<Page>
[ANNOTATED FORM N-CSR FOR ANNUAL REPORTS]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file
number: 811-05624
-------------------------------------------------
Morgan Stanley Institutional Fund, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1221 Avenue of the America's 22nd Floor New York, NY 10020
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Ronald E. Robison
1221 Avenue of the Americas, 34th Floor New York, New York 10020
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area
code: 1-800-221-6726
-----------------------------------
Date of fiscal year
end: 12/31
--------------------------------------------------------------
Date of reporting
period: 12/31
--------------------------------------------------------------
<Page>
ITEM 1. REPORTS TO STOCKHOLDERS.
The Fund's as annual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows: [Provide annual report.]
<Page>
[MORGAN STANLEY LOGO]
ANNUAL REPORT
DECEMBER 31, 2003
MORGAN STANLEY INSTITUTIONAL FUND, INC.
GLOBAL AND INTERNATIONAL EQUITY PORTFOLIOS
ACTIVE INTERNATIONAL ALLOCATION
ASIAN REAL ESTATE
EMERGING MARKETS
EUROPEAN REAL ESTATE
EUROPEAN VALUE EQUITY
GLOBAL FRANCHISE
GLOBAL VALUE EQUITY
INTERNATIONAL EQUITY
INTERNATIONAL MAGNUM
INTERNATIONAL SMALL CAP
JAPANESE VALUE EQUITY
LATIN AMERICAN
U.S. EQUITY PORTFOLIOS
EQUITY GROWTH
FOCUS EQUITY
SMALL COMPANY GROWTH
TECHNOLOGY
U.S. REAL ESTATE
VALUE EQUITY
FIXED INCOME PORTFOLIO
EMERGING MARKETS DEBT
MONEY MARKET PORTFOLIOS
MONEY MARKET
MUNICIPAL MONEY MARKET
<Page>
2003 ANNUAL REPORT
December 31, 2003
TABLE OF CONTENTS
<Table>
SHAREHOLDER'S LETTER 3
PERFORMANCE SUMMARY 4
INVESTMENT OVERVIEWS AND STATEMENTS OF NET ASSETS
GLOBAL AND INTERNATIONAL EQUITY PORTFOLIOS:
Active International Allocation 6
Asian Real Estate 17
Emerging Markets 20
European Real Estate 27
European Value Equity 31
Global Franchise 35
Global Value Equity 38
International Equity 42
International Magnum 47
International Small Cap 54
Japanese Value Equity 58
Latin American 62
U.S. EQUITY PORTFOLIOS:
Equity Growth 66
Focus Equity 69
Small Company Growth 72
Technology 76
U.S. Real Estate 79
Value Equity 83
FIXED INCOME PORTFOLIO:
Emerging Markets Debt 86
MONEY MARKET PORTFOLIOS:
Money Market 91
Municipal Money Market 93
STATEMENTS OF OPERATIONS 97
STATEMENTS OF CHANGES IN NET ASSETS 101
FINANCIAL HIGHLIGHTS 112
NOTES TO FINANCIAL STATEMENTS 132
INDEPENDENT AUDITOR'S REPORT 141
FEDERAL INCOME TAX INFORMATION 142
DIRECTOR AND OFFICER INFORMATION 143
</Table>
This report is authorized for distribution only when preceded or accompanied by
prospectuses of the Morgan Stanley Institutional Fund, Inc. To receive a
prospectus and/or SAI, which contains more complete information such as charges,
expenses, policies for voting proxies, risk considerations, and describes in
detail each of the Portfolio's investment policies to the prospective investor,
please call 1-(800)-548-7786. Please read the prospectuses carefully before you
invest or send money. Additionally, you can access portfolio information
including performance, characteristics, and investment team commentary through
Morgan Stanley Investment Management's website: www.morganstanley.com/im.
1
<Page>
2003 ANNUAL REPORT
December 31, 2003
(This page has been left blank intentionally.)
2
<Page>
2003 ANNUAL REPORT
December 31, 2003
Dear Shareholders:
We are pleased to present to you the Fund's Annual Report for the year ended
December 31, 2003. Our Fund currently offers 21 portfolios providing investors
with a full array of global and domestic equity and fixed-income products. The
Fund's portfolios, together with the portfolios of the Morgan Stanley
Institutional Fund Trust, provide investors with a means to help them meet
specific investment needs and to allocate their investments among equities
(e.g., value and growth; small, medium, and large capitalization), fixed income
(e.g., short, medium, and long duration; investment grade and high yield) and
cash (e.g., money market).
Sincerely,
/s/ Ronald E. Robison
Ronald E. Robison
Executive Vice President and Principal Executive Officer
January 2004
3
<Page>
2003 ANNUAL REPORT
December 31, 2003
PERFORMANCE SUMMARY (UNAUDITED)
<Table>
<Caption>
ONE YEAR
INCEPTION DATES TOTAL RETURN
- -------------------------------------------------------------------------------------------------------------------------
COMPARABLE
CLASS A CLASS B CLASS A CLASS B INDICES
- -------------------------------------------------------------------------------------------------------------------------
GLOBAL AND INTERNATIONAL EQUITY PORTFOLIOS:
Active International Allocation 1/17/92 1/2/96 33.65% 33.13% 38.59%(1)
Asian Real Estate 10/1/97 10/1/97 42.76 42.42 47.43(2)
Emerging Markets 9/25/92 1/2/96 55.08 54.31 55.82(3)
European Real Estate 10/1/97 10/1/97 42.41 42.06 45.03(4)
European Value Equity 4/2/93 1/2/96 30.15 29.80 38.54(5)
Global Franchise 11/28/01 11/28/01 27.92 27.62 33.11(6)
Global Value Equity 7/15/92 1/2/96 29.21 28.95 33.11(6)
International Equity 8/4/89 1/2/96 32.82 32.46 38.59(1)
International Magnum 3/15/96 3/15/96 29.07 28.49 38.59(1)
International Small Cap 12/15/92 -- 48.32 -- 61.35(7)
Japanese Value Equity 4/25/94 1/2/96 31.97 31.59 35.91(8)
Latin American 1/18/95 1/2/96 59.35 58.90 73.51(9)
- -------------------------------------------------------------------------------------------------------------------------
U.S. EQUITY PORTFOLIOS:
Equity Growth* 4/2/91 1/2/96 26.41 26.13 28.68(10)
Focus Equity* 3/8/95 1/2/96 30.99 30.62 28.68(10)
Small Company Growth 11/1/89 1/2/96 44.13 43.80 48.54(11)
Technology* 9/16/96 9/16/96 46.94 46.44 50.01(12)
U.S. Real Estate 2/24/95 1/2/96 37.61 37.23 37.13(13)
Value Equity 1/31/90 1/2/96 31.05 30.86 30.03(14)
- -------------------------------------------------------------------------------------------------------------------------
FIXED INCOME PORTFOLIO:
Emerging Markets Debt 2/1/94 1/2/96 28.46 28.34 25.66(15)
- -------------------------------------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIOS:
Money Market 11/15/88 -- -- -- --
Municipal Money Market 2/10/89 -- -- -- --
</Table>
YIELD INFORMATION AS OF DECEMBER 31, 2003
<Table>
<Caption>
7 DAY 7 DAY 30 DAY 30 DAY
CURRENT EFFECTIVE CURRENT COMPARABLE
YIELD+ YIELD+ YIELD++ YIELD
- ----------------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIOS:
Money Market 0.61% 0.61% 0.59% 0.53%(16)
Municipal Money Market 0.67 0.67 0.54 0.51(17)
</Table>
+ The 7 day current yield and 7 day effective yield assume an annualization of
the current yield with all dividends reinvested. As with all money market
portfolios, yields will fluctuate as market conditions change and the 7 day
yields are not necessarily indicative of future performance.
++ 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.
* Performance was positively impacted due to the receipt of proceeds from the
settlement of class action suits involving, primarily, one of the Portfolio's
holdings. This was a one-time settlement, and as a result, the impact on the
NAV and consequently the performance will not likely be repeated in the
future.
4
<Page>
2003 ANNUAL REPORT
December 31, 2003
PERFORMANCE SUMMARY (CONT'D)
<Table>
<Caption>
FIVE YEAR TEN YEAR
AVERAGE ANNUAL TOTAL RETURN AVERAGE ANNUAL TOTAL RETURN
- -------------------------------------------------------------------------------------------------------------------
COMPARABLE COMPARABLE
CLASS A CLASS B INDICES CLASS A CLASS B INDICES
- -------------------------------------------------------------------------------------------------------------------
GLOBAL AND INTERNATIONAL EQUITY PORTFOLIOS:
Active International Allocation 0.76% 0.44% (0.05)%(1) 5.05% -- 4.47%(1)
Asian Real Estate 6.67 6.42 7.57(2) -- -- --(2)
Emerging Markets 11.28 11.25 10.45(3) 1.09 -- 0.11(3)
European Real Estate 12.89 12.57 13.67(4) -- -- --(4)
European Value Equity 3.77 3.49 (0.78)(5) 8.80 -- 8.71(5)
Global Franchise -- -- --(6) -- -- --(6)
Global Value Equity 2.61 2.36 (0.77)(6) 9.66 -- 7.14(6)
International Equity 8.01 7.77 (0.05)(1) 11.52 -- 4.47(1)
International Magnum 0.32 0.04 (0.05)(1) -- -- --(1)
International Small Cap 12.86 -- 6.37(7) 9.12 -- 1.38(7)
Japanese Value Equity 0.50 0.25 (0.02)(8) -- -- --(8)
Latin American 12.37 12.06 12.11(9) -- -- --(9)
- -------------------------------------------------------------------------------------------------------------------
U.S. EQUITY PORTFOLIOS:
Equity Growth* (0.81) (1.06) (0.57)(10) 11.40 -- 11.07(10)
Focus Equity* 0.46 0.22 (0.57)(10) -- -- --(10)
Small Company Growth 12.55 12.29 0.86(11) 13.41 -- 5.43(11)
Technology* (4.15) (4.33) (1.79)(12) -- -- --(12)
U.S. Real Estate 13.98 13.65 14.35(13) -- -- --(13)
Value Equity 5.21 4.99 3.56(14) 11.09 -- 11.88(14)
- -------------------------------------------------------------------------------------------------------------------
FIXED INCOME PORTFOLIO:
Emerging Markets Debt 18.17 17.72 15.40(15) -- -- --(15)
- -------------------------------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIOS:
Money Market -- -- -- -- -- --
Municipal Money Market -- -- -- -- -- --
<Caption>
SINCE INCEPTION
AVERAGE ANNUAL TOTAL RETURN
- ----------------------------------------------------------------------------------------------
COMPARABLE COMPARABLE
INDICES - INDICES -
CLASS A CLASS A CLASS B CLASS B
- ----------------------------------------------------------------------------------------------
GLOBAL AND INTERNATIONAL EQUITY PORTFOLIOS:
Active International Allocation 6.20% 5.46% 4.85% 3.25%(1)
Asian Real Estate (0.40) (2.48) (0.68) (2.48)(2)
Emerging Markets 6.88 5.91 3.63 1.68(3)
European Real Estate 10.15 10.73 9.87 10.73(4)
European Value Equity 10.77 9.95 7.77 7.93(5)
Global Franchise 19.42 3.96 19.03 3.96(6)
Global Value Equity 11.65 7.98 8.57 5.76(6)
International Equity 11.14 3.51 11.05 3.25(1)
International Magnum 2.99 3.38 2.71 3.38(1)
International Small Cap 12.04 4.17 -- --(7)
Japanese Value Equity (0.57) (3.69) (0.32) (4.67)(8)
Latin American 9.00 6.15 10.55 7.67(9)
- ----------------------------------------------------------------------------------------------
U.S. EQUITY PORTFOLIOS:
Equity Growth* 10.84 10.98 8.48 9.28(10)
Focus Equity* 13.82 11.77 10.12 9.28(10)
Small Company Growth 13.16 7.10 12.73 3.59(11)
Technology* 8.65 7.36 8.43 7.36(12)
U.S. Real Estate 15.71 13.29 14.32 12.83(13)
Value Equity 10.88 12.31 9.80 10.68(14)
- ----------------------------------------------------------------------------------------------
FIXED INCOME PORTFOLIO:
Emerging Markets Debt 11.36 10.96 12.48 13.27(15)
- ----------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIOS:
Money Market -- -- -- --
Municipal Money Market -- -- -- --
</Table>
INDICES:
(1) MSCI EAFE (Europe, Australasia, and Far East)
(2) GPR General Real Estate Securities Index - Far East
(3) MSCI Emerging Markets Free
(4) GPR General Real Estate Securities Index - Europe
(5) MSCI Europe
(6) MSCI World
(7) MSCI EAFE Small Cap Total Return
(8) MSCI Japan
(9) MSCI Emerging Markets Free Latin America
(10) S&P 500
(11) Russell 2000 Growth
(12) NASDAQ Composite
(13) National Association of Real Estate Investment Trusts (NAREIT) Equity
(14) Russell 1000 Value
(15) J.P. Morgan Emerging Markets Bond Global
(16) iMoneyNet Money Fund Comparable Yield
(17) iMoneyNet Municipal Money Fund Comparable Yield
Past performance should not be construed as a guarantee of future performance
and assumes that all dividends and distributions, if any, were reinvested.
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.
Investments in the Money Market or Municipal Money Market Portfolios are neither
insured nor guaranteed by the Federal Deposit Insurance Corporation. Although
the Money Market and Municipal Money Market Portfolios seek to preserve the
value of your investment at $1.00 per share, it is possible to lose money by
investing in these portfolios. Please read the Portfolios' prospectuses
carefully before you invest or send money.
5
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO
[CHART]
COMPARISON OF THE CHANGE IN VALUE OF A $500,000* INVESTMENT
OVER 10 YEARS
FISCAL YEAR ENDED DECEMBER 31
<Table>
<Caption>
ACTIVE
INTERNATIONAL
MSCI EAFE ALLOCATION
INDEX PORTFOLIO - CLASS A
"1993" $ 500,000 $ 500,000
"1994" $ 538,850 $ 497,400
"1995" $ 599,255 $ 549,975
"1996" $ 635,510 $ 603,378
"1997" $ 646,822 $ 655,329
"1998" $ 776,187 $ 787,181
"1999" $ 985,446 $ 1,006,192
"2000" $ 845,791 $ 855,565
"2001" $ 664,453 $ 704,729
"2002" $ 558,539 $ 612,339
"2003" $ 774,080 $ 818,391
</Table>
* Minimum Investment
In accordance with SEC regulations, Portfolio performance shown assumes that all
recurring fees (including management fees) were deducted and all dividends and
distributions were reinvested. Total returns do not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the redemption
of Portfolio shares. The performance of Class B shares will vary based upon the
different inception dates and fees assessed to that class.
PERFORMANCE COMPARED TO THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE
INDEX(1)
<Table>
<Caption>
TOTAL RETURNS(2)
------------------------------------
AVERAGE ANNUAL
----------------------------
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION
- -------------------------------------------------------------------
Portfolio - Class A (3) 33.65% 0.76% 5.05% 6.20%
Index - Class A 38.59 (0.05) 4.47 5.46
Portfolio - Class B (4) 33.13 0.44 N/A 4.85
Index - Class B 38.59 (0.05) N/A 3.25
</Table>
(1) The MSCI EAFE Index is an unmanaged index of common stocks in Europe,
Australasia and the Far East.
(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. Fee waivers and/or reimbursements are voluntary
and the Adviser reserves the right to commence or terminate any waiver
and/or reimbursement at any time.
(3) Commenced operations on January 17, 1992
(4) Commenced operations on January 2, 1996
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 Active International Allocation Portfolio seeks long-term capital
appreciation by investing primarily, in accordance with country and sector
weightings determined by the investment adviser, in equity securities of
non-U.S. issuers which, in the aggregate, replicate broad market indices.
Foreign investing involves certain risks, including currency fluctuations and
controls, restrictions on foreign investments, less governmental supervision and
regulation, less liquidity and the potential for market volatility and political
instability.
PERFORMANCE
For the year ended December 31, 2003, the Portfolio had a total return of 33.65%
for the Class A shares and 33.13% for the Class B shares compared to 38.59% for
the Morgan Stanley Capital International (MSCI) EAFE Index (the "Index").
FACTORS AFFECTING PERFORMANCE
- In 2003, global equities posted their strongest gain in over 15 years. The
MSCI World index rose more than 33% and every MSCI country (20+) and
sector (10) had positive performance.
- Given that environment, however, the gains came in spurts. In the first
quarter, Europe, Japan, and Hong Kong hit multi-year lows, followed by an
amazingly strong second quarter (the Index 19% in U.S. dollars), a third
quarter pause (except for Japan and Asia), and then a whopping 31%
increase in Germany in the fourth quarter (20% for Europe overall), while
Japan ended in line with its second quarter highs.
- The Portfolio's overweight position (relative to the Index) in developed
Asia, specifically Japan, Hong Kong, and Singapore, detracted from
relative returns, while an allocation of roughly 3% of the Portfolio to
some of the Asian emerging markets (Thailand, China, and India) somewhat
offset this, and contributed to performance.
- In Europe, an above benchmark allocation to Germany was positive, but was
not enough to overcome the drag from an underweight position in the United
Kingdom (18.2%). From a sector perspective, overweight positions in
materials and energy added to returns; underweight allocations to
financials and telecommunications services detracted from Portfolio
performance.
MANAGEMENT STRATEGIES
- We reduced the Portfolio's overweight position in Asia ex-Japan.
- We added to the Portfolio's positions in Continental Europe, particularly
France and Germany. This resulted in a large part from a trip to
Germany-wherein it became clear from policy leaders (and from the Morgan
Stanley Economics team on the ground) that Germany was serious about the
reform Agenda 2010. In the fourth quarter, economic growth in Europe
steadily accelerated out of its mild first half of 2003 recession and
business confidence surveys (e.g. German IFO and Belgian BNB) improved
quite dramatically.
January 2004
6
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
COMMON STOCKS (84.5%)
AUSTRALIA (3.5%)
Alumina Ltd. 56,634 $ 280
Amcor Ltd. (c)41,326 257
AMP Ltd. 64,643 243
Ansell Ltd. 6,268 30
Australia & New Zealand Banking Group Ltd. 31,242 415
Australian Gas Light Co., Ltd. 22,603 191
BHP Billiton Ltd. 173,259 1,588
BlueScope Steel Ltd. 42,780 180
Boral Ltd. 13,558 52
Brambles Industries Ltd. (c)48,120 191
Centro Properties Group 14,703 44
CFS Gandel Retail Trust 32,671 33
Coca-Cola Amatil Ltd. 24,502 115
Coles Myer Ltd. 52,212 297
Commonwealth Bank of Australia 25,815 572
CSL Ltd. 6,454 87
CSR Ltd. 24,666 34
Foster's Group Ltd. 99,230 336
General Property Trust 42,779 96
Insurance Australia Group Ltd. 36,721 117
Investa Property Group 27,715 41
James Hardie Industries N.V. 10,751 56
John Fairfax Holdings Ltd. 46,580 123
Leighton Holdings Ltd. 16,450 146
Lend Lease Corp., Ltd. 8,959 68
Macquarie Bank Ltd. 4,516 121
Macquarie Infrastructure Group 92,924 238
Mayne Group Ltd. 43,767 107
Mirvac Group 16,593 54
National Australia Bank Ltd. 31,659 713
Newcrest Mining Ltd. 17,840 174
News Corp., Ltd. 69,032 622
News Corp., Ltd. (Limited Voting Shares) (c)98,153 738
OneSteel Ltd. 18,129 28
Orica Ltd. 14,905 156
Origin Energy Ltd. 15,058 54
PaperlinX Ltd. 20,637 77
Patrick Corp., Ltd. 9,067 100
QBE Insurance Group Ltd. 13,859 110
Rinker Group Ltd. 21,090 104
Rio Tinto Ltd. (c)14,944 418
Santos Ltd. 30,380 157
Sonic Healthcare Ltd. 6,667 35
Southcorp Ltd. 34,621 70
Stockland 25,570 100
Stockland (New) 1,546 6
Suncorp-Metway Ltd. 11,598 108
TABCORP Holdings Ltd. 18,666 158
Telstra Corp., Ltd. 104,925 380
Transurban Group 26,160 88
Wesfarmers Ltd. 18,263 364
Westfield Holdings Ltd. 9,237 97
Westfield Trust 48,057 129
Westfield Trust (New) (a)3,961 10
Westpac Banking Corp. 36,508 $ 439
WMC Resources Ltd. (a)56,887 241
Woodside Petroleum Ltd. 23,173 258
Woolworths Ltd. 48,044 426
- ------------------------------------------------------------------------------
12,472
==============================================================================
AUSTRIA (0.3%)
Bank Austria Creditanstalt AG (a)2,579 131
Boehler-Uddeholm AG 464 31
Erste Bank der Oesterreichischen
Sparkassen AG 2,087 257
Flughafen Wien AG 751 35
IMMOFINANZ Immobilien Anlagen AG (a)13,458 107
Mayr-Melnhof Karton AG 300 36
OMV AG 946 141
RHI AG (a)1,264 24
Telekom Austria AG (a)13,990 173
VA Technologie AG (a)600 19
Verbund-Oesterreichische
Elektrizitaetswirtschafts AG, Class A 250 29
Voestalpine AG 1,531 62
Wienerberger AG (c)2,301 61
- ------------------------------------------------------------------------------
1,106
==============================================================================
BELGIUM (0.7%)
AGFA-Gevaert N.V. 7,790 221
Bekaert S.A. 329 21
Dexia (c)37,624 647
Electrabel S.A. 708 222
Fortis 46,259 928
KBC Bankverzekeringsholding (c)3,312 154
Solvay S.A. 2,883 249
UCB S.A. 2,261 85
Umicore 398 28
- ------------------------------------------------------------------------------
2,555
==============================================================================
DENMARK (0.3%)
Danske Bank A/S 34,445 806
Group 4 Falck A/S 900 18
ISS A/S 500 25
Novo-Nordisk A/S, Class B 6,900 280
Novozymes A/S, Class B 1,114 41
Vestas Wind Systems A/S (c)1,900 31
- ------------------------------------------------------------------------------
1,201
==============================================================================
FINLAND (0.8%)
Fortum Oyj 14,610 150
Kesko Oyj, Class B 558 10
Kone Oyj, Class B 3,046 174
Metso Oyj (c)14,179 173
Nokia Oyj 55,855 963
Outokumpu Oyj 11,667 158
Sampo Oyj, Class A 13,305 137
Stora Enso Oyj, Class R 32,405 435
TietoEnator Oyj 5,556 152
UPM-Kymmene Oyj 24,422 465
Uponor Oyj 957 30
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
7
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
FINLAND (CONT'D)
Wartsila Oyj, Class B (c)2,976 $ 57
- ------------------------------------------------------------------------------
2,904
==============================================================================
FRANCE (6.7%)
Accor S.A. 7,231 326
Air France 3,149 48
Alcatel S.A. (a)(c)18,624 239
Alstom (a)(c)2,427 4
Arcelor 17,133 298
Aventis S.A. (c)25,081 1,653
AXA 48,302 1,031
BNP Paribas S.A. 26,718 1,678
Bouygues S.A. 14,780 515
Business Objects S.A. (a)662 23
Cap Gemini S.A. (a)(c)4,233 187
Carrefour S.A. (c)10,371 568
Casino Guichard Perrachon S.A. (c)1,367 133
Cie de Saint-Gobain 22,364 1,092
CNP Assurances 2,289 119
Credit Agricole S.A. 7,840 187
Dassault Systemes S.A. 828 38
Essilor International S.A. 1,185 61
France Telecom S.A. (a)39,514 1,126
Groupe Danone 2,720 443
Imerys S.A. 610 128
L'Air Liquide S.A. (c)4,180 736
Lafarge S.A. (c)6,223 553
Lagardere S.C.A. (c)4,493 259
LVMH Moet Hennessy Louis Vuitton S.A. 14,391 1,044
Michelin (CGDE), Class B 4,885 224
Peugeot S.A. 6,727 342
Publicis Groupe 3,199 103
Renault S.A. 6,079 418
Sagem S.A. 247 26
Sanofi-Synthelabo S.A. 13,026 978
Schneider Electric S.A. (c)12,513 817
Societe BIC S.A. 1,806 83
Societe Generale 10,233 901
Societe Television Francaise 1 3,990 139
Sodexho Alliance S.A. 4,221 127
Suez S.A. 23,208 465
Technip S.A. 157 17
Thales S.A. 8,154 273
Total S.A., Class B 28,373 5,261
Valeo S.A. 2,635 105
Veolia Environnement 4,022 108
Vinci S.A. 2,953 244
Vivendi Universal S.A. (a)34,142 828
Wanadoo (a)9,345 76
Zodiac S.A. 458 13
- ------------------------------------------------------------------------------
24,037
==============================================================================
GERMANY (6.1%)
Adidas-Salomon AG 774 88
Allianz AG 14,119 1,777
Altana AG 1,090 65
BASF AG 23,021 $ 1,291
Bayer AG 27,979 817
Bayerische Hypo-und Vereinsbank AG (a)(c)29,948 691
Beiersdorf AG 3,670 444
Celesio AG (c)1,121 54
Commerzbank AG 35,493 694
Continential AG 4,600 174
DaimlerChrysler AG 30,838 1,435
Deutsche Bank AG (Registered) 26,399 2,182
Deutsche Boerse AG 7,587 414
Deutsche Lufthansa AG (Registered) (c)30,150 502
Deutsche Post AG (Registered) 19,839 408
Deutsche Telekom AG (Registered) (a)80,420 1,468
Douglas Holding AG 878 24
E. ON AG 23,651 1,539
Epcos AG (a)292 7
Fresenius Medical Care AG (c)1,633 116
HeidelbergCement AG (a)1,471 62
Henkel KGaA (Non-Voting Shares) 331 26
KarstadtQuelle AG 814 20
Linde AG 4,461 240
MAN AG 4,599 139
Merck KGaA 1,765 73
Metro AG 2,391 105
Muenchener Rueckversicherungs AG
(Registered) 3,478 421
Porsche AG (Non-Voting Shares) 289 171
ProSiebenSat.1 Media AG (Non-Voting Shares) 2,100 35
Puma AG Rudolf Dassler Sport 302 53
RWE AG 12,566 496
SAP AG 4,937 827
Schering AG 4,281 216
Siemens AG (Registered) (c)49,516 3,955
ThyssenKrupp AG (c)13,373 264
TUI AG (c)4,635 96
Volkswagen AG 8,096 450
Volkswagen AG (Non-Voting Shares) 3,949 143
- ------------------------------------------------------------------------------
21,982
==============================================================================
GREECE (0.1%)
Alpha Bank A.E. 5,100 154
EFG Eurobank Ergasias S.A. 3,200 62
National Bank of Greece S.A. 8,641 225
Titan Cement Co. S.A. 1,200 49
- ------------------------------------------------------------------------------
490
==============================================================================
HONG KONG (2.9%)
Aluminum Corp. of China Ltd. (c)378,000 287
Bank of East Asia Ltd. 65,583 201
Beijing Capital International Airport Co.,
Ltd. 186,000 64
Beijing Datang Power Generation Co., Ltd.,
Class H (c)198,000 142
BOC Hong Kong Holdings Ltd. 124,500 234
Cathay Pacific Airways Ltd. 48,000 91
Cheung Kong Holdings Ltd. 70,000 557
Cheung Kong Infrastructure Holdings Ltd. 26,000 58
China Eastern Airlines Corp., Ltd., Class H (a)216,000 37
China Petroleum & Chemical Corp., Class H (c)2,310,000 1,034
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
8
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
HONG KONG (CONT'D)
China Shipping Development Co., Ltd., Class H 178,000 $ 132
China Southern Airlines Co., Ltd., Class H (a)(c)162,000 69
China Telecom Corp., Ltd. (c)1,106,000 456
CLP Holdings Ltd. 82,300 392
Esprit Holdings Ltd. 41,000 137
Guangshen Railway Co., Ltd. 198,000 56
Hang Lung Properties Ltd. (c)57,000 73
Hang Seng Bank Ltd. (c)33,100 435
Henderson Land Development Co., Ltd. 32,000 141
Hong Kong & China Gas Co., Ltd. 181,079 276
Hong Kong Exchanges & Clearing Ltd. 49,000 106
HongKong Electric Holdings Ltd. 64,500 255
Hopewell Holdings Ltd. 15,000 23
Huadian Power International Co., Class H 335,000 140
Huaneng Power International, Inc., Class H 210,000 364
Hutchison Whampoa Ltd. 102,200 754
Hysan Development Co., Ltd. 11,000 17
Jiangsu Express Co., Ltd., Class H 168,000 89
Jiangxi Copper Co., Ltd., Class H 159,000 88
Johnson Electric Holdings Ltd. 69,000 88
Li & Fung Ltd. 75,000 129
MTR Corp. 63,850 84
New World Development Ltd. 64,179 52
PCCW Ltd. (a)(c)146,411 95
PetroChina Co., Ltd., Class H 2,420,000 1,387
Qingling Motors Co., Class H 170,000 34
SCMP Group Ltd. 18,000 8
Shangri-La Asia Ltd. (c)52,802 50
Sino Land Co. (c)45,466 26
Sinopec Shangai Petrochemical Co., Ltd.,
Class H 320,000 142
Sinopec Yizheng Chemical Fibre Co., Ltd.,
Class H 192,000 48
Sinotrans Ltd. 246,000 111
Sun Hung Kai Properties Ltd. 62,000 513
Swire Pacific Ltd., Class A 44,000 271
Techtronic Industries Co. 21,000 58
Television Broadcasts Ltd. 8,000 40
Travelsky Technology Ltd. 43,000 46
Tsingtao Brewing Co., Ltd., Class H 56,000 66
Wharf Holdings Ltd. 57,600 160
Yanzhou Coal Mining Co., Ltd. 140,000 142
Yue Yuen Industrial Holdings Ltd. 22,000 61
Zhejiang Expressway Co., Ltd., Class H (c)197,000 138
- ------------------------------------------------------------------------------
10,457
==============================================================================
INDIA (1.1%)
Bajaj Auto Ltd. 3,800 95
Dr. Reddy's Laboratories Ltd. 5,500 172
GAIL India Ltd. 22,300 127
Grasim Industries Ltd. 1,900 42
HDFC Bank Ltd. 10,100 81
Hero Honda Motors Ltd. 8,500 84
Hindalco Industries Ltd. 5,700 176
Hindustan Lever Ltd. 71,500 321
Hindustan Petroleum Corp. 10,200 98
Housing Development Finance Corp. 14,200 $ 200
ICICI Bank, Ltd. 33,300 216
I-Flex Solutions Ltd. 2,100 39
Infosys Technologies Ltd. 3,200 390
ITC Ltd. 7,600 164
Larsen & Toubro Ltd. 23,600 273
Mahanagar Telephone Nigam Ltd. 6,900 21
Maruti Udyog Ltd. (a)4,000 33
Ranbaxy Laboratories Ltd. 7,800 188
Reliance Industries Ltd. 49,300 619
Satyam Computer Services Ltd. 17,300 139
Tata Iron & Steel Co., Ltd. 15,700 153
Tata Motors Ltd. 11,300 112
Wipro Ltd. 1,900 72
- ------------------------------------------------------------------------------
3,815
==============================================================================
IRELAND (0.4%)
Allied Irish Banks plc 26,996 431
Bank of Ireland (London Shares) 30,894 420
CRH plc 7,082 145
CRH plc (London Shares) 4,100 84
DCC plc 1,800 24
Grafton Group plc (a)3,800 26
Independent News & Media plc 8,500 20
Irish Life & Permanent plc 5,600 127
- ------------------------------------------------------------------------------
1,277
==============================================================================
ITALY (1.6%)
Alleanza Assicurazioni S.p.A. 9,219 101
Assicurazioni Generali S.p.A. 12,129 320
Autogrill S.p.A. (a)3,112 44
Banca Fideuram S.p.A. 4,060 24
Banca Intesa S.p.A. 99,599 388
Banca Intesa S.p.A. RNC 7,091 20
Banca Monte dei Paschi di Siena S.p.A. 7,569 24
Banca Nazionale del Lavoro S.p.A. (a)10,534 25
Banca Popolare di Milano Scrl 2,773 18
Banco Popolare di Verona e Novara Scrl 10,497 177
Benetton Group S.p.A. (c)2,526 29
Enel S.p.A. 39,571 268
ENI S.p.A. 63,879 1,202
Fiat S.p.A. (a)9,237 71
Finmeccanica S.p.A. 64,703 51
Italcementi S.p.A. (c)2,528 32
Mediaset S.p.A. 18,783 223
Mediobanca S.p.A. 6,362 69
Mediolanum S.p.A. 3,051 24
Pirelli & C. S.p.A. 52,675 54
Riunione Adriatica di Sicurta S.p.A. 3,906 66
Sanpaolo IMI S.p.A. 38,756 504
Seat Pagine Gialle S.p.A. (a)60,586 58
Snam Rete Gas S.p.A. 2,328 10
SNIA S.p.A. 7,597 19
Telecom Italia S.p.A. (a)(c)210,889 623
Telecom Italia S.p.A. RNC (a)129,017 262
TIM S.p.A. 77,360 419
Tiscali S.p.A. (a)629 4
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
9
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
ITALY (CONT'D)
UniCredito Italiano S.p.A. 130,103 $ 700
- ------------------------------------------------------------------------------
5,829
==============================================================================
JAPAN (20.3%)
Advantest Corp. 1,590 126
Aeon Co., Ltd. 4,300 144
Ajinomoto Co., Inc. 41,400 475
Alps Electric Co., Ltd. 6,000 88
Amada Co., Ltd. 13,000 68
Asahi Breweries Ltd. 20,800 189
Asahi Glass Co., Ltd. (c)67,800 556
Asahi Kasei Corp. 66,000 358
Asatsu-DK, Inc. 2,200 57
Bellsystem 24, Inc. 130 27
Benesse Corp. 3,200 78
Bridgestone Corp. 49,000 658
Canon, Inc. 31,600 1,469
Casio Computer Co., Ltd. (c)24,800 262
Central Japan Railway Co. 88 759
Chubu Electric Power Co., Inc. 6,500 135
Chugai Pharmaceutical Co., Ltd. 21,100 303
Citizen Watch Co., Ltd. (c)10,000 92
COMSYS Holdings Corp. (a)1,000 6
CSK Corp. (c)2,600 94
Dai Nippon Printing Co., Ltd. 23,600 331
Daicel Chemical Industries Ltd. (c)8,000 33
Daiichi Pharmaceutical Co., Ltd. (c)15,900 286
Daikin Industries Ltd. 9,600 221
Dainippon Ink & Chemicals, Inc. 34,000 65
Daito Trust Construction Co., Ltd. 6,400 190
Daiwa House Industry Co., Ltd. 33,600 357
Daiwa Securities Group, Inc. 165,000 1,120
Denki Kagaku Kogyo KK 22,000 71
Denso Corp. 38,550 758
Dowa Mining Co., Ltd. (c)12,000 64
East Japan Railway Co. 196 922
Ebara Corp. 20,800 90
Eisai Co., Ltd. 16,200 436
Fanuc Ltd. 10,300 616
Fast Retailing Co., Ltd. 300 18
Fuji Photo Film Co., Ltd. 28,000 902
Fuji Television Network, Inc. 10 54
Fujikura Ltd. 10,000 59
Fujisawa Pharmaceutical Co., Ltd. 12,600 268
Fujitsu Ltd. (a)64,200 378
Furukawa Electric Co., Ltd. (c)33,800 112
Hankyu Department Stores, Inc. 2,000 13
Hirose Electric Co., Ltd. 1,200 137
Hitachi Ltd. 111,000 668
Honda Motor Co., Ltd. (c)52,304 2,319
Hoya Corp. 4,100 376
Isetan Co., Ltd. 2,700 30
Ishihara Sangyo Kaisha Ltd. (a)(c)9,000 18
Ishikawajima-Harima Heavy Industries Co., Ltd 42,000 60
Ito-Yokado Co., Ltd. 5,000 157
Itochu Corp. 65,000 214
Japan Airlines System Corp. 51,000 $ 134
Japan Tobacco, Inc. 29 212
JFE Holdings, Inc. 22,700 618
JGC Corp. 7,000 73
JSR Corp. 8,000 178
Kajima Corp. (c)63,400 205
Kaken Pharmaceutical Co., Ltd. 2,000 10
Kaneka Corp. 13,000 97
Kansai Electric Power Co., Inc. (The) 27,000 472
Kao Corp. 36,000 731
Kawasaki Heavy Industries Ltd. (c)42,000 52
Kawasaki Kisen Kaisha Ltd. 3,000 15
Keihin Electric Express Railway Co., Ltd. (c)20,000 117
Keio Electric Railway Co., Ltd. 11,000 57
Keyence Corp. 1,000 210
Kikkoman Corp. 4,000 28
Kinden Corp. 1,000 5
Kintetsu Corp. (a)(c)89,200 268
Kirin Brewery Co., Ltd. (c)58,400 497
Kokuyo Co., Ltd. 3,600 39
Komatsu Ltd. 60,400 383
Konami Corp. 4,900 142
Konica Minolta Holdings, Inc. 7,000 94
Kubota Corp. 85,000 350
Kuraray Co., Ltd. 18,000 152
Kurita Water Industries Ltd. 3,600 43
Kyocera Corp. 6,300 419
Kyowa Hakko Kogyo Co., Ltd. 23,600 150
Kyushu Electric Power Co., Inc. 4,300 74
Lawson, Inc. 200 7
Mabuchi Motor Co., Ltd. 1,100 85
Marubeni Corp. (c)65,000 124
Marui Co., Ltd. 10,300 130
Matsushita Electric Industrial Co., Ltd. 110,000 1,518
Matsushita Electric Works Ltd. (c)7,000 63
Meiji Seika Kaisha Ltd. (c)9,000 36
Meitec Corp. 1,400 54
Millea Holdings, Inc. 72 939
Minebea Co., Ltd. (c)14,000 71
Mitsubishi Chemical Corp. 95,000 247
Mitsubishi Corp. 64,000 677
Mitsubishi Electric Corp. 110,800 459
Mitsubishi Estate Co., Ltd. (c)53,000 502
Mitsubishi Heavy Industries Ltd. 191,000 530
Mitsubishi Logistics Corp. 4,000 33
Mitsubishi Rayon Co., Ltd. 26,000 97
Mitsubishi Tokyo Financial Group, Inc. 272 2,118
Mitsui & Co., Ltd. 67,800 545
Mitsui Chemicals, Inc. 25,000 146
Mitsui Fudosan Co., Ltd. (c)37,400 337
Mitsui Mining & Smelting Co., Ltd. 30,000 124
Mitsui OSK Lines Ltd. 4,000 19
Mitsui Sumitomo Insurance Co., Ltd. 132,000 1,082
Mitsui Trust Holdings, Inc. (a)86,545 483
Murata Manufacturing Co., Ltd. 8,700 469
Namco Ltd. 300 8
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
JAPAN (CONT'D)
NEC Corp. 57,400 $ 422
NGK Insulators Ltd. 23,600 176
NGK Spark Plug Co., Ltd. 17,000 138
Nidec Corp. 1,200 114
Nikko Cordial Corp. 54,000 300
Nikon Corp. (a)6,000 90
Nintendo Co., Ltd. 6,400 596
Nippon Express Co., Ltd. 48,800 230
Nippon Meat Packers, Inc. 13,600 133
Nippon Mining Holdings, Inc. 13,000 45
Nippon Oil Corp. 78,800 401
Nippon Sheet Glass Co., Ltd. 19,000 55
Nippon Steel Corp. (c)361,000 773
Nippon Telegraph & Telephone Corp. 376 1,810
Nippon Unipac Holding Corp. 42 216
Nippon Yusen Kabushiki Kaisha 67,000 303
Nissan Chemical Industries Ltd. 8,000 71
Nissan Motor Co., Ltd. 144,700 1,650
Nisshin Seifun Group, Inc. 5,000 44
Nisshinbo Industries, Inc. 4,000 22
Nissin Food Products Co., Ltd. 3,700 92
Nitto Denko Corp. 8,100 430
Nomura Holdings, Inc. 112,000 1,904
NSK Ltd. 40,000 146
NTN Corp. 22,000 105
NTT Data Corp. 58 219
NTT DoCoMo, Inc. 393 889
Obayashi Corp. 30,000 134
OJI Paper Co., Ltd. 66,400 428
Oki Electric Industry Co., Ltd. (a)27,000 105
Olympus Corp. 8,000 173
Omron Corp. 9,500 192
Onward Kashiyama Co., Ltd. 10,000 121
Oracle Corp. Japan 2,100 109
Oriental Land Co., Ltd. 4,000 246
Osaka Gas Co., Ltd. 66,600 180
Pioneer Corp. (c)9,254 255
Ricoh Co., Ltd. 23,000 453
Rohm Co., Ltd. 2,600 304
Sanden Corp. 1,000 6
Sankyo Co., Ltd. 34,600 649
Sanyo Electric Co., Ltd. (c)98,000 511
Secom Co., Ltd. 7,600 283
Sekisui Chemical Co., Ltd. 19,000 97
Sekisui House Ltd. 39,600 408
Seven-Eleven Japan Co., Ltd. 5,000 151
Sharp Corp. 49,200 775
Shimamura Co., Ltd. 400 27
Shimano, Inc. 6,000 124
Shimizu Corp. 48,600 185
Shin-Etsu Chemical Co., Ltd. 16,496 673
Shionogi & Co., Ltd. 21,000 390
Shiseido Co., Ltd. 22,000 267
Showa Denko K.K. 4,000 9
Showa Shell Sekiyu K.K. 9,900 80
Skylark Co., Ltd. (c)7,700 $ 127
SMC Corp. 3,500 435
Softbank Corp. (c)12,900 394
Sompo Japan Insurance, Inc. 48,000 394
Sony Corp. 41,397 1,430
Stanley Electric Co., Ltd. 2,700 52
Sumitomo Bakelite Co., Ltd. 8,000 52
Sumitomo Chemical Co., Ltd. (c)77,600 319
Sumitomo Corp. 42,400 316
Sumitomo Electric Industries Ltd. 31,400 280
Sumitomo Metal Industries Ltd. 17,000 17
Sumitomo Metal Mining Co., Ltd. (c)28,800 213
Sumitomo Realty & Development Co., Ltd. 2,000 18
Sumitomo Trust & Banking Co., Ltd. (The) (c)90,000 528
Taiheiyo Cement Corp. (c)4,000 11
Taisei Corp. 4,000 15
Taisho Pharmaceutical Co., Ltd. 22,800 407
Taiyo Yuden Co., Ltd. 4,000 52
Takara Holdings, Inc. 4,000 37
Takashimaya Co., Ltd. (c)4,000 29
Takeda Chemical Industries Ltd. 61,000 2,415
Takuma Co., Ltd. 4,000 22
TDK Corp. 4,300 309
Teijin Ltd. (c)48,400 142
Teikoku Oil Co., Ltd. 5,000 25
Terumo Corp. 11,700 222
THK Co., Ltd. (c)1,200 24
TIS, Inc. 1,404 47
Tobu Railway Co., Ltd. 48,400 173
Toho Co., Ltd. 3,700 47
Tohoku Electric Power Co., Inc. 13,200 218
Tokyo Broadcasting System, Inc. 7,200 114
Tokyo Electric Power Co., Inc. (The) 38,600 845
Tokyo Electron Ltd. 3,600 273
Tokyo Gas Co., Ltd. 74,600 265
Tokyu Corp. (c)54,400 279
TonenGeneral Sekiyu K.K. 5,000 41
Toppan Printing Co., Ltd. 22,600 235
Toray Industries, Inc. 66,100 276
Toshiba Corp. 117,000 442
Tosoh Corp. 25,000 83
Tostem Inax Holding Corp. 11,000 212
Toto Ltd. 30,600 259
Toyo Seikan Kaisha Ltd. 11,000 153
Toyoba Co., Ltd. 4,000 9
Toyoda Gosei Co., Ltd. 700 20
Toyota Industries Corp. 4,850 103
Toyota Motor Corp. 150,400 5,071
Trend Micro, Inc. (a)(c)2,200 59
UFJ Holdings, Inc. (a)252 1,209
Uni-Charm Corp. 2,300 113
UNY Co., Ltd. 2,000 20
Ushio, Inc. 1,000 17
Wacoal Corp. 4,000 33
West Japan Railway Co. 18 71
World Co., Ltd. (c)1,500 48
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
11
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
JAPAN (CONT'D)
Yakult Honsha Co., Ltd. 4,000 $ 62
Yamada Denki Co., Ltd. (c)400 13
Yamaha Corp. 5,400 106
Yamaha Motor Co., Ltd. 2,000 22
Yamanouchi Pharmaceutical Co., Ltd. 27,500 853
Yamato Transport Co., Ltd. 15,000 176
Yamazaki Baking Co., Ltd. (c)4,000 33
Yokogawa Electric Corp. (c)3,000 43
- ------------------------------------------------------------------------------
73,052
==============================================================================
MALAYSIA (0.0%)
Media Prima Bhd (A)1 @--
- ------------------------------------------------------------------------------
NETHERLANDS (4.7%)
ABN AMRO Holding N.V. 68,400 1,596
Aegon N.V. 75,031 1,107
Akzo Nobel N.V. 12,431 479
DSM N.V. 2,246 110
Euronext N.V. 4,100 104
European Aeronautic Defense & Space Co. (c)11,927 283
Hagemeyer N.V. 4,373 10
Heineken N.V. 22,522 855
ING Groep N.V. CVA 54,430 1,266
Koninklijke Philips Electronics N.V. 59,778 1,741
OCE N.V. 873 13
Reed Elsevier N.V. 28,684 355
Royal Dutch Petroleum Co. 99,146 5,213
Royal KPN N.V. (a)65,211 502
TPG N.V. 26,559 620
Unilever N.V. CVA 28,223 1,841
Vedior N.V. CVA 7,702 120
VNU N.V. 7,997 252
Wolters Kluwer N.V. CVA 14,704 229
- ------------------------------------------------------------------------------
16,696
==============================================================================
NEW ZEALAND (0.0%)
Carter Holt Harvey Ltd. 50,568 62
Telecom Corp. of New Zealand Ltd. 13,851 49
- ------------------------------------------------------------------------------
111
==============================================================================
NORWAY (0.3%)
DNB NOR ASA (c)13,299 89
Norsk Hydro ASA 7,419 456
Norske Skogindustrier ASA 5,600 107
Orkla ASA 7,350 164
Statoil ASA 12,800 143
Tandberg ASA (a)900 7
Tomra Systems ASA 5,453 33
- ------------------------------------------------------------------------------
999
==============================================================================
PORTUGAL (0.1%)
Banco Commercial Portugues S.A. (Registered) 31,810 71
Electricidade de Portugal S.A. 15,231 40
Portugal Telecom SGPS S.A. (Registered) 38,617 388
PT Multimedia SGPS S.A. (a)416 8
- ------------------------------------------------------------------------------
507
==============================================================================
RUSSIA (1.0%)
LUKOIL ADR 7,100 $ 660
MMC Norilsk Nickel ADR 9,900 645
Mosenergo ADR 22,500 151
OAO Gazprom ADR (Registered) 4,400 112
Rostelecom ADR 6,046 76
Surgutneftegaz ADR 19,100 556
Unified Energy System ADR 36,800 1,027
Vimpel Communications ADR (a)1,400 103
YUKOS ADR 7,973 340
- ------------------------------------------------------------------------------
3,670
==============================================================================
SINGAPORE (0.3%)
City Developments Ltd. 6,719 24
ComfortDelgro Corp., Ltd. 31,477 15
Creative Technology Ltd. 670 7
DBS Group Holdings Ltd. 18,612 161
Oversea-Chinese Banking Corp., Ltd. 16,356 117
Overseas Union Enterprise Ltd. 7,468 31
SembCorp Industries Ltd. 29,493 22
Singapore Exchange Ltd. 29,539 29
Singapore Press Holdings Ltd. 8,536 95
Singapore Technologies Engineering Ltd. (c)55,296 66
Singapore Telecommunications Ltd. 144,872 167
United Overseas Bank Ltd. 17,389 135
United Overseas Land Ltd. (London Shares) 28,851 33
Venture Corp., Ltd. 3,444 41
- ------------------------------------------------------------------------------
943
==============================================================================
SPAIN (4.9%)
Abertis Infraestructuras S.A. (c)25,082 378
Acciona S.A. 4,707 286
Acerinox S.A. 3,505 165
Actividades de Construccion y Servicios S.A. 16,470 802
Altadis S.A. 16,139 457
Amadeus Global Travel Distribution S.A.,
Class A (c)29,509 191
Antena 3 Television S.A. (a)875 38
Banco Bilbao Vizcaya Argentaria S.A. (c)148,850 2,050
Banco Popular Espanol S.A. 3,129 186
Banco Santander Central Hispano S.A. 200,193 2,365
Endesa S.A. (c)48,397 928
Fomento de Construcciones y Contratas S.A. (c)11,676 429
Gas Natural SDG S.A. (c)69,465 1,621
Grupo Ferrovial S.A. (c)10,600 370
Iberdrola S.A. (c)41,862 825
Iberia Lineas Aereas de Espana S.A. 108,062 310
Inditex S.A. 3,711 75
Indra Sistemas S.A. 1,725 22
Repsol YPF S.A. (c)61,632 1,199
Sacyr Vallehermoso S.A. 16,652 251
Sociedad General de Aguas de Barcelona S.A. (c)10,447 156
Telefonica S.A. (c)286,710 4,198
Union Fenosa S.A. (c)10,802 202
- ------------------------------------------------------------------------------
17,504
==============================================================================
SWEDEN (2.1%)
Alfa Laval AB 1,100 17
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
12
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
SWEDEN (CONT'D)
Assa Abloy AB, Class B 12,527 $ 149
Atlas Copco AB, Class A 11,266 403
Atlas Copco AB, Class B 6,099 199
Electrolux AB, Class B 19,600 430
Eniro AB 4,500 43
Holmen AB, Class B (c)4,500 160
Modern Times Group AB, Class B (a)1,200 25
Nordea AB 116,544 874
Sandvik AB (c)21,968 757
SAS AB (a)3,446 33
Securitas AB, Class B 21,940 296
Skandia Forsakrings AB 52,265 190
Skandinaviska Enskilda Banken AB, Class A 17,066 251
Skanska AB, Class B (c)39,051 345
SKF AB, Class B 7,116 275
Svenska Cellulosa AB, Class B 9,572 391
Svenska Handelsbanken, Class A 35,436 724
Svenskt Stal AB, Class A 6,600 118
Swedish Match AB (c)16,700 171
Tele2 AB, Class B (a)3,108 166
Telefonaktiebolaget LM Ericsson, Class B (a)192,717 345
TeliaSonera AB (c)90,587 473
Volvo AB, Class A 5,425 159
Volvo AB, Class B 18,435 563
Wm-Data AB, Class B (a)10,675 23
- ------------------------------------------------------------------------------
7,580
==============================================================================
SWITZERLAND (6.3%)
ABB Ltd. (a)42,649 216
Adecco S.A. (Registered) 16,210 1,039
Ciba Specialty Chemicals AG (Registered) (a)3,521 272
Clariant AG (Registered) (a)7,023 103
Compagnie Financiere Richemont AG, Class A 5,272 126
Credit Suisse Group 52,442 1,913
Geberit AG (Registered) 82 40
Givaudan (Registered) 517 268
Holcim Ltd. (Registered) 7,774 361
Kudelski S.A. (a)583 19
Logitech International S.A. (Registered) (a)1,422 61
Lonza Group AG (Registered) 2,102 121
Nestle S.A. (Registered) 11,699 2,914
Novartis AG (Registered) 100,814 4,563
Roche Holding AG 29,906 3,008
Roche Holding AG (Bearer) (c)1,656 229
Schindler Holding AG (a)173 42
Serono S.A. 480 341
SGS S.A. 433 271
Sulzer AG (Registered) 64 17
Swatch Group AG (Registered) 1,389 33
Swatch Group AG, Class B 1,306 157
Swiss Reinsurance (Registered) 9,082 611
Swisscom AG (Registered) 1,430 470
Syngenta AG 5,572 374
UBS AG (Registered) 62,058 4,237
Valora Holding AG 61 15
Zurich Financial Services AG (a)6,085 $ 873
- ------------------------------------------------------------------------------
22,694
==============================================================================
THAILAND (1.8%)
Advanced Info Sevice PCL (Foreign) 280,200 598
Bangkok Bank PCL (a)110,800 305
Bangkok Bank PCL (Foreign) (a)213,100 618
BEC World plc (Foreign) (d)28,200 161
Charoen Pokphand Foods PCL (Foreign) (d)702,352 78
Delta Electronics Thai PCL (Foreign) (d)99,600 67
Electricity Generating PCL 53,856 122
Hana Microelectronics Co., Ltd. (Foreign) (d)12,016 38
Kasikornbank PCL (a)178,400 293
Kasikornbank PCL (Foreign) (a)267,261 472
Land & Houses PCL 549,039 170
Land & Houses PCL (Foreign, Registered) 410,436 132
National Finance PCL (Foreign) 201,300 85
PTT Exploration & Production PCL (Foreign) 32,394 219
PTT PCL (Foreign) 233,500 1,019
Sahaviriya Steel Industries PCL (Foreign) (a)(d)132,700 116
Shin Corp. PCL (Foreign) 363,200 357
Siam Cement PCL 53,536 343
Siam Cement PCL (Foreign) 96,600 673
Siam City Bank PCL (Foreign, Registered) 1 @--
Siam City Cement PCL (Foreign) (d)31,400 181
Siam Commercial Bank PCL (Foreign) (a)158,000 215
Tisco Finance PCL (a)(d)120,800 100
- ------------------------------------------------------------------------------
6,362
==============================================================================
UNITED KINGDOM (18.2%)
Aegis Group plc 32,384 57
Amec plc 11,260 52
Amersham plc 38,133 521
AstraZeneca plc 61,745 2,955
Aviva plc 27,314 239
BAA plc 56,955 505
BAE Systems plc 278,950 838
Balfour Beatty plc 7,642 30
Barclays plc 165,684 1,474
Barratt Developments plc 7,557 73
BG Group plc 143,482 735
BHP Billiton plc 104,483 910
BOC Group plc 21,576 329
Boots Group plc 21,134 261
BP plc 979,308 7,921
BPB plc 17,017 105
Brambles Industries plc 41,037 149
British Airways plc (a)85,768 356
British American Tobacco plc 51,313 706
British Sky Broadcasting plc (a)59,061 741
BT Group plc 325,805 1,095
Bunzl plc 13,485 103
Cable & Wireless plc 71,129 170
Cadbury Schweppes plc 62,440 457
Capita Group plc 43,838 190
Carlton Communications plc 20,144 83
Carnival plc 6,117 246
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
13
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
UNITED KINGDOM (CONT'D)
Centrica plc 83,632 $ 315
Cobham plc 1,869 39
Compass Group plc 77,314 525
Daily Mail & General Trust 10,063 118
Davis Service Group plc 2,167 14
De La Rue plc 22,562 112
Diageo plc 118,251 1,552
Dixons Group plc 47,304 117
Electrocomponents plc 12,512 73
Emap plc 8,639 132
EMI Group plc 25,217 72
Enterprise Inns plc 6,448 117
Exel plc 13,445 177
FKI plc 8,261 16
Friends Provident plc 30,315 71
GKN plc 33,915 162
GlaxoSmithKline plc 206,909 4,729
Granada plc 98,006 214
GUS plc 30,389 420
Hanson plc 35,093 257
Hays plc 105,486 226
HBOS plc 96,002 1,240
HHG plc CDI (a)64,643 47
Hilton Group plc 58,674 235
HSBC Holdings plc 390,390 6,120
IMI plc 13,001 78
Imperial Chemical Industries plc 51,327 182
Imperial Tobacco Group plc 21,679 426
Intercontinental Hotels Group plc 27,635 261
Invensys plc (a)56,502 18
Johnson Matthey plc 10,252 180
Kelda Group plc 20,058 168
Kesa Electricals plc 6,602 30
Kidde plc 20,295 39
Kingfisher plc 28,883 144
Legal & General Group plc 199,189 357
Lloyds TSB Group plc 141,559 1,132
LogicaCMG plc 24,720 113
Marks & Spencer Group plc 63,235 326
MFI Furniture plc 6,439 17
Misys plc 15,753 60
Mitchells & Butlers plc 27,030 109
National Grid Transco plc 127,197 909
Novar plc 1,882 5
Pearson plc 27,701 308
Peninsular & Oriental Steam Navigation Co. 30,947 127
Persimmon plc 8,213 79
Pilkington plc 25,810 44
Prudential plc 61,262 517
Rank Group plc 24,000 120
Reckitt Benckiser plc 38,453 868
Reed Elsevier plc 43,419 362
Rentokil Initial plc 120,543 409
Reuters Group plc 50,851 213
Rexam plc 20,558 157
Rio Tinto plc 46,082 $ 1,270
RMC Group plc 9,662 120
Rolls-Royce Group plc 131,916 418
Royal & Sun Alliance Insurance Group 17,424 27
Royal Bank of Scotland Group plc 70,853 2,082
Sage Group plc 32,400 102
Sainsbury (J) plc 49,449 276
Scottish & Southern Energy plc 30,772 370
Scottish Power plc 67,436 448
Securicor plc 5,088 9
Serco Group plc 29,265 90
Severn Trent plc 17,743 237
Shell Transport & Trading Co. plc 421,930 3,130
Smith & Nephew plc 20,830 175
Smiths Group plc 16,703 197
Taylor Woodrow plc 5,663 27
Tesco plc 181,288 834
TI Automotive Ltd., Class A (a)(d)1,505 @--
Tomkins plc 15,705 75
Unilever plc 99,804 928
United Business Media plc 10,872 95
Vodafone Group plc 2,814,260 6,960
Whitbread plc 13,339 171
William Hill plc 20,333 155
Wimpey (George) plc 14,900 99
Wolseley plc 30,794 434
WPP Group plc 43,368 425
Yell Group plc 14,084 77
- ------------------------------------------------------------------------------
65,390
==============================================================================
TOTAL COMMON STOCKS (COST $279,550) 303,633
==============================================================================
PREFERRED STOCK (0.0%)
THAILAND (0.0%)
Siam Commercial Bank PCL (COST $78) (a)74,968 102
- ------------------------------------------------------------------------------
TOTAL FOREIGN SECURITIES (84.5%)
(COST $279,628) 303,735
==============================================================================
<Caption>
FACE
AMOUNT
(000)
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (18.7%)
SHORT-TERM DEBT SECURITIES HELD AS COLLATERAL
ON LOANED SECURITIES (8.3%)
American Express Credit Corp.,
1.17%, 5/17/04 $ 432 432
BETA Finance, Inc., 1.08%, 6/16/04 2,014 2,014
Canadian Imperial Bank NY, 1.11%, 8/3/04 719 719
CC USA, Inc., 1.09%, 2/6/04 720 720
Chase Credit Card Master Trust,
1.18%, 10/15/04 576 576
Credit Industrial et Commercial (CIC)/NY,
1.14%, 2/10/04 748 748
Dorado Finance, Inc., 1.09%, 2/5/04 719 719
Federal National Mortgage Association,
0.96%, 1/29/04 4,316 4,316
Federal National Mortgage Association -
Discounted, 1.13%, 4/14/04 635 635
Goldman Sachs & Co., 1.02%, 1/2/04 4,714 4,714
International Credit Card Funding No. 1
Ltd., 1.15%, 3/19/04 1,669 1,669
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
14
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
SHORT-TERM DEBT SECURITIES HELD AS COLLATERAL
ON LOANED (CONT'D)
Securities
Landesbank Baden Wuerttemberg,
1.50%, 11/19/04 $ 720 $ 720
Links Finance LLC, 1.08%, 6/16/04 719 719
Links Finance LLC, 1.09%, 5/24/04 1,151 1,151
Macquarie Bank Ltd., 1.24%, 6/24/04 633 633
Natexis Banques Populaires NY,
1.15%, 12/20/04 1,150 1,150
Sears Credit Account Master Trust,
1.19%, 10/15/04 1,152 1,152
Societe Generale/London, 1.54%, 11/12/04 719 719
SWIFT 2001, Series A6, 1.16%, 1/15/04 509 509
SWIFT 2001, Series A7, 1.16%, 3/15/04 1,439 1,439
Target Credit Card Master Trust,
1.17%, 7/26/04 1,137 1,137
Wachovia Bank, NA, 1.06%, 11/15/04 1,440 1,440
Wells Fargo Bank, San Francisco NA,
1.06%, 1/30/04 403 403
Westdeutsche Landesbank N.Y.,
1.09%, 11/29/04 1,410 1,410
- ------------------------------------------------------------------------------
29,844
==============================================================================
REPURCHASE AGREEMENT (10.4%)
J.P. Morgan Securities, Inc., 0.75%,
dated 12/31/03, due 1/2/04,
repurchase price $37,390 (f)37,388 37,388
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(COST $67,232) 67,232
==============================================================================
FOREIGN CURRENCY (2.6%)
Australian Dollar AUD 176 133
British Pound GBP 79 141
Euro EUR 2,148 2,702
Hong Kong Dollar HKD 135 17
Indian Rupee INR 55 1
Japanese Yen JPY 500,536 4,662
Malaysian Ringgit MYR 27 7
Norwegian Krone NOK 28 4
Singapore Dollar SGD 11 7
Swedish Krona SEK 3,755 522
Swiss Franc CHF 1,176 948
Thai Baht THB 296 7
- ------------------------------------------------------------------------------
TOTAL FOREIGN CURRENCY (COST $9,070) 9,151
==============================================================================
TOTAL INVESTMENTS (105.8%) (COST $355,930)--
INCLUDING $28,550 OF SECURITIES LOANED 380,118
==============================================================================
<Caption>
AMOUNT AMOUNT
(000) (000)
- ------------------------------------------------------------------------------
OTHER ASSETS (3.9%)
Due from Broker $ 7,417
Receivable for Investments Sold 4,439
Net Unrealized Appreciation on Foreign
Currency Exchange Contracts 1,020
Receivable for Portfolio Shares Sold 779
Dividends Receivable 310
Foreign Withholding Tax Reclaim
Receivable 77
Interest Receivable 1
Other 12 $ 14,055
- ------------------------------------------------------------------------------
LIABILITIES (-9.7%)
Collateral on Securities Loaned, at Value (29,844)
Payable for Investments Purchased (4,471)
Investment Advisory Fees Payable (383)
Bank Overdraft Payable (104)
Payable for Portfolio Shares Redeemed (85)
Administrative Fees Payable (48)
Custodian Fees Payable (45)
Directors' Fees and Expenses Payable (44)
Distribution Fees, Class B (4)
Other Liabilities (22) (35,050)
- ------------------------------------------------------------------------------
NET ASSETS (100%) $ 359,123
==============================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 446,821
Undistributed (Distributions in Excess of)
Net Investment Income 1,349
Accumulated Net Realized Gain (Loss) (115,652)
Unrealized Appreciation (Depreciation) on:
Investments 24,188
Foreign Currency Exchange Contracts and
Translations 1,047
Futures Contracts 1,370
- ------------------------------------------------------------------------------
NET ASSETS $ 359,123
==============================================================================
CLASS A:
NET ASSETS $ 353,488
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 36,905,504 outstanding $0.001
par value shares (authorized 500,000,000
shares) $ 9.58
==============================================================================
CLASS B:
NET ASSETS $ 5,635
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 579,752 outstanding $0.001 par
value shares (authorized 500,000,000 shares) $ 9.72
==============================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
15
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO
(a) Non-income producing security.
