ANNUAL REPORT
AUGUST 31, 1999
VISTA CAPITAL ADVANTAGE(SM)
MUTUAL FUND VARIABLE ANNUITY TRUST
Vista Fund Distributors, Inc., distributor
This report must be accompanied or preceded by a current prospectus for
Vista Capital Advantage
<PAGE>
[VISTA Logo]
April 10, 1999
Dear Vista Capital Advantage Contract Owner:
Enclosed is the February 28, 1999 Semi-Annual Report of the Mutual Fund Variable
Annuity Trust, whose portfolios serve as the underlying investments for the
Vista Capital Advantage variable annuity.
The table below shows the one year and since inception results, after the
deduction of all insurance and withdrawal fees, of the accounts in the Vista
Capital Advantage at February 28, 1999. The insurance fees include mortality and
expense risk charges, surrender charges and the annual contract administration
charge. The surrender charges reflect the sales charges that would have been
assessed against the contract value had the contract been surrendered.(1)
The first chart applies to all Vista Capital Advantage investors outside of New
York state, whose policy is issued by Anchor National Life Insurance Company.
The second chart applies to Vista Capital Advantage investors within New York
state, whose policy is issued by First SunAmerica Life Insurance Company.
Anchor National Life Insurance Company Policy Holders
Average Annual Total Return as of 2/28/99(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 (3/13/95) (8.40%) 17.15%
Capital Growth (3/13/95) (20.31%) 12.87%
International Equity (3/13/95) (5.51%) 4.79%
Asset Allocation (3/13/95) (5.75%) 11.12%
U.S. Government Income (7/13/95) (2.30%) 3.02%
Money Market (6/2/95)3 (2.65%) 2.28%
7-day current yield as of 2/28/99; 2.81%
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</TABLE>
First SunAmerica Life Insurance Company Policy Holders (New York)
Average Annual Total Return as of 2/28/99(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) (8.41%) 14.63%
Capital Growth (12/6/95) (20.35%) 8.91%
International Equity (12/22/95) (5.55%) 2.82%
Asset Allocation (12/22/95) (5.77%) 9.47%
U.S. Government Income (12/22/95) (2.27%) 2.64%
Money Market (12/22/95)3 (2.63%) 2.33%
7-day current yield as of 2/28/99; 2.89%
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</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 Fund shares are not insured or guaranteed by the FDIC or any other government
agency. There can be no guarantee that the Fund will maintain a stable net
asset value of $1.00.
The Vista Capital Advantage (VCA) is distributed by Vista Fund Distributors,
Inc., which is unaffiliated with The Chase Manhattan Bank, Anchor National Life
Insurance Company or First SunAmerica Life Insurance Company. Chase Manhattan is
the portfolio advisor, administrator and custodian of the underlying investment
options of the variable annuity. VCA is issued by Anchor National Life Insurance
Company and in New York by First SunAmerica Life Insurance Company.
- --------------------------------------------------------------------------------
Investments in Vista Capital Advantage are not deposits, or guaranteed or
endorsed by, Chase, and are not insured by the FDIC, Federal Reserve Board or
any other government agency. Investments in Vista Capital Advantage, including
the underlying variable investment options, involve risk, including the
possible loss of principal.
- --------------------------------------------------------------------------------
The views expressed on this page are exclusively those of Chase Manhattan. The
financial information presented on this page has been taken from the books and
records of the portfolios without examination by independent accountants, who
express no opinion thereto.
<PAGE>
<TABLE>
<S> <C>
Table of Contents
4 Letter from the Chairman
Performance & Commentary
5 Growth and Income
6 Capital Growth
7 International Equity
8 Asset Allocation
9 U.S. Government Income
10 Money Market
Portfolio of Investments
11 Growth and Income
13 Capital Growth
14 International Equity
18 Asset Allocation
21 U.S. Government Income
21 Money Market
Mutual Fund Variable Annuity Trust
23 Statement of Assets & Liabilities
24 Statement of Operations
25 Statement of Changes in Net Assets
26 Financial Highlights
28-32 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.
- --------------------------------------------------------------------------------
<PAGE>
page 4 Letter from the Chairman
October 10, 1999
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 ended August 31,
1999. This report summarizes the performance of each portfolio in light of
events in the financial markets, giving you the opportunity to monitor and
adjust your individual investment choices if necessary. Here are some
highlights:
A Robust U.S. Economy Helps Propel Stock Prices Higher
Stock prices started the fiscal year under pressure due to worries over a
potential global economic meltdown ignited by the near collapse of Russia's
economy. Once those worries began to fade, stock prices rallied on improving
economic conditions. Large-cap, well-established companies led the way, as they
have throughout the bull market of the 1990s. Technology stocks were among the
better performing sectors. As the period progressed, the economy continued to
strengthen, raising concerns of potentially higher inflation. However, the
environment stayed generally positive for equities, with many corporations
posting better-than-expected earnings, and consumer confidence remaining
strong.
The Federal Reserve Stays Active Throughout the Period
At the start of the period, the Fed reduced short-term interest rates three
times to help stimulate economic activity. These rate cuts played a significant
role in ending the global economic crisis and gave rise to a rebound in many
equity markets around the world. Following the rate cuts, the U.S. economy
strengthened to a point where inflation became a growing concern to the Fed.
This caused the Fed to revert to a tightening monetary policy, raising interest
rates in June and again in August. At the end of the period, there was much
speculation that a third rate hike was likely before year-end to ensure
inflation remains under control.
Higher Interest Rates Put Pressure on Bonds
Following the end to the global economic crisis, bond yields climbed steadily
due to the pickup in economic activity. During the period, the yield on the
30-year Treasury bond rose from about 5.34% to around 6.06%. Some of the
economic data that propelled yields higher included a steady stream of strong
consumer confidence reports, historically low unemployment and consistently good
news on consumer spending.
Sincerely,
[/s/ Fergus Reid]
Fergus Reid
Chairman
<PAGE>
Growth and Income Portfolio page 5
The Growth and Income Portfolio seeks to provide long-term capital appreciation
and dividend income primarily through diversified holdings of common stocks.
Performance
Investors in the Growth and Income Portfolio continued to participate in the
strong performance of the U.S. stock market during the reporting period. For the
one year ended August 31, 1999, the Portfolio had a total return of 21.23%.
Strategy
The Portfolio's investment results were largely due to improving economic
conditions, outstanding stock selection and a generally good environment for
equities. Specifically, the Portfolio's investment in technology stocks proved
beneficial to shareholders. Despite coming under pressure on several occasions
throughout the period, technology stocks registered solid gains thanks to
favorable corporate earnings reports and improving growth prospects for stocks
in this sector.
Management's decision to invest in oil and gas companies also contributed
positively to the Portfolio's performance, as energy prices rose sharply
throughout the first eight months of 1999. A pledge made by Middle-East oil
ministers to increase the price of oil and reduce output was the main reason for
the spike in prices.
Interest-rate sensitive stocks, such as utility stocks, came under pressure
following the Federal Reserve's series of interest-rate cuts in late 1998. The
Fed's adoption of an easing monetary policy boosted global economic activity,
which led to an increase in interest rates. The Portfolio's investment in health
care and pharmaceutical stocks also detracted from performance, though many of
these securities posted solid gains early in the period.
In keeping with our long-term investment strategy, the Portfolio used periodic
downturns in the market to increase exposure to attractively priced stocks
across a broad range of sectors. This strategy proved particularly beneficial
following the sharp downturn in technology stocks in February. The downturn was
due to a spate of stronger-than-expected economic data, including the best
consumer confidence report ever and the lowest unemployment rate in a
generation.
Outlook
Although the economy has been showing signs of overheating, we believe the
outlook for the stock market remains positive. For one, we think interest rates
will decline later this year and into the year 2000. Our rationale is based on
the fact that the economy will slow later in the year due to seasonal factors
and concerns over Y2K. We also believe that once the uncertainty surrounding Y2K
begins to fade, investor interest in equities will increase. Since further signs
of a pickup in economic activity are likely to result in greater market
volatility, stock selection will play an important role in delivering good
investment results. We intend to view volatility as an opportunity to increase
our exposure in high-quality stocks that, in our judgment, will help bolster the
Portfolio's long-term growth potential.
Life of Portfolio Performance
A $10,000 tax-deferred investment in the Growth and Income Portfolio at NAV (Net
Asset Value) would have grown to $20,728 from inception on 3/1/95 through
8/31/99.*
Investment Results
<TABLE>
- ---------------------------------------------------------
Average Annual Total Return as of 8/31/99
<S> <C>
One year 21.23%
Since Inception (3/1/95) 17.55%
- ---------------------------------------------------------
</TABLE>
[Plot Points for Line Chart
<TABLE>
<CAPTION>
Growth and Income S&P 500
<S> <C> <C>
3/1/95 $10,000 $10,000
8/31/95 11,480 11,678
8/31/96 13,344 13,861
8/31/97 18,084 19,491
8/31/98 17,098 21,071
8/31/99 20,728 29,457
</TABLE>
Source for Index returns: Lipper Analytical Services, Inc.
* Past performance is no guarantee of future results. Investment returns and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than the original cost. Performance figures do not
include any insurance company charges associated with a variable annuity or
reflect any withdrawal charges. No expenses are deducted from the performance
of the indexes.
Hypothetical $10,000 investment assumes an initial investment on 3/1/95, shows
changes in Net Asset Value and reinvestment of all distributions, but does not
include the effect of any insurance charges or the annual maintenance fee. The
illustration above would be reduced if these fees were reflected. There is no
direct correlation between a hypothetical investment and the anticipated
performance of the Portfolio. The investment adviser is currently waiving
certain fees. This voluntary waiver may be modified or terminated at any time,
which would reduce performance.
The Standard & Poor's 500 Index is an unmanaged broad-based index that
replicates the U.S. stock market. It includes 500 widely held common stocks and
assumes reinvestment of dividends. An individual cannot invest in an index.
Withdrawals prior to age 59-1/2 from the Vista Capital Advantage variable
annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary
income.
The views expressed on this page are exclusively those of Chase Manhattan. The
financial information presented on this page has been taken from the books and
records of the portfolios without examination by independent accountants, who
express no opinion thereto.
<PAGE>
page 6 Capital Growth Portfolio
The Capital Growth Portfolio seeks to provide long-term capital growth primarily
through diversified holdings of common stocks.
Performance
Despite a volatile environment for equities, particularly small- and mid-cap
stocks, The Capital Growth Portfolio recorded positive performance during the
fiscal year. For the one year ended August 31, 1999, the Portfolio had a total
return of 30.59%.
Strategy
Favorable economic conditions, highlighted by benign inflation, robust consumer
spending and low unemployment, were largely responsible for the Fund's
investment results. The Portfolio benefited from its exposure to technology
stocks, many of which recorded double-digit percentage results during the
period.
Consumer cyclical stocks contributed positively to performance early in the
period, following the Federal Reserve Board's decision to reduce short-term
interest rates to help stimulate economic activity. Many of these securities
also turned in solid gains after the stock market's pullback in February
following a spate of stronger-than-expected economic data. Energy stocks also
added to performance. A pledge by Middle-East oil ministers to increase the
price of oil and reduce output was the main reason for the strong move in energy
stocks.
Several sectors detracted from the Portfolio's investment results. These
included utility stocks, which came under pressure due to the sharp increase in
long-term interest rates. During the period, the yield on the benchmark 30-year
Treasury bond rose to approximately 6.06%, from around 5.34% at the start of the
period. The rise in rates was largely due to a strong increase in economic
activity. Real estate investment trusts also hindered investment results,
despite showing some strength midway through the period.
In late 1998, the Portfolio enjoyed good performance from health care stocks,
but these securities retreated as the period progressed. Some of the Portfolio's
better investments in this sector included Biogen, a biotechnology company that
rose sharply over the past 12 months. Despite the pullback in health care
stocks, we remain optimistic on their long-term growth prospects. Our optimism
is based on the growing number of babyboomers likely to become dependent on the
health care system in the new millennium. In less than six years, the first of
the babyboomers (those individuals born between 1946 and 1964) will turn 60
years of age.
Outlook
Our outlook for the stock market and the types of stocks represented in the
Portfolio remains positive. Economic conditions are still favorable, given the
benign inflationary environment, high consumer spending and low unemployment
rate. Moreover, corporate earnings remain solid. Continuing signs of an
overheating economy may cause near-term market volatility, and uncertainty
surrounding Y2K may also weigh on the market. However, the Y2K issue is likely
to be a non-factor by the end of this year, and we believe the economy will slow
sometime later in 1999 and into the year 2000. In turn, interest rates are
likely to moderate, which should prove beneficial for equities.
Life of Portfolio Performance
A $10,000 tax-deferred investment in the Capital Growth Portfolio at NAV (Net
Asset Value) would have grown to $19,789 from inception on 3/1/95 through
8/31/99.*
Investment Results
<TABLE>
- ---------------------------------------------------------
Average Annual Total Return as of 8/31/99
<S> <C>
One year 30.59%
Since Inception (3/1/95) 16.35%
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</TABLE>
[Plot Points for Line Chart]
<TABLE>
<CAPTION>
Capital Growth Russell 2000
<S> <C> <C>
3/1/95 $10,000 $10,000
8/31/95 11,900 12,010
8/31/96 14,240 13,316
8/31/97 18,123 17,173
8/31/98 15,154 13,839
8/31/99 19,789 17,766
</TABLE>
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>
International Equity Portfolio page 7
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 recorded good investment results during a
period highlighted by concerns over global economic growth, a turnaround in
Japanese equities and the launch of the European Monetary Union (EMU). For the
one year ended August 31, 1999, the Portfolio posted a total return of 25.03%.
Strategy
The International Equity Portfolio registered good performance thanks to its
exposure to Japanese equities, which recorded solid returns throughout the first
eight months of 1999. The Fund's investment in Europe also contributed
positively to investment results, particularly early in the year after the
launch of the European Monetary Union.
At the start of the period, the Portfolio's investment in Japan was mixed as
concerns over the country's banking woes weighed heavily on equity prices.
Moreover, investors were not convinced that the government would adopt the
necessary reform measures to lift the country from its decade-long economic
decline.
