-----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, UVKaZNNvNEn0+iHCWSslRDHmhZhdQAFSlNEovWnJm5QJS4XsaQUJeVBQ/hK7d7p2 eQP4LfN8xn+lnl6gtO4NgA== 0000950146-99-001706.txt : 19991102 0000950146-99-001706.hdr.sgml : 19991102 ACCESSION NUMBER: 0000950146-99-001706 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990831 FILED AS OF DATE: 19991101 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: 99738348 BUSINESS ADDRESS: STREET 1: 1 CHASE MANHATTAN PLAZA STREET 2: 3RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10081 MAIL ADDRESS: STREET 1: CHASE MANHATTAN BANK STREET 2: ONE CHASE SQ 7TH FLOOR CITY: ROCHESTER STATE: NY ZIP: 14643 N-30D 1 ANNUAL REPORT ANNUAL REPORT AUGUST 31, 1999 VISTA CAPITAL ADVANTAGE(SM) MUTUAL FUND VARIABLE ANNUITY TRUST Vista Fund Distributors, Inc., distributor This report must be accompanied or preceded by a current prospectus for Vista Capital Advantage [VISTA Logo] April 10, 1999 Dear Vista Capital Advantage Contract Owner: Enclosed is the February 28, 1999 Semi-Annual Report of the Mutual Fund Variable Annuity Trust, whose portfolios serve as the underlying investments for the Vista Capital Advantage variable annuity. The table below shows the one year and since inception results, after the deduction of all insurance and withdrawal fees, of the accounts in the Vista Capital Advantage at February 28, 1999. The insurance fees include mortality and expense risk charges, surrender charges and the annual contract administration charge. The surrender charges reflect the sales charges that would have been assessed against the contract value had the contract been surrendered.(1) The first chart applies to all Vista Capital Advantage investors outside of New York state, whose policy is issued by Anchor National Life Insurance Company. The second chart applies to Vista Capital Advantage investors within New York state, whose policy is issued by First SunAmerica Life Insurance Company. Anchor National Life Insurance Company Policy Holders Average Annual Total Return as of 2/28/99(2)
- ---------------------------------------------------------------------------- Portfolio (Contract Inception Date) One-Year Since Inception - ---------------------------------------------------------------------------- Growth and Income (3/13/95) (8.40%) 17.15% Capital Growth (3/13/95) (20.31%) 12.87% International Equity (3/13/95) (5.51%) 4.79% Asset Allocation (3/13/95) (5.75%) 11.12% U.S. Government Income (7/13/95) (2.30%) 3.02% Money Market (6/2/95)3 (2.65%) 2.28% 7-day current yield as of 2/28/99; 2.81% - ----------------------------------------------------------------------------
First SunAmerica Life Insurance Company Policy Holders (New York) Average Annual Total Return as of 2/28/99(2)
- ---------------------------------------------------------------------------- Portfolio (Contract Inception Date) One-Year Since Inception - ---------------------------------------------------------------------------- Growth and Income (12/6/95) (8.41%) 14.63% Capital Growth (12/6/95) (20.35%) 8.91% International Equity (12/22/95) (5.55%) 2.82% Asset Allocation (12/22/95) (5.77%) 9.47% U.S. Government Income (12/22/95) (2.27%) 2.64% Money Market (12/22/95)3 (2.63%) 2.33% 7-day current yield as of 2/28/99; 2.89% - ----------------------------------------------------------------------------
Your Vista Capital Advantage variable annuity represents a unique combination of professional money management and tax advantages. It is designed to help contribute to your plans for a financially secure future. If you have any questions, please call your investment representative or 1-800-90-VISTA. Sincerely, [/s/ Fergus Reid] Fergus Reid Chairman - ------------- 1 The Surrender Charge schedule for each year in states other than NY is as follows: 6%, 6%, 5%, 4%, 3%, 2%, 0%. In NY the Surrender Charge schedule for each year is: 6%, 6%, 5%, 4%, 3%, 2%, 1%, 0%. A 10% Federal tax penalty may apply to withdrawals before age 59-1/2. 2 Past performance is no guarantee of future results. An investor's return and principal value will fluctuate. An investor's units, when redeemed, may be worth more or less than their original investment. This material is authorized for public distribution only when accompanied or preceded by a prospectus for Vista Capital Advantage. 3 Fund shares are not insured or guaranteed by the FDIC or any other government agency. There can be no guarantee that the Fund will maintain a stable net asset value of $1.00. The Vista Capital Advantage (VCA) is distributed by Vista Fund Distributors, Inc., which is unaffiliated with The Chase Manhattan Bank, Anchor National Life Insurance Company or First SunAmerica Life Insurance Company. Chase Manhattan is the portfolio advisor, administrator and custodian of the underlying investment options of the variable annuity. VCA is issued by Anchor National Life Insurance Company and in New York by First SunAmerica Life Insurance Company. - -------------------------------------------------------------------------------- Investments in Vista Capital Advantage are not deposits, or guaranteed or endorsed by, Chase, and are not insured by the FDIC, Federal Reserve Board or any other government agency. Investments in Vista Capital Advantage, including the underlying variable investment options, involve risk, including the possible loss of principal. - -------------------------------------------------------------------------------- The views expressed on this page are exclusively those of Chase Manhattan. The financial information presented on this page has been taken from the books and records of the portfolios without examination by independent accountants, who express no opinion thereto. Table of Contents 4 Letter from the Chairman Performance & Commentary 5 Growth and Income 6 Capital Growth 7 International Equity 8 Asset Allocation 9 U.S. Government Income 10 Money Market Portfolio of Investments 11 Growth and Income 13 Capital Growth 14 International Equity 18 Asset Allocation 21 U.S. Government Income 21 Money Market Mutual Fund Variable Annuity Trust 23 Statement of Assets & Liabilities 24 Statement of Operations 25 Statement of Changes in Net Assets 26 Financial Highlights 28-32 Notes to Financial Statements
- -------------------------------------------------------------------------------- INVESTMENTS IN VISTA CAPITAL ADVANTAGE ARE NOT DEPOSITS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN BANK, AND ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. INVESTMENTS IN VISTA CAPITAL ADVANTAGE, INCLUDING THE UNDERLYING VARIABLE INVESTMENT OPTIONS, INVOLVE RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. - -------------------------------------------------------------------------------- page 4 Letter from the Chairman October 10, 1999 Dear Vista Capital Advantage Investor: We are pleased to present this annual report on the six portfolios underlying the Vista Capital Advantage Variable Annuity for the one year ended August 31, 1999. This report summarizes the performance of each portfolio in light of events in the financial markets, giving you the opportunity to monitor and adjust your individual investment choices if necessary. Here are some highlights: A Robust U.S. Economy Helps Propel Stock Prices Higher Stock prices started the fiscal year under pressure due to worries over a potential global economic meltdown ignited by the near collapse of Russia's economy. Once those worries began to fade, stock prices rallied on improving economic conditions. Large-cap, well-established companies led the way, as they have throughout the bull market of the 1990s. Technology stocks were among the better performing sectors. As the period progressed, the economy continued to strengthen, raising concerns of potentially higher inflation. However, the environment stayed generally positive for equities, with many corporations posting better-than-expected earnings, and consumer confidence remaining strong. The Federal Reserve Stays Active Throughout the Period At the start of the period, the Fed reduced short-term interest rates three times to help stimulate economic activity. These rate cuts played a significant role in ending the global economic crisis and gave rise to a rebound in many equity markets around the world. Following the rate cuts, the U.S. economy strengthened to a point where inflation became a growing concern to the Fed. This caused the Fed to revert to a tightening monetary policy, raising interest rates in June and again in August. At the end of the period, there was much speculation that a third rate hike was likely before year-end to ensure inflation remains under control. Higher Interest Rates Put Pressure on Bonds Following the end to the global economic crisis, bond yields climbed steadily due to the pickup in economic activity. During the period, the yield on the 30-year Treasury bond rose from about 5.34% to around 6.06%. Some of the economic data that propelled yields higher included a steady stream of strong consumer confidence reports, historically low unemployment and consistently good news on consumer spending. Sincerely, [/s/ Fergus Reid] Fergus Reid Chairman Growth and Income Portfolio page 5 The Growth and Income Portfolio seeks to provide long-term capital appreciation and dividend income primarily through diversified holdings of common stocks. Performance Investors in the Growth and Income Portfolio continued to participate in the strong performance of the U.S. stock market during the reporting period. For the one year ended August 31, 1999, the Portfolio had a total return of 21.23%. Strategy The Portfolio's investment results were largely due to improving economic conditions, outstanding stock selection and a generally good environment for equities. Specifically, the Portfolio's investment in technology stocks proved beneficial to shareholders. Despite coming under pressure on several occasions throughout the period, technology stocks registered solid gains thanks to favorable corporate earnings reports and improving growth prospects for stocks in this sector. Management's decision to invest in oil and gas companies also contributed positively to the Portfolio's performance, as energy prices rose sharply throughout the first eight months of 1999. A pledge made by Middle-East oil ministers to increase the price of oil and reduce output was the main reason for the spike in prices. Interest-rate sensitive stocks, such as utility stocks, came under pressure following the Federal Reserve's series of interest-rate cuts in late 1998. The Fed's adoption of an easing monetary policy boosted global economic activity, which led to an increase in interest rates. The Portfolio's investment in health care and pharmaceutical stocks also detracted from performance, though many of these securities posted solid gains early in the period. In keeping with our long-term investment strategy, the Portfolio used periodic downturns in the market to increase exposure to attractively priced stocks across a broad range of sectors. This strategy proved particularly beneficial following the sharp downturn in technology stocks in February. The downturn was due to a spate of stronger-than-expected economic data, including the best consumer confidence report ever and the lowest unemployment rate in a generation. Outlook Although the economy has been showing signs of overheating, we believe the outlook for the stock market remains positive. For one, we think interest rates will decline later this year and into the year 2000. Our rationale is based on the fact that the economy will slow later in the year due to seasonal factors and concerns over Y2K. We also believe that once the uncertainty surrounding Y2K begins to fade, investor interest in equities will increase. Since further signs of a pickup in economic activity are likely to result in greater market volatility, stock selection will play an important role in delivering good investment results. We intend to view volatility as an opportunity to increase our exposure in high-quality stocks that, in our judgment, will help bolster the Portfolio's long-term growth potential. Life of Portfolio Performance A $10,000 tax-deferred investment in the Growth and Income Portfolio at NAV (Net Asset Value) would have grown to $20,728 from inception on 3/1/95 through 8/31/99.* Investment Results - --------------------------------------------------------- Average Annual Total Return as of 8/31/99 One year 21.23% Since Inception (3/1/95) 17.55% - ---------------------------------------------------------
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Growth and Income S&P 500 3/1/95 $10,000 $10,000 8/31/95 11,480 11,678 8/31/96 13,344 13,861 8/31/97 18,084 19,491 8/31/98 17,098 21,071 8/31/99 20,728 29,457
Source for Index returns: Lipper Analytical Services, Inc. * Past performance is no guarantee of future results. Investment returns and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance figures do not include any insurance company charges associated with a variable annuity or reflect any withdrawal charges. No expenses are deducted from the performance of the indexes. Hypothetical $10,000 investment assumes an initial investment on 3/1/95, shows changes in Net Asset Value and reinvestment of all distributions, but does not include the effect of any insurance charges or the annual maintenance fee. The illustration above would be reduced if these fees were reflected. There is no direct correlation between a hypothetical investment and the anticipated performance of the Portfolio. The investment adviser is currently waiving certain fees. This voluntary waiver may be modified or terminated at any time, which would reduce performance. The Standard & Poor's 500 Index is an unmanaged broad-based index that replicates the U.S. stock market. It includes 500 widely held common stocks and assumes reinvestment of dividends. An individual cannot invest in an index. Withdrawals prior to age 59-1/2 from the Vista Capital Advantage variable annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary income. The views expressed on this page are exclusively those of Chase Manhattan. The financial information presented on this page has been taken from the books and records of the portfolios without examination by independent accountants, who express no opinion thereto. page 6 Capital Growth Portfolio The Capital Growth Portfolio seeks to provide long-term capital growth primarily through diversified holdings of common stocks. Performance Despite a volatile environment for equities, particularly small- and mid-cap stocks, The Capital Growth Portfolio recorded positive performance during the fiscal year. For the one year ended August 31, 1999, the Portfolio had a total return of 30.59%. Strategy Favorable economic conditions, highlighted by benign inflation, robust consumer spending and low unemployment, were largely responsible for the Fund's investment results. The Portfolio benefited from its exposure to technology stocks, many of which recorded double-digit percentage results during the period. Consumer cyclical stocks contributed positively to performance early in the period, following the Federal Reserve Board's decision to reduce short-term