(c) All or portion of security on loan at December 31, 2003.
(d) Security was valued at fair value -- At December 31, 2003, the Portfolio
held $741,000 of fair valued securities, representing 0.2% of net assets.
(f) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of this
statement of net assets. The investment in the repurchase agreement is
through participation in a joint account with affiliated parties.
@ Face Amount/Value is less than $500.
ADR American Depositary Receipts
CDI Chess Depositary Interests
CVA Certificaten Van Aandelen
RNC Non-Convertible Savings Shares
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Portfolio had the following foreign currency exchange contract(s) open at
period end:
<Table>
<Caption>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
- ---------------------------------------------------------------------------------------------------------
EUR 53 $ 67 1/5/04 US$ 67 $ 67 $ @--
EUR 115 144 1/6/04 US$ 144 144 @--
EUR 36,339 45,618 3/18/04 US$ 44,430 44,430 (1,188)
EUR 10,147 12,737 3/18/04 US$ 12,429 12,429 (308)
JPY 1,199,882 11,201 3/18/04 US$ 11,220 11,220 19
JPY 897,299 8,377 3/18/04 US$ 8,394 8,394 17
JPY 18,758 175 3/18/04 US$ 175 175 @--
US$ 244 244 1/7/04 EUR 194 245 1
US$ 56,131 56,131 3/18/04 EUR 45,944 57,675 1,544
US$ 16,415 16,415 3/18/04 EUR 13,424 16,852 437
US$ 7,685 7,685 3/18/04 EUR 6,283 7,887 202
US$ 2,630 2,630 3/18/04 EUR 2,154 2,704 74
US$ 1,151 1,151 3/18/04 EUR 944 1,184 33
US$ 1,400 1,400 3/18/04 EUR 1,131 1,420 20
US$ 3,225 3,225 3/18/04 GBP 1,875 3,329 104
US$ 2,337 2,337 3/18/04 GBP 1,350 2,397 60
US$ 3,315 3,315 3/18/04 GBP 1,912 3,395 80
US$ 21,268 21,268 3/18/04 JPY 2,272,361 21,213 (55)
US$ 3,415 3,415 3/18/04 JPY 364,931 3,407 (8)
US$ 159 159 3/18/04 JPY 17,065 159 @--
US$ 1,956 1,956 3/18/04 JPY 208,955 1,951 (5)
US$ 2,341 2,341 3/18/04 JPY 250,270 2,336 (5)
US$ 1,797 1,797 3/18/04 JPY 192,280 1,795 (2)
--------------- --------------- ---------------
$ 203,788 $ 204,808 $ 1,020
=============== =============== ===============
</Table>
FUTURES CONTRACTS:
The Portfolio had the following futures contract(s) open at period end:
<Table>
<Caption>
NET
UNREALIZED
NUMBER APPRECIATION
OF VALUE EXPIRATION (DEPRECIATION)
CONTRACTS (000) DATE 000
- -------------------------------------------------------------------------------
LONG:
Hang Seng Index
(Hong Kong) 22 $ 1,790 Jan-04 $ 4
CAC 40 Index
(France) 202 9,076 Mar-04 140
DAX Index
(Germany) 125 15,703 Mar-04 374
DJ Euro Stoxx 50
(Germany) 151 5,240 Mar-04 131
FTSE 100 Index
(United Kingdom) 118 9,411 Mar-04 255
TOPIX Index
(Japan) 119 11,582 Mar-04 466
------------
$ 1,370
============
</Table>
SUMMARY OF TOTAL FOREIGN SECURITIES BY INDUSTRY
CLASSIFICATION -- DECEMBER 31, 2003
(UNAUDITED)
<Table>
<Caption>
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
- -------------------------------------------------------------------------
Automobiles $ 12,352 3.4%
Beverages 3,816 1.0
Building Products 3,525 1.0
Capital Markets 11,870 3.3
Chemicals 9,474 2.6
Commercial Banks 39,422 11.0
Commercial Services & Supplies 4,312 1.2
Construction & Engineering 3,599 1.0
Diversified Financial Services 3,583 1.0
Diversified Telecommunication Services 15,409 4.3
Electric Utilities 8,516 2.4
Electronic Equipment & Instruments 3,530 1.0
Food Products 7,488 2.1
Household Durables 10,321 2.9
Industrial Conglomerates 5,502 1.5
Insurance 11,024 3.1
Machinery 6,554 1.8
Media 7,585 2.1
Metals & Mining 9,692 2.7
Oil & Gas 31,615 8.8
Pharmaceuticals 23,709 6.6
Wireless Telecommunication Services 9,484 2.6
Other 61,353 17.1
- -------------------------------------------------------------------------
$ 303,735 84.5%
=========================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
16
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
ASIAN REAL ESTATE PORTFOLIO
[CHART]
COMPARISON OF THE CHANGE IN VALUE OF A $500,000** INVESTMENT
SINCE INCEPTION
FISCAL YEAR ENDED DECEMBER 31
<Table>
<Caption>
"ASIAN REAL ESTATE PORTFOLIO "ASIAN REAL ESTATE PORTFOLIO "GPR GENERAL REAL ESTATE SECURITIES INDEX
-CLASS A" -CLASS B" -FAR EAST"(1)
"*" $ 500,000 $ 100,000 $ 500,000
"1997" $ 400,400 $ 80,300 $ 330,450
"1998" $ 353,073 $ 70,238 $ 296,711
"1999" $ 438,764 $ 87,011 $ 357,418
"2000" $ 453,857 $ 89,874 $ 356,596
"2001" $ 386,187 $ 76,231 $ 309,918
"2002" $ 341,582 $ 67,297 $ 289,804
"2003" $ 487,643 $ 95,844 $ 427,259
</Table>
* Commenced operations on October 1, 1997
** Minimum Investment
In accordance with SEC regulations, Portfolio performance shown assumes that all
recurring fees (including management fees) were deducted and all dividends and
distributions were reinvested. Total returns do not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the redemption
of Portfolio shares. The performance of Class B shares will vary based upon the
different fees assessed to that class. The GPR General Real Estate Securities
Index - Far East value at December 31, 2003 assumes a minimum investment of
$500,000; if a minimum initial investment of $100,000 (the minimum investment
for Class B shares) is assumed, the value at December 31, 2003 would be $85,452.
PERFORMANCE COMPARED TO THE GPR GENERAL REAL ESTATE SECURITIES INDEX - FAR
EAST(1)
<Table>
<Caption>
TOTAL RETURNS(2)
---------------------------
AVERAGE ANNUAL
-------------------
ONE FIVE SINCE
YEAR YEARS INCEPTION
- -------------------------------------------------------------
Portfolio - Class A (3) 42.76% 6.67% (0.40)%
Portfolio - Class B (3) 42.42 6.42 (0.68)
Index 47.43 7.57 (2.48)
</Table>
(1) The GPR General Real Estate Securities Index - Far East is a market
capitalization weighted index measuring total return of listed
property/real estate securities in the Far East.
(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. Fee waivers and/or reimbursements are
voluntary and the Adviser reserves the right to commence or terminate any
waiver and/or reimbursement at any time.
(3) Commenced operations on October 1, 1997
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 Asian Real Estate Portfolio seeks to provide long-term capital appreciation
by investing primarily in equity securities of companies in the Asian real
estate industry. Foreign investing involves certain risks, including currency
fluctuations and controls, restrictions on foreign investments, less
governmental supervision and regulation, less liquidity and the potential for
market volatility and political instability. The Portfolio's concentration in
the real estate sector makes it subject to greater risk and volatility than
other portfolios that are more diversified and the value of its shares may be
substantially affected by economic events in the real estate industry.
PERFORMANCE
For the year ended December 31, 2003, the Portfolio had a total return of 42.76%
for the Class A shares and 42.42% for the Class B shares compared to 47.43% for
the GPR General Real Estate Securities Index - Far East (the "Index").
FACTORS AFFECTING PERFORMANCE
- In 2003, the reversal of sentiment and return of confidence in the Hong
Kong and Japanese property markets led to a powerful rally in real estate
stocks in the third quarter.
- Our Portfolio has underperformed the Index as property stocks in Asia
performed poorly due to economic and political concerns, SARS, and
negative effects from the Iraq war.
- Security selection detracted from performance. The fundamentally backed
large cap property names were being sold off in the first half of 2003 due
to economic and SARS concerns. Conversely, the large-cap stable companies
rallied significantly less than the highly leveraged mid to small cap
property companies when sentiments rebounded in the third quarter.
- From a country allocation perspective, our underweight in Australia and
New Zealand detracted from performance as strong gains in the domestic
currencies significantly lifted total returns from the listed property
trust sector. Our underweight in property stocks in Malaysia and the
Philippines detracted from performance as domestic liquidity drove up
share prices despite weak fundamentals.
MANAGEMENT STRATEGIES
- In 2003, we were overweight the Hong Kong property developers and
investors and the Japanese property majors as their valuations were
trading at or near historical lows and presented compelling investment
opportunities. We were underweight the diversified and office property
trusts in Australia as we believed stocks were trading at par to their net
asset value.
January 2004
17
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
ASIAN REAL ESTATE PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
COMMON STOCKS (101.5%)
AUSTRALIA (22.0%)
Centro Properties Group 14,896 $ 45
CFS Gandel Retail Trust 43,200 43
Deutsche Office Trust 15,500 13
General Property Trust 47,710 107
Investa Property Group 55,070 81
Macquarie Goodman Industrial Trust 14,300 18
Mirvac Group 18,705 61
Stockland 26,255 103
Stockland (New) 790 3
Westfield Holdings Ltd. 3,600 38
Westfield Trust 51,566 138
Westfield Trust (New) (a)1,713 5
- -------------------------------------------------------------------------------------------
655
===========================================================================================
HONG KONG (46.9%)
Cheung Kong Holdings Ltd. 4,000 32
Hang Lung Properties Ltd. 82,000 105
Henderson Land Development Co., Ltd. 67,000 296
Hongkong Land Holdings Ltd. 56,000 95
Hysan Development Co., Ltd. 31,166 48
Kerry Properties Ltd. 42,000 55
New World Development Ltd. 75,000 60
Sino Land Co. 96,014 55
Sun Hung Kai Properties Ltd. 61,000 505
Wharf Holdings Ltd. 52,000 144
- -------------------------------------------------------------------------------------------
1,395
===========================================================================================
JAPAN (25.3%)
Daibiru Corp. 3,000 16
Japan Real Estate Investment Corp. REIT 4 25
Japan Retail Fund Investment Corp. REIT 3 19
Mitsubishi Estate Co., Ltd. 34,000 322
Mitsui Fudosan Co., Ltd. 25,000 226
Nippon Building Fund, Inc. REIT 5 32
Sumitomo Realty & Development Co., Ltd. 13,000 114
- -------------------------------------------------------------------------------------------
754
===========================================================================================
SINGAPORE (6.3%)
CapitaLand Ltd. 64,500 59
City Developments Ltd. 5,000 18
Fortune Real Estate Investment Trust REIT (a)61,000 38
Keppel Land Ltd. 23,000 21
United Overseas Land Ltd. 16,000 18
Wing Tai Holdings Ltd. 70,000 34
- -------------------------------------------------------------------------------------------
188
===========================================================================================
THAILAND (1.0%)
Land & Houses PCL (Foreign) 94,600 30
- -------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $2,581) 3,022
===========================================================================================
TOTAL FOREIGN SECURITIES (101.5%) (COST $2,581) 3,022
===========================================================================================
<Caption>
AMOUNT AMOUNT
(000) (000)
- -------------------------------------------------------------------------------------------
OTHER ASSETS (3.8%)
Receivable for Investments Sold $ 95
Dividends Receivable 9
Due from Investment Adviser 9 $ 113
- -------------------------------------------------------------------------------------------
LIABILITIES (-5.3%)
Bank Overdraft Payable (93)
Payable for Portfolio Shares Redeemed (53)
Custodian Fees Payable (4)
Administrative Fees Payable (2)
Other Liabilities (8) (160)
- -------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 2,975
===========================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 4,864
Undistributed (Distributions in Excess of) Net
Investment Income (105)
Accumulated Net Realized Gain (Loss) (2,225)
Unrealized Appreciation (Depreciation) on:
Investments 441
- -------------------------------------------------------------------------------------------
NET ASSETS $ 2,975
===========================================================================================
CLASS A:
NET ASSETS $ 2,962
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 390,534 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 7.58
===========================================================================================
CLASS B:
NET ASSETS $ 13
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 1,751 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 7.70
===========================================================================================
</Table>
(a) Non-income producing security.
@ Face Amount/Value is less than $500.
REIT Real Estate Investment Trust
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
18
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
ASIAN REAL ESTATE PORTFOLIO
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Portfolio had the following foreign currency exchange contract(s) open at
period end:
<Table>
<Caption>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
- -------------------------------------------------------------------------------------------
AUD 41 $ 31 1/5/04 US$ 31 $ 31 $ @--
HKD 324 42 1/5/04 US$ 42 42 @--
JPY 536 5 1/5/04 US$ 5 5 @--
JPY 1,902 18 1/7/04 US$ 18 18 @--
------------- ----------- ---------------
$ 96 $ 96 $ @--
============= =========== ===============
</Table>
AUD -- Australian Dollar
HKD -- Hong Kong Dollar
JPY -- Japanese Yen
SUMMARY OF TOTAL FOREIGN SECURITIES BY INDUSTRY
CLASSIFICATION -- DECEMBER 31, 2003
(UNAUDITED)
<Table>
<Caption>
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
- -------------------------------------------------------------------------
Diversified Financial Services $ 144 4.8%
Household Durables 30 1.0
Media 60 2.0
Real Estate 2,788 93.7
- -------------------------------------------------------------------------
$ 3,022 101.5%
=========================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
19
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
EMERGING MARKETS PORTFOLIO
[CHART]
COMPARISON OF THE CHANGE IN VALUE OF A $500,000* INVESTMENT
OVER 10 YEARS
FISCAL YEAR ENDED DECEMBER 31
<Table>
<Caption>
"MSCI EMERGING MARKETS FREE INDEX"(1) "EMERGING MARKETS PORTFOLIO-CLASS A"
"1993" $ 500,000 $ 500,000
"1994" $ 463,400 $ 451,875
"1995" $ 439,257 $ 394,193
"1996" $ 465,744 $ 442,261
"1997" $ 411,764 $ 437,728
"1998" $ 307,423 $ 326,479
"1999" $ 511,583 $ 658,783
"2000" $ 354,987 $ 405,646
"2001" $ 345,687 $ 387,736
"2002" $ 324,358 $ 363,561
"2003" $ 505,414 $ 563,810
</Table>
* Minimum Investment
In accordance with SEC regulations, Portfolio performance shown assumes that all
recurring fees (including management fees) were deducted and all dividends and
distributions were reinvested. Total returns do not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the redemption
of Portfolio shares. The performance of Class B shares will vary based upon the
different inception dates and fees assessed to that class.
PERFORMANCE COMPARED TO THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EMERGING
MARKETS FREE INDEX(1)
<Table>
<Caption>
TOTAL RETURNS(2)
------------------------------------------
AVERAGE ANNUAL
-------------------------------
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION
- -----------------------------------------------------------------------
Portfolio - Class A (3) 55.08% 11.28% 1.09% 6.88%
Index - Class A 55.82 10.45 0.11 5.91
Portfolio - Class B (4) 54.31 11.25 N/A 3.63
Index - Class B 55.82 10.45 N/A 1.68
</Table>
(1) The MSCI Emerging Markets Free Index is a market capitalization weighted
index comprised of companies that are representative of the market
structure of developing countries in Latin America, Asia, Eastern Europe,
the Middle East and Africa.
(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. Fee waivers and/or reimbursements are
voluntary and the Adviser reserves the right to commence or terminate any
waiver and/or reimbursement at any time.
(3) Commenced operations on September 25, 1992
(4) Commenced operations on January 2, 1996
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 Emerging Markets Portfolio seeks long-term capital appreciation by investing
primarily in growth-oriented equity securities of issuers in emerging market
countries. Foreign investing involves certain risks, including currency
fluctuations and controls, restrictions on foreign investments, less
governmental supervision and regulation, less liquidity and the potential for
market volatility and political instability. In addition, investing in emerging
markets may involve a relative higher degree of volatility.
PERFORMANCE
For the year ended December 31, 2003, the Portfolio had a total return of 55.08%
for the Class A shares and 54.31% for the Class B shares compared with 55.82%
for the Morgan Stanley Capital International (MSCI) Emerging Markets Free Index
(the "Index").
FACTORS AFFECTING PERFORMANCE
- Global emerging markets rebounded from early year weakness to return 55.8%
during the period in review. The region benefited from a bounce in
investor sentiment following the successful U.S. campaign in Iraq,
accommodative global monetary policy and a recovery in global growth.
- All emerging market regions experienced strong double-digit gains with
particular strength in Latin America as Brazil outperformed given reduced
political and debt concerns. Asia also performed well as the threat of
SARS eased for most markets in the region at mid-year, while strong
domestic demand and export growth continued for select countries, notably
Thailand, Indonesia, and India. Meanwhile, commodity and oil-producing
countries continued to benefit from still firm prices.
- In terms of relative performance, positive contributors came from the
Portfolio's holdings in India, Russia, South Korea and Indonesia and from
overweight positions in outperforming countries such Turkey, Thailand, and
Indonesia.
- Stock selection in Brazil, China, and Israel coupled with underweight
positions in Chile and China were the largest detractors to relative
performance.
20
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (CONT'D)
EMERGING MARKETS PORTFOLIO
MANAGEMENT STRATEGIES
- We continued to focus on countries where gross domestic product growth,
fiscal policy, and reform agendas remained strong, and on companies with
strong management and earnings visibility.
- In 2003, we continued to increase our overweight position in Turkey and
Thailand while moving to a neutral position in South Africa (reduced
overweight) and China (closed underweight). Going into 2004, the
Portfolio's key overweight positions were in Turkey, Russia, Thailand, and
Indonesia given better valuations and earning growth opportunities.
- Brazil and Mexico remained neutral positions. Taiwan, after further
reducing our exposure in technology related names, is now an underweight.
Malaysia, South Korea, Israel, and Chile remain the largest underweight
countries in the Portfolio.
January 2004
21
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
EMERGING MARKETS PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
COMMON STOCKS (96.0%)
(UNLESS OTHERWISE NOTED)
ARGENTINA (0.2%)
Tenaris S.A. ADR (a)(c)67,000 $ 2,232
- -------------------------------------------------------------------------------------------
BRAZIL (9.2%)
AmBev ADR (Preferred) 479,710 12,237
Aracruz Celulose S.A. ADR 131,200 4,597
Banco Bradesco S.A. (Preferred) 338,794,000 1,781
Banco Bradesco S.A. ADR (c)105,600 2,789
Banco Itau Holding Financeira S.A.
(Preferred) 10,437,269 1,036
Banco Itau Holding Financeira S.A. ADR 135,516 6,609
Banco Nacional S.A. (Preferred) (a)(d)295,998,880 @--
CEMIG S.A. (Preferred) 120,704,000 2,202
CEMIG S.A. ADR (Preferred) (c)144,600 2,661
Cia Brasileira de Distribuicao Grupo
Pao de Acucar ADR 129,600 3,259
CSN S.A. ADR (c)71,000 3,806
CVRD ADR (c)11,210 656
CVRD ADR (Preferred) (c)306,097 15,767
Lojas Arapua S.A. (Preferred) (a)(d)119,019,000 @--
Lojas Arapua S.A. GDR (a)(d)120,830 @--
Petrobras S.A. (Preferred) 28,943 765
Petrobras S.A. ADR (c)362,875 10,610
Petrobras S.A. ADR (Preferred) 579,598 15,452
Telesp Celular Participacoes S.A.
(Preferred) (a)1,021,119,000 2,673
Telesp Celular Participacoes S.A. ADR (a)(c)221,400 1,457
Unibanco GDR (c)182,000 4,541
Votorantim Celulose e Papel S.A. ADR (c)147,300 4,618
- -------------------------------------------------------------------------------------------
97,516
===========================================================================================
CHINA/HONG KONG (7.0%)
Asia Aluminum Holdings Ltd. 7,586,000 1,505
AviChina Industry & Technology Co.,
Class H (a)8,209,000 1,734
Byd Co., Ltd., Class H (c)1,682,000 4,431
China Life Insurance Co., Ltd. (a)7,028,000 5,748
China Merchants Holdings International
Co., Ltd. 1,832,000 2,419
China Oilfield Services Ltd., Class H (c)12,923,000 4,578
China Petroleum & Chemical Corp.,
Class H 9,344,000 4,182
China Resources Power Holdings Co. (a)2,579,000 1,204
China Shipping Development Co.,
Ltd., Class H (c)5,204,000 3,854
China Telecom Corp., Ltd. 5,787,000 2,385
China Unicom Ltd. (c)2,646,000 2,471
CNOOC Ltd. 6,274,000 12,284
Fountain Set Holdings Ltd. (c)3,863,000 2,637
Grande Holdings Ltd. 1,407,000 1,803
Hopewell Highway Infrastructure Ltd. (a)5,009,000 2,839
Huaneng Power International, Inc.,
Class H 2,384,000 4,130
Kingboard Chemicals Holdings (c)1,479,000 2,276
Lianhua Supermarket Holdings Co., Ltd. (a)388,000 410
Moulin International Holdings Ltd. 1,162,000 771
Norstar Founders Group Ltd. (a)2,915,000 $ 939
PetroChina Co., Ltd., Class H 5,720,000 3,279
PICC Property & Casualty Co., Ltd. (a)2,804,000 1,255
Shougang Concord Century Holdings Ltd. 12,407,000 1,822
TPV Technology Ltd. 7,770,000 4,118
Victory City International Holdings 1,785,000 782
Wumart Stores, Inc. (a)377,000 369
- -------------------------------------------------------------------------------------------
74,225
===========================================================================================
EGYPT (1.2%)
Commercial International Bank 55,958 200
MobiNil 281,390 3,435
Orascom Construction Industries 734,731 8,642
- -------------------------------------------------------------------------------------------
12,277
===========================================================================================
HUNGARY (0.8%)
Gedeon Richter Rt. 57,434 6,736
Matav Rt. ADR (c)94,292 1,764
- -------------------------------------------------------------------------------------------
8,500
===========================================================================================
INDIA (5.9%)
Bharat Heavy Electricals Corp. 536,465 5,973
Colgate-Palmolive (India) Ltd. 339,029 1,186
Container Corp. of India Ltd. 234,619 3,422
GlxoSmithKline Pharmaceuticals Ltd. 103,000 1,298
Gujarat Ambuja Cements Ltd. 366,939 2,444
Hero Honda Motors Ltd. 262,075 2,578
Hindalco Industries Ltd. 69,980 2,160
Hindustan Lever Ltd. 455,260 2,043
Hindustan Petroleum Corp. 226,000 2,167
Housing Development Finance Corp. 70 1
India Info.com PCL (d)393,611 @--
Industrial Development Bank of India 1,698,000 2,311
Infosys Technologies Ltd. 47,734 5,821
ITC Ltd. 108,000 2,331
Morgan Stanley Growth Fund (a)(k)17,282,900 6,390
Oil & Natural Gas Corp., Ltd. 157,500 2,760
Ranbaxy Laboratories Ltd. 124,604 2,999
Reliance Industries Ltd. 241,700 3,036
State Bank of India Ltd. (d)318,152 4,256
Steel Authority of India Ltd. (a)1,984,082 2,222
Tata Iron & Steel Co., Ltd. 340,030 3,309
Tata Motors Ltd. 426,914 4,232
- -------------------------------------------------------------------------------------------
62,939
===========================================================================================
INDONESIA (3.1%)
Astra International Tbk PT 10,780,269 6,400
Bank Central Asia Tbk PT 7,178,000 2,834
Bank Mandiri Persero Tbk PT (a)16,513,000 1,960
Bank Rakyat Indonesia (a)17,086,500 2,536
Bumi Resources Tbk PT 61,799,000 3,669
HM Sampoerna Tbk PT 4,594,500 2,441
Indocement Tunggal Prakarsa Tbk PT (a)9,786,500 2,469
Ramayana Lestari Sentosa Tbk PT 8,592,500 4,438
Telekomunikasi Indonesia Tbk PT 8,153,000 6,534
- -------------------------------------------------------------------------------------------
33,281
===========================================================================================
ISRAEL (1.0%)
Check Point Software Technologies Ltd. (a)572,784 9,634
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
22
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
EMERGING MARKETS PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
ISRAEL (CONT'D)
ECI Telecom Ltd. (a)248,952 $ 1,427
- -------------------------------------------------------------------------------------------
11,061
===========================================================================================
JORDAN (0.1%)
Arab Bank plc 3,090 1,329
- -------------------------------------------------------------------------------------------
MALAYSIA (1.4%)
Astro All Asia Networks plc (a)(d)724,000 842
Commerce Asset Holdings Bhd 1,909,000 2,060
Magnum Corp. Bhd 4,301,000 3,147
Malayan Banking Bhd 1,096,500 2,785
Resorts World Bhd 774,000 2,057
SP Setia Bhd 2,630,999 2,423
YTL Corp. Bhd 1,531,000 1,740
- -------------------------------------------------------------------------------------------
15,054
===========================================================================================
MEXICO (6.6%)
America Movil S.A. de C.V., ADR 749,403 20,489
Cemex S.A. de C.V. 117,300 615
Cemex S.A. de C.V., ADR (c)177,700 4,656
Coca-Cola Femsa S.A. ADR (a)(c)87,000 1,848
Grupo Aeroportuario del Sureste
S.A. de C.V., ADR 139,390 2,453
Grupo Financiero BBVA Bancomer
S.A. de C.V., ADR (a)(c)30,500 521
Grupo Financiero BBVA Bancomer
S.A. de C.V., Class B (a)7,260,353 6,222
Grupo Televisa S.A. ADR 163,500 6,517
Telmex, Class L ADR (c)479,468 15,837
Wal-Mart de Mexico S.A. de C.V., ADR (c)77,822 2,218
Wal-Mart de Mexico S.A. de C.V., Class C 1,664,042 4,464
Wal-Mart de Mexico S.A. de C.V., Class V 1,325,344 3,790
- -------------------------------------------------------------------------------------------
69,630
===========================================================================================
PERU (0.7%)
Cia de Minas Buenaventura S.A. ADR 249,700 7,062
- -------------------------------------------------------------------------------------------
POLAND (0.1%)
Eastbridge N.V. (d)33,400 1,336
- -------------------------------------------------------------------------------------------
RUSSIA (7.3%)
Alliance Cellulose Ltd. (d)592,359 @--
LukOil ADR (c)173,934 16,176
MMC Norilsk Nickel ADR (c)371,300 24,190
Mobile Telesystems 63,700 5,048
Mobile Telesystems ADR (c)45,000 3,726
OAO Gazprom ADR (Registered) 327,440 8,481
Surgutneftegaz ADR (c)466,089 13,563
Surgutneftegaz ADR (Preferred) (c)119,090 4,603
YUKOS ADR (a)33,682 1,405
- -------------------------------------------------------------------------------------------
77,192
===========================================================================================
SOUTH AFRICA (13.6%)
ABSA Group Ltd. 541,100 3,408
African Bank Investments Ltd. 4,878,400 6,883
African Life Assurance Co., Ltd. 2,354,600 5,384
Anglo American Platinum Corp., Ltd. 86,500 3,769
Anglo American plc (London Shares) 369,491 7,963
Anglo American plc 1,363,047 29,131
AngloGold Ltd. 98,000 4,599
AngloGold Ltd. ADR (c)48,273 2,254
Edgars Consolidated Stores Ltd. 163,800 $ 3,121
FirstRand Ltd. 7,223,890 9,630
Gold Fields Ltd. 586,080 8,365
Harmony Gold Mining Co., Ltd. 123,900 2,009
Impala Platinum Holdings Ltd. 100,038 8,672
Massmart Holdings Ltd. 571,900 2,607
MTN Group Ltd. (a)2,592,350 11,023
Naspers Ltd. 421,000 2,612
Pretoria Portland Cement Co., Ltd. 8,800 189
Shoprite Holdings Ltd. 1,769,562 2,473
Standard Bank Group Ltd. 2,563,780 15,013
Steinhoff International Holdings Ltd. 1,794,000 2,051
Telkom S.A. Ltd. 1,293,330 13,424
Telkom S.A. Ltd. ADR 3,200 135
- -------------------------------------------------------------------------------------------
144,715
===========================================================================================
SOUTH KOREA (16.0%)
Cheil Industries, Inc. 180,870 2,624
Daewoo Shipbuilding & Marine
Engineering Co., Ltd. (a)579,370 7,433
Daishin Securities Co., Ltd. 344,420 5,054
Daishin Securities Co., Ltd. (Preferred) 110,920 795
Good Morning Shinhan Securities Co., Ltd. (a)505,340 2,331
Handsome Co., Ltd. 372,290 3,778
Hankook Tire Co., Ltd. 549,340 4,146
Honam Petrochemical Corp. 110,800 5,714
Hyundai Department Store Co., Ltd. (a)248,200 8,096
Hyundai Mobis 253,510 13,627
Kookmin Bank Ltd. 132,120 4,947
KT&G Corp. 225,070 3,907
LG Card Co., Ltd. (a)85,389 218
LG Investment & Securities Co., Ltd. 408,120 2,841
Orion Corp. 47,830 3,506
POSCO 8,163 1,116
Samsung Electronics Co., Ltd. 139,543 52,775
Samsung Electronics Co., Ltd. (Preferred) 25,940 5,340
Samsung SDI Co., Ltd. 249,070 29,345
Shinhan Financial Group Co., Ltd. 198,330 3,168
SK Telecom Co., Ltd. 28,850 4,814
STX Corp. 17,970 138
STX Shipbuilding Co., Ltd. 262,980 3,495
- -------------------------------------------------------------------------------------------
169,208
===========================================================================================
TAIWAN (10.2%)
Acer, Inc. 2,309,207 3,434
Asia Optical Co., Inc. 1,013,200 6,981
Catcher Technology Co., Ltd. 524,000 1,890
Chinatrust Financial Holding Co., Ltd. 5,974,972 6,000
CTCI Corp. 3,643,000 2,950
Cyberlink Corp. 516,000 2,127
Eva Airways Corp. 4,473,069 1,824
Evergreen Marine Corp. 5,958,700 5,194
Fubon Financial Holding Co., Ltd. 3,879,000 3,712
Grand Hall Enterprise Co., Ltd. 163,000 754
HON HAI Precision Industry Co., Ltd. 1,778,560 6,992
Infortrend Technology, Inc. 892,900 2,932
Kaulin Manufacturing Co., Ltd. 1,055,000 1,528
Largan Precision Co., Ltd. 442,580 4,301
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
23
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
EMERGING MARKETS PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
TAIWAN (CONT'D)
MediaTek, Inc. 835,000 $ 7,844
Nan Ya Plastic Corp. 2,712,860 3,914
Novatek Microelectronics Corp., Ltd. 907,400 2,565
Phoenixtec Power Co., Ltd. 3,048,355 3,573
Pihsiang Machinery Manufacturing
Co., Ltd. 172,200 598
Polaris Securities Co., Ltd. (a)10,346,120 4,844
Sunplus Technology Co., Ltd. 1,077,000 2,014
Taishin Financial Holdings Co., Ltd. 4,210,000 3,112
Taiwan Cellular Corp. 3,777,000 3,281
Taiwan Cement Corp. 12,485,940 6,140
Taiwan Navigation Co., Ltd. 3,340,040 2,213
Taiwan Semiconductor
Manufacturing Co., Ltd. (a)1,613,010 3,016
Waffer Technology Co., Ltd. 1,309,000 3,989
Ya Hsin Industrial Co., Ltd. 5,139,000 6,643
Yuanta Core Pacific Securities Co. 4,376,495 2,616
Zyxel Communications Corp. 860,200 1,798
- -------------------------------------------------------------------------------------------
108,779
===========================================================================================
THAILAND (5.5%)
Asian Property Development PCL (d)5,409,100 785
Bangkok Bank PCL (Foreign) (a)(c)4,663,300 13,534
Banpu PCL (Foreign) (d)344,000 1,111
BEC World PCL (Foreign) (d)205,900 1,174
CP Seven Eleven PCL (Foreign) (a)738,500 1,044
Italian-Thai Development PCL (Foreign) (a)(d)1,740,800 6,063
Kasikornbank PCL (Foreign) (a)(c)2,916,900 5,153
Kasikornbank PCL NVDR (a)(c)2,719,100 4,461
Land & Houses PCL (Foreign, Registered) (c)15,981,900 5,122
MBK PCL (Foreign) (d)28,600 36
PTT PCL (Foreign) 588,600 2,570
Ratchaburi Electricity Generating
Holding PCL (Foreign) (d)1,063,600 1,315
Siam Cement PCL (The) NVDR (a)1,228,600 7,876
Siam Commercial Bank PCL (Foreign,
Registered) (a)2,497,000 3,403
Sino Thai Engineering & Construction
PCL (Foreign) (a)(d)2,269,700 1,180
Thai Airways International (Foreign) (d)1,516,200 1,751
Thai Olefins PCL (a)(d)440,000 811
Thai Plastics & Chemical Co. (Foreign) (d)240,200 1,188
- -------------------------------------------------------------------------------------------
58,577
===========================================================================================
TURKEY (5.9%)
Akbank T.A.S. 1,110,072,529 5,817
Akcansa Cimento A.S. 1,468,456,750 4,214
Arcelik A.S. 957,573,750 5,325
Enka Insaat ve Sanayi A.S. 166,662,914 4,337
Ford Otomotive Sanayii A.S. (a)83,573,000 560
Hurriyet Gazetecilik ve Matbaacilik A.S. (a)1,871,012,000 6,670
Migros Turk T.A.S. (Registered) 65,726,000 942
Tofas Turk Otomobil Fabrikasi A.S. (a)1,518,099,285 3,355
Trakya Cam Sanayii A.S. 1,049,837,826 2,320
Turkcell Iletisim Hizmet A.S. (a)647,257,000 6,460
Turkiye Garanti Bankasi A.S. (a)2,886,828,000 8,439
Turkiye IS Bankasi, Class C (a)2,579,871,360 10,484
Yapi Ve Kredi Bankasi A.S. (a)1,652,946,000 $ 3,418
- -------------------------------------------------------------------------------------------
62,341
===========================================================================================
VENEZUELA (0.2%)
CANTV ADR 152,065 2,321
- -------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $780,651) 1,019,575
===========================================================================================
<Caption>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
FIXED INCOME SECURITIES (1.4%)
INDIA (0.0%)
DCM Shriram Industries Ltd. INR (b)(d)677 @--
Saurashtra Cement & Chemicals Ltd. (b)(d)700 @--
- -------------------------------------------------------------------------------------------
@--
===========================================================================================
RUSSIA (1.4%)
Mustcom Ltd. $ (d)(e)66,270 15,242
- -------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (COST $62,480 ) 15,242
===========================================================================================
TOTAL FOREIGN SECURITIES (97.4%) (COST $843,131 ) 1,034,817
===========================================================================================
SHORT-TERM INVESTMENTS (13.1%)
SHORT-TERM DEBT SECURITIES HELD AS COLLATERAL ON
LOANED SECURITIES (10.7%)
American Express Credit Corp.,
1.17%, 5/17/04 1,640 1,640
BETA Finance, Inc., 1.08%, 6/16/04 7,648 7,648
Canadian Imperial Bank NY,
1.11%, 8/3/04 2,732 2,732
CC USA, Inc., 1.09%, 2/6/04 2,732 2,732
Chase Credit Card Master Trust,
1.18%, 10/15/04 2,187 2,187
Credit Industrial et Commercial (CIC)/NY,
1.14%, 2/10/04 2,841 2,841
Dorado Finance, Inc., 1.09%, 2/5/04 2,732 2,732
Federal National Mortgage Association,
0.96%, 1/29/04 16,391 16,391
Federal National Mortgage Association -
discounted, 1.13%, 4/14/04 2,409 2,409
Goldman Sachs & Co., 1.02%, 1/2/04 17,900 17,900
International Credit Card Funding No. 1
Ltd., 1.15%, 3/19/04 6,339 6,339
Landesbank Baden Wuerttemberg,
1.50%, 11/19/04 2,735 2,735
Links Finance LLC, 1.08%, 6/16/04 2,732 2,732
Links Finance LLC, 1.09%, 5/24/04 4,371 4,371
Macquarie Bank Ltd., 1.24%, 6/24/04 2,405 2,405
Natexis Banques Populaires NY,
1.15%, 12/20/04 4,368 4,368
Sears Credit Account Master Trust,
1.19%, 10/15/04 4,376 4,376
Societe Generale/London,
1.54%, 11/12/04 2,732 2,732
SWIFT 2001, Series A6, 1.16%, 1/15/04 1,934 1,934
SWIFT 2001, Series A7, 1.16%, 3/15/04 5,465 5,465
Target Credit Card Master Trust,
1.17%, 7/26/04 4,319 4,319
Wachovia Bank, NA, 1.06%, 11/15/04 5,468 5,468
Wells Fargo Bank, San Francisco NA,
1.06%, 1/30/04 1,530 1,530
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
24
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
EMERGING MARKETS PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------------------
SHORT-TERM DEBT SECURITIES HELD AS COLLATERAL ON
LOANED SECURITIES (CONT'D)
Westdeutsche Landesbank N.Y.,
1.09%, 11/29/04 $ 5,353 $ 5,353
- -------------------------------------------------------------------------------------------
113,339
===========================================================================================
REPURCHASE AGREEMENT (2.4%)
J.P. Morgan Securities, Inc., 0.75%, dated
12/31/03, due 1/2/04, repurchase
price $25,587 (f)25,586 25,586
- -------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $138,925 ) 138,925
===========================================================================================
FOREIGN CURRENCY (0.2%)
Brazilian Real BRL 561 194
British Pound GBP 2 3
Egyptian Pound EGP 628 102
Euro EUR 131 165
Hong Kong Dollar HKD 2 @--
Hungarian Forint HUF 917 4
Indian Rupee INR 40,200 882
Isreali Shekel ILS 78 18
Malaysian Ringgit MYR 535 141
Polish Zloty PLN 101 27
South African Rand ZAR 738 110
South Korean Won KRW 1,482 1
Taiwan Dollar TWD 21,065 620
Turkish Lira TRL 19,683,163 14
- -------------------------------------------------------------------------------------------
TOTAL FOREIGN CURRENCY (COST $2,275) 2,281
===========================================================================================
<Caption>
VALUE
(000)
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (110.7%) (COST $984,331) --
INCLUDING $110,437 OF SECURITIES LOANED $ 1,176,023
===========================================================================================
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
OTHER ASSETS (1.2%)
Receivable for Portfolio Shares
Sold $ 6,555
Dividends Receivable 3,181
Receivable for Investments Sold 2,127
Foreign Withholding Tax Reclaim
Receivable 376
Interest Receivable 1
Other 34 12,274
- -------------------------------------------------------------------------------------------
LIABILITIES (-11.9%)
Collateral on Securities Loaned, at
Value (113,339)
Payable for Portfolio Shares
Redeemed (3,728)
Payable for Investments
Purchased (3,263)
Investment Advisory Fees Payable (3,036)
Deferred Country Taxes (1,929)
Directors' Fees and Expenses
Payable (177)
Custodian Fees Payable (173)
Administrative Fees Payable (141)
Bank Overdraft Payable (40)
Distribution Fees, Class B (23)
Other Liabilities (49) (125,898)
- -------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 1,062,399
===========================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 1,213,800
Undistributed (Distributions in Excess of) Net
Investment Income (4,916)
Accumulated Net Realized Gain (Loss) (336,248)
Unrealized Appreciation (Depreciation) on
Investments (Net of $1,929 Deferred Country Tax) 189,763
- -------------------------------------------------------------------------------------------
NET ASSETS $ 1,062,399
===========================================================================================
CLASS A:
NET ASSETS $ 1,020,353
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 65,755,520 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 15.52
===========================================================================================
CLASS B:
NET ASSETS $ 42,046
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 2,737,482 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 15.36
===========================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
25
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
EMERGING MARKETS PORTFOLIO
(a) Non-income producing security.
