-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KS+gEznmWv+MbS1KQ6DILDiSSK52/5DhS0HZGZo1y2G4TKB0FBlUx7n0MjzQZHje iJREkAx/uq8ON4MkGFW4qg== /in/edgar/work/0000950146-00-000954/0000950146-00-000954.txt : 20001025 0000950146-00-000954.hdr.sgml : 20001025 ACCESSION NUMBER: 0000950146-00-000954 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000831 FILED AS OF DATE: 20001024 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MUTUAL FUND VARIABLE ANNUITY TRUST CENTRAL INDEX KEY: 0000927053 STANDARD INDUSTRIAL CLASSIFICATION: [ ] STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-08630 FILM NUMBER: 744772 BUSINESS ADDRESS: STREET 1: 1 CHASE MANHATTAN PLAZA STREET 2: 3RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10081 MAIL ADDRESS: STREET 1: CHASE MANHATTAN BANK STREET 2: ONE CHASE SQ 7TH FLOOR CITY: ROCHESTER STATE: NY ZIP: 14643 N-30D 1 0001.txt MFVAT [CHASE LOGO] ANNUAL REPORT AUGUST 31, 2000 VISTA CAPITAL ADVANTAGE(SM) MUTUAL FUND VARIABLE ANNUITY TRUST Vista Fund Distributors, Inc., distributor This report must be accompanied or preceeded by a current prospectus for Vista Capital Advantage [VISTA CAPITAL ADVANTAGE MANAGED BY CHASE MANHATTAN LOGO] October 2, 2000 Dear Vista Capital Advantage Contract Owner: Enclosed is the August 31, 2000 Annual Report of the Mutual Fund Variable Annuity Trust, whose portfolios serve as the underlying investments for the Vista Capital Advantage variable annuity. The tables below show the one year, five years (if applicable) and since inception results, after the deduction of all insurance and withdrawal fees, of the accounts in the Vista Capital Advantage at August 31, 2000. The insurance fees include mortality and expense risk charges, surrender charges and the annual contract administration charge. The surrender charges reflect the sales charges that would have been assessed against the contract value had the contract been surrendered.1 The first chart applies to all Vista Capital Advantage investors outside of New York state, whose policy is issued by Anchor National Life Insurance Company. The second chart applies to Vista Capital Advantage investors within New York state, whose policy is issued by First SunAmerica Life Insurance Company. Anchor National Life Insurance Company Policy Holders Average Annual Total Return as of 8/31/002
- ----------------------------------------------------------------------------- 1 5 Since Portfolio (Contract Inception Date) Year Year Inception - ----------------------------------------------------------------------------- Growth and Income (3/13/95) 2.79% 12.72% 14.45% Capital Growth (3/13/95) 20.24% 14.22% 16.56% International Equity (3/13/95) 12.86% 8.22% 9.34% Asset Allocation (3/13/95) 1.71% 8.55% 9.73% U.S. Government Income (7/13/95) 0.24% 3.40% 3.32% Money Market (6/2/95) -2.06% 2.89% 3.05% 7-day yield as of 8/31/00; 4.45% - -----------------------------------------------------------------------------
First SunAmerica Life Insurance Company Policy Holders (New York) Average Annual Total Return as of 8/31/002
- ----------------------------------------------------------------------------- 1 Since Portfolio (Contract Inception Date) Year Inception - ----------------------------------------------------------------------------- Growth and Income (12/6/95) 2.79% 12.26% Capital Growth (12/6/95) 20.20% 14.22% International Equity (12/22/95) 12.81% 8.53% Asset Allocation (12/22/95) 1.70% 8.26% U.S. Government Income (12/22/95) 0.25% 2.91% Money Market (12/22/95) -1.98% 2.99% 7-day yield as of 8/31/00; 4.53% - -----------------------------------------------------------------------------
Your Vista Capital Advantage variable annuity represents a unique combination of professional money management and tax advantages. It is designed to help contribute to your plans for a financially secure future. If you have any questions, please call your investment representative or 1-800-90-VISTA. Sincerely, /s/ Fergus Reid - --------------- Fergus Reid Chairman - ------------- (1) The Surrender Charge schedule for each year in states other than NY is as follows: 6%, 6%, 5%, 4%, 3%, 2%, 0%. In NY the Surrender Charge schedule for each year is: 6%, 6%, 5%, 4%, 3%, 2%, 1%, 0%. A 10% Federal tax penalty may apply to withdrawals before age 591/2. (2) Past performance is no guarantee of future results. An investor's return and principal value will fluctuate. An investor's units, when redeemed, may be worth more or less than their original investment. This material is authorized for public distribution only when accompanied or preceded by a prospectus for Vista Capital Advantage. (3) 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. 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 15 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 Notes to Financial Statements
- -------------------------------------------------------------------------------- INVESTMENTS IN VISTA CAPITAL ADVANTAGE ARE NOT DEPOSITS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN BANK, AND ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. INVESTMENTS IN VISTA CAPITAL ADVANTAGE, INCLUDING THE UNDERLYING VARIABLE INVESTMENT OPTIONS, INVOLVE RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. - -------------------------------------------------------------------------------- page 4 Letter from the Chairman October 2, 2000 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 year ended August 31, 2000. This report summarizes each portfolio's performance in light of events in the financial markets and the economy. Seven Month Period of Extreme Divergence Favors "New Economy" Sectors For the first half of the reporting period and into March 2000, the story in world equity markets was the growing divergence in performance between stocks in the telecommunications, technology and Internet-related sectors and those of traditional "old economy" companies. Like all divergences, this one began on a logical foundation, one that saw the global economy as being in the midst of a period of profound change that would disproportionately benefit companies tied to the technology and communications revolution. After reaching its high on March 10, 2000, the technology-laden Nasdaq fell sharply in April. In a nerve-wracking month for investors, there were several days when heavy selling sent the Nasdaq down dramatically and investors braced themselves for the worst. The best that can be said is that the worst-case scenarios did not materialize, despite the fact that the Nasdaq was down more than one-third from its 2000 high on April 17. It should be noted that, following the spring volatility, world equity markets remained highly correlated to the Nasdaq. Focus on the U.S. Economy Grows as Fed Works to Create Soft Landing After the extreme volatility of April and May, global equity markets recovered some of their losses in June amid a general feeling that many of the previous excesses had been worked out. With more reasonable valuations to work with--and signs that the U.S. economy may be headed for another soft landing--investors began to feel a bit more comfortable looking ahead. After a bumpy July, markets again rallied in August as evidence mounted that a "soft landing" had been achieved through the Federal Reserve Board's six rate hikes, with technology stocks at least temporarily re-assuming their position of leadership. Among other major events in world financial markets was the U.S. Treasury's February announcement and subsequent implementation of a plan to use the proceeds of the U.S. budget surplus to buy back long-term Treasury bonds. This created significant dislocation in fixed-income markets in the U.S. and, to a lesser degree, globally as investors scrambled to buy longer-dated Treasuries and caused the U.S. yield curve to invert. In foreign exchange markets, investors and central bankers alike were focused on the continuing weakness of the Euro, which had fallen to an all-time low of 88.37 cents to the U.S. Dollar at the end of August, down from a value of $1.18 when it was introduced on January 1, 1999. As the period ended, there were concerns of the effect the weaker Euro would have on earnings of U.S. corporations who do business in Europe and, therefore, must convert their earnings back to more expensive dollars. It was against this volatile backdrop that your portfolio management team once again delivered positive returns. On behalf of them and everyone at Chase, we thank you for your continued investment and look forward to serving your investment needs for many years to come. Sincerely, /s/ Fergus Reid - --------------- Fergus Reid Chairman Growth and Income Portfolio page 5 (unaudited) The Growth and Income Portfolio seeks to provide long-term capital appreciation and dividend income primarily through diversified holdings of common stocks. Performance The Growth and Income Portfolio had a total return of 10.44% for the year ended August 31, 2000. This compares to the 16.31% return from the S&P 500 Index. Strategy The Portfolio employs a large-cap value strategy that seeks to outperform its benchmark through outstanding stock selection. In the first half of the reporting year, the Portfolio suffered a bit as its value orientation lagged in a market that seemed to place no limit on the valuation of growth stocks. However, within the technology sector, holdings did quite well. Of specific benefit were the Portfolio's positions in semiconductor companies that benefited from the demand for chips created by the combination of rapid growth in the Internet, mobile communications and new consumer electronics products, such as digital cameras. After starting the reporting year slowly, the Portfolio's financial and pharmaceutical stocks picked up nicely after the Nasdaq peaked on March 10, 2000. Overall, the Portfolio's value orientation came into favor after the slide in technology and communications services stocks accelerated in March and April. Among the larger holdings having a positive impact on returns in the latter part of the reporting year were pharmaceutical companies Pharmacia Corp., Pfizer, Abbott Laboratories and American Home Products. In other value-oriented sectors that performed well, such as utilities and energy, the Portfolio was well represented and had excellent stock selection. Outlook The U.S. stock market appears to have regained its focus on fundamental issues after a prolonged period of favoring high-growth technology and related stocks at the expense of virtually every other sector. With the market unsure as to the extent of the economic slowdown, the coming corporate earnings season will be an important driver of performance through the end of 2000. And, moving into the U.S. corporate earnings season, our view is that results will show larger-than-normal divergences within sectors and industries, leading us to believe that we're in a stock-pickers market with plenty of opportunity for outperformance. In our view, the policy of searching out growth at a reasonable price is likely to continue to provide a firm foundation for the Portfolio in the months ahead. 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 $22,893 from inception on 3/1/95 through 8/31/00.* Investment Results - -------------------------------------------------------------------------------- Average Annual Return as of 8/31/00 1 year 10.44% 5 year 14.80% Since Inception (3/1/95) 16.25% - --------------------------------------------------------------------------------
[LINE CHART PLOT POINTS]
Growth and Income Portfolio S&P 500 10000 10000 11480 11678.6 13344 13861.9 18084.9 19491.5 17098.7 21071.9 20728.4 29457.4 22893 34262