interest rates to help stimulate economic activity. Many of these securities also turned in solid gains after the stock market's pullback in February following a spate of stronger-than-expected economic data. Energy stocks also added to performance. A pledge by Middle-East oil ministers to increase the price of oil and reduce output was the main reason for the strong move in energy stocks. Several sectors detracted from the Portfolio's investment results. These included utility stocks, which came under pressure due to the sharp increase in long-term interest rates. During the period, the yield on the benchmark 30-year Treasury bond rose to approximately 6.06%, from around 5.34% at the start of the period. The rise in rates was largely due to a strong increase in economic activity. Real estate investment trusts also hindered investment results, despite showing some strength midway through the period. In late 1998, the Portfolio enjoyed good performance from health care stocks, but these securities retreated as the period progressed. Some of the Portfolio's better investments in this sector included Biogen, a biotechnology company that rose sharply over the past 12 months. Despite the pullback in health care stocks, we remain optimistic on their long-term growth prospects. Our optimism is based on the growing number of babyboomers likely to become dependent on the health care system in the new millennium. In less than six years, the first of the babyboomers (those individuals born between 1946 and 1964) will turn 60 years of age. Outlook Our outlook for the stock market and the types of stocks represented in the Portfolio remains positive. Economic conditions are still favorable, given the benign inflationary environment, high consumer spending and low unemployment rate. Moreover, corporate earnings remain solid. Continuing signs of an overheating economy may cause near-term market volatility, and uncertainty surrounding Y2K may also weigh on the market. However, the Y2K issue is likely to be a non-factor by the end of this year, and we believe the economy will slow sometime later in 1999 and into the year 2000. In turn, interest rates are likely to moderate, which should prove beneficial for equities. Life of Portfolio Performance A $10,000 tax-deferred investment in the Capital Growth Portfolio at NAV (Net Asset Value) would have grown to $19,789 from inception on 3/1/95 through 8/31/99.* Investment Results - --------------------------------------------------------- Average Annual Total Return as of 8/31/99 One year 30.59% Since Inception (3/1/95) 16.35% - ---------------------------------------------------------
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Capital Growth Russell 2000 3/1/95 $10,000 $10,000 8/31/95 11,900 12,010 8/31/96 14,240 13,316 8/31/97 18,123 17,173 8/31/98 15,154 13,839 8/31/99 19,789 17,766
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. International Equity Portfolio page 7 The International Equity Portfolio seeks to provide a total return on assets from long-term growth of capital and from income principally through diversified holdings of the stocks of established foreign companies outside the United States. Performance The International Equity Portfolio recorded good investment results during a period highlighted by concerns over global economic growth, a turnaround in Japanese equities and the launch of the European Monetary Union (EMU). For the one year ended August 31, 1999, the Portfolio posted a total return of 25.03%. Strategy The International Equity Portfolio registered good performance thanks to its exposure to Japanese equities, which recorded solid returns throughout the first eight months of 1999. The Fund's investment in Europe also contributed positively to investment results, particularly early in the year after the launch of the European Monetary Union. At the start of the period, the Portfolio's investment in Japan was mixed as concerns over the country's banking woes weighed heavily on equity prices. Moreover, investors were not convinced that the government would adopt the necessary reform measures to lift the country from its decade-long economic decline. As the period progressed, however, Japan's economy showed clear signs of recovery. Investors also became increasingly optimistic about stocks along the Pacific Rim as governments in the region made important fundamental changes to improve their respective economies. Elsewhere, Latin American markets recorded generally good investment results but not without significant market volatility along the way. In January, for example, markets retreated sharply following concerns over Brazil's inherent financial difficulties. Outlook Our outlook for European equities remains positive. Fundamentals for stocks across the region are still generally attractive. Companies are continuing to reduce operating costs to improve profitability, and investor sentiment is favorable. Moreover, with Europe's economy still showing pockets of weakness, no major upturn in interest rates appears imminent. We are equally optimistic about the prospects for Japanese stocks, though corporations will need to restructure their operations to improve profitability. Assuming economic conditions improve and companies take steps to bolster their balance sheets, we intend to use market weakness as long-term buying opportunities in the months ahead. Finally, the long-term growth prospects for emerging markets of southeast Asia and Latin America are strong, but the duration and durability of any sustainable rally will largely depend on the ongoing commitment among governments to economic reform. Life of Portfolio Performance A $10,000 tax-deferred investment in the International Equity Portfolio at NAV (Net Asset Value) would have grown to $14,727 from inception on 3/1/95 through 8/31/99.* Investment Results - --------------------------------------------------------- Average Annual Total Return as of 8/31/99 One year 25.03% Since Inception (3/1/95) 8.97% - ---------------------------------------------------------
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International Equity MSCI EAFE 3/1/95 $10,000 $10,000 8/31/95 10,890 10,950 8/31/96 11,153 11,845 8/31/97 12,075 12,953 8/31/98 11,779 12,970 8/31/99 14,727 16,346
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 8 Asset Allocation Portfolio The Asset Allocation Portfolio seeks to provide maximum return through a combination of long-term capital growth and current income by investing in common stocks, convertible securities and government and corporate fixed-income obligations. Performance The Asset Allocation Portfolio recorded positive returns as equities moved higher, but bonds came under pressure due to rising interest rates brought on by a robust economy. Given this backdrop, the Portfolio posted a total return of 11.88% for the one year ended August 31, 1999. Strategy Strong performance by the Portfolio's technology stocks bolstered investment results, as these securities delivered solid investment gains. Large-cap, well-established companies in this sector, such as EMC and IBM, were among the better performing issues. The impressive returns registered by technology companies was not without volatility along the way. For example, in March, technology stocks came under pressure, as the Nasdaq Composite lost 500 points in about a week. Management's decision to increase its exposure to select technology stocks during these downturns proved beneficial to shareholders. The Fund's investment in consumer stocks also contributed favorably to performance, thanks to a marked rise in consumer spending and a sharp increase in retail sales. Energy stocks also added to performance following a pledge by Middle-East oil ministers to increase the price of oil and reduce output. The Portfolio's investment in fixed-income securities and interest-rate sensitive stocks, such as financial, banking and insurance companies, did not fare as well. During the period, long-term interest rates, as measured by the benchmark 30-year Treasury bond, increased steadily, causing bonds prices to fall. The rise in rates was ignited by a rebound in the global economy following the Federal Reserve Board's decision to adopt an easing monetary policy late in 1998. Continuing strength in the U.S. economy during the first eight months of 1999 also played an important role in pushing interest rates higher. At the end of the reporting period, the Portfolio had 49% invested in common stocks, 51% in fixed-income securities and cash equivalents. Outlook Looking ahead, our outlook for both the stock and fixed-income markets remains favorable. While we expect the economy to continue to grow throughout the remainder of this year and into the year 2000, we believe it will moderate. In turn, we expect interest rates to fall and inflation to remain under control. We are also optimistic about the stock and bond market based on our favorable projection for corporate earnings. While volatility is likely to continue given the relatively high valuations in the market and concerns over Y2K, we believe such a development will create investment opportunities. In light of this fact, we intend to use market pullbacks to increase our exposure to securities that we believe can help the Portfolio achieve its long-term investment objective. Life of Portfolio Performance A $10,000 tax-deferred investment in the Asset Allocation Portfolio at NAV (Net Asset Value) would have grown to $16,786 from inception on 3/1/95 through 8/31/99.* Investment Results - --------------------------------------------------------- Average Annual Total Return as of 8/31/99 One year 11.88% Since Inception (3/1/95) 12.18% - ---------------------------------------------------------
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Asset Allocation 60% S&P 500/40% Lehman Gov't Bond 3/1/95 $10,000 $10,000 8/31/95 11,040 11,311 8/31/96 12,242 12,731 8/31/97 15,010 16,225 8/31/98 15,004 17,911 8/31/99 16,786 21,968
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. U.S. Government Income Portfolio page 9 The U.S. Government Income Portfolio seeks to provide monthly dividends as well as to preserve principal. Performance The Variable Annuity U.S. Government Income Portfolio came under pressure during the period due to a steady increase in interest rates brought on by improving economic conditions in the U.S. and around the globe. For the one year ended August 31, 1999, the Portfolio recorded a total return of -1.15%. Strategy The period began on a positive note for Treasury issues, as investors gravitated toward these securities following the near collapse of Russia's economy. From the start of the period to early October, the height of the Russian economic crisis, the yield on the benchmark 30-year Treasury bond dropped from 5.34% to a record low of 4.72%. The Federal Reserve allayed fears of a global economic meltdown and a further decline in yields by cutting short-term interest rates three times in late 1998. The Fed's decision to trim rates gave the global economy a much needed boost, sending interest rates markedly higher by year-end. In January, global economic concerns resurfaced with the emergence of Brazil's economic difficulties, but those worries were short-lived. Soon after, the U.S. economy strengthened, sending interest rates higher and raising worries among investors that inflation might become a problem. From that point on, most of the economic news pointed to stronger-than-expected growth, leading investors to speculate that the Fed would reverse its monetary policy to keep inflation under control. On June 30th, the Fed delivered on those assumptions, raising short-term interest rates for the first time since March, 1997. Following a spate of stronger-than-expected economic news, the Fed increased rates again in August, just one week before the fiscal year came to a close. At the end of the period, the yield on the 30-year U.S. Treasury bond stood around 6.06%. Outlook Despite the increase in interest rates, our outlook for the Portfolio remains favorable. We expect the economy to moderate by the end of this year and into the year 2000. In turn, we believe interest rates will begin to fall, which would be a boon to bond prices. Given this backdrop, we intend to use further increases in interest rates as an opportunity to extend the Portfolio's average duration and increase the level of income paid to shareholders. Life of Portfolio Performance A $10,000 tax-deferred investment in the U.S. Government Income Portfolio at NAV (Net Asset Value) would have grown to $13,026 from inception on 3/1/95 through 8/31/99.* Investment Results - --------------------------------------------------------- Average Annual Total Return as of 8/31/99 One year (1.15%) Since Inception (3/1/95) 6.04% - ---------------------------------------------------------
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U.S. Government Income Lehman Intermediate US Gov't Bond 3/1/95 $10,000 $10,000 8/31/95 10,690 10,618 8/31/96 10,970 11,091 8/31/97 11,859 11,983 8/31/98 13,178 13,092 8/31/99 13,026 13,387