(b) Issuer is in default.
(c) All or portion of security on loan at December 31, 2003.
(d) Security was valued at fair value -- At December 31, 2003, the Portfolio
held $37,090,000 of fair valued securities, representing 3.5% of net
assets.
(e) 144A security -- certain conditions for public sale may exist.
(f) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of this
statement of net assets. The investment in the repurchase agreement is
through participation in a joint account with affiliated parties.
(k) The Morgan Stanley Growth Fund is advised by an affiliate of the Adviser.
At the beginning of the period the Portfolio held 17,902,900 shares of
the security valued at $3,528,000. For the year ended December 31, 2003,
the Portfolio had no purchases and sold 620,000 shares of the security,
for a loss of $10,803. The Portfolio did not derive income from this
security during the year ended December 31, 2003.
@ Face Amount/Value is less than $500.
ADR American Depositary Receipts
GDR Global Depositary Receipts
NVDR Non Voting Depositary Receipts
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Portfolio had the following foreign currency exchange contract(s) open at
period end:
<Table>
<Caption>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
- -------------------------------------------------------------------------------------------
BRL 241 $ 83 1/2/04 US$ 83 $ 83 $ @--
US$ 105 105 1/2/04 HKD 812 105 @--
US$ 264 264 1/5/04 HKD 2,047 264 @--
US$ 15 15 1/2/04 IDR 130,060 15 @--
US$ 47 47 1/5/04 THB 1,851 47 @--
US$ 41 41 1/6/04 THB 1,625 41 @--
------------- ----------- ---------------
$ 555 $ 555 $ @--
============= =========== ===============
</Table>
IDR -- Indonesian Rupiah
THB -- Thai Baht
SUMMARY OF TOTAL FOREIGN SECURITIES BY INDUSTRY
CLASSIFICATION -- DECEMBER 31, 2003
(UNAUDITED)
<Table>
<Caption>
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
- -------------------------------------------------------------------------
Auto Components $ 18,711 1.8%
Automobiles 17,125 1.6
Beverages 14,085 1.3
Chemicals 13,449 1.3
Commercial Banks 143,755 13.5
Computers & Peripherals 10,484 1.0
Construction & Engineering 18,834 1.8
Construction Materials 28,602 2.7
Diversified Financial Services 26,776 2.5
Diversified Telecommunication Services 57,643 5.4
Electric Utilities 13,253 1.3
Electrical Equipment 15,425 1.4
Electronic Equipment & Instruments 49,687 4.7
Food & Staples Retailing 10,325 1.0
Household Durables 15,055 1.4
Insurance 12,388 1.2
Leisure Equipment & Products 12,053 1.1
Marine 11,261 1.1
Media 16,974 1.6
Metals & Mining 131,829 12.4
Multiline Retail 25,121 2.4
Oil & Gas 98,762 9.3
Pharmaceuticals 11,033 1.0
Semiconductors & Semiconductor Equipment 73,554 6.9
Software 11,761 1.1
Textiles, Apparel & Luxury Goods 10,661 1.0
Wireless Telecommunication Services 64,878 6.1
Other 101,333 9.5
- -------------------------------------------------------------------------
$ 1,034,817 97.4%
=========================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
26
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
EUROPEAN REAL ESTATE PORTFOLIO
[CHART]
COMPARISON OF THE CHANGE IN VALUE OF A $500,000** INVESTMENT
SINCE INCEPTION
FISCAL YEAR ENDED DECEMBER 31
<Table>
<Caption>
EUROPEAN EUROPEAN GPR
REAL ESTATE REAL ESTATE GENERAL REAL
PORTFOLIO - PORTFOLIO - ESTATE SECURITIES
CLASS A CLASS B INDEX - EUROPE(1)
"*" $ 500,000 $ 100,000 $ 500,000
"1997" $ 476,400 $ 95,240 $ 500,650
"1998" $ 499,029 $ 99,621 $ 498,647
"1999" $ 487,252 $ 97,021 $ 515,601
"2000" $ 559,901 $ 111,138 $ 562,263
"2001" $ 515,949 $ 102,158 $ 533,306
"2002" $ 642,460 $ 126,788 $ 652,447
"2003" $ 914,927 $ 180,115 $ 946,243
</Table>
* Commenced operations on October 1, 1997
** Minimum Investment
In accordance with SEC regulations, Portfolio performance shown assumes that all
recurring fees (including management fees) were deducted and all dividends and
distributions were reinvested. Total returns do not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the redemption
of Portfolio shares. The performance of Class B shares will vary based upon the
different fees assessed to that class. The GPR General Real Estate Securities
Index - Europe value at December 31, 2003 assumes a minimum investment of
$500,000; if a minimum initial investment of $100,000 (the minimum investment
for Class B shares) is assumed, the value at December 31, 2003 would be
$189,249.
PERFORMANCE COMPARED TO THE GPR GENERAL REAL ESTATE SECURITIES INDEX - EUROPE(1)
<Table>
<Caption>
TOTAL RETURNS(2)
---------------------------
AVERAGE ANNUAL
-------------------
ONE FIVE SINCE
YEAR YEARS INCEPTION
- -------------------------------------------------------------
Portfolio - Class A (3) 42.41% 12.89% 10.15%
Portfolio - Class B (3) 42.06 12.57 9.87
Index 45.03 13.67 10.73
</Table>
(1) The GPR General Real Estate Securities Index - Europe is a market
capitalization weighted index of listed property/real estate securities
in Europe 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. Fee waivers and/or reimbursements are
voluntary and the Adviser reserves the right to commence or terminate any
waiver and/or reimbursement at any time.
(3) Commenced operations on October 1, 1997
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 European Real Estate Portfolio seeks to provide current income and long-term
capital appreciation by investing primarily in equity securities of companies in
the European real estate industry. Foreign investing involves certain risks,
including currency fluctuations and controls, restrictions on foreign
investments, less governmental supervision and regulation, less liquidity and
the potential for market volatility and political instability. The Portfolio's
concentration in the real estate sector makes it subject to greater risk and
volatility than other portfolios that are more diversified and the value of its
shares may be substantially affected by economic events in the real estate
industry.
PERFORMANCE
For the year ended December 31, 2003, the Portfolio had a total return of 42.41%
for the Class A shares and 42.06% for the Class B shares compared to 45.03% for
the GPR General Real Estate Securities Index - Europe (the "Index").
FACTORS AFFECTING PERFORMANCE
- European real estate securities advanced strongly for a second year in a
row. Following a weak first quarter, the Index increased in each of the
remaining three quarters, finishing up 45% for the year.
- The strong performance during the year was aided by a depreciation of the
U.S. dollar, which lost 20% versus the euro and 9% versus the British
pound.
- The best performing markets during the year were Finland, Sweden, and
Spain with U.S. dollar returns of 75.0%, 71.1% and 59.4%, respectively.
- Compared to the Index, the Portfolio was underweight in Sweden, which
resulted in negative relative performance that was only partly compensated
for by overweights in Spain and Finland.
- The worst performing countries during the year were Switzerland, Germany
and Austria with dollar returns of 15.7%, 25.4% and 28.7%, respectively.
Compared to the Index, the Portfolio was underweighted in these lagging
countries, which helped account for the positive relative performance.
- Security selection added to returns in France, Spain, and Switzerland, but
this was more than offset by a negative contribution from stock picking in
the United Kingdom, Sweden, and Italy.
27
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (CONT'D)
EUROPEAN REAL ESTATE PORTFOLIO
MANAGEMENT STRATEGIES
- The Portfolio continued its long-term strategy of trying to achieve
superior returns in real estate securities by focusing on the underlying
properties' risk and return characteristics. We continued to focus on both
the top-down allocation across countries and real estate sectors, as well
as on a thorough bottom-up stock selection process based on fundamental
analysis.
- In 2003, we implemented this strategy through overweights in the French
and Italian real estate markets, where we found several opportunities to
invest in robust real estate markets at attractive valuations.
- We also maintained underweights in markets where we viewed that real
estate fundamentals were less appealing compared to the European average.
This resulted in underweights in Sweden and Germany during the year.
- Our focus on relative valuation also resulted in underweights in the
Austrian and Belgian markets and overweights in Spain and Finland.
January 2004
28
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
EUROPEAN REAL ESTATE PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
COMMON STOCKS (97.7%)
BELGIUM (0.4%)
Cofinimmo 705 $ 98
- -------------------------------------------------------------------------------------------
FINLAND (1.8%)
Sponda Oyj 49,294 410
- -------------------------------------------------------------------------------------------
FRANCE (24.0%)
Bail-Investissement 12,875 389
Gecina S.A. (a)10,683 1,567
Klepierre 11,184 671
Silic 3,499 233
Societe Fonciere Lyonnaise 18,926 818
Sophia 8,915 458
Unibail 15,057 1,408
- -------------------------------------------------------------------------------------------
5,544
===========================================================================================
GERMANY (1.4%)
IVG Immobilien AG 27,392 319
- -------------------------------------------------------------------------------------------
ITALY (7.4%)
Aedes S.p.A. 170,179 719
Beni Stabili S.p.A. 1,377,983 900
Risanamento S.p.A. 48,153 88
- -------------------------------------------------------------------------------------------
1,707
===========================================================================================
NETHERLANDS (12.6%)
AM N.V. 39,400 305
Corio N.V. 6,689 258
Eurocommercial Properties N.V. 24,836 651
Rodamco Europe N.V. 23,478 1,364
Wereldhave N.V. 4,332 324
- -------------------------------------------------------------------------------------------
2,902
===========================================================================================
NORWAY (1.7%)
Steen & Strom ASA (a)20,500 389
- -------------------------------------------------------------------------------------------
SPAIN (5.4%)
Inmobiliaria Colonial S.A. 23,759 568
Inmobiliaria Urbis S.A. 47,293 467
Metrovacesa S.A. 6,053 206
- -------------------------------------------------------------------------------------------
1,241
===========================================================================================
SWEDEN (0.7%)
JM AB 11,940 176
- -------------------------------------------------------------------------------------------
SWITZERLAND (1.4%)
PSP Swiss Property AG 2,378 335
- -------------------------------------------------------------------------------------------
UNITED KINGDOM (40.9%)
British Land Co. plc 138,540 1,445
Brixton plc 28,100 135
Canary Wharf Group plc (a)100,701 482
Capital & Regional Properties plc 12,843 92
Chelsfield plc 155,561 851
CLS Holdings plc (a)26,933 130
Derwent Valley Holdings plc 12,234 163
Freeport plc 49,510 356
Hammerson plc 51,362 594
Land Securities Group plc 118,230 2,094
Liberty International plc 67,435 822
London Merchant Securities plc 56,900 175
Minerva plc 76,700 294
Pillar Property plc 26,006 240
Shaftesbury plc 31,393 $ 138
Slough Estates plc 92,014 722
Unite Group plc 217,974 708
- -------------------------------------------------------------------------------------------
9,441
===========================================================================================
TOTAL COMMON STOCKS (COST $16,914) 22,562
===========================================================================================
TOTAL FOREIGN SECURITIES (97.7%) (COST $16,914) 22,562
===========================================================================================
<Caption>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
FOREIGN CURRENCY (0.0%)
British Pound GBP 2 3
Euro EUR 1 1
- -------------------------------------------------------------------------------------------
TOTAL FOREIGN CURRENCY (COST $4) 4
===========================================================================================
TOTAL INVESTMENTS (97.7%) (COST $16,918) 22,566
===========================================================================================
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
OTHER ASSETS (5.6%)
Receivable for Investments Sold $ 1,135
Foreign Withholding Tax Reclaim Receivable 127
Dividends Receivable 34
Other 1 1,297
- -------------------------------------------------------------------------------------------
LIABILITIES (-3.3%)
Bank Overdraft Payable (710)
Investment Advisory Fees Payable (30)
Custodian Fees Payable (6)
Administrative Fees Payable (5)
Directors' Fees and Expenses Payable (3)
Distribution Fees, Class B (1)
Other Liabilities (9) (764)
- -------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 23,099
===========================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 21,705
Undistributed (Distributions in Excess of) Net
Investment Income (274)
Accumulated Net Realized Gain (Loss) (4,011)
Unrealized Appreciation (Depreciation) on:
Investments 5,648
Foreign Currency Translations 31
- -------------------------------------------------------------------------------------------
NET ASSETS $ 23,099
===========================================================================================
CLASS A:
NET ASSETS $ 22,184
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 1,466,655 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 15.13
===========================================================================================
CLASS B:
NET ASSETS $ 915
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 60,317 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 15.17
===========================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
29
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
EUROPEAN REAL ESTATE PORTFOLIO
(a) Non-income producing security.
SUMMARY OF TOTAL FOREIGN SECURITIES BY INDUSTRY
CLASSIFICATION -- DECEMBER 31, 2003
(UNAUDITED)
<Table>
<Caption>
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
- -------------------------------------------------------------------------
Apartments $ 2,241 9.7%
Diversified 11,887 51.5
Office & Industrial 5,366 23.2
Office Buildings 2,145 9.3
Shopping Centers 838 3.6
Other 85 0.4
- -------------------------------------------------------------------------
$ 22,562 97.7%
=========================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
30
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
EUROPEAN VALUE EQUITY PORTFOLIO
[CHART]
COMPARISON OF THE CHANGE IN VALUE OF A $500,000* INVESTMENT
OVER 10 YEARS
FISCAL YEAR ENDED DECEMBER 31
<Table>
<Caption>
"EUROPEAN VALUE EQUITY PORTFOLIO-CLASS A" "MSCI EUROPE INDEX"(1)
"1993" $ 500,000 $ 500,000
"1994" $ 554,415 $ 511,412
"1995" $ 620,113 $ 621,980
"1996" $ 758,336 $ 753,156
"1997" $ 893,926 $ 932,407
"1998" $ 966,246 $ 1,198,423
"1999" $ 1,059,005 $ 1,388,852
"2000" $ 1,137,160 $ 1,272,328
"2001" $ 983,985 $ 1,019,135
"2002" $ 893,064 $ 831,818
"2003" $ 1,162,323 $ 1,152,400
</Table>
* Minimum Investment
In accordance with SEC regulations, Portfolio performance shown assumes that all
recurring fees (including management fees) were deducted and all dividends and
distributions were reinvested. Total returns do not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the redemption
of Portfolio shares. The performance of Class B shares will vary based upon the
different inception dates and fees assessed to that class.
PERFORMANCE COMPARED TO THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EUROPE
INDEX(1)
<Table>
<Caption>
TOTAL RETURNS(2)
---------------------------------------
AVERAGE ANNUAL
----------------------------
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION
- --------------------------------------------------------------------
Portfolio - Class A (3) 30.15% 3.77% 8.80% 10.77%
Index - Class A 38.54 (0.78) 8.71 9.95
Portfolio - Class B (4) 29.80 3.49 N/A 7.77
Index - Class B 38.54 (0.78) N/A 7.93
</Table>
(1) The MSCI Europe Index is an unmanaged market value weighted index of
common stocks listed on the stock exchanges of countries in Europe.
(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. Fee waivers and/or reimbursements are voluntary
and the Adviser reserves the right to commence or terminate any waiver
and/or reimbursement at any time.
(3) Commenced operations on April 2, 1993
(4) Commenced operations on January 2, 1996
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 European Value Equity Portfolio seeks long-term capital appreciation by
investing primarily in equity securities of European issuers. Foreign investing
involves certain risks, including currency fluctuations and controls,
restrictions on foreign investments, less governmental supervision and
regulation, less liquidity and the potential for market volatility and political
instability.
PERFORMANCE
For the year ended December 31, 2003, the Portfolio had a total return of 30.15%
for the Class A shares and 29.80% for the Class B shares compared to 38.54% for
the Morgan Stanley Capital International (MSCI) Europe Index (the "Index").
FACTORS AFFECTING PERFORMANCE
- In 2003, European equity markets rebounded strongly, driven by strong
performance in the most cyclical sectors: information technology,
industrials, and financials.
- Defensive sectors such as healthcare, consumer staples, and energy were
the worst performing sectors.
- The Portfolio's underperformance was primarily driven by weaker stock
selection in industrials, materials, and information technology.
- Our value discipline leads us to invest in stocks that have a solid
business model, a sound balance sheet, and an attractive valuation
relative to their long-term fair value. This emphasis has led us to stay
away from the higher beta, higher financial leverage and low profitability
stocks that led the equity market recovery.
- In terms of sector allocation, the Portfolio's overweight in industrials
was positive. However, both the underweight in financials and the
overweight in consumer staples had a negative impact on the overall
return.
MANAGEMENT STRATEGIES
- As patient long-term investors, we continued to search for undervalued
securities that we believed would provide both capital appreciation and a
margin of safety. We paid particular attention to free cash flow
generation, as we believe it is the key driver to economic value creation.
January 2004
31
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
EUROPEAN VALUE EQUITY PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
COMMON STOCKS (95.8%)
BELGIUM (2.8%)
AGFA-Gevaert N.V. 9,847 $ 280
Fortis 16,747 337
Solvay S.A., Class A 3,855 333
- -------------------------------------------------------------------------------------------
950
===========================================================================================
DENMARK (0.9%)
Danske Bank A/S 13,231 310
- -------------------------------------------------------------------------------------------
FINLAND (2.7%)
Nokia Oyj 43,770 755
Sampo Oyj, Class A 17,062 176
- -------------------------------------------------------------------------------------------
931
===========================================================================================
FRANCE (16.0%)
Aventis S.A. (c)13,738 905
AXA 9,830 210
BNP Paribas S.A. 11,836 743
Carrefour S.A. (c)3,097 170
France Telecom S.A. (a)18,628 531
Groupe Danone 1,877 306
Neopost S.A. 3,487 175
Peugeot S.A. 3,514 179
Schneider Electric S.A. 8,757 572
Societe Generale 4,889 430
Total S.A. 6,496 1,204
- -------------------------------------------------------------------------------------------
5,425
===========================================================================================
GERMANY (4.5%)
Adidas-Salomon AG 3,338 379
Deutsche Boerse AG 6,458 352
Deutsche Telekom AG (Registered) (a)11,600 212
E. ON AG 3,006 196
Siemens AG (Registered) 4,860 388
- -------------------------------------------------------------------------------------------
1,527
===========================================================================================
IRELAND (2.2%)
Allied Irish Banks plc 20,800 332
Bank of Ireland (London Shares) 30,690 417
- -------------------------------------------------------------------------------------------
749
===========================================================================================
ITALY (5.2%)
ENI S.p.A. 27,965 526
Telecom Italia S.p.A. (a)(c)128,703 381
Telecom Italia S.p.A. RNC (Non-Voting Shares) (a)220,508 448
UniCredito Italiano S.p.A. 76,909 414
- -------------------------------------------------------------------------------------------
1,769
===========================================================================================
NETHERLANDS (5.6%)
European Aeronautic Defense & Space Co. (c)6,345 150
Heineken N.V. 6,860 261
Royal Dutch Petroleum Co. 15,505 815
Unilever N.V. CVA 10,352 675
- -------------------------------------------------------------------------------------------
1,901
===========================================================================================
NORWAY (1.5%)
DNB NOR ASA (c)56,373 375
Telenor ASA 17,970 117
- -------------------------------------------------------------------------------------------
492
===========================================================================================
SPAIN (1.4%)
Telefonica S.A. 32,267 $ 472
- -------------------------------------------------------------------------------------------
SWITZERLAND (19.2%)
ABB Ltd. (a)53,116 269
Ciba Specialty Chemicals AG (Registered) (a)4,246 328
Converium Holding AG 7,387 392
Credit Suisse Group 7,675 280
Holcim Ltd. (Registered) 6,923 321
Nestle S.A. (Registered) 4,476 1,115
Novartis AG (Registered) 26,415 1,196
Roche Holding AG 1,682 169
Schindler Holding AG (Registered) (a)731 202
STMicroelectronics N.V 13,568 367
Swiss Reinsurance (Registered) 5,023 338
Swisscom AG (Registered) 719 236
Syngenta AG 8,954 601
UBS AG (Registered) 10,601 724
- -------------------------------------------------------------------------------------------
6,538
===========================================================================================
UNITED KINGDOM (33.8%)
Allied Domecq plc 59,776 460
Barclays plc 42,713 380
BOC Group plc 27,886 425
British American Tobacco plc 25,148 346
Cadbury Schweppes plc 24,780 182
Diageo plc 16,414 215
GlaxoSmithKline plc 55,842 1,276
GUS plc 14,854 205
Hays plc 157,271 337
HSBC Holdings plc 26,327 413
Invensys plc (a)180,153 59
Lloyds TSB Group plc 46,420 371
National Grid Transco plc 41,131 294
Pearson plc 14,644 163
Prudential plc 60,530 510
Reed Elsevier plc 86,800 724
Rentokil Initial plc 170,167 577
Rolls-Royce Group plc 76,739 243
Royal Bank of Scotland Group plc 30,248 889
Scottish & Southern Energy plc 14,847 178
Shell Transport & Trading Co. plc 147,624 1,095
Smiths Group plc 37,336 441
Vodafone Group plc 554,214 1,371
Yell Group plc 59,241 323
- -------------------------------------------------------------------------------------------
11,477
===========================================================================================
TOTAL COMMON STOCKS (COST $27,116) 32,541
===========================================================================================
TOTAL FOREIGN SECURITIES (95.8%) (COST $27,116) 32,541
===========================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
32
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
EUROPEAN VALUE EQUITY PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (5.0%)
SHORT-TERM DEBT SECURITIES HELD AS COLLATERAL
ON LOANED SECURITIES (4.0%)
American Express Credit Corp.,
1.17%, 5/17/04 $ 20 $ 20
BETA Finance, Inc., 1.08%, 6/16/04 92 92
Canadian Imperial Bank NY, 1.11%, 8/3/04 33 33
CC USA, Inc., 1.09%, 2/6/04 33 33
Chase Credit Card Master Trust,
1.18%, 10/15/04 26 26
Credit Industrial et Commercial (CIC)/NY,
1.14%, 2/10/04 34 34
Dorado Finance, Inc., 1.09%, 2/5/04 33 33
Federal National Mortgage Association,
0.96%, 1/29/04 198 198
Federal National Mortgage Association -
Discounted, 1.13%, 4/14/04 29 29
Goldman Sachs & Co., 1.02%, 1/2/04 216 216
International Credit Card Funding No. 1 Ltd.,
1.15%, 3/19/04 77 77
Landesbank Baden Wuerttemberg,
1.50%, 11/19/04 33 33
Links Finance LLC, 1.08%, 6/16/04 33 33
Links Finance LLC, 1.09%, 5/24/04 53 53
Macquarie Bank Ltd., 1.24%, 6/24/04 29 29
Natexis Banques Populaires NY,
1.15%, 12/20/04 53 53
Sears Credit Account Master Trust,
1.19%, 10/15/04 53 53
Societe Generale/London, 1.54%, 11/12/04 33 33
SWIFT 2001, Series A6, 1.16%, 1/15/04 23 23
SWIFT 2001, Series A7, 1.16%, 3/15/04 66 66
Target Credit Card Master Trust, 1.17%, 7/26/04 52 52
Wachovia Bank, NA, 1.06%, 11/15/04 66 66
Wells Fargo Bank, San Francisco NA,
1.06%, 1/30/04 19 19
Westdeutsche Landesbank N.Y.,
1.09%, 11/29/04 65 65
- -------------------------------------------------------------------------------------------
1,369
===========================================================================================
REPURCHASE AGREEMENT (1.0%)
J.P. Morgan Securities, Inc., 0.75%, dated
12/31/03, due 1/2/04, repurchase price $339 (f)339 339
- -------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $1,708) 1,708
===========================================================================================
FOREIGN CURRENCY (0.2%)
British Pound GBP 2 4
Danish Krone DKK 35 6
Euro EUR 11 14
Norwegian Krone NOK 153 23
Swedish Krona SEK 29 4
Swiss Franc CHF @-- @--
- -------------------------------------------------------------------------------------------
TOTAL FOREIGN CURRENCY (COST $51) 51
===========================================================================================
<Caption>
VALUE
(000)
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.0%) (COST $28,875) -- INCLUDING
$1,321 OF SECURITIES LOANED $ 34,300
===========================================================================================
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
OTHER ASSETS (3.4%)
Receivable for Investments Sold $ 774
Foreign Withholding Tax Reclaim Receivable 321
Dividends Receivable 54
Other 2 1,151
- -------------------------------------------------------------------------------------------
LIABILITIES (-4.4%)
Collateral on Securities Loaned, at Value (1,369)
Investment Advisory Fees Payable (51)
Directors' Fees and Expenses Payable (24)
Custodian Fees Payable (13)
Administrative Fees Payable (6)
Net Unrealized Depreciation on Foreign
Currency Exchange Contracts (4)
Bank Overdraft Payable (3)
Distribution Fees, Class B (1)
Other Liabilities (9) (1,480)
- -------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 33,971
===========================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 31,980
Undistributed (Distributions in Excess of) Net
Investment Income (4)
Accumulated Net Realized Gain (Loss) (3,518)
Unrealized Appreciation (Depreciation) on:
Investments 5,425
Foreign Currency Exchange Contracts and Translations 88
- -------------------------------------------------------------------------------------------
NET ASSETS $ 33,971
===========================================================================================
CLASS A:
NET ASSETS $ 32,791
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 2,518,148 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 13.02
===========================================================================================
CLASS B:
NET ASSETS $ 1,180
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 90,502 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 13.04
===========================================================================================
</Table>
(a) Non-income producing security.
(c) All or portion of security on loan at December 31, 2003.
(f) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated parties.
@ Face Amount/Value is less than $500.
CVA Certificaten Van Aandelen
RNC Non-Convertible Savings Shares
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
33
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
EUROPEAN VALUE EQUITY PORTFOLIO
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Portfolio had the following foreign currency exchange contract(s) open at
period end:
<Table>
<Caption>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
- -----------------------------------------------------------------------------
CHF 473 $ 381 1/5/04 US$ 379 $ 379 $ (2)
DKK 114 19 1/5/04 US$ 19 19 @--
EUR 157 198 1/2/04 US$ 197 197 (1)
EUR 112 141 1/5/04 US$ 140 140 (1)
NOK 112 17 1/5/04 US$ 17 17 @--
------- ------- --------
$ 756 $ 752 $ (4)
======= ======= ========
</Table>
SUMMARY OF TOTAL FOREIGN SECURITIES BY INDUSTRY
CLASSIFICATION -- DECEMBER 31, 2003
(UNAUDITED)
<Table>
<Caption>
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
- -----------------------------------------------------------------------------
Aerospace & Defense $ 393 1.2%
Beverages 936 2.8
Capital Markets 1,004 3.0
Chemicals 1,687 5.0
Commercial Banks 5,075 14.9
Commercial Services & Supplies 914 2.7
Communications Equipment 755 2.2
Diversified Financial Services 689 2.0
Diversified Telecommunication Services 2,397 7.0
Electric Utilities 374 1.1
Electrical Equipment 840 2.5
Food Products 2,277 6.7
Household Durables 905 2.7
Industrial Conglomerates 829 2.4
Insurance 1,626 4.8
Media 1,209 3.6
Oil & Gas 3,641 10.7
Pharmaceuticals 2,641 7.8
Semiconductors & Semiconductor Equipment 367 1.1
Textiles, Apparel & Luxury Goods 379 1.1
Tobacco 346 1.0
Wireless Telecommunication Services 1,371 4.0
Other 1,886 5.5
- -----------------------------------------------------------------------------
$ 32,541 95.8%
=============================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
34
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
GLOBAL FRANCHISE PORTFOLIO
[CHART]
COMPARISON OF THE CHANGE IN VALUE OF A $500,000** INVESTMENT
SINCE INCEPTION
FISCAL YEAR ENDED DECEMBER 31
<Table>
<Caption>
"MSCI WORLD INDEX"(1) "GLOBAL FRANCHISE PORTFOLIO-CLASS A" "GLOBAL FRANCHISE PORTFOLIO-CLASS B"
"*" $ 500,000 $ 500,000 $ 100,000
"2001" $ 503,100 $ 524,000 $ 104,600
"2002" $ 403,033 $ 566,444 $ 112,780
"2003" $ 536,478 $ 724,595 $ 143,929
</Table>
* Commenced operations on November 28, 2001
** Minimum Investment
In accordance with SEC regulations, Portfolio performance shown assumes that all
recurring fees (including management fees) were deducted and all dividends and
distributions were reinvested. Total returns do not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the redemption
of Portfolio shares. The performance of Class B shares will vary based upon the
different fees assessed to that class. The MSCI World Index value at December
31, 2003 assumes a minimum investment of $500,000; if a minimum initial
investment of $100,000 (the minimum for Class B shares) is assumed, the value at
December 31, 2003 would be $103,112.
PERFORMANCE COMPARED TO THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) WORLD
INDEX(1)
<Table>
<Caption>
TOTAL RETURNS(2)
----------------------------
AVERAGE
ANNUAL
ONE SINCE
YEAR INCEPTION
- -----------------------------------------------------------------
Portfolio - Class A (3) 27.92% 19.42%
Portfolio - Class B (3) 27.62 19.03
Index 33.11 3.96
</Table>
(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.
(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. Fee waivers and/or reimbursements are voluntary
and the Adviser reserves the right to commence or terminate any waiver
and/or reimbursement at any time.
(3) Commenced operations on November 28, 2001
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 Global Franchise Portfolio seeks long-term capital appreciation by investing
primarily in equity securities of issuers located throughout the world, that it
believes have, among other things, resilient business franchises and growth
potential. This Portfolio's concentration of its assets in a smaller number of
companies may subject it to greater investment risk than a portfolio with a
larger number of companies. Foreign investing involves certain risks, including
currency fluctuations and controls, restrictions on foreign investments, less
governmental supervision and regulation, less liquidity and the potential for
market volatility and political instability.
PERFORMANCE
For the year ended December 31, 2003, the Portfolio had a total return of 27.92%
for the Class A shares and 27.62% for the Class B shares compared to 33.11% for
the Morgan Stanley Capital International (MSCI) World Index (the "Index").
FACTORS AFFECTING PERFORMANCE
- In 2003, equity markets rallied driven by strong performance in materials
(+46%), information technology (+37%), and industrials (+33%).
- The lowest performing sectors included healthcare (+14%), consumer staples
(+21%), and utilities (+23%).
- In this environment, value stocks underperformed growth stocks.
- The Portfolio's investment strategy prevents us from investing in the
sectors that drove the market this year. As long-only investors, we seek
high quality companies that are relatively less affected by various
economic cycles. We avoid investing in sectors that are characterized by
cyclicality, leverage, high capital expenditure, or obsolescence risk.
Consequently, zero allocation to the highest performing sectors this year
has been the largest deterrent to our performance.
- The largest contribution to our performance came from stock selection in
industrials. The two elevator-servicing companies in the Portfolio rose
92% for the year. The second largest contributor to our performance has
been stock selection in consumer staples. Security selection detracted
from performance in the consumer discretionary sector.
MANAGEMENT STRATEGIES
- Overall, we continued to invest in companies with strong business
franchises protected by a dominant intangible asset. Additionally, we
demanded sound management, substantial free cash flow, and growth
potential. We invested in these high quality companies only when we could
identify compelling value as measured by a current free cash flow yield in
excess of the risk-free bond yield.
January 2004
35
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
GLOBAL FRANCHISE PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (94.8%)
CANADA (3.0%)
Torstar Corp., Class B 110,980 $ 2,482
- --------------------------------------------------------------------------------
FINLAND (4.5%)
Kone Oyj, Class B 64,588 3,697
- --------------------------------------------------------------------------------
FRANCE (7.0%)
Aventis S.A. 34,288 2,260
Groupe Danone 21,439 3,490
- --------------------------------------------------------------------------------
5,750
================================================================================
ITALY (2.6%)
Davide Campari-Milano S.p.A. 45,091 2,184
- --------------------------------------------------------------------------------
NETHERLANDS (2.7%)
Reed Elsevier N.V. 179,980 2,230
- --------------------------------------------------------------------------------
SPAIN (3.9%)
Zardoya Otis S.A. 156,445 3,247
- --------------------------------------------------------------------------------
SWEDEN (4.5%)
Swedish Match AB 360,384 3,680
- --------------------------------------------------------------------------------
SWITZERLAND (7.3%)
Nestle S.A. (Registered) 14,603 3,637
Novartis AG (Registered) 52,902 2,395
- --------------------------------------------------------------------------------
6,032
================================================================================
UNITED KINGDOM (37.9%)
Allied Domecq plc 425,745 3,276
British American Tobacco plc 442,056 6,078
Cadbury Schweppes plc 617,013 4,520
Capital Radio plc 199,732 1,676
Diageo plc 267,665 3,513
GlaxoSmithKline plc 116,281 2,658
Imperial Tobacco Group plc 112,038 2,201
Reckitt Benckiser plc 150,050 3,387
SMG plc 1,161,802 2,406
WPP Group plc 152,657 1,495
- --------------------------------------------------------------------------------
31,210
================================================================================
UNITED STATES (21.4%)
Altria Group, Inc. 69,363 3,775
Bristol-Myers Squibb Co. 70,611 2,019
Brown-Forman Corp., Class B 16,349 1,528
Fortune Brands, Inc. 23,158 1,655
Kimberly-Clark Corp. 49,975 2,953
Merck & Co., Inc. 54,223 2,505
New York Times Co., (The) Class A 66,241 3,166
- --------------------------------------------------------------------------------
17,601
================================================================================
TOTAL COMMON STOCKS (COST $61,041) 78,113
================================================================================
<Caption>
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (5.5%)
REPURCHASE AGREEMENT (5.5%)
J.P. Morgan Securities, Inc., 0.75%, dated
12/31/03, due 1/2/04, repurchase price
$4,575 (COST $4,575) $ (f)4,575 4,575
================================================================================
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
FOREIGN CURRENCY (0.0%)
British Pound GBP @-- $ @--
Canadian Dollar CAD 15 12
Euro EUR 18 22
- -------------------------------------------------------------------------------
TOTAL FOREIGN CURRENCY (COST $34) 34
===============================================================================
TOTAL INVESTMENTS (100.3%) (COST $65,650) 82,722
===============================================================================
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------------
OTHER ASSETS (0.4%)
Dividends Receivable $ 177
Foreign Withholding Tax Reclaim Receivable 138
Receivable for Portfolio Shares Sold 25
Other 2 342
- -------------------------------------------------------------------------------
LIABILITIES (-0.7%)
Net Unrealized Depreciation on Foreign
Currency Exchange Contracts (464)
Investment Advisory Fees Payable (122)
Administrative Fees Payable (13)
Custodian Fees Payable (7)
Bank Overdraft Payable (7)
Distribution Fees, Class B (1)
Directors' Fees and Expenses Payable (1)
Other Liabilities (11) (626)
- -------------------------------------------------------------------------------
NET ASSETS (100%) $ 82,438
===============================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 66,098
Undistributed (Distributions in Excess of ) Net
Investment Income (212)
Accumulated Net Realized Gain (Loss) (86)
Unrealized Appreciation (Depreciation) on:
Investments 17,072
Foreign Currency Exchange Contracts and
Translations (434)
- -------------------------------------------------------------------------------
NET ASSETS $ 82,438
===============================================================================
CLASS A:
NET ASSETS $ 79,756
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 5,582,725 outstanding $0.001 par
value shares (authorized 500,000,000 shares) $ 14.29
===============================================================================
CLASS B:
NET ASSETS $ 2,682
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 188,615 outstanding $0.001 par
value shares (authorized 500,000,000 shares) $ 14.22
===============================================================================
</Table>
(f) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated parties.
@ Face Amount/Value is less than $500.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
36
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
GLOBAL FRANCHISE PORTFOLIO
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Portfolio had the following foreign currency exchange contract(s) open
at period end:
<Table>
<Caption>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
- --------------------------------------------------------------------------------
GBP 6,750 $ 12,050 1/8/04 US$ 11,586 $ 11,586 $ (464)
======== ======== =======
</Table>
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY
CLASSIFICATION -- DECEMBER 31, 2003
(UNAUDITED)
<Table>
<Caption>
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
- --------------------------------------------------------------------------------
Beverages $ 10,501 12.7%
Food Products 11,647 14.1
Household Durables 3,916 4.8
Household Products 6,340 7.7
Machinery 6,943 8.4
Media 10,290 12.5
Metals & Mining 3,166 3.9
Pharmaceuticals 9,577 11.6
Tobacco 15,733 19.1
- --------------------------------------------------------------------------------
$ 78,113 94.8%
================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
37
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
GLOBAL VALUE EQUITY PORTFOLIO
[CHART]
COMPARISON OF THE CHANGE IN VALUE OF A $500,000* INVESTMENT
OVER 10 YEARS
FISCAL YEAR ENDED DECEMBER 31
<Table>
<Caption>
MSCI WORLD NET INDEX(1) GLOBAL VALUE EQUITY PORTFOLIO-CLASS A
"1993" $ 500,000 $ 500,000
"1994" $ 525,400 $ 534,770
"1995" $ 634,263 $ 634,579
"1996" $ 719,762 $ 779,479
"1997" $ 833,196 $ 964,637
"1998" $ 1,035,996 $ 1,105,512
"1999" $ 1,294,373 $ 1,149,888
"2000" $ 1,123,750 $ 1,285,046
"2001" $ 934,735 $ 1,177,680
"2002" $ 748,817 $ 973,482
"2003" $ 996,750 $ 1,257,836
</Table>
* Minimum Investment
In accordance with SEC regulations, Portfolio performance shown assumes that all
recurring fees (including management fees) were deducted and all dividends and
distributions were reinvested. Total returns do not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the redemption
of Portfolio shares. The performance of Class B shares will vary based upon the
different inception dates and fees assessed to that class.
PERFORMANCE COMPARED TO THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) WORLD
INDEX(1)
<Table>
<Caption>
TOTAL RETURNS(2)
---------------------------------------
AVERAGE ANNUAL
----------------------------
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION
- --------------------------------------------------------------------
Portfolio - Class A (3) 29.21% 2.61% 9.66% 11.65%
Index - Class A 33.11 (0.77) 7.14 7.98
Portfolio - Class B (4) 28.95 2.36 N/A 8.57
Index - Class B 33.11 (0.77) N/A 5.76
</Table>
(1) The MSCI World Index is an unmanaged index of common stocks and includes
securities representative of the market structure over 20 developed market
countries in North America, Europe, and the Asia/Pacific region.
(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. Fee waivers and/or reimbursements are voluntary
and the Adviser reserves the right to commence or terminate any waiver
and/or reimbursement at any time.
(3) Commenced operations on July 15, 1992
(4) Commenced operations on January 2, 1996
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 Global Value Equity Portfolio seeks long-term capital appreciation by
investing primarily in equity securities of issuers throughout the world,
including U.S. issuers. Foreign investing involves certain risks, including
currency fluctuations and controls, restrictions on foreign investments, less
governmental supervision and regulation, less liquidity and the potential for
market volatility and political instability.
PERFORMANCE
For the year ended December 31, 2003, the Portfolio had a total return of 29.21%
for the Class A shares and 28.95% for the Class B shares compared to 33.11% for
the Morgan Stanley Capital International (MSCI) World Index (the "Index").
FACTORS AFFECTING PERFORMANCE
- Marked improvements in economic growth in the world's major regions
ensured the year finished off on a resolutely positive note. Confirmation
that the difficulties of the first quarter were behind us came as equity
markets staged a significant rally post March, which has continued to the
end of the year.
- Early in the year, the Iraq war and its impact on the global economy
dominated investors' thinking. During this period, the Portfolio was
overweight relative to the Index in the defensive consumer staples sector,
but this sector also suffered through the impact of the general retreat
from equities. In addition, the more economically sensitive sectors such
as financials, consumer discretionary, materials, and industrials, which
the Portfolio was at Index weight or overweight, also suffered. As a
consequence, the Portfolio underperformed in the first quarter.
- In the second quarter, the Iraq conflict ended and a relief rally ensued.
The market rose 17.0% during the quarter, and returns from all sectors
were positive. The Portfolio's positioning remained similar to the first
quarter, and the Portfolio outperformed in this environment. However, the
rebound was not sufficient to fully recover the losses incurred in the
anomalous conditions of the first quarter.
- As an economic recovery began to gain momentum and the year progressed,
the Portfolio continued to outperform in the third quarter and its
performance was in line with the Index for the fourth quarter.
MANAGEMENT STRATEGIES
- Relative to the Index at the end of the period, the Portfolio maintained
its significant overweight in the consumer staples sector. We remained
underweight in the information technology sector where stocks that meet
our quality criteria continue to be too expensive.
- Finally, we have been able to identify a number of attractive
opportunities in Japan, particularly in the pharmaceutical and household
products categories, which meet our stringent quality and value criteria,
and we have nominally increased the weighting of the Portfolio there.
