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SEMI-ANNUAL REPORT
FEBRUARY 28, 1998
VISTA CAPITAL ADVANTAGE(SM)
MUTUAL FUND VARIABLE ANNUITY TRUST
Vista Fund Distributors, Inc., distributor
This report must be accompanied or preceded by a current prospectus for
Vista Capital Advantage
<PAGE>
[SWOOSH LOGO]
April 10, 1998
Dear Vista Capital Advantage Contract Owner:
Enclosed is the February 28, 1998 Semi-Annual Report of the Mutual Fund
Variable Annuity Trust, whose portfolios serve as the underlying investments
for the Vista Capital Advantage variable annuity.
The table below shows the one year and since inception results, after the
deduction of all insurance and withdrawal fees, of the accounts in the Vista
Capital Advantage for the fiscal semi-annual period ended February 28, 1998.
The insurance fees include mortality and expense risk charges, surrender
charges and the annual contract administration charge. The surrender charges
reflect the sales charges that would have been assessed against the contract
value had the contract been surrendered.(1)
The first chart applies to all Vista Capital Advantage investors outside of New
York state, whose policy is issued by Anchor National Life Insurance Company.
The second chart applies to Vista Capital Advantage investors within New York
state, whose policy is issued by First SunAmerica Life Insurance Company.
Anchor National Life Insurance Company Policy Holders
Average Annual Total Return as of 2/28/98(2)
Portfolio (Contract Inception Date) One-Year Since Inception
- ------------------------------------------------------------------------
Growth and Income (3/13/95) 23.98% 24.60%
Capital Growth (3/13/95) 18.65% 24.03%
International Equity (3/13/95) 1.46% 6.27%
Asset Allocation (3/13/95) 12.89% 15.03%
U.S. Government Income (7/13/95) 1.88% 2.69%
Money Market (6/2/95)(3) -2.50% 1.82%
7-day current yield as of 2/28/98; 3.49%
First SunAmerica Life Insurance Company Policy Holders (New York)
Average Annual Total Return as of 2/28/98(2)
Portfolio (Contract Inception Date) One-Year Since Inception
- ------------------------------------------------------------------------
Growth and Income (12/6/95) 23.96% 22.88%
Capital Growth (12/6/95) 18.61% 21.16%
International Equity (12/22/95) 1.38% 3.46%
Asset Allocation (12/22/95) 12.87% 13.56%
U.S. Government Income (12/22/95) 1.91% 1.63%
Money Market (12/22/95)(3) -2.51% 1.34%
7-day current yield as of 2/28/98; 3.46%
Your Vista Capital Advantage variable annuity represents a unique combination
of professional money management and tax advantages. It is designed to help
contribute to your plans for a financially secure future. If you have any
questions, please call your investment representative or 1-800-90-VISTA.
Sincerely,
/s/ Fergus Reid
- ---------------
Fergus Reid
Chairman
- -------------
(1) The Surrender Charge schedule for each year in states other than NY is as
follows: 6%, 6%, 5%, 4%, 3%, 2%, 0%. In NY the Surrender Charge schedule for
each year is: 6%, 6%, 5%, 4%, 3%, 2%, 1%, 0%. A 10% Federal tax penalty may
apply to withdrawals before age 591/2.
(2) Past performance is no guarantee of future results. An investor's return and
principal value will fluctuate. An investor's units, when redeemed, may be
worth more or less than their original investment. This material is
authorized for public distribution only when accompanied or preceded by a
prospectus for Vista Capital Advantage.
(3) There can be no assurance that the underlying fund will be able to maintain
a stable net asset value of $1.00 per share and fund shares themselves are
not insured or guaranteed by the U.S. Government.
The Vista Capital Advantage (VCA) is distributed by Vista Fund Distributors,
Inc., which is unaffiliated with The Chase Manhattan Bank, Anchor National Life
Insurance Company or First SunAmerica Life Insurance Company. Chase Manhattan
is the portfolio advisor, administrator and custodian of the underlying
investment options of the variable annuity. VCA is issued by Anchor National
Life Insurance Company and in New York by First SunAmerica Life Insurance
Company.
Investments in Vista Capital Advantage are not deposits, or guaranteed or
endorsed by, Chase, and are not insured by the FDIC, Federal Reserve Board or
any other government agency. Investments in Vista Capital Advantage, including
the underlying variable investment options, involve risk, including the
possible loss of principal.
The views expressed on this page are exclusively those of Chase Manhattan. The
financial information presented on this page has been taken from the books and
records of the portfolios without examination by independent accountants, who
express no opinion thereto.
<PAGE>
Table of Contents
1 Letter from the Chairman
Performance & Commentary
2 Growth and Income
3 Capital Growth
4 International Equity
5 Asset Allocation
6 U.S. Government Income
7 Money Market
Portfolio of Investments
8 Growth and Income
10 Capital Growth
12 International Equity
15 Asset Allocation
17 U.S. Government Income
17 Money Market
Mutual Fund Variable Annuity Trust
18 Statement of Assets & Liabilities
19 Statement of Operations
20 Statement of Changes in Net Assets
21 Financial Highlights
22-26 Notes to Financial Statements
INVESTMENTS IN VISTA CAPITAL ADVANTAGE ARE NOT DEPOSITS OF, OR GUARANTEED OR
ENDORSED BY, THE CHASE MANHATTAN BANK, AND ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. INVESTMENTS IN VISTA
CAPITAL ADVANTAGE, INCLUDING THE UNDERLYING VARIABLE INVESTMENT OPTIONS,
INVOLVE RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
<PAGE>
Letter from the Chairman page 1
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April 10, 1998
Dear Vista Capital Advantage Investor:
We are pleased to present this semi-annual report on the six portfolios
underlying the Vista Capital Advantage Variable Annuity for the six months
ended February 28, 1998. This report summarizes the performance of each
portfolio in light of events in the financial markets, giving you the
opportunity to monitor and adjust your individual investment choices if
necessary. Here are some highlights:
Exceptional Economic Environment Continued in the U.S.
During the reporting period, the U.S. economy continued to display an ability
to grow at a robust pace without igniting inflationary pressures. The strong
growth was very much in evidence as corporate profits increased for the seventh
consecutive year and unemployment fell to lows not seen since the late 1960s.
In this environment, large company stocks that make up the S&P 500 Index led
the market.
Asian Crisis Caused Sharp but Temporary Setback
In the summer of 1997, Thailand's currency, the baht, came under attack due to
problems with the country's current account (trade) deficit and the perceived
weakness of its financial institutions. By the fall, the currency crisis had
spread throughout most of Asia, undermining confidence in the region's
financial systems and ultimately leading to October's sharp downturn in equity
prices around the world. While U.S. and European stocks quickly recovered from
the selloff to move to new highs, stocks in Japan, emerging Asia and Latin
America struggled through the remainder of the period.
U.S. Bond Market Remained the World's Safe Haven
After being driven for several years by an acute sensitivity to whether the
high levels of U.S. economic growth would lead to a resurgence in inflation,
U.S. fixed income securities were prime beneficiaries of the Asian crisis.
Foreign and domestic investors sought a safe haven in U.S. Treasury securities.
The belief that cheaper imports from weaker Asian economies would hold down
U.S. inflation provided another source of support, as did the realization that
the U.S. Federal budget would produce a surplus after 20 years of deficits.
Overall, it was another strong period for those invested in the U.S. stock
market, including those who've chosen to invest in Vista Capital Advantage
variable annuity. We thank you for your business and look forward to continuing
to serve your investment needs for many years to come. If you have questions,
please do not hesitate to call your investment professional or 1-800-90-VISTA.
Sincerely,
/s/ Fergus Reid
- ---------------
Fergus Reid
Chairman
<PAGE>
page 2 Growth and Income Portfolio
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The Growth and Income Portfolio seeks to provide long-term capital appreciation
and dividend income primarily through diversified holdings of common stocks.
Performance
Investors in the Growth and Income Portfolio participated in the strong
performance of U.S. stocks during the reporting period. For the six months ended
February 28, 1998, the Portfolio had a total return of 13.29%.
Strategy
The portfolio management team utilized its five-step stock management system to
select individual holdings for the portfolio. Early in the period, the Portfolio
had an overweight position in technology stocks, but the management team had
begun reducing these holdings prior to the onset of the Asian crisis, which
proved beneficial during October's selloff. A comparable underweight position in
money center banks also helped as these stocks suffered from their exposure to
Asia, but the management team maintained its positions in regional banks and
insurers, both of which benefited as the bond market rallied. Other sectors that
added to relative performance in late 1997 were consumer cyclicals, utilities,
health care, consumer staples and real estate investment trusts.
As the market shifted its focus to more growth-oriented stocks in early 1998,
the Portfolio's relatively defensive position caused it to lag the market.
However, relative performance quickly picked up steam thanks to strong stock
picking, particularly in the financial, technology, consumer cyclical and
telecommunications sectors. The managers were opportunistic, moving into new
energy names as their prices fell and rotating from pharmaceuticals to services
in the health care sector.
Outlook
At the end of the period, the market was shrugging off lower earnings
expectations and focusing instead on stable interest rates, low inflation and
stabilization in the Asia/ Pacific region. The managers believe that large cap
earnings for the first quarter can exceed the lowered expectations, but that
latter-year forecasts remain excessively optimistic. Therefore, the managers
expect to maintain a stock-by-stock approach, focusing on those companies which
they believe can maintain their earnings growth.
Life of Portfolio Performance
A $10,000 tax-deferred investment in the Growth and Income Portfolio at NAV (Net
Asset Value) would have grown to $20,411 from inception on 3/1/95 through
2/28/98.*
Investment Results
Average Annual Total Return as of 2/28/98*
One year 31.81%
Since Inception (3/1/95) 26.98%
[TABULAR REPRESENTATION OF MOUNTAIN CHART]
Growth and Income S&P 500
Feb-95 10000 10000
10270 10294
Apr-95 10410 10597
10730 11020
Jun-95 11000 11275
11460 11649
Aug-95 11480 11678
11710 12171
Oct-95 11480 12127
11960 12659
Dec-95 12150 12903
12558 13342
Feb-96 12767 13466
13019 13596
Apr-96 13228 13796
13375 14151
Jun-96 13344 14205
12893 13578
Aug-96 13344 13865
13941 14644
Oct-96 14161 15048
15051 16184
Dec-96 14768 15864
15603 16854
Feb-97 15543 16987
14899 16290
Apr-97 15579 17262
16569 18317
Jun-97 17214 19131
18609 20653
Aug-97 18084 19497
18931 20534
Oct-97 18562 19826
19170 20710
Dec-97 19363 21035
19046 21250
Feb-98 20411 22746
Source for Index returns: Lipper Analytical Services, Inc.
* Past performance is no guarantee of future results. Investment returns and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than the original cost. Performance figures do not include
any insurance company charges associated with a variable annuity or reflect any
withdrawal charges. No expenses are deducted from the performance of the
indexes.
Hypothetical $10,000 investment assumes an initial investment on 3/1/95, shows
changes in Net Asset Value and reinvestment of all distributions, but does not
include the effect of any insurance charges or the annual maintenance fee. The
illustration above would be reduced if these fees were reflected. There is no
direct correlation between a hypothetical investment and the anticipated
performance of the Portfolio. The investment adviser is currently waiving
certain fees. This voluntary waiver may be modified or terminated at any time,
which would reduce performance.
The Standard & Poor's 500 Index is an unmanaged broad-based index that
replicates the U.S. stock market. It includes 500 widely held common stocks and
assumes reinvestment of dividends. An individual cannot invest in an index.
Withdrawals prior to age 59 1/2 from the Vista Capital Advantage variable
annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary
income.
The views expressed on this page are exclusively those of Chase Manhattan.
The financial information presented on this page has been taken from the books
and records of the portfolios without examination by independent accountants,
who express no opinion thereto.
<PAGE>
Capital Growth Portfolio page 3
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The Capital Growth Portfolio seeks to provide long-term capital growth primarily
through diversified holdings of common stocks.
Performance
For the six months ended February 28, 1998, the Capital Growth Portfolio
provided investors with a total return of 11.94%.
Strategy
The Portfolio began the period modestly positioned for a slowing economy, with a
lower allocation, relative to its benchmark, to the technology sector that
proved beneficial in the last several months of 1997. Overweight allocations to
select consumer cyclical and cable stocks also worked out well. However, the
Portfolio was held back by its aerospace holdings as this sector suffered from
concerns about new equipment orders from the Asia/Pacific region. Another area
of focus was mid-cap insurance companies, which performed quite well in a
consolidating environment.
In early 1998, the Portfolio was well positioned for the market's strong move.
Specifically, overweight positions in consumer cyclical stocks, particularly in
retailing and cable, proved beneficial, as did the management team's decision to
add to HMO and managed care holdings. The Portfolio's return was enhanced by
reduced exposure to technology as well as by strong stock selection within that
sector.
Outlook
As the period ended, investors had begun turning their attention to better
relative valuations in small- and mid-cap stocks. Concerned about overly
optimistic latter-year earnings forecasts, the management team is finding a
plethora of strong earnings prospects in the mid-cap area and, therefore,
expects to remain focused on stock picking while possibly becoming more
defensive as 1998 progresses.
Life of Portfolio Performance
A $10,000 tax-deferred investment in the Capital Growth Portfolio at NAV (Net
Asset Value) would have grown to $20,234 from inception on 3/1/95 through
2/28/98.*
Investment Results
Average Annual Total Return as of 2/28/98*
One year 26.47%
Since Inception (3/1/95) 26.57%
[TABULAR REPRESENTATION OF MOUNTAIN CHART]
Capital Growth Russell 2000
Feb-95 10000 10000
10350 10172
Apr-95 10470 10398
10870 10577
Jun-95 11140 11125
11830 11766
Aug-95 11900 12010
12090 12224
Oct-95 11660 11677
12220 12168
Dec-95 12707 12489
12871 12476
Feb-96 13077 12865
13674 13126
Apr-96 14363 13828
14785 14373
Jun-96 14404 13783
13571 12579
Aug-96 14240 13310
14960 13830
Oct-96 14764 13617
15526 14178
Dec-96 15670 14549
16284 14840
Feb-97 16040 14480
15276 13797
Apr-97 15403 13836
16492 15375
Jun-97 17141 16034
18321 16780
Aug-97 18123 17164
19069 18420
Oct-97 18485 17612
18707 17497
Dec-97 18854 17803
18854 17522
Feb-98 20234 18817
Source for Index Returns: Lipper Analytical Services, Inc.