Source for Index Returns: Lipper Analytical Services, Inc. * Past performance is no guarantee of future results. Investment returns and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance figures do not include any insurance company charges associated with a variable annuity or reflect any withdrawal charges. No expenses are deducted from the performance of the indexes. Hypothetical $10,000 investment assumes an initial investment on 3/1/95 and shows changes in Net Asset Value, but does not include the effect of any insurance charges or the annual maintenance fee. The illustration above would be reduced if these fees were reflected. There is no direct correlation between a hypothetical investment and the anticipated performance of the Portfolio. The investment adviser is currently waiving certain fees. This voluntary waiver may be modified or terminated at any time, which would reduce performance. The unmanaged Lehman Intermediate Government Bond Index includes bonds with 1 to 10 year maturities and assumes the reinvestment of dividends. An individual cannot invest in an index. Withdrawals prior to age 59-1/2 from the Vista Capital Advantage variable annuity may be subject to a 10% IRS tax penalty, and are taxed as ordinary income. The views expressed on this page are exclusively those of Chase Manhattan. The financial information presented on this page has been taken from the books and records of the portfolios without examination by independent accountants, who express no opinion thereto. page 10 Money Market Portfolio The Money Market Portfolio seeks to provide maximum current income consistent with preservation of capital and maintenance of liquidity. Performance The Money Market Portfolio recorded good investment results in an environment highlighted by rising interest rates brought on by stronger-than-expected economic conditions. For the one year ended August 31, 1999, the Portfolio recorded a total return of 4.66%. Strategy Early in the period, yields on money market funds were low due to a sharp pullback in interest rates following the near-collapse of the Russian economy. However, after the Federal Reserve Board adopted an easing monetary policy in September, money market yields began to rise. That trend continued throughout the rest of 1998. In January, concerns over financial problems in Brazil kept rates under pressure, as investors wondered whether another round of global economic uncertainty might hit the market. But Brazil's problems faded. Soon after, investors turned their attention to the U.S. economy, which showed signs of overheating throughout the spring. Concerned that the robust U.S. economy might cause inflation to rise, the Fed adopted a tightening monetary policy in June, pushing short-term interest rates higher for the first time since March, 1997. In turn, yields on money market funds increased. The wave of strong economic data throughout much of July and August, led the Fed to raise rates again on August 24th. As the period came to a close, there was much speculation that the central bank would push up rates one more time before the end of 1999. Given the steady increase in interest rates, our investment strategy throughout the fiscal year was to capitalize on this trend in order to provide shareholders with a higher yield. Outlook Our outlook for the Money Market Portfolio continues to be positive. We believe the sharp rise in interest rates is behind us for now. Uncertainty regarding Y2K is likely to keep the economy from over heating. Furthermore, we expect a moderation in economic growth due to seasonal factors. Given this backdrop, we intend to extend the Portfolio's average maturity on any significant rise in interest rates going forward. As always, we will continue to focus our attention on high-quality, liquid investments that meet our strict criteria for investment. The views expressed on this page are exclusively those of Chase Manhattan. The financial information presented on this page has been taken from the books and records of the portfolios without examination by independent accountants, who express no opinion thereto. Fund shares are not insured or guaranteed by the FDIC or any other government agency. There can be no guarantee that the Fund will maintain a stable net asset value of $1.00. Growth and Income Portfolio page 11 Portfolio of Investments August 31, 1999
Shares Issuer Value ------ ------ ----- LONG-TERM INVESTMENTS--92.5% COMMON STOCK--92.5% AEROSPACE--1.7% 5,000 GENERAL DYNAMICS CORP. .............................. $ 315,000 ----------- AIRLINES--1.5% 4,700 AMR CORP.* .......................................... 275,538 ----------- AUTOMOTIVE--1.9% 7,000 FORD MOTOR CO. ...................................... 364,875 ----------- BANKING--5.3% 6,000 BANK OF AMERICA CORP. ............................... 363,000 6,000 BANK ONE CORP. ...................................... 240,750 3,400 CULLEN/FROST BANKERS, INC. .......................... 88,824 4,000 FIRST SECURITY CORP. ................................ 86,750 2,400 FIRST UNION CORP. ................................... 99,600 2,500 MERCANTILE BANCOPORATION ............................ 137,969 ----------- 1,016,893 ----------- BIOTECHNOLOGY--0.9% 2,000 AMGEN, INC.* ........................................ 166,375 ----------- BROADCASTING--1.4% 5,700 CBS CORP.* .......................................... 267,900 ----------- CHEMICALS--1.3% 3,200 AIR PRODUCTS AND CHEMICALS, INC. .................... 108,800 1,200 DOW CHEMICAL CO. .................................... 136,350 ----------- 245,150 ----------- COMPUTER SOFTWARE--3.9% 4,300 AMERICAN MANAGEMENT SYSTEMS, INC.* .................. 123,087 4,500 COMPUTER ASSOCIATES INTERNATIONAL, INC. ............. 254,250 6,000 SYMANTEC CORP.* ..................................... 180,000 4,500 UNISYS CORP.* ....................................... 193,500 ----------- 750,837 ----------- COMPUTERS/COMPUTER HARDWARE--4.6% 3,000 EMC CORP.* .......................................... 180,000 3,000 INTERNATIONAL BUSINESS MACHINES CORP. ............... 373,687 4,000 TEXAS INSTRUMENTS, INC. ............................. 328,250 ----------- 881,937 ----------- CONSTRUCTION--1.0% 13,800 D.R. HORTON, INC. ................................... 200,963 ----------- CONSTRUCTION MATERIALS--2.6% 17,500 MASCO CORP. ......................................... 495,469 ----------- CONSUMER PRODUCTS--3.9% 3,500 FORTUNE BRANDS, INC. ................................ 131,250 10,500 PHILIP MORRIS COMPANIES, INC. ....................... 393,094 11,100 SHAW INDUSTRIES, INC. ............................... 222,000 ----------- 746,344 ----------- DIVERSIFIED--1.1% 2,100 TYCO INTERNATIONAL LTD (BERMUDA) .................... 212,756 ----------- ELECTRONICS/ELECTRICAL EQUIPMENT--5.3% 10,000 ALTERA CORP.* ....................................... 421,250 6,000 APPLIED MATERIALS, INC.* ............................ 426,375 5,500 EG&G, INC. .......................................... 174,968 ----------- 1,022,593 -----------
Shares Issuer Value ------ ------ ----- ENTERTAINMENT/LEISURE--2.2% 10,000 VIACOM, INC. CLASS B* ............................... $ 420,625 ----------- ENVIRONMENTAL SERVICES--0.5% 4,500 WASTE MANAGEMENT, INC. .............................. 98,156 ----------- FINANCIAL SERVICES--7.1% 10,920 ASSOCIATES FIRST CAPITAL CORP., CLASS A ............. 374,693 8,000 CITIGROUP, INC. ..................................... 355,500 7,500 FREDDIE MAC ......................................... 386,250 1,700 LEHMAN BROTHERS HOLDINGS, INC. ...................... 91,374 1,800 MORGAN STANLEY DEAN WITTER & CO. .................... 154,463 ----------- 1,362,280 ----------- FOOD/BEVERAGE PRODUCTS--1.0% 5,600 PEPSICO, INC. ....................................... 191,100 ----------- HEALTH CARE/HEALTH CARE SERVICES--3.3% 1,600 AETNA, INC. ......................................... 124,400 4,500 COLUMBIA/HCA HEALTHCARE CORP. ....................... 110,812 8,600 HCR MANOR CARE, INC. * .............................. 168,238 28,000 HEALTHSOUTH CORP. * ................................. 229,250 ----------- 632,700 ----------- INSURANCE--3.0% 6,000 ALLSTATE CORP. ...................................... 196,875 7,500 TRAVELERS PROPERTY CASUALTY CORP., CLASS A .......... 266,250 2,300 XL CAPITAL LTD, CLASS A (BERMUDA) ................... 115,718 ----------- 578,843 ----------- MANUFACTURING--4.8% 8,000 INGERSOLL-RAND CO. .................................. 509,000 3,200 JOHNSON CONTROLS, INC. .............................. 218,800 4,100 PENTAIR, INC. ....................................... 186,550 ----------- 914,350 ----------- METALS/MINING--2.9% 8,600 ALCOA, INC. ......................................... 555,238 ----------- OFFICE/BUSINESS EQUIPMENT--0.5% 2,000 XEROX CORP. ......................................... 95,500 ----------- OIL & GAS--8.4% 3,000 CHEVRON CORP. ....................................... 276,750 15,300 COASTAL CORP. ....................................... 662,681 7,000 HALLIBURTON CO. ..................................... 324,625 1,900 MOBIL CORP. ......................................... 194,513 6,000 ULTRAMAR DIAMOND SHAMROCK CORP. ..................... 156,750 ----------- 1,615,319 ----------- PAPER/FOREST PRODUCTS--1.9% 3,000 WEYERHAEUSER CO. .................................... 168,750 4,800 WILLAMETTE INDUSTRIES ............................... 190,200 ----------- 358,950 ----------- PHARMACEUTICALS--3.1% 11,400 PHARMACIA & UPJOHN, INC. ............................ 595,650 ----------- PIPELINES--0.9% 3,000 COLUMBIA ENERGY GROUP, INC. ......................... 177,188 -----------
See notes to financial statements. page 12 Growth and Income Portfolio (continued) Portfolio of Investments August 31, 1999
Shares Issuer Value ------ ------ ----- PRINTING & PUBLISHING--1.4% 6,700 NEW YORK TIMES CO., CLASS A ................... $ 261,719 ----------- REAL ESTATE INVESTMENT TRUST--1.3% 3,400 EQUITY RESIDENTIAL PROPERTIES TRUST ........... 149,600 2,920 ESSEX PROPERTY TRUST, INC. .................... 102,565 ----------- 252,165 ----------- RETAILING--3.0% 3,500 FEDERATED DEPARTMENT STORES, INC.* ............ 161,000 13,800 KROGER CO.* ................................... 319,125 9,000 OFFICE DEPOT, INC.* ........................... 93,938 ----------- 574,063 ----------- SHIPPING/TRANSPORTATION--1.4% 5,500 UNION PACIFIC CORP. ........................... 267,781 ----------- TELECOMMUNICATIONS--4.7% 1,977 AT&T CORP. .................................... 88,965 5,000 GTE CORP. ..................................... 343,125 5,000 MCI WORLDCOM, INC.* ........................... 378,750 1,500 TELLABS, INC.* ................................ 89,344 ----------- 900,184 ----------- TELECOMMUNICATIONS EQUIPMENT--0.8% 3,200 GENERAL INSTRUMENT CORP.* ..................... 157,400 ----------- UTILITIES--3.9% 6,000 CMS ENERGY CORP. .............................. 237,375 1,900 DUKE ENERGY CORP. ............................. 109,250 5,000 TEXAS UTILITIES CO. ........................... 202,187 5,000 UNICOM CORP. .................................. 193,125 ----------- 741,937 ----------- TOTAL COMMON STOCK (COST $17,001,269) ............................ 17,713,778 ----------- TOTAL LONG-TERM INVESTMENTS (COST $17,001,269) ............................ 17,713,778 ----------- Principal Amount ---------- SHORT-TERM INVESTMENT--7.3% REPURCHASE AGREEMENT--7.3% $1,394,000 GREENWICH CAPITAL MARKETS, INC., 5.48% DUE 9/1/99, (DATED 8/31/99, PROCEEDS $1,394,212, SECURED BY FNMA, $1,397,122, FRN, DUE 07/18/27; MARKET VALUE $1,422,900) (COST $1,394,000) ............................. 1,394,000 ----------- TOTAL INVESTMENTS--99.8% (COST $18,395,269) ............................ $19,107,778 ===========
* = Non-income producing security. FNMA = Federal National Mortgage Association FRN = Floating Rate Note See notes to financial statements. Capital Growth Portfolio page 13 Portfolio of Investments August 31, 1999
Shares Issuer Value ------ ------ ----- LONG-TERM INVESTMENTS--79.5% COMMON STOCK--79.5% BANKING--4.5% 13,000 CULLEN/FROST BANKERS, INC. ......................... $ 339,625 4,590 ZIONS BANCORPORATION ............................... 228,352 ----------- 567,977 ----------- BIOTECHNOLOGY--4.6% 7,500 BIOGEN, INC.* ...................................... 575,625 ----------- CHEMICALS--2.1% 4,500 CYTEC INDUSTRIES, INC.* ............................ 104,906 10,000 IMC GLOBAL, INC. ................................... 159,375 ----------- 264,281 ----------- COMPUTER SOFTWARE--4.6% 10,000 AMERICAN MANAGEMENT SYSTEMS, INC.* ................. 286,250 10,000 SYMANTEC CORP.* .................................... 300,000 ----------- 586,250 ----------- COMPUTERS/COMPUTER HARDWARE--3.3% 7,000 EMC CORP.* ......................................... 420,000 ----------- CONSUMER PRODUCTS--3.9% 4,200 FURNITURE BRANDS INTERNATIONAL, INC.* .............. 84,263 10,000 SHAW INDUSTRIES, INC. .............................. 200,000 5,000 YORK INTERNATIONAL CORP. ........................... 205,625 ----------- 489,888 ----------- ELECTRONICS/ELECTRICAL EQUIPMENT--10.4% 6,000 ALTERA CORP.* ...................................... 252,750 5,000 ASM LITHOGRAPHY HOLDING NV (NETHERLANDS)* .......... 315,625 8,000 EG&G, INC. ......................................... 254,500 7,500 WATERS CORP.* ...................................... 494,531 ----------- 1,317,406 ----------- ENTERTAINMENT/LEISURE--3.3% 5,000 GALILEO INTERNATIONAL INC. ......................... 242,500 10,000 INTERNATIONAL GAME TECHNOLOGY ...................... 175,000 ----------- 417,500 ----------- FINANCIAL SERVICES--5.1% 6,300 BEAR STEARNS COMPANIES, INC. ....................... 262,238 4,000 COUNTRYWIDE CREDIT INDUSTRIES, INC. ................ 128,500 6,000 THE PMI GROUP, INC. ................................ 255,000 ----------- 645,738 ----------- HEALTH CARE/HEALTH CARE SERVICES--3.7% 6,750 TENET HEALTHCARE CORP.* ............................ 117,703 5,100 UNIVERSAL HEALTH SERVICES, INC., CLASS B* .......... 170,212 2,500 WELLPOINT HEALTH NETWORKS, INC., CLASS A* .......... 182,188 ----------- 470,103 -----------
Shares Issuer Value ------ ------ ----- INSURANCE--6.4% 3,700 EQUITABLE COMPANIES, INC.* ......................... $ 228,475 8,000 RELIASTAR FINANCIAL CORP. .......................... 360,500 3,000 TRANSATLANTIC HOLDINGS, INC. ....................... 216,375 ----------- 805,350 ----------- MANUFACTURING--2.2% 6,000 PENTAIR, INC. ...................................... 273,000 ----------- MEDIA/ADVERTISING--2.4% 4,000 OMNICOM GROUP, INC. ................................ 301,500 ----------- OIL & GAS--7.4% 11,000 BJ SERVICES CO.* ................................... 376,750 6,000 COOPER CAMERON CORP.* .............................. 249,750 25,000 VARCO INTERNATIONAL, INC.* ......................... 309,375 ----------- 935,875 ----------- PAPER/FOREST PRODUCTS--2.0% 7,000 BOISE CASCADE CORP. ................................ 254,625 ----------- PIPELINES--2.5% 5,400 COLUMBIA ENERGY GROUP, INC. ........................ 318,937 ----------- REAL ESTATE INVESTMENT TRUST--3.6% 10,000 ARCHSTONE COMMUNITIES TRUST ........................ 213,750 7,000 ESSEX PROPERTY TRUST, INC. ......................... 245,875 ----------- 459,625 ----------- RETAILING--4.2% 4,000 CVS CORP. .......................................... 166,750 15,000 OFFICE DEPOT, INC.* ................................ 156,563 5,000 ROSS STORES, INC. .................................. 208,125 ----------- 531,438 ----------- UTILITIES--3.3% 3,500 CMS ENERGY CORP. ................................... 138,469 7,500 TNP ENTERPRISES, INC. .............................. 280,312 ----------- 418,781 ----------- TOTAL LONG-TERM INVESTMENTS (COST $7,822,159) .................................. 10,053,899 ----------- Principal Amount ---------- SHORT-TERM INVESTMENT--20.8% REPURCHASE AGREEMENT--20.8% $2,634,000 GREENWICH CAPITAL MARKETS, INC., 5.48% DUE 9/1/99, (DATED 8/31/99, PROCEEDS $2,634,401, SECURED BY FNMA, $2,638,084, FRN, DUE 07/18/27; MARKET VALUE $2,686,760) (COST $2,634,000) .................................. 2,634,000 ----------- TOTAL INVESTMENTS--100.3% (COST $10,456,159) ................................. $12,687,899 ===========
* = Non-income producing security. FNMA = Federal National Mortgage Association FRN = Floating Rate Note See notes to financial statements. page 14 International Equity Portfolio Portfolio of Investments August 31, 1999