January 2004
38
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
GLOBAL VALUE EQUITY PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (95.4%)
BERMUDA (0.7%)
XL Capital Ltd., Class A 8,283 $ 642
- --------------------------------------------------------------------------------
DENMARK (0.7%)
Danisco A/S 13,970 620
- --------------------------------------------------------------------------------
FINLAND (0.2%)
Nokia Oyj 11,615 200
- --------------------------------------------------------------------------------
FRANCE (7.1%)
Aventis S.A. 22,076 1,455
BNP Paribas S.A. 21,316 1,338
Cie de Saint-Gobain 15,204 742
Groupe Danone 2,940 479
Lafarge S.A. 11,971 1,063
Total S.A., Class B 6,266 1,162
- --------------------------------------------------------------------------------
6,239
================================================================================
GERMANY (1.6%)
BASF AG 19,427 1,089
Porsche AG (non-voting shares) 534 316
- --------------------------------------------------------------------------------
1,405
================================================================================
HONG KONG (0.5%)
HongKong Electric Holdings Ltd. 107,180 424
- --------------------------------------------------------------------------------
IRELAND (0.6%)
Bank of Ireland (London Shares) 39,673 539
- --------------------------------------------------------------------------------
ITALY (2.7%)
ENI S.p.A. 77,987 1,467
Telecom Italia S.p.A. RNC (a)427,738 869
- --------------------------------------------------------------------------------
2,336
================================================================================
JAPAN (12.5%)
Canon, Inc. 20,000 930
Fuji Photo Film Co., Ltd. 37,000 1,192
Fuji Television Network, Inc. 44 238
Fujitsu Ltd. (a)66,000 388
Hitachi Ltd. 77,000 463
Kao Corp. 43,000 873
Mitsubishi Estate Co., Ltd. 87,000 823
Mitsui Sumitomo Insurance Co., Ltd. 138,000 1,131
Nippon Telegraph & Telephone Corp. 179 862
Rohm Co., Ltd. 5,100 597
Sankyo Co., Ltd. 33,900 636
Sekisui House Ltd. 68,000 701
Sumitomo Electric Industries Ltd. 81,000 723
Takeda Chemical Industries Ltd. 28,800 1,140
Toyota Motor Corp. 10,200 344
- --------------------------------------------------------------------------------
11,041
================================================================================
NETHERLANDS (4.7%)
Heineken N.V. 23,279 884
ING Groep N.V. CVA 19,304 449
Koninklijke Philips Electronics N.V. 28,138 819
Royal Dutch Petroleum Co. (NY Shares) 34,025 1,783
Unilever N.V. CVA 3,652 238
- --------------------------------------------------------------------------------
4,173
================================================================================
SOUTH KOREA (0.2%)
Samsung Electronics Co., Ltd. GDR
(Registered) 1,145 215
- --------------------------------------------------------------------------------
SPAIN (1.0%)
Telefonica S.A. 58,004 $ 849
- --------------------------------------------------------------------------------
SWEDEN (0.5%)
Nordea AB 59,652 448
- --------------------------------------------------------------------------------
SWITZERLAND (6.9%)
Converium Holding AG 19,250 1,020
Holcim Ltd. (Registered) 15,079 700
Nestle S.A. (Registered) 6,741 1,679
Novartis AG (Registered) 16,444 745
Roche Holding AG 5,937 597
Syngenta AG 12,445 836
UBS AG (Registered) 7,572 517
- --------------------------------------------------------------------------------
6,094
================================================================================
UNITED KINGDOM (15.8%)
Allied Domecq plc 157,134 1,209
BAA plc 57,807 512
Cadbury Schweppes plc 194,068 1,422
Diageo plc 75,875 996
GlaxoSmithKline plc 74,132 1,694
Lloyds TSB Group plc 60,492 484
National Grid Transco plc 63,179 452
Prudential plc 54,487 460
Reed Elsevier plc 224,750 1,875
Rentokil Initial plc 135,103 458
Rolls-Royce Group plc 173,184 548
Royal Bank of Scotland Group plc 16,238 477
Scottish & Southern Energy plc 61,572 740
Vodafone Group plc 657,334 1,626
WPP Group plc 48,729 477
Yell Group plc 88,440 482
- --------------------------------------------------------------------------------
13,912
================================================================================
UNITED STATES (39.7%)
Alcoa, Inc. 26,022 989
Altria Group, Inc. 34,862 1,897
BellSouth Corp. 16,928 479
BJ's Wholesale Club, Inc. (a)28,880 663
Boeing Co. (The) 16,766 706
Boise Cascade Corp. 38,346 1,260
Bristol-Myers Squibb Co. 35,557 1,017
ChevronTexaco Corp. 6,708 579
Coca Cola Co. (The) 9,907 503
DuPont (E.I.) De Nemours & Co. 5,182 238
Emerson Electric Co. 4,711 305
Exxon Mobil Corp. 12,712 521
First Data Corp. 24,067 989
Gap, Inc. (The) 12,461 289
General Dynamics Corp. 8,868 802
Georgia-Pacific Corp. 31,452 965
Hewlett-Packard Co. 44,172 1,015
International Business Machines Corp. 20,479 1,898
J.P. Morgan Chase & Co. 12,158 447
Kimberly-Clark Corp. 25,913 1,531
Kroger Co. (a)39,508 731
Loews Corp. - Carolina Group 24,204 611
MBIA, Inc. 16,686 988
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
39
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
GLOBAL VALUE EQUITY PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
UNITED STATES (CONT'D)
McDonald's Corp. 34,256 $ 851
Mellon Financial Corp. 34,915 1,121
Merck & Co., Inc. 11,978 553
Merrill Lynch & Co., Inc. 12,969 761
Motorola, Inc. 95,724 1,347
New York Times Co., (The) Class A 12,058 576
Northrop Grumman Corp. 10,270 982
Parker Hannifin Corp. 7,854 467
Pfizer, Inc. 32,555 1,150
Prudential Financial, Inc. 16,814 702
SBC Communications, Inc. 43,877 1,144
Travelers Property Casualty Corp., Class A 64,824 1,088
U.S. Bancorp 17,196 512
Verizon Communications, Inc. 33,718 1,183
Viacom, Inc., Class B 10,498 466
Wells Fargo & Co. 6,418 378
Wyeth 43,317 1,839
Xerox Corp. (a)39,771 549
- --------------------------------------------------------------------------------
35,092
================================================================================
TOTAL COMMON STOCKS (COST $72,587) 84,229
================================================================================
PREFERRED STOCK (0.7%)
UNITED STATES (0.7%)
Ford Motor Co., Capital Trust II (COST $495) (a)10,355 578
- --------------------------------------------------------------------------------
<Caption>
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (3.7%)
REPURCHASE AGREEMENT (3.7%)
J.P. Morgan Securities, Inc., 0.75%, dated
12/31/03, due 1/2/04, repurchase price
$3,311 (COST $3,311) $ (f)3,311 3,311
- --------------------------------------------------------------------------------
FOREIGN CURRENCY (0.1%)
British Pound GBP 24 44
Danish Krone DKK 63 11
Euro EUR 11 14
Hong Kong Dollar HKD 1 @--
Japanese Yen JPY 2,907 27
Norwegian Krone NOK 101 15
Swiss Franc CHF 26 21
- --------------------------------------------------------------------------------
TOTAL FOREIGN CURRENCY (COST $129) 132
================================================================================
<Caption>
VALUE
(000)
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.9%) (COST $76,522) $ 88,250
================================================================================
<Caption>
AMOUNT
(000)
- --------------------------------------------------------------------------------
OTHER ASSETS (0.4%)
Cash $ 4
Foreign Withholding Tax Reclaim Receivable 158
Dividends Receivable 134
Receivable for Portfolio Shares Sold 31
Receivable for Investments Sold 25
Other 5 357
- --------------------------------------------------------------------------------
LIABILITIES (-0.3%)
Investment Advisory Fees Payable (142)
Payable for Portfolio Shares Redeemed (83)
Directors' Fees and Expenses Payable (22)
Distribution Fees, Class B (19)
Administrative Fees Payable (13)
Custodian Fees Payable (10)
Other Liabilities (12) (301)
- --------------------------------------------------------------------------------
NET ASSETS (100%) $ 88,306
================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 84,283
Undistributed (Distributions in Excess of) Net
Investment Income (12)
Accumulated Net Realized Gain (Loss) (7,733)
Unrealized Appreciation (Depreciation) on:
Investments 11,728
Foreign Currency Translations 40
- --------------------------------------------------------------------------------
NET ASSETS $ 88,306
================================================================================
CLASS A:
NET ASSETS $ 55,545
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 3,505,949 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 15.84
================================================================================
CLASS B:
NET ASSETS $ 32,761
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 2,086,921 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 15.70
================================================================================
</Table>
(a) Non-income producing security.
(f) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated parties.
@ Face Amount/Value is less than $500.
CVA Certificaten Van Aandelen
GDR Global Depositary Receipts
RNC Non-Convertible Savings Shares
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
40
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
GLOBAL VALUE EQUITY PORTFOLIO
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY
CLASSIFICATION -- DECEMBER 31,2003
(UNAUDITED)
<Table>
<Caption>
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
- --------------------------------------------------------------------------------
Aerospace & Defense $ 3,038 3.4%
Automobiles 1,238 1.4
Beverages 3,592 4.1
Capital Markets 2,845 3.2
Chemicals 2,163 2.5
Commercial Banks 4,176 4.7
Communications Equipment 1,547 1.8
Computers & Peripherals 3,301 3.7
Construction Materials 1,763 2.0
Diversified Telecommunication Services 5,386 6.1
Electric Utilities 1,164 1.3
Electrical Equipment 1,028 1.2
Food & Staples Retailing 1,394 1.6
Food Products 4,437 5.0
Hotels, Restaurants & Leisure 851 1.0
Household Durables 2,976 3.4
Household Products 2,404 2.7
Insurance 6,032 6.8
IT Services 989 1.1
Leisure Equipment & Products 1,192 1.3
Media 3,538 4.0
Metals & Mining 1,565 1.8
Office Electronics 1,478 1.7
Oil & Gas 5,513 6.3
Paper & Forest Products 2,225 2.5
Pharmaceuticals 9,371 10.6
Tobacco 2,508 2.8
Wireless Telecommunication Services 1,626 1.8
Other 5,467 6.3
- --------------------------------------------------------------------------------
$ 84,807 96.1%
================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
41
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
INTERNATIONAL EQUITY PORTFOLIO
[CHART]
COMPARISON OF THE CHANGE IN VALUE OF A $500,000* INVESTMENT
OVER 10 YEARS
FISCAL YEAR ENDED DECEMBER 31
<Table>
<Caption>
MSCI EAFE INDEX(1) INTERNATIONAL EQUITY PORTFOLIO - CLASS A
"1993" $ 500,000 $ 500,000
"1994" $ 538,950 $ 561,943
"1995" $ 599,366 $ 627,971
"1996" $ 635,628 $ 751,304
"1997" $ 646,942 $ 855,811
"1998" $ 776,305 $ 1,012,424
"1999" $ 985,596 $ 1,183,625
"2000" $ 845,898 $ 1,293,584
"2001" $ 664,504 $ 1,167,537
"2002" $ 558,582 $ 1,120,602
"2003" $ 774,138 $ 1,488,383
</Table>
* Minimum Investment
In accordance with SEC regulations, Portfolio performance shown assumes that all
recurring fees (including management fees) were deducted and all dividends and
distributions were reinvested. Total returns do not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the redemption
of Portfolio shares. The performance of Class B shares will vary based upon the
different inception dates and fees assessed to that class.
PERFORMANCE COMPARED TO THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE
INDEX(1)
<Table>
<Caption>
TOTAL RETURNS(2)
---------------------------------------
AVERAGE ANNUAL
----------------------------
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION
- --------------------------------------------------------------------
Portfolio - Class A (3) 32.82% 8.01% 11.52% 11.14%
Index - Class A 38.59 (0.05) 4.47 3.51
Portfolio - Class B (4) 32.46 7.77 N/A 11.05
Index - Class B 38.59 (0.05) N/A 3.25
</Table>
(1) The MSCI EAFE Index is an unmanaged index of common stocks in Europe,
Australasia and the Far East.
(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. Fee waivers and/or reimbursements are voluntary
and the Adviser reserves the right to commence or terminate any waiver
and/or reimbursement at any time.
(3) Commenced operations on August 4, 1989
(4) Commenced operations on January 2, 1996
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 International Equity Portfolio seeks long-term capital appreciation by
investing primarily in equity securities of non-U.S. issuers. Foreign investing
involves certain risks, including currency fluctuations and controls,
restrictions on foreign investments, less governmental supervision and
regulation, less liquidity and the potential for market volatility and political
instability.
PERFORMANCE
For the year ended December 31, 2003, the Portfolio had a total return of 32.82%
for the Class A shares and 32.46% for the Class B shares compared to 38.59% for
the Morgan Stanley Capital International (MSCI) EAFE Index (the "Index").
FACTORS AFFECTING PERFORMANCE
- The Index had its strongest annual return in 17 years, helped, in no small
way, by the fall in the U.S. dollar. The euro finished the year at a
lifetime high of 1.26 against the U.S. dollar, while sterling reached a
12-year high of 1.78. The Japanese yen also appreciated by over 10%
despite heavy intervention by the Bank of Japan.
- Assisted by euro strength, the euro-bloc markets recorded a return of
41.6%. The commodity-based markets of Canada (+54.6%), Australia (+49.5%)
and New Zealand (+55.4%) also enjoyed strong performances, primarily on
the back of strong currency appreciation against the U.S. dollar. Japan
and the heavily defensive-weighted United Kingdom market both
underperformed with returns of 35.9% and 32.1%, respectively.
- The Portfolio's large overweight position in consumer staples was the
single largest detractor from relative performance for the year, while
poor stock selection in materials and industrials (characterized more by
what the Portfolio did not own rather than what it did own) also explains
a large part of the underperformance. Favorable stock selection in
financials (mainly Japanese insurance) compensated for the underweight in
the sector, while stock selection in the telecommunications sector was
also a positive contributor. Throughout the year, however, the Portfolio's
relative performance was overwhelmed by the relentless divergence in
returns between cyclicals and defensives.
42
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (CONT'D)
INTERNATIONAL EQUITY PORTFOLIO
- Size also mattered with an almost perfect linear relationship between
market capitalization and performance, with smaller capitalization stocks
outperforming. The Portfolio's bias towards the larger capitalization
stocks was therefore a negative factor.
MANAGEMENT STRATEGIES
- The Portfolio continued its long-term strategy of trying to find
attractively priced, high-quality companies capable of generating
sustainable free cash flow.
- The underperformance of Japan in the first quarter opened up a clear
relative and absolute valuation opportunity, and we added to the
Portfolio's Japanese holdings across the board. The subsequent rally in
Japan in the third quarter pushed many Japanese holdings above our fair
value targets and accordingly the Portfolio took profits, particularly in
the technology and financial sectors.
January 2004
43
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
INTERNATIONAL EQUITY PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
COMMON STOCKS (94.8%)
AUSTRALIA (2.0%)
AMP Ltd. (c)4,613,496 $ 17,380
National Australia Bank Ltd. 1,444,979 32,542
Telstra Corp., Ltd. 20,959,314 75,965
- -------------------------------------------------------------------------------------------
125,887
===========================================================================================
BELGIUM (0.5%)
Fortis 1,462,464 29,378
- -------------------------------------------------------------------------------------------
DENMARK (0.5%)
Danisco A/S 667,462 29,614
- -------------------------------------------------------------------------------------------
FINLAND (1.0%)
Nokia Oyj 3,542,876 61,097
- -------------------------------------------------------------------------------------------
FRANCE (9.3%)
Aventis S.A. (c)3,031,360 199,801
BNP Paribas S.A. (c)930,105 58,403
France Telecom S.A. (a)2,392,073 68,181
Groupe Danone (c)382,107 62,194
Societe Generale (c)438,976 38,652
Total S.A., Class B (c)905,159 167,823
- -------------------------------------------------------------------------------------------
595,054
===========================================================================================
GERMANY (2.7%)
Deutsche Telekom AG (Registered) (a)2,180,948 39,805
E. ON AG (c)576,356 37,510
Muenchener Rueckversicherungs AG
(Registered) 224,411 27,132
Porsche AG (Non-Voting Shares) (c)57,960 34,303
Volkswagen AG (c)568,183 31,554
- -------------------------------------------------------------------------------------------
170,304
===========================================================================================
HONG KONG (0.1%)
Hongkong Land Holdings Ltd. 3,323,306 5,649
- -------------------------------------------------------------------------------------------
ITALY (3.8%)
ENI S.p.A. 4,165,232 78,379
Telecom Italia S.p.A. RNC (a)(c)48,381,122 98,283
UniCredito Italiano S.p.A. 12,432,049 66,929
- -------------------------------------------------------------------------------------------
243,591
===========================================================================================
JAPAN (20.4%)
Asatsu-DK, Inc. (c)439,400 11,295
Canon, Inc. 1,631,500 75,824
Central Japan Railway Co. (c)6,750 58,215
Dai Nippon Printing Co., Ltd. (c)6,579,000 92,217
Daiwa Securities Group, Inc. (c)3,495,000 23,730
Fuji Photo Film Co., Ltd. (c)5,021,200 161,808
Fuji Television Network, Inc. 8,182 44,198
Fujitsu Ltd. (a)(c)4,570,560 26,903
Japan Tobacco, Inc. 5,456 39,890
Kao Corp. 2,880,000 58,474
Konica Minolta Holdings, Inc. 1,842,000 24,721
Lawson, Inc. (c)853,200 29,084
Matsushita Electric Industrial Co.,
Ltd. 2,189,700 30,224
Millea Holdings, Inc. (c)6,829 89,043
Mitsubishi Estate Co., Ltd. (c)5,608,400 53,070
Mitsui Sumitomo Insurance Co., Ltd. (c)3,512,000 28,784
Nintendo Co., Ltd. 249,800 23,265
Nippon Telegraph & Telephone Corp. 14,847 $ 71,490
Oriental Land Co., Ltd. 194,000 11,943
Rohm Co., Ltd. 325,400 38,065
Sankyo Co., Ltd. 3,721,000 69,832
Sekisui House Ltd. 2,895,000 29,848
Shionogi & Co., Ltd. (c)719,800 13,381
Sumitomo Electric Industries Ltd. 3,679,000 32,826
Tokyo Electric Power Co., Inc. (The) 1,392,700 30,482
Tokyo Gas Co., Ltd. (c)13,390,200 47,640
Vodafone Holdings K.K. 1,881 5,028
Yamanouchi Pharmaceutical Co., Ltd. 2,728,100 84,610
- -------------------------------------------------------------------------------------------
1,305,890
===========================================================================================
NETHERLANDS (8.9%)
Akzo Nobel N.V. 1,402,037 53,965
CSM N.V. CVA 1,063,417 23,194
ING Groep N.V. CVA 2,660,757 61,883
Royal Dutch Petroleum Co. (c)3,481,931 183,073
Royal KPN N.V. (a)8,290,876 63,824
Unilever N.V. CVA (c)2,854,659 186,180
- -------------------------------------------------------------------------------------------
572,119
===========================================================================================
NEW ZEALAND (0.5%)
Telecom Corp. of New Zealand Ltd. (c)9,017,560 31,706
- -------------------------------------------------------------------------------------------
PORTUGAL (0.2%)
Electricidade de Portugal S.A. 5,802,703 15,255
- -------------------------------------------------------------------------------------------
SOUTH KOREA (1.1%)
Samsung Electronics Co., Ltd. GDR
(Registered) (c)391,823 73,663
- -------------------------------------------------------------------------------------------
SPAIN (1.2%)
Telefonica S.A. 5,077,921 74,348
- -------------------------------------------------------------------------------------------
SWEDEN (1.3%)
ForeningsSparbanken AB (c)1,034,301 20,335
Nordea AB 8,533,834 64,029
- -------------------------------------------------------------------------------------------
84,364
===========================================================================================
SWITZERLAND (10.5%)
Ciba Specialty Chemicals AG (Registered) (a)377,170 29,097
Credit Suisse Group 1,031,180 37,615
Holcim Ltd. (Registered) 1,009,815 46,889
Nestle S.A. (Registered) 713,325 177,684
Novartis AG (Registered) 3,159,122 142,995
Roche Holding AG 675,624 67,944
Schindler Holding AG (a)77,160 18,785
Syngenta AG 1,055,888 70,903
UBS AG (Registered) 1,121,290 76,560
- -------------------------------------------------------------------------------------------
668,472
===========================================================================================
TAIWAN (0.2%)
Chunghwa Telecom Co., Ltd. ADR 1,134,540 16,451
- -------------------------------------------------------------------------------------------
UNITED KINGDOM (30.6%)
Allied Domecq plc (c)11,152,742 85,831
BAA plc 1,620,552 14,360
Barclays plc 14,033,610 124,854
BHP Billiton plc 8,515,004 74,197
BOC Group plc 3,790,687 57,770
BP plc 19,474,260 157,523
British American Tobacco plc 9,889,818 135,976
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
44
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
INTERNATIONAL EQUITY PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
UNITED KINGDOM (CONT'D)
Bunzl plc 4,736,341 $ 36,091
Cadbury Schweppes plc 13,505,790 98,936
GlaxoSmithKline plc 5,006,999 114,438
Granada plc 30,300,679 66,008
GUS plc 3,761,155 51,948
Hays plc 27,468,610 58,858
HHG plc CDI (a)4,613,496 3,330
Imperial Tobacco Group plc 7,447,328 146,277
International Power plc (a)1,445,804 3,188
Lloyds TSB Group plc 2,196,706 17,573
National Grid Transco plc 6,895,928 49,284
Prudential plc 5,023,006 42,357
Reckitt Benckiser plc 2,195,446 49,551
Reed Elsevier plc 15,125,407 126,195
Rentokil Initial plc 22,043,323 74,785
RMC Group plc 1,479,948 18,432
Rolls-Royce Group plc 10,990,691 34,785
Royal Bank of Scotland Group plc 4,473,418 131,478
Vodafone Group plc 50,692,085 125,364
Wolseley plc 3,984,934 56,212
- -------------------------------------------------------------------------------------------
1,955,601
===========================================================================================
TOTAL COMMON STOCKS (COST $4,944,681) 6,058,443
===========================================================================================
TOTAL FOREIGN SECURITIES (94.8%) (COST $4,944,681) 6,058,443
===========================================================================================
<Caption>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (9.1%)
SHORT-TERM DEBT SECURITIES HELD AS COLLATERAL ON LOANED
SECURITIES (6.8%)
American Express Credit Corp.,
1.17%, 5/17/04 $ 6,320 6,320
BETA Finance, Inc., 1.08%, 6/16/04 29,474 29,474
Canadian Imperial Bank NY,
1.11%, 8/3/04 10,526 10,526
CC USA, Inc., 1.09%, 2/6/04 10,528 10,528
Chase Credit Card Master Trust,
1.18%, 10/15/04 8,428 8,428
Credit Industrial et Commercial
(CIC)/NY, 1.14%, 2/10/04 10,950 10,950
Dorado Finance, Inc., 1.09%, 2/5/04 10,528 10,528
Federal National Mortgage Association,
0.96%, 1/29/04 63,165 63,165
Federal National Mortgage Association -
Discounted, 1.13%, 4/14/04 9,285 9,285
Goldman Sachs & Co., 1.02%, 1/2/04 68,982 68,982
International Credit Card Funding No. 1
Ltd., 1.15%, 3/19/04 24,430 24,430
Landesbank Baden Wuerttemberg,
1.50%, 11/19/04 10,538 10,538
Links Finance LLC, 1.08%, 6/16/04 10,527 10,527
Links Finance LLC, 1.09%, 5/24/04 16,842 16,842
Macquarie Bank Ltd., 1.24%, 6/24/04 9,268 9,268
Natexis Banques Populaires NY,
1.15%, 12/20/04 16,833 16,833
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------------------
Sears Credit Account Master Trust,
1.19%, 10/15/04 $ 16,863 $ 16,863
Societe Generale/London,
1.54%, 11/12/04 10,528 10,528
SWIFT 2001, Series A6,
1.16%, 1/15/04 7,454 7,454
SWIFT 2001, Series A7,
1.16%, 3/15/04 21,060 21,060
Target Credit Card Master Trust,
1.17%, 7/26/04 16,642 16,642
Wachovia Bank, NA,
1.06%, 11/15/04 21,074 21,074
Wells Fargo Bank, San Francisco NA,
1.06%, 1/30/04 5,896 5,896
Westdeutsche Landesbank N.Y.,
1.09%, 11/29/04 20,630 20,630
- -------------------------------------------------------------------------------------------
436,771
===========================================================================================
REPURCHASE AGREEMENT (2.3%)
J.P. Morgan Securities, Inc., 0.75%, dated
12/31/03, due 1/2/04, repurchase
price $144,405 (f)144,399 144,399
- -------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $581,170) 581,170
===========================================================================================
FOREIGN CURRENCY (2.2%)
Australian Dollar AUD 48 36
British Pound GBP @-- 1
Canadian Dollar CAD @-- @--
Euro EUR 110,318 138,763
Japanese Yen JPY 3,159 29
New Zealand Dollar NZD 2 1
- -------------------------------------------------------------------------------------------
TOTAL FOREIGN CURRENCY (COST $136,745) 138,830
===========================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
45
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
INTERNATIONAL EQUITY PORTFOLIO
<Table>
<Caption>
VALUE
(000)
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (106.1%) (COST $5,662,596) --
INCLUDING $418,289 OF SECURITIES LOANED $ 6,778,443
- -------------------------------------------------------------------------------------------
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
OTHER ASSETS (1.0%)
Cash $ 3,160
Net Unrealized Appreciation on Foreign
Currency Exchange Contracts 28,607
Receivable for Portfolio Shares Sold 27,033
Dividends Receivable 6,497
Foreign Withholding Tax Reclaim
Receivable 2,368
Interest Receivable 3
Other 207 67,875
- -------------------------------------------------------------------------------------------
LIABILITIES (-7.1%)
Collateral on Securities Loaned, at Value (436,771)
Investment Advisory Fees Payable (11,544)
Payable for Portfolio Shares Redeemed (4,308)
Administrative Fees Payable (842)
Directors' Fees and Expenses Payable (507)
Distribution Fees, Class B (413)
Custodian Fees Payable (247)
Payable for Investments Purchased (235)
Other Liabilities (212) (455,079)
- -------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 6,391,239
===========================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 5,307,928
Undistributed (Distributions in Excess of)
Net Investment Income 13,763
Accumulated Net Realized Gain (Loss) (75,547)
Unrealized Appreciation (Depreciation) on:
Investments 1,115,847
Foreign Currency Exchange Contracts and Translations 29,248
- -------------------------------------------------------------------------------------------
NET ASSETS $ 6,391,239
===========================================================================================
CLASS A:
NET ASSETS $ 5,657,941
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 296,833,307 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 19.06
===========================================================================================
CLASS B:
NET ASSETS $ 733,298
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 38,685,826 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 18.96
===========================================================================================
</Table>
(a) Non-income producing security.
(c) All or portion of security on loan at December 31, 2003.
(f) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated parties.
@ Face Amount/Value is less than $500.
ADR American Depositary Receipts
CDI Chess Depositary Interests
CVA Certificaten Van Aandelen
GDR Global Depositary Receipts
RNC Non-Convertible Savings Shares
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Portfolio had the following foreign currency exchange contract(s) open at
period end:
<Table>
<Caption>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
- ----------------------------------------------------------------------------------------
JPY 42,500,000 $ 396,370 2/17/04 EUR 338,268 $ 424,978 $ 28,608
US$ 236 236 1/6/04 JPY 25,237 235 (1)
---------- ---------- --------------
$ 396,606 $ 425,213 $ 28,607
========== ========== ==============
</Table>
SUMMARY OF TOTAL FOREIGN SECURITIES BY INDUSTRY
CLASSIFICATION -- DECEMBER 31, 2003
(UNAUDITED)
<Table>
<Caption>
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
- -------------------------------------------------------------------------------------------
Automobiles $ 65,857 1.0%
Beverages 85,831 1.3
Capital Markets 137,905 2.2
Chemicals 211,736 3.3
Commercial Banks 554,795 8.7
Commercial Services & Supplies 261,951 4.1
Communications Equipment 61,097 1.0
Construction Materials 65,321 1.0
Diversified Financial Services 91,261 1.4
Diversified Telecommunication Services 575,562 9.0
Food Products 577,802 9.0
Household Durables 259,873 4.1
Household Products 108,026 1.7
Insurance 208,027 3.3
Leisure Equipment & Products 161,808 2.5
Media 247,696 3.9
Metals & Mining 74,197 1.2
Office Electronics 100,545 1.6
Oil & Gas 586,798 9.2
Pharmaceuticals 493,199 7.7
Semiconductors & Semiconductor Equipment 111,728 1.7
Tobacco 322,143 5.0
Wireless Telecommunication Services 125,364 2.0
Other 569,921 8.9
- -------------------------------------------------------------------------------------------
$ 6,058,443 94.8%
===========================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
46
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
INTERNATIONAL MAGNUM PORTFOLIO
[CHART]
COMPARISON OF THE CHANGE IN VALUE OF A $500,000** INVESTMENT
SINCE INCEPTION
FISCAL YEAR ENDED DECEMBER 31
<Table>
<Caption>
INTERNATIONAL MAGNUM INTERNATIONAL MAGNUM
MSCI EAFE INDEX(1) PORTFOLIO-CLASS A PORTFOLIO-CLASS B
"*" 500,000 500,000 100,000
"1996" 526,300 541,250 107,900
"1997" 535,668 576,864 114,730
"1998" 642,802 619,148 122,910
"1999" 816,101 773,130 153,121
"2000" 700,459 691,951 136,569
"2001" 550,281 562,487 110,798
"2002" 462,566 487,338 95,851
"2003" 641,071 629,008 123,159
</Table>
* Commenced operations on March 15, 1996
** Minimum Investment
In accordance with SEC regulations, Portfolio performance shown assumes that all
recurring fees (including management fees) were deducted and all dividends and
distributions were reinvested. Total returns do not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the redemption
of Portfolio shares. The performance of Class B shares will vary based upon the
different fees assessed to that class. The MSCI EAFE Index value at December 31,
2003 assumes a minimum investment of $500,000; if a minimum initial investment
of $100,000 (the minimum investment for Class B shares) is assumed, the value at
December 31, 2003 would be $128,214.
PERFORMANCE COMPARED TO THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI)
EAFE INDEX(1)
<Table>
<Caption>
TOTAL RETURNS(2)
--------------------------
AVERAGE ANNUAL
----------------
SINCE
ONE FIVE INCEP-
YEAR YEARS TION
- --------------------------------------------------------------------------------
Portfolio - Class A (3) 29.07% 0.32% 2.99%
Portfolio - Class B (3) 28.49 0.04 2.71
Index 38.59 (0.05) 3.38
</Table>
(1) The MSCI EAFE Index is an unmanaged index of common stocks in Europe,
Australasia and the Far East.
(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. Fee waivers and/or reimbursements are voluntary
and the Adviser reserves the right to commence or terminate any waiver
and/or reimbursement at any time.
(3) Commenced operations on March 15, 1996
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 International Magnum Portfolio seeks long-term capital appreciation by
investing primarily in equity securities of non-U.S. issuers domiciled in EAFE
countries. Foreign investing involves certain risks, including currency
fluctuations and controls, restrictions on foreign investments, less
governmental supervision and regulation, less liquidity and the potential for
market volatility and political instability.
PERFORMANCE
For the year ended December 31, 2003, the Portfolio had a total return of 29.07%
for the Class A shares and 28.49% for the Class B shares compared to 38.59% for
the Morgan Stanley Capital International (MSCI) EAFE Index (the "Index").
FACTORS AFFECTING PERFORMANCE
- World financial markets ended the year with one of the best performances
in three years despite a turbulent first half marked by geopolitical
fears, economic uncertainties, and the threat of SARS.
- Global equity markets staged an impressive rally during the second half on
a wave of investor enthusiasm following the end of the Iraq war and
massive liquidity stimulus. The rally was further supported by evidence of
a synchronized global recovery, as stronger demand merged in Asia and
Europe.
- High beta, low quality and economically geared companies were the
strongest performers as investors increased their appetite for risk.
- Our preference for higher quality, less leveraged companies caused the
Portfolio to lag in the market recovery and explains the majority of the
underperformance during the year.
- Security selection within european financials, healthcare and industrials
were negatively impacted in this trend.
- Offsetting the underperformance was security selection within the Pacific
Rim. Within Japan, security selection within healthcare, consumer
discretionary, and financials contributed the most to performance.
- Within Asia ex-Japan, strong stock selection, particularly within consumer
discretionary, added to overall results.
47
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (CONT'D)
INTERNATIONAL MAGNUM PORTFOLIO
MANAGEMENT STRATEGIES
- The Portfolio began the year with a defensive posture and a less sanguine
outlook towards the ownership of equities.
- As the markets sold off and better valuations were found, we moved to an
overweight position relative to the Index in the Pacific including Japan,
Hong Kong and Singapore.
- In the fourth quarter the economic recovery gained traction with positive
economic news in Europe and continued improvements in Asia.
- This turnaround in market activity led us to begin decreasing the
Portfolio's underweight position (relative to the Index) in Europe.
January 2004
48
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
INTERNATIONAL MAGNUM PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
COMMON STOCKS (97.3%)
AUSTRALIA (2.7%)
Amcor Ltd. 11,900 $ 74
Australia & New Zealand Banking Group Ltd. 12,408 165
BHP Billiton Ltd. 53,239 488
Coles Myer Ltd. 13,850 79
Commonwealth Bank of Australia 10,100 224
Foster's Group Ltd. 52,100 176
National Australia Bank Ltd. 10,030 226
News Corp., Ltd. 40,200 362
Qantas Airways Ltd. 34,800 86
Rio Tinto Ltd. 14,550 407
Westpac Banking Corp. 17,400 209
- -------------------------------------------------------------------------------------------
2,496
===========================================================================================
BELGIUM (1.2%)
AGFA-Gevaert N.V. 12,424 353
Fortis 19,983 401
Solvay S.A. 4,724 409
- -------------------------------------------------------------------------------------------
1,163
===========================================================================================
DENMARK (0.7%)
Danske Bank A/S 15,751 369
Novo-Nordisk A/S, Class B 6,827 277
- -------------------------------------------------------------------------------------------
646
===========================================================================================
FINLAND (2.5%)
Nokia Oyj 101,845 1,756
Sampo Oyj, Class A 32,652 337
Tietoenator Oyj 9,444 258
- -------------------------------------------------------------------------------------------
2,351
===========================================================================================
FRANCE (10.8%)
Aventis S.A. (c)16,468 1,086
AXA 36,157 772
BNP Paribas S.A. 21,808 1,369
Carrefour S.A. (c)6,089 333
France Telecom S.A. (a)32,274 920
Groupe Danone 2,268 369
Neopost S.A. 4,301 216
Peugeot S.A. 4,195 213
Schneider Electric S.A. 19,643 1,282
Societe Generale 9,381 826
Technip S.A. 2,388 258
Total S.A., Class B 12,868 2,386
- -------------------------------------------------------------------------------------------
10,030
===========================================================================================
GERMANY (4.8%)
Adidas-Salomon AG 6,927 787
Bayerische Motoren Werke AG 2,779 128
Deutsche Boerse AG 14,240 776
Deutsche Telekom AG (Registered) (a)30,819 563
E. ON AG 10,106 658
Porsche AG (Non-Voting Shares) 435 257
SAP AG 1,903 319
Siemens AG (Registered) (c)12,443 994
- -------------------------------------------------------------------------------------------
4,482
===========================================================================================
HONG KONG (2.4%)
Bank of East Asia Ltd. 30,000 92
Cathay Pacific Airways Ltd. 135,000 $ 257
Cheung Kong Holdings Ltd. 41,900 333
Esprit Holdings Ltd. 79,800 266
Great Eagle Holdings Co. 66,000 79
Henderson Land Development Co., Ltd. 126,000 557
Hong Kong & China Gas Co., Ltd. 78,000 119
Hysan Development Co., Ltd. 66,000 102
Johnson Electric Holdings Ltd. 91,000 116
Li & Fung Ltd. 125,000 214
Television Broadcasts Ltd. 28,000 141
- -------------------------------------------------------------------------------------------
2,276
===========================================================================================
IRELAND (1.2%)
Allied Irish Banks plc 24,824 397
Bank of Ireland 770 10
Bank of Ireland (London Shares) 50,773 690
- -------------------------------------------------------------------------------------------
1,097
===========================================================================================
ITALY (3.3%)
ENI S.p.A. 52,226 983
Telecom Italia S.p.A. (a)228,869 676
Telecom Italia S.p.A. RNC (a)(c)272,532 554
UniCredito Italiano S.p.A. (c)163,019 878
- -------------------------------------------------------------------------------------------
3,091
===========================================================================================
JAPAN (21.3%)
Amada Co., Ltd. 50,000 260
Canon, Inc. 12,000 558
Casio Computer Co., Ltd. (c)38,000 401
Dai Nippon Printing Co., Ltd. 21,000 294
Daicel Chemical Industries Ltd. (c)70,000 288
Daifuku Co., Ltd. 55,000 245
Daikin Industries Ltd. 22,000 507
Denki Kagaku Kogyo KK 80,000 257
East Japan Railway Co. 68 320
FamilyMart Co., Ltd. (c)14,800 336
Fuji Machine Manufacturing Co., Ltd. 12,700 161
Fuji Photo Film Co., Ltd. 14,000 451
Fujitec Co., Ltd. 21,000 90
Fujitsu Ltd. (a)67,000 394
Furukawa Electric Co., Ltd. (c)35,000 116
Hitachi Capital Corp. (c)23,200 321
Hitachi High-Technologies Corp. (c)7,000 111
Hitachi Ltd. 71,000 427
House Foods Corp. (c)13,000 147
Kaneka Corp. 46,000 343
Kurita Water Industries Ltd. 23,600 284
Kyocera Corp. 5,100 339
Kyudenko Corp. 16,000 66
Lintec Corp. (c)17,000 270
Matsushita Electric Industrial Co., Ltd. 40,000 552
Minebea Co., Ltd. (c)48,000 243
Mitsubishi Chemical Corp. 112,000 291
Mitsubishi Corp. 48,000 508
Mitsubishi Estate Co., Ltd. (c)37,000 350
Mitsubishi Heavy Industries Ltd. 112,000 311
Mitsubishi Logistics Corp. 13,000 108
Mitsumi Electric Co., Ltd. (c)18,100 199
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
49
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
INTERNATIONAL MAGNUM PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
JAPAN (CONT'D)
Nagase & Co., Ltd. 13,000 $ 86
NEC Corp. (c)66,000 485
Nifco, Inc. 19,000 238
Nintendo Co., Ltd. 4,700 438
Nippon Meat Packers, Inc. 17,000 166
Nippon Telegraph & Telephone Corp. 90 433
Nissan Motor Co., Ltd. 64,900 740
Nissha Printing Co., Ltd. 16,000 209
Nisshinbo Industries, Inc. 24,000 133
Obayashi Corp. 53,000 236
Ono Pharmaceutical Co., Ltd. 9,000 338
Ricoh Co., Ltd. 25,000 492
Rinnai Corp. 7,200 171
Rohm Co., Ltd. 1,600 187
Ryosan Co., Ltd. (c)11,000 192
Sangetsu Co., Ltd. 1,000 19
Sanki Engineering Co., Ltd. 6,000 31
Sankyo Co., Ltd. 22,700 426
Sanwa Shutter Corp. 47,000 265
Sekisui Chemical Co., Ltd. 43,000 219
Sekisui House Ltd. 31,000 320
Shin-Etsu Polymer Co., Ltd. 30,000 183
Sony Corp. 10,000 346
Suzuki Motor Corp. 23,000 340
TDK Corp. 6,700 482
Toho Co., Ltd. 11,000 140
Tokyo Electric Power Co., Inc. (The) 15,600 341
Toshiba Corp. (c)119,000 450
Toyo Ink Manufacturing Co., Ltd. (c)31,000 110
Toyota Motor Corp. 18,400 620
Tsubakimoto Chain Co. 68,000 224
Yamaha Corp. 29,100 571
Yamaha Motor Co., Ltd. (c)18,000 196
Yamanouchi Pharmaceutical Co., Ltd. 15,000 465
- -------------------------------------------------------------------------------------------
19,840
===========================================================================================
NETHERLANDS (5.5%)
Aegon N.V. 19,252 284
European Aeronautic Defense & Space Co. (c)7,568 179
Heineken N.V. 8,271 314
ING Groep N.V. CVA 9,348 217
Koninklijke Philips Electronics N.V. 16,190 471
Numico N.V. CVA (a)10,230 282
Royal Dutch Petroleum Co. 31,847 1,675
Royal KPN N.V. (a)30,098 232
Unilever N.V. CVA 18,916 1,234
Wolters Kluwer N.V. CVA 13,302 208
- -------------------------------------------------------------------------------------------
5,096
===========================================================================================
NORWAY (0.8%)
DNB NOR ASA (c)86,999 579
Telenor ASA 21,460 140
- -------------------------------------------------------------------------------------------
719
===========================================================================================
SINGAPORE (1.8%)
CapitaLand Ltd. (c)269,000 245
City Developments Ltd. 71,000 $ 253
Neptune Orient Lines Ltd. (a)136,000 173
Oversea-Chinese Banking Corp., Ltd. 30,000 214
SembCorp Industries Ltd. 144,000 107
Singapore Airlines Ltd. 63,000 415
Venture Corp., Ltd. (c)24,000 283
- -------------------------------------------------------------------------------------------
1,690
===========================================================================================
SPAIN (1.6%)
Antena 3 Television S.A. (a)1 @--
Banco Bilbao Vizcaya Argentaria S.A. (c)22,121 305
Grupo Ferrovial S.A. 4,059 142
Inditex S.A. 5,704 115
Telefonica S.A. 64,163 939
- -------------------------------------------------------------------------------------------
1,501
===========================================================================================
SWEDEN (0.6%)
Assa Abloy AB 27,533 327
Securitas AB, Class B 18,368 248
- -------------------------------------------------------------------------------------------
575
===========================================================================================
SWITZERLAND (11.1%)
ABB Ltd. (a)59,933 303
Adecco S.A. (Registered) 2,821 181
Ciba Specialty Chemicals AG (Registered) (a)5,052 390
Converium Holding AG 8,841 468
Credit Suisse Group 9,093 332
Holcim Ltd. (Registered) 8,309 386
Nestle S.A. (Registered) 5,387 1,342
Novartis AG (Registered) 50,145 2,270
Roche Holding AG 5,720 575
Schindler Holding AG (Registered) (a)(c)914 253
STMicroelectronics N.V. 25,065 678
Swiss Reinsurance (Registered) 5,995 403
Swisscom AG (Registered) 858 282
Syngenta AG 14,547 977
UBS AG (Registered) 22,849 1,560
- -------------------------------------------------------------------------------------------
10,400
===========================================================================================
UNITED KINGDOM (25.0%)
Allied Domecq plc 75,051 578
AstraZeneca plc 9,551 457
Barclays plc 95,147 847
BOC Group plc 33,376 509
BP plc 36,943 299
British American Tobacco plc 30,006 413
British Sky Broadcasting plc (a)17,692 222
Cadbury Schweppes plc 29,535 216
Celltech Group plc (a)13,529 91
Compass Group plc 39,369 267
Diageo plc 48,093 631
Emap plc 17,747 272
GlaxoSmithKline plc 107,699 2,462
Granada plc 119,458 260
GUS plc 18,195 251
Hays plc 283,969 608
HSBC Holdings plc 69,170 1,084
Invensys plc (a)198,747 65
Lloyds TSB Group plc 82,032 656
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
50
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
INTERNATIONAL MAGNUM PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
UNITED KINGDOM (CONT'D)
Marks & Spencer Group plc 43,673 $ 225
MFI Furniture plc 83,684 226
National Grid Transco plc 83,445 596
Pearson plc 17,041 189
Prudential plc 109,232 921
Reed Elsevier plc 103,593 864
Rentokil Initial plc 203,515 690
Rolls-Royce Group plc 91,601 290
Royal Bank of Scotland Group plc 65,859 1,936
Scottish & Southern Energy plc 17,712 213
Shell Transport & Trading Co. plc 302,603 2,245
Smith & Nephew plc 37,923 318
Smiths Group plc 43,786 517
Tesco plc 66,366 305
Vedanta Resources plc (a)27,654 182
Vodafone Group plc 1,053,798 2,606
WPP Group plc 21,221 208
Yell Group plc 108,509 591
- -------------------------------------------------------------------------------------------
23,310
===========================================================================================
TOTAL COMMON STOCKS (COST $79,399) 90,763
===========================================================================================
TOTAL FOREIGN SECURITIES (97.3%) (COST $79,399) 90,763
===========================================================================================
<Caption>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (13.2%)
SHORT-TERM DEBT SECURITIES HELD AS COLLATERAL ON
LOANED SECURITIES (7.8%)
American Express Credit Corp.,
1.17%, 5/17/04 $ 106 106
BETA Finance, Inc., 1.08%, 6/16/04 492 492
Canadian Imperial Bank NY, 1.11%, 8/3/04 176 176
CC USA, Inc., 1.09%, 2/6/04 176 176
Chase Credit Card Master Trust,
1.18%, 10/15/04 141 141
Credit Industrial et Commercial (CIC)/NY,
1.14%, 2/10/04 183 183
Dorado Finance, Inc., 1.09%, 2/5/04 176 176
Federal National Mortgage Association,
0.96%, 1/29/04 1,055 1,055
Federal National Mortgage Association -
Discounted, 1.13%, 4/14/04 155 155
Goldman Sachs & Co., 1.02%, 1/2/04 1,152 1,152
International Credit Card Funding No. 1 Ltd.,
1.15%, 3/19/04 408 408
Landesbank Baden Wuerttemberg,
1.50%, 11/19/04 176 176
Links Finance LLC, 1.08%, 6/16/04 176 176
Links Finance LLC, 1.09%, 5/24/04 281 281
Macquarie Bank Ltd., 1.24%, 6/24/04 155 155
Natexis Banques Populaires NY,
1.15%, 12/20/04 281 281
Sears Credit Account Master Trust,
1.19%, 10/15/04 282 282
Societe Generale/London, 1.54%, 11/12/04 176 176
SWIFT 2001, Series A6, 1.16%, 1/15/04 125 125
SWIFT 2001, Series A7, 1.16%, 3/15/04 $ 352 $ 352
Target Credit Card Master Trust,
1.17%, 7/26/04 278 278
Wachovia Bank, NA, 1.06%, 11/15/04 352 352
Wells Fargo Bank, San Francisco NA,
1.06%, 1/30/04 98 98
Westdeutsche Landesbank N.Y.,
1.09%, 11/29/04 345 345
- -------------------------------------------------------------------------------------------
7,297
===========================================================================================
REPURCHASE AGREEMENT (5.4%)
J.P. Morgan Securities, Inc., 0.75%, dated
12/31/03, due 1/2/04, repurchase price $5,018 (f)5,018 5,018
- -------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $12,315) 12,315
===========================================================================================
FOREIGN CURRENCY (0.4%)
British Pound GBP 83 149
Euro EUR 125 158
Norwegian Krone NOK 177 26
Singapore Dollar SGD 22 13
Swiss Franc CHF 32 26
- -------------------------------------------------------------------------------------------
TOTAL FOREIGN CURRENCY (COST $369) 372
===========================================================================================
TOTAL INVESTMENTS (110.9%) (COST $92,083) --
INCLUDING $6,968 OF SECURITIES LOANED 103,450
===========================================================================================
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
OTHER ASSETS (5.0%)
Due from Broker $ 3,599
Receivable for Investments Sold 511
Net Unrealized Appreciation on Foreign
Currency Exchange Contracts 368
Dividends Receivable 98
Foreign Withholding Tax Reclaim
Receivable 54
Receivable for Portfolio Shares Sold 23
Other 3 4,656
- -------------------------------------------------------------------------------------------
LIABILITIES (-15.9%)
Collateral on Securities Loaned, at Value (7,297)
Payable for Portfolio Shares Redeemed (7,274)
Investment Advisory Fees Payable (139)
Directors' Fees and Expenses Payable (25)
Custodian Fees Payable (20)
Administrative Fees Payable (15)
Distribution Fees, Class B (6)
Other Liabilities (11) (14,787)
- -------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 93,319
===========================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
51
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
INTERNATIONAL MAGNUM PORTFOLIO
<Table>
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid-in Capital $ 102,909
Undistributed (Distributions in Excess of) Net
Investment Income 168
Accumulated Net Realized Gain (Loss) (21,773)
Unrealized Appreciation (Depreciation) on:
Investments 11,367
Foreign Currency Exchange Contracts and Translations 386
Futures Contracts 262
- -------------------------------------------------------------------------
NET ASSETS $ 93,319
=========================================================================
CLASS A:
NET ASSETS $ 91,087
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 8,928,405 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 10.20
=========================================================================
CLASS B:
NET ASSETS $ 2,232
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 219,204 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 10.18
=========================================================================
</Table>
(a) Non-income producing security.
(c) All or portion of security on loan at December 31, 2003.
(f) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of this
statement of net assets. The investment in the repurchase agreement is
through participation in a joint account with affiliated parties.
@ Face Amount/Value is less than $500.
CVA Certificaten Van Aandelen
RNC Non-Convertible Savings Shares
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Portfolio had the following foreign currency exchange contract(s) open at
period end:
<Table>
<Caption>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
- ----------------------------------------------------------------------------------
AUD 661 $ 492 3/18/04 US$ 491 $ 491 $ (1)
CHF 119 96 1/5/04 US$ 95 95 (1)
DKK 30 5 1/5/04 US$ 5 5 @--
EUR 152 191 1/2/04 US$ 190 190 (1)
EUR 29 37 1/5/04 US$ 37 37 @--
EUR 2,753 3,456 3/18/04 US$ 3,370 3,370 (86)
EUR 498 625 3/18/04 US$ 608 608 (17)
GBP 101 180 1/2/04 US$ 179 179 (1)
GBP 692 1,228 3/18/04 US$ 1,198 1,198 (30)
GBP 1,735 3,080 3/18/04 US$ 3,003 3,003 (77)
JPY 64,214 600 3/18/04 US$ 601 601 1
NOK 13 2 1/5/04 US$ 2 2 @--
US$ 2,380 2,380 3/18/04 AUD 3,301 2,461 81
US$ 40 40 3/18/04 AUD 55 41 1
US$ 4,200 4,200 3/18/04 EUR 3,516 4,414 214
US$ 594 594 3/18/04 EUR 486 610 16
US$ 2,451 2,451 3/18/04 EUR 2,004 2,516 65
US$ 914 914 3/18/04 EUR 749 940 26
US$ 3,353 3,353 3/18/04 GBP 1,947 3,456 103
US$ 776 776 3/18/04 GBP 449 796 20
US$ 1,816 1,816 3/18/04 GBP 1,049 1,863 47
US$ 680 680 3/18/04 GBP 393 698 18
US$ 1,235 1,235 3/18/04 JPY 131,925 1,232 (3)
US$ 1,246 1,246 3/18/04 JPY 133,237 1,244 (2)
US$ 2,095 2,095 3/18/04 JPY 223,982 2,091 (4)
US$ 378 378 3/18/04 JPY 40,385 377 (1)
---------- ----------- --------------
$ 32,150 $ 32,518 $ 368
========== =========== ==============
</Table>
AUD -- Australian Dollar
DKK -- Danish Krone
JPY -- Japanese Yen
FUTURES CONTRACTS:
The Portfolio had the following futures contract(s) open at period end:
<Table>
<Caption>
NET
UNREALIZED
NUMBER APPRECIATION
OF VALUE EXPIRATION (DEPRECIATION)
CONTRACTS (000) DATE (000)
- ----------------------------------------------------------------------------------
LONG:
FTSE 100 Index 28 $ 2,233 Mar-04 $ 60
(United Kingdom)
TOPIX Index 46 4,477 Mar-04 202
(Japan)
------
$ 262
======
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
52
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
INTERNATIONAL MAGNUM PORTFOLIO
SUMMARY OF TOTAL FOREIGN SECURITIES BY INDUSTRY
CLASSIFICATION -- DECEMBER 31, 2003
(UNAUDITED)
<Table>
<Caption>
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
- ---------------------------------------------------------------
Automobiles $ 2,495 2.7%
Beverages 1,699 1.8
Building Products 1,099 1.2
Capital Markets 1,892 2.0
Chemicals 4,264 4.6
Commercial Banks 11,075 11.9
Commercial Services & Supplies 2,230 2.4
Communications Equipment 1,756 1.9
Computers & Peripherals 1,528 1.6
Diversified Financials 1,395 1.5
Diversified Telecommunication Services 5,081 5.4
Electrical Equipment 1,817 1.9
Electronic Equipment & Instruments 1,834 2.0
Food & Staples Retailing 1,054 1.1
Food Products 3,756 4.0
Household Durables 3,809 4.1
Industrial Conglomerates 1,618 1.7
Insurance 3,186 3.4
Leisure Equipment & Products 1,375 1.5
Machinery 2,136 2.3
Media 3,457 3.7
Metals & Mining 1,077 1.2
Office Electronics 1,267 1.4
Oil & Gas 7,587 8.1
Pharmaceuticals 7,270 7.8
Real Estate 1,920 2.1
Textiles, Apparel & Luxury Goods 920 1.0
Wireless Telecommunication Services 2,606 2.8
Other 9,560 10.2
- ---------------------------------------------------------------
$ 90,763 97.3%
===============================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
53
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
INTERNATIONAL SMALL CAP PORTFOLIO
[CHART]
COMPARISON OF THE CHANGE IN VALUE OF A $500,000* INVESTMENT
OVER 10 YEARS
FISCAL YEAR ENDED DECEMBER 31
<Table>
<Caption>
MSCI EAFE SMALL CAP INTERNATIONAL SMALL
TOTAL RETURN INDEX CAP PORTFOLIO - CLASS A
"1993" $ 500,000 $ 500,000
"1994" $ 541,550 $ 526,250
"1995" $ 530,611 $ 539,933
"1996" $ 529,868 $ 630,371
"1997" $ 399,308 $ 628,077
"1998" $ 421,031 $ 653,953
"1999" $ 495,427 $ 911,219
"2000" $ 449,699 $ 884,036
"2001" $ 393,442 $ 832,019
"2002" $ 362,675 $ 807,142
"2003" $ 585,175 $ 1,197,153
</Table>
* Minimum Investment
In accordance with SEC regulations, Portfolio performance shown assumes that all
recurring fees (including management fees) were deducted and all dividends and
distributions were reinvested. Total returns do not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the redemption
of Portfolio shares.