As the period progressed, however, Japan's economy showed clear signs of
recovery. Investors also became increasingly optimistic about stocks along the
Pacific Rim as governments in the region made important fundamental changes to
improve their respective economies.
Elsewhere, Latin American markets recorded generally good investment results but
not without significant market volatility along the way. In January, for
example, markets retreated sharply following concerns over Brazil's inherent
financial difficulties.
Outlook
Our outlook for European equities remains positive. Fundamentals for stocks
across the region are still generally attractive. Companies are continuing to
reduce operating costs to improve profitability, and investor sentiment is
favorable. Moreover, with Europe's economy still showing pockets of weakness, no
major upturn in interest rates appears imminent.
We are equally optimistic about the prospects for Japanese stocks, though
corporations will need to restructure their operations to improve profitability.
Assuming economic conditions improve and companies take steps to bolster their
balance sheets, we intend to use market weakness as long-term buying
opportunities in the months ahead.
Finally, the long-term growth prospects for emerging markets of southeast Asia
and Latin America are strong, but the duration and durability of any sustainable
rally will largely depend on the ongoing commitment among governments to
economic reform.
Life of Portfolio Performance
A $10,000 tax-deferred investment in the International Equity Portfolio at NAV
(Net Asset Value) would have grown to $14,727 from inception on 3/1/95 through
8/31/99.*
Investment Results
<TABLE>
- ---------------------------------------------------------
Average Annual Total Return as of 8/31/99
<S> <C>
One year 25.03%
Since Inception (3/1/95) 8.97%
- ---------------------------------------------------------
</TABLE>
[Plot Points for Line Chart]
<TABLE>
<CAPTION>
International Equity MSCI EAFE
<S> <C> <C>
3/1/95 $10,000 $10,000
8/31/95 10,890 10,950
8/31/96 11,153 11,845
8/31/97 12,075 12,953
8/31/98 11,779 12,970
8/31/99 14,727 16,346
</TABLE>
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>
page 8 Asset Allocation Portfolio
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 recorded positive returns as equities moved
higher, but bonds came under pressure due to rising interest rates brought on by
a robust economy. Given this backdrop, the Portfolio posted a total return of
11.88% for the one year ended August 31, 1999.
Strategy
Strong performance by the Portfolio's technology stocks bolstered investment
results, as these securities delivered solid investment gains. Large-cap,
well-established companies in this sector, such as EMC and IBM, were among the
better performing issues. The impressive returns registered by technology
companies was not without volatility along the way. For example, in March,
technology stocks came under pressure, as the Nasdaq Composite lost 500 points
in about a week. Management's decision to increase its exposure to select
technology stocks during these downturns proved beneficial to shareholders.
The Fund's investment in consumer stocks also contributed favorably to
performance, thanks to a marked rise in consumer spending and a sharp increase
in retail sales. Energy stocks also added to performance following a pledge by
Middle-East oil ministers to increase the price of oil and reduce output.
The Portfolio's investment in fixed-income securities and interest-rate
sensitive stocks, such as financial, banking and insurance companies, did not
fare as well. During the period, long-term interest rates, as measured by the
benchmark 30-year Treasury bond, increased steadily, causing bonds prices to
fall. The rise in rates was ignited by a rebound in the global economy following
the Federal Reserve Board's decision to adopt an easing monetary policy late in
1998. Continuing strength in the U.S. economy during the first eight months of
1999 also played an important role in pushing interest rates higher.
At the end of the reporting period, the Portfolio had 49% invested in common
stocks, 51% in fixed-income securities and cash equivalents.
Outlook
Looking ahead, our outlook for both the stock and fixed-income markets remains
favorable. While we expect the economy to continue to grow throughout the
remainder of this year and into the year 2000, we believe it will moderate. In
turn, we expect interest rates to fall and inflation to remain under control. We
are also optimistic about the stock and bond market based on our favorable
projection for corporate earnings. While volatility is likely to continue given
the relatively high valuations in the market and concerns over Y2K, we believe
such a development will create investment opportunities. In light of this fact,
we intend to use market pullbacks to increase our exposure to securities that we
believe can help the Portfolio achieve its long-term investment objective.
Life of Portfolio Performance
A $10,000 tax-deferred investment in the Asset Allocation Portfolio at NAV (Net
Asset Value) would have grown to $16,786 from inception on 3/1/95 through
8/31/99.*
Investment Results
<TABLE>
- ---------------------------------------------------------
Average Annual Total Return as of 8/31/99
<S> <C>
One year 11.88%
Since Inception (3/1/95) 12.18%
- ---------------------------------------------------------
</TABLE>
[Plot Points fdor Line Chart
<TABLE>
<CAPTION>
Asset Allocation 60% S&P 500/40% Lehman Gov't Bond
<S> <C> <C>
3/1/95 $10,000 $10,000
8/31/95 11,040 11,311
8/31/96 12,242 12,731
8/31/97 15,010 16,225
8/31/98 15,004 17,911
8/31/99 16,786 21,968
</TABLE>
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>
U.S. Government Income Portfolio page 9
The U.S. Government Income Portfolio seeks to provide monthly dividends as well
as to preserve principal.
Performance
The Variable Annuity U.S. Government Income Portfolio came under pressure during
the period due to a steady increase in interest rates brought on by improving
economic conditions in the U.S. and around the globe. For the one year ended
August 31, 1999, the Portfolio recorded a total return of -1.15%.
Strategy
The period began on a positive note for Treasury issues, as investors gravitated
toward these securities following the near collapse of Russia's economy. From
the start of the period to early October, the height of the Russian economic
crisis, the yield on the benchmark 30-year Treasury bond dropped from 5.34% to a
record low of 4.72%.
The Federal Reserve allayed fears of a global economic meltdown and a further
decline in yields by cutting short-term interest rates three times in late 1998.
The Fed's decision to trim rates gave the global economy a much needed boost,
sending interest rates markedly higher by year-end.
In January, global economic concerns resurfaced with the emergence of Brazil's
economic difficulties, but those worries were short-lived. Soon after, the U.S.
economy strengthened, sending interest rates higher and raising worries among
investors that inflation might become a problem.
From that point on, most of the economic news pointed to stronger-than-expected
growth, leading investors to speculate that the Fed would reverse its monetary
policy to keep inflation under control. On June 30th, the Fed delivered on those
assumptions, raising short-term interest rates for the first time since March,
1997. Following a spate of stronger-than-expected economic news, the Fed
increased rates again in August, just one week before the fiscal year came to a
close. At the end of the period, the yield on the 30-year U.S. Treasury bond
stood around 6.06%.
Outlook
Despite the increase in interest rates, our outlook for the Portfolio remains
favorable. We expect the economy to moderate by the end of this year and into
the year 2000. In turn, we believe interest rates will begin to fall, which
would be a boon to bond prices. Given this backdrop, we intend to use further
increases in interest rates as an opportunity to extend the Portfolio's average
duration and increase the level of income paid to shareholders.
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 $13,026 from inception on 3/1/95 through
8/31/99.*
Investment Results
<TABLE>
- ---------------------------------------------------------
Average Annual Total Return as of 8/31/99
<S> <C>
One year (1.15%)
Since Inception (3/1/95) 6.04%
- ---------------------------------------------------------
</TABLE>
[Plot Points for Line Chart]
<TABLE>
<CAPTION>
U.S. Government Income Lehman Intermediate US Gov't Bond
<S> <C> <C>
3/1/95 $10,000 $10,000
8/31/95 10,690 10,618
8/31/96 10,970 11,091
8/31/97 11,859 11,983
8/31/98 13,178 13,092
8/31/99 13,026 13,387
</TABLE>
Source for Index Returns: Lipper Analytical Services, Inc.
* Past performance is no guarantee of future results. Investment returns and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than the original cost. Performance figures do not include
any insurance company charges associated with a variable annuity or reflect any
withdrawal charges. No expenses are deducted from the performance of the
indexes.
Hypothetical $10,000 investment assumes an initial investment on 3/1/95 and
shows changes in Net Asset Value, but does not include the effect of any
insurance charges or the annual maintenance fee. The illustration above would be
reduced if these fees were reflected. There is no direct correlation between a
hypothetical investment and the anticipated performance of the Portfolio. The
investment adviser is currently waiving certain fees. This voluntary waiver may
be modified or terminated at any time, which would reduce performance.
The unmanaged Lehman Intermediate Government Bond Index includes bonds with 1 to
10 year maturities and assumes the reinvestment of dividends. An individual
cannot invest in an index.
Withdrawals prior to age 59-1/2 from the Vista Capital Advantage variable
annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary
income.
The views expressed on this page are exclusively those of Chase Manhattan. The
financial information presented on this page has been taken from the books and
records of the portfolios without examination by independent accountants, who
express no opinion thereto.
<PAGE>
page 10 Money Market Portfolio
The Money Market Portfolio seeks to provide maximum current income consistent
with preservation of capital and maintenance of liquidity.
Performance
The Money Market Portfolio recorded good investment results in an environment
highlighted by rising interest rates brought on by stronger-than-expected
economic conditions. For the one year ended August 31, 1999, the Portfolio
recorded a total return of 4.66%.
Strategy
Early in the period, yields on money market funds were low due to a sharp
pullback in interest rates following the near-collapse of the Russian economy.
However, after the Federal Reserve Board adopted an easing monetary policy in
September, money market yields began to rise. That trend continued throughout
the rest of 1998.
In January, concerns over financial problems in Brazil kept rates under
pressure, as investors wondered whether another round of global economic
uncertainty might hit the market. But Brazil's problems faded. Soon after,
investors turned their attention to the U.S. economy, which showed signs of
overheating throughout the spring. Concerned that the robust U.S. economy might
cause inflation to rise, the Fed adopted a tightening monetary policy in June,
pushing short-term interest rates higher for the first time since March, 1997.
In turn, yields on money market funds increased.
The wave of strong economic data throughout much of July and August, led the Fed
to raise rates again on August 24th. As the period came to a close, there was
much speculation that the central bank would push up rates one more time before
the end of 1999.
Given the steady increase in interest rates, our investment strategy throughout
the fiscal year was to capitalize on this trend in order to provide shareholders
with a higher yield.
Outlook
Our outlook for the Money Market Portfolio continues to be positive. We believe
the sharp rise in interest rates is behind us for now. Uncertainty regarding Y2K
is likely to keep the economy from over heating. Furthermore, we expect a
moderation in economic growth due to seasonal factors. Given this backdrop, we
intend to extend the Portfolio's average maturity on any significant rise in
interest rates going forward. As always, we will continue to focus our attention
on high-quality, liquid investments that meet our strict criteria for
investment.
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.
Fund shares are not insured or guaranteed by the FDIC or any other government
agency. There can be no guarantee that the Fund will maintain a stable net asset
value of $1.00.
<PAGE>
Growth and Income Portfolio page 11
Portfolio of Investments August 31, 1999
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
LONG-TERM INVESTMENTS--92.5%
COMMON STOCK--92.5%
AEROSPACE--1.7%
5,000 GENERAL DYNAMICS CORP. .............................. $ 315,000
-----------
AIRLINES--1.5%
4,700 AMR CORP.* .......................................... 275,538
-----------
AUTOMOTIVE--1.9%
7,000 FORD MOTOR CO. ...................................... 364,875
-----------
BANKING--5.3%
6,000 BANK OF AMERICA CORP. ............................... 363,000
6,000 BANK ONE CORP. ...................................... 240,750
3,400 CULLEN/FROST BANKERS, INC. .......................... 88,824
4,000 FIRST SECURITY CORP. ................................ 86,750
2,400 FIRST UNION CORP. ................................... 99,600
2,500 MERCANTILE BANCOPORATION ............................ 137,969
-----------
1,016,893
-----------
BIOTECHNOLOGY--0.9%
2,000 AMGEN, INC.* ........................................ 166,375
-----------
BROADCASTING--1.4%
5,700 CBS CORP.* .......................................... 267,900
-----------
CHEMICALS--1.3%
3,200 AIR PRODUCTS AND CHEMICALS, INC. .................... 108,800
1,200 DOW CHEMICAL CO. .................................... 136,350
-----------
245,150
-----------
COMPUTER SOFTWARE--3.9%
4,300 AMERICAN MANAGEMENT SYSTEMS, INC.* .................. 123,087
4,500 COMPUTER ASSOCIATES INTERNATIONAL, INC. ............. 254,250
6,000 SYMANTEC CORP.* ..................................... 180,000
4,500 UNISYS CORP.* ....................................... 193,500
-----------
750,837
-----------
COMPUTERS/COMPUTER HARDWARE--4.6%
3,000 EMC CORP.* .......................................... 180,000
3,000 INTERNATIONAL BUSINESS MACHINES CORP. ............... 373,687
4,000 TEXAS INSTRUMENTS, INC. ............................. 328,250
-----------
881,937
-----------
CONSTRUCTION--1.0%
13,800 D.R. HORTON, INC. ................................... 200,963
-----------
CONSTRUCTION MATERIALS--2.6%
17,500 MASCO CORP. ......................................... 495,469
-----------
CONSUMER PRODUCTS--3.9%
3,500 FORTUNE BRANDS, INC. ................................ 131,250
10,500 PHILIP MORRIS COMPANIES, INC. ....................... 393,094
11,100 SHAW INDUSTRIES, INC. ............................... 222,000
-----------
746,344
-----------
DIVERSIFIED--1.1%
2,100 TYCO INTERNATIONAL LTD (BERMUDA) .................... 212,756
-----------
ELECTRONICS/ELECTRICAL EQUIPMENT--5.3%
10,000 ALTERA CORP.* ....................................... 421,250
6,000 APPLIED MATERIALS, INC.* ............................ 426,375
5,500 EG&G, INC. .......................................... 174,968
-----------
1,022,593
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
ENTERTAINMENT/LEISURE--2.2%
10,000 VIACOM, INC. CLASS B* ............................... $ 420,625
-----------
ENVIRONMENTAL SERVICES--0.5%
4,500 WASTE MANAGEMENT, INC. .............................. 98,156
-----------
FINANCIAL SERVICES--7.1%
10,920 ASSOCIATES FIRST CAPITAL CORP., CLASS A ............. 374,693
8,000 CITIGROUP, INC. ..................................... 355,500
7,500 FREDDIE MAC ......................................... 386,250
1,700 LEHMAN BROTHERS HOLDINGS, INC. ...................... 91,374
1,800 MORGAN STANLEY DEAN WITTER & CO. .................... 154,463
-----------
1,362,280
-----------
FOOD/BEVERAGE PRODUCTS--1.0%
5,600 PEPSICO, INC. ....................................... 191,100
-----------
HEALTH CARE/HEALTH CARE SERVICES--3.3%
1,600 AETNA, INC. ......................................... 124,400
4,500 COLUMBIA/HCA HEALTHCARE CORP. ....................... 110,812
8,600 HCR MANOR CARE, INC. * .............................. 168,238
28,000 HEALTHSOUTH CORP. * ................................. 229,250
-----------
632,700
-----------
INSURANCE--3.0%
6,000 ALLSTATE CORP. ...................................... 196,875
7,500 TRAVELERS PROPERTY CASUALTY CORP., CLASS A .......... 266,250
2,300 XL CAPITAL LTD, CLASS A (BERMUDA) ................... 115,718
-----------
578,843
-----------
MANUFACTURING--4.8%
8,000 INGERSOLL-RAND CO. .................................. 509,000
3,200 JOHNSON CONTROLS, INC. .............................. 218,800
4,100 PENTAIR, INC. ....................................... 186,550
-----------
914,350
-----------
METALS/MINING--2.9%
8,600 ALCOA, INC. ......................................... 555,238
-----------
OFFICE/BUSINESS EQUIPMENT--0.5%
2,000 XEROX CORP. ......................................... 95,500
-----------
OIL & GAS--8.4%
3,000 CHEVRON CORP. ....................................... 276,750
15,300 COASTAL CORP. ....................................... 662,681
7,000 HALLIBURTON CO. ..................................... 324,625
1,900 MOBIL CORP. ......................................... 194,513
6,000 ULTRAMAR DIAMOND SHAMROCK CORP. ..................... 156,750
-----------
1,615,319
-----------
PAPER/FOREST PRODUCTS--1.9%
3,000 WEYERHAEUSER CO. .................................... 168,750
4,800 WILLAMETTE INDUSTRIES ............................... 190,200
-----------
358,950
-----------
PHARMACEUTICALS--3.1%
11,400 PHARMACIA & UPJOHN, INC. ............................ 595,650
-----------
PIPELINES--0.9%
3,000 COLUMBIA ENERGY GROUP, INC. ......................... 177,188
-----------
</TABLE>
See notes to financial statements.
