electric........................ 20,481,250 2.68%
------------ ----------
WHOLESALE TRADE
320,000 Ogden Corp........................................... 6,840,000 0.89%
------------ ----------
Total Common Stock (cost $513,200,242)........... 657,890,144 86.08%
------------ ----------
Total Securities (cost $660,136,580)................. 805,216,482 105.35%
------------ ----------
</TABLE>
See notes to financial statements.
38
<PAGE>
EQUITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ------------ ------------ ----------
<S> <C> <C> <C>
REPURCHASE AGREEMENT
$ 52,732 Repurchase agreement with Morgan Stanley, dated
12/29/95 5.65%, proceeds at maturity $52,765, Due
01/02/96 (Collateralized by US Treasury Note,
7.25%, due 08/15/04 with a market value of $53,891)
(cost $52,740)....................................... $ 52,740 0.01%
------------ ----------
Total Investments (cost $660,189,320)................ $805,269,222 105.36%
Liabilities Less Other Assets........................ (40,966,692) (5.36)%
------------ ----------
Net Assets........................................... $764,302,530 100.00%
------------ ----------
------------ ----------
The aggregate cost of securities for federal income tax purposes at December
31, 1995 is $660,285,984.
The following amount is based on costs for federal
income tax purposes:
Gross unrealized appreciation........................ $169,674,387
Gross unrealized depreciation........................ (24,691,149)
------------
Net unrealized appreciation.......................... $144,983,238
------------
------------
</TABLE>
- ------------
(a) All or part of this security is on loan.
(c) Non-income producing security.
(d) Collateral for securities on loan.
(e) Zero coupon bond.
(g) This interest rate resets on a daily basis. The rate shown was in effect as
of December 31, 1995.
See notes to financial statements.
39
<PAGE>
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ----------- ------------ ----------
<C> <S> <C> <C>
TIME DEPOSITS
$ 6,420,627 First National Bank of Boston, Nassau, 4.81%
Due 01/02/96(d)(g).................................. $ 6,421,634
549,964 First Union Bank, Nassau, 5.8125% Due 01/02/96(d)..... 550,050
1,455,200 Fleet Bank, Massachusetts, Nassau, 5.84375%
Due 01/05/96(d)..................................... 1,455,429
------------
Total Time Deposits (cost $8,427,113)............. 8,427,113 6.75%
------------ ----------
<CAPTION>
SHARES COMMON STOCK
- ----------- ------------------------------------------------------
<C> <S> <C> <C>
AIRCRAFT & PARTS
19,000 Allied Signal Inc..................................... 902,500
23,200 Boeing Co............................................. 1,818,300
16,700 Lockheed Martin....................................... 1,319,300
13,000 Sundstrand Corp....................................... 914,875
------------
Total Aircraft & Parts............................ 4,954,975 3.97%
------------ ----------
ATHLETIC FOOTWEAR
19,300 Nike Inc.............................................. 1,343,763 1.08%
------------ ----------
AUTOMOTIVE PRODUCTS
29,000 General Motors Corp Cl E (a).......................... 1,508,000
24,700 General Motors Corp Cl H.............................. 1,213,388
------------
Total Automotive Products......................... 2,721,388 2.18%
------------ ----------
BEVERAGES
16,600 Anheuser Busch........................................ 1,110,125 0.89%
------------ ----------
BROADCASTING
9,000 Capital Cities/ABC Inc................................ 1,110,375
27,700 Viacom Inc Cl B(c).................................... 1,312,288
------------
Total Broadcasting................................ 2,422,663 1.94%
------------ ----------
CABLE & OTHER PAY TV SERVICES
30,500 Liberty Media Group Cl A.............................. 819,687 0.66%
------------ ----------
CIGARETTES
27,400 Philip Morris Co Inc.................................. 2,479,700 1.99%
------------ ----------
COMMERCIAL BANKING
22,500 Bank of Boston........................................ 1,040,625
26,300 Bankamerica Corp...................................... 1,702,925
2,400 Barnett Banks Inc..................................... 141,600
19,100 Chemical Banking Corp................................. 1,122,125
26,300 Citicorp.............................................. 1,768,675
20,600 Nationsbank Corp...................................... 1,434,275
------------
Total Commercial Banking.......................... 7,210,225 5.78%
------------ ----------
COMMUNICATION SYSTEMS
25,700 3 Com Corp............................................ 1,198,263
5,200 US Robotics Corp...................................... 456,300
------------
Total Communication Systems....................... 1,654,563 1.32%
------------ ----------
</TABLE>
See notes to financial statements.
40
<PAGE>
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ----------- ------------ ----------
<C> <S> <C> <C>
COMPUTER & OFFICE EQUIPMENT
12,300 Alco Standard Corp.................................... $ 561,187
26,600 CUC International Inc................................. 907,725
13,900 International Business Machines....................... 1,275,325
8,300 Xerox Corp............................................ 1,137,100
------------
Total Computer & Office Equipment................. 3,881,337 3.11%
------------ ----------
COMPUTER RELATED SERVICES
12,800 Ceridian Corp......................................... 528,000
15,600 Cisco Systems Inc(c).................................. 1,164,150
32,500 Honeywell............................................. 1,580,312
------------
Total Computer Related Services................... 3,272,462 2.62%
------------ ----------
CONSTRUCTION
18,600 Fluor Corp............................................ 1,227,600
18,200 Halliburton Co........................................ 921,375
------------
Total Construction................................ 2,148,975 1.72%
------------ ----------
CONSUMER GOODS & SERVICES
28,782 Kimberly-Clark Corp................................... 2,381,710
21,500 Procter & Gamble Company.............................. 1,784,500
------------
Total Consumer Goods & Services................... 4,166,210 3.34%
------------ ----------
CUTLERY, HANDTOOLS, GENERAL HARDWARE
31,200 Black & Decker Corp................................... 1,099,800 0.88%
------------ ----------
DRUGS
27,200 Eli Lilly & Co........................................ 1,530,000
22,500 Merck & Co Inc........................................ 1,479,375
49,300 Pharmacia & Upjohn Inc................................ 1,910,375
31,000 Smithkline Beecham ADR (a)............................ 1,720,500
------------
Total Drugs....................................... 6,640,250 5.32%
------------ ----------
ELECTRICAL EQUIPMENT
13,800 Cabletron Systems Communications (a).................. 1,117,800
18,100 Emerson Electric...................................... 1,479,675
21,400 Hewlett Packard....................................... 1,792,250
20,500 Linear Technology Corp................................ 804,625
19,300 LSI Logic(a)(c)....................................... 632,075
------------
Total Electrical Equipment........................ 5,826,425 4.67%
------------ ----------
FINANCE-SERVICES
21,400 First Data Corp....................................... 1,431,125
16,200 Franklin Resources Inc................................ 816,075
24,100 MBNA Corp............................................. 888,687
19,200 Merrill Lynch......................................... 979,200
------------
Total Finance--Services........................... 4,115,087 3.30%
------------ ----------
</TABLE>
See notes to financial statements.
41
<PAGE>
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ----------- ------------ ----------
<C> <S> <C> <C>
FOOD DISTRIBUTOR
7,700 IBP Inc............................................... $ 388,850
29,900 Nabisco Holdings Corp Cl A............................ 975,488
31,400 Pepsico Inc........................................... 1,754,475
------------
Total Food Distributor............................ 3,118,813 2.50%
------------ ----------
HEALTH CARE PRODUCTS
21,700 Amgen Inc(c).......................................... 1,288,437
23,000 Johnson & Johnson..................................... 1,969,375
------------
Total Health Care Products........................ 3,257,812 2.61%
------------ ----------
HOTELS
23,500 Marriott International inc............................ 898,875
33,400 Mirage Resorts Inc.................................... 1,152,300
------------
Total Hotels...................................... 2,051,175 1.64%
------------ ----------
INDUSTRIAL MACHINERY
26,900 Applied Materials Inc.(c)............................. 1,059,188 0.85%
------------ ----------
INSURANCE
14,575 American International Group.......................... 1,348,188
9,100 Cigna Corp............................................ 939,575
15,800 MGIC Investment(a).................................... 857,150
27,400 Travelers Inc......................................... 1,722,775
------------
Total Insurance................................... 4,867,688 3.90%
------------ ----------
MEDICAL EQUIPMENT
26,400 Baxter International Inc.............................. 1,105,500
19,300 Guidant Corp.......................................... 815,425
8,500 Medtronic Inc......................................... 474,938
------------
Total Medical Equipment........................... 2,395,863 1.92%
------------ ----------
METAL MINING
39,500 Freeport McMoran Copper & Gold(a)..................... 1,106,000 0.89%
------------ ----------
MISCELLANEOUS
12,500 Pioneer Hi-Bred International......................... 695,313 0.56%
------------ ----------
OIL & GAS
14,100 British Petroleum PLC ADR............................. 1,439,963
25,300 Enron................................................. 964,563
20,100 Exxon Corp............................................ 1,610,512
19,900 Mobil Corp............................................ 2,228,800
34,000 Total Petroleum ADR................................... 1,156,000
------------
Total Oil & Gas................................... 7,399,838 5.93%
------------ ----------
PHOTOGRAPHIC EQUIPMENT
18,100 Polaroid Corp......................................... 857,488 0.69%
------------ ----------
RAILROADS
17,300 Burlington Northern Sante Fe.......................... 1,349,400 1.08%
------------ ----------
</TABLE>
See notes to financial statements.
42
<PAGE>
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ----------- ------------ ----------
<C> <S> <C> <C>
RETAIL STORES
42,600 Federated Department Stores (a)(c).................... $ 1,171,500
20,100 Harcourt General Inc.................................. 841,688
29,900 Rite Aid Corp......................................... 1,024,075
18,300 Safeway Inc (a)(c).................................... 942,450
30,900 Sears Roebuck & Co.................................... 1,205,100
------------
Total Retail Stores............................... 5,184,813 4.15%
------------ ----------
SERVICES-HEALTH & ALLIED SERVICES
20,600 Columbia/HCA Healthcare Corp.......................... 1,045,450
13,600 HBO & Co.............................................. 1,042,100
------------
Total Services--Health & Allied Services.......... 2,087,550 1.67%
------------ ----------
SEMICONDUCTORS
18,400 Intel Corp............................................ 1,044,200 0.84%
------------ ----------
SOFTWARE MANUFACTURE
22,200 Microsoft Corp(c)..................................... 1,948,050
17,800 Parametric Technology Corp(c)......................... 1,183,700
13,900 Sybase Inc(c)......................................... 500,400
------------
Total Software Manufacture........................ 3,632,150 2.91%
------------ ----------
SPECIALTY CHEMICALS
8,100 Great Lakes Chemical Corp............................. 583,200
20,200 Pfizer................................................ 1,272,600
32,900 Praxair Inc........................................... 1,106,261
------------
Total Specialty Chemicals......................... 2,962,061 2.37%
------------ ----------
TELECOMMUNICATIONS
25,200 Bell Atlantic Corp(a)................................. 1,685,250
39,200 GTE Corp.............................................. 1,724,800
70,900 MCI Communications.................................... 1,852,261
40,600 Southwestern Bell Corp.(c)............................ 2,334,500
------------
Total Telecommunications.......................... 7,596,811 6.08%
------------ ----------
U.S. GOVERNMENT AGENCY
12,600 Federal National Mortgage Association................. 1,563,975 1.25%
------------ ----------
Total Common Stock (cost $99,906,919)............. 108,097,773 86.61%
------------ ----------
Total Securities (cost $108,334,032).............. 116,524,886 93.36%
------------ ----------
</TABLE>
See notes to financial statements.
43
<PAGE>
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ----------- ------------ ----------
REPURCHASE AGREEMENT
<C> <S> <C> <C>
$18,367,949 Repurchase Agreement with Morgan Stanley, dated
12/29/95 5.65%, proceeds at maturity $18,379,322,
due 01/02/96 (Collateralized by US Treasury Note,
7.25%, due 08/15/04 with a market value of
$18,771,414) (cost $18,370,832)....................... $ 18,370,832 14.72%
------------ ----------
Total Investments (cost $126,704,864)................. $134,895,718 108.08%
Liabilities Less Other Assets......................... (10,083,987) (8.08)%
------------ ----------
Net Assets............................................ $124,811,731 100.00%
------------ ----------
------------ ----------
The aggregate cost of securities for federal income tax purposes at December 31, 1995 is
$126,843,209.
The following amount is based on costs for federal income tax purposes:
Gross unrealized appreciation......................... $ 9,790,143
Gross unrealized depreciation......................... (1,737,634)
------------
Net unrealized appreciation........................... $ 8,052,509
------------
------------
</TABLE>
- ------------
(a) All or part of this security is on loan.
(c) Non-income producing security.
(d) Collateral for securities on loan.
(g) This interest rate resets on a daily basis. The rate shown was in
effect as of December 31, 1995.
See notes to financial statements.
44
<PAGE>
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ----------- ------------ -------------
<C> <S> <C> <C>
BANK NOTES
$ 2,000,000 Republic New York Securities Corp, 6.15%
Due 02/12/96 (d)(g) (cost $2,000,316)............. $ 2,000,316 0.90%
------------ -------------
COMMERCIAL PAPER
6,000,000 Lehman Brothers Holdings, Inc, 4.90%
Due 04/25/96 (d)(g) (cost $6,000,948)............. 6,000,948 2.70%
------------ -------------
TIME DEPOSITS
10,912,901 First National Bank of Boston, Nassau, 4.81%
Due 01/02/96 (d)(g)............................... 10,914,626
2,827,299 First Union Bank, Nassau, 5.81255 Due 01/02/96 (d).. 2,827,746
7,575,800 Fleet Bank, Massachusetts, Nassau, 5.84375%
Due 01/05/96 (d).................................. 7,576,998
14,000,000 Fleet Bank, Rhode Island, Cayman, 5.8125
Due 01/31/96 (d).................................. 14,002,213
------------
Total Time Deposits (cost $35,321,583).......... 35,321,583 15.88%
------------ -------------
</TABLE>
<TABLE><CAPTION>
SHARES COMMON STOCK
- ----------- ----------------------------------------------------
<C> <S> <C> <C>
ANIMAL SERVICES
159,050 Petsmart Inc. (a)(c)................................ 4,930,550 2.22%
------------ -------------
COMMUNICATIONS EQUIPMENT
147,000 3 Com Corp. (c)..................................... 6,853,875
29,800 Cascade Communications Corp (a)(c).................. 2,540,450
38,000 Motorola Inc........................................ 2,166,000
178,400 Tellabs Inc. (c).................................... 6,600,800
------------
Total Communications Equipment.................. 18,161,125 8.17%
------------ -------------
COMMUNICATIONS SERVICES
117,100 Mobile Telecommunications (c)....................... 2,503,013 1.13%
------------ -------------
CONSTRUCTION
179,000 Lowes Co's, Inc..................................... 5,996,500 2.70%
------------ -------------
EATING & DRINKING PLACES
328,200 Starbucks Corp. (a)(c).............................. 6,892,200 3.10%
------------ -------------
ELECTRICAL EQUIPMENT
93,200 Cisco Systems, Inc. (c)............................. 6,955,050
68,500 Intel Corp.......................................... 3,887,375
------------
Total Electrical Equipment...................... 10,842,425 4.87%
------------ -------------
</TABLE>
See notes to financial statements.
45
<PAGE>
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ----------- ------------
<C> <S> <C> <C>
FINANCIAL SERVICES
35,700 First Data Corp (a)................................. $ 2,387,438 1.07%
------------ -------------
FOOD AND BEVERAGE
196,900 Boston Chicken Inc. (a)(c).......................... 6,325,413 2.84%
------------ -------------
MEDICAL & OTHER HEALTH SERVICES
212,300 Healthsource Inc. (c)............................... 7,642,800
63,600 Medtronic Inc....................................... 3,553,650
107,800 Oxford Health Plans (c)............................. 7,963,725
------------
Total Medical & Other Health Services........... 19,160,175 8.62%
------------ -------------
OFFICE & BUSINESS EQUIPMENT
143,650 CUC International Inc............................... 4,902,056
64,300 Hewlett-Packard Inc................................. 5,385,125
224,700 Informix Corporation (c)............................ 6,741,000
73,600 Microsoft Corp. (c)................................. 6,458,400
180,900 Office Depot (c).................................... 3,572,775
189,650 Officemax Inc.(c)................................... 4,243,419
121,750 Oracle Systems Corp. (c)............................ 5,159,156
------------
Total Office & Business Equipment............... 36,461,931 16.40%
------------ -------------
PERSONAL SERVICES
137,000 H & R Block, Inc.................................... 5,548,500 2.49%
------------ -------------
RESEARCH, DEVELOPMENT & TESTING
149,400 Biogen, Inc. (c).................................... 9,188,100 4.13%
------------ -------------
RETAIL SALES
186,500 Autozone Inc. (a)(c)................................ 5,385,188
181,898 Home Depot.......................................... 8,708,367
266,462 Staples Inc. (c).................................... 6,495,010
------------
Total Retail Sales.............................. 20,588,565 9.26%
------------ -------------
SERVICES-HEALTH & ALLIED SERVICES
137,000 Boston Scientific Corp (a)(c)....................... 6,713,000
97,000 Genzyme Corp--General Division (c).................. 6,050,375
49,200 HBO & Co............................................ 3,769,950
88,000 United Healthcare Corp.............................. 5,764,000
------------
Total Services--Health & Allied Services........ 22,297,325 10.03%
------------ -------------
SOFTWARE DEVELOPMENT
60,500 Intuit Inc. (c)..................................... 4,719,000
46,300 Netcom On-Line Communication (a)(c)................. 1,666,800
28,800 Netscape Communications Corp (a)(c)................. 4,003,200
70,200 Peoplesoft Inc. (a)(c).............................. 3,018,600
69,500 Sybase Inc. (c)..................................... 2,502,000
------------
Total Software Development...................... 15,909,600 7.15%
------------ -------------
</TABLE>
See notes to financial statements.
46
<PAGE>
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ----------- ------------ -------------
<C> <S> <C> <C>
TELECOMMUNICATIONS
220,100 Airtouch Communications Inc. (c).................... $ 6,217,825
219,600 Ericsson L M Telephone ADR.......................... 4,282,200
134,300 Paging Network Inc. Telecom (c)..................... 3,273,562
123,600 Vodafone Group PLC ADR.............................. 4,356,900
205,300 Worldcom Inc........................................ 7,236,825
------------
Total Telecommunications........................ 25,367,312 11.41%
------------ -------------
Total Common Stock (cost $173,010,404).......... 212,560,172 95.59%
------------ -------------
Total Securities (cost $216,333,251)............ 255,883,019 115.07%
------------ -------------
PRINCIPAL
- -----------
REPURCHASE AGREEMENT
$ 9,711,528 Repurchase Agreement with Morgan Stanley, dated
12/29/95 5.65%, proceeds at maturity $9,717,624,
due 01/02/96 (Collateralized by US Treasury Note,
7.25%, due 08/15/04 with a market value of
$9,924,849) (cost $9,713,052)....................... 9,713,052 4.37%
------------ -------------
Total Investments (cost $226,046,303)........... $265,596,071 119.44%
Liabilities Less Other Assets................... (43,233,681) (19.44)%
------------ -------------
Net Assets...................................... $222,362,390 100.00%
------------ -------------
------------ -------------
The aggregate cost of securities for federal income tax purposes at December 31, 1995 is
$226,046,303.
