<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES TWO WORLD TRADE CENTER, NEW
YORK, NEW YORK
10048
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997
DEAR SHAREHOLDER:
This annual report to shareholders of the various portfolios that comprise Dean
Witter Select Dimensions Investment Series covers the fiscal year ended December
31, 1997. The thirteen investment portfolios described below are offered to
participants in Dean Witter Select Dimensions Plan, a program of tax-deferred
variable annuities issued by Hartford Life Insurance Company and ITT Hartford
Life and Annuity Insurance Company.
MARKET OVERVIEW
THE UNITED STATES
Nineteen ninety-seven truly proved to be a tale of two markets worldwide. In the
United States, the first half of the year was characterized by a strong equity
market versus fixed-income securities, while the second half saw bonds
powerfully outperform all other asset classes. Global markets were characterized
by robust growth during the first six months of the year, only to be rocked by a
currency crisis in Southeast Asia during the latter portion of the year.
Overall, the stock market was very generous to investors in 1997. However, in
August the Dow Jones industrials appeared to have peaked, at 8340. Bellwether
multinational corporations such as Coca-Cola began to guide earnings estimates
downward for the first time in many years, on the basis of slower growth and the
currency impact of the turmoil in Asia. The NASDAQ Composite and Mid-Cap indexes
peaked in early October, while the Standard & Poor's 500 Composite Stock Price
Index (S&P 500) topped out in early December as uncertainty grew regarding
earnings outlooks. Despite a flat to down fourth quarter for the various
indexes, the stock market increased by more than 20 percent for three years in a
row for the first time ever. As the year-end approached, historically defensive
sectors such as consumer goods and utilities outperformed the overall market
while cyclical stocks lagged.
Over the past year the U.S. economy exhibited healthy growth, with declining
inflation and strong employment growth. In this environment
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DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
the Federal Reserve Board periodically expressed concern that inflationary
pressures could be on the rise. However, inflation remains in check.
Accordingly, the Federal Reserve Board interest rates have been left unchanged
since March.
As the summer came to a close the situation in Asia induced an investor "flight
to quality." As a result, demand for U.S. Treasury securities and the U.S.
dollar increased. With many of the Southeast Asian economies in turmoil, 1998
may see the United States inherit the deflationary (declining price) aspect of
those markets. This would be likely to benefit the disinflationary (slowing in
the rate of price increases) trend here.
Real interest rates (market interest rates less inflation) in the United States
remain above historical norms. A realization of this situation by investors,
combined with the probability of a surplus in the U.S. budget (leading to a
reduction in the issuance of U.S. Treasury securities in 1998), could cause
interest rates to continue to decline in the months to come.
EUROPE
Despite sharp falls in October following the currency crisis in Asia, the
European markets generally made a steady recovery during November and December.
Overall, 1997 was characterized by significant improvement in the economic
environment across Europe. In the United Kingdom low interest rates combined
with low inflation resulted in strong economic growth and falling unemployment.
Following the general election in May, the Bank of England tightened monetary
policy on concerns over the possibility of higher inflation, but with little
effect on domestic consumer demand. However, the strength of the British pound
relative to the German mark and other European currencies had a negative impact
on British exporters.
Continental Europe experienced a year of economic convergence, partly engineered
in preparation for monetary union in 1999. In Germany the deutsche mark's
weakness relative to the U.S. dollar resulted in strong export performance,
which offset relatively subdued domestic consumer demand. In Italy and Spain,
falling short-term interest rates stimulated domestic consumption and investment
demand. Inflation, long-term interest rates and budget deficit levels are now
broadly similar across the Continent. Further convergence of short-term interest
rates is likely during the first half of 1998 and expectations are high that the
unified currency will go ahead as planned in 1999.
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
ASIA (EXCEPT JAPAN)
Nineteen ninety-seven was a uniquely difficult year for the markets of the
Pacific Basin. The only markets that were notably weak during the first half
were Japan, Korea and Thailand, all of which were addressing specific economic
difficulties. Performance during the first half of the year provided little hint
of the severe weakness that would overcome the region in the second half.
The economic problems of Thailand proved to be the catalyst for the currency
crisis that has plagued the region since July. By then, the uncertain state of
Thailand's economy had been cause for concern for some time. The rigid pegging
of the Thai baht to the U.S. dollar had resulted in significant overinvestment
in the Thai economy, particularly in real estate. This overinvestment was funded
by access to cheap U.S.-dollar loans, at interest rates well below those
prevailing locally, without any apparent currency risk. Thailand had also run a
current-account deficit of about 8 percent of gross domestic product (GDP) in
1996, which made the country's dependence on foreign capital even more marked.
Although it did not come as a surprise when Thai authorities devalued the
currency on July 2, it was not initially anticipated that the Thai crisis would
trigger similar developments in the other countries of Southeast Asia,
particularly Indonesia, Malaysia, the Philippines and Singapore. The first three
of these countries have current-account deficits, although theirs are
considerably smaller than that of Thailand relative to their GDP. They had also
seen signs of excessive investment again, particularly in real estate. The
Philippines quickly followed Thailand in devaluation, and Malaysia and Indonesia
continued the trend in August. Even Singapore, which enjoys one of the world's
largest current-account surpluses, has seen its currency come under pressure
because of its role as the financial center of Southeast Asia.
For much of 1997 northeastern Asian markets stood apart from their southeastern
counterparts and produced considerably better performance. Hong Kong, the
largest market in the Pacific Basin outside Japan, performed well through
August, despite the death of Chinese leader Deng Xiaopeng in February and the
handover of Hong Kong to China in July. In August, Hong Kong appeared to have
successfully defended its U.S.-dollar-pegged currency rate against speculative
attack. However, pressure reemerged much more severely in October, following a
move by Taiwan to permit a small further depreciation in its currency. The
result was a sharp upward movement in Hong Kong interest rates, which severely
affected the stock market there, given its significant exposure to bank and
real-estate-related stocks.
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DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
JAPAN
The Japanese market peaked in June. Supportive factors included very strong
first-quarter GDP growth, strong corporate profits and a realization that U.S.
interest rates were on hold. As anticipated, fiscal tightening -- including an
increased consumption tax of an additional 2 percent, the withdrawal of income
tax rebates and the growth of medical costs -- produced a weak second quarter.
In the third quarter evidence emerged that the economic slowdown was worsening.
In fact, this was the weakest quarter the Japanese economy had seen in nearly 23
years. This recognition further depressed the market and made it vulnerable to
the crisis developing elsewhere in Asia. The dramatic fall of the Hong Kong
market in October was the final cause that pushed the Nikkei down. Reports that
currency devaluations and market falls throughout Southeast Asia were spreading
to the Northeast added to the overall concern, because Korean and Taiwanese
companies are viewed as more direct competitors to Japan.
These factors provided hedge funds with reasons to short Japan, which pushed the
market to a two-year low and to levels approaching the postcrash bottoms of 1992
and 1995. Subsequently, suggestions that public money would be used to support
Japan's financial system and reports that the "convoy system" -- whereby the
stronger institutions are expected to carry the weaker -- had been abandoned
resulted in a dramatic rebound of some 10 percent. However, later news that
Yamaichi, the fourth-largest brokerage house in Japan, was to be declared
insolvent reversed much of this move and again raised questions about the
stability of the financial sector. The government and the Bank of Japan moved
rapidly to reassure depositors in the wake of this development.
LATIN AMERICA
The Latin American equity markets began 1997 on a strong note as robust
corporate earnings growth and attractive valuations prompted strong capital
inflows. The region's markets continued to rally during the second quarter as
macroeconomic and political fundamentals maintained their pace of improvement,
while corporate earnings were generally in line with expectations.
During the second half of the year, however, many Latin American markets,
particularly Brazil and Argentina, suffered under the broad emerging market
volatility. Generally healthy economies and continued privatization programs
nevertheless provided investors with a higher degree of confidence that these
markets would not be fundamentally disturbed by the situation in Asia.
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DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
AGGRESSIVE GROWTH
DEVELOPING GROWTH PORTFOLIO
The Developing Growth Portfolio produced a total return of 13.77 percent for the
twelve-month period ended December 31, 1997. This compares to a return of 18.95
percent for the Lipper Variable Annuity
Small-Cap Underlying Funds Average,
33.35 percent for the broad-based S&P
500 Index and 22.36 percent for the
Russell 2000 Index. The accompanying
chart illustrates the growth of a
$10,000 investment in the Portfolio
from its inception on November 9, 1994,
through the fiscal year ended December
31, 1997, versus a similar hypothetical
investment in the issues that comprise
the Lipper Average, S&P 500 Index and
Russell 2000 Index.
After underperforming during the early
part of 1997, small-cap stocks started
to show signs of life in May on news of
a proposed reduction in the capital
gains tax rate and word that the
Federal Reserve Board would not raise
interest rates. This upward momentum
continued during the third quarter of
1997, with the small-cap indexes
reaching record highs in August.
The small-cap rally came to an abrupt
halt in October, however, as events in
Asia cast a pall on much of the
technology sector. Semiconductor
manufacturers were hit particularly
hard as companies within this industry
see 30 to 40 percent of their sales
coming from Asian markets. Small caps
were further hit as a flight to safety
and the sector's lack of liquidity pushed down many stock prices.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Growth of $10,000
($ in Thousands)
Russell
Fund S&P 500(3) 2000(4) Lipper(5)
<S> <C> <C> <C> <C>
November 9, 1994 $10,000 $10,000 $10,000 $10,000
December 31, 1994 $10,158 $9,916 $10,269 $10,213
December 31, 1995 $15,365 $13,639 $13,190 $13,155
December 31, 1996 $17,355 $16,769 $15,366 $15,780
December 31, 1997 $19,745(2) $22,362 $18,802 $18,770
Average Annual Total Returns
(Fund)
Life of
1 Year Fund
13.77%(1) 24.17%(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS
(1) Figure assumes reinvestment of all distributions for the underlying fund
based on net asset value (NAV). It does not reflect the deduction of
insurance expenses, an annual contract maintenance fee, or surrender
charges.
(2) Closing value on December 31, 1997 for the underlying fund. This figure does
not reflect the deduction of any account fees or sales charges.
(3) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
broad-based index, the performance of which is based on the average
performance of 500 widely held common stocks. The Index does not include any
expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
(4) The Russell 2000 Index is a capitalization weighted index which is comprised
of 2000 of the smallest stocks (on the basis of capitalization) in the
Russell 3000 Index. The performance of the Index does not include any
expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
(5) The Lipper Variable Annuity Small-Cap Underlying Funds Average tracks the
performance of funds that by prospectus or portfolio practice invest
primarily in companies with market capitalizations less than $1 billion at
the time of purchase, as reported by Lipper Analytical Services.
During the year, the Portfolio's sector weightings have remained fairly
consistent with the exception of technology, which has been reduced to 21
percent of assets. The Portfolio maintains a fairly sizable
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DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
exposure to the health care and energy sectors. At year-end, the Portfolio
maintained a fairly large cash position of 15 percent. Among the Portfolio's
largest holdings were Information Management Resources, Inc., Mail-Well, Inc.,
Allied Waste Industries, Inc., Lason, Inc. and Halter Marine Group, Inc.
EMERGING MARKETS PORTFOLIO
The Emerging Markets Portfolio produced a total return of 1.27 percent for the
twelve-month period ended December 31, 1997, compared to a return of -4.62
percent for the Lipper Variable Annuity
Emerging Markets Underlying Funds
Average (Lipper Average) and -14.74
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
accompanying chart illustrates the
performance of a $10,000 investment in
the Portfolio from its inception on
November 9, 1994, through December 31,
1997, versus a similar investment in
the issues that comprise the Lipper
Average and the IFCI Index. TCW Funds
Management, Inc. (TCW) is the
Portfolio's sub-adviser.
As an asset class, emerging market
equities posted declines in 1997 as a
result of the currency crisis in Asia
and its potential spillover effect into
other regions. The Portfolio's
outperforming of the IFCI Index is
primarily attributable to a
significantly underweighted position in
the Asian equity markets, while being
overweighted in Latin America and
emerging Europe. Despite continuing
uncertainty in Southeast Asia, the
fundamentals in Latin America and
emerging Europe remain largely
positive.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Growth of $10,000
($ in Thousands)
Fund IFCI IX(3) Lipper(4)
<S> <C> <C> <C>
November-09-1994 $10,000 $10,000 $10,000
December-31-1994 $10,057 $8,740 $9,301
December-31-1995 $10,000 $8,004 $8,775
December-31-1996 $11,768 $8,754 $10,429
December-31-1997 $11,918(2) $7,464 $9,947
Average Annual Total Returns
(Fund)
Life of
1 Year Fund
1.27%(1) 5.74%(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS
(1) Figure assumes reinvestment of all distributions for the underlying fund
based on net asset value (NAV). It does not reflect the deduction of
insurance expenses, an annual contract maintenance fee, or surrender
charges.
(2) Closing value on December 31, 1997 for the underlying fund. This figure does
not reflect the deduction of any account fees or sales charge.
(3) The International Finance Corporation Investable Emerging Markets Total
Returns Index (IFCI) is designed to measure more precisely the returns
foreign portfolio investors might receive from investing in baskets of
stocks that were legally and practically available to them in the emerging
markets of Latin America, East Asia, South Asia, Europe, the Mideast and
Africa. The Index does not include any expenses, fees, or charges. The Index
is unmanaged and should not be considered an investment.
(4) The Lipper Variable Annuity Emerging Market Underlying Funds Average tracks
the performance of funds which seek long-term capital appreciation by
investing at least 65% of their equity portfolio in emerging market shares,
as reported by Lipper Analytical Services.
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
As of December 31, 1997, approximately 53 percent of the Portfolio's assets were
invested in Latin American equities, 14.8 percent in Europe, 12.9 percent in
Asia and 4.1 percent in Africa and the Middle East. The Portfolio's largest
country holdings were Mexico (18.5 percent), Brazil (14.8 percent), Argentina
(6.9 percent), India (5.6 percent) and Turkey (5.0 percent).
During the fiscal year, the Emerging Markets Portfolio made several significant
changes to its portfolio. In Latin America the Portfolio reduced its exposure to
the Brazilian market, where the Asian crisis had put into question the
sustainability of financing Brazil's current-account balance. The Portfolio's
Peruvian holdings are also being reduced, due to concerns that positive economic
news is being discounted by investors and that certain political factors and
weather concerns could negatively affect future growth. In Asia the Portfolio
eliminated its holdings in the Korean, Malaysian and Thai equity markets but
continues to maintain underweighted positions in Taiwan, Hong Kong, China and
the Philippines. In emerging Europe the Portfolio eliminated its exposure to the
Czech equity market in 1997, as investors remained concerned about the lack of
transparency in the capital markets there and the collapse of the ruling
center-right coalition government. However, the Portfolio's managers believe the
outlook for the Czech market could improve if the government can proceed with
certain key reform measures (i.e., bank privatization and financial market
regulation).
Despite significant weakness in the emerging equity markets during the fourth
quarter, TCW remains optimistic about the medium-term prospects for stronger
economic growth and the creation of earnings momentum. Although the potential
for further turmoil in the Asian equity markets and a deflationary slowdown in
the industrialized economies exists, economic growth in Latin America is being
driven by demographics, productivity gains and private sector inflows. The
fundamentals in emerging Europe also remain relatively solid, since interest
rates and inflation should continue their downward trend. In Asia most
governments are now beginning to acknowledge the need for economic reform and
seem prepared to begin tackling the difficult issues, such as much-needed
banking and financial reforms. Nevertheless, TCW remains apprehensive given the
region's poor track record of concrete policy responses thus far. As a result,
we have temporarily raised the Portfolio's cash position, given the continued
short-term currency risk in Asia. However, TCW will continue to monitor events
closely and will add to the Portfolio's positions on indications of a shift
toward orthodox policy approaches. This approach, together with an improvement
in the region's current-account balances, should allow the currencies to
stabilize, at which point TCW will reconsider entering the Asian markets.
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
GROWTH
AMERICAN VALUE PORTFOLIO
The American Value Portfolio produced a total return of 31.93 percent for the
twelve-month period ended December 31, 1997. This compares to a return of 25.36
for the Lipper Variable Annuity Growth
Underlying Funds Average and 33.35
percent for the S&P 500 Index. The
accompanying chart illustrates the
growth of a $10,000 investment in the
Portfolio from its inception on
November 9, 1994, through December 31,
1997, versus a similar investment in
the issues that comprise the S&P 500
Index and the Lipper Average.
The fiscal year ended December 31,
1997, proved to be a very eventful one
for the financial markets. Through the
first half of the year, the market's
leadership was exclusively blue chip,
with only index funds and
blue-chip-type equity funds
outperforming. Through that period the
Portfolio was up only 11 percent, but
by midsummer a major development
unfolded to which the world markets are
still adjusting. The dollar broke out
of its 6- and 10-year trading ranges.
Initially we felt that this merely
suggested that a domestic rotation was
called for out of industries with
substantial foreign exposure and into
domestically oriented ones.
As a result of these trends, we began
to reduce the Portfolio's weightings in groups such as technology, aerospace,
agriculture, energy service and global consumer stocks while increasing its
exposure to such domestic industries as retailing and finance. We also increased
the Portfolio's weighting in mid-capitalization stocks to 40 percent of assets,
given this sector's minimal exposure to foreign currencies and economies, the
passage last summer of the new capital gains tax rate that more heavily favors
mid caps and the relative earnings outperformance that we foresaw for mid caps
in a still robust domestic economy.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Growth of $10,000
($ in Thousands)
Fund S&P 500(3) Lipper(4)
<S> <C> <C> <C>
November-09-1994 $10,000 $10,000 $10,000
December-31-1994 $10,069 $9,916 $10,113
December-31-1995 $13,991 $13,639 $13,391
December-31-1996 $15,803 $16,769 $16,125
December-31-1997 $20,848(2) $22,362 $20,214
Average Annual Total Returns
(Fund)
Life of
1 Year Fund
31.93%(1) 26.33%(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS
(1) Figure assumes reinvestment of all distributions for the underlying fund
based on net asset value (NAV). It does not reflect the deduction of
insurance expenses, an annual contract maintenance fee, or surrender
charges.
(2) Closing value on December 31, 1997 for the underlying fund. This figure does
not reflect the deduction of any account fees or sales charges.
(3) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
broad-based index, the performance of which is based on the average
performance of 500 widely held common stocks. The Index does not include any
expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
(4) The Lipper Variable Annuity Growth Underlying Funds Average tracks the
performance of funds which normally invest in companies with long-term
earnings expected to grow significantly faster than the earnings of the
stocks represented in the major unmanaged stock indices, as reported by
Lipper Analytical Services.
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
By September it became clear that the dollar's breakout carried greater
repercussions than we had initially expected. Many of the emerging markets
countries, which had pegged their currencies to the U.S. dollar, suddenly found
that their exports had now become uncompetitive. In response to these
developments, currency devaluations began to spread from the Asian countries to
Korea, Brazil, Russia and Hong Kong. In an attempt to stabilize their own
currencies, these markets increased local interest rates, which put pressure on
their banking and real estate sectors as well as their overall economies.
Based on these trends, we now expect the U.S. economy to slow to a 2.25 percent
rate of growth, with earnings in the 5 percent range. Historically when S&P
earnings growth has slipped below 10 percent, market leadership has typically
shifted from economically sensitive issues to steady growth ones. Thus, we have
tilted the Portfolio in this direction by increasing its consumer staples
weighting to 15 percent of assets and emphasizing industries and companies with
little or no South American or Asian exposure. Holdings within this sector
include Safeway, Inc. (food chains), Rite Aid Corp. (drugstores) and Nabisco
Holdings Corp. (food companies). In the consumer/business services area (12
percent) we continue to favor radio, cable and newspaper stocks such as Clear
Channel Communications, Inc., CBS Corp., Comcast Corp. and Gannett Co., Inc.
The Portfolio remains overweighted in the health care and the
interest-rate-sensitive sectors. Within health care, the Portfolio favors drug
companies and biotechnology and medical device companies that have patent
protection and pricing power. Holdings include Lilly (Eli) & Co., Pfizer, Inc.,
Centocor Inc. and Guidant Corp. Within the interest-sensitive sector the
Portfolio focuses on regional banks, brokers, government agencies and utilities.
A sample of holdings includes Summit Bancorp, Norwest Corp., Travelers Group,
Inc., Fannie Mae and Bell Atlantic Corp.
Within its more cyclical holdings the Portfolio retains a 10 percent weighting
in technology, emphasizing software and services, which are more stable than
other areas of technology during economic slowdowns. Holdings here include
Computer Associates International, Inc. and BMC Software, Inc. The Portfolio
also maintains an 8 percent weighting in retailing, which we believe will be
bolstered by low unemployment, real wage growth and lower sourcing costs. The
Portfolio's positions include Wal-mart Stores, Inc., Dayton-Hudson Corp. and
Barnes & Noble, Inc.
Finally, the Portfolio has also established a 6 percent position in long-term
U.S. Treasuries and a 2 percent position in 30-year zero-coupon bonds. These
holdings should benefit investors as interest rates decline.
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
CORE EQUITY PORTFOLIO
The Core Equity Portfolio produced a total return of 23.07 percent for the
twelve-month period ended December 31, 1997, compared to a return of 33.35
percent for the S&P 500 Index and 25.36
percent for the Lipper Variable Annuity
Growth Underlying Funds Average. The
accompanying chart illustrates the
growth of a $10,000 investment in the
Portfolio from its inception on
November 9, 1994, through December 31,
1997, versus a similar investment in
the issues that comprise the S&P 500
Index and the Lipper Average.
During the fiscal year, several changes
were made to the Portfolio as concerns
grew that domestic corporate profit
growth would slow in 1998. Our emphasis
has been to reduce Asian exposure and
to benefit from lower interest rates.
Although the Portfolio has increased
its focus on domestic earning power, it
has not sacrificed potential earnings
growth. At year-end the Portfolio's
managers continued to believe that
health care, financial services,
information and communications
technology, airlines and aerospace
together with entertainment,
outsourcing and business services
represented areas in which the
long-term revenue growth prospects were
excellent.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Growth of $10,000
($ in Thousands)
Fund S&P 500(3) Lipper(4)
<S> <C> <C> <C>
November-09-1994 $10,000 $10,000 $10,000
December-31-1994 $10,067 $9,916 $10,113
December-31-1995 $11,405 $13,639 $13,391
December-31-1996 $14,091 $16,769 $16,125
December-31-1997 $17,343(2) $22,362 $20,214
Average Annual Total Returns
(Fund)
Life of
1 Year Fund
23.07%(1) 19.15%(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS
(1) Figure assumes reinvestment of all distributions for the underlying fund
based on net asset value (NAV). It does not reflect the deduction of
insurance expenses, an annual contract maintenance fee, or surrender
charges.
(2) Closing value on December 31, 1997 for the underlying fund. This figure does
not reflect the deduction of any account fees or sales charge.
(3) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
broad-based index, the performance of which is based on the average
performance of 500 widely held common stocks. The Index does not include any
expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
(4) The Lipper Variable Annuity Growth Underlying Funds Average tracks the
performance of funds which normally invest in companies with long-term
earnings expected to grow significantly faster than the earnings of the
stocks represented in the major unmanaged stock indices, as reported by
Lipper Analytical Services.
Among the Portfolio's largest holdings at year-end were Intel Corp., Cisco
Systems, Inc., Time Warner, Inc., Microsoft Corp., Home Depot, Inc., Procter &
Gamble Co., Delta Airlines, Inc., Wells Fargo & Co., CBS Corp. and Lilly (Eli) &
Co.
On November 6, 1997, the Board of Trustees of the Dean Witter Select Dimensions
Investment Series unanimously recommended that a new sub-advisory agreement
between InterCapital and
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
Morgan Stanley Asset Management Inc. in respect to the Core Equity Portfolio be
submitted to shareholders of the Core Equity Portfolio for approval at a special
meeting scheduled for February 26, 1998.
GLOBAL EQUITY PORTFOLIO
The Global Equity Portfolio produced a total return of 8.66 percent for the
twelve-month period ended December 31, 1997, compared to a return of 14.17
percent for the Morgan Stanley Capital
International (MSCI) World Index and
13.24 percent for the Lipper Variable
Annuity Global Underlying Funds
Average. The accompanying chart
illustrates the growth of a $10,000
investment from its inception on
November 9, 1994, through the fiscal
year ended December 31, 1997, versus a
similar hypothetical investment in the
issues that comprise the MSCI World
Index and the Lipper Average.
As noted, the United States continued
to be one of the top performers in
1997, with the S&P 500 Index advancing
33.35 percent. Markets in Asia declined
sharply, however, on the back of weak
currencies and economic turmoil.
Indonesia, the hardest hit market, was
down 74.5 percent, while Thailand and
Korea were down 74.3 percent and 67.3
percent, respectively. Hong Kong, whose
currency has not fluctuated in value,
declined 25.8 percent and the Japanese
market disappointed investors again,
falling 24.2 percent. As the Japanese
economy slowed after the reversal of an
income tax rebate and a hike in the
consumption tax, its financial system
appeared more fragile, and national politicians lost credibility in dealing with
the economic slump. In Europe, the equity markets mirrored the U.S. market's
rally, with the dual catalysts of weak domestic currencies and positive
sentiment toward European monetary union. Especially strong performance was seen
in Portugal (up 43.9 percent), Switzerland (up 43.2 percent) and Italy (up 33.6
percent). Core European markets also performed well, with Germany and the
Netherlands up 23.3 percent and 21.6 percent, respectively.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Growth of $10,000
($ in Thousands)
Fund MSCI World IX(3) Lipper(4)
<S> <C> <C> <C>
November-09-1994 $10,000 $10,000 $10,000
December-31-1994 $9,970 $9,840 $9,969
December-31-1995 $11,342 $11,681 $11,580
December-31-1996 $12,639 $13,050 $13,659
December-31-1997 $13,733(2) $14,899 $15,467
Average Annual Total Returns
(Fund)
Life of
1 Year Fund
8.66%(1) 10.62%(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS
(1) Figure assumes reinvestment of all distributions for the underlying fund
based on net asset value (NAV). It does not reflect the deduction of
insurance expenses, an annual contract maintenance fee, or surrender
charges.
(2) Closing value on December 31, 1997 for the underlying fund. This figure does
not reflect the deduction of any account fees or sales charges.
(3) The Morgan Stanley Capital International World Index (MSCI) measures
performance for a diverse range of global stock markets including the U.S.,
Canada, Europe, Australia, New Zealand, and the Far East. The Index does not
reflect the deduction of any expenses, fees or charges or reinvestment of
dividends. The Index is unmanaged and should not be considered an
investment.
(4) The Lipper Variable Annuity Global Underlying Funds Average tracks the
performance of funds which invest at least 25% of their portfolio in
securities traded outside of the United States and that may own U.S.
securities as well, as reported by Lipper Analytical Services.
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
In response to the continuing market decline in Japan and the economic crisis in
Asia, the Portfolio has reduced its exposure to those markets. The Portfolio's
asset allocation targets for the beginning of 1998 are: Europe (38 percent),
United States (35 percent), Japan (6 percent), emerging Asia (6 percent), Latin
America (6 percent) and the remainder in cash. During 1997 the Portfolio's
performance was negatively affected by its larger positions in Japan and Asia.
Among the Portfolio's largest holdings at year-end were Glaxo Wellcome PLC,
Shell Transport & Trading Co. PLC, Bed Bath & Beyond, Inc., Diebold, Inc. and
Gateway 2000, Inc.
MID-CAP GROWTH PORTFOLIO
The Mid-Cap Growth Portfolio began operations on January 21, 1997. From
inception through December 31, 1997, the Portfolio produced a total return of
15.84 percent. This compares to a return
of 27.47 percent for the S&P Midcap
Index and 14.62 percent for the Lipper
Variable Annuity Mid-Cap Growth
Underlying Funds Average. The
accompanying chart illustrates the
growth of a $10,000 investment in the
Portfolio from inception through
December 31, 1997, versus a similar
investment in the issues that comprise
the S&P Midcap Index and the Lipper
Average.
On December 31, 1997, approximately 80
percent of the Portfolio was allocated
to common stocks, with the remaining 20
percent in short-term investments.
Early in the fiscal year the Portfolio
was positioned in favor of more
economically sensitive industries
(e.g., technology, media, financial
services). Then the character of the
market leadership started to change
toward small capitalization and
economically sensitive companies. This
shift was brought on by three trends
manifesting in May and June. The first
was a capital gains tax cut that caused
the markets to favor
capital-appreciation stocks over
dividend-paying issues. The second was
a strengthening of the
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Growth of $10,000
($ in Thousands)
Fund S&P Midcap(3) Lipper(4)
<S> <C> <C> <C>
January 21, 1997 $10,000 $10,000 $10,000
January 31, 1997 $10,010 $10,000 $10,000
February 28, 1997 $9,748 $9,918 $9,605
March 31, 1997 $9,400 $9,495 $9,063
April 30, 1997 $9,399 $9,742 $9,230
May 31, 1997 $10,073 $10,593 $10,100
June 30, 1997 $10,361 $10,895 $10,452
July 31, 1997 $11,098 $11,969 $11,309
August 31, 1997 $11,126 $11,955 $11,228
September 30, 1997 $11,739 $12,642 $11,955
October 31, 1997 $11,094 $12,092 $11,365
November 30, 1997 $11,076 $12,271 $11,353
December 31, 1997 $11,584(2) $12,747 $11,462
Cumulative Total Returns
(Fund)
Life of Fund
15.84%(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS
(1) Figure assumes reinvestment of all distributions for the underlying fund
based on net asset value (NAV). It does not reflect the deduction of
insurance expenses, an annual contract maintenance fee, or surrender
charges.
(2) Closing value on December 31, 1997 for the underlying fund. This figure does
not reflect the deduction of any account fees or sales charges.
(3) The S&P Midcap Index is a market-value weighted index, the performance of
which is based on the average performance of 400 domestic stocks chosen for
market size, liquidity, and industry group representation. The Index does
not include any expenses, fees or charges. The Index is unmanaged and should
not be considered an investment.
(4) The Lipper Variable Annuity Mid-Cap Growth Underlying Funds Average tracks
the performance of funds which by prospectus or portfolio practice invest
primarily in companies with market capitalizations less than $5 billion at
the time of purchase, as reported by Lipper Analytical Services.
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
dollar and economic turbulence in Asia. During such times, small and mid-tier
stocks that are domestically oriented tend to perform better. The last trend was
that the earnings of mid-cap stocks accelerated faster than those of larger-cap
stocks, causing the group as a whole to outperform others.
Throughout September, the market leadership continued to be centered on
mid-capitalization stocks as money that would normally flow into more
speculative foreign markets began being directed toward more speculative U.S.
stocks. However, this robust trend was abruptly halted when market turbulence in
Asia reverberated around the world.
During October and November it was the industries with the greatest foreign
exposure and economic sensitivity that experienced the most severe corrections.
In this environment the market leadership narrowed and only large defensive
stocks performed well. Over this period the Portfolio reduced its overweighted
position in technology and instead became overweighted in the interest-sensitive
and health care groups.
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
GROWTH AND INCOME
BALANCED PORTFOLIO
The Balanced Portfolio achieved a total return of 17.87 percent for the
twelve-month period ended December 31, 1997. This compares to a return of 18.95
percent for the Lipper Variable Annuity
Balanced Underlying Funds Average,
33.35 percent for the S&P 500 Index and
9.65 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
accompanying chart illustrates the
growth of a $10,000 investment in the
Portfolio from its inception on
November 9, 1994, through December 31,
1997, versus a similar investment in
the issues that comprise the S&P 500
Index, the Lehman Brothers Aggregate
Bond Index and the Lipper Average.
At year-end approximately 64.3 percent
of the Portfolio's net assets were
invested in equities, with the
remaining 32.9 percent in fixed-income
securities. The Portfolio's equity
component was well diversified across
industry sectors including transport
and aerospace, electronics
(semiconductors and equipment),
communications equipment and computer
software, computer services and air
transport and the automotive sectors.
The Portfolio's largest equity holdings
were Intel Corp., Cisco Systems, Inc.,
Time Warner, Inc., Microsoft Corp.,
Home Depot, Inc., and Proctor & Gamble
Co.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Growth of $10,000
($ in Thousands)
Fund S&P 500(3) Lehman(4) Lipper(5)
<S> <C> <C> <C> <C>
November-09-1994 $10,000 $10,000 $10,000 $10,000
December-31-1994 $10,060 $9,916 $10,069 $10,081
December-31-1995 $12,359 $13,639 $11,929 $12,476
December-31-1996 $14,033 $16,769 $12,362 $14,053
December-31-1997 $16,542(2) $22,362 $13,556 $16,716
Average Annual Total Returns
(Fund)
Life of
1 Year Fund
17.87%(1) 17.37%(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS
(1) Figure assumes reinvestment of all distributions for the underlying fund
based on net asset value (NAV). It does not reflect the deduction of
insurance expenses, an annual contract maintenance fee, or surrender
charges.
(2) Closing value on December 31, 1997 for the underlying fund. This figure does
not reflect the deduction of any account fees or sales charges.
(3) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
broad-based index, the performance of which is based on the average
performance of 500 widely held common stocks. The performance of the Index
does not include any expenses, fees or charges. The Index is unmanaged and
should not be considered an investment.
(4) The Lehman Brothers Aggregate Bond Index tracks the performance of all U.S.
Government agency and Treasury securities, investment-grade corporate debt
securities, agency mortgage-backed securities and asset-backed securities.
The Index does not include any expenses, fees or charges. The Index is
unmanaged and should not be considered an investment.
(5) The Lipper Variable Annuity Balanced Underlying Funds Average tracks the
performance of funds whose primary objective is to conserve principal by
maintaining at all times a balanced portfolio of both stocks and bonds.
Typically, the stock/bond ratio ranges around 60%/40%, as reported by Lipper
Analytical Services.
During the fourth quarter the Portfolio's duration was lengthened to its current
position of 110 percent of its benchmark index. The Portfolio also maintained an
overweighting in Aaa/AAA-rated asset-backed securities. Although these
securities underperformed as the spreads of all non-Treasury issues widened
early in the quarter, they continue to offer excellent value.
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
On November 6, 1997, the Board of Trustees of Dean Witter Select Dimensions
Investment Series unanimously recommended that a proposal to change the Balanced
Portfolio's investment objective from high total return through a combination of
income and capital appreciation to capital growth with reasonable current income
be submitted to shareholders of the Balanced Portfolio for approval at a special
meeting scheduled to be held on February 26, 1998.
DIVIDEND GROWTH PORTFOLIO
For the twelve-month period ended December 31, 1997, the Dividend Growth
Portfolio posted a total return of 26.12 percent. This compares to a return of
33.35 percent for the S&P 500 Index and
27.21 percent for the Lipper Variable
Annuity Growth and Income Underlying
Funds Average. The accompanying chart
illustrates the growth of a $10,000
investment in the Portfolio from its
inception on November 9, 1994, through
December 31, 1997, versus a similar
hypothetical investment in the issues
that comprise the Index and the Lipper
Average.
The Portfolio's underperformance of the
broad market was in large part due to
exceptional strength in
small-capitalization stocks at various
times during the year, in particular
technology, which afford little or no
current yield.
Since its inception the Portfolio has
maintained a fully invested posture,
with 98.7 percent of net assets
committed to common stocks at year-end.