<PAGE>
page 12 Growth and Income Portfolio (continued)
Portfolio of Investments August 31, 1999
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
PRINTING & PUBLISHING--1.4%
6,700 NEW YORK TIMES CO., CLASS A ................... $ 261,719
-----------
REAL ESTATE INVESTMENT TRUST--1.3%
3,400 EQUITY RESIDENTIAL PROPERTIES TRUST ........... 149,600
2,920 ESSEX PROPERTY TRUST, INC. .................... 102,565
-----------
252,165
-----------
RETAILING--3.0%
3,500 FEDERATED DEPARTMENT STORES, INC.* ............ 161,000
13,800 KROGER CO.* ................................... 319,125
9,000 OFFICE DEPOT, INC.* ........................... 93,938
-----------
574,063
-----------
SHIPPING/TRANSPORTATION--1.4%
5,500 UNION PACIFIC CORP. ........................... 267,781
-----------
TELECOMMUNICATIONS--4.7%
1,977 AT&T CORP. .................................... 88,965
5,000 GTE CORP. ..................................... 343,125
5,000 MCI WORLDCOM, INC.* ........................... 378,750
1,500 TELLABS, INC.* ................................ 89,344
-----------
900,184
-----------
TELECOMMUNICATIONS EQUIPMENT--0.8%
3,200 GENERAL INSTRUMENT CORP.* ..................... 157,400
-----------
UTILITIES--3.9%
6,000 CMS ENERGY CORP. .............................. 237,375
1,900 DUKE ENERGY CORP. ............................. 109,250
5,000 TEXAS UTILITIES CO. ........................... 202,187
5,000 UNICOM CORP. .................................. 193,125
-----------
741,937
-----------
TOTAL COMMON STOCK
(COST $17,001,269) ............................ 17,713,778
-----------
TOTAL LONG-TERM INVESTMENTS
(COST $17,001,269) ............................ 17,713,778
-----------
Principal
Amount
----------
SHORT-TERM INVESTMENT--7.3%
REPURCHASE AGREEMENT--7.3%
$1,394,000 GREENWICH CAPITAL MARKETS, INC., 5.48% DUE
9/1/99, (DATED 8/31/99, PROCEEDS $1,394,212,
SECURED BY FNMA, $1,397,122, FRN, DUE 07/18/27;
MARKET VALUE $1,422,900)
(COST $1,394,000) ............................. 1,394,000
-----------
TOTAL INVESTMENTS--99.8%
(COST $18,395,269) ............................ $19,107,778
===========
</TABLE>
* = Non-income producing security.
FNMA = Federal National Mortgage Association
FRN = Floating Rate Note
See notes to financial statements.
<PAGE>
Capital Growth Portfolio page 13
Portfolio of Investments August 31, 1999
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
LONG-TERM INVESTMENTS--79.5%
COMMON STOCK--79.5%
BANKING--4.5%
13,000 CULLEN/FROST BANKERS, INC. ......................... $ 339,625
4,590 ZIONS BANCORPORATION ............................... 228,352
-----------
567,977
-----------
BIOTECHNOLOGY--4.6%
7,500 BIOGEN, INC.* ...................................... 575,625
-----------
CHEMICALS--2.1%
4,500 CYTEC INDUSTRIES, INC.* ............................ 104,906
10,000 IMC GLOBAL, INC. ................................... 159,375
-----------
264,281
-----------
COMPUTER SOFTWARE--4.6%
10,000 AMERICAN MANAGEMENT SYSTEMS, INC.* ................. 286,250
10,000 SYMANTEC CORP.* .................................... 300,000
-----------
586,250
-----------
COMPUTERS/COMPUTER HARDWARE--3.3%
7,000 EMC CORP.* ......................................... 420,000
-----------
CONSUMER PRODUCTS--3.9%
4,200 FURNITURE BRANDS INTERNATIONAL, INC.* .............. 84,263
10,000 SHAW INDUSTRIES, INC. .............................. 200,000
5,000 YORK INTERNATIONAL CORP. ........................... 205,625
-----------
489,888
-----------
ELECTRONICS/ELECTRICAL EQUIPMENT--10.4%
6,000 ALTERA CORP.* ...................................... 252,750
5,000 ASM LITHOGRAPHY HOLDING NV (NETHERLANDS)* .......... 315,625
8,000 EG&G, INC. ......................................... 254,500
7,500 WATERS CORP.* ...................................... 494,531
-----------
1,317,406
-----------
ENTERTAINMENT/LEISURE--3.3%
5,000 GALILEO INTERNATIONAL INC. ......................... 242,500
10,000 INTERNATIONAL GAME TECHNOLOGY ...................... 175,000
-----------
417,500
-----------
FINANCIAL SERVICES--5.1%
6,300 BEAR STEARNS COMPANIES, INC. ....................... 262,238
4,000 COUNTRYWIDE CREDIT INDUSTRIES, INC. ................ 128,500
6,000 THE PMI GROUP, INC. ................................ 255,000
-----------
645,738
-----------
HEALTH CARE/HEALTH CARE SERVICES--3.7%
6,750 TENET HEALTHCARE CORP.* ............................ 117,703
5,100 UNIVERSAL HEALTH SERVICES, INC., CLASS B* .......... 170,212
2,500 WELLPOINT HEALTH NETWORKS, INC., CLASS A* .......... 182,188
-----------
470,103
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
INSURANCE--6.4%
3,700 EQUITABLE COMPANIES, INC.* ......................... $ 228,475
8,000 RELIASTAR FINANCIAL CORP. .......................... 360,500
3,000 TRANSATLANTIC HOLDINGS, INC. ....................... 216,375
-----------
805,350
-----------
MANUFACTURING--2.2%
6,000 PENTAIR, INC. ...................................... 273,000
-----------
MEDIA/ADVERTISING--2.4%
4,000 OMNICOM GROUP, INC. ................................ 301,500
-----------
OIL & GAS--7.4%
11,000 BJ SERVICES CO.* ................................... 376,750
6,000 COOPER CAMERON CORP.* .............................. 249,750
25,000 VARCO INTERNATIONAL, INC.* ......................... 309,375
-----------
935,875
-----------
PAPER/FOREST PRODUCTS--2.0%
7,000 BOISE CASCADE CORP. ................................ 254,625
-----------
PIPELINES--2.5%
5,400 COLUMBIA ENERGY GROUP, INC. ........................ 318,937
-----------
REAL ESTATE INVESTMENT TRUST--3.6%
10,000 ARCHSTONE COMMUNITIES TRUST ........................ 213,750
7,000 ESSEX PROPERTY TRUST, INC. ......................... 245,875
-----------
459,625
-----------
RETAILING--4.2%
4,000 CVS CORP. .......................................... 166,750
15,000 OFFICE DEPOT, INC.* ................................ 156,563
5,000 ROSS STORES, INC. .................................. 208,125
-----------
531,438
-----------
UTILITIES--3.3%
3,500 CMS ENERGY CORP. ................................... 138,469
7,500 TNP ENTERPRISES, INC. .............................. 280,312
-----------
418,781
-----------
TOTAL LONG-TERM INVESTMENTS
(COST $7,822,159) .................................. 10,053,899
-----------
Principal
Amount
----------
SHORT-TERM INVESTMENT--20.8%
REPURCHASE AGREEMENT--20.8%
$2,634,000 GREENWICH CAPITAL MARKETS, INC., 5.48%
DUE 9/1/99, (DATED 8/31/99, PROCEEDS $2,634,401,
SECURED BY FNMA, $2,638,084, FRN, DUE
07/18/27; MARKET VALUE $2,686,760)
(COST $2,634,000) .................................. 2,634,000
-----------
TOTAL INVESTMENTS--100.3%
(COST $10,456,159) ................................. $12,687,899
===========
</TABLE>
* = Non-income producing security.
FNMA = Federal National Mortgage Association
FRN = Floating Rate Note
See notes to financial statements.
<PAGE>
page 14 International Equity Portfolio
Portfolio of Investments August 31, 1999
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
LONG-TERM INVESTMENTS--96.8%
COMMON STOCK--96.8%
AUSTRALIA--0.5%
BROADCASTING--0.2%
2,000 NEWS CORP., LTD ................................ $ 14,622
-----------
DIVERSIFIED--0.2%
3,400 LANG CORP., LTD* ............................... 11,614
-----------
FINANCIAL SERVICES--0.0%
400 AUSTRALIAN STOCK EXCHANGE LTD .................. 2,937
-----------
FOOD/BEVERAGE PRODUCTS--0.1%
3,100 FOSTER'S BREWING GROUP LTD ..................... 9,085
-----------
TOTAL AUSTRALIA ................................ 38,258
-----------
BRAZIL--2.9%
TELECOMMUNICATIONS--1.5%
1,470 TELECOMUNICACOES BRASILEIRAS SA, ADR* .......... 69
1,470 TELECOMUNICACOES BRASILEIRAS SA, ADR,
PREFERRED* ..................................... 109,056
-----------
109,125
-----------
UTILITIES--1.4%
12,100 CENTRAIS ELECTRICAS BRASILEIRAS, ADR ........... 93,805
1,330 CENTRAIS ELECTRICAS BRASILEIRAS
SA-ELECTROBRAS, ADR, PREFERRED* ................ 10,415
523 CENTRAIS GERADORAS DO SUL DO BRASIL SA,
ADR* ........................................... 1,837
-----------
106,057
-----------
TOTAL BRAZIL ................................... 215,182
-----------
FINLAND--3.3%
PAPER/FOREST PRODUCTS--0.3%
700 UPM-KYMMENE OYJ ................................ 24,280
-----------
TELECOMMUNICATIONS--3.0%
1,718 NOKIA OYJ, A SHARES ............................ 143,743
3,057 SONERA GROUP OYJ ............................... 74,305
-----------
218,048
-----------
TOTAL FINLAND .................................. 242,328
-----------
FRANCE--10.7%
AUTOMOTIVE--0.8%
1,050 RENAULT SA ..................................... 56,715
-----------
BANKING--1.2%
710 CREDIT COMMERCIAL DE FRANCE@ ................... 89,258
-----------
COMPUTER SOFTWARE--2.1%
900 CAP GEMINI SA@ ................................. 154,893
-----------
INDUSTRIAL COMPONENTS--0.9%
322 COMPAGNIE DE SAINT GOBAIN ...................... 62,409
-----------
INSURANCE--1.0%
2,816 CNP ASSURANCES ................................. 74,412
-----------
OIL & GAS--2.1%
437 ELF AQUITANE SA ................................ 76,829
600 TOTALFINA SA CLASS B ........................... 77,526
-----------
154,355
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
FRANCE (cont'd)
PHARMACEUTICALS--1.8%
2,650 RHONE-POULENC SA ............................... $ 128,880
-----------
RETAILING--0.8%
360 PINAULT-PRINTEMPS-REDOUTE SA ................... 62,529
-----------
TOTAL FRANCE ................................... 783,451
-----------
GERMANY--8.5%
CHEMICALS--1.3%
2,530 DEGUSSA-HUELS AG* .............................. 98,071
-----------
FOOD/BEVERAGE PRODUCTS--4.2%
5,529 KAMPS AG ....................................... 306,842
-----------
MANUFACTURING--2.0%
750 VEBA AG ........................................ 46,960
4,680 VIAG AG* ....................................... 98,339
-----------
145,299
-----------
SEMI-CONDUCTORS--0.2%
150 CE CONSUMER ELECTRONIC AG ...................... 14,139
-----------
TELECOMMUNICATIONS--0.8%
370 MANNESMANN AG .................................. 56,899
-----------
TOTAL GERMANY .................................. 621,250
-----------
IRELAND--2.4%
AIRLINES--0.4%
3,486 RYANAIR* ....................................... 32,490
-----------
PAPER/FOREST PRODUCTS--0.7%
16,748 SMURFIT (JEFFERSON) GROUP ...................... 47,708
-----------
REAL ESTATE--0.5%
6,515 GREEN PROPERTY PLC ............................. 40,054
-----------
TELECOMMUNICATIONS--0.8%
1,413 ESAT TELECOM GROUP PLC, ADR* ................... 57,580
-----------
TOTAL IRELAND .................................. 177,832
-----------
ITALY--3.6%
COMPUTERS/COMPUTER HARDWARE--0.1%
3,720 TECNOST SPA* ................................... 9,767
-----------
FOOD/BEVERAGE PRODUCTS--0.5%
14,700 GRUPPO CREMONINI SPA* .......................... 32,788
-----------
INSURANCE--1.6%
11,000 ALLEANZA ASSICURAZIONI SPA ..................... 115,091
-----------
OIL & GAS--0.6%
7,700 ENTE NAZIONALE IDROCARBURI SPA (ENI) ........... 46,484
-----------
TELECOMMUNICATIONS--0.8%
7,600 TELECOM ITALIA MOBILE SPA ...................... 44,246
1,700 TELECOM ITALIA SPA ............................. 17,229
-----------
61,475
-----------
TOTAL ITALY .................................... 265,605
-----------
JAPAN--23.0%
AUTOMOTIVE--0.8%
2,000 TOYOTA MOTOR CORP. ............................. 59,125
-----------
</TABLE>
See notes to financial statements.