Shares Issuer Value ------ ------ ----- LONG-TERM INVESTMENTS--96.8% COMMON STOCK--96.8% AUSTRALIA--0.5% BROADCASTING--0.2% 2,000 NEWS CORP., LTD ................................ $ 14,622 ----------- DIVERSIFIED--0.2% 3,400 LANG CORP., LTD* ............................... 11,614 ----------- FINANCIAL SERVICES--0.0% 400 AUSTRALIAN STOCK EXCHANGE LTD .................. 2,937 ----------- FOOD/BEVERAGE PRODUCTS--0.1% 3,100 FOSTER'S BREWING GROUP LTD ..................... 9,085 ----------- TOTAL AUSTRALIA ................................ 38,258 ----------- BRAZIL--2.9% TELECOMMUNICATIONS--1.5% 1,470 TELECOMUNICACOES BRASILEIRAS SA, ADR* .......... 69 1,470 TELECOMUNICACOES BRASILEIRAS SA, ADR, PREFERRED* ..................................... 109,056 ----------- 109,125 ----------- UTILITIES--1.4% 12,100 CENTRAIS ELECTRICAS BRASILEIRAS, ADR ........... 93,805 1,330 CENTRAIS ELECTRICAS BRASILEIRAS SA-ELECTROBRAS, ADR, PREFERRED* ................ 10,415 523 CENTRAIS GERADORAS DO SUL DO BRASIL SA, ADR* ........................................... 1,837 ----------- 106,057 ----------- TOTAL BRAZIL ................................... 215,182 ----------- FINLAND--3.3% PAPER/FOREST PRODUCTS--0.3% 700 UPM-KYMMENE OYJ ................................ 24,280 ----------- TELECOMMUNICATIONS--3.0% 1,718 NOKIA OYJ, A SHARES ............................ 143,743 3,057 SONERA GROUP OYJ ............................... 74,305 ----------- 218,048 ----------- TOTAL FINLAND .................................. 242,328 ----------- FRANCE--10.7% AUTOMOTIVE--0.8% 1,050 RENAULT SA ..................................... 56,715 ----------- BANKING--1.2% 710 CREDIT COMMERCIAL DE FRANCE@ ................... 89,258 ----------- COMPUTER SOFTWARE--2.1% 900 CAP GEMINI SA@ ................................. 154,893 ----------- INDUSTRIAL COMPONENTS--0.9% 322 COMPAGNIE DE SAINT GOBAIN ...................... 62,409 ----------- INSURANCE--1.0% 2,816 CNP ASSURANCES ................................. 74,412 ----------- OIL & GAS--2.1% 437 ELF AQUITANE SA ................................ 76,829 600 TOTALFINA SA CLASS B ........................... 77,526 ----------- 154,355 -----------
Shares Issuer Value ------ ------ ----- FRANCE (cont'd) PHARMACEUTICALS--1.8% 2,650 RHONE-POULENC SA ............................... $ 128,880 ----------- RETAILING--0.8% 360 PINAULT-PRINTEMPS-REDOUTE SA ................... 62,529 ----------- TOTAL FRANCE ................................... 783,451 ----------- GERMANY--8.5% CHEMICALS--1.3% 2,530 DEGUSSA-HUELS AG* .............................. 98,071 ----------- FOOD/BEVERAGE PRODUCTS--4.2% 5,529 KAMPS AG ....................................... 306,842 ----------- MANUFACTURING--2.0% 750 VEBA AG ........................................ 46,960 4,680 VIAG AG* ....................................... 98,339 ----------- 145,299 ----------- SEMI-CONDUCTORS--0.2% 150 CE CONSUMER ELECTRONIC AG ...................... 14,139 ----------- TELECOMMUNICATIONS--0.8% 370 MANNESMANN AG .................................. 56,899 ----------- TOTAL GERMANY .................................. 621,250 ----------- IRELAND--2.4% AIRLINES--0.4% 3,486 RYANAIR* ....................................... 32,490 ----------- PAPER/FOREST PRODUCTS--0.7% 16,748 SMURFIT (JEFFERSON) GROUP ...................... 47,708 ----------- REAL ESTATE--0.5% 6,515 GREEN PROPERTY PLC ............................. 40,054 ----------- TELECOMMUNICATIONS--0.8% 1,413 ESAT TELECOM GROUP PLC, ADR* ................... 57,580 ----------- TOTAL IRELAND .................................. 177,832 ----------- ITALY--3.6% COMPUTERS/COMPUTER HARDWARE--0.1% 3,720 TECNOST SPA* ................................... 9,767 ----------- FOOD/BEVERAGE PRODUCTS--0.5% 14,700 GRUPPO CREMONINI SPA* .......................... 32,788 ----------- INSURANCE--1.6% 11,000 ALLEANZA ASSICURAZIONI SPA ..................... 115,091 ----------- OIL & GAS--0.6% 7,700 ENTE NAZIONALE IDROCARBURI SPA (ENI) ........... 46,484 ----------- TELECOMMUNICATIONS--0.8% 7,600 TELECOM ITALIA MOBILE SPA ...................... 44,246 1,700 TELECOM ITALIA SPA ............................. 17,229 ----------- 61,475 ----------- TOTAL ITALY .................................... 265,605 ----------- JAPAN--23.0% AUTOMOTIVE--0.8% 2,000 TOYOTA MOTOR CORP. ............................. 59,125 -----------
See notes to financial statements. International Equity Portfolio (continued) page 15 Portfolio of Investments August 31, 1999
Shares Issuer Value ------ ------ ----- JAPAN (cont'd) BANKING--1.7% 3,000 BANK OF TOKYO-MITSUBISHI LTD@ ..................... $ 44,893 4,000 DAI-ICHI KANGYO BANK .............................. 42,138 3,000 SUMITOMO BANK ..................................... 41,186 ----------- 128,217 ----------- CHEMICALS--2.0% 3,000 KANEKA CORP.@ ..................................... 34,322 7,000 NIPPON SANSO CORP. ................................ 25,371 1,000 SHIN-ETSU CHEMICAL CO. ............................ 40,820 7,000 SUMITOMO CHEMICAL CO.* ............................ 36,006 6,000 UBE INDUSTRIES LTD* ............................... 13,289 ----------- 149,808 ----------- COMPUTERS/COMPUTER HARDWARE--0.8% 2,000 FUJITSU LTD ....................................... 58,759 ----------- CONSTRUCTION--0.3% 3,000 RAITO KOGYO* ...................................... 21,966 ----------- CONSTRUCTION MATERIALS--0.5% 16,000 TAIHEIYO CEMENT CORP. ............................. 42,028 ----------- CONSUMER PRODUCTS--1.0% 3 JAPAN TOBACCO INC. ................................ 41,735 1,000 KAO CORP.@ ........................................ 28,464 ----------- 70,199 ----------- DIVERSIFIED--0.3% 3,000 MITSUI & CO. ...................................... 21,170 ----------- ELECTRONICS/ELECTRICAL EQUIPMENT--4.0% 6,000 FUJIKURA LTD ...................................... 38,550 200 MABUCHI MOTOR CORP. ............................... 24,968 1,000 MURATA MANUFACTURING CO., LTD@ .................... 80,999 3,000 NEC CORP. ......................................... 48,874 3,000 SHARP CORP. ....................................... 45,854 6,000 TOSHIBA CORP. ..................................... 53,432 ----------- 292,677 ----------- FINANCIAL SERVICES--1.5% 300 ACOM CO., LTD ..................................... 30,505 3,000 DAIWA SECURITIES GROUP INC. ....................... 27,210 400 ORIX CORP.* ....................................... 38,587 20 SHOHKOH FUND ...................................... 14,516 ----------- 110,818 ----------- FOOD/BEVERAGE PRODUCTS--1.1% 2,000 KIKKOMAN* ......................................... 16,456 21,000 NIPPON SUISAN KAISHA LTD* ......................... 41,323 1,000 NISSIN FOOD PRODUCTS* ............................. 26,542 ----------- 84,321 ----------- HEALTH CARE/HEALTH CARE SERVICES--0.9% 2,000 TERUMO ............................................ 64,067 ----------- HOME BUILDING CONSTRUCTION--0.4% 3,000 SEKISUI HOUSE LTD ................................. 32,317 ----------- INSURANCE--0.5% 3,000 TOKIO MARINE & FIRE INSURANCE CO.* ................ 35,420 -----------
Shares Issuer Value ------ ------ ----- JAPAN (cont'd) MACHINERY & ENGINEERING EQUIPMENT--0.4% 5,000 TOKYO KIKAI SEISAKUSHO ............................ $ 29,974 ----------- METALS/MINING--0.6% 8,000 MITSUI MINING & SMELTING* ......................... 47,373 ----------- OIL & GAS--0.6% 13,000 OSAKA GAS CO.@ .................................... 41,644 ----------- PHARMACEUTICALS--0.5% 2,000 FUJISAWA PHARMACEUTICAL CO., LTD .................. 34,432 ----------- REAL ESTATE--0.5% 3,000 HANKYU REALTY CO., LTD ............................ 12,630 2,000 MITSUBISHI ESTATE CO., LTD ........................ 20,721 ----------- 33,351 ----------- RETAILING--0.8% 1,500 AOYAMA TRADING .................................... 55,327 ----------- SHIPPING/TRANSPORTATION--0.4% 5 EAST JAPAN RAILWAY CO. ............................ 30,340 ----------- STEEL--0.5% 13,000 NIPPON STEEL CO. .................................. 34,148 ----------- TELECOMMUNICATIONS--1.6% 3 NIPPON TELEGRAPH & TELEPHONE CORP. ................ 33,773 1 NTT MOBILE COMMUNICATIONS NETWORK INC.@ 16,658 4 NTT MOBILE COMMUNICATIONS NETWORK INC., BONUS*@ ........................................... 66,264 ----------- 116,695 ----------- TEXTILES--0.7% 4,000 KURARAY CO., LTD .................................. 48,179 ----------- TOYS & GAMES--0.6% 300 NINTENDO CO., LTD ................................. 50,934 ----------- TOTAL JAPAN ....................................... 1,693,289 ----------- MALTA--0.6% TELECOMMUNICATIONS--0.6% 2,382 MALTACOM PLC, GDR, REG. S ......................... 41,090 ----------- MEXICO--0.9% DIVERSIFIED--0.5% 10,000 ALFA, SA DE CV, CLASS A ........................... 37,766 ----------- REAL ESTATE--0.2% 500 CORPORACION GEO, SA DE CV, SER. B, GDS* ........... 6,606 500 CORPORACION GEO, SA DE CV, SER. B, GDR*# .......... 6,606 ----------- 13,212 ----------- RETAILING--0.2% 25,000 GRUPO ELEKTRA, SA DE CV, L SHARES ................. 11,596 ----------- TOTAL MEXICO ...................................... 62,574 ----------- NETHERLANDS--7.2% AUTOMOTIVE--0.9% 2,600 ATHLON GROEP ...................................... 63,059 ----------- ELECTRONICS/ELECTRICAL EQUIPMENT--0.9% 607 KONINKLIJKE PHILIPS ELECTRONICS NV ................ 62,733 -----------
See notes to financial statements. page 16 International Equity Portfolio (continued) Portfolio of Investments August 31, 1999
Shares Issuer Value ------ ------ ----- NETHERLANDS (cont'd) FINANCIAL SERVICES--2.1% 4,750 FORTIS (NL) ................................... $ 161,235 ----------- PRINTING & PUBLISHING--1.0% 1,900 VERENIGDE NEDERLANDSE UITGEVERSBEDRIJVAN VERENIGD BEZIT (VNU) .......................... 73,046 ----------- RETAILING--1.0% 957 KONINKLIJKE AHOLD NV .......................... 34,360 1,713 LAURUS NV ..................................... 38,553 ----------- 72,913 ----------- TELECOMMUNICATIONS--1.3% 1,600 UNITED PAN-EUROPE COMMUNICATIONS NV* .......... 97,268 ----------- TOTAL NETHERLANDS ............................. 530,254 ----------- PORTUGAL--1.0% BANKING--0.6% 1,600 BANCO ESPIRITO SANTO E COMMERCIAL ............. 40,686 ----------- TELECOMMUNICATIONS--0.4% 240 TELECEL-COMUNICACOES PESSOAIS, SA ............. 31,061 ----------- TOTAL PORTUGAL ................................ 71,747 ----------- SINGAPORE--0.1% REAL ESTATE--0.1% 2,500 DBS LAND, LTD ................................. 5,702 ----------- SPAIN--4.1% BANKING--0.9% 2,870 ARGENTARIA, CAJA POSTAL Y BANCO HIPOTECARIO DE ESPANA, SA ..................... 65,504 ----------- BROADCASTING--0.7% 1,880 SOGECABLE SA* ................................. 51,331 ----------- BUSINESS SERVICES--0.5% 3,900 PROSEGUR COMPANIA SEGURIDAD SA ................ 38,579 ----------- CONSTRUCTION--0.4% 480 FOMENTO DE CONSTRUCCIONES Y CONTRATAS, SA ................................. 28,545 ----------- RETAILING--0.7% 2,000 CONTINENTE SA ................................. 53,230 ----------- STEEL--0.4% 830 ACERINOX SA ................................... 27,567 ----------- TELECOMMUNICATIONS--0.5% 2,241 TELEFONICA SA* ................................ 35,839 ----------- TOTAL SPAIN ................................... 300,595 ----------- SWEDEN--3.0% BANKING--1.1% 5,850 SVENSKA HANDELSBANKEN ......................... 81,428 ----------- BUSINESS SERVICES--0.6% 3,882 ASSA ABLOY AB ................................. 41,057 ----------- MEDIA/ADVERTISING--0.2% 607 MODERN TIMES GROUP AB* ........................ 16,972 -----------
Shares Issuer Value ------ ------ ----- SWEDEN (cont'd) TELECOMMUNICATIONS--1.1% 2,420 TELEFONAKTIEBOLAGET LM ERICSSON ............... $ 78,254 ----------- TOTAL SWEDEN .................................. 217,711 ----------- SWITZERLAND--5.6% ADVERTISING--2.8% 270 PUBLIGROUPE SA ................................ 202,772 ----------- BANKING--0.1% 25 UBS AG ........................................ 7,072 ----------- CONSUMER PRODUCTS--0.8% 30 RICHEMONT (CIE FIN) ........................... 57,169 ----------- INSURANCE--0.4% 55 ZURICH ALLIED AG .............................. 32,353 ----------- RETAILING--1.5% 1,000 TAG HEUER INTERNATIONAL SA .................... 109,012 ----------- TOTAL SWITZERLAND ............................. 408,378 ----------- THAILAND--0.0% OIL & GAS--0.0% 400 PTT EXPLORATION AND PRODUCTION PUBLIC CO., LTD (FOREIGN)* ................................ 3,151 ----------- UTILITIES--0.0% 1,900 ELECTRICITY GENERATING PUBLIC CO., LTD (FOREIGN) ..................................... 2,974 ----------- TOTAL THAILAND ................................ 6,125 ----------- UNITED KINGDOM--19.4% BANKING--3.7% 3,540 BARCLAY'S PLC*@ ............................... 105,400 4,575 NATIONAL WESTMINSTER BANK PLC@ ................ 94,367 3,479 ROYAL BANK OF SCOTLAND GROUP PLC@ ............. 72,760 ----------- 272,527 ----------- CHEMICALS--0.5% 3,300 LAPORTE PLC ................................... 36,141 29,700 LAPORTE PLC, B SHARES* ........................ 239 ----------- 36,380 ----------- COMPUTER SOFTWARE/SERVICES--0.8% 1,500 EXCHANGE HOLDINGS PLC* ........................ 4,744 5,200 SEMA GROUP PLC@ ............................... 56,908 ----------- 61,652 ----------- CONSTRUCTION--0.7% 4,283 BERKELEY GROUP PLC@ ........................... 54,145 ----------- DIVERSIFIED--1.2% 8,795 GENERAL ELECTRIC CO., PLC ..................... 88,396 ----------- ELECTRONICS/ELECTRICAL EQUIPMENT--0.6% 5,800 NXT PLC* ...................................... 42,472 ----------- FINANCIAL SERVICES--0.6% 14,880 LEGAL & GENERAL GROUP PLC ..................... 41,339 ----------- FOOD/BEVERAGE PRODUCTS--1.0% 6,974 DIAGEO PLC@ ................................... 71,122 -----------
See notes to financial statements. International Equity Portfolio (continued) page 17 Portfolio of Investments August 31, 1999
Shares Issuer Value ------ ------ ----- UNITED KINGDOM (cont'd) MULTI-MEDIA--1.1% 5,460 REUTERS GROUP PLC@ ........................... $ 80,668 ----------- OIL & GAS--4.2% 9,202 BP AMOCO PLC@ ................................ 171,743 17,250 SHELL TRANSPORT & TRADING CO., PLC@ .......... 138,267 ----------- 310,010 ----------- PHARMACEUTICALS--2.8% 5,270 GLAXO WELLCOME PLC ........................... 139,097 5,116 SMITHKLINE BEECHAM PLC@ ...................... 66,899 ----------- 205,996 ----------- STEEL--0.6% 15,500 BRITISH STEEL PLC ............................ 40,841 ----------- TELECOMMUNICATIONS--1.6% 5,689 VODAFONE AIRTOUCH PLC@ ....................... 115,181 ----------- TOTAL UNITED KINGDOM ......................... 1,420,729 ----------- TOTAL COMMON STOCK (COST $6,270,972) ............................ 7,102,100 ----------- PREFERRED STOCK--0.0% MALAYSIA--0.0% CONSTRUCTION--0.0% 4,000 SUNWAY BUILDING TECHNOLOGY, BHD, 3.0% RULS, (REDEEMABLE UNSECURED LOAN STOCK) (COST $1,284) ................................ 900 -----------
Units ----- WARRANTS--0.0% GERMANY--0.0% INSURANCE--0.0% 11 MUENCHENER RUECKVERSICHERUNGS- GESELLSCHAFT AG, EXPIRES 06/03/02 .......... 367 ----------- HONG KONG--0.0% DIVERSIFIED--0.0% 300 WHARF HOLDINGS, EXPIRES 12/31/99 ........... 185 ----------- TOTAL WARRANTS (COST $0) .................................. 552 -----------
Principal Amount (DEM) - ---------- CONVERTIBLE CORPORATE BOND--0.0% GERMANY--0.0% AUTOMOTIVE--0.0% 1,310 DAIMLERCHRYSLER AG, 5.75%, 06/14/02 (COST $769) ....................... 741 ----------- TOTAL INVESTMENTS--96.8% (COST $6,273,025) ................. $ 7,104,293 ===========
Number Original Value Expiration of Cost (USD) at Unrealized Description Date Contracts (USD) 08/31/99 Depreciation - -------------------- ------------ ----------- ---------- ---------- ------------- LONG INDEX FUTURES CONTRACTS OUTSTANDING ALL ORDINARIES SPI Sept. 1999 3 $147,309 $145,553 ($ 1,756) SHORT INDEX FUTURES CONTRACTS OUTSTANDING DJ EURO STOXX 50 Sept. 1999 4 155,238 161,140 (5,902)
* = Non-income producing security # = Security may only be sold to institutional buyers @ = All or a portion of this secruity is segregated for forward foreign currency contracts ADR = American Depositary Receipt GDR = Global Depositary Receipt GDS = Global Depositary Share See notes to financial statements. page 18 Asset Allocation Portfolio Portfolio of Investments August 31, 1999