On December 31, 1997, the Portfolio
owned 37 equity issues spread among 29
industry groups. Six new stock
positions (PPG Industries, Inc.,
American Home Products Corp., Lincoln
National Corp., Whirlpool Corp., Tricon
Global Restaurants, Inc. and Unicom Corp.) were initiated during the fiscal
year, while the Portfolio's positions in Pacific Gas & Electric Co., El Paso
Natural Gas Co. and Newport News Shipbuilding, Inc. were liquidated.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Growth of $10,000
($ in Thousands)
Fund S&P 500(3) Lipper(4)
<S> <C> <C> <C>
November 9, 1994 $10,000 $10,000 $10,000
December 31, 1994 $9,995 $9,916 $10,117
December 31, 1995 $14,005 $13,639 $13,344
December 31, 1996 $17,435 $16,769 $16,131
December 31, 1997 $21,990(2) $22,362 $20,520
Average Annual Total Returns
(Fund)
Life of
1 Year Fund
26.12%(1) 28.49%(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS
(1) Figure assumes reinvestment of all distributions for the underlying fund
based on net asset value (NAV). It does not reflect the deduction of
insurance expenses, an annual contract maintenance fee, or surrender
charges.
(2) Closing value on December 31, 1997 for the underlying fund. This figure does
not reflect the deduction of any account fees or sales charges.
(3) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
broad-based Index, the performance of which is based on the average
performance of 500 widely held common stocks. The Index does not include any
expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
(4) The Lipper Variable Annuity Growth and Income Underlying Funds Average
tracks the performance of funds which combine a growth-of-earnings
orientation and an income requirement for level and/or rising dividends, as
reported by Lipper Analytical Services.
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
UTILITIES PORTFOLIO
The Utilities Portfolio produced a total return of 26.45 percent for the
twelve-month period ended December 31, 1997, compared to a return of 33.35
percent for the broad-based S&P 500 Index and
26.13 percent for the Lipper Variable
Annuity Utilities Underlying Funds
Average. The accompanying chart
illustrates the growth of a $10,000
investment in the Portfolio from its
inception on November 9, 1994, through
December 31, 1997, versus a similar
hypothetical investment in the issues
that comprise the S&P 500 Index and the
Lipper Average.
During 1997, the utilities industry
benefited from a blend of improving
fundamentals, a favorable interest-rate
environment and the continuation of
industrywide merger and acquisition
activity and speculation. During the
second half of the year, persistent
stock market volatility from the Asian
currency crisis prompted investors to
seek the relative safety and defensive
characteristics that utilities offer.
In this context, electric utilities
were a chief beneficiary of the
cautious investment environment, with
much of the impetus being a flight to
quality and safety. Additionally, electric utilities continued to witness fair
and balanced deregulation initiatives by many state utility commissions, which
tempered the market's concerns and strengthened shareholder confidence. Electric
utility merger and acquisition activity, such as the recent American Electric
Power/Central & Southwest proposal, was consistently evident throughout the year
as many companies strove to enhance their earnings outlook and expand their
product offerings in preparation for the new competitive environment.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Growth of $10,000
($ in Thousands)
Fund S&P 500(3) Lipper(4)
<S> <C> <C> <C>
November 9, 1994 $10,000 $10,000 $10,000
December 31, 1994 $10,065 $9,916 $10,014
December 31, 1995 $12,888 $13,639 $12,759
December 31, 1996 $13,981 $16,769 $14,133
December 31, 1997 $17,679(2) $22,362 $17,826
Average Annual Total Returns
(Fund)
Life of
1 Year Fund
26.45%(1) 19.88%(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS
(1) Figure assumes reinvestment of all distributions for the underlying fund
based on net asset value (NAV). It does not reflect the deduction of
insurance expenses, an annual contract maintenance fee, or surrender
charges.
(2) Closing value on December 31, 1997 for the underlying fund. This figure does
not reflect the deduction of any account fees or sales charges.
(3) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
broad-based index, the performance of which is based on the average
performance of 500 widely held common stocks. The Index does not include any
expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
(4) The Lipper Variable Annuity Utility Underlying Funds Average tracks the
performance of funds which invest 65% of their equity portfolio in utility
shares, as reported by Lipper Analytical Services.
The telecommunications sector also performed well in 1997, since the sector
benefited from numerous mergers and acquisitions (e.g., Bell Atlantic and Nynex)
as well as from strong earnings growth fueled by an expanding economy and
high-growth applications including wireless, data and
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
selective international investments. Further reflecting the sector's strong
performance was a turnaround in the share price of AT&T Corp., whose new
management and objectives appealed to investors.
While mild weather patterns toward the end of 1997 adversely affected natural
gas prices, gas pipeline companies (e.g., Questar Corp.) exhibited strong
overall performance benefiting from strong growth in core earnings and
anticipation of a future acceleration in nonregulated earnings.
On December 31, 1997, 88 percent of the Portfolio's net assets were allocated to
utility and utility-related equities. Within this component, 42 percent was
allocated to electric utilities, 37 percent to telecommunications and 21 percent
to natural gas. The Portfolio's fixed-income holdings accounted for 4 percent of
net assets, with 8 percent held in cash and cash equivalents. Further enhancing
overall Portfolio diversification were selective foreign securities, which
accounted for 10 percent of net assets and focused on the growth area of global
telecommunications.
Looking forward, we believe that the long-term outlook for the energy and
telecommunications sectors is positive, as these sectors continue to benefit
from globalization, privatization and strong product demand.
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
VALUE-ADDED MARKET SERIES PORTFOLIO
For the twelve-month period ended December 31, 1997, the Value-Added Market
Portfolio produced a total return of 26.12 percent, compared to a return of
33.35 percent for the S&P 500 Index and
27.21 percent for the Lipper Variable
Annuity Growth and Income Underlying
Funds Average. The accompanying chart
illustrates the growth of a $10,000
investment in the Portfolio from its
inception on November 9, 1994, through
December 31, 1997, versus a similar
hypothetical investment in the issues
that comprise the S&P 500 Index and the
Lipper Average.
Although the Portfolio registered
strong returns during this period, it
lagged behind the
capitalization-weighted S&P 500
because, while the Portfolio invests in
substantially all the stocks of the S&P
500, it equally weights all the
positions. The effect is to have the
Portfolio emphasize smaller- to
medium-cap companies that have
historically outperformed larger caps
over long time periods. However, during
the twelve-month period under review,
large-cap stocks as well as stocks in
the financial services sector--two
areas in which the Portfolio is
underweighted--were market leaders.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Growth of $10,000
($ in Thousands)
Fund S&P 500(3) Lipper(4)
<S> <C> <C> <C>
November 9, 1994 $10,000 $10,000 $10,000
December 31, 1994 $9,924 $9,916 $10,117
December 31, 1995 $12,617 $13,639 $13,344
December 31, 1996 $14,861 $16,769 $16,131
December 31, 1997 $18,743(2) $22,362 $20,520
Average Annual Total Returns
(Fund)
Life of
1 Year Fund
26.12%(1) 22.13%(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS
(1) Figure assumes reinvestment of all distributions for the underlying fund
based on net asset value (NAV). It does not reflect the deduction of
insurance expenses, an annual contract maintenance fee, or surrender
charges.
(2) Closing value on December 31, 1997 for the underlying fund. This figure does
not reflect the deduction of any account fees or sales charges.
(3) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
broad-based index, the performance of which is based on the average
performance of 500 widely held common stocks. The Index does not include any
expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
(4) The Lipper Variable Annuity Growth and Income Underlying Funds Average
tracks the performance of funds which combine a growth-of-earnings
orientation and an income requirement for level and/or rising dividends, as
reported by Lipper Analytical Services.
Large-capitalization stocks have been the market leaders for the last three
years overshadowing the solid returns provided by small- and mid-cap stocks. The
Asian currency crisis may lead investors in emerging markets to evaluate the
attractiveness of the neglected domestic small- and mid-cap sectors. Such a
scenario would bode well for the equally weighted strategy employed by the
Portfolio.
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
INCOME
DIVERSIFIED INCOME PORTFOLIO
The Diversified Income Portfolio produced a total return of 8.32 percent for the
twelve-month period ended December 31, 1997, compared to a return of 7.86
percent for the Lehman Brothers
Government/Corporate Intermediate Bond
Index and 9.53 percent for the Lipper
Variable Annuity General Bond
Underlying Funds Average. The
accompanying chart illustrates the
growth of a $10,000 investment in the
Portfolio from its inception on
November 9, 1994, through the fiscal
year ended December 31, 1997, versus a
similar hypothetical investment in the
issues that comprise the Lehman Index
and the Lipper Average.
At year-end, the Portfolio was divided
equally among high-quality shorter-term
global securities (principally U.S. and
foreign government securities),
intermediate-term U.S. government and
agency mortgage-backed securities and
lower-rated, higher-yielding corporate
bonds.
GLOBAL SHORT-TERM SECURITIES COMPONENT.
Against a background of uncertainty in
the global bond markets, the average
maturity of the Portfolio's global bond
component was maintained at about one
and one-half years, minimizing this
component's exposure to fluctuations in
the interest-rate markets. More importantly, the currency risks of the European
positions were effectively hedged, safeguarding these investments from the
impact of the rising U.S. dollar. The global bond component decreased its
investments in Australia and New Zealand, since the yields in these markets were
deemed no longer attractive. The resulting proceeds from these transactions were
shifted to the U.S. market. In August, as the dollar began to move lower, most
of the component's currency hedges were removed, allowing the Portfolio to
participate in the values of its foreign currency holdings.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Growth of $10,000
($ in Thousands)
Fund Lehman(3) Lipper(4)
<S> <C> <C> <C>
November 9, 1994 $10,000 $10,000 $10,000
December 31, 1994 $10,076 $10,035 $10,016
December 31, 1995 $10,777 $11,574 $11,812
December 31, 1996 $11,806 $12,043 $12,699
December 31, 1997 $12,788(2) $12,990 $13,609
Average Annual Total Returns
(Fund)
Life of
1 Year Fund
8.32%(1) 8.14%(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS
(1) Figure assumes reinvestment of all distributions for the underlying fund
based on net asset value (NAV). It does not reflect the deduction of
insurance expenses, an annual contract maintenance fee, or surrender
charges.
(2) Closing value on December 31, 1997 for the underlying fund. This figure does
not reflect the deduction of any account fees or sales charges.
(3) The Lehman Brothers Government/Corporate Intermediate Bond Index tracks the
performance of government and corporate bonds, including U.S. Government
agency and U.S. Treasury securities and corporate and yankee bonds with
maturities of 1 to 10 years. The Index does not include any expenses, fees
or charges. The Index is unmanaged and should not be considered an
investment.
(4) The Lipper Variable Annuity General Bond Underlying Funds Average tracks the
performance of funds that do not have any quality or maturity restrictions
and intend to keep the bulk of assets in corporate and government debt
issues, as reported by Lipper Analytical Services.
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
Going forward, we anticipate a continuation of the global bond component's
strategy of global diversification while favoring markets that exhibit improving
inflation outlooks and fiscal discipline. In addition, we will continue to place
an emphasis on securities and markets that offer compelling values and low
relative risk.
INTERMEDIATE-TERM U.S. GOVERNMENT SECURITIES COMPONENT. As of December 31, 1997,
this component of the Portfolio was invested primarily in mortgage-backed
securities issued by the Federal National Mortgage Association (FNMAs), the
Government National Mortgage Association (GNMAs) and the Federal Home Loan
Mortgage Corporation (FHLMCs). U.S. agency and Treasury securities accounted for
24 percent and 9 percent of the Portfolio, respectively.
We believe that mortgage-backed securities continue to provide significant
long-term value and, in the current investment environment, offer not only an
incremental yield incentive over U.S. Treasury securities of similar maturity
but also the potential for total return.
LONG-TERM HIGH-YIELD SECURITIES COMPONENT. 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 of the market that provide
attractive yields as well as appreciation potential. We continue to feel that
many of these issues are very attractive long-term investments. However, given
the lower market yields available today and the potential for added market
volatility down the road, we have taken some defensive steps with the high-yield
component. These include increasing its allocation to the higher-quality end of
the market (BB-rated issues or higher). We feel that these holdings will better
protect shareholders during a potentially nervous market environment as well as
provide the liquidity and portfolio flexibility needed to take advantage of
future opportunities. In addition, the high-yield component continues to limit
its exposure to cyclical industries and remains focused on more-predictable,
recession-resistant growth sectors of the economy such as broadcast media, cable
& telecommunications and foods & beverages. In some of these sectors, such as
broadcast media and cable & telecommunications, we expect to see continued
consolidation, which should bode well for many of this high-yield component's
individual holdings.
The one- to two-year outlook for the high-yield market remains favorable, given
our expectations for continued growth in the economy and generally improving
credit quality in the high-yield marketplace. We caution, however, that during
this period the possibility exists for another round of investor nervousness,
given the possibility of further foreign emerging market disruptions and the
potential for Federal Reserve Board moves later in the year. As discussed above,
this component of
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
the Portfolio is well positioned to take advantage of any potential market
disruptions, given its more conservative positioning today. Assuming that the
longer-term market outlook remains unchanged, these market disruptions may be
viewed as buying opportunities, allowing the high-yield component to lock in
attractive yields and prices for its shareholders.
NORTH AMERICAN GOVERNMENT SECURITIES PORTFOLIO
The North American Government Securities Portfolio produced a total return of
5.91 percent for the twelve-month period ended December 31, 1997, compared to a
return of 7.11 percent for the Lehman
Brothers Short (1 - 5 year) U.S.
Government Index and 4.31 percent for
the Lipper Variable Annuity Global
Income Underlying Funds Average. The
accompanying chart illustrates the
growth of a $10,000 investment in the
Portfolio from its inception on
November 9, 1994, through December 31,
1997, versus a similar hypothetical
investment in the issues that comprise
the Lehman Index and Lipper Average.
TCW Funds Management, Inc. (TCW) is the
Portfolio's sub-adviser.
As noted, 1997 turned into a stellar
year for fixed-income investments,
thanks to declining inflationary
pressures and strong investor demand
for all types of bonds. Although
interest rates rose rapidly during the
first quarter of the year on news of
strong economic growth, once the
inflationary pressures appeared to be
benign, investors quickly gained
confidence and drove interest rates
lower. After beginning the year at 6.64
percent, the 30-year benchmark U.S.
Treasury bond quickly rose to 7.10
percent by early April and then
steadily declined to end the year at 5.92 percent, close to its historic low.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Growth of $10,000
($ in Thousands)
Fund Lehman(3) Lipper(4)
<S> <C> <C> <C>
November 9, 1994 $10,000 $10,000 $10,000
December 31, 1994 $10,061 $10,022 $9,844
December 31, 1995 $10,705 $11,291 $11,497
December 31, 1996 $11,171 $11,810 $12,649
December 31, 1997 $11,831(2) $12,650 $13,194
Average Annual Total Returns
(Fund)
Life of
1 Year Fund
5.91%(1) 5.50%(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS
(1) Figure assumes reinvestment of all distributions for the underlying fund
based on net asset value (NAV). It does not reflect the deduction of
insurance expenses, an annual contract maintenance fee, or surrender
charges.
(2) Closing value on December 31, 1997 for the underlying fund. This figure does
not reflect the deduction of any account fees or sales charges.
(3) The Lehman Brothers Short (1-5) U.S. Government Index measures the
performance of all U.S. Government agency and U.S. Treasury securities with
maturities of one to five years. The Index does not include any expenses,
fees or charges. The Index is unmanaged and should not be considered an
investment.
(4) The Lipper Variable Annuity Global Income Underlying Funds Average tracks
the performance of funds that state in their prospectus that they invest
primarily in U.S. dollar and non-U.S. dollar debt securities of issuers
located in at least three countries, one of which may be the United States,
as reported by Lipper Analytical Services.
Stable prepayment rates and strong investor demand helped mortgages outperform
both Treasuries and corporates during the first half of 1997. Although mortgage
spreads appeared tight on a historic
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
basis, the sector retained much of its yield advantage over other fixed-income
sectors. But in the second half of the year the mortgage sector fared less well.
Declining interest rates intensified investors' fears about accelerating
prepayment rates, and spreads widened.
The weakness in Asia has had a positive effect on the U.S. bond market. The
United States bond market has rallied on days when Asian equity markets declined
as investors sold stocks and bought U.S. bonds. Additionally, the Federal
Reserve has been reluctant to raise rates in the U.S. and possibly exacerbate
financial conditions in Asia. If the U.S. economy does slow in response to the
problems in Asia, inflationary pressures are expected to subside further.
High-grade U.S. fixed-income investments have emerged as attractive investment
alternatives from the turmoil of global financial markets.
In Mexico and Canada political and economic conditions continued to improve
during the year. The Portfolio currently intends to invest up to 10 percent of
its total assets in Mexico, due to the availability there of attractive
investment opportunities and favorable market conditions. The Portfolio has
heretofore remained on the sidelines with respect to making investments in
Canada but continues to monitor conditions in search of attractive investments.
TCW's long-term outlook on the U.S. bond market remains favorable. Many of the
fundamental and technical factors that supported the bond rally in 1997 remain
intact. Inflation is under control even though unemployment stands at a 24-year
low. Wages are rising along with productivity so that producers don't have to
pass along higher costs. The dollar is strong, encouraging foreign investors to
buy U.S. bonds, and commodity prices are dropping, signaling a continuance in
the benign inflationary environment. A U.S. budget surplus is even in sight,
raising the possibility of a government bond shortage.
MONEY MARKET PORTFOLIO
As of December 31, 1997, the Money Market Portfolio had assets in excess of $84
million with an average life of 56 days. The Portfolio's total return for the
most recent twelve-month fiscal period was 5.21 percent and its annualized yield
for December was 5.19 percent.
At year-end, approximately 85 percent of the Portfolio was invested in
high-quality commercial paper, 8 percent in certificates of deposit and
short-term bank notes of major, financially strong commercial banks, and 7
percent in the bankers' acceptances of such institutions. At the end of the
period under review, approximately 92 percent of the Portfolio's holdings 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
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
structured notes or derivatives that could fluctuate excessively with changing
interest rates. As always, the Portfolio serves as a useful investment for
liquidity, preservation of capital and a yield that reflects the prevailing
money market conditions.
At this time we anticipate a slight moderation in the pace of economic activity
during the first half of 1998, with no major adverse surprises in the rate of
inflation. We do not expect the investment yields available to the Portfolio
early in 1998 to differ dramatically from those available during the second half
of 1997.
We appreciate your support of 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
* * *
THE NET ASSET VALUES (THE "NAVs") PRESENTED IN THE FINANCIAL STATEMENTS OF DEAN
WITTER SELECT DIMENSIONS INVESTMENT SERIES (THE "FUND") REFLECT THE NAVs OF EACH
OF THE RESPECTIVE PORTFOLIOS. THE FUND IS THE UNDERLYING INVESTMENT FOR VARIOUS
VARIABLE ANNUITY CONTRACTS AND AS SUCH, THE NAVs OF EACH PORTFOLIO ARE NOT
INDICATIVE OF THE UNIT VALUES OF THE INSURANCE COMPANY SEPARATE ACCOUNTS.
<PAGE>
MONEY MARKET
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER (85.1%)
AUTOMOTIVE - FINANCE (10.9%)
$ 4,200 Chrysler Financial Corp........................... 5.66-5.74% 02/02/98-03/02/98 $ 4,169,859
900 Ford Motor Credit Co.............................. 5.80 01/16/98 897,844
4,150 General Motors Acceptance Corp.................... 5.71-5.84 01/20/98-04/16/98 4,114,115
-----------
9,181,818
-----------
BANK HOLDING COMPANIES (7.7%)
1,500 BankAmerica Corp.................................. 5.69 01/14/98 1,496,994
3,550 Bankers Trust New York Corp....................... 5.72-5.75 01/08/98-02/19/98 3,531,448
1,500 Morgan (J.P.) & Co. Inc........................... 5.80 04/23/98 1,473,447
-----------
6,501,889
-----------
BANKS - COMMERCIAL (18.7%)
4,525 Abbey National North America Corp................. 5.67-5.72 01/22/98-03/03/98 4,502,466
2,430 ABN-AMRO North American Finance Inc............... 5.69-5.85 02/05/98-04/20/98 2,411,826
1,000 Barclays U.S. Funding Corp........................ 5.81 03/12/98 988,897
1,000 Deutsche Bank Financial Inc....................... 5.64 01/16/98 997,685
1,500 Dresdner U.S. Finance Inc......................... 5.81 02/06/98 1,491,375
1,320 KfW International Finance Inc..................... 5.67 03/26/98 1,302,998
1,500 National Australia Funding (DE) Inc............... 5.65 01/09/98 1,498,150
1,000 Rabobank USA Financial Corp....................... 5.76 04/30/98 981,423
1,500 WestPac Capital Corp.............................. 5.72 01/12/98 1,497,443
-----------
15,672,263
-----------
BROKERAGE (1.3%)
1,090 Goldman Sachs Group L.P........................... 5.80 03/09/98 1,078,396
-----------
FINANCE - COMMERCIAL (3.0%)
2,600 CIT Group Holdings, Inc........................... 5.71-5.81 02/23/98-06/19/98 2,556,629
-----------
FINANCE - CONSUMER (24.0%)
3,555 American Express Credit Corp...................... 6.45 01/02/98 3,554,363
3,270 American General Finance Corp..................... 5.62-5.76 01/07/98-01/26/98 3,261,609
4,200 Avco Financial Services, Inc...................... 5.68-5.82 02/25/98-04/08/98 4,155,515
4,300 Beneficial Corp................................... 5.64-5.83 01/05/98-02/27/98 4,281,695
2,500 Household Finance Corp............................ 5.75-5.81 02/12/98-04/24/98 2,466,536
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
MONEY MARKET
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 2,500 Norwest Financial Inc............................. 5.63-5.78% 01/13/98-03/16/98 $ 2,480,671
-----------
20,200,389
-----------
FINANCE - CORPORATE (2.4%)
2,000 Ciesco, L.P....................................... 5.79 04/09/98 1,969,076
-----------
FINANCE - DIVERSIFIED (4.6%)
3,886 General Electric Capital Corp..................... 5.66-5.78 1/2/98-3/31/98 3,868,538
-----------
INDUSTRIALS (1.7%)
1,470 Caterpillar Financial Services Corp............... 5.65 02/04/98 1,462,295
-----------
OFFICE EQUIPMENT (1.2%)
1,000 IBM Credit Corp................................... 5.70 02/09/98 993,966
-----------
RETAIL (5.1%)
4,300 Sears Roebuck Acceptance Corp..................... 5.62-5.84 01/06/98-02/24/98 4,285,214
-----------
UTILITIES - FINANCE (4.5%)
3,795 National Rural Utilities Cooperative Finance
Corp............................................ 5.60-5.79 02/03/98-04/14/98 3,751,723
-----------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $71,522,196)..................................................... 71,522,196
-----------
BANKERS' ACCEPTANCES (6.6%)
3,623 BankBoston, N.A................................... 5.73-5.86 01/20/98-05/27/98 3,572,925
2,000 First Union National Bank......................... 5.78 06/15/98 1,948,483
-----------
TOTAL BANKERS' ACCEPTANCES
(AMORTIZED COST $5,521,408)...................................................... 5,521,408
-----------
CERTIFICATES OF DEPOSIT (3.6%)
1,035 Chase Manhattan Bank (USA)........................ 5.64 01/21/98 1,035,000
2,000 Union Bank of California, N.A..................... 5.82 04/14/98 2,000,000
-----------
TOTAL CERTIFICATES OF DEPOSIT
(AMORTIZED COST $3,035,000)...................................................... 3,035,000
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
MONEY MARKET
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM BANK NOTES (4.1%)
$ 2,000 F.C.C. National Bank.............................. 5.79% 06/17/98 $ 2,000,000
1,500 La Salle National Bank............................ 5.82 03/10/98 1,500,000
-----------
TOTAL SHORT-TERM BANK NOTES
(AMORTIZED COST $3,500,000)...................................................... 3,500,000
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(AMORTIZED COST $83,578,604) (a).................................................. 99.4 % 83,578,604
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.................................... 0.6 466,790
------ -----------
NET ASSETS........................................................................ 100.0 % $84,045,394
------ -----------
------ -----------
</TABLE>
- ---------------------
(a) Cost is the same for federal income tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
NORTH AMERICAN GOVERNMENT SECURITIES
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (17.7%)
$ 250 U.S. Treasury Note................................ 5.50 % 11/15/98 $ 249,692
200 U.S. Treasury Note................................ 5.50 02/28/99 199,724
150 U.S. Treasury Note................................ 5.50 04/15/00 149,432
100 U.S. Treasury Note................................ 6.00 08/15/99 100,491
200 U.S. Treasury Note................................ 6.375 05/15/99 201,844
----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $902,588)......................................................... 901,183
----------
MORTGAGE-BACKED SECURITIES (61.3%)
86 Federal Home Loan Mortgage Corp................... 5.50 11/01/00 84,001
55 Federal Home Loan Mortgage Corp................... 6.00 11/01/99 54,660
19 Federal Home Loan Mortgage Corp................... 7.00 07/01/00 18,889
296 Federal Home Loan Mortgage Corp................... 7.00 09/01/17 298,649
83 Federal Home Loan Mortgage Corp................... 7.50 05/01/11 85,194
159 Federal Home Loan Mortgage Corp................... 7.50 06/01/11 162,769
128 Federal Home Loan Mortgage Corp................... 7.50 08/01/11 131,282
247 Federal Home Loan Mortgage Corp................... 8.00 12/01/26 255,869
263 Federal National Mortgage Assoc................... 5.851 04/01/27 272,445
74 Federal National Mortgage Assoc................... 6.00 09/01/00 72,903
169 Federal National Mortgage Assoc................... 6.092 05/01/27 172,716
200 Federal National Mortgage Assoc................... 6.294 12/01/26 206,668
72 Federal National Mortgage Assoc................... 6.50 07/01/02 72,304
231 Federal National Mortgage Assoc................... 6.892 05/01/27 237,281
79 Federal National Mortgage Assoc................... 7.00 06/01/02 79,949
71 Federal National Mortgage Assoc................... 7.00 10/01/02 72,098
124 Federal National Mortgage Assoc................... 7.00 01/01/03 125,706
246 Federal National Mortgage Assoc................... 7.75 01/01/22 255,410
61 Federal National Mortgage Assoc................... 7.811 09/01/26 62,466
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
NORTH AMERICAN GOVERNMENT SECURITIES
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 55 Federal National Mortgage Assoc................... 8.075% 07/01/24 $ 57,841
117 Government National Mortgage Assoc................ 7.00 02/20/23 119,168
71 Government National Mortgage Assoc................ 7.00 01/20/26 72,503
77 Government National Mortgage Assoc................ 7.375 06/20/25 79,276
71 Government National Mortgage Assoc................ 7.375 05/20/26 73,038
----------
TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $3,082,223)....................................................... 3,123,085
----------
SHORT-TERM INVESTMENTS (20.1%)
U.S. GOVERNMENT AGENCIES (a) (15.1%)
200 Federal Farm Credit Bank.......................... 5.65-5.70 01/14/98-02/10/98 198,955
570 Federal Home Loan Mortgage Corp................... 5.61-5.70 01/05/98-01/14/98 569,453
----------
TOTAL U.S. GOVERNMENT AGENCIES
(IDENTIFIED COST $768,408)......................................................... 768,408
----------
REPURCHASE AGREEMENT (5.0%)
252 The Bank of New York (dated 12/31/97; proceeds
$252,339) (b) (IDENTIFIED COST $252,285) ....... 3.875 01/02/98 252,285
----------
TOTAL SHORT-TERM INVESTMENTS
(AMORTIZED COST $1,020,693)........................................................ 1,020,693
----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $5,005,504) (c)...................................................... 99.1 % 5,044,961
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................................ 0.9 46,486
------ ----------
NET ASSETS............................................................................ 100.0 % $5,091,447
------ ----------
------ ----------
</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 $251,641 U.S. Treasury Note 5.875% due 02/28/99 valued at
$257,331.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $46,378 and the
aggregate gross unrealized depreciation is $6,921, resulting in net
unrealized appreciation of $39,457.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DIVERSIFIED INCOME
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
GOVERNMENT & CORPORATE BONDS (95.6%)
DENMARK (e) (2.1%)
GOVERNMENT OBLIGATIONS
DKr 5,800 Denmark Treasury Note....................................... 9.00 % 11/15/98 $ 879,624
3,000 Denmark Treasury Note....................................... 6.00 12/10/99 450,160
-----------
TOTAL DENMARK............................................................................. 1,329,784
-----------
ITALY (e) (3.7%)
GOVERNMENT OBLIGATIONS
ITL 75M Italy Treasury Bond......................................... 10.50 04/01/00 47,285
3,900M Italy Treasury Bond......................................... 5.50 09/15/00 2,247,095
-----------
TOTAL ITALY............................................................................... 2,294,380
-----------
SPAIN (e) (2.0%)
GOVERNMENT OBLIGATION
ESP 180M Spain Treasury Bond......................................... 6.75 04/15/00 1,234,606
-----------
SWEDEN (e) (2.6%)
GOVERNMENT OBLIGATIONS
SEK 2,700 Sweden Treasury Bond........................................ 11.00 01/21/99 360,328
9,100 Sweden Treasury Bond........................................ 10.25 05/05/00 1,265,936
-----------
TOTAL SWEDEN.............................................................................. 1,626,264
-----------
UNITED STATES (85.2%)
AEROSPACE (0.3%)
$ 200 Sabreliner Corp. (Series B)................................. 12.50 04/15/03 209,500
-----------
AUTOMOTIVE (0.2%)
200 APS, Inc.................................................... 11.875 01/15/06 106,000
-----------
BROADCAST MEDIA (1.5%)
2 Australis Media Ltd......................................... 15.75 ++ 05/15/03 654
200 Echostar DBS Corp........................................... 12.50 07/01/02 217,000
100 Paxson Communications Corp.................................. 11.625 10/01/02 107,250
200 Spanish Broadcasting System, Inc............................ 12.50 06/15/02 230,000
550 TCI Satellite Entertainment Corp. - 144A*................... 12.25 ++ 02/15/07 369,875
-----------
924,779
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DIVERSIFIED INCOME
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
BUSINESS SERVICES (2.2%)
$ 500 Anacomp, Inc. (Series B).................................... 10.875% 04/01/04 $ 525,000
500 Comforce Operating Inc. - 144A*............................. 12.00 12/01/07 506,250
300 Xerox Credit Corp........................................... 15.00 06/26/98 313,041
-----------
1,344,291
-----------
CABLE & TELECOMMUNICATIONS (9.4%)
200 Adelphia Communications, Inc. (Series B).................... 9.875 03/01/07 211,000
425 Advanced Radio Telecommunication............................ 14.00 02/15/07 408,000
300 American Communications Services, Inc. - 144A*.............. 13.75 07/15/07 357,000
500 Clearnet Communications, Inc. (Canada)...................... 14.75 ++ 12/15/05 398,125
294 Falcon Holdings Group, L.P. (Series B)...................... 11.00+ 09/15/03 317,045
150 Frontiervision L.P. /Capital................................ 11.00 10/15/06 166,500
400 Hyperion Telecommunication, Inc. (Series B)................. 13.00 ++ 04/15/03 290,000
400 In-Flight Phone Corp. (Series B) (a)........................ 14.00 ++ 05/15/02 56,000
200 IXC Communications, Inc. (Series B)......................... 12.50 10/01/05 230,000
500 McCaw International Ltd..................................... 13.00 ++ 04/15/07 290,000
200 Metronet Communications Corp. (Units)++ - 144A*............. 12.00 08/15/07 230,500
500 Nextel Communications - 144A*............................... 10.65 ++ 09/15/07 313,125
150 NextLink Communications, LLC................................ 12.50 04/15/06 171,000
200 Orbcomm Global L.P. /Capital (Series B)..................... 14.00 08/15/04 217,000
300 Paging Network, Inc......................................... 10.125 08/01/07 312,000
300 Peoples Telephone Co., Inc.................................. 12.25 07/15/02 315,000
500 Price Communications Cellular Holdings - 144A*.............. 13.50 ++ 08/01/07 315,000
300 Primus Telecommunications Group............................. 11.75 08/01/04 325,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DIVERSIFIED INCOME
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 250 USA Mobile Communications Holdings, Inc..................... 14.00 % 11/01/04 $ 278,750
500 Winstar Communications, Inc................................. 14.00 ++ 10/15/05 400,000
250 Winstar Equipment Corp...................................... 12.50 03/15/04 280,625
-----------
5,882,170
-----------
CONSUMER PRODUCTS (1.2%)
300 North Atlantic Trading...................................... 11.00 06/15/04 313,500
500 Renaissance Cosmetics, Inc.................................. 11.75 02/15/04 460,000
-----------
773,500
-----------
ELECTRICAL & ALARM SYSTEMS (0.5%)
400 Mosler, Inc................................................. 11.00 04/15/03 308,000
-----------
ENTERTAINMENT/GAMING & LODGING (4.7%)
250 Fitzgerald Gaming Corp. - 144A*............................. 12.25 12/15/04 253,750
500 Lady Luck Gaming Finance Corp............................... 11.875 03/01/01 512,500
200 Motels of America, Inc. (Series B).......................... 12.00 04/15/04 194,500
250 Players International, Inc.................................. 10.875 04/15/05 269,375
500 Plitt Theaters, Inc......................................... 10.875 06/15/04 540,000
300 Riviera Holdings Corp. - 144A*.............................. 10.00 08/15/04 297,750
500 Stuart Entertainment, Inc. (Series B)....................... 12.50 11/15/04 410,000
400 Walt Disney Co.............................................. 15.00 12/14/98 434,100
-----------
2,911,975
-----------
FINANCE (0.2%)
250 Cityscape Financial Corp. (Series A)........................ 12.75 06/01/04 120,000
-----------
FOODS & BEVERAGES (2.2%)
500 Envirodyne Industries, Inc.................................. 10.25 12/01/01 492,500
250 PepsiCo, Inc................................................ 15.00 08/06/98 263,373
250 Sparkling Spring Water - 144A*.............................. 11.50 11/15/07 257,500
100 Specialty Foods Acquisition Corp. (Series B)................ 11.25 08/15/03 95,000
600 Specialty Foods Acquisition Corp. (Series B)................ 13.00 ++ 08/15/05 267,000
-----------
1,375,373
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DIVERSIFIED INCOME
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
HEALTHCARE (1.5%)
$ 200 Imagyn Medical Technologies................................. 12.50 % 04/01/04 $ 189,500
300 Unilab Corp................................................. 11.00 04/01/06 306,000
500 Unison Healthcare Corp. - 144A*............................. 12.25 11/01/06 450,000
-----------
945,500
-----------
MANUFACTURING (1.2%)
300 International Semi - Tech Microelectronics.................. 11.50 ++ 08/15/03 102,000
600 Uniroyal Technology Corp.................................... 11.75 06/01/03 624,000
-----------
726,000
-----------
MANUFACTURING - DIVERSIFIED (1.0%)
200 Interlake Corp.............................................. 12.125 03/01/02 207,000
200 J.B. Poindexter & Co., Inc.................................. 12.50 05/15/04 204,000
325 Jordan Industries, Inc. (Series B).......................... 11.75 ++ 04/01/09 195,000
-----------
606,000
-----------
PUBLISHING (0.7%)
250 American Media Operations, Inc.............................. 11.625 11/15/04 271,250
200 United States Banknote Corp. (Series B)..................... 10.375 06/01/02 198,000
-----------
469,250
-----------
RESTAURANTS (0.9%)
1 American Restaurant Group Holdings, Inc..................... 13.00 09/15/98 1,355
100 Carrols Corp................................................ 11.50 08/15/03 106,000
200 FRD Acquisition Corp. (Series B)............................ 12.50 07/15/04 218,000
250 Friendly Ice Cream.......................................... 10.50 12/01/07 253,125
-----------
578,480
-----------
RETAIL (0.4%)
400 County Seat Stores Co. (b).................................. 12.00 10/01/02 220,000
-----------
RETAIL - FOOD CHAINS (2.3%)
250 Big V Supermarkets, Inc. (Series B)......................... 11.00 02/15/04 261,875
250 Mrs Fields Original Cookies - 144A*......................... 10.125 12/01/04 251,875
250 Pantry Inc. - 144A*......................................... 10.25 10/15/07 256,875
200 Pathmark Stores, Inc........................................ 9.625 05/01/03 184,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DIVERSIFIED INCOME
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 500 Pueblo Xtra International, Inc. (Series C).................. 9.50 % 08/01/03 $ 480,000
-----------
1,434,625
-----------
TEXTILES - APPAREL MANUFACTURERS (0.1%)
150 U.S. Leather, Inc. (b)...................................... 10.25 07/31/03 70,500
-----------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (54.7%)
949 Federal Home Loan Mortgage Corp. (1.6%)..................... 7.00 06/01/04 962,488
-----------
Federal National Mortgage Assoc. (11.1%)
904 ............................................................ 6.00 02/01/11-03/01/11 889,745
2,001 ............................................................ 6.50 04/01/12-03/01/27 1,989,532
3,582 ............................................................ 7.00 07/01/25-05/01/27 3,607,270
439 ............................................................ 8.00 06/01/26 454,225
-----------
6,940,772
-----------
Government National Mortgage Assoc. (11.1%)
3,784 ............................................................ 6.50 01/15/24-04/15/26 3,745,332
931 ............................................................ 7.00 01/15/26-04/15/26 938,254
1,276 ............................................................ 7.50 02/15/26-07/15/26 1,307,721
895 ............................................................ 8.00 02/15/26-06/15/26 927,658
-----------
6,918,965
-----------
6,000 Resolution Funding Corp. (e) (5.6%)......................... 0.00 01/15/05-10/15/07 3,493,080
-----------
U.S. Treasury Notes (e) (25.3%)
7,450 ............................................................ 5.75 11/15/00-11/30/02 7,463,206
3,100 ............................................................ 6.00 06/30/99-08/15/00 3,121,588
1,000 ............................................................ 6.25 08/31/02 1,020,870
4,100 ............................................................ 6.375 05/15/00 4,161,951
-----------
15,767,615
-----------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS................................................ 34,082,920
-----------
TOTAL UNITED STATES....................................................................... 53,088,863
-----------
TOTAL GOVERNMENT & CORPORATE BONDS
(IDENTIFIED COST $59,266,721)............................................................. 59,573,897
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DIVERSIFIED INCOME
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMON STOCKS (c) (0.4%)
BROADCAST MEDIA (0.0%)
2,150 Price Communications Corp. ............................................................... 18,409
-----------
CABLE & TELECOMMUNICATIONS (0.0%)
700 Nextel Communications, Inc. (Series A).................................................... 18,025
-----------
ENTERTAINMENT/GAMING & LODGING (0.0%)
500 Cobblestone Holdings, Inc. - 144A*........................................................ 17,500
-----------
HEALTHCARE (0.1%)
10,000 Unigene Laboratories, Inc................................................................. 25,625
20,000 Unilab Corp............................................................................... 37,500
-----------
63,125
-----------
MANUFACTURING - DIVERSIFIED (0.2%)
3,000 Thermadyne Holdings Corp. (d)............................................................. 84,750
-----------
TEXTILES (0.1%)
20,000 Ithaca Industries, Inc.................................................................... 65,000
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $283,574)................................................................ 266,809
-----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE
- ---------- ------------------
<C> <S> <C> <C>
WARRANTS (c) (0.1%)
CABLE & TELECOMMUNICATIONS (0.1%)
400 Hyperion Telecommunication, Inc. (Series B) - 144A*................... 04/01/01 36,000
500 McCaw International Ltd. - 144A*...................................... 04/15/07 5
300 Primus Telecommunications Group....................................... 08/01/04 3,691
300 UIH Australia/Pacific, Inc............................................ 05/15/06 3
-----------
39,699
-----------
ENTERTAINMENT/GAMING & LODGING (0.0%)
787 Fitzgeralds Gaming Corp............................................... 12/19/98 3,542
100 Fitzgeralds South Inc. - 144A*........................................ 03/15/99 1
-----------
3,543
-----------
HEALTHCARE (0.0%)
200 Imagyn Medical Technologies - 144A*................................... 04/10/04 2
-----------
TOTAL WARRANTS
(IDENTIFIED COST $9,304).................................................................. 43,244
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DIVERSIFIED INCOME
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM INVESTMENT (1.4%)
REPURCHASE AGREEMENT
$ 856 The Bank of New York (dated 12/31/97; proceeds $856,056) (f)
(IDENTIFIED COST $855,871)................................ 3.875 01/02/98 855,871
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $60,415,470) (g)............................................................ 97.5 % 60,739,821
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................................... 2.5 1,547,180
------ ------------
NET ASSETS................................................................................... 100.0 % $ 62,287,001
------ ------------
------ ------------
</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/warrants.
