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ANNUAL REPORT
AUGUST 31, 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
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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
16 Asset Allocation
18 U.S. Government Income
18 Money Market
Mutual Fund Variable Annuity Trust
19 Statement of Assets & Liabilities
20 Statement of Operations
21 Statement of Changes in Net Assets
22 Financial Highlights
23-28 Notes to Financial Statements
</TABLE>
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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.
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<PAGE>
VISTA
CAPITAL ADVANTATAGE
MANAGED BY CHASE MANHATTAN
October 1, 1998
Dear Vista Capital Advantage Contract Owner:
Enclosed is the August 31, 1998 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 at fiscal year-end, August 31, 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 8/31/98(2)
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<CAPTION>
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Portfolio (Contract Inception Date) One-Year Since Inception
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<S> <C> <C>
Growth and Income (3/13/95) (12.79%) 14.14%
Capital Growth (3/13/95) (23.63%) 10.00%
International Equity (3/13/95) (9.89%) 2.35%
Asset Allocation (3/13/95) (7.45%) 9.63%
U.S. Government Income (7/13/95) 3.50% 3.74%
Money Market (6/2/95)(3) (2.46%) 2.12%
7-day current yield as of 8/31/98; 3.47%
</TABLE>
First SunAmerica Life Insurance Company Policy Holders (New York)
Average Annual Total Return as of 8/31/98(2)
<TABLE>
<CAPTION>
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Portfolio (Contract Inception Date) One-Year Since Inception
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<S> <C> <C>
Growth and Income (12/6/95) (12.81%) 10.18%
Capital Growth (12/6/95) (23.66%) 4.40%
International Equity (12/22/95) (9.95%) (0.97%)
Asset Allocation (12/22/95) (7.47%) 6.97%
U.S. Government Income (12/22/95) 3.54% 3.05%
Money Market (12/22/95)(3) (2.49%) 1.78%
7-day current yield as of 8/31/98; 3.44%
</TABLE>
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
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(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 59-1/2.
(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.
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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>
Letter from the Chairman page 1
October 1, 1998
Dear Vista Capital Advantage Investor:
We are pleased to present this annual report on the six portfolios underlying
the Vista Capital Advantage Variable Annuity for the one-year period ended
August 31, 1998. This report summarizes each portfolio's performance in light
of events in the financial markets and the economy.
U.S. Economy Remains Healthy But Concerns Linger
Economic conditions were generally good throughout the period. Inflation was
benign, and interest rates fell to record lows. Early in 1998, many economists
thought the Federal Reserve might raise rates, but the economic turmoil in
southeast Asia and its potential impact on the U.S. kept the Fed from taking
this stand. As the period came to a close, the economy was slowing and the
problems in Asia were worsening, which eventually encouraged the Fed to lower
rates in September (after our reporting period). It was the Fed's first rate
cut since December, 1996.
U.S. Equities Advance Amidst High Volatility
U.S equities posted positive gains but not without significant volatility along
the way. The volatility began in October, 1997 when stock prices tumbled around
the globe due to concerns over Asia's financial crisis. Before yearend, stocks
rebounded to complete the best consecutive three-year performance period in
stock market history. After retreating in January, stocks rallied over the next
few months, as concerns over the Asian crisis waned. Those worries re-surfaced
in the spring but did not stop the market from climbing to new highs. In
mid-July, the Russian financial crisis hit, raising new fears about the global
economy and causing equity prices to fall worldwide. President Clinton's
troubles put more pressure on stock prices as the period came to a close.
Europe Advances While Japan Continues to Slide
Most European markets fared well, while markets in Japan and southeast Asia and
Latin America trended lower. European markets benefitted from falling interest
rates, corporate restructuring and generally good earnings. Japan's weak economy
and problem-laden banking system kept its stock market under pressure. Southeast
Asian markets were hurt by the staggering economic and currency crisis in the
region, while most Latin American markets were negatively impacted by the
problems in Asia.
Bond Market Rallies As Interest Rates Tumble
The bond market enjoyed strong performance as long-term interest rates fell
sharply. Interest rates began their steep decent in October, 1997, as deepening
concerns over the Asian financial crisis gripped global financial markets. Bonds
stayed in a relatively narrow trading range early in 1998, but when the turmoil
in Asia re-surfaced, the rate slide resumed and bond prices moved higher. Early
in the summer, the full impact of Russia's economic troubles emerged, raising
serious concerns over the global economy and sending rates even lower. By the
end of the period, the yield on the 30-year Treasury bond was at a historic low
of 5.26%, down from 6.61% at the start of the period.
Sincerely,
/s/ Fergus Reid
Fergus Reid
Chairman
<PAGE>
page 2 Growth and Income Portfolio
The Growth and Income Portfolio seeks to provide long-term capital appreciation
and dividend income primarily through diversified holdings of common stocks.
Performance
The Growth and Income Portfolio produced a total return of -5.45% for the
one-year period ended August 31, 1998.
Strategy
Despite superior stock selection within several sectors, a series of external
events from mid-July through the end of August had a negative effect on the
equity market and, in turn, the Portfolio's performance.
The stock market's summer swoon was predominantly due to the impact of southeast
Asia's ongoing economic and political crisis, deepening financial problems in
Russia and domestic political uncertainty resulting from President Clinton's
personal problems.
Leading up to the correction, the Portfolio was faring well. Early in the
period, we benefitted from our exposure to financial stocks, consumer cyclicals,
utilities, health care and consumer staples. While we were underweighted in
technology, several stocks in this sector also contributed favorably to
performance.
Additionally, the Fund profited from its investment in phar- maceutical stocks
and, later in the period, undervalued HMO stocks. Finally, our exposure to
economically sensitive stocks proved beneficial to shareholders, thanks in large
part to the strength of the domestic economy.
As the period progressed, we became increasingly cautious in our investment
approach and, in doing so, slightly reduced our exposure to equities. This
strategy proved effective in protect- ing shareholder capital from even greater
exposure to the stock market's sharp turnaround late in the period.
Outlook
Looking ahead, we expect the stock market to remain vola- tile given the global
political and economic uncertainty. While the U.S. economy remains in relatively
good health, we expect it too slow in the months ahead and corporate earnings to
remain under pressure.
In this environment, stock selection will remain critically important in
achieving above-average market results. We intend to focus much of our efforts
on finding fundamen- tally sound companies in sectors that have lagged the
market and now offer good relative value.
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 $17,098 from inception on 3/1/95 through
8/31/98.*
Investment Results
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Average Annual Total Return as of 8/31/98
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<S> <C>
One year (5.45%)
Since Inception (3/1/95) 16.53%
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[PLOT POINTS FOR GROWTH & INCOME CHART]
Growth and
Income S&P 500
Mar-95 10000 10000
Apr-95 10270 10295
10410 10597
Jun-95 10730 11020
11000 11276
Aug-95 11460 11649
11480 11678
Oct-95 11710 12171
11480 12127
Dec-95 11960 12659
12150 12903
Feb-96 12558 13342
12767 13466
Apr-96 13019 13595
13228 13795
Jun-96 13375 14149
13344 14203
Aug-96 12893 13575
13344 13861
Oct-96 13941 14641
14161 15045
Dec-96 15051 16181
14768 15861
Feb-97 15603 16850
15543 16983
Apr-97 14899 16287
15579 17258
Jun-97 16569 18312
17214 19127
Aug-97 18609 20648
18084 19491
Oct-97 18931 20558
18562 19871
Dec-97 19170 20791
19436 21149
Feb-98 19118 21381
20487 22923
Apr-98 21428 24096
21179 24342
Jun-98 20723 23923
21096 24894
Aug-98 20418 24631
17098 21071
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 perforance 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
The Capital Growth Portfolio seeks to provide long-term capital growth primarily
through diversified holdings of common stocks.
Performance
The Capital Growth Portfolio produced a total return of -16.38% for the one-year
period ended August 31, 1998.
Strategy
The stock market sell-off that took place from mid-July through the end of
August had the most significant impact on the Portfolio's performance.
The period began with stocks performing well, but in late 1997, the equity
market experienced significant turbulence due to the outbreak of the economic
and currency crisis in southeast Asia. By the end of 1997, however, these fears
waned and stock prices resumed their rise.
Early in 1998, prudent sector allocation decisions and good performance by
several stocks contributed favorably to performance. Some of the Portfolio's top
performers during this period included American Management Systems, a leading
information technology consulting firm; Transatlantic Holdings, an insurance
company purchased by AIG, and Lear, an auto parts supplier.
Specific industry sectors that contributed favorably to the Portfolio's
performance during that period included financial stocks, which benefitted from
the wave of merger and acquisition activity within the industry, and consumer
cyclical stocks, such as retailers, which were helped by a robust economy.
The Asian crisis, however, again became a major factor in May. When Russia's
financial problems worsened in the summer, the prospect of an economic slowdown
shook the financial markets. President Clinton's personal troubles added a layer
of political uncertainty to an already fragile market. Particularly under
pressure in this environment were small and medium sized companies favored by
the fund.
Outlook
The recent market pullback has created good long-term values in certain industry
groups. However, given the problems and concerns currently hanging over the
market (Asian turmoil, U.S. political uncertainty, etc.), we expect the market
to remain choppy in the months ahead.
We plan to maintain our cautious investment approach. We intend to focus on
companies with the prospects of generating good earnings despite the state of
the economy. As is the case in this type of environment, stock selection will be
key in outperforming the broader averages.
Life of Portfolio Performance
A $10,000 tax-deferred investment in the Capital Growth Portfolio at NAV (Net
Asset Value) would have grown to $15,153 from inception on 3/1/95 through
8/31/98.*
Investment Results
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Average Annual Total Return as of 8/31/98
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<S> <C>
One year (16.38%)
Since Inception (3/1/95) 12.58%
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[PLOT POINTS FOR CAPITAL GROWTH CHART]
Capital Russell
Growth 2000
Mar-95 10000 10000
Apr-95 10350 10172
10470 10398
Jun-95 10870 10577
11140 11126
Aug-95 11830 11766
11900 12010
Oct-95 12090 12225
11660 11679
Dec-95 12220 12169
12707 12490
Feb-96 12872 12477
13077 12866
Apr-96 13674 13132
14364 13835
Jun-96 14785 14380
14405 13789
Aug-96 13571 12585
14240 13316
Oct-96 14960 13837
14765 13624
Dec-96 15526 14185
15670 14557
Feb-97 16284 14848
16041 14489
Apr-97 15276 13805
15404 13843
Jun-97 16493 15383
17141 16043
Aug-97 18322 16789
18123 17173
Oct-97 19069 18430
18485 17621
Dec-97 18707 17507
18903 17813
Feb-98 18904 17531
20287 18829
Apr-98 20998 19605
20921 19712
Jun-98 20003 18650
20184 18690
Aug-98 18865 17175
15154 13840
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
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
The International Equity Portfolio produced a total return of -2.46% for the
one-year period ended August 31, 1998.
Strategy
Early in the period, good corporate earnings, benign inflation and improving
economic conditions in Europe helped propel stock prices on the continent.
However, in the final two months of the period, Russia's deepening financial
problems had a negative spillover effect on most European markets.
Japan's banking crisis and lingering economic recession along with the
government's unwillingness to introduce a sound economic reform package kept
Japanese stocks under pressure for much of the period. Latin American stocks
trended lower due to the impact of the economic and currency crisis in
southeast Asia.
Despite the slide in European equities during the last two months of the period,
the Portfolio's overweighting in these securities helped bolster investment
results. Through the first eight months of this year, several European markets
were among the world's top performing markets.
The Portfolio's underweighting in Japan and southeast Asia also contributed
favorably to performance. Southeast Asia was plagued by a sweeping economic and
currency crisis that resulted in double-digit percentage declines in many
markets throughout the region.
Outlook
Looking ahead, global economic uncertainty may continue to weigh heavily on
international markets. We remain positive on the growth potential of European
markets. The creation of the 11-country European Monetary Union, which takes
effect this January, should be good for business. Moreover, economic conditions
are still good.
In Asia, we intend to maintain our underweighting in Japan until the government
institutes major reforms to repair the country's troubled banking system and the
overall economy. Given the impact that southeast Asia can have on emerging
markets, we remain neutral on Latin America.
