-----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, IttcGVzz7lCtn2IIVtavbFkccGKwic8AgQULFAuAN/xY9E1qYklykpRHuty9FHsk v7Q9MVtdd7Cwykj2ZauFJA== 0001047469-03-034566.txt : 20031028 0001047469-03-034566.hdr.sgml : 20031028 20031028134439 ACCESSION NUMBER: 0001047469-03-034566 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030831 FILED AS OF DATE: 20031028 EFFECTIVENESS DATE: 20031028 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-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-08630 FILM NUMBER: 03960465 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-CSR 1 a2120859zn-csr.txt N-CSR ----------------------------- OMB APPROVAL ----------------------------- OMB Number: 3235-0570 Expires: November 30, 2005 Estimated average burden hours per response....... 5.0 ----------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-08630 --------------------------------------------- Mutual Fund Variable Annuity Trust - ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 522 Fifth Avenue, New York, NY 10036 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) BISYS Fund Services, 3435 Stelzer Road, Columbus, OH 43219 - ------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 1-800-348-4782 ---------------------------- Date of fiscal year end: August 31, 2003 ------------------------------------------------------- Date of reporting period: September 1, 2002 through August 31, 2003 ------------------------------------------------------ Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. Include a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Act (17 CFR 270.30e-1). [GRAPHIC] ANNUAL REPORT AUGUST 31, 2003 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. Past performance is no guarantee for future performance. The general market views expressed in this report are opinions based on current market conditions and are subject to change without notice. These views are not intended to predict the future performance of a Fund or the securities markets. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Such views are not meant as investment advice and may not be relied on as an indication of trading intent on behalf of any Fund. 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. [GRAPHIC] Dear Vista Capital Advantage Contract Owner: Enclosed is the August 31, 2003 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 August 31, 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 8/31/03(2)
1 3 5 SINCE PORTFOLIO (CONTRACT INCEPTION DATE) YEAR YEAR YEAR INCEPTION --------------------------------------------------------------------------------------------------------------- Growth and Income (3/13/95) 3.73% -11.55% -1.56% 5.50% Capital Growth (3/13/95) 15.86% -8.05% 5.45% 8.12% International Equity (3/13/95) -0.13% -12.67% 0.17% 2.10% Asset Allocation (3/13/95) 0.41% -9.21% -1.92% 3.64% U.S. Government Income (7/13/95) -5.51% 4.01% 3.30% 4.49% Money Market(3) (6/2/95) -6.78% -0.72% 1.24% 2.61% 7-DAY YIELD AS OF 8/31/03; -0.02%
FIRST SUNAMERICA LIFE INSURANCE COMPANY POLICY HOLDERS (NEW YORK) AVERAGE ANNUAL TOTAL RETUN AS OF 8/31/03(2)
1 3 5 SINCE PORTFOLIO (CONTRACT INCEPTION DATE) YEAR YEAR YEAR INCEPTION --------------------------------------------------------------------------------------------------------------- Growth and Income (12/6/95) 3.73% -11.55% -1.35% 3.51% Capital Growth (12/6/95) 15.86% -8.05% 5.61% 6.10% International Equity (12/22/95) -0.13% -12.67% 0.37% 0.98% Asset Allocation (12/22/95) 0.41% -9.21% -1.70% 2.23% U.S. Government Income (12/22/95) -5.51% 4.01% 3.48% 4.30% Money Market(3) (12/22/95) -6.78% -0.72% 1.43% 2.54% 7-DAY YIELD AS OF 8/31/03; -0.02%
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 - - "Baghdad Bounce" revives U.S. and international markets - - Economies strengthen in U.S. and Asia - - Bond markets correct during late summer - - High probability of synchronized global growth
3 [GRAPHIC] PRESIDENT'S LETTER October 6, 2003 DEAR SHAREHOLDER: We are pleased to present this annual report for the Vista Capital Advantage Variable Annuity Portfolios. Inside, you will find information detailing the performance of the Portfolios for the year ended August 31, 2003, along with a report from the portfolio manager. THE "BAGHDAD BOUNCE" TRIGGERS A LIQUIDITY-DRIVEN RALLY Despite the uncertainty of the first few months of 2003, global equity markets found direction once it became clear that allied troops would cross the border into Iraq in mid-March. Prior to that, wrangling in the United Nations regarding the legitimacy of war dogged market sentiment. However, the combination of action, followed by a quicker-than-expected war, led to a relief rally--the "Baghdad Bounce." This momentum, thanks to utterances by the U.S. Federal Reserve Board, confirmed its determination to avoid deflation and to nurture growth (leading ultimately to a 1/4-point rate cut in late June), Congress's approval of a $350 billion package of tax cuts by the Bush administration in an attempt to boost consumer demand, and the easy monetary stance adopted by the Bank of England and European Central Bank. By late summer, there were clear signs of a strengthening U.S. economy, matched by better-than-expected economic reports out of Japan and the rest of Asia. Even in Europe, forward-looking indicators implied the economy might soon turn around. By August 31, the S&P 500 Index of blue-chip U.S. stocks had risen 16.0% year to date, and the MSCI EAFE Index of international stocks was up 14.8%. Fixed income markets suffered, with bond yields rising as fears that the United States and Europe were headed for Japan-style deflation subsided. Earlier in 2003, there had been a significant rally in bond prices, both as the likelihood of deflation had seemed to increase, and as some of the liquidity unleashed by the swift end to the official war made its way to the bond markets. Yields on 10-year government bonds rose by 95 basis points in the United States and 35 basis points in Europe during July and August. We expect U.S. share prices, going forward, will hinge on whether the improved economy enables companies to deliver stronger earnings and to begin hiring additional workers. Our best judgment is that companies will gradually begin to deliver on both fronts, allowing the economy to keep growing and share prices to keep moving up. Long-term interest rates may eventually rise further in this scenario, dampening bond returns. The balance of risks in the economy appears to have shifted further in the direction of a renewed phase of global growth that may last longer and be spread more widely than investors have been expecting. If Europe gradually breaks out of its slump, and Japan remains on its improved course, the world may be able to look forward to the first globally synchronized economic expansion in at least a decade. Non-U.S. equities, given their comparatively attractive valuations, would be likely, in such a scenario, to produce returns at least competitive with those on U.S. stocks. In this challenging environment, your portfolio managers will continue to work hard to maintain strong performance. The portfolio management team and all of us at JPMorgan Fleming Asset Management appreciate your continued investment with us and we anticipate serving your investment needs for many years to come. 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 gained 11.33% in the twelve months through August 31, 2003. The portfolio participated in the market's climb, although results trailed the S&P 500/BARRA Value Index, which rose 14.15% for the same period. Q: WHY DID THE PORTFOLIO PERFORM THIS WAY? A: The Portfolio's underperformance was mostly attributable to its underweight position in the information technology sector as well as adverse stock selection in the healthcare sector. Adept stock selection in the consumer discretionary sector enhanced the Portfolio's relative return. Among the Portfolio's main detractors was energy company TXU. In October 2002 management lowered its expectations for 2002 and 2003 as a result of low wholesale prices and aggressive retail competition in the United Kingdom. The depressed wholesale market in the U.K. led to intense retail competition that eroded margins. As a result of these issues we sold our position in the company. CIGNA Corp. declined after the company made several negative announcements. The most significant announcements were related to a new technology platform that the company is implementing. The time and costs of switching current clients will be greater than expected and several products had been underpriced leading to a financial shortfall. As a result of these issues we sold our position in the company. The top contributor for the period was Citigroup, which has shown strong and steady profitability. Additionally, the company posted strong earnings, beating consensus Wall Street expectations. Q: HOW WAS THE PORTFOLIO MANAGED? A: Despite the market's climb we still are finding high-quality companies in which to invest. Holdings such as Pfizer, Wyeth, PepsiCo, and QUALCOMM reflect short-term concerns in their prices rather than the potentially high returns and durable business models that we see. We are also finding traditional value plays: companies in lower growth industries that possess strong balance sheets and generate excess cash flow. With interest rates and dividend tax rates low, these companies are poised to attract more investor attention as they raise their payout ratios. Holdings in this area include Altria Group, Mattel, AutoZone and Automatic Data Processing. 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 $17,755 from inception on 3/1/95 through 8/31/03.* INVESTMENT RESULTS Average Annual Returns as of 8/31/03 1 year 11.33% 3 year -8.12% 5 year 0.76% Since Inception (3/1/95) 6.99%
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GROWTH AND INCOME PORTFOLIO S&P 500/BARRA VALUE INDEX LIPPER GROWTH AND INCOME FUNDS INDEX 3/1/1995 $ 10,000 $ 10,000 $ 10,000 3/31/1995 $ 10,270 $ 10,276 $ 10,235 4/30/1995 $ 10,410 $ 10,614 $ 10,517 5/31/1995 $ 10,729 $ 11,086 $ 10,871 6/30/1995 $ 11,000 $ 11,171 $ 11,076 7/31/1995 $ 11,459 $ 11,556 $ 11,449 8/31/1995 $ 11,479 $ 11,654 $ 11,558 9/30/1995 $ 11,708 $ 12,060 $ 11,903 10/31/1995 $ 11,479 $ 11,872 $ 11,741 11/30/1995 $ 11,959 $ 12,494 $ 12,246 12/31/1995 $ 12,149 $ 12,840 $ 12,449 1/31/1996 $ 12,557 $ 13,224 $ 12,819 2/29/1996 $ 12,767 $ 13,348 $ 12,998 3/31/1996 $ 13,018 $ 13,660 $ 13,163 4/30/1996 $ 13,228 $ 13,800 $ 13,365 5/31/1996 $ 13,375 $ 14,008 $ 13,560 6/30/1996 $ 13,344 $ 13,941 $ 13,502 7/31/1996 $ 12,893 $ 13,353 $ 12,952 8/31/1996 $ 13,343 $ 13,721 $ 13,342 9/30/1996 $ 13,939 $ 14,308 $ 13,937 10/31/1996 $ 14,160 $ 14,793 $ 14,253 11/30/1996 $ 15,050 $ 15,925 $ 15,171 12/31/1996 $ 14,767 $ 15,664 $ 15,023 1/31/1997 $ 15,602 $ 16,386 $ 15,693 2/28/1997 $ 15,542 $ 16,506 $ 15,826 3/31/1997 $ 14,899 $ 15,941 $ 15,275 4/30/1997 $ 15,578 $ 16,539 $ 15,839 5/31/1997 $ 16,569 $ 17,576 $ 16,761 6/30/1997 $ 17,214 $ 18,247 $ 17,418 7/31/1997 $ 18,610 $ 19,707 $ 18,668 8/31/1997 $ 18,085 $ 18,816 $ 17,968 9/30/1997 $ 18,931 $ 19,919 $ 18,876 10/31/1997 $ 18,562 $ 19,186 $ 18,249 11/30/1997 $ 19,171 $ 19,917 $ 18,758 12/31/1997 $ 19,437 $ 20,359 $ 19,060 1/31/1998 $ 19,119 $ 20,109 $ 19,096 2/28/1998 $ 20,488 $ 21,617 $ 20,294 3/31/1998 $ 21,428 $ 22,713 $ 21,233 4/30/1998 $ 21,179 $ 22,981 $ 21,348 5/31/1998 $ 20,722 $ 22,657 $ 21,021 6/30/1998 $ 21,095 $ 22,829 $ 21,274 7/31/1998 $ 20,418 $ 22,334 $ 20,752 8/31/1998 $ 17,098 $ 18,742 $ 17,822 9/30/1998 $ 17,983 $ 19,882 $ 18,622 10/31/1998 $ 19,449 $ 21,439 $ 19,974 11/30/1998 $ 20,293 $ 22,556 $ 20,937 12/31/1998 $ 21,482 $ 23,347 $ 21,649 1/31/1999 $ 21,596 $ 23,819 $ 21,853 2/28/1999 $ 20,300 $ 23,307 $ 21,370 3/31/1999 $ 20,759 $ 24,013 $ 22,107 4/30/1999 $ 22,154 $ 26,083 $ 23,539 5/31/1999 $ 21,645 $ 25,621 $ 23,198 6/30/1999 $ 22,547 $ 26,605 $ 24,158 7/31/1999 $ 21,465 $ 25,786 $ 23,465 8/31/1999 $ 20,727 $ 25,133 $ 22,946 9/30/1999 $ 20,053 $ 24,151 $ 22,226 10/31/1999 $ 20,627 $ 25,515 $ 23,177 11/30/1999 $ 20,759 $ 25,365 $ 23,381 12/31/1999 $ 21,491 $ 26,318 $ 24,218 1/31/2000 $ 21,064 $ 25,481 $ 23,269 2/29/2000 $ 20,059 $ 23,889 $ 22,513 3/31/2000 $ 21,934 $ 26,380 $ 24,627 4/30/2000 $ 21,803 $ 26,204 $ 24,188 5/31/2000 $ 21,491 $ 26,285 $ 24,099 6/30/2000 $ 21,293 $ 25,247 $ 24,007 7/31/2000 $ 21,589 $ 25,752 $ 23,921 8/31/2000 $ 22,889 $ 27,477 $ 25,409 9/30/2000 $ 22,182 $ 27,472 $ 24,712 10/31/2000 $ 22,264 $ 27,985 $ 24,784 11/30/2000 $ 21,079 $ 26,552 $ 23,426 12/31/2000 $ 21,737 $ 27,920 $ 24,311 1/31/2001 $ 21,687 $ 29,098 $ 24,803 2/28/2001 $ 20,507 $ 27,169 $ 23,463 3/31/2001 $ 19,527 $ 26,096 $ 22,400 4/30/2001 $ 20,954 $ 27,865 $ 23,897 5/31/2001 $ 21,170 $ 28,158 $ 24,203 6/30/2001 $ 20,340 $ 27,245 $ 23,614 7/31/2001 $ 20,208 $ 26,774 $ 23,404 8/31/2001 $ 18,929 $ 25,226 $ 22,325 9/30/2001 $ 17,451 $ 22,830 $ 20,530 10/31/2001 $ 17,568 $ 22,830 $ 20,791 11/30/2001 $ 18,530 $ 24,280 $ 22,145 12/31/2001 $ 18,795 $ 24,649 $ 22,506 1/31/2002 $ 18,660 $ 23,973 $ 22,179 2/28/2002 $ 18,610 $ 23,760 $ 22,033 3/31/2002 $ 19,402 $ 24,976 $ 22,894 4/30/2002 $ 18,424 $ 23,725 $ 22,033 5/31/2002 $ 18,627 $ 23,820 $ 22,005 6/30/2002 $ 17,362 $ 22,317 $ 20,566 7/31/2002 $ 15,810 $ 19,904 $ 18,929 8/31/2002 $ 15,945 $ 20,042 $ 19,116 9/30/2002 $ 14,258 $ 17,751 $ 17,182 10/31/2002 $ 15,539 $ 19,226 $ 18,307 11/30/2002 $ 16,299 $ 20,578 $ 19,319 12/31/2002 $ 15,541 $ 19,508 $ 18,479 1/31/2003 $ 15,129 $ 18,973 $ 17,984 2/28/2003 $ 14,687 $ 18,457 $ 17,599 3/31/2003 $ 14,651 $ 18,433 $ 17,713 4/30/2003 $ 15,987 $ 20,256 $ 19,102 5/31/2003 $ 17,084 $ 21,747 $ 20,175 6/30/2003 $ 17,289 $ 21,906 $ 20,434 7/31/2003 $ 17,495 $ 22,392 $ 20,705 8/31/2003 $ 17,755 $ 22,876 $ 21,155
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 gained 23.63% in the twelve months through August 31, 2003. The Portfolio participated in the market's climb, although results trailed the Russell MidCap Growth Index, which rose 30.39% for the same period. Q: WHY DID THE PORTFOLIO PERFORM THIS WAY? A: Despite the Portfolio's gains for the period, performance relative to the benchmark was somewhat muted by lack of exposure to the highly cyclical and/or highly leveraged segments of the market that have been the driving force behind the rally. The Portfolio's overriding focus on quality generally results in the construction of the Portfolio that has no exposure to the highly cyclical and leveraged companies. Additionally, adverse stock selection in the healthcare sector, in particular the Portfolio's biotechnology exposure, hindered relative performance. The primary detractors in healthcare were AmerisourceBergen, the largest U.S. drug wholesaler, and Triad Hospitals, an owner and operator of hospitals. Shares of AmerisourceBergen declined as expectations for the drug-wholesaling sector remain depressed due to slowing pharmaceutical sales growth. Triad's stock price decline resulted from the pressure the entire hospital group faced in the wake of the emerging surgery and billing scandals at Tenet Healthcare. The top contributor for the period was Expedia, the travel-booking website. Expedia's stock price advanced on news of its merger with InterActiveCorp. The deal was completed in August 2003. Another top contributor for the period was Gilead Sciences, a biopharmaceutical company that discovers, develops and commercializes therapeutics to advance the care of patients suffering from life-threatening diseases. The stock has rallied as the company's HIV drug Viread continues to see strong sales and costs remain low. Q: HOW WAS THE PORTFOLIO MANAGED? A: The portfolio manager's focus remains on stock selection, believing that quality growth companies--regardless of their economic sector--should perform well in the long-term. The portfolio manager has sought to maintain significant sector diversification and to avoid any large bets contingent on macroeconomic or sector trends. During the period, some changes were made to the Portfolio's healthcare holdings. In particular, the Portfolio's weight in drug and pharmaceutical stocks was reduced and we added a number of biotechnology names. Valuation was the primary driver behind these changes. Additionally, the Portfolio's consumer discretionary and technology weightings were decreased, as both sectors performed well during the period. 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 $21,878 from inception on 3/1/95 through 8/31/03.* INVESTMENT RESULTS Average Annual Returns as of 8/31/03 1 year 23.63% 3 year -4.75% 5 year 7.62% Since Inception (3/1/95) 9.65%