* Past performance is no guarantee of future results. Investment returns and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than the original cost. Performance figures do not include
any insurance company charges associated with a variable annuity or reflect any
withdrawal charges. No expenses are deducted from the performance of the
indexes.
Hypothetical $10,000 investment assumes an initial investment on 3/1/95, shows
changes in Net Asset Value and reinvestment of all distributions, but does not
include the effect of any insurance charges or the annual maintenance fee. The
illustration above would be reduced if these fees were reflected. There is no
direct correlation between a hypothetical investment and the anticipated
performance of the Portfolio. The investment adviser is currently waiving
certain fees. This voluntary waiver may be modified or terminated at any time,
which would reduce performance.
The Russell 2000 Index is unmanaged and tracks the shares of 2000 small-
capitalization companies. Figures include the reinvestment of dividends. An
individual cannot invest in an index.
Withdrawals prior to age 59 1/2 from the Vista Capital Advantage variable
annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary
income.
The views expressed on this page are exclusively those of Chase Manhattan. The
financial information presented on this page has been taken from the books and
records of the portfolios without examination by independent accountants, who
express no opinion thereto.
<PAGE>
page 4 International Equity Portfolio
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The International Equity Portfolio seeks to provide a total return on assets
from long-term growth of capital and from income principally through diversified
holdings of the stocks of established foreign companies outside the United
States.
Performance
For the six months ended February 28, 1998, the International Equity Portfolio
provided investors with a total return of 6.56%.
Strategy
Throughout the reporting period, the Portfolio maintained a significantly
overweight position in European companies, which reflected the management team's
belief that the profound restructuring that's taken place in Europe has laid the
groundwork for higher levels of profitability. This stance was proven correct
when signs of sustainable economic growth began to appear on the continent after
several years of fits and starts.
The Portfolio was underweight in Japan throughout the period given the
management team's concern about tepid economic activity. Investments in Japan
were focused on the large, multinational exporting companies, which benefited
from the weaker yen, as opposed to domestic companies, which depend on local
consumer spending.
In the emerging markets, the Portfolio's relatively neutral holdings in
Southeast Asia were hit hard by the currency crisis but did rally somewhat in
early 1998. Despite this bounce, the management team has been focusing on
fundamentals in the region, investing in companies which have the ability to
deliver earnings growth in the midst of regional restructuring. In Latin
America, the Fund retained a slightly overweight position, which reflected that
region's stronger fundamentals.
Outlook
In the management team's view, Western European restructuring has created an
environment in which the arrival of sustained economic growth has been resulting
in higher bottom line profit growth. The management team believes that this, in
turn, can mean higher levels of investment, which could provide the fuel for
further internalizing of economic growth. Within Europe, the manager expects to
reduce weightings in financial and pharmaceutical stocks in favor of cyclical
and small cap stocks which historically tend to do better in a growing economy.
The management team remains concerned about the Asian markets given the weakness
in Japan and its importance as a trading partner and financing source to the
region.
Life of Portfolio Performance
A $10,000 tax-deferred investment in the International Equity Portfolio at NAV
(Net Asset Value) would have grown to $12,858 from inception on 3/1/95 through
2/28/98.*
Investment Results
Average Annual Total Return as of 2/28/98*
One year 9.06%
Since inception (3/1/95) 8.76%
[TABULAR REPRESENTATION OF MOUNTAIN CHART]
International Equity MSCI EAFE
Feb-95 10000 10000
10180 10626
Apr-95 10350 11028
10480 10900
Jun-95 10470 10712
11010 11381
Aug-95 10890 10950
11070 11167
Oct-95 10910 10869
10870 11175
Dec-95 10890 11628
11058 11678
Feb-96 11132 11721
11427 11973
Apr-96 11753 12324
11616 12100
Jun-96 11679 12171
11121 11818
Aug-96 11153 11847
11448 12165
Oct-96 11300 12043
11690 12526
Dec-96 11648 12367
11532 11937
Feb-97 11798 12136
11752 12183
Apr-97 11729 12250
12214 13050
Jun-97 12688 13773
13289 13999
Aug-97 12075 12956
12734 13684
Oct-97 12729 12636
11659 12510
Dec-97 11806 12622
12087 13203
Feb-98 12858 14054
Source for Index Returns: Lipper Analytical Services, Inc.
* Past performance is no guarantee of future results. Investment returns and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than the original cost. Performance figures do not include
any insurance company charges associated with a variable annuity or reflect any
withdrawal charges. No expenses are deducted from the performance of the
indexes.
Hypothetical $10,000 investment assumes an initial investment on 3/1/95, shows
changes in Net Asset Value and reinvestment of all distributions, but does not
include the effect of any insurance charges or the annual maintenance fee. The
illustration above would be reduced if these fees were reflected. There is no
direct correlation between a hypothetical investment and the anticipated
performance of the Portfolio. The investment adviser is currently waiving
certain fees. This voluntary waiver may be modified or terminated at any time,
which would reduce performance.
International investing involves a greater degree of risk and increased
volatility. Changes in currency exchange rates and differences in accounting and
taxation policies outside the U.S. can raise or lower returns. Also, some
overseas markets may not be as politically and economically stable as the United
States and other nations.
The MSCI EAFE Index is unmanaged, is a replica (or model) of the performance of
the European, Australian and Far Eastern equity markets, and assumes the
reinvestment of dividends. An individual cannot invest in an index.
Withdrawals prior to age 59 1/2 from the Vista Capital Advantage variable
annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary
income.
The views expressed on this page are exclusively those of Chase Manhattan. The
financial information presented on this page has been taken from the books and
records of the portfolios without examination by independent accountants, who
express no opinion thereto.
<PAGE>
Asset Allocation Portfolio page 5
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The Asset Allocation Portfolio seeks to provide maximum return through a
combination of long-term capital growth and current income by investing in
common stocks, convertible securities and government and corporate fixed income
obligations.
Performance
For the six months ended February 28, 1998, the Asset Allocation Portfolio had a
total return of 8.98%.
Strategy
At the end of the reporting period, 52.0% of the Portfolio's assets were
invested in common stocks and 48.0% were invested in fixed income securities and
cash equivalents.
On the equity side, the portfolio management team began the period by reducing
exposure to technology stocks prior to the onset of the Asian crisis, which
proved beneficial during October's selloff. A comparable underweight position in
money center banks also helped as these stocks suffered from their exposure to
Asia. The management team maintained its positions in regional banks and
insurers, both of which benefited as the bond market rallied. As the market
shifted its focus to more growth-oriented stocks in early 1998, the Portfolio's
relatively defensive position caused it to lag the market. However, relative
performance quickly picked up steam thanks to strong stock picking, particularly
in the financial, technology, consumer cyclical and telecommunications sectors.
The Portfolio's fixed income holdings provided a strong performance boost,
particularly after the onset of the Asian crisis. Specifically, the management
team took advantage of the rallying Treasury market, maintaining investments in
fairly liquid securities and reducing holdings in bonds with exposure to the
Asian crisis. As bond yields settled into a trading range in early 1998, the
Portfolio began moving back into "spread" securities in the mortgage-backed and
corporate sectors. The management team rebuilt a slight overweight position in
mortgages with an emphasis on discount and 15-year coupons. The portfolio
remained underweight in corporate securities, however, because of heavy new
supply brought on the market by low interest rates. Throughout the period, the
Fund attempted to maintain a slightly long duration relative to its benchmark.
Outlook
At the end of the period, the management team believed that latter-year
forecasts for earnings were excessively optimistic. Therefore, it was
maintaining a careful stock-by-stock approach and focusing on those companies
which it believes can maintain their earnings growth. The management team does
not expect the Federal Reserve Board to make any move on short term interest
rates any time soon and continues to believe that the 1998 bias is towards lower
long-term interest rates.
Life of Portfolio Performance
A $10,000 tax-deferred investment in the Asset Allocation Portfolio at NAV (Net
Asset Value) would have grown to $16,342 from inception on 3/1/95 through
2/28/98.*
Investment Results
Average Annual Total Return as of 2/28/98*
One year 20.66%
Since Inception (3/1/95) 17.81%
[TABULAR REPRESENTATION OF MOUNTAIN CHART]
Asset Allocation 60% S&P 500/40%
Lehman Govt Bond
Feb-95 10000 10000
10160 10198
Apr-95 10270 10427
10570 10795
Jun-95 10730 10975
10980 11201
Aug-95 11040 11254
11200 11578
Oct-95 11120 11598
11440 11970
Dec-95 11595 12160
11880 12460
Feb-96 11935 12487
12045 12545
Apr-96 12133 12653
12198 12863
Jun-96 12231 12940
12001 12578
Aug-96 12242 12755
12627 13280
Oct-96 12835 13596
13362 14333
Dec-96 13220 14115
13596 14728
Feb-97 13557 14814
13194 14370
Apr-97 13596 15005
14102 15674
Jun-97 14465 16203
15321 17203
Aug-97 15010 16491
15464 17116
Oct-97 15360 16880
15646 17366
Dec-97 15807 17602
15708 17815
Feb-98 16342 18550
Source for Index Returns: Lipper Analytical Services, Inc.
* Past performance is no guarantee of future results. Investment returns and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than the original cost. Performance figures do not include
any insurance company charges associated with a variable annuity or reflect any
withdrawal charges. No expenses are deducted from the performance of the
indexes.
Hypothetical $10,000 investment assumes an initial investment on 3/1/95, shows
changes in Net Asset Value and reinvestment of all distributions, but does not
include the effect of any insurance charges or the annual maintenance fee. The
illustration above would be reduced if these fees were reflected. There is no
direct correlation between a hypothetical investment and the anticipated
performance of the Portfolio. The investment adviser is currently waiving
certain fees. This voluntary waiver may be modified or terminated at any time,
which would reduce performance.
The Standard & Poor's 500 Index is an unmanaged broad-based index that
replicates the U.S. stock market. It includes 500 widely held common stocks and
assumes reinvestment of all dividends.
The unmanaged Lehman Government Bond Index includes the Treasury Bond Index and
the Agency Bond Index. Maturities range from 1 to 20 years. An individual cannot
invest in an index.
Withdrawals prior to age 59 1/2 from the Vista Capital Advantage variable
annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary
income.
The views expressed on this page are exclusively those of Chase Manhattan. The
financial information presented on this page has been taken from the books and
records of the portfolios without examination by independent accountants, who
express no opinion thereto.
<PAGE>
page 6 U.S. Government Income Portfolio
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The U.S. Government Income Portfolio seeks to provide monthly dividends as well
as to preserve principal.
Performance
For the year ended February 28, 1998, the U.S. Government Income Portfolio had a
total return of 5.63%.
Strategy
Over the reporting period, the yield on the 30-year U.S. Treasury bond fell from
6.58% to 5.89%. The Fund's strategy in the latter part of 1997 was to maintain a
slightly-longer duration relative to its benchmark. This proved beneficial when
investors sought a safe haven in U.S. government securities in light of the
Asian currency crisis.
Later in the reporting period the management team anticipated a flattening of
the yield curve. As a result, it attempted to pursue a barbell strategy, mixing
investments in short-term securities (1-4 years) with those in the 20 to 30
year range, while avoiding 10-year maturities.
Outlook
As the period ended, fixed income securities were trading in a narrow range.
This environment resulted from the competing pressures of strong domestic growth
on one side and the absence of inflation pressure on the other. The latter was
supported by the widespread belief that the Asian financial crisis and the
strong dollar will weaken U.S. exports. The management team does not expect the
Federal Reserve Board to make any move on short-term interest rates any time
soon and continues to believe that the 1998 bias is towards lower long-term
interest rates.
Life of Portfolio Performance
A $10,000 tax-deferred investment in the U.S. Government Income Portfolio at NAV
(Net Asset Value) would have grown to $12,527 from inception on 3/1/95 through
2/28/98.*
Investment Results
Average Annual Total Return as of 2/28/98*
One year 9.59%
Since Inception (3/1/95) 7.79%
[TABULAR REPRESENTATION OF MOUNTAIN CHART]
U.S. Government Lehman Intmd
Income Portfolio U.S. Govt
Feb-95 10000 10000
10050 10055
Apr-95 10170 10171
10550 10458
Jun-95 10620 10525
10570 10530
Aug-95 10690 10617
10800 10688
Oct-95 10950 10805
11100 10937
Dec-95 11235 11044
11292 11138
Feb-96 11027 11020
10924 10970
Apr-96 10855 10938
10820 10932
Jun-96 10970 11043
10993 11077
Aug-96 10970 11090
11131 11233
Oct-96 11350 11417
11522 11555
Dec-96 11430 11493
11455 11537
Feb-97 11430 11556
11304 11490
Apr-97 11468 11620
11556 11710
Jun-97 11683 11811
11998 12028
Aug-97 11859 11982
12048 12113
Oct-97 12238 12255
12288 12282
Dec-97 12397 12381
12527 12542
Feb-98 12527 12529
Source for Index Returns: Lipper Analytical Services, Inc.
* Past performance is no guarantee of future results. Investment returns and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than the original cost. Performance figures do not
include any insurance company charges associated with a variable annuity or
reflect any withdrawal charges. No expenses are deducted from the performance
of the indexes.
Hypothetical $10,000 investment assumes an initial investment on 3/1/95 and
shows changes in Net Asset Value, but does not include the effect of any
insurance charges or the annual maintenance fee. The illustration above would be
reduced if these fees were reflected. There is no direct correlation between a
hypothetical investment and the anticipated performance of the Portfolio. The
investment adviser is currently waiving certain fees. This voluntary waiver may
be modified or terminated at any time, which would reduce performance.
The unmanaged Lehman Intermediate Government Bond Index includes bonds with 1 to
10 year maturities and assumes the reinvestment of dividends. An individual
cannot invest in an index.
Withdrawals prior to age 59 1/2 from the Vista Capital Advantage variable
annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary
income.
The views expressed on this page are exclusively those of Chase Manhattan. The
financial information presented on this page has been taken from the books and
records of the portfolios without examination by independent accountants, who
express no opinion thereto.
<PAGE>
Money Market Portfolio page 7
[SWOOSH LOGO]
The Money Market Portfolio seeks to provide maximum current income consistent
with preservation of capital and maintenance of liquidity.
