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Morgan Stanley Convertible Securities Trust – ‘N-30B-2’ for 3/31/99

On: Monday, 6/7/99 · For: 3/31/99 · Accession #: 1047469-99-23356 · File #: 811-04310

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 6/07/99  Morgan Stanley Convertible Se… Tr N-30B-2     3/31/99    1:567K                                   Merrill Corp/New/FA

Periodic or Interim Report Mailed to Shareholders — Rule 30b-2
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: N-30B-2     Quarterly Report                                     253±   959K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Fixed Income Performance Summary President's Letter
1	1st Page - Filing Submission
3	President's Letter
4	Performance Summary
107	Fixed Income

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MORGAN STANLEY DEAN WITTER

MORGAN STANLEY DEAN WITTER
INSTITUTIONAL FUND, INC.
FIRST QUARTER REPORT
MARCH 31, 1999
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Institutional Fund, Inc.
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TABLE OF CONTENTS
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[Download Table]

President's Letter.......................... 1
Performance Summary......................... 2
Letters to Shareholders and Investments by
Portfolio:
Global and International Equity Portfolios:
Active International Allocation........... 4
Asian Equity.............................. 13
Asian Real Estate......................... 18
Emerging Markets.......................... 22
European Equity .......................... 30
European Real Estate...................... 34
Global Equity ............................ 38
International Equity ..................... 43
International Magnum ..................... 47
International Small Cap................... 53
Japanese Equity........................... 57
Latin American............................ 61
U.S. Equity Portfolios:
Aggressive Equity......................... 65
Emerging Growth........................... 69
Equity Growth............................. 73
Technology................................ 78
U.S. Equity Plus.......................... 81
U.S. Real Estate.......................... 88
Value Equity.............................. 94
Fixed Income Portfolios:
Emerging Markets Debt..................... 99
Fixed Income.............................. 105
Global Fixed Income....................... 109
High Yield................................ 113
Municipal Bond............................ 118
Directors and Officers ..................... 120

Daily net asset values and monthly updates, including certain portfolio
characteristics, for each portfolio can now be accessed at
www.msdw.com/institutional/investmentmanagement.

Portfolio information for the Money Market and Municipal Money Market Portfolios
is provided in the semi-annual and annual reports to shareholders.

This report is authorized for distribution only when preceded or accompanied by
prospectuses of the Morgan Stanley Dean Witter Institutional Fund, Inc.
Prospectuses describe in detail each of the Portfolio's investment policies to
the prospective investor. Please read the prospectuses carefully before you
invest or send money.

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Institutional Fund, Inc.
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PRESIDENT'S LETTER
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Fellow Shareholders:

We are pleased to present to you the Fund's Quarterly Report for the quarter
ended March 31, 1999. This quarter, we have combined the commentaries and
portfolio holdings for the Fund's 24 individual portfolios into one report along
the lines of our Semi-Annual and Annual Reports. We hope you find the format
both informative and "user-friendly".

MARKET REVIEW

The first quarter of 1999 was a period of uncertainty for the global
economy. Although fourth quarter strength and optimism continued in the United
States and Europe well into mid-January, markets turned cautious amidst concerns
regarding earnings disappointments and Brazil's currency devaluation and
financial crisis. However, by early March, economic worries in the U.S. abated,
when earnings announcements remained solid, consumer spending held steady,
strong growth continued without substantial inflationary or wage pressures and
the financial situation in Brazil appeared to stabilize. Equity markets finished
the quarter with firm gains, driven primarily by performance in March.

Leading the developed equity markets in the first quarter was Japan, which
rose 12.2% in U.S. dollar terms, driven by increased investor optimism
surrounding corporate restructuring. Asian markets also fared well, with the
Pacific ex-Japan region rising 6.1% also in U.S. dollar terms. Emerging markets
were surprisingly strong in the first quarter, despite the Brazilian
devaluation. Markets generally fell in the weeks immediately before and after
the devaluation. However, investors were quickly comforted by the seemingly
contained nature of the crisis, the strength and stability of Brazil's financial
sector, and relatively decisive steps taken by the government. Large cap US
equities were also strong, as the S&P 500 rose 5.0% in the first quarter. Mid
and small cap equities in the U.S. continued to lag, as the Russell 2500 Index
returned -4.7%. Of the developed market regions, Euroland was the laggard in the
first quarter, falling -1.5% in U.S. dollar terms (+4.9% in Euro terms).
Euroland equities were held back over concerns regarding earnings, high
unemployment, and uncertainty about the direction of interest rates. The
resignation in Germany of LaFontaine in late March opened the door for an
interest rate ease by the European Central Bank (ECB) (which occurred in early
April), but equity prices remained somewhat stagnant, concerned with a
combination of high valuations and sluggish economic performance.

Bonds suffered globally during the first quarter, as yields rose in response
to stronger economic growth prospects. In the U.S., the Lehman Aggregate Bond
Index fell -0.5% for the quarter. Corporate, mortgage and high yield bond
spreads continued to tighten during the quarter, reflecting confidence in
economic growth and a return to a more normal risk environment.

While prospects for the global economy had brightened by the end of the
quarter, economic growth remained concentrated in the U.S. Although the Yen
briefly strengthened in January, it had pulled back by March. Likewise, the
newborn Euro also weakened against the dollar, falling from 1.16 to 1.078 by the
end of the quarter.

MARKET OUTLOOK

We view global macro fundamentals as remaining in the sweet spot for
financial markets with continued growth and subdued inflation. The world
manufacturing slowdown triggered by the emerging market crises of 1997-1999
appears to have ended with most global leading indicators pointing to a recovery
in manufacturing growth. World growth, and, therefore, earnings growth, should
benefit from the combination of strong consumption and renewed manufacturing
activity. Both U.S. and European earnings should grow between 5%-10%, with the
U.S. outperforming Europe. The Japanese economy appears to have flattened out
but sustainable economic growth is still questionable. Still, recurring profits
for Japanese corporates are expected to grow from this past year's depressed
levels.

Equity market valuations look threatening, particularly in the U.S. However,
in the absence of a change in the current steady growth/subdued inflation
environment, the bias for equities remains upward, particularly given the number
of monetary easings we have witnessed. Among the risk factors we are tracking
are renewed inflationary pressures spurred by the bottoming in manufacturing
activity in most regions and very high levels of speculative optimism, which
could trigger a correction.

In this Report, each of our portfolio managers discuss the performance
results and outlook of their markets and portfolios in greater detail. As noted
above, we hope you find the Report informative. As always, we very much
appreciate your continued support of the Fund.

Sincerely,

/s/Michael F. Klein

Michael F. Klein
PRESIDENT

April 1999

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PERFORMANCE SUMMARY
MARCH 31, 1999
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[Enlarge/Download Table]

NET ASSETS NET ASSET VALUE
INCEPTION DATES (000) PER SHARE YTD TOTAL RETURN
------------------ -------------------- ----------------- ---------------------------
COMPARABLE
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B INDICES
-------- -------- ---------- -------- ------- ------- ------- ------- --------------

GLOBAL AND INTERNATIONAL EQUITY
PORTFOLIOS:
Active International
Allocation 1/17/92 1/02/96 $ 423,374 $ 472 $12.04 $12.19 1.18% 0.58% 1.39% (1)
Asian Equity 7/01/91 1/02/96 50,577 1,468 8.17 8.11 2.00 1.76 5.02 (2)
Asian Real Estate 10/01/97 10/01/97 2,773 788 6.93 6.96 4.53 4.51 6.01 (11)
Emerging Markets 9/25/92 1/02/96 870,673 7,458 10.66 10.67 11.62 11.61 8.86 (3)
12.44 (12)
European Equity 4/02/93 1/02/96 139,939 3,867 15.16 15.13 - 3.75 - 3.88 - 2.11 (4)
European Real Estate 10/01/97 10/01/97 19,451 2,061 9.44 9.46 - 1.46 - 1.56 1.07 (13)
Global Equity 7/15/92 1/02/96 194,696 18,906 19.91 19.80 - 4.00 - 4.02 3.57 (5)
International Equity 8/04/89 1/02/96 3,723,601 22,722 18.48 18.44 1.26 1.21 1.39 (1)
International Magnum 3/15/96 3/15/96 194,308 24,830 11.55 11.51 - 0.17 - 0.26 1.39 (1)
International Small Cap 12/15/92 -- 249,984 -- 15.52 -- 1.77 -- 2.78 (14)
Japanese Equity 4/25/94 1/02/96 51,817 1,364 6.90 6.84 11.83 11.58 12.18 (6)
Latin American 1/18/95 1/02/96 18,723 1,273 7.89 7.93 17.06 16.96 15.69 (7)
U.S. EQUITY PORTFOLIOS:
Aggressive Equity 3/08/95 1/02/96 108,462 17,715 19.79 19.67 13.09 13.05 4.98 (9)
4.80 (15)
Emerging Growth 11/01/89 1/02/96 35,495 1,269 8.84 8.69 9.54 9.58 - 5.42 (10)
Equity Growth 4/02/91 1/02/96 801,163 133,505 20.44 20.35 7.35 7.22 4.98 (9)
Technology 9/16/96 9/16/96 27,886 1,161 21.26 21.17 18.24 18.14 4.98 (9)
U.S. Equity Plus 7/31/97 7/31/97 24,076 1,333 12.94 12.93 4.10 4.11 4.98 (9)
U.S. Real Estate 2/24/95 1/02/96 272,247 12,256 12.35 12.30 - 2.83 - 2.92 - 5.59 (16)
Value Equity 1/31/90 1/02/96 46,596 934 11.25 11.22 4.36 4.37 4.98 (9)
FIXED INCOME PORTFOLIOS:
Emerging Markets Debt 2/01/94 1/02/96 56,041 949 2.73 2.76 4.60 3.76 5.06 (17)
Fixed Income 5/15/91 1/02/96 203,849 2,958 10.89 10.91 - 0.82 - 0.84 - 0.50 (8)
Global Fixed Income 5/01/91 1/02/96 42,254 346 12.02 11.98 - 3.92 - 3.93 - 3.90 (18)
High Yield 9/28/92 1/02/96 146,249 40,088 10.90 10.87 2.92 2.79 1.64 (19)
Municipal Bond 1/18/95 -- 31,209 -- 10.36 -- 0.29 -- 0.85 (20)

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[Download Table]

YIELD INFORMATION AS OF MARCH 31, 1999
--------------------------------------------
30 DAY
CURRENT YIELD+
-----------------
CLASS A CLASS B
------- -------

FIXED INCOME PORTFOLIOS:
Emerging Markets Debt 14.69% 15.12%
Fixed Income 5.73% 5.58%
Global Fixed Income 4.02% 3.87%
High Yield 9.84% 9.59%
Municipal Bond 4.10% --

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+The current 30 day yield reflects the net investment income generated by the
Portfolio over a specified 30 day period expressed as an annual percentage.
Expenses accrued for the 30 day period include any fees charged to all
shareholders. Yields will fluctuate as market conditions change and are not
necessarily indicative of future performance.

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[Enlarge/Download Table]

AVERAGE ANNUAL FIVE AVERAGE ANNUAL TOTAL
ONE YEAR TOTAL RETURN YEAR TOTAL RETURN RETURN SINCE INCEPTION
------------------------------------- -------------------------- --------------------------------------------------------
COMPARABLE COMPARABLE COMPARABLE COMPARABLE
CLASS A CLASS B INDICES CLASS A INDICES CLASS A INDICES-CLASS A CLASS B INDICES-CLASS B
-------- -------- --------------- -------- --------------- -------- ----------------- -------- ---------------

5.05% 4.98% 6.06% (1) 10.18% 8.75% (1) 10.07% 9.48 (1) 11.82% 8.74% (1)
- 9.89 - 10.36 - 10.94 (2) - 11.18 - 8.46 (2) 2.14 2.89 (2) - 20.39 - 15.58 (2)
- 9.09 - 8.71 - 5.15 (11) -- -- - 18.37 - 26.64 (11) - 18.68 - 26.64 (11)
- 23.05 - 23.23 - 20.06 (3) - 5.30 - 5.42 (3) 5.12 3.88 (3) - 2.89 - 7.32 (3)
- 20.95 (12) - 5.34 (12) 4.88 (12) - 7.73 (12)
- 12.11 - 12.44 4.58 (4) 11.44 18.96 (4) 15.74 18.90 (4) 12.69 21.37 (4)
- 11.23 - 11.37 - 11.02 (13) -- -- - 1.11 0.46 (13) - 1.30 0.46 (13)
- 5.41 - 5.67 12.64 (5) 14.78 16.36 (5) 17.69 15.27 (5) 16.68 17.44 (5)
2.83 2.66 6.06 (1) 13.82 8.75 (1) 12.62 5.46 (1) 15.82 8.74 (1)
- 6.23 - 6.51 6.06 (1) -- -- 7.21 9.48 (1) 6.92 9.48 (1)
- 7.11 -- - 8.42 (14) 3.48 - 4.79 (14) 11.21 2.77 (14) -- --
18.08 17.48 15.49 (6) -- -- 0.60 - 4.91 (6) 2.23 - 7.89 (6)
- 29.03 - 28.78 - 25.27 (7) -- -- 8.58 2.42 (7) 12.77 5.07 (7)
10.37 10.08 18.45 -- -- 35.71 29.74 (9) 31.27 18.38 (9)
11.50 (15) -- 21.35 (15) 27.45 (15)
20.11 19.72 - 16.26 (10) 17.43 11.22 (10) 14.22 11.42 (10) 15.59 8.69 (10)
9.44 9.20 18.45 (9) 27.25 26.24 (9) 19.48 19.21 (9) 26.95 27.45 (9)
57.07 56.63 18.45 (9) -- -- 47.39 30.42 (9) 47.03 29.88 (9)
12.58 12.30 18.45 (9) -- -- 17.71 21.47 (9) 17.53 21.47 (9)
- 13.71 - 13.95 - 21.75 -- -- 16.00 9.63 (16) 13.16 7.57 (16)
0.09 - 0.14 18.45 (9) 19.06 26.24 (9) 14.31 19.08 (9) 18.36 27.45 (9)
- 36.53 - 36.46 - 14.47 (17) 10.35 13.06 (17) 5.43 7.62 (17) 5.12 10.94 (17)
5.42 5.35 6.49 (8) 7.82 7.79 (8) 8.06 8.19 (8) 6.37 6.56 (8)
7.92 7.67 9.73 (18) 6.44 7.36 (18) 7.43 8.55 (18) 5.04 5.05 (18)
1.73 1.48 - 0.75 (19) 10.96 8.74 (19) 11.75 9.62 (19) 10.82 8.24 (19)
4.87 -- 5.92 (20) -- -- 6.06 7.39 (20) -- --

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INDICES:

(1) MSCI EAFE (Europe, Australasia, and Far East)
(2) MSCI All-Country Far East Free ex-Japan
(3) IFC Global Total Return Composite
(4) MSCI Europe
(5) MSCI World
(6) MSCI Japan
(7) MSCI Emerging Markets Global Latin America
(8) Lehman Aggregate Bond
(9) S&P 500
(10) Russell 2000
(11) GPR General Real Estate Securities Index -- Far East
(12) MSCI Emerging Markets Free
(13) GPR General Real Estate Securities Index -- Europe
(14) MSCI EAFE Small Cap
(15) Lipper Capital Appreciation
(16) National Association of Real Estate Investment Trusts
(NAREIT) Equity
(17) J.P. Morgan Emerging Markets Bond Plus
(18) J.P. Morgan Traded Global Bond
(19) CS First Boston High Yield
(20) Lehman 7-Year Municipal Bond

Past performance should not be construed as a guarantee of future performance.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Please read the Portfolios' prospectuses carefully before you invest or send
money.

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LETTER TO SHAREHOLDERS
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ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO

The Active International Allocation Portfolio invests in international equity
markets, with emphasis placed upon countries and sectors, rather than stock
selection. This approach reflects our belief that a diversified selection of
securities representing exposure to countries that we find attractive provides
an effective way to maximize the return potential and minimize the risk
associated with global investing.

For the three months ended March 31, 1999, the Portfolio had a total return of
1.18% for the Class A shares and 0.58% for the Class B shares compared to 1.39%
for the Morgan Stanley Capital International (MSCI) EAFE (the "Index"). For the
one year period ended March 31, 1999, the Portfolio had a total return of 5.05%
for the Class A shares and 4.98% for the Class B shares compared to 6.06% for
the Index. For the five-year period ended March 31, 1999, the average annual
total return for Class A shares was 10.18% compared to 8.75% for the Index. From
inception on January 17, 1992 through March 31, 1999, the average annual total
return for Class A shares was 10.07% compared to 9.48% for the Index. From
inception on January 2, 1996 to March 31, 1999, the average annual total return
for Class B shares was 11.82% compared to 8.74% for the Index.

PERFORMANCE COMPARED TO MORGAN STANLEY CAPITAL
INTERNATIONAL (MSCI) EAFE INDEX(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
---------------------------------------
AVERAGE
AVERAGE ANNUAL
ONE ANNUAL SINCE
YTD YEAR FIVE YEARS INCEPTION
------ ----- ---------- ---------

PORTFOLIO -- CLASS A...................... 1.18% 5.05% 10.18% 10.07%
PORTFOLIO -- CLASS B...................... 0.58 4.98 N/A 11.82
INDEX -- CLASS A.......................... 1.39 6.06 8.75 9.48
INDEX -- CLASS B.......................... 1.39 6.06 N/A 8.74

1. The MSCI EAFE Index is an unmanaged index of common stocks in Europe,
Australasia and the Far East (includes dividends net of withholding taxes).

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE COUNTRY SPECIFIC PERFORMANCE
RESULTS PROVIDED ARE AS MEASURED BY THE MSCI EAFE INDEX AND ARE FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE
PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK
CONSIDERATIONS ASSOCIATED WITH INTERNATIONAL INVESTING.

Our first quarter performance was mediocre both compared to the Index and the
average international manager. We are defensively postured because most global
markets are priced for perfection and there are disconcerting pockets of
speculative mania. However although we can think of many things that could go
wrong, none have as yet, so there is no catalyst, other than price, for a bear
market.

For the time being, the U.S. economy is enjoying the best of all possible worlds
with strong growth and virtually no inflation. The rest of the world is not as
robust however, with Japan still in recession, Europe languishing, and the
developing world generally suffering. Our contacts with analysts and corporate
managers in Europe and in Asia continue to suggest a general loss of pricing
power and pressure on margins. Thus, we continue to worry that profit forecasts
(still almost 12% in Europe) for 1999 may disappoint.

However, since we are mindful of our mandate to be an EAFE portfolio and
respectful of the momentum of markets and the power of the bulls, we have not
taken an extreme negative position, although we have held 5-10% cash throughout
most of the quarter. We have also remained relatively close to the EAFE country
benchmarks. If pressed we would have to admit that we believe that both U.S. and
European equities are at the top of their trading ranges and the next move in
most of the developed equity markets, with the possible exception of Japan, is
down and not up.

Currently, we are about 5% underweight the Index in Europe, some 3% over in the
U.K. including a small and medium capitalization tilt, and about Index weight in
Asia and Japan. Relative to the Index, our biggest overweight is Singapore, and
we still emphasize the "Euro-Bubble" economies of Spain, Italy, and Portugal.
Our target cash position is 5%. We hold our tilt into European real estate and
have been extensively analyzing other tilts, particularly out of European
telecommunications and into value cyclical groups such as chemicals and papers.

Early in the quarter we visited Singapore, Hong Kong, and Japan and talked with
government officials, central bankers, other investors, and businessmen. These
meetings were illuminating in reinforcing our conviction that Asia is not yet
out of the economic woods; however we were impressed with the fervor for
restructuring and belt tightening we

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Active International Allocation Portfolio

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LETTER TO SHAREHOLDERS
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ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO (CONT.)
found in Singapore. We are admirers of the Hong Kong Monetary Authority, but the
austerity the peg imposes on the economy makes it difficult for equities to
prosper.

Our time in Japan was particularly interesting. Japanese equities are not cheap
on earnings and dividends, but on price to sales and enterprise value they are
the cheapest in the industrial world. Profitability both in terms of return on
equity and operating margins has collapsed, and as a result earnings are as
depressed as profits were in the U.S. in the 1930's. We are pretty much
convinced that the Japanese government and corporate management are now
committed to radical restructuring.

This should be the recipe for a long lasting recovery in both profitability and
stock prices. It has been calculated that if Japanese companies over the next
ten years restructure so as to bring their returns to 75% of the level of
European companies today, their profits will go at an annual rate of 16%.

Unfortunately, the Japanese economy is suffering from both recession and
deflation, and corporate restructuring in the short run only increases the pain.
There are no real signs yet that the economy has begun to recover, and our
economists in Japan are quite pessimistic. It is hard to see a new bull market
beginning in Japan without some signs of life from the economy.

As a result of all this, we have moved to about an Index weight in Japanese
equities. If we believed an economic spring was imminent we would increase our
weighting substantially. In the meantime, since a weaker yen is essential for
economic revival, we have hedged a portion of our Japanese yen position.

Ann D. Thivierge
PORTFOLIO MANAGER

Barton M. Biggs
PORTFOLIO MANAGER

April 1999

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Active International Allocation Portfolio

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO
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[Download Table]

VALUE
SHARES (000)

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COMMON STOCKS (75.6%)
AUSTRALIA (3.3%)
71,278 AMP Ltd.......................................... $ 781
49,476 Amcor Ltd........................................ 248
28,260 Australian Gas Light Co., Ltd.................... 202
83,395 Boral Ltd........................................ 121
16,621 Brambles Industries Ltd.......................... 423
121,212 Broken Hill Proprietary Co., Ltd................. 1,034
8,069 CSL Ltd.......................................... 67
77,723 CSR Ltd.......................................... 169
71,400 Coca-Cola Amatil Ltd............................. 310
83,083 Coles Myer Ltd................................... 451
9,325 F.H. Faulding & Co., Ltd......................... 56
134,451 Fosters Brewing Group Ltd........................ 396
100,833 General Property Trust........................... 177
50,111 Gio Australia Holdings Ltd....................... 144
89,885 Goodman Fielder Ltd.............................. 93
22,003 ICI Australia Ltd................................ 116
20,774 Leighton Holdings Ltd............................ 69
40,185 Lend Lease Corp., Ltd............................ 512
27,141 Mayne Nickless Ltd............................... 90
100,499 National Australia Bank Ltd...................... 1,827
142,572 News Corp., Ltd.................................. 1,056
147,069 Normandy Mining Ltd.............................. 118
51,580 North Ltd........................................ 82
81,600 Pacific Dunlop Ltd............................... 142
70,223 Pioneer International Ltd........................ 139
30,307 QBE Insurance Group Ltd.......................... 126
13,815 Rio Tinto Ltd.................................... 193
45,866 Santos Ltd....................................... 133
29,834 Schroders Property Fund.......................... 46
15,020 Smith (Howard) Ltd............................... 117
47,729 Southcorp Holdings Ltd........................... 194
23,904 Stockland Trust Group............................ 58
24,364 Suncorp-Metway Ltd............................... 148
24,775 TABCORP Holdings Ltd............................. 189
367,092 Telstra Corp., Ltd............................... 1,923
136,902 WMC Ltd.......................................... 436
14,151 Wesfarmers Ltd................................... 133
97,523 Westfield Trust.................................. 210
138,048 Westpac Banking Corp............................. 1,007
86,290 Woolworths Ltd................................... 276
----------
14,012
----------
AUSTRIA (0.3%)
1,191 Austian Airlines/Oest Luftv AG................... 39
159 Austria Mikro Systeme International AG........... 6
1,170 Austria Tabakwerke AG............................ 79
486 BBag Oest Brau Beteiligungs AG................... 22
90 BWT AG........................................... 18
5,990 Bank Austria AG.................................. 357
250 Bau Holding AG................................... 8
587 Boehler-Uddeholm AG.............................. 28
375 EA-Generali AG................................... 79
1,127 Flughafen Wein AG................................ 48
197 Lenzing AG....................................... 12

VALUE
SHARES (000)

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637 Mayr-Melnhof Karton AG........................... $ 28
1,420 OMV AG........................................... 126
1,621 Oest Elektrizatswirts AG, Class A................ 259
743 Radex-Heraklith Industriebet AG.................. 20
795 VA Technologie AG................................ 57
458 Wienerberger Baustoffindustrie AG................ 81
----------
1,267
----------
FRANCE (5.3%)
1,158 Accor............................................ 288
5,896 Alcatel Alsthom.................................. 679
10,098 Axa.............................................. 1,341
406 Bail Investissement.............................. 54
6,301 Banque Nationale de Paris........................ 549
855 Bouygues......................................... 238
943 Canal Plus....................................... 277
2,227 Cap Gemini Sogeti................................ 374
1,174 Carrefour........................................ 906
2,339 Casino Guichard-Perrachon........................ 208
3,045 Cie de Saint Gobain.............................. 484
4,817 Cie Generale des Eaux............................ 1,187
5,399 Compangnie Financiere de Paribas................. 604
3,523 Dassault Systemes SA............................. 131
8,515 Elf Aquitaine.................................... 1,158
1,319 Eridania Beghin-Say.............................. 196
411 Essilor International............................ 137
30,452 France Telecom................................... 2,466
1,924 Groupe Danone.................................... 485
2,748 Klepierre........................................ 254
2,011 L'OREAL.......................................... 1,274
2,805 L'Air Liquide.................................... 419
2,695 LVMH Moet Hennessy Louis Vuitton................. 669
3,337 Lafarge.......................................... 301
4,372 Lagardere S.C.A.................................. 142
875 Legrand.......................................... 184
4,368 Lyonnaise des Eaux............................... 810
6,574 Michelin Compagnie Generale des Establissements,
Class B........................................ 295
1,605 PSA Peugeot Citroen.............................. 231
2,742 Pechiney......................................... 99
2,170 Pernod Ricard.................................... 138
3,612 Pinault-Printemps - Re doute..................... 577
578 Promodes......................................... 354
11,457 Rhone-Poulenc, Class A........................... 519
88 Sagem............................................ 49
3,311 Sanofi........................................... 559
5,294 Schneider........................................ 293
2,040 SEITA............................................ 139
968 Silic............................................ 162
3,827 Simco (RFD)...................................... 335
1,880 Soceite BIC...................................... 99
900 Societe Fonciere Lyonnaise....................... 120
2,948 Societe Generale, Class A........................ 568
1,052 Sodexho Alliance................................. 172
795 Sophia........................................... 30
5,074 Thomson CSF...................................... 155
7,925 Total, Class B................................... 978

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SHARES (000)
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FRANCE (CONT.)

[Download Table]

3,507 Unibail.......................................... $ 440
8,809 Usinor Sacilor................................... 116
2,735 Valeo............................................ 214
----------
22,457
----------
GERMANY (6.0%)
1,883 AGIV AG.......................................... 35
1,883 Adidas AG........................................ 167
9,958 Allianz AG....................................... 3,033
1,350 AMB AG........................................... 160
23,950 BASF AG.......................................... 873
27,800 Bayer AG......................................... 1,036
15,670 Bayerische Vereinsbank AG........................ 942
2,567 Bilfinger & Berger Bau AG........................ 49
1,367 CKAG AG.......................................... 136
4,567 Continential AG.................................. 114
35,834 DaimlerChrysler AG............................... 3,123
19,550 Deutsche Bank AG................................. 1,021
83,989 Deutsche Telekom AG.............................. 3,383
18,717 Dresdner Bank AG................................. 749
5,867 FAG Kugelfischer Georg Schaefer AG............... 44
1,985 Heidelberger Zement AG........................... 121
4,133 Hochtief AG...................................... 136
483 Karstadt AG...................................... 173
2,683 Kloeckner-Humboldt-Deutz AG...................... 18
333 Linde AG......................................... 190
14,033 Lufthansa AG..................................... 310
13,900 Mannesmann AG.................................... 1,727
8,417 Merck KGaA....................................... 288
9,143 Metro AG......................................... 581
5,607 Muechener Rueck AG (Registered).................. 1,120
650 Preussag AG...................................... 340
16,823 RWE AG........................................... 755
2,367 SAP AG........................................... 682
3,017 Schering AG...................................... 344
21,583 Siemens AG....................................... 1,419
19,200 VEBA AG.......................................... 1,012
1,123 Viag AG.......................................... 616
11,580 Volkswagen AG.................................... 771
----------
25,468
----------
HONG KONG (1.8%)
72,800 Bank of East Asia Ltd............................ 124
148,000 Cathay Pacific Airways Ltd....................... 170
105,000 Cheung Kong Holdings Ltd......................... 799
120,000 CLP Holdings Ltd................................. 576
75,000 Hang Lung Development Co......................... 91
88,500 Hang Seng Bank Ltd............................... 814
226,000 Hong Kong & China Gas Co., Ltd................... 319
65,500 Hong Kong & Shanghai Hotel Ltd................... 50
577,682 Hong Kong Telecommunications Ltd................. 1,140
65,200 Hopewell Holdings Ltd............................ 32
180,000 Hutchison Whampoa Ltd............................ 1,417
53,000 Hysan Development Co., Ltd....................... 69
107,333 New World Development Co., Ltd................... 211
296,000 Regal Hotel International Ltd.................... 29

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7,000 Shangri-La Asia Ltd.............................. $ 7
190,393 Sino Land Co..................................... 100
118,000 South China Morning Post Holdings Ltd............ 65
115,000 Sun Hung Kai Properties Ltd...................... 861
77,000 Swire Pacific Ltd., Class A...................... 358
20,000 Television Broadcasts Ltd........................ 73
121,000 Wharf Holdings Ltd............................... 186
----------
7,491
----------
ITALY (4.5%)
68,197 ALITALIA......................................... 232
50,062 Assicurazioni Generali S.p.A..................... 2,008
94,637 Banca Commerciale Italiana....................... 778
129,773 Banco Ambrosiano Veneto S.p.A.................... 766
17,711 Banco Popolare di Milano......................... 165
85,671 Benetton Group S.p.A............................. 154
4,338 Cartiere Burgo................................... 31
215,113 Credito Italiano S.p.A........................... 1,163
403,248 ENI S.p.A........................................ 2,573
34,066 Edison S.p.A..................................... 314
272,703 Fiat S.p.A....................................... 796
49,981 Fiat S.p.A. Di Risp (NCS)........................ 90
8,170 Immobiliaria Urbis............................... 8
21,020 Impregilo S.p.A.................................. 16
69,204 Instituto Bancario San Paolo di Torino........... 1,126
200,856 Istituto Nazionale delle Assicurazioni........... 608
7,770 Italcementi S.p.A................................ 86
11,315 Italcementi S.p.A. (RNC)......................... 56
24,068 Italgas.......................................... 117
23,899 Magneti Marelli S.p.A............................ 35
59,569 Mediaset S.p.A................................... 561
32,900 Mediobanca S.p.A................................. 443
199,337 Montedison S.p.A................................. 207
65,897 Montedison S.p.A. Di Risp (NCS).................. 53
145,540 Olivetti S.p.A................................... 457
88,086 Parmalat Finanziaria S.p.A....................... 126
112,197 Pirelli S.p.A.................................... 320
24,625 R.A.S. S.p.A..................................... 258
6,039 Reno de Medici S.p.A............................. 15
10,825 Rinascente S.p.A................................. 85
6,942 SAI.............................................. 89
9,171 Sirti S.p.A...................................... 55
45,711 Snia BPD S.p.A................................... 62
182,208 Telecom Italia S.p.A............................. 1,939
48,316 Telecom Italia S.p.A. (RNC)...................... 287
323,205 Telecom Italia Mobile S.p.A...................... 2,177
78,811 Telecom Italia Mobile S.p.A. (RNC)............... 305
566,695 Unione Immobiliare S.p.A......................... 297
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18,858
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JAPAN (18.7%)
16,000 77 Bank Ltd...................................... 155
6,700 Acom Co., Ltd.................................... 474
63,400 Ajinomoto Co., Inc............................... 755
58,600 Aoki Corp........................................ 38
97,900 Asahi Bank Ltd................................... 517
32,000 Asahi Breweries Ltd.............................. 419

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JAPAN (CONT.)

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129,000 Asahi Chemical Industry Co., Ltd................. $ 755
85,800 Asahi Glass Co., Ltd............................. 623
218,000 Bank of Tokyo-Mitsubishi Ltd..................... 3,005
36,800 Bank of Yokohama Ltd............................. 93
48,000 Bridgestone Corp................................. 1,224
42,600 Canon, Inc....................................... 1,054
24,800 Casio Computer Co., Ltd.......................... 168
29,400 Chiba Bank Ltd................................... 129
24,600 Chugai Pharmaceuticals Co., Ltd.................. 284
7,600 Credit Saison Co., Ltd........................... 167
40,600 Dai Nippon Printing Co., Ltd..................... 617
36,600 Daiei, Inc....................................... 105
43,600 Daikin Industries Ltd............................ 432
43,600 Daiwa House Industry Co., Ltd.................... 498
98,000 Daiwa Securities Co., Ltd........................ 526
14,600 Denso Corp....................................... 287
288 East Japan Railway Co............................ 1,712
28,800 Ebara Corp....................................... 318
9,700 Fanuc Ltd........................................ 397
250,000 Fuji Bank........................................ 1,480
28,000 Fuji Photo Film Ltd.............................. 1,059
107,200 Fujitsu Ltd...................................... 1,722
31,800 Furukawa Electric Co., Ltd....................... 132
16,000 Gunma Bank Ltd................................... 126
23,000 Hankyu Corp...................................... 100
43,000 Hazama Corp...................................... 35
208,000 Hitachi Ltd...................................... 1,541
45,000 Honda Motor Co., Ltd............................. 2,033
121,000 Industrial Bank of Japan......................... 818
21,000 Ito-Yokado Co., Ltd.............................. 1,351
137,000 Japan Airlines Co., Ltd.......................... 448
102,000 Japan Energy Corp................................ 115
17,600 Joyo Bank Ltd.................................... 75
21,800 Jusco Co., Ltd................................... 379
84,400 Kajima Corp...................................... 257
55,600 Kansai Electric Power Co., Ltd................... 1,125
29,000 Kao Corp......................................... 641
68,400 Kawasaki Steel Corp.............................. 116
67,200 Kinki Nippon Railway Co., Ltd.................... 360
88,400 Kirin Brewery Co., Ltd........................... 1,036
70,400 Komatsu Ltd...................................... 362
124,000 Kubota Corp...................................... 330
136,400 Kumagai Gumi Co., Ltd............................ 120
11,400 Kyocera Corp..................................... 614
39,600 Kyowa Hakko Kogyo Co., Ltd....................... 208
70,000 Marubeni Corp.................................... 133
8,800 Marui Co., Ltd................................... 150
97,000 Matsushita Electric Industrial Co., Ltd.......... 1,892
131,000 Mitsubishi Chemical Corp......................... 372
89,000 Mitsubishi Corp.................................. 583
147,800 Mitsubishi Electric Corp......................... 494
38,000 Mitsubishi Estate Co., Ltd....................... 387
192,000 Mitsubishi Heavy Industries Ltd.................. 868
82,400 Mitsubishi Materials Corp........................ 177
60,000 Mitsubishi Trust & Banking Co.................... 622
120,800 Mitsui & Co., Ltd................................ 817

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86,400 Mitsui Engineering & Shipbuilding Co., Ltd....... $ 80
29,400 Mitsui Fudosan Co., Ltd.......................... 265
200 Mitsui Trust & Banking Co., Ltd..................
44,800 Mitsukoshi Ltd................................... 125
21,000 Murata Manufacturing Co., Ltd.................... 1,117
28,800 Mycal Corp....................................... 178
75,400 NEC Corp......................................... 907
45,600 NGK Insulators Ltd............................... 515
256,800 NKK Corp......................................... 163
32,800 Nippon Express Co., Ltd.......................... 194
31,600 Nippon Fire & Marine Insurance Co., Ltd.......... 100
39,800 Nippon Light Metal Co., Ltd...................... 44
15,600 Nippon Meat Packers, Inc......................... 220
126,800 Nippon Oil Co., Ltd.............................. 496
487,000 Nippon Steel Co.................................. 999
614 Nippon Telegraph & Telephone Corp................ 6,015
123,000 Nippon Yusen Kabushiki Kaisha.................... 488
151,600 Nissan Motor Co., Ltd............................ 589
84,000 Nomura Securities Co., Ltd....................... 880
47,600 Odakyu Electric Railway Corp..................... 178
88,400 Oji Paper Co., Ltd. (New)........................ 471
1,800 Orix Corp........................................ 135
174,600 Osaka Gas Co., Ltd............................... 602
39,600 Penta-Ocean Construction Co., Ltd................ 75
11,000 Pioneer Electric Corp............................ 204
5,000 Rohm Co., Ltd.................................... 598
3,200 SMC.............................................. 286
165,000 Sakura Bank Ltd.................................. 500
24,800 Sankyo Co., Ltd.................................. 532
30,000 Sanwa Bank Ltd................................... 326
114,000 Sanyo Electric Co., Ltd.......................... 400
7,800 Secom Co., Ltd................................... 739
8,700 Sega Enterprises Ltd............................. 158
42,600 Sekisui House Co., Ltd........................... 453
70,200 Sharp Corp....................................... 741
10,800 Shimano, Inc..................................... 263
61,600 Shimizu Corp..................................... 250
16,000 Shin-Etsu Chemical Co., Ltd...................... 420
20,000 Shiseido Co., Ltd................................ 277
22,600 Shizuoka Bank Ltd................................ 273
83,400 Showa Denko...................................... 86
18,900 Sony Corp........................................ 1,748
106,000 Sumitomo Bank.................................... 1,435
165,600 Sumitomo Chemical Co., Ltd....................... 667
83,400 Sumitomo Corp.................................... 547
59,400 Sumitomo Electric Industries..................... 704
8,800 Sumitomo Forestry Co., Ltd....................... 61
42,800 Sumitomo Metal & Mining Co....................... 183
156,800 Sumitomo Metal Industries........................ 189
42,600 Sumitomo Osaka Cement Co., Ltd................... 96
88,400 Taisei Corp., Ltd................................ 208
24,800 Taisho Pharmaceutical Co., Ltd................... 775
28,000 Taiyo Yuden Co., Ltd............................. 363
48,600 Takeda Chemical Industries....................... 1,884
82,400 Teijin Ltd....................................... 333

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SHARES (000)
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JAPAN (CONT.)

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58,400 Tobu Railway Co., Ltd............................ $ 172
14,200 Tohoku Electric Power Co., Ltd................... 216
81,800 Tokai Bank Ltd................................... 528
76,000 Tokio Marine & Fire Insurance Co., Ltd........... 867
71,900 Tokyo Electric Power Co.......................... 1,548
7,000 Tokyo Electron Ltd............................... 362
82,600 Tokyo Gas Co..................................... 202
68,400 Tokyu Corp....................................... 179
31,600 Toppan Printing Co., Ltd......................... 414
115,100 Toray Industries, Inc............................ 598
43,600 Toto Ltd......................................... 324
66,400 Toyoba Co........................................ 92
178,000 Toyota Motor Corp................................ 5,156
83,400 Ube Industries Ltd............................... 161
600 Yamaichi Securities Co., Ltd..................... --
1,000 Yasuda Trust & Banking Co........................ 1
41,000 Yokogawa Electric Corp........................... 202
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79,387
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NETHERLANDS (6.0%)
82,240 ABN Amro Holding N.V............................. 1,716
31,951 Aegon N.V........................................ 2,921
19,132 Akzo Nobel N.V................................... 710
5,089 Buhrmann N.V..................................... 89
34,516 Elsevier N.V..................................... 515
4,948 Getronics N.V.................................... 183
4,734 Hagemeyer N.V.................................... 146
17,824 Heineken N.V..................................... 900
52,880 ING Groep N.V.................................... 2,919
4,854 KLM Royal Dutch Airlines N.V..................... 136
33,530 Koninklijke Ahold N.V............................ 1,287
1,479 Nedlloyd Groep N.V............................... 34
5,209 Oce N.V.......................................... 130
20,512 Philips Electronics N.V.......................... 1,674
6,034 Rodamco N.V...................................... 140
123,467 Royal Dutch Petroleum Co......................... 6,575
25,688 Royal KPN N.V.................................... 1,024
2,698 Stork N.V........................................ 53
27,863 TNT Post Group N.V............................... 841
37,485 Unilever N.V..................................... 2,608
4,142 Vedior N.V....................................... 96
4,160 Wolters Kluwer N.V............................... 756
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25,453
----------
PORTUGAL (1.1%)
20,709 Banco Commercial Portugues (Registered).......... 627
12,702 Banco Espirito Santo e Comercial de Lisboa
(Registered)................................... 343
8,408 Banco Portugues de Investimento (New)............ 256
6,261 Brisa-Auto Estradas.............................. 290
2,326 Cia de Seguros Tranquilidade, (Registered)....... 66
9,482 Cimpor SGPS...................................... 266
400 Cin-Corparacao Industial do Norte................ 11
63,151 EDP-Electricidade de Portugal.................... 1,248

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537 INAPA-Investimentos Participacoes e Gestao....... $ 5
8,498 Jeronimo Martins SGPS............................ 303
19,858 Portugal Telecom (Registered).................... 891
11,271 Portucel Industrial-Empressa..................... 62
358 Sociedade de Construcoes Soares da Costa......... 1
3,032 Somague-Sociedade Gestora de Participacoes....... 13
4,830 Sonae Investmentos............................... 188
1,789 UNICER-Uniao Cervejeira.......................... 38
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4,608
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SINGAPORE (1.5%)
32,000 Asia Food & Properties Ltd....................... 6
92,000 City Developments Ltd............................ 479
66,000 Comfort Group Ltd................................ 20
11,350 Creative Technology Ltd.......................... 132
29,000 Cycle & Carriage Ltd............................. 123
127,000 DBS Land Ltd..................................... 188
46,000 Development Bank of Singapore Ltd. (Foreign)..... 349
31,000 First Capital Corp., Ltd......................... 30
33,800 Fraser & Neave Ltd............................... 120
47,000 Hotel Properties Ltd............................. 22
105,750 Keppel Corp., Ltd................................ 285
44,000 NatSteel Ltd..................................... 46
130,560 Oversea-Chinese Banking Corp. (Foreign).......... 885
21,226 Overseas Union Enterprise Ltd.................... 37
44,000 Parkway Holdings Ltd............................. 86
188,644 Sembcorp Industries Ltd.......................... 206
113,000 Singapore Airlines Ltd. (Foreign)................ 818
23,018 Singapore Ltd. (Foreign)......................... 255
7,000 Singapore Press Holdings Ltd..................... 77
335,000 Singapore Technologies Engineering Ltd........... 303
716,000 Singapore Telecommunications Ltd................. 1,020
22,000 Straits Trading Co., Ltd......................... 20
147,000 United Industrial Corp., Ltd..................... 77
87,000 United Overseas Bank Ltd. (Foreign).............. 544
70,000 United Overseas Land Ltd......................... 47
22,000 Venture Manufacturing (Singapore) Ltd............ 99
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6,274
----------
SPAIN (4.1%)
4,526 ACS Actividades.................................. 140
5,569 Acerinox......................................... 142
3,519 Aguas de Barcelona............................... 212
34,173 Argentaria....................................... 823
19,526 Autopistas Concesionaria Espanola................ 251
2,402 Azucarera Ebro Agricolas......................... 47
153,813 Banco Bilbao Vizcaya (Registered)................ 2,295
71,352 Banco Central Hispano Americano.................. 896
89,000 Banco Santander.................................. 1,829
1,081 Corporacion Financiera Alba...................... 155
5,430 Corporacion Mapfre............................... 108
4,330 Dragados y Construccion.......................... 142

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SHARES (000)
-------------------------------------------------------------------------------

SPAIN (CONT.)

[Download Table]

70,435 Endesa........................................... $ 1,781
1 Ercros........................................... --
3,446 Fomento Construction y Cantractas................ 212
11,003 Gas Natural SDG.................................. 1,017
66,400 Iberdrola........................................ 985
13,611 Inmobiliaria Metropolitana Vasco Central......... 319
23,861 Repsol........................................... 1,231
2,403 Sol Melia........................................ 88
13,205 Tabacalera....................................... 268
76,766 Telefonica....................................... 3,261
16,707 Telepizza........................................ 128
21,964 Union Electrica Fenosa........................... 328
57 Uralita.......................................... 1
44,682 Vallehermoso..................................... 478
100 Viscofan Envolturas Celulosicas.................. 1
1,808 Zardoya Otis..................................... 46
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17,184
----------
SWEDEN (1.9%)
26,500 ABB AB, Class A.................................. 329
11,100 ABB AB, Class B.................................. 138
6,300 AGA AB, Class B.................................. 79
45,833 Astra AB, Class A................................ 1,053
11,100 Astra AB, Class B................................ 252
5,050 Atlas Copco AB, Class A.......................... 137
2,700 Atlas Copco AB, Class B.......................... 72
13,540 Castellum AB..................................... 126
21,180 Diligentia AB.................................... 168
13,800 Drott AB, Class B................................ 122
12,200 Electrolux AB, Series B.......................... 242
75,500 Ericsson LM, Class B............................. 1,840
4,640 Fastighets AB Tornet............................. 63
13,800 ForeningsSparbanken AB........................... 325
8,200 Hennes & Mauritz AB, Class B..................... 620
4,100 Netcom Systems AB, Class B....................... 140
2,900 OM Gruppen AB.................................... 36
980 Piren AB......................................... 6
3,300 S.K.F. AB, Class B............................... 47
7,900 Sandvik AB, Class A.............................. 158
3,200 Sandvik AB, Class B.............................. 64
10,640 Securitas AB, Class B............................ 169
20,400 Skandia Forsakrings AB........................... 380
23,800 Skandinaviska Enskilda Banken, Class A........... 292
5,000 Skanska AB, Class B.............................. 171
8,800 Svenska Cellulosa AB, Class B.................... 191
8,500 Svenska Handelsbanken, Class A................... 297
4,800 Svenskt Stal AB (SSAB), Series A................. 60
5,800 Trelleborg AB, Class B........................... 56
5,800 Volvo AB, Class A................................ 150
12,050 Volvo AB, Class B................................ 316
2,900 WM-Data AB, Class B.............................. 113
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8,212
----------
SWITZERLAND (6.1%)
465 ABB AG........................................... 617
895 Adecco........................................... 455

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295 Alusuisse-Lonza Holdings Ltd. (Registered)....... $ 325
12,600 CS Holding AG (Registered)....................... 2,355
350 Holderbank Financiere Glarus AG, Class B
(Bearer)....................................... 392
1,865 Nestle (Registered).............................. 3,396
3,020 Novartis AG (Registered)......................... 4,911
76 Roche Holding AG (Bearer)........................ 1,359
326 Roche Holding AG (Registered).................... 3,985
750 SAirgroup (Registered)........................... 162
80 SGS Surveillance................................. 66
260 SMH AG (Bearer).................................. 166
210 Sulzer AG (Registered)........................... 134
695 Swiss Reinsurance (Registered)................... 1,542
3,630 Swisscom AG (Registered)......................... 1,421
9,869 Union Bank of Switzerland AG (Registered)........ 3,108
315 Valora Holding AG................................ 74
2,260 Zurich Allied AG................................. 1,450
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25,918
----------
THAILAND (0.0%)
8,000 CMIC Finance & Securities PCL (Foreign).......... --
18,600 General Finance & Securities PCL (Foreign)....... --
34,700 Siam City Bank PCL (Foreign)..................... --
----------
--
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UNITED KINGDOM (15.0%)
53,563 Abbey National plc............................... 1,102
34,817 Albert Fisher Group plc.......................... 3
1,851 Alldays plc...................................... 2
2,415 Allders plc...................................... 4
58,643 Allied Zurich plc................................ 791
7,063 AMEC plc......................................... 26
20,898 Anglian Water plc................................ 257
34,741 Arjo Wiggins Appleton plc........................ 79
29,624 Associated British Foods plc..................... 208
21,152 Associated British Ports Holdings plc............ 96
43,513 BAA plc.......................................... 485
53,303 Barclays plc..................................... 1,534
10,099 Barratt Developments plc......................... 48
27,053 Bass plc......................................... 368
1,209 BBA Group plc.................................... 8
25,448 Beazer Group plc................................. 78
17,594 Berisford plc.................................... 63
154,396 BG plc........................................... 908
35,417 BICC plc......................................... 54
66,198 Blue Circle Industries plc....................... 381
21,425 BOC Group plc.................................... 299
37,939 Boots Co. plc.................................... 548
68,361 BPB Industries plc............................... 298
75,975 British Aerospace plc............................ 508
45,104 British Airways plc.............................. 313
58,654 British American Tobacco plc..................... 489
58,492 British Land Co. plc............................. 503

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SHARES (000)
-------------------------------------------------------------------------------

UNITED KINGDOM (CONT.)

[Download Table]

290,608 British Petroleum Co. plc........................ $ 4,958
59,331 British Sky Broadcasting plc..................... 509
104,121 British Steel plc................................ 215
210,400 British Telecommunications plc................... 3,436
158,240 BTR plc.......................................... 699
34,088 Burmah Castrol plc............................... 521
80,272 Cable & Wireless plc............................. 1,004
42,358 Cadbury Schweppes plc............................ 615
4,621 Capital Corp. plc................................ 6
25,950 Capital Shopping Centers plc..................... 159
85,194 Caradon plc...................................... 189
11,379 Carpetright plc.................................. 66
177,581 Centrica plc..................................... 313
4,309 Cobham plc....................................... 64
36,806 Commercial Union plc............................. 574
25,488 Compass Group plc................................ 295
2,363 Delta plc........................................ 6
120,057 Diageo plc....................................... 1,350
4,384 Dialog Corp. plc................................. 8
5,841 EMAP plc......................................... 114
64,737 EMI Group plc.................................... 463
4,673 Empla plc Rights................................. 5
26,630 Enterprise Oil plc............................... 153
25,800 Firstgroup plc................................... 170
21,058 FKI plc.......................................... 54
96,509 General Electric plc............................. 871
54,218 GKN plc.......................................... 825
117,363 Glaxo Wellcome plc............................... 3,930
32,123 Granada Group plc................................ 651
117,360 Grantchester Holdings plc........................ 351
51,500 Great Portland Estates plc....................... 164
37,062 Great Universal Stores plc....................... 404
5,362 Greycoat plc..................................... 19
22,063 Guardian Royal Exchange plc...................... 131
98,343 Halifax plc...................................... 1,207
51,045 Hanson plc....................................... 458
13,575 House of Fraser.................................. 17
55,088 HSBC Holdings plc................................ 1,756
22,226 HSBC Holdings plc (75p).......................... 717
9,035 Hyder plc........................................ 114
24,877 IMI plc.......................................... 106
29,662 Imperial Chemical Industries plc................. 265
14,587 Jarvis plc....................................... 132
1,427 JBA Holdings plc................................. 4
29,407 Johnson Matthey plc.............................. 221
55,767 Kingfisher plc................................... 704
2,469 Kwik-Fit Holdings plc............................ 17
52,578 Ladbroke Group plc............................... 241
6,302 Laird Group plc.................................. 23
18,405 Land Securities plc.............................. 244
70,346 Lasmo plc........................................ 143
56,939 Legal & General Group plc........................ 671
11,777 Lex Service plc.................................. 78
11,340 Limit plc........................................ 25
191,131 Lloyds TSB Group plc............................. 2,893
21,361 London Clubs International plc................... 52

VALUE
SHARES (000)

-------------------------------------------------------------------------------
7,019 London Forfaiting Co. plc........................ $ 7
28,645 Lonrho plc....................................... 210
1,872 Low & Bonar plc.................................. 5
110,010 Lucascarity plc.................................. 510
1,810 Manchester United plc............................ 6
103,929 Marks and Spencer plc............................ 685
40,248 Marley plc....................................... 80
237 Mayflower Corp. plc.............................. 1
2,171 McKechnie plc.................................... 15
5,553 Meggitt plc...................................... 17
28,326 MEPC plc......................................... 198
21,924 Mirror Group News plc............................ 74
57,700 MISYS plc........................................ 584
50,775 National Power plc............................... 391
16,137 NEXT plc......................................... 185
42,137 NFC plc.......................................... 94
890 Ocean Group plc.................................. 13
9,481 Parity plc....................................... 107
28,910 Peninsular & Oriental Steam Navigation........... 421
11,317 Pennon Group plc................................. 174
178,701 Pilkington plc................................... 241
1,975 Powerscreen International plc.................... 5
78,655 Prudential Corp. plc............................. 1,026
10,414 Racal Electronic plc............................. 67
17,911 Railtrack Group plc.............................. 411
62,124 Rank Group plc................................... 227
47,708 Reed International plc........................... 425
124,404 Rentokil Initial plc............................. 772
51,543 Reuters Group plc................................ 758
26,392 Rexam plc........................................ 87
39,391 Rio Tinto plc.................................... 547
15,240 RMC Group plc.................................... 206
37,612 Rolls-Royce plc.................................. 159
41,777 Royal & Sun Alliance Insurance Group plc......... 394
12,052 Rugby Group plc.................................. 22
45,756 Safeway plc...................................... 179
72,318 Sainsbury (J) plc................................ 448
4,107 Schroders plc.................................... 95
5,310 Scotia Holdings plc.............................. 9
187 Scottish & Newcastle plc......................... 2
47,576 Scottish Hydro-Electric plc...................... 430
53,424 Scottish Power plc............................... 466
1,614 Skillsgroup plc.................................. 8
13,093 Slough Estates plc............................... 67
193,141 Smithkline Beecham plc........................... 2,788
5,565 Smiths Industries plc............................ 81
45,467 Stagecoach Holdings plc.......................... 167
52,065 Tarmac plc....................................... 89
32,085 Tate & Lyle plc.................................. 216
18,917 Taylor Woodrow plc............................... 55
81,094 Tesco plc........................................ 215
20,033 Thames Water plc................................. 304
6,861 The Berkeley Group plc........................... 70
19,443 TI Group plc..................................... 126
1,574 Torotrac plc..................................... 3
121,514 Unilever plc..................................... 1,130

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)
-------------------------------------------------------------------------------

UNITED KINGDOM (CONT.)

[Download Table]

27,355 United Utilities plc............................. $ 327
2,637 Vickers plc...................................... 6
121,033 Vodafone Group plc............................... 2,251
1,107 Wickes plc....................................... 5
16,674 William Baird plc................................ 30
30,156 WPP Group plc.................................... 262
19,291 Yorkshire Water plc.............................. 138
35,432 Zeneca Group plc................................. 1,676
----------
63,600
----------
TOTAL COMMON STOCKS (Cost $291,584)................................ 320,189
----------
PREFERRED STOCKS (0.4%)
AUSTRALIA (0.2%)
125,978 News Corp., Ltd.................................. 867
----------
AUSTRIA (0.0%)
3 Bau Holdings AG.................................. --
----------
GERMANY (0.2%)
1,617 SAP AG........................................... 517
3,630 Volkswagen AG.................................... 145
----------
662
----------
HONG KONG (0.0%)
37,500 Johnson Electric Holdings Ltd.................... 106
----------
TOTAL PREFERRED STOCKS (Cost $1,505)............................... 1,635
----------

[Download Table]

NO. OF
WARRANTS

--------------

WARRANTS (0.0%)
HONG KONG (0.0%)
7,850 Hong Kong and China Gas Co,. Ltd., expiring
9/30/99........................................ --
4,300 Hysan Development Co., Ltd., expiring 4/30/99.... --
THAILAND (0.0%)
6,349 National Finance & Securities PCL, expiring
11/15/99....................................... --
----------
TOTAL WARRANTS (Cost $0)........................................... --
----------
[Download Table]

FACE
AMOUNT

--------------

FIXED INCOME SECURITIES (0.0%)
FRANCE (0.0%)
$ 62,000 Casino Guichard-Perrachon, Series XW, 4.50%,
expiring 7/12/01............................... 55
----------
PORTUGAL (0.0%)
PTE 9,600 Jeronimo Martins, SGPS, Zero Coupon, 12/30/04.... 6
----------
TOTAL FIXED INCOME SECURITIES (Cost $32)........................... 61
----------
TOTAL FOREIGN SECURITIES (76.0%) (Cost $293,121)................... 321,885
----------

FACE VALUE
AMOUNT (000)

-------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (29.5%)
REPURCHASE AGREEMENT (29.5%)
$ 124,994 Chase Securities, Inc. 4.65%, dated 3/31/99, due
4/01/99, to be repurchased at $125,010,
collateralized by U.S. Treasury Notes 4.5% due
1/31/01, valued at $125,947 (Cost $124,994).... $ 124,994
----------
FOREIGN CURRENCY (0.0%)
AUD 21 Australian Dollar................................ 13
GBP 2 British Pound.................................... 3
EUR 41 European Monetary Unit........................... 44
HKD 189 Hong Kong Dollar................................. 24
JPY 56 Japanese Yen..................................... 1
NOK 20 Norwegian Krone.................................. 3
SGD 28 Singapore Dollar................................. 16
SEK 7 Swedish Krona.................................... 1
----------
TOTAL FOREIGN CURRENCY (Cost $105)................................. 105
----------
TOTAL INVESTMENTS 105.5% (Cost $418,220)........................... 446,984
----------

[Download Table]

OTHER ASSETS AND LIABILITIES (-5.5%)
Other Assets....................................................... 243,098
Liabilities........................................................ (266,236)
--------
(23,138)
--------
NET ASSETS (100%).................................................... $423,846
--------
--------

[Download Table]

CLASS A:
--------------------------------------------------------------
NET ASSETS.................................................... $423,374
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 35,150,753 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $12.04
---------
---------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $472
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 38,725 outstanding $0.001 par
value shares (authorized 500,000,000 shares)................ $12.19
---------
---------

------------------------------------------------------------

NCS -- Non-Convertible Shares
PCL -- Private Company Limited
RFD -- Ranked for Dividend
RNC -- Non-Convertible Savings Shares
Foreign -- Prior governmental approval for foreign investments may be required
under certain circumstances.