The following amount is based on costs for federal income tax purposes:
Gross unrealized appreciation....................... $ 44,075,286
Gross unrealized depreciation....................... (4,525,518)
------------
Net unrealized appreciation......................... $ 39,549,768
------------
------------
</TABLE>
- ------------
(a) All or part of this security is on loan
(c) Non-income producing security.
(d) Collateral for securities on loan.
(g) This interest rate resets on a daily basis. The rate shown was in
effect as of December 31, 1995.
See notes to financial statements.
47
<PAGE>
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ----------- ------------ ----------
<C> <S> <C> <C>
TIME DEPOSITS
$13,348,289 First National Bank of Boston, Nassau, 4.81%
Due 01/02/96 (d)(g).................................. $ 13,350,371
1,665,311 First Union Bank, Nassau, 5.8125%
Due 01/02/96 (d)..................................... 1,665,571
10,500,000 Fleet Bank, Rhode Island, Cayman, 5.8125%
Due 01/31/96 (d)..................................... 10,501,638
------------
Total Time Deposits (cost $25,517,580)............. 25,517,580 8.09%
------------ ----------
<CAPTION>
SHARES COMMON STOCK
- ----------- -------------------------------------------------------
<C> <S> <C> <C>
BANKING EQUITY
110,000 Peoples Bank Bridgeport................................ 2,090,000
162,300 Premier Bancorp........................................ 3,793,763
------------
Total Banking Equity............................... 5,883,763 1.87%
------------ ----------
BEVERAGES
12,400 Pete's Brewing Company (c)............................. 173,600 0.06%
------------ ----------
BOOKS
34,900 Gartner Group Inc. Cl A (a)(c)......................... 1,670,838 0.53%
------------ ----------
BROADCASTING
47,400 Granite Broadcasting Corp (a)(c)....................... 503,625
42,000 Heftel Broadcasting Corp. (c).......................... 735,000
73,700 Osborn Communications CP-New (c)....................... 626,450
------------
Total Broadcasting................................. 1,865,075 0.59%
------------ ----------
CABLE & OTHER PAY TV SERVICES
14,800 Cablevision Systems Corp. (c).......................... 802,900
21,400 Comcast UK Cable Partners (c).......................... 267,500
1,800 Jones Intercable Inc................................... 22,500
64,500 Jones Intercable Inc. Cl A............................. 798,188
------------
Total Cable & Other Pay TV Services................ 1,891,088 0.60%
------------ ----------
COMMERCIAL BANKING
11,300 Norwest Corporation.................................... 372,900 0.12%
------------ ----------
COMMUNICATIONS EQUIPMENT
25,700 Ascend Communications Inc (c).......................... 2,084,913
37,800 Picturetel Corp (a)(c)................................. 1,630,125
------------
Total Communications Equipment..................... 3,715,038 1.18%
------------ ----------
COMMUNICATIONS SERVICES
22,500 Arch Communications Group Inc (c)...................... 540,000
12,000 Cellular Communications of Puerto Rico (c)............. 333,000
11,100 CommNet Cellular Inc. (c).............................. 320,513
------------
Total Communications Services...................... 1,193,513 0.38%
------------ ----------
COMPUTER & OFFICE EQUIPMENT
16,000 Aaron Rents Inc Cl B................................... 288,000
52,600 Acxiom Corp. (c)....................................... 1,439,925
25,400 Altron Inc (c)......................................... 762,000
70,000 Amplicon Inc. ......................................... 1,120,000
</TABLE>
See notes to financial statements.
48
<PAGE>
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ----------- ------------ ----------
<C> <S> <C> <C>
COMPUTER & OFFICE EQUIPMENT--(CONTINUED)
14,000 Boise Cascade Office Products (c)...................... $ 598,500
12,400 Cisco Systems Inc (c).................................. 925,350
40,800 Compaq Computer (c).................................... 1,958,400
38,850 Corporate Express Inc. (c)............................. 1,170,356
12,200 CDW Computer Centers Inc. (a)(c)....................... 494,100
34,600 CUC International Inc. ................................ 1,180,725
46,400 Cambridge Tech Partners Inc. (c)....................... 2,668,000
51,200 Comverse Technology Inc (a)(c)......................... 1,024,000
16,200 Fair Issac & Company Inc. ............................. 419,175
28,150 Jack Henry & Associates................................ 696,712
43,950 McAfee Associates Inc. (c)............................. 1,928,306
41,300 National Computer System Inc. ......................... 779,538
13,300 Storemedia (c)......................................... 485,450
35,600 Telxon Corp............................................ 805,450
24,800 U. S. Office Products Co. (c).......................... 564,200
54,000 Zebra Technologies Corp. (c)........................... 1,836,000
------------
Total Computer & Office Equipment.................. 21,144,187 6.70%
------------ ----------
COMPUTER SERVICES
42,000 America On-Line Inc (a)(c)............................. 1,575,000
12,400 Cascade Communications Corp (a)(c)..................... 1,057,100
30,400 Ciber Inc (c).......................................... 710,600
21,000 DST Systems Inc (c).................................... 598,500
20,900 Diamond Multimedia Systems (c)......................... 749,787
------------
Total Computer Services............................ 4,690,987 1.49%
------------ ----------
CONSUMER GOODS & SERVICES
30,000 Alternative Resources Corp. (c)........................ 907,500
10,000 Armor All Products Corp. .............................. 181,250
36,800 Kimberly-Clark Corp.................................... 3,045,200
------------
Total Consumer Goods & Services.................... 4,133,950 1.31%
------------ ----------
DRUGS
58,400 American Safety Razor Company (c)...................... 459,900
27,200 Chiron Corp. (a)(c).................................... 3,005,600
42,200 Vitalink Pharmacy Services (c)......................... 981,150
------------
Total Drugs........................................ 4,446,650 1.41%
------------ ----------
EATING & DRINKING PLACES
25,238 Apple South Inc. ...................................... 542,606
29,700 Boston Chicken (a)(c).................................. 954,113
13,400 Papa John's International Inc (a)...................... 551,913
------------
Total Eating & Drinking Places..................... 2,048,632 0.65%
------------ ----------
EDUCATION
8,600 Apollo Group Inc Cl A (c).............................. 336,475
180,000 ITT Educational Services Inc. (c)...................... 4,432,500
152,500 Kinder Care Learning Centers (c)....................... 1,925,313
</TABLE>
See notes to financial statements.
49
<PAGE>
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ----------- ------------ ----------
<C> <S> <C> <C>
EDUCATION--(CONTINUED)
485,800 National Education Corp. .............................. $ 3,947,125
------------
Total Education.................................... 10,641,413 3.37%
------------ ----------
ELECTRICAL EQUIPMENT
26,600 Alantec Corp. (c)...................................... 1,549,450
39,700 Cable Design Technologies (c).......................... 1,746,800
48,350 Checkpoint Systems Inc. (c)............................ 1,807,081
48,900 Kemet Corp. (c)........................................ 1,167,488
13,100 Kent Electronics Corp. (c)............................. 764,712
85,000 Rogers Corp. .......................................... 1,848,750
7,300 Sterling Electronics................................... 125,013
34,700 Tencor Instruments (c)................................. 845,813
49,200 Ultratech Stepper Inc. (c)............................. 1,266,900
------------
Total Electrical Equipment......................... 11,122,007 3.53%
------------ ----------
ENVIRONMENTAL MANAGEMENT
51,200 United Waste Systems Inc. (c).......................... 1,907,200 0.61%
------------ ----------
FINANCE
73,000 Allied Capital Corporation (a)......................... 994,625
45,327 Allied Capital Lending Co.............................. 600,583
77,600 Cash American Investments Inc. ........................ 426,800
------------
Total Finance...................................... 2,022,008 0.64%
------------ ----------
FINANCIAL SERVICES
31,900 Concord EFS Inc. (c)................................... 1,347,775 0.43%
------------ ----------
FREIGHT AND CARGO
36,000 Fritz Companies Inc. (a)(c)............................ 1,494,000
169,700 Harper Group Inc. ..................................... 3,012,175
------------
Total Freight and Cargo............................ 4,506,175 1.43%
------------ ----------
GAMING
13,100 Anchor Gaming (c)...................................... 298,025
42,300 Harveys Casinos Resorts................................ 761,400
26,100 Scientific Games Holdings Corp (c)..................... 985,275
------------
Total Gaming....................................... 2,044,700 0.65%
------------ ----------
GROCERY STORES
44,000 Dairymart Coven Stores Cl A (c)........................ 247,500
37,700 General Nutrition Companies (c)........................ 867,100
19,400 Uni-Marts Inc.......................................... 160,050
------------
Total Grocery Stores............................... 1,274,650 0.40%
------------ ----------
HEALTH SERVICES & HOSPITAL SUPPLIES
52,900 Advocat Inc. (c)....................................... 588,513
24,000 Circon Corp (c)........................................ 486,000
14,700 Coherent Inc. (c)...................................... 595,350
27,500 Daig Corp (c).......................................... 632,500
21,100 Gulf South Medical Supply Inc. (c)..................... 638,275
</TABLE>
See notes to financial statements.
50
<PAGE>
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ----------- ------------ ----------
<C> <S> <C> <C>
HEALTH SERVICES & HOSPITAL SUPPLIES--(CONTINUED)
22,800 Neuromedical Systems Inc. (c).......................... $ 458,850
28,200 Orthodontic Centers Of America (c)..................... 1,360,650
46,400 Owen Healthcare Inc. (c)............................... 1,281,800
157,500 Owens & Minor Holding Co. ............................. 2,008,125
48,300 Physician Sales & Service (c).......................... 1,376,550
25,400 Quintiles Transnational Corp. (c)...................... 1,041,400
102,600 Unilab Corporation (c)................................. 275,738
97,200 Universal Health Services Cl B......................... 4,313,250
------------
Total Health Services & Hospital Supplies.......... 15,057,001 4.77%
------------ ----------
HORTICULTURAL SPECIALTIES
47,000 Sylvan Inc. (c)........................................ 558,125 0.18%
------------ ----------
HOTELS
12,400 HFS Inc................................................ 1,013,700 0.32%
------------ ----------
INDUSTRIAL MACHINERY
45,700 Applied Materials Inc. (c)............................. 1,799,438
17,600 Astec Industries (c)................................... 173,800
67,500 Electro Rent Corp. (c)................................. 1,468,125
13,400 MSC Industrial Direct Co. Cl A (a)(c).................. 368,500
------------
Total Industrial Machinery......................... 3,809,863 1.21%
------------ ----------
INSURANCE
56,800 American Travellers Corp. (a)(c)....................... 1,597,500
22,500 Intercargo Inc. ....................................... 225,000
38,600 National Western Life Insurance Cl A (c)............... 2,161,600
38,700 Western National Corp. ................................ 624,038
72,800 Willis Corroon Group ADR (a)........................... 846,300
------------
Total Insurance.................................... 5,454,438 1.73%
------------ ----------
MANUFACTURING
51,600 Blyth Industries Inc. (c).............................. 1,522,200
3,500 In Focus Systems Inc (c)............................... 126,438
32,900 Qualcomm Inc. (c)...................................... 1,414,700
22,000 Wolverine Tube Inc. (c)................................ 825,000
------------
Total Manufacturing................................ 3,888,338 1.23%
------------ ----------
MANUFACTURER OF INTEGRATED CIRCUITS
19,400 Hadco Corp (c)......................................... 545,625 0.17%
------------ ----------
MEDICAL & OTHER HEALTH SERVICE
15,299 Community Health Systems (c)........................... 545,027
27,000 Compdent Corp (c)...................................... 1,120,500
48,200 Genzyme Corp.--General Division (a).................... 3,006,475
9,500 Health Management Systems Inc (c)...................... 370,500
71,300 Healthsource Inc. (c).................................. 2,566,800
27,300 IDEXX Laboratories Inc. (c)............................ 1,283,100
26,500 Living Centers of America (c).......................... 927,500
60,500 Medpartners/Millikin Inc. (a)(c)....................... 1,996,500
</TABLE>
See notes to financial statements.
51
<PAGE>
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ----------- ------------ ----------
<C> <S> <C> <C>
MEDICAL & OTHER HEALTH SERVICE--(CONTINUED)
42,400 Omnicare Inc. (a)...................................... $ 1,897,400
16,000 Ornda Healthcorp (c)................................... 372,000
37,800 Oxford Health Plans.................................... 2,792,475
19,800 Pacificare Health Systems Cl B (c)..................... 1,722,600
13,850 Phycor Inc. (c)........................................ 700,291
26,600 Physician Reliance (c)................................. 1,057,350
22,200 Quorum Health Group Inc (c)............................ 488,400
32,800 Renal Treatment Centers Inc (c)........................ 1,443,200
23,000 Summit Care Corp. (c).................................. 526,125
------------
Total Medical & Other Health Service............... 22,816,243 7.23%
------------ ----------
MISCELLANEOUS
100,300 Alpha Industries Inc. ................................. 1,416,738
3,000 Delta & Pine Land Co. ................................. 110,250
32,300 Midwest Grain Products, Inc. (c)....................... 452,200
------------
Total Miscellaneous................................ 1,979,188 0.63%
------------ ----------
MOTOR VEHICLES AND EQUIPMENT
42,800 Discount Auto Parts Inc. (c)........................... 1,332,150 0.42%
------------ ----------
NON-DEPOSITORY CREDIT INSTITUTIONS
80,500 The Money Store Inc. .................................. 1,257,813 0.40%
------------ ----------
OIL & GAS
50,200 Berry Petroleum Cl A................................... 508,275
49,700 Daniel Industries...................................... 708,225
88,900 Tosco Corp. ........................................... 3,389,313
------------
Total Oil & Gas.................................... 4,605,813 1.46%
------------ ----------
PERSONAL CARE PRODUCTS
40,400 Helen of Troy LTD--New................................. 848,400 0.27%
------------ ----------
PERSONNEL SERVICES
31,800 Accustaff Inc (c)...................................... 1,399,200
32,575 Brandon System Corp. .................................. 834,734
51,600 Manpower Inc. ......................................... 1,451,250
23,100 Robert Half International Inc. ........................ 967,312
------------
Total Personnel Services........................... 4,652,496 1.47%
------------ ----------
PHOTORESIST REMOVAL EQUIPMENT
40,100 Gasonics International Corp (c)........................ 541,350 0.17%
------------ ----------
PLASTICS MATERIALS & SYNTHETIC
139,800 Lydall Inc. ........................................... 3,180,450 1.01%
------------ ----------
POLLUTION CONTROL
51,102 Tetra Tech Inc. (c).................................... 1,162,561
38,100 U.S. Filter Corp. (c).................................. 1,014,412
------------
Total Pollution Control............................ 2,176,973 0.69%
------------ ----------
PRINTING & PUBLISHING
50,800 ASM Lithography Holding NV (c)......................... 1,689,100
</TABLE>
See notes to financial statements.
52
<PAGE>
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ----------- ------------ ----------
<C> <S> <C> <C>
PRINTING & PUBLISHING--(CONTINUED)
19,600 Clear Channel Communications........................... $ 864,850
60,000 Houghton Mifflin Company............................... 2,580,000
25,700 Scholastic Corp. (c)................................... 1,998,175
235,000 Steck Vaughn Publishing Corp. (c)...................... 1,733,125
------------
Total Printing & Publishing........................ 8,865,250 2.81%
------------ ----------
RADIATION MONITORING SERVICE
27,800 Landauer Inc. ......................................... 604,650 0.19%
------------ ----------
RADIO, TV, CONSUMER ELECTRONICS & MUSIC
82,600 Cognex Corp. (c)....................................... 2,870,350 0.91%
------------ ----------
RAILROADS
19,500 Wisconsin Central Transport (c)........................ 1,282,125 0.41%
------------ ----------
REAL ESTATE INVESTMENT TRUST
99,800 Allied Capital Commercial Corp......................... 1,971,050
65,400 Equity Inns Inc........................................ 752,100
22,800 Health Care Property Invest Inc. ...................... 800,850
14,800 RFS Hotel Investors Inc................................ 227,550
26,800 Roc Communities Inc. .................................. 643,200
------------
Total Real Estate Investment Trust................. 4,394,750 1.39%
------------ ----------
RETAIL SALES
9,900 Baby Superstore (a)(c)................................. 564,300
62,700 Catherines Stores Corp. (c)............................ 517,275
86,200 Consolidated Stores Corp. (c).......................... 1,874,850
69,000 Fred's Inc. ........................................... 517,500
18,600 Gap Stores............................................. 781,200
29,000 Global Directmail Corp. (c)............................ 797,500
175,000 MacFrugals Bargains Close-Outs......................... 2,450,000
30,300 The Men's Wearhouse Inc (a)............................ 780,225
155,200 Michael Anthony Jewellers Inc. (c)..................... 407,400
23,700 Micro Warehouse Inc. (a)(c)............................ 1,025,025
41,700 Nautica Enterprises Inc (c)............................ 1,824,375
58,200 Pentech International Inc. (c)......................... 116,400
37,700 Sunglass Hut Inc. (c).................................. 895,375
13,100 Tandy Crafts Inc. ..................................... 103,162
81,900 Tommy Hilfiger Corp (c)................................ 3,470,512
52,600 Travel Ports of America (c)............................ 131,500
------------
Total Retail Sales................................. 16,256,599 5.15%
------------ ----------
SANITARY SERVICES
44,500 National Sanitary Supply (c)........................... 522,875
27,300 Sanifill Inc (c)....................................... 911,137
------------
Total Sanitary Services............................ 1,434,012 0.45%
------------ ----------
SAVINGS & LOAN HOLDING COMPANY
52,573 First Republic Bancorp Inc. ........................... 690,020 0.22%
------------ ----------
</TABLE>
See notes to financial statements.
53
<PAGE>
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ----------- ------------ ----------
<C> <S> <C> <C>
SAVINGS INSTITUTIONS
114,000 American Federal Bank.................................. $ 1,738,500
101,400 Charter One Finance Inc................................ 3,105,375
103,000 First Saving Bank of Washington........................ 1,351,875
140,000 Roosevelt Financial Group Inc. (a)..................... 2,712,500
60,000 Washington Mutual Inc (a).............................. 1,732,500
------------
Total Savings Institutions......................... 10,640,750 3.37%
------------ ----------
SECURITY SYSTEM SERVICES
753,692 Automated Security Holdings ADR........................ 565,267
9,000 Protection One Inc (c)................................. 92,250
130,000 Sensormatic Electronics Corp (a)....................... 2,258,750
------------
Total Security System Services..................... 2,916,267 0.92%
------------ ----------
SEMICONDUCTOR MANUFACTURER
20,000 FSI International Inc. (c)............................. 405,000
39,100 Input/Output Inc. (a)(c)............................... 2,258,025
17,500 Richardson Electronics................................. 188,125
36,700 Sierra Semiconductor (c)............................... 509,212
------------
Total Semiconductor Manufacturer................... 3,360,362 1.07%
------------ ----------
SERVICES-CLEANING & MAINTENANCE TO DWELLERS
28,800 ABM Industries Inc. ................................... 799,200 0.25%
------------ ----------
SEWER/DRAIN CLEANING SERVICE
23,900 Roto Rooter Inc. ...................................... 788,700 0.25%
------------ ----------
SOFTWARE MANUFACTURER
36,800 Actel Corp (c)......................................... 395,600
7,000 American Business Information (c)...................... 135,625
42,200 Astea International Inc (c)............................ 965,325
9,900 Broderbund Software Inc. (a)(c)........................ 601,425
4,900 Catalyst International Inc (c)......................... 56,350
93,200 Computer Associates Intl Inc. ......................... 5,300,750
43,600 Computron Software Inc (c)............................. 784,800
18,000 Dialogic Corp (c)...................................... 693,000
43,700 Electronics For Imaging (c)............................ 1,911,875
71,400 Hyperion Software Corp. (c)............................ 1,517,250
21,300 INSO Corp (a) (c)...................................... 905,250
18,600 Integrated Systems Inc (c)............................. 725,400
9,900 Intuit Inc (c)......................................... 772,200
16,600 Medic Computer Systems Inc. (c)........................ 1,004,300
60,500 Microsoft Corp (c)..................................... 5,308,875
51,900 Netmanage Inc (a)(c)................................... 1,206,675
30,500 Optical Data Systems Inc (c)........................... 770,125
42,000 Oracle Corporation (c)................................. 1,779,750
74,100 Parametric Technology Corp (a)......................... 4,927,650
20,600 Project Software & Development......................... 718,425
19,800 Remedy Corp (c)........................................ 1,173,150
26,600 Shiva Corp (a)(c)...................................... 1,935,150
</TABLE>
See notes to financial statements.