Life of Portfolio Performance
A $10,000 tax-deferred investment in the International Equity Portfolio at NAV
(Net Asset Value) would have grown to $11,779 from inception on 3/1/95 through
8/31/98.*
Investment Results
- --------------------------------------------------------------------------------
Average Annual Total Return as of 8/31/98
<TABLE>
<S> <C>
One year (2.46%)
Since inception (3/1/95) 4.78%
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</TABLE>
[PLOT POINTS FOR INTERNATIONAL EQUITY CHART]
International MSCI
Equity EAFE
Mar-95 10000 10000
Apr-95 10180 10627
10350 11029
Jun-95 10480 10900
10470 10712
Aug-95 11010 11381
11890 10950
Oct-95 11070 11167
10910 10870
Dec-95 10870 11175
10890 11628
Feb-96 11058 11678
11132 11720
Apr-96 11427 11972
11753 12322
Jun-96 11616 12098
11679 12170
Aug-96 11121 11817
11153 11845
Oct-96 11448 12162
11300 12041
Dec-96 11690 12522
11648 12365
Feb-97 11532 11934
11798 12132
Apr-97 11752 12180
11729 12248
Jun-97 12214 13047
12688 13769
Aug-97 13289 13995
12075 12952
Oct-97 12734 13680
11729 12632
Dec-97 11659 12506
11816 12619
Feb-98 12097 13199
12867 14049
Apr-98 13442 14485
13748 14602
Jun-98 13797 14535
13626 14648
Aug-98 14017 14801
11779 12970
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
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
The Asset Allocation Portfolio produced a total return of -0.04% for the
one-year period ended August 31, 1998.
Strategy
The Portfolio's asset allocation strategy contributed favorably to performance.
Early in the reporting period, we decreased our exposure to equities due to our
concerns over the Asian financial crisis. We raised our stock market exposure
early in 1998 when the turmoil appeared to wane, and scaled back our equity
investments before the stock market's summer selloff.
Good stock selection, especially in the financial, telecommunications and
consumer cyclical areas, also contributed positively to the Portfolio's
investment results. Additionally, our underweighting in technology helped
performance, as these stocks came under intense pressure each time the Asian
crisis weighed heavily on the global financial markets.
Many sectors that bolstered the Portfolio during the stock market's strong rally
in late 1997 and early in 1998 hindered performance when equities declined late
in the period. Utilities and telecommunications were among the exceptions. The
Portfolio's exposure to small and medium cap stocks also detracted from
performance, as secondary issues under-performed their large-cap counterparts.
The Portfolio's exposure to fixed-income securities and management's decision to
maintain a higher-than-average duration buoyed performance as a result of the
sharp decline in interest rates. Additionally, management's decision to reduce
the Portfolio's investment in bonds with exposure to the Asian crisis proved
rewarding for shareholders.
Outlook
Looking ahead, we expect to maintain our relatively defensive asset allocation
strategy given our belief that earnings growth will slow due to the Asian
financial crisis. However, as the economy tapers off and that slowdown is, in
our judgment, fully reflected in stock prices, we intend to increase gradually
our exposure to equities, particularly among undervalued small stocks.
Given our forecast for slower economic growth, we intend to remain overweighted
in fixed income securities and to maintain our above-average duration in
anticipation of lower 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 $15,004 from inception on 3/1/95 through
8/31/98.*
Investment Results
- --------------------------------------------------------------------------------
Average Annual Total Return as of 8/31/98
<TABLE>
<S> <C>
One year (0.04%)
Since Inception (3/1/95) 12.27%
- --------------------------------------------------------------------------------
</TABLE>
[PLOT POINTS FOR ASSET ALLOCATION CHART]
Asset 60% S&P 500/
Allocation 40% Lehman Gov't Bond
Mar-95 10000 10000
Apr-95 10160 10202
10270 10435
Jun-95 10570 10854
10730 11038
Aug-95 10980 11241
11040 11311
Oct-95 11200 11641
11120 11687
Dec-95 11440 12068
11595 12275
Feb-96 11880 12556
11935 12524
Apr-96 12045 12555
12133 12634
Jun-96 12198 12821
12231 12916
Aug-96 12001 12587
12242 12735
Oct-96 12627 13250
12835 13585
Dec-96 13362 14295
13220 14067
Feb-97 13596 14600
13557 14677
Apr-97 13194 14253
13596 14846
Jun-97 14102 15440
14465 15925
Aug-97 15321 16866
15010 16232
Oct-97 15464 16863
15360 16642
Dec-97 15646 17138
15822 17387
Feb-98 15723 17606
16358 18349
Apr-98 16809 18934
16767 19082
Jun-98 16640 18963
16879 19511
Aug-98 16513 19398
15004 17918
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
The U.S. Government Income Portfolio seeks to provide monthly dividends as well
as to preserve principal.
Performance
The U.S. Government Income Portfolio produced a total return of 11.12% for the
one-year period ended August 31, 1998.
Strategy
The sharp decline in interest rates and management's duration strategy were
chiefly responsible for the Portfolio's superior investment results.
Early in the period, in anticipation of a flattening yield curve, management
employed a barbell strategy, meaning the Portfolio was overweighted in long-term
bonds (those with maturities over 10 years) and short-term bonds (those with
maturities between one and four years.) This strategy proved beneficial to
shareholders, as interest rates fell sharply in late 1997 and again in the final
three months of the period. The primary driver behind the decline in rates was
concern among investors over the impact of the Asian financial crisis on the
global economy.
During the period, we maintained an above-average duration due to our belief
that interest rates would fall in light of the global economic uncertainty. In
anticipation of a subsequent flight to quality among investors, we maintained a
heavy emphasis on Treasury securities. This strategy helped performance as
Treasuries recorded solid gains.
Finally, the Portfolio's investment in asset-backed securities bolstered the
annual dividend yield. During the first nine and a half months of the year,
approximately $230 billion in asset-backed securities was issued, just shy of
the annual record for public issuance ($236 billion) set last year.
Outlook
With the economy showing signs of slowing and the economic crisis in Asia still
a threat to the global economy, we expect interest rates to continue to trend
lower and bond prices to rise in the months ahead. Given this backdrop, we
intend to maintain our above-average duration strategy through the end of this
year and into 1999.
Any significant increase in interest rates will be viewed as an opportunity to
increase the Portfolio's average duration and its income producing potential. As
always, we will continue to maintain a high-quality portfolio by emphasizing
U.S. government securities.
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 $13,178 from inception on 3/1/95 through
8/31/98.*
Investment Results
- --------------------------------------------------------------------------------
Average Annual Total Return as of 8/31/98
<TABLE>
<S> <C>
One year 11.12%
Since Inception (3/1/95) 8.19%
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
[PLOT POINTS FOR U.S. GOVERNMENT INCOME CHART]
U.S. Government Lehman Intrmd
Income Portfolio U.S. Gov't
Mar-95 10000 10000
Apr-95 10050 10057
10170 10180
Jun-95 10550 10488
10620 10558
Aug-95 10570 10559
10690 10655
Oct-95 10800 10732
10950 10851
Dec-95 11100 10993
11235 11109
Feb-96 11292 11204
11027 11073
Apr-96 10924 11016
10855 10978
Jun-96 10820 10969
10970 11085
Aug-96 10993 11119
10970 11128
Oct-96 11131 11282
11350 11482
Dec-96 11152 11634
11430 11559
Feb-97 11455 11604
11430 11626
Apr-97 11304 11546
11468 11681
Jun-97 11556 11778
11683 11885
Aug-97 11998 12126
11859 12066
Oct-97 12048 12206
12238 12341
Dec-97 12288 12368
12397 12467
Feb-98 12527 12631
12527 12605
Apr-98 12566 12646
12618 12709
Jun-98 12735 12802
12878 12884
Aug-98 12891 12929
13178 13132
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 perfor- mance 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 insur-
ance 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
The Money Market Portfolio seeks to provide maximum current income consistent
with preservation of capital and maintenance of liquidity.
Performance
The Money Market Portfolio produced a total return of 5.04% for the one-year
period ended August 31, 1998.
Strategy
The Portfolio continued to provide investors with an attractive yield despite
the decline in interest rates brought on by the impact of the Asian economic and
currency turmoil on the global economy.
During the reporting period, the yield on the 3-month Treasury bill fell from
5.14 percent on August 31, 1997 to 4.80 percent on August 31, 1998. The yield on
the one-year Treasury bill declined even more--from 5.80 percent at the start of
the period to 4.78 percent by the end of the period.
Throughout much of the year, management maintained a longer-than-average
duration in anticipation of falling interest rates. This strategy helped
performance in late 1997 when Asia's financial problems drove down interest
rates and again in mid-1998 when the turmoil re-surfaced, culminating with the
near-collapse of Russia's economy.
Management's emphasis on Treasury securities also proved beneficial to
shareholders. Inflows into the Treasury markets were strong, as domestic and
international investors turned to the safe haven of U.S. Government securities
amidst the uncertainty created by the Asian crisis.
Outlook
Our outlook for the Money Market Portfolio remains positive. Investor concerns
over the global economy are unlikely to abate anytime soon. Given this backdrop,
investors should continue to favor high quality, liquid investments, such as
those in our portfolio.
<PAGE>
page 8 Growth & Income Portfolio
Portfolio of Investments August 31, 1998
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
LONG-TERM INVESTMENTS--94.7%
COMMON STOCK--94.7%
AEROSPACE--0.9%
3,300 GENERAL DYNAMICS CORP. ..................... $ 156,956
-----------
AGRICULTURAL PRODUCTION/SERVICES--1.5%
8,100 UNIVERSAL CORP. ............................ 255,150
-----------
AIRLINES--1.9%
5,900 AMR CORP.* ................................. 321,550
-----------
AUTOMOTIVE--2.3%
9,000 FORD MOTOR CO. ............................. 396,000
-----------
BANKING--7.7%
2,600 COMERICA, INC. ............................. 135,850
2,500 CULLEN/FROST BANKERS, INC. ................. 106,875
10,900 FIRSTSTAR CORP. ............................ 422,375
2,500 NATIONAL CITY CORP. ........................ 146,875
7,400 NATIONSBANK CORP. .......................... 421,800
5,300 NORTH FORK BANCORP., INC. .................. 100,700
-----------
1,334,475
-----------
BIOTECHNOLOGY--0.4%
1,700 BIOGEN, INC. ............................... 78,625
-----------
CHEMICALS--0.5%
6,400 CROMPTON & KNOWLES CORP. ................... 93,600
-----------
COMPUTER SOFTWARE--4.0%
7,800 COMPUTER SCIENCES CORP.* ................... 441,188
4,300 MASTECH CORP. .............................. 88,284
4,200 PLATINUM TECHNOLOGY, INC.* ................. 78,750
4,900 SYMANTEC CORP.* ............................ 80,238
-----------
688,460
-----------
COMPUTERS/COMPUTER HARDWARE--5.9%
8,000 EMC CORP.* ................................. 361,500
7,700 GATEWAY 2000, INC.* ........................ 364,306
1,600 LEXMARK INTERNATIONAL GROUP, INC.
(GERMANY)* ................................. 96,900
4,000 STORAGE TECHNOLOGY CORP.* .................. 87,000
2,900 SUN MICROSYSTEMS, INC.* .................... 114,912
-----------
1,024,618
-----------
CONSUMER PRODUCTS--3.4%
14,200 PHILIP MORRIS COMPANIES, INC. .............. 590,187
-----------
DIVERSIFIED--3.2%
8,400 CANADIAN PACIFIC, LTD. ..................... 159,075
15,300 CBS CORP. .................................. 397,800
-----------
556,875
-----------
FINANCIAL SERVICES--5.5%
2,261 ASSOCIATES FIRST CAPITAL CORP. ............. 133,670
11,600 FEDERAL HOME LOAN MORTGAGE CORP. ........... 458,200
6,700 MORGAN STANLEY, DEAN WITTER & CO. .......... 389,019
-----------
980,889
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
FOOD/BEVERAGE PRODUCTS--1.3%
3,900 PEPSICO., INC. ............................. $ 107,981
2,300 QUAKER OATS CO. ............................ 122,187
-----------
230,168
-----------
HEALTH CARE/HEALTH CARE SERVICES--5.7%
4,900 COLUMBIA/HCA HEALTHCARE CORP. .............. 110,556
5,200 CONCENTRA MANAGED CARE, INC.* .............. 66,625
4,900 HBO & CO. .................................. 104,125
26,900 HEALTHSOUTH CORP.* ......................... 509,419
4,700 TENET HEALTHCARE CORP.* .................... 121,319
4,000 TOTAL RENAL CARE HOLDINGS, INC.* ........... 76,000
-----------
988,044
-----------
INSURANCE--4.7%
12,100 ALLSTATE CORP. ............................. 453,750
2,000 EXEL LTD. (BERMUDA) ........................ 133,625
7,800 RELIANCE GROUP HOLDINGS, INC. .............. 98,475
2,900 TRAVELERS, INC. ............................ 128,687
-----------
814,537
-----------
MANUFACTURING--4.3%
3,500 INGERSOLL-RAND CO. ......................... 139,125
9,700 JOHNSON CONTROLS ........................... 415,281
3,100 PENTAIR, INC. .............................. 86,412
4,100 UNITED DOMINION INDUSTRIES, LTD. ........... 99,681
-----------
740,499
-----------
MEDIA/ADVERTISING--0.9%
3,100 OMNICOM GROUP, INC. ........................ 147,637
-----------
METALS/MINING--0.8% ........................