Performance
The Money Market Portfolio had a total return of 2.46% for the six months ended
February 28, 1998.
As the reporting period began, a consensus was building that the Federal
Reserve Board would raise short-term interest rates as a preemptive strike
against potential inflationary pressures in a buoyant U.S. economy. As so often
happens, however, the conventional thinking was overwhelmed by an outside
event, in this case the onset of the currency and economic crisis in Asia.
While the Asian crisis had a negative short-term effect on world stock markets,
its consequences for U.S. fixed income markets proved highly beneficial because
it changed the inflation paradigm. Specifically, the markets assumed that the
rapidly-deteriorating currencies of our Asian trading partners would make their
goods cheaper here, therefore holding down prices. On the other side of the
import-export coin, most market participants came to believe that slowing
exports to Asia would cut into U.S. economic growth, allowing the Fed to remain
on the sidelines. Finally, the market generally benefited from a strong inflow
of dollars from investors seeking a safe haven in U.S. government securities.
While the Fed did, in fact, change from a tightening to a neutral stance in
December, short-term interest rates remained relatively flat even as long-term
rates fell sharply. Over the reporting period, the yield on the 1-year U.S.
Treasury bill changed only slightly, from 5.56% to 5.40%.
In this environment, your portfolio management team once again provided you
with competitive yields and stability.
* Total return figures do not include the effect of any insurance or withdrawal
charges associated with a variable annuity. The investment advisor is currently
waiving certain fees. This voluntary waiver may be modified or terminated at
any time, which would reduce performance. Past performance is not a guarantee
of future results.
An investment in Vista Capital Advantage Money Market Portfolio is neither
insured nor guaranteed by the U.S. Government. Yields will fluctuate, and there
can be no assurance that the Fund will be able to maintain a stable net asset
value of $1.00 per share.
The views expressed on this page are exclusively those of Chase Manhattan. The
financial information presented on this page has been taken from the books and
records of the portfolios without examination by independent accountants, who
express no opinion thereto.
<PAGE>
page 8 Growth and Income Portfolio
Portfolio of Investments February 28, 1998 (unaudited)
[SWOOSH LOGO]
Shares Issuer Value
------ ------ ------
LONG-TERM INVESTMENTS--90.7%
COMMON STOCK--90.7%
AEROSPACE--1.0%
2,100 UNITED TECHNOLOGIES, CORP. ............................. $ 187,556
---------
AGRICULTURAL PRODUCTION/SERVICES--1.0%
2,700 CASE CORP. ............................................. 175,669
---------
AIRLINES--0.6%
800 AMR CORP.* ............................................. 101,250
---------
AUTOMOTIVE--3.5%
9,300 FORD MOTOR CO. ......................................... 526,031
2,100 LEAR CORP.* ............................................ 111,038
---------
637,069
---------
BANKING--4.5%
2,100 BANKAMERICA CORP. ...................................... 162,750
1,400 CULLEN/FROST BANKERS, INC. ............................. 79,713
8,000 NATIONSBANK CORP. ...................................... 548,000
---------
790,463
---------
BUSINESS SERVICES--0.4%
2,200 SUNGARD DATA SYSTEMS, INC.* ............................ 75,212
---------
CHEMICALS--2.4%
4,800 DOW CHEMICAL CO. ....................................... 439,200
---------
COMPUTER SOFTWARE--2.6%
8,450 COMPUTER ASSOCIATES INTERNATIONAL ...................... 398,206
1,200 NETWORK ASSOCIATES, INC.* .............................. 77,550
---------
475,756
---------
COMPUTERS/COMPUTER HARDWARE--7.0%
14,700 EMC CORP.* ............................................. 562,275
4,300 INTERNATIONAL BUSINESS MACHINES CORP. .................. 449,081
1,000 STORAGE TECHNOLOGY CORP.* .............................. 68,250
3,700 SUN MICROSYSTEMS, INC.* ................................ 176,212
---------
1,255,818
---------
CONSUMER PRODUCTS--4.6%
8,800 PHILIP MORRIS COMPANIES, INC. .......................... 382,250
3,100 RJR NABISCO HOLDINGS CORP. ............................. 107,143
1,800 UNILEVER NV, ADR ....................................... 115,762
4,500 UNIVERSAL CORPORATION .................................. 213,750
---------
818,905
---------
DIVERSIFIED--4.3%
6,000 HONEYWELL, INC. ........................................ 475,500
10,200 CANADIAN PACIFIC, LTD. ................................. 291,338
---------
766,838
---------
ELECTRONICS/ELECTRICAL EQUIPMENT--1.1%
2,500 LINEAR TECHNOLOGY CORP. ................................ 189,375
---------
ENTERTAINMENT/LEISURE--1.0%
3,100 CARNIVAL CORP., CLASS A ................................ 182,513
---------
FINANCIAL SERVICES--1.4%
1,500 FINOVA GROUP, INC. ..................................... 82,500
2,400 MORGAN STANLEY, DEAN WITTER, DISCOVER AND CO. .......... 167,250
---------
249,750
---------
Shares Issuer Value
------ ------ ------
FOOD/BEVERAGE PRODUCTS--3.3%
10,000 PEPSICO., INC. ......................................... $ 365,625
2,000 QUAKER OATS CO. ........................................ 107,750
1,200 RALSTON-RALSTON PURINA GROUP ........................... 121,725
---------
595,100
---------
HEALTH CARE/HEALTH CARE SERVICES--6.2%
7,200 COLUMBIA/HCA HEALTHCARE CORP. .......................... 195,300
4,500 CONCENTRA MANAGED CARE, INC.* .......................... 154,406
14,200 HEALTHSOUTH CORP.* ..................................... 383,400
10,000 TENET HEALTHCARE CORP.* ................................ 373,125
---------
1,106,231
---------
INSURANCE--8.0%
5,100 ACE, LTD. # ............................................ 504,262
5,500 ALLSTATE CORP. ......................................... 512,875
3,100 EQUITABLE COMPANIES, INC. .............................. 162,169
2,100 MGIC INVESTMENT CORP. .................................. 154,744
5,900 RELIANCE GROUP HOLDINGS, INC. .......................... 100,300
---------
1,434,350
---------
MANUFACTURING--3.6 %
10,700 INGERSOLL-RAND CO. ..................................... 509,588
1,800 PENTAIR, INC. .......................................... 74,138
2,500 UNITED DOMINION INDUSTRIES, LTD. ....................... 71,875
---------
655,601
---------
MEDIA/ADVERTISING--1.1 %
4,400 OMNICOM GROUP, INC. .................................... 201,300
---------
OFFICE/BUSINESS EQUIPMENT--1.1%
2,200 XEROX CORP. ............................................ 195,112
---------
OIL & GAS--10.6%
2,400 BJ SERVICES CO.* ....................................... 82,500
5,600 COASTAL CORP. .......................................... 356,300
6,400 CONSOLIDATED NATURAL GAS CO. ........................... 368,000
4,800 DRESSER INDUSTRIES, INC. ............................... 214,500
7,000 HALLIBURTON COMPANY .................................... 325,500
4,400 MOBIL CORP. ............................................ 318,725
1,400 MURPHY OIL CORP. ....................................... 69,913
3,200 TEXACO, INC. ........................................... 178,600
---------
1,914,038
---------
PAPER/FOREST PRODUCTS--1.4%
2,200 BOISE CASCADE CORP. .................................... 73,288
5,000 WILLAMETTE INDUSTRIES, INC. ............................ 184,687
---------
257,975
---------
PHARMACEUTICALS--3.1 %
2,000 BRISTOL-MYERS SQUIBB CO. ............................... 200,375
5,700 SMITHKLINE BEECHAM PLC, ADR ............................ 352,687
---------
553,062
---------
PRINTING & PUBLISHING--1.0%
2,800 NEW YORK TIMES COMPANY, CLASS A ........................ 183,225
---------
REAL ESTATE INVESTMENT TRUST--0.6%
4,571 SECURITY CAPITAL PACIFIC TRUST ......................... 104,847
---------
See notes to financial statements.
<PAGE>
Growth and Income Portfolio (continued) page 9
Portfolio of Investments February 28, 1998 (unaudited)
[SWOOSH LOGO]
Shares Issuer Value
------ ------ -----
RETAILING--8.3%
10,100 COSTCO COMPANIES, INC.* ................ $ 493,638
10,200 FEDERATED DEPARTMENT STORES* ........... 478,125
9,600 KROGER CO.* ............................ 405,600
3,200 NEIMAN-MARCUS GROUP, INC.* ............. 119,000
-----------
1,496,363
-----------
TELECOMMUNICATIONS--3.4%
1,400 BELL ATLANTIC CORP. .................... 125,650
5,800 BELLSOUTH CORP. ........................ 353,800
2,100 SPRINT CORP. ........................... 138,600
-----------
618,050
-----------
UTILITIES--3.6%
1,900 CMS ENERGY CORP. ....................... 84,075
6,200 FPL GROUP INC. ......................... 359,988
2,200 SIERRA PACIFIC RESOURCES ............... 78,925
3,200 TEXAS UTILITIES CO. .................... 129,400
-----------
652,388
-----------
TOTAL COMMON STOCK
(COST $13,522,548) ..................... 16,313,016
-----------
Shares Issuer Value
------ ------ -----
WARRANTS--0.0%
REAL ESTATE INVESTMENT TRUST--0.0%
240 SECURITY CAPITAL GROUP, SER. B, 09/18/98
(COST $0) .............................. $ 885
-----------
TOTAL LONG-TERM INVESTMENTS
(COST $13,522,548) ..................... 16,313,901
-----------
Principal
Amount
(USD)
---------
SHORT-TERM INVESTMENTS--
CERTIFICATE OF DEPOSIT--9.5%
$1,703,000 CANADIAN IMPERIAL BANK, 5.56%, 03/02/98
(COST $1,703,000) ...................... 1,703,000
-----------
TOTAL INVESTMENTS--100.2%
(COST $15,225,548) ..................... $18,016,901
===========
See notes to financial statements.
<PAGE>
page 10 Capital Growth Portfolio
Portfolio of Investments February 28, 1998 (unaudited)
[SWOOSH LOGO]
Shares Issuer Value
------ ------ -----
LONG-TERM INVESTMENTS--83.6%
COMMON STOCK--83.6%
AGRICULTURAL PRODUCTION/SERVICES--1.8%
5,000 UNIVERSAL CORPORATION .............................. $ 237,500
----------
AIRLINES--1.9%
5,000 CONTINENTAL AIRLINES, INC., CLASS B* ............... 251,250
----------
AUTOMOTIVE--2.8%
7,000 LEAR CORP.* ........................................ 370,125
----------
BANKING--3.5%
3,500 CULLEN/FROST BANKERS, INC. ......................... 199,281
1,304 ING GROEP NV, ADR .................................. 69,357
4,590 ZIONS BANCORPORATION ............................... 197,370
----------
466,008
----------
BUSINESS SERVICES--2.9%
3,500 CDI CORP.* ......................................... 161,875
6,500 SUNGARD DATA SYSTEMS, INC.* ........................ 222,218
----------
384,093
----------
COMPUTER SOFTWARE--5.4%
6,000 AUTODESK, INC. ..................................... 284,250
4,500 NETWORK ASSOCIATES, INC.* .......................... 290,813
3,750 WIND RIVER SYSTEMS* ................................ 146,718
----------
721,781
----------
COMPUTERS/COMPUTER HARDWARE--6.9%
7,000 BAY NETWORKS, INC.* ................................ 237,125
6,000 EMC CORP.* ......................................... 229,500
7,000 QUANTUM CORP.* ..................................... 175,875
4,000 STORAGE TECHNOLOGY CORP.* .......................... 273,000
----------
915,500
----------
CONSUMER PRODUCTS--1.2%
6,000 FURNITURE BRANDS INTERNATIONAL, INC.* .............. 164,250
----------
ELECTRONICS/ELECTRICAL EQUIPMENT--5.1%
5,000 BMC INDUSTRIES, INC. ............................... 97,188
3,000 LINEAR TECHNOLOGY CORP. ............................ 227,250
5,000 WATERS CORP.* ...................................... 247,187
2,500 XILINX, INC.* ...................................... 109,687
----------
681,312
----------
FINANCIAL SERVICES--3.6%
3,000 LEHMAN BROTHERS HOLDING, INC. ...................... 189,188
4,000 THE PMI GROUP, INC. ................................ 291,000
----------
480,188
----------
FOOD/BEVERAGE PRODUCTS--1.5%
6,000 COCA-COLA ENTERPRISES, INC. ........................ 198,375
----------
Shares Issuer Value
------ ------ -----
HEALTH CARE/HEALTH CARE SERVICES--10.8%
10,000 ASSISTED LIVING CONCEPTS* .......................... $ 186,250
6,000 CONCENTRA MANAGED CARE, INC.* ...................... 205,875
7,500 INTEGRATED HEALTH SERVICES, INC. ................... 254,531
6,750 TENET HEALTHCARE CORP.* ............................ 251,859
5,100 UNIVERSAL HEALTH SERVICES, INC., CLASS B* .......... 266,475
10,000 VENCOR, INC.* ...................................... 286,875
----------
1,451,865
----------
HOME BUILDING CONSTRUCTION--1.2%
5,690 LENNAR CORP. ....................................... 158,964
----------
INSURANCE--4.5%
8,000 RELIASTAR FINANCIAL CORP. .......................... 380,500
3,000 TRANSATLANTIC HOLDINGS, INC. ....................... 226,875
----------
607,375
----------
MANUFACTURING--5.3%
3,500 KENNAMETAL INC. .................................... 184,188
3,000 HARNISCHFEGER INDUSTRIES, INC. ..................... 106,125
4,000 PENTAIR, INC. ...................................... 164,750
9,000 UNITED DOMINION INDUSTRIES, LTD. ................... 258,750
----------
713,813
----------
MEDIA/ADVERTISING--1.4%
4,000 OMNICOM GROUP, INC. ................................ 183,000
----------
OIL & GAS--3.7%
7,000 BJ SERVICES CO.* ................................... 240,625
5,000 MURPHY OIL CORP. ................................... 249,688
----------
490,313
----------
PAPER/FOREST PRODUCTS--1.7%
7,000 BOISE CASCADE CORP. ................................ 233,188
----------
PIPELINES--2.1%
3,600 COLUMBIA GAS SYSTEM, INC. .......................... 274,725
----------
REAL ESTATE INVESTMENT TRUST--2.8%
6,600 OASIS RESIDENTIAL, INC. ............................ 141,488
10,000 SECURITY CAPITAL PACIFIC TRUST ..................... 229,375
----------
370,863
----------
RETAILING--6.4%
10,000 CORPORATE EXPRESS INC.* ............................ 101,250
2,000 CVS CORP. .......................................... 148,125
7,000 NIEMAN-MARCUS GROUP, INC. .......................... 260,313
4,000 PROFFITT'S, INC.* .................................. 135,500
5,000 STAGE STORES, INC.* ................................ 210,000
----------
855,188
----------
TELECOMMUNICATIONS--1.0%
5,000 ASPECT TELECOMMUNICATIONS CORP.* ................... 131,875
----------
TEXTILES--1.5%
4,000 LIZ CLAIBORNE, INC. ................................ 200,000
----------
See notes to financial statements.