+ Payment-in-kind security.
++ Currently a zero coupon bond and will pay interest at the rate shown at a
future specified date.
(a) Non-income producing security; issuer in bankruptcy.
(b) Non-income producing security; issuer in default.
(c) Non-income producing securities.
(d) Acquired through exchange offer.
(e) Some or all of these securities are segregated in connection with open
forward foreign currency contracts.
(f) Collateralized by $694,571 U.S. Treasury Bond 7.875% due 02/15/21 valued at
$872,989.
(g) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $1,497,780 and the
aggregate gross unrealized depreciation is $1,173,429, resulting in net
unrealized appreciation of $324,351.
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT DECEMBER 31, 1997:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS IN EXCHANGE DELIVERY APPRECIATION/
TO DELIVER FOR DATE (DEPRECIATION)
- ------------------------------------------------------------
<S> <C> <C> <C>
Y 120,000,000 $ 942,729 02/04/98 $ 18,372
Y 100,793,000 $ 780,132 03/17/98 (939)
DEM 5,000,000 $2,811,990 04/06/98 15,591
NLG 902,000 $ 450,212 04/06/98 2,377
NLG 3,155,000 $1,602,670 06/15/98 30,167
--------------
Net unrealized appreciation........... $ 65,568
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
BALANCED
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (64.3%)
AEROSPACE (1.9%)
27,400 Boeing Co............................................................................... $ 1,340,887
-----------
AIR TRANSPORT (4.4%)
3,600 AMR Corp.*.............................................................................. 462,600
14,100 Delta Air Lines, Inc.................................................................... 1,677,900
11,200 UAL Corp.*.............................................................................. 1,036,000
-----------
3,176,500
-----------
AUTO PARTS - AFTER MARKET (2.9%)
24,600 Lear Corp.*............................................................................. 1,168,500
14,100 Magna International Inc. (Class A) (Canada)............................................. 885,656
-----------
2,054,156
-----------
BANKS - MONEY CENTER (0.3%)
1,900 Citicorp................................................................................ 240,231
-----------
BANKS - REGIONAL (2.3%)
4,900 Wells Fargo & Co........................................................................ 1,663,244
-----------
BEVERAGES - SOFT DRINKS (1.3%)
25,100 PepsiCo, Inc............................................................................ 914,581
-----------
BROKERAGE (1.7%)
17,000 Merrill Lynch & Co., Inc................................................................ 1,239,937
-----------
CABLE & TELECOMMUNICATIONS (1.6%)
27,700 Cox Communications, Inc. (Class A)*..................................................... 1,109,731
-----------
COMMERCIAL SERVICES (1.2%)
23,100 Corrections Corp. of America*........................................................... 856,144
-----------
COMMUNICATIONS EQUIPMENT (4.8%)
22,600 3Com Corp.*............................................................................. 788,175
20,170 Ascend Communications, Inc.*............................................................ 495,426
38,150 Cisco Systems, Inc.*.................................................................... 2,126,862
-----------
3,410,463
-----------
COMPUTER SERVICES (2.0%)
16,800 Computer Sciences Corp.*................................................................ 1,402,800
-----------
COMPUTER SOFTWARE (2.7%)
14,900 Microsoft Corp.*........................................................................ 1,924,894
-----------
DRUGS (2.7%)
10,400 Johnson & Johnson....................................................................... 685,100
10,300 Warner-Lambert Co....................................................................... 1,277,200
-----------
1,962,300
-----------
ELECTRICAL EQUIPMENT (1.1%)
11,000 Honeywell, Inc.......................................................................... 753,500
-----------
ENTERTAINMENT (5.9%)
52,955 CBS Corp................................................................................ 1,558,863
32,200 Mirage Resorts, Inc.*................................................................... 732,550
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
31,600 Time Warner, Inc........................................................................ $ 1,959,200
-----------
4,250,613
-----------
FINANCIAL - MISCELLANEOUS (4.3%)
17,100 Associates First Capital Corp. (Class A)*............................................... 1,216,238
22,100 Fannie Mae.............................................................................. 1,261,081
5,800 Golden West Financial Corp.............................................................. 567,313
-----------
3,044,632
-----------
FOODS (1.1%)
16,400 Kellogg Co.............................................................................. 813,850
-----------
HEALTH EQUIPMENT & SERVICES (1.0%)
14,400 United Healthcare Corp.................................................................. 715,500
-----------
HEALTHCARE - DRUGS (2.2%)
22,400 Lilly (Eli) & Co........................................................................ 1,559,600
-----------
INSURANCE BROKERS (1.5%)
13,900 Marsh & McLennan Companies, Inc......................................................... 1,036,419
-----------
OIL - DOMESTIC (0.6%)
4,700 Amoco Corp.............................................................................. 400,088
-----------
RAILROADS (1.6%)
12,334 Burlington Northern Santa Fe Corp....................................................... 1,146,291
-----------
RESTAURANTS (0.1%)
2,450 Tricon Global Restaurants, Inc.*........................................................ 71,203
-----------
RETAIL - SPECIALTY (4.7%)
32,350 Home Depot, Inc......................................................................... 1,904,606
37,300 Tandy Corp.............................................................................. 1,438,381
-----------
3,342,987
-----------
SEMICONDUCTORS (3.2%)
32,600 Intel Corp.............................................................................. 2,288,113
-----------
SOAP & HOUSEHOLD PRODUCTS (2.4%)
21,700 Procter & Gamble Co..................................................................... 1,731,931
-----------
TELECOMMUNICATIONS EQUIPMENT (0.9%)
8,000 Lucent Technologies Inc................................................................. 639,000
-----------
TOBACCO (1.8%)
28,200 Philip Morris Companies, Inc............................................................ 1,277,813
-----------
UTILITIES - TELEPHONE (2.1%)
26,800 BellSouth Corp.......................................................................... 1,509,175
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $37,374,272)........................................................... 45,876,583
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
BALANCED
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (5.9%)
AUTO PARTS (0.6%)
$ 400 Raytheon Co.
6.45% due 08/15/02.................................................................... $ 403,076
-----------
BANKS (0.9%)
200 NationsBank Corp.
7.50% due 09/15/06.................................................................... 213,574
325 Norwest Corp.
6.80% due 05/15/02.................................................................... 332,322
110 Wells Fargo & Co.
6.875% due 04/01/06................................................................... 112,544
-----------
658,440
-----------
BANKS - MONEY CENTER (0.2%)
145 Citicorp
6.375% due 01/15/06................................................................... 143,991
-----------
BROKERAGE (0.2%)
150 Merrill Lynch & Co., Inc.
6.00% due 01/15/01.................................................................... 149,271
-----------
ENTERTAINMENT (0.3%)
180 Walt Disney Co. (Series B)
6.75% due 03/30/06.................................................................... 184,932
-----------
FINANCIAL (0.9%)
100 Abbey National PLC (United Kingdom)
6.69% due 10/17/05.................................................................... 101,443
100 BHP Finance U.S.A. Ltd.
6.69% due 03/01/06.................................................................... 100,448
400 Bear Stearns Co., Inc.
6.50% due 08/01/02.................................................................... 401,496
-----------
603,387
-----------
HEALTHCARE - DRUGS (0.1%)
45 Lilly (Eli) & Co.
8.375% due 12/01/06................................................................... 51,448
-----------
INDUSTRIALS (1.8%)
100 General American Transportation Corp.
6.75% due 03/01/06.................................................................... 100,571
500 IBM Corp.
7.00% due 10/30/25.................................................................... 517,715
150 Lockheed Martin Corp.
7.25% due 05/15/06.................................................................... 157,484
15 Mead Corp.
7.125% due 08/01/25................................................................... 14,854
40 Monsanto Co.
8.875% due 12/15/09................................................................... 48,495
200 Praxair, Inc.
6.90% due 11/01/06.................................................................... 205,890
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
$ 15 Texas Utilities Electric Co.
7.875% due 04/01/24................................................................... $ 15,807
200 Willamette Industries, Inc.
7.85% due 07/01/26.................................................................... 225,294
-----------
1,286,110
-----------
TELECOMMUNICATIONS (0.7%)
400 MCI Communication Corp.
6.95% due 08/15/06.................................................................... 408,652
120 Northern Telecom Capital
7.40% due 06/15/06.................................................................... 127,999
-----------
536,651
-----------
UTILITIES - ELECTRIC (0.2%)
150 Union Electric Co.
6.75% due 05/01/08.................................................................... 153,392
-----------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $4,046,641)............................................................ 4,170,698
-----------
ASSET-BACKED SECURITIES (2.8%)
400 Delta Funding Home Equity Loan Trust
6.77% due 11/25/19.................................................................... 402,688
400 EQCC Home Equity Loan Trust
6.45% due 09/15/12.................................................................... 400,562
400 GE Capital Mortgage Services, Inc.
6.79% due 06/25/17.................................................................... 401,562
400 Green Tree Financial Corp.
6.42% due 05/15/29.................................................................... 399,812
400 Oakwood Mortgage Investors, Inc.
6.45% due 11/15/27.................................................................... 400,938
-----------
TOTAL ASSET-BACKED SECURITIES
(IDENTIFIED COST $1,996,500)............................................................ 2,005,562
-----------
GOVERNMENT OBLIGATIONS (17.2%)
500 Province of Ontario (Canada)
6.00% due 02/21/06.................................................................... 490,970
1,305 U.S. Treasury Bond
7.50% due 11/15/24.................................................................... 1,561,302
1,065 U.S. Treasury Bond
6.00% due 02/15/26.................................................................... 1,063,946
795 U.S. Treasury Note
5.00% due 01/31/98.................................................................... 794,563
765 U.S. Treasury Note
5.125% due 04/30/98................................................................... 764,212
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
BALANCED
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
$ 530 U.S. Treasury Note
6.00% due 09/30/98.................................................................... $ 531,516
500 U.S. Treasury Note
5.875% due 10/31/98................................................................... 500,825
300 U.S. Treasury Note
6.375% due 05/15/99................................................................... 302,766
175 U.S. Treasury Note
7.75% due 11/30/99.................................................................... 181,513
750 U.S. Treasury Note
7.75% due 01/31/00.................................................................... 780,165
300 U.S. Treasury Note
6.25% due 08/31/00.................................................................... 304,065
200 U.S. Treasury Note
6.625% due 06/30/01................................................................... 205,618
1,725 U.S. Treasury Note
6.625% due 04/30/02................................................................... 1,782,460
80 U.S. Treasury Note
7.875% due 11/15/04................................................................... 89,449
2,575 U.S. Treasury Note
5.875% due 11/15/05................................................................... 2,588,519
440 U.S. Treasury Strip
0.00% due 05/15/02.................................................................... 343,842
-----------
TOTAL GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $12,008,915)........................................................... 12,285,731
-----------
MORTGAGE-BACKED SECURITIES (7.0%)
U.S. GOVERNMENT AGENCIES (7.0%)
950 Federal Home Loan Mortgage Corp. 7.00% due 08/01/12..................................... 964,745
180 Federal Home Loan Mortgage Corp. 7.00% due 12/01/25..................................... 181,299
300 Federal Home Loan Mortgage Corp. 7.00% due 04/01/26..................................... 302,516
760 Federal Home Loan Mortgage Corp. 7.00% due 12/01/27..................................... 766,888
578 Federal National Mortgage Assoc. 6.00% due 04/01/04..................................... 571,045
569 Federal National Mortgage Assoc. 7.50% due 08/01/12..................................... 584,237
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
$ 1,028 Federal National Mortgage Assoc. 6.50% due 10/01/17..................................... $ 1,015,422
592 Government National Mortgage Assoc. 7.50% due 08/15/27.................................. 606,699
-----------
TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $4,952,274)............................................................ 4,992,851
-----------
SHORT-TERM INVESTMENT (4.6%)
REPURCHASE AGREEMENT
3,276 The Bank of New York 3.875% due 01/02/98 (dated 12/31/97; proceeds $3,277,072) (a)
(IDENTIFIED COST $3,276,366).......................................................... 3,276,366
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $63,654,968) (b)......................................................... 101.8 % 72,607,791
LIABILITIES IN EXCESS OF OTHER ASSETS..................................................... (1.8) (1,284,355)
------ ------------
NET ASSETS................................................................................ 100.0 % $ 71,323,436
------ ------------
------ ------------
</TABLE>
- ---------------------
* Non-income producing security.
(a) Collateralized by $1,859,195 U.S. Treasury Note 5.875% due 02/15/00 valued
at $1,907,417 and $1,409,145 U.S. Treasury Note 6.00% due 09/30/98 valued
at $1,434,477.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $9,877,438 and the
aggregate gross unrealized depreciation is $924,615, resulting in net
unrealized appreciation of $8,952,823.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
UTILITIES
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (87.2%)
NATURAL GAS (17.5%)
20,000 AGL Resources, Inc...................................................................... $ 408,750
5,500 Anadarko Petroleum Corp................................................................. 333,781
11,000 Cabot Oil & Gas Corp.................................................................... 213,812
10,000 Clayton Williams Energy, Inc.*.......................................................... 140,000
6,000 Consolidated Natural Gas Co............................................................. 363,000
7,000 Eastern Enterprises..................................................................... 315,000
6,311 El Paso Natural Gas Co.................................................................. 419,682
11,912 Enron Corp.............................................................................. 495,093
6,000 Ente Nazionale Idrocarburi SpA (ADR) (Italy)............................................ 342,375
8,000 Exxon Corp.............................................................................. 489,500
11,000 Indiana Energy Inc...................................................................... 362,313
12,000 KeySpan Energy Corp..................................................................... 441,750
9,000 KN Energy, Inc.......................................................................... 486,000
20,000 Mallon Resources Corp.*................................................................. 162,500
13,000 MCN Corp................................................................................ 524,875
10,500 New Jersey Resources.................................................................... 420,656
10,000 North Carolina Natural Gas Corp......................................................... 347,500
11,750 Northwest Natural Gas Co................................................................ 364,250
10,000 Pacific Enterprises..................................................................... 376,250
6,000 Pioneer Natural Resources Co............................................................ 173,625
12,000 Questar Corp............................................................................ 535,500
7,000 Reading & Bates Corp.*.................................................................. 293,125
7,000 Royal Dutch Petroleum Co. (ADR) (Netherlands)........................................... 379,312
6,000 South Jersey Industries, Inc............................................................ 181,875
10,000 Washington Gas Light Co................................................................. 309,375
-----------
8,879,899
-----------
REAL ESTATE INVESTMENT TRUST (0.2%)
5,000 Nationwide Health Properties, Inc....................................................... 127,500
-----------
TELECOMMUNICATIONS (32.5%)
9,000 360 DEG. Communications Co.*............................................................ 181,687
10,000 Airtouch Communications, Inc.*.......................................................... 415,625
7,000 Alcatel Alsthom (ADR) (France).......................................................... 177,187
7,500 Alltel Corp............................................................................. 307,969
4,000 Ameritech Corp.......................................................................... 322,000
8,000 AT&T Corp............................................................................... 490,000
15,000 BCE, Inc. (Canada)...................................................................... 499,687
5,572 Bell Atlantic Corp...................................................................... 507,052
5,000 BellSouth Corp.......................................................................... 281,562
8,000 Brooks Fiber Properties, Inc.*.......................................................... 440,000
6,500 Century Telephone Enterprises, Inc...................................................... 323,781
15,000 Cincinnati Bell, Inc.................................................................... 465,000
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
7,800 Colt Telecom Group PLC (ADR)*........................................................... $ 327,600
10,000 Deutsche Telekom AG (ADR)............................................................... 186,250
4,500 Ericsson (L.M.) Telephone Co. (Class B) (ADR) (Sweden).................................. 167,906
9,900 Esat Telecom Group PLC (ADR)*........................................................... 133,031
6,200 France Telecom S.A. (ADR)*.............................................................. 223,200
20,000 General Communication, Inc. (Class A)*.................................................. 132,500
14,000 Grupo Iusacell S.A. de C.V. (Series L) (ADR) (Mexico)*.................................. 303,625
5,500 GTE Corp................................................................................ 287,375
6,000 Harris Corp............................................................................. 275,250
10,000 ICG Communications, Inc.*............................................................... 272,500
14,000 LCI International, Inc.*................................................................ 430,500
12,000 Loral Space & Communications Ltd.*...................................................... 257,250
4,896 Lucent Technologies Inc................................................................. 391,068
10,500 MCI Communications Corp................................................................. 449,531
13,000 Nextel Communications, Inc. (Series A)*................................................. 334,750
13,300 Nextlink Communications, Inc. (Class A)*................................................ 283,456
5,000 Philips Electronics NV (ADR) (Netherlands).............................................. 302,500
10,000 Portugal Telecom S.A. (ADR) (Portugal).................................................. 470,000
20,000 Primus Telecommunications Group, Inc.*.................................................. 323,750
5,000 Qwest Communications International Inc.*................................................ 296,250
6,000 RCN Corp.*.............................................................................. 205,500
7,000 Royal PTT Nederland NV (ADR) (Netherlands).............................................. 290,500
10,000 RSL Communications, Ltd. (Class A)*..................................................... 221,250
6,194 SBC Communications, Inc................................................................. 453,711
8,000 Southern New England Telecommunications Corp............................................ 402,500
7,000 Sprint Corp............................................................................. 410,375
15,000 Tel-Save Holdings, Inc.*................................................................ 296,250
10,000 Tele Danmark AS (ADR) (Denmark)......................................................... 308,125
2,500 Telecomunicacoes Brasileiras S/A-Telebras (ADR)......................................... 291,094
5,000 Telefonica Espana S.A. (ADR) (Spain).................................................... 455,313
9,000 Telephone & Data Systems, Inc........................................................... 419,063
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
UTILITIES
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
6,000 Teleport Communications Group Inc.*..................................................... $ 329,250
10,000 Teligent, Inc. (Class A)*............................................................... 242,500
5,000 Telstra Corp., Ltd. (ADR)*.............................................................. 208,750
5,000 U.S. West Communications Group, Inc..................................................... 225,625
10,000 U.S. West Media Group, Inc.*............................................................ 288,750
7,000 United States Cellular Corp.*........................................................... 217,000
7,000 Vanguard Cellular Systems, Inc. (Class A)*.............................................. 89,250
5,000 Vodafone Group PLC (ADR) (United Kingdom)............................................... 362,500
17,000 WorldCom, Inc.*......................................................................... 514,250
-----------
16,491,398
-----------
UTILITIES - ELECTRIC (36.1%)
14,000 AES Corp.*.............................................................................. 652,750
11,000 Allegheny Energy, Inc................................................................... 357,500
10,000 American Electric Power Co.............................................................. 516,250
5,000 Boston Edison Co........................................................................ 189,375
9,000 Calenergy, Inc.*........................................................................ 258,750
13,000 Carolina Power & Light Co............................................................... 551,688
10,000 Central & South West Corp............................................................... 270,625
12,000 Central Louisiana Electric.............................................................. 388,500
11,500 CINergy Corp............................................................................ 440,594
10,000 CMS Energy Corp......................................................................... 440,625
12,000 Consolidated Edison Co. of New York, Inc................................................ 492,000
10,000 Dominion Resources, Inc................................................................. 425,625
12,500 DQE, Inc................................................................................ 439,062
13,355 Duke Power Co........................................................................... 739,533
11,000 Edison International.................................................................... 299,063
6,500 Enersis S.A. (ADR) (Chile).............................................................. 188,500
8,000 Enova Corp.............................................................................. 216,500
9,500 Entergy Corp............................................................................ 284,406
15,000 FPL Group, Inc.......................................................................... 887,813
14,000 GPU, Inc................................................................................ 589,750
15,000 Houston Industries, Inc................................................................. 400,312
6,500 Illinova Corp........................................................................... 175,094
12,000 IPALCO Enterprises, Inc................................................................. 503,250
10,000 Kansas City Power & Light Co............................................................ 295,625
15,000 LG&E Energy Corp........................................................................ 371,250
10,000 Nevada Power Co......................................................................... 265,625
11,000 New Century Energies, Inc............................................................... 527,312
8,000 New England Electric System............................................................. 342,000
12,000 NIPSCO Industries, Inc.................................................................. 593,250
16,000 Northwestern Public Service Co.......................................................... 368,000
12,000 OGE Energy Corp......................................................................... 656,250
11,000 PacifiCorp.............................................................................. 300,438
7,500 Peco Energy Co.......................................................................... 181,875
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
7,500 PG & E Corp............................................................................. $ 228,281
9,500 Pinnacle West Capital Corp.............................................................. 402,562
12,500 Public Service Company of New Mexico.................................................... 296,094
6,000 Public Service Enterprise Group, Inc.................................................... 190,125
15,000 SCANA Corp.............................................................................. 449,063
15,000 Sierra Pacific Resources................................................................ 562,500
15,000 Southern Co............................................................................. 388,125
15,000 Teco Energy, Inc........................................................................ 421,875
9,000 TNP Enterprises, Inc.................................................................... 299,250
9,000 Tucson Electric Power Co.*.............................................................. 163,125
10,000 Utilicorp United, Inc................................................................... 388,125
11,000 Western Resources, Inc.................................................................. 473,000
15,000 Wisconsin Energy Corp................................................................... 431,250
-----------
18,302,565
-----------
WATER (0.9%)
17,000 American Water Works Company, Inc....................................................... 464,313
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $33,546,444)........................................................... 44,265,675
-----------
PREFERRED STOCKS (0.7%)
UTILITIES - ELECTRIC
6,000 Alabama Power Capital Trust I (Series Q) $1.84.......................................... 151,125
1,000 Duquesne Capital LP (Series A) $2.09*................................................... 26,000
2,500 Public Service Electric & Gas Co. (Series B) $2.00...................................... 64,687
5,000 Virginia Power Capital $2.01............................................................ 127,500
-----------
TOTAL PREFERRED STOCKS
(IDENTIFIED COST $363,687).............................................................. 369,312
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C>
CORPORATE BONDS (3.7%)
TELECOMMUNICATIONS (1.3%)
$ 100 Southwestern Bell Telephone Co. 7.25% due 07/15/25...................................... 102,095
500 WorldCom, Inc.
7.75% due 04/01/07.................................................................... 534,050
-----------
636,145
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
UTILITIES
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
UTILITIES - ELECTRIC (2.4%)
$ 100 Florida Power & Light Co. 7.05% due 12/01/26............................................ $ 101,281
1,000 Southern Caliornia Edison Co. 7.25% due 03/01/26........................................ 1,023,470
100 Western Resources
6.875% due 08/01/04................................................................... 101,724
-----------
1,226,475
-----------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $1,836,484)............................................................ 1,862,620
-----------
U.S. GOVERNMENT AGENCY (0.1%)
25 Tennessee Valley Authority (Series 95-A) 8.00% due 03/31/45 (IDENTIFIED COST $25,000)... 26,438
-----------
SHORT-TERM INVESTMENTS (8.2%)
COMMERCIAL PAPER (a) (3.9%)
AUTOMOTIVE - FINANCE
2,000 Ford Motor Credit Co. 5.95% due 01/07/98 (AMORTIZED COST $1,998,017).................... 1,998,017
-----------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT (4.3%)
$ 2,174 The Bank of New York 3.875% due 01/02/98 (dated 12/31/97; proceeds $2,173,990) (b)
(IDENTIFIED COST $2,173,522).......................................................... $ 2,173,522
-----------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $4,171,539)............................................................ 4,171,539
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $39,943,154) (c).......................................................... 99.9 % 50,695,584
OTHER ASSETS IN EXCESS OF LIABILITIES...................................................... 0.1 70,361
------ ------------
NET ASSETS................................................................................. 100.0 % $ 50,765,945
------ ------------
------ ------------
</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 $1,737,350 U.S. Treasury Note 6.375% due 04/30/99 valued
at $1,771,757 and $421,757 U.S. Treasury Note 6.625% due 07/31/01 valued at
$445,235.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $11,231,957 and the
aggregate gross unrealized depreciation is $479,527, resulting in net
unrealized appreciation of $10,752,430.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DIVIDEND GROWTH
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (98.7%)
AEROSPACE (2.7%)
193,000 United Technologies Corp............................................................... $ 14,052,812
-------------
AUTOMOTIVE (5.4%)
390,000 Chrysler Corp.......................................................................... 13,723,125
296,000 Ford Motor Co.......................................................................... 14,411,500
-------------
28,134,625
-------------
BANKS (5.4%)
252,000 Banc One Corp.......................................................................... 13,686,750
193,000 BankAmerica Corp....................................................................... 14,089,000
-------------
27,775,750
-------------
BEVERAGES - SOFT DRINKS (2.8%)
394,000 PepsiCo, Inc........................................................................... 14,356,375
-------------
CHEMICALS (5.5%)
142,000 Dow Chemical Co........................................................................ 14,413,000
243,000 PPG Industries, Inc.................................................................... 13,881,375
-------------
28,294,375
-------------
COMPUTERS (2.7%)
135,000 International Business Machines Corp................................................... 14,115,937
-------------
CONGLOMERATES (5.4%)
161,000 Minnesota Mining & Manufacturing Co.................................................... 13,212,062
369,000 Tenneco, Inc........................................................................... 14,575,500
-------------
27,787,562
-------------
DRUGS (2.6%)
208,000 Abbott Laboratories.................................................................... 13,637,000
-------------
ELECTRIC - MAJOR (2.7%)
191,000 General Electric Co.................................................................... 14,014,625
-------------
FOODS (2.7%)
267,000 Quaker Oats Company (The).............................................................. 14,084,250
-------------
HEALTHCARE - DIVERSIFIED (2.7%)
186,000 American Home Products Corp............................................................ 14,229,000
-------------
INSURANCE (2.8%)
189,000 Lincoln National Corp.................................................................. 14,765,625
-------------
MACHINERY - AGRICULTURAL (2.8%)
251,000 Deere & Co............................................................................. 14,636,437
-------------
MANUFACTURING - CONSUMER &
INDUSTRIAL PRODUCTS (2.8%)
264,000 Whirlpool Corp......................................................................... 14,520,000
-------------
MANUFACTURING - DIVERSIFIED INDUSTRIES (2.7%)
203,000 Honeywell, Inc......................................................................... 13,905,500
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
METALS & MINING (2.7%)
221,000 Phelps Dodge Corp...................................................................... $ 13,757,250
-------------
NATURAL GAS (2.8%)
349,000 Enron Corp............................................................................. 14,505,313
-------------
OFFICE EQUIPMENT & SUPPLIES (2.7%)
158,000 Pitney Bowes, Inc...................................................................... 14,210,125
-------------
OIL INTEGRATED - DOMESTIC (5.7%)
184,000 Atlantic Richfield Co.................................................................. 14,743,000
430,000 USX-Marathon Group..................................................................... 14,512,500
-------------
29,255,500
-------------
OIL INTEGRATED - INTERNATIONAL (5.3%)
223,000 Exxon Corp............................................................................. 13,644,813
194,000 Mobil Corp............................................................................. 14,004,375
-------------
27,649,188
-------------
PAPER & FOREST PRODUCTS (2.8%)
292,000 Weyerhaeuser Co........................................................................ 14,326,250
-------------
PHOTOGRAPHY (2.8%)
241,000 Eastman Kodak Co....................................................................... 14,655,813
-------------
RAILROADS (2.7%)
261,000 CSX Corp............................................................................... 14,094,000
-------------
RESTAURANTS (0.2%)
33,600 Tricon Global Restaurants, Inc.*....................................................... 976,500
-------------
RETAIL - DEPARTMENT STORES (2.8%)
278,000 May Department Stores Co............................................................... 14,647,125
-------------
RETAIL - FOOD CHAINS (2.8%)
698,000 American Stores Co..................................................................... 14,352,625
-------------
TELECOMMUNICATIONS (5.4%)
155,000 Bell Atlantic Corp..................................................................... 14,105,000
241,000 Sprint Corp............................................................................ 14,128,625
-------------
28,233,625
-------------
TOBACCO (2.7%)
311,000 Philip Morris Companies, Inc........................................................... 14,092,188
-------------
UTILITIES - ELECTRIC (5.6%)
340,000 GPU, Inc............................................................................... 14,322,500
470,000 Unicom Corp............................................................................ 14,452,500
-------------
28,775,000
-------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $439,470,235)......................................................... 511,840,375
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DIVIDEND GROWTH
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (1.1%)
REPURCHASE AGREEMENT
$ 5,476 The Bank of New York 3.875% due 01/02/98 (dated 12/31/97; proceeds $5,477,278) (a)
(IDENTIFIED COST $5,476,099)......................................................... $ 5,476,099
-------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $444,946,334) (b)........................................................ 99.8 % 517,316,474
OTHER ASSETS IN EXCESS OF LIABILITIES..................................................... 0.2 1,102,631
------ -------------
NET ASSETS................................................................................ 100.0 % $ 518,419,105
------ -------------
------ -------------
</TABLE>
- ---------------------
* Non-income producing security.