2,300 ALUMINUM CO. OF AMERICA (ALCOA) ............ 137,713
-----------
OFFICE/BUSINESS EQUIPMENT--2.2%
4,400 XEROX CORP. ................................ 386,375
-----------
OIL & GAS--3.7%
3,300 BJ SERVICES CO.* ........................... 41,663
15,300 COASTAL CORP. .............................. 397,800
2,100 MOBIL CORP. ................................ 145,163
2,200 ULTRAMAR DIAMOND SHAMROCK CORP. ............ 50,875
-----------
635,501
-----------
PACKAGING--2.2%
12,400 OWENS-ILLINOIS, INC.* ...................... 386,725
-----------
PHARMACEUTICALS--3.9%
6,400 SCHERING-PLOUGH CORP. ...................... 550,400
2,200 SMITHKLINE BEECHAM PLC, ADR (UNITED
KINGDOM) ................................... 125,125
-----------
675,525
-----------
PRINTING & PUBLISHING--1.0%
5,800 NEW YORK TIMES CO., CLASS A ................ 168,200
-----------
REAL ESTATE INVESTMENT TRUST--1.3%
6,000 BRANDYWINE REALTY TRUST .................... 108,000
3,920 ESSEX PROPERTY TRUST, INC. ................. 111,475
-----------
219,475
-----------
</TABLE>
See notes to financial statements.
<PAGE>
Growth and Income Portfolio (continued) page 9
Portfolio of Investments August 31, 1998
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
RESTAURANTS/FOOD SERVICES--1.0%
5,500 CKE RESTAURANTS, INC. .......................... $ 170,500
-----------
RETAILING--10.0%
3,000 COSTCO COMPANIES, INC. A* ...................... 141,188
2,900 CVS CORP. ...................................... 105,488
8,800 FEDERATED DEPARTMENT STORES* ................... 383,350
12,600 KROGER CO.* .................................... 567,000
6,700 NEIMAN-MARCUS GROUP, INC.* ..................... 162,894
14,500 OFFICE DEPOT, INC.* ............................ 369,750
-----------
1,729,670
-----------
TELECOMMUNICATIONS--3.8%
3,100 BELLSOUTH CORP. ................................ 212,544
2,300 TELLABS, INC.* ................................. 97,175
8,700 WORLDCOM, INC.* ................................ 356,156
-----------
665,875
-----------
UTILITIES--8.3%
3,600 CMS ENERGY CORP. ............................... 152,325
9,800 CONSOLIDATED EDISON, INC. ...................... 463,663
7,400 DUKE ENERGY CORP. .............................. 461,575
3,300 FPL GROUP INC. ................................. 219,656
5,900 LG&E ENERGY CORP. .............................. 151,188
-----------
1,448,407
-----------
WASTE MANAGEMENT--2.4%
9,600 WASTE MANAGEMENT, INC.* ........................ 423,600
-----------
TOTAL COMMON STOCK
(COST $19,464,387) ............................. 16,445,836
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
WARRANTS--0.0%
REAL ESTATE INVESTMENT TRUST--0.0%
240 SECURITY CAPITAL GROUP, SER. B, 09/18/98
(COST $0) ...................................... $ 1
-----------
TOTAL LONG-TERM INVESTMENTS
(COST $19,464,387).............................. 16,445,837
-----------
Principal
Amount
----------
SHORT-TERM INVESTMENTS--5.8%
REPURCHASE AGREEMENT--5.8%
$1,002,000 GREENWICH CAPITAL MARKETS, 5.80%, DUE 09/01/98,
(DATED 08/31/98, PROCEEDS $1,002,161, SECURED BY
U.S. TREASURY BOND, $625,000 AT 11.25%, DUE
02/15/15; MARKET $1,026,495)
(COST $1,002,000) .............................. 1,002,000
-----------
TOTAL INVESTMENTS--100.5%
(COST $20,466,387).............................. $17,447,837
===========
</TABLE>
See notes to financial statements.
<PAGE>
page 10 Capital Growth Portfolio
Portfolio of Investments August 31, 1998
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
LONG-TERM INVESTMENTS--84.3%
COMMON STOCK--84.3%
AGRICULTURAL PRODUCTION/SERVICES--1.4%
5,000 UNIVERSAL CORP. .................................... $ 157,500
----------
BANKING--4.1%
6,500 CULLEN/FROST BANKERS, INC. ......................... 277,875
4,590 ZIONS BANCORP. ..................................... 176,141
----------
454,016
----------
BIOTECHNOLOGY--2.3%
5,500 BIOGEN, INC.* ...................................... 254,375
----------
BUSINESS SERVICES--2.4%
5,000 PERSONNEL GROUP OF AMERICA, INC.* .................. 56,562
6,500 SUNGARD DATA SYSTEMS, INC.* ........................ 205,969
----------
262,531
----------
CHEMICALS--2.1%
9,000 CROMPTON & KNOWLES CORP. ........................... 131,625
4,500 CYTEC INDUSTRIES, INC.* ............................ 102,938
----------
234,563
----------
COMPUTER SOFTWARE--6.7%
10,000 AMERICAN MANAGEMENT SYSTEMS, INC.* ................. 267,500
9,000 PLATINUM TECHNOLOGY, INC.* ......................... 168,750
10,000 SYMANTEC CORP.* .................................... 163,750
3,750 WIND RIVER SYSTEMS* ................................ 140,625
----------
740,625
----------
COMPUTERS/COMPUTER HARDWARE--7.3%
6,000 EMC CORP.* ......................................... 271,125
4,700 LEXMARK INTERNATIONAL GROUP, INC.
(GERMANY)* ......................................... 284,644
7,000 QUANTUM CORP.* ..................................... 80,062
8,000 STORAGE TECHNOLOGY CORP.* .......................... 174,000
----------
809,831
----------
CONSUMER PRODUCTS--3.5%
6,000 FURNITURE BRANDS INTERNATIONAL, INC.* .............. 134,250
8,400 INTERFACE, INC. CLASS A ............................ 102,900
10,000 SHAW INDUSTRIES .................................... 151,250
----------
388,400
----------
ELECTRONICS/ELECTRICAL EQUIPMENT--2.4%
5,000 WATERS CORP.* ...................................... 269,375
----------
ENVIRONMENTAL SERVICES--1.9%
11,000 ALLIED WASTE INDUSTRIES, INC.* ..................... 209,000
----------
FINANCIAL SERVICES--5.2%
6,000 BEAR STEARNS COMPANIES, INC. ....................... 221,625
3,000 FINOVA GROUP, INC. ................................. 133,875
4,000 THE PMI GROUP, INC. ................................ 221,500
----------
577,000
----------
FOOD/BEVERAGE PRODUCTS--1.3%
9,000 WHITMAN CORP. ...................................... 139,500
----------
HEALTH CARE/HEALTH CARE SERVICES--9.7%
10,000 ASSISTED LIVING CONCEPTS ........................... 126,875
</TABLE>
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
HEALTH CARE/HEALTH CARE SERVICES (cont'd)
16,000 CONCENTRA MANAGED CARE, INC.* ...................... $ 205,000
7,500 INTEGRATED HEALTH SERVICES, INC. ................... 145,313
6,750 TENET HEALTHCARE CORP.* ............................ 174,234
5,000 TOTAL RENAL CARE HOLDINGS, INC.* ................... 95,000
5,100 UNIVERSAL HEALTH SERVICES, INC., CLASS B* .......... 197,625
2,500 WELLPOINT HEALTH NETWORKS, INC.* ................... 133,437
----------
1,077,484
----------
HOME BUILDING CONSTRUCTION--0.9%
5,690 LENNAR CORP. ....................................... 103,131
----------
INSURANCE--7.0%
6,000 ORION CAPITAL CORP. ................................ 223,500
8,000 RELIASTAR FINANCIAL CORP. .......................... 314,000
3,000 TRANSATLANTIC HOLDINGS, INC. ....................... 243,562
----------
781,062
----------
MANUFACTURING--3.5%
6,000 PENTAIR, INC. ...................................... 167,250
9,000 UNITED DOMINION INDUSTRIES, LTD. ................... 218,813
----------
386,063
----------
MEDIA/ADVERTISING--1.7%
4,000 OMNICOM GROUP, INC. ................................ 190,500
----------
OIL & GAS--2.7%
11,000 BJ SERVICES CO.* ................................... 138,875
2,000 CAMCO INTERNATIONAL, INC. .......................... 100,500
3,000 COOPER CAMERON CORP.* .............................. 63,750
----------
303,125
----------
PAPER/FOREST PRODUCTS--1.5%
7,000 BOISE CASCADE CORP. ................................ 171,063
----------
PIPELINES--2.4%
5,400 COLUMBIA GAS SYSTEM, INC. .......................... 268,650
----------
REAL ESTATE INVESTMENT TRUST--3.6%
10,000 ARCHSTONE COMMUNITIES TRUST ........................ 193,750
7,000 ESSEX PROPERTY TRUST, INC. ......................... 199,063
----------
392,813
----------
RETAILING--5.2%
4,000 CVS CORP. .......................................... 145,500
7,000 NEIMAN-MARCUS GROUP, INC.* ......................... 170,188
8,000 PROFFITT'S, INC.* .................................. 204,000
5,000 STAGE STORES, INC.* ................................ 52,187
----------
571,875
----------
TELECOMMUNICATIONS--2.2%
10,000 ASPECT TELECOMMUNICATIONS CORP.* ................... 238,125
----------
UTILITIES--3.3%
3,500 CMS ENERGY CORP. ................................... 148,094
7,500 TNP ENTERPRISES, INC. .............................. 222,656
----------
370,750
----------
TOTAL LONG-TERM INVESTMENTS
(COST $10,605,518).................................. 9,351,357
----------
</TABLE>
See notes to financial statements.
<PAGE>
Capital Growth Portfolio (continued) page 11
Portfolio of Investments August 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Issuer Value
------ ------ -----
<S> <C> <C>
SHORT-TERM INVESTMENTS--16.1%
REPURCHASE AGREEMENT--16.1%
$ 1,785,000 GREENWICH CAPITAL MARKETS, 5.80%, DUE 09/01/98,
(DATED 08/31/98, PROCEEDS $1,785,288, SECURED BY
U.S TREASURY BOND, $1,110,000 AT 11.25%, DUE
02/15/15; MARKET $1,823,054)
(COST $1,785,000) .............................. $ 1,785,000
-----------
TOTAL INVESTMENTS--100.4%
(COST $12,390,518) ............................. $11,136,357
===========
</TABLE>
See notes to financial statements.