<PAGE>
Capital Growth Portfolio (continued) page 11
Portfolio of Investments February 28, 1998 (unaudited)
[SWOOSH LOGO]
Shares Issuer Value
------ ------ -----
UTILITIES--4.6%
3,500 CMS ENERGY CORP. .................. $ 154,875
6,000 SIERRA PACIFIC RESOURCES .......... 215,250
7,500 TNP ENTERPRISES, INC. ............. 240,937
----------
611,062
----------
TOTAL COMMON STOCK
(COST $8,400,332) ................. 11,152,613
----------
Principal
Amount
(USD) Issuer Value
--------- ------ -----
SHORT-TERM INVESTMENTS--14.7%
(CERTIFICATE OF DEPOSIT--14.7%
$ 1,964,000 CANADIAN IMPERIAL BANK, 5.56%, 03/03/98
(COST $1,964,000) ..................... $ 1,964,000
-----------
TOTAL INVESTMENTS--98.3%
(COST $10,364,332) .................... $13,116,613
===========
See notes to financial statements.
<PAGE>
page 12 International Equity Portfolio
Portfolio of Investments February 28, 1998 (unaudited)
[SWOOSH LOGO]
Shares Issuer Value
------ ------ -----
LONG-TERM INVESTMENTS--83.7%
COMMON STOCK--83.2%
AUSTRALIA--0.5%
MULTI-MEDIA--0.1%
1,000 PUBLISHING & BROADCASTING LTD. ..................... $ 5,054
--------
DIVERSIFIED--0.2%
6,000 FUTURIS CORP., LTD. ................................ 7,124
2,000 SOUTHCORP LTD. ..................................... 7,382
--------
14,506
--------
FINANCIAL SERVICES--0.0%
1,000 FXF TRUST .......................................... 180
--------
FOOD/BEVERAGE PRODUCTS--0.1%
3,000 FOSTER'S BREWING GROUP LTD. ........................ 6,615
--------
OIL & GAS--0.1%
9,000 ENERGY EQUITY CORP. LTD.* .......................... 3,847
--------
30,202
--------
AUSTRIA--0.8%
OIL & GAS--0.8%
235 OMV AG ............................................. 28,604
175 SCHOELLER-BLECKMANN OILFIELD EQUIPMENT AG .......... 19,759
--------
48,363
--------
BRAZIL--5.9%
UTILITIES--1.9%
5,230 CENTRAIS ELECTRICAS BRASILEIRAS
SA-ELECTROBRAS, ADR ................................ 122,634
--------
TELECOMMUNICATIONS--4.0%
2,070 TELECOMUNICACOES BRASILEIROS SA, ADR ............... 253,834
--------
FINLAND--1.5%
ELECTRONICS/ELECTRICAL EQUIPMENT--1.2%
775 NOKIA AB, SER. A ................................... 77,589
--------
FOOD/BEVERAGE PRODUCTS--0.3%
115 RAISIO GROUP PLC ................................... 19,008
--------
473,065
--------
FRANCE--7.5%
APPLIANCES & HOUSEHOLD DURABLES--0.4%
900 MOULINEX ........................................... 22,559
--------
AUTOMOTIVE--1.1%
295 EQUIPMENT ET COMPOSANTS POUR L'INDUSTRIE
AUTOMOBILE ......................................... 69,095
--------
BANKING--2.4%
1,750 BANQUE NATIONALE DE PARIS .......................... 105,851
650 CREDIT COMMERCIAL DE FRANCE ........................ 48,087
--------
153,938
--------
COMPUTER SOFTWARE--1.2%
650 CAP GEMINI SOGETI SA ............................... 74,786
--------
ENTERTAINMENT/LEISURE--0.4%
1,000 PARC ASTERIX SA .................................... 25,575
--------
OIL & GAS--0.9%
500 SOCIETE NATIONAL ELF-AQUITANE ...................... 56,952
--------
Shares Issuer Value
------ ------ -----
FRANCE (cont'd)
TELECOMMUNICATIONS--1.1%
521 ALCATEL ALSTHOM (CIE GENERAL EL) ................... $ 67,822
--------
470,727
--------
GERMANY--9.7%
AIRLINES--0.8%
2,800 DEUTSCHE LUFTHANSA AG .............................. 53,949
--------
BANKING--2.6%
900 BAYERISCHE VEREINSBANK AG .......................... 56,165
2,415 DRESDNER BANK AG ................................... 109,570
--------
165,735
--------
CAPITAL GOODS--0.9%
100 MANNESMANN AG ...................................... 60,090
--------
CONSUMER PRODUCTS--0.9%
348 ADIDAS AG, ADR # ................................... 54,484
--------
DIVERSIFIED--1.3%
1,490 RWE AG ............................................. 82,429
--------
INSURANCE--3.2%
655 ALLIANZ AG HOLDING ................................. 206,363
--------
623,050
--------
GREECE--0.4%
CONSTRUCTION--0.4%
590 TITAN CEMENT CO., SA ............................... 27,914
--------
HONG KONG--1.5%
CONSTRUCTION--0.0%
1,000 CHEUNG KONG INFRASTRUCTURE ......................... 3,080
--------
DIVERSIFIED--0.5%
3,000 CITIC PACIFIC LTD. ................................. 11,624
3,000 HUTCHISON WHAMPOA .................................. 21,214
--------
32,838
--------
FINANCIAL SERVICES--0.3%
600 HSBC HOLDINGS PLC .................................. 17,359
--------
REAL ESTATE--0.7%
2,000 CHEUNG KONG (HOLDINGS) LTD. ........................ 14,014
2,000 CHINA RESOURCES ENTERPRISES LTD. ................... 4,366
1,000 HENDERSON LAND DEVELOPMENT COMPANY, LTD. ........... 5,218
14,080 HKR INTERNATIONAL, LTD. ............................ 10,548
1,000 NEW WORLD DEVELOPMENT COMPANY, LTD.* ............... 3,687
1,000 SUN HUNG KAI PROPERTIES LTD. ....................... 7,491
--------
45,324
--------
TELECOMMUNICATIONS--0.0%
800 HONG KONG TELECOMMUNICATIONS LTD. .................. 1,684
--------
100,285
--------
IRELAND--1.7%
CONSTRUCTION MATERIALS--0.7%
3,517 CRH PLC ............................................ 43,830
--------
COMPUTER SOFTWARE--0.3%
602 IONA TECHNOLOGIES PLC, ADR ......................... 17,759
--------
See notes to financial statements.
<PAGE>
International Equity Portfolio (continued) page 13
Portfolio of Investments February 28, 1998 (unaudited)
[SWOOSH LOGO]
Shares Issuer Value
------ ------ -----
IRELAND (cont'd)
REAL ESTATE--0.7%
7,534 GREEN PROPERTY PLC ................................. $ 45,316
----------
106,905
----------
ITALY--5.3%
CONSUMER PRODUCTS--0.8%
4,500 CSP INTERNATIONAL INDUSTRIA CALZE SPA* ............. 52,300
----------
INSURANCE--1.7%
2,800 ASSICURAZIONI GENERALI ............................. 80,024
10,000 INSTITUTO NAZIONALE DELLE ASSICURAZIONI,
ORDINARY SHARES .................................... 27,190
----------
107,214
----------
OIL & GAS--0.8%
9,000 SAIPEM SPA ......................................... 53,634
----------
TELECOMMUNICATIONS--2.0%
18,650 TELECOM ITALIA SPA ................................. 127,054
----------
340,202
----------
JAPAN--8.2%
AUTOMOTIVE--0.4%
1,000 TOYOTA MOTOR CORP. ................................. 27,678
----------
BANKING--1.1%
2,000 BANK OF TOKYO-MITSUBISHI ........................... 28,391
5,000 INDUSTRIAL BANK OF JAPAN, LTD. ..................... 41,239
----------
69,630
----------
COMPUTERS/COMPUTER HARDWARE--0.4%
2,000 FUJITSU LTD. ....................................... 22,523
----------
CONSUMER PRODUCTS--1.3%
4,000 CITIZEN WATCH CO. .................................. 29,026
2,000 KAO CORP. .......................................... 27,122
300 SONY CORP. ......................................... 27,122
----------
83,270
----------
ELECTRONICS/ELECTRICAL EQUIPMENT--0.9%
300 KEYENCE CORP. ...................................... 44,014
1,000 SUMITOMO ELECTRIC INDUSTRIES ....................... 14,592
----------
58,606
----------
ENTERTAINMENT/LEISURE--0.9%
600 NINTENDO COMPANY LTD. .............................. 55,196
----------
INSURANCE--0.4%
2,000 TOKIO MARINE & FIRE INSURANCE CO. .................. 22,681
----------
MACHINERY & ENGINEERING EQUIPMENT--0.4%
5,000 TOKYO KIKAI SEISAKUSHO ............................. 24,466
----------
MANUFACTURING--1.0%
1,000 FUJI MACHINE MANUFACTURING CO. ..................... 26,805
2,000 KOMORI CORP. ....................................... 35,370
----------
62,175
----------
PHARMACEUTICALS--0.4%
1,000 SANKYO CO. LTD. .................................... 26,884
----------
REAL ESTATE--0.6%
3,000 HANKYU REALTY ...................................... 17,606
2,000 MITSUBISHI ESTATE CO., LTD. ........................ 22,364
----------
39,970
----------
Shares Issuer Value
------ ------ -----
RETAIL--0.4%
700 MATSUMOTOKIYOSHI ................................... $ 26,313
----------
519,392
----------
MALAYSIA--0.1%
AGRICULTURAL PRODUCTION/SERVICES--0.0%
1,000 MALAKOFF BHD ....................................... 2,666
----------
CONSTRUCTION--0.1%
5,000 SUNWAY BUILDING TECHNOLOGY BHD ..................... 4,032
----------
CONSTRUCTION MATERIALS--0.0%
1,400 SUNGEI WAY HOLDINGS BHD ............................ 587
----------
FINANCIAL SERVICES--0.0%
2,000 SIME DARBY BHD ..................................... 2,597
----------
9,882
----------
MEXICO--1.5%
DIVERSIFIED--0.7%
8,274 ALFA, SA DE C.V., CLASS A .......................... 47,083
----------
FINANCIAL SERVICES--0.4%
10,000 GRUPO FINANCIERO BANAMEX ACCIVAL, SA DE CV
(BANACCI), SER. B .................................. 25,226
----------
HOME BUILDING CONSTRUCTION--0.4%
1,000 CORPORACION GEO, SA DE CV, SER. B, ADR* ............ 22,762
----------
95,071
----------
NETHERLANDS--3.4%
BUSINESS SERVICES--2.2%
4,083 BRUNEL INTERNATIONAL NV* ........................... 99,851
1,250 KONINKLIJKE AHHREND GROEP NV ....................... 41,024
----------
140,875
----------
RETAILING--1.2%
1,226 VENDEX INTERNATIONAL NV ............................ 77,294
----------
218,169
----------
PHILIPPINES--0.0%
UTILITIES--0.0%
700 MANILA ELECTRIC CO., CLASS B ....................... 2,094
----------
POLAND--1.6%
BANKING--1.3%
4,000 BANK INICJATYW GOSPODARCZYCH BIG SA, GDR* .......... 82,500
----------
ELECTRONICS/ELECTRICAL EQUIPMENT--0.3%
26,000 ELEKTRIM SPOLKA AKCYJNA SA ......................... 16,459
----------
98,959
----------
PORTUGAL--3.1%
BANKING--1.0%
2,000 BANCO COMERCIAL PORTUGUES, SA ...................... 66,329
----------
RETAILING--0.7%
1,275 JERONIMO MARTINS & FILHO, SGPS SA .................. 44,035
----------
TELECOMMUNICATIONS--1.4%
1,683 PORTUGAL TELECOM SA* ............................... 88,317
----------
198,681
----------
See notes to financial statements.