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CAPITAL GROWTH PORTFOLIO RUSSELL MIDCAP GROWTH INDEX LIPPER MID-CAP FUNDS INDEX 3/1/1995 $ 10,000 $ 10,000 $ 10,000 3/31/1995 $ 10,350 $ 10,397 $ 10,303 4/30/1995 $ 10,470 $ 10,484 $ 10,394 5/31/1995 $ 10,870 $ 10,743 $ 10,569 6/30/1995 $ 11,140 $ 11,232 $ 11,258 7/31/1995 $ 11,829 $ 11,939 $ 12,125 8/31/1995 $ 11,899 $ 12,070 $ 12,283 9/30/1995 $ 12,089 $ 12,339 $ 12,667 10/31/1995 $ 11,659 $ 12,027 $ 12,363 11/30/1995 $ 12,219 $ 12,565 $ 12,762 12/31/1995 $ 12,706 $ 12,571 $ 12,890 1/31/1996 $ 12,871 $ 12,793 $ 12,933 2/29/1996 $ 13,077 $ 13,277 $ 13,467 3/31/1996 $ 13,674 $ 13,382 $ 13,735 4/30/1996 $ 14,363 $ 14,028 $ 14,499 5/31/1996 $ 14,785 $ 14,314 $ 14,970 6/30/1996 $ 14,405 $ 13,882 $ 14,470 7/31/1996 $ 13,571 $ 12,805 $ 13,186 8/31/1996 $ 14,240 $ 13,498 $ 13,959 9/30/1996 $ 14,960 $ 14,355 $ 14,829 10/31/1996 $ 14,765 $ 14,187 $ 14,514 11/30/1996 $ 15,526 $ 15,022 $ 15,070 12/31/1996 $ 15,671 $ 14,770 $ 14,991 1/31/1997 $ 16,285 $ 15,424 $ 15,469 2/28/1997 $ 16,042 $ 15,085 $ 14,882 3/31/1997 $ 15,277 $ 14,233 $ 13,988 4/30/1997 $ 15,404 $ 14,581 $ 14,247 5/31/1997 $ 16,493 $ 15,888 $ 15,676 6/30/1997 $ 17,141 $ 16,328 $ 16,204 7/31/1997 $ 18,322 $ 17,890 $ 17,486 8/31/1997 $ 18,124 $ 17,715 $ 17,376 9/30/1997 $ 19,070 $ 18,611 $ 18,486 10/31/1997 $ 18,487 $ 17,679 $ 17,521 11/30/1997 $ 18,709 $ 17,865 $ 17,472 12/31/1997 $ 18,905 $ 18,099 $ 17,610 1/31/1998 $ 18,905 $ 17,773 $ 17,367 2/28/1998 $ 20,289 $ 19,444 $ 18,958 3/31/1998 $ 21,001 $ 20,258 $ 19,837 4/30/1998 $ 20,923 $ 20,534 $ 20,018 5/31/1998 $ 20,005 $ 19,690 $ 19,013 6/30/1998 $ 20,185 $ 20,247 $ 19,760 7/31/1998 $ 18,867 $ 19,380 $ 18,845 8/31/1998 $ 15,156 $ 15,681 $ 15,039 9/30/1998 $ 15,906 $ 16,866 $ 16,213 10/31/1998 $ 17,237 $ 18,108 $ 17,011 11/30/1998 $ 17,780 $ 19,328 $ 18,115 12/31/1998 $ 18,669 $ 21,330 $ 20,060 1/31/1999 $ 18,367 $ 21,970 $ 20,600 2/28/1999 $ 17,647 $ 20,896 $ 19,319 3/31/1999 $ 18,510 $ 22,060 $ 20,217 4/30/1999 $ 18,812 $ 23,066 $ 21,086 5/31/1999 $ 19,186 $ 22,768 $ 21,120 6/30/1999 $ 20,337 $ 24,357 $ 22,444 7/31/1999 $ 20,121 $ 23,583 $ 22,027 8/31/1999 $ 19,789 $ 23,338 $ 21,732 9/30/1999 $ 19,315 $ 23,139 $ 21,632 10/31/1999 $ 19,790 $ 24,928 $ 23,113 11/30/1999 $ 20,322 $ 27,510 $ 25,120 12/31/1999 $ 21,450 $ 32,275 $ 28,895 1/31/2000 $ 20,519 $ 32,269 $ 28,282 2/29/2000 $ 21,869 $ 39,052 $ 33,342 3/31/2000 $ 23,483 $ 39,091 $ 33,132 4/30/2000 $ 23,312 $ 35,295 $ 30,379 5/31/2000 $ 22,272 $ 32,722 $ 28,535 6/30/2000 $ 22,862 $ 36,194 $ 31,400 7/31/2000 $ 22,800 $ 33,903 $ 30,690 8/31/2000 $ 25,315 $ 39,015 $ 34,459 9/30/2000 $ 24,789 $ 37,107 $ 33,156 10/31/2000 $ 24,571 $ 34,569 $ 31,180 11/30/2000 $ 22,600 $ 27,057 $ 26,235 12/31/2000 $ 24,550 $ 28,483 $ 27,885 1/31/2001 $ 24,717 $ 30,110 $ 28,588 2/28/2001 $ 23,457 $ 24,901 $ 25,169 3/31/2001 $ 21,730 $ 21,337 $ 22,627 4/30/2001 $ 23,490 $ 24,894 $ 25,324 5/31/2001 $ 23,939 $ 24,777 $ 25,521 6/30/2001 $ 23,740 $ 24,790 $ 25,243 7/31/2001 $ 23,342 $ 23,119 $ 23,999 8/31/2001 $ 22,611 $ 21,443 $ 22,336 9/30/2001 $ 20,088 $ 17,898 $ 19,113 10/31/2001 $ 20,753 $ 19,779 $ 20,238 11/30/2001 $ 22,031 $ 21,910 $ 21,973 12/31/2001 $ 23,511 $ 22,742 $ 22,722 1/31/2002 $ 22,964 $ 22,003 $ 22,027 2/28/2002 $ 22,897 $ 20,756 $ 21,020 3/31/2002 $ 23,643 $ 22,339 $ 22,456 4/30/2002 $ 22,780 $ 21,157 $ 21,733 5/31/2002 $ 21,967 $ 20,527 $ 21,194 6/30/2002 $ 19,942 $ 18,261 $ 19,369 7/31/2002 $ 18,131 $ 16,486 $ 17,473 8/31/2002 $ 17,700 $ 16,428 $ 17,478 9/30/2002 $ 16,505 $ 15,122 $ 16,064 10/31/2002 $ 17,535 $ 16,294 $ 16,917 11/30/2002 $ 18,382 $ 17,570 $ 18,032 12/31/2002 $ 17,483 $ 16,509 $ 17,027 1/31/2003 $ 17,256 $ 16,347 $ 16,687 2/28/2003 $ 16,796 $ 16,205 $ 16,368 3/31/2003 $ 17,277 $ 16,506 $ 16,561 4/30/2003 $ 18,248 $ 17,630 $ 17,674 5/31/2003 $ 19,859 $ 19,326 $ 19,157 6/30/2003 $ 20,253 $ 19,603 $ 19,427 7/31/2003 $ 20,915 $ 20,302 $ 20,041 8/31/2003 $ 21,878 $ 21,421 $ 20,903
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 DID THE PORTFOLIO PERFORM? A: The International Equity Portfolio had a total return of 7.28% during the year ended August 31, 2003. This compares with a rise of 9.11% for the MSCI EAFE Index, the Portfolio's benchmark. Q: WHY DID THE PORTFOLIO PERFORM THIS WAY? A: In a 12-month period that was dominated by the Iraq crisis, the Portfolio trailed its MSCI EAFE Index benchmark by a small margin. Broadly speaking, the underperformance occurred in the volatile months leading up to the outbreak of hostilities in early March. Since then the Portfolio has outpaced the MSCI EAFE Index, demonstrating its tendency to outperform in rising markets. During the period prior to the Iraq war, there were a number of stock-specific difficulties. BAE Systems, the British defense contractor, was the biggest detractor from performance after it warned of cost overruns and delays on U.K. military projects. In Korea, holdings such as Kookmin Bank were hit by concerns over North Korea's nuclear intentions. Another poor performer was the German company, Heidelberg Cement, where trading was damaged by a weak construction market. There was also a period of poor performance from Japanese consumer discretionary stocks including Nintendo and Sony, which extended into the second quarter. In the rally that celebrated the swift end to "the combat phase," of the conflict in Iraq and the gradual emergence of stronger economic data, stock selection drove outperformance. The portfolio manager succeeded in picking those stocks most geared to a rebound in confidence. In the basic materials sector, these included Wolseley of the U.K. and Compagnie de Saint Gobain of France. Among insurers, AXA of France and Zurich Financial Services of Switzerland were leading contributors to portfolio performance. And, in telecommunications, Nokia and Vodafone, of Finland and the U.K. respectively, performed well. Q: HOW WAS THE PORTFOLIO MANAGED? A: As equity prices dipped in the early months of 2003, the portfolio manager seized the opportunity to buy attractive companies trading at low valuations. More recently, following the rally in cyclical stocks, we have taken profits in industrial cyclical stocks. We have added to defensive holdings such as consumer staples and healthcare, while maintaining the Fund's exposure to a pickup in the world economy through additions to the energy and financial sectors. Broadly speaking, the Portfolio continues to take an active fundamental approach, focusing on proprietary research at both the local and sector levels. 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 $13,271 from inception on 3/1/95 through 8/31/03.* INVESTMENT RESULTS Average Annual Returns as of 8/31/03 1 year 7.28% 3 year -9.25% 5 year 2.41% Since Inception (3/1/95) 3.38%
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INTERNATIONAL EQUITY PORTFOLIO MSCI EAFE INDEX LIPPER INTERNATIONAL FUNDS INDEX 3/1/1995 $ 10,000.00 $ 10,000.00 $ 10,000.00 3/31/1995 $ 10,180.00 $ 10,624.00 $ 10,263.00 4/30/1995 $ 10,350.01 $ 11,023.46 $ 10,640.68 5/31/1995 $ 10,480.42 $ 10,892.28 $ 10,744.96 6/30/1995 $ 10,469.94 $ 10,701.67 $ 10,785.79 7/31/1995 $ 11,010.18 $ 11,368.38 $ 11,379.01 8/31/1995 $ 10,890.17 $ 10,935.25 $ 11,186.70 9/30/1995 $ 11,069.86 $ 11,148.48 $ 11,373.52 10/31/1995 $ 10,909.35 $ 10,848.59 $ 11,136.95 11/30/1995 $ 10,868.98 $ 11,150.18 $ 11,252.77 12/31/1995 $ 10,888.55 $ 11,599.53 $ 11,579.10 1/31/1996 $ 11,057.32 $ 11,647.09 $ 11,852.37 2/29/1996 $ 11,131.40 $ 11,686.69 $ 11,903.34 3/31/1996 $ 11,426.39 $ 11,934.45 $ 12,089.03 4/30/1996 $ 11,753.18 $ 12,281.74 $ 12,483.13 5/31/1996 $ 11,616.84 $ 12,055.76 $ 12,469.40 6/30/1996 $ 11,679.58 $ 12,123.27 $ 12,582.87 7/31/1996 $ 11,121.29 $ 11,769.27 $ 12,158.83 8/31/1996 $ 11,152.43 $ 11,795.16 $ 12,316.89 9/30/1996 $ 11,446.86 $ 12,108.91 $ 12,592.79 10/31/1996 $ 11,299.19 $ 11,985.40 $ 12,542.42 11/30/1996 $ 11,689.01 $ 12,462.42 $ 13,131.91 12/31/1996 $ 11,646.93 $ 12,301.66 $ 13,248.79 1/31/1997 $ 11,531.63 $ 11,871.10 $ 13,266.01 2/28/1997 $ 11,796.86 $ 12,065.78 $ 13,506.13 3/31/1997 $ 11,750.85 $ 12,109.22 $ 13,577.71 4/30/1997 $ 11,727.35 $ 12,173.40 $ 13,637.45 5/31/1997 $ 12,212.86 $ 12,965.89 $ 14,406.60 6/30/1997 $ 12,686.72 $ 13,680.31 $ 15,098.12 7/31/1997 $ 13,288.07 $ 13,901.93 $ 15,582.77 8/31/1997 $ 12,074.87 $ 12,863.46 $ 14,459.25 9/30/1997 $ 12,732.95 $ 13,583.81 $ 15,387.54 10/31/1997 $ 11,728.32 $ 12,539.21 $ 14,219.62 11/30/1997 $ 11,659.12 $ 12,411.31 $ 14,100.18 12/31/1997 $ 11,815.35 $ 12,519.29 $ 14,210.16 1/31/1998 $ 12,096.56 $ 13,091.42 $ 14,554.04 2/28/1998 $ 12,867.11 $ 13,931.89 $ 15,478.23 3/31/1998 $ 13,442.27 $ 14,361.00 $ 16,318.69 4/30/1998 $ 13,747.41 $ 14,474.45 $ 16,570.00 5/31/1998 $ 13,796.90 $ 14,403.52 $ 16,603.14 6/30/1998 $ 13,625.82 $ 14,512.99 $ 16,458.69 7/31/1998 $ 14,016.88 $ 14,659.57 $ 16,710.51 8/31/1998 $ 11,778.38 $ 12,843.25 $ 14,305.87 9/30/1998 $ 11,154.13 $ 12,448.96 $ 13,860.96 10/31/1998 $ 11,875.80 $ 13,746.15 $ 14,879.74 11/30/1998 $ 12,425.65 $ 14,449.95 $ 15,625.21 12/31/1998 $ 12,885.40 $ 15,019.28 $ 16,009.59 1/31/1999 $ 13,676.56 $ 14,974.22 $ 16,107.25 2/28/1999 $ 13,132.24 $ 14,617.83 $ 15,693.29 3/31/1999 $ 13,417.20 $ 15,227.39 $ 16,215.88 4/30/1999 $ 14,039.76 $ 15,844.10 $ 16,971.54 5/31/1999 $ 13,236.69 $ 15,028.13 $ 16,340.20 6/30/1999 $ 13,755.57 $ 15,614.23 $ 17,114.73 7/31/1999 $ 14,443.35 $ 16,077.97 $ 17,496.38 8/31/1999 $ 14,727.88 $ 16,137.46 $ 17,634.61 9/30/1999 $ 14,819.19 $ 16,300.45 $ 17,691.04 10/31/1999 $ 15,351.20 $ 16,911.72 $ 18,308.45 11/30/1999 $ 17,217.91 $ 17,498.55 $ 19,650.46 12/31/1999 $ 19,549.21 $ 19,069.92 $ 22,065.50 1/31/2000 $ 18,921.68 $ 17,858.98 $ 20,774.67 2/29/2000 $ 20,416.49 $ 18,339.39 $ 22,145.80 3/31/2000 $ 20,402.20 $ 19,050.96 $ 22,203.38 4/30/2000 $ 18,947.53 $ 18,048.88 $ 20,795.69 5/31/2000 $ 18,079.73 $ 17,608.49 $ 20,223.80 6/30/2000 $ 18,506.41 $ 18,296.98 $ 21,160.17 7/31/2000 $ 17,651.42 $ 17,530.33 $ 20,474.58 8/31/2000 $ 17,759.09 $ 17,682.85 $ 20,820.60 9/30/2000 $ 16,663.35 $ 16,821.69 $ 19,606.76 10/31/2000 $ 16,196.78 $ 16,424.70 $ 18,940.13 11/30/2000 $ 15,769.18 $ 15,808.77 $ 18,140.85 12/31/2000 $ 16,281.68 $ 16,369.99 $ 18,817.51 1/31/2001 $ 16,265.40 $ 16,361.80 $ 18,928.53 2/28/2001 $ 14,990.19 $ 15,134.67 $ 17,599.75 3/31/2001 $ 14,066.80 $ 14,125.18 $ 16,362.49 4/30/2001 $ 15,040.22 $ 15,106.88 $ 17,357.32 5/31/2001 $ 14,604.05 $ 14,573.61 $ 16,937.28 6/30/2001 $ 14,016.97 $ 13,977.55 $ 16,459.65 7/31/2001 $ 13,680.56 $ 13,723.16 $ 16,031.70 8/31/2001 $ 13,361.81 $ 13,375.96 $ 15,709.46 9/30/2001 $ 12,236.74 $ 12,020.98 $ 13,997.13 10/31/2001 $ 12,606.29 $ 12,328.71 $ 14,376.45 11/30/2001 $ 13,126.93 $ 12,783.64 $ 14,912.69 12/31/2001 $ 13,411.79 $ 12,859.07 $ 15,178.14 1/31/2002 $ 12,824.35 $ 12,176.25 $ 14,564.94 2/28/2002 $ 12,959.01 $ 12,261.49 $ 14,768.85 3/31/2002 $ 13,680.82 $ 12,924.83 $ 15,550.12 4/30/2002 $ 13,948.97 $ 13,010.14 $ 15,658.97 5/31/2002 $ 14,116.35 $ 13,175.36 $ 15,882.90 6/30/2002 $ 13,714.04 $ 12,650.98 $ 15,255.52 7/31/2002 $ 12,269.95 $ 11,402.33 $ 13,733.02 8/31/2002 $ 12,370.56 $ 11,376.11 $ 13,744.01 9/30/2002 $ 10,893.52 $ 10,154.31 $ 12,263.78 10/31/2002 $ 11,548.22 $ 10,699.60 $ 12,900.27 11/30/2002 $ 12,118.70 $ 11,185.36 $ 13,510.45 12/31/2002 $ 11,735.75 $ 10,809.53 $ 13,078.12 1/31/2003 $ 11,053.90 $ 10,358.78 $ 12,599.46 2/28/2003 $ 10,763.00 $ 10,122.00 $ 12,227.00 3/31/2003 $ 10,576.99 $9,923.18 $ 11,926.96 4/30/2003 $ 11,771.13 $ 10,895.65 $ 13,107.73 5/31/2003 $ 12,572.75 $ 11,555.93 $ 13,949.25 6/30/2003 $ 12,794.03 $ 11,835.58 $ 14,278.45 7/31/2003 $ 13,033.28 $ 12,122.00 $ 14,678.25 8/31/2003 $ 13,271.00 $ 12,414.00 $ 15,102.00
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 returned 7.97% during the year ended August 31, 2003. This compares to gains of 12.07% and 5.46% in the S&P 500 Index and Lehman Gov't/Credit Index, respectively. Q: WHY DID THE PORTFOLIO PERFORM THIS WAY? A: On an absolute basis, both the equity and fixed income portions of the Portfolio posted positive results for the trailing one-year time period. On a relative basis, the large cap equity component of the Portfolio outperformed the benchmark, but this positive contribution was offset to some extent by the underperformance of the fixed income component, again relative to the benchmark. Q: HOW WAS THE PORTFOLIO MANAGED? A: Strong stock selection within the utilities, semiconductors and pharmaceuticals sectors contributed the most to performance over the year. In contrast, positions in the health services & systems, retail and software & services sectors were the primary detractors. On a stock-specific level, overweight positions in Countrywide Financial, Guidant Corp., and PG&E Corp. aided performance, while overweight positions in Home Depot and Freddie Mac detracted from it. At the end of August 2003, the Fund's Top 10 holdings on an absolute basis were General Electric Co., Citigroup, Microsoft Corp., Pfizer, Wal-Mart Stores, The Coca-Cola Co., Procter & Gamble Co., Viacom, Cisco Systems and Ambac Financial Group. In the fixed-income portion of the Portfolio, security selection contributed to performance, while our cross-sector and durations decisions detracted from it. At the sector level, performance was enhanced by our underweight positions in Treasuries and Agencies, which underperformed as interest rates rose. In addition, we have held a position in investment-grade corporate bonds although we were underweight vs. the benchmark. Corporate bonds have made a strong recovery year-to-date as spreads tightened on light supply, lower volatility and improvements in the equity markets and in the general business environment, throughout the year. Our prepayment-sensitive public mortgage allocation detracted from performance, with most of the underperformance concentrated in the month of July when an unprecedented backup in interest rates compelled prepayments to slow, mortgage durations to extend and spreads to widen. For our part, we continued 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 seek 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 $15,306 from inception on 3/1/95 through 8/31/03.* INVESTMENT RESULTS Average Annual Returns as of 8/31/03 1 year 7.97% 3 year -5.87% 5 year 0.40% Since Inception (3/1/95) 5.13%