<PAGE>
page 12 International Equity Portfolio
Portfolio of Investments August 31, 1998
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
LONG-TERM INVESTMENTS--91.5%
COMMON STOCK--91.5%
AUSTRALIA--0.3%
DIVERSIFIED--0.1%
6,000 FUTURIS CORP., LTD. ................................ $ 4,732
--------
FINANCIAL SERVICES--0.0%
23,000 FXF TRUST* ......................................... 2,366
--------
FOOD/BEVERAGE PRODUCTS--0.1%
2,000 FOSTER'S BREWING GROUP LTD. ........................ 4,114
--------
MINING--0.0%
200 SOUL PATTINSON & COMPANY LTD.
(WASHINGTON H.) .................................... 2,806
--------
MULTI-MEDIA--0.1%
1,000 PUBLISHING & BROADCASTING LTD. ..................... 3,514
--------
TOTAL AUSTRALIA 17,532
--------
AUSTRIA--1.2%
FINANCIAL SERVICES--0.7%
785 BANK AUSTRIA AG .................................... 43,148
--------
OIL & GAS--0.5%
389 SCHOELLER-BLECKMANN OILFIELD EQUIPMENT AG .......... 34,588
--------
TOTAL AUSTRIA 77,736
--------
BELGIUM--1.8%
BANKING--1.8%
1,393 KREDIETBANK NV ..................................... 110,300
--------
BRAZIL--3.0%
TELECOMMUNICATIONS--2.3%
800 TELECOMUNICACOES BRASILEIRAS SA, ADR,
PREFERRED* ......................................... 57,450
1,270 TELECOMUNICACOES BRASILEIRAS SA, ADR ............... 89,535
--------
146,985
--------
UTILITIES--0.7%
5,230 CENTRAIS ELECTRICAS BRASILEIRAS
SA-ELECTROBRAS, ADR ................................ 41,993
523 CENTRAIS GERADORAS DO SUL DO BRAZIL SA* ............ 2,711
--------
44,704
--------
TOTAL BRAZIL 191,689
--------
CROATIA--0.3%
PHARMECUTICALS--0.3%
2,155 PLIVA D.D., GDR, REG S ............................. 18,533
--------
FINLAND--3.2%
FOOD/BEVERAGE PRODUCTS--0.3%
1,240 RAISIO GROUP PLC ................................... 16,333
--------
TELECOMMUNICATIONS--2.9%
2,619 NOKIA OYJ, A SHARES ................................ 185,942
--------
TOTAL FINLAND 202,275
--------
FRANCE--10.1%
APPLIANCES & HOUSEHOLD DURABLES--0.9%
2,786 MOULINEX* .......................................... 55,285
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
FRANCE (cont'd)
AUTOMOTIVE--1.0%
299 EQUIPMENT ET COMPOSANTS POUR L'INDUSTRIE
AUTOMOBILE ......................................... $ 63,340
--------
BANKING--2.3%
1,469 BANQUE NATIONALE DE PARIS .......................... 97,294
710 CREDIT COMMERCIAL DE FRANCE ........................ 49,734
--------
147,028
--------
COMPUTER SOFTWARE--1.5%
585 CAP GEMINI SOGETI SA ............................... 92,274
--------
DIVERSIFIED--1.5%
2,595 LAGARDERE SCA ...................................... 97,709
--------
ENTERTAINMENT/LEISURE--0.4%
1,075 PARC ASTERIX SA* ................................... 25,781
--------
TELECOMMUNICATIONS--2.5%
966 ALCATEL ALSTHOM (CIE GENERAL EI) ................... 156,467
--------
TOTAL FRANCE 637,884
--------
GERMANY--11.8%
AIRLINES--2.3%
5,865 DEUTSCHE LUFTHANSA AG .............................. 145,115
--------
AUTOMOTIVE--1.0%
2,727 KOLBENSCHMIDT PIERBURG AG .......................... 62,044
--------
BANKING--1.2%
960 BAYERISCHE VEREINSBANK AG .......................... 73,443
--------
CAPITAL GOODS--1.4%
990 MANNESMANN AG* ..................................... 89,534
--------
FOOD/BEVERAGE PRODUCTS--1.8%
2,718 KAMPS AG* .......................................... 113,630
--------
INSURANCE--1.8%
280 MUENCHENER RUECKVERSICHERUNGS-
GESELLSCHAFT AG .................................... 109,095
11 MUENCHENER RUECKVERSICHERUNGS-
GESELLSCHAFT AG, NEW SHARES ........................ 4,248
--------
113,343
--------
TELECOMMUNICATIONS--2.3%
558 MOBILCOM AG ........................................ 147,585
--------
TOTAL GERMANY 744,694
--------
GREECE--0.2%
TELECOMMUNICATIONS--0.2%
421 STET HELLAS TELECOMMUNICATIONS SA, ADR* ............ 12,314
--------
HONG KONG--0.1%
TELECOMMUNICATIONS--0.1%
4,000 HONG KONG TELECOMMUNICATIONS LTD.* ................. 7,072
--------
IRELAND--1.3%
COMPUTER SOFTWARE--0.3%
815 IONA TECHNOLOGIES PLC, ADR* ........................ 16,096
--------
REAL ESTATE--0.5%
6,515 GREEN PROPERTY PLC ................................. 32,773
--------
</TABLE>
See notes to financial statements.
<PAGE>
International Equity Portfolio (continued) page 13
Portfolio of Investments August 31, 1998
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
IRELAND (cont'd)
TELECOMMUNICATIONS--0.5%
1,413 ESAT TELECOM GROUP PLC* ........................... $ 31,086
--------
TOTAL IRELAND 79,955
--------
ITALY--7.2%
AUTOMOTIVE--0.0%
400 FIAT SPA, PREFERENCE SHARES ....................... 735
--------
BANKING--3.3%
14,000 ISTITUTO BANCARIO SAN PAOLO DI TORINO ............. 205,093
--------
COMPUTERS/COMPUTER HARDWARE--2.1%
60,000 OLIVETTI GROUP SPA ................................ 134,687
--------
PRINTING & PUBLISHING--1.8%
14,500 POLIGRAFICI EDITORIALE SPA* ....................... 35,777
123,100 SEAT SPA* ......................................... 78,942
--------
114,719
--------
TOTAL ITALY 455,234
--------
JAPAN--9.8%
BANKING--0.2%
2,000 BANK OF TOKYO-MITSUBISHI .......................... 14,168
--------
COMPUTERS/COMPUTER HARDWARE--0.3%
2,000 FUJITSU LTD. ...................................... 20,301
--------
CONSUMER PRODUCTS--1.6%
4,000 CITIZEN WATCH CO. ................................. 28,535
1,000 KAO CORP. ......................................... 15,439
200 SONY CORP. ........................................ 14,637
1,200 UNI-CHARM CORP. ................................... 43,697
--------
102,308
--------
ELECTRONICS/ELECTRICAL EQUIPMENT--2.2%
5,000 ANRITSU CORP. ..................................... 38,011
300 KEYENCE CORP. ..................................... 30,324
600 MABUCHI MOTOR ..................................... 40,503
1,000 MITSUMI ELECTRIC COMPANY LTD.* .................... 18,597
5,000 OKI ELECTRIC INDUSTRY COMPANY, LTD.* .............. 11,038
--------
138,473
--------
ENTERTAINMENT/LEISURE--0.4%
300 NINTENDO COMPANY LTD. ............................. 27,832
--------
HEALTH CARE/HEALTH CARE SERVICES--0.4%
1,000 TAKEDA CHEMICAL INDUSTRIES ........................ 26,193
--------
INSURANCE--0.3%
2,000 TOKIO MARINE & FIRE INSURANCE CO. ................. 16,496
--------
MACHINERY & ENGINEERING EQUIPMENT--0.4%
5,000 TOKYO KIKAI SEISAKUSHO ............................ 28,109
--------
MANUFACTURING--1.1%
1,000 FUJI MACHINE MANUFACTURING CO. LTD. ............... 31,090
2,000 KOMORI CORP. ...................................... 36,769
--------
67,859
--------
OIL & GAS--0.4%
10,000 OSAKA GAS CO. ..................................... 25,412
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
JAPAN (cont'd)
PERSONAL SERVICES--0.9%
1,000 SECOM CO., LTD. ................................... $ 57,780
--------
PHOTOGRAPHIC EQUIPMENT--0.5%
1,000 FUJI PHOTO FILM ................................... 32,297
--------
REAL ESTATE--0.2%
3,000 HANKYU REALTY CO., LTD ............................ 11,712
--------
RETAILING--0.4%
700 MATSUMOTOKIYOSHI .................................. 22,359
--------
TELECOMMUNICATIONS--0.5%
1,000 MATSUSHITA COMMUNICATION INDUSTRIES ............... 33,717
--------
TOTAL JAPAN 625,016
--------
MALTA--1.0%
TELECOMMUNICATIONS--1.0%
5,000 MALTACOM PLC, GDR* ................................ 65,000
--------
MEXICO--0.6%
DIVERSIFIED--0.3%
8,274 ALFA, SA DE CV, CLASS A ........................... 18,677
--------
FINANCIAL SERVICES--0.1%
10,000 GRUPO FINANCIERO BANAMEX ACCIVAL, SA DE CV
(BANACCI), SER. B* ................................ 8,508
--------
HOME BUILDING CONSTRUCTION--0.2%
500 CORPORACION GEO, SA DE CV, SER. B, GDR # .......... 5,117
500 CORPORACION GEO, SA DE CV, SER. B, ADR* ........... 5,117
--------
10,234
--------
TOTAL MEXICO 37,419
--------
NETHERLANDS--4.4%
BUSINESS SERVICES--2.1%
2,543 BRUNEL INTERNATIONAL NV* .......................... 84,585
2,103 KONINKLIJKE AHREND GROEP NV ....................... 48,223
--------
132,808
--------
COMPUTER SOFTWARE--0.3%
3,000 TAS GROEP NV* ..................................... 20,411
--------
CONSUMER PRODUCTS--0.0%
5 HAGEMEYER NV ...................................... 182
--------
DIVERSIFIED--1.5%
3,000 ORDINA BEHEER NV* ................................. 92,831
--------
RETAILING--0.5%
862 VENDEX INTERNATIONAL NV ........................... 29,628
--------
TOTAL NETHERLANDS 275,860
--------
PHILIPPINES--0.1%
UTILITIES--0.1%
2,100 MANILA ELECTRIC CO., CLASS B ...................... 3,448
--------
PORTUGAL--2.0%
BANKING--1.7%
3,895 BANCO COMERCIAL PORTUGUES, SA ..................... 108,451
--------
RETAILING--0.3%
520 JERONIMO MARTINS & FILHO, SGPS SA ................. 20,548
--------
TOTAL PORTUGAL 128,999
--------
</TABLE>
See notes to financial statements.
<PAGE>
page 14 International Equity Portfolio (continued)
Portfolio of Investments August 31, 1998
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
SINGAPORE--0.3%
BANKING--0.1%
2,000 OVERSEAS CHINESE BANKING CORP. ..................... $ 5,166
----------
PRINTING & PUBLISHING--0.1%
1,000 SINGAPORE PRESS HOLDINGS LTD. ...................... 7,050
----------
REAL ESTATE--0.1%
2,000 CITY DEVELOPMENTS, LTD. ............................ 3,519
----------
TOTAL SINGAPORE 15,735
----------
SPAIN-- 2.4%
BANKING--0.7%
3,342 BANCO BILBOA VIZCAYA, SA ........................... 44,324
----------
CONSUMER PRODUCTS--0.5%
3,030 CORP. FINANCIERA REUNIDA, SA (COFIR)* .............. 34,503
----------
TELECOMMINCIATIONS--1.2%
1,980 TELEPHONICA DE ESPANA .............................. 75,996
----------
TOTAL SPAIN ........................................ 154,823
----------
SWEDEN--2.2%
COMPUTER SOFTWARE--0.2%
1,832 INDUSTRI-MATEMATIK INTERNATIONAL CORP.* .......... 10,992
----------
INSURANCE--2.0%
9,338 SKANDIA FORSAKRINGS AB ............................. 131,440
----------
TOTAL SWEDEN 142,432
----------
SWITZERLAND--5.7%
BANKING--1.1%
390 CREDIT SUISSE GROUP ................................ 68,561
----------
HEALTH CARE/HEALTH CARE SERVICES--3.3%
132 NOVARTIS AG (REGISTERED)* .......................... 205,872
----------
MANUFACTURING--0.6%
70 SULZER AG .......................................... 38,495
----------
PHOTOGRAPHIC EQUIPMENT--0.7%
162 FOTOLABO SA ........................................ 44,825
----------
TOTAL SWITZERLAND 357,753
----------
THAILAND--0.1%
OIL & GAS--0.1%
400 PTT EXPLORATION AND PRODUCTION PUBLIC CO.,
LTD. (FOREIGN) ..................................... 2,635
----------
UTILITIES--0.0%
1,900 ELECTRICITY GENERATING PUBLIC COMPANY LTD.
