-----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, SJkONpDMKAFVJ9O9b/0tqlz5bno+vxcbVcexoChV4P2MyLUJHaeAQI9GMjk97sFY VX5Jq3dXE0Dx15tNQq1PEg== 0000950146-97-001631.txt : 19971110 0000950146-97-001631.hdr.sgml : 19971110 ACCESSION NUMBER: 0000950146-97-001631 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971107 SROS: NONE 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: 97709795 BUSINESS ADDRESS: STREET 1: 101 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10178 BUSINESS PHONE: 2124261600 MAIL ADDRESS: STREET 1: 125 WEST 55TH ST CITY: NEW YORK STATE: NY ZIP: 10019 N-30D 1 ANNUAL REPORT [LOGO OF CHASE VISTA] ANNUAL REPORT AUGUST 31, 1997 VISTA CAPITAL ADVANTAGE MANAGED BY CHASE MANHATTAN MUTUAL FUND VARIABLE ANNUITY TRUST Vista Fund Distributors,Inc., distributor This report must be accompanied or preceded by a current prospectus for Vista Capital Advantage Table of Contents 1 Letter from the Chairman Performance & Commentary 2 Growth and Income 3 Capital Growth 4 International Equity 5 Asset Allocation 6 U.S. Government Income 7 Money Market Portfolio of Investments 8 Growth and Income 10 Capital Growth 12 International Equity 16 Asset Allocation 18 U.S. Government Income 18 Money Market Mutual Fund Variable Annuity Trust 19 Statement of Assets & Liabilities 20 Statement of Operations 21 Statement of Changes in Net Assets 22 Selected Per Share Data and Ratios 23-27 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 1 Letter from the Chairman October 10, 1997 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, 1997. This report summarizes the performance of each portfolio in light of events in the financial markets, giving you the opportunity to monitor and adjust your individual investment choices if necessary. Here are some highlights: Exceptional U.S. Economy Led to Strong Stock Market Gains During the reporting year, the U.S. economy painted a near-perfect picture, one characterized by substantial economic growth, excellent corporate performance, strong job creation and the virtual absence of inflationary pressures. Against this backdrop, the U.S. stock market continued to deliver above-average returns, with the widely-followed unmanaged S&P 500 Index showing a total return of 40.62% for the reporting year. Small- and mid-cap stocks, which had lagged their large-cap counterparts since 1994, began to show signs of relative strength over the summer of 1997. The U.S. bond market also provided positive returns, although bond investors remained highly sensitive to even the slightest hint of inflation in the face of the growing economy and falling unemployment. While inflation did, in fact, remain well under control, this heightened sensitivity created occasional periods of volatility during a year in which the yield on the 30-year U.S. Treasury bond fell from 7.12% to 6.61%. Markets in Europe and Latin America Led Overseas Performance Overseas, European stock markets generally turned in strong performance, aided by ongoing corporate restructuring, the increasing likelihood of a successful launch of the euro and, at the end of the reporting year, signs of sustainable economic growth. Latin American markets were the stars among the developing countries as the effects of ongoing economic and political reforms proved attractive to global investors. Markets were less positive in Japan, where the economy was actually contracting as the reporting year ended. Also problematic was Southeast Asia, where currency problems in Thailand, the Philippines, Indonesia and Malaysia ultimately sent stock markets throughout the region into a tailspin. Overall, it was another strong year for most U.S. market investors, including those investors who've chosen to invest in Vista Capital Advantage variable annuity. We thank you for your business and look forward to continuing to serve your investment needs for many years to come. If you have any questions, please do not hesitate to call your investment professional or 1-800-90-VISTA. Sincerely, /s/ Fergus Reid Fergus Reid Chairman page 2 Growth and Income Portfolio The Growth and Income Portfolio seeks to provide long-term capital appreciation and dividend income primarily through diversified holdings of common stocks. Performance Investors in the Growth and Income Portfolio participated in the strong performance of U.S. stocks during the reporting period. For the year ended August 31, 1997, the Portfolio had a total return of 35.53%. Strategy The portfolio management team utilized Vista's five-step stock management system to select individual holdings for the Portfolio. In the fall of 1996, the system led the management team to take overweight positions in the financial services and technology sectors, which proved quite beneficial to performance as these sectors led the market's advance. As signs of accelerating economic growth became apparent late in 1996, the management team took profits in the financial services sector and focused more heavily on economically sensitive stocks. After the U.S. market stumbled briefly in the early spring, signs of moderating economic growth led to a strong recovery. During this period and for the remainder of the reporting year, the portfolio management team maintained a highly-diversified approach and continued to allocate a portion of assets to mid-cap stocks. Although this mid-cap focus proved to be a drag on performance for the year as a whole, it did prove beneficial in the latter part of the reporting year. During this time, investors finally began turning their attention to the more compelling valuations and improved earnings in small- and mid-cap company stocks. As the year ended, the Portfolio was emphasizing energy and technology companies and had trimmed holdings in economically sensitive stocks. Outlook The portfolio management team expects the U.S. economy to remain strong for the rest of 1997. The team believes that, after several years of strong performance on the corporate earnings front, the market will focus more than ever on whether or not companies can deliver visible earnings growth. Using Vista's disciplined stock management system, the portfolio management team expects to continue to focus on large- and mid-cap companies which it believes have the characteristics to provide the required earnings growth. Life of Portfolio Performance A $10,000 tax-deferred investment in the Growth and Income Portfolio at NAV (Net Asset Value) would have grown to $18,085 from inception on 3/1/95 through 8/31/97.* Investment Results Average Annual Total Return as of 8/31/97* One year 35.53% Since Inception (3/1/95) 26.66% [MOUNTAIN CHART] 10000 10000 10270 10294 10410 10597 10730 11020 11000 11275 11460 11649 11480 11678 11710 12171 11480 12127 11960 12659 12150 12903 12558 13342 12767 13466 13019 13596 13375 14151 13344 14205 12893 13578 13344 13865 13941 14644 14161 15048 15051 16184 14768 15864 15603 16854 15543 16987 14899 16290 15579 17262 16569 18317 17214 19131 18609 20653 18084 19497 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 rep- licates the U.S. stock market. It includes 500 widely held common stocks and assumes reinvestment of dividends. An individual cannot invest in an index. Withdrawals prior to age 59 1/2 from the Vista Capital Advantage variable annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary income. The views expressed on this page are exclusively those of Chase Manhattan. The financial information presented on this page has been taken from the books and records of the portfolios without examination by independent accountants, who express no opinion thereto. page 3 Capital Growth Portfolio The Capital Growth Portfolio seeks to provide long-term capital growth primarily through diversified holdings of common stocks. Performance For the year ended August 31, 1997, the Capital Growth Portfolio provided investors with a total return of 27.27%. Strategy Using Vista's five-step stock management system, the portfolio management team focused on individual selection of mid-cap stocks. For the majority of the reporting year, mid-cap stocks underperformed as investors continued to focus on the stocks of the largest companies. Beginning in April, however, investors increasingly turned their attention to the more compelling valuations in small- and mid-cap stocks and, as the reporting year ended, market performance had broadened considerably. On a sector level, the Portfolio took overweight positions in financial and technology stocks in the last several months of 1996, which proved beneficial as these two sectors were the market's best performers. Anticipating a modestly accelerating economy moving into 1997, the management team cut these overweight exposures in favor of stocks in sectors that perform better in a stronger economy. After the market briefly stumbled early in the spring, the Portfolio took a relatively-sector neutral position, but it did place a heavy emphasis on insurers within the financial sector. As the reporting year ended, the Portfolio had significant positions in retailing stocks. Outlook The portfolio management team expects the U.S. economy to remain strong for the rest of 1997 and believes that the environment will continue to support mid-cap stocks. Within the mid-cap universe of companies, the management team believes that visible earnings growth will be the key to outperformance, and it expects to continue to look for compelling companies with strong earnings growth prospects. Life of Portfolio Performance A $10,000 tax-deferred investment in the Capital Growth Portfolio at NAV (Net Asset Value) would have grown to $18,123 from inception on 3/1/95 through 8/31/97.* Investment Results Average Annual Total Return as of 8/31/97* One year 27.27% Since Inception (3/1/95) 26.77% [MOUNTAIN CHART] 10000 10000 10350 10172 10470 10398 10870 10577 11140 11125 11830 11766 11900 12010 12090 12224 11660 11677 12220 12168 12707 12489 12871 12476 13077 12865 13674 13126 14363 13828 14785 14373 14404 13783 13571 12579 14240 13310 14960 13830 14764 13617 15526 14178 15670 14549 16284 14840 16040 14480 15276 13797 15403 13836 16492 15375 17141 16034 18321 16780 18123 17164 Source for Index Returns: Lipper Analytical Services, Inc. * Past performance is no guarantee of future results. Investment returns and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance figures do not include any insurance company charges associated with a variable annuity or reflect any withdrawal charges. No expenses are deducted from the performance of the indexes. Hypothetical $10,000 investment assumes an initial investment on 3/1/95, shows changes in Net Asset Value and reinvestment of all distributions, but does not include the effect of any insurance charges or the annual maintenance fee. The illustration above would be reduced if these fees were reflected. There is no direct correlation between a hypothetical investment and the anticipated performance of the Portfolio. The investment adviser is currently waiving certain fees. This voluntary waiver may be modified or terminated at any time, which would reduce performance. The Russell 2000 Index is unmanaged and tracks the shares of 2000 small- capitalization companies. Figures include the reinvestment of dividends. An individual cannot invest in an index. Withdrawals prior to age 59 1/2 from the Vista Capital Advantage variable annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary income. The views expressed on this page are exclusively those of Chase Manhattan. The financial information presented on this page has been taken from the books and records of the portfolios without examination by independent accountants, who express no opinion thereto. page 4 International Equity Portfolio The International Equity Portfolio seeks to provide a total return on assets from long-term growth of capital and from income principally through diversified holdings of the stocks of established foreign companies outside the United States. Performance For the year ended August 31, 1997, the International Equity Portfolio provided investors with a total return of 8.27%. Strategy Throughout the reporting year, the Portfolio maintained an overweight position in European companies. This strategy reflected the management team's continuing belief that Europe is in the midst of a profound period of corporate restructuring much like that of the United States several years ago. In addition to restructuring companies, the Portfolio was overweight for most of the year in interest-rate sensitive European companies which benefited from the interest rate convergence among countries in the run-up to the introduction of the euro. However, as the reporting period ended, signs of economic growth led the management team to reduce these interest-rate sensitive holdings in favor of growth-oriented companies. The Portfolio remained underweight in Japan throughout the reporting year. However, the Portfolio raised its allocation there in the second half by focusing on large exporting multinationals, which benefited from a weakening yen. In the emerging markets, the Portfolio continued to build positions in Latin America as the results of economic and political reform drew the attention of investors. In Southeast Asia, the management team responded to the currency crisis by sharply cutting positions in most markets. Outlook The management team believes that an imminent European Monetary Union and economic growth support its continued overweight position in Europe. In Japan, the lack of economic growth calls for caution in the broad market, but the management team does see opportunities within the exporting companies. While most international markets have not kept pace with the U.S. stock market over the past several years, it's important to remember that international investments provide a level of risk reduction through diversification as well as the potential for capital appreciation over the long-term. Life of Portfolio Performance A $10,000 tax-deferred investment in the International Equity Portfolio at NAV (Net Asset Value) would have grown to $12,075 from inception on 3/1/95 through 8/31/97.