-----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, LEHMlasuX+qe3rqGmvAXimw1VmA2fJcxciSSXcWNouTPshaby0+4yct4Q+rwC5X1 GuxaQbeYYvByB9SB/sndCg== 0001047469-03-015145.txt : 20030429 0001047469-03-015145.hdr.sgml : 20030429 20030429162103 ACCESSION NUMBER: 0001047469-03-015145 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030228 FILED AS OF DATE: 20030429 EFFECTIVENESS DATE: 20030429 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MUTUAL FUND VARIABLE ANNUITY TRUST CENTRAL INDEX KEY: 0000927053 IRS NUMBER: 133782139 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-08630 FILM NUMBER: 03669792 BUSINESS ADDRESS: STREET 1: 522 FIFTH AVENUE STREET 2: 16TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 800-348-4782 MAIL ADDRESS: STREET 1: J.P. MORGAN FLEMING ASSET MANAGEMENT STREET 2: 522 FIFTH AVENUE, 16TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 N-30D 1 a2108473zn-30d.txt N-30D [LOGO] SEMI-ANNUAL REPORT FEBRUARY 28, 2003 (UNAUDITED) VISTA CAPITAL ADVANTAGE(SM) MUTUAL FUND VARIABLE ANNUITY TRUST J.P. MORGAN FUND DISTRIBUTORS, INC., DISTRIBUTOR THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS FOR VISTA CAPITAL ADVANTAGE The Vista Capital Advantage (VCA) is distributed by J.P. Morgan Fund Distributors, Inc., which is unaffiliated with JPMorgan Chase Bank, Anchor National Life Insurance Company or First SunAmerica Life Insurance Company. JPMorgan Chase is the portfolio 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, JPMORGAN CHASE 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 THE POSSIBLE LOSS OF PRINCIPAL. [LOGO] Dear Vista Capital Advantage Contract Owner: Enclosed is the February 28, 2003 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 tables below show the one year, three years, five years and since inception results, after the deduction of all insurance and withdrawal fees, of the accounts in the Vista Capital Advantage at February 28, 2003. 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 RETUN AS OF 2/28/03(2)
1 3 5 SINCE PORTFOLIO (CONTRACT INCEPTION DATE) YEAR YEAR YEAR INCEPTION ---------------------------------------------------------------------------------------------- Growth and Income (3/13/95) -28.27% -13.36% -8.95% 3.46% Capital Growth (3/13/95) -33.69% -11.83% -6.09% 5.20% International Equity (3/13/95) -24.14% -23.11% -5.90% -0.35% Asset Allocation (3/13/95) -19.43% -10.04% -5.79% 2.60% U.S. Government Income (7/13/95) 2.87% 6.83% 4.86% 5.19% Money Market (6/2/95) -6.42% 0.20% 1.71% 2.85% 7-DAY YIELD AS OF 2/28/03; 0.31%
FIRST SUNAMERICA LIFE INSURANCE COMPANY POLICY HOLDERS (NEW YORK) AVERAGE ANNUAL TOTAL RETUN AS OF 2/28/03(2)
1 3 5 SINCE PORTFOLIO (CONTRACT INCEPTION DATE) YEAR YEAR YEAR INCEPTION ----------------------------------------------------------------------------------------------- Growth and Income (12/6/95) -28.27% -13.36% -8.66% 1.17% Capital Growth (12/6/95) -33.69% -11.83% -5.83% 2.81% International Equity (12/22/95) -24.14% -23.11% -5.65% -1.78% Asset Allocation (12/22/95) -19.43% -10.04% -5.53% 0.99% U.S. Government Income (12/22/95) 2.87% 6.83% 5.03% 5.03% Money Market (12/22/95) -6.42% 0.20% 1.90% 2.79% 7-DAY YIELD AS OF 2/28/03; 0.36%
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 1-800-908-4782. Sincerely, /s/ George C.W. Gatch George C.W. Gatch President, JPMorgan Funds - ---------- (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 views expressed on this page are exclusively those of JPMorgan Fleming. (UNAUDITED) TABLE OF CONTENTS 3 PRESIDENT'S LETTER PERFORMANCE & COMMENTARY 4 GROWTH AND INCOME 6 CAPITAL GROWTH 8 INTERNATIONAL EQUITY 10 ASSET ALLOCATION 12 U.S. GOVERNMENT INCOME 14 MONEY MARKET PORTFOLIO OF INVESTMENTS 15 GROWTH AND INCOME 17 CAPITAL GROWTH 19 INTERNATIONAL EQUITY 21 ASSET ALLOCATION 25 U.S. GOVERNMENT INCOME 26 MONEY MARKET MUTUAL FUND VARIABLE ANNUITY TRUST 27 STATEMENT OF ASSETS & LIABILITIES 28 STATEMENT OF OPERATIONS 29 STATEMENT OF CHANGES IN NET ASSETS 30 FINANCIAL HIGHLIGHTS 32 NOTES TO FINANCIAL STATEMENTS
HIGHLIGHTS - - March to war exerts downward pressure - - International markets underperform - - Bonds rally - - Some compelling equity valuations 3 PRESIDENT'S LETTER [LOGO] April 7, 2003 DEAR SHAREHOLDER: We are pleased to present this half yearly report for the Variable Annuity Portfolios. Inside, you'll find information detailing the performance of your portfolio for the six months ended February 28, 2003, along with a report from the portfolio manager. EQUITIES DRIFT LOWER Equity markets ebbed and flowed during the six months, although by the end of the period they had drifted lower. Sentiment was buffeted by a powerful combination of geopolitical, economic and corporate events. The march to war with Iraq exerted a constant downward pressure. Corporate and economic news switched between good and bad. Positive data drove a fourth-quarter rally, which was then undermined early in 2003 by a deterioration in data. The S&P 500 Index fell 7.3% during the period. International markets fell still further--largely as a result of poor corporate news--with the benchmark MSCI EAFE Index declining 11.0%. There were a few areas of relative resilience, such as U.S. mid-cap growth stocks, where the Russell Mid Cap Index fell by just 1.4%. In international markets, a few European exchanges fell exceptionally badly--notably Amsterdam and Germany. The accounting scandal surrounding food retailer Ahold hurt Dutch stock prices. Meanwhile, in Germany poor economic news pushed prices lower. By contrast, some Asia Pacific markets experienced muted price falls. Markets such as Hong Kong's were supported by relatively strong local economic growth--especially in mainland China. BONDS RALLY Fixed income securities were the one bright spot in the period. Although volatile, they tended to rise in price as indicated by a 4.7% appreciation in the Lehman Aggregate Bond Index. All the factors that held back equities also signaled to the bond market that inflationary forces remained subdued, causing bond prices to rally. By some measures bonds now appear expensive, but they remain an essential part of a well-diversified portfolio. OUTLOOK Looking forward, investors are faced with the question of whether we are in for a long period of low economic growth and low inflation and, if so, what does this mean for investment returns? We believe that equity returns are likely to be low but respectable, given the context of muted inflation. We would add, however, that equities could bounce back from this period of extreme stress to produce returns well in excess of single digits. Indeed, following the most recent setback in equity prices, many of our managers are now investing in good quality companies with shares trading on valuations that we do not believe fully represent their prospects. Sincerely, /s/ George C.W. Gatch George C.W. Gatch President JPMorgan Funds 4 GROWTH AND INCOME PORTFOLIO (UNAUDITED) THE GROWTH AND INCOME PORTFOLIO SEEKS TO PROVIDE LONG-TERM CAPITAL APPRECIATION AND DIVIDEND INCOME PRIMARILY THROUGH DIVERSIFIED HOLDINGS OF COMMON STOCKS. Q: HOW DID THE PORTFOLIO PERFORM? A: The Growth & Income Portfolio fell 7.91% in the six months ended February 28, 2003. This compares with a fall of 7.90% for the S&P 500/Barra Value Index. Q: WHY DID THE PORTFOLIO PERFORM THIS WAY? A: Large cap value stocks declined during a volatile period, buffeted by a potent combination of geopolitical, economic, and corporate concerns. On a relative basis, the Portfolio performed in line with its market benchmark, primarily driven by strong stock selection in the consumer discretionary sector. The Portfolio's best performers in the consumer discretionary sector during an otherwise difficult period were in the cable and satellite television industries. Shares of Echostar Communications rallied after the Department of Justice filed to block the company's planned acquisition of DirectTV, allowing the company to refocus on its successful ongoing operations. In the cable sector, shares of both Liberty Media and Comcast recovered strongly after a period of weakness in which the scandals at Adelphia and overall doubts regarding the heavy debt load of cable operators began to subside. Some of the Portfolio's worst performers were in the healthcare sector. Shares of Tenet Healthcare fell sharply after an investigation into the company's revenues from Medicare was launched, while CIGNA's shares fell after the company reported poor operating results and announced a major restructuring effort. Q: HOW WAS THE PORTFOLIO MANAGED? A: Given the near-term geopolitical, economic, and corporate sector uncertainties, the portfolio manager has sought to maintain significant sector diversification in the Portfolio and to avoid any large bets contingent on macroeconomic or sector trends. The portfolio manager's focus remains on stock selection, believing that quality, undervalued companies will perform well even in a challenging economic environment. Q. WHAT IS THE OUTLOOK? A. Over the last two months, the S&P 500/Barra Value Index has not only declined on an absolute basis, but also underperformed the S&P 500/Barra Growth Index on a relative basis. This trend is consistent with what we observed in the market sell-off of last September/early October, when large-cap value stocks underperformed as stocks plunged across-the-board. In the three-month rally subsequent to that sell-off, however, we observed significant outperformance on the part of large-cap value stocks. Our expectation is that stocks are again nearing the oversold levels seen during the last sell-off, and the stage is being set for a recovery in large-cap value stocks consistent with the outperformance observed in the subsequent rally. 5 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 $14,687 from inception on 3/1/95 through 2/28/03.* INVESTMENT RESULTS Average Annual Returns as of 2/28/03 1 year -21.10% 3 year -9.87% 5 year -6.44% Since Inception (3/1/95) 4.92%
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GROWTH AND S&P 500/BARRA LIPPER GROWTH AND INCOME PORTFOLIO VALUE INDEX INCOME FUNDS INDEX 3/1/95 $ 10,000 $ 10,000 $ 10,000 3/31/95 $ 10,270 $ 10,276 $ 10,235 4/30/95 $ 10,410 $ 10,614 $ 10,517 5/31/95 $ 10,729 $ 11,086 $ 10,871 6/30/95 $ 11,000 $ 11,171 $ 11,076 7/31/95 $ 11,459 $ 11,556 $ 11,449 8/31/95 $ 11,479 $ 11,654 $ 11,558 9/30/95 $ 11,708 $ 12,060 $ 11,903 10/31/95 $ 11,479 $ 11,872 $ 11,741 11/30/95 $ 11,959 $ 12,494 $ 12,246 12/31/95 $ 12,149 $ 12,840 $ 12,449 1/31/96 $ 12,557 $ 13,224 $ 12,819 2/28/96 $ 12,767 $ 13,348 $ 12,998 3/31/96 $ 13,018 $ 13,660 $ 13,163 4/30/96 $ 13,228 $ 13,800 $ 13,365 5/31/96 $ 13,375 $ 14,008 $ 13,560 6/30/96 $ 13,344 $ 13,941 $ 13,502 7/31/96 $ 12,893 $ 13,353 $ 12,952 8/31/96 $ 13,343 $ 13,721 $ 13,342 9/30/96 $ 13,939 $ 14,308 $ 13,937 10/31/96 $ 14,160 $ 14,793 $ 14,253 11/30/96 $ 15,050 $ 15,925 $ 15,171 12/31/96 $ 14,767 $ 15,664 $ 15,023 1/31/97 $ 15,602 $ 16,386 $ 15,693 2/28/97 $ 15,542 $ 16,506 $ 15,826 3/31/97 $ 14,899 $ 15,941 $ 15,275 4/30/97 $ 15,578 $ 16,539 $ 15,839 5/31/97 $ 16,569 $ 17,576 $ 16,761 6/30/97 $ 17,214 $ 18,247 $ 17,418 7/31/97 $ 18,610 $ 19,707 $ 18,668 8/31/97 $ 18,085 $ 18,816 $ 17,968 9/30/97 $ 18,931 $ 19,919 $ 18,876 10/31/97 $ 18,562 $ 19,186 $ 18,249 11/30/97 $ 19,171 $ 19,917 $ 18,758 12/31/97 $ 19,437 $ 20,359 $ 19,060 1/31/98 $ 19,119 $ 20,109 $ 19,096 2/28/98 $ 20,488 $ 21,617 $ 20,294 3/31/98 $ 21,428 $ 22,713 $ 21,233 4/30/98 $ 21,179 $ 22,981 $ 21,348 5/31/98 $ 20,722 $ 22,657 $ 21,021 6/30/98 $ 21,095 $ 22,829 $ 21,274 7/31/98 $ 20,418 $ 22,334 $ 20,752 8/31/98 $ 17,098 $ 18,742 $ 17,822 9/30/98 $ 17,983 $ 19,882 $ 18,622 10/31/98 $ 19,449 $ 21,439 $ 19,974 11/30/98 $ 20,293 $ 22,556 $ 20,937 12/31/98 $ 21,482 $ 23,347 $ 21,649 1/31/99 $ 21,596 $ 23,819 $ 21,853 2/28/99 $ 20,300 $ 23,307 $ 21,370 3/31/99 $ 20,759 $ 24,013 $ 22,107 4/30/99 $ 22,154 $ 26,083 $ 23,539 5/31/99 $ 21,645 $ 25,621 $ 23,198 6/30/99 $ 22,547 $ 26,605 $ 24,158 7/31/99 $ 21,465 $ 25,786 $ 23,465 8/31/99 $ 20,727 $ 25,133 $ 22,946 9/30/99 $ 20,053 $ 24,151 $ 22,226 10/31/99 $ 20,627 $ 25,515 $ 23,177 11/30/99 $ 20,759 $ 25,365 $ 23,381 12/31/99 $ 21,491 $ 26,318 $ 24,218 1/31/00 $ 21,064 $ 25,481 $ 23,269 2/28/00 $ 20,059 $ 23,889 $ 22,513 3/31/00 $ 21,934 $ 26,380 $ 24,627 4/30/00 $ 21,803 $ 26,204 $ 24,188 5/31/00 $ 21,491 $ 26,285 $ 24,099 6/30/00 $ 21,293 $ 25,247 $ 24,007 7/31/00 $ 21,589 $ 25,752 $ 23,921 8/31/00 $ 22,889 $ 27,477 $ 25,409 9/30/00 $ 22,182 $ 27,472 $ 24,712 10/31/00 $ 22,264 $ 27,985 $ 24,784 11/30/00 $ 21,079 $ 26,552 $ 23,426 12/31/00 $ 21,737 $ 27,920 $ 24,311 1/31/01 $ 21,687 $ 29,098 $ 24,803 2/28/01 $ 20,507 $ 27,169 $ 23,463 3/31/01 $ 19,527 $ 26,096 $ 22,400 4/30/01 $ 20,954 $ 27,865 $ 23,897 5/31/01 $ 21,170 $ 28,158 $ 24,203 6/30/01 $ 20,340 $ 27,245 $ 23,614 7/31/01 $ 20,208 $ 26,774 $ 23,404 8/31/01 $ 18,929 $ 25,226 $ 22,325 9/30/01 $ 17,451 $ 22,830 $ 20,530 10/31/01 $ 17,568 $ 22,830 $ 20,791 11/30/01 $ 18,530 $ 24,280 $ 22,145 12/31/01 $ 18,795 $ 24,649 $ 22,506 1/31/02 $ 18,660 $ 23,973 $ 22,179 2/28/02 $ 18,610 $ 23,760 $ 22,033 3/31/02 $ 19,402 $ 24,976 $ 22,894 4/30/02 $ 18,424 $ 23,725 $ 22,033 5/31/02 $ 18,627 $ 23,820 $ 22,005 6/30/02 $ 17,362 $ 22,317 $ 20,566 7/31/02 $ 15,810 $ 19,904 $ 18,929 8/31/02 $ 15,945 $ 20,042 $ 19,116 9/30/02 $ 14,258 $ 17,751 $ 17,182 10/31/02 $ 15,539 $ 19,226 $ 18,307 11/30/02 $ 16,299 $ 20,578 $ 19,319 12/31/02 $ 15,541 $ 19,508 $ 18,479 1/31/03 $ 15,129 $ 18,973 $ 17,984 2/28/03 $ 14,687 $ 18,457 $ 17,599