(a) Collateralized by $5,712,670 U.S. Treasury Bill 0.0% due 06/04/98 valued at
$5,585,621.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $77,895,834 and the
aggregate gross unrealized depreciation is $5,525,694, resulting in net
unrealized appreciation of $72,370,140.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (95.7%)
ADVERTISING/MARKETING SERVICES (0.6%)
6,200 Cognizant Corp......................................................................... $ 276,287
5,100 Interpublic Group of Companies, Inc.................................................... 254,044
6,600 Omnicom Group, Inc..................................................................... 279,675
------------
810,006
------------
AEROSPACE & DEFENSE (0.7%)
5,300 Boeing Co.............................................................................. 259,369
3,000 General Dynamics Corp.................................................................. 259,312
2,700 Lockheed Martin Corp................................................................... 265,950
2,400 Northrop Grumman Corp.................................................................. 276,000
------------
1,060,631
------------
AGRICULTURE RELATED (0.4%)
12,000 Archer-Daniels-Midland Co.............................................................. 260,250
2,700 Pioneer Hi-Bred International, Inc..................................................... 289,575
------------
549,825
------------
AIR FREIGHT (0.2%)
4,400 Federal Express Corp.*................................................................. 268,675
------------
AIRLINES (0.8%)
2,100 AMR Corp.*............................................................................. 269,850
2,500 Delta Air Lines, Inc................................................................... 297,500
11,550 Southwest Airlines Co.................................................................. 284,419
4,900 US Airways Group Inc.*................................................................. 306,250
------------
1,158,019
------------
ALUMINUM (0.5%)
9,700 Alcan Aluminum Ltd. (Canada)........................................................... 267,962
3,600 Aluminum Co. of America................................................................ 253,350
4,400 Reynolds Metals Co..................................................................... 264,000
------------
785,312
------------
AUTO PARTS - AFTER MARKET (1.5%)
10,400 Cooper Tire & Rubber Co................................................................ 253,500
5,400 Dana Corp.............................................................................. 256,500
7,100 Echlin, Inc............................................................................ 256,931
7,600 Genuine Parts Co....................................................................... 257,925
4,300 Goodyear Tire & Rubber Co.............................................................. 273,587
8,700 ITT Industries, Inc.................................................................... 272,962
5,900 Snap-On, Inc........................................................................... 257,387
4,800 TRW, Inc............................................................................... 256,200
------------
2,084,992
------------
AUTOMOBILES (0.6%)
7,300 Chrysler Corp.......................................................................... 256,869
5,500 Ford Motor Co.......................................................................... 267,781
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
4,400 General Motors Corp.................................................................... $ 266,750
------------
791,400
------------
BANKS - MONEY CENTER (1.5%)
3,500 BankAmerica Corp....................................................................... 255,500
2,200 Bankers Trust New York Corp............................................................ 247,362
2,300 Chase Manhattan Corp................................................................... 251,850
2,100 Citicorp............................................................................... 265,519
3,200 First Chicago NBD Corp................................................................. 267,200
5,000 First Union Corp....................................................................... 256,250
2,300 Morgan (J.P.) & Co., Inc............................................................... 259,612
4,400 NationsBank Corp....................................................................... 267,575
------------
2,070,868
------------
BANKS - REGIONAL (4.3%)
4,500 Banc One Corp.......................................................................... 244,406
5,000 Bank of New York Co., Inc.............................................................. 289,062
2,900 BankBoston Corp........................................................................ 272,419
3,800 Barnett Banks, Inc..................................................................... 273,125
4,100 BB&T Corp.............................................................................. 262,656
3,100 Comerica, Inc.......................................................................... 279,775
3,600 CoreStates Financial Corp.............................................................. 288,225
3,575 Fifth Third Bancorp.................................................................... 291,809
3,600 Fleet Financial Group, Inc............................................................. 269,775
7,400 Huntington Bancshares, Inc............................................................. 265,475
3,800 KeyCorp................................................................................ 269,087
4,800 Mellon Bank Corp....................................................................... 291,000
4,100 National City Corp..................................................................... 269,575
8,000 Norwest Corp........................................................................... 309,000
5,200 PNC Bank Corp.......................................................................... 296,725
2,400 Republic New York Corp................................................................. 274,050
4,400 State Street Corp...................................................................... 256,025
3,500 SunTrust Banks, Inc.................................................................... 249,812
8,000 Synovus Financial Corp................................................................. 262,000
2,700 U.S. Bancorp........................................................................... 302,231
3,400 Wachovia Corp.......................................................................... 275,825
800 Wells Fargo & Co....................................................................... 271,550
------------
6,063,607
------------
BEVERAGES - ALCOHOLIC (0.8%)
5,800 Anheuser-Busch Companies, Inc.......................................................... 255,200
5,100 Brown-Forman Corp. (Class B)........................................................... 281,775
8,200 Coors (Adolph) Co. (Class B)........................................................... 271,625
8,400 Seagram Co. Ltd. (Canada).............................................................. 271,425
------------
1,080,025
------------
BEVERAGES - SOFT DRINKS (0.6%)
4,200 Coca Cola Co........................................................................... 279,825
7,000 PepsiCo, Inc........................................................................... 255,062
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
10,000 Whitman Corp........................................................................... $ 260,625
------------
795,512
------------
BIOTECHNOLOGY (0.2%)
5,400 Amgen Inc.*............................................................................ 292,275
------------
BROADCAST MEDIA (1.0%)
9,700 CBS Corp............................................................................... 285,544
3,800 Clear Channel Communications, Inc.*.................................................... 301,862
9,400 Comcast Corp. (Class A Special)........................................................ 296,100
10,300 Tele-Communications, Inc. (Class A)*................................................... 287,112
10,100 U.S. West Media Group, Inc.*........................................................... 291,637
------------
1,462,255
------------
BUILDING MATERIALS (0.5%)
3,600 Armstrong World Industries, Inc........................................................ 269,100
5,100 Masco Corp............................................................................. 259,462
7,600 Owens-Corning.......................................................................... 259,350
------------
787,912
------------
CHEMICALS (1.3%)
3,200 Air Products & Chemicals, Inc.......................................................... 263,200
2,800 Dow Chemical Co........................................................................ 284,200
4,300 Du Pont (E.I.) De Nemours & Co., Inc................................................... 258,269
4,500 Eastman Chemical Co.................................................................... 268,031
5,800 Praxair, Inc........................................................................... 261,000
2,700 Rohm & Haas Co......................................................................... 258,525
6,200 Union Carbide Corp..................................................................... 266,212
------------
1,859,437
------------
CHEMICALS - DIVERSIFIED (0.9%)
14,700 Engelhard Corp......................................................................... 255,412
4,000 FMC Corp.*............................................................................. 269,250
6,200 Goodrich (B.F.) Co..................................................................... 256,912
6,100 Monsanto Co............................................................................ 256,200
4,400 PPG Industries, Inc.................................................................... 251,350
------------
1,289,124
------------
CHEMICALS - SPECIALTY (1.5%)
4,700 Ecolab, Inc............................................................................ 260,556
3,400 Grace (W. R.) & Co..................................................................... 273,487
5,800 Great Lakes Chemical Corp.............................................................. 260,275
5,200 Hercules, Inc.......................................................................... 260,325
5,000 International Flavors & Fragrances Inc................................................. 257,500
7,900 Morton International, Inc.............................................................. 271,562
6,600 Nalco Chemical Co...................................................................... 261,112
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
7,000 Sigma-Aldrich Corp..................................................................... $ 276,500
------------
2,121,317
------------
COMMERCIAL & CONSUMER SERVICES (1.0%)
6,400 Block (H.&R.), Inc..................................................................... 286,800
9,100 Cendant Corp.*......................................................................... 312,812
8,600 Dun & Bradstreet Corp.................................................................. 266,062
19,700 Laidlaw, Inc. (Canada)................................................................. 268,412
7,500 Service Corp. International............................................................ 277,031
------------
1,411,117
------------
COMMUNICATIONS EQUIPMENT (1.7%)
11,100 Andrew Corp.*.......................................................................... 265,706
11,500 DSC Communications Corp.*.............................................................. 274,562
5,800 Harris Corp............................................................................ 266,075
3,100 Lucent Technologies Inc................................................................ 247,612
4,600 Motorola, Inc.......................................................................... 262,487
16,500 NextLevel Systems, Inc.*............................................................... 294,937
3,100 Northern Telecom Ltd. (Canada)......................................................... 275,900
15,100 Scientific-Atlanta, Inc................................................................ 252,925
4,800 Tellabs, Inc.*......................................................................... 252,900
------------
2,393,104
------------
COMPUTER - NETWORKING (0.8%)
7,100 3Com Corp.*............................................................................ 247,612
10,500 Bay Networks, Inc.*.................................................................... 268,406
19,000 Cabletron Systems, Inc.*............................................................... 285,000
5,100 Cisco Systems, Inc.*................................................................... 284,325
------------
1,085,343
------------
COMPUTER SOFTWARE & SERVICES (2.2%)
6,800 Adobe Systems, Inc..................................................................... 279,650
7,100 Autodesk, Inc.......................................................................... 260,925
5,850 Computer Associates International, Inc................................................. 309,319
3,200 Computer Sciences Corp.*............................................................... 267,200
5,800 HBO & Co............................................................................... 278,037
2,100 Microsoft Corp.*....................................................................... 271,294
34,900 Novell, Inc.*.......................................................................... 259,569
11,900 Oracle Corp.*.......................................................................... 264,775
6,000 Parametric Technology Corp.*........................................................... 283,500
4,600 Shared Medical Systems Corp............................................................ 303,600
21,100 Unisys Corp.*.......................................................................... 292,762
------------
3,070,631
------------
COMPUTERS - PERIPHERAL EQUIPMENT (0.4%)
10,600 EMC Corp.*............................................................................. 290,837
13,400 Seagate Technology, Inc.*.............................................................. 257,950
------------
548,787
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMPUTERS - SYSTEMS (1.7%)
19,200 Apple Computer, Inc.*.................................................................. $ 250,800
4,800 COMPAQ Computer Corp................................................................... 270,900
14,000 Data General Corp.*.................................................................... 244,125
3,300 Dell Computer Corp.*................................................................... 277,200
7,000 Digital Equipment Corp.*............................................................... 259,000
4,200 Hewlett-Packard Co..................................................................... 262,500
2,600 International Business Machines Corp................................................... 271,862
21,500 Silicon Graphics, Inc.*................................................................ 267,406
7,000 Sun Microsystems, Inc.*................................................................ 279,125
------------
2,382,918
------------
CONSUMER - NONCYCLICAL (0.4%)
6,800 American Greetings Corp. (Class A)..................................................... 266,050
11,300 Jostens, Inc........................................................................... 260,606
------------
526,656
------------
CONTAINERS - METAL & GLASS (0.6%)
7,600 Ball Corp.............................................................................. 268,375
5,200 Crown Cork & Seal Co., Inc............................................................. 260,650
7,800 Owens-Illinois, Inc.*.................................................................. 295,912
------------
824,937
------------
CONTAINERS - PAPER (0.7%)
6,500 Bemis Company, Inc..................................................................... 286,406
24,900 Stone Container Corp................................................................... 259,894
5,100 Temple-Inland, Inc..................................................................... 266,794
4,800 Union Camp Corp........................................................................ 257,700
------------
1,070,794
------------
DATA PROCESSING (0.8%)
4,900 Automatic Data Processing, Inc......................................................... 300,737
6,300 Ceridian Corp.*........................................................................ 288,619
7,700 Equifax, Inc........................................................................... 272,869
9,800 First Data Corp........................................................................ 286,650
------------
1,148,875
------------
DISTRIBUTORS - FOOD & HEALTH (0.7%)
3,400 Cardinal Health, Inc................................................................... 255,425
12,600 Fleming Companies, Inc................................................................. 169,312
6,700 Supervalu, Inc......................................................................... 280,562
6,400 Sysco Corp............................................................................. 291,600
------------
996,899
------------
ELECTRICAL EQUIPMENT (1.5%)
6,500 AMP, Inc............................................................................... 273,000
4,500 Emerson Electric Co.................................................................... 253,969
3,600 General Electric Co.................................................................... 264,150
6,200 General Signal Corp.................................................................... 261,562
3,800 Honeywell, Inc......................................................................... 260,300
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
6,000 Raychem Corp........................................................................... $ 258,375
5,200 Rockwell International Corp............................................................ 271,700
5,500 Thomas & Betts Corp.................................................................... 259,875
------------
2,102,931
------------
ELECTRONIC COMPONENTS (0.2%)
2,700 Grainger (W.W.), Inc................................................................... 262,406
------------
ELECTRONICS - DEFENSE (0.2%)
5,101 Raytheon Co. (Class B)................................................................. 257,578
------------
ELECTRONICS - INSTRUMENTATION (0.5%)
13,000 EG & G, Inc............................................................................ 270,562
3,600 Perkin-Elmer Corp...................................................................... 255,825
6,600 Tektronix, Inc......................................................................... 261,937
------------
788,324
------------
ELECTRONICS - SEMICONDUCTORS (1.1%)
14,500 Advanced Micro Devices, Inc.*.......................................................... 260,094
3,500 Intel Corp............................................................................. 245,656
13,000 LSI Logic Corp.*....................................................................... 256,750
10,100 Micron Technology, Inc.*............................................................... 262,600
10,000 National Semiconductor Corp.*.......................................................... 259,375
6,000 Texas Instruments, Inc................................................................. 270,000
------------
1,554,475
------------
ENGINEERING & CONSTRUCTION (0.6%)
7,100 Fluor Corp............................................................................. 265,362
9,500 Foster Wheeler Corp.................................................................... 257,094
7,700 McDermott International, Inc........................................................... 282,012
------------
804,468
------------
ENTERTAINMENT (0.8%)
5,000 King World Productions Inc.*........................................................... 288,750
4,500 Time Warner, Inc....................................................................... 279,000
7,400 Viacom, Inc. (Class B)*................................................................ 306,637
3,000 Walt Disney Co......................................................................... 297,187
------------
1,171,574
------------
FACILITIES & ENVIRONMENTAL SERVICES (0.2%)
10,400 Safety-Kleen Corp...................................................................... 285,350
------------
FINANCE - CONSUMER (1.2%)
3,400 Beneficial Corp........................................................................ 282,625
6,700 Countrywide Credit Industries, Inc..................................................... 287,262
10,300 Green Tree Financial Corp.............................................................. 269,731
2,100 Household International, Inc........................................................... 267,881
10,000 MBNA Corp.............................................................................. 273,125
6,100 Providian Financial Corp............................................................... 275,644
------------
1,656,268
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
FINANCE - DIVERSIFIED (1.6%)
2,900 American Express Co.................................................................... $ 258,825
4,800 American General Corp.................................................................. 259,500
5,100 Fannie Mae............................................................................. 291,019
6,600 Federal Home Loan Mortgage Corp........................................................ 276,787
4,000 MBIA Inc............................................................................... 267,250
4,400 MGIC Investment Corp................................................................... 292,600
5,400 Morgan Stanley, Dean Witter, Discover & Co. (Note 3)................................... 319,275
6,450 SunAmerica, Inc........................................................................ 275,737
------------
2,240,993
------------
FOODS (2.3%)
4,800 Campbell Soup Co....................................................................... 279,000
7,600 ConAgra, Inc........................................................................... 249,375
2,500 CPC International Inc.................................................................. 269,375
3,400 General Mills, Inc..................................................................... 243,525
5,300 Heinz (H.J.) Co........................................................................ 269,306
4,500 Hershey Foods Corp..................................................................... 278,719
5,800 Kellogg Co............................................................................. 287,825
5,100 Quaker Oats Company (The).............................................................. 269,025
2,700 Ralston-Ralston Purina Group........................................................... 250,931
4,800 Sara Lee Corp.......................................................................... 270,300
4,400 Unilever N.V. (ADR) (Netherlands)...................................................... 274,725
3,400 Wrigley (Wm.) Jr. Co. (Class A)........................................................ 270,512
------------
3,212,618
------------
FOOTWEAR (0.4%)
6,500 Nike, Inc. (Class B)................................................................... 255,125
9,200 Reebok International Ltd. (United Kingdom)*............................................ 265,075
------------
520,200
------------
GAMING, LOTTERY, & PARI-MUTUEL COMPANIES (0.4%)
14,100 Harrah's Entertainment, Inc.*.......................................................... 266,137
11,900 Mirage Resorts, Inc.*.................................................................. 270,725
------------
536,862
------------
GOLD & PRECIOUS METALS MINING (1.0%)
14,800 Barrick Gold Corp. (Canada)............................................................ 275,650
47,000 Battle Mountain Gold Co................................................................ 276,125
44,800 Echo Bay Mines Ltd. (Canada)........................................................... 109,200
28,700 Homestake Mining Co.................................................................... 254,712
8,700 Newmont Mining Corp.................................................................... 255,562
21,500 Placer Dome Inc. (Canada).............................................................. 272,781
------------
1,444,030
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
HARDWARE & TOOLS (0.4%)
6,600 Black & Decker Corp.................................................................... $ 257,812
5,800 Stanley Works.......................................................................... 273,687
------------
531,499
------------
HEALTHCARE - DIVERSIFIED (1.3%)
3,900 Abbott Laboratories.................................................................... 255,694
7,800 Allergan, Inc.......................................................................... 261,787
3,400 American Home Products Corp............................................................ 260,100
3,100 Bristol-Myers Squibb Co................................................................ 293,337
4,100 Johnson & Johnson...................................................................... 270,087
6,900 Mallinckrodt Group, Inc................................................................ 262,200
2,300 Warner-Lambert Co...................................................................... 285,200
------------
1,888,405
------------
HEALTHCARE - DRUGS (1.0%)
4,200 Lilly (Eli) & Co....................................................................... 292,425
2,700 Merck & Co., Inc....................................................................... 286,875
4,000 Pfizer, Inc............................................................................ 298,250
7,400 Pharmacia & Upjohn, Inc................................................................ 271,025
4,400 Schering-Plough Corp................................................................... 273,350
------------
1,421,925
------------
HEALTHCARE - HMOS (0.4%)
13,700 Humana, Inc.*.......................................................................... 284,275
5,500 United Healthcare Corp................................................................. 273,281
------------
557,556
------------
HEALTHCARE - LONG TERM (0.4%)
9,600 Healthsouth Corp.*..................................................................... 266,400
7,500 Manor Care, Inc........................................................................ 262,500
------------
528,900
------------
HEALTHCARE - SPECIALIZED SERVICES (0.2%)
9,000 ALZA Corp. (Class A)*.................................................................. 286,312
------------
HEAVY DUTY TRUCKS & PARTS (0.5%)
4,600 Cummins Engine Co., Inc................................................................ 271,687
10,400 Navistar International Corp.*.......................................................... 258,050
4,700 PACCAR, Inc............................................................................ 246,750
------------
776,487
------------
HOME BUILDING (0.8%)
4,500 Centex Corp............................................................................ 283,219
6,900 Fleetwood Enterprises, Inc............................................................. 292,819
11,500 Kaufman & Broad Home Corp.............................................................. 258,031
6,300 Pulte Corp............................................................................. 263,419
------------
1,097,488
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
HOSPITAL MANAGEMENT (0.4%)
8,800 Columbia/HCA Healthcare Corp........................................................... $ 260,700
9,000 Tenet Healthcare Corp.*................................................................ 298,125
------------
558,825
------------
HOUSEHOLD FURNISHINGS & APPLIANCES (0.4%)
7,300 Maytag Corp............................................................................ 272,381
5,000 Whirlpool Corp......................................................................... 275,000
------------
547,381
------------
HOUSEHOLD PRODUCTS - NON-DURABLE (0.9%)
3,400 Clorox Co.............................................................................. 268,812
3,900 Colgate-Palmolive Co................................................................... 286,650
6,800 Fort James Corp........................................................................ 260,100
5,000 Kimberly-Clark Corp.................................................................... 246,562
3,300 Procter & Gamble Co.................................................................... 263,381
------------
1,325,505
------------
HOUSEWARES (0.7%)
7,600 Fortune Brands, Inc.................................................................... 281,675
6,000 Newell Co.............................................................................. 255,000
10,150 Rubbermaid, Inc........................................................................ 253,750
9,600 Tupperware Corp........................................................................ 267,600
------------
1,058,025
------------
INSURANCE BROKERS (0.4%)
4,500 Aon Corp............................................................................... 263,812
3,600 Marsh & McLennan Companies, Inc........................................................ 268,425
------------
532,237
------------
INVESTMENT BANKING/BROKERAGE (0.4%)
3,800 Merrill Lynch & Co., Inc............................................................... 277,162
7,350 Schwab (Charles) Corp.................................................................. 308,241
------------
585,403
------------
LEISURE TIME - PRODUCTS (0.6%)
8,500 Brunswick Corp......................................................................... 257,656
9,300 Hasbro, Inc............................................................................ 292,950
7,400 Mattel, Inc............................................................................ 275,650
------------
826,256
------------
LIFE & HEALTH INSURANCE (1.1%)
3,900 Aetna, Inc............................................................................. 275,194
6,000 Conseco, Inc........................................................................... 272,625
3,400 Jefferson-Pilot Corp................................................................... 264,775
6,000 Torchmark Corp......................................................................... 252,375
2,500 Transamerica Corp...................................................................... 266,250
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
5,100 UNUM Corp.............................................................................. $ 277,312
------------
1,608,531
------------
LODGING - HOTELS (0.5%)
8,700 Hilton Hotels Corp..................................................................... 258,825
3,500 ITT Corp.*............................................................................. 290,062
3,500 Marriot International, Inc............................................................. 242,375
------------
791,262
------------
MACHINERY - DIVERSIFIED (1.9%)
4,400 Case Corp.............................................................................. 265,925
5,700 Caterpillar Inc........................................................................ 276,806
10,500 Cincinnati Milacron, Inc............................................................... 272,344
5,300 Cooper Industries, Inc................................................................. 259,700
4,600 Deere & Co............................................................................. 268,237
7,200 Dover Corp............................................................................. 260,100
7,200 Harnischfeger Industries, Inc.......................................................... 254,250
6,600 Ingersoll-Rand Co...................................................................... 267,300
2,400 NACCO Industries, Inc. (Class A)....................................................... 257,250
7,400 Timken Co.............................................................................. 254,375
------------
2,636,287
------------
MANUFACTURING - DIVERSIFIED (2.6%)
5,500 Aeroquip-Vickers, Inc.................................................................. 269,844
7,000 AlliedSignal, Inc...................................................................... 272,562
7,100 Corning, Inc........................................................................... 263,588
6,100 Crane Co............................................................................... 264,588
2,900 Eaton Corp............................................................................. 258,825
4,700 Illinois Tool Works Inc................................................................ 282,588
5,500 Johnson Controls, Inc.................................................................. 262,625
3,100 Minnesota Mining & Manufacturing Co.................................................... 254,394
5,200 National Service Industries, Inc....................................................... 257,725
6,700 Tenneco, Inc........................................................................... 264,650
4,300 Textron Inc............................................................................ 268,750
6,500 Thermo Electron Corp.*................................................................. 289,250
5,800 Tyco International Ltd................................................................. 261,363
3,700 United Technologies Corp............................................................... 269,406
------------
3,740,158
------------
MANUFACTURING - SPECIALIZED (0.9%)
6,000 Avery Dennison Corp.................................................................... 268,500
5,400 Briggs & Stratton Corp................................................................. 262,238
7,300 Millipore Corp......................................................................... 247,744
12,500 Pall Corp.............................................................................. 258,594
5,550 Parker-Hannifin Corp................................................................... 254,606
------------
1,291,682
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
MEDICAL PRODUCTS & SUPPLIES (1.9%)
9,000 Bard (C.R.), Inc....................................................................... $ 281,813
6,700 Bausch & Lomb, Inc..................................................................... 265,488
5,300 Baxter International, Inc.............................................................. 267,319
5,000 Becton, Dickinson & Co................................................................. 250,000
11,500 Biomet, Inc............................................................................ 293,250
5,500 Boston Scientific Corp.*............................................................... 252,313
4,800 Guidant Corp........................................................................... 298,800
5,400 Medtronic, Inc......................................................................... 282,488
8,700 St. Jude Medical, Inc.*................................................................ 265,350
9,500 United States Surgical Corp............................................................ 278,469
------------
2,735,290
------------
METALS & MINING (0.9%)
11,400 ASARCO, Inc............................................................................ 255,788
17,000 Cyprus Amax Minerals Co................................................................ 261,375
16,500 Freeport-McMoran Copper & Gold, Inc. (Class B)......................................... 259,875
14,900 Inco Ltd. (Canada)..................................................................... 253,300
4,100 Phelps Dodge Corp...................................................................... 255,225
------------
1,285,563
------------
MULTI-LINE INSURANCE (1.1%)
2,350 American International Group, Inc...................................................... 255,563
1,500 CIGNA Corp............................................................................. 259,594
3,000 Hartford Financial Services Group Inc. (Note 3)........................................ 280,688
3,400 Lincoln National Corp.................................................................. 265,625
2,400 Loews Corp............................................................................. 254,700
5,500 Travelers Group, Inc................................................................... 296,313
------------
1,612,483
------------
OFFICE EQUIPMENT & SUPPLIES (0.4%)
18,100 Moore Corp. Ltd. (Canada).............................................................. 273,763
3,000 Pitney Bowes, Inc...................................................................... 269,813
------------
543,576
------------
OIL & GAS - EXPLORATION & PRODUCTION (0.2%)
2,800 Burlington Northern Santa Fe Corp...................................................... 260,225
------------
OIL & GAS - REFINING & MARKETING (0.2%)
5,000 Ashland, Inc........................................................................... 268,438
------------
OIL & GAS DRILLING (1.3%)
5,900 Baker Hughes, Inc...................................................................... 257,388
6,300 Dresser Industries, Inc................................................................ 264,206
5,400 Halliburton Co......................................................................... 280,463
4,000 Helmerich & Payne, Inc................................................................. 271,500
9,200 Rowan Companies, Inc.*................................................................. 280,600
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
3,400 Schlumberger, Ltd...................................................................... $ 273,700
3,800 Western Atlas, Inc.*................................................................... 281,200
------------
1,909,057
------------
OIL - EXPLORATION & PRODUCTION (0.8%)
4,400 Anardarko Petroleum Corp............................................................... 267,025
7,500 Apache Corp............................................................................ 262,969
6,600 Burlington Resources, Inc.............................................................. 295,763
11,100 Oryx Energy Co.*....................................................................... 283,050
------------
1,108,807
------------
OIL INTEGRATED - DOMESTIC (1.9%)
4,700 Amerada Hess Corp...................................................................... 257,913
3,300 Atlantic Richfield Co.................................................................. 264,413
4,200 Kerr-McGee Corp........................................................................ 265,913
9,600 Occidental Petroleum Corp.............................................................. 281,400
3,800 Pennzoil Co............................................................................ 253,888
5,400 Phillips Petroleum Co.................................................................. 262,575
6,300 Sun Co., Inc........................................................................... 264,994
11,000 Union Pacific Resources Group, Inc..................................................... 266,750
6,800 Unocal Corp............................................................................ 263,925
8,300 USX-Marathon Group..................................................................... 280,125
------------
2,661,896
------------
OIL INTEGRATED - INTERNATIONAL (1.1%)
3,100 Amoco Corp............................................................................. 263,888
3,200 Chevron Corp........................................................................... 246,400
4,200 Exxon Corp............................................................................. 256,988
3,600 Mobil Corp............................................................................. 259,875
4,800 Royal Dutch Petroleum Co. (ADR) (Netherlands).......................................... 260,100
4,500 Texaco, Inc............................................................................ 244,688
------------
1,531,939
------------
PAPER & FOREST PRODUCTS (1.8%)
8,200 Boise Cascade Corp..................................................................... 248,050
5,900 Champion International Corp............................................................ 267,344
4,300 Georgia-Pacific Corp................................................................... 261,225
6,000 International Paper Co................................................................. 258,750
13,600 Louisiana-Pacific Corp................................................................. 258,400
9,000 Mead Corp.............................................................................. 252,000
6,200 Potlatch Corp.......................................................................... 266,600
8,200 Westvaco Corp.......................................................................... 257,788
5,300 Weyerhaeuser Co........................................................................ 260,031
8,000 Willamette Industries, Inc............................................................. 257,500
------------
2,587,688
------------
PERSONAL CARE (0.5%)
7,900 Alberto-Culver Co. (Class B)........................................................... 253,294
4,000 Avon Products, Inc..................................................................... 245,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
2,800 Gillette Co............................................................................ $ 281,225
------------
780,019
------------
PHOTOGRAPHY/IMAGING (0.8%)
4,300 Eastman Kodak Co....................................................................... 261,494
10,000 IKON Office Solutions, Inc............................................................. 281,250
5,100 Polaroid Corp.......................................................................... 248,306
3,700 Xerox Corp............................................................................. 273,106
------------
1,064,156
------------
PROPERTY - CASUALTY INSURANCE (1.5%)
3,100 Allstate Corp.......................................................................... 281,713
3,500 Chubb Corp............................................................................. 264,688
1,900 Cincinnati Financial Corp.............................................................. 266,950
1,200 General Re Corp........................................................................ 254,400
2,300 Progressive Corp....................................................................... 275,713
5,200 Safeco Corp............................................................................ 252,850
3,100 St. Paul Companies, Inc................................................................ 254,394
11,200 USF&G Corp............................................................................. 247,100
------------
2,097,808
------------
PUBLISHING (0.8%)
5,100 Dow Jones & Co., Inc................................................................... 273,806
3,700 McGraw-Hill, Inc....................................................................... 273,800
7,400 Meredith Corp.......................................................................... 264,088
4,800 Times Mirror Co. (Class A)............................................................. 295,200
------------
1,106,894
------------
PUBLISHING - NEWSPAPER (0.8%)
4,600 Gannett Co., Inc....................................................................... 284,338
5,000 Knight-Ridder, Inc..................................................................... 260,000
4,400 New York Times Co. (Class A)........................................................... 290,950
4,600 Tribune Co............................................................................. 286,350
------------
1,121,638
------------
RAILROADS (0.6%)
4,700 CSX Corp............................................................................... 253,800
8,600 Norfolk Southern Corp.................................................................. 264,988
4,200 Union Pacific Corp..................................................................... 262,238
------------
781,026
------------
RESTAURANTS (0.7%)
21,500 Darden Restaurants, Inc................................................................ 268,750
5,400 McDonald's Corp........................................................................ 257,850
9,000 TRICON Global Restaurants, Inc.*....................................................... 261,563
11,200 Wendy's International, Inc............................................................. 269,500
------------
1,057,663
------------
RETAIL - BUILDING SUPPLIES (0.6%)
4,500 Home Depot, Inc........................................................................ 264,938
6,300 Lowe's Companies, Inc.................................................................. 300,431
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
9,800 Sherwin-Williams Co.................................................................... $ 271,950
------------
837,319
------------
RETAIL - COMPUTERS & ELECTRONICS (0.4%)
7,500 Circuit City Stores, Inc............................................................... 266,719
6,800 Tandy Corp............................................................................. 262,225
------------
528,944
------------
RETAIL - DEPARTMENT STORES (1.3%)
8,000 Dillard Department Stores, Inc. (Class A).............................................. 282,000
6,100 Federated Department Stores, Inc.*..................................................... 262,681
4,900 Harcourt General, Inc.................................................................. 268,275
5,100 May Department Stores Co............................................................... 268,706
4,400 Mercantile Stores Co., Inc............................................................. 267,850
4,400 Nordstrom, Inc......................................................................... 264,550
4,400 Penney (J.C.) Co., Inc................................................................. 265,375
------------
1,879,437
------------
RETAIL - DRUG STORES (0.8%)
4,100 CVS Corp............................................................................... 262,656
8,900 Longs Drug Stores Corp................................................................. 285,913
4,400 Rite Aid Corp.......................................................................... 258,225
9,100 Walgreen Co............................................................................ 285,513
------------
1,092,307
------------
RETAIL - FOOD CHAINS (1.2%)
6,300 Albertson's, Inc....................................................................... 298,463
12,600 American Stores Co..................................................................... 259,088
7,500 Giant Food, Inc. (Class A)............................................................. 252,656
8,500 Great Atlantic & Pacific Tea Co., Inc.................................................. 252,344
8,400 Kroger Co.*............................................................................ 310,275
6,700 Winn-Dixie Stores, Inc................................................................. 292,706
------------
1,665,532
------------
RETAIL - GENERAL MERCHANDISE (1.0%)
6,200 Costco Companies, Inc.*................................................................ 276,288
4,200 Dayton-Hudson Corp..................................................................... 283,500
23,000 Kmart Corp.*........................................................................... 265,938
6,200 Sears, Roebuck & Co.................................................................... 280,550
6,600 Wal-Mart Stores, Inc. (Class A)........................................................ 260,288
------------
1,366,564
------------
RETAIL - SPECIALTY (0.8%)
8,900 AutoZone, Inc.*........................................................................ 258,100
11,500 Pep Boys-Manny, Moe & Jack............................................................. 274,563
9,000 Toys 'R' Us, Inc.*..................................................................... 282,938
12,600 Woolworth Corp.*....................................................................... 256,725
------------
1,072,326
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
RETAIL - SPECIALTY APPAREL (0.8%)
52,000 Charming Shoppes, Inc.*................................................................ $ 240,500
7,950 Gap, Inc............................................................................... 281,728
10,300 Limited (The), Inc..................................................................... 262,650
8,400 TJX Companies, Inc..................................................................... 288,750
------------
1,073,628
------------
SAVINGS & LOAN COMPANIES (0.6%)
4,300 Ahmanson (H.F.) & Co................................................................... 287,831
2,900 Golden West Financial Corp............................................................. 283,656
4,180 Washington Mutual, Inc................................................................. 266,475
------------
837,962
------------
SEMICONDUCTOR EQUIPMENT (0.4%)
8,700 Applied Materials, Inc.*............................................................... 261,544
6,800 KLA-Tencor Corp.*...................................................................... 262,225
------------
523,769
------------
SPECIALTY PRINTING (0.5%)
7,300 Deluxe Corp............................................................................ 251,850
7,000 Donnelley (R.R.) & Sons Co............................................................. 260,750
12,400 Harland (John H.) Co................................................................... 260,400
------------
773,000
------------
STEEL & IRON (1.3%)
9,900 Allegheny Teledyne Inc................................................................. 256,163
55,000 Armco, Inc............................................................................. 271,563
28,900 Bethlehem Steel Corp.*................................................................. 249,263
15,900 Inland Steel Industries, Inc........................................................... 272,288
5,700 Nucor Corp............................................................................. 275,381
9,500 USX-U.S. Steel Group, Inc.............................................................. 296,875
16,300 Worthington Industries, Inc............................................................ 266,913
------------
1,888,446
------------
TELECOMMUNICATIONS - CELLULAR/WIRELESS (0.2%)
7,000 Airtouch Communications, Inc.*......................................................... 290,938
------------
TELECOMMUNICATIONS - LONG DISTANCE (0.8%)
4,500 AT&T Corp.............................................................................. 275,625
6,700 MCI Communications Corp................................................................ 286,844
4,700 Sprint Corp............................................................................ 275,538
8,300 WorldCom, Inc.*........................................................................ 251,075
------------
1,089,082
------------
TELEPHONES (1.6%)
7,100 ALLTEL Corp............................................................................ 291,544
3,500 Ameritech Corp......................................................................... 281,750
3,200 Bell Atlantic Corp..................................................................... 291,200
5,100 BellSouth Corp......................................................................... 287,194
10,600 Frontier Corp.......................................................................... 255,063
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
5,700 GTE Corp............................................................................... $ 297,825
3,900 SBC Communications, Inc................................................................ 285,675
6,300 U.S. West Communications Group, Inc.................................................... 284,288
------------
2,274,539
------------
TEXTILES - APPAREL (0.7%)
10,300 Fruit of the Loom, Inc. (Class A)*..................................................... 263,938
6,400 Liz Claiborne, Inc..................................................................... 267,600
9,400 Russell Corp........................................................................... 249,688
5,600 VF Corp................................................................................ 257,250
------------
1,038,476
------------
TEXTILES - HOME FURNISHINGS (0.2%)
5,200 Springs Industries, Inc. (Class A)..................................................... 270,400
------------
TOBACCO (0.4%)
6,000 Philip Morris Companies, Inc........................................................... 271,875
7,900 UST, Inc............................................................................... 291,806
------------
563,681
------------
TRUCKERS (0.4%)
5,600 Caliber System, Inc.................................................................... 272,650
8,200 Ryder System, Inc...................................................................... 268,550
------------
541,200
------------
UTILITIES - ELECTRIC (5.2%)
5,200 American Electric Power Co., Inc....................................................... 268,450
8,600 Baltimore Gas & Electric Co............................................................ 292,938
6,700 Carolina Power & Light Co.............................................................. 284,331
10,600 Central & South West Corp.............................................................. 286,863
7,400 CINergy Corp........................................................................... 283,513
7,000 Consolidated Edison Co. of New York, Inc............................................... 287,000
6,400 Dominion Resources, Inc................................................................ 272,400
8,000 DTE Energy Co.......................................................................... 277,500
5,000 Duke Power Co.......................................................................... 276,875
10,000 Edison International................................................................... 271,875
9,800 Entergy Corp........................................................................... 293,388
10,100 FirstEnergy Corp.*..................................................................... 292,900
4,800 FPL Group, Inc......................................................................... 284,100
6,700 GPU, Inc............................................................................... 282,238
11,000 Houston Industries, Inc................................................................ 293,563
26,700 Niagara Mohawk Power Corp.*............................................................ 280,350
4,900 Northern States Power Co............................................................... 285,425
10,600 PacifiCorp............................................................................. 289,513
11,200 PECO Energy Co......................................................................... 271,600
9,500 PG & E Corp............................................................................ 289,156
11,200 PP&L Resources, Inc.................................................................... 268,100
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
9,300 Public Service Enterprise Group, Inc................................................... $ 294,694
10,800 Southern Co............................................................................ 279,450
7,000 Texas Utilities Co..................................................................... 290,938
9,500 Unicom Corp............................................................................ 292,125
6,500 Union Electric Co...................................................................... 281,125
------------
7,370,410
------------
UTILITIES - NATURAL GAS (2.1%)
4,200 Coastal Corp........................................................................... 260,138
3,500 Columbia Gas System, Inc............................................................... 274,969
4,400 Consolidated Natural Gas Co............................................................ 266,200
6,500 Eastern Enterprises.................................................................... 292,500
6,500 Enron Corp............................................................................. 270,156
6,400 NICOR, Inc............................................................................. 270,000
7,200 ONEOK, Inc............................................................................. 290,700
7,300 Pacific Enterprises.................................................................... 274,663
6,600 Peoples Energy Corp.................................................................... 259,875
5,800 Sonat, Inc............................................................................. 265,350
10,400 Williams Companies, Inc................................................................ 295,100
------------
3,019,651
------------
WASTE MANAGEMENT (0.4%)
6,900 Browning-Ferris Industries, Inc........................................................ 255,300
9,900 Waste Management Inc................................................................... 272,250
------------
527,550
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $107,331,778)......................................................... 135,258,781
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C>
SHORT-TERM INVESTMENTS (6.7%)
U.S. GOVERNMENT AGENCIES (a) (6.3%)
$ 5,400 Federal Home Loan Mortgage Corp. 6.00% due 01/02/98.................................... 5,399,100
3,500 Federal National Mortgage Assoc. 5.75-5.76% due 01/05/98-01/08/98...................... 3,497,283
------------
TOTAL U.S. GOVERNMENT AGENCIES
(AMORTIZED COST $8,896,383)............................................................ 8,896,383
------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT (0.4%)
$ 564 The Bank of New York 3.875% due 01/02/98 (dated 12/31/97; proceeds $563,851) (b)
(IDENTIFIED COST $563,729)........................................................... $ 563,729
------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $9,460,112)........................................................... 9,460,112
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $116,791,890) (C)........................................................ 102.4 % 144,718,893
LIABILITIES IN EXCESS OF OTHER ASSETS..................................................... (2.4) (3,402,720)
------ -------------
NET ASSETS................................................................................ 100.0 % $ 141,316,173
------ -------------
------ -------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(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 $559,495 U.S. Treasury Note 6.25% due 10/31/01 valued at
$575,004.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $31,397,848 and the
aggregate gross unrealized depreciation is $3,470,845, resulting in net
unrealized appreciation of $27,927,003.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
CORE EQUITY
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (97.4%)
AEROSPACE (2.8%)
23,400 Boeing Co............................................................................... $ 1,145,137
-----------
AIRLINES (6.7%)
3,000 AMR Corp.*.............................................................................. 385,500
12,000 Delta Air Lines, Inc.................................................................... 1,428,000
9,600 UAL Corp.*.............................................................................. 888,000
-----------
2,701,500
-----------
AUTO PARTS - ORIGINAL EQUIPMENT (4.4%)
21,100 Lear Corp.*............................................................................. 1,002,250
12,100 Magna International, Inc. (Class A) (Canada)............................................ 760,031
-----------
1,762,281
-----------
BANKS - MONEY CENTER (0.5%)
1,700 Citicorp................................................................................ 214,944
-----------
BANKS - REGIONAL (3.5%)
4,200 Wells Fargo & Co........................................................................ 1,425,637
-----------
BEVERAGES - SOFT DRINKS (1.9%)
21,400 PepsiCo, Inc............................................................................ 779,762
-----------
BROKERAGE (2.6%)
14,500 Merrill Lynch & Co., Inc................................................................ 1,057,594
-----------
CABLE & TELECOMMUNICATIONS (2.4%)
23,700 Cox Communications, Inc. (Class A)*..................................................... 949,481
-----------
COMMERCIAL SERVICES (1.8%)
19,800 Corrections Corp. of America*........................................................... 733,837
-----------
COMMUNICATIONS - EQUIPMENT/MANUFACTURERS (1.7%)
19,300 3Com Corp.*............................................................................. 673,087
-----------
COMMUNICATIONS EQUIPMENT (5.6%)
17,220 Ascend Communications, Inc.*............................................................ 422,966
32,550 Cisco Systems, Inc.*.................................................................... 1,814,663
-----------
2,237,629
-----------
COMPUTER SERVICES (3.0%)
14,400 Computer Sciences Corp.*................................................................ 1,202,400
-----------
COMPUTER SOFTWARE (4.1%)
12,700 Microsoft Corp.*........................................................................ 1,640,681
-----------
COMPUTERS - SYSTEMS (3.2%)
32,900 Tandy Corp.............................................................................. 1,268,706
-----------
ELECTRICAL EQUIPMENT (4.9%)
45,293 CBS Corp................................................................................ 1,333,313
9,400 Honeywell, Inc.......................................................................... 643,900
-----------
1,977,213
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
ENTERTAINMENT/GAMING (1.6%)
27,600 Mirage Resorts, Inc.*................................................................... $ 627,900
-----------
FINANCIAL - MISCELLANEOUS (6.4%)
14,600 Associates First Capital Corp.