54
<PAGE>
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
- ----------- ------------ ----------
<C> <S> <C> <C>
SOFTWARE MANUFACTURER--(CONTINUED)
21,000 Sterling Software...................................... $ 1,309,875
16,700 Veritas Software Corp (c).............................. 634,600
------------
Total Software Manufacturer........................ 35,533,425 11.26%
------------ ----------
SPECIALTY CHEMICALS
29,100 Chemed Corp. .......................................... 1,131,262
37,600 IMC Global Inc......................................... 1,536,900
------------
Total Specialty Chemicals.......................... 2,668,162 0.85%
------------ ----------
TELECOMMUNICATIONS
36,500 ACC Corp. ............................................. 841,781
24,100 Allen Group............................................ 539,237
29,600 Aspect Telecommunications Corp (c)..................... 991,600
63,500 AT&T Capital Corp...................................... 2,428,875
11,575 Associated Group Inc.-Cl A (c)......................... 218,477
19,675 Associated Group Inc.-Cl B (c)......................... 373,825
65,000 Cabletron Systems Inc. (c)............................. 5,265,000
1,000 Cellular Communications Inc (c)........................ 49,750
59,975 Centennial Cellular Corp Cl A (c)...................... 1,027,072
78,400 Communications Central Inc. (c)........................ 352,800
53,000 Davel Communications Group (c)......................... 715,500
56,300 Premisys Communications Inc (a)(c)..................... 3,152,800
33,600 Pronet Inc. (c)........................................ 991,200
77,800 TPI Enterprises (c).................................... 243,125
32,000 VTEL Corp (c).......................................... 592,000
17,800 Worldcom Inc (c)....................................... 627,450
------------
Total Telecommunications........................... 18,410,492 5.84%
------------ ----------
TRANSPORTATION
92,000 Air Express International Corp. ....................... 2,116,000
100,000 Airborne Freight Corp. ................................ 2,662,500
105,700 Consolidated Freightways Inc. ......................... 2,801,050
33,300 Oxford Resources Corp. Cl A (c)........................ 749,250
129,700 Pittston Services Group................................ 4,069,337
------------
Total Transportation............................... 12,398,137 3.93%
------------ ----------
WIDE AREA NETWORKS
100,600 Stratacom Inc (a)(c)................................... 7,394,100
34,600 Sun Microsystems Inc (c)............................... 1,578,625
------------
Total Wide Area Networks........................... 8,972,725 2.84%
------------ ----------
Total Common Stocks (cost $249,235,219)................ 294,700,091 93.42%
------------ ----------
PREFERRED STOCK
TELECOMMUNICATIONS
9,094 Cellular Communications Inc. (c) (cost $425,145)....... 445,606 0.14%
------------ ----------
Total Securities (cost $275,177,944)................... 320,663,277 101.65%
------------ ----------
</TABLE>
See notes to financial statements.
55
<PAGE>
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ----------- ------------ ----------
REPURCHASE AGREEMENT
<C> <S> <C> <C>
$21,474,530 Repurchase Agreement with Morgan Stanley, dated
12/29/95 5.65%, proceeds at maturity $21,488,011,
due 01/02/96 (Collateralized by US Treasury Note,
7.25%, due 08/15/04 with a market value of
$21,946,233) (cost $21,477,900)...................... $ 21,477,900 6.81%
------------ ----------
Total Investments (cost $296,655,844).................. $342,141,177 108.46%
Liabilities in Excess of Other Assets.................. (26,682,952) (8.46)%
------------ ----------
Net Assets............................................. $315,458,225 100.00%
------------ ----------
------------ ----------
The aggregate cost of securities for federal income tax purposes at December 31, 1995 is
$297,912,599.
The following amount is based on costs for federal income tax purposes:
Gross unrealized appreciation.......................... $ 59,947,614
Gross unrealized depreciation.......................... (15,719,036)
------------
Net unrealized appreciation............................ $ 44,228,578
------------
------------
</TABLE>
- ------------
(a) All or part of this security is on loan.
(c) Non-income producing security.
(d) Collateral for securities on loan.
(g) This interest rate resets on a daily basis. The rate shown was in
effect as of December 31, 1995.
See notes to financial statements.
56
<PAGE>
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ----------- ------------ ----------
<C> <S> <C> <C>
CORPORATE BONDS AND NOTES
AEROSPACE
$ 250,000 BE Aerospace 9.75% Due 03/01/03....................... $ 250,625 2.79%
------------ ----------
AMUSEMENT & RECREATION
250,000 ARA Group 8.50% Due 06/01/03.......................... 261,875
250,000 MGM Grand Hotel Finance Corp 11.75%
Due 05/01/99........................................ 265,000
------------
Total Amusement & Recreation...................... 526,875 5.86%
------------ ----------
AUTO PARTS
250,000 Exide Corp 10.75% Due 12/15/02........................ 271,563
250,000 SPX Corp 11.75% Due 06/01/02.......................... 267,500
------------
Total Auto Parts.................................. 539,063 5.99%
------------ ----------
BROADCASTING
200,000 Infinity Broadcasting 10.375% Due 03/15/02............ 214,500
250,000 Viacom International 8.00% Due 07/07/06............... 255,020
------------
Total Broadcasting................................ 469,520 5.22%
------------ ----------
CABLE TV SERVICES
250,000 Century Communications 9.75% Due 02/15/02............. 260,000
250,000 Continental Cablevision Inc 11.00% Due 06/01/07....... 278,750
50,000 Jones Intercable 9.625% Due 03/15/02.................. 53,688
125,000 Rogers Cablesystems 9.625% Due 08/01/02............... 131,250
25,000 Rogers Cablesystems Ltd. 11.00% Due 12/01/15.......... 26,875
250,000 TCI Communications 8.75% Due 08/01/15................. 275,248
------------
Total Cable TV Services........................... 1,025,811 11.40%
------------ ----------
CHEMICAL AND ALLIED PRODUCTS
250,000 AK Steel Holding Corp 10.75% Due 04/01/04............. 276,875
250,000 Freeport McMoran Resource Partners 8.75%
Due 02/15/04........................................ 256,250
75,000 IDEX Corp 9.75% Due 09/15/02.......................... 79,500
250,000 NL Industries Inc 11.75% Due 10/15/03................. 266,875
125,000 Sherritt Gordon Ltd 9.75% Due 04/01/03................ 132,187
------------
Total Chemical and Allied Products................ 1,011,687 11.24%
------------ ----------
COMMUNICATION EQUIPMENT
250,000 K-III Communications Corp 10.625% Due 05/01/02........ 267,500
250,000 Metrocall Inc 10.375% Due 10/01/07.................... 265,000
------------
Total Communication Equipment..................... 532,500 5.92%
------------ ----------
MANUFACTURING
250,000 American Standard Senior Notes 10.875%
Due 05/15/99........................................ 273,125
250,000 Huntsman Corp 10.625% Due 04/15/01.................... 280,000
250,000 Owens-Illinois Inc 11.00% Due 12/01/03................ 283,813
250,000 USG Corp 8.50% Due 08/01/05........................... 258,125
250,000 Westinghouse Air 9.375% Due 06/15/05.................. 254,688
------------
Total Manufacturing............................... 1,348,751 14.99%
------------ ----------
</TABLE>
See notes to financial statements.
57
<PAGE>
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS
- ----------- ------------ ----------
<C> <S> <C> <C>
MEDICAL AND OTHER HEALTH SERVICES
$ 250,000 Abbey Healthcare 9.50% Due 11/01/02................... $ 265,000
250,000 Healthsound Rehabilitation 9.50% Due 04/01/01......... 266,875
70,000 Quorum Health 8.75% Due 11/01/05...................... 72,362
250,000 Tenet Healthcare Corp 8.625% Due 12/01/03............. 263,750
------------
Total Medical and Other Health Services........... 867,987 9.65%
------------ ----------
MISCELLANEOUS
216,458 Midland Cogeneration Venture 10.33% Due 07/23/02...... 228,274 2.54%
------------ ----------
OIL AND GAS
250,000 Ferrellgas LP/Fin Corp 10.00% Due 08/01/01............ 265,000
125,000 Gulf Canada Resources Ltd 9.25% Due 01/15/04.......... 129,457
80,000 Vintage Petroleum 9.00% Due 12/15/05.................. 80,700
------------
Total Oil & Gas................................... 475,157 5.28%
------------ ----------
PAPER PRODUCTS
25,000 Buckeye Cellulose Corp 8.50% Due 12/05/05............. 25,656
200,000 Container Corp of America 11.25% Due 05/01/04......... 204,000
125,000 Repap New Brunswick 9.875% Due 07/15/00............... 125,312
------------
Total Paper Products.............................. 354,968 3.94%
------------ ----------
PHARMACEUTICALS
60,000 Ivac Corp 9.25% Due 12/01/02.......................... 61,500 0.68%
------------ ----------
SECURITY SYSTEMS
250,000 ADT Operations 9.25% Due 08/01/03..................... 267,500 2.97%
------------ ----------
TRANSPORTATION
250,000 Viking Star Ship 9.625% Due 07/15/03.................. 258,750 2.88%
------------ ----------
Total Investments (cost $8,056,922)............... $ 8,218,968 91.35%
Other Assets Less Liabilities..................... 778,627 8.65%
------------ ----------
Net Assets........................................ $ 8,997,595 100.00%
------------ ----------
------------ ----------
</TABLE>
The aggregate cost of securities for federal income tax purposes at December 31,
1995 is $8,056,922. The following amount is based on costs for federal income
tax purposes.
<TABLE>
<C> <S> <C>
Aggregate gross unrealized appreciation............... $ 174,397
Aggregate gross unrealized depreciation............... (12,351)
------------
Net unrealized appreciation........................... $ 162,046
------------
------------
</TABLE>
See notes to financial statements.
58
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
PRINCIPAL VALUE NET ASSETS COUNTRY
- ------------ ------------ ---------- -------
<C> <S> <C> <C> <C>
CORPORATE BONDS AND NOTES
------------------------------------------------
$ 277,000 Bangkok Bank Public Co. 3.25%, Due 03/03/04..... $ 294,313 HK
200,000 British Air Capital 9.75%, Due 06/15/05......... 636,560 UK
15,000,000 Sekisui House 2.50%, Due 01/31/02............... 201,975 JPN
------------
Total Corporate Bonds and Notes
(cost $1,106,891)......................... 1,132,848 1.36%
------------ ----------
CONVERTIBLE BONDS
------------------------------------------------
2,000 Ericson LM 4.25%, Due 06/30/00.................. 5,375 SWE
390,000 Sumitomo Bank 3.125% Due 03/31/04............... 353,925 JPN
390,000 Renong Berhad 2.50% Due 01/15/05................ 437,288 MAL
------------
Total Convertible Bonds (cost $762,913)..... 796,588 0.95%
------------ ----------
<CAPTION>
SHARES/UNITS COMMON STOCKS AND WARRANTS
- ------------ ------------------------------------------------
<C> <S> <C> <C> <C>
AEROSPACE/DEFENSE
74,400 CAE Industries.................................. 565,702 0.68% GER
------------ ----------
AIRLINES
275,000 Citic Pacific LTD............................... 940,720 HK
17,000 British Airways PLC............................. 122,997 UK
1,100 Swissair (c).................................... 803,024 SWI
------------
Total Airlines.............................. 1,866,741 2.24%
------------ ----------
AMUSEMENT & RECREATION
162,000 Euro Disneyland SCA (c)......................... 369,344 0.44% FRA
------------ ----------
AUTO EQUIPMENT
5,900 Mannesmann AG................................... 1,881,781 GER
6,000 Valeo........................................... 278,260 FRA
------------
Total Auto Equipment........................ 2,160,041 2.59%
------------ ----------
BANKING
20,000 ABN AMRO Holdings............................... 912,046 NET
2,000 Banco Popular Espanola.......................... 368,788 SPA
48,000 Barclay's PLC................................... 550,738 UK
6,200 CS Holdings..................................... 637,161 SWI
900 Holderbank Finan Glaris Cl B.................... 692,217 SWI
22,600 International Nederlanden Group................. 1,511,375 NET
99,000 Morgan Crucible Company PLC..................... 590,228 UK
86,000 National Westminster............................ 866,562 UK
65,000 Overseas Chinese Bkng Corp...................... 813,378 SIN
12,000 Sumitomo Bank................................... 254,770 JPN
196,000 Westpac Banking Corp............................ 868,946 AUS
------------
Total Banking............................... 8,066,209 9.67%
------------ ----------
BEVERAGES
98,000 Amatil LTD Coca Cola............................ 782,197 AUS
116,000 Lion Nathan..................................... 276,799 NZL
21,000 Seagrams Co Ltd................................. 727,125 CAN
------------
Total Beverages............................. 1,786,121 2.14%
------------ ----------
</TABLE>
See notes to financial statements.
59
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES/UNITS VALUE NET ASSETS COUNTRY
- ------------ ------------ ---------- -------
<C> <S> <C> <C> <C>
BROADCASTING
95,000 British Sky Broadcasting PLC.................... $ 599,574 UK
4,000 Canal Plus...................................... 750,862 FRA
17,100 Grupo Televisa--GDR............................. 384,750 MEX
13,000 Rogers Communications Cl B (c).................. 145,291 CAN
135,000 Television Broadcasts Ltd....................... 481,019 HK
35,000 Tokyo Broadcasting.............................. 576,818 JPN
------------
Total Broadcasting.......................... 2,938,314 3.52%
------------ ----------
BUILDING CONTRACTOR
52,000 Sekisui House LTD............................... 665,423 0.80% JPN
------------ ----------
BUILDING MATERIALS
74,000 Italcenenti Frabbriche Riunit................... 443,142 GER*
13,000 Tostem Corp..................................... 432,276 JPN
------------
Total Building Materials.................... 875,418 1.05%
------------ ----------
CHEMICALS
32,000 AGA AB.......................................... 441,814 SWE
1,900 Akzo Dutch...................................... 219,989 NET
20,000 Norsk Hydro..................................... 842,058 NOR
------------
Total Chemicals............................. 1,503,861 1.80%
------------ ----------
COMMUNICATIONS
84 DDI Corp........................................ 651,468 0.78% JPN
------------ ----------
CONSUMER GOODS
48,000 Nikon Corp...................................... 651,466 JPN
56,000 Reckitt and Colman PLC.......................... 619,920 UK
15,000 Sony Corp....................................... 900,131 JPN
37,000 Thorn EMI PLC................................... 871,457 UK
------------
Total Consumer Goods........................ 3,042,974 3.65%
------------ ----------
DRUGS
49,000 Astra AB........................................ 1,959,343 SWE
52,000 Banyu Pharmaceutical Co......................... 640,219 JPN
56,000 Sankyo Co Ltd................................... 1,259,502 JPN
------------
Total Drugs................................. 3,859,064 4.62%
------------ ----------
ELECTRIC UTILITIES
8,400 Asea--A......................................... 817,538 SWE
180,000 Hong Kong Electric.............................. 590,148 MAL
------------
Total Electric Utilities.................... 1,407,686 1.69%
------------ ----------
ELECTRONICS
900 BBC Brown Boveri & Cie.......................... 1,048,103 SWI
79,000 Bombardier Inc Cl B............................. 1,042,140 CAN
142,000 Hitachi LTD..................................... 1,431,672 JPN
26,000 Kokusai Electric................................ 544,440 JPN
17,000 Kyocera Corp.................................... 1,264,061 JPN
19,000 Murata Mfg Co Ltd............................... 699,939 JPN
19,000 Omron Corp...................................... 438,383 JPN
24,600 Philips Electronics N.V. ADR.................... 882,525 NET
------------
Total Electronics........................... 7,351,263 8.81%
------------ ----------
</TABLE>
See notes to financial statements.
60
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES/UNITS VALUE NET ASSETS COUNTRY
- ------------ ------------ ---------- -------
<C> <S> <C> <C> <C>
ENGINEERING
17,000 Chudenko Corp................................... $ 583,411 0.70% JPN
------------ ----------
FINANCIAL SERVICES
3,000 Hong Leong Credit BHD........................... 14,888 MAL
16,800 HSBC Holdings PLC............................... 262,270 UK
20,450 Lend Lease Corp Ltd............................. 296,635 AUS
29,000 Nomura Securities Co Ltd........................ 632,563 JPN
15,000 Orix Corp....................................... 618,021 JPN
76,000 Wako Securities Co Ltd (c)...................... 674,888 JPN
------------
Total Financial Services.................... 2,499,265 3.00%
------------ ----------
FOOD & BEVERAGE
1,200 Nestle (Malaysia) Berhad........................ 8,791 MAL
1,200 Nestle.......................................... 1,330,725 SWI
------------
Total Food & Beverage....................... 1,339,516 1.61%
------------ ----------
FREIGHT TRANSPORTATION
122,000 Kawasaki Kisen (c).............................. 387,923 JPN
244,000 TNT Limited..................................... 346,651 AUS
------------
Total Freight Transportation................ 734,574 0.88%
------------ ----------
HOTELS
63,000 Forte PLC....................................... 323,272 0.39% UK
------------ ----------
INSURANCE
22,800 Alleanza Assicuraz.............................. 160,248 ITL
200 Baloise Holdings................................ 417,155 SWI
259,081 GIO Australian Holdings Ltd..................... 603,218 AUS
7,600 Mapfre Vida Seguros............................. 451,052 SPA
62,000 Mitsui Marine & Fire Ins........................ 442,376 JPN
327 Muenchener Rueckversicherungs................... 705,964 GER
20 Muenchener Rueckversicherungs--Warrants
(Expires 03/13/98)............................ 2,648 GER
71,000 Yasuda Fire & Marine Ins........................ 502,460 JPN
------------
Total Insurance............................. 3,285,121 3.94%
------------ ----------
INVESTMENT HOLDING COS
665,000 Brierley Investments Ltd........................ 526,015 NZL
337,000 Sime Darby Berhad............................... 895,948 MAL
1,000 UMW Holdings BHD Warrants (Expires 01/26/00).... 705 MAL
------------
Total Investment Holding Cos................ 1,422,668 1.70%
------------ ----------
MACHINERY PRODUCTION
11,400 ASM Lithography Holding NV (c).................. 379,050 NET
19,000 Atlas Copco AB--Cl A............................ 292,431 SWE
21,000 Atlas Copco AB--Cl B............................ 316,875 SWE
18,000 Mitsubishi Heavy................................ 941,463 JPN
100 Sidel........................................... 31,204 FRA
------------
Total Machinery Production.................. 1,961,023 2.35%
------------ ----------
METAL MINING
26,000 Inco Ltd........................................ 864,500 CAN
216,000 Placer Pacific Ltd.............................. 446,666 AUS
90,000 Western Mining Corp Holding Ltd................. 578,430 AUS
------------
Total Metal Mining.......................... 1,889,596 2.26%
------------ ----------
</TABLE>
See notes to financial statements.