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 S&P 500/BARRA Value Index contains large U.S. Companies with low price-to-book ratios relative to the S&P 500 Index. The Lipper Growth and Income Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. 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. 6 CAPITAL GROWTH PORTFOLIO (UNAUDITED) THE CAPITAL GROWTH PORTFOLIO SEEKS TO PROVIDE LONG-TERM CAPITAL APPRECIATION PRIMARILY THROUGH DIVERSIFIED HOLDINGS OF COMMON STOCKS. Q: HOW DID THE PORTFOLIO PERFORM? A: The Capital Growth Portfolio fell 5.09% during the six months ended February 28, 2003. This compares with a fall of 1.36% for the Russell Mid Cap Growth Index, the Portfolio's benchmark. Q: WHY DID THE PORTFOLIO PERFORM THIS WAY? A: Mid-cap growth stocks declined during the volatile period, buffeted by a potent combination of geopolitical, economic, and corporate concerns. On a relative basis, the Portfolio lagged its market benchmark due to weak stock selection, particularly in the healthcare, technology, and transportation sectors. Among the largest detractors from the Portfolio's performance were several healthcare sector names. Shares of Ameriscourcebergen, the distributor of pharmaceutical products, fell on concerns about the company's ability to maintain its current level of sales growth. Idec Pharmaceuticals dropped on concerns that its drugs for non-Hodgkins lymphona--Zituxan and Zavalin--faced slowing sales growth and slower-than-expected market penetration, respectively. Lastly, shares of Dentsply International, which manufactures equipment and supplies for dentists, declined as investors questioned the company's true internal growth rate in light of the company's aggressive acquisition strategy. Notwithstanding difficulties noted above, some of the top performers on an absolute basis came from the technology sector. Shares of BEA Systems, Adobe Systems, and Microchip Technology all rallied as investors returned to the technology sector in pursuit of companies with strong business fundamentals and beaten-down stock prices. Q: HOW WAS THE PORTFOLIO MANAGED? A: Given the near-term geopolitical, economic, and corporate sector uncertainties, the portfolio manager has sought to maintain significant sector diversification and to avoid any large bets contingent on macroeconomic or sector trends. The portfolio manager's focus remains on stock selection, believing that quality growth companies--regardless of their economic sector--will perform well even in a challenging economic environment. Q: WHAT IS THE OUTLOOK? A: Despite its decline in the first two months of 2003, the Russell Mid Cap Growth Index has been the best performing of the Russell equity indices so far this year. The Index has been supported by the performance of technology, energy, and producer durable stocks--all poor performers in 2002 when we saw an extreme compression in the valuation of growth stocks. The fact remains, however, that there are many quality growth companies producing EPS growth whose stocks were indiscriminately sold as investors fled growth investments of all kinds. We believe investors are now correcting for this oversold condition by investing in companies with proven track records of growth. 7 LIFE OF PORTFOLIO PERFORMANCE A $10,000 tax-deferred investment in the Capital Growth Portfolio at NAV (Net Asset Value) would have grown to $16,796 from inception on 3/1/95 through 2/28/03.* INVESTMENT RESULTS Average Annual Returns as of 2/28/03 1 year -26.63% 3 year -8.42% 5 year -3.71% Since Inception (3/1/95) 6.70%
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CAPITAL GROWTH RUSSELL MIDCAP LIPPER MID-CAP PORTFOLIO GROWTH INDEX FUNDS INDEX 3/1/95 $ 10,000 $ 10,000 $ 10,000 3/31/95 $ 10,350 $ 10,397 $ 10,303 4/30/95 $ 10,470 $ 10,484 $ 10,394 5/31/95 $ 10,870 $ 10,743 $ 10,569 6/30/95 $ 11,140 $ 11,232 $ 11,258 7/31/95 $ 11,829 $ 11,939 $ 12,125 8/31/95 $ 11,899 $ 12,070 $ 12,283 9/30/95 $ 12,089 $ 12,339 $ 12,667 10/31/95 $ 11,659 $ 12,027 $ 12,363 11/30/95 $ 12,219 $ 12,565 $ 12,762 12/31/95 $ 12,706 $ 12,571 $ 12,890 1/31/96 $ 12,871 $ 12,793 $ 12,933 2/28/96 $ 13,077 $ 13,277 $ 13,467 3/31/96 $ 13,674 $ 13,382 $ 13,735 4/30/96 $ 14,363 $ 14,028 $ 14,499 5/31/96 $ 14,785 $ 14,314 $ 14,970 6/30/96 $ 14,405 $ 13,882 $ 14,470 7/31/96 $ 13,571 $ 12,805 $ 13,186 8/31/96 $ 14,240 $ 13,498 $ 13,959 9/30/96 $ 14,960 $ 14,355 $ 14,829 10/31/96 $ 14,765 $ 14,187 $ 14,514 11/30/96 $ 15,526 $ 15,022 $ 15,070 12/31/96 $ 15,671 $ 14,770 $ 14,991 1/31/97 $ 16,285 $ 15,424 $ 15,469 2/28/97 $ 16,042 $ 15,085 $ 14,882 3/31/97 $ 15,277 $ 14,233 $ 13,988 4/30/97 $ 15,404 $ 14,581 $ 14,247 5/31/97 $ 16,493 $ 15,888 $ 15,676 6/30/97 $ 17,141 $ 16,328 $ 16,204 7/31/97 $ 18,322 $ 17,890 $ 17,486 8/31/97 $ 18,124 $ 17,715 $ 17,376 9/30/97 $ 19,070 $ 18,611 $ 18,486 10/31/97 $ 18,487 $ 17,679 $ 17,521 11/30/97 $ 18,709 $ 17,865 $ 17,472 12/31/97 $ 18,905 $ 18,099 $ 17,610 1/31/98 $ 18,905 $ 17,773 $ 17,367 2/28/98 $ 20,289 $ 19,444 $ 18,958 3/31/98 $ 21,001 $ 20,258 $ 19,837 4/30/98 $ 20,923 $ 20,534 $ 20,018 5/31/98 $ 20,005 $ 19,690 $ 19,013 6/30/98 $ 20,185 $ 20,247 $ 19,760 7/31/98 $ 18,867 $ 19,380 $ 18,845 8/31/98 $ 15,156 $ 15,681 $ 15,039 9/30/98 $ 15,906 $ 16,866 $ 16,213 10/31/98 $ 17,237 $ 18,108 $ 17,011 11/30/98 $ 17,780 $ 19,328 $ 18,115 12/31/98 $ 18,669 $ 21,330 $ 20,060 1/31/99 $ 18,367 $ 21,970 $ 20,600 2/28/99 $ 17,647 $ 20,896 $ 19,319 3/31/99 $ 18,510 $ 22,060 $ 20,217 4/30/99 $ 18,812 $ 23,066 $ 21,086 5/31/99 $ 19,186 $ 22,768 $ 21,120 6/30/99 $ 20,337 $ 24,357 $ 22,444 7/31/99 $ 20,121 $ 23,583 $ 22,027 8/31/99 $ 19,789 $ 23,338 $ 21,732 9/30/99 $ 19,315 $ 23,139 $ 21,632 10/31/99 $ 19,790 $ 24,928 $ 23,113 11/30/99 $ 20,322 $ 27,510 $ 25,120 12/31/99 $ 21,450 $ 32,275 $ 28,895 1/31/00 $ 20,519 $ 32,269 $ 28,282 2/28/00 $ 21,869 $ 39,052 $ 33,342 3/31/00 $ 23,483 $ 39,091 $ 33,132 4/30/00 $ 23,312 $ 35,295 $ 30,379 5/31/00 $ 22,272 $ 32,722 $ 28,535 6/30/00 $ 22,862 $ 36,194 $ 31,400 7/31/00 $ 22,800 $ 33,903 $ 30,690 8/31/00 $ 25,315 $ 39,015 $ 34,459 9/30/00 $ 24,789 $ 37,107 $ 33,156 10/31/00 $ 24,571 $ 34,569 $ 31,180 11/30/00 $ 22,600 $ 27,057 $ 26,235 12/31/00 $ 24,550 $ 28,483 $ 27,885 1/31/01 $ 24,717 $ 30,110 $ 28,588 2/28/01 $ 23,457 $ 24,901 $ 25,169 3/31/01 $ 21,730 $ 21,337 $ 22,627 4/30/01 $ 23,490 $ 24,894 $ 25,324 5/31/01 $ 23,939 $ 24,777 $ 25,521 6/30/01 $ 23,740 $ 24,790 $ 25,243 7/31/01 $ 23,342 $ 23,119 $ 23,999 8/31/01 $ 22,611 $ 21,443 $ 22,336 9/30/01 $ 20,088 $ 17,898 $ 19,113 10/31/01 $ 20,753 $ 19,779 $ 20,238 11/30/01 $ 22,031 $ 21,910 $ 21,973 12/31/01 $ 23,511 $ 22,742 $ 22,722 1/31/02 $ 22,964 $ 22,003 $ 22,027 2/28/02 $ 22,897 $ 20,756 $ 21,020 3/31/02 $ 23,643 $ 22,339 $ 22,456 4/30/02 $ 22,780 $ 21,157 $ 21,733 5/31/02 $ 21,967 $ 20,527 $ 21,194 6/30/02 $ 19,942 $ 18,261 $ 19,369 7/31/02 $ 18,131 $ 16,486 $ 17,473 8/31/02 $ 17,700 $ 16,428 $ 17,478 9/30/02 $ 16,505 $ 15,122 $ 16,064 10/31/02 $ 17,535 $ 16,294 $ 16,917 11/30/02 $ 18,382 $ 17,570 $ 18,032 12/31/02 $ 17,483 $ 16,509 $ 17,027 1/31/03 $ 17,256 $ 16,347 $ 16,687 2/28/03 $ 16,796 $ 16,205 $ 16,368
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 MidCap Growth Index measures the performance of those Russell Mid Cap companies with higher price-to-book ratios and higher forecasted growth values. The Lipper Mid-Cap Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. 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. 8 INTERNATIONAL EQUITY PORTFOLIO (UNAUDITED) THE INTERNATIONAL EQUITY PORTFOLIO SEEKS TO PROVIDE A TOTAL RETURN ON ASSETS FROM LONG-TERM GROWTH OF CAPITAL PRINCIPALLY THROUGH DIVERSIFIED HOLDINGS OF THE STOCKS OF ESTABLISHED FOREIGN COMPANIES OUTSIDE THE UNITED STATES. Q: HOW WAS THE PORTFOLIO MANAGED? A: The International Equity Portfolio fell 12.99% during the six months ended February 28, 2003. This compares with a decline of 10.97% in the MSCI EAFE Index. Q: WHY DID THE PORTFOLIO PERFORM THIS WAY? A: During the six months under review, disappointing news from a small number of holdings caused the Portfolio to trail its MSCI EAFE benchmark. Such was the state of nervousness in equity markets, that negative news caused substantial falls in stock prices. This period of underperformance contrasts with the long-term record of outperformance generated by this stock-picking style. Much of the poor performance was caused by just two German holdings. Bayer shares fell by almost 50% following uncertainty over potential liabilities related to its Baycol cholesterol-reducing drug, which has so far been linked to about 100 deaths. Heidelberg Cement shares also lost approaching half of their value, with concerns about declining demand for cement, both globally and in Germany. In the U.K. there were problems at Allied Domecq and BAE Systems. Shares in Allied Domecq fell sharply after the company warned that profits would be lower than expected citing foreign exchange issues, and mounting pension fund costs. BAE Systems also issued a profit warning during the period, following cost overruns on two U.K. government defense contracts. But there were some bright spots. Among defensives, the stable cash flows of Portuguese motorway company Brisa and Spanish tobacco company Altadis were rewarded by positive stock price returns. There were also positive returns from commodity price plays such as the Italian oil company ENI and metals company Rio Tinto. In Japan, there were strong returns from stocks including Canon, Fuji Photo and Yamanichi Pharmaceutical. Q: HOW WAS THE PORTFOLIO MANAGED? A: The manager continued to search for stocks that will drive Portfolio returns higher. As stock markets have fallen, so an increasing number of high-quality stocks are trading on attractive valuations. These include companies such as Allied Domecq, Aventis, BG Group, Nestle and Renault. This search for attractive companies trading at compelling valuations has led to an increased holding in cyclical stocks, although the Portfolio retains a defensive bias. Q: WHAT IS THE OUTLOOK? A: War in the Middle East, and dissent between the U.S. and its erstwhile allies, have been the dominant factors driving down equity markets. While this has led to declining consumer confidence and higher oil prices, we remain believers in long-term equity returns. Quite simply, the valuations of some equities are currently too low. 9 LIFE OF PORTFOLIO PERFORMANCE A $10,000 tax-deferred investment in the International Equity Portfolio at NAV (Net Asset Value) would have grown to $10,763 from inception on 3/1/95 through 2/28/03.* INVESTMENT RESULTS Average Annual Returns as of 2/28/03 1 year -16.94% 3 year -19.22% 5 year -3.51% Since Inception (3/1/95) 0.92%
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INTERNATIONAL LIPPER INTERNATIONAL EQUITY PORTFOLIO MSCI EAFE INDEX FUNDS INDEX 3/1/95 $ 10,000 $ 10,000 $ 10,000 3/31/95 $ 10,180 $ 10,624 $ 10,263 4/30/95 $ 10,350 $ 11,023 $ 10,641 5/31/95 $ 10,480 $ 10,892 $ 10,745 6/30/95 $ 10,470 $ 10,702 $ 10,786 7/31/95 $ 11,010 $ 11,368 $ 11,379 8/31/95 $ 10,890 $ 10,935 $ 11,187 9/30/95 $ 11,070 $ 11,148 $ 11,374 10/31/95 $ 10,909 $ 10,849 $ 11,137 11/30/95 $ 10,869 $ 11,150 $ 11,253 12/31/95 $ 10,889 $ 11,600 $ 11,579 1/31/96 $ 11,057 $ 11,647 $ 11,852 2/28/96 $ 11,131 $ 11,687 $ 11,903 3/31/96 $ 11,426 $ 11,934 $ 12,089 4/30/96 $ 11,753 $ 12,282 $ 12,483 5/31/96 $ 11,617 $ 12,056 $ 12,469 6/30/96 $ 11,680 $ 12,123 $ 12,583 7/31/96 $ 11,121 $ 11,769 $ 12,159 8/31/96 $ 11,152 $ 11,795 $ 12,317 9/30/96 $ 11,447 $ 12,109 $ 12,593 10/31/96 $ 11,299 $ 11,985 $ 12,542 11/30/96 $ 11,689 $ 12,462 $ 13,132 12/31/96 $ 11,647 $ 12,302 $ 13,249 1/31/97 $ 11,532 $ 11,871 $ 13,266 2/28/97 $ 11,797 $ 12,066 $ 13,506 3/31/97 $ 11,751 $ 12,109 $ 13,578 4/30/97 $ 11,727 $ 12,173 $ 13,637 5/31/97 $ 12,213 $ 12,966 $ 14,407 6/30/97 $ 12,687 $ 13,680 $ 15,098 7/31/97 $ 13,288 $ 13,902 $ 15,583 8/31/97 $ 12,075 $ 12,863 $ 14,459 9/30/97 $ 12,733 $ 13,584 $ 15,388 10/31/97 $ 11,728 $ 12,539 $ 14,220 11/30/97 $ 11,659 $ 12,411 $ 14,100 12/31/97 $ 11,815 $ 12,519 $ 14,210 1/31/98 $ 12,097 $ 13,091 $ 14,554 2/28/98 $ 12,867 $ 13,932 $ 15,478 3/31/98 $ 13,442 $ 14,361 $ 16,319 4/30/98 $ 13,747 $ 14,474 $ 16,570 5/31/98 $ 13,797 $ 14,404 $ 16,603 6/30/98 $ 13,626 $ 14,513 $ 16,459 7/31/98 $ 14,017 $ 14,660 $ 16,711 8/31/98 $ 11,778 $ 12,843 $ 14,306 9/30/98 $ 11,154 $ 12,449 $ 13,861 10/31/98 $ 11,876 $ 13,746 $ 14,880 11/30/98 $ 12,426 $ 14,450 $ 15,625 12/31/98 $ 12,885 $ 15,019 $ 16,010 1/31/99 $ 13,677 $ 14,974 $ 16,107 2/28/99 $ 13,132 $ 14,618 $ 15,693 3/31/99 $ 13,417 $ 15,227 $ 16,216 4/30/99 $ 14,040 $ 15,844 $ 16,972 5/31/99 $ 13,237 $ 15,028 $ 16,340 6/30/99 $ 13,756 $ 15,614 $ 17,115 7/31/99 $ 14,443 $ 16,078 $ 17,496 8/31/99 $ 14,728 $ 16,137 $ 17,635 9/30/99 $ 14,819 $ 16,300 $ 17,691 10/31/99 $ 15,351 $ 16,912 $ 18,308 11/30/99 $ 17,218 $ 17,499 $ 19,650 12/31/99 $ 19,549 $ 19,070 $ 22,066 1/31/00 $ 18,922 $ 17,859 $ 20,775 2/28/00 $ 20,416 $ 18,339 $ 22,146 3/31/00 $ 20,402 $ 19,051 $ 22,203 4/30/00 $ 18,948 $ 18,049 $ 20,796 5/31/00 $ 18,080 $ 17,608 $ 20,224 6/30/00 $ 18,506 $ 18,297 $ 21,160 7/31/00 $ 17,651 $ 17,530 $ 20,475 8/31/00 $ 17,759 $ 17,683 $ 20,821 9/30/00 $ 16,663 $ 16,822 $ 19,607 10/31/00 $ 16,197 $ 16,425 $ 18,940 11/30/00 $ 15,769 $ 15,809 $ 18,141 12/31/00 $ 16,282 $ 16,370 $ 18,818 1/31/01 $ 16,265 $ 16,362 $ 18,929 2/28/01 $ 14,990 $ 15,135 $ 17,600 3/31/01 $ 14,067 $ 14,125 $ 16,362 4/30/01 $ 15,040 $ 15,107 $ 17,357 5/31/01 $ 14,604 $ 14,574 $ 16,937 6/30/01 $ 14,017 $ 13,978 $ 16,460 7/31/01 $ 13,681 $ 13,723 $ 16,032 8/31/01 $ 13,362 $ 13,376 $ 15,709 9/30/01 $ 12,237 $ 12,021 $ 13,997 10/31/01 $ 12,606 $ 12,329 $ 14,376 11/30/01 $ 13,127 $ 12,784 $ 14,913 12/31/01 $ 13,412 $ 12,859 $ 15,178 1/31/02 $ 12,824 $ 12,176 $ 14,565 2/28/02 $ 12,959 $ 12,261 $ 14,769 3/31/02 $ 13,681 $ 12,925 $ 15,550 4/30/02 $ 13,949 $ 13,010 $ 15,659 5/31/02 $ 14,116 $ 13,175 $ 15,883 6/30/02 $ 13,714 $ 12,651 $ 15,256 7/31/02 $ 12,270 $ 11,402 $ 13,733 8/31/02 $ 12,371 $ 11,376 $ 13,744 9/30/02 $ 10,894 $ 10,154 $ 12,264 10/31/02 $ 11,548 $ 10,700 $ 12,900 11/30/02 $ 12,119 $ 11,185 $ 13,510 12/31/02 $ 11,736 $ 10,810 $ 13,078 1/31/03 $ 11,054 $ 10,359 $ 12,599 2/28/03 $ 10,763 $ 10,122 $ 12,227
