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MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS TWO WORLD TRADE CENTER, NEW
INVESTMENT SERIES YORK, NEW YORK 10048
LETTER TO THE SHAREHOLDERS JUNE 30, 1998
DEAR SHAREHOLDER:
This semiannual report to shareholders of the various portfolios that comprise
Morgan Stanley Dean Witter Select Dimensions Investment Series covers the
six-month period ended June 30, 1998. The thirteen investment portfolios
described below are offered to participants in the Morgan Stanley Dean Witter
Select Dimensions Plan, a program of tax-deferred variable annuities issued by
Hartford Life Insurance Company and Hartford Life and Annuity Insurance Company.
MARKET OVERVIEWS
Equity markets across the globe were choppy during the first half of 1998. The
fear of an Asian contagion impact, coupled with Japan's slide into a recession,
ignited fears of a possible worldwide economic downturn. Despite this, equity
markets surged ahead with the United States up 17.7 percent and Europe up 26.7
percent on the strength of firm economies, strong consumer spending and low
inflation. The real damage was in Asia and in the emerging markets. Hong Kong,
whose currency has not devalued, shed 26.2 percent of its market's value, while
Indonesia, the hardest hit Asian market, lost 57.9 percent of its value. The
shock waves were felt half the world away in eastern Europe and Latin America.
Russia and Brazil, consistently rumored to be on the brink of devaluation, found
their markets were down 59.3 percent and 15.9 percent, respectively.
THE UNITED STATES
The financial crisis in Asia appeared to be having an increasing impact on the
internationally oriented part of the U.S. economy. In April the U.S. trade
deficit widened to $14.5 billion, higher than the consensus estimate. Falling
exports and inventory overhang have slowed the growth of the industrial sector
since the beginning of the year. Nonetheless, the domestic sector of the U.S.
remained strong. Consumer spending grew at the rapid rate of 6 percent in the
first quarter and continued strong into the second, due to the high level of
employment and real wage gains.
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Also on the positive side, inflationary pressures diminished, the U.S. budget
surplus accelerated and the supply of Treasury securities contracted. Interest
rates fell across most of the maturity spectrum, but the long-term rates eased
the most dramatically. On the short end, the federal-funds rate remained flat
within the 50 basis point range of the last three years. While domestic
employment trends remain strong, an imported manufacturing slowdown and subdued
inflation have left the Federal Reserve on hold. Though the Fed's governors
acknowledged a bias toward tighter monetary conditions in March, few market
participants believe such a move would follow suit given continued financial
turmoil in Asia and the continued strength in the U.S. dollar.
While initially volatile, the U.S. stock market powered ahead as evidence built
that the economy remained solid. American large-cap stocks benefited from a
perception that they could provide a safe haven from the turmoil in Asia and as
U.S. earnings comparisons became more difficult. Low inflation, high employment,
rising consumer confidence and expenditures supported rising equity prices.
While smaller companies also posted solid performances, they were overshadowed
by the exceptional returns of the larger ones.
ASIA PACIFIC
Following a sharp first-quarter rally, the Asian equity markets corrected
dramatically during the second quarter. A recessionary fallout from the Asian
currency crisis is now apparent, with several countries posting negative GDP
growth for the first quarter. Further, the persistent weakness of the Japanese
yen reignited concerns about China's ability and willingness to maintain its
fixed exchange rate at current levels. Hong Kong equities fell 26.2 percent
during the first six months of 1998 as market sentiment was hurt by slower than
expected first quarter economic growth and real estate price wars. However, the
announcement of a coordinated intervention by the United States and Japan to
support the yen has since helped stabilize the markets.
In greater China, the well-publicized summit between President Clinton and
President Jiang Zemin was successful in that it showed relatively friendly
diplomatic relations between the two countries, but it failed to address several
issues adequately, including trade disputes, admission to the World Trade
Organization and relations with Taiwan. Taiwanese stock prices fell by 16.4
percent during the first half of the year, hurt by the economic slowdown in Asia
(particularly that in Japan), which has affected exports, and Taiwan's continued
tight monetary policy.
In Korea, stock prices surged 59.1 percent during the first quarter but ended
the first half up only 5.6 percent in U.S. dollar terms. In India, stock prices
fell 15.8 percent, due to continued economic
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and political uncertainties. India's equity markets rallied briefly following
India's elections but fell sharply when the United States and Japan imposed
sanctions on India for conducting nuclear weapons tests in May.
In Southeast Asia, Philippine equities ended the period down 4.5 percent.
Following the strong gains witnessed early in the year, the market fell sharply
during the second quarter amid profit taking in response to indications that the
government was seeking to lower interest rates rather than strengthen the
currency. Although we remain cautious regarding Philippine equities over the
short to medium term, we believe that the underlying longer-term fundamentals
remain relatively sound there.
In Thailand, the market rallied briefly as the government abandoned its
two-tiered foreign exchange system, indicating a shift away from capital
controls and a return to liberalized markets. However, the market ended the
first six months of 1998 down 23.5 percent. Although a restrictive monetary
policy has helped stabilize the currency, continued high interest rates have
hurt the economy (GDP growth is now expected to fall by 8 percent in 1998).
The Malaysian and Indonesian markets fell 29.7 percent and 57.9 percent,
respectively. In Malaysia, the economic outlook continued to deteriorate and
several companies filed for bankruptcy. Although the government loosened its
fiscal and monetary policy to boost economic activity, these stimulating
measures will inevitably put further downward pressure on the currency. In
Indonesia, investors were concerned that the government was not committed to
complying with terms of the relief package offered by the International Monetary
Fund (IMF) and, as a result the currency lost value.
EMERGING EUROPE, THE MIDDLE EAST AND AFRICA
The European, Middle Eastern and African markets proved more resilient during
this period than those of Asia and Latin America as robust performances in
Greece and Portugal partially offset sharp declines in Russia and South Africa.
The recent shift of investor focus from eastern Europe to the Mediterranean was
primarily the result of declining interest rates and lower political risk in
that region. In eastern Europe, Russian equities fared the worst and fell 59.3
percent.
In the Mediterranean and the Middle East, the Greek equity market outperformed
those of the entire region, gaining 44.9 percent. Following the Greek currency's
entry to Europe's ERM (exchange rate mechanism) in March, cash flows from
international mutual funds have driven up prices, because the market is now
being revalued as a legitimate EMU convergence play. Earnings growth
expectations have risen in major segments of the market as a result of increased
export profitability and lower interest rates.
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Portuguese equities also outperformed their peers in the first half of the year,
rising 29.7 percent as interest rates continued to decline. The weakness in Asia
has increased the likelihood that EMU convergence will occur at lower, rather
than higher, core European interest rates. Turkish stock prices fell 14.3
percent during the period, with investors discouraged by high interest rates and
political tensions early in the year. In Israel, equities rose 7.8 percent as
inflation declined to a 28-year low and the Bank of Israel cut interest rates by
180 basis points to 11.6 percent, the fifth consecutive rate cut this year. We
expect the lower interest rate environment to sustain the upward trend of this
market in the near term.
LATIN AMERICA
The Latin American equity markets suffered sharp declines in the period under
review, due in part to the persistent weakness of the Japanese yen and of
several emerging markets currencies. Mexican stocks fell 22.4 percent, Brazil's
15.9 percent, Argentine stocks 16.4 percent, Chilean 21.2 percent and Colombian
30 percent.
SMALL-CAP GROWTH
DEVELOPING GROWTH PORTFOLIO
The Developing Growth Portfolio produced a total return of 9.47 percent for the
six-month period ended June 30, 1998, compared to 7.06 percent for the Lipper
Variable Annuity Small-Cap Underlying Funds Average, 17.70 percent for the
broad-based S&P 500 Index and 4.93 percent for the Russell 2000 Index.
The first half of the fiscal year was generally volatile for small caps.
Concerns regarding the impact of Asia on earnings sent many investors seeking
the perceived safety of larger companies. In an effort to minimize the potential
impact on the Portfolio, we continued to focus primarily on domestic issues
having little or no exposure to Asia. In addition, we intend to remain focused
on consumer stocks, because we expect continuing strength in this sector as a
result of high consumer confidence coupled with abnormally low oil prices.
During this period, the Portfolio moved toward a more fully invested posture,
and common stock holdings increased from 85.3 percent of net assets on December
31, 1997, to 91.5 percent on June 30. In terms of industry weightings, the
Portfolio gained greater exposure to computer software and services, increasing
this allocation from 9.8 percent to 18.5 percent.
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AGGRESSIVE GROWTH
EMERGING MARKETS PORTFOLIO
The Emerging Markets Portfolio produced a total return of -20.14 percent for the
six-month period ended June 30, 1998, compared to -18.35 percent for the Lipper
Variable Annuity Emerging Markets Underlying Funds Average and -15.71 percent
for the International Finance Corporation's Investable Emerging Markets Total
Return Index (IFCI Index), which measures the performance of the world's
emerging markets.
The underperformance of the Portfolio relative to these benchmarks during the
period under review was primarily the result of the Portfolio's defensive
strategy during the first quarter. The Portfolio was overweighted in Latin
America, which has been a relatively safe haven in the midst of the Asian
currency crisis, but this market was then adversely affected by falling
commodity prices. At the same time, the Portfolio was underweighted in Asia,
where the markets rallied as the region's currencies appeared to be stabilizing.
We were also underweighted in Europe and Africa, which outperformed during the
period. However approximately 50 percent of the underperformance was recouped
during the second quarter as the Portfolio shifted to a neutral position in
Latin America and Europe, while maintaining an underweighted position in the
declining Asian markets.
Because of slower than expected first quarter economic growth, real estate price
wars and the prospects of a currency devaluation in China with its potential
impact on the Hong Kong dollar, we reduced the Portfolio's exposure to Hong
Kong. We reduced our overall exposure to Taiwan, as this country is being hit
hard by the economic slowdown in Asia (particularly in Japan), which has
negatively affected exports, and Taiwan's continued tight monetary policy.
However, we have maintained an overweighted allocation to the electronics sector
in Taiwan because of expectations of improved sales in the latter half of the
year.
We reentered the Korean equity market in January on signs that the Korean
government appeared willing to implement the structural changes recommended by
the IMF. Korean stock prices surged 59.1 percent during the first quarter as
international lenders agreed to exchange $24 billion in short-term commercial
bank debt for medium-term loans. However, we took profits during the second
quarter, before the market fell sharply in the last week of May following
growing labor unrest, continued concerns about the weakening yen and rising
domestic debt. Korean stock prices ended the first half of 1998 up only 5.6
percent.
The Portfolio took profits in India before the United States and Japan imposed
sanctions on India for testing nuclear weapons in May. This market was down 15.8
percent for the first half.
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In the Philippines, we maintain a cautious outlook over the short to medium
term, but we believe that the underlying longer-term fundamentals remain sound.
Early in the year the Portfolio reestablished a position in Thailand, a market
that rallied strongly as the government seemed to shift away from capital
controls and return to liberalized markets. Early in the second quarter we took
profits and virtually exited the market, which ended the first half down 23.5
percent in dollar terms.
The Portfolio continued to avoid Malaysia and Indonesia -- markets that fell
29.7 percent and 57.9 percent, respectively, during the first half -- due to
concerns that the governments in these countries were not fully committed to
implementing the economic reforms recommended by the IMF.
EMERGING EUROPE, THE MIDDLE EAST AND AFRICA
We maintain our underweighted allocation in Russia, because investor confidence
in that market has been eroded by continued global market volatility, lower oil
prices, regional government bond payment defaults, and a sharp rise in domestic
and external debt yields. We maintained an overweighted position in Poland as
external account balances have improved and the continued decline of inflation
has raised expectations of further interest-rate cuts later this year. We
maintained a zero allocation to the Czech Republic due to continued weakness in
the domestic economy.
In the Mediterranean and the Middle East we maintain an overweighted allocation
in the Greek equity market, which outperformed those of the entire region,
gaining 44.9 percent in dollar terms, during the first six months of 1998.
Following the Greek currency's entry to Europe's ERM (exchange rate mechanism)
in March, cash flows from international mutual funds have driven up prices,
because the market is now being revalued as a legitimate EMU convergence play.
Earnings growth expectations have risen in major segments of the market as a
result of increased export profitability and lower interest rates.
LATIN AMERICA
The Portfolio exited the Venezuelan equity market, which fell 45.7 percent.
Investors in this market have been concerned about the impact of continued weak
oil prices, especially with respect to the government's willingness and ability
to continue the current exchange rate regime.
At the end of the first half of 1998, the Portfolio's largest country
allocations were Mexico (14.2 percent of net assets), Brazil (12.3 percent),
South Africa (7.5 percent), Turkey (6.2 percent), Greece (6.1 percent) and
Argentina (5.3 percent).
Despite the sharp declines posted in most of the emerging markets during the
first half of 1998, we remain positive about the medium- and longer-term
prospects for these countries. While the near-
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term outlook for the Asian equity markets remains highly connected to the fiscal
policies of Japan, the reality of recession and declining earnings is beginning
to be discounted. In Latin America, continued declines in commodity prices have
increased concerns about that region's ability to post solid economic growth,
given the fallout from Asia and subsequent possibility of declining exports. We
are encouraged to see that in general Latin American policy makers have
responded to the external shocks with appropriate and timely monetary and fiscal
adjustments. In other emerging markets, several positive developments in the
Mediterranean and Middle East have been overshadowed by the financial crises in
Russia and South Africa. Due to these concerns we have maintained a relatively
high cash position in order to minimize any negative impact on the Portfolio,
while providing a reserve for opportune purchases.
AMERICAN VALUE PORTFOLIO
The American Value Portfolio produced a total return of 20.06 percent for the
six-month period ended June 30, 1998, compared to 16.23 for the Lipper Variable
Annuity Growth Underlying Funds Average and 17.70 percent for the S&P 500 Index.
The Portfolio was positioned to exploit the opportunities presented by the Asian
turmoil and Japan. The initial fallout was to actually benefit the U.S. domestic
economy as interest rates plunged thereby stimulating consumer and related
industries. More specifically, the drop in interest rates spurred a wave of
refinancings, lowering monthly mortgage costs and thereby leading to
acceleration in housing, retail and media sales. Consumer spending bounded ahead
to levels not seen in a decade.
However, it became more apparent that the Asian influence would negatively
manifest itself on the more internationally oriented sectors of the economy,
such as manufacturing, capital goods and technology. Evidence continued to build
throughout the period that these industries particularly bore the brunt of
pricing pressures and falling unit growth. Earnings disappointments proliferated
in these industries.
At period end, the Portfolio was heavily oriented toward consumer and
domestically centered industries. Industry emphases included consumer cyclical
stocks which represented a 17 percent weighting and included primarily retail
stocks with some assorted auto, restaurant and airline stocks; media stocks
which represented a 10 percent weighting and consisted primarily of radio, and
cable issues; healthcare which represented a 12 percent weighting and included
primarily drug stocks with some medical device related stocks; consumer staples
which represented a 10 percent weighting and included drug store, grocery store,
and household products stocks; and financials which represented a
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13 percent weighting and included banks, brokers and life insurance stocks. The
Portfolio had little to no manufacturing exposure and was underweighted in
technology issues given record pricing pressure and slowing capital spending
trends.
We expect that the back end of the economy (manufacturing and capital goods)
will increasingly slow the front end of the economy (consumer) as the year
progresses. Corporate profitability should be increasingly under pressure from
slower exports, an increase in cheap imports, rising wages (two-thirds of the
average company's cost) and little to no pricing flexibility. Against such a
backdrop, capital spending is likely to slow further and payroll growth should
diminish, putting a lid on future spending by the consumer. Given this outlook,
the Portfolio may reduce its consumer cyclical holdings over the remainder of
1998, while adding further to more defensive industries such as consumer
staples, telephones and electric utilities. Interest rates are expected to
decline to new lows, adding stability to the stock market, particularly to those
industries that can continue to deliver positive earnings growth.
GROWTH PORTFOLIO
The Growth Portfolio produced a total return of 10.62 percent for the six-month
period ended June 30, 1998, compared to a return of 17.70 percent for the S&P
500 Index and 16.23 percent for the Lipper Variable Annuity Growth Underlying
Funds Average.
The Portfolio's new subadvisor, Morgan Stanley Asset Management Inc. (MSAM),
assumed its responsibilities on March 2, 1998. Since that time, they have
created a Portfolio of 78 stocks broadly diversified by sector. The Portfolio's
new subadvisor has been managing the Portfolio for a relatively short period of
time and some of the new issues they have chosen for the Portfolio have
performed well, while others have underperformed. One of the strongest
performers during the period was Continental Airlines. However, the
outperformance of this stock was not enough to offset the weakness experienced
in Cendant and Loews Corp. and the Portfolio therefore underperformed versus the
S&P 500 and its Lipper category.
As of June 30, 1998, the Portfolio's largest industries were airlines (8.72
percent of net assets), banks-money centers (5.20 percent), aerospace and
defense (5.53 percent), multi-line insurance (7.01 percent) and broadcast media
(5.91 percent). The Portfolio's largest holdings were Continental Airlines (8.72
percent), Clear Channel Communications (5.54 percent), United Technologies (5.11
percent), Loews Corp. (4.86 percent) and American Express (3.52 percent).
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LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
GLOBAL EQUITY PORTFOLIO
The Global Equity Portfolio produced a total return of 13.51 percent for the
six-month period ended June 30, 1998, compared to 15.92 percent for the Morgan
Stanley Capital International (MSCI) World Index and 15.44 percent for the
Lipper Variable Annuity Global Underlying Funds Average. The Portfolio's
performance shortfall stemmed from its overweightings in Asia and Latin America
relative to the Index. The performance of the World Index has been driven by the
United States and Europe, which together account for 85 percent of the Index's
weight.
The Fund's allocation targets are 40 percent North America (underweighted), 45
percent Europe (overweighted), 6 percent Japan (underweighted), 4 percent Asia
(slightly overweighted) and 5 percent Latin America (overweighted). Portfolio
holdings include Renault (France, automotive), MAN (Germany, automotive) Banca
Commerciale Italiana (Italy, banking), Aegon (Netherlands, insurance) and Gap
(United States, retail).
After the global turbulence of the first half of 1998, value is emerging in many
of the markets that had been exposed to sharp selloffs. Against the current
backdrop of low rates, low inflation and corporate restructurings, we believe
that global equities will perform well.
MID-CAP GROWTH PORTFOLIO
The Mid-Cap Growth Portfolio produced a total return of 9.45 percent for the
six-month period ended June 30, 1998, compared to 8.63 percent for the Standard
& Poor's MidCap Index and 13.40 percent for the Lipper Variable Annuity Mid-Cap
Growth Underlying Funds Average. While the Portfolio performed competitively
against the S&P MidCap Index, it underperformed against its Lipper category due
to its higher cash position relative to many of the Lipper category funds. In
addition, the Portfolio had an underweighting in technology and financial
services earlier in 1998; however, over the last few months, the Portfolio has
increased its exposure to both technology and financial services.
Over the past year, the mid-cap sector has been buffeted by two distinct trends.
Last year this sector of the market was perceived to be very inexpensive
relative to large-cap stocks. As a result, monies flowed into this sector
consistently throughout the late spring, summer and early fall of 1997 with a
corresponding rally in performance on both an absolute and a relative basis.
With the advent of concerns regarding the economic prospects of Southeast Asia
that arose in the second half of 1997 and continued throughout the first half of
the 1998 fiscal year, the equity markets in general and mid-cap stocks in
particular have become increasingly volatile. This has led to mid-cap
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stocks noticeably underperforming their large-cap brethren over the last several
months as investors flocked to the seemingly relative safety of larger, more
liquid equities. At this juncture, mid-cap stocks are again cheap relative to
large caps, as they were a year ago.
By the end of June, the Portfolio was approximately 27 percent invested in
technology/capital goods stocks, 43 percent in the consumer/consumer-related
sector, 14 percent in the basic industry/ economically sensitive sector, and 13
percent in financial services/interest-rate-sensitive stocks. The balance of the
Portfolio was invested in cash.
Looking forward, we are optimistic about the Portfolio's prospects. The
Portfolio remains fully invested, given the outstanding values found in its
universe. We will continue to emphasize what we believe to be the growth areas
of the stock market, with concentrations in technology, health care, retail,
consumer services and financial services.
GROWTH AND INCOME
BALANCED GROWTH PORTFOLIO
The Balanced Growth Portfolio produced a total return of 10.82 percent for the
six-month period ended June 30, 1998, compared to 9.61 percent for the Lipper
Variable Annuity Balanced Funds Underlying Average, 17.70 percent for the S&P
500 Index and 3.93 percent for the Lehman Brothers Aggregate Bond Index. Unlike
the all-equity S&P 500 Index, the Portfolio is invested primarily in a
combination of large-capitalization equities, U.S. government and
mortgage-backed securities and corporate bonds. The asset mix of the Portfolio
is 65 percent equities and 35 percent fixed income.
On March 2, 1998 (after the Series' fiscal six-month reporting period began),
the assets of the Balanced Growth Portfolio were placed under the sub-advisory
management of Morgan Stanley Dean Witter Advisors. In conjunction with the
Portfolio's subadvisory change, the Portfolio's name was changed from the
Balanced Portfolio to the Balanced Growth Portfolio and the Portfolio's
investment objective was changed from high total return through a combination of
income and capital appreciation to capital growth with reasonable current
income. A new equity portfolio was established which consists of 26 common
stocks spread among 22 different industry groups.
During the period under review, as cash flows permitted we purchased
current-coupon mortgages at attractive levels, enhancing the Portfolio's
prospects for higher total returns. As of June 30, 1998, the Portfolio's
fixed-income assets were invested as follows: 44 percent in mortgage-backed
securities, 32 percent in U.S. Treasuries, 12 percent in U.S. corporate
obligations, 8 percent in U.S. agency obligations and 4 percent in cash
equivalents.
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LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
DIVIDEND GROWTH PORTFOLIO
The Dividend Growth Portfolio produced a total return of 13.85 percent for the
six-month period ended June 30, 1998, compared to 17.70 percent for the S&P 500
Index and 12.26 percent for the Lipper Variable Annuity Growth and Income
Underlying Funds Average. The underperformance relative to the S&P 500 Index can
be attributed to the Portfolio's lack of exposure to high-technology stocks,
which have little if any current yield. Additionally, the Portfolio was
underweighted in financial services, which performed very well during the
period.
Since its inception on November 9, 1994, the Portfolio has maintained a fully
invested posture. During the fiscal six months, shares of Associates First
Capital were received by the Portfolio as a spin-off from Ford Motor Co.
Subsequently, this holding has been built into a full portfolio position. The
Portfolio's holding in Tricon Global Restaurants (a spin-off from Pepsico) was
liquidated. At period-end, the Portfolio owned 37 common stocks spread among 21
industry groups.
UTILITIES PORTFOLIO
The Utilities Portfolio produced a total return of 11.92 percent for the
six-month period ended June 30, 1998, compared to a return of 17.70 percent for
the broad-based S&P 500 Index and 9.30 percent for the Lipper Variable Annuity
Utilities Underlying Funds Average.
During the first six months of 1998, Asian economic fears and uncertainties
resurfaced and contributed to extreme volatility in U.S. financial markets.
Beneficiaries of the turmoil in the Pacific region included Treasury bonds,
electric utilities and selective telecom equities which investors sought for
their perceived relative safety and quality. Investors especially favored
electric utility equities because of their appealing valuations, defensive
characteristics, strengthening fundamentals and minimal Asian exposure. This
positive utility backdrop provided the underpinnings for the favorable
investment performance of the Portfolio during the first half of 1998. The
resumption of Asian concerns enabled the Portfolio to close the performance gap
with the overall market during the second quarter when safe-haven investments,
became increasingly appealing.
The performance of electric utilities was very robust during the period and
fundamentals continue to prove positive as the industry progresses from a
monopoly environment to a competitive marketplace and investor concerns
regarding regulatory treatment ease further. The Portfolio continues to
emphasize companies characterized by low unit costs and good earnings growth
opportunities through sound diversification strategies. Within this sector, the
trend of mergers and acquisitions continued, and providing additional upside
movement for the group was a suggestion of foreign utility company interests in
selective U.S. electric assets.
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Turning to the telecom sector, merger and acquisition fever was similarly
evident during the first six months of 1998 as investors propelled stock prices
upward, anticipating further industry consolidation. Notably, SBC Communications
announced its acquisition of Ameritech in a colossal $62 billion merger proposal
creating a local carrier with a customer reach from Ohio to California. Also,
AT&T announced a groundbreaking merger with the cable company Telecommunications
Inc., which provides AT&T a powerful foray into the local telecom market. Both
proposed mergers follow the convergence path many telecom companies have been
taking since the Telecommunication Act of 1996 became law. Additionally, the
outlook for earnings growth within this sector remains favorable, especially
given the high-growth prospects for newer industry applications such as data and
Internet services. Telecom companies are now capitalizing on the strong growth
of data services by incorporating Internet access into their existing suites of
telecom services.
Foreign telecom companies within the Portfolio also performed strongly. This
segment enhances the Portfolio's overall investment appeal and includes very
minimal Asian exposure, with a primary emphasis on Europe, as well as Canada and
Latin America. The foreign component remains geographically dispersed and
benefited from the strong revenue growth characteristics of broadening worldwide
telecom infrastructure as well as potential consolidation among telecom
companies globally.
The natural gas sector, in contrast, lagged within the utilities sectors as
natural gas prices weakened considerably because of the drop in oil prices and
mild temperatures. However, given that gas prices are extremely sensitive to
weather changes, a turn toward warmer-than-normal weather during June increased
demand for natural gas resulting in a modest rebound in gas commodity prices and
stocks. The Portfolio continues to focus on high-quality and well-diversified
gas companies within all areas of the natural gas sector. This is due to the
favorable long-term outlook of natural gas given its increasing appeal worldwide
as a clean-burning, environmentally friendly energy source.
The Portfolio remained fully invested during the first half of 1998, reflecting
improved investor confidence, particularly within the electric sector, given its
appeal in a volatile financial marketplace. Widespread and unique
diversification remains a key characteristic and strength of the Portfolio. To
place this in perspective, on June 30, 1998, 93 percent of the Portfolio was
allocated to utility and utility related equities. Within the equity component,
45 percent were allocated to telecommunications, 39 percent to electric
utilities and 16 percent to natural gas. Enhancing overall Portfolio
diversification are global foreign securities accounting for 15 percent of net
assets that are focused on the growth area of telecommunications. The
Portfolio's high-quality fixed-income portfolio accounted for 3 percent of net
assets, with 4 percent held in cash and cash equivalents.
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LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
The Portfolio is well positioned to benefit from the current environment of low
inflation and low interest rates. It remains uniquely positioned to capitalize
on the growth occurring across all the utility sectors and remains structured to
meet its long term total return objectives.
VALUE-ADDED MARKET PORTFOLIO
The Value-Added Market Portfolio produced a total return of 11.16 percent for
the six-month period ended June 30, 1998, compared to 17.70 percent for the S&P
500 Index and 12.26 percent for the Lipper Variable Annuity Growth and Income
Underlying Funds Average.
The Portfolio invests in substantially all the stocks included in the S&P 500
Index. Unlike the Index, however, the Portfolio weights all its stock positions
equally, thus emphasizing the stocks of smaller-to medium-capitalization
companies, which have historically outperformed the larger-capitalization
companies over the long term. But even though the small- and mid-capitalization
stocks have provided strong returns over the last three to four years, they have
been eclipsed by the returns of a narrow list of large-capitalization growth
stocks. The huge cash flows into these few large-cap companies have left the
rest of the market neglected and have pushed the relative valuations of small-
and mid-cap companies to historically low levels.
Factors such as slowing global growth, especially in Southeast Asia, coupled
with a stronger dollar are likely to present greater risks to the earnings of
larger companies with more foreign exposure. Smaller companies, on the other
hand, may be cushioned from these events to a greater degree. This scenario may
bode well for the small-cap equity markets of the United States. If small-cap
stocks benefit, so should the Portfolio, through its strategy of equally
weighting S&P issues of all market caps.
INCOME
DIVERSIFIED INCOME PORTFOLIO
The Diversified Income Portfolio produced a total return of 3.07 percent for the
six-month period ended June 30, 1998, compared to 3.47 percent for the Lehman
Brothers Government/Corporate Intermediate Bond Index and 3.58 percent for the
Lipper Variable Annuity General Bond Underlying Funds Average.
GLOBAL SECURITIES COMPONENT. As the crisis in the Asian financial markets
continued to benefit bonds in the developed markets, we lengthened the average
maturity of the Portfolio's global bond component to about 2.65 years to better
participate in the strong performance of those markets. The global bond
component decreased exposure to U.S. bonds in favor of those of Europe and New
Zealand, where yields were deemed more attractive. Most of the currency risks of
these investments, especially in
13
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
the case of New Zealand, which has a large export exposure to Asia, were hedged
back into the U.S. dollar to protect the value of the securities against an
appreciating U.S. currency. In April we removed some of the European currency
hedges, allowing the Portfolio to benefit as the values of those currencies
increased.
Going forward, we anticipate continuing the global bond component's strategy of
global diversification while seeking markets that offer attractive yields, good
inflation outlooks and fiscal discipline. In addition, we will continue to
emphasize securities and markets that offer compelling values and low relative
risk.
U.S. GOVERNMENT SECURITIES COMPONENT. During this period, mortgage-backed
securities spreads widened versus Treasury securities of similar duration.
Spread movements in the mortgage-backed market were driven primarily by an
increase in prepayments and a renewed concern for prepayment risk. However,
spread stability returned by the end of the period as Treasury securities began
trading in a well-defined range. Additional positions in mortgage-backed
securities, agencies and zero-coupon securities were established during this
period. At present, the mortgage portfolio consists of securities ranging in
coupon from 6.0 percent to 8 percent. Mortgages represent 32 percent, Treasuries
6 percent, agencies 54 percent, zero-coupon agencies 6 percent and cash
equivalents 2 percent.
HIGH-YIELD SECURITIES COMPONENT. Following some market weakness in 1997's fourth
quarter as a result of the crisis in the emerging market, the high-yield bond
sector proceeded to stabilize and recover during the early part of 1998 as a
result of the continued strength in the U.S. economy. This strength has resulted
in solid earnings improvements for many high-yield companies and has provided
the fuel for the sharp equity market advance experienced during the period. Many
high-yield companies have taken advantage of higher equity valuations to raise
equity and strengthen their own balance sheets. The resulting credit quality
improvement has kept the high-yield market's performance strong relative to that
of many other fixed-income markets.
As the economy has continued to expand over the past few years, the Portfolio's
high-yield component has tended to concentrate on B-rated issues. In a growing
economy, one can generally find undervalued upgrade candidates in this sector
that provide attractive yields as well as appreciation potential. We continue to
believe that many of these issues are very attractive investments, given our
expectation for ongoing economic growth this year. However, in light of the
lower market yields available today and the potential for a correction in the
market, we have taken some defensive steps for the high-yield component over the
past year, including increasing its
14
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
allocation to the higher-quality end of the market (BB-rated issues or higher).
We believe that these holdings will better protect shareholders during a
potentially nervous market as well as provide the liquidity and flexibility
needed to take advantage of higher, more attractive yields in the future.
The high-yield bond component sold many of its heavily cyclical positions and is
now focused on more-predictable, recession-resistant, growth sectors of the
economy such as food and beverages, health care, telecommunications and media
and cable. In some of these sectors, such as media and telecommunications, we
expect to see continued consolidation, which should bode well for many of the
Portfolio's individual holdings. Finally, in keeping with our more defensive
posture, we will continue to limit our exposure to emerging high-yield markets,
particularly given the risk associated with the ongoing crisis in many overseas
markets.
The one- to two-year outlook for the high-yield market remains positive, and we
expect continued economic growth with a relatively favorable interest-rate
environment. We caution, however, that during this period the possibility exists
for another round of investor nervousness in reaction to potential Federal
Reserve Board moves or another disruption in the emerging markets.
NORTH AMERICAN GOVERNMENT SECURITIES PORTFOLIO
The North American Government Securities Portfolio produced a total return of
2.25 percent for the six-month period ended June 30, 1998, compared to 3.15
percent for the Lehman Brothers Short (1 - 5 year) U.S. Government Index and
2.31 percent for the Lipper Variable Annuity Global Income Underlying Funds
Average.
International markets and money flows played a prominent role in both the
Mexican and U.S. financial markets during the first half of 1998. Large flows of
capital moved quickly in and out of both countries in response to volatile
conditions in the financial markets of Asia and Russia. The impact of these
capital flows on the U.S. financial system was most strongly felt in the second
week of June, following the announcement of a 5.3 percent decline in Japan's
first-quarter GDP and the yen's fall to a 10-year low. Foreign investors quickly
moved out of emerging market securities into the safe haven of the U.S. Treasury
market, causing the yield on the benchmark 30-year U.S. Treasury bond to plummet
to a historic low. The reduction in foreign capital investment in Mexico caused
the peso to depreciate slightly. Nonetheless, the Mexican economy remained
fundamentally sound.
Mortgage rates brushed near a multi-year low in June, causing spreads to widen
on fears of another wave of refinancings. Rumors and reports of sales by
distressed mortgage investors pushed spreads out even wider, contributing to the
underperformance of the mortgage sector. Prepayments in general have declined in
many sectors of the mortgage market, including some adjustable rate
15
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
mortgages (ARMs). As expected, certain types of collaterized mortgage
obligations (CMOs) fared better than other types of securities in this
environment. Short sequential agencies performed well, due to strong demand, and
securities with principal paydown lockouts and average life protection
outperformed those that lacked call protection.
The Portfolio remained on the sidelines with respect to investing in both Mexico
and Canada. However, we continue to monitor each sector for relative value and
will reinvest when opportunities arise. As always, we maintain a high
concentration in the highest tiers of fixed-income credit quality.
The primary risks now confronting the U.S. mortgage market are that a relatively
small change in mortgage rates, of perhaps 25 basis points or so, might
stimulate another flood of refinancing applications. Analysts estimate that
about 15 million households continue to pay mortgage rates of 8 percent or
higher. That statistic, combined with forecasts of low interest rates persisting
into the fall season make mortgages vulnerable to further price pressures. On
the other hand, mortgages have now cheapened to a point where many of these
risks are offset yet demand remains strong. These factors, along with our
continued emphasis on call protection, support a relatively favorable outlook
for the mortgage sector over the next few months.
MONEY MARKET PORTFOLIO
As of June 30, 1998, the Money Market Portfolio had assets in excess of $91.6
million with an average life of 72 days. The Portfolio's total return for the
most recent six-month fiscal period was 2.56 percent.
After rising approximately 25 basis points late in the first quarter of 1997,
money market yields held remarkably stable over the past five quarters. Federal
Reserve policy makers have held the target rate for federal funds at 5.50
percent since March 25, 1997.
On June 30, 1998, approximately 87 percent of the Portfolio consisted of
high-quality commercial paper, 2 percent was invested in short-term bank notes
of major, financially strong commercial banks, 9 percent was in bankers'
acceptances issued by such institutions, and the remaining 2 percent was in
Federal agency obligations.
At the end of this fiscal period, approximately 80 percent of the Portfolio's
assets were due to mature in less than four months. Therefore, the Portfolio is
well positioned for stability of value with a high degree of liquidity. We
continue to operate the Portfolio in a straightforward, conservative style
without structured notes or derivatives, which could fluctuate excessively when
interest rates
16
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
change. In addition, the Portfolio has avoided making direct investment in Asian
financial institutions. As a result, its exposure to credit-rating downgrades,
which some money market funds may have experienced recently, has been limited.
At this time we anticipate a slight moderation in the pace of economic activity
during the remainder of 1998, with no major adverse surprises in the rate of
inflation. In view of the benign inflationary environment along with the
uncertainty of international economic events, we anticipate that the Fed will
maintain the current federal funds target rate for the near term. As a result,
we do not expect investment yields available to the Portfolio during the months
immediately ahead to differ dramatically from those available during the fiscal
period just ended.
We appreciate your support of Morgan Stanley Dean Witter Select Dimensions
Investment Series and look forward to continuing to serve your investment needs
and objectives.
Very truly yours,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
17
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS
INVESTMENT SERIES
RESULTS OF SPECIAL MEETING (UNAUDITED)
* * *
On February 26, 1998, a special meeting of shareholders of Morgan Stanley Dean
Witter Select Dimensions Investment Series was held for the purpose of voting on
two separate matters, the results of which are as follows:
1) For the Growth Portfolio (formerly named the Core Equity Portfolio), approval
of a sub-advisory agreement between Morgan Stanley Dean Witter Advisors Inc.