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
ASIAN EQUITY PORTFOLIO

The investment objective of the Asian Equity Portfolio is to seek long-term
capital appreciation by investing primarily in equity securities which are
traded on recognized exchanges of Hong Kong, Singapore, Malaysia, Thailand,
Indonesia and the Philippines. The Portfolio may also invest in equity
securities traded on markets in Taiwan, South Korea, India, Pakistan, Sri Lanka
and other Asian developing markets which are open for foreign investment. The
Portfolio does not intend to invest in securities which are principally traded
in Japan or in companies organized under the laws of Japan.

PERFORMANCE COMPARED TO MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) ALL-COUNTRY
FAR EAST FREE EX-JAPAN INDEX(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
-------------------------------------------------
AVERAGE
AVERAGE ANNUAL
ANNUAL FIVE SINCE
YTD ONE YEAR YEARS INCEPTION
---------- ---------- ------------ -----------

PORTFOLIO -- CLASS
A.................. 2.00% -9.89% -11.18% 2.14%
PORTFOLIO -- CLASS
B.................. 1.76 -10.36 N/A -20.39
INDEX -- CLASS A.... 5.02 -10.94 -8.46 2.89
INDEX -- CLASS B.... 5.02 -10.94 N/A -15.58

1. The MSCI All-Country Far East Free ex-Japan Index is an unmanaged index of
common stocks and includes Indonesia, Hong Kong, the Philippines, Korea,
Singapore, Taiwan and Thailand (includes dividends).

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE COUNTRY SPECIFIC PERFORMANCE
RESULTS PROVIDED ARE AS MEASURED BY THE MSCI ALL-COUNTRY FAR EAST FREE EX-JAPAN
INDEX AND ARE FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A
GUARANTEE OF THE PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN
RISK CONSIDERATIONS ASSOCIATED WITH INTERNATIONAL INVESTING.

For the three months ended March 31, 1999, the Portfolio had a total return of
2.00% for the Class A shares and 1.76% for the Class B shares compared to a
total return of 5.02% for the Morgan Stanley Capital International (MSCI) All
Country Far East Free ex-Japan Index (the "Index"). For the one-year period
ended March 31, 1999, the Portfolio had a total return of -9.89% for the Class A
shares and -10.36% for the Class B shares compared to -10.94% for the Index. For
the five-year period ending March 31, 1999, the average annual total return for
Class A shares was -11.18% compared to -8.46% for the Index. From inception on
July 1, 1991 through March 31, 1999, the average annual total return of Class A
shares was 2.14% compared to 2.89% for the Index. From inception on January 2,
1996 through March 31, 1999 the average annual total return of Class B shares
was -20.39% compared to -15.58% for the Index.

Asian stock markets rose in the first quarter of 1999 as the Index rose 5.0%
during the quarter, led by Taiwan and South Korea. A broader index including
Malaysia, the MSCI All Country Far East Free ex Japan plus Malaysia, rose 5.5%
during the quarter. The Portfolio underperformed the Index during the quarter.
All of the quarter's gains came in March, based on a combination of
international and domestic factors. The rally in the Japanese market improved
sentiment and encouraged international capital inflows into Asia. Most surveys
suggest that international fund managers remain underweight Asian markets
relative to their benchmarks. Positive domestic factors contributing to market
strength include falling domestic interest rates (South Korea), government
policy initiatives (Taiwan, South Korea and Hong Kong) and exchange rate
stability. Markets that lagged during the quarter included Singapore (largely
due to weakness in the Singapore dollar), Thailand, Indonesia and China.

South Korea has shown the strongest signs of recovery from the economic
recession of the past eighteen months. The Koreans aggressively implemented
their IMF program in 1998, producing a savage contraction in domestic
consumption, investment and inventory levels. The contraction rapidly turned the
current account from deficit to surplus, stabilizing and then strengthening the
won. As mentioned in the last quarterly letter, currency strength allowed the
government to relax monetary and fiscal policy in the third quarter of last
year. After a 6% contraction in overall gross domestic product last year, the
Korean government and independent analysts have been busily upgrading growth
expectations for 1999. 1999 consensus growth estimates have moved up to the 3-4%
range. Growth drivers are expected to include a rebound in domestic consumption,
government investment spending and inventory restocking. The Korean government
has aggressively tackled the bad debt situation in its banking system, budgeting
$52.2 billion to recapitalize banks and to purchase non-performing loans. This
program has had two positive effects -- some banks have become attractive
investments and financial intermediation within the economy will revive faster
than expected. Incentives offered by the Korean government encouraged HSBC to
take a control position in one of the

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Asian Equity Portfolio

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
ASIAN EQUITY PORTFOLIO (CONT.)

leading Korean banks, which should enhance competition in the entire sector. The
decline in interest rates has encouraged retail investors and institutions to
switch from fixed income to equity investments. Domestic investing fueled much
of the first quarter's rally. Lower rates have also had a beneficial effect on
the corporate sector, as new bankruptcy filings and other signs of corporate
distress are falling. Finally, we expect corporate restructuring efforts at
certain market leaders, like the Samsung group of companies, to drive returns as
the year progresses.

Hong Kong slightly underperformed the Index during the first quarter but
performed very well in March when it tended to track the rally in Japan very
closely. We are cautious on Hong Kong for a number of fundamental macroeconomic
reasons, but given its size, liquidity and ease of access it has and should
continue to benefit when fresh investment allocations are made to Asia. The
economy remains weak, with rising unemployment, falling consumption, consumer
price deflation, an arguably overvalued exchange rate and high real interest
rates. Consensus forecasters expect a slight gross domestic product contraction
in 1999, although the government is forecasting 1% growth. Due to Hong Kong's
decision to maintain its currency peg to the U.S. dollar even as its neighbors
devalued, companies in Hong Kong have been forced to cut costs to remain
competitive. The resulting deflationary conditions have prevented real interest
rates from falling very far in Hong Kong; cuts in nominal interest rates have
been matched by a fall into outright deflation. The territory has not
experienced real interest rates at these levels for an extended period of time
over the last few decades and this should delay economic recovery and limit
stock market gains. We expect further reductions in nominal and real rates in
1999 but the scope for significant declines is limited given the U.S. dollar peg
and deflation. Revenue growth will be hard to come by in 1999 and much of the
earnings growth will be generated from comparisons with 1998 earnings depressed
by heavy non-recurring provisions. In addition, the Hong Kong Monetary Authority
(HKMA) is designing a program for the disposition of a portion of its extensive
stock holdings accumulated during the market support operations in August.
Positives for the market include improved liquidity in the banking sector, as
banks have repaired their loan-to-deposit ratios, and a number of government
stimulus measures announced in their new budget. Banks have demonstrated a
desire to extend more mortgages with their improved liquidity, and aggressive
mortgage lending will be supportive of the residential property market. We have
maintained a small underweight position in Hong Kong during the first quarter
but have focused the Portfolio on residential property developers and companies
cutting costs ahead of an economic recovery.

The Singapore market lagged the overall Index in the first quarter, partially
due to the 4.8% depreciation of the Singapore dollar relative to the U.S.
dollar. Although this decline negatively affected the returns of the Portfolio
during the first quarter, we believe that this currency weakness is a long-term
positive. This is part of a package designed by the Singapore government to
enhance the economy's competitiveness, and it should yield benefits in the
long-term. The government's drive to cut the cost of doing business in Singapore
and efforts by numerous corporates to enhance returns on capital should bode
well for the market going forward.

The Chinese Index once again was the worst performing East Asian market in the
first quarter. This underperformance reflects the weak fundamentals of most
listed Chinese companies and the challenging economic conditions within China.
The Chinese economy is experiencing persistent deflation, oversupply of most
manufactured goods, slowing exports, high real interest rates and bank asset
quality problems. The Chinese government has responded to these problems with a
massive government-funded infrastructure program. In the first quarter the
Chinese government also began to grapple with external debt problems, as the
decision to place GITIC, a company controlled by the Guangdong provincial
government, into bankruptcy caused foreign bank lenders to reassess risks of
lending to China. We expect the Chinese government will shift from
infrastructure spending to more reform initiatives as 1999 progresses. We
continue to maintain limited exposure to Chinese companies.

The Taiwan market was very volatile in the first quarter, falling persistently
until mid-February and then rebounding strongly when the government announced a
new package of reforms to support the financial system. The Taiwanese economy
has performed relatively well throughout the Asian crisis, maintaining growth
rates near 5%. This is low by Taiwanese standards but high by regional
standards. However, domestic debt levels are high in Taiwan and slower growth,
combined with high real interest rates, was creating a build-up in bad debt. In
addition, domestic banks have under-provided for their non-performing loans.
Taiwan is largely a retail

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
ASIAN EQUITY PORTFOLIO (CONT.)

driven market strongly affected by sentiment and reports of corporate financial
distress were hurting the market. The financial support package introduced in
February has alleviated some of the financial stress within the system and has
significantly improved retail sentiment. The subsequent rally turned Taiwan from
the worst into the best performing market in the quarter, largely based on
rallies in financial, cyclical and semiconductor stocks.

Malaysia's decision to implement capital controls in early September 1998 led to
its removal from the MSCI free Indexes in December. Shifting securities
regulations severely limited the ability of most foreign investors to trade in
Malaysia since September. In February 1999 the securities regulators relaxed
some of the new trading regulations and a new system of exit taxes were imposed
on repatriation of portfolio capital. In the first quarter, we realigned the
portfolio of Malaysian securities we hold and generated some capital gains that
we are repatriating free of exit taxes. As of April 1, 1999, a 20% tax will be
imposed on the repatriation of any "principal" invested in the country as of
September 1, 1998. Capital gains generated since that date can be repatriated
tax-free. The Malaysian authorities will have to substantially relax these
regulations before the market will become accessible enough to attract foreign
investors and return to the MSCI Index.

Several positive themes we expect to drive equity performance in 1999 include
improvements in domestic consumption in most Asian economies and the ability of
companies to enhance their own performance through corporate restructuring.
Restructurings broadly include debt restructuring, divestitures, sale of
strategic stakes to multinationals, business unit shutdowns, mergers or staff
downsizing. We have seen all of the above announced in various forms in 1998 and
in the first quarter of 1999. The markets have clearly rewarded companies that
adopt Western style restructuring with a focus on enhancing shareholder value
and we expect to see that trend continue in the balance of 1999. We will monitor
the progress of the restructurings announced so far and will search for
management teams with the vision and ability to improve returns to shareholders
going forward. Restructuring in Japan could have a positive effect on companies
in the rest of Asia if Japanese managements follow the American model and
outsource production. We have seen growing signs of Japanese companies
outsourcing, particularly electronics components outsourced to Taiwanese
manufacturers. We have invested in a number of companies in Taiwan, Korea and
Singapore that would benefit from a continuation of this trend.

Several risk factors we will be monitoring include the performance of the
Japanese economy, the large supply of new offerings and capital raisings we
expect to see in Asia and growth in the developed economies that are the primary
markets for Asian exports. Upside surprises could include successful bank
recapitalization and economic recovery in Japan and stronger than expected
import demand from the U.S. and Europe.

During 1998 we constructed a fairly defensive Portfolio emphasizing consumer and
technology companies and utilities while limiting our exposure to banks and
properties. During the first quarter of 1999 we increased our exposure to
property companies and cyclicals. In 1999 we are focusing more of our research
time and company visits on companies that have the ability to implement sound
restructuring programs or are sensitive to recoveries in domestic consumption.
We do not believe that all of Asia's economic problems have been solved but the
trends have certainly improved.

Timothy D. Jensen
PORTFOLIO MANAGER

Ashutosh Sinha
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

ASIAN EQUITY PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)

--------------------------------------------------------------------------

COMMON STOCKS (99.6%)
HONG KONG (34.8%)
381,200 Axa China Region Ltd............................. $ 268
206,000 CLP Holdings Ltd................................. 989
537,000 Cathay Pacific Airways Ltd....................... 617
318,900 Cheung Kong Holdings Ltd......................... 2,428
310,100 China Telecom Ltd................................ 516
286,000 Dairy Farm International Holdings Ltd............ 332
111,000 Dao Heng Bank Group Ltd.......................... 367
13,500 HSBC Holdings plc................................ 423
698,000 Hengan International Group Co., Ltd.............. 270
188,900 Hong Kong & China Gas Co., Ltd................... 267
943,400 Hong Kong Telecommunications Ltd................. 1,863
360,100 Hutchison Whampoa Ltd............................ 2,834
58,000 Johnson Electric Holdings Ltd.................... 164
392,100 Li & Fung Ltd.................................... 830
253,000 New World Development Co., Ltd................... 498
287,000 SmarTone Telecommunications Holdings Ltd......... 831
342,600 Sun Hung Kai Properties Ltd...................... 2,564
225,200 Swire Pacific Ltd., Class A...................... 1,046
283,900 Television Broadcasts Ltd........................ 1,035
100 VTech Holdings Ltd............................... --
--------
18,142
--------
INDIA (2.5%)
25,000 Aptech Ltd....................................... 556
1,556 Hero Honda Motors Ltd............................ 32
10 Housing Development Finance Corp., Ltd........... 1
50 Nestle India Ltd................................. 1
9,450 NIIT Ltd......................................... 418
2,805 Reckitt & Coleman of India Ltd................... 32
50 State Bank of India.............................. --
80 Tata Engineering & Locomotive Co., Ltd........... --
6,126 Tata Infotech Ltd................................ 243
--------
1,283
--------
INDONESIA (2.5%)
554,500 Gudang Garam..................................... 738
153,500 Semen Gresik..................................... 175
117,300 Unilever Indonesia............................... 407
--------
1,320
--------
KOREA (19.5%)
2,280 Dae Duck Electronics Co.......................... 170
15,160 Hana Bank........................................ 169
8,330 Hankuk Glass Industry Co., Ltd................... 163
32,280 Housing & Commercial Bank........................ 645
1,700 Housing & Commercial Bank GDR.................... 33
6,430 Korea Chemical Company Ltd....................... 335
30,960 Korea Electric Power Corp........................ 747
57,400 Korea Electric Power Corp. ADR................... 728
24,130 Korea Telecom Corp............................... 953
7,750 Nong Shim Co., Ltd............................... 423
9,240 Pohang Iron & Steel Co., Ltd..................... 582

VALUE
SHARES (000)

--------------------------------------------------------------------------

22,000 Pohang Iron & Steel Co., Ltd. ADR................ $ 393
118 S1 Corp.......................................... 22
608 SK Telecom Co., Ltd.............................. 548
19,984 Samsung Electro-Mechanics Co..................... 458
38,768 Samsung Electronics Co........................... 3,002
2,043 Samsung Fire & Marine Insurance Co............... 779
--------
10,150
--------
MALAYSIA (5.1%)
130,000 Amway (Malaysia) Holdings Bhd.................... 199
157,000 Carlsberg Brewery Malaysia Bhd................... 411
21,000 Guinness Anchor Bhd.............................. 20
326,000 Hap Seng Consolidated Bhd........................ 172
136,000 Nestle (Malaysia) Bhd............................ 476
411,000 R.J. Reynolds Bhd................................ 374
170,400 Rothmans of Pall Mall (Malaysia) Bhd............. 1,009
--------
2,661
--------
PAKISTAN (0.2%)
250,000 Hub Power Co..................................... 79
--------
PHILIPPINES (2.2%)
202,450 La Tondena Distillers, Inc....................... 177
82,630 Manila Electric Co., Class B..................... 273
373,000 Music Corp....................................... 24
1,403,600 SM Prime Holdings, Inc........................... 290
232,950 San Miguel Corp., Class B........................ 388
--------
1,152
--------
SINGAPORE (11.8%)
192,600 City Developments Ltd............................ 1,004
380,000 Finlayson Global Corp. CVTBD..................... 390
285,000 Natsteel Electronics Ltd......................... 779
124,000 Oversea-Chinese Banking Corp. (Foreign).......... 840
43,000 Rothmans Industries Ltd.......................... 222
114,200 Sembcorp Logistics Ltd........................... 253
109,200 Singapore Airlines Ltd. (Foreign)................ 790
42,900 Singapore Press Holdings Ltd..................... 474
89,600 United Overseas Bank Ltd. (Foreign).............. 560
178,700 Venture Manufacturing (Singapore) Ltd............ 807
--------
6,119
--------
TAIWAN (18.2%)
101,000 Acer Peripherals Inc............................. 155
240,000 Acer, Inc........................................ 319
60,000 Advanced Semiconductor Engineering, Inc.......... 141
125,870 Asustek Computer, Inc............................ 1,063
203,000 Bank Sinopac..................................... 112
110,000 Cathay Life Insurance Co., Ltd................... 355
109,130 Compal Electronics, Inc.......................... 286
82,560 Compeq Manufacturing Co., Ltd.................... 394
443,480 Far East Textile Ltd............................. 436
87,000 First Commercial Bank............................ 143
315,920 Hon Hai Precision Industry....................... 1,687
57,000 Hua Nan Commercial Bank.......................... 98

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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ASIAN EQUITY PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)
--------------------------------------------------------------------------

TAIWAN (CONT.)

[Download Table]

89,000 International Commercial Bank of China........... $ 104
522,000 Powerchip Semiconductor Corp..................... 348
76,800 President Chain Store Corp....................... 238
15,000 Quanta Computer Inc.............................. 253
126,788 Siliconware Precision Industries Co.............. 258
186,000 Taishin International Bank....................... 105
799,850 Taiwan Semiconductor Manufacturing Co............ 2,510
126,006 United Micro Electronics Corp., Ltd.............. 219
216,000 Winbond Electronics Corp......................... 256
--------
9,480
--------
THAILAND (2.8%)
45,500 Advanced Info Service PCL (Foreign).............. 330
71,600 BEC World PCL (Foreign).......................... 347
39,200 Delta Electronics (Thailand) PCL (Foreign)....... 172
360,400 Golden Land Property (Foreign)................... 115
26,600 Shinawatra Computer Co. PCL (Foreign)............ 69
23,900 Siam Cement Co. (Foreign)........................ 81
7,400 Siam Cement PCL (Foreign)........................ 150
98,300 Thai Farmers Bank PCL (Foreign).................. 199
--------
1,463
--------
TOTAL COMMON STOCKS (Cost $48,657).............................. 51,849
--------

[Download Table]

FACE
AMOUNT
(000)

-----------

FOREIGN CURRENCY (2.8%)
HKD 4,542 Hong Kong Dollar................................. 586
INR 5,705 Indian Rupee..................................... 135
MYR 2,211 Malaysian Ringgit................................ 582
PHP 540 Philippines Peso................................. 14
KRW 3,458 South Korean Won................................. 3
TWD 3,689 Taiwan Dollar.................................... 111
--------
TOTAL FOREIGN CURRENCY (Cost $1,296)............................ 1,431
--------

[Enlarge/Download Table]

VALUE
(000)

-------------------------------------------------------------------------------------

TOTAL INVESTMENTS (102.4%) (Cost $49,953)................................ $ 53,280
----------
OTHER ASSETS AND LIABILITIES (-2.4%)
Other Assets........................................................... 4,103
Liabilities............................................................ (5,338)
----------
(1,235)
----------
NET ASSETS (100%)........................................................ $ 52,045
----------
----------

[Download Table]

CLASS A:
--------------------------------------------------------------
NET ASSETS.................................................... $50,577
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 6,193,555 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $8.17
----------
----------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $1,468
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 181,052 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $8.11
----------
----------

------------------------------------------------------------

ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
PCL -- Public Company Limited
Foreign -- Prior governmental approval for foreign investments may be required
under certain circumstances.

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LETTER TO SHAREHOLDERS
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ASIAN REAL ESTATE PORTFOLIO

The investment objective of the Asian Real Estate Portfolio is to provide
long-term capital appreciation by investing primarily in equity securities of
companies in the Asian real estate industry whose shares trade on a recognized
stock exchange in Asia and in equity securities of companies organized under the
laws of an Asian country whose business is conducted principally in Asia.

PERFORMANCE COMPARED TO THE GPR GENERAL
REAL ESTATE SECURITIES INDEX -- FAR EAST(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
-----------------------------------------
AVERAGE ANNUAL
YTD ONE YEAR SINCE INCEPTION
---------- ---------- -----------------

PORTFOLIO -- CLASS A(3)...... 4.53% -9.09% -18.37%
PORTFOLIO -- CLASS B(3)...... 4.51 -8.71 -18.68
INDEX........................ 6.01 -5.15 -26.64

1. The GPR General Real Estate Securities Index -- Far East is a Far East market
capitalization weighted index of listed property/real estate securities in
the Far East measuring total return.

2. Total returns for the Portfolio reflect expenses waived and reimbursed if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

3. The Portfolio commenced operations on October 1, 1997.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE COUNTRY SPECIFIC PERFORMANCE
RESULTS PROVIDED ARE FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED
AS A GUARANTEE OF THE PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS
NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN
RISK CONSIDERATIONS ASSOCIATED WITH INTERNATIONAL INVESTING.

For the three months ended March 31, 1999, the Portfolio had a total return of
4.53% for Class A shares and 4.51% for Class B shares compared to 6.01% for the
GPR General Real Estate Securities Index -- Far East (the "Index"). For the
one-year period ended March 31, 1999, the Portfolio had a total return of -9.09%
for the Class A shares and -8.71% for the Class B shares compared to -5.15% for
the Index. From inception on October 1, 1997 through March 31, 1999, the
Portfolio had an average annual total return of -18.37% for Class A shares and
-18.68% for Class B shares compared to -26.64% for the Index.

MACRO-ECONOMIC OVERVIEW
Asia put up a credible performance in the first quarter despite Brazil's
currency devaluation in January. This came about amidst an improved global
environment and the unfolding of the so-called "deflationary boom" environment
in the developed world. The U.S. economy and equity market continued to be
robust, while European consumption remained strong despite weakness in
manufacturing activities there. Within Asia, investors warmed to Bank of Japan's
announcement in February to expand the money supply and cap the strength of the
yen in an effort to boost the economy. News of further restructuring stories in
corporate Japan, the most notable being Sony's plan to cut 10% of its work force
and close a fifth of its factories over four years, gave the market another
confidence boost. The news was significant in that Japan remains the world's
major source of deflationary pressure given its outsized output gap of -5.6% of
gross domestic product. There were also a number of other recent positive news
stories that point to possible up-side surprises for the Japanese economy in
1999. These were improvement in the inventory-shipment ratio, moderate recovery
in business confidence, decline in corporate bankruptcies and lastly, but
importantly, significant cuts in marginal tax rates starting this new fiscal
year. On the other hand, a recent series of cuts in employment, wages, capital
expenditure and plant closures will probably moderate the pace of economic
recovery.

Meanwhile, economic conditions in non-Japan Asia have clearly stabilized,
although growth is subdued as the region continues to be plagued by the powerful
deflationary forces. Recent industrial output data indicate that Korea has come
roaring back since the last quarter of 1998, while Thailand and Singapore appear
to have established a clear bottom. In Thailand, the senate has finally passed
several important bankruptcy and foreclosure laws that will pave the way for
corporate restructuring and meaningful reforms. Even the troubled economies of
Malaysia and Indonesia have shown signs of stabilization in the past quarter,
though they are by no means out of the woods yet. Malaysia has relaxed its
capital control rules in a bid to attract foreign capital flows back into the
country, while its effort to clean up the non-performing loan problems in the
banking sector appear to be making good progress. Though politics and social
stability remain an issue, Indonesia's economy has stabilized after big
contractions in 1998. In Australia, economic growth at slightly above 4% in the
second half of 1998 has been stronger than expected. This is primarily the
result of robust consumption, supported by low interest rates and employment
growth.

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ASIAN REAL ESTATE PORTFOLIO (CONT.)

Elsewhere, China's economic performance was worse than expected. Exports fell
10% year on year in January, an outcome that was likely to be attributable to
the state sector. The state-owned enterprises are mainly involved in the
commodity industries, which are plagued by sharply falling prices. China's
financial reforms have also reduced their ability to cut prices, hence eroding
their competitiveness. The only robust growth driver continues to be public
investment, with private consumption and investment remaining anemic. Weak
Chinese exports have translated into poor trade performance for Hong Kong, where
deflationary conditions have persisted with weak private consumption. The two
brighter spots in Hong Kong appear to be the housing and tourist sectors. Recent
tourist industry figures, including a rise in hotel occupancy levels, suggest
that the sector could be on the mend, while consistently firm take-up rates in
the residential market indicate that the property market may be close to a
sustained recovery.

REAL ESTATE MARKETS
The most surprising development in the past quarter is the pace at which the
Singapore residential market is recovering. Based on preliminary statistics from
Jones Lang LaSalle (JLL), more than 3,000 private residential units were sold
during the first three months of 1999. This was close to the 3,100 units
recorded in the last quarter of 1998 and compares favorably with the normalized
annual take-up of roughly 6,000-7,000 units. The performance for the first
quarter of this year was all the more remarkable given the long Chinese New Year
break in February. The strong take-up could be attributable to a better economic
outlook, competitive sale prices and the fierce housing mortgage rate war among
the local banks. This latter factor has brought first-year housing mortgage
rates from around 6.5% to 4% per annum currently. Some banks have even started
to offer fixed rates of around 5-5.5% for the subsequent two years. With the
recent brisk sales, the number of unsold housing units has fallen to about 4,500
units from levels well in excess of 10,000. JLL's latest research indicates that
average capital values of residential properties located in prime districts rose
by about 2.7% to an average of S$755 per square foot (psf) (U.S. $436 psf) as at
end March, while those located outside the prime districts were 3.4% higher at
S$450 psf (U.S. $260 psf).

The Singapore office sector, on the other hand, has remained soft. Average prime
rents and capital values fell by another 8.1% and 10.7% in the first quarter to
S$5.10 psf (U.S. $2.9 psf), and S$1,250 psf (U.S. $722 psf), respectively. Prime
office rents and capital values have now fallen by roughly 40% and 50%,
respectively from their peaks in 1996. Current estimates suggest some 5.9
million sq. ft. of new office space will be completed over the next two years,
bringing vacancy rates close to 18% in year 2000 before improving in 2001 based
on present demand projections.

The Hong Kong residential market continued to experience steady take-up in the
first quarter of 1999, although monthly transaction volumes have returned to a
more sustainable 8,000 level. Mass residential prices, which fell 34% in 1998,
have also stabilized after the fourth quarter's 11% rebound. Major developers
are now planning to accelerate land premium negotiations with the government.
The recent successful land premium negotiations were for sites in Discovery Bay
and Kowloon Station Phase 4. With the stabilization of property prices, the Hong
Kong government announced in February its intention to resume land sale for the
next financial year beginning April 1999.

The Hong Kong office sector remains lackluster as supply continues to overwhelm
demand. Average net effective rent in the core central area fell 48% in 1998 to
around Hong Kong $40 psf (U.S. $5 psf) level. Tenants were generally reluctant
to commit given the uncertainties surrounding the Asian economies. The most
publicized deal was Goldman Sachs' 190,000 square feet lease at the Cheung Kong
Center. For the strata-titled office sector, yields rose from 7-8% to more than
9% as concerns over a possible flood of forced sales by Chinese entities
mounted.

In Japan, housing starts rose by 3.2% in February, an increase for the third
straight month. Overall residential prices, however, fell 2.3% in the last
quarter of 1998. Both commercial land prices and rents in the Tokyo metropolitan
area remained weak, falling by around 3-4% in the last quarter. The vacancy rate
for the Tokyo office market now stands at 5.4%. The ongoing global mergers and
acquisitions and corporate cost cuttings have clearly lessened demand for

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LETTER TO SHAREHOLDERS
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ASIAN REAL ESTATE PORTFOLIO (CONT.)

office space. The recent demand from foreign corporations looking to expand or
relocate their corporate offices has been somewhat offset by the downsizing of
many Japanese corporations.

Within Australia, the Sydney office market appears to have started to soften in
the face of increased supply, with a number of large tenants pulling out of
advanced negotiations to lease space in new developments probably as a result of
uncertainties posed by the ongoing mergers and acquisitions activities. Sydney's
office vacancy rate rose to 7.7% at the end of 1998 with roughly 1.5 million sq.
ft. of new supply added to the market in 1998. Another 4 million sq. ft. of new
supply space is expected to come on stream in 1999 and 2000, which is likely to
put further pressure on rents if demand does not recover quickly. The Sydney
retail market has remained resilient, due mainly to strong consumer confidence
and continued high real wage growth. Rents continued to firm, especially in
prime Central Business District (CBD) locations where rents rose 10% in 1998.
Vacancies in the CBD declined to 3.7% as at the end of 1998, with regional
shopping malls recording even lower vacancies of 0.8%.

REAL ESTATE SECURITIES

Despite the strong advances in the last quarter of 1998, Asian real estate
shares continue to perform surprisingly well in 1999, on the back of sustained
low interest rates and better confidence in the prospect for an eventual
economic recovery. Large cap property stocks in Singapore and Hong Kong led the
rally, with some beginning to trade at premiums over their net asset values
(NAV), reflecting investor expectation of NAV growth going forward. The mid-cap
companies have also joined the rally, in the process narrowing the discounts to
their underlying NAVs. We notice that analysts have also started to selectively
revise up company NAVs, either as a result of lower interest and capitalization
rates, higher sale prices and volumes achieved on pre-sales, or savvy
acquisitions leading to shareholder value enhancement. We expect these valuation
levels to be sustained, and even exceeded as signs of recovery in the property
markets become more visible. Office rents and capital values in Hong Kong and
Singapore have adjusted substantially and are probably quite close to the
bottom. As they trade at substantial discounts to NAV, the downside risk is
probably quite limited.

Property trusts in Australia have significantly under-performed the Australian
equity market as well as their regional property securities counterparts over
the past quarter. This was a result of higher domestic bond yields, which rose
from 4.7% in mid-December to as high as 5.6% in March, as well as domestic
general equity investors switching out of defensive sectors into cyclical
sectors driven by higher global and domestic growth expectations. Although the
property trusts continue to offer secure earnings and high yield premium
relative to bonds, they seem unlikely to outperform in the regional context over
the medium term, given their relatively rich valuations (Price/NAV premium).

The reason for Japanese real estate shares' strong recovery during the quarter
was due primarily to lower Japanese bond yields and an improved economic
outlook. The central bank's commitment to keep long-term bond yields low and its
willingness to tolerate a weaker yen will probably reduce the downside risk for
the Japanese economy, which is critical to ensure healthy real estate demand. We
continue to hold the view that listed Japanese real estate securities represent
a geared play on the eventual recovery of the Japanese real estate market, but
it is probably premature to expect sustained strong share price performance in
the absence of a visible pick-up in economic activity.

Kiat Seng Seah
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

ASIAN REAL ESTATE PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)

--------------------------------------------------------------------------

COMMON STOCKS (95.3%)
AUSTRALIA (8.2%)
40,000 Armstrong Jones Retail Fund...................... $ 22
28,000 Centro Properties Group.......................... 49
61,000 IPOH Ltd......................................... 83
12,000 Westfield Holdings Ltd........................... 81
26,000 Westfield Trust.................................. 56
-------
291
-------
HONG KONG (40.0%)
39,000 Cheung Kong Holdings Ltd......................... 297
290,000 China Resources Beijing Land..................... 48
880,000 Far East Hotels & Entertainment Ltd.............. 80
26,000 Henderson Land Development Co., Ltd.............. 127
288,400 HKR International Ltd............................ 178
240,000 Hopson Development Holdings Ltd.................. 25
50,000 New Asia Realty & Trust Co., Class A............. 42
87,000 New World Development Co., Ltd................... 171
270,000 Regal Hotel International Ltd.................... 26
270,000 Shun Tak Holdings Ltd............................ 52
41,000 Sun Hung Kai Properties Ltd...................... 307
15,000 Swire Pacific Ltd., Class A...................... 70
-------
1,423
-------
JAPAN (20.1%)
10,000 Daibiru Corp..................................... 75
31,000 Mitsubishi Estate Co., Ltd....................... 316
24,000 Mitsui Fudosan Co., Ltd.......................... 216
29,000 Sumitomo Realty & Development Co., Ltd........... 110
-------
717
-------
PHILIPPINES (4.3%)
279,400 Ayala Land, Inc., Class B........................ 81
370,000 Filinvest Land, Inc.............................. 31
200,000 SM Prime Holdings, Inc........................... 41
-------
153
-------
SINGAPORE (17.4%)
47,000 City Developments Ltd............................ 245
54,000 DBS Land Ltd..................................... 80
30,000 Keppel Land Ltd.................................. 35
59,000 Marco Polo Developments Ltd...................... 74
40,000 United Industrial Corp., Ltd..................... 21
50,000 United Overseas Land Ltd......................... 34
159,000 Wing Tai Holdings Ltd............................ 129
-------
618
-------
TAIWAN (1.7%)
110,000 Delpha Construction Co., Ltd..................... 61
-------

VALUE
SHARES (000)

--------------------------------------------------------------------------

THAILAND (3.6%)
177,000 MBK Properties and Development PCL............... $ 92
8,900 Oriental Hotel (Thailand) PCL.................... 38
-------
130
-------
TOTAL COMMON STOCKS (Cost $2,907)................................ 3,393
-------

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FACE
AMOUNT
(000)

------------

CONVERTIBLE DEBENTURE (3.6%)
SINGAPORE (3.6%)
$ 170 Wing Tai Holdings Ltd., 1.50% 7/15/02 (Cost
$92)........................................... 129
-------
TOTAL FOREIGN SECURITIES (98.9%) (Cost $2,999)................... 3,522
-------
FOREIGN CURRENCY (0.9%)
AUD 7,261 Australian Dollar................................ 4
HKD 21,591 Hong Kong Dollar................................. 3
PHP 10,800 Philippines Peso................................. --
TWD 850,890 Taiwan Dollar.................................... 26
-------
TOTAL FOREIGN CURRENCY (Cost $34)................................ 33
-------
TOTAL INVESTMENTS (99.8%) (Cost $3,033).......................... 3,555
-------

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OTHER ASSETS AND LIABILITIES (0.2%)
Other Assets.................................................. 57
Liabilities................................................... (51)
--------
6
--------
NET ASSETS (100%)............................................... $ 3,561
--------
--------

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CLASS A:
--------------------------------------------------------------
NET ASSETS.................................................... $2,773
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 399,895 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $6.93
---------
---------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $788
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 113,156 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $6.96
---------
---------

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LETTER TO SHAREHOLDERS
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EMERGING MARKETS PORTFOLIO

The investment objective of the Emerging Markets Portfolio is to provide
long-term capital appreciation by investing in equity securities of emerging
country issuers.

PERFORMANCE COMPARED TO THE IFC GLOBAL TOTAL RETURN COMPOSITE INDEX AND THE
MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EMERGING MARKETS FREE INDEX(1)
-----------------------------------------

[Enlarge/Download Table]

TOTAL RETURNS(2)
-----------------------------------------
AVERAGE
AVERAGE ANNUAL
ONE ANNUAL SINCE
YTD YEAR FIVE YEARS INCEPTION
------ ------- ---------- ---------

PORTFOLIO -- CLASS A....................... 11.62% -23.05% -5.30% 5.12%
PORTFOLIO -- CLASS B....................... 11.61 -23.23 N/A -2.89
IFC GLOBAL TOTAL RETURN COMPOSITE INDEX --
CLASS A.................................... 8.86 -20.06 -5.42 3.88
MSCI EMERGING MARKETS FREE INDEX -- CLASS
A.......................................... 12.44 -20.95 -5.34 4.88
IFC GLOBAL TOTAL RETURN COMPOSITE INDEX --
CLASS B.................................... 8.86 -20.06 N/A -7.32
MSCI EMERGING MARKETS FREE INDEX -- CLASS
B.......................................... 12.44 -20.95 N/A -7.73

1. The IFC Global Total Return Composite Index is an unmanaged index of common
stocks and includes developing countries in Latin America, East and South
Asia, Europe, the Middle East and Africa (includes dividends). The MSCI
Emerging Markets Free Index is a market capitalization weighted index
composed of companies that are representative of the market structure of
developing countries in Latin America, Asia, Eastern Europe, the Middle East
and Africa. (includes dividends)

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE COUNTRY SPECIFIC PERFORMANCE
RESULTS PROVIDED IN THIS OVERVIEW ARE AS MEASURED BY THE MORGAN STANLEY CAPITAL
INTERNATIONAL (MSCI) EMERGING MARKETS COUNTRY OR REGIONAL INDICES, ARE FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE
PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK
CONSIDERATIONS ASSOCIATED WITH INTERNATIONAL INVESTING.

For the three months ended March 31, 1999, the Portfolio had a total return of
11.62% for the Class A shares and 11.61% for the Class B shares compared to
8.86% for the IFC Global Total Return Composite Index (the "IFC Index") and
12.44% for the Morgan Stanley Capital International (MSCI) Emerging Markets Free
Index (the "MSCI Index"). For the one-year period ended March 31, 1999, the
Portfolio had a total return of -23.05% for the Class A shares and -23.23% for
the Class B shares compared to -20.06% for the IFC Index and -20.95% for the
MSCI Index. For the five-year period ended March 31, 1999, the average annual
total return of Class A shares was -5.30% compared to -5.42% for the IFC Index
and -5.34% for the MSCI Index. From inception on September 25, 1992 through
March 31, 1999, the average annual total return for Class A shares was 5.12%
compared to 3.88% for the IFC Index and 4.88% for the MSCI Index. From inception
on January 2, 1996 through March 31, 1999, the average annual total return of
Class B shares was -2.89% compared to -7.32% for the IFC Index and -7.73% for
the MSCI Index.

After two consecutive positive quarters in the Emerging Markets Equity asset
class, is it still too early to declare the end of the emerging markets bear
market? Events this past quarter suggest that we could be entering a turnaround
phase. The major event which took place this quarter was the devaluation of the
Brazilian currency, the real, thus removing the "Sword of Damocles" that had
hung over this market for months. The truly amazing feature of the devaluation
was not that it occurred, but that the real lost roughly 30% in value and the
Brazilian equity market finished the quarter in positive territory in US
dollars. Before delving into the particulars of Brazil, however, we would like
to first review the major events which took place in the first quarter in the
Emerging Markets:

- Brazil's currency devalued roughly 30% against the U.S. dollar.

- Turkish authorities captured Kurdish terrorist Abdullah Ocalan, boosting the
political fortunes of the existing government and sentiment in that market.

- On the back of a Euro-area economic slow down, current account and fiscal
deficit deterioration caused currency weakness and significant equity market
underperformance in Eastern Europe (Czech Republic, Hungary, Poland),
effectively stripping them of their "safe haven" status.

- Lack of hyperinflation and the strong oil price recovery propelled Russia to
the rank of top performing emerging market in the first quarter.

- A market-friendly budget in India boosted sentiment in that market as it
posted strong gains for the quarter.

- The strong price of oil, robust U.S. economy, and lack of meltdown in Brazil
allowed Mexico to differentiate itself from the rest of Latin America and
stage a dramatic recovery from last year's anemic performance.

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EMERGING MARKETS PORTFOLIO (CONT.)

The devaluation of the real has removed one of the last remaining identifiable
risks in the asset class, and the market action in the wake of this devaluation
has been quite encouraging. As previously mentioned, despite a 30% decline in
the value of the currency vis-a-vis the U.S. dollar (USD), Brazil ended the
quarter in positive territory in USD and was up 36.8% in the month of March.
While the devaluation was uncontrolled, the surprise selection of ex-Soros fund
manager Arminio Fraga to head Brazil's Central Bank injected a much needed boost
of confidence precisely when the currency markets were on the verge of spiraling
out of control. Although there were tense moments in the quarter, and the
country is by no means out of the woods, the trends evolving by quarter's end
point to a more stable outlook for the country for the balance of the year.

PORTFOLIO REVIEW AND OUTLOOK

Our stock selection and allocation decisions in Brazil had the single largest
positive impact on performance. Specifically, underweighting Brazil going into
the devaluation and then quickly moving to a neutral weight after the
devaluation was favorable for performance. Additionally, our holdings, largely
in the telecommunications sector, did well. Other contributors to performance
included our underweight positions in Colombia (- 14.2%) and Venezuela (-13.3%)
as well as strong stock selection in Mexico, India, South Korea, and Thailand.

The Latin American region performed well during the quarter, rising 12.9% in
U.S. dollars. The most notable market event throughout all the emerging markets
was the devaluation of the Brazilian currency, the real. The currency plunged
40% in January, then retraced some of its decline to end the quarter down 30%.
Most emerging markets investors anticipated the devaluation, but few, if any,
expected the Brazilian equity market to recover so quickly. By quarter-end, the
equity market had gained 5.5% in US dollars. Fueling the market was the
unexpected appointment of Arminio Fraga, the former portfolio manager of George
Soros' Quantum Emerging Markets Growth Fund, as head of the Central Bank. Fraga
offers financial market expertise and shareholder focus, which has aided market
sentiment.

As mentioned above, over the course of the quarter, we added to our Brazilian
holdings and are now overweight relative to the MSCI Index. Our cautious
optimism is based on several points; interest rates are declining, foreign banks
are largely rolling over their loans to Brazilian borrowers, the central bank is
running a tight monetary policy, and inflation seems under control. Within
Brazil, we are focusing on the telecommunications industry which offers strong
management, high pent-up demand, and room for cost efficiencies.

Mexico was the best performing Latin market, gaining 28.7% in U.S. dollar terms.
Its market has been supported by falling interest rates, attractive corporate
earnings, and continued strong U.S. economic growth. Also buoying the market has
been Mexico's ability to differentiate itself from other Latin markets,
specifically Brazil. Markets within regions are typically highly correlated
during times of crisis, but Mexico was able to de-couple from Brazil. As a
result of Mexico's positive corporate and macroeconomic fundamentals, investors
have deemed it the "safe haven" within the region, further bolstering the
market. Given Mexico's favorable macro and micro scenario, we added to our
position in the beginning of the quarter, and later trimmed as the market
continued to climb higher. By quarter-end, we were market weight, focusing on
consumer-related industries, such as telecommunications, beverages, retailing,
and health and personal care.

Asia gained 11.1% in the first quarter led by India, which rose 26.4%. The
government's announcement of a better-than-expected budget spurred the Indian
market. Our stock holdings fared well, and we trimmed some positions as the
market rallied. We are currently at neutral weight as we continue to find many
attractive stock opportunities. We are less compelled by the macro story, as
there are little signs of any improvement with respect to its economic
fundamentals. Our Indian portfolio is tilted towards technology-based stocks,
such as Infosys, a $3 billion market capitalization computer software company.

Taiwan's market rose 11.6% in the first quarter owing to a financial sector
reform package announced by the government. We are impressed with Taiwanese
companies as they offer strong management and excellent earnings growth
potential. We added to our Taiwanese positions during the quarter and are now
modestly overweight the MSCI Index. As in India, we are focusing on the
technology sector. For example, Taiwan Semiconductor is a leader in making
integrated circuits for other companies. It is expected to benefit from both a
cyclical upturn in semiconductors and a long-term trend towards outsourcing
various computer components.

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LETTER TO SHAREHOLDERS
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EMERGING MARKETS PORTFOLIO (CONT.)

Our favorite Asian market is South Korea, where we are overweight the MSCI Index
owing to both strong macro and micro fundamentals. The Korean government has
come a long way over the past year to improve its economic condition. During the
quarter, the Korean government focused on improving the non-performing loan
situation in its banking sector. Over $50 billion has been budgeted to
recapitalize its banks and to purchase non-performing loans. Also beneficial has
been the decline in interest rates which has encouraged retail investors and
institutions to switch from fixed income to equity investments. We also expect
to see a continuation of corporate restructuring. We have significant weightings
in Samsung Electronics and also within the telecommunications industry. Samsung
Electronics is a leading semiconductor, electronics, and telecommunications
equipment manufacturer. The company is positioned to benefit from a cyclical
upturn in semiconductor demand as well as its own corporate restructuring.

Emerging Europe and the Middle East gained 14.3% in the first quarter. Russia
and Turkey were the star performers, each gaining more than 50%. We are market
weight Russia, as we believe it is un-wise to underweight such a volatile, "low
valuation" country. Most recently, the market has been driven by positive
developments in IMF negotiations and oil price increases.

We added to and are now overweight Turkey as its political, economic, and
interest rate scenario begins to improve. The capture of Kurdish leader Abdullah
Ocalan could be very positive as it increases the likelihood that a
reform-minded coalition will be victorious in the April elections. The World
Bank and IMF have indicated they will provide financial support to Turkey
contingent on the implementation of various reforms (banking, social security,
and agricultural subsidies). In Turkey, our largest weighting is in the banking
industry as we expect interest rates to trend lower.

Hungary (-15.2%) and Poland (+2.3%) were market laggards during the quarter. We
trimmed both markets due to their deteriorating macro environment. Both
countries have widening current account deficits, which puts pressure on their
currencies and may prevent the central banks from lowering interest rates. We
are now at neutral weight in Hungary, but have maintained an overweight position
in Poland.

We have also trimmed Greece and are now underweight the market. Having returned
more than 80% in 1998 and 9.2% year-to-date, we have looked to Greece as a
source of cash. Greece has recently experienced some weakness given its role in
the handover of Ocalan to Turkey and the Kosovo crisis. Longer-term, we remain
positive on Greece as its market will be bolstered by its future induction into
the (EMU).

Israel, a market we are overweight, has performed well gaining 16.4% during the
quarter. The market was fuelled by a recent IMF report which forecasted better
economic and inflation figures. Israel is another market offering outstanding
technology-based companies with solid management and strong earnings growth
potential.

South Africa rose 13.1% in the first quarter responding favorably to interest
rate cuts. We expect continued market strength on the back of further rate cuts
and a benign upcoming election. We added to our South African weighting, though
we maintain an underweight position. We have significant exposure to the
financial services industry given our interest rate call and to the beverage
industry as disposable income is expected to rise. One of our large holdings,
South African Breweries, is a world class brewing operation with exposure to
several emerging markets. The company has excellent management and is
attractively valued relative to its emerging markets and global peers.

Robert L. Meyer
PORTFOLIO MANAGER

Andy B. Skov
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

EMERGING MARKETS PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)

-------------------------------------------------------------------------------

COMMON STOCKS (UNLESS OTHERWISE NOTED) (96.3%)
ARGENTINA (2.0%)
6 Acindar, Class B................................. $ --
354,268 Telecom Argentina ADR............................ 9,720
108,019 Telefonica de Argentina ADR...................... 3,268
135,238 YPF ADR.......................................... 4,268
---------
17,256
---------
BRAZIL (12.0%)
73,602,000 Banco Bradesco (Preferred)....................... 395
295,998,880 Banco Nacional (Preferred)....................... 9
5,229,313 Brahma (Preferred)............................... 2,461
207,330,066 CEMIG (Preferred)................................ 4,636
173,325 CEMIG ADR (Preferred)............................ 3,856
(e)103,238 CEMIG ADR (Preferred)............................ 2,297
98,865 Coteminas ADR.................................... 291
12,714,900 Coteminas........................................ 719
247,512 CRT (Preferred).................................. 75
569,337 CRT RFD (Preferred).............................. 173
33,059,644 CRT (Preferred).................................. 10,024
3,665 CVRD, Class A (Preferred)........................ 54
171,164 CVRD ADR (Preferred)............................. 2,503
98,021,210 Embratel (Preferred)............................. 1,647
66,192 Embratel ADR..................................... 1,105
119,019,000 Lojas Arapua (Preferred)......................... --
120,830 Lojas Arapua GDR (Preferred)..................... --
39,236,000 Pao de Acucar (Preferred)........................ 579
26,429 Pao de Acucar ADR................................ 386
65,121,000 Petrobras (Preferred)............................ 9,037
42,860 Petrobras ADR (Preferred)........................ 597
35,423,000 Renner Participacoes (Preferred)................. 26
122,109,610 Telebras (Preferred)............................. 21
284,574 Telebras ADR (Preferred)......................... 22,944
363,515,510 Tele Celular Sul (Preferred)..................... 729
18,400 Tele Celular Sul................................. 352
29,711 Tele Centro Sul.................................. 1,372
317,814,610 Tele Centro Sul (Preferred)...................... 2,963
168,257,700 Telecom Brasil (Preferred)....................... 13,657
1 Telecomunicacoes de Sao Paulo.................... --
442,516,610 Tele Leste Celular (Preferred)................... 294
11,175 Telemig Celular.................................. 293
386,812,716 Telemig Celular (Preferred)...................... 521
253,287,610 Tele Nordeste Celular (Preferred)................ 275
8,975 Tele Nordeste Celular............................ 200
92,670,610 Tele Norte Celular (Preferred)................... 56
122,109,610 Tele Norte Leste (Preferred)..................... 1,865
93,088 Tele Norte Leste (ADR)........................... 1,431
20,876,000 Telerj Celular, Class B.......................... 353
227,910,610 Telesp Celular (Preferred)....................... 1,900
20,546 Telesp Celular................................... 430
85,101,399 Telesp Celular, Class B.......................... 3,176
44,515,610 Telesp (Preferred)............................... 932
337,684,610 Tele Sudeste Celular (Preferred)................. 1,378
4,165 Tele Sudeste Celular............................. 84

VALUE
SHARES (000)

-------------------------------------------------------------------------------

469,340 Unibanco GDR (Preferred)......................... $ 9,035
318,900 Usiminas (Preferred)............................. 545
62,535 Usinas Siderurgicas de Minas Gerais S.A.......... 106
---------
105,782
---------
CHILE (1.1%)
106,800 CCU ADR.......................................... 2,330
125,265 Endesa ADR....................................... 1,761
186,545 Enersis ADR...................................... 5,002
67,086 Santa Isabel ADR................................. 587
---------
9,680
---------
CHINA (0.8%)
133,010 Huaneng Power International, Inc. ADR............ 1,322
235,136 Yanzhou Coal Mining Co., Ltd. ADR................ 1,866
4,887,000 Zhejiang Expressway Co., Ltd., Class H........... 832
15,463,000 Zhenhai Refining & Chemical Co., Ltd., Class H... 2,674
---------
6,694
---------
CZECH REPUBLIC (0.7%)
140,440 SPT Telecom a.s.................................. 1,812
338,339 SPT Telecom a.s. GDR............................. 4,532
---------
6,344
---------
EGYPT (0.8%)
53,084 Al-Ahram Beverages Co............................ 1,639
5,160 Al-Ahram Beverages Co. GDR....................... 159
54 Ameriyah Cement Co............................... 1
346 Commercial International Bank.................... 4
106,838 Eastern Tobacco.................................. 3,028
22,500 Egypt Gas Co..................................... 1,491
450 Egyptian Finance & Industrial.................... 7
25 Helwan Cement.................................... --
37,981 Industrial & Engineering......................... 497
4,975 North Cairo Flour Mills Co....................... 76
4,310 Paints & Chemical Industry GDR................... 27
---------
6,929
---------
GREECE (5.9%)
52,740 Alpha Credit Bank................................ 3,512
8,275 Commercial Bank Of Greece........................ 1,296
9,410 Ergo Bank........................................ 706
51,860 Hellenic Bottling Co............................. 1,543
899,388 Hellenic Telecommunication Organization (OTE).... 21,889
1,078,103 Hellenic Telecommunication Organization (OTE)
ADR............................................ 12,600
154,650 National Bank of Greece.......................... 10,493
---------
52,039
---------

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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EMERGING MARKETS PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)
-------------------------------------------------------------------------------

HUNGARY (1.1%)
147,065 Magyar Tavkozlesi Rt............................. $ 784
49,516 Matav Rt......................................... 1,325
140,645 Matav Rt. ADR.................................... 3,762
69,436 MOL Magyar Olaj-es Gazipari Rt. GDR
(Registered)................................... 1,423
52,235 OTP Bank Rt...................................... 2,026
---------
9,320
---------
INDIA (9.3%)
5,650 Apollo Tyres Ltd................................. 7
41,000 Aptech Ltd....................................... 912
433 Associated Cement Cos., Ltd...................... 15
1,449,800 Bharat Heavy Electricals Ltd..................... 8,116
990,300 Container Corp. of India Ltd..................... 4,106
167,000 Digital Equipment (India) Ltd.................... 1,531
1,900 Federal Bank Ltd................................. 2
191,700 Gujarat Ambuja Cements Ltd....................... 1,356
113,850 HCL Infosystems Ltd.............................. 1,680
63 Hero Honda Motors Ltd............................ 1
410,711 Hero Honda Motors Ltd............................ 8,473
83,050 Hindustan Lever Ltd.............................. 4,432
1,000 Hindustan Lever Ltd.............................. 53
27,995 Housing Development Finance Corp., Ltd........... 1,505
32,377 Housing Development Finance Corp., Ltd........... 1,740
(g)4,900 India Magnum Fund Ltd., (The) Class A............ 159
176,200 Infosys Technology Ltd........................... 12,148
196,449 ITC Ltd.......................................... 4,459
1,547 Larsen & Toubro Ltd.............................. 9
368,400 Mahanagar Telephone Nigam Ltd.................... 1,534
(g)42,697,100 Morgan Stanley Growth Fund....................... 7,296
70,381 MRF Ltd., Class B................................ 3,215
9,000 NIIT Ltd......................................... 398
86,550 NIIT Ltd......................................... 3,825
220,000 Saytam Computer Services Ltd..................... 8,411
45,000 Sri Venkatesa Mills Ltd.......................... 6
550 State Bank of India.............................. 3
2,608 Sudarshan Chemical Industries Ltd................ 3
495,000 Tata Engineering & Locomotive Co., Ltd........... 1,974
197,700 Tata Engineering & Locomotive Co., Ltd........... 788
149,000 Zee Telefilms Ltd................................ 3,466
---------
81,623
---------
INDONESIA (1.3%)
5,008,641 Gudang Garam..................................... 6,673
13,249,055 Indah Kiat Pulp & Paper Corp. (Foreign).......... 3,753
931,600 Semen Gresik..................................... 1,061
---------
11,487
---------

VALUE
SHARES (000)

-------------------------------------------------------------------------------

ISRAEL (4.5%)
794,800 Bank Hapoalim Ltd. (Registered).................. $ 1,867
1,134,000 Bank Leumi Le-Israel............................. 2,013
46,230 Converse Technology, Inc......................... 3,929
216,300 Dor Energy 1988 Limited.......................... 714
189,574 ECI Telecommunications Ltd....................... 6,635
79,140 Gilat Satellite Networks Ltd..................... 4,748
78,345 Koor Industries Ltd.............................. 8,308
87,526 NICE-Systems Ltd. ADR............................ 2,582
17,875 NICE-Systems Ltd................................. 530
86,770 Orbotech Ltd..................................... 4,263
28,020 Orckit Communications Ltd........................ 585
62,295 Teva Pharmaceutical Industries Ltd. ADR.......... 2,955
---------
39,129
---------
KOREA (12.9%)
115,200 Hankuk Glass Industry Co., Ltd................... 2,253
392,240 Housing & Commercial Bank........................ 7,832
136,700 Korea Electric Power Corp........................ 3,298
876,810 Korea Electric Power Corp. ADR................... 11,125
450,640 Korea Telecom Corp............................... 17,799
147,183 Pohang Iron & Steel Co., Ltd..................... 9,271
1,158 S1 Corp.......................................... 219
195,929 Samsung Electro-Mechanics Co..................... 4,487
593,382 Samsung Electronics Co........................... 45,943
21,364 Samsung Electronics Co. GDR...................... 830
11,231 SK Telecom Co., Ltd.............................. 10,114
---------
113,171
---------
MALAYSIA (1.0%)
36,000 Kuala Lumpur Kepong Bhd.......................... 45
527,000 Nestle (Malaysia) Bhd............................ 1,845
656,000 Rothmans of Pall Mall (Malaysia) Bhd............. 3,884
1,371,000 Telekom Malaysia Bhd............................. 2,760
---------
8,534
---------
MEXICO (12.0%)
349,359 Alfa, Class A.................................... 1,061
1,417,139 Banacci, Class B................................. 3,068
966,103 Banacci, Class L................................. 1,939
1,080,901 Bancomer, Class B................................ 370
277,930 Bancomer, Class C ADR............................ 1,911
664,209 Carso, Class A1.................................. 2,730
356,165 Cemex CPO........................................ 1,454
919,867 Cemex CPO ADR.................................... 7,474
307,336 Cemex, Class B................................... 1,290
431,157 Cemex, Class B ADR............................... 3,611
1,454,796 Cifra, Class C................................... 2,248
684,283 Cifra, Class V................................... 1,074
202,768 Cifra, Class V ADR............................... 3,138
318,773 Fomento Economico Mexicano ADR................... 9,862
1,833,247 Kimberly-Clark, Class A.......................... 6,907

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

EMERGING MARKETS PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)
-------------------------------------------------------------------------------

MEXICO (CONT.)