PERFORMANCE COMPARED TO THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE
SMALL CAP TOTAL RETURN INDEX(1)
<Table>
<Caption>
TOTAL RETURNS(2)
-------------------------------------
AVERAGE ANNUAL
-----------------------------
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION
- -------------------------------------------------------------------------
Portfolio - Class A (3) 48.32% 12.86% 9.12% 12.04%
Index 61.35 6.37 1.38 4.17
</Table>
(1) The MSCI EAFE Small Cap Total Return Index is an 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, including price performance and income from dividend payments.
(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. Fee waivers and/or reimbursements are voluntary and
the Adviser reserves the right to commence or terminate any waiver and/or
reimbursement at any time.
(3) Commenced operations on December 15, 1992
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 International Small Cap Portfolio seeks long-term capital appreciation by
investing primarily in equity securities of small non-U.S. companies.
Investments in small sized corporations are more vulnerable to financial risks
and other risks than larger corporations and may involve a higher degree of
price volatility than investments in the general equity markets. Foreign
investing involves certain risks, including currency fluctuations and controls,
restrictions on foreign investments, less governmental supervision and
regulation, less liquidity and the potential for market volatility and political
instability.
PERFORMANCE
For the year ended December 31, 2003, the Portfolio had a total return of 48.32%
compared to 61.35% for the Morgan Stanley Capital International (MSCI) EAFE
Small Cap Total Return Index (the "Index").
FACTORS AFFECTING PERFORMANCE
- In the first quarter of the year, the pending Iraq war combined with
economic uncertainty weighed on investor sentiment. By the beginning of
the second quarter, the initial stages of the war were decisive and along
with enthusiasm for a brighter economic outlook, most markets around the
world embarked on a nine-month rally.
- In general, our long-term value approach suffered in a market where the
more cyclical, often lower quality stocks rallied the most. The
underperformance of the Portfolio for the full year is primarily explained
by poor stock selection within the consumer discretionary and information
technology sectors.
- Stock selection in the materials, the Portfolio's best contributing
sector, and the consumer staples sectors were strong contributors to
performance for the year.
MANAGEMENT STRATEGIES
- The Portfolio remained underweight in much of the consumer discretionary
sector (retail, consumer dura-bles, autos), feeling that the consumer was
over-borrowed and vulnerable to increasing interest rates and,
specifically in the United Kingdom, to the housing bubble. The Portfolio's
overweight to the hotels and leisure sector through gambling and licensed
bars, typically a less economically sensitive segment, contributed to the
Portfolio. However, the resilience of the consumer was a surprise and
stock selection in autos, retail, and media detracted from performance
over the year.
- Regarding technology, even following a correction after the boom in
1999/2000 we felt the sector was still trading at fair value over the
year. We preferred hardware and semiconductor equipment over software and
information technology services, owing to a greater prevalence of strong
franchises and high barriers to entry (more akin to our investment
philosophy). However, stock selection, particularly in information
technology services, contributed to the Portfolio's underperformance in
the sector over the year.
January 2004
54
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
INTERNATIONAL SMALL CAP PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
COMMON STOCKS (97.1%)
AUSTRALIA (2.9%)
Infomedia Ltd. 6,516,316 $ 4,508
John Fairfax Holdings Ltd. 4,899,192 12,967
Promina Group Ltd. 1,546,852 3,815
Ramsay Health Care Ltd. 1,328,430 4,765
- -------------------------------------------------------------------------------------------
26,055
===========================================================================================
BELGIUM (1.1%)
Omega Pharma S.A. 300,259 9,517
- -------------------------------------------------------------------------------------------
DENMARK (1.6%)
Danisco A/S 127,791 5,670
Kobenhavns Lufthavne A/S 75,065 8,779
- -------------------------------------------------------------------------------------------
14,449
===========================================================================================
FINLAND (5.8%)
KCI Konecranes Oyj 468,208 16,254
Kone Oyj, Class B 329,354 18,850
Metso Oyj 947,738 11,540
Uponor Oyj 176,072 5,537
- -------------------------------------------------------------------------------------------
52,181
===========================================================================================
FRANCE (5.0%)
Algeco 65,608 5,624
Autoroutes du Sud de la France 288,848 9,664
Chargeurs S.A. 72,140 2,359
Europeenne d'Extincteurs (a)(d)131,043 @--
Neopost S.A. 335,882 16,900
Zodiac S.A. 366,047 10,710
- -------------------------------------------------------------------------------------------
45,257
===========================================================================================
GERMANY (4.9%)
Beru AG 129,759 8,438
Celesio AG 93,787 4,536
Hugo Boss AG (Non-Voting Shares) 253,596 5,088
MPC Muenchmeyer Petersen Capital AG 189,994 6,049
Pfeiffer Vacuum Technology AG 129,006 4,544
Rational AG 37,830 2,142
Sartorius AG (Non-Voting Shares) 328,639 2,811
SCS Standard Computer Systeme AG (d)21,289 @--
Techem AG (a)419,736 8,104
WMF Wuerttembergische Metallwarenfabrik AG
(Non-Voting Shares) 147,082 2,294
- -------------------------------------------------------------------------------------------
44,006
===========================================================================================
GREECE (0.8%)
OPAP S.A. 530,209 7,603
- -------------------------------------------------------------------------------------------
HONG KONG (1.7%)
Asia Satellite Telecommunications Holdings Ltd. 5,596,500 10,633
Hongkong Land Holdings Ltd. 369,000 627
Television Broadcasts Ltd. 784,000 3,959
- -------------------------------------------------------------------------------------------
15,219
===========================================================================================
IRELAND (0.5%)
Kingspan Group plc 939,636 4,954
- -------------------------------------------------------------------------------------------
ITALY (3.9%)
Buzzi Unicem S.p.A. 922,063 10,844
Cassa di Risparmio di Firenze S.p.A. 2,478,668 4,427
Davide Campari-Milano S.p.A. 195,608 9,473
SAES Getters S.p.A. 154,570 $ 1,915
SAES Getters S.p.A. RNC 266,305 1,953
Sogefi S.p.A. 1,875,799 6,442
- -------------------------------------------------------------------------------------------
35,054
===========================================================================================
JAPAN (31.2%)
Aiful Corp. 339,000 24,753
Ariake Japan Co., Ltd. 516,000 16,388
Asatsu-DK, Inc. 667,800 17,166
Asia Securities Printing Co., Ltd. 719,000 4,018
Daibiru Corp. 3,695,500 19,859
Fujimi, Inc. 187,300 5,739
Fukuda Denshi Co., Ltd. 418,900 8,817
Hurxley Corp. 253,637 3,662
ITO EN Ltd. 173,500 7,449
Jaccs Co., Ltd. 3,461,000 12,733
Leopalace21 Corp. 2,586,000 24,326
Maezawa Kasei Industries Co., Ltd. 129,200 1,612
Megane Top Co., Ltd. 296,100 2,739
Mirai Co., Ltd. 99,000 447
Nakanishi, Inc. 186,000 8,047
Nihon Trim Co., Ltd. 97,900 4,997
Nippon Broadcasting System, Inc. 106,000 4,926
Nissei Corp. 313,900 2,339
Nitta Corp. 908,400 12,572
Osaki Electric Co., Ltd. 1,588,000 8,208
OZEKI Co., Ltd. 19,900 778
Shidax Corp. 5,759 3,728
Shinkawa Ltd. 415,000 8,716
Sumitomo Osaka Cement Co., Ltd. 6,223,000 12,171
Taisei Lamick Co., Ltd. 239,300 5,215
Takuma Co., Ltd. 775,000 4,223
Tenma Corp. 810,000 8,238
TOC Co., Ltd. 2,023,000 11,267
Tokyo Kikai Seisakusho Ltd. 1,805,000 4,589
Tomy Co., Ltd. (a)433,100 6,389
Toppan Forms Co., Ltd. 571,900 6,344
Union Tool Co. 163,900 5,389
Yamaichi Electronics Co., Ltd. 655,600 7,114
Yomiuri Land Co., Ltd. 2,000,000 6,203
- -------------------------------------------------------------------------------------------
281,161
===========================================================================================
NETHERLANDS (4.2%)
BE Semiconductor Industries N.V. (a)760,555 6,429
CSM N.V. CVA 113,004 2,465
IHC Caland N.V. 200,937 10,868
Laurus N.V. (a)6,042,411 9,196
Nutreco Holding N.V. 319,742 8,760
- -------------------------------------------------------------------------------------------
37,718
===========================================================================================
NEW ZEALAND (3.2%)
Fisher & Paykel Appliances Holdings Ltd. 1,718,424 4,320
Fisher & Paykel Healthcare Corp., Ltd. 1,684,709 13,954
Sky City Entertainment Group Ltd. 3,463,616 10,455
- -------------------------------------------------------------------------------------------
28,729
===========================================================================================
NORWAY (2.0%)
DNB NOR ASA 2,288,599 15,230
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
55
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
INTERNATIONAL SMALL CAP PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
NORWAY (CONT'D)
Storebrand ASA 420,280 $ 2,728
- -------------------------------------------------------------------------------------------
17,958
===========================================================================================
SOUTH KOREA (0.9%)
KT&G Corp. 475,700 8,257
- -------------------------------------------------------------------------------------------
SPAIN (1.9%)
Abertis Infraestructuras S.A. 317,906 4,794
Amadeus Global Travel Distribution S.A., Series A 699,109 4,529
Miquel y Costas & Miquel S.A. 194,565 8,199
- -------------------------------------------------------------------------------------------
17,522
===========================================================================================
SWEDEN (4.2%)
D. Carnegie & Co. AB (a)414,551 4,090
Getinge AB, Class B 496,695 4,762
Hoganas AB, Class B 232,376 4,972
Intrum Justitia AB 2,249,906 11,879
Swedish Match AB 1,179,722 12,048
- -------------------------------------------------------------------------------------------
37,751
===========================================================================================
SWITZERLAND (6.1%)
Converium Holding AG 167,674 8,887
Edipresse S.A. (Bearer), Class B 23,663 11,445
Galenica Holding AG (Registered), Class B 43,344 6,290
Schindler Holding AG (a)18,456 4,493
SIG Holding AG (Registered) 32,126 4,422
Valora Holding AG 50,753 12,601
Zehnder Group AG, Class B 7,851 6,329
- -------------------------------------------------------------------------------------------
54,467
===========================================================================================
UNITED KINGDOM (15.2%)
British Vita plc 1,442,839 6,183
Capital Radio plc 1,000,712 8,398
Cattles plc 2,601,351 15,526
De La Rue plc 916,959 4,539
Devro plc 2,617,584 4,235
HMV Group plc 1,835,892 5,475
Jarvis plc 1,334,779 4,940
Keller Group plc 1,166,201 4,499
Luminar plc 1,491,821 10,842
Michael Page International plc 1,153,213 3,830
Novar plc 3,752,679 9,247
PHS Group plc 4,636,347 6,933
Regent Inns plc 2,391,895 3,182
Rotork plc 1,380,469 9,028
SIG plc 1,212,966 7,039
Spirax-Sarco Engineering plc 987,834 9,525
SSL International plc 1,259,660 7,422
William Hill plc 757,009 5,772
Wincanton plc 2,638,448 9,787
- -------------------------------------------------------------------------------------------
136,402
===========================================================================================
TOTAL COMMON STOCKS (COST $712,510) 874,260
===========================================================================================
TOTAL FOREIGN SECURITIES (97.1%) (COST $712,510) 874,260
===========================================================================================
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (2.6%)
REPURCHASE AGREEMENT (2.6%)
J.P. Morgan Securities, Inc., 0.75%, dated
12/31/03, due 1/2/04, repurchase
price $22,908 (COST $22,907) $ (f)22,907 $ 22,907
===========================================================================================
FOREIGN CURRENCY (0.0%)
Australian Dollar AUD 1 1
British Pound GBP @-- 1
Euro EUR 84 105
Japanese Yen JPY 55 1
New Zealand Dollar NZD @-- @--
Norwegian Krone NOK @-- @--
Swedish Krona SEK 10 1
- -------------------------------------------------------------------------------------------
TOTAL FOREIGN CURRENCY (COST $107) 109
===========================================================================================
TOTAL INVESTMENTS (99.7%) (COST $735,524) 897,276
===========================================================================================
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
OTHER ASSETS (0.6%)
Cash $ 467
Receivable for Portfolio Shares Sold 2,002
Dividends Receivable 1,599
Foreign Withholding Tax Reclaim Receivable 1,195
Receivable for Investments Sold 56
Interest Receivable 1
Other 26 5,346
- -------------------------------------------------------------------------------------------
LIABILITIES (-0.3%)
Investment Advisory Fees Payable (1,925)
Payable for Portfolio Shares Redeemed (427)
Administrative Fees Payable (121)
Custodian Fees Payable (66)
Directors' Fees and Expenses Payable (45)
Payable for Investments Purchased (9)
Other Liabilities (33) (2,626)
- -------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 899,996
===========================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 733,611
Undistributed (Distributions in Excess of) Net Investment
Income (660)
Accumulated Net Realized Gain (Loss) 4,996
Unrealized Appreciation (Depreciation) on:
Investments 161,752
Foreign Currency Exchange Contracts and Translations 297
- -------------------------------------------------------------------------------------------
NET ASSETS $ 899,996
===========================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
Applicable to 43,856,360 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 20.52
===========================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
56
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
INTERNATIONAL SMALL CAP PORTFOLIO
(a) Non-income producing security.
(d) Security was valued at fair value -- At December 31, 2003, the Portfolio
held fair valued securities, each valued at less than $500, representing
less than 0.05% of net assets.
(f) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of this
statement of net assets. The investment in the repurchase agreement is
through participation in a joint account with affiliated parties.
@ Face Amount/Value is less than $500.
CVA Certificaten Van Aandelen
RNC Non-Convertible Savings Shares
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Portfolio had the following foreign currency exchange contract(s) open at
period end:
<Table>
<Caption>
NET
IN UNREALIZED
CURRENCY TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
- ------------------------------------------------------------------------------------------
JPY 5,997 $ 56 1/6/04 US$ 56 $ 56 $ @--
US$ 9 9 1/7/04 JPY 958 9 @--
------- -------- -------
$ 65 $ 65 $ @--
======= ======== =======
</Table>
SUMMARY OF TOTAL FOREIGN SECURITIES BY INDUSTRY
CLASSIFICATION -- DECEMBER 31, 2003
(UNAUDITED)
<Table>
<Caption>
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
- ---------------------------------------------------------------
Aerospace & Defense $ 10,710 1.2%
Auto Components 19,388 2.1
Beverages 16,922 1.9
Building Products 61,192 6.8
Chemicals 11,922 1.3
Commercial Banks 19,657 2.2
Commercial Services & Supplies 38,653 4.3
Construction & Engineering 13,279 1.5
Consumer Finance 53,012 5.9
Diversified Financial Services 12,606 1.4
Diversified Telecommunication Services 10,633 1.2
Electrical Equipment 15,335 1.7
Electronic Equipment & Instruments 17,845 2.0
Energy Equipment & Services 18,972 2.1
Food & Staples Retailing 13,636 1.5
Food Products 37,517 4.2
Health Care Equipment & Supplies 34,185 3.8
Health Care Providers & Services 21,214 2.3
Hotels, Restaurants & Leisure 40,181 4.5
Insurance 12,702 1.4
Machinery 115,448 12.8
Media 58,862 6.5
Office Electronics 16,900 1.9
Pharmaceuticals 9,518 1.0
Real Estate 56,080 6.2
Semiconductors & Semiconductor Equipment 22,258 2.5
Specialty Retail 18,076 2.0
Tobacco 20,305 2.3
Transportation Infrastructure 14,459 1.6
Other 62,793 7.0
- ---------------------------------------------------------------
$ 874,260 97.1%
===============================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
57
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
JAPANESE VALUE EQUITY PORTFOLIO
[CHART]
COMPARISON OF THE CHANGE IN VALUE OF A $500,00** INVESTMENT
SINCE INCEPTION
FISCAL YEAR ENDED DECEMBER 31
<Table>
<Caption>
"JAPANESE VALUE
"MSCI JAPAN INDEX(1)" EQUITY PORTFOLIO-CLASS A"
"*" $ 500,000 $ 500,000
"1994" $ 512,000 $ 491,500
"1995" $ 515,533 $ 473,609
"1996" $ 435,625 $ 466,979
"1997" $ 332,513 $ 423,877
"1998" $ 349,304 $ 461,263
"1999" $ 564,231 $ 755,318
"2000" $ 405,344 $ 576,383
"2001" $ 286,173 $ 403,699
"2002" $ 256,754 $ 358,404
"2003" $ 348,955 $ 472,986
</Table>
* Commenced operations on April 25, 1994
** Minimum Investment
In accordance with SEC regulations, Portfolio performance shown assumes that all
recurring fees (including management fees) were deducted and all dividends and
distributions were reinvested. Total returns do not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the redemption
of Portfolio shares. The performance of Class B shares will vary based upon the
different inception dates and fees assessed to that class.
PERFORMANCE COMPARED TO THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) JAPAN
INDEX(1)
<Table>
<Caption>
TOTAL RETURNS(2)
--------------------------------
AVERAGE ANNUAL
---------------------
ONE FIVE SINCE
YEAR YEARS INCEPTION
- -----------------------------------------------------------------
Portfolio - Class A (3) 31.97% 0.50% (0.57)%
Index - Class A 35.91 (0.02) (3.69)
Portfolio - Class B (4) 31.59 0.25 (0.32)
Index - Class B 35.91 (0.02) (4.67)
</Table>
(1) The MSCI Japan Index is an unmanaged index of common 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. Fee waivers and/or reimbursements are voluntary and
the Adviser reserves the right to commence or terminate any waiver and/or
reimbursement at any time.
(3) Commenced operations on April 25, 1994
(4) Commenced operations on January 2, 1996
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 Japanese Value Equity Portfolio seeks long-term capital appreciation by
investing primarily in equity securities of Japanese issuers. Foreign investing
involves certain risks, including currency fluctuations and controls,
restrictions on foreign investments, less governmental supervision and
regulation, less liquidity and the potential for market volatility and political
instability.
PERFORMANCE
For the year ended December 31, 2003, the Portfolio had a total return of 31.97%
for the Class A shares and 31.59% for the Class B shares compared to 35.91% for
the Morgan Stanley Capital International (MSCI) Japan Index (the "Index").
FACTORS AFFECTING PERFORMANCE
- The Japanese market declined over the first quarter, weighed heavily by
geopolitical concerns in Iraq and North Korea, and a lack of confidence in
the global economic recovery, which was dragged further down by the
effects of SARS. In addition, many domestic corporate pension funds
returned portions of their unfunded portfolios back to the government,
further weakening supply and demand in an already fragile environment.
- In April, the Japanese markets started rallying together with major global
equity markets. Earnings released for the fiscal year ending in March 2003
confirmed that restructuring efforts over the last several years were
beginning to bear fruit, led by massive purchases by non-resident
investors as well as increased activity by domestic Japanese individuals.
In addition, the Japanese Government's decisive move to provide public
funds for Resona Bank in April led many observers to conclude that the
Government had the ability to act quickly to resolve a potential financial
crisis.
- Japanese equity markets were generally range bound during the fourth
quarter, owing largely to consolidation of gains for the prior six months.
In addition, a falling U.S. dollar versus the Japanese yen, investors'
"wait and see" attitude towards Lower House elections in Japan, and
semi-annual corporate earnings all weighed on the investor sentiment,
despite improving economic data.
- The Portfolio's small exposure to the languishing banking sector helped it
sidestep major declines in that sector during the first eight months of
the period. However, this stance detracted from performance for the entire
period by causing the Portfolio to miss out on the banking sector's sharp,
momentum-driven rise in September. The Portfolio's minimal exposure to
steel
58
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (CONT'D)
JAPANESE VALUE EQUITY PORTFOLIO
companies, which fared well, also negatively affected performance.
- On a more positive note, the Portfolio enjoyed strong performance in
several areas. While smaller cap stocks were very strong during the first
half of 2003, investors shifted focus to large-capitalization Japanese
companies in technology and other globally competitive sectors in June. As
a result, the Portfolio benefited from its higher exposure to large cap
blue chip stocks, specifically within the capital goods and the technology
hardware and equipment sectors during the June to August period. Strong
stock selection within the pharmaceutical and automobile sectors also
supported the Portfolio's relative performance.
MANAGEMENT STRATEGIES
- The Portfolio continued its long-term strategy of trying to find
high-quality value-oriented companies with earnings potential.
- The Portfolio benefited from our strategy of emphasizing
large-capitalization high quality stocks, especially within the technology
and capital goods sectors. For example, although we believed the Japanese
technology sector had a generally positive profit outlook, we modestly
reduced exposure to the sector, while increasing number of holdings in
companies with relatively strong balance sheets. This approach bore fruit
early in the second half of the year when investors shifted their
attention away from small capitalization stocks to larger capitalization
companies in technology and other globally competitive sectors.
January 2004
59
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
JAPANESE VALUE EQUITY PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
COMMON STOCKS (100.2%)
AUTOMOBILES (8.9%)
Nissan Motor Co., Ltd. 100,200 $ 1,142
Suzuki Motor Corp. 46,900 693
Toyota Motor Corp. 31,600 1,065
Yamaha Motor Co., Ltd. 36,000 392
- -------------------------------------------------------------------------------------------
3,292
===========================================================================================
BUILDING PRODUCTS (3.3%)
Daikin Industries Ltd. 36,000 830
Sanwa Shutter Corp. 70,000 395
- -------------------------------------------------------------------------------------------
1,225
===========================================================================================
CHEMICALS (10.1%)
Daicel Chemical Industries Ltd. 123,000 506
Denki Kagaku Kogyo Kabushiki Kaisha 176,000 565
Kaneka Corp. 91,000 678
Lintec Corp. 24,000 381
Mitsubishi Chemical Corp. 220,000 572
Nifco, Inc. 34,000 426
Shin-Etsu Polymer Co., Ltd. 54,000 329
Toyo Ink Manufacturing Co., Ltd. 74,000 263
- -------------------------------------------------------------------------------------------
3,720
===========================================================================================
COMMERCIAL SERVICES & SUPPLIES (1.9%)
Dai Nippon Printing Co., Ltd. 41,000 575
Nissha Printing Co., Ltd. 9,000 117
- -------------------------------------------------------------------------------------------
692
===========================================================================================
COMPUTERS & PERIPHERALS (8.8%)
Fujitsu Ltd. (a)162,000 953
Mitsumi Electric Co., Ltd. 42,100 463
NEC Corp. 120,000 882
Toshiba Corp. 245,000 926
- -------------------------------------------------------------------------------------------
3,224
===========================================================================================
CONSTRUCTION & ENGINEERING (1.5%)
Kyudenko Corp. 19,000 78
Obayashi Corp. 91,000 406
Sanki Engineering Co., Ltd. 16,000 82
- -------------------------------------------------------------------------------------------
566
===========================================================================================
CONSUMER FINANCE (1.4%)
Hitachi Capital Corp. 36,900 511
- -------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (3.4%)
Nippon Telegraph & Telephone Corp. 137 659
Tokyo Electric Power Co., Inc. (The) 26,400 578
- -------------------------------------------------------------------------------------------
1,237
===========================================================================================
ELECTRICAL EQUIPMENT (0.9%)
Furukawa Electric Co., Ltd. 100,000 332
- -------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (8.2%)
Hitachi High-Technologies Corp. 14,300 226
Hitachi Ltd. 144,000 866
Kyocera Corp. 10,400 692
Ryosan Co., Ltd. 21,400 374
TDK Corp. 11,800 848
- -------------------------------------------------------------------------------------------
3,006
===========================================================================================
FOOD & STAPLES RETAILING (1.6%)
FamilyMart Co., Ltd. 25,200 573
- -------------------------------------------------------------------------------------------
FOOD PRODUCTS (1.6%)
House Foods Corp. 23,600 $ 266
Nippon Meat Packers, Inc. 34,000 332
- -------------------------------------------------------------------------------------------
598
===========================================================================================
HOUSEHOLD DURABLES (11.0%)
Casio Computer Co., Ltd. 63,000 665
Matsushita Electric Industrial Co., Ltd. 82,000 1,132
Rinnai Corp. 13,400 318
Sangetsu Co., Ltd. 2,000 38
Sekisui Chemical Co., Ltd. 113,000 574
Sekisui House Ltd. 57,000 588
Sony Corp. 20,900 722
- -------------------------------------------------------------------------------------------
4,037
===========================================================================================
LEISURE EQUIPMENT & PRODUCTS (4.8%)
Fuji Photo Film Co., Ltd. 29,000 935
Yamaha Corp. 41,900 821
- -------------------------------------------------------------------------------------------
1,756
===========================================================================================
MACHINERY (9.0%)
Amada Co., Ltd. 89,000 462
Daifuku Co., Ltd. 77,000 343
Fuji Machine Manufacturing Co., Ltd. 17,500 222
Fujitec Co., Ltd. 36,000 155
Kurita Water Industries Ltd. 48,000 578
Minebea Co., Ltd. 103,000 522
Mitsubishi Heavy Industries Ltd. 237,000 658
Tsubakimoto Chain Co. 108,000 355
- -------------------------------------------------------------------------------------------
3,295
===========================================================================================
MEDIA (0.6%)
Toho Co., Ltd. 18,800 239
- -------------------------------------------------------------------------------------------
OFFICE ELECTRONICS (5.9%)
Canon, Inc. 23,000 1,069
Ricoh Co., Ltd. 56,000 1,103
- -------------------------------------------------------------------------------------------
2,172
===========================================================================================
PHARMACEUTICALS (5.8%)
Ono Pharmaceutical Co., Ltd. 17,900 672
Sankyo Co., Ltd. 34,600 649
Yamanouchi Pharmaceutical Co., Ltd. 26,100 810
- -------------------------------------------------------------------------------------------
2,131
===========================================================================================
REAL ESTATE (1.9%)
Mitsubishi Estate Co., Ltd. 73,000 691
- -------------------------------------------------------------------------------------------
ROAD & RAIL (1.8%)
East Japan Railway Co. 142 668
- -------------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.2%)
Rohm Co., Ltd. 3,900 456
- -------------------------------------------------------------------------------------------
SOFTWARE (2.4%)
Nintendo Co., Ltd. 9,600 894
- -------------------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS (0.8%)
Nisshinbo Industries, Inc. 51,000 284
- -------------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS (2.7%)
Mitsubishi Corp. 73,000 773
Nagase & Co., Ltd. 32,000 211
- -------------------------------------------------------------------------------------------
984
===========================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
60
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
JAPANESE VALUE EQUITY PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE (0.7%)
Mitsubishi Logistics Corp. 30,000 $ 249
- -------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $38,695) 36,832
===========================================================================================
<Caption>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
FOREIGN CURRENCY (0.0%)
Japanese Yen (COST $3) JPY 310 3
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.2%) (COST $38,698) 36,835
===========================================================================================
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
OTHER ASSETS (0.2%)
Receivable for Investments Sold $ 71
Dividends Receivable 7
Receivable for Portfolio Shares Sold 4
Other 2 84
- -------------------------------------------------------------------------------------------
LIABILITIES (-0.4%)
Bank Overdraft Payable (79)
Investment Advisory Fees Payable (57)
Directors' Fees and Expenses Payable (15)
Administrative Fees Payable (7)
Custodian Fees Payable (6)
Other Liabilities (9) (173)
- -------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 36,746
===========================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 74,722
Undistributed Net Investment Income
(Accumulated Net Investment Loss) (15)
Accumulated Net Realized Gain (Loss) (36,098)
Unrealized Appreciation (Depreciation) on Investments (1,863)
- -------------------------------------------------------------------------------------------
NET ASSETS $ 36,746
===========================================================================================
CLASS A:
NET ASSETS $ 36,295
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 5,899,299 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 6.15
===========================================================================================
CLASS B:
NET ASSETS $ 451
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 74,584 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 6.04
===========================================================================================
</Table>
(a) Non-income producing security.
@ Face Amount/Value is less than $500.
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Portfolio had the following foreign currency exchange contract(s)open at
period end:
<Table>
<Caption>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
- -------------------------------------------------------------------------------------------
JPY 7,615 $ 71 1/7/04 US$ 71 $ 71 $ @--
====== ===== =======
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
61
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
LATIN AMERICAN PORTFOLIO
[CHART]
COMPARISON OF THE CHANGE IN VALUE OF A $500,000** INVESTMENT
SINCE INCEPTION
FISCAL YEAR ENDED DECEMBER 31
<Table>
<Caption>
MSCI EMERGING MARKETS LATIN AMERICAN
FREE LATIN AMERICAN INDEX(1) PORTFOLIO-CLASS A
"*" $ 500,000 $ 500,000
"1995" $ 460,100 $ 456,600
"1996" $ 562,288 $ 679,284
"1997" $ 740,196 $ 959,692
"1998" $ 480,313 $ 603,647
"1999" $ 763,170 $ 1,033,927
"2000" $ 636,713 $ 866,326
"2001" $ 632,638 $ 853,504
"2002" $ 490,294 $ 678,109
"2003" $ 850,709 $ 1,080,567
</Table>
* Commenced operations on January 18, 1995
** Minimum Investment
In accordance with SEC regulations, Portfolio performance shown assumes that all
recurring fees (including management fees) were deducted and all dividends and
distributions were reinvested. Total returns do not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the redemption
of Portfolio shares. The performance of Class B shares will vary based upon the
different inception dates and fees assessed to that class.
PERFORMANCE COMPARED TO THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EMERGING
MARKETS FREE LATIN AMERICA INDEX(1)
<Table>
<Caption>
TOTAL RETURNS(2)
----------------------------
AVERAGE ANNUAL
-------------------
ONE FIVE SINCE
YEAR YEARS INCEPTION
- ----------------------------------------------------------------------------------
Portfolio - Class A (3) 59.35% 12.37% 9.00%
Index - Class A 73.51 12.11 6.15
Portfolio - Class B (4) 58.90 12.06 10.55
Index - Class B 73.51 12.11 7.67
</Table>
(1) The MSCI Emerging Markets Free Latin America Index (the "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. The Index takes into account local market restrictions for
specific securities or classes of shares that may be excluded from or
limited for foreign investor ownership.
(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. Fee waivers and/or reimbursements are voluntary
and the Adviser reserves the right to commence or terminate any waiver
and/or reimbursement at any time.
(3) Commenced operations on January 18, 1995
(4) Commenced operations on January 2, 1996
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 Latin American Portfolio seeks long-term capital appreciation by investing
primarily in growth-oriented equity securities of Latin American issuers.
Foreign investing involves certain risks, including currency fluctuations and
controls, restrictions on foreign investments, less governmental supervision and
regulation, less liquidity and the potential for market volatility and political
instability. In addition, investing in emerging markets may involve a relative
higher degree of volatility.
PERFORMANCE
For the year ended December 31, 2003, the Portfolio had a total return of 59.35%
for the Class A shares and 58.90% for the Class B shares compared to 73.51% for
the Morgan Stanley Capital International (MSCI) Emerging Markets Free Latin
America Index (the "Index").
FACTORS AFFECTING PERFORMANCE
- Latin American markets rebounded from early year weakness to return 73.5%
during the period in review. The region benefited from a bounce in
investor sentiment due to accommodative global monetary policy and a
recovery in global growth.
- All Latin markets experienced strong double-digit gains with particular
strength in major markets such as Brazil (given improving domestic economy
and reduced political and debt concerns) and Chile (given strong commodity
prices and economic growth). The smaller markets of Argentina, Peru, and
Colombia also performed well. The Mexican market, given weak economic
growth and disappointing reform momentum, was the weakest performer in the
region in 2003.
- In terms of relative performance, negative contributors came from stock
selection in Brazil, Venezuela, Mexico, and Chile, and our overweight
position in Mexico.
- Stock selection in Peru coupled with overweight positions in Brazil and
Venezuela were the largest contributors to relative performance.
MANAGEMENT STRATEGIES
- We continued to focus on countries where gross domestic product growth,
fiscal policy, and reform agendas remain strong and on companies with
strong management and earnings visibility.
62
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (CONT'D)
LATIN AMERICAN PORTFOLIO
- In Mexico we focused the Portfolio on consumer names and followed a
bottom-up stock selection strategy, based on individual earnings quality
and visibility. In Brazil we continued to increase our position focusing
on domestically oriented companies that trade at attractive valuation
levels, demonstrate strong pricing power, and offer a positive-growth
outlook. The Portfolio's largest country allocations remained Brazil and
Mexico. On a relative basis, we were overweight in Mexico and Brazil,
neutral Venezuela, and underweight the rest of the region.
January 2004
63
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
LATIN AMERICAN PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
COMMON STOCKS (98.4%)
(UNLESS OTHERWISE NOTED)
ARGENTINA (1.4%)
Tenaris S.A. ADR (a)10,765 $ 359
- -------------------------------------------------------------------------------------------
BRAZIL (52.2%)
AmBev ADR (Preferred) 62,098 1,584
Aracruz Celulose S.A. ADR 12,000 420
Banco Bradesco S.A. (Preferred) 21,648,000 114
Banco Bradesco S.A. ADR 15,890 420
Banco Itau Holding Financeira S.A. (Preferred) 260,000 26
Banco Itau Holding Financeira S.A. ADR 17,481 853
Banco Nacional S.A. (Preferred) (a)(d)11,847,000 @--
Brasil Telecom Participacoes S.A. (Preferred) 13,030,000 97
Brasil Telecom Participacoes S.A. ADR 13,006 492
Brasil Telecom S.A. 237,581 1
Caemi Mineracao E Metalurgica S.A.
(Preferred) (a)170,000 75
CEMIG S.A. (Preferred) 11,300,000 206
CEMIG S.A. ADR (Preferred) 28,128 518
Cia Brasileira de Distribuicao Grupo Pao de
Acucar ADR 24,299 611
Cia De Bebidas das Americas (Preferred) 380,000 97
CSN S.A. ADR 5,188 278
CVRD (Bonus Shares) (d)34,986 @--
CVRD ADR 4,460 261
CVRD ADR (Preferred) 33,413 1,721
CVRD, Class A (Preferred) 772 39
Empresa Brasileira de Aeronautica S.A.
(Preferred) 1,942 17
Empresa Brasileira de Aeronautica S.A. ADR 3,200 112
Gerdau S.A. ADR 10,941 221
Klabin S.A. (Preferred) 63,000 82
Lojas Arapua S.A. (Preferred) (a)(d)10,009,300 @--
Lojas Arapua S.A. GDR (a)(d)13,460 @--
Petrobras S.A. (Preferred) 965 26
Petrobras S.A. ADR 64,914 1,898
Petrobras S.A. ADR (Preferred) 65,970 1,759
Tele Leste Celular Participacoes S.A.
(Preferred) (a)1 @--
Telesp Celular Participacoes S.A. (Preferred) (a)201,021,000 526
Telesp Celular Participacoes S.A. ADR (a)65,927 434
Unibanco GDR 25,200 629
Usinas Siderurgicas de Minas Gerais S.A.
(Preferred) 20,897 245
Votorantim Celulose e Papel S.A. (Preferred) 943,000 60
Votorantim Celulose e Papel S.A. ADR 6,292 197
- -------------------------------------------------------------------------------------------
14,019
===========================================================================================
CHILE (5.3%)
Banco de Chile ADR 1 @--
Banco Santander Chile S.A. (Preferred) 13,516 321
Colbun S.A. 692,783 95
Distribucion y Servicio S.A. ADR 11,521 238
Empresa Nacional de Telecomunicaciones S.A. 13,947 86
Enersis S.A. 77,650 571
S.A.C.I. Falabella S.A. 67,900 120
- -------------------------------------------------------------------------------------------
1,431
===========================================================================================
MEXICO (37.7%)
Alfa S.A. de C.V., Class A 69,700 $ 210
America Movil S.A. de C.V., Class L ADR 105,423 2,882
Carso Global Telecom S.A.de C.V., Class A1 (a)50,136 70
Cemex S.A. de C.V. 55,687 292
Cemex S.A. de C.V. ADR 15,849 415
Coca-Cola Femsa S.A. ADR (a)12,500 266
Controladora Comercial Mexicana S.A. de C.V. 24,500 25
Grupo Aeroportuario del Sureste
S.A. de C.V., ADR 16,520 291
Grupo Financiero Banorte S.A. de C.V.,
Class O 43,000 150
Grupo Financiero BBVA Bancomer
S.A. de C.V., Class B (a)795,761 682
Grupo Mexico S.A. de C.V., Class B (a)33,200 85
Grupo Televisa S.A. ADR 25,400 1,012
Telmex, Class L ADR 71,096 2,348
Wal-Mart de Mexico S.A. de C.V. ADR 980 28
Wal-Mart de Mexico S.A. de C.V.,
Class C 156,079 419
Wal-Mart de Mexico S.A. de C.V., Class V 325,280 930
- -------------------------------------------------------------------------------------------
10,105
===========================================================================================
PERU (1.0%)
Cia de Minas Buenaventura S.A. ADR 9,300 263
- -------------------------------------------------------------------------------------------
VENEZUELA (0.8%)
CANTV ADR 14,454 220
- -------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $22,339) 26,397
===========================================================================================
TOTAL FOREIGN SECURITIES (98.4%) (COST $22,339) 26,397
===========================================================================================
<Caption>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (2.5%)
REPURCHASE AGREEMENT (2.5%)
J.P. Morgan Securities, Inc., 0.75%,
dated 12/31/03, due 1/2/04,
repurchase price $671 (COST $671) $ (f)671 671
- -------------------------------------------------------------------------------------------
FOREIGN CURRENCY (0.1%)
Brazilian Real BRL 93 32
Mexican Peso MXN @-- @--
- -------------------------------------------------------------------------------------------
TOTAL FOREIGN CURRENCY (COST $33) 32
===========================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
64
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
LATIN AMERICAN PORTFOLIO
<Table>
<Caption>
VALUE
(000)
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.0%) (COST $23,043) $ 27,100
===========================================================================================
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
OTHER ASSETS (2.2%)
Cash $ 2
Receivable for Investments Sold 392
Dividends Receivable 213
Other 1 608
- -------------------------------------------------------------------------------------------
LIABILITIES (-3.2%)
Payable for Investments Purchased (776)
Investment Advisory Fees Payable (64)
Custodian Fees Payable (8)
Directors' Fees and Expenses Payable (6)
Administrative Fees Payable (5)
Other Liabilities (10) (869)
- -------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 26,839
===========================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 49,381
Undistributed (Distributions in Excess of) Net
Investment Income 22
Accumulated Net Realized Gain (Loss) (26,621)
Unrealized Appreciation (Depreciation) on Investments 4,057
- -------------------------------------------------------------------------------------------
NET ASSETS $ 26,839
===========================================================================================
CLASS A:
NET ASSETS $ 26,817
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 2,398,504 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 11.18
===========================================================================================
CLASS B:
NET ASSETS $ 22
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 1,924 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 11.33
===========================================================================================
</Table>
(a) Non-income producing security.
(d) Security was valued at fair value -- At December 31, 2003, the Portfolio
held fair valued securities, each valued at less than $500, representing
less than 0.05% of net assets.
(f) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of this
statement of net assets. The investment in the repurchase agreement is
through participation in a joint account with affiliated parties.
@ Face Amount/Value is less than $500.
ADR American Depositary Receipts
GDR Global Depositary Receipts
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Portfolio had the following foreign currency exchange contract(s) open at
period end:
<Table>
<Caption>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
- -------------------------------------------------------------------------------------------
MXN 1,613 $ 144 1/2/04 US$ 144 $ 144 $ @--
============= =========== ===============
</Table>
SUMMARY OF TOTAL FOREIGN SECURITIES BY INDUSTRY
CLASSIFICATION -- DECEMBER 31, 2003
(UNAUDITED)
<Table>
<Caption>
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
- -------------------------------------------------------------------------
Airlines $ 291 1.1%
Beverages 1,947 7.2
Commercial Banks 3,194 11.9
Construction Materials 985 3.7
Diversified Telecommunication Services 3,315 12.3
Electric Utilities 1,184 4.4
Energy Equipment & Services 565 2.1
Food & Staples Retailing 849 3.2
Media 1,012 3.8
Metals & Mining 2,911 10.9
Multiline Retail 1,522 5.7
Oil & Gas 3,682 13.7
Paper & Forest Products 562 2.1
Wireless Telecommunication Services 3,843 14.3
Other 535 2.0
- -------------------------------------------------------------------------
$ 26,397 98.4%
=========================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
65
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
EQUITY GROWTH PORTFOLIO
[CHART]
COMPARISON OF THE CHANGE IN VALUE OF A $500,000* INVESTMENT
OVER 10 YEARS
FISCAL YEAR ENDED DECEMBER 31
<Table>
<Caption>
S&P 500 INDEX(1) EQUITY GROWTH PORTFOLIO-CLASS A
"1993" $ 500,000 $ 500,000
"1994" $ 506,702 $ 516,300
"1995" $ 696,938 $ 748,738
"1996" $ 856,982 $ 980,622
"1997" $ 1,142,906 $ 1,287,787
"1998" $ 1,469,480 $ 1,533,033
"1999" $ 1,778,717 $ 2,144,621
"2000" $ 1,616,587 $ 1,891,985
"2001" $ 1,424,617 $ 1,608,755
"2002" $ 1,109,991 $ 1,164,095
"2003" $ 1,428,336 $ 1,471,532
</Table>
* Minimum Investment
In accordance with SEC regulations, Portfolio performance shown assumes that all
recurring fees (including management fees) were deducted and all dividends and
distributions were reinvested. Total returns do not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the redemption
of Portfolio shares. The performance of Class B shares will vary based upon the
different inception dates and fees assessed to that class.
Performance was positively impacted due to the receipt of proceeds from the
settlement of class action suits involving, primarlily one of the Portfolio's
holdings. This was a one-time settlement, and as a result, the impact on the NAV
and consequently the performance will not likely be repeated in the future.
PERFORMANCE COMPARED TO THE S&P 500 INDEX(1)
<Table>
<Caption>
TOTAL RETURNS(2)
------------------------------------
AVERAGE ANNUAL
----------------------------
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION
- -------------------------------------------------------------------
Portfolio - Class A (3) 26.41% (0.81)% 11.40% 10.84%
Index - Class A 28.68 (0.57) 11.07 10.98
Portfolio - Class B (4) 26.13 (1.06) N/A 8.48
Index - Class B 28.68 (0.57) N/A 9.28
</Table>
(1) The S&P 500 Index is an unmanaged stock index comprised of 500 large-cap
U.S. companies with market capitalization of $1 billion or more.
(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. Fee waivers and/or reimbursements are
voluntary and the Adviser reserves the right to commence or terminate any
waiver and/or reimbursement at any time.
(3) Commenced operations on April 2, 1991
(4) Commenced operations on January 2, 1996
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 Equity Growth Portfolio seeks long-term capital appreciation by investing
primarily in growth-oriented equity securities of large capitalization
companies.
PERFORMANCE
For the year ended December 31, 2003, the Portfolio had a total return of 26.41%
for the Class A shares and 26.13% for the Class B shares compared to 28.68% for
the S&P 500 Index (the "Index").
FACTORS AFFECTING PERFORMANCE
- During 2003, across the market cap spectrum, smaller cap and lower
quality, more speculative stocks exceeded larger, higher quality names.
Our emphasis on the larger, higher quality names we favor detracted from
the Portfolio's performance.
- Stock selection was weakest in the consumer discretionary sector. The
Portfolio was hampered by weak performance from a number of retailer and
media companies.
- Favorable stock selection in the healthcare sector was unfortunately
overshadowed by the negative effect of our sector overweight, as compared
to the Index. Healthcare did not advance as strongly as other economically
sensitive sectors.
- Compared to the Index, an overweight in the information technology sector
was the largest positive contributor to relative results for the year.
This was augmented by strong stock selection. The Portfolio generally
benefited from its semi-conductor overweight as the semi-conductor
industry advanced amid the improved economic environment.
MANAGEMENT STRATEGIES
- On average the three largest sectors in the Portfolio during 2003 were
technology, healthcare and consumer discretionary.
- In 2003, the Portfolio owned a mix of stable and cyclical companies,
although at the margin we increased exposure to cyclicals. We implemented
this strategy through overweights in the technology and healthcare sectors
(as compared to the Index), where we found attractive investment
opportunities.
January 2004
66
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
EQUITY GROWTH PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
COMMON STOCKS (97.8%)
AIR FREIGHT & LOGISTICS (0.7%)
United Parcel Service, Inc., Class B 77,600 $ 5,785
- -------------------------------------------------------------------------------------------
BEVERAGES (3.6%)
Anheuser Busch Cos., Inc. 112,000 5,900
Coca Cola Co. (The) 305,063 15,482
PepsiCo., Inc. 150,970 7,038
- -------------------------------------------------------------------------------------------
28,420
===========================================================================================
BIOTECHNOLOGY (3.0%)
Amgen, Inc. (a)266,442 16,466
Biogen Idec, Inc. (a)38,500 1,416
Genzyme Corp. (a)67,900 3,350
Gilead Sciences, Inc. (a)45,630 2,653
- -------------------------------------------------------------------------------------------
23,885
===========================================================================================
CAPITAL MARKETS (4.4%)
Bank of New York Co., Inc. (The) 228,000 7,552
Charles Schwab Corp. (The) 355,000 4,203
Goldman Sachs Group, Inc. 150,715 14,880
Lehman Brothers Holdings, Inc. 105,300 8,131
- -------------------------------------------------------------------------------------------
34,766
===========================================================================================
COMMERCIAL BANKS (1.4%)
Wells Fargo & Co. 183,800 10,824
- -------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (0.7%)
Apollo Group, Inc., Class A (a)84,150 5,722
- -------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (5.1%)
Analog Devices, Inc. (a)246,800 11,266
Cisco Systems, Inc. (a)870,350 21,141
Juniper Networks, Inc. (a)105,700 1,974
QUALCOMM, Inc. 104,163 5,618
- -------------------------------------------------------------------------------------------
39,999
===========================================================================================
COMPUTERS & PERIPHERALS (4.0%)
Dell, Inc. (a)345,025 11,717
EMC Corp. (a)256,425 3,313
International Business Machines Corp. 94,550 8,763
Network Appliance, Inc. (a)258,700 5,311
SanDisk Corp. (a)44,600 2,727
Seagate Technology, Inc. (d)186,100 @--
- -------------------------------------------------------------------------------------------
31,831
===========================================================================================
CONSUMER FINANCE (1.3%)
American Express Co. 219,050 10,565
- -------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (3.6%)
Citigroup, Inc. 586,779 28,482
- -------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (0.7%)
Emerson Electric Co. 92,000 5,957
- -------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.4%)
Amphenol Corp., Class A (a)44,600 2,851
- -------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (0.9%)
Smith International, Inc. (a)163,100 6,772
- -------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING (2.5%)
Walgreen Co. 58,669 2,135
Wal-Mart Stores, Inc. 331,238 17,572
- -------------------------------------------------------------------------------------------
19,707
===========================================================================================
HEALTH CARE EQUIPMENT & SUPPLIES (2.3%)
Boston Scientific Corp. (a)169,960 $ 6,248
Guidant Corp. 64,900 3,907
Medtronic, Inc. 84,200 4,093
St. Jude Medical, Inc. (a)62,300 3,822
- -------------------------------------------------------------------------------------------
18,070
===========================================================================================
HEALTH CARE PROVIDERS & SERVICES (2.4%)
Anthem, Inc. (a)99,549 7,466
Caremark Rx, Inc. (a)127,700 3,235
UnitedHealth Group, Inc. 140,900 8,197
- -------------------------------------------------------------------------------------------
18,898
===========================================================================================
HOTELS, RESTAURANTS & LEISURE (1.7%)
Carnival Corp. 130,400 5,181
McDonald's Corp. 191,700 4,760
Yum! Brands, Inc. (a)94,420 3,248
- -------------------------------------------------------------------------------------------
13,189
===========================================================================================
HOUSEHOLD PRODUCTS (2.5%)
Colgate-Palmolive Co. 99,688 4,990
Procter & Gamble Co. 145,288 14,511
- -------------------------------------------------------------------------------------------
19,501
===========================================================================================
INDUSTRIAL CONGLOMERATES (7.4%)
3M Co. 191,700 16,300
General Electric Co. 1,360,800 42,158
- -------------------------------------------------------------------------------------------
58,458
===========================================================================================
INSURANCE (2.9%)
American International Group, Inc. 345,050 22,870
- -------------------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL (3.2%)
eBay, Inc. (a)256,600 16,574
InterActiveCorp (a)257,400 8,733
- -------------------------------------------------------------------------------------------
25,307
===========================================================================================
INTERNET SOFTWARE & SERVICES (1.0%)
Yahoo!, Inc. (a)184,400 8,329
- -------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES (2.0%)
Accenture Ltd., Class A (a)296,450 7,803
First Data Corp. 125,400 5,153
Paychex, Inc. 77,400 2,879
- -------------------------------------------------------------------------------------------
15,835
===========================================================================================
MEDIA (4.2%)
Clear Channel Communications, Inc. 180,150 8,436
EchoStar Communications Corp., Class A (a)175,300 5,960
News Corp., Ltd.