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, Australasia and Far Eastern equity markets, and assumes the reinvestment of dividends. An individual cannot invest in an index. The Lipper International Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. 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. 10 ASSET ALLOCATION PORTFOLIO (UNAUDITED) THE ASSET ALLOCATION PORTFOLIO SEEKS TO PROVIDE MAXIMUM RETURN THROUGH A COMBINATION OF LONG-TERM CAPITAL GROWTH AND CURRENT INCOME BY INVESTING IN COMMON STOCKS, CONVERTIBLE SECURITIES AND GOVERNMENT AND CORPORATE FIXED INCOME OBLIGATIONS. Q: HOW DID THE PORTFOLIO PERFORM? A: The Asset Allocation Portfolio declined 2.88% during the six months ended February 28, 2003. This compares to a decline of 7.29% and a gain of 4.73% in the S&P 500 Index and Lehman Aggregate Index, respectively. Q: WHY DID THE PORTFOLIO PERFORM THIS WAY? A: The Fund's underperformance relative to its benchmark was due primarily to the underperformance of the fixed-income portion of the Portfolio, which more than offset the outperformance of the equity portion of the portfolio, during this period. Within the bond segment, weak performance was due primarily to our positions in corporates and utilities. Corporates were down for most of the reporting period, though they rallied sharply in November and December. On a stock-specific level, overweight positions in Travelers Property & Casualty and Amgen contributed most to performance, while our overweights in CIGNA and Tenet Healthcare detracted most from performance. Q: HOW WAS THE PORTFOLIO MANAGED? A: In a highly volatile market environment, one marked by the looming prospect of war with Iraq and a weak national economy, amongst other negative influences, our domestic large cap portfolio outperformed its S&P 500 benchmark. We overweighted our positions in the utilities and pharmaceuticals sectors, and our underweighting of the semiconductor sector contributed positively to performance. However, our decision to overweight the insurance and consumer staple sectors, and underweight the health services & systems sector, detracted from performance. The fixed-income portion of the Portfolio struggled over the past six months, particularly in the fourth quarter of 2002. Although corporates endured a late-2002 rally, this hurt performance, as we were underweight the corporate sector during the six-month period. Also in the fourth quarter, lower quality, investment-grade names outperformed higher quality names, with industrials, utilities and finance companies leading the way. As we were underweight utilities in the fourth quarter, this served to undermine performance as well. Q: WHAT IS THE OUTLOOK? A: Going forward, the nation's equity markets likely will remain troubled by the increasing risk of war. Among other things, stocks are vulnerable to high current oil prices, which may persist while the conflict remains unresolved. Investors are also wary of the significant risks involved in unilateral military action by the United States. We believe the more enduring and fundamental issues are poor profitability and deflation in the corporate sector, both of which are delaying the recovery of capital spending and employment. Until profit fundamentals improve, the recovery should be slow, uneven, and heavily dependent on support from low interest rates. Accordingly, we assign a very low probability to a "coiled spring" scenario, in which the economy snaps back to above-trend growth and the Federal Reserve Board begins a tightening process. Balancing these negatives are favorable equity valuations and relatively low interest rates globally. If a war with Iraq were to be resolved quickly and successfully, we believe equities would respond favorably and bond yields would probably spike upwards in response. As far as the fixed-income markets are concerned, we continue to focus on yield-enhancing strategies, as interest rates appear range-bound until economic and geopolitical forces sort themselves out. For our part, we will continue to manage the equity portion of the Portfolio by emphasizing the selection of undervalued securities, relative to their long-term prospects within a sector neutral framework. On the fixed-income side, we hope to add value by continuing to manage a diversified portfolio of high-quality investments in both traditional and extended markets. 11 LIFE OF PORTFOLIO PERFORMANCE A $10,000 tax-deferred investment in the Asset Allocation Portfolio at NAV (Net Asset Value) would have grown to $13,766 from inception on 3/1/95 through 2/28/03.* INVESTMENT RESULTS Average Annual Returns as of 2/28/03 1 year -12.13% 3 year -6.68% 5 year -3.39% Since Inception (3/1/95) 4.08%
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ASSET ALLOCATION LEHMAN GOV'T/ LIPPER BALANCED PORTFOLIO S&P 500 INDEX CREDIT INDEX FUNDS INDEX 3/1/95 $ 10,000 $ 10,000 $ 10,000 $ 10,000 3/31/95 $ 10,160 $ 10,295 $ 10,067 $ 10,177 4/30/95 $ 10,270 $ 10,599 $ 10,207 $ 10,368 5/31/95 $ 10,570 $ 11,023 $ 10,635 $ 10,700 6/30/95 $ 10,729 $ 11,278 $ 10,720 $ 10,890 7/31/95 $ 10,979 $ 11,653 $ 10,678 $ 11,119 8/31/95 $ 11,040 $ 11,682 $ 10,815 $ 11,206 9/30/95 $ 11,200 $ 12,175 $ 10,925 $ 11,474 10/31/95 $ 11,120 $ 12,131 $ 11,085 $ 11,445 11/30/95 $ 11,440 $ 12,664 $ 11,268 $ 11,801 12/31/95 $ 11,595 $ 12,908 $ 11,434 $ 11,986 1/31/96 $ 11,880 $ 13,347 $ 11,505 $ 12,203 2/28/96 $ 11,935 $ 13,471 $ 11,261 $ 12,209 3/31/96 $ 12,045 $ 13,600 $ 11,166 $ 12,256 4/30/96 $ 12,132 $ 13,800 $ 11,089 $ 12,337 5/31/96 $ 12,198 $ 14,156 $ 11,071 $ 12,463 6/30/96 $ 12,231 $ 14,210 $ 11,219 $ 12,504 7/31/96 $ 12,000 $ 13,582 $ 11,245 $ 12,182 8/31/96 $ 12,241 $ 13,869 $ 11,218 $ 12,375 9/30/96 $ 12,625 $ 14,649 $ 11,417 $ 12,834 10/31/96 $ 12,834 $ 15,054 $ 11,683 $ 13,106 11/30/96 $ 13,361 $ 16,192 $ 11,898 $ 13,717 12/31/96 $ 13,218 $ 15,871 $ 11,766 $ 13,552 1/31/97 $ 13,595 $ 16,863 $ 11,780 $ 13,971 2/28/97 $ 13,555 $ 16,995 $ 11,805 $ 14,023 3/31/97 $ 13,192 $ 16,296 $ 11,665 $ 13,615 4/30/97 $ 13,594 $ 17,269 $ 11,835 $ 14,024 5/31/97 $ 14,100 $ 18,321 $ 11,945 $ 14,599 6/30/97 $ 14,464 $ 19,142 $ 12,088 $ 15,083 7/31/97 $ 15,320 $ 20,665 $ 12,458 $ 15,942 8/31/97 $ 15,009 $ 19,508 $ 12,319 $ 15,437 9/30/97 $ 15,464 $ 20,577 $ 12,512 $ 16,053 10/31/97 $ 15,360 $ 19,890 $ 12,712 $ 15,761 11/30/97 $ 15,646 $ 20,811 $ 12,780 $ 16,051 12/31/97 $ 15,823 $ 21,169 $ 12,914 $ 16,304 1/31/98 $ 15,725 $ 21,404 $ 13,096 $ 16,420 2/28/98 $ 16,360 $ 22,947 $ 13,070 $ 17,072 3/31/98 $ 16,812 $ 24,122 $ 13,110 $ 17,594 4/30/98 $ 16,770 $ 24,365 $ 13,176 $ 17,717 5/31/98 $ 16,642 $ 23,946 $ 13,317 $ 17,539 6/30/98 $ 16,882 $ 24,918 $ 13,453 $ 17,861 7/31/98 $ 16,515 $ 24,654 $ 13,463 $ 17,652 8/31/98 $ 15,006 $ 21,089 $ 13,726 $ 16,131 9/30/98 $ 15,570 $ 22,441 $ 14,119 $ 16,827 10/31/98 $ 16,262 $ 24,266 $ 14,018 $ 17,457 11/30/98 $ 16,684 $ 25,736 $ 14,102 $ 18,096 12/31/98 $ 17,290 $ 27,218 $ 14,136 $ 18,763 1/31/99 $ 17,368 $ 28,356 $ 14,237 $ 19,064 2/28/99 $ 16,647 $ 27,474 $ 13,898 $ 18,606 3/31/99 $ 16,913 $ 28,573 $ 13,967 $ 19,066 4/30/99 $ 17,556 $ 29,679 $ 14,002 $ 19,691 5/31/99 $ 17,259 $ 28,979 $ 13,858 $ 19,388 6/30/99 $ 17,605 $ 30,587 $ 13,815 $ 19,923 7/31/99 $ 17,119 $ 29,633 $ 13,776 $ 19,550 8/31/99 $ 16,790 $ 29,484 $ 13,765 $ 19,345 9/30/99 $ 16,587 $ 28,677 $ 13,889 $ 19,097 10/31/99 $ 16,837 $ 30,492 $ 13,925 $ 19,651 11/30/99 $ 16,758 $ 31,111 $ 13,917 $ 19,864 12/31/99 $ 17,378 $ 32,943 $ 13,832 $ 20,451 1/31/00 $ 16,940 $ 31,289 $ 13,828 $ 19,938 2/28/00 $ 16,940 $ 30,698 $ 14,001 $ 19,890 3/31/00 $ 17,996 $ 33,700 $ 14,202 $ 21,062 4/30/00 $ 17,607 $ 32,686 $ 14,133 $ 20,676 5/31/00 $ 17,088 $ 32,016 $ 14,120 $ 20,482 6/30/00 $ 17,704 $ 32,804 $ 14,408 $ 20,810 7/31/00 $ 17,720 $ 32,292 $ 14,561 $ 20,754 8/31/00 $ 18,353 $ 34,297 $ 14,766 $ 21,679 9/30/00 $ 17,656 $ 32,486 $ 14,822 $ 21,224 10/31/00 $ 17,543 $ 32,350 $ 14,916 $ 21,205 11/30/00 $ 16,715 $ 29,801 $ 15,171 $ 20,435 12/31/00 $ 16,763 $ 29,947 $ 15,470 $ 20,944 1/31/01 $ 17,113 $ 31,010 $ 15,729 $ 21,388 2/28/01 $ 16,213 $ 28,182 $ 15,891 $ 20,558 3/31/01 $ 15,597 $ 26,395 $ 15,965 $ 19,894 4/30/01 $ 16,280 $ 28,446 $ 15,845 $ 20,730 5/31/01 $ 16,280 $ 28,636 $ 15,937 $ 20,914 6/30/01 $ 16,030 $ 27,941 $ 16,013 $ 20,594 7/31/01 $ 16,113 $ 27,667 $ 16,412 $ 20,580 8/31/01 $ 15,563 $ 25,935 $ 16,622 $ 19,993 9/30/01 $ 15,047 $ 23,842 $ 16,775 $ 19,032 10/31/01 $ 15,430 $ 24,297 $ 17,201 $ 19,349 11/30/01 $ 15,964 $ 26,161 $ 16,919 $ 20,119 12/31/01 $ 16,014 $ 26,391 $ 16,785 $ 20,264 1/31/02 $ 15,927 $ 26,006 $ 16,908 $ 20,086 2/28/02 $ 15,671 $ 25,504 $ 17,051 $ 19,949 3/31/02 $ 16,014 $ 26,463 $ 16,705 $ 20,386 4/30/02 $ 15,431 $ 24,859 $ 17,029 $ 19,897 5/31/02 $ 15,363 $ 24,675 $ 17,186 $ 19,887 6/30/02 $ 14,678 $ 22,918 $ 17,332 $ 19,038 7/31/02 $ 14,044 $ 21,131 $ 17,540 $ 18,061 8/31/02 $ 14,182 $ 21,270 $ 17,933 $ 18,247 9/30/02 $ 13,410 $ 18,958 $ 18,319 $ 17,158 10/31/02 $ 13,908 $ 20,626 $ 18,143 $ 17,873 11/30/02 $ 14,439 $ 21,841 $ 18,154 $ 18,599 12/31/02 $ 14,035 $ 20,559 $ 18,635 $ 18,097 1/31/03 $ 13,807 $ 20,021 $ 18,635 $ 18,070 2/28/03 $ 13,766 $ 19,720 $ 18,966 $ 17,934
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 S&P 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 Lehman Gov't./Credit Index includes the government and corporate bond indices, including U.S. government and treasury agency securities, corporate and Yankee bonds. Investors cannot invest directly in an index. The Lipper Balanced Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. 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. 12 U.S. GOVERNMENT INCOME PORTFOLIO (UNAUDITED) THE U.S. GOVERNMENT INCOME PORTFOLIO SEEKS TO PROVIDE ANNUAL DIVIDENDS AS WELL AS TO PRESERVE PRINCIPAL. Q: HOW DID THE PORTFOLIO PERFORM? A: The U.S. Government Income Portfolio returned 4.20% for the six months ended February 28, 2003. This compares to the 4.48% return of its benchmark index, the Lehman Government Bond Index. Q: WHY DID THE PORTFOLIO PERFORM THIS WAY? A: Duration positioning had a slightly negative impact on performance. A positive contributor was our overweight to prepayment sensitive mortgages. Despite record lows in interest rates, mortgage securities continued their strong performance, with lower coupon securities outperforming. Given the anemic loan demand and an aversion to credit risk, banks continued to be large buyers of mortgages. Q: HOW WAS THE PORTFOLIO MANAGED? A: The fixed-income markets were highly volatile during the final months of 2002 as investors continued to react to the declining equity market, contradictory economic data and escalating geopolitical risk. Following the election of Republican majorities in the House and Senate, discussions in Washington centered on a new fiscal stimulus package that included additional tax cuts. In November, the Federal Reserve Board lowered the Federal Funds Rate by one-half percent--a larger-than-expected decrease--and adopted a neutral bias. The growing fear of war in Iraq and disappointing economic news sent more investors into the relative safety of the bond market during January and February. Iraq concerns and associated energy-market developments also created additional headwinds for both businesses and consumers. During the period, we tactically traded the duration position versus the benchmark. In February, we assumed a tactical short duration position, trading out of it by month-end. In the second half of the period, we reduced our exposure to agencies and increased our exposure to pre-payment sensitive FNMA mortgages. Q: WHAT IS THE OUTLOOK? A: We do not believe that geopolitical angst is the only force restraining the economic recovery. For us, the more enduring and fundamental issues are poor profitability and deflation in the corporate sector, both of which are delaying a recovery of capital spending and hiring. Until profit fundamentals improve, the recovery should be slow, uneven and heavily dependent on continued support from low interest rates. Accordingly, we think the Fed is unlikely to tighten in 2003. We plan to maintain our overweight to payment sensitive mortgages as long as spreads remain attractive. 13 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 $17,616 from inception on 3/1/95 through 2/28/03.* INVESTMENT RESULTS Average Annual Returns as of 2/28/03 1 year 10.47% 3 year 9.86% 5 year 7.06% Since Inception (3/1/95) 7.34%
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U.S. GOVERNMENT LEHMAN U.S. GOV'T LIPPER GENERAL U.S. INCOME PORTFOLIO BOND INDEX GOV'T FUNDS INDEX 3/1/95 $ 10,000 $ 10,000 $ 10,000 3/31/95 $ 10,050 $ 10,063 $ 10,046 4/30/95 $ 10,170 $ 10,195 $ 10,170 5/31/95 $ 10,550 $ 10,606 $ 10,539 6/30/95 $ 10,620 $ 10,687 $ 10,602 7/31/95 $ 10,570 $ 10,648 $ 10,565 8/31/95 $ 10,690 $ 10,772 $ 10,688 9/30/95 $ 10,800 $ 10,876 $ 10,789 10/31/95 $ 10,950 $ 11,041 $ 10,931 11/30/95 $ 11,100 $ 11,213 $ 11,085 12/31/95 $ 11,236 $ 11,373 $ 11,240 1/31/96 $ 11,293 $ 11,442 $ 11,297 2/28/96 $ 11,029 $ 11,209 $ 11,065 3/31/96 $ 10,925 $ 11,116 $ 10,972 4/30/96 $ 10,856 $ 11,044 $ 10,897 5/31/96 $ 10,822 $ 11,026 $ 10,856 6/30/96 $ 10,971 $ 11,168 $ 10,982 7/31/96 $ 10,994 $ 11,196 $ 11,003 8/31/96 $ 10,971 $ 11,171 $ 10,975 9/30/96 $ 11,132 $ 11,357 $ 11,159 10/31/96 $ 11,350 $ 11,606 $ 11,401 11/30/96 $ 11,523 $ 11,808 $ 11,602 12/31/96 $ 11,431 $ 11,688 $ 11,482 1/31/97 $ 11,456 $ 11,701 $ 11,506 2/28/97 $ 11,431 $ 11,717 $ 11,530 3/31/97 $ 11,305 $ 11,593 $ 11,394 4/30/97 $ 11,469 $ 11,760 $ 11,563 5/31/97 $ 11,557 $ 11,861 $ 11,659 6/30/97 $ 11,683 $ 11,994 $ 11,797 7/31/97 $ 11,999 $ 12,334 $ 12,122 8/31/97 $ 11,859 $ 12,212 $ 11,996 9/30/97 $ 12,049 $ 12,396 $ 12,180 10/31/97 $ 12,238 $ 12,610 $ 12,359 11/30/97 $ 12,289 $ 12,674 $ 12,403 12/31/97 $ 12,397 $ 12,807 $ 12,528 1/31/98 $ 12,527 $ 12,999 $ 12,688 2/28/98 $ 12,527 $ 12,964 $ 12,663 3/31/98 $ 12,566 $ 13,001 $ 12,695 4/30/98 $ 12,617 $ 13,059 $ 12,745 5/31/98 $ 12,734 $ 13,194 $ 12,863 6/30/98 $ 12,877 $ 13,344 $ 12,972 7/31/98 $ 12,890 $ 13,364 $ 12,992 8/31/98 $ 13,176 $ 13,712 $ 13,247 9/30/98 $ 13,475 $ 14,082 $ 13,546 10/31/98 $ 13,397 $ 14,034 $ 13,446 11/30/98 $ 13,436 $ 14,038 $ 13,475 12/31/98 $ 13,461 $ 14,069 $ 13,512 1/31/99 $ 13,517 $ 14,151 $ 13,589 2/28/99 $ 13,188 $ 13,814 $ 13,295 3/31/99 $ 13,244 $ 13,868 $ 13,363 4/30/99 $ 13,271 $ 13,900 $ 13,398 5/31/99 $ 13,120 $ 13,777 $ 13,250 6/30/99 $ 13,065 $ 13,750 $ 13,181 7/31/99 $ 13,038 $ 13,729 $ 13,106 8/31/99 $ 13,023 $ 13,729 $ 13,071 9/30/99 $ 13,133 $ 13,840 $ 13,232 10/31/99 $ 13,173 $ 13,862 $ 13,253 11/30/99 $ 13,133 $ 13,843 $ 13,241 12/31/99 $ 13,088 $ 13,753 $ 13,151 1/31/00 $ 13,102 $ 13,772 $ 13,110 2/28/00 $ 13,280 $ 13,968 $ 13,277 3/31/00 $ 13,518 $ 14,214 $ 13,476 4/30/00 $ 13,488 $ 14,174 $ 13,426 5/31/00 $ 13,503 $ 14,182 $ 13,411 6/30/00 $ 13,726 $ 14,435 $ 13,681 7/31/00 $ 13,845 $ 14,575 $ 13,786 8/31/00 $ 14,039 $ 14,791 $ 13,998 9/30/00 $ 14,069 $ 14,832 $ 14,050 10/31/00 $ 14,188 $ 14,974 $ 14,163 11/30/00 $ 14,486 $ 15,269 $ 14,436 12/31/00 $ 14,754 $ 15,573 $ 14,712 1/31/01 $ 14,911 $ 15,731 $ 14,875 2/28/01 $ 15,067 $ 15,910 $ 15,021 3/31/01 $ 15,082 $ 15,966 $ 15,058 4/30/01 $ 14,895 $ 15,803 $ 14,930 5/31/01 $ 14,942 $ 15,855 $ 15,000 6/30/01 $ 15,004 $ 15,928 $ 15,050 7/31/01 $ 15,363 $ 16,310 $ 15,401 8/31/01 $ 15,520 $ 16,512 $ 15,573 9/30/01 $ 15,816 $ 16,800 $ 15,793 10/31/01 $ 16,253 $ 17,233 $ 16,173 11/30/01 $ 15,801 $ 16,847 $ 15,845 12/31/01 $ 15,625 $ 16,700 $ 15,693 1/31/02 $ 15,760 $ 16,809 $ 15,833 2/28/02 $ 15,946 $ 16,964 $ 16,000 3/31/02 $ 15,592 $ 16,596 $ 15,669 4/30/02 $ 15,946 $ 16,991 $ 16,015 5/31/02 $ 16,046 $ 17,092 $ 16,115 6/30/02 $ 16,231 $ 17,332 $ 16,279 7/31/02 $ 16,550 $ 17,713 $ 16,569 8/31/02 $ 16,905 $ 18,064 $ 16,857 9/30/02 $ 17,292 $ 18,486 $ 17,140 10/31/02 $ 17,139 $ 18,339 $ 17,029 11/30/02 $ 17,004 $ 18,181 $ 16,930 12/31/02 $ 17,380 $ 18,621 $ 17,259 1/31/03 $ 17,343 $ 18,574 $ 17,236 2/28/03 $ 17,616 $ 18,873 $ 17,462