Shares Issuer Value ------ ------ ----- LONG-TERM INVESTMENTS--94.5% COMMON STOCK--49.0% AEROSPACE--0.8% 1,200 GENERAL DYNAMICS CORP. .............................. $ 75,600 ----------- AIRLINES--0.8% 1,200 AMR CORP.* .......................................... 70,350 ----------- AUTOMOTIVE--1.0% 1,800 FORD MOTOR CO. ...................................... 93,825 ----------- BANKING--2.7% 1,500 BANKAMERICA CORP. ................................... 90,750 1,400 BANK ONE CORP. ...................................... 56,175 800 CULLEN/FROST BANKERS, INC. .......................... 20,900 1,000 FIRST SECURITY CORP. ................................ 21,687 600 FIRST UNION CORP. ................................... 24,900 600 MERCANTILE BANCOPORATION ............................ 33,112 ----------- 247,524 ----------- BIOTECHNOLOGY--0.5% 600 AMGEN, INC.* ........................................ 49,913 ----------- BROADCASTING--0.8% 1,500 CBS CORP.* .......................................... 70,500 ----------- CHEMICALS--0.7% 800 AIR PRODUCTS AND CHEMICALS, INC. .................... 27,200 300 DOW CHEMICAL CO. .................................... 34,088 ----------- 61,288 ----------- COMPUTER SOFTWARE--2.0% 1,200 AMERICAN MANAGEMENT SYSTEMS, INC.* .................. 34,350 1,100 COMPUTER ASSOCIATES INTERNATIONAL, INC. ............. 62,150 1,500 SYMANTEC CORP.* ..................................... 45,000 1,100 UNISYS CORP.* ....................................... 47,300 ----------- 188,800 ----------- COMPUTERS/COMPUTER HARDWARE--2.3% 800 EMC CORP.* .......................................... 48,000 800 INTERNATIONAL BUSINESS MACHINES CORP. ............... 99,650 800 TEXAS INSTRUMENTS, INC. ............................. 65,650 ----------- 213,300 ----------- CONSTRUCTION--0.6% 3,800 D.R. HORTON, INC. ................................... 55,338 ----------- CONSTRUCTION MATERIALS--1.5% 4,800 MASCO CORP. ......................................... 135,900 ----------- CONSUMER PRODUCTS--2.2% 1,000 FORTUNE BRANDS, INC. ................................ 37,500 2,900 PHILIP MORRIS COMPANIES, INC. ....................... 108,569 3,100 SHAW INDUSTRIES, INC. ............................... 62,000 ----------- 208,069 ----------- DIVERSIFIED--0.5% 500 TYCO INTERNATIONAL LTD (BERMUDA)* ................... 50,656 ----------- ELECTRONICS/ELECTRICAL EQUIPMENT--2.6% 2,100 ALTERA CORP.* ....................................... 88,462 1,500 APPLIED MATERIALS, INC.* ............................ 106,594 1,600 EG&G, INC. .......................................... 50,900 ----------- 245,956 -----------
Shares Issuer Value ------ ------ ----- ENTERTAINMENT/LEISURE--1.1% 2,500 VIACOM, INC. CLASS B* ............................... $ 105,156 ----------- ENVIRONMENTAL SERVICES--0.3% 1,100 WASTE MANAGEMENT, INC. .............................. 23,994 ----------- FINANCIAL SERVICES--3.7% 2,942 ASSOCIATES FIRST CAPITAL CORP., CLASS A ............. 100,947 1,900 CITIGROUP, INC. ..................................... 84,431 2,000 FREDDIE MAC ......................................... 103,000 400 LEHMAN BROTHERS HOLDING, INC. ....................... 21,500 400 MORGAN STANLEY, DEAN WITTER, & CO. .................. 34,325 ----------- 344,203 ----------- FOOD/BEVERAGE PRODUCTS--0.5% 1,400 PEPSICO, INC. ....................................... 47,775 ----------- HEALTH CARE/HEALTH CARE SERVICES--1.7% 400 AETNA INC. .......................................... 31,100 1,000 COLUMBIA/HCA HEALTHCARE CORP. ....................... 24,625 2,200 HCR MANOR CARE, INC.* ............................... 43,037 7,000 HEALTHSOUTH CORP.* .................................. 57,313 ----------- 156,075 ----------- INSURANCE--1.6% 1,600 ALLSTATE CORP. ...................................... 52,500 1,900 TRAVELERS PROPERTY CASUALTY CORP., CLASS A .......... 67,450 600 XL CAPITAL LTD, CLASS A (BERMUDA) ................... 30,188 ----------- 150,138 ----------- MANUFACTURING--2.5% 2,000 INGERSOLL-RAND CO. .................................. 127,250 800 JOHNSON CONTROLS, INC. .............................. 54,700 1,100 PENTAIR, INC. ....................................... 50,050 ----------- 232,000 ----------- METALS/MINING--1.7% 2,400 ALCOA, INC. ......................................... 154,950 ----------- OFFICE/BUSINESS EQUIPMENT--0.3% 500 XEROX CORP. ......................................... 23,875 ----------- OIL & GAS--4.5% 800 CHEVRON CORP. ....................................... 73,800 4,200 COASTAL CORP. ....................................... 181,912 1,700 HALLIBURTON CO. ..................................... 78,837 500 MOBIL CORP. ......................................... 51,188 1,600 ULTRAMAR DIAMOND SHAMROCK CORP. ..................... 41,800 ----------- 427,537 ----------- PAPER/FOREST PRODUCTS--0.9% 700 WEYERHAEUSER CO. .................................... 39,375 1,200 WILLAMETTE INDUSTRIES ............................... 47,550 ----------- 86,925 ----------- PHARMACEUTICALS--1.7% 3,000 PHARMACIA & UPJOHN, INC. ............................ 156,750 ----------- PIPELINES--0.5% 800 COLUMBIA ENERGY GROUP, INC. ......................... 47,250 -----------
See notes to financial statements. Asset Allocation Portfolio (continued) page 19 Portfolio of Investments August 31, 1999
Shares Issuer Value ------ ------ ----- PRINTING & PUBLISHING--0.8% 1,800 NEW YORK TIMES CO., CLASS A .................. $ 70,313 ----------- REAL ESTATE INVESTMENT TRUST--0.7% 900 EQUITY RESIDENTIAL PROPERTIES TRUST .......... 39,600 800 ESSEX PROPERTY TRUST, INC. ................... 28,100 ----------- 67,700 ----------- RETAILING--1.9% 900 FEDERATED DEPARTMENT STORES* ................. 41,400 3,800 KROGER CO.* .................................. 87,875 4,500 OFFICE DEPOT, INC.* .......................... 46,969 ----------- 176,244 ----------- SHIPPING/TRANSPORTATION--0.7% 1,400 UNION PACIFIC CORP. .......................... 68,163 ----------- TELECOMMUNICATIONS--2.4% 580 AT&T CORP. ................................... 26,100 1,200 GTE CORP. .................................... 82,350 1,200 MCI WORLDCOM, INC.* .......................... 90,900 400 TELLABS, INC.* ............................... 23,825 ----------- 223,175 ----------- TELECOMMUNICATIONS EQUIPMENT--0.4% 800 GENERAL INSTRUMENT CORP.* .................... 39,350 ----------- UTILITIES--2.1% 1,600 CMS ENERGY CORP. ............................. 63,300 500 DUKE ENERGY CORP. ............................ 28,750 1,400 TEXAS UTILITIES CO. .......................... 56,612 1,200 UNICOM CORP. ................................. 46,350 ----------- 195,012 ----------- TOTAL COMMON STOCK (COST $4,378,459) ............................ 4,563,604 ----------- Principal Amount (USD) --------- CORPORATE NOTES & BONDS--10.8% AUTOMOTIVE--2.0% FORD MOTOR CREDIT CO., $ 50,000 5.80%, 01/12/09 ............................. 44,858 50,000 6.70%, 07/16/04 ............................. 49,199 100,000 GENERAL MOTORS ACCEPTANCE CORP., 5.85%, 01/14/09 .............................. 89,632 ----------- 183,689 ----------- BANKING--0.5% 50,000 SOVEREIGN BANCORP, 6.63%, 03/15/01 ........... 49,178 ----------- DIVERSIFIED--1.5% TYCO INTERNATIONAL GROUP, SA (LUXEMBURG), 75,000 5.88%, 11/01/04 ............................. 70,504 75,000 6.88%, 01/15/29 ............................. 66,434 ----------- 136,938 -----------
Principal Amount (USD) Issuer Value --------- ------ ----- FINANCIAL SERVICES--4.3% $ 49,829 BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES, INC., 6.80%, 09/15/08 ...................... $ 49,186 100,000 GENERAL ELECTRIC CAPITAL CORP., MTN, 9.18%, 12/30/08 ........................................ 114,032 50,000 GOLDMAN SACHS GROUP, 6.65%, 05/15/09 ................... 47,237 50,000 LEHMAN BROTHERS HOLDINGS, 6.63%, 04/01/04 .............. 48,174 50,000 NATIONSLINK FUNDING CORP., 6.30%, 12/10/02 ............. 48,922 50,000 TPSA FINANCE, 7.75%, 12/10/08 .......................... 47,368 50,000 TXU EASTERN FUNDING (UNITED KINGDOM),# 6.45%, 05/15/05 ............................................... 47,043 ----------- 401,962 ----------- OIL & GAS--0.5% 50,000 CONOCO INC., 5.90%, 04/15/04 ........................... 46,503 ----------- PRINTING & PUBLISHING--0.3% 30,000 WASHINGTON POST CO., CLASS B, 5.50%, 02/15/09 .......... 26,925 ----------- TELECOMMUNICATIONS--1.7% 75,000 AT&T CORP., 5.63%, 03/15/04 ............................ 71,671 100,000 SPRINT CAPITAL CORP., 6.38%, 05/01/09 .................. 92,775 ----------- 164,446 ----------- TOTAL CORPORATE NOTES & BONDS (COST $1,054,429) ...................................... 1,009,641 ----------- MORTGAGE BACKED SECURITIES--11.3% FEDERAL NATIONAL MORTGAGE ASSOCIATION 118,242 POOL 252339, 6.00%, 03/01/29 .......................... 108,744 78,196 POOL 252435, 6.00%, 05/01/14 ........................... 74,408 50,886 POOL 313563, 10.50%, 03/01/18 .......................... 55,608 235,374 POOL 323614, 6.50%, 02/01/14 ........................... 228,607 233,956 POOL 323633, 7.00%, 03/01/29 ........................... 227,229 214,061 POOL 323688, 7.50%, 03/01/29 ........................... 212,588 157,105 POOL 484753, 6.50%, 03/01/29 ........................... 148,709 ----------- TOTAL MORTGAGE BACKED SECURITIES (COST $1,097,451) ...................................... 1,055,893 ----------- ASSET BACKED SECURITIES--1.1% 100,000 DISCOVER CARD MASTER TRUST I, SER. 1998-2, CLASS A, 5.80%, 09/16/03 (COST $99,430) ......................................... 99,437 ----------- U.S. TREASURY SECURITIES--19.6% U.S. TREASURY NOTES & BONDS, 250,000 4.25%, 11/15/03 ....................................... 234,610 100,000 4.63%, 12/31/00@ ....................................... 98,672 100,000 4.75%, 02/15/04 ........................................ 95,453 50,000 4.75%, 11/15/08 ........................................ 45,258 100,000 5.00%, 02/28/01 ........................................ 99,016 50,000 5.25%, 05/31/01 ........................................ 49,586 175,000 5.25%, 11/15/28 ........................................ 151,676 50,000 5.63%, 02/15/06 ........................................ 48,703 50,000 6.00%, 07/31/02 ........................................ 50,211
See notes to financial statements. page 20 Asset Allocation Portfolio (continued) Portfolio of Investments August 31, 1999
Principal Amount (USD) Issuer Value --------- ------ ----- U.S. TREASURY SECURITIES (cont'd) $ 250,000 6.13%, 11/15/27 .............................. $ 242,813 450,000 6.50%, 10/15/06 .............................. 457,947 40,000 8.13%, 08/15/19 .............................. 47,231 125,000 8.50%, 02/15/20 .............................. 153,223 50,000 8.75%, 08/15/00 ............................. 51,453 ---------- TOTAL U.S. TREASURY SECURITIES (COST $1,879,152) ............................ 1,825,852 ---------- U.S. GOVERNMENT AGENCY OBLIGATIONS--1.5% FEDERAL HOME LOAN MORTGAGE ASSOCIATION, 50,000 5.13%, 10/15/08 ............................. 44,047 50,000 6.00%, 11/15/17 ............................. 48,672 50,000 FEDERAL NATIONAL MORTGAGE ASSOCIATION, 5.13%, 02/13/04 .............................. 47,203 ---------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $148,586) .............................. 139,922 ---------- STATE & MUNICIPAL OBLIGATIONS--1.2% MICHIGAN--1.2% 130,000 WAYNE CHARTER COUNTY, MICHIGAN, DETROIT METROPOLITAN WAYNE COUNTY, SER. A, REV., 5.00%, 12/01/28 (COST $123,673) .............................. 114,104 ---------- TOTAL LONG-TERM INVESTMENTS (COST $8,781,180) ............................ 8,808,453 ---------- SHORT-TERM INVESTMENT--5.0% REPURCHASE AGREEMENT--5.0% 470,000 GREENWICH CAPITAL MARKETS, INC., 5.48%, DUE 09/01/99, (DATED 08/31/99, PROCEEDS $470,072, SECURED BY FHLMC, $498,010, FRN, DUE 05/15/29; MARKET VALUE $481,821) (COST $470,000) .............................. 470,000 ---------- TOTAL INVESTMENTS--99.5% (COST $9,251,180) ............................ $9,278,453 ========== SHORT FUTURES CONTRACTS OUTSTANDING
Number Expiration of Original Value at Unrealized Description Date Contracts Cost 08/31/99 Appreciation - ---------------------- ------------ ----------- ---------- ---------- ------------- U.S. TREASURY NOTE Sept. 99 5 $560,624 $550,000 $10,624
* = Non-income producing security # = Security may only be sold to institutional buyers @ = All or a portion of this security is segregated FHLMC = Federal Home Loan Mortgage Corporation FRN = Floating Rate Note MTN = Medium Term Note REV. = Revenue Bond See notes to financial statements. U.S. Government Income Portfolio Portfolio of Investments August 31, 1999
Principal Amount Issuer Value ------ ------ ----- LONG-TERM INVESTMENTS--93.6% U.S. TREASURY SECURITIES--47.2% U.S. TREASURY NOTES & BONDS, $ 575,000 5.63%, 05/15/08 ............................ $ 554,967 335,000 6.13%, 09/30/00 ............................ 336,883 400,000 6.75%, 08/15/26 ............................ 418,564 675,000 8.50%, 02/15/20 ............................ 827,401 735,000 10.75%, 08/15/05 ........................... 898,883 ---------- TOTAL U.S. TREASURY SECURITIES (COST $3,276,968) ........................... 3,036,698 ---------- U.S. GOVERNMENT AGENCY OBLIGATIONS--36.0% 750,000 FEDERAL HOME LOAN MORTGAGE CORP., 5.70%, 03/25/03 .................................... 731,130 FEDERAL NATIONAL MORTGAGE ASSOCIATION, 469,000 5.13%, 02/13/04 ............................ 442,764 150,000 5.88%, 04/23/04 ............................ 144,446 1,000,000 STUDENT LOAN MARKETING ASSOCIATION, 5.57%, 03/17/00 .................................... 998,120 ---------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $2,347,227) ........................... 2,316,460 ---------- MORTGAGE BACKED SECURITIES--10.4% 702,752 GOVERNMENT NATIONAL MORTGAGE ASSOCIATION, POOL 354779, 6.50%, 03/15/24 (COST $641,543) ............................. 668,928 ---------- TOTAL LONG-TERM INVESTMENTS (COST $6,265,738) ........................... 6,022,086 ---------- SHORT-TERM INVESTMENT--4.7% REPURCHASE AGREEMENT--4.7% 304,000 GREENWICH CAPITAL MARKETS, INC., 5.48%, DUE 09/01/99, (DATED 08/31/99, PROCEEDS $304,046, SECURED BY FNMA POOL, $305,673, FRN, DUE 07/18/27; MARKET VALUE $311,312) (COST $304,000) ............................. 304,000 ---------- TOTAL INVESTMENTS--98.3% (COST $6,569,738) ........................... $6,326,086 ==========
FNMA = Federal National Mortgage Association FRN = Floating Rate Note Money Market Portfolio page 21 Portfolio of Investments August 31, 1999