(Limited Voting Shares) ADR 105,400 3,189
Univision Communications, Inc., Class A (a)133,475 5,298
Viacom, Inc., Class B 226,180 10,038
- -------------------------------------------------------------------------------------------
32,921
===========================================================================================
MULTILINE RETAIL (2.5%)
Dollar Tree Stores, Inc. (a)250,170 7,520
Target Corp. 309,136 11,871
- -------------------------------------------------------------------------------------------
19,391
===========================================================================================
OIL & GAS (0.9%)
Exxon Mobil Corp. 183,250 7,513
- -------------------------------------------------------------------------------------------
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
67
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
EQUITY GROWTH PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
PHARMACEUTICALS (10.0%)
Abbott Laboratories 151,813 $ 7,074
Allergan, Inc. 25,600 1,966
Bristol-Myers Squibb Co. 96,500 2,760
Eli Lilly & Co. 74,800 5,261
INAMED Corp. (a)41,050 1,973
Johnson & Johnson 317,800 16,418
Merck & Co., Inc. 77,075 3,561
Pfizer, Inc. 1,063,342 37,568
Wyeth 49,678 2,109
- -------------------------------------------------------------------------------------------
78,690
===========================================================================================
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (7.9%)
Applied Materials, Inc. (a)320,301 7,191
Broadcom Corp., Class A (a)67,800 2,311
Intel Corp. 768,425 24,743
Linear Technology Corp. 179,650 7,558
Marvell Technology Group Ltd. (a)133,900 5,079
Maxim Integrated Products, Inc. 52,800 2,630
Novellus Systems, Inc. (a)71,700 3,015
Texas Instruments, Inc. 264,650 7,775
Xilinx, Inc. (a)52,100 2,018
- -------------------------------------------------------------------------------------------
62,320
===========================================================================================
SOFTWARE (9.5%)
Mercury Interactive Corp. (a)160,900 7,826
Microsoft Corp. 1,635,526 45,042
Novell, Inc. (a)507,800 5,342
Oracle Corp. (a)581,050 7,670
Peoplesoft, Inc. (a)165,900 3,783
VERITAS Software Corp. (a)145,150 5,394
- -------------------------------------------------------------------------------------------
75,057
===========================================================================================
SPECIALTY RETAIL (4.5%)
Abercrombie & Fitch Co. (a)105,900 2,617
Bed Bath & Beyond, Inc. (a)110,300 4,781
Chico's FAS, Inc. (a)87,120 3,219
Home Depot, Inc. 375,745 13,335
Lowe's Cos., Inc. 76,000 4,210
Tiffany & Co. 96,270 4,351
TJX Cos., Inc. 127,100 2,803
- -------------------------------------------------------------------------------------------
35,316
===========================================================================================
TOBACCO (0.6%)
Altria Group, Inc. 87,800 4,778
- -------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $675,930) 772,009
===========================================================================================
<Caption>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (1.0%)
REPURCHASE AGREEMENT (1.0%)
J.P. Morgan Securities, Inc., 0.75%, dated
12/31/03, due 1/2/04, repurchase price
$8,144 (COST $8,144) $ (f)8,144 8,144
- -------------------------------------------------------------------------------------------
<Caption>
VALUE
(000)
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.8%) (COST $684,074) $ 780,153
- -------------------------------------------------------------------------------------------
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
OTHER ASSETS (2.9%)
Receivable for Investments Sold $ 13,894
Receivable for Portfolio Shares Sold 7,738
Litigation Recovery Receivable 895
Dividends Receivable 519
Other 27 23,073
- -------------------------------------------------------------------------------------------
LIABILITIES (-1.7%)
Payable for Investments Purchased (11,604)
Investment Advisory Fees Payable (1,122)
Payable for Portfolio Shares Redeemed (822)
Directors' Fees and Expenses Payable (117)
Distribution Fees, Class B (116)
Administrative Fees Payable (108)
Custodian Fees Payable (9)
Bank Overdraft Payable (4)
Other Liabilities (35) (13,937)
- -------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 789,289
===========================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 888,929
Undistributed (Distributions in Excess of) Net
Investment Income (117)
Accumulated Net Realized Gain (Loss) (195,602)
Unrealized Appreciation (Depreciation) on
Investments 96,079
- -------------------------------------------------------------------------------------------
NET ASSETS $ 789,289
===========================================================================================
CLASS A:
NET ASSETS $ 589,698
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 37,461,432 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 15.74
===========================================================================================
CLASS B:
NET ASSETS $ 199,591
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 12,836,833 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 15.55
===========================================================================================
</Table>
(a) Non-income producing security.
(d) Security was valued at fair value -- At December 31, 2003, the Portfolio
held a fair valued security, valued at less than $500, representing less
than 0.05% of net assets.
(f) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated parties.
@ Face Amount/Value is less than $500.
ADR American Depositary Receipts
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
68
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
FOCUS EQUITY PORTFOLIO
[CHART]
COMPARISON OF THE CHANGE IN VALUE OF A $500,000** INVESTMENT SINCE INCEPTION
FISCAL YEAR ENDED DECEMBER 31
<Table>
<Caption>
S&P 500 INDEX(1) FOCUS EQUITY PORTFOLIO - CLASS A
"*" $ 500,000 $ 500,000
"1995" $ 650,860 $ 706,250
"1996" $ 800,285 $ 995,106
"1997" $ 1,067,260 $ 1,326,576
"1998" $ 1,372,176 $ 1,530,205
"1999" $ 1,660,883 $ 2,240,832
"2000" $ 1,509,410 $ 1,979,551
"2001" $ 1,330,092 $ 1,678,263
"2002" $ 1,036,275 $ 1,194,755
"2003" $ 1,333,478 $ 1,565,010
</Table>
* Commenced operations on March 8, 1995
** Minimum Investment
In accordance with SEC regulations, Portfolio performance shown assumes that all
recurring fees (including management fees) were deducted and all dividends and
distributions were reinvested. Total returns do not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the redemption
of Portfolio shares. The performance of Class B shares will vary based upon the
different inception dates and fees assessed to that class.
Performance was positively impacted due to the receipt of proceeds from the
settlement of class action suits involving, primarily one of the Portfolio's
holdings. This was a one-time settlement, and as a result, the impact on the NAV
and consequently the performance will not likely be repeated in the future.
PERFORMANCE COMPARED TO THE S&P 500 INDEX(1)
<Table>
<Caption>
TOTAL RETURNS(2)
-------------------------------
AVERAGE ANNUAL
--------------------
ONE FIVE SINCE
YEAR YEARS INCEPTION
- ---------------------------------------------------------------
Portfolio - Class A (3) 30.99% 0.46% 13.82%
S&P 500 Index - Class A 28.68 (0.57) 11.77
Portfolio - Class B (4) 30.62 0.22 10.12
S&P 500 Index - Class B 28.68 (0.57) 9.28
</Table>
(1) The S&P 500 Index is an unmanaged stock index comprised of 500 large-cap
U.S. companies with market capitalization of $1 billion or more.
(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. Fee waivers and/or reimbursements are voluntary and
the Adviser reserves the right to commence or terminate any waiver and/or
reimbursement at any time.
(3) Commenced operations on March 8, 1995
(4) Commenced operations on January 2, 1996
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 Focus Equity Portfolio seeks capital appreciation by investing primarily in
growth-oriented equity securities of large capitalization companies. The
Portfolio's concentration of its assets in a small number of issuers will
subject it to greater risks.
PERFORMANCE
For the year ended December 31, 2003, the Portfolio had a total return of 30.99%
for the Class A shares and 30.62% for the Class B shares compared to 28.68% for
the S&P 500 Index (the "Index").
FACTORS AFFECTING PERFORMANCE
- A meaningful underweight in telecommunications stocks was the largest
positive contributor to relative results for the year. Although
telecommunications stocks were among the leaders in the early stages of
the 2003 rally, telecommunications finished the year as the worst
performing Index sector. Strong stock selection in the telecommunications
sector also proved beneficial as our single holding far exceeded the Index
sector return.
- An overweight in the information technology sector added to relative
return. The Portfolio generally benefited from its semi-conductor
overweight as the semi-conductor industry advanced amid the improved
economic environment.
- Stock selection was weakest in the consumer discretionary sector. The
Portfolio was hampered by weak performance from a number of retailers.
- In the healthcare sector, weak stock selection and a sector overweight had
a negative effect on performance. Healthcare did not advance as strongly
as other economically sensitive sectors.
MANAGEMENT STRATEGIES
- On average the three largest sectors in the Portfolio during 2003 were
technology, healthcare and financials.
- In 2003, we owned a mix of stable and cyclical companies, although we
increased our exposure to cyclicals. We implemented this strategy through
overweights in the technology and healthcare sectors, where we found
attractive investment opportunities.
January 2004
69
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
FOCUS EQUITY PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
COMMON STOCKS (104.7%)
AIR FREIGHT & LOGISTICS (1.1%)
United Parcel Service, Inc., Class B 9,900 $ 738
- -------------------------------------------------------------------------------------------
BEVERAGES (4.1%)
Anheuser Busch Cos., Inc. 10,900 574
Coca Cola Co. (The) 45,075 2,288
- -------------------------------------------------------------------------------------------
2,862
===========================================================================================
BIOTECHNOLOGY (3.7%)
Amgen, Inc. (a)32,582 2,014
Genzyme Corp. (a)11,500 567
- -------------------------------------------------------------------------------------------
2,581
===========================================================================================
CAPITAL MARKETS (4.0%)
Bank of New York Co., Inc. (The) 29,750 985
Goldman Sachs Group, Inc. 18,000 1,777
- -------------------------------------------------------------------------------------------
2,762
===========================================================================================
COMMERCIAL BANKS (2.4%)
Wells Fargo & Co. 27,800 1,637
- -------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (3.3%)
Cisco Systems, Inc. (a)94,200 2,288
- -------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS (4.5%)
Dell, Inc. (a)41,725 1,417
International Business Machines Corp. 12,550 1,163
Network Appliance, Inc. (a)28,100 577
- -------------------------------------------------------------------------------------------
3,157
===========================================================================================
CONSUMER FINANCE (2.2%)
American Express Co. 32,350 1,560
- -------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (5.0%)
Citigroup, Inc. 72,270 3,508
- -------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (1.1%)
Smith International, Inc. (a)18,200 756
- -------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING (2.9%)
Wal-Mart Stores, Inc. 38,600 2,048
- -------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (2.7%)
Boston Scientific Corp. (a)20,600 757
Guidant Corp. 19,100 1,150
- -------------------------------------------------------------------------------------------
1,907
===========================================================================================
HEALTH CARE PROVIDERS & SERVICES (2.5%)
Anthem, Inc. (a)22,951 1,721
- -------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (2.7%)
Procter & Gamble Co. 19,175 1,915
- -------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (10.0%)
3M Co. 34,200 2,908
General Electric Co. 131,150 4,063
- -------------------------------------------------------------------------------------------
6,971
===========================================================================================
INSURANCE (4.1%)
American International Group, Inc. 43,075 2,855
- -------------------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL (5.1%)
eBay, Inc. (a)38,900 2,513
InterActiveCorp (a)30,800 1,045
- -------------------------------------------------------------------------------------------
3,558
===========================================================================================
INFORMATION TECHNOLOGY SERVICES (0.8%)
First Data Corp. 12,775 525
- -------------------------------------------------------------------------------------------
MEDIA (4.5%)
Clear Channel Communications, Inc. 34,350 $ 1,609
EchoStar Communications Corp., Class A (a)20,800 707
Univision Communications, Inc., Class A (a)20,250 804
- -------------------------------------------------------------------------------------------
3,120
===========================================================================================
MULTILINE RETAIL (4.4%)
Dollar Tree Stores, Inc. (a)40,930 1,230
Target Corp. 47,723 1,833
- -------------------------------------------------------------------------------------------
3,063
===========================================================================================
OIL & GAS (2.1%)
Exxon Mobil Corp. 34,950 1,433
- -------------------------------------------------------------------------------------------
PHARMACEUTICALS (8.9%)
Bristol-Myers Squibb Co. 24,600 703
Johnson & Johnson 30,775 1,590
Pfizer, Inc. 109,450 3,867
- -------------------------------------------------------------------------------------------
6,160
===========================================================================================
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (9.7%)
Applied Materials, Inc. (a)41,375 929
Intel Corp. 86,000 2,769
Linear Technology Corp. 36,225 1,524
Texas Instruments, Inc. 32,575 957
Xilinx, Inc. (a)14,500 562
- -------------------------------------------------------------------------------------------
6,741
===========================================================================================
SOFTWARE (9.3%)
Mercury Interactive Corp. (a)21,100 1,026
Microsoft Corp. 154,400 4,252
Oracle Corp. (a)90,175 1,191
- -------------------------------------------------------------------------------------------
6,469
===========================================================================================
SPECIALTY RETAIL (3.6%)
Bed, Bath & Beyond, Inc. (a)19,750 856
Home Depot, Inc. 47,400 1,682
- -------------------------------------------------------------------------------------------
2,538
===========================================================================================
TOTAL COMMON STOCKS (COST $67,691) 72,873
===========================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
70
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
FOCUS EQUITY PORTFOLIO
<Table>
<Caption>
VALUE
(000)
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (104.7%) (COST $67,691) $ 72,873
- -------------------------------------------------------------------------------------------
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
OTHER ASSETS (4.1%)
Receivable for Investments Sold $ 2,334
Litigation Recovery Receivable 369
Receivable for Portfolio Shares Sold 120
Dividends Receivable 43
Other 3 2,869
- -------------------------------------------------------------------------------------------
LIABILITIES (-8.8%)
Payable for Portfolio Shares Redeemed (4,141)
Payable for Investments Purchased (1,833)
Investment Advisory Fees Payable (126)
Directors' Fees and Expenses Payable (19)
Bank Overdraft Payable (17)
Administrative Fees Payable (12)
Distribution Fees, Class B (5)
Custodian Fees Payable (3)
Other Liabilities (10) (6,166)
- -------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 69,576
===========================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 99,937
Undistributed (Distributions in Excess of) Net
Investment Income (19)
Accumulated Net Realized Gain (Loss) (35,524)
Unrealized Appreciation (Depreciation) on
Investments 5,182
- -------------------------------------------------------------------------------------------
NET ASSETS $ 69,576
===========================================================================================
CLASS A:
NET ASSETS $ 61,420
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 5,207,719 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 11.79
===========================================================================================
CLASS B:
NET ASSETS $ 8,156
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 705,126 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 11.57
===========================================================================================
</Table>
(a) Non-income producing security.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
71
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
SMALL COMPANY GROWTH PORTFOLIO
[CHART]
COMPARISON OF THE CHANGE IN VALUE OF A $500,000* INVESTMENT OVER 10 YEARS
FISCAL YEAR ENDED DECEMBER 31
<Table>
<Caption>
RUSSELL 2000 GROWTH INDEX(1) SMALL COMPANY GROWTH PORTFOLIO - CLASS A
"1993" $ 500,000 $ 500,000
"1994" $ 487,850 $ 496,886
"1995" $ 639,279 $ 662,398
"1996" $ 711,261 $ 687,039
"1997" $ 803,370 $ 765,087
"1998" $ 813,251 $ 975,792
"1999" $ 1,163,681 $ 1,916,943
"2000" $ 902,667 $ 1,789,581
"2001" $ 819,351 $ 1,571,539
"2002" $ 571,416 $ 1,221,400
"2003" $ 848,781 $ 1,760,404
</Table>
* Minimum Investment
In accordance with SEC regulations, Portfolio performance shown assumes that all
recurring fees (including management fees) were deducted and all dividends and
distributions were reinvested. Total returns do not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the redemption
of Portfolio shares. The performance of Class B shares will vary based upon the
different inception dates and fees assessed to that class.
PERFORMANCE COMPARED TO THE RUSSELL 2000 GROWTH INDEX(1)
<Table>
<Caption>
TOTAL RETURNS(2)
---------------------------------------------
AVERAGE ANNUAL
---------------------------------
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION
- ---------------------------------------------------------------------------
Portfolio - Class A (3) 44.13% 12.55% 13.41% 13.16%
Index - Class A 48.54 0.86 5.43 7.10
Portfolio - Class B (4) 43.80 12.29 N/A 12.73
Index - Class B 48.54 0.86 N/A 3.59
</Table>
(1) The Russell 2000 Growth Index is a market capitalization - weighted index
comprised of those companies of the Russell 2000 Index with higher
forecasted growth values and higher price-to-book ratios.
(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. Fee waivers and/or reimbursements are voluntary and
the Adviser reserves the right to commence or terminate any waiver and/or
reimbursement at any time.
(3) Commenced operations on November 1, 1989
(4) Commenced operations on January 2, 1996
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 Small Company Growth Portfolio seeks long-term capital appreciation by
investing primarily in growth-oriented equity securities of small U.S. and, to a
limited extent, foreign companies that are listed on U.S. exchanges or traded in
U.S. markets. Investments in small sized corporations are more vulnerable to
financial risks and other risks than larger corporations and may involve a
higher degree of price volatility than investments in the general equity
markets.
PERFORMANCE
For the year ended December 31, 2003, the Portfolio had a total return of 44.13%
for the Class A shares and 43.80% for the Class B shares compared to 48.54% for
the Russell 2000 Growth Index (the "Index").
FACTORS AFFECTING PERFORMANCE
- The largest positive contributor to the Portfolio's relative results was
stock selection in the consumer discretionary sector, although this was
slightly offset by the negative effect of the Portfolio's substantial
sector overweight, as compared to the Index. A number of consumer
discretionary stocks ranked among the Portfolio's largest individual
positions and several of these added meaningfully to relative results.
- In the technology sector, the favorable impact of an overweight (as
compared to the Index) in semiconductor companies was offset by
underperformance in other areas such as software. During 2003, higher beta
technology stocks rallied. Many of these companies did not pass our tests
for portfolio inclusion.
- The Portfolio's healthcare position had the most significant negative
impact from a stock selection perspective, primarily due to weakness in
pharmaceuticals and biotechnology.
MANAGEMENT STRATEGIES
- On average, the three largest sectors in the Portfolio during 2003 were
consumer discretionary, healthcare and technology.
January 2004
72
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
SMALL COMPANY GROWTH PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
COMMON STOCKS (98.4%)
ADVERTISING AGENCIES (0.5%)
R.H. Donnelley Corp. (a)107,100 $ 4,267
- -------------------------------------------------------------------------------------------
AEROSPACE (0.6%)
Moog, Inc., Class A (a)91,675 4,529
- -------------------------------------------------------------------------------------------
AIR TRANSPORT (0.3%)
Airtran Holdings, Inc. (a)207,700 2,472
- -------------------------------------------------------------------------------------------
AUTO PARTS: AFTER MARKET (0.4%)
TBC Corp. (a)130,900 3,379
- -------------------------------------------------------------------------------------------
BANKS: OUTSIDE NEW YORK CITY (1.5%)
TierOne Corp. (a)260,800 5,988
UCBH Holdings, Inc. 149,300 5,818
- -------------------------------------------------------------------------------------------
11,806
===========================================================================================
BIOTECHNOLOGY RESEARCH & PRODUCTION (4.2%)
Digene Corp. (a)135,600 5,438
Idexx Laboratories, Inc. (a)86,600 4,008
Martek Biosciences Corp. (a)65,800 4,275
MGI Pharma, Inc. (a)134,900 5,551
Taro Pharmaceuticals Industries Ltd. (a)113,550 7,324
Telik, Inc. (a)265,325 6,105
- -------------------------------------------------------------------------------------------
32,701
===========================================================================================
CASINOS & GAMBLING (4.5%)
Alliance Gaming Corp. (a)146,700 3,616
GTECH Holdings Corp. 317,654 15,721
Kerzner International Ltd. (a)106,700 4,157
Shuffle Master, Inc. (a)81,900 2,835
Station Casinos, Inc. 290,600 8,901
- -------------------------------------------------------------------------------------------
35,230
===========================================================================================
COMMERCIAL INFORMATION SERVICES (0.5%)
Viad Corp. 153,000 3,825
- -------------------------------------------------------------------------------------------
COMMUNICATIONS & MEDIA (1.1%)
Media General, Inc., Class A 131,775 8,579
- -------------------------------------------------------------------------------------------
COMMUNICATIONS TECHNOLOGY (3.9%)
Crown Castle International Corp. (a)841,000 9,276
Dobson Communications Corp. (a)422,200 2,774
F5 Networks, Inc. (a)109,700 2,753
Sonus Networks, Inc. (a)763,500 5,772
Spectrasite, Inc. (a)289,600 10,064
- -------------------------------------------------------------------------------------------
30,639
===========================================================================================
COMPUTER SERVICES SOFTWARE & SYSTEMS (10.1%)
Akamai Technologies, Inc. (a)349,400 3,756
Emulex Corp. (a)108,573 2,897
Espeed, Inc., Class A (a)169,800 3,975
FileNET Corp. (a)146,300 3,962
Hyperion Solutions Corp. (a)128,200 3,864
Informatica Corp. (a)365,120 3,761
Merge Technologies, Inc. (a)154,700 2,729
Micromuse, Inc. (a)691,700 4,773
MicroStrategy, Inc., Class A (a)53,200 2,792
Neoforma, Inc. (a)446,629 4,752
NetIQ Corp. (a)564,475 7,479
Quest Software, Inc. (a)335,750 4,768
Red Hat, Inc. (a)280,600 5,267
SERENA Software, Inc. (a)165,100 3,030
SkillSoft plc ADR (a)942,700 $ 8,154
ValueClick, Inc. (a)348,350 3,163
Verint Systems, Inc. (a)141,600 3,194
Websense, Inc. (a)228,200 6,672
- -------------------------------------------------------------------------------------------
78,988
===========================================================================================
COMPUTER TECHNOLOGY (0.3%)
Intergraph Corp. (a)112,400 2,689
- -------------------------------------------------------------------------------------------
CONSTRUCTION (0.8%)
Chicago Bridge & Iron Co. N.V. (NY Shares) 209,800 6,063
- -------------------------------------------------------------------------------------------
CONSUMER ELECTRONICS (0.3%)
CNET Networks, Inc. (a)359,800 2,454
- -------------------------------------------------------------------------------------------
DRUGS & PHARMACEUTICALS (1.7%)
Gen-Probe, Inc. (a)235,300 8,581
Medicines Co. (a)98,300 2,896
Valeant Pharmaceuticals International 60,400 1,519
- -------------------------------------------------------------------------------------------
12,996
===========================================================================================
EDUCATION SERVICES (0.6%)
Strayer Education, Inc. 43,450 4,729
- -------------------------------------------------------------------------------------------
ELECTRICAL & ELECTRONICS (0.5%)
Power Integrations, Inc. (a)123,500 4,132
- -------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT & COMPONENTS (0.5%)
MKS Instruments, Inc. (a)124,800 3,619
- -------------------------------------------------------------------------------------------
ELECTRONICS (2.0%)
Amphenol Corp., Class A (a)70,500 4,507
Avid Technology, Inc. (a)81,900 3,931
Planar Systems, Inc. (a)118,100 2,872
Trimble Navigation Ltd. (a)112,100 4,175
- -------------------------------------------------------------------------------------------
15,485
===========================================================================================
ELECTRONICS: SEMICONDUCTORS/COMPONENTS (3.6%)
Actel Corp. (a)151,550 3,652
Brooks Automation, Inc. (a)208,700 5,044
Entegris, Inc. (a)259,800 3,339
Integrated Circuit Systems, Inc. (a)98,500 2,806
O2Micro International Ltd. (a)134,600 3,015
PMC-Sierra, Inc. (a)161,400 3,252
Rambus, Inc. (a)130,200 3,997
Tessera Technologies, Inc. (a)156,700 2,948
- -------------------------------------------------------------------------------------------
28,053
===========================================================================================
ELECTRONICS: TECHNOLOGY (0.5%)
Secure Computing Corp. (a)224,900 4,028
- -------------------------------------------------------------------------------------------
ENERGY MISCELLANEOUS (3.6%)
Evergreen Resources, Inc. (a)210,100 6,830
PetroKazakhstan, Inc. (a)140,600 3,165
Ultra Petroleum Corp. (a)755,500 18,601
- -------------------------------------------------------------------------------------------
28,596
===========================================================================================
ENGINEERING & CONTRACTING SERVICES (0.4%)
Washington Group International, Inc. (a)81,600 2,772
- -------------------------------------------------------------------------------------------
FINANCIAL MISCELLANEOUS (2.5%)
First Marblehead Corp. (The) (a)122,200 2,674
Interactive Data Corp. (a)668,595 11,072
PMI Group, Inc. (The) 153,400 5,711
- -------------------------------------------------------------------------------------------
19,457
===========================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
73
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
SMALL COMPANY GROWTH PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
FOODS (0.8%)
J&J Snack Foods Corp. (a)157,341 $ 5,941
- -------------------------------------------------------------------------------------------
HEALTH CARE FACILITIES (1.3%)
VistaCare, Inc., Class A (a)287,400 10,102
- -------------------------------------------------------------------------------------------
HEALTH CARE MANAGEMENT SERVICES (0.8%)
Eclipsys Corp. (a)522,900 6,087
- -------------------------------------------------------------------------------------------
HEALTH CARE SERVICES (6.1%)
Apria Healthcare Group, Inc. (a)208,132 5,925
Dade Behring Holdings, Inc. (a)535,000 19,121
Genesis HealthCare Corp. (a)131,200 2,989
Immucor, Inc. (a)358,300 7,306
Stericycle, Inc. (a)258,425 12,068
- -------------------------------------------------------------------------------------------
47,409
===========================================================================================
HOMEBUILDING (1.1%)
Brookfield Homes Corp. 324,850 8,371
Levitt Corp., Class A (a)29,700 591
- -------------------------------------------------------------------------------------------
8,962
===========================================================================================
HOTEL/MOTEL (1.6%)
Wynn Resorts Ltd. (a)436,090 12,215
- -------------------------------------------------------------------------------------------
HOUSEHOLD FURNISHINGS (0.4%)
Select Comfort Corp. (a)115,450 2,859
- -------------------------------------------------------------------------------------------
INSURANCE: PROPERTY & CASUALTY (1.1%)
Markel Corp. (a)34,250 8,683
- -------------------------------------------------------------------------------------------
INVESTMENT MANAGEMENT COMPANIES (0.5%)
Affiliated Managers Group, Inc. (a)56,400 3,925
- -------------------------------------------------------------------------------------------
LEISURE TIME (0.4%)
WMS Industries, Inc. (a)118,500 3,105
- -------------------------------------------------------------------------------------------
MACHINERY & ENGINEERING (0.5%)
Graco, Inc. 101,400 4,066
- -------------------------------------------------------------------------------------------
MACHINERY: OIL WELL EQUIPMENT & SERVICES (0.9%)
Maverick Tube Corp. (a)383,250 7,378
- -------------------------------------------------------------------------------------------
MEDICAL & DENTAL INSTRUMENTS & SUPPLIES (0.8%)
INAMED Corp. (a)134,900 6,483
- -------------------------------------------------------------------------------------------
MEDICAL SERVICES (0.6%)
Specialty Laboratories, Inc. (a)280,030 4,702
- -------------------------------------------------------------------------------------------
METALS & MINING (0.2%)
Glamis Gold, Ltd. (a)99,300 1,700
- -------------------------------------------------------------------------------------------
MISCELLANEOUS HEALTH CARE (2.6%)
CV Therapeutics, Inc. (a)131,500 1,928
NPS Pharmaceuticals, Inc. (a)211,100 6,489
VCA Antech, Inc. (a)398,400 12,342
- -------------------------------------------------------------------------------------------
20,759
===========================================================================================
OFFICE FURNITURE & BUSINESS EQUIPMENT (2.4%)
Imagistics International, Inc. (a)493,700 18,514
- -------------------------------------------------------------------------------------------
OIL: INTEGRATED DOMESTIC (0.4%)
Whiting Petroleum Corp. (a)174,200 3,205
- -------------------------------------------------------------------------------------------
PRODUCTION TECHNOLOGY EQUIPMENT (1.8%)
Cymer, Inc. (a)96,300 4,448
Dionex Corp. (a)123,500 5,683
Varian Semiconductor Equipment Associates, Inc. (a)88,300 3,858
- -------------------------------------------------------------------------------------------
13,989
===========================================================================================
PUBLISHING: NEWSPAPERS (1.0%)
Pulitzer, Inc. 149,374 $ 8,066
- -------------------------------------------------------------------------------------------
RADIO & TV BROADCASTERS (1.7%)
Citadel Broadcasting Corp. (a)239,150 5,350
Radio One, Inc., Class D (a)431,536 8,328
- -------------------------------------------------------------------------------------------
13,678
===========================================================================================
REAL ESTATE INVESTMENT TRUSTS (REIT) (0.8%)
MI Developments, Inc., Class A (a)226,500 6,324
- -------------------------------------------------------------------------------------------
RESTAURANTS (3.2%)
Buffalo Wild Wings, Inc. (a)113,800 2,953
Checkers Drive-In Restaurant, Inc. (a)191,500 1,994
Chicago Pizza & Brewery, Inc. (a)210,800 3,145
P.F. Chang's China Bistro, Inc. (a)112,225 5,710
Sonic Corp. (a)335,438 10,271
Steak n Shake Co. (The) (a)57,900 1,034
- -------------------------------------------------------------------------------------------
25,107
===========================================================================================
RETAIL (6.4%)
Brookstone, Inc. (a)193,775 4,129
CEC Entertainment, Inc. (a)79,200 3,753
Cost Plus, Inc. (a)67,550 2,770
Dick's Sporting Goods, Inc. (a)110,050 5,355
Fred's, Inc. 100,867 3,125
HOT Topic, Inc. (a)144,575 4,259
Petco Animal Supplies, Inc. (a)186,600 5,682
Tractor Supply Co. (a)199,700 7,766
Tuesday Morning Corp. (a)349,700 10,579
Urban Outfitters, Inc. (a)73,200 2,712
- -------------------------------------------------------------------------------------------
50,130
===========================================================================================
SAVINGS & LOAN (0.7%)
Provident Financial Services, Inc. 300,700 5,683
- -------------------------------------------------------------------------------------------
SERVICES: COMMERCIAL (7.1%)
Advisory Board Co. (The) (a)232,900 8,130
Arbitron, Inc. (a)420,475 17,542
Autobytel, Inc. (a)296,700 2,694
Corporate Executive Board Co. (a)203,499 9,497
DeVry, Inc. (a)224,900 5,652
ITT Educational Services, Inc. (a)205,400 9,648
Roto-Rooter, Inc. 51,600 2,379
- -------------------------------------------------------------------------------------------
55,542
===========================================================================================
TELECOMMUNICATIONS EQUIPMENT (0.4%)
Inter-Tel, Inc. 122,500 3,060
- -------------------------------------------------------------------------------------------
TEXTILE APPAREL MANUFACTURES (1.4%)
Carter's, Inc. (a)315,500 8,029
Oxford Industries, Inc. 81,600 2,765
- -------------------------------------------------------------------------------------------
10,794
===========================================================================================
TRUCKERS (1.5%)
Landstar System, Inc. (a)101,700 3,869
Overnite Corp. (a)350,000 7,962
- -------------------------------------------------------------------------------------------
11,831
===========================================================================================
UTILITIES: TELECOMMUNICATIONS (5.0%)
IDT Corp., Class B (a)489,200 11,315
NTL, Inc. (a)257,051 17,929
PTEK Holdings, Inc. (a)1,128,300 9,940
- -------------------------------------------------------------------------------------------
39,184
===========================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
74
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
SMALL COMPANY GROWTH PORTFOLIO
<Table>
<Caption>
VALUE
(000)
- -------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $660,283) $ 770,971
===========================================================================================
<Caption>
SHARES
- -------------------------------------------------------------------------------------------
PREFERRED STOCK (0.0%)
COMMUNICATIONS TECHNOLOGY (0.0%)
Warp Solutions, Inc., Series A (COST $11) (a)(i)12,301 1
===========================================================================================
<Caption>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (3.7%)
REPURCHASE AGREEMENT (3.7%)
J.P. Morgan Securities, Inc., 0.75%, dated
12/31/03, due 1/2/04, repurchase price
$28,958 (COST $28,957) $ (f)28,957 28,957
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (102.1%) (COST $689,251) 799,929
===========================================================================================
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
OTHER ASSETS (1.5%)
Receivable for Portfolio Shares Sold 7,089
Receivable for Investments Sold 4,889
Dividends Receivable 30
Litigation Recovery Receivable 5
Interest Receivable 1
Other 19 12,033
- -------------------------------------------------------------------------------------------
LIABILITIES (-3.6%)
Payable for Investments Purchased (21,866)
Payable for Portfolio Shares Redeemed (4,820)
Investment Advisory Fees Payable (1,482)
Distribution Fees, Class B (274)
Administrative Fees Payable (104)
Directors' Fees and Expenses Payable (30)
Custodian Fees Payable (17)
Other Liabilities (35) (28,628)
- -------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 783,334
===========================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 822,003
Undistributed Net Investment Income
(Accumulated Net Investment Loss) (30)
Accumulated Net Realized Gain (Loss) (149,317)
Unrealized Appreciation (Depreciation) on:
Investments 110,678
- -------------------------------------------------------------------------------------------
NET ASSETS $ 783,334
===========================================================================================
CLASS A:
NET ASSETS $ 299,198
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 27,681,455 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 10.81
===========================================================================================
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
CLASS B:
NET ASSETS $ 484,136
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 46,395,991 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 10.43
===========================================================================================
</Table>
(a) Non-income producing security.
(f) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated parties.
(i) Restricted security valued at fair value and not registered under the
Securities Act of 1933. Acquired July 2000 at a cost of $11,000. At
December 31, 2003, this security had an aggregate market value of $1,000,
representing less than 0.05% of net assets.
ADR American Depositary Receipts
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
75
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
TECHNOLOGY PORTFOLIO
[CHART]
COMPARISON OF THE CHANGE IN VALUE OF A $250,000** INVESTMENT
SINCE INCEPTION
FISCAL YEAR ENDED DECEMBER 31
<Table>
<Caption>
NASDAQ COMPOSITE INDEX(1) TECHNOLOGY PORTFOLIO - CLASS A TECHNOLOGY PORTFOLIO - CLASS B
"*" $ 250,000 $ 250,000 $ 50,000
"1996" $ 270,325 $ 267,750 $ 53,550
"1997" $ 328,823 $ 367,540 $ 73,310
"1998" $ 459,136 $ 565,645 $ 112,545
"1999" $ 852,111 $ 1,474,184 $ 292,910
"2000" $ 517,316 $ 1,139,984 $ 225,952
"2001" $ 408,421 $ 594,046 $ 117,518
"2002" $ 279,646 $ 311,458 $ 61,556
"2003" $ 419,497 $ 457,657 $ 90,143
</Table>
* Commenced operations on September 16, 1996
** Minimum Investment
In accordance with SEC regulations, Portfolio performance shown assumes that all
recurring fees (including management fees) were deducted and all dividends and
distributions were reinvested. Total returns do not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the redemption
of Portfolio shares. The performance of Class B shares will vary based upon the
different fees assessed to that class. The NASDAQ Composite Index value at
December 31, 2003 assumes a minimum investment of $250,000; if a minimum initial
investment of $50,000 (the minimum investment for Class B shares) is assumed,
the value at December 31, 2003 would be $83,900.
Performance was positively impacted due to the receipt of proceeds from the
settlement of class action suits involving, primarily one of the Portfolio's
holdings. This was a one-time settlement, and as a result, the impact on the NAV
and consequently the performance will not likely be repeated in the future.
PERFORMANCE COMPARED TO THE NASDAQ COMPOSITE INDEX AND THE S&P 500 INDEX(1)
<Table>
<Caption>
TOTAL RETURNS(2)
------------------------------------
AVERAGE ANNUAL
-----------------------
ONE FIVE SINCE
YEAR YEARS INCEPTION
- --------------------------------------------------------------
Portfolio - Class A (3) 46.94% (4.15)% 8.65%
Portfolio - Class B (3) 46.44 (4.33) 8.43
NASDAQ Composite Index 50.01 (1.79) 7.36
S&P 500 Index 28.68 (0.57) 8.60
</Table>
(1) The NASDAQ Composite Index is a market capitalization - weighted index
comprised of all common stocks listed on the NASDAQ Stock Market. The S&P
500 Index is an unmanaged stock index comprised of 500 large-cap U.S.
companies with market capitalization of $1 billion or more.
(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. Fee waivers and/or reimbursements are voluntary and
the Adviser reserves the right to commence or terminate any waiver and/or
reimbursement at any time.
(3) Commenced operations on September 16, 1996
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 Technology Portfolio seeks long-term capital appreciation by investing
primarily in equity securities of companies that the investment adviser expects
will benefit from their involvement in technology and technology-related
industries. The Portfolio's concentration in the technology sector makes it
subject to greater risk and volatility than portfolios that are more
diversified, and the value of its shares may be substantially affected by
economic events. In addition, the Portfolio may invest up to 35% of its total
assets in the equity or fixed income securities of foreign issuers.
PERFORMANCE
For the year ended December 31, 2003, the Portfolio had a total return of 46.94%
for the Class A shares and 46.44% for the Class B shares compared to 50.01% for
the NASDAQ Composite Index (the "Index") and 28.68% for the S&P 500 Index.
FACTORS AFFECTING PERFORMANCE
- Technology proved to be one of the top performing sectors in the broad
equity market for the year. Among the major technology groups within the
Index, internet software and services, wireless telecommunications, and
electronic equipment and instruments were the leading industries.
Semiconductors also outpaced the Index return, while software, computers
and peripherals, and biotechnology were among the lagging groups for the
year.
- The largest positive influence on relative return came from our
semiconductor position where a substantial overweight added meaningfully
to results and was only partially offset by modest underperformance of
individual semiconductor holdings.
- An overweight in the software sector was the largest detractor from
relative performance; however, this was more than offset by favorable
stock selection.
- A substantial underweight in internet and catalog retail was a major
detractor, as that industry was among the leaders in the Index. The
combination of weak stock performance and a slight underweight in wireless
telecommunications also had a negative impact on relative results.
Although the Portfolio's wireless positions provided a triple-digit
return, the average return for the wireless industry was even higher.
MANAGEMENT STRATEGIES
- We continued our strategy of seeking to achieve long-term capital
appreciation by investing in equity securities of companies that we
expected to benefit from their involvement in technology and
technology-related industries.
January 2004
76
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
TECHNOLOGY PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
COMMON STOCKS (100.4%)
BIOTECHNOLOGY (3.1%)
Amgen, Inc. (a)5,223 $ 323
Celgene Corp. (a)5,050 227
Gilead Sciences, Inc. (a)1,425 83
NPS Pharmaceuticals, Inc. (a)4,500 138
Telik, Inc. (a)6,700 154
- -------------------------------------------------------------------------------------------
925
===========================================================================================
COMMUNICATIONS (0.3%)
Avaya, Inc. (a)5,800 75
- -------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (18.2%)
Advanced Fibre Communications, Inc. (a)2,800 56
Alcatel S.A. ADR (a)21,500 276
Analog Devices, Inc. (a)9,913 453
Cisco Systems, Inc. (a)65,975 1,603
Corning, Inc. (a)12,300 128
Emulex Corp. (a)10,150 271
Extreme Networks, Inc. (a)15,113 109
F5 Networks, Inc. (a)4,200 105
Finisar Corp. (a)38,338 120
Inter-Tel, Inc. 3,350 84
Juniper Networks, Inc. (a)8,300 155
Motorola, Inc. 16,800 236
Nokia Oyj ADR 11,600 197
Nortel Networks Corp. (a)34,900 148
QLogic Corp. (a)8,063 416
QUALCOMM, Inc. 7,850 423
Sonus Networks, Inc. (a)39,400 298
Telefonaktiebolaget LM Ericsson ADR (a)5,800 103
Tellabs, Inc. (a)17,900 151
- -------------------------------------------------------------------------------------------
5,332
===========================================================================================
COMPUTERS & PERIPHERALS (5.9%)
Dell, Inc. (a)15,300 520
EMC Corp. (a)33,310 431
Magal Security Systems Ltd. (a)9,487 74
Network Appliance, Inc. (a)21,050 432
SanDisk Corp. (a)2,750 168
Western Digital Corp. (a)8,000 94
- -------------------------------------------------------------------------------------------
1,719
===========================================================================================
DIVERSIFIED TELECOMMUNICATION SERVICES (0.9%)
Amdocs Ltd. (a)8,500 191
Optical Communication Products, Inc. (a)18,700 69
- -------------------------------------------------------------------------------------------
260
===========================================================================================
ELECTRONIC EQUIPMENT & INSTRUMENTS (3.3%)
Amphenol Corp., Class A (a)2,300 147
Flextronics International Ltd. (a)21,800 324
Jabil Circuit, Inc. (a)7,025 199
Power Integrations, Inc. (a)2,400 80
Solectron Corp. (a)23,550 139
Veeco Instruments, Inc. (a)2,700 76
- -------------------------------------------------------------------------------------------
965
===========================================================================================
INTERNET & CATALOG RETAIL (1.0%)
InterActiveCorp. (a)8,900 $ 302
- -------------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES (1.7%)
Akamai Technologies, Inc. (a)5,700 61
VeriSign, Inc. (a)15,700 256
Verso Technologies, Inc. (a)21,900 70
Yahoo!, Inc. (a)2,638 119
- -------------------------------------------------------------------------------------------
506
===========================================================================================
OFFICE ELECTRONICS (0.5%)
Zebra Technologies Corp. (a)2,200 146
- -------------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (32.8%)
Actel Corp. (a)2,700 65
Agere Systems, Inc., Class A (a)71,150 217
Amkor Technologies, Inc. (a)9,900 180
Applied Materials, Inc. (a)35,825 804
Applied Micro Circuits Corp. (a)26,600 159
ASML Holding N.V. (NY Shares) (a)18,175 364
Broadcom Corp., Class A (a)9,900 338
Brooks Automation, Inc. (a)10,500 254
Credence Systems Corp. (a)24,200 319
Integrated Circuit Systems, Inc. (a)5,700 162
Intel Corp. 54,325 1,749
Intersil Corp., Class A 8,325 207
KLA-Tencor Corp. (a)5,775 339
Kopin Corp. (a)13,300 89
Lam Research Corp. (a)7,200 233
Linear Technology Corp. 10,588 445
LTX Corp. (a)4,400 66
Marvell Technology Group Ltd. (a)19,850 753
Maxim Integrated Products, Inc. 11,438 570
Microchip Technology, Inc. 4,100 137
MKS Instruments, Inc. (a)2,800 81
Novellus Systems, Inc. (a)6,800 286
PMC-Sierra, Inc. (a)14,000 282
RF Micro Devices, Inc. (a)25,900 260
STMicroelectronics N.V. (NY Shares) 2,500 68
Taiwan Semiconductor Manufacturing Co.,
Ltd. ADR (a)7,300 75
Texas Instruments, Inc. 19,400 570
United Microelectronics Corp., ADR (a)26,000 129
Vitesse Semiconductor Corp. (a)18,800 110
Xilinx, Inc. (a)8,050 312
- -------------------------------------------------------------------------------------------
9,623
===========================================================================================
SOFTWARE (31.5%)
Adobe Systems, Inc. 6,350 250
BEA Systems, Inc. (a)9,500 117
Check Point Software Technologies Ltd. (a)11,475 193
Citrix Systems, Inc. (a)3,350 71
Computer Associates International, Inc. 8,163 223
Hyperion Solutions Corp. (a)5,475 165
Informatica Corp. (a)11,658 120
Lexar Media, Inc. (a)7,700 134
Macromedia, Inc. (a)6,400 114
Mercury Interactive Corp. (a)8,150 396
Micromuse, Inc. (a)27,800 192
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
77
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
TECHNOLOGY PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
SOFTWARE (CONT'D)
Microsoft Corp. 77,700 $ 2,140
NetScreen Technologies, Inc. (a)6,000 148
Network Associates, Inc. (a)18,225 274
Novell, Inc. (a)60,600 638
Oracle Corp. (a)73,113 965
Peoplesoft, Inc. (a)23,500 536
Quest Software, Inc. (a)17,575 250
Red Hat, Inc. (a)8,400 158
SAP AG ADR 8,600 357
Siebel Systems, Inc. (a)36,550 507
Symantec Corp. (a)15,200 527
Verint Systems, Inc. (a)4,300 97
VERITAS Software Corp. (a)18,625 692
- -------------------------------------------------------------------------------------------
9,264
===========================================================================================
WIRELESS TELECOMMUNICATION SERVICES (1.2%)
Nextel Communications, Inc., Class A (a)12,738 357
- -------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $27,056) 29,474
===========================================================================================
PREFERRED STOCK (0.5%)
INTERNET SOFTWARE & SERVICES (0.5%)
Warp Solutions, Inc., Series A (COST $800) (a)(i)1,473,124 155
- -------------------------------------------------------------------------------------------
<Caption>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (0.0%)
REPURCHASE AGREEMENT (0.0%)
J.P. Morgan Securities, Inc., 0.75%, dated
12/31/03, due 1/2/04, repurchase
price $11 (COST $11) $ (f)11 11
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.9%) (COST $27,867) 29,640
===========================================================================================
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
OTHER ASSETS (1.3%)
Cash 1
Receivable for Investments Sold 293
Receivable for Portfolio Shares Sold 55
Litigation Recovery Receivable 18
Dividends Receivable 1
Other 1 369
- -------------------------------------------------------------------------------------------
LIABILITIES (-2.2%)
Payable for Portfolio Shares Redeemed (407)
Payable for Investments Purchased (141)
Investment Advisory Fees Payable (64)
Directors' Fees and Expenses Payable (7)
Administrative Fees Payable (6)
Custodian Fees Payable (3)
Distribution Fees, Class B (2)
Other Liabilities (8) (638)
- -------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 29,371
===========================================================================================
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid-in Capital $ 112,091
Undistributed Net Investment Income
(Accumulated Net Investment Loss) (7)
Accumulated Net Realized Gain (Loss) (84,486)
Unrealized Appreciation (Depreciation) on Investments 1,773
- -------------------------------------------------------------------------------------------
NET ASSETS $ 29,371
===========================================================================================
CLASS A:
NET ASSETS $ 24,934
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 2,536,400 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 9.83
===========================================================================================
CLASS B:
NET ASSETS $ 4,437
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 458,065 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 9.69
===========================================================================================
</Table>
(a) Non-income producing security.
(f) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated parties.
(i) Restricted security valued at fair value and not registered under the
Securities Act of 1933. Acquired December 1999 at a cost of $800,000. At
December 31, 2003, this security had a market value of $155,000,
representing 0.5% of net assets.
ADR American Depositary Receipts
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
78
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
U.S. REAL ESTATE PORTFOLIO
[CHART]
COMPARISON OF THE CHANGE IN VALUE OF A $500,000* INVESTMENT
SINCE INCEPTION
FISCAL YEAR ENDED DECEMBER 31
<Table>
<Caption>
NAREIT EQUITY INDEX(1) U.S. REAL ESTATE PORTFOLIO - CLASS A
"*" $ 500,000 $ 500,000
"1995" $ 575,000 $ 605,350
"1996" $ 777,803 $ 844,826
"1997" $ 935,385 $ 1,078,167
"1998" $ 771,693 $ 945,660
"1999" $ 736,040 $ 931,664
"2000" $ 930,134 $ 1,207,902
"2001" $ 1,059,702 $ 1,319,875
"2002" $ 1,100,183 $ 1,322,251
"2003" $ 1,508,681 $ 1,819,549
</Table>
* Commenced operations on February 24, 1995
** Minimum Investment
In accordance with SEC regulations, Portfolio performance shown assumes that all
recurring fees (including management fees) were deducted and all dividends and
distributions were reinvested. Total returns do not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the redemption
of Portfolio shares. The performance of Class B shares will vary based upon the
different inception dates and fees assessed to that class.
PERFORMANCE COMPARED TO THE NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT
TRUSTS (NAREIT) EQUITY INDEX(1)
<Table>
<Caption>
TOTAL RETURNS(2)
------------------------------------
AVERAGE ANNUAL
-----------------------
ONE FIVE SINCE
YEAR YEARS INCEPTION
- --------------------------------------------------------------
Portfolio - Class A (3) 37.61% 13.98% 15.71%
Index - Class A 37.13 14.35 13.29
Portfolio - Class B (4) 37.23 13.65 14.32
Index - Class B 37.13 14.35 12.83
</Table>
(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. Fee waivers and/or reimbursements are voluntary and
the Adviser reserves the right to commence or terminate any waiver and/or
reimbursement at any time.
(3) Commenced operations on February 24, 1995
(4) Commenced operations on January 2, 1996
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 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"). The Portfolio's concentration in the real estate sector makes
it subject to greater risk and volatility than other portfolios that are more
diversified, and the value of its shares may be substantially affected by
economic events in the real estate industry.
PERFORMANCE
For the year ended December 31, 2003, the Portfolio had a total return of 37.61%
for the Class A shares and 37.23% for the Class B shares compared to 37.13% for
the National Association of Real Estate Investment Trusts (NAREIT) Equity Index
(the "Index").