61
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES/UNITS VALUE NET ASSETS COUNTRY
- ------------ ------------ ---------- -------
<C> <S> <C> <C> <C>
METAL REFINERIES
17,000 Alcan Aluminum LTD.............................. $ 529,125 CAN
107,000 Kawasaki Steel.................................. 373,430 JPN
15,000 Pechiney........................................ 567,440 FRA
15,000 Pechiney Warrants (Expires 01/08/96)............ 31 FRA
9,900 Sandvik AB--A................................... 174,032 SWE
2,800 Sandvik AB--B (c)............................... 49,221 SWE
------------
Total Metal Refineries...................... 1,693,279 2.03%
------------ ----------
MOTOR VEHICLES
9,700 Autoliv AB...................................... 567,901 SWE
54,000 Mitsubishi Motor Corp (c)....................... 440,262 JPN
24,000 Toyota Motor Co................................. 509,539 JPN
2,300 Volkswagen AG................................... 772,946 GER
30,000 Volvo Aktiebolag B Free......................... 615,642 SWE
------------
Total Motor Vehicles........................ 2,906,290 3.48%
------------ ----------
OIL AND GAS
98,000 British Gas Corp................................ 386,473 UK
17,000 Repsol SA--ADR.................................. 558,875 SPA
6,200 Societe National Elf--Aquitaine................. 457,420 FRA
15,000 YPF Sociedad Anonima--ADR....................... 324,375 ARG
------------
Total Oil and Gas........................... 1,727,143 2.07%
------------ ----------
PERSONAL SERVICES
15,000 Secom Co Ltd.................................... 1,044,093 1.25% JPN
------------
PRINTING AND PUBLISHING
93,000 News Corp Ltd................................... 496,704 AUS
29,000 Singapore Press Holdings Ltd.................... 512,561 SIN
------------
Total Printing and Publishing............... 1,009,265 1.21%
------------ ----------
REAL ESTATE
62,000 City Developments............................... 451,472 SIN
82,000 Mitsui Fudosan.................................. 1,009,576 JPN
------------
Total Real Estate........................... 1,461,048 1.75%
------------ ----------
RESTAURANTS
24,000 Izumi (c)....................................... 530,479 0.64% JPN
------------ ----------
RETAIL SALES
13,000 Electrolux...................................... 534,538 SWE
12,700 Hennes & Mauritz................................ 709,046 SWE
------------
Total Retail Sales.......................... 1,243,584 1.49%
------------ ----------
SOFTWARE
4,900 SAP AG Vorzug (c)............................... 745,642 0.89% GER
------------ ----------
TELECOMMUNICATIONS
86,000 Cable and Wireless.............................. 614,203 UK
32,000 Ericsson AB (c)................................. 627,715 SWE
400,000 Hong Kong Telecom............................... 713,920 HK
800 Hong Kong Telecom--ADR.......................... 14,200 HK
209 Nippon Telegraph and Telephone Corp............. 1,691,829 JPN
8,300 Nokia AB K Shares (c)........................... 328,788 FIN
2,000 Rogers Cantel Mobile Comm--B (c)................ 53,000 CAN
</TABLE>
See notes to financial statements.
62
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
<TABLE><CAPTION>
PERCENT OF
SHARES/UNITS VALUE NET ASSETS COUNTRY
- ------------ ------------ ---------- -------
<C> <S> <C> <C> <C>
TELECOMMUNICATIONS--(CONTINUED)
253,000 Telecom Italia Mobile--drnc (c)................. $ 266,308 ITA
456,000 Telecom Italia Mobile (c)....................... 803,381 ITA
18,500 Telecomunicacoes Brasileiras--ADR............... 890,816 BRA
44,000 Telefonica De Espana............................ 609,316 SPA
25,600 Telefonos De Mexico ADR......................... 816,000 MEX
5,400 Vodafone Group PLC ADR.......................... 190,350 UK
------------
Total Telecommunications.................... 7,619,826 9.13%
------------ ----------
TELEPHONE UTILITIES
300 Tele Danmark B.................................. 16,403 DEN
34,600 Tele Danmark--ADR............................... 955,825 DEN
------------
Total Telephone Utilities................... 972,228 1.17%
------------ ----------
TEXTILES
28,000 Wacoal Corp..................................... 380,022 0.45% JPN
------------ ----------
TIRE PRODUCTION
81,000 Bridgestone Corp................................ 1,287,810 JPN
9,000 Michelin B...................................... 359,420 FRA
------------
Total Tire Production....................... 1,647,230 1.97%
------------ ----------
TOBACCO PRODUCTS
58,000 B.A.T. Industries............................... 511,037 0.61% UK
------------ ----------
TOYS AND GAMES
18,100 Nintendo Corp Ltd............................... 1,377,437 1.65% JPN
------------ ----------
WHOLESALERS
184,000 Hutchison Whampoa............................... 1,120,853 1.34% HK
------------ ----------
Total Common Stocks and Warrants (cost
$75,986,728).................................... 77,137,531 92.44%
------------ ----------
PREFERRED STOCK
------------------------------------------------
DRUGS AND COSMETICS
200 Wella AG (cost $144,093)........................ 108,574 0.13% GER
------------ ----------
Total Investments (cost $78,000,625)........ $ 79,175,541 94.88%
Total Assets Less Liabilities............... 4,270,774 5.12%
------------ ----------
Net Assets.................................. $ 83,446,315 100.00%
------------ ----------
------------ ----------
The aggregate cost of securities for federal income tax purposes at December 31, 1995
is $78,000,625.
The following amount is based on costs for federal income tax purposes:
Gross unrealized appreciation................... $ 3,665,875
Gross unrealized depreciation................... $ (2,490,959)
------------
Net unrealized appreciation..................... $ 1,174,916
------------
------------
</TABLE>
* Traded on Italian exchange
- ------------
(c) Non-income producing security.
See notes to financial statements.
63
<PAGE>
COUNTRY COMPOSITION
<TABLE>
<S> <C>
Argentina......................................................... 0.42%
Australia......................................................... 5.58%
Brazil............................................................ 1.13%
Canada............................................................ 4.96%
Denmark........................................................... 1.23%
Finland........................................................... 0.42%
France............................................................ 3.55%
Germany........................................................... 5.33%
Hong Kong......................................................... 4.88%
Italy............................................................. 2.11%
Japan............................................................. 30.81%
Malasia........................................................... 1.71%
Mexico............................................................ 1.52%
Netherlands....................................................... 4.93%
Norway............................................................ 1.06%
New Zealand....................................................... 1.01%
Singapore......................................................... 2.24%
Spain............................................................. 2.51%
Sweden............................................................ 8.98%
Switzerland....................................................... 6.22%
Thailand.......................................................... 0.37%
United Kingdom.................................................... 9.03%
Total:...................................................... 100.00%
</TABLE>
64
<PAGE>
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Diversified Investors Portfolios (the "Series Portfolio"), a series trust
organized on September 1, 1993 under the laws of the State of New York, is
composed of eleven different series that are, in effect, separate investment
funds: the Money Market Series, the High Quality Bond Series, the Intermediate
Government Bond Series, the Government/Corporate Bond Series, the Balanced
Series, the Equity Income Series, the Growth & Income Series, the Equity Growth
Series, the Special Equity Series, the High-Yield Bond Series, and the
International Equity Series (each a "Series"). The Declaration of Trust permits
the Board of Trustees to issue an unlimited number of beneficial interests in
each Series. Investors in a Series (e.g., investment companies, insurance
company separate accounts and common and commingled trust funds) will each be
liable for all obligations of that Series (and of no other Series). On January
3, 1994 (commencement of operations for each series except the High-Yield Bond
Series and the International Equity Series), MONY Pooled Separate Accounts
transferred all of their investable assets at a market value of $1,183,075,019
to those Series with corresponding investment objectives in exchange for
interests in those Series. The High-Yield Bond Series and International Equity
Series commenced operations on August 22, 1995 and September 29, 1995,
respectively.
The International Equity Series was established by a redemption of assets
in-kind, valued at $77,137,079 from the Non-U.S. Equity Fund for Participant
Directed Plans within the Capital Guardian Collective Trust for Employee Benefit
Plans, a bank collective trust fund established and maintained by Capital
Guardian Trust Company, which were immediately invested at market value into the
Portfolio. The transaction resulted in a non-taxable event.
2. SIGNIFICANT ACCOUNTING POLICIES
A. Security Valuation:
Short-term securities having remaining maturities of 60 days or less are
valued at amortized cost or original cost plus accrued interest receivable, both
of which approximate value. The amortized cost of a security is determined by
valuing it at original cost and thereafter amortizing any discount or premium at
a constant rate until maturity. Securities traded on national securities
exchanges are valued at the last sales price as of the close of business on each
day or at the closing bid price for over-the-counter securities. Equity
securities are valued at the last sale price on the exchange on which they are
primarily traded or at the ask price on the NASDAQ system for unlisted national
market issues, or at the last quoted bid price for securities not reported on
the NASDAQ system. Bonds are valued at the last available price provided by an
independent pricing service for securities traded on a national securities
exchange. Bonds that are listed on a national securities exchange but are not
traded and bonds that are regularly traded in the over-the-counter market are
valued at the mean of the last available bid and asked prices by an independent
pricing service. All other securities will be valued at their fair value as
determined by the Board of Trustees.
B. Repurchase Agreements:
Each Series, along with other affiliated entities of the investment advisor,
may enter into repurchase agreements with financial institutions deemed to be
creditworthy by the Series investment advisor, subject to the seller's agreement
to repurchase and the Series agreement to resell such securities at a mutually
agreed upon price. Securities purchased subject to repurchase agreements are
deposited with a third party custodian, and pursuant to the terms of the
repurchase agreement must have an aggregate market value greater than or equal
to 102% and 105% of domestic and international securities, respectively, of the
repurchase price plus accrued interest at all times. If the value of the
underlying securities falls below the value of the repurchase price plus accrued
interest, the Series will require the seller to deposit additional collateral by
the next business day. If the request for additional collateral is not met or
the seller defaults on its repurchase obligation, the Series maintains the right
to
65
<PAGE>
DIVERSIFIED INVESTORS PORTFOLIOS--(CONTINUED)
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
sell the underlying securities at market value and may claim any resulting loss
against the seller. However, in the event of default or bankruptcy by the
seller, realization and/or retention of the collateral may be subject to legal
proceedings.
C. Foreign Currency Translation
The accounting records of the International Equity Series are maintained in
U.S. dollars. The market values of foreign securities, currency holdings and
other assets and liabilities are translated to U.S. dollars based on the
prevailing exchange rates each business day. Income and expenses denominated in
foreign currencies are translated at prevailing exchange rates when accrued or
incurred. The Series does not isolate realized gains and losses attributable to
changes in exchange rates from gains and losses that arise from changes in the
market value of investments. Such fluctuations are included with net realized
and unrealized gains or losses on investments. Net realized gains and losses on
foreign currency transactions represent net exchange gains and losses on
disposition of foreign currencies, the difference between the amount of
investment income receivable and foreign withholding taxes receivable recorded
on the Series' books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at fiscal
year end and forward foreign currency contracts, resulting from changes in the
exchange rate.
D. Forward Currency Contracts
The International Equity Series may enter into forward currency contracts
and forward cross currency contracts in connection with settling planned
purchases or sales of securities or to hedge the currency exposure associated
with some or all of the Series' portfolio securities. A forward currency
contract is an agreement between two parties to buy and sell a currency at a set
price on a future date. The market value of a forward currency contract
fluctuates with changes in forward currency exchange rates. Forward currency
contracts are marked to market daily and the change in value is recorded by the
Series as an unrealized gain or loss. When a forward currency contract is
extinguished, through delivery or offset by entering into another forward
currency contract, the Series records a realized gain or loss equal to the
different between the value of the contract at the time it was opened and the
value of the contract at the time it was extinguished or offset. These contracts
may involve market risk in excess of the unrealized gain or loss reflected in
the Series' Statement of Assets and Liabilities and the Statement of Operations.
In addition, the Series could be exposed to risk if the counterparties are
unable to meet the terms of the contracts or if the value of the currency
changes unfavorably to the U.S. dollar.
E. Federal Income Taxes:
It is the Series policy to comply with the applicable provisions of the
Internal Revenue Code. Therefore, no federal income tax provision is required.
F. Security Transactions and Investment Income:
Security transactions are accounted for on a trade date basis (the day after
the date the order to buy or sell is executed). Dividend income is recorded on
the ex-dividend date. Interest income is recorded on the accrual basis and
includes amortization of premium and discount on investments. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
All of the net investment income and realized and unrealized gains and
losses from security transactions are determined on each valuation day and
allocated pro rata among the investors in a Series at the time of such
determination.
66
<PAGE>
DIVERSIFIED INVESTORS PORTFOLIOS--(CONTINUED)
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
G. Operating Expenses:
The Series Portfolio accounts separately for the assets, liabilities and
operations of each Series. Expenses directly attributable to a Series are
charged to that Series, while expenses attributable to all Series are allocated
among them.
H. Other:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
3. FEES AND TRANSACTIONS WITH AFFILIATES
AUSA Life Insurance Company, Inc. ("AUSA") is the parent company of
Diversified Investment Advisors, Inc. (the "Advisor"). AUSA has sub-accounts
which invests in the corresponding Portfolios as follows:
<TABLE><CAPTION>
AUSA SUBACCOUNT PERCENTAGE INVESTMENT IN PORTFOLIO
- ---------------------------------------------------------------- ----------------------------------
<S> <C>
Money Market.................................................... 42.43%
High Quality Bond............................................... 54.41%
Intermediate Government Bond.................................... 63.72%
Government/Corporate Bond....................................... 25.83%
Balanced........................................................ 92.89%
Equity Income................................................... 68.02%
Growth & Income................................................. 72.63%
Equity Growth................................................... 85.74%
Special Equity.................................................. 51.48%
High Yield Bond................................................. 73.21%
International Equity............................................ 41.39%
</TABLE>
The Advisor manages the assets of each Series of the Series Portfolio
pursuant to an Investment Advisory Agreement (the "Advisory Agreement") with the
Series Portfolio with respect to each Series. Subject to such further policies
as the Board of Trustees may determine, the Advisor provides general investment
advice to each Series. For its services under the Advisory Agreement, the
Adviser receives from each Series fees accrued daily and paid monthly at an
annual rate equal to the percentages specified in the table below of the
corresponding Series' average daily net assets. The Advisor is currently waiving
a portion of its investment advisory fee.
For each Series, the Advisor has entered into an Investment Subadvisory
Agreement (each a "Subadvisory Agreement") with the subadvisors listed in the
table below (each a "Subadvisor", collectively the "Subadvisors"). It is the
responsibility of a Subadvisor to make the day-to-day investment decisions of
the Series and to place the purchase and sales orders for securities
transactions of such series, subject in all cases to the general supervision of
the Advisor. For its services under each
67
<PAGE>
DIVERSIFIED INVESTORS PORTFOLIOS--(CONTINUED)
NOTES TO FINANCIAL STATEMENTS
3. FEES AND TRANSACTIONS WITH AFFILIATES--(CONTINUED)
Subadvisory Agreement, the Subadvisors receive a fee from the Advisor at an
annual rate equal to the percentages specified in the table below of the
corresponding Series' average net assets.
<TABLE>
<CAPTION>
DIVERSIFIED INVESTORS ADVISOR SUBADVISORS
PORTFOLIO SERIES PORTFOLIO SUBADVISORS FEE(1) FEE
- ------------------------------------ ------------------------------------ ------- -----------
<S> <C> <C> <C>
Money Market Series Capital Management Group 0.25% 0.05%
High Quality Bond Series Merganser Capital Management
Corporation 0.35 (2)
Intermediate Government Bond Series 1740 Advisors, Inc. 0.35 0.15
Government/Corporate Bond Series Capital Management Group 0.35 0.15
Balanced Series Institutional Capital Corporation 0.45 (3)
Equity Income Series Asset Management Group 0.45 0.25
Growth & Income Series Munder Capital Management, Inc.
(1/1/95--11/13/95) 0.60 (4)
The Putnam Advisory Co Inc.
(11/14/95--12/31/95) 0.60 (4)
Equity Growth Series Jundt Associates, Inc. 0.70 0.63
Special Equity Series (5) 0.80 0.50
High-Yield Bond Series Delaware Investment Advisors 0.55 (6)
International Equity Series Capital Guardian Trust Co. 0.75 (7)
</TABLE>
- ------------
(1) The Advisor is currently waiving a portion of its fee.
(2) 0.50 on the first $10,000,000 in net assets, 0.375% on the next $15,000,000
in net assets, 0.25 on the next $75,000,000 in net assets and 0.1875% on all
net assets in excess of $100,000,000.
(3) 0.55% on the first $25,000,000 in net assets, 0.45% on the next $25,000,000
in net assets, and 0.35% on all net assets in excess of $50,000,000.
(4) Munder: 0.50% on the first $50,000,000 in net assets, 0.30% on the next
$25,000,000 in net assets, and 0.25% on net assets in excess of $75,000,000.
Putnam: 0.30% on the first $100,000,000 in net assets, 0.20% on net assets
in excess of $100,000,000.
(5) The Special Equity Series has four Subadvisors: Pilgrim Baxter & Associates,
Ltd., Ark Asset Management Co., Inc.; Liberty Investment Management, Inc.;
and Westport Asset Management, Inc.
(6) 0.40% on the first $20,000,000 in net assets, 0.30% on the next $20,000,000
in net assets, and 0.20% on all net assets in excess of $40,000,000.
(7) 0.75% on the first $25,000,000 in net assets, 0.60% on the next $25,000,000
to $50,000,000 in net assets, 0.425% on the next $50,000,000 to $250,000,000
in net assets and 0.375% on all net assets in excess of $250,000,000.
68
<PAGE>
DIVERSIFIED INVESTORS PORTFOLIOS--(CONTINUED)
NOTES TO FINANCIAL STATEMENTS
3. FEES AND TRANSACTIONS WITH AFFILIATES--(CONTINUED)
For the year ended December 31, 1995, the Advisor has voluntarily undertaken
to waive fees in accordance with the expense caps as follows:
<TABLE><CAPTION>
FUND EXPENSE CAP
- ---------------------------------------------------------------------- -----------------------
<S> <C>
Money Market Series................................................... 30 basis points (b.p.)
High Quality Bond Series.............................................. 40 b.p.
Intermediate Government Bond Series................................... 40 b.p.
Government/Corporate Bond Series...................................... 40 b.p.
Balanced Series....................................................... 50 b.p.
Equity Income Series.................................................. 50 b.p.
Growth & Income Series................................................ 65 b.p.
Equity Growth Series.................................................. 75 b.p.
Special Equity Series................................................. 85 b.p
High-Yield Bond Series................................................ 60 b.p.
International Equity Series........................................... 80 b.p.
</TABLE>
Certain trustees and officers of the Series Portfolio are also directors,
officers or employees of the Advisor or its affiliates. None of the trustees so
affiliated receive compensation for services as trustees of the Series
Portfolio. Similarly, none of the Series Portfolio officers receive compensation
from the Series Portfolio.