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 Lehman U.S. Gov't Bond Index is composed of the U.S. Treasury Bond Index and the Agency Bond Index and includes U.S. Treasury and Agency bond issues. The index is unmanaged and reflects the reinvestment of dividends. An individual cannot invest directly in an index. The Lipper General U.S. Gov't Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. 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. 14 MONEY MARKET PORTFOLIO (UNAUDITED) THE MONEY MARKET PORTFOLIO SEEKS TO PROVIDE MAXIMUM CURRENT INCOME CONSISTENT WITH PRESERVATION OF CAPITAL AND MAINTENANCE OF LIQUIDITY. Q: HOW DID THE PORTFOLIO PERFORM? A: The Money Market Portfolio returned 0.43% for the six months ended February 28, 2003. Q: HOW WAS THE PORTFOLIO MANAGED? A: The fixed-income markets were highly volatile during the final months of 2002 as investors continued to react to the declining equity market, contradictory economic data and escalating geopolitical risk. Following the election of Republican majorities in the House and Senate, discussions in Washington centered on a new fiscal stimulus package that included additional tax cuts. In November, the Federal Reserve Board lowered the Federal Funds Rate by one-half percent--a larger-than-expected decrease--and adopted a neutral bias. The growing fear of war in Iraq and disappointing economic news sent more investors into the relative safety of the bond market during January and February. Iraq concerns and associated energy-market developments also created additional headwinds for both businesses and consumers. The dominant event during the fourth quarter of 2002 was the Fed's one-half percent interest rate reduction. We focused on purchasing commercial paper and certificates of deposit with six-month maturities. Because we were positioned for two eases of a quarter-percent each, the Fund performed well. After the announcement, we maintained a longer weighted average maturity (WAM) to take advantage of the positively sloped LIBOR curve. Toward the end of the year, we let our cash positions build, shortening the WAM and giving us flexibility through year-end. As the LIBOR curve flattened in early 2003 and we were challenged by the resulting lack of relative value, we extended our WAM by purchasing one-year paper. Q: WHAT'S AHEAD? A: We do not believe that geopolitical angst is the only force restraining the economic recovery. For us, the more enduring and fundamental issues are poor profitability and deflation in the corporate sector, both of which are delaying a recovery of capital spending and hiring. Until profit fundamentals improve, the recovery should be slow, uneven and heavily dependent on continued support from low interest rates. Accordingly, we think the Fed is unlikely to tighten in 2003. We plan to add positions that will benefit from the continued flattening of the Treasury yield curve. AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH PORTFOLIO SHARES STRIVE TO PRESERVE THE VALUE OF THE INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THIS PORTFOLIO. 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. 15 GROWTH AND INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 28, 2003 (UNAUDITED)
SHARES ISSUER VALUE - ------ ------ ----- LONG-TERM INVESTMENTS--99.4% COMMON STOCKS--99.4% AEROSPACE--2.0% 700 GENERAL DYNAMICS CORP $ 41,482 1,200 UNITED TECHNOLOGIES CORP 70,296 ---------- 111,778 ---------- AGRICULTURAL PRODUCTION/SERVICES--2.7% 4,025 ALTRIA GROUP, INC. 155,566 ---------- APPAREL--1.3% 1,000 NIKE, INC., CLASS B 46,370 800 VF CORP. 27,080 ---------- 73,450 ---------- BANKING--11.2% 1,300 BANK OF AMERICA CORP. 90,012 900 BB&T CORP. 29,547 1,400 PNC FINANCIAL SERVICES GROUP, INC. 62,902 1,800 SUNTRUST BANKS, INC. 101,249 1,924 THE BANK OF NEW YORK CO., INC. 43,829 4,700 U.S. BANCORP 98,324 2,000 WACHOVIA CORP. 70,960 1,300 WASHINGTON MUTUAL, INC. 44,889 2,025 WELLS FARGO & CO. 91,834 ---------- 633,546 ---------- BUSINESS SERVICES--1.2% 2,000 EQUIFAX, INC. 38,360 2,000 IMS HEALTH, INC. 30,000 ---------- 68,360 ---------- CHEMICALS--0.6% 700 PPG INDUSTRIES, INC. 32,480 ---------- COMPUTER SOFTWARE--0.6% 2,500 COMPUTER ASSOCIATES INTERNATIONAL, INC. 33,375 ---------- COMPUTERS/COMPUTER HARDWARE--3.0% 800 INTERNATIONAL BUSINESS MACHINES CORP. 62,360 1,300 LEXMARK INTERNATIONAL, INC.* 81,133 2,700 SEAGATE TECHNOLOGY HOLDINGS* 25,029 ---------- 168,522 ---------- CONSTRUCTION--0.4% 1,800 CLAYTON HOMES, INC. 20,268 ---------- CONSTRUCTION MATERIALS--0.6% 1,000 VULCAN MATERIALS CO. 31,700 ---------- DIVERSIFIED--1.9% 1,425 GENERAL ELECTRIC CO. 34,271 4,850 TYCO INTERNATIONAL LTD (BERMUDA) 71,780 ---------- 106,051 ---------- ELECTRONICS/ELECTRICAL EQUIPMENT--0.7% 800 EMERSON ELECTRIC CO. 37,656 ---------- ENTERTAINMENT/LEISURE--0.5% 1,200 CARNIVAL CORP. $ 27,564 ---------- ENVIRONMENTAL SERVICES--0.8% 2,400 WASTE MANAGEMENT, INC. 47,760 ---------- FINANCIAL SERVICES--15.0% 3,050 AMERICAN EXPRESS CO. 102,419 1,000 CAPITAL ONE FINANCIAL CORP. 30,970 6,991 CITIGROUP, INC. 233,080 2,000 FREDDIE MAC 109,300 2,200 GOLDEN WEST FINANCIAL CORP. 159,280 3,900 JANUS CAPITAL GROUP, INC. 46,137 1,350 MERRILL LYNCH & CO., INC. 46,008 1,150 MORGAN STANLEY 42,378 1,600 PRUDENTIAL FINANCIAL, INC. 48,048 1,500 T. ROWE PRICE GROUP, INC. 38,580 ---------- 856,200 ---------- FOOD/BEVERAGE PRODUCTS--2.3% 600 BROWN-FORMAN CORP., CLASS B 41,730 1,900 KRAFT FOODS, INC., CLASS A 56,259 900 PEPSICO, INC. 34,488 ---------- 132,477 ---------- HEALTH CARE/HEALTH CARE SERVICES--0.8% 700 WELLPOINT HEALTH NETWORKS, INC.* 47,607 ---------- INSURANCE--8.9% 3,325 AMERICAN INTERNATIONAL GROUP, INC. 163,889 600 CHUBB CORP. 28,692 1,300 HARTFORD FINANCIAL SERVICES GROUP, INC. 46,969 1,600 JOHN HANCOCK FINANCIAL SERVICES, INC. 44,960 1,250 MARSH & MCLENNAN COMPANIES, INC. 50,875 1,000 MGIC INVESTMENT CORP. 39,460 1,000 PRINCIPAL FINANCIAL GROUP, INC. 27,570 1,600 SAFECO CORP. 52,608 3,123 TRAVELERS PROPERTY CASUALTY CORP., CLASS A 48,875 ---------- 503,898 ---------- MANUFACTURING--0.8% 2,025 HONEYWELL INTERNATIONAL, INC. 46,352 ---------- METALS/MINING--0.9% 2,500 ALCOA, INC. 51,250 ---------- MULTI-MEDIA--9.0% 8,225 AOL TIME WARNER, INC.* 93,107 3,493 COMCAST CORP., CLASS A* 102,065 500 E.W. SCRIPPS CO., CLASS A 40,050 900 GANNETT CO., INC. 64,953 600 KNIGHT RIDDER, INC. 38,292 10,616 LIBERTY MEDIA CORP., CLASS A* 97,561 2,175 THE WALT DISNEY CO. 37,106 1,034 VIACOM, INC., CLASS B* 38,392 ---------- 511,526 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 16
SHARES ISSUER VALUE - ------ ------ ----- OIL & GAS--12.5% 1,300 BURLINGTON RESOURCES, INC. $ 60,255 2,850 CHEVRONTEXACO CORP. 182,885 2,041 CONOCOPHILLIPS 103,479 1,400 DEVON ENERGY CORP. 67,480 8,916 EXXONMOBIL CORP. 303,322 ---------- 717,421 ---------- PHARMACEUTICALS--2.1% 2,700 PFIZER, INC. 80,514 1,150 WYETH 40,538 ---------- 121,052 ---------- PHOTOGRAPHIC EQUIPMENT--0.6% 1,100 EASTMAN KODAK CO. 32,560 ---------- PIPELINES--1.0% 1,300 KINDER MORGAN, INC. 59,189 ---------- REAL ESTATE--0.6% 1,800 BROOKFIELD PROPERTIES CORP. (CANADA) 33,714 ---------- REAL ESTATE INVESTMENT TRUST--0.8% 1,300 PUBLIC STORAGE, INC. 42,900 ---------- RESTAURANTS/FOOD SERVICES--1.2% 1,725 MCDONALD'S CORP. 23,477 1,300 OUTBACK STEAKHOUSE, INC. 41,860 ---------- 65,337 ---------- RETAILING--3.3% 900 AUTOZONE, INC.* 59,220 2,581 CARMAX, INC.* 38,844 6,300 CIRCUIT CITY STORES, INC. 27,846 2,100 HOME DEPOT, INC. 49,245 900 THE TJX COMPANIES, INC. 14,463 ---------- 189,618 ---------- TELECOMMUNICATIONS--8.1% 2,100 ALLTEL CORP. 91,182 2,725 AT&T CORP. 50,522 1,225 BELLSOUTH CORP. 26,546 1,700 ECHOSTAR COMMUNICATIONS CORP., CLASS A* 44,761 4,100 GENERAL MOTORS - HUGHES ELECTRONICS CORP., CLASS H* 41,779 4,525 SBC COMMUNICATIONS, INC. 94,120 3,200 VERIZON COMMUNICATIONS, INC. 110,655 ---------- 459,565 ---------- TOYS & GAMES--0.5% 1,300 MATTEL, INC. 27,716 ---------- UTILITIES--3.5% 1,300 CONSOLIDATED EDISON, INC. 50,700 1,125 DOMINION RESOURCES, INC. 60,638 1,600 ENERGY EAST CORP. 30,112 1,900 FIRSTENERGY CORP. 56,050 ---------- 197,500 ---------- TOTAL COMMON STOCKS (COST $6,662,244) $5,643,958 ---------- SHORT-TERM INVESTMENTS--0.6% MONEY MARKET FUND--0.6% 35,469 JPMORGAN PRIME MONEY MARKET FUND(a) (COST $35,469) 35,469 ---------- TOTAL INVESTMENTS--100.0% (COST $6,697,713) $5,679,427 ==========
SEE NOTES TO FINANCIAL STATEMENTS. 17 CAPITAL GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 28, 2003 (UNAUDITED)
SHARES ISSUER VALUE - ------ ------ ----- LONG-TERM INVESTMENTS--94.0% COMMON STOCKS--94.0% AIRLINES--0.7% 3,300 SKYWEST, INC. $ 29,535 ---------- AUTOMOTIVE--0.6% 500 POLARIS INDUSTRIES, INC. 24,200 ---------- BANKING--2.3% 580 M&T BANK CORP. 45,832 1,320 TCF FINANCIAL CORP. 55,360 ---------- 101,192 ---------- BIOTECHNOLOGY--4.8% 1,760 GILEAD SCIENCES, INC.* 59,840 810 ICOS CORP.* 16,160 910 IDEC PHARMACEUTICALS CORP.* 26,163 2,270 MEDIMMUNE, INC.* 68,122 1,130 MYRIAD GENETICS, INC.* 11,051 800 PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.* 25,096 ---------- 206,432 ---------- BROADCASTING/CABLE--2.0% 4,600 MEDIACOM COMMUNICATIONS CORP.* 38,594 1,950 UNIVISION COMMUNICATIONS, INC., CLASS A* 48,302 ---------- 86,896 ---------- BUSINESS SERVICES--7.8% 1,646 CHOICEPOINT, INC.* 55,552 780 CINTAS CORP. 26,185 1,960 CSG SYSTEMS INTERNATIONAL, INC.* 18,914 1,760 EQUIFAX, INC. 33,757 500 FAIR, ISAAC & CO., INC. 24,420 1,350 HEWITT ASSOCIATES, INC., CLASS A* 37,112 1,100 IRON MOUNTAIN, INC.* 38,720 1,420 MOODY'S CORP. 62,621 2,070 SUNGARD DATA SYSTEMS, INC.* 40,738 ---------- 338,019 ---------- COMPUTER NETWORKS--1.4% 2,300 JUNIPER NETWORKS, INC.* 20,677 3,930 NETWORK APPLIANCE, INC.* 41,737 ---------- 62,414 ---------- COMPUTER SOFTWARE--9.0% 1,340 ADOBE SYSTEMS, INC. 36,850 1,240 AFFILIATED COMPUTER SERVICES, INC., CLASS A* 55,589 4,000 BEA SYSTEMS, INC.* 38,880 1,650 BMC SOFTWARE, INC.* 32,010 910 ELECTRONIC ARTS, INC.* 48,048 1,330 INTUIT, INC.* 63,201 1,550 MACROMEDIA, INC.* 24,552 950 MERCURY INTERACTIVE CORP.* 30,828 1,210 NATIONAL INSTRUMENTS CORP.* 40,753 1,100 VERITAS SOFTWARE CORP.* 18,733 ---------- 389,444 ---------- COMPUTERS/COMPUTER HARDWARE--1.9% 2,200 APPLE COMPUTER, INC.* $ 33,022 1,050 EMULEX CORP.* 18,869 1,310 TECH DATA CORP.* 29,632 ---------- 81,523 ---------- CONSTRUCTION--1.2% 970 LENNAR CORP. 52,370 ---------- CONSUMER SERVICES--0.5% 500 WEIGHT WATCHERS INTERNATIONAL, INC.* 20,925 ---------- ELECTRONICS/ELECTRICAL EQUIPMENT--2.9% 1,200 AMPHENOL CORP., CLASS A* 48,948 1,800 JABIL CIRCUIT, INC.* 29,898 4,610 VISHAY INTERTECHNOLOGY, INC.* 46,561 ---------- 125,407 ---------- ENTERTAINMENT/LEISURE--2.0% 1,760 HARRAH'S ENTERTAINMENT, INC.* 57,798 790 INTERNATIONAL SPEEDWAY CORP., CLASS A 30,123 ---------- 87,921 ---------- FINANCIAL SERVICES--2.7% 1,010 A.G. EDWARDS, INC. 26,937 2,340 JANUS CAPITAL GROUP, INC. 27,682 2,370 T. ROWE PRICE GROUP, INC. 60,956 ---------- 115,575 ---------- FOOD/BEVERAGE PRODUCTS--0.7% 3,850 DEL MONTE FOODS CO.* 31,493 ---------- HEALTH CARE/HEALTH CARE SERVICES--18.8% 1,120 ANTHEM, INC.* 66,763 3,460 CAREMARK RX, INC.* 60,412 1,000 DENTSPLY INTERNATIONAL, INC. 34,880 3,150 HEALTH MANAGEMENT ASSOCIATES, INC., CLASS A 56,448 2,640 LABORATORY CORP. OF AMERICA HOLDINGS* 73,312 2,110 MANOR CARE, INC.* 38,676 4,460 OMNICARE, INC. 112,748 2,120 PRIORITY HEALTHCARE CORP., CLASS B* 47,954 850 STERIS CORP.* 21,463 1,120 STRYKER CORP. 73,024 1,930 TRIAD HOSPITALS, INC.* 50,161 880 VARIAN MEDICAL SYSTEMS, INC.* 44,484 930 WELLPOINT HEALTH NETWORKS, INC.* 63,249 1,650 ZIMMER HOLDINGS, INC.* 73,244 ---------- 816,818 ---------- INSURANCE--0.9% 1,600 HCC INSURANCE HOLDINGS, INC. 39,472 ---------- INTERNET SERVICES/SOFTWARE--2.4% 670 EXPEDIA, INC., CLASS A* 46,759 1,760 NETWORK ASSOCIATES, INC.* 26,048 820 SYMANTEC CORP.* 33,210 ---------- 106,017 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 18
SHARES ISSUER VALUE - ------ ------ ----- MULTI-MEDIA--1.4% 2,870 COX RADIO, INC., CLASS A* $ 61,418 ---------- OIL & GAS--6.1% 1,000 ENSCO INTERNATIONAL, INC. 27,980 1,900 FMC TECHNOLOGIES, INC.* 37,905 960 NABORS INDUSTRIES LTD (BARBADOS)* 38,064 1,350 PIONEER NATURAL RESOURCES CO.* 35,303 1,565 POGO PRODUCING CO. 62,208 1,550 TALISMAN ENERGY, INC. (CANADA) 62,186 ---------- 263,646 ---------- PHARMACEUTICALS--4.0% 1,310 AMERISOURCEBERGEN CORP. 72,050 1,420 MEDICIS PHARMACEUTICAL CORP., CLASS A* 66,172 1,860 MILLENNIUM PHARMACEUTICALS, INC.* 13,318 1,960 VERTEX PHARMACEUTICALS, INC.* 21,658 ---------- 173,198 ---------- RESTAURANTS/FOOD SERVICES--1.7% 2,730 CBRL GROUP, INC. 72,891 ---------- RETAILING--10.3% 1,800 ABERCROMBIE & FITCH CO., CLASS A* 49,500 1,720 AMAZON.COM, INC.* 37,857 1,660 BED BATH & BEYOND, INC.* 54,846 2,046 CARMAX, INC.* 30,792 1,320 CDW COMPUTER CENTERS, INC.* 57,632 600 COSTCO WHOLESALE CORP.* 18,312 1,500 FAMILY DOLLAR STORES 42,330 1,510 FASTENAL CO. 50,223 2,700 STAPLES, INC.* 46,737 1,700 THE TJX COMPANIES, INC. 27,319 590 WHOLE FOODS MARKET, INC.* 30,131 ---------- 445,679 ---------- SEMI-CONDUCTORS--6.8% 4,210 ALTERA CORP.* 52,751 1,860 BROADCOM CORP., CLASS A* 26,933 2,050 INTERSIL CORP., CLASS A* 32,083 1,670 KLA-TENCOR CORP.* 59,703 2,540 MICROCHIP TECHNOLOGY, INC. 64,642 1,970 NOVELLUS SYSTEMS, INC.* 57,426 ---------- 293,538 ---------- SHIPPING/TRANSPORTATION--1.1% 1,570 C.H. ROBINSON WORLDWIDE, INC. 48,215 ---------- TOTAL COMMON STOCKS (COST $4,589,183) 4,074,238 ---------- SHORT-TERM INVESTMENTS--6.0% MONEY MARKET FUND--6.0% 261,297 JPMORGAN PRIME MONEY MARKET FUND(a) (COST $261,297) 261,297 ---------- TOTAL INVESTMENTS--100.0% (COST $4,850,480) $4,335,535 ==========
SEE NOTES TO FINANCIAL STATEMENTS. 19 INTERNATIONAL EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 28, 2003 (UNAUDITED)