(formerly Dean Witter InterCapital Inc.) and Morgan Stanley Asset Management
Inc.:
<TABLE>
<CAPTION>
<S> <C>
For..................................... 2,142,060.046
Against................................. 34,429.901
Abstain................................. 167,530.160
</TABLE>
2) For the Balanced Growth Portfolio (formerly the Balanced Portfolio), approval
of a change in the Portfolio's investment objective from high total return
through a combination of income and capital appreciation to capital growth with
reasonable current income:
<TABLE>
<S> <C>
For..................................... 4,069,610.588
Against................................. 179,252.467
Abstain................................. 298,140.381
</TABLE>
18
<PAGE>
MONEY MARKET
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER, (87.1%)
AUTOMOTIVE - FINANCE (15.1%)
$ 4,500 American Honda Finance Corp....................... 5.56-5.57% 07/08/98-07/24/98 $ 4,490,111
1,000 Chrysler Financial Corp........................... 5.55 02/02/98-03/02/98 992,950
1,500 Daimler-Benz North America Corp................... 5.60 07/23/98 1,494,958
3,000 Ford Motor Credit Co.............................. 5.57-6.10 07/01/98-07/02/98 2,999,770
3,930 General Motors Acceptance Corp.................... 5.81-5.83 07/10/98-10/22/98 3,896,309
-----------
13,874,098
-----------
BANK HOLDING COMPANIES (17.6%)
4,150 Bankers Trust Corp................................ 5.56-5.65 08/24/98-10/23/98 4,107,181
2,000 Mellon Financial Co............................... 5.60 07/27/98 1,992,027
4,470 Morgan (J.P.) & Co. Inc........................... 5.61-5.67 07/17/98-12/07/98 4,385,503
2,000 NationsBank Corp.................................. 5.61 08/13/98 1,986,813
1,750 Norwest Corp...................................... 5.60 07/21/98 1,744,575
2,000 PNC Funding Corp.................................. 5.62 08/27/98 1,982,520
-----------
16,198,619
-----------
BANKS - COMMERCIAL (13.0%)
2,500 ABN- AMRO North America Finance Inc............... 5.61 09/25/98 2,467,451
1,000 Barclays U.S. Funding Corp........................ 5.56 07/07/98 999,098
1,500 Deutsche Bank Financial Inc....................... 5.60 08/14/98 1,489,880
2,000 Societe Generale N.A. Inc......................... 5.56 10/07/98 1,970,546
3,200 Toronto-Dominion Holdings USA Inc................. 5.58-5.71 08/10/98-01/28/99 3,128,429
1,900 UBS Finance (DE) Inc.............................. 5.66 11/20/98 1,858,856
-----------
11,914,260
-----------
BROKERAGE (3.7%)
3,370 Goldman Sachs Group L.P........................... 5.54-5.59 07/06/98-08/28/98 3,352,465
-----------
FINANCE - COMMERCIAL (4.7%)
1,400 CIT Group Holdings, Inc........................... 5.60 10/09/98 1,378,806
3,000 International Lease Finance Corp.................. 5.61-5.62 10/29/98-11/06/98 2,943,373
-----------
4,322,179
-----------
FINANCE - CONSUMER (12.7%)
1,000 American Express Credit Corp...................... 5.58 08/12/98 993,642
1,700 American General Finance Corp..................... 5.59 08/06/98 1,690,667
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
MONEY MARKET
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 3,075 Avco Financial Services, Inc...................... 5.59-5.62% 08/11/98-09/09/98 $ 3,051,198
4,105 Beneficial Corp................................... 5.55-5.59 07/20/98-08/05/98 4,087,423
1,820 Commercial Credit Co.............................. 5.58 09/04/98 1,801,894
-----------
11,624,824
-----------
FINANCE - DIVERSIFIED (8.6%)
3,500 Associates Corp. of North America................. 5.58-5.60 07/30/98-12/11/98 3,454,140
4,500 General Electric Capital Corp..................... 5.60-5.65 08/07/98-01/29/99 4,422,663
-----------
7,876,803
-----------
FINANCE - EQUIPMENT (1.7%)
1,560 Deere (John) Capital Corp......................... 5.60 09/18/98 1,541,069
-----------
INDUSTRIALS (2.0%)
1,850 Deere & Co........................................ 5.57 07/14/98 1,846,306
-----------
INSURANCE (0.7%)
675 American General Corp............................. 5.58 07/16/98 673,459
-----------
OFFICE EQUIPMENT (1.1%)
1,080 Pitney Bowes Credit Corp.......................... 5.71 07/09/98 1,078,632
-----------
RETAIL (3.9%)
3,570 Sears Roebuck Acceptance Corp..................... 5.56-5.58 07/31/98-08/20/98 3,548,671
-----------
UTILITIES - FINANCE (2.3%)
2,085 National Rural Utilities Cooperative Finance
Corp............................................ 5.56 07/22/98 2,078,335
-----------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $79,929,720)..................................................... 79,929,720
-----------
BANKERS' ACCEPTANCES (8.6%)
4,039 BankBoston, N.A................................... 5.60-5.66 07/15/98-11/20/98 3,988,641
2,000 Corestates Bank, N.A.............................. 5.64 10/28/98 1,963,639
2,000 Mellon Bank, N.A.................................. 5.61-5.65 10/09/98-10/23/98 1,967,417
-----------
TOTAL BANKERS' ACCEPTANCES
(AMORTIZED COST $7,919,697)...................................................... 7,919,697
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
MONEY MARKET
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM BANK NOTE (2.2%)
$ 2,000 First Union National Bank
(AMORTIZED COST $2,000,000)....................... 5.65% 01/20/99 $ 2,000,000
-----------
U.S. GOVERNMENT AGENCIES (2.0%)
515 Federal Farm Credit
Bank............................................ 5.56 06/15/99 488,688
877 Federal Home Loan
Banks........................................... 5.52 01/11/99 851,716
500 Federal Home Loan Mortgage Corp................... 5.51 08/04/98 497,459
-----------
TOTAL U.S. GOVERNMENT AGENCIES
(AMORTIZED COST $1,837,863)...................................................... 1,837,863
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(AMORTIZED COST $91,687,280) (a).................................................. 99.9 % 91,687,280
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.................................... 0.1 48,111
------ -----------
NET ASSETS........................................................................ 100.0 % $91,735,391
------ -----------
------ -----------
</TABLE>
- ---------------------
(a) Cost is the same for federal income tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
NORTH AMERICAN GOVERNMENT SECURITIES
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (14.6%)
U.S. Treasury Note
$ 250 .................................................. 5.50 % 11/15/98 $ 250,078
200 .................................................. 5.50 02/28/99 200,058
150 .................................................. 5.50 04/15/00 149,998
100 .................................................. 6.00 08/15/99 100,490
200 .................................................. 6.375 05/15/99 201,410
----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $902,588)............................................ 902,034
----------
MORTGAGE-BACKED SECURITIES (49.2%)
Federal Home Loan Mortgage Corp.
76 .................................................. 5.50 11/01/00 74,818
40 .................................................. 6.00 11/01/99 39,874
7 .................................................. 7.00 07/01/00 7,206
271 .................................................. 7.00 09/01/17 275,653
481 .................................................. 7.00 02/01/28 487,275
68 .................................................. 7.50 05/01/11 69,529
131 .................................................. 7.50 06/01/11 134,966
102 .................................................. 7.50 08/01/11 105,112
Federal National Mortgage Assoc.
64 .................................................. 6.00 09/01/00 63,061
59 .................................................. 6.50 07/01/02 59,835
65 .................................................. 7.00 06/01/02 65,612
71 .................................................. 7.00 10/01/02 71,802
107 .................................................. 7.00 01/01/03 108,810
131 .................................................. 7.551 12/01/26 135,536
35 .................................................. 7.565 05/01/27 36,240
82 .................................................. 7.60 04/01/27 83,675
57 .................................................. 7.718 05/01/27 58,361
233 .................................................. 7.75 01/01/22 245,039
35 .................................................. 7.813 09/01/26 35,878
33 .................................................. 8.075 07/01/24 34,220
Government National Mortgage Assoc.
278 .................................................. 6.00 07/20/27 282,720
281 .................................................. 6.00 08/20/27 286,006
101 .................................................. 6.875 02/20/23 103,006
55 .................................................. 6.875 01/20/26 55,888
55 .................................................. 7.375 06/20/25 56,122
53 .................................................. 7.375 05/20/26 54,205
----------
TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $2,996,358).......................................... 3,030,449
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
NORTH AMERICAN GOVERNMENT SECURITIES
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (34.2%)
U.S. GOVERNMENT AGENCIES (a) (32.4)
Federal Agricultural Mortgage Corp.
$ 500 .................................................. 5.42 % 07/01/98 $ 500,000
109 .................................................. 5.44 07/01/98 109,000
Federal Farm Credit Bank
301 .................................................. 5.44 07/10/98 300,590
200 .................................................. 5.47 07/01/98 200,000
177 .................................................. 5.50 07/01/98 176,784
Federal Home Loan Banks
100 .................................................. 5.40 07/01/98 100,000
250 .................................................. 5.45 07/06/98 249,811
100 .................................................. 5.45 07/22/98 99,682
125 .................................................. 5.45 08/07/98 124,300
134 Federal Home Loan Mortgage Corp................... 5.55 07/13/98 133,752
----------
TOTAL U.S. GOVERNMENT AGENCIES
(AMORTIZED COST $1,993,919)........................................... 1,993,919
----------
REPURCHASE AGREEMENT (1.8%)
112 The Bank of New York (dated 06/30/98; proceeds
$111,518) (b) (IDENTIFIED COST $111,501)........ 5.50 07/01/98 111,501
----------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $2,105,420).......................................... 2,105,420
----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $6,004,366) (c)............................................................ 98.0 % 6,037,903
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.............................................. 2.0 122,183
------ -----------
NET ASSETS.................................................................................. 100.0 % $ 6,160,086
------ -----------
------ -----------
</TABLE>
- ---------------------
(a) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $111,809 U.S. Treasury Note 6.125% due 12/31/01 valued at
$113,731.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $38,787 and the
aggregate gross unrealized depreciation is $5,250, resulting in net
unrealized appreciation of $33,537.
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
DIVERSIFIED INCOME
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
GOVERNMENT & CORPORATE BONDS (94.5%)
FOREIGN (19.6%)
AUSTRALIA (0.0%)
CABLE/CELLULAR
$ 3 Australis Media Ltd......................................... 15.75 ++% 05/15/03 $ 427
-----------
CANADA (1.5%)
CABLE/CELLULAR (0.6%)
500 Clearnet Communications Inc................................. 14.75 ++ 12/15/05 420,000
-----------
FOODS & BEVERAGES (0.3%)
250 Sparkling Spring Water...................................... 11.50 11/15/07 262,500
-----------
MANUFACTURING (0.3%)
750 International Semi-Tech Microelectronics.................... 11.50 ++ 08/15/03 232,500
-----------
TELECOMMUNICATIONS (0.3%)
200 Metronet Communications..................................... 12.00 08/15/07 225,000
-----------
TOTAL CANADA.............................................................................. 1,140,000
-----------
DENMARK (a) (2.7%)
GOVERNMENT OBLIGATION
DKK 13,000 Kingdom of Denmark.......................................... 9.00 11/15/00 2,080,075
-----------
FINLAND (a)(0.4%)
FINANCIAL
GBP 200 Leonia Corporation Bank PLC................................. 6.75 12/29/00 327,298
-----------
GERMANY (a) (3.3%)
BANKS
DEM 1,100 Allgemeine HypothekenBank AG................................ 5.75 03/13/00 624,244
GBP 150 Bayerische Hypotheken Bank.................................. 6.75 12/30/99 246,142
100 Bayerische VereinsBank...................................... 7.50 12/27/00 166,775
DEM 1,100 Depfa-Bank.................................................. 6.00 08/28/00 630,448
GBP 150 Deutsche Siedlungs Bank..................................... 7.50 12/27/00 249,975
DEM 1,100 Rheinische HypothekenBank AG................................ 5.50 12/20/99 620,595
-----------
TOTAL GERMANY............................................................................. 2,538,179
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
DIVERSIFIED INCOME
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ITALY (a) (4.4%)
GOVERNMENT OBLIGATIONS
ITL 2,075 Italy Treasury Bond......................................... 9.50 % 02/01/01 $ 1,305,062
M
3,325 M Italy Treasury Bond......................................... 9.50 05/01/01 2,111,410
-----------
TOTAL ITALY............................................................................... 3,416,472
-----------
NETHERLANDS (0.3%)
TELECOMMUNICATIONS
$ 200 Versatel Telecommunications BV (Units)++ - 144A*............ 13.25 05/15/08 210,000
-----------
NEW ZEALAND (1.8%)
BANKS (0.7%)
NZD 1,100 International Bank for Reconstruction & Development......... 7.00 09/18/00 562,923
-----------
GOVERNMENT OBLIGATION (a) (1.1%)
1,600 New Zealand Government Bond................................. 8.00 02/15/01 846,295
-----------
TOTAL NEW ZEALAND......................................................................... 1,409,218
-----------
NORWAY (0.8%)
GOVERNMENT OBLIGATION (0.6%)
NOK 3,400 Norway Government Bond...................................... 9.00 01/31/99 452,756
-----------
OIL & GAS (0.2%)
$ 200 Northern Offshore ASA - 144A*............................... 10.00 05/15/05 194,000
-----------
TOTAL NORWAY.............................................................................. 646,756
-----------
SPAIN (1.4%)
GOVERNMENT OBLIGATION
ESP 150 M Spain Treasury Bond......................................... 12.25 03/25/00 1,105,386
-----------
UNITED KINGDOM (3.0%)
BANKS (a) (1.8%)
GBP 176 Baden Wurt L-Finance NV..................................... 7.75 12/14/00 294,923
300 Halifax PLC................................................. 8.375 12/15/99 503,249
DEM 1,100 Suedwest LB Capital Markets (Series EMTN)................... 7.00 03/31/00 636,263
-----------
1,434,435
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
25
<PAGE>
DIVERSIFIED INCOME
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
GOVERNMENT OBLIGATION (0.9%)
GBP 400 United Kingdom Treasury Bond................................ 10.00 % 02/26/01 $ 716,608
-----------
TRANSPORTATION (0.3%)
$ 250 Alpha Shipping PLC - 144A*.................................. 9.50 02/15/08 235,625
-----------
TOTAL UNITED KINGDOM...................................................................... 2,386,668
-----------
TOTAL FOREIGN
(IDENTIFIED COST $15,522,567)............................................................. 15,260,479
-----------
UNITED STATES (74.9%)
CORPORATE BONDS (28.1%)
AEROSPACE (0.3%)
200 Sabreliner Corp. - 144A*.................................... 11.00 06/15/08 200,500
-----------
BROADCAST MEDIA (1.1%)
300 Interep National Radio Sales - 144A*........................ 10.00 07/01/08 303,000
100 Paxson Communications Corp.................................. 11.625 10/01/02 107,000
200 Spanish Broadcasting System, Inc............................ 12.50 06/15/02 228,000
200 Tri-State Outdoor Media - 144A*............................. 11.00 05/15/08 203,000
-----------
841,000
-----------
BUSINESS SERVICES (1.4%)
500 Anacomp, Inc. (Series B).................................... 10.875 04/01/04 526,250
500 Comforce Operating Inc...................................... 12.00 12/01/07 540,000
-----------
1,066,250
-----------
CABLE/CELLULAR (1.7%)
294 Falcon Holdings Group L.P................................... 11.00 09/15/03 313,375
500 McCaw International Ltd..................................... 13.00 ++ 04/15/07 327,500
300 Nextel Communications....................................... 10.65 ++ 09/15/07 203,250
600 Price Communications Cellular Holdings...................... 13.50 ++ 08/01/07 420,000
200 Triton Communications - 144A*............................... 11.00 ++ 05/01/08 112,500
-----------
1,376,625
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
26
<PAGE>
DIVERSIFIED INCOME
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CHEMICALS (0.3%)
$ 250 Harris Chemical North America, Inc.......................... 10.75 % 10/15/03 $ 262,813
-----------
COMPUTER EQUIPMENT (1.3%)
400 CHS Electronics Inc......................................... 9.875 04/15/05 390,000
300 IBM Credit Corp............................................. 15.00 02/02/99 315,930
250 Unisys Corp. - (Series B)................................... 12.00 04/15/03 281,875
-----------
987,805
-----------
CONSUMER PRODUCTS (0.3%)
200 Samsonite Corp. - 144A*..................................... 10.75 06/15/08 199,500
-----------
ELECTRICAL & ALARM SYSTEMS (0.5%)
400 Mosler, Inc................................................. 11.00 04/15/03 368,000
-----------
ENTERTAINMENT/GAMING & LODGING (3.3%)
400 Aladdin Gaming/Capital Corp. (Units)++ - 144A*.............. 13.50 ++ 03/01/10 188,000
250 Argosy Gaming Co............................................ 13.25 06/01/04 280,000
300 Epic Resorts LLC/Capital - 144A*............................ 13.00 06/15/05 302,997
250 Fitzgerald Gaming Corp. - 144A*............................. 12.25 12/15/04 246,250
500 Lady Luck Gaming Finance Corp............................... 11.875 03/01/01 510,000
200 Motels of America, Inc. (Series B).......................... 12.00 04/15/04 195,000
265 Resort At Summer
Co. - 144A*............................................... 13.00+ 12/15/07 276,815
250 Stuart Entertainment, Inc. (Series B)....................... 12.50 11/15/04 186,250
400 Walt Disney Co.............................................. 15.00 12/14/98 416,324
-----------
2,601,636
-----------
FINANCE (1.1%)
300 General Electric Capital Corp. (Series A)................... 15.00 01/21/99 315,285
GBP 325 KFW International Finance (a)............................... 7.625 12/29/00 544,485
-----------
859,770
-----------
FOODS & BEVERAGES (1.6%)
$ 200 Envirodyne Industries, Inc.................................. 10.25 12/01/01 200,500
500 General Mills, Inc.......................................... 15.00 01/29/99 527,045
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
27
<PAGE>
DIVERSIFIED INCOME
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 250 PepsiCo, Inc................................................ 15.00 % 08/06/98 $ 252,183
600 Specialty Foods Acquisition Corp. (Series B)................ 13.00 ++ 08/15/05 256,500
-----------
1,236,228
-----------
HEALTHCARE (0.8%)
300 Unilab Corp................................................. 11.00 04/01/06 323,250
500 Unison Healthcare Corp. - 144A* (c)......................... 12.25 11/01/06 276,250
-----------
599,500
-----------
MANUFACTURING (0.8%)
325 Berry Plastics.............................................. 12.25 04/15/04 353,438
250 Outsourcing Services Group, Inc. - 144A*.................... 10.875 03/01/06 256,250
-----------
609,688
-----------
MANUFACTURING - DIVERSIFIED (0.8%)
200 Interlake Corp.............................................. 12.125 03/01/02 206,250
200 J.B. Poindexter & Co., Inc.................................. 12.50 05/15/04 199,000
325 Jordan Industries, Inc. (Series B).......................... 11.75 ++ 04/01/09 209,625
-----------
614,875
-----------
OIL & GAS (1.1%)
300 Texaco Capital, Inc......................................... 15.00 01/13/99 314,616
500 TransAmerica Refining Corp. (Units)++ - 144A*............... 16.00 06/30/03 532,500
-----------
847,116
-----------
PUBLISHING (0.3%)
250 American Media Operations, Inc.............................. 11.625 11/15/04 268,125
-----------
RESTAURANTS (1.3%)
300 Carrols Corp................................................ 11.50 08/15/03 317,250
200 FRD Acquisition Corp. (Series B)............................ 12.50 07/15/04 219,500
250 Friendly Ice Cream Corp..................................... 10.50 12/01/07 264,375
250 Planet Hollywood International.............................. 12.00 04/01/05 225,000
-----------
1,026,125
-----------
RETAIL (0.3%)
250 K Mart Corp................................................. 13.50 01/01/09 267,175
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
28
<PAGE>
DIVERSIFIED INCOME
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
RETAIL - FOOD CHAINS (1.3%)
$ 250 Big V Supermarkets, Inc. (Series B)......................... 11.00 % 02/15/04 $ 260,625
250 Mrs. Fields Original........................................ 10.125 12/01/04 242,500
500 Pueblo Xtra International, Inc. (Series C).................. 9.50 08/01/03 491,250
-----------
994,375
-----------
TELECOMMUNICATIONS (6.3%)
400 21st Century Telecom Group, Inc............................. 12.25 ++ 02/15/08 226,000
425 Advanced Radio Telecommunication............................ 14.00 02/15/07 452,625
200 Birch Telecommunication Inc. (Units)++ - 144A*.............. 14.00 06/15/08 200,250
200 Cellnet Data Systems Inc.................................... 14.00 ++ 10/01/07 112,000
300 e. Spire Communications..................................... 13.75 07/15/07 342,750
200 Facilicom International..................................... 10.50 01/15/08 196,000
400 FirstWorld Communication (Units)++ - 144A*.................. 13.00 ++ 04/15/08 176,000
250 GST Equipment Funding Corp.................................. 13.25 05/01/07 287,500
300 Hyperion Telecommunication, Inc. (Series B)................. 12.25 09/01/04 323,250
400 In-Flight Phone Corp. (Series B) (b)........................ 14.00 05/15/02 56,000
150 NextLink Communications LLC................................. 12.50 04/15/06 169,875
300 Optel Inc. - 144A*.......................................... 11.50 07/01/08 300,000
300 Paging Network, Inc......................................... 10.125 08/01/07 312,000
300 Peoples Telephone Co., Inc.................................. 12.25 07/15/02 316,500
300 Primus Telecommunications Group............................. 11.75 08/01/04 318,000
400 USA Mobile Communications Holdings, Inc..................... 14.00 11/01/04 442,000
500 Winstar Communications...................................... 14.00 ++ 10/15/05 418,750
250 Winstar Equipment Corp...................................... 12.50 03/15/04 282,500
-----------
4,932,000
-----------
TELECOMMUNICATIONS EQUIPMENT (0.5%)
400 FWT Inc..................................................... 9.875 11/15/07 372,000
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
29
<PAGE>
DIVERSIFIED INCOME
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEXTILES - APPAREL MANUFACTURERS (0.1%)
$ 150 U.S. Leather, Inc. (c)...................................... 10.25 % 07/31/03 $ 66,750
-----------
WIRELESS COMMUNICATION (1.6%)
200 Echostar DBS Corp........................................... 12.50 07/01/02 224,500
250 GlobalStar LP/Capital....................................... 11.375 02/15/04 241,875
150 Globalstar LP/Capital - 144A*............................... 11.50 06/01/05 145,688
200 Orbcomm Global LP/Capital................................... 14.00 08/15/04 226,000
600 TCI Statellite Entertainment Corp........................... 12.25 ++ 02/15/07 406,500
-----------
1,244,563
-----------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $21,935,185)............................................................. 21,842,419
-----------
MORTGAGE-BACKED SECURITIES (21.2%)
765 Federal Home Loan Mortgage Corp. (1.0%)..................... 7.00 06/01/04 777,119
-----------
Federal National Mortgage Assoc. (9.4%)
851 ............................................................ 6.00 02/01/11-03/01/11 841,280
2,970 ............................................................ 6.50 04/01/12-06/01/28 2,966,061
3,129 ............................................................ 7.00 07/01/25-05/01/27 3,172,337
353 ............................................................ 8.00 07/01/26 365,442
-----------
7,345,120
-----------
Government National Mortgage Assoc. (10.8%)
5,632 ............................................................ 6.50 01/15/24-04/20/28 5,613,393
873 ............................................................ 7.00 01/15/26-04/15/26 886,627
1,069 ............................................................ 7.50 02/15/26-07/15/26 1,098,339
777 ............................................................ 8.00 02/15/26-06/15/26 804,710
-----------
8,403,069
-----------
TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $16,157,129)............................................................. 16,525,308
-----------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (25.6%)
Federal Home Loan Banks (a) (1.5%)
500 ............................................................ 5.53 01/15/03 495,660
DEM 1,100 ............................................................ 6.00 08/23/00 630,172
-----------
1,125,832
-----------
Federal National Mortgage Assoc. (a) (2.2%)
$ 500 ............................................................ 5.60 02/02/01 498,705
NZD 2,400 ............................................................ 7.00 09/26/00 1,225,516
-----------
1,724,221
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
30
<PAGE>
DIVERSIFIED INCOME
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 6,000 Resolution Funding Corp. (a) (4.7%)......................... 0.00 % 01/15/05-10/15/07 $ 3,670,320
-----------
1,000 Tennesee Valley Authority (a) (1.1%)........................ 0.00 07/15/00 891,620
-----------
U.S. Treasury Notes (a) (16.1%)
5,100 ............................................................ 5.375 02/15/01 5,080,416
3,500 ............................................................ 5.625 05/15/01 3,511,480
1,800 ............................................................ 5.75 11/30/02 1,814,490
1,000 ............................................................ 6.25 08/31/02 1,025,150
1,000 ............................................................ 8.00 05/15/01 1,063,560
-----------
12,495,096
-----------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(IDENTIFIED COST $19,732,699)............................................................. 19,907,089
-----------
TOTAL UNITED STATES
(IDENTIFIED COST $57,825,013)............................................................. 58,274,816
-----------
TOTAL GOVERNMENT & CORPORATE BONDS
(IDENTIFIED COST $73,347,580)............................................................. 73,535,295
-----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- ----------
<C> <S> <C>
COMMON STOCKS (d) (0.4%)
CABLE/CELLULAR (0.1%)
3,358 Price Communications Corp................................................................. 51,419
-----------
RETAIL (0.3%)
53,200 County Seat Stores, Inc. (e) (f).......................................................... 248,391
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $304,957)................................................................ 299,810
-----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE
- ---------- ------------------
<C> <S> <C> <C>
WARRANTS (d) (0.0%)
CABLE & TELECOMMUNICATIONS (0.0%)
500 McCaw International Ltd. - 144A*...................................... 04/15/07 125
200 Metronet Communications - 144A*....................................... 08/15/07 9,644
300 UIH Australia/Pacific Inc............................................. 05/15/06 3
-----------
9,772
-----------
ENTERTAINMENT/GAMING & LODGING (0.0%)
300 Epic Resorts - 144A*.................................................. 06/15/05 3
787 Fitzgeralds Gaming Corp............................................... 12/19/98 3,542
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
31
<PAGE>
DIVERSIFIED INCOME
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
100 Fitzgeralds South Inc. - 144A*........................................ 03/15/99 $ 1
250 Resort At Summerlin Corp. - 144A*..................................... 12/15/07 3
-----------
3,549
-----------
TOTAL WARRANTS
(IDENTIFIED COST $4,554).................................................................. 13,321
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ---------- ------- ------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENT (3.6%)
REPURCHASE AGREEMENT
$ 2,818 The Bank of New York (dated 06/30/98; proceeds $2,818,423)
(g)
(IDENTIFIED COST $2,817,993).............................. 5.50 % 07/01/98 2,817,993
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $76,475,084) (h)............................................................ 98.5 % 76,666,419
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................................... 1.5 1,145,132
------ ------------
NET ASSETS................................................................................... 100.0 % $ 77,811,551
------ ------------
------ ------------
</TABLE>
- ---------------------
M In millions.
* Resale is restricted to qualified institutional investors.
++ Consists of one or more class of securities traded together as a unit;
bonds with attached stocks or warrants.
+ Payment-in-kind security.
++ Currently a zero coupon bond and will pay interest at the rate shown at a
future specified date.
(a) Some or all of these securities are segregated in connection with open
forward foreign currency contracts.
(b) Non-income producing securities; issuer in bankruptcy.
(c) Non-income producing security; issuer in default.
(d) Non-income producing securities.
(e) Acquired through exchange offer.
(f) Includes 19,087 shares which are due from the issuer pursuant to a
reorganization.
(g) Collateralized by $1,652,391 U.S. Treasury Note 5.875% due 09/30/02 valued
at $1,695,633 and $1,161,439 U.S. Treasury Note 5.25% due 01/31/01 valued
at $1,178,720.
(h) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $1,520,620 and the
aggregate gross unrealized depreciation is $1,329,285, resulting in net
unrealized appreciation of $191,335.
SEE NOTES TO FINANCIAL STATEMENTS
32
<PAGE>
DIVERSIFIED INCOME
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JUNE 30, 1998:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS IN EXCHANGE DELIVERY APPRECIATION/
TO DELIVER FOR DATE DEPRECIATION
- -------------------------------------------------------------------
<S> <C> <C> <C>
GBP 550,000 $ 903,485 07/13/98 $ (12,973)
NZD 1,362,000 $ 721,329 07/20/98 17,629
NZD 1,600,000 $ 849,920 07/21/98 23,312
NZD 2,100,000 $ 1,115,100 07/31/98 30,940
GBP 800,000 $ 1,302,800 08/17/98 (27,568)
DEM 1,352,500 $ 745,960 09/10/98 (5,237)
DEM 1,220,000 $ 671,510 09/10/98 (6,094)
FRF 13,747,000 $ 2,256,585 09/10/98 (21,989)
NLG 580,000 $ 283,868 09/10/98 (1,914)
NLG 170,000 $ 83,668 09/17/98 (131)
JPY 91,391,000 $ 652,513 10/01/98 (14,098)
--------------
Net unrealized depreciation.................. $ (18,123)
--------------
--------------
</TABLE>
CURRENCY ABBREVIATIONS:
<TABLE>
<S> <C>
GBP British Pound.
DKK Danish Krone.
NLG Dutch Guilder.
FRF French Franc.
DEM Deutsche Mark.
ITL Italian Lira.
JPY Japanese Yen.
NZD New Zealand Dollar.
NOK Norwegian Krone.
ESP Spanish Peseta.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
33
<PAGE>
BALANCED GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (64.3%)
AEROSPACE & DEFENSE (2.7%)
42,000 Raytheon Co. (Class B).................................................................. $ 2,483,250
-----------
ALUMINUM (2.5%)
36,000 Aluminum Co. of America................................................................. 2,373,750
-----------
AUTOMOTIVE (5.0%)
40,500 Ford Motor Co........................................................................... 2,389,500
34,500 General Motors Corp..................................................................... 2,305,031
-----------
4,694,531
-----------
BANKING (4.9%)
41,000 Banc One Corp........................................................................... 2,288,312
27,000 BankAmerica Corp........................................................................ 2,333,812
-----------
4,622,124
-----------
BEVERAGES - SOFT DRINKS (2.4%)
55,000 PepsiCo, Inc............................................................................ 2,265,312
-----------
CHEMICALS (2.4%)
30,000 Du Pont (E.I.) de Nemours & Co., Inc.................................................... 2,238,750
-----------
COMPUTER EQUIPMENT (2.6%)
21,000 International Business Machines Corp.................................................... 2,411,062
-----------
CONGLOMERATES (2.5%)
60,000 Tenneco, Inc............................................................................ 2,283,750
-----------
DRUGS (2.5%)
20,500 Bristol-Myers Squibb Co................................................................. 2,356,219
-----------
ELECTRIC - MAJOR (2.5%)
26,000 General Electric Co..................................................................... 2,366,000
-----------
FINANCIAL - MISCELLANEOUS (2.5%)
29,800 Associates First Capital Corp. (Class A)................................................ 2,290,875
-----------
FOODS (2.4%)
71,000 ConAgra, Inc............................................................................ 2,249,813
-----------
MACHINERY - AGRICULTURAL (2.6%)
45,000 Deere & Co.............................................................................. 2,379,375
-----------
NATURAL GAS (2.7%)
46,000 Enron Corp.............................................................................. 2,486,875
-----------
OIL - DOMESTIC (2.4%)
29,000 Atlantic Richfield Co................................................................... 2,265,625
-----------
PAPER & FOREST PRODUCTS (2.4%)
49,000 Weyerhaeuser Co......................................................................... 2,263,188
-----------
RAILROADS (2.4%)
49,000 CSX Corp................................................................................ 2,229,500
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
RETAIL (4.8%)
46,000 Dayton-Hudson Corp...................................................................... $ 2,231,000
35,000 May Department Stores Co................................................................ 2,292,500
-----------
4,523,500
-----------
SOAP & HOUSEHOLD PRODUCTS (2.5%)
26,000 Procter & Gamble Co..................................................................... 2,367,625
-----------
STEEL (2.4%)
74,000 Timken Co............................................................................... 2,280,125
-----------
TELECOMMUNICATIONS (2.4%)
32,000 Sprint Corp............................................................................. 2,256,000
-----------
UTILITIES - ELECTRIC (4.8%)
59,000 GPU, Inc................................................................................ 2,230,938
63,000 Unicom Corp............................................................................. 2,208,938
-----------
4,439,876
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $57,395,804)........................................................... 60,127,125
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C>
CORPORATE BONDS (4.4%)
AEROSPACE & DEFENSE (0.4%)
$ 400 Raytheon Co.
6.45% due 08/15/02.................................................................... 403,324
-----------
BANKS (0.7%)
200 NationsBank Corp.
7.50% due 09/15/06.................................................................... 215,898
325 Norwest Corp.
6.80% due 05/15/02.................................................................... 333,408
110 Wells Fargo & Co.
6.875% due 04/01/06................................................................... 114,331
-----------
663,637
-----------
BANKS - MONEY CENTER (0.1%)
145 Citicorp
6.375% due 01/15/06................................................................... 146,032
-----------
BROKERAGE (0.2%)
150 Merrill Lynch & Co., Inc.
6.00% due 01/15/01.................................................................... 150,076
-----------
ENTERTAINMENT (0.2%)
180 Walt Disney Co. (Series B)
6.75% due 03/30/06.................................................................... 188,984
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
34
<PAGE>
BALANCED GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
FINANCIAL (0.5%)
$ 100 Abbey National PLC (United Kingdom)
6.69% due 10/17/05.................................................................... $ 101,809
400 Bear Stearns Co., Inc.
6.50% due 08/01/02.................................................................... 405,156
-----------
506,965
-----------
HEALTHCARE - DRUGS (0.1%)
45 Lilly (Eli) & Co.
8.375% due 12/01/06................................................................... 51,800
-----------
INDUSTRIALS (1.4%)
100 General American Transportation Corp.
6.75% due 03/01/06.................................................................... 102,358
500 IBM Corp.
7.00% due 10/30/25.................................................................... 532,965
150 Lockheed Martin Corp.
7.25% due 05/15/06.................................................................... 159,151
15 Mead Corp.
7.125% due 08/01/25................................................................... 15,315
40 Monsanto Co.
8.875% due 12/15/09................................................................... 48,921
200 Praxair, Inc.
6.90% due 11/01/06.................................................................... 206,426
15 Texas Utilities Electric Co.
7.875% due 04/01/24................................................................... 16,027
200 Willamette Industries, Inc.
7.85% due 07/01/26.................................................................... 225,554
-----------
1,306,717
-----------
TELECOMMUNICATIONS (0.6%)
400 MCI Communication Corp.
6.95% due 08/15/06.................................................................... 413,096
120 Northern Telecom Capital
7.40% due 06/15/06.................................................................... 129,125
-----------
542,221
-----------
UTILITIES - ELECTRIC (0.2%)
150 Union Electric Co.
6.75% due 05/01/08.................................................................... 157,626
-----------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $3,946,641)............................................................ 4,117,382
-----------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
MORTGAGE-BACKED SECURITIES (15.8%)
$ 1,852 Federal Home Loan Mortgage Corp.
6.00% due 04/01/03.................................................................... $ 1,848,219
874 Federal Home Loan Mortgage Corp.
7.00% due 08/01/12.................................................................... 890,090
298 Federal Home Loan Mortgage Corp.
7.00% due 04/01/26.................................................................... 301,960
724 Federal Home Loan Mortgage Corp.
7.00% due 12/01/27.................................................................... 734,730
536 Federal National Mortgage Assoc.
6.00% due 04/01/04.................................................................... 534,838
28 Federal National Mortgage Assoc.
6.50% due 01/01/13.................................................................... 27,798
1,455 Federal National Mortgage Assoc.
6.00% due 03/01/13.................................................................... 1,438,981
288 Federal National Mortgage Assoc.
6.50% due 03/01/13.................................................................... 289,504
993 Federal National Mortgage Assoc.
6.50% due 04/01/13.................................................................... 998,690
2,495 Federal National Mortgage Assoc.