[Download Table]

834,035 Televisa CPO GDR................................. $ 26,168
470,273 Telmex, Class L ADR.............................. 30,803
---------
105,108
---------
PAKISTAN (1.0%)
33 Crescent Textile Mills Ltd....................... --
50 D.G. Khan Cement Ltd............................. --
4,626,500 Fauji Fertilizer Co., Ltd........................ 4,949
384,600 Hub Power Co..................................... 121
1,503,198 Pakistan State Oil Co., Ltd...................... 2,449
430,900 Pakistan Telecommunications Corp., Class A....... 154
5,627,702 Sui Northern Gas................................. 1,057
---------
8,730
---------
PERU (0.0%)
49 Cementos Lima.................................... --
---------
PHILIPPINES (1.0%)
780,620 Manila Electric Co., Class B..................... 2,579
2,155,910 San Miguel Corp., Class B........................ 3,588
13,876,500 SM Prime Holdings, Inc........................... 2,865
---------
9,032
---------
POLAND (2.2%)
43,191 Bank Polska Kasa Opieki Grupa Pekao.............. 449
828 Bank Slaski...................................... 35
74,200 BIG Bank Gdanski................................. 133
33,400 Eastbridge N.V................................... 2,246
369,838 Elektrim......................................... 3,934
30,688 Powszechny Bank Kredytowy........................ 522
111,002 Prokom Software GDR.............................. 1,881
1,774,105 Telekomunikacja Polska GDR....................... 9,625
112,788 Wielkopolski Bank Kredytowy...................... 621
---------
19,446
---------
RUSSIA (1.4%)
592,359 Alliance Cellulose Ltd........................... 911
77,600 AO Tatneft ADR................................... 213
88,970 Lukoil Holding ADR............................... 2,569
37,259,635 Mustcom.......................................... 4,087
31,300 RAO Unified Energy Systems GDR................... 155
39,300 Rostelecom (ADR)................................. 184
317,851 Russian Telecom Development Corp................. 735
990 Storyfirst Communications, Inc., Class C......... 239
2,640 Storyfirst Communications, Inc., Class D......... 638
3,250 Storyfirst Communications, Inc., Class E......... 785
1,331 Storyfirst Communications, Inc., Class F......... 643

VALUE
SHARES (000)

-------------------------------------------------------------------------------

155,900 Surgutneftgaz ADR................................ $ 994
35,900 Vimpel-Communications ADR........................ 556
---------
12,709
---------
SINGAPORE (0.0%)
431,000 Want Want Holdings Ltd........................... 435
---------
SOUTH AFRICA (8.0%)
1,042,790 ABSA Group Ltd................................... 4,990
2,020 Anglo American Corp.............................. 70
99,720 Anglo American Corporation of South Africa,
Ltd............................................ 3,462
898,941 Bidvest Group Ltd................................ 7,364
7,565,177 BOE Corp., Ltd., Class N......................... 5,522
977,509 BOE Ltd.......................................... 872
96,840 De Beers Centenary AG............................ 1,869
48,070 De Beers Consolidated Mines ADR.................. 910
39,960 Dimension Data Holdings Ltd...................... 178
828,650 Ellerine Holdings Ltd............................ 3,286
6,068,930 FirstRand Ltd.................................... 5,818
212,405 Liberty Life Association of Africa Ltd........... 2,632
278,958 Nedcor Ltd....................................... 6,226
3,426,570 New Africa Investments Ltd., Class N............. 1,973
223,950 Persetel Holdings Ltd............................ 1,747
16,120 Primedia Ltd., Class N........................... 31
606,000 Rembrandt Group Ltd.............................. 4,355
340,400 South African Breweries Ltd...................... 2,954
1,657,710 South African Breweries Ltd...................... 14,582
1,372,254 The Education Investment Corp., Ltd.............. 1,670
---------
70,511
---------
TAIWAN (11.1%)
1,240,000 Acer, Inc........................................ 1,650
1,614,000 Advanced Semiconductor Engineering, Inc.......... 3,798
1,481,750 Asustek Computer, Inc............................ 12,518
2,259,000 Bank Sinopac..................................... 1,240
742,693 Compal Electronics, Inc.......................... 1,950
162,000 Compeq Manufacturing Co., Ltd.................... 772
4,992,000 Far East Textile Ltd............................. 4,910
1,577,000 First Commercial Bank............................ 2,593
1,054,000 Formosa Plastics Corp............................ 1,733
2,783,000 Hon Hai Precision Industry....................... 14,861
1,732,000 Hua Nan Commercial Bank.......................... 2,979
798,000 International Commercial Bank of China........... 929
1,274,000 Nan Ya Plastics Corp............................. 1,872
566,000 President Chain Store Corp....................... 1,750
102,000 Quanta Computer Inc.............................. 1,723
1 Shinkong Synthetic Fiber......................... --
2,461,072 Siliconware Precision Industries Co.............. 5,012
1,438,000 Taishin International Bank....................... 811
5,027,000 Taiwan Semiconductor Manufacturing Co............ 15,773

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

EMERGING MARKETS PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)
-------------------------------------------------------------------------------

TAIWAN (CONT.)

[Download Table]

554,031 Taiwan Semiconductor Manufacturing Co. ADR....... $ 13,089
3,403,000 United Micro Electronics Corp., Ltd.............. 5,904
43,550 Winbond Electronics Corp......................... 1,276
---------
97,143
---------
THAILAND (2.3%)
1,103,950 Advanced Information Services PCL (Foreign)...... 7,996
716,300 BEC World PCL (Foreign).......................... 3,471
448,350 Delta Electronics (Thailand) PCL (Foreign)....... 1,970
1,631,800 Shinawatra Computer Co. PCL (Foreign)............ 4,258
689,900 Siam Cement PCL (Foreign)........................ 2,333
---------
20,028
---------
TURKEY (3.7%)
73,090 Akbank T.A.S..................................... 4,167
153,692,000 Dogan Sirketler Grubu Holding.................... 1,380
31,243,100 Ege Biracilik.................................... 3,265
69,192,932 Erciyas Biracilik................................ 1,725
14,312,000 Garanti Bankasi A.S.............................. 595
8,679,000 Koc Holding A.S.................................. 1,082
1,153,000 Migros (Registered).............................. 1,514
22,801,000 Tupras-Turkiye Petrol Rafinerileri A.S........... 1,620
84,463,000 Turkiye Is Bankasi, Class C...................... 3,679
42,354,601 Vestel Elektronik Sanayi Ve Ticaret A.S.......... 4,031
522,796,664 Yapi Ve Kredi Bankasi A.S........................ 9,670
---------
32,728
---------
ZIMBABWE (0.1%)
867,999 Delta Corp. Ltd.................................. 221
917,040 Meikles Africa Ltd. ADR.......................... 734
---------
955
---------
OTHER (0.1%)
(g)100,130 Morgan Stanley Africa Investment Fund, Inc....... 939
---------
TOTAL COMMON STOCKS (Cost $899,504)................................. 845,752
---------
PREFERRED STOCKS (0.0%)
COLOMBIA (0.0%)
103,207 Bancolombia (Cost $617).......................... 123
---------

[Download Table]

NO. OF
WARRANTS

---------------

WARRANTS (0.0%)
THAILAND (0.0%)
1,020,633 Siam Commercial Bank PCL (Foreign) (Cost $0)..... --
---------

[Download Table]

NO. OF VALUE
UNITS (000)

-------------------------------------------------------------------------------

UNITS (1.4%)
MEXICO (1.3%)
3,796,449 Fomento Economico Mexicano....................... $ 11,611
---------
RUSSIA (0.1%)
1,637 Storyfirst Communications, Inc., First Section,
Tranche I, 25.00%, 3/31/99..................... 395
96 Storyfirst Communications, Inc., Second Section,
Tranche I, 25.00%, 3/31/99..................... 23
421 Storyfirst Communications, Inc., Tranche II,
26.00%, 3/31/99................................ 102
562 Storyfirst Communications, Inc., Tranche IV,
28.00%, 3/31/99................................ 136
654 Storyfirst Communications, Inc., Tranche V,
29.00%, 3/31/99................................ 158
550 Storyfirst Convertible Bond, Tranche VI, 30.00%,
3/31/99........................................ 133
---------
947
---------
TOTAL UNITS (Cost $12,120).......................................... 12,558
---------

[Download Table]

FACE
AMOUNT
(000)

---------------

FIXED INCOME SECURITIES (0.4%)
RUSSIA (0.4%)
21,883 Svyaz Finance, 17.00%, 8/11/99 (Cost $21,883).... 3,326
---------
CONVERTIBLE DEBENTURES (0.0%)
INDIA (0.0%)
INR 336 DCM Shriram Industries Ltd., 7.50%, 2/12/02 (Cost
$473).......................................... 138
---------
NON-CONVERTIBLE DEBENTURES (0.2%)
INDIA (0.2%)
341 DCM Shriram Industries Ltd., (Floating Rate),
9.90%, 2/21/02................................. 187
700 Saurashtra Cement & Chemicals Ltd., 18.00%,
11/27/98....................................... 1,541
---------
TOTAL NON-CONVERTIBLE DEBENTURES (Cost $2,864)...................... 1,728
---------
TOTAL FOREIGN SECURITIES (98.3%) (Cost $937,461).................... 863,625
---------

[Download Table]

SHORT-TERM INVESTMENTS (0.1%)
REPURCHASE AGREEMENT (0.1%)
797 Chase Securities, Inc. 4.65%, dated 3/31/99, due
4/01/99, to be repurchased at $797,
collateralized by U.S. Treasury Bonds, 6.625%,
due 2/15/27, valued at $803 (Cost $797)........ 797
---------
FOREIGN CURRENCY (2.2%)
BRL 468 Brazilian Real................................... 273
INR 33,718 Indian Rupee..................................... 795
IDR 487,497 Indonesian Rupiah................................ 56

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

EMERGING MARKETS PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

FACE
AMOUNT VALUE
(000) (000)
-------------------------------------------------------------------------------

FOREIGN CURRENCY (CONT.)

[Download Table]

MYR 62,931 Malaysian Ringgit................................ $ 16,561
MXP 4,737 Mexican Peso..................................... 498
PHP 14,066 Philippine Peso.................................. 363
KRW 35,709 South Korean Won................................. 29
LKR 2 Sri Lankan Rupee................................. --
TWD 14,795 Taiwan Dollar.................................... 446
TRL 12,132,646 Turkish Lira..................................... 32
ZWD 3,455 Zimbabwe Dollars................................. 91
---------
TOTAL FOREIGN CURRENCY (Cost $16,519)............................... 19,144
---------
TOTAL INVESTMENTS (100.6%) (Cost $954,777).......................... 883,566
---------

[Download Table]

OTHER ASSETS AND LIABILITIES (-0.6%)
Other Assets....................................................... 63,532
Liabilities........................................................ (68,967)
--------
(5,435)
--------
NET ASSETS (100%).................................................... $878,131
--------
--------

[Download Table]

CLASS A:
--------------------------------------------------------------
NET ASSETS.................................................... $870,673
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 81,655,315 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $10.66
---------
---------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $7,458
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 699,120 outstanding $0.001 par
value shares (authorized 500,000,000 shares)................ $10.67
---------
---------

------------------------------------------------------------

(e) -- 144A Security -- Certain conditions for public sale may exist
(g) -- The fund is advised by an affiliate
ADR -- American Depositary Receipt
CPO -- Certificate of Participation
GDR -- Global Depositary Receipt
PCL -- Public Company Limited
Floating Rate Security -- Interest rate changes on these instruments are based
on changes in a designated base rate. The rates shown are those in effect on
March 31, 1999.
Foreign -- Prior governmental approval for foreign investments may be required
under certain circumstances.

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
EUROPEAN EQUITY PORTFOLIO

The investment objective of the European Equity Portfolio is to seek long-term
capital appreciation through investment in equity securities of European
issuers. Equity securities for this purpose include stocks and stock equivalents
such as securities convertible into common and preferred stocks and securities
having equity characteristics, such as rights and warrants to purchase common
stock.

PERFORMANCE COMPARED TO THE MORGAN STANLEY
CAPITAL INTERNATIONAL (MSCI) EUROPE INDEX(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
--------------------------------------------------
AVERAGE
AVERAGE ANNUAL
ONE ANNUAL SINCE
YTD YEAR FIVE YEARS INCEPTION
---------- ---------- ------------ ------------

PORTFOLIO -- CLASS A.... -3.75% -12.11% 11.44% 15.74%
PORTFOLIO -- CLASS B.... -3.88 -12.44 N/A 12.69
INDEX -- CLASS A........ -2.11 4.58 18.96 18.90
INDEX -- CLASS B........ -2.11 4.58 N/A 21.37

1. The MSCI Europe Index is an unmanaged market value weighted index of common
stocks listed on the stock exchanges of countries in Europe (includes
dividends).

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE COUNTRY SPECIFIC PERFORMANCE
RESULTS PROVIDED ARE MEASURED BY THE MSCI EUROPE INDEX AND ARE FOR INFORMATIONAL
PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE PORTFOLIO'S
FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT PREDICTIVE OF FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING.

The approach taken in selecting investments for the Portfolio is oriented to
individual stock selection and is value driven. The initial step in identifying
attractive undervalued securities is the screening of European databases. Stocks
are screened for undervaluation on two primary criteria, cash flow and book
value, and three secondary criteria, earnings, sales and yield. Once stocks have
been selected from this screening process, they are put through detailed
fundamental analysis. Important areas covered during this in-depth study include
the companies' balance sheets and cash flow, franchise, products, management and
the strategic value of the assets.

For the three months ended March 31, 1999, the Portfolio had a total return of
-3.75% for the Class A shares and -3.88% for the Class B shares compared to a
total return of -2.11% for the Morgan Stanley Capital International (MSCI)
Europe Index (the "Index"). For the one-year period ended March 31, 1999, the
Portfolio had a total return of -12.11% for the Class A shares and -12.44% for
the Class B shares compared to 4.58% for the Index. For the five-year period
ended March 31, 1999, the average annual total return of Class A shares was
11.44% compared to 18.96% for the Index. From inception on April 2, 1993 through
March 31, 1999, the average annual total return of Class A shares was 15.74%
compared to 18.90% for the Index. From inception on January 2, 1996 through
March 31, 1999, the average annual total return of Class B shares was 12.69%
compared to 21.37% for the Index.

The Portfolio underperformed the Index in the first quarter of 1999. This was
disappointing, as the Portfolio had been outperforming for the quarter to-date
in early March. The Portfolio's overweighting to small and mid cap stocks
constrained performance for the quarter despite contributing positively in
February. As in the U.S., investors have focussed attention on the largest, most
liquid stocks in the European Index. The largest 20 stocks in the Index now
account for 30% of the Index by weight illustrating the degree of concentration.
Growth and financial sectors now represent 67% of the European large cap
universe, up from 40% at the 1980-81 interest rate peak. Valuations have risen
strongly in this group, limiting our participation.

Although the Portfolio is neutral weight in banks overall, the largest banks in
Europe have been heavily underweighted, in particular the U.K. banks, on
valuation grounds. Zero weights in Index heavyweights such as HSBC (+29%),
Barclays (+36%) and Credit Suisse (+19%) were a negative. Large declines in some
of the Portfolio's smaller regional banks hurt performance, for example Sweden's
Svenska Handelsbanken (-17%) and Nordbanken (-8%), Denmark's Unidanmark (-22%),
and Germany's Bayer Hypo-Veriensbank (-24%, on concerns about the merged bank's
real estate exposure).

The Portfolio's overweight to food & household goods (10% versus 4% in the
Index) also contributed to the underperformance as the sector fell 17% in the
first quarter of 1999. As prospects brightened for a rate cut in Europe,
investors moved away from consumer defensive staple companies in order to add
cyclical and credit sensitive exposure. Negatives

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LETTER TO SHAREHOLDERS
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EUROPEAN EQUITY PORTFOLIO (CONT.)

for the Portfolio in this sector included Sudzucker (-22%), Nestle (-17%),
Reckitt & Colman (-16%) and Greencore (-24%).

The Portfolio's overweighting in machinery & engineering was another negative.
Small stocks Halma (U.K., -26%) and Rauma (Finland, -16%) were notably weak in
this sector. Zero weighting to Finland's Nokia (+32%), on valuation grounds,
also proved a negative as the company disclosed improved results from its mobile
phone business.

On a positive note, the Portfolio's underweight to insurance was rewarded as the
large European insurers weakened significantly (Aegon -26%, Alliance -17%) in
line with the rise in bond yields since the start of the year. The Portfolio's
overweight and strong stock selection in advertising and media was a positive.
WPP (+42%) rose on improved prospects for U.S. ad spending. U.K. media buyer
Aegis (+50%), top London radio station Capital Radio (+14%) and Italy's dominant
TV operator Mediaset (+16%) all made strong contributions in the quarter. The
Portfolio's overweight to Telecom Italia (+24%) was a positive following
Olivetti's hostile bid for the company in the quarter. Richemont (+18%) made a
strong contribution following the announced merger of its majority owned
subsidiary Rothmans International with the U.K.'s BAT in January.

The emergence over the last twelve months of a European "Nifty Fifty" phenomena,
along the lines of the U.S. experience of narrowing leadership among the largest
Index stocks, has been the factor most responsible for the poor relative
performance of our disciplined value strategy in Europe. Europe's slowing
economic growth has favored stocks with demonstrated capabilities in generating
top-line sales growth or cost reduction from merger synergies. Not only has
value been out of favor, but mega-cap stocks (companies with a market
capitalization of over $20 billion) have beaten all other market cap segments
following the liquidity boom in European equity markets.

Timing a return to favor of value investing has been dangerous. Certainly we
know the valuation gap between mega-cap stocks and small/mid size stocks in
Europe is at an historical high. The Portfolio has exploited this gap by
overweighting quality small and mid cap stocks. But companies face real
challenges in today's operating environment -- walking the tightrope of falling
inflation and outright deflation. In recognition of these challenges we have
been opportunistically reducing our small and mid cap exposure in the Portfolio
in favor of large caps demonstrating attractive relative valuation. Mega-cap
stocks offer little value. Small and mid cap stocks now represent less than 30%
of the Portfolio versus an Index weight in the segment of 10%.

It is likely that macro events in the quarter have moved us closer to the point
where value may start to perform better. The resignation of Oskar Lafontaine,
the German Minister of Finance and stalwart of the left wing of the SPD was an
important turning point for Europe. The euro-zone economy has showed further
signs of slowing with very subdued inflation, dipping into near deflation in
Germany. And yet the European Central Bank (ECB) was previously loathe to reduce
interest rates not wishing to appear politically motivated (Lafontaine had been
vociferous in his calls for rate cuts). With Lafontaine out of the way, the ECB
is more likely to lower interest rates and indeed, since quarter end the ECB has
announced a 0.5% cut. This may lead to a more stable outlook for the European
economy which, in turn, would benefit our value discipline.

The narrow leadership currently dominating the European indices is a result of
abundant liquidity and a yearning for "growth". Multiples placed on the earnings
of large/mega-cap companies have risen reflecting their increased liquidity,
perceived higher growth prospects and restructuring/consolidation potential.
Mega-cap performance has also benefited from a sector mix shift toward growth
and financial sectors which have benefited from lower interest rates. With the
valuation premium of this narrow leadership currently at its widest, there is
little room for disappointment from the ranks of healthcare, technology and
telecommunications. We remain committed to our disciplined bottom-up value
philosophy and await signs of a deterioration in the Portfolio Fundamentals
currently supporting growth stocks.

Margaret Naylor
PORTFOLIO MANAGER

Alastair Anderson
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

EUROPEAN EQUITY PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

SHARES VALUE
(000) (000)

---------------------------------------------------------------------------

COMMON STOCKS (93.7%)
BELGIUM (1.1%)
55 GB INNO AFV...................................... $ 2
39,500 GB INNO BM....................................... 1,557
---------
1,559
---------
DENMARK (1.0%)
21,610 Unidanmark A/S, Class A.......................... 1,478
---------
FINLAND (4.3%)
21,740 KCI Konecranes International..................... 752
15,645 Kone Oyj, Class B................................ 1,650
404,650 Merita Ltd., Class A............................. 2,170
49,195 Sampo Insurance Co., plc, Class A................ 1,543
1,024 The Rauma Group.................................. 12
---------
6,127
---------
FRANCE (13.3%)
80,300 CNP Assurances................................... 2,114
15,820 Cie de Saint Gobain.............................. 2,515
56,400 Cie Generale des Establissements
Michelin, Class B (Registered)................. 2,534
16,710 Elf Aquitaine.................................... 2,273
7,790 Groupe Danone.................................... 1,964
12,330 Pernod Ricard.................................... 785
35,850 Rhone-Poulenc.................................... 1,624
37,960 Schneider........................................ 2,104
26,620 Total, Class B................................... 3,284
---------
19,197
---------
GERMANY (10.4%)
500 Adidas AG........................................ 45
61,200 BASF AG.......................................... 2,230
46,540 Bayerische Vereinsbank AG........................ 2,798
4,709 Bewag Aktiengesellschaft......................... 97
38,758 Hoechst AG....................................... 1,651
10,777 Philipp Holzmann AG.............................. 1,387
800 Schering AG...................................... 91
4,895 Suedzucker AG.................................... 1,720
30,580 VEBA AG.......................................... 1,612
2,110 Viag AG.......................................... 1,157
31,830 Volkswagen AG.................................... 2,120
---------
14,908
---------
IRELAND (1.4%)
98,773 Bank of Ireland.................................. 2,072
---------
ITALY (7.3%)
21,085 Banca Popolare Di Bergamo S.p.A. ................ 503
244,500 Marzotto (Gaetano) & Figli S.p.A. ............... 2,076
209,700 Mediaset S.p.A. ................................. 1,975
285,230 Telecom Italia S.p.A. ........................... 3,035
498,905 Telecom Italia S.p.A. (RNC)...................... 2,967
---------
10,556
---------

SHARES VALUE
(000) (000)

---------------------------------------------------------------------------

NETHERLANDS (5.7%)
60,650 Akzo Nobel N.V................................... $ 2,249
62,186 ING Groep N.V.................................... 3,433
30,300 Philips Electronics N.V.......................... 2,472
---------
8,154
---------
NORWAY (1.4%)
105,290 Sparebanken...................................... 2,046
---------
PORTUGAL (1.4%)
100,150 Electricidade de Portugal........................ 1,980
---------
SPAIN (5.0%)
60,300 Banco Bilbao Vizcaya (Registered)................ 900
48,000 Banco Santander S.A. ............................ 986
66,250 Endesa........................................... 1,675
102,400 Iberdrola........................................ 1,519
48,303 Telefonica....................................... 2,052
---------
7,132
---------
SWEDEN (6.3%)
69,800 Autoliv, Inc..................................... 2,662
424,700 Nordbanken Holding AB............................ 2,432
98,600 Svedala Intrustri AB............................. 1,724
62,500 Svenska Handelsbanken, Class A................... 2,181
---------
8,999
---------
SWITZERLAND (10.5%)
2,925 Cie Financiere Richemont AG, Class A............. 4,873
2,410 Holderbank Financiere Glarus AG, Class B
(Bearer)....................................... 2,701
2,475 Nestle (Registered).............................. 4,507
798 Schindler Holding AG (Registered)................ 1,349
4,250 Swisscom AG...................................... 1,664
190 Union Bank of Switzerland AG (Registered)........ 60
---------
15,154
---------
UNITED KINGDOM (24.6%)
729,800 Aegis Group plc.................................. 1,609
170,200 Allied Domecq plc................................ 1,268
123,700 Allied Zurich plc................................ 1,669

[Download Table]

302,718 BG plc........................................... 1,780
85,800 BOC Group plc.................................... 1,198
136,310 Bank of Scotland................................. 1,812
114,100 British Telecommunications plc................... 1,864
165,010 Burmah Castrol plc............................... 2,523
203,800 Capital Radio plc................................ 2,239
624,700 Devro plc........................................ 1,443
154,283 Diageo plc....................................... 1,735
199,480 Great Universal Stores plc....................... 2,175
848,000 Halma plc........................................ 1,274
234,400 Imperial Tobacco Group plc....................... 2,425
340,900 Morgan Crucible Co............................... 1,206
256,282 Reckitt & Colman plc............................. 2,776
185,900 RMC Group plc.................................... 2,518

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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EUROPEAN EQUITY PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

SHARES VALUE
(000) (000)
---------------------------------------------------------------------------

UNITED KINGDOM (CONT.)

[Download Table]

193,261 Royal & Sun Alliance Insurance Group plc......... $ 1,825
239,800 WPP Group plc.................................... 2,080
---------
35,419
---------
TOTAL COMMON STOCKS (Cost $123,938)............................. 134,781
---------
PREFERRED STOCKS (2.1%)
GERMANY (2.1%)
5,780 Dyckerhoff AG.................................... 1,556
4,623 Fresenius AG..................................... 915
6,872 Henkel KGaA-Vorzug............................... 502
---------
TOTAL PREFERRED STOCKS (Cost $2,859)............................ 2,973
---------
TOTAL FOREIGN SECURITIES (95.8%) (Cost $126,797)................ 137,754
---------

[Download Table]

FACE
AMOUNT
(000)

-----------

SHORT-TERM INVESTMENT (3.0%)
REPURCHASE AGREEMENT (3.0%)
$ 4,328 Chase Securities, Inc. 4.65%, dated 3/31/99, due
4/01/99, to be repurchased at $4,329,
collateralized by U.S. Treasury Bonds, 7.125%
due 2/15/23, valued at $4,362 (Cost $4,328).... 4,328
---------

[Download Table]

FOREIGN CURRENCY (0.1%)
GBP 6 British Pound.................................... 10
DKK 243 Danish Krone..................................... 35
EUR 117 European Monetary Unit........................... 127
---------
TOTAL FOREIGN CURRENCY (Cost $171).............................. 172
---------

[Download Table]

VALUE
(000)

------------------------------------------------------------------------

TOTAL INVESTMENTS (98.9%) (Cost $131,296)................... $ 142,254
----------
OTHER ASSETS AND LIABILITIES (1.1%)
Other Assets.............................................. 8,654
Liabilities............................................... (7,102)
----------
1,552
----------
NET ASSETS (100%)........................................... $ 143,806
----------
----------

[Download Table]

CLASS A:
--------------------------------------------------------------
NET ASSETS.................................................... $139,939
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 9,233,480 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $15.16
---------
---------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $3,867
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 255,578 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $15.13
---------
---------

------------------------------------------------------------

RNC -- Non-Convertible Savings Shares

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LETTER TO SHAREHOLDERS
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EUROPEAN REAL ESTATE PORTFOLIO

The investment objective of the European Real Estate Portfolio is to provide
current income and long-term capital appreciation by investing primarily in
equity securities of companies in the European real estate industry.

PERFORMANCE COMPARED TO THE GPR GENERAL
REAL ESTATE SECURITIES INDEX -- EUROPE(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
------------------------------------------
AVERAGE ANNUAL
YTD ONE YEAR SINCE INCEPTION
---------- ----------- -----------------

PORTFOLIO -- CLASS
A(3)................ -1.46% -11.23% -1.11%
PORTFOLIO -- CLASS
B(3)................ -1.56 -11.37 -1.30
INDEX................ 1.07 -11.02 0.46

1. The GPR General Real Estate Securities Index -- Europe is a European market
capitalization weighted index of listed property/real estate securities
measuring total return.

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

3. The Portfolio commenced operations on October 1, 1997.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE COUNTRY SPECIFIC PERFORMANCE
RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES ONLY AND SHOULD
NOT BE CONSTRUED AS A GUARANTEE OF THE PORTFOLIO'S FUTURE PERFORMANCE. PAST
PERFORMANCE SHOWN IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE SEE THE PROSPECTUS FOR A
DESCRIPTION OF CERTAIN RISK CONSIDERATIONS ASSOCIATED WITH INTERNATIONAL
INVESTING.

For the three months ended March 31, 1999, the Portfolio had a total return of
-1.46% for the Class A shares and -1.56% for the Class B shares compared to
1.07% for the GPR General Real Estate Securities Index -- Europe (the "Index").
For the one-year period ended March 31, 1999, the Portfolio had a total return
of -11.23% for the Class A shares and -11.37% for the Class B shares compared to
-11.02% for the Index. From inception on October 1, 1997 through March 31, 1999,
the Portfolio had an average annual total return of -1.11% for Class A shares
and -1.30% for Class B shares compared to 0.46% for the Index.

The first quarter of 1999 saw a drastically different outcome from 1998. In
1998, the European real estate securities markets focused on the inauguration of
the single currency. As the Euro drew near, the single currency countries such
as France, Belgium, Italy and Spain significantly outperformed the non-Euro
property markets of Sweden, Norway and the United Kingdom. Once the currency
arrived, and global economic concerns persisted, the indirect property markets
reexamined their thinking. The growth in Euroland continued to look positive,
but significantly slowed. Especially when the anticipated adrenaline shot from
the European Central Bank (ECB) failed to materialize due to currency concerns.
As slower Euro growth expectations were being accepted, property investors
recognized that Armageddon had not hit the U.K. On the contrary, many economists
expect the economy to actually avoid recession in 1999, followed by growth in
2000. The result of this change in thinking was a flip in performance, with the
non-Euro markets leading the pack this time.

Going forward, we see opportunities both in and out of Euroland. Economic
growth, or the demand for space, is clearly the number one concern facing the
industry. This being said, in a number of markets vacancies are low, available
quality space is limited, new supply is marginal, and demand is growing, only at
a slower rate than previously expected. We believe these issues will drive
rental growth marginally better than inflation over the upcoming 12 months.
Meanwhile, it is our impression that the sharp decline in interest rates last
year has not yet fully fed through property yields. This should be corrected in
the second half of 1999 as global fears subside, central banks lower rates
further, and international investors return to buying. Therefore, we remain
optimistic the property markets will continue along the recovery path of early
1998.

The United Kingdom property shares rebounded significantly from their 1998
dismal performance. The market's 9.8% first quarter U.S. dollar return
outperformed the Index by 8.7%. The first quarter returns were driven by the
realization that the pessimistic downgrade by the financial community following
the Asian meltdown last summer was overblown. For example, the Net Asset Value
(NAV) for Wates City of London, a pure London City office play, was downgraded
by 6% in response to Asia. However, the year-end valuation outperformed this
revalued estimate by 4%. In other words, the market grew by less than originally
anticipated, but faster than the revalued post-crisis estimates suggested.
Furthermore, takeover bids and public to private speculation, in names such as
Greycoat and Chesterfield, confirms our thesis that severe discounts to NAV
should not remain in the market long-term. Going forward, we believe the U.K.
continues to

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EUROPEAN REAL ESTATE PORTFOLIO (CONT.)

hold some upside derived from the panic selling of the Summer. Upward-only
rental revisions provide a degree of protection for current valuations, while
further Bank of England rate cuts offer positive surprises on the yield front.
We remain slightly underweight the country overall, but could go to market at
the right pricing levels. Our focus remains on the out-of-town retail and
West-end office sectors. The Canary Wharf Group flotation should maintain the
concerns over new space impacting the city office market, although some stocks
are sufficiently discounted to warrant a holding. The industrial sector looks
interesting, but we are not ready to move forward until the recent price
appreciation fades away from particular names.

The French market followed the U.K.'s lead and performed exactly opposite to
their 1998 returns. Rather than offering a strong outperformance, the property
stocks fell -9.2% during the quarter, trailing the Index's -1.1%, and the CAC
40's -1.1% returns, in U.S. dollars. We believe this fallback will be
short-lived. ECB rate cuts, and interest from the international opportunity
funds should push property yields down by at least 25 basis points this year.
Office vacancies in the city and La Defense regions remain below 4%, while
recent lettings attest to the existence of upward pressure on rents. At the same
time, the market's shortage of quality modern space will not be corrected in the
near term due to a lack of significant new supply in the city. However, there
are a few concerns regarding demand. In February, unemployment rose for the
first time since June 1997, albeit from a three-and-a-half year low. While these
jobs are primarily manufacturing positions, where high inventory stocks are in
need of a correction, rather than the office located service sector, there is
some cause for alarm. At the same time, we are seeing confidence surveys for
both businesses and consumers falling. However, we believe these declining
trends will encourage a more aggressive ECB, notwithstanding current Euro-Dollar
exchange rates and the oil recovery impact on inflation. We are cautious in the
near term with a market weight, but expect the French commercial sector to shine
over the next 12-18 months.

Not to be outdone, Sweden also turned their -12.5% 1998 return into a 2.4%
positive U.S. dollar performance. The sole driver here was consolidation.
Balder's bid for Prifast, and IVG's proposal for Asticus within 2 weeks of each
other, caused a flurry of speculation of who would be next. The premiums offered
for Prifast and Asticus pulled the remainder of the sector to higher levels. We
believe these transactions confirm the Swedish indirect property market is
undervalued. An investor can buy similar real estate cheaper through the public
market than acquiring bricks and mortar directly. From a top-down perspective,
once again demand is the concern. Growth estimates in Sweden have fallen from
2.8% in 1998 to 2.0% in 1999, although still some of the strongest in Europe.
This decline is driven by lower expectations for export growth, but healthy
consumer demand. However, these figures may be helped by the Riksbank's recent
rate drop to 2.9%, 10 basis points below the current ECB 3.0% rate. Further
declines could be expected if inflation estimates remain below the Bank's
two-year 2% horizon. Thus, we remain overweight the sector, encouraged by
consumer demand, economic growth relative to Europe, and continued price/NAV
discounts. But we are taking some profits from the recent run.

Continuing with the quarter's theme of reversed fortunes, Norway and Finland,
who lost ground in 1998, posted positive numbers in 1999, while Denmark slid
back. The Norwegian property market, Europe's strongest market this quarter,
grew by 14.1% while Finland's Sponda fell by -6.1% in U.S. dollar terms.
Denmark, the only Nordic property market to outperform the Index in 1998, fell
-12.7% during the quarter, underperforming the Index by 13.8% in U.S. dollars.
The Norwegian rise is directly correlated with the recent rebound in oil prices,
but we believe better opportunities exist within Euroland and are lowering our
overweight stance closer to a neutral level. In Finland, the slight price
appreciation tells us very little. Going forward, we hope to capitalize on the
Finnish growth by opportunistically increasing our weighting to this market. We
also anticipate additional activity in the market with the rumored flotation of
a large bank portfolio. The story in Denmark is a little different. The market
dominated by one small company had a difficult quarter. The bridge with Malmo is
proceeding, oversupply is not yet a concern, and domestic demand faces the same
issues as the rest of Europe. This being said, we are slightly reducing our
overweight position when pricing allows. Even though we like the market from a
top-down view,

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EUROPEAN REAL ESTATE PORTFOLIO (CONT.)
and the discount to NAV is favorable, we are uncomfortable with such a large
overweight in an illiquid name.

Once Euroland's ugly stepchild, the Dutch market performed as the darling during
the quarter. Led by the restructuring of a few large internationals and
impressive domestic performance, Holland's property shares returned the second
strongest numbers among the 11 Euro countries behind Ireland, although the
market still fell back -4.1% in U.S. dollars. We expect to see additional rental
growth in 1999, but believe the share premiums are recognizing this potential.
Furthermore, the 300,000 - 400,000 square meters of space under construction
and/or planning should provide a top to the rents and a bottom to investment
yields. The Netherlands, Germany and U.K. are the only countries to offer
supply-side concerns in Europe at this time. As a result, we will remain
underweight the Dutch internationals, and could sell shares if the price
appreciation continues.

As the run-up to the single currency came and went, so did the capital's real
estate performance. The Belgian property shares market returned a disappointing
-8.2% this quarter. This European Community dominated market should continue to
underperform going forward. With one large tenant, landlords have difficulty
raising rents. Furthermore, international investment interest is far below the
rest of Europe. Brussels cannot offer the large market rebound of Paris, or the
remaining one-time bump due to interest rate convergence in Spain, Italy or
Portugal. Thus, we remain underweight the market and expect it to chug along at
a stable, unexciting pace.

Spain returned a significant percentage of its 1998 returns, falling -14.7%, in
U.S. dollars, over the past 3 months. This decline was in part a result of Latin
American concerns, as well as Spanish rental increases falling short of
extraordinary expectations. Going-forward, we expect to see a combination of
good economic growth, insufficient quality office space and limited construction
completions to maintain relatively strong rental growth in both Madrid and
Barcelona. International investors are continuing to bid-up the price for
quality retail space, nearing a top we expect. Finally, the homebuilding
business fell in-line with expectations as lower interest rates are opening the
pent-up demand for low- and medium-cost housing. We expect to see 2-4 more
strong years for the homebuilding segment in Spain. We are increasing our
Spanish exposure based on the recent price weakness, looking for existing
commercial exposure, but not excited about managements who are buying
aggressively in this market.

Italy and Portugal each trailed the European Index by -8.7% and -13.9% in U.S.
dollars this quarter, respectively. Even though we like both markets from a
top-down perspective, the limited investment opportunities prevent us from
taking an aggressive overweight stance. We have added Portuguese retail exposure
through Sonae Imobiliaria on price weakness.

The closed end property companies in Germany, Switzerland and Austria were mixed
this quarter, returning -13.0%, -4.3%, and -8.7%, respectively, in dollar terms.
We are continuing to underweight these countries and their open-end fund
structure. Along with the inefficiencies caused by the structure, we fear the
development plans in these markets are too aggressive for the space requirements
in the near to medium term. We do not foresee adding to these positions anytime
soon, but could invest with significant price deterioration.

Theodore R. Bigman
PORTFOLIO MANAGER

Daniel A. Policy
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

EUROPEAN REAL ESTATE PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)

------------------------------------------------------------------------

COMMON STOCKS (97.5%)
DENMARK (1.8%)
8,080 EjendomsSelskabet Norden A/S..................... $ 379
--------
FINLAND (2.3%)
91,840 Sponda Oyj....................................... 501
--------
FRANCE (26.3%)
15,338 Klepierre........................................ 1,416
3,710 Silic............................................ 621
7,050 Simco (RFD)...................................... 618
7,360 Societe Fonciere Lyonnaise....................... 979
16,116 Sophia........................................... 605
11,232 Unibail.......................................... 1,409
--------
5,648
--------
IRELAND (4.6%)
2,796,410 Dunloe Ewart plc ................................ 998
--------
ITALY (2.4%)
503,650 Immobiliaria Urbis............................... 513
--------
NETHERLANDS (1.6%)
14,800 Rodamco N.V. .................................... 344
--------
NORWAY (1.4%)
46,120 Avantor ASA...................................... 293
--------
SPAIN (6.0%)
63,178 Prima Immobiliaria............................... 478
76,630 Vallehermoso..................................... 820
--------
1,298
--------
SWEDEN (10.0%)
49,000 Castellum AB..................................... 457
86,400 Diligentia AB.................................... 684
28,760 Fastighets AB Tornet............................. 393
101,290 Piren AB......................................... 629
1 Platzer Bygg AB, Class B......................... --
--------
2,163
--------
UNITED KINGDOM (41.1%)
172,360 British Land Co. plc............................. 1,481
129,800 Buford Holdings plc.............................. 231
163,930 Capital Shopping Centers plc..................... 1,006
84,590 Freeport Leisure plc............................. 695
250,480 Grantchester Holdings plc........................ 749
199,880 Great Portland Estates plc....................... 635
135,760 Land Securities plc.............................. 1,799
135,540 MEPC plc ........................................ 946
280,644 NHP plc ......................................... 816
356,560 Wates City Of London Properties plc.............. 484
--------
8,842
--------
TOTAL COMMON STOCKS (Cost $21,393)............................ 20,979
--------

[Download Table]

NO. OF VALUE
WARRANTS (000)

------------------------------------------------------------------------

WARRANTS (0.0%)
FRANCE (0.0%)
6,800 Societe Fonciere Lyonnaise (Cost $0)............. 5
--------
TOTAL FOREIGN SECURITIES (97.5%) (Cost $21,393)............... 20,984
--------

[Download Table]

FACE
AMOUNT
(000)

---------

SHORT-TERM INVESTMENT (2.1%)
REPURCHASE AGREEMENT (2.1%)
$ 458 Chase Securities, Inc. 4.65%, dated 3/31/99, due
4/01/99, to be repurchased at $458,
collateralized by U.S. Treasury Bonds, 10.375%,
due 11/15/12, valued at $472 (Cost $458)....... 458
--------
FOREIGN CURRENCY (0.1%)
EMU 14 European Monetary Unit (Cost $16)................ 15
--------
TOTAL INVESTMENTS (99.7%) (Cost $21,867)...................... 21,457
--------

[Download Table]

OTHER ASSETS AND LIABILITIES (0.3%)
Other Assets................................................ 1,441
Liabilities................................................. (1,386)
--------
55
--------
NET ASSETS (100%)............................................. $ 21,512
--------
--------

[Download Table]

CLASS A:
--------------------------------------------------------------
NET ASSETS.................................................... $19,451
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 2,060,122 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $9.44
---------
---------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $2,061
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 217,827 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $9.46
---------
---------

------------------------------------------------------------

RFD -- Ranked for Dividend

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO

The Global Equity Portfolio is managed with the objective of obtaining long-term
capital appreciation by investing in equity securities of issuers throughout the
world, including U.S. issuers. Investments may also be made with discretion in
emerging markets.

For the three months ended March 31, 1999, the Portfolio had a total return of
-4.00% for the Class A shares and -4.02% for the Class B shares compared to a
total return of 3.57% for the Morgan Stanley Capital International (MSCI) World
Index (the "Index"). For the one-year period ended March 31, 1999, the Portfolio
had a total return of -5.41% for the Class A shares and -5.67% for the Class B
shares compared to 12.64% for the Index. For the five-year period ended March
31, 1999, the Portfolio had a total return of 14.78% for the Class A shares
compared to 16.36% for the Index. From inception on July 15, 1992 through March
31, 1999, the average annual total return of Class A shares was 17.69% compared
to 15.27% for the Index. From inception on January 2, 1996 through March 31,
1999, the average annual total return of Class B shares was 16.68% compared to
17.44% for the Index.

PERFORMANCE COMPARED TO MORGAN STANLEY CAPITAL
INTERNATIONAL (MSCI) WORLD INDEX(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
----------------------------------------
AVERAGE
AVERAGE ANNUAL
ONE ANNUAL SINCE
YTD YEAR FIVE YEARS INCEPTION
------ ------ ---------- ---------

PORTFOLIO -- CLASS A....................... -4.00% -5.41% 14.78% 17.69%
PORTFOLIO -- CLASS B....................... -4.02 -5.67 N/A 16.68
INDEX -- CLASS A........................... 3.57 12.64 16.36 15.27
INDEX -- CLASS B........................... 3.57 12.64 N/A 17.44

1. The MSCI World Index is an unmanaged index of common stocks and includes
securities representative of the market structure of 22 developed market
countries in North America, Europe, and the Asia/ Pacific region (includes
dividends).

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE COUNTRY SPECIFIC PERFORMANCE
RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES ONLY AND SHOULD
NOT BE CONSTRUED AS A GUARANTEE OF THE PORTFOLIO'S FUTURE PERFORMANCE. PAST
PERFORMANCE SHOWN IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE SEE THE PROSPECTUS FOR A
DESCRIPTION OF CERTAIN RISK CONSIDERATIONS ASSOCIATED WITH INTERNATIONAL
INVESTING.

PERFORMANCE REVIEW

The Portfolio's performance shortfall for the first quarter was explained
primarily by weak performance of global consumer defensive industries (where the
Portfolio is overweighted) such as food, food retailing, household products,
beverages and tobacco. Poor performance of interest sensitive utilities and
insurance, overweighted by the Portfolio, also contributed negatively. The
continued narrow leadership of technology, telecoms and pharmaceuticals also
hurt the Portfolio as it has little exposure, on valuation grounds, to these
sought after growth sectors. Eight of the top ten Index contributors were
technology or telecom related with Microsoft, Cisco and America Online chief
among them. America Online's market value now exceeds both Coca Cola and Philip
Morris.

The Portfolio's largest holding, Philip Morris (-34%), explained one third of
the Portfolio's underperformance in the first quarter of 1999. In March, an
Oregon jury ordered Philip Morris to pay a record $81 million to a smoker's
family adding to concern about the hundreds of individual and group lawsuits
that weren't involved in the tobacco industry's $206 billion settlement with 46
States in November last year. Nestle (-17%) was the second largest negative
contributor in the quarter following the devaluation of the Brazilian real and
the impact that slow growth in Latin America and Asia will have on business in
the short term. Reckitt & Colman (-18%) underperformed over the period due to
its exposure to emerging market economies as well as de-stocking by large
retailers in North America in the fourth quarter last year. U.S. food and drug
retailer American Stores (-11%, announced merger with Albertson's) and Belgian
food retailer GB Inno (-25%) were weak in the quarter. Comsat (-20%) continued
to languish on concerns that Lockheed Martin's bid for the satellite
communications provider will not receive regulatory approval.

Rising bond yields in the first quarter negatively impacted the insurance and
utility sectors where the Portfolio has an overweight position. French re-
insurer Scor (-24%) and U.S. municipal bond insurer MBIA (-12%) were notably
weak. Enhance Financial (-23%), a niche financial re-insurer suffered from the
negative credit downgrade of its principal competitor Cap Re.

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO (CONT.)

On a positive note, NTT (+27%) rose strongly in the quarter, outperforming a
firmer Japanese market on restructuring potential in its core telephone business
and future growth from its mobile business. Tobacco and luxury goods company
Richemont (+18%) benefitted from the announced merger of its majority owned
Rothmans International with BAT in January and prospects of a turnaround in
Asia, an important market for luxury goods. WPP (+42%) was the third largest
contributor in the quarter on improved prospects for U.S. advertising spending.
WPP is also seen as a beneficiary of Proctor and Gamble's decision to
de-consolidate its global advertising spending, as WPP currently does little
business with P&G.

INVESTMENT OUTLOOK

Our biggest concern as disciplined value investors remains the persistent trend
favoring mega-cap growth stocks globally. The U.S. appears increasingly gripped
in a nifty-50 mania reminiscent of the early 70's. Indeed the average price
earnings of the largest 50 S&P 500 stocks is at its highest premium ever
compared to the next 450. The largest 30 stocks in the MSCI World Index comprise
29% of the Index weight (recall the Index has approximately 1500 stocks in it).
All have market capitalization exceeding $100 billion. The average
price/earnings, price/cash flow, and price/book value for this elite group is 57
times, 29 times and 12 times, respectively, according to Factset (America Online
is in the group but we exclude it from the calculation due to its anomalous
valuation ratios of 496 times, 301 times, and 175 times, respectively).
Multiples placed on mega-cap companies have risen -- reflecting increased
liquidity, perceived predictably higher growth prospects and restructuring
potential from mergers and more focussed management. The mega-cap companies also
have a higher representation from growth industries and financials, both of
which have benefited from lower interest rates. The catch is that if we are in
an extended period of low global inflation, the high multiples of mega-cap
companies suggest some risk, as implied real growth rates start to look
stretched. The narrow leadership driving index returns has disguised mediocre
performance from a broader representation of stocks. For example the S&P 400
MidCap Index fell 6.3% in the first quarter of 1999. We do not believe the Mega
cap outperformance is sustainable. However, we have no way of accurately
forecasting a reversal in this trend.

The defensiveness of the Portfolio, particularly our weighting to consumer
staples, telecoms and utilities reflects our concern at the near deflationary
conditions in the major economies outside the U.S. In Japan, we continue to be
frustrated at lackluster attempts to reform the corporate sector and open up the
economy. However, despite ongoing severe structural problems we respect the
massive efforts at stimulation both by monetary and now fiscal measures.
Regardless, Japan remains a stock-pickers market and our attention is squarely
on those companies demonstrating an understanding of shareholder value. This
keeps us in the strong domestic franchises and the exporters. Japanese banks
staged a strong rally in the first quarter of 1999 with Bank Tokyo-Mitsubishi,
Sumitomo and Fuji banks rising an average of 49%. However, the banks and deep
cyclicals remain unattractive due to chronic overinvestment, heavy indebtedness
and mismanagement. Although the pace of change has been frustratingly slow,
change is happening (as reflected in a rising unemployment rate) and western
shareholder value concepts are being introduced. Even the Bank of Japan has
hired American consultants to review its structure. These developments are
encouraging and, coupled with a fiscal package potentially larger than expected,
could lead to a period of better performance. Our current weighting is roughly
neutral, derived from the bottom up opportunities in Japan, and reflects these
slow-burning changes having been underweight for the past ten years.

Europe, as elsewhere, has seen a divergence in performance between its
manufacturing and service sectors. Economic growth has slowed dramatically and
may be troughing. With German Finance Minister Lafontaine now out of the
picture, the European Central Bank (ECB) may see fit to ease interest rates
further, having delayed previously due to the weakness of the euro and
unwillingness to appear politically influenced. Our cyclical exposure remains
limited in Europe to cement/building materials, and autos (Volkswagen).

The U.S. remains the engine of the global economy and U.S. households have
become the consumer of last resort. Despite the maturity of the current business
cycle (longest since WWII), excesses appear limited to the financial markets.
Inflation is at record lows, productivity is high and unemployment low.

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO (CONT.)
The problem is that the equity market as represented by the mega-cap stocks
appears to have priced this good news in. Ironically, amidst the uncertainty
brought on by continued deflationary pressure and the potential for a wider
conflict in Kosovo, it is the defensiveness of the Portfolio that has
constrained our performance so far in 1999. We would expect it, at some stage,
to pay dividends.

Frances Campion
PORTFOLIO MANAGER

Richard Boon
PORTFOLIO MANAGER

Paul Boyne
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

GLOBAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)

-----------------------------------------------------------------------------

COMMON STOCKS (96.3%)
AUSTRALIA (0.7%)
665,100 CSR Ltd............................................... $1,443
---------
BELGIUM (1.5%)
16,600 Delhaize-Le Lion...................................... 1,540
44,500 G.I.B. Holdings Ltd................................... 1,754
---------
3,294
---------
CANADA (2.3%)
89,844 BCT.Telus Communications Inc.......................... 2,205
29,897 BCT.Telus Communications Inc. (A Shares).............. 709
39,250 Potash Corp. of Saskatchewan, Inc..................... 2,090
---------
5,004
---------
DENMARK (0.5%)
23,250 Danisco A/S........................................... 1,066
---------
FRANCE (7.4%)
5,342 Bongrain.............................................. 2,007
19,750 Cie Generale des Establissements Michelin, Class B
(Registered)........................................ 887
29,066 Elf Aquitaine......................................... 3,954
17,730 Groupe Danone......................................... 4,469
730 Pernod Ricard......................................... 47
45,800 Rhone-Poulenc, Class A................................ 2,075
47,750 Scor.................................................. 2,406
---------
15,845
---------
GERMANY (4.5%)
97,090 BASF AG............................................... 3,538
40,620 Bayer AG.............................................. 1,513
3,310 Karstadt AG........................................... 1,185
58,600 VEBA AG............................................... 3,089
5,420 Volkswagen AG......................................... 361
---------
9,686
---------
IRELAND (2.8%)
166,310 Bank of Ireland....................................... 3,489
69,200 Clondalkin Group plc.................................. 494
342,981 Green Property plc.................................... 1,984
---------
5,967
---------
ITALY (3.3%)
305,000 Mediaset S.p.A........................................ 2,873
700,913 Telecom Italia S.p.A. (RNC)........................... 4,168
---------
7,041
---------
JAPAN (8.7%)
12,000 Daiichi Pharmaceutical Co. Ltd........................ 202
93,000 Fuji Photo Film Ltd................................... 3,519
81,000 Fujisawa Pharmaceutical Co., Ltd...................... 1,276
199,000 Hitachi Ltd........................................... 1,474
178,000 Kao Corp.............................................. 3,931
140,000 Nichido Fire & Marine Insurance Co., Ltd.............. 820

VALUE
SHARES (000)

-----------------------------------------------------------------------------

568 Nippon Telegraph & Telephone Corp..................... $5,565
86,000 Sumitomo Marine & Fire Insurance Co., Ltd............. 550
14,000 TDK Corp.............................................. 1,134
---------
18,471
---------
NETHERLANDS (4.6%)
119,912 ABN Amro Holding N.V. ................................ 2,502
39,600 Benckiser N.V., Class B............................... 2,225
60,172 ING Groep N.V. ....................................... 3,322
22,700 Philips Electronics N.V. ............................. 1,852
---------
9,901
---------
NEW ZEALAND (0.5%)
398,100 Lion Nathan Ltd....................................... 1,001
---------
PORTUGAL (0.8%)
57,170 Cimpor SGPS........................................... 1,601
---------
SPAIN (2.9%)
195,300 Iberdrola............................................. 2,897
76,908 Telefonica............................................ 3,268
---------
6,165
---------
SWEDEN (1.1%)
404,200 Nordbanken Holding AB................................. 2,315
---------
SWITZERLAND (8.6%)
4,061 Cie Financiere Richemont AG, Class A.................. 6,766
2,500 Forbo Holding AG (Registered)......................... 1,041
2,330 Holderbank Financiere Glarus AG, Class B (Bearer)..... 2,612
3,170 Nestle (Registered)................................... 5,773
2,095 SIG Schweizensche Industrie-Gesellschaft Holding AG
(Registered)........................................ 1,206
2,610 Swisscom AG........................................... 1,022
---------
18,420
---------
UNITED KINGDOM (11.3%)
245,000 Allied Domecq plc..................................... 1,825
553,371 BTR plc............................................... 2,443
242,304 Blue Circle Industries plc............................ 1,396
158,150 Burmah Castrol plc.................................... 2,418
213,140 English China Clays plc............................... 795
161,000 Imperial Tobacco Group plc............................ 1,666
241,400 Matthews (Bernard) plc................................ 499
653,333 Pentos plc............................................ --
398,991 Reckitt & Colman plc.................................. 4,322
375,677 Royal & Sun Alliance Insurance Group plc.............. 3,547
285,200 WPP Group plc......................................... 2,474
360,100 Wolseley plc.......................................... 2,734
---------
24,119
---------
UNITED STATES (34.8%)
29,600 Albertson's, Inc...................................... 1,608
67,900 Alcoa Inc. ........................................... 2,797

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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GLOBAL EQUITY PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)
-----------------------------------------------------------------------------

UNITED STATES (CONT.)