<PAGE>
International Equity Portfolio (continued) page 15
Portfolio of Investments August 31, 1999
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
JAPAN (cont'd)
BANKING--1.7%
3,000 BANK OF TOKYO-MITSUBISHI LTD@ ..................... $ 44,893
4,000 DAI-ICHI KANGYO BANK .............................. 42,138
3,000 SUMITOMO BANK ..................................... 41,186
-----------
128,217
-----------
CHEMICALS--2.0%
3,000 KANEKA CORP.@ ..................................... 34,322
7,000 NIPPON SANSO CORP. ................................ 25,371
1,000 SHIN-ETSU CHEMICAL CO. ............................ 40,820
7,000 SUMITOMO CHEMICAL CO.* ............................ 36,006
6,000 UBE INDUSTRIES LTD* ............................... 13,289
-----------
149,808
-----------
COMPUTERS/COMPUTER HARDWARE--0.8%
2,000 FUJITSU LTD ....................................... 58,759
-----------
CONSTRUCTION--0.3%
3,000 RAITO KOGYO* ...................................... 21,966
-----------
CONSTRUCTION MATERIALS--0.5%
16,000 TAIHEIYO CEMENT CORP. ............................. 42,028
-----------
CONSUMER PRODUCTS--1.0%
3 JAPAN TOBACCO INC. ................................ 41,735
1,000 KAO CORP.@ ........................................ 28,464
-----------
70,199
-----------
DIVERSIFIED--0.3%
3,000 MITSUI & CO. ...................................... 21,170
-----------
ELECTRONICS/ELECTRICAL EQUIPMENT--4.0%
6,000 FUJIKURA LTD ...................................... 38,550
200 MABUCHI MOTOR CORP. ............................... 24,968
1,000 MURATA MANUFACTURING CO., LTD@ .................... 80,999
3,000 NEC CORP. ......................................... 48,874
3,000 SHARP CORP. ....................................... 45,854
6,000 TOSHIBA CORP. ..................................... 53,432
-----------
292,677
-----------
FINANCIAL SERVICES--1.5%
300 ACOM CO., LTD ..................................... 30,505
3,000 DAIWA SECURITIES GROUP INC. ....................... 27,210
400 ORIX CORP.* ....................................... 38,587
20 SHOHKOH FUND ...................................... 14,516
-----------
110,818
-----------
FOOD/BEVERAGE PRODUCTS--1.1%
2,000 KIKKOMAN* ......................................... 16,456
21,000 NIPPON SUISAN KAISHA LTD* ......................... 41,323
1,000 NISSIN FOOD PRODUCTS* ............................. 26,542
-----------
84,321
-----------
HEALTH CARE/HEALTH CARE SERVICES--0.9%
2,000 TERUMO ............................................ 64,067
-----------
HOME BUILDING CONSTRUCTION--0.4%
3,000 SEKISUI HOUSE LTD ................................. 32,317
-----------
INSURANCE--0.5%
3,000 TOKIO MARINE & FIRE INSURANCE CO.* ................ 35,420
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
JAPAN (cont'd)
MACHINERY & ENGINEERING EQUIPMENT--0.4%
5,000 TOKYO KIKAI SEISAKUSHO ............................ $ 29,974
-----------
METALS/MINING--0.6%
8,000 MITSUI MINING & SMELTING* ......................... 47,373
-----------
OIL & GAS--0.6%
13,000 OSAKA GAS CO.@ .................................... 41,644
-----------
PHARMACEUTICALS--0.5%
2,000 FUJISAWA PHARMACEUTICAL CO., LTD .................. 34,432
-----------
REAL ESTATE--0.5%
3,000 HANKYU REALTY CO., LTD ............................ 12,630
2,000 MITSUBISHI ESTATE CO., LTD ........................ 20,721
-----------
33,351
-----------
RETAILING--0.8%
1,500 AOYAMA TRADING .................................... 55,327
-----------
SHIPPING/TRANSPORTATION--0.4%
5 EAST JAPAN RAILWAY CO. ............................ 30,340
-----------
STEEL--0.5%
13,000 NIPPON STEEL CO. .................................. 34,148
-----------
TELECOMMUNICATIONS--1.6%
3 NIPPON TELEGRAPH & TELEPHONE CORP. ................ 33,773
1 NTT MOBILE COMMUNICATIONS NETWORK INC.@ 16,658
4 NTT MOBILE COMMUNICATIONS NETWORK INC.,
BONUS*@ ........................................... 66,264
-----------
116,695
-----------
TEXTILES--0.7%
4,000 KURARAY CO., LTD .................................. 48,179
-----------
TOYS & GAMES--0.6%
300 NINTENDO CO., LTD ................................. 50,934
-----------
TOTAL JAPAN ....................................... 1,693,289
-----------
MALTA--0.6%
TELECOMMUNICATIONS--0.6%
2,382 MALTACOM PLC, GDR, REG. S ......................... 41,090
-----------
MEXICO--0.9%
DIVERSIFIED--0.5%
10,000 ALFA, SA DE CV, CLASS A ........................... 37,766
-----------
REAL ESTATE--0.2%
500 CORPORACION GEO, SA DE CV, SER. B, GDS* ........... 6,606
500 CORPORACION GEO, SA DE CV, SER. B, GDR*# .......... 6,606
-----------
13,212
-----------
RETAILING--0.2%
25,000 GRUPO ELEKTRA, SA DE CV, L SHARES ................. 11,596
-----------
TOTAL MEXICO ...................................... 62,574
-----------
NETHERLANDS--7.2%
AUTOMOTIVE--0.9%
2,600 ATHLON GROEP ...................................... 63,059
-----------
ELECTRONICS/ELECTRICAL EQUIPMENT--0.9%
607 KONINKLIJKE PHILIPS ELECTRONICS NV ................ 62,733
-----------
</TABLE>
See notes to financial statements.
<PAGE>
page 16 International Equity Portfolio (continued)
Portfolio of Investments August 31, 1999
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
NETHERLANDS (cont'd)
FINANCIAL SERVICES--2.1%
4,750 FORTIS (NL) ................................... $ 161,235
-----------
PRINTING & PUBLISHING--1.0%
1,900 VERENIGDE NEDERLANDSE UITGEVERSBEDRIJVAN
VERENIGD BEZIT (VNU) .......................... 73,046
-----------
RETAILING--1.0%
957 KONINKLIJKE AHOLD NV .......................... 34,360
1,713 LAURUS NV ..................................... 38,553
-----------
72,913
-----------
TELECOMMUNICATIONS--1.3%
1,600 UNITED PAN-EUROPE COMMUNICATIONS NV* .......... 97,268
-----------
TOTAL NETHERLANDS ............................. 530,254
-----------
PORTUGAL--1.0%
BANKING--0.6%
1,600 BANCO ESPIRITO SANTO E COMMERCIAL ............. 40,686
-----------
TELECOMMUNICATIONS--0.4%
240 TELECEL-COMUNICACOES PESSOAIS, SA ............. 31,061
-----------
TOTAL PORTUGAL ................................ 71,747
-----------
SINGAPORE--0.1%
REAL ESTATE--0.1%
2,500 DBS LAND, LTD ................................. 5,702
-----------
SPAIN--4.1%
BANKING--0.9%
2,870 ARGENTARIA, CAJA POSTAL Y BANCO
HIPOTECARIO DE ESPANA, SA ..................... 65,504
-----------
BROADCASTING--0.7%
1,880 SOGECABLE SA* ................................. 51,331
-----------
BUSINESS SERVICES--0.5%
3,900 PROSEGUR COMPANIA SEGURIDAD SA ................ 38,579
-----------
CONSTRUCTION--0.4%
480 FOMENTO DE CONSTRUCCIONES Y
CONTRATAS, SA ................................. 28,545
-----------
RETAILING--0.7%
2,000 CONTINENTE SA ................................. 53,230
-----------
STEEL--0.4%
830 ACERINOX SA ................................... 27,567
-----------
TELECOMMUNICATIONS--0.5%
2,241 TELEFONICA SA* ................................ 35,839
-----------
TOTAL SPAIN ................................... 300,595
-----------
SWEDEN--3.0%
BANKING--1.1%
5,850 SVENSKA HANDELSBANKEN ......................... 81,428
-----------
BUSINESS SERVICES--0.6%
3,882 ASSA ABLOY AB ................................. 41,057
-----------
MEDIA/ADVERTISING--0.2%
607 MODERN TIMES GROUP AB* ........................ 16,972
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
SWEDEN (cont'd)
TELECOMMUNICATIONS--1.1%
2,420 TELEFONAKTIEBOLAGET LM ERICSSON ............... $ 78,254
-----------
TOTAL SWEDEN .................................. 217,711
-----------
SWITZERLAND--5.6%
ADVERTISING--2.8%
270 PUBLIGROUPE SA ................................ 202,772
-----------
BANKING--0.1%
25 UBS AG ........................................ 7,072
-----------
CONSUMER PRODUCTS--0.8%
30 RICHEMONT (CIE FIN) ........................... 57,169
-----------
INSURANCE--0.4%
55 ZURICH ALLIED AG .............................. 32,353
-----------
RETAILING--1.5%
1,000 TAG HEUER INTERNATIONAL SA .................... 109,012
-----------
TOTAL SWITZERLAND ............................. 408,378
-----------
THAILAND--0.0%
OIL & GAS--0.0%
400 PTT EXPLORATION AND PRODUCTION PUBLIC CO.,
LTD (FOREIGN)* ................................ 3,151
-----------
UTILITIES--0.0%
1,900 ELECTRICITY GENERATING PUBLIC CO., LTD
(FOREIGN) ..................................... 2,974
-----------
TOTAL THAILAND ................................ 6,125
-----------
UNITED KINGDOM--19.4%
BANKING--3.7%
3,540 BARCLAY'S PLC*@ ............................... 105,400
4,575 NATIONAL WESTMINSTER BANK PLC@ ................ 94,367
3,479 ROYAL BANK OF SCOTLAND GROUP PLC@ ............. 72,760
-----------
272,527
-----------
CHEMICALS--0.5%
3,300 LAPORTE PLC ................................... 36,141
29,700 LAPORTE PLC, B SHARES* ........................ 239
-----------
36,380
-----------
COMPUTER SOFTWARE/SERVICES--0.8%
1,500 EXCHANGE HOLDINGS PLC* ........................ 4,744
5,200 SEMA GROUP PLC@ ............................... 56,908
-----------
61,652
-----------
CONSTRUCTION--0.7%
4,283 BERKELEY GROUP PLC@ ........................... 54,145
-----------
DIVERSIFIED--1.2%
8,795 GENERAL ELECTRIC CO., PLC ..................... 88,396
-----------
ELECTRONICS/ELECTRICAL EQUIPMENT--0.6%
5,800 NXT PLC* ...................................... 42,472
-----------
FINANCIAL SERVICES--0.6%
14,880 LEGAL & GENERAL GROUP PLC ..................... 41,339
-----------
FOOD/BEVERAGE PRODUCTS--1.0%
6,974 DIAGEO PLC@ ................................... 71,122
-----------
</TABLE>
See notes to financial statements.
<PAGE>
International Equity Portfolio (continued) page 17
Portfolio of Investments August 31, 1999
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
UNITED KINGDOM (cont'd)
MULTI-MEDIA--1.1%
5,460 REUTERS GROUP PLC@ ........................... $ 80,668
-----------
OIL & GAS--4.2%
9,202 BP AMOCO PLC@ ................................ 171,743
17,250 SHELL TRANSPORT & TRADING CO., PLC@ .......... 138,267
-----------
310,010
-----------
PHARMACEUTICALS--2.8%
5,270 GLAXO WELLCOME PLC ........................... 139,097
5,116 SMITHKLINE BEECHAM PLC@ ...................... 66,899
-----------
205,996
-----------
STEEL--0.6%
15,500 BRITISH STEEL PLC ............................ 40,841
-----------
TELECOMMUNICATIONS--1.6%
5,689 VODAFONE AIRTOUCH PLC@ ....................... 115,181
-----------
TOTAL UNITED KINGDOM ......................... 1,420,729
-----------
TOTAL COMMON STOCK
(COST $6,270,972) ............................ 7,102,100
-----------
PREFERRED STOCK--0.0%
MALAYSIA--0.0%
CONSTRUCTION--0.0%
4,000 SUNWAY BUILDING TECHNOLOGY, BHD, 3.0%
RULS, (REDEEMABLE UNSECURED LOAN STOCK)
(COST $1,284) ................................ 900
-----------
</TABLE>
<TABLE>
<CAPTION>
Units
-----
<S> <C> <C>
WARRANTS--0.0%
GERMANY--0.0%
INSURANCE--0.0%
11 MUENCHENER RUECKVERSICHERUNGS-
GESELLSCHAFT AG, EXPIRES 06/03/02 .......... 367
-----------
HONG KONG--0.0%
DIVERSIFIED--0.0%
300 WHARF HOLDINGS, EXPIRES 12/31/99 ........... 185
-----------
TOTAL WARRANTS
(COST $0) .................................. 552
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
(DEM)
- ----------
<S> <C> <C>
CONVERTIBLE CORPORATE BOND--0.0%
GERMANY--0.0%
AUTOMOTIVE--0.0%
1,310 DAIMLERCHRYSLER AG, 5.75%, 06/14/02
(COST $769) ....................... 741
-----------
TOTAL INVESTMENTS--96.8%
(COST $6,273,025) ................. $ 7,104,293
===========
</TABLE>
<TABLE>
<CAPTION>
Number Original Value
Expiration of Cost (USD) at Unrealized
Description Date Contracts (USD) 08/31/99 Depreciation
- -------------------- ------------ ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
LONG INDEX FUTURES CONTRACTS OUTSTANDING
ALL ORDINARIES SPI Sept. 1999 3 $147,309 $145,553 ($ 1,756)
SHORT INDEX FUTURES CONTRACTS OUTSTANDING
DJ EURO STOXX 50 Sept. 1999 4 155,238 161,140 (5,902)
</TABLE>
* = Non-income producing security
# = Security may only be sold to institutional buyers
@ = All or a portion of this secruity is segregated for forward foreign
currency contracts
ADR = American Depositary Receipt
GDR = Global Depositary Receipt
GDS = Global Depositary Share
See notes to financial statements.