6.00% due 05/01/13.................................................................... 2,466,999
671 Federal National Mortgage Assoc.
6.50% due 05/01/13.................................................................... 674,688
42 Federal National Mortgage Assoc.
6.00% due 06/01/13.................................................................... 41,406
1,001 Federal National Mortgage Assoc.
6.50% due 10/01/17.................................................................... 1,001,167
1,010 Federal National Mortgage Assoc.
6.50% due 06/01/28.................................................................... 1,005,581
554 Government National Mortgage Assoc.
7.50% due 08/15/27.................................................................... 569,050
998 Government National Mortgage Assoc.
6.50% due 04/20/28.................................................................... 991,039
1,000 Government National Mortgage Assoc.
6.00% due 07/21/28.................................................................... 976,875
-----------
TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $14,698,756)........................................................... 14,791,615
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
35
<PAGE>
BALANCED GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS (14.6%)
$ 1,100 Federal Home Loan Banks
5.65% due 02/06/03.................................................................... $ 1,095,611
1,500 Federal Home Loan Banks
5.96% due 02/05/08.................................................................... 1,509,210
1,705 U.S. Treasury Bond
7.50% due 11/15/24.................................................................... 2,113,672
1,065 U.S. Treasury Bond
6.00% due 02/15/26.................................................................... 1,107,014
530 U.S. Treasury Note
6.00% due 09/30/98.................................................................... 530,869
500 U.S. Treasury Note
5.875% due 10/31/98................................................................... 500,695
300 U.S. Treasury Note
6.375% due 05/15/99................................................................... 302,115
1,965 U.S. Treasury Note
6.00% due 06/30/99.................................................................... 1,974,511
175 U.S. Treasury Note
7.75% due 11/30/99.................................................................... 180,166
750 U.S. Treasury Note
7.75% due 01/31/00.................................................................... 774,728
300 U.S. Treasury Note
6.25% due 08/31/00.................................................................... 304,302
385 U.S. Treasury Note
6.625% due 06/30/01................................................................... 395,896
1,400 U.S. Treasury Note
6.625% due 04/30/02................................................................... 1,450,092
80 U.S. Treasury Note
7.875% due 11/15/04................................................................... 89,830
1,300 U.S. Treasury Note
5.875% due 11/15/05................................................................... 1,324,895
-----------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(IDENTIFIED COST $13,343,680)........................................................... 13,653,606
-----------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (1.5%)
REPURCHASE AGREEMENT
$ 1,353 The Bank of New York 5.50% due 07/01/98 (dated 06/30/98; proceeds $1,353,494) (a)
(IDENTIFIED COST $1,353,287).......................................................... $ 1,353,287
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $90,738,168) (b).......................................................... 100.6 % 94,043,015
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS............................................. (0.6) (543,018)
------ ------------
NET ASSETS................................................................................. 100.0 % $ 93,499,997
------ ------------
------ ------------
</TABLE>
- ---------------------
(a) Collateralized by $195,431 U.S. Treasury Bill 0.0% due 08/27/98 valued at
$193,909 and $1,215,432 U.S. Treasury Bill 0.0% due 12/17/98 valued at
$1,186,444.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $5,138,822 and the
aggregate gross unrealized depreciation is $1,833,975, resulting in net
unrealized appreciation of $3,304,847.
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
UTILITIES
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (92.7%)
NATURAL GAS (13.5%)
20,000 AGL Resources, Inc...................................................................... $ 397,500
5,500 Anadarko Petroleum Corp................................................................. 369,531
10,000 Cabot Oil & Gas Corp.................................................................... 200,000
6,000 Consolidated Natural Gas Co............................................................. 353,250
7,000 Eastern Enterprises..................................................................... 300,125
12,622 El Paso Natural Gas Co.................................................................. 482,791
11,912 Enron Corp.............................................................................. 643,992
7,000 Ente Nazionale Idrocarburi SpA (ADR) (Italy)............................................ 455,000
10,000 Exxon Corp.............................................................................. 713,125
12,000 Indiana Energy Inc...................................................................... 358,500
12,000 KU Energy, Inc.......................................................................... 650,250
18,000 MCN Energy Group Inc.................................................................... 447,750
12,000 New Jersey Resources Corp............................................................... 428,250
15,000 North Carolina Natural Gas Corp......................................................... 380,625
11,750 Northwest Natural Gas Co................................................................ 328,266
24,000 Questar Corp............................................................................ 471,000
7,000 Royal Dutch Petroleum Co. (Netherlands)................................................. 383,687
7,000 South Jersey Industries, Inc............................................................ 193,375
11,000 Washington Gas Light Co................................................................. 294,250
10,000 Williams Companies, Inc................................................................. 337,500
16,000 YPF Sociedad Anomina (ADR) (Argentina).................................................. 481,000
-----------
8,669,767
-----------
TELECOMMUNICATIONS (43.5%)
9,000 360 DEG. Communications Co.*............................................................ 288,000
10,000 AirTouch Communications, Inc.*.......................................................... 584,375
14,000 Alcatel Alsthom (ADR) (France).......................................................... 569,625
7,500 ALLTEL Corp............................................................................. 348,750
9,000 Ameritech Corp.......................................................................... 403,875
9,000 AT&T Corp............................................................................... 514,125
15,000 BCE, Inc. (Canada)...................................................................... 640,312
11,144 Bell Atlantic Corp...................................................................... 508,445
5,000 BellSouth Corp.......................................................................... 335,625
20,000 Cellnet Data Systems, Inc.*............................................................. 193,750
6,000 Cellular Communications International, Inc.*............................................ 299,250
9,750 Century Telephone Enterprises, Inc...................................................... 447,281
10,000 China Telecom (Hong Kong) Ltd. (ADR)*................................................... 345,625
20,000 Cincinnati Bell, Inc.................................................................... 572,500
4,800 COLT Telecom Group plc (ADR) (United Kingdom)*.......................................... 775,200
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
10,000 Commonwealth Telephone Enterprises, Inc.*............................................... $ 263,750
12,000 Deutsche Telekom AG (ADR) (Germany)..................................................... 330,000
15,000 Dycom Industries*....................................................................... 506,250
15,000 Electric Lightwave, Inc.*............................................................... 165,000
9,000 Ericsson (L.M.) Telephone Co. (Class B) (ADR) (Sweden).................................. 257,625
9,900 Esat Telecom Group PLC (ADR) (Ireland)*................................................. 373,725
6,200 France Telecom S.A. (ADR) (France)...................................................... 431,287
5,000 General Motors Corp. (Class H) (Hughs Electronics)...................................... 235,625
14,000 Grupo Iusacell S.A. de C.V. (Series L) (ADR) (Mexico)*.................................. 192,500
12,000 GST Telecommunications, Inc.*........................................................... 172,500
6,500 GTE Corp................................................................................ 361,562
6,000 Harris Corp............................................................................. 268,125
25,000 Hyperion Telecommunications, Inc.*...................................................... 392,187
9,000 ICG Communications, Inc.*............................................................... 328,500
10,000 ITC DeltaCom, Inc.*..................................................................... 426,875
9,292 Lucent Technologies, Inc................................................................ 772,978
10,500 MCI Communications Corp................................................................. 609,656
12,000 MediaOne Group Inc.*.................................................................... 527,250
20,000 MetroNet Communications Corp. (Class B)*................................................ 560,000
15,000 Metzler Group, Inc.*.................................................................... 549,375
18,000 Nextel Communications, Inc. (Class A)*.................................................. 446,625
10,000 NEXTLINK Communications, Inc. (Class A)*................................................ 378,125
10,000 Omnipoint Corp.*........................................................................ 229,375
5,000 Philips Electronics NV (ADR) (Netherlands).............................................. 425,000
10,000 Portugal Telecom S.A. (ADR) (Portugal).................................................. 529,375
10,000 Powertel, Inc.*......................................................................... 185,000
19,000 Primus Telecommunications Group, Inc.*.................................................. 359,812
10,000 QUALCOMM, Inc.*......................................................................... 561,875
23,325 Qwest Communications International, Inc.*............................................... 812,002
16,000 RCN Corp.*.............................................................................. 309,000
7,000 Royal PTT Nederland NV (ADR) (Netherlands).............................................. 445,375
10,000 RSL Communications, Ltd. (Class A)*..................................................... 297,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
UTILITIES
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
7,000 Saville Systems Ireland PLC (ADR) (Ireland)*............................................ $ 349,125
10,388 SBC Communications, Inc................................................................. 415,520
8,000 SmarTalk TeleServices, Inc.*............................................................ 113,000
6,000 Southern New England Telecommunications Corp............................................ 393,000
7,000 Sprint Corp............................................................................. 493,500
10,000 Startec Global Communications Corp.*.................................................... 113,750
14,000 Tel-Save Holdings, Inc.*................................................................ 206,500
10,000 Tele Danmark AS (ADR) (Denmark)......................................................... 471,250
4,000 Telecomunicacoes Brasileiras S/A-Telebras (ADR) (Brasil)................................ 436,750
5,000 Telefonica Espana S.A. (ADR) (Spain).................................................... 695,312
12,000 Teleglobe Inc........................................................................... 318,000
9,000 Telephone & Data Systems, Inc........................................................... 354,375
12,000 Teligent, Inc. (Class A)*............................................................... 349,500
5,000 Telstra Corp. Ltd. (ADR) (Australia).................................................... 253,750
10,000 The Associated Group, Inc.*............................................................. 390,000
7,000 TNT Post Group NV (ADR) (Netherlands)*.................................................. 178,062
5,327 U.S. West, Inc.......................................................................... 250,403
7,000 United States Cellular Corp.*........................................................... 215,250
15,000 USN Communications, Inc.*............................................................... 133,125
10,000 Vanguard Cellular Systems, Inc. (Class A)*.............................................. 188,125
4,000 Vodafone Group PLC (ADR) (United Kingdom)............................................... 504,250
20,000 Western Wireless Corp. (Class A)........................................................ 397,500
24,800 WorldCom, Inc.*......................................................................... 1,198,150
-----------
27,948,769
-----------
UTILITIES - ELECTRIC (34.8%)
15,000 AES Corp. (The)*........................................................................ 788,438
11,000 Allegheny Energy, Inc................................................................... 331,375
10,000 American Electric Power Co.............................................................. 453,750
12,000 American Superconductor Corp.*.......................................................... 142,500
11,000 BEC Energy.............................................................................. 456,500
10,000 Calenergy, Inc.*........................................................................ 300,625
15,000 Carolina Power & Light Co............................................................... 650,625
10,000 Central & South West Corp............................................................... 268,750
11,500 CINERGY Corp............................................................................ 402,500
15,000 CLECO Corp.............................................................................. 446,250
10,000 CMS Energy Corp......................................................................... 440,000
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
14,000 Consolidated Edison Co. of New York, Inc................................................ $ 644,875
14,000 Dominion Resources, Inc................................................................. 570,500
15,500 DQE, Inc................................................................................ 558,000
13,355 Duke Energy Corp........................................................................ 791,284
16,000 Edison International.................................................................... 473,000
6,500 Enersis S.A. (ADR) (Chile).............................................................. 158,844
9,500 Entergy Corp............................................................................ 273,125
15,000 FPL Group, Inc.......................................................................... 945,000
14,000 GPU, Inc................................................................................ 529,375
15,000 Houston Industries, Inc................................................................. 463,125
7,500 Illinova Corp........................................................................... 225,000
15,000 IPALCO Enterprises, Inc................................................................. 666,563
10,000 Kansas City Power & Light Co............................................................ 290,000
31,700 LG&E Energy Corp........................................................................ 857,881
31,600 MarketSpan Corp......................................................................... 946,025
10,000 Nevada Power Co......................................................................... 257,500
11,000 New Century Energies, Inc............................................................... 499,813
10,000 New England Electric System............................................................. 432,500
25,000 Niagara Mohawk Power Corp.*............................................................. 373,438
24,000 NIPSCO Industries, Inc.................................................................. 672,000
18,000 Northwestern Corp....................................................................... 450,000
24,000 OGE Energy Corp......................................................................... 648,000
12,000 PacifiCorp.............................................................................. 271,500
7,500 Peco Energy Co.......................................................................... 218,906
7,500 PG & E Corp............................................................................. 236,719
9,500 Pinnacle West Capital Corp.............................................................. 427,500
12,500 Public Service Company of New Mexico.................................................... 283,594
6,000 Public Service Enterprise Group, Inc.................................................... 206,625
17,000 SCANA Corp.............................................................................. 506,813
24,541 Sempra Energy........................................................................... 681,035
16,000 Sierra Pacific Resources................................................................ 581,000
15,000 Southern Co............................................................................. 415,313
20,000 Teco Energy, Inc........................................................................ 536,250
9,000 TNP Enterprises, Inc.................................................................... 277,875
11,000 Utilicorp United, Inc................................................................... 414,563
11,000 Western Resources, Inc.................................................................. 426,938
16,000 Wisconsin Energy Corp................................................................... 486,000
-----------
22,377,792
-----------
WATER (0.9%)
18,000 American Water Works Company, Inc....................................................... 558,000
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $44,174,367)........................................................... 59,554,328
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
UTILITIES
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
PREFERRED STOCKS (0.6%)
UTILITIES - ELECTRIC
6,000 Alabama Power Capital Trust I (Series Q) $1.84.......................................... $ 152,625
1,000 Duquesne Capital LP (Series A) $2.09.................................................... 25,812
2,500 Public Service Electric & Gas Capital (Series B) $2.00.................................. 63,750
5,000 Virginia Power Capital $2.01............................................................ 128,125
-----------
TOTAL PREFERRED STOCKS
(IDENTIFIED COST $363,687).............................................................. 370,312
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C>
CORPORATE BONDS (3.4%)
TELECOMMUNICATIONS (2.4%)
$ 500 360 DEG. Communications Co.
6.65% due 01/15/08.................................................................... 505,445
500 Aliant Communications, Inc. 6.75% due 04/01/28.......................................... 510,895
500 LCI International, Inc.
7.25% due 06/15/07.................................................................... 509,695
-----------
1,526,035
-----------
UTILITIES - ELECTRIC (1.0%)
100 Florida Power & Light Co. 7.05% due 12/01/26............................................ 101,329
500 Niagara Mohawk Power Corp.
8.00% due 06/01/04.................................................................... 535,155
-----------
636,484
-----------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $2,150,535)............................................................ 2,162,519
-----------
U.S. GOVERNMENT AGENCY (0.0%)
25 Tennessee Valley Authority (Series 95-A)
8.00% due 03/31/45
(IDENTIFIED COST $25,000)............................................................. 25,938
-----------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (3.9%)
U.S. GOVERNMENT AGENCY (a) (0.8%)
$ 500 Federal Home Loan Mortgage Corp. 5.43% due 07/01/98
(IDENTIFIED COST $500,000)............................................................ $ 500,000
-----------
REPURCHASE AGREEMENT (3.1%)
1,992 The Bank of New York 5.50% due 07/01/98 (dated 06/30/98; proceeds $1,992,294) (b)
(IDENTIFIED COST $1,991,990).......................................................... 1,991,990
-----------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $2,491,990)............................................................ 2,491,990
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $49,205,579) (c).......................................................... 100.6 % 64,605,087
LIABILITIES IN EXCESS OF OTHER ASSETS...................................................... (0.6) (364,524)
------ ------------
NET ASSETS................................................................................. 100.0 % $ 64,240,563
------ ------------
------ ------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $1,906,927 U.S. Treasury Bill 0.00% due 03/04/99 valued
at $1,840,471 and $178,137 U.S. Treasury Bond 6.125% due 11/15/27 valued at
$191,359.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $16,524,773 and the
aggregate gross unrealized depreciation is $1,125,265, resulting in net
unrealized appreciation of $15,399,508.
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
DIVIDEND GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (99.0%)
AEROSPACE (2.8%)
199,000 United Technologies Corp............................................................... $ 18,407,500
------------
AUTOMOTIVE (5.5%)
312,000 Chrysler Corp.......................................................................... 17,589,000
309,000 Ford Motor Co.......................................................................... 18,231,000
------------
35,820,000
------------
BANKS (5.3%)
301,700 Banc One Corp.......................................................................... 16,838,631
205,000 BankAmerica Corp....................................................................... 17,719,687
------------
34,558,318
------------
BEVERAGES - SOFT DRINKS (2.6%)
416,000 PepsiCo, Inc........................................................................... 17,134,000
------------
CHEMICALS (5.5%)
181,000 Dow Chemical Co........................................................................ 17,500,437
260,000 PPG Industries, Inc.................................................................... 18,086,250
------------
35,586,687
------------
COMPUTERS (2.7%)
154,000 International Business Machines Corp................................................... 17,681,125
------------
CONGLOMERATES (5.2%)
205,000 Minnesota Mining & Manufacturing Co.................................................... 16,848,437
442,000 Tenneco, Inc........................................................................... 16,823,625
------------
33,672,062
------------
DRUGS (2.7%)
433,000 Abbott Laboratories.................................................................... 17,698,875
------------
ELECTRIC - MAJOR (2.8%)
200,000 General Electric Co.................................................................... 18,200,000
------------
FINANCIAL SERVICES (2.7%)
225,100 Associates First Capital Corp. (Class A)............................................... 17,304,562
------------
FOODS (2.6%)
310,000 Quaker Oats Company (The).............................................................. 17,030,625
------------
HEALTHCARE - DIVERSIFIED (2.6%)
333,000 American Home Products Corp............................................................ 17,232,750
------------
INSURANCE (2.7%)
194,000 Lincoln National Corp.................................................................. 17,726,750
------------
MACHINERY - AGRICULTURAL (2.7%)
338,000 Deere & Co............................................................................. 17,871,750
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
MANUFACTURING - CONSUMER & INDUSTRIAL PRODUCTS (2.8%)
265,000 Whirlpool Corp......................................................................... $ 18,218,750
------------
MANUFACTURING - DIVERSIFIED INDUSTRIES (2.7%)
211,000 Honeywell, Inc......................................................................... 17,631,688
------------
METALS & MINING (2.6%)
294,000 Phelps Dodge Corp...................................................................... 16,813,125
------------
NATURAL GAS (2.8%)
340,000 Enron Corp............................................................................. 18,381,250
------------
OFFICE EQUIPMENT & SUPPLIES (2.6%)
359,000 Pitney Bowes, Inc...................................................................... 17,276,875
------------
OIL INTEGRATED - DOMESTIC (5.3%)
216,000 Atlantic Richfield Co.................................................................. 16,875,000
506,000 USX-Marathon Group..................................................................... 17,362,125
------------
34,237,125
------------
OIL INTEGRATED - INTERNATIONAL (5.3%)
243,000 Exxon Corp............................................................................. 17,328,938
222,000 Mobil Corp............................................................................. 17,010,750
------------
34,339,688
------------
PAPER & FOREST PRODUCTS (2.6%)
370,000 Weyerhaeuser Co........................................................................ 17,089,375
------------
PHOTOGRAPHY (2.8%)
251,000 Eastman Kodak Co....................................................................... 18,338,688
------------
RAILROADS (2.6%)
379,000 CSX Corp............................................................................... 17,244,500
------------
RETAIL - DEPARTMENT STORES (2.7%)
268,000 May Department Stores Co............................................................... 17,554,000
------------
RETAIL - FOOD CHAINS (2.7%)
730,000 American Stores Co..................................................................... 17,656,875
------------
TELECOMMUNICATIONS (5.2%)
368,000 Bell Atlantic Corp..................................................................... 16,790,000
239,000 Sprint Corp............................................................................ 16,849,500
------------
33,639,500
------------
TOBACCO (2.7%)
443,000 Philip Morris Companies, Inc........................................................... 17,443,125
------------
UTILITIES - ELECTRIC (5.2%)
450,000 GPU, Inc............................................................................... 17,015,625
487,000 Unicom Corp............................................................................ 17,075,438
------------
34,091,063
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $528,842,625)......................................................... 645,880,631
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
DIVIDEND GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (0.9%)
REPURCHASE AGREEMENT
$ 5,977 The Bank of New York 5.50% due 07/01/98 (dated 06/30/98; proceeds $5,977,885) (a)
(IDENTIFIED COST $5,976,972)......................................................... $ 5,976,972
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $534,819,597) (B)........................................................ 99.9 % 651,857,603
OTHER ASSETS IN EXCESS OF LIABILITIES..................................................... 0.1 516,125
------ -------------
NET ASSETS................................................................................ 100.0 % $ 652,373,728
------ -------------
------ -------------
</TABLE>
- ---------------------
(a) Collateralized by $3,973,146 U.S. Treasury Bond 9.375% due 02/15/06 valued
at $5,037,670 and $1,022,316 U.S. Treasury Note 7.75% due 11/30/99 valued
at $1,058,842.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $125,843,377 and the
aggregate gross unrealized depreciation is $8,805,371, resulting in net
unrealized appreciation of $117,038,006.
SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (97.0%)
ADVERTISING/MARKETING SERVICES (0.6%)
6,200 Cognizant Corp......................................................................... $ 390,600
5,100 Interpublic Group of Companies, Inc.................................................... 309,506
6,600 Omnicom Group, Inc..................................................................... 329,175
------------
1,029,281
------------
AEROSPACE & DEFENSE (0.7%)
7,200 Boeing Co.............................................................................. 320,850
6,600 General Dynamics Corp.................................................................. 306,900
2,900 Lockheed Martin Corp................................................................... 307,037
3,000 Northrop Grumman Corp.................................................................. 309,375
------------
1,244,162
------------
AGRICULTURE RELATED (0.4%)
15,100 Archer-Daniels-Midland Co.............................................................. 292,562
9,600 Pioneer Hi-Bred International, Inc..................................................... 397,200
------------
689,762
------------
AIR FREIGHT (0.2%)
5,200 FDX Corp.*............................................................................. 326,300
------------
AIRLINES (0.8%)
4,200 AMR Corp.*............................................................................. 349,650
2,500 Delta Air Lines, Inc................................................................... 323,125
11,550 Southwest Airlines Co.................................................................. 342,169
4,900 US Airways Group Inc.*................................................................. 388,325
------------
1,403,269
------------
ALUMINUM (0.5%)
11,500 Alcan Aluminum Ltd. (Canada)........................................................... 317,687
4,700 Aluminum Co. of America................................................................ 309,906
5,200 Reynolds Metals Co..................................................................... 290,875
------------
918,468
------------
AUTO PARTS - AFTER MARKET (1.4%)
14,000 Cooper Tire & Rubber Co................................................................ 288,750
5,400 Dana Corp.............................................................................. 288,900
7,100 Echlin, Inc............................................................................ 348,344
8,500 Genuine Parts Co....................................................................... 293,781
4,600 Goodyear Tire & Rubber Co.............................................................. 296,412
8,700 ITT Industries, Inc.................................................................... 325,162
8,000 Snap-On, Inc........................................................................... 290,000
5,800 TRW, Inc............................................................................... 316,825
------------
2,448,174
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
AUTOMOBILES (0.6%)
6,700 Chrysler Corp.......................................................................... $ 377,712
6,500 Ford Motor Co.......................................................................... 383,500
4,400 General Motors Corp.................................................................... 293,975
------------
1,055,187
------------
BANKS - MONEY CENTER (1.5%)
3,800 BankAmerica Corp....................................................................... 328,462
2,500 Bankers Trust New York Corp............................................................ 290,156
4,600 Chase Manhattan Corp................................................................... 347,300
2,100 Citicorp............................................................................... 313,425
3,200 First Chicago NBD Corp................................................................. 283,600
6,432 First Union Corp....................................................................... 374,664
2,500 Morgan (J.P.) & Co., Inc............................................................... 292,812
4,800 NationsBank Corp....................................................................... 367,200
------------
2,597,619
------------
BANKS - REGIONAL (4.3%)
5,720 Banc One Corp.......................................................................... 319,247
5,000 Bank of New York Co., Inc.............................................................. 303,437
5,800 BankBoston Corp........................................................................ 322,625
4,800 BB&T Corp.............................................................................. 324,600
4,650 Comerica, Inc.......................................................................... 308,062
5,362 Fifth Third Bancorp.................................................................... 337,136
3,600 Fleet Financial Group, Inc............................................................. 300,600
9,000 Huntington Bancshares, Inc............................................................. 300,937
8,400 KeyCorp................................................................................ 299,250
4,800 Mellon Bank Corp....................................................................... 334,200
6,200 Mercantile Bancorporation, Inc......................................................... 312,325
4,100 National City Corp..................................................................... 291,100
4,800 Northern Trust Corp.................................................................... 365,700
8,000 Norwest Corp........................................................................... 299,000
5,500 PNC Bank Corp.......................................................................... 295,969
4,800 Republic New York Corp................................................................. 302,100
4,400 State Street Corp...................................................................... 305,800
6,400 Summit Bancorp.*....................................................................... 304,000
4,200 SunTrust Banks, Inc.................................................................... 341,512
12,900 Synovus Financial Corp................................................................. 306,375
8,100 U.S. Bancorp........................................................................... 348,300
3,700 Wachovia Corp.......................................................................... 312,650
900 Wells Fargo & Co....................................................................... 332,100
------------
7,267,025
------------
BEVERAGES - ALCOHOLIC (0.8%)
6,800 Anheuser-Busch Companies, Inc.......................................................... 320,875
5,100 Brown-Forman Corp. (Class B)........................................................... 327,675
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
42
<PAGE>
VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
8,200 Coors (Adolph) Co. (Class B)........................................................... $ 278,800
8,400 Seagram Co. Ltd. (Canada).............................................................. 343,875
------------
1,271,225
------------
BEVERAGES - SOFT DRINKS (0.4%)
4,200 Coca Cola Co........................................................................... 359,100
8,500 PepsiCo, Inc........................................................................... 350,094
------------
709,194
------------
BIOTECHNOLOGY (0.2%)
5,400 Amgen Inc.*............................................................................ 353,025
------------
BROADCAST MEDIA (1.1%)
9,700 CBS Corp............................................................................... 307,975
3,700 Clear Channel Communications, Inc.*.................................................... 403,762
9,400 Comcast Corp. (Class A Special)........................................................ 381,287
8,500 MediaOne Group Inc.*................................................................... 373,469
10,300 Tele-Communications, Inc. (Class A)*................................................... 395,262
------------
1,861,755
------------
BUILDING MATERIALS (0.6%)
4,700 Armstrong World Industies, Inc......................................................... 316,662
5,100 Masco Corp............................................................................. 308,550
9,500 Owens Corning.......................................................................... 387,719
------------
1,012,931
------------
CHEMICALS (1.3%)
7,600 Air Products & Chemicals, Inc.......................................................... 304,000
3,500 Dow Chemical Co........................................................................ 338,406
4,300 DuPont (E.I.) de Nemours & Co., Inc.................................................... 320,887
4,800 Eastman Chemical Co.................................................................... 298,800
7,400 Praxair, Inc........................................................................... 346,412
3,100 Rohm & Haas Co......................................................................... 322,206
6,200 Union Carbide Corp..................................................................... 330,925
------------
2,261,636
------------
CHEMICALS - DIVERSIFIED (0.9%)
14,700 Engelhard Corp......................................................................... 297,675
4,400 FMC Corp.*............................................................................. 300,025
6,200 Goodrich (B.F.) Co..................................................................... 307,675
6,100 Monsanto Co............................................................................ 340,837
4,400 PPG Industries, Inc.................................................................... 306,075
------------
1,552,287
------------
CHEMICALS - SPECIALTY (1.5%)
11,100 Ecolab, Inc............................................................................ 344,100
18,100 Grace (W. R.) & Co..................................................................... 308,831
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
7,500 Great Lakes Chemical Corp.............................................................. $ 295,781
8,000 Hercules, Inc.......................................................................... 329,000
7,600 International Flavors & Fragrances Inc................................................. 330,125
12,700 Morton International, Inc.............................................................. 317,500
9,500 Nalco Chemical Co...................................................................... 333,687
8,400 Sigma-Aldrich Corp..................................................................... 295,050
------------
2,554,074
------------
COMMERCIAL & CONSUMER SERVICES (1.0%)
7,900 Block (H.&R.), Inc..................................................................... 332,787
15,300 Cendant Corp.*......................................................................... 319,387
8,600 Dun & Bradstreet Corp.................................................................. 310,675
29,000 Laidlaw, Inc. (Canada)................................................................. 353,437
7,500 Service Corp. International............................................................ 321,562
------------
1,637,848
------------
COMMUNICATIONS EQUIPMENT (1.8%)
16,100 Andrew Corp.*.......................................................................... 289,800
12,500 DSC Communications Corp.*.............................................................. 373,437
14,400 General Instrument Corp.*.............................................................. 391,500
7,000 Harris Corp............................................................................ 312,812
4,700 Lucent Technologies Inc................................................................ 390,981
5,500 Motorola, Inc.......................................................................... 289,094
5,600 Northern Telecom Ltd. (Canada)......................................................... 317,800
15,100 Scientific-Atlanta, Inc................................................................ 383,162
4,800 Tellabs, Inc.*......................................................................... 343,500
------------
3,092,086
------------
COMPUTER - NETWORKING (1.0%)
11,000 3Com Corp.*............................................................................ 337,562
5,800 Ascend Communications, Inc.*........................................................... 287,100
11,800 Bay Networks, Inc.*.................................................................... 380,550
24,000 Cabletron Systems, Inc.*............................................................... 322,500
4,300 Cisco Systems, Inc.*................................................................... 395,869
------------
1,723,581
------------
COMPUTER HARDWARE (1.8%)
13,300 Apple Computer, Inc.*.................................................................. 381,544
12,815 COMPAQ Computer Corp................................................................... 363,626
20,200 Data General Corp.*.................................................................... 301,737
4,000 Dell Computer Corp.*................................................................... 371,000
6,500 Gateway 2000, Inc.*.................................................................... 329,062
5,000 Hewlett-Packard Co..................................................................... 299,375
3,000 International Business Machines Corp................................................... 344,437
25,000 Silicon Graphics, Inc.*................................................................ 303,125
7,000 Sun Microsystems, Inc.*................................................................ 304,062
------------
2,997,968
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMPUTER SOFTWARE & SERVICES (2.0%)
6,800 Adobe Systems, Inc..................................................................... $ 288,575
7,800 Autodesk, Inc.......................................................................... 299,812
5,850 Computer Associates International, Inc................................................. 325,041
6,000 Computer Sciences Corp................................................................. 384,000
11,600 HBO & Co............................................................................... 408,900
3,600 Microsoft Corp.*....................................................................... 390,150
30,000 Novell, Inc.*.......................................................................... 382,500
12,000 Oracle Corp.*.......................................................................... 294,000
10,800 Parametric Technology Corp.*........................................................... 292,275
13,500 Unisys Corp.*.......................................................................... 381,375
------------
3,446,628
------------
COMPUTERS - PERIPHERAL EQUIPMENT (0.4%)
8,200 EMC Corp.*............................................................................. 367,462
13,400 Seagate Technology, Inc.*.............................................................. 319,087
------------
686,549
------------
COMPUTERS - SYSTEMS (0.2%)
4,600 Shared Medical Systems Corp............................................................ 337,812
------------
CONSUMER - NONCYCLICAL (0.4%)
6,800 American Greetings Corp. (Class A)..................................................... 346,375
13,300 Jostens, Inc........................................................................... 320,862
------------
667,237
------------
CONTAINERS - METAL & GLASS (0.6%)
9,500 Ball Corp.............................................................................. 381,781
6,100 Crown Cork & Seal Co., Inc............................................................. 289,750
7,800 Owens-Illinois, Inc.*.................................................................. 349,050
------------
1,020,581
------------
CONTAINERS - PAPER (0.8%)
7,500 Bemis Company, Inc..................................................................... 306,562
24,900 Stone Container Corp................................................................... 389,062
6,200 Temple-Inland, Inc..................................................................... 334,025
6,000 Union Camp Corp........................................................................ 297,750
------------
1,327,399
------------
DATA PROCESSING (0.8%)
4,900 Automatic Data Processing, Inc......................................................... 357,087
6,300 Ceridian Corp.*........................................................................ 370,125
7,700 Equifax, Inc........................................................................... 279,606
9,800 First Data Corp........................................................................ 326,462
------------
1,333,280
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
DISTRIBUTORS - FOOD & HEALTH (0.6%)
3,400 Cardinal Health, Inc................................................................... $ 318,750
6,700 Supervalu, Inc......................................................................... 297,312
12,800 Sysco Corp............................................................................. 328,000
------------
944,062
------------
ELECTRICAL EQUIPMENT (1.5%)
8,600 AMP, Inc............................................................................... 295,625
5,500 Emerson Electric Co.................................................................... 332,062
3,600 General Electric Co.................................................................... 327,600
8,100 General Signal Corp.................................................................... 291,600
3,800 Honeywell, Inc......................................................................... 317,537
10,700 Raychem Corp........................................................................... 316,319
6,200 Rockwell International Corp............................................................ 297,987
7,000 Thomas & Betts Corp.................................................................... 344,750
------------
2,523,480
------------
ELECTRONIC COMPONENTS (0.2%)
6,200 Grainger (W.W.), Inc................................................................... 308,837
------------
ELECTRONICS - DEFENSE (0.2%)
5,100 Raytheon Co. (Class B)................................................................. 301,537
------------
ELECTRONICS - INSTRUMENTATION (0.6%)
12,900 EG & G, Inc............................................................................ 387,000
5,600 Perkin-Elmer Corp...................................................................... 348,250
8,500 Tektronix, Inc......................................................................... 300,687
------------
1,035,937
------------
ELECTRONICS - SEMICONDUCTORS (1.1%)
17,500 Advanced Micro Devices, Inc.*.......................................................... 298,594
4,500 Intel Corp............................................................................. 333,281
13,000 LSI Logic Corp.*....................................................................... 299,812
12,500 Micron Technology, Inc.*............................................................... 310,156
22,000 National Semiconductor Corp.*.......................................................... 290,125
6,000 Texas Instruments, Inc................................................................. 349,875
------------
1,881,843
------------
ENGINEERING & CONSTRUCTION (0.6%)
7,100 Fluor Corp............................................................................. 362,100
14,900 Foster Wheeler Corp.................................................................... 319,419
9,400 McDermott International, Inc........................................................... 323,712
------------
1,005,231
------------
ENTERTAINMENT (0.8%)
12,500 King World Productions Inc.*........................................................... 318,750
4,200 Time Warner, Inc....................................................................... 358,837
6,200 Viacom, Inc. (Class B)*................................................................ 361,150
3,000 Walt Disney Co......................................................................... 315,187
------------
1,353,924
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
FINANCE - CONSUMER (1.3%)
2,400 Beneficial Corp........................................................................ $ 367,650
6,700 Countrywide Credit Industries, Inc..................................................... 340,025
8,900 Green Tree Financial Corp.............................................................. 381,031
6,300 Household International, Inc........................................................... 313,425