[Download Table]

150,500 American Stores Co.................................... $4,966
127,000 BJ's Wholesale Club, Inc.............................. 3,358
95,900 Boise Cascade Corp.................................... 3,093
61,450 Borg-Warner Automotive, Inc........................... 2,938
134,250 COMSAT Corp........................................... 3,885
103,500 Cadiz, Inc............................................ 828
22,000 Cadiz, Inc. (Restricted Shares)....................... 176
25,850 Chase Manhattan Bank.................................. 2,102
232,050 Data General Corp..................................... 2,349
118,400 Enhance Financial Services Group, Inc................. 2,694
65,250 Finova Group, Inc..................................... 3,385
127,200 GenRad, Inc........................................... 1,828
22,700 Georgia Pacific Group................................. 1,685
46,800 Goodrich (BF) Co...................................... 1,606
130,900 Houghton Mifflin Co................................... 6,136
23,350 IBP, Inc.............................................. 435
83,000 InteliData Technologies Corp.......................... 101
72,130 MBIA, Inc............................................. 4,183
36,900 Mellon Bank Corp...................................... 2,597
86,000 Noble Drilling Corp................................... 1,489
147,815 Ocean Energy, Inc..................................... 1,007
120,100 Penncorp Financial Group, Inc......................... 67
41,200 Pharmacia & Upjohn, Inc............................... 2,570
208,150 Philip Morris Cos., Inc............................... 7,324
52,000 Tenneco, Inc.......................................... 1,453
38,100 Terra Nova (Bermuda) Holdings Ltd., Class A........... 833
88,900 Tupperware Corp....................................... 1,600
67,700 UST Corp.............................................. 1,479
100,200 Unicom Corp........................................... 3,664
135,400 WorldCorp, Inc........................................ 7
---------
74,243
---------
TOTAL COMMON STOCKS (Cost $192,226)............................... 205,582
---------
PREFERRED STOCKS (0.7%)
GERMANY (0.7%)
38,660 Volkswagen AG (Cost $1,125)........................... 1,547
---------
TOTAL FOREIGN & U.S. SECURITIES (97.0%) (Cost $193,351)........... 207,129
---------

[Download Table]

FACE
AMOUNT VALUE
(000) (000)

-----------------------------------------------------------------------------

SHORT-TERM INVESTMENT (2.0%)
REPURCHASE AGREEMENT (2.0%)
$ 4,216 Chase Securities, Inc. 4.65%, dated 3/31/99, due
4/01/99, to be repurchased at $4,217, collateralized
by U.S. Treasury Bonds, 8.5% due 2/15/20, valued at
$4,251 (Cost $4,216)................................ $4,216
---------

[Download Table]

FOREIGN CURRENCY (0.7%)
GBP 2 British Pound......................................... 4
EUR 116 European Monetary Unit................................ 126
JPY 172,185 Japanese Yen.......................................... 1,454
CHF 1 Swiss Franc........................................... --
---------
TOTAL FOREIGN CURRENCY (Cost $1,565).............................. 1,584
---------
TOTAL INVESTMENTS (99.7%) (Cost $199,132)......................... 212,929
---------

[Download Table]

OTHER ASSETS AND LIABILITIES (0.3%)
Other Assets..................................................... 2,586
Liabilities...................................................... (1,913)
---------
673
---------
NET ASSETS (100%).................................................. $213,602
---------
---------

[Download Table]

CLASS A:
--------------------------------------------------------------
NET ASSETS.................................................... $194,696
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 9,779,364 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $19.91
---------
---------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $18,906
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 955,063 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $19.80
---------
---------

------------------------------------------------------------

RNC -- Non-Convertible Savings Shares

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LETTER TO SHAREHOLDERS
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INTERNATIONAL EQUITY PORTFOLIO

The investment objective of the International Equity Portfolio is long-term
capital appreciation through investment primarily in equity securities of
non-U.S. issuers. Equity securities for this purpose include common stocks and
equivalents, such as securities convertible into common stocks, and securities
having common stock characteristics, such as rights and warrants to purchase
common stocks.

For the three months ended March 31, 1999, the Portfolio had a total return of
1.26% for the Class A shares and 1.21% for the Class B shares compared to 1.39%
for the Morgan Stanley Capital International (MSCI) EAFE Index (the "Index").
For the one-year period ended March 31, 1999, the Portfolio had a total return
of 2.83% for the Class A shares and 2.66% for the Class B shares compared to
6.06% for the Index. For the five-year period ended March 31, 1999, the average
annual total return of Class A shares was 13.82% compared to 8.75% for the
Index. From inception on August 4, 1989 through March 31, 1999, the average
annual total return of Class A shares was 12.62% compared to 5.46% for the
Index. From inception on January 2, 1996 through March 31, 1999, the average
annual total return of Class B shares was 15.82% compared to 8.74% for the
Index.

PERFORMANCE COMPARED TO MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE
INDEX(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
--------------------------------------
AVERAGE
AVERAGE ANNUAL
ONE ANNUAL SINCE
YTD YEAR FIVE YEARS INCEPTION
----- ----- ---------- ---------

PORTFOLIO -- CLASS A....................... 1.26% 2.83% 13.82% 12.62%
PORTFOLIO -- CLASS B....................... 1.21 2.66 N/A 15.82
INDEX -- CLASS A........................... 1.39 6.06 8.75 5.46
INDEX -- CLASS B........................... 1.39 6.06 N/A 8.74

1. The MSCI EAFE Index is an unmanaged index of common stocks in Europe,
Australasia and the Far East (includes dividends net of withholding taxes).

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE COUNTRY SPECIFIC PERFORMANCE
RESULTS PROVIDED ARE FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED
AS A GUARANTEE OF THE PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS
NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN
RISK CONSIDERATIONS ASSOCIATED WITH INTERNATIONAL INVESTING.

The outcome of events in the first quarter of 1999 illustrates once again how
easy it is to be wrong in this business. The U.S. economy continues to surprise
on the upside and in so doing is pulling economists' estimates of world economic
growth up with it. The price of oil rebounded some 40% from its lows within
weeks of The Economist's feature article predicting an oil price of $5 per
barrel. Somewhat out of the blue, Mr. Lafontaine was cast aside just as
investors were becoming increasingly nervous over his socialist agenda. The
Japanese stock market has been the best performing developed market (with the
exception of Finland) up 17.8% in local terms or 12.2% in U.S. dollar terms, in
defiance of most commentators' predictions at the beginning of the year; and
perhaps the most unexpected of all, Olivetti making a takeover bid for Telecom
Italia.

The uptick in global gross domestic product forecasts has sparked a moderate
rally in industrial cyclicals. This rally is probably justifiable as valuations,
particularly in the U.K., were discounting a 1992/93 type recession and were
looking incredibly cheap with free cash flow yields well in excess of long term
bond rates. If the public market didn't correct the valuation anomaly, the
private market most certainly would have.

However, for the rally in industrial cyclicals to go a lot further the market
would need to be convinced that there is a sustainable recovery in world growth.
On this count we remain skeptical given that the main engine of growth is still
the U.S. consumer who's confidence and willingness to borrow is in turn
intertwined with an over-extended and increasingly narrow stock market.

In Japan there is growing hope from foreign investors that the corporate
restructuring is for real this time. This together with the usual fiscal year-
end jockeying has propelled the market. The corporate restructuring
announcements from the likes of Sony, NEC and Hitachi have been on a scale not
seen in Japan before and mergers and acquisitions activity is also beginning to
feature. Even the government has finally acknowledged that the economy has a
supply side problem (not just a demand side problem) and has set up a special
council of business leaders and politicians to address excess industrial
capacity.

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INTERNATIONAL EQUITY PORTFOLIO (CONT.)

To-date the rally in Japan has been typically indiscriminate with a rising tide
lifting all boats, even the ones that are far from seaworthy. We therefore think
there is still plenty of value to be added in Japan from picking the real
restructuring stories and those companies that have a sustainable business
franchise and avoiding those that only pay lip service to restructuring and
shareholder value. Work done by Goldman Sachs suggests that the Nikkei at 16,000
is already discounting a recovery in corporate return on equity from 1.4% to 7%.
If this is the case, the delivery better be good.

Dominic Caldecott
PORTFOLIO MANAGER

Peter Wright
PORTFOLIO MANAGER

William Lock
PORTFOLIO MANAGER

Kate Cornish-Bowden
PORTFOLIO MANAGER

Walter Riddell
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)

------------------------------------------------------------------------------

COMMON STOCKS (89.6%)
AUSTRALIA (1.6%)
1,571,650 Brambles Industries Ltd.......................... $ 39,977
7,049,100 Fosters Brewing Group Ltd........................ 20,759
-----------
60,736
-----------
BELGIUM (0.2%)
238,050 G.I.B. Holdings Ltd.............................. 9,383
-----------
CANADA (2.8%)
1,253,333 BCT.Telus Communications, Inc.................... 30,766
450,661 BCT.Telus Communications, Inc. (A Shares)........ 10,689
545,680 Potash Corp. of Saskatchewan, Inc................ 29,052
2,973,600 Renaissance Energy Ltd........................... 34,721
-----------
105,228
-----------
DENMARK (1.5%)
382,592 Danisco A/S...................................... 17,535
202,800 Den Danske Bank.................................. 21,340
269,308 Unidanmark A/S, plc, Class A (Registered)........ 18,416
-----------
57,291
-----------
FINLAND (0.5%)
370,200 Huhtamaki Oyj, Series 1.......................... 13,211
1,318,967 Merita Ltd., plc, Class A........................ 7,074
-----------
20,285
-----------
FRANCE (11.3%)
354,060 Alcatel Alsthom.................................. 40,775
496,312 Assurances Generales de France (Bearer).......... 26,834
14,884 Bongrain......................................... 5,591
223,582 Cie de Saint Gobain.............................. 35,540
567,500 Elf Aquitaine.................................... 77,199
401,415 France Telecom................................... 32,512
259,540 Groupe Danone.................................... 65,420
1,485,170 Rhone-Poulenc, Class A........................... 67,291
299,154 Schneider........................................ 16,579
103,386 Scor............................................. 5,210
337,000 Total, Class B................................... 41,580
659,095 Usinor Sacilor................................... 8,695
-----------
423,226
-----------
GERMANY (5.0%)
1,079,600 BASF AG.......................................... 39,342
724,000 Bayer AG......................................... 26,971
24,796 Karstadt AG...................................... 8,875
1,688,719 RWE AG........................................... 75,783
66,910 Viag AG.......................................... 36,683
-----------
187,654
-----------
HONG KONG (1.1%)
14,554,155 Hong Kong Land Holdings Ltd...................... 18,920
3,561,600 Swire Pacific Ltd., Class A...................... 16,545
6,842,500 Swire Pacific Ltd., Class B...................... 4,680
-----------
40,145
-----------

VALUE
SHARES (000)

------------------------------------------------------------------------------
ITALY (3.5%)
3,854,200 Mediaset S.p.A................................... 36,301
15,689,387 Telecom Italia S.p.A. (RNC)...................... 93,311
-----------
129,612
-----------
JAPAN (18.6%)
2,948,000 Aisin Seiki Co., Ltd............................. 28,632
693,600 Aoyama Trading Co., Ltd.......................... 18,745
762,000 Canon, Inc....................................... 18,856
325,480 Chudenko Corp.................................... 6,487
1,844,000 Daibiru Corp..................................... 13,861
736,000 Daiichi Pharmaceutical Co., Ltd.................. 12,370
947,000 Eisai Co., Ltd................................... 19,795
1,567,000 Fuji Photo Film Ltd.............................. 59,289
832,000 Fujisawa Pharmaceutical Co., Ltd................. 13,105
2,945,000 Hitachi Ltd...................................... 21,813
4,639 Japan Tobacco, Inc............................... 45,056
3,207,000 Kao Corp......................................... 70,827
3,899,000 NEC Corp......................................... 46,924
3,618,000 Nichido Fire & Marine Insurance Co., Ltd......... 21,206
10,823 Nippon Telegraph & Telephone Corp................ 106,032
714,000 Nomura Securities Co., Ltd....................... 7,477
486,000 Ono Pharmaceutical Co., Ltd...................... 19,620
509,000 Pioneer Electric Corp............................ 9,457
76,000 Rohm Co.......................................... 9,082
97,000 Sankyo Co., Ltd.................................. 2,081
2,580,000 Shionogi & Co., Ltd.............................. 22,661
67,000 Shiseido Co., Ltd................................ 928
4,485,000 Sumitomo Marine & Fire Insurance Co., Ltd........ 28,712
312,400 Takefuji Corp.................................... 24,010
673,000 Toppan Printing Co., Ltd......................... 8,816
1,922,000 Toyo Seikan Kaisha Ltd........................... 41,474
576,000 Yamanouchi Pharmaceutical Co..................... 18,243
-----------
695,559
-----------
NETHERLANDS (4.2%)
1,016,500 Akzo Nobel N.V................................... 37,702
549,158 Buhrmann N.V..................................... 9,561
330,800 CSM N.V.......................................... 17,564
826,060 Hollandsche Beton Groep N.V...................... 8,709
646,639 ING Groep N.V.................................... 35,696
572,300 Philips Electronics N.V.......................... 46,693
-----------
155,925
-----------
NEW ZEALAND (0.4%)
5,719,800 Lion Nathan Ltd.................................. 14,386
392,500 Smith City Group Ltd............................. --
-----------
14,386
-----------
PORTUGAL (0.5%)
617,510 Cimentos de Portugal............................. 17,295
-----------

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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INTERNATIONAL EQUITY PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)
------------------------------------------------------------------------------

SINGAPORE (1.4%)
16,057,837 Jardine Strategic Holdings, Inc.................. 27,138
3,836,000 United Overseas Bank Ltd. (Foreign).............. 23,989
-----------
51,127
-----------
SPAIN (2.5%)
4,960,500 Iberdrola........................................ 73,595
482,250 Telefonica....................................... 20,489
-----------
94,084
-----------
SWEDEN (2.7%)
1,606,100 ForeningsSparbanken AB........................... 37,865
5,100,200 Nordbanken Holding AB............................ 29,205
1,570,500 Svenska Cellulosa AB, Class B.................... 34,155
-----------
101,225
-----------
SWITZERLAND (8.1%)
49,457 Cie Financiere Richemont AG, Class A............. 82,397
25,820 Forbo Holding AG (Registered).................... 10,754
20,931 Holderbank Financiere Glarus AG, Class B
(Bearer)....................................... 23,461
45,545 Nestle (Registered).............................. 82,944
11,524 Schindler Holding AG (Participating
Certificates).................................. 17,943
9,800 Sulzer AG (Registered)........................... 6,272
106,470 Swisscom AG (Registered)......................... 41,678
120,115 Union Bank of Switzerland AG (Registered)........ 37,827
-----------
303,276
-----------
UNITED KINGDOM (23.7%)
6,075,800 Aggreko plc...................................... 21,005
4,739,266 Allied Domecq plc................................ 35,296
1,447,569 Allied Zurich plc................................ 19,527
1,189,655 Bank of Scotland................................. 15,817
6,112,200 BG plc........................................... 35,942
18,224,600 Billiton plc..................................... 44,089
6,096,629 Blue Circle Industries plc....................... 35,112
1,558,769 British American Tobacco plc..................... 12,994
2,773,300 British Telecommunications plc................... 45,296
10,028,477 BTR plc.......................................... 44,269
7,909,000 Bunzl plc........................................ 31,208
3,697,950 Burmah Castrol plc............................... 56,545
6,217,500 Christian Salvesen plc........................... 8,236
2,208,100 Commercial Union plc............................. 34,424
3,566,128 English China Clays plc.......................... 13,308
2,904,000 Great Universal Stores plc....................... 31,667
1,907,700 Imperial Tobacco Group plc....................... 19,740
5,026,451 John Mowlem & Co. plc............................ 9,501
340,050 Lonrho Africa plc................................ 297
2,745,950 Lonrho plc....................................... 20,096
1,804,268 National Westminster Bank plc.................... 41,623
4,694,200 Premier Farnell plc.............................. 16,229
3,502,400 Racal Electronic plc............................. 22,519
5,993,502 Reckitt & Colman plc............................. 64,922
2,892,400 RMC Group plc.................................... 39,181
3,857,600 Royal & Sun Alliance Insurance Group plc......... 36,426

VALUE
SHARES (000)

------------------------------------------------------------------------------
2,613,302 Tate & Lyle plc.................................. 17,605
515,900 Williams plc..................................... 3,334
4,975,900 Wolseley plc..................................... 37,781
8,612,900 WPP Group plc.................................... 74,719
-----------
888,708
-----------
TOTAL COMMON STOCKS (Cost $2,755,356)............................ 3,355,145
-----------
PREFERRED STOCKS (1.0%)
GERMANY (1.0%)
968,600 Volkswagen AG (Cost $20,022)..................... 38,754
-----------

[Download Table]

FACE
AMOUNT
(000)

------------

SHORT-TERM INVESTMENT (5.5%)
REPURCHASE AGREEMENT (5.5%)
$ 206,870 Chase Securities, Inc. 4.65%, dated 3/31/99, due
4/01/99, to be repurchased at $206,897 (Cost
$206,870)...................................... 206,870
-----------
FOREIGN
CURRENCY
(5.3%)
AUD 380 Australian Dollar................................ 241
GBP 4,859 British Pound.................................... 7,851
DKK 6,409 Danish Krone..................................... 932
EMU 173,010 European Monetary Unit........................... 187,085
JPY 442,484 Japanese Yen..................................... 3,737
-----------
TOTAL FOREIGN CURRENCY (Cost $202,853)........................... 199,846
-----------
TOTAL INVESTMENTS (101.4%) (Cost $3,185,101)..................... 3,800,615
-----------

[Download Table]

OTHER ASSETS AND LIABILITIES (-1.4%)
Other Assets.................................................... 684,500
Liabilities..................................................... (738,792)
----------
(54,292)
----------
NET ASSETS (100%)................................................. $3,746,323
----------
----------

[Download Table]

CLASS A:
--------------------------------------------------------------
NET ASSETS.................................................... $3,723,601
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 201,485,134 outstanding $0.001 par value
shares (authorized 500,000,000 shares)...................... $18.48
----------
----------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $22,722
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 1,232,095 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $18.44
----------
----------

------------------------------------------------------------

RNC -- Non-Convertible Savings Shares

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LETTER TO SHAREHOLDERS
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INTERNATIONAL MAGNUM PORTFOLIO

The International Magnum Portfolio seeks long-term capital appreciation by
investing primarily in equity securities of non-U.S. issuers in accordance with
the EAFE country weightings determined by the Adviser. The EAFE countries in
which the Portfolio will invest are those comprising the Morgan Stanley Capital
International (MSCI) EAFE Index, which includes Australia, Japan, New Zealand,
most nations located in Western Europe, and certain developed countries in Asia.

For the three months ended March 31, 1999, the Portfolio had a total return of
-0.17% for the Class A shares and -0.26% for the Class B shares compared to
1.39% for the MSCI EAFE Index (the "Index"). For the one-year period ended March
31, 1999, the Portfolio had a total return of -6.23% for the Class A shares and
-6.51% for the Class B shares compared to 6.06% for the Index. From inception on
March 15, 1996 through March 31, 1999, the average annual total return of Class
A shares was 7.21% and 6.92% for Class B shares compared to 9.48% for the Index.

PERFORMANCE COMPARED TO MORGAN STANLEY CAPITAL
INTERNATIONAL (MSCI) EAFE INDEX(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
-------------------------------------------
ONE AVERAGE ANNUAL
YTD YEAR SINCE INCEPTION
---------- ---------- -------------------

PORTFOLIO -- CLASS A(3)...... -0.17% -6.23% 7.21%
PORTFOLIO -- CLASS B(3)...... -0.26 -6.51 6.92
INDEX........................ 1.39 6.06 9.48

1. The MSCI EAFE Index is an unmanaged index of common stocks and includes
Europe, Australasia and the Far East (includes dividends net of withholding
taxes).

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

3. The Portfolio commenced operations on March 15, 1996.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE PERFORMANCE RESULTS PROVIDED ARE
FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF
THE PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK
CONSIDERATIONS ASSOCIATED WITH INTERNATIONAL INVESTING.

The first quarter of 1999 stood in stark contrast to 1998 results as once
powerful Europe languished, while Japan and Asia both posted substantial gains
after lackluster performance in the previous year. The Index ended the first
quarter gaining 1.4% in U.S. dollar terms, although performance of individual
markets was mixed. Regionally, Europe saw the most variance in performance and
the weakest returns as the MSCI Europe Index returned 4.3% in local currency
terms (-2.1% in U.S. dollar terms). General economic slowing, unexpected
depreciation of the newly introduced euro and the Brazilian currency devaluation
contributed to European market difficulty. The Japanese market gained surprising
momentum, with the MSCI Japan Index finishing the first quarter up 17.8% in
local currency terms (+12.2% in U.S. dollar terms), the top performing region
and the second highest performing country in EAFE. Government stimulus packages,
news of corporate restructurings and a weakening yen spurred the market and
restored the confidence of wary investors. Asian markets rode the wave of
euphoria on the back of Japan's performance, appreciating 6.6% in local currency
terms (+7.5% in U.S. dollar terms).

The Portfolio's regional allocation strategy during the first quarter
contributed significantly to returns. We maintained an underweight to Europe
throughout the quarter, further reducing our exposure in March to be
approximately 5% below the Index weighting of 71%. At the same time we increased
our exposure to Japan, ending the quarter slightly overweight the Index
weighting of 23%. The Portfolio benefited significantly from this strategy as
Japan and Asia were the relative outperformers, while Europe underperformed.

Portfolio underperformance was attributable primarily to stock selection within
the European portfolio and in Japan. Weak performance of global consumer
defensive industries (where the Portfolio is overweighted) such as food and
household products detracted significantly from results. From a security
perspective, the largest detractors from performance for the first quarter were
European food & household product companies such as Nestle and Reckitt & Colman.
Our underweight in large European banks, which rallied during the quarter due to
the consolidation trend evident in that industry, impacted returns. The
Portfolio held smaller, regional European banks which did not benefit from this
trend. We were also hurt by not holding Japanese banks which saw strong
performance in response to government recapitalization and bail-out packages
announced during the quarter. We believe that

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INTERNATIONAL MAGNUM PORTFOLIO (CONT.)

banks will continue to experience problems stemming from bad-loan losses,
further bankruptcies and inadequate capital.

During the first quarter we made some adjustments to the European portion of the
Portfolio. We decreased our allocation to smaller cap companies in Europe and
re-deployed to larger cap holdings. However, the Portfolio still holds an
overweighting to small caps in Europe which detracted from overall results as
the largest, most liquid stocks once again outperformed small caps with MSCI
Europe returning -2.5% versus MSCI Europe Small Cap's -3.0% return (in U.S.
dollars). We have strong conviction in the quality names comprising our small
cap segment, and as important, our conviction also remains firm not to own the
expensive mega cap stocks whose performance has dominated the Index recently.

The emergence over the last twelve months of a European "Nifty Fifty" phenomena,
along the lines of the U.S. experience of narrowing leadership among the largest
Index stocks, has been the factor most responsible for the poor relative
performance of our disciplined value strategy in Europe. Slower economic growth,
stiffer competition and lack of pricing power are making it increasingly
difficult for companies to produce the kinds of results investors demand. In
such an environment, investors have gravitated toward stocks with demonstrated
capabilities in generating top-line sales growth or cost reduction from merger
synergies. Not only has value been out of favor, but mega-cap stocks (companies
with a market capitalization of over $20 billion) have beaten all other market
cap segments following the liquidity boom in European equity markets.

It has been difficult to predict value's return to favor. The valuation gap
between mega-cap stocks and small and mid size stocks in Europe is at a
historical high. The European portfolio has exploited this gap by overweighting
quality small and mid cap stocks. But companies face real challenges in today's
operating environment -- walking the tightrope of falling inflation and outright
deflation. In recognition of these challenges we have been opportunistically
reducing our small and mid cap exposure in the Portfolio and redeploying to
larger capitalization stocks which demonstrate attractive relative valuation. We
feel that Mega-cap stocks are overvalued and overpriced, and that this scenario
is not sustainable long term.

Recent events in Europe may be harbingers of value's comeback. The resignation
of German Finance Minister Oskar Lafontaine, the stalwart of the left wing of
the Socialist Democratic Party, was an important turning point for Europe.
Lafontaine's resignation will allow Chancellor Schroder to steer a more moderate
and business friendly course, and has allowed the hesitant European Central Bank
to ease interest rates, having delayed such action due to euro weakness and an
unwillingness to appear politically influenced. As of this writing, the ECB cut
its benchmark short-term rate by 50 basis points to an unexpectedly low 2.5%,
and Britain and Switzerland followed suit and cut rates by 25 and 50 basis
points, respectively. The resignation of the EU Commission is also positive as
the new president of the Commission, former Italian Prime Minister Romano Prodi,
is credited with readying Italy for EMU entrance and is considered to be a
champion of reform necessary to jump-start Eurozone economies. These events may
lead to a more stable outlook for the European economy which, in turn, would
benefit our value discipline.

The Japanese equity market rallied during the first quarter, particularly during
March, as investors began re-evaluating their allocation to Japanese equities.
The Government's proposal to provide 7.4 trillion yen of public funds for
Japanese bank's non-performing loans was officially approved after considerable
debate. Under this scheme banks will issue preference shares to the Japanese
Government to write off non-performing loans and in turn these banks are
expected to comply with the FSA (Financial Supervisory Authority) for disclosure
of non-performing loans as well as definitive measures to improve profitability.
Furthermore, to alleviate the credit crunch for medium to smaller companies the
Government's 20 trillion yen loan guarantee program enacted in 1998 became
available should these companies require such credit. With the above mentioned
factors, investors became increasingly convinced that many of Japan's recent
credit and non-performing loan problems were sufficiently addressed by the
authorities and sentiment regarding investments in Japan greatly improved.

At the same time, full scale restructuring efforts seemed to make daily
headlines on a micro level,

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INTERNATIONAL MAGNUM PORTFOLIO (CONT.)
and business confidence is on the rise as evidenced by the March Tankan report.
NEC, Sony, Mitsubishi Chemical and numerous other leading private sector
companies declared unprecedented labor, production and management changes which
focused on return on equity (ROE) over market share. Highly insular companies
such as Nissan and Sumitomo Rubber also departed from their traditional
"keiretsu" relationships to announce major tie-ups with foreign companies. At
the margin all these changes were viewed positively and evidence to this was the
record 1.8 trillion yen worth of equities purchased by foreign investors during
March.

As we stated in our outlook earlier in the year, we believe 1999 will be
remembered as an important milestone for long term investors in Japanese
equities. However, a "V" shaped economic recovery remains highly unlikely given
the weak domestic Japanese macro activity and rising unemployment. If Japanese
managements embrace Western-style corporate restructuring efforts to yield the
kinds of changes investors demand, corporate earnings should rebound as ROE
improves. However, we believe there will likely be some short term
disappointments when restructuring erodes short term profitability and the
market becomes subject to corrections as investors realize that momentum may
have carried the market ahead of economic reality. We believe that the light at
the end of the ten-year depressed economy will likely shine for Japanese
consumer technology industries such as Sony's new Playstation II which may in
time become a "home server" for numerous applications and fuel new consumer
demand for Japanese consumer related products.

Following the lead of Japan, markets in Asia ex-Japan ended the quarter ahead of
their 1998 year-end levels. Asia has been riding the wave of euphoria created by
the Nikkei's rise in March, and these markets began to benefit from increased
attention by foreign investors as they outperformed other developed markets.
Hong Kong led the rally as the Hang Seng Index climbed to levels not seen since
April 1998. Although the economies of the region have been seeing marginal
economic improvement, the strong performance in March was almost wholly
attributable to the newfound confidence in Japanese equities. Our strategy of
favoring the global franchise names and owning finance, consumer goods and
services companies was successful as these holdings outperformed relative to the
region.

We are optimistic about Asia and have increased our weighting in the Portfolio
to approximately neutral with the Index weighting. Valuations remain attractive
relative to historic averages and interest rate declines will support the case
for revaluation. As of this writing, the Hong Kong Monetary Authority cut
interest rates by 25 basis points on April 9th, following the lead of central
banks in Europe, and we expect further rate cuts by year-end. Increased
liquidity and Asian consumers' heightened optimism along with their willingness
to spend should sustain the economic recovery. Markets have clearly rewarded
companies that adopt Western style restructuring with a focus on enhancing
shareholder value and we expect to see this trend continue in the balance of
1999.

Francine J. Bovich
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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INTERNATIONAL MAGNUM PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)

-------------------------------------------------------------------------

COMMON STOCKS (87.8%)
AUSTRALIA (2.0%)
8,600 Brambles Industries Ltd.......................... $ 219
28,450 Broken Hill Proprietary Co., Ltd................. 243
67,250 Colonial Ltd..................................... 268
19,950 Commonwealth Bank Of Australia................... 328
160,400 Fosters Brewing Group Ltd........................ 472
10,160 Lend Lease Corp., Ltd............................ 129
30,030 National Australia Bank Ltd...................... 546
59,700 News Corp., Ltd.................................. 442
118,100 Oil Search Ltd................................... 142
20,450 Rio Tinto Ltd.................................... 286
94,550 Telstra Corp., Ltd............................... 495
65,100 Westpac Banking Corp............................. 475
81,200 WMC Ltd.......................................... 259
---------
4,304
---------
BELGIUM (0.6%)
33,425 G.I.B. Holdings Ltd.............................. 1,317
---------
DENMARK (1.4%)
16,890 Novo-Nordisk A/S, Class B........................ 1,892
16,010 Unidanmark A/S, Class A (Registered)............. 1,095
---------
2,987
---------
FINLAND (2.7%)
49,305 KCI Konecranes International..................... 1,706
15,725 Kone Oyj, Class B................................ 1,658
248,610 Merita Ltd., Class A............................. 1,334
30,400 Sampo Insurance Co., plc, Class A................ 953
26,308 The Rauma Group.................................. 306
---------
5,957
---------
FRANCE (9.5%)
5,610 Alcatel Alsthom.................................. 646
15,531 Cie de Saint Gobain.............................. 2,469
82,750 CNP Assurances................................... 2,179
14,440 Elf Aquitaine.................................... 1,964
6,882 Groupe Danone.................................... 1,735
49,090 Compagnie Generale des Establissements Michelin,
Class B........................................ 2,206
35,460 Pernod Ricard.................................... 2,256
34,350 Rhone-Poulenc, Class A........................... 1,556
37,690 Schneider........................................ 2,089
30,450 Total, Class B................................... 3,757
---------
20,857
---------
GERMANY (6.6%)
11,940 Adidas AG........................................ 1,060
55,300 BASF AG.......................................... 2,015
48,010 Bayerische Vereinsbank AG........................ 2,887
25,655 Bewag Aktiengesellschaft......................... 527
3,038 Buderus AG....................................... 982
13,520 Henkel KGaA-Vorzug............................... 987
9,550 Hoechst AG....................................... 407

VALUE
SHARES (000)

-------------------------------------------------------------------------

11,434 Philipp Holzmann AG.............................. $ 1,471
7,650 Plettac AG....................................... 407
25,400 VEBA AG.......................................... 1,339
1,790 Viag AG.......................................... 982
20,480 Volkswagen AG.................................... 1,364
---------
14,428
---------
HONG KONG (1.7%)
226,000 Cathay Pacific Airways Ltd....................... 260
36,000 Cheung Kong Holdings Ltd......................... 274
35,500 CLP Holdings, Ltd................................ 170
110,000 China Telecom Ltd................................ 183
99,000 Dairy Farm International Holdings Ltd............ 115
98,300 Hong Kong & China Gas Co., Ltd................... 139
135,200 Hong Kong Telecommunications Ltd................. 267
11,600 HSBC Holdings plc................................ 364
91,000 Hutchison Whampoa Ltd............................ 716
61,000 Li & Fung Ltd.................................... 129
58,000 Smartone Telecommunications...................... 168
70,000 Sun Hung Kai Properties Ltd...................... 524
53,000 Swire Pacific Ltd., Class A...................... 246
39,000 Television Broadcasts Ltd........................ 142
---------
3,697
---------
IRELAND (0.9%)
93,430 Bank of Ireland.................................. 1,960
---------
ITALY (4.5%)
57,905 Banca Popolare Di Bergamo S.p.A.................. 1,471
211,200 Marzotto (Gaetano) & Figli S.p.A................. 1,793
178,800 Mediaset S.p.A................................... 1,684
292,200 Sogefi S.p.A..................................... 777
706,111 Telecom Italia S.p.A. (RNC)...................... 4,200
---------
9,925
---------
JAPAN (22.7%)
17,000 Aiwa Co., Ltd.................................... 392
113,000 Amada Co., Ltd................................... 601
8,200 Autobacs Seven Co., Ltd.......................... 336
59,000 Canon, Inc....................................... 1,460
75,000 Casio Computer Co., Ltd.......................... 509
60,000 Dai Nippon Printing Co., Ltd..................... 912
203,000 Daicel Chemical Industries Ltd................... 669
113,000 Daifuku Co., Ltd................................. 749
88,000 Daikin Industries Ltd............................ 872
12,200 FamilyMart Co., Ltd.............................. 619
39,000 Fuji Machine Manufacturing Co.................... 1,400
39,000 Fuji Photo Film Ltd.............................. 1,476
71,000 Fujitec Co., Ltd................................. 577
119,000 Fujitsu Ltd...................................... 1,911
166,000 Furukawa Electric Co............................. 687
38,800 Hitachi Credit Corp.............................. 770
224,000 Hitachi Ltd...................................... 1,659
129,000 Kaneka Corp...................................... 1,024
47,000 Kurita Water Industries Ltd...................... 769

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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INTERNATIONAL MAGNUM PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)
-------------------------------------------------------------------------

JAPAN (CONT.)

[Download Table]

17,600 Kyocera Corp..................................... $ 948
63,000 Kyudenko Co., Ltd................................ 386
42,000 Lintec Corp...................................... 408
81,000 Matsushita Electric Industrial Co., Ltd.......... 1,580
44,000 Minebea Co., Ltd................................. 455
234,000 Mitsubishi Chemical Corp......................... 664
85,000 Mitsubishi Estate Co., Ltd....................... 865
213,000 Mitsubishi Heavy Industries Ltd.................. 962
58,000 Mitsumi Electric Co., Ltd........................ 1,161
153,000 NEC Corp......................................... 1,841
57,000 Nifco, Inc....................................... 538
17,000 Nintendo Corp., Ltd.............................. 1,467
161 Nippon Telegraph & Telephone Corp................ 1,577
289,000 Nissan Motor Co., Ltd............................ 1,123
54,000 Nissha Printing Co., Ltd......................... 366
85 NTT Data Corp.................................... 658
28,000 Ono Pharmaceutical Co., Ltd...................... 1,130
147,000 Ricoh Co., Ltd................................... 1,536
32,800 Rinnai Corp...................................... 659
6,000 Rohm Co.......................................... 717
13,000 Ryosan Co........................................ 212
18,000 Sangetsu Co., Ltd................................ 289
62,000 Sankyo Co., Ltd.................................. 1,330
103,000 Sanwa Shutter Corp............................... 531
71,000 Sekisui Chemical Co.............................. 505
49,000 Sekisui House Co., Ltd........................... 521
99,000 Shin-Etsu Polymer Co., Ltd....................... 569
22,100 Sony Corp........................................ 2,044
65,000 Suzuki Motor Co., Ltd............................ 862
16,000 TDK Corp......................................... 1,296
240,000 Toshiba Corp..................................... 1,640
37,000 Toyota Motor Corp................................ 1,072
168,000 Tsubakimoto Chain Co............................. 390
59,000 Yamaha Corp...................................... 625
46,000 Yamanouchi Pharmaceutical Co., Ltd............... 1,457
---------
49,776
---------
MALAYSIA (0.0%)
21,000 Carlsberg Brewery Malaysia Bhd................... 55
8,000 Rothmans of Pall Mall (Malaysia) Bhd............. 47
---------
102
---------
NETHERLANDS (2.9%)
53,135 Akzo Nobel N.V. ................................. 1,971
50,700 ING Groep N.V. .................................. 2,799
19,650 Philips Electronics N.V. ........................ 1,603
---------
6,373
---------

VALUE
SHARES (000)

-------------------------------------------------------------------------

NEW ZEALAND (0.1%)
85,700 Fletcher Challenge Building...................... $ 116
30,900 Telecom Corp. of New Zealand Ltd. (Installment
Receipts-Final Installment: NZD 4.15/share due
3/31/99)....................................... 151
---------
267
---------
NORWAY (0.7%)
74,285 Sparebanken...................................... 1,444
---------
PORTUGAL (0.8%)
93,050 Electricidade de Portugal........................ 1,839
---------
SINGAPORE (0.5%)
30,000 City Developments Ltd............................ 156
43,000 Natsteel Electronics Ltd......................... 118
20,000 Oversea-Chinese Banking Corp. (Foreign).......... 136
17,000 Singapore Airlines Ltd. (Foreign)................ 123
89,000 Singapore Technologies Engineering Ltd. ......... 80
40,000 United Overseas Bank Ltd. (Foreign).............. 250
29,000 Venture Manufacturing Ltd........................ 131
---------
994
---------
SPAIN (3.0%)
44,990 Banco Bilbao Vizcaya............................. 672
49,800 Banco Santander.................................. 1,023
68,300 Endesa........................................... 1,727
88,650 Iberdrola........................................ 1,315
35,608 Telefonica....................................... 1,513
34,200 Uralita.......................................... 305
---------
6,555
---------
SWEDEN (3.4%)
52,100 Autoliv, Inc..................................... 1,987
369,500 Nordbanken Holding AB............................ 2,116
98,300 Svedala Intrustri AB............................. 1,718
48,840 Svenska Handelsbanken, Class A................... 1,705
---------
7,526
---------
SWITZERLAND (7.3%)
2,718 Cie Financiere Richemont AG, Class A............. 4,528
3,080 Forbo Holding AG (Registered).................... 1,283
2,000 Holderbank Financiere Glarus AG, Class B
(Bearer)....................................... 2,242
2,100 Nestle (Registered).............................. 3,824
985 Schindler Holding AG (Registered)................ 1,665
3,220 Swisscom AG...................................... 1,261
3,440 Union Bank of Switzerland AG (Registered)........ 1,083
---------
15,886
---------

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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INTERNATIONAL MAGNUM PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)
-------------------------------------------------------------------------

UNITED KINGDOM (16.5%)
716,500 Aegis Group plc.................................. $ 1,580
302,620 Allied Domecq plc................................ 2,254
93,600 Allied Zurich plc................................ 1,263
142,970 Bank of Scotland................................. 1,901
209,005 BG plc........................................... 1,229
139,700 BOC Group plc.................................... 1,950
87,100 British Telecommunications plc................... 1,422
170,752 Burmah Castrol plc............................... 2,611
180,050 Capital Radio plc................................ 1,978
541,600 Devro plc........................................ 1,251
123,236 Diageo plc....................................... 1,386
185,160 Great Universal Stores plc....................... 2,019
1,095,400 Halma plc........................................ 1,646
220,100 Imperial Tobacco Group plc....................... 2,277
578,100 Morgan Crucible Co............................... 2,045
2,648,100 Premier Oil plc.................................. 599
250,056 Reckitt & Colman plc............................. 2,709
110,920 RMC Group plc.................................... 1,502
192,583 Royal & Sun Alliance Insurance Group plc......... 1,818
316,600 WPP Group plc.................................... 2,747
---------
36,187
---------
TOTAL COMMON STOCKS (Cost $187,149)........................... 192,381
---------
PREFERRED STOCKS (2.7%)
GERMANY(2.7%)
4,716 Dyckerhoff AG.................................... 1,270
16,140 Fresenius AG..................................... 3,194
4,480 Suedzucker AG.................................... 1,574
---------
TOTAL PREFERRED STOCKS (Cost $7,191).......................... 6,038
---------

[Download Table]

NO. OF
WARRANTS

---------

WARRANTS (0.0%)
HONG KONG (0.0%)
10,650 Hong Kong & China Gas Co., Ltd., expiring 9/30/99
(Cost $0)...................................... --
---------

[Download Table]

FACE
AMOUNT VALUE
(000) (000)

-------------------------------------------------------------------------

SHORT TERM INVESTMENTS (7.5%)
REPURCHASE AGREEMENT (7.5%)
$ 16,507 Chase Securities, Inc. 4.65%, dated 3/31/99, due
4/01/99, to be repurchased at $16,509,
collateralized by U.S. Treasury Bonds, 9.25%,
due 2/15/16, valued at $16,649 (Cost
$16,507)....................................... $ 16,507
---------
FOREIGN CURRENCY (0.3%)
AUD 23 Australian Dollar................................ 15
GBP 5 British Pound.................................... 8
DKK 302 Danish Krone..................................... 44
EMU 464 European Monetary Unit........................... 502
HKD 18 Hong Kong Dollar................................. 2
MYR 17 Malaysian Ringgit................................ 5
---------
TOTAL FOREIGN CURRENCY (Cost $571)............................ 576
---------
TOTAL INVESTMENTS (98.3%) (Cost $211,418)..................... 215,502
---------

[Download Table]

OTHER ASSETS AND LIABILITIES (1.7%)
Other Assets................................................ 58,187
Liabilities................................................. (54,551)
---------
3,636
---------
NET ASSETS (100%)............................................. $ 219,138
---------
---------

[Download Table]

CLASS A:
--------------------------------------------------------------
NET ASSETS.................................................... $194,308
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 16,825,880 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $11.55
---------
---------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $24,830
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 2,157,266 outstanding $0.001 par
value shares (authorized 500,000,000 shares)................ $11.51
---------
---------

------------------------------------------------------------

RNC -- Non-Convertible Savings Shares

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
INTERNATIONAL SMALL CAP PORTFOLIO

The International Small Cap Portfolio seeks long-term capital appreciation by
investing primarily in the equity securities of non-U.S. issuers. The Portfolio
applies a disciplined bottom-up value approach to identify and invest in small
capitalization companies which are both attractive businesses and available at
cheap prices. A market capitalization cut-off of U.S. $1 billion is used as our
definition of "small."

For the three months ended March 31, 1999, the Portfolio had a total return of
1.77% compared to a total return of 2.78% for the Morgan Stanley Capital
International (MSCI) EAFE Small Cap Index (the "Index"). For the one-year period
ended March 31, 1999, the total return for the Portfolio was -7.11% compared to
-8.42% for the Index. For the five-year period ended March 31, 1999, the average
annual total return for the Portfolio was 3.48% compared to -4.79% for the
Index. From inception on December 15, 1992 through March 31, 1999, the average
annual total return of the Portfolio was 11.21% compared to 2.77% for the Index.

PERFORMANCE COMPARED TO MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE SMALL
CAP INDEX(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
--------------------------------------------------
AVERAGE
AVERAGE ANNUAL
ONE ANNUAL SINCE
YTD YEAR FIVE YEARS INCEPTION
---------- ---------- ------------ ------------

PORTFOLIO................ 1.77% -7.11% 3.48% 11.21%
INDEX.................... 2.78 -8.42 -4.79 2.77

1. The MSCI EAFE Small Cap Index is an arithmetic, unmanaged, market value
weighted average of the performance of over 900 securities of companies
listed on the stock exchanges of countries in Europe, Australasia and the Far
East with a fixed market capitalization cut off of U.S. $200-$800 million
(this index is a price only index and does not include dividends).

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE COUNTRY SPECIFIC PERFORMANCE
RESULTS PROVIDED ARE AS MEASURED BY THE MSCI EAFE SMALL CAP INDEX AND ARE FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE
PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK
CONSIDERATIONS ASSOCIATED WITH INTERNATIONAL INVESTING.

The rather muted Index return for the quarter, masks a much stronger return in
local currency terms (EAFE Small Cap +8.13%) offset by U.S. dollar strength, and
some strong market returns most notably Japan (+19.5%) and Singapore (+17.7%).
Importantly, the Index outperformed large cap EAFE for the first time in many
quarters although this primarily reflected strong relative returns in Japan, the
U.K. and Scandinavia. In the core European markets small caps continued to lag
largely, we believe, as a result of the introduction of the Euro. The large
pension funds, most notably in the Netherlands and Ireland, reduced their
holdings in domestic small caps in order to increase weightings in large cap
'Euroland'. We believe this process is now largely complete and have started to
see some rebound in European small caps in the last few weeks.

The key contributor to the Portfolio's underperformance during the quarter was
its low weighting in Japan which cost 1.5% of relative performance.
Exceptionally strong stock selection in Australia (Solution 6, ERG, Eltin,
Skilled Engineering and Ausdoc) together with strong returns in Italy
(Buffetti), Germany (Kamps, Sartorius) and Switzerland (Publigroup) more than
compensated for the negative impact of the Japanese underweight in January and
February leading to strong relative returns. Stock selection, however, was not
sufficient in March to offset both Japan and weak returns in the U.K. (Devro and
GEI) and the Netherlands (OPG, Samas).

Turnover for the quarter was 7%, in line with the long-term average. Star City,
an Australian casino operator was sold having reached our assessed fair value
following strong outperformance. New positions were created in Neopost, a French
IPO, Asia Security Printing in Japan and Telestra in Finland.

Neopost is the second largest supplier of franking machines in the world after
Pitney Bowes and is the largest player in Europe with 64% of the market in
France and 25% in the U.K. The business enjoys good visibility, thanks to strong
recurring revenues (60%+) and high barriers to entry. Neopost is in a strong
position to benefit from its new products (on-line services) which should boost
future growth. The stock was priced at 13 times prospective earnings and 5.8
times cash flow, attractive multiples given the quality of the business and its
growth prospects.

Asia Securities Printing is one of the leading Japanese providers of consultancy
and printing services

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LETTER TO SHAREHOLDERS
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INTERNATIONAL SMALL CAP PORTFOLIO (CONT.)

for accounting and legal documents for stock exchange listed companies. Its
revenue stream is mainly recurrent as companies tend not to change printing
companies given the confidential nature of the material. Growth for Asia
Securities Printing is derived from IPO's (new clients) as well as the financial
deregulation of the Japanese financial markets which is leading to a higher
number of mutual trusts and other financial products for which disclosure
documents will have to be printed. The shares were purchased on an earnings
ratio of 14 times, price cash flow ratio of 12 times and economic value
added/earnings before interest taxes depreciation & amortization (EV/EBITDA)
ratio of 2.5 times, which represented a very substantial discount to its peer
group valuation and our discounted cash flow (DCF).

Teleste is a Finnish provider of cable network equipment and multi-media
language training products. Within the European market for cable network
equipment, Teleste is the third largest player. This market is expected to
experience dramatic growth during the next few years as the cable operators
upgrade their networks to cater to telephony services, digital TV and
interactive services. The shares were purchased on a price earnings ratio of
17.5 times and price cash flow ratio of 12.7 times which we believe offers
attractive value given growth prospects and peer group valuations.

The U.S. economy has continued to enjoy solid, low inflationary growth, despite
our ongoing concerns over its sustainability, and it has certainly helped
confidence in the rest of the world, most particularly Asia. Nevertheless the
capital goods cycle has been weak as expected and the Portfolio benefited during
the quarter from its reduced exposure to this sector.

The Asian markets have bounced back strongly with the exception of Hong Kong. We
continue to worry over China and its ability to walk its tight rope of reform
given increasing cross winds of domestic pressure and loss of export
competitiveness. Nevertheless valuations in small cap Hong Kong appear to more
than discount this concern and a recent visit has uncovered some interesting new
ideas.

In contrast we continue to struggle with value in Japan and Singapore. The
Japanese Government's efforts to solve the banking crisis are indeed encouraging
but the headline-making announcements of significant restructuring measures from
corporate Japan -- Sony and Hitachi to name two -- do not reflect what we are
seeing at the smaller company level. Although the Portfolio's Japanese weighting
has doubled over the last year from 8% to 17% this still leaves us shy of the
32% Index weight and reflects our difficulties in finding quality business
franchises in Japan on attractive multiples. The recent rally in small caps was
largely focussed in growth names despite their already demanding valuations.
Deeply discounted Japanese value, while available in abundance, has barely moved
and will require greater evidence of a change in management's attitudes to
shareholder value or, more likely, increasing merger and acquisition activity of
which we are just starting to see the first signs.

In Singapore what is striking is the shortage of quality business franchises
available. Moreover, just as in Japan, the much touted corporate restructuring,
which is currently the key driver of earnings growth in this market, is limited
to large cap dominated conglomerates and banks.

In Europe the European Central Bank's recent 0.5% interest rate cut has
positively surprised investors, adding to the relief provided by the resignation
of Mr. Lafontaine in Germany during the quarter. Despite a recent rally in
cyclicals, however, we remain cautious on the outlook for core Europe although
we continue to be impressed with the nimbleness of many small cap management
teams in working around the restrictive working practices in France and Germany.
The U.K. looks increasingly like a soft landing and recent strength has rewarded
the Portfolio's increased weighting here.

While it was pleasing to see small caps finally starting to enjoy some relative
strength in some markets, this is only the tip of the iceberg given the relative
underperformance of small caps over the last few years. Valuations are
compelling.

Margaret Naylor
PORTFOLIO MANAGER

Willem Vinke
PORTFOLIO MANAGER

Nathalie Degaus
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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INTERNATIONAL SMALL CAP PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)

-----------------------------------------------------------------------------

COMMON STOCKS (93.5%)
AUSTRALIA (9.2%)
1,396,940 Ausdoc Group Ltd................................. $ 2,837
623,503 Auspine Ltd...................................... 653
1,748,543 Australian Hospital Care Ltd..................... 1,116
887,866 Bains Harding Ltd................................ 115
361,560 BRL Hardy Ltd.................................... 1,549
1,973,731 Eltin Ltd........................................ 1,891
7,440,847 E.R.G. Ltd....................................... 8,546
7,490,464 Parbury Ltd...................................... 1,331
683,700 Ramsay Health Care Ltd........................... 646
1,490,614 Skilled Engineering Ltd.......................... 2,365
1,188,900 Solution 6 Holdings Ltd.......................... 1,848
-----------
22,897
-----------
DENMARK (1.0%)
72,400 Sydbank A/S...................................... 2,370
-----------
FINLAND (5.9%)
87,308 KCI Konecranes International..................... 3,021
47,573 Kone Oyj, Class B................................ 5,016
314,100 Metsa Tissue Oyj................................. 2,377
282,458 Rapala Normark Corp.............................. 2,205
71,200 Teleste Oyj...................................... 643
134,010 The Rauma Group.................................. 1,558
-----------
14,820
-----------
FRANCE (7.0%)
34,569 Algeco........................................... 2,411
24,500 Chargeurs........................................ 1,306
21,999 Dauphin O.T.A.................................... 1,713
41,053 De Dietrich et Compagnie......................... 1,994
93,113 Europeene d'Extincteurs.......................... 4,566
90,490 Legris Industries................................ 4,208
87,250 Neopost S.A...................................... 1,406
-----------
17,604
-----------
GERMANY (5.4%)
60,094 Beru AG.......................................... 1,170
11,680 Kamps AG......................................... 1,225
81,120 Marseille-Kliniken AG............................ 1,197
117,509 Moebel Walther AG................................ 2,033
18,134 Philipp Holzmann AG.............................. 2,333
3,432 Plettac AG....................................... 183
13,510 Sartorius AG..................................... 2,760
93,230 Winkler & Duennebier AG.......................... 2,551
-----------
13,452
-----------
HONG KONG (2.2%)
1,514,000 Li & Fung Ltd.................................... 3,204
7,657,000 Vitasoy International Holdings Ltd............... 2,223
-----------
5,427
-----------

VALUE
SHARES (000)

-----------------------------------------------------------------------------

IRELAND (3.6%)
1,809,127 Anglo Irish Bank Corp. plc (British Pound
Shares)........................................ $ 5,223
100,005 Clondalkin Group plc............................. 714
539,556 Green Property plc............................... 3,122
-----------
9,059
-----------
ITALY (2.9%)
1,174,200 Buffetti S.p.A................................... 5,016
459,000 Sogefi S.p.A..................................... 1,221
18,200 Vincenzo Zucchi S.p.A............................ 135
207,050 Vincenzo Zucchi S.p.A. (NCS)..................... 940
-----------
7,312
-----------
JAPAN (17.2%)
94,800 Aiful Corp....................................... 6,461
237,900 Asatsu, Inc...................................... 6,671
37,000 Asia Securities Printing Co., Ltd................ 523
72,400 Disco Corp....................................... 2,813
231,000 Foster Electric Co., Ltd......................... 1,385
760,000 Hankyu Realty Co., Ltd........................... 3,126
227,000 Hanshin Department Store Ltd..................... 949
86,000 H.I.S. Co., Ltd.................................. 2,528
780,000 Japan Oil Transportation Co., Ltd................ 1,449
117,000 Kirin Beverage Corp.............................. 2,149
131,600 Maezawa Kasei Industries......................... 1,556
135,000 Nifco, Inc....................................... 1,274
676,000 Nissan Fire & Insurance Co....................... 1,953
110,000 Nissei Industries................................ 743
64,000 Rock Field Co., Ltd.............................. 1,519
136,000 Sotoh Co., Ltd................................... 689
598,000 Toc Co........................................... 4,545
240,000 Ushio, Inc....................................... 2,556
-----------
42,889
-----------
NETHERLANDS (7.1%)
74,600 Ahrend Groep N.V. ............................... 1,303
103,595 Apothekers Cooperatie OPG........................ 2,218
52,373 Atag Holding N.V. ............................... 971
83,850 Benckiser N.V., Class B.......................... 4,710
105,700 GTI Holding N.V.................................. 2,057
118,299 Hollandsche Beton Groep N.V. .................... 1,247
58,510 International Muller............................. 1,199
67,600 Nutreco Holding N.V. ............................ 2,789
95,532 Samas Groep N.V. ................................ 1,240
-----------
17,734
-----------
NEW ZEALAND (2.1%)
1,111,100 Auckland International Airport Ltd............... 1,629
766,736 Fisher & Paykel Industries Ltd................... 2,544
842,700 Fletcher Challenge Building...................... 1,141
-----------
5,314
-----------

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International Small Cap Portfolio

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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INTERNATIONAL SMALL CAP PORTFOLIO (CONT.)
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[Download Table]

VALUE
SHARES (000)
-----------------------------------------------------------------------------

NORWAY (2.2%)
70,850 Adelsten ASA, Class B............................ $ 431
121,900 Kverneland ASA................................... 2,480
228,020 Oceanor.......................................... --
128,268 Sparebanken...................................... 2,493
-----------
5,404
-----------
SINGAPORE (0.6%)
1,101,000 GP Batteries International Ltd................... 1,613
-----------
SPAIN (1.2%)
105,358 Miquel y Costas & Miquel......................... 3,025
-----------
SWEDEN (2.8%)
104,900 Haldex AB........................................ 1,508
245,240 Nobel Biocare AB................................. 3,377
75,510 Scandic Hotels AB................................ 2,171
-----------
7,056
-----------
SWITZERLAND (6.3%)
957 Bobst AG (Bearer)................................ 1,134
10,567 Edipresse (Bearer)............................... 2,433
9,440 PubliGroupe...................................... 4,098
4,841 SIG Schweizensche Industrie-Gesellschaft Holding
AG (Registered)................................ 2,787
11,154 Valora Holding AG................................ 2,629
6,305 Zehnder Holding AG, Class B...................... 2,648
-----------
15,729
-----------
UNITED KINGDOM (16.8%)
981,300 Aegis Group plc.................................. 2,164
350,970 Capital Radio plc................................ 3,856
1,118,190 Devro plc........................................ 2,583
2,540,850 Donelon Tyson plc................................ --
2,159,498 GEI International plc............................ 1,378
889,423 Informa Group plc................................ 4,828
1,024,665 John Mowlem & Co. plc............................ 1,937
33,795,100 Kendell plc...................................... --
214,635 Le Riches Stores plc............................. 1,716
676,800 Litho Supplies plc............................... 1,564
2,631,600 Matthews (Bernard) plc........................... 5,442
673,960 NHP plc.......................................... 1,960
459,700 Oriflame International........................... 1,337
2,659,393 Pentos plc....................................... --
577,200 Quadramatic plc.................................. 1,520
177,172 Seton Scholl Healthcare Group plc................ 2,304
373,700 SGB Group plc.................................... 1,364
1,149,800 SIG plc.......................................... 2,879
1,509,500 The 600 Group plc................................ 1,780
1,086,300 Time Products plc................................ 1,518
392,600 Westminster Health Care Holdings plc............. 1,915
-----------
42,045
-----------
TOTAL COMMON STOCKS (Cost $250,635)............................. 233,750
-----------

VALUE
SHARES (000)

-----------------------------------------------------------------------------

PREFERRED STOCKS (2.5%)
GERMANY (2.5%)
9,355 Dyckerhoff AG.................................... $ 2,519
6,111 STO AG-Vorzug.................................... 1,255
158,703 Wuerttembergische Metallwarenfabrik AG........... 2,488
-----------
TOTAL PREFERRED STOCKS (Cost $7,703)............................ 6,262
-----------

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NO. OF
RIGHTS

-----------

RIGHTS (0.1%)
AUSTRALIA (0.1%)
1,189 Solution 6 Holdings Ltd. (Cost $0)............... 339
-----------
TOTAL FOREIGN SECURITIES (96.1%) (Cost $258,338)................ 240,351
-----------

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FACE
AMOUNT

-----------

SHORT-TERM INVESTMENT (3.1%)
REPURCHASE AGREEMENT (3.1%)
$ 7,736 Chase Securities, Inc. 4.65%, dated 3/31/99, due
4/01/99, to be repurchased at $7,737,
collateralized by U.S. Treasury Bonds, 7.125%
due 2/15/23, valued at $7,796 (Cost $7,736).... 7,736
-----------
FOREIGN CURRENCY (0.5%)
AUD 363 Australian Dollar................................ 230
GBP 167 British Pound.................................... 269
EUR 391 European Monetary Unit........................... 423
JPY 22,444 Japanese Yen..................................... 190
-----------
TOTAL FOREIGN CURRENCY (Cost $1,101)............................ 1,112
-----------
TOTAL INVESTMENTS (99.7%) (Cost $267,175)....................... 249,199
-----------

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OTHER ASSETS AND LIABILITIES (0.3%)
Other Assets................................................... 2,796
Liabilities.................................................... (2,011)
----------
785
----------
NET ASSETS (100%)................................................ $ 249,984
----------
----------

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NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 16,105,040 outstanding $0.001 par value shares
(authorized 1,000,000,000 shares)........................... $15.52
---------
---------

------------------------------------------------------------

NCS -- Non-Convertible Shares

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LETTER TO SHAREHOLDERS
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JAPANESE EQUITY PORTFOLIO

The investment objective of the Japanese Equity Portfolio is to seek long-term
capital appreciation by investing primarily in equity securities of Japanese
issuers. Equity securities are defined as common and preferred stocks,
convertible securities and rights and warrants to purchase common stocks.