<PAGE>
page 18 Asset Allocation Portfolio
Portfolio of Investments August 31, 1999
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
LONG-TERM INVESTMENTS--94.5%
COMMON STOCK--49.0%
AEROSPACE--0.8%
1,200 GENERAL DYNAMICS CORP. .............................. $ 75,600
-----------
AIRLINES--0.8%
1,200 AMR CORP.* .......................................... 70,350
-----------
AUTOMOTIVE--1.0%
1,800 FORD MOTOR CO. ...................................... 93,825
-----------
BANKING--2.7%
1,500 BANKAMERICA CORP. ................................... 90,750
1,400 BANK ONE CORP. ...................................... 56,175
800 CULLEN/FROST BANKERS, INC. .......................... 20,900
1,000 FIRST SECURITY CORP. ................................ 21,687
600 FIRST UNION CORP. ................................... 24,900
600 MERCANTILE BANCOPORATION ............................ 33,112
-----------
247,524
-----------
BIOTECHNOLOGY--0.5%
600 AMGEN, INC.* ........................................ 49,913
-----------
BROADCASTING--0.8%
1,500 CBS CORP.* .......................................... 70,500
-----------
CHEMICALS--0.7%
800 AIR PRODUCTS AND CHEMICALS, INC. .................... 27,200
300 DOW CHEMICAL CO. .................................... 34,088
-----------
61,288
-----------
COMPUTER SOFTWARE--2.0%
1,200 AMERICAN MANAGEMENT SYSTEMS, INC.* .................. 34,350
1,100 COMPUTER ASSOCIATES INTERNATIONAL, INC. ............. 62,150
1,500 SYMANTEC CORP.* ..................................... 45,000
1,100 UNISYS CORP.* ....................................... 47,300
-----------
188,800
-----------
COMPUTERS/COMPUTER HARDWARE--2.3%
800 EMC CORP.* .......................................... 48,000
800 INTERNATIONAL BUSINESS MACHINES CORP. ............... 99,650
800 TEXAS INSTRUMENTS, INC. ............................. 65,650
-----------
213,300
-----------
CONSTRUCTION--0.6%
3,800 D.R. HORTON, INC. ................................... 55,338
-----------
CONSTRUCTION MATERIALS--1.5%
4,800 MASCO CORP. ......................................... 135,900
-----------
CONSUMER PRODUCTS--2.2%
1,000 FORTUNE BRANDS, INC. ................................ 37,500
2,900 PHILIP MORRIS COMPANIES, INC. ....................... 108,569
3,100 SHAW INDUSTRIES, INC. ............................... 62,000
-----------
208,069
-----------
DIVERSIFIED--0.5%
500 TYCO INTERNATIONAL LTD (BERMUDA)* ................... 50,656
-----------
ELECTRONICS/ELECTRICAL EQUIPMENT--2.6%
2,100 ALTERA CORP.* ....................................... 88,462
1,500 APPLIED MATERIALS, INC.* ............................ 106,594
1,600 EG&G, INC. .......................................... 50,900
-----------
245,956
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
ENTERTAINMENT/LEISURE--1.1%
2,500 VIACOM, INC. CLASS B* ............................... $ 105,156
-----------
ENVIRONMENTAL SERVICES--0.3%
1,100 WASTE MANAGEMENT, INC. .............................. 23,994
-----------
FINANCIAL SERVICES--3.7%
2,942 ASSOCIATES FIRST CAPITAL CORP., CLASS A ............. 100,947
1,900 CITIGROUP, INC. ..................................... 84,431
2,000 FREDDIE MAC ......................................... 103,000
400 LEHMAN BROTHERS HOLDING, INC. ....................... 21,500
400 MORGAN STANLEY, DEAN WITTER, & CO. .................. 34,325
-----------
344,203
-----------
FOOD/BEVERAGE PRODUCTS--0.5%
1,400 PEPSICO, INC. ....................................... 47,775
-----------
HEALTH CARE/HEALTH CARE SERVICES--1.7%
400 AETNA INC. .......................................... 31,100
1,000 COLUMBIA/HCA HEALTHCARE CORP. ....................... 24,625
2,200 HCR MANOR CARE, INC.* ............................... 43,037
7,000 HEALTHSOUTH CORP.* .................................. 57,313
-----------
156,075
-----------
INSURANCE--1.6%
1,600 ALLSTATE CORP. ...................................... 52,500
1,900 TRAVELERS PROPERTY CASUALTY CORP., CLASS A .......... 67,450
600 XL CAPITAL LTD, CLASS A (BERMUDA) ................... 30,188
-----------
150,138
-----------
MANUFACTURING--2.5%
2,000 INGERSOLL-RAND CO. .................................. 127,250
800 JOHNSON CONTROLS, INC. .............................. 54,700
1,100 PENTAIR, INC. ....................................... 50,050
-----------
232,000
-----------
METALS/MINING--1.7%
2,400 ALCOA, INC. ......................................... 154,950
-----------
OFFICE/BUSINESS EQUIPMENT--0.3%
500 XEROX CORP. ......................................... 23,875
-----------
OIL & GAS--4.5%
800 CHEVRON CORP. ....................................... 73,800
4,200 COASTAL CORP. ....................................... 181,912
1,700 HALLIBURTON CO. ..................................... 78,837
500 MOBIL CORP. ......................................... 51,188
1,600 ULTRAMAR DIAMOND SHAMROCK CORP. ..................... 41,800
-----------
427,537
-----------
PAPER/FOREST PRODUCTS--0.9%
700 WEYERHAEUSER CO. .................................... 39,375
1,200 WILLAMETTE INDUSTRIES ............................... 47,550
-----------
86,925
-----------
PHARMACEUTICALS--1.7%
3,000 PHARMACIA & UPJOHN, INC. ............................ 156,750
-----------
PIPELINES--0.5%
800 COLUMBIA ENERGY GROUP, INC. ......................... 47,250
-----------
</TABLE>
See notes to financial statements.
<PAGE>
Asset Allocation Portfolio (continued) page 19
Portfolio of Investments August 31, 1999
<TABLE>
<CAPTION>
Shares Issuer Value
------ ------ -----
<S> <C> <C>
PRINTING & PUBLISHING--0.8%
1,800 NEW YORK TIMES CO., CLASS A .................. $ 70,313
-----------
REAL ESTATE INVESTMENT TRUST--0.7%
900 EQUITY RESIDENTIAL PROPERTIES TRUST .......... 39,600
800 ESSEX PROPERTY TRUST, INC. ................... 28,100
-----------
67,700
-----------
RETAILING--1.9%
900 FEDERATED DEPARTMENT STORES* ................. 41,400
3,800 KROGER CO.* .................................. 87,875
4,500 OFFICE DEPOT, INC.* .......................... 46,969
-----------
176,244
-----------
SHIPPING/TRANSPORTATION--0.7%
1,400 UNION PACIFIC CORP. .......................... 68,163
-----------
TELECOMMUNICATIONS--2.4%
580 AT&T CORP. ................................... 26,100
1,200 GTE CORP. .................................... 82,350
1,200 MCI WORLDCOM, INC.* .......................... 90,900
400 TELLABS, INC.* ............................... 23,825
-----------
223,175
-----------
TELECOMMUNICATIONS EQUIPMENT--0.4%
800 GENERAL INSTRUMENT CORP.* .................... 39,350
-----------
UTILITIES--2.1%
1,600 CMS ENERGY CORP. ............................. 63,300
500 DUKE ENERGY CORP. ............................ 28,750
1,400 TEXAS UTILITIES CO. .......................... 56,612
1,200 UNICOM CORP. ................................. 46,350
-----------
195,012
-----------
TOTAL COMMON STOCK
(COST $4,378,459) ............................ 4,563,604
-----------
Principal
Amount
(USD)
---------
CORPORATE NOTES & BONDS--10.8%
AUTOMOTIVE--2.0%
FORD MOTOR CREDIT CO.,
$ 50,000 5.80%, 01/12/09 ............................. 44,858
50,000 6.70%, 07/16/04 ............................. 49,199
100,000 GENERAL MOTORS ACCEPTANCE CORP.,
5.85%, 01/14/09 .............................. 89,632
-----------
183,689
-----------
BANKING--0.5%
50,000 SOVEREIGN BANCORP, 6.63%, 03/15/01 ........... 49,178
-----------
DIVERSIFIED--1.5%
TYCO INTERNATIONAL GROUP, SA (LUXEMBURG),
75,000 5.88%, 11/01/04 ............................. 70,504
75,000 6.88%, 01/15/29 ............................. 66,434
-----------
136,938
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
(USD) Issuer Value
--------- ------ -----
<S> <C> <C>
FINANCIAL SERVICES--4.3%
$ 49,829 BEAR STEARNS COMMERCIAL MORTGAGE
SECURITIES, INC., 6.80%, 09/15/08 ...................... $ 49,186
100,000 GENERAL ELECTRIC CAPITAL CORP., MTN,
9.18%, 12/30/08 ........................................ 114,032
50,000 GOLDMAN SACHS GROUP, 6.65%, 05/15/09 ................... 47,237
50,000 LEHMAN BROTHERS HOLDINGS, 6.63%, 04/01/04 .............. 48,174
50,000 NATIONSLINK FUNDING CORP., 6.30%, 12/10/02 ............. 48,922
50,000 TPSA FINANCE, 7.75%, 12/10/08 .......................... 47,368
50,000 TXU EASTERN FUNDING (UNITED KINGDOM),# 6.45%,
05/15/05 ............................................... 47,043
-----------
401,962
-----------
OIL & GAS--0.5%
50,000 CONOCO INC., 5.90%, 04/15/04 ........................... 46,503
-----------
PRINTING & PUBLISHING--0.3%
30,000 WASHINGTON POST CO., CLASS B, 5.50%, 02/15/09 .......... 26,925
-----------
TELECOMMUNICATIONS--1.7%
75,000 AT&T CORP., 5.63%, 03/15/04 ............................ 71,671
100,000 SPRINT CAPITAL CORP., 6.38%, 05/01/09 .................. 92,775
-----------
164,446
-----------
TOTAL CORPORATE NOTES & BONDS
(COST $1,054,429) ...................................... 1,009,641
-----------
MORTGAGE BACKED SECURITIES--11.3%
FEDERAL NATIONAL MORTGAGE ASSOCIATION
118,242 POOL 252339, 6.00%, 03/01/29 .......................... 108,744
78,196 POOL 252435, 6.00%, 05/01/14 ........................... 74,408
50,886 POOL 313563, 10.50%, 03/01/18 .......................... 55,608
235,374 POOL 323614, 6.50%, 02/01/14 ........................... 228,607
233,956 POOL 323633, 7.00%, 03/01/29 ........................... 227,229
214,061 POOL 323688, 7.50%, 03/01/29 ........................... 212,588
157,105 POOL 484753, 6.50%, 03/01/29 ........................... 148,709
-----------
TOTAL MORTGAGE BACKED SECURITIES
(COST $1,097,451) ...................................... 1,055,893
-----------
ASSET BACKED SECURITIES--1.1%
100,000 DISCOVER CARD MASTER TRUST I, SER. 1998-2,
CLASS A, 5.80%, 09/16/03
(COST $99,430) ......................................... 99,437
-----------
U.S. TREASURY SECURITIES--19.6%
U.S. TREASURY NOTES & BONDS,
250,000 4.25%, 11/15/03 ....................................... 234,610
100,000 4.63%, 12/31/00@ ....................................... 98,672
100,000 4.75%, 02/15/04 ........................................ 95,453
50,000 4.75%, 11/15/08 ........................................ 45,258
100,000 5.00%, 02/28/01 ........................................ 99,016
50,000 5.25%, 05/31/01 ........................................ 49,586
175,000 5.25%, 11/15/28 ........................................ 151,676
50,000 5.63%, 02/15/06 ........................................ 48,703
50,000 6.00%, 07/31/02 ........................................ 50,211
</TABLE>
See notes to financial statements.