<PAGE>
page 14 International Equity Portfolio (continued)
Portfolio of Investments February 28, 1998 (unaudited)
[SWOOSH LOGO]
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
SINGAPORE--0.0%
REAL ESTATE--0.0%
2,000 WING TAI HOLDINGS LTD. ................................ $ 1,777
----------
SPAIN--3.4%
BANKING--2.5%
3,260 BANCO BILBAO VCIZCAYA, SA ............................. 149,054
69 BANCO PASTOR .......................................... 8,976
----------
158,030
----------
BUSINESS SERVICES--0.1%
854 PROSEGUR, CIA DE SEGURIDAD SA ......................... 9,526
----------
CONSTRUCTION--0.8%
1,604 ACS, ACTIVIDADES DE CONSTRUCCION Y SERVICIOS, SA ...... 49,866
----------
217,422
----------
SWITZERLAND--6.8%
BANKING--3.1%
125 UBS-UNION BANK OF SWITZERLAND ......................... 194,752
----------
HEALTH CARE/HEALTH CARE SERVICES--1.1%
40 NOVARTIS AG (REGISTERED) .............................. 72,980
----------
INSURANCE--1.1%
130 ZURICH VERSICHERUNGS-GESELLSCHAFT ..................... 70,881
----------
PHARMACEUTICALS--1.5%
80 ROCHE HOLDING AG ...................................... 93,672
----------
432,285
----------
THAILAND--0.1%
UTILITIES--0.1%
1,900 ELECTRICITY GENERATING PUBLIC COMPANY LTD. ............ 4,964
----------
UNITED KINGDOM--19.5%
AEROSPACE--1.8%
3,612 BRITISH AEROSPACE PLC ................................. 113,568
----------
AUTOMOTIVE--0.8%
2,000 GKN PLC, ORDINARY SHARES .............................. 48,579
----------
BANKING--4.0%
4,000 HSBC HOLDINGS PLC ..................................... 123,592
7,000 NATIONAL WESTMINSTER BANK ............................. 130,007
----------
253,599
----------
BUSINESS SERVICES--0.5%
2,509 DELPHI GROUP PLC ...................................... 33,159
----------
CONSTRUCTION--0.9%
4,644 BERKELEY GROUP PLC .................................... 54,144
----------
DIVERSIFIED--0.6%
10,057 COOKSON GROUP PLC ..................................... 36,958
----------
FINANCIAL SERVICES--2.6%
14,600 LEGAL & GENERAL GROUP PLC ............................. 163,844
----------
FOOD/BEVERAGE PRODUCTS--0.8%
6,500 DEVRO PLC ............................................. 49,433
----------
HOTELS/OTHER LODGING--0.5%
11,859 JARVIS HOTELS PLC* .................................... 31,659
----------
OIL & GAS--1.9%
12,435 SHELL TRANSPORT & TRADING PLC ......................... 89,196
5,865 BRITISH-BORNEO PETROLEUM SYNDICATE PLC ................ 33,827
----------
123,023
----------
Shares Issuer Value
------ ------ -----
UNITED KINGDOM (cont'd)
PRINTING & PUBLISHING--1.4%
9,000 JARVIS PORTER GROUP, PLC .............................. 87,281
----------
REAL ESTATE--1.5%
6,600 MEPC PLC .............................................. 65,257
17,904 TBI PLC ............................................... 28,324
----------
93,581
----------
RETAILING--0.7%
5,000 DIXONS GROUP PLC, ADR, ORDINARY SHARES ................ 44,741
----------
TELECOMMUNICATIONS--1.5%
10,750 VODAFONE GROUP PLC .................................... 95,661
----------
1,229,230
----------
VENEZUELA--0.7%
TELECOMMUNICATIONS--0.7%
1,000 COMPANIA ANONIMA NACIONAL TELEFONOS DE
VENEZUELA (CANTV), ADR ................................ 35,438
----------
TOTAL COMMON STOCK
(COST $4,812,943) ..................................... 5,284,077
----------
PREFERRED STOCK--0.4%
GERMANY--0.4%
HEALTH CARE/HEALTH CARE SERVICES--0.4%
400 FRESENIUS MEDICAL CARE AG ............................. 22,713
----------
MALAYSIA--0.0%
CONSTRUCTION--0.0%
4,000 SUNWAY BUILDING TECHNOLOGY, BHD., 3.0% RULES,
REDEEMABLE, UNSECURED ................................. 855
----------
TOTAL PREFERRED STOCK
(COST $23,851) ........................................ 23,568
----------
WARRANTS--0.0%
HONG KONG--0.0%
DIVERSIFIED--0.0%
1,600 GUANGDONG INVESTMENT LTD., EXPIRES 07/30/99 ........... 122
----------
MALAYSIA--0.0%
CONSTRUCTION--0.0%
1,600 SUNWAY BUILDING TECHNOLOGY, BHD., EXPIRE
07/30/01 .............................................. 307
----------
TOTAL WARRANTS
(COST $0) ............................................. 429
----------
Principal
Amount (USD) CORPORATE NOTES & BONDS--0.1%
------------
GERMANY--0.0%
$ 1,000 DAIMLER BENZ AG, 5.75% DUE JUNE 14, 2002 .............. 849
----------
Principal
Amount
(Italian Lire) ITALY--0.1%
-------------
BANKING--0.1%
L. 12,100,000 BANCO INTESA SPA 6.30% DUE JANUARY 1, 2003 ............ 6,769
----------
TOTAL CORPORATE NOTES & BONDS
(COST $7,529) ......................................... 7,618
----------
TOTAL INVESTMENTS
(COST $4,844,323) ..................................... $5,315,692
==========
</TABLE>
See notes to financial statements.
<PAGE>
Asset Allocation Portfolio page 15
Portfolio of Investments February 28, 1998 (unaudited)
[SWOOSH LOGO]
Shares Issuer Value
------ ------ -----
LONG-TERM INVESTMENTS--77.1%
COMMON STOCK--52.5%
AEROSPACE--0.6%
500 UNITED TECHNOLOGIES, CORP. ..................... $ 44,656
--------
AGRICULTURAL PRODUCTION/SERVICES--0.6%
700 CASE CORP. ..................................... 45,544
--------
AIRLINES--0.3%
200 AMR CORP.* ..................................... 25,312
--------
AUTOMOTIVE--2.0%
2,300 FORD MOTOR CO. ................................. 130,094
500 LEAR CORP.* .................................... 26,438
--------
156,532
--------
BANKING--2.5%
500 BANKAMERICA CORP. .............................. 38,750
400 CULLEN/FROST BANKERS, INC. ..................... 22,775
2,000 NATIONSBANK CORP. .............................. 137,000
--------
198,525
--------
BUSINESS SERVICES--0.3%
600 SUNGARD DATA SYSTEMS, INC.* .................... 20,512
--------
CHEMICALS--1.4%
1,200 DOW CHEMICAL CO. ............................... 109,800
--------
COMPUTER SOFTWARE--1.5%
2,100 COMPUTER ASSOCIATES INTERNATIONAL .............. 98,963
300 NETWORK ASSOCIATES, INC.* ...................... 19,388
--------
118,351
--------
COMPUTERS/COMPUTER HARDWARE--3.9%
3,700 EMC CORP.* ..................................... 141,525
1,000 INTERNATIONAL BUSINESS MACHINES CORP. .......... 104,438
200 STORAGE TECHNOLOGY CORP.* ...................... 13,650
900 SUN MICROSYSTEMS, INC.* ........................ 42,862
--------
302,475
--------
CONSUMER PRODUCTS--2.7%
2,200 PHILIP MORRIS COMPANIES, INC. .................. 95,563
800 RJR NABISCO HOLDINGS CORP. ..................... 27,650
500 UNILEVER NV, ADR ............................... 32,156
1,100 UNIVERSAL CORPORATION .......................... 52,250
--------
207,619
--------
DIVERSIFIED--2.5%
2,700 CANADIAN PACIFIC, LTD. ......................... 77,119
1,500 HONEYWELL, INC. ................................ 118,875
--------
195,994
--------
ELECTRONICS/ELECTRICAL EQUIPMENT--0.6%
600 LINEAR TECHNOLOGY CORP. ........................ 45,450
--------
ENTERTAINMENT/LEISURE--0.6%
800 CARNIVAL CORP., CLASS A ........................ 47,100
--------
FINANCIAL SERVICES--0.8%
400 FINOVA GROUP, INC. ............................. 22,000
600 MORGAN STANLEY, DEAN WITTER, DISCOVER AND CO. 41,813
--------
63,813
--------
Shares Issuer Value
------ ------ -----
FOOD/BEVERAGE PRODUCTS--1.9%
2,500 PEPSICO., INC. ................................. $ 91,406
500 QUAKER OATS CO. ................................ 26,938
300 RALSTON-RALSTON PURINA GROUP ................... 30,431
--------
148,775
--------
HEALTH CARE/HEALTH CARE SERVICES--3.6%
1,800 COLUMBIA/HCA HEALTHCARE CORP. .................. 48,825
1,100 CONCENTRA MANAGED CARE, INC.* .................. 37,744
3,600 HEALTHSOUTH CORP.* ............................. 97,200
2,500 TENET HEALTHCARE CORP.* ........................ 93,281
--------
277,050
--------
INSURANCE--4.7%
1,300 ACE, LTD. # .................................... 128,537
1,400 ALLSTATE CORP. ................................. 130,550
800 EQUITABLE COMPANIES, INC. ...................... 41,850
500 MGIC INVESTMENT CORP. .......................... 36,844
1,500 RELIANCE GROUP HOLDINGS, INC. .................. 25,500
--------
363,281
--------
MANUFACTURING--2.1 %
2,650 INGERSOLL-RAND CO. ............................. 126,206
400 PENTAIR, INC. .................................. 16,475
600 UNITED DOMINION INDUSTRIES, LTD. ............... 17,250
--------
159,931
--------
MEDIA/ADVERTISING--0.6 %
1,100 OMNICOM GROUP, INC. ............................ 50,325
--------
OFFICE/BUSINESS EQUIPMENT--0.7%
600 XEROX CORP. .................................... 53,212
--------
OIL & GAS--6.2%
600 BJ SERVICES CO.* ............................... 20,625
1,400 COASTAL CORP. .................................. 89,075
1,600 CONSOLIDATED NATURAL GAS CO. ................... 92,000
1,200 DRESSER INDUSTRIES, INC. ....................... 53,625
1,800 HALLIBURTON COMPANY ............................ 83,700
1,100 MOBIL CORP. .................................... 79,681
400 MURPHY OIL CORP. ............................... 19,975
800 TEXACO, INC. ................................... 44,650
--------
483,331
--------
PAPER/FOREST PRODUCTS--0.8%
600 BOISE CASCADE CORP. ............................ 19,987
1,200 WILLAMETTE INDUSTRIES, INC. .................... 44,325
--------
64,312
--------
PHARMACEUTICALS--1.8 %
500 BRISTOL-MYERS SQUIBB CO. ....................... 50,093
1,400 SMITHKLINE BEECHAM PLC, ADR .................... 86,625
--------
136,718
--------
PRINTING & PUBLISHING--0.6%
700 NEW YORK TIMES COMPANY, CLASS A ................ 45,806
--------
REAL ESTATE INVESTMENT TRUST--0.3%
1,128 SECURITY CAPITAL PACIFIC TRUST ................. 25,874
--------
See notes to financial statements.
<PAGE>
page 16 Asset Allocation Portfolio (continued)
Portfolio of Investments February 28, 1998 (unaudited)
[SWOOSH LOGO]
Shares Issuer Value
------ ------ -----
RETAILING--4.6%
2,500 COSTCO COMPANIES, INC.* ............................. $ 122,188
2,500 FEDERATED DEPARTMENT STORES* ........................ 117,188
2,400 KROGER CO.* ......................................... 101,400
800 NEIMAN-MARCUS GROUP, INC.* .......................... 29,750
---------
370,526
---------
TELECOMMUNICATIONS--2.1%
400 BELL ATLANTIC CORP. ................................. 35,900
1,500 BELLSOUTH CORP. ..................................... 91,500
500 SPRINT CORP. ........................................ 33,000
---------
160,400
---------
UTILITIES--2.2%
500 CMS ENERGY CORP. .................................... 22,125
1,600 FPL GROUP INC. ...................................... 92,900
600 SIERRA PACIFIC RESOURCES ............................ 21,525
800 TEXAS UTILITIES CO. ................................. 32,350
---------
168,900
---------
TOTAL COMMON STOCK
(COST $3,371,990) ................................... 4,090,124
---------
WARRANTS--
REAL ESTATE INVESTMENT TRUST--0.0%
54 SECURITY CAPITAL GROUP, SER. B, 09/18/98
(COST $0) ........................................... 199
---------
Principal
Amount (USD)
- ---------------
NON-CONVERTIBLE CORPORATE NOTES & BONDS--10.4%
AEROSPACE--1.4%
$100,000 LOCKHEED MARTIN CORP., 7.45%, 06/15/04 .............. 105,454
---------
BANKING--1.3%
100,000 BANCO LATINOAMERICAN (PANAMA), 7.20%, 05/28/02 ...... 101,330
---------
BROADCASTING--1.6%
100,000 TIME WARNER, INC., 9.15%, 02/01/23 .................. 123,072
---------
CONSTRUCTION/TRANSPORTATION--1.3%
100,000 ZHUHAI HIGHWAY CO., LTD., SER. A,# (YANKEE)
(CHINA), 9.13%, 07/01/06 ............................ 97,951
---------
FINANCIAL SERVICES--3.5%
100,000 CORP ANDINA DE FOMENTO (VENEZUELA), 7.38%,
07/21/00 ............................................ 101,870
100,000 GENERAL ELECTRIC CAPITAL CORP., MTN, 9.18%,
12/30/08 ............................................ 125,749
50,000 TERMOEMCALI FUNDING CORP.,# 10.13%, 12/15/14 ........ 51,955
---------
279,574
---------
OIL & GAS--1.3%
100,000 PETROZUATA FINANCE, INC.,# (VENEZUELA), 8.22%,
04/01/17 ............................................ 103,241
---------
TOTAL NON-CONVERTIBLE CORPORATE NOTES &
BONDS (COST $796,515) ............................... 810,622
---------
Principal
Amount (USD) Issuer Value
- -------------- ------ -----
ASSET BACKED SECURITIES--1.2%
$ 94,552 MID-STATE TRUST, SER. 6, CLASS A4, 7.79%, 07/01/35
(COST $94,640) ................................... $ 97,462
----------
U.S. TREASURY SECURITIES--11.7%
U.S. TREASURY NOTES,
100,000 5.63%, 12/31/99 ................................. 100,094
100,000 8.75%, 08/15/00 ................................. 107,234
345,000 7.88%, 11/15/04 ................................. 386,831
50,000 7.00%, 07/15/06 ................................. 54,203
125,000 8.50%, 02/15/20 ................................. 162,871
100,000 6.13%, 11/15/27 ................................. 102,797
----------
TOTAL U.S. TREASURY SECURITIES
(COST $877,433) .................................. 914,030
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS--1.3%
88,225 FEDERAL NATIONAL MORTGAGE ASSOCIATION, TBA,
10.50%, 06/01/27
(COST $98,076) ................................... 98,180
----------
TOTAL LONG-TERM INVESTMENTS
(COST $5,238,654) ................................ 6,010,617
----------
SHORT-TERM INVESTMENTS--22.3%
CERTIFICATE OF DEPOSIT--22.3%
1,736,000 CANADIAN IMPERIAL BANK, 5.56%, 03/02/98
(COST $1,736,000) ................................ 1,736,000
----------
TOTAL INVESTMENTS--99.4%
(COST $6,974,654) ................................ $7,746,617
==========
See notes to financial statements.