(Class A)............................................................................. 1,038,425
18,900 Fannie Mae.............................................................................. 1,078,481
4,900 Golden West Financial Corp.............................................................. 479,281
-----------
2,596,187
-----------
FOODS (1.7%)
14,000 Kellogg Co.............................................................................. 694,750
-----------
HEALTHCARE - DIVERSIFIED (2.7%)
8,800 Warner-Lambert Co....................................................................... 1,091,200
-----------
HEALTHCARE - DRUGS (3.3%)
19,100 Lilly (Eli) & Co........................................................................ 1,329,838
-----------
HEALTHCARE - MISCELLANEOUS (1.5%)
12,400 United Healthcare Corp.................................................................. 616,125
-----------
INSURANCE BROKERS (2.2%)
11,800 Marsh & McLennan Companies, Inc......................................................... 879,838
-----------
MEDIA GROUP (4.2%)
27,000 Time Warner, Inc........................................................................ 1,674,000
-----------
OIL INTEGRATED - INTERNATIONAL (0.8%)
4,000 Amoco Corp.............................................................................. 340,500
-----------
PHARMACEUTICALS (1.5%)
8,900 Johnson & Johnson....................................................................... 586,288
-----------
RAILROADS (2.4%)
10,540 Burlington Northern Santa Fe Corp....................................................... 979,561
-----------
RESTAURANTS (0.2%)
2,130 Tricon Global Restaurants, Inc.*........................................................ 61,903
-----------
RETAIL - SPECIALTY (4.0%)
27,650 Home Depot, Inc......................................................................... 1,627,894
-----------
SEMICONDUCTORS (4.8%)
27,800 Intel Corp.............................................................................. 1,951,213
-----------
SOAP & HOUSEHOLD PRODUCTS (3.7%)
18,600 Procter & Gamble Co..................................................................... 1,484,513
-----------
TELECOMMUNICATIONS (1.4%)
6,900 Lucent Technologies Inc................................................................. 551,138
-----------
TOBACCO (2.7%)
24,100 Philip Morris Companies, Inc............................................................ 1,092,031
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
CORE EQUITY
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
UTILITIES - TELEPHONE (3.2%)
23,000 BellSouth Corp.......................................................................... $ 1,295,188
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $33,184,925)........................................................... 39,249,956
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C>
SHORT-TERM INVESTMENT (4.3%)
REPURCHASE AGREEMENT
$ 1,746 The Bank of New York 3.875% due 01/02/98 (dated 12/31/97; proceeds $1,746,970) (a)
(IDENTIFIED COST $1,746,594).......................................................... 1,746,594
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $34,931,519) (b).......................................................... 101.7 % 40,996,550
LIABILITIES IN EXCESS OF OTHER ASSETS...................................................... (1.7) (685,437)
------ ------------
NET ASSETS................................................................................. 100.0 % $ 40,311,113
------ ------------
------ ------------
</TABLE>
- ---------------------
* Non-income producing security.
(a) Collateralized by $461,638 U.S. Treasury Note 6.50% due 08/15/05 valued at
$492,942 and $1,242,922 U.S. Treasury Note 6.375% due 09/30/01 valued at
$1,288,584.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $6,839,795 and the
aggregate gross unrealized depreciation is $774,764, resulting in net
unrealized appreciation of $6,065,031.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
AMERICAN VALUE
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (87.8%)
AGRICULTURE RELATED (1.2%)
20,000 Dekalb Genetics Corp. (Class B)........................................................ $ 785,000
26,333 Delta & Pine Land Co................................................................... 803,156
11,000 Pioneer Hi-Bred International, Inc..................................................... 1,179,750
------------
2,767,906
------------
AUTO RELATED (0.1%)
7,000 Budget Group, Inc. (Class A)*.......................................................... 241,937
------------
BANKS (8.3%)
16,200 AmSouth Bancorporation................................................................. 879,862
4,400 City National Corp..................................................................... 162,525
5,900 Comerica, Inc.......................................................................... 532,475
765,000 Credito Italiano SpA (Italy)........................................................... 2,359,602
17,200 Crestar Financial Corp................................................................. 980,400
20,000 First Security Corp.................................................................... 837,500
60,000 Hibernia Corp. (Class A)............................................................... 1,128,750
20,000 Mellon Bank Corp....................................................................... 1,212,500
16,000 Northern Trust Corp.................................................................... 1,116,000
64,000 Norwest Corp........................................................................... 2,472,000
20,000 PNC Bank Corp.......................................................................... 1,141,250
4,000 Southtrust Corp........................................................................ 253,000
7,500 Summit Bancorp......................................................................... 399,375
7,500 Union Planters Corp.................................................................... 509,531
9,000 Wells Fargo & Co....................................................................... 3,054,937
7,500 Westamerica Bancorporation............................................................. 766,875
30,000 Zions Bancorporation................................................................... 1,350,000
------------
19,156,582
------------
BIOTECHNOLOGY (2.1%)
49,000 Centocor, Inc.*........................................................................ 1,629,250
11,000 Dura Pharmaceuticals, Inc.*............................................................ 504,625
30,000 Genzyme Corp. General Division*........................................................ 828,750
19,000 Gilead Sciences, Inc.*................................................................. 726,750
30,000 IDEC Pharmaceuticals Corp.*............................................................ 1,031,250
------------
4,720,625
------------
CABLE/CELLULAR (4.4%)
80,000 Comcast Corp. (Class A Special)........................................................ 2,520,000
17,000 Comcast Corp. (Class A)................................................................ 539,750
30,000 Cox Communications, Inc. (Class A)*.................................................... 1,201,875
30,000 HSN, Inc.*............................................................................. 1,545,000
40,000 Tele-Communications, Inc. (Class A)*................................................... 1,115,000
50,000 Time Warner, Inc....................................................................... 3,100,000
------------
10,021,625
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CAPITAL GOODS (0.6%)
18,000 General Electric Co.................................................................... $ 1,320,750
------------
COMMUNICATIONS EQUIPMENT (0.8%)
20,000 CIENA Corp.*........................................................................... 1,222,500
10,000 Cisco Systems, Inc.*................................................................... 557,500
------------
1,780,000
------------
COMPUTER SERVICES (0.7%)
30,000 Paychex, Inc........................................................................... 1,518,750
------------
COMPUTER SOFTWARE (4.7%)
17,000 BMC Software, Inc.*.................................................................... 1,113,500
5,000 Citrix Systems, Inc.*.................................................................. 380,000
45,000 Computer Associates International, Inc................................................. 2,379,375
25,000 Compuware Corp.*....................................................................... 800,000
33,000 Manugistics Group, Inc.*............................................................... 1,464,375
50,000 PeopleSoft, Inc.*...................................................................... 1,937,500
30,000 Platinum Technology, Inc.*............................................................. 847,500
2,000 SAP AG (Pref.) (Germany)............................................................... 654,616
24,000 Veritas Software Corp.*................................................................ 1,215,000
------------
10,791,866
------------
CONSUMER - NONCYCLICAL (3.5%)
20,000 Alberto-Culver Co. (Class B)........................................................... 641,250
24,000 Clorox Co.............................................................................. 1,897,500
3,200 Coca Cola Co........................................................................... 213,200
30,000 Heinz (H.J.) Co........................................................................ 1,524,375
32,000 Nabisco Holdings Corp. (Class A)....................................................... 1,550,000
6,000 Procter & Gamble Co.................................................................... 478,875
25,600 Quaker Oats Company (The).............................................................. 1,350,400
9,000 Sara Lee Corp.......................................................................... 506,812
------------
8,162,412
------------
CONSUMER BUSINESS SERVICES (2.4%)
38,000 Automatic Data Processing, Inc......................................................... 2,332,250
45,000 Corrections Corp. of America*.......................................................... 1,667,812
35,000 Sysco Corp............................................................................. 1,594,687
------------
5,594,749
------------
CONSUMER PRODUCTS (8.1%)
35,000 Albertson's, Inc....................................................................... 1,658,125
101,250 Arbor Drugs, Inc....................................................................... 1,873,125
33,000 CVS Corp............................................................................... 2,114,062
30,000 Dominick's Supermarkets, Inc.*......................................................... 1,095,000
60,000 Fred Meyer, Inc.*...................................................................... 2,182,500
60,000 Kroger Co.*............................................................................ 2,216,250
35,000 Rite Aid Corp.......................................................................... 2,054,063
38,000 Safeway, Inc.*......................................................................... 2,403,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
AMERICAN VALUE
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
18,000 Sunbeam Corporation, Inc............................................................... $ 758,250
69,000 Walgreen Co............................................................................ 2,164,875
------------
18,519,750
------------
DRUGS (6.2%)
50,000 Biochem Pharma, Inc. (Canada).......................................................... 1,040,625
23,000 Bristol-Myers Squibb Co................................................................ 2,176,375
12,000 Cardinal Health, Inc................................................................... 901,500
30,000 Lilly (Eli) & Co....................................................................... 2,088,750
25,000 Medicis Pharmaceutical Corp. (Class A)*................................................ 1,281,250
550 Novartis AG (Switzerland).............................................................. 891,892
27,000 Pfizer, Inc............................................................................ 2,013,188
35,000 Schering-Plough Corp................................................................... 2,174,375
14,000 Warner-Lambert Co...................................................................... 1,736,000
------------
14,303,955
------------
FINANCIAL - MISCELLANEOUS (6.9%)
15,000 American Express Co.................................................................... 1,338,750
9,000 Associates First Capital Corp. (Class A)............................................... 640,125
11,000 Donaldson, Lufkin & Jenrette, Inc...................................................... 874,500
26,450 Edwards (A.G.), Inc.................................................................... 1,051,388
45,000 Fannie Mae............................................................................. 2,567,813
60,000 Freddie Mac............................................................................ 2,516,250
40,000 Hambrecht & Quist Group*............................................................... 1,460,000
1,100 Legg Mason, Inc........................................................................ 61,531
20,000 Lehman Brothers Holdings, Inc.......................................................... 1,020,000
31,000 Merrill Lynch & Co., Inc............................................................... 2,261,063
30,000 Paine Webber Group, Inc................................................................ 1,036,875
4,000 Price (T. Rowe) Associates, Inc........................................................ 251,500
20,000 Providian Financial Corp............................................................... 903,750
------------
15,983,545
------------
HEALTHCARE PRODUCTS & SERVICES (3.6%)
12,900 Capital Senior Living Corp.*........................................................... 134,644
46,000 HBO & Co............................................................................... 2,205,125
70,500 Health Management Associates, Inc. (Class A)*.......................................... 1,780,125
63,000 Healthsouth Corp.*..................................................................... 1,748,250
30,000 Renal Treatment Centers, Inc.*......................................................... 1,083,750
50,000 Total Renal Care Holdings, Inc.*....................................................... 1,375,000
------------
8,326,894
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
INSURANCE (3.0%)
20,000 Allstate Corp.......................................................................... $ 1,817,500
10,000 Equitable Companies, Inc............................................................... 497,500
6,400 Marsh & McLennan Companies, Inc........................................................ 477,200
18,400 SunAmerica, Inc........................................................................ 786,600
12,500 Torchmark Corp......................................................................... 525,781
50,000 Travelers Group, Inc................................................................... 2,693,750
------------
6,798,331
------------
INTERNET (2.6%)
32,000 America Online, Inc.*.................................................................. 2,854,000
20,000 Check Point Software Technologies Ltd. (Israel)*....................................... 815,000
20,000 CheckFree Holdings Corp.*.............................................................. 540,000
22,000 Excite, Inc.*.......................................................................... 660,000
15,000 Yahoo! Inc.*........................................................................... 1,038,750
------------
5,907,750
------------
MEDIA GROUP (7.6%)
90,000 CBS Corp............................................................................... 2,649,375
35,000 Chancellor Media Corp.*................................................................ 2,611,875
19,400 Clear Channel Communications, Inc.*.................................................... 1,541,088
20,000 Gannett Co., Inc....................................................................... 1,236,250
20,000 Jacor Communications, Inc.*............................................................ 1,062,500
20,000 News Corp., Ltd. (ADR) (Australia)..................................................... 446,250
39,000 Outdoor Systems, Inc.*................................................................. 1,496,625
6,000 Telemundo Group, Inc. (Class A)*....................................................... 245,250
25,600 Tribune Co............................................................................. 1,593,600
16,000 Universal Outdoor Holdings, Inc.*...................................................... 832,000
15,800 Univision Communications, Inc. (Class A)*.............................................. 1,103,038
40,000 Viacom, Inc. (Class B)*................................................................ 1,657,500
12,000 Walt Disney Co......................................................................... 1,188,750
------------
17,664,101
------------
MEDICAL SUPPLIES (2.5%)
26,000 Guidant Corp........................................................................... 1,618,500
25,000 Medtronic, Inc......................................................................... 1,307,813
40,000 Mentor Corp............................................................................ 1,460,000
14,400 Sofamor Danek Group, Inc.*............................................................. 936,900
9,100 Thermo Electron Corp.*................................................................. 404,950
------------
5,728,163
------------
MISCELLANEOUS (1.1%)
72,093 Cendant Corp.*......................................................................... 2,478,197
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
AMERICAN VALUE
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
MULTI-LINE INSURANCE (0.3%)
10,000 Lincoln National Corp.................................................................. $ 781,250
------------
REAL ESTATE INVESTMENT TRUST (0.4%)
20,000 Reckson Associates Realty Corp......................................................... 507,500
13,000 Security Capital Group Inc. (Class B)*................................................. 422,500
------------
930,000
------------
RESTAURANTS (0.3%)
22,500 Cracker Barrel Old Country Store, Inc.................................................. 750,938
------------
RETAIL (7.9%)
20,000 Barnes & Noble, Inc.*.................................................................. 667,500
82,000 Costco Companies, Inc.*................................................................ 3,654,125
35,200 Dayton-Hudson Corp..................................................................... 2,376,000
36,250 Dollar General Corp.................................................................... 1,314,063
48,000 Family Dollar Stores, Inc.............................................................. 1,407,000
32,000 Gap, Inc............................................................................... 1,134,000
20,000 General Nutrition Companies*........................................................... 677,500
40,000 Home Depot, Inc........................................................................ 2,355,000
21,700 Lowe's Companies, Inc.................................................................. 1,034,819
25,000 Mattel, Inc............................................................................ 931,250
40,000 Proffitt's, Inc.*...................................................................... 1,137,500
40,800 Wal-Mart Stores, Inc................................................................... 1,609,050
------------
18,297,807
------------
SAVINGS & LOAN COMPANIES (1.6%)
17,100 Ahmanson (H.F.) & Co................................................................... 1,144,631
37,500 Dime Bancorp, Inc...................................................................... 1,134,375
21,000 Washington Mutual, Inc................................................................. 1,338,750
------------
3,617,756
------------
TELECOMMUNICATIONS (1.5%)
4,000 Intermedia Communications Inc.*........................................................ 242,000
40,000 LCI International, Inc.*............................................................... 1,230,000
36,000 Teleport Communications Group Inc.*.................................................... 1,975,500
------------
3,447,500
------------
TRANSPORTATION (0.8%)
29,000 US Airways Group Inc.*................................................................. 1,812,500
------------
UTILITIES (4.6%)
18,000 Ameritech Corp......................................................................... 1,449,000
20,000 Bell Atlantic Corp..................................................................... 1,820,000
21,000 Consolidated Edison Co. of New York, Inc............................................... 861,000
60,000 DPL, Inc............................................................................... 1,725,000
22,000 GTE Corp............................................................................... 1,149,500
45,000 New York State Electric & Gas Corp..................................................... 1,597,500
30,000 SCANA Corp............................................................................. 898,125
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
25,000 U.S. West Communications Group, Inc.................................................... $ 1,128,125
------------
10,628,250
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $175,213,751)......................................................... 202,053,889
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS (8.3%)
$ 12,600 U.S. Treasury Bond 6.375%
due 08/15/27......................................................................... 13,293,378
14,400 U.S. Treasury Strip 0.00%
due 11/15/19......................................................................... 3,856,896
7,200 U.S. Treasury Strip 0.00%
due 05/15/20......................................................................... 1,871,928
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $18,181,855).......................................................... 19,022,202
------------
SHORT-TERM INVESTMENT (a) (7.2%)
U.S. GOVERNMENT AGENCY
16,500 Federal Home Loan Mortgage Corp. 6.00% due 01/02/98
(AMORTIZED COST $16,497,250)......................................................... 16,497,250
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST
$209,892,856) (B)......................................................................... 103.3 % 237,573,341
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS............................................ (3.3) (7,559,707)
------ -------------
NET ASSETS................................................................................ 100.0 % $ 230,013,634
------ -------------
------ -------------
</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) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $28,829,481 and the
aggregate gross unrealized depreciation is $1,148,996, resulting in net
unrealized appreciation of $27,680,485.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
MID-CAP GROWTH
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (83.8%)
AEROSPACE (0.3%)
3,100 Wyman-Gordon Co.*....................................................................... $ 60,837
-----------
AGRICULTURE RELATED (2.6%)
2,300 Dekalb Genetics Corp. (Class B)......................................................... 90,275
3,733 Delta & Pine Land Co.................................................................... 113,856
2,000 Monsanto Co............................................................................. 84,000
1,900 Pioneer Hi-Bred International, Inc...................................................... 203,775
-----------
491,906
-----------
APPAREL & FOOTWEAR (0.5%)
2,200 Jones Apparel Group, Inc.*.............................................................. 94,600
-----------
AUTO RELATED (1.1%)
6,000 Budget Group, Inc. (Class A)*........................................................... 207,375
-----------
BANKS (9.3%)
2,300 AmSouth Bancorporation.................................................................. 124,919
2,000 Bay View Capital Corp................................................................... 72,500
2,300 City National Corp...................................................................... 84,956
1,300 Compass Bancshares Inc.................................................................. 56,875
2,600 Crestar Financial Corp.................................................................. 148,200
2,000 First American Corp..................................................................... 99,500
1,700 First of America Bank Corp.............................................................. 131,112
4,400 First Security Corp..................................................................... 184,250
200 First Union Corp........................................................................ 10,250
2,300 Golden State Bancorp Inc.*.............................................................. 85,962
4,200 North Fork Bancorporation, Inc.......................................................... 140,962
3,400 Southtrust Corp......................................................................... 215,050
2,200 Union Planters Corp..................................................................... 149,462
1,400 Westamerica Bancorporation.............................................................. 143,150
3,000 Zions Bancorporation.................................................................... 135,000
-----------
1,782,148
-----------
BIOTECHNOLOGY (6.2%)
14,600 Alkermes, Inc.*......................................................................... 286,525
12,300 BioChem Pharma, Inc. (Canada)*.......................................................... 255,994
5,600 Centocor, Inc.*......................................................................... 186,200
4,600 Gilead Sciences, Inc.*.................................................................. 175,950
1,800 IDEC Pharmaceuticals Corp.*............................................................. 61,875
2,000 MedImmune, Inc.*........................................................................ 85,750
4,500 Vertex Pharmaceuticals, Inc.*........................................................... 147,937
-----------
1,200,231
-----------
CABLE/CELLULAR (1.1%)
6,500 Comcast Corp. (Class A Special)......................................................... 204,750
-----------
COMMUNICATIONS EQUIPMENT (0.5%)
1,500 CIENA Corp.*............................................................................ 91,687
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMPUTER SOFTWARE (7.9%)
2,400 Arbor Software Corp.*................................................................... $ 96,900
7,300 BEA Systems, Inc.*...................................................................... 126,381
1,800 Citrix Systems, Inc.*................................................................... 136,800
2,400 Computer Associates International, Inc.................................................. 126,900
4,400 Compuware Corp.*........................................................................ 140,800
3,900 Legato Systems, Inc.*................................................................... 170,625
5,000 Manugistics Group, Inc.*................................................................ 221,875
6,000 PeopleSoft, Inc.*....................................................................... 232,500
6,000 Software AG Systems, Inc.*.............................................................. 87,000
3,750 Veritas Software Corp.*................................................................. 189,844
-----------
1,529,625
-----------
CONSUMER - NONCYCLICAL (0.9%)
1,000 Consolidated Cigar Holdings Inc.*....................................................... 27,562
2,000 Dean Foods Co........................................................................... 119,000
1,000 Lance, Inc.............................................................................. 26,250
-----------
172,812
-----------
CONSUMER BUSINESS SERVICES (5.1%)
9,500 Allied Waste Industries, Inc.*.......................................................... 221,469
7,800 Corporate Express, Inc.*................................................................ 100,425
9,600 Corrections Corp. of America*........................................................... 355,800
4,600 Eastern Environmental Services, Inc.*................................................... 101,200
3,700 U.S.A Waste Services, Inc.*............................................................. 145,225
1,800 US Filter Corp.*........................................................................ 53,887
-----------
978,006
-----------
CONSUMER PRODUCTS (2.6%)
4,500 Arbor Drugs, Inc........................................................................ 83,250
2,200 CVS Corp................................................................................ 140,937
5,300 Dominick's Supermarkets, Inc.*.......................................................... 193,450
2,500 Kroger Co.*............................................................................. 92,344
-----------
509,981
-----------
DRUGS (2.1%)
4,200 Dura Pharmaceuticals, Inc.*............................................................. 192,675
4,200 Medicis Pharmaceutical Corp. (Class A)*................................................. 215,250
-----------
407,925
-----------
ENERGY (2.8%)
1,300 Coflexip S.A. (ADR) (France)............................................................ 72,150
1,600 Cooper Cameron Corp.*................................................................... 97,600
2,100 Falcon Drilling Company, Inc.*.......................................................... 73,631
2,400 Halter Marine Group, Inc.*.............................................................. 69,300
2,300 Marine Drilling Company, Inc.*.......................................................... 47,725
1,400 Rowan Companies, Inc.*.................................................................. 42,700
900 Smith International, Inc.*.............................................................. 55,237
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
MID-CAP GROWTH
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
1,800 Stolt Comex Seaway, S.A. (United Kingdom)*.............................................. $ 87,300
-----------
545,643
-----------
ENTERTAINMENT (0.6%)
3,000 Electronic Arts, Inc.*.................................................................. 113,438
-----------
ENTERTAINMENT/GAMING & LODGING (0.3%)
1,700 MGM Grand, Inc.*........................................................................ 61,306
-----------
FINANCIAL - MISCELLANEOUS (2.3%)
300 American Express Co..................................................................... 26,775
200 CMAC Investment Corp.................................................................... 12,075
1,750 Edwards (A.G.), Inc..................................................................... 69,563
2,100 Finova Group Inc........................................................................ 104,344
3,800 Morgan Keegan, Inc...................................................................... 96,188
2,100 Paine Webber Group, Inc................................................................. 72,581
1,400 Providian Financial Corp................................................................ 63,263
-----------
444,789
-----------
HEALTHCARE PRODUCTS & SERVICES (6.5%)
5,600 Concentra Managed Care, Inc.*........................................................... 188,300
2,000 Health Care & Retirement Corp.*......................................................... 80,500
6,300 Health Management Associates, Inc. (Class A)*........................................... 159,075
1,000 Healthsouth Corp.*...................................................................... 27,750
3,700 Horizon Health Corp.*................................................................... 84,175
5,800 IDX Systems Corp.*...................................................................... 214,600
3,300 PMR Corp.*.............................................................................. 65,588
5,900 Renal Treatment Centers, Inc.*.......................................................... 213,138
3,800 Tenet Healthcare Corp.*................................................................. 125,875
3,200 Total Renal Care Holdings, Inc.*........................................................ 88,000
-----------
1,247,001
-----------
INSURANCE (1.9%)
500 Executive Risk, Inc..................................................................... 34,906
1,600 Hartford Life, Inc. (Class A)........................................................... 72,500
2,500 HCC Insurance Holdings, Inc............................................................. 53,125
400 Protective Life Corp.................................................................... 23,900
2,800 Provident Companies, Inc................................................................ 108,150
1,400 UNUM Corp............................................................................... 76,125
-----------
368,706
-----------
INTERNET (3.8%)
1,000 America Online, Inc.*................................................................... 89,188
5,200 Check Point Software Technologies Ltd. (Israel)*........................................ 211,900
9,000 CheckFree Holdings Corp.*............................................................... 243,000
2,500 Netscape Communications Corp.*.......................................................... 60,625
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
3,600 Security Dynamics Technologies, Inc.*................................................... $ 128,700
-----------
733,413
-----------
MEDIA GROUP (7.0%)
1,500 Applied Graphics Technologies, Inc.*.................................................... 79,125
1,400 Chancellor Media Corp. (Class A)*....................................................... 104,475
4,200 Hearst-Argyle Television, Inc.*......................................................... 123,375
1,800 Heftel Broadcasting Corp. (Class A)*.................................................... 84,150
3,900 Jacor Communications, Inc.*............................................................. 207,188
4,100 Outdoor Systems, Inc.*.................................................................. 157,338
900 TCA Cable TV, Inc....................................................................... 41,400
400 Telemundo Group, Inc. (Class A)*........................................................ 16,350
4,200 TV Azteca, S.A. de C.V (ADR) (Mexico)*.................................................. 94,763
2,900 Universal Outdoor Holdings, Inc.*....................................................... 150,800
1,700 Univision Communications, Inc. (Class A)*............................................... 118,681
4,800 Valassis Communications, Inc.*.......................................................... 177,600
-----------
1,355,245
-----------
MEDICAL SUPPLIES (1.5%)
600 Guidant Corp............................................................................ 37,350
6,100 Mentor Corp............................................................................. 222,650
1,000 North American Scientific, Inc.*........................................................ 22,000
-----------
282,000
-----------
MISCELLANEOUS (0.4%)
2,403 Cendant Corp.*.......................................................................... 82,603
-----------
REAL ESTATE INVESTMENT TRUST (0.3%)
3,300 Catellus Development Corp.*............................................................. 66,000
-----------
RESTAURANTS (2.4%)
8,700 Foodmaker, Inc.*........................................................................ 131,044
9,000 Showbiz Pizza Time, Inc.*............................................................... 207,000
3,000 Starbucks Corp.*........................................................................ 115,125
-----------
453,169
-----------
RETAIL (4.0%)
3,750 99 Cents Only Stores*................................................................... 110,625
3,200 Barnes & Noble, Inc.*................................................................... 106,800
4,000 Borders Group, Inc.*.................................................................... 125,250
500 Costco Companies, Inc.*................................................................. 22,281
2,300 Dollar General Corp..................................................................... 83,375
3,100 General Nutrition Companies*............................................................ 105,013
2,200 Linens 'N Things, Inc.*................................................................. 95,975
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
MID-CAP GROWTH
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
4,200 Proffitt's, Inc.*....................................................................... $ 119,438
-----------
768,757
-----------
SAVINGS & LOAN COMPANIES (0.5%)
1,400 Washington Mutual, Inc.................................................................. 89,250
-----------
SEMICONDUCTORS (0.3%)
1,450 Vitesse Semiconductor Corp.*............................................................ 54,738
-----------
TELECOMMUNICATIONS (4.4%)
4,700 ICG Communications, Inc.*............................................................... 128,075
1,700 Intermedia Communications Inc.*......................................................... 102,850
4,500 LCI International, Inc.*................................................................ 138,375
1,600 Newbridge Networks Corp. (Canada)*...................................................... 55,800
3,600 Pacific Gateway Exchange, Inc.*......................................................... 193,500
4,100 Teleport Communications Group Inc.*..................................................... 224,988
-----------
843,588
-----------
TRANSPORTATION (0.5%)
3,200 Knightsbridge Tankers Ltd............................................................... 89,600
-----------
UTILITIES (4.1%)
4,000 Consolidated Edison Co. of New York, Inc................................................ 164,000
5,000 New York State Electric & Gas Corp...................................................... 177,500
4,000 Pinnacle West Capital Corp.............................................................. 169,500
5,500 SCANA Corp.............................................................................. 164,656
2,500 Texas Utilities Co...................................................................... 103,906
-----------
779,562
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $14,563,975)........................................................... 16,110,691
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C>
SHORT-TERM INVESTMENTS (21.7%)
U.S. GOVERNMENT AGENCY (a) (20.8%)
$ 4,000 Federal Home Loan Banks 5.75% due 01/02/98 (AMORTIZED COST $3,999,361).................. 3,999,361
-----------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT (0.9%)
$ 180 The Bank of New York 3.875% due 01/02/98 (dated 12/31/97; proceeds $179,676) (b)
(IDENTIFIED COST $179,637)............................................................ $ 179,637
-----------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $4,178,998)............................................................ 4,178,998
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $18,742,973) (C).......................................................... 105.5 % 20,289,689
LIABILITIES IN EXCESS OF OTHER ASSETS...................................................... (5.5) (1,053,654)
------ ------------
NET ASSETS................................................................................. 100.0 % $ 19,236,035
------ ------------
------ ------------
</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 $131,731 U.S. Treasury Bond 9.25% due 02/15/16 valued at
$183,230.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $1,953,551 and the
aggregate gross unrealized depreciation is $406,835, resulting in net
unrealized appreciation of $1,546,716.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON AND PREFERRED STOCKS (93.9%)
ARGENTINA (0.7%)
BANKING
16,000 Banco de Galicia y Buenos Aires S.A. de C.V. (ADR)................ $ 412,000
------------
BREWERY
20,000 Quilmes Industrial S.A. (ADR)..................................... 273,750
------------
TOTAL ARGENTINA................................................... 685,750
------------
AUSTRALIA (1.3%)
BANKING
48,000 Westpac Banking Corp., Ltd........................................ 306,495
------------
ENERGY
30,000 Woodside Petroleum Ltd............................................ 211,152
------------
FINANCIAL SERVICES
120,000 Tyndall Australia Ltd............................................. 187,344
------------
FOODS & BEVERAGES
100,000 Goodman Fielder Ltd............................................... 158,722
------------
TELECOMMUNICATIONS
11,700 Telstra Corp., Ltd. (ADR)*........................................ 488,475
------------
TOTAL AUSTRALIA................................................... 1,352,188
------------
BELGIUM (0.2%)
RETAIL
3,500 G.I.B. Holdings Ltd............................................... 169,871
------------
BRAZIL (1.6%)
BREWERY
20,000 Companhia Cervejaria Brahma (ADR)................................. 283,750
------------
ELECTRIC
37,500 Companhia Paranaense de Energia - Copel (ADR)..................... 513,281
------------
TELECOMMUNICATIONS
7,300 Telecomunicacoes Brasileiras S.A. (ADR)........................... 849,994
------------
TOTAL BRAZIL...................................................... 1,647,025
------------
CANADA (1.5%)
BANKING
10,000 Royal Bank of Canada.............................................. 528,930
------------
COMPUTERS - SYSTEMS
10,000 Geac Computer Corp., Ltd.*........................................ 329,532
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
DRUGS
31,500 BioChem Pharma, Inc.*............................................. $ 655,594
------------
TOTAL CANADA...................................................... 1,514,056
------------
CHILE (0.5%)
AIRLINES
25,000 Linea Aerea Nacional Chile S.A. (ADR)*............................ 340,625
------------
FOOD, BEVERAGE, TOBACCO &
HOUSEHOLD PRODUCTS
10,000 Santa Isabel S.A. (ADR)........................................... 175,000
------------
TOTAL CHILE....................................................... 515,625
------------
CHINA (0.4%)
TELECOMMUNICATIONS
12,350 China Telecom Ltd. (ADR)*......................................... 414,497
------------
DENMARK (1.0%)
PHARMACEUTICALS
5,000 Novo-Nordisk AS (Series B)........................................ 715,443
------------
TRANSPORTATION
3,000 Kobenhavns Lufthavne AS........................................... 361,372
------------
TOTAL DENMARK..................................................... 1,076,815
------------
FINLAND (0.3%)
DRUGS & HEALTHCARE
10,080 Orion-yhtymae Oy (B Shares)....................................... 266,569
------------
MANUFACTURING
3,000 KCI Konecranes International...................................... 99,170
------------
TOTAL FINLAND..................................................... 365,739
------------
FRANCE (5.5%)
AUTOMOTIVE
5,000 Compagnie Generale des Etablissements Michelin (B Shares)......... 251,536
7,500 Valeo S.A......................................................... 508,301
------------
759,837
------------
BANKING
9,000 Banque Nationale de Paris......................................... 478,018
------------
COMPUTER SERVICES
1,800 Atos S.A.*........................................................ 231,911
------------
ELECTRICAL EQUIPMENT
3,300 Alcatel Alsthom................................................... 419,143
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
ELECTRONICS
16,000 Thomson CSF....................................................... $ 503,935
------------
ENERGY
3,800 Elf Aquitaine S.A................................................. 441,640
------------
FINANCIAL SERVICES
6,000 Compagnie Financiere de Paribas (A Shares)........................ 521,003
------------
INSURANCE
11,000 AXA-UAP........................................................... 850,523
------------
LEISURE
2,500 Accor S.A......................................................... 464,470
------------
MANUFACTURING - INTERNATIONAL