<PAGE>
page 20 Asset Allocation Portfolio (continued)
Portfolio of Investments August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount
(USD) Issuer Value
--------- ------ -----
<S> <C> <C>
U.S. TREASURY SECURITIES (cont'd)
$ 250,000 6.13%, 11/15/27 .............................. $ 242,813
450,000 6.50%, 10/15/06 .............................. 457,947
40,000 8.13%, 08/15/19 .............................. 47,231
125,000 8.50%, 02/15/20 .............................. 153,223
50,000 8.75%, 08/15/00 ............................. 51,453
----------
TOTAL U.S. TREASURY SECURITIES
(COST $1,879,152) ............................ 1,825,852
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS--1.5%
FEDERAL HOME LOAN MORTGAGE ASSOCIATION,
50,000 5.13%, 10/15/08 ............................. 44,047
50,000 6.00%, 11/15/17 ............................. 48,672
50,000 FEDERAL NATIONAL MORTGAGE ASSOCIATION,
5.13%, 02/13/04 .............................. 47,203
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $148,586) .............................. 139,922
----------
STATE & MUNICIPAL OBLIGATIONS--1.2%
MICHIGAN--1.2%
130,000 WAYNE CHARTER COUNTY, MICHIGAN, DETROIT
METROPOLITAN WAYNE COUNTY, SER. A, REV.,
5.00%, 12/01/28
(COST $123,673) .............................. 114,104
----------
TOTAL LONG-TERM INVESTMENTS
(COST $8,781,180) ............................ 8,808,453
----------
SHORT-TERM INVESTMENT--5.0%
REPURCHASE AGREEMENT--5.0%
470,000 GREENWICH CAPITAL MARKETS, INC., 5.48%, DUE
09/01/99, (DATED 08/31/99, PROCEEDS $470,072,
SECURED BY FHLMC, $498,010, FRN, DUE 05/15/29;
MARKET VALUE $481,821)
(COST $470,000) .............................. 470,000
----------
TOTAL INVESTMENTS--99.5%
(COST $9,251,180) ............................ $9,278,453
==========
SHORT FUTURES CONTRACTS OUTSTANDING
</TABLE>
<TABLE>
<CAPTION>
Number
Expiration of Original Value at Unrealized
Description Date Contracts Cost 08/31/99 Appreciation
- ---------------------- ------------ ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY NOTE Sept. 99 5 $560,624 $550,000 $10,624
</TABLE>
* = Non-income producing security
# = Security may only be sold to institutional buyers
@ = All or a portion of this security is segregated
FHLMC = Federal Home Loan Mortgage Corporation
FRN = Floating Rate Note
MTN = Medium Term Note
REV. = Revenue Bond
See notes to financial statements.
<PAGE>
U.S. Government Income Portfolio
Portfolio of Investments
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Issuer Value
------ ------ -----
<S> <C> <C>
LONG-TERM INVESTMENTS--93.6%
U.S. TREASURY SECURITIES--47.2%
U.S. TREASURY NOTES & BONDS,
$ 575,000 5.63%, 05/15/08 ............................ $ 554,967
335,000 6.13%, 09/30/00 ............................ 336,883
400,000 6.75%, 08/15/26 ............................ 418,564
675,000 8.50%, 02/15/20 ............................ 827,401
735,000 10.75%, 08/15/05 ........................... 898,883
----------
TOTAL U.S. TREASURY SECURITIES
(COST $3,276,968) ........................... 3,036,698
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS--36.0%
750,000 FEDERAL HOME LOAN MORTGAGE CORP., 5.70%,
03/25/03 .................................... 731,130
FEDERAL NATIONAL MORTGAGE ASSOCIATION,
469,000 5.13%, 02/13/04 ............................ 442,764
150,000 5.88%, 04/23/04 ............................ 144,446
1,000,000 STUDENT LOAN MARKETING ASSOCIATION, 5.57%,
03/17/00 .................................... 998,120
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $2,347,227) ........................... 2,316,460
----------
MORTGAGE BACKED SECURITIES--10.4%
702,752 GOVERNMENT NATIONAL MORTGAGE ASSOCIATION,
POOL 354779, 6.50%, 03/15/24
(COST $641,543) ............................. 668,928
----------
TOTAL LONG-TERM INVESTMENTS
(COST $6,265,738) ........................... 6,022,086
----------
SHORT-TERM INVESTMENT--4.7%
REPURCHASE AGREEMENT--4.7%
304,000 GREENWICH CAPITAL MARKETS, INC., 5.48%, DUE
09/01/99, (DATED 08/31/99, PROCEEDS $304,046,
SECURED BY FNMA POOL, $305,673, FRN, DUE
07/18/27; MARKET VALUE $311,312)
(COST $304,000) ............................. 304,000
----------
TOTAL INVESTMENTS--98.3%
(COST $6,569,738) ........................... $6,326,086
==========
</TABLE>
FNMA = Federal National Mortgage Association
FRN = Floating Rate Note
Money Market Portfolio page 21
Portfolio of Investments
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount
(USD) Issuer Value
----- ------ -----
<S> <C> <C>
U.S. TREASURY SECURITIES--6.8%
U.S. TREASURY BILLS,
$ 172,000 4.57%, 09/16/99 ...................................... $171,673
100,000 4.57%, 10/21/99 ...................................... 99,365
--------
TOTAL U.S. TREASURY SECURITIES
(COST $271,038) ....................................... 271,038
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS--2.4%
98,000 FEDERAL NATIONAL MORTGAGE ASSOCIATION, MTN,
5.01%, 09/27/99
(COST $97,645) ....................................... 97,645
--------
COMMERCIAL PAPER--78.8%
ASSET BACKED SECURITIES--3.7%
150,000 CIESCO L.P., 5.30%, 10/14/99 .......................... 149,051
--------
BANKING--18.2%
100,000 BANCO BOZANO SIMONSEN (CI), (SPAIN),
5.30%, 09/24/99 ....................................... 99,661
150,000 BANCO NACIONAL DE MEXICO SA (BANAMEX),
(UNITED KINGDOM), 5.35%, 09/07/99 ..................... 149,866
100,000 NATIONAL AUSTRALIA FUNDING, (AUSTRALIA),
5.20%, 09/21/99 ....................................... 99,711
190,000 SWEDBANK (SWEDEN), 5.15%, 09/15/99 .................... 189,619
190,000 UNIFUNDING, INC., (DENMARK), 5.17%, 10/04/99 .......... 189,100
--------
727,957
--------
CONSTRUCTION MACHINERY--4.8%
190,000 CATERPILLAR FINANCIAL SERVICES CORP.,
4.93%, 09/02/99 ....................................... 189,974
--------
CONSUMER PRODUCTS--2.5%
100,000 PROCTER & GAMBLE CO., 5.15%, 09/13/99 ................. 99,828
--------
ELECTRONICS/ELECTRICAL EQUIPMENT--2.5%
100,000 GENERAL ELECTRIC CAPITAL CORP.,
5.26%, 09/20/99 ....................................... 99,722
--------
ENTERTAINMENT--2.5%
100,000 WALT DISNEY CO., 5.20%, 11/08/99 ...................... 99,018
--------
</TABLE>
See notes to financial statements.
<PAGE>
page 22 Money Market Portfolio (continued)
Portfolio of Investments
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount
(USD) Issuer Value
----- ------ -----
<S> <C> <C>
FINANCIAL SERVICES--26.9%
$ 190,000 BIL NORTH AMERICA, INC., (BELGIUM),
5.23%, 09/17/99 ....................................... $ 189,558
195,000 INTERNATIONAL LEASE FINANCE CORP.,
4.78%, 09/13/99 ....................................... 194,689
130,000 J.P. MORGAN SECURITIES, INC., 4.82%, 09/15/99 ......... 129,756
190,000 MERRILL LYNCH & CO., INC., 5.10%, 09/07/99 ............ 189,838
190,000 SALOMON SMITH BARNEY HOLDINGS, INC., 5.20%,
09/13/99 .............................................. 189,671
180,000 UBS FINANCE INC., (SWITZERLAND), 5.20%, 09/10/99 ...... 179,766
----------
1,073,278
----------
INSURANCE--9.5%
190,000 ING AMERICA INSURANCE HOLDINGS, INC.,
(NETHERLANDS), 5.17%, 11/12/99 ........................ 188,035
190,000 METLIFE FUNDING, INC., 5.20%, 09/15/99 ................ 189,616
----------
377,651
----------
PHARMACEUTICALS--4.6%
185,000 ABBOTT LABORATORIES, 5.17%, 09/14/99 .................. 184,655
----------
RETAILING--3.6%
145,000 ST. MICHAEL FINANCE LTD, (UNITED KINGDOM),
5.28%, 10/14/99 ....................................... 144,087
----------
TOTAL COMMERCIAL PAPER
(COST $3,145,221) ..................................... 3,145,221
----------
CERTIFICATES OF DEPOSITS (YANKEE)--11.9%
100,000 CANADIAN IMPERIAL BANK OF COMMERCE (CIBC),
(CANADA), 5.27%, 03/03/00 ............................. 100,004
125,000 DEUTSCHE BANK AG, (GERMANY), 5.33%, 03/09/00 .......... 125,039
150,000 NATIONAL WESTMINSTER BANK PLC, (UNITED
KINGDOM), 5.20%, 05/10/00 ............................. 149,326
100,000 TORONTO DOMINION BANK LTD, (CANADA), 5.05%,
02/14/00 .............................................. 99,949
----------
TOTAL CERTIFICATES OF DEPOSITS (YANKEE)
(COST $474,318) ....................................... 474,318
----------
TOTAL INVESTMENTS--99.9%
(COST $3,988,222)* .................................... $3,988,222
==========
</TABLE>
* = The cost of securities is substantially the same for federal income tax
purposes.
MTN = Medium Term Note.
See notes to financial statements.
<PAGE>
Statement of Assets and Liabilities page 23
August 31, 1999
<TABLE>
<CAPTION>
Growth and Capital International
Income Growth Equity
Portfolio Portfolio Portfolio
--------- --------- ---------
<S> <C> <C> <C>
ASSETS:
Investment securities, at value (Note 1) $19,107,778 $12,687,899 $7,104,293
Cash 578 640 53,006
Foreign Currency (Cost $202,143)(a) -- -- 203,986
Other assets 171 112 62
Receivables:
Investment securities sold 93,708 -- 205,512
Portfolio shares sold 15,078 -- --
Dividends and interest 21,595 6,251 11,794
Variation margin -- -- --
Open forward foreign currency contracts -- -- 34,909
Expense reimbursement from VFD -- -- 11,000
Other -- -- --
----------- ----------- ----------
TOTAL ASSETS 19,238,908 12,694,902 7,624,562
----------- ----------- ----------
LIABILITIES:
Payables:
Investment securities purchased -- -- 228,208
Portfolio shares redeemed 241 469 155
Variation margin -- -- 7,646
Open forward foreign currency contracts -- -- 6,051
Accrued liabilities: (Note 2)
Investment advisory fees 2,488 -- --
Administration fees 3,317 -- --
Custody fees 16,534 14,289 6,233
Other 62,991 31,500 39,707
----------- ----------- ----------
TOTAL LIABILITIES 85,571 46,258 288,000
----------- ----------- ----------
NET ASSETS:
Paid in capital 18,709,718 10,979,708 6,475,467
Accumulated undistributed/(overdistributed) net investment
income 46,071 558 (109,647)
Accumulated net realized gain (loss) on investments and
futures transactions (314,961) (563,362) 116,135
Net unrealized appreciation (depreciation) of investments,
futures and assets and liabilities denominated in foreign
currencies 712,509 2,231,740 854,607
----------- ----------- ----------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL
INTERESTS $19,153,337 $12,648,644 $7,336,562
=========== =========== ==========
Shares of beneficial interest outstanding ($.001 par value;
unlimited number of shares authorized) 1,516,069 920,135 645,906
Net asset value, maximum offering price per share and
redemption price per share $ 12.63 $ 13.75 $ 11.36
=========== =========== ==========
Cost of investments $18,395,269 $10,456,159 $6,273,025
=========== =========== ==========
<CAPTION>
Asset U.S. Government Money
Allocation Income Market
Portfolio Portfolio Portfolio
--------- --------- ---------
<S> <C> <C> <C>
ASSETS:
Investment securities, at value (Note 1) $ 9,278,453 $6,326,086 $3,988,222
Cash 3,300 646 3,365
Foreign Currency (Cost $202,143)(a) -- -- --
Other assets 82 56 33
Receivables:
Investment securities sold -- -- --
Portfolio shares sold -- 36,176 --
Dividends and interest 61,752 77,875 11,244
Variation margin 703 -- --
Open forward foreign currency contracts -- -- --
Expense reimbursement from VFD 9,000 10,000 10,254
Other -- -- 296
----------- ---------- ----------
TOTAL ASSETS 9,353,290 6,450,839 4,013,414
----------- ---------- ----------
LIABILITIES:
Payables:
Investment securities purchased -- -- --
Portfolio shares redeemed 204 34 51
Variation margin -- -- --
Open forward foreign currency contracts -- -- --
Accrued liabilities: (Note 2)
Investment advisory fees -- -- --
Administration fees -- -- --
Custody fees 13,356 3,848 7,236
Other 15,877 13,737 15,018
----------- ---------- ----------
TOTAL LIABILITIES 29,437 17,619 22,305
----------- ---------- ----------
NET ASSETS:
Paid in capital 9,019,858 6,276,807 3,991,819
Accumulated undistributed/(overdistributed) net investment
income 221,337 294,656 (213)
Accumulated net realized gain (loss) on investments and
futures transactions 44,761 105,409 (497)
Net unrealized appreciation (depreciation) of investments,
futures and assets and liabilities denominated in foreign
currencies 37,897 (243,652) --
----------- ---------- ----------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL
INTERESTS $ 9,323,853 $6,433,220 $3,991,109
=========== ========== ==========
Shares of beneficial interest outstanding ($.001 par value;
unlimited number of shares authorized) 869,780 676,521 3,991,805
Net asset value, maximum offering price per share and
redemption price per share $ 10.72 $ 9.51 $ 1.00
=========== ========== ==========
Cost of investments $ 9,251,180 $6,569,738 $3,988,222
=========== ========== ==========
</TABLE>
(a) Including foreign cash of $36,460 segregated for margin on futures
contracts.
See notes to financial statements.