10,000 MBNA Corp.............................................................................. 330,000
5,000 Providian Financial Corp............................................................... 392,812
------------
2,124,943
------------
FINANCE - DIVERSIFIED (1.8%)
3,400 American Express Co.................................................................... 387,600
4,800 American General Corp.................................................................. 341,700
4,100 Associates First Capital Corp. (Class A)............................................... 315,187
5,100 Fannie Mae............................................................................. 309,825
6,600 Federal Home Loan Mortgage Corp........................................................ 310,612
4,000 MBIA Inc............................................................................... 299,500
5,300 MGIC Investment Corp................................................................... 302,431
4,300 Morgan Stanley Dean Witter & Co. (Note 3).............................................. 392,912
6,450 SunAmerica Inc......................................................................... 370,472
------------
3,030,239
------------
FOODS (2.2%)
5,000 BestFoods.............................................................................. 290,312
6,000 Campbell Soup Co....................................................................... 318,750
10,000 ConAgra, Inc........................................................................... 316,875
4,500 General Mills, Inc..................................................................... 307,687
5,300 Heinz (H.J.) Co........................................................................ 297,462
4,500 Hershey Foods Corp..................................................................... 310,500
8,000 Kellogg Co............................................................................. 300,500
6,000 Quaker Oats Company (The).............................................................. 329,625
2,700 Ralston-Ralston Purina Group........................................................... 315,394
5,300 Sara Lee Corp.......................................................................... 296,469
4,400 Unilever N.V. (ADR) (Netherlands)...................................................... 347,325
3,400 Wrigley (Wm.) Jr. Co. (Class A)........................................................ 333,200
------------
3,764,099
------------
FOOTWEAR (0.4%)
6,500 Nike, Inc. (Class B)................................................................... 316,469
11,100 Reebok International Ltd. (United Kingdom)*............................................ 307,331
------------
623,800
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
GAMING, LOTTERY, & PARI-MUTUEL COMPANIES (0.4%)
14,100 Harrah's Entertainment, Inc.*.......................................................... $ 327,825
14,000 Mirage Resorts, Inc.*.................................................................. 298,375
------------
626,200
------------
GOLD & PRECIOUS METALS MINING (1.0%)
17,500 Barrick Gold Corp. (Canada)............................................................ 335,781
60,000 Battle Mountain Gold Co................................................................ 356,250
28,700 Homestake Mining Co.................................................................... 297,762
14,800 Newmont Mining Corp.................................................................... 349,650
30,000 Placer Dome Inc. (Canada).............................................................. 352,500
------------
1,691,943
------------
HARDWARE & TOOLS (0.4%)
6,300 Black & Decker Corp.................................................................... 384,300
7,000 Stanley Works.......................................................................... 290,937
------------
675,237
------------
HEALTHCARE - DIVERSIFIED (1.4%)
7,800 Abbott Laboratories.................................................................... 318,825
7,800 Allergan, Inc.......................................................................... 361,725
6,800 American Home Products Corp............................................................ 351,900
3,100 Bristol-Myers Squibb Co................................................................ 356,306
4,100 Johnson & Johnson...................................................................... 302,375
10,000 Mallinckrodt Group, Inc................................................................ 296,875
5,600 Warner-Lambert Co...................................................................... 388,500
------------
2,376,506
------------
HEALTHCARE - DRUGS (1.1%)
5,200 Lilly (Eli) & Co....................................................................... 343,525
2,700 Merck & Co., Inc....................................................................... 361,125
3,400 Pfizer, Inc............................................................................ 369,538
7,400 Pharmacia & Upjohn, Inc................................................................ 341,325
4,000 Schering-Plough Corp................................................................... 366,500
------------
1,782,013
------------
HEALTHCARE - HMOS (0.4%)
12,000 Humana, Inc.*.......................................................................... 374,250
5,500 United Healthcare Corp................................................................. 349,250
------------
723,500
------------
HEALTHCARE - LONG TERM (0.4%)
11,000 Healthsouth Corp.*..................................................................... 293,563
9,000 Manor Care, Inc........................................................................ 345,938
------------
639,501
------------
HEALTHCARE - SPECIALIZED SERVICES (0.2%)
8,300 ALZA Corp. (Class A)*.................................................................. 358,975
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
HEAVY DUTY TRUCKS & PARTS (0.5%)
5,700 Cummins Engine Co., Inc................................................................ $ 292,125
10,300 Navistar International Corp.*.......................................................... 297,413
5,500 PACCAR, Inc............................................................................ 286,344
------------
875,882
------------
HOME BUILDING (0.8%)
9,000 Centex Corp............................................................................ 339,750
8,500 Fleetwood Enterprises, Inc............................................................. 340,000
11,100 Kaufman & Broad Home Corp.............................................................. 352,425
12,600 Pulte Corp............................................................................. 376,425
------------
1,408,600
------------
HOSPITAL MANAGEMENT (0.4%)
10,000 Columbia/HCA Healthcare Corp........................................................... 291,250
11,000 Tenet Healthcare Corp.*................................................................ 343,750
------------
635,000
------------
HOUSEHOLD FURNISHINGS & APPLIANCES (0.4%)
7,300 Maytag Corp............................................................................ 360,438
5,000 Whirlpool Corp......................................................................... 343,750
------------
704,188
------------
HOUSEHOLD PRODUCTS - NON-DURABLE (0.9%)
3,400 Clorox Co.............................................................................. 324,275
3,900 Colgate-Palmolive Co................................................................... 343,200
6,800 Fort James Corp........................................................................ 302,600
6,300 Kimberly-Clark Corp.................................................................... 289,013
3,300 Procter & Gamble Co.................................................................... 300,506
------------
1,559,594
------------
HOUSEWARES (0.8%)
9,000 Fortune Brands, Inc.................................................................... 345,938
6,000 Newell Co.............................................................................. 298,875
10,150 Rubbermaid, Inc........................................................................ 336,853
11,900 Tupperware Corp........................................................................ 334,688
------------
1,316,354
------------
INSURANCE BROKERS (0.4%)
4,500 Aon Corp............................................................................... 316,125
5,400 Marsh & McLennan Companies, Inc........................................................ 326,363
------------
642,488
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
INVESTMENT BANKING/BROKERAGE (0.6%)
4,800 Lehman Brothers Holdings, Inc.......................................................... $ 372,300
3,800 Merrill Lynch & Co., Inc............................................................... 350,550
9,500 Schwab (Charles) Corp.................................................................. 308,750
------------
1,031,600
------------
INVESTMENT COMPANIES (0.2%)
6,200 Franklin Resources, Inc................................................................ 334,800
------------
LEISURE TIME - PRODUCTS (0.6%)
14,200 Brunswick Corp......................................................................... 351,450
9,300 Hasbro, Inc............................................................................ 365,606
8,600 Mattel, Inc............................................................................ 363,888
------------
1,080,944
------------
LIFE & HEALTH INSURANCE (1.1%)
3,900 Aetna, Inc............................................................................. 296,888
7,000 Conseco, Inc........................................................................... 327,250
5,100 Jefferson-Pilot Corp................................................................... 295,481
7,500 Torchmark Corp......................................................................... 343,125
2,500 Transamerica Corp...................................................................... 287,813
6,000 UNUM Corp.............................................................................. 333,000
------------
1,883,557
------------
LODGING - HOTELS (0.4%)
10,500 Hilton Hotels Corp..................................................................... 299,250
9,500 Marriott International, Inc............................................................ 307,563
------------
606,813
------------
MACHINERY - DIVERSIFIED (1.8%)
6,700 Case Corp.............................................................................. 323,275
5,700 Caterpillar, Inc....................................................................... 301,388
13,300 Cincinnati Milacron, Inc............................................................... 323,356
5,300 Cooper Industries, Inc................................................................. 291,169
6,000 Deere & Co............................................................................. 317,250
8,400 Dover Corp............................................................................. 287,700
11,700 Harnischfeger Industries, Inc.......................................................... 331,256
7,100 Ingersoll-Rand Co...................................................................... 312,844
2,400 NACCO Industries, Inc. (Class A)....................................................... 310,200
9,300 Timken Co.............................................................................. 286,556
------------
3,084,994
------------
MANUFACTURING - DIVERSIFIED (2.6%)
5,500 Aeroquip-Vickers, Inc.................................................................. 321,063
7,000 AlliedSignal, Inc...................................................................... 310,625
8,500 Corning, Inc........................................................................... 295,375
6,100 Crane Co............................................................................... 296,231
3,700 Eaton Corp............................................................................. 287,675
4,700 Illinois Tool Works Inc................................................................ 313,431
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
46
<PAGE>
VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
5,500 Johnson Controls, Inc.................................................................. $ 314,531
3,600 Minnesota Mining & Manufacturing Co.................................................... 295,875
6,000 National Service Industries, Inc....................................................... 305,250
8,000 Tenneco, Inc........................................................................... 304,500
4,300 Textron, Inc........................................................................... 308,256
10,000 Thermo Electron Corp.*................................................................. 341,875
5,800 Tyco International Ltd................................................................. 365,400
3,700 United Technologies Corp............................................................... 342,250
------------
4,402,337
------------
MANUFACTURING - SPECIALIZED (1.1%)
6,000 Avery Dennison Corp.................................................................... 322,500
8,700 Briggs & Stratton Corp................................................................. 325,706
10,600 Millipore Corp......................................................................... 288,850
14,500 Pall Corp.............................................................................. 297,250
8,000 Parker-Hannifin Corp................................................................... 305,000
8,900 Sealed Air Corp.*...................................................................... 327,075
------------
1,866,381
------------
MEDICAL PRODUCTS & SUPPLIES (2.1%)
9,000 Bard (C.R.), Inc....................................................................... 342,563
6,700 Bausch & Lomb, Inc..................................................................... 335,838
5,300 Baxter International, Inc.............................................................. 285,206
5,000 Becton, Dickinson & Co................................................................. 388,125
11,500 Biomet, Inc............................................................................ 379,500
5,400 Boston Scientific Corp.*............................................................... 386,775
4,800 Guidant Corp........................................................................... 342,300
5,400 Medtronic, Inc......................................................................... 344,250
8,700 St. Jude Medical, Inc.*................................................................ 320,269
8,400 United States Surgical Corp............................................................ 383,250
------------
3,508,076
------------
METALS & MINING (0.9%)
14,000 ASARCO, Inc............................................................................ 311,500
22,000 Cyprus Amax Minerals Co................................................................ 291,500
22,000 Freeport-McMoran Copper & Gold, Inc. (Class B)......................................... 334,125
24,200 Inco Ltd. (Canada)..................................................................... 329,725
5,200 Phelps Dodge Corp...................................................................... 297,375
------------
1,564,225
------------
MULTI-LINE INSURANCE (1.2%)
2,350 American International Group, Inc...................................................... 343,100
4,500 CIGNA Corp............................................................................. 310,500
3,000 Hartford Financial Services Group Inc. (Note 3)........................................ 343,125
3,400 Lincoln National Corp.................................................................. 310,675
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
3,500 Loews Corp............................................................................. $ 304,938
5,500 Travelers Group, Inc................................................................... 333,438
------------
1,945,776
------------
NATURAL GAS (2.2%)
5,000 Coastal Corp........................................................................... 349,063
6,150 Columbia Gas System, Inc............................................................... 342,094
5,500 Consolidated Natural Gas Co............................................................ 323,813
7,800 Eastern Enterprises.................................................................... 334,425
6,500 Enron Corp............................................................................. 351,406
7,500 NICOR, Inc............................................................................. 300,938
8,500 ONEOK, Inc............................................................................. 338,938
8,500 Peoples Energy Corp.................................................................... 328,313
10,978 Sempra Energy*......................................................................... 304,632
8,500 Sonat, Inc............................................................................. 328,313
10,400 Williams Companies, Inc................................................................ 351,000
------------
3,652,935
------------
OFFICE EQUIPMENT & SUPPLIES (0.3%)
22,000 Moore Corp. Ltd. (Canada).............................................................. 291,500
6,000 Pitney Bowes, Inc...................................................................... 288,750
------------
580,250
------------
OIL & GAS - EXPLORATION & PRODUCTION (1.1%)
4,400 Anardarko Petroleum Corp............................................................... 295,625
9,000 Apache Corp............................................................................ 283,500
8,000 Burlington Resources, Inc.............................................................. 344,500
5,500 Kerr-McGee Corp........................................................................ 318,313
14,600 Oryx Energy Co.*....................................................................... 323,025
6,500 Union Pacific Corp..................................................................... 286,813
------------
1,851,776
------------
OIL & GAS - REFINING & MARKETING (0.4%)
6,000 Ashland, Inc........................................................................... 309,750
7,600 Sun Co., Inc........................................................................... 294,975
------------
604,725
------------
OIL & GAS DRILLING (1.3%)
8,500 Baker Hughes, Inc...................................................................... 293,781
7,400 Dresser Industries, Inc................................................................ 326,063
6,800 Halliburton Co......................................................................... 303,025
13,500 Helmerich & Payne, Inc................................................................. 300,375
15,400 Rowan Companies, Inc.*................................................................. 299,338
4,300 Schlumberger, Ltd...................................................................... 293,744
3,800 Western Atlas, Inc.*................................................................... 322,525
------------
2,138,851
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
47
<PAGE>
VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
OIL INTEGRATED - DOMESTIC (1.3%)
5,700 Amerada Hess Corp...................................................................... $ 309,581
4,100 Atlantic Richfield Co.................................................................. 320,313
12,000 Occidental Petroleum Corp.............................................................. 324,000
6,000 Pennzoil Co............................................................................ 303,750
6,200 Phillips Petroleum Co.................................................................. 298,763
8,500 Unocal Corp............................................................................ 303,875
8,300 USX-Marathon Group..................................................................... 284,794
------------
2,145,076
------------
OIL INTEGRATED - INTERNATIONAL (1.1%)
7,200 Amoco Corp............................................................................. 299,700
3,800 Chevron Corp........................................................................... 315,638
4,200 Exxon Corp............................................................................. 299,513
4,100 Mobil Corp............................................................................. 314,163
6,000 Royal Dutch Petroleum Co. (Netherlands)................................................ 328,875
5,500 Texaco, Inc............................................................................ 328,281
------------
1,886,170
------------
PAPER & FOREST PRODUCTS (1.9%)
10,000 Boise Cascade Corp..................................................................... 327,500
7,100 Champion International Corp............................................................ 349,231
5,000 Georgia-Pacific Corp................................................................... 294,688
7,000 International Paper Co................................................................. 301,000
18,300 Louisiana-Pacific Corp................................................................. 333,975
11,000 Mead Corp.............................................................................. 349,250
7,300 Potlatch Corp.......................................................................... 306,600
10,500 Westvaco Corp.......................................................................... 296,625
6,500 Weyerhaeuser Co........................................................................ 300,219
9,500 Willamette Industries, Inc............................................................. 304,000
------------
3,163,088
------------
PERSONAL CARE (0.6%)
10,200 Alberto-Culver Co. (Class B)........................................................... 295,800
4,500 Avon Products, Inc..................................................................... 348,750
5,600 Gillette Co............................................................................ 317,450
------------
962,000
------------
PHOTOGRAPHY/IMAGING (0.8%)
5,000 Eastman Kodak Co....................................................................... 365,313
19,000 IKON Office Solutions, Inc............................................................. 276,688
8,000 Polaroid Corp.......................................................................... 284,500
3,400 Xerox Corp............................................................................. 345,525
------------
1,272,026
------------
PROPERTY - CASUALTY INSURANCE (1.3%)
3,400 Allstate Corp.......................................................................... 311,313
3,800 Chubb Corp............................................................................. 305,425
7,500 Cincinnati Financial Corp.............................................................. 289,688
1,400 General Re Corp........................................................................ 354,900
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
2,300 Progressive Corp....................................................................... $ 324,300
6,300 Safeco Corp............................................................................ 285,863
9,000 St. Paul Companies, Inc................................................................ 378,563
------------
2,250,052
------------
PUBLISHING (0.8%)
5,900 Dow Jones & Co., Inc................................................................... 328,925
3,700 McGraw-Hill, Inc....................................................................... 301,781
7,400 Meredith Corp.......................................................................... 347,338
4,800 Times Mirror Co. (Class A)............................................................. 301,800
------------
1,279,844
------------
PUBLISHING - NEWSPAPER (0.8%)
4,600 Gannett Co., Inc....................................................................... 326,888
6,100 Knight-Ridder, Inc..................................................................... 335,881
4,400 New York Times Co. (Class A)........................................................... 348,700
4,600 Tribune Co............................................................................. 316,538
------------
1,328,007
------------
RAILROADS (0.7%)
3,000 Burlington Northern Santa Fe Corp...................................................... 294,563
6,500 CSX Corp............................................................................... 295,750
10,000 Norfolk Southern Corp.................................................................. 298,125
16,500 Union Pacific Resources Group, Inc..................................................... 289,781
------------
1,178,219
------------
RESTAURANTS (0.8%)
21,500 Darden Restaurants, Inc................................................................ 341,313
5,400 McDonald's Corp........................................................................ 372,600
11,500 TRICON Global Restaurants, Inc.*....................................................... 364,406
14,500 Wendy's International, Inc............................................................. 340,750
------------
1,419,069
------------
RETAIL - BUILDING SUPPLIES (0.6%)
4,500 Home Depot, Inc........................................................................ 373,781
8,800 Lowe's Companies, Inc.................................................................. 356,950
9,800 Sherwin-Williams Co.................................................................... 324,625
------------
1,055,356
------------
RETAIL - COMPUTERS & ELECTRONICS (0.4%)
7,500 Circuit City Stores, Inc............................................................... 351,563
6,800 Tandy Corp............................................................................. 360,825
------------
712,388
------------
RETAIL - DEPARTMENT STORES (1.4%)
8,000 Dillard's, Inc. (Class A).............................................................. 331,500
6,100 Federated Department Stores, Inc.*..................................................... 328,256
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
48
<PAGE>
VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
5,700 Harcourt General, Inc.................................................................. $ 339,150
5,100 May Department Stores Co............................................................... 334,050
4,400 Mercantile Stores Co., Inc............................................................. 347,325
5,000 Nordstrom, Inc......................................................................... 385,938
4,400 Penney (J.C.) Co., Inc................................................................. 318,175
------------
2,384,394
------------
RETAIL - DRUG STORES (0.8%)
8,200 CVS Corp............................................................................... 319,288
10,500 Longs Drug Stores Corp................................................................. 303,188
8,800 Rite Aid Corp.......................................................................... 330,550
9,100 Walgreen Co............................................................................ 375,944
------------
1,328,970
------------
RETAIL - FOOD CHAINS (1.2%)
6,300 Albertson's, Inc....................................................................... 326,419
12,600 American Stores Co..................................................................... 304,763
7,500 Giant Food, Inc. (Class A)............................................................. 322,969
10,600 Great Atlantic & Pacific Tea Co., Inc.................................................. 350,463
8,000 Kroger Co.*............................................................................ 343,000
7,700 Winn-Dixie Stores, Inc................................................................. 394,144
------------
2,041,758
------------
RETAIL - GENERAL MERCHANDISE (1.1%)
6,000 Costco Companies, Inc.*................................................................ 378,375
7,500 Dayton Hudson Corp..................................................................... 363,750
19,700 Kmart Corp.*........................................................................... 379,225
6,200 Sears, Roebuck & Co.................................................................... 378,588
6,200 Wal-Mart Stores, Inc................................................................... 376,650
------------
1,876,588
------------
RETAIL - SPECIALTY (0.9%)
10,000 AutoZone, Inc.*........................................................................ 319,375
9,500 Consolidated Stores Corp.*............................................................. 344,375
16,900 Pep Boys-Manny, Moe & Jack............................................................. 320,044
12,000 Toys 'R' Us, Inc.*..................................................................... 282,750
15,500 Venator Group, Inc*.................................................................... 296,438
------------
1,562,982
------------
RETAIL - SPECIALTY APPAREL (0.8%)
52,000 Charming Shoppes, Inc.*................................................................ 245,375
6,050 Gap, Inc............................................................................... 372,831
10,300 Limited (The), Inc..................................................................... 341,188
14,600 TJX Companies, Inc..................................................................... 352,225
------------
1,311,619
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SAVINGS & LOAN COMPANIES (0.6%)
4,300 Ahmanson (H.F.) & Co................................................................... $ 305,300
2,900 Golden West Financial Corp............................................................. 308,306
7,500 Washington Mutual, Inc................................................................. 325,313
------------
938,919
------------
SEMICONDUCTOR EQUIPMENT (0.4%)
11,000 Applied Materials, Inc.*............................................................... 324,500
10,500 KLA-Tencor Corp.*...................................................................... 290,719
------------
615,219
------------
SPECIALTY PRINTING (0.4%)
9,000 Deluxe Corp............................................................................ 322,313
7,000 Donnelley (R.R.) & Sons Co............................................................. 320,250
------------
642,563
------------
STEEL & IRON (1.3%)
14,000 Allegheny Teledyne Inc................................................................. 320,250
55,000 Armco, Inc.*........................................................................... 350,625
24,000 Bethlehem Steel Corp.*................................................................. 298,500
13,500 Inland Steel Industries, Inc........................................................... 380,531
6,500 Nucor Corp............................................................................. 299,000
9,100 USX-U.S. Steel Group, Inc.............................................................. 300,300
19,500 Worthington Industries, Inc............................................................ 292,500
------------
2,241,706
------------
TELECOMMUNICATIONS - CELLULAR/WIRELESS (0.4%)
6,500 AirTouch Communications, Inc.*......................................................... 379,844
12,500 Nextel Communications, Inc. (Class A)*................................................. 310,156
------------
690,000
------------
TELECOMMUNICATIONS - LONG DISTANCE (0.9%)
6,000 AT&T Corp.............................................................................. 342,750
6,700 MCI Communications Corp................................................................ 389,019
4,700 Sprint Corp............................................................................ 331,350
8,000 WorldCom, Inc.*........................................................................ 386,500
------------
1,449,619
------------
TELEPHONES (1.5%)
7,100 ALLTEL Corp............................................................................ 330,150
7,000 Ameritech Corp......................................................................... 314,125
6,400 Bell Atlantic Corp..................................................................... 292,000
5,100 BellSouth Corp......................................................................... 342,338
10,600 Frontier Corp.......................................................................... 333,900
5,700 GTE Corp............................................................................... 317,063
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
49
<PAGE>
VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
7,800 SBC Communications, Inc................................................................ $ 312,000
6,576 U.S. West, Inc......................................................................... 309,064
------------
2,550,640
------------
TEXTILES & APPAREL (0.8%)
10,300 Fruit of the Loom, Inc. (Class A)*..................................................... 341,831
6,400 Liz Claiborne, Inc..................................................................... 334,400
11,000 Russell Corp........................................................................... 332,063
5,600 VF Corp................................................................................ 288,400
------------
1,296,694
------------
TEXTILES - HOME FURNISHINGS (0.2%)
7,100 Springs Industries, Inc. (Class A)..................................................... 327,488
------------
TOBACCO (0.4%)
9,500 Philip Morris Companies, Inc........................................................... 374,063
12,500 UST, Inc............................................................................... 337,500
------------
711,563
------------
TRUCKERS (0.2%)
10,000 Ryder System, Inc...................................................................... 315,625
------------
UTILITIES - ELECTRIC (4.9%)
7,500 Ameren Corp............................................................................ 298,125
6,300 American Electric Power Co., Inc....................................................... 285,863
10,500 Baltimore Gas & Electric Co............................................................ 326,156
6,700 Carolina Power & Light Co.............................................................. 290,613
12,500 Central & South West Corp.............................................................. 335,938
8,700 CINergy Corp........................................................................... 304,500
7,000 Consolidated Edison, Inc............................................................... 322,438
7,700 Dominion Resources, Inc................................................................ 313,775
8,000 DTE Energy Co.......................................................................... 323,000
5,000 Duke Power Co.......................................................................... 296,250
10,000 Edison International................................................................... 295,625
12,000 Entergy Corp........................................................................... 345,000
10,100 FirstEnergy Corp....................................................................... 310,575
4,800 FPL Group, Inc......................................................................... 302,400
8,000 GPU, Inc............................................................................... 302,500
11,000 Houston Industries, Inc................................................................ 339,625
25,500 Niagara Mohawk Power Corp.*............................................................ 380,906
12,000 Northern States Power Co............................................................... 343,500
13,400 PacifiCorp............................................................................. 303,175
13,000 PECO Energy Co......................................................................... 379,438
9,500 PG & E Corp............................................................................ 299,844
14,000 PP&L Resources, Inc.................................................................... 317,625
9,300 Public Service Enterprise Group, Inc................................................... 320,269
12,500 Southern Co............................................................................ 346,094
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
7,000 Texas Utilities Co..................................................................... $ 291,375
9,500 Unicom Corp............................................................................ 333,094
------------
8,307,703
------------
WASTE MANAGEMENT (0.4%)
9,300 Browning-Ferris Industries, Inc........................................................ 323,175
11,000 Waste Management, Inc.................................................................. 385,000
------------
708,175
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $122,443,463)......................................................... 163,831,816
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C>
SHORT-TERM INVESTMENTS (2.7%)
REPURCHASE AGREEMENT
$ 4,640 The Bank of New York 5.50% due 07/01/98 (dated 06/30/98; proceeds $4,640,954) (a)
(IDENTIFIED COST $4,640,236)......................................................... 4,640,236
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $127,083,699) (B)........................................................ 99.7 % 168,472,052
OTHER ASSETS IN EXCESS OF LIABILITIES..................................................... 0.3 471,781
------ -------------
NET ASSETS................................................................................ 100.0 % $ 168,943,833
------ -------------
------ -------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by $2,559,345 U.S. Treasury Note 5.375% due 02/15/01 valued
at $2,599,849 and $1,993,928 U.S. Treasury Note 8.875% due 05/15/00 valued
at 2,133,192.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $45,745,221 and the
aggregate gross unrealized depreciation is $4,356,868, resulting in net
unrealized appreciation of $41,388,353.
SEE NOTES TO FINANCIAL STATEMENTS
50
<PAGE>
GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (96.1%)
ADVERTISING/MARKETING SERVICES (0.4%)
5,800 Young & Rubicam, Inc.*.................................................................. $ 185,600
-----------
AEROSPACE & DEFENSE (5.5%)
13,400 Cordant Technologies, Inc............................................................... 618,075
22,000 Gulfstream Aerospace Corp.*............................................................. 1,023,000
10,700 Northrop Grumman Corp................................................................... 1,103,437
-----------
2,744,512
-----------
AIRLINES (8.7%)
71,100 Continental Airlines, Inc. (Class B)*................................................... 4,328,212
-----------
AUTO PARTS - ORIGINAL EQUIPMENT (0.5%)
6,900 ITT Industries, Inc..................................................................... 257,887
-----------
AUTOMOBILES (2.4%)
17,900 General Motors Corp..................................................................... 1,195,944
-----------
BANKS - MONEY CENTER (5.2%)
6,700 BankAmerica Corp........................................................................ 579,131
8,400 Chase Manhattan Corp.................................................................... 634,200
4,000 Citicorp................................................................................ 597,000
2,800 Morgan (J.P.) & Co., Inc................................................................ 327,950
1,200 Wells Fargo & Co........................................................................ 442,800
-----------
2,581,081
-----------
BEVERAGES - SOFT DRINKS (2.6%)
7,400 Coca Cola Co............................................................................ 632,700
17,200 Coca-Cola Enterprises Inc............................................................... 675,100
-----------
1,307,800
-----------
BROADCAST MEDIA (5.9%)
25,200 Clear Channel Communications, Inc.*..................................................... 2,749,950
4,600 Comcast Corp. (Class A)................................................................. 182,275
-----------
2,932,225
-----------
CHEMICALS (1.1%)
7,400 Du Pont (E.I.) De Nemours & Co., Inc.................................................... 552,225
-----------
CHEMICALS - DIVERSIFIED (0.9%)
8,200 Monsanto Co............................................................................. 458,175
-----------
COMMERCIAL & CONSUMER SERVICES (2.4%)
57,500 Cendant Corp.*.......................................................................... 1,200,312
-----------
COMMUNICATIONS EQUIPMENT (1.1%)
1,600 ADC Telecommunications, Inc.*........................................................... 58,400
2,000 CIENA Corp.*............................................................................ 139,000
3,700 Motorola, Inc........................................................................... 194,481
2,200 Tellabs, Inc.*.......................................................................... 157,438
-----------
549,319
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMPUTER - NETWORKING (0.9%)
4,650 Cisco Systems, Inc.*.................................................................... $ 428,091
-----------
COMPUTER HARDWARE (1.1%)
3,300 Dell Computer Corp.*.................................................................... 306,075
2,000 International Business Machines Corp.................................................... 229,625
-----------
535,700
-----------
COMPUTER SOFTWARE & SERVICES (4.3%)
5,100 America Online, Inc..................................................................... 540,600
5,300 Computer Associates International, Inc.................................................. 294,481
11,900 Microsoft Corp.*........................................................................ 1,289,663
-----------
2,124,744
-----------
ELECTRONIC COMPONENTS (0.7%)
7,800 Ingram Micro Inc. (Class A)*............................................................ 345,150
-----------
ELECTRONICS - DEFENSE (2.1%)
17,400 Litton Industries, Inc.*................................................................ 1,026,600
-----------
ELECTRONICS - SEMICONDUCTORS (1.3%)
4,500 Intel Corp.............................................................................. 333,282
4,700 Linear Technology Corp.................................................................. 283,175
-----------
616,457
-----------
ENTERTAINMENT (1.9%)
11,000 SFX Entertainment, Inc.*................................................................ 503,938
5,100 Time Warner, Inc........................................................................ 435,731
-----------
939,669
-----------
FINANCE - CONSUMER (0.2%)
3,000 MBNA Corp............................................................................... 99,000
-----------
FINANCE - DIVERSIFIED (3.5%)
15,300 American Express Co..................................................................... 1,744,200
-----------
FOODS (2.3%)
4,500 Quaker Oats Company (The)............................................................... 247,219
4,100 Ralston-Ralston Purina Group............................................................ 478,931
4,000 Wrigley (Wm.) Jr. Co. (Class A)......................................................... 392,000
-----------
1,118,150
-----------
GAMING, LOTTERY, & PARI-MUTUEL COMPANIES (0.7%)
3,200 Harrah's Entertainment, Inc.*........................................................... 74,400
10,500 International Game Technology........................................................... 254,625
-----------
329,025
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
51
<PAGE>
GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
HEALTHCARE - DRUGS (2.1%)
3,500 Lilly (Eli) & Co........................................................................ $ 231,219
3,800 Merck & Co., Inc........................................................................ 508,250
2,800 Pfizer, Inc............................................................................. 304,325
-----------
1,043,794
-----------
INSURANCE (3.1%)
10,600 Ace, Ltd. (Bermuda)*.................................................................... 413,400
6,200 Provident Companies, Inc................................................................ 213,900
7,400 Reinsurance Group of America, Inc.*..................................................... 379,713
12,694 St. Paul Companies, Inc................................................................. 533,941
-----------
1,540,954
-----------
INVESTMENT BANKING/BROKERAGE (1.0%)
5,300 Merrill Lynch & Co., Inc................................................................ 488,925
-----------
LODGING - HOTELS (0.6%)
10,900 Hilton Hotels Corp...................................................................... 310,650
-----------
MACHINERY (1.8%)
18,100 Case Corp............................................................................... 873,325
-----------
MANUFACTURING (5.1%)
27,400 United Technologies Corp................................................................ 2,534,500
-----------
MANUFACTURING - DIVERSIFIED (2.2%)
6,800 Textron, Inc............................................................................ 487,475
9,200 Tyco International Ltd.................................................................. 579,600
-----------
1,067,075
-----------
MULTI-LINE INSURANCE (7.0%)
27,700 Loews Corp.............................................................................. 2,413,362
6,000 Nationwide Financial Services, Inc. (Class A)........................................... 306,000
12,500 Travelers Group, Inc.................................................................... 757,813
-----------
3,477,175
-----------
OFFICE EQUIPMENT & SUPPLIES (3.7%)
24,900 Knoll, Inc.*............................................................................ 734,550
8,300 Pitney Bowes, Inc....................................................................... 399,438
6,800 Xerox Corp.............................................................................. 691,050
-----------
1,825,038
-----------
OIL & GAS DRILLING (1.0%)
7,100 Diamond Offshore Drilling, Inc.......................................................... 284,000
2,800 Schlumberger Ltd........................................................................ 191,275
-----------
475,275
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
PROPERTY - CASUALTY INSURANCE (3.9%)
9,900 Allstate Corp........................................................................... $ 906,469
5,200 CMAC Investment Corp.................................................................... 319,800
1,900 General Re Corp......................................................................... 481,650
1,600 Progressive Corp........................................................................ 225,600
-----------
1,933,519
-----------
PUBLISHING - NEWSPAPER (1.5%)
3,700 Gannett Co., Inc........................................................................ 262,931
5,500 Pulitzer Publishing Co.................................................................. 490,875
-----------
753,806
-----------
RESTAURANTS (0.8%)
13,000 Brinker International, Inc.*............................................................ 250,250
5,200 Cracker Barrell Old Country Store, Inc.................................................. 165,100
-----------
415,350
-----------
RETAIL - BUILDING SUPPLIES (1.5%)
9,150 Home Depot, Inc......................................................................... 760,022
-----------
RETAIL - SPECIALTY (0.4%)
7,500 Staples, Inc.*.......................................................................... 217,031
-----------
SAVINGS & LOAN COMPANIES (0.4%)
4,200 Washington Mutual, Inc.................................................................. 182,175
-----------
TELECOMMUNICATIONS - CELLULAR/WIRELESS (0.5%)
6,900 The Associated Group, Inc.*............................................................. 269,100
-----------
TELECOMMUNICATIONS - LONG DISTANCE (1.8%)
7,400 AT&T Corp............................................................................... 422,725
10,100 WorldCom, Inc.*......................................................................... 487,956
-----------
910,681
-----------
TOBACCO (2.0%)
25,000 Philip Morris Companies, Inc............................................................ 984,375
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $45,920,330)........................................................... 47,662,848
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
52
<PAGE>
GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (4.4%)
REPURCHASE AGREEMENT
$ 2,198 The Bank of New York 5.50% due 07/01/98 (dated 6/30/98; proceeds $2,198,612) (a)
(IDENTIFIED COST $2,198,276).......................................................... $ 2,198,276
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $48,118,606) (b).......................................................... 100.5 % 49,861,124
LIABILITIES IN EXCESS OF OTHER ASSETS...................................................... (0.5) (243,417)
------ ------------
NET ASSETS................................................................................. 100.0 % $ 49,617,707
------ ------------
------ ------------
</TABLE>
- ---------------------
* Non-income producing security.
(a) Collateralized by $235,162 U.S. Treasury Bond 10.75% due 02/15/03 valued at
$283,921 and $1,487,993 U.S. Treasury Bond 8.125% due 08/15/19 valued at
$1,958,320.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $3,967,922 and the
aggregate gross unrealized depreciation is $2,225,404, resulting in net
unrealized appreciation of $1,742,518.