Principal Amount (USD) Issuer Value ----- ------ ----- U.S. TREASURY SECURITIES--6.8% U.S. TREASURY BILLS, $ 172,000 4.57%, 09/16/99 ...................................... $171,673 100,000 4.57%, 10/21/99 ...................................... 99,365 -------- TOTAL U.S. TREASURY SECURITIES (COST $271,038) ....................................... 271,038 -------- U.S. GOVERNMENT AGENCY OBLIGATIONS--2.4% 98,000 FEDERAL NATIONAL MORTGAGE ASSOCIATION, MTN, 5.01%, 09/27/99 (COST $97,645) ....................................... 97,645 -------- COMMERCIAL PAPER--78.8% ASSET BACKED SECURITIES--3.7% 150,000 CIESCO L.P., 5.30%, 10/14/99 .......................... 149,051 -------- BANKING--18.2% 100,000 BANCO BOZANO SIMONSEN (CI), (SPAIN), 5.30%, 09/24/99 ....................................... 99,661 150,000 BANCO NACIONAL DE MEXICO SA (BANAMEX), (UNITED KINGDOM), 5.35%, 09/07/99 ..................... 149,866 100,000 NATIONAL AUSTRALIA FUNDING, (AUSTRALIA), 5.20%, 09/21/99 ....................................... 99,711 190,000 SWEDBANK (SWEDEN), 5.15%, 09/15/99 .................... 189,619 190,000 UNIFUNDING, INC., (DENMARK), 5.17%, 10/04/99 .......... 189,100 -------- 727,957 -------- CONSTRUCTION MACHINERY--4.8% 190,000 CATERPILLAR FINANCIAL SERVICES CORP., 4.93%, 09/02/99 ....................................... 189,974 -------- CONSUMER PRODUCTS--2.5% 100,000 PROCTER & GAMBLE CO., 5.15%, 09/13/99 ................. 99,828 -------- ELECTRONICS/ELECTRICAL EQUIPMENT--2.5% 100,000 GENERAL ELECTRIC CAPITAL CORP., 5.26%, 09/20/99 ....................................... 99,722 -------- ENTERTAINMENT--2.5% 100,000 WALT DISNEY CO., 5.20%, 11/08/99 ...................... 99,018 --------
See notes to financial statements. page 22 Money Market Portfolio (continued) Portfolio of Investments August 31, 1999
Principal Amount (USD) Issuer Value ----- ------ ----- FINANCIAL SERVICES--26.9% $ 190,000 BIL NORTH AMERICA, INC., (BELGIUM), 5.23%, 09/17/99 ....................................... $ 189,558 195,000 INTERNATIONAL LEASE FINANCE CORP., 4.78%, 09/13/99 ....................................... 194,689 130,000 J.P. MORGAN SECURITIES, INC., 4.82%, 09/15/99 ......... 129,756 190,000 MERRILL LYNCH & CO., INC., 5.10%, 09/07/99 ............ 189,838 190,000 SALOMON SMITH BARNEY HOLDINGS, INC., 5.20%, 09/13/99 .............................................. 189,671 180,000 UBS FINANCE INC., (SWITZERLAND), 5.20%, 09/10/99 ...... 179,766 ---------- 1,073,278 ---------- INSURANCE--9.5% 190,000 ING AMERICA INSURANCE HOLDINGS, INC., (NETHERLANDS), 5.17%, 11/12/99 ........................ 188,035 190,000 METLIFE FUNDING, INC., 5.20%, 09/15/99 ................ 189,616 ---------- 377,651 ---------- PHARMACEUTICALS--4.6% 185,000 ABBOTT LABORATORIES, 5.17%, 09/14/99 .................. 184,655 ---------- RETAILING--3.6% 145,000 ST. MICHAEL FINANCE LTD, (UNITED KINGDOM), 5.28%, 10/14/99 ....................................... 144,087 ---------- TOTAL COMMERCIAL PAPER (COST $3,145,221) ..................................... 3,145,221 ---------- CERTIFICATES OF DEPOSITS (YANKEE)--11.9% 100,000 CANADIAN IMPERIAL BANK OF COMMERCE (CIBC), (CANADA), 5.27%, 03/03/00 ............................. 100,004 125,000 DEUTSCHE BANK AG, (GERMANY), 5.33%, 03/09/00 .......... 125,039 150,000 NATIONAL WESTMINSTER BANK PLC, (UNITED KINGDOM), 5.20%, 05/10/00 ............................. 149,326 100,000 TORONTO DOMINION BANK LTD, (CANADA), 5.05%, 02/14/00 .............................................. 99,949 ---------- TOTAL CERTIFICATES OF DEPOSITS (YANKEE) (COST $474,318) ....................................... 474,318 ---------- TOTAL INVESTMENTS--99.9% (COST $3,988,222)* .................................... $3,988,222 ==========
* = The cost of securities is substantially the same for federal income tax purposes. MTN = Medium Term Note. See notes to financial statements. Statement of Assets and Liabilities page 23 August 31, 1999
Growth and Capital International Income Growth Equity Portfolio Portfolio Portfolio --------- --------- --------- ASSETS: Investment securities, at value (Note 1) $19,107,778 $12,687,899 $7,104,293 Cash 578 640 53,006 Foreign Currency (Cost $202,143)(a) -- -- 203,986 Other assets 171 112 62 Receivables: Investment securities sold 93,708 -- 205,512 Portfolio shares sold 15,078 -- -- Dividends and interest 21,595 6,251 11,794 Variation margin -- -- -- Open forward foreign currency contracts -- -- 34,909 Expense reimbursement from VFD -- -- 11,000 Other -- -- -- ----------- ----------- ---------- TOTAL ASSETS 19,238,908 12,694,902 7,624,562 ----------- ----------- ---------- LIABILITIES: Payables: Investment securities purchased -- -- 228,208 Portfolio shares redeemed 241 469 155 Variation margin -- -- 7,646 Open forward foreign currency contracts -- -- 6,051 Accrued liabilities: (Note 2) Investment advisory fees 2,488 -- -- Administration fees 3,317 -- -- Custody fees 16,534 14,289 6,233 Other 62,991 31,500 39,707 ----------- ----------- ---------- TOTAL LIABILITIES 85,571 46,258 288,000 ----------- ----------- ---------- NET ASSETS: Paid in capital 18,709,718 10,979,708 6,475,467 Accumulated undistributed/(overdistributed) net investment income 46,071 558 (109,647) Accumulated net realized gain (loss) on investments and futures transactions (314,961) (563,362) 116,135 Net unrealized appreciation (depreciation) of investments, futures and assets and liabilities denominated in foreign currencies 712,509 2,231,740 854,607 ----------- ----------- ---------- NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS $19,153,337 $12,648,644 $7,336,562 =========== =========== ========== Shares of beneficial interest outstanding ($.001 par value; unlimited number of shares authorized) 1,516,069 920,135 645,906 Net asset value, maximum offering price per share and redemption price per share $ 12.63 $ 13.75 $ 11.36 =========== =========== ========== Cost of investments $18,395,269 $10,456,159 $6,273,025 =========== =========== ========== Asset U.S. Government Money Allocation Income Market Portfolio Portfolio Portfolio --------- --------- --------- ASSETS: Investment securities, at value (Note 1) $ 9,278,453 $6,326,086 $3,988,222 Cash 3,300 646 3,365 Foreign Currency (Cost $202,143)(a) -- -- -- Other assets 82 56 33 Receivables: Investment securities sold -- -- -- Portfolio shares sold -- 36,176 -- Dividends and interest 61,752 77,875 11,244 Variation margin 703 -- -- Open forward foreign currency contracts -- -- -- Expense reimbursement from VFD 9,000 10,000 10,254 Other -- -- 296 ----------- ---------- ---------- TOTAL ASSETS 9,353,290 6,450,839 4,013,414 ----------- ---------- ---------- LIABILITIES: Payables: Investment securities purchased -- -- -- Portfolio shares redeemed 204 34 51 Variation margin -- -- -- Open forward foreign currency contracts -- -- -- Accrued liabilities: (Note 2) Investment advisory fees -- -- -- Administration fees -- -- -- Custody fees 13,356 3,848 7,236 Other 15,877 13,737 15,018 ----------- ---------- ---------- TOTAL LIABILITIES 29,437 17,619 22,305 ----------- ---------- ---------- NET ASSETS: Paid in capital 9,019,858 6,276,807 3,991,819 Accumulated undistributed/(overdistributed) net investment income 221,337 294,656 (213) Accumulated net realized gain (loss) on investments and futures transactions 44,761 105,409 (497) Net unrealized appreciation (depreciation) of investments, futures and assets and liabilities denominated in foreign currencies 37,897 (243,652) -- ----------- ---------- ---------- NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS $ 9,323,853 $6,433,220 $3,991,109 =========== ========== ========== Shares of beneficial interest outstanding ($.001 par value; unlimited number of shares authorized) 869,780 676,521 3,991,805 Net asset value, maximum offering price per share and redemption price per share $ 10.72 $ 9.51 $ 1.00 =========== ========== ========== Cost of investments $ 9,251,180 $6,569,738 $3,988,222 =========== ========== ==========
(a) Including foreign cash of $36,460 segregated for margin on futures contracts. See notes to financial statements. page 24 Statement of Operations For the year ended August 31, 1999
Growth and Capital Income Growth Portfolio Portfolio --------- --------- INVESTMENT INCOME (Note 1B): Interest $ 55,737 $ 87,739 Dividends 228,067 98,738 Foreign taxes withheld -- (363) ---------- ---------- TOTAL INVESTMENT INCOME 283,804 186,114 ---------- ---------- EXPENSES (Note 2): Investment advisory fees 117,969 74,744 Administration fees 39,322 24,915 Accounting fees -- -- Custodian fees 56,614 59,909 Printing and postage 3,840 3,984 Professional fees 25,895 26,683 Transfer agent fees 16,600 14,138 Trustees' fees and expenses 983 623 Miscellaneous expenses -- 6,742 ---------- ---------- TOTAL EXPENSES 261,223 211,738 ---------- ---------- Less amounts waived (Note 2D) 84,365 99,659 Less expenses assumed by VFD -- -- ---------- ---------- NET EXPENSES 176,858 112,079 ---------- ---------- NET INVESTMENT INCOME 106,946 74,035 ---------- ---------- NET REALIZED GAIN (LOSS) ON: Investment transactions (273,794) (326,396) Futures transactions -- -- Foreign currency transactions -- -- CHANGE IN NET UNREALIZED APPRECIATION/ DEPRECIATION ON: Investments 3,731,059 3,485,901 Futures -- -- Foreign currency contracts and foreign currency translation -- -- ---------- ---------- Net realized and unrealized gain (loss) 3,457,265 3,159,505 ---------- ---------- Net increase (decrease) in net assets from operations $3,564,211 $3,233,540 ========== ========== International Asset U.S. Government Money Equity Allocation Income Market Portfolio Portfolio Portfolio Portfolio --------- --------- --------- --------- INVESTMENT INCOME (Note 1B): Interest $ 9,079 $ 60,703 $ 410,910 $198,187 Dividends 77,276 244,875 -- -- Foreign taxes withheld (10,510) (66) -- -- ---------- -------- ---------- -------- TOTAL INVESTMENT INCOME 75,845 305,512 410,910 198,187 ---------- -------- ---------- -------- EXPENSES (Note 2): Investment advisory fees 53,428 50,452 33,422 9,736 Administration fees 13,358 18,346 13,369 7,789 Accounting fees 64,999 -- -- -- Custodian fees 16,696 58,693 41,562 30,039 Printing and postage 21,002 11,490 7,496 5,160 Professional fees 31,441 20,002 18,344 16,499 Transfer agent fees 12,349 12,758 13,380 12,735 Trustees' fees and expenses 334 459 334 195 Miscellaneous expenses 2,671 1,787 3,907 6,777 ---------- -------- ---------- -------- TOTAL EXPENSES 216,278 173,987 131,814 88,930 ---------- -------- ---------- -------- Less amounts waived (Note 2D) 66,786 68,798 46,791 17,525 Less expenses assumed by VFD 75,990 27,218 31,544 49,985 ---------- -------- ---------- -------- NET EXPENSES 73,502 77,971 53,479 21,420 ---------- -------- ---------- -------- NET INVESTMENT INCOME 2,343 227,541 357,431 176,767 ---------- -------- ---------- -------- NET REALIZED GAIN (LOSS) ON: Investment transactions 58,956 35,467 111,284 216 Futures transactions 51,524 22,528 -- -- Foreign currency transactions (75,184) -- -- -- CHANGE IN NET UNREALIZED APPRECIATION/ DEPRECIATION ON: Investments 1,430,112 636,818 (547,700) -- Futures 1,201 11,564 -- -- Foreign currency contracts and foreign currency translation 15,462 -- -- -- ---------- -------- ---------- -------- Net realized and unrealized gain (loss) 1,482,071 706,377 (436,416) 216 ---------- -------- ---------- -------- Net increase (decrease) in net assets from operations $1,484,414 $933,918 $ (78,985) $176,983 ========== ======== ========== ========
See notes to financial statements. Statement of Changes in Net Assets page 25 For the year ended August 31,
Growth and Income Capital Growth Portfolio Portfolio ------------------------------- ------------------------------ 1999 1998 1999 1998 --------------- --------------- --------------- -------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 106,946 $ 140,213 $ 74,035 $ 93,943 Net realized gain (loss) on investments, futures and foreign currency transactions (273,794) 3,688,903 (326,396) 1,362,111 Change in net unrealized appreciation/ depreciation on investments, futures and foreign currency translations 3,731,059 (5,264,810) 3,485,901 (3,730,448) ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 3,564,211 (1,435,694) 3,233,540 (2,274,394) ------------ ------------ ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (141,313) (152,413) (91,620) (75,294) Net realized gain on investment transactions (3,026,944) (2,095,439) (1,211,368) (1,086,897) ------------ ------------ ------------ ------------ TOTAL DISTRIBUTIONS TO SHAREHOLDERS (3,168,257) (2,247,852) (1,302,988) (1,162,191) ------------ ------------ ------------ ------------ INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS: Proceeds from shares issued 2,745,113 7,392,467 1,764,277 4,208,043 Dividends reinvested 3,168,265 2,247,852 1,302,988 1,162,192 Cost of shares redeemed (4,525,706) (3,588,729) (3,444,937) (3,211,182) ------------ ------------ ------------ ------------ INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS 1,387,672 6,051,590 (377,672) 2,159,053 ------------ ------------ ------------ ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS 1,783,626 2,368,044 1,552,880 (1,277,532) NET ASSETS: Beginning of period 17,369,711 15,001,667 11,095,764 12,373,296 ------------ ------------ ------------ ------------ End of period $ 19,153,337 $ 17,369,711 $ 12,648,644 $ 11,095,764 ============ ============ ============ ============ Share Transactions: Issued 206,744 487,129 138,153 270,050 Reinvested 10,795 162,983 103,819 81,196 Redeemed (106,283) (234,746) (268,589) (201,529) ------------ ------------ ------------ ------------ Change in shares 111,256 415,366 (26,617) 149,717 ============ ============ ============ ============ International Equity Asset Allocation Portfolio Portfolio ------------------------------ ------------------------------- 1999 1998 1999 1998 --------------- -------------- --------------- --------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 2,343 $ 12,165 $ 227,541 $ 217,174 Net realized gain (loss) on investments, futures and foreign currency transactions 35,296 377,671 57,995 860,769 Change in net unrealized appreciation/ depreciation on investments, futures and foreign currency translations 1,446,775 (611,170) 648,382 (1,192,269) ------------- ---------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 1,484,414 (221,334) 933,918 (114,326) ------------- ---------- ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (65,684) (103,835) (150,706) (188,322) Net realized gain on investment transactions (309,348) (217,881) (783,916) (398,931) ------------- ---------- ------------- ------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (375,032) (321,716) (934,622) (587,253) ------------- ---------- ------------- ------------- INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS: Proceeds from shares issued 540,673 1,608,468 1,873,665 2,149,078 Dividends reinvested 375,032 321,716 934,622 587,253 Cost of shares redeemed (1,006,352) (489,849) (1,296,518) (504,107) ------------- ---------- ------------- ------------- INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS (90,647) 1,440,335 1,511,769 2,232,224 ------------- ---------- ------------- ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS 1,018,735 897,285 1,511,065 1,530,645 NET ASSETS: Beginning of period 6,317,827 5,420,542 7,812,788 6,282,143 ------------- ---------- ------------- ------------- End of period $ 7,336,562 $6,317,827 $ 9,323,853 $ 7,812,788 ============= ========== ============= ============= Share Transactions: Issued 52,457 150,107 168,082 182,176 Reinvested 37,761 33,368 84,851 52,028 Redeemed (100,131) (46,315) (117,135) (43,387) ------------- ---------- ------------- ------------- Change in shares (9,913) 137,160 135,798 190,817 ============= ========== ============= ============= U.S. Government Income Money Market Portfolio Portfolio ----------------------------- ------------------------------- 1999 1998 1999 1998 -------------- -------------- --------------- --------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 357,431 $ 293,366 $ 176,767 $ 173,400 Net realized gain (loss) on investments, futures and foreign currency transactions 111,284 (4,875) 216 (380) Change in net unrealized appreciation/ depreciation on investments, futures and foreign currency translations (547,700) 270,455 -- -- ------------- ---------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (78,985) 558,946 176,983 173,020 ------------- ---------- ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (341,109) (152,142) (177,389) (172,997) Net realized gain on investment transactions -- -- (316) -- ------------- ---------- ------------- ------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (341,109) (152,142) (177,705) (172,997) ------------- ---------- ------------- ------------- INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS: Proceeds from shares issued 1,813,167 2,677,221 3,209,679 827,196 Dividends reinvested 341,107 152,142 178,002 179,352 Cost of shares redeemed (1,882,389) (456,130) (2,674,958) (2,581,778) ------------- ---------- ------------- ------------- INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS 271,885 2,373,233 712,723 (1,575,230) ------------- ---------- ------------- ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS (148,209) 2,780,037 712,001 (1,575,207) NET ASSETS: Beginning of period 6,581,429 3,801,392 3,279,108 4,854,315 ------------- ---------- ------------- ------------- End of period $ 6,433,220 $6,581,429 $ 3,991,109 $ 3,279,108 ============= ========== ============= ============= Share Transactions: Issued 181,506 276,633 3,209,679 827,196 Reinvested 34,700 15,978 178,002 179,352 Redeemed (189,910) (46,840) (2,674,958) (2,581,778) ------------- ---------- ------------- ------------- Change in shares 26,296 245,771 712,723 (1,575,230) ============= ========== ============= =============