(FOREIGN) .......................................... 2,630
----------
TOTAL THAILAND 5,265
----------
UNITED KINGDOM--22.2%
AEROSPACE--1.2%
11,772 BRITISH AEROSPACE PLC .............................. 77,181
----------
AIRLINES--0.8%
6,735 BRITISH AIRWAYS PLC ................................ 50,763
----------
BANKING--2.6%
9,471 NATIONAL WESTMINSTER BANK .......................... 166,750
----------
BUSINESS SERVICES--0.3%
2,625 DELPHI GROUP PLC ................................... 17,386
----------
</TABLE>
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
UNITED KINGDOM (cont'd)
CONSTRUCTION--0.8%
5,733 BERKELEY GROUP PLC ................................. $ 49,507
----------
CONSUMER PRODUCTS--0.9%
6,260 UNILEVER PLC ....................................... 58,467
----------
ELECTRONICS/ELECTRICAL EQUIPMENT--1.0%
50,000 VERITY GROUP PLC ................................... 60,365
----------
ENTERTAINMENT/LEISURE 0.5%
2,391 GRANADA GROUP PLC .................................. 31,793
----------
FINANCIAL SERVICES--3.3%
6,500 BARCLAYS PLC ....................................... 154,224
4,560 LEGAL & GENERAL GROUP PLC .......................... 54,441
----------
208,665
----------
HOTELS/OTHER LODGING--0.5%
16,259 JARVIS HOTELS PLC* ................................. 32,716
----------
OIL & GAS--2.0%
7,800 BRITISH PETROLEUM CO., PLC ......................... 100,235
6,367 BRITISH-BORNEO PETROLEUM SYNDICATE PLC ............. 25,836
----------
126,071
----------
PHARMACEUTICALS--3.1%
6,459 GLAXO WELLCOME PLC ................................. 194,948
----------
PRINTING & PUBLISHING--0.7%
5,425 JARVIS PORTER GROUP, PLC ........................... 45,483
----------
REAL ESTATE--0.8%
31,756 TBI PLC ............................................ 48,989
----------
TELECOMMUNICATIONS--3.7%
13,680 SECURICOR PLC ...................................... 118,822
8,161 VODAFONE GROUP PLC ................................. 113,854
----------
232,676
----------
TOTAL UNITED KINGDOM 1,401,760
----------
VENEZUELA--0.2%
TELECOMMUNICATIONS--0.2%
1,000 COMPANIA ANONIMA NACIONAL TELEFONOS
DE VENEZUELA (CANTV), ADR* ......................... 10,500
----------
TOTAL COMMON STOCK
(COST $6,377,859) .................................. 5,779,228
----------
WARRANTS--0.0%
GERMANY--0.0%
INSURANCE--0.0%
11 MUENCHENER RUECKVERSICHERUNGS-
GESELLSCHAFT AG, EXPIRES 06/03/02 .................. 447
----------
HONG KONG--0.0%
DIVERSIFIED--0.0%
1,600 GUANGDONG INVESTMENT LTD., EXPIRES 07/30/99 ........ 2
300 WHARF HOLDINGS, EXPIRES 12/31/99 ................... 3
----------
TOTAL HONG KONG 5
----------
</TABLE>
See notes to financial statements.
<PAGE>
International Equity Portfolio (continued) page 15
Portfolio of Investments August 31, 1998
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
MALAYSIA--0.0%
CONSTRUCTION--0.0%
4,000 SUNWAY BUILDING TECHNOLOGY, BHD., 3.0%,
REDEEMABLE, UNSECURED ................. $ 535
----------
TOTAL WARRANTS
(COST $1,284) ......................... 987
----------
Principal
Amount
(USD) CORPORATE NOTES & BONDS--0.0%
---------
GERMANY--0.0%
AUTOMOTIVE--0.0%
$1,000 DAIMLER BENZ AG, 5.75%, DUE 06/14/02
(COST $769) ........................... 852
----------
TOTAL INVESTMENTS--91.5%
(COST $6,379,911) ..................... $5,781,067
----------
</TABLE>
<TABLE>
<CAPTION>
Number Original Value Unrealized
Expiration of Cost (USD) at Appreciation/
Description Date Contracts (USD) 08/31/98 (Depreciation)
- ---------------------- ------------ ----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
LONG INDEX FUTURES CONTRACTS OUTSTANDING
NIKKEI 225 (CME) Sept. 1998 2 $164,000 $134,500 ($ 29,500)
NIKKEI 225 (SMX) Sept. 1998 4 217,348 199,602 (17,746)
HANG SENG Index Sept. 1998 1 48,263 45,166 (3,097)
SHORT INDEX FUTURES CONTRACTS OUTSTANDING
Financial Times Stock
Exchange 100 Index Sept. 1998 3 305,833 264,349 41,484
</TABLE>
See notes to financial statements.
<PAGE>
page 16 Asset Allocation Portfolio
Portfolio of Investments August 31, 1998
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
LONG-TERM INVESTMENTS--97.6%
COMMON STOCK--51.7%
AEROSPACE--0.5%
800 GENERAL DYNAMICS CORP. ...................... $ 38,050
--------
AGRICULTURAL PRODUCTION/SERVICES--0.9%
2,100 UNIVERSAL CORP. ............................. 66,150
--------
AIRLINES--1.0%
1,400 AMR CORP.* .................................. 76,300
--------
AUTOMOTIVE--1.3%
2,200 FORD MOTOR CO. .............................. 96,800
--------
BANKING--4.1%
600 COMERICA, INC. .............................. 31,350
600 CULLEN/FROST BANKERS, INC. .................. 25,650
2,600 FIRSTSTAR CORP. ............................. 100,750
600 NATIONAL CITY CORP. ......................... 35,250
1,800 NATIONSBANK CORP. ........................... 102,600
1,300 NORTH FORK BANCORP., INC. ................... 24,700
--------
320,300
--------
BIOTECHNOLOGY--0.3%
400 BIOGEN, INC. ................................ 18,500
--------
CHEMICALS--0.3%
1,600 CROMPTON & KNOWLES CORP. .................... 23,400
--------
COMPUTER SOFTWARE--2.2%
2,000 COMPUTER SCIENCES CORP. ..................... 113,125
1,000 MASTECH CORP. ............................... 20,531
1,100 PLATINUM TECHNOLOGY, INC.* .................. 20,625
1,200 SYMANTEC CORP.* ............................. 19,650
--------
173,931
--------
COMPUTERS/COMPUTER HARDWARE--3.3%
2,000 EMC CORP.* .................................. 90,375
1,900 GATEWAY 2000, INC.* ......................... 89,894
400 LEXMARK INTERNATIONAL GROUP, INC.* .......... 24,225
1,000 STORAGE TECHNOLOGY CORP.* ................... 21,750
700 SUN MICROSYSTEMS, INC.* ..................... 27,737
--------
253,981
--------
CONSUMER PRODUCTS--1.9%
3,500 PHILIP MORRIS COMPANIES, INC. ............... 145,469
--------
DIVERSIFIED--1.7%
2,100 CANADIAN PACIFIC, LTD. ...................... 39,769
3,700 CBS CORP. ................................... 96,200
--------
135,969
--------
FINANCIAL SERVICES--3.0%
571 ASSOCIATES FIRST CAPITAL CORP. .............. 33,760
2,800 FEDERAL HOME LOAN MORTGAGE CORP. ............ 110,600
1,600 MORGAN STANLEY, DEAN WITTER & CO. ........... 92,900
--------
237,260
--------
FOOD/BEVERAGE PRODUCTS--0.7%
900 PEPSICO., INC. .............................. 24,919
600 QUAKER OATS CO. ............................. 31,875
--------
56,794
--------
</TABLE>
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
HEALTH CARE/HEALTH CARE SERVICES--3.2%
1,200 COLUMBIA/HCA HEALTHCARE CORP. ............... $ 27,075
1,300 CONCENTRA MANAGED CARE, INC.* ............... 16,656
1,200 HBO & CO. ................................... 25,500
6,800 HEALTHSOUTH CORP.* .......................... 128,775
1,200 TENET HEALTHCARE CORP.* ..................... 30,975
1,000 TOTAL RENAL CARE HOLDINGS, INC.* ............ 19,000
--------
247,981
--------
INSURANCE--2.5%
2,900 ALLSTATE CORP. .............................. 108,750
500 EXEL LIMITED, CLASS A ....................... 33,406
1,900 RELIANCE GROUP HOLDINGS, INC. ............... 23,987
700 TRAVELERS, INC. ............................. 31,063
--------
197,206
--------
MANUFACTURING--2.3%
850 INGERSOLL-RAND CO. .......................... 33,788
2,400 JOHNSON CONTROLS ............................ 102,750
800 PENTAIR, INC. ............................... 22,300
1,000 UNITED DOMINION INDUSTRIES, LTD. ............ 24,313
--------
183,151
--------
MEDIA/ADVERTISING--0.5%
800 OMNICOM GROUP, INC. ......................... 38,100
--------
METALS/MINING--0.5%
600 ALUMINUM CO. OF AMERICA (ALCOA) ............. 35,925
--------
OFFICE/BUSINESS EQUIPMENT--1.2%
1,100 XEROX CORP. ................................. 96,594
--------
OIL & GAS--2.0%
800 BJ SERVICES CO.* ............................ 10,100
3,700 COASTAL CORP. ............................... 96,200
500 MOBIL CORP. ................................. 34,562
500 ULTRAMAR DIAMOND SHAMROCK CORP. ............. 11,563
--------
152,425
--------
PACKAGING--1.2%
3,000 OWENS-ILLINOIS, INC.* ....................... 93,563
--------
PHARMACEUTICALS--2.2%
1,600 SCHERING-PLOUGH CORP. ....................... 137,600
600 SMITHKLINE BEECHAM PLC, ADR (UNITED
KINGDOM) .................................... 34,125
--------
171,725
--------
PRINTING & PUBLISHING--0.5%
1,400 NEW YORK TIMES CO., CLASS A ................. 40,600
--------
REAL ESTATE INVESTMENT TRUST--0.7%
1,500 BRANDYWINE REALTY TRUST ..................... 27,000
900 ESSEX PROPERTY TRUST, INC. .................. 25,594
--------
52,594
--------
RESTAURANTS/FOOD SERVICES--0.5%
1,300 CKE RESTAURANTS, INC. ....................... 40,300
--------
RETAILING--5.4%
800 COSTCO COMPANIES, INC.* ..................... 37,650
700 CVS CORP. ................................... 25,462
</TABLE>
See notes to financial statements.
<PAGE>
Asset Allocation Portfolio (continued) page 17
Portfolio of Investments August 31, 1998
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
RETAILING (cont'd)
2,100 FEDERATED DEPARTMENT STORES* .................... $ 91,481
3,100 KROGER CO.* ..................................... 139,500
1,600 NEIMAN-MARCUS GROUP, INC.* ...................... 38,900
3,500 OFFICE DEPOT, INC.* ............................. 89,250
---------
422,243
---------
TELECOMMUNICATIONS--2.0%
700 BELLSOUTH CORP. ................................. 47,994
600 TELLABS, INC.* .................................. 25,350
2,100 WORLDCOM, INC.* ................................. 85,969
---------
159,313
---------
UTILITIES--4.5%
900 CMS ENERGY CORP. ................................ 38,081
2,400 CONSOLIDATED EDISON, INC. ....................... 113,550
1,800 DUKE ENERGY CORP. ............................... 112,275
800 FPL GROUP INC. .................................. 53,250
1,400 LG&E ENERGY CORP. ............................... 35,875
---------
353,031
---------
WASTE MANAGEMENT--1.3%
2,300 WASTE MANAGEMENT, INC.* ......................... 101,487
---------
TOTAL COMMON STOCK
(COST $4,752,046) ............................... 4,029,142
=========
WARRANTS--0.0%
REAL ESTATE INVESTMENT TRUST--0.0%
54 SECURITY CAPITAL GROUP, SER. B, EXPIRES 09/18/98
(COST $0) ....................................... 0
---------
Principal
Amount
---------
CORPORATE NOTES & BONDS--7.4%
AEROSPACE--1.4%
$ 100,000 LOCKHEED MARTIN CORP., 7.45%, 06/15/04 .......... 105,946
---------
BROADCASTING--1.5% ..............................
100,000 TIME WARNER, INC., 9.15%, 02/01/23 .............. 120,016
---------
CONSUMER PRODUCTS--1.9% .........................
150,000 KIMBERLY-CLARK CORP., 6.25%, 07/15/18 ........... 149,250
---------
FINANCIAL SERVICES--2.2% ........................