SHARES ISSUER VALUE - ------ ------ ----- LONG-TERM INVESTMENTS--100.0% COMMON STOCKS--100.0% AUSTRALIA--1.1% 3,188 NEWS CORP., LTD* $ 19,733 3,345 WOODSIDE PETROLEUM LTD* 22,046 ----------- 41,779 ----------- BELGIUM--1.6% 4,150 DEXIA* 37,648 1,580 FORTIS* 21,653 ----------- 59,301 ----------- BRAZIL--0.3% 1,075 UNIBANCO-UNIAO DE BANCOS BRASILEIROS SA, GDR * 12,201 ----------- FINLAND--2.5% 7,213 NOKIA OYJ 96,364 ----------- FRANCE--12.9% 1,591 AVENTIS SA* 72,217 3,896 AXA 47,600 1,440 BNP PARIBAS* 59,576 1,720 COMPAGNIE DE SAINT-GOBAIN* 51,942 1,410 DASSAULT SYSTEMES SA* 32,297 330 IMERYS SA 35,128 450 RENAULT SA 19,015 1,320 TOTALFINAELF SA* 174,359 ----------- 492,134 ----------- GERMANY--7.0% 3,031 BAYER AG* 40,004 2,259 BAYERISCHE MOTOREN WERKE AG* 63,280 1,487 DEUTSCHE BANK AG* 60,399 2,706 DEUTSCHE POST AG 27,522 1,439 HEIDELBERGCEMENT AG* 34,434 993 SIEMENS AG 39,349 ----------- 264,988 ----------- HONG KONG--0.5% 15,500 MTR CORP.* 17,191 ----------- IRELAND--0.7% 2,400 BANK OF IRELAND 26,426 ----------- ITALY--5.2% 11,333 ENI-ENTE NAZIONALE IDROCARBURI SPA* 168,134 6,000 TELECOM ITALIA SPA 29,413 ----------- 197,547 ----------- JAPAN--19.7% 450 ACOM CO., LTD* 14,770 3,000 CANON, INC. 108,367 2,700 CHUGAI PHARMACEUTICAL CO., LTD* 24,599 2,000 FUJI PHOTO FILM CO., LTD 63,446 400 HIROSE ELECTRIC CO., LTD* $ 28,322 1,600 HONDA MOTOR CO., LTD* 58,472 700 HOYA CORP. 44,945 3,000 KANEKA CORP. 14,288 2,000 KAO CORP.* 42,213 900 MURATA MANUFACTURING CO., LTD* 34,109 8,000 NIKKO CORDIAL CORP. 28,762 400 NINTENDO CO., LTD 31,909 8 NIPPON TELEGRAPH & TELEPHONE CORP.* 28,965 2 NIPPON UNIPAC HOLDING 7,935 13 NTT DOCOMO, INC.* 24,524 1,500 SONY CORP. 56,975 5,000 SUMITOMO CORP. 23,433 1,000 TAKEDA CHEMICAL INDUSTRIES LTD* 36,884 520 TAKEFUJI CORP.* 25,778 1,000 TERUMO CORP.* 15,498 1,300 YAMANOUCHI PHARMACEUTICAL CO., LTD* 35,412 ----------- 749,606 ----------- PORTUGAL--0.1% 601 BRISA-AUTO ESTRADAS DE PORTUGAL SA 3,257 ----------- SOUTH KOREA--2.8% 800 KOOKMIN BANK 24,463 970 POSCO, ADR * 22,407 340 SAMSUNG ELECTRONICS CO., LTD, GDR,#* 40,460 1,200 SK TELECOM CO., LTD, ADR* 18,468 ----------- 105,798 ----------- SPAIN--3.0% 2,100 ALTADIS SA 49,753 1,607 BANCO POPULAR ESPANOL* 65,447 ----------- 115,200 ----------- SWEDEN--1.5% 13,034 NORDEA AB* 56,888 ----------- SWITZERLAND--7.9% 240 HOLCIM LTD, CLASS B 38,864 410 NESTLE SA* 82,479 2,460 NOVARTIS AG* 90,275 1,010 ROCHE HOLDING AG* 60,620 316 ZURICH FINANCIAL SERVICES AG* 26,779 ----------- 299,017 ----------- THE NETHERLANDS--5.5% 2,757 ABN AMRO HOLDING NV* 43,813 3,562 ING GROEP NV* 48,163 2,725 KONINKLIJKE PHILIPS ELECTRONICS NV 45,448 4,030 REED ELSEVIER NV 41,378 2,130 WOLTERS KLUWER NV 29,443 ----------- 208,245 -----------
SEE NOTES TO FINANCIAL STATEMENTS. 20
SHARES ISSUER VALUE - ------ ------ ----- UNITED KINGDOM--27.7% 2,060 ABBEY NATIONAL PLC* $ 12,642 5,930 ALLIED DOMECQ PLC 27,948 8,634 AVIVA PLC 53,768 18,081 BAE SYSTEMS PLC* 31,296 12,862 BARCLAYS PLC 74,280 17,287 BG GROUP PLC* 66,579 4 BP PLC* 25 4,480 BRAMBLES INDUSTRIES PLC 10,610 8,000 CENTRICA PLC 17,750 5,440 COMPASS GROUP PLC 23,541 5,275 GKN PLC* 13,074 7,096 GLAXOSMITHKLINE PLC* 124,615 3,770 RECKITT BENCKISER PLC* 59,384 2,000 RIO TINTO PLC* 40,441 2,300 ROYAL BANK OF SCOTLAND GROUP PLC 52,588 6,060 SCHRODERS PLC* 38,812 5,088 SIX CONTINENTS PLC 49,560 28,457 TESCO PLC 72,543 6,801 THE BRITISH LAND CO., PLC* 45,912 2,262 UNILEVER PLC* 20,147 87,664 VODAFONE GROUP PLC* 156,920 8,530 WOLSELEY PLC 67,248 ----------- 1,059,683 ----------- TOTAL INVESTMENTS--100.0% (COST $4,964,287) $ 3,805,625 ===========
SUMMARY OF INVESTMENTS BY INDUSTRY, FEBRUARY 28, 2003
INDUSTRY % OF INVESTMENT SECURITIES Banking 13.8% Pharmaceuticals 11.7 Oil & Gas 11.3 Telecommunications 9.3 Food/Beverage Products 6.0 Insurance 4.6 Electronics/Electrical Equipment 4.3 Construction Materials 4.2 Automotive 4.0 Consumer Products 4.0 Financial Services 3.4 Office/Business Equipment 2.9 Distribution 2.4 Photographic Equipment 1.7 Health Care/Health Care Services 1.6 Chemicals 1.4 Hotels/Other Lodging 1.3 Other (Below 1.3%) 12.1 - --------------------------------------------------------------------- Total 100.0%
SEE NOTES TO FINANCIAL STATEMENTS. 21 ASSET ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 28, 2003 (UNAUDITED)
SHARES ISSUER VALUE - ------ ------ ----- LONG-TERM INVESTMENTS--85.7% COMMON STOCKS--50.7% AEROSPACE--0.4% 480 UNITED TECHNOLOGIES CORP. $ 28,118 ---------- AGRICULTURAL PRODUCTION/SERVICES--0.5% 895 ALTRIA GROUP, INC. 34,592 ---------- APPAREL--0.9% 820 JONES APPAREL GROUP, INC.* 23,255 770 NIKE, INC., CLASS B 35,705 ---------- 58,960 ---------- AUTOMOTIVE--0.3% 270 JOHNSON CONTROLS, INC. 21,049 ---------- BANKING--1.9% 1,580 BANK ONE CORP. 56,927 470 SUNTRUST BANKS, INC. 26,438 1,730 U.S. BANCORP 36,192 ---------- 119,557 ---------- BIOTECHNOLOGY--1.0% 860 AMGEN, INC.* 46,991 530 MEDIMMUNE, INC.* 15,905 ---------- 62,896 ---------- BUSINESS SERVICES--0.4% 1,450 ACCENTURE LTD, (BERMUDA), CLASS A* 22,243 ---------- CHEMICALS--0.9% 400 POTASH CORP. OF SASKATCHEWAN (CANADA) 24,668 640 PPG INDUSTRIES, INC. 29,696 ---------- 54,364 ---------- COMPUTER NETWORKS--0.8% 3,130 CISCO SYSTEMS, INC.* 43,757 900 JUNIPER NETWORKS, INC.* 8,091 ---------- 51,848 ---------- COMPUTER SOFTWARE--2.4% 5,310 MICROSOFT CORP. 125,847 2,130 ORACLE CORP.* 25,475 ---------- 151,322 ---------- COMPUTERS/COMPUTER HARDWARE--1.9% 805 DELL COMPUTER CORP.* 21,703 1,940 HEWLETT-PACKARD CO. 30,749 885 INTERNATIONAL BUSINESS MACHINES CORP. 68,986 ---------- 121,438 ---------- CONSUMER PRODUCTS--1.9% 970 PROCTER & GAMBLE CO. 79,404 1,300 THE GILLETTE CO. 39,247 ---------- 118,651 ---------- DIVERSIFIED--2.3% 4,285 GENERAL ELECTRIC CO. $ 103,054 2,680 TYCO INTERNATIONAL LTD (BERMUDA) 39,664 ---------- 142,718 ---------- ENVIRONMENTAL SERVICES--0.3% 1,040 WASTE MANAGEMENT, INC. 20,696 ---------- FINANCIAL SERVICES--5.7% 1,280 CAPITAL ONE FINANCIAL CORP. 39,642 3,750 CITIGROUP, INC. 125,024 980 COUNTRYWIDE FINANCIAL CORP. 52,322 1,520 FREDDIE MAC 83,067 240 GOLDMAN SACHS GROUP, INC. 16,668 600 HOUSEHOLD INTERNATIONAL, INC. 16,758 550 MORGAN STANLEY 20,268 ---------- 353,749 ---------- FOOD/BEVERAGE PRODUCTS--1.7% 700 PEPSICO, INC. 26,824 2,045 THE COCA-COLA CO. 82,250 ---------- 109,074 ---------- HEALTH CARE/HEALTH CARE SERVICES--1.7% 690 BECTON, DICKINSON & CO. 23,736 790 GUIDANT CORP.* 28,250 450 HCA, INC. 18,558 880 MEDTRONIC, INC. 39,336 ---------- 109,880 ---------- HOTELS/OTHER LODGING--0.3% 690 MARRIOTT INTERNATIONAL, INC., CLASS A 20,852 ---------- INSURANCE--3.0% 1,005 AMBAC FINANCIAL GROUP, INC. 49,094 340 AMERICAN INTERNATIONAL GROUP, INC. 16,759 1,440 AON CORP. 28,008 860 CIGNA CORP. 36,954 800 METLIFE, INC. 20,936 2,532 TRAVELERS PROPERTY CASUALTY CORP., CLASS A 39,626 ---------- 191,377 ---------- MACHINERY & ENGINEERING EQUIPMENT--0.4% 590 INGERSOLL-RAND CO., LTD, (BERMUDA), CLASS A 23,276 ---------- MANUFACTURING--0.3% 740 HONEYWELL INTERNATIONAL, INC. 16,939 ---------- METALS/MINING--0.2% 670 ALCOA, INC. 13,735 ---------- MULTI-MEDIA--2.5% 2,090 AOL TIME WARNER, INC.* 23,659 1,240 COMCAST CORP., SPECIAL CLASS A* 34,832 1,400 LIBERTY MEDIA CORP., CLASS A* 12,866 840 THE WALT DISNEY CO. 14,330 2,030 VIACOM, INC., CLASS B* 75,374 ---------- 161,061 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 22
SHARES ISSUER VALUE - ------ ------ ----- OIL & GAS--3.5% 1,030 BAKER HUGHES, INC. $ 31,951 455 CHEVRONTEXACO CORP. 29,197 300 CONOCOPHILLIPS 15,210 598 DEVON ENERGY CORP. 28,824 2,680 EXXONMOBIL CORP. 91,173 1,260 ROWAN COMPANIES, INC. 24,734 ---------- 221,089 ---------- PACKAGING--0.3% 1,440 SMURFIT-STONE CONTAINER CORP.* 19,066 ---------- PAPER/FOREST PRODUCTS--0.3% 420 TEMPLE-INLAND, INC. 17,598 ---------- PHARMACEUTICALS--5.0% 890 ABBOTT LABORATORIES 31,702 800 BRISTOL-MYERS SQUIBB CO. 18,640 465 ELI LILLY & CO. 26,300 540 FOREST LABORATORIES, INC.* 26,892 1,090 JOHNSON & JOHNSON 57,171 2,481 PFIZER, INC. 73,983 750 PHARMACIA CORP. 30,990 700 SCHERING-PLOUGH CORP. 12,614 840 WYETH 29,610 ---------- 307,902 ---------- RESTAURANTS/FOOD SERVICES--0.7% 1,870 YUM! BRANDS, INC.* 44,525 ---------- RETAILING--3.1% 935 BED BATH & BEYOND, INC.* 30,892 640 CVS CORP. 15,936 1,310 HOME DEPOT, INC. 30,720 785 TARGET CORP. 22,490 1,935 WAL-MART STORES, INC. 92,996 ---------- 193,034 ---------- SEMI-CONDUCTORS--1.4% 740 ANALOG DEVICES, INC.* 21,578 2,475 INTEL CORP. 42,694 770 INTERSIL CORP., CLASS A* 12,051 640 XILINX, INC.* 14,656 ---------- 90,979 ---------- SHIPPING/TRANSPORTATION--0.4% 420 UNITED PARCEL SERVICE, INC., CLASS B 24,167 ---------- TELECOMMUNICATIONS--1.7% 1,690 SBC COMMUNICATIONS, INC. 35,152 3,330 SPRINT CORP. - PCS GROUP* 13,187 1,803 VERIZON COMMUNICATIONS, INC. 62,348 ---------- 110,687 ---------- TELECOMMUNICATIONS EQUIPMENT--0.4% 1,100 NOKIA OYJ, ADR (FINLAND) 14,553 400 QUALCOMM, INC.* 13,832 ---------- 28,385 ---------- TOYS & GAMES--0.5% 1,490 MATTEL, INC. $ 31,767 ---------- UTILITIES--1.7% 1,000 AMERICAN ELECTRIC POWER CO., INC. 21,780 300 DOMINION RESOURCES, INC. 16,170 1,890 PG&E CORP.* 24,098 1,011 PINNACLE WEST CAPITAL CORP. 30,875 1,320 XCEL ENERGY, INC. 14,639 ---------- 107,562 ---------- TOTAL COMMON STOCKS (COST $3,528,335) 3,205,156 ---------- PRINCIPAL AMOUNT (USD) - --------- U.S. TREASURY SECURITIES--6.8% U.S. TREASURY NOTES & BONDS, $ 10,000 2.13%, 10/31/04+ 10,121 35,000 3.00%, 11/30/03,@ 35,466 180,000 3.25%, 08/15/07+ 185,519 60,000 4.00%, 11/15/12,@+ 61,545 115,000 6.25%, 05/15/30+ 140,206 ------- TOTAL U.S. TREASURY SECURITIES (COST $422,508) 432,857 ------- U.S. GOVERNMENT AGENCY SECURITIES--4.2% 75,000 FEDERAL HOME LOAN MORTGAGE CORP., 3.50%, 09/15/07+ 77,341 FEDERAL HOME LOAN MORTGAGE CORP., 25,000 4.25%, 06/15/05+ 26,415 25,000 5.13%, 07/15/12+ 27,055 FEDERAL NATIONAL MORTGAGE ASSOCIATION, 50,000 3.88%, 03/15/05 52,266 45,000 6.13%, 03/15/12 52,016 25,000 7.13%, 01/15/30+ 31,602 ------ TOTAL U.S. GOVERNMENT AGENCY SECURITIES (COST $251,982) 266,695 ------- FOREIGN GOVERNMENT SECURITIES--0.2% 5,000 PROVINCE OF QUEBEC (CANADA), 7.50%, 09/15/29 6,476 5,000 REGION OF LOMBARDY (ITALY), 5.80%, 10/25/32 5,379 ------- TOTAL FOREIGN GOVERNMENT SECURITIES (COST $10,980) 11,855 ------- CORPORATE NOTES & BONDS--5.3% AUTOMOTIVE--0.5% 20,000 FORD MOTOR CREDIT CO., 5.80%, 01/12/09 18,745 10,000 GENERAL MOTORS ACCEPTANCE CORP., 8.00%, 11/01/31 10,043 ------- 28,788 ------- BANKING--0.6% 5,000 ABBEY NATIONAL CAPITAL TRUST I, 8.96%, 12/31/49, FRN+ 6,316 5,000 BANK OF AMERICA CORP., 4.88%, 09/15/12+ 5,116 5,000 DEUTSCHE BANK FINANCIAL LLC, 5.38%, 03/02/15+ 5,077 5,000 GOLDEN WEST FINANCIAL CORP., 4.75%, 10/01/12 5,098
SEE NOTES TO FINANCIAL STATEMENTS. 23
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------- ------ ----- BANKING (CONT'D) $ 5,000 HSBC HOLDINGS PLC (UNITED KINGDOM), 5.25%, 12/12/12 $ 5,202 ROYAL BANK OF SCOTLAND GROUP PLC 5,000 (UNITED KINGDOM), 7.65%, 12/31/49, FRN 5,968 5,000 U.S. BANK N.A., 6.38%, 08/01/11 5,698 5,000 WELLS FARGO & CO., 5.13%, 09/01/12 5,267 ----------- 43,742 ----------- DIVERSIFIED--0.3% GENERAL ELECTRIC CAPITAL CORP., 15,000 5.88%, 02/15/12, SER. A, MTN 16,221 ----------- FINANCIAL SERVICES--1.2% 5,000 AMERICAN GENERAL FINANCE CORP., 5.38%, 10/01/12, SER. H, MTN+ 5,191 5,000 CIT GROUP, INC., 5.50%, 11/30/07+ 5,186 5,000 CITIGROUP, INC., 7.25%, 10/01/10+ 5,900 5,000 COUNTRYWIDE HOME LOANS, INC., 5.63%, 05/15/07, SER. K, MTN+ 5,416 5,000 CREDIT SUISSE FIRST BOSTON USA, INC., 7.13%, 07/15/32+ 5,527 5,000 GOLDMAN SACHS GROUP, INC., 5.70%, 09/01/12 5,277 HOUSEHOLD FINANCE CORP., 5,000 6.40%, 06/17/08, MTN 5,540 5,000 8.00%, 07/15/10 5,899 5,000 7.00%, 05/15/12 5,661 5,000 ING CAPITAL FUNDING TRUST III, 8.44%, 12/31/49, FRN 5,907 5,000 LEHMAN BROTHERS HOLDINGS, INC., 6.63%, 01/18/12 5,650 10,000 MORGAN STANLEY, 5.80%, 04/01/07 10,962 5,000 UBS PREFERRED FUNDING TRUST I, 8.62%, 12/31/49, FRN 6,131 5,000 WASHINGTON MUTUAL, INC., 4.38%, 01/15/08 5,240 ----------- 83,487 ----------- FOOD/BEVERAGE PRODUCTS--0.2% 5,000 ARCHER-DANIELS MIDLAND CO., 5.94%, 10/01/32+ 5,175 5,000 KRAFT FOODS, INC., 6.25%, 06/01/12 5,643 ----------- 10,818 ----------- INSURANCE--0.3% 5,000 AXA FINANCIAL, INC., 7.75%, 08/01/10+ 5,821 5,000 METLIFE, INC., 6.13%, 12/01/11 5,549 5,000 NATIONWIDE FINANCIAL SERVICES, INC., 5.90%, 07/01/12 5,229 ----------- 16,599 ----------- MULTI-MEDIA--0.2% 10,000 AOL TIME WARNER, INC., 7.63%, 04/15/31+ 10,553 ----------- OIL & GAS--0.3% 5,000 ANADARKO FINANCE CO., 6.75%, 05/01/11, SER. B+ 5,705 5,000 DEVON FINANCING CORP. ULC, 7.88%, 09/30/31+ 6,060 5,000 OCCIDENTAL PETROLEUM CORP., 4.25%, 03/15/10, MTN 5,000 ----------- 16,765 ----------- PIPELINES--0.1% $ 5,000 KINDER MORGAN ENERGY PARTNERS LP, 7.40%, 03/15/31 $ 5,698 ----------- RETAILING--0.2% 5,000 KROGER CO., 7.50%, 04/01/31 5,705 5,000 SAFEWAY, INC., 6.50%, 03/01/11 5,541 ----------- 11,246 ----------- SHIPPING/TRANSPORTATION--0.2% 5,000 BURLINGTON NORTHERN SANTA FE CORP., 6.75%, 07/15/11+ 5,769 5,000 UNION PACIFIC CORP., 6.65%, 01/15/11 5,700 ----------- 11,469 ----------- TELECOMMUNICATIONS--0.9% 5,000 AT&T BROADBAND CORP., 8.38%, 03/15/13+ 5,961 5,000 AT&T CORP., 8.50%, 11/15/31+ 5,408 5,000 AT&T WIRELESS SERVICES, INC., 8.75%, 03/01/31+ 5,313 5,000 FRANCE TELECOM SA (FRANCE), 9.25%, 03/01/11, SUB 5,923 5,000 SBC COMMUNICATIONS, INC., 5.88%, 08/15/12 5,465 5,000 SPRINT CAPITAL CORP., 8.75%, 03/15/32 4,825 5,000 TCI COMMUNICATIONS, INC., 7.88%, 02/15/26 5,376 5,000 TELEFONICA EUROPE BV (THE NETHERLANDS), 7.75%, 09/15/10 5,886 5,000 VERIZON GLOBAL FUNDING CORP., 7.38%, 09/01/12 5,906 10,000 VERIZON NEW YORK, INC., 6.88%, 04/01/12, SER. A 11,497 ----------- 61,560 ----------- UTILITIES--0.3% 5,000 CONSOLIDATED EDISON COMPANY OF NEW YORK, 5.63%, 07/01/12, SER. 2002-A+ 5,444 5,000 FLORIDA POWER & LIGHT CO., 4.85%, 02/01/13 5,221 5,000 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP., 7.25%, 03/01/12, SER. C, MTN 5,850 ----------- 16,515 ----------- TOTAL CORPORATE NOTES & BONDS (COST $309,232) 333,461 ----------- RESIDENTIAL MORTGAGE BACKED SECURITIES--14.6% MORTGAGE BACKED PASS-THROUGH SECURITIES--14.6% 100,000 FEDERAL HOME LOAN MORTGAGE CORP., 6.00%, 03/15/18, GOLD POOL, TBA 104,875 154,960 FEDERAL NATIONAL MORTGAGE ASSOCIATION, 5.50%, 10/01/32, POOL 657269 158,795 FEDERAL NATIONAL MORTGAGE ASSOCIATION, 50,000 6.00%, 03/25/33, TBA 51,984 450,000 6.50%, 03/25/33, TBA 470,532 GOVERNMENT NATIONAL MORTGAGE ASSOCIATION, 23,844 6.50%, 10/15/28, POOL 483490 25,170 102,623 7.00%, 09/15/31, POOL 550867 109,076 ----------- TOTAL RESIDENTIAL MORTGAGE BACKED SECURITIES (COST $912,212) 920,432 -----------