See notes to financial statements. page 26 Financial Highlights
Growth and Income Portfolio ------------------------------------------------------------ Year Ended August 31, 03/01/95* through 1999 1998 1997 1996 08/31/95 ----------- ------------ ----------- ----------- ----------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 12.36 $ 15.16 $ 12.74 $ 11.48 $ 10.00 ------- ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.06 0.09 0.15 0.29 0.11 Net gains or losses on investments (both realized and unrealized) 2.58 ( 0.71) 3.99 1.52 1.37 ------- ------- ------- ------- ------- TOTAL FROM INVESTMENT OPERATIONS 2.64 ( 0.62) 4.14 1.81 1.48 ------- ------- ------- ------- ------- LESS DISTRIBUTIONS: Dividends from net investment income 0.09 0.13 0.15 0.30 -- Distributions from capital gains 2.28 2.05 1.57 0.25 -- ------- ------- ------- ------- -------- TOTAL DISTRIBUTIONS 2.37 2.18 1.72 0.55 -- ------- ------- ------- ------- -------- NET ASSET VALUE, END OF PERIOD $ 12.63 $ 12.36 $ 15.16 $ 12.74 $ 11.48 ======= ======= ======= ======= ======== TOTAL RETURN 21.23% ( 5.45%) 35.53% 16.24% 14.80% RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Period (000 omitted) $19,153 $17,370 $15,002 $ 8,081 $ 6,247 Ratios to Average Net Assets:# Expenses 0.90% 0.90% 0.90% 0.90% 0.90% Net investment income 0.54% 0.78% 1.18% 1.71% 2.14% Expenses without waivers and assumption of expenses 1.33% 1.70% 1.70% 1.98% 1.80% Net investment income without waivers and assumption of expenses 0.11% ( 0.02%) 0.38% 0.63% 1.24% Portfolio Turnover Rate 114% 170% 89% 129% 32% Capital Growth Portfolio ------------------------------------------------------------ 03/01/95* Year Ended August 31, through 1999 1998 1997 1996 08/31/95 ----------- ------------- ----------- ----------- ---------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 11.72 $ 15.52 $ 13.84 $ 11.90 $ 10.00 ------- --------- ------- -------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.07 0.10 0.09 0.16 0.06 Net gains or losses on investments (both realized and unrealized) 3.37 ( 2.37) 3.42 2.14 1.84 ------- --------- ------- -------- ------- TOTAL FROM INVESTMENT OPERATIONS 3.44 ( 2.27) 3.51 2.30 1.90 ------- --------- ------- -------- ------- LESS DISTRIBUTIONS: Dividends from net investment income 0.09 0.09 0.10 0.14 -- Distributions from capital gains 1.32 1.44 1.73 0.22 -- ------- --------- ------- -------- -------- TOTAL DISTRIBUTIONS 1.41 1.53 1.83 0.36 -- ------- --------- ------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 13.75 $ 11.72 $ 15.52 $ 13.84 $ 11.90 ======= ========= ======= ======== ======== TOTAL RETURN 30.59% (16.38%) 27.27% 19.66% 19.00% RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Period (000 omitted) $12,649 $ 11,096 $12,373 $ 7,910 $ 6,329 Ratios to Average Net Assets:# Expenses 0.90% 0.90% 0.90% 0.90% 0.90% Net investment income 0.59% 0.72% 0.64% 0.97% 1.04% Expenses without waivers and assumption of expenses 1.70% 1.70% 1.70% 1.97% 1.80% Net investment income without waivers and assumption of expenses ( 0.21%) ( 0.08%) ( 0.16%) ( 0.10)% 0.14% Portfolio Turnover Rate 27% 71% 54% 107% 28%
International Equity Portfolio ----------------------------------------------------------------- Year Ended August 31, 03/01/95* through 1999 1998 1997 1996 08/31/95 ------------ ---------------- ----------- ----------- ----------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 9.63 $ 10.45 $ 10.59 $ 10.89 $ 10.00 -------- --------- ------- -------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income -- 0.02 (b) 0.19 0.22 0.10 Net gains or losses on investments (both realized and unrealized) 2.32 ( 0.28) 0.65 0.03 0.79 -------- --------- ------- -------- ------- TOTAL FROM INVESTMENT OPERATIONS 2.32 ( 0.26) 0.84 0.25 0.89 -------- --------- ------- -------- ------- LESS DISTRIBUTIONS: Dividends from net investment income 0.10 0.18 0.13 0.25 -- Distributions from capital gains 0.49 0.38 0.85 0.30 -- -------- --------- ------- -------- -------- TOTAL DISTRIBUTIONS 0.59 0.56 0.98 0.55 -- -------- --------- ------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 11.36 $ 9.63 $ 10.45 $ 10.59 $ 10.89 ======== ========= ======= ======== ======== TOTAL RETURN 25.03% ( 2.46%) 8.27% 2.42% 8.90% RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Period (000 omitted) $ 7,337 $ 6,318 $ 5,421 $ 3,901 $ 5,482 Ratios to Average Net Assets:# Expenses 1.10% 1.10% 1.11% 1.10% 1.09% Net investment income 0.04% 0.19% 1.96% 0.82% 1.92% Expenses without waivers and assumption of expenses 3.24% 3.05% 2.99% 4.22% 2.90% Net investment income without waivers and assumption of expenses ( 2.10%) ( 1.76%) 0.08% ( 2.30%) 0.11% Portfolio Turnover Rate 170% 157% 158% 200% 75% Asset Allocation Portfolio ---------------------------------------------------------- Year Ended August 31, 03/01/95* through 1999 1998 1997 1996 08/31/95 ----------- ----------- ----------- ----------- ---------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 10.64 $ 11.57 $ 11.15 $ 11.04 $ 10.00 ------- -------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.24 0.28 0.33 0.66 0.21 Net gains or losses on investments (both realized and unrealized) 1.04 ( 0.25) 1.94 0.49 0.83 ------- -------- ------- ------- ------- TOTAL FROM INVESTMENT OPERATIONS 1.28 0.03 2.27 1.15 1.04 ------- -------- ------- ------- ------- LESS DISTRIBUTIONS: Dividends from net investment income 0.18 0.30 0.30 0.67 -- Distributions from capital gains 1.02 0.66 1.55 0.37 -- ------- -------- ------- ------- -------- TOTAL DISTRIBUTIONS 1.20 0.96 1.85 1.04 -- ------- -------- ------- ------- -------- NET ASSET VALUE, END OF PERIOD $ 10.72 $ 10.64 $ 11.57 $ 11.15 $ 11.04 ======= ======== ======= ======= ======== TOTAL RETURN 11.88% ( 0.04%) 22.61% 10.90% 10.40% RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Period (000 omitted) $ 9,324 $ 7,813 $ 6,282 $ 4,033 $ 5,546 Ratios to Average Net Assets:# Expenses 0.85% 0.85% 0.85% 0.85% 0.85% Net investment income 2.48% 2.81% 3.28% 3.18% 3.86% Expenses without waivers and assumption of expenses 1.90% 1.91% 2.03% 2.33% 1.65% Net investment income without waivers and assumption of expenses 1.43% 1.75% 2.10% 1.71% 3.06% Portfolio Turnover Rate 112% 162% 122% 155% 45%
* Commencement of operations. # Short periods have been annualized. b Net investment income per share has been calculated based on average shares outstanding during the period. See notes to financial statements. Financial Highlights (continued) page 27
U.S. Government Income Portfolio++ -------------------------------------------------------- Year Ended August 31, 03/01/95* through 1999 1988 1997 1996 08/31/95 ----------- ---------- ---------- ----------- ---------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 10.12 $ 9.40 $ 9.53 $ 10.69 $ 10.00 -------- ------- ------ ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.52 0.39 0.52 1.17 0.32 Net gains or losses on investments (both realized and unrealized) ( 0.62) 0.64 0.22 ( 0.86) 0.37 -------- ------- ------ -------- ------- TOTAL FROM INVESTMENT OPERATIONS ( 0.10) 1.03 0.74 0.31 0.69 -------- ------- ------ -------- ------- LESS DISTRIBUTIONS: Dividends from net investment income 0.51 0.31 0.54 1.13 -- Distributions from capital gains -- -- 0.33 0.34 -- -------- ------- ------ -------- -------- TOTAL DISTRIBUTIONS 0.51 0.31 0.87 1.47 -- -------- ------- ------ -------- -------- NET ASSET VALUE, END OF PERIOD $ 9.51 $ 10.12 $ 9.40 $ 9.53 $ 10.69 ======== ======= ====== ======== ======== TOTAL RETURN ( 1.15%) 11.12% 8.11% 2.62% 6.90% RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Period (000 omitted) $ 6,433 $ 6,581 $3,801 $ 2,994 $ 5,390 Ratios to Average Net Assets:# Expenses 0.80% 0.80% 0.80% 0.80% 0.80% Net investment income 5.35% 5.40% 5.91% 6.06% 6.19% Expenses without waivers and assumption of expenses 1.97% 1.99% 1.50% 1.79% 1.62% Net investment income without waivers and assumption of expenses 4.18% 4.21% 5.21% 5.07% 5.37% Portfolio Turnover Rate 31% 14% 40% 83% 46% Money Market Portfolio ----------------------------------------------------- Year Ended August 31, 03/01/95* through 1999 1998 1997 1996 08/31/95 ---------- ---------- ---------- ---------- --------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------ ------ ------ INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.05 0.05 0.05 0.05 0.03 Net gains or losses on investments (both realized and unrealized) -- -- -- -- -- ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS 0.05 0.05 0.05 0.05 0.03 ------ ------ ------ ------ ------ LESS DISTRIBUTIONS: Dividends from net investment income 0.05 .05 0.05 0.05 0.03 Distributions from capital gains -- -- -- -- -- ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS 0.05 0.05 0.05 0.05 0.03 ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ====== ====== TOTAL RETURN 4.66% 5.04% 4.93% 5.15% 2.79% RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Period (000 omitted) $3,991 $3,279 $4,854 $2,950 $5,422 Ratios to Average Net Assets:# Expenses 0.55% 0.55% 0.55% 0.55% 0.55% Net investment income 4.54% 4.94% 4.84% 5.10% 5.46% Expenses without waivers and assumption of expenses 2.28% 2.24% 1.46% 1.74% 1.21% Net investment income without waivers and assumption of expenses 2.81% 3.25% 3.93% 3.91% 4.80% Portfolio Turnover Rate -- -- -- -- --
* Commencement of operations. # Short periods have been annualized. ++ On 12/27/96, the Portfolio changed its name from U.S. Treasury Income Portfolio to U.S. Government Income Portfolio. See notes to financial statements. page 28 Notes to Financial Statements 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES--Mutual Fund Variable Annuity Trust (the "Trust") was organized on April 14, 1994 as a Massachusetts business trust, and is registered under the Investment Company Act of 1940 (the "1940 Act"), as amended, as an open-end management investment company. The Trust was established to provide a funding medium for variable annuity contracts issued by life insurance companies. Shares of the Trust are issued only to insurance company separate accounts in connection with variable annuity contracts. The Trust issues six separate series of shares (the "Portfolio(s)"), each of which represents a separately managed portfolio of securities with its own investment objectives. The Portfolios are the Growth and Income Portfolio ("GIP"), Capital Growth Portfolio ("CGP"), International Equity Portfolio ("IEP"), Asset Allocation Portfolio ("AAP"), U.S. Government Income Portfolio ("USGIP") and Money Market Portfolio ("MMP"). THE FOLLOWING IS A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOLLOWED BY THE PORTFOLIOS: The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. Valuation of Investments--Equity securities and options are valued at the last sale price on the exchange on which they are primarily traded, including the NASDAQ National Market. Securities for which sale prices are not available and other over-the-counter securities are valued at the last quoted bid price. Except for MMP, bonds and other fixed income securities (other than short-term obligations), including listed issues, are valued on the basis of valuations furnished by a pricing service. In making such valuations, the pricing service utilizes both dealer-supplied valuations and electronic data processing techniques that take into account appropriate factors such as institutional-sized trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data, without exclusive reliance upon quoted prices. Short-term obligations are valued at amortized cost if acquired with fewer than 61 days to maturity, or at value, based on quoted exchange or over-the-counter prices, until the 61st day prior to maturity and thereafter by amortizing the value on the 61st day to par at maturity. Money market instruments held by MMP are valued at amortized cost, which approximates market value. The Trust's use of amortized cost is subject to the Trust's compliance with certain conditions as specified under Rule 2a-7 of the 1940 Act. Portfolio securities for which there are no such quotations or valuations are valued at fair value as determined in good faith by or at the direction of the Trustees. B. Security Transactions and Investment Income-- Investment transactions are accounted for on the trade date (the date the order to buy or sell is executed). Securities gains and losses are calculated on the identified cost basis. Interest income is accrued as earned. Dividend income is recorded on the ex-dividend date. C. Repurchase agreements--It is the Portfolios' policy that all repurchase agreements are fully collateralized by U.S. Treasury and Government agency securities. All collateral is held by the Portfolio's custodian bank, sub-custodian or a bank with which the custodian bank has entered into a sub-custodian agreement or is segregated in the Federal Reserve Book Entry System. If the seller of a repurchase agreement defaults and the value of the collateral declines, or if the seller enters into an insolvency proceeding, realization of the collateral by the Portfolio may be delayed or limited. D. Futures Contracts--When a Portfolio enters into a futures contract, it makes an initial margin deposit in a segregated account, either in cash or liquid securities. Thereafter, the