50,000 ASSOCIATES CORP. OF NORTH AMERICA,
5.88%, 07/15/02 ................................. 49,910
100,000 GENERAL ELECTRIC CAPITAL CORP., MTN,
9.18%, 12/30/08 ................................. 125,381
---------
175,291
---------
TELECOMMUNICATIONS--0.4%
30,000 WORLDCOM, INC., 6.13%, 08/15/01 ................. 30,065
---------
TOTAL CORPORATE NOTES & BONDS
(COST $560,129) ................................. 580,568
---------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Issuer Value
------ ------ -----
<S> <C> <C>
MORTGAGE-BACKED PASS THRU SECURITIES--11.9%
$ 500,000 FEDERAL NATIONAL MORTGAGE ASSOCIATION,
15 YEAR, TBA, 6.00%, 09/01/13 .......................... $ 498,905
73,647 FEDERAL NATIONAL MORTGAGE ASSOCIATION,
30 YEAR, TBA, 10.50%, 06/01/27 ......................... 81,943
250,000 GE CAPITAL MORTGAGE SERVICES, INC., SER. 1998-13,
CLASS A10, FRN, 5.96%, 08/25/28 ........................ 250,703
100,000 SALOMON BROTHERS MORTGAGE SECURITIES VII,
SER. 1998-NC2, CLASS M2, FRN, 6.26%, 06/25/28 .......... 99,406
----------
(COST $926,860) ........................................ 930,957
----------
ASSET BACKED SECURITIES--1.1%
89,345 MID-STATE TRUST, SER. 6, CLASS A4, 7.79%, 07/01/35
(COST $89,428).......................................... 89,596
----------
U.S. TREASURY OBLIGATIONS--23.9%
U.S. TREASURY NOTES AND BONDS,
500,000 6.13%, 08/15/07 ........................................ 535,390
100,000 6.13%, 11/15/27 + ...................................... 111,078
500,000 6.50%, 10/15/06 + ...................................... 545,470
50,000 7.00%, 07/15/06 + ...................................... 56,031
345,000 7.88%, 11/15/04 + ...................................... 395,994
125,000 8.50%, 02/15/20 + ...................................... 172,617
50,000 8.75%, 08/15/00 ........................................ 53,485
----------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $1,784,454) ...................................... 1,870,065
----------
STATE & LOCAL OBLIGATIONS--1.6%
130,000 WAYNE CHARTER COUNTY, MICHIGAN, DETROIT
METROPOLITAN WAYNE COUNTY, SER. A, REV.,
5.00%, 12/01/28 ........................................ 126,628
----------
(COST $123,584)
TOTAL LONG-TERM INVESTMENTS
(COST $8,236,501)....................................... 7,626,956
----------
SHORT-TERM INVESTMENTS--8.6%
REPURCHASE AGREEMENT--8.6%
671,000 GREENWICH CAPITAL MARKETS, 5.80%, DUE 09/01/98,
(PROCEEDS $671,108, SECURED BY U.S. TREASURY
BOND, $420,000 AT 11.25%, DUE 02/15/15; MARKET
$689,804)
(COST $671,000) ........................................ 671,000
----------
TOTAL INVESTMENTS--106.2%
(COST $8,907,501)....................................... $8,297,956
==========
</TABLE>
SHORT FUTURES CONTRACTS OUTSTANDING
<TABLE>
<CAPTION>
Number
Expiration of Original Value at Unrealized
Description Date Contracts Cost 08/31/98 (Depreciation)
- -------------------- ------------ ----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
U.S. Treasury Bond Dec. 98 5 $584,685 $585,625 (940)
</TABLE>
See notes to financial statements.
<PAGE>
page 18 U.S. Government Income Portfolio
Portfolio of Investments
August 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Issuer Value
------ ------ -----
<S> <C> <C>
LONG-TERM INVESTMENTS--98.7%
U.S. TREASURY OBLIGATIONS--35.4%
U.S. TREASURY NOTES & BONDS
$ 500,000 6.13%, 09/30/00 ......................... $ 511,405
1,000,000 6.75%, 08/15/26 ......................... 1,187,970
400,000 8.50%, 02/15/20 ......................... 552,376
60,000 10.75%, 08/15/05 ........................ 79,631
----------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $2,135,541) ........................ 2,331,382
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS--50.6%
750,000 FEDERAL HOME LOAN MORTGAGE CORP.,
5.70%, 03/25/03 .......................... 760,193
1,100,000 FEDERAL HOME LOAN MORTGAGE CORP.,
DN, 5.70%, 09/01/98 ...................... 1,100,000
450,000 FEDERAL NATIONAL MORTGAGE ASSOCIATION,
6.24%, 07/29/02 .......................... 463,712
1,000,000 STUDENT LOAN MARKETING ASSOCIATION,
5.57%, 03/17/00 .......................... 1,004,220
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $3,295,034) ........................ 3,328,125
----------
COLLATERALIZED MORTGAGE OBLIGATION--12.7 %
829,046 GOVERNMENT NATIONAL MORTGAGE ASSOCIATION,
POOL 354779, 6.50%, 03/15/24 .............
(COST $761,954) .......................... 837,070
----------
TOTAL INVESTMENTS--98.7%
(COST $6,192,529) ........................ $6,496,577
==========
</TABLE>
Money Market Portfolio
Portfolio of Investments
August 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Issuer Value
------ ------ -----
<S> <C> <C>
U.S. TREASURY OBLIGATION--21.0%
$ 695,000 U.S. TREASURY BILL, 4.84%, 11/19/98
(COST $687,543) ...................................... $ 687,543
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS--24.5%
FEDERAL FARM CREDIT BANK, DN,
96,000 5.39%, 09/11/98 ..................................... 95,856
100,000 5.42%, 09/01/98 ..................................... 100,000
98,000 5.70%, 09/01/98 ..................................... 98,000
172,000 FEDERAL HOME LOAN BANK, DN, 5.40%, 09/18/98 .......... 171,561
170,000 FEDERAL HOME LOAN MORTGAGE CORP.,
DN, 5.42%, 11/06/98 .................................. 168,311
170,000 FEDERAL NATIONAL MORTGAGE ASSOCIATION,
DN, 5.44%, 09/28/98 .................................. 169,306
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $803,034) ...................................... 803,034
----------
COMMERCIAL PAPER--54.6%
100,000 BANKERS TRUST CORP., 5.53%, 09/09/98 ................. 99,877
150,000 BRITISH COLUMBIA, PROVINCE OF CANADA,
5.38%, 02/02/99 ...................................... 146,548
155,000 BUDGET FUNDING CORP., 5.54%, 09/16/98 ................ 154,642
108,000 CIESCO L.P., 5.52%, 09/10/98 ......................... 107,851
120,000 DAIMLER-BENZ NORTH AMERICA CORP., (GERMANY)
5.55%, 09/24/98 ...................................... 119,575
150,000 DEN DANSKE CORP., (DENMARK) 5.53%, 09/04/98 .......... 149,931
139,000 FORMOSA PLASTIC CORP. OF USA, SER. B,
5.53%, 09/10/98 ...................................... 138,808
160,000 GENERAL ELECTRIC CAPITAL CORP., SER. A,
MTN, 5.52%, 09/09/98 ................................. 159,804
150,000 GLENCORE FINANCE (BERMUDA), SER. B,
5.53%, 09/18/98 ...................................... 149,608
160,000 KFW INTERNATIONAL FINANCE, 5.53%, 09/17/98 ........... 159,607
145,000 METLIFE FUNDING INC., 5.52%, 09/10/98 ................ 144,800
150,000 NATIONWIDE BUILDING SOCIETY, (UNITED
KINGDOM) 5.48%, 11/24/98 ............................. 148,082
113,000 SVENSKA HANDELSBANK, INC., (SWEDEN)
5.52%, 09/24/98 ...................................... 112,601
----------
TOTAL COMMERCIAL PAPER
(COST $1,791,734) .................................... 1,791,734
----------
TOTAL INVESTMENTS--100.1%
(COST $3,282,311)** .................................. $3,282,311
==========
</TABLE>
INDEX:
* = Non-income producing securities
** = The cost of securities is substantially the same for federal income tax
purposes
# = Security may only be sold to institutional buyers
+ = All or a portion of this security is segregated
ADR = American Depository Receipt
DN = Discount Note
FRN = Floating Rate Note: The maturity date shown is the next interest reset
date; the rate shown is the rate in effect at August 31, 1998.
GDR = Global Depository Receipt
MTN = Medium Term Note
TBA = To be announced
See notes to financial statements.
<PAGE>
Statement of Assets and Liabilities page 19
August 31, 1998
<TABLE>
<CAPTION>
GROWTH AND CAPITAL INTERNATIONAL
INCOME GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- ---------------
<S> <C> <C> <C>
ASSETS:
Investment securities, at value (Note 1) $ 17,447,837 $ 11,136,357 $5,781,067
Cash 235 159 196,504
Foreign Currency (Cost $118,539) -- -- 119,878
Other assets (a) 250 166 83,848
Receivables:
Open forward foreign currency contracts -- -- 53,347
Investment securities sold -- -- 174,228
Dividends and Interest 19,178 5,823 17,613
Expense reimbursement from Sub-administrator -- -- --
Portfolio shares sold 125 92 95
------------ ------------ ----------
TOTAL ASSETS 17,467,625 11,142,597 6,426,580
------------ ------------ ----------
LIABILITIES:
Payables:
Investment securities purchased -- -- 20,411
Portfolio shares redeemed 1,264 502 442
Open forward foreign currency contracts -- -- 40,994
Variation margin -- -- 8,859
Accrued liabilities: (Note 2)
Custody fees 22,571 15,602 3,226
Other 74,079 30,729 34,821
------------ ------------ ----------
TOTAL LIABILITIES 97,914 46,833 108,753
------------ ------------ ----------
NET ASSETS:
Paid in capital 17,321,875 11,357,267 6,566,052
Accumulated undistributed net investment income 92,433 62,324 (3,409)
Accumulated net realized gain (loss) on investment and
futures transactions 2,973,953 930,334 347,352
Net unrealized appreciation (depreciation) of investments, futures and
assets and liabilities denominated in foreign currencies (3,018,550) (1,254,161) (592,168)
------------ ------------ ----------
NET ASSETS APPLICABLE TO INVESTORS'
BENEFICIAL INTERESTS $ 17,369,711 $ 11,095,764 $6,317,827
============ ============ ==========
Shares of beneficial interest outstanding
($.001 par value; unlimited number of shares authorized) 1,404,813 946,752 655,819
Net asset value, redemption price per share and
maximum offering price per share $ 12.36 $ 11.72 $ 9.63
Cost of investments $ 20,466,387 $ 12,390,518 $6,379,911
------------ ------------ ----------
<CAPTION>
ASSET U.S. GOVERNMENT MONEY
ALLOCATION INCOME MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ----------------- -------------
<S> <C> <C> <C>
ASSETS:
Investment securities, at value (Note 1) $8,297,956 $6,496,577 $3,282,311
Cash 1,773 35,139 347
Foreign Currency (Cost $118,539) -- -- --
Other assets (a) 107 78 40
Receivables:
Open forward foreign currency contracts -- -- --
Investment securities sold 1,020,028 -- --
Dividends and Interest 42,299 68,758 --
Expense reimbursement from Sub-administrator 4,000 8,000 22,004
Portfolio shares sold 92 -- --
---------- ---------- ----------
TOTAL ASSETS 9,366,255 6,608,552 3,304,702
---------- ---------- ----------
LIABILITIES:
Payables:
Investment securities purchased 1,514,330 852 --
Portfolio shares redeemed 177 -- 29
Open forward foreign currency contracts -- -- --
Variation margin 1,719 -- --
Accrued liabilities: (Note 2)
Custody fees 19,412 16,094 3,000
Other 17,829 10,177 22,565
---------- ---------- ----------
TOTAL LIABILITIES 1,553,467 27,123 25,594
---------- ---------- ----------
NET ASSETS:
Paid in capital 7,508,089 6,004,922 3,279,096
Accumulated undistributed net investment income 144,502 278,334 409
Accumulated net realized gain (loss) on investment and
futures transactions 770,682 (5,875) (397)
Net unrealized appreciation (depreciation) of investments, futures and
assets and liabilities denominated in foreign currencies (610,485) 304,048 --
---------- ---------- ----------
NET ASSETS APPLICABLE TO INVESTORS'
BENEFICIAL INTERESTS $7,812,788 $6,581,429 $3,279,108
========== ========== ==========
Shares of beneficial interest outstanding
($.001 par value; unlimited number of shares authorized) 733,982 650,225 3,279,082
Net asset value, redemption price per share and
maximum offering price per share $ 10.64 $ 10.12 $ 1.00
Cost of investments $8,907,501 $6,192,529 $3,282,311
---------- ---------- ----------
</TABLE>
(a) Including cash segregated for margin on futures contracts.
See notes to financial statements.