FACTORS AFFECTING PERFORMANCE
- We believe that REITs were able to achieve strong performance primarily
due to continued strong funds flow to the sector from a number of
constituents. Retail investors have been attracted to REITs primarily due
to the absolute level of the dividend of these securities. In addition,
the continuous inflows are likely part of the self-fulfilling reality that
the group is performing strongly.
- In 2003, dedicated REIT mutual funds received more than $4.5 billion,
their highest annual level of inflows, and closed end funds that invest in
common and preferred REIT shares raised an additional $4 billion. REIT
shares also benefited from favorable funds flow from pension plans and
endowments, which continue to implement a favorable shift to real estate
and REITs in asset allocation models due to the historical diversification
attributes and attractive returns.
- Aside from the dramatic favorable flows to the sector, the improvement in
underlying real estate values partially supported the year's improvement
in share prices. Finally, the sector also benefited from continued
optimism with regard to an economic recovery, which helped all stocks.
- For the full year, among the major asset classes, retail was the big
winner, the office sector modestly underperformed, and apartments were the
weakest sector. Within retail, the mall sub-sector had the best
performance and although the strip shopping centers trailed the malls,
they posted strong outperformance as well. The office sector only modestly
underperformed for the full year. The apartments were the worst
79
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (CONT'D)
U.S. REAL ESTATE PORTFOLIO
performing sector. Among the smaller sectors, the hotels trailed for the
year due to a very weak first quarter. Storage was about even with the
Index, and healthcare REITs had the best performance, just beating out
the malls.
- The Portfolio's outperformance this year was a result of stock selection.
While the bottom-up effects were positive across most sectors, the most
significant contributions were generated in the office and hotel sectors.
The prospects for the overall office sector were weak, yet we continued to
find value among selected owners of central business district (CBD) office
properties. We believe there was a significant disparity in pricing
between CBD assets relative to suburban assets in the private markets,
which was not reflected in the public market. In the lodging sector, we
were rewarded for owning those companies that are owners of major urban
hotel assets, that have superior balance sheets, and that are affiliated
with a major brand. Despite this sector's underperformance, our stock
selection provided significant outperformance for the sector as a whole.
Other favorable areas were the manufactured home sector and the mall
sub-sector of retail. In manufactured homes, the Portfolio held a large
position in one company which was taken private at a healthy premium. The
malls provided outperformance for the Portfolio both due to the overweight
stance relative to the Index, and due to the bottom up stock selection,
where we favor owners of the more dominant malls in the major metropolitan
areas.
MANAGEMENT STRATEGIES
- We have maintained our core investment philosophy as a real estate value
investor. This results in the ownership of stocks that provide what we
believe is the best valuation relative to their underlying real estate
values.
- The top-down themes included an overweighting of the hotel, mall, and
apartment sectors and an underweighting of the strip shopping center and
office sectors.
- The overweighting in the hotel sector was accomplished through the
ownership of selected companies that are owners of major urban hotel
assets. Although weak demand fundamentals, in particular a depressed level
of corporate travel, have put pressure on cash flows, these companies were
trading at favorable discounts to asset value. In the second half of the
year, the sector posted favorable occupancy comparisons versus the
previous year due to improved leisure travel.
- We remained cautious on the office sector given the sector's reliance on a
job recovery, the level of excess office space available and the costs
required for attracting tenants. We continued to have a below consensus
outlook for the prospects of a recovery in rental rates.
- In the apartment sector, the most favorable factor was that valuation
remained attractive as the stocks were trading below private market
values. In addition, given that the sector has been weak for almost two
years and the tenants have short lease terms, the cash flows have absorbed
the majority of their downside.
January 2004
80
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
U.S. REAL ESTATE PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
COMMON STOCKS (95.5%)
DIVERSIFIED (2.8%)
Correctional Properties Trust REIT 112,800 $ 3,249
Frontline Capital Group (a)(d)1,179,600 @--
Vornado Realty Trust REIT 426,700 23,362
- -------------------------------------------------------------------------------------------
26,611
===========================================================================================
HEALTH CARE (0.7%)
Nationwide Health Properties, Inc. REIT 120,749 2,361
Ventas, Inc. REIT 208,100 4,578
- -------------------------------------------------------------------------------------------
6,939
===========================================================================================
INDUSTRIAL (7.0%)
AMB Property Corp. REIT 933,500 30,694
BRCP REIT LLC I (d)34,429 34
ProLogis REIT 1,123,199 36,043
PS Business Parks, Inc. REIT 32,300 1,333
- -------------------------------------------------------------------------------------------
68,104
===========================================================================================
LODGING/RESORTS (11.1%)
FelCor Lodging Trust, Inc. REIT (a)292,200 3,237
Hilton Hotels Corp. 1,285,500 22,021
Host Marriot Corp. REIT (a)2,893,800 35,652
Interstate Hotels & Resorts, Inc. (a)28,830 154
La Quinta Corp. (a)102,150 655
Starwood Hotels & Resorts Worldwide, Inc. 1,248,993 44,926
Wyndham International, Inc., Class A (a)1,468,154 984
- -------------------------------------------------------------------------------------------
107,629
===========================================================================================
OFFICE (21.0%)
Arden Realty, Inc. REIT 1,134,500 34,421
Beacon Capital Partners, Inc. (i)335,100 1,513
Boston Properties, Inc. REIT 813,050 39,181
Brookfield Properties Co. 2,146,901 61,616
Equity Office Properties Trust REIT 1,410,707 40,417
Mack-Cali Realty Corp. REIT 152,000 6,326
Reckson Associates Realty Corp. REIT 409,800 9,958
SL Green Realty Corp. REIT 228,450 9,378
- -------------------------------------------------------------------------------------------
202,810
===========================================================================================
OTHER (1.2%)
Atlantic Gulf Communities Corp., Class B (a)(i)140,284 @--
Brookfield Homes Corp. 15,300 394
Cabot Industrial Value LP (d)475 237
Pacific Gulf Properties, Inc. (d)413,000 @--
St. Joe Co. (The) 136,900 5,105
Wellsford Real Properties, Inc. (a)305,949 5,691
- -------------------------------------------------------------------------------------------
11,427
===========================================================================================
RESIDENTIAL APARTMENTS (19.4%)
Amli Residential Properties Trust REIT 266,500 7,142
Apartment Investment & Management
Co., Class A REIT 836,500 28,859
Archstone-Smith Trust REIT 1,748,596 48,926
AvalonBay Communities, Inc. REIT 1,057,562 50,552
Equity Residential Properties Trust REIT 859,750 25,371
Essex Property Trust, Inc. REIT 317,400 20,384
Post Properties, Inc. REIT 237,150 $ 6,621
- -------------------------------------------------------------------------------------------
187,855
===========================================================================================
RESIDENTIAL MANUFACTURED HOMES (1.1%)
Manufactured Home Communities, Inc.
REIT 273,100 10,282
- -------------------------------------------------------------------------------------------
RETAIL REGIONAL MALLS (19.2%)
Forest City Enterprises, Inc., Class A 84,700 4,024
General Growth Properties, Inc. REIT 1,364,700 37,871
Macerich Co. (The) REIT 150,300 6,688
Rouse Co. (The) REIT 1,007,000 47,329
Simon Property Group, Inc. REIT 1,508,300 69,895
Taubman Centers, Inc. REIT 992,778 20,451
- -------------------------------------------------------------------------------------------
186,258
===========================================================================================
RETAIL STRIP CENTERS (5.8%)
Burnham Pacific Properties, Inc. (d)113,290 53
Chelsea Property Group, Inc. REIT 6,400 351
Federal Realty Investment Trust REIT 866,500 33,265
Heritage Property Investment Trust REIT 33,700 959
Pan Pacific Retail Properties, Inc. REIT 5,100 243
Regency Centers Corp. REIT 530,400 21,136
- -------------------------------------------------------------------------------------------
56,007
===========================================================================================
SELF STORAGE (6.2%)
Public Storage, Inc. REIT 855,190 37,107
Shurgard Storage Centers, Inc., Class A REIT 605,300 22,789
- -------------------------------------------------------------------------------------------
59,896
===========================================================================================
TOTAL COMMON STOCKS (COST $698,404) 923,818
===========================================================================================
PREFERRED STOCKS (0.9%)
LODGING/RESORTS (0.9%)
Wyndham International, Inc., Series I (d)91,243 5,498
Wyndham International, Inc., Series II (d)48,837 3,090
- -------------------------------------------------------------------------------------------
8,588
===========================================================================================
OTHER (0.0%)
Atlantic Gulf Communities Corp., Series B (a)(d)107,021 @--
- -------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $6,159) 8,588
===========================================================================================
CONVERTIBLE PREFERRED STOCKS (0.0%)
OTHER (0.0%)
Atlantic Gulf Communities Corp., Series B
(COST $758) (a)(d)75,765 @--
- -------------------------------------------------------------------------------------------
WARRANTS (0.0%)
OTHER (0.0%)
Atlantic Gulf Communities Corp., Class A,
expiring 6/24/04 (a)(d)62,000 @--
Atlantic Gulf Communities Corp., Class B,
expiring 6/23/04 (a)(d)50,510 @--
Atlantic Gulf Communities Corp., Class B,
expiring 6/24/04 (a)(d)62,000 @--
Atlantic Gulf Communities Corp., Class C,
expiring 6/23/04 (a)(d)50,510 @--
Atlantic Gulf Communities Corp., Class C,
expiring 6/24/04 (a)(d)62,000 @--
- -------------------------------------------------------------------------------------------
TOTAL WARRANTS (COST $ @--) @--
===========================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
81
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
U.S. REAL ESTATE PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (3.2%)
REPURCHASE AGREEMENT (3.2%)
J.P. Morgan Securities, Inc., 0.75%, dated
12/31/03, due 1/2/04, repurchase
price $30,972 (COST $30,971) $ (f)30,971 $ 30,971
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.6%) (COST $736,292) 963,377
===========================================================================================
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
OTHER ASSETS (0.8%)
Cash 369
Dividends Receivable 5,623
Receivable for Portfolio Shares Sold 2,314
Interest Receivable 1
Other 33 8,340
- -------------------------------------------------------------------------------------------
LIABILITIES (-0.4%)
Payable for Portfolio Shares Redeemed (1,875)
Investment Advisory Fees Payable (1,870)
Administrative Fees Payable (134)
Directors' Fees and Expenses Payable (52)
Distribution Fees, Class B (40)
Custodian Fees Payable (9)
Other Liabilities (40) (4,020)
- -------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 967,697
===========================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 737,677
Undistributed (Distributions in Excess of) Net
Investment Income (52)
Accumulated Net Realized Gain (Loss) 2,987
Unrealized Appreciation (Depreciation) on
Investments 227,085
- -------------------------------------------------------------------------------------------
NET ASSETS $ 967,697
===========================================================================================
CLASS A:
NET ASSETS $ 897,551
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 50,091,213 outstanding $0.001 par
value shares (authorized 500,000,000 shares) $ 17.92
===========================================================================================
CLASS B:
NET ASSETS $ 70,146
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 3,939,737 outstanding $0.001 par
value shares (authorized 500,000,000 shares) $ 17.80
===========================================================================================
</Table>
(a) Non-income producing security.
(d) Security was valued at fair value -- At December 31, 2003, the Portfolio
held $8,912,000 of fair valued securities, representing 0.9% of net assets.
(f) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated parties.
(i) Restricted security valued at fair value and not registered under the
Securities Act of 1933. Atlantic Gulf Communities Corp. and Beacon Capital
Partners, Inc. were acquired June 1997and March 1998, respectively, at a
cost of $790,000 and $1,743,000, respectively. At December 31, 2003, these
securities had an aggregate market value of $1,513,000, representing 0.2%
of net assets.
@ Face Amount/Value is less than $500.
REIT Real Estate Investment Trust
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
82
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
VALUE EQUITY PORTFOLIO
[CHART]
COMPARISON OF THE CHANGE IN VALUE OF A $500,000* INVESTMENT
OVER 10 YEARS
FISCAL YEAR ENDED DECEMBER 31
<Table>
<Caption>
RUSSELL 1000 VALUE INDEX(1) VALUE EQUITY PORTFOLIO-CLASS A
"1993" $ 500,000 $ 500,000
"1994" $ 490,080 $ 493,575
"1995" $ 678,075 $ 659,880
"1996" $ 824,810 $ 790,101
"1997" $ 1,114,978 $ 1,020,822
"1998" $ 1,289,249 $ 1,110,553
"1999" $ 1,384,009 $ 1,239,710
"2000" $ 1,481,167 $ 1,463,849
"2001" $ 1,398,309 $ 1,441,160
"2002" $ 1,181,291 $ 1,092,111
"2003" $ 1,536,033 $ 1,431,211
</Table>
* Minimum Investment
In accordance with SEC regulations, Portfolio performance shown assumes that all
recurring fees (including management fees) were deducted and all dividends and
distributions were reinvested. Total returns do not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the redemption
of Portfolio shares. The performance of Class B shares will vary based upon the
different inception dates and fees assessed to that class.
PERFORMANCE COMPARED TO THE RUSSELL 1000 VALUE INDEX AND S&P 500 INDEX(1)
<Table>
<Caption>
TOTAL RETURNS(2)
-----------------------------------------------------
AVERAGE ANNUAL
---------------------------------------
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION
- ------------------------------------------------------------------------------------------
Portfolio - Class A (3) 31.05% 5.21% 11.09% 10.88%
Russell 1000 Value Index - Class A 30.03 3.56 11.88 12.31
S&P 500 Index - Class A 28.68 (0.57) 11.07 11.57
Portfolio - Class B (4) 30.86 4.99 N/A 9.80
Russell 1000 Value Index - Class B 30.03 3.56 N/A 10.68
S&P 500 Index - Class B 28.68 (0.57) N/A 9.28
</Table>
(1) The Russell 1000 Value Index consists of the largest 1000 companies in the
Russell 3000 Index. This Index represents the universe of large
capitalization stocks from which most active money managers typically
select. 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 represent
approximately 100 industries chosen mainly for market size, liquidity and
industry group representation.
(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. Fee waivers and/or reimbursements are voluntary and
the Adviser reserves the right to commence or terminate any waiver and/or
reimbursement at any time.
(3) Commenced operations on January 31, 1990
(4) Commenced operations on January 2, 1996
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 Value Equity Portfolio seeks high total return by investing primarily in
equity securities that the investment adviser sees as attractively valued large
capitalization U.S. stocks.
PERFORMANCE
For the year ended December 31, 2003, the Portfolio had a total return of 31.05%
for the Class A shares and 30.86% for the Class B shares compared to 30.03% for
the Russell 1000 Value Index (the "Index") and 28.68% for the S&P 500 Index.
FACTORS AFFECTING PERFORMANCE
- Stock prices advanced sharply during the year as economic strength
gathered momentum fueled by fiscal and monetary stimulus.
- Total returns in the market were strongest in sectors that were most
sensitive to positive economic signals, including information technology
and consumer discretionary.
- Sector weightings and stock selection within sectors contributed to the
Portfolio's relative outperformance versus the Index for the year.
- Compared to the Index, a sector underweight in telecommunication services
(the poorest performing market sector) contributed the most to relative
performance, followed by an underweight in energy and an overweight in
information technology (the best performing market sector for the period).
- Stock selection was positive overall, led by strong performance in
holdings within materials, consumer discretionary, and industrials. Weaker
selection within information technology and healthcare detracted from
relative performance.
MANAGEMENT STRATEGIES
- The Large Value management team began overseeing the Portfolio on
September 30, 2003.
- The team has reduced somewhat the degree of economic sensitivity in the
Portfolio, consistent with appropriate valuations, but without losing
contact with the continued market expansion. As of the end of the period,
the Portfolio emphasized materials, healthcare, and consumer staples, and
a smaller overweight (compared to the Index) in industrials. The team has
also decreased the weightings in financials, information technology, and
telecommunications.
January 2004
83
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
VALUE EQUITY PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
COMMON STOCKS (98.7%)
ADVERTISING AGENCIES (0.7%)
Interpublic Group of Cos., Inc. (a)86,210 $ 1,345
- -------------------------------------------------------------------------------------------
AEROSPACE (0.4%)
Raytheon Co. 23,180 696
- -------------------------------------------------------------------------------------------
AUTOMOBILES (2.4%)
Honda Motor Co., Ltd. ADR 105,750 2,379
Magna International, Inc., Class A 25,190 2,017
- -------------------------------------------------------------------------------------------
4,396
===========================================================================================
BEVERAGES: SOFT DRINKS (0.9%)
PepsiCo., Inc. 32,920 1,535
- -------------------------------------------------------------------------------------------
CABLE TELEVISION SERVICES (3.0%)
Time Warner, Inc. (a)299,580 5,390
- -------------------------------------------------------------------------------------------
CHEMICALS (3.6%)
Bayer AG ADR 116,400 3,423
Dow Chemical Co. (The) 46,650 1,939
DuPont (E.I.) De Nemours & Co. 26,860 1,233
- -------------------------------------------------------------------------------------------
6,595
===========================================================================================
COMMUNICATIONS & MEDIA (2.0%)
Walt Disney Co. (The) 157,730 3,680
- -------------------------------------------------------------------------------------------
COMMUNICATIONS TECHNOLOGY (1.1%)
Nokia Oyj ADR 117,870 2,004
- -------------------------------------------------------------------------------------------
COMPUTER SERVICES SOFTWARE & SYSTEMS (1.7%)
Microsoft Corp. 113,510 3,126
- -------------------------------------------------------------------------------------------
COMPUTER TECHNOLOGY (2.5%)
Hewlett-Packard Co. 86,940 1,997
International Business Machines Corp. 28,090 2,603
- -------------------------------------------------------------------------------------------
4,600
===========================================================================================
COPPER (1.7%)
Phelps Dodge Corp. (a)39,890 3,035
- -------------------------------------------------------------------------------------------
COSMETICS (1.9%)
Kimberly-Clark Corp. 58,750 3,472
- -------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (5.6%)
Bank of America Corp. 24,690 1,986
Bank One Corp. 50,390 2,297
PNC Financial Services Group, Inc. 73,100 4,001
Wachovia Corp. 38,600 1,798
- -------------------------------------------------------------------------------------------
10,082
===========================================================================================
DRUGS & PHARMACEUTICALS (8.1%)
AstraZeneca plc ADR 34,830 1,685
Bristol-Myers Squibb Co. 254,340 7,274
Roche Holding AG ADR 31,030 3,130
Schering-Plough Corp. 151,260 2,631
- -------------------------------------------------------------------------------------------
14,720
===========================================================================================
ELECTRONICS: INSTRUMENTS GAUGES & METERS (1.1%)
Parker Hannifin Corp. 33,500 1,993
- -------------------------------------------------------------------------------------------
ENERGY EQUIPMENT (2.3%)
Schlumberger Ltd. 77,300 4,230
- -------------------------------------------------------------------------------------------
ENERGY MISCELLANEOUS (1.9%)
EOG Resources, Inc. 36,740 1,696
Valero Energy Corp. 38,450 1,782
- -------------------------------------------------------------------------------------------
3,478
===========================================================================================
FINANCIAL DATA PROCESSING SERVICES & SYSTEMS (0.9%)
Automatic Data Processing, Inc. 42,460 $ 1,682
- -------------------------------------------------------------------------------------------
FINANCIAL MISCELLANEOUS (5.4%)
Equifax, Inc. 110,350 2,704
Fannie Mae 39,950 2,999
Freddie Mac 69,500 4,053
- -------------------------------------------------------------------------------------------
9,756
===========================================================================================
FOODS (2.4%)
Cadbury Schweppes plc ADR 53,350 1,595
Kraft Foods, Inc., Class A 42,570 1,371
Nestle S.A. ADR (Registered) 22,320 1,397
- -------------------------------------------------------------------------------------------
4,363
===========================================================================================
HEALTH CARE FACILITIES (1.4%)
Tenet Healthcare Corp. (a)156,130 2,506
- -------------------------------------------------------------------------------------------
HEALTH CARE PRODUCTS (1.5%)
Bausch & Lomb, Inc. 51,550 2,675
- -------------------------------------------------------------------------------------------
HOTEL/MOTEL (3.0%)
Hilton Hotels Corp. 169,240 2,899
Starwood Hotels & Resorts Worldwide, Inc. 69,340 2,494
- -------------------------------------------------------------------------------------------
5,393
===========================================================================================
INSURANCE: LIFE (1.0%)
Cigna Corp. 30,960 1,780
- -------------------------------------------------------------------------------------------
INSURANCE: MULTI-LINE (4.8%)
Hartford Financial Services Group, Inc. 74,700 4,410
Metlife, Inc. 50,060 1,686
Prudential Financial, Inc. 60,750 2,537
- -------------------------------------------------------------------------------------------
8,633
===========================================================================================
INSURANCE: PROPERTY & CASUALTY (4.3%)
Chubb Corp. 70,770 4,819
Travelers Property Casualty Corp., Class A 169,680 2,847
Travelers Property Casualty Corp., Class B 10,800 183
- -------------------------------------------------------------------------------------------
7,849
===========================================================================================
INVESTMENT MANAGEMENT COMPANIES (9.1%)
Citigroup, Inc. 130,500 6,334
Edwards (A.G.), Inc. 29,980 1,086
J.P. Morgan Chase & Co. 81,680 3,000
Lehman Brothers Holdings, Inc. 30,300 2,340
Merrill Lynch & Co., Inc. 62,400 3,660
- -------------------------------------------------------------------------------------------
16,420
===========================================================================================
MANUFACTURING (2.2%)
Ingersoll Rand Co., Class A 32,390 2,199
Textron, Inc. 29,820 1,701
- -------------------------------------------------------------------------------------------
3,900
===========================================================================================
MINING (1.2%)
Newmont Mining Corp. 45,900 2,231
- -------------------------------------------------------------------------------------------
OIL: INTEGRATED DOMESTIC (6.2%)
BP plc ADR 99,740 4,922
ConocoPhillips 39,400 2,583
Exxon Mobil Corp. 89,750 3,680
- -------------------------------------------------------------------------------------------
11,185
===========================================================================================
PAPER (1.5%)
Temple-Inland, Inc. 43,740 2,741
- -------------------------------------------------------------------------------------------
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
84
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
VALUE EQUITY PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------------------
RADIO & TV BROADCASTERS (0.7%)
Clear Channel Communications, Inc. 27,400 $ 1,283
- -------------------------------------------------------------------------------------------
RAILROADS (3.0%)
Norfolk Southern Corp. 142,760 3,377
Union Pacific Corp. 29,580 2,055
- -------------------------------------------------------------------------------------------
5,432
===========================================================================================
RETAIL (2.0%)
McDonald's Corp. 51,070 1,268
Wal-Mart Stores, Inc. 42,720 2,266
- -------------------------------------------------------------------------------------------
3,534
===========================================================================================
TOBACCO (1.6%)
Altria Group, Inc. 54,400 2,960
- -------------------------------------------------------------------------------------------
UTILITIES: ELECTRICAL (3.3%)
Edison International 66,660 1,462
Entergy Corp. 26,210 1,498
Exelon Corp. 26,120 1,733
FirstEnergy Corp. 37,980 1,337
- -------------------------------------------------------------------------------------------
6,030
===========================================================================================
UTILITIES: TELECOMMUNICATIONS (2.3%)
Sprint Corp. 79,980 1,313
Verizon Communications, Inc. 79,200 2,779
- -------------------------------------------------------------------------------------------
4,092
===========================================================================================
TOTAL COMMON STOCKS (COST $161,357) 178,822
===========================================================================================
<Caption>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (0.8%)
REPURCHASE AGREEMENT (0.8%)
J.P. Morgan Securities, Inc., 0.75%, dated
12/31/03, due 1/2/04, repurchase price
$1,419 (COST $1,419) $ (f)1,419 1,419
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.5%) (COST $162,776) 180,241
===========================================================================================
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
OTHER ASSETS (0.8%)
Receivable for Portfolio Shares Sold 695
Dividends Receivable 387
Receivable for Investments Sold 346
Other 5 1,433
- -------------------------------------------------------------------------------------------
LIABILITIES (-0.3%)
Investment Advisory Fees Payable (191)
Payable for Investments Purchased (147)
Distribution Fees, Class B (51)
Payable for Portfolio Shares Redeemed (29)
Administrative Fees Payable (26)
Directors' Fees and Expenses Payable (24)
Bank Overdraft Payable (12)
Custodian Fees Payable (5)
Other Liabilities (12) (497)
- -------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 181,177
===========================================================================================
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid-in Capital $ 187,344
Undistributed (Distributions in Excess of) Net
Investment Income (20)
Accumulated Net Realized Gain (Loss) (23,612)
Unrealized Appreciation (Depreciation) on Investments 17,465
- -------------------------------------------------------------------------------------------
NET ASSETS $ 181,177
===========================================================================================
CLASS A:
NET ASSETS $ 108,997
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 11,714,605 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 9.30
===========================================================================================
CLASS B:
NET ASSETS $ 72,180
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 7,756,628 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 9.31
===========================================================================================
</Table>
(a) Non-income producing security.
(f) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated parties.
ADR American Depositary Receipts
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
85
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
EMERGING MARKETS DEBT PORTFOLIO
[CHART]
COMPARISON OF THE CHANGE IN VALUE OF A $500,000** INVESTMENT
SINCE INCEPTION
FISCAL YEAR ENDED DECEMBER 31
<Table>
<Caption>
J.P. MORGAN EMERGING EMERGING MARKETS DEBT
MARKETS BOND GLOBAL INDEX(1) PORTFOLIO-CLASS A
"*" $ 500,000 $ 500,000
"1994" $ 404,780 $ 429,500
"1995" $ 511,541 $ 550,748
"1996" $ 691,741 $ 828,986
"1997" $ 774,404 $ 978,949
"1998" $ 685,007 $ 627,017
"1999" $ 850,641 $ 810,231
"2000" $ 973,218 $ 914,022
"2001" $ 986,454 $ 1,010,634
"2002" $ 1,115,778 $ 1,124,735
"2003" $ 1,402,087 $ 1,444,834
</Table>
* Commenced operations on February 1, 1994
** Minimum Investment
In accordance with SEC regulations, Portfolio performance shown assumes that all
recurring fees (including management fees) were deducted and all dividends and
distributions were reinvested. Total returns do not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the redemption
of Portfolio shares. The performance of Class B shares will vary based upon the
different inception dates and fees assessed to that class.
PERFORMANCE COMPARED TO THE J.P. MORGAN EMERGING MARKETS BOND GLOBAL INDEX(1)
<Table>
<Caption>
TOTAL RETURNS(2)
------------------------------------
AVERAGE ANNUAL
-----------------------
ONE FIVE SINCE
YEAR YEARS INCEPTION
- --------------------------------------------------------------
Portfolio - Class A (3) 28.46% 18.17% 11.36%
Index - Class A 25.66 15.40 10.96
Portfolio - Class B (4) 28.34 17.72 12.48
Index - Class B 25.66 15.40 13.27
</Table>
(1) The J.P. Morgan Emerging Markets Bond Global Index tracks total returns for
U.S. dollar - denominated debt instruments issued by emerging market
sovereign and quasi - sovereign entities, including Brady Bonds, loans,
Eurobonds and local market instruments for over 30 emerging market
countries.
(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. Fee waivers and/or reimbursements are voluntary and
the Adviser reserves the right to commence or terminate any waiver and/or
reimbursement at any time.
(3) Commenced operations on February 1, 1994
(4) Commenced operations on January 2, 1996
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 Emerging Markets Debt Portfolio seeks high total return by investing
primarily in fixed income securities of government and government-related
issuers and, to a lesser extent, of corporate issuers in emerging market
countries. Foreign investing involves certain risks, including currency
fluctuations and controls, restrictions on foreign investments, less
governmental supervision and regulation, less liquidity and the potential for
market volatility and political instability. In addition, investing in emerging
markets may involve a relatively higher degree of volatility.
PERFORMANCE
For the year ended December 31, 2003, the Portfolio had a total return of 28.46%
for the Class A shares and 28.34% for the Class B shares compared to 25.66% for
the J.P. Morgan Emerging Markets Bond Global Index (the "Index").
FACTORS AFFECTING PERFORMANCE
- By almost any measure, 2003 was a remarkable year for emerging-markets
debt (EMD) investors. With the exception of a brief summer respite, the
market rallied from start to finish with yield spreads on the Index
plummeting by more than 300 basis points versus U.S. treasuries. Thanks to
this significant yield-spread compression and attractive coupon income,
the asset class generated total returns in excess of 25%, one of its best
years on record.
- Supportive external conditions, including strong global economic growth,
rising commodity prices, and ample global liquidity, in conjunction with
significant improvements in emerging markets fundamentals led to a
dramatic reduction of sovereign risk and improved credit quality over the
course of the year. Most remarkably, Moody's upgrade of Russia's
credit-quality rating to Baa3 shifted over half of the Index's market
value to investment-grade status; clearly, this represented a dramatic
change from the 1998 environment when Russia's default led many to
speculate about the "death" of the asset class.
- Investors' EMD perceptions shifted remarkably during 2003, leading to
significant new inflows into the asset class. This was perhaps the first
year in which the notion that EMD could provide a diversified source of
income to most fixed-income strategies gained widespread support. Although
some inflows reflected tactical allocations seeking higher returns in a
low-yield and low-return environment, we find it reassuring that the
majority of new inflows stemmed from strategic asset allocation decisions
with long-term horizons. Improving
86
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (CONT'D)
EMERGING MARKETS DEBT PORTFOLIO
fundamentals and a ten-year history of high returns and declining
volatility attracted strategic investors in search of additional yield
to meet liabilities or funding requirements.
MANAGEMENT STRATEGIES
- Key factors contributing to our favorable relative performance during the
period included our overweights in Brazil, Peru, and Russia, as well as an
underweight to the Asian region. In addition, effective interest-rate risk
management during the second half of the year aided performance. An
underweight allocation to Ecuador part of the year detracted from relative
returns.
- From a country-specific standpoint, both Brazil and Ecuador generated some
of the asset class' best returns last year. In both cases, the newly
elected presidents pleasantly surprised deeply skeptical investors with
their ability to implement reasonable policies. In Brazil, President Lula
adhered to cautious fiscal and monetary policies and negotiated approval
of crucial structural reforms with the Brazilian congress. In Ecuador,
President Gutierrez's adherence to International Monetary Fund
commitments, albeit with hiccups, allowed his nation to benefit from
higher oil production and prices. Better-than-expected economic
performance and favorable external conditions led the value of Brazilian
and Ecuadorian assets to increase by almost 70% and 100%, respectively,
during 2003.
January 2004
87
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
EMERGING MARKETS DEBT PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------------------
DEBT INSTRUMENTS (95.2%)
ARGENTINA (1.3%)
SOVEREIGN (1.3%)
Republic of Argentina, 2.063%, 3/31/23 $ (b)440 $ 220
Republic of Argentina, 6.00%, 3/31/23 (b)202 100
Republic of Argentina, (Linked Variable Rate)
76.953%, 4/10/05 (b)(h)1,210 405
- -------------------------------------------------------------------------------------------
725
===========================================================================================
BRAZIL (24.0%)
SOVEREIGN (24.0%)
Federative Republic of Brazil, 8.875%, 4/15/24 3,040 2,968
Federative Republic of Brazil, 11.00%, 8/17/40 3,210 3,547
Federative Republic of Brazil, 11.25%, 7/26/07 1,220 1,433
Federative Republic of Brazil, 12.25%, 3/6/30 1,000 1,250
Federative Republic of Brazil, 14.50%, 10/15/09 1,740 2,284
Federative Republic of Brazil, PIK,
8.00%, 4/15/14 1,755 1,735
- -------------------------------------------------------------------------------------------
13,217
===========================================================================================
BULGARIA (1.6%)
SOVEREIGN (1.6%)
Republic of Bulgaria, 8.25%, 1/15/15 (e)373 439
Republic of Bulgaria (Registered),
8.25%, 1/15/15 370 438
- -------------------------------------------------------------------------------------------
877
===========================================================================================
CHILE (1.8%)
CORPORATE (1.8%)
Empresa Nacional de Petroleo,
6.75%, 11/15/12 (e)900 993
- -------------------------------------------------------------------------------------------
COLOMBIA (1.5%)
SOVEREIGN (1.5%)
Republic of Colombia, 9.75%, 4/9/11 731 834
- -------------------------------------------------------------------------------------------
DOMINICAN REPUBLIC (0.7%)
SOVEREIGN (0.7%)
Dominican Republic (Registered),
9.04%, 1/23/13 490 365
- -------------------------------------------------------------------------------------------
ECUADOR (4.4%)
SOVEREIGN (4.4%)
Government of Ecuador (Registered),
7.00%, 8/15/30 (n)3,160 2,449
- -------------------------------------------------------------------------------------------
INDONESIA (2.2%)
CORPORATE (2.2%)
Pindo Deli Finance Mauritius, 10.75%, 10/1/07 (b)(e)3,200 672
Tjiwi Kimia Finance Mauritius Ltd.,
10.00%, 8/1/04 (b)460 149
Tjiwi Kimia International BV, 13.25%, 8/1/49 (b)1,190 387
- -------------------------------------------------------------------------------------------
1,208
===========================================================================================
IVORY COAST (0.2%)
SOVEREIGN (0.2%)
Ivory Coast, 2.00%, 3/29/18 (b)580 93
- -------------------------------------------------------------------------------------------
MALAYSIA (1.4%)
SOVEREIGN (1.4%)
Government of Malaysia, 7.50%, 7/15/11 650 771
- -------------------------------------------------------------------------------------------
MEXICO (18.3%)
CORPORATE (6.4%)
Pemex Project Funding Master Trust,
2.95%, 10/15/09 $ (e)(h)570 $ 583
Pemex Project Funding Master Trust,
9.125%, 10/13/10 990 1,180
Petroleos Mexicanos (Registered),
8.625%, 12/1/23 410 452
Petroleos Mexicanos, 9.50%, 9/15/27 650 777
Satelites Mexicanos S.A. de C.V.,
10.125%, 11/1/04 (b)1,207 549
- -------------------------------------------------------------------------------------------
3,541
===========================================================================================
SOVEREIGN (11.9%)
United Mexican States, 8.375%, 1/14/11 1,630 1,940
United Mexican States, 10.375%, 2/17/09 340 432
United Mexican States, 11.375%, 9/15/16 2,960 4,203
- -------------------------------------------------------------------------------------------
6,575
===========================================================================================
10,116
===========================================================================================
NIGERIA (1.2%)
SOVEREIGN (1.2%)
Central Bank of Nigeria, 6.25%, 11/15/20 (n)750 667
- -------------------------------------------------------------------------------------------
PANAMA (1.5%)
SOVEREIGN (1.5%)
Republic of Panama, 9.375%, 4/1/29 440 497
Republic of Panama, 9.625%, 2/8/11 295 342
- -------------------------------------------------------------------------------------------
839
===========================================================================================
PERU (2.9%)
SOVEREIGN (2.9%)
Republic of Peru, 8.75%, 11/21/33 560 563
Republic of Peru, 9.875%, 2/6/15 910 1,060
- -------------------------------------------------------------------------------------------
1,623
===========================================================================================
PHILIPPINES (1.7%)
SOVEREIGN (1.7%)
Republic of Philippines, 9.375%, 1/18/17 843 913
- -------------------------------------------------------------------------------------------
QATAR (0.8%)
SOVEREIGN (0.8%)
State of Qatar (Registered), 9.75%, 6/15/30 300 424
- -------------------------------------------------------------------------------------------
RUSSIA (19.6%)
SOVEREIGN (19.6%)
Russian Federation, 5.00%, 3/31/30 (e)(n)65 63
Russian Federation (Registered),
5.00%, 3/31/30 (n)6,633 6,417
Russian Federation (Registered),
8.25%, 3/31/10 880 984
Russian Federation (Registered),
11.00%, 7/24/18 1,626 2,191
Russian Federation (Registered),
12.75%, 6/24/28 720 1,147
- -------------------------------------------------------------------------------------------
10,802
===========================================================================================
SOUTH AFRICA (1.9%)
SOVEREIGN (1.9%)
Republic of South Africa, 8.50%, 6/23/17 860 1,030
- -------------------------------------------------------------------------------------------
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
88
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
EMERGING MARKETS DEBT PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------------------
SOUTH KOREA (0.6%)
SOVEREIGN (0.6%)
Republic of Korea, 4.25%, 6/1/13 $ 320 $ 310
- -------------------------------------------------------------------------------------------
TUNISIA (0.4%)
SOVEREIGN (0.4%)
Banque Centrale de Tunisie, 7.375%, 4/25/12 210 237
- -------------------------------------------------------------------------------------------
TURKEY (2.7%)
SOVEREIGN (2.7%)
Republic of Turkey, 11.50%, 1/23/12 570 728
Republic of Turkey, 11.75%, 6/15/10 270 343
Republic of Turkey, 12.375%, 6/15/09 320 411
- -------------------------------------------------------------------------------------------
1,482
===========================================================================================
UKRAINE (1.0%)
SOVEREIGN (1.0%)
Ukraine Government (Registered),
11.00%, 3/15/07 495 553
- -------------------------------------------------------------------------------------------
VENEZUELA (3.5%)
SOVEREIGN (3.5%)
Republic of Venezuela, 9.25%, 9/15/27 640 586
Republic of Venezuela, 10.75%, 9/19/13 (e)1,230 1,319
- -------------------------------------------------------------------------------------------
1,905
===========================================================================================
TOTAL DEBT INSTRUMENTS (COST $49,658) 52,433
===========================================================================================
<Caption>
NO. OF
WARRANTS
- -------------------------------------------------------------------------------------------
WARRANTS (0.0%)
COLOMBIA (0.0%)
Occidente y Caribe Cellular, expiring 3/15/04 (a)(d)(e)20,600 @--
- -------------------------------------------------------------------------------------------
NIGERIA (0.0%)
Central Bank of Nigeria, expiring 11/15/20 (a)(d)8,500 @--
- -------------------------------------------------------------------------------------------
VENEZUELA (0.0%)
Republic of Venezuela, expiring 4/15/20 (a)(d)2,700 @--
- -------------------------------------------------------------------------------------------
TOTAL WARRANTS (COST $13) @--
===========================================================================================
<Caption>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (2.5%)
REPURCHASE AGREEMENT (2.5%)
J.P. Morgan Securities, Inc., 0.75%, dated
12/31/03, due 1/2/04, repurchase price
$1,386 (COST $1,386) $ (f)1,386 1,386
- -------------------------------------------------------------------------------------------
FOREIGN CURRENCY (0.0%)
Euro (COST $13) EUR 11 14
===========================================================================================
TOTAL INVESTMENTS (97.7%) (COST $51,070) 53,833
===========================================================================================
<Caption>
AMOUNT AMOUNT
(000) (000)
- -------------------------------------------------------------------------------------------
OTHER ASSETS (3.1%)
Cash $ 1
Interest Receivable 1,151
Due from Broker 462
Receivable for Portfolio Shares Sold 90
Other 2 $ 1,706
- -------------------------------------------------------------------------------------------
LIABILITIES (-0.8%)
Payablefor Investments Purchased (318)
Investment Advisory Fees Payable (102)
Directors' Fees and Expenses Payable (17)
Administrative Fees Payable (9)
Custodian Fees Payable (5)
Other Liabilities (12) (463)
- -------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 55,076
===========================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 139,235
Undistributed (Distributions in Excess of) Net
Investment Income (174)
Accumulated Net Realized Gain (Loss) (86,570)
Unrealized Appreciation (Depreciation) on:
Investments 2,763
Futures Contracts (178)
- -------------------------------------------------------------------------------------------
NET ASSETS $ 55,076
===========================================================================================
CLASS A:
NET ASSETS $ 54,647
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 15,486,461 outstanding $0.001 par
value shares (authorized 500,000,000 shares) $ 3.53
===========================================================================================
CLASS B:
NET ASSETS $ 429
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 119,160 outstanding $0.001 par value
shares (authorized 500,000,000 shares) $ 3.60
===========================================================================================
</Table>
(a) Non-income producing security.
(b) Issuer is in default.
(d) Security was valued at fair value -- At December 31, 2003, the Portfolio
held fair valued securities, each valued at less than $500, representing
less than 0.05% of net assets.
(e) 144A security -- certain conditions for public sale may exist.
(f) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated parties.
(h) Variable/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 December 31, 2003.
(n) Step Bond -- coupon rate increases in increments to maturity. Rate
disclosed is as of December 31, 2003. Maturity date disclosed is the
ultimate maturity date.
@ Face Amount/Value is less than $500.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
89
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
EMERGING MARKETS DEBT PORTFOLIO
FUTURES CONTRACTS:
The Portfolio had the following futures contract(s) open at period end:
<Table>
<Caption>
NET
UNREALIZED
NUMBER APPRECIATION
OF VALUE EXPIRATION (DEPRECIATION)
CONTRACTS (000) DATE (000)
- -------------------------------------------------------------------------------------
SHORT:
U.S. 5 Year
Treasury Note 179 $ 19,981 Mar-04 $ (150)
U.S. 10 Year
Treasury Note 32 3,593 Mar-04 (28)
---------------
$ (178)
===============
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
90
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
MONEY MARKET PORTFOLIO
[CHART]
COMPARATIVE YIELDS
FISCAL YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
"MONEY MARKET PORTFOLIO "iMONEYNET MONEY
30 DAY YIELDS" FUND COMPARABLE YIELDS"
"Jan" 1.01% 0.83%
"Feb" 0.89% 0.79%
"Mar" 0.83% 0.75%
"Apr" 0.79% 0.72%
"May" 0.74% 0.70%
"Jun" 0.71% 0.67%
"Jul" 0.57% 0.54%
"Aug" 0.51% 0.52%
"Sept" 0.53% 0.51%
"Oct" 0.54% 0.51%
"Nov" 0.55% 0.52%
"Dec" 0.59% 0.53%
</Table>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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 Money Market Portfolio seeks to maximize current income and preserve capital
while maintaining high levels of liquidity. Investments in shares of the
Portfolio are neither insured nor guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the Portfolio seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Portfolio.
PERFORMANCE
The seven day yield and seven day effective yield (which assumes an
annualization of the current yield with all dividends reinvested) for the
Portfolio as of December 31, 2003, were 0.61% and 0.61%, respectively. The yield
quotation more closely reflects the current earnings of the Portfolio than the
total return. As with all money market portfolios, the seven day yields are not
necessarily indicative of future performance.
FACTORS AFFECTING PERFORMANCE
- The Federal Open Market Committee lowered its target rate for federal
funds to 1.00%, a 45-year low, on June 25, 2003. It maintained that target
throughout the second half of 2003 to encourage a faster pace of economic
activity. Against this backdrop, money market fund yields have fallen to
record lows.
- Third quarter gross domestic product growth jumped to 8.2%, its highest
rate of expansion since the fourth quarter 1983. The December ISM
Manufacturing Index rose to 66.2, its highest level since December 1983,
and has remained above 50 since July, while non-farm payrolls have risen
monthly since August.
MANAGEMENT STRATEGY
- As of December 31, 2003, the Portfolio had net assets of $795 million. The
average maturity of the Portfolio was 18 days.
- The Portfolio seeks high liquidity and preservation of capital while
generating a yield reflecting prevailing money market conditions.
- Throughout the past year, we continued our longstanding policy of
purchasing only high quality, very liquid money market securities. The
Portfolio does not contain any derivative securities.
January 2004
91
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
MONEY MARKET PORTFOLIO
<Table>
<Caption>
FACE AMORTIZED
AMOUNT COST
(000) (000)
- -------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS (87.2%)
BANKING (7.6%)
Citicorp, 1.07%, 2/2/04 $ 35,000 $ 34,967
Northern Trust Co., Ltd., 1.06%, 2/2/04 25,000 24,976
- -------------------------------------------------------------------------------------------
59,943
===========================================================================================
DIVERSIFIED FINANCIAL SERVICES (8.8%)
General Electric Capital Corp., 1.09%, 1/15/04 35,000 34,985
Mortgage Interest Networking Trust,
1.09%, 1/20/04 35,000 34,980
- -------------------------------------------------------------------------------------------
69,965
===========================================================================================
FINANCE - AUTOMOTIVE (13.2%)
DaimlerChrysler Revolving Auto Conduit LLC,
1.10%, 1/6/04 35,000 34,995
Fcar Owner Trust, 1.07%, 1/14/04 35,000 34,986
New Center Asset Trust, 1.08%, 1/6/04 35,000 34,995
- -------------------------------------------------------------------------------------------
104,976
===========================================================================================
FINANCE - CONSUMER (4.4%)
American Express Co., 1.05%, 1/30/04 35,000 34,970
- -------------------------------------------------------------------------------------------
INTERNATIONAL BANKS (12.9%)
CBA Delaware Finance, Inc., 1.08%, 1/12/04 30,000 29,990
Danske Corp., 1.07%, 1/23/04 35,000 34,977
Dexia Delaware LLC, 1.08%, 1/9/04 38,000 37,991
- -------------------------------------------------------------------------------------------
102,958
===========================================================================================
MAJOR BANKS (8.8%)
State Street Bank & Trust Co., 1.05%, 2/2/04 35,000 35,000
Wells Fargo Bank NA, 1.05%, 2/2/04 35,000 35,000
- -------------------------------------------------------------------------------------------
70,000
===========================================================================================
US GOVERNMENT & AGENCY SECURITIES (31.5%)
Federal Home Loan Bank, 1.00%, 2/4/04 50,000 49,953
Federal Home Loan Bank, 1.00%, 2/6/04 50,000 49,950
Federal Home Loan Mortgage Corporation,
1.01%, 1/27/04 50,000 49,964
Federal National Mortgage Association,
1.04%, 1/21/04 25,450 25,435
Federal National Mortgage Association,
1.05%, 1/5/04 75,000 74,991
- -------------------------------------------------------------------------------------------
250,293
===========================================================================================
TOTAL MONEY MARKET INSTRUMENTS (COST $693,105) 693,105
===========================================================================================
REPURCHASE AGREEMENT (13.0%)
Bear Stearns & Co., Tri-Party, 1.03%, dated
12/31/03, due 1/2/04, repurchase price
$103,506, collateralized by Federal National
Mortgage Association ARM Pools, having
various maturities and interest rates valued
at $105,571 (COST $103,500) 103,500 103,500
===========================================================================================
TOTAL INVESTMENTS (100.2%) (COST $796,605) 796,605
===========================================================================================
<Caption>
AMOUNT AMOUNT
(000) (000)
- -------------------------------------------------------------------------------------------
OTHER ASSETS (0.0%)
Cash $ 85
Interest Receivable 15
Other 45 $ 145
- -------------------------------------------------------------------------------------------
LIABILITIES (-0.2%)
Investment Advisory Fees Payable (656)
Directors' Fees and Expenses Payable (264)
Dividends Declared Payable (221)
Administrative Fees Payable (124)
Custodian Fees Payable (8)
Other Liabilities (78) (1,351)
- -------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 795,399
===========================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 795,311
Undistributed Net Investment Income 88
- -------------------------------------------------------------------------------------------
NET ASSETS $ 795,399
===========================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 795,481,197outstanding $0.001 par
value shares (authorized 4,000,000,000 shares) $ 1.00
===========================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
92
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT OVERVIEW (UNAUDITED)
MUNICIPAL MONEY MARKET PORTFOLIO
[CHART]
COMPARATIVE YIELDS
FISCAL YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
"MUNICIPAL MONEY MARKET "iMONEYNET MUNICIPAL MONEY
PORTFOLIO 30 DAY YIELDS" FUND COMPARABLE YIELDS"
"Jan" 0.74% 0.62%
"Feb" 0.60% 0.62%
"Mar" 0.62% 0.61%
"Apr" 0.64% 0.67%
"May" 0.70% 0.72%
"Jun" 0.62% 0.59%
"Jul" 0.42% 0.36%
"Aug" 0.32% 0.36%
"Sept" 0.33% 0.39%
"Oct" 0.41% 0.45%
"Nov" 0.45% 0.51%
"Dec" 0.54% 0.51%
</Table>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE AND ASSUMES THAT ALL
DIVIDENDS AND DISTRIBUTIONS, IF ANY, WERE REINVESTED. 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. YIELD WILL FLUCTUATE AS MARKET
CONDITIONS CHANGE.
The Municipal Money Market Portfolio seeks to maximize current tax-exempt income
and preserve capital. Investments in shares of the Portfolio are neither insured
nor guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Portfolio seeks to preserve its net asset value
of $1.00 per share, it is possible to lose money by investing in the Portfolio.
PERFORMANCE
The seven day yield and seven day effective yield (assumes an annualization of
the current yield with all dividends reinvested) for the Portfolio as of
December 31, 2003, were 0.67% and 0.67%, respectively. The seven day taxable
equivalent yield and the seven day taxable equivalent effective yield for the
Portfolio at December 31, 2003 assuming a Federal income tax rate of 35.0%
(maximum rate) were 1.03% and 1.03%, respectively. The seven day yields are not
necessarily indicative of future performance.
FACTORS AFFECTING PERFORMANCE
- The 12 months ended December 31, 2003, was a period of record low yields
in the municipal money market. Following its latest cut in the federal
funds rate target in June, the Federal Reserve Open Market Committee
indicated its intentions to remain accommodative for a considerable
period.
- The short end of the tax-free money market yield curve was largely flat
through much of the year, though it inverted in the last quarter of the
period as seasonal redemptions pushed yields for the shortest maturities
higher.
- Yields on municipal money market paper were highly attractive relative to
taxable instruments. Tax-free to taxable yield ratios exceeded 90% for
much of the year and for overnight paper the ratio at times rose above
100%.
- Accommodative monetary policy appeared to have an effect. As the year drew
to a close, improvements in the economy were reflected in better prospects
for most municipalities with tax receipts on the rise and the general
trend toward widespread credit downgrades slowing.