SEE NOTES TO FINANCIAL STATEMENTS. 24
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------- ------ ----- COMMERCIAL MORTGAGE BACKED SECURITIES--1.4% LB-UBS COMMERCIAL MORTGAGE TRUST, $ 20,000 6.65%, 11/15/27, SER. 2001-C2, CLASS A2 $ 23,089 60,000 6.46%, 03/15/31, SER. 2002-C1, CLASS A4 68,152 ----------- TOTAL COMMERCIAL MORTGAGE BACKED SECURITIES (COST $81,226) 91,241 ----------- ASSET BACKED SECURITIES--2.5% 25,000 AMERICREDIT AUTOMOBILE RECEIVABLES TRUST, 5.37%, 06/12/08, SER. 2001-B, CLASS A4+ 26,138 45,000 CAPITAL ONE MASTER TRUST, 5.45%, 03/16/09, SER. 2001-3A, CLASS A+ 48,657 15,000 FORD CREDIT AUTO OWNER TRUST, 5.25%, 09/15/05, SER. 2001-C, CLASS A5 15,546 20,000 HONDA AUTO RECEIVABLES OWNER TRUST, 5.56%, 06/19/06, SER. 2001-1, CLASS A4 20,687 45,000 MBNA CREDIT CARD MASTER NOTE TRUST, 5.75%, 10/15/08, SER. 2001-A1, CLASS A1 49,294 ----------- TOTAL ASSET BACKED SECURITIES (COST $150,120) 160,322 ----------- TOTAL LONG-TERM INVESTMENTS (COST $5,666,595) 5,422,019 ----------- SHORT-TERM INVESTMENT--14.3% MONEY MARKET FUND--14.3% SHARES ------ 906,667 JPMORGAN PRIME MONEY MARKET FUND(a)+ (COST $906,667) 906,667 ----------- TOTAL INVESTMENTS--100.0% (COST $6,573,262) $ 6,328,686 ===========
FUTURES CONTRACTS
NOTIONAL UNREALIZED NUMBER VALUE AT APPRECIATION/ OF EXPIRATION 2/28/03 (DEPRECIATION) CONTRACTS DESCRIPTION DATE (USD) (USD) - ----------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 1 S&P 500 Index March, 2003 $ 210,225 $ (14,080) 2 2 Year Treasury Notes June, 2003 430,656 1,192 SHORT FUTURES OUTSTANDING (1) 10 Year Treasury Notes June, 2003 (115,375) (1,451) (2) 5 Year Treasury Notes June, 2003 (227,406) (1,902)
SEE NOTES TO FINANCIAL STATEMENTS. 25 U.S. GOVERNMENT INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 28, 2003 (UNAUDITED)
PRINCIPAL AMOUNT ISSUER VALUE - --------- ------ ----- LONG-TERM INVESTMENTS--84.2% U.S. TREASURY SECURITIES--42.7% U.S. TREASURY NOTES & BONDS, $ 400,000 2.00%, 11/30/04 $ 403,984 350,000 3.00%, 11/15/07 356,125 165,000 3.00%, 02/15/08 167,514 190,000 3.38%, 04/30/04 194,631 145,000 3.50%, 11/15/06 151,446 215,000 4.38%, 08/15/12 227,152 25,000 4.88%, 02/15/12 27,414 5,000 6.13%, 08/15/29 5,985 250,000 6.25%, 08/15/23 299,580 40,000 6.25%, 05/15/30 48,767 220,000 6.75%, 08/15/26 280,878 550,000 8.50%, 02/15/20+ 807,685 ------------ TOTAL U.S. TREASURY SECURITIES (COST $2,752,266) 2,971,161 ------------ U.S. GOVERNMENT AGENCY SECURITIES--26.7% 600,001 FEDERAL FARM CREDIT BANK, 3.88%, 12/15/04 623,031 FEDERAL HOME LOAN BANK, 2.13%, 12/15/04 500,000 2.13%, 12/15/04 504,856 100,000 4.50%, 11/15/12 102,917 550,000 FEDERAL HOME LOAN MORTGAGE CORP., 5.75%, 01/15/12 622,236 ------------ TOTAL U.S. GOVERNMENT AGENCY SECURITIES (COST $1,752,388) 1,853,040 ------------ RESIDENTIAL MORTGAGE BACKED SECURITIES--14.8% MORTGAGE BACKED PASS-THROUGH SECURITIES--14.8% FEDERAL NATIONAL MORTGAGE ASSOCIATION, 498,930 POOL 673233, 5.50%, 01/01/33 511,280 500,000 TBA, 6.00%, 03/25/33 519,844 ------------ TOTAL RESIDENTIAL MORTGAGE BACKED SECURITIES (COST $1,020,777) 1,031,124 ------------ TOTAL LONG-TERM INVESTMENTS (COST $5,525,431) 5,855,325 ------------ SHORT-TERM INVESTMENT--15.8% MONEY MARKET FUND--15.8% SHARES ------ 1,096,956 JPMORGAN U.S. GOVERNMENT MONEY MARKET FUND(a) (COST $1,096,956) 1,096,956 ------------ TOTAL INVESTMENTS--100.0% (COST $6,622,387) $ 6,952,281 ============
SEE NOTES TO FINANCIAL STATEMENTS. 26 MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 28, 2003 (UNAUDITED)
PRINCIPAL AMOUNT ISSUER VALUE - --------- ------ ----- MONEY MARKET INSTRUMENTS--100.0% U.S. TREASURY SECURITY--41.8% $ 1,530,000 U.S. TREASURY BILL, 1.15%, 03/13/03 (COST $1,529,411) $ 1,529,411 ------------ U.S. GOVERNMENT AGENCY SECURITIES--58.2% 400,000 FEDERAL HOME LOAN BANK, DN, 1.24%, 03/19/03 399,752 547,000 FEDERAL HOME LOAN MORTGAGE CORP., DN, 1.23%, 04/10/03 546,252 525,000 FEDERAL NATIONAL MORTGAGE ASSOCIATION, DN, 1.23%, 03/03/03 524,964 662,000 STUDENT LOAN MARKETING ASSOCIATION, DN, 1.28%, 03/03/03 661,953 ------------ TOTAL U.S. GOVERNMENT AGENCY SECURITIES (COST $2,132,921) 2,132,921 ------------ TOTAL INVESTMENTS--100.0% (COST $3,662,332)** $ 3,662,332 ============
INDEX: * = Non-income producing security. ** = The cost of securities is substantially the same for federal income tax purposes. # = All or a portion of this security is a 144A or private placement security and can only be sold to qualified institutional buyers. + = All or a portion of this security is segregated for TBA, when issued or delayed delivery securities. @ = Security is fully or partially segregated with the custodian as collateral for futures or with brokers as initial margins for futures contracts. (a) = Affiliated. Money market fund registered under the Investment Company Act of 1940, as amended and advised by JPMorgan Fleming Asset Management, Inc. ADR = American Depositary Receipt. DN = Discount Note. The rate shown is the effective yield at the date of purchase. FRN = Floating Rate Note. The maturity date is the actual maturity date; the rate shown is the rate in effect as February 28, 2003. GDR = Global Depositary Receipt. MTN = Medium Term Note. SUB = Step-up Bond. The rate shown is the rate in effect as of February 28, 2003. SER. = Series. TBA = To Be Announced. USD = United States Dollar. SEE NOTES TO FINANCIAL STATEMENTS. 27 STATEMENTS OF ASSETS AND LIABILITIES FEBRUARY 28, 2003 (UNAUDITED)
GROWTH AND CAPITAL INTERNATIONAL ASSET U.S. GOVERNMENT MONEY INCOME GROWTH EQUITY ALLOCATION INCOME MARKET PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ------------ ----------- ----------- ----------- ----------- ------------ ASSETS: Investment securities, at value $ 5,679,427 $ 4,335,535 $ 3,805,625 $ 6,328,686 $ 6,952,281 $ 3,662,332 Cash 2,143 498 1,954 1,074 -- 530 Foreign currency, at value -- -- 3,453 -- -- -- Receivables: Investment securities sold 196,646 42,285 5,080 14,652 -- -- Interest and dividends 13,373 883 6,243 21,813 29,087 -- Foreign tax reclaim -- -- 6,949 -- -- -- Expense reimbursement from Administrator 2,086 3,006 -- 3,697 2,853 2,090 ------------ ----------- ----------- ----------- ----------- ------------ TOTAL ASSETS 5,893,675 4,382,207 3,829,304 6,369,922 6,984,221 3,664,952 ------------ ----------- ----------- ----------- ----------- ------------ LIABILITIES: Payables: Dividends -- -- -- -- -- 1,830 Investment securities purchased 41,518 25,374 5,127 675,600 683,295 -- Variation margin -- -- -- 403 -- -- Custodian fees 16,164 15,324 16,253 21,822 14,370 12,362 Trustee fees 3,264 1,589 1,998 2,211 1,138 1,271 Other 20,735 18,014 6,414 16,893 24,669 19,738 ------------ ----------- ----------- ----------- ----------- ------------ TOTAL LIABILITIES 81,681 60,301 29,792 716,929 723,472 35,201 ------------ ----------- ----------- ----------- ----------- ------------ Net Assets: $ 5,811,994 $ 4,321,906 $ 3,799,512 $ 5,652,993 $ 6,260,749 $ 3,629,751 ============ =========== =========== =========== =========== ============ NET ASSETS: Paid in capital 8,841,015 5,407,837 6,010,132 7,548,274 5,843,777 3,629,750 Accumulated undistributed (overdistributed) net investment income 12,269 (17,489) (733) 13,838 27,092 1 Accumulated net realized gain (loss) on investments, futures and foreign exchange transactions (2,023,004) (553,497) (1,051,892) (1,648,302) 59,986 -- Net unrealized appreciation (depreciation) of investments, futures and foreign currency translations (1,018,286) (514,945) (1,157,995) (260,817) 329,894 -- ------------ ----------- ----------- ----------- ----------- ------------ NET ASSETS APPLICABLE TO INVESTOR' BENEFICIAL INTERESTS $ 5,811,994 $ 4,321,906 $ 3,799,512 $ 5,652,993 $ 6,260,749 $ 3,629,751 ============ =========== =========== =========== =========== ============ Shares of beneficial interest outstanding ($0.001 par value; unlimited number of shares authorized) 677,822 531,923 602,609 718,100 636,153 3,629,698 Net asset value, maximum offering price per share and redemption price per share $ 8.57 $ 8.13 $ 6.31 $ 7.87 $ 9.84 $ 1.00 ============ =========== =========== =========== =========== ============ Cost of investments $ 6,697,713 $ 4,850,480 $ 4,964,287 $ 6,573,262 $ 6,622,387 $ 3,662,332 ============ =========== =========== =========== =========== ============ Cost of foreign currency $ -- $ -- $ 3,454 $ -- $ -- $ -- ============ =========== =========== =========== =========== ============
SEE NOTES TO FINANCIAL STATEMENTS. 28 STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED FEBRUARY 28, 2003 (UNAUDITED)
GROWTH AND CAPITAL INTERNATIONAL ASSET U.S. GOVERNMENT MONEY INCOME GROWTH EQUITY ALLOCATION INCOME MARKET PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ------------- ---------- ---------- ---------- ---------- ---------- INVESTMENT INCOME: Interest $ -- $ -- $ -- $ 41,102 $ 108,248 $ 25,517 Dividend 74,556 5,453 27,706 26,247 -- -- Dividend income from affiliated investments* 407 726 -- 8,377 7,998 -- Foreign tax withheld -- -- (3,198) -- -- -- ------------- ---------- ---------- ---------- ---------- ---------- TOTAL INVESTMENT INCOME 74,963 6,179 24,508 75,726 116,246 25,517 ------------- ---------- ---------- ---------- ---------- ---------- EXPENSES: Investment advisory fees 19,486 14,501 16,602 16,122 15,522 4,492 Administration fees 4,872 3,625 3,113 4,397 4,657 2,099 Accounting fees -- -- 38,590 -- -- -- Custodian fees 22,813 22,758 2,139 31,744 23,894 3,148 Printing and postage 5,381 4,462 3,444 3,590 5,137 3,593 Professional fees 10,417 10,654 12,794 12,093 11,611 9,111 Transfer agent fees 8,274 6,209 8,630 8,135 6,939 5,390 Trustees' fees 33 24 21 29 31 18 Other 2,903 2,939 6,394 3,212 4,144 3,269 ------------- ---------- ---------- ---------- ---------- ---------- TOTAL EXPENSES 74,179 65,172 91,727 79,322 71,935 31,120 ------------- ---------- ---------- ---------- ---------- ---------- Less amounts waived 24,358 18,126 19,715 20,519 20,179 6,591 Less expense reimbursements 20,585 24,786 49,183 33,882 26,876 14,647 Less earnings credits 5 510 -- 5 44 -- ------------- ---------- ---------- ---------- ---------- ---------- NET EXPENSES 29,231 21,750 22,829 24,916 24,836 9,882 ------------- ---------- ---------- ---------- ---------- ---------- NET INVESTMENT INCOME (LOSS) 45,732 (15,571) 1,679 50,810 91,410 15,635 ------------- ---------- ---------- ---------- ---------- ---------- NET REALIZED GAIN (LOSS) ON TRANSACTIONS FROM: Investments (673,696) (526,513) (124,348) (214,543) 102,543 -- Futures -- -- -- (27,982) -- -- Foreign currency -- -- 1,284 -- -- -- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) OF: Investments 95,577 294,647 (467,690) 8,256 61,289 -- Futures -- -- -- 7,319 -- -- Foreign currency translations -- -- 1,657 -- -- -- ------------- ---------- ---------- ---------- ---------- ---------- Net realized and unrealized gain (loss) (578,119) (231,866) (589,097) (226,950) 163,832 -- ------------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets from operations $ (532,387) $ (247,437) $ (587,418) $ (176,140) $ 255,242 $ 15,635 ============= ========== ========== ========== ========== ========== * Includes Reimbursements of Investment Advisory and Administration fees: $ 83 $ 82 $ -- $ 960 $ 909 $ --
SEE NOTES TO FINANCIAL STATEMENTS. 29 STATEMENTS OF CHANGES IN NET ASSETS FOR THE PERIODS INDICATED (UNAUDITED)
GROWTH AND INCOME CAPITAL GROWTH INTERNATIONAL EQUITY PORTFOLIO PORTFOLIO PORTFOLIO --------------------------- -------------------------- --------------------------- 9/1/02 YEAR 9/1/02 YEAR 9/1/02 YEAR THROUGH ENDED THROUGH ENDED THROUGH ENDED 2/28/03 8/31/02 2/28/03 8/31/02 2/28/03 8/31/02 ------------- -------------- ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income (loss) $ 45,732 $ 100,865 $ (15,571) $ (26,107) $ 1,679 $ 48,854 Net realized gain loss on investments, futures and foreign exchange transactions (673,696) (881,803) (526,513) 420,201 (123,064) (712,959) Change in net unrealized appreciation (depreciation) on investments, futures and foreign currency translations 95,577 (719,509) 294,647 (2,071,240) (466,033) 278,229 ------------- -------------- ------------ ------------ ------------ ----------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (532,387) (1,500,447) (247,437) (1,677,146) (587,418) (385,876) ------------- -------------- ------------ ------------ ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (101,286) (158,117) -- (1,217) (67,750) -- Net realized gain on investment transactions -- -- (962,703) -- -- -- ------------- -------------- ------------ ------------ ------------ ----------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (101,286) (158,117) (962,703) (1,217) (67,750) -- ------------- -------------- ------------ ------------ ------------ ----------- INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS: Proceeds from shares issued 79,125 117,157 68,080 142,281 39,905 74,842 Dividends reinvested 101,286 158,117 962,703 1,217 67,750 -- Cost of shares redeemed (911,563) (3,072,327) (773,026) (3,617,731) (210,016) (575,277) ------------- -------------- ------------ ------------ ------------ ----------- INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS (731,152) (2,797,053) 257,757 (3,474,233) (102,361) (500,435) ------------- -------------- ------------ ------------ ------------ ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS (1,364,825) (4,455,617) (952,383) (5,152,596) (757,529) (886,311 NET ASSETS: Beginning of period 7,176,819 11,632,436 5,274,289 10,426,885 4,557,041 5,443,352 ------------- -------------- ------------ ------------ ------------ ----------- End of period $ 5,811,994 $ 7,176,819 $ 4,321,906 $ 5,274,289 $ 3,799,512 $ 4,557,041 ============= ============== ============ ============ ============ =========== Undistributed net investment income (loss) 12,269 67,823 (17,489) (1,918) (733) 65,338 ------------- -------------- ------------ ------------ ------------ ----------- Share Transactions: Issued 8,395 11,091 6,718 10,834 5,750 9,480 Reinvested 10,950 14,335 112,071 87 9,876 -- Redeemed (100,770) (286,609) (81,436) (282,163) (31,258) (74,907) ------------- -------------- ------------ ------------ ------------ ----------- Change in Shares (81,425) (261,183) 37,353 (271,242) (15,632) (65,427) ============= ============== ============ ============ ============ =========== ASSET ALLOCATION U.S. GOVERNMENT INCOME MONEY MARKET PORTFOLIO PORTFOLIO PORTFOLIO --------------------------- -------------------------- -------------------------- 9/1/02 YEAR 9/1/02 YEAR 9/1/02 YEAR THROUGH ENDED THROUGH ENDED THROUGH ENDED 2/28/03 8/31/02 2/28/03 8/31/02 2/28/03 8/31/02 ------------ ------------ ------------ ------------ ------------ ----------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income (loss) $ 50,810 $ 110,842 $ 91,410 $ 218,711 $ 15,635 $ 61,574 Net realized gain loss on investments, futures and foreign exchange transactions (242,525) (725,672) 102,543 206,984 -- 638 Change in net unrealized appreciation (depreciation) on investments, futures and foreign currency translations 15,575 566 61,289 101,074 -- -- ------------ ------------ ------------ ------------ ------------ ----------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (176,140) (614,264) 255,242 526,769 15,635 62,212 ------------ ------------ ------------ ------------ ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (120,068) (205,827) (238,159) (355,820) (15,611) (61,574) Net realized gain on investment transactions -- -- (137,744) (84,486) (66) (138) ------------ ------------ ------------ ------------ ------------ ----------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (120,068) (205,827) (375,903) (440,306) (15,677) (61,712) ------------ ------------ ------------ ------------ ------------ ----------- INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS: Proceeds from shares issued 15,194 64,303 280,660 472,485 158,933 548,026 Dividends reinvested 120,068 205,827 375,903 440,306 15,682 59,898 Cost of shares redeemed (327,073) (599,602) (403,017) (1,043,067) (126,477) (901,383) ------------ ------------ ------------ ------------ ------------ ----------- INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS (191,811) (329,472) 253,546 (130,276) 48,138 (293,459) ------------ ------------ ------------ ------------ ------------ ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS (488,019) (1,149,563) 132,885 (43,813) 48,096 (292,959) NET ASSETS: Beginning of period 6,141,012 7,290,575 6,127,864 6,171,677 3,581,655 3,874,614 ------------ ------------ ------------ ------------ ------------ ----------- End of period $ 5,652,993 $ 6,141,012 $ 6,260,749 $ 6,127,864 $ 3,629,751 $ 3,581,655 ============ ============ ============ ============ ============ =========== Undistributed net investment income (loss) 13,838 83,096 27,092 173,841 1 (23) ------------ ------------ ------------ ------------ ------------ ----------- Share Transactions: Issued 1,851 7,303 27,702 50,246 158,933 548,026 Reinvested 14,823 22,037 39,116 47,962 15,682 59,898 Redeemed (40,841) (67,990) (41,056) (107,913) (126,477) (901,383) ------------ ------------ ------------ ------------ ------------ ----------- Change in Shares (24,167) (38,650) 25,762 (9,705) 48,138 (293,459) ============ ============ ============ ============ ============ ===========
SEE NOTES TO FINANCIAL STATEMENTS. 30 FINANCIAL HIGHLIGHTS (UNAUDITED)
GROWTH AND INCOME PORTFOLIO --------------------------------------------------------------- 9/1/02 THROUGH YEAR ENDED AUGUST 31, 2/28/03 2002 2001 2000 1999 1998 ---------- ------- -------- -------- ------- -------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 9.45 $ 11.40 $ 13.91 $ 12.63 $ 12.36 $ 15.16 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.07 0.15 0.14 0.11 0.06 0.09 Net gains or losses on investments (both realized and unrealized) (0.81) (1.92) (2.53) 1.21 2.58 (0.71) ---------- ------- -------- -------- ------- -------- TOTAL FROM INVESTMENT OPERATIONS (0.74) (1.77) (2.39) 1.32 2.64 (0.62) ---------- ------- -------- -------- ------- -------- LESS DISTRIBUTIONS FROM: Net investment income 0.14 0.18 0.12 0.04 0.09 0.13 Net realized gains -- -- -- -- 2.28 2.05 ---------- ------- -------- -------- ------- -------- TOTAL DISTRIBUTIONS 0.14 0.18 0.12 0.04 2.37 2.18 ---------- ------- -------- -------- ------- -------- NET ASSET VALUE, END OF PERIOD $ 8.57 $ 9.45 $ 11.40 $ 13.91 $ 12.63 $ 12.36 ========== ======= ======== ======== ======= ======== TOTAL RETURN(a) (7.91%) (15.77%) (17.29%) 10.44% 21.23% (5.45%) RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (000 omitted) $ 5,812 $ 7,177 $ 11,632 $ 16,223 $19,153 $ 17,370 Ratios to Average Net Assets: Expenses 0.90% 0.90% 0.90% 0.90% 0.90% 0.90% Net investment income (loss) 1.41% 1.06% 0.99% 0.73% 0.54% 0.78% Expenses without waivers, reimbursements and earning credits 2.29% 1.95% 1.51% 1.37% 1.33% 1.70% Net investment income (loss) without waivers, reimbursements and earning credits 0.02% 0.01% 0.38% 0.26% 0.11% (0.02%) Portfolio turnover(a) 14% 57% 14% 65% 114% 170% CAPITAL GROWTH PORTFOLIO ----------------------------------------------------------------- 9/1/02 THROUGH YEAR ENDED AUGUST 31, 2/28/03 2002 2001 2000 1999 1998 ---------- ------- -------- -------- --------- -------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 10.66 $ 13.62 $ 16.31 $ 13.75 $ 11.72 $ 15.52 INCOME FROM INVESTMENT OPERATIONS: Net investment income (0.03) (0.06) --(b) 0.03 0.07 0.10 Net gains or losses on investments (both realized and unrealized) (0.40) (2.90) (1.73) 3.54 3.37 (2.37) ---------- ------- -------- -------- --------- -------- TOTAL FROM INVESTMENT OPERATIONS (0.43) (2.96) (1.73) 3.57 3.44 (2.27) ---------- ------- -------- -------- --------- -------- LESS DISTRIBUTIONS FROM: Net investment income -- --(b) -- 0.09 0.09 0.09 Net realized gains 2.10 -- 0.96 0.92 1.32 1.44 ---------- ------- -------- -------- --------- -------- TOTAL DISTRIBUTIONS 2.10 -- 0.96 1.01 1.41 1.53 ---------- ------- -------- -------- --------- -------- NET ASSET VALUE, END OF PERIOD $ 8.13 $ 10.66 $ 13.62 $ 16.31 $ 13.75 $ 11.72 ========== ======= ======== ======== ========= ======== TOTAL RETURN(a) (5.09%) (21.72%) (10.70%) 27.92% 30.59% (16.38%) RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (000 omitted) $ 4,322 $ 5,274 $ 10,427 $ 13,177 $ 12,649 $ 11,096 Ratios to Average Net Assets: Expenses 0.90% 0.90% 0.90% 0.90% 0.90% 0.90% Net investment income (loss) (0.65%) (0.34%) (0.01%) 0.21% 0.59% 0.72% Expenses without waivers, reimbursements and earning credits 2.70% 2.29% 1.75% 1.69% 1.70% 1.70% Net investment income (loss) without waivers, reimbursements and earning credits (2.45%) (1.73%) (0.86%) (0.58%) (0.21%) (0.08%) Portfolio turnover(a) 18% 98% 47% 128% 27% 71%
INTERNATIONAL EQUITY PORTFOLIO ----------------------------------------------------------- 9/1/02 THROUGH YEAR ENDED AUGUST 31, 2/28/03 2002 2001 2000 1999 1998 --------- ------- -------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 7.37 $ 7.96 $ 13.30 $ 11.36 $ 9.63 $ 10.45 INCOME FROM INVESTMENT OPERATIONS: Net investment income -- 0.08 0.08 (0.03) -- 0.02 Net gains or losses on investments (both realized and unrealized) (0.95) (0.67) (2.98) 2.38 2.32 (0.28) --------- ------- -------- ------- ------- ------- TOTAL FROM INVESTMENT OPERATIONS (0.95) (0.59) (2.90) 2.35 2.32 (0.26) --------- ------- -------- ------- ------- ------- LESS DISTRIBUTIONS FROM: Net investment income 0.11 -- -- -- 0.10 0.18 Net realized gains -- -- 2.44 0.41 0.49 0.38 --------- ------- -------- ------- ------- ------- TOTAL DISTRIBUTIONS 0.11 -- 2.44 0.41 0.59 0.56 --------- ------- -------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 6.31 $ 7.37 $ 7.96 $ 13.30 $ 11.36 $ 9.63 ========= ======= ======== ======= ======= ======= TOTAL RETURN(a) (12.99%) (7.41%) (24.76%) 20.58% 25.03% (2.46%) RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (000 omitted) $ 3,800 $ 4,557 $ 5,443 $ 7,960 $ 7,337$ 6,318 Ratios to Average Net Assets: Expenses 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% Net investment income (loss) 0.08% 0.95% 0.71% (0.15%) 0.04% 0.19% Expenses without waivers, reimbursements and earning credits 4.44% 3.88% 3.38% 2.62% 3.24% 3.05% Net investment income (loss) without waivers, reimbursements and earning credits (3.26%) (1.83%) (1.57%) (1.67%) (2.10%) (1.76%) Portfolio turnover(a) 6% 74% 98% 102% 170% 157% ASSET ALLOCATION PORTFOLIO ----------------------------------------------------------- 9/1/02 THROUGH YEAR ENDED AUGUST 31, 2/28/03 2002 2001 2000 1999 1998 --------- ------- -------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 8.27 $ 9.34 $ 11.31 $ 10.72 $ 10.64 $ 11.57 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.07 0.15 0.25 0.29 0.24 0.28 Net gains or losses on investments (both realized and unrealized) (0.30) (0.95) (1.95) 0.68 1.04 (0.25) --------- ------- -------- ------- ------- ------- TOTAL FROM INVESTMENT OPERATIONS (0.23) (0.80) (1.70) 0.97 1.28 0.03 --------- ------- -------- ------- ------- ------- LESS DISTRIBUTIONS FROM: Net investment income 0.17 0.27 0.27 0.30 0.18 0.30 Net realized gains -- -- -- 0.08 1.02 0.66 --------- ------- -------- ------- ------- ------- TOTAL DISTRIBUTIONS 0.17 0.27 0.27 0.38 1.20 0.96 --------- ------- -------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 7.87 $ 8.27 $ 9.34 $ 11.31 $ 10.72 $ 10.64 ========= ======= ======== ======= ======= ======= TOTAL RETURN(a) (2.88%) (8.90%) (15.20%) 9.31% 11.88% (0.04%) RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (000 omitted) $ 5,653 $ 6,141 $ 7,291 $ 9,112 $ 9,324 $ 7,813 Ratios to Average Net Assets: Expenses 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% Net investment income (loss) 1.73% 1.59% 2.39% 2.52% 2.48% 2.81% Expenses without waivers, reimbursements and earning credits 2.71% 3.31% 2.25% 2.16% 1.90% 1.91% Net investment income (loss) without waivers, reimbursements and earning credits (0.13%) (0.87%) 0.99% 1.21% 1.43% 1.75% Portfolio turnover(a) 118% 312% 100% 145% 112% 162%
(a) Not annualized for periods less than one year. (b) Net investment income per share has been calculated based on average shares outstanding during the period. (c) Amount is less than $0.005. SEE NOTES TO FINANCIAL STATEMENTS. 31
U.S. GOVERNMENT INCOME PORTFOLIO -------------------------------------------------------- 9/1/02 THROUGH YEAR ENDED AUGUST 31, 2/28/03 2002 2001 2000 1999 1998 -------- ------- ------- ------- -------- -------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 10.04 $ 9.95 $ 9.44 $ 9.51 $ 10.12 $ 9.40 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.14 0.37 0.51 0.59 0.52 0.39 Net gains or losses on investments (both realized and unrealized) 0.26 0.45 0.46 0.10 (0.62) 0.64 -------- ------- ------- ------- -------- -------- TOTAL FROM INVESTMENT OPERATIONS 0.40 0.82 0.97 0.69 (0.10) 1.03 -------- ------- ------- ------- -------- -------- LESS DISTRIBUTIONS FROM: Net investment income 0.38 0.59 0.46 0.58 0.51 0.31 Net realized gains 0.22 0.14 -- 0.18 -- -- -------- ------- ------- ------- -------- -------- TOTAL DISTRIBUTIONS 0.60 0.73 0.46 0.76 0.51 0.31 -------- ------- ------- ------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 9.84 $ 10.04 $ 9.95 $ 9.44 $ 9.51 $ 10.12 ======== ======= ======= ======= ======== ======== TOTAL RETURN(a) 4.20% 8.92% 10.53% 7.80% (1.15%) 11.12% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (000 omitted) $ 6,261 $ 6,128 $ 6,172 $ 5,885 $ 6,433 $ 6,581 Ratios to Average Net Assets: Expenses 0.80% 0.80% 0.80% 0.80% 0.80% 0.80% Net investment income (loss) 2.94% 3.61% 5.21% 5.70% 5.35% 5.40% Expenses without waivers, reimbursements and earning credits 2.32% 2.47% 2.26% 2.49% 1.97% 1.99% Net investment income (loss) without waivers, reimbursements and earning credits 1.42% 1.94% 3.75% 4.01% 4.18% 4.21% Portfolio turnover(a) 133% 458% 91% 37% 31% 14% MONEY MARKET PORTFOLIO ----------------------------------------------------------- 9/1/02 THROUGH YEAR ENDED AUGUST 31, 2/28/03 2002 2001 2000 1999 1998 -------- ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income --(b) 0.02 0.05 0.05 0.05 0.05 Net gains or losses on investments (both realized and unrealized) -- -- -- -- -- -- -------- ------- ------- ------- ------- ------- TOTAL FROM INVESTMENT OPERATIONS -- 0.02 0.05 0.05 0.05 0.05 -------- ------- ------- ------- ------- ------- LESS DISTRIBUTIONS FROM: Net investment income --(b) 0.02 0.05 0.05 0.05 0.05 Net realized gains -- -- -- -- -- -- -------- ------- ------- ------- ------- ------- TOTAL DISTRIBUTIONS -- 0.02 0.05 0.05 0.05 0.05 -------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======= ======= ======= ======= ======= TOTAL RETURN(a) 0.43% 1.62% 5.05% 5.57% 4.66% 5.04% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (000 omitted) $ 3,630 $ 3,582 $ 3,875 $ 3,883 $ 3,991 $ 3,279 Ratios to Average Net Assets: Expenses 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% Net investment income (loss) 0.87% 1.61% 4.90% 5.43% 4.54% 4.94% Expenses without waivers, reimbursements and earning credits 1.73% 2.55% 2.77% 2.51% 2.28% 2.24% Net investment income (loss) without waivers, reimbursements and earning credits (0.31%) (0.39%) 2.68% 3.47% 2.81% 3.25% Portfolio turnover(a) -- -- -- -- -- --