* Investment Results Average Annual Total Return as of 8/31/97* One year 8.27% Since inception (3/1/95) 7.81% [MOUNTAIN CHART] 10000 10000 10180 10626 10350 11028 10480 10900 10470 10712 11010 11381 10890 10950 11070 11167 10910 10869 10870 11175 10890 11628 11058 11678 11132 11721 11427 11973 11753 12324 11616 12100 11679 12171 11121 11818 11153 11847 11448 12165 11300 12043 11690 12526 11648 12367 11532 11937 11798 12136 11752 12183 11729 12250 12214 13050 12688 13773 13289 13999 12075 12956 Source for Index Returns: Lipper Analytical Services, Inc. * Past performance is no guarantee of future results. Investment returns and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance figures do not include any insurance company charges associated with a variable annuity or reflect any withdrawal charges. No expenses are deducted from the performance of the indexes. Hypothetical $10,000 investment assumes an initial investment on 3/1/95, shows changes in Net Asset Value and reinvestment of all distributions, but does not include the effect of any insurance charges or the annual maintenance fee. The illustration above would be reduced if these fees were reflected. There is no direct correlation between a hypothetical investment and the anticipated performance of the Portfolio. The investment adviser is currently waiving certain fees. This voluntary waiver may be modified or terminated at any time, which would reduce performance. International investing involves a greater degree of risk and increased volatility. Changes in currency exchange rates and differences in accounting and taxation policies outside the U.S. can raise or lower returns. Also, some overseas markets may not be as politically and economically stable as the United States and other nations. The MSCI EAFE Index is unmanaged, is a replica (or model) of the performance of the European, Australian and Far Eastern equity markets, and assumes the reinvestment of dividends. An individual cannot invest in an index. Withdrawals prior to age 59 1/2 from the Vista Capital Advantage variable annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary income. The views expressed on this page are exclusively those of Chase Manhattan. The financial information presented on this page has been taken from the books and records of the portfolios without examination by independent accountants, who express no opinion thereto. page 5 Asset Allocation Portfolio The Asset Allocation Portfolio seeks to provide maximum return through a combination of long-term capital growth and current income by investing in common stocks, convertible securities and government and corporate fixed income obligations. Performance For the year ended August 31, 1997, the Asset Allocation Portfolio had a total return of 22.61%. Strategy At the end of the reporting year, 51.7% of the Portfolio's assets were invested in common stocks. In the fall of 1996, the stock portion of the Portfolio was overweight in technology and financial stocks, which proved beneficial as these were the market's strongest sectors. At the end of 1996, the management team reduced the financial sector exposure in favor of more economically sensitive sectors. After the market's slide in early spring, stock exposure was well- diversified, but the management team increased investments in insurers and retailers over the summer. On the bond side, the Portfolio's exposure to corporate bonds was increased substantially in the second half of the year and positions in U.S. Treasury securities were reduced as the management team sought to increase yield. Within the mortgage sector, the falling interest rate environment prompted management to focus on structured securities which offered some protection against pre-payment. Although the management team did extend duration beyond neutral at several points during the year, concerns about the strength of economic growth led to a relatively neutral duration by year-end. Outlook Given strong consumer spending and the wealth effect created by the strong stock market, the portfolio management team does not expect economic growth to slow much for the remainder of 1997. The stock portion of the Portfolio expects to continue to focus on companies with visible earnings growth. And, the bond portion expects to continue to focus on adding value through sector and security selection as opposed to making investments based on interest rate direction. Life of Portfolio Performance A $10,000 tax-deferred investment in the Asset Allocation Portfolio at NAV (Net Asset Value) would have grown to $15,010 from inception on 3/1/95 through 8/31/97.* Investment Results Average Annual Total Return as of 8/31/97* One year 22.61% Since Inception (3/1/95) 17.59% [MOUNTAIN CHART] 10000 10000 10160 10198 10270 10497 10570 10795 10730 10975 10980 11201 11040 11254 11200 11578 11120 11598 11440 11970 11595 12160 11880 12460 11935 12487 12045 12545 12133 12653 12198 12863 12231 12940 12001 12578 12242 12755 12677 13280 12835 13596 13362 14333 13220 14115 13596 14728 13557 14814 13194 14370 13596 15005 14102 15674 14465 16203 15321 17203 15010 16491 Source for Index Returns: Lipper Analytical Services, Inc. * Past performance is no guarantee of future results. Investment returns and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance figures do not include any insurance company charges associated with a variable annuity or reflect any withdrawal charges. No expenses are deducted from the performance of the indexes. Hypothetical $10,000 investment assumes an initial investment on 3/1/95, shows changes in Net Asset Value and reinvestment of all distributions, but does not include the effect of any insurance charges or the annual maintenance fee. The illustration above would be reduced if these fees were reflected. There is no direct correlation between a hypothetical investment and the anticipated performance of the Portfolio. The investment adviser is currently waiving certain fees. This voluntary waiver may be modified or terminated at any time, which would reduce performance. The Standard & Poor's 500 Index is an unmanaged broad-based index that replicates the U.S. stock market. It includes 500 widely held common stocks and assumes reinvestment of all dividends. The unmanaged Lehman Government Bond Index includes the Treasury Bond Index and the Agency Bond Index. Maturities range from 1 to 20 years. An individual cannot invest in an index. Withdrawals prior to age 59 1/2 from the Vista Capital Advantage variable annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary income. The views expressed on this page are exclusively those of Chase Manhattan. The financial information presented on this page has been taken from the books and records of the portfolios without examination by independent accountants, who express no opinion thereto. page 6 U.S. Government Income Portfolio The U.S. Government Income Portfolio seeks to provide monthly dividends as well as to preserve principal. Performance For the year ended August 31, 1997, the U.S. Government Income Portfolio had a total return of 8.11%. Strategy Over the course of the year, the yield on the 30-year U.S. Treasury bond fell from 7.12% to 6.61%. The Portfolio was able to take advantage of the fall 1996 rally in U.S. Treasuries thanks to a slightly long duration relative to its benchmark. However, the management team took a more conservative stance moving into 1997 and, by the end of February, had reduced the Portfolio's duration below benchmark. Although the Portfolio was slightly long of benchmark at certain points during the second half of the reporting year, the portfolio management team kept a close eye on reports of economic growth and, at times, reined in duration to protect principal. Outlook Given strong consumer spending and the wealth effect created by the strong stock market, the portfolio manage- ment team does not expect economic growth to slow much for the remainder of 1997. Given this view and the belief that the Federal Reserve Board would act in the face of any linkage to inflation, the portfolio management team expects to maintain a neutral to slightly-conservative stance moving forward. 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 $11,859 from inception on 3/1/95 through 8/31/97.* Investment Results Average Annual Total Return as of 8/31/97* One year 8.11% Since Inception (3/1/95) 7.04% Source for Index Returns: Lipper Analytical Services, Inc. * Past performance is no guarantee of future results. Investment returns and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance figures do not include any insurance company charges associated with a variable annuity or reflect any withdrawal charges. No expenses are deducted from the performance of the indexes. Hypothetical $10,000 investment assumes an initial investment on 3/1/95 and shows changes in Net Asset Value, but does not include the effect of any insurance charges or the annual maintenance fee. The illustration above would be reduced if these fees were reflected. There is no direct correlation between a hypothetical investment and the anticipated performance of the Portfolio. The investment adviser is currently waiving certain fees. This voluntary waiver may be modified or terminated at any time, which would reduce performance. The unmanaged Lehman Intermediate Government Bond Index includes bonds with 1 to 10 year maturities and assumes the reinvestment of dividends. An individual cannot invest in an index. Withdrawals prior to age 59 1/2 from the Vista Capital Advantage variable annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary income. The views expressed on this page are exclusively those of Chase Manhattan. The financial information presented on this page has been taken from the books and records of the portfolios without examination by independent accountants, who express no opinion thereto. [MOUNTAIN CHART] 10000 10000 10050 10055 10170 10171 10550 10458 10620 10525 10570 10530 10690 10617 10800 10688 10950 10805 11100 10937 11235 11044 11292 11138 11027 11020 10924 10970 10855 10938 10820 10932 10970 11043 10993 11077 10970 11090 11131 11233 11350 11417 11522 11555 11430 11493 11455 11537 11430 11556 11304 11490 11468 11620 11556 11710 11683 11811 11998 12028 11859 11982 page 7 Money Market Portfolio The Money Market Portfolio seeks to provide maximum current income consistent with preservation of capital and maintenance of liquidity. Performance The Money Market Portfolio had a total return of 4.93% for the year ended August 31, 1997.* At the end of the reporting period, the Portfolio's current SEC seven-day yield was 4.83%. Changing perceptions of the strength of U.S. economic growth were the primary drivers of short-term interest rates during the reporting year as the yield on the one-year Treasury bill declined from 5.90% to 5.56%. Overall, the year can be characterized by substantial economic growth, excellent corporate performance, strong job creation and the absence of inflationary pressures. This combination of factors challenged the traditional economic view that a growing economy and low unemployment inevitably lead to inflation and higher interest rates. Against this backdrop, bond investors were highly sensitive to each report on the economy's performance. This created occasional periods of volatility as they anticipated whether the Federal Reserve Board would make a preemptive strike against inflation. Ultimately, the Fed acted only once, raising the Federal Funds rate slightly in March and effectively driving the yield on the one-year Treasury bill to its highest point of the year. Rates subsequently fell, however, and continued on a generally downward trend as it became clear that the Fed would not act again without clear and sustainable signs of inflation. In this environment, the portfolio management team worked to provide competitive yields with the highest degree of safety and stability. * Total return figures do not include the effect of any insurance or withdrawal charges associated with a variable annuity. The investment advisor is currently waiving certain fees. This voluntary waiver may be modified or terminated at any time, which would reduce performance. Past performance is not a guarantee of future results. An investment in Vista Capital Advantage Money Market Portfolio is neither insured nor guaranteed by the U.S. Government. Yields will fluctuate, and there can be no assurance that the Fund will be able to maintain a stable net asset value of $1.00 per share. The views expressed on this page are exclusively those of Chase Manhattan. The financial information presented on this page has been taken from the books and records of the portfolios without examination by independent accountants, who express no opinion thereto. page 8 Growth & Income Portfolio Portfolio of Investments August 31, 1997 Shares Issuer Value - --------- ----------------------------------------------- ----------- LONG-TERM INVESTMENTS--92.7% COMMON STOCK--92.0% AGRICULTURAL PRODUCTION/SERVICES--1.3% 2,900 CASE CORP. .................................... $ 194,481 ----------- AIRLINES--2.1% 2,500 AMR CORP.