futures contract is marked to market and the Portfolio makes (or receives) additional cash payments daily to the broker. Changes in the value of the contract are recorded as unrealized appreciation/depreciation until the contract is closed or settled. The Portfolios may enter into futures contracts only on exchanges or boards of trade. The exchange or board of trade acts as the counterparty to each futures transaction; therefore, the Portfolio's credit risk is limited to failure of the exchange or board of trade. IEP may invest a portion of its liquid assets in index futures contracts to control the asset mix of the Portfolio in the most efficient manner. This allows the fund manager to more fully participate in the market, adjusting country exposures while incurring minimal transaction costs. Long index futures contracts are used to gain exposure to equities when Notes to Financial Statements (continued) page 29 the fund manager anticipates that this will be more efficient than buying stocks directly. The use of long futures contracts subjects the Portfolio to risk of loss up to the amount of the value of the contract. Short index futures contracts are used for hedging purposes (to reduce the exposure to equities). The use of short futures contracts subjects the Portfolio to unlimited risk of loss. AAP may invest in interest rate futures contracts as a hedge against rate risk or to change the duration of the fixed income components of the Portfolio. As of August 31, 1999, the Portfolios had outstanding futures contracts as described on the respective Portfolio of Investments. E. Foreign Currency Translations--The books and records of the Portfolios are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the official exchange rates, or at the mean of the current bid and asked prices of such currencies against the U.S. dollar last quoted by a major bank on the following basis: (1) Market value of investment securities, other assets and liabilities: at the closing rate of exchange at the balance sheet date. (2) Purchases and sales of investment securities and income and expenses: at the rates of exchange prevailing on the respective dates of such transactions. Reported realized foreign exchange gains or losses arise from disposition of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Portfolios' books on the transaction date and the U.S. dollar equivalent of the amounts actually received or paid. Unrealized foreign exchange gains and losses arise from changes (due to the changes in the exchange rate) in the value of foreign currency and other assets and liabilities denominated in foreign currencies which are held at period end. F. Forward Foreign Currency Exchange Contracts--A forward foreign currency contract is an obligation to purchase or sell a specific currency for an agreed price at a future date. Each day the forward contract is open, changes in the value of the contract are recognized as unrealized gains or losses by "marking to market." When the forward contract is closed, or the delivery of the currency is made or taken, the Portfolio records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Portfolio's basis in the contract. The Portfolios are subject to off balance sheet risk to the extent of the value of the contract for purchases of currency and in an unlimited amount for sales of currency. G. Federal Income Tax Status--It is each Portfolio's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. H. Dividends and Distributions to Shareholders--The Portfolios record dividends and distributions to their shareholders on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment. The reclassifications for GIP and CGP relate primarily to the character for tax purposes of current year distributions. The reclassification for IEP relates primarily to the character for tax purposes of foreign currency losses and current year distributions. Paid in capital, accumulated undistributed net investment income and accumulated undistributed net realized gain/loss were increased or (decreased) as shown below:
GIP CGP IEP --- --- --- Paid in capital $ 171 $ 113 $ 62 Accumulated undistributed net investment income (11,995) (44,181) (42,897) Accumulated net realized gain (loss) on investments 11,824 44,068 42,835
Dividends and distributions which exceed net investment income and net realized capital gains for financial reporting purposes but not for tax purposes are reported as dividends in excess of net investment income or distributions in excess of net realized capital gains. To the extent they exceed net investment income and net realized capital gains for tax purposes, they are reported as distributions of paid-in-capital. page 30 Notes to Financial Statements (continued) I. Expenses--Direct expenses of a Portfolio are charged to the respective Portfolio. General Trust expenses are allocated on the basis of relative net assets or on another reasonable basis. 2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES A. Investment Advisory Fees--The Chase Manhattan Bank ("Chase"), a direct wholly-owned subsidiary of the Chase Manhattan Corporation, is the Portfolios' investment advisor (the "Advisor") and custodian (the "Custodian"). The Advisor manages the assets of the Portfolios pursuant to an Advisory Agreement and, for such services, is paid an annual fee computed daily and paid monthly based on an annual rate equal to 0.80% of the International Equity Portfolio's, 0.60% of the Capital Growth and Growth and Income Portfolios', 0.55% of the Asset Allocation Portfolio's, 0.50% of the U.S. Government Income Portfolio's and 0.25% of the Money Market Portfolio's average daily net assets. The Advisor voluntarily waived some or all its fees as shown in 2.D. Chase Asset Management, Inc. ("CAM"), a registered investment advisor, is the sub-investment advisor to each Portfolio pursuant to a Sub- Investment Advisory Agreement between CAM and Chase. CAM is a wholly-owned subsidiary of Chase and is entitled to receive a fee, payable by Chase from its advisory fee, at an annual rate equal to 0.30% of the Growth and Income and Capital Growth Portfolios', 0.25% of the Asset Allocation and U.S. Government Income Portfolios' and 0.10% of the Money Market Portfolio's average daily net assets. Chase Asset Management (London) Limited (CAM London), a registered investment advisor, is the sub-investment advisor to the International Equity Portfolio pursuant to a Sub-Investment Advisory Agreement between CAM London and Chase. CAM London is a wholly-owned subsidiary of Chase and is entitled to receive a fee, payable by Chase from its advisory fee, at an annual rate equal to 0.40% of the average daily net assets of the International Equity Portfolio. B. Administration Fee--Pursuant to an Administration Agreement, Chase (the "Administrator") provides certain administration services to the Portfolios. For these services, the Administrator receives from each Portfolio a fee computed at an annual rate equal to 0.05% of the respective Portfolio's average daily net assets. The Administrator voluntarily waived some or all of its fees as shown in 2.D. C. Sub-Administration Fees--Pursuant to a Sub-Administration Agreement, Vista Fund Distributors, Inc. ("VFD" or the "Sub-Administrator"), an indirect wholly-owned subsidiary of The BISYS Group Inc., provides certain sub-administration services to the Portfolios, including providing officers, clerical staff and office space for an annual fee of 0.15% of the average daily net assets of each Portfolio. The Sub-Administrator voluntarily waived some or all of its fees as shown in 2.D. D. Assumption of Expenses--For the year ended August 31, 1999, the Investment Advisor, Administrator and Sub-Administrator voluntarily waived expenses for the Portfolios as follows:
GIP CGP IEP AAP USGIP MMP ---- --- --- --- ----- --- Advisory $78,364 $74,744 $53,428 $50,452 $33,422 $ 9,736 Administration 6,001 24,915 13,358 18,346 13,369 7,789 ------- ------- ------- ------- ------- ------- TOTAL WAIVERS $84,365 $99,659 $66,786 $68,798 $46,791 $17,525 ======= ======= ======= ======= ======= ======= The Sub-Administrator voluntarily assumed certain expenses of the funds: Assumed Expenses -- -- $75,990 $27,218 $31,544 $49,985 ======= ======= ======= ======= ======= =======
E. Other--Chase provides portfolio custody and fund accounting services for all of the Portfolios, with the exception of the IEP for which it provides only the custody services. Compensation for such services from Chase is presented in the Statement of Operations as Custodian fees. The IEP earned approximately $6,200 in interest income on deposits placed with an affiliate of the Chase Manhattan Bank. The Trust has adopted an unfunded noncontributory defined benefit pension plan covering all independent trustees of the Trust who will have served as an independent trustee for at least five years at the time of retirement. Benefits under this plan Notes to Financial Statements (continued) page 31 are based on compensation and years of service. Pension expenses for the year ended August 31, 1999, included in Trustees Fees and Expenses in the Statement of Operations, and accrued pension liability included in other accrued liabilities in the Statement of Assets and Liabilities were as follows:
Accrued Pension Pension Expenses Liability Portfolio: -------- --------- Growth and Income Portfolio $348 $1,206 Capital Growth Portfolio 225 938 International Equity Portfolio 113 473 Asset Allocation Portfolio 155 564 U.S. Government Income Portfolio 111 397 Money Market Portfolio 63 300
3. INVESTMENT TRANSACTIONS--For the year ended August 31, 1999, the cost of purchases and proceeds from sales of investments (excluding short-term investments) were as follows:
GIP CGP IEP AAP USGIP --- --- --- --- ----- Purchases (excluding U.S. Government) $21,094,810 $2,933,087 $10,540,052 $8,155,233 $ -- Sales (excluding U.S. Government) 23,282,927 5,390,051 10,692,784 8,011,397 -- Purchases of U.S. Government -- -- -- 2,073,304 2,983,015 Sales of U.S. Government -- -- -- 1,388,138 1,868,873
4. FEDERAL INCOME TAX MATTERS--For Federal income tax purposes, the cost and unrealized appreciation/(depreciation) in value of the investment securities at August 31, 1999 are as follows:
GIP CGP IEP AAP USGIP --- --- --- --- ----- Aggregate cost $ 18,430,626 $10,454,663 $6,281,561 $9,262,727 $6,569,738 ------------ ----------- ---------- ---------- ---------- Gross unrealized appreciation $ 1,950,193 $ 2,692,704 $1,118,036 $ 516,127 $ 31,094 Gross unrealized depreciation (1,273,041) (459,468) (295,304) (500,401) (274,746) ------------ ----------- ---------- ---------- ---------- Net unrealized appreciation/ depreciation $ 677,152 $ 2,233,236 $ 822,732 $ 15,726 $ (243,652) ============ =========== ========== ========== ==========
At August 31, 1999, GIP had a net capital loss carryover of approximately $224,525, which will be available to offset future capital gains and will expire on August 31, 2007. To the extent that any net capital losses are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders. 5. OPEN FORWARD FOREIGN CURRENCY CONTRACTS The following forward foreign currency contracts were held by the International Equity Portfolio at August 31, 1999:
Contract Contract Net Amount Amount Unrealized Purchased/ Sold/ Settlement Gain (Loss) (Sold) (Purchased) Date (USD) ------ ----------- ---- ----- Unrealized Gain - ------------------------------- 55,125,000 (JPY) 300,000 (GBP) 10/26/99 $ 25,736 633,939 (EURO) 666,929 (USD) 09/08/99 4,913 210,159 (GBP) 334,000 (USD) 09/08/99 4,260 -------- $ 34,909 ======== Unrealized Loss - ------------------------------- (319,296) (EURO) (334,000) (USD) 09/08/99 (4,387) (415,392) (GBP) (666,929) (USD) 09/08/99 (1,664) -------- $ (6,051) ========
EUR = Euro Currency DEM = Deutsche Mark GBP = Great British Pound JPY = Japanese Yen 6. FOREIGN CASH POSITIONS--International Equity Portfolio
Net Delivery Market Unrealized Value (Local Value Gain (Loss) Currency Currency) Cost (USD) (USD) (USD) -------- --------- ---------- ----- ----- Australian Dollar 19,891 $ 13,219 $ 12,701 $(518) EURO 76,687 79,767 81,219 1,452 Great British Pound 1,824 2,940 2,936 (4) Greek Drachma 60,000 215 195 (20) Hong Kong Dollar 30 4 4 -- Indonesian Rupiah 894,077 58 117 59 Japanese Yen 878,301 7,677 8,039 362 Malaysian Ringgit 1,835 432 483 51 Mexican Peso 93 10 10 -- Philippine Peso 22,439 535 565 30 Singapore Dollar 67 41 40 (1) Swedish Krona 260,966 31,331 31,724 393 Swiss Franc 99,638 65,887 65,928 41 Thai Baht 964 27 25 (2) -------- -------- -------- Total $202,143 $203,986 $1,843 ======== ======== =======
page 32 Notes to Financial Statements (continued) 7. CONCENTRATION OF SHAREHOLDERS At August 31, 1999, all shares outstanding for each Portfolio are owned either directly or indirectly by a single insurance company. 8. CONCENTRATION OF CREDIT RISK As of August 31, 1999, MMP invested 71.6% of its net assets in financial institutions, of which 12.8% was invested in Broker Dealers, 30.1% in Banking and 28.7% in other financial service providers. General economic conditions, as well as exposure to credit losses arising from possible financial difficulties of borrowers, play an important role in the operation of the financial services industry. IEP invested 23.0% and 19.4% of its net assets in Japan and the United Kingdom, respectively. The issuers' abilities to meet their obligations may be affected by economic or political developments in a specific country or region. 9. BANK BORROWINGS IEP may borrow money for temporary or emergency purposes. Any borrowings representing more than 5% of IEP's total assets must be repaid before IEP may make additional investments. IEP has entered into an agreement, enabling it to participate with other Chase Vista Funds in an unsecured line of credit with a syndicate of banks, which permits borrowings up to $350 million, collectively. Interest is charged to IEP based on its borrowings at an annual rate equal to the sum of the Federal Funds Rate plus 0.35%. IEP also pays a commitment fee of 0.075% per annum on the average daily amount of the available commitment, which is allocated on a pro-rata basis to IEP. The commitment fee is included in Other expenses on the Statement of Operations. Borrowings are payable on demand. IEP had no borrowings outstanding at August 31, 1999, nor at any time during the year then ended. Report of Independent Accountants page 33 To the Trustees and Shareholders of Mutual Fund Variable Annuity Trust In our opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Growth and Income Portfolio, Capital Growth Portfolio, International Equity Portfolio, Asset Allocation Portfolio, U.S. Government Income Portfolio and Money Market Portfolio (separate portfolios constituting Mutual Fund Variable Annuity Trust, hereafter referred to as the "Trust") at August 31, 1999, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trust's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 1999 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York 10036 October 11, 1999 Back Cover A-7036-CRT (C)The Chase Manhattan Corporation, 1999, 2000. All Rights Reserved. October 1999 F-7036(CMB) VCA-2-1099 -----END PRIVACY-ENHANCED MESSAGE-----