4. FINANCIAL HIGHLIGHTS:
<TABLE><CAPTION>
RATIO OF NET
RATIO OF RATIO OF NET INVESTMENT
RATIO OF EXPENSES, INVESTMENT INCOME, NET
GROSS NET INCOME TO OF WAIVERS
EXPENSES OF WAIVERS PORTFOLIO TO PORTFOLIO
TO AVERAGE TO AVERAGE AVERAGE NET AVERAGE PORTFOLIO
NET ASSETS NET ASSETS ASSETS NET ASSETS TURNOVER
------------ ------------ ------------ ------------ ------------
1995 1994 1995 1994 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market Series..................... .31% .32% .30% .30% 5.70% 4.05% 5.69% 4.07% n/a n/a
High Quality Bond Series................ .41 .41 .40 .40 5.83 5.77 5.82 5.79 25% 37%
Intermediate Government Bond Series..... .45 .45 .40 .40 5.57 5.71 5.52 5.76 59 21
Government/Corporate Bond Series........ .39 .40 .39 .40 5.90 5.71 5.90 5.72 122 122
Balanced Series......................... .54 .53 .50 .50 4.19 3.57 4.15 3.61 124 118
Equity Income Series.................... .49 .49 .49 -- 3.37 3.43 3.37 3.43 23 30
Growth & Income Series.................. .68 .67 .65 .65 1.49 1.35 1.47 1.37 155 21
Equity Growth Series.................... .75 .76 .75 .75 .41 .08 .41 .11 62 75
Special Equity Series................... .88 .88 .85 .85 .33 .27 .30 .30 155 90
High-Yield Bond Series*................. 1.32 n/a .60 n/a 8.45 n/a 7.73 n/a 21 n/a
International Equity Series*............ .83 n/a .80 n/a .53 n/a .50 n/a 7 n/a
</TABLE>
- ------------
* Annualized (except "Portfolio Turnover")
5. SECURITIES LENDING
The Series may lend its securities to certain firms of the New York Stock
Exchange. The loans are collateralized at all times with cash or securities with
a market value at least equal to the market value of the securities on loan. Any
deficiencies or excess of collateral must be delivered or transferred by the
member firms no later than the close of business on the next business day. As
with other extensions of credit, the Series may bear the risk of delay in
recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. The Series receives compensation, net of related
expenses, for
69
<PAGE>
DIVERSIFIED INVESTORS PORTFOLIOS--(CONTINUED)
NOTES TO FINANCIAL STATEMENTS
5. SECURITIES LENDING--(CONTINUED)
lending its securities which is included in interest income on the Statement of
Operations. At December 31, 1995, the Series loaned securities having market
values as follows:
<TABLE><CAPTION>
MARKET VALUE COLLATERAL
------------ -----------
<S> <C> <C>
Intermediate Government Bond Series...................... $ 9,632,499 $10,072,779
Government/Corporate Bond Series......................... 24,882,591 25,522,680
Balanced Series.......................................... 44,855,823 45,264,696
Equity Income Series..................................... 32,341,850 40,895,567
Growth & Income Series................................... 9,295,738 8,426,958
Equity Growth Series..................................... 38,008,275 43,322,473
Special Equity Series.................................... 24,289,950 25,517,296
</TABLE>
6. PURCHASE AND SALES OF INVESTMENTS
The aggregate cost of investments purchased and proceeds from sales or
maturities for the year ended December 31, 1995, except for the High-Yield Bond
Series and the International Equity Series, which commenced operations on August
22, 1995 and September 29, 1995, respectively, were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C> <C>
High Quality Bond Government Obligations $ 7,485,156 $ 9,775,000
Other 90,987,861 27,551,146
Intermediate Government Government Obligations 39,072,203 46,901,641
Bond Other 2,483,850 0
Government/Corporate Government Obligations 197,580,983 209,414,611
Bond Other 122,386,994 79,397,548
Balanced Government Obligations 57,119,727 59,294,289
Other 126,156,208 110,742,597
Equity Income Other 134,758,652 150,097,939
Growth & Income Other 149,015,878 153,018,963
Equity Growth Other 140,230,205 97,274,051
Special Equity Other 377,723,502 364,616,633
High-Yield Bond Other 9,592,564 1,527,669
International Equity Other 10,480,055 4,995,961
</TABLE>
70
<PAGE>
DIVERSIFIED INVESTORS PORTFOLIOS--(CONTINUED)
NOTES TO FINANCIAL STATEMENTS
7. FORWARD CURRENCY CONTRACTS
At December 31, 1995, the International Equity Series had entered into
forward currency contracts which contractually obligate the Portfolio to
deliver/receive currency at specified future dates. The open contracts are as
follows:
<TABLE>
<CAPTION>
UNITS OF IN EXCHANGE NET UNREALIZED
VALUE DATE DELIVER/RECEIVE CURRENCY FOR APPR/(DEPR)
- ----------------- ----------------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
Buys
01/03/96 Spanish Peseta 2,110,172 $ 17,370 $ 24
01/24/96 Canadian Dollars 814,248 597,467 (748)
10/30/96 Japanese Yen 93,267,250 962,610 (21,277)
--------------
($22,001)
--------------
Sells
01/02/96 Malaysian Ringgit 189 $ 74 $ 0
01/04/96 Japanese Yen 15,595,020 151,629 377
01/24/96 Canadian Dollars 814,248 593,000 (3,718)
03/11/96 German Marks 433,140 300,000 (3,813)
10/15/96 Japanese Yen 377,578,600 3,962,000 157,873
10/15/96 Japanese Yen 19,026,000 200,000 8,312
10/30/96 Japanese Yen 93,267,250 965,000 23,667
--------------
$182,697
--------------
</TABLE>
71
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF TRUSTEES AND OWNERS OF BENEFICIAL INTERESTS OF THE
DIVERSIFIED INVESTORS PORTFOLIOS:
We have audited the accompanying statements of assets and liabilities of
Diversified Investors Portfolios (comprising, respectively, the Money Market,
High Quality Bond, Intermediate Government Bond, Government/Corporate Bond,
Balanced, Equity Income, Growth and Income, Equity Growth, Special Equity,
High-Yield Bond and International Equity Portfolios) (collectively the "Series
Portfolios") as of December 31, 1995 and the related statements of operations
for the year then ended, and the statements of changes in net assets and the
financial highlights for each of the two years in the period then ended for each
Portfolio except the High-Yield Bond and International Equity Portfolios, for
which the periods were from August 22, 1995 and September 29, 1995 (commencement
of operations), respectively, to December 31, 1995. These financial statements
and financial highlights are the responsibility of the Series Portfolios
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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. Our procedures included
confirmation of securities owned as of December 31, 1995 by correspondence with
the custodian and brokers. 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 constituting Diversified Investors Portfolios as of
December 31, 1995, the results of their operations, the changes in their net
assets, and the financial highlights for the periods referred to above in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
February 12, 1996
72
<PAGE>
Annual Report--December 31, 1995
--------------
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO
Managed by Calvert Asset Management Company, Inc. and NCM Capital
Management, Inc., effective February 1995
Dear Investor:
In seeking to provide investors with consistently competitive
returns, the Board of Directors selected different investment managers. In
February, NCM Capital assumed responsibility for managing the equity portion
of the Portfolio and Calvert Asset Management Company, Inc. assumed
responsibility for managing the Portfolio's fixed-income assets. U.S. Trust
Company of Boston was the previous investment manager.
The 12-month period ended December 31, 1995 proved to be an excellent
one for most investors as a cooling economy, tame inflation and falling
interest rates worked together to push stock and bond prices higher. Gross
Domestic Product (GDP) slowed to 2% annualized, based on estimates of fourth
quarter data. To stimulate the economy, the Federal Reserve lowered interest
rates twice in the second half of 1995, reducing its target for the federal
funds rate to 5.5% by year end.
[GRAPH]
- ------------------------------------------------------------------------
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO
Comparison of change in value of a
hypethetical $10,000 investment
40,000 ----------------------------------------------------
35,513
35,000 ----------------------------------------------------
30,000 ----------------------------------------------------
25,000 ----------------------------------------------------
24,648
22,242
20,000 ----------------------------------------------------
16,681
15,000 ----------------------------------------------------
10,000 ----------------------------------------------------
5,000 ----------------------------------------------------
9/86 12/89 12/93
12/87 12/91 12/95
CRI Balanced
S&P 500*
Lehman Aggregated Bond
90 - Day T-Bill
Average Annual Total Return
(periods ending 12/31/95)
1 Year 29.87% 5 Year 11.16%
Life of Fund 10.15% (9/86)*
- ------------------------------------------------------------------------
* New sub-advisors assumed management of the
Portfolio effective February 1995.
Performance information is for the Portfolio only and does not reflect
charges and expenses of the variable annuity. Past performance does not
indicate future results.
- ------------------------------------------------------------------------
MARKET SUMMARY
The stock market, as measured by the Standard & Poor's 500 Registration
Mark Index, had its best year since 1975, rising 34% for the year. Stocks
from the technology and financial sectors were among the leading issues.
Investors sought the safety of large-capitalization stocks which outperformed
small-capitalization stocks by a significant margin.
<PAGE>
As yields fell, bonds moved ahead, with the Lehman Aggregate Bond
Index advancing 18.47%. Money market investors paid a high price for security
as the average money market fund returned just over 5% for the entire year.
PERFORMANCE AND STRATEGY
For the 12-month period ended December 31, 1995, the Balanced
Portfolio's total return of 29.87% was significantly ahead of the Lipper
Balanced Funds Average total return of 25.16%.
The Portfolio's above-average gain was due to its substantial equity
investments in the financial, technology and consumer-staple sectors.
Particularly, our financial service holdings benefited from declining
interest rates and from merger and acquisition activity in the banking area.
The fixed-income portion is continuing to make a significant contribution to
the Portfolio's performance. Near the end of the year, we added callable
agency securities to the Portfolio as they became undervalued by the rest of
the market. Currently, the average maturity of the Portfolio's bond portion
is approximately 7.9 years.
OUTLOOK
Nineteen ninety-six marks the sixth year of the economic expansion.
With a sluggish economy at hand, we would not be surprised to see the Federal
Reserve cut short-term rates another 50 basis points, possibly as early as
the first quarter. Our forecast for the year calls for continued slow economic
growth, low inflation and low interest rates. Stocks and bonds should continue
to move higher in 1996, albeit at a slower rate than in 1995.
As of this writing, a shareholder meeting was pending to merge the
CRI Bond Portfolio into the CRI Balanced Portfolio. Assuming the merger was
approved, we welcome all CRI Bond Portfolio shareholders.
We appreciate your investment in the CRI Balanced Portfolio.
Sincerely,
/s/ Clifton S. Sorrell
- ----------------------
Clifton S. Sorrell
President
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------
To the Board of Directors of Acacia Capital Corporation and Shareholders of
the Calvert Responsibly Invested Balanced Portfolio:
We have audited the accompanying statement of assets and liabilities
of Calvert Responsibly Invested Balanced Portfolio (one of the portfolios
comprising the Acacia Capital Corporation), including the portfolio of
investments, as of December 31, 1995, and the related statement of operations
for the year then ended, and statement of changes in net assets and financial
highlights for each of the two years 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. The financial highlights for each
of the preceding years were audited by other auditors whose report dated
January 31, 1994 expressed an unqualified opinion thereon.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
investments owned as of December 31, 1995, by correspondence with the custodia
n and brokers. 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 Calvert Responsibly Invested Balanced Portfolio as of December
31, 1995, the results of its operations for the year then ended, and the
changes in its net assets and financial highlights for each of the two years
in the period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
January 26, 1996
<PAGE>
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENT
DECEMBER 31, 1995
---------
Principal
Corporate Debt (8.2%) Amount Value
- --------------------------------------------------------------------------------
BellSouth Savings, 9.19%, 7/1/03 ....................... $ 395,312 $ 445,374
CIT Group Holdings, Inc., 5.82%, 5/11/98 ............... 3,000,000 2,994,132
First Union Corp., 7.50%, 4/15/35 (Tender 7/1/05 @ 100) 2,000,000 2,215,020
Puget Power Consv., 6.45%, 4/11/05 ..................... 1,904,373 1,989,544
United Dominion Reality Trust, Inc., 8.50%, 9/15/24 .... 1,200,000 1,351,200
----------
Total Corporate Debt (Cost $8,687,485) ........... 8,995,270
---------
Mortgage Backed Securities (7.8%)
- --------------------------------------------------------------------------------
Advanta Corp., 5.50%, 3/25/10 ......................... 2,294,773 2,209,436
Federal Home Loan Mortgage Corp., 6.00%, 12/15/19 ..... 1,000,000 999,470
Federal Home Loan Mortgage Corp., 6.50%, 8/15/21 ....... 1,000,000 1,020,350
Federal Home Loan Mortgage Corp., 7.00%, 9/1/25 ....... 976,288 985,133
Federal National Mortgage Assn., 6.50%, 12/25/23 ....... 1,000,000 993,090
Federal National Mortgage Assn., 7.00%, 8/1/25 ......... 990,110 998,149
Government National Mortgage Assn., 6.50%, 12/15/23 ... 1,447,099 1,435,797
---------
Total Mortgage Backed Securities (Cost $8,343,292) .. 8,641,425
---------
Municipal Obligations (6.7%)
- --------------------------------------------------------------------------------
Gardena, California Certificates of Participation VRDN,
6.15%, 7/1/25, LOC: Sumitomo Trust & Banking Ltd. ** 1,500,000 1,500,000
Illinois Housing Development Authority VRDN, 6.027%,
6/1/22, AMBAC Insured (Tender 1/2/96 @ 100) ** ..... 1,600,000 1,600,000
Illinois Housing Development Authority, 8.35%, 8/1/26 .. 1,170,000 1,247,922
Long Beach, California Pension Obligation, 7.14%, 9/1/10,
FSA Insured ........................................ 1,000,000 1,043,420
Sacramento County, California Pension Funding, 5.98%,
8/15/14, MBIA Insured (Tender 2/15/96 @ 100) ....... 2,000,000 2,000,000
---------
Total Municipal Obligations (Cost $7,277,136)....... 7,391,342
---------
REPURCHASE AGREEMENTS FOR DEPOSIT
AT COST, COLLATERALIZED BY SECURITIES
ISSUED OR GUARANTEED BY THE
U.S. GOVERNMENT (2.7%)
- --------------------------------------------------------------------------------
Donaldson, Lufkin, Jenerette: 5.85%, dated 12/29/95,
due 1/2/96 ($3,055,934, Resolution Funding
Corp., Zero Coupon, 1/15/30) ............................. 3,000,000 3,000,000
---------
Total Repurchase Agreements (Cost $3,000,000) 3,000,000
---------
See notes to portfolio of investments.
<PAGE>
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENT(CONTINUED)
DECEMBER 31, 1995
---------
U.S. Government Agencies and Principal
Instrumentalities (10.6%) Amount Value
- --------------------------------------------------------------------------------
Federal Home Loan Bank, 6.83%, 11/9/00 ............... $1,000,000 $1,001,300
Federal Home Loan Mortgage Corp., 5.47%, 1/5/96 ...... 3,000,000 2,998,177
Federal National Mortgage Assn., 5.49%, 10/2/03 ...... 1,000,000 994,600
Federal National Mortgage Assn., 6.85%, 9/12/05 ...... 2,500,000 2,573,300
Resolution Funding Corp., 8.625%, 1/15/21 ............ 1,000,000 1,309,140
Small Business Administration, 8.05%, 6/1/12 ......... 869,101 925,854
U.S. Department of Veteran Affairs, 8.00%, 7/15/18 ... 1,000,000 1,067,830
WNH Ltd Partnership, 9.40%, 10/01/99 ................. 705,000 764,509
---------
Total U.S. Government Agencies and Instrumentalities
(Cost $11,303,794) .............................. 11 ,634,710
U.S. TREASURY (4.5%)
- --------------------------------------------------------------------------------
U.S. Treasury Bonds, 6.875%, 8/15/25 ................... 3,500,000 3,949,750
U.S. Treasury Notes, 5.875%, 11/15/05 .................. 1,000,000 1,022,650
---------
Total U.S. Treasury (Cost $4,935,525 ) ............. 4,972,400
OTHER DEBT (0.9%)
- --------------------------------------------------------------------------------
Chickasaw Nation, Oklahoma, 10.00%, 8/1/03 ........... 1,000,000 1,000,000
---------
Total Other Debt (Cost $1,000,000) ................... 1,000,000
EQUITY SECURITIES (57.8%) SHARES
- --------------------------------------------------------------------------------
BEVERAGE HOTEL AND LEISURE (1.9%)
Delta Corp. .................................... 350,000 920,719
Regal Cinemas, Inc. * .......................... 39,683 1,180,554
---------
2,101,273
---------
BIOTECHNOLOGY (1.1%)
Amgen, Inc. * ................................... 21,160 1,256,375
---------
1,256,375
---------
BUSINESS EQUIPMENT AND SERVICES (2.3%)
Hewlett Packard Co. ............................. 16,000 1,340,000
Xerox Corp. ..................................... 8,850 1,212,450
--------
2,552,450
---------
See notes to portfolio of investments.
<PAGE>
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENT(CONTINUED)
DECEMBER 31, 1995
---------
EQUITY SECURITIES (CONT'D) SHARES VALUE
- --------------------------------------------------------------------------------
COMMUNICATIONS (2.8%)
Ameritech Corp. ..................................... 22,360 $ 1,319,240
DSC Communications Corp. * .......................... 47,860 1,764,838
---------
3,084,078
---------
COMPUTERS (6.0%)
3Com Corp. * ........................................ 26,300 1,226,238
BMC Software, Inc. * ................................ 23,470 1,003,343
Computer Associates International, Inc. ............. 21,950 1,248,406
Oracle Systems Corp. * .............................. 23,405 991,787
Seagate Technology * ................................ 17,700 840,750
Sun Microsystems, Inc. * ............................ 28,820 1,314,913
---------
6,625,437
---------
CONSUMER PRODUCTS (1.3%)
Gillette Co. ........................................ 26,700 1,391,738
---------
1,391,738
---------
DELIVERY (0.6%)
Federal Express Corp. * ............................. 9,300 687,038
-------
687,038
-------
ELECTRONICS (5.5%)
Arrow Electronics, Inc. * ........................... 22,090 952,631
E M C Corp. * ....................................... 73,350 1,127,756
Linear Technology Corp. ............................. 17,900 702,575
Micron Technology, Inc. ............................. 19,600 776,634
Philips Electronics N.V ............................. 28,100 1,008,088
Teradyne, Inc. (rights) * ........................... 58,280 1,457,000
---------
6,024,684
---------
Entertainment (1.2%)
Walt Disney Co. ..................................... 21,905 1,292,395
---------
1,292,395
---------
FINANCIAL SERVICES (9.8%)
Advanta Corp., Class A .............................. 15,100 577,575
Bank New York, Inc. ................................. 25,800 1,257,750
Bank of Boston Corp. (rights) ....................... 32,915 1,522,319
Baybanks, Inc. (rights) ............................. 15,845 1,556,771
Federal National Mortgage Assn ...................... 12,200 1,514,325
Green Tree Finl Corp. ............................... 37,830 997,766
Umbono Investment Corp., Ltd. * .....................1,156,540 3,331,140
----------
10,757,646
----------
See notes to portfolio of investments.