10,000 Rhone-Poulenc (A Shares).......................................... 447,617
------------
TELECOMMUNICATIONS
14,300 France Telecom S.A. (ADR)*........................................ 514,800
------------
TOTAL FRANCE...................................................... 5,632,897
------------
GERMANY (3.6%)
APPAREL
1,700 Adidas AG......................................................... 223,704
------------
AUTOMOTIVE
670 Bayerische Motoren Werke (BMW) AG................................. 501,196
1,400 M.A.N. AG......................................................... 405,673
330 Volkswagen AG..................................................... 185,740
------------
1,092,609
------------
CHEMICALS
9,400 Bayer AG.......................................................... 351,324
3,300 SGL Carbon AG..................................................... 425,806
------------
777,130
------------
COMPUTER SOFTWARE
2,300 SAP AG (Pref.).................................................... 752,808
------------
ELECTRICAL EQUIPMENT
7,600 Siemens AG........................................................ 450,167
------------
MANUFACTURING
450 Mannesmann AG..................................................... 227,503
------------
MULTI-INDUSTRY
100 Hugo Boss AG (Pref.).............................................. 127,920
------------
TOTAL GERMANY..................................................... 3,651,841
------------
HONG KONG (3.1%)
BANKING
60,000 Guoco Group Ltd................................................... 146,761
16,608 HSBC Holdings PLC................................................. 409,450
------------
556,211
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CONGLOMERATES
75,000 Hutchison Whampoa, Ltd............................................ $ 470,487
------------
NATURAL GAS
242,000 Hong Kong & China Gas Co., Ltd.................................... 468,550
------------
REAL ESTATE
76,000 Cheung Kong (Holdings) Ltd........................................ 497,851
70,000 New World Development Co., Ltd.................................... 242,149
31,000 Sun Hung Kai Properties Ltd....................................... 216,075
------------
956,075
------------
UTILITIES - ELECTRIC
123,000 China Light & Power Co., Ltd...................................... 682,689
------------
TOTAL HONG KONG................................................... 3,134,012
------------
HUNGARY (0.8%)
TELECOMMUNICATIONS
30,000 Magyar Tavkozlesi RT (ADR)*....................................... 780,000
------------
INDIA (0.4%)
TELECOMMUNICATIONS
25,000 Mahanagar Telephone Nigam (GDR)*.................................. 386,250
------------
INDONESIA (0.4%)
OIL & GAS EXPLORATION
10,600 Gulf Indonesia Resources Ltd.*.................................... 233,200
------------
TELECOMMUNICATIONS
20,000 PT Telekomunikasi Indonesia (ADR)................................. 221,250
------------
TOTAL INDONESIA................................................... 454,450
------------
ISRAEL (0.7%)
RETAIL STORES
50,000 Super-Sol Ltd. (ADR).............................................. 703,125
------------
ITALY (1.8%)
BANKING
225,000 Banca Commerciale Italiana........................................ 782,421
------------
ENERGY
5,000 Ente Nazionale Idrocarburi SpA (ADR).............................. 285,312
------------
MANUFACTURING
16,000 Industrie Natuzzi SpA (ADR)....................................... 330,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS
75,000 Telecom Italia SpA................................................ $ 479,206
------------
TOTAL ITALY....................................................... 1,876,939
------------
JAPAN (7.9%)
AUTOMOTIVE
20,000 Honda Motor Co.................................................... 734,100
45,000 Suzuki Motor Co., Ltd............................................. 406,897
------------
1,140,997
------------
BANKING
130,000 Sakura Bank Ltd................................................... 371,571
------------
BUILDING & CONSTRUCTION
54,000 Sekisui House Ltd................................................. 347,172
------------
BUSINESS SERVICES
5,000 Secom Co.......................................................... 319,540
------------
COMPUTERS
30,000 Fujitsu, Ltd...................................................... 321,839
------------
ELECTRONICS
7,000 Sony Corp......................................................... 622,222
3,000 TDK Corp.......................................................... 226,207
------------
848,429
------------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS
5,000 Rohm Co., Ltd..................................................... 509,578
------------
FINANCIAL SERVICES
30,000 Nomura Securities Co., Ltd........................................ 400,000
------------
INTERNATIONAL TRADE
86,000 Mitsui & Co....................................................... 508,751
------------
MACHINERY
47,000 Minebea Co., Ltd.................................................. 504,215
------------
PHARMACEUTICALS
21,000 Eisai Co., Ltd.................................................... 320,230
8,000 Terumo Corp....................................................... 117,701
------------
437,931
------------
REAL ESTATE
25,000 Mitsui Fudosan Co., Ltd........................................... 241,379
------------
RESTAURANTS
23 Yoshinoya D & C Co., Ltd.......................................... 209,732
------------
RETAIL
8,000 Family Mart Co., Ltd.............................................. 286,897
------------
TELECOMMUNICATIONS
60 DDI Corp.......................................................... 158,621
75 Nippon Telegraph & Telephone...................................... 643,678
------------
802,299
------------
TIRE & RUBBER GOODS
20,000 Bridgestone Corp.................................................. 433,716
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
TRANSPORTATION
80 East Japan Railway Co............................................. $ 361,073
------------
TOTAL JAPAN....................................................... 8,045,119
------------
MALAYSIA (0.4%)
NATURAL GAS
120,000 Petronas Gas Berhad............................................... 273,711
------------
TELECOMMUNICATIONS
90,000 Tenaga Nasional Berhad............................................ 192,526
------------
TOTAL MALAYSIA.................................................... 466,237
------------
MEXICO (3.4%)
BEVERAGES
9,000 Coca-Cola Femsa S.A. de C.V. (ADR)................................ 522,000
5,000 Panamerican Beverages, Inc. (Class A)............................. 163,125
16,000 Pepsi-Gemex S.A. de C.V. (ADR).................................... 231,000
------------
916,125
------------
BUILDING MATERIALS
70,600 Cemex S.A. de C.V. (B Shares)*.................................... 374,805
------------
CONGLOMERATES
11,030 DESC S.A. de C.V. (Series C) (ADR)................................ 413,625
34,000 Grupo Carso S.A. de C.V. (Series A1).............................. 226,470
------------
640,095
------------
FINANCIAL SERVICES
500,000 Grupo Financiero Bancomer S.A. de C.V. (Series B)*................ 324,981
------------
MEDIA
10,000 Grupo Televisa S.A. de C.V. (GDR)*................................ 386,875
------------
PAPER & FOREST PRODUCTS
60,000 Kimberly-Clark de Mexico S.A. de C.V. (A Shares).................. 284,297
------------
TELECOMMUNICATIONS
9,100 Telefonos de Mexico S.A. de C.V. (Series L) (ADR)................. 510,169
------------
TOTAL MEXICO...................................................... 3,437,347
------------
NETHERLANDS (3.3%)
BUSINESS & PUBLIC SERVICES
3,750 Randstad Holdings NV.............................................. 141,227
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CHEMICALS
4,500 Akzo Nobel NV..................................................... $ 776,505
------------
ELECTRICAL EQUIPMENT
8,600 Philips Electronics NV............................................ 516,170
------------
FOOD PROCESSING
4,500 Koninklijke Nutricia Verenigde Bedrijven NV....................... 136,599
------------
HOUSEHOLD FURNISHINGS & APPLIANCES
8,000 Koninklijke Ahrend Groep NV....................................... 251,530
------------
INSURANCE
4,600 Aegon NV.......................................................... 409,822
8,000 ING Groep NV...................................................... 337,216
------------
747,038
------------
PUBLISHING
7,600 Elsevier NV....................................................... 123,041
9,000 Ver Ned Utigev Ver Bezit NV....................................... 254,097
------------
377,138
------------
RETAIL
16,500 Koninklijke Ahold NV.............................................. 430,824
------------
TOTAL NETHERLANDS................................................. 3,377,031
------------
PERU (0.2%)
BANKING
34,000 Banco Wiese (ADR)................................................. 170,000
------------
PHILIPPINES (0.2%)
TELECOMMUNICATIONS
10,000 Philippine Long Distance Telephone Co. (ADR)...................... 225,000
------------
PORTUGAL (0.6%)
TELECOMMUNICATIONS
8,500 Portugal Telecom S.A. (ADR)....................................... 399,500
2,400 Telecel-Comunicacoes Pessoais S.A.*............................... 255,852
------------
TOTAL PORTUGAL.................................................... 655,352
------------
SINGAPORE (0.8%)
BANKING
8,500 Development Bank of Singapore, Ltd................................ 72,814
48,000 Overseas Union Bank, Ltd.......................................... 184,176
------------
256,990
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
UTILITIES - TELECOMMUNICATIONS
305,000 Singapore Telecommunications, Ltd................................. $ 569,720
------------
TOTAL SINGAPORE................................................... 826,710
------------
SOUTH AFRICA (0.3%)
COMPUTERS - SYSTEMS
24,444 Dimension Data Holdings Ltd. (GDR)* - 144A**...................... 311,661
------------
SPAIN (1.7%)
BANKING
11,200 Banco Popular Espanol S.A......................................... 782,677
------------
ELECTRIC
8,800 Endesa S.A........................................................ 156,194
------------
FINANCIAL SERVICES
2,000 Corporacion Financiera Alba....................................... 210,630
------------
FOODS & BEVERAGES
15,000 Centros Comerciales Pryca S.A..................................... 223,425
------------
TELECOMMUNICATIONS
3,800 Telefonica de Espana S.A. (ADR)................................... 346,038
------------
TOTAL SPAIN....................................................... 1,718,964
------------
SWEDEN (0.8%)
AUTO TRUCKS & PARTS
8,800 Scania AB (A Shares).............................................. 196,934
------------
BUSINESS SERVICES
5,000 Assa Abloy AB (Series B).......................................... 132,382
6,000 Securitas AB (Series "B" Free).................................... 181,552
------------
313,934
------------
MEDICAL SUPPLIES
6,200 Getinge Industrier AB (B Shares).................................. 98,492
------------
TELECOMMUNICATION EQUIPMENT
5,100 Ericsson (L.M.) Telephone Co. AB (Series "B" Free)................ 191,935
------------
TOTAL SWEDEN...................................................... 801,295
------------
SWITZERLAND (2.2%)
BUILDING MATERIALS
250 Holderbank Financiere Glarus AG (B Shares)........................ 203,900
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CONGLOMERATES
160 ABB AG - Bearer................................................... $ 200,889
------------
FOOD PROCESSING
500 Nestle S.A........................................................ 748,888
------------
PHARMACEUTICALS
294 Novartis AG....................................................... 476,757
130 Novartis AG - Bearer.............................................. 211,256
40 Roche Holdings AG................................................. 396,989
------------
1,085,002
------------
TOTAL SWITZERLAND................................................. 2,238,679
------------
UNITED KINGDOM (14.2%)
AEROSPACE
80,543 Rolls-Royce PLC................................................... 311,927
------------
AEROSPACE & DEFENSE
16,058 British Aerospace PLC............................................. 459,143
8,600 Smiths Industries PLC............................................. 120,185
------------
579,328
------------
AUTO PARTS
135,000 LucasVarity PLC................................................... 478,332
------------
AUTO PARTS - ORIGINAL EQUIPMENT
56,000 BBA Group PLC..................................................... 374,689
------------
BANKING
16,000 Abbey National PLC................................................ 287,675
35,630 National Westminster Bank PLC..................................... 594,229
------------
881,904
------------
BEVERAGES
24,800 Bass PLC.......................................................... 386,021
------------
BROADCAST MEDIA
6,300 Flextech PLC*..................................................... 54,196
------------
BUILDING & CONSTRUCTION
61,679 Blue Circle Industries PLC........................................ 347,125
------------
BUSINESS SERVICES
24,200 Reuters Holdings PLC.............................................. 265,213
------------
COMPUTER SOFTWARE & SERVICES
18,000 SEMA Group PLC.................................................... 439,027
------------
ENERGY
144,000 Shell Transport & Trading Co. PLC................................. 1,044,173
------------
FOOD PROCESSING
41,000 Devro PLC......................................................... 256,083
52,000 Unilever PLC...................................................... 446,476
------------
702,559
------------
HOUSEHOLD PRODUCTS
26,000 Reckitt & Colman PLC.............................................. 409,198
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
INSURANCE
18,000 Britannic Assurance PLC........................................... $ 324,821
36,000 Commercial Union PLC.............................................. 503,695
71,110 Royal & Sun Alliance Insurance Group PLC.......................... 718,370
------------
1,546,886
------------
LEISURE
13,722 Granada Group PLC................................................. 210,309
74,000 Rank Group PLC.................................................... 413,417
65,674 Tomkins PLC....................................................... 314,952
------------
938,678
------------
MANUFACTURING
75,000 Vickers PLC....................................................... 291,696
------------
MERCHANDISING
34,000 Next PLC.......................................................... 387,741
------------
PHARMACEUTICALS
60,000 British Biotech PLC*.............................................. 104,813
48,998 Glaxo Wellcome PLC................................................ 1,162,781
------------
1,267,594
------------
PUBLISHING
50,000 Reed International PLC............................................ 502,640
------------
RESTAURANTS
25,500 Compass Group PLC................................................. 314,760
------------
RETAIL
65,000 Sainsbury (J.) PLC................................................ 545,241
------------
TELECOMMUNICATIONS
60,600 British Telecommunications PLC.................................... 477,872
20,700 Esat Telecom Group PLC (ADR)*..................................... 278,156
61,723 Securicor PLC..................................................... 290,409
80,607 Vodafone Group PLC................................................ 583,169
------------
1,629,606
------------
TRANSPORTATION
32,959 British Airways PLC............................................... 304,172
------------
UTILITIES - ELECTRIC
56,000 National Power PLC................................................ 553,728
------------
TOTAL UNITED KINGDOM.............................................. 14,556,434
------------
UNITED STATES (34.1%)
AEROSPACE & DEFENSE
13,100 General Motors Corp. (Class H).................................... 483,881
12,500 Honeywell, Inc.................................................... 856,250
7,367 Raytheon Co. (Class A)............................................ 363,307
------------
1,703,438
------------
ALUMINUM
12,200 Aluminum Co. of America........................................... 858,575
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
APPLIANCES & HOUSEHOLD DURABLES
24,400 Maytag Corp....................................................... $ 910,425
------------
AUTOMOTIVE
24,100 Chrysler Corp..................................................... 848,019
18,500 Ford Motor Co..................................................... 900,719
------------
1,748,738
------------
BANKS
13,100 First Tennessee National Corp..................................... 874,425
------------
BEVERAGES - SOFT DRINKS
24,100 PepsiCo, Inc...................................................... 878,144
------------
BUILDING MATERIALS
18,300 Champion International Corp....................................... 829,219
------------
CHEMICALS
8,700 Dow Chemical Co................................................... 883,050
28,000 Georgia Gulf Corp................................................. 857,500
20,200 Monsanto Co....................................................... 848,400
------------
2,588,950
------------
COMMUNICATIONS - EQUIPMENT & SOFTWARE
15,450 Cisco Systems, Inc.*.............................................. 861,337
------------
COMPUTERS
18,500 Diebold, Inc...................................................... 936,563
28,400 Gateway 2000, Inc.*............................................... 926,550
13,600 Hewlett-Packard Co................................................ 850,000
22,100 Sun Microsystems, Inc.*........................................... 881,237
------------
3,594,350
------------
FINANCIAL SERVICES
10,000 American Express Co............................................... 892,500
16,100 Fannie Mae........................................................ 918,706
16,100 Travelers Group, Inc.............................................. 867,388
------------
2,678,594
------------
FOODS & BEVERAGES
11,000 General Mills, Inc................................................ 787,875
------------
HOUSEHOLD PRODUCTS
12,300 Colgate-Palmolive Co.............................................. 904,050
------------
INSURANCE
4,800 ESG Re Ltd.*...................................................... 111,600
------------
MEDICAL SERVICES
19,100 HBO & Co.......................................................... 915,606
------------
OIL - DOMESTIC
11,300 Atlantic Richfield Co............................................. 905,413
------------
OIL INTEGRATED - INTERNATIONAL
11,100 Chevron Corp...................................................... 854,700
13,900 Exxon Corp........................................................ 850,506
11,700 Mobil Corp........................................................ 844,594
------------
2,549,800
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
OIL WELL EQUIPMENT & SERVICE
16,800 Diamond Offshore Drilling, Inc.................................... $ 808,500
10,100 Schlumberger, Ltd................................................. 813,050
------------
1,621,550
------------
PHARMACEUTICALS
12,800 Abbott Laboratories............................................... 839,200
11,400 American Home Products Corp....................................... 872,100
------------
1,711,300
------------
RECREATION
9,300 Walt Disney Co.................................................... 921,281
------------
RETAIL - SPECIALTY
25,100 Bed Bath & Beyond, Inc.*.......................................... 963,213
34,500 Pep Boys-Manny, Moe & Jack........................................ 823,688
------------
1,786,901
------------
RETAIL - SPECIALTY APPAREL
22,800 Gap, Inc.......................................................... 807,975
------------
SAVINGS & LOAN ASSOCIATIONS
13,500 Ahmanson (H.F.) & Co.............................................. 903,656
9,300 Golden West Financial Corp........................................ 909,656
------------
1,813,312
------------
SEMICONDUCTORS
11,600 Intel Corp........................................................ 814,175
------------
STEEL
17,300 Nucor Corp........................................................ 835,806
------------
TELECOMMUNICATIONS
38,300 Loral Space & Communications Ltd.*................................ 821,056
------------
TOTAL UNITED STATES............................................... 34,833,895
------------
TOTAL COMMON AND PREFERRED STOCKS
(IDENTIFIED COST $86,923,718)..................................... 96,024,804
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (6.0%)
U.S. GOVERNMENT AGENCY (a) (3.4%)
$ 3,500 Federal Home Loan Banks 5.80% due 01/05/98 (AMORTIZED COST
$3,497,745).......................................................... 3,497,745
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT (2.6%)
$ 2,661 The Bank of New York 3.875% due 01/02/98 (dated 12/31/97; proceeds
$2,662,036) (b)
(IDENTIFIED COST $2,661,463)......................................... $ 2,661,463
------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $6,159,208)........................................... 6,159,208
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $93,082,926) (C)......................................................... 99.9 % 102,184,012
OTHER ASSETS IN EXCESS OF LIABILITIES..................................................... 0.1 45,454
------ -------------
NET ASSETS................................................................................ 100.0 % $ 102,229,466
------ -------------
------ -------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
GDR Global Depository Receipt.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(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 $2,026,396 U.S. Treasury Bill 0.00% due 03/26/98 valued
at $2,001,998 and $659,123 U.S. Treasury Note 8.875% due 05/15/00 valued at
$712,695.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $13,384,850 and the
aggregate gross unrealized depreciation is $4,283,764, resulting in net
unrealized appreciation of $9,101,086.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
GLOBAL EQUITY
SUMMARY OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Aerospace......................................................................... $ 311,927 0.3 %
Aerospace & Defense............................................................... 2,282,766 2.2
Airlines.......................................................................... 340,625 0.3
Aluminum.......................................................................... 858,575 0.8
Apparel........................................................................... 223,704 0.2
Appliances & Household Durables................................................... 910,425 0.9
Auto Parts........................................................................ 478,332 0.5
Auto Parts - Original Equipment................................................... 374,689 0.4
Auto Trucks & Parts............................................................... 196,934 0.2
Automotive........................................................................ 4,742,181 4.6
Banking........................................................................... 5,527,217 5.4
Banks............................................................................. 874,425 0.9
Beverages......................................................................... 1,302,146 1.3
Beverages - Soft Drinks........................................................... 878,144 0.9
Brewery........................................................................... 557,500 0.5
Broadcast Media................................................................... 54,196 0.1
Building & Construction........................................................... 694,297 0.7
Building Materials................................................................ 1,407,924 1.4
Business & Public Services........................................................ 141,227 0.1
Business Services................................................................. 898,687 0.9
Chemicals......................................................................... 4,142,585 4.1
Communications - Equipment & Software............................................. 861,337 0.8
Computer Services................................................................. 231,911 0.2
Computer Software................................................................. 752,808 0.7
Computer Software & Services...................................................... 439,027 0.4
Computers......................................................................... 3,916,189 3.8
Computers - Systems............................................................... 641,193 0.6
Conglomerates..................................................................... 1,311,471 1.3
Drugs............................................................................. 655,594 0.6
Drugs & Healthcare................................................................ 266,569 0.3
Electric.......................................................................... 669,475 0.7
Electrical Equipment.............................................................. 1,385,480 1.4
Electronics....................................................................... 1,352,364 1.3
Electronics - Semiconductors/Components........................................... 509,578 0.5
Energy............................................................................ 1,982,277 1.9
Financial Services................................................................ 4,322,552 4.2
Food Processing................................................................... 1,588,046 1.6
Food, Beverage, Tobacco & Household Products...................................... 175,000 0.2
Foods & Beverages................................................................. 1,170,022 1.1
Household Furnishings & Appliances................................................ 251,530 0.2
Household Products................................................................ 1,313,248 1.3
Insurance......................................................................... 3,256,047 3.2
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
International Trade............................................................... $ 508,751 0.5 %
Leisure........................................................................... 1,403,148 1.4
Machinery......................................................................... 504,215 0.5
Manufacturing..................................................................... 948,369 0.9
Manufacturing - International..................................................... 447,617 0.4
Media............................................................................. 386,875 0.4
Medical Services.................................................................. 915,606 0.9
Medical Supplies.................................................................. 98,492 0.1
Merchandising..................................................................... 387,741 0.4
Multi-Industry.................................................................... 127,920 0.1
Natural Gas....................................................................... 742,261 0.7
Oil & Gas Exploration............................................................. 233,200 0.2
Oil - Domestic.................................................................... 905,413 0.9
Oil Integrated - International.................................................... 2,549,800 2.5
Oil Well Equipment & Service...................................................... 1,621,550 1.6
Paper & Forest Products........................................................... 284,297 0.3
Pharmaceuticals................................................................... 5,217,270 5.1
Publishing........................................................................ 879,778 0.9
Real Estate....................................................................... 1,197,454 1.2
Recreation........................................................................ 921,281 0.9
Repurchase Agreement.............................................................. 2,661,463 2.6
Restaurants....................................................................... 524,492 0.5
Retail............................................................................ 1,432,833 1.4
Retail - Specialty................................................................ 1,786,901 1.7
Retail - Specialty Apparel........................................................ 807,975 0.8
Retail Stores..................................................................... 703,125 0.7
Savings & Loan Associations....................................................... 1,813,312 1.8
Semiconductors.................................................................... 814,175 0.8
Steel............................................................................. 835,806 0.8
Telecommunication Equipment....................................................... 191,935 0.2
Telecommunications................................................................ 9,316,518 9.1
Tire & Rubber Goods............................................................... 433,716 0.4
Transportation.................................................................... 1,026,617 1.0
U.S. Government Agency............................................................ 3,497,745 3.4
Utilities - Electric.............................................................. 1,236,417 1.2
Utilities - Telecommunications.................................................... 569,720 0.6
------------ ---
$102,184,012 99.9 %
------------ ---
------------ ---
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Common Stocks..................................................................... $ 95,144,076 93.1 %
Preferred Stocks.................................................................. 880,728 0.8
Short-Term Investments............................................................ 6,159,208 6.0
------------ ---
$102,184,012 99.9 %
------------ ---
------------ ---
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEVELOPING GROWTH
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (85.3%)
AEROSPACE & DEFENSE (0.9%)
6,000 BE Aerospace, Inc.*..................................................................... $ 160,500
13,000 Citation Corp.*......................................................................... 211,250
11,300 Triumph Group, Inc.*.................................................................... 375,725
-----------
747,475
-----------
AIRLINES (1.3%)
8,800 Alaska Air Group, Inc.*................................................................. 341,000
16,600 Midway Airlines, Corp.*................................................................. 251,075
12,100 Midwest Express Holdings, Inc.*......................................................... 469,631
-----------
1,061,706
-----------
APPAREL (0.8%)
28,800 Braun's Fashions Corp.*................................................................. 288,000
10,350 Quiksilver, Inc.*....................................................................... 296,269
3,900 Tefron Ltd*............................................................................. 89,700
-----------
673,969
-----------
AUTO RELATED (0.5%)
3,400 Delco Remy International, Inc.*......................................................... 42,500
6,700 Group 1 Automotive, Inc.*............................................................... 60,719
7,300 Tower Automotive, Inc.*................................................................. 307,056
-----------
410,275
-----------
BIOTECHNOLOGY (3.3%)
15,000 BioChem Pharma, Inc. (Canada)*.......................................................... 312,187
1,000 ERGO Science Corp.*..................................................................... 15,000
10,000 ESC Medical Systems Ltd.* (Israel)...................................................... 386,250
12,500 Gilead Sciences, Inc.*.................................................................. 478,125
10,100 IDEC Pharmaceuticals Corp.*............................................................. 347,187
18,000 Medco Research, Inc.*................................................................... 252,000
4,000 Protein Design Labs, Inc.*.............................................................. 158,500
12,565 SangStat Medical Corp.*................................................................. 507,312
8,000 Vertex Pharmaceuticals, Inc.*........................................................... 263,000
-----------
2,719,561
-----------
BROADCAST MEDIA (0.3%)
7,500 Metro Networks, Inc.*................................................................... 245,625
-----------
BUSINESS SERVICES (2.7%)
10,000 Billing Information Concepts Corp.*..................................................... 480,000
3,500 Conning Corp.*.......................................................................... 57,750
10,000 Faroudja, Inc.*......................................................................... 101,250
15,500 Hagler Bailly, Inc.*.................................................................... 346,812
11,400 Hypercom Corp.*......................................................................... 161,025
15,400 LCC International, Inc. (Class A)*...................................................... 217,525
7,500 Metzler Group, Inc.*.................................................................... 296,250
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
13,000 Saville Systems Ireland PLC (ADR) (Ireland)*............................................ $ 538,687
-----------
2,199,299
-----------
COMMERCIAL SERVICES (5.1%)
7,500 Abacus Direct Corp.*.................................................................... 307,500
15,700 CheckFree Holdings Corp.*............................................................... 423,900
10,000 Consolidated Graphics, Inc.*............................................................ 466,250
2,000 DBT Online, Inc.*....................................................................... 49,875
20,000 HA-LO Industries, Inc.*................................................................. 520,000
13,000 Iron Mountain, Inc.*.................................................................... 468,000
22,500 Lason, Inc.*............................................................................ 590,625
21,400 LECG, Inc.*............................................................................. 187,250
5,000 Pinnacle Systems, Inc.*................................................................. 121,875
10,950 Steiner Leisure Ltd.*................................................................... 335,344
11,700 U.S. Rentals, Inc.*..................................................................... 274,950
20,000 Vestcom International, Inc.*............................................................ 432,500
-----------
4,178,069
-----------
COMPUTER HARDWARE (1.1%)
14,000 Creative Technology Ltd.* (Singapore)................................................... 306,250
10,000 In Focus Systems, Inc.*................................................................. 303,750
3,300 SCM Microsystems, Inc.*................................................................. 77,962
10,000 Telxon Corp............................................................................. 238,750
-----------
926,712
-----------
COMPUTER SOFTWARE (3.6%)
7,700 Arbor Software Corp.*................................................................... 310,887
26,800 BEA Systems, Inc.*...................................................................... 463,975
30,000 Credit Management Solutions, Inc.*...................................................... 378,750
9,250 Dr Solomon's Group PLC (United Kingdom)*................................................ 293,687
10,000 Netscape Communications Corp.*.......................................................... 242,500
12,000 PeopleSoft, Inc.*....................................................................... 465,000
20,000 Simulation Sciences, Inc.*.............................................................. 322,500
9,800 T-HQ, Inc.*............................................................................. 224,175
7,100 Wind River Systems, Inc.*............................................................... 278,675
-----------
2,980,149
-----------
COMPUTER SOFTWARE & SERVICES (6.2%)
14,000 Affiliated Computer Services, Inc. (Class A)*........................................... 368,375
9,000 BARRA, Inc.*............................................................................ 214,875
22,000 CACI International Inc. (Class A)*...................................................... 433,125
13,900 Concord Communications, Inc.*........................................................... 283,212
2,600 FlexiInternational Software, Inc.*...................................................... 40,300
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEVELOPING GROWTH
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
19,500 Information Management Resources, Inc.*................................................. $ 731,250
19,900 Intersolv, Inc.*........................................................................ 402,975
11,400 Keane, Inc.*............................................................................ 463,125
33,100 MAPICS, Inc.*........................................................................... 355,825
10,700 MindSpring Enterprises, Inc.*........................................................... 356,444
18,000 ONTRACK Data International, Inc.*....................................................... 441,000
1,700 ProBusiness Services, Inc.*............................................................. 38,250
11,600 Safeguard Scientifics, Inc.*............................................................ 363,950
4,500 Shared Medical Systems Corp............................................................. 297,000
11,000 Sungard Data Systems, Inc.*............................................................. 341,000
-----------
5,130,706
-----------
CONSUMER SERVICES (0.8%)
14,035 Coinmach Laundry Corp.*................................................................. 343,857
18,000 Mac-Gray Corp.*......................................................................... 281,250
-----------
625,107
-----------
DISTRIBUTION (0.8%)
15,000 JLK Direct Distribution Inc. (Class A)*................................................. 420,000
15,000 MicroAge, Inc.*......................................................................... 225,937
-----------
645,937
-----------
DRUGS (2.6%)
16,800 Alpharma Inc. (Class A)................................................................. 365,400
14,773 ArQule, Inc.*........................................................................... 338,856
8,700 Dura Pharmaceuticals, Inc.*............................................................. 399,112
10,000 Medicis Pharmaceutical Corp. (Class A)*................................................. 512,500
10,600 PathoGenesis Corp.*..................................................................... 393,525
12,000 Vivus, Inc.*............................................................................ 127,500
-----------
2,136,893
-----------
EDUCATION (0.9%)
16,000 Education Management Corp.*............................................................. 496,000
9,000 EduTrek International, Inc. (Class A)*.................................................. 227,250
-----------
723,250
-----------
ELECTRICAL EQUIPMENT (1.2%)
16,400 EFTC Corp.*............................................................................. 268,550
5,600 Hadco Corp.*............................................................................ 253,400
6,350 IDX Systems Corp.*...................................................................... 234,950
9,000 National Instruments Corp.*............................................................. 261,000
-----------
1,017,900
-----------
ELECTRONICS (0.5%)
6,500 Pittway Corp. (Class A)................................................................. 452,562
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
ELECTRONICS - SEMICONDUCTORS/COMPONENTS (0.3%)
24,100 Quickturn Design System, Inc.*.......................................................... $ 277,150
-----------
ENTERTAINMENT & LEISURE TIME (2.1%)
10,700 AMF Bowling, Inc.*...................................................................... 267,500
10,400 Cinar Films, Inc. (Class B) (Canada)*................................................... 399,100
10,000 Fairfield Communities, Inc.*............................................................ 441,250
20,700 GameTech International, Inc.*........................................................... 219,937
15,000 Hollywood Park, Inc.*................................................................... 330,000
5,000 Video Lottery Technologies, Inc.*....................................................... 58,125
-----------
1,715,912
-----------
ENVIRONMENTAL (1.6%)
26,800 Allied Waste Industries, Inc.*.......................................................... 624,775
28,000 ITEQ, Inc.*............................................................................. 320,250
16,800 Tetra Technologies, Inc.*............................................................... 353,850
-----------
1,298,875
-----------
FINANCE (0.7%)
8,000 Bank United Corp. (Class A)............................................................. 390,000
5,600 HealthCare Financial Partners*.......................................................... 196,000
-----------
586,000
-----------
FINANCIAL SERVICES (3.6%)
6,165 CMAC Investment Corp.................................................................... 372,212
7,800 Finova Group Inc........................................................................ 387,562
6,500 GreenPoint Financial Corp............................................................... 471,656
4,200 Hambrecht & Quist Group*................................................................ 153,300
7,633 Legg Mason, Inc......................................................................... 426,971
12,000 McDonald & Co. Investments, Inc......................................................... 340,500
18,750 Morgan Keegan, Inc...................................................................... 474,609
11,300 PennFed Financial Services, Inc......................................................... 377,137
-----------
3,003,947
-----------
FOOD DISTRIBUTION (0.5%)
15,000 Triarc Co., Inc.*....................................................................... 408,750
-----------
FOOD WHOLESALERS (1.0%)
5,000 Earthgrains Co.......................................................................... 235,000
13,000 Ralcorp Holdings, Inc.*................................................................. 220,187
11,000 Smithfield Foods, Inc.*................................................................. 358,187
-----------
813,374
-----------
FOREST PRODUCTS, PAPER & PACKING (0.5%)
8,450 Buckeye Technologies Inc.*.............................................................. 390,812
-----------
HEALTHCARE (0.2%)
8,100 Coast Dental Services, Inc.*............................................................ 192,375
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEVELOPING GROWTH
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
HEALTHCARE FACILITIES (1.7%)
20,000 Assisted Living Concepts, Inc.*......................................................... $ 395,000
10,900 CareMatrix Corp.*....................................................................... 313,375
25,000 NovaCare, Inc.*......................................................................... 326,562
13,537 Rehabcare Group, Inc.*.................................................................. 358,731
-----------
1,393,668
-----------
HEALTHCARE MANAGEMENT SERVICES (2.5%)
11,100 Advance Paradigm, Inc.*................................................................. 352,425
18,900 Coventry Corp.*......................................................................... 288,225
20,000 HealthPlan Services Corp................................................................ 420,000
11,333 Total Renal Care Holdings, Inc.*........................................................ 311,658
14,600 Trigon Healthcare, Inc.*................................................................ 381,425
34,300 Vision Twenty-One, Inc.*................................................................ 308,700
-----------
2,062,433
-----------
HOME BUILDING (0.3%)
10,000 Crossmann Communities, Inc.*............................................................ 274,375
-----------
HOTELS/MOTELS (0.4%)
14,500 Prime Hospitality Corp.*................................................................ 295,438
-----------
INSURANCE (1.7%)