For the three months ended March 31, 1999, the Portfolio had a total return of
11.83% for the Class A shares and 11.58% for the Class B shares as compared to
12.18% for the Morgan Stanley Capital International (MSCI) Japan Index (the
"Index"). For the one-year period ended March 31, 1999, the Portfolio had a
total return of 18.08% for the Class A shares and 17.48% for the Class B shares
compared to 15.49% for the Index. From inception on April 25, 1994 through March
31, 1999, the average annual total return of Class A shares was 0.60% compared
to -4.91% for the Index. From inception on January 2, 1996 through March 31,
1999, the average annual total return of Class B shares was 2.23% compared to
-7.89% for the Index.

PERFORMANCE COMPARED TO MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) JAPAN
INDEX(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
------------------------------------------
ONE AVERAGE ANNUAL
YTD YEAR SINCE INCEPTION
---------- ----------- -----------------

PORTFOLIO -- CLASS A....... 11.83% 18.08% 0.60%
PORTFOLIO -- CLASS B....... 11.58 17.48 2.23
INDEX -- CLASS A........... 12.18 15.49 -4.91
INDEX -- CLASS B........... 12.18 15.49 -7.89

1. The MSCI Japan Index is an unmanaged index of common stocks (includes
dividends).

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE PERFORMANCE RESULTS PROVIDED ARE
FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF
THE PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK
CONSIDERATIONS ASSOCIATED WITH INTERNATIONAL INVESTING.

The Japanese equity market rallied during the first quarter, particularly during
March as investors began re-evaluating their allocation to Japanese equities.
The Bank of Japan sent a subtle message in January yen intervention at 110 level
suggesting authorities did not desire a strong currency, which also seemed to be
supported during the G7 Bonn Summit in February. Yields on 10-year Japanese
Government Bonds (JGB) rose rapidly during the beginning of the year owing to
fears of huge supply coming to the market with deficit spending substantially
increasing in a weak economic environment. To stem this rise the Bank of Japan
guided the overnight call rate to "0" and the Ministry of Finance's Trust Fund
Bureau announced they will continue to purchase JGB's in a reversal of previous
statements. Both of these developments were viewed positively by investors
because Government authorities acted quickly and decisively to calm market
volatility.

In addition, the Government's proposal to provide Y7.4 trillion of public funds
for Japanese banks' non-performing loans was officially approved after
considerable debate. Under this scheme banks will issue preference shares to the
Japanese Government to write off non-performing loans and in turn these banks
are expected to comply with the FSA (Financial Supervisory Authority) for
disclosure of non-performing loans as well as definitive measures to improve
profitability. Furthermore, to alleviate the credit crunch for medium to smaller
companies the Government's Y20 trillion loan guarantee program enacted in 1998
became available should these companies require such credit. With the above
mentioned factors investors became increasingly convinced that many of Japan's
recent credit and non-performing loan problems were sufficiently addressed by
the authorities and sentiment regarding investments in Japan greatly improved.

At the same, time full scale restructuring efforts seemed to make daily
headlines on a micro level; NEC, Sony, Mitsubishi Chemical and numerous other
leading private sector companies declared unprecedented labor, production and
management changes which focused on return on equity over market share. Highly
insular companies such as Nissan and Sumitomo Rubber also departed from their
traditional "keiretsu" relationships to announce major tie-ups with foreign
companies. At the margin all these changes were viewed positively and evidence
to this was the record Y1.8 trillion worth of equities purchased by foreign
investors during March.

While domestic Japanese institutional and corporate investors were largely
inactive or net sellers during the quarter preparing for their fiscal year-end
in March, Japanese retail investors returned to the

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LETTER TO SHAREHOLDERS
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JAPANESE EQUITY PORTFOLIO (CONT.)

market. Record consecutive rises in the OTC Index as well as heavily
oversubscribed IPO's suggested that many have made money in the markets and
contributed to the improvement of overall market sentiment and volume of trading
activity. In addition, the NY Dow reached record highs during the quarter which
also added momentum to the buying frenzy during March.

OUTLOOK
As we stated in our outlook earlier in the year, we believe 1999 will be
remembered as an important milestone for long term investors in Japanese
equities. Restructuring on a micro level appears to be real while authorities
have provided a "put option" for Japanese banks in the form of public funds and
issuance of preference shares. A "V" shaped economic recovery is highly unlikely
given the weak domestic Japanese macro activity and rising unemployment.
However, it is evident to us that corporate earnings will rebound as return on
equity improves with these restructuring efforts. Importantly, we believe there
will likely be some short-term disappointments when restructuring erodes
short-term profitability and the markets therefore become subject to corrections
as investors realize that momentum may have carried the market ahead of economic
reality. We believe that the light at the end of the ten year depressed economy
will likely shine for Japanese consumer technology industries such as Sony's new
Playstation II which may in time become a "home server" for numerous
applications and fuel new consumer demand for Japanese consumer related
products.

We have sold our positions in Tokyo Electron and Murata during the quarter. Both
securities have reached our valuation targets and departed in the cheapest 1/3
of our valuation screens for price/book ratio, price/cash flow ratio and
price/earnings ratio and we have used proceeds to add to our existing positions
in Toshiba, Mineabea, Sony and Ono Pharmaceuticals based on their relative
attractive valuations.

John R. Alkire
PORTFOLIO MANAGER

Kunihiko Sugio
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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JAPANESE EQUITY PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)

-----------------------------------------------------------------------------

COMMON STOCKS (94.4%)
APPLIANCES & HOUSEHOLD DURABLES (6.6%)
85,000 Matsushita Electric Industrial Co., Ltd.......... $ 1,658
20,000 Sony Corp........................................ 1,850
---------
3,508
---------
AUTOMOBILES (7.5%)
70,000 Nifco, Inc....................................... 660
338,000 Nissan Motor Co., Ltd............................ 1,313
70,000 Suzuki Motor Co., Ltd............................ 929
37,000 Toyota Motor Corp................................ 1,072
---------
3,974
---------
BROADCASTING & PUBLISHING (0.8%)
60,000 Nissha Printing Co., Ltd......................... 406
---------
BUILDING MATERIALS & COMPONENTS (4.4%)
90,000 Fujitec Co., Ltd................................. 731
25,000 Rinnai Corp...................................... 503
100,000 Sanwa Shutter Corp............................... 515
82,000 Sekisui Chemical Co.............................. 584
---------
2,333
---------
BUSINESS & PUBLIC SERVICES (2.0%)
69,000 Dai Nippon Printing Co., Ltd..................... 1,049
---------
CHEMICALS (5.3%)
171,000 Daicel Chemical Industries Ltd................... 563
140,000 Kaneka Corp...................................... 1,111
218,000 Mitsubishi Chemical Corp......................... 619
90,000 Shin-Etsu Polymer Co., Ltd....................... 517
---------
2,810
---------
CONSTRUCTION & HOUSING (1.1%)
57,000 Sekisui House Co.,Ltd............................ 607
---------
DATA PROCESSING & REPRODUCTION (8.9%)
60,000 Canon, Inc....................................... 1,485
110,000 Fujitsu Ltd...................................... 1,767
141,000 Ricoh Co., Ltd................................... 1,473
---------
4,725
---------
ELECTRICAL & ELECTRONICS (13.9%)
208,000 Hitachi Ltd...................................... 1,541
75,000 Mineabea Co., Ltd................................ 775
54,000 Mitsumi Electric Co., Ltd........................ 1,081
140,000 NEC Corp......................................... 1,685
36,000 Ryosan Co........................................ 586
253,000 Toshiba Corp..................................... 1,728
---------
7,396
---------
ELECTRONIC COMPONENTS, INSTRUMENTS (6.8%)
21,000 Kyocera Corp..................................... 1,131
8,000 Rohm Co.......................................... 956
19,000 TDK Corp......................................... 1,539
---------
3,626
---------

VALUE
SHARES (000)

-----------------------------------------------------------------------------

ENERGY EQUIPMENT & SERVICES (1.3%)
44,000 Kurita Water Industries Ltd...................... $ 720
---------
FINANCIAL SERVICES (1.8%)
49,000 Hitachi Credit Corp.............................. 972
---------
FOOD & HOUSEHOLD PRODUCTS (3.2%)
24,000 Aiwa Co., Ltd.................................... 553
16,000 Sangetsu Co., Ltd................................ 257
84,000 Yamaha Corp...................................... 890
---------
1,700
---------
HEALTH & PERSONAL CARE (8.0%)
34,000 Ono Pharmaceutical Co., Ltd...................... 1,373
69,000 Sankyo Co., Ltd.................................. 1,480
45,000 Yamanouchi Pharmaceutical Co., Ltd............... 1,425
---------
4,278
---------
INDUSTRIAL COMPONENTS (1.2%)
150,000 Furukawa Electric Co............................. 621
---------
MACHINERY & ENGINEERING (8.0%)
73,000 Amada Co., Ltd................................... 388
60,000 Daifuku Co., Ltd................................. 398
53,000 Daikin Industries Ltd............................ 525
43,000 Fuji Machine Manufacturing Co., Ltd.............. 1,544
243,000 Mitsubishi Heavy Industries Ltd.................. 1,098
130,000 Tsubakimoto Chain Co............................. 302
---------
4,255
---------
MERCHANDISING (1.1%)
12,000 FamilyMart Co., Ltd.............................. 609
---------
MULTI-INDUSTRY (0.9%)
50,000 Lintec Corp...................................... 486
---------
REAL ESTATE (1.7%)
87,000 Mitsubishi Estate Co., Ltd....................... 885
---------
RECREATION, OTHER CONSUMER GOODS (7.0%)
91,000 Casio Computer Co................................ 617
37,000 Fuji Photo Film Ltd.............................. 1,400
20,000 Nintendo Corp., Ltd.............................. 1,726
---------
3,743
---------
TELECOMMUNICATIONS (2.9%)
155 Nippon Telegraph & Telephone Corp................ 1,519
---------
TOTAL COMMON STOCKS (Cost $46,928)................................ 50,222
---------

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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JAPANESE EQUITY PORTFOLIO (CONT.)
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[Download Table]

FACE
AMOUNT VALUE
(000) (000)

-----------------------------------------------------------------------------

SHORT-TERM INVESTMENT (5.2%)
REPURCHASE AGREEMENT (5.2%)
$ 2,768 Chase Securities, Inc. 4.65%, dated 3/31/99, due
4/01/99, to be repurchased at $2,768,
collateralized by U.S. Treasury Bonds, 10.375%
due 11/15/12, valued at $2,849 (Cost $2,768)... $ 2,768
---------
TOTAL INVESTMENTS (99.6%) (Cost $49,696).......................... 52,990
---------

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OTHER ASSETS AND LIABILITIES (0.4%)
Other Assets..................................................... 15,357
Liabilities...................................................... (15,166)
--------
191
--------
NET ASSETS (100%).................................................. $ 53,181
--------
--------

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VALUE
(000)

-----------------------------------------------------------------------------
CLASS A:
NET ASSETS......................................................... $ 51,817
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 7,511,647 outstanding $0.001 par value shares
(authorized, 500,000,000 shares)................................. $ 6.90
--------
--------
CLASS B:
NET ASSETS......................................................... $ 1,364
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 199,420 outstanding $0.001 par value shares
(authorized 500,000,000 shares).................................. $ 6.84
--------
--------

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LETTER TO SHAREHOLDERS
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LATIN AMERICAN PORTFOLIO

The investment objective of the Latin American Portfolio is long-term capital
appreciation through investment primarily in equity securities of Latin American
issuers. The Portfolio may also invest in debt securities issued or guaranteed
by a Latin American government or governmental entity.

For the three months ended March 31, 1999, the Portfolio had a total return of
17.06% for the Class A shares and 16.96% for the Class B shares compared to a
total return of 15.69% for the Morgan Stanley Capital International (MSCI)
Emerging Markets Global Latin America Index (the "Index"). For the one-year
period ended March 31, 1999, the Portfolio had a total return of -29.03%, for
the Class A shares and -28.78% for the Class B shares compared to -25.27% for
the Index. From inception on January 18, 1995 through March 31, 1999, the
average annual total return of Class A Shares was 8.58% compared to 2.42% for
the Index. From inception on January 2, 1996 through March 31, 1999, the average
annual total return of Class B Shares was 12.77% compared to 5.07% for the
Index.

PERFORMANCE COMPARED TO MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EMERGING
MARKETS GLOBAL LATIN AMERICA INDEX(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
-------------------------------------------
ONE AVERAGE ANNUAL
YTD YEAR SINCE INCEPTION
---------- ----------- ------------------

PORTFOLIO -- CLASS
A.................... 17.06% -29.03% 8.58%
PORTFOLIO -- CLASS
B.................... 16.96 -28.78 12.77
INDEX -- CLASS A...... 15.69 -25.27 2.42
INDEX -- CLASS B...... 15.69 -25.27 5.07

1. The MSCI Emerging Markets Global Latin America Index is a broad based market
cap weighted composite index covering at least 60% of markets in Argentina,
Brazil, Chile, Colombia, Mexico, Peru and Venezuela (includes dividends).

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE COUNTRY SPECIFIC PERFORMANCE
RESULTS PROVIDED IN THIS OVERVIEW ARE AS MEASURED BY THE MSCI EMERGING MARKETS
COUNTRY OR REGIONAL INDICES, ARE FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT
BE CONSTRUED AS A GUARANTEE OF THE PORTFOLIO'S FUTURE PERFORMANCE. PAST
PERFORMANCE SHOWN IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE SEE THE PROSPECTUS FOR A
DESCRIPTION OF CERTAIN RISK CONSIDERATIONS ASSOCIATED WITH INTERNATIONAL
INVESTING.

Outperformance relative to the Index was largely attributable to our Mexican
positions. Overweighting the country was favorable, as Mexico was the best
performing Latin market during the quarter gaining 29.9%. Additionally, our
Mexican stock selection was strong. Underweighting Colombia (-14.2%) and
Venezuela (-13.3%) also helped performance. Less favorable was our stock
selection in Brazil and Chile.

The first quarter of 1999 was the watershed for the Latin markets. Characterized
by strong performance, the turning point in the markets occurred with the
devaluation of the Brazilian real. On January 21, the Brazilian authorities
abandoned the currency peg that was put in place in mid 1994. With dollar
reserves plummeting daily, pressure from capital flight had become too great.

The Brazilian devaluation had long been expected and much of the risk premium
attached to such an event had been priced into the market. Consequently, with
this event behind it, the market looked forward to a more encouraging future
both for Brazil and the region as a whole. Many observers were amazed to see the
Brazilian equity market gain 5.5% in U.S. dollars over the quarter. However, in
the weeks after the devaluation, the Brazilian government took decisive action
to ensure new, strong management of the central bank as well as aggressively
passing measures through congress that were essential in achieving the primary
fiscal targets agreed upon with the IMF.

With regard to the central bank, Arminio Fraga, former portfolio manager for
Soros Funds Management's Quantum Emerging Growth Fund was appointed as its head.
Fraga offers financial expertise and a more reliable currency management
technique. The move was taken to be so positive that most foreign banks with
Brazilian exposure decided to roll over most of their credit to Brazilian
institutions and in addition, welcomed the notion of a sovereign bond issue.
These developments ensured that confidence both domestically and externally
improved dramatically. Inflation has remained surprisingly subdued and the
currency has rallied off its lows.

We are confident that Brazil has avoided insolvency in the near-term and are
more optimistic on the country's ability to avoid debt default over time.
However, Brazil's continued solvency will be contingent upon the government's
ability to keep real interest rates low (sub 15%) and the primary fiscal

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LETTER TO SHAREHOLDERS
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LATIN AMERICAN PORTFOLIO (CONT.)

surplus high (above 3% GDP). Should the government achieve this, the growth in
the stock of public debt (now at 49% GDP) will be contained and the debt
restructuring avoided. To ensure that rates do remain low, congress and the
executive (President Cardoso and his cabinet) must be seen to be acting
responsibly. Legislation must pass that allows for social security system and
tax reforms. We do want to point out that none of these measures are necessary
for the government to achieve their fiscal targets with the IMF for this year.
They are important however for the longer-term health of the economy, and hence
guide market sentiment.

Over the course of the quarter, we have added to our Brazilian exposure and are
now overweight the Index. Within Brazil, we are focusing on the
telecommunications industry that offers strong management, high pent-up demand,
and room for cost efficiencies. Telebras is one such example. Telebras was the
former holding company for the Brazilian telecommunications sector. The company
was privatized during the past summer, and split into 12 separate companies.
Through the purchase of the aggregated Telebras security, we are able to tap
into all 12 companies, taking advantage of reduced transaction charges and
increased liquidity. Telebras offers a great potential for revenue growth and
significant margin expansion.

While Mexico performed as poorly as Brazil in 1998, its strong economic
position, coupled with increasing oil prices, have allowed Mexico to
differentiate itself from the rest of Latin America in the first quarter of
1999. The strength in oil prices has removed any constraints that were weighing
on the government's fiscal balance and consistently lower than expected
inflation allowed the peso to rally 7% in real terms. Given its better than
expected economy, stronger currency and lower domestic interest rates, dollar
earnings estimates for Mexico were revised upwards, providing a further boost to
the market.

Within Mexico, we are focusing on consumer-related industries, such as
telecommunications, broadcasting and publishing, beverages, retailing, and
health and personal care. Telmex, one of our holdings, is an integrated
telecommunications provider for Mexico. The company offers excellent management
which focuses on profitability, ensuring the enhancement of shareholder value.
We also own Televisa, the largest media conglomerate in Mexico, which includes a
television network, publishing, radio and music companies. Televisa offers a
favorable combination of cost reductions, ratings momentum and improved
management focus. Upside exists for tariff increases as advertising rates in
Mexico are among the cheapest in the world.

Argentina's market lagged, gaining only 4.7% during the quarter. We are
underweight Argentina owing to potential internal and external risks. Endogenous
risks include election year uncertainties, as a new President will come into
power in October, a deteriorating current account, and the economy's direct link
to Brazil. While Brazil has been improving, any set back will hinder Argentina's
progress. Exogenous risks include a weak commodity cycle and a rise in U.S.
interest rates. Within Argentina, we are invested in the energy sector,
specifically YPF, the country's largest integrated oil and gas company, and in
the telecommunications sector.

Chile's market rose 16.3%, largely driven by an interest rate cut, increased
demand for pulp from Asian markets, and a critical change in company by-laws for
energy-giant Enersis. We are underweight Chile given its slowing economy and
lackluster corporate earnings. Chile's lack of export diversification has
hindered it economically given the country's dependence on commodities.
Specifically, weak copper prices remain a concern.

Turning to other countries, domestic factors including high interest rates,
inflation and a slowing economy have resulted in our Colombian underweight. We
are also underweight Peru and Venezuela. Peru, like Chile, is highly commodity
dependent (particularly copper) and thus has been negatively impacted by low
commodity prices. Concerns regarding Venezuela include uncertainty over
President Chavez' policies, its oil price dependence, and prospects of a
currency devaluation.

Robert L. Meyer
PORTFOLIO MANAGER

Andy B. Skov
PORTFOLIO MANAGER

Michael L. Perl
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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LATIN AMERICAN PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)

---------------------------------------------------------------------------

COMMON STOCKS (97.3%)
ARGENTINA (11.0%)
17,712 Perez Companc, Class B........................... $ 83
44,285 Quilmes Industrial ADR........................... 418
18,281 Telecom Argentina ADR............................ 502
10,622 Telefonica de Argentina ADR...................... 321
27,710 YPF ADR.......................................... 875
--------
2,199
--------
BRAZIL (35.4%)
11,847,000 Banco Nacional (Preferred)....................... --
11,891,386 CEMIG (Preferred)................................ 266
18,864 CEMIG ADR (Preferred)............................ 420
(e) 1,275 CEMIG ADR (Preferred)............................ 28
683,074,000 Cia Electric Est Rio Janeiro..................... 155
6,193,000 Cia Siderurgica Nacional......................... 105
1,820,177 CRT (Preferred).................................. 552
5,000 CVRD............................................. 53
34,986 CVRD (Bonus Shares).............................. --
13,175 CVRD ADR (Preferred)............................. 193
29,233 CVRD, Class A (Preferred)........................ 430
30,790 Copel ADR (Preferred)............................ 231
46,915,400 Copel, Class B ADR (Preferred)................... 354
603,830 Coteminas........................................ 34
9,105 Coteminas ADR.................................... 27
4,654,000 Eletrobras....................................... 91
5,564,000 Eletrobras, Class B (Preferred).................. 117
23,982,000 Embratel......................................... 403
10,100,532 Gerdau (Preferred)............................... 104
5,000 Globex Utilidades (Preferred).................... 18
389,175 Itaubanco (Preferred)............................ 199
208,900 Iven (Preferred)................................. 22
10,009,300 Lojas Arapua (Preferred)......................... --
13,460 Lojas Arapua ADR (Preferred)..................... --
5,889,000 Petrobras (Preferred)............................ 817
4,933 Petrobras ADR (Preferred)........................ 69
5,153,000 Renner Participacoes............................. 4
49,299 Rossi GDR........................................ 43
101,175 Rossi GDS........................................ 89
20,882,275 Tele Celular Sul (Preferred)..................... 42
23,363,675 Tele Centro Sul.................................. 218
132,328,000 Tele Leste Celular (Preferred)................... 88
77,455,600 Tele Nordeste Celular (Preferred)................ 84
128,532,000 Tele Norte Celular (Preferred)................... 77
33,435,000 Tele Norte Leste (Preferred)..................... 511
14,478,275 Tele Sudeste Celular (Preferred)................. 59
3,890 Tele Sudeste Celular ADR......................... 79
32,144,275 Telebras (Preferred)............................. 5
7,447 Telebras ADR (Preferred)......................... 600
3,921 Telenorte Leste (ADR)............................ 60
13,868,275 Telesp Celular (Preferred)....................... 116
550 Teleste Celular ADR.............................. 18

VALUE
SHARES (000)

---------------------------------------------------------------------------

13,173 Unibanco GDR (Preferred)......................... $ 254
20,150 Usiminas......................................... 34
--------
7,069
--------
CHILE (9.0%)
3,840 Banco Edwards ADR................................ 44
3,180 Banco Santander ADR.............................. 48
2,478 Banco Santiago ADR............................... 44
9,505 CCU ADR.......................................... 207
17,797 Chilectra ADR.................................... 382
17,865 Cia. De Telecomunicaciones de Chile ADR.......... 421
6,316 D&S ADR.......................................... 78
17,903 Endesa ADR....................................... 252
6,468 Enersis ADR...................................... 173
8,245 Quinenco ADR..................................... 82
8,063 Santa Isabel ADR................................. 70
--------
1,801
--------
COLOMBIA (0.4%)
13,621 Bavaria.......................................... 60
22,318 Valores Bavaria.................................. 23
--------
83
--------
MEXICO (39.5%)
45,907 Alfa, Class A.................................... 139
32,531 Banacci, Class B................................. 70
78,246 Banacci, Class L................................. 157
443,043 Bancomer, Class B................................ 152
118,138 Banorte, Class B................................. 155
53,971 Carso Global Telecom............................. 280
69,215 Carso, Class A1.................................. 284
55,880 Cemex CPO........................................ 228
26,120 Cemex CPO ADR.................................... 212
51,529 Cemex, Class B................................... 216
43,584 Cemex, Class B ADR............................... 365
233,731 Cifra, Class C................................... 361
22,071 Cifra, Class V................................... 35
1,960 Cifra, Class V ADR............................... 30
21,187 Femsa ADR........................................ 656
31,361 Femsa (Units).................................... 96
53,656 Grupo Industrial Bimbo, Class A.................. 120
74,253 Grupo Modelo, Class C............................ 190
186,761 Kimberly-Clark, Class A.......................... 704
88,357 Soriana, Class B................................. 306
15,613 Tamsa ADR........................................ 141
25,037 Televisa CPO GDR................................. 786
31,258 Telmex, Class L ADR.............................. 2,047
8,212 TV Azteca ADR.................................... 51
19,843 Vitro ADR........................................ 115
--------
7,896
--------
PERU (1.1%)
17,426 Tel Peru, Class B ADR............................ 222
--------

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

LATIN AMERICAN PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)
---------------------------------------------------------------------------

VENEZUELA (0.9%)
10,225 CANTV ADR........................................ $ 186
--------
TOTAL COMMON STOCKS (Cost $21,312)............................... 19,456
--------

[Download Table]

FACE
AMOUNT
(000)

------------

SHORT-TERM INVESTMENT (1.9%)
REPURCHASE AGREEMENT (1.9%)
$ 372 Chase Securities, Inc. 4.65%, dated 3/31/99, due
4/01/99, to be repurchased at $372,
collateralized by U.S. Treasury Bonds, 8.875%,
due 8/15/17, valued at $375 (Cost $372)........ 372
--------
FOREIGN CURRENCY (0.0%)
ARP 1 Argentine Peso................................... 1
BRL 4 Brazilian Real................................... 2
MXP 15 Mexican Peso..................................... 2
--------
TOTAL FOREIGN CURRENCY (Cost $4)................................. 5
--------
TOTAL INVESTMENTS (99.2%) (Cost $21,688)......................... 19,833
--------

[Download Table]

OTHER ASSETS AND LIABILITIES (0.8%)
Other Assets.................................................... 376
Liabilities..................................................... (213)
-------
163
-------
NET ASSETS (100%)................................................. $19,996
-------
-------

[Download Table]

-----------------------------------------------------------------------
CLASS A:
--------------------------------------------------------------

NET ASSETS.................................................... $18,723
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 2,372,769 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $7.89
-------
-------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $1,273
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 160,629 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $7.93
-------
-------

------------------------------------------------------------

(e) -- 144A Security -- certain conditions for public sale may exist.
ADR -- American Depositary Receipt
CPO -- Certificate of Participation
GDR -- Global Depositary Receipt
GDS -- Global Depositary Shares

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
AGGRESSIVE EQUITY PORTFOLIO

The Aggressive Equity Portfolio seeks capital appreciation through a
concentrated, non-diversified portfolio of corporate equity and equity-linked
securities. Short sales and options can be used to enhance performance.

PERFORMANCE COMPARED TO THE S&P 500 INDEX(1) AND THE LIPPER CAPITAL APPRECIATION
INDEX
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
------------------------------------------
AVERAGE ANNUAL
YTD ONE YEAR SINCE INCEPTION
---------- ---------- ------------------

PORTFOLIO -- CLASS A..... 13.09% 10.37% 35.71%
PORTFOLIO -- CLASS B..... 13.05 10.08 31.27
S&P 500 INDEX -- CLASS
A....................... 4.98 18.45 29.74
LIPPER CAPITAL
APPRECIATION INDEX --
CLASS A................. 4.80 11.50 21.35
S&P 500 INDEX -- CLASS
B....................... 4.98 18.45 18.38
LIPPER CAPITAL
APPRECIATION INDEX --
CLASS B................. 4.80 11.50 27.45

1. The S&P 500 Index is a stock index comprised of 500 large-cap U.S. companies
with market capitalization of $1 billion or more. These 500 companies are a
representative sample of some 100 industries chosen mainly for market size,
liquidity and industry group representation. The Lipper Capital Appreciation
Index is a composite of mutual funds managed for maximum capital gains.

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------
THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE PORTFOLIO'S CONCENTRATION OF ITS
ASSETS IN A SMALL NUMBER OF ISSUERS AND ITS USE OF EQUITY-LINKED SECURITIES WILL
SUBJECT IT TO GREATER RISKS. THE PERFORMANCE RESULTS PROVIDED ARE FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE
PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.

For the three months ended March 31, 1999, the Portfolio had a total return of
13.09% for the Class A shares and 13.05% for the Class B shares compared to a
total return of 4.98% for the S&P 500 Index and 4.80% for the Lipper Capital
Appreciation Index. For the one-year period ended March 31, 1999, the Portfolio
had a total return of 10.37% for the Class A shares and 10.08% for the Class B
shares compared to a total return of 18.45% for the S&P 500 Index and 11.50% for
the Lipper Capital Appreciation Index. From inception on March 8, 1995 through
March 31, 1999, the average annual total return of Class A shares was 35.71%
compared to 29.74% for the S&P 500 Index and 21.35% for the Lipper Capital
Appreciation Index. From inception on January 2, 1996 through March 31, 1999,
the average annual total return of Class B shares was 31.27% compared to 18.38%
for the S&P 500 Index and 27.45% for the Lipper Capital Appreciation Index.

Outperformance for the quarter was driven by Montana Power (up 30% in the first
quarter), Ntl Inc., Neilsen Media Research and Amgen. The largest detractors to
performance were Loews Corp., 3Com Corp, Compaq and Forest Labs, which have all
been eliminated in the Portfolio.

The Portfolio and its top ten holdings reflect a balance of classic growth
stocks and less traditional growth opportunities including:

[Download Table]

COMPANY %
------------------------------------------- ---------

Tyco 6.6
Associated Group 6.2
AT&T Corp.-Liberty Media 5.8
United Technologies 5.6
General Electric 4.8
Cisco 4.6
Amgen 4.5
Pitney Bowes 4.3
MCI Worldcom 4.0
Abercrombie & Fitch 4.0

The 49% weighting in our top ten positions illustrates our strategy of
"opportunistic concentration". Our belief is that heavy concentration may lead
to greater than average volatility but not necessarily greater than average
risk. To us, risk is synonymous with lack of knowledge, which our strategy of
"seeking the information edge" endeavours to avoid.

Tyco (our largest holding) closed its AMP acquisition on April 2. This should be
a materially additive acquisition and a platform from which we expect the
company to make additional accretive acquisitions. The integration of U.S.
Surgical is ahead of plan. We expect a combination of organic growth and
strategic actions (further acquisitions as well as selective divestitures) to
lead to significant earnings growth (at least 30% for the foreseeable future).

We have elected to participate in the dynamic growth of the internet through a
combination of content and infrastructure providers. AT&T Corp.-Liberty Media,
led by industry visionary John Malone, is a unique portfolio of investments in
the rapidly growing cable programming sector along with opportunistic
investments in the internet

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
AGGRESSIVE EQUITY PORTFOLIO (CONT.)

world. Liberty actively manages its investment portfolio in a very tax-efficient
and shareholder-friendly manner. In addition to owning a stock which trades
below the value of its publicly listed investments, we believe we own a free
call on well-positioned "private" investments and John Malone's ability to
strategically invest billions of dollars.

On the infrastructure side MCI Worldcom has emerged as the leading global data
company. In 1998 global data traffic exceeded voice traffic, and is growing at
25% per year. The exponential growth of the internet has led businesses and
internet service providers to demand global end-to-end communication links that
carry voice, data and internet traffic. MCI Worldcom data revenues are growing
at 45% per year and in 1999 will comprise 37% of total revenues. MCI Worldcom's
on-net business model (global facilities-based end-to-end services) offer
compelling economics. For example, European PTT's currently charge is about
$18,000 per month for an E-1 circuit (a 2 million bit per second dedicated
connection) between London and Frankfurt. With its on-net economics MCI Worldcom
can profitably offer the same service for $600 per month -- thus driving market
share gains and stimulating demand with lower prices.

Finally we remain very enthusiastic about our third largest holding, United
Technologies. Earnings quality is high, cash flow is strong and acquisitions are
now a focal point. Even with the stock's strong performance in 1998 (up almost
50%) and so far in 1999, we continue to believe the stock remains attractive,
selling at about 19 times year 2000 estimated earnings per share.

Philip W. Friedman
PORTFOLIO MANAGER

William S. Auslander
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

AGGRESSIVE EQUITY PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)

-------------------------------------------------------------------------

COMMON STOCKS (98.0%)
CAPITAL GOODS (24.8%)
ELECTRICAL EQUIPMENT (4.7%)
54,300 General Electric Co.............................. $ 6,007
---------
MANUFACTURING (DIVERSIFIED) (15.8%)
59,600 Textron, Inc..................................... 4,612
115,000 Tyco International Ltd........................... 8,251
52,000 United Technologies Corp......................... 7,043
---------
19,906
---------
OFFICE EQUIPMENT & SUPPLIES (4.3%)
85,100 Pitney Bowes, Inc................................ 5,425
---------
TOTAL CAPITAL GOODS......................................... 31,338
---------
COMMUNICATION SERVICES (12.6%)
TELECOMMUNICATIONS (CELLULAR/WIRELESS) (6.2%)
45,100 Associated Group, Inc., Class A.................. 2,235
114,700 Associated Group, Inc., Class B.................. 5,563
---------
7,798
---------
TELECOMMUNICATIONS (LONG DISTANCE) (2.5%)
40,049 AT&T Corp........................................ 3,197
---------
TELEPHONE (3.9%)
56,100 MCI Worldcom, Inc................................ 4,968
---------
TOTAL COMMUNICATION SERVICES................................ 15,963
---------
CONSUMER CYCLICALS (15.6%)
RETAIL (BUILDING SUPPLIES) (1.7%)
35,000 Home Depot, Inc.................................. 2,179
---------
RETAIL (GENERAL MERCHANDISE) (2.4%)
33,500 Costco Companies Inc............................. 3,067
---------
RETAIL (SPECIALTY) (6.5%)
54,800 Abercrombie & Fitch Co., Class A................. 5,041
46,050 Gap, Inc......................................... 3,100
---------
8,141
---------
SERVICES (ADVERTISING/MARKETING) (1.6%)
68,100 Outdoors Systems, Inc............................ 2,043
---------
SERVICES (COMMERCIAL & CONSUMER) (3.4%)
170,700 Nielsen Media Research, Inc...................... 4,214
---------
TOTAL CONSUMER CYCLICALS.................................... 19,644
---------
CONSUMER STAPLES (10.3%)
BROADCASTING (TV, RADIO, CABLE) (9.6%)
139,500 AT&T-Liberty Media Corp., Class A................ 7,341
16,300 Chancellor Media Corp............................ 768
60,000 Clear Channel Communications, Inc................ 4,024
---------
12,133
---------

VALUE
SHARES (000)

-------------------------------------------------------------------------

FOODS (0.7%)
24,500 Keebler Foods Co................................. $ 894
---------
TOTAL CONSUMER STAPLES...................................... 13,027
---------
FINANCIAL (4.3%)
BANKS (MAJOR REGIONAL) (1.0%)
33,700 Bank of New York Co., Inc........................ 1,211
---------
INSURANCE (LIFE & HEALTH) (1.2%)
46,650 Reinsurance Group of America, Inc. (Non-
Voting)........................................ 1,580
---------
INSURANCE (MULTI-LINE) (2.1%)
35,100 Loews Corp....................................... 2,620
---------
TOTAL FINANCIAL............................................. 5,411
---------
HEALTH CARE (12.9%)
HEALTH CARE (DIVERSIFIED) (3.2%)
61,700 Warner Lambert Co................................ 4,084
---------
HEALTH CARE (DRUGS -- GENERIC & OTHERS) (4.5%)
76,300 Amgen, Inc....................................... 5,713
---------
HEALTH CARE (DRUGS -- MAJOR PHARMS) (3.5%)
17,300 Pfizer, Inc...................................... 2,401
35,800 Schering-Plough Corp............................. 1,980
---------
4,381
---------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) (1.7%)
31,900 Bausch & Lomb, Inc............................... 2,073
---------
TOTAL HEALTH CARE........................................... 16,251
---------
TECHNOLOGY (13.6%)
COMMUNICATION EQUIPMENT (2.0%)
102,200 American Tower Corp., Class A.................... 2,504
---------
COMPUTERS (NETWORKING) (4.6%)
52,600 Cisco Systems, Inc............................... 5,763
---------
COMPUTERS (SOFTWARE & SERVICES) (4.3%)
11,600 America Online, Inc.............................. 1,694
42,400 Microsoft Corp................................... 3,800
---------
5,494
---------
ELECTRONICS (DEFENSE) (1.0%)
21,500 Litton Industries, Inc........................... 1,236
---------
EQUIPMENT (SEMICONDUCTORS) (1.7%)
35,700 Applied Materials, Inc........................... 2,202
---------
TOTAL TECHNOLOGY............................................ 17,199
---------
UTILITIES (3.9%)
ELECTRIC COMPANIES (3.9%)
66,300 Montana Power Co................................. 4,877
---------
TOTAL COMMON STOCKS (Cost $103,072)........................... 123,710
---------

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

AGGRESSIVE EQUITY PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

FACE VALUE
AMOUNT (000)

-----------------------------------------------------------------------

SHORT-TERM INVESTMENTS (1.2%)
REPURCHASE AGREEMENT (1.2%)
$ 1,457 Chase Securities, Inc. 4.65%, dated 3/31/99, due
4/01/99, to be repurchased at $1,457,
collateralized by U.S. Treasury Bonds, 8.00%,
due 11/15/21, valued at $1,492 (Cost $1,457)... $ 1,457
---------
TOTAL INVESTMENTS (99.2%) (Cost $104,529)................... 125,167
---------

[Download Table]

OTHER ASSETS AND LIABILITIES (0.8%)
Other Assets............................................. 6,845
Liabilities.............................................. (5,835)
----------
1,010
----------
NET ASSETS (100%).......................................... $ 126,177
----------
----------

[Download Table]

--------------------------------------------------------------------------
CLASS A:
--------------------------------------------------------------

NET ASSETS.................................................... $108,462
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 5,480,745 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $19.79
----------
----------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $17,715
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 900,587 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $19.67
----------
----------

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO

The Emerging Growth Portfolio invests primarily in growth-oriented equity
securities of small-to-
medium sized domestic corporations and, to a limited extent, foreign
corporations. Such companies generally have market capitalizations ranging from
$200 million to $3 billion.

For the three months ended March 31, 1999, the Portfolio had a total return of
9.54% for the Class A shares and 9.58% for the Class B shares compared to a
total return of -5.42% for the Russell 2000 Index (the "Index"). For the
one-year period ended March 31, 1999, the Portfolio had a total return of 20.11%
for the Class A shares and 19.72% for the Class B shares compared to -16.26% for
the Index. For the five-year period ended March 31, 1999, the average annual
total return of Class A shares was 17.43% compared to 11.22% for the Index. From
inception on November 1, 1989 through March 31, 1999, the average annual total
return of Class A shares was 14.22% compared to 11.42% for the Index. From
inception on January 2, 1996 through March 31, 1999, the average annual total
return of Class B shares was 15.59% compared to 8.69% for the Index.

PERFORMANCE COMPARED TO THE RUSSELL 2000 INDEX(1)
-----------------------------------------

[Enlarge/Download Table]

TOTAL RETURNS(2)
-----------------------------------------
AVERAGE
AVERAGE ANNUAL
ONE ANNUAL SINCE
YTD YEAR FIVE YEARS INCEPTION
------ ------- ---------- ---------

PORTFOLIO -- CLASS A....................... 9.54% 20.11% 17.43% 14.22%
PORTFOLIO -- CLASS B....................... 9.58 19.72 N/A 15.59
INDEX -- CLASS A........................... -5.42 -16.26 11.22 11.42
INDEX--CLASS B............................. -5.42 -16.26 N/A 8.69

1. The Russell 2000 Index is comprised of the 2,000 smallest companies in the
Russell 3000 Index. The companies have an average market capitalization of
approximately $600 million.

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE PERFORMANCE RESULTS PROVIDED ARE
FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF
THE PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.

The first quarter return was very strong. These returns compare favorably to the
performance of the Index over the same period. Importantly we were able to
achieve significant outperformance despite having minimal exposure to internet
stocks, which added substantially to the results of the Index. Our best
performers for the period included several positions in our top 10 -- Nielsen
Media, Montana Power, and Abercrombie & Fitch, as well as several small cap
technology issues.

Our investment process continues to be driven by bottom up, fundamental
research. We tend to favor companies with exceptional earnings and cash flow
growth potential, strong leadership positions within their industries, high
levels of profitability and top notch management teams. In addition, we focus
more on individual companies than sector allocation. Although we were overweight
consumer discretionary and underweight healthcare, and materials and processing
for the quarter, this was a function of our specific stock selection rather than
a top down decision.

While we had minimal exposure to the "pure play" internet stocks the Portfolio
is positioned to benefit from continuing growth of the internet. Our largest
position at quarter end, Nielsen Media Research, is the dominant provider of
television ratings in the U.S. and Canada, serving national and local customers
including television networks and affiliates, independent stations, syndicates,
cable networks, advertisers and their agencies. The company's stock appreciated
over 30% in the first quarter as investors became more aware of Nielsen's
internet ratings opportunity. We continue to view the shares as attractive given
the company's monopoly position in its core business, high visibility of
earnings and strong cash flow.

Another large holding in the Portfolio is Associated Group. The company owns an
exciting group of telecommunications interests including a controlling interest
in Teligent, a wireless communications company with a small to medium-sized
business focus. In addition, the company's management team has an exceptional
history of creating significant shareholder value in the radio, cable and
telecom industries. We expect progress in Associated's True Position solution,
which enables local authorities to locate wireless emergency 911 callers, to be
a catalyst for the stock over the next year.

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO (CONT.)

Sonic remains a top 10 position in the Portfolio. The largest operator and
franchisor of drive-in restaurants in the U.S., Sonic's core business is
accelerating due to the company's increased efforts to update the look of its
older restaurants, as well as its expanded advertising program. The incremental
returns on the company's investment in store remodels is well over 40% and
should help drive earnings per share growth over the next 18 months. In
addition, Sonic is in the process of raising its royalty fees from franchisees,
which will benefit companywide profitability significantly through the remainder
of the year.

Looking forward, we continue to see many opportunities for capital appreciation
in small to mid-sized companies. At quarter end there were 86 names in the
Portfolio, with the top 10 representing roughly 43% of the Portfolio's net
assets.

Alexander L. Umansky
PORTFOLIO MANAGER

Dennis P. Lynch
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

EMERGING GROWTH PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)

-----------------------------------------------------------------------

COMMON STOCKS (97.4%)
AUTO & TRANSPORTATION (0.9%)
TRANSPORTATION MISCELLANEOUS (0.9%)
12,500 C.H. Robinson Worldwide, Inc..................... $ 318
--------
CONSUMER DISCRETIONARY (38.3%)
ADVERTISING AGENCIES (4.8%)
6,500 ADVO, Inc........................................ 126
105,462 R.H. Donnelley Corp.............................. 1,628
--------
1,754
--------
COMMUNICATIONS & MEDIA (0.4%)
5,300 Pegasus Communications Corp...................... 148
--------
EDUCATION SERVICES (1.0%)
6,200 DeVry, Inc....................................... 180
5,100 ITT Educational Services, Inc.................... 191
--------
371
--------
ENTERTAINMENT (4.4%)
31,864 Cedar Fair L.P................................... 801
12,472 SFX Entertainment, Inc........................... 805
--------
1,606
--------
HOTEL/MOTEL (0.6%)
4,900 Four Seasons Hotels, Inc......................... 205
--------
LEISURE TIME (0.3%)
3,700 Ducati Motor Holdings, Inc....................... 106
--------
PUBLISHING (0.0%)
400 Ziff-Davis Inc................................... 14
--------
RADIO & TV BROADCASTERS (4.2%)
5,500 Heftel Broadcasting Corp., Class A............... 239
15,192 Metro Networks, Inc.............................. 835
12,500 TV Guide, Inc.................................... 461
--------
1,535
--------
RESTAURANTS (5.5%)
12,900 Papa John's International, Inc................... 569
54,446 Sonic Corp....................................... 1,467
--------
2,036
--------
RETAIL (7.4%)
17,300 Abercrombie & Fitch Co., Class A................. 1,591
3,900 dELiA*s Inc...................................... 123
4,700 Linens' n Things, Inc............................ 213
13,400 P.F. Chang's China Bistro, Inc................... 409
12,400 Tweeter Home Entertainment Group, Inc............ 400
--------
2,736
--------
SERVICES: COMMERCIAL (9.7%)
7,000 Argosy Education Group, Inc...................... 60
73,611 Nielsen Media Research, Inc...................... 1,817
25,900 The Corporate Executive Board Company............ 683

VALUE
SHARES (000)

-----------------------------------------------------------------------

8,400 USWeb Corp....................................... $ 347
23,408 Viad Corp........................................ 651
--------
3,558
--------
TOTAL CONSUMER DISCRETIONARY............................... 14,069
--------
CONSUMER STAPLES (2.9%)
FOODS (2.9%)
23,168 Tootsie Roll Industries, Inc..................... 1,067
--------
FINANCIAL SERVICES (14.5%)
DIVERSIFIED FINANCIAL SERVICES (3.0%)
3,600 BISYS Group, Inc................................. 202
23,321 Mutual Risk Management Ltd....................... 892
--------
1,094
--------
FINANCIAL MISCELLANEOUS (0.8%)
41,068 Indigo Aviation AB ADR........................... 298
--------
INSURANCE: MULTI-LINE (7.6%)
30,796 American Bankers Insurance Group, Inc............ 1,602
34,784 Reinsurance Group of America, Inc. (Non-
Voting)........................................ 1,178
--------
2,780
--------
INVESTMENT MANAGEMENT COMPANIES (2.7%)
31,792 PIMCO Advisors Holdings L.P...................... 999
--------
SAVINGS & LOAN (0.4%)
1,900 TeleBanc Financial Corp.......................... 152
--------
TOTAL FINANCIAL SERVICES................................... 5,323
--------
HEALTH CARE (1.1%)
DRUGS & PHARMACEUTICALS (0.3%)
4,082 Medicis Pharmaceutical, Class A.................. 122
--------
MEDICAL & DENTAL INSTRUMENTS & SUPPLIES (0.8%)
4,400 Novoste Corp..................................... 106
4,800 Xomed Surgical Products, Inc..................... 188
--------
294
--------
TOTAL HEALTH CARE.......................................... 416
--------
MATERIALS & PROCESSING (0.6%)
ENGINEERING & CONTRACTING SERVICES (0.6%)
4,400 Metromedia Fiber Network, Inc., Class A.......... 228
--------
PRODUCER DURABLES (4.5%)
ELECTRONICS: INSTRUMENTS GAUGES & METERS (2.1%)
20,768 Dionex Corp...................................... 784
--------
MACHINERY: INDUSTRIAL/SPECIALTY (0.8%)
7,600 Veeco Instruments, Inc........................... 281
--------
OFFICE FURNITURE & BUSINESS EQUIPMENT (0.3%)
4,300 Knoll, Inc....................................... 106
--------
PRODUCTION TECHNOLOGY EQUIPMENT (1.3%)
4,300 Uniphase Corp.................................... 495
--------
TOTAL PRODUCER DURABLES.................................... 1,666
--------

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

EMERGING GROWTH PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)
-----------------------------------------------------------------------

TECHNOLOGY (24.2%)
COMMUNICATIONS TECHNOLOGY (11.6%)
19,000 Advanced Fibre Communications, Inc............... $ 182
51,140 American Tower Corp., Class A.................... 1,253
9,700 Cellular Communications of Puerto Rico........... 262
10,400 CIENA Corp....................................... 234
5,700 CoreComm Ltd..................................... 209
20,400 Crown Castle International Corp.................. 367
4,800 Harmonic Lightwaves Inc.......................... 133
2,700 International Network Services................... 189
8,400 L-3 Communications Corp.......................... 389
3,400 Leap Wireless International, Inc................. 43
7,800 Level One Communications, Inc.................... 379
4,500 Proxim, Inc...................................... 129
4,200 RF Micro Devices, Inc............................ 402
10,400 Tekelec, Inc..................................... 76
600 Teligent, Inc. Class A........................... 25
--------
4,272
--------
COMPUTER SERVICES SOFTWARE & SYSTEMS (6.7%)
200 Autobytel.com, Inc............................... 8
11,600 Citrix Systems, Inc.............................. 442
2,400 Concentric Network Corp.......................... 179
1,400 Exodus Communications, Inc....................... 188
8,200 J.D. Edwards & Co................................ 98
9,100 Micromuse, Inc................................... 419
10,700 National Computer Systems, Inc................... 262
3,000 New Era of Networks, Inc......................... 203
300 OneMain.com, Inc................................. 11
3,100 PSInet, Inc...................................... 132
27,700 Software AG Systems, Inc......................... 232
100 Valley Media, Inc................................ 2
11,400 Vantive Corp..................................... 138
3,500 Verio Inc........................................ 162
--------
2,476
--------
COMPUTER TECHNOLOGY (3.3%)
700 At Home Corp., Series A.......................... 110
8,200 FORE Systems, Inc................................ 155
1,900 Qlogic Corp...................................... 128
10,300 SanDisk Corp..................................... 273
9,000 Transwitch Corp.................................. 407
7,200 Western Digital Corp............................. 57
3,500 Xircom, Inc...................................... 88
--------
1,218
--------
ELECTRONICS: SEMI-CONDUCTORS/COMPONENTS (2.6%)
10,100 Conexant Systems Inc............................. 280
4,500 Micrel, Inc...................................... 225
7,800 Powerwave Technologies, Inc...................... 221
2,300 SDL Inc.......................................... 209
--------
935
--------
TOTAL TECHNOLOGY........................................... 8,901
--------

VALUE
SHARES (000)

-----------------------------------------------------------------------

UTILITIES (10.4%)
UTILITIES: ELECTRICAL (4.3%)
21,668 Montana Power Co................................. $ 1,594
--------
UTILITIES: TELECOMMUNICATIONS (6.1%)
36,232 Associated Group, Inc., Class B.................. 1,757
3,400 NTL, Inc......................................... 277
11,300 Rogers Cantel Mobile Communications Inc.......... 204
--------
2,238
--------
TOTAL UTILITIES............................................ 3,832
--------
TOTAL COMMON STOCKS (Cost $29,413)........................... 35,820
--------

[Download Table]

FACE
AMOUNT
(000)

--------

SHORT-TERM INVESTMENT (4.2%)
REPURCHASE AGREEMENT (4.2%)
$ 1,528 Chase Securities, Inc. 4.65%, dated 3/31/99, due
4/01/99, to be repurchased at $1,528,
collateralized by U.S. Treasury Bonds, 8.00%,
due 11/15/21, valued at $1,565 (Cost $1,528)... 1,528
--------
TOTAL INVESTMENTS (101.6%) (Cost $30,941).................... 37,348
--------

[Download Table]

OTHER ASSETS AND LIABILITIES (-1.6%)
Other Assets............................................... 410
Liabilities................................................ (994)
--------
(584)
--------
NET ASSETS (100%)............................................ $ 36,764
--------
--------

[Download Table]

CLASS A:
--------------------------------------------------------------
NET ASSETS.................................................... $35,495
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 4,013,402 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $8.84
---------
---------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $1,269
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 146,073 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $8.69
---------
---------

------------------------------------------------------------

ADR -- American Depositary Receipt

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--------------------------------------------------------------------------------

LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
EQUITY GROWTH PORTFOLIO

The Equity Growth Portfolio employs a growth-oriented investment strategy
seeking long-term capital appreciation. The Portfolio seeks to accomplish its
objective by investing primarily in equities of medium and large capitalization
companies exhibiting strong earnings growth.

For the three months ended March 31, 1999, the Portfolio had a total return of
7.35% for the Class A shares and 7.22% for the Class B shares compared to a
total return of 4.98% for the S&P 500 Index (the "Index"). For the one-year
period ended March 31, 1999, the Portfolio had a total return of 9.44% for the
Class A shares and 9.20% for the Class B shares compared to 18.45% for the
Index. For the five-year period ended March 31, 1999, the average annual total
return for Class A shares was 27.25% compared to 26.24% for the Index. From
inception on April 2, 1991 through March 31, 1999, the average annual total
return for Class A shares was 19.48% compared to 19.21% for the Index. From
inception on January 2, 1996 through March 31, 1999 the average annual total
return of Class B shares was 26.95% compared to 27.45% for the Index.

PERFORMANCE COMPARED TO THE S&P 500 INDEX(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
---------------------------------------------------
AVERAGE AVERAGE
ONE ANNUAL FIVE ANNUAL SINCE
YTD YEAR YEARS INCEPTION
---------- ---------- ------------- ------------

PORTFOLIO -- CLASS A... 7.35% 9.44% 27.25% 19.48%
PORTFOLIO -- CLASS B... 7.22 9.20 N/A 26.95
INDEX -- CLASS A....... 4.98 18.45 26.24 19.21
INDEX -- CLASS B....... 4.98 18.45 N/A 27.45

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE PERFORMANCE RESULTS PROVIDED ARE
FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF
THE PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.

We are very encouraged by the strong first quarter return. Outperformance was
driven by United Technologies (our largest position at the beginning of the year
-- and up 26.7% in the first quarter) as well as America Online, Microsoft and
Clear Channel Communications. The largest detractors to performance came from
our tobacco-related holdings -- Loews Corp and Philip Morris, which have both
been reduced in the Portfolio.

We continue to have confidence in the strength of large capitalization growth
stocks for the balance of 1999. Notwithstanding higher oil prices, inflation
remains in check. While gross domestic product growth has been somewhat stronger
than expected, concerns about emerging markets, parts of Europe and certain
cyclical components of the U.S. economy should keep interest rates reasonable.
The weighted average market capitalization of the Portfolio is now approximately
$100 billion, in line with the Index weighted average market capitalization of
approximately $102 billion. The Portfolio has an estimated five-year earnings
growth rate of 19%, above that of the Indexes 15.9% expected growth rate (per
Factset).