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ASSET ALLOCATION PORTFOLIO S&P 500 INDEX LEHMAN GOV'T/CREDIT INDEX LIPPER BALANCED FUNDS INDEX 3/1/1995 $ 10,000 $ 10,000 $ 10,000 $ 10,000 3/31/1995 $ 10,160 $ 10,295 $ 10,067 $ 10,177 4/30/1995 $ 10,270 $ 10,599 $ 10,207 $ 10,368 5/31/1995 $ 10,570 $ 11,023 $ 10,635 $ 10,700 6/30/1995 $ 10,729 $ 11,278 $ 10,720 $ 10,890 7/31/1995 $ 10,979 $ 11,653 $ 10,678 $ 11,119 8/31/1995 $ 11,040 $ 11,682 $ 10,815 $ 11,206 9/30/1995 $ 11,200 $ 12,175 $ 10,925 $ 11,474 10/31/1995 $ 11,120 $ 12,131 $ 11,085 $ 11,445 11/30/1995 $ 11,440 $ 12,664 $ 11,268 $ 11,801 12/31/1995 $ 11,595 $ 12,908 $ 11,434 $ 11,986 1/31/1996 $ 11,880 $ 13,347 $ 11,505 $ 12,203 2/29/1996 $ 11,935 $ 13,471 $ 11,261 $ 12,209 3/31/1996 $ 12,045 $ 13,600 $ 11,166 $ 12,256 4/30/1996 $ 12,132 $ 13,800 $ 11,089 $ 12,337 5/31/1996 $ 12,198 $ 14,156 $ 11,071 $ 12,463 6/30/1996 $ 12,231 $ 14,210 $ 11,219 $ 12,504 7/31/1996 $ 12,000 $ 13,582 $ 11,245 $ 12,182 8/31/1996 $ 12,241 $ 13,869 $ 11,218 $ 12,375 9/30/1996 $ 12,625 $ 14,649 $ 11,417 $ 12,834 10/31/1996 $ 12,834 $ 15,054 $ 11,683 $ 13,106 11/30/1996 $ 13,361 $ 16,192 $ 11,898 $ 13,717 12/31/1996 $ 13,218 $ 15,871 $ 11,766 $ 13,552 1/31/1997 $ 13,595 $ 16,863 $ 11,780 $ 13,971 2/28/1997 $ 13,555 $ 16,995 $ 11,805 $ 14,023 3/31/1997 $ 13,192 $ 16,296 $ 11,665 $ 13,615 4/30/1997 $ 13,594 $ 17,269 $ 11,835 $ 14,024 5/31/1997 $ 14,100 $ 18,321 $ 11,945 $ 14,599 6/30/1997 $ 14,464 $ 19,142 $ 12,088 $ 15,083 7/31/1997 $ 15,320 $ 20,665 $ 12,458 $ 15,942 8/31/1997 $ 15,009 $ 19,508 $ 12,319 $ 15,437 9/30/1997 $ 15,464 $ 20,577 $ 12,512 $ 16,053 10/31/1997 $ 15,360 $ 19,890 $ 12,712 $ 15,761 11/30/1997 $ 15,646 $ 20,811 $ 12,780 $ 16,051 12/31/1997 $ 15,823 $ 21,169 $ 12,914 $ 16,304 1/31/1998 $ 15,725 $ 21,404 $ 13,096 $ 16,420 2/28/1998 $ 16,360 $ 22,947 $ 13,070 $ 17,072 3/31/1998 $ 16,812 $ 24,122 $ 13,110 $ 17,594 4/30/1998 $ 16,770 $ 24,365 $ 13,176 $ 17,717 5/31/1998 $ 16,642 $ 23,946 $ 13,317 $ 17,539 6/30/1998 $ 16,882 $ 24,918 $ 13,453 $ 17,861 7/31/1998 $ 16,515 $ 24,654 $ 13,463 $ 17,652 8/31/1998 $ 15,006 $ 21,089 $ 13,726 $ 16,131 9/30/1998 $ 15,570 $ 22,441 $ 14,119 $ 16,827 10/31/1998 $ 16,262 $ 24,266 $ 14,018 $ 17,457 11/30/1998 $ 16,684 $ 25,736 $ 14,102 $ 18,096 12/31/1998 $ 17,290 $ 27,218 $ 14,136 $ 18,763 1/31/1999 $ 17,368 $ 28,356 $ 14,237 $ 19,064 2/28/1999 $ 16,647 $ 27,474 $ 13,898 $ 18,606 3/31/1999 $ 16,913 $ 28,573 $ 13,967 $ 19,066 4/30/1999 $ 17,556 $ 29,679 $ 14,002 $ 19,691 5/31/1999 $ 17,259 $ 28,979 $ 13,858 $ 19,388 6/30/1999 $ 17,605 $ 30,587 $ 13,815 $ 19,923 7/31/1999 $ 17,119 $ 29,633 $ 13,776 $ 19,550 8/31/1999 $ 16,790 $ 29,484 $ 13,765 $ 19,345 9/30/1999 $ 16,587 $ 28,677 $ 13,889 $ 19,097 10/31/1999 $ 16,837 $ 30,492 $ 13,925 $ 19,651 11/30/1999 $ 16,758 $ 31,111 $ 13,917 $ 19,864 12/31/1999 $ 17,378 $ 32,943 $ 13,832 $ 20,451 1/31/2000 $ 16,940 $ 31,289 $ 13,828 $ 19,938 2/29/2000 $ 16,940 $ 30,698 $ 14,001 $ 19,890 3/31/2000 $ 17,996 $ 33,700 $ 14,202 $ 21,062 4/30/2000 $ 17,607 $ 32,686 $ 14,133 $ 20,676 5/31/2000 $ 17,088 $ 32,016 $ 14,120 $ 20,482 6/30/2000 $ 17,704 $ 32,804 $ 14,408 $ 20,810 7/31/2000 $ 17,720 $ 32,292 $ 14,561 $ 20,754 8/31/2000 $ 18,353 $ 34,297 $ 14,766 $ 21,679 9/30/2000 $ 17,656 $ 32,486 $ 14,822 $ 21,224 10/31/2000 $ 17,543 $ 32,350 $ 14,916 $ 21,205 11/30/2000 $ 16,715 $ 29,801 $ 15,171 $ 20,435 12/31/2000 $ 16,763 $ 29,947 $ 15,470 $ 20,944 1/31/2001 $ 17,113 $ 31,010 $ 15,729 $ 21,388 2/28/2001 $ 16,213 $ 28,182 $ 15,891 $ 20,558 3/31/2001 $ 15,597 $ 26,395 $ 15,965 $ 19,894 4/30/2001 $ 16,280 $ 28,446 $ 15,845 $ 20,730 5/31/2001 $ 16,280 $ 28,636 $ 15,937 $ 20,914 6/30/2001 $ 16,030 $ 27,941 $ 16,013 $ 20,594 7/31/2001 $ 16,113 $ 27,667 $ 16,412 $ 20,580 8/31/2001 $ 15,563 $ 25,935 $ 16,622 $ 19,993 9/30/2001 $ 15,047 $ 23,842 $ 16,775 $ 19,032 10/31/2001 $ 15,430 $ 24,297 $ 17,201 $ 19,349 11/30/2001 $ 15,964 $ 26,161 $ 16,919 $ 20,119 12/31/2001 $ 16,014 $ 26,391 $ 16,785 $ 20,264 1/31/2002 $ 15,927 $ 26,006 $ 16,908 $ 20,086 2/28/2002 $ 15,671 $ 25,504 $ 17,051 $ 19,949 3/31/2002 $ 16,014 $ 26,463 $ 16,705 $ 20,386 4/30/2002 $ 15,431 $ 24,859 $ 17,029 $ 19,897 5/31/2002 $ 15,363 $ 24,675 $ 17,186 $ 19,887 6/30/2002 $ 14,678 $ 22,918 $ 17,332 $ 19,038 7/31/2002 $ 14,044 $ 21,131 $ 17,540 $ 18,061 8/31/2002 $ 14,182 $ 21,270 $ 17,933 $ 18,247 9/30/2002 $ 13,410 $ 18,958 $ 18,319 $ 17,158 10/31/2002 $ 13,908 $ 20,626 $ 18,143 $ 17,873 11/30/2002 $ 14,439 $ 21,841 $ 18,154 $ 18,599 12/31/2002 $ 14,035 $ 20,559 $ 18,635 $ 18,097 1/31/2003 $ 13,807 $ 20,021 $ 18,635 $ 18,070 2/28/2003 $ 13,766 $ 19,720 $ 18,966 $ 17,934 3/31/2003 $ 13,843 $ 19,912 $ 18,942 $ 18,008 4/30/2003 $ 14,578 $ 21,552 $ 19,144 $ 18,982 5/31/2003 $ 15,208 $ 22,688 $ 19,688 $ 19,821 6/30/2003 $ 15,278 $ 22,978 $ 19,609 $ 19,972 7/31/2003 $ 15,085 $ 23,383 $ 18,788 $ 20,018 8/31/2003 $ 15,306 $ 23,839 $ 18,912 $ 20,356
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 1.97% for the one-year period ending August 31, 2003. This compares to the 2.98% return of its benchmark index, the Lehman U.S. Government Bond Index. Q: WHY DID THE PORTFOLIO PERFORM THIS WAY? A: Our residential mortgage positioning was positive through the spring but hindered returns during July. Although our Treasury underweight helped performance, our Agency underweight was negative. Q: HOW WAS THE PORTFOLIO MANAGED? A: During the final months of 2002, the fixed-income markets were highly volatile as investors continued to react to disappointing economic data and increased geopolitical risk. To support the economy, the Federal Reserve Board lowered the Federal Funds Rate in November by one-half percent to 1.25%. Early in 2003, the war in Iraq, SARS and persistent labor market and economic weakness dominated the market's attention. By spring, the nation saw improving corporate earnings, the passage of a tax package and a brighter economic outlook--supported by an extraordinary mortgage-refinancing wave driven by low interest rates. However, persistent job losses and excess capacity increased deflation worries. Interest rates fell to levels not seen for generations. In June, the Fed cut the Federal Funds Rate to 1%; but the optimistic tone of Alan Greenspan's subsequent Congressional testimony, combined with an uptick in economic data, sparked an enormous bond market sell-off in mid-June and July. Rising interest rates shocked the mortgage market in July. Interest rates continued to move higher in August on increasing demand growth and improving economic fundamentals. Because of the improving economy, credit spreads narrowed substantially from the fall of 2002. Because of their attractive yields, we overweighted prepayment-sensitive mortgage-backed securities throughout the period. We actively managed coupon selection, focusing on 30-year current coupon mortgages (i.e., Fannie Mae, 5% and 5.5%). We balanced our mortgage overweight primarily with an underweight to Agency debentures, as well as a modest underweight to Treasuries. 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 $17,241 from inception on 3/1/95 through 8/31/03.* INVESTMENT RESULTS Average Annual Returns as of 8/31/03 1 year 1.97% 3 year 7.08% 5 year 5.52% Since Inception (3/1/95) 6.62%
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U.S. GOVERNMENT INCOME PORTFOLIO LEHMAN U.S. GOV'T BOND INDEX LIPPER GENERAL U.S. GOV'T FUNDS INDEX 3/1/1995 $ 10,000 $ 10,000 $ 10,000 3/31/1995 $ 10,050 $ 10,063 $ 10,046 4/30/1995 $ 10,170 $ 10,195 $ 10,170 5/31/1995 $ 10,550 $ 10,606 $ 10,539 6/30/1995 $ 10,620 $ 10,687 $ 10,602 7/31/1995 $ 10,570 $ 10,648 $ 10,565 8/31/1995 $ 10,690 $ 10,772 $ 10,688 9/30/1995 $ 10,800 $ 10,876 $ 10,789 10/31/1995 $ 10,950 $ 11,041 $ 10,931 11/30/1995 $ 11,100 $ 11,213 $ 11,085 12/31/1995 $ 11,236 $ 11,373 $ 11,240 1/31/1996 $ 11,293 $ 11,442 $ 11,297 2/29/1996 $ 11,029 $ 11,209 $ 11,065 3/31/1996 $ 10,925 $ 11,116 $ 10,972 4/30/1996 $ 10,856 $ 11,044 $ 10,897 5/31/1996 $ 10,822 $ 11,026 $ 10,856 6/30/1996 $ 10,971 $ 11,168 $ 10,982 7/31/1996 $ 10,994 $ 11,196 $ 11,003 8/31/1996 $ 10,971 $ 11,171 $ 10,975 9/30/1996 $ 11,132 $ 11,357 $ 11,159 10/31/1996 $ 11,350 $ 11,606 $ 11,401 11/30/1996 $ 11,523 $ 11,808 $ 11,602 12/31/1996 $ 11,431 $ 11,688 $ 11,482 1/31/1997 $ 11,456 $ 11,701 $ 11,506 2/28/1997 $ 11,431 $ 11,717 $ 11,530 3/31/1997 $ 11,305 $ 11,593 $ 11,394 4/30/1997 $ 11,469 $ 11,760 $ 11,563 5/31/1997 $ 11,557 $ 11,861 $ 11,659 6/30/1997 $ 11,683 $ 11,994 $ 11,797 7/31/1997 $ 11,999 $ 12,334 $ 12,122 8/31/1997 $ 11,859 $ 12,212 $ 11,996 9/30/1997 $ 12,049 $ 12,396 $ 12,180 10/31/1997 $ 12,238 $ 12,610 $ 12,359 11/30/1997 $ 12,289 $ 12,674 $ 12,403 12/31/1997 $ 12,397 $ 12,807 $ 12,528 1/31/1998 $ 12,527 $ 12,999 $ 12,688 2/28/1998 $ 12,527 $ 12,964 $ 12,663 3/31/1998 $ 12,566 $ 13,001 $ 12,695 4/30/1998 $ 12,617 $ 13,059 $ 12,745 5/31/1998 $ 12,734 $ 13,194 $ 12,863 6/30/1998 $ 12,877 $ 13,344 $ 12,972 7/31/1998 $ 12,890 $ 13,364 $ 12,992 8/31/1998 $ 13,176 $ 13,712 $ 13,247 9/30/1998 $ 13,475 $ 14,082 $ 13,546 10/31/1998 $ 13,397 $ 14,034 $ 13,446 11/30/1998 $ 13,436 $ 14,038 $ 13,475 12/31/1998 $ 13,461 $ 14,069 $ 13,512 1/31/1999 $ 13,517 $ 14,151 $ 13,589 2/28/1999 $ 13,188 $ 13,814 $ 13,295 3/31/1999 $ 13,244 $ 13,868 $ 13,363 4/30/1999 $ 13,271 $ 13,900 $ 13,398 5/31/1999 $ 13,120 $ 13,777 $ 13,250 6/30/1999 $ 13,065 $ 13,750 $ 13,181 7/31/1999 $ 13,038 $ 13,729 $ 13,106 8/31/1999 $ 13,023 $ 13,729 $ 13,071 9/30/1999 $ 13,133 $ 13,840 $ 13,232 10/31/1999 $ 13,173 $ 13,862 $ 13,253 11/30/1999 $ 13,133 $ 13,843 $ 13,241 12/31/1999 $ 13,088 $ 13,753 $ 13,151 1/31/2000 $ 13,102 $ 13,772 $ 13,110 2/29/2000 $ 13,280 $ 13,968 $ 13,277 3/31/2000 $ 13,518 $ 14,214 $ 13,476 4/30/2000 $ 13,488 $ 14,174 $ 13,426 5/31/2000 $ 13,503 $ 14,182 $ 13,411 6/30/2000 $ 13,726 $ 14,435 $ 13,681 7/31/2000 $ 13,845 $ 14,575 $ 13,786 8/31/2000 $ 14,039 $ 14,791 $ 13,998 9/30/2000 $ 14,069 $ 14,832 $ 14,050 10/31/2000 $ 14,188 $ 14,974 $ 14,163 11/30/2000 $ 14,486 $ 15,269 $ 14,436 12/31/2000 $ 14,754 $ 15,573 $ 14,712 1/31/2001 $ 14,911 $ 15,731 $ 14,875 2/28/2001 $ 15,067 $ 15,910 $ 15,021 3/31/2001 $ 15,082 $ 15,966 $ 15,058 4/30/2001 $ 14,895 $ 15,803 $ 14,930 5/31/2001 $ 14,942 $ 15,855 $ 15,000 6/30/2001 $ 15,004 $ 15,928 $ 15,050 7/31/2001 $ 15,363 $ 16,310 $ 15,401 8/31/2001 $ 15,520 $ 16,512 $ 15,573 9/30/2001 $ 15,816 $ 16,800 $ 15,793 10/31/2001 $ 16,253 $ 17,233 $ 16,173 11/30/2001 $ 15,801 $ 16,847 $ 15,845 12/31/2001 $ 15,625 $ 16,700 $ 15,693 1/31/2002 $ 15,760 $ 16,809 $ 15,833 2/28/2002 $ 15,946 $ 16,964 $ 16,000 3/31/2002 $ 15,592 $ 16,596 $ 15,669 4/30/2002 $ 15,946 $ 16,991 $ 16,015 5/31/2002 $ 16,046 $ 17,092 $ 16,115 6/30/2002 $ 16,231 $ 17,332 $ 16,279 7/31/2002 $ 16,550 $ 17,713 $ 16,569 8/31/2002 $ 16,905 $ 18,064 $ 16,857 9/30/2002 $ 17,292 $ 18,486 $ 17,140 10/31/2002 $ 17,139 $ 18,339 $ 17,029 11/30/2002 $ 17,004 $ 18,181 $ 16,930 12/31/2002 $ 17,380 $ 18,621 $ 17,259 1/31/2003 $ 17,343 $ 18,574 $ 17,236 2/28/2003 $ 17,616 $ 18,873 $ 17,462 3/31/2003 $ 17,540 $ 18,819 $ 17,399 4/30/2003 $ 17,612 $ 18,905 $ 17,483 5/31/2003 $ 18,077 $ 19,397 $ 17,783 6/30/2003 $ 17,970 $ 19,296 $ 17,698 7/31/2003 $ 17,111 $ 18,499 $ 18,353 8/31/2003 $ 17,241 $ 18,603 $ 18,456
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 0.70% for the year ended August 31, 2003. Q: HOW WAS THE PORTFOLIO MANAGED? A: During the final months of 2002, the fixed-income markets were highly volatile as investors continued to react to the falling equity market, contradictory economic data and increased geopolitical risk. In support of the economy, the Federal Reserve Board lowered the Federal Funds Rate by one-half percent in November. War fears, terrorism, SARS and economic weakness sent large numbers of investors into the relative safety of the bond market in early 2003. However, by the spring, investors turned their attention to deflation, better-than-expected corporate earnings, passage of a tax package and a brighter economic outlook. In June, the Fed cut the Federal Funds Rate to 1%. During July, interest rates in the market surged higher as investors focused on the prospects for economic recovery. Rates continued to increase in August because of improved economic fundamentals and the expectation of a Fed rate increase in 2004. The dominant event during the fourth quarter of 2002 was the Fed's 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 Portfolio 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. We continued to maintain a longer WAM during the spring in expectation of another Fed ease. We concentrated our purchases in four- to six-month maturities. However, as the time for Fed action drew near, the market priced in a more aggressive cut than was actually announced. Consequently, we saw little value in investing in extended maturities and let our WAM shorten. In July, we extended by purchasing six-month agency discount notes. As interest rates moved higher in August, we added one-year paper and additional six-month agency discount notes. 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 AUGUST 31, 2003
SHARES ISSUER VALUE ------ ------ ----- LONG-TERM INVESTMENTS--98.1% COMMON STOCKS--98.1% AEROSPACE--2.8% 700 GENERAL DYNAMICS CORP. $ 60,277 1,500 UNITED TECHNOLOGIES CORP. 120,375 ------------- 180,652 ------------- APPAREL--1.5% 600 NIKE, INC., CLASS B 34,188 1,600 VF CORP. 64,160 ------------- 98,348 ------------- AUTOMOTIVE--0.4% 900 GENUINE PARTS CO. 28,818 ------------- BANKING--11.6% 1,500 BANK OF AMERICA CORP. 118,875 2,200 BB&T CORP. 80,344 1,900 NORTH FORK BANCORPORATION, INC. 64,163 800 PNC FINANCIAL SERVICES GROUP, INC. 38,080 1,800 SUNTRUST BANKS, INC. 110,034 1,924 THE BANK OF NEW YORK CO., INC. 56,604 4,900 U.S. BANCORP 117,110 2,100 WACHOVIA CORP. 88,515 1,525 WELLS FARGO & CO. 76,464 ------------- 750,189 ------------- BROADCASTING/CABLE--0.6% 1,900 CABLEVISION SYSTEMS CORP., CLASS A* 38,285 ------------- BUSINESS SERVICES--1.5% 1,000 AUTOMATIC DATA PROCESSING, INC. 39,910 3,000 IMS HEALTH, INC. 58,410 ------------- 98,320 ------------- CHEMICALS--0.6% 700 PPG INDUSTRIES, INC. 38,437 ------------- COMPUTER SOFTWARE--1.1% 2,700 COMPUTER ASSOCIATES INTERNATIONAL, INC. 69,201 ------------- COMPUTERS/COMPUTER HARDWARE--2.6% 2,600 HEWLETT-PACKARD CO. 51,792 800 INTERNATIONAL BUSINESS MACHINES CORP. 65,608 800 LEXMARK INTERNATIONAL, INC.* 53,632 ------------- 171,032 ------------- CONSTRUCTION MATERIALS--1.0% 1,600 VULCAN MATERIALS CO. 66,256 ------------- CONSUMER PRODUCTS--2.0% 3,125 ALTRIA GROUP, INC. 128,813 ------------- DIVERSIFIED--0.8% 2,450 TYCO INTERNATIONAL LTD (BERMUDA) 50,421 ------------- ENTERTAINMENT/LEISURE--0.9% 1,600 CARNIVAL CORP. 55,344 ------------- ENVIRONMENTAL SERVICES--1.1% 2,700 WASTE MANAGEMENT, INC. $ 71,847 ------------- FINANCIAL SERVICES--14.0% 2,750 AMERICAN EXPRESS CO. 123,888 7,191 CITIGROUP, INC. 311,729 1,500 FREDDIE MAC 79,725 1,500 GOLDEN WEST FINANCIAL CORP. 129,405 3,200 JANUS CAPITAL GROUP, INC. 55,264 550 MERRILL LYNCH & CO., INC. 29,579 1,600 PRUDENTIAL FINANCIAL, INC. 58,256 1,500 T. ROWE PRICE GROUP, INC. 63,750 1,300 WASHINGTON MUTUAL, INC. 50,674 ------------- 902,270 ------------- FOOD/BEVERAGE PRODUCTS--2.3% 404 BROWN-FORMAN CORP., CLASS B 31,932 2,200 KRAFT FOODS, INC., CLASS A 65,340 1,100 PEPSICO, INC. 48,994 ------------- 146,266 ------------- HEALTH CARE/HEALTH CARE SERVICES--0.7% 600 WELLPOINT HEALTH NETWORKS, INC.* 46,800 ------------- INSURANCE--8.5% 3,025 AMERICAN INTERNATIONAL GROUP, INC. 180,199 1,300 CHUBB CORP. 88,322 550 MARSH & MCLENNAN COMPANIES, INC. 27,500 1,600 MGIC INVESTMENT CORP. 90,192 1,000 PRINCIPAL FINANCIAL GROUP, INC. 31,460 1,700 SAFECO CORP. 61,302 4,323 TRAVELERS PROPERTY CASUALTY CORP., CLASS A 66,531 ------------- 545,506 ------------- MANUFACTURING--1.4% 1,000 COOPER INDUSTRIES LTD, CLASS A 50,890 1,325 HONEYWELL INTERNATIONAL, INC. 38,412 ------------- 89,302 ------------- METALS/MINING--0.6% 1,300 ALCOA, INC. 37,128 ------------- MULTI-MEDIA--9.0% 7,125 AOL TIME WARNER, INC.* 116,564 2,493 COMCAST CORP., CLASS A* 74,167 800 DOW JONES & CO., INC. 33,976 600 E.W. SCRIPPS CO., CLASS A 51,954 900 GANNETT CO., INC. 70,578 440 KNIGHT RIDDER, INC. 29,858 8,816 LIBERTY MEDIA CORP., CLASS A* 106,674 1,575 THE WALT DISNEY CO. 32,288 1,434 VIACOM, INC., CLASS B 64,530 ------------- 580,589 ------------- OIL & GAS--10.8% 1,300 BURLINGTON RESOURCES, INC. 62,946 1,950 CHEVRONTEXACO CORP. 142,097
SEE NOTES TO FINANCIAL STATEMENTS. 16
SHARES ISSUER VALUE ------ ------ ----- OIL & GAS (CONT'D) 2,341 CONOCOPHILLIPS $ 130,721 1,400 DEVON ENERGY CORP. 72,450 7,616 EXXON MOBIL CORP. 287,123 ------------- 695,337 ------------- PHARMACEUTICALS--2.4% 800 AMERISOURCEBERGEN CORP. 46,568 1,700 PFIZER, INC. 50,864 1,350 WYETH 57,848 ------------- 155,280 ------------- PIPELINES--1.3% 1,600 KINDER MORGAN, INC. 85,200 ------------- REAL ESTATE--0.7% 1,900 BROOKFIELD PROPERTIES CORP. (CANADA) 44,308 ------------- REAL ESTATE INVESTMENT TRUST--0.7% 1,300 PUBLIC STORAGE, INC. 47,957 ------------- RESTAURANTS/FOOD SERVICES--0.9% 1,500 OUTBACK STEAKHOUSE, INC. 57,975 ------------- RETAILING--4.0% 800 AUTOZONE, INC.* 73,440 3,900 CIRCUIT CITY STORES, INC. 40,677 2,400 HOME DEPOT, INC. 77,184 900 KROGER CO.* 17,289 2,400 THE TJX COMPANIES, INC. 51,984 ------------- 260,574 ------------- TELECOMMUNICATIONS--7.0% 2,300 ALLTEL CORP. 105,340 1,225 BELLSOUTH CORP. 30,870 4,700 GENERAL MOTORS - HUGHES ELECTRONICS CORP., CLASS H* 70,218 5,725 SBC COMMUNICATIONS, INC. 128,755 3,200 VERIZON COMMUNICATIONS, INC. 113,024 ------------- 448,207 ------------- TELECOMMUNICATIONS EQUIPMENT--0.6% 1,000 QUALCOMM, INC. 41,280 ------------- TOYS & GAMES--1.4% 4,600 MATTEL, INC. 88,872 ------------- UTILITIES--3.3% 1,300 CONSOLIDATED EDISON, INC. 51,389 1,225 DOMINION RESOURCES, INC. 74,211 1,600 ENERGY EAST CORP. 34,544 1,900 FIRSTENERGY CORP. 55,594 ------------- 215,738 ------------- TOTAL COMMON STOCKS (COST $5,938,422) 6,334,552 ------------- SHORT-TERM INVESTMENT--1.9% MONEY MARKET FUND--1.9% 120,208 JPMORGAN PRIME MONEY MARKET FUND(a) (COST $120,208) $ 120,208 ------------- TOTAL INVESTMENTS--100.0% (COST $6,058,630) $ 6,454,760 =============