(a) Not annualized for periods less than one Year. (b) Amount is less than $0.005. SEE NOTES TO FINANCIAL STATEMENTS. 32 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION--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"). 2. SIGNIFICANT ACCOUNTING POLICIES THE FOLLOWING IS A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOLLOWED BY THE PORTFOLIOS: The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America 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, purchased options and futures contracts 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 mean between the bid and ask quotations. Fixed income securities, (other than convertible bonds), with a maturity of 61 days or more held by the Funds will be valued each day based on readily available market quotations received from independent or affiliated commercial pricing services. Such pricing services will generally provide bidside quotations. Convertible bonds are valued at the last sale price on the primary exchange on which the bond is principally traded. When valuations are not readily available, securities are valued at fair value as determined in accordance with procedures adopted by the Trustees. Valuations may be based upon current market prices of securities, which are comparable in coupon, rating, maturity and industry. It is possible that the estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and such differences could have been material. Short-term investments with 60 days or less to maturity at time of purchase are valued at amortized cost, which approximates market value. Trading in securities on most foreign exchanges and over-the-counter markets is normally completed before the close of the domestic market and may also take place on days when the domestic market is closed. If events materially affecting the value of foreign securities occur between the time when the exchange on which they are traded closes and the time when the Portfolios' net assets are calculated, such securities will be valued at fair value in accordance with procedures adopted by the Trustees. Money market instruments held in the MMP are valued at amortized cost which approximates market value. The MMP's use of amortized cost is subject to the MMP's compliance with certain conditions as specified under Rule 2a-7 of the 1940 Act. B. Repurchase Agreements--It is each Portfolio's policy that repurchase agreements be fully collateralized, primarily by U.S. Treasury and Government Agency securities. All collateral is held by the Portfolio's custodian bank, subcustodian, or a bank with which the custodian bank has entered into a subcustodian agreement, or is segregated in the Federal Reserve Book Entry System. In connection with transactions in repurchase agreements, if the seller defaults and the value of the collateral declines, realization of the collateral by the Portfolio may be delayed or limited. C. Futures Contracts--When a Portfolio enters into a futures contract, it makes an initial margin deposit in a segregated account, either in cash or liquid securities. Thereafter, the futures contract is marked to market and the Portfolio makes (or receives) additional cash payments daily to (or from) the broker. Changes in the value of the contract are recorded as unrealized appreciation (depreciation) until the contract is closed or settled. AAP may invest in exchange-traded interest rate futures for hedging purposes, to either modify the duration of the portfolio, modify the yield curve exposure of the Portfolio, or in anticipation of buying or selling a specific security. 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, allowing the fund 33 manager to adjust country exposures while incurring minimal transaction costs. Long index futures contracts are used to gain exposure to equities when it is anticipated that this will be more efficient than buying stocks directly. Use of long futures contracts subject the Portfolios to risk of loss in excess of the amounts shown on the Statement of Assets and Liabilities, up to the notional value of the futures contracts. Use of short futures contracts subject the Portfolios to unlimited risk of loss. The Portfolios 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. As of February 28, 2003, AAP had open futures contracts as shown on its Portfolio of Investments. D. 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 prevailing exchange rates, or at the mean of the current bid and asked prices, of such currencies against the U.S. dollar as quoted by a major bank, on the following basis: (1) Market value of investment securities and other assets and liabilities: at the rate of exchange at the valuation date. (2) Purchases and sales of investment securities, income and expenses: at the rates of exchange prevailing on the respective dates of such transactions. The Portfolios do not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held or sold during the year. Accordingly, such realized foreign currency gains (losses) are included in the reported net realized gains (losses) on investment 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 assets other than investments and liabilities denominated in foreign currencies which are held at period end. E. Forward Foreign Currency Exchange Contracts--The Portfolios may enter into forward foreign currency contracts (obligations to purchase or sell foreign currency in the future on a date and price fixed at the time the contracts are entered into) to manage the Portfolio's exposure to foreign currency exchange fluctuations. 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 Portfolios's basis in the contract. The Portfolios are subject to off-balance sheet risk to the extent of the value of the contracts for purchases of foreign currency and in an unlimited amount for sales of foreign currency. As of February 28, 2003, the Portfolios had no outstanding forward foreign currency exchange contracts. F. 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 determined on the basis of coupon interest accrued using the interest method adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on the ex-dividend date. Purchases of To Be Announced (TBA), when-issued or delayed delivery securities may be settled a month or more after the trade date; interest income is not accrued until settlement date. It is each Portfolios's policy to segregate assets with a current value at least equal to the amount of its TBA, when-issued or delayed delivery purchase commitments. G. Dollar Rolls--The AAP may enter into dollar rolls in which the Portfolio sells mortgage-backed securities for delivery in the current month and simultaneously contract to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. During the roll period, the Portfolio forgoes principal and interest paid on the securities. The Portfolio's policy is to record the components of dollar rolls using 34 "to be announced" mortgage-backed securities ("TBA Dollar Rolls") as purchase and sale transactions. Any difference between the purchase and sale price is recorded as a realized gain or loss on the date the transaction is entered into. AAP had TBA Dollar Rolls outstanding as of February 28, 2003, which are included in Receivable for Investment securities sold and Payable for Investment securities purchased on the Statement of Assets and Liabilities. H. Allocation of Expenses--Expenses directly attributable to a Portfolio are charged to that Portfolio; other expenses of the Trust are allocated proportionately among each of the Portfolios within the Trust in relation to the net assets of each Portfolio or on another reasonable basis I. Federal Income Tax Status--Each Portfolio is treated as a separate taxable entity for Federal income tax purposes. The policy of the Portfolios is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders all of their distributable net investment income and net realized gain on investments. In addition, the Portfolios intend to make distributions as required to avoid excise taxes. Accordingly, no provision for Federal income or excise tax is necessary. J. Distributions to Shareholders--Dividends and distributions paid to shareholders are recorded on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains is determined in accordance with Federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. To the extent these "book/tax" differences are permanent in nature, (i.e., that they result from other than timing of recognition"temporary differences") such amounts are reclassified within the capital accounts based on their Federal tax-basis treatment. 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES A. Investment Advisory Fee--Pursuant to an Investment Advisory Agreement, J.P. Morgan Fleming Asset Management (USA), Inc. ("JPMFAM" or "Adviser") acts as the investment adviser to the Portfolios. JPMFAM is a direct wholly owned subsidiary of JPMorgan Chase Bank ("JPMCB") and an indirect wholly owned subsidiary of JPMorgan Chase & Co. ("JPMorgan"). The Adviser supervises the investments of each respective Portfolio and for such services is paid a fee. The fee is accrued daily and paid monthly based on each Portfolio's respective average daily net assets. The annual fee for each Portfolio is as follows:
INVESTMENT PORTFOLIO: ADVISORY FEE (%) --------------- GIP 0.60 CGP 0.60 IEP 0.80 AAP 0.55 USGIP 0.50 MMP 0.25
J.P. Morgan Fleming Asset Management (London) "JPMFAM(London)" Ltd:, a wholly owned subsidiary of JPMCB, is the sub-advisor to IEP pursuant to a sub-advisory agreement between JPMFAM and JPMFAM(London). For it services as sub-advisor, JPMFAM(London) receives a portion of the fees payable to JPMFAM as advisor. The Adviser waived fees as outlined in Note 3.D. below. The Portfolios, other than MMP, may invest in one or more of the affiliated JPMorgan Money Market Funds. The Adviser has agreed to waive and/or reimburse its advisory fee from the Portfolios in an amount sufficient to offset any doubling up of investment advisory, administration and shareholder servicing fees related to each Portfolio's investment in an affiliated money market fund. B. Administration Fee--Pursuant to the Administration Agreement, JPMCB (the "Administrator") provides certain administration services to the Portfolios. In consideration of these services, the Administrator receives a fee computed daily and paid monthly at the annual rate of 0.15% of each Portfolio's average daily net assets. BISYS serves as the Portfolios' sub-administrator. For its services as sub-administrator, BISYS receives a portion of the fees payable to JPMCB as Administrator. The Administrator waived fees and reimbursed expenses as outlined in Note 3.D. below. C. Custodian and Accounting Fees--JPMCB provides portfolio accounting and custody services for GIP, CGP, AAP and USGIP (only custody services is provided for IEP by JPMCB). Compensation for such services is presented in the Statement of Operations as custodian fees. The custodian fees may be reduced by credits earned by each Portfolio, based on uninvested cash balances held by the custodian. Such earnings 35 credits are presented separately in the Statement of Operations. D. Waivers and Reimbursements--For the six months ended February 28, 2003, the Portfolios' vendors voluntarily waived expenses as follows:
GIP CGP IEP AAP USGIP MMP TOTAL ---------- ---------- ---------- ---------- ---------- ---------- ---------- Advisory $ 19,486 $ 14,501 $ 16,602 $ 16,122 $ 15,522 $ 4,492 $ 86,725 Administration 4,872 3,625 3,113 4,397 4,657 2,099 22,763 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total $ 24,358 $ 18,126 $ 19,715 $ 20,519 $ 20,179 $ 6,591 $ 109,488
The Administrator voluntarily reimbursed certain expenses of the portfolios as follows:
GIP CGP IEP AAP USGIP MMP TOTAL --------- --------- --------- --------- --------- --------- ---------- $ 20,585 $ 24,786 $ 49,183 $ 33,882 $ 26,876 $ 14,647 $ 169,959
E. Other--Certain officers of the Trust are officers of J.P. Morgan Chase & Co. or of BISYS or their subsidiaries. 4. INVESTMENT TRANSACTIONS--For the six months ended February 28, 2003, purchases and sales of investments (excluding short-term investments) were as follows:
GIP CGP IEP AAP USGIP ----------- ---------- ---------- ------------ ---------- Purchases (excluding U.S. Government) $ 886,703 $ 860,809 $ 265,101 $ 1,790,612 $ -- Sales (excluding U.S. Government) 1,662,146 1,829,290 443,045 1,438,050 -- Purchases of U.S. Government -- -- -- 4,593,026 7,952,962 Sales of U.S. Government -- -- -- 4,986,618 7,722,695
5. FEDERAL INCOME TAX MATTERS--For Federal income tax purposes, the cost and unrealized appreciation(depreciation) in value of the investment securities at February 28, 2003, are as follows:
GIP CGP IEP AAP USGIP ------------ ------------ ------------ ------------ ----------- Aggregate cost $ 6,697,713 $ 4,850,480 $ 4,964,287 $ 6,573,262 $ 6,622,387 ------------ ------------ ------------ ------------ ----------- Gross unrealized appreciation 164,735 361,439 158,641 177,521 329,894 Gross unrealized depreciation (1,183,021) (876,384) (1,316,636) (438,338) -- ------------ ------------ ------------ ------------ ----------- Net unrealized appreciation (depreciation) (1,018,286) (514,945) (1,157,995) (260,817) 329,894 ============ ============ ============ ============ ===========
6. CONCENTRATIONS AND INDEMNIFICATIONS--As of February 28, 2003, all shares outstanding for each Portfolio are owned either directly or indirectly by a single insurance company. IEP may have elements of risk not typically associated with investments in the United States of America due to concentrated investments in a limited number of countries or regions which may vary throughout the year. Such concentrations may subject the Portfolio to additional risks resulting from political or economic conditions in such countries or regions and the possible imposition of adverse governmental laws or currency exchange restrictions could cause the securities and their markets to be less liquid and their prices more volatile than those of comparable U.S. securities. As of February 28, 2003, IEP invested 19.7% and 27.7% of its total investments 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. As of February 28, 2003, CGP invested approximately 18.8% of its net assets in securities issued by Health Care/Health Care Services companies. In the normal course of business the Funds enter into contracts that contain a variety of representations which provide general indemnifications. Each Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against each Fund that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote. 7. SUBSEQUENT EVENT--The Funds' Board of Trustees has approved a change in the fund accounting and custody vendor for MMP from The Bank of New York to JPMCB. This change is expected to occur on or about May 1, 2003. 8. REORGANIZATION--On April 9, 2003, The Board of Trustees approved in principle management's proposal to merge the Portfolios ("Target Portfolios") into the SunAmerica Series Trust Funds as shown in the table below. Each of the proposed mergers is contingent upon approval from each of the Target Portfolio's shareholders and regulatory review. If approved, the mergers are expect to occur prior to December 31, 2003.
MUTUAL FUND VARIABLE ANNUITY TRUST SUNAMERICA SERIES TRUST (TARGET PORTFOLIO) (SURVIVOR FUND) ---------------------------- ------------------------------- Vista International Equity International Growth and Income Vista Capital Growth Marsico Growth Vista Growth and Income Davis Venture Value Vista Asset Allocation MFS Total Return Vista U.S. Government Income Cash Management Vista Money Market Cash Management
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