SEE NOTES TO FINANCIAL STATEMENTS
53
<PAGE>
AMERICAN VALUE
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (87.5%)
ADVERTISING (0.3%)
22,000 Snyder Communications, Inc.*........................................................... $ 968,000
------------
AGRICULTURE RELATED (0.3%)
18,000 Delta & Pine Land Co................................................................... 801,000
------------
APPAREL & FOOTWEAR (0.7%)
60,000 Jones Apparel Group, Inc.*............................................................. 2,193,750
------------
AUTO RELATED (1.8%)
58,000 Ford Motor Co.......................................................................... 3,422,000
30,000 General Motors Corp.................................................................... 2,004,375
------------
5,426,375
------------
BANKS (3.6%)
80,000 Argentaria S.A. (Spain)................................................................ 1,793,535
26,000 BankBoston Corp........................................................................ 1,446,250
565,000 Credito Italiano SpA (Italy)........................................................... 2,952,558
20,000 Mellon Bank Corp....................................................................... 1,392,500
7,000 Morgan (J.P.) & Co., Inc............................................................... 819,875
15,000 NationsBank Corp....................................................................... 1,147,500
3,800 Wells Fargo & Co....................................................................... 1,402,200
------------
10,954,418
------------
BASIC CYCLICALS (0.5%)
20,000 Du Pont (E.I.) De Nemours & Co., Inc................................................... 1,492,500
------------
BIOTECHNOLOGY (0.7%)
17,000 Centocor, Inc.*........................................................................ 616,250
11,000 Genentech, Inc. (Special)*............................................................. 746,625
15,000 Quintiles Transnational Corp.*......................................................... 736,875
------------
2,099,750
------------
CABLE/CELLULAR (3.4%)
96,000 Comcast Corp. (Class A Special)........................................................ 3,894,000
64,000 Cox Communications, Inc. (Class A)*.................................................... 3,100,000
40,000 Time Warner, Inc....................................................................... 3,417,500
------------
10,411,500
------------
CAPITAL GOODS (1.6%)
54,000 General Electric Co.................................................................... 4,914,000
------------
COMMUNICATIONS EQUIPMENT (6.2%)
40,000 Alcatel Alsthom (ADR) (France)......................................................... 1,627,500
7,300 Alcatel Alsthom (France)............................................................... 1,483,010
85,000 Ascend Communications, Inc.*........................................................... 4,207,500
30,000 CIENA Corp.*........................................................................... 2,085,000
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
34,000 Cisco Systems, Inc.*................................................................... $ 3,130,125
7,000 Glenayre Technologies, Inc.*........................................................... 75,250
42,000 Lucent Technologies, Inc............................................................... 3,493,875
21,000 Nokia Corp. (ADR) (Class A) (Finland).................................................. 1,523,812
7,500 Northern Telecom Ltd. (Canada)......................................................... 425,625
8,000 Tellabs, Inc.*......................................................................... 572,500
2,900 Visual Networks, Inc.*................................................................. 106,212
------------
18,730,409
------------
COMPUTER HARDWARE (1.2%)
40,000 Dell Computer Corp.*................................................................... 3,710,000
------------
COMPUTER SERVICES (0.4%)
33,150 Paychex, Inc........................................................................... 1,346,719
------------
COMPUTER SOFTWARE (4.2%)
43,200 BMC Software, Inc.*.................................................................... 2,243,700
16,000 CBT Group Public Limited Co. (ADR) (Ireland)........................................... 856,000
45,000 Computer Associates International, Inc................................................. 2,500,312
38,000 Compuware Corp.*....................................................................... 1,940,375
14,800 Great Plains Software, Inc.*........................................................... 499,500
4,500 Intuit Inc.*........................................................................... 275,625
38,000 Legato Systems, Inc.*.................................................................. 1,482,000
3,700 Microsoft Corp.*....................................................................... 400,987
40,000 Platinum Technology, Inc.*............................................................. 1,142,500
36,000 Veritas Software Corp.*................................................................ 1,487,250
------------
12,828,249
------------
CONSTRUCTION (1.9%)
40,000 Kaufman & Broad Home Corp.............................................................. 1,270,000
20,000 Masco Corp............................................................................. 1,210,000
55,000 Maytag Corp............................................................................ 2,715,625
10,000 Whirlpool Corp......................................................................... 687,500
------------
5,883,125
------------
CONSUMER - NONCYCLICAL (1.4%)
31,000 Clorox Co.............................................................................. 2,956,625
13,000 Procter & Gamble Co.................................................................... 1,183,812
------------
4,140,437
------------
CONSUMER BUSINESS SERVICES (1.7%)
30,000 Apollo Group, Inc. (Class A)*.......................................................... 991,875
30,000 Automatic Data Processing, Inc......................................................... 2,186,250
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
54
<PAGE>
AMERICAN VALUE
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
30,000 Gartner Group, Inc. (Class A)*......................................................... $ 1,048,125
30,000 Sylvan Learning Systems, Inc.*......................................................... 982,500
------------
5,208,750
------------
CONSUMER PRODUCTS (8.5%)
16,100 Colgate-Palmolive Co................................................................... 1,416,800
55,000 CVS Corp............................................................................... 2,141,562
45,000 Dominick's Supermarkets, Inc.*......................................................... 2,005,312
18,000 Estee Lauder Companies Inc. (Class A).................................................. 1,254,375
76,300 Fred Meyer, Inc.*...................................................................... 3,242,750
31,000 Groupe Danone (ADR) (France)........................................................... 1,705,000
68,000 Kroger Co.*............................................................................ 2,915,500
300 Nestle S.A. (Registered) (Switzerland)................................................. 641,080
70,000 Rite Aid Corp.......................................................................... 2,629,375
19,000 Rubbermaid, Inc........................................................................ 630,562
75,500 Safeway, Inc.*......................................................................... 3,071,906
35,000 Seagram Co. Ltd. (Canada).............................................................. 1,432,812
70,000 Walgreen Co............................................................................ 2,891,874
------------
25,978,908
------------
DRUGS (7.2%)
40,000 American Home Products Corp............................................................ 2,070,000
34,000 Bristol-Myers Squibb Co................................................................ 3,907,875
56,000 Forest Laboratories, Inc.*............................................................. 2,002,000
23,000 Lilly (Eli) & Co....................................................................... 1,519,438
22,000 Merck & Co., Inc....................................................................... 2,942,500
25,000 Pfizer, Inc............................................................................ 2,717,188
35,000 Schering-Plough Corp................................................................... 3,206,875
53,000 Warner-Lambert Co...................................................................... 3,676,875
------------
22,042,751
------------
ENERGY (0.9%)
10,000 Camco International Inc................................................................ 778,750
12,613 Coflexip, S.A. (ADR) (France).......................................................... 769,393
10,000 Cooper Cameron Corp.*.................................................................. 510,000
13,000 Halliburton Co......................................................................... 579,313
------------
2,637,456
------------
ENTERTAINMENT (1.1%)
61,000 Electronic Arts Inc.*.................................................................. 3,294,000
------------
ENVIRONMENTAL CONTROL (0.6%)
35,000 U.S.A. Waste Services, Inc.*........................................................... 1,728,125
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
FINANCIAL - MISCELLANEOUS (5.9%)
24,500 American Express Co.................................................................... $ 2,793,000
40,000 Amvescap PLC (United Kingdom).......................................................... 390,195
17,172 Associates First Capital Corp. (Class A)............................................... 1,320,098
26,450 Edwards (A.G.), Inc.................................................................... 1,129,084
35,000 Fannie Mae............................................................................. 2,126,250
40,300 Freddie Mac............................................................................ 1,896,619
30,000 Hambrecht & Quist Group*............................................................... 1,089,375
17,000 Lehman Brothers Holdings, Inc.......................................................... 1,318,563
26,500 Merrill Lynch & Co., Inc............................................................... 2,444,625
27,000 Paine Webber Group, Inc................................................................ 1,157,625
31,000 Providian Financial Corp............................................................... 2,435,438
------------
18,100,872
------------
HEALTHCARE PRODUCTS & SERVICES (2.3%)
12,900 Capital Senior Living Corp.*........................................................... 158,831
80,000 HBO & Co............................................................................... 2,820,000
38,500 Health Management Associates, Inc. (Class A)*.......................................... 1,287,344
16,000 Healthsouth Corp.*..................................................................... 427,000
70,000 Total Renal Care Holdings, Inc.*....................................................... 2,415,000
------------
7,108,175
------------
INSURANCE (3.4%)
50,000 Equitable Companies, Inc............................................................... 3,746,875
9,600 Marsh & McLennan Companies, Inc........................................................ 580,200
24,300 Nationwide Financial Services, Inc. (Class A).......................................... 1,239,300
20,000 ReliaStar Financial Corp............................................................... 960,000
18,400 SunAmerica Inc......................................................................... 1,056,850
12,500 Torchmark Corp......................................................................... 571,875
37,000 Travelers Group, Inc................................................................... 2,243,125
------------
10,398,225
------------
INTERNET (2.8%)
40,000 America Online, Inc.................................................................... 4,240,000
20,000 At Home Corp. (Series A)*.............................................................. 945,000
26,900 BroadVision, Inc.*..................................................................... 638,875
3,700 Inktomi Corp.*......................................................................... 146,613
17,000 Yahoo! Inc.*........................................................................... 2,675,375
------------
8,645,863
------------
LEISURE TIME - PRODUCTS (0.3%)
20,000 Hasbro, Inc............................................................................ 786,250
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
55
<PAGE>
AMERICAN VALUE
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
MEDIA GROUP (6.3%)
62,000 CBS Corp............................................................................... $ 1,968,500
55,000 Chancellor Media Corp.*................................................................ 2,729,375
28,000 Clear Channel Communications, Inc.*.................................................... 3,055,500
20,000 Jacor Communications, Inc.*............................................................ 1,180,000
65,000 News Corp., Ltd. (ADR) (Australia)..................................................... 2,088,125
87,750 Outdoor Systems, Inc.*................................................................. 2,457,000
27,700 Univision Communications, Inc. (Class A)*.............................................. 1,031,825
60,000 USA Networks, Inc.*.................................................................... 1,507,500
48,000 Viacom, Inc. (Class B)*................................................................ 2,796,000
9,700 Young & Rubicam, Inc.*................................................................. 310,400
------------
19,124,225
------------
MEDICAL SUPPLIES (1.8%)
20,000 Becton, Dickinson & Co................................................................. 1,552,500
14,000 Boston Scientific Corp.*............................................................... 1,002,750
24,100 Medtronic, Inc......................................................................... 1,536,375
14,400 Sofamor Danek Group, Inc.*............................................................. 1,246,500
------------
5,338,125
------------
RESTAURANTS (3.1%)
60,000 Brinker International, Inc.*........................................................... 1,155,000
31,000 Cracker Barrell Old Country Store, Inc................................................. 984,250
35,000 McDonald's Corp........................................................................ 2,415,000
40,000 Outback Steakhouse, Inc.*.............................................................. 1,557,500
40,000 Papa John's International, Inc.*....................................................... 1,577,500
35,000 Starbucks Corp.*....................................................................... 1,868,125
------------
9,557,375
------------
RETAIL (12.0%)
21,733 Abercrombie & Fitch Co. (Class A)*..................................................... 956,252
22,000 Amazon.com, Inc.*...................................................................... 2,193,125
20,000 Barnes & Noble, Inc.*.................................................................. 748,750
56,000 Costco Companies, Inc.*................................................................ 3,531,500
64,000 Dayton Hudson Corp..................................................................... 3,104,000
21,018 Dollar General Corp.................................................................... 831,525
22,500 Dollar Tree Stores, Inc.*.............................................................. 911,250
96,000 Family Dollar Stores, Inc.............................................................. 1,776,000
40,000 Gap, Inc............................................................................... 2,465,000
37,000 Home Depot, Inc........................................................................ 3,073,313
134,800 Kmart Corp.*........................................................................... 2,594,900
80,000 Limited (The), Inc..................................................................... 2,650,000
50,000 Linens 'N Things, Inc.*................................................................ 1,528,125
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
92,000 Lowe's Companies, Inc.................................................................. $ 3,731,750
40,000 Proffitt's, Inc.*...................................................................... 1,615,000
70,000 TJX Companies, Inc..................................................................... 1,688,750
50,000 Wal-Mart Stores, Inc................................................................... 3,037,500
------------
36,436,740
------------
TELECOMMUNICATIONS (1.0%)
28,000 AirTouch Communications, Inc.*......................................................... 1,636,250
9,000 ICG Communications, Inc.*.............................................................. 328,500
12,000 Intermedia Communications Inc.*........................................................ 502,500
33,000 Vanguard Cellular Systems, Inc. (Class A)*............................................. 620,813
------------
3,088,063
------------
TRANSPORTATION (0.4%)
45,000 Southwest Airlines Co.................................................................. 1,333,125
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $216,076,007)......................................................... 266,707,260
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS (9.2%)
$ 18,800 U.S. Treasury Strip
0.00% due 05/15/19................................................................... 5,692,264
24,300 U.S. Treasury Strip
0.00% due 02/15/21................................................................... 6,652,854
11,400 U.S. Treasury Strip
0.00% due 05/15/21................................................................... 3,077,088
9,500 U.S. Treasury Strip
0.00% due 08/15/21................................................................... 2,527,570
9,500 U.S. Treasury Bond
6.125% due 11/15/27.................................................................. 10,169,465
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $27,375,842).......................................................... 28,119,241
------------
SHORT-TERM INVESTMENTS (3.5%)
U.S. GOVERNMENT AGENCY (a) (3.2%)
9,800 Federal Home Loan Mortgage Corp. 5.85% due 07/01/98 (AMORTIZED COST $9,800,000)........ 9,800,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
56
<PAGE>
AMERICAN VALUE
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT (0.3%)
$ 748 The Bank of New York 5.50% due 07/01/98
(dated 06/30/98; proceeds $748,529) (b) (IDENTIFIED COST $748,415)................... $ 748,415
------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $10,548,415).......................................................... 10,548,415
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $254,000,264) (c)........................................................ 100.2 % 305,374,916
LIABILITIES IN EXCESS OF OTHER ASSETS..................................................... (0.2) (476,784)
------ -------------
NET ASSETS................................................................................ 100.0 % $ 304,898,132
------ -------------
------ -------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $746,169 U.S. Treasury Note 5.875% due 08/31/99 valued at
$763,383.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $53,163,369 and the
aggregate gross unrealized depreciation is $1,788,717, resulting in net
unrealized appreciation of $51,374,652.
SEE NOTES TO FINANCIAL STATEMENTS
57
<PAGE>
MID-CAP GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (94.8%)
APPAREL & FOOTWEAR (4.7%)
14,000 Jones Apparel Group, Inc.*.............................................................. $ 511,875
9,000 Tommy Hilfiger Corp.*................................................................... 562,500
5,500 Warnaco Group, Inc. (Class A)........................................................... 233,406
-----------
1,307,781
-----------
BIOTECHNOLOGY (2.3%)
20,000 BioChem Pharma Inc. (Canada)*........................................................... 527,500
3,000 Centocor, Inc.*......................................................................... 108,750
-----------
636,250
-----------
COMMUNICATIONS EQUIPMENT (2.5%)
4,000 ADC Telecommunications, Inc.*........................................................... 146,000
3,500 Advanced Fibre Communications, Inc.*.................................................... 140,219
4,000 CIENA Corp.*............................................................................ 278,000
5,000 Scientific-Atlanta, Inc................................................................. 126,875
-----------
691,094
-----------
COMPUTER HARDWARE (3.3%)
10,000 EMC Corp.*.............................................................................. 448,125
7,500 Lexmark International Group, Inc. (Class A)*............................................ 457,500
-----------
905,625
-----------
COMPUTER SOFTWARE (9.6%)
12,000 Cadence Design Systems, Inc.*........................................................... 375,000
5,000 Compuware Corp.*........................................................................ 255,312
7,000 FileNET Corp.*.......................................................................... 200,375
14,000 Network Associates, Inc.*............................................................... 669,375
20,000 Platinum Technology, Inc.*.............................................................. 571,250
10,000 Software AG Systems, Inc.*.............................................................. 292,500
7,000 Synopsys, Inc.*......................................................................... 320,250
-----------
2,684,062
-----------
COMPUTER SOFTWARE & SERVICES (4.5%)
8,000 Citrix Systems, Inc.*................................................................... 547,000
12,000 Legato Systems, Inc.*................................................................... 468,000
5,000 Visio Corp.*............................................................................ 238,750
-----------
1,253,750
-----------
CONSTRUCTION (1.4%)
5,500 Southdown, Inc.......................................................................... 392,562
-----------
CONSUMER BUSINESS SERVICES (7.6%)
10,200 AccuStaff, Inc.*........................................................................ 318,750
20,000 Allied Waste Industries, Inc.*.......................................................... 478,750
15,000 Eastern Environmental Services, Inc.*................................................... 507,187
11,000 U.S. Filter Corp.*...................................................................... 308,687
10,000 U.S.A. Waste Services, Inc.*............................................................ 493,750
-----------
2,107,124
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CONSUMER PRODUCTS (1.0%)
6,500 Dominick's Supermarkets, Inc.*.......................................................... $ 289,656
-----------
DRUGS (4.6%)
10,000 ICN Pharmaceuticals, Inc................................................................ 456,875
10,000 Medicis Pharmaceutical Corp. (Class A)*................................................. 362,500
5,000 Mylan Laboratories, Inc................................................................. 150,312
6,500 Watson Pharmaceuticals, Inc.*........................................................... 303,469
-----------
1,273,156
-----------
ELECTRONICS (0.9%)
6,000 Sanmina Corp.*.......................................................................... 259,125
-----------
ENERGY (3.8%)
10,000 AES Corp. (The)*........................................................................ 525,625
7,500 Stolt Comex Seaway, S.A. (ADR) (United Kingdom)*........................................ 129,375
12,000 Stolt Comex Seaway, S.A. (United Kingdom)*.............................................. 231,000
8,000 Varco International, Inc.*.............................................................. 158,500
-----------
1,044,500
-----------
ENTERTAINMENT (1.7%)
9,000 Electronic Arts Inc.*................................................................... 486,000
-----------
ENVIRONMENTAL CONTROL (0.7%)
18,000 Newpark Resources, Inc.*................................................................ 200,250
-----------
FINANCIAL - MISCELLANEOUS (3.8%)
12,000 Newcourt Credit Group Inc. (Canada)..................................................... 590,250
6,000 Providian Financial Corp................................................................ 471,375
-----------
1,061,625
-----------
HEALTHCARE PRODUCTS & SERVICES (5.8%)
6,500 Health Management Associates, Inc. (Class A)*........................................... 217,344
7,500 Healthsouth Corp.*...................................................................... 200,156
6,000 IDX Systems Corp.*...................................................................... 276,750
9,000 Renal Care Group, Inc.*................................................................. 396,562
15,000 Total Renal Care Holdings, Inc.*........................................................ 517,500
-----------
1,608,312
-----------
HOSPITAL MANAGEMENT (0.7%)
2,500 Express Scripts, Inc. (Class A)*........................................................ 200,000
-----------
INSURANCE (1.6%)
3,000 Equitable Companies, Inc................................................................ 224,813
4,000 Hartford Life, Inc. (Class A)........................................................... 227,750
-----------
452,563
-----------
INTERNET (2.2%)
10,000 At Home Corp. (Series A)*............................................................... 472,500
1,500 MindSpring Enterprises, Inc.*........................................................... 154,313
-----------
626,813
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
58
<PAGE>
MID-CAP GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
LIFE & HEALTH INSURANCE (1.7%)
10,000 Conseco, Inc............................................................................ $ 467,500
-----------
MANUFACTURING - DIVERSIFIED (1.4%)
6,000 Tyco International Ltd.................................................................. 378,000
-----------
MEDIA GROUP (9.9%)
6,800 Chancellor Media Corp.*................................................................. 337,450
4,000 Clear Channel Communications, Inc.*..................................................... 436,500
5,000 Cox Radio, Inc. (Class A)*.............................................................. 216,250
6,000 HA-LO Industries, Inc.*................................................................. 186,750
6,000 Jacor Communications, Inc.*............................................................. 354,000
18,000 Outdoor Systems, Inc.*.................................................................. 504,000
12,000 Snyder Communications, Inc.*............................................................ 528,000
5,000 Univision Communications, Inc. (Class A)*............................................... 186,250
-----------
2,749,200
-----------
MEDICAL SUPPLIES (0.1%)
1,500 North American Scientific, Inc.*........................................................ 30,563
-----------
PRECISION INSTRUMENTS (0.1%)
1,800 Mettler-Toledo International Inc.*...................................................... 36,113
-----------
RESTAURANTS (3.1%)
12,000 Showbiz Pizza Time, Inc.*............................................................... 481,500
7,000 Starbucks Corp.*........................................................................ 373,625
-----------
855,125
-----------
RETAIL (11.4%)
8,500 Abercrombie & Fitch Co. (Class A)*...................................................... 374,000
6,800 Consolidated Stores Corp.*.............................................................. 246,500
7,500 Dillard's, Inc. (Class A)............................................................... 310,781
5,000 Dollar General Corp..................................................................... 197,813
11,000 Finish Line, Inc. (Class A)*............................................................ 308,000
7,000 Fred Meyer, Inc.*....................................................................... 297,500
10,000 Proffitt's, Inc.*....................................................................... 403,750
10,000 Stage Stores, Inc.*..................................................................... 452,500
20,000 Staples, Inc.*.......................................................................... 578,750
-----------
3,169,594
-----------
TELECOMMUNICATIONS (4.4%)
6,000 ICG Communications, Inc.*............................................................... 219,000
4,000 Intermedia Communications Inc.*......................................................... 167,500
11,000 Pacific Gateway Exchange, Inc.*......................................................... 440,688
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
12,000 Vanguard Cellular Systems, Inc. (Class A)*.............................................. $ 225,750
3,500 WorldCom, Inc.*......................................................................... 169,094
-----------
1,222,032
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $23,341,694)........................................................... 26,388,375
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C>
SHORT-TERM INVESTMENTS (6.4%)
U.S. GOVERNMENT AGENCY (a) (5.8%)
$ 1,600 Federal Home Loan Mortgage Corp. 5.85% due 07/01/98 (AMORTIZED COST $1,600,000)......... 1,600,000
-----------
REPURCHASE AGREEMENT (0.6%)
181 The Bank of New York 5.50% due 07/01/98 (dated 06/30/98; proceeds $180,529) (b)
(IDENTIFIED COST $180,502)............................................................ 180,502
-----------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $1,780,502)............................................................ 1,780,502
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $25,122,196) (C).......................................................... 101.2 % 28,168,877
LIABILITIES IN EXCESS OF OTHER ASSETS...................................................... (1.2) (338,051)
------ ------------
NET ASSETS................................................................................. 100.0 % $ 27,830,826
------ ------------
------ ------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $181,001 U.S. Treasury Note 6.125% due 12/31/01 valued at
$184,112.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $3,649,758 and the
aggregate gross unrealized depreciation is $603,077, resulting in net
unrealized appreciation of $3,046,681.
SEE NOTES TO FINANCIAL STATEMENTS
59
<PAGE>
GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON AND PREFERRED STOCKS, RIGHTS AND WARRANTS (93.2%)
ARGENTINA (0.3%)
BREWERY
40,000 Quilmes Industrial S.A. (ADR).......................................................... $ 390,000
------------
AUSTRALIA (0.6%)
BANKING
48,000 Westpac Banking Corp., Ltd............................................................. 292,569
------------
ENERGY
30,000 Woodside Petroleum Ltd................................................................. 149,626
------------
FINANCIAL SERVICES
132,000 Tyndall Australia Ltd.................................................................. 171,531
------------
FOODS & BEVERAGES
100,000 Goodman Fielder Ltd.................................................................... 145,418
------------
TOTAL AUSTRALIA........................................................................ 759,144
------------
BELGIUM (0.2%)
RETAIL
3,500 G.I.B. Holdings Ltd.................................................................... 197,157
------------
BRAZIL (1.7%)
BANKING
10,000 Uniao de Bancos Brasileiros S.A. (GDR)................................................. 295,000
------------
ELECTRIC
37,500 Companhia Paranaense de Energia - Copel (ADR).......................................... 346,875
------------
RETAIL
18,000 Companhia Brasileira de Distribuicao Grupo Pao de Acucar (ADR)......................... 407,250
------------
TELECOMMUNICATIONS
9,600 Telecomunicacoes Brasileiras S.A. (ADR)................................................ 1,048,200
------------
TOTAL BRAZIL........................................................................... 2,097,325
------------
CANADA (2.0%)
COMPUTER SOFTWARE & SERVICES
40,000 Certicom Corp.*........................................................................ 565,241
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
DRUGS
31,500 BioChem Pharma, Inc.*.................................................................. $ 830,812
788 Clinichem Development Inc.*............................................................ 4,482
------------
835,294
------------
ELECTRONICS
20,000 Celestica Inc.*........................................................................ 375,000
------------
LIFE INSURANCE
20,000 Great-West Lifeco Inc.................................................................. 701,444
------------
TOTAL CANADA........................................................................... 2,476,979
------------
CHILE (0.4%)
FOODS & BEVERAGES
15,000 Embotelladora Andina S.A. (Series B) (ADR)............................................. 234,375
------------
TELECOMMUNICATIONS
12,000 Compania de Telecommunicaciones de Chile S.A. (ADR).................................... 243,750
12,000 Compania de Telecommunicaciones de Chile S.A. (Rights)*................................ 4,125
------------
247,875
------------
TOTAL CHILE............................................................................ 482,250
------------
DENMARK (1.4%)
PHARMACEUTICALS
5,000 Novo-Nordisk AS (Series B)............................................................. 688,603
------------
TELECOMMUNICATIONS
15,000 Tele Danmark A/S (ADR)................................................................. 706,875
------------
TRANSPORTATION
3,000 Kobenhavns Lufthavne AS................................................................ 363,587
------------
TOTAL DENMARK.......................................................................... 1,759,065
------------
FINLAND (0.8%)
DRUGS & HEALTHCARE
10,080 Orion-yhtymae Oy (B Shares)............................................................ 310,137
------------
TELECOMMUNICATION EQUIPMENT
10,000 Nokia Corp. (ADR) (Class A)............................................................ 725,625
------------
TOTAL FINLAND.......................................................................... 1,035,762
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
60
<PAGE>
GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
FRANCE (7.8%)
AUTOMOTIVE
10,000 Compagnie Generale des Etablissements Michelin (B Shares).............................. $ 575,955
18,000 Renault S.A............................................................................ 1,021,569
7,500 Valeo S.A.............................................................................. 764,915
------------
2,362,439
------------
BROADCAST MEDIA
5,500 Havas S.A.............................................................................. 465,633
------------
ELECTRICAL EQUIPMENT
4,600 Alcatel Alsthom........................................................................ 934,500
------------
ELECTRONICS
24,000 Thomson CSF............................................................................ 910,966
------------
ENERGY
5,800 Elf Aquitaine S.A...................................................................... 813,599
------------
FINANCIAL SERVICES
6,000 Compagnie Financiere de Paribas........................................................ 640,647
------------
FOOD PROCESSING
13,000 Royal Canin S.A........................................................................ 742,305
------------
INSURANCE
11,000 AXA-UAP................................................................................ 1,234,425
------------
LEISURE
3,500 Accor S.A.............................................................................. 977,308
------------
OIL RELATED
5,000 Total S.A. (B Shares).................................................................. 648,568
------------
TOTAL FRANCE........................................................................... 9,730,390
------------
GERMANY (4.2%)
APPAREL
1,700 Adidas AG.............................................................................. 295,664
300 Hugo Boss AG (Pref.)................................................................... 660,289
------------
955,953
------------
AUTOMOTIVE
670 Bayerische Motoren Werke (BMW) AG...................................................... 676,187
134 Bayerische Motoren Werke (BMW) AG (New)*............................................... 133,385
2,700 MAN AG................................................................................. 1,051,153
------------
1,860,725
------------
BANKING
16,000 Commerzbank AG......................................................................... 607,864
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CHEMICALS
9,400 Bayer AG............................................................................... $ 485,517
------------
CHEMICALS - DIVERSIFIED
6,000 Henkel KGaA - Vorzug (Pref.)........................................................... 592,269
15,000 Hoechst AG............................................................................. 752,779
------------
1,345,048
------------
TOTAL GERMANY.......................................................................... 5,255,107
------------
HONG KONG (2.1%)
BANKING
200,000 Dao Heng Bank Group Ltd................................................................ 283,999
16,608 HSBC Holdings PLC...................................................................... 406,276
------------
690,275
------------
CONGLOMERATES
75,000 Hutchison Whampoa Ltd.................................................................. 395,985
------------
NATURAL GAS
266,200 Hong Kong & China Gas Co., Ltd......................................................... 302,402
12,100 Hong Kong & China Gas Co., Ltd. (Warrants due 09/30/99)*............................... 828
------------
303,230
------------
REAL ESTATE
76,000 Cheung Kong (Holdings) Ltd............................................................. 373,795
70,000 New World Development Co., Ltd......................................................... 135,545
31,000 Sun Hung Kai Properties Ltd............................................................ 131,660
------------
641,000
------------
UTILITIES - ELECTRIC
123,000 CLP Holdings Ltd....................................................................... 560,498
------------
TOTAL HONG KONG........................................................................ 2,590,988
------------
HUNGARY (0.5%)
TELECOMMUNICATIONS
20,000 Magyar Tavkozlesi RT (ADR)*............................................................ 588,750
------------
ITALY (2.4%)
BANKING
225,000 Banca Commerciale Italiana............................................................. 1,343,227
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
61
<PAGE>
GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
ENERGY
10,000 Ente Nazionale Idrocarburi SpA (ADR)*.................................................. $ 650,000
------------
TELECOMMUNICATIONS
75,000 Telecom Italia SpA..................................................................... 551,149
65,000 Telecom Italia Mobile SpA.............................................................. 396,804
------------
947,953
------------
TOTAL ITALY............................................................................ 2,941,180
------------
JAPAN (5.3%)
AUTOMOTIVE
10,000 Honda Motor Co......................................................................... 355,396
35,000 Suzuki Motor Co., Ltd.................................................................. 317,266
------------
672,662
------------
BANKING
130,000 Sakura Bank Ltd........................................................................ 336,691
------------
BREWERY
100,000 Kirin Brewery Co., Ltd................................................................. 942,446
------------
BUILDING & CONSTRUCTION
29,000 Sekisui House Ltd...................................................................... 224,280
------------
BUSINESS SERVICES
5,000 Secom Co............................................................................... 288,129
------------
COMPUTERS
30,000 Fujitsu, Ltd........................................................................... 315,108
------------
ELECTRONICS
6,000 Sony Corp.............................................................................. 515,827
3,000 TDK Corp............................................................................... 221,223
------------
737,050
------------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS
5,000 Rohm Co., Ltd.......................................................................... 512,590
------------
FINANCIAL SERVICES
30,000 Nomura Securities Co., Ltd............................................................. 348,561
------------
INTERNATIONAL TRADE
86,000 Mitsui & Co............................................................................ 464,029
------------
MACHINERY
27,000 Minebea Co., Ltd....................................................................... 268,252
------------
PHARMACEUTICALS
40,000 Banyu Pharmaceutical Co., Ltd.......................................................... 431,655
8,000 Terumo Corp............................................................................ 126,619
------------
558,274
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
REAL ESTATE
25,000 Mitsui Fudosan Co., Ltd................................................................ $ 197,122
------------
TIRE & RUBBER GOODS
30,000 Bridgestone Corp....................................................................... 707,914
------------
TOTAL JAPAN............................................................................ 6,573,108
------------
MALAYSIA (0.2%)
NATURAL GAS
120,000 Petronas Gas Berhad.................................................................... 223,729
------------
MEXICO (2.4%)
BANKING
120,000 Grupo Financiero Banamex Accival, S.A. de C.V. (B Shares)*............................. 227,997
------------
BEVERAGES
200,000 Grupo Continental, S.A. (Series CP).................................................... 643,001
20,000 Panamerican Beverages, Inc. (Class A).................................................. 628,750
25,000 Pepsi-Gemex S.A. de C.V. (ADR)......................................................... 301,562
------------
1,573,313
------------
CONGLOMERATES
58,000 Grupo Carso S.A. de C.V. (Series A1)................................................... 239,239
15,000 Grupo Imsa, S.A. de C.V. (ADR)......................................................... 226,875
------------
466,114
------------
STEEL
20,000 Tubos de Acero de Mexico S.A. (ADR)*................................................... 256,250
------------
TELECOMMUNICATIONS
9,100 Telefonos de Mexico S.A. (Series L) (ADR).............................................. 437,369
------------
TOTAL MEXICO........................................................................... 2,961,043
------------
NETHERLANDS (4.8%)
ELECTRICAL EQUIPMENT
13,600 Philips Electronics NV................................................................. 1,140,783
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
62
<PAGE>
GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
FOOD PROCESSING
4,500 Koninklijke Numico NV.................................................................. $ 140,611
7,000 Nutreco Holding NV..................................................................... 244,481
------------
385,092
------------
HOUSEHOLD FURNISHINGS & APPLIANCES
8,000 Koninklijke Ahrend Groep NV............................................................ 260,571
------------
INSURANCE
17,200 Aegon NV............................................................................... 1,493,378
14,000 ING Groep NV........................................................................... 914,745
------------
2,408,123
------------
MEDIA
12,000 PolyGram NV............................................................................ 611,008
------------
PUBLISHING
18,000 Ver Ned Utigev Ver Bezit NV............................................................ 652,507
------------
RETAIL
16,500 Koninklijke Ahold NV................................................................... 528,524
------------
TOTAL NETHERLANDS...................................................................... 5,986,608
------------
PERU (0.2%)
TELECOMMUNICATIONS
10,000 Telefonica del Peru S.A. (ADR)......................................................... 204,375
------------
PHILIPPINES (0.2%)
TELECOMMUNICATIONS
10,000 Philippine Long Distance Telephone Co. (ADR)........................................... 226,250
------------
PORTUGAL (1.8%)
BUILDING MATERIALS
22,000 Cimpor-Cimentos de Portugal, SGPS, S.A................................................. 771,367
------------
TELECOMMUNICATIONS
10,500 Portugal Telecom S.A. (ADR)............................................................ 555,844
5,000 Telecel-Comunicacoes Pessoais S.A.*.................................................... 886,007
------------
1,441,851
------------
TOTAL PORTUGAL......................................................................... 2,213,218
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SINGAPORE (0.9%)
BANKING
100,000 Overseas Chinese Banking Corp., Ltd.................................................... $ 341,246
------------
PAPER PRODUCTS
25,000 Asia Pulp & Paper Co., Ltd. (ADR)...................................................... 281,250
------------
REAL ESTATE
270,000 Keppel Land Ltd........................................................................ 248,368
------------
UTILITIES - TELECOMMUNICATIONS
155,000 Singapore Telecommunications Ltd....................................................... 220,772
------------
TOTAL SINGAPORE........................................................................ 1,091,636
------------
SPAIN (3.1%)
BANKING
40,000 Banco Central Hispanoamericano S.A..................................................... 1,256,517
------------
ELECTRIC
28,800 Endesa S.A............................................................................. 629,719
------------
FINANCIAL SERVICES
2,000 Corporacion Financiera Alba............................................................ 219,630
------------
FOODS & BEVERAGES
30,000 Centros Comerciales Pryca S.A.......................................................... 555,266
------------
LIFE INSURANCE
12,000 Mapfre Vida Seguros.................................................................... 572,471
------------
TELECOMMUNICATIONS
4,145 Telefonica de Espana S.A. (ADR)........................................................ 576,414
------------
TOTAL SPAIN............................................................................ 3,810,017
------------
SWEDEN (1.2%)
BUSINESS SERVICES
5,000 Assa Abloy AB (Series B)............................................................... 196,085
6,000 Securitas AB
(Series "B" Free).................................................................... 293,095
------------
489,180
------------
DRUGS & HEALTHCARE
1,240 Lifco AB (B Shares)*................................................................... 6,049
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
63
<PAGE>
GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
MEDICAL SUPPLIES
6,200 Getinge Industrier AB (B Shares)....................................................... $ 126,420
------------
RETAIL
4,200 Hennes & Mauritz AB (B Shares)......................................................... 267,426
------------
TELECOMMUNICATION EQUIPMENT
22,200 Ericsson (L.M.) Telephone Co. AB (Series "B" Free)..................................... 647,060
------------
TOTAL SWEDEN........................................................................... 1,536,135
------------
SWITZERLAND (3.0%)
BANKING
3,200 Credit Suisse Group.................................................................... 710,994
------------
BUILDING MATERIALS
250 Holderbank Financiere Glarus AG (B Shares)............................................. 317,643
------------
CONGLOMERATES
160 ABB AG - Bearer........................................................................ 235,945
------------
FOOD PROCESSING
500 Nestle S.A............................................................................. 1,068,466
------------
PHARMACEUTICALS
494 Novartis AG............................................................................ 820,840
130 Novartis AG - Bearer................................................................... 216,181
40 Roche Holdings AG...................................................................... 392,232
------------
1,429,253
------------
TOTAL SWITZERLAND...................................................................... 3,762,301
------------
UNITED KINGDOM (13.5%)
AEROSPACE
80,543 Rolls-Royce PLC*....................................................................... 332,406
------------
AEROSPACE & DEFENSE
64,232 British Aerospace PLC.................................................................. 491,620
------------
AUTO PARTS
135,000 LucasVarity PLC........................................................................ 535,768
------------
AUTO PARTS - ORIGINAL EQUIPMENT
56,000 BBA Group PLC.......................................................................... 421,144
------------
BANKING
36,000 Abbey National PLC..................................................................... 639,319
35,630 National Westminster Bank PLC.......................................................... 636,313
------------
1,275,632
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
BREWERS
22,142 Bass PLC............................................................................... $ 414,632
------------
BUILDING & CONSTRUCTION
61,679 Blue Circle Industries PLC............................................................. 348,146
------------
COMPUTER SOFTWARE & SERVICES
20,000 Sage Group (The) PLC................................................................... 564,742
72,000 SEMA Group PLC......................................................................... 846,423
------------
1,411,165
------------
ELECTRONICS & ELECTRICAL
40,000 General Electric Co. PLC............................................................... 344,506
------------
ENERGY
150,000 Shell Transport & Trading Co. PLC...................................................... 1,055,528
------------
FOOD PROCESSING
41,000 Devro PLC.............................................................................. 343,205
52,000 Unilever PLC........................................................................... 553,210
------------
896,415
------------
HOUSEHOLD PRODUCTS
26,000 Reckitt & Colman PLC................................................................... 495,981
------------
INSURANCE
18,000 Britannic Assurance PLC................................................................ 340,670
36,000 Commercial Union PLC................................................................... 671,135
71,110 Royal & Sun Alliance Insurance Group PLC............................................... 734,578
------------
1,746,383
------------
LEISURE
13,722 Granada Group PLC...................................................................... 252,153
74,000 Rank Group PLC......................................................................... 405,970
65,674 Tomkins PLC............................................................................ 356,186
------------
1,014,309
------------
MANUFACTURING
75,000 Vickers PLC............................................................................ 272,636
------------
MERCHANDISING
34,000 Next PLC............................................................................... 291,979
------------
PUBLISHING
50,000 Reed International PLC................................................................. 451,893
------------
RESTAURANTS
51,000 Compass Group PLC...................................................................... 585,943
------------
RETAIL
65,000 Sainsbury (J.) PLC..................................................................... 578,789
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
64
<PAGE>
GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS
60,600 British Telecommunications PLC......................................................... $ 747,774
20,700 Esat Telecom Group PLC (ADR) (Ireland)*................................................ 781,425
61,723 Securicor PLC.......................................................................... 502,265
80,607 Vodafone Group PLC..................................................................... 1,022,205
------------
3,053,669
------------
TRANSPORTATION
62,959 British Airways PLC.................................................................... 680,822
------------
TOTAL UNITED KINGDOM................................................................... 16,699,366
------------
UNITED STATES (32.2%)
AEROSPACE & DEFENSE
13,100 General Motors Corp. (Class H)*........................................................ 617,337
12,500 Honeywell, Inc......................................................................... 1,044,531
38,300 Loral Space & Communications Ltd.*..................................................... 1,081,975
7,367 Raytheon Co. (Class A)................................................................. 424,523
------------
3,168,366
------------
ALUMINUM
12,200 Aluminum Co. of America................................................................ 804,437
------------
APPLIANCES & HOUSEHOLD DURABLES
24,400 Maytag Corp............................................................................ 1,204,750
------------
AUTOMOTIVE
24,100 Chrysler Corp.......................................................................... 1,358,637
18,500 Ford Motor Co.......................................................................... 1,091,500
------------
2,450,137
------------
BANKING
26,200 First Tennessee National Corp.......................................................... 825,300
------------
BEVERAGES - SOFT DRINKS
24,100 PepsiCo, Inc........................................................................... 992,619
------------
CHEMICALS
8,700 Dow Chemical Co........................................................................ 841,181
28,000 Georgia Gulf Corp...................................................................... 638,750
20,200 Monsanto Co............................................................................ 1,128,675
------------
2,608,606
------------
COMMUNICATIONS - EQUIPMENT & SOFTWARE
15,450 Cisco Systems, Inc.*................................................................... 1,422,366
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMPUTERS
18,500 Diebold, Inc........................................................................... $ 534,187
28,400 Gateway 2000, Inc.*.................................................................... 1,437,750
13,600 Hewlett-Packard Co..................................................................... 814,300
22,100 Sun Microsystems, Inc.*................................................................ 959,969
------------
3,746,206
------------
FINANCIAL SERVICES
10,000 American Express Co.................................................................... 1,140,000
4,848 Associates First Capital Corp. (Class A)............................................... 372,690
16,100 Fannie Mae............................................................................. 978,075
16,100 Travelers Group, Inc................................................................... 976,063
------------
3,466,828
------------
FOODS & BEVERAGES
11,000 General Mills, Inc..................................................................... 752,125
------------
FOREST & PAPER PRODUCTS
18,300 Champion International Corp............................................................ 900,131
------------
HOUSEHOLD PRODUCTS
12,300 Colgate-Palmolive Co................................................................... 1,082,400
------------
MEDICAL SERVICES
38,200 HBO & Co............................................................................... 1,346,550
------------
OIL - DOMESTIC
11,300 Atlantic Richfield Co.................................................................. 882,813
------------
OIL INTEGRATED - INTERNATIONAL
11,100 Chevron Corp........................................................................... 921,994
13,900 Exxon Corp............................................................................. 991,244
11,700 Mobil Corp............................................................................. 896,513
------------
2,809,751
------------
OIL WELL EQUIPMENT & SERVICE
16,800 Diamond Offshore Drilling, Inc......................................................... 672,000
10,100 Schlumberger Ltd....................................................................... 689,956
------------
1,361,956
------------
PHARMACEUTICALS
25,600 Abbott Laboratories.................................................................... 1,046,400
22,800 American Home Products Corp............................................................ 1,179,900
------------
2,226,300
------------
RECREATION
9,300 Walt Disney Co......................................................................... 977,081
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
65
<PAGE>
GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
RETAIL - SPECIALTY
25,100 Bed Bath & Beyond, Inc.*............................................................... $ 1,300,494
34,500 Pep Boys-Manny, Moe & Jack............................................................. 653,344
------------
1,953,838
------------
RETAIL - SPECIALTY APPAREL
22,800 Gap, Inc............................................................................... 1,405,050
------------
SAVINGS & LOAN ASSOCIATIONS
13,500 Ahmanson (H.F.) & Co................................................................... 958,500
9,300 Golden West Financial Corp............................................................. 988,706
------------
1,947,206
------------
SEMICONDUCTORS
11,600 Intel Corp............................................................................. 859,125
------------
STEEL
17,300 Nucor Corp............................................................................. 795,800
------------
TOTAL UNITED STATES.................................................................... 39,989,741
------------
TOTAL COMMON AND PREFERRED STOCKS, RIGHTS AND WARRANTS
(IDENTIFIED COST $94,517,976).......................................................... 115,581,624
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C>
SHORT-TERM INVESTMENTS (6.8%)
U.S. GOVERNMENT AGENCY (a) (4.0%)
$ 5,000 Federal National Mortgage Assoc. 5.44% due 07/06/98 (AMORTIZED COST $4,996,111)........ 4,996,111
------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT (2.8%)
$ 3,468 The Bank of New York 5.50% due 07/01/98 (dated 06/30/98; proceeds $3,468,961) (b)
(IDENTIFIED COST $3,468,431)......................................................... $ 3,468,431
------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $8,464,542)........................................................... 8,464,542
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $102,982,518) (C)........................................................ 100.0 % 124,046,166
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS............................................ (0.0) (40,901)
------ -------------
NET ASSETS................................................................................ 100.0 % $ 124,005,265
------ -------------
------ -------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
GDR Global Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $2,271,013 U.S. Treasury Note 6.0% due 07/31/02 valued at
$2,363,313 and $1,132,815 U.S. Treasury Note 6.125% due 07/31/00 valued at
$1,174,486.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $27,247,616 and the
aggregate gross unrealized depreciation is $6,183,968, resulting in net
unrealized appreciation of $21,063,648.