Although the focus of our work is company-oriented, fundamental research, our
convictions at the security level may result in sector over- or under-weights.
Consequently, in the first quarter, as a result of our holdings in Tyco
International, United Technologies and General Electric the Portfolio was
overweight in capital goods.

Tyco (our largest holding) closed on its AMP acquisition April 2. This should be
a materially additive acquisition and a platform from which the company can make
additional accretive acquisitions. The integration of U.S. Surgical is ahead of
plan. We expect a combination of organic growth and strategic actions (further
acquisitions as well as selective divestitures) to lead to significant earnings
growth.

United Technologies was one of the strongest contributors to outperformance in
the first quarter. Management has now demonstrated an ability to consistently
increase quarterly and annual earnings per share at 15% or more. Earnings
quality is high, cash flow is strong and acquisitions are now a focal point.
With its acquisition of Sundstrand, the company has demonstrated an ability to
make acquisitions that are both strategically appropriate and financially sound.
Even with the stock's strong performance in 1998 (up almost 50%) and so far in
1999, we continue to believe the stock remains attractive, selling at about 19
times year 2000 estimated earnings per share.

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
EQUITY GROWTH PORTFOLIO (CONT.)

Consistency reigns supreme at General Electric. Management focus on being number
one or two, Six Sigma impact on operating margin advances and a learning culture
combine to lead to strong top line and bottom line growth. In addition, the
company is selectively making acquisitions in Asia to take advantage of rock
bottom prices. We believe this will be one of the next areas of value creation
and will be as successful as the company's previous purchase of real estate
properties at depressed prices following the Savings and Loan debacle and the
opportunistic European acquisitions of the last several years.

Technology now represents over 20% of the Portfolio. Positions initiated in the
quarter include Applied Materials, Uniphase, American Tower, Texas Instruments,
At Home, Sun Microsystems and Quantum. We eliminated Compaq Computer and Dell as
concerns about personal computer spending caused us to move to the sidelines.
One of our largest technology holdings is Microsoft, the worldwide leader in
software for personal computers; Microsoft is a "classic" growth story,
leveraging its dominant market position to capitalize on the dynamic growth in
the technology sector. We added to the stock at a suppressed level earlier in
the year as it came under pressure due to fears of an antitrust settlement.

We continue to search for ways to participate in the Internet phenomena. While
we believe this revolution is very real (traffic on the Internet doubles every
100 days), we remain concerned about some of the valuations of "pure play"
Internet stocks and prefer to play this growth through more traditional
holdings. With the exception of a 1.8% position in America Online and a farm
team position in At Home (0.4%), we have no pure Internet plays. However, we
have significant holdings in companies that will provide the infrastructure
and/or content for the Internet. Our largest holdings in this space include
Cisco, MCI Worldcom, AT&T, Time Warner, Comcast Cable, Clear Channel
Communications and Liberty Media. We also have farm team holdings in Montana
Power (a utility with a telecommunications business providing a data backbone),
Nielsen Media (which just launched an Internet capability), Disney, Chancellor
Media and three satellite companies (Hughes Electronics, Loral and Echostar). In
total, we have about 20% invested in the above telecommunications, technology
and content stocks that are exposed to the Internet.

Merck and Pfizer remain our largest pharmaceutical holdings. We further
increased our health care exposure in the first quarter, initiating positions in
Warner Lambert, Schering-Plough, Bristol Myers, American Home Products, and
Pharmacia & Upjohn, and adding to positions in Amgen, Pfizer, and Bausch & Lomb.
We eliminated our position in Genzyme, and reduced our holding in Eli Lilly. The
drug stocks underperformed the market in the first quarter as investor attention
returned to more economically sensitive names. We believe the group's
fundamentals remain intact, and potential Medicare legislation now looks likely
to be delayed until 2001.

We have been disappointed in our Loews holding and have reduced it from about 5%
at the beginning of the quarter to about 1.5%. While the company is repurchasing
stock, its CNA Insurance and Diamond Offshore holdings have been experiencing
downward earnings revisions and negative news on the tobacco litigation front
has impaired the tobacco division unit.

Philip W. Friedman
PORTFOLIO MANAGER

Margaret K. Johnson
PORTFOLIO MANAGER

William S. Auslander
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

EQUITY GROWTH PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)

------------------------------------------------------------------------

COMMON STOCKS (97.3%)
CAPITAL GOODS (20.5%)
AEROSPACE/DEFENSE (1.6%)
345,700 Gulfstream Aerospace Corp........................ $ 14,995
---------
ELECTRICAL EQUIPMENT (3.6%)
299,000 General Electric Co.............................. 33,077
---------
MANUFACTURING (DIVERSIFIED) (13.0%)
220,500 Textron, Inc..................................... 17,061
741,100 Tyco International Ltd........................... 53,174
380,700 United Technologies Corp......................... 51,561
---------
121,796
---------
OFFICE EQUIPMENT & SUPPLIES (2.3%)
336,700 Pitney Bowes, Inc................................ 21,464
---------
TOTAL CAPITAL GOODS........................................ 191,332
---------
COMMUNICATION SERVICES (6.5%)
TELECOMMUNICATIONS (LONG DISTANCE) (2.5%)
289,589 AT&T Corp........................................ 23,113
---------
TELEPHONE (4.0%)
162,200 Bell Atlantic Corp............................... 8,384
328,100 MCI Worldcom, Inc................................ 29,057
---------
37,441
---------
TOTAL COMMUNICATION SERVICES............................... 60,554
---------
CONSUMER CYCLICALS (12.3%)
LEISURE TIME PRODUCTS (0.1%)
12,700 Harley-Davidson, Inc............................. 730
---------
RETAIL (BUILDING SUPPLIES) (2.3%)
318,000 Home Depot, Inc.................................. 19,795
31,200 Lowe's Cos., Inc................................. 1,888
---------
21,683
---------
RETAIL (GENERAL MERCHANDISE) (3.3%)
160,300 Costco Cos., Inc................................. 14,677
179,000 Wal-Mart Stores, Inc............................. 16,502
---------
31,179
---------
RETAIL (SPECIALTY) (2.5%)
13,900 Abercrombie & Fitch Co., Class A................. 1,279
272,100 Gap, Inc......................................... 18,316
78,800 Intimate Brands, Inc............................. 3,792
---------
23,387
---------
RETAIL (SPECIALTY/APPAREL) (0.6%)
141,500 Office Depot, Inc................................ 5,209
---------
RETAILS (COMPUTERS & ELECTRONICS) (0.4%)
82,000 Best Buy Co., Inc................................ 4,264
---------
SERVICES (ADVERTISING/MARKETING) (0.8%)
88,500 Omnicom Group, Inc............................... 7,074
---------

VALUE
SHARES (000)

------------------------------------------------------------------------

SERVICES (COMMERCIAL & CONSUMER) (2.3%)
58 Berkshire Hathaway, Inc., Class A................ $ 4,141
4,469 Berkshire Hathaway, Inc., Class B................ 10,507
254,132 Nielsen Media Research, Inc...................... 6,274
---------
20,922
---------
TOTAL CONSUMER CYCLICALS................................... 114,448
---------
CONSUMER STAPLES (14.5%)
BEVERAGES (NON-ALCOHOLIC) (0.9%)
266,500 Coca Cola Enterprises, Inc....................... 8,062
---------
BROADCASTING (TV, RADIO, CABLE) (6.7%)
267,700 AT&T Corp., Liberty Media Group, Class A-
Common......................................... 14,088
125,700 Chancellor Media Corp............................ 5,924
453,100 Clear Channel Communications, Inc................ 30,386
128,100 Comcast Corp., Class A-Special................... 8,062
74,300 Comcast Corp., Class A-Common.................... 4,569
---------
63,029
---------
ENTERTAINMENT (2.2%)
145,600 The Walt Disney Co............................... 4,532
232,000 Time Warner, Inc................................. 16,486
---------
21,018
---------
FOODS (1.1%)
103,300 Keebler Foods Co................................. 3,770
100,600 Quaker Oats Co................................... 6,294
---------
10,064
---------
HOUSEHOLD PRODUCTS (NON-DURABLES) (1.1%)
8,500 Clorox Co........................................ 996
90,700 Procter & Gamble Co.............................. 8,883
---------
9,879
---------
RETAIL (DRUG STORES) (0.4%)
125,700 Walgreen Company................................. 3,551
---------
RETAIL (FOOD CHAINS) (0.6%)
115,100 Safeway Inc...................................... 5,906
---------
TOBACCO (1.5%)
398,200 Philip Morris Cos., Inc.......................... 14,012
---------
TOTAL CONSUMER STAPLES..................................... 135,521
---------
ENERGY (0.5%)
OIL (INTERNATIONAL INTEGRATED) (0.5%)
62,000 Exxon Corp....................................... 4,375
---------
FINANCIAL (6.5%)
BANKS (MAJOR REGIONAL) (0.9%)
243,200 Bank of New York Co., Inc........................ 8,740
---------
FINANCIAL (DIVERSIFIED) (2.3%)
92,900 American Express Co.............................. 10,916
158,050 Citigroup, Inc................................... 10,095
---------
21,011
---------

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

EQUITY GROWTH PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)
------------------------------------------------------------------------

FINANCIAL (CONT.)

[Download Table]

INSURANCE (LIFE & HEALTH) (0.5%)
132,850 Reinsurance Group of America, Inc., cumulative
non-voting..................................... $ 4,500
---------
INSURANCE (MULTI-LINE) (1.7%)
213,500 Loews Corp....................................... 15,933
---------
INSURANCE (PROPERTY-CASUALTY) (0.2%)
15,000 Progressive Corp................................. 2,153
---------
INVESTMENT BANKING & BROKERAGE (0.7%)
78,100 Merrill Lynch & Co............................... 6,907
---------
INVESTMENT MANAGEMENT (0.2%)
68,900 PIMCO Advisors Holdings L.P...................... 2,166
---------
TOTAL FINANCIAL............................................ 61,410
---------
HEALTH CARE (13.3%)
HEALTH CARE (DIVERSIFIED) (3.2%)
42,700 American Home Products Corp...................... 2,786
91,200 Bristol-Myers Squibb Co.......................... 5,865
81,800 Johnson & Johnson................................ 7,664
206,900 Warner Lambert Co................................ 13,694
---------
30,009
---------
HEALTH CARE (DRUGS-GENERIC & OTHERS) (1.9%)
238,000 Amgen, Inc....................................... 17,820
---------
HEALTH CARE (DRUGS-MAJOR PHARMS) (6.9%)
64,000 Eli Lilly & Co................................... 5,432
301,200 Merck & Co., Inc................................. 24,153
171,700 Pfizer, Inc...................................... 23,823
40,200 Pharmacia & Upjohn, Inc.......................... 2,508
157,200 Schering-Plough Corp............................. 8,695
---------
64,611
---------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) (1.3%)
175,800 Bausch & Lomb, Inc............................... 11,427
---------
TOTAL HEALTH CARE.......................................... 123,867
---------
TECHNOLOGY (22.9%)
COMMUNICATION EQUIPMENT (2.5%)
176,600 American Tower Corp., Class A.................... 4,327
12,000 EchoStar Communications Corp..................... 980
27,400 L-3 Communications Corp.......................... 1,267
50,900 Lucent Technologies, Inc......................... 5,484
151,600 Motorola, Inc.................................... 11,105
---------
23,163
---------
COMPUTERS (HARDWARE) (0.8%)
30,500 International Business Machines Corp............. 5,406
19,400 Sun Microsystems, Inc............................ 2,424
---------
7,830
---------

VALUE
SHARES (000)

------------------------------------------------------------------------

COMPUTERS (NETWORKING) (3.6%)
11,100 Ascend Communications, Inc....................... $ 929
16,200 At Home Corp., Series A.......................... 2,551
273,675 Cisco Systems, Inc............................... 29,985
---------
33,465
---------
COMPUTERS (PERIPHERALS) (0.5%)
16,800 EMC Corp......................................... 2,146
175,100 Quantum Corp..................................... 3,152
---------
5,298
---------
COMPUTERS (SOFTWARE & SERVICES) (7.5%)
126,900 America Online, Inc.............................. 18,527
6,400 Autobytel.com, Inc............................... 268
467,700 Microsoft Corp................................... 41,918
226,700 Novell, Inc...................................... 5,710
7,600 OneMain.com, Inc................................. 275
122,350 Oracle Corp...................................... 3,227
2,000 Valley Media, Inc................................ 46
10,500 Ziff-Davis, Inc.................................. 378
---------
70,349
---------
ELECTRONICS (DEFENSE) (3.1%)
168,700 General Motors Corp., Class H.................... 8,509
256,900 Litton Industries, Inc........................... 14,772
375,300 Loral Space & Communications..................... 5,418
---------
28,699
---------
ELECTRONICS (SEMICONDUCTORS) (3.4%)
235,800 Intel Corp....................................... 28,089
41,600 Texas Instruments, Inc........................... 4,129
---------
32,218
---------
EQUIPMENT (SEMICONDUCTORS) (1.5%)
131,300 Applied Materials, Inc........................... 8,100
46,300 Uniphase Corp.................................... 5,330
9,300 Veeco Instruments, Inc........................... 343
---------
13,773
---------
TOTAL TECHNOLOGY........................................... 214,795
---------
UTILITIES (0.3%)
ELECTRIC COMPANIES (0.3%)
43,000 Montana Power Co................................. 3,163
---------
TOTAL COMMON STOCKS (Cost $695,486).......................... 909,465
---------

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Equity Growth Portfolio

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

EQUITY GROWTH PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

FACE
AMOUNT VALUE
(000) (000)

----------------------------------------------------------------------

SHORT-TERM INVESTMENT (4.2%)
REPURCHASE AGREEMENT (4.2%)
$38,970 Chase Securities, Inc. 4.65%, dated 3/31/99, due
4/01/99, to be repurchased at $38,975,
collateralized by U.S. Treasury Notes, 4.50%,
due 1/31/01, valued at $39,267 (Cost
$38,970)....................................... $ 38,970
--------
TOTAL INVESTMENTS (101.5%) (Cost $734,456).................. 948,435
--------

[Download Table]

OTHER ASSETS AND LIABILITIES (-1.5%)
Other Assets.............................................. 30,635
Liabilities............................................... (44,402)
--------
(13,767)
--------
NET ASSETS (100%)........................................... $934,668
--------
--------

[Download Table]

------------------------------------------------------------------------
CLASS A:
--------------------------------------------------------------

NET ASSETS.................................................... $801,163
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 39,200,133 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $20.44
--------
--------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $133,505
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 6,561,031 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $20.35
--------
--------

--------------------------------------------------------------------------------
Equity Growth Portfolio

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Institutional Fund, Inc.
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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
TECHNOLOGY PORTFOLIO

The investment objective of the Technology Portfolio is to achieve long-term
capital appreciation by investing primarily in equity securities of companies
that the investment adviser expects to benefit from their involvement in
technology and technology-related industries. The focus of the Portfolio is to
identify significant long-term technology trends and to invest in those premier
companies we believe are positioned to materially gain from these trends. Stocks
selected for the Portfolio are also expected to meet comprehensive selection
criteria. The Portfolio may invest up to 35% of its total investments in
securities of foreign companies to participate sufficiently in the global
technology market.

PERFORMANCE COMPARED TO THE S&P 500 INDEX AND THE LIPPER SCIENCE AND TECHNOLOGY
FUNDS INDEX(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
--------------------------------------------
AVERAGE ANNUAL
YTD ONE YEAR SINCE INCEPTION
---------- ------------ ------------------

PORTFOLIO -- CLASS A.... 18.24% 57.07% 47.39%
PORTFOLIO -- CLASS B.... 18.14 56.63 47.03
S&P 500 INDEX........... 4.98 18.45 30.42
LIPPER SCIENCE AND
TECHNOLOGY FUNDS
INDEX.................. 11.61 42.67 29.88

1. The S&P 500 Index is a stock index comprised of 500 large-cap U.S. companies
with market capitalization of $1 billion or more. These 500 companies are a
representative sample of some 100 industries chosen mainly for market size,
liquidity and industry group representation. The Lipper Science and
Technology Funds Index is a composite index of mutual funds that invest at
least 65% of their assets in science and technology stocks.

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE PERFORMANCE RESULTS PROVIDED ARE
FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF
THE PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK
CONSIDERATIONS ASSOCIATED WITH INTERNATIONAL INVESTING.

For the three months ended March 31, 1999, the Portfolio had a total return of
18.24% for the Class A shares and 18.14% for the Class B shares compared to
4.98% for the S&P 500 Index and 11.61% for the Lipper Science and Technology
Funds Index. For the one-year period ended March 31, 1999, the Portfolio had a
total return of 57.07% for the Class A shares and 56.63% for the Class B shares
compared to 18.45% for the S&P 500 Index and 42.67% for the Lipper Science and
Technology Funds Index. From inception on September 16, 1996 through March 31,
1999, the average annual total return of Class A shares was 47.39% and 47.03%
for Class B shares compared to 30.42% for the S&P 500 Index and 29.88% for the
Lipper Science and Technology Funds Index.

The first quarter return was very strong. We were pleased with the Portfolio's
outperformance of the S&P 500 Index and Lipper Science and Technology Index as
we managed to create substantial relative and absolute gains.

The outperformance for the quarter was due to the Portfolio being overweight the
telecom, semiconductor and semi-cap equipment sectors, and underweight the
software sector. Our Internet names such as America Online and At Home exhibited
very strong performance as well.

During the quarter we dramatically reduced our exposure to the PC sector by
eliminating names such as Compaq, Dell, and IBM. We further increased our
positions in the semiconductor and semi-cap equipment areas by adding to
positions in Linear Technology, Maxim, Xilinx, and Applied Materials.

We believe fundamentals for technology continue to be favorable, especially in
broadband technology and Internet Protocol communications. The
telecommunications industry continues to see 25%-to-35% growth in the demand for
data services; Internet access (business and consumer) is growing exponentially
and the cable and long distance companies are in the middle of a multi-billion
dollar, multi-year broadband build out.

Even though there are some valid concerns over a potential slowdown in IT
spending due to Y2K related problems, we believe that companies will continue to
spend on these technologies in order to stay competitive, in both product and
service features and to decrease costs.

There are over 2,000 public technology companies and we strive to invest in the
best 100. Our goal remains the same; identify the premier sectors and companies
that present compelling investment opportunities and avoid the sectors and
companies with deteriorating fundamentals.

Alexander Umansky
PORTFOLIO MANAGER

Stephen C. Sexauer
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

TECHNOLOGY PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)

----------------------------------------------------------------------

COMMON STOCK (96.8%)
TECHNOLOGY (96.8%)
DATA COMMUNICATIONS (22.9%)
7,500 3Com Corp........................................ $ 175
6,800 Adaptec, Inc..................................... 156
15,800 ADC Telecommunications, Inc...................... 753
38,500 Advanced Fibre Communications, Inc............... 369
1,600 AirTouch Communications, Inc..................... 155
8,600 Alcatel Alsthom ADR.............................. 196
6,000 American Tower Corp., Class A.................... 147
5,900 Ascend Communications, Inc....................... 494
9,200 CIENA Corp....................................... 207
9,350 Cisco Systems, Inc............................... 1,024
7,600 Commscope, Inc................................... 159
4,500 General Instrument Corp.......................... 136
3,600 Harmonic Lightwaves, Inc......................... 99
3,200 JDS Fitel, Inc................................... 180
6,600 Metromedia Fiber Network, Inc., Class A.......... 342
11,600 Newbridge Networks Corp.......................... 360
1,700 Northern Telecom Ltd............................. 106
5,800 Powerwave Technologies, Inc...................... 165
3,800 Proxim, Inc...................................... 109
4,100 QUALCOMM, Inc.................................... 510
3,200 RF Micro Devices, Inc............................ 306
2,300 Scientific-Atlanta, Inc.......................... 63
1,650 Sprint PCS....................................... 73
7,900 Tekelec, Inc..................................... 58
6,800 TranSwitch Corp.................................. 308
--------
6,650
--------
DATA STORAGE & PROCESSING (5.2%)
4,200 EMC Corp......................................... 536
16,500 Quantum Corp..................................... 297
9,700 SanDisk Corp..................................... 257
12,300 Seagate Technology, Inc.......................... 364
8,400 Western Digital Corp............................. 67
--------
1,521
--------
ELECTRONIC EQUIPMENT (11.3%)
7,300 Best Buy Co., Inc................................ 380
1,200 Exodus Communications, Inc....................... 161
20,000 FORE Systems, Inc................................ 378
1,300 International Network Services................... 91
5,150 Level One Communications, Inc.................... 250
4,600 Micrel, Inc...................................... 230
2,800 Networks Associates, Inc......................... 86
400 Sanmina Corp..................................... 25
4,500 Tandy Corp....................................... 287
4,100 Tweeter Home Entertainment Group, Inc............ 132
8,500 Uniphase Corp.................................... 979
12,000 Universal Electronics, Inc....................... 150
400 Visual Networks, Inc............................. 15
3,600 Xylan Corp....................................... 133
--------
3,297
--------

VALUE
SHARES (000)

----------------------------------------------------------------------

INFORMATION PROCESSING (8.3%)
13,720 America Online, Inc.............................. $ 2,003
14,094 Cendant Corp..................................... 222
4,700 Electronics For Imaging, Inc..................... 183
--------
2,408
--------
MEDICAL TECHNOLOGY (0.6%)
6,900 Novoste Corp..................................... 166
--------
MICRO COMPUTER MFG (1.5%)
3,600 Sun Microsystems, Inc............................ 450
--------
MINI & MAINFRAME COMPUTER MFG (0.7%)
2,900 Hewlett Packard Co............................... 197
--------
SEMICONDUCTOR CAPITAL EQUIPMENT MFG (3.4%)
13,500 Applied Materials, Inc........................... 833
3,000 KLA Tencor Corp.................................. 145
--------
978
--------
SEMICONDUCTOR MFG (11.4%)
3,300 Altera Corp...................................... 196
4,800 Analog Devices, Inc.............................. 143
5,000 ASM Lithography Holding N.V...................... 225
400 Broadcom Corp., Class A.......................... 25
7,700 Conexant Systems Inc............................. 213
1,000 Dupont Photomasks, Inc........................... 40
4,800 Intel Corp....................................... 572
4,300 Linear Technology Corp........................... 220
5,700 Maxim Integrated Products, Inc................... 308
13,900 Micron Electronics, Inc.......................... 163
2,400 Micron Technology, Inc........................... 116
5,700 Motorola, Inc.................................... 418
2,700 Texas Instruments, Inc........................... 268
10,100 Xilinx, Inc...................................... 410
--------
3,317
--------
SOFTWARE PRODUCTS (17.7%)
2,600 At Home Corp., Series A.......................... 409
200 Autobytel.com, Inc............................... 8
1,000 BEA Systems, Inc................................. 16
6,800 BMC Software, Inc................................ 252
18,400 Citrix Systems, Inc.............................. 701
14,100 Compuware Corp................................... 337
3,700 Concentric Network Corp.......................... 277
7,500 Hyperion Solutions Corp.......................... 109
3,100 Intuit, Inc...................................... 315
12,500 J.D. Edwards & Co................................ 149
1,800 Lycos, Inc....................................... 155
100 MarketWatch.com, Inc............................. 7
6,100 Micromuse, Inc................................... 281
4,000 Microsoft Corp................................... 358
27,400 Novell, Inc...................................... 690
200 OneMain.com, Inc................................. 7
10,000 Parametric Technology Corp....................... 198
3,700 Progress Software Corp........................... 126

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Institutional Fund, Inc.
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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

TECHNOLOGY PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)
----------------------------------------------------------------------

TECHNOLOGY (CONT.)
SOFTWARE PRODUCTS (CONT.)

[Download Table]

2,200 PSInet, Inc...................................... $ 94
43,900 Software AG Systems, Inc......................... 368
11,000 Vantive Corp..................................... 133
2,900 Verio Inc........................................ 134
300 Ziff Davis, Inc.................................. 11
--------
5,135
--------
TEST, ANALYSIS & INSTRUMENTATION EQUIPMENT (1.7%)
2,000 Teradyne, Inc.................................... 109
10,500 Veeco Instruments, Inc........................... 388
--------
497
--------
OTHER (12.1%)
3,000 Genesystems Telecommunications Labs, Inc......... 45
3,900 Jones Pharma, Inc................................ 136
6,400 MCI Worldcom, Inc................................ 567
5,700 Medicis Pharmaceutical, Class A.................. 171
2,100 Montana Power Co................................. 154
18,900 Nielsen Media Research, Inc...................... 467
6,600 SABRE Group Holdings, Inc........................ 299
3,200 Sprint Corp. (Fon Group)......................... 314
5,500 SunGard Data Systems, Inc........................ 220
3,300 TeleBanc Financial Corp.......................... 263
8,200 TV Guide, Inc.................................... 302
7,900 USWeb Corp....................................... 326
100 Valley Media, Inc................................ 2
11,000 Whittman-Hart, Inc............................... 237
--------
3,503
--------
TOTAL TECHNOLOGY.......................................... 28,119
--------
TOTAL COMMON STOCKS (Cost $22,421).......................... 28,119
--------

[Download Table]

VALUE
(000)

-------------------------------------------------
OTHER ASSETS AND LIABILITIES (3.2%)
Other Assets......................... $ 1,557
Liabilities.......................... (629)
--------
928
--------
NET ASSETS (100%)...................... $ 29,047
--------
--------

[Download Table]

CLASS A:
--------------------------------------------------------------
NET ASSETS.................................................... $27,886
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 1,311,679 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $21.26
---------
---------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $1,161
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 54,806 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $21.17
---------
---------

------------------------------------------------------------

ADR -- American Depositary Receipt

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
U.S. EQUITY PLUS PORTFOLIO

The U.S. Equity Plus Portfolio seeks long-term capital appreciation by investing
primarily in equity securities of issuers in the S&P 500 Index. Equity
securities include common and preferred stocks, convertible securities, and
rights and warrants to purchase common stocks.

The Portfolio investment process utilizes systematic quantitative and
qualitative inputs. The quantitative inputs include several proprietary
valuation and momentum models, as well as a market conditions model. The
qualitative inputs include stock ratings from Morgan Stanley Dean Witter's
Equity Research analysts. These inputs are combined in a systematic way to
produce an attractiveness measure for every stock in the Portfolio investment
universe. The Portfolio is designed to have consistently higher returns than the
S&P 500 with a volatility of portfolio return that is approximately equal to
that of the S&P 500. This is sought by using a multi-factor risk model for
building the Portfolio and by maintaining sector neutrality with respect to the
S&P 500 Index. The active exposure to any single company is also kept to a
modest level.

For the three months ended March 31, 1999, the Portfolio had a total return of
4.10% for the Class A shares and 4.11% for the Class B shares compared to 4.98%
for the S&P 500 Index (the "Index"). For the one-year period ended March 31,
1999, the Portfolio

PERFORMANCE COMPARED TO THE S&P 500 INDEX(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
------------------------------------------
ONE AVERAGE ANNUAL
YTD YEAR SINCE INCEPTION
---------- ---------- ------------------

PORTFOLIO -- CLASS A(3)....... 4.10% 12.58% 17.71%
PORTFOLIO -- CLASS B(3)....... 4.11 12.30 17.53
INDEX......................... 4.98 18.45 21.47

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

3. The Portfolio commenced operations on July 31, 1997.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE PERFORMANCE RESULTS PROVIDED ARE
FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF
THE PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.

had a total return of 12.58% for the Class A shares and 12.30% for the Class B
shares compared to 18.45% for the Index. For the period from inception on July
31, 1997 through March 31, 1999, the Portfolio had an average annual total
return of 17.71% for Class A shares and 17.53% for the Class B shares compared
to 21.47% for the Index.

The Portfolio is sector neutral to the S&P 500, so sector weights had no impact
on incremental performance. The performance of a sector in the Portfolio is
completely driven by stock selection (and relative weights) within the sector.
Based on stock selection, our best performing sectors were technology,
telephone, capital goods, consumer services, and basic industries. Our worst
performing sectors were insurance, financial services, energy, health, and
banking.

Virtually all of the differential performance between Portfolio and the Index
came from active stock selection. The five largest contributions to our
performance relative to the Index came from the following stocks: 1) Amgen, a
large biomedical company, climbed 43% during the quarter. The company is close
to winning approval for promising new products for cancer and anemia. 2)
Anheuser Busch, a brewery company, returned 16%, as its dominant market share
and premium pricing helped it to maintain a strong momentum. 3) Bellsouth, a
local telephone company, fell 19%, as expectations that accelerated investments
on Internet and other new services would depress profits for the quarter. 4) SBC
Communications, an integrated telephone company, fell 11%, as the Supreme Court
upheld rules designed to make it easier for competitors to enter the local phone
market. 5) United Technologies, an aerospace and defense equipment company,
advanced 25% on good news of increasing margins in North America and Europe and
optimism about the sale of its auto parts business.

On the other side, the five most negative contributions to our performance
relative to the Index came from the following stocks: 1) Philip Morris, which
produces tobacco products, plunged 34%, amid a series of legislative losses and
increasing legal challenges. 2) Countrywide, which provides mortgage loans and
other banking services, dropped 25%, over concern that a recent rise in interest
rates would choke off their mortgage loan business as consumers shy away from
refinancing their loans. 3) Bank of New York, a money center bank, fell

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
U.S. EQUITY PLUS PORTFOLIO (CONT.)

10%, as analysts voiced doubts about future revenues and earnings growth. 4)
Morgan Stanley Dean Witter, a diversified financial services firm, surged 41%,
as the firm reported record earnings, mostly from trading revenues (we are not
allowed to own MSDW shares). 5) Bankamerica, a money center bank, rose 18%, on
optimism that the company would boost future earnings by concentrating on core
products and reducing its international exposure.

After a choppy start in January and February, U.S. equities continued their
climb in March of 1999 and the Index advanced 4.98% during the quarter. Many of
the themes that began in 1998 continued. Large cap growth stocks outperformed
their value counterparts by 4%, as measured by S&P 500/Barra indices and small
stocks, as measured by the Russell 2000, underperformed large cap stocks by more
than 10%. For the most part, the marcoeconomic landscape for equities held
stable. Consumer confidence climbed back to the high levels seen in the second
quarter of 1998 and the economy continued on a path of non-inflationary growth.
The good news was tempered, however, with a small increase in interest rates and
weakening job creation in March. Looking forward, we maintain a cautious stance
about U.S. equity markets. Market breadth continued to deteriorate and the Fed
is probably no longer in an easing mode. The best hope for equities is corporate
earnings. Earnings have shown some signs of life after a fall in the second part
of 1998. Moreover, the global economic atmosphere may be warming. This can only
be supportive for U.S. equities.

Eugene Flood, Jr.
PORTFOLIO MANAGER

Narayan Ramachandran
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

U.S. EQUITY PLUS PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)

----------------------------------------------------------------------

COMMON STOCK (100.1%)
BASIC MATERIALS (3.0%)
CHEMICALS (1.4%)
2,100 Dow Chemical Co.................................. $ 196
1,800 E.I. du Pont de Nemours & Co..................... 104
1,200 Rohm & Haas Co................................... 40
--------
340
--------
CHEMICALS (DIVERSIFIED) (0.4%)
2,400 Goodrich (BF) Co................................. 82
500 Monsanto Co...................................... 23
--------
105
--------
GOLD & PRECIOUS METALS MINING (0.4%)
2,100 Barrick Gold Corp................................ 36
3,700 Newmont Mining Corp.............................. 65
--------
101
--------
IRON & STEEL (0.1%)
3,000 Bethlehem Steel Corp............................. 25
--------
PAPER & FOREST (0.7%)
1,700 Georgia Pacific Group............................ 126
1,000 Louisiana-Pacific Corp........................... 19
600 Mead Corp........................................ 19
400 Weyerhauser Co................................... 22
--------
186
--------
TOTAL BASIC MATERIALS..................................... 757
--------
CAPITAL GOODS (10.4%)
AEROSPACE & DEFENSE (0.1%)
600 Boeing Co........................................ 20
--------
ELECTRICAL EQUIPMENT (4.8%)
4,400 Bank One Corp.................................... 242
1,600 Emerson Electric Co.............................. 85
7,200 General Electric Co.............................. 797
800 Raychem Corp..................................... 18
300 Solectron Corp................................... 15
300 Thomas & Betts Corp.............................. 11
1,800 Wells Fargo & Co................................. 63
--------
1,231
--------
ENGINEERING & CONSTRUCTION (0.7%)
6,600 McDermot International, Inc...................... 167
--------
MACHINERY (DIVERSIFIED) (0.3%)
2,600 Case Corp........................................ 66
--------
MANUFACTURING (DIVERSIFIED) (3.5%)
4,600 Allied Signal, Inc............................... 226
1,500 Corning, Inc..................................... 90
1,900 Illinois Tool Works Inc.......................... 118
1,300 Johnson Controls, Inc............................ 81

VALUE
SHARES (000)

----------------------------------------------------------------------

2,100 Tyco International Ltd........................... $ 151
1,700 United Technologies Corp......................... 230
--------
896
--------
MANUFACTURING (SPECIALIZED) (0.7%)
900 Avery Dennison Corp.............................. 52
10,200 Fruit of the Loom, Inc........................... 106
500 Millipore, Corp.................................. 12
--------
170
--------
OFFICE EQUIPMENT & SUPPLIES (0.2%)
1,100 Xerox Corp....................................... 59
--------
TRUCKS & PARTS (0.1%)
200 Cummins Engine Co., Inc.......................... 7
200 Navistar International Corp...................... 8
--------
15
--------
WASTE MANAGEMENT (0.0%)
300 Waste Management, Inc............................ 13
--------
TOTAL CAPITAL GOODS....................................... 2,637
--------
COMMUNICATION SERVICES (8.9%)
TELECOMMUNICATIONS (CELLULAR/WIRELESS) (0.5%)
1,200 AirTouch Communications, Inc..................... 116
--------
TELECOMMUNICATIONS (LONG DISTANCE) (2.8%)
4,730 AT&T Corp........................................ 377
3,300 Sprint Corp...................................... 324
--------
701
--------
TELEPHONE (5.6%)
4,600 Alltel Corp...................................... 287
7,500 Bell Atlantic Corp............................... 388
1,400 Bellsouth Corp................................... 56
1,200 Frontier Corp.................................... 62
3,600 GTE Corp......................................... 218
4,800 MCI Worldcom, Inc................................ 425
--------
1,436
--------
TOTAL COMMUNICATION SERVICES.............................. 2,253
--------
CONSUMER CYCLICALS (10.1%)
AUTOMOBILES (0.9%)
2,300 Ford Motor Co.................................... 130
700 General Motors Corp.............................. 61
--------
191
--------
BUILDING MATERIALS (0.5%)
600 Armstrong World Industries, Inc.................. 27
3,100 Owens Corning.................................... 99
--------
126
--------
CONSUMER (JEWELRY, NOVELTIES & GIFTS) (0.3%)
1,700 American Greetings Corp., Class A................ 43
1,300 Jostens, Inc..................................... 28
--------
71
--------

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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U.S. EQUITY PLUS PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)
----------------------------------------------------------------------

CONSUMER CYCLICALS (CONT.)

[Download Table]

HARDWARE & TOOLS (0.3%)
1,000 Black & Decker Corp.............................. $ 56
1,800 Milacron, Inc.................................... 28
--------
84
--------
HOMEBUILDING (0.2%)
1,800 Kaufman & Broad Home Corp........................ 40
1,000 Pulte Corp....................................... 21
--------
61
--------
HOUSEHOLD FURNISHINGS & APPLIANCES (0.1%)
300 Maytag Corp...................................... 18
--------
LEISURE TIME PRODUCTS (1.0%)
3,300 Brunswick Corp................................... 63
2,400 Hasbro, Inc...................................... 69
5,300 Mattel, Inc...................................... 132
--------
264
--------
LODGING -- HOTELS (0.1%)
300 Carnival Corp., Class A.......................... 15
--------
PUBLISHING (0.0%)
200 McGraw-Hill Cos., Inc............................ 11
--------
PUBLISHING (NEWSPAPERS) (0.2%)
600 Gannett Co., Inc................................. 38
--------
RETAIL (BUILDING SUPPLIES) (1.2%)
4,100 Home Depot, Inc.................................. 255
1,000 Lowe's Cos., Inc................................. 61
--------
316
--------
RETAIL (DEPARTMENT STORES) (0.3%)
300 Kohl's Corp...................................... 21
1,650 May Department Stores, Co........................ 65
--------
86
--------
RETAIL (GENERAL MERCHANDISE) (3.8%)
300 Costco Companies Inc............................. 27
3,400 Dayton Hudson Corp............................... 227
1,000 Kmart Corp....................................... 17
1,600 Sears Roebuck & Co............................... 72
6,800 Wal-Mart Stores, Inc............................. 627
--------
970
--------
RETAIL (SPECIALTY) (0.2%)
300 Gap, Inc......................................... 20
600 Staples Inc...................................... 20
300 TJX Cos., Inc.................................... 10
--------
50
--------
SERVICES (ADVERTISING/MARKETING) (0.6%)
1,800 Omnicom Group, Inc............................... 144
--------

VALUE
SHARES (000)

----------------------------------------------------------------------

SERVICES (COMMERCIAL & CONSUMER) (0.1%)
800 Cendant Corp..................................... $ 12
300 Dun & Brandstreet Corp........................... 11
200 McKesson HBOC, Inc............................... 13
--------
36
--------
TEXTILES (APPAREL) (0.3%)
2,400 Liz Claiborne, Inc............................... 78
--------
TOTAL CONSUMER CYCLICALS.................................. 2,559
--------
CONSUMER STAPLES (12.5%)
BEVERAGES (ALCOHOLIC) (2.1%)
6,600 Anheuser Busch Cos., Inc......................... 503
700 Coors (Adolph), Inc., Class B.................... 38
--------
541
--------
BEVERAGES (NON-ALCOHOLIC) (0.6%)
300 Coca Cola Enterprises, Inc....................... 9
3,900 PepsiCo, Inc..................................... 153
--------
162
--------
BROADCASTING (TV, RADIO, CABLE) (0.7%)
1,100 CBS Corp......................................... 45
700 Comcast Corp., Class A........................... 44
800 MediaOne Group, Inc.............................. 51
--------
140
--------
DISTRIBUTORS (FOOD & HEALTH) (0.2%)
2,600 SUPERVALU, Inc................................... 54
--------
ENTERTAINMENT (1.3%)
3,500 King World Productions, Inc...................... 107
100 The Walt Disney Co............................... 3
2,900 Time Warner, Inc................................. 206
300 Viacom, Inc., Class B............................ 25
--------
341
--------
FOODS (0.8%)
500 Quaker Oats Co................................... 31
600 Ralston-Ralston Purina Group..................... 16
6,500 Sara Lee Corp.................................... 161
--------
208
--------
HOUSEHOLD PRODUCTS (NON-DURABLES) (2.3%)
600 Clorox Co........................................ 70
2,200 Kimberly-Clark Corp.............................. 106
4,200 Procter & Gamble Co.............................. 411
--------
587
--------
HOUSEWARES (0.1%)
400 Fortune Brands, Inc.............................. 15
--------

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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U.S. EQUITY PLUS PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)
----------------------------------------------------------------------

CONSUMER STAPLES (CONT.)

[Download Table]

PERSONAL CARE (0.5%)
1,200 Alberto-Culver Co., Class B...................... $ 28
400 Avon Products, Inc............................... 19
1,500 Gillette Co...................................... 89
--------
136
--------
RESTAURANTS (1.2%)
6,300 McDonald's Corp.................................. 286
1,000 Wendy's International, Inc....................... 28
--------
314
--------
RETAIL (DRUG STORES) (0.3%)
500 Rite Aid Corp.................................... 12
1,800 Walgreen Co...................................... 51
--------
63
--------
RETAIL (FOOD CHAINS) (1.2%)
700 Albertson's, Inc................................. 38
1,900 Kroger Co........................................ 114
3,000 Safeway Inc...................................... 154
--------
306
--------
SPECIALTY PRINTING (0.2%)
1,700 Deluxe Corp...................................... 50
--------
TOBACCO (1.0%)
6,400 Philip Morris Cos., Inc.......................... 225
1,400 RJR Nabisco Holdings Corp........................ 35
--------
260
--------
TOTAL CONSUMER STAPLES.................................... 3,177
--------
ENERGY (4.5%)
OIL & GAS (DRILLING) (0.6%)
500 Halliburton Co................................... 19
2,400 Schlumberger Ltd................................. 145
--------
164
--------
OIL & GAS (EXPLORATION & DRILLING) (0.4%)
1,000 Burlington Resources, Inc........................ 40
4,900 Union Pacific Resources Group Inc................ 58
--------
98
--------
OIL (DOMESTIC INTEGRATED) (0.4%)
3,200 USX-Marathon Group............................... 88
--------
OIL (INTERNATIONAL INTEGRATED) (3.1%)
5,800 Exxon Corp....................................... 409
3,700 Mobil Corp....................................... 326
1,000 Royal Dutch Petroleum Co......................... 52
--------
787
--------
TOTAL ENERGY.............................................. 1,137
--------

VALUE
SHARES (000)

----------------------------------------------------------------------

FINANCIAL (15.0%)
BANKS (MAJOR REGIONAL) (2.6%)
6,600 Bank of New York Co., Inc........................ $ 237
1,300 BankBoston Corp.................................. 56
2,300 Comerica, Inc.................................... 144
2,300 Fleet Financial Group, Inc....................... 87
1,500 KeyCorp.......................................... 46
600 Mellon Bank Corp................................. 42
600 SunTrust Banks, Inc.............................. 37
200 Wachovia Corp.................................... 16
--------
665
--------
BANKS (MONEY CENTER) (1.7%)
3,100 Chase Manhattan Corp............................. 252
3,500 First Union Corp................................. 187
--------
439
--------
BANKS (REGIONAL) (0.2%)
500 Firstar Corp..................................... 45
--------
CONSUMER FINANCE (0.5%)
400 Associates First Capital Corp., Class A.......... 18
1,800 Countrywide Credit Industries, Inc............... 67
1,000 Household International, Inc..................... 46
--------
131
--------
FINANCIAL (DIVERSIFIED) (4.8%)
1,700 American Express Co.............................. 200
8,800 Citigroup, Inc................................... 562
3,100 Federal Home Loan Mortgage Corp.................. 177
3,900 Federal National Mortgage Assoc.................. 270
--------
1,209
--------
INSURANCE (BROKERS) (0.5%)
1,800 Marsh & McLennan Cos............................. 133
--------
INSURANCE (LIFE & HEALTH) (0.8%)
3,200 Conseco, Inc..................................... 99
1,100 Provident Cos., Inc.............................. 38
1,900 Torchmark Corp................................... 60
--------
197
--------
INSURANCE (MULTI-LINE) (2.2%)
3,500 American International Group, Inc................ 422
2,600 Hartford Financial Service Group, Inc............ 148
--------
570
--------
INSURANCE (PROPERTY -- CASUALTY) (0.7%)
2,600 Allstate Corp.................................... 96
1,400 Chubb Corp....................................... 82
--------
178
--------

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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U.S. EQUITY PLUS PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)
----------------------------------------------------------------------

FINANCIAL (CONT.)

[Download Table]

INVESTMENT BANKING & BROKERAGE (0.8%)
1,900 Bear Stearns Cos., Inc........................... $ 85
500 Charles Schwab Corp.............................. 48
1,200 Lehman Brothers Holdings, Inc.................... 72
--------
205
--------
SAVINGS & LOANS (0.2%)
1,200 Washington Mutual, Inc........................... 49
--------
TOTAL FINANCIAL........................................... 3,821
--------
HEALTH CARE (11.9%)
HEALTH CARE (DIVERSIFIED) (4.8%)
800 Abbott Laboratories.............................. 37
1,700 American Home Products Corp...................... 111
9,100 Bristol-Myers Squibb Co.......................... 585
3,700 Johnson & Johnson................................ 347
2,200 Warner Lambert Co................................ 146
--------
1,226
--------
HEALTH CARE (DRUGS -- GENERIC & OTHERS) (1.2%)
4,100 Amgen, Inc....................................... 307
--------
HEALTH CARE (DRUGS -- MAJOR PHARMS) (4.2%)
4,100 Eli Lilly & Co................................... 348
4,700 Merck & Co., Inc................................. 377
2,200 Pfizer, Inc...................................... 305
500 Schering-Plough Corp............................. 28
--------
1,058
--------
HEALTH CARE (LONG-TERM CARE) (0.1%)
2,700 HEALTHSOUTH Corp................................. 28
--------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) (1.6%)
3,800 Bausch & Lomb, Inc............................... 247
1,100 Becton Dickinson & Co............................ 42
1,200 Guidant Corp..................................... 72
500 Medtronic, Inc................................... 36
--------
397
--------
HEALTH CARE (SPECIALIZED SERVICES) (0.0%)
200 Alza Corp., Class A.............................. 8
--------
TOTAL HEALTH CARE......................................... 3,024
--------
TECHNOLOGY (20.0%)
BIOTECHNOLOGY (0.1%)
300 Baxter International, Inc........................ 20
--------
COMMUNICATION EQUIPMENT (2.8%)
3,200 Lucent Technologies, Inc......................... 345
1,700 Motorola, Inc.................................... 124
2,400 Northern Telecom Ltd............................. 149
500 Scientific-Atlanta, Inc.......................... 14
900 Tellabs, Inc..................................... 88
--------
720
--------

VALUE
SHARES (000)

----------------------------------------------------------------------

COMPUTERS (HARDWARE) (4.5%)
1,500 Compaq Computer Corp............................. $ 48
5,500 Dell Computer Corp............................... 225
600 Gateway 2000, Inc................................ 41
3,900 Hewlett Packard Co............................... 265
2,400 International Business Machines Corp............. 425
1,100 Sun Microsystems, Inc............................ 137
--------
1,141
--------
COMPUTERS (NETWORKING) (1.6%)
400 Ascend Communications, Inc....................... 33
3,400 Cisco Systems, Inc............................... 373
--------
406
--------
COMPUTERS (PERIPHERALS) (1.2%)
1,700 EMC Corp......................................... 217
2,700 Seagate Technology, Inc.......................... 80
--------
297
--------
COMPUTERS (SOFTWARE & SERVICES) (6.5%)
2,100 America Online, Inc.............................. 306
1,600 BMC Software, Inc................................ 59
200 Computer Sciences Corp........................... 11
1,300 Compuware Corp................................... 31
12,400 Microsoft Corp................................... 1,111
3,100 Oracle Corp...................................... 82
1,200 Parametric Technology Corp....................... 24
1,400 Unisys Corp...................................... 39
--------
1,663
--------
ELECTRONICS (DEFENSE) (0.3%)
1,500 Raytheon Co., Class B............................ 88
--------
ELECTRONICS (SEMICONDUCTORS) (2.5%)
4,700 Intel Corp....................................... 560
800 Texas Instruments, Inc........................... 79
--------
639
--------
EQUIPMENT (SEMICONDUCTORS) (0.4%)
1,600 Applied Materials, Inc........................... 99
--------
SERVICES (DATA PROCESSING) (0.1%)
200 Electronic Data Systems Corp..................... 9
300 First Data Corp.................................. 13
--------
22
--------
TOTAL TECHNOLOGY.......................................... 5,095
--------
TRANSPORTATION (1.0%)
AIR FREIGHT (0.2%)
500 FDX Corp......................................... 46
--------
AIRLINES (0.6%)
500 AMR Corp......................................... 29
600 Delta Air Lines, Inc............................. 42

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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U.S. EQUITY PLUS PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)
----------------------------------------------------------------------

TRANSPORTATION (CONT.)
AIRLINES (CONT.)

[Download Table]

1,600 Southwest Airlines Co............................ $ 48
400 US Airways Group, Inc............................ 20
--------
139
--------
TRUCKERS (0.2%)
2,200 Ryder System, Inc................................ 61
--------
TOTAL TRANSPORTATION...................................... 246
--------
UTILITIES (2.8%)
ELECTRIC COMPANIES (2.6%)
2,000 Cinergy Corp..................................... 55
1,700 Edison International............................. 38
1,300 GPU, Inc......................................... 48
2,400 PECO Energy Co................................... 111
3,500 PG&E Corp........................................ 109
4,200 Texas Utilities Co............................... 175
3,700 Unicom Corp...................................... 135
--------
671
--------
POWER PRODUCERS (INDEPENDENT) (0.2%)
1,200 AES Corp......................................... 45
--------
TOTAL UTILITIES........................................... 716
--------
TOTAL COMMON STOCKS (Cost $23,192)........................ 25,422
--------

[Download Table]

VALUE
SHARES (000)
----------------------------------------------------------------------

TOTAL INVESTMENTS 100.1% (Cost $23,192)................... $ 25,422
--------

[Download Table]

OTHER ASSETS AND LIABILITIES (-0.1%)
Other Assets.............................................. 93
Liabilities............................................... (106)
--------
(13)
--------
NET ASSETS (100%)........................................... $ 25,409
--------
--------

[Download Table]

CLASS A:
--------------------------------------------------------------
NET ASSETS.................................................... $24,076
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 1,860,007 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $12.94
---------
---------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $1,333
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 103,106 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $12.93
---------
---------

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LETTER TO SHAREHOLDERS
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U.S. REAL ESTATE PORTFOLIO

The U.S. Real Estate Portfolio seeks to provide above average current income and
long-term capital appreciation by investing primarily in equity securities of
companies in the U.S. real estate industry, including real estate investment
trusts ("REITs").

For the three months ended March 31, 1999, the Portfolio had a total return of
-2.83% for the Class A shares and -2.92% for the Class B shares compared to a
total return of -5.59% for the National Association of Real Estate Investment
Trusts (NAREIT) Equity Index (the "Index"). For the one-year period ended March
31, 1999, the Portfolio had a total return of -13.71% for the Class A shares and
-13.95% for the Class B shares compared to -21.75% for the Index. From inception
on February 24, 1995 through March 31, 1999, the average annual total return of
the Class A shares was 16.00% compared to 9.63% for the Index. From inception on
January 2, 1996 through March 31, 1999, the average annual total return of the
Class B shares was 13.16% compared to 7.57% for the Index.

PERFORMANCE COMPARED TO THE NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT
TRUSTS (NAREIT) EQUITY INDEX(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
------------------------------------------
ONE AVERAGE ANNUAL
YTD YEAR SINCE INCEPTION
---------- ----------- -----------------

PORTFOLIO -- CLASS
A.................. -2.83% -13.71% 16.00%
PORTFOLIO -- CLASS
B.................. -2.92 -13.95 13.16
INDEX -- CLASS A.... -5.59 -21.75 9.63
INDEX -- CLASS B.... -5.59 -21.75 7.57

1. The NAREIT Equity Index is an unmanaged market weighted index of tax
qualified REITs listed on the New York Stock Exchange, American Stock
Exchange and the NASDAQ National Market System, including dividends.

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATION PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE PERFORMANCE RESULTS PROVIDED ARE
FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF
THE PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.

Despite renewed levels of enthusiasm at the beginning of 1999, the REIT market
provided more of the same bad news in the first quarter of the year. The Index
posted a loss of 5.6%. The Index has now experienced a decline in excess of 27%
since hitting its all-time high in October, 1997. Once again, the decline
occurred despite public real estate companies reporting strong cashflow growth
from their properties. The pain of negative returns was amplified by the
fascination with the Dow Jones Index flirting with the 10,000 level and the
surging internet stocks. Clearly it has been difficult for any of the small cap
or value-oriented stocks to catch the attention of equity investors. In the
quarter, small cap stocks continued their under-performance relative to big cap
stocks as the Russell 2000 Index of small capitalization stocks declined 5.4%
for the quarter. As a result of this quarter's performance, it remains cheaper
for investors to buy real estate assets on Wall Street (through the ownership of
securities) than on Main Street (through the direct ownership of assets). On
average, REITs are trading 10% below the liquidation value of their portfolios
and private investors are actively exploring methods to take advantage of this
arbitrage.

Perhaps the only positive event to come from another difficult quarter was the
renewed level of interest in the public securities markets from both private and
public pension funds. These investors have established target allocations for
investment in real estate as a separate asset class. Historically, they have
placed the majority of this allocation in the direct markets (through the
purchase of real estate properties). However, many are reviewing increasing
their exposure to the indirect markets (through public real estate securities),
because they are attracted by current valuation levels. In the quarter, this new
inflow was modest compared to net redemptions by non-dedicated real estate
investors. However, it is a strong sign for the industry to expand its
shareholder base to include a greater number of dedicated real estate investors.

The first quarter featured a modest gain for the REIT market in the beginning of
January as most prognosticators unveiled their expected returns for the year,
with consensus returns in the 12% to 15% range. However, a constant and
continued decline ensued in which the REIT market declined a modest degree each
day. In contrast to last year, the quarter was devoid of any serious attempts at
gaining territory. The quarter ended with the Index approaching its 52-week low
achieved in early October, 1998.

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LETTER TO SHAREHOLDERS
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U.S. REAL ESTATE PORTFOLIO (CONT.)

The continued outflow from dedicated mutual funds contributed to the sector's
declines. Total redemptions in the last three quarters of 1998 were almost $1.5
billion and the pattern continued with more than $500 million in redemptions in
the first quarter. The continued success of the broader equity markets, which
was predominantly limited to a narrow group of big cap and internet stocks, did
not bode well for real estate stocks. In addition, REITs had difficulty
positioning themselves as defensive stocks given last year's performance and the
continued declines this year. As a large number of REIT stocks approach the 10%
dividend yield level, investors have become confused as to whether the stocks
are cheap or are preparing to cut their dividend. We believe that the sector
represents a defensive asset class at a very attractive current valuation level
and will attempt to outline our thesis below. Note that in the beginning of 1998
we provided total return estimates far below the consensus as we cautioned that
the sector was not defensive given then current valuations levels.

We have previously discussed our investment perspective that, over the medium
and long term, the largest determinant of the value of shares of real estate
stocks will be underlying real estate fundamentals. We measure REITs based on
their Price to Net Asset Value per share ratio ("P/NAV"). The third quarter of
1998 was the first in which P/ NAV had fallen below 100% since early 1995. At
the end of this quarter, we are residing firmly below NAV at the 90% P/NAV
level.

The public markets are forward looking and we expect that the market will reward
the REIT market with premium valuations in the face of improving fundamentals
and will penalize REITs with prices below NAV in the anticipation of
deteriorating fundamentals. We also recognize that the public markets may not be
perfectly calibrated, which results in a tendency to overshoot on both the
upside and the downside. Thus, we believe the appropriate analysis for current
valuations in the REIT market is to answer the following question: are the
public markets betting on a deterioration in NAV or are the securities mispriced
as a result of the selling pressure by non-dedicated investors?

The key factor is an analysis of the likelihood of a deterioration in NAV. This
deterioration can come in the form of a reduction in the net operating income
("NOI") at the property level or a worsening in the cap rates (the multiple
applied to the NOI) to determine real estate prices.

Last quarter, we discussed our concerns with regard to real estate valuations.
We correctly anticipated a slowing in transaction volumes; however, our
assumption that the new clearing prices would decline by 10% or more has been
proven wrong with the exception of the hotel sector and second tier properties
and markets. As a result, it appears that cap rates have stabilized once again.
This stabilization appears to dispel the current concern over a deterioration in
cap rates. It is important to note that since the companies have increased
leverage ratios to, on average, 40%, a 5% deterioration in cap rates would
result in a 10% decrease in NAV per share.

The case for a deterioration in NOI for real estate is dependent on weak
fundamentals. Our measure for real estate fundamentals is the supply-demand
balance for real estate in each of the component markets as measured by
occupancy rates and rental levels. Demand for real estate space will be directly
affected by gross domestic product growth, job growth and business and consumer
confidence. A consensus concurs that a slowdown in the U.S. economy is
inevitable even if it has been pushed back by a number of quarters. Thus, the
operative question is the degree to which supply will slow in concert with the
eventual reduction in demand.