[END PLOT POINTS] 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 591/2 from the Vista Capital Advantage variable annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary income. page 6 Capital Growth Portfolio (unaudited) The Capital Growth Portfolio seeks to provide long-term capital growth primarily through diversified holdings of common stocks. Performance The Capital Growth Portfolio had a total return of 27.92% for the year ended August 31, 2000. This compares to the 25.03% return for the Russell 2000 Index. Strategy The Portfolio's excellent performance during the reporting year was the result of outstanding stock selection and a shift in investor sentiment towards mid-cap stocks. During the first half of the reporting year, the Portfolio did particularly well with its holdings in technology and other sectors that outperformed the broader market. Performance was also boosted during this portion of the reporting year by management's decision to reduce exposure to value-oriented sectors, most notably among basic materials and capital goods. As a mid-cap portfolio that's a blend of growth and value styles, the Portfolio has benefited from the fact that mid-caps have outperformed both large and small caps to date in 2000 (through August 31). Early in 2000, semiconductor companies were key to performance as the combination of rapid growth in the Internet, mobile communications and new consumer electronics products drove demand for chips. The Portfolio's energy holdings also performed well as investors refocused on the sector in light of attractive valuations and higher energy prices. Energy exploration and production stocks have risen with oil and gas prices, and a tight balance between supply and demand indicates that the sector may have more room to run. Outlook The U.S. stock market appears to have regained its focus on fundamental issues after a prolonged period of favoring high-growth technology and related stocks at the expense of virtually every other sector. With the market unsure as to the extent of the economic slowdown, the coming corporate earnings season will be an important driver of performance through the end of 2000. And, moving into the U.S. corporate earnings season, our view is that results will show larger-than-normal divergences within sectors and industries, leading us to believe that we're in a stock-pickers market with plenty of opportunity for outperformance. Although mid-caps have outperformed in 2000, there are plenty of stocks with attractive valuations. Following the addition of a number of technology stocks to the large-cap S&P 500 Index, the S&P MidCap 400 has seen a marked reduction in volatility, and this should serve investors well in an uncertain market. Life of Portfolio Performance A $10,000 tax-deferred investment in the Capital Growth Portfolio at NAV (Net Asset Value) would have grown to $25,316 from inception on 3/1/95 through 8/31/00.* Investment Results - -------------------------------------------------------------------------------- Average Annual Return as of 8/31/00 1 year 27.92% 5 year 16.30% Since Inception (3/1/95) 18.39% - --------------------------------------------------------------------------------
[LINE CHART PLOT POINTS]
Capital Growth Portfolio Russell 2000 10000 10000 11900 12010 14240.1 13316.2 18123.4 17173.1 15154 13839.8 19789.6 17766.4 25316 22213
[END PLOT POINTS] 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 591/2 from the Vista Capital Advantage variable annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary income. International Equity Portfolio page 7 (unaudited) 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 had a total return of 20.58% in the year ended August 31, 2000. This compares to the 9.83% return from the MSCI EAFE Index. Strategy In the first half of the reporting year, the management team took an overweight position in the technology, media and telecommunications (TMT) sectors. This proved to be highly beneficial to performance, as these sectors were winners all across the world. Within Europe, the Fund's outstanding stock selection included a combination of well-known industry leaders, as well as many smaller, lesser-known "new economy" names. As valuations became extreme in some of its favored holdings, the management team chose to pare back a bit, reducing its TMT overweight and shifting some assets from the Pacific Rim to Latin America. Additionally, the Fund's slight emphasis on Europe was reduced, leading to a neutral regional and sector weighting in the second half of the reporting year. Outlook Looking ahead, uncertainty continues to cloud the short-term outlook in Europe. We expect further rate rises throughout the year in order to counter the threat of inflation, but are concerned about the growing signs of peaking economic performance. Longer term, our outlook for European equities is better, due to ongoing corporate and economic restructuring. In the United Kingdom, the outlook for the stock market is sound, as interest rates appear close to a peak in spite of the fact that the domestic economy is quite healthy. In our view, U.K. valuations remain attractive both on an absolute basis and relative to those in other regions. In Japan, we are greatly encouraged by the recent wave of upward earnings revisions and look forward to a firm first-half results season. However, the flow of funds equation remains complex, with accelerated sales of cross- shareholdings being the major negative factor. Additionally, the market remains sensitive to global issues such as Nasdaq performance and the rising price of oil. In Southeast Asia, our view is that the larger markets in the region all have positive themes to support them over the coming months. In Latin America, Brazil and Mexico enjoy improving macroeconomic fundamentals, including low inflation and better government finances. With uncertainty over U.S. interest rates having eased, the attractiveness of these two largest markets has risen. Life of Portfolio Performance A $10,000 tax-deferred investment in the International Equity Portfolio at NAV (Net Asset Value) would have grown to $17,758 from inception on 3/1/95 through 8/31/00.* Investment Results - -------------------------------------------------------------------------------- Average Annual Return as of 8/31/00 1 year 20.58% 5 year 10.27% Since inception (3/1/95) 11.00% - --------------------------------------------------------------------------------
[LINE CHART PLOT POINTS]
International Equity Portfolio MSCI EAFE 10000 10000 10890 10950.3 11153.3 11845.5 12075.9 12953 11779.3 12970.2 14727.8 16346.6 17758 17953
[END PLOT POINTS] 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 591/2 from the Vista Capital Advantage variable annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary income. page 8 Asset Allocation Portfolio (unaudited) 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 had a total return of 9.31% for the year ended August 31, 2000. This compares to the 13.74% return for the blended 60% S&P 500/40% Lehman Government Bond Index. Strategy In the first half of the reporting year, the Portfolio's fixed-income securities continued to come under pressure as a result of a rising interest-rate environment in the United States. However, the management team did relieve some of this pressure by maintaining a lower-than-average duration (a measure of interest rate sensitivity) for much of early 2000. Within the equity portion of the Portfolio, exposure to small- and mid-cap stocks contributed favorably to performance as many secondary issues that had previously underperformed their large-cap counterparts generated strong investment results. Volatility was the theme in the second half of the reporting year, as technology stocks lost many of the gains previously recorded. Fortunately, the Portfolio was well diversified and had holdings that performed well in many sectors. The Fund's fixed income securities turned in a positive performance. Outlook The U.S. stock market appears to have regained its focus on fundamental issues after a prolonged period of favoring high-growth technology and related stocks at the expense of virtually every other sector. With the market unsure as to the extent of the economic slowdown, the coming corporate earnings season will be an important driver of performance through the end of 2000. And, moving into the U.S. corporate earnings season, our view is that results will show larger-than-normal divergences within sectors and industries, leading us to believe that we're in the type of stock-pickers market with plenty of opportunity for outperformance. With the Fed firmly ensconced on the sidelines, our view is that the fixed-income markets will twist and bend mainly with the economic and inflationary breezes, although supply conditions, the upcoming elections, international events, crude oil prices and technical factors will all certainly play a role as well. But a range-bound bond market does not necessarily imply inaction, as market participants will be kept rather busy sifting through the data for clues relating to the extent, timing and sustainability of the economy's more moderate growth path. Life of Portfolio Performance A $10,000 tax-deferred investment in the Asset Allocation Portfolio at NAV (Net Asset Value) would have grown to $18,349 from inception on 3/1/95 through 8/31/00.* Investment Results - -------------------------------------------------------------------------------- Average Annual Return as of 8/31/00 1 year 9.31% 5 year 10.70% Since Inception (3/1/95) 11.67% - --------------------------------------------------------------------------------
[LINE CHART PLOT POINTS]
Asset Allocation 60% S&P 500/40% Portfolio Lehman Gov't Bond 10000 10000 11040 11311 12242.8 12731.6 15010.4 16225 15004.3 17911.5 16786.9 21968.9 18349 24987
[END PLOT POINTS] 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 591/2 from the Vista Capital Advantage variable annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary income. U.S. Government Income Portfolio page 9 (unaudited) The U.S. Government Income Portfolio seeks to provide monthly dividends as well as to preserve principal. Performance The U.S. Government Income Portfolio had a total return of 7.80% for the year ended August 31, 2000. This compares to the 6.21% return from the Lehman Intermediate U.S. Government Bond Index. Strategy Early in the reporting period, the Portfolio turned in strong relative performance as a result of several factors. First, in a rising rate environment, the management team allowed the Portfolio's duration (and hence its sensitivity to changes in interest rates) to further shorten below that of its peer group before making a strategic reduction in December. Next, the Portfolio's exposure to mortgage-backed securities was increased to 50% and these holdings outperformed significantly in late 1999 as new mortgage issuance fell. Finally, the Portfolio ended 1999 with an emphasis on 20-year maturities in the Treasury sector, which was positive as this part of the yield curve outperformed 30-year issues. In the January through April 2000 period, technical factors-- especially the U.S. Treasury's program to buy back longer-dated securities--overwhelmed fundamentals and caused fairly severe dislocation in the fixed income markets. However, the Portfolio benefited during early 2000 from its longer-than-benchmark duration as yields on longer-dated securities fell in response to the Treasury buyback program. In the latter part of the reporting year, the management team kept the Portfolio's duration relatively neutral and adjusted its yield curve strategy to neutral. With specific regard to the yield curve, the Portfolio had benefited from a barbell strategy when the yield curve inverted but this was adjusted given the expectation that the curve would correct back to a more normal slope. The management team maintained the Portfolio's exposure to mortgage and agency securities due to historically high spreads despite the anticipation of short-term volatility. This proved beneficial towards the end of the reporting period as spreads began to narrow. Outlook With the Fed firmly ensconced on the sidelines, our view is that the fixed-income markets will twist and bend mainly with the economic and inflationary breezes, although supply conditions, the upcoming elections, international events, crude oil prices and technical factors will all certainly play a role as well. But a range-bound bond market does not necessarily imply inaction, as market participants will be kept rather busy sifting through the data for clues relating to the extent, timing and sustainability of the economy's more moderate growth path. 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 $14,043 from inception on 3/1/95 through 8/31/00.* Investment Results - -------------------------------------------------------------------------------- Average Annual Return as of 8/31/00 1 year 7.80% 5 year 5.61% Since Inception (3/1/95) 6.37% - --------------------------------------------------------------------------------
[LINE CHART PLOT POINTS]
US Government Lehman Intermediate Income Portfolio US Gov't Bond 10000 10000 10689.7 10616.9 10970 11090.3 11859.3 11982.8 13178.1 13093.1 13026.3 13388.8 14043 14218