SEE NOTES TO FINANCIAL STATEMENTS
66
<PAGE>
GLOBAL EQUITY
SUMMARY OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Aerospace......................................................................... $ 332,406 0.3 %
Aerospace & Defense............................................................... 3,659,986 3.0
Aluminum.......................................................................... 804,437 0.6
Apparel........................................................................... 955,953 0.8
Appliances & Household Durables................................................... 1,204,750 1.0
Auto Parts........................................................................ 535,768 0.4
Auto Parts - Original Equipment................................................... 421,144 0.3
Automotive........................................................................ 7,345,963 5.9
Banking........................................................................... 8,203,312 6.6
Beverages......................................................................... 1,573,313 1.3
Beverages - Soft Drinks........................................................... 992,619 0.8
Brewers........................................................................... 414,632 0.3
Brewery........................................................................... 1,332,446 1.1
Broadcast Media................................................................... 465,633 0.4
Building & Construction........................................................... 572,426 0.5
Building Materials................................................................ 1,089,010 0.9
Business Services................................................................. 777,309 0.6
Chemicals......................................................................... 3,094,123 2.5
Chemicals - Diversified........................................................... 1,345,048 1.1
Communications - Equipment & Software............................................. 1,422,366 1.1
Computer Software & Services...................................................... 1,976,406 1.6
Computers......................................................................... 4,061,314 3.3
Conglomerates..................................................................... 1,098,044 0.9
Drugs............................................................................. 835,294 0.7
Drugs & Healthcare................................................................ 316,186 0.3
Electric.......................................................................... 976,594 0.8
Electrical Equipment.............................................................. 2,075,283 1.7
Electronics....................................................................... 2,023,016 1.6
Electronics & Electrical.......................................................... 344,506 0.3
Electronics - Semiconductors/
Components...................................................................... 512,590 0.4
Energy............................................................................ 2,668,753 2.2
Financial Services................................................................ 4,847,197 3.9
Food Processing................................................................... 3,092,278 2.5
Foods & Beverages................................................................. 1,687,184 1.4
Forest & Paper Products........................................................... 900,131 0.7
Household Furnishings & Appliances................................................ 260,571 0.2
Household Products................................................................ 1,578,381 1.3
Insurance......................................................................... 5,388,931 4.3
International Trade............................................................... 464,029 0.4
Leisure........................................................................... 1,991,617 1.6
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Life Insurance.................................................................... $ 1,273,915 1.0 %
Machinery......................................................................... 268,252 0.2
Manufacturing..................................................................... 272,636 0.2
Media............................................................................. 611,008 0.5
Medical Services.................................................................. 1,346,550 1.1
Medical Supplies.................................................................. 126,420 0.1
Merchandising..................................................................... 291,979 0.2
Natural Gas....................................................................... 526,959 0.4
Oil - Domestic.................................................................... 882,813 0.7
Oil Integrated - International.................................................... 2,809,751 2.3
Oil Related....................................................................... 648,568 0.5
Oil Well Equipment & Service...................................................... 1,361,956 1.1
Paper Products.................................................................... 281,250 0.2
Pharmaceuticals................................................................... 4,902,430 3.9
Publishing........................................................................ 1,104,400 0.9
Real Estate....................................................................... 1,086,490 0.9
Recreation........................................................................ 977,081 0.8
Repurchase Agreement.............................................................. 3,468,431 2.8
Restaurants....................................................................... 585,943 0.5
Retail............................................................................ 1,979,146 1.6
Retail - Specialty................................................................ 1,953,838 1.6
Retail - Specialty Apparel........................................................ 1,405,050 1.1
Savings & Loan Associations....................................................... 1,947,206 1.6
Semiconductors.................................................................... 859,125 0.7
Steel............................................................................. 1,052,050 0.8
Telecommunication Equipment....................................................... 1,372,685 1.1
Telecommunications................................................................ 9,479,581 7.6
Tire & Rubber Goods............................................................... 707,914 0.6
Transportation.................................................................... 1,044,409 0.8
U.S. Government Agency............................................................ 4,996,111 4.0
Utilities - Electric.............................................................. 560,498 0.4
Utilities - Telecommunications.................................................... 220,772 0.2
------------ -----
$124,046,166 100.0 %
------------ -----
------------ -----
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Common Stocks..................................................................... $114,324,113 92.2 %
Preferred Stocks.................................................................. 1,252,558 1.0
Rights & Warrants................................................................. 4,953 0.0
Short-Term Investments............................................................ 8,464,542 6.8
------------ -----
$124,046,166 100.0 %
------------ -----
------------ -----
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
67
<PAGE>
DEVELOPING GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (91.5%)
ADVERTISING (0.5%)
23,000 CKS Group, Inc.*........................................................................ $ 411,125
-----------
AEROSPACE & DEFENSE (0.4%)
22,600 Howmet International, Inc.*............................................................. 339,000
-----------
AIRLINES (0.9%)
5,000 Atlantic Coast Airlines Holdings*....................................................... 148,750
18,150 Midwest Express Holdings, Inc.*......................................................... 656,803
-----------
805,553
-----------
APPAREL (0.6%)
28,700 Quiksilver, Inc.*....................................................................... 572,206
-----------
AUTO RELATED (0.4%)
7,300 Tower Automotive, Inc.*................................................................. 312,987
-----------
BIOTECHNOLOGY (2.8%)
7,500 Arterial Vascular Engineering, Inc.*.................................................... 267,656
22,500 ArthroCare Corp.*....................................................................... 376,875
19,000 BioChem Pharma Inc. (Canada)*........................................................... 501,125
12,500 Gilead Sciences, Inc.*.................................................................. 400,000
24,900 Medco Research, Inc.*................................................................... 634,950
10,600 PathoGenesis Corp.*..................................................................... 307,400
-----------
2,488,006
-----------
BROADCAST MEDIA (0.9%)
10,000 Boron, LePore & Associates, Inc.*....................................................... 378,750
9,500 SFX Entertainment, Inc. (Class A)*...................................................... 435,219
-----------
813,969
-----------
BROKERAGE (1.5%)
7,633 Legg Mason, Inc......................................................................... 439,375
12,000 McDonald & Co. Investments, Inc......................................................... 393,750
18,750 Morgan Keegan, Inc...................................................................... 485,156
-----------
1,318,281
-----------
BUSINESS SERVICES (7.2%)
15,874 American Management Systems, Inc.*...................................................... 474,236
14,700 CheckFree Holdings Corp.*............................................................... 432,731
22,000 Concord EFS, Inc.*...................................................................... 572,000
8,000 DST Systems, Inc.*...................................................................... 448,000
15,500 Hagler Bailly, Inc.*.................................................................... 399,125
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
26,000 LCC International, Inc. (Class A)*...................................................... $ 476,125
22,550 Metzler Group, Inc.*.................................................................... 825,894
28,500 Pegasus Systems, Inc.*.................................................................. 726,750
17,500 Saville Systems Ireland PLC (ADR) (Ireland)*............................................ 872,812
20,000 The BISYS Group, Inc.*.................................................................. 820,000
39,500 Vestcom International, Inc.*............................................................ 355,500
-----------
6,403,173
-----------
COMMERCIAL SERVICES (4.4%)
7,500 Abacus Direct Corp.*.................................................................... 389,531
11,600 Charles River Associates Inc.*.......................................................... 290,000
20,000 HA-LO Industries, Inc.*................................................................. 622,500
13,000 Iron Mountain, Inc.*.................................................................... 572,000
17,100 Lason, Inc.*............................................................................ 925,537
40,000 LECG, Inc.*............................................................................. 600,000
16,425 Steiner Leisure Ltd.*................................................................... 496,856
-----------
3,896,424
-----------
COMPUTER SOFTWARE (8.0%)
21,000 AXENT Technologies, Inc.*............................................................... 641,812
16,000 BEA Systems, Inc.*...................................................................... 366,000
25,900 BroadVision, Inc.*...................................................................... 615,125
20,600 Business Objects S.A. (ADR) (France)*................................................... 347,625
10,000 Cerner Corp.*........................................................................... 283,125
10,000 Check Point Software Technologies Ltd. (Israel)*........................................ 327,500
15,000 Electronics for Imaging, Inc.*.......................................................... 315,937
6,000 Intuit Inc.*............................................................................ 367,500
19,000 Learning Company, Inc.*................................................................. 562,875
10,000 Manugistics Group, Inc.*................................................................ 247,500
40,000 Novell, Inc.*........................................................................... 510,000
12,000 Peregrine Systems, Inc.*................................................................ 342,000
23,000 Rational Software Corp.*................................................................ 350,750
22,000 Segue Software, Inc.*................................................................... 343,750
30,000 Software AG Systems, Inc.*.............................................................. 877,500
7,000 Systems & Computer Technology Corp.*.................................................... 188,125
11,100 VERTAS Software Corp.*.................................................................. 458,569
-----------
7,145,693
-----------
COMPUTER SOFTWARE & SERVICES (9.0%)
8,333 Aspen Technology, Inc.*................................................................. 420,816
19,000 Avant! Corp.*........................................................................... 469,062
25,000 CACI International Inc. (Class A)*...................................................... 526,562
20,000 CCC Information Services Group, Inc.*................................................... 332,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
68
<PAGE>
DEVELOPING GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
2,000 Citrix Systems, Inc.*................................................................... $ 136,750
11,000 Dendrite International, Inc.*........................................................... 409,750
20,000 Information Management Resources, Inc.*................................................. 676,250
13,200 J.D. Edwards & Co.*..................................................................... 565,950
7,500 JDA Software Group, Inc.*............................................................... 328,125
10,900 Keane, Inc.*............................................................................ 610,400
30,100 MAPICS, Inc.*........................................................................... 592,594
19,400 New Era of Networks, Inc.*.............................................................. 591,700
14,940 Safeguard Scientifics, Inc.*............................................................ 622,811
30,800 Summit Design, Inc.*.................................................................... 452,375
15,600 Technology Solutions Co.*............................................................... 494,325
10,000 VeriSign, Inc.*......................................................................... 372,500
7,500 Visio Corp.*............................................................................ 358,125
-----------
7,960,595
-----------
COMPUTERS - PERIPHERAL EQUIPMENT (1.5%)
10,000 ATL Ultrasound, Inc.*................................................................... 451,250
15,000 Hutchinson Technology Inc.*............................................................. 408,750
8,500 Hypercom Corp.*......................................................................... 90,312
6,100 SCM Microsystems, Inc.*................................................................. 380,487
-----------
1,330,799
-----------
CONSUMER SERVICES (0.4%)
16,735 Coinmach Laundry Corp.*................................................................. 391,181
-----------
DRUGS (0.2%)
5,000 Medicis Pharmaceutical Corp. (Class A)*................................................. 181,250
-----------
EDUCATION (1.4%)
16,000 Education Management Corp.*............................................................. 526,000
15,000 School Specialty, Inc.*................................................................. 245,625
15,000 Sylvan Learning Systems, Inc.*.......................................................... 491,250
-----------
1,262,875
-----------
ELECTRICAL EQUIPMENT (2.5%)
17,266 AFC Cable Systems, Inc.*................................................................ 612,943
24,900 EFTC Corp.*............................................................................. 323,700
7,100 Micrel, Inc.*........................................................................... 230,750
23,000 National Computer Systems, Inc.......................................................... 549,125
6,500 Pittway Corp. (Class A)................................................................. 480,187
-----------
2,196,705
-----------
ENTERTAINMENT & LEISURE TIME (2.1%)
20,000 Cinar Films, Inc. (Class B) (Canada)*................................................... 370,000
5,000 Medialink Worldwide Inc.*............................................................... 103,750
20,000 Oakley, Inc.*........................................................................... 260,000
12,500 Pinnacle Systems, Inc.*................................................................. 398,437
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
26,000 Royal Olympic Cruise Lines Inc.*........................................................ $ 260,000
16,600 T-HQ, Inc.*............................................................................. 506,300
-----------
1,898,487
-----------
ENVIRONMENTAL (0.6%)
38,000 ITEQ, Inc.*............................................................................. 277,875
16,800 TETRA Technologies, Inc.*............................................................... 277,200
-----------
555,075
-----------
FINANCE (1.0%)
7,000 FINOVA Group, Inc....................................................................... 396,375
4,000 HealthCare Financial Partners, Inc.*.................................................... 245,000
36,000 Medaphis Corp.*......................................................................... 216,000
-----------
857,375
-----------
FINANCIAL SERVICES (0.9%)
10,000 Allied Capital Corp..................................................................... 245,000
13,700 Headlands Mortgage Co.*................................................................. 256,875
20,000 Southern Pacific Funding Corp.*......................................................... 313,750
-----------
815,625
-----------
FOOD PROCESSING (0.4%)
11,000 Smithfield Foods, Inc.*................................................................. 331,375
-----------
FOOD WHOLESALERS (1.2%)
10,000 Aurora Foods Inc.*...................................................................... 211,250
9,300 Earthgrains Co.......................................................................... 519,637
17,000 Ralcorp Holdings, Inc.*................................................................. 320,875
-----------
1,051,762
-----------
FOREST PRODUCTS, PAPER & PACKING (0.4%)
16,000 Buckeye Technologies Inc.*.............................................................. 377,000
-----------
HEALTHCARE SERVICES (2.0%)
8,000 Access Health, Inc.*.................................................................... 204,000
20,000 Atria Communities, Inc.*................................................................ 343,750
6,000 Integrated Health Services, Inc......................................................... 225,000
20,000 MedPartners, Inc.*...................................................................... 160,000
20,000 PhyCor, Inc.*........................................................................... 330,000
14,000 Trigon Healthcare, Inc.*................................................................ 506,625
-----------
1,769,375
-----------
HOME BUILDING (0.8%)
10,000 Crossmann Communities, Inc.*............................................................ 303,750
20,000 D.R. Horton, Inc........................................................................ 417,500
-----------
721,250
-----------
HOTELS/MOTELS (0.0%)
4,000 U.S. Franchise Systems, Inc. (Class A)*................................................. 32,250
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
69
<PAGE>
DEVELOPING GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
INSURANCE (2.2%)
6,000 CMAC Investment Corp.................................................................... $ 369,000
7,282 Delphi Financial Group, Inc. (Class A)*................................................. 410,068
17,000 ESG Re Ltd.............................................................................. 367,625
5,600 Executive Risk, Inc..................................................................... 413,000
7,500 Fremont General Corp.................................................................... 406,406
-----------
1,966,099
-----------
INTERNET (1.1%)
4,000 Excite, Inc.*........................................................................... 374,000
7,500 Lycos, Inc.*............................................................................ 564,844
-----------
938,844
-----------
MACHINERY & MACHINE TOOLS (0.2%)
11,000 Citation Corp.*......................................................................... 219,312
-----------
MEDIA GROUP (1.6%)
10,000 Jacor Communications, Inc.*............................................................. 590,000
30,000 Outdoor Systems, Inc.*.................................................................. 840,000
-----------
1,430,000
-----------
MEDICAL EQUIPMENT (1.3%)
10,000 Inhale Therapeutic Systems*............................................................. 247,500
21,100 Millennium Pharmaceuticals, Inc.*....................................................... 298,037
45,100 Orthofix International N.V.*............................................................ 580,662
-----------
1,126,199
-----------
MEDICAL PRODUCTS & SUPPLIES (2.7%)
11,000 Bard (C.R.), Inc........................................................................ 418,687
25,000 Cytyc Corp.*............................................................................ 407,812
15,700 Horizon Medical Products, Inc.*......................................................... 141,300
11,500 Osteotech, Inc.*........................................................................ 201,250
12,000 STERIS Corp.*........................................................................... 761,250
15,500 Xomed Surgical Products, Inc.*.......................................................... 476,625
-----------
2,406,924
-----------
MEDICAL SERVICES (0.9%)
25,000 Oxford Health Plans, Inc.*.............................................................. 382,813
11,333 Total Renal Care Holdings, Inc.*........................................................ 390,989
-----------
773,802
-----------
OFFICE EQUIPMENT & SUPPLIES (1.3%)
7,000 Consolidated Graphics, Inc.*............................................................ 413,000
34,400 Mail-Well, Inc.*........................................................................ 746,050
-----------
1,159,050
-----------
OIL & GAS DRILLING (2.0%)
7,500 Cliffs Drilling Co.*.................................................................... 246,094
13,000 Dril-Quip, Inc.*........................................................................ 341,250
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
8,500 Stolt Comex Seaway, S.A. (ADR) (United Kingdom)*........................................ $ 146,625
17,000 Stolt Comex Seaway, S.A. (United Kingdom)*.............................................. 327,250
14,000 Tuboscope Inc.*......................................................................... 276,500
8,100 Veritas DGC Inc.*....................................................................... 404,494
-----------
1,742,213
-----------
OIL - EXPLORATION & PRODUCTION (0.9%)
25,175 Basin Exploration, Inc.*................................................................ 443,709
16,000 Energen Corp............................................................................ 322,000
-----------
765,709
-----------
PERSONAL PRODUCTS (0.7%)
15,000 Twinlab Corp.*.......................................................................... 655,313
-----------
PHARMACEUTICALS (0.1%)
2,100 Schein Pharmaceutical, Inc.*............................................................ 55,913
-----------
PUBLISHING (0.3%)
17,000 CMP Media Inc. (Class A)*............................................................... 289,000
-----------
REAL ESTATE INVESTMENT TRUST (1.1%)
15,565 Golf Trust of America, Inc.............................................................. 535,047
11,400 OMEGA Healthcare Investors, Inc......................................................... 400,425
-----------
935,472
-----------
RECREATION (0.1%)
8,600 American Skiing Co.*.................................................................... 111,800
-----------
RESTAURANTS (0.5%)
14,500 Friendly Ice Cream Corp.*............................................................... 242,875
10,000 Triarc Co., Inc.*....................................................................... 219,375
-----------
462,250
-----------
RETAIL - DEPARTMENT STORES (0.5%)
17,500 Elder-Beerman Stores Corp.*............................................................. 467,031
-----------
RETAIL - GENERAL MERCHANDISE (0.8%)
11,300 Cost Plus, Inc.*........................................................................ 336,175
12,200 Linens 'N Things, Inc.*................................................................. 372,863
-----------
709,038
-----------
RETAIL - SPECIALTY (7.6%)
25,900 1-800 CONTACTS, Inc.*................................................................... 391,738
30,000 Baker (J.), Inc......................................................................... 345,000
17,500 Burlington Coat Factory Warehouse Corp.................................................. 393,750
25,000 Corporate Express, Inc.*................................................................ 315,625
15,100 Finish Line, Inc. (Class A)*............................................................ 422,800
24,300 Fossil, Inc.*........................................................................... 604,463
28,775 Garden Ridge Corp.*..................................................................... 557,516
15,000 Genesco Inc.*........................................................................... 244,688
15,200 Goody's Family Clothing, Inc.*.......................................................... 829,350
15,900 Guitar Center, Inc.*.................................................................... 478,988
24,700 Micro Warehouse, Inc.*.................................................................. 379,763
32,700 PETsMART, Inc.*......................................................................... 325,978
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
70
<PAGE>
DEVELOPING GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
10,100 Schein (Henry), Inc.*................................................................... $ 462,075
24,100 Sunglass Hut International, Inc.*....................................................... 265,100
10,000 Watsco, Inc............................................................................. 351,875
11,000 White Cap Industries, Inc.*............................................................. 195,250
10,000 Wolverine World Wide, Inc............................................................... 216,875
-----------
6,780,834
-----------
SEMICONDUCTORS (1.5%)
44,300 Aeroflex Inc.*.......................................................................... 459,613
29,400 Vitesse Semiconductor Corp.*............................................................ 907,725
-----------
1,367,338
-----------
TELECOMMUNICATION EQUIPMENT (3.6%)
30,300 ANTEC Corp.*............................................................................ 702,581
15,000 Aspect Telecommunications Corp.*........................................................ 410,625
28,600 Boston Communications Group, Inc.*...................................................... 246,675
20,200 FORE Systems, Inc.*..................................................................... 534,038
15,000 GeoTel Communications Corp.*............................................................ 605,625
63,700 International FiberCom, Inc.*........................................................... 553,394
10,200 SmarTalk TeleServices, Inc.*............................................................ 144,075
-----------
3,197,013
-----------
TELECOMMUNICATIONS (6.6%)
10,782 CFW Communications Co................................................................... 250,682
10,000 Dycom Industries, Inc.*................................................................. 337,500
22,000 e. Spire Communications, Inc.*.......................................................... 496,375
8,900 ICG Communications, Inc.*............................................................... 324,850
15,000 ITC DeltaCom, Inc.*..................................................................... 640,313
10,100 IXC Communications, Inc.*............................................................... 487,325
9,900 McLeodUSA, Inc. (Class A)*.............................................................. 384,863
20,000 Metromedia Fiber Network, Inc. (Class A)*............................................... 927,500
20,000 MetroNet Communications Corp. (Class B) (Canada)*....................................... 560,000
18,000 NEXTLINK Communications, Inc. (Class A)*................................................ 680,625
15,000 SkyTel Communications Inc.*............................................................. 350,625
10,000 WinStar Communications, Inc.*........................................................... 429,375
-----------
5,870,033
-----------
TRANSPORTATION (0.4%)
10,000 Aviation Sales Co.*..................................................................... 396,250
-----------
UTILITIES - ELECTRIC (0.4%)
12,000 CalEnergy Co., Inc.*.................................................................... 360,750
-----------
WIRELESS COMMUNICATION (1.1%)
34,300 Clearnet Communications Inc. (Class A) (Canada)*........................................ 373,013
31,250 Vanguard Cellular Systems, Inc. (Class A)*.............................................. 587,891
-----------
960,904
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $65,696,102)........................................................... 81,386,487
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (9.0%)
U.S. GOVERNMENT AGENCY (a) (8.4%)
$ 7,500 Federal Home Loan Mortgage Corp. 5.85% due 07/01/98 (AMORTIZED COST $7,500,000)......... $ 7,500,000
-----------
REPURCHASE AGREEMENT (0.6%)
494 The Bank of New York 5.50% due 07/01/98 (dated 06/30/98; proceeds $493,838) (b)
(IDENTIFIED COST $493,763)............................................................ 493,763
-----------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $7,993,763)............................................................ 7,993,763
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $73,689,865) (C).......................................................... 100.5 % 89,380,250
LIABILITIES IN EXCESS OF OTHER ASSETS...................................................... (0.5) (455,556)
------ ------------
NET ASSETS................................................................................. 100.0 % $ 88,924,694
------ ------------
------ ------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $238,215 U.S. Treasury Bill 0.00% due 11/27/98 valued at
$233,237 and $264,797 U.S. Treasury Note 6.25% due 03/31/99 valued at
$270,401.
(c) The aggregate cost for federal income tax purposes approximates indentified
cost. The aggregate gross unrealized appreciation is $18,622,129 and the
aggregate gross unrealized depreciation is $2,931,744, resulting in net
unrealized appreciation of $15,690,385.
SEE NOTES TO FINANCIAL STATEMENTS
71
<PAGE>
EMERGING MARKETS
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON AND PREFERRED STOCKS, RIGHTS AND WARRANTS (85.4%)
ARGENTINA (5.3%)
BANKING
7,627 Banco de Galicia y Buenos Aires S.A. de C.V. (Class B) (ADR)........................... $ 138,239
-----------
MULTI-INDUSTRY
23,402 Perez Companc S.A. (Class B)........................................................... 117,496
-----------
OIL & GAS
7,175 Yacimentos Petroliferos Fiscales S.A. (ADR)............................................ 215,698
-----------
STEEL
36,485 Siderca S.A. (Class A)................................................................. 62,034
-----------
TELECOMMUNICATIONS
5,380 Telecom Argentina Stet - France Telecom S.A. (Class B) (ADR)........................... 160,391
6,230 Telefonica de Argentina S.A. (ADR)..................................................... 202,086
-----------
362,477
-----------
TOTAL ARGENTINA........................................................................ 895,944
-----------
BRAZIL (12.3%)
BREWERY
135,000 Companhia Cervejaria Brahma (Pref.) *.................................................. 84,047
-----------
ELECTRIC POWER
222,000 Light Servicos de Eletricidade S.A..................................................... 68,145
-----------
METALS & MINING
5,000 Companhia Vale do Rio Doce S.A. (Debentures)........................................... --
4,650 Companhia Vale do Rio Doce S.A. (Pref.)................................................ 92,477
-----------
92,477
-----------
MULTI-INDUSTRY
174,000 Itausa - Investmentos Itau S.A. (Pref.)................................................ 109,831
-----------
OIL & GAS
854,000 Petroleo Brasileiro S.A. (Pref.)....................................................... 158,764
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS
10,212 Telecomunicacoes Brasileiras S.A. (ADR)................................................ $ 1,115,023
950,000 Telecomunicacoes Brasileiras S.A....................................................... 75,573
13,285 Telecomunicacoes de Sao Paulo S.A.*.................................................... 2,009
624 Telecomunicacoes de Sao Paulo S.A. (Rights)............................................ 10
13,285 Telesp Celular S.A.*................................................................... 563
-----------
1,193,178
-----------
TEXTILES
30,000 Empresa Nacional de Comercio Redito e Participacoes S.A. (Pref.)....................... 75
-----------
UTILITIES - ELECTRIC
1,720,000 Centrais Electricas Brasileiras S.A. (Pref.)........................................... 51,756
1,720,000 Centrais Geradoras do Sul do Brasil S.A................................................ 2,484
10,702 Companhia Energetica de Minas Gerais S.A. (Pref.) (ADR)................................ 333,769
-----------
388,009
-----------
TOTAL BRAZIL........................................................................... 2,094,526
-----------
CHILE (3.1%)
FOOD, BEVERAGE, TOBACCO, & HOUSEHOLD PRODUCTS
8,140 Embotelladora Andina S.A. (Series A) (ADR)............................................. 142,450
3,540 Embotelladora Andina S.A. (Series B) (ADR)............................................. 55,313
2,600 Vina Concha Y Toro (ADR)............................................................... 74,100
-----------
271,863
-----------
PHARMACEUTICALS
5,170 Laboratorio Chile S.A. (ADR)........................................................... 74,319
-----------
TELECOMMUNICATIONS
3,008 Cia de Telecomunicaciones de Chile S.A. (ADR).......................................... 61,100
-----------
UTILITIES - GAS
5,800 Chilectra S.A. (ADR) - 144A**.......................................................... 122,165
-----------
TOTAL CHILE............................................................................ 529,447
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
72
<PAGE>
EMERGING MARKETS
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CHINA (0.6%)
ELECTRIC
347,000 Beijing Datang Power Generation Co., Ltd............................................... $ 97,428
-----------
COLOMBIA (2.1%)
BANKING
32,100 Bancolombia S.A. (ADR)................................................................. 351,094
-----------
EGYPT (0.9%)
BANKING
4,825 Commercial International Bank (GDR)* - 144A**.......................................... 52,351
-----------
MANUFACTURING
5,200 Suez Cement Co. (GDR) - 144A**......................................................... 94,380
-----------
TOTAL EGYPT............................................................................ 146,731
-----------
GREECE (6.2%)
BANKING
2,900 Alpha Credit Bank...................................................................... 234,766
2,900 Alpha Credit Bank (Rights)............................................................. 4,934
1,200 National Bank of Greece S.A............................................................ 153,564
-----------
393,264
-----------
BUILDING & CONSTRUCTION
3,600 Titan Cement Co. S.A................................................................... 235,191
-----------
OIL - INTEGRATED
6,000 Hellenic Petroleum S.A.*............................................................... 48,937
-----------
TELEPHONES
14,444 Hellenic Telecommunication Organization S.A............................................ 369,776
-----------
TOTAL GREECE........................................................................... 1,047,168
-----------
HONG KONG (1.5%)
COMPUTERS
134,000 Legend Holdings Ltd.................................................................... 40,218
-----------
MANUFACTURING
21,000 Shanghai Industrial Holdings Ltd....................................................... 49,474
-----------
TELECOMMUNICATIONS
98,000 China Telecom Ltd.*.................................................................... 170,154
-----------
TOTAL HONG KONG........................................................................ 259,846
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
HUNGARY (2.6%)
OIL - EXPLORATION & PRODUCTION
7,100 MOL Magyar Olaj-es Gazipari RT (GDR) - 144A**.......................................... $ 191,700
-----------
PHARMACEUTICALS
980 Gedeon Richter RT (GDR)* - 144A**...................................................... 78,400
-----------
TELECOMMUNICATIONS
6,000 Magyar Tavkozlesi RT (ADR)............................................................. 176,625
-----------
TOTAL HUNGARY.......................................................................... 446,725
-----------
INDIA (1.2%)
TELECOMMUNICATIONS
7,900 Mahanagar Telephone Nigam Ltd. (GDR)* 144**............................................ 82,753
12,100 Videsh Sanchar Nigam Ltd. (GDR)*....................................................... 129,470
-----------
TOTAL INDIA............................................................................ 212,223
-----------
ISRAEL (3.4%)
BANKING
105,150 Bank Hapoalim Ltd.*.................................................................... 318,228
-----------
RETAIL
7,615 Blue Square Chain Investments & Properties Ltd.*....................................... 93,846
-----------
TELECOMMUNICATION EQUIPMENT
4,470 NICE-Systems Ltd. (ADR)*............................................................... 167,346
-----------
TOTAL ISRAEL........................................................................... 579,420
-----------
MEXICO (14.2%)
BEVERAGES
4,200 Fomento Economico Mexicano, S.A. de C.V. (ADR)*........................................ 132,300
-----------
BEVERAGES - SOFT DRINKS
2,200 Coca-Cola Femsa S.A. de C.V. (ADR)..................................................... 38,225
-----------
BUILDING MATERIALS
23,100 Apasco S.A. de C.V..................................................................... 122,488
55,460 Cemex S.A. de C.V. (B Shares).......................................................... 244,549
-----------
367,037
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
73
<PAGE>
EMERGING MARKETS
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CONGLOMERATES
9,900 DESC S.A. de C.V. (Series B)........................................................... $ 50,616
25,400 Grupo Carso S.A. de C.V. (Series A1)................................................... 107,180
-----------
157,796
-----------
CONSUMER PRODUCTS
69,650 Kimberly-Clark de Mexico, S.A. de C.V. (A Shares)...................................... 246,862
-----------
FOOD, BEVERAGE, TOBACCO, & HOUSEHOLD PRODUCTS
66,200 Grupo Industrial Bimbo S.A. de C.V. (Series A)......................................... 134,499
17,100 Grupo Modelo S.A. de C.V. (Series C)................................................... 145,650
2,684 Panamerican Beverages, Inc. (Class A).................................................. 84,378
-----------
364,527
-----------
MEDIA GROUP
7,570 Grupo Televisa S.A. de C.V. (GDR)*..................................................... 284,821
-----------
RETAIL
165,900 Cifra S.A. de C.V. (Series C).......................................................... 231,127
22,300 Organizacion Soriana S.A. de C.V. (Series B)........................................... 63,729
-----------
294,856
-----------
STEEL & IRON
3,400 Tubos de Acero de Mexico S.A. de C.V. (ADR)*........................................... 43,562
-----------
TELECOMMUNICATIONS
10,270 Telefonos de Mexico S.A. de C.V. (Series L) (ADR)...................................... 493,602
-----------
TOTAL MEXICO........................................................................... 2,423,588
-----------
PERU (1.3%)
BREWERY
124,495 Union de Cervecerias Peruanas Backus & Johnston S.A. (T Shares)........................ 63,756
-----------
BUILDING MATERIALS
52,475 Cementos Lima, S.A..................................................................... 98,536
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
METALS & MINING
8,420 Compania de Minas Buenaventura S.A. (B Shares)......................................... $ 55,338
-----------
TOTAL PERU............................................................................. 217,630
-----------
PHILIPPINES (1.5%)
RESTAURANTS
190,000 Jollibee Foods Co.