* ................................... 251,875 1,900 CONTINENTAL AIRLINES, INC., CLASS B* ........... 69,588 ----------- 321,463 ----------- AUTOMOTIVE--0.5% 1,800 LEAR CORP.* ................................... 82,463 ----------- BANKING--7.6% 1,800 BANKAMERICA CORP. ............................. 118,463 2,500 CULLEN/FROST BANKERS, INC. .................... 111,250 8,800 FIRST UNION CORP. ............................. 422,950 1,900 NATIONSBANK CORP. ............................. 112,813 6,400 WASHINGTON MUTUAL SAVINGS BANK ................. 383,200 ----------- 1,148,676 ----------- BUSINESS SERVICES--0.5% 2,000 CERIDIAN CORP.* ................................ 69,125 ----------- CHEMICALS--2.7% 2,200 CABOT CORP. ................................... 60,225 3,900 DOW CHEMICAL CO. ............................. 345,150 ----------- 405,375 ----------- COMPUTER SOFTWARE--3.8% 2,200 CISCO SYSTEMS, INC. .......................... 165,825 6,100 COMPUTER ASSOCIATES INTERNATIONAL .............. 407,938 ----------- 573,763 ----------- COMPUTERS/COMPUTER HARDWARE--6.8% 3,500 EMC CORP.* ................................... 179,594 4,000 INTERNATIONAL BUSINESS MACHINES CORP. ........ 403,500 9,100 SUN MICROSYSTEMS, INC.* ....................... 436,800 ----------- 1,019,894 ----------- CONSTRUCTION MACHINERY--2.0% 5,100 CATERPILLAR TRACTOR, INC. .................... 296,119 ----------- CONSUMER PRODUCTS--4.2% 2,000 AVON PRODUCTS, INC. .......................... 128,125 8,200 PHILIP MORRIS COMPANIES, INC. ................. 357,725 1,600 RALSTON-RALSTON PURINA GROUP ................. 144,000 ----------- 629,850 ----------- DIVERSIFIED--2.4% 2,300 HARNISCHFEGER INDUSTRIES, INC. ................. 92,288 3,400 TYCO INTERNATIONAL LTD. ....................... 266,688 ----------- 358,976 ----------- ELECTRONICS / ELECTRICAL EQUIPMENT--2.8% 2,200 ATMEL CORP.* ................................... 77,825 1,900 INTEL CORP. ................................... 175,038 2,200 MOTOROLA, INC. ................................ 161,425 ----------- 414,288 ----------- Shares Issuer Value - --------- ----------------------------------------------- ----------- ENTERTAINMENT/LEISURE--3.2% 7,700 CARNIVAL CORP., CLASS A ....................... $ 337,356 2,700 TIME WARNER, INC. ............................. 139,050 ----------- 476,406 ----------- FINANCIAL SERVICES--0.9% 2,700 MORGAN STANLEY, DEAN WITTER, DISCOVER AND CO. ............................. 129,937 ----------- FOOD/BEVERAGE PRODUCTS--2.3% 9,600 PEPSICO., INC. ................................ 345,600 ----------- HEALTH CARE/HEALTH CARE SERVICES--4.8% 2,200 BECKMAN INSTRUMENTS, INC. .................... 103,538 7,700 COLUMBIA/HCA HEALTHCARE CORP. ................. 243,031 10,300 HEALTHSOUTH CORP.* ............................. 256,856 2,600 UNIVERSAL HEALTH SERVICES, INC., CLASS B* ..... 113,912 ----------- 717,337 ----------- INSURANCE--4.9% 5,300 ALLSTATE CORP. ................................ 387,231 1,500 AMERICAN BANKERS INSURANCE GROUP, INC. ........ 99,000 3,300 EQUITABLE COMPANIES, INC. .................... 143,550 8,300 RELIANCE GROUP HOLDINGS, INC. ................. 101,675 ----------- 731,456 ----------- MANUFACTURING--3.7% 4,000 JOHNSON CONTROLS ............................. 190,750 4,400 INGERSOLL-RAND CO. ............................. 264,550 2,900 PENTAIR, INC. ................................ 103,312 ----------- 558,612 ----------- MEDIA/ADVERTISING--1.0% 2,200 OMNICOM GROUP, INC. .......................... 149,050 ----------- METALS/MINING--0.5% 900 ALUMINUM CO. OF AMERICA (ALCOA) .............. 74,025 ----------- OFFICE/BUSINESS EQUIPMENT--0.1% 100 XEROX CORP. ................................... 7,550 ----------- OIL & GAS--10.7% 3,800 BRITISH PETROLEUM PLC, ADR (UNITED KINGDOM) ... 321,575 5,500 COASTAL CORP. ................................ 317,625 7,000 HALLIBURTON COMPANY .......................... 334,250 1,700 MOBIL CORP. ................................... 123,675 2,200 MURPHY OIL CORP. ............................. 118,112 1,100 TEXACO, INC. ................................... 126,775 2,400 TIDEWATER, INC. ................................ 126,000 2,900 WILLIAMS COMPANIES, INC. ....................... 135,031 ----------- 1,603,043 ----------- PAPER/FOREST PRODUCTS--1.5% 1,700 BOISE CASCADE CORP. .......................... 67,256 2,000 WILLAMETTE INDUSTRIES, INC. .................... 159,500 ----------- 226,756 ----------- PHARMACEUTICALS--3.7% 2,000 BRISTOL-MYERS SQUIBB CO. ....................... 152,000 2,800 JOHNSON & JOHNSON ............................. 158,725 5,600 SMITHKLINE BEECHAM PLC, ADR (UNITED KINGDOM) 242,550 ----------- 553,275 ----------- See notes to financial statements. page 9 Growth & Income Portfolio Portfolio of Investments August 31, 1997 Shares Issuer Value - --------- ----------------------------------------------- ------------ PRINTING & PUBLISHING--2.0% 6,500 NEW YORK TIMES COMPANY, CLASS A ............. $ 307,125 ------------ REAL ESTATE INVESTMENT TRUST--0.6% 4,000 SECURITY CAPITAL PACIFIC TRUST ............. 87,250 ------------ RETAILING--7.6% 1,800 BARNES & NOBLE, INC.* ...................... 83,587 10,600 COSTCO COMPANIES, INC. ...................... 382,262 2,800 CVS CORP. .................................. 157,850 3,500 FEDERATED DEPARTMENT STORES* ................ 147,000 12,300 KROGER CO.* ............................... 370,537 ------------ 1,141,236 ------------ SHIPPING/TRANSPORTATION--0.6% 1,000 BURLINGTON NORTHERN SANTA FE ................ 91,688 ------------ TELECOMMUNICATIONS--3.0% 7,100 BELLSOUTH CORP. ............................ 312,400 2,800 SPRINT CORP. ............................... 131,600 ------------ 444,000 ------------ TEXTILES--0.5% 1,700 LIZ CLAIBORNE, INC. ......................... 75,756 ------------ UTILITIES--3.7% 3,600 CAROLINA POWER & LIGHT CO. ................ 121,500 7,200 FPL GROUP INC. ............................ 334,800 3,000 SIERRA PACIFIC RESOURCES ................... 93,750 ------------ 550,050 ------------ TOTAL COMMON STOCK (COST $11,553,500) .......................... 13,784,625 ------------ Shares Issuer Value - --------- ----------------------------------------------- ------------ CONVERTIBLE PREFERRED STOCK--0.7% FINANCIAL SERVICES--0.4% 1,500 SUNAMERICA INC., $3.188, 10/31/99 .......... $ 66,469 ------------ PAPER/FOREST PRODUCTS--0.3% 800 INTERNATIONAL PAPER CAPITAL CORP., 5.25% # .. 44,916 ------------ TOTAL CONVERTIBLE PREFERRED STOCK (COST $96,250) ................................ 111,385 ------------ RIGHTS--0.0% REAL ESTATE INVESTMENT TRUST--0.0% 4,000 SECURITY CAPITAL PACIFIC TRUST, $21.81, EXPIRES 09/08/97 .................................... 0 ------------ TOTAL LONG-TERM INVESTMENTS (COST $11,649,750) .......................... 13,896,010 ------------ Principal Amount - ------------- SHORT-TERM INVESTMENTS--6.9% TIME DEPOSIT--6.9% BANKING--6.9% $1,042,000 SUMITOMO BANK, 5.531%, DUE 09/02/97 (COST $1,042,000) ............ $ 1,042,000 ------------ TOTAL INVESTMENTS--99.6% (COST $12,691,750) ............ $14,938,010 ============ See notes to financial statements. page 10 Capital Growth Portfolio Portfolio of Investments August 31, 1997 Shares Issuer Value - --------- ------------------------------------------- ----------- LONG-TERM INVESTMENTS--87.7% COMMON STOCK--87.7% AGRICULTURAL PRODUCTION/SERVICES--1.4% 5,400 AGCO CORP. ................................... $ 175,500 ----------- AIRLINES--1.5% 5,000 CONTINENTAL AIRLINES, INC., CLASS B* ........... 183,125 ----------- AUTOMOTIVE--3.0% 3,500 CIRCUIT CITY STORES, INC., CARMAX GROUP* ..... 48,125 7,000 LEAR CORP.* ................................... 320,688 ----------- 368,813 ----------- BANKING--1.4% 4,590 ZIONS BANCORPORATION .......................... 177,863 ----------- BUSINESS SERVICES--0.8% 3,000 CERIDIAN CORP.* ................................ 103,687 ----------- CHEMICALS--3.6% 10,000 CABOT CORP. ................................... 273,750 5,000 WATERS CORP.* ................................ 166,563 ----------- 440,313 ----------- COMPUTER SOFTWARE--3.1% 5,500 ADOBE SYSTEMS, INC. .......................... 216,563 55 NETSCAPE COMMUNICATIONS CORP.* ................. 2,190 3,750 WIND RIVER SYSTEMS* .......................... 160,781 ----------- 379,534 ----------- COMPUTERS/COMPUTER HARDWARE--4.2% 3,000 EMC CORP.* .................................... 153,938 4,000 GATEWAY 2000 INC.,* ........................... 156,500 4,000 STORAGE TECHNOLOGY CORP.* ..................... 203,750 ----------- 514,188 ----------- CONSUMER PRODUCTS--1.7% 4,000 FIRST BRANDS CORP. .............................. 99,750 6,000 FURNITURE BRANDS INTERNATIONAL, INC.* ......... 105,750 ----------- 205,500 ----------- DIVERSIFIED--2.9% 5,000 AMERICAN STANDARD COMPANIES, INC.* ............ 235,000 3,000 HARNISCHFEGER INDUSTRIES, INC. .................. 120,375 ----------- 355,375 ----------- ELECTRONICS/ELECTRICAL EQUIPMENT--7.7% 7,000 ADAPTEC, INC.* ................................. 336,000 4,000 ATMEL CORP.* .................................... 141,500 5,000 BMC INDUSTRIES, INC. ........................... 155,625 5,000 MICRON ELECTRONICS, INC.* ..................... 81,562 5,000 XILINX, INC.* ................................. 237,500 ----------- 952,187 ----------- FINANCIAL SERVICES--5.4% 4,000 COUNTRYWIDE CREDIT INDUSTRIES, INC. ............ 134,750 4,000 GREEN TREE FINANCIAL CORP. ..................... 175,750 3,000 LEHMAN BROTHERS HOLDING, INC. .................. 131,625 4,000 THE PMI GROUP, INC. ........................... 231,250 ----------- 673,375 ----------- Shares Issuer Value - --------- ------------------------------------------- ----------- FOOD/BEVERAGE PRODUCTS--1.3% 6,000 COCA-COLA ENTERPRISES, INC. ..................... $ 165,000 ----------- HEALTH CARE/HEALTH CARE SERVICES--7.0% 10,000 ASSISTED LIVING CONCEPTS* ..................... 158,750 2,500 HBO & CO. ....................................... 179,062 4,000 PHYCOR, INC.* ................................. 117,750 6,750 TENET HEALTHCARE CORP.* ........................ 183,938 5,100 UNIVERSAL HEALTH SERVICES, INC., CLASS B* ...... 223,444 ----------- 862,944 ----------- HOME BUILDING CONSTRUCTION--0.7% 5,000 PACIFIC GREYSTONE CORP.* ........................ 86,875 ----------- INSURANCE--9.2% 5,000 AMERICAN BANKERS INSURANCE GROUP, INC. ......... 330,000 4,500 EQUITABLE OF IOWA COMPANIES ..................... 293,062 4,000 RELIASTAR FINANCIAL CORP. ..................... 299,000 3,000 TRANSATLANTIC HOLDINGS, INC. .................. 212,063 ----------- 1,134,125 ----------- MANUFACTURING--3.8% 3,500 KENNAMETAL INC. ................................. 163,844 4,000 PENTAIR, INC. ................................. 142,500 3,500 UCAR INTERNATIONAL, INC.* ..................... 165,156 ----------- 471,500 ----------- MEDIA/ADVERTISING--1.1% 2,000 OMNICOM GROUP, INC. ........................... 135,500 ----------- OIL & GAS--6.0% 5,000 MURPHY OIL CORP. .............................. 268,437 2,500 NUEVO ENERGY CO.* .............................. 127,031 6,500 TIDEWATER, INC. ................................. 341,250 ----------- 736,718 ----------- PAPER/FOREST PRODUCTS--2.2% 7,000 BOISE CASCADE CORP. ........................... 276,937 ----------- PHARMACEUTICALS--1.7% 6,000 PAREXEL INTERNATIONAL CORP.* .................. 212,250 ----------- PIPELINES--1.9% 3,600 COLUMBIA GAS SYSTEM, INC. ..................... 237,600 ----------- REAL ESTATE INVESTMENT TRUST--1.2% 6,600 OASIS RESIDENTIAL, INC. ........................ 154,275 ----------- RETAILING--7.6% 10,000 CORPORATE EXPTRESS INC.* ........................ 170,625 2,000 CVS CORP. ....................................... 112,750 5,000 HOLLYWOOD ENTERTAINMENT CORP.* .................. 81,875 2,500 MSC INDUSTRIAL DIRECT CO., INC.* ............... 101,562 6,000 PROFFITT'S, INC.* .............................. 322,125 5,000 STAGE STORES, INC.* ........................... 154,688 ----------- 943,625 ----------- TELECOMMUNICATIONS--3.2% 5,000 ASPECT TELECOMMUNICATIONS CORP.* ............... 110,000 5,000 CINCINNATI BELL, INC. ........................... 134,687 5,000 OCTEL COMMUNICATIONS CORP.* ..................... 151,875 ----------- 396,562 ----------- See notes to financial statements. page 11 Capital Growth Portfolio Portfolio of Investments August 31, 1997 Shares Issuer Value - --------- -------------------------- ------------ TEXTILES--1.4% 4,000 LIZ CLAIBORNE, INC. ............ $ 178,250 ------------ UTILITIES--2.7% 5,000 SIERRA PACIFIC RESOURCES ...... 156,250 7,500 TNP ENTERPRISES, INC. ......... 175,781 ------------ 332,031 ------------ TOTAL COMMON STOCK (COST $8,377,365) ............... 10,853,652 ------------ Principal Amount Issuer Value - ------------- ----------------------------------- ------------ SHORT-TERM INVESTMENTS--12.0% TIME DEPOSIT--12.0% $1,483,000 SUMITOMO BANK, 5.531%, DUE 09/02/97 (COST $1,483,000) ............. $ 1,483,000 ------------ TOTAL INVESTMENTS--99.7% (COST $9,860,365) ............... $12,336,652 ============ See notes to financial statements. page 12 International Equity Portfolio Portfolio of Investments August 31, 1997 Shares Issuer Value - -------- -------------------------------------------------- ---------- LONG-TERM INVESTMENTS--93.5% COMMON STOCK--93.3% AUSTRALIA--0.6% BANKING--0.1% 700 COMMONWEALTH BANK OF AUSTRALIA .................. $ 7,739 DIVERSIFIED--0.3% 12,000 FUTURIS CORP., LTD. ........................... 17,994 INSURANCE--0.0% 400 QBE INSURANCE GROUP, LTD. ..................... 2,171 OIL & GAS--0.2% 9,000 ENERGY EQUITY CORP. LTD.* ..................... 