[END PLOT POINTS] 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 U.S. 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 591/2 from the Vista Capital Advantage variable annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary income. page 10 Money Market Portfolio (unaudited) The Money Market Portfolio seeks to provide maximum current income consistent with preservation of capital and maintenance of liquidity. Performance The Money Market Portfolio's 7-day current yield (with waivers) as of August 31, 2000 was 6.03%. Strategy The Portfolio continued to provide its investors with an attractive yield. For most of the year, yields on money market securities moved higher along with the Fed's decision to continue raising interest rates to cool the economy's blistering pace, which was evidenced by strong consumer confidence data and the lowest unemployment data in a generation. Management maintained a shorter-than-average average-weighted duration during the rising rate environment, a strategy that helped performance when rates continued to edge higher. Towards the end of the reporting period, the Fed eased on tightening its monetary policy, which resulted in stabilizing yields of money market securities. Outlook Going forward, we maintain a favorable outlook for the Money Market Portfolio. We anticipate the economy to continue its more-muted pace, and given this backdrop, investors should continue to favor high-quality liquid instruments, such as those included within the Portfolio. Should interest rates resume their upward movement, however, we intend to use any significant increase as an opportunity to extend our average duration. Portfolio shares are not insured or guaranteed by the FDIC or any other government agency. Although Fund shares strive to preserve the value of the investment at $1.00 per share, it is possible to lose money by investing in this Fund. Withdrawals prior to age 591/2 from the Vista Capital Advantage variable annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary income. Growth and Income Portfolio page 11 Portfolio of Investments August 31, 2000
Shares Issuer Value ------ ------ ----- LONG-TERM INVESTMENTS--98.5% COMMON STOCK--98.5% AEROSPACE--0.9% 2,700 BOEING CO. ....................................... $ 144,788 ----------- AUTOMOTIVE--2.6% 11,237 FORD MOTOR CO. ................................... 271,795 2,000 GENERAL MOTORS CORP. ............................. 144,375 ----------- 416,170 ----------- BANKING--5.8% 1,700 BANK OF AMERICA CORP. ............................ 91,056 7,199 BANK OF NEW YORK CO., INC. ....................... 377,498 2,927 FIRSTAR CORP. .................................... 69,882 9,500 WELLS FARGO CO. .................................. 410,281 ----------- 948,717 ----------- CHEMICALS--2.2% 3,600 DOW CHEMICAL CO. ................................. 94,275 6,000 E.I. DUPONT DE NEMOURS CO. ....................... 269,250 ----------- 363,525 ----------- COMPUTER SOFTWARE--0.3% 1,300 COMPUTER ASSOCIATES INTERNATIONAL, INC. .......... 41,275 ----------- COMPUTERS/COMPUTER HARDWARE--1.4% 1,000 HEWLETT-PACKARD CO. .............................. 120,750 800 INTERNATIONAL BUSINESS MACHINES CORP. ............ 105,600 ----------- 226,350 ----------- CONSUMER PRODUCTS--0.6% 3,100 PHILIP MORRIS COMPANIES, INC. .................... 91,838 ----------- DIVERSIFIED--3.1% 5,600 GENERAL ELECTRIC CO. ............................. 328,650 3,000 TYCO INTERNATIONAL LTD (BERMUDA) ................. 171,000 ----------- 499,650 ----------- FINANCIAL SERVICES--20.4% 8,700 AMERICAN EXPRESS CO. ............................. 514,388 16,667 CITIGROUP, INC. .................................. 972,935 2,200 FANNIE MAE ....................................... 118,250 700 FREDDIE MAC ...................................... 29,488 1,900 J.P. MORGAN & CO. ................................ 317,656 3,700 MERRILL LYNCH & CO., INC. ........................ 536,500 7,500 MORGAN STANLEY DEAN WITTER & CO. ................. 806,718 300 STATE STREET CORP. ............................... 35,325 ----------- 3,331,260 ----------- FOOD/BEVERAGE PRODUCTS--2.3% 1,600 ANHEUSER-BUSCH COMPANIES, INC. ................... 126,100 3,700 PEPSICO, INC. .................................... 157,712 2,300 SYSCO CORP. ...................................... 97,319 ----------- 381,131 -----------
Shares Issuer Value ------ ------ ----- INSURANCE--6.9% 10,200 AMERICAN INTERNATIONAL GROUP, INC. ............... $ 909,075 1,800 MARSH & MCLENNAN COMPANIES ....................... 213,750 ----------- 1,122,825 ----------- MACHINERY & ENGINEERING EQUIPMENT--0.8% 2,500 DOVER CORP. ...................................... 122,188 ----------- MANUFACTURING--0.6% 2,500 HONEYWELL INTERNATIONAL, INC. .................... 96,406 ----------- METALS/MINING--0.7% 3,200 ALCOA, INC. ...................................... 106,400 ----------- MULTI-MEDIA--4.7% 7,100 THE WALT DISNEY CO. .............................. 276,456 7,184 VIACOM, INC., CLASS B* ........................... 483,573 ----------- 760,029 ----------- OIL & GAS--12.2% 1,640 BP AMOCO PLC, ADR (UNITED KINGDOM) ............... 90,610 4,200 CHEVRON CORP. .................................... 354,900 8,908 EXXON MOBIL CORP. ................................ 727,115 3,500 HALLIBURTON CO. .................................. 185,500 7,400 ROYAL DUTCH PETROLEUM CO., N.Y. REGISTERED SHARES (NETHERLANDS) ............................. 452,787 2,200 SCHLUMBERGER LTD ................................. 187,688 ----------- 1,998,600 ----------- PAPER/FOREST PRODUCTS--1.7% 3,277 INTERNATIONAL PAPER CO. .......................... 104,454 2,200 WEYERHAEUSER CO. ................................. 101,888 2,300 WILLAMETTE INDUSTRIES ............................ 70,150 ----------- 276,492 ----------- PHARMACEUTICALS--6.9% 6,000 ABBOTT LABORATORIES .............................. 262,500 4,000 AMERICAN HOME PRODUCTS CORP. ..................... 216,750 1,500 ELI LILLY & CO. .................................. 109,500 2,400 PFIZER, INC. ..................................... 103,800 7,184 PHARMACIA CORP. .................................. 420,713 ----------- 1,113,263 ----------- RESTAURANTS/FOOD SERVICES--0.7% 3,600 MCDONALD'S CORP. ................................. 107,550 ----------- RETAILING--1.0% 300 KOHLS CORP.* ..................................... 16,800 6,000 TARGET CORP. ..................................... 139,500 ----------- 156,300 ----------- SEMI-CONDUCTORS--6.1% 4,000 ALTERA CORP.* .................................... 259,250 2,300 APPLIED MATERIALS, INC.* ......................... 198,518 2,600 INTEL CORP. ...................................... 194,675 5,000 TEXAS INSTRUMENTS, INC. .......................... 334,688 ----------- 987,131 -----------
See notes to financial statements. page 12 Growth and Income Portfolio (continued) Portfolio of Investments August 31, 2000
Shares Issuer Value ------ ------ ----- TELECOMMUNICATIONS--8.9% 4,977 AT&T CORP. ..................................... $ 156,776 7,700 BELLSOUTH CORP. ................................ 287,306 2,300 GLOBAL CROSSING LTD (BERMUDA)* ................. 69,144 4,400 SBC COMMUNICATIONS, INC. ....................... 183,700 3,000 SPRINT CORP. (FON GROUP) ....................... 100,500 8,900 VERIZON COMMUNICATIONS ......................... 388,262 7,500 WORLDCOM, INC.* ................................ 273,750 ----------- 1,459,438 ----------- TELECOMMUNICATIONS EQUIPMENT--3.8% 7,020 MOTOROLA, INC. ................................. 253,159 4,400 NORTEL NETWORKS CORP. (CANADA) ................. 358,875 ----------- 612,034 ----------- UTILITIES--3.9% 1,500 DOMINION RESOURCES, INC. ....................... 79,500 2,800 DQE, INC. ...................................... 112,525 1,900 DUKE ENERGY CORP. .............................. 142,144 3,500 ENRON CORP. .................................... 297,063 ----------- 631,232 ----------- TOTAL LONG-TERM INVESTMENTS (COST $13,381,017) ............................. 15,994,592 ----------- Principal Amount ------ SHORT-TERM INVESTMENT--1.7% REPURCHASE AGREEMENT--1.7% $ 268,000 GREENWICH CAPITAL MARKETS, INC., TRI PARTY, 6.64%, DUE 09/01/00, (DATED 08/31/00, PROCEEDS $268,049, SECURED BY FNMA, $330,000, 6.00%, DUE 10/15/10; MARKET VALUE $277,001) (COST $268,000) ................................ 268,000 ----------- TOTAL INVESTMENTS--100.2% (COST $13,649,017) ............................. $16,262,592 ===========
See notes to financial statements. Capital Growth Portfolio page 13 Portfolio of Investments August 31, 2000
Shares Issuer Value ------ ------ ----- LONG-TERM INVESTMENTS--96.1% COMMON STOCK--96.1% ADVERTISING--1.7% 4,900 TRUE NORTH COMMUNICATIONS INC. ........................ $ 227,238 ----------- APPAREL--0.9% 4,900 JONES APPAREL GROUP, INC.* ............................ 120,050 ----------- BANKING--3.0% 4,200 CULLEN/FROST BANKERS, INC. ............................ 130,200 3,200 TCF FINANCIAL CORP. ................................... 105,000 3,500 ZIONS BANCORP. ........................................ 156,625 ----------- 391,825 ----------- BIOTECHNOLOGY--1.4% 3,500 CHIRON CORP.* ......................................... 189,219 ----------- BROADCASTING/CABLE--2.2% 3,000 AT&T CORP.--LIBERTY MEDIA GROUP, CLASS A* ............. 64,125 2,200 UNIVISION COMMUNICATIONS, INC.* ....................... 97,075 5,100 USA NETWORKS, INC.* ................................... 122,719 ----------- 283,919 ----------- BUSINESS SERVICES--4.7% 5,800 ACNIELSEN CORP.* ...................................... 139,563 3,200 AFFILIATED COMPUTER SERVICES, INC., CLASS A* .......... 149,000 6,400 CONCORD EFS, INC.* .................................... 205,600 3,600 MANPOWER INC. ......................................... 130,275 ----------- 624,438 ----------- CHEMICALS--3.1% 4,200 CYTEC INDUSTRIES, INC.* ............................... 140,175 2,000 FMC CORP.* ............................................ 135,625 5,500 SHERWIN-WILLIAMS CO. .................................. 126,500 ----------- 402,300 ----------- COMPUTER SOFTWARE--3.7% 3,200 ALLAIRE CORP.* ........................................ 108,600 2,400 RATIONAL SOFTWARE CORP.* .............................. 308,850 1,400 SYMANTEC CORP.* ....................................... 68,338 ----------- 485,788 ----------- COMPUTERS/COMPUTER HARDWARE--1.1% 5,600 ELECTRONICS FOR IMAGING, INC.* ........................ 145,600 ----------- CONSTRUCTION--2.0% 2,800 AMERICAN STANDARD COMPANIES, INC.* .................... 129,675 4,900 LENNAR CORP. .......................................... 135,363 ----------- 265,038 ----------- ELECTRONICS/ELECTRICAL EQUIPMENT--11.8% 3,200 AMPHENOL CORP., CLASS A* .............................. 204,800 5,000 APW LTD.* ............................................. 220,000 1,900 COHERENT, INC.* ....................................... 152,950 2,900 PERKINELMER, INC. ..................................... 260,818 1,800 SANMINA CORP.* ........................................ 212,400 7,100 SENSORMATIC ELECTRONICS CORP.* ........................ 118,038 2,200 SYMBOL TECHNOLOGIES, INC. ............................. 91,025 7,000 VISHAY INTERTECHNOLOGY, INC.* ......................... 282,187 ----------- 1,542,218 -----------
Shares Issuer Value ------ ------ ----- ENTERTAINMENT/LEISURE--2.4% 4,800 HARRAH'S ENTERTAINMENT, INC.* ......................... $ 136,200 12,100 PARK PLACE ENTERTAINMENT CORP.* ....................... 177,719 ----------- 313,919 ----------- FINANCIAL SERVICES--2.8% 3,400 A.G. EDWARDS, INC. .................................... 176,800 1,300 LEHMAN BROTHERS HOLDINGS, INC. ........................ 188,500 ----------- 365,300 ----------- FOOD/BEVERAGE PRODUCTS--1.0% 4,300 PEPSI BOTTLING GROUP, INC. ............................ 136,525 ----------- HEALTH CARE/HEALTH CARE SERVICES--5.7% 2,800 CYTYC CORP.* .......................................... 130,550 3,650 DENTSPLY INTERNATIONAL, INC. .......................... 121,819 13,500 HEALTH MANAGEMENT ASSOCIATES, INC., CLASS A*. 220,218 5,000 OXFORD HEALTH PLANS, INC.* ............................ 152,500 2,700 STRYKER CORP. ......................................... 120,994 ----------- 746,081 ----------- INSURANCE--4.7% 2,800 AXA FINANCIAL, INC. ................................... 144,900 3,400 RADIAN GROUP, INC. .................................... 211,225 4,900 RELIASTAR FINANCIAL CORP. ............................. 263,681 ----------- 619,806 ----------- MACHINERY & ENGINEERING EQUIPMENT--2.1% 3,200 DOVER CORP. ........................................... 156,400 2,200 ZEBRA TECHNOLOGIES CORP., CLASS A* .................... 118,800 ----------- 275,200 ----------- MANUFACTURING--1.5% 6,000 PENTAIR, INC. ......................................... 195,000 ----------- OIL & GAS--9.3% 6,940 ANADARKO PETROLEUM CORP. .............................. 456,443 3,600 COOPER CAMERON CORP.* ................................. 280,125 7,100 GLOBAL MARINE, INC.* .................................. 229,419 2,000 NICOR, INC. ........................................... 73,750 5,600 TOSCO CORP. ........................................... 170,800 ----------- 1,210,537 ----------- PAPER/FOREST PRODUCTS--0.9% 3,800 WILLAMETTE INDUSTRIES ................................. 115,900 ----------- PHARMACEUTICALS--6.5% 1,400 ALZA CORP.* ........................................... 105,875 3,900 BIOVAIL CORP. INTERNATIONAL (CANADA)* ................. 249,843 2,100 FOREST LABORATORIES INC., CLASS A* .................... 205,538 1,900 MEDIMMUNE, INC.* ...................................... 159,838 2,300 WATSON PHARMACEUTICALS, INC.* ......................... 141,881 ----------- 862,975 ----------- PIPELINES--3.5% 2,800 COLUMBIA ENERGY GROUP ................................. 196,525 3,300 EL PASO ENERGY CORP. .................................. 192,225 1,500 NATIONAL FUEL GAS CO. ................................. 78,656 ----------- 467,406 -----------