<PAGE>
page 17
[SWOOSH LOGO]
U.S. Government Income Portfolio
Portfolio of Investments
February 28, 1998 (unaudited)
Principal
Amount Issuer Value
--------- ------ -----
LONG-TERM INVESTMENTS--99.3%
U.S. TREASURY SECURITIES--26.8%
U.S. TREASURY NOTES & BONDS,
$ 500,000 6.13%, 09/30/00 ....................... $ 506,560
60,000 10.75%, 08/15/05 ....................... 78,160
400,000 8.50%, 02/15/20 ....................... 521,188
400,000 6.75%, 08/15/26 ....................... 441,436
----------
TOTAL U.S. TREASURY SECURITIES
(COST $1,472,540) ....................... 1,547,344
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS--57.5%
2,650,000 FEDERAL HOME LOAN BANK, DISCOUNT NOTE,
5.45%, 03/03/98 ......................... 2,649,598
450,000 FEDERAL NATIONAL MORTGAGE ASSOCIATION,
6.24%, 07/29/02 ......................... 457,664
200,000 STUDENT LOAN MORTGAGE ASSOCIATION,
7.00%, 03/03/98 ......................... 199,968
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $3,300,407) ....................... 3,307,230
----------
COLLATERALIZED MORTGAGE OBLIGATION--15.0%
866,289 GOVERNMENT NATIONAL MORTGAGE ASSOCIATION,
6.50%, 03/15/24
(COST $794,808) ......................... 860,606
----------
TOTAL INVESTMENTS
(COST $5,567,755) ....................... $5,715,180
==========
Money Market Portfolio
Portfolio of Investments
February 28, 1998 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount (USD) Issuer Value
- ------------ ------ -----
<S> <C> <C>
U.S. TREASURY SECURITIES--22.7%
$ 740,000 U.S. TREASURY BILL, 4.97%, 04/23/98
(COST $734,688) .......................................... $ 734,688
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS--25.2%
195,000 FEDERAL HOME LOAN BANK, DISCOUNT NOTE,
5.39%, 03/20/98 .......................................... 194,474
110,000 FEDERAL MORTGAGE CORP., DISCOUNT NOTE,
5.42%, 03/24/98 .......................................... 109,636
180,000 FEDERAL MORTGAGE CORP., DISCOUNT NOTE,
5.41%, 03/31/98 .......................................... 179,216
330,000 FEDERAL NATIONAL MORTGAGE ASSOCIATION,
DISCOUNT NOTE, 5.45%, 03/10/98 ........................... 329,600
----------
(COST $812,926) .......................................... 812,926
----------
COMMERCIAL PAPER--52.4%
150,000 BANCO RIO DE LA PLATA SA, (ARGENTINA),
5.51%, 03/13/98 .......................................... 149,747
133,000 BELL ATLANTIC CAPITAL FUNDING CORP.,
5.50%, 03/18/98 .......................................... 132,674
115,000 BRITISH COLUMBIA, PROVIDENCE OF CANADA,
(CANADA), 5.52%, 03/16/98 ................................ 114,753
150,000 CAROLINA POWER & LIGHT, 5.52%, 03/05/98 .................. 149,931
140,000 EKSPORTFINANS AS (NORWAY), 5.60%, 03/09/98 ............... 139,848
150,000 ELF AQUITANE FINANCE SA (FRANCE), 5.50%, 04/01/98 149,313
123,000 FORD MOTOR CREDIT CORP., 5.52%, 03/06/98 ................. 122,925
155,000 GENERAL ELECTRIC CAPITAL CORP., 5.49%, 03/04/98 .......... 154,953
150,000 MERRILL LYNCH & CO., INC., 5.49%, 03/02/98 ............... 150,000
150,000 MOTOROLA, INC., 5.50%, 03/06/98 .......................... 149,908
130,000 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORP., 5.50%, 03/09/98 ................................... 129,861
150,000 XEROX CORP., 5.55%, 03/18/98 ............................. 149,630
----------
(COST $1,693,543) ........................................ 1,693,543
----------
TOTAL INVESTMENTS--100.3%
(COST $3,241,157)** ...................................... $3,241,157
==========
</TABLE>
abrv description
ADR = American Depository Receipt
MTN = Medium Term Note
TBA = To be announced
# = Security may only be sold to qualified institutional buyers.
* = Non-income producing securities
** = The cost of securities is substantially the same for federal income tax
purposes.
See notes to financial statements.
<PAGE>
page 18 Statement of Assets and Liabilities
February 28, 1998 (unaudited)
[SWOOSH LOGO]
<TABLE>
<CAPTION>
Growth and Capital
Income Growth
Portfolio Portfolio
---------------- ----------------
<S> <C> <C>
ASSETS:
Investment securities, at value (Note 1) $ 18,016,901 $ 13,116,613
Cash 858 678
Foreign Currency (Cost $201,856) -- --
Other assets 321 258
Receivables:
Open forward foreign currency contracts -- --
Investment securities sold -- 278,128
Dividends and Interest 28,185 6,910
Expense reimbursement from Sub-administrator -- --
Portfolio shares sold 52,132 48,575
------------ ------------
TOTAL ASSETS 18,098,397 13,451,162
------------ ------------
LIABILITIES:
Payable for investment securities purchased -- --
Payable for Portfolio shares redeemed 69,592 72,690
Accrued liabilities: (Note 2)
Custody fees 12,137 10,407
Other 38,317 30,552
------------ ------------
TOTAL LIABILITIES 120,046 113,649
------------ ------------
NET ASSETS:
Paid in capital 14,414,874 9,846,800
Accumulated undistributed net investment income (loss) 22,826 25,305
Accumulated net realized gain (loss) on investment transactions 749,298 713,127
Net unrealized appreciation of investments 2,791,353 2,752,281
------------ ------------
NET ASSETS APPLICABLE TO INVESTORS'
BENEFICIAL INTERESTS $ 17,978,351 $ 13,337,513
============ ============
Shares of beneficial interest outstanding
($.001 par value; unlimited number of shares authorized) 1,213,613 850,208
Net asset value, redemption price per share and
maximum offering price per share $ 14.81 $ 15.69
Cost of investments $ 15,225,548 $ 10,364,332
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
International Asset U.S. Government Money
Equity Allocation Income Market
Portfolio Portfolio Portfolio Portfolio
--------------- --------------- ----------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment securities, at value (Note 1) $5,315,692 $ 7,746,617 $5,715,180 $3,241,157
Cash 857,819 11,596 42,116 462
Foreign Currency (Cost $201,856) 201,848 -- -- --
Other assets 15,033 133 79 72
Receivables:
Open forward foreign currency contracts 31 -- -- --
Investment securities sold 140,795 -- -- --
Dividends and Interest 7,295 36,244 30,051 --
Expense reimbursement from Sub-administrator 16,604 5,302 5,722 2,000
Portfolio shares sold 10,010 25,627 1,000 --
---------- ----------- ---------- ----------
TOTAL ASSETS 6,565,127 7,825,519 5,794,148 3,243,691
---------- ----------- ---------- ----------
LIABILITIES:
Payable for investment securities purchased 142,296 -- -- --
Payable for Portfolio shares redeemed 1,176 319 18,159 58
Accrued liabilities: (Note 2)
Custody fees 1,774 19,646 15,072 1,053
Other 66,051 11,750 6,758 10,749
---------- ----------- ---------- ----------
TOTAL LIABILITIES 211,297 31,715 39,989 11,860
---------- ----------- ---------- ----------
NET ASSETS:
Paid in capital 5,988,968 6,767,388 5,497,690 3,231,849
Accumulated undistributed net investment income (loss) (145) 37,130 114,919 410
Accumulated net realized gain (loss) on investment transactions (105,301) 217,323 (5,875) (428)
Net unrealized appreciation of investments 470,308 771,963 147,425 --
---------- ----------- ---------- ----------
NET ASSETS APPLICABLE TO INVESTORS'
BENEFICIAL INTERESTS $6,353,830 $ 7,793,804 $5,754,159 $3,231,831
========== =========== ========== ==========
Shares of beneficial interest outstanding
($.001 par value; unlimited number of shares authorized) 604,085 672,086 598,144 3,231,835
Net asset value, redemption price per share and
maximum offering price per share $ 10.52 $ 11.60 $ 9.62 $ 1.00
Cost of investments $4,844,323 $ 6,974,654 $5,567,755 $3,241,157
---------- ----------- ---------- ----------
</TABLE>
See notes to financial statements.
<PAGE>
Statement of Operations page 19
For the six months ended February 28, 1998 (unaudited)
[SWOOSH LOGO]
<TABLE>
<CAPTION>
Growth and Capital
Income Growth
Portfolio Portfolio
------------- -------------
<S> <C> <C>
INVESTMENT INCOME (NOTE 1B):
Interest $ 37,294 $ 62,977
Dividends 104,989 41,793
Foreign taxes withheld (766) --
---------- ----------
TOTAL INVESTMENT INCOME 141,517 104,770
---------- ----------
EXPENSES:
Investment advisory fees (Note 2) 47,422 36,188
Administration fees (Note 2) 15,807 12,063
Accounting fees -- --
Custodian fees 22,747 22,749
Professional fees 18,538 14,094
Trustees fees and expenses 395 302
Miscellaneous expenses 29,451 17,231
---------- ----------
TOTAL EXPENSES 134,360 102,627
Less amounts waived (Note 2E) 63,229 48,250
Less amounts borne by VFD (Note 2) -- --
---------- ----------
NET EXPENSES 71,131 54,377
---------- ----------
NET INVESTMENT INCOME (LOSS) 70,386 50,393
---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON:
Investment transactions 1,464,247 1,146,548
Foreign currency transactions -- --
CHANGE IN NET UNREALIZED APPRECIATION ON:
Investments 545,093 275,994
Foreign currency contracts and foreign currency translation -- --
---------- ----------
Net realized and unrealized gain (loss) 2,009,340 1,422,542
---------- ----------
Net increase in net assets from operations $2,079,726 $1,472,935
========== ==========
</TABLE>
<TABLE>
<CAPTION>
International Asset U.S. Government Money
Equity Allocation Income Market
Portfolio Portfolio Portfolio Portfolio
--------------- ------------ ----------------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE 1B):
Interest $ 9,232 $109,667 $148,290 $100,516
Dividends 21,811 26,422 -- --
Foreign taxes withheld (3,501) (257) -- --
--------- -------- -------- --------
TOTAL INVESTMENT INCOME 27,542 135,832 148,290 100,516
--------- -------- -------- --------
EXPENSES:
Investment advisory fees (Note 2) 23,041 19,105 11,462 4,550
Administration fees (Note 2) 5,760 6,948 4,585 3,641
Accounting fees 32,232 -- -- --
Custodian fees 7,200 27,520 25,303 14,738
Professional fees 7,526 5,554 2,995 8,122
Trustees fees and expenses 144 174 115 91
Miscellaneous expenses 1,984 6,514 952 3,989
--------- -------- -------- --------
TOTAL EXPENSES 77,887 65,815 45,412 35,131
Less amounts waived (Note 2E) 28,819 26,053 16,047 8,191
Less amounts borne by VFD (Note 2) 17,387 10,236 11,026 16,930
--------- -------- -------- --------
NET EXPENSES 31,681 29,526 18,339 10,010
--------- -------- -------- --------
NET INVESTMENT INCOME (LOSS) (4,139) 106,306 129,951 90,506
--------- -------- -------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON:
Investment transactions 7,927 310,905 (4,875) (411)
Foreign currency transactions (63,439) -- -- --
CHANGE IN NET UNREALIZED APPRECIATION ON:
Investments 440,030 190,179 113,832 --
Foreign currency contracts and foreign currency translation 11,375 -- -- --
--------- -------- -------- --------
Net realized and unrealized gain (loss) 395,893 501,084 108,957 (411)
--------- -------- -------- --------
Net increase in net assets from operations $ 391,754 $607,390 $238,908 $ 90,095
========= ======== ======== ========
</TABLE>
See notes to financial statements.
<PAGE>
page 20 Statement of Changes in Net Assets
For the periods indicated (unaudited)
[SWOOSH LOGO]
<TABLE>
<CAPTION>
Growth and Income Capital Growth
Portfolio Portfolio
------------------------------- -------------------------------
09/01/97 09/01/96 09/01/97 09/01/96
Through Through Through Through
02/28/98 08/31/97 02/28/98 08/31/97
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income $ 70,386 $ 136,850 $ 50,393 $ 63,795
Net realized gain (loss) on investment and
foreign currency transactions 1,464,247 1,488,185 1,146,548 790,892
Change in net unrealized appreciation on
investments and foreign currency transactions 545,093 1,876,210 275,994 1,575,253
------------ ------------ ------------ ------------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS 2,079,726 3,501,245 1,472,935 2,429,940
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (152,413) (100,605) (75,294) (57,567)
Net realized gain on investment transactions (2,095,439) (1,052,999) (1,086,898) (1,021,229)
------------ ------------ ------------ ------------
(2,247,852) (1,153,604) (1,162,192) (1,078,796)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) FROM CAPITAL
SHARE TRANSACTIONS 3,144,810 4,572,685 653,474 3,112,197
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS 2,976,684 6,920,326 964,217 4,463,341
NET ASSETS:
Beginning of period 15,001,667 8,081,341 12,373,296 7,909,955
------------ ------------ ------------ ------------
End of period $ 17,978,351 $ 15,001,667 $ 13,337,513 $ 12,373,296
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
U.S.