9,129 --------- 37,033 --------- AUSTRIA--2.0% OIL & GAS--0.7% 10 SCHOELLER-BLECKMANN OILFIELD EQUIPMENT AG* ...... 1,327 297 OMV AG .......................................... 39,146 STEEL--1.3% 893 BOEHLER--UDDEHOLM AG ........................... 69,890 --------- 110,363 --------- BRAZIL--3.3% TELECOMMUNICATIONS--2.8% 1,270 TELECOMUNICACOES BRASILEIRAS SA, ADR ............ 149,860 UTILITIES--0.5% 1,330 CENTRAIS ELECTRICAS BRASILEIRAS SA- ELECTROBRAS, ADR ............................. 30,510 --------- 180,370 --------- CHINA--0.2% AUTOMOTIVE--0.2% 22,000 QINGLING MOTORS COMPANY LTD.-H .................. 12,420 --------- FINLAND--1.1% ELECTRONICS / ELECTRICAL EQUIPMENT--1.1% 775 NOKIA AB, SER. A .............................. 59,869 --------- FRANCE--5.9% APPLIANCES & HOUSEHOLD DURABLES--0.4% 900 MOULINEX* ....................................... 21,770 AUTOMOTIVE--0.8% 295 EQUIPMENT ET COMPOSANTS POUR L'INDUSTRIE AUTOMOBILE ................................... 46,018 BANKING--0.8% 1,050 BANQUE NATIONALE DE PARIS ..................... 44,749 COMPUTER SOFTWARE--0.7% 650 CAP GEMINI SOGETI SA ........................... 39,574 FINANCIAL SERVICES--0.7% 350 CETELEM GROUP ................................. 35,304 OIL & GAS--1.0% 500 SOCIETE NATIONAL ELF-AQUITANE .................. 55,535 TELECOMMUNICATIONS--1.5% 670 ALCATEL ALSTHOM (CIE GENERAL EL) ............... 82,025 --------- 324,975 --------- Shares Issuer Value - -------- -------------------------------------------------- ---------- GERMANY--7.9% AUTOMOTIVE--1.0% 75 VOLKSWAGEN AG ................................. $ 53,779 BANKING--2.1% 1,455 DRESDNER BANK AG .............................. 57,902 1,600 COMMERZBANK AG ................................. 55,460 CAPITAL GOODS--1.4% 171 MANNESMANN AG ................................. 79,156 CONSUMER PRODUCTS--0.6% 248 ADIDAS AG ....................................... 29,867 HEALTH CARE / HEALTH CARE SERVICES--0.9% 700 FRESENIUS MEDICAL CARE AG * ..................... 48,566 MACHINERY & ENGINEERING EQUIPMENT--1.4% 140 GEA AG, ORDINARY SHARES ........................ 48,837 75 GEA AG, PREFERENCE SHARES ..................... 25,474 RETAILING--0.5% 600 METRO AG ....................................... 27,410 --------- 426,451 --------- HONG KONG--4.9% AIRLINES--0.1% 3,000 CATHAY PACIFIC AIRWAYS ........................ 4,897 BANKING--0.4% 2,000 BANK OF EAST ASIA, LTD. ........................ 7,136 2,000 DAO HENG BANK GROUP, LTD. ..................... 8,517 600 HANG SENG BANK LTD. ........................... 7,239 DIVERSIFIED--1.1% 3,000 CITIC PACIFIC LTD. .............................. 15,988 10,000 GUANGDONG INVESTMENTS, LTD. ..................... 12,065 3,000 HUTCHISON WHAMPOA .............................. 24,969 1,000 JARDINE MATHESON HOLDINGS (USD) ............... 7,000 FINANCIAL SERVICES--0.8% 3,000 GUOCO GROUP LTD ................................. 11,652 1,000 HSBC HOLDINGS PLC .............................. 30,454 FOOD/BEVERAGE PRODUCTS--0.0% 2,000 GUANGDONG BREWERY HOLDINGS, LTD.* ............... 703 REAL ESTATE--2.5% 2,000 CHEUNG KONG (HOLDINGS) LTD. ..................... 21,163 14,000 CHINA RESOURCES BEIJING LAND .................. 9,033 2,000 CHINA RESOURCES ENTERPRISES LTD. ............... 8,388 12,800 HKR INTERNATIONAL, LTD. ........................ 16,352 3,000 HONG KONG LAND HOLDINGS LTD. .................. 8,670 5,000 HYSAN DEVELOPMENT CO., LTD. ..................... 14,517 4,000 NEW WORLD DEVELOPMENT COMPANY, LTD. ............ 24,931 1,000 SUN HUNG KAI PROPERTIES LTD. .................. 11,356 3,000 WHARF (HOLDINGS) LTD. ........................... 10,859 5,000 WHEELOCK & CO., LTD. ........................... 10,323 --------- 266,212 --------- INDIA--0.0% UTILITIES--0.0% 100 BSES LTD., GDR ................................. 1,710 --------- See notes to financial statements. page 13 International Equity Portfolio Portfolio of Investments August 31, 1997 Shares Issuer Value - ---------- ------------------------------------------------ ------------ INDONESIA--0.0% DIVERSIFIED--0.0% 2,000 PT BIMANTARA CITRA (Foreign) .................. $ 1,788 TELECOMMUNICATIONS--0.0% 1,500 PT TELEKOMUNIKASI INDONESIA (Foreign) ......... 1,353 ----------- 3,141 ----------- IRELAND--1.7% CONSTRUCTION MATERIALS--0.7% 3,500 CRH PLC ....................................... 37,570 FOOD/BEVERAGE PRODUCTS--0.5% 5,300 GREENCORE GROUP PLC ........................... 27,071 REAL ESTATE--0.5% 5,818 GREEN PROPERTY PLC ........................... 30,188 ----------- 94,829 ----------- ITALY--4.5% BANKING--0.8% 11,000 BANCO AMBROSIANO VENETO SPA, RNC ............ 24,010 4,000 BANCO AMBROSIANO VENETO SPA .................. 23,744 CONSUMER PRODUCTS--0.9% 5,000 CSP INTERNATIONAL INDUSTRIA CALZE SPA * ...... 48,815 INSURANCE--0.9% 2,200 ASSICURAZIONI GENERALI, SPA .................. 46,371 OIL & GAS--1.9% 19,057 ENTE NAZIONALE IDROCARBURI SPA (ENI) ......... 105,428 ----------- 248,368 ----------- JAPAN--27.7% AUTOMOTIVE--1.2% 3,000 KEIHIN CORP. ................................. 37,213 3,000 SANDEN ....................................... 20,467 1,000 YAMAHA MOTOR CO., LTD. ........................ 9,014 BANKING--1.5% 2,000 BANK OF TOKYO-MITSUBISHI ..................... 36,221 1,000 MITSUBISHI TRUST & BANKING CORP. ............ 13,976 3,000 SUMITOMO TRUST & BANKING ..................... 29,026 CHEMICALS--1.0% 2,000 SHIN-ETSU CHEMICAL CO., LTD. .................. 50,941 2,000 TOSOH CORP. * ................................. 5,078 COMPUTER SOFTWARE--0.4% 700 KONAMI CO., LTD. .............................. 21,650 COMPUTERS/COMPUTER HARDWARE--0.4% 2,000 FUJITSU LTD. ................................. 23,816 CONSUMER PRODUCTS--2.0% 3,000 CITIZEN WATCH CO. ........................... 23,047 2,000 KAO CORP. .................................... 29,440 2,000 NIPPON ELECTRIC GLASS CO., LTD. ............... 27,290 300 SONY CORP. .................................... 26,049 DIVERSIFIED--0.5% 3,000 MITSUI & CO. ................................. 24,412 ELECTRONICS/ELECTRICAL EQUIPMENT--7.8% 300 ADVANTEST CORP. .............................. 27,290 500 HIROSE ELECTRONICS CO., LTD. .................. 34,939 Shares Issuer Value - ---------- ------------------------------------------------ ------------ JAPAN (cont'd) 1,000 HITACHI MAXELL LTD. ........................... $ 22,493 400 KEYENCE CORP. ................................. 58,218 1,200 MITSUI HIGH-TEC. .............................. 28,778 1,000 MURATA MUFACTURING CO., LTD. .................. 40,852 1,000 ROHM COMPANY ................................. 103,370 800 SHINKO ELECTRIC INDUSTRIES .................. 34,137 600 SMC CORP. .................................... 50,114 3,000 TOKIN CORP. ................................. 28,034 ENGINEERING SERVICES--0.3% 700 NEC SYSTEM INTEGRATION & CONS ............... 13,603 ENTERTAINMENT/LEISURE--1.1% 300 ORIENTAL LAND CO., LTD. ..................... 18,259 1,000 SHOCHIKU CO., LTD. ........................... 8,600 220 TOHO CO., LTD. .............................. 30,201 FINANCIAL SERVICES--1.5% 700 ACOM CO., LTD. .............................. 32,938 200 AEON CREDIT SERVICE CO., LTD. ............... 12,222 1,000 NIKKO SECURITIES CO. LTD. ..................... 4,705 600 PROMISE CO., LTD. ........................... 30,167 INSURANCE--0.4% 2,000 TOKIO MARINE & FIRE INSURANCE CO. ............ 22,824 MACHINERY & ENGINEERING EQUIPMENT--0.5% 5,000 TOKYO KIKAI SEISAKUSHO ........................ 28,489 MANUFACTURING--2.4% 2,000 FUJI MACHINE MANUFACTURING CO. ............... 68,638 2,000 KOMORI CORP. ................................. 41,844 400 SHIMA SEIKI MANUFACTURING, LTD. ............... 16,903 PHARMACEUTICALS--1.1% 2,000 SANKYO CO. LTD. .............................. 60,533 PHOTOGRAPHIC EQUIPMENT--0.7% 1,000 FUJI PHOTO FILM .............................. 38,371 PRINTING & PUBLISHING--0.4% 1,000 DAI NIPPON PRINTING CO. LTD. .................. 20,839 REAL ESTATE--1.3% 2,000 DAIBIRU CORP. ................................. 22,328 3,000 HANKYU REALTY ................................. 19,847 2,000 MITSUBISHI ESTATE CO., LTD. .................. 27,951 RETAILING--0.9% 800 CREDIT SAISON CO. LTD. ........................ 20,576 700 MATSUMOTOKIYOSHI .............................. 26,628 TELECOMMUNICATIONS--2.2% 2,000 NIPPON COMSYS CORP. ........................... 28,282 30 NIPPON TELEGRAPH & TELEPHONE CORP. ............ 28,034 2,000 MATSUSHITA COMMUNICATION INDUSTRIES ......... 64,999 WHOLESALING--0.1% 1,000 MARUBENI CORP. .............................. 3,614 ----------- 1,497,260 ----------- MALAYSIA--0.8% AGRICULTURAL PRODUCTION/SERVICES--0.2% 4,000 KUMPULAN GUTHRIE BHD. ........................ 4,214 3,000 MALAKOFF BHD. ................................. $ 6,977 See notes to financial statements. page 14 International Equity Portfolio Portfolio of Investments August 31, 1997 Shares Issuer Value - ---------- ----------------------------------------------------- ---------- BANKING--0.1% 1,000 MALAYAN BANKING BHD. .............................. $ 6,635 CONSTRUCTION--0.1% 5,000 SUNWAY BUILDING TECHNOLOGY BHD. .................. 6,293 CONSTRUCTION MATERIALS--0.2% 7,400 SUNGEI WAY HOLDINGS BHD. ........................... 8,707 DIVERSIFIED--0.1% 2,000 UNITED ENGINEERS LTD. .............................. 8,140 UTILITIES--0.1% 1,000 TENAGA NASIONAL BHD. .............................. 2,976 --------- 43,942 --------- MEXICO--2.1% DIVERSIFIED--1.2% 8,274 ALFA, S.A. DE C.V., CLASS A ........................ 63,368 FINANCIAL SERVICES--0.5% 10,000 GRUPO FINANCIERO BANAMEX ACCIVAL, SA DE CV (BANACCI), SER B ................................ 26,793 CONSTRUCTION--0.4% 1,000 CORPORACION GEO, S.A. DE C.V., SER. B, ADR*# ...... 24,158 --------- 114,319 --------- NETHERLANDS--5.6% BUSINESS SERVICES--2.4% 1,250 KONINKLIJKE AHREND GROEP NV ........................ 40,868 4,083 BRUNEL INTERNATIONAL NV * ........................ 84,310 COMPUTER SOFTWARE--1.3% 1,160 BAAN COMPANY, N.V. * .............................. 69,748 PRINTING & PUBLISHING--0.9% 2,222 VERENIGDE NEDERLANDSE UITGEVERSBEDRIJVAN VERENIGD BEZIT (VNU) ............................. 46,319 RETAILING--1.0% 1,080 VENDEX INTERNATIONAL NV ........................... 54,053 --------- 295,298 --------- PHILIPPINES--0.1% CONSTRUCTION--0.0% 6,000 DMCI HOLDINGS INC. ................................. 892 DIVERSIFIED--0.0% 16,000 METRO PACIFIC CORP. .............................. 2,144 TELECOMMUNICATIONS--0.1% 120 PHILIPPINE LONG DISTANCE TELEPHONE ............... 3,020 UTILITIES--0.0% 150 MANILA ELECTRIC CO., CLASS B ..................... 505 --------- 6,561 --------- PORTUGAL--1.1% TELECOMMUNICATIONS--1.1% 1,456 PORTUGAL TELECOM SA .............................. 54,058 44 TELECEL-COMUNICACAOES PESSOAIS, SA ............... 3,205 --------- 57,263 --------- Shares Issuer Value - ---------- ----------------------------------------------------- ---------- SINGAPORE--0.5% REAL ESTATE--0.5% 2,000 SINGAPORE LAND LTD. .............................. $ 8,865 3,000 DBS LAND, LTD. .................................... 7,701 2,000 CITY DEVELOPMENTS, LTD. ........................... 12,636 --------- 29,202 --------- SPAIN--1.2% BANKING--1.2% 2,400 BANCO SANTANDER SA ................................. 66,671 --------- SWEDEN--0.5% STEEL--0.5% 2,600 AVESTA-SHEFFIELD ................................. 24,576 --------- SWITZERLAND--5.1% HEALTH CARE/HEALTH CARE SERVICES--0.9% 30 ARES-SERONO GROUP, CLASS B ........................ 46,751 PHARMACEUTICALS--4.2% 180 ROCHE HOLDING AG ................................. 151,738 50 ABB AG ............................................. 73,652 --------- 272,141 --------- THAILAND--0.4% BROADCASTING--0.1% 500 BEC WORLD PUBLIC CO., LTD. (Foreign) ............... 3,196 FINANCIAL SERVICES--0.1% 3,700 INDUSTRIAL FINANCE CORP. OF THAILAND (Foreign) . 2,930 METALS/MINING--0.0% 200 BANPU COAL LTD. (Foreign) ........................ 1,842 OIL & GAS--0.1% 300 PTT EXPLORATION AND PRODUCTION PUBLIC CO., LTD. (Foreign) ............................. 3,202 TELECOMMUNICATIONS--0.1% 800 ADVANCED INFOR SERVICE PUBLIC CO., LTD. (Foreign) ......................................... 3,777 --------- 14,947 --------- UNITED KINGDOM--16.1% AEROSPACE--1.0% 2,412 BRITISH AEROSPACE PLC .............................. 56,476 AIRLINES--0.6% 3,386 BRITISH AIRPORT AUTHORITY PLC ..................... 30,444 BROADCASTING--0.4% 2,400 CARLTON COMMUNICATIONS PLC ........................ 19,108 BUSINESS SERVICES--0.5% 2,500 DELPHI GROUP PLC ................................. 29,025 CONSTRUCTION--0.9% 3,800 BERKELEY GROUP PLC ................................. 46,213 DIVERSIFIED--0.8% 10,057 COOKSON GROUP PLC ................................. 41,258 FINANCIAL SERVICES--1.9% 8,000 JARVIS FUNDING PLC ................................. 32,300 9,600 LEGAL & GENERAL GROUP PLC ........................ 70,438 FOOD/BEVERAGE PRODUCTS--0.9% 3,745 ALLIED DOMECQ PLC ................................. 28,328 3,250 DEVRO PLC .......................................... 20,236 See notes to financial statements. page 15 International Equity Portfolio Portfolio of Investments August 31, 1997 Shares Issuer Value - ----------- ---------------------------------------------------- ----------- UNITED KINGDOM (cont'd) HOTELS/OTHER LODGING--0.5% 11,859 JARVIS HOTELS PLC ................................. $ 29,806 INSURANCE--2.0% 2,500 GENERAL ACCIDENT PLC .............................. 36,768 8,400 ROYAL & SUN ALLIANCE GROUP PLC .................. 68,103 OIL & GAS--1.6% 5,865 BRITISH-BORNEO PETRO SYNDICATE PLC ............... 44,697 6,435 SHELL TRANSPORT & TRADING PLC ..................... 