See notes to financial statements. page 14 Capital Growth Portfolio (continued) Portfolio of Investments August 31, 2000
Shares Issuer Value ------ ------ ----- REAL ESTATE INVESTMENT TRUST--1.2% 2,000 EQUITY RESIDENTIAL PROPERTIES TRUST ................ $ 96,000 3,000 PROLOGIS TRUST ..................................... 68,625 ----------- 164,625 ----------- RESTAURANTS/FOOD SERVICES--1.4% 6,000 BRINKER INTERNATIONAL, INC.* ....................... 190,500 ----------- RETAILING--1.6% 6,400 BJ'S WHOLESALE CLUB, INC.* ......................... 216,800 ----------- SEMI-CONDUCTORS--7.8% 4,400 ALTERA CORP.* ...................................... 285,174 3,200 ASM LITHOGRAPHY HOLDING NV (NETHERLANDS)* .......... 122,000 5,000 ATMEL CORP.* ....................................... 100,000 4,200 MICROCHIP TECHNOLOGY, INC.* ........................ 285,862 2,700 VITESSE SEMICONDUCTOR CORP.* ....................... 239,794 ----------- 1,032,830 ----------- SHIPPING/TRANSPORTATION--1.0% 2,300 C.H. ROBINSON WORLDWIDE, INC. ...................... 136,131 ----------- TELECOMMUNICATIONS--2.2% 2,200 U.S. CELLULAR CORP.* ............................... 161,838 2,400 WESTERN WIRELESS CORP., CLASS A* ................... 122,700 ----------- 284,538 ----------- TELECOMMUNICATIONS EQUIPMENT--1.3% 1,800 COMVERSE TECHNOLOGY, INC.* ......................... 165,488 ----------- UTILITIES--3.6% 4,000 AGL RESOURCES, INC. ................................ 75,750 4,450 ALLIANT ENERGY CORP. ............................... 130,163 2,800 AMERICAN WATER WORKS, INC. ......................... 68,600 2,900 ENERGY EAST CORP. .................................. 65,794 5,100 SCANA CORP. ........................................ 139,612 ----------- 479,919 ----------- TOTAL LONG-TERM INVESTMENTS (COST $9,658,777) .................................. 12,657,113 -----------
Principal Amount ------ SHORT-TERM INVESTMENT--3.9% REPURCHASE AGREEMENT--3.9% $ 514,000 GREENWICH CAPITAL MARKETS, INC., TRI PARTY, 6.64%, DUE 09/01/00, (DATED 08/31/00, PROCEEDS $514,095, SECURED BY FNMA, $530,000, 8.00%, DUE 07/25/30; MARKET VALUE $525,279) (COST $514,000)................................... 514,000 ------- TOTAL INVESTMENTS--100.0% (COST $10,172,777) ............................... $13,171,113 ===========
See notes to financial statements. International Equity Portfolio page 15 Portfolio of Investments August 31, 2000
Shares Issuer Value ------ ------ ----- LONG-TERM INVESTMENTS--98.6% COMMON STOCK--95.9% AUSTRALIA--0.6% 3,100 FOSTER'S BREWING GROUP LTD ....................... $ 7,329 3,400 LANG CORP., LTD* ................................. 17,642 2,000 NEWS CORP., LTD .................................. 26,094 -------- 51,065 -------- BELGIUM--0.2% 500 UBIZEN* .......................................... 19,080 -------- BRAZIL--1.1% 970 TELECOMUNICACOES BRASILEIRAS SA, ADR, PREFERRED ........................................ 89,119 -------- FINLAND--4.0% 2,200 COMPTEL OYJ ...................................... 37,017 5,352 NOKIA OYJ ........................................ 234,489 1,457 SONERA OYJ ....................................... 48,617 -------- 320,123 -------- FRANCE--11.8% 1,650 ALCATEL .......................................... 134,788 1,040 BOUYGUES SA ...................................... 65,299 2,606 CNP ASSURANCES ................................... 82,101 800 EULER SA* ........................................ 37,663 720 FRANCE TELECOM SA ................................ 82,107 1,250 LAGARDERE S.C.A. ................................. 89,022 230 PINAULT-PRINTEMPS-REDOUTE SA ..................... 43,456 1,920 SOCIETE GENERALE, CLASS A ........................ 113,650 350 SOCIETE TELEVISION FRANCAISE ..................... 25,501 1,494 STMICROELECTRONICS N.V. .......................... 91,483 1,188 TOTAL FINA SA, CLASS B ........................... 176,172 -------- 941,242 -------- GERMANY--4.2% 70 ALLIANZ AG ....................................... 23,575 480 BKN INTERNATIONAL AG* ............................ 25,686 327 CE CONSUMER ELECTRONIC AG ........................ 39,612 2,500 COMMERZBANK AG ................................... 80,691 800 DIALOG SEMICONDUCTOR PLC* ........................ 39,474 3,698 KAMPS AG ......................................... 79,780 274 SIEMENS AG ....................................... 43,891 -------- 332,709 -------- IRELAND--0.8% 3,650 BANK OF IRELAND .................................. 21,541 6,515 GREEN PROPERTY PLC ............................... 40,672 -------- 62,213 -------- ITALY--3.4% 9,600 AUTOGRILL SPA .................................... 107,431 4,700 BANCA FIDEURAM SPA ............................... 71,575 5,700 TELECOM ITALIA MOBILE SPA ........................ 49,421 3,400 TELECOM ITALIA SPA ............................... 42,001 -------- 270,428 --------
Shares Issuer Value ------ ------ ----- JAPAN--24.3% 4,000 BANK OF TOKYO-MITSUBISHI LTD ..................... $ 48,964 1,000 BRIDGESTONE CORP. ................................ 12,935 1,000 CANON, INC. ...................................... 44,709 2,000 DAI NIPPON PRINTING CO., LTD ..................... 31,474 4,000 DAI-ICHI KANGYO BANK LTD ......................... 30,331 3,000 DAIWA SECURITIES GROUP, INC. ..................... 37,398 3 EAST JAPAN RAILWAY CO. ........................... 16,309 1,000 FAMILYMART CO., LTD .............................. 29,806 300 FANUC LTD ........................................ 32,618 1,000 FUJI PHOTO FILM CO., LTD ......................... 35,805 2,000 FUJITSU LTD ...................................... 57,925 1 FUTURE SYSTEM CONSULTING CORP.* .................. 17,809 1,000 HITACHI MAXELL ................................... 25,682 1,000 HONDA MOTOR CO., LTD ............................. 36,555 1,000 HOYA CORP. ....................................... 95,604 4 JAPAN TOBACCO, INC. .............................. 30,668 1,000 KAO CORP. ........................................ 27,463 100 KEYENCE CORP. .................................... 33,180 1,000 KURITA WATER INDUSTRIES LTD ...................... 20,808 200 MABUCHI MOTOR CO., LTD ........................... 24,388 1,000 MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD .......... 27,369 2,000 MATSUSHITA ELECTRIC WORKS LTD .................... 24,370 3,000 MINEBEA CO., LTD ................................. 38,804 3,000 MITSUBISHI CORP. ................................. 21,933 2,000 MITSUBISHI ESTATE CO., LTD ....................... 19,684 2,000 MITSUBISHI TRUST & BANKING CORP. ................. 15,372 700 NAMCO LTD ........................................ 19,552 2,000 NEC CORP. ........................................ 57,175 1 NET ONE SYSTEMS CO., LTD* ........................ 32,149 5 NIPPON TELEGRAPH & TELEPHONE CORP. ............... 59,518 1,000 NITTO DENKO CORP. ................................ 40,491 1,000 NOMURA SECURITIES CO., LTD ....................... 23,386 4 NTT DOCOMO, INC. ................................. 105,727 1,000 OLYMPUS OPTICAL CO., LTD ......................... 17,527 2,000 OMRON CORP. ...................................... 49,677 400 ORIENTAL LAND CO., LTD ........................... 36,817 300 ORIX CORP. ....................................... 39,929 1,000 PIONEER CORP. .................................... 42,178 2,000 RICOH CORP., LTD ................................. 34,961 100 ROHM CO., LTD .................................... 28,447 3,000 SANYO ELECTRIC CO., LTD .......................... 25,448 2,000 SHISEIDO CO., LTD ................................ 23,620 200 SOFTBANK CORP. ................................... 26,413 400 SONY CORP. ....................................... 44,615 2,000 SUMITOMO BANK LTD ................................ 24,745 4,000 SUMITOMO CHEMICAL CO., LTD ....................... 18,596 1,000 TAKEDA CHEMICAL INDUSTRIES ....................... 59,143 2,000 TOKIO MARINE & FIRE INSURANCE CO. ................ 20,302 800 TOKYO ELECTRIC POWER CO. ......................... 17,884 3,000 TOSHIBA CORP. .................................... 29,497 2,000 TOYOTA MOTOR CORP. ............................... 86,980
See notes to financial statements. page 16 International Equity Portfolio (continued) Portfolio of Investments August 31, 2000
Shares Issuer Value ------ ------ ----- JAPAN (cont'd) 500 TREND MICRO INC.* ................................... $ 77,796 1,000 YAMANOUCHI PHARMACEUTICAL CO., LTD .................. 49,489 ---------- 1,930,025 ---------- MEXICO--0.8% 10,000 ALFA SA, CLASS A* ................................... 27,719 500 CORPORACION GEO SA, ADR* ............................ 3,778 500 CORPORACION GEO SA, SER. B, ADR* .................... 3,778 25,000 GRUPO ELEKTRA SA .................................... 25,545 ---------- 60,820 ---------- NETHERLANDS--4.9% 1,335 ASM LITHOGRAPHY HOLDING NV* ......................... 50,387 2,470 BUHRMANN NV ......................................... 70,034 500 KONINKLIJKE NUMICO NV ............................... 25,292 1,191 KONINKLIJKE PHILIPS ELECTRONICS NV .................. 57,921 1,900 ROYAL DUTCH PETROLEUM CO. ........................... 115,164 1,308 VNU NV .............................................. 69,647 ---------- 388,445 ---------- PORTUGAL--0.5% 2,608 BANCO ESPIRITO SANTO SA ............................. 42,332 ---------- SPAIN--3.4% 900 ACTIVIDADES DE CONSTRUCCION Y SERVICIOS SA .......... 22,164 5,930 AMADEUS GLOBAL TRAVEL DISTRIBUTION SA, CLASS A* ............................................ 60,520 1,600 BANKINTER SA ........................................ 66,395 1,380 SOGECABLE* .......................................... 49,599 3,895 TELEFONICA SA ....................................... 74,663 ---------- 273,341 ---------- SWEDEN--4.3% 3,400 SKANDIA FORSAKRINGS AB .............................. 68,763 13,590 TELEFONAKTIEBOLAGET LM ERICSON, CLASS B ............. 274,130 ---------- 342,893 ---------- SWITZERLAND--8.2% 290 ABB LTD ............................................. 32,438 480 CHARLES VOEGELE HOLDING AG .......................... 88,659 30 COMPAGNIE FINANCIERE RICHEMONT, CLASS A* ............ 84,891 522 CREDIT SUISSE GROUP ................................. 108,993 170 DISTEFORA HOLDING AG* ............................... 45,150 53 NESTLE SA ........................................... 114,130 110 NOVARTIS AG ......................................... 166,203 100 SIA ABRASIVES HOLDING AG* ........................... 13,652 ---------- 654,116 ---------- UNITED KINGDOM--23.1% 2,650 ASTRAZENECA GROUP PLC ............................... 120,804 3,829 BAE SYSTEMS PLC ..................................... 23,848 6,142 BARCLAYS PLC ........................................ 153,371 18,884 BP AMOCO PLC ........................................ 172,857 6,556 BRITISH TELECOM PLC ................................. 83,283 3,812 CABLE & WIRELESS PLC ................................ 70,451 15,800 CENTRICA PLC ........................................ 51,611