SEE NOTES TO FINANCIAL STATEMENTS. 17 CAPITAL GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2003
SHARES ISSUER VALUE ------ ------ ----- LONG-TERM INVESTMENTS--98.7% COMMON STOCKS--98.7% AIRLINES--0.8% 2,520 SKYWEST, INC. $ 44,050 ------------- AUTOMOTIVE--1.3% 870 POLARIS INDUSTRIES, INC. 67,216 ------------- BANKING--2.4% 1,000 BOK FINANCIAL CORP.* 39,620 560 M&T BANK CORP. 47,174 800 TCF FINANCIAL CORP. 36,792 ------------- 123,586 ------------- BIOTECHNOLOGY--4.4% 770 BIOGEN, INC.* 30,384 1,210 GILEAD SCIENCES, INC.* 80,707 1,170 ICOS CORP.* 45,560 1,800 MEDIMMUNE, INC.* 62,766 1,000 MYRIAD GENETICS, INC.* 12,520 ------------- 231,937 ------------- BROADCASTING/CABLE--1.7% 4,260 MEDIACOM COMMUNICATIONS CORP.* 29,138 1,590 UNIVISION COMMUNICATIONS, INC., CLASS A* 59,610 ------------- 88,748 ------------- BUSINESS SERVICES--6.4% 896 CHOICEPOINT, INC.* 35,168 760 CINTAS CORP. 30,347 1,610 EQUIFAX, INC. 36,933 1,070 FAIR ISAAC CORP. 62,702 1,310 HEWITT ASSOCIATES, INC., CLASS A* 32,685 1,070 IRON MOUNTAIN, INC.* 39,590 1,380 MOODY'S CORP. 71,567 940 SUNGARD DATA SYSTEMS, INC.* 26,508 ------------- 335,500 ------------- COMPUTER NETWORKS--2.8% 3,830 JUNIPER NETWORKS, INC.* 65,953 3,510 NETWORK APPLIANCE, INC.* 78,659 ------------- 144,612 ------------- COMPUTER SOFTWARE--8.5% 900 ADOBE SYSTEMS, INC. 34,947 1,200 AFFILIATED COMPUTER SERVICES, INC., CLASS A* 59,532 900 COGNOS, INC. (CANADA)* 27,585 1,600 COMPUTER ASSOCIATES INTERNATIONAL, INC. 41,008 680 ELECTRONIC ARTS, INC.* 61,029 630 INTUIT, INC.* 28,552 1,600 MACROMEDIA, INC.* 38,144 920 MERCURY INTERACTIVE CORP.* 40,379 1,170 NATIONAL INSTRUMENTS CORP. 46,344 900 TAKE-TWO INTERACTIVE SOFTWARE, INC.* 26,793 1,070 VERITAS SOFTWARE CORP.* 36,894 ------------- 441,207 ------------- COMPUTERS/COMPUTER HARDWARE--4.8% 1,930 APPLE COMPUTER, INC.* $ 43,676 1,020 EMULEX CORP.* 24,694 500 LEXMARK INTERNATIONAL, INC.* 33,520 3,900 MAXTOR CORP.* 44,577 1,170 TECH DATA CORP.* 39,020 1,170 ZEBRA TECHNOLOGIES CORP., CLASS A* 62,735 ------------- 248,222 ------------- CONSTRUCTION--1.3% 97 LENNAR CORP., B SHARES 6,281 940 LENNAR CORP., CLASS A 63,215 ------------- 69,496 ------------- CONSUMER SERVICES--1.4% 500 RENT-A-CENTER, INC.* 40,185 780 WEIGHT WATCHERS INTERNATIONAL, INC.* 33,813 ------------- 73,998 ------------- ELECTRONICS/ELECTRICAL EQUIPMENT--4.2% 1,160 AMPHENOL CORP., CLASS A* 63,255 1,000 FISHER SCIENTIFIC INTERNATIONAL* 39,220 1,650 JABIL CIRCUIT, INC.* 46,448 4,270 VISHAY INTERTECHNOLOGY, INC.* 70,326 ------------- 219,249 ------------- ENTERTAINMENT/LEISURE--0.9% 1,820 INTERNATIONAL GAME TECHNOLOGY 47,029 ------------- FINANCIAL SERVICES--1.7% 2,100 T. ROWE PRICE GROUP, INC. 89,250 ------------- FOOD/BEVERAGE PRODUCTS--0.6% 3,630 DEL MONTE FOODS CO.* 32,597 ------------- HEALTH CARE/HEALTH CARE SERVICES--13.8% 970 AETNA, INC. 55,290 990 ANTHEM, INC.* 72,467 1,860 CAREMARK RX, INC.* 46,742 1,070 DENTSPLY INTERNATIONAL, INC. 46,813 2,370 HEALTH MANAGEMENT ASSOCIATES, INC., CLASS A 52,804 1,260 LABORATORY CORP. OF AMERICA HOLDINGS* 38,115 950 MANOR CARE, INC. 26,220 2,840 OMNICARE, INC. 96,275 1,000 RENAL CARE GROUP, INC.* 36,310 1,310 STERIS CORP.* 30,680 690 STRYKER CORP. 52,302 850 VARIAN MEDICAL SYSTEMS, INC.* 47,473 610 WELLPOINT HEALTH NETWORKS, INC.* 47,580 1,400 ZIMMER HOLDINGS, INC.* 72,436 ------------- 721,507 ------------- HOTELS/OTHER LODGING--1.0% 2,000 FAIRMONT HOTELS & RESORTS, INC. (CANADA) 53,100 ------------- INSURANCE--0.9% 1,550 HCC INSURANCE HOLDINGS, INC. 45,384 -------------
SEE NOTES TO FINANCIAL STATEMENTS. 18
SHARES ISSUER VALUE ------ ------ ----- INTERNET SERVICES/SOFTWARE--2.2% 770 CHECKFREE CORP.* $ 17,695 1,357 INTERACTIVECORP* 50,222 800 SYMANTEC CORP.* 45,944 ------------- 113,861 ------------- MANUFACTURING--0.7% 1,000 HARSCO CORP. 38,990 ------------- MULTI-MEDIA--1.8% 2,700 CITADEL BROADCASTING CORP.* 59,616 390 E.W. SCRIPPS CO., CLASS A 33,770 ------------- 93,386 ------------- OIL & GAS--4.3% 1,540 FMC TECHNOLOGIES, INC.* 36,452 830 NABORS INDUSTRIES LTD (BARBADOS)* 33,325 920 PATTERSON-UTI ENERGY, INC.* 27,453 1,710 PIONEER NATURAL RESOURCES CO.* 43,365 1,900 PRIDE INTERNATIONAL, INC.* 32,471 1,070 TALISMAN ENERGY, INC. (CANADA) 50,771 ------------- 223,837 ------------- PHARMACEUTICALS--5.4% 390 AMERISOURCEBERGEN CORP. 22,702 1,700 ANDRX CORP.* 30,600 1,640 MEDICIS PHARMACEUTICAL CORP., CLASS A 100,171 1,600 MILLENNIUM PHARMACEUTICALS, INC.* 22,240 3,300 NBTY, INC.* 87,285 1,700 VERTEX PHARMACEUTICALS, INC.* 21,420 ------------- 284,418 ------------- RESTAURANTS/FOOD SERVICES--2.6% 1,960 CBRL GROUP, INC. 68,364 1,070 OUTBACK STEAKHOUSE, INC. 41,356 1,100 RUBY TUESDAY, INC. 25,047 ------------- 134,767 ------------- RETAILING--11.5% 1,000 ABERCROMBIE & FITCH CO., CLASS A* 30,440 400 ADVANCED AUTO PARTS, INC.* 29,860 1,010 BED BATH & BEYOND, INC.* 43,460 1,500 BIG LOTS, INC.* 27,450 1,486 CARMAX, INC.* 57,285 1,270 CDW CORP.* 65,545 2,500 DOLLAR GENERAL CORP. 57,325 1,460 FASTENAL CO. 59,028 2,030 PETSMART, INC.* 48,558 680 ROSS STORES, INC. 34,258 3,620 STAPLES, INC.* 89,161 1,070 WHOLE FOODS MARKET, INC.* 58,133 ------------- 600,503 ------------- SEMI-CONDUCTORS--8.0% 2,980 ALTERA CORP.* 66,871 1,490 INTERSIL CORP., CLASS A* 43,404 1,620 KLA-TENCOR CORP.* 96,162 1,000 MAXIM INTEGRATED PRODUCTS, INC. $ 44,910 4,300 MEMC ELECTRONICS MATERIALS* 55,814 1,460 MICROCHIP TECHNOLOGY, INC. 40,895 1,710 NOVELLUS SYSTEMS, INC.* 68,332 ------------- 416,388 ------------- TELECOMMUNICATIONS--1.6% 2,200 NEXTEL COMMUNICATIONS, INC., CLASS A* 42,416 4,800 NEXTEL PARTNERS, INC., CLASS A* 39,504 ------------- 81,920 ------------- TELECOMMUNICATIONS EQUIPMENT--1.7% 3,200 CIENA CORP.* 20,800 3,600 CORNING, INC.* 29,700 5,900 JDS UNIPHASE CORP.* 20,296 8,500 LUCENT TECHNOLOGIES, INC.* 16,235 ------------- 87,031 ------------- TOTAL COMMON STOCKS (COST $4,368,782) 5,151,789 ------------- SHORT-TERM INVESTMENT--1.3% MONEY MARKET FUND--1.3% 66,996 JPMORGAN PRIME MONEY MARKET FUND(a) (COST $66,996) 66,996 ------------- TOTAL INVESTMENTS--100.0% (COST $4,435,778) $ 5,218,785 =============
SEE NOTES TO FINANCIAL STATEMENTS. 19 INTERNATIONAL EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2003
SHARES ISSUER VALUE ------ ------ ----- LONG-TERM INVESTMENTS--100.0% COMMON STOCKS--100.0% AUSTRALIA--2.3% 4,100 BHP BILLITON LTD $ 29,032 1,100 NATIONAL AUSTRALIA BANK LTD 22,156 3,188 NEWS CORP., LTD 27,263 3,345 WOODSIDE PETROLEUM LTD 28,930 ------------- 107,381 ------------- BELGIUM--1.7% 4,150 DEXIA 52,123 1,580 FORTIS 26,621 ------------- 78,744 ------------- BRAZIL--0.3% 400 COMPANHIA VALE DO RIO DOCE , ADR 14,980 ------------- FINLAND--2.2% 6,213 NOKIA OYJ 101,949 ------------- FRANCE--12.7% 1,591 AVENTIS SA 77,410 3,096 AXA 54,990 1,440 BNP PARIBAS 71,869 1,720 COMPAGNIE DE SAINT-GOBAIN 67,324 1,210 DASSAULT SYSTEMES SA 43,782 330 IMERYS SA 54,476 320 RENAULT SA 19,321 1,250 TOTAL SA 192,052 ------------- 581,224 ------------- GERMANY--7.6% 500 BASF AG 23,063 2,259 BAYERISCHE MOTOREN WERKE AG 89,416 1,127 DEUTSCHE BANK AG 65,246 2,706 DEUTSCHE POST AG 43,450 798 HEIDELBERGCEMENT AG* 29,401 900 SCHERING AG 36,267 993 SIEMENS AG 61,595 ------------- 348,438 ------------- IRELAND--0.6% 2,400 BANK OF IRELAND 28,507 ------------- ITALY--4.2% 10,533 ENI-ENTE NAZIONALE IDROCARBURI SPA 159,399 19,805 TELECOM ITALIA SPA* 31,322 ------------- 190,721 ------------- JAPAN--19.4% 450 ACOM CO., LTD 18,668 2,000 CANON, INC. 96,169 2,700 CHUGAI PHARMACEUTICAL CO., LTD 28,604 2,000 FUJI PHOTO FILM CO., LTD 59,998 400 HIROSE ELECTRIC CO., LTD 42,822 1,600 HONDA MOTOR CO., LTD 65,141 700 HOYA CORP. 53,578 2,000 KAO CORP. 37,713 3,000 MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD $ 38,262 900 MURATA MANUFACTURING CO., LTD 50,604 8,000 NIKKO CORDIAL CORP. 38,467 400 NINTENDO CO., LTD 33,290 8 NIPPON TELEGRAPH & TELEPHONE CORP. 35,245 2 NIPPON UNIPAC HOLDING 9,154 13 NTT DOCOMO, INC. 33,428 1,000 SECOM CO., LTD 34,285 700 SHIN-ETSU CHEMICAL CO., LTD 27,479 1,000 SONY CORP. 32,913 5,000 SUMITOMO CORP. 30,985 1,600 TAKEDA CHEMICAL INDUSTRIES LTD 57,873 520 TAKEFUJI CORP. 29,416 1,300 YAMANOUCHI PHARMACEUTICAL CO., LTD 34,096 ------------- 888,190 ------------- RUSSIA--0.6% 444 YUKOS, ADR 25,575 ------------- SOUTH KOREA--3.1% 800 KOOKMIN BANK 29,255 970 POSCO, ADR 29,100 340 SAMSUNG ELECTRONICS CO.,LTD, GDR 63,070 1,200 SK TELECOM CO., LTD , ADR 22,872 ------------- 144,297 ------------- SPAIN--2.3% 1,700 ALTADIS SA 40,198 1,407 BANCO POPULAR ESPANOL 63,444 ------------- 103,642 ------------- SWEDEN--1.5% 13,034 NORDEA AB 66,338 ------------- SWITZERLAND--7.6% 1,200 HOLCIM LTD 47,614 410 NESTLE SA 89,401 2,460 NOVARTIS AG 90,574 1,010 ROCHE HOLDING AG 77,442 332 ZURICH FINANCIAL SERVICES AG 42,724 ------------- 347,755 ------------- THE NETHERLANDS--6.1% 2,757 ABN AMRO HOLDING NV 48,363 222 HEINEKEN NV 8,499 3,212 ING GROEP NV 62,738 2,725 KONINKLIJKE PHILIPS ELECTRONICS NV 66,532 4,030 REED ELSEVIER NV 44,499 3,130 WOLTERS KLUWER NV 48,778 ------------- 279,409 ------------- UNITED KINGDOM--27.8% 2,349 ABBEY NATIONAL PLC 19,553 5,930 ALLIED DOMECQ PLC 35,616 4,534 AVIVA PLC 35,915 18,081 BAE SYSTEMS PLC 48,764
SEE NOTES TO FINANCIAL STATEMENTS. 20
SHARES ISSUER VALUE ------ ------ ----- UNITED KINGDOM (CONT'D) 11,362 BARCLAYS PLC $ 82,553 17,287 BG GROUP PLC 74,474 4 BP PLC 27 4,480 BRAMBLES INDUSTRIES PLC 13,197 9,500 CENTRICA PLC 26,672 5,440 COMPASS GROUP PLC 30,095 6,105 GKN PLC 25,288 6,346 GLAXOSMITHKLINE PLC 120,984 4,311 INTERCONTINENTAL HOTELS GROUP PLC* 33,297 7,000 KINGFISHER PLC 30,074 7,400 NATIONAL GRID TRANSCO PLC 45,263 3,770 RECKITT BENCKISER PLC 70,861 2,000 RIO TINTO PLC 43,942 2,300 ROYAL BANK OF SCOTLAND GROUP PLC 57,181 4,760 SCHRODERS PLC 46,766 2,900 STANDARD CHARTERED PLC 38,751 25,457 TESCO PLC 86,852 6,801 THE BRITISH LAND CO., PLC 53,362 1,562 UNILEVER PLC 12,694 80,164 VODAFONE GROUP PLC 146,561 8,530 WOLSELEY PLC 97,680 ------------- 1,276,422 ------------- TOTAL INVESTMENTS--100.0% (COST $4,774,043) $ 4,583,572 =============
SUMMARY OF INVESTMENTS BY INDUSTRY, AUGUST 31, 2003
INDUSTRY % OF INVESTMENT SECURITIES Banking 14.1% Pharmaceuticals 11.4 Oil & Gas 10.5 Telecommunications 8.1 Electronics/Electrical Equipment 5.8 Food/Beverage Products 5.7 Automotive 4.3 Construction Materials 4.3 Insurance 4.3 Financial Services 3.5 Consumer Products 3.2 Distribution 2.8 Office/Business Equipment 2.1 Metals/Mining 1.9 Multi-Media 1.7 Utilities 1.6 Semi-Conductors 1.4 Diversified 1.3 Photographic Equipment 1.3 Other (Below 1.3%) 10.7 - ----------------------------------------------------------------------------- Total 100.0%
SEE NOTES TO FINANCIAL STATEMENTS. 21 ASSET ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2003
SHARES ISSUER VALUE ------ ------ ----- LONG-TERM INVESTMENTS--89.3% COMMON STOCKS--54.7% AEROSPACE--1.3% 390 LOCKHEED MARTIN CORP. $ 19,980 620 UNITED TECHNOLOGIES CORP. 49,755 ------------- 69,735 ------------- APPAREL--0.7% 340 JONES APPAREL GROUP, INC. 10,503 480 NIKE, INC., CLASS B 27,350 ------------- 37,853 ------------- AUTOMOTIVE--0.6% 770 FORD MOTOR CO. 8,901 230 JOHNSON CONTROLS, INC. 22,770 ------------- 31,671 ------------- BANKING--2.2% 390 BANK ONE CORP. 15,393 300 CITY NATIONAL CORP. 15,510 610 MELLON FINANCIAL CORP. 19,124 300 SUNTRUST BANKS, INC. 18,339 2,060 U.S. BANCORP 49,234 ------------- 117,600 ------------- BIOTECHNOLOGY--0.8% 500 AMGEN, INC.* 32,950 340 MEDIMMUNE, INC.* 11,856 ------------- 44,806 ------------- BUSINESS SERVICES--1.0% 870 ACCENTURE LTD, (BERMUDA), CLASS A* 18,409 480 FIRST DATA CORP. 18,432 500 SUNGARD DATA SYSTEMS, INC.* 14,100 ------------- 50,941 ------------- CHEMICALS--0.8% 460 EASTMAN CHEMICAL CO. 16,473 440 PRAXAIR, INC. 28,080 ------------- 44,553 ------------- COMPUTER NETWORKS--1.3% 3,040 CISCO SYSTEMS, INC.* 58,216 690 JUNIPER NETWORKS, INC.* 11,882 ------------- 70,098 ------------- COMPUTER SOFTWARE--2.0% 3,250 MICROSOFT CORP. 86,190 1,730 ORACLE CORP.* 22,109 ------------- 108,299 ------------- COMPUTERS/COMPUTER HARDWARE--2.0% 1,045 DELL COMPUTER CORP.* 34,098 425 INTERNATIONAL BUSINESS MACHINES CORP. 34,854 960 SEAGATE TECHNOLOGY (CAYMAN ISLANDS) 22,090 3,470 SUN MICROSYSTEMS, INC.* 13,394 ------------- 104,436 ------------- CONSUMER PRODUCTS--2.6% 1,145 ALTRIA GROUP, INC. $ 47,197 710 PROCTER & GAMBLE CO. 61,976 970 THE GILLETTE CO. 31,486 ------------- 140,659 ------------- DIVERSIFIED--3.1% 3,705 GENERAL ELECTRIC CO. 109,557 2,640 TYCO INTERNATIONAL LTD (BERMUDA) 54,331 ------------- 163,888 ------------- ENTERTAINMENT/LEISURE--0.3% 390 CARNIVAL CORP. 13,490 ------------- FINANCIAL SERVICES--6.2% 790 CAPITAL ONE FINANCIAL CORP. 42,186 760 CIT GROUP, INC. 20,710 2,500 CITIGROUP, INC. 108,375 570 COUNTRYWIDE FINANCIAL CORP. 38,675 1,030 FREDDIE MAC 54,745 340 GOLDMAN SACHS GROUP, INC. 30,087 700 MORGAN STANLEY 34,153 ------------- 328,931 ------------- FOOD/BEVERAGE PRODUCTS--1.5% 370 PEPSICO, INC. 16,480 1,455 THE COCA-COLA CO. 63,321 ------------- 79,801 ------------- HEALTH CARE/HEALTH CARE SERVICES--2.0% 340 ANTHEM, INC.* 24,888 190 BOSTON SCIENTIFIC CORP.* 11,419 820 GUIDANT CORP. 41,164 420 HCA, INC. 15,956 460 OMNICARE, INC. 15,594 ------------- 109,021 ------------- INSURANCE--2.8% 895 AMBAC FINANCIAL GROUP, INC. 58,103 310 AMERICAN INTERNATIONAL GROUP, INC. 18,467 990 AON CORP. 21,978 680 RENAISSANCERE HOLDINGS LTD (BERMUDA) 28,424 1,572 TRAVELERS PROPERTY CASUALTY CORP., CLASS A 24,193 ------------- 151,165 ------------- INTERNET SERVICES/SOFTWARE--0.4% 420 EBAY, INC.* 23,323 ------------- MACHINERY & ENGINEERING EQUIPMENT--0.3% 290 INGERSOLL-RAND CO., LTD (BERMUDA), CLASS A 17,261 ------------- MANUFACTURING--0.3% 190 EATON CORP. 17,792 ------------- METALS/MINING--0.6% 1,130 ALCOA, INC. 32,273 -------------
SEE NOTES TO FINANCIAL STATEMENTS. 22
SHARES ISSUER VALUE ------ ------ ----- MULTI-MEDIA--2.1% 1,010 AOL TIME WARNER, INC.* $ 16,524 620 COMCAST CORP., SPECIAL CLASS A* 17,583 190 E.W. SCRIPPS CO., CLASS A 16,452 1,320 VIACOM, INC., CLASS B 59,400 ------------- 109,959 ------------- OIL & GAS--3.8% 410 ANADARKO PETROLEUM CORP. 17,835 510 BAKER HUGHES, INC. 17,065 365 CHEVRONTEXACO CORP. 26,598 310 CONOCOPHILLIPS 17,310 668 DEVON ENERGY CORP. 34,569 1,280 EXXON MOBIL CORP. 48,256 720 GLOBALSANTAFE CORP. 17,856 860 ROWAN COMPANIES, INC.* 21,534 ------------- 201,023 ------------- PAPER/FOREST PRODUCTS--0.3% 390 BOWATER, INC. 16,891 ------------- PHARMACEUTICALS--5.1% 370 ABBOTT LABORATORIES 14,911 840 BRISTOL-MYERS SQUIBB CO. 21,311 635 ELI LILLY & CO. 42,247 470 FOREST LABORATORIES, INC.* 22,090 650 JOHNSON & JOHNSON 32,227 63 MEDCO HEALTH SOLUTIONS, INC.* 1,682 310 MERCK & CO., INC. 15,599 2,611 PFIZER, INC. 78,120 1,010 WYETH 43,279 ------------- 271,466 ------------- RESTAURANTS/FOOD SERVICES--0.6% 830 DARDEN RESTAURANTS, INC. 18,094 500 YUM! BRANDS, INC.* 14,825 ------------- 32,919 ------------- RETAILING--3.7% 510 ABERCROMBIE & FITCH CO., CLASS A* 15,524 860 CVS CORP. 28,036 1,520 HOME DEPOT, INC. 48,883 490 PIER 1 IMPORTS, INC. 10,079 650 TARGET CORP. 26,390 1,165 WAL-MART STORES, INC. 68,934 ------------- 197,846 ------------- SEMI-CONDUCTORS--2.5% 770 ALTERA CORP.* 17,279 290 ANALOG DEVICES, INC.* 11,890 1,805 INTEL CORP. 51,658 520 INTERSIL CORP., CLASS A* 15,148 410 NOVELLUS SYSTEMS, INC.* 16,384 970 TEXAS INSTRUMENTS, INC. 23,135 ------------- 135,494 ------------- SHIPPING/TRANSPORTATION--0.4% 370 UNITED PARCEL SERVICE, INC., CLASS B $ 23,221 ------------- TELECOMMUNICATIONS--1.8% 1,320 SBC COMMUNICATIONS, INC. 29,687 2,550 SPRINT CORP. - PCS GROUP* 13,235 1,453 VERIZON COMMUNICATIONS, INC. 51,319 ------------- 94,241 ------------- UTILITIES--1.6% 1,250 PG&E CORP.* 27,713 1,061 PINNACLE WEST CAPITAL CORP. 36,391 1,350 XCEL ENERGY, INC. 19,778 ------------- 83,882 ------------- TOTAL COMMON STOCKS (COST $2,639,607) 2,924,538 ------------- PRINCIPAL AMOUNT (USD) - --------- U.S. TREASURY SECURITIES--7.9% U.S. TREASURY NOTES & BONDS, $ 10,000 2.13%, 10/31/04@+ 10,087 65,000 1.13%, 06/30/05+ 64,190 95,000 2.63%, 05/15/08+ 92,009 50,000 3.25%, 08/15/08 49,559 20,000 3.88%, 02/15/13+ 19,161 80,000 4.25%, 08/15/13+ 78,700 45,000 7.88%, 02/15/21+ 58,605 50,000 5.38%, 02/15/31+ 51,074 ------------- TOTAL U.S. TREASURY SECURITIES (COST $433,500) 423,385 ------------- U.S. GOVERNMENT AGENCY SECURITIES--3.4% FEDERAL HOME LOAN MORTGAGE CORP., 25,000 4.25%, 06/15/05 25,964 75,000 3.50%, 09/15/07 75,098 FEDERAL NATIONAL MORTGAGE ASSOCIATION, 50,000 3.88%, 03/15/05 51,596 25,000 7.13%, 01/15/30 29,102 ------------- TOTAL U.S. GOVERNMENT AGENCY SECURITIES (COST $179,036) 181,760 ------------- STATE AND MUNICIPAL OBLIGATION--0.1% 5,000 STATE OF ILLINOIS, TAXABLE PENSION, GO, 5.10%, 06/01/33 (COST $5,000) 4,375 ------------- CORPORATE NOTES & BONDS--5.7% AEROSPACE--0.1% 5,000 GENERAL DYNAMICS CORP., 2.13%, 05/15/06 4,925 ------------- AUTOMOTIVE--0.6% FORD MOTOR CREDIT CO., 10,000 5.80%, 01/12/09 9,710 5,000 7.25%, 10/25/11 5,052 5,000 GENERAL MOTORS ACCEPTANCE CORP., 8.00%, 11/01/31 4,810