Government
International Equity Asset Allocation Income
Portfolio Portfolio Portfolio
----------------------------- ---------------------------- --------------
09/01/97 09/01/96 09/01/97 09/01/96 09/01/97
Through Through Through Through Through
02/28/98 08/31/97 02/28/98 08/31/97 02/28/98
-------------- -------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income ($ 4,139) $ 94,650 $ 106,306 $ 168,248 $ 129,951
Net realized gain (loss) on investment and
foreign currency transactions (55,512) 229,815 310,905 399,608 (4,875)
Change in net unrealized appreciation on
investments and foreign currency transactions 451,405 23,702 190,179 466,666 113,832
--------- ---------- ---------- ---------- ----------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS 391,754 348,167 607,390 1,034,522 238,908
--------- ---------- ---------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (103,835) (53,064) (188,322) (118,324) (152,142)
Net realized gain on investment transactions (217,881) (346,955) (398,930) (611,347) --
--------- ---------- ---------- ---------- ----------
(321,716) (400,019) (587,252) (729,671) (152,142)
--------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) FROM CAPITAL
SHARE TRANSACTIONS 863,250 1,571,627 1,491,523 1,944,075 1,866,001
--------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS 933,288 1,519,775 1,511,661 2,248,926 1,952,767
NET ASSETS:
Beginning of period 5,420,542 3,900,767 6,282,143 4,033,217 3,801,392
--------- ---------- ---------- ---------- ----------
End of period $6,353,830 $5,420,542 $7,793,804 $6,282,143 $5,754,159
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
U.S. Government
Income Money Market
Portfolio Portfolio
-------------- ---------------------------
09/01/96 09/01/97 09/01/96
Through Through Through
08/31/97 02/28/98 08/31/97
-------------- --------------- -------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income $ 200,891 $ 90,506 $ 161,224
Net realized gain (loss) on investment and
foreign currency transactions (1,000) (411) (11)
Change in net unrealized appreciation on
investments and foreign currency transactions 62,226 -- --
---------- ------------- ----------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS 262,117 90,095 161,213
---------- ------------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (175,708) (90,102) (161,224)
Net realized gain on investment transactions (107,377) -- --
---------- ------------- ----------
(283,085) (90,102) (161,224)
---------- ------------- ----------
NET INCREASE (DECREASE) FROM CAPITAL
SHARE TRANSACTIONS 828,347 (1,622,477) 1,903,996
---------- ------------- ----------
NET INCREASE (DECREASE) IN NET ASSETS 807,379 (1,622,484) 1,903,985
NET ASSETS:
Beginning of period 2,994,013 4,854,315 2,950,330
---------- ------------- ----------
End of period $3,801,392 $ 3,231,831 $4,854,315
========== ============= ==========
</TABLE>
See notes to financial statements.
<PAGE>
Financial Highlights (unaudited) page 21
[SWOOSH LOGO]
<TABLE>
<CAPTION>
Growth and Income
Portfolio
-----------------------------------------------
09/01/97 Year Year 03/1/95*
Through Ended Ended through
02/28/98 08/31/97 08/31/96 08/31/95
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 15.16 $ 12.74 $ 11.48 $ 10.00
-------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.043 0.149 0.294 0.110
Net Gains or Losses on Investments
(both realized and unrealized) 1.789 3.991 1.516 1.370
-------- -------- ------- --------
TOTAL FROM INVESTMENT OPERATIONS 1.832 4.140 1.810 1.480
-------- -------- ------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income 0.130 0.150 0.300 --
Distributions from capital gains 2.052 1.570 0.250 --
-------- -------- ------- --------
TOTAL DISTRIBUTIONS 2.182 1.720 0.550 --
-------- -------- ------- --------
NET ASSET VALUE, END OF PERIOD $ 14.81 $ 15.16 $ 12.74 $ 11.48
======== ======== ======= ========
TOTAL RETURN 13.29% 35.53% 16.24% 14.80%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000 omitted) $17,978 $15,002 $ 8,081 $ 6,247
Ratios to Average Net Assets#:
Ratio of expenses 0.90% 0.90% 0.90% 0.90%
Ratio of net investment income 0.89% 1.18% 1.71% 2.14%
Ratio of expenses without waivers and
assumption of expenses 1.70% 1.70% 1.98% 1.80%
Ratio of net investment income without
waivers and assumption of expenses 0.09% 0.38% 0.63% 1.24%
Portfolio Turnover Rate 57% .89% 129% 32%
Average commission rate paid** $0.0598 $0.0609 $.0599 --
</TABLE>
<TABLE>
<CAPTION>
Capital Growth International Equity
Portfolio Portfolio
------------------------------------------------- -------------------------
09/01/97 Year Year 03/1/95* 09/01/97 Year
Through Ended Ended through Through Ended
02/28/98 08/31/97 08/31/96 08/31/95 02/28/98 08/31/97
----------- ------------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 15.52 $ 13.84 $ 11.90 $ 10.00 $ 10.45 $ 10.59
-------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.057 0.088 0.158 0.055 (0.007) 0.190
Net Gains or Losses on Investments
(both realized and unrealized) 1.639 3.422 2.139 1.845 0.634 0.650
-------- ------- ------- -------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 1.696 3.510 2.297 1.900 0.627 0.840
-------- ------- ------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income 0.090 0.100 0.142 -- 0.175 0.130
Distributions from capital gains 1.436 1.730 0.215 -- 0.382 0.850
-------- ------- ------- -------- ------- -------
TOTAL DISTRIBUTIONS 1.526 1.830 0.357 -- 0.557 0.980
-------- ------- ------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 15.69 $ 15.52 $ 13.84 $ 11.90 $ 10.52 $ 10.45
======== ======= ======= ======== ======= =======
TOTAL RETURN 11.94% 27.27% 19.66% 19.00% 6.56% 8.27%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000 omitted) $13,338 $12,373 $ 7,910 $ 6,329 $ 6,354 $ 5,421
Ratios to Average Net Assets#:
Ratio of expenses 0.90% 0.90% 0.90% 0.90% 1.09% 1.11%
Ratio of net investment income 0.84% 0.64% 0.97% 1.04% (0.14%) 1.96%
Ratio of expenses without waivers and
assumption of expenses 1.70% 1.70% 1.97% 1.80% 2.68% 2.99%
Ratio of net investment income without
waivers and assumption of expenses 0.04% (0.16%) (0.09)% 0.14% (1.73%) 0.08%
Portfolio Turnover Rate 38% 54% 107% 28% 68% 158%
Average commission rate paid** $0.0597 $0.0594 $ .0604 -- $0.0352 $0.0282
</TABLE>
<TABLE>
<CAPTION>
International Equity
Portfolio
-----------------------
Year 03/01/95*
Ended through
08/31/96 08/31/95
------------ ----------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 10.89 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.216 0.101
Net Gains or Losses on Investments
(both realized and unrealized) 0.034 0.789
------- -------
TOTAL FROM INVESTMENT OPERATIONS 0.250 0.890
------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income 0.250 --
Distributions from capital gains 0.300 --
------- -------
TOTAL DISTRIBUTIONS 0.550 --
------- -------
NET ASSET VALUE, END OF PERIOD $ 10.59 $ 10.89
======= =======
TOTAL RETURN 2.42% 8.90%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000 omitted) $ 3,901 $ 5,482
Ratios to Average Net Assets#:
Ratio of expenses 1.10% 1.09%
Ratio of net investment income 0.82% 1.92%
Ratio of expenses without waivers and
assumption of expenses 4.22% 2.90%
Ratio of net investment income without
waivers and assumption of expenses (2.30)% 0.11%
Portfolio Turnover Rate 200% 75%
Average commission rate paid** $.0631 --
</TABLE>
<TABLE>
<CAPTION>
Asset Allocation
Portfolio
--------------------------------------------------
09/01/97 Year Year 03/01/95*
Through Ended Ended through
02/28/98 08/31/97 08/31/96 08/31/95
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 11.57 $ 11.15 $ 11.04 $ 10.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.136 0.328 0.657 0.205
Net Gains or Losses on Investments
(both realized and unrealized) 0.858 1.942 0.488 0.835
------- ------- ------- --------
TOTAL FROM INVESTMENT OPERATIONS 0.994 2.270 1.145 1.040
------- ------- ------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income 0.300 0.300 0.670 --
Distributions from capital gains 0.664 1.550 0.365 --
------- ------- ------- --------
TOTAL DISTRIBUTIONS 0.964 1.850 1.035 --
------- ------- ------- --------
NET ASSET VALUE, END OF PERIOD $ 11.60 $ 11.57 $ 11.15 $ 11.04
======= ======= ======= ========
TOTAL RETURN 8.98% 22.61% 10.90% 10.40%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000 omitted) $ 7,794 $ 6,282 $ 4,033 $ 5,546
Ratios to Average Net Assets#:
Ratio of expenses 0.85% 0.85% 0.85% 0.85%
Ratio of net investment income 3.06% 3.28% 3.18% 3.86%
Ratio of expenses without waivers and
assumption of expenses 1.75% 2.03% 2.33% 1.65%
Ratio of net investment income without
waivers and assumption of expenses 2.16% 2.10% 1.71% 3.06%
Portfolio Turnover Rate 44% 122% 155% 45%
Average commission rate paid** $0.0598 $0.0594 $ .0598 --
</TABLE>
<TABLE>
<CAPTION>
U.S. Government Income Money Market
Portfolio Portfolio
--------------------------------------------- --------------------------------
09/01/97 Year Year 03/01/95* 09/01/97 Year Year 03/01/95*
Through Ended Ended through Through Ended Ended through
02/28/98 08/31/97 08/31/96 08/31/95 02/28/98 08/31/97 08/31/96 08/31/95
---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 9.40 $ 9.53 $ 10.69 $ 10.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ -------- ------- ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.158 0.522 1.173 0.322 0.025 0.048 0.050 0.028
Net Gains or Losses on Investments
(both realized and unrealized) 0.368 0.218 ( 0.858) 0.368 -- -- -- --
------ ------ --------- -------- ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.526 0.740 0.315 0.690 0.025 0.048 0.050 0.028
------ ------ --------- -------- ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income 0.306 0.540 1.134 -- 0.025 0.048 0.050 0.028
Distributions from capital gains -- 0.330 0.341 -- -- -- -- --
------ ------ --------- -------- ------ ------ ------ ------
TOTAL DISTRIBUTIONS 0.306 0.870 1.475 -- 0.025 0.048 0.050 0.028
------ ------ --------- -------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 9.62 $ 9.40 $ 9.53 $ 10.69 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ========= ======== ====== ====== ====== ======
TOTAL RETURN 5.63% 8.11% 2.62% 6.90% 2.46% 4.93% 5.15% 2.79%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000 omitted) $5,754 $3,801 $ 2,994 $ 5,390 $3,232 $4,854 $2,950 $5,422
Ratios to Average Net Assets#:
Ratio of expenses 0.80% 0.80% 0.80% 0.80% 0.55% 0.55% 0.55% 0.55%
Ratio of net investment income 5.67% 5.91% 6.06% 6.19% 4.97% 4.84% 5.10% 5.46%
Ratio of expenses without waivers and
assumption of expenses 1.74% 1.50% 1.79% 1.62% 1.46% 1.46% 1.74% 1.21%
Ratio of net investment income without
waivers and assumption of expenses 4.73% 5.21% 5.08% 5.37% 4.06% 3.93% 3.90% 4.80%
Portfolio Turnover Rate 0% 40% 83% 46% -- -- -- --
Average commission rate paid** -- -- -- -- -- -- -- --
</TABLE>
* Commencement of operations.
# Short periods have been annualized.
** Price per share required for periods commencing after 9/1/95.
See notes to financial statements.
<PAGE>
page 22 Notes to Financial Statements (unaudited)
[SWOOSH LOGO]
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES--Mutual Fund Variable
Annuity Trust (the "Trust") was organized on April 14, 1994 as a
Massachusetts business trust, and is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. The
Trust was established to provide a funding medium for variable annuity
contracts issued by life insurance companies. Shares of the Trust are issued
only to insurance company separate accounts in connection with variable
annuity contracts. The Trust issues six separate series of shares (the
"Portfolio(s)") each of which represents a separately managed portfolio of
securities with its own investment objectives. The Portfolios are the Growth
and Income Portfolio ("GIP"), Capital Growth Portfolio ("CGP"), International
Equity Portfolio ("IEP"), Asset Allocation Portfolio ("AAP"), U.S. Government
Income Portfolio ("USGIP"), and Money Market Portfolio ("MMP").
THE FOLLOWING IS A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOLLOWED BY THE
PORTFOLIOS:
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 in the financial statements.
Actual results could differ from those estimates.
A. Valuation of Investments--Equity securities and options are valued at the
last sale price on the exchange on which they are primarily traded,
including the NASDAQ National Market. Securities for which sale prices are
not available and other over-the-counter securities are valued at the last
quoted bid price. Bonds and other fixed income securities (other than
short-term obligations), including listed issues, are valued on the basis
of valuations furnished by a pricing service. In making such valuations,
the pricing service utilizes both dealer-supplied valuations and
electronic data processing techniques that take into account appropriate
factors such as institutional-sized trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance upon
quoted prices. Short-term obligations are valued at amortized cost if
acquired with fewer than 61 days to maturity, or at value, based on quoted
exchange or over-the-counter prices, until the 61st day prior to maturity
and thereafter by amortizing the value on the 61st day to par at maturity.
Portfolio securities for which there are no such quotations or valuations
are valued at fair value as determined in good faith by or at the
direction of the Trustees.
B. Security Transactions and Investment Income-- Investment transactions are
accounted for on the trade date (the date the order to buy or sell is
executed). Securities gains and losses are calculated on the identified
cost basis. Interest income is accrued as earned. Dividend income is
recorded on the ex-dividend date.
C. Repurchase agreements--It is the portfolios' policy that all repurchase
agreements are fully collateralized by U.S. Treasury and Government agency
securities. All collateral is held by the Trust's custodian bank,
sub-custodian or a bank with which the custodian bank has entered into a
sub-custodian agreement or is segregated in the Federal Reserve Book Entry
System. In connection with transactions in repurchase agreements, if the
seller defaults and the value of the collateral declines, or if the seller
enters into an insolvency proceeding, realization of the collateral by the
Trust may be delayed or limited.
D. Futures Contracts--When a portfolio enters into a futures contract, it
makes an initial margin deposit in a segregated account, either in cash or
liquid securities. Thereafter, the futures contract is marked to market
and the portfolio makes (or receives) additional cash payments daily to
the broker. Changes in the value of the contract are recorded as
unrealized appreciation/depreciation until the contract is closed or
settled.
The Portfolios may enter into futures contracts only on exchanges or
boards of trade. The exchange or board of trade acts as the counterparty
to each futures transaction, therefore, the Portfolio's credit risk is
limited to failure of the exchange or board of trade.
The IEP may invest a portion of its liquid assets in long stock index
futures contracts to more fully participate in the market. Use of futures
contracts subject the Portfolio to risk of loss up to the amount of the
value of the contract.
As of February 28, 1998, the IEP had no outstanding futures contracts.