Shares Issuer Value ------ ------ ----- UNITED KINGDOM (cont'd) 6,800 DIMENSION DATA HOLDINGS PLC* ........................ $ 67,230 3,129 GLAXO WELLCOME PLC .................................. 89,991 6,450 HANSON PLC .......................................... 38,206 8,087 HSBC HOLDINGS PLC ................................... 116,350 6,312 KINGFISHER PLC ...................................... 45,819 3,300 LAPORTE PLC ......................................... 21,918 29,700 LAPORTE PLC, CLASS B* ............................... 345 23,880 LEGAL & GENERAL GROUP PLC ........................... 61,364 4,395 MARCONI PLC ......................................... 77,972 3,673 NXT PLC* ............................................ 82,653 4,312 SHELL TRANSPORT & TRADING CO., PLC .................. 36,810 11,208 SMITHKLINE BEECHAM PLC .............................. 146,039 18,911 TESCO PLC ........................................... 59,509 4,200 UNITED NEWS & MEDIA PLC ............................. 53,049 64,111 VODAFONE AIRTOUCH PLC ............................... 258,984 ---------- 1,832,464 ---------- UNITED STATES--0.3% 640 UPROAR LTD., #* ..................................... 4,260 1,170 VIATEL, INC.* ....................................... 16,088 ---------- 20,348 ---------- TOTAL COMMON STOCK (COST $6,902,130) ................................... 7,630,763 ---------- PREFERRED STOCK--2.7% GERMANY--2.7% 1,400 MARSCHOLLEK LAUTENSCHLAEGER UND PARTNER AG. 189,471 90 SAP AG .............................................. 22,683 ---------- TOTAL PREFERRED STOCK (COST $108,787) ..................................... 212,154 ---------- REDEEMABLE UNSECURED LOAN STOCK--0.0% MALAYSIA--0.0% 4,000 SUNWAY BUILDING TECHNOLOGY, BHD, 3.00%, 07/30/01* (COST $1,284) ....................................... 1,011 ---------- WARRANTS--0.0% AUSTRALIA--0.0% 141 LANG CORP., LTD, EXPIRES 12/30/04 ................... 163 ---------- GERMANY--0.0% 11 MUENCHENER RUECKVERSICHERUNGS- GESELLSCHAFT AG EXPIRES 06/03/02 ................... 742 ---------- TOTAL WARRANTS (COST $0) ........................................... 905 ---------- Principal Amount (DEM) ----- CONVERTIBLE CORPORATE BOND--0.0% GERMANY--0.0% 1,307 DAIMLERCHRYSLER AG, 5.75%, 06/14/02 (COST $769) ......................................... 686 ---------- TOTAL INVESTMENTS--98.6% (COST $7,012,970) ................................... $7,845,519 ==========
See notes to financial statements. International Equity Portfolio (continued) page 17 Portfolio of Investments August 31, 2000
Original Notional Number Notional Value at Unrealized of Expiration Value 08/31/00 Appreciation Contracts Description Date (USD) (USD) (USD) --------- ----------- ---- ----- ----- ----- LONG FUTURES OUTSTANDING 2 ALL ORDINARIES STOCK PRICE INDEX September, 2000 $92,627 $94,946 $2,319
Summary of Investments by Industry, August 31, 2000
Industry % of Investment Securities TELECOMMUNICATIONS 12.2% TELECOMMUNICATIONS EQUIPMENT 9.3% FINANCIAL SERVICES 9.1% ELECTRONICS/ELECTRICAL EQUIPMENT 8.5% PHARMACEUTICALS 8.0% BANKING 7.6% OIL & GAS 7.0% RETAILING 3.7% INSURANCE 3.3% FOOD/BEVERAGE PRODUCTS 2.9% SEMI-CONDUCTORS 2.8% DIVERSIFIED 2.3% COMPUTER SOFTWARE 2.0% PRINTING & PUBLISHING 2.0% OTHER (BELOW 2%) 19.3% - -------------------------------------------------------------------------------- TOTAL 100%
See notes to financial statements. page 18 Asset Allocation Portfolio Portfolio of Investments August 31, 2000
Shares Issuer Value ------ ------ ----- LONG-TERM INVESTMENTS--98.5% COMMON STOCK--59.7% ADVERTISING--0.3% 375 OMNICOM GROUP .................................. $ 31,289 ---------- AIRLINES--0.7% 2,900 SOUTHWEST AIRLINES, INC. ....................... 65,613 ---------- AUTOMOTIVE--0.4% 675 FORD MOTOR CO. ................................. 16,327 275 GENERAL MOTORS CORP. ........................... 19,851 ---------- 36,178 ---------- BANKING--0.8% 475 BANK OF AMERICA CORP. .......................... 25,442 975 BANK OF NEW YORK CO., INC. ..................... 51,127 ---------- 76,569 ---------- BIOTECHNOLOGY--0.6% 675 AMGEN, INC.* ................................... 51,173 ---------- COMPUTER NETWORKS--2.1% 2,800 CISCO SYSTEMS, INC.* ........................... 191,800 ---------- COMPUTER SOFTWARE--2.8% 2,175 MICROSOFT CORP.* ............................... 151,842 1,125 ORACLE CORP.* .................................. 102,305 ---------- 254,147 ---------- COMPUTERS/COMPUTER HARDWARE--5.3% 1,725 COMPAQ COMPUTER CORP. .......................... 58,758 1,450 DELL COMPUTER CORP.* ........................... 63,256 1,350 EMC CORP.* ..................................... 132,301 475 HEWLETT-PACKARD CO. ............................ 57,356 675 INTERNATIONAL BUSINESS MACHINES CORP. .......... 89,100 650 SUN MICROSYSTEMS, INC.* ........................ 82,509 ---------- 483,280 ---------- CONSUMER PRODUCTS--1.8% 975 AVON PRODUCTS, INC. ............................ 38,207 975 COLGATE-PALMOLIVE CO. .......................... 49,664 675 GILLETTE CO. ................................... 20,250 900 PHILIP MORRIS COMPANIES, INC. .................. 26,663 475 PROCTER & GAMBLE CO. ........................... 29,361 ---------- 164,145 ---------- DIVERSIFIED--3.5% 4,350 GENERAL ELECTRIC CO. ........................... 255,291 1,175 TYCO INTERNATIONAL LTD (BERMUDA) ............... 66,975 ---------- 322,266 ---------- ELECTRONICS/ELECTRICAL EQUIPMENT--1.6% 575 SANMINA CORP.* ................................. 67,850 1,650 SOLECTRON CORP.* ............................... 74,766 ---------- 142,616 ----------
Shares Issuer Value ------ ------ ----- FINANCIAL SERVICES--6.2% 2,425 AMERICAN EXPRESS CO. ........................... $ 143,378 2,075 CHARLES SCHWAB CORP. ........................... 79,239 2,700 CITIGROUP, INC. ................................ 157,613 625 MERRILL LYNCH & CO., INC. ...................... 90,625 875 MORGAN STANLEY DEAN WITTER & CO. ............... 94,117 ---------- 564,972 ---------- FOOD/BEVERAGE PRODUCTS--1.8% 475 ANHEUSER-BUSCH COMPANIES, INC. ................. 37,436 975 COCA-COLA CO. .................................. 51,309 1,750 PEPSICO, INC. .................................. 74,594 ---------- 163,339 ---------- HEALTH CARE/HEALTH CARE SERVICES--1.4% 925 GUIDANT CORP.* ................................. 62,264 1,250 MEDTRONIC, INC. ................................ 64,063 ---------- 126,327 ---------- INSURANCE--2.0% 2,025 AMERICAN INTERNATIONAL GROUP, INC. ............. 180,478 ---------- INTERNET SERVICES/SOFTWARE--0.9% 875 AMERICA ONLINE, INC.* .......................... 51,297 250 YAHOO! INC.* ................................... 30,375 ---------- 81,672 ---------- MACHINERY & ENGINEERING EQUIPMENT--0.3% 500 DOVER CORP. .................................... 24,438 ---------- METALS/MINING--0.5% 1,450 ALCOA, INC. .................................... 48,213 ---------- MULTI-MEDIA--1.6% 1,850 THE WALT DISNEY CO. ............................ 72,034 875 TIME WARNER, INC. .............................. 74,813 ---------- 146,847 ---------- OIL & GAS--3.3% 625 BJ SERVICES CO.* ............................... 41,875 300 CHEVRON CORP. .................................. 25,350 2,045 EXXON MOBIL CORP. .............................. 166,922 1,075 ROYAL DUTCH PETROLEUM CO., N.Y. REGISTERED SHARES (NETHERLANDS) ........................... 65,777 ---------- 299,924 ---------- PHARMACEUTICALS--4.1% 600 AMERICAN HOME PRODUCTS CORP. ................... 32,513 875 BRISTOL-MYERS SQUIBB CO. ....................... 46,375 500 ELI LILLY & CO. ................................ 36,500 475 JOHNSON & JOHNSON .............................. 43,670 975 MERCK & CO., INC. .............................. 68,128 3,281 PFIZER, INC. ................................... 141,903 ---------- 369,089 ---------- PIPELINES--0.6% 775 COLUMBIA ENERGY GROUP .......................... 54,395 ----------
See notes to financial statements. Asset Allocation Portfolio (continued) page 19 Portfolio of Investments August 31, 2000
Shares Issuer Value ------ ------ ----- RETAILING--3.9% 700 ALBERTSON'S, INC. ........................ $ 15,050 975 BEST BUY CO., INC.* ...................... 60,206 1,200 HOME DEPOT, INC. ......................... 57,675 1,350 TARGET CORP. ............................. 31,388 2,700 WAL-MART STORES, INC. .................... 128,081 1,950 WALGREEN CO. ............................. 64,106 ---------- 356,506 ---------- SEMI-CONDUCTORS--4.9% 1,750 ALTERA CORP.* ............................ 113,422 875 APPLIED MATERIALS, INC.* ................. 75,523 2,900 INTEL CORP. .............................. 217,137 575 TEXAS INSTRUMENTS, INC. .................. 38,489 ---------- 444,571 ---------- TELECOMMUNICATIONS--2.7% 655 AT&T CORP. ............................... 20,633 975 BELLSOUTH CORP. .......................... 36,380 1,450 SBC COMMUNICATIONS, INC. ................. 60,537 875 SPRINT CORP. (FON GROUP) ................. 29,313 823 VERIZON COMMUNICATIONS ................... 35,903 1,825 WORLDCOM, INC.* .......................... 66,612 ---------- 249,378 ---------- TELECOMMUNICATIONS EQUIPMENT--3.4% 2,500 ADC TELECOMMUNICATIONS, INC.* ............ 102,344 450 JDS UNIPHASE CORP.* ...................... 56,081 1,125 LUCENT TECHNOLOGIES, INC. ................ 47,039 1,275 NORTEL NETWORKS CORP., (CANADA) .......... 103,992 ---------- 309,456 ---------- UTILITIES--2.2% 975 AES CORP.* ............................... 62,156 400 DUKE ENERGY CORP. ........................ 29,925 1,250 ENRON CORP. .............................. 106,094 ---------- 198,175 ---------- TOTAL COMMON STOCK (COST $4,542,690) ........................ 5,436,856 ---------- Principal Amount (USD) ----- U.S. TREASURY SECURITIES--11.1% U.S. TREASURY NOTES & BONDS $ 50,000 5.25%, 05/31/01 ......................... 49,578 75,000 5.25%, 11/15/28 ......................... 68,977 300,000 5.63%, 02/15/06 ......................... 294,608 50,000 6.00%, 07/31/02 ......................... 49,821 260,000 6.25%, 08/15/23 ......................... 270,847 147,000 6.38%, 03/31/01 ......................... 146,931 125,000 6.75%, 05/15/05 ......................... 128,868 ---------- TOTAL U.S. TREASURY SECURITIES (COST $993,958) .......................... 1,009,630 ----------
Principal Amount (USD) Issuer Value ----- ------ ----- U.S. GOVERNMENT AGENCY SECURITIES--4.5% $ 204,740 FEDERAL HOME LOAN MORTGAGE CORP., 7.00%, 11/01/29 ............................................ $ 199,685 50,000 FEDERAL NATIONAL MORTGAGE ASSOCIATION, 5.13%, 02/13/04 ..................................... 47,508 TENNESSEE VALLEY AUTHORITY, 125,000 5.38%, 11/13/08 .................................... 112,871 50,000 6.75%, 11/01/25 .................................... 49,071 ---------- TOTAL U.S. GOVERNMENT AGENCY SECURITIES (COST $411,050) ..................................... 409,135 ---------- CORPORATE NOTES & BONDS--12.0% AUTOMOTIVE--3.0% 100,000 DAIMLERCHRYSLER NORTH AMERICA HOLDINGS CORP., MTN, 6.63%, 09/21/01 ......................... 99,358 150,000 FORD MOTOR CO., 7.45%, 07/16/31 ..................... 141,590 50,000 FORD MOTOR CREDIT CO., 5.80%, 01/12/09 .............. 40,757 ---------- 281,705 ---------- COMPUTERS/COMPUTER HARDWARE--1.1% 100,000 INTERNATIONAL BUSINESS MACHINES CORP., 5.37%, 09/22/03 ............................................ 96,234 ---------- FINANCIAL SERVICES--2.5% 50,000 GOLDMAN SACHS GROUP, INC., 6.65%, 05/15/09 .......... 47,105 85,000 INTERNATIONAL LEASE FINANCE CORP., MTN, 8.35%, 02/04/02 ............................................ 86,431 95,000 MERRILL LYNCH & CO., INC., SER. B, MTN, 5.71%, 01/15/02 ............................................ 93,180 ---------- 226,716 ---------- INSURANCE--1.6% 100,000 ALLSTATE CORP., 7.20%, 12/01/09 ..................... 97,640 60,000 MBIA, INC., 6.63%, 10/01/28 ......................... 51,484 ---------- 149,124 ---------- MACHINERY & ENGINEERING EQUIPMENT--1.1% 100,000 CATERPILLAR FINANCIAL SERVICES CORP., MTN, 5.89%, 06/17/02 ..................................... 97,903 ---------- OIL & GAS--0.5% 50,000 CONOCO, INC., 5.90%, 04/15/04 ....................... 48,218 ---------- PRINTING & PUBLISHING--0.3% 30,000 WASHINGTON POST CO., 5.50%, 02/15/09 ................ 26,659 ---------- TELECOMMUNICATIONS--0.8% 75,000 AT&T CORP., 5.63%, 03/15/04 ......................... 70,827 ---------- UTILITIES--1.1% 100,000 BALTIMORE GAS & ELECTRIC CO., SER. D, MTN, 6.90%, 02/01/05 ..................................... 99,067 ---------- TOTAL CORPORATE NOTES & BONDS (COST $1,125,193) ................................... 1,096,453 ---------- RESIDENTIAL MORTGAGE BACKED SECURITIES--11.2% 78,296 FEDERAL HOME LOAN MORTGAGE CORP., GOLD POOL E00532, 6.50%, 02/01/13 ............................. 76,363
See notes to financial statements. page 20 Asset Allocation Portfolio (continued) Portfolio of Investments August 31, 2000