SEE NOTES TO FINANCIAL STATEMENTS. 23
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------- ------ ----- AUTOMOTIVE (CONT'D) $ 10,000 GENERAL MOTORS CORP., 8.38%, 07/15/33 $ 9,885 ------------- 29,457 ------------- BANKING--1.0% 5,000 ABBEY NATIONAL CAPITAL TRUST I, 8.96%, 12/31/49, FRN+ 6,462 BANK OF AMERICA CORP., 5,000 3.25%, 08/15/08+ 4,824 5,000 4.88%, 09/15/12+ 4,897 5,000 CBA CAPITAL TRUST I, 5.80%, 12/31/49,#+ 4,936 5,000 DEUTSCHE BANK FINANCIAL LLC, 5.38%, 03/02/15 4,907 5,000 HSBC CAPITAL FUNDING LP (CHANNEL ISLANDS), 4.61%, 12/31/49, FRN,# 4,625 5,000 KFW INTERNATIONAL FINANCE, INC., 4.75%, 01/24/07 5,312 5,000 POPULAR NORTH AMERICA, INC., 4.25%, 04/01/08 5,005 5,000 ROYAL BANK OF SCOTLAND GROUP PLC (UNITED KINGDOM), 7.65%, 12/31/49, FRN 5,825 5,000 WACHOVIA BANK NA, 5.00%, 08/15/15 4,839 5,000 WESTPAC CAPITAL TRUST III, 5.82%, 12/31/49, FRN,# 4,984 ------------- 56,616 ------------- DIVERSIFIED--0.3% 15,000 GENERAL ELECTRIC CAPITAL CORP., 5.88%, 02/15/12, SER. A, MTN 15,713 ------------- FINANCIAL SERVICES--1.5% 5,000 AMERICAN EXPRESS CO., 4.88%, 07/15/13+ 4,875 5,000 AMERICAN EXPRESS CREDIT CORP., 3.00%, 05/16/08+ 4,793 5,000 AMERICAN GENERAL FINANCE CORP., 5.38%, 10/01/12, SER. H, MTN+ 5,028 5,000 CIT GROUP, INC., 5.50%, 11/30/07+ 5,275 5,000 CITIGROUP, INC., 7.25%, 10/01/10 5,726 5,000 CREDIT SUISSE FIRST BOSTON USA, INC., 5.50%, 08/15/13 4,968 GOLDMAN SACHS GROUP, INC., 5,000 5.70%, 09/01/12 5,123 5,000 4.75%, 07/15/13 4,728 HOUSEHOLD FINANCE CORP., 5,000 8.00%, 07/15/10 5,855 5,000 6.38%, 10/15/11 5,352 5,000 ING CAPITAL FUNDING TRUST III, 8.44%, 12/31/49, FRN 5,857 10,000 MORGAN STANLEY, 5.80%, 04/01/07 10,736 5,000 SLM CORP., 5.63%, 08/01/33, MTN 4,568 5,000 UBS PREFERRED FUNDING TRUST I, 8.62%, 12/31/49, FRN 6,016 5,000 UFJ FINANCE AEC (ARUBA), 6.75%, 07/15/13 4,949 ------------- 83,849 ------------- INSURANCE--0.4% $ 5,000 AEGON NV (THE NETHERLANDS), 4.75%, 06/01/13+ $ 4,715 5,000 AXA FINANCIAL, INC., 7.75%, 08/01/10+ 5,813 5,000 MONUMENTAL GLOBAL FUNDING II, 3.85%, 03/03/08,# 4,973 5,000 NATIONWIDE FINANCIAL SERVICES, INC., 5.90%, 07/01/12 5,142 ------------- 20,643 ------------- MULTI-MEDIA--0.2% 5,000 AOL TIME WARNER, INC., 7.63%, 04/15/31+ 5,413 5,000 LIBERTY MEDIA CORP., 5.70%, 05/15/13 4,811 ------------- 10,224 ------------- OIL & GAS--0.2% 5,000 ANADARKO FINANCE CO., 6.75%, 05/01/11, SER. B+ 5,569 5,000 DEVON FINANCING CORP. ULC, 7.88%, 09/30/31 5,760 ------------- 11,329 ------------- PACKAGING--0.1% 5,000 SEALED AIR CORP., 6.88%, 07/15/33,# 4,848 ------------- PIPELINES--0.1% 5,000 KINDER MORGAN ENERGY PARTNERS LP, 7.40%, 03/15/31 5,525 ------------- RETAILING--0.1% 5,000 SAFEWAY, INC., 6.50%, 03/01/11 5,351 ------------- TELECOMMUNICATIONS--0.6% 5,000 AT&T BROADBAND CORP., 8.38%, 03/15/13+ 5,939 5,000 DEUTSCHE TELEKOM INTERNATIONAL FINANCE BV (THE NETHERLANDS), 5.25%, 07/22/13 4,812 5,000 FRANCE TELECOM SA (FRANCE), 9.25%, 03/01/11 SUB 5,968 5,000 SPRINT CAPITAL CORP., 8.75%, 03/15/32 5,681 10,000 VERIZON NEW YORK, INC., 6.88%, 04/01/12, SER. A 11,013 ------------- 33,413 ------------- UTILITIES--0.5% 5,000 CONSOLIDATED EDISON COMPANY OF NEW YORK, 5.63%, 07/01/12, SER. 2002-A 5,181 5,000 CONSTELLATION ENERGY GROUP, INC., 4.55%, 06/15/15 4,405 5,000 DUKE CAPITAL CORP., 6.25%, 02/15/13 4,885 5,000 FLORIDA POWER & LIGHT CO., 4.85%, 02/01/13 4,941 5,000 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP., 7.25%, 03/01/12, SER. C, MTN 5,647 ------------- 25,059 ------------- TOTAL CORPORATE NOTES & BONDS (COST $298,427) 306,952 -------------
SEE NOTES TO FINANCIAL STATEMENTS. 24
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------- ------ ----- RESIDENTIAL MORTGAGE BACKED SECURITIES--11.7% MORTGAGE BACKED PASS-THROUGH SECURITIES--11.7% $ 500,000 FEDERAL HOME LOAN MORTGAGE CORP., 5.50%, 08/15/33, GOLD POOL, TBA $ 498,173 126,519 FEDERAL NATIONAL MORTGAGE ASSOCIATION, 5.50%, 10/01/32, POOL 657269 126,081 ------------- TOTAL RESIDENTIAL MORTGAGE BACKED SECURITIES (COST $631,168) 624,254 ------------- COMMERCIAL MORTGAGE BACKED SECURITIES--1.5% 65,000 CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP., 3.94%, 05/15/38, SER. 2003-C3, CLASS A5 58,847 20,000 LB-UBS COMMERCIAL MORTGAGE TRUST, 6.65%, 11/15/27, SER. 2001-C2, CLASS A2 22,018 ------------- TOTAL COMMERCIAL MORTGAGE BACKED SECURITIES (COST $85,421) 80,865 ------------- ASSET BACKED SECURITIES--4.3% 25,000 AMERICREDIT AUTOMOBILE RECEIVABLES TRUST, 5.37%, 06/12/08, SER. 2001-B, CLASS A4+ 25,876 5,000 BANK ONE ISSUANCE TRUST, 4.77%, 02/16/16, SER. 2003-C3, CLASS C3+ 4,506 CAPITAL AUTO RECEIVABLES ASSET TRUST, 10,000 1.15%, 02/15/07, SER. 2003-2, CLASS A3B, FRN 9,999 5,000 1.96%, 01/15/09, SER. 2003-2, CLASS A4A 4,806 45,000 CAPITAL ONE MASTER TRUST, 5.45%, 03/16/09, SER. 2001-3A, CLASS A 47,556 5,000 CITIBANK CREDIT CARD ISSUANCE TRUST, 5.00%, 06/10/15, SER. 2003-C4, CLASS C4 4,542 5,000 DISCOVER CARD MASTER TRUST I, 1.16%, 05/16/07, SER. 2002-5, CLASS A, FRN 4,997 15,000 FORD CREDIT AUTO OWNER TRUST, 5.25%, 09/15/05, SER. 2001-C, CLASS A5 15,298 20,000 HOUSEHOLD AUTOMOTIVE TRUST, 2.22%, 11/17/09, SER. 2003-1, CLASS A4 19,411 45,000 MBNA CREDIT CARD MASTER NOTE TRUST, 5.75%, 10/15/08, SER. 2001-A1, CLASS A1 48,583 15,000 NISSAN AUTO RECEIVABLES OWNER TRUST, 2.05%, 03/16/09, SER. 2003-B, CLASS A4 14,519 5,000 ONYX ACCEPTANCE GRANTOR TRUST, 2.66%, 05/17/10, SER. 2003-C, CLASS A4 4,913 4,989 OPTION ONE MORTGAGE LOAN TRUST, 1.43%, 07/01/33, SER. 2003-5, CLASS A2, FRN 4,994 RESIDENTIAL ASSET SECURITIES CORP., 7,344 1.36%, 07/25/32, SER. 2002-KS4, CLASS AIIB, FRN 7,332 9,916 1.40%, 07/25/33, SER. 2003-KS5, CLASS AIIB, FRN 9,897 5,000 WACHOVIA ASSET SECURITIZATION, INC., 1.54%, 12/25/32, SER. 2002-HE2, CLASS A, FRN 5,009 ------------- TOTAL ASSET BACKED SECURITIES (COST $227,133) 232,238 ------------- TOTAL LONG-TERM INVESTMENTS (COST $4,499,292) 4,778,367 ------------- SHARES ISSUER VALUE ------ ------ ----- SHORT-TERM INVESTMENT--10.7% MONEY MARKET FUND--10.7% 573,809 JPMORGAN PRIME MONEY MARKET FUND(a)+ (COST $573,809) $ 573,809 ------------- TOTAL INVESTMENTS--100.0% (COST $5,073,101) $ 5,352,176 =============
FUTURES CONTRACTS
NOTIONAL UNREALIZED NUMBER VALUE AT APPRECIATION/ OF EXPIRATION 8/31/03 (DEPRECIATION) CONTRACTS DESCRIPTION DATE (USD) (USD) - ----------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 1 2 Year Treasury Notes December, 2003 $ 213,047 $ 402 SHORT FUTURES OUTSTANDING (2) 5 Year Treasury Notes December, 2003 (219,719) (423)
SEE NOTES TO FINANCIAL STATEMENTS. 25 U.S. GOVERNMENT INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2003
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------- ------ ------ LONG-TERM INVESTMENTS--93.3% U.S. TREASURY SECURITIES--56.1% U.S. TREASURY NOTES & BONDS, $ 65,000 3.38%, 04/30/04 $ 65,960 250,000 1.13%, 06/30/05 246,885 115,000 3.50%, 11/15/06 118,046 90,000 3.00%, 11/15/07 89,546 100,000 2.63%, 05/15/08 96,852 60,000 4.38%, 08/15/12 60,038 35,000 4.25%, 08/15/13 34,431 25,000 3.88%, 02/15/13 23,951 150,000 8.50%, 02/15/20+ 205,342 85,000 6.25%, 08/15/23 94,353 75,000 6.75%, 08/15/26 88,623 5,000 6.13%, 08/15/29 5,533 15,000 6.25%, 05/15/30 16,930 ------------- TOTAL U.S. TREASURY SECURITIES (COST $1,114,244) 1,146,490 ------------- U.S. GOVERNMENT AGENCY SECURITIES--29.2% 210,001 FEDERAL FARM CREDIT BANK, 3.88%, 12/15/04 215,793 FEDERAL HOME LOAN BANK, 175,000 2.13%, 12/15/04 176,172 35,000 4.50%, 11/15/12 34,081 180,000 FEDERAL HOME LOAN MORTGAGE CORP., 4.50%, 07/15/13 172,229 ------------- TOTAL U.S. GOVERNMENT AGENCY SECURITIES (COST $599,093) 598,275 ------------- RESIDENTIAL MORTGAGE BACKED SECURITY--8.0% MORTGAGE BACKED PASS-THROUGH SECURITY--8.0% 165,000 FEDERAL NATIONAL MORTGAGE ASSOCIATION, 5.50%, 09/25/33, TBA+ (COST $162,473) 164,278 ------------- TOTAL LONG-TERM INVESTMENTS (COST $1,875,810) 1,909,043 ------------- SHARES ------ SHORT-TERM INVESTMENT--6.7% MONEY MARKET FUND--6.7% 136,406 JPMORGAN U.S. GOVERNMENT MONEY MARKET FUND(a) (COST $136,406) 136,406 ------------- TOTAL INVESTMENTS--100.0% (COST $2,012,216) $ 2,045,449 =============
SEE NOTES TO FINANCIAL STATEMENTS. 26 MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2003
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------- ------ ----- MONEY MARKET INSTRUMENTS--100.0% U.S. TREASURY SECURITY--51.8% $ 1,047,000 U.S. TREASURY BILL, 0.96%, 09/25/03 (COST $1,046,327) $ 1,046,327 ------------- U.S. GOVERNMENT AGENCY SECURITIES--48.2% 300,000 FEDERAL HOME LOAN BANK, DN, 0.99%, 09/17/03 299,868 260,000 FEDERAL HOME LOAN MORTGAGE CORP., DN, 0.94%, 12/22/03 259,240 260,000 FEDERAL NATIONAL MORTGAGE ASSOCIATION, DN, 0.92%, 12/10/03 259,339 155,000 STUDENT LOAN MARKETING ASSOCIATION, DN, 0.93%, 09/02/03 154,996 ------------- TOTAL U.S. GOVERNMENT AGENCY SECURITIES (COST $973,443) 973,443 ------------- TOTAL INVESTMENTS--100.0% (COST $2,019,770)** $ 2,019,770 =============
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 with the custodian for futures contracts, TBA, when issued, or delayed delivery securities. @ = Security is fully or partially segregated with brokers as initial margin 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 August 31, 2003. GDR = Global Depositary Receipt. GO = General Obligation Bond. MTN = Medium Term Note. SUB = Step-up Bond. The rate shown is the rate in effect as August 31, 2003. SER.= Series. TBA = To Be Announced. USD = United States Dollar. SEE NOTES TO FINANCIAL STATEMENTS. 27 STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2003
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 $ 6,454,760 $ 5,218,785 $ 4,583,572 $ 5,352,176 $ 2,045,449 $ 2,019,770 Cash 546 354 18,113 274 -- 59 Foreign currency, at value -- -- 4,819 -- -- -- Receivables: Investment securities sold 18,984 -- 11,272 165,297 -- -- Interest and dividends 12,196 731 8,251 14,508 9,636 -- Foreign tax reclaim -- -- 9,467 -- -- -- Expense reimbursement from Administrator 2,713 4,642 8,934 6,691 6,249 5,271 ------------ ------------ ------------ ------------ ------------ ------------ TOTAL ASSETS 6,489,199 5,224,512 4,644,428 5,538,946 2,061,334 2,025,100 ------------ ------------ ------------ ------------ ------------ ------------ LIABILITIES: Payables: Investment securities purchased 34,598 -- -- 663,493 196,942 -- Fund shares redeemed 62,418 52,148 251 8,540 281 -- Variation margin -- -- -- 219 -- -- Accrued liabilities: Custodian fees 7,622 5,648 4,850 7,178 6,265 11,386 Trustees' fees--deferred compensation plan 3,258 1,584 1,994 2,204 1,128 1,266 Other 30,446 32,488 35,900 28,551 29,054 21,195 ------------ ------------ ------------ ------------ ------------ ------------ TOTAL LIABILITIES 138,342 91,868 42,995 710,185 233,670 33,847 ------------ ------------ ------------ ------------ ------------ ------------ NET ASSETS: Paid in capital 8,219,905 4,946,135 5,933,239 6,197,678 1,481,763 1,989,391 Accumulated undistributed (overdistributed) net investment income 47,359 (1,586) 67,775 48,190 66,871 1,831 Accumulated net realized gain (loss) on investments, futures and foreign exchange transactions (2,312,537) (594,912) (1,209,199) (1,696,161) 245,797 31 Net unrealized appreciation (depreciation) of investments, futures and foreign currency translations 396,130 783,007 (190,382) 279,054 33,233 -- ------------ ------------ ------------ ------------ ------------ ------------ NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS $ 6,350,857 $ 5,132,644 $ 4,601,433 $ 4,828,761 $ 1,827,664 $ 1,991,253 ============ ============ ============ ============ ============ ============ Shares of beneficial interest outstanding ($0.001 par value; unlimited number of shares authorized) 613,053 484,566 591,209 551,693 189,863 1,989,339 Net asset value, maximum offering price per share and redemption price per share $ 10.36 $ 10.59 $ 7.78 $ 8.75 $ 9.63 $ 1.00 ============ ============ ============ ============ ============ ============ Cost of investments $ 6,058,630 $ 4,435,778 $ 4,774,043 $ 5,073,101 $ 2,012,216 $ 2,019,770 ============ ============ ============ ============ ============ ============ Cost of foreign currency $ -- $ -- $ 4,814 $ -- $ -- $ -- ============ ============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS. 28 STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2003
GROWTH AND CAPITAL INTERNATIONAL ASSET U.S. GOVERNMENT MONEY INCOME GROWTH EQUITY ALLOCATION INCOME MARKET PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ------------ ------------ ------------- ------------ --------------- ------------ INVESTMENT INCOME: Interest $ -- $ -- $ -- $ 70,213 $ 157,151 $ 40,640 Dividend 136,782 11,201 129,374 47,599 -- -- Dividend income from affiliated investments* 1,462 1,240 -- 13,479 10,593 -- Foreign tax withheld -- -- (15,747) -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ TOTAL INVESTMENT INCOME 138,244 12,441 113,627 131,291 167,744 40,640 ------------ ------------ ------------ ------------ ------------ ------------ EXPENSES: Investment advisory fees 38,281 28,715 33,567 29,855 22,847 7,522 Administration fees 9,570 7,179 6,294 8,143 6,854 4,513 Accounting fees -- -- 64,839 -- -- -- Custodian fees 31,610 30,235 13,695 45,225 33,901 9,570 Printing and postage 6,967 4,647 4,882 3,686 5,243 3,624 Professional fees 34,805 39,214 46,261 39,515 32,568 24,907 Transfer agent fees 14,028 13,316 16,586 13,878 11,550 10,404 Trustees' fees 64 48 42 54 46 31 Other 6,005 6,232 7,180 6,183 5,594 4,832 ------------ ------------ ------------ ------------ ------------ ------------ TOTAL EXPENSES 141,330 129,586 193,346 146,539 118,603 65,403 ------------ ------------ ------------ ------------ ------------ ------------ Less amounts waived 47,851 35,894 39,861 37,998 29,701 12,035 Less expense reimbursements 36,050 50,108 107,331 62,382 52,298 36,819 Less earnings credits 8 511 -- 19 49 -- ------------ ------------ ------------ ------------ ------------ ------------ NET EXPENSES 57,421 43,073 46,154 46,140 36,555 16,549 ------------ ------------ ------------ ------------ ------------ ------------ NET INVESTMENT INCOME (LOSS) 80,823 (30,632) 67,473 85,151 131,189 24,091 ------------ ------------ ------------ ------------ ------------ ------------ NET REALIZED GAIN (LOSS) ON TRANSACTIONS FROM: Investments (963,229) (567,928) (280,371) (275,707) 288,354 31 Futures -- -- -- (14,667) -- -- Foreign currency -- -- 2,714 -- -- -- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) OF: Investments 1,509,993 1,592,599 500,501 531,907 (235,372) -- Futures -- -- -- 23,539 -- -- Foreign currency translations -- -- 1,079 -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ Net realized and unrealized gain (loss) 546,764 1,024,671 223,923 265,072 52,982 31 ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets from operations $ 627,587 $ 994,039 $ 291,396 $ 350,223 $ 184,171 $ 24,122 ============ ============ ============ ============ ============ ============ * Includes Reimbursements of Investment Advisory and Administration fees: $ 244 $ 158 $ -- $ 1,725 $ 1,287 $ --