<PAGE>
page 20 Statement of Operations
For the year ended August 31, 1998
<TABLE>
<CAPTION>
Growth and Capital International
Income Growth Equity
Portfolio Portfolio Portfolio
--------------- --------------- ---------------
<S> <C> <C> <C>
INVESTMENT INCOME (NOTE 1C):
Interest $ 77,099 $ 125,008 $ 21,180
Dividends 225,850 86,572 66,656
Foreign taxes withheld (1,249) (342) (5,571)
----------- ----------- ---------
TOTAL INVESTMENT INCOME 301,700 211,238 82,265
----------- ----------- ---------
EXPENSES:
Investment advisory fees (Note 2) 107,568 78,176 50,982
Administration fees (Note 2) 35,856 26,059 12,755
Accounting fees -- -- 64,999
Custodian fees 61,279 64,237 24,398
Printing and postage 46,151 20,178 8,031
Professional fees 43,576 30,855 31,976
Trustees fees and expenses 896 651 319
Miscellaneous expenses 9,585 1,374 1,000
----------- ----------- ---------
TOTAL EXPENSES 304,911 221,530 194,460
----------- ----------- ---------
Less amounts waived (Note 2) 143,424 104,235 63,737
Less amounts borne by VFD (Note 2) -- -- 60,623
----------- ----------- ---------
NET EXPENSES 161,487 117,295 70,100
----------- ----------- ---------
NET INVESTMENT INCOME 140,213 93,943 12,165
----------- ----------- ---------
NET REALIZED GAIN (LOSS) ON:
Investment transactions 3,688,903 1,362,111 474,168
Futures transactions -- -- (45,428)
Foreign exchange transactions -- -- (51,069)
CHANGE IN NET UNREALIZED APPRECIATION/DEPRECIATION ON:
Investments (5,264,810) (3,730,448) (630,184)
Futures transactions -- -- (8,859)
Foreign currency contracts and foreign currency translation -- -- 27,873
----------- ----------- ---------
Net realized and unrealized gain (loss) (1,575,907) (2,368,337) (233,499)
----------- ----------- ---------
Net increase (decrease) in net assets from operations ($ 1,435,694) ($ 2,274,394) ($ 221,334)
=========== =========== =========
<CAPTION>
Asset U.S. Government Money
Allocation Income Market
Portfolio Portfolio Portfolio
--------------- ----------------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME (NOTE 1C):
Interest $ 225,288 $336,625 $192,632
Dividends 57,936 -- --
Foreign taxes withheld (431) -- --
------------ -------- --------
TOTAL INVESTMENT INCOME 282,793 336,625 192,632
------------ -------- --------
EXPENSES:
Investment advisory fees (Note 2) 42,474 27,037 8,742
Administration fees (Note 2) 15,445 10,815 6,979
Accounting fees -- -- --
Custodian fees 62,132 50,810 40,863
Printing and postage 6,713 1,191 1,192
Professional fees 18,236 17,161 20,224
Trustees fees and expenses 386 270 175
Miscellaneous expenses 2,241 500 549
------------ -------- --------
TOTAL EXPENSES 147,627 107,784 78,724
------------ -------- --------
Less amounts waived (Note 2) 57,919 37,852 15,721
Less amounts borne by VFD (Note 2) 24,089 26,673 43,771
------------ -------- --------
NET EXPENSES 65,619 43,259 19,232
------------ -------- --------
NET INVESTMENT INCOME 217,174 293,366 173,400
------------ -------- --------
NET REALIZED GAIN (LOSS) ON:
Investment transactions 876,005 (4,875) (380)
Futures transactions (15,236) -- --
Foreign exchange transactions -- -- --
CHANGE IN NET UNREALIZED APPRECIATION/DEPRECIATION ON:
Investments (1,191,328) 270,455 --
Futures transactions (941) -- --
Foreign currency contracts and foreign currency translation -- -- --
------------ -------- --------
Net realized and unrealized gain (loss) (331,500) 265,580 (380)
------------ -------- --------
Net increase (decrease) in net assets from operations ($ 114,326) $558,946 $173,020
============ ======== ========
</TABLE>
See notes to financial statements.
<PAGE>
Statement of Changes in Net Assets page 21
For the year ended August 31,
<TABLE>
<CAPTION>
Growth and Income Capital Growth
Portfolio Portfolio
------------------------------- -------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income $ 140,213 $ 136,850 $ 93,943 $ 63,795
Net realized gain (loss) on investment and
foreign currency transactions 3,688,903 1,488,185 1,362,111 790,892
Change in net unrealized appreciation/
depreciation on investments and foreign
currency transactions (5,264,810) 1,876,210 (3,730,448) 1,575,253
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (1,435,694) 3,501,245 (2,274,394) 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) (1,086,897) (1,021,229)
----------- ----------- ----------- -----------
(2,247,852) (1,153,604) (1,162,191) (1,078,796)
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) FROM CAPITAL
SHARE TRANSACTIONS 6,051,590 4,572,685 2,159,053 3,112,197
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS 2,368,044 6,920,326 (1,277,532) 4,463,341
NET ASSETS:
Beginning of period 15,001,667 8,081,341 12,373,296 7,909,955
----------- ----------- ----------- -----------
End of period $17,369,711 $15,001,667 $11,095,764 $12,373,296
=========== =========== =========== ===========
<CAPTION>
International Equity Asset Allocation
Portfolio Portfolio
---------------------------- -----------------------------
1998 1997 1998 1997
------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income $ 12,165 $ 94,650 $ 217,174 $ 168,248
Net realized gain (loss) on investment and
foreign currency transactions 377,671 229,815 860,769 399,608
Change in net unrealized appreciation/
depreciation on investments and foreign
currency transactions (611,170) 23,702 (1,192,269) 466,666
---------- ---------- ----------- ----------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (221,334) 348,167 (114,326) 1,034,522
---------- ---------- ----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (103,835) (53,064) (188,322) (118,324)
Net realized gain on investment
transactions (217,881) (346,955) (398,931) (611,347)
---------- ---------- ----------- ----------
(321,716) (400,019) (587,253) (729,671)
---------- ---------- ----------- ----------
NET INCREASE (DECREASE) FROM CAPITAL
SHARE TRANSACTIONS 1,440,335 1,571,627 2,232,224 1,944,075
---------- ---------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS 897,285 1,519,775 1,530,645 2,248,926
NET ASSETS:
Beginning of period 5,420,542 3,900,767 6,282,143 4,033,217
---------- ---------- ----------- ----------
End of period $6,317,827 $5,420,542 $ 7,812,788 $6,282,143
========== ========== =========== ==========
<CAPTION>
U.S. Government Income Money Market
Portfolio Portfolio
-------------------------- -----------------------------
1998 1997 1998 1997
------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income $ 293,366 $ 200,891 $ 173,400 $ 161,224
Net realized gain (loss) on investment and
foreign currency transactions (4,875) (1,000) (380) (11)
Change in net unrealized appreciation/
depreciation on investments and foreign
currency transactions 270,455 62,226 -- --
---------- ---------- ----------- ----------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 558,946 262,117 173,020 161,213
---------- ---------- ----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (152,142) (175,708) (172,997) (161,224)
Net realized gain on investment
transactions -- (107,377) -- --
---------- ---------- ----------- ----------
(152,142) (283,085) (172,997) (161,224)
---------- ---------- ----------- ----------
NET INCREASE (DECREASE) FROM CAPITAL
SHARE TRANSACTIONS 2,373,233 828,347 (1,575,230) 1,903,996
---------- ---------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS 2,780,037 807,379 (1,575,207) 1,903,985
NET ASSETS:
Beginning of period 3,801,392 2,994,013 4,854,315 2,950,330
---------- ---------- ----------- ----------
End of period $6,581,429 $3,801,392 $ 3,279,108 $4,854,315
========== ========== =========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
page 22 Financial Highlights
<TABLE>
<CAPTION>
Growth and Income Capital Growth
Portfolio Portfolio
------------------------------------------------ -------------------------------------
Year Ended 03/01/95* Year Ended
August 31, through August 31,
1998 1997 1996 08/31/95 1998 1997 1996
------------ ----------- ----------- ----------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 15.16 $ 12.74 $11.48 $10.00 $ 15.52 $ 13.84 $ 11.90
------- ------- ------ ------ ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.091 0.149 0.294 0.110 0.100 0.088 0.158
Net Gains or Losses on Investments
(both realized and unrealized) (0.709) 3.991 1.516 1.370 (2.374) 3.422 2.139
------- ------- ------ ------ ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS (0.618) 4.140 1.810 1.480 (2.274) 3.510 2.297
------- ------- ------ ------ ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income 0.130 0.150 0.300 -- 0.090 0.100 0.142
Distributions from capital gains 2.052 1.570 0.250 -- 1.436 1.730 0.215
------- ------- ------ ------ ------- ------- -------
TOTAL DISTRIBUTIONS 2.182 1.720 0.550 -- 1.526 1.830 0.357
------- ------- ------ ------ ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 12.36 $ 15.16 $12.74 $11.48 $ 11.72 $ 15.52 $ 13.84
======= ======= ====== ====== ======= ======= =======
TOTAL RETURN (5.45%) 35.53% 16.24% 14.80% (16.38%) 27.27% 19.66%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000 omitted) $17,370 $15,002 $8,081 $6,247 $11,096 $12,373 $7,910
Ratios to Average Net Assets#:
Expenses 0.90% 0.90% 0.90% 0.90% 0.90% 0.90% 0.90%
Net investment income 0.78% 1.18% 1.71% 2.14% 0.72% 0.64% 0.97%
Expenses without waivers and
assumption of expenses 1.70% 1.70% 1.98% 1.80% 1.70% 1.70% 1.97%
Net investment income without
waivers and assumption of expenses (0.02%) 0.38% 0.63% 1.24% (0.08%) (0.16%) (0.09)%
Portfolio Turnover Rate 170% 89% 129% 32% 71% 54% 107%
<CAPTION>
Capital
Growth International Equity
Portfolio Portfolio
----------- -------------------------------------------------
03/01/95* Year Ended 03/01/95*
through August 31, through
08/31/95 1998 1997 1996 08/31/95
----------- --------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $10.00 $10.45 $10.59 $ 10.89 $10.00
------ ------ ------ ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.055 0.020(b) 0.190 0.216 0.101
Net Gains or Losses on Investments
(both realized and unrealized) 1.845 (0.282) 0.650 0.034 0.789
------ ------ ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS 1.900 (0.262) 0.840 0.250 0.890
------ ------ ------- ------- ------
LESS DISTRIBUTIONS:
Dividends from net investment income -- 0.175 0.130 0.250 --
Distributions from capital gains -- 0.382 0.850 0.300 --
------ ------ ------ ------- ------
TOTAL DISTRIBUTIONS -- 0.557 0.980 0.550 --
------ ------ ------ ------- ------
NET ASSET VALUE, END OF PERIOD $11.90 $ 9.63 $10.45 $ 10.59 $10.89
====== ====== ====== ======= ======
TOTAL RETURN 19.00% (2.46%) 8.27% 2.42% 8.90%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000 omitted) $6,329 $6,318 $5,421 $ 3,901 $5,482
Ratios to Average Net Assets#:
Expenses 0.90% 1.10% 1.11% 1.10% 1.09%
Net investment income 1.04% 0.19% 1.96% 0.82% 1.92%
Expenses without waivers and
assumption of expenses 1.80% 3.05% 2.99% 4.22% 2.90%
Net investment income without
waivers and assumption of expenses 0.14% (1.76%) 0.08% (2.30)% 0.11%
Portfolio Turnover Rate 28% 157% 158% 200% 75%
</TABLE>
<TABLE>
<CAPTION>
Asset Allocation U.S. Government Income
Portfolio Portfolio++
----------------------------------------------- ---------------------------------
Year Ended 03/01/95* Year Ended
August 31, through August 31,
1998 1997 1996 08/31/95 1998 1997 1996
----------- ----------- ----------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $11.57 $11.15 $11.04 $10.00 $ 9.40 $ 9.53 $10.69
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.282 0.328 0.657 0.205 0.391 0.522 1.173
Net Gains or Losses on Investments
(both realized and unrealized) (0.248) 1.942 0.488 0.835 0.635 0.218 (0.858)
------ ------ ------ ------- ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.034 2.270 1.145 1.040 1.026 0.740 0.315
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income 0.300 0.300 0.670 -- 0.306 0.540 1.134
Distributions from capital gains 0.664 1.550 0.365 -- -- 0.330 0.341
------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS 0.964 1.850 1.035 -- 0.306 0.870 1.475
------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.64 $11.57 $11.15 $11.04 $10.12 $ 9.40 $ 9.53
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (0.04%) 22.61% 10.90% 10.40% 11.12% 8.11% 2.62%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000 omitted) $7,813 $6,282 $4,033 $5,546 $6,581 $3,801 $2,994
Ratios to Average Net Assets#:
Expenses 0.85% 0.85% 0.85% 0.85% 0.80% 0.80% 0.80%
Net investment income 2.81% 3.28% 3.18% 3.86% 5.40% 5.91% 6.06%
Expenses without waivers and
assumption of expenses 1.91% 2.03% 2.33% 1.65% 1.99% 1.50% 1.79%
Net investment income without
waivers and assumption of expenses 1.75% 2.10% 1.71% 3.06% 4.21% 5.21% 5.08%
Portfolio Turnover Rate 162% 122% 155% 45% 14% 40% 83%
<CAPTION>
U.S.
Government
Income Money Market
Portfolio++ Portfolio
----------- ---------------------------------------
03/01/95* Year Ended 03/01/95*
through August 31, through
08/31/95 1998 1997 1996 08/31/95
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $10.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.322 0.050 0.048 0.050 0.028
Net Gains or Losses on Investments
(both realized and unrealized) 0.368 -- -- -- --
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.690 0.050 0.048 0.050 0.028
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income -- 0.050 0.048 0.050 0.028
Distributions from capital gains -- -- -- -- --
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS -- 0.050 0.048 0.050 0.028
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.69 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
TOTAL RETURN 6.90% 5.04% 4.93% 5.15% 2.79%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000 omitted) $5,390 $3,279 $4,854 $2,950 $5,422
Ratios to Average Net Assets#:
Expenses 0.80% 0.55% 0.55% 0.55% 0.55%
Net investment income 6.19% 4.94% 4.84% 5.10% 5.46%
Expenses without waivers and
assumption of expenses 1.62% 2.24% 1.46% 1.74% 1.21%
Net investment income without
waivers and assumption of expenses 5.37% 3.25% 3.93% 3.90% 4.80%
Portfolio Turnover Rate 46% -- -- -- --
</TABLE>
* Commencement of operations.