We can classify the various components of the U.S. real estate market into three
categories. We place the multifamily and industrial markets into the stabilized
category. These sectors were the first to achieve equilibrium and remain in a
stage of active construction that has kept pace with demand. Given the short
construction cycle for these assets, supply can react quickly to a decline in
demand, which would only cause a brief period of over-supply. The office and
hotel markets fall into the volatile category. Both were poised for a dramatic
level of over-supply by the latter part of 1998, but the pace of new planned
construction is slowing dramatically in each sector. In the office sector,
although the supply pipeline grew by 20%, it was a slower pace than the previous
period and was largely the result of developers completing projects that had
their financing commitments in place before the turmoil last fall. Similarly in
the hotel sector, the construction pipeline has fallen from 4% to 3% of existing
supply.

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U.S. REAL ESTATE PORTFOLIO (CONT.)

Finally, the exogenous shock category best represents the status of the retail
and healthcare sectors. These sectors face an additional significant risk apart
from the typical supply-demand analysis. In retail, the concern over internet
retailing (or e-commerce) has caused shock waves through the public listed
owners of retail properties but it is not clear that it has affected the private
real estate markets. Note that retail sales via the internet were more than $10
billion in 1998 versus more than $2 trillion of total retail based sales. The
expectations for internet sales by 2003 are in excess of $100 billion, a
comparable figure to total catalog sales in the U.S. today (in our view, the
retail component most likely to be impacted by e-commerce). In the case of
healthcare, the new Medicare Prospective Payment System ("PPS") has created
financial difficulties for the operators of nursing homes. These companies have
revised earnings estimates downward in the face of complying with PPS. This has
resulted in a dramatic decline for the share prices of healthcare REITs that own
and lease nursing homes to these operators and the potential risk for a
re-pricing of the assets.

The scenario described above indicates that it is difficult to make a case for
deterioration in NOI based on over-supply. We believe the key risk is one of
under-demand. Given the current supply-demand scenario outlined above, we would
require a recession of some length in order to depress NOI by 5% (which would
reduce NAV per share by 10%). The combined result of the cap rate and NOI
analyses is that it is difficult to construct a base case that results in a
decline in NAV per share to the levels currently implied in the pricing for
public securities. We do not project an immediate catalyst for improved pricing,
but as value investors, our style is to identify mispricing opportunities and
realize the benefits over time. It is interesting to note that on the several
occasions when the REIT market has rallied in this current cycle, it tends to
run up very quickly. Thus, employing a strategy to wait on the sidelines for
evidence of a catalyst may result in an inability to enter the sector in a
meaningful fashion when the inefficiency is being realized.

Last year, as REIT prices plummeted, we introduced the concept that REITs must
compare the potential returns from their typical external growth opportunity
set, the development and acquisition of properties, versus the opportunity to
"buy" their own portfolio (based on the implied valuation as determined by their
share price) through a share repurchase program. We firmly believe that REITs
must monitor their implied valuation and utilize the analysis to determine their
external growth plans as well as their price tolerance for issuing equity. Many
companies have implemented share repurchase programs, although capital
availability has slowed the pace. Those companies that have capital availability
have taken a selective attitude and have increased targeted investment returns
as a result of treating this capital as a scarce resource. These actions also
reflect a more targeted strategic direction for REITs to focus on "value-added"
external growth. This is in contrast to the growth and expansion mentality for
many REITs in 1997, a theme predicated on the availability of cheap equity and a
private real estate market that had not yet fully recovered. The ultimate
example of a revised focus on growing NAV per share, as opposed to growing for
growth's sake, is the strategy to sell assets in the private markets and use the
proceeds to buy back stock.

The most significant evidence that REITs are mispriced would come in the form of
the Board's of cheap companies -- those trading at the greatest discount to the
liquidation value of their properties -- placing the companies for sale. The
first quarter witnessed the closing of two of these transactions in which
Storage Trust and Meridian Industrial Trust were sold, as each merged their
assets into larger public companies and eliminated management in its entirety.
In the second quarter Tower Realty will complete the sale of their assets by
merging into Reckson Associates. In addition, MGI Properties will sell the vast
majority of its assets to an undisclosed private buyer. We applaud the decision
of these companies and their Boards to sell.

Given the deterioration in share prices, there remains a serious debate as to
the viability of leveraged buyouts ("LBO's") in the sector. Since the structure
is highly dependent on cheap and plentiful financing, the apartment sector has
been the first in which investors have tested the strategy. This quarter, the
Board of Irvine Apartment Communities accepted a buyout offer from its Chairman
and largest shareholder. We considered this situation unique, given the
approximate 70% stake that the shareholder holds in the public company as well
as certain unique legal advantages granted to the shareholder at the initial
public offering. However, a

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LETTER TO SHAREHOLDERS
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U.S. REAL ESTATE PORTFOLIO (CONT.)

second situation has arisen in which the Chairman of Berkshire Realty -- another
owner of apartments -- has made a bid to take the company private. Finally, a
well-known LBO expert, Irwin Jacobs, made an unsolicited bid for a smaller
apartment company, Cornerstone Realty. We believe that each of these
announcements illustrate the arbitrage between the private and public real
estate markets and the current mispricing.

We have continued to shape the Portfolio with companies offering attractive
fundamental valuations relative to their underlying real estate value. Given the
expected slowdown in the demand for real estate, we have maintained a modestly
defensive posture. However, we are encouraged by the undeniable strength of the
U.S. economy and have become more constructive with regard to the likelihood
that real estate fundamentals will remain favorable. As a result, from a
top-down perspective, we have increased our overweighting to the office sector,
decreased our underweighting to the hotel sectors, and decreased our
overweighting to the less volatile residential housing sectors (both apartments
and manufactured home communities). Once again we took advantage of a weak
market and price declines to add a number of the most talented companies in the
REIT universe to the Portfolio, including Simon Property Group, Prologis and
Boston Properties.

Theodore R. Bigman
PORTFOLIO MANAGER

Douglas A. Funke
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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U.S. REAL ESTATE PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)

-----------------------------------------------------------------------

COMMON STOCKS (95.4%)
DIVERSIFIED (9.6%)
333,700 Crescent Real Estate Equities, Inc. REIT......... $7,175
354,000 Pacific Gulf Properties, Inc. REIT............... 6,372
230,500 Pennsylvania REIT................................ 4,307
115,100 Rouse Co. REIT................................... 2,554
35,600 Vornado Realty Trust REIT........................ 1,228
654,898 Wellsford Real Properties, Inc................... 5,730
-------
27,366
-------
HEALTH CARE (0.8%)
190,300 Meditrust Corp. REIT............................. 2,367
-------
LODGING/RESORTS (4.5%)
106,500 Candlewood Hotel Company, Inc.................... 426
12,070 Crestline Capital Corp........................... 185
308,800 Host Marriot Corp................................ 3,435
108,300 John Q Hammons Hotels, Inc., Class A............. 393
995,454 Patriot American Hospitality, Inc. REIT.......... 5,102
109,937 Starwood Lodging Trust REIT...................... 3,140
-------
12,681
-------
OFFICE INDUSTRIAL (33.3%)
INDUSTRIAL (5.1%)
412,400 Prime Group Realty Trust REIT.................... 5,464
441,260 ProLogis Trust REIT.............................. 9,046
-------
14,510
-------
OFFICE/INDUSTRIAL MIXED (2.6%)
218,710 PS Business Parks, Inc. REIT..................... 4,798
74,600 Spieker Properties, Inc. REIT.................... 2,630
-------
7,428
-------
OFFICE (25.6%)
484,500 Arden Realty, Inc. REIT.......................... 10,780
335,100 Beacon Capital Partners, Inc..................... 6,702
143,500 Boston Properties, Inc. REIT..................... 4,538
515,754 Brandywine Realty Trust REIT..................... 8,381
788,797 Brookfield Properties Corp. (Canada)............. 9,318
265,030 CarrAmerica Realty Corp. REIT.................... 5,847
217,600 Cornerstone Properties, Inc...................... 3,183
308,427 Equity Office Properties Trust REIT.............. 7,846
598,300 Great Lakes, Inc. REIT........................... 8,675
71,800 Highwoods Properties, Inc........................ 1,692
108,600 Mack-Cali Realty Corp. REIT...................... 3,190
93,700 Prentiss Properties Trust REIT................... 1,745
55,500 SL Green Realty Corp. REIT....................... 1,044
-------
72,941
-------
TOTAL OFFICE INDUSTRIAL..................................... 94,879
-------

VALUE
SHARES (000)

-----------------------------------------------------------------------

OTHER (2.2%)
580,384 Atlantic Gulf Communities Corp................... $ 987
22,530 Merry Land Properties, Inc....................... 132
375,700 Security Capital Group, Inc., Class B............ 5,025
-------
6,144
-------
RESIDENTIAL (24.1%)
RESIDENTIAL APARTMENTS (18.3%)
97,000 Amli Residential Properties Trust REIT........... 2,001
166,100 Apartment Investment & Management Co. REIT....... 6,021
318,510 Archstone Communities Trust REIT................. 6,410
380,500 Avalon Bay Communities, Inc. REIT................ 12,033
143,318 Equity Residential Properties Trust REIT......... 5,912
341,300 Essex Property Trust, Inc. REIT.................. 8,917
51,800 Irvine Apartment Communities, Inc. REIT.......... 1,703
204,700 Smith (Charles E.) Residential Realty, Inc.
REIT........................................... 6,307
157,900 Summit Properties, Inc........................... 2,635
-------
51,939
-------
RESIDENTIAL MANUFACTURED HOMES (5.8%)
544,752 Chateau Communities, Inc. REIT................... 14,981
61,800 Manufactured Home Communities, Inc. REIT......... 1,483
1,500 Sun Communities, Inc. REIT....................... 47
-------
16,511
-------
TOTAL RESIDENTIAL........................................... 68,450
-------
RETAIL (17.7%)
RETAIL REGIONAL MALLS (9.6%)
132,800 Acadia Realty Trust REIT......................... 697
7,500 Mills Corp. REIT................................. 134
8,200 Philips International Realty Corp. REIT.......... 116
406,000 Simon Property Group, Inc. REIT.................. 11,140
931,078 Taubman Centers, Inc. REIT....................... 11,406
135,900 Urban Shopping Centers, Inc. REIT................ 3,899
-------
27,392
-------
RETAIL STRIP CENTERS (8.1%)
942,390 Burnham Pacific Property Trust REIT.............. 9,895
63,600 Developers Diversified Realty Corp............... 910
450,500 Federal Realty Investment Trust REIT............. 9,545
145,700 Pan Pacific Retail Properties Inc. REIT.......... 2,586
2,300 Ramco-Gershenson Properties Trust REIT........... 37
2,000 Regency Realty Corp. REIT........................ 38
-------
23,011
-------
TOTAL RETAIL................................................ 50,403
-------
SELF STORAGE (3.2%)
312,366 Public Storage, Inc. REIT........................ 7,809
56,300 Shurgard Storage Centers, Inc., Series A REIT.... 1,422
-------
9,231
-------
TOTAL COMMON STOCKS (Cost $294,280)........................... 271,521
-------

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U.S. Real Estate Portfolio

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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U.S. REAL ESTATE PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)

-----------------------------------------------------------------------

PREFERRED STOCKS (0.8%)
RETAIL (0.8%)
RETAIL STRIP CENTERS (0.8%)
80,400 First Washington Realty Trust, Series A REIT
(Cost $2,251).................................. $2,181
-------
CONVERTIBLE PREFERRED STOCKS (0.6%)
OTHER (0.6%)
107,021 Atlantic Gulf Communities Corp................... 1,010
75,765 Altantic Gulf Communities Corp., Series B........ 715
-------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $1,828).............. 1,725
-------

[Download Table]

NO. OF
WARRANTS

---------
WARRANTS (0.0%)
OTHER (0.0%)
112,509 Atlantic Gulf Communities Corp., Class A,
expiring 6/24/04............................... 35
112,509 Atlantic Gulf Communities Corp., Class B,
expiring 6/24/04............................... 35
112,509 Atlantic Gulf Communities Corp., Class C,
expiring 6/24/04............................... 35
-------
TOTAL WARRANTS (COST $0)...................................... 105
-------

[Download Table]

FACE
AMOUNT VALUE
(000) (000)

-----------------------------------------------------------------------

CORPORATE BONDS (0.9%)
OFFICE INDUSTRIAL (0.9%)
OFFICE (0.9%)
$ 2,934 Brookfield Properties Corp. (Canada), 6.00%,
2/14/07 (Cost $2,264).......................... $2,478
-------
SHORT-TERM INVESTMENT (1.4%)
REPURCHASE AGREEMENT (1.4%)
3,895 Chase Securities, Inc. 4.65%, dated 3/31/99, due
4/01/99, to be repurchased at $3,896,
collateralized by U.S. Treasury Bonds, 8.00%
due 11/15/21, valued at $3,989 (Cost $3,895)... 3,895
-------
TOTAL INVESTMENTS (99.1%) (Cost $304,518)..................... 281,905
-------

[Download Table]

OTHER ASSETS AND LIABILITIES (0.9%)
Other Assets.................................................. 3,584
Liabilities................................................... (986)
---------
2,598
---------
NET ASSETS (100%)............................................... $284,503
---------
---------

[Download Table]

CLASS A:
--------------------------------------------------------------
NET ASSETS.................................................... $272,247
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 22,048,791 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $12.35
----------
----------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $12,256
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 996,270 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $12.30
----------
----------

------------------------------------------------------------

REIT -- Real Estate Investment Trust

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
VALUE EQUITY PORTFOLIO

The Value Equity Portfolio seeks long-term capital appreciation by investing
primarily in equity securities which the Investment advisor believes to be
undervalued relative to the stock market in general at the time of purchase.

Our value investment philosophy for the Value Equity Portfolio is based on the
premise that a diversified portfolio of undervalued securities should outperform
the market over the long-term, and would be expected to preserve principal in a
difficult market environment. Our Portfolio is characterized by a distinctly
below average price-to-earnings ratio, price-to-book ratio, and a high dividend
yield.

PERFORMANCE COMPARED TO THE S&P 500 INDEX AND THE INDATA EQUITY-MEDIAN INDEX(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
--------------------------------------------------
AVERAGE
AVERAGE ANNUAL
ANNUAL SINCE
YTD ONE YEAR FIVE YEARS INCEPTION
---------- ---------- ------------ ------------

PORTFOLIO -- CLASS
A.................... 4.36% 0.09% 19.06% 14.31%
PORTFOLIO -- CLASS
B.................... 4.37 -0.14 N/A 18.36
S&P 500 INDEX -- CLASS
A.................... 4.98 18.45 26.24 19.08
S&P 500 INDEX -- CLASS
B.................... 4.98 18.45 N/A 27.45
INDATA EQUITY-MEDIAN
INDEX -- CLASS A..... 1.65 8.35 21.12 16.64
INDATA EQUITY-MEDIAN
INDEX -- CLASS B..... 1.65 8.35 N/A 21.94

1. The S&P 500 Index is comprised of 500 large-cap U.S. companies with market
capitalization of $1 billion or more. These 500 companies are a
representative sample of some 100 industries chosen mainly for market size,
liquidity and industry group representation. The Indata Equity-Median Index
is an unmanaged index of common stocks. The Indata Equity-Median Index
includes an average asset allocation of 92.0% equity and 8.0% cash based on
$48.1 billion in assets among 1,228 portfolios for the period ended March 31,
1999.

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE PERFORMANCE RESULTS PROVIDED ARE
FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF
THE PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.

For the three months ended March 31, 1999, the Portfolio had a total return of
4.36% for the Class A shares and 4.37% for the Class B shares compared to a
total return of 4.98% for the S&P 500 Index and 1.65% for the Indata
Equity-Median Index. For the one-year period ended March 31, 1999, the Portfolio
had a total return of 0.09% for the Class A shares and -0.14% for the Class B
shares compared to a total of 18.45% for the S&P 500 Index and 8.35% for the
Indata Equity-Median Index. For the five-year period ended March 31, 1999, the
average annual total return of Class A shares was 19.06% compared to 26.24% for
the S&P 500 Index and 21.12% for the Indata Equity-Median Index. From inception
on January 31, 1990 through March 31, 1999, the average annual total return of
Class A shares was 14.31% compared to 19.08% for the S&P 500 Index and 16.64%
for the Indata Equity-Median Index. From inception on January 2, 1996 through
March 31, 1999, the average annual total return of Class B shares was 18.36%
compared to 27.45% for the S&P 500 Index and 21.94% for the Indata Equity-Median
Index.

For the three months ended, the S&P/Barra Growth Index returned 7.0%, and the
S&P/Barra Value Index returned 2.7%. Equally weighted, the S&P 500 returned
1.3%. The small-cap Indexes were down 5.5% (Russell 2000) and 8.4% (S&P
Small-Cap). The worst performing sectors were (S&P) Utilities, down 10% and
(Small-cap) Value, down 10%.

For the Portfolio, the best performing stocks were Sprint-PCS, up 92%, Nielsen
Media Research, up 82% (an internet/media company that has current earnings that
we added at a 12 price/earnings last fall), United Technologies, up 25%, Lincoln
National, up 22% and TJX Companies, up 17%. The worst performing stocks were
Philip Morris, down 33%, Meritor Automotive (now a 6 P-E), down 26%, Loews, down
24%, Harris, down 21%, and Gulf Stream Aerospace, down 19% (26% earnings per
share growth, upward earnings estimates, and now a 10 price/earnings).

Overall performance was a telescoped version of the last few years: a narrow
market increasingly driven by and valued by, a small number of mega-cap stocks
with high and increasing valuations. For the quarter the S&P 100 was up 7.3%,
over 15% better than the S&P Small-Cap Index which was down 8.4%. This quarter
also saw the emergence of the mania in Internet stocks (more on the Internet
below).

Performance in the Portfolio was driven by the recovery in four of our large
value holdings: TJMaxx, Lincoln National, United Technologies and Philips
Electronics. We also had help from wireless.

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
VALUE EQUITY PORTFOLIO (CONT.)

Lincoln National rose on the news that Aegon, a global Dutch insurer, is buying
Transamerica; highlighting the attraction as well as the scarcity of high
quality US-based financial/insurance companies. TJMaxx's performance was a
recovery from the economic slowdown scare in the third quarter of 1998 (which is
when TJMaxx was added to the Portfolio). United Technologies and Philips
recovered based on good 1998 fourth quarter earnings and solid expectations for
1999. Sprint-PCS return reflected the value of a nationwide wireless service.
Based on valuation we sold Sprint-PCS and purchased Telesp Celular
Participacoes, a Brazilian cellular company spun off from Telebras, the
Brazilian telecommunications company, and added to our Sprint holdings.

Our biggest positions are AT&T, Sprint, United Technologies, Lincoln National,
and Chase Manhattan. These five stocks account for 22% of the Portfolio's net
assets. The top 10 positions have similar characteristics and comprise 41% of
the Portfolio and include TJMaxx, BankBoston, Allstate, Bell Atlantic, and
Philips Electronics. These top 10 comprise the core of the Portfolio.

This quarter we added to our holding of broadband and wireless stocks when
liquidity-driven or momentum selling created discounts to the markets. We added
the following companies at average price/ earnings of 22 and price-to-sales of
2: 3Com (networking), Newbridge Networks (ATM switches), FORE Systems (ATM
switches). We believe these are reasonable valuations for high quality broadband
stocks.

Here is why we have added this basket of stocks that total 2.5% to 3% of the
Portfolio net assets, while still maintaining a portfolio price/earnings of 15.

THE i.NET ECONOMY

The "Internet" has grown faster than any other technology. Internet traffic is
doubling every three-to-twelve months. Why? The structure of the Internet lets
any device (PC, Mainframe, PDA, Cell Phone) connect to any other device anywhere
in the world. And, much like voice mail, the connection is not time dependent;
you can connect at any time on any day. The connection can then carry data,
voice, and video. The data arrives in discreet packets that are very cheap to
transport relative to existing dedicated phone circuits. This structure has
enormous implications for how business-to-business transactions occur and how
consumers buy services.

The power of the Internet is based on data/ telecommunications protocols (rules)
known by the acronym TCP/IP, which stands for Transmission Control
Protocol/Internet Protocol. The protocols are the same worldwide. While the
current surge in Internet demand has led to exponential growth in demand for
computer servers (SUN, HP, IBM et.al.) and telecommunications bandwidth (WCOM,
AT&T, Sprint. et.al.), the core of the Internet is based on open standards.
There are no monopolies. Anyone can compete by writing a better browser, putting
up a better portal, or selling a product cheaper (DELL, Amazon).

This leads to the question of which companies win, and which companies struggle
with more competition and lower margins. The next question is can a low
price/earnings and high yield Value manager position a Value portfolio to
benefit from the changes the Internet is bringing.

We believe yes. We are looking for businesses such as Allstate and Countrywide
Credit where scale and technology allow the high quality/low cost producers to
get to more customers at less cost. They both currently sell at less than 11
price/ earnings. We can also own broadband backbone companies like Sprint and
AT&T, broadband consumer companies like AT&T, and broadband infrastructure
companies such as 3Com, Newbridge Networks, and FORE Systems. These companies
are valued at reasonable multiples of earnings (yes, they have them) and sales.

For the rest of the Internet companies (sometimes know as .COM companies) the
following quiz may be interesting.

THE i.NET QUIZ

Below are statements in public offerings. Three are from recent IPO's and the
fourth is from The South-Sea Bubble in England in the 1700's. Can you match the
statements with the sources?

Statements:

1.We may never generate significant revenues or be profitable.

2.We expect to continue to incur substantial losses for the foreseeable future.

3.A company for carrying on an undertaking of great advantage, but nobody knows
what it is.

4.We have recently made public statements upon which you should not rely.

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
VALUE EQUITY PORTFOLIO (CONT.)

Sources:

1.Ivillage Inc. IPO (IPO price @ $24, current $119)

2.EXTRA ORDINARY POPULAR DELUSIONS AND THE MADNESS OF CROWDS, Charles Mackay.

3.Value America IPO (IPO price @ 23, current $50)

The current mania has pushed IPO's, Internet stocks, and large cap growth stocks
to valuation levels that are extraordinary by any measure. Here are the top ten
stocks in the S&P 500 and the expected 1999 price/earnings.

[Download Table]

COMPANY WEIGHT % INDEX P-E 99
---------------------------------- --------------- ---------

Microsoft......................... 4.2 68
General Electric.................. 3.2 37
Wal-Mart.......................... 1.9 46
Intel............................. 1.9 26
Merck............................. 1.7 34
Pfizer............................ 1.7 60
Cisco............................. 1.6 78
Exxon............................. 1.6 29
AT&T.............................. 1.5 26
IBM............................... 1.5 24
Average (arithmetic).............. 43

While the current mania has pushed the above stocks and the market indexes which
they now dominate to historically high valuation levels, a large percentage of
stocks are trading at very attractive valuations.

We have a bifurcated market. For example, Cordant Technologies is growing
earnings between 8% and 10% and is selling at a price/earnings of 10. Meritor
Automotive, recently spun off from Rockwell International, has a strong
management team, and is growing by acquisition in a consolidating, but growing,
market; it is selling at a price/earnings of 6. The upcoming merger between
Fleet and BankBoston is an in-market merger of two strong franchises, combined
with BankBoston's profitable Latin America businesses, yet the companies sell at
a price/earnings of 13. The core of our Portfolio is comprised of stocks like
these, and the Portfolio's conservative valuation and yield reflect this with a
price/earnings (99) of 15 and a dividend yield of 1.9%.

Stephen C. Sexauer
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

VALUE EQUITY PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)

-----------------------------------------------------------------------

COMMON STOCKS (98.1%)
BASIC MATERIALS (4.7%)
CHEMICALS (SPECIALTY) (1.4%)
33,200 Milennium Chemicals, Inc......................... $ 660
--------
CONSTRUCTION (CEMENT & AGGREGATES) (0.9%)
8,300 Southdown, Inc................................... 446
--------
METALS MINING (2.4%)
81,700 USEC, Inc........................................ 1,113
--------
TOTAL BASIC MATERIALS...................................... 2,219
--------
CAPITAL GOODS (11.2%)
AEROSPACE/DEFENSE (4.7%)
31,000 Cordant Technologies, Inc........................ 1,234
18,400 Gulfstream Aerospace Corp........................ 798
3,000 Northrop Grumman Corp............................ 180
--------
2,212
--------
MACHINERY (DIVERSIFIED) (2.3%)
43,800 Case Corp........................................ 1,112
--------
MANUFACTURING (DIVERSIFIED) (4.2%)
14,600 United Technologies Corp......................... 1,977
--------
TOTAL CAPITAL GOODS........................................ 5,301
--------
COMMUNICATION SERVICES (14.6%)
TELECOMMUNICATIONS (CELLULAR/WIRELESS) (0.9%)
21,400 Telesp Celular Participacoes S.A................. 448
--------
TELECOMMUNICATIONS (LONG DISTANCE) (8.9%)
27,752 AT&T Corp........................................ 2,215
20,600 Sprint Corp...................................... 2,021
--------
4,236
--------
TELEPHONE (4.8%)
34,400 Bell Atlantic Corp............................... 1,778
9,100 U.S. WEST, Inc................................... 501
--------
2,279
--------
TOTAL COMMUNICATIONS SERVICES.............................. 6,963
--------
CONSUMER CYCLICALS (14.0%)
AUTO PARTS & EQUIPMENT (2.4%)
73,066 Meritor Automotive, Inc.......................... 1,132
--------
AUTOMOBILES (2.1%)
11,600 General Motors Corp.............................. 1,008
--------
PUBLISHING (NEWSPAPERS) (0.5%)
9,300 News Corp., Ltd ADR.............................. 256
--------
RETAIL (SPECIALTY) (4.0%)
55,600 TJX Cos., Inc.................................... 1,890
--------
SERVICES (ADVERTISING/MARKETING) (1.1%)
32,620 R.H. Donnelly Corp............................... 504
--------

VALUE
SHARES (000)

-----------------------------------------------------------------------

SERVICES (COMMERCIAL & CONSUMER) (3.9%)
52,633 Nielsen Media Research Inc....................... $ 1,299
23,000 Ogden Corp....................................... 554
--------
1,853
--------
TOTAL CONSUMER CYCLICALS................................... 6,643
--------
CONSUMER STAPLES (0.7%)
TOBACCO (0.7%)
10,000 Philip Morris Cos., Inc.......................... 352
--------
ENERGY (5.0%)
OIL & GAS (REFINING & MARKETING) (0.4%)
4,300 Ashland, Inc..................................... 176
--------
OIL (DOMESTIC INTEGRATED) (4.6%)
4,100 BP Amoco plc ADR................................. 414
56,500 Conoco, Inc...................................... 1,388
14,000 USX-Marathon Group............................... 385
--------
2,187
--------
TOTAL ENERGY............................................... 2,363
--------
FINANCIAL (29.4%)
BANKS (MAJOR REGIONAL) (10.3%)
42,400 BankBoston Corp.................................. 1,836
33,800 Fleet Financial Group, Inc....................... 1,272
12,700 Mellon Bank Corp................................. 894
16,200 PNC Bank Corp.................................... 900
--------
4,902
--------
BANKS (MONEY CENTER) (4.0%)
23,200 Chase Manhattan Corp............................. 1,886
--------
CONSUMER FINANCE (1.0%)
12,800 Countrywide Credit Industries, Inc............... 480
--------
FINANCIAL (DIVERSIFIED) (2.7%)
18,200 American General Corp............................ 1,283
--------
INSURANCE (MULTI-LINE) (7.0%)
20,000 Lincoln National Corp............................ 1,977
17,900 Loews Corp....................................... 1,336
--------
3,313
--------
INSURANCE (PROPERTY-CASUALTY) (3.8%)
48,800 Allstate Corp.................................... 1,809
--------
INVESTMENT BANKING & BROKERAGE (0.6%)
6,667 Bear Stearns Cos., Inc........................... 298
--------
TOTAL FINANCIAL............................................ 13,971
--------
HEALTH CARE (2.8%)
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) (2.8%)
20,500 Bausch & Lomb, Inc............................... 1,332
--------

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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VALUE EQUITY PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

VALUE
SHARES (000)
-----------------------------------------------------------------------

TECHNOLOGY (9.7%)
COMMUNICATION EQUIPMENT (1.4%)
14,550 Harris Corp...................................... $ 416
10,400 Telefonaktiebolaget LM Ericsson ADR.............. 248
--------
664
--------
COMPUTERS (NETWORKING) (2.1%)
8,900 3Com Corp........................................ 207
17,700 FORE Systems, Inc................................ 335
4,700 Newbridge Networks Corp.......................... 456
--------
998
--------
ELECTRONICS (COMPONENT DISTRIBUTORS) (3.3%)
19,300 Philips Electronics N. V. (NY Shares)............ 1,591
--------
ELECTRONICS (DEFENSE) (2.3%)
18,800 Litton Industries, Inc........................... 1,081
--------
ELECTRONICS (SEMICONDUCTORS) (0.6%)
2,678 Texas Instruments, Inc........................... 266
--------
TOTAL TECHNOLOGY........................................... 4,600
--------
TRANSPORTATION (2.2%)
AIRLINES (2.2%)
27,700 Continental Airlines, Inc., Class B.............. 1,052
--------
UTILITIES (3.8%)
ELECTRIC COMPANIES (3.8%)
52,700 NIPSCO Industries, Inc........................... 1,423
10,800 Pinnacle West Capital Corp....................... 393
--------
TOTAL UTILITIES............................................ 1,816
--------
TOTAL COMMON STOCKS (Cost $37,164)........................... 46,612
--------

[Download Table]

FACE
AMOUNT
(000)

--------

SHORT-TERM INVESTMENT (1.9%)
REPURCHASE AGREEMENT (1.9%)
$ 907 Chase Securities, Inc. 4.65%, dated 3/31/99, due
4/01/99, to be repurchased at $907,
collateralized by U.S. Treasury Bonds, 7.125%,
due 2/15/23, valued at $914 (Cost $907)........ 907
--------
TOTAL INVESTMENTS (100.0%) (Cost $38,071).................... 47,519
--------

[Enlarge/Download Table]

VALUE
(000)

------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.0%)
Other Assets.................................................. $ 111
Liabilities................................................... (100)
--------
11
--------
NET ASSETS (100%)......................................................... $ 47,530
--------
--------

[Download Table]

CLASS A:
--------------------------------------------------------------
NET ASSETS.................................................... $46,596
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 4,142,332 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $11.25
----------
----------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $934
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 83,313 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $11.22
----------
----------

------------------------------------------------------------

ADR -- American Depositary Receipt

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LETTER TO SHAREHOLDERS
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EMERGING MARKETS DEBT PORTFOLIO

The investment objective of the Emerging Markets Debt Portfolio is high total
return through investment primarily in debt securities of government,
government-related and corporate issuers located in emerging countries.

PERFORMANCE COMPARED TO THE J.P. MORGAN
EMERGING MARKETS BOND PLUS INDEX(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
-------------------------------------
AVERAGE AVERAGE
ANNUAL FIVE ANNUAL SINCE
YTD ONE YEAR YEARS INCEPTION
---------- ---------- ------------- ------------

PORTFOLIO -- CLASS
A................. 4.60% -36.53% 10.35% 5.43%
PORTFOLIO -- CLASS
B................. 3.76 -36.46 N/A 5.12
INDEX -- CLASS A... 5.06 -14.47 13.06 7.62
INDEX -- CLASS B... 5.06 -14.47 N/A 10.94

1. The J.P. Morgan Emerging Markets Bond Plus Index is a total return index
tracking the traded U.S. dollar denominated debt instruments in the emerging
markets. The index is composed of Brady Bonds, benchmark Eurobonds, loans and
Argentine domestic debt.

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE PERFORMANCE RESULTS PROVIDED ARE
FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF
THE PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK
CONSIDERATIONS ASSOCIATED WITH INTERNATIONAL INVESTMENT. YIELDS WILL FLUCTUATE
AS MARKET CONDITIONS CHANGE.

For the three months ended March 31, 1999, the Portfolio had a total return of
4.60% for the Class A shares and 3.76% for the Class B shares compared to a
total return of 5.06% for the J.P. Morgan Emerging Markets Bond Plus Index (the
"Index"). For the one-year period ended March 31, 1999, the Portfolio had a
total return of -36.53% for the Class A shares and -36.46% for the Class B
shares compared to -14.47% for the Index. For the five-year period ended March
31, 1999, the average annual total return of Class A shares was 10.35% compared
to 13.06% for the Index. From inception on February 1, 1994 through March 31,
1999, the average annual total return of Class A shares was 5.43% compared to
7.62% for the Index. From inception on January 2, 1996 through March 31, 1999,
the average annual total return of Class B shares was 5.12% compared to 10.94%
for the Index. As of March 31, 1999, the Portfolio had a SEC 30-day yield of
14.69% for the Class A shares and 15.12% for the Class B shares.

During the first quarter of 1999, emerging market investors decided that many of
the negative external factors overhanging the market were reflected in debt
prices and that the worst in terms of economic conditions would soon pass. As a
result, despite a poor start, the Portfolio had a strong rebound during the
latter part of the first quarter of 1999. The challenges facing emerging market
countries as they entered 1999 were daunting. The prospects for lower OECD
growth, continued weak commodity prices, global excess capacity and rising
deficits were enough to discourage even the most optimistic investor. However,
OECD growth as a whole held up a little better than expected during the first
quarter. The Japanese economy stabilized, at least temporarily, which helped to
underpin a modest recovery in most of the economies of Emerging Asia. The U.S.
economy continued to perform above trend while weakness was evident only in the
Euro block countries. Another positive surprise was higher oil prices, which
resulted from a mid-March OPEC agreement to cut oil production. This development
eased the fiscal pressures burdening many of the commodity exporting countries
this year. While base metals and other commodity prices remain weak, the 45%
move in the price of oil since the beginning of the year will serve as a
windfall to emerging countries such as Ecuador, Mexico, Russia and Venezuela.
Still, global excess oil capacity remains high and the moderate OECD growth
rates won't materially improve the outlook for oil. But to their credit,
emerging countries have by and large made the necessary adjustments to cope with
the realities of lower revenues from commodity exports and higher costs of
capital.

During the month of January, emerging markets debt as measured by the Index sold
off by 3.7%, with spreads widening by 137 basis points to +1,288 basis points
over comparable U.S. Treasury securities. The Portfolio benefited from
underweight positions in Ecuador, Brazil and Venezuela, the three worst
performing countries for the month. Portfolio performance was enhanced by
overweights in Mexico and Bulgaria, and to a lesser extent South Korea, as
assets rallied in response to an upward revision in the country's credit rating
and outlook by S&P.

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EMERGING MARKETS DEBT PORTFOLIO (CONT.)

An underweight in Poland and Nigeria, the only other countries to post positive
returns in January, detracted from performance. Also during January, Brazil
floated its currency. The real subsequently depreciated 42% during the month.
The immediate economic fallout will be felt in the form of a deeper economic
contraction, higher inflation, higher interest rates and a deteriorating public
sector debt dynamic. The Brazilians will need to make further fiscal cuts and
adhere to tighter monetary policy to combat the short-term negative effects of
the devaluation.

For the month of February, the Index returned 1.44% during the same period.
Latin America led the market higher as Brazil, Peru and Venezuela were among the
top four performers during the month. Bulgaria, with a 4.22% return, was the
only non-Latin country to post strong positive returns. Latin America also
produced one of the worst performers of the month as Ecuador sold off by 9.67%
due to a deteriorating fiscal and political environment, which has reduced the
prospects for IMF aid this year. Ecuadorian bonds are trading at distressed
levels reflecting the fact that without multi-lateral aid, the probability of
default this year is high. Russia was the only country to fair worse, returning
-9.76% for the month, as investors continued to doubt the government's ability
to service its external debt. Since the crisis last summer, the Russians have
not articulated a coherent economic policy framework. In the absence of such a
framework, the prospects for hyperinflation and continued capital flight remain
high. Portfolio returns were aided by overweights in Bulgaria, Turkey, Colombia
and, to a lesser extent, Peru. Underperformance attributable to underweight
positions in Brazil and Venezuela was mitigated somewhat by beneficial security
selection within those countries.

Emerging markets debt staged a significant rally in the month of March. The
broad market as measured by the Index rallied by 7.57%, with spreads tightening
by 159 basis points to 1,171 basis points over U.S. Treasuries. The market was
led higher by the riskier Latin American credits, with Brazil, Ecuador and
Venezuela producing the best returns for the month. Despite a positive 14.87%
return in March, Ecuadorian assets remain the worst performers in 1999, as
Ecuador has returned -7.98% year to date. In general, the Portfolio rallied in
March as many of the negative events that had been anticipated by investors
failed to materialize. Inflation in Brazil, while still high by most standards,
was tamer than expected allowing the Central Bank to lower domestic interest
rates sooner than had been anticipated. The current government in Ecuador was
able to piece together a fragile political coalition in support of a fiscal
reform package that is a pre-condition to any agreement with the IMF. While the
situation remains tenuous and banking sector reform still needs to be addressed,
the formation of this coalition is a significant first step towards reform and
again was unanticipated by the general market. Lastly, the recent rebound in the
price of oil had a significant positive impact on Venezuelan, Mexican and
Russian assets.

The conflict in Kosovo proved to be the only cloud hanging over the Portfolio in
March. Bulgarian assets bore the brunt of investors' fears, as the Bulgarian
sub-index sold off by 2.99%, making it the only country to produce negative
returns last month. While Bulgaria shares a border with Serbia, the trade links
between the countries are limited. Exports to Yugoslavia account for
approximately 2.2% of Bulgaria's total exports. However, most of the trade
routes from Bulgaria to Western Europe run through Yugoslavia and are now
effectively closed due to the war. Bulgarian goods must now be transported by a
more circuitous route, which will hinder trade flows in the future. In addition,
fears that the war will spread and destabilize the entire Balkan region
adversely impacted Bulgaria's performance. An overweight in Bulgarian assets and
an underweight in Venezuelan assets dampened Portfolio returns in March.

This confluence of positive external developments mentioned above helped propel
emerging debt prices during the first quarter and is likely to continue to
provide the necessary environment for a continued rally in the months ahead.
However, these conditions remain fragile. It may only be a matter of months
before OPEC quotas are ignored and the recent run up in oil prices reverses. The
nascent recovery in Japan appears to us to have been driven by last summer's
fiscal stimulus package. The effects of the government works spending became
visible during the fourth quarter of 1998 and the first quarter of 1999. All
other sectors of the economy continued to decline. So far, Brazil has

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LETTER TO SHAREHOLDERS
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EMERGING MARKETS DEBT PORTFOLIO (CONT.)

done an estimable job of managing investor expectations and market
technicalities. However, the difficult tasks of holding the line on fiscal cuts
and implementing structural reforms remain ahead. In short, the developments in
March were undoubtedly positive for the market, but the gains may be fleeting.
Therefore we will shift to a more aggressive posture only upon further evidence
that these positive trends are sustainable.

Thomas L. Bennett
PORTFOLIO MANAGER

Stephen F. Esser
PORTFOLIO MANAGER

Abigail L. McKenna
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

EMERGING MARKETS DEBT PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

FACE
AMOUNT VALUE
(000) (000)

----------------------------------------------------------------------------------

DEBT INSTRUMENTS (95.6%)
ARGENTINA (19.2%)
CORPORATE (2.1%)
ARP (e)950 CIA International Telecommunications, 10.375%,
8/01/04........................................ $ 737
U.S.$ (e)391 Nortel Inversora, Series A, 6.00%, 3/31/07....... 235
(e)500 Supercanal Holdings, 11.50%, 5/15/05............. 225
--------
1,197
--------
SOVEREIGN (17.1%)
1,460 Republic of Argentina, Global Bond, 11.75%,
4/07/09........................................ 1,420
1,900 Republic of Argentina, Global Bond, 12.125%,
2/15/19........................................ 1,882
7,492 Republic of Argentina, Global Bond, Series L,
(Floating Rate), 5.938%, 3/31/05............... 6,420
--------
9,722
--------
10,919
--------
BRAZIL (20.9%)
SOVEREIGN (20.9%)
2,100 Federative Republic of Brazil, New Money Bonds,
Series L, (Floating Rate), 6.188%, 4/15/09..... 1,336
(v)4,120 Federative Republic of Brazil, Debt Conversion
Bond, Series L, (Floating Rate), 6.188%,
4/15/12........................................ 2,403
(v)6,192 Federative Republic of Brazil, Series IE-L,
(Floating Rate), 6.125%, 4/15/06............... 4,489
(v)5,002 Federative Republic of Brazil, C Bond, PIK,
5.00%, 4/15/14................................. 3,173
250 Federative Republic of Brazil, Series L,
(Floating Rate), 6.188%, 4/15/09............... 159
(n)100 Federative Republic of Brazil, Series L,
(Floating Rate), 4.50%, 4/15/09................ 56
(n)500 Federative Republic of Brazil, Debt Conversion
Bond, Series L, (Floating Rate), 5.00%,
4/15/09........................................ 277
--------
11,893
--------

FACE
AMOUNT VALUE
(000) (000)

----------------------------------------------------------------------------------

BULGARIA (5.3%)
SOVEREIGN (5.3%)
U.S.$ 2,870 Republic of Bulgaria, Discount Bond, Series A,
(Floating Rate), 5.875%, 7/28/24............... $ 1,952
(n,v)950 Republic of Bulgaria, Front Loaded Interest
Reduction Bond, Series A, 2.50%, 7/28/12....... 544
820 Republic of Bulgaria, Interest Arrears PDI Bond,
(Floating Rate), 5.875%, 7/28/11............... 552
--------
3,048
--------
COLOMBIA (4.6%)
CORPORATE (0.3%)
1,550 Transtel, Discount Note, 0.018%, 8/13/08......... 170
--------
SOVEREIGN (4.3%)
1,210 Republic of Colombia, (Floating Rate), 10.986%,
8/13/05........................................ 1,110
1,290 Republic of Colombia, Global Bond, 10.875%,
3/09/04........................................ 1,338
--------
2,448
--------
2,618
--------
ECUADOR (1.7%)
SOVEREIGN (1.7%)
2,030 Republic of Ecuador, Discount Bond, (Floating
Rate) 6.00%, 2/28/25........................... 964
--------
INDIA (1.1%)
CORPORATE (1.1%)
(e)690 Reliance Industries Ltd., 10.375%, 6/24/16....... 616
--------
JORDAN (0.9%)
SOVEREIGN (0.9%)
(v)922 Government of Jordan, Discount Bond, (Floating
Rate), 6.00%,12/23/23.......................... 516
--------
KOREA (2.7%)
QUASI-SOVEREIGN (2.7%)
340 Export-Import Bank of Korea, Global Bond, 6.50%,
2/10/02........................................ 328
1,250 Korea Electric Power 7.00%, 10/01/02............. 1,191
--------
1,519
--------

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

EMERGING MARKETS DEBT PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

FACE
AMOUNT VALUE
(000) (000)
----------------------------------------------------------------------------------

MEXICO (21.1%)
CORPORATE (0.9%)
U.S.$ (e)150 Innova S De R.L., Senior Notes, 12.875%,
4/01/07........................................ $ 125
(e)440 Petroleos Mexicanos, (Floating Rate), 9.875%,
7/15/05........................................ 411
--------
536
--------
SOVEREIGN (20.2%)
(v)200 United Mexican States, Discount Bond, Series A,
(Floating Rate), 6.116%, 12/31/19.............. 171
(v)1,150 United Mexican States, Discount Bond, Series B,
(Floating Rate), 6.039%, 12/31/19.............. 980
250 United Mexican States, Discount Bonds, Series C,
(Floating Rate), 6.201%, 12/31/19.............. 213
(v)2,710 United Mexican States, Discount Bond, Series D,
(Floating Rate), 6.098%, 12/31/19.............. 2,310
1,890 United Mexican States, Global Bond, 10.375%,
2/17/09........................................ 1,959
740 United Mexican States, Global Bond, 11.375%,
9/15/16........................................ 801
(v)1,500 United Mexican States, Par Bond, Series W-A,
6.25%, 12/31/19................................ 1,178
(v)4,961 United Mexican States, Par Bond, Series W-B,
6.25%, 12/31/19................................ 3,897
--------
11,509
--------
12,045
--------
MOROCCO (1.0%)
SOVEREIGN (1.0%)
670 Government of Morocco, Series A, (Floating Rate),
6.063%, 1/01/09................................ 546
--------
NIGERIA (1.1%)
SOVEREIGN (1.1%)
500 Central Bank of Nigeria, Par Bonds, 6.25%,
11/15/20....................................... 314
(n)710 Nigeria Promissory Note, 5.092%, 1/05/10......... 294
--------
608
--------
PANAMA (2.5%)
SOVEREIGN (2.5%)
1,450 Republic of Panama, Global Bonds, 9.375%,
4/01/29........................................ 1,450
--------

FACE
AMOUNT VALUE
(000) (000)

----------------------------------------------------------------------------------

PERU (2.3%)
SOVEREIGN (2.3%)
U.S.$ (e,n,v)1,298 Republic of Peru, Front Loaded Interest Reduction
Bond, 3.25%, 3/07/17........................... $ 772
(n,v)880 Republic of Peru, PDI Bond, 4.00%, 3/07/17....... 562
--------
1,334
--------
PHILIPPINES (2.6%)
SOVEREIGN (2.6%)
(v)1,670 Republic of Phillipines, Front Loaded Interest
Reduction Bond, Series B, (Floating Rate),
5.962%, 6/01/08................................ 1,478
--------
POLAND (1.0%)
CORPORATE (1.0%)
(n)1,320 @Entertainment Inc. 0.00%, 2/01/09............... 587
--------
RUSSIA (3.3%)
SOVEREIGN (3.3%)
(e)2,130 Russian Federation, 8.75%, 7/24/05............... 538
(e)3,670 Russian Federation, 11.00%, 7/24/18.............. 950
(v)116 Russian Interest Arrears Note, (Floating Rate),
5.969%, 12/15/15............................... 9
(b,v)5,571 Russian Principal Loans, (Floating Rate), 0.00%,
12/15/20....................................... 390
--------
1,887
--------
TURKEY (2.2%)
CORPORATE (2.2%)
(e)820 Cellco Finance NV, 15.00%, 8/01/05............... 799
(e)539 Pera Financial Services Co., 9.375%, 10/15/02.... 459
--------
1,258
--------
VENEZUELA (2.1%)
SOVEREIGN (2.1%)
1,714 Republic of Venezuela Debt Conversion Bond,
Series DL, (Floating Rate), 5.938%, 12/18/07... 1,205
--------
TOTAL DEBT INSTRUMENTS (Cost $52,435)................................... 54,491
--------

[Download Table]

NO. OF
RIGHTS

-------------------

RIGHTS (0.0%)
MEXICO (0.0%)
6,246 United Mexican States, Value Recovery Rights,
expiring 6/30/03 (Cost $0)..................... --
--------

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

EMERGING MARKETS DEBT PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

NO. OF VALUE
WARRANTS (000)

----------------------------------------------------------------------------------

WARRANTS (0.0%)
ARGENTINA (0.0%)
2 Republic of Argentina, expiring 2/25/00.......... $ 5
--------

[Download Table]

FACE
AMOUNT
(000)

-------------------

SHORT-TERM INVESTMENT (2.1%)
REPURCHASE AGREEMENT (2.1%)
$ 1,187 Chase Securities, Inc. 4.65%, dated 3/31/99, due
4/01/99, to be repurchased at $1,187,
collateralized by U.S. Treasury Bonds, 8.875%
due 8/15/17, valued at $1,197 (Cost $1,187).... 1,187
--------
TOTAL INVESTMENTS 97.7% (Cost $53,622).................................. 55,683
--------

[Download Table]

OTHER ASSETS AND LIABILITIES (2.3%)
Other Assets.......................................................... 5,516
Liabilities........................................................... (4,209)
--------
1,307
--------
NET ASSETS (100%)....................................................... $ 56,990
--------
--------

[Download Table]

CLASS A:
--------------------------------------------------------------
NET ASSETS.................................................... $56,041
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 20,522,696 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $2.73
---------
---------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $949
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 344,002 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $2.76
---------
---------

------------------------------------------------------------

(e) -- 144A security -- certain conditions for public resale may exist.
(n) -- Step Bond -- coupon rate increases in increments to maturity. Rate
disclosed is as of March 31, 1999. Maturity date disclosed is the
ultimate maturity.
(v) -- Security is a Brady Bond, created through the debt restructuring
exchange of commercial bank loans to foreign entities for new fixed
income obligations. These bonds may be collateralized and are actively
traded on the over-the-counter secondary market.
ARP -- Argentina Peso
PDI -- Past Due Interest
PIK -- Payment-In-Kind. Income may be paid in additional securities or cash
at the discretion of the issuer.
Floating Rate -- Interest rate changes on these instruments are based on changes
in a designated base rate. The rates shown are those in effect at March 31,
1999.

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LETTER TO SHAREHOLDERS
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FIXED INCOME PORTFOLIO

The Fixed Income Portfolio seeks to produce a high total return consistent with
the preservation of capital by investing primarily in a diversified portfolio of
fixed income securities.

For the three months ended March 31, 1999, the Portfolio had a total return of
-0.82% for the Class A shares and -0.84% for the Class B shares compared to a
total return of -0.50% for the Lehman Aggregate Bond Index (the "Index"). For
the one-year period ended March 31, 1999, the Portfolio had a total return of
5.42% for the Class A shares and 5.35% for the Class B shares compared to 6.49%
for the Index. For the five-year period ended March 31, 1999, the average annual
total return of Class A shares was 7.82% compared to 7.79% for the Index. From
inception on May 15, 1991 through March 31, 1999, the average annual total
return of Class A shares was 8.06% compared to 8.19% for the Index. From
inception on January 2, 1996 through March 31, 1999, the average annual total
return of Class B shares was 6.37% compared to 6.56% for the Index. As of March
31, 1999, the Portfolio had an SEC 30-day yield of 5.73% for the Class A shares
and 5.58% for the Class B shares.

PERFORMANCE COMPARED TO THE LEHMAN AGGREGATE BOND INDEX(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
------------------------------------
AVERAGE AVERAGE
ANNUAL ANNUAL
ONE FIVE SINCE
YTD YEAR YEARS INCEPTION
------ ----- ------- ---------

PORTFOLIO -- CLASS A....................... -0.82% 5.42% 7.82% 8.06%
PORTFOLIO -- CLASS B....................... -0.84 5.35 N/A 6.37
INDEX -- CLASS A........................... -0.50 6.49 7.79 8.19
INDEX -- CLASS B........................... -0.50 6.49 N/A 6.56

1. The Lehman Aggregate Bond Index is an unmanaged index comprised of the
Government/Corporate Index, the Mortgage-Backed Securities Index and the
Asset-Backed Securities Index.

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE PERFORMANCE RESULTS PROVIDED ARE
FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF
THE PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. YIELDS WILL FLUCTUATE AS MARKET CONDITIONS CHANGE.

FIXED INCOME

Evidence of continuing strength of the U.S. economy had an adverse effect on the
domestic bond market during the first quarter. With robust retail sales,
consumption, housing, and consumer confidence data, market participants became
concerned that the Federal Reserve might raise short-term interest rates to
reduce the risk of higher inflation. The result was a sell-off that temporarily
forced most Treasury securities yields to their highest levels since mid-August
of last year.

Despite the surprisingly strong economic data, most measures of inflation have
actually remained well behaved. Our research shows that inflation trends over
the past few years can be explained by three major factors: productivity gains
(favorable), rising labor costs (unfavorable), and lower oil prices (favorable).
As we look ahead, our view is that productivity gains might diminish, labor
costs are likely to stabilize, and oil prices could be flat to higher. Thus, it
appears that these three factors are again likely to create a relatively stable
inflationary environment with the Consumer Price Index staying in the 1.5%-2.0%
area on an annualized basis for at least the rest of this year. Under such
circumstances, it would be difficult for the Federal Reserve to tighten monetary
policy, as evidenced by the recently concluded FOMC meeting where monetary
policy was left unchanged. The Fed is also keenly aware that its actions can
have consequences outside the U.S., most notably on the delicate economic
situation in parts of Asia and Latin America. Accordingly, we expect the central
bank to maintain a steady policy for most of 1999, and that signs of a third
quarter or fourth quarter economic slowdown might allow the Fed to consider
pursuing a more accommodative monetary policy.

Although absolute returns in the fixed income area were generally unfavorable
during the first quarter, corporates and mortgages were once again strong
performers relative to Treasuries, continuing a trend that has been in place
since the end of the "flight-to-quality" Treasury rally early in the fourth
quarter of last year. Yield spreads on these and other non-Treasury securities
tightened, thereby having a favorable effect on relative returns. We remain
overweighted in both corporates and mortgages relative to their benchmark
weights as yield spreads are still above long-term averages, and trends in

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FIXED INCOME PORTFOLIO (CONT.)
overall corporate credit quality and mortgage prepayment speeds also remain
favorable. Despite the overweight in these non-Treasury sectors, we have
preserved a very high weighted average credit quality in the Portfolio. The
overall level of prepayment risk associated with our mortgage securities is very
close to that of the broader mortgage index.

We have maintained the interest rate sensitivity of the Portfolio at
approximately a half-year greater than the benchmark during the quarter,
primarily because real interest rates remained at above-average levels at a time
of stable inflation. With the sharp rise in Treasury yields, however, this
decision detracted from relative performance. Longer maturities remain
attractive relative to lower-yielding intermediates, so we continue to have
modest yield-curve strategy involving an underweight in intermediates in favor
of longer maturities. TIPS have held their value quite well during the first
quarter sell-off, and have had a favorable effect on relative performance. It
remains the case that TIPS have "running yields" -- real yields plus the current
annual inflation rate -- above those on nominal Treasuries with similar
maturities. Also helping performance was the hedged DM bond holding as euro-bond
markets held their values better than the U.S. market.