SEE NOTES TO FINANCIAL STATEMENTS. 29 STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIODS INDICATED
GROWTH AND INCOME CAPITAL GROWTH INTERNATIONAL EQUITY PORTFOLIO PORTFOLIO PORTFOLIO -------------------------- -------------------------- -------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED 8/31/03 8/31/02 8/31/03 8/31/02 8/31/03 8/31/02 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income (loss) $ 80,823 $ 100,865 $ (30,632) $ (26,107) $ 67,473 $ 48,854 Net realized gain (loss) on investments, futures and foreign exchange transactions (963,229) (881,803) (567,928) 420,201 (277,657) (712,959) Change in net unrealized appreciation (depreciation) on investments, futures and foreign currency translations 1,509,993 (719,509) 1,592,599 (2,071,240) 501,580 278,229 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 627,587 (1,500,447) 994,039 (1,677,146) 291,396 (385,876) ------------ ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (101,287) (158,117) -- (1,217) (67,750) -- Net realized gain on investment transactions -- -- (962,703) -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ TOTAL DISTRIBUTIONS TO SHAREHOLDERS (101,287) (158,117) (962,703) (1,217) (67,750) -- ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS: Proceeds from shares issued 120,953 117,157 227,262 142,281 95,931 74,842 Dividends reinvested 101,287 158,117 962,703 1,217 67,750 -- Cost of shares redeemed (1,574,502) (3,072,327) (1,362,946) (3,617,731) (342,935) (575,277) ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS (1,352,262) (2,797,053) (172,981) (3,474,233) (179,254) (500,435) ------------ ------------ ------------ ------------ ------------ ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS (825,962) (4,455,617) (141,645) (5,152,596) 44,392 (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 $ 6,350,857 $ 7,176,819 $ 5,132,644 $ 5,274,289 $ 4,601,433 $ 4,557,041 ============ ============ ============ ============ ============ ============ Accumulated undistributed (overdistrubuted) net investment income $ 47,359 $ 67,823 $ (1,586) $ (1,918) $ 67,775 $ 65,338 ------------ ------------ ------------ ------------ ------------ ------------ Share Transactions: Issued 12,549 11,091 22,820 10,834 13,312 9,480 Reinvested 10,950 14,335 112,071 87 9,876 -- Redeemed (169,693) (286,609) (144,895) (282,163) (50,220) (74,907) ------------ ------------ ------------ ------------ ------------ ------------ Change in Shares (146,194) (261,183) (10,004) (271,242) (27,032) (65,427) ============ ============ ============ ============ ============ ============ ASSET ALLOCATION U.S. GOVERNMENT INCOME MONEY MARKET PORTFOLIO PORTFOLIO PORTFOLIO -------------------------- -------------------------- -------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED 8/31/03 8/31/02 8/31/03 8/31/02 8/31/03 8/31/02 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income (loss) $ 85,151 $ 110,842 $ 131,189 $ 218,711 $ 24,091 $ 61,574 Net realized gain (loss) on investments, futures and foreign exchange transactions (290,374) (725,672) 288,354 206,984 31 638 Change in net unrealized appreciation (depreciation) on investments, futures and foreign currency translations 555,446 566 (235,372) 101,074 -- -- ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 350,223 (614,264) 184,171 526,769 24,122 62,212 ------------ ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (120,067) (205,827) (238,159) (355,820) (22,237) (61,574) Net realized gain on investment transactions -- -- (137,744) (84,486) (66) (138) ------------ ------------ ------------ ------------ ------------ ------------ TOTAL DISTRIBUTIONS TO SHAREHOLDERS (120,067) (205,827) (375,903) (440,306) (22,303) (61,712) ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS: Proceeds from shares issued 23,491 64,303 305,094 472,485 283,023 548,026 Dividends reinvested 120,067 205,827 375,903 440,306 22,303 59,898 Cost of shares redeemed (1,685,965) (599,602) (4,789,465) (1,043,067) (1,897,547) (901,383) ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS (1,542,407) (329,472) (4,108,468) (130,276) (1,592,221) (293,459) ------------ ------------ ------------ ------------ ------------ ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS (1,312,251) (1,149,563) (4,300,200) (43,813) (1,590,402) (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 $ 4,828,761 $ 6,141,012 $ 1,827,664 $ 6,127,864 $ 1,991,253 $ 3,581,655 ============ ============ ============ ============ ============ ============ Accumulated undistributed (overdistrubuted) net investment income $ 48,190 $ 83,096 $ 66,871 $ 173,841 $ 1,831 $ (23) ------------ ------------ ------------ ------------ ------------ ------------ Share Transactions: Issued 2,803 7,303 30,164 50,246 283,023 548,026 Reinvested 14,823 22,037 39,116 47,962 22,303 59,898 Redeemed (208,200) (67,990) (489,808) (107,913) (1,897,547) (901,383) ------------ ------------ ------------ ------------ ------------ ------------ Change in Shares (190,574) (38,650) (420,528) (9,705) (1,592,221) (293,459) ============ ============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS. 30 FINANCIAL HIGHLIGHTS
GROWTH AND INCOME PORTFOLIO ------------------------------------------------------------- YEAR ENDED AUGUST 31, 2003 2002 2001 2000 1999 ---- ---- ---- ---- ---- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 9.45 $ 11.40 $ 13.91 $ 12.63 $ 12.36 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.13 0.15 0.14 0.11 0.06 Net gains (losses) on investments (both realized and unrealized) 0.92 (1.92) (2.53) 1.21 2.58 ---------- ---------- ---------- ---------- ---------- TOTAL FROM INVESTMENT OPERATIONS 1.05 (1.77) (2.39) 1.32 2.64 ---------- ---------- ---------- ---------- ---------- LESS DISTRIBUTIONS FROM: Net investment income 0.14 0.18 0.12 0.04 0.09 Net realized gains -- -- -- -- 2.28 ---------- ---------- ---------- ---------- ---------- TOTAL DISTRIBUTIONS 0.14 0.18 0.12 0.04 2.37 ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 10.36 $ 9.45 $ 11.40 $ 13.91 $ 12.63 ========== ========== ========== ========== ========== TOTAL RETURN 11.33% (15.77%) (17.29%) 10.44% 21.23% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (thousands) $ 6,351 $ 7,177 $ 11,632 $ 16,223 $ 19,153 Ratios to Average Net Assets: Expenses 0.90% 0.90% 0.90% 0.90% 0.90% Net investment income (loss) 1.27% 1.06% 0.99% 0.73% 0.54% Expenses without waivers, reimbursements and earning credits 2.21% 1.95% 1.51% 1.37% 1.33% Net investment income (loss) without waivers, reimbursements and earning credits (0.04%) 0.01% 0.38% 0.26% 0.11% Portfolio turnover 33% 57% 14% 65% 114% CAPITAL GROWTH PORTFOLIO -------------------------------------------------------------- YEAR ENDED AUGUST 31, 2003 2002 2001 2000 1999 ---- ---- ---- ---- ---- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 10.66 $ 13.62 $ 16.31 $ 13.75 $ 11.72 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (0.07) (0.06) --(a) 0.03 0.07 Net gains (losses) on investments (both realized and unrealized) 2.10 (2.90) (1.73) 3.54 3.37 ---------- ---------- ---------- ---------- ---------- TOTAL FROM INVESTMENT OPERATIONS 2.03 (2.96) (1.73) 3.57 3.44 ---------- ---------- ---------- ---------- ---------- LESS DISTRIBUTIONS FROM: Net investment income -- --(a) -- 0.09 0.09 Net realized gains 2.10 -- 0.96 0.92 1.32 ---------- ---------- ---------- ---------- ---------- TOTAL DISTRIBUTIONS 2.10 -- 0.96 1.01 1.41 ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 10.59 $ 10.66 $ 13.62 $ 16.31 $ 13.75 ========== ========== ========== ========== ========== TOTAL RETURN 23.63% (21.72%) (10.70%) 27.92% 30.59% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (thousands) $ 5,133 $ 5,274 $ 10,427 $ 13,177 $ 12,649 Ratios to Average Net Assets: Expenses 0.90% 0.90% 0.90% 0.90% 0.90% Net investment income (loss) (0.64%) (0.34%) (0.01%) 0.21% 0.59% Expenses without waivers, reimbursements and earning credits 2.71% 2.29% 1.75% 1.69% 1.70% Net investment income (loss) without waivers, reimbursements and earning credits (2.45%) (1.73%) (0.86%) (0.58%) (0.21%) Portfolio turnover 53% 98% 47% 128% 27% INTERNATIONAL EQUITY PORTFOLIO -------------------------------------------------------------- YEAR ENDED AUGUST 31, 2003 2002 2001 2000 1999 ---- ---- ---- ---- ---- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 7.37 $ 7.96 $ 13.30 $ 11.36 $ 9.63 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.11 0.08 0.08 (0.03) -- Net gains (losses) on investments (both realized and unrealized) 0.41 (0.67) (2.98) 2.38 2.32 ---------- ---------- ---------- ---------- ---------- TOTAL FROM INVESTMENT OPERATIONS 0.52 (0.59) (2.90) 2.35 2.32 ---------- ---------- ---------- ---------- ---------- LESS DISTRIBUTIONS FROM: Net investment income 0.11 -- -- -- 0.10 Net realized gains -- -- 2.44 0.41 0.49 ---------- ---------- ---------- ---------- ---------- TOTAL DISTRIBUTIONS 0.11 -- 2.44 0.41 0.59 ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 7.78 $ 7.37 $ 7.96 $ 13.30 $ 11.36 ========== ========== ========== ========== ========== TOTAL RETURN 7.28% (7.41%) (24.76%) 20.58% 25.03% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (thousands) $ 4,601 $ 4,557 $ 5,443 $ 7,960 $ 7,337 Ratios to Average Net Assets: Expenses 1.10% 1.10% 1.10% 1.10% 1.10% Net investment income (loss) 1.60% 0.95% 0.71% (0.15%) 0.04% Expenses without waivers, reimbursements and earning credits 4.60% 3.88% 3.38% 2.62% 3.24% Net investment income (loss) without waivers, reimbursements and earning credits (1.90%) (1.83%) (1.57%) (1.67%) (2.10%) Portfolio turnover 16% 74% 98% 102% 170% ASSET ALLOCATION PORTFOLIO ------------------------------------------------------------------- YEAR ENDED AUGUST 31, 2003 2002 2001 2000 1999 ---- ---- ---- ---- ---- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 8.27 $ 9.34 $ 11.31 $ 10.72 $ 10.64 ---------- ---------- ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.15 0.15 0.25 0.29 0.24 Net gains (losses) on investments (both realized and unrealized) 0.50 (0.95) (1.95) 0.68 1.04 ---------- ---------- ------------ ------------ ------------ TOTAL FROM INVESTMENT OPERATIONS 0.65 (0.80) (1.70) 0.97 1.28 ---------- ---------- ------------ ------------ ------------ LESS DISTRIBUTIONS FROM: Net investment income 0.17 0.27 0.27 0.30 0.18 Net realized gains -- -- -- 0.08 1.02 ---------- ---------- ------------ ------------ ------------ TOTAL DISTRIBUTIONS 0.17 0.27 0.27 0.38 1.20 ---------- ---------- ------------ ------------ ------------ NET ASSET VALUE, END OF PERIOD $ 8.75 $ 8.27 $ 9.34 $ 11.31 $ 10.72 ========== ========== ============ ============ ============ TOTAL RETURN 7.97% (8.90%) (15.20%) 9.31% 11.88% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (thousands) $ 4,829 $ 6,141 $ 7,291 $ 9,112 $ 9,324 Ratios to Average Net Assets: Expenses 0.85% 0.85% 0.85% 0.85% 0.85% Net investment income (loss) 1.57% 1.59% 2.39% 2.52% 2.48% Expenses without waivers, reimbursements and earning credits 2.70% 3.31% 2.25% 2.16% 1.90% Net investment income (loss) without waivers, reimbursements and earning credits (0.28%) (0.87%) 0.99% 1.21% 1.43% Portfolio turnover 243% 312% 100% 145% 112%
(a) Amount is less than $0.005. SEE NOTES TO FINANCIAL STATEMENTS. 31
U.S. GOVERNMENT INCOME PORTFOLIO ----------------------------------------------------------- YEAR ENDED AUGUST 31, 2003 2002 2001 2000 1999 ---- ---- ---- ---- ---- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 10.04 $ 9.95 $ 9.44 $ 9.51 $ 10.12 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.45 0.37 0.51 0.59 0.52 Net gains (losses) on investments (both realized and unrealized) (0.26) 0.45 0.46 0.10 (0.62) ---------- ---------- ---------- ---------- ---------- TOTAL FROM INVESTMENT OPERATIONS 0.19 0.82 0.97 0.69 (0.10) ---------- ---------- ---------- ---------- ---------- LESS DISTRIBUTIONS FROM: Net investment income 0.38 0.59 0.46 0.58 0.51 Net realized gains 0.22 0.14 -- 0.18 -- ---------- ---------- ---------- ---------- ---------- TOTAL DISTRIBUTIONS 0.60 0.73 0.46 0.76 0.51 ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 9.63 $ 10.04 $ 9.95 $ 9.44 $ 9.51 ========== ========== ========== ========== ========== TOTAL RETURN 1.97% 8.92% 10.53% 7.80% (1.15%) RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (thousands) $ 1,828 $ 6,128 $ 6,172 $ 5,885 $ 6,433 Ratios to Average Net Assets: Expenses 0.80% 0.80% 0.80% 0.80% 0.80% Net investment income (loss) 2.87% 3.61% 5.21% 5.70% 5.35% Expenses without waivers, reimbursements and earning credits 2.59% 2.47% 2.26% 2.49% 1.97% Net investment income (loss) without waivers, reimbursements and earning credits 1.08% 1.94% 3.75% 4.01% 4.18% Portfolio turnover 249% 458% 91% 37% 31% MONEY MARKET PORTFOLIO ------------------------------------------------------------- YEAR ENDED AUGUST 31, 2003 2002 2001 2000 1999 ---- ---- ---- ---- ---- PER SHARE OPERATING PERFORMANCE Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.01 0.02 0.05 0.05 0.05 Net gains (losses) on investments (both realized and unrealized) --(a) -- -- -- -- ---------- ---------- ---------- ---------- ---------- TOTAL FROM INVESTMENT OPERATIONS 0.01 0.02 0.05 0.05 0.05 ---------- ---------- ---------- ---------- ---------- LESS DISTRIBUTIONS FROM: Net investment income 0.01 0.02 0.05 0.05 0.05 Net realized gains --(a) --(a) -- -- -- ---------- ---------- ---------- ---------- ---------- TOTAL DISTRIBUTIONS 0.01 0.02 0.05 0.05 0.05 ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ========== ========== ========== ========== ========== TOTAL RETURN 0.70% 1.62% 5.05% 5.57% 4.66% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (thousands) $ 1,991 $ 3,582 $ 3,875 $ 3,883 $ 3,991 Ratios to Average Net Assets: Expenses 0.55% 0.55% 0.55% 0.55% 0.55% Net investment income (loss) 0.80% 1.61% 4.90% 5.43% 4.54% Expenses without waivers, reimbursements and earning credits 2.17% 2.55% 2.77% 2.51% 2.28% Net investment income (loss) without waivers, reimbursements and earning credits (0.82%) (0.39%) 2.68% 3.47% 2.81% Portfolio turnover -- -- -- -- --
(a) Amount is less than $0.005. SEE NOTES TO FINANCIAL STATEMENTS. 32 NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION--Mutual Fund Variable Annuity Trust ("MFVAT"), (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"). On July 17, 2003, the Board of Trustees of MFVAT and on June 12, 2003, the Board of Trustees of SunAmerica Series Trust ("SAST", together with MFVAT, the "Trusts"), approved an agreement and plan of reorganization pursuant to which each Current Fund listed in the table below will transfer all of its assets and liabilities to a Successor Fund listed across from it in the table below in exchange for shares of such Successor Fund (each, a "reorganization") subject to approval by shareholders of the applicable Current Fund. Upon consummation of a reorganization, each shareholder of the Current Fund would receive the number of Class 1 shares of the applicable Successor Fund with a total net asset value equal to the total net asset value of such shareholder's Current Fund shares on the date of the exchange. If a reorganization is approved by shareholders of a Current Fund, such Current Fund's existence as a series of MFVAT will be terminated following the applicable reorganization. If all reorganizations are approved, it is the intention of the Board of Trustees of MFVAT to terminate MFVAT. A special meeting of shareholders of each Current Fund has been called for Monday, December 1, 2003, to consider the applicable reorganization and related transactions. Before these special meetings, shareholders will receive a combined prospectus/proxy statement containing information about the proposed reorganization relating to their Current Fund and information about the relevant Successor Fund. If approved by the shareholders of a Current Fund, the applicable reorganization will take place on Friday, December 5, 2003, or another date determined by the Trusts that are involved in the particular reorganization.