43,511 REAL ESTATE--1.0% 4,100 MEPC PLC .......................................... 31,147 17,904 TBI PLC .......................................... 26,128 RETAILING--2.3% 4,052 BOOTS COMPANY, PLC .............................. 52,464 2,424 GREAT UNIVERSAL STORES PLC ........................ 24,644 7,800 SAFEWAY PLC ....................................... 47,429 SHIPPING/TRANSPORTATION--1.0% 4,500 RAILTRACK GROUP PLC .............................. 56,367 TELECOMMUNICATIONS--0.7% 7,200 VODAFONE GROUP PLC .............................. 36,542 ----------- 871,432 ----------- TOTAL COMMON STOCK (COST $5,031,992) .................................. 5,059,353 ----------- PREFERRED STOCK--0.1% AUSTRALIA--0.1% ENTERTAINMENT/LEISURE 3,000 SYDNEY HARBOR CASINO, LTD. * ..................... 4,080 ----------- MALAYSIA CONSTRUCTION--0.0% 4,000 SUNWAY BUILDING TECHNOLOGY, BHD., LOAN STOCK........ 1,094 ----------- TOTAL PREFERRED STOCK (COST $5,945) ..................................... 5,174 ----------- WARRANTS--0.1% HONG KONG--0.0% FINANCIAL SERVICES--0.0% 1,600 GUANGDONG INVESTMENT, $8.00, EXPIRE 07/30/99 ...... 929 ----------- MALAYSIA--0.1% CONSTRUCTION--0.0% 1,600 SUNWAY BUILDING TECHNOLOGY, BHD., EXPIRE 07/30/01 ......................................... 1,149 DIVERSIFIED--0.1% 11,750 INDUSTRIAL OXYGEN INC., BHD, EXPIRE 4/30/00 ...... 3,737 ----------- 4,886 ----------- TOTAL WARRANTS (COST $1,065) .................................... 5,815 ----------- TOTAL LONG-TERM INVESTMENTS (COST $5,039,002) ................................. 5,070,342 ----------- Principal Amount (USD) Issuer Value - -------------- ------------------------------------------------ ----------- SHORT-TERM INVESTMENTS--2.9% UNITED STATES--2.9% TIME DEPOSIT--2.7% $ 145,000 SUMITOMO BANK, LTD., 5.53%, 09/02/97 ......... $ 145,000 ----------- U.S. GOVERNMENT OBLIGATIONS--0.2% 10,000 U.S. TREASURY BILL, 4.84%, DUE 09/18/97 ...... 9,973 ----------- TOTAL SHORT-TERM INVESTMENTS (COST $154,973) .............................. 154,973 ----------- TOTAL INVESTMENTS--96.4% (COST $5,193,975) .............................. $5,225,315 =========== See notes to financial statements. page 16 Asset Allocation Portfolio Portfolio of Investments August 31, 1997 Shares Issuer Value - --------- ---------------------------------------------------- ---------- LONG-TERM INVESTMENTS--95.9% COMMON STOCK--51.7% AGRICULTURAL PRODUCTION/SERVICES--0.7% 700 CASE CORP. ....................................... $ 46,944 --------- AIRLINES--1.2% 600 AMR CORP. * ....................................... 60,450 400 CONTINENTAL AIRLINES, INC., CLASS B* ............ 14,650 --------- 75,100 --------- AUTOMOTIVE--0.3% 400 LEAR CORP.* ....................................... 18,325 --------- BANKING--4.2% 400 BANKAMERICA CORP. ................................. 26,325 600 CULLEN/FROST BANKERS, INC. ........................ 26,700 2,000 FIRST UNION CORP. ................................. 96,125 400 NATIONSBANK CORP. ................................. 23,750 1,500 WASHINGTON MUTUAL SAVINGS BANK .................. 89,813 --------- 262,713 --------- BUSINESS SERVICES--0.3% 500 CERIDIAN CORP. * ................................. 17,281 --------- CHEMICALS--1.5% 500 CABOT CORP. ....................................... 13,687 900 DOW CHEMICAL CO. ................................. 79,650 --------- 93,337 --------- COMPUTER SOFTWARE--2.2% 500 CISCO SYSTEMS, INC. .............................. 37,687 1,500 COMPUTER ASSOCIATES INTERNATIONAL ............... 100,313 --------- 138,000 --------- COMPUTERS/COMPUTER HARDWARE--3.9% 800 EMC CORP.* ....................................... 41,050 1,000 INTERNATIONAL BUSINESS MACHINES CORP. ............ 100,875 2,200 SUN MICROSYSTEMS, INC.* ........................... 105,600 --------- 247,525 --------- CONSTRUCTION MACHINERY--1.1% 1,200 CATERPILLAR TRACTOR, INC. ........................ 69,675 --------- CONSUMER PRODUCTS--2.5% 500 AVON PRODUCTS, INC. .............................. 32,031 2,000 PHILIP MORRIS COMPANIES, INC. ..................... 87,250 400 RALSTON-RALSTON PURINA GROUP ..................... 36,000 --------- 155,281 --------- DIVERSIFIED--1.3% 500 HARNISCHFEGER INDUSTRIES, INC. .................. 20,063 800 TYCO INTERNATIONAL LTD. ........................... 62,750 --------- 82,813 --------- ELECTRONICS/ELECTRICAL EQUIPMENT--1.6% 500 ATMEL CORP.* .................................... 17,688 500 INTEL CORP. ....................................... 46,063 500 MOTOROLA, INC. .................................... 36,688 --------- 100,439 --------- Shares Issuer Value - --------- ---------------------------------------------------- ---------- ENTERTAINMENT/LEISURE--1.8% 1,900 CARNIVAL CRUISE LINES, CLASS A .................. $ 83,244 600 TIME WARNER, INC. ................................. 30,900 --------- 114,144 --------- FINANCIAL SERVICES--0.5% 600 MORGAN STANLEY, DEAN WITTER, DISCOVER AND CO. . 28,875 --------- FOOD/BEVERAGE PRODUCTS--1.3% 2,300 PEPSICO., INC. .................................... 82,800 --------- HEALTH CARE/HEALTH CARE SERVICES--2.6% 500 BECKMAN INSTRUMENTS, INC. ........................ 23,531 1,800 COLUMBIA/HCA HEALTHCARE CORP. ..................... 56,813 2,400 HEALTHSOUTH CORP.* .............................. 59,850 600 UNIVERSAL HEALTH SERVICES, INC., CLASS B * ...... 26,287 --------- 166,481 --------- INSURANCE--2.7% 1,200 ALLSTATE CORP. .................................... 87,675 400 AMERICAN BANKERS INSURANCE GROUP, INC. ............ 26,400 700 EQUITABLE COMPANIES, INC. ........................ 30,450 1,900 RELIANCE GROUP HOLDINGS, INC. ..................... 23,275 --------- 167,800 --------- MANUFACTURING--2.2% 1,100 INGERSOLL-RAND CO. .............................. 66,137 1,000 JOHNSON CONTROLS ................................. 47,688 700 PENTAIR, INC. .................................... 24,938 --------- 138,763 --------- MEDIA/ADVERTISING--0.5% 500 OMNICOM GROUP, INC. .............................. 33,875 --------- METALS/MINING--0.3% 200 ALUMINUM CO. OF AMERICA (ALCOA) .................. 16,450 --------- OIL & GAS--6.0% 900 BRITISH PETROLEUM PLC, ADR (UNITED KINGDOM) ...... 76,162 1,200 COASTAL CORP. .................................... 69,300 1,700 HALLIBURTON COMPANY .............................. 81,175 400 MOBIL CORP. ....................................... 29,100 500 MURPHY OIL CORP. ................................. 26,844 300 TEXACO, INC. .................................... 34,575 500 TIDEWATER, INC. ................................. 26,250 700 WILLIAMS COMPANIES, INC. ........................ 32,594 --------- 376,000 --------- PAPER/FOREST PRODUCTS--0.9% 400 BOISE CASCADE CORP. .............................. 15,825 500 WILLAMETTE INDUSTRIES, INC. ..................... 39,875 --------- 55,700 --------- PHARMACEUTICALS--2.1% 500 BRISTOL-MYERS SQUIBB CO. ........................ 38,000 600 JOHNSON & JOHNSON ................................. 34,012 1,400 SMITHKLINE BEECHAM PLC, ADR (UNITED KINGDOM) 60,638 --------- 132,650 --------- See notes to financial statements. page 17 Asset Allocation Portfolio Portfolio of Investments August 31, 1997 Shares Issuer Value - ----------- --------------------------------------------------- ----------- PRINTING & PUBLISHING--1.1% 1,500 NEW YORK TIMES COMPANY, CLASS A, ............... $ 70,875 ----------- REAL ESTATE INVESTMENT TRUST--0.3% 900 SECURITY CAPITAL PACIFIC TRUST .................. 19,631 ----------- RETAILING--4.4% 400 BARNES & NOBLE, INC. * ........................... 18,575 2,500 COSTCO COMPANIES, INC. ........................... 90,156 700 CVS CORP. ....................................... 39,462 900 FEDERATED DEPARTMENT STORES * .................. 37,800 2,900 KROGER CO.* .................................... 87,363 ----------- 273,356 ----------- SHIPPING/TRANSPORTATION--0.3% 200 BURLINGTON NORTHERN SANTA FE ..................... 18,338 ----------- TELECOMMUNICATIONS--1.6% 1,600 BELLSOUTH CORP. ................................. 70,400 700 SPRINT CORP. .................................... 32,900 ----------- 103,300 ----------- TEXTILES--0.3% 400 LIZ CLAIBORNE, INC. .............................. 17,825 ----------- UTILITIES--2.0% 700 CAROLINA POWER & LIGHT CO. ..................... 23,625 1,700 FPL GROUP INC. ................................. 79,050 700 SIERRA PACIFIC RESOURCES ........................ 21,875 ----------- 124,550 ----------- TOTAL COMMON STOCK (COST $2,697,613) ................................. 3,248,846 ----------- CONVERTIBLE PREFERRED STOCK--0.8% FINANCIAL SERVICES--0.4% 500 SUNAMERICA INC., $3.188, 10/31/99 ............... 22,156 ----------- PAPER/FOREST PRODUCTS--0.4% 400 INTERNATIONAL PAPER CAPITAL CORP., 5.25% # ...... 22,458 ----------- TOTAL CONVERTIBLE PREFERRED STOCK (COST $38,750) .................................... 44,614 ----------- RIGHTS--0.0% REAL ESTATE INVESTMENT TRUST--0.0% 900 SECURITY CAPITAL PACIFIC TRUST, $21.82, EXPIRE 09/08/97, ..................................... 0 ----------- Principal Amount (USD) - ------------- CORPORATE NOTES & BONDS--17.0% AEROSPACE--1.6% $ 100,000 LOCKHEED MARTIN CORP., 7.45%, 6/15/04 ............... 103,442 ----------- BANKING--1.6% 100,000 BANCO LATINOAMERICAN, 7.20%, 5/28/02 (PANAMA) ...... 100,750 ----------- BROADCASTING--1.8% 100,000 TIME WARNER, INC. 9.15%,2/01/23 ..................... 113,295 ----------- CONSTRUCTION/TRANSPORTATION--1.7% 100,000 ZHUHAI HIGHWAY CO., LTD., 9.125%, 7/1/06 YANKEE, SER. A, # (CHINA) ................................ 105,137 ----------- Principal Amount (USD) Issuer Value - -------------- ------------------------------------------------------ ---------- FINANCIAL SERVICES--5.3% $ 100,000 CORP ANDINA DE FOMENTO, 7.375%, 7/21/00 (VENEZUELA) ..................................... $ 102,012 100,000 GENERAL ELECTRIC CAPITAL CORP., MTN, 9.18%, 12/30/08 ........................................ 120,058 100,000 TERMOEMCALI FUNDING CORP., 10.125%, 12/15/14 # ..... 108,750 ---------- 330,820 ---------- PIPELINE/OIL--3.3% 100,000 OLEODUCTO CENTRA, SA, SER. B, 9.35%, 9/1/05 # (COLOMBIA) ........................................ 106,180 100,000 PETROZUATA FINANCE, INC., 8.22%, 04/01/17 # (VENEZUELA) ..................................... 104,447 ---------- 210,627 ---------- UTILITIES--1.7% 100,000 RAS LAFFAN LIQUEFIED NATURAL GAS, 8.294%, 3/15/14 # (QATAR) ............................... 107,250 ---------- TOTAL CORPORATE NOTES & BONDS (COST $1,063,616) .................................... 1,071,321 ---------- MORTGAGE BACKED SECURITIES--1.6% 100,000 FEDERAL HOME LOAN MORTGAGE CORP., SER. 1865, CLASS G, 8.0%, 08/15/24 (COST $103,262) ................................. 103,084 ---------- ASSET BACKED SECURITIES--1.6% 98,403 MID-STATE TRUST , SER. 6, CLASS A4, 7.79%, 07/01/35 (COST $98,495) ..................................... 99,879 ---------- U.S. TREASURY OBLIGATIONS--10.1% U.S. TREASURY NOTES, 345,000 7.88%, 11/15/04 .................................... 374,918 100,000 8.75%, 08/15/00 .................................... 107,062 125,000 U.S. TREASURY BOND, 8.50%, 02/15/20, .............. 150,899 ---------- (COST $624,423) .................................... 632,879 ---------- U.S. GOVERNMENT AGENCY OBLIGATIONS--13.1% 250,000 FEDERAL HOME LOAN BANK, 7.54%, 02/13/98 ........... 251,992 75,000 FEDERAL HOME LOAN MORTGAGE CORP., 8.00%, 04/09/07 ........................................ 75,340 FEDERAL NATIONAL MORTGAGE ASSOCIATION, 342,617 10.00%, 04/15/27, 30 YEAR, TBA ..................... 379,969 100,360 10.5%, 06/01/27, 30 YEAR, TBA ..................... 113,312 ---------- (COST $813,294) .................................... 820,613 ---------- TOTAL LONG-TERM INVESTMENTS (COST $5,439,453) .................................... 6,021,236 ---------- SHORT-TERM INVESTMENTS--3.3% TIME DEPOSIT--3.3% BANKING--3.3% 210,000 SUMITOMO BANK, 5.531%, 9/2/97 (COST $210,000) .................................. 210,000 ---------- TOTAL INVESTMENTS--99.2% (COST $5,649,453) ................................... $6,231,236 ========== See notes to financial statements. page 18 U.S. Government Income Portfolio Portfolio of Investments August 31, 1997 Money Market Portfolio Portfolio of Investments August 31, 1997 Principal Amount Issuer Value - ------------ ------------------------------------------------------- ----------- LONG-TERM INVESTMENTS--89.2% U.S. TREASURY OBLIGATIONS--38.5% U.S. TREASURY BONDS AND NOTES, $ 500,000 6.13%, 09/30/00 .................................... $ 500,155 400,000 6.75%, 08/15/26 .................................... 404,188 400,000 8.50%, 02/15/20 .................................... 482,876 60,000 10.75%, 08/15/05 .................................... 76,059 ----------- (COST $1,472,541) .................................... 1,463,278 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS--27.7% 200,000 FEDERAL FARM MEDIUM TERM NOTE, 7.51%, 2/13/98 . 201,594 200,000 FEDERAL HOME LOAN BANK, 7.54%, 2/13/98 ............... 201,594 450,000 FEDERAL NATIONAL MORTGAGE ASSOCIATION, 6.24%, 7/29/02 ....................................... 447,116 200,000 STUDENT LOAN MORTGAGE ASSOCIATION, 7.00%, 3/3/98 ....................................... 201,188 ----------- (COST $1,055,592) .................................... 1,051,492 ----------- COLLATERALIZED MORTGAGE OBLIGATION--23.0% 904,838 GOVERNMENT NATIONAL MORTGAGE ASSOCIATION, POOL #3547, 6.50%, 3/15/24 (COST $828,755) ....................................... 875,711 ----------- TOTAL LONG-TERM INVESTMENTS (COST $3,356,888) .................................... 