Principal Amount (USD) Issuer Value ----- ------ ----- FEDERAL NATIONAL MORTGAGE ASSOCIATION, $ 38,887 POOL 313563, 10.50%, 03/01/18 ................. $ 41,742 203,914 POOL 323614, 6.50%, 02/01/14 .................. 198,879 GOVERNMENT NATIONAL MORTGAGE ASSOCIATION, 118,439 POOL 423130, 8.50%, 10/15/29 ................... 121,289 125,404 POOL 461206, 6.50%, 01/15/28 ................... 120,388 294,185 POOL 487057, 6.50%, 03/15/29 ................... 282,418 114,401 POOL 513746, 7.00%, 08/15/29 ................... 112,256 69,387 POOL 518585, 6.50%, 11/15/29 ................... 66,611 ---------- TOTAL RESIDENTIAL MORTGAGE BACKED SECURITIES (COST $1,024,041) .............................. 1,019,946 ---------- TOTAL LONG-TERM INVESTMENTS (COST $8,096,932) .............................. 8,972,020 ---------- SHORT-TERM INVESTMENT--1.1% REPURCHASE AGREEMENT--1.1% 101,000 GREENWICH CAPITAL MARKETS, INC., TRI PARTY, 6.64%, DUE 09/01/00, (DATED 08/31/00, PROCEEDS $101,019, SECURED BY FNMA, $125,000, 6.00%, DUE 10/15/10; MARKET VALUE $104,925) (COST $101,000) ................................ 101,000 ---------- TOTAL INVESTMENTS--99.6% (COST $8,197,932) .............................. $9,073,020 ==========
See notes to financial statements. page 21 U.S. Government Income Portfolio Portfolio of Investments August 31, 2000
Principal Amount (USD) Issuer Value ----- ------ ----- LONG-TERM INVESTMENTS--88.8% U.S. TREASURY SECURITIES--56.0% U.S. TREASURY NOTES & BONDS, $ 700,000 5.63%, 05/15/08 ................................. $ 686,217 150,000 6.13%, 09/30/00 ................................. 149,931 500,000 6.50%, 05/31/01 ................................. 500,235 550,000 6.75%, 08/15/26 ................................. 612,392 675,000 8.50%, 02/15/20 ................................. 871,066 400,000 10.75%, 08/15/05 ................................ 478,812 ---------- TOTAL U.S. TREASURY SECURITIES (COST $3,331,191) ................................ 3,298,653 ---------- U.S. GOVERNMENT AGENCY SECURITIES--22.4% 750,000 FEDERAL HOME LOAN BANK, 5.70%, 03/25/03 .......... 731,250 FEDERAL NATIONAL MORTGAGE ASSOCIATION, 469,000 5.13%, 02/13/04 ................................. 445,625 150,000 5.88%, 04/23/04 ................................. 144,047 ---------- TOTAL U.S. GOVERNMENT AGENCY SECURITIES (COST $1,352,445) ................................ 1,320,922 ---------- MORTGAGE-BACKED PASS THROUGH SECURITY--10.4% 632,224 GOVERNMENT NATIONAL MORTGAGE ASSOCIATION, POOL 354779, 6.50%, 03/15/24 (COST $578,001) .................................. 609,895 ---------- TOTAL LONG-TERM INVESTMENTS (COST $5,261,637)................................. 5,229,470 ---------- SHORT-TERM INVESTMENT--10.2% REPURCHASE AGREEMENT--10.2% 599,000 GREENWICH CAPITAL MARKETS, INC., TRI PARTY, 6.64%, DUE 09/01/00, (DATED 08/31/00, PROCEEDS $599,110, SECURED BY FHLMC, $645,000, 6.00%, DUE 11/15/22; MARKET VALUE $611,333) (COST $599,000) .................................. 599,000 ---------- TOTAL INVESTMENTS--99.0% (COST $5,860,637) ................................ $5,828,470 ==========
Money Market Portfolio Portfolio of Investments August 31, 2000
Principal Amount (USD) Issuer Value ----- ------ ----- U.S. TREASURY SECURITIES--9.0% U.S. TREASURY BILLS, $ 190,000 5.76%, 09/21/00 ...................................... $ 189,401 130,000 6.01%, 09/28/00 ...................................... 129,421 30,000 6.03%, 09/28/00 ...................................... 29,866 ---------- TOTAL U.S. TREASURY SECURITIES (COST $348,688) ....................................... 348,688 ---------- COMMERCIAL PAPER--91.1% AUTOMOTIVE--16.5% 115,000 AMERICAN HONDA FINANCE CORP., 6.55%, 10/10/00 ......... 114,190 195,000 DAIMLERCHRYSLER NORTH AMERICA CORP., (GERMANY), 6.57%, 09/20/00 ............................ 194,331 150,000 FORD MOTOR CREDIT CO., 6.56%, 10/18/00 ................ 148,727 185,000 GENERAL MOTORS ACCEPTANCE CORP., 6.57%, 09/12/00 .............................................. 184,633 ---------- 641,881 ---------- BANKING--7.7% 100,000 ANZ, INC., 6.63%, 11/08/00 ............................ 98,763 200,000 BANCO DE GALICIA Y BUENOS AIRES SA DE CV, (ARGENTINA), 6.63%, 09/22/00 .......................... 199,237 ---------- 298,000 ---------- DIVERSIFIED--3.9% 150,000 GENERAL ELECTRIC CAPITAL CORP, 6.59%, 09/11/00 ........ 149,728 ---------- FINANCIAL SERVICES--29.1% 150,000 CREGEM NORTH AMERICA, INC., 6.69%, 09/11/00 ........... 149,726 195,000 GOLDMAN SACHS GROUP LP, 6.74%, 02/15/01 ............... 189,102 194,000 HOMESIDE LENDING, INC., 6.55%, 10/11/00 ............... 192,599 200,000 KFW INTERNATIONAL FINANCE, INC., 6.65%, 09/27/00....... 199,053 150,000 MERRILL LYNCH & CO., INC., 6.58%, 09/15/00 ............ 149,619 140,000 SOCIETE GENERAL NORTH AMERICA, INC., 6.55%, 09/21/00 .............................................. 139,494 115,000 UBS FINANCE INC., (SWITZERLAND), 6.71%, 09/05/00 ...... 114,916 ---------- 1,134,509 ---------- FOOD/BEVERAGE PRODUCTS--5.0% 195,000 HEINZ (H J) CO., 6.55%, 09/13/00 ...................... 194,578 ---------- MANUFACTURING--5.1% 200,000 FORMOSA PLASTICS CORP. USA, 1998 USCP PROGRAM, SER. II, 6.96%, 11/09/00 ..................... 197,420 ---------- RETAILING--5.0% 197,000 ST. MICHAEL FINANCE LTD, (UNITED KINGDOM), 6.63%, 11/13/00 ....................................... 194,395 ---------- TELECOMMUNICATIONS--9.7% 178,000 AT&T CORP., 6.63%, 11/15/00 ........................... 175,582 200,000 BELL ATLANTIC FINANCIAL SERVICES, INC., 6.56%, 09/12/00 .............................................. 199,604 ---------- 375,186 ----------
See notes to financial statements. page 22 Money Market Portfolio (continued) Portfolio of Investments August 31, 2000
Principal Amount (USD) Issuer Value ----- ------ ----- TELECOMMUNICATIONS EQUIPMENT--4.2% $ 165,000 MOTOROLA CREDIT CORP., 6.58%, 09/15/00 .......... $ 164,582 ---------- UTILITIES--4.9% 189,000 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP., 6.30%, 09/12/00 .......................... 188,648 ---------- TOTAL COMMERCIAL PAPER (COST $3,538,927) ............................... 3,538,927 ---------- TOTAL INVESTMENTS--100.1% (COST $3,887,615)+ .............................. $3,887,615 ==========
INDEX: * = Non-income producing security. # = Security may only be sold to qualified institutional buyers. + = The cost of securities is substantially the same for federal income tax purposes. ADR = American Depositary Receipt. FHLMC = Federal Home Loan Mortgage Corporation. FNMA = Federal National Mortgage Association. MTN = Medium Term Note. SER. = Series. See notes to financial statements. Statement of Assets and Liabilities page 23 August 31, 2000
Growth and Capital International Income Growth Equity Portfolio Portfolio Portfolio --------- --------- --------- ASSETS: Investment securities, at value (Note 1) $16,262,592 $13,171,113 $7,845,519 Cash 90 568 41,751 Foreign Currency (Cost $65,180)(a) -- -- 60,175 Other assets 104 79 54 Receivables: Investment securities sold 18,653 104,448 -- Portfolio shares sold -- 87 10,627 Dividends and interest 26,233 5,095 12,114 Variation margin -- -- 2,337 Expense reimbursement from VFD -- -- -- ----------- ----------- ---------- TOTAL ASSETS 16,307,672 13,281,390 7,972,577 ----------- ----------- ---------- LIABILITIES: Payables: Investment securities purchased 31,039 59,224 -- Portfolio shares redeemed 593 244 90 Accrued liabilities: (Note 2) Investment advisory fees 1,362 -- -- Administration fees 2,724 -- -- Custodian fees 6,563 7,731 340 Other 42,786 37,211 11,847 ----------- ----------- ---------- TOTAL LIABILITIES 85,067 104,410 12,277 ----------- ----------- ---------- NET ASSETS: Paid in capital 14,214,689 9,313,051 5,775,788 Accumulated undistributed (distributions in excess of) net investment income 121,288 (1,127) (43,497) Accumulated net realized gain (loss) on investments and futures transactions (726,947) 866,720 1,398,559 Net unrealized appreciation (depreciation) of investments, futures and assets and liabilities denominated in foreign currencies 2,613,575 2,998,336 829,450 ----------- ----------- ---------- NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS $16,222,605 $13,176,980 $7,960,300 =========== =========== ========== Shares of beneficial interest outstanding ($.001 par value; unlimited number of shares authorized) 1,166,573 807,954 598,333 Net asset value, maximum offering price per share and redemption price per share $ 13.91 $ 16.31 $ 13.30 =========== =========== ========== Cost of investments $13,649,017 $10,172,777 $7,012,970 =========== =========== ========== Asset U.S. Government Money Allocation Income Market Portfolio Portfolio Portfolio --------- --------- --------- ASSETS: Investment securities, at value (Note 1) $9,073,020 $5,828,470 $3,887,615 Cash 644 80 3,529 Foreign Currency (Cost $65,180)(a) -- -- -- Other assets 59 39 26 Receivables: Investment securities sold -- -- -- Portfolio shares sold -- -- -- Dividends and interest 46,559 56,400 -- Variation margin -- -- -- Expense reimbursement from VFD 15,959 19,457 19,817 ---------- ---------- ---------- TOTAL ASSETS 9,136,241 5,904,446 3,910,987 ---------- ---------- ---------- LIABILITIES: Payables: Investment securities purchased -- -- -- Portfolio shares redeemed 181 458 10,537 Accrued liabilities: (Note 2) Investment advisory fees -- -- -- Administration fees -- -- -- Custodian fees 6,800 5,167 8,000 Other 17,151 14,293 9,014 ---------- ---------- ---------- TOTAL LIABILITIES 24,132 19,918 27,551 ---------- ---------- ---------- NET ASSETS: Paid in capital 8,324,903 5,751,298 3,883,957 Accumulated undistributed (distributions in excess of) net investment income 200,264 274,342 (58) Accumulated net realized gain (loss) on investments and futures transactions (288,146) (108,945) (463) Net unrealized appreciation (depreciation) of investments, futures and assets and liabilities denominated in foreign currencies 875,088 (32,167) -- ---------- ---------- ---------- NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS $9,112,109 $5,884,528 $3,883,436 ========== ========== ========== Shares of beneficial interest outstanding ($.001 par value; unlimited number of shares authorized) 805,617 623,328 3,883,926 Net asset value, maximum offering price per share and redemption price per share $ 11.31 $ 9.44 $ 1.00 ========== ========== ========== Cost of investments $8,197,932 $5,860,637 $3,887,615 ========== ========== ==========
(a) Including foreign cash of $31,288 segregated for margin on futures contracts. See notes to financial statements. page 24 Statement of Operations For the year ended August 31, 2000
Growth and Capital Income Growth Portfolio Portfolio --------- --------- INVESTMENT INCOME: (Note 1B) Interest $ 45,451 $ 50,963 Dividends 230,384 85,641 Foreign taxes withheld -- (75) ---------- ---------- TOTAL INVESTMENT INCOME 275,835 136,529 ---------- ---------- EXPENSES: (Note 2) Investment advisory fees 101,837 74,061 Administration fees 33,946 24,687 Accounting fees -- -- Custodian fees 51,848 53,029 Printing and postage 4,583 9,355 Professional fees 20,542 24,414 Transfer agent fees 16,856 18,065 Trustees' fees 843 1,134 Other 1,952 3,644 ---------- ---------- TOTAL EXPENSES 232,407 208,389 ---------- ---------- Less amounts waived (Note 2D) 79,079 96,183 Less expenses assumed by VFD (Note 2D) -- -- Less earnings credits (Note 2E) 478 1,114 ---------- ---------- NET EXPENSES 152,850 111,092 ---------- ---------- NET INVESTMENT INCOME (LOSS) 122,985 25,437 ---------- ---------- NET REALIZED GAIN (LOSS) ON: Investment transactions (412,544) 2,259,981 Futures transactions -- -- Foreign currency transactions -- -- CHANGE IN NET UNREALIZED APPRECIATION/DEPRECIATION ON: Investments 1,901,066 766,596 Futures -- -- Foreign currency contracts and foreign currency translations -- -- ---------- ---------- Net realized and unrealized gain 1,488,522 3,026,577 ---------- ---------- Net increase in net assets from operations $1,611,507 $3,052,014 ========== ========== International Asset U.S. Government Money Equity Allocation Income Market Portfolio Portfolio Portfolio Portfolio --------- --------- --------- --------- INVESTMENT INCOME: (Note 1B) Interest $ 5,592 $ 261,717 $ 379,683 $239,917 Dividends 86,544 45,710 -- -- Foreign taxes withheld (12,948) (6) -- -- ---------- ------------- ----------- -------- TOTAL INVESTMENT INCOME 79,188 307,421 379,683 239,917 ---------- ------------ ----------- -------- EXPENSES: (Note 2) Investment advisory fees 66,950 50,176 29,248 10,038 Administration fees 16,737 18,246 11,699 8,031 Accounting fees 64,585 -- -- -- Custodian fees 22,625 79,740 59,898 42,805 Printing and postage 6,631 3,597 2,932 2,119 Professional fees 23,004 22,410 21,371 20,161 Transfer agent fees 16,737 20,626 17,058 16,914 Trustees' fees 419 456 292 201 Other 1,043 2,319 2,829 432 ---------- ------------ ----------- -------- TOTAL EXPENSES 218,731 197,570 145,327 100,701 ---------- ------------ ----------- -------- Less amounts waived (Note 2D) 83,687 68,422 40,947 18,069 Less expenses assumed by VFD (Note 2D) 42,984 50,428 56,641 60,181 Less earnings credits (Note 2E) 3 1,163 926 365 ---------- ------------ ----------- -------- NET EXPENSES 92,057 77,557 46,813 22,086 ---------- ------------ ----------- -------- NET INVESTMENT INCOME (LOSS) (12,869) 229,864 332,870 217,831 ---------- ------------ ----------- -------- NET REALIZED GAIN (LOSS) ON: Investment transactions 1,446,805 (274,916) (108,945) 8 Futures transactions 5,626 8,942 -- -- Foreign currency transactions (21,663) -- -- -- CHANGE IN NET UNREALIZED APPRECIATION/DEPRECIATION ON: Investments 1,281 847,815 211,485 -- Futures 9,977 (10,624) -- -- Foreign currency contracts and foreign currency translations (36,415) -- -- -- ---------- ------------ ----------- -------- Net realized and unrealized gain 1,405,611 571,217 102,540 8 ---------- ------------ ----------- -------- Net increase in net assets from operations $1,392,742 $ 801,081 $ 435,410 $217,839 ========== ============ =========== ========