CURRENT FUND SUCCESSOR FUND ------------------------------------ ----------------------------------------- Growth and Income Portfolio Davis Venture Value Portfolio Capital Growth Portfolio Marsico Growth Portfolio International Equity Portfolio International Growth and Income Portfolio Asset Allocation Portfolio MFS Total Return Portfolio U.S. Government Income Portfolio Cash Management Portfolio Money Market Portfolio Cash Management Portfolio
Effective August 20, 2003, the Portfolios closed to new shareholders. 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. The value of National Market Systems equity securities quotes by the Nasdaq Stock Market, Inc. shall generally be the Nasdaq Official Closing Price. 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 Portfolios 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 of securities 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 33 investments existed and such differences could have been material. For foreign securities, if activity in the local shares indicates that a current local price should be used, or the market quotation is determined to be not readily available or unreliable or material events or conditions affecting the value of a portfolio security has occurred since the last sale, such securities may be valued at fair value in accordance with procedures adopted by the Trustees. Short-term investments with 60 days or less to maturity at time of purchase are valued at amortized cost, which approximates market value. 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. FUTURES CONTRACTS--When a Portfolio enters into a futures contract, it makes an initial margin deposit in a segregated account, either in cash or liquid securities. Thereafter, the futures contract is marked to market and the Portfolio makes (or receives) additional cash payments daily to (or from) the broker. Changes in the value of the contract are recorded as unrealized appreciation (depreciation) until the contract is closed or settled. The Portfolios may invest in exchange-traded interest rate futures for hedging purposes, to either modify the duration of the Portfolios, modify the yield curve exposure of the Portfolios, or in anticipation of buying or selling a specific security. IEP may invest in index futures contracts to control the asset mix of the Portfolio in the most efficient manner, allowing the fund 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. Short index futures contracts are used for hedging purposes; i.e., to reduce the exposure to equities. Use of long futures contracts subjects 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 subjects the Portfolios to unlimited risk. 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 August 31, 2003, AAP had open futures contracts as shown on its Portfolio of Investments. C. 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. Although the net assets of the Portfolio are presented at the foreign exchange rates and market values at the close of the periods, 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 other assets and liabilities denominated in foreign currencies, which are held at period end. D. 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 34 value of the contract are recognized as unrealized gains or losses by "marking to market". When the forward contract is closed, or the delivery of the currency is made or taken, the Portfolio records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Portfolio's basis in the contract. The Portfolios are subject to off-balance sheet risk to the extent of the value of the contracts for purchases of foreign currency and in an unlimited amount for sales of foreign currency. As of August 31, 2003, the Portfolios had no outstanding forward foreign currency exchange contracts. E. 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 recorded on the ex-dividend date or when the Portfolios first learn of the dividend. 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 Portfolio'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. F. 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. G. 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. H. 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. The following amounts were reclassified within the capital accounts:
ACCUMULATED ACCUMULATED UNDISTRIBUTED/ NET REALIZED PAID-IN (OVERDISTRIBUTED) GAIN (LOSS) CAPITAL NET INVESTMENT INCOME ON INVESTMENTS --------- --------------------- -------------- CGP $ (30,964) $ 30,964 $ -- IEP -- 2,714 (2,714) AAP -- 10 (10)
The reclassifications for CGP relate primarily to the character for tax purposes of non-deductible net operating losses. The reclassifications for IEP relate primarily to the character for tax purposes of foreign currency gains and losses. The reclassifications for AAP relate primarily to the character for tax purposes of paydowns. 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 "Advisor") acts as the investment advisor to the Portfolios. JPMFAM is a direct wholly owned subsidiary of JPMorgan Chase Bank ("JPMCB") and an indirect wholly owned subsidiary of J.P. Morgan Chase & Co. ("JPMorgan"). The Advisor 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
35 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 its services as sub-advisor, JPMFAM(London) receives a portion of the fees payable to JPMFAM as advisor. The Advisor waived fees as outlined in Note 3.D. The Portfolios, other than MMP, may invest in one or more of the affiliated JPMorgan Money Market Funds. The Advisor 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. CUSTODIAN AND ACCOUNTING FEES--JPMCB provided portfolio accounting and custody services for GIP, CGP, AAP and USGIP, (only custody services is provided for IEP by JPMCB) for the entire year. As of May 5, 2003, JPMCB provided portfolio accounting and custody services for MMP. Compensation for such services is presented in the Statement of Operations as custodian fees. The amounts paid to JPMCB for these services from GIP, CGP, IEP, AAP, USGIP and MMP were: $31,610, $30,235, $695, $45,225, $33,901 and $5,086, respectively. The custodian fees may be reduced by credits earned by each Portfolio, based on uninvested cash balances held by the custodian. Such earnings credits are presented separately in the Statement of Operations. C. 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 Fund Services, LP ("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. D. WAIVERS AND REIMBURSEMENTS--For the year ended August 31, 2003, the Portfolios' vendors voluntarily waived expenses as follows:
GIP CGP IEP AAP USGIP MMP --- --- --- --- ----- --- Advisory $ 38,281 $ 28,715 $ 33,567 $ 29,855 $ 22,847 $ 7,522 Administration 9,570 7,179 6,294 8,143 6,854 4,513 -------- -------- -------- -------- -------- -------- Total $ 47,851 $ 35,894 $ 39,861 $ 37,998 $ 29,701 $ 12,035
The Administrator voluntarily reimbursed certain expenses of the portfolios as follows:
GIP CGP IEP AAP USGIP MMP --- --- --- --- ----- --- Assumed Expenses $ 36,050 $ 50,108 $107,331 $ 62,382 $ 52,298 $ 36,819
E. OTHER--Certain officers of the Trust are officers of JPMorgan or of BISYS or their subsidiaries. For the year ended August 31, 2003, there were no brokerage commissions with brokers/dealers affiliated with JPMCB. 4. INVESTMENT TRANSACTIONS--For the year ended August 31, 2003, purchases and sales of investments (excluding short-term investments) were as follows:
GIP CGP IEP AAP USGIP --- --- --- --- ----- Purchases (excluding U.S. Government) $ 2,052,121 $ 2,545,406 $ 666,749 $ 3,468,858 $ -- Sales (excluding U.S. Government) 3,261,854 3,692,874 874,949 4,297,675 -- Purchases of U.S. Government -- -- -- 8,743,330 10,672,203 Sales of U.S. Government -- -- -- 9,060,450 14,275,592
5. FEDERAL INCOME TAX MATTERS--For Federal income tax purposes, the cost and unrealized appreciation(depreciation) in value of the investment securities at August 31, 2003, are as follows:
GIP CGP IEP AAP USGIP --- --- --- --- ----- Aggregate cost $ 6,173,018 $ 4,441,345 $ 5,415,704 $ 5,332,213 $ 2,014,072 ----------- ----------- ----------- ----------- ----------- Gross unrealized appreciation 619,676 966,303 318,913 118,085 48,997 Gross unrealized depreciation (337,934) (188,863) (1,151,045) (98,122) (17,620) ----------- ----------- ----------- ----------- ----------- Net unrealized appreciation (depreciation) $ 281,742 $ 777,440 $ (832,132) $ 19,963 $ 31,377 =========== =========== =========== =========== ===========
36 The tax character of distributions paid during the years ended August 31, 2003, and August 31, 2002, respectively were as follows:
YEAR ENDED AUGUST 31, 2003 -------------------------- ORDINARY LONG-TERM TOTAL INCOME CAPITAL GAIN DISTRIBUTIONS ---------- ------------ ------------- GIP $ 101,287 $ -- $ 101,287 CGP -- 962,703 962,703 IEP 67,750 -- 67,750 AAP 120,067 -- 120,067 USGIP 319,927 55,976 375,903 MMP 22,303 -- 22,303 YEAR ENDED AUGUST 31, 2002 -------------------------- ORDINARY LONG-TERM TOTAL INCOME CAPITAL GAIN DISTRIBUTIONS ---------- ------------ ------------- GIP $ 158,117 $ -- $ 158,117 CGP -- 1,217 1,217 AAP 205,827 -- 205,827 USGIP 410,879 29,427 440,306 MMP 61,712 -- 61,712
At August 31, 2003, the components of net assets (excluding paid in capital) on a tax basis were as follows:
GIP CGP IEP --- --- --- Current distributable ordinary income $ 50,619 $ -- $ 73,951 Plus/Less: cumulative timing differences (3,260) (1,586) (1,996) ------------ ------------ ------------ Undistributed ordinary income or overdistribution of ordinary income $ 47,359 $ (1,586) $ 71,955 ============ ============ ============ Current distributable long-term capital gain or tax basis capital loss carryover (1,339,183) (412,041) (240,887) Plus/Less: cumulative timing differences (858,966) (177,304) (330,831) ------------ ------------ ------------ Undistributed long-term gains/accumulated capital loss (2,198,149) (589,345) (571,718) ============ ============ ============ Unrealized appreciation (depreciation) $ 281,742 $ 777,440 $ (832,043) ============ ============ ============ AAP USGIP MMP --- ----- --- Current distributable ordinary income $ 50,396 $ 165,766 $ 3,129 Plus/Less: cumulative timing differences (2,206) (1,129) (1,267) ------------ ------------ ------------ Undistributed ordinary income or overdistribution of ordinary income $ 48,190 $ 164,637 $ 1,862 ============ ============ ============ Current distributable long-term capital gain or tax basis capital loss carryover (1,210,121) 149,887 -- Plus/Less: cumulative timing differences (226,856) -- -- ------------ ------------ ------------ Undistributed long-term gains/accumulated capital loss (1,436,977) 149,887 -- ============ ============ ============ Unrealized appreciation (depreciation) $ 19,870 $ 31,377 $ -- ============ ============ ============
For GIP, the difference between book and tax basis unrealized appreciation/(depreciation) is primarily attributed to wash sale loss deferrals. The cumulative timing difference account primarily consists of deferred compensation, and post October capital loss deferrals. For CGP, the difference between book and tax basis unrealized appreciation/(deprecation) is primarily attributed to wash sale loss deferrals. The cumulative timing difference account primarily consists of deferred compensation, and post October capital loss deferrals. For IEP, the difference between book and tax basis unrealized appreciation/(depreciation) is primarily attibuted to wash sale loss deferrals, and mark to market of Passive Foreign Investment Companies. The cumulative timing difference account primarily consists of deferred compensation, and post October capital loss deferrals. For AAP, the difference between book and tax basis unrealized appreciation/(depreciation) is primarily attributed to wash sale loss deferrals, straddle loss deferrals, and the mark to market of futures. The cumulative timing difference account primarily consists of deferred compensation, and post October capital loss deferrals. For USGIP, the difference between book and tax basis unrealized appreciation/(depreciation) is primarily attributed to wash sale loss deferrals. The cumulative timing difference account primarily consists of deferred compensation. For MMP, the cumulative timing difference account primarily consists of deferred compensation. As of August 31, 2003, the following Portfolios have capital loss carryovers which will be available to offset capital gains. To the extent that any net capital loss carryovers are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders.
EXPIRATION FUND AMOUNT DATE --- ------------ --------------- GIP $ 467,476 August 31, 2008 200,302 August 31, 2010 671,405 August 31, 2011 ------------ 1,339,183 ============ CGP 412,041 August 31, 2011 ============ IEP 163,873 August 31, 2010 77,014 August 31, 2011 ------------ 240,887 ============ AAP 67,791 August 31, 2008 299,875 August 31, 2009 346,788 August 31, 2010 495,667 August 31, 2011 ------------ $ 1,210,121 ============
37 Capital losses incurred after October 31, within a Portfolio's fiscal year are deemed to arise on the first business day of the following fiscal year for tax purposes. The following Portfolios have incurred the following post-October realized losses.
FUND AMOUNT ---- --------- GIP $ 858,966 CGP 177,305 IEP 330,831 AAP 226,856
6. CONCENTRATIONS AND INDEMNIFICATIONS--As of August 31, 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 August 31, 2003, IEP invested 28.0% of its total investments in the United Kingdom. The issuers' abilities to meet their obligations may be affected by economic or political developments in a specific country or region. In the normal course of business, the Portfolios enter into contracts that contain a variety of representations which provide general indemnifications. Each Portfolio's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against each Portfolio that have not yet occurred. However, based on experience, the Portfolios expect the risk of loss to be remote. 7. SUBSEQUENT EVENT--On September 1, 2003, Robert Fleming, Inc. and J.P. Morgan Fleming Asset Management (USA), Inc. merged into J.P. Morgan Investment Management, Inc. ("JPMIM"). The investment advisory services and personnel providing investment advice have not changed as a result of the merger. Effective September 1, 2003, JPMIM, the surviving entity, will serve as advisor to all the Portfolios. On October 1, 2003, JPMIM changed from being a wholly owned subsidiary of JPMorgan ("Parent") to being an indirectly wholly owned subsidiary of the Parent, with the intermediary being J.P. Morgan Fleming Asset Management Holdings, Inc. 38 REPORT OF INDEPENDENT AUDITORS To the Trustees and Shareholders of Mutual Fund Variable Annuity Trust: In our opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Growth and Income Portfolio, Capital Growth Portfolio, International Equity Portfolio, Asset Allocation Portfolio, U.S. Government Income Portfolio and Money Market Portfolio (separate portfolios of Mutual Fund Variable Annuity Trust, hereafter referred to as the "Trust") at August 31, 2003, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trust's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York October 20, 2003 39 TRUSTEE AND OFFICER INFORMATION (UNAUDITED) The following tables contain basic information regarding the Trustees and Officers, respectively, that oversee operations of the Trusts and other investment companies within the JPMorgan Funds complex.