E. Foreign Currency Translations--The books and records of the Portfolios are
maintained in U.S. dollars. Foreign currency amounts are translated into
U.S. dollars at the official exchange rates, or at the
<PAGE>
Notes to Financial Statements (unaudited) page 23
[SWOOSH LOGO]
mean of the current bid and asked prices of such currencies against the
U.S. dollar last quoted by a major bank on the following basis:
(1) Market value of investment securities, other assets and liabilities:
at the closing rate of exchange at the balance sheet date.
(2) Purchases and sales of investment securities and income and expenses:
at the rates of exchange prevailing on the respective dates of such
transactions.
Reported realized foreign exchange gains or losses arise from disposition
of foreign currency, currency gains or losses realized between the trade
and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the portfolios' books on the transaction date and the U.S.
dollar equivalent of the amounts actually received or paid. Unrealized
foreign exchange gains and losses arise from changes (due to the changes
in the exchange rate) in the value of foreign currency and other assets
and liabilities denominated in foreign currencies which are held at period
end.
F. Forward Foreign Currency Exchange Contracts--A forward foreign currency
contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date. Each day the forward contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market." When the forward contract is closed, or the
delivery of the currency is made or taken, the portfolio records a
realized gain or loss equal to the difference between the proceeds from
(or cost of) the closing transaction and the portfolio's basis in the
contract. The portfolios are subject to off balance sheet risk to the
extent of the value of the contract for purchases of currency and in an
unlimited amount for sales of currency.
G. Federal Income Tax Status--It is the Trust'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.
H. Dividends and Distributions to Shareholders--The portfolios record
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 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. 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.
I. Expenses--Direct expenses of a portfolio are charged to the respective
Portfolio and general Trust expenses are allocated on the basis of
relative net assets or on another reasonable basis.
2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A. Investment Advisory Fees--The Chase Manhattan Bank ("Chase"), a direct
wholly-owned subsidiary of the Chase Manhattan Corporation, is the
Portfolios' investment advisor (the "Advisor") and custodian (the
"Custodian"). The Advisor manages the assets of the Portfolios pursuant to
an Advisory Agreement and, for such services, is paid an annual fee
computed daily and paid monthly based on an annual rate equal to 0.80% of
the International Equity Portfolio's, 0.60% of the Capital Growth and
Growth and Income Portfolios', 0.55% of the Asset Allocation Portfolio's,
0.50% of the U.S. Government Income Portfolio's and 0.25% of the Money
Market Portfolio's average daily net assets. The Advisor voluntarily
waived all its fees.
Chase Asset Management, Inc. ("CAM"), a registered investment advisor, is
the sub-investment advisor to each Portfolio pursuant to a Sub-Investment
Advisory Agreement between CAM and Chase. CAM is a wholly owned subsidiary
of Chase and is entitled to receive a fee, payable by Chase from its
advisory fee, at an annual rate equal to 0.30% of the Growth and Income
and Capital Growth Portfolio's, 0.25% of the Asset Allocation and U.S.
Government Income Portfolio's and 0.10% of the Money Market Portfolio's
average daily net assets.
<PAGE>
page 24
Notes to Financial Statements (unaudited)
[SWOOSH LOGO]
Chase Asset Management (London) Limited (CAM London), a registered
investment advisor, is the sub-investment advisor to the International
Equity Portfolio pursuant to a Sub-Investment Advisory Agreement between
CAM London and Chase. CAM London is a wholly owned subsidiary of Chase and
is entitled to receive a fee, payable by Chase from its advisory fee, at
an annual rate equal to 0.40% of the average daily net assets of the
International Equity Portfolio.
B. Administration Fee--Pursuant to an Administration Agreement, Chase (the
"Administrator") provides certain administration services to the
Portfolios. For these services, the Administrator receives from each
Portfolio a fee computed at an annual rate equal to 0.05% of the
respective Portfolio's average daily net assets. The Administrator
voluntarily waived all of its fees.
C. Sub-Administration Fees--Pursuant to a Sub-administration Agreement, Vista
Fund Distributors, Inc. ("VFD" or the "Sub-administrator"), an indirect
wholly-owned subsidiary of BISYS Group Inc., provides certain
sub-administration services to the Portfolios, including providing
officers, clerical staff and office space for an annual fee of 0.15% of
the average daily net assets of each Portfolio. The Sub-administrator
voluntarily waived all of its fees.
D. Waivers of Fees--For the six months ended February 28, 1998, the
Administrator and Advisor voluntarily waived all fees as shown in the
Statement of Operations, and the Sub-administrator assumed expenses for
the portfolios as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
U.S.
Growth and Capital International Asset Government Money
Income Growth Equity Allocation Income Market
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
---------- --------- ------------- ---------- ---------- ---------
$ -- $ -- $ 17,387 $ 10,236 $ 11,026 $ 16,930
----- ---------- -------------- ----------- ----------- ---------
</TABLE>
E. Other--Chase provides portfolio custody and fund accounting services for
all of the Portfolios, with the exception of the IEP for which it provides
only the custody services. Compensation for such services from Chase are
presented in the Statement of Operations as Custodian fees.
The Trust has adopted an unfunded noncontributory defined benefit pension
plan covering all independent trustees of the Trust who will have served
as an independent trustee for at least five years at the time of
retirement. Benefits under this plan are based on compensation and years
of service. Pension expenses for the six months ended February 28, 1998,
included in Trustees Fees and Expenses in the Statement of Operations, and
accrued pension liability included in other accrued liabilities in the
Statement of Assets and Liabilities were as follows:
Accrued
Pension Pension
Portfolio: Expenses Liability
-------- ---------
Growth and Income Portfolio $ 159 $ 917
Capital Growth Portfolio 125 735
International Equity Portfolio 59 349
Asset Allocation Portfolio 67 380
U.S. Government Income Portfolio 42 229
Money Market Portfolio 34 204
3. INVESTMENT TRANSACTIONS--For the six months ended February 28, 1998,
purchases and sales of investments (excluding short-term investments) were
as follows:
<TABLE>
<CAPTION>
U.S.
Growth Capital Intl. Asset Government
& Income Growth Equity Allocation Income
Portfolio Portfolio Portfolio Portfolio Portfolio
---------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Purchases (excluding
U.S. Government) $9,122,718 $3,710,242 $3,361,156 $ 2,331,633 $ --
Sales (excluding
U.S. Government) 8,714,166 4,833,822 3,608,802 2,273,162 --
Purchases of
U.S. Government -- -- -- 257,925 --
Sales of
U.S. Government -- -- -- 814,128 400,000
</TABLE>
4. FEDERAL INCOME TAX MATTERS--For Federal income tax purposes, the cost and
unrealized appreciation/(depreciation) in value of the investment
securities at February 28, 1998 are as follows:
<TABLE>
<CAPTION>
U.S.
Growth Capital Intl. Asset Government
& Income Growth Equity Allocation Income
Portfolio Portfolio Portfolio Portfolio Portfolio
----------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Aggregate Cost $15,225,548 $10,364,332 $4,844,323 $ 6,974,654 $ 5,567,755
----------- ----------- ---------- ----------- -----------
Gross Unrealized
Appreciation 2,891,119 2,926,355 712,017 808,765 151,641
Gross Unrealized
Depreciation (99,766) (174,074) (240,647) (36,802) (4,216)
----------- ----------- ---------- ----------- -----------
NET UNREALIZED
APPRECIATION
(DEPRECIATION) $ 2,791,353 $ 2,752,281 $ 471,370 $ 771,963 $ 147,425
=========== =========== ========== =========== ===========
</TABLE>
<PAGE>
Notes to Financial Statements (unaudited) page 25
[SWOOSH LOGO]
5. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST--Transactions in shares of
beneficial interest for the periods presented were as follows:
<TABLE>
<CAPTION>
Growth and Income Portfolio
09/01/97
Through Year Ended
02/28/98 August 31, 1997
--------------------------- ----------------------------
Amount Shares Amount Shares
------------ ------- ---------- ------
<S> <C> <C> <C> <C>
Shares sold $ 3,691,722 242,836 $ 5,749,214 426,540
Shares issued in reinvestment
of distributions 2,247,852 162,983 1,153,604 93,214
Shares redeemed (2,794,764) (181,654) (2,330,133) (164,444)
------------- --------- ------------- ---------
Net increase (decrease) in
Trust shares outstanding $ 3,144,810 224,165 $ 4,572,685 355,310
============= ========= ============= =========
</TABLE>
<TABLE>
<CAPTION>
Capital Growth Portfolio
09/01/97
Through Year Ended
02/28/98 August 31, 1997
----------------------------- -----------------------------
Amount Shares Amount Shares
------------- --------- ------------- ---------
<S> <C> <C> <C> <C>
Shares sold $ 2,138,671 137,064 $ 3,889,436 271,956
Shares issued in reinvestment
of distributions 1,162,192 81,196 1,078,795 78,724
Shares redeemed (2,647,389) (165,087) (1,856,034) (125,230)
------------- --------- ------------- ---------
Net increase (decrease) in
Trust shares outstanding $ 653,474 53,173 $ 3,112,197 225,450
============= ========= ============= =========
</TABLE>
<TABLE>
<CAPTION>
International Equity Portfolio
09/01/97
Through Year Ended
02/28/98 August 31, 1997
----------------------------- -----------------------------
Amount Shares Amount Shares
------------- --------- ------------- ---------
<S> <C> <C> <C> <C>
Shares sold $ 794,869 76,986 $ 1,376,612 129,737
Shares issued in reinvestment
of distributions 321,716 33,368 400,018 39,666
Shares redeemed (253,335) (24,928) (205,003) (19,191)
------------- --------- ------------- ---------
Net increase (decrease) in
Trust shares outstanding $ 863,250 85,426 $ 1,571,627 150,212
============= ========= ============= =========
</TABLE>
<TABLE>
<CAPTION>
Asset Allocation Portfolio
09/01/97
Through Year Ended
02/28/98 August 31, 1997
----------------------------- -----------------------------
Amount Shares Amount Shares
------------- --------- ------------- ---------
<S> <C> <C> <C> <C>
Shares sold $ 1,014,823 86,471 $ 1,347,903 121,979
Shares issued in reinvestment
of distributions 587,253 52,028 729,672 71,619
Shares redeemed (110,553) (9,578) (133,500) (12,026)
------------- --------- ------------- ---------
Net increase (decrease) in
Trust shares outstanding $ 1,491,523 128,921 $ 1,944,075 181,572
============= ========= ============= =========
</TABLE>
<TABLE>
<CAPTION>
U.S. Government Income Portfolio
09/01/97
Through Year Ended
02/28/98 August 31, 1997
----------------------------- ------------------------------
Amount Shares Amount Shares
------------- --------- ------------- ---------
<S> <C> <C> <C> <C>
Shares sold $ 1,831,689 189,935 $ 696,656 75,260
Shares issued in reinvestment
of distributions 152,142 15,978 283,085 31,241
Shares redeemed (117,830) (12,223) (151,394) (16,243)
------------- --------- ------------- ---------
Net increase (decrease) in
Trust shares outstanding $ 1,866,001 193,690 $ 828,347 90,258
============= ========= ============= =========
</TABLE>
<TABLE>
<CAPTION>
Money Market Portfolio
09/01/97
Through Year Ended
02/28/98 August 31, 1997
----------------------------- -----------------------------
Amount Shares Amount Shares
------------- --------- ------------- ---------
<S> <C> <C> <C> <C>
Shares sold $ 162,556 162,556 $ 3,081,078 3,081,076
Shares issued in reinvestment
of distributions 96,458 96,458 161,224 161,224
Shares redeemed (1,881,491) (1,881,491) (1,338,306) (1,338,306)
------------- ---------- ------------- ----------
Net increase (decrease) in
Trust shares outstanding ($ 1,622,477) (1,622,477) $ 1,903,996 1,903,994
============= ========== ============= ==========
</TABLE>
6. OPEN FORWARD FOREIGN CURRENCY CONTRACTS The following forward foreign
currency contracts were held by the Variable Annuity International Equity
Portfolio at February 28, 1998:
Net
Delivery Market Unrealized
Value (Local Settlement Value Gain (Loss)
Currency) Cost (USD) Date (USD) (USD)
------------ ---------- ---------- ------ -----------
Sales
- -----
Italian Lira 30,000,000 $16,812 03/05/98 $16,781 $ 31
<PAGE>
page 26 Notes to Financial Statements (unaudited)
[SWOOSH LOGO]
7. FOREIGN CASH POSITIONS--International Equity Portfolio
Net
Delivery Market Unrealized
Value (Local Value Gain (Loss)
Currency Currency) Cost (USD) (USD) (USD)
- -------- ------------ ---------- ------ ----------
Austrian Schilling 400 $ 31 $ 31 $ 0
Australian Dollar 3,684 2,523 2,499 (24)
Swiss Franc 13,410 9,157 9,139 (18)
German Deutsche Mark 2,314 1,269 1,276 7
Spanish Peseta 119,789 780 779 (1)
Finnish Markka 3,850 696 699 3
French Franc 60,039 9,868 9,868 0
Great British Pound 81,886 134,497 134,939 442
Greek Drachma 177,779 646 618 (28)
Hong Kong Dollar 55,234 7,134 7,134 0
Indonesian Rupiah 894,077 58 100 42
Irish Punt 7,000 10,259 9,557 (702)
Italian Lira 18,978,347 10,552 10,617 65
Japanese Yen 265,753 2,074 2,108 34
Malaysian Ringgit 657 144 178 34
Netherlands Guilder 2,326 1,131 1,138 7
Philippine Peso 4,860 118 122 4
Portuguese Escudo 602,349 3,280 3,242 (38)
Swedish Krona 3,992 532 499 (33)
Singapore Dollar 6,117 3,652 3,774 122
Thai Baht 152,741 3,455 3,531 76
-------- -------- -----
Total $201,856 $201,848 $ (8)
======== ======== =====
8. CONCENTRATION OF SHAREHOLDERS At February 28, 1998, all shares outstanding
for each Portfolio are owned either directly or indirectly by a single
insurance company.
9. CONCENTRATION OF CREDIT RISK As of February 28, 1998, MMP invested 52.3%
of its net assets in financial institutions, of which 43.1% was invested
in other financial service providers, 4.6% in broker dealers and 4.6% in
Banking. General economic conditions, as well as exposure to credit losses
arising from possible financial difficulties of borrowers, play an
important role in the operation of the financial services industry.
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A-7036-CRT
(C) The Chase Manhattan Corporation, 1998. All Rights Reserved.
April 1998
F-7036(CMB)
VCA-3 498