<PAGE>
EQUITY SECURITIES (CONT'D) SHARES VALUE
- --------------------------------------------------------------------------------
FOOD SERVICES (2.5%)
Kellogg Co. .................................... 17,150 $1,324,837
Sysco Corp. (rights) ........................... 44,300 1,439,750
----------
2,764,587
----------
HEALTH CARE (2.6%)
Healthcare Compare Corp. * ..................... 33,650 1,463,775
Johnson & Johnson .............................. 16,700 1,429,937
----------
2,893,712
----------
INDUSTRIAL PRODUCTS (2.8%)
Applied Materials, Inc. * ..................... 15,600 676,650
Sigma Aldrich Corp. ............................ 23,325 1,154,587
Wellman, Inc. .................................. 20,200 459,550
----------
3,066,474
----------
INSURANCE (3.1%)
AFLAC, Inc. .................................... 17,900 776,413
Allstate Corp. ................................. 31,550 1,297,494
American International Group, Inc. ............. 14,650 1,355,125
----------
3,429,032
----------
MACHINERY (1.3%)
AGCO Corp. ..................................... 26,920 1,372,920
----------
1,372,920
MANUFACTURING (1.0%)
Dover Corp. .................................... 31,400 1,157,875
----------
1,157,875
MEDIA AND PUBLISHING (1.0%)
Scholastic Corp. * ............................. 13,665 1,062,454
----------
1,062,454
----------
MEDICAL (3.4%)
Becton Dickinson & Co. ......................... 22,700 1,702,500
Boston Scientific Corp. * ...................... 15,085 739,165
Medtronic, Inc. ................................ 24,100 1,346,587
----------
3,788,252
----------
MERCHANDISING (0.9%)
Albertson's, Inc. .............................. 28,980 952,717
----------
952,717
----------
See notes to portfolio of investments.
<PAGE>
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENT(CONTINUED)
DECEMBER 31, 1995
---------
EQUITY SECURITIES (CONT'D) SHARES VALUE
- --------------------------------------------------------------------------------
OIL & GAS (0.7%)
Smith International, Inc. (rights)* .............. 33,135 $ 778,673
----------
778,673
----------
PAPER AND PACKAGING (0.9%)
Chesapeake Corp. (rights) ........................ 33,410 989,771
----------
989,771
----------
PHARMACEUTICAL (1.4%)
Merck & Co., Inc. ................................ 24,000 1,578,000
----------
1,578,000
----------
RETAIL (1.0%)
Consolidated Stores Corp. * ...................... 49,550 1,077,713
----------
1,077,713
----------
TELECOMMUNICATIONS (2.7%)
Century Tel Enterprises, Inc. (rights) ........... 52,045 1,652,429
Ericsson L M Tel, Co., Class B, ADR .............. 69,305 1,351,447
----------
3,003,876
----------
Total Equity Securities (Cost $53,795,240) .. 63,689,170
----------
TOTAL INVESTMENTS (99.2%)
(Cost $98,342,472) ..................... $109,324,317
============
<PAGE>
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENT
DECEMBER 31, 1995
---------
ASSETS
- --------------------------------------------------------------------------------
Investments in securities, at value
- see accompanying portfolio ........................... $109,324,317
Cash ....................................................... 529,881
Receivable for securities sold ............................. 1,118,254
Interest and dividends receivable .......................... 619,319
Other assets ............................................... 1,146
-----------
Total assets ........................................... 111,592,917
-----------
Liabilities
- --------------------------------------------------------------------------------
Payable for securities purchased ........................... 1,285,855
Payable to Calvert Asset Management Company, Inc. .......... 65,553
Accrued expenses and other liabilities ..................... 4,296
------------
Total liabilities ...................................... 1,355,704
------------
Net assets ........................................... $110,237,213
============
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Par value and paid-in capital applicable to
64,728,020 shares of common stock outstanding;
$1 par value, 70,000,000 shares authorized ............. $ 98,074,699
Undistributed net investment income (loss) ................. 270,941
Accumulated net realized gains (losses) on investments
and foreign currencies ................................. 909,752
Net unrealized appreciation (depreciation) on investments
and assets and liabilities in foreign currencies ....... 10,981,821
------------
NET ASSETS ............................................. $110,237,213
============
Net Asset Value per Share .............................. $ 1.703
============
See notes to portfolio of investments.
<PAGE>
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENT
DECEMBER 31, 1995
---------
NET INVESTMENT INCOME
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Interest income ............................................. $2,666,330
Dividend income (net of foreign taxes of $14,460) ........... 724,043
---------
Total investment income ..................................... 3,390,373
---------
Expenses
Investment advisory fee ..................................... 610,216
Directors' fees and expenses ................................ 11,987
Custodian fees .............................................. 24,129
Registration fees ........................................... 6,340
Reports to shareholders ..................................... 44,249
Professional fees ........................................... 25,803
Miscellaneous ............................................... 3,565
---------
Total expenses .......................................... 726,289
Fees paid indirectly .................................... (24,129)
---------
Net expenses ........................................ 702,160
---------
Net Investment Income ............................ 2,688,213
---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
- --------------------------------------------------------------------------------
Net realized gain (loss) on:
Securities .............................................. 9,151,962
Foreign currencies ...................................... (20,556)
---------
9,131,406
---------
Change in unrealized appreciation or depreciation on:
Securities .............................................. 10,212,497
Assets and liabilities in foreign currencies ............ (24)
----------
10,212,473
----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... 19,343,879
----------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................ $ 22,032,092
============
See notes to financial statements.
<PAGE>
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENT
DECEMBER 31, 1995
---------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
OPERATIONS
Net investment income ..................... $ 2,688,213 $ 2,063,409
Net realized gain (loss) on investments ... 9,131,406 (604,541)
Change in unrealized appreciation
or depreciation .......................... 10,212,473 (3,394,657)
---------- ----------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............. 22,032,092 (1,935,789)
---------- ----------
Distributions to shareholders from:
Net investment income ..................... (2,379,651) (2,067,159)
Net realized gain on investments .......... (7,467,802) --
---------- ----------
Total distributions ...................... (9,847,453) (2,067,159)
---------- ----------
Capital share transactions
Shares sold ............................... 27,827,859 21,821,042
Reinvestment of distributions ............. 9,847,448 2,067,159
Shares redeemed ........................... (6,215,413) (7,292,332)
---------- ----------
Total capital share transactions ..... 31,459,894 16,595,869
---------- ----------
TOTAL INCREASE (DECREASE)
IN NET ASSETS ............................... 43,644,533 12,592,921
Net Assets
- --------------------------------------------------------------------------------
Beginning of year ......................... 66,592,680 53,999,759
---------- ----------
End of year ( including undistributed
net investment income (loss) of $270,941
and $(22), respectively.) ............... $ 110,237,213 66,592,680
============= ==========
CAPITAL SHARE ACTIVITY
- --------------------------------------------------------------------------------
Shares sold ............................... 16,449,557 14,565,450
Reinvestment of distributions ............. 5,782,412 1,425,675
Shares redeemed ........................... (3,747,516) (4,889,932)
---------- ----------
Total capital share activity .............. 18,484,453 11,101,193
========== ==========
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
GENERAL: The Balanced Portfolio (the "Portfolio"), a series of Acacia Capital
Corporation's Calvert Responsibly Invested (CRI) Portfolios, is registered under
the Investment Company Act of 1940 as a non-diversified, open-end management
investment company. The Balanced Portfolio was formerly known as Calvert
Responsibly Invested Managed Growth Portfolio/Socially Responsible Series. The
operations of each series are accounted for separately. The shares of the
Portfolio are sold to affiliated and unaffiliated insurance companies for
allocation to certain of their variable separate accounts.
SECURITY VALUATION: Securities listed or traded on a national securities
exchange are valued at the last reported sale price. Unlisted securities and
listed securities for which the last sale price is not available are valued
at the most recent bid price or based on a yield equivalent obtained from the
securities' market maker. Short-term securities maturing within 60 days are
valued at amortized cost which approximates market. Foreign security prices,
furnished by quotation services in the security's local currency, are
translated using the current U. S. dollar exchange rate. Municipal securities
are valued utilizing the average of bid prices or at bid prices based on a
matrix system (which considers such factors as security prices, yields,
maturities and ratings) furnished by dealers through an independent pricing
service. Other securities and assets for which market quotations are not
available or deemed inappropriate are valued in good faith under the
direction of the Board of Directors.
REPURCHASE AGREEMENTS: The Portfolio may enter into repurchase agreements
with recognized financial institutions or registered broker/dealers and, in
all instances, holds underlying securities with a value exceeding the total
repurchase price, including accrued interest.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are accounted
for on trade date. Realized gains and losses are recorded on an identified cost
basis. Dividend income is recorded on the ex-dividend date or, in the case of
dividends on certain foreign securities, as soon as the Portfolio is informed of
the ex-dividend date. Interest income, accretion of discount and amortization of
premium are recorded on an accrual basis.
FOREIGN CURRENCY TRANSACTIONS: The Portfolio's accounting records are
maintained in U. S. dollars. For purposes of valuation of investments, assets
and liabilities on each date of net asset value determination, the current
exchange rate is applied to foreign currencies for translation to U. S.
dollars. Security transactions, income and expenses are converted at the
prevailing rate of exchange on the date of the event. The changes in foreign
exchange rates on securities are included in the net realized and unrealized
gain or loss on securities.
DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders are recorded by
the Portfolio on ex-dividend date. Dividends from net investment income are
paid annually. Distributions from net realized capital gains, if any, are
paid at least annually. Distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles,
<PAGE>
accordingly, periodic reclassifications are made within the
Portfolio's capital accounts to reflect income and gains available for
distribution under income tax regulations.
EXPENSE OFFSET ARRANGEMENTS: The Portfolio has an arrangement with its
custodian bank whereby the custodian's fees are paid indirectly by credits
earned on the Portfolio's cash on deposit with the bank. Such deposit
arrangement is an alternative to overnight investments.
FEDERAL INCOME TAXES: No provision for federal income or excise tax is
required since the Portfolio intends to continue to qualify as a regulated
investment company under the Internal Revenue Code and to distribute
substantially all of its earnings.
NOTE B--RELATED PARTY TRANSACTIONS
Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by
Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by Acacia
Mutual Life Insurance Company. The Advisor provides investment advisory
services and pays the salaries and fees of officers and affiliated Directors
of the Portfolio. For its services, the Advisor receives a monthly fee based
on an annual rate of .70% of the Portfolio's average daily net assets.
Calvert Shareholder Services, Inc., an affiliate of the Advisor, acts as
transfer, dividend disbursing and shareholder servicing agent for the Portfolio.
Each Director who is not affiliated with the Advisor receives a fee of $500
for each Board meeting attended plus an annual fee of $2,000 for Directors
not serving on other Calvert Fund Boards. Director's fees are allocated to
each of the portfolios served.
NOTE C--INVESTMENT ACTIVITY
During the year, purchases and sales of investments, other than short-term
securities, were $151,831,684 and $125,197,142, respectively.
The cost of investments owned at December 31, 1995 for federal income tax
purposes was $98,398,834. Net unrealized appreciation aggregated $10,925,483,
of which $12,196,885 related to appreciated securities and $1,271,402 related
to depreciated securities.
NOTE D--SUBSEQUENT EVENT
The shareholders of CRI Bond Portfolio have been asked to vote (under the
instructions of the contract holders) on February 16, 1996 on a merger into
the Portfolio effected by a tax-free exchange of net assets of CRI Bond,
approximately $3.6 million, for shares of the Portfolio.
<PAGE>
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DEC 31, DEC 31, DEC 31, DEC 31, DEC 31,
1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning ................ $1.44 $1.537 $1.465 $1.403 $1.249
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
---------------------------------
Net investment income ................. .050 .046 .045 .044 .050
Net realized and unrealized gain (loss) .380 (.097) .072 .062 .154
--------- --------- --------- --------- ---------
Total from investment operations ... .430 (.051) .117 .106 .204
--------- --------- --------- --------- ---------
DISTRIBUTIONS FROM
--------------------
Net investment income ................. (.040) (.046) (.045) (.044) (.050)
Net realized gains .................... (.127) -- -- -- --
--------- --------- --------- --------- ---------
Total distributions ................ (.167) (.046) (.045) (.044) (.050)
--------- --------- --------- --------- ---------
Total increase (decrease) in
net asset value ....................... .263 (.097) .072 .062 .154
--------- --------- --------- --------- ---------
Net asset value, ending ................... $1.703 $1.440 $1.537 $1.465 $1.403
========= ========= ========= ========= =========
Total return .............................. 29.87% (3.30%) 8.00% 7.61% 16.40%
========= ========= ========= ========= =========
Ratios to average net assets:
Net investment income ................. 3.08% 3.39% 3.69% 4.05% 4.49%
========= ========= ========= ========= =========
Total expenses ........................ .83% -- -- -- --
========= ========= ========= ========= =========
Net expenses .......................... .81% .80% .81% .85% .85%
========= ========= ========= ========= =========
Portfolio turnover ........................ 163% 43% 14% 15% 12%
========= ========= ========= ========= =========
Net assets, ending (in thousands) ......... $110,237 $66,593 $54,000 $28,471 $14,946
========= ========= ========= ========= =========
Number of shares outstanding,
ending (in thousands) ................. 64,728 46,244 35,142 19,433 10,656
========= ========= ========= ========= =========
</TABLE>
Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the
ratio of net expenses.
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
SCUDDER [LOGO]
Scudder Variable Life
Investment Fund
Annual Report
December 31, 1995
An open-end management investment company that offers shares of beneficial
interest
in six types of diversified portfolios, one of which is offered herein.
<PAGE>
SCUDDER VARIABLE LIFE INVESTMENT FUND
Contents
Letter from the Fund's President .......................................... 2
International Portfolio Management Discussion ............................. 3
International Portfolio Summary ........................................... 4
Investment Portfolio, Financial Statements, and Financial Highlights
International Portfolio ............................................. 5
Notes to Financial Statements ............................................. 15
Report of Independent Accountants ......................................... 18
<PAGE>
SCUDDER VARIABLE LIFE INVESTMENT FUND
LETTER FROM THE FUND'S PRESIDENT
[PHOTO]
David B. Watts, President,
Scudder Variable Life
Investment Fund
Dear Shareholders,
Global stock and bond markets generally were strong in 1995, as slow
growth, moderate inflation, and falling interest rates provided a positive
economic backdrop. The biggest investment story of the year was the stunning
advance in the domestic stock market, as the average U.S. equity mutual fund
tracked by Lipper Analytical Services rose 31.07%. The U.S. bond markets rallied
as well, as evidenced by the average return of 17.30% for funds in Lipper's
income category--the product of sharply declining interest rates.
Internationally, while several European bourses provided solid returns in 1995,
interest rate declines in that region were not as compelling to investors as
those in the U.S., and market returns were correspondingly lower. Japan's stock
market was essentially flat, although the investment climate in that country
appeared to be improving as the year drew to a close.
Despite its impressive performance in 1995, the U.S. stock market appears
to be reasonably valued based on 1996 earnings forecasts. In addition, the
long-term outlook for U.S. financial assets is positive, as the economy is
expected to grow without inflation. A repeat of 1995's exceptional performance
is unlikely, however, especially if the economy slows in the coming year, as
anticipated. Many international markets are attractively valued by comparison,
and economies such as those in Europe are just beginning to realize the full
impact of falling interest rates and corporate restructuring--underscoring the
value of a global approach to investing.
We see a number of trends underway that support the outlook for investment
in the U.S. and around the world. Technology is bringing efficiencies to every
stage of the product cycle, from design to distribution. Globalization has
widened the competitive universe, making inflationary price increases less
likely. Deregulation is subjecting major industries to market discipline,
increasing capacity and reducing supply bottlenecks. While investing will always
involve uncertainties and market fluctuation, the net result of these forces may
well be an era of disinflationary growth that benefits investors and raises
living standards worldwide. We look forward to the challenges and opportunities
afforded by the evolving economic landscape, and thank you for your continued
investment in Scudder Variable Life Investment Funds.
Sincerely,
/s/David B. Watts
David B. Watts
President,
Scudder Variable Life Investment Fund
- ----
2
<PAGE>
INTERNATIONAL PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
The international equity investment climate was generally positive in 1995,
as slow growth, low interest rates, and low inflation prevailed in most major
economies. The International Portfolio's return of 11.11% for the 12 months
ended December 31, is in line with the 11.46% return of the unmanaged Morgan
Stanley Capital International Europe, Australia, and Far East plus Canada Index,
and compares favorably with the 9.41% average return of international funds
tracked by Lipper Analytical Services.
Throughout the year, Portfolio weightings favored Europe at the expense of
Japan. This strategy proved effective, as European stock markets in aggregate
produced solid returns. Among the major European bourses, Switzerland and Great
Britain turned in especially strong performances, with returns of 25.9% and
17.2%, respectively. After a shaky start to the year, the Japanese market
essentially finished flat, staging a recovery over the last quarter based on
lower interest rates and signs of a more determined effort on the part of the
government to address the underlying problems in the economy.
Going forward, while we have trimmed our European holdings, we remain
modestly overweight in the region, which we consider attractively valued. With
growth falling and unemployment rising, a key issue is whether France and other
European governments laboring under large budget deficits will be able to meet
the criteria established in Maastricht for European Monetary Union. We believe
that some degree of monetary stimulus is likely and that rates will fall
further, and have therefore added to or initiated positions in interest rate
sensitive stocks, such as French insurer AXA and Spanish motorway operator
Acesa.
Outside of Europe, we have increased our Japanese weighting. The yen has
given back some of its gains versus the dollar--a positive for Japan's
export-driven economy. Firms continue to restructure and interest rates are low.
Moreover, Japan is one of the few markets poised to benefit from the early
stages of economic recovery and upward revisions in corporate earnings.
Accordingly, we have added to Japanese stocks that are sensitive to economic
growth, such as retail conglomerate Ito-Yokado and specialized component
manufacturer THK.
In the year ahead, we will continue to focus on finding companies with the
ability to thrive in an increasingly globalized economy characterized by slow
growth and low inflation. The International Portfolio continues to provide a
vehicle for important exposure to economies and stock markets outside of the
United States.
Sincerely,
Your Portfolio Management Team
/s/Carol L. Franklin /s/Nicholas Bratt
Carol L. Franklin Nicholas Bratt
Lead Portfolio Manager
/s/Joan R. Gregory
Joan R. Gregory
----
3
<PAGE>
INTERNATIONAL PORTFOLIO
PORTFOLIO SUMMARY as of December 31, 1995
-----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
-----------------------------------------------------------------
INTERNATIONAL PORTFOLIO
----------------------------------------
Total Return
Period Growth --------------
Ended of Average
12/31/95 $10,000 Cumulative Annual
-------- ------- ---------- ------
1 Year $11,111 11.11% 11.11%
5 Year $16,403 64.03% 10.40%
Life of
Fund* $21,773 117.73% 9.39%
MSCI EAFE @ Canada Index
--------------------------------------
Total Return
Period Growth --------------
Ended of Average
12/31/95 $10,000 Cumulative Annual
-------- ------- ---------- ------
1 Year $11,146 11.46% 11.46%
5 Year $15,540 55.40% 9.21%
Life of
Fund* $15,509 55.09% 5.24%
*The Fund commenced operations on May 1, 1987.
Index comparisons begin May 31, 1987.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
YEARLY PERIODS ENDED DECEMBER 31
Bond Portfolio
Year Amount
----------------------
5/31/87* $10,000
87 $ 8,997
88 $10,502
89 $14,470
90 $13,363
91 $14,893
92 $14,433
93 $19,896
94 $19,727
95 $21,919
MSCI EAFE & Canada Index
Year Amount
----------------------
5/31/87* $10,000
87 $ 9,138
88 $11,682
89 $12,968
90 $ 9,980
91 $11,186
92 $ 9,824
93 $12,961
94 $13,915
95 $15,509
The Morgan Stanley Capital International (MSCI) Europe, Australia, the Far
East (EAFE) & Canada Index is an unmanaged capitalization-weighted measure
of stock markets in Europe, Australia, the Far East and Canada. Index returns
assume dividends reinvested net of witholding tax and, unlike Fund returns,
do not reflect any fees or expenses.