7,140 Delphi Financial Group, Inc. (Class A)*................................................. 321,300
3,800 ESG Re Ltd.*............................................................................ 88,350
7,500 Fremont General Corp.................................................................... 410,625
12,000 John Alden Financial Corp............................................................... 288,000
15,500 Presidential Life Corp.................................................................. 313,875
-----------
1,422,150
-----------
MEDIA GROUP (0.9%)
4,800 Jacor Communications, Inc.*............................................................. 255,000
12,997 Outdoor Systems, Inc.*.................................................................. 498,760
-----------
753,760
-----------
MEDICAL EQUIPMENT (2.7%)
10,000 Lincare Holdings, Inc.*................................................................. 570,000
30,000 Orthofix International N.V.*............................................................ 352,500
10,000 Safeskin Corp.*......................................................................... 568,750
14,200 Schick Technologies, Inc.*.............................................................. 269,800
10,000 Steris Corp.*........................................................................... 482,500
-----------
2,243,550
-----------
MEDICAL PRODUCTS & SUPPLIES (0.9%)
23,000 Cyberonics Inc.*........................................................................ 346,438
10,100 Mentor Corp............................................................................. 368,650
4,300 Young Innovations, Inc.*................................................................ 74,175
-----------
789,263
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
MISCELLANEOUS (0.3%)
5,400 Hybrid Networks, Inc.*.................................................................. $ 60,075
4,200 Robbins & Myers, Inc.................................................................... 166,425
-----------
226,500
-----------
OFFICE EQUIPMENT & SUPPLIES (1.3%)
18,000 Mail-Well, Inc.*........................................................................ 729,000
15,700 Viking Office Products, Inc.*........................................................... 342,456
-----------
1,071,456
-----------
OIL & GAS (1.5%)
8,200 New Jersey Resources Corp............................................................... 328,513
10,000 Northern Border Partners, L.P.*......................................................... 340,000
7,000 ONEOK, Inc.............................................................................. 282,625
8,000 Piedmont Natural Gas Co................................................................. 287,500
-----------
1,238,638
-----------
OIL & GAS DRILLING (2.7%)
19,400 Bayard Drilling Technologies, Inc.*..................................................... 315,250
10,260 ENSCO International, Inc................................................................ 343,710
10,000 Falcon Drilling Company, Inc.*.......................................................... 350,625
12,635 Global Marine, Inc.*.................................................................... 309,558
5,160 Helmerich & Payne, Inc.................................................................. 350,235
13,000 Marine Drilling Co., Inc.*.............................................................. 269,750
10,000 Rowan Companies, Inc.*.................................................................. 305,000
-----------
2,244,128
-----------
OIL & GAS EXPLORATION (1.1%)
10,000 Energen Corp............................................................................ 397,500
18,900 Lomak Petroleum, Inc.................................................................... 307,125
13,200 Petsec Energy Ltd (ADR) (Australia)*.................................................... 181,500
-----------
886,125
-----------
OIL EQUIPMENT & SERVICES (1.1%)
6,000 Carbo Ceramics, Inc.*................................................................... 192,000
20,000 Global Industries Ltd.*................................................................. 340,000
4,700 IRI International Corp.*................................................................ 65,800
5,500 Smith International, Inc.*.............................................................. 337,563
-----------
935,363
-----------
OIL RELATED (0.6%)
12,800 Veritas DGC Inc.*....................................................................... 505,600
-----------
PERSONAL PRODUCTS (1.3%)
20,000 Chattem, Inc.*.......................................................................... 292,500
11,800 NBTY, Inc.*............................................................................. 393,825
15,590 Twinlab Corp.*.......................................................................... 385,853
-----------
1,072,178
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEVELOPING GROWTH
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
PUBLISHING (0.7%)
10,000 Petersen Companies, Inc. (Class A)*..................................................... $ 230,000
10,000 Valassis Communications, Inc.*.......................................................... 370,000
-----------
600,000
-----------
REAL ESTATE INVESTMENT TRUST (0.9%)
6,000 Capstone Capital Corp................................................................... 153,375
15,565 Golf Trust of America, Inc.............................................................. 451,385
5,000 OMEGA Healthcare Investors, Inc......................................................... 193,125
-----------
797,885
-----------
RETAIL (1.7%)
17,000 Ames Department Stores Inc.*............................................................ 291,125
11,400 Fred Meyer, Inc.*....................................................................... 414,675
19,625 Fred's, Inc............................................................................. 385,141
13,000 Pier 1 Imports, Inc..................................................................... 294,125
-----------
1,385,066
-----------
RETAIL - SPECIALTY (3.8%)
10,000 Barnes & Noble, Inc.*................................................................... 333,750
6,800 Cole National Corp. (Class A)*.......................................................... 203,575
8,000 CompUSA, Inc.*.......................................................................... 248,000
5,000 Fossil, Inc.*........................................................................... 125,000
17,975 Garden Ridge Corp.*..................................................................... 256,144
11,800 Goody's Family Clothing, Inc.*.......................................................... 320,813
15,900 Guitar Center Inc.*..................................................................... 365,700
10,000 Just For Feet, Inc.*.................................................................... 130,625
7,800 Linens 'N Things, Inc.*................................................................. 340,275
9,300 Schein (Henry), Inc.*................................................................... 325,500
7,000 Wet Seal, Inc. (Class A)*............................................................... 206,500
18,000 White Cap Industries, Inc.*............................................................. 324,000
-----------
3,179,882
-----------
SAVINGS & LOAN ASSOCIATIONS (0.5%)
6,760 Astoria Financial Corp.................................................................. 376,870
-----------
SEMICONDUCTOR CAPITAL EQUIPMENT (0.0%)
1,000 Asyst Technologies, Inc.*............................................................... 21,750
-----------
SEMICONDUCTORS (2.2%)
15,000 DII Group, Inc.*........................................................................ 403,125
5,570 Linear Technology Corp.................................................................. 320,275
9,260 Maxim Integrated Products, Inc.*........................................................ 319,470
10,000 Photronics, Inc.*....................................................................... 242,500
22,000 RF Micro Devices, Inc.*................................................................. 261,250
12,000 Unitrode Corp.*......................................................................... 258,000
-----------
1,804,620
-----------
SHIPBUILDING (0.7%)
20,250 Halter Marine Group, Inc.*.............................................................. 584,719
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATION EQUIPMENT (3.7%)
10,000 ANTEC Corp.*............................................................................ $ 156,250
13,000 Aspect Telecommunications Corp.*........................................................ 271,375
6,000 Bell Canada International Inc.*......................................................... 91,500
25,265 Boston Communications Group, Inc.*...................................................... 271,599
6,600 CrossKeys Systems Corp. (Canada)*....................................................... 84,150
16,750 Davox Corp.*............................................................................ 540,188
18,000 Digital Microwave Corp.*................................................................ 261,000
10,085 Genesys Telecommunications Laboratories, Inc.*.......................................... 316,417
7,500 GeoTel Communications Corp.*............................................................ 117,188
1,000 Innova Corp./ Wash*..................................................................... 14,875
10,000 Pairgain Technologies, Inc.*............................................................ 193,750
12,000 Premisys Communications, Inc.*.......................................................... 310,500
8,000 REMEC, Inc.*............................................................................ 180,000
10,000 SmarTalk Teleservices Inc.*............................................................. 227,500
-----------
3,036,292
-----------
TELECOMMUNICATIONS (2.5%)
10,700 Aliant Communications, Inc.............................................................. 335,713
5,782 CFW Communications Co................................................................... 127,204
9,100 IXC Communications, Inc.*............................................................... 285,513
36,000 Metrocall, Inc.*........................................................................ 177,750
6,000 NEXTLINK Communications, Inc. (Class A)*................................................ 127,875
10,300 NTL Incorporated*....................................................................... 285,825
8,000 Pacific Gateway Exchange, Inc.*......................................................... 430,000
20,000 Primus Telecommunications Group, Inc.*.................................................. 323,750
-----------
2,093,630
-----------
TELECOMMUNICATIONS - WIRELESS (1.3%)
20,000 Centennial Cellular Corp. (Class A)*.................................................... 402,500
17,000 Clearnet Communications Inc. (Class A) (Canada)*........................................ 191,250
9,920 Globalstar Telecommunications Ltd.*..................................................... 487,320
-----------
1,081,070
-----------
TOBACCO (0.4%)
15,900 General Cigar Holdings, Inc.*........................................................... 338,869
-----------
TRANSPORTATION (2.8%)
10,202 Air Express International Corp.......................................................... 307,335
13,000 Aviation Sales Co.*..................................................................... 489,125
6,000 Avis Rent-A-Car, Inc.*.................................................................. 191,625
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEVELOPING GROWTH
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
11,100 Budget Group, Inc. (Class A)*........................................................... $ 383,644
3,400 C.H. Robinson Worldwide, Inc............................................................ 76,075
12,900 Galileo International, Inc.............................................................. 356,363
4,000 Hub Group, Inc. (Class A)*.............................................................. 115,000
2,400 Jevic Transportation, Inc.*............................................................. 37,800
10,000 USFreightways Corp...................................................................... 325,000
-----------
2,281,967
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $57,240,338)........................................................... 70,559,635
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C>
SHORT-TERM INVESTMENTS (15.7%)
U.S. GOVERNMENT AGENCY (a) (15.5%)
$ 12,800 Federal Home Loan Mortgage Corp. 6.00% due 01/02/98
(AMORTIZED COST $12,797,867).......................................................... 12,797,867
-----------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT (0.2%)
$ 132 The Bank of New York 3.875% due 01/02/98 (dated 12/31/97; proceeds $131,921) (b)
(IDENTIFIED COST $131,893)............................................................ $ 131,893
-----------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $12,929,760)........................................................... 12,929,760
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $70,170,098) (c).......................................................... 101.0 % 83,489,395
LIABILITIES IN EXCESS OF OTHER ASSETS...................................................... (1.0) (798,983)
------ ------------
NET ASSETS................................................................................. 100.0 % $ 82,690,412
------ ------------
------ ------------
</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 $96,719 U.S. Treasury Bond 9.25% due 02/15/16 valued at
$134,531.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $15,880,143 and the
aggregate gross unrealized depreciation is $2,560,846, resulting in net
unrealized appreciation of $13,319,297.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
EMERGING MARKETS
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON AND PREFERRED STOCKS AND RIGHTS (84.8%)
ARGENTINA (6.9%)
BANKING
4,789 Banco de Galicia y Buenos Aires S.A. de C.V. (ADR)................. $ 123,317
4,900 Banco Rio de la Plata S.A. (ADR)................................... 68,600
-----------
191,917
-----------
BREWERY
7,580 Quilmes Industrial S.A. (ADR)...................................... 103,751
-----------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
9,572 Molinos Rio de la Plata S.A. (Class B)*............................ 22,977
-----------
INVESTMENT COMPANIES
19,926 CEI Citicorp Holdings S.A.......................................... 79,720
-----------
MULTI-INDUSTRY
54,702 Perez Companc S.A. (Class B)....................................... 390,650
-----------
OIL & GAS
12,575 Yacimentos Petroliferos Fiscales S.A. (ADR)........................ 429,908
-----------
STEEL
45,185 Siderca S.A. (Class A)............................................. 125,639
-----------
TELECOMMUNICATIONS
1,980 Telecom Argentina Stet - France Telecom S.A. (Class B) (ADR)....... 70,785
6,230 Telefonica de Argentina S.A. (ADR)................................. 232,068
-----------
302,853
-----------
TOTAL ARGENTINA.................................................... 1,647,415
-----------
BRAZIL (14.8%)
BREWERY
200,000 Companhia Cervejaria Brahma (Pref.)+*.............................. 134,409
-----------
ELECTRIC
6,290 Companhia Paranaense de Energia - Copel (ADR)+..................... 86,094
-----------
FINANCIAL SERVICES
174,000 Itausa Investimentos Itau S.A. (Pref.)+............................ 135,645
-----------
GAS
1,540,000 Petrobras Distribuidora S.A. (Pref.)+.............................. 26,909
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
METALS & MINING
6,600 Companhia Vale do Rio Doce S.A. (ADR)+............................. $ 133,650
7,400 Companhia Vale do Rio Doce S.A. (Pref.)+........................... 148,862
5,000 Companhia Vale do Rio Doce S.A. (Debentures)....................... --
-----------
282,512
-----------
OIL & GAS
954,000 Petroleo Brasileiro S.A. (Pref.)+.................................. 223,113
-----------
TELECOMMUNICATIONS
1,962 Cia Riograndense Telecomunicacoes S.A. (Pref.)..................... 2,417
950,000 Telecomunicacoes Brasileiras S.A................................... 96,617
11,627 Telecomunicacoes Brasileiras S.A. (ADR)+........................... 1,353,819
13,285 Telecomunicacoes de Sao Paulo S.A.+*............................... 3,023
441,518 Telecomunicacoes de Sao Paulo S.A. (Pref.)+*....................... 117,497
-----------
1,573,373
-----------
TEXTILES
30,000 Empresa Nacional de Comercio Redito e Participacoes S.A.*.......... 23
-----------
UTILITIES - ELECTRIC
4,765 Centrais Electricas Brasileiras S.A. (ADR)+........................ 119,721
3,500,000 Centrais Electricas Brasileiras S.A. (Pref.)+...................... 178,763
10,572 Companhia Energetica de Minas Gerais S.A. (Pref.) (ADR)+........... 459,750
670,000 Light Participacoes S.A............................................ 201,120
-----------
959,354
-----------
WATER
434,000 Companhia de Saneamento Basico do Estado de Sao Paulo+............. 103,056
1,378 Companhia de Saneamento Basico do Estado de Sao Paulo (Rights)*.... --
-----------
103,056
-----------
TOTAL BRAZIL....................................................... 3,524,488
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
EMERGING MARKETS
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CHILE (4.4%)
BANKING
2,100 Banco BHIF (ADR)*.................................................. $ 33,600
6,100 Banco Santander Chile (ADR)........................................ 86,162
-----------
119,762
-----------
FOOD, BEVERAGE, TOBACCO &
HOUSEHOLD PRODUCTS
8,140 Embotelladora Andina S.A. (Series A) (ADR)......................... 169,414
3,540 Embotelladora Andina S.A. (Series B) (ADR)......................... 68,809
2,600 Vina Concha Y Toro (ADR)........................................... 65,650
-----------
303,873
-----------
INVESTMENT COMPANIES
3,352 Genesis Chile Fund Ltd............................................. 127,376
26,850 The Five Arrows Chile Investment Trust Ltd......................... 67,394
-----------
194,770
-----------
TELECOMMUNICATIONS
7,917 Compania de Telecommunicaciones de Chile S.A. (ADR)................ 236,520
-----------
UTILITIES - ELECTRIC
5,350 Enersis S.A. (ADR)................................................. 155,150
-----------
UTILITIES - GAS
1,800 Chilectra S.A. (ADR) - 144A**...................................... 48,150
-----------
TOTAL CHILE........................................................ 1,058,225
-----------
CHINA (1.2%)
AIR TRANSPORT
338,000 China Southern Airlines Co., Ltd. (Class H)*....................... 87,256
-----------
MACHINERY
172,000 First Tractor Co., Ltd. (Class H)*................................. 103,791
-----------
OIL REFINERIES
240,000 Zhenhai Refining & Chemical Co. (Class H).......................... 99,906
-----------
TOTAL CHINA........................................................ 290,953
-----------
COLOMBIA (2.4%)
BANKING
41,300 Banco Industrial Colombiano S.A. (ADR)............................. 578,200
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
EGYPT (1.0%)
BANKING
4,825 Commercial International Bank (GDR)* - 144A**...................... $ 100,963
2,250 MISR International Bank S.A.E. (GDR)* - 144A**..................... 33,019
-----------
133,982
-----------
MANUFACTURING
5,200 Suez Cement Co. (GDR) - 144A**..................................... 104,520
-----------
TOTAL EGYPT........................................................ 238,502
-----------
HONG KONG (1.5%)
APPLIANCES & HOUSEHOLD DURABLES
97,000 Guangdong Kelon Elec Holding (Class H)............................. 99,538
-----------
ELECTRIC
249,000 Beijing Datang Power Generation Co., Ltd.*......................... 114,098
-----------
TELECOMMUNICATIONS
78,000 China Telecom Ltd.*................................................ 133,904
-----------
TOTAL HONG KONG.................................................... 347,540
-----------
HUNGARY (2.9%)
CHEMICALS
1,865 BorsodChem RT (GDR) - 144A**....................................... 66,208
-----------
OIL - EXPLORATION & PRODUCTION
7,100 MOL Magyar Olaj-es Gazipari RT (GDR) - 144A**...................... 170,400
-----------
PHARMACEUTICALS
1,985 EGIS RT............................................................ 124,433
980 Gedeon Richter RT (GDR)* - 144A**.................................. 110,740
-----------
235,173
-----------
TELECOMMUNICATIONS
8,000 Magyar Tavkozlesi RT (ADR)*........................................ 208,000
-----------
TOTAL HUNGARY...................................................... 679,781
-----------
INDIA (5.6%)
BANKING
13,700 State Bank of India (GDR)*......................................... 229,475
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
EMERGING MARKETS
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
DIVERSIFIED MANUFACTURING
26,000 Reliance Industries Ltd. (GDR) - 144A**............................ $ 214,500
-----------
FINANCIAL SERVICES
5,025 Hindalco Industries Ltd. (GDR)*.................................... 95,475
-----------
INDUSTRIALS
11,700 Mahindra & Mahindra Ltd. (GDR)*.................................... 117,000
-----------
PHARMACEUTICALS
5,000 Ranbaxy Laboratories Ltd. (GDR).................................... 128,750
-----------
TELECOMMUNICATIONS
11,900 Mahanagar Telephone Nigam (GDR)*................................... 183,855
12,100 Videsh Sanchar Nigam Ltd. (GDR)*................................... 169,702
-----------
353,557
-----------
UTILITIES - ELECTRIC
12,500 BSES Ltd. (GDR).................................................... 206,250
-----------
TOTAL INDIA........................................................ 1,345,007
-----------
KAZAKHSTAN (0.3%)
BANKING
3,360 Kazkommertsbank Co. (GDR) - 144A**................................. 67,200
-----------
MEXICO (18.5%)
BUILDING & CONSTRUCTION
5,280 Empresas ICA Sociedad Controladora S.A. de C.V. (ADR)*............. 86,790
-----------
BUILDING MATERIALS
19,700 Apasco S.A. de C.V................................................. 136,839
72,860 Cemex S.A. de C.V. (B Shares)...................................... 389,515
-----------
526,354
-----------
CONGLOMERATES
26,801 ALFA S.A. de C.V. (Class A)........................................ 181,843
19,200 DESC S.A. de C.V. (Series B)....................................... 183,617
37,600 Grupo Carso S.A. de C.V. (Series A1)*.............................. 251,848
-----------
617,308
-----------
FINANCIAL SERVICES
36,124 Grupo Financiero Inbursa S.A. de C.V. (B Shares)................... 147,866
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
FOOD, BEVERAGE, TOBACCO &
HOUSEHOLD PRODUCTS
25,200 Fomento Economico Mexicano S.A. de C.V. (B Shares)................. $ 201,612
15,800 Grupo Industrial Bimbo S.A. de C.V. (Series A)..................... 152,865
19,200 Grupo Modelo S.A. de C.V. (Series C)............................... 161,469
3,784 Panamerican Beverages, Inc. (Class A).............................. 123,453
-----------
639,399
-----------
MEDIA GROUP
6,770 Grupo Televisa S.A. de C.V. (GDR)*................................. 261,914
-----------
PAPER & FOREST PRODUCTS
83,650 Kimberly-Clark de Mexico S.A. de C.V. (A Shares)................... 409,846
-----------
RETAIL
169,000 Cifra S.A. de C.V. (Series C)...................................... 379,422
9,460 Cifra S.A. de C.V. (Series V)...................................... 23,351
27,300 Organizacion Soriana S.A. de C.V. (Series B)....................... 120,212
-----------
522,985
-----------
STEEL & IRON
7,300 Tubos de Acero de Mexico S.A. de C.V. (ADR)*....................... 157,862
-----------
TELECOMMUNICATIONS
18,270 Telefonos de Mexico S.A. de C.V. (Series L) (ADR).................. 1,024,262
-----------
TOTAL MEXICO....................................................... 4,394,586
-----------
PERU (2.9%)
BREWERY
160,971 Union de Cervecerias Peruanas Backus & Johnston S.A. (T Shares).... 147,788
-----------
BUILDING MATERIALS
57,595 Cementos Lima, S.A................................................. 125,004
-----------
FINANCIAL SERVICES
7,268 Credicorp Ltd...................................................... 130,824
-----------
METALS & MINING
8,420 Compania de Minas Buenaventura S.A. (B Shares)..................... 63,390
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
EMERGING MARKETS
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS
9,267 CPT Telefonica del Peru S.A. (ADR)................................. $ 216,037
-----------
TOTAL PERU......................................................... 683,043
-----------
PHILIPPINES (0.5%)
TELECOMMUNICATIONS
4,600 Philippine Long Distance Telephone Co.............................. 101,200
-----------
UTILITIES - ELECTRIC
7,383 Manila Electric Co. (B Shares)..................................... 24,733
-----------
TOTAL PHILIPPINES.................................................. 125,933
-----------
POLAND (2.1%)
BANKING
9,300 Bank Rozwoju Eksportu S.A.......................................... 192,869
-----------
BREWERY
1,500 Zaklady Piwowarskie w Zywcu S.A.................................... 126,137
-----------
INVESTMENT COMPANIES
5,288 Polish National Investment Fund*................................... 186,282
-----------
TOTAL POLAND....................................................... 505,288
-----------
RUSSIA (4.8%)
ELECTRIC - MAJOR
5,300 Unified Energy Systems (ADR)....................................... 159,000
2,680 Unified Energy Systems (BRIDGE) Certificate (ADR) - 144A**......... 181,389
-----------
340,389
-----------
GAS
12,400 Gazprom (ADR) - 144A**............................................. 294,500
-----------
OIL & GAS
1,000 Lukoil Holding Co. (ADR) - 144A**.................................. 92,000
28,000 Surgutneftegaz (ADR)............................................... 283,640
-----------
375,640
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
UTILITIES - ELECTRIC
1,000 AO Tatneft (ADR)................................................... $ 141,000
-----------
TOTAL RUSSIA....................................................... 1,151,529
-----------
SOUTH AFRICA (3.1%)
BANKING
6,840 Nedcor Ltd......................................................... 151,875
-----------
FINANCE - DIVERSIFIED
8,820 Johnnies Industrial Corp., Ltd..................................... 93,930
-----------
LIFE INSURANCE
4,130 Liberty Life Association of Africa Ltd............................. 106,137
-----------
MULTI-INDUSTRY
12,024 Barlow Ltd......................................................... 102,095
11,220 Rembrandt Group Ltd................................................ 81,889
-----------
183,984
-----------
OIL & GAS
13,173 Sasol Ltd.......................................................... 138,121
-----------
TELECOMMUNICATION EQUIPMENT
65,400 New Africa Investments Ltd. (N Shares)............................. 62,523
-----------
TOTAL SOUTH AFRICA................................................. 736,570
-----------
TAIWAN (3.8%)
COMPUTERS - PERIPHERAL EQUIPMENT
10,100 Asustek Computer Inc. (GDR)........................................ 167,912
-----------
ELECTRONICS - SEMICONDUCTORS/
COMPONENTS
2,700 Siliconware Precision Industries Co. (GDR)......................... 34,560
20,000 Taiwan Semiconductor Manufacturing Co. (ADR)....................... 363,750
-----------
398,310
-----------
INVESTMENT COMPANIES
25,400 ROC Taiwan Fund.................................................... 206,375
12,000 The Taiwan Index Fund Ltd.......................................... 142,560
-----------
348,935
-----------
TOTAL TAIWAN....................................................... 915,157
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
EMERGING MARKETS
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
TURKEY (5.0%)
BANKING
1,600,000 Akbank T.A.S....................................................... $ 141,063
880,000 Turkiye Garanti Bankasi A.S........................................ 43,575
-----------
184,638
-----------
BUILDING MATERIALS
1,440,000 Cimsa Cimento Sanayi Ve Ticaret A.S................................ 78,261
-----------
CEMENT
480,000 Baticim Bati Anadolu Cimento Sanayii A.S........................... 55,652
-----------
HOUSEWARES
5,246,858 Trakya Cam Sanayii A.S............................................. 304,165
-----------
PROPERTY - CASUALTY INSURANCE
3,600,000 Aksigorta A.S...................................................... 230,435
-----------
TELECOMMUNICATIONS
620,000 Netas Northern Elektrik Telekomunikasyon A.S.*..................... 224,638
-----------
TELEVISION
1,400,000 Vestel Elektronik Sanayi ve Ticaret A.S............................ 114,976
-----------
TOTAL TURKEY....................................................... 1,192,765
-----------
VENEZUELA (3.0%)
TELECOMMUNICATIONS
16,950 Compania Anonima Nacional Telefonos de Venezuela (ADR)*............ 705,544
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
VIETNAM (0.1%)
INVESTMENT COMPANIES
1,800 Lazard Vietnam Fund Ltd............................................ $ 14,400
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL COMMON AND PREFERRED STOCKS AND RIGHTS
(IDENTIFIED COST $18,976,480) (a).......................................................... 84.8 % 20,202,126
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................................. 15.2 3,612,509
------ ------------
NET ASSETS................................................................................. 100.0 % $ 23,814,635
------ ------------
------ ------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
GDR Global Depository Receipt.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
+ Some or all of these securities are segregated in connection with open
forward foreign currency contracts.
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $2,743,366 and the
aggregate gross unrealized depreciation is $1,517,720, resulting in net
unrealized appreciation of $1,225,646.
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT DECEMBER 31, 1997:
<TABLE>
<CAPTION>
CONTRACTS TO IN EXCHANGE DELIVERY UNREALIZED
RECEIVE FOR DATE DEPRECIATION
- -------------------------------------------------------------------
<S> <C> <C> <C>
MXN 190,263 $ 23,621 01/02/98 $ (21)
$ 541,000 BRL 649,200 04/29/98 (6,756)
$ 541,000 BRL 649,200 04/30/98 (6,478)
--------------
Total unrealized depreciation................ $ (13,255)
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
EMERGING MARKETS
SUMMARY OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Air Transport...................................................................... $ 87,256 0.4 %
Appliances & Household Durables.................................................... 99,538 0.4
Banking............................................................................ 1,849,918 7.8
Brewery............................................................................ 512,085 2.1
Building & Construction............................................................ 86,790 0.4
Building Materials................................................................. 729,619 3.1
Cement............................................................................. 55,652 0.2
Chemicals.......................................................................... 66,208 0.3
Computers - Peripheral Equipment................................................... 167,912 0.7
Conglomerates...................................................................... 617,308 2.6
Diversified Manufacturing.......................................................... 214,500 0.9
Electric........................................................................... 200,192 0.9
Electric - Major................................................................... 340,389 1.4
Electronics - Semiconductors/Components............................................ 398,310 1.7
Finance - Diversified.............................................................. 93,930 0.4
Financial Services................................................................. 509,810 2.1
Food, Beverage, Tobacco & Household Products....................................... 966,249 4.1
Gas................................................................................ 321,409 1.3
Housewares......................................................................... 304,165 1.3
Industrials........................................................................ 117,000 0.5
Investment Companies............................................................... 824,107 3.5
Life Insurance..................................................................... 106,137 0.4
Machinery.......................................................................... 103,791 0.4
Manufacturing...................................................................... 104,520 0.4
Media Group........................................................................ 261,914 1.1
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Metals & Mining.................................................................... $ 345,902 1.5 %
Multi-Industry..................................................................... 574,634 2.4
Oil & Gas.......................................................................... 1,166,782 4.9
Oil - Exploration & Production..................................................... 170,400 0.7
Oil Refineries..................................................................... 99,906 0.4
Paper & Forest Products............................................................ 409,846 1.7
Pharmaceuticals.................................................................... 363,923 1.5
Property - Casualty Insurance...................................................... 230,435 1.0
Retail............................................................................. 522,985 2.2
Steel.............................................................................. 125,639 0.5
Steel & Iron....................................................................... 157,862 0.7
Telecommunication Equipment........................................................ 62,523 0.3
Telecommunications................................................................. 5,079,888 21.3
Television......................................................................... 114,976 0.5
Textiles........................................................................... 23 --
Utilities - Electric............................................................... 1,486,487 6.2
Utilities - Gas.................................................................... 48,150 0.2
Water.............................................................................. 103,056 0.4
----------- ---
$20,202,126 84.8 %
----------- ---
----------- ---
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Common Stocks...................................................................... $18,774,761 78.8 %
Preferred Stocks................................................................... 1,427,365 6.0
----------- ---
$20,202,126 84.8 %
----------- ---
----------- ---
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31, 1997
NORTH
AMERICAN
MONEY GOVERNMENT DIVERSIFIED
MARKET SECURITIES INCOME BALANCED UTILITIES
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
ASSETS:
Investments in
securities, at value
*.................... $ 83,578,604 $5,044,961 $60,739,821 $ 72,607,791 $ 50,695,584
Cash................... 6,167 33,228 333,005 -- --
Receivable for:
Investments sold... -- -- 79,250 -- --
Shares of
beneficial
interest sold.... 804,184 -- 111,886 41,267 42,841
Dividends.......... -- -- -- 24,087 67,966
Interest........... 31,937 28,947 924,494 275,979 40,981
Foreign withholding
taxes
reclaimed........ -- -- -- -- 3,985
Compensated forward
foreign currency
contracts........ -- -- 342,773 -- --
Unrealized appreciation
on open forward
foreign currency
contracts............ -- -- 66,507 -- --
Deferred organizational
expenses............. 2,980 2,980 2,980 2,980 2,980
Receivable from
affiliate............ -- -- -- -- --
Prepaid expenses and
other assets......... 1,364 44 4 -- 6
------------ ----------- ------------ ------------ ------------
TOTAL ASSETS...... 84,425,236 5,110,160 62,600,720 72,952,104 50,854,343
------------ ----------- ------------ ------------ ------------
LIABILITIES:
Payable for:
Investments
purchased........ -- -- -- 1,533,294 --
Shares of
beneficial
interest
repurchased...... 314,571 207 2,581 20,448 36,178
Compensated forward
foreign currency
contracts........ -- -- 262,184 -- --
Investment
management
fees............. 38,681 2,917 21,802 47,126 28,198
Unrealized depreciation
on open forward
foreign currency
contracts............ -- -- 939 -- --
Accrued expenses and
other payables....... 26,590 15,589 26,213 27,800 24,022
------------ ----------- ------------ ------------ ------------
TOTAL
LIABILITIES....... 379,842 18,713 313,719 1,628,668 88,398
------------ ----------- ------------ ------------ ------------
NET ASSETS:
Paid-in-capital........ 84,045,331 5,046,465 61,744,472 60,398,224 39,233,765
Accumulated
undistributed net
investment income
(loss)............... 63 15,876 433,907 117,451 81,278
Accumulated
undistributed net
realized gain
(loss)............... -- (10,351) (274,507) 1,854,938 698,472
Net unrealized
appreciation......... -- 39,457 383,129 8,952,823 10,752,430
------------ ----------- ------------ ------------ ------------
NET ASSETS........ $ 84,045,394 $5,091,447 $62,287,001 $ 71,323,436 $ 50,765,945
------------ ----------- ------------ ------------ ------------
------------ ----------- ------------ ------------ ------------
*IDENTIFIED
COST.............. $ 83,578,604 $5,005,504 $60,415,470 $ 63,654,968 $ 39,943,154
------------ ----------- ------------ ------------ ------------
------------ ----------- ------------ ------------ ------------
SHARES OF
BENEFICIAL
INTEREST
OUTSTANDING....... 84,045,331 500,680 6,050,755 4,745,175 3,205,930
------------ ----------- ------------ ------------ ------------
------------ ----------- ------------ ------------ ------------
NET ASSET VALUE PER
SHARE
(UNLIMITED AUTHORIZED
SHARES OF $.01 PAR
VALUE)................. $1.00 $10.17 $10.29 $15.03 $15.84
------------ ----------- ------------ ------------ ------------
------------ ----------- ------------ ------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31, 1997
DIVIDEND VALUE-ADDED AMERICAN MID-CAP GLOBAL DEVELOPING EMERGING
GROWTH MARKET CORE EQUITY VALUE GROWTH EQUITY GROWTH MARKETS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments in
securities, at value
*.................... $517,316,474 $144,718,893 $40,996,550 $237,573,341 $20,289,689 $102,184,012 $83,489,395 $20,202,126
Cash................... -- -- -- 27,749 -- -- -- 3,614,248
Receivable for:
Investments sold... -- 2,281,748 -- 1,895,415 349,058 -- 179,690 200
Shares of
beneficial
interest sold.... 830,093 112,289 48,203 202,810 47,060 105,361 29,000 5,707
Dividends.......... 1,012,815 178,701 20,989 125,529 5,265 96,513 16,577 68,646
Interest........... 589 61 376 303,401 39 287 14 46,126
Foreign withholding
taxes
reclaimed........ -- -- -- 204 -- 45,043 -- --
Compensated forward
foreign currency
contracts........ -- -- -- -- -- -- -- --
Unrealized appreciation
on open forward
foreign currency
contracts............ -- -- -- -- -- -- -- --
Deferred organizational
expenses............. 2,980 2,980 2,980 2,980 -- 2,980 2,980 2,980
Receivable from
affiliate............ -- -- -- -- 13,966 -- -- --
Prepaid expenses and
other assets......... 3,315 24 -- 794 3,296 312 400 243
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
TOTAL ASSETS...... 519,166,266 147,294,696 41,069,098 240,132,223 20,708,373 102,434,508 83,718,056 23,940,276
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
LIABILITIES:
Payable for:
Investments
purchased........ -- 5,761,269 697,938 9,779,707 1,454,353 -- 643,643 23,600
Shares of
beneficial
interest
repurchased...... 415,807 118,818 8,216 167,500 722 73,807 316,323 25,336
Compensated forward
foreign currency
contracts........ -- -- -- -- -- -- -- --
Investment
management
fees............. 285,630 61,919 30,089 125,547 -- 90,542 36,127 26,480
Unrealized depreciation
on open forward
foreign currency
contracts............ -- -- -- -- -- -- -- 13,255
Accrued expenses and
other payables....... 45,724 36,517 21,742 45,835 17,263 40,693 31,551 36,970
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
TOTAL
LIABILITIES....... 747,161 5,978,523 757,985 10,118,589 1,472,338 205,042 1,027,644 125,641
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
NET ASSETS:
Paid-in-capital........ 419,602,338 111,007,677 32,995,259 174,404,265 17,711,433 93,732,538 69,320,011 23,464,634
Accumulated
undistributed net
investment income
(loss)............... 784,586 169,935 -- 166,525 19,748 310,005 36,082 85,508
Accumulated
undistributed net
realized gain
(loss)............... 25,662,041 2,211,558 1,250,823 27,762,359 (41,862) (911,992) 15,022 (947,778)
Net unrealized
appreciation......... 72,370,140 27,927,003 6,065,031 27,680,485 1,546,716 9,098,915 13,319,297 1,212,271
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
NET ASSETS........ $518,419,105 $141,316,173 $40,311,113 $230,013,634 $19,236,035 $102,229,466 $82,690,412 $23,814,635
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
*IDENTIFIED
COST.............. $444,946,334 $116,791,890 $34,931,519 $209,892,856 $18,742,973 $ 93,082,926 $70,170,098 $18,976,480
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
SHARES OF
BENEFICIAL
INTEREST
OUTSTANDING....... 26,484,381 8,046,487 2,434,295 11,680,635 1,687,227 7,882,702 4,315,931 2,105,876
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
NET ASSET VALUE PER
SHARE
(UNLIMITED AUTHORIZED
SHARES OF $.01 PAR
VALUE)................. $19.57 $17.56 $16.56 $19.69 $11.40 $12.97 $19.16 $11.31
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
------------ ------------ ----------- ------------ ----------- ------------ ----------- -----------
</TABLE>
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
NORTH
AMERICAN
MONEY GOVERNMENT DIVERSIFIED
MARKET SECURITIES INCOME BALANCED UTILITIES
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
INCOME
Interest............... $ 5,223,567 $277,812 $ 4,018,833 $ 1,304,270 $ 276,868
Dividends from
affiliate (Note 3)... -- -- -- -- --
Dividends.............. -- -- -- 359,903** 1,165,235**
----------- -------------- ------------ ----------- ------------
TOTAL INCOME...... 5,223,567 277,812 4,018,833 1,664,173 1,442,103
----------- -------------- ------------ ----------- ------------
EXPENSES
Investment management
fee.................. 463,709 30,048 186,066 422,583 261,168
Professional fees...... 16,821 13,615 15,345 16,593 14,073
Custodian fees......... 13,548 10,250 35,076 21,161 13,151
Shareholder reports and
notices.............. 12,293 1,202 7,107 11,748 11,382
Trustees' fees and
expenses............. 1,869 2 617 632 536
Transfer agent fees and
expenses............. 500 500 500 500 500
Organizational
expenses............. 1,606 1,606 1,606 1,606 1,606
Other.................. 2,207 1,198 8,702 5,508 2,373
----------- -------------- ------------ ----------- ------------
TOTAL EXPENSES.... 512,553 58,421 255,019 480,331 304,789
Less: amounts
reimbursed/waived.... -- -- -- -- --
----------- -------------- ------------ ----------- ------------
NET EXPENSES...... 512,553 58,421 255,019 480,331 304,789
----------- -------------- ------------ ----------- ------------
NET INVESTMENT
INCOME............ 4,711,014 219,391 3,763,814 1,183,842 1,137,314
----------- -------------- ------------ ----------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS):
Net realized gain
(loss) on:
Investments........ -- (1,271) (1,093,986) 1,883,756 872,891
Foreign exchange
transactions..... -- -- 767,173 -- --
----------- -------------- ------------ ----------- ------------
NET GAIN (LOSS)... -- (1,271) (326,813) 1,883,756 872,891
----------- -------------- ------------ ----------- ------------
Net change in
unrealized
appreciation/
depreciation on:
Investments........ -- 44,134 445,640 5,626,407 8,023,362
Translation of
forward foreign
currency
contracts and
other assets and
liabilities
denominated in
foreign
currencies....... -- -- (14,561) -- --
----------- -------------- ------------ ----------- ------------
NET APPRECIATION
(DEPRECIATION).... -- 44,134 431,079 5,626,407 8,023,362
----------- -------------- ------------ ----------- ------------
NET GAIN (LOSS)... -- 42,863 104,266 7,510,163 8,896,253
----------- -------------- ------------ ----------- ------------
NET INCREASE
(DECREASE)............. $ 4,711,014 $262,254 $ 3,868,080 $ 8,694,005 $ 10,033,567
----------- -------------- ------------ ----------- ------------
----------- -------------- ------------ ----------- ------------
</TABLE>
- ------------------
* For the period January 21, 1997 (commencement of operations) through
December 31, 1997.