<PAGE>
page 24 Statement of Operations
For the year ended August 31, 1999
<TABLE>
<CAPTION>
Growth and Capital
Income Growth
Portfolio Portfolio
--------- ---------
<S> <C> <C>
INVESTMENT INCOME (Note 1B):
Interest $ 55,737 $ 87,739
Dividends 228,067 98,738
Foreign taxes withheld -- (363)
---------- ----------
TOTAL INVESTMENT INCOME 283,804 186,114
---------- ----------
EXPENSES (Note 2):
Investment advisory fees 117,969 74,744
Administration fees 39,322 24,915
Accounting fees -- --
Custodian fees 56,614 59,909
Printing and postage 3,840 3,984
Professional fees 25,895 26,683
Transfer agent fees 16,600 14,138
Trustees' fees and expenses 983 623
Miscellaneous expenses -- 6,742
---------- ----------
TOTAL EXPENSES 261,223 211,738
---------- ----------
Less amounts waived (Note 2D) 84,365 99,659
Less expenses assumed by VFD -- --
---------- ----------
NET EXPENSES 176,858 112,079
---------- ----------
NET INVESTMENT INCOME 106,946 74,035
---------- ----------
NET REALIZED GAIN (LOSS) ON:
Investment transactions (273,794) (326,396)
Futures transactions -- --
Foreign currency transactions -- --
CHANGE IN NET UNREALIZED APPRECIATION/ DEPRECIATION ON:
Investments 3,731,059 3,485,901
Futures -- --
Foreign currency contracts and foreign currency translation -- --
---------- ----------
Net realized and unrealized gain (loss) 3,457,265 3,159,505
---------- ----------
Net increase (decrease) in net assets from operations $3,564,211 $3,233,540
========== ==========
<CAPTION>
International Asset U.S. Government Money
Equity Allocation Income Market
Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (Note 1B):
Interest $ 9,079 $ 60,703 $ 410,910 $198,187
Dividends 77,276 244,875 -- --
Foreign taxes withheld (10,510) (66) -- --
---------- -------- ---------- --------
TOTAL INVESTMENT INCOME 75,845 305,512 410,910 198,187
---------- -------- ---------- --------
EXPENSES (Note 2):
Investment advisory fees 53,428 50,452 33,422 9,736
Administration fees 13,358 18,346 13,369 7,789
Accounting fees 64,999 -- -- --
Custodian fees 16,696 58,693 41,562 30,039
Printing and postage 21,002 11,490 7,496 5,160
Professional fees 31,441 20,002 18,344 16,499
Transfer agent fees 12,349 12,758 13,380 12,735
Trustees' fees and expenses 334 459 334 195
Miscellaneous expenses 2,671 1,787 3,907 6,777
---------- -------- ---------- --------
TOTAL EXPENSES 216,278 173,987 131,814 88,930
---------- -------- ---------- --------
Less amounts waived (Note 2D) 66,786 68,798 46,791 17,525
Less expenses assumed by VFD 75,990 27,218 31,544 49,985
---------- -------- ---------- --------
NET EXPENSES 73,502 77,971 53,479 21,420
---------- -------- ---------- --------
NET INVESTMENT INCOME 2,343 227,541 357,431 176,767
---------- -------- ---------- --------
NET REALIZED GAIN (LOSS) ON:
Investment transactions 58,956 35,467 111,284 216
Futures transactions 51,524 22,528 -- --
Foreign currency transactions (75,184) -- -- --
CHANGE IN NET UNREALIZED APPRECIATION/ DEPRECIATION ON:
Investments 1,430,112 636,818 (547,700) --
Futures 1,201 11,564 -- --
Foreign currency contracts and foreign currency translation 15,462 -- -- --
---------- -------- ---------- --------
Net realized and unrealized gain (loss) 1,482,071 706,377 (436,416) 216
---------- -------- ---------- --------
Net increase (decrease) in net assets from operations $1,484,414 $933,918 $ (78,985) $176,983
========== ======== ========== ========
</TABLE>
See notes to financial statements.
<PAGE>
Statement of Changes in Net Assets page 25
For the year ended August 31,
<TABLE>
<CAPTION>
Growth and Income Capital Growth
Portfolio Portfolio
------------------------------- ------------------------------
1999 1998 1999 1998
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 106,946 $ 140,213 $ 74,035 $ 93,943
Net realized gain (loss) on
investments, futures and foreign
currency transactions (273,794) 3,688,903 (326,396) 1,362,111
Change in net unrealized appreciation/
depreciation on investments, futures
and foreign currency translations 3,731,059 (5,264,810) 3,485,901 (3,730,448)
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS 3,564,211 (1,435,694) 3,233,540 (2,274,394)
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (141,313) (152,413) (91,620) (75,294)
Net realized gain on investment
transactions (3,026,944) (2,095,439) (1,211,368) (1,086,897)
------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (3,168,257) (2,247,852) (1,302,988) (1,162,191)
------------ ------------ ------------ ------------
INCREASE (DECREASE) FROM CAPITAL
SHARE TRANSACTIONS:
Proceeds from shares issued 2,745,113 7,392,467 1,764,277 4,208,043
Dividends reinvested 3,168,265 2,247,852 1,302,988 1,162,192
Cost of shares redeemed (4,525,706) (3,588,729) (3,444,937) (3,211,182)
------------ ------------ ------------ ------------
INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS 1,387,672 6,051,590 (377,672) 2,159,053
------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS 1,783,626 2,368,044 1,552,880 (1,277,532)
NET ASSETS:
Beginning of period 17,369,711 15,001,667 11,095,764 12,373,296
------------ ------------ ------------ ------------
End of period $ 19,153,337 $ 17,369,711 $ 12,648,644 $ 11,095,764
============ ============ ============ ============
Share Transactions:
Issued 206,744 487,129 138,153 270,050
Reinvested 10,795 162,983 103,819 81,196
Redeemed (106,283) (234,746) (268,589) (201,529)
------------ ------------ ------------ ------------
Change in shares 111,256 415,366 (26,617) 149,717
============ ============ ============ ============
<CAPTION>
International Equity Asset Allocation
Portfolio Portfolio
------------------------------ -------------------------------
1999 1998 1999 1998
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 2,343 $ 12,165 $ 227,541 $ 217,174
Net realized gain (loss) on
investments, futures and foreign
currency transactions 35,296 377,671 57,995 860,769
Change in net unrealized appreciation/
depreciation on investments, futures
and foreign currency translations 1,446,775 (611,170) 648,382 (1,192,269)
------------- ---------- ------------- -------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS 1,484,414 (221,334) 933,918 (114,326)
------------- ---------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (65,684) (103,835) (150,706) (188,322)
Net realized gain on investment
transactions (309,348) (217,881) (783,916) (398,931)
------------- ---------- ------------- -------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (375,032) (321,716) (934,622) (587,253)
------------- ---------- ------------- -------------
INCREASE (DECREASE) FROM CAPITAL
SHARE TRANSACTIONS:
Proceeds from shares issued 540,673 1,608,468 1,873,665 2,149,078
Dividends reinvested 375,032 321,716 934,622 587,253
Cost of shares redeemed (1,006,352) (489,849) (1,296,518) (504,107)
------------- ---------- ------------- -------------
INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS (90,647) 1,440,335 1,511,769 2,232,224
------------- ---------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS 1,018,735 897,285 1,511,065 1,530,645
NET ASSETS:
Beginning of period 6,317,827 5,420,542 7,812,788 6,282,143
------------- ---------- ------------- -------------
End of period $ 7,336,562 $6,317,827 $ 9,323,853 $ 7,812,788
============= ========== ============= =============
Share Transactions:
Issued 52,457 150,107 168,082 182,176
Reinvested 37,761 33,368 84,851 52,028
Redeemed (100,131) (46,315) (117,135) (43,387)
------------- ---------- ------------- -------------
Change in shares (9,913) 137,160 135,798 190,817
============= ========== ============= =============
<CAPTION>
U.S. Government Income Money Market
Portfolio Portfolio
----------------------------- -------------------------------
1999 1998 1999 1998
-------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 357,431 $ 293,366 $ 176,767 $ 173,400
Net realized gain (loss) on
investments, futures and foreign
currency transactions 111,284 (4,875) 216 (380)
Change in net unrealized appreciation/
depreciation on investments, futures
and foreign currency translations (547,700) 270,455 -- --
------------- ---------- ------------- -------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS (78,985) 558,946 176,983 173,020
------------- ---------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (341,109) (152,142) (177,389) (172,997)
Net realized gain on investment
transactions -- -- (316) --
------------- ---------- ------------- -------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS (341,109) (152,142) (177,705) (172,997)
------------- ---------- ------------- -------------
INCREASE (DECREASE) FROM CAPITAL
SHARE TRANSACTIONS:
Proceeds from shares issued 1,813,167 2,677,221 3,209,679 827,196
Dividends reinvested 341,107 152,142 178,002 179,352
Cost of shares redeemed (1,882,389) (456,130) (2,674,958) (2,581,778)
------------- ---------- ------------- -------------
INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS 271,885 2,373,233 712,723 (1,575,230)
------------- ---------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS (148,209) 2,780,037 712,001 (1,575,207)
NET ASSETS:
Beginning of period 6,581,429 3,801,392 3,279,108 4,854,315
------------- ---------- ------------- -------------
End of period $ 6,433,220 $6,581,429 $ 3,991,109 $ 3,279,108
============= ========== ============= =============
Share Transactions:
Issued 181,506 276,633 3,209,679 827,196
Reinvested 34,700 15,978 178,002 179,352
Redeemed (189,910) (46,840) (2,674,958) (2,581,778)
------------- ---------- ------------- -------------
Change in shares 26,296 245,771 712,723 (1,575,230)
============= ========== ============= =============
</TABLE>
See notes to financial statements.
<PAGE>
page 26 Financial Highlights
<TABLE>
<CAPTION>
Growth and Income Portfolio
------------------------------------------------------------
Year Ended August 31, 03/01/95*
through
1999 1998 1997 1996 08/31/95
----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 12.36 $ 15.16 $ 12.74 $ 11.48 $ 10.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.06 0.09 0.15 0.29 0.11
Net gains or losses on investments
(both realized and unrealized) 2.58 ( 0.71) 3.99 1.52 1.37
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 2.64 ( 0.62) 4.14 1.81 1.48
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income 0.09 0.13 0.15 0.30 --
Distributions from capital gains 2.28 2.05 1.57 0.25 --
------- ------- ------- ------- --------
TOTAL DISTRIBUTIONS 2.37 2.18 1.72 0.55 --
------- ------- ------- ------- --------
NET ASSET VALUE, END OF PERIOD $ 12.63 $ 12.36 $ 15.16 $ 12.74 $ 11.48
======= ======= ======= ======= ========
TOTAL RETURN 21.23% ( 5.45%) 35.53% 16.24% 14.80%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000 omitted) $19,153 $17,370 $15,002 $ 8,081 $ 6,247
Ratios to Average Net Assets:#
Expenses 0.90% 0.90% 0.90% 0.90% 0.90%
Net investment income 0.54% 0.78% 1.18% 1.71% 2.14%
Expenses without waivers and
assumption of expenses 1.33% 1.70% 1.70% 1.98% 1.80%
Net investment income without
waivers and assumption of expenses 0.11% ( 0.02%) 0.38% 0.63% 1.24%
Portfolio Turnover Rate 114% 170% 89% 129% 32%
<CAPTION>
Capital Growth Portfolio
------------------------------------------------------------
03/01/95*
Year Ended August 31, through
1999 1998 1997 1996 08/31/95
----------- ------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 11.72 $ 15.52 $ 13.84 $ 11.90 $ 10.00
------- --------- ------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.07 0.10 0.09 0.16 0.06
Net gains or losses on investments
(both realized and unrealized) 3.37 ( 2.37) 3.42 2.14 1.84
------- --------- ------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS 3.44 ( 2.27) 3.51 2.30 1.90
------- --------- ------- -------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income 0.09 0.09 0.10 0.14 --
Distributions from capital gains 1.32 1.44 1.73 0.22 --
------- --------- ------- -------- --------
TOTAL DISTRIBUTIONS 1.41 1.53 1.83 0.36 --
------- --------- ------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 13.75 $ 11.72 $ 15.52 $ 13.84 $ 11.90
======= ========= ======= ======== ========
TOTAL RETURN 30.59% (16.38%) 27.27% 19.66% 19.00%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000 omitted) $12,649 $ 11,096 $12,373 $ 7,910 $ 6,329
Ratios to Average Net Assets:#
Expenses 0.90% 0.90% 0.90% 0.90% 0.90%
Net investment income 0.59% 0.72% 0.64% 0.97% 1.04%
Expenses without waivers and
assumption of expenses 1.70% 1.70% 1.70% 1.97% 1.80%
Net investment income without
waivers and assumption of expenses ( 0.21%) ( 0.08%) ( 0.16%) ( 0.10)% 0.14%
Portfolio Turnover Rate 27% 71% 54% 107% 28%
</TABLE>
<TABLE>
<CAPTION>
International Equity Portfolio
-----------------------------------------------------------------
Year Ended August 31,
03/01/95*
through
1999 1998 1997 1996 08/31/95
------------ ---------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 9.63 $ 10.45 $ 10.59 $ 10.89 $ 10.00
-------- --------- ------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income -- 0.02 (b) 0.19 0.22 0.10
Net gains or losses on investments
(both realized and unrealized) 2.32 ( 0.28) 0.65 0.03 0.79
-------- --------- ------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS 2.32 ( 0.26) 0.84 0.25 0.89
-------- --------- ------- -------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income 0.10 0.18 0.13 0.25 --
Distributions from capital gains 0.49 0.38 0.85 0.30 --
-------- --------- ------- -------- --------
TOTAL DISTRIBUTIONS 0.59 0.56 0.98 0.55 --
-------- --------- ------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 11.36 $ 9.63 $ 10.45 $ 10.59 $ 10.89
======== ========= ======= ======== ========
TOTAL RETURN 25.03% ( 2.46%) 8.27% 2.42% 8.90%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000 omitted) $ 7,337 $ 6,318 $ 5,421 $ 3,901 $ 5,482
Ratios to Average Net Assets:#
Expenses 1.10% 1.10% 1.11% 1.10% 1.09%
Net investment income 0.04% 0.19% 1.96% 0.82% 1.92%
Expenses without waivers and
assumption of expenses 3.24% 3.05% 2.99% 4.22% 2.90%
Net investment income without
waivers and assumption of expenses ( 2.10%) ( 1.76%) 0.08% ( 2.30%) 0.11%
Portfolio Turnover Rate 170% 157% 158% 200% 75%
<CAPTION>
Asset Allocation Portfolio
----------------------------------------------------------
Year Ended August 31,
03/01/95*
through
1999 1998 1997 1996 08/31/95
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 10.64 $ 11.57 $ 11.15 $ 11.04 $ 10.00
------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.24 0.28 0.33 0.66 0.21
Net gains or losses on investments
(both realized and unrealized) 1.04 ( 0.25) 1.94 0.49 0.83
------- -------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 1.28 0.03 2.27 1.15 1.04
------- -------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income 0.18 0.30 0.30 0.67 --
Distributions from capital gains 1.02 0.66 1.55 0.37 --
------- -------- ------- ------- --------
TOTAL DISTRIBUTIONS 1.20 0.96 1.85 1.04 --
------- -------- ------- ------- --------
NET ASSET VALUE, END OF PERIOD $ 10.72 $ 10.64 $ 11.57 $ 11.15 $ 11.04
======= ======== ======= ======= ========
TOTAL RETURN 11.88% ( 0.04%) 22.61% 10.90% 10.40%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000 omitted) $ 9,324 $ 7,813 $ 6,282 $ 4,033 $ 5,546
Ratios to Average Net Assets:#
Expenses 0.85% 0.85% 0.85% 0.85% 0.85%
Net investment income 2.48% 2.81% 3.28% 3.18% 3.86%
Expenses without waivers and
assumption of expenses 1.90% 1.91% 2.03% 2.33% 1.65%
Net investment income without
waivers and assumption of expenses 1.43% 1.75% 2.10% 1.71% 3.06%
Portfolio Turnover Rate 112% 162% 122% 155% 45%
</TABLE>
* Commencement of operations.