(Warrants due 03/25/03)*............................................................. 58,373
-----------
TELECOMMUNICATIONS
8,900 Philippine Long Distance Telephone Co.................................................. 203,735
-----------
TOTAL PHILIPPINES...................................................................... 262,108
-----------
POLAND (4.2%)
BANKING
14,100 Bank Handlowy W. Warszawie............................................................. 269,092
3,400 Bank Przemyslowo-Handlowy S.A.......................................................... 243,937
-----------
513,029
-----------
CHEMICALS - DIVERSIFIED
24,000 Polifarb Cieszyn-Wroclaw S.A........................................................... 61,989
-----------
INVESTMENT COMPANIES
5,288 Powszechne Swiadectwo Udzialowe*....................................................... 141,135
-----------
TOTAL POLAND........................................................................... 716,153
-----------
PORTUGAL (1.1%)
BANKING
2,200 Banco Espirito Santo e Comercial de Lisboa, S.A........................................ 65,929
715 Banco Espirito Santo e Comercial de Lisboa, S.A. (Baby Shares)......................... 21,427
4,100 Banco Pinto & Sotto Mayor, S.A......................................................... 101,558
-----------
TOTAL PORTUGAL......................................................................... 188,914
-----------
RUSSIA (2.4%)
ELECTRIC
18,800 Mosenergo (ADR)........................................................................ 91,650
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
74
<PAGE>
EMERGING MARKETS
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
GAS
12,400 Gazprom (ADR) - 144A**................................................................. $ 137,330
-----------
OIL & GAS
3,260 Lukoil Holding Co. (ADR)............................................................... 106,765
-----------
TELECOMMUNICATIONS - LONG DISTANCE
5,400 Rostelecom (ADR)....................................................................... 72,225
-----------
TOTAL RUSSIA........................................................................... 407,970
-----------
SOUTH AFRICA (7.5%)
BANKING
8,205 Nedcor Ltd............................................................................. 171,534
-----------
BREWERY
12,489 South African Breweries Ltd............................................................ 255,647
-----------
FINANCE - DIVERSIFIED
5,760 Anglo American Corporation of South Africa Ltd......................................... 193,289
-----------
LIFE INSURANCE
7,460 Liberty Life Association of Africa Ltd................................................. 144,694
-----------
METALS & MINING
2,867 Anglogold Ltd.......................................................................... 114,969
-----------
MULTI-INDUSTRY
10,698 Barlow Ltd............................................................................. 56,093
113,600 New Clicks Holdings Ltd................................................................ 142,000
-----------
198,093
-----------
RETAIL
17,512 Truworths International Ltd.*.......................................................... 11,753
39,800 Wooltru Ltd............................................................................ 50,752
-----------
62,505
-----------
TELECOMMUNICATION EQUIPMENT
24,200 Allied Technologies Ltd................................................................ 54,003
82,147 New Africa Investments Ltd. (N Shares)................................................. 87,522
-----------
141,525
-----------
TOTAL SOUTH AFRICA..................................................................... 1,282,256
-----------
SOUTH KOREA (1.5%)
ELECTRONIC & ELECTRICAL EQUIPMENT
2,017 Samsung Electronics Co................................................................. 62,571
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
STEEL & IRON
5,610 Pohang Iron & Steel Co., Ltd........................................................... $ 184,832
-----------
TOTAL SOUTH KOREA...................................................................... 247,403
-----------
TAIWAN (6.2%)
COMPUTERS - PERIPHERAL EQUIPMENT
32,750 Asustek Computer Inc. (GDR)............................................................ 258,725
-----------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS
13,800 Taiwan Semiconductor Manufacturing Co., Ltd. (ADR)..................................... 232,875
-----------
INSURANCE
26,000 Fubon Insurance Co. (GDR) - 144A**..................................................... 451,750
-----------
INVESTMENT COMPANIES
12,000 The Taiwan Index Fund Ltd.............................................................. 120,000
-----------
TOTAL TAIWAN........................................................................... 1,063,350
-----------
THAILAND (0.1%)
REAL ESTATE INVESTMENT TRUST
58,954 MBK Properties & Development Public Co., Ltd........................................... 22,055
-----------
TURKEY (6.2%)
BANKING
1,600,000 Akbank T.A.S........................................................................... 51,688
2,400,000 Akbank T.A.S. (Receipts)*.............................................................. 77,533
4,000,000 Turkiye Is Bankasi (C Shares).......................................................... 161,527
-----------
290,748
-----------
DIVERSIFIED ENERGY
441,000 Koc Holdings A.S....................................................................... 86,143
-----------
HOUSEWARES
2,646,858 Trakya Cam Sanayii A.S................................................................. 109,370
-----------
PROPERTY - CASUALTY INSURANCE
3,600,000 Aksigorta A.S.......................................................................... 233,274
-----------
RETAIL
177,700 Migros Turk T.A.S...................................................................... 173,555
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
75
<PAGE>
EMERGING MARKETS
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS
620,000 Netas Northern Electric Telekomunikasyon A.S.*......................................... $ 165,358
-----------
TOTAL TURKEY........................................................................... 1,058,448
-----------
VIETNAM (0.0%)
INVESTMENT COMPANIES
1,800 Lazard Vietnam Fund Ltd................................................................ --
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL COMMON AND PREFERRED STOCKS, RIGHTS AND WARRANTS
(IDENTIFIED COST $16,565,403).............................................................. 85.4 % 14,550,427
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................................. 14.6 2,496,988
------ ------------
NET ASSETS................................................................................. 100.0 % $ 17,047,415
------ ------------
------ ------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
GDR Global Depository Receipt.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $830,025 and the
aggregate gross unrealized depreciation is $2,845,001, resulting in net
unrealized depreciation of $2,014,976.
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JUNE 30, 1998:
<TABLE>
<CAPTION>
CONTRACTS TO IN EXCHANGE DELIVERY UNREALIZED
RECEIVE FOR DATE DEPRECIATION
- -------------------------------------------------------------------
<S> <C> <C> <C>
$ 46,446 GRD 14,172,933 07/03/98 $ (72)
$ 10,272 THB 435,531 07/03/98 (73)
-----
Total unrealized depreciation................ $ (145)
-----
-----
</TABLE>
CURRENCY ABBREVIATIONS:
<TABLE>
<S> <C>
GRD Greek Drachma.
THB Thai Bat.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
76
<PAGE>
EMERGING MARKETS
SUMMARY OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Banking............................................................................ $ 2,417,401 14.2 %
Beverages.......................................................................... 132,300 0.8
Beverages - Soft Drinks............................................................ 38,225 0.2
Brewery............................................................................ 403,450 2.4
Building & Construction............................................................ 235,191 1.4
Building Materials................................................................. 465,573 2.7
Chemicals - Diversified............................................................ 61,989 0.4
Computers.......................................................................... 40,218 0.2
Computers - Peripheral Equipment................................................... 258,725 1.5
Conglomerates...................................................................... 157,796 0.9
Consumer Products.................................................................. 246,862 1.5
Diversified Energy................................................................. 86,143 0.5
Electric........................................................................... 189,078 1.1
Electric Power..................................................................... 68,145 0.4
Electronic & Electrical Equipment.................................................. 62,571 0.4
Electronics - Semiconductors/
Components....................................................................... 232,875 1.4
Finance - Diversified.............................................................. 193,289 1.1
Food, Beverage, Tobacco & Household Products....................................... 636,390 3.7
Gas................................................................................ 137,330 0.8
Housewares......................................................................... 109,370 0.6
Insurance.......................................................................... 451,750 2.7
Investment Companies............................................................... 261,135 1.5
Life Insurance..................................................................... 144,694 0.9
Manufacturing...................................................................... 143,854 0.9
Media Group........................................................................ 284,821 1.7
Metals & Mining.................................................................... 262,784 1.5
Multi-Industry..................................................................... 425,420 2.5
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Oil & Gas.......................................................................... $ 481,227 2.8 %
Oil - Exploration & Production..................................................... 191,700 1.1
Oil - Integrated................................................................... 48,937 0.3
Pharmaceuticals.................................................................... 152,719 0.9
Property - Casualty
Insurance........................................................................ 233,274 1.4
Real Estate Investment Trust....................................................... 22,055 0.1
Restaurants........................................................................ 58,373 0.3
Retail............................................................................. 624,762 3.7
Steel.............................................................................. 62,034 0.4
Steel & Iron....................................................................... 228,394 1.3
Telecommunication
Equipment........................................................................ 308,871 1.8
Telecommunications................................................................. 3,038,452 17.8
Telecommunications - Long Distance................................................. 72,225 0.4
Telephones......................................................................... 369,776 2.2
Textiles........................................................................... 75 0.0
Utilities - Electric............................................................... 388,009 2.3
Utilities - Gas.................................................................... 122,165 0.7
----------- ---
$14,550,427 85.4 %
----------- ---
----------- ---
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Common Stocks...................................................................... $13,656,391 80.1 %
Preferred Stocks................................................................... 830,719 4.9
Rights & Warrants.................................................................. 63,317 0.4
----------- ---
$14,550,427 85.4 %
----------- ---
----------- ---
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
77
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
JUNE 30, 1998 (UNAUDITED)
NORTH
AMERICAN
MONEY GOVERNMENT DIVERSIFIED BALANCED
MARKET SECURITIES INCOME GROWTH UTILITIES
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
ASSETS:
Investments in
securities, at
value*............... $ 91,687,280 $6,037,903 $76,666,419 $ 94,043,015 $ 64,605,087
Cash................... 19,465 108,007 428,790** 59,471 --
Receivable for:
Investments sold... -- -- 540,008 58,448 --
Shares of
beneficial
interest sold.... 487,848 8,894 49,453 194,275 74,921
Dividends.......... -- -- -- 51,495 95,466
Interest........... 2,197 28,218 1,357,519 327,952 29,654
Foreign withholding
taxes
reclaimed........ -- -- -- -- 11,448
Compensated forward
foreign currency
contracts........ -- -- 43,912 -- --
Unrealized appreciation
on open forward
foreign currency
contracts............ -- -- 71,881 -- --
Prepaid expenses and
other assets......... 4,667 64 100 18,835 23
Deferred organizational
expenses............. 2,184 2,184 2,184 2,184 2,184
Receivable from
affiliate............ -- -- -- -- --
------------ ----------- ------------ ------------ ------------
TOTAL ASSETS...... 92,203,641 6,185,270 79,160,266 94,755,675 64,818,783
------------ ----------- ------------ ------------ ------------
LIABILITIES:
Payable for:
Investments
purchased........ -- -- 1,048,876 1,184,983 514,313
Shares of
beneficial
interest
repurchased...... 412,774 9,770 17,166 4,238 16,724
Compensated forward
foreign currency
contracts........ -- -- 143,130 -- --
Investment
management
fees............. 39,893 3,401 26,750 47,900 35,381
Payable to bank........ -- -- 4,284 -- --
Unrealized depreciation
on open forward
foreign currency
contracts............ -- -- 90,004 -- --
Accrued expenses and
other payables....... 15,583 12,013 18,505 18,557 11,802
------------ ----------- ------------ ------------ ------------
TOTAL
LIABILITIES....... 468,250 25,184 1,348,715 1,255,678 578,220
------------ ----------- ------------ ------------ ------------
NET ASSETS:
Paid-in-capital........ 91,735,326 6,108,904 77,946,790 77,298,504 47,726,273
Accumulated
undistributed net
investment income
(loss)............... 65 24,834 497,517 217,276 122,522
Accumulated
undistributed net
realized gain
(loss)............... -- (7,189) (803,026) 12,679,370 992,260
Net unrealized
appreciation
(depreciation)....... -- 33,537 170,270 3,304,847 15,399,508
------------ ----------- ------------ ------------ ------------
NET ASSETS........ $ 91,735,391 $6,160,086 $77,811,551 $ 93,499,997 $ 64,240,563
------------ ----------- ------------ ------------ ------------
------------ ----------- ------------ ------------ ------------
*IDENTIFIED
COST.............. $ 91,687,280 $6,004,366 $76,475,084 $ 90,738,168 $ 49,205,579
------------ ----------- ------------ ------------ ------------
------------ ----------- ------------ ------------ ------------
SHARES OF
BENEFICIAL
INTEREST
OUTSTANDING....... 91,735,326 605,279 7,632,646 5,803,938 3,710,104
------------ ----------- ------------ ------------ ------------
------------ ----------- ------------ ------------ ------------
NET ASSET VALUE PER
SHARE
(UNLIMITED AUTHORIZED
SHARES OF $.01 PAR
VALUE)................. $1.00 $10.18 $10.19 $16.11 $17.32
------------ ----------- ------------ ------------ ------------
------------ ----------- ------------ ------------ ------------
</TABLE>
- ------------------
** Including foreign currency of $1,792 and $772,555, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
78
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
JUNE 30, 1998 (UNAUDITED)
DIVIDEND VALUE-ADDED AMERICAN MID-CAP GLOBAL DEVELOPING EMERGING
GROWTH MARKET GROWTH VALUE GROWTH EQUITY GROWTH MARKETS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments in
securities, at
value*............... $651,857,603 $168,472,052 $49,861,124 $305,374,916 $28,168,877 $124,046,166 $89,380,250 $14,550,427
Cash................... -- -- -- -- -- 772,555** -- 2,454,389
Receivable for:
Investments sold... -- 1,384,456 427,738 -- 223,463 -- 1,268,723 56,863
Shares of
beneficial
interest sold.... 720,155 113,858 76,517 204,659 75,525 117,199 28,723 6,505
Dividends.......... 986,020 176,374 43,816 108,024 3,127 218,724 11,735 25,165
Interest........... 913 709 336 74,430 28 530 75 18,144
Foreign withholding
taxes
reclaimed........ -- -- -- 35,126 -- 123,136 -- --
Compensated forward
foreign currency
contracts........ -- -- -- -- -- -- -- --
Unrealized appreciation
on open forward
foreign currency
contracts............ -- -- -- -- -- -- -- --
Prepaid expenses and
other assets......... 9,847 324 15,934 892 8 8 211 11,674
Deferred organizational
expenses............. 2,184 2,184 2,184 2,184 -- 2,184 2,184 2,184
Receivable from
affiliate............ -- -- -- -- 10,235 -- -- --
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
TOTAL ASSETS...... 653,576,722 170,149,957 50,427,649 305,800,231 28,481,263 125,280,502 90,691,901 17,125,351
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
LIABILITIES:
Payable for:
Investments
purchased........ 695,032 1,081,374 714,927 704,975 634,402 1,122,555 1,682,275 --
Shares of
beneficial
interest
repurchased...... 159,060 26,725 2,244 17,948 5,792 16,299 33,467 38,738
Compensated forward
foreign currency
contracts........ -- -- -- -- -- -- -- --
Investment
management
fees............. 335,115 72,867 33,413 158,088 -- 106,643 37,198 19,473
Payable to bank........ 148 -- -- -- -- -- -- --
Unrealized depreciation
on open forward
foreign currency
contracts............ -- -- -- -- -- -- -- 145
Accrued expenses and
other payables....... 13,639 25,158 59,358 21,088 10,243 29,740 14,267 19,580
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
TOTAL
LIABILITIES....... 1,202,994 1,206,124 809,942 902,099 650,437 1,275,237 1,767,207 77,936
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
NET ASSETS:
Paid-in-capital........ 510,790,870 125,693,902 39,093,045 225,649,584 24,531,980 103,022,300 67,941,609 21,287,039
Accumulated
undistributed net
investment income
(loss)............... 788,824 165,041 (3,965) 180,700 15,671 168,799 10,910 40,338
Accumulated
undistributed net
realized gain
(loss)............... 23,756,028 1,696,537 8,786,109 27,693,189 236,494 (245,817) 5,281,790 (2,262,684)
Net unrealized
appreciation
(depreciation)....... 117,038,006 41,388,353 1,742,518 51,374,659 3,046,681 21,059,983 15,690,385 (2,017,278)
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
NET ASSETS........ $652,373,728 $168,943,833 $49,617,707 $304,898,132 $27,830,826 $124,005,265 $88,924,694 $17,047,415
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
*IDENTIFIED
COST.............. $534,819,597 $127,083,699 $48,118,606 $254,000,264 $25,122,196 $102,982,518 $73,689,865 $16,565,403
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
SHARES OF
BENEFICIAL
INTEREST
OUTSTANDING....... 30,818,898 8,829,587 2,786,278 14,182,221 2,259,041 8,520,955 4,247,673 1,905,085
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
NET ASSET VALUE PER
SHARE
(UNLIMITED AUTHORIZED
SHARES OF $.01 PAR
VALUE)................. $21.17 $19.13 $17.81 $21.50 $12.32 $14.55 $20.93 $8.95
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
</TABLE>
79
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
NORTH
AMERICAN
MONEY GOVERNMENT DIVERSIFIED BALANCED
MARKET SECURITIES INCOME GROWTH UTILITIES
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
INCOME
Interest............... $ 2,371,160 $162,812 $ 2,889,569 $ 956,917 $ 170,904
Dividends.............. -- -- -- 448,275 746,669*
----------- -------------- ------------ ----------- ------------
TOTAL INCOME...... 2,371,160 162,812 2,889,569 1,405,192 917,573
----------- -------------- ------------ ----------- ------------
EXPENSES
Investment management
fee.................. 209,158 18,151 139,526 266,299 186,939
Professional fees...... 8,135 10,268 8,261 15,725 6,894
Custodian fees......... 5,390 5,216 15,060 12,198 5,948
Shareholder reports and
notices.............. 7,519 821 3,744 3,079 3,649
Trustees' fees and
expenses............. 637 -- 282 348 329
Transfer agent fees and
expenses............. 248 248 248 248 248
Organizational
expenses............. 796 796 796 796 796
Other.................. 730 763 4,645 2,357 765
----------- -------------- ------------ ----------- ------------
TOTAL EXPENSES.... 232,613 36,263 172,562 301,050 205,568
Less: amounts
reimbursed/waived.... -- -- -- -- --
----------- -------------- ------------ ----------- ------------
NET EXPENSES...... 232,613 36,263 172,562 301,050 205,568
----------- -------------- ------------ ----------- ------------
NET INVESTMENT
INCOME (LOSS)..... 2,138,547 126,549 2,717,007 1,104,142 712,005
----------- -------------- ------------ ----------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS):
Net realized gain
(loss) on:
Investments........ -- 3,162 (517,683) 12,708,577 992,329
Foreign exchange
transactions..... -- -- 88,498 -- --
----------- -------------- ------------ ----------- ------------
NET GAIN (LOSS)... -- 3,162 (429,185) 12,708,577 992,329
----------- -------------- ------------ ----------- ------------
Net change in
unrealized
appreciation/depreciation
on:
Investments........ -- (5,920) (133,016) (5,647,976) 4,647,078
Translation of
forward foreign
currency
contracts, other
assets and
liabilities
denominated in
foreign
currencies....... -- -- (79,843) -- --
----------- -------------- ------------ ----------- ------------
NET APPRECIATION
(DEPRECIATION).... -- (5,920) (212,859) (5,647,976) 4,647,078
----------- -------------- ------------ ----------- ------------
NET GAIN (LOSS)... -- (2,758) (642,044) 7,060,601 5,639,407
----------- -------------- ------------ ----------- ------------
NET INCREASE
(DECREASE)............. $ 2,138,547 $123,791 $ 2,074,963 $ 8,164,743 $ 6,351,412
----------- -------------- ------------ ----------- ------------
----------- -------------- ------------ ----------- ------------
</TABLE>
- ------------------
* Net of foreign withholding tax of $16,422, $3,822, $32,063, $166, $124,931,
$1,402 and $11,154, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
80
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
DIVIDEND VALUE-ADDED AMERICAN MID-CAP GLOBAL DEVELOPING EMERGING
GROWTH MARKET GROWTH VALUE GROWTH EQUITY GROWTH MARKETS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
INCOME
Interest............... $ 160,728 $ 185,903 $ 47,527 $ 589,783 $ 49,125 $ 210,911 $ 182,243 $ 52,885
Dividends.............. 7,249,264 1,179,322* 209,979 844,876* 29,678* 1,256,769* 96,496* 209,419*
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
TOTAL INCOME...... 7,409,992 1,365,225 257,506 1,434,659 78,803 1,467,680 278,739 262,304
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
EXPENSES
Investment management
fee.................. 1,825,508 393,819 186,281 826,237 88,455 567,990 214,777 131,199
Professional fees...... 9,176 9,011 14,983 9,787 8,718 8,529 8,966 8,553
Custodian fees......... 16,531 14,474 10,249 23,196 12,472 28,635 17,993 26,330
Shareholder reports and
notices.............. 23,223 6,128 2,705 9,067 4,168 8,857 3,475 1,513
Trustees' fees and
expenses............. 3,982 653 45,483 1,136 -- 968 425 66
Transfer agent fees and
expenses............. 248 248 248 248 248 248 248 248
Organizational
expenses............. 796 796 796 796 -- 796 796 796
Other.................. 1,393 5,612 726 1,331 328 6,531 686 3,053
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
TOTAL EXPENSES.... 1,880,857 430,741 261,471 871,798 114,389 622,554 247,366 171,758
Less: amounts
reimbursed/waived.... -- -- -- -- (114,389) -- -- --
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
NET EXPENSES...... 1,880,857 430,741 261,471 871,798 -- 622,554 247,366 171,758
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
NET INVESTMENT
INCOME (LOSS)..... 5,529,135 934,484 (3,965) 562,861 78,803 845,126 31,373 90,546
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
NET REALIZED AND
UNREALIZED GAIN (LOSS):
Net realized gain
(loss) on:
Investments........ 24,254,342 1,807,914 8,835,101 24,634,735 502,450 1,090,762 5,387,450 (1,203,983)
Foreign exchange
transactions..... -- -- -- -- -- (2,311) -- (62,108)
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
NET GAIN (LOSS)... 24,254,342 1,807,914 8,835,101 24,634,735 502,450 1,088,451 5,387,450 (1,266,091)
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
Net change in
unrealized
appreciation/depreciation
on:
Investments........ 44,667,866 13,461,350 (4,322,513) 23,694,167 1,499,965 11,962,562 2,371,088 (3,240,622)
Translation of
forward foreign
currency
contracts, other
assets and
liabilities
denominated in
foreign
currencies....... -- -- -- 7 -- (1,494) -- 11,073
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
NET APPRECIATION
(DEPRECIATION).... 44,667,866 13,461,350 (4,322,513) 23,694,174 1,499,965 11,961,068 2,371,088 (3,229,549)
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
NET GAIN (LOSS)... 68,922,208 15,269,264 4,512,588 48,328,909 2,002,415 13,049,519 7,758,538 (4,495,640)
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
NET INCREASE
(DECREASE)............. $74,451,343 $16,203,748 $4,508,623 $48,891,770 $2,081,218 $13,894,645 $7,789,911 $(4,405,094)
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
</TABLE>
81
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET NORTH AMERICAN
--------------------------- GOVERNMENT SECURITIES
-------------------------------
FOR THE SIX
MONTHS ENDED FOR THE YEAR FOR THE SIX FOR THE YEAR
JUNE 30, ENDED MONTHS ENDED ENDED
1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
<S> <C> <C> <C> <C>
- ---------------------------------------------------- -------------------------------
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment
income............... $ 2,138,547 $ 4,711,014 $ 126,549 $ 219,391
Net realized gain
(loss)............... -- -- 3,162 (1,271)
Net change in
unrealized
appreciation/
depreciation......... -- -- (5,920) 44,134
------------ ------------ ------------- ---------------
NET INCREASE...... 2,138,547 4,711,014 123,791 262,254
------------ ------------ ------------- ---------------
DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment
income............... (2,138,545) (4,710,989) (117,591) (222,788)
Net realized gain...... -- -- -- --
------------ ------------ ------------- ---------------
TOTAL............. (2,138,545) (4,710,989) (117,591) (222,788)
------------ ------------ ------------- ---------------
TRANSACTIONS IN SHARES
OF BENEFICIAL INTEREST:
Net proceeds from
sales................ 59,542,377 120,256,057 1,834,434 1,648,694
Reinvestment of
dividends and
distributions........ 2,138,546 4,710,989 117,591 222,788
Cost of shares
repurchased.......... (53,990,928) (127,923,366) (889,586) (991,209)
------------ ------------ ------------- ---------------
NET INCREASE
(DECREASE)........ 7,689,995 (2,956,320) 1,062,439 880,273
------------ ------------ ------------- ---------------
TOTAL INCREASE
(DECREASE)........ 7,689,997 (2,956,295) 1,068,639 919,739
NET ASSETS:
Beginning of period.... 84,045,394 87,001,689 5,091,447 4,171,708
------------ ------------ ------------- ---------------
END OF PERIOD..... $ 91,735,391 $84,045,394 $ 6,160,086 $ 5,091,447
------------ ------------ ------------- ---------------
------------ ------------ ------------- ---------------
UNDISTRIBUTED NET
INVESTMENT INCOME...... $ 65 $ 63 $ 24,834 $ 15,876
------------ ------------ ------------- ---------------
------------ ------------ ------------- ---------------
SHARES ISSUED AND
REPURCHASED:
Sold................... 59,542,377 120,256,057 180,548 162,979
Issued in reinvestment
of dividends and
distributions........ 2,138,546 4,710,989 11,599 22,097
Repurchased............ (53,990,928) (127,923,366) (87,548) (98,049)
------------ ------------ ------------- ---------------
NET INCREASE
(DECREASE)............. 7,689,995 (2,956,320) 104,599 87,027
------------ ------------ ------------- ---------------
------------ ------------ ------------- ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
82
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BALANCED GROWTH UTILITIES
DIVERSIFIED INCOME ------------------------- -------------------------
--------------------------
FOR THE SIX FOR THE SIX
FOR THE SIX FOR THE MONTHS FOR THE MONTHS FOR THE
MONTHS ENDED YEAR ENDED YEAR ENDED YEAR
JUNE 30, ENDED JUNE 30, ENDED JUNE 30, ENDED
1998 DECEMBER 1998 DECEMBER 1998 DECEMBER
(UNAUDITED) 31, 1997 (UNAUDITED) 31, 1997 (UNAUDITED) 31, 1997
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------- -------------------------
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment income.... $ 2,717,007 $3,763,814 $1,104,142 $1,183,842 $ 712,005 $1,137,314
Net realized gain
(loss)................. (429,185) (326,813) 12,708,577 1,883,756 992,329 872,891
Net change in unrealized
appreciation/
depreciation........... (212,859) 431,079 (5,647,976) 5,626,407 4,647,078 8,023,362
------------ ----------- ----------- ----------- ----------- -----------
NET INCREASE........ 2,074,963 3,868,080 8,164,743 8,694,005 6,351,412 10,033,567
------------ ----------- ----------- ----------- ----------- -----------
DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment income.... (2,653,397) (3,642,497) (1,004,317) (1,157,698) (670,761) (1,156,425)
Net realized gain........ (99,334) (92,958) (1,884,145) (164,839) (698,541) (140,005)
------------ ----------- ----------- ----------- ----------- -----------
TOTAL............... (2,752,731) (3,735,455) (2,888,462) (1,322,537) (1,369,302) (1,296,430)
------------ ----------- ----------- ----------- ----------- -----------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from
sales.................. 19,850,664 37,352,457 19,184,112 32,245,427 13,024,788 12,711,349
Reinvestment of dividends
and distributions...... 2,752,731 3,735,455 2,888,462 1,322,537 1,369,302 1,296,430
Cost of shares
repurchased............ (6,401,077) (11,052,734) (5,172,294) (8,509,024) (5,901,582) (7,665,054)
------------ ----------- ----------- ----------- ----------- -----------
NET INCREASE
(DECREASE).......... 16,202,318 30,035,178 16,900,280 25,058,940 8,492,508 6,342,725
------------ ----------- ----------- ----------- ----------- -----------
TOTAL INCREASE
(DECREASE).......... 15,524,550 30,167,803 22,176,561 32,430,408 13,474,618 15,079,862
NET ASSETS:
Beginning of period...... 62,287,001 32,119,198 71,323,436 38,893,028 50,765,945 35,686,083
------------ ----------- ----------- ----------- ----------- -----------
END OF PERIOD....... $77,811,551 $62,287,001 $93,499,997 $71,323,436 $64,240,563 $50,765,945
------------ ----------- ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- ----------- -----------
UNDISTRIBUTED NET
INVESTMENT INCOME........ $ 497,517 $ 433,907 $ 217,276 $ 117,451 $ 122,522 $ 81,278
------------ ----------- ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- ----------- -----------
SHARES ISSUED AND
REPURCHASED:
Sold..................... 1,937,420 3,651,731 1,200,906 2,274,595 773,674 904,097
Issued in reinvestment of
dividends and
distributions.......... 269,443 366,945 180,481 93,933 81,434 95,848
Repurchased.............. (624,972) (1,079,349) (322,624) (598,705) (350,934) (551,585)
------------ ----------- ----------- ----------- ----------- -----------
NET INCREASE
(DECREASE)............... 1,581,891 2,939,327 1,058,763 1,769,823 504,174 448,360
------------ ----------- ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- ----------- -----------
</TABLE>
83
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
DIVIDEND GROWTH
--------------------------- VALUE-ADDED MARKET
-------------------------------
FOR THE SIX
MONTHS ENDED FOR THE YEAR FOR THE SIX FOR THE YEAR
JUNE 30, ENDED MONTHS ENDED ENDED
1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
<S> <C> <C> <C> <C>
- ---------------------------------------------------- -------------------------------
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment income
(loss)............... $ 5,529,135 $ 8,348,134 $ 934,484 $ 1,612,380
Net realized gain
(loss)............... 24,254,342 25,772,008 1,807,914 2,211,559
Net change in
unrealized
appreciation/depreciation... 44,667,866 50,279,373 13,461,350 20,050,469
------------ ------------ ------------- ---------------
NET INCREASE...... 74,451,343 84,399,515 16,203,748 23,874,408
------------ ------------ ------------- ---------------
DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment
income............... (5,524,897) (8,067,138) (939,378) (1,545,598)
Net realized gain...... (26,160,355) (13,688,414) (2,322,935) (214,735)
------------ ------------ ------------- ---------------
TOTAL............. (31,685,252) (21,755,552) (3,262,313) (1,760,333)
------------ ------------ ------------- ---------------
TRANSACTIONS IN SHARES
OF BENEFICIAL INTEREST:
Net proceeds from
sales................ 95,486,374 216,990,147 22,497,341 56,658,607
Reinvestment of
dividends and
distributions........ 31,685,257 21,755,552 3,262,313 1,760,333
Cost of shares
repurchased.......... (35,983,099) (41,071,424) (11,073,429) (12,733,322)
------------ ------------ ------------- ---------------
NET INCREASE...... 91,188,532 197,674,275 14,686,225 45,685,618
------------ ------------ ------------- ---------------
TOTAL INCREASE.... 133,954,623 260,318,238 27,627,660 67,799,693
NET ASSETS:
Beginning of period.... 518,419,105 258,100,867 141,316,173 73,516,480
------------ ------------ ------------- ---------------
END OF PERIOD..... $652,373,728 $518,419,105 $ 168,943,833 $141,316,173
------------ ------------ ------------- ---------------
------------ ------------ ------------- ---------------
UNDISTRIBUTED NET
INVESTMENT INCOME
(LOSS)................. $ 788,824 $ 784,586 $ 165,041 $ 169,935
------------ ------------ ------------- ---------------
------------ ------------ ------------- ---------------
SHARES ISSUED AND
REPURCHASED:
Sold................... 4,533,815 11,751,312 1,195,324 3,510,750
Issued in reinvestment
of dividends and
distributions........ 1,502,142 1,203,410 172,914 110,135
Repurchased............ (1,701,440) (2,163,103) (585,138) (765,113)
------------ ------------ ------------- ---------------
NET INCREASE........... 4,334,517 10,791,619 783,100 2,855,772
------------ ------------ ------------- ---------------
------------ ------------ ------------- ---------------
</TABLE>
- ------------------
* For the period January 21, 1997 (commencement of operations) through
December 31, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
84
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GLOBAL
AMERICAN VALUE MID-CAP GROWTH EQUITY
GROWTH --------------------------- -------------------------- ------------
----------------------------
FOR THE SIX FOR THE SIX FOR THE FOR THE SIX
FOR THE SIX FOR THE YEAR MONTHS ENDED FOR THE YEAR MONTHS ENDED YEAR MONTHS ENDED
MONTHS ENDED ENDED JUNE 30, ENDED JUNE 30, ENDED JUNE 30,
JUNE 30, 1998 DECEMBER 31, 1998 DECEMBER 31, 1998 DECEMBER 1998
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED) 31, 1997* (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------ ------------
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment income
(loss)................. $ (3,965) $ 39,493 $ 562,861 $ 722,602 $ 78,803 $ 156,690 $ 845,126
Net realized gain
(loss)................. 8,835,101 1,290,619 24,634,735 28,077,637 502,450 (41,862) 1,088,451
Net change in unrealized
appreciation/depreciation... (4,322,513) 4,281,360 23,694,174 18,351,924 1,499,965 1,546,716 11,961,068
------------- ------------ ------------ ------------ ------------ ----------- ------------
NET INCREASE........ 4,508,623 5,611,472 48,891,770 47,152,163 2,081,218 1,661,544 13,894,645
------------- ------------ ------------ ------------ ------------ ----------- ------------
DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment income.... -- (51,873) (548,686) (581,955) (82,880) (136,942) (986,332)
Net realized gain........ (1,299,815) (131,373) (24,703,905) (3,287,899) (224,094) -- (422,276)
------------- ------------ ------------ ------------ ------------ ----------- ------------
TOTAL............... (1,299,815) (183,246) (25,252,591) (3,869,854) (306,974) (136,942) (1,408,608)
------------- ------------ ------------ ------------ ------------ ----------- ------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from
sales.................. 9,186,533 28,816,261 45,211,568 83,771,943 8,894,906 20,630,739 20,829,867
Reinvestment of dividends
and distributions...... 1,299,815 183,246 25,252,591 3,869,854 306,974 136,942 1,408,608
Cost of shares
repurchased............ (4,388,562) (12,331,431) (19,218,840) (21,814,303) (2,381,333) (3,056,248) (12,948,713)
------------- ------------ ------------ ------------ ------------ ----------- ------------
NET INCREASE........ 6,097,786 16,668,076 51,245,319 65,827,494 6,820,547 17,711,433 9,289,762
------------- ------------ ------------ ------------ ------------ ----------- ------------
TOTAL INCREASE...... 9,306,594 22,096,302 74,884,498 109,109,803 8,594,791 19,236,035 21,775,799
NET ASSETS:
Beginning of period...... 40,311,113 18,214,811 230,013,634 120,903,831 19,236,035 -- 102,229,466
------------- ------------ ------------ ------------ ------------ ----------- ------------
END OF PERIOD....... $ 49,617,707 $40,311,113 $304,898,132 $230,013,634 $27,830,826 $19,236,035 $124,005,265
------------- ------------ ------------ ------------ ------------ ----------- ------------
------------- ------------ ------------ ------------ ------------ ----------- ------------
UNDISTRIBUTED NET
INVESTMENT INCOME
(LOSS)................... $ (3,965) -- $ 180,700 $ 166,525 $ 15,671 $ 19,748 $ 168,799
------------- ------------ ------------ ------------ ------------ ----------- ------------
------------- ------------ ------------ ------------ ------------ ----------- ------------
SHARES ISSUED AND
REPURCHASED:
Sold..................... 519,289 1,878,945 2,140,326 4,775,976 746,901 1,956,099 1,471,727
Issued in reinvestment of
dividends and
distributions.......... 75,659 12,436 1,263,465 238,084 26,533 12,916 97,075
Repurchased.............. (242,965) (801,820) (902,205) (1,234,165) (201,620) (281,788) (930,549)
------------- ------------ ------------ ------------ ------------ ----------- ------------
NET INCREASE............. 351,983 1,089,561 2,501,586 3,779,895 571,814 1,687,227 638,253
------------- ------------ ------------ ------------ ------------ ----------- ------------
------------- ------------ ------------ ------------ ------------ ----------- ------------
<CAPTION>
FOR THE
YEAR
ENDED
DECEMBER
31, 1997
<S> <C>
- -------------------------
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment income
(loss)................. $ 778,723
Net realized gain
(loss)................. 206,968
Net change in unrealized
appreciation/depreciation 4,447,711
-----------
NET INCREASE........ 5,433,402
-----------
DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment income.... (731,065)
Net realized gain........ (128,304)
-----------
TOTAL............... (859,369)
-----------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from
sales.................. 51,953,057
Reinvestment of dividends
and distributions...... 859,369
Cost of shares
repurchased............ (14,403,393)
-----------
NET INCREASE........ 38,409,033
-----------
TOTAL INCREASE...... 42,983,066
NET ASSETS:
Beginning of period...... 59,246,400
-----------
END OF PERIOD....... $102,229,466
-----------
-----------
UNDISTRIBUTED NET
INVESTMENT INCOME
(LOSS)................... $ 310,005
-----------
-----------
SHARES ISSUED AND
REPURCHASED:
Sold..................... 4,006,028
Issued in reinvestment of
dividends and
distributions.......... 66,503
Repurchased.............. (1,101,520)
-----------
NET INCREASE............. 2,971,011
-----------
-----------
</TABLE>
85
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
EMERGING MARKETS
DEVELOPING GROWTH ------------------------
--------------------------
FOR THE SIX
FOR THE SIX MONTHS FOR THE
MONTHS ENDED FOR THE YEAR ENDED YEAR
JUNE 30, ENDED JUNE 30, ENDED
1998 DECEMBER 31, 1998 DECEMBER
(UNAUDITED) 1997 (UNAUDITED) 31, 1997
<S> <C> <C> <C> <C>
- -------------------------------------------------- ------------------------
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment
income............... $ 31,373 $ 181,401 $ 90,546 $ 120,967
Net realized gain
(loss)............... 5,387,450 2,009,657 (1,266,091) (594,755)
Net change in
unrealized
appreciation/depreciation... 2,371,088 6,889,489 (3,229,549) (156,630)
------------ ------------ ----------- -----------
NET INCREASE
(DECREASE)........ 7,789,911 9,080,547 (4,405,094) (630,418)
------------ ------------ ----------- -----------
DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment
income............... (56,544) (145,319) (135,716) (113,623)
Net realized gain...... (120,683) -- (48,815) --
------------ ------------ ----------- -----------
TOTAL............. (177,227) (145,319) (184,531) (113,623)
------------ ------------ ----------- -----------
TRANSACTIONS IN SHARES
OF BENEFICIAL INTEREST:
Net proceeds from
sales................ 8,910,944 32,654,294 2,344,168 13,701,773
Reinvestment of
dividends and
distributions........ 177,227 145,319 184,529 113,623
Cost of shares
repurchased.......... (10,466,573) (20,164,427) (4,706,292) (6,496,911)
------------ ------------ ----------- -----------
NET INCREASE
(DECREASE)........ (1,378,402) 12,635,186 (2,177,595) 7,318,485
------------ ------------ ----------- -----------
TOTAL INCREASE
(DECREASE)........ 6,234,282 21,570,414 (6,767,220) 6,574,444
NET ASSETS:
Beginning of period.... 82,690,412 61,119,998 23,814,635 17,240,191
------------ ------------ ----------- -----------
END OF PERIOD..... $ 88,924,694 $82,690,412 $17,047,415 $23,814,635
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
UNDISTRIBUTED NET
INVESTMENT INCOME...... $ 10,910 $ 36,082 $ 40,338 $ 85,508
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
SHARES ISSUED AND
REPURCHASED:
Sold................... 443,081 1,800,018 223,442 1,094,065
Issued in reinvestment
of dividends and
distributions........ 9,121 9,034 17,774 8,961
Repurchased............ (520,460) (1,113,498) (442,007) (536,332)
------------ ------------ ----------- -----------
NET INCREASE
(DECREASE)............. (68,258) 695,554 (200,791) 566,694
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
86
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Select Dimensions Investment Series (the "Fund"),
formerly Dean Witter Select Dimensions Investment Series, is registered under
the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The shares of the Fund will only be sold to
Hartford Life Insurance Company and ITT Hartford Life and Annuity Insurance
Company for allocation to certain of its separate accounts to fund variable
annuity contracts and variable life insurance policies they issue.