Warren Ackerman, III
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

FIXED INCOME PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

FACE
AMOUNT VALUE
(000) (000)

---------------------------------------------------------------------------

FIXED INCOME SECURITIES (99.5%)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (51.9%)
FEDERAL HOME LOAN MORTGAGE CORPORATION (8.4%)
$ 6 13.00%, 9/01/10.................................. $ 7
17,901 6.00%, 12/01/28.................................. 17,414
---------
17,421
---------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (23.9%)
2,909 6.00%, 9/01/10................................... 2,896
4,175 6.00%, 2/01/11................................... 4,151
2,279 8.00%, 2/01/12................................... 2,345
6,633 6.00%, 4/01/13................................... 6,583
7,500 5.50%, 4/01/14................................... 7,303
16,802 6.00%, 4/01/28................................... 16,330
10,088 6.00%, 2/01/29................................... 9,804
---------
49,412
---------
U.S. TREASURY BONDS (7.1%)
11,000 8.75%, 5/15/20................................... 14,725
---------
U.S. TREASURY NOTES (12.5%)
9,000 6.00%, 7/31/02................................... 9,228
4,000 5.75%, 8/15/03................................... 4,081
7,000 6.50%, 8/15/05................................... 7,422
5,174 3.375%, 1/15/07 (Inflation Indexed).............. 4,981
---------
25,712
---------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS.................. 107,270
---------
CORPORATE BONDS AND NOTES (30.5%)
AUTOMOTIVE (1.6%)
2,000 Ford Motor Co. 6.375%, 2/01/29................... 1,864
1,500 General Motors 6.75%, 5/01/28.................... 1,462
---------
3,326
---------
BANKING (0.7%)
1,500 Chase Manhattan Corp. 6.00%, 2/15/09............. 1,461
---------
CHEMICALS (0.9%)
2,000 Monsanto Co. 6.60%, 12/01/28..................... 1,910
---------
CONSUMER STAPLES (1.2%)
2,500 Philip Morris Cos., Inc., (Floating Rate) 6.15%,
3/15/00........................................ 2,517
---------
ELECTRONICS (1.5%)
3,000 Sony Corp. 6.125%, 3/04/03....................... 3,034
---------
FINANCE (18.7%)
2,000 American General Institutional Capital, Series A,
7.57%, 12/01/45................................ 2,082
2,000 BT Capital Trust, Series B1, D91 7.90%,
1/15/27........................................ 2,029
3,000 CNA Financial Corp. 6.50%, 4/15/05............... 2,963
2,000 Donaldson, Lufkin & Jenrette, Inc. 6.90%,
10/01/07....................................... 2,035
2,500 Farmers Exchange Capital, 7.05%, 7/15/28......... 2,390

FACE
AMOUNT VALUE
(000) (000)

---------------------------------------------------------------------------

$ 2,000 First Chicago Corp. 7.75%, 12/01/26.............. $ 2,053
2,000 Ford Motor Credit Co. 6.125%, 4/28/03............ 2,015
2,500 General Motors Acceptance Corp. 7.375%,
6/22/00........................................ 2,558
1,500 Goldman Sachs Group, Series A 6.34%, 3/01/06..... 1,488
2,350 Lehman Brothers Holdings, Inc. 6.625%, 4/01/04... 2,350
1,300 Lehman Brothers Holdings, Inc. 7.375%, 5/15/04... 1,343
3,000 Liberty Mutal Insurance Co. 8.20%, 5/04/07....... 3,274
2,000 Lumbermans Mutual Casualty Co., 8.45%,
12/01/69....................................... 1,995
3,000 Merrill Lynch & Co. 6.00%, 2/12/03............... 3,015
1,000 Progressive Corp. 6.625%, 3/01/29................ 958
2,500 Prudential Insurance Co. 6.375%, 7/23/06......... 2,510
2,000 Salomon, Inc. 7.30%, 5/15/02..................... 2,080
1,500 Simon Debartolo Group, MTN, 7.125%, 9/20/07...... 1,494
---------
38,632
---------
HEALTH CARE SUPPLIES & SERVICES (0.7%)
1,500 Columbia/HCA Healthcare, MTN 8.85%, 1/01/07...... 1,497
---------
MULTI-INDUSTRY (0.5%)
1,000 Lowes Companies Inc. 6.50%, 3/15/29.............. 951
---------
TELECOMMUNICATIONS (1.9%)
1,000 AT&T Corp. 6.50%, 3/15/29........................ 978
3,000 Worldcom, Inc. 6.40%, 8/15/05.................... 3,035
---------
4,013
---------
TRANSPORTATION-ROAD & RAIL (0.7%)
1,500 Union Pacific Co. 6.625%, 2/01/29................ 1,402
---------
UTILITIES (2.1%)
2,500 Endesa-Chile (Yankee Bond) 7.75%, 7/15/08........ 2,405
1,889 Oil Enterprises Ltd., 6.239%, 6/30/08............ 1,836
---------
4,241
---------
TOTAL CORPORATE BONDS AND NOTES............................... 62,984
---------
ASSET BACKED SECURITIES (8.7%)
3,000 Aesop Funding II LLC, Series 97-1, Class A1
6.22%, 10/20/01................................ 3,018
3,000 COMED, Series 1998-1, Class A2, SEQ 5.29%,
6/25/03........................................ 2,986
1 Federal National Mortgage Association, 5.34%,
8/25/06........................................ 1
5,000 Ford Credit Auto Owner Trust, Series 98-B, Class
A3, 5.85%, 10/15/01............................ 5,023
2,203 Mid-State Trust, Series IV A 8.33%, 4/01/30...... 2,352
1,250 Peco Energy Transition Trust, 6.05%, 3/01/09..... 1,241

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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FIXED INCOME PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

FACE
AMOUNT VALUE
(000) (000)
---------------------------------------------------------------------------

ASSET BACKED SECURITIES (CONT.)

[Download Table]

$ 3,250 Team Fleet Financing Corp., Series 97-1A 7.35%,
5/15/03........................................ $ 3,353
---------
TOTAL ASSET BACKED SECURITIES................................... 17,974
---------
COLLATERALIZED MORTGAGE OBLIGATIONS (6.6%)
650 Chase Commercial Mortgage Securities Corp.,
Series 97-2, Class A1, 6.45%, 12/19/04......... 656
3,024 First Union-Lehman Brothers Commercial Mortgage,
6.479%, 3/18/04................................ 3,050
4,016 Lehman Brothers Large Loan, Series 97-LLI A1,
6.79%, 6/12/04................................. 4,104
2,790 Merrill Lynch Mortgage Investors, Inc., 6.22%,
2/15/30........................................ 2,801
246 Resolution Trust Corp., Series 91-M5, Class A,
9.00%, 3/25/17................................. 246
2,898 World Financial Credit Services 6.91%, 9/01/13... 2,937
---------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS....................... 13,794
---------
EUROBONDS (1.8%)
GOVERNMENT BONDS (1.8%)
EUR 3,600 Deutschland Republic 4.75%, 7/04/28.............. 3,760
---------
TOTAL FIXED INCOME SECURITIES (Cost $207,104)................. 205,782
---------
SHORT-TERM INVESTMENTS (2.9%)
REPURCHASE AGREEMENT (2.9%)
6,002 Chase Securities, Inc. 4.65%, dated 3/31/99, due
4/01/99, to be repurchased at $6,003,
collateralized by U.S. Treasury Bonds, 7.125%,
due 2/15/23, valued at $6,049 (Cost $6,002).... 6,002
---------
TOTAL INVESTMENTS (102.4%) (Cost $213,106)...................... 211,784
---------

[Download Table]

VALUE
(000)

---------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-2.4%)
Other Assets................................................... $ 6,927
Liabilities.................................................... (11,904)
--------
4,977
--------
NET ASSETS (100%)................................................ $206,807
--------
--------

[Download Table]

CLASS A:
--------------------------------------------------------------
NET ASSETS.................................................... $203,849
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 18,710,663 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $10.89
---------
---------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $2,958
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 271,240 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $10.91
---------
---------

------------------------------------------------------------

EUR -- European Monetary Unity
MTN -- Medium Term Note
Floating Rate Security -- The interest rate changes on these instruments are
based on changes in a designated base rate. The rates shown are those in effect
on March 31, 1999.
Inflation Indexed -- Security includes principal adjustment feature in which par
amount adjusts with the Consumer Price Index to insulate bonds from the effects
of inflation. The face amount shown is that in effect on March 31, 1999.

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
GLOBAL FIXED INCOME PORTFOLIO

The Global Fixed Income Portfolio seeks to produce an attractive real rate of
return while preserving capital by investing primarily in high quality fixed
income securities issued by U.S. and foreign issuers including governments,
agencies, supranational entities, eurobonds and corporations with varying
maturities in various currencies.

PERFORMANCE COMPARED TO THE J.P. MORGAN TRADED GLOBAL BOND INDEX(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
---------------------------------------
AVERAGE
AVERAGE ANNUAL
ONE ANNUAL SINCE
YTD YEAR FIVE YEARS INCEPTION
------ ----- ---------- ---------

PORTFOLIO -- CLASS A....................... -3.92% 7.92% 6.44% 7.43%
PORTFOLIO -- CLASS B....................... -3.93 7.67 N/A 5.04
INDEX -- CLASS A........................... -3.90 9.73 7.36 8.55
INDEX -- CLASS B........................... -3.90 9.73 N/A 5.05

1. The J.P. Morgan Traded Global Bond Index is an unmanaged index of securities
and includes Australia, Belgium, Canada, Denmark, Finland, France, Germany,
Ireland, Italy, Japan, The Netherlands, New Zealand, Portugal, South Africa,
Spain, Sweden, the United Kingdom and the United States.

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE PERFORMANCE RESULTS PROVIDED ARE
FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF
THE PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK
CONSIDERATIONS ASSOCIATED WITH INTERNATIONAL INVESTING. YIELDS WILL FLUCTUATE AS
MARKET CONDITIONS CHANGE.

For the three months ended March 31, 1999, the Portfolio had a total return of
-3.92% for the Class A shares and -3.93% for the Class B shares compared to a
total return of -3.90% for the J.P. Morgan Traded Global Bond Index (the
"Index"). For the one-year period ended March 31, 1999, the Portfolio had a
total return of 7.92% for the Class A shares and 7.67% for the Class B shares
compared to 9.73% for the Index. For the five-year period ended March 31, 1999,
the average annual total return of Class A shares was 6.44% compared to 7.36%
for the Index. From inception on May 1, 1991 through March 31, 1999, the average
annual total return of Class A shares was 7.43% compared to 8.55% for the Index.
From inception on January 2, 1996 through March 31, 1999, the average annual
total return of Class B shares was 5.04% compared to 5.05% for the Index. As of
March 31, 1999, the Portfolio had an SEC 30-day yield of 4.02% for the Class A
shares and 3.87% for the Class B shares.

The first quarter was a disappointing period for global bond markets.

In the U.S., the Treasury market underwent a significant change in sentiment as
the U.S. economy continued to exceed growth expectations and concerns about the
emerging economies diminished. Investor's concluded that the Federal Reserve,
far from cutting interest rates further, could move to reverse some of the
easing initiated last autumn. Therefore, apart from a short rally following the
Brazilian devaluation in mid-January, U.S. yields moved steadily upwards, with
the ten-year bond ending the period approximately 60 basis points higher.

In Europe, domestic factors were more supportive; further weak economic data out
of the industrial sector, particularly Germany, and the surprise resignation of
the German Finance Minister broadened the consensus that the ECB would move to
cut interest rates. As a result, ten-year yields in Europe moved only 10-30
basis points higher with markets showing minimal reaction to both the
resignation of the European Commission and the war in Kosovo.

The Japanese market initially remained concerned about oversupply but rallied
from the sharp sell-off of December/January as the targeting of a zero overnight
call rate by the Bank of Japan signaled a significant shift in monetary policy.
Ten-year yields fell from a high of 2.40% at the beginning of February to end at
1.75%, a fall of approximately 30 basis points during the quarter.

Global portfolio returns in U.S. dollar terms were also hurt by the strength of
the dollar which appreciated 8.3% against the euro and 4.8% against the Japanese
yen over the period.

Changes to our investment strategy were focused on our Japanese position taking
advantage of the high volatility within the market. Following the sharp move up
in yields in late January, we reduced our underweight Japanese bond position by
half, taking interest rate exposure to approximately minus 0.35 years. In terms
of currency, we switched 2% out of the yen, and later back into the yen,
following the

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LETTER TO SHAREHOLDERS
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GLOBAL FIXED INCOME PORTFOLIO (CONT.)

Bank of Japan move. We also sold our position in New Zealand government bonds
following their recent outperformance.

The Portfolio remained overweight interest rate exposure in both the dollar bloc
and European markets and overall duration was unchanged at slightly longer than
the benchmark. Given market movements, country allocation was the main reason
for the Portfolio's underperformance over the quarter as both our underweighting
to the Japanese market and our overweighting to the world ex-Japan proved to be
negative factors.

Looking forward, we believe the fundamental background for bonds remains
supportive. Despite the pick up in activity in some Asian economies, we expect a
period of persistent slow global growth and benign inflation over the coming
year. We see the Japanese economy remaining under pressure, with a corporate
sector still blighted by large excess capacity, falling earnings and a need for
restructuring. The main risk to the Japanese market is the large increase in
supply expected to occur over the next few months. Within Europe, performance is
mixed; while growth is picking up in some countries such as France and the
Netherlands, Germany is still weak. In the U.S., the 'engine of global growth'
over the past year, we expect a moderation in the robust pace of growth. While
the U.S. consumer has proved extremely resilient, we believe that ongoing growth
in consumption is dependent on consumers continuing to enjoy outsized stock
market gains, and as such is unsustainable. With regard to price pressures, we
see the recent rise in energy prices as representing a one-off effect and while
there may be an increase in inflation this year relative to 1998, the underlying
trend will remain that of stable low inflation.

We are concerned about the size of the U.S. current account deficit and this
clearly has negative potential for the dollar. In the near term, however, the
dollar will continue to be supported as long as the U.S. remains the area of
strong growth and higher interest rates within the world. These considerations
lead us to be neutral on the dollar versus the euro, but the need for Japan to
maintain an easy money/weak currency policy to support its economy leads us to
favor the dollar and the euro versus the yen.

J. David Germany
PORTFOLIO MANAGER

Michael B. Kushma
PORTFOLIO MANAGER

Paul F. O'Brien
PORTFOLIO MANAGER

Ram Willner
PORTFOLIO MANAGER

April 1999

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

GLOBAL FIXED INCOME PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

FACE
AMOUNT VALUE
(000) (000)

---------------------------------------------------------------------------

FIXED INCOME SECURITIES (90.8%)
AUSTRALIAN DOLLAR (1.9%)
GOVERNMENT BONDS (1.1%)
AUD 700 Government of Australia 8.75%, 1/15/01........... $ 473
--------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS-- GLOBAL (0.8%)
AUD 500 Federal National Mortgage Association--Global
6.375%, 8/15/07................................ 329
--------
802
--------
BELGIAN FRANC (0.6%)
GOVERNMENT BONDS (0.6%)
BEF 200 Kingdom of Belgium 9.20%, 6/28/10................ 249
--------
BRITISH POUND (7.7%)
GOVERNMENT BONDS (7.7%)
GBP 125 United Kingdom Treasury Gilt 8.00%, 6/10/03...... 227
1,500 United Kingdom Treasury Gilt 8.50%, 7/16/07...... 3,052
--------
3,279
--------
CANADIAN DOLLAR (2.8%)
GOVERNMENT BONDS (2.8%)
CAD 1,500 Government of Canada 8.75%, 12/01/05............. 1,200
--------
DANISH KRONE (1.9%)
GOVERNMENT BONDS (1.9%)
DKK 4,800 Kingdom of Denmark 8.00%, 5/15/03................ 813
--------
FRENCH FRANC (3.8%)
GOVERNMENT BONDS (3.8%)
FRF 350 Government of France 4.50%, 7/12/03.............. 397
1,000 Government of France O.A.T. 6.00%, 10/25/25...... 1,234
--------
1,631
--------
GERMAN MARK (22.1%)
CORPORATE BONDS (1.1%)
DEM 400 Kredit Fuer Wiederaufbau 5.00%, 1/04/09.......... 460
--------
GOVERNMENT BONDS (21.0%)
DEM 2,500 Deutschland Republic, Series 91, 8.375%,
5/21/01........................................ 3,000
1,150 Government of Germany 6.25%, 1/04/24............. 1,472
400 Hypothekenbk in Essen 4.00%, 1/19/09............. 419
1,510 Treuhandanstalt 6.875%, 6/11/03.................. 1,857
1,700 Treuhandanstalt 7.50%, 9/09/04................... 2,192
--------
8,940
--------
9,400
--------
GREEK DRACHMA (1.8%)
GOVERNMENT BONDS (1.8%)
GRD 220,000 Hellenic Republic 6.60%, 1/15/04................. 751
--------

FACE
AMOUNT VALUE
(000) (000)

---------------------------------------------------------------------------

ITALIAN LIRA (3.4%)
GOVERNMENT BONDS (3.4%)
ITL 1,000 Buoni Poliennali L.C. el Tesoro 9.50%, 2/01/06... $ 1,441
--------
JAPANESE YEN (9.1%)
GOVERNMENT BONDS (9.1%)
JPY 300,000 Government of Japan, Series 207, 0.90%,
12/22/08....................................... 2,326
150,000 International Bank for Reconstruction &
Development 4.75%, 12/20/04.................... 1,534
--------
3,860
--------
NETHERLANDS GUILDER (4.3%)
GOVERNMENT BONDS (4.3%)
NLG 1,500 Netherlands Government, Series 1, 8.25%,
2/15/02........................................ 1,847
--------
SPANISH PESETA (2.4%)
GOVERNMENT BONDS (2.4%)
ESP 900 Spanish Government 5.15%, 7/30/09................ 1,034
--------
SWEDISH KRONA (1.6%)
GOVERNMENT BONDS (1.6%)
SEK 4,900 Swedish Government 6.00%, 2/09/05................ 665
--------
UNITED STATES DOLLAR (27.4%)
ASSET BACKED SECURITIES (2.8%)
U.S.$ 130 California Infrastructure (Southern California
Edison), Series 97-1, Class A7, 6.42%,
12/26/09....................................... 132
460 Delta Funding Home Equity Loan Trust, Series
97-1, 7.21%, 4/25/29........................... 474
402 Mid-State Trust, Series IV A, 8.33%, 4/01/30..... 427
(e)200 Monsanto Co. 6.60%, 12/01/28..................... 192
--------
1,225
--------
COLLATERALIZED MORTGAGE OBLIGATIONS (1.3%)
528 Asset Securitization Corp., Series 95-MD4 A1,
CMO, 7.10%, 8/13/29............................ 547
--------
CORPORATE BONDS AND NOTES (6.0%)
150 AT&T Corp., 6.50%, 3/15/29....................... 147
(e)250 Farmers Exchange Capital, 7.05%, 7/15/28......... 239
(e)150 First Chicago Corp., 7.75%, 12/01/26............. 153
(e)100 Flordia Winstorm, 7.125%, 2/25/19................ 99
250 Ford Motor Co. 6.375%, 2/01/29................... 234
150 General Motors 6.75%, 5/01/28.................... 148
(e)385 Goldman Sachs Group, 6.25%, 2/01/03.............. 387
300 Lucent Technologies 6.45%, 3/15/29............... 293
250 Merrill Lynch & Co Inc. 6.875%, 11/15/18......... 248

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

GLOBAL FIXED INCOME PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

FACE
AMOUNT VALUE
(000) (000)
---------------------------------------------------------------------------

CORPORATE BONDS AND NOTES (CONT.)

[Download Table]

U.S.$ (e)300 Metropolitan Life Insurance 7.45%, 11/01/23...... $ 308
(e)300 Nationwide Mutual Insurance 7.50%, 2/15/24....... 296
--------
2,552
--------
EUROBONDS (0.9%)
400 Deutsche Ausgleichsbank, Series E, MTN 5.125%,
9/22/03........................................ 390
--------
TAX-EXEMPT INSTRUMENT (0.7%)
300 Tennessee Valley Authority, Series G, 5.375%,
11/13/08....................................... 289
--------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (15.7%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION
750 5.75%, 6/15/05................................... 752
--------
U.S. TREASURY BOND
2,890 6.25%, 8/15/23................................... 3,026
--------
U.S. TREASURY NOTES
1,000 6.25%, 10/31/01.................................. 1,028
750 7.25%, 5/15/04................................... 817
950 7.50%, 2/15/05................................... 1,053
19 3.625%, 1/15/08 (Inflation Indexed).............. 19
--------
2,917
--------
6,695
--------
11,698
--------
TOTAL FIXED INCOME SECURITIES (Cost $38,985)..................... 38,670
--------
SHORT-TERM INVESTMENTS (7.4%)
COMMERICAL PAPERS (3.5%)
800 Abbot Labs, Inc., due 4/19/99, 3.99%............. 799
700 General Mills, Inc., due 4/9/99, 4.82%........... 699
--------
TOTAL COMMERICAL PAPERS.......................................... 1,498
--------
REPURCHASE AGREEMENT (3.9%)
1,660 Chase Securities, Inc. 4.65%, dated 3/31/99, due
4/01/99, to be repurchased at $1,660,
collateralized by U.S. Treasury Bonds, 7.125%,
due 2/15/23, valued at $1,673 (Cost $1,660).... 1,660
--------
TOTAL SHORT-TERM INVESTMENTS (Cost $3,158)....................... 3,158
--------

[Download Table]

VALUE
(000)

---------------------------------------------------------------------------

TOTAL INVESTMENTS (98.2%) (Cost $42,143)........................ $ 41,828
---------
OTHER ASSETS AND LIABILITIES (1.8%)
Other Assets.................................................. 4,530
Liabilities................................................... (3,758)
---------
772
---------
NET ASSETS (100%)............................................... $ 42,600
---------
---------

[Download Table]

CLASS A:
--------------------------------------------------------------
NET ASSETS.................................................... $42,254
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 3,515,297 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $12.02
---------
---------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $346
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 28,899 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $11.98
---------
---------

------------------------------------------------------------

(e) -- 144A Security -- certain conditions for public sale may exist.
CMO -- Collateralized Mortgage Obligation
MTN -- Medium Term Notes
Inflation Indexed Security -- Security includes principal adjustment feature in
which par amount adusts with the Consumer Price Index to insulate bonds from the
effects of inflation. The face amount shown is that in effect on March 31, 1999.

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LETTER TO SHAREHOLDERS
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HIGH YIELD PORTFOLIO

The High Yield Portfolio seeks to maximize total return by investing primarily
in a diversified portfolio of high yield fixed income securities that offer a
yield above that generally available on debt securities in the four highest
rating categories of the recognized rating services.

For the three months ended March 31, 1999, the Portfolio had a total return of
2.92% for the Class A shares and 2.79% for the Class B shares compared to a
total return of 1.64% for the CS First Boston High Yield Index (the "Index").
For the one-year period ended March 31, 1999, the Portfolio had a total return
of 1.73% for the Class A shares and 1.48% for the Class B shares compared to
-0.75% for the Index. For the five-year period ended December 31, 1999, the
average annual total return of Class A shares was 10.96% compared to 8.74% for
the Index. From inception on September 28, 1992 through March 31, 1999, the
average annual total return of Class A shares was 11.75% compared to 9.62% for
the Index. From inception on January 2, 1996 through March 31, 1999, the average
annual total return of Class B shares was 10.82% compared to 8.24% for the
Index. As of March 31, 1999, the Portfolio had an SEC 30-day yield of 9.84% for
the Class A shares and 9.59% for the Class B shares.

PERFORMANCE COMPARED TO THE CS FIRST BOSTON HIGH YIELD INDEX(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
---------------------------------------------------------
AVERAGE
ONE ANNUAL AVERAGE ANNUAL
YTD YEAR FIVE YEARS SINCE INCEPTION
---------- ---------- ------------- ------------------

PORTFOLIO -- CLASS
A................... 2.92% 1.73% 10.96% 11.75%
PORTFOLIO -- CLASS
B................... 2.79 1.48 N/A 10.82
INDEX -- CLASS A..... 1.64 -0.75 8.74 9.62
INDEX -- CLASS B..... 1.64 -0.75 N/A 8.24

1. The CS First Boston High Yield Index is an unmanaged index of high yield
corporate bonds.

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. INVESTING IN HIGH YIELD FIXED INCOME
SECURITIES, OTHERWISE KNOWN AS "JUNK BONDS" IS SPECULATIVE AND INCLUDES GREATER
RISK OF LOSS OF PRINCIPAL AND INTEREST. THE PERFORMANCE RESULTS PROVIDED ARE FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE
PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. YIELDS WILL FLUCTUATE AS MARKET CONDITIONS CHANGE.

The high yield market outperformed high quality bonds in the first quarter as
investors continued to be more willing to bear risk. Despite volatility and a
sell off in the Treasury market, robust mergers and acquisitions activity,
evidence of a stronger than expected U.S. economy, and solid inflows into high
yield mutual funds contributed to the strength in the sector. In addition, a
strong equity market, rising energy prices and relative stability in the
emerging markets also helped the performance of high yield bonds.

The positive results versus the Index were primarily a result of a large
overweight in the telecommunications sector, which continued to demonstrate
strong performance. Results also benefited from security selection across
sectors, exposure to non-US issues, and from an underweight in the energy
sector, which performed poorly. Exposure to the healthcare sector, which is
under pressures and an underweight in cyclical issues, which started to rebound
in the quarter, detracted from relative performance.

Consolidation, equity investments by higher quality companies and initial public
offerings demonstrate the inherent asset values in many of the companies in the
telecommunications and cable sectors. Nextel Communications, a leading player in
the domestic wireless business and one of our largest holdings, performed well
on speculation regarding a possible combination with a higher quality company.
Similarly, the Portfolio benefited as long distance providers Qwest, Level
Three, Dolphin Telecom and Global Crossing have either entered into a strategic
combination or partnership or have raised additional capital in a very favorable
market environment. Internet data and access providers such as PSINet, Rhythms
Net and Concentric held in the Portfolio also performed well. In contrast, small
exposure to satellite communications companies including Iridium and American
Mobile Satellite detracted slightly from returns as these companies performed
poorly due to disappointing launch experience and slow customer uptake of
service.

Equity investments and actual or proposed M&A activity propelled the cable and
media sectors as well. For example, the Portfolio benefited from Microsoft's
$500 million investment in NTL, a U.K. cable company. Cable holdings in general
benefited from Comcast's merger with Media One and from Microsoft co-founder
Paul Allen's multi-billion dollar investments in cable systems throughout the
world.

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
HIGH YIELD PORTFOLIO (CONT.)
Regarding positive developments in other holdings, Adelphia Communications in
the cable sector was buoyed by a ratings upgrade and Chancellor Media rallied
when it announced it was exploring alternatives to enhance shareholder value.
The positive developments in the cable sector are starting to price many of the
cable issues out of the high yield market.

After concern early in the quarter over the much anticipated devaluation of the
Brazilian currency, emerging market issues benefited from the upgrade of Korean
sovereign debt to investment grade and from reduced fear of contagion from
Brazil. The gaming industry has also demonstrated a sound earnings trend and the
securities in that sector have generally performed well.

Cyclical issues rebounded somewhat in the period. While the Portfolio has
benefited as certain individual cyclical credits have done well, being
underweighted in these issues was a negative for returns. Pricing has been
somewhat better in many product lines, but security prices may be a bit ahead of
the fundamentals in some cases. For example, capacity utilization in steel is
still at unacceptable levels and the likelihood of strong profitability is
questionable for many companies. However, the level of imports is declining and
some price increases are taking hold. We have been underweighted in these
issues, which has been a large positive for returns over recent years, but have
been gradually reducing this bet by adding names such as Pacifica Papers,
National Steel and DR Horton.

The weakest sectors have been healthcare and energy as weak industry pricing has
put serious pressure on the most leveraged competitors. The price of Vencor, a
holding in the long term care segment, has fallen dramatically due to difficulty
adjusting to a new regulatory pricing scheme. In addition, Columbia HCA, an
important holding that we believe is a sound credit, sold off when it lost its
investment grade rating by S&P. Until recently, weak oil prices depressed the
energy sector. OPEC pledged to reduce production and several major oil companies
have announced mergers with the likely result that combined drilling plans will
be reduced significantly. This should be beneficial for the exploration and
production companies that survive, but spells continued problems for drilling
companies and other service companies.

Even with the rebound in the high yield market relative to high quality bonds,
we continue to believe that the sector offers attractive relative value. Spread
levels versus high quality bonds are still at levels that are wider than long
term averages at a time when the economy and credit quality of most issuers is
strong. High yield bonds also appear compelling versus equities on a risk
adjusted expected return basis.

Robert Angevine
PORTFOLIO MANAGER

Thomas L. Bennett
PORTFOLIO MANAGER

Stephen F. Esser
PORTFOLIO MANAGER

Gordon W. Loery
PORTFOLIO MANAGER

April 1999

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--------------------------------------------------------------------------------
INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

HIGH YIELD PORTFOLIO
--------------------------------------------------------------------------------

[Download Table]

FACE
AMOUNT VALUE
(000) (000)

---------------------------------------------------------------------------

CORPORATE BONDS AND NOTES (94.2%)
ASSET BACKED CORPORATES (0.4%)
$ 815 Long Beach Auto, Series 97-1, Class B, 14.22%,
10/26/03....................................... $ 808
---------
CABLE (2.1%)
1,100 Lenfest Communications, Inc., 8.375%, 11/01/05... 1,179
1,000 Rogers Cablesystems Ltd., Series B, 10.00%,
3/15/05........................................ 1,127
185 Rogers Cablesystems of America, 10.125%,
9/01/12........................................ 207
1,325 Rogers Communications, Inc., 9.125%, 1/15/06..... 1,391
---------
3,904
---------
CHEMICALS (1.1%)
2,000 ISP Holdings, Inc., Series B, 9.00%, 10/15/03.... 2,058
---------
COMMERCIAL MORTGAGES (0.4%)
875 FMAC Loan Receivables Trust, Series 96-B, Class
C, (Floating Rate), 7.929%, 11/01/18........... 665
---------
COMMUNICATIONS (7.5%)
1,040 Globalstar Capital Corp., 11.375%, 2/15/04....... 681
310 Globalstar LP, 11.50%, 6/01/05................... 197
1,010 Hyperion Telecommunication, 0.00%, 4/15/03....... 836
(n)3,130 Intermedia Communications, Inc., Series B, 0.00%,
7/15/07........................................ 2,387
800 Intermedia Communications, Inc., Series B, 8.50%,
1/15/08........................................ 798
1,620 Iridium LLC/Capital Corp., Series A, 13.00%,
7/15/05........................................ 697
1,020 Metromedia Fiber Network, 10.00%, 11/15/08....... 1,094
(n)4,095 Nextel Communications, Inc., 0.00%, 9/15/07...... 3,000
1,290 Onepoint Communications Corp., 14.50%, 6/01/08... 658
(n)770 RCN Corp., 0.00%, 10/15/07....................... 520
1,620 Rogers Cantel, Inc., 8.30%, 10/01/07............. 1,693
(n)51 RSL Communications, plc, 12.25%, 11/15/06........ 56
(n)1,440 Viatel, Inc., 0.00%, 4/15/08..................... 882
570 Vintage Petroleum, 9.75%, 6/30/09................ 581
---------
14,080
---------
CORPORATE BONDS (0.7%)
1,300 Mosaic Re, Class A, 10.10%, 7/09/99.............. 1,309
---------
ENERGY (1.1%)
2,040 Snyder Oil Corp., 8.75%, 6/15/07................. 2,045
---------
FINANCIAL (0.6%)
(n)1,110 SB Treasury Co. LLC, 9.40%, 12/29/49............. 1,088
---------
FOOD AND BEVERAGE (0.7%)
1,425 Smithfield Foods, Inc., 7.625%, 2/15/08.......... 1,375
---------

FACE
AMOUNT VALUE
(000) (000)

---------------------------------------------------------------------------

GAMING (1.8%)
$ 2,663 Station Casinos, Inc., 10.125%, 3/15/06.......... $ 2,826
470 Station Casinos, Inc., 9.75%, 4/15/07............ 497
---------
3,323
---------
GENERAL INDUSTRIAL (17.4%)
400 Adelphia Communications, Inc., 8.375%, 2/01/08... 411
275 Adelphia Communications, Series B, 9.875%,
3/01/07........................................ 303
1,025 Adelphia Communications, Series B, 8.375%,
2/01/08........................................ 1,053
485 Allied Waste North America, 7.875%, 1/01/09...... 474
1,390 American Standard, Cos., Inc., 7.375%, 2/01/08... 1,358
585 Applied Power Inc., 8.75%, 4/01/09............... 591
950 Axia, Inc., 10.75%, 7/15/08...................... 958
2,150 Cex Holdings Inc., 9.625%, 6/01/08............... 2,021
1,380 Chancellor Media, 9.00%, 10/01/08................ 1,478
3,758 Columbia Healthcare Corp., 7.69%, 6/15/25........ 3,160
1,450 Columbia/HCA Heathcare Corp., 7.00%, 7/01/07..... 1,304
600 Columbia/HCA Healthcare Corp., 7.58%, 9/15/25.... 503
1,855 D R Horton Inc., 8.00%, 2/01/09.................. 1,827
2,010 Echostar DBS Corp., 9.375%, 2/01/09.............. 2,085
320 Entex Telecom Group plc, 12.50%, 8/01/06......... 230
1,880 Harrahs Operating Co., Inc., 7.875%, 12/15/05.... 1,894
1,675 Hayes Lemmerz International, Inc., 8.25%,
12/15/08....................................... 1,679
1,820 Hilton Hotels Corp., 7.95%, 4/15/07.............. 1,865
700 Host Marriott LP, 8.375%, 2/15/06................ 702
910 Lenfest Communications, Inc., 7.625%, 2/15/08.... 939
(n)1,620 Norcal Waste Systems, Inc., Series B, 13.50%,
11/15/05....................................... 1,798
1,405 National Steel Corp., 9.875%, 3/01/09............ 1,444
(n)3,050 NTL, Inc., 0.00%, 4/01/08........................ 2,074
1,425 Park Place Entertainment, 7.875%, 12/15/05....... 1,402
950 R&B Falcon Corp., 9.50%, 12/15/08................ 841
---------
32,394
---------
HEALTH CARE (3.1%)
1,730 Fresenius Medical Capital Trust II, 7.875%,
2/01/08........................................ 1,708
1,975 Tenet Healthcare Corp., 8.625%, 1/15/07.......... 1,958
1,750 Tenet Healthcare Corp., 8.125%, 12/01/08......... 1,700
3,150 Vencor, Inc., 9.875%, 5/01/05.................... 472
---------
5,838
---------
MEDIA AND ENTERTAINMENT (3.3%)
215 CB Richard Ellis Service Group, Inc., 8.875%,
6/01/06........................................ 215
1,770 Chancellor Media Corp., Series B, 8.125%,
12/15/07....................................... 1,797

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

HIGH YIELD PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

FACE
AMOUNT VALUE
(000) (000)
---------------------------------------------------------------------------

MEDIA AND ENTERTAINMENT (CONT.)

[Download Table]

$ 2,650 HMH Properties, Inc., Series A, 7.875%,
8/01/05........................................ $ 2,587
1,400 Outdoor Systems, Inc., 8.875%, 6/15/07........... 1,498
---------
6,097
---------
METALS (0.7%)
1,380 Murrin Murrin Holdings, PTY, (Yankee Bond),
9.375%, 8/31/07................................ 1,242
---------
PACKAGING (4.5%)
895 Columbia/HCA Healthcare Corp., 8.13%, 8/04/03.... 883
1,570 Columbia/HCA Healthcare Corp., 7.25%, 5/20/08.... 1,425
500 Musicland Group, Inc., 9.00%, 6/15/03............ 505
2,245 Musicland Group, Inc., 9.875%, 3/15/08........... 2,295
1,970 Nortek, Inc., 8.875%, 8/01/08.................... 2,024
1,145 SD Warren Co., 12.00%, 12/15/04.................. 1,239
---------
8,371
---------
RETAIL (4.3%)
1,645 CA FM Lease Trust, 8.50%, 7/15/17................ 1,771
604 DR Securitized Lease Trust, Series 93-K1, Class
A1, 6.66%, 8/15/10............................. 575
2,172 DR Securitized Lease Trust, Series 94-K1, Class
A1, 7.60%, 8/15/07............................. 2,171
1,175 DR Securitized Lease Trust, Series 94-K1, Class
A2, 8.375%, 8/15/15............................ 1,201
2,210 Kmart Corp., 8.80%, 7/01/10...................... 2,307
---------
8,025
---------
SOVEREIGN AND EMERGING MARKETS (26.4%)
970 Asia Pulp & Paper Co., Ltd., 12.00%, 2/15/04..... 466
1,350 AST Research, Inc., 7.45%, 10/01/02.............. 1,271
(n)1,195 Cia Energitica de Sao Paulo, 9.125%, 6/26/07..... 956
(n)1,830 CTI Holdings, 0.00%, 4/15/08..................... 1,016
(n)2,425 Dolphin Telecom plc, 0.00%, 6/01/08.............. 1,237
600 Esprit Telecom Group plc, 11.50%, 12/15/07....... 639
965 Esprit Telecom Group plc, 10.875%, 6/15/08....... 1,014
1,520 Fuji JGB Investments, LLC, 9.87%, 12/31/49....... 1,353
1,530 Glencore Nickel Property Ltd., 9.00%, 12/01/14... 1,310
815 Grupo Minero Mexico, 8.25%, 4/01/08.............. 680
1,760 Hermes Europe Railtel BV, 11.50%, 8/15/07........ 1,927
1,925 HMV Media Group plc, Series A, 10.25%, 5/15/08... 1,988
1,270 Husky Oil Ltd., 8.90%, 8/15/28................... 1,206
975 Hyundai Semiconductor, 8.625%, 5/15/07........... 782
2,025 Indah Kiat Financial Mauritius, 10.00%,
7/01/07........................................ 1,134
972 Korea Development Bank, 6.625%, 11/21/03......... 925
1,640 Multicanal, 10.50%, 2/01/07...................... 1,468
830 Multicanal, 10.50%, 4/15/18...................... 691
2,345 Norampac, Inc., 9.50%, 2/01/08................... 2,439

FACE
AMOUNT VALUE
(000) (000)

---------------------------------------------------------------------------

$ 1,010 NSM Steel, Inc., 12.25%, 2/01/08................. $ 61
(n)2,275 Occidente y Caribe Cellular, 0.00%, 3/15/04...... 1,649
1,545 Pacific Papers Corp., 10.00%, 3/15/09............ 1,589
2,470 Philippine Long Distance Telephone, Global Bond,
9.25%, 6/30/06................................. 2,346
2,445 Pindo Deli Finincial Mauritius, 10.75%,
10/01/07....................................... 1,369
(n)2,690 PTC International Finance BV, 0.00%, 7/01/07..... 1,957
1,380 Quezon Power Ltd., 8.86%, 6/15/17................ 1,049
1,185 Ras Laffan Gas Liquified Natural Gas, 8.294%,
3/15/14........................................ 1,115
1,470 RBS Participacoes, 11.00%, 4/01/07............... 779
5,048 Republic of Argentina, (Floating Rate) (Bearer),
5.938%, 3/31/05................................ 4,326
(n)1,440 RSL Communications, plc, 0.00%, 3/01/08.......... 950
(n)2,975 RSL Communications, plc, 9.125%, 3/01/08......... 2,945
1,410 Samsung Electronics America, 9.75%, 5/01/03...... 1,443
2,480 Satelites Mexicanos, 10.125%, 11/01/04........... 1,984
3,600 TV Azteca, Series B, 10.50%, 2/15/07............. 2,988
373 RG Receivables Ltd., 9.60%, 2/10/05.............. 224
---------
49,276
---------
TECHNOLOGY (10.2%)
1,765 American Cellular Corp., 10.50%, 5/15/08......... 1,840
1,845 AMSC Acquisition Co., Inc., 12.25%, 4/01/08...... 927
3,400 CSC Holdings, Inc., 9.875%, 5/15/06.............. 3,736
1,255 Dobson Communications Corp., 11.75%, 4/15/07..... 1,349
(n)1,860 Nextel Communications, Inc., 9.75%, 8/15/04...... 1,934
(n)1,335 Nextel Communications, Inc., 0.00%, 2/15/08...... 934
3,785 NEXTLINK Communications, Inc., 0.00%, 4/15/08.... 2,422
1,315 Primus Telecommunications Group, Inc., 9.875%,
5/15/08........................................ 1,269
640 Primus Telecommunications Group, Inc., 11.25%,
1/15/09........................................ 661
1,120 Psinet Inc., 10.00%, 2/15/05..................... 1,196
1,565 Qwest Communications International, Inc., 0.00%,
10/15/07....................................... 1,240
2,265 RCN Corp., 0.00%, 2/15/08........................ 1,416
---------
18,924
---------
TELEPHONE (3.0%)
900 Centennial Cellular, 10.75%, 12/15/08............ 963
1,725 Global Crossing Holdings, 9.625%, 5/15/08........ 1,922
(n)3,450 Rhythms Netconnections, 0.00%, 5/15/08........... 1,932
(n)1,290 Wam!Net, Inc., 13.25%, 3/1/05.................... 748
---------
5,565
---------
TRANSPORTATION (3.1%)
1,751 Aircraft Lease Portfolio Securitization Ltd.,
Series 96-1 P1, Class D, 12.75%, 6/15/06....... 1,751
1,950 American Commercial Lines LLC, 10.25%, 6/30/08... 2,008

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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
--------------------------------------------------------------------------------

HIGH YIELD PORTFOLIO (CONT.)
--------------------------------------------------------------------------------

[Download Table]

FACE
AMOUNT VALUE
(000) (000)
---------------------------------------------------------------------------

TRANSPORTATION (CONT.)

[Download Table]

$ 1,050 Jet Equipment Trust, Series C-1, 11.79%,
6/15/13........................................ $ 1,335
525 Jet Equipment Trust, Series 95-D, 11.44%,
11/01/14....................................... 661
---------
5,755
---------
UTILITIES (1.8%)
1,780 AES Corp., 8.50%, 11/01/07....................... 1,756
1,605 CMS Eergy, 7.50%, 1/15/09........................ 1,634
---------
3,390
---------
TOTAL CORPORATE BONDS AND NOTES (Cost $185,699)................. 175,532
---------

[Download Table]

-----------

COMMON STOCKS (0.0%)
HOTEL/LODGING/RESTAURANTS (0.0%)
1,300 Motels of America, Inc. (Cost $84)............... 14
---------
PREFERRED STOCKS (1.9%)
COMMUNICATIONS (0.9%)
5,644 Viatel, Inc., Class A, 10.00%, 4/15/10........... 93
1,387 IXC Communications, Inc., Series B, PIK, 12.50%,
8/15/09........................................ 1,498
---------
1,591
---------
PACKAGING (0.6%)
10,056 Paxson Communications Corp., PIK, 13.25%,
11/15/06....................................... 837
3,373 Paxson Communications Corp., PIK, 9.75%,
12/31/06....................................... 314
---------
1,151
---------
TECHNOLOGY (0.4%)
7,430 Concentric Network Corp.......................... 802
---------
TOTAL PREFERRED STOCKS (Cost $3,147)............................ 3,544
---------
[Download Table]

NO. OF
WARRANTS

-----------

WARRANTS (0.5%)
COMMUNICATIONS (0.4%)
600 Globalstar Telecommunications Ltd., expiring
2/15/04........................................ 29
605 Iridium World Communications, Inc., expiring
7/15/05........................................ 35
12,900 Onepoint Communications Corp., expiring 6/1/08... 1
138,000 Rhythms Net Connections.......................... 552
---------
617
---------
PACKAGING (0.0%)
1,024 Paxson Communications Corp., expiring 6/30/03.... --
---------
SOVEREIGN AND EMERGING MARKETS (0.1%)
6,394,240 NSM Steel Ltd., Inc., expiring 2/01/08........... 7
9,100 Occidente y Caribe Cellular, expiring 3/15/04.... 159
---------
166
---------

NO. OF VALUE
WARRANTS (000)

---------------------------------------------------------------------------

TECHNOLOGY (0.0%)
18,450 American Mobile Satellite Corp., expiring
4/01/08........................................ $ 6
2,800 Nextel Communications, Inc., expiring 4/25/99.... --
38,700 Wam!Net, Inc., expiring 3/01/05.................. 77
---------
83
---------
TOTAL WARRANTS (Cost $0)........................................ 866
---------

[Download Table]

FACE
AMOUNT
(000)

-----------

SHORT-TERM INVESTMENTS (0.6%)
REPURCHASE AGREEMENT (0.6%)
$ 1,216 Chase Securities, Inc. 4.65%, dated 3/31/99, due
4/01/99, to be repurchased at $1,216,
collateralized by U.S. Treasury Bonds, 7.125%,
due 2/15/23, valued at $1,255.................. 1,216
---------
PROMISARY NOTES (0.0%)
1 Capital Gaming International, Inc. (Cost $0)..... --
---------
TOTAL SHORT-TERM INVESTMENTS (Cost $1,216)...................... 1,216
---------
TOTAL INVESTMENTS (97.2%) (Cost $190,146)....................... 181,172
---------

[Download Table]

OTHER ASSETS AND LIABILITIES (2.8%)
Other Assets..................................................... 14,831
Liabilities...................................................... (9,666)
-------
5,165
-------
NET ASSETS (100%).................................................. $186,337
-------
-------

[Download Table]

CLASS A:
--------------------------------------------------------------
NET ASSETS.................................................... $146,249
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 13,422,771 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $10.90
----------
----------
CLASS B:
--------------------------------------------------------------
NET ASSETS.................................................... $40,088
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 3,688,279 outstanding $0.001 par
value shares (authorized 500,000,000 shares)................ $10.87
----------
----------

------------------------------------------------------------

(e) -- 144A Security -- certain conditions for public sale may exist.
(n) -- Step Bond -- coupon rate increases in increments to maturity. Rate
disclosed is as of March 31, 1999. Maturity date disclosed is the
ultimate maturity date.
PIK -- Payment-in-Kind. Income may be recieved in additional securities or
cash at the discretion of the issuer.
Floating Rate Security -- The interest rate changes on these instruments are
based on changes in a designated base rate. The rates shown are those in effect
on March 31, 1999.

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LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
MUNICIPAL BOND PORTFOLIO

The Municipal Bond Portfolio seeks high current income consistent with
preservation of principal through investment in a portfolio consisting primarily
of intermediate and long-term investment grade municipal obligations, the
interest on which is exempt from Federal income tax.

For the three months ended March 31, 1999, the Portfolio had a total return of
0.29% for the Class A shares compared to a total return of 0.85% for the Lehman
7-Year Municipal Bond Index (the "Index"). For the one-year period ended March
31, 1999, the Portfolio had a total return for the Class A shares of 4.87%
compared to 5.92% for the Index. From inception on January 18, 1995 through
March 31, 1999, the average annual total return of the Portfolio Class A shares
was 6.06% compared to 7.39% for the Index. As of March 31, 1999 the Portfolio
had an SEC 30-day yield of 4.10% for the Class A shares.

During the first quarter of 1999, municipal bonds were strong performers
relative to U.S. Treasuries. This continued a trend that has been in place since
the end of the "flight-to-quality" Treasury rally early in the fourth quarter of
last year. Yield spreads on municipals as compared to Treasuries moved closer to
historical averages, thereby having a favorable effect on relative returns. The
5-year municipal versus Treasury ratio went from 82.6% to 75% and the 30-year
ratio went from 97% to 89.6%.

PERFORMANCE COMPARED TO THE LEHMAN
7-YEAR MUNICIPAL BOND INDEX(1)
-----------------------------------------

[Download Table]

TOTAL RETURNS(2)
-------------------------------------------
ONE AVERAGE ANNUAL
YTD YEAR SINCE INCEPTION
---------- ---------- -------------------

PORTFOLIO.................. 0.29% 4.87% 6.06%
INDEX...................... 0.85 5.92 7.39

1. The Lehman 7-Year Municipal Bond Index consists of investment grade bonds
with maturities between 6-8 years, rated BAA or better. All bonds have been
taken from issues of at least $50 million in size sold within the last five
years.

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

------------------------------------------------------------

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE PERFORMANCE RESULTS PROVIDED ARE
FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF
THE PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. YIELDS WILL FLUCTUATE AS MARKET CONDITIONS CHANGE.

The U.S. Treasury market suffered as economic reports pointing to resilience in
the U.S. economy dashed expectations for an additional Federal Reserve rate cut.
With robust retail sales, consumption, housing and consumer confidence data,
market participants became concerned that the Federal Reserve might raise
short-term interest rates to reduce the risk of higher inflation. The result was
a sell-off that temporarily forced yields on Treasury securities to their
highest levels since mid-August of last year. With the current relatively stable
inflationary environment, it would be difficult for the Federal Reserve to
tighten monetary policy, as evidenced by the recently concluded FOMC meetings
where monetary policy was left unchanged. The Fed is also keenly aware that its
actions can have consequences outside the U.S., most notably on the delicate
economic situation in parts of Asia and Latin America. Accordingly, we expect
the Fed to maintain a steady policy for most of 1999.

The municipal market remained calm given the storm in the Treasury market during
the first quarter. With Treasury yields backing up, municipal yields barely
budged during the quarter. Municipal new issuance volume was 19% lower in the
first quarter of 1999 versus the first quarter of 1998. This decline in volume
was due to a drop in refunding volume. With municipal vs. Treasury ratios coming
back in line with their historical averages, crossover buyers and total return
accounts were finally rewarded. Fundamentals for the municipal market look good
going forward. Low supply, manageable dealer inventories and low volatility
should overcome apathy from investors even given that nominal yields are near
their historical lows.

The Portfolio's average maturity during the quarter was maintained at
approximately 8 years, with a slightly barbelled structure. In the current
interest rate environment we continue to look for opportunities to purchase
bonds that provide a high level of current income.

Lori A. Cohane
PORTFOLIO MANAGER

April 1999

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Municipal Bond Portfolio

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[LOGO] Morgan Stanley Dean Witter
Institutional Fund, Inc.
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INVESTMENTS (UNAUDITED)
MARCH 31, 1999
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MUNICIPAL BOND PORTFOLIO
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[Download Table]

FACE
AMOUNT VALUE
(000) (000)

----------------------------------------------------------------------

TAX-EXEMPT INSTRUMENTS (98.5%)
FIXED RATE INSTRUMENTS (98.5%)
$ 500 California Housing Finance Agency Single Family
Mtg., 5.05%, 8/01/17........................... $ 509
1,000 California Housing Finance Agency Single Family
Mtg., 5.00%, 8/01/17........................... 995
1,000 California State, 5.25%, 10/01/10................ 1,074
1,000 California State, Department of Water Revenue
Bonds, Series Q, 6.00%, 12/01/10............... 1,146
1,220 City of Dallas, Texas, General Obligation Bonds,
6.00%, 2/15/06................................. 1,352
1,500 Connecticut State, General Obligation Bonds,
Series E, 6.00%, 3/15/12....................... 1,711
1,095 Connecticut State, Housing Finance Authority,
Revenue Bonds, Sub. Series D-1, 6.20%,
5/15/07........................................ 1,154
525 Delaware Transit Authority 5.75%, 7/01/08........ 563
500 Fairfax County, Virginia, Water Authority Revenue
Bonds, 6.00%, 4/01/22 Prerefunded 4/01/07 at
102............................................ 569
1,500 Florida State Board of Education, Capital Outlay,
Public Education, General Obligation Bonds,
6.40%, 06/01/19................................ 1,617
160 Georgia State, General Obligation Bonds, Series
B, 6.00%, 3/01/12.............................. 182
500 Georgia State, General Obligation Bonds, Series
F, 6.50%, 12/01/06............................. 579
1,000 Gwinnett County, Georgia, General Obligation
Bonds, 6.00%, 1/01/11.......................... 1,084
1,000 Hawaii State, General Obligation Bonds, Series
CJ, 6.20%, 1/01/12 Prerefunded 1/15/05 at
100............................................ 1,111
570 Huntsville, Alabama, General Obligation Bonds,
Series A, 5.50%, 2/01/20....................... 589
1,000 Kentucky State Housing Corp., Revenue Bonds,
Series A, 6.00%, 7/01/10....................... 1,060
1,625 Michigan State Housing Development Authority,
Revenue Bonds, Series A, 6.75%, 12/01/14....... 1,744
1,400 Mississippi State, General Obligation Bonds,
6.00%, 2/01/09, Prerefunded 2/01/05 at 100..... 1,540
1,500 Municipal Assistance Corp. for City of New York,
NY, Revenue Bonds, 6.00%, 7/01/04.............. 1,644
960 Ohio State, Housing Finance Agency, Residential
Mortgage Revenue Bonds, Series A-1, 6.20%,
9/01/14........................................ 1,030
1,000 Orlando, Florida, Utilities Commission Water &
Electric, Revenue Bonds, Series D, 6.75%,
10/01/17....................................... 1,211

FACE
AMOUNT VALUE
(000) (000)

----------------------------------------------------------------------
$ 600 Salt Lake City, Utah, General Obligation Bonds,
6.375%, 6/15/11................................ $ 631
1,385 Shelby County, Tennessee, General Obligation
Bonds, Series B, 5.50%, 8/01/10................ 1,515
1,500 Texas State, Public Finance Authority, Series A,
5.95%, 10/01/15 Prerefunded 4/01/05 at 100..... 1,650
500 Triborough Bridge & Tunnel Authority, New York,
Revenue Bonds, Series Y, 6.00%, 1/01/12........ 566
1,000 Utah State, Housing Financing Agency, Single
Family Mortgage Revenue Bonds, Series G-1,
Class I, 5.50%, 7/01/16........................ 1,026
500 Virginia State Housing Development Authority,
Commonwealth Mortgage Revenue Bonds, Series B,
6.60%, 1/01/12................................. 536
1,000 Washington State, General Obligation Bonds,
Series B, 6.40%, 6/01/17....................... 1,175
1,115 Wisconsin State, General Obligation Bonds, Series
2, 5.125%, 11/01/11............................ 1,175
--------
TOTAL FIXED RATE INSTRUMENTS (Cost $29,271)............... 30,738
--------
TOTAL TAX-EXEMPT INSTRUMENTS (Cost $29,271)................. 30,738
--------

[Download Table]

TOTAL INVESTMENTS 98.5% (Cost $29,271).................... 30,738
----------
OTHER ASSETS AND LIABILITIES (1.5%)
Other Assets............................................ 523
Liabilities............................................. (52)
----------
471
----------
NET ASSETS (100%)......................................... $ 31,209
----------
----------

[Download Table]

CLASS A:
--------------------------------------------------------------
NET ASSETS.................................................... $31,209
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 3,011,663 outstanding $0.001 par value shares
(authorized 500,000,000 shares)............................. $10.36
----------
----------

------------------------------------------------------------

Prerefunded Bonds -- Outstanding bonds have been refunded to the first call date
(prerefunded date) by the issuance of new bonds. Principal and interest are paid
from monies escrowed in U.S. Treasury securities. Prerefunded bonds are
generally re-rated AAA due to the U.S. Treasury escrow.

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Municipal Bond Portfolio

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MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.

-----------------------------------------------------------------------------

DIRECTORS

Barton M. Biggs
CHAIRMAN OF THE BOARD
Chairman and Director, Morgan Stanley Dean Witter
Investment Management Inc. and Morgan Stanley Dean Witter
Investment Management Limited; Managing
Director, Morgan Stanley & Co. Incorporated

Michael F. Klein
DIRECTOR AND PRESIDENT
Principal, Morgan Stanley Dean Witter Investment
Management Inc. and Morgan Stanley & Co.
Incorporated
John D. Barrett II
Chairman and Director,
Barrett Associates, Inc.

Gerard E. Jones
Partner, Richards & O'Neil LLP
Andrew McNally IV
River Road Partners
Samuel T. Reeves
Chairman of the Board and Chief
Executive Officer,
Pinacle L.L.C.
Fergus Reid
Chairman and Chief Executive Officer,
LumeLite Plastics Corporation
Frederick O. Robertshaw
Of Counsel, Copple, Chamberlin & Boehm, P.C.

INVESTMENT ADVISER AND ADMINISTRATOR

Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020

DISTRIBUTOR

Morgan Stanley & Co. Incorporated
1221 Avenue of the Americas
New York, New York 10020

CUSTODIAN

The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, New York 11245

LEGAL COUNSEL

Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103-2921

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036

OFFICERS
Stefanie V. Chang
VICE PRESIDENT
ACTING SECRETARY

Harold J. Schaaff, Jr.
VICE PRESIDENT

Joseph P. Stadler
VICE PRESIDENT

Karl O. Hartmann
ASSISTANT SECRETARY

Joanna M. Haigney
TREASURER

Belinda A. Brady
ASSISTANT TREASURER

FOR CURRENT PERFORMANCE, CURRENT NET ASSET VALUE, OR FOR ASSISTANCE WITH YOUR
ACCOUNT, PLEASE CONTACT THE FUND AT (800) 548-7786, OR VISIT OUR WEBSITE AT
www.msdw.com/institutional/investmentmanagement. THIS REPORT IS AUTHORIZED FOR
DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY PROSPECTUSES OF THE MORGAN
STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.

--------------------------------------------------------------------------------

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘N-30B-2’ Filing	Date	First	Last	Other Filings

	12/31/99	115
Filed on:	6/7/99
	4/1/99	17
For Period End:	3/31/99	1	121	497, N-30D, NSAR-A
	9/1/98	17
	10/1/97	20	36
	7/31/97	83
	9/16/96	80
	3/15/96	49
	1/2/96	6	115
	3/8/95	67
	2/24/95	90
	1/18/95	63	120
	4/25/94	59
	2/1/94	101
	4/2/93	32
	12/15/92	55
	9/28/92	115
	9/25/92	24
	7/15/92	40
	1/17/92	6
				List all Filings

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Filing Submission 0001047469-99-023356 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Morgan Stanley Convertible Securities Trust – ‘N-30B-2’ for 3/31/99

On: Monday, 6/7/99 · For: 3/31/99 · Accession #: 1047469-99-23356 · File #: 811-04310

Periodic or Interim Report Mailed to Shareholders — Rule 30b-2Filing Table of Contents

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Dates Referenced Herein and Documents Incorporated by Reference

Periodic or Interim Report Mailed to Shareholders — Rule 30b-2
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