# Short periods have been annualized.
b Net investment income per share has been calculated based on average shares
outstanding during the period.
See notes to financial statements.
<PAGE>
Financial Highlights (continued) page 27
<TABLE>
<CAPTION>
U.S. Government Income Portfolio++
--------------------------------------------------------
Year Ended August 31,
03/01/95*
through
1999 1988 1997 1996 08/31/95
----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 10.12 $ 9.40 $ 9.53 $ 10.69 $ 10.00
-------- ------- ------ ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.52 0.39 0.52 1.17 0.32
Net gains or losses on investments
(both realized and unrealized) ( 0.62) 0.64 0.22 ( 0.86) 0.37
-------- ------- ------ -------- -------
TOTAL FROM INVESTMENT OPERATIONS ( 0.10) 1.03 0.74 0.31 0.69
-------- ------- ------ -------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income 0.51 0.31 0.54 1.13 --
Distributions from capital gains -- -- 0.33 0.34 --
-------- ------- ------ -------- --------
TOTAL DISTRIBUTIONS 0.51 0.31 0.87 1.47 --
-------- ------- ------ -------- --------
NET ASSET VALUE, END OF PERIOD $ 9.51 $ 10.12 $ 9.40 $ 9.53 $ 10.69
======== ======= ====== ======== ========
TOTAL RETURN ( 1.15%) 11.12% 8.11% 2.62% 6.90%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000 omitted) $ 6,433 $ 6,581 $3,801 $ 2,994 $ 5,390
Ratios to Average Net Assets:#
Expenses 0.80% 0.80% 0.80% 0.80% 0.80%
Net investment income 5.35% 5.40% 5.91% 6.06% 6.19%
Expenses without waivers and
assumption of expenses 1.97% 1.99% 1.50% 1.79% 1.62%
Net investment income without
waivers and assumption of expenses 4.18% 4.21% 5.21% 5.07% 5.37%
Portfolio Turnover Rate 31% 14% 40% 83% 46%
<CAPTION>
Money Market Portfolio
-----------------------------------------------------
Year Ended August 31,
03/01/95*
through
1999 1998 1997 1996 08/31/95
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.05 0.05 0.05 0.05 0.03
Net gains or losses on investments
(both realized and unrealized) -- -- -- -- --
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.05 0.05 0.05 0.05 0.03
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income 0.05 .05 0.05 0.05 0.03
Distributions from capital gains -- -- -- -- --
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS 0.05 0.05 0.05 0.05 0.03
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
TOTAL RETURN 4.66% 5.04% 4.93% 5.15% 2.79%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000 omitted) $3,991 $3,279 $4,854 $2,950 $5,422
Ratios to Average Net Assets:#
Expenses 0.55% 0.55% 0.55% 0.55% 0.55%
Net investment income 4.54% 4.94% 4.84% 5.10% 5.46%
Expenses without waivers and
assumption of expenses 2.28% 2.24% 1.46% 1.74% 1.21%
Net investment income without
waivers and assumption of expenses 2.81% 3.25% 3.93% 3.91% 4.80%
Portfolio Turnover Rate -- -- -- -- --
</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.
See notes to financial statements.
<PAGE>
page 28 Notes to Financial Statements
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 (the "1940 Act"), 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.
Except for MMP, 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.
Money market instruments held by MMP are valued at amortized cost, which
approximates market value. The Trust's use of amortized cost is subject to
the Trust's compliance with certain conditions as specified under Rule
2a-7 of the 1940 Act.
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 Portfolio'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 Portfolio 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.
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
<PAGE>
Notes to Financial Statements (continued) page 29
the fund manager anticipates that this will be more efficient than buying
stocks directly. The use of long futures contracts subjects the Portfolio
to risk of loss up to the amount of the value of the contract. Short index
futures contracts are used for hedging purposes (to reduce the exposure to
equities). The use of short futures contracts subjects 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, 1999, the Portfolios 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 each Portfolio's policy to comply 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 their shareholders on the ex-dividend 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. The reclassifications for GIP and CGP relate
primarily to the character for tax purposes of current year distributions.
The reclassification for IEP relates primarily to the character for tax
purposes of foreign currency losses and current year distributions. Paid
in capital, accumulated undistributed net investment income and
accumulated undistributed net realized gain/loss were increased or
(decreased) as shown below:
<TABLE>
<CAPTION>
GIP CGP IEP
--- --- ---
<S> <C> <C> <C>
Paid in capital $ 171 $ 113 $ 62
Accumulated undistributed net investment
income (11,995) (44,181) (42,897)
Accumulated net realized gain (loss) on
investments 11,824 44,068 42,835
</TABLE>
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.
<PAGE>
page 30 Notes to Financial Statements (continued)
I. Expenses--Direct expenses of a Portfolio are charged to the respective
Portfolio. General Trust expenses are allocated on the basis of relative
net assets or on another reasonable basis.
2. FEES AND OTHER TRANSACTIONS
WITH AFFILIATES
A. Investment Advisory Fees--The Chase Manhattan Bank ("Chase"), a direct
wholly-owned subsidiary of the Chase Manhattan Corporation, is the
Portfolios' investment advisor (the "Advisor") and custodian (the
"Custodian"). The Advisor manages the assets of the Portfolios pursuant to
an Advisory Agreement and, for such services, is paid an annual fee
computed daily and paid monthly based on an annual rate equal to 0.80% of
the International Equity Portfolio's, 0.60% of the Capital Growth and
Growth and Income Portfolios', 0.55% of the Asset Allocation Portfolio's,
0.50% of the U.S. Government Income Portfolio's and 0.25% of the Money
Market Portfolio's average daily net assets. The Advisor voluntarily
waived some or all its fees as shown in 2.D.
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 Portfolios', 0.25% of the Asset Allocation and U.S.
Government Income Portfolios' 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 some or all of its fees as shown in 2.D.
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 The 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 some or all of its fees as shown in 2.D.
D. Assumption of Expenses--For the year ended August 31, 1999, the Investment
Advisor, Administrator and Sub-Administrator voluntarily waived expenses
for the Portfolios as follows:
<TABLE>
<CAPTION>
GIP CGP IEP AAP USGIP MMP
---- --- --- --- ----- ---
<S> <C> <C> <C> <C> <C> <C>
Advisory $78,364 $74,744 $53,428 $50,452 $33,422 $ 9,736
Administration 6,001 24,915 13,358 18,346 13,369 7,789
------- ------- ------- ------- ------- -------
TOTAL
WAIVERS $84,365 $99,659 $66,786 $68,798 $46,791 $17,525
======= ======= ======= ======= ======= =======
The Sub-Administrator voluntarily assumed certain expenses of the funds:
Assumed
Expenses -- -- $75,990 $27,218 $31,544 $49,985
======= ======= ======= ======= ======= =======
</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 is
presented in the Statement of Operations as Custodian fees.
The IEP earned approximately $6,200 in interest income on deposits placed
with an affiliate of the Chase Manhattan Bank.
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
<PAGE>
Notes to Financial Statements (continued) page 31
are based on compensation and years of service. Pension expenses for the
year ended August 31, 1999, 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
Expenses Liability
Portfolio: -------- ---------
<S> <C> <C>
Growth and Income Portfolio $348 $1,206
Capital Growth Portfolio 225 938
International Equity Portfolio 113 473
Asset Allocation Portfolio 155 564
U.S. Government Income
Portfolio 111 397
Money Market Portfolio 63 300
</TABLE>
3. INVESTMENT TRANSACTIONS--For the year ended August 31, 1999, the cost of
purchases and proceeds from sales of investments (excluding short-term
investments) were as follows:
<TABLE>
<CAPTION>
GIP CGP IEP AAP USGIP
--- --- --- --- -----
<S> <C> <C> <C> <C> <C>
Purchases
(excluding U.S.
Government) $21,094,810 $2,933,087 $10,540,052 $8,155,233 $ --
Sales (excluding
U.S. Government) 23,282,927 5,390,051 10,692,784 8,011,397 --
Purchases of
U.S. Government -- -- -- 2,073,304 2,983,015
Sales of
U.S. Government -- -- -- 1,388,138 1,868,873
</TABLE>
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, 1999 are as follows:
<TABLE>
<CAPTION>
GIP CGP IEP AAP USGIP
--- --- --- --- -----
<S> <C> <C> <C> <C> <C>
Aggregate cost $ 18,430,626 $10,454,663 $6,281,561 $9,262,727 $6,569,738
------------ ----------- ---------- ---------- ----------
Gross unrealized
appreciation $ 1,950,193 $ 2,692,704 $1,118,036 $ 516,127 $ 31,094
Gross unrealized
depreciation (1,273,041) (459,468) (295,304) (500,401) (274,746)
------------ ----------- ---------- ---------- ----------
Net unrealized
appreciation/
depreciation $ 677,152 $ 2,233,236 $ 822,732 $ 15,726 $ (243,652)
============ =========== ========== ========== ==========
</TABLE>
At August 31, 1999, GIP had a net capital loss carryover of approximately
$224,525, which will be available to offset future capital gains and will
expire on August 31, 2007. To the extent that any net capital losses are used
to offset future capital gains, it is probable that the gains so offset will
not be distributed to shareholders.
5. OPEN FORWARD FOREIGN CURRENCY CONTRACTS The following forward foreign
currency contracts were held by the International Equity Portfolio at August
31, 1999:
<TABLE>
<CAPTION>
Contract Contract Net
Amount Amount Unrealized
Purchased/ Sold/ Settlement Gain (Loss)
(Sold) (Purchased) Date (USD)
------ ----------- ---- -----
<S> <C> <C> <C>
Unrealized Gain
- -------------------------------
55,125,000 (JPY) 300,000 (GBP) 10/26/99 $ 25,736
633,939 (EURO) 666,929 (USD) 09/08/99 4,913
210,159 (GBP) 334,000 (USD) 09/08/99 4,260
--------
$ 34,909
========
Unrealized Loss
- -------------------------------
(319,296) (EURO) (334,000) (USD) 09/08/99 (4,387)
(415,392) (GBP) (666,929) (USD) 09/08/99 (1,664)
--------
$ (6,051)
========
</TABLE>
EUR = Euro Currency
DEM = Deutsche Mark
GBP = Great British Pound
JPY = Japanese Yen
6. 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 19,891 $ 13,219 $ 12,701 $(518)
EURO 76,687 79,767 81,219 1,452
Great British Pound 1,824 2,940 2,936 (4)
Greek Drachma 60,000 215 195 (20)
Hong Kong Dollar 30 4 4 --
Indonesian Rupiah 894,077 58 117 59
Japanese Yen 878,301 7,677 8,039 362
Malaysian Ringgit 1,835 432 483 51
Mexican Peso 93 10 10 --
Philippine Peso 22,439 535 565 30
Singapore Dollar 67 41 40 (1)
Swedish Krona 260,966 31,331 31,724 393
Swiss Franc 99,638 65,887 65,928 41
Thai Baht 964 27 25 (2)
-------- -------- --------
Total $202,143 $203,986 $1,843
======== ======== =======
</TABLE>
<PAGE>
page 32 Notes to Financial Statements (continued)
7. CONCENTRATION OF SHAREHOLDERS
At August 31, 1999, all shares outstanding for each Portfolio are owned
either directly or indirectly by a single insurance company.
8. CONCENTRATION OF CREDIT RISK
As of August 31, 1999, MMP invested 71.6% of its net assets in financial
institutions, of which 12.8% was invested in Broker Dealers, 30.1% in Banking
and 28.7% in other financial service providers. 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 23.0% and 19.4% of its net assets in Japan and the United
Kingdom, respectively. The issuers' abilities to meet their obligations may
be affected by economic or political developments in a specific country or
region.
9. 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, enabling 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 an annual
rate equal to the sum of the Federal Funds Rate plus 0.35%. IEP also pays a
commitment fee of 0.075% per annum on the average daily amount of the
available commitment, which is allocated on a pro-rata basis to IEP. The
commitment fee is included in Other expenses on the Statement of Operations.
Borrowings are payable on demand.
IEP had no borrowings outstanding at August 31, 1999, nor at any time during
the year then ended.
<PAGE>
Report of Independent Accountants page 33
To the Trustees and Shareholders of
Mutual Fund Variable Annuity Trust
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Growth and Income Portfolio,
Capital Growth Portfolio, International Equity Portfolio, Asset Allocation
Portfolio, U.S. Government Income Portfolio and Money Market Portfolio (separate
portfolios constituting Mutual Fund Variable Annuity Trust, hereafter referred
to as the "Trust") at August 31, 1999, 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, 1999 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 11, 1999
<PAGE>
Back Cover
A-7036-CRT
(C)The Chase Manhattan Corporation, 1999, 2000. All Rights Reserved.
October 1999
F-7036(CMB)
VCA-2-1099