** Net of foreign withholding tax of $1,619, $15,705, $5,460, $1,268, $3,822,
$154, $102,055, $468 and $26,423, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
DIVIDEND VALUE-ADDED CORE AMERICAN MID-CAP GLOBAL DEVELOPING EMERGING
GROWTH MARKET EQUITY VALUE GROWTH* EQUITY GROWTH MARKETS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
INCOME
Interest............... $ 349,892 $ 446,343 $ 43,951 $ 761,291 $ 127,380 $ 571,528 $ 497,037 $ 141,678
Dividends from
affiliate (Note 3)... -- 5,660 -- -- -- -- -- --
Dividends.............. 10,583,415 1,782,249** 294,480** 1,147,123** 29,310** 1,172,224** 109,186** 401,826**
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
TOTAL INCOME...... 10,933,307 2,234,252 338,431 1,908,414 156,690 1,743,752 606,223 543,504
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
EXPENSES
Investment management
fee.................. 2,477,416 540,475 254,398 1,082,276 66,404 852,703 355,267 308,327
Professional fees...... 19,122 15,584 15,757 18,943 16,538 16,382 15,696 15,306
Custodian fees......... 28,755 27,195 19,088 45,621 12,571 64,967 31,357 85,020
Shareholder reports and
notices.............. 46,228 21,269 5,080 31,002 2,067 14,143 16,331 2,151
Trustees' fees and
expenses............. 5,975 1,447 206 2,076 39 1,228 986 831
Transfer agent fees and
expenses............. 500 500 500 500 500 500 500 500
Organizational
expenses............. 1,606 1,606 1,606 1,606 -- 1,606 1,606 1,606
Other.................. 5,571 13,796 2,303 3,788 688 13,500 3,079 8,796
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
TOTAL EXPENSES.... 2,585,173 621,872 298,938 1,185,812 98,807 965,029 424,822 422,537
Less: amounts
reimbursed/waived.... -- -- -- -- (98,807) -- -- --
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
NET EXPENSES...... 2,585,173 621,872 298,938 1,185,812 -- 965,029 424,822 422,537
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
NET INVESTMENT
INCOME............ 8,348,134 1,612,380 39,493 722,602 156,690 778,723 181,401 120,967
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
NET REALIZED AND
UNREALIZED GAIN (LOSS):
Net realized gain
(loss) on:
Investments........ 25,772,008 2,211,559 1,290,619 28,077,637 (41,862) 207,794 2,009,657 (600,494)
Foreign exchange
transactions..... -- -- -- -- -- (826) -- 5,739
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
NET GAIN (LOSS)... 25,772,008 2,211,559 1,290,619 28,077,637 (41,862) 206,968 2,009,657 (594,755)
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
Net change in
unrealized
appreciation/
depreciation on:
Investments........ 50,279,373 20,050,469 4,281,360 18,351,924 1,546,716 4,450,608 6,889,489 (143,450)
Translation of
forward foreign
currency
contracts and
other assets and
liabilities
denominated in
foreign
currencies....... -- -- -- -- -- (2,897) -- (13,180)
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
NET APPRECIATION
(DEPRECIATION).... 50,279,373 20,050,469 4,281,360 18,351,924 1,546,716 4,447,711 6,889,489 (156,630)
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
NET GAIN (LOSS)... 76,051,381 22,262,028 5,571,979 46,429,561 1,504,854 4,654,679 8,899,146 (751,385)
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
NET INCREASE
(DECREASE)............. $84,399,515 $23,874,408 $5,611,472 $47,152,163 $1,661,544 $5,433,402 $9,080,547 $(630,418)
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
----------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
</TABLE>
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
NORTH AMERICAN
MONEY MARKET GOVERNMENT SECURITIES
---------------------------- -------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
- ----------------------------------------------------- -------------------------
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment
income............... $ 4,711,014 $ 2,961,002 $ 219,391 $ 158,771
Net realized gain
(loss)............... -- -- (1,271) (8,538)
Net change in
unrealized
appreciation/
depreciation......... -- -- 44,134 (11,739)
------------- ------------ ----------- -----------
NET INCREASE...... 4,711,014 2,961,002 262,254 138,494
------------- ------------ ----------- -----------
DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment
income............... (4,710,989) (2,960,990) (222,788) (144,983)
Net realized gain...... -- -- -- --
------------- ------------ ----------- -----------
TOTAL............. (4,710,989) (2,960,990) (222,788) (144,983)
------------- ------------ ----------- -----------
TRANSACTIONS IN SHARES
OF BENEFICIAL INTEREST:
Net proceeds from
sales................ 120,256,057 78,840,405 1,648,694 3,289,914
Reinvestment of
dividends and
distributions........ 4,710,989 2,960,989 222,788 144,983
Cost of shares
repurchased.......... (127,923,366) (36,888,754) (991,209) (544,380)
------------- ------------ ----------- -----------
NET INCREASE
(DECREASE)........ (2,956,320) 44,912,640 880,273 2,890,517
------------- ------------ ----------- -----------
TOTAL INCREASE
(DECREASE)........ (2,956,295) 44,912,652 919,739 2,884,028
NET ASSETS:
Beginning of period.... 87,001,689 42,089,037 4,171,708 1,287,680
------------- ------------ ----------- -----------
END OF PERIOD..... $ 84,045,394 $ 87,001,689 $ 5,091,447 $ 4,171,708
------------- ------------ ----------- -----------
------------- ------------ ----------- -----------
UNDISTRIBUTED NET
INVESTMENT INCOME...... $ 63 $ 38 $ 15,876 $ 19,273
------------- ------------ ----------- -----------
------------- ------------ ----------- -----------
SHARES ISSUED AND
REPURCHASED:
Sold................... 120,256,057 78,840,405 162,979 326,740
Issued in reinvestment
of dividends and
distributions........ 4,710,989 2,960,989 22,097 14,475
Repurchased............ (127,923,366) (36,888,754) (98,049) (54,111)
------------- ------------ ----------- -----------
NET INCREASE
(DECREASE)............. (2,956,320) 44,912,640 87,027 287,104
------------- ------------ ----------- -----------
------------- ------------ ----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
DIVERSIFIED INCOME BALANCED UTILITIES DIVIDEND GROWTH
------------------------- ------------------------ ------------------------ --------------------------
1997 1996 1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------- --------------------------
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment income.... $ 3,763,814 $ 1,632,440 $ 1,183,842 $ 732,777 $ 1,137,314 $ 981,948 $ 8,348,134 $ 3,973,273
Net realized gain
(loss)................. (326,813) 222,680 1,883,756 165,198 872,891 (34,414) 25,772,008 13,581,202
Net change in unrealized
appreciation/
depreciation........... 431,079 (85,690) 5,626,407 2,556,189 8,023,362 1,420,438 50,279,373 15,794,035
------------ ----------- ----------- ----------- ----------- ----------- ------------ ------------
NET INCREASE........ 3,868,080 1,769,430 8,694,005 3,454,164 10,033,567 2,367,972 84,399,515 33,348,510
------------ ----------- ----------- ----------- ----------- ----------- ------------ ------------
DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment income.... (3,642,497) (1,475,700) (1,157,698) (689,333) (1,156,425) (940,692) (8,067,138) (3,704,044)
Net realized gain........ (92,958) (20,718) (164,839) (141,913) (140,005) (20,650) (13,688,414) (181,533)
------------ ----------- ----------- ----------- ----------- ----------- ------------ ------------
TOTAL............... (3,735,455) (1,496,418) (1,322,537) (831,246) (1,296,430) (961,342) (21,755,552) (3,885,577)
------------ ----------- ----------- ----------- ----------- ----------- ------------ ------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from
sales.................. 37,352,457 27,898,560 32,245,427 28,026,839 12,711,349 23,406,556 216,990,147 152,508,539
Reinvestment of dividends
and distributions...... 3,735,455 1,496,418 1,322,537 831,246 1,296,430 961,342 21,755,552 3,885,577
Cost of shares
repurchased............ (11,052,734) (6,520,785) (8,509,024) (8,899,367) (7,665,054) (8,047,676) (41,071,424) (6,450,410)
------------ ----------- ----------- ----------- ----------- ----------- ------------ ------------
NET INCREASE
(DECREASE).......... 30,035,178 22,874,193 25,058,940 19,958,718 6,342,725 16,320,222 197,674,275 149,943,706
------------ ----------- ----------- ----------- ----------- ----------- ------------ ------------
TOTAL INCREASE
(DECREASE).......... 30,167,803 23,147,205 32,430,408 22,581,636 15,079,862 17,726,852 260,318,238 179,406,639
NET ASSETS:
Beginning of period...... 32,119,198 8,971,993 38,893,028 16,311,392 35,686,083 17,959,231 258,100,867 78,694,228
------------ ----------- ----------- ----------- ----------- ----------- ------------ ------------
END OF PERIOD....... $ 62,287,001 $32,119,198 $71,323,436 $38,893,028 $50,765,945 $35,686,083 $518,419,105 $258,100,867
------------ ----------- ----------- ----------- ----------- ----------- ------------ ------------
------------ ----------- ----------- ----------- ----------- ----------- ------------ ------------
UNDISTRIBUTED NET
INVESTMENT INCOME........ $ 433,907 $ 325,346 $ 117,451 $ 91,307 $ 81,278 $ 100,389 $ 784,586 $ 503,590
------------ ----------- ----------- ----------- ----------- ----------- ------------ ------------
------------ ----------- ----------- ----------- ----------- ----------- ------------ ------------
SHARES ISSUED AND
REPURCHASED:
Sold..................... 3,651,731 2,726,316 2,274,595 2,258,138 904,097 1,865,091 11,751,312 10,022,691
Issued in reinvestment of
dividends and
distributions.......... 366,945 146,667 93,933 66,953 95,848 76,796 1,203,410 254,031
Repurchased.............. (1,079,349) (639,097) (598,705) (721,662) (551,585) (638,597) (2,163,103) (394,437)
------------ ----------- ----------- ----------- ----------- ----------- ------------ ------------
NET INCREASE
(DECREASE)............... 2,939,327 2,233,886 1,769,823 1,603,429 448,360 1,303,290 10,791,619 9,882,285
------------ ----------- ----------- ----------- ----------- ----------- ------------ ------------
------------ ----------- ----------- ----------- ----------- ----------- ------------ ------------
</TABLE>
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
FOR THE YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
VALUE-ADDED MARKET CORE EQUITY
------------------------------- ----------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
- -------------------------------------------------------- ----------------------------
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment
income............... $ 1,612,380 $ 836,850 $ 39,493 $ 66,185
Net realized gain
(loss)............... 2,211,559 214,733 1,290,619 92,662
Net change in
unrealized
appreciation/
depreciation......... 20,050,469 6,697,183 4,281,360 1,698,937
------------- --------------- ------------- ------------
NET INCREASE
(DECREASE)........ 23,874,408 7,748,766 5,611,472 1,857,784
------------- --------------- ------------- ------------
DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment
income............... (1,545,598) (781,217) (51,873) (56,282)
Net realized gain...... (214,735) (24,655) (131,373) (26,347)
Paid-in-capital........ -- -- -- --
------------- --------------- ------------- ------------
TOTAL............. (1,760,333) (805,872) (183,246) (82,629)
------------- --------------- ------------- ------------
TRANSACTIONS IN SHARES
OF BENEFICIAL INTEREST:
Net proceeds from
sales................ 56,658,607 42,917,521 28,816,261 15,980,007
Reinvestment of
dividends and
distributions........ 1,760,333 805,872 183,246 82,629
Cost of shares
repurchased.......... (12,733,322) (1,119,434) (12,331,431) (3,579,392)
------------- --------------- ------------- ------------
NET INCREASE...... 45,685,618 42,603,959 16,668,076 12,483,244
------------- --------------- ------------- ------------
TOTAL INCREASE.... 67,799,693 49,546,853 22,096,302 14,258,399
NET ASSETS:
Beginning of period.... 73,516,480 23,969,627 18,214,811 3,956,412
------------- --------------- ------------- ------------
END OF PERIOD..... $ 141,316,173 $ 73,516,480 $ 40,311,113 $ 18,214,811
------------- --------------- ------------- ------------
------------- --------------- ------------- ------------
UNDISTRIBUTED NET
INVESTMENT INCOME...... $ 169,935 $ 103,153 -- $ 12,380
------------- --------------- ------------- ------------
------------- --------------- ------------- ------------
SHARES ISSUED AND
REPURCHASED:
Sold................... 3,510,750 3,257,040 1,878,945 1,265,283
Issued in reinvestment
of dividends and
distributions........ 110,135 60,960 12,436 6,625
Repurchased............ (765,113) (85,436) (801,820) (284,554)
------------- --------------- ------------- ------------
NET INCREASE........... 2,855,772 3,232,564 1,089,561 987,354
------------- --------------- ------------- ------------
------------- --------------- ------------- ------------
</TABLE>
- ------------------
* For the period January 21, 1997 (commencement of operations) through
December 31, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MID-CAP
AMERICAN VALUE GROWTH GLOBAL EQUITY DEVELOPING GROWTH
-------------------------- ----------- ------------------------- --------------------------
1997 1996 1997* 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment income.... $ 722,602 $ 426,571 $ 156,690 $ 778,723 $ 468,960 $ 181,401 $ 23,712
Net realized gain
(loss)................. 28,077,637 3,030,821 (41,862) 206,968 (692,618) 2,009,657 (1,972,014)
Net change in unrealized
appreciation/
depreciation........... 18,351,924 6,446,354 1,546,716 4,447,711 4,065,701 6,889,489 4,927,547
------------ ------------ ----------- ------------ ----------- ------------ ------------
NET INCREASE
(DECREASE).......... 47,152,163 9,903,746 1,661,544 5,433,402 3,842,043 9,080,547 2,979,245
------------ ------------ ----------- ------------ ----------- ------------ ------------
DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment income.... (581,955) (466,925) (136,942) (731,065) (488,553) (145,319) (44,381)
Net realized gain........ (3,287,899) (368,284) -- (128,304) (42,086) -- (41,144)
Paid-in-capital.......... -- -- -- -- -- -- (12,078)
------------ ------------ ----------- ------------ ----------- ------------ ------------
TOTAL............... (3,869,854) (835,209) (136,942) (859,369) (530,639) (145,319) (97,603)
------------ ------------ ----------- ------------ ----------- ------------ ------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from
sales.................. 83,771,943 79,809,158 20,630,739 51,953,057 46,445,852 32,654,294 53,395,835
Reinvestment of dividends
and distributions...... 3,869,854 835,209 136,942 859,369 530,639 145,319 97,603
Cost of shares
repurchased............ (21,814,303) (7,043,859) (3,056,248) (14,403,393) (8,115,798) (20,164,427) (12,666,934)
------------ ------------ ----------- ------------ ----------- ------------ ------------
NET INCREASE........ 65,827,494 73,600,508 17,711,433 38,409,033 38,860,693 12,635,186 40,826,504
------------ ------------ ----------- ------------ ----------- ------------ ------------
TOTAL INCREASE...... 109,109,803 82,669,045 19,236,035 42,983,066 42,172,097 21,570,414 43,708,146
NET ASSETS:
Beginning of period...... 120,903,831 38,234,786 -- 59,246,400 17,074,303 61,119,998 17,411,852
------------ ------------ ----------- ------------ ----------- ------------ ------------
END OF PERIOD....... $230,013,634 $120,903,831 $19,236,035 $102,229,466 $59,246,400 $ 82,690,412 $ 61,119,998
------------ ------------ ----------- ------------ ----------- ------------ ------------
------------ ------------ ----------- ------------ ----------- ------------ ------------
UNDISTRIBUTED NET
INVESTMENT INCOME........ $ 166,525 $ 25,801 $ 19,748 $ 310,005 $ 10,246 $ 36,082 --
------------ ------------ ----------- ------------ ----------- ------------ ------------
------------ ------------ ----------- ------------ ----------- ------------ ------------
SHARES ISSUED AND
REPURCHASED:
Sold..................... 4,775,976 5,549,567 1,956,099 4,006,028 4,014,156 1,800,018 3,224,490
Issued in reinvestment of
dividends and
distributions.......... 238,084 58,182 12,916 66,503 45,738 9,034 6,038
Repurchased.............. (1,234,165) (494,896) (281,788) (1,101,520) (702,081) (1,113,498) (770,797)
------------ ------------ ----------- ------------ ----------- ------------ ------------
NET INCREASE............. 3,779,895 5,112,853 1,687,227 2,971,011 3,357,813 695,554 2,459,731
------------ ------------ ----------- ------------ ----------- ------------ ------------
------------ ------------ ----------- ------------ ----------- ------------ ------------
<CAPTION>
EMERGING MARKETS
------------------------
1997 1996
<S> <C> <C>
- ------------------------- ------------------------
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment income.... $ 120,967 $ 162,121
Net realized gain
(loss)................. (594,755) (216,419)
Net change in unrealized
appreciation/
depreciation........... (156,630) 1,353,117
----------- -----------
NET INCREASE
(DECREASE).......... (630,418) 1,298,819
----------- -----------
DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment income.... (113,623) (149,041)
Net realized gain........ -- --
Paid-in-capital.......... -- --
----------- -----------
TOTAL............... (113,623) (149,041)
----------- -----------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from
sales.................. 13,701,773 13,447,515
Reinvestment of dividends
and distributions...... 113,623 149,041
Cost of shares
repurchased............ (6,496,911) (1,598,361)
----------- -----------
NET INCREASE........ 7,318,485 11,998,195
----------- -----------
TOTAL INCREASE...... 6,574,444 13,147,973
NET ASSETS:
Beginning of period...... 17,240,191 4,092,218
----------- -----------
END OF PERIOD....... $23,814,635 $17,240,191
----------- -----------
----------- -----------
UNDISTRIBUTED NET
INVESTMENT INCOME........ $ 85,508 $ 18,607
----------- -----------
----------- -----------
SHARES ISSUED AND
REPURCHASED:
Sold..................... 1,094,065 1,248,927
Issued in reinvestment of
dividends and
distributions.......... 8,961 13,861
Repurchased.............. (536,332) (146,135)
----------- -----------
NET INCREASE............. 566,694 1,116,653
----------- -----------
----------- -----------
</TABLE>
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Select Dimensions Investment Series (the "Fund") 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 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 Growth Seeks to provide reasonable current income and long-term growth of
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.
Core Equity Seeks long-term growth of capital by investing primarily in common
stocks and securities convertible into common stocks issued by
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.
<PAGE>
</TABLE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
<C> <S>
Mid-Cap Growth Seeks long-term capital appreciation by investing primarily in
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 Growth Seeks long-term capital growth by investing primarily in common
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 Markets Seeks long-term capital appreciation by investing primarily in
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>
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
valuation; (3) when market quotations are not readily available, including
circumstances under which it is determined by Dean Witter InterCapital Inc. (the
"Investment Manager"), or (in the case of the North American Government
Securities, Balanced, Core Equity and Emerging Markets Portfolios) by TCW Funds
Management Inc. (the "Sub-Adviser"), 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
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997, CONTINUED
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. 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
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997, CONTINUED
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) which
have been reimbursed for the full amount thereof, exclusive of amounts waived of
approximately $22,000 ($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.
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997, CONTINUED
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 % Core Equity ............................ 0.85 %
North American Government Securities.... 0.65 American Value ......................... 0.625
Diversified Income...................... 0.40 Mid-Cap Growth ......................... 0.75
Balanced................................ 0.75 Global Equity .......................... 1.00
Utilities............................... 0.65 Developing Growth ...................... 0.50
Dividend Growth......................... 0.625 Emerging Markets ....................... 1.25
Value-Added Market...................... 0.50
</TABLE>
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 a Sub-Advisory Agreement between the Sub-Adviser and the Investment
Manager, the Sub-Adviser provides the North American Government Securities,
Balanced, Core Equity and Emerging Markets Portfolios 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 its services provided pursuant to the Sub-Advisory Agreement, the Investment
Manager pays the Sub-Adviser monthly compensation equal to 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
July 31, 1998, whichever comes first. At December 31, 1997, included in the
Statements of Assets and Liabilities is a receivable from an affiliate of
$13,966, which represents expense reimbursements due to the Portfolio.
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997, CONTINUED
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 period ended
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES OTHER
------------------------------- --------------------------------
PURCHASES SALES/MATURITIES PURCHASES SALES/MATURITIES
----------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C>
Money Market............................ $29,904,557 $ 35,057,721 $597,381,525 $ 600,998,450
North American Government Securities.... 1,867,675 1,039,739 -- --
Diversified Income...................... 38,519,168 13,330,987 41,490,988 33,363,192
Balanced................................ 20,508,113 14,842,556 40,076,236 19,280,774
Utilities............................... -- -- 16,421,721 12,875,246
Dividend Growth......................... -- -- 284,258,051 101,093,886
Value-Added Market...................... 118,023 11,319 50,264,069 8,142,553
Core Equity............................. -- -- 31,560,006 15,774,045
American Value.......................... 21,068,109 5,349,731 461,485,447 418,843,643
Mid-Cap Growth.......................... -- -- 22,731,980 8,126,143
Global Equity........................... 369,525 15,479 109,308,318 65,101,923
Developing Growth....................... -- -- 101,532,398 92,308,934
Emerging Markets........................ -- -- 24,090,778 19,226,486
</TABLE>
Included in the aforementioned sales of portfolio securities of Value-Added
Market are sales of Morgan Stanley, Dean Witter, Discover & Co., an affiliate of
the Investment Manager, effective May 31, 1997, of $123,681, as well as a
realized gain of $39,336.
Included in the aforementioned purchases of portfolio securities of Value-Added
Market are purchases of Hartford Financial Services Group, Inc., the parent
company of Hartford Life and ITT Hartford Life and Annuity Insurance Company,
affiliates of the Fund, in the amount of $76,240.
For the period ended December 31, 1997, the following Portfolios incurred
brokerage commissions with Dean Witter Reynolds Inc. ("DWR"), an affiliate of
the Investment Manager, for executed portfolio transactions:
<TABLE>
<CAPTION>
DIVIDEND CORE AMERICAN MID-CAP GLOBAL DEVELOPING
BALANCED UTILITIES GROWTH EQUITY VALUE GROWTH EQUITY GROWTH
- ------------ ----------- ------------- --------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 4,707 $ 15,600 $ 148,680 $ 3,655 $ 73,465 $ 9,511 $ 38,917 $ 27,638
------ ----------- ------------- --------- ----------- ----------- ----------- -------
------ ----------- ------------- --------- ----------- ----------- ----------- -------
</TABLE>
For the period May 31, 1997 through December 31, 1997, the following Portfolios
incurred brokerage commissions with Morgan Stanley & Co., Inc., an affiliate of
the Investment Manager since May 31, 1997, for executed portfolio transactions:
<TABLE>
<CAPTION>
DIVIDEND AMERICAN MID-CAP GLOBAL DEVELOPING EMERGING
BALANCED GROWTH CORE EQUITY VALUE GROWTH EQUITY GROWTH MARKETS
- ------------- ----------- ----------- ----------- ----------- --------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 165 $ 11,150 $ 135 $ 27,095 $ 850 $ 3,141 $ 2,758 $ 3,274
----- ----------- ----- ----------- ----- --------- ------ ------
----- ----------- ----- ----------- ----- --------- ------ ------
</TABLE>
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997, CONTINUED
Included at December 31, 1997 in the payable for investments purchased and
receivable for investments sold were $247,974 and $244,924, respectively, for
Mid-Cap Growth and $442,396 and $54,508, respectively, for American Value for
unsettled trades with DWR.
Included at December 31, 1997 in the payable for investments purchased was
$40,160 for Developing Growth, and $362,055 for American Value, for unsettled
trades with Morgan Stanley & Co., Inc. Included in the receivable for
investments sold was $440,616 for American Value, for unsettled trades with
Morgan Stanley & Co., Inc.
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>
During the year ended December 31, 1997, the following Portfolios utilized
approximate net capital loss carryovers: Developing Growth -- $1,121,000 and
Emerging Markets -- $87,000.
Net capital and foreign currency losses incurred after October 31 ("post-October
losses") within the taxable year are deemed to arise on the first business day
of the Portfolios' next taxable year. The following 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.
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997, CONTINUED
At December 31, 1997, the primary reason(s) for significant temporary/permanent
book/tax differences were as follows:
<TABLE>
<CAPTION>
TEMPORARY DIFFERENCES PERMANENT DIFFERENCES
----------------------------- ----------------------
POST-OCTOBER LOSS DEFERRALS FOREIGN CURRENCY
LOSSES FROM WASH SALES GAINS/LOSSES
------------ --------------- ----------------------
<S> <C> <C> <C>
Diversified Income...................... - -
Balanced................................ -
Dividend Growth......................... -
Value Added............................. -
Core Equity............................. -
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. Global Equity and
Emerging Markets had permanent differences attributable to tax adjustments on
passive foreign investment companies sold by the Portfolios.
To reflect reclassifications arising from the permanent differences, the
following accounts were (charged) credited.
<TABLE>
<CAPTION>
ACCUMULATED UNDISTRIBUTED
NET INVESTMENT INCOME ACCUMULATED UNDISTRIBUTED
(LOSS) NET REALIZED GAIN (LOSS)
------------------------- -------------------------
<S> <C> <C>
Diversified Income...................... $(12,756) $ 12,756
American Value.......................... 77 (77)
Global Equity........................... 252,101 (252,101)
Emerging Markets........................ 59,557 (59,557)
</TABLE>
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.
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997, CONTINUED
At December 31, 1997, Emerging Markets had outstanding forward contracts used to
facilitate settlement of foreign currency denominated portfolio transactions and
Diversified Income and Emerging Markets had outstanding forward contracts used
to manage foreign currency exposure.
At December 31, 1997, Diversified Income's and Emerging Markets' cash balances
consisted principally of interest bearing deposits with Chase Manhattan Bank
N.A., each Portfolio's custodian.
6. OTHER
On November 6, 1997, the Board of Trustees approved the selection of Morgan
Stanley Asset Management Inc. ("MSAM"), an affiliate of the Investment Manager,
to act as sub-adviser to Core Equity. In connection therewith, the Board of
Trustees also agreed that upon approval and execution of a new Sub-Advisory
Agreement, the Investment Management Agreement be amended to reduce the overall
investment management fee from an annual rate of 0.85% of Core Equity's daily
net assets to 0.80% of daily net assets. The new Sub-Advisory Agreement is
subject to shareholder approval at a meeting to be held on February 26, 1998.
On November 6, 1997, the Board of Trustees approved a proposal by the Investment
Manager of Balanced to assume the duties previously performed by the
Sub-Adviser. In connection therewith, the Investment Manager also proposed that
the investment management fee be reduced from 0.75% of the daily net assets of
Balanced to 0.60% of daily net assets. The Board of Trustees also approved,
subject to shareholder approval at a meeting to be held on February 26, 1998, a
change in the investment objective of Balanced from its current investment
objective of high total return through a combination of income and capital
appreciation, to an investment objective of capital growth with reasonable
current income.
<PAGE>
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)
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)
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)
BALANCED
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)
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)
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)
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)
CORE EQUITY
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)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<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 AVERAGE
YEAR ENDED VALUE END INVESTMENT PERIOD NET INVESTMENT INVESTMENT TURNOVER COMMISSION
DECEMBER 31 OF PERIOD RETURN+ (000'S) EXPENSES INCOME (LOSS) EXPENSES INCOME RATE RATE PAID
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 N/A
1995 1.00 6.10 42,089 0.81 5.11 -- 5.92 N/A N/A
1996 1.00 5.07 87,002 0.59 4.94 0.57% 4.96 N/A N/A
1997 1.00 5.21 84,045 0.55 5.08 0.55 5.08 N/A N/A
NORTH AMERICAN
GOVERNMENT
SECURITIES
1994 (a) 10.04 0.61(1) 122 2.50*(2) 1.78*(2) -- 4.28(2) -- N/A
1995 10.18 6.40 1,288 2.50* 3.24* -- 5.74 18% N/A
1996 10.09 4.35 4,172 1.45 4.55 0.50 5.50 48 N/A
1997 10.17 5.91 5,091 1.26 4.75 1.26 4.75 27 N/A
DIVERSIFIED
INCOME
1994 (a) 10.05 0.76(1) 402 2.50*(2) 3.08*(2) -- 5.58(2) -- N/A
1995 10.22 6.96 8,972 1.33 5.95 -- 7.28 33 N/A
1996 10.32 9.54 32,119 0.71 8.26 0.50 8.47 69 N/A
1997 10.29 8.32 62,287 0.55 8.09 0.55 8.09 110 N/A
BALANCED
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 $ 0.0580
1997 15.03 17.87 71,323 0.86 2.13 0.86 2.13 64 0.0581
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 0.0500
1997 15.84 26.45 50,766 0.76 2.83 0.76 2.83 34 0.0520
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 0.0518
1997 19.57 26.12 518,419 0.65 2.11 0.65 2.11 26 0.0545
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 0.0300
1997 17.56 26.12 141,316 0.58 1.49 0.58 1.49 8 0.0300
CORE EQUITY
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 0.0573
1997 16.56 23.07 40,311 1.01 0.13 1.01 0.13 55 0.0585
</TABLE>
<TABLE>
<C> <S>
- ---------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
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>
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)
MID-CAP GROWTH
1997 (b) 10.00 0.18 1.39 1.57 (0.17) -- (0.17)
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)
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)
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)
</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.
(1) Not annualized.
(2) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<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 AVERAGE
YEAR ENDED VALUE END INVESTMENT PERIOD NET INVESTMENT INVESTMENT TURNOVER COMMISSION
DECEMBER 31 OF PERIOD RETURN+ (000'S) EXPENSES INCOME (LOSS) EXPENSES INCOME RATE RATE PAID
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 $ 0.0557
1997 19.69 31.93 230,014 0.68 0.42 0.68 0.42 262 0.0566
MID-CAP GROWTH
1997 (b) 11.40 15.84(1) 19,236 1.12(2) 0.65(2) -- 1.77(2) 104(1) 0.0546
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 0.0451
1997 12.97 8.66 102,229 1.13 0.91 1.13 0.91 87 0.0283
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 0.0537
1997 19.16 13.77 82,690 0.60 0.26 0.60 0.26 149 0.0555
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 0.0022
1997 11.31 1.27 23,815 1.71 0.49 1.71 0.49 91 0.0007
</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.
(1) Not annualized.
(2) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Money Market Portfolio, North
American Government Securities Portfolio, Diversified Income Portfolio, Balanced
Portfolio, Utilities Portfolio, Dividend Growth Portfolio, Value-Added Market
Portfolio, Core Equity Portfolio, American Value Portfolio, Mid-Cap Growth
Portfolio, Global Equity Portfolio, Developing Growth Portfolio and Emerging
Markets Portfolio (constituting Dean Witter Select Dimensions Investment Series,
hereafter referred to as the "Fund") at December 31, 1997, the results of each
of their operations for the year then ended, the changes in each of their net
assets for each of the two years in the period then ended and the financial
highlights for each of the three years in the period then ended and for the
period November 9, 1994 (commencement of operations) through December 31, 1994,
in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1997 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
FEBRUARY 10, 1998
<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
------------------------------------------------ ------------------------------------------------
Dean Witter Trust FSB Price Waterhouse LLP
Harborside Financial Center--Plaza Two 1177 Avenue of the Americas
Jersey City, New Jersey 07311 New York, New York 10036
</TABLE>
Investment Manager
------------------------------------------------------------
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
Sub-Adviser
North American Government Securities,
Balanced, Core Equity and Emerging Markets Portfolios
-------------------------------------------------------------------
TCW Funds Management, Inc.
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>
Hartford Life
Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
#40474
[PHOTO]
Dean Witter
Select Dimensions Investment Series
Annual Report
December 31, 1997
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