See notes to financial statements. Statement of Changes in Net Assets page 25 For the year ended August 31,
Growth and Income Capital Growth Portfolio Portfolio ------------------------------- ------------------------------- 2000 1999 2000 1999 --------------- --------------- --------------- --------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 122,985 $ 106,946 $ 25,437 $ 74,035 Net realized gain (loss) on investments, futures and foreign currency transactions (412,544) (273,794) 2,259,981 (326,396) Change in net unrealized appreciation/ depreciation on investments, futures and foreign currency translations 1,901,066 3,731,059 766,596 3,485,901 ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 1,611,507 3,564,211 3,052,014 3,233,540 ------------ ------------ ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (47,277) (141,313) (77,220) (91,620) Net realized gain on investment transactions -- (3,026,944) (779,834) (1,211,368) ------------ ------------ ------------ ------------ TOTAL DISTRIBUTIONS TO SHAREHOLDERS (47,277) (3,168,257) (857,054) (1,302,988) ------------ ------------ ------------ ------------ INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS: Proceeds from shares issued 903,541 2,745,113 1,036,385 1,764,277 Dividends reinvested 47,277 3,168,265 857,054 1,302,988 Cost of shares redeemed (5,445,780) (4,525,706) (3,560,063) (3,444,937) ------------ ------------ ------------ ------------ INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS (4,494,962) 1,387,672 (1,666,624) (377,672) ------------ ------------ ------------ ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS (2,930,732) 1,783,626 528,336 1,552,880 NET ASSETS: Beginning of period 19,153,337 17,369,711 12,648,644 11,095,764 ------------ ------------ ------------ ------------ End of period $ 16,222,605 $ 19,153,337 $ 13,176,980 $ 12,648,644 ============ ============ ============ ============ Share Transactions: Issued 69,980 206,744 73,130 138,153 Reinvested 3,746 10,795 66,541 103,819 Redeemed (423,222) (106,283) (251,852) (268,589) ------------ ------------ ------------ ------------ Change in shares (349,496) 111,256 (112,181) (26,617) ============ ============ ============ ============ International Equity Asset Allocation Portfolio Portfolio ------------------------------- ------------------------------- 2000 1999 2000 1999 --------------- --------------- --------------- --------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ (12,869) $ 2,343 $ 229,864 $ 227,541 Net realized gain (loss) on investments, futures and foreign currency transactions 1,430,768 35,296 (265,974) 57,995 Change in net unrealized appreciation/ depreciation on investments, futures and foreign currency translations (25,157) 1,446,775 837,191 648,382 ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 1,392,742 1,484,414 801,081 933,918 ------------- ------------- ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income -- (65,684) (250,511) (150,706) Net realized gain on investment transactions (242,807) (309,348) (67,251) (783,916) ------------- ------------- ------------- ------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (242,807) (375,032) (317,762) (934,622) ------------- ------------- ------------- ------------- INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS: Proceeds from shares issued 837,144 540,673 315,535 1,873,665 Dividends reinvested 242,807 375,032 317,762 934,622 Cost of shares redeemed (1,606,148) (1,006,352) (1,328,360) (1,296,518) ------------- ------------- ------------- ------------- INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS (526,197) (90,647) (695,063) 1,511,769 ------------- ------------- ------------- ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS 623,738 1,018,735 (211,744) 1,511,065 NET ASSETS: Beginning of period 7,336,562 6,317,827 9,323,853 7,812,788 ------------- ------------- ------------- ------------- End of period $ 7,960,300 $ 7,336,562 $ 9,112,109 $ 9,323,853 ============= ============= ============= ============= Share Transactions: Issued 59,891 52,457 29,366 168,082 Reinvested 17,788 37,761 30,292 84,851 Redeemed (125,252) (100,131) (123,821) (117,135) ------------- ------------- ------------- ------------- Change in shares (47,573) (9,913) (64,163) 135,798 ============= ============= ============= ============= U.S. Government Income Money Market Portfolio Portfolio ------------------------------- ------------------------------- 2000 1999 2000 1999 --------------- --------------- --------------- --------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 332,870 $ 357,431 $ 217,831 $ 176,767 Net realized gain (loss) on investments, futures and foreign currency transactions (108,945) 111,284 8 216 Change in net unrealized appreciation/ depreciation on investments, futures and foreign currency translations 211,485 (547,700) -- -- ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 435,410 (78,985) 217,839 176,983 ------------- ------------- ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (352,501) (341,109) (217,633) (177,389) Net realized gain on investment transactions (106,053) -- -- (316) ------------- ------------- ------------- ------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (458,554) (341,109) (217,633) (177,705) ------------- ------------- ------------- ------------- INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS: Proceeds from shares issued 382,727 1,813,167 1,206,210 3,209,679 Dividends reinvested 458,554 341,107 217,633 178,002 Cost of shares redeemed (1,366,829) (1,882,389) (1,531,722) (2,674,958) ------------- ------------- ------------- ------------- INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS (525,548) 271,885 (107,879) 712,723 ------------- ------------- ------------- ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS (548,692) (148,209) (107,673) 712,001 NET ASSETS: Beginning of period 6,433,220 6,581,429 3,991,109 3,279,108 ------------- ------------- ------------- ------------- End of period $ 5,884,528 $ 6,433,220 $ 3,883,436 $ 3,991,109 ============= ============= ============= ============= Share Transactions: Issued 41,193 181,506 1,206,210 3,209,679 Reinvested 51,363 34,700 217,633 178,002 Redeemed (145,749) (189,910) (1,531,722) (2,674,958) ------------- ------------- ------------- ------------- Change in shares (53,193) 26,296 (107,879) 712,723 ============= ============= ============= =============
See notes to financial statements. page 26 Financial Highlights
Growth and Income Portfolio ------------------------------------------------------------ Year Ended August 31, 2000 1999 1998 1997 1996 ----------- ----------- ------------ ----------- ----------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 12.63 $ 12.36 $ 15.16 $ 12.74 $ 11.48 ------- ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.11 0.06 0.09 0.15 0.29 Net gains or losses on investments (both realized and unrealized) 1.21 2.58 (0.71) 3.99 1.52 ------- ------- ------- ------- ------- TOTAL FROM INVESTMENT OPERATIONS 1.32 2.64 (0.62) 4.14 1.81 ------- ------- ------- ------- ------- LESS DISTRIBUTIONS: Dividends from net investment income 0.04 0.09 0.13 0.15 0.30 Distributions from capital gains -- 2.28 2.05 1.57 0.25 ------- ------- ------- ------- ------- TOTAL DISTRIBUTIONS 0.04 2.37 2.18 1.72 0.55 ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 13.91 $ 12.63 $ 12.36 $ 15.16 $ 12.74 ======= ======= ======= ======= ======= TOTAL RETURN 10.44% 21.23% (5.45%) 35.53% 16.24% RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Period (000 omitted) $16,223 $19,153 $17,370 $15,002 $ 8,081 Ratios to Average Net Assets: Expenses 0.90% 0.90% 0.90% 0.90% 0.90% Net investment income 0.73% 0.54% 0.78% 1.18% 1.71% Expenses without waivers, reimbursements and earnings credits 1.37% 1.33% 1.70% 1.70% 1.98% Net investment income without waivers, reimbursements and earnings credits 0.26% 0.11% (0.02%) 0.38% 0.63% Portfolio Turnover Rate 65% 114% 170% 89% 129% Capital Growth Portfolio ------------------------------------------------------------- Year Ended August 31, 2000 1999 1998 1997 1996 ----------- ----------- ------------- ----------- ----------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 13.75 $ 11.72 $ 15.52 $ 13.84 $ 11.90 ------- ------- --------- ------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.07 0.10 0.09 0.16 Net gains or losses on investments (both realized and unrealized) 3.54 3.37 (2.37) 3.42 2.14 ------- ------- --------- ------- -------- TOTAL FROM INVESTMENT OPERATIONS 3.57 3.44 (2.27) 3.51 2.30 ------- ------- --------- ------- -------- LESS DISTRIBUTIONS: Dividends from net investment income 0.09 0.09 0.09 0.10 0.14 Distributions from capital gains 0.92 1.32 1.44 1.73 0.22 ------- ------- --------- ------- -------- TOTAL DISTRIBUTIONS 1.01 1.41 1.53 1.83 0.36 ------- ------- --------- ------- -------- NET ASSET VALUE, END OF PERIOD $ 16.31 $ 13.75 $ 11.72 $ 15.52 $ 13.84 ======= ======= ========= ======= ======== TOTAL RETURN 27.92% 30.59% (16.38%) 27.27% 19.66% RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Period (000 omitted) $13,177 $12,649 $ 11,096 $12,373 $ 7,910 Ratios to Average Net Assets: Expenses 0.90% 0.90% 0.90% 0.90% 0.90% Net investment income 0.21% 0.59% 0.72% 0.64% 0.97% Expenses without waivers, reimbursements and earnings credits 1.69% 1.70% 1.70% 1.70% 1.97% Net investment income without waivers, reimbursements and earnings credits (0.58%) (0.21%) (0.08%) (0.16%) (0.10%) Portfolio Turnover Rate 128% 27% 71% 54% 107%
International Equity Portfolio ----------------------------------------------------------------- Year Ended August 31, 2000 1999 1998 1997 1996 ----------- ------------ ---------------- ----------- ----------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 11.36 $ 9.63 $ 10.45 $ 10.59 $ 10.89 -------- -------- --------- ------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (0.03) -- 0.02 (b) 0.19 0.22 Net gains or losses on investments (both realized and unrealized) 2.38 2.32 (0.28) 0.65 0.03 -------- -------- --------- ------- -------- TOTAL FROM INVESTMENT OPERATIONS 2.35 2.32 (0.26) 0.84 0.25 -------- -------- --------- ------- -------- LESS DISTRIBUTIONS: Dividends from net investment income -- 0.10 0.18 0.13 0.25 Distributions from capital gains 0.41 0.49 0.38 0.85 0.30 -------- -------- --------- ------- -------- TOTAL DISTRIBUTIONS 0.41 0.59 0.56 0.98 0.55 -------- -------- --------- ------- -------- NET ASSET VALUE, END OF PERIOD $ 13.30 $ 11.36 $ 9.63 $ 10.45 $ 10.59 ======== ======== ========= ======= ======== TOTAL RETURN 20.58% 25.03% (2.46%) 8.27% 2.42% RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Period (000 omitted) $ 7,960 $ 7,337 $ 6,318 $ 5,421 $ 3,901 Ratios to Average Net Assets: Expenses 1.10% 1.10% 1.10% 1.11% 1.10% Net investment income (0.15%) 0.04% 0.19% 1.96% 0.82% Expenses without waivers, reimbursements and earnings credits 2.62% 3.24% 3.05% 2.99% 4.22% Net investment income without waivers, reimbursements and earnings credits (1.67%) (2.10%) (1.76%) 0.08% (2.30%) Portfolio Turnover Rate 102% 170% 157% 158% 200% Asset Allocation Portfolio ----------------------------------------------------------- Year Ended August 31, 2000 1999 1998 1997 1996 ----------- ----------- ----------- ----------- ----------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 10.72 $ 10.64 $ 11.57 $ 11.15 $ 11.04 ------- ------- -------- ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.29 0.24 0.28 0.33 0.66 Net gains or losses on investments (both realized and unrealized) 0.68 1.04 (0.25) 1.94 0.49 ------- ------- -------- ------- ------- TOTAL FROM INVESTMENT OPERATIONS 0.97 1.28 0.03 2.27 1.15 ------- ------- -------- ------- ------- LESS DISTRIBUTIONS: Dividends from net investment income 0.30 0.18 0.30 0.30 0.67 Distributions from capital gains 0.08 1.02 0.66 1.55 0.37 ------- ------- -------- ------- ------- TOTAL DISTRIBUTIONS 0.38 1.20 0.96 1.85 1.04 ------- ------- -------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 11.31 $ 10.72 $ 10.64 $ 11.57 $ 11.15 ======= ======= ======== ======= ======= TOTAL RETURN 9.31% 11.88% (0.04%) 22.61% 10.90% RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Period (000 omitted) $ 9,112 $ 9,324 $ 7,813 $ 6,282 $ 4,033 Ratios to Average Net Assets: Expenses 0.85% 0.85% 0.85% 0.85% 0.85% Net investment income 2.52% 2.48% 2.81% 3.28% 3.18% Expenses without waivers, reimbursements and earnings credits 2.16% 1.90% 1.91% 2.03% 2.33% Net investment income without waivers, reimbursements and earnings credits 1.21% 1.43% 1.75% 2.10% 1.71% Portfolio Turnover Rate 145% 112% 162% 122% 155%