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Investment return
and principal value will fluctuate, so an investor's shares, when redeemed,
may be worth more or less than when purchased. Total returns in some
periods were higher due to maintenance of the Fund's expenses. See Financial
Highlights for the International Portfolio.
- -------------------------------------------------------------------
DIVERSIFICATION
- -------------------------------------------------------------------
By Region By Sector
(Excluding Cash Equivalents) (Equity Holdings)
- ---------------------------- ---------------------------
Europe 53% Manufacturing 21%
Japan 27% Financial 12%
Pacific Basin 13% Metals & Minerals 9%
Latin America 4% Technology 8%
Canada 3% Durables 7%
---- Energy 7%
100%
==== Service Industries 6%
Health 5%
Consumer Staples 5%
Other 20%
----
100%
====
Graphs in the form of pie charts appears here,
illustrating the exact data points in the above table.
- -------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
- -------------------------------------------------------------------
1. SAP AG
German computer software manufacturer
2. CANON NC.
Leading producer of visual image and information equipment in Japan
3. MATSUSHITA ELECTRICAL INDUSTRIAL CO., LTD.
Consumer electronic products manufacturer in Japan
4. SMC CORP.
Leading maker of pneumatic equipment in Japan
5. FUJITSU LTD.
Leading manufacturing of computers in Japan
6. KYOCERA CORP.
Leading ceramic package manufacturer in Japan
7. TELECOM ITALIA MOBILE SPA
Cellular telecommunication services in Italy
8. SKANDIA FOERSAEKRINGS AB
Swedish financial conglomerate
9. HUTCHISON WHAMPOA, LTD.
Container terminal and real estate company in Hong Kong
10. HEINEKEN HOLDINGS N.V.
Brewery in the Netherlands
- ----
4
<PAGE>
<TABLE><CAPTION>
INTERNATIONAL PORTFOLIO
INVESTMENT PORTFOLIO as of December 31, 1995
- ----------------------------------------------------------------------------------------------------------------------------------
% of Principal Market
Portfolio Amount ($) Value ($)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------
7.0% REPURCHASE AGREEMENT
----------------------------------------------------------------------------------
U.S. $37,648,000 Repurchase Agreement with Donaldson, Lufkin
& Jenrette dated 12/29/95 at 5.85%, to be
repurchased at $37,672,471 on 1/2/96, collateralized
by a $39,769,000 U.S. Treasury Bill, 11/14/96
(Cost $37,648,000).................................... 37,648,000
----------
----------------------------------------------------------------------------------
0.0% BONDS
----------------------------------------------------------------------------------
DM 350,000 Deutsche Bank AG, 8%, 4/11/00 (Cost $190,295)........... 268,517
----------
----------------------------------------------------------------------------------
3.9% PREFERRED STOCKS
----------------------------------------------------------------------------------
Shares
----------------------------------------------------------------------------------
GERMANY 3.4%
15,000 RWE AG (Producer and marketer of petroleum
and chemical products)............................... 4,188,482
92,500 SAP AG (Computer software manufacturer)................. 14,012,216
----------
18,200,698
----------
ITALY 0.5% 1,500,000 Fiat SpA (Multi-industry, automobiles).................. 2,742,749
----------
TOTAL PREFERRED STOCKS (Cost $9,723,236)................ 20,943,447
----------
----------------------------------------------------------------------------------
89.1% COMMON STOCKS
----------------------------------------------------------------------------------
ARGENTINA 0.7%
170,000 YPF S.A. "D" (ADR) (Petroleum company).................. 3,676,250
----------
AUSTRALIA 0.6%
1,556,504 Ampol Exploration Ltd. (Oil and gas exploration company)* 3,401,203
----------
BRAZIL 2.9%
8,578,870 Centrais Eletricas Brasileiras S/A "B" (pfd.)
(Electric utility).................................. 2,321,357
5,086,206 Companhia Cervejaria Brahma (pfd.) (Leading beer
producer and distributor) .......................... 2,093,249
28,110,000 Companhia Vale do Rio Doce (pfd.) (Diverse mining
and industrial complex)............................. 4,627,398
22,000,000 Petroleo Brasileiro S/A (pfd.) (Petroleum company) ..... 1,878,471
65,040,000 Telecomunicacoes Brasileiras S.A. (pfd.)
(Telecommunication services)........................ 3,131,717
2,330,200,000 Usinas Siderurgicas de Minas Gerais S/A (pfd.)
(Non-coated flat products and electrolytic
galvanized products)* ........................... 1,893,984
----------
15,946,176
----------
CANADA 2.4%
160,000 Barrick Gold Corp. (Gold exploration and production
in North and South America)......................... 4,219,007
206,500 Canadian National Railway Co. (Operator of one of
Canada's two principal railroads)*.................. 3,097,500
203,043 Canadian Pacific Ltd. (Ord.) (Transportation and
natural resource conglomerate)...................... 3,699,457
200,000 Hemlo Gold Mines, Inc. (Large gold producer, with
single mine in Ontario; active exploration
company).......................................... 1,904,413
----------
12,920,377
----------
DENMARK 0.8%
85,000 Unidanmark A/S "A" (Bank holding company) 4,212,471
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
----
5
<PAGE>
<TABLE><CAPTION>
INVESTMENT PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
% of Principal Market
Portfolio Amount ($) Value ($)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINLAND 1.5%
116,000 Nokia AB Oy "A" (Leading manufacturer of
cellular telephones) ................................ 4,482,525
247,000 Outokumpu Oy "A" (Metals and minerals).................. 3,920,139
----------
8,402,664
----------
FRANCE 6.9%
55,000 AXA SA (Insurance group providing insurance, finance
and real estate services)............................ 3,710,898
9,300 Carrefour (Hypermarket and food retailing).............. 5,649,213
36,800 Compagnie Bancaire SA (Bank)............................ 4,123,165
12,000 LVMH Moet-Hennessy Louis Vuitton SA (Producer of
wines, spirits and luxury products).................. 2,502,556
88,000 Michelin "B" (Leading tire manufacturer)................ 3,513,883
20,000 Societe Generale (Bank)................................. 2,473,932
50,780 Societe Nationale Elf Aquitaine (Petroleum company)..... 3,745,946
15,996 Societe Nationale Elf Aquitaine (ADR) .................. 587,853
72,508 Total SA "B" (International oil and gas exploration,
development and production).......................... 4,899,590
16,000 Union des Assurances Federales SA (Insurance group) .... 1,913,719
95,523 Valeo SA (Automobile and truck components
manufacturer) ....................................... 4,429,486
----------
37,550,241
----------
GERMANY 4.3%
86,980 Deutsche Bank AG (Bank) ................................ 4,127,072
14,860 Mannesmann AG (Bearer) (Diversified construction
and technology company).............................. 4,737,565
69,000 Schering AG (Pharmaceutical and chemical producer)...... 4,577,361
3,027 Siemens AG (Bearer) (Manufacturer of electrical and
electronic equipment) ............................... 1,658,775
74,200 VEBA AG (Electric utility, distributor of oil and
chemicals)........................................... 3,154,471
12,000 Viag AG (Provider of electrical power and natural gas
services, aluminum products, chemicals, ceramics
and glass)......................................... 4,816,754
----------
23,071,998
----------
HONG KONG 4.3%
3,000,000 First Pacific Co., Ltd. (International management and
investment company).................................. 3,317,168
209,787 HSBC Holdings Ltd. (Bank)............................... 3,174,275
2,700,159 Hong Kong & China Gas Co., Ltd. (Gas utility)........... 4,347,492
1,182,000 Hutchison Whampoa, Ltd. (Container terminal and real
estate company)...................................... 7,184,481
1,510,000 Television Broadcasts, Ltd. (Television broadcasting)... 5,379,955
----------
23,403,371
----------
INDONESIA 1.6%
370,000 HM Sampoerna (Foreign registered) (Tobacco company)..... 3,851,301
200,000 Indocement Tunggal (Foreign registered) (Cement
producer) ........................................... 671,332
75,400 Indonesia Satellite Corp. (ADR) (International
telecommunication services).......................... 2,752,100
402,000 Kalbe Farma (Foreign registered) (Pharmaceutical
producer and distributor)* .......................... 1,362,563
----------
8,637,296
----------
Italy 2.4%
65,000 Luxottica Group SpA (ADR) (Manufacturer and marketer
of eyeglass frames and eyeglasses)................... 3,802,500
4,210,000 Telecom Italia Mobile SpA (Cellular
telecommunication services)*......................... 7,419,262
1,130,000 Telecom Italia SpA (Telecommunication services)......... 1,759,836
----------
12,981,598
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ----
6
<PAGE>
<TABLE><CAPTION>
INTERNATIONAL PORTFOLIO
------------------------------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value ($)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JAPAN 25.6%
140,000 Bridgestone Corp. (Leading automobile tire manufacturer)..... 2,222,652
508,000 Canon Inc. (Leading producer of visual image and
information equipment)..................................... 9,196,128
510 DDI Corp. (Long distance telephone and cellular operator).... 3,949,661
825 East Japan Railway Co. (Railway operator).................... 4,009,196
705,000 Fujitsu Ltd. (Leading manufacturer of computers)............. 7,848,499
190,000 Hitachi Construction Machinery Co., Ltd.
(Leading maker of hydraulic shovels)....................... 2,299,129
497,000 Hitachi Ltd. (General electronics manufacturer).............. 5,003,679
465,000 Hitachi Metals, Ltd. (Major producer of high-quality
specialty steels).......................................... 5,806,873
88,000 Horipro Inc. (Growing entertainment production company)...... 1,175,605
77,000 Ito-Yokado Co., Ltd. (Leading supermarket operator).......... 4,740,755
465,000 Itochu Corp. (Leading general trading company)............... 3,128,509
58,000 Jusco Co., Ltd. (Major supermarket operator)................. 1,510,358
830,000 Kawasaki Steel Corp. (Major integrated steelmaker)........... 2,892,546
44,000 Keyence Corp. (Specialized manufacturer of sensors).......... 5,068,732
103,000 Kyocera Corp. (Leading ceramic package manufacturer)......... 7,647,725
37,000 Mabuchi Motor Co., Ltd. (Manufacturer of DC motors).......... 2,299,516
280,000 Matsushita Electric Works, Inc. (Leading maker of
building materials and lighting equipment)................. 2,954,501
520,000 Matsushita Electrical Industrial Co., Ltd. (Consumer
electronic products manufacturer).......................... 8,456,922
500,000 Mitsubishi Heavy Industries, Ltd. (Diversified heavy
machinery manufacturer and leading shipbuilder)............ 3,983,543
380,000 NGK Spark Plug Co., Ltd. (Leading manufacturer of
automotive spark plugs).................................... 4,782,188
540,000 NSK Ltd. (Leading manufacturer of bearings and other
machinery parts)........................................... 3,920,619
33,000 Nichiei Co., Ltd. (Finance company for small and
medium-sized firms)........................................ 2,459,826
50,000 Nippon Electric Glass Co., Ltd. (Leading producer of
cathode-ray tube glass).................................... 948,693
945,000 Nisshin Steel Co., Ltd. (Blast furnace steelmaker)........... 3,814,763
390,000 Ricoh Co., Ltd. (Leading maker of copiers and
information equipment)..................................... 4,266,215
110,000 SMC Corp. (Leading maker of pneumatic equipment)............. 7,954,501
44,000 Seven-Eleven Japan Co., Ltd. (Leading convenience
store operator)............................................ 3,100,871
250,000 ShinMaywa Industries, Ltd. (Leading maker of dump
trucks and other specialty vehicles)....................... 2,061,955
530,000 Sumitomo Corp. (Leading general trading company, with
offices, subsidiaries and affiliates throughout the world). 5,387,222
1,710,000 Sumitomo Metal Industries, Ltd. (Leading integrated
crude steel producer)*..................................... 5,181,316
75,000 THK Co., Ltd. (Manufacturer of linear motion systems
for industrial machinery).................................. 2,134,559
145,000 Takeda Chemical Industries, Ltd. (Leading
pharmaceutical manufacturer).............................. 2,386,254
720,000 Toshiba Corp. (General electronics manufacturer)............ 5,638,722
-----------
138,232,233
-----------
KOREA 2.2%
186,000 Korea Electric Power Corp. (ADR) (New) (Electric utility)... 4,929,000
7,870 Pohang Iron & Steel Co., Ltd. (Leading producer
of steel products for construction and shipbuilding
industries) (b)......................................... 570,931
93,400 Pohang Iron & Steel Co., Ltd. (ADR)......................... 2,043,125
3,376 Samsung Electronics Co., Ltd. (GDS) (Voting)................ 324,096
664 Samsung Electronics Co., Ltd. (GDS) (Voting) (New (a))...... 61,752
873 Samsung Electronics Co., Ltd. (GDS) (Voting) (New (a))...... 81,189
56,650 Samsung Electronics Co., Ltd. (GDS) (Non-voting)
(Major electronics manufacturer).......................... 3,399,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
----
7
<PAGE>
<TABLE><CAPTION>
INVESTMENT PORTFOLIO
------------------------------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value ($)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11,148 Samsung Electronics Co., Ltd. (GDS) (Non-voting) (New (a))........ 657,732
-----------
12,066,825
-----------
MALAYSIA 1.3%
445,000 Malayan Banking Bhd. (Leading banking and financial
services group)................................................. 3,749,655
2,100,000 Renong Berhad (Holding company involved in engineering and
construction, financial services, telecommunication and
information technology)....................................... 3,109,029
-----------
6,858,684
-----------
NETHERLANDS 5.4%
105,000 AEGON Insurance Group NV (Insurance company)...................... 4,653,268
24,000 Akzo-Nobel N.V. (Chemical producer)............................... 2,780,351
204,870 Elsevier NV (International publisher of scientific,
professional, business, and consumer information books)......... 2,736,545
46,137 Getronics N.V. (Computer and software distributor)................ 2,159,837
43,750 Heineken Holdings N.V. "A" (Brewery).............................. 7,181,980
85,000 Koninklijke PTT Nederland (Telecommunication services)............ 3,093,128
114,000 Philips Electronics N.V. (Leading manufacturer of
electrical equipment)........................................... 4,127,083
26,935 Wolters Kluwer CVA (Publisher).................................... 2,552,108
-----------
29,284,300
-----------
NORWAY 0.7%
271,889 Saga Petroleum AS "A" (Oil and gas exploration
and production)................................................. 3,632,035
-----------
PHILIPPINES 0.5%
4,008,000 C&P Homes, Inc. (Home construction company)*...................... 2,941,456
-----------
PORTUGAL 0.3%
30,192 Jeronimo Martins (Food producer and retailer)..................... 1,677,446
-----------
SPAIN 4.2%
41,140 Acerinox, S.A (Stainless steel producer).......................... 4,161,482
400,000 Autopistas Concesionaria Espanol SA (Motorway
builder and operator)........................................... 4,550,701
22,000 Banco Popular Espanol, S.A. (Retail bank)......................... 4,057,213
160,000 Compania Telefonica Nacional de Espana S.A.
(Telecommunication services).................................... 2,215,993
133,000 Repsol SA (Integrated oil company)................................ 4,358,409
525,000 Union Electrica Fenosa SA (Producer and distributor
of electrical energy)........................................... 3,159,522
-----------
22,503,320
-----------
SWEDEN 5.4%
99,000 Astra AB "A" (Free) (Pharmaceutical company)...................... 3,952,840
600 Astra AB "B" (Free)............................................... 23,776
101,000 Autoliv AB (Free) (Manufacturer of safety airbags for
automobiles).................................................... 5,904,475
356,400 L.M. Ericsson Telephone Co. "B" (ADR) (Leading
manufacturer of cellular telephone equipment)................... 6,949,800
57,000 Mo och Domsjo AB "B" (Free) (Manufacturer of newsprint,
paperboard, and various sawn timber products)................... 2,430,466
144,000 S.K.F. AB "B" (Free)* (Manufacturer of roller bearings)........... 2,755,462
270,000 Skandia Foersaekrings AB (Free) (Financial conglomerate).......... 7,302,245
-----------
29,319,064
-----------
SWITZERLAND 4.3%
5,180 Brown, Boveri & Cie. AG (Bearer) (Manufacturer of
electrical equipment)........................................... 6,021,949
5 Brown, Boveri & Cie. AG (Registered).............................. 1,132
3,600 Ciba-Geigy AG (Bearer) (Pharmaceutical company)................... 3,154,470
2,514 Nestle SA (Registered) (Food manufacturer)........................ 2,783,034
1,710 SGS Holdings SA (Bearer) (Trade inspection company)............... 3,397,302
5,000 Sandoz Ltd. AG (Registered) (Pharmaceutical company).............. 4,580,749
</TABLE>
The accompanying notes are an integral part of the financial
statements.
----
8
<PAGE>
<TABLE><CAPTION>
INTERNATIONAL PORTFOLIO
------------------------------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value ($)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8,054 Swiss Bank Corp. (Bearer) (Universal bank).................. 3,291,054
------------
23,229,690
------------
TAIWAN 0.5%
819,000 Taiwan Semiconductor Manufacturing Co.
(Manufacturer of integrated circuits and other
semiconductor devices).................................. 2,566,222
------------
THAILAND 1.4%
175,000 Bangkok Bank Ltd. (Foreign registered) (Leading
commercial bank, providing full range of financial
services).............................................. 2,125,844
525,220 Thai Farmers Bank (Foreign registered) (Commercial bank)... 5,295,986
------------
7,421,830
------------
UNITED KINGDOM 8.9%
725,000 Argyll Group PLC (Owner and operator of retail food
supermarkets)............................................ 3,829,995
600,017 British Petroleum PLC (Major integrated world oil company). 5,010,987
236,000 Carlton Communications PLC (Television post
production products and services)........................ 3,540,345
143,938 De La Rue PLC (Printer of commercial banknotes and
securities).............................................. 1,455,921
655,706 Lasmo PLC (Oil production and exploration)................. 1,772,718
170,000 Midlands Electricity PLC (Electric companies).............. 2,007,446
137,530 National Grid Group PLC (Operator of electric
transmission system in England and Wales)................ 425,238
511,110 PowerGen PLC (Electric utility)............................ 4,224,811
307,362 RTZ Corp. PLC (Mining and finance company)................. 4,469,998
654,200 Reuters Holdings PLC (International news agency)........... 5,992,053
598,345 SmithKline Beecham PLC "A" (Manufacturer of ethical
drugs and healthcare products)........................... 6,600,720
130,000 Thorn EMI PLC (Amusement and recreational services)........ 3,063,141
300,000 Zeneca Group PLC (Manufacturing and marketing of
pharmaceutical and agrochemical products and
specialty chemicals)................................... 5,805,588
------------
48,198,961
------------
TOTAL COMMON STOCKS (Cost $421,638,324).................... 482,135,711
------------
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $469,199,855) (c).................................. 540,995,675
============
------------------------------------------------------------------------------------------------------------------------
* Non-income producing security.
(a) New shares issued during 1995, eligible for a pro rata share of 1995 dividends.
(b) Securities valued in good faith by the Valuation Committee of the Trustees. The cost and
market value of these securities at December 31, 1995 aggregated $736,139 and $570,931
(.10% of net assets), respectively.