NUMBER OF PORTFOLIOS IN POSITIONS TERM OF JPMORGAN HELD WITH OFFICE AND PRINCIPAL FUND OTHER DIRECTORSHIPS NAME, CONTACT EACH LENGTH OF OCCUPATIONS COMPLEX(1) HELD OUTSIDE ADDRESS AND JPMORGAN TIME DURING PAST OVERSEEN BY JPMORGAN FUND DATE OF BIRTH TRUST SERVED 5 YEARS TRUSTEE COMPLEX - -------------------------- -------------- ------------ ---------------------- --------------- ---------------------------- NON-INTERESTED TRUSTEE(S) William J. Armstrong; Trustee Since 1994 Retired; Vice 71 None 522 Fifth Avenue, President and New York, NY 10036; Treasurer of 12/4/1941 Ingersoll-Rand Company (manufacturer of industrial equipment) (1972-2000) Roland R. Eppley, Jr.; Trustee Since 1994 Retired 71 Director, Janel Hydro Inc. 522 Fifth Avenue, (1993-Present) New York, NY 10036; 4/1/1932 Ann Maynard Gray; Trustee Since 2001 Vice President of 71 Director of Duke Energy 522 Fifth Avenue, Capital Cities/ABC, Corporation, (1997-Present); New York, NY 10036; Inc. (communications) Director of Elan 8/22/1945 (1986-1998); Corporation, Plc President of (pharmaceuticals) Diversified (2001-Present); Publishing Director of The Phoenix Group (1991-1997) Companies (wealth management) (2002-Present) Matthew Healey; Trustee and Since 2001 Retired; Chief 71 None 522 Fifth Avenue, President of Executive New York, NY 10036; the Board Officer of certain 8/23/1937 of Trustees J.P. Morgan Fund Trusts (1982-2001) Fergus Reid, III; Trustee and Since 1994 Chairman of 71 Trustee of 16 Morgan 522 Fifth Avenue, Chairman of Lumelite Stanley Funds New York, NY 10036; the Board Corporation (plastics (1995-Present) 8/12/1932 of Trustees manufacturing) (1985-Present) James J. Schonbachler; Trustee Since 2001 Retired; Managing 71 None 522 Fifth Avenue, Director of Bankers New York, NY 10036; Trust Company, 1/26/1943 (financial services) (1968-1998); Group Head and Director of Bankers Trust, A.G., Zurich and BT Brokerage Corp. (financial services) (1995-2002) Robert J. Higgins; Trustee Since 2002 Director of 71 Director of Providian 522 Fifth Avenue, Administration of Financial Corp. (banking) New York, NY 10036; the State of Rhode (2002-Present) 10/9/1945 Island (2003-Present); President-- Consumer Banking and Investment Services Fleet Boston Financial (1971-2002)
(1) A Fund Complex means two or more investment companies that hold themselves out to investors as related companies for purposes of investment and investment services or have a common investment advisor or have an investment advisor that is an affiliated person of the investment advisor of any of the other investment companies. The JPMorgan Fund Complex for which the Trustees serve includes 11 investment companies. 40
NUMBER OF PORTFOLIOS IN POSITIONS TERM OF JPMORGAN HELD WITH OFFICE AND PRINCIPAL FUND OTHER DIRECTORSHIPS NAME, CONTACT EACH LENGTH OF OCCUPATIONS COMPLEX HELD OUTSIDE ADDRESS AND JPMORGAN TIME DURING PAST OVERSEEN BY JPMORGAN FUND DATE OF BIRTH TRUST SERVED 5 YEARS TRUSTEE COMPLEX - -------------------------- -------------- ------------ ---------------------- --------------- ---------------------------- Dr. Matthew Goldstein; Trustee Since 2003 Chancellor of the 71 Trustee of the 522 Fifth Avenue, City University of Albert Einstein School of New York, NY 10036; New York, since Medicine (1998-present); 11/10/1941 September 1, 1999; Trustee of Bronx Lebanon President, Adelphi Hospital Center University (1992-present); Director of (New York) New Plan Excel Realty (1998-1999). Trust, Inc (real estate investment company) (2000-present); Director of Lincoln Center Institute for the Arts in Education (1999-present); Director of Jewish Community Relations Counsel of New York, Inc. (2000-present); Director of United Way of New York City (2002-present). William G. Morton, Jr.; Trustee Since 2003 Formerly Chairman 71 Director of Radio Shack 522 Fifth Avenue, Emeritus (March Corporation (electronics) New York, NY 10036; 2001 - October 2002), (1987-present); Director of 3/13/1937 and Chairman and the Griswold Company Chief Executive (securities brokerage) Officer, Boston (2002-present); Director of Stock Exchange The National Football (June 1985 - Foundation and College March 2001). Hall of Fame (1994-present); Trustee of the Berklee College of Music (1998-present); Trustee of the Stratton Mountain School (2001-present). INTERESTED TRUSTEE(S) Leonard M. Spalding* Trustee Since 1998 Retired; Chief 71 Director of Glenview 522 Fifth Avenue, Executive Officer Trust; Director of Pizza New York, NY 10036; of Chase Mutual Magia; Trustee of 7/20/1935 Funds (investment St. Catherine College company) Trust; Trustee of Bellarmine (1989-1998); Chief University Trust; Director Investment Executive of Marion Washington of Chase Manhattan Airport Board Trust; Private Bank Director of Springfield (investment Washington Economic management) Development Board Trust; (1990-1995)
* Mr. Spalding is deemed to be an "interested person" due to his ownership of equity securities of J.P. Morgan Chase & Co. 41
POSITIONS HELD WITH PRINCIPAL NAME, EACH TERM OF OFFICE OCCUPATIONS CONTACT ADDRESS JPMORGAN AND LENGTH OF DURING PAST AND DATE OF BIRTH TRUST TIME SERVED 5 YEARS - -------------------------- -------------- ---------------------- ------------------------------------ George Gatch; President Since 2001 Managing Director, J.P. Morgan 522 Fifth Avenue, Investment Management Inc.; New York, NY Head of J.P. Morgan Fleming's 10036; U.S. Mutual Funds and Financial 12/21/1962 Intermediaries Business ("FFI"); he has held numerous positions throughout the firm in business management, marketing and sales. David Wezdenko; Treasurer Since 2001 Managing Director, J.P. Morgan 522 Fifth Avenue, Investment Management Inc.; New York, NY Chief Operating Officer for FFI; 10036; since joining J.P. Morgan Chase in 10/2/1963 1996, he has held numerous financial and operation related positions supporting the J.P. Morgan pooling funds business. Sharon J. Weinberg; Secretary Since 2001 Managing Director, J.P. Morgan 522 Fifth Avenue, Investment Management Inc.; New York, NY Head of Business and Product 10036; Strategy for FFI; since joining 6/15/1959 J.P. Morgan Chase in 1996, she has held numerous positions throughout the asset management business in mutual funds marketing, legal and product development. Stephen M. Ungerman; Vice President Since 2001 Vice President, J.P. Morgan 522 Fifth Avenue and Assistant Investment Management Inc. Business New York, NY Treasurer Head for Vehicle Services Group 10036; within Fund Administration; prior 6/2/1953 to joining J.P. Morgan Chase in 2000, he held a number of senior management positions in Prudential Insurance Co. of America's asset management business, including Associate General Counsel, Tax Director and Co-head of Fund Administration Department; Mr. Ungerman was also the Assistant Treasurer of all mutual funds managed by Prudential. Judy R. Bartlett; Vice President Since 2001 Vice President and Assistant 522 Fifth Avenue, and Assistant General Counsel, J.P. Morgan New York, NY Secretary Investment Management Inc., since 10036; September 2000; from August 1998 5/29/1965 through August 2000, she was an attorney at New York Life Insurance Company where she served as Assistant Secretary for the Mainstay Funds. Joseph J. Bertini; Vice President Since 2001 Vice President and Assistant 522 Fifth Avenue, and Assistant General Counsel, J.P. Morgan New York, NY Secretary Investment Management Inc. 10036; 11/4/1965 Wayne H. Chan Vice President Since 2003 Vice President and Assistant 522 Fifth Avenue, and Assistant General Counsel, J.P. Morgan New York, NY Secretary Investment Management Inc., since 10036 September 2002; Mr. Chan was an 6/27/1965 associate at the law firm of Shearman & Sterling LLP from May 2001 through September 2002; Swidler Berlin Shereff Friedman LLP from June 1999 through May 2001 and Whitman Breed Abbott & Morgan LLP from September 1997 through May 1999
42
POSITIONS HELD WITH PRINCIPAL NAME, EACH TERM OF OFFICE OCCUPATIONS CONTACT ADDRESS JPMORGAN AND LENGTH OF DURING PAST AND DATE OF BIRTH TRUST TIME SERVED 5 YEARS - -------------------------- -------------- ---------------------- ---------------------------------- Paul M. DeRusso Assistant Since 2001 Vice President, J.P. Morgan 522 Fifth Avenue, Treasurer Investment Management, Inc.; New York, NY Manager of the Budgeting and 10036 Expense Group of Funds 12/3/1954 Administration Group. Lai Ming Fung Assistant Since 2001 Associate, J.P. Morgan Investment 522 Fifth Avenue, Treasurer Management, Inc.; Budgeting New York, NY Analyst for the Budgeting and 10036 Expense Group of Funds 9/8/1974 Administration Group. Mary D. Squires Assistant Since 2001 Vice President, J.P. Morgan 522 Fifth Avenue, Treasurer Investment Management, Inc.; New York, NY Ms. Squires has held numerous 10036 financial and operations positions 1/8/1955 supporting the J.P. Morgan Chase organization complex. Nimish S. Bhatt Assistant Since 2001 Senior Vice President of 3435 Stelzer Rd. Treasurer Alternative Investment Products Columbus, OH and Tax Services of BISYS Fund 43219 Services, Inc. since January 2002; 6/6/1963 held various positions within BISYS since 1996, including Senior Vice President of Fund Administration and Financial Services, Vice President and Director of International Operation, Vice President of Financial Administration and Vice President of Tax. Arthur A. Jensen Assistant Since 2001 Vice President of Financial 3435 Stelzer Rd. Treasurer Services of BISYS Fund Services, Columbus, OH Inc. since June 2001; formerly 43219 Section Manager of Northern Trust 9/28/1966 Company and Accounting Supervisor at Allstate Insurance Company. Martin R. Dean Assistant Since 2001 Vice President of Regulatory 3435 Stelzer Rd. Treasurer Services of BISYS Fund Services, Columbus, OH Inc. 43219 11/27/1963 Alaina Metz Assistant Since 2001 Chief Administrative Officer of 3435 Stelzer Rd. Secretary BISYS Fund Services, Inc.; Columbus, OH formerly, Supervisor of the Blue 43219 Sky Department of Alliance Capital 4/7/1967 Management, L.P. Ryan M. Louvar Assistant Since 2003 Counsel of Legal Services, BISYS 60 State Street, Secretary Fund Services, Inc. since 2000; Suite 1300 formerly Attorney at Hill, Farrer Boston, MA & Burrill LLP from 1999 to 2000 02109 and Knapp Petersen & Clarke, PC 2/18/1972 from 1997 to 1999. Lisa Hurley Assistant Since 2001 Executive Vice President and 60 State Street, Secretary General Counsel of BISYS Fund Suite 1300 Services, Inc. Boston, MA 02109 5/29/1955 Thomas J. Smith Vice President Since 2002 Managing Director, Head of 522 Fifth Avenue, and Assistant Compliance for J.P. Morgan Chase & New York, NY Secretary Co.'s asset management business in 10036 the Americas. 6/24/1955
Additional information concerning the Trustees is contained in the Statement of Additional Information and is available without charge by calling 1-800-348-4782. 43 TAX LETTER (UNAUDITED) Certain tax information for the Mutual Fund Variable Annuity Portfolios is required to be provided to shareholders based upon the Portfolio's income and distributions for the taxable year end August 31, 2003. The information and distributions reported in this letter may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2003. The information necessary to complete your income tax returns for the calendar year ending December 31, 2003 will be received under separate cover. FOR THE FISCAL YEAR ENDED AUGUST 31, 2003: The following represents the long-term capital gains distributed by the Portfolio:
LONG-TERM CAPITAL GAINS PORTFOLIO DISTRIBUTIONS - ------------------------------------------------------------------------- CGP $ 962,703 USGIP 55,976
THIS PAGE IS INTENTIONALLY LEFT BLANK [GRAPHIC] A-7036-CRT (C)J.P. MORGAN CHASE & CO., 2003. ALL RIGHTS RESERVED. OCTOBER, 2003 F-7036(CMB) AN-VCA-803 ITEM 2. CODE OF ETHICS. (a) Disclose whether, as of the end of the period covered by the report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. If the registrant has not adopted such a code of ethics, explain why it has not done so. THE REGISTRANT HAS ADOPTED A CODE OF ETHICS THAT APPLIES TO THE REGISTRANT'S PRINCIPAL EXECUTIVE OFFICER, PRINCIPAL FINANCIAL OFFICER, PRINCIPAL ACCOUNTING OFFICER OR CONTROLLER, OR PERSONS PERFORMING SIMILAR FUNCTIONS. THE REGISTRANT WILL PROVIDE ANY PERSON WITHOUT CHARGE, UPON REQUEST, A COPY OF THE CODE OF ETHICS. A REQUEST MAY BE MADE BY CALLING 1-800-348-4782. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a) (1) Disclose that the registrant's board of directors has determined that the registrant either: (i) Has at least one audit committee financial expert serving on its audit committee; or (ii) Does not have an audit committee financial expert serving on its audit committee. THE REGISTRANT'S BOARD OF DIRECTORS HAS DETERMINED THAT THE REGISTRANT HAS AT LEAST ONE AUDIT COMMITTEE FINANCIAL EXPERT SERVING ON ITS AUDIT COMMITTEE. (2) If the registrant provides the disclosure required by paragraph (a)(1)(i) of this Item, it must disclose the name of the audit committee financial expert and whether that person is "independent." In order to be considered "independent" for purposes of this Item, a member of an audit committee may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (i) Accept directly or indirectly any consulting, advisory, or other compensatory fee from the issuer; or (ii) Be an "interested person" of the investment company as defined in Section 2(a)(19) of the Act (15 U.S.C. 80a- 2(a)(19)). THE AUDIT COMMITTEE FINANCIAL EXPERT IS WILLIAM ARMSTRONG. HE IS A "NON-INTERESTED" TRUSTEE AND IS ALSO "INDEPENDENT" AS DEFINED BY THE SECURITIES AND EXCHANGE COMMISSION FOR PURPOSES AUDIT COMMITTEE FINANCIAL EXPERT DETERMINATIONS. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Disclose, under the caption AUDIT FEES, the aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. (b) Disclose, under the caption AUDIT-RELATED FEES, the aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (c) Disclose, under the caption TAX FEES, the aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (d) Disclose, under the caption ALL OTHER FEES, the aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (e) (1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. (2) Disclose the percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees. (g) Disclose the aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant. (h) Disclose whether the registrant's audit committee of the board of directors has considered whether the provision of nonaudit services that were rendered to the registrant's investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. NOT APPLICABLE - ONLY EFFECTIVE FOR ANNUAL REPORTS WITH FISCAL YEARS ENDING ON OR AFTER DECEMBER 15, 2003. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. NOT APPLICABLE. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. A closed-end management investment company that is filing an annual report on this Form N-CSR must, unless it invests exclusively in non-voting securities, describe the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities, including the procedures that the company uses when a vote presents a conflict between the interests of its shareholders, on the one hand, and those of the company's investment adviser; principal underwriter; or any affiliated person (as defined in Section 2(a)(3) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules thereunder) of the company, its investment adviser, or its principal underwriter, on the other. Include any policies and procedures of the company's investment adviser, or any other third party, that the company uses, or that are used on the company's behalf, to determine how to vote proxies relating to portfolio securities. NOT APPLICABLE ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) Disclose the conclusions of the registrant's principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, about the effectiveness of the registrant's disclosure controls and procedures (as defined in Rule 30a-2(c) under the Act (17 CFR 270.30a-2(c))) based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph. THE REGISTRANT'S PRINCIPAL EXECUTIVE AND PRINCIPAL FINANCIAL OFFICERS HAVE CONCLUDED, BASED ON THEIR EVALUATION OF THE REGISTRANT'S DISCLOSURE CONTROLS AND PROCEDURES AS OF A DATE WITHIN 90 DAYS OF THE FILING DATE OF THIS REPORT, THAT THE REGISTRANT'S DISCLOSURE CONTROLS AND PROCEDURES ARE REASONABLY DESIGNED TO ENSURE THAT INFORMATION REQUIRED TO BE DISCLOSED BY THE REGISTRANT ON FORM N-CSR IS RECORDED, PROCESSED, SUMMARIZED AND REPORTED WITHIN THE REQUIRED TIME PERIODS AND THAT INFORMATION REQUIRED TO BE DISCLOSED BY THE REGISTRANT IN THE REPORTS THAT IT FILES OR SUBMITS ON FORM N-CSR IS ACCUMULATED AND COMMUNICATED TO THE REGISTRANT'S MANAGEMENT, INCLUDING ITS PRINCIPAL EXECUTIVE AND PRINCIPAL FINANCIAL OFFICERS, AS APPROPRIATE TO ALLOW TIMELY DECISIONS REGARDING REQUIRED DISCLOSURE. (b) Disclose whether or not there were significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. THERE WERE NO CHANGES IN THE REGISTRANT'S INTERNAL CONTROL OVER FINANCIAL REPORTING THAT OCCURRED DURING THE REGISTRANT'S MOST RECENT FISCAL HALF-YEAR (THE REGISTRANT'S SECOND FISCAL HALF-YEAR IN THE CASE OF AN ANNUAL REPORT) THAT HAVE MATERIALLY AFFECTED, OR ARE REASONABLY LIKELY TO MATERIALLY AFFECT, THE REGISTRANT'S INTERNAL CONTROL OVER FINANCIAL REPORTING. ITEM 10. EXHIBITS. (a) File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (a)(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit. NOT APPLICABLE - SEE ITEM 2 ABOVE. (a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2). CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 ARE ATTACHED HERETO. (b) A separate or combined certification for each principal executive officer and principal officer of the registrant as required by Rule 30a-2(b) under the Act of 1940. CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 ARE ATTACHED HERETO. SIGNATURES [See General Instruction F] Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Mutual Fund Variable Annuity Trust -------------------------------------------------------------------- By (Signature and Title)* /s/ David Wezdenko ------------------------------------------------------- David Wezdenko, Treasurer Date October 21, 2003 ---------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ David Wezdenko ------------------------------------------------------- David Wezdenko, Treasurer Date October 21, 2003 ---------------------------------------------------------------------------- By (Signature and Title)* /s/ George C.W. Gatch ------------------------------------------------------- George C.W. Gatch, President Date October 21, 2003 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature. - -------------------------------------------------------------------------------- EX-99.CERT 3 a2120859zex-99_cert.txt EX-99.CERT Ex 99.cert CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002 I, George C.W. Gatch, certify that: 1. I have reviewed this report on Form N-CSR of Asset Allocation Portfolio, Capital Growth Portfolio, Growth and Income Portfolio, International Equity Portfolio, Money Market Portfolio and U.S. Government Income Portfolio (the "Portfolios"), each a series of Mutual Fund Variable Annuity Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Portfolios as of, and for, the periods presented in this report; 4. The Portfolios' other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Portfolios and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Funds, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the Portfolios' disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the Portfolios' internal control over financial reporting that occurred during the Portfolios' most recent fiscal half-year (the Portfolios' second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Portfolios' internal control over financial reporting; and 5. The Portfolios' other certifying officer(s) and I have disclosed to the Portfolios' auditors and the audit committee of the Portfolios' board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Portfolios' ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Portfolios' internal control over financial reporting. /s/ George C.W. Gatch - ------------------------------- George C.W. Gatch President October 21, 2003 - ------------------------------- Date CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002 I, David Wezdenko, certify that: 1. I have reviewed this report on Form N-CSR of Asset Allocation Portfolio, Capital Growth Portfolio, Growth and Income Portfolio, International Equity Portfolio, Money Market Portfolio and U.S. Government Income Portfolio (the "Portfolios"), each a series of Mutual Fund Variable Annuity Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Portfolios as of, and for, the periods presented in this report; 4. The Portfolios' other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Portfolios and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Funds, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the Portfolios' disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the Portfolios' internal control over financial reporting that occurred during the Portfolios' most recent fiscal half-year (the Portfolios' second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Portfolios' internal control over financial reporting; and 5. The Portfolios' other certifying officer(s) and I have disclosed to the Portfolios' auditors and the audit committee of the Portfolios' board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Portfolios' ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Portfolios' internal control over financial reporting. /s/ David Wezdenko - ------------------------------- David Wezdenko Treasurer October 21, 2003 - ------------------------------- Date EX-99.906CERT 4 a2120859zex-99_906cert.txt EX-99.906CERT Ex 99.906cert CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES OXLEY ACT OF 2002 This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, and accompanies the report on Form N-CSR for the period ended August 31, 2003 of the Asset Allocation Portfolio, Capital Growth Portfolio, Growth and Income Portfolio, International Equity Portfolio, Money Market Portfolio and U.S. Government Income Portfolio, each a series of Mutual Fund Variable Annuity Trust (the "Registrant"). I, George C.W. Gatch, certify that: 1. The Form N-CSR fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)), as applicable; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Asset Allocation Portfolio, Capital Growth Portfolio, Growth and Income Portfolio, International Equity Portfolio, Money Market Portfolio and U.S. Government Income Portfolio, each a series of the Registrant. /s/ George C.W. Gatch - ------------------------------- George C.W. Gatch President October 21, 2003 - ------------------------------- Date This certificate is furnished pursuant to the requirements of Form N-CSR and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act of 1934. CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES OXLEY ACT OF 2002 This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, and accompanies the report on Form N-CSR for the period ended August 31, 2003 of the Asset Allocation Portfolio, Capital Growth Portfolio, Growth and Income Portfolio, International Equity Portfolio, Money Market Portfolio and U.S. Government Income Portfolio, each a series of Mutual Fund Variable Annuity Trust; (the "Registrant"). I, David Wezdenko, certify that: 1. The Form N-CSR fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)), as applicable; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Asset Allocation Portfolio, Capital Growth Portfolio, Growth and Income Portfolio, International Equity Portfolio, Money Market Portfolio and U.S. Government Income Portfolio, each a series of the Registrant. /s/ David Wezdenko - ------------------------------- David Wezdenko Treasurer October 21, 2003 - ------------------------------- Date This certificate is furnished pursuant to the requirements of Form N-CSR and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act of 1934. -----END PRIVACY-ENHANCED MESSAGE-----