3,390,481 ----------- SHORT-TERM INVESTMENTS--10.0% REPURCHASE AGREEMENT--10.0% 382,000 HONG KONG-SHANGHAI BANKING CORP., 5.35%, DUE 9/2/97; (DATED 8/29/97, PROCEEDS $382,170. SECURED BY U.S. TREASURY BOND; $309,000 AT 10.75% DUE 8/15/05; MARKET VALUE $390,500) (COST $382,000) ....................................... 382,000 ----------- TOTAL INVESTMENTS--99.2% (COST $3,738,888) .................................... $3,772,481 =========== Principal Amount Issuer Value - ------------ ------------------------------------------------------- ----------- U.S. TREASURY OBLIGATIONS--34.4% U.S. TREASURY BILLS, $ 652,000 4.960%, 09/25/97 .................................... $ 649,934 1,010,000 5.030%, 09/25/97 .................................... 1,006,754 12,000 5.310%, 09/18/97 .................................... 11,972 ----------- (COST $1,688,660) .................................... 1,668,660 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS--28.0% 250,000 FEDERAL FARM CREDIT BANK, 5.430%, 09/23/97 ......... 249,208 250,000 FEDERAL HOME LOAN BANK, DN 5.415%, 10/22/97 ......... 248,120 85,000 FEDERAL HOME LOAN MORTGAGE CORP., FRN, 5.390%, 09/30/97 .................................... 84,644 695,000 FEDERAL HOME LOAN MORTGAGE CORP., DN 5.420%, 09/11/97 .................................... 694,058 85,000 FEDERAL NATIONAL MORTGAGE ASSOCIATION, DN 5.400%, 09/25/97 .................................... 84,707 ----------- (COST $1,360,737) .................................... 1,360,737 ----------- COMMERCIAL PAPER--37.7% 180,000 BARCLAYS US FUNDING CORP., 5.480%, 09/15/97 ......... 179,644 200,000 CHINA MERCHANTS HOLDINGS CO. LTD., SER. A, (CAYMAN), 5.550%, 11/03/97 ........................... 198,088 155,000 COMMONWEALTH BANK OF AUSTRALIA, 5.550%, 01/09/98 ............................................. 151,917 160,000 DUPONT (EI) NEMOUR, 5.450%, 10/03/97 ............... 159,249 150,000 FORD MOTOR CREDIT CORP., 5.00%, 09/11/97 ............ 149,794 176,000 IBM CREDIT CORP., 5.520%, 09/18/97 .................. 175,568 150,000 INTERNATIONAL NEDERLANDEN US HOLDINGS, 5.500%, 11/12/97 .................................... 148,373 120,000 MADISON FUNDING CORP., 5.550%, 09/08/97 ............ 119,889 175,000 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP., 5.500%, 11/06/97 .............................. 173,262 175,000 NEW CENTER ASSET TRUST, 5.500%, 10/08/97 ............ 174,038 90,000 PEPSICO INC., 5.470%, 09/17/97 ..................... 89,795 115,000 PROVINCE OF BRITISH COLUMBIA, 5.520%, 03/16/98 ...... 111,561 ----------- (COST $1,831,178) .................................... 1,831,178 ----------- TOTAL INVESTMENTS--100.1% (COST $4,860,575)** ................................. $4,860,575 =========== INDEX * = Non-Income producing securities. # = Security may only be sold to institutional buyers. ** = The cost of securities is substantially the same for federal income tax purposes. ADR = American Depository Receipt DN = Discount Note FRN = Floating Rate Note: The maturity date shown is the next interest reset date; the rate shown is the rate in effect at August 31, 1997. MTN = Medium Term Note TBA = To be announced See notes to financial statements. page 19 Statement of Assets and Liabilities August 31, 1997
Growth and Capital International Income Growth Equity Portfolio Portfolio Portfolio ------------- ------------- --------------- ASSETS: Investment securities, at value (Note 1) $14,938,010 $12,336,652 $5,225,315 Cash 311 970 44,680 Foreign Currency (Cost $15,874) -- -- 16,061 Other assets 291 380 112 Receivables: Open forward foreign currency contracts -- -- 13,899 Investment securities sold -- -- 111,731 Dividends and Interest 29,159 8,746 59,210 Expense reimbursement from Sub-administrator -- -- -- Portfolio shares sold 51,839 47,625 26,553 ------------ ------------ ----------- TOTAL ASSETS 15,019,610 12,394,373 5,497,561 ------------ ------------ ----------- LIABILITIES: Payable for investment securities purchased -- -- 14,280 Payable for Portfolio shares redeemed 2,490 1,209 462 Payable for open forward foreign currency contracts -- -- 24,323 Accrued liabilities: (Note 2) Custody fees 4,813 6,350 2,809 Other 10,640 13,518 35,145 ------------ ------------ ----------- TOTAL LIABILITIES 17,943 21,077 77,019 ------------ ------------ ----------- NET ASSETS: Paid in capital 11,270,064 9,193,326 5,125,717 Accumulated undistributed net investment income 104,854 50,206 107,829 Accumulated net realized gain (loss) on investment transactions 1,380,489 653,477 167,994 Net unrealized appreciation/depreciation of investments and assets and liabilities denominated in foreign currencies 2,246,260 2,476,287 19,002 ------------ ------------ ----------- NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS $15,001,667 $12,373,296 $5,420,542 ============ ============ =========== Shares of beneficial interest outstanding ($.001 par value; unlimited number of shares authorized) 989,448 797,035 518,659 Net asset value, redemption price per share and maximum offering price per share $ 15.16 $ 15.52 $ 10.45 Cost of investments $12,691,750 $ 9,860,365 $5,193,975 ------------ ------------ ----------- Asset U.S. Government Money Allocation Income Market Portfolio Portfolio Portfolio ------------ ----------------- -------------- ASSETS: Investment securities, at value (Note 1) $6,231,236 $3,772,481 $4,860,575 Cash 856 554 746 Foreign Currency (Cost $15,874) -- -- -- Other assets 120 72 86 Receivables: Open forward foreign currency contracts -- -- -- Investment securities sold -- -- -- Dividends and Interest 47,603 32,684 -- Expense reimbursement from Sub-administrator 4,496 -- 5,781 Portfolio shares sold 24,985 11,661 -- ----------- ---------- ---------- TOTAL ASSETS 6,309,296 3,817,452 4,867,188 ----------- ---------- ---------- LIABILITIES: Payable for investment securities purchased -- -- -- Payable for Portfolio shares redeemed 1,367 120 283 Payable for open forward foreign currency contracts -- -- -- Accrued liabilities: (Note 2) Custody fees 5,875 1,965 1,813 Other 19,911 13,976 10,777 ----------- ---------- ---------- TOTAL LIABILITIES 27,153 16,061 12,873 ----------- ---------- ---------- NET ASSETS: Paid in capital 5,275,865 3,631,688 4,854,326 Accumulated undistributed net investment income 119,146 137,110 6 Accumulated net realized gain (loss) on investment transactions 305,348 (1,000) (17) Net unrealized appreciation/depreciation of investments and assets and liabilities denominated in foreign currencies 581,784 33,593 -- ----------- ---------- ---------- NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS $6,282,143 $3,801,391 $4,854,315 =========== ========== ========== Shares of beneficial interest outstanding ($.001 par value; unlimited number of shares authorized) 543,165 404,454 4,854,312 Net asset value, redemption price per share and maximum offering price per share $ 11.57 $ 9.40 $ 1.00 Cost of investments $5,649,453 $3,738,888 $4,860,575 ----------- ---------- ----------
See notes to financial statements. page 20 Statement of Operations For the year ended August 31, 1997
Growth and Capital Income Growth Portfolio Portfolio ------------ ------------ INVESTMENT INCOME (NOTE 1C): Interest $ 53,239 $ 75,334 Dividends 188,775 78,143 Foreign taxes withheld (1,044) -- ---------- ----------- TOTAL INVESTMENT INCOME 240,970 153,477 ---------- ----------- EXPENSES: Investment advisory fees (Note 2) 69,369 59,790 Administration fees (Note 2) 23,123 19,930 Accounting fees -- -- Custodian fees 35,962 30,156 Professional fees 41,638 37,431 Trustees fees and expenses 578 500 Miscellaneous expenses 25,942 21,595 ---------- ----------- TOTAL EXPENSES 196,612 169,402 ---------- ----------- Less fees waived by the Advisor, Administrator & Sub-Administrator (Note 2E) 92,492 79,720 Less amounts borne by VFD (Note 2) -- -- ---------- ----------- NET EXPENSES 104,120 89,682 ---------- ----------- NET INVESTMENT INCOME 136,850 63,795 ---------- ----------- REALIZED GAIN (LOSS) ON: Investment transactions 1,488,185 790,892 Foreign currency transactions -- -- CHANGE IN NET UNREALIZED APPRECIATION/DEPRECIATION ON: Investments 1,876,210 1,575,253 Foreign currency contracts and foreign currency tranlation -- -- ---------- ----------- Net realized and unrealized gain (loss) 3,364,395 2,366,145 ---------- ----------- Net increase in net assets from operations $3,501,245 $2,429,940 ========== =========== International Asset U.S. Government Money Equity Allocation Income Market Portfolio Portfolio Portfolio Portfolio --------------- ------------ ----------------- ---------- INVESTMENT INCOME (NOTE 1C): Interest $ 18,374 $ 166,500 $228,140 $179,588 Dividends 150,961 45,679 -- -- Foreign taxes withheld (21,130) (284) -- -- ---------- ---------- -------- -------- TOTAL INVESTMENT INCOME 148,205 211,895 228,140 179,588 ---------- ---------- -------- -------- EXPENSES: Investment advisory fees (Note 2) 38,328 28,254 17,031 8,359 Administration fees (Note 2) 9,583 10,275 6,812 6,665 Accounting fees 65,712 -- -- -- Custodian fees 10,358 32,518 11,507 4,835 Professional fees 15,311 28,343 22,777 18,136 Trustees fees and expenses 243 257 171 167 Miscellaneous expenses 4,820 4,727 2,920 10,634 ---------- ---------- -------- -------- TOTAL EXPENSES 144,355 104,374 61,218 48,796 ---------- ---------- -------- -------- Less fees waived by the Advisor, Administrator & Sub-Administrator (Note 2E) 47,911 38,528 23,843 15,024 Less amounts borne by VFD (Note 2) 42,889 22,199 10,126 15,408 ---------- ---------- -------- -------- NET EXPENSES 53,555 43,647 27,249 18,364 ---------- ---------- -------- -------- NET INVESTMENT INCOME 94,650 168,248 200,891 161,224 ---------- ---------- -------- -------- REALIZED GAIN (LOSS) ON: Investment transactions 215,754 399,608 (1,000) (11) Foreign currency transactions 14,061 -- -- -- CHANGE IN NET UNREALIZED APPRECIATION/DEPRECIATION ON: Investments 29,943 466,666 62,226 -- Foreign currency contracts and foreign currency tranlation (6,241) -- -- -- ---------- ---------- -------- -------- Net realized and unrealized gain (loss) 253,517 866,274 61,226 (11) ---------- ---------- -------- -------- Net increase in net assets from operations $ 348,167 $1,034,522 $262,117 $161,213 ========== ========== ======== ========
See notes to financial statements. page 21 Statement of Changes in Net Assets For the periods indicated
Growth and Income Capital Growth Portfolio Portfolio ----------------------------- ---------------------------- Year Ended August 31, 1997 1996 1997 1996 --------------- ------------- --------------- ------------ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 136,850 $ 101,413 $ 63,795 $ 60,589 Net realized gain (loss) on investment and foreign currency transactions 1,488,185 951,933 790,892 857,222 Change in net unrealized appreciation/ depreciation on investments and foreign currency translations 1,876,210 (252,165) 1,575,253 60,856 ------------- ---------- ------------- ---------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 3,501,245 801,181 2,429,940 978,667 ------------- ---------- ------------- ---------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (100,605) (95,201) (57,567) (49,138) Net realized gain on investment transactions (1,052,999) (79,334) (1,021,229) (74,399) ------------- ---------- ------------- ---------- (1,153,604) (174,535) (1,078,796) (123,537) ------------- ---------- ------------- ---------- NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS 4,572,685 1,208,079 3,112,197 726,248 ------------- ---------- ------------- ---------- NET INCREASE (DECREASE) IN NET ASSETS 6,920,326 1,834,725 4,463,341 1,581,378 NET ASSETS: Beginning of period 8,081,341 6,246,616 7,909,955 6,328,577 ------------- ---------- ------------- ---------- End of period $ 15,001,667 $8,081,341 $ 12,373,296 $7,909,955 ============= ========== ============= ========== International Equity Asset Allocation U.S. Government Income Portfolio Portfolio Portfolio ---------------------------- ---------------------------- ----------------------------- 1997 1996 1997 1996 1997 1996 ------------ --------------- ------------ --------------- ------------- --------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 94,650 $ 31,819 $ 168,248 $ 129,234 $ 200,891 $ 220,478 Net realized gain (loss) on investment and foreign currency transactions 229,815 375,948 399,608 524,469 (1,000) 117,161 Change in net unrealized appreciation/ depreciation on investments and foreign currency translations 23,702 (378,878) 466,666 (219,331) 62,226 (143,239) ---------- ------------- ---------- ------------- ---------- ------------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 348,167 28,889 1,034,522 434,372 262,117 194,400 ---------- ------------- ---------- ------------- ---------- ------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (53,064) (57,394) (118,324) (162,866) (175,708) (269,425) Net realized gain on investment transactions (346,955) (68,873) (611,347) (88,726) (107,377) (81,018) ---------- ------------- ---------- ------------- ---------- ------------- (400,019) (126,267) (729,671) (251,592) (283,085) (350,443) ---------- ------------- ---------- ------------- ---------- ------------- NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS 1,571,627 (1,483,401) 1,944,075 (1,695,297) 828,347 (2,239,862) ---------- ------------- ---------- ------------- ---------- ------------- NET INCREASE (DECREASE) IN NET ASSETS 1,519,775 (1,580,779) 2,248,926 (1,512,517) 807,379 (2,395,905) NET ASSETS: Beginning of period 3,900,767 5,481,546 4,033,217 5,545,734 2,994,013 5,389,918 ---------- ------------- ---------- ------------- ---------- ------------- End of period $5,420,542 $ 3,900,767 $6,282,143 $ 4,033,217 $3,801,392 $ 2,994,013 ========== ============= ========== ============= ========== ============= Money Market Portfolio ------------------------------- 1997 1996 ------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 161,224 $ 181,767 Net realized gain (loss) on investment and foreign currency transactions (11) (6) Change in net unrealized appreciation/ depreciation on investments and foreign currency translations -- -- ---------- -------------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 161,213 181,761 ---------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (161,224) (181,761) Net realized gain on investment transactions -- (134) ---------- -------------- (161,224) (181,895) ---------- -------------- NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS 1,903,996 (2,471,888) ---------- -------------- NET INCREASE (DECREASE) IN NET ASSETS 1,903,985 (2,472,022) NET ASSETS: Beginning of period 2,950,330 5,422,352 ---------- -------------- End of period $4,854,315 $ 2,950,330 ========== ==============