(c) At December 31, 1995, the net unrealized appreciation on investments based on cost for
federal income tax purposes of $469,199,855 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an excess
of market value over tax cost............................................................... $ 89,136,201
Aggregate gross unrealized depreciation for all investments in which there is an excess of
tax cost over market value.................................................................. (17,340,381)
------------
Net unrealized appreciation................................................................... $ 71,795,820
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
----
9
<PAGE>
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
At December 31, 1995, the International Portfolio had a net tax basis capital
loss carryforward of approximately $4,914,971, which may be applied against
any realized net taxable capital gains of each succeeding year until fully
utilized or until December 31, 2003, whichever occurs first.
- -----------------------------------------------------------------------------
From November 1, 1995 through December 31, 1995, the International Portfolio
incurred approximately $3,652,097 of net realized capital losses which the
Portfolio intends to elect to defer and treat as arising in the fiscal year
ended December 31, 1996.
- -----------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term investments),
for the year ended December 31, 1995, aggregated $246,433,640 and $211,051,347,
respectively.
- -----------------------------------------------------------------------------
Sector breakdown of the International Portfolio's equity securities is noted
on the Portfolio Summary.
- -----------------------------------------------------------------------------
Transactions in written call option contracts during the year ended
December 31, 1995 were:
<TABLE><CAPTION>
PRINCIPAL AMOUNT RECEIVED ($)
-----------------------------------------
<S> <C> <C>
Outstanding at December 31, 1994..................... - -
Contracts written.................................. JPY 3,752,000,000 1,200,836
Contracts closed................................... JPY (3,752,000,000) (1,200,836)
-----------------------------------------
Outstanding at December 31, 1995..................... - -
============= =========
- ----------------------------------------------------------------------------------------------------
</TABLE>
COMMITMENTS:
As of December 31, 1995, the International Portfolio entered into the
following forward foreign currency exchange contracts resulting in net
unrealized appreciation of $7,747,842.
<TABLE><CAPTION>
NET UNREALIZED
APPRECIATION/
SETTLEMENT DEPRECIATION
CONTRACTS TO DELIVER IN EXCHANGE FOR DATE (U.S.$)
- --------------------------- -------------------------- ----------- ---------------
<S> <C> <C> <C>
Japanese Yen 1,434,720,000 U.S. Dollars 17,133,031 4/15/96 3,033,949
Japanese Yen 2,705,000,000 U.S. Dollars 27,617,540 5/17/96 921,852
Japanese Yen 2,206,000,000 U.S. Dollars 25,723,533 7/12/96 3,792,041
-----------
7,747,842
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ----
10
<PAGE>
<TABLE><CAPTION>
INTERNATIONAL PORTFOLIO
FINANCIAL STATEMENTS
-----------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
-----------------------------------------------------------------------------------------------------
DECEMBER 31, 1995
-----------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Investments, at market (identified cost $469,199,855) (Note A)......... $ 540,995,675
Cash................................................................... 788,449
Unrealized appreciation on forward currency exchange contracts (Note A) 7,747,842
Receivables:
Investments sold..................................................... 2,062,098
Portfolio shares sold................................................ 1,122,116
Foreign taxes recoverable ........................................... 795,897
Dividends and interest .............................................. 279,722
-------------
Total assets...................................................... 553,791,799
LIABILITIES
Payables:
Investments purchased ............................................... $3,256,983
Portfolio shares redeemed ........................................... 1,583,122
Accrued management fee (Note B)...................................... 390,027
Other accrued expenses (Note B)...................................... 184,759
Payable on closed forward currency exchange contracts (Note A)...... 174,415
----------
Total liabilities................................................. 5,589,306
-------------
Net assets, at market value $ 548,202,493
=============
NET ASSETS
Net assets consist of:
Undistributed net investment income................................. $ 5,598,231
Net unrealized appreciation on:
Investments ..................................................... 71,795,820
Foreign currency related transactions............................ 7,763,610
Accumulated net realized loss....................................... (8,741,483)
Paid-in capital..................................................... 471,786,315
-------------
Net assets, at market value............................................ $ 548,202,493
=============
NET ASSET VALUE, offering and redemption price per share
($548,202,493/46,398,169 outstanding shares of beneficial
interest, no par value, unlimited number of shares authorized).... $11.82
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
----
11
<PAGE>
<TABLE><CAPTION>
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -----------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
- -----------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Income:
<S> <C> <C>
Dividends (net of foreign taxes withheld of $1,092,029).......... $ 7,980,980
Interest......................................................... 2,125,283
-----------
10,106,263
Expenses (Note A):
Management fee (Note B).......................................... $ 4,357,541
Accounting fees (Note B)......................................... 277,867
Trustees' fees (Note B) ......................................... 23,623
Custodian fees .................................................. 581,990
Auditing ........................................................ 62,767
Legal ........................................................... 33,163
Other ........................................................... 55,614 5,392,565
---------- -----------
Net investment income .............................................. 4,713,698
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments...................................................... (7,286,434)
Options.......................................................... 736,708
Foreign currency related transactions............................ (1,376,862) (7,926,588)
----------
Net unrealized appreciation during the period on:
Investments ..................................................... 46,850,491
Foreign currency related transactions............................ 9,269,441 56,119,932
---------- -----------
Net gain on investment transactions................................. 48,193,344
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $52,907,042
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
----
12
<PAGE>
<TABLE><CAPTION>
INTERNATIONAL PORTFOLIO
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income........................................... $ 4,713,698 $ 2,210,527
Net realized gain (loss) from investment transactions........... (7,926,588) 3,671,002
Net unrealized appreciation (depreciation) on investment
transactions during the period................................ 56,119,932 (14,866,907)
------------ ------------
Net increase (decrease) in net assets resulting from
operations...................................................... 52,907,042 (8,985,378)
------------ ------------
Distributions to shareholders from:
Net investment income ($.01 and $.07 per share, respectively)... (572,293) (1,958,854)
------------ ------------
Net realized gain from investment transactions ($.04 per share). (1,628,833) -
------------ ------------
Portfolio share transactions:
Proceeds from shares sold....................................... 383,866,201 313,276,872
Net asset value of shares issued to shareholders in
reinvestment of distributions................................. 2,201,126 1,958,854
Cost of shares redeemed......................................... (360,607,349) (70,378,561)
------------ ------------
Net increase in net assets from Portfolio share transactions...... 25,459,978 244,857,165
------------ ------------
INCREASE IN NET ASSETS............................................ 76,165,894 233,912,933
Net assets at beginning of period................................. 472,036,599 238,123,666
------------ ------------
NET ASSETS AT END OF PERIOD (including undistributed
net investment income of $5,598,231 and $722,015,
respectively)................................................. $548,202,493 $472,036,599
============ ============
OTHER INFORMATION
INCREASE (DECREASE) IN PORTFOLIO SHARES
Shares outstanding at beginning of period......................... 44,139,826 21,943,195
------------ ------------
Shares sold..................................................... 34,890,301 28,463,330
Shares issued to shareholders in reinvestment of distributions.. 216,220 177,916
Shares redeemed................................................. (32,848,178) (6,444,615)
------------ ------------
Net increase in Portfolio shares................................ 2,258,343 22,196,631
------------ ------------
Shares outstanding at end of period............................... 46,398,169 44,139,826
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
----
13
<PAGE>
<TABLE><CAPTION>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER PERFORMANCE INFORMATION
DERIVED FROM THE FINANCIAL STATEMENTS.
FOR THE PERIOD
MAY 1, 1987
(COMMENCEMENT)
YEARS ENDED DECEMBER 31, OF OPERATIONS)
------------------------------------------------------------------------- TO DECEMBER 31,
1995(E) 1994(E) 1993(E) 1992(E) 1991(E) 1990(E) 1989(E) 1988 1987
------------------------------------------------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period......... $10.69 $10.85 $ 8.12 $ 8.47 $ 7.78 $ 8.46 $ 6.14 $ 5.26 $ 6.00(b)
------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income (a). .11 .06 .09 .10 .12 .25 .10 .09 --
Net realized and unrealized
gain (loss) on investment
transactions............ 1.07 (.15) 2.90 (.36) .77 (.89) 2.22(f) .79 (.64)
------ ------ ------ ------ ------ ------ ------ ---- ------
Total from investment
operations.................. 1.18 (.09) 2.99 (.26) .89 (.64) 2.32 .88 (.64)
------ ------ ------ ------ ------ ------ ------ ---- ------
Less distributions:
From net investment income.. (.01) (.07) (.14) (.09) (.20) (.04) -- -- --
In excess of net investment
income.................... -- -- (.12) -- -- -- -- -- --
From net realized gains on
investment transactions... (.04) -- -- -- -- -- -- -- (.10)
------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions......... (.05) (.07) (.26) (.09) (.20) (.04) -- -- (.10)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period...................... $11.82 $10.69 $10.85 $ 8.12 $ 8.47 $ 7.78 $ 8.46 $ 6.14 $ 5.26
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%).............. 11.11 (.85) 37.82 (3.08) 11.45 (7.65) 37.79 16.73 (10.64)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
($ millions)................ 548 472 238 65 41 35 17 3 2
Ratio of operating expenses,
net to average net
assets(%)(a).............. 1.08 1.08 1.20 1.31 1.39 1.38 1.50 1.50 1.50(c)
Ratio of net investment income
to average net assets(%).... .95 .57 .91 1.23 1.43 2.89 1.30 1.59 .02(c)
Portfolio turnover rate(%).... 45.76 33.52 20.36 34.42 45.01 26.67 57.69 110.42 146.08(c)
(a) Portion of expenses
reimbursed (Note B)...... $ -- $ -- $ -- $ -- $ -- $ -- $ .02 $ .14 $ .07
(b) Original capital
(c) Annualized
(d) Not annualized
(e) Per share amounts, for each of the periods identified, have been calculated using the monthly average shares outstanding
during the period method.
(f) Includes provision for federal income tax of $.03 per share.
</TABLE>
- ----
14
<PAGE>
SCUDDER VARIABLE LIFE INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. Significant Accounting Policies
- --------------------------------------------------------------------------------
Scudder Variable Life Investment Fund (the "Fund") is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended, as an open-end, diversified management investment company.
Its shares of beneficial interest are divided into six separate diversified
series, called "Portfolios." These financial statements report on the
International Portfolio.
The Fund is intended to be the funding vehicle for variable annuity contracts
and variable life insurance policies to be offered by the separate accounts of
certain life insurance companies ("Participating Insurance Companies"). As of
December 31, 1995, ownership breakdown of the Portfolios by each Participating
Insurance Company is as follows:
Portfolios
-----------------------
Participating International
Insurance Companies
- --------------------------------------------------------------------------------
Aetna Life Insurance & Annuity Co. . . . . . . . . . . . . . . . . . . 46.5%
AUSA Life Insurance Co. . . . . . . . . . . . . . . . . . . . . . . . 1.2
Banner Life Insurance Co. . . . . . . . . . . . . . . . . . . . . . . 0.6
Charter National Life Insurance Co. . . . . . . . . . . . . . . . . . 15.2
Fortis Benefits Insurance Co. . . . . . . . . . . . . . . . . . . . . 0.3
Intramerica Life Insurance Co. . . . . . . . . . . . . . . . . . . . . 1.5
Mutual of America Life Insurance Co. . . . . . . . . . . . . . . . . . 24.4
Paragon Life Insurance Co. . . . . . . . . . . . . . . . . . . . . . 0.1
Providentmutual Life and Annuity Co.
of America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1
Safeco Life Insurance Co. . . . . . . . . . . . . . . . . . . . . . . 2.6
Security First Life Insurance Co. . . . . . . . . . . . . . . . . . . 0.1
Union Central Life Insurance Co. . . . . . . . . . . . . . . . . . . 7.2
United of Omaha Life Insurance Co. . . . . . . . . . . . . . . . . . . 0.2
-----------------------
100.0%
======
The policies described below are followed consistently by the Fund in the
preparation of the financial statements for its Portfolios in conformity with
generally accepted accounting principles.
Security Valuation. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the National Association of
Securities Dealers Automatic Quotation ("NASDAQ") System, for which there have
been sales, are valued at the most recent sale price reported on such system. If
there are no such sales, the value is the high or "inside" bid quotation.
Securities which are not quoted on the NASDAQ System but are traded in another
over-the-counter market are valued at the most recent sale price on such market.
If no sale occurred, the security is then valued at the calculated mean between
the most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities with remaining maturities greater than sixty days are
valued by pricing agents approved by the officers of the Fund, which quotations
reflect broker/dealer-supplied valuations and electronic data processing
techniques. If the pricing agents are unable to provide such quotations, the
most recent bid quotation supplied by a bona fide market maker shall be used.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Trustees.
----
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Options. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised. During the
period, the International Portfolio purchased put options on currencies and
wrote call options on currencies as a hedge against potential adverse price
movements in the value of portfolio assets.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price or at the most recent asked price (bid for purchased options) if no bid
and asked price are available. Over-the-counter written or purchased options are
valued using dealer supplied quotations.
Foreign Currency Translations. The books and records of the Portfolios are
maintained in U.S. dollars. Foreign currency transactions are translated into
U.S. dollars on the following basis:
(i) market value of investment securities, other assets and liabilities at
the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on
the respective dates of such transactions.
The Portfolios do not isolate that portion of gains and losses on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
non-money market Portfolios utilized forward contracts as a hedge in connection
with portfolio purchases and sales of securities denominated in foreign
currencies and the International Portfolio utilized forward contracts as a hedge
against changes in exchange rates relating to foreign currency denominated
assets.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
Repurchase Agreements. The Fund on behalf of each Portfolio may enter into
repurchase agreements with U.S. and foreign banks and broker/dealers whereby the
Fund, through its custodian, receives delivery of the underlying securities, the
amount of which at the time of purchase and each subsequent business day is
required to be maintained at such a level that the market value, depending on
the maturity of the repurchase agreement and the underlying collateral, is equal
to at least 100.5% of the resale price.
Federal Income Taxes. Each Portfolio is treated as a single corporate taxpayer
as provided for in the Internal Revenue Code of 1986, as amended. It is each
Portfolio's policy to comply with the requirements of the Internal Revenue Code
which are applicable to regulated investment companies and to distribute all of
its investment company taxable income to the separate accounts of the
Participating Insurance Companies which hold its shares. Accordingly, the
Portfolios paid no federal income taxes and no provision for federal income
taxes was required.
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SCUDDER VARIABLE LIFE INVESTMENT FUND
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Distribution of Income and Gains. All of the net investment income of the
International Portfolio normally will be declared and distributed as a dividend
annually. During any particular year, net realized gains from investment
transactions for each Portfolio, in excess of available capital loss
carryforwards, would be taxable to the Portfolio if not distributed and,
therefore, will be distributed to the Participating Insurance Companies.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. The differences
primarily relate to investments in forward contracts, passive foreign investment
companies, post October loss deferral, non-taxable distributions, and certain
securities sold at a loss. As a result, net investment income (loss) and net
realized gain (loss) on investment transactions for a reporting period may
differ significantly from distributions during such period. Accordingly, the
Portfolios may periodically make reclassifications among certain of its capital
accounts without impacting the net asset value of each Portfolio.
The Portfolios use the specific identification method for determining realized
gain or loss on investments for both financial and federal income tax reporting
purposes.
Expenses. Each Portfolio is charged for those expenses which are directly
attributable to it, such as management fees and custodian fees, while other
expenses (reports to shareholders, legal and audit fees) are allocated based on
relative net asset value among the Portfolios.
Other. Investment security transactions are accounted for on a trade date basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. All original
issue discounts are accreted for both tax and financial reporting purposes.
B. Related Parties
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Under the Fund's Investment Advisory Agreement (the "Agreement") with Scudder,
Stevens and Clark, Inc. (the "Adviser"), the Fund agrees to pay the Adviser a
fee, based on average daily net assets, equal to an annual rate of 0.875% for
the International Portfolio.
The Trustees authorized the Fund on behalf of each Portfolio to pay Scudder Fund
Accounting Corp., a subsidiary of the Adviser, for determining the daily net
asset value per share and maintaining the portfolio and general accounting
records of the Fund.
Related fees for such services are detailed in each Portfolio's statement of
operations.
For a period of five years from the date of execution of a Participation
Agreement with the Fund, and from year to year thereafter as agreed by the Fund
and the Participating Insurance Companies, each of the Participating Insurance
Companies has agreed to reimburse the Fund to the extent that such expenses of
the International Portfolio exceed one and one-half percent (1.50 of 1%) of the
Portfolio's average annual net assets. The Adviser may advance some or all of
such reimbursement to the Fund prior to receiving payment therefore from a
Participating Insurance Company, but it is under no obligation to do so. If the
Adviser does advance such reimbursement to the Fund and does not receive payment
therefore, it will be entitled to be repaid such amounts by the Fund.
The Fund pays each Trustee not affiliated with the Adviser and not a Trustee of
other Scudder affiliated funds $12,000 annually plus specified amounts for
attended board and committee meetings. The Fund pays each Trustee not affiliated
with the Adviser and who is a Trustee of other Scudder affiliated funds $7,500
annually plus specified amounts for attended board and committee meetings.
Allocated Trustees' fees for each Portfolio for the year ended December 31, 1995
are detailed in each Portfolio's statement of operations.
C. Line of Credit
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The International Portfolio and several other Funds ("The Participants") share
in a $500 million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require the
untimely disposition of securities. The Participants are charged an annual
commitment fee which is allocated among each of the Participants. Interest is
calculated based on the market rates at the time of the borrowing. The
International Portfolio may borrow up to a maximum of 25 percent of its net
assets under the agreement. In addition, the International Portfolio also
maintains an uncommitted line of credit.
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17
<PAGE>
SCUDDER VARIABLE LIFE INVESTMENT FUND
REPORT OF INDEPENDENT ACCOUNTANTS
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To the Trustees and Shareholders of Scudder Variable Life Investment Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
Variable Life Investment Fund (comprised of the one Portfolio identified in Note
A), including the investment portfolio, as of December 31, 1995, and the related
statement of operations, the statements of changes in net assets, and the
financial highlights for each of the periods indicated therein. 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 generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian and brokers. 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
Scudder Variable Life Investment Fund (comprised of the one Portfolio identified
in Note A) as of December 31, 1995, the results of its operations, the changes
in its net assets, and the financial highlights for each of the periods
indicated therein in conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
January 29, 1996
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18
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Celebrating Over 75 Years of Serving Investors
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Established in 1919 by Theodore Scudder, Sidney Stevens, and
F. Haven Clark, Scudder, Stevens & Clark was the first independent
investment counsel firm in the United States. Since its birth,
Scudder's pioneering spirit and commitment to professional long-term
investment management have helped shape the investment industry. In
1928, we introduced the nation's first no-load mutual fund. Today we
offer 37 pure no load(TM) funds, including the first international
mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and
dedication to research and fundamental investment disciplines have
helped Scudder become one of the largest and most respected investment
managers in the world. Though times have changed since our beginnings,
we remain committed to our long-standing principles: managing money
with integrity and distinction; keeping the interests of our clients
first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
This information must be preceded or
accompanied by a current prospectus.
Portfolio changes should not be considered
recommendations for action by individual
investors.
SCUDDER
[LOGO]
[SYMBOL] PRINTED WITH [LOGO] Printed on recycled paper
SOY INK
QR-26
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AUSA LIFE INSURANCE COMPANY, INC.
4 Manhattanville Road, Purchase, New York 10577