The Fund, which consists of 13 separate portfolios ("Portfolios"), was organized
on June 2, 1994 as a Massachusetts business trust and commenced operations on
November 9, 1994, with the exception of Mid-Cap Growth which commenced
operations on January 21, 1997.
The investment objectives of each Portfolio are as follows:
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
<C> <S>
Money Market Seeks high current income, preservation of capital and liquidity
by investing in short-term money market instruments.
North American Seeks to earn a high level of current income while maintaining
Government relatively low volatility of principal by primarily investing in
Securities investment grade fixed income securities issued or guaranteed by
the U.S., Canadian or Mexican governments.
Diversified Seeks, as a primary objective, to earn a high level of current
Income income and, as a secondary objective, to maximize total return,
but only to the extent consistent with its primary objective, by
equally allocating its assets among three separate groupings of
fixed income securities.
Balanced Seeks to achieve capital growth with reasonable current income by
Growth investing in common stock of companies which have a record of
(formerly paying dividends and have the potential for increasing dividends,
Balanced)* securities convertible into common stock and in investment grade
fixed income securities. Prior to March 2, 1998, the investment
objective was to achieve high total return through a combination
of income and capital appreciation by investing in a diversified
portfolio of common stocks and investment grade fixed income
securities.
Utilities Seeks to provide current income and long-term growth of income and
capital by investing in equity and fixed income securities of
companies in the public utilities industry.
Dividend Seeks to provide reasonable current income and long-term growth of
Growth income and capital by investing primarily in common stock of
companies with a record of paying dividends and the potential for
increasing dividends.
Value-Added Seeks to achieve a high level of total return on its assets
Market through a combination of capital appreciation and current income
by investing, on an equally-weighted basis, in a diversified
portfolio of common stocks of the companies which are represented
in the Standard & Poor's 500 Composite Stock Price Index.
</TABLE>
87
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
<C> <S>
Growth Seeks long-term growth of capital by investing primarily in common
(formerly Core stocks and securities convertible into common stocks issued by
Equity) domestic and foreign companies.
American Value Seeks long-term capital growth consistent with an effort to reduce
volatility by investing principally in common stock of companies
in industries which, at the time of the investment, are believed
to be undervalued in the marketplace.
Mid-Cap Seeks long-term capital appreciation by investing primarily in
Growth equity securities of "mid-cap" companies (that is, companies whose
equity market capitalization falls within the range of $250
million to $5 billion).
Global Equity Seeks a high level of total return on its assets primarily through
long-term capital growth and, to a lesser extent, from income,
through investments in all types of common stocks and equivalents
(such as convertible securities and warrants), preferred stocks
and bonds and other debt obligations of domestic and foreign
companies and governments and international organizations.
Developing Seeks long-term capital growth by investing primarily in common
Growth stocks of smaller and medium-sized companies that, in the opinion
of the Investment Manager, have the potential for growing more
rapidly than the economy and which may benefit from new products
or services, technological developments or changes in management.
Emerging Seeks long-term capital appreciation by investing primarily in
Markets equity securities of companies in emerging market countries. The
Portfolio may invest up to 35% of its total assets in high risk
fixed income securities that are rated below investment grade or
are unrated.
</TABLE>
* On February 26, 1998, shareholders approved a change in the investment
objective.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Money Market: securities are valued at amortized
cost which approximates market value. All remaining Portfolios: (1) an equity
security listed or traded on the New York, American or other domestic or foreign
stock exchange is valued at its latest sale price on that exchange prior to the
time when assets are valued; if there were no sales that day, the security is
valued at the latest bid price (in cases where securities are traded on more
than one exchange, the securities are valued on the exchange designated as the
primary market pursuant to procedures adopted by the Trustees); (2) all other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest available bid price prior to the time of
88
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
valuation; (3) when market quotations are not readily available, including
circumstances under which it is determined by Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Manager"), formerly Dean Witter InterCapital
Inc., or (in the case of Growth) by Morgan Stanley Asset Management Inc.
("MSAM"), or (in the case of the North American Government Securities and
Emerging Markets) by TCW Funds Management Inc. ("TCW"), that sale or bid prices
are not reflective of a security's market value, portfolio securities are valued
at their fair value as determined in good faith under procedures established by
and under the general supervision of the Trustees (valuation of debt securities
for which market quotations are not readily available may be based upon current
market prices of securities which are comparable in coupon, rating and maturity
or an appropriate matrix utilizing similar factors); (4) certain of the
securities may be valued by an outside pricing service approved by the Trustees.
The pricing service may utilize a matrix system incorporating security quality,
maturity and coupon as the evaluation model parameters, and/or research and
evaluations by its staff, including review of broker-dealer market price
quotations, if available, in determining what it believes is the fair valuation
of the securities valued by such pricing service; and (5) short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date
except certain dividends on foreign securities which are recorded as soon as the
Fund is informed after the ex-dividend date. Interest income is accrued daily
except where collection is not expected. The Money Market Portfolio amortizes
premiums and accretes discounts over the life of the respective securities;
gains and losses realized upon the sale of securities are based on amortized
cost. For all other Portfolios, discounts are accreted over the life of the
respective securities.
C. FOREIGN CURRENCY TRANSLATION -- The books and records of the Portfolios
investing in foreign currency denominated transactions are translated into U.S.
dollars as follows: (1) the foreign currency market value of investment
securities, other assets and liabilities and forward contracts are translated at
the exchange rates prevailing at the end of the period; and (2) purchases,
sales, income and expenses are translated at the exchange rates prevailing on
the respective dates of such transactions.
89
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
The resultant exchange gains and losses are included in the Statement of
Operations as realized and unrealized gain/loss on foreign exchange
transactions. Pursuant to U.S. Federal income tax regulations, certain exchange
gains/losses included in realized and unrealized gain/loss are included in or
are a reduction of ordinary income for federal income tax purposes. The
Portfolios do not isolate that portion of the results of operations arising as a
result of changes in the foreign exchange rates from the changes in the market
prices of the securities.
D. FORWARD FOREIGN CURRENCY CONTRACTS -- Some of the Portfolios may enter into
forward foreign currency contracts which are valued daily at the appropriate
exchange rates. The resultant unrealized exchange gains and losses are included
in the Statement of Operations as unrealized gain/loss on foreign exchange
transactions. The Portfolios record realized gains or losses on delivery of the
currency or at the time the forward contract is extinguished (compensated) by
entering into a closing transaction prior to delivery.
E. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply individually
for each Portfolio with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its taxable income to
its shareholders. Accordingly, no federal income tax provision is required.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the record date. The amount of dividends
and distributions from net investment income and net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
G. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of approximately $96,000 ($8,000 for each respective Portfolio,
excluding Mid-Cap Growth) which have been reimbursed for the full amount
thereof, exclusive of amounts waived of approximately $22,000
90
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
($1,833 for each respective Portfolio, excluding Mid-Cap Growth). Such expenses
have been deferred and are being amortized by the straight-line method over a
period not to exceed five years from the commencement of operations.
H. EXPENSES -- Direct expenses are charged to the respective Portfolio and
general Fund expenses are allocated on the basis of relative net assets or
equally among the Portfolios.
2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
following annual rates to each Portfolio's net assets determined at the close of
each business day:
<TABLE>
<CAPTION>
ANNUAL ANNUAL
PORTFOLIO RATE PORTFOLIO RATE
- ---------------------------------------- ------ ---------------------------------------- ------
<S> <C> <C> <C>
Money Market............................ 0.50 % Growth ................................. 0.80*%
North American Government Securities.... 0.65 American Value ......................... 0.625
Diversified Income...................... 0.40 Mid-Cap Growth ......................... 0.75
Balanced Growth......................... 0.60* Global Equity .......................... 1.00
Utilities............................... 0.65 Developing Growth ...................... 0.50
Dividend Growth......................... ** Emerging Markets ....................... 1.25
Value-Added Market...................... 0.50
</TABLE>
- ----------------
* Effective March 2, 1998, the Agreement was amended to reduce the annual
rate from 0.75% of daily net assets to 0.60% of daily net assets for
Balanced Growth, and from 0.85% of daily net assets to 0.80% of daily net
assets for Growth.
** Effective May 1, 1998, the Agreement was amended to reduce the annual rate
from 0.625% of the daily net assets to 0.625% of the portion of the daily
net assets not exceeding $500 million and 0.50% of the portion of daily net
assets in excess of $500 million.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
Under Sub-Advisory Agreements between MSAM and the Investment Manager and TCW
and the Investment Manager, MSAM provides Growth and TCW provides North American
Government Securities and Emerging Markets with investment advice and portfolio
management relating to the Portfolios' investments in securities, subject to the
overall supervision of the Investment Manager. As compensation for their
services provided pursuant to the Sub-Advisory Agreements, the
91
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
Investment Manager pays MSAM and TCW monthly compensation equal to 40% of its
monthly compensation. Prior to March 2, 1998 TCW acted as sub-advisor to both
Growth and Balanced Growth. As compensation for its services under the
Sub-Advisory Agreements, the Investment Manager paid TCW 40% of its monthly
compensation.
The Investment Manager has undertaken to reimburse all operating expenses and
waive the compensation provided for in its Investment Management Agreement with
Mid-Cap Growth until such time as the Portfolio has $50 million of net assets or
December 31, 1998, whichever comes first. At June 30, 1998, included in the
Statements of Assets and Liabilities is a receivable from an affiliate which
represents expense reimbursements due to the Portfolio.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
Purchases and sales/maturities of portfolio securities, excluding short-term
investments (except for the Money Market Portfolio), for the six months ended
June 30, 1998 were as follows:
<TABLE>
<CAPTION>
U.S.GOVERNMENT SECURITIES OTHER
------------------------------- --------------------------------
PURCHASES SALES/MATURITIES PURCHASES SALES/MATURITIES
----------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C>
Money Market............................ $ 5,386,136 $ 3,560,416 $314,798,821 $ 310,704,303
North American Government Securities.... 1,096,304 1,175,677 -- --
Diversified Income...................... 19,540,988 17,441,111 31,975,883 20,356,811
Balanced Growth......................... 17,206,689 5,363,142 61,402,442 56,971,205
Utilities............................... -- -- 17,459,519 7,509,875
Dividend Growth......................... -- -- 137,852,369 72,734,321
Value-Added Market...................... -- -- 19,799,229 6,495,275
Growth.................................. -- -- 67,927,057 64,026,923
American Value.......................... 34,642,520 27,919,942 300,697,513 282,431,267
Mid-Cap Growth.......................... -- -- 31,914,470 23,639,200
Global Equity........................... -- -- 35,077,882 28,569,407
Developing Growth....................... 138,000 434,123 83,209,160 79,844,053
Emerging Markets........................ -- -- 11,065,023 12,261,983
</TABLE>
Included in the aforementioned sales of portfolio securities of Value-Added
Market are sales of Morgan Stanley Dean Witter & Co., an affiliate of the
Investment Manager, of $96,695, as well as a realized gain of $66,835.
92
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
For the six months ended June 30, 1998, the following Portfolios incurred
brokerage commissions with Dean Witter Reynolds Inc. ("DWR"), an affiliate of
the Investment Manager, for executed portfolio transactions:
<TABLE>
<CAPTION>
BALANCED DIVIDEND AMERICAN MID-CAP GLOBAL DEVELOPING
GROWTH UTILITIES GROWTH VALUE GROWTH EQUITY GROWTH
- ------------ ----------- ----------- ----------- ----------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 16,361 $ 5,650 $ 33,400 $ 4,590 $ 4,998 $ 1,915 $ 13,152
- ------------ ----------- ----------- ----------- ----------- --------- -------
- ------------ ----------- ----------- ----------- ----------- --------- -------
</TABLE>
Included at June 30, 1998 in the payable for investments purchased and
receivable for investments sold were $212,900 and $58,448, respectively, for
Balanced Growth for unsettled trades with DWR.
Included at June 30, 1998 in the payable for investments purchased was $260,100
for American Value, $228,606 for Mid-Cap Growth and $155,713 for Developing
Growth, for unsettled trades with DWR.
For the six months ended June 30, 1998, the following Portfolios incurred
brokerage commissions with Morgan Stanley & Co., Inc., an affiliate of the
Investment Manager, for executed portfolio transactions:
<TABLE>
<CAPTION>
BALANCED DIVIDEND AMERICAN MID-CAP GLOBAL DEVELOPING EMERGING
GROWTH UTILITIES GROWTH GROWTH VALUE GROWTH EQUITY GROWTH MARKETS
- ------------ ----------- ----------- ------------- ----------- ----------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 3,930 $ 250 $ 16,371 $ 45 $ 56,916 $ 2,090 $ 500 $ 3,895 $ 2,037
------ ----- ----------- --- ----------- ----------- ----- ------ ------
------ ----- ----------- --- ----------- ----------- ----- ------ ------
</TABLE>
Included at June 30, 1998 in the receivable for investments sold was $19,500 for
Mid-Cap Growth for unsettled trades with Morgan Stanley & Co., Inc.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is
the Fund's transfer agent.
4. FEDERAL INCOME TAX STATUS
At December 31, 1997 North American Government Securities had a net capital loss
carryover of approximately $10,000 which may be used to offset future capital
gains to the extent provided by regulations which is available through December
31 of the following years:
<TABLE>
<CAPTION>
2003 2004 2005
- --------- --------- ---------
<S> <C> <C>
$ 1,000 $ 7,000 $ 2,000
</TABLE>
Net capital and currency losses incurred after October 31 ("post-October
losses") within the taxable year are deemed to arise on the first business day
of the Portfolio's next taxable year. The following
93
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
Portfolios incurred and will elect to defer post-October losses during fiscal
1997: Diversified Income -- $454,000; Mid Cap Growth -- $263,000; Global Equity
- -- $1,317,000; Emerging Markets -- $975,000.
At December 31, 1997, the primary reason(s) for significant temporary book/tax
differences were as follows:
<TABLE>
<CAPTION>
POST-OCTOBER LOSS DEFERRALS
LOSSES FROM WASH SALES
------------ ---------------
<S> <C> <C>
Diversified Income...................... -
Balanced Growth......................... -
Dividend Growth......................... -
Value-Added Market...................... -
Growth.................................. -
American Value.......................... -
Mid-Cap Growth.......................... - -
Global Equity........................... - -
Developing Growth....................... -
Emerging Markets........................ - -
</TABLE>
Additionally, Diversified Income had temporary differences attributable to the
mark-to-market of open forward foreign currency exchange contracts and
compensated forward foreign currency exchange contracts.
5. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
Some of the Portfolios may enter into forward foreign currency contracts
("forward contracts") to facilitate settlement of foreign currency denominated
portfolio transactions or to manage foreign currency exposure associated with
foreign currency denominated securities.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Portfolios bear the
risk of an unfavorable change in the foreign exchange rates underlying the
forward contracts. Risks may also arise upon entering into these contracts from
the potential inability of the counterparties to meet the terms of their
contracts.
At June 30, 1998, Emerging Markets had outstanding forward contracts used to
facilitate settlement of foreign currency denominated portfolio transactions and
Diversified Income had outstanding forward contracts used to manage foreign
currency exposure.
At June 30, 1998, Emerging Markets' cash balance consisted principally of
interest bearing deposits with Chase Manhattan Bank N.A., the Portfolio's
custodian.
94
<PAGE>
(This page has been left blank intentionally.)
95
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
NET ASSET
VALUE NET NET REALIZED TOTAL FROM DISTRIBUTIONS TOTAL DIVIDENDS
BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO TO AND
YEAR ENDED DECEMBER 31 OF PERIOD INCOME GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MONEY MARKET
1994 (a) $ 1.00 $ 0.01 -- $ 0.01 $(0.01) -- $(0.01)
1995 1.00 0.06 -- 0.06 (0.06) -- (0.06)
1996 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1997 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1998 ** 1.00 0.03 -- 0.03 (0.03) -- (0.03)
NORTH AMERICAN GOVERNMENT SECURITIES
1994 (a) 10.00 0.06 -- 0.06 (0.02) -- (0.02)
1995 10.04 0.53 $ 0.11 0.64 (0.50) -- (0.50)
1996 10.18 0.52 (0.09) 0.43 (0.52) -- (0.52)
1997 10.09 0.48 0.09 0.57 (0.49) -- (0.49)
1998 ** 10.17 0.23 -- 0.23 (0.22) -- (0.22)
DIVERSIFIED INCOME
1994 (a) 10.00 0.08 -- 0.08 (0.03) -- (0.03)
1995 10.05 0.57 0.11 0.68 (0.51) -- (0.51)
1996 10.22 0.80 0.13 0.93 (0.82) $(0.01) (0.83)
1997 10.32 0.80 0.02 0.82 (0.83) (0.02) (0.85)
1998 ** 10.29 0.39 (0.08) 0.31 (0.40) (0.01) (0.41)
BALANCED GROWTH
1994 (a) 10.00 0.08 (0.02) 0.06 (0.02) -- (0.02)
1995 10.04 0.40 1.85 2.25 (0.40) -- (0.40)
1996 11.89 0.33 1.25 1.58 (0.33) (0.07) (0.40)
1997 13.07 0.29 2.01 2.30 (0.30) (0.04) (0.34)
1998 ** 15.03 0.20 1.41 1.61 (0.19) (0.34) (0.53)
UTILITIES
1994 (a) 10.00 0.07 -- 0.07 (0.03) -- (0.03)
1995 10.04 0.45 2.30 2.75 (0.44) -- (0.44)
1996 12.35 0.43 0.60 1.03 (0.43) (0.01) (0.44)
1997 12.94 0.39 2.96 3.35 (0.40) (0.05) (0.45)
1998 ** 15.84 0.21 1.66 1.87 (0.20) (0.19) (0.39)
DIVIDEND GROWTH
1994 (a) 10.00 0.08 (0.09) (0.01) (0.02) -- (0.02)
1995 9.97 0.36 3.57 3.93 (0.36) -- (0.36)
1996 13.54 0.34 2.94 3.28 (0.35) (0.02) (0.37)
1997 16.45 0.38 3.80 4.18 (0.38) (0.68) (1.06)
1998 ** 19.57 0.20 2.50 2.70 (0.20) (0.90) (1.10)
VALUE-ADDED MARKET
1994 (a) 10.00 0.06 (0.14) (0.08) (0.02) -- (0.02)
1995 9.90 0.31 2.34 2.65 (0.31) -- (0.31)
1996 12.24 0.23 1.93 2.16 (0.23) (0.01) (0.24)
1997 14.16 0.23 3.43 3.66 (0.23) (0.03) (0.26)
1998 ** 17.56 0.11 1.84 1.95 (0.11) (0.27) (0.38)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
96
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET
ASSETS
RATIOS TO AVERAGE NET (AFTER EXPENSES
ASSETS WERE
(BEFORE EXPENSES WERE ASSUMED)
NET ASSETS ASSUMED) ------------------------
NET ASSET TOTAL END OF ------------------------- NET PORTFOLIO
YEAR ENDED VALUE END INVESTMENT PERIOD NET INVESTMENT INVESTMENT TURNOVER
DECEMBER 31 OF PERIOD RETURN+ (000'S) EXPENSES INCOME EXPENSES INCOME RATE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MONEY MARKET
1994 (a) $ 1.00 0.76%(1) $ 1,234 2.50%*(2) 3.33%*(2) -- 5.83%(2) N/A
1995 1.00 6.10 42,089 0.81 5.11 -- 5.92 N/A
1996 1.00 5.07 87,002 0.59 4.94 0.57% 4.96 N/A
1997 1.00 5.21 84,045 0.55 5.08 0.55 5.08 N/A
1998 ** 1.00 2.56(1) 91,735 0.56(2) 5.11(2) 0.56(2) 5.11(2) N/A
NORTH AMERICAN
GOVERNMENT
SECURITIES
1994 (a) 10.04 0.61(1) 122 2.50*(2) 1.78*(2) -- 4.28(2) --
1995 10.18 6.40 1,288 2.50* 3.24* -- 5.74 18%
1996 10.09 4.35 4,172 1.45 4.55 0.50 5.50 48
1997 10.17 5.91 5,091 1.26 4.75 1.26 4.75 27
1998 ** 10.18 2.25(1) 6,160 1.30(2) 4.53(2) 1.30(2) 4.53(2) 26
DIVERSIFIED
INCOME
1994 (a) 10.05 0.76(1) 402 2.50*(2) 3.08*(2) -- 5.58(2) --
1995 10.22 6.96 8,972 1.33 5.95 -- 7.28 33
1996 10.32 9.54 32,119 0.71 8.26 0.50 8.47 69
1997 10.29 8.32 62,287 0.55 8.09 0.55 8.09 110
1998 ** 10.19 3.07(1) 77,812 0.49(2) 7.79(2) 0.49(2) 7.79(2) 56
BALANCED GROWTH
1994 (a) 10.04 0.60(1) 796 2.50*(2) 2.90*(2) -- 5.40(2) --
1995 11.89 22.86 16,311 1.39 2.45 -- 3.84 99
1996 13.07 13.54 38,893 0.90 2.35 0.50 2.75 88
1997 15.03 17.87 71,323 0.86 2.13 0.86 2.13 64
1998 ** 16.11 10.82(1) 93,500 0.73(2) 2.68(2) 0.73(2) 2.68(2) 79
UTILITIES
1994 (a) 10.04 0.65(1) 498 2.50*(2) 2.79*(2) -- 5.29(2) --
1995 12.35 28.05 17,959 1.43 3.01 -- 4.44 3
1996 12.94 8.48 35,686 0.80 3.16 0.50 3.46 15
1997 15.84 26.45 50,766 0.76 2.83 0.76 2.83 34
1998 ** 17.32 11.92(1) 64,241 0.71(2) 2.48(2) 0.71(2) 2.48(2) 14
DIVIDEND GROWTH
1994 (a) 9.97 (0.05) (1) 1,378 2.50*(2) 3.28*(2) -- 5.78(2) --
1995 13.54 40.13 78,694 0.83 2.80 -- 3.63 4
1996 16.45 24.49 258,101 0.67 2.44 0.67 2.44 39
1997 19.57 26.12 518,419 0.65 2.11 0.65 2.11 26
1998 ** 21.17 13.85(1) 652,374 0.63(2) 1.86(2) 0.63(2) 1.86(2) 12
VALUE-ADDED
MARKET
1994 (a) 9.90 (0.76) (1) 349 2.50*(2) 1.25*(2) -- 3.75(2) --
1995 12.24 27.14 23,970 1.46 1.64 -- 3.10 4
1996 14.16 17.78 73,516 0.64 1.69 0.56 1.77 4
1997 17.56 26.12 141,316 0.58 1.49 0.58 1.49 8
1998 ** 19.13 11.16(1) 168,944 0.55(2) 1.19(2) 0.55(2) 1.19(2) 4
</TABLE>
<TABLE>
<C> <S>
- ---------------------
</TABLE>
EMPTY FOOTNOTE
97
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
NET ASSET
VALUE NET NET REALIZED TOTAL FROM DISTRIBUTIONS TOTAL DIVIDENDS
BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO TO AND
YEAR ENDED DECEMBER 31 OF PERIOD INCOME GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
GROWTH
1994 (a) $ 10.00 $ 0.07 -- $ 0.07 $(0.02) -- $(0.02)
1995 10.05 0.26 $ 1.05 1.31 (0.29) -- (0.29)
1996 11.07 0.08 2.52 2.60 (0.08) $(0.04) (0.12)
1997 13.55 0.09 3.09 3.18 (0.10) (0.07) (0.17)
1998 ** 16.56 -- 1.74 1.74 -- (0.49) (0.49)
AMERICAN VALUE
1994 (a) 10.00 0.06 0.01 0.07 (0.02) -- (0.02)
1995 10.05 0.21 3.66 3.87 (0.21) -- (0.21)
1996 13.71 0.08 1.68 1.76 (0.10) (0.07) (0.17)
1997 15.30 0.07 4.73 4.80 (0.06) (0.35) (0.41)
1998 ** 19.69 0.04 3.76 3.80 (0.05) (1.94) (1.99)
MID-CAP GROWTH
1997 (b) 10.00 0.18 1.39 1.57 (0.17) -- (0.17)
1998 ** 11.40 0.04 1.02 1.06 (0.04) (0.10) (0.14)
GLOBAL EQUITY
1994 (a) 10.00 0.07 (0.10) (0.03) (0.03) -- (0.03)
1995 9.94 0.29 1.05 1.34 (0.29) -- (0.29)
1996 10.99 0.15 1.10 1.25 (0.17) (0.01) (0.18)
1997 12.06 0.12 0.92 1.04 (0.11) (0.02) (0.13)
1998 ** 12.97 0.10 1.65 1.75 (0.12) (0.05) (0.17)
DEVELOPING GROWTH
1994 (a) 10.00 0.08 0.08 0.16 (0.03) -- (0.03)
1995 10.13 0.24 4.88 5.12 (0.25) -- (0.25)
1996 15.00 0.02 1.92 1.94 (0.04)++ (0.02) (0.06)
1997 16.88 0.05 2.27 2.32 (0.04) -- (0.04)
1998 ** 19.16 -- 1.81 1.81 (0.01) (0.03) (0.04)
EMERGING MARKETS
1994 (a) 10.00 0.06 -- 0.06 (0.02) -- (0.02)
1995 10.04 0.29 (0.33) (0.04) (0.31) -- (0.31)
1996 9.69 0.16 1.51 1.67 (0.16) -- (0.16)
1997 11.20 0.06 0.11 0.17 (0.06) -- (0.06)
1998 ** 11.31 0.05 (2.31) (2.26) (0.07) (0.03) (0.10)
</TABLE>
<TABLE>
<C> <S>
- ---------------------
(a) For the period November 9, 1994 (commencement of operations) through December 31, 1994.
(b) For the period January 21, 1997 (commencement of operations) through December 31, 1997.
+ Calculated based on the net asset value as of the last business day of the period.
++ Includes distributions from paid-in-capital of $0.01.
* After application of the Fund's expense limitation.
** For the the six months ended June 30, 1998 (unaudited).
(1) Not annualized.
(2) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
98
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET
ASSETS
RATIOS TO AVERAGE NET (AFTER EXPENSES
ASSETS WERE
(BEFORE EXPENSES WERE ASSUMED)
NET ASSETS ASSUMED) ------------------------
NET ASSET TOTAL END OF ------------------------- NET PORTFOLIO
YEAR ENDED VALUE END INVESTMENT PERIOD NET INVESTMENT INVESTMENT TURNOVER
DECEMBER 31 OF PERIOD RETURN+ (000'S) EXPENSES INCOME (LOSS) EXPENSES INCOME (LOSS) RATE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH
1994 (a) $ 10.05 0.67%(1) $ 316 2.50%*(2) 2.32%*(2) -- 4.82%(2) --
1995 11.07 13.29 3,956 2.50* (0.64) * -- 1.86 39%
1996 13.55 23.56 18,215 1.22 (0.03) 0.50% 0.69 47
1997 16.56 23.07 40,311 1.01 0.13 1.01 0.13 55
1998 ** 17.81 10.62(1) 49,618 1.14(2) (0.02) (2) 1.14(2) (0.02) (2) 151
AMERICAN VALUE
1994 (a) 10.05 0.69(1) 823 2.50*(2) 1.60*(2) -- 4.10(2) 10(1)
1995 13.71 38.95 38,235 0.96 1.11 -- 2.07 174
1996 15.30 12.95 120,904 0.71 0.52 0.69 0.54 232
1997 19.69 31.93 230,014 0.68 0.42 0.68 0.42 262
1998 ** 21.50 20.06(1) 304,898 0.66(2) 0.43(2) 0.66(2) 0.43(2) 122
MID-CAP GROWTH
1997 (b) 11.40 15.84(1) 19,236 1.12(2) 0.65(2) -- 1.77(2) 104(1)
1998 ** 12.32 9.45(1) 27,831 0.97(2) (0.30) (2) -- 0.67(2) 108(1)
GLOBAL EQUITY
1994 (a) 9.94 (0.30) (1) 1,194 2.50*(2) 2.20*(2) -- 4.70(2) --
1995 10.99 13.76 17,074 1.69 1.09 -- 2.78 74
1996 12.06 11.43 59,246 1.25 0.69 0.72 1.22 62
1997 12.97 8.66 102,229 1.13 0.91 1.13 0.91 87
1998 ** 14.55 13.51(1) 124,005 1.10(2) 1.49(2) 1.10(2) 1.49(2) 27
DEVELOPING
GROWTH
1994 (a) 10.13 1.58(1) 380 2.50*(2) 2.31*(2) -- 4.81(2) 3(1)
1995 15.00 51.26 17,412 1.24 0.86 -- 2.10 80
1996 16.88 12.95 61,120 0.68 (0.04) 0.58 0.06 146
1997 19.16 13.77 82,690 0.60 0.26 0.60 0.26 149
1998 ** 20.93 9.47(1) 88,925 0.58(2) 0.07(2) 0.58(2) 0.07(2) 102
EMERGING
MARKETS
1994 (a) 10.04 0.57(1) 448 2.50*(2) 2.22*(2) -- 4.72(2) --
1995 9.69 (0.57) 4,092 2.50* 0.18* -- 2.68 36
1996 11.20 17.69 17,240 2.02 (0.10) 0.50 1.42 46
1997 11.31 1.27 23,815 1.71 0.49 1.71 0.49 91
1998 ** 8.95 (20.14) (1) 17,047 1.64(2) 0.86(2) 1.64(2) 0.86(2) 59
</TABLE>
<TABLE>
<C> <S>
- ---------------------
(a) For the period November 9, 1994 (commencement of operations) through December 31, 1994.
(b) For the period January 21, 1997 (commencement of operations) through December 31, 1997.
+ Calculated based on the net asset value as of the last business day of the period.
++ Includes distributions from paid-in-capital of $0.01.
* After application of the Fund's expense limitation.
** For the the six months ended June 30, 1998 (unaudited).
(1) Not annualized.
(2) Annualized.
</TABLE>
EMPTY FOOTNOTE
99
<PAGE>
Trustees
------------------------------------------------------------
<TABLE>
<S> <C>
Michael Bozic Dr. Manuel H. Johnson
Charles A. Fiumefreddo Michael E. Nugent
Edwin J. Garn Philip J. Purcell
John R. Haire John L. Schroeder
Wayne E. Hedien
</TABLE>
Officers
------------------------------------------------------------
Charles A. Fiumefreddo
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Barry Fink
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
Thomas F. Caloia
TREASURER
<TABLE>
<S> <C>
Transfer Agent Independent Accountants
------------------------------------------------ ------------------------------------------------
Morgan Stanley Dean Witter Trust FSB PricewaterhouseCoopers LLP
Harborside Financial Center--Plaza Two 1177 Avenue of the Americas
Jersey City, New Jersey 07311 New York, New York 10036
</TABLE>
Investment Manager
------------------------------------------------------------
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
Sub-Advisors
North American Government Securities
and Emerging Markets Portfolios
-------------------------------------------------------------------
TCW Funds Management, Inc.
Growth Portfolio
-------------------------------------------------------------------
Morgan Stanley Asset Management, Inc.
The financial statements included herein have been taken from the records of the
Fund without examination by the independent accountants and accordingly they do
not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of the
Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
<PAGE>
[GRAPHIC]
MORGAN STANLEY DEAN WITTER
SELECT DIMENSIONS
INVESTMENT SERIES
- --------------------------
SELECT
DIMENSIONS
- --------------------------
SEMI-ANNUAL REPORT
JUNE 30, 1998
MORGAN STANLEY DEAN WITTER
Hartford Life
Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
#40474