See notes to financial statements. page 22 Selected Data and Ratios For a Share of Beneficial Interest Outstanding Throughout Each Period Indicated
Growth and Income Capital Growth Portfolio Portfolio ------------------------------------ -------------------------------------- Year Year 03/1/95* Year Year 03/1/95* Ended Ended through Ended Ended through 08/31/97 08/31/96 08/31/95 08/31/97 08/31/96 08/31/95 ---------- ---------- ---------- ------------ ------------ ---------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 12.74 $ 11.48 $ 10.00 $ 13.84 $ 11.90 $ 10.00 ---------- ---------- ---------- ------------ ------------ ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.149 0.294 0.110 0.088 0.158 0.055 Net Gains or Losses on Investments (both realized and unrealized) 3.991 1.516 1.370 3.422 2.139 1.845 ---------- ---------- ---------- ------------ ------------ ---------- TOTAL FROM INVESTMENT OPERATIONS 4.140 1.810 1.480 3.510 2.297 1.900 ---------- ---------- ---------- ------------ ------------ ---------- LESS DISTRIBUTIONS: Dividends from net investment income 0.150 0.300 -- 0.100 0.142 -- Distributions from capital gains 1.570 0.250 -- 1.730 0.215 -- ---------- ---------- ---------- ------------ ------------ ---------- TOTAL DISTRIBUTIONS 1.720 0.550 -- 1.830 0.357 -- ---------- ---------- ---------- ------------ ------------ ---------- NET ASSET VALUE, END OF PERIOD $ 15.16 $ 12.74 $ 11.48 $ 15.52 $ 13.84 $ 11.90 ========== ========== ========== ============ ============ ========== TOTAL RETURN 35.53% 16.24% 14.80% 27.27% 19.66% 19.00% RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (000 omitted) $ 15,002 $ 8,081 $ 6,247 $ 12,373 $ 7,910 $ 6,329 Ratios to Average Net Assets:# Ratio of expenses 0.90% 0.90% 0.90% 0.90% 0.90% 0.90% Ratio of net investment income 1.18% 1.71% 2.14% 0.64% 0.97% 1.04% Ratio of expenses without waivers and assumption of expenses 1.70% 1.98% 1.80% 1.70% 1.97% 1.80% Ratio of net investment income without waivers and assumption of expenses 0.38% 0.63% 1.24% (0.16%) (0.09)% 0.14% Portfolio Turnover Rate .89% 129% 32% 54% 107% 28% Average commission rate paid** $ 0.0609 $ .0599 -- $ 0.0594 $ .0604 -- International Equity Portfolio -------------------------------------- Year Year 03/01/95* Ended Ended through 08/31/97 08/31/96 08/31/95 ---------- ------------ ----------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 10.59 $ 10.89 $ 10.00 ---------- ------------ ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.1899 0.216 0.101 Net Gains or Losses on Investments (both realized and unrealized) 0.6501 0.034 0.789 ---------- ------------ ----------- TOTAL FROM INVESTMENT OPERATIONS 0.840 0.250 0.890 ---------- ------------ ----------- LESS DISTRIBUTIONS: Dividends from net investment income 0.130 0.250 -- Distributions from capital gains 0.850 0.300 -- ---------- ------------ ----------- TOTAL DISTRIBUTIONS 0.980 0.550 -- ---------- ------------ ----------- NET ASSET VALUE, END OF PERIOD $ 10.45 $ 10.59 $ 10.89 ========== ============ =========== TOTAL RETURN 8.27% 2.42% 8.90% RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (000 omitted) $ 5,421 $ 3,901 $ 5,482 Ratios to Average Net Assets:# Ratio of expenses 1.11% 1.10% 1.09% Ratio of net investment income 1.96% 0.82% 1.92% Ratio of expenses without waivers and assumption of expenses 2.99% 4.22% 2.90% Ratio of net investment income without waivers and assumption of expenses 0.08% (2.30)% 0.11% Portfolio Turnover Rate 158% 200% 75% Average commission rate paid** $ 0.0282 $ .0631 --
Asset Allocation U.S. Government Income Portfolio Portfolio ------------------------------------- ------------------------------------ Year Year 03/01/95* Year Year 03/01/95* Ended Ended through Ended Ended through 08/31/97 08/31/96 08/31/95 08/31/97 08/31/96 08/31/95 ---------- ---------- ----------- ---------- --------- ----------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 11.15 $ 11.04 $ 10.00 $ 9.53 $ 10.69 $ 10.00 ---------- ---------- ----------- ---------- --------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.328 0.657 0.205 0.522 1.173 0.322 Net Gains or Losses on Investments (both realized and unrealized) 1.942 0.488 0.835 0.218 (0.858) 0.368 ---------- ---------- ----------- ---------- --------- ----------- TOTAL FROM INVESTMENT OPERATIONS 2.270 1.145 1.040 0.740 0.315 0.690 ---------- ---------- ----------- ---------- --------- ----------- LESS DISTRIBUTIONS: Dividends from net investment income 0.300 0.670 -- 0.540 1.134 -- Distributions from capital gains 1.550 0.365 -- 0.330 0.341 -- ---------- ---------- ----------- ---------- --------- ----------- TOTAL DISTRIBUTIONS 1.850 1.035 -- 0.870 1.475 -- ---------- ---------- ----------- ---------- --------- ----------- NET ASSET VALUE, END OF PERIOD $ 11.57 $ 11.15 $ 11.04 $ 9.40 $ 9.53 $ 10.69 ========== ========== =========== ========== ========= =========== TOTAL RETURN 22.61% 10.90% 10.40% 8.11% 2.62% 6.90% RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (000 omitted) $ 6,282 $ 4,033 $ 5,546 $ 3,801 $ 2,994 $ 5,390 Ratios to Average Net Assets:# Ratio of expenses 0.85% 0.85% 0.85% 0.80% 0.80% 0.80% Ratio of net investment income 3.28% 3.18% 3.86% 5.91% 6.06% 6.19% Ratio of expenses without waivers and assumption of expenses 2.03% 2.33% 1.65% 1.50% 1.79% 1.62% Ratio of net investment income without waivers and assumption of expenses 2.10% 1.71% 3.06% 5.21% 5.08% 5.37% Portfolio Turnover Rate 122% 155% 45% 40% 83% 46% Average commission rate paid** $ 0.0594 $ .0598 -- -- -- -- Money Market Portfolio ------------------------------------- Year Year 03/01/95* Ended Ended through 08/31/97 08/31/96 08/31/95 ---------- ---------- ----------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 ---------- ---------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.048 0.050 0.028 Net Gains or Losses on Investments (both realized and unrealized) -- -- -- ---------- ---------- ----------- TOTAL FROM INVESTMENT OPERATIONS 0.048 0.050 0.028 ---------- ---------- ----------- LESS DISTRIBUTIONS: Dividends from net investment income 0.048 0.050 0.028 Distributions from capital gains -- -- -- ---------- ---------- ----------- TOTAL DISTRIBUTIONS 0.048 0.050 0.028 ---------- ---------- ----------- NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 ========== ========== =========== TOTAL RETURN 4.93% 5.15% 2.79% RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (000 omitted) $ 4,854 $ 2,950 $ 5,422 Ratios to Average Net Assets:# Ratio of expenses 0.55% 0.55% 0.55% Ratio of net investment income 4.84% 5.10% 5.46% Ratio of expenses without waivers and assumption of expenses 1.46% 1.74% 1.21% Ratio of net investment income without waivers and assumption of expenses 3.93% 3.90% 4.80% Portfolio Turnover Rate -- -- -- Average commission rate paid** -- -- --
* Commencement of operations. # Short periods have been annualized. ** Price per share required for periods commencing after 9/1/95. See notes to financial statements. page 23 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, 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 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. THE FOLLOWING IS A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOLLOWED BY THE PORTFOLIOS: A. Valuation of Investments--Equity securities and options are valued at the last sale price on the exchange on which they are primarily traded, including the NASDAQ National Market. Securities for which sale prices are not available and other over-the-counter securities are valued at the last quoted bid price. Bonds and other fixed income securities (other than short-term obligations), including listed issues, are valued on the basis of valuations furnished by a pricing service. In making such valuations, the pricing service utilizes both dealer-supplied valuations and electronic data processing techniques that take into account appropriate factors such as institutional-sized trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data, without exclusive reliance upon quoted prices. Short-term obligations are valued at amortized cost if acquired with fewer than 61 days to maturity, or at value, based on quoted exchange or over-the-counter prices, until the 61st day prior to maturity and thereafter by amortizing the value on the 61st day to par at maturity. Portfolio securities for which there are no such quotations or valuations are valued at fair value as determined in good faith by or at the direction of the Trustees. B. Security Transactions and Investment Income-- Investment transactions are accounted for on the trade date (the date the order to buy or sell is executed). Securities gains and losses are calculated on the identified cost basis. Interest income is accrued as earned. Dividend income is recorded on the ex-dividend date. C. Repurchase agreements--It is the portfolios' policy that all repurchase agreements are fully collateralized by U.S. Treasury and Government agency securities. All collateral is held by the Trust's custodian bank, sub-custodian or a bank with which the custodian bank has entered into a sub-custodian agreement or is segregated in the Federal Reserve Book Entry System. In connection with transactions in repurchase agreements, if the seller defaults and the value of the collateral declines, or if the seller enters into an insolvency proceeding, realization of the collateral by the Trust may be delayed or limited. D. Futures Contracts--When a portfolio enters into a futures contract, it makes an initial margin deposit in a segregated account, either in cash or liquid securities. Thereafter, the futures contract is marked to market and the portfolio makes (or receives) additional cash payments daily to the broker. Changes in the value of the contract are recorded as unrealized appreciation/depreciation until the contract is closed or settled. The Portfolios may enter into futures contracts only on exchanges or boards of trade. The exchange or board of trade acts as the counterparty to each futures transaction, therefore, the Portfolio's credit risk is limited to failure of the exchange or board of trade. The IEP invested a portion of its liquid assets in long stock index futures contracts to more fully participate in the market. Use of futures contracts subject the Portfolio to risk of loss up to the amount of the value of the contract. As of August 31, 1997, the IEP had no outstanding futures contracts. E. Foreign Currency Translations--The books and records of the Portfolios are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the official exchange rates, or at the page 24 Notes to Financial Statements mean of the current bid and asked prices of such currencies against the U.S. dollar last quoted by a major bank on the following basis: (1) Market value of investment securities, other assets and liabilities: at the closing rate of exchange at the balance sheet date. (2) Purchases and sales of investment securities and income and expenses: at the rates of exchange prevailing on the respective dates of such transactions. Reported realized foreign exchange gains or losses arise from disposition of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the portfolios' books on the transaction date and the U.S. dollar equivalent of the amounts actually received or paid. Unrealized foreign exchange gains and losses arise from changes (due to the changes in the exchange rate) in the value of foreign currency and other assets and liabilities denominated in foreign currencies which are held at period end. F. Forward Foreign Currency Exchange Contracts--A forward foreign currency contract is an obligation to purchase or sell a specific currency for an agreed price at a future date. Each day the forward contract is open, changes in the value of the contract are recognized as unrealized gains or losses by "marking to market." When the forward contract is closed, or the delivery of the currency is made or taken, the portfolio records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the portfolio's basis in the contract. The portfolios are subject to off balance sheet risk to the extent of the value of the contract for purchases of currency and in an unlimited amount for sales of currency. G. Federal Income Tax Status--It is the Trust's policy to comply individually for each portfolio with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. H. Dividends and Distributions to Shareholders--The portfolios record dividends and distributions to its shareholders on the record date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment. Dividends and distributions which exceed net investment income and net realized capital gains for financial reporting purposes but not for tax purposes are reported as dividends in excess of net investment income or distributions in excess of net realized capital gains. To the extent they exceed net investment income and net realized capital gains for tax purposes, they are reported as distributions of paid-in-capital. I. Expenses--Direct expenses of a portfolio are charged to the respective Portfolio and general Trust expenses are allocated on the basis of relative net assets or on another reasonable basis. 