(b) Net investment income per share has been calculated based on average shares outstanding during the period. See notes to financial statements. Financial Highlights (continued) page 27
U.S. Government Income Portfolio++ -------------------------------------------------------- Year Ended August 31, 2000 1999 1998 1997 1996 ---------- ----------- ---------- ---------- ----------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 9.51 $ 10.12 $ 9.40 $ 9.53 $ 10.69 ------ -------- ------- ------ ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.59 0.52 0.39 0.52 1.17 Net gains or losses on investments (both realized and unrealized) 0.10 (0.62) 0.64 0.22 (0.86) ------ -------- ------- ------ -------- TOTAL FROM INVESTMENT OPERATIONS 0.69 (0.10) 1.03 0.74 0.31 ------ -------- ------- ------ -------- LESS DISTRIBUTIONS: Dividends from net investment income 0.58 0.51 0.31 0.54 1.13 Distributions from capital gains 0.18 -- -- 0.33 0.34 ------ -------- ------- ------ -------- TOTAL DISTRIBUTIONS 0.76 0.51 0.31 0.87 1.47 ------ -------- ------- ------ -------- NET ASSET VALUE, END OF PERIOD $ 9.44 $ 9.51 $ 10.12 $ 9.40 $ 9.53 ====== ======== ======= ====== ======== TOTAL RETURN 7.80% (1.15%) 11.12% 8.11% 2.62% RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Period (000 omitted) $5,885 $ 6,433 $ 6,581 $3,801 $ 2,994 Ratios to Average Net Assets: Expenses 0.80% 0.80% 0.80% 0.80% 0.80% Net investment income 5.70% 5.35% 5.40% 5.91% 6.06% Expenses without waivers, reimbursements and earnings credits 2.49% 1.97% 1.99% 1.50% 1.79% Net investment income without waivers, reimbursements and earnings credits 4.01% 4.18% 4.21% 5.21% 5.07% Portfolio Turnover Rate 37% 31% 14% 40% 83% Money Market Portfolio ------------------------------------------------------ Year Ended August 31, 2000 1999 1998 1997 1996 ---------- ---------- ---------- ---------- ---------- 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 0.05 Net gains or losses on investments (both realized and unrealized) -- -- -- -- -- ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS 0.05 0.05 0.05 0.05 0.05 ------ ------ ------ ------ ------ LESS DISTRIBUTIONS: Dividends from net investment income 0.05 0.05 .05 0.05 0.05 Distributions from capital gains -- -- -- -- -- ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS 0.05 0.05 0.05 0.05 0.05 ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 ====== ====== ====== ====== ====== TOTAL RETURN 5.57% 4.66% 5.04% 4.93% 5.15% RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Period (000 omitted) $3,883 $3,991 $3,279 $4,854 $2,950 Ratios to Average Net Assets: Expenses 0.55% 0.55% 0.55% 0.55% 0.55% Net investment income 5.43% 4.54% 4.94% 4.84% 5.10% Expenses without waivers, reimbursements and earnings credits 2.51% 2.28% 2.24% 1.46% 1.74% Net investment income without waivers, reimbursements and earnings credits 3.47% 2.81% 3.25% 3.93% 3.91% Portfolio Turnover Rate -- -- -- -- --
++ 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 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. Purchases of to be announced (TBA), when-issued or delayed delivery securities may be settled a month or more after the trade date; interest income is not accrued until settlement date. Each Fund segregates assets with a current value at least equal to the amount of its TBA, when-issued and delayed delivery purchase commitments. 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 (or from) 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. Notes to Financial Statements (continued) page 29 IEP may invest a portion of its liquid assets in index futures contracts to control the asset mix of the Portfolio in the most efficient manner. This allows the fund manager to more fully participate in the market, adjusting country exposures while incurring minimal transaction costs. Long index futures contracts are used to gain exposure to equities when the fund manager anticipates that this will be more efficient than buying stocks directly. The use of long futures contracts 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, 2000, the Portfolios had outstanding futures contracts as described on their 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 CGP relate primarily to the character for tax purposes of current year distributions. The reclassifications for IEP relate primarily to the character for tax purposes of net operating losses and current year distributions. The following accounts were increased or decreased as shown below:
CGP IEP --- --- Paid in capital $ (33) $ (173,482) Accumulated undistributed (distributions in excess of) net investment income 50,098 79,019 Accumulated net realized gain (loss) on investments and futures transactions (50,065) 94,463
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 page 30 Notes to Financial Statements (continued) investment income or distributions in excess of net realized capital gains. To the extent they exceed net investment income and net realized capital gains for tax purposes, they are reported as distributions of paid-in-capital. I. Expenses--Direct expenses of a Portfolio are charged to the respective Portfolio. 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 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 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 fees as shown in 2.D. D. Assumption of Expenses--For the year ended August 31, 2000, the Portfolios' vendors voluntarily waived expenses as follows:
GIP CGP IEP AAP USGIP MMP --- --- --- --- ----- --- Advisory $79,079 $74,061 $66,950 $50,176 $29,248 $10,038 Administration -- 22,122 16,737 18,246 11,699 8,031 The Sub-Administrator voluntarily reimbursed certain expenses of the portfolios: Assumed Expenses -- -- $42,984 $50,428 $56,641 $60,181
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 custody services. Compensation for such services from Chase is presented in the Statement of Operations as Custodian fees. Custodian fees are subject to reduction by credits earned by each Fund, based on cash balances held by Chase as custodian. Such earnings credits are presented separately in the Statement of Operations. The Funds could have invested the cash balances utilized in connection with the earnings credit arrangements in income producing assets if they had not entered into such arrangements. The Trust has adopted an unfunded noncontributory defined benefit pension plan covering all independent trustees of the Trust who will have served as an independent trustee for at least five years at the time of retirement. Benefits under this plan are based on compensation and years of service. Pension expenses for the year ended August 31, 2000, included in Trustees Fees in the Statement of Operations, and accrued pension liability included in other Notes to Financial Statements (continued) page 31 accrued liabilities in the Statement of Assets and Liabilities were as follows:
Accrued Pension Pension Expenses Liability Portfolio: ---------- ---------- Growth and Income Portfolio $322 $1,461 Capital Growth Portfolio 222 1,127 International Equity Portfolio 147 612 Asset Allocation Portfolio 165 706 U.S. Government Income Portfolio 100 481 Money Market Portfolio 68 361
3. INVESTMENT TRANSACTIONS--For the year ended August 31, 2000, the cost of purchases and proceeds from sales of investments (excluding short-term investments) were as follows:
GIP CGP IEP AAP USGIP --- --- --- --- ----- Purchases (excluding U.S. Government) $10,551,330 $14,672,294 $8,278,404 $7,094,051 $ -- Sales (excluding U.S. Government) 13,759,039 15,095,657 9,221,894 6,896,685 -- Purchases of U.S. Government -- -- -- 5,608,791 2,057,773 Sales of U.S. Government -- -- -- 6,214,485 2,959,031
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, 2000, are as follows:
GIP CGP IEP AAP USGIP --- --- --- --- ----- Aggregate cost $ 13,649,194 $10,190,693 $7,029,771 $8,198,203 $5,870,032 ------------ ----------- ---------- ---------- ---------- Gross unrealized appreciation $ 3,720,542 $ 3,338,287 $1,318,142 $1,294,158 $ 43,059 Gross unrealized depreciation (1,107,144) (357,867) (502,394) (419,341) (84,621) ------------ ----------- ---------- ---------- ---------- Net unrealized appreciation/ (depreciation) $ 2,613,398 $ 2,980,420 $ 815,748 $ 874,817 $ (41,562) ============ =========== ========== ========== ==========
At August 31, 2000, the following Portfolios had capital loss carryovers which will be available to offset capital gains. To the extent that any net capital loss carryovers are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders.
Expiration Portfolio Amount Date --------- ------ ---- GIP $224,525 Aug. 31, 2007 502,245 Aug. 31, 2008 -------- 726,770 AAP 67,791 Aug. 31, 2008 USGIP 49,658 Aug. 31, 2008 MMP 405 Aug. 31, 2008
5. FOREIGN CASH POSITIONS--International Equity Portfolio
Net Delivery Market Unrealized Value (Local Value Gain (Loss) Currency Currency) Cost (USD) (USD) (USD) -------- --------- ---------- ----- ----- Australian Dollar 58,955 $38,261 $33,997 $(4,264) British Pound Sterling 454 679 659 (20) EURO 12,499 11,737 11,093 (644) Greek Drachma 60,000 215 158 (57) Hong Kong Dollar 1,284 165 165 -- Indonesian Rupiah 894,077 58 107 49 Japanese Yen 389,310 3,569 3,648 79 Malaysian Ringgit 1,835 432 483 51 Mexican Nuevo Peso 93 10 10 -- Philippine Peso 22,439 536 498 (38) Singapore Dollar 6,183 3,593 3,592 (1) South African Rand 87 14 13 (1) Swedish Krona 387 44 41 (3) Swiss Franc 2,671 1,604 1,532 (72) Thai Baht 170,805 4,263 4,179 (84) ------- ------- --------- $65,180 $60,175 $(5,005) ======= ======= =========
6. CONCENTRATION OF SHAREHOLDERS At August 31, 2000, all shares outstanding for each Portfolio are owned either directly or indirectly by a single insurance company. 7. CONCENTRATION OF CREDIT RISK As of August 31, 2000, MMP and GIP invested 36.8% and 33.1%, respectively, of their net assets in securities issued by institutions in the financial services industry including banks, broker dealers and insurance companies. 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 24.3% and 23.1% 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. 8. 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 page 32 Notes to Financial Statements (continued) Federal Funds Rate plus 0.50%. IEP also pays a commitment fee of 0.10% 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, 2000, nor at any time during the year then ended. 9. SUBSEQUENT EVENTS Effective September 5, 2000, CAM changed its name to Chase Fleming Asset Management (USA) Inc. Effective September 5, 2000, CAM London changed its name to Chase Fleming Asset Management (London) Limited. 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, 2000, 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 five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. 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 auditing standards generally accepted in the United States of America, 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, 2000 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York 10036 October 11, 2000 A-7036-CRT (c)The Chase Manhattan Corporation, 2000. All Rights Reserved. October, 2000 F-7036(CMB) VCA-2-1000 -----END PRIVACY-ENHANCED MESSAGE-----