# Short periods have been annualized.
++ On 12/27/96, the Portfolio changed its name from U.S. Treasury Income
Portfolio to U.S. Government Income Portfolio.
b Net investment income per share has been calculated based on average shares
outstanding during the period.
See notes to financial statements.
<PAGE>
Notes to Financial Statements page 23
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. If the seller of a repurchase agreement 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 index futures
contracts to control the asset mix of the Portfolio in the most efficient
manner. This allows the fund manager to more fully participate in the
market, adjusting country exposures while incurring minimal transaction
costs. Long index futures contracts are used to gain exposure to
equities, when the fund manager anticipates that this will be more
efficient than buying stocks directly. The use of long futures contracts
subject the Portfolio to risk of loss up to the amount of the value of
the contract. Short index futures contracts are used
<PAGE>
page 24 Notes to Financial Statements
for hedging purposes (to reduce the exposure to equities). The use of
short futures contracts subject the Portfolio to unlimited risk of loss.
AAP may invest in interest rate futures contracts as a hedge against rate
risk or to change the duration of the fixed income components of the
portfolio.
As of August 31, 1998, the IEP and AAP had outstanding futures contracts
as described on the respective Portfolio of Investments.
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 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. IEP accumulated undistributed net
investment income was decreased by $19,568 and undistributed net
realized gain was increased by $19,568. 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
<PAGE>
Notes to Financial Statements page 25
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.
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. Assumption of Expenses--For the year ended August 31, 1998, the
Sub-administrator voluntarily assumed expenses for the portfolios as
follows:
<TABLE>
<CAPTION>
U.S.
International Asset Government Money
Equity Allocation Income Market
Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------
<S> <C> <C> <C>
$ 60,623 $ 24,089 $ 26,673 $ 43,771
--------------- ---------- ---------- ---------
</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 year ended August 31, 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:
<TABLE>
<CAPTION>
Accrued
Pension Pension
Portfolio: Expenses Liability
-------- ---------
<S> <C> <C>
Growth and Income Portfolio $ 321 $ 937
Capital Growth Portfolio 245 767
International Equity Portfolio 115 387
Asset Allocation Portfolio 137 434
U.S. Government Income
Portfolio 90 309
Money Market Portfolio 65 244
</TABLE>
3. INVESTMENT TRANSACTIONS--For the year ended August 31, 1998, the cost of
purchases and proceeds from 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) $32,592,802 $10,008,310 $9,744,296 $8,550,255 $ --
Sales (excluding
U.S. Government) 28,467,067 9,142,268 8,878,574 7,841,334 --
Purchases of
U.S. Government -- -- -- 3,237,883 2,406,283
Sales of
U.S. Government -- -- -- 2,500,523 600,000
</TABLE>
<PAGE>
page 26
Notes to Financial Statements
4. FEDERAL INCOME TAX MATTERS--For Federal income tax purposes, the cost and
unrealized appreciation/(depreciation) in value of the investment securities
at August 31, 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 $20,507,554 $ 12,390,518 $ 6,387,165 $ 8,914,834 $ 6,192,529
------------ ------------ ------------ ----------- -----------
Gross
Unrealized
Appreciation 541,748 1,223,925 450,762 244,524 306,739
Gross
Unrealized
Depreciation (3,601,465) (2,478,086) (1,056,860) (861,402) (2,691)
------------ ------------ ------------ ----------- -----------
Net Unrealized
Appreciation
(Depreciation) $(3,059,717) $ (1,254,101) $ (606,098) $ (616,878) $ 304,048
============ ============ ============ =========== ===========
</TABLE>
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
Year Ended August 31
-------------------------------------------------------------------
1998 1997
------------------------------ ---------------------------------
Amount Shares Amount Shares
------------ ------ ---------- ------
<S> <C> <C> <C> <C>
Shares sold $ 7,392,467 487,129 $ 5,749,214 426,540
Shares issued in reinvestment
of distributions 2,247,852 162,983 1,153,604 93,214
Shares redeemed (3,588,729) (234,746) (2,330,133) (164,444)
------------- --------- ------------- ---------
Net increase (decrease) in
Trust shares outstanding $ 6,051,590 415,366 $ 4,572,685 355,310
============= ========= ============= =========
Capital Growth Portfolio
Year Ended August 31
-------------------------------------------------------------------
1998 1997
------------------------------ ---------------------------------
Amount Shares Amount Shares
------------- --------- ------------- ---------
Shares sold $ 4,208,043 270,050 $ 3,889,436 271,956
Shares issued in reinvestment
of distributions 1,162,192 81,196 1,078,795 78,724
Shares redeemed (3,211,182) (201,529) (1,856,034) (125,230)
------------- --------- ------------- ---------
Net increase (decrease) in
Trust shares outstanding $ 2,159,053 149,717 $ 3,112,197 225,450
============= ========= ============= =========
International Equity Portfolio
Year Ended August 31
-------------------------------------------------------------------
1998 1997
------------------------------ ---------------------------------
Amount Shares Amount Shares
------------- --------- ------------- ---------
Shares sold $ 1,608,468 150,107 $ 1,376,612 129,737
Shares issued in reinvestment
of distributions 321,716 33,368 400,018 39,666
Shares redeemed (489,849) (46,315) (205,003) (19,191)
------------- --------- ------------- ---------
Net increase (decrease) in
Trust shares outstanding $ 1,440,335 137,160 $ 1,571,627 150,212
============= ========= ============= =========
</TABLE>
<TABLE>
<CAPTION>
Asset Allocation Portfolio
Year Ended August 31
-------------------------------------------------------------------
1998 1997
------------- -------------
Amount Shares Amount Shares
------------------------------ ----------------------------------
<S> <C> <C> <C> <C>
Shares sold $ 2,149,078 182,176 $ 1,347,903 121,979
Shares issued in reinvestment
of distributions 587,253 52,028 729,672 71,619
Shares redeemed (504,107) (43,387) (133,500) (12,026)
------------- --------- ------------- ---------
Net increase (decrease) in
Trust shares outstanding $ 2,232,224 190,817 $ 1,944,075 181,572
============= ========= ============= =========
U.S. Government Income Portfolio
Year Ended August 31
-------------------------------------------------------------------
1998 1997
------------------------------ ----------------------------------
Amount Shares Amount Shares
------------- --------- ------------- ---------
Shares sold $ 2,677,221 276,633 $ 696,656 75,260
Shares issued in reinvestment
of distributions 152,142 15,978 283,085 31,241
Shares redeemed (456,130) (46,840) (151,394) (16,243)
------------- --------- ------------- ---------
Net increase (decrease) in
Trust shares outstanding $ 2,373,233 245,771 $ 828,347 90,258
============= ========= ============= =========
Money Market Portfolio
Year Ended August 31
-------------------------------------------------------------------
1998 1997
------------------------------ ----------------------------------
Amount Shares Amount Shares
------------- --------- ------------- ---------
Shares sold $ 827,196 827,196 $ 3,081,078 3,081,078
Shares issued in reinvestment
of distributions 179,352 179,352 161,224 161,224
Shares redeemed (2,581,778) (2,581,778) (1,338,306) (1,338,306)
------------- ---------- ------------- ----------
Net increase (decrease) in
Trust shares outstanding ($ 1,575,230) (1,575,230) $ 1,903,996 1,903,996
============= ========== ============= ==========
</TABLE>
6. OPEN FORWARD FOREIGN CURRENCY CONTRACTS The following forward foreign
currency contracts were held by the International Equity Portfolio at August
31, 1998:
<TABLE>
<CAPTION>
Unrealized
Contract Amount Contract Amount Settlement Gain/(Loss)
Purchased/(Sold) Sold/(Purchased) Date (USD)
- ----------------------------- ------------------------- ------------ ------------
<S> <C> <C> <C>
Unrealized Gain
- -----------------------------
178,930 (DEM) 100,000 (USD) 09/01/98 $ 1,781
293,118 (GBP) 69,000,000 (JPY) 09/10/98 750
69,000,000 (JPY) 290,967 (GBP) 09/10/98 2,854
(102,336,500) (JPY) (781,971) (USD) 11/10/98 47,962
--------
$53,347
--------
Unrealized Loss
- -----------------------------
499,115 (DEM) 41,160,000 (JPY) 09/10/98 $ (8,518)
707,275,000 (ITL) 250,000 (GBP) 11/10/98 (10,459)
(84,600,000) (ITL) (47,396) (USD) 09/02/98 (1,262)
(10,000,000) (JPY) (69,735) (USD) 09/01/98 (1,258)
78,336,500 (JPY) 575,570 (USD) 11/10/98 (13,701)
24,000,000 (JPY) 177,936 (USD) 11/10/98 (5,796)
--------
$(40,994)
--------
</TABLE>
DEM = Deutsche Mark
GBP = Great British Pound
ITL = Italian Lira
JPY = Japanese Yen
<PAGE>
Notes to Financial Statements page 27
7. FOREIGN CASH POSITIONS--International Equity Portfolio
<TABLE>
<CAPTION>
Net
Delivery Market Unrealized
Value (Local Value Gain (Loss)
Currency Currency) Cost (USD) (USD) (USD)
- ---------------------- --------- ---------- ------ ----------
<S> <C> <C> <C> <C>
Australian Dollar 1,159 $ 719 $ 663 $ (56)
Austrian Schilling 5,980 466 483 17
Belgian Franc 70,653 1,939 1,943 4
Finnish Markka 1,157 211 216 5
French Franc 6,772 1,120 1,149 29
German Deutsche Mark 1,109 612 631 19
Great British Pound 408 680 683 3
Hong Kong Dollar 247 32 32 0
Indonesian Rupiah 894,077 58 80 22
Irish Punt 7,000 10,259 9,976 (283)
Italian Lira 3,027,212 1,712 1,741 29
Japanese Yen 4,927,365 34,897 34,975 78
Malaysian Ringgit 2,220 524 530 6
Netherlands Guilder 17,603 8,761 8,871 110
Philippine Peso 22,439 535 512 (23)
Portuguese Escudo 47,106 257 261 4
Singapore Dollar 258 154 146 (8)
Spanish Peseta 6,797,827 44,332 45,534 1,202
Swedish Krona 19,807 2,517 2,456 (61)
Swiss Franc 12,938 8,727 8,973 246
Thai Baht 964 27 23 (4)
-------- -------- ------
Total $118,539 $119,878 $1,339
======== ======== ======
</TABLE>
8. CONCENTRATION OF SHAREHOLDERS
At August 31, 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 August 31, 1998, MMP invested 42.3% of its net assets in financial
institutions, of which 31.2% was invested in other financial service
providers and 11.1% 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.
IEP invested 22.2% of its net assets in the United Kingdom. The issuers'
abilities to meet their obligations may be affected by economic or political
developments in a specific country or region.
10. BANK BORROWINGS
IEP may borrow money for temporary or emergency purposes. Any borrowings
representing more than 5% of IEP's total assets must be repaid before IEP
may make additional investments. IEP has entered into an agreement, which
enables it to participate with other Chase Vista Funds in an unsecured line
of credit with a syndicate of banks, which permits borrowings up to $350
million, collectively. Interest is charged to IEP, based on its borrowings
at a rate equal to the sum of the Federal Funds Rate plus 0.35%. Borrowings
are payable on demand. IEP pays a committment fee of approximately $200
annually.
IEP had no borrowings outstanding at August 31, 1998.
<PAGE>
page 28 Report of Independent Accountants
To the Trustees and Shareholders of
Mutual Fund Variable Annuity Trust
In our opinion, the accompanying statement of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Growth and Income Portfolio,
Capital Growth Portfolio, International Equity Portfolio, Asset Allocation
Portfolio, U.S. Government Income Portfolio (formerly U.S. Treasury Income
Portfolio), and Money Market Portfolio (separate portfolios constituting Mutual
Fund Variable Annuity Trust, hereafter referred to as the "Trust") at August
31, 1998, the results of each of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the period
then ended and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at August 31, 1998 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
October 9, 1998
<PAGE>
[LOGO]
A-7036-CRT
(C)The Chase Manhattan Corporation, 1998. All Rights Reserved.
October 1998 F-7036(CMB)
VCA-2-1098