2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES A. Investment Advisory Fees--The Chase Manhattan Bank ("Chase"), a direct wholly-owned subsidiary of the Chase Manhattan Corporation, is the Portfolios' investment advisor (the "Advisor") and custodian (the "Custodian"). The Advisor manages the assets of the Portfolios pursuant to an Advisory Agreement and, for such services, is paid an annual fee computed daily and paid monthly based on an annual rate equal to 0.80% of the International Equity Portfolio's, 0.60% of the Capital Growth and Growth and Income Portfolios', 0.55% of the Asset Allocation Portfolio's, 0.50% of the U.S. Government Income Portfolio's and 0.25% of the Money Market Portfolio's average daily net assets. The Advisor voluntarily waived all its fees. Chase Asset Management, Inc. ("CAM"), a registered investment advisor, is the sub-investment advisor to each Portfolio pursuant to a Sub-Investment Advisory Agreement between CAM and Chase. CAM is a wholly owned subsidiary of Chase and is entitled to receive a fee, payable by Chase from its advisory fee, at an annual rate equal to 0.30% of the Growth and Income and Capital Growth Portfolio's, 0.25% of the Asset Allocation and U.S. Government Income Portfolio's and 0.10% of the Money Market Portfolio's average daily net assets. page 25 Notes to Financial Statements Chase Asset Management (London) Limited (CAM London), a registered investment advisor, is the sub-investment advisor to the International Equity Portfolio pursuant to a Sub-Investment Advisory Agreement between CAM London and Chase. CAM London is a wholly owned subsidiary of Chase and is entitled to receive a fee, payable by Chase from its advisory fee, at an annual rate equal to 0.40% of the average daily net assets of the International Equity Portfolio. B. Administration Fee--Pursuant to an Administration Agreement, Chase (the "Administrator") provides certain administration services to the Portfolios. For these services, the Administrator receives from each Portfolio a fee computed at an annual rate equal to 0.05% of the respective Portfolio's average daily net assets. The Administrator voluntarily waived all of its fees. C. Sub-Administration Fees--Pursuant to a Sub-administration Agreement, Vista Fund Distributors, Inc. ("VFD" or the "Sub-administrator"), an indirect wholly-owned subsidiary of BISYS Group Inc., provides certain sub-administration services to the Portfolios, including providing officers, clerical staff and office space for an annual fee of 0.15% of the average daily net assets of each Portfolio. The Sub-administrator voluntarily waived all of its fees. D. Waivers of Fees--For the year ended August 31, 1997, the Administrator and Advisor voluntarily waived all fees as shown in the Statement of Operations, and the Sub-administrator assumed expenses for the portfolios as follows:
U.S. Growth and Capital International Asset Government Money Income Growth Equity Allocation Income Market Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio ---------- ---------- -------------- ----------- ----------- ---------- $-- $ -- $ 42,889 $ 22,199 $ 10,126 $ 15,408 ---------- ---------- -------------- ----------- ----------- ----------
E. Other--Chase provides portfolio custody and fund accounting services for all of the Portfolios, with the exception of the IEP for which it provides only the custody services. Compensation for such services from Chase are presented in the Statement of Operations as Custodian fees. The Trust has adopted an unfunded noncontributory defined benefit pension plan covering all independent trustees of the Trust who will have served as an independent trustee for at least five years at the time of retirement. Benefits under this plan are based on compensation and years of service. Pension expenses for the year ended August 31, 1997, included in Trustees Fees and Expenses in the Statement of Operations, and accrued pension liability included in other accrued liabilities in the Statement of Assets and Liabilities were as follows:
Accrued Pension Pension Portfolio: Expenses Liability --------- ---------- Growth and Income Portfolio $ 220 $ 758 Capital Growth Portfolio 210 610 International Equity Portfolio 108 290 Asset Allocation Portfolio 113 313 U.S. Government Income Portfolio 81 187 Money Market Portfolio 80 170
3. INVESTMENT TRANSACTIONS--For the year ended August 31, 1997, purchases and sales of investments (excluding short-term investments) were as follows:
U.S. Growth Capital Intl. Asset Government & Income Growth Equity Allocation Income Portfolio Portfolio Portfolio Portfolio Portfolio ------------ ----------- ----------- ------------ ----------- Purchases (excluding U.S. Government) $12,748,120 $7,239,713 $8,051,932 $ 4,511,585 $ -- Sales (excluding U.S. Government) 9,394,889 4,607,318 6,481,014 2,443,079 -- Purchases of U.S. Government -- -- -- 2,897,177 2,126,998 Sales of U.S. Government -- -- -- 3,022,322 1,053,828
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, 1997 are as follows:
U.S. Growth Capital Intl. Asset Government & Income Growth Equity Allocation Income Portfolio Portfolio Portfolio Portfolio Portfolio ----------- ---------- ---------- ----------- ----------- Aggregate Cost $12,698,341 $9,860,365 $5,200,253 $ 5,649,562 $ 3,738,888 ----------- ---------- ---------- ----------- ----------- Gross Unrealized Appreciation 2,335,331 2,603,593 339,707 605,120 50,298 Gross Unrealized Depreciation (95,662) (127,306) (315,147) (23,445) (16,705) ----------- ---------- ---------- ----------- ----------- NET UNREALIZED APPRECIATION (DEPRECIATION) $2,239,669 $2,476,287 $ 24,560 $ 581,675 $ 33,593 =========== ========== ========== =========== ===========
page 26 Notes to Financial Statements 5. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST--Transactions in shares of beneficial interest for the periods presented were as follows:
Growth and Income Portfolio Year Ended August 31, 1997 1996 --------------------------- ------------------------- Amount Shares Amount Shares ------------- ----------- ------------ ----------- Shares sold $ 5,749,214 426,540 $ 4,085,514 328,234 Shares issued in reinvestment of distributions 1,153,604 93,214 174,534 15,050 Shares redeemed (2,330,133) (164,444) (3,051,969) (253,425) ------------- ----------- ------------ ----------- Net increase (decrease) in Trust shares outstanding $ 4,572,685 355,310 $ 1,208,079 89,859 ============= =========== ============ =========== Capital Growth Portfolio Year Ended August 31, 1997 1996 --------------------------- ------------------------- Amount Shares Amount Shares ------------- ----------- ------------ ----------- Shares sold $ 3,889,436 271,956 $ 3,666,046 276,967 Shares issued in reinvestment of distributions 1,078,795 78,724 123,537 10,004 Shares redeemed (1,856,034) (125,230) (3,063,335) (247,141) ------------- ----------- ------------ ----------- Net increase (decrease) in Trust shares outstanding $ 2,112,197 225,450 $ 726,248 39,830 ============= =========== ============ =========== International Equity Portfolio Year Ended August 31, 1997 1996 --------------------------- ------------------------- Amount Shares Amount Shares ------------- ----------- ------------ ----------- Shares sold $ 1,376,612 129,737 $ 1,419,165 130,714 Shares issued in reinvestment of distributions 400,018 39,666 126,267 12,206 Shares redeemed (205,003) (19,191) (3,028,833) (278,033) ------------- ----------- ------------ ----------- Net increase (decrease) in Trust shares outstanding $ 1,571,627 150,212 ($ 1,483,401) (135,113) ============= =========== ============ =========== Asset Allocation Portfolio Year Ended August 31, 1997 1996 --------------------------- ------------------------- Amount Shares Amount Shares ------------- ----------- ------------ ----------- Shares sold $ 1,347,903 121,979 $ 1,061,288 96,621 Shares issued in reinvestment of distributions 729,672 71,619 251,592 23,832 Shares redeemed (133,500) (12,026) (3,008,177) (261,398) ------------- ----------- ------------ ----------- Net increase (decrease) in Trust shares outstanding $ 1,944,075 181,572 ($ 1,695,297) (140,945) ============= =========== ============ =========== U.S. Government Income Portfolio Year Ended August 31, 1997 1996 --------------------------- ------------------------- Amount Shares Amount Shares ------------- ----------- ------------ ----------- Shares sold $ 696,656 75,260 $ 439,144 45.896 Shares issued in reinvestment of distributions 283,085 31,241 350,442 35,888 Shares redeemed (151,394) (16,243) (3,029,448) (271,621) ------------- ----------- ------------ ----------- Net increase (decrease) in Trust shares outstanding $ 828,347 90,258 ($ 2,239,862) (189,837) ============= =========== ============ =========== Money Market Portfolio Year Ended August 31, 1997 1996 --------------------------- ------------------------- Amount Shares Amount Shares ------------- ----------- ------------ ----------- Shares sold $ 3,081,078 3,081,076 $ 1,170,389 1,170,381 Shares issued in reinvestment of distributions 161,224 161,224 181,836 181,836 Shares redeemed (1,338,306) (1,338,306) (3,824,113) (3,824,110) ------------- ----------- ------------ ----------- Net increase (decrease) in Trust shares outstanding $ 1,903,996 1,903,994 ($ 2,471,888) (2,471,893) ============= =========== ============ ===========
6. OPEN FORWARD FOREIGN CURRENCY CONTRACTS The following forward foreign currency contracts were held by the Variable Annuity International Equity Portfolio at August 31, 1997: Net Delivery Market Unrealized Value (Local Settlement Value Gain (Loss) Currency) Cost (USD) Date (USD) (USD) ------------ ----------- ---------- --------- ----------- Purchases - ------------------- German Deutschemark 120,000 $ 65,129 09/12/97 $ 66,508 $ 1,379 Japanese Yen 39,387,700 348,801 09/12/97 327,072 (21,729) Sales - ------------------- German Deutschemark 610,000 $ 348,801 09/12/97 $338,084 $ 10,717 German Deutschemark 200,000 109,575 09/12/97 110,847 (1,272) German Deutschemark 120,000 65,488 11/14/97 66,790 (1,302) German Deutschemark 300,000 166,954 11/14/97 166,974 (20) Japanese Yen 7,626,000 65,129 09/12/97 63,326 1,803
7. FOREIGN CASH POSITIONS--International Equity Portfolio Net Delivery Market Unrealized Value (Local Value Gain (Loss) Currency Currency) Cost (USD) (USD) (USD) - ------------------ ----------- ---------- -------- ------------ Australian Dollars 13,457 $ 9,892 $ 9,892 $ 0 Finnish Markka 122 23 22 (1) French Franc 37,486 6,211 6,168 (43) Hong Kong Dollar 3,639 470 470 0 Italian Lira 7,425,871 4,125 4,206 81 Japanese Yen (802,972) (6,819) (6,640) 179 Philippines Peso (71,669) (2,410) (2,342) 68 Thai Baht 146,121 4,382 4,285 (97) ---------- -------- ------------ Total $ 15,874 $ 16,061 $ 187 ========== ======== ============
page 27 Notes to Financial Statements 8. CONCENTRATION OF SHAREHOLDERS At August 31, 1997, all shares outstanding for each Portfolio are owned either directly or indirectly by a single insurance company. 9. CONCENTRATION OF CREDIT RISK-- As of August 31, 1997 MMP invested 26.2% of its net assets in financial institutions, of which 20.0% was invested in other financial service providers and 6.2% in Banking. General economic conditions, as well as exposure to credit losses arising from possible financial difficulties of borrowers, play an important role in the operation of the financial services industry. page 28 Report of Independent Accountants To the Trustees and Shareholders of Mutual Fund Variable Annuity Trust In our opinion, the accompanying statement of assets and liabilities, including the portfolios of investments, and the related statements of operations and of changes in net assets and the selected data and ratios for a share of beneficial interest outstanding present fairly, in all material respects, the financial position of Growth and Income Portfolio, Capital Growth Portfolio, International Equity Portfolio, Asset Allocation Portfolio, U.S. Government Income Portfolio, formerly U.S. Treasury Income Portfolio, and Money Market Portfolio (separate portfolios constituting Mutual Fund Variable Annuity Trust, hereafter referred to as the "Trust") at August 31, 1997, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the selected data and ratios for a share of beneficial interest outstanding for each of the periods presented, in conformity with generally accepted accounting principles. These financial statements and selected data and ratios for a share of beneficial interest outstanding (hereinafter referred to as "financial statements") are the responsibility of the Trust's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 1997 by correspondence with the custodian and the application of alternative auditing procedures where securities purchased had not been received, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP 1177 Avenue of the Americas New York, New York 10036 October 14, 1997 (C)The Chase Manhattan Bank, 1997 Vista Investment Services A-7036-CRT F-7036(CMB) VCA-2 1097 -----END PRIVACY-ENHANCED MESSAGE-----