- Many states worked to close budget gaps through a combination of increased
fees and service cuts and onetime measures such as tobacco bond receipts
and long-term refinancing.
- Against this backdrop, the issuance of traditional notes rose considerably
in 2003. Rising deficits led many issuers to turn to the capital markets
for temporary borrowing to meet shortfalls in cash flow.
MANAGEMENT STRATEGIES
- Because of the flatness of the yield curve and very low interest rates, we
placed an emphasis on the short-to-intermediate maturity range of the
municipal money market. At the end of December, the Portfolio's average
maturity was 26 days.
- Our generally cautious approach was reflected in the Portfolio's
composition. By the end of the period, the Portfolio was comprised of
75-80% short-term variable rate paper, with the remainder in short-term
tax-exempt commercial paper and fixed rate notes. As always, we remained
highly selective in our investment commitments and thoroughly screened
potential purchases to ensure that they met the Portfolio's credit
criteria.
January 2004
93
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS
MUNICIPAL MONEY MARKET PORTFOLIO
<Table>
<Caption>
FACE AMORTIZED
AMOUNT COST
(000) (000)
- -------------------------------------------------------------------------------------------
TAX-EXEMPT INSTRUMENTS (98.9%)
FIXED RATE INSTRUMENTS (20.1%)
COMMERCIAL PAPER (2.6%)
San Antonio, Texas, Electric & Gas, Ser. 1995 A,
1.05%, 1/27/04 $ 7,200 $ 7,200
Tennessee School Bond Authority, Higher Educational
Facilities, Ser. 1997 A, 0.95%, 1/14/04 6,000 6,000
- -------------------------------------------------------------------------------------------
13,200
===========================================================================================
MUNICIPAL BONDS & NOTES (9.2%)
Erie County, New York, Ser. 2003 A RANs (FGIC),
1.50%, 6/23/04 5,000 5,014
Indiana Bond Bank, Midyear Funding Notes, Ser. 2003 A,
1.25%, 4/15/04 15,000 15,014
Indianapolis Local Public Improvement Bond Bank,
Indiana, Ser. 2003 F Notes, 1.25%, 1/8/04 5,000 5,000
Kentucky Association of Counties Advance Revenue
Program, Ser. 2003 A COPs TRANs,
2.00%, 6/30/04 15,000 15,081
New York State Thruway Authority, Ser. 2003 A BANs,
1.125%, 3/25/04 7,000 7,000
- -------------------------------------------------------------------------------------------
47,109
===========================================================================================
PUT OPTION BONDS (8.3%)
Intermountain Power Agency, Utah, 1985 Ser. E
(Ambac), (Put 3/15/04), 0.92%, 7/1/14 23,500 23,500
Northside Independent School District, Texas,
Ser. 2003 (Put 6/15/04), 1.02%, 6/15/33 4,000 4,000
Northside Independent School District, Texas,
Ser. 2003-A (Put 8/1/04), 1.00%, 8/1/31 6,000 6,000
Oklahoma Water Resources Board, State Loan, Ser.
1995 (Put 3/3/04), 0.90%, 9/1/24 8,845 8,845
- -------------------------------------------------------------------------------------------
42,345
===========================================================================================
102,654
===========================================================================================
VARIABLE/FLOATING RATE INSTRUMENTS (78.8%)
DAILY VARIABLE RATE BONDS (13.6%)
Bell County Health Facilities Development Corp.,
Texas, Scott & White Memorial Hospital, Ser.
2001-2 (MBIA), 1.30%, 8/15/31 1,600 1,600
Breckinridge County, Kentucky, Kentucky Association
of Counties Leasing Trust, 2002 Ser. A,
1.30%, 2/1/32 4,500 4,500
California Health Facilities Financing Authority,
Adventist Health System/West, 1998 Ser. A
(MBIA), 1.27%, 9/1/28 1,100 1,100
Clark County School District, Nevada, Ser. 2001 B
(FSA), 1.14%, 6/15/21 5,850 5,850
Geisinger Authority, Pennsylvania, Geisinger Health
System, Ser. 2002, 1.30%, 11/15/32 600 600
Harris County Health Facilities Development Corp.,
Texas, Methodist Hospital, Ser. 2002,
1.30%, 12/1/32 14,900 14,900
Illinois Health Facilities Authority, Northwestern
Memorial Hospital, Ser. 1995, 1.33%, 8/15/25 4,450 4,450
Illinois Health Facilities Authority, Northwestern
Memorial Hospital, Ser. 2002 B, 1.33%, 8/15/09 7,400 7,400
Illinois Health Facilities Authority, Northwestern
Memorial Hospital, Ser. 2002 B, 1.33%, 8/15/32 7,100 7,100
Los Angeles Department of Water & Power, California,
Power System, 2001 Ser. B Sub-Ser. B-6,
1.27%, 7/1/34 $ 7,600 $ 7,600
Massachusetts Health & Educational Facilities
Authority, Capital Asset, Ser. D (MBIA), 1.26%,
1/1/35 720 720
Metropolitan Government of Nashville & Davidson
County Health & Education Facilities Board,
Tennessee, Vanderbilt University, Ser. 2002 B,
1.30%, 10/1/32 5,800 5,800
Murray City, Utah, IHC Health Services, Inc.,
Ser. 2003 C, 1.30%, 5/15/36 1,300 1,300
Nassau County Industrial Development Agency,
New York, 1999 Cold Spring Harbor Laboratory,
1.27%, 1/1/34 700 700
Ward County, North Dakota, Trinity Obligated Group,
Ser. 2002 A, 1.37%, 7/1/29 4,250 4,250
Weber County, Utah, IHC Health Services, Inc., Ser.
2000 C, 1.30%, 2/15/35 1,500 1,500
- -------------------------------------------------------------------------------------------
69,370
===========================================================================================
WEEKLY VARIABLE RATE BONDS (65.2%)
Allegheny County Hospital Development Authority,
Pennsylvania, Presbyterian-University Health
System, Inc., Ser. 1990 C (MBIA), 1.27%, 3/1/20 8,000 8,000
American Public Energy Agency, Nebraska, National
Public Gas Agency, 2003 Ser. A, 1.28%, 2/1/14 5,000 5,000
Arizona Board of Regents, Arizona State University,
Ser. 2003 A (Ambac), 1.15%, 7/1/34 10,000 10,000
Arizona Health Facilities Authority, Northern
Arizona Healthcare, Ser. 1996 B (MBIA), 1.25%,
10/1/26 6,850 6,850
Arkansas Development Finance Authority, Higher
Education Capital Asset Program, 1985 Ser. A
(FGIC), 1.22%, 12/1/15 6,900 6,900
Atlanta, Georgia, Water & Wastewater, Ser. 2001 B
(FSA), 1.22%, 11/1/38 16,875 16,875
Chicago, Illinois, Neighborhoods Alive, Ser. 21 B
(MBIA), 1.30%, 1/1/37 8,000 8,000
Chicago, Illinois, Ser. 1997, 1.10%, 1/1/12 2,910 2,910
Clackamas County Hospital Facility Authority,
Oregon, Legacy Health System, Ser. 2003, 1.10%,
2/15/30 10,000 10,000
Clarksville Public Building Authority, Tennessee,
Pooled Financing, Ser. 1994, 1.25%, 6/1/24 4,205 4,205
Detroit, Michigan, Sewage Disposal System, Senior
Lien, Ser. 2001 C-1 (FSA), 1.22%, 7/1/27 10,570 10,570
District of Columbia, George Washington University,
Ser. 1999 C (MBIA), 1.25%, 9/15/29 5,000 5,000
Eastern Municipal Water District, California, Water
& Sewer, Ser. 1993 B COPs (FGIC), 1.20%, 7/1/20 9,000 9,000
Fulton County Development Authority, Georgia,
Morehouse College, Ser. 1997, 1.15%, 8/1/17 3,215 3,215
Illinois Development Finance Authority, Jewish
Federation of Metropolitan Chicago, Ser. 1999
(Ambac), 1.15%, 9/1/24 3,000 3,000
Indiana Health Facility Financing Authority,
Community Hospitals of Indiana, Inc., Ser. 2000 A,
1.25%, 7/1/28 7,500 7,500
Jackson Energy Authority, Tennessee, Water System,
Ser. 2002 (FSA), 1.15%, 12/1/23 5,210 5,210
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
94
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
MUNICIPAL MONEY MARKET PORTFOLIO
<Table>
<Caption>
FACE AMORTIZED
AMOUNT COST
(000) (000)
- -------------------------------------------------------------------------------------------
VARIABLE/FLOATING RATE INSTRUMENTS (CONT'D)
WEEKLY VARIABLE RATE BONDS (CONT'D)
JEA, Florida, Water & Sewer System, 2003 Ser. B
(XLCA), 1.07%, 10/1/36 $ 4,400 $ 4,400
Lakeland, Florida, Energy System, Ser. 2003,
1.10%, 10/1/37 6,000 6,000
Lee's Summit, Missouri, Multifamily Housing,
Ser. 2001 A, 1.46%, 7/1/46 10,000 10,000
Louisiana Public Facilities Authority, College &
University Equipment, Ser. A (FGIC), 1.25%, 9/1/10 4,700 4,700
Massachusetts Bay Transportation Authority, Ser.
2000, 1.10%, 3/1/30 7,000 7,000
Mecklenburg County, North Carolina, Ser. 2001 COPs,
1.25%, 12/1/21 9,900 9,900
Minneapolis, Minnesota, Guthrie Theater on the
River, Ser. 2003 A, 1.27%, 10/1/23 5,000 5,000
Montgomery County Public Building Authority,
Tennessee, Pooled Financing, Ser. 1997,
1.25%, 11/1/27 5,955 5,955
New York City Transitional Finance Authority,
New York, Fiscal 1999, 2nd Series, Sub-Ser. A-1,
1.25%, 11/15/22 9,135 9,135
New York City, New York, Fiscal 2003 Ser. G,
Sub-Ser. G-3, 1.10%, 8/1/14 3,000 3,000
Niagara Falls Bridge Commission, New York, Toll
Bridge Refg., Ser. 1993 A (FGIC), 1.05%, 10/1/19 1,900 1,900
North Carolina Educational Facilities Finance
Agency, Duke University, Ser. 1987 B, 1.15%,
12/1/21 15,000 15,000
North Carolina Medical Care Commission, North
Carolina Baptist Hospitals, Ser. 2000,
1.13%, 6/1/30 10,000 10,000
Oregon, Veterans' Welfare, Ser. 73 F, 1.10%, 12/1/17 20,500 20,500
Orlando-Orange County Expressway Authority, Florida,
Ser. 2003 C4 (FSA), 1.20%, 7/1/25 4,950 4,950
Pennsylvania Higher Educational Facilities
Authority, University of Pennsylvania Health
Services, Ser. 1994 B, 1.25%, 1/1/24 10,500 10,500
Pennsylvania Turnpike Commission, 2002 Ser. A-2,
1.15%, 12/1/30 8,200 8,200
Private Colleges & Universities Authority, Georgia,
Emory University, 2001 Ser. B, 1.08%, 9/1/33 5,000 5,000
Regional Transportation District, Colorado, Transit
Vehicles, Ser. 2002 A COPs (Ambac),
1.22%, 12/1/22 11,000 11,000
Triborough Bridge & Tunnel Authority, New York,
Ser. 2002 F, 1.25%, 11/1/32 3,400 3,400
University of Delaware, Ser. 1998, 1.15%, 11/1/23 10,000 10,000
University of Minnesota Regents, Ser. 1999 A,
1.28%, 1/1/34 12,525 12,525
University of Texas System, Refunding, Ser. 2001
A, 1.15%, 8/15/13 13,200 13,200
Washington State, Ser. VR-96 B, 1.00%, 6/1/20 10,700 10,700
Williamsburg, Kentucky, Cumberland College,
Ser. 2002, 1.25%, 9/1/32 9,430 9,430
- -------------------------------------------------------------------------------------------
333,630
===========================================================================================
403,000
===========================================================================================
TOTAL TAX-EXEMPT INSTRUMENTS (COST $505,654) 505,654
===========================================================================================
<Caption>
VALUE
(000)
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.9%) (COST $505,654) $ 505,654
===========================================================================================
<Caption>
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
OTHER ASSETS (1.3%)
Cash $ 3,772
Receivable for Investments Sold 2,022
Interest Receivable 966
Other 32 6,792
- -------------------------------------------------------------------------------------------
LIABILITIES (-0.2%)
Investment Advisory Fees Payable (459)
Directors' Fees and Expenses Payable (146)
Dividends Declared Payable (145)
Administrative Fees Payable (85)
Custodian Fees Payable (7)
Other Liabilities (53) (895)
- -------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 511,551
===========================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 511,532
Undistributed Net Investment Income 19
- -------------------------------------------------------------------------------------------
NET ASSETS $ 511,551
===========================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 511,532,031 outstanding $0.001 par
value shares (authorized 4,000,000,000 shares) $ 1.00
===========================================================================================
</Table>
Ambac Ambac Assurance Corp.
FGIC Financial Guaranty Insurance Co.
FSA Financial Security Assurance Inc.
MBIA MBIA Insurance Corp.
XLCA XL Capital Assurance
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
95
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENT OF NET ASSETS (CONT'D)
MUNICIPAL MONEY MARKET PORTFOLIO
SUMMARY OF TAX-EXEMPT INSTRUMENTS BY STATE
(UNAUDITED)
<Table>
<Caption>
AMORTIZED PERCENT
COST OF NET
STATE (000) ASSETS
- -----------------------------------------------
Arizona $ 16,850 3.3%
Arkansas 6,900 1.3
California 17,700 3.5
Colorado 11,000 2.2
Florida 15,350 3.0
Georgia 25,090 4.9
Illinois 32,860 6.4
Indiana 27,514 5.4
Kentucky 29,010 5.7
Louisiana 4,700 0.9
Maryland 10,000 2.0
Massachusetts 7,720 1.5
Michigan 23,095 4.5
Minnesota 5,000 1.0
Missouri 10,000 2.0
Nebraska 5,000 1.0
Nevada 5,850 1.1
New York 30,150 5.9
North Carolina 34,900 6.8
North Dakota 4,250 0.8
Oklahoma 8,845 1.7
Oregon 30,500 6.0
Pennsylvania 27,300 5.3
Tennessee 27,170 5.3
Texas 46,900 9.2
Utah 26,300 5.1
Washington 10,700 2.1
Washington D.C 5,000 1.0
- -----------------------------------------------
$ 505,654 98.9%
===============================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
96
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
ACTIVE ASIAN EUROPEAN EUROPEAN
INTERNATIONAL REAL EMERGING REAL VALUE
ALLOCATION ESTATE MARKETS ESTATE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
(000) (000) (000) (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 7,382 $ 89 $ 23,064 $ 747 $ 962
Interest 340 1 600 12 23
Less: Foreign Taxes Withheld (683) (5) (1,490) (93) (114)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 7,039 85 22,174 666 871
- ---------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment Advisory Fees 1,860 20 9,933 165 258
Administrative Fees 454 8 1,248 36 55
Custodian Fees 240 21 934 47 105
Directors' Fees and Expenses 20 -- 74 1 9
Country Tax Expense -- -- 203 -- --
Interest Expense 1 -- 28 1 1
Professional Fees 42 21 90 22 24
Shareholder Reporting Fees 59 1 192 4 4
Distribution Fees on Class B Shares 18 1 68 2 3
Other Expenses 83 29 362 31 33
- ---------------------------------------------------------------------------------------------------------------------------------
Total Expenses 2,777 101 13,132 309 492
- ---------------------------------------------------------------------------------------------------------------------------------
Waiver of Investment Advisory Fees (469) (20) -- (100) (165)
Expenses Reimbursed by Adviser -- (55) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net Expenses 2,308 26 13,132 209 327
- ---------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 4,731 59 9,042 457 544
- ---------------------------------------------------------------------------------------------------------------------------------
REALIZED GAIN (LOSS):
Investments Sold (22,168) 138 60,773 2,485 493
Foreign Currency Transactions 2,706 2 (629) 24 34
Futures Contracts 2,131 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) (17,331) 140 60,144 2,509 527
- ---------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION):
Investments 100,262 702 310,151* 4,760 7,751
Foreign Currency Exchange Contracts and Translations 521 (1) 33 21 38
Futures Contracts 1,354 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net Change in Unrealized Appreciation (Depreciation) 102,137 701 310,184 4,781 7,789
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN (LOSS) AND CHANGE IN
UNREALIZED APPRECIATION (DEPRECIATION) 84,806 841 370,328 7,290 8,316
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations $ 89,537 $ 900 $ 379,370 $ 7,747 $ 8,860
=================================================================================================================================
</Table>
* Net of $1,929 Deferred Country Taxes
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
97
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
GLOBAL
GLOBAL VALUE INTERNATIONAL INTERNATIONAL INTERNATIONAL
FRANCHISE EQUITY EQUITY MAGNUM SMALL CAP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
(000) (000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 1,682 $ 1,837 $ 135,747 $ 1,905 $ 17,946
Interest 14 37 6,136 153 283
Less: Foreign Taxes Withheld (63) (117) (17,011) (171) (2,006)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 1,633 1,757 124,872 1,887 16,223
- ----------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment Advisory Fees 448 574 40,205 669 6,040
Administrative Fees 92 117 7,856 131 992
Custodian Fees 46 85 1,407 152 389
Directors' Fees and Expenses 1 9 267 10 26
Interest Expense -- 2 -- 1 1
Professional Fees 31 29 215 24 56
Shareholder Reporting Fees 29 9 574 31 69
Distribution Fees on Class B Shares 5 70 1,304 25 --
Other Expenses 43 37 497 65 81
- ----------------------------------------------------------------------------------------------------------------------------------
Total Expenses 695 932 52,325 1,108 7,654
- ----------------------------------------------------------------------------------------------------------------------------------
Waiver of Investment Advisory Fees (126) (141) (755) (245) (342)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Expenses 569 791 51,570 863 7,312
- ----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 1,064 966 73,302 1,024 8,911
- ----------------------------------------------------------------------------------------------------------------------------------
REALIZED GAIN (LOSS):
Investments Sold 1,398 (3,100) 42,840 (1,867) 35,209
Foreign Currency Transactions (1,087) (128) 23,889 761 (98)
Futures Contracts -- -- -- 229 --
- ----------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) 311 (3,228) 66,729 (877) 35,111
- ----------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION):
Investments 14,516 22,495 1,402,664 24,024 219,181
Foreign Currency Exchange Contracts and Translations (230) 62 17,775 94 122
Futures Contracts -- -- -- 289 --
- ----------------------------------------------------------------------------------------------------------------------------------
Net Change in Unrealized Appreciation (Depreciation) 14,286 22,557 1,420,439 24,407 219,303
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN (LOSS) AND CHANGE IN
UNREALIZED APPRECIATION (DEPRECIATION) 14,597 19,329 1,487,168 23,530 254,414
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 15,661 $ 20,295 $ 1,560,470 $ 24,554 $ 263,325
==================================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
98
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
JAPANESE SMALL
VALUE LATIN EQUITY FOCUS COMPANY
EQUITY AMERICAN GROWTH EQUITY GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
(000) (000) (000) (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 368 $ 781 $ 7,485 $ 794 $ 636
Interest 9 4 210 25 153
Less: Foreign Taxes Withheld (37) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total Investment Income 340 785 7,695 819 789
- -----------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment Advisory Fees 265 231 4,059 535 4,580
Administrative Fees 56 37 1,066 110 715
Custodian Fees 48 43 56 26 89
Directors' Fees and Expenses 5 3 52 8 14
Interest Expense 11 2 -- 1 --
Professional Fees 24 25 46 26 62
Shareholder Reporting Fees 15 5 189 19 122
Distribution Fees on Class B Shares 1 -- 426 18 763
Other Expenses 36 31 100 36 190
- -----------------------------------------------------------------------------------------------------------------------------
Total Expenses 461 377 5,994 779 6,535
- -----------------------------------------------------------------------------------------------------------------------------
Waiver of Investment Advisory Fees (119) (17) (153) (90) (730)
- -----------------------------------------------------------------------------------------------------------------------------
Net Expenses 342 360 5,841 689 5,805
- -----------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (2) 425 1,854 130 (5,016)
- -----------------------------------------------------------------------------------------------------------------------------
REALIZED GAIN (LOSS):
Investments Sold 3,965 1,951 30,184 8,486 69,288
Foreign Currency Transactions (5) 2 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) 3,960 1,953 30,184 8,486 69,288
- -----------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION):
Investments 7,682 7,711 128,831 9,403 104,359
Foreign Currency Exchange Contracts and Translations (2) 1 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net Change in Unrealized Appreciation (Depreciation) 7,680 7,712 128,831 9,403 104,359
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN (LOSS) AND CHANGE IN
UNREALIZED APPRECIATION (DEPRECIATION) 11,640 9,665 159,015 17,889 173,647
- -----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations $ 11,638 $ 10,090 $ 160,869 $ 18,019 $ 168,631
=============================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
99
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
EMERGING MUNICIPAL
U.S. REAL VALUE MARKETS MONEY MONEY
TECHNOLOGY ESTATE EQUITY DEBT MARKET MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
(000) (000) (000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 45 $ 32,943 $ 3,054 $ -- $ -- $ --
Interest 6 282 38 4,805 13,152 8,239
Less: Foreign Taxes Withheld -- (161) (1) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 51 33,064 3,091 4,805 13,152 8,239
- ----------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment Advisory Fees 266 6,476 665 417 3,301 2,385
Administrative Fees 46 1,271 213 92 1,754 1,263
Custodian Fees 23 48 25 32 61 40
Directors' Fees and Expenses 3 33 11 7 120 68
Country Tax Expense -- -- -- 9 -- --
Interest Expense 3 -- 1 5 -- --
Professional Fees 21 49 25 33 64 50
Shareholder Reporting Fees 7 168 38 13 170 91
Distribution Fees on Class B Shares 7 112 148 1 -- --
Other Expenses 33 109 50 35 151 113
- ----------------------------------------------------------------------------------------------------------------------------------
Total Expenses 409 8,266 1,176 644 5,621 4,010
- ----------------------------------------------------------------------------------------------------------------------------------
Waiver of Investment Advisory Fees (67) (55) (94) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net Expenses 342 8,211 1,082 644 5,621 4,010
- ----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (291) 24,853 2,009 4,161 7,531 4,229
- ----------------------------------------------------------------------------------------------------------------------------------
REALIZED GAIN (LOSS):
Investments Sold 324 23,763 2,159 7,521 -- 10
Foreign Currency Transactions -- -- -- (15) -- --
Futures Contracts -- -- -- (314) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) 324 23,763 2,159 7,192 -- 10
- ----------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION):
Investments 10,687 215,670 32,309 2,858 -- --
Futures Contracts -- -- -- (81) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net Change in Unrealized Appreciation
(Depreciation) 10,687 215,670 32,309 2,777 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN (LOSS) AND CHANGE IN
UNREALIZED APPRECIATION (DEPRECIATION) 11,011 239,433 34,468 9,969 -- 10
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 10,720 $ 264,286 $ 36,477 $ 14,130 $ 7,531 $ 4,239
==================================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
100
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
ACTIVE INTERNATIONAL ALLOCATION
PORTFOLIO
- ---------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2003 2002
(000) (000)
- ---------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS OPERATIONS:
Net Investment Income (Loss) $ 4,731 $ 4,963
Net Realized Gain (Loss) (17,331) (44,653)
Net Change in Unrealized Appreciation (Depreciation) 102,137 5,061
- ---------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations 89,537 (34,629)
- ---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
CLASS A:
Net Investment Income (6,132) (7,427)
CLASS B:
Net Investment Income (86) (222)
- ---------------------------------------------------------------------------------------------------------
Total Distributions (6,218) (7,649)
- ---------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
CLASS A:
Subscribed 150,855 159,875
Distributions Reinvested 5,120 4,778
Redeemed (133,423) (261,623)
CLASS B:
Subscribed 40,954 71,895
Distributions Reinvested 86 216
Redeemed (45,948) (73,290)
- ---------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Capital Share Transactions 17,644 (98,149)
- ---------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 100,963 (140,427)
NET ASSETS:
Beginning of Period 258,160 398,587
- ---------------------------------------------------------------------------------------------------------
End of Period $ 359,123 $ 258,160
=========================================================================================================
Undistributed (distributions in excess of) net investment income
included in end of period net assets $ 1,349 $ (121)
=========================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
CLASS A:
Shares Subscribed 19,765 20,117
Shares Issued on Distributions Reinvested 555 635
Shares Redeemed (17,615) (31,429)
- ---------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class A Shares Outstanding 2,705 (10,677)
=========================================================================================================
CLASS B:
Shares Subscribed 5,167 9,059
Shares Issued on Distributions Reinvested 9 28
Shares Redeemed (5,732) (9,132)
- ---------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class B Shares Outstanding (556) (45)
=========================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
101
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
ASIAN REAL ESTATE EMERGING MARKETS
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2003 2002
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS OPERATIONS:
Net Investment Income (Loss) $ 59 $ 57 $ 9,042 $ 2,786
Net Realized Gain (Loss) 140 33 60,144 (56,372)
Net Change in Unrealized Appreciation (Depreciation) 701 (377) 310,184 4,603
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 900 (287) 379,370 (48,983)
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
CLASS A:
Net Investment Income (160) (69) (11,316) (324)
Return of Capital -- -- (653) --
CLASS B:
Net Investment Income (4) (13) (408) --
Return of Capital -- -- (24) --
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (164) (82) (12,401) (324)
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
CLASS A:
Subscribed 515 160 861,356 888,416
Distributions Reinvested 34 5 11,229 306
Redeemed (118) (41) (860,411) (928,810)
CLASS B:
Subscribed 100 33 554,055 446,446
Distributions Reinvested 2 13 421 --
Redeemed (536) -- (541,631) (449,154)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Capital Share Transactions (3) 170 25,019 (42,796)
- -------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 733 (199) 391,988 (92,103)
NET ASSETS:
Beginning of Period 2,242 2,441 670,411 762,514
- -------------------------------------------------------------------------------------------------------------------------------
End of Period $ 2,975 $ 2,242 $ 1,062,399 $ 670,411
===============================================================================================================================
Undistributed (distributions in excess of) net investment
income included in end of period net assets $ (105) $ (38) $ (4,916) $ --
Accumulated net investment loss included in end of period
net assets -- -- -- (2,432)
===============================================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
CLASS A:
Shares Subscribed 75 27 72,921 85,929
Shares Issued on Distributions Reinvested 4 1 742 30
Shares Redeemed (16) (6) (72,761) (90,310)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class A Shares Outstanding 63 22 902 (4,351)
===============================================================================================================================
CLASS B:
Shares Subscribed 14 5 49,916 40,886
Shares Issued on Distributions Reinvested @-- 2 28 --
Shares Redeemed (83) -- (48,519) (40,921)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class B Shares Outstanding (69) 7 1,425 (35)
===============================================================================================================================
</Table>
@ Amount/Shares are less than 500.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
102
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
EUROPEAN REAL ESTATE EUROPEAN VALUE EQUITY
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2003 2002
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS OPERATIONS:
Net Investment Income (Loss) $ 457 $ 583 $ 544 $ 552
Net Realized Gain (Loss) 2,509 654 527 (1,959)
Net Change in Unrealized Appreciation (Depreciation) 4,781 2,366 7,789 (1,640)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 7,747 3,603 8,860 (3,047)
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
CLASS A:
Net Investment Income (609) (1,033) (591) (497)
CLASS B:
Net Investment Income (23) (54) (19) (13)
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (632) (1,087) (610) (510)
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
CLASS A:
Subscribed 6,645 4,490 14,811 40,190
Distributions Reinvested 607 959 554 470
Redeemed (11,123) (2,366) (19,988) (41,916)
CLASS B:
Subscribed 50 148 496 530
Distributions Reinvested 12 37 17 13
Redeemed (375) (1,129) (536) (489)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Capital Share Transactions (4,184) 2,139 (4,646) (1,202)
- -------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 2,931 4,655 3,604 (4,759)
NET ASSETS:
Beginning of Period 20,168 15,513 30,367 35,126
- -------------------------------------------------------------------------------------------------------------------------------
End of Period $ 23,099 $ 20,168 $ 33,971 $ 30,367
===============================================================================================================================
Undistributed (distributions in excess of) net investment
income included in end of period net assets $ (274) $ (163) $ (4) $ 29
===============================================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
CLASS A:
Shares Subscribed 551 407 1,409 3,704
Shares Issued on Distributions Reinvested 41 88 44 46
Shares Redeemed (884) (223) (1,823) (3,850)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class A Shares Outstanding (292) 272 (370) (100)
===============================================================================================================================
CLASS B:
Shares Subscribed 3 13 49 46
Shares Issued on Distributions Reinvested 1 3 1 1
Shares Redeemed (30) (110) (52) (43)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class B Shares Outstanding (26) (94) (2) 4
===============================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
103
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
GLOBAL FRANCHISE GLOBAL VALUE EQUITY
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2003 2002
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS OPERATIONS:
Net Investment Income (Loss) $ 1,064 $ 825 $ 966 $ 655
Net Realized Gain (Loss) 311 (1,160) (3,228) (3,233)
Net Change in Unrealized Appreciation (Depreciation) 14,286 2,089 22,557 (9,850)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 15,661 1,754 20,295 (12,428)
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
CLASS A:
Net Investment Income (197) -- (552) (527)
Net Realized Gain (581) (164) (296) (335)
CLASS B:
Net Investment Income (2) -- (260) (334)
Net Realized Gain (19) (5) (176) (266)
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (799) (169) (1,284) (1,462)
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
CLASS A:
Subscribed 29,757 60,250 50,855 143,418
Distributions Reinvested 771 164 837 844
Redeemed (13,703) (24,012) (42,293) (135,881)
CLASS B:
Subscribed 1,050 1,835 12,816 15,905
Distributions Reinvested 21 4 436 600
Redeemed (391) (765) (14,519) (14,001)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Capital Share Transactions 17,505 37,476 8,132 10,885
- -------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 32,367 39,061 27,143 (3,005)
NET ASSETS:
Beginning of Period 50,071 11,010 61,163 64,168
- -------------------------------------------------------------------------------------------------------------------------------
End of Period $ 82,438 $ 50,071 $ 88,306 $ 61,163
===============================================================================================================================
Undistributed (distributions in excess of) net investment
income included in end of period net assets $ (212) $ -- $ (12) $ (38)
===============================================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
CLASS A:
Shares Subscribed 2,451 5,437 4,031 10,431
Shares Issued on Distributions Reinvested 56 14 57 66
Shares Redeemed (1,234) (2,152) (3,335) (9,948)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class A Shares Outstanding 1,273 3,299 753 549
===============================================================================================================================
CLASS B:
Shares Subscribed 92 154 1,014 1,143
Shares Issued on Distributions Reinvested 2 1 30 47
Shares Redeemed (32) (68) (1,133) (978)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class B Shares Outstanding 62 87 (89) 212
===============================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
104
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
INTERNATIONAL EQUITY INTERNATIONAL MAGNUM
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2003 2002
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS OPERATIONS:
Net Investment Income (Loss) $ 73,302 $ 51,748 $ 1,024 $ 633
Net Realized Gain (Loss) 66,729 (32,221) (877) (9,210)
Net Change in Unrealized Appreciation (Depreciation) 1,420,439 (184,451) 24,407 (3,010)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 1,560,470 (164,924) 24,554 (11,587)
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
CLASS A:
Net Investment Income (93,410) (87,623) (1,476) (442)
Net Realized Gain -- (7,616) -- --
CLASS B:
Net Investment Income (11,014) (8,590) (164) (23)
Net Realized Gain -- (802) -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (104,424) (104,631) (1,640) (465)
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
CLASS A:
Subscribed 2,674,838 1,471,477 26,857 86,175
Distributions Reinvested 76,093 79,948 1,369 433
Redeemed (2,347,373) (1,351,956) (23,785) (127,233)
CLASS B:
Subscribed 493,867 654,576 312,397 116,041
Distributions Reinvested 10,897 9,264 164 23
Redeemed (366,206) (370,933) (321,516) (119,763)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Capital Share Transactions 542,116 492,376 (4,514) (44,324)
- -------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 1,998,162 222,821 18,400 (56,376)
NET ASSETS:
Beginning of Period 4,393,077 4,170,256 74,919 131,295
- -------------------------------------------------------------------------------------------------------------------------------
End of Period $ 6,391,239 $ 4,393,077 $ 93,319 $ 74,919
===============================================================================================================================
Undistributed (distributions in excess of) net investment
income included in end of period net assets $ 13,763 $ (13,902) $ 168 $ 22
===============================================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
CLASS A:
Shares Subscribed 172,150 129,820 3,223 9,726
Shares Issued on Distributions Reinvested 4,076 5,495 141 51
Shares Redeemed (150,128) (121,464) (2,922) (14,222)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class A Shares Outstanding 26,098 13,851 442 (4,445)
===============================================================================================================================
CLASS B:
Shares Subscribed 31,747 43,886 37,663 13,932
Shares Issued on Distributions Reinvested 587 640 17 3
Shares Redeemed (23,883) (24,947) (38,288) (14,240)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class B Shares Outstanding 8,451 19,579 (608) (305)
===============================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
105
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
INTERNATIONAL SMALL CAP JAPANESE VALUE EQUITY
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2003 2002
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS OPERATIONS:
Net Investment Income (Loss) $ 8,911 $ 4,266 $ (2) $ (41)
Net Realized Gain (Loss) 35,111 (15,521) 3,960 (3,529)
Net Change in Unrealized Appreciation (Depreciation) 219,303 (5,530) 7,680 896
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 263,325 (16,785) 11,638 (2,674)
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
CLASS A:
Net Investment Income (9,894) (4,135) -- --
Net Realized Gain (13,236) (1,006) -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (23,130) (5,141) -- --
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
CLASS A:
Subscribed 322,236 243,823 40,742 36,263
Distributions Reinvested 21,202 4,538 -- --
Redeemed (123,761) (163,292) (40,176) (32,381)
CLASS B:
Subscribed -- -- 275 1,345
Redeemed -- -- (200) (2,064)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Capital Share Transactions 219,677 85,069 641 3,163
- -------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 459,872 63,143 12,279 489
NET ASSETS:
Beginning of Period 440,124 376,981 24,467 23,978
- -------------------------------------------------------------------------------------------------------------------------------
End of Period $ 899,996 $ 440,124 $ 36,746 $ 24,467
===============================================================================================================================
Undistributed (distributions in excess of) net investment
income included in end of period net assets $ (660) $ 416 $ -- $ --
Accumulated net investment loss included in end of period
net assets -- -- (15) (11)
===============================================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
CLASS A:
Shares Subscribed 19,043 16,577 8,384 7,334
Shares Issued on Distributions Reinvested 1,059 313 -- --
Shares Redeemed (7,215) (11,351) (7,673) (6,511)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class A Shares Outstanding 12,887 5,539 711 823
===============================================================================================================================
CLASS B:
Shares Subscribed -- -- 51 252
Shares Redeemed -- -- (44) (389)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class B Shares Outstanding -- -- 7 (137)
===============================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
106
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
LATIN AMERICAN EQUITY GROWTH
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2003 2002
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS OPERATIONS:
Net Investment Income (Loss) $ 425 $ 315 $ 1,854 $ 1,055
Net Realized Gain (Loss) 1,953 (4,124) 30,184 (161,941)
Net Change in Unrealized Appreciation (Depreciation) 7,712 (990) 128,831 (66,890)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 10,090 (4,799) 160,869 (227,776)
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
CLASS A:
Net Investment Income (413) (233) (1,800) (1,002)
CLASS B:
Net Investment Income @-- (1) (170) --
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (413) (234) (1,970) (1,002)
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
CLASS A:
Subscribed 9,658 5,693 215,085 152,575
Distributions Reinvested 401 230 1,755 978
Redeemed (10,903) (5,623) (179,059) (158,888)
CLASS B:
Subscribed -- 99 46,547 39,890
Distributions Reinvested @-- 2 168 --
Redeemed (222) (664) (42,814) (44,367)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) from Net Assets Resulting from
Capital Share Transactions (1,066) (263) 41,682 (9,812)
- -------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 8,611 (5,296) 200,581 (238,590)
NET ASSETS:
Beginning of Period 18,228 23,524 588,708 827,298
- -------------------------------------------------------------------------------------------------------------------------------
End of Period $ 26,839 $ 18,228 $ 789,289 $ 588,708
===============================================================================================================================
Undistributed (distributions in excess of) net investment
income included in end of period net assets $ 22 $ 8 $ (117) $ (37)
===============================================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
CLASS A:
Shares Subscribed 1,263 741 20,284 19,117
Shares Issued on Distributions Reinvested 37 32 113 77
Shares Redeemed (1,432) (741) (17,540) (19,492)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class A Shares Outstanding (132) 32 2,857 (298)
===============================================================================================================================
CLASS B:
Shares Subscribed -- 10 3,359 2,672
Shares Issued on Distributions Reinvested @-- 1 11 --
Shares Redeemed (26) (74) (3,217) (3,079)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class B Shares Outstanding (26) (63) 153 (407)
===============================================================================================================================
</Table>
@ Amount/Shares are less than 500.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
107
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOCUS EQUITY SMALL COMPANY GROWTH
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2003 2002
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS OPERATIONS:
Net Investment Income (Loss) $ 130 $ (5) $ (5,016) $ (2,744)
Net Realized Gain (Loss) 8,486 (22,037) 69,288 (42,857)
Net Change in Unrealized Appreciation (Depreciation) 9,403 (4,056) 104,359 (27,447)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 18,019 (26,098) 168,631 (73,048)
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
CLASS A:
Net Investment Income (137) -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
CLASS A:
Subscribed 39,096 23,618 137,063 46,585
Issued on Portfolio Merger -- -- 98,228 --
Distributions Reinvested 132 -- -- --
Redeemed (45,080) (34,446) (58,979) (33,493)
CLASS B:
Subscribed 2,464 2,113 247,321 147,135
Issued on Portfolio Merger -- -- 1,975 --
Redeemed (2,679) (5,773) (101,358) (63,125)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Capital Share Transactions (6,067) (14,488) 324,250 97,102
- -------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 11,815 (40,586) 492,881 24,054
NET ASSETS:
Beginning of Period 57,761 98,347 290,453 266,399
- -------------------------------------------------------------------------------------------------------------------------------
End of Period $ 69,576 $ 57,761 $ 783,334 $ 290,453
===============================================================================================================================
Undistributed (distributions in excess of) net investment
income included in end of period net assets $ (19) $ -- $ -- $ --
Accumulated net investment loss included in end of period
net assets -- (13) (30) (10)
===============================================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
CLASS A:
Shares Subscribed 3,847 5,039 13,630 5,967
Shares Issued on Portfolio Merger -- -- 10,221 --
Shares Issued on Distributions Reinvested 11 -- -- --
Shares Redeemed (4,344) (6,073) (6,106) (4,557)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class A Shares Outstanding (486) (1,034) 17,745 1,410
===============================================================================================================================
CLASS B:
Shares Subscribed 275 228 27,650 18,139
Shares Issued on Portfolio Merger -- -- 213 --
Shares Redeemed (295) (558) (11,195) (8,081)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class B Shares Outstanding (20) (330) 16,668 10,058
===============================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
108
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
TECHNOLOGY U.S. REAL ESTATE
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2003 2002
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS OPERATIONS:
Net Investment Income (Loss) $ (291) $ (309) $ 24,853 $ 27,570
Net Realized Gain (Loss) 324 (22,790) 23,763 20,011
Net Change in Unrealized Appreciation (Depreciation) 10,687 3,898 215,670 (55,613)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 10,720 (19,201) 264,286 (8,032)
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
CLASS A:
Net Investment Income -- -- (23,648) (26,650)
Net Realized Gain -- -- (8,798) (29,124)
CLASS B:
Net Investment Income -- -- (1,359) (996)
Net Realized Gain -- -- (689) (1,321)
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- (34,494) (58,091)
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
CLASS A:
Subscribed 22,239 15,412 236,560 290,341
Distributions Reinvested -- -- 29,125 50,451
Redeemed (27,493) (19,397) (240,705) (319,193)
CLASS B:
Subscribed 11,079 6,182 40,038 24,064
Distributions Reinvested -- -- 1,994 2,306
Redeemed (9,377) (6,125) (15,965) (15,057)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Capital Share Transactions (3,552) (3,928) 51,047 32,912
- -------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 7,168 (23,129) 280,839 (33,211)
NET ASSETS:
Beginning of Period 22,203 45,332 686,858 720,069
- -------------------------------------------------------------------------------------------------------------------------------
End of Period $ 29,371 $ 22,203 $ 967,697 $ 686,858
===============================================================================================================================
Undistributed (distributions in excess of) net investment
income included in end of period net assets $ -- $ -- $ (52) $ (32)
Accumulated net investment loss included in end of period
net assets (7) (5) -- --
===============================================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
CLASS A:
Shares Subscribed 2,976 1,912 16,166 24,809
Shares Issued on Distributions Reinvested -- -- 1,764 3,577
Shares Redeemed (3,478) (2,180) (16,197) (27,657)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class A Shares Outstanding (502) (268) 1,733 729
===============================================================================================================================
CLASS B:
Shares Subscribed 1,388 831 2,488 1,630
Shares Issued on Distributions Reinvested -- -- 120 166
Shares Redeemed (1,213) (797) (1,013) (1,046)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class B Shares Outstanding 175 34 1,595 750
===============================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
109
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
VALUE EQUITY EMERGING MARKETS DEBT
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2003 2002
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS OPERATIONS:
Net Investment Income (Loss) $ 2,009 $ 2,158 $ 4,161 $ 4,653
Net Realized Gain (Loss) 2,159 (21,579) 7,192 1,754
Net Change in Unrealized Appreciation (Depreciation) 32,309 (19,695) 2,777 (1,246)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 36,477 (39,116) 14,130 5,161
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
CLASS A:
Net Investment Income (1,250) (1,456) (3,737) (5,033)
CLASS B:
Net Investment Income (778) (693) (28) (33)
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2,028) (2,149) (3,765) (5,066)
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
CLASS A:
Subscribed 66,165 42,581 20,057 10,976
Distributions Reinvested 1,164 1,266 3,619 4,640
Redeemed (53,059) (42,155) (28,095) (19,493)
CLASS B:
Subscribed 45,709 43,271 -- --
Distributions Reinvested 752 644 28 33
Redeemed (37,212) (7,421) (10) (129)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Capital Share Transactions 23,519 38,186 (4,401) (3,973)
- -------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 57,968 (3,079) 5,964 (3,878)
NET ASSETS:
Beginning of Period 123,209 126,288 49,112 52,990
- -------------------------------------------------------------------------------------------------------------------------------
End of Period $ 181,177 $ 123,209 $ 55,076 $ 49,112
===============================================================================================================================
Undistributed (distributions in excess of) net investment
income included in end of period net assets $ (20) $ (1) $ (174) $ (570)
- -------------------------------------------------------------------------------------------------------------------------------
(1) CAPITAL SHARE TRANSACTIONS:
CLASS A:
Shares Subscribed 7,984 6,387 6,560 7,995
Shares Issued on Distributions Reinvested 142 162 1,028 1,578
Shares Redeemed (7,020) (6,448) (8,658) (10,813)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class A Shares Outstanding 1,106 101 (1,070) (1,240)
===============================================================================================================================
CLASS B:
Shares Subscribed 5,461 4,789 -- --
Shares Issued on Distributions Reinvested 93 84 8 11
Shares Redeemed (4,284) (930) (3) (40)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class B Shares Outstanding 1,270 3,943 5 (29)
===============================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
110
<Page>
2003 ANNUAL REPORT
December 31, 2003
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
MONEY MARKET MUNICIPAL MONEY MARKET
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2003 2002
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS OPERATIONS:
Net Investment Income $ 7,531 $ 23,617 $ 4,229 $ 10,310
Net Realized Gain (Loss) -- -- 10 --
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 7,531 23,617 4,239 10,310
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
CLASS A:
Net Investment Income (7,531) (23,615) (4,229) (10,310)
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
CLASS A:
Subscribed 3,249,589 6,805,999 3,422,911 5,534,478
Distributions Reinvested 7,829 23,615 4,390 10,310
Redeemed (3,831,954) (8,165,964) (3,826,186) (5,981,180)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Capital Share Transactions (574,536) (1,336,350) (398,885) (436,392)
- -------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (574,536) (1,336,348) (398,875) (436,392)
NET ASSETS:
Beginning of Period 1,369,935 2,706,283 910,426 1,346,818
- -------------------------------------------------------------------------------------------------------------------------------
End of Period $ 795,399 $ 1,369,935 $ 511,551 $ 910,426
===============================================================================================================================
Undistributed (distributions in excess of) net investment
income included in end of period net assets $ 88 $ 88 $ 19 $ 9
===============================================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
CLASS A:
Shares Subscribed 3,249,588 6,805,999 3,422,906 5,534,480
Shares Issued on Distributions Reinvested 7,829 23,615 4,390 10,310
Shares Redeemed (3,831,950) (8,165,964) (3,826,184) (5,981,170)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Class A Shares Outstanding (574,533) (1,336,350) (398,888) (436,380)
===============================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
111
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO
<Table>
<Caption>
CLASS A
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.30 $ 8.65 $ 10.68
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.13+ 0.13+ 0.12
Net Realized and Unrealized Gain (Loss) on Investments 2.32 (1.26) (2.01)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.45 (1.13) (1.89)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.17) (0.22) (0.14)
Net Realized Gain -- -- (0.00)++
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.17) (0.22) (0.14)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.58 $ 7.30 $ 8.65
=====================================================================================================================
TOTAL RETURN 33.65% (13.11)% (17.63)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 353,488 $ 249,742 $ 388,225
Ratio of Expenses to Average Net Assets(1) 0.80% 0.80% 0.81%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 0.80% N/A 0.80%
Ratio of Net Investment Income (Loss) to Average Net Assets(1) 1.66% 1.57% 1.25%
Portfolio Turnover Rate 55% 42% 36%
- ---------------------------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 0.96% 0.93% 0.89%
Net Investment Income (Loss) to Average Net Assets 1.50% 1.44% 1.17%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS A
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.26 $ 11.90
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.19 0.22
Net Realized and Unrealized Gain (Loss) on Investments (2.32) 3.01
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations (2.13) 3.23
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.01) (0.11)
Net Realized Gain (1.44) (0.76)
- ----------------------------------------------------------------------------------------------------
Total Distributions (1.45) (0.87)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.68 $ 14.26
====================================================================================================
TOTAL RETURN (14.97)% 27.82%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 509,309 $ 583,607
Ratio of Expenses to Average Net Assets(1) 0.82% 0.80%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 0.80% N/A
Ratio of Net Investment Income (Loss) to Average Net Assets(1) 1.55% 1.71%
Portfolio Turnover Rate 80% 53%
- ----------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 0.93% 0.92%
Net Investment Income (Loss) to Average Net Assets 1.45% 1.59%
- ----------------------------------------------------------------------------------------------------
<Caption>
CLASS B
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.41 $ 8.77 $ 10.80
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.12+ 0.11+ 0.13
Net Realized and Unrealized Gain (Loss) on Investments 2.33 (1.27) (2.06)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.45 (1.16) (1.93)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.14) (0.20) (0.10)
Net Realized Gain -- -- (0.00)++
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.14) (0.20) (0.10)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.72 $ 7.41 $ 8.77
=====================================================================================================================
TOTAL RETURN 33.13% (13.29)% (17.81)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 5,635 $ 8,418 $ 10,362
Ratio of Expenses to Average Net Assets(2) 1.05% 1.05% 1.06%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.05% N/A 1.05%
Ratio of Net Investment Income (Loss) to Average Net Assets(2) 1.41% 1.32% 1.05%
Portfolio Turnover Rate 55% 42% 36%
- ---------------------------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.21% 1.18% 1.14%
Net Investment Income (Loss) to Average Net Assets 1.25% 1.19% 0.97%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS B
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.41 $ 12.12
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.27 0.13
Net Realized and Unrealized Gain (Loss) on Investments (2.43) 3.02
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations (2.16) 3.15
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.01) (0.10)
Net Realized Gain (1.44) (0.76)
- ----------------------------------------------------------------------------------------------------
Total Distributions (1.45) (0.86)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.80 $ 14.41
====================================================================================================
TOTAL RETURN (15.02)% 26.63%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 19,814 $ 9,959
Ratio of Expenses to Average Net Assets(2) 1.07% 1.05%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.05% N/A
Ratio of Net Investment Income (Loss) to Average Net Assets(2) 1.42% 1.16%
Portfolio Turnover Rate 80% 53%
- ----------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.18% 1.17%
Net Investment Income (Loss) to Average Net Assets 1.31% 0.95%
- ----------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
++ Amount is less than $0.005 per share.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
112
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
ASIAN REAL ESTATE PORTFOLIO
<Table>
<Caption>
CLASS A
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.63 $ 6.60 $ 8.01
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.15+ 0.15+ 0.12
Net Realized and Unrealized Gain (Loss) on Investments 2.22 (0.91) (1.31)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.37 (0.76) (1.19)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.42) (0.21) (0.22)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 7.58 $ 5.63 $ 6.60
=====================================================================================================================
TOTAL RETURN 42.76% (11.55)% (14.91)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 2,962 $ 1,843 $ 2,020
Ratio of Expenses to Average Net Assets(1) 1.00% 1.00% 1.02%
Ratio of Expenses to Average Net Assets Excluding Interest Expense N/A N/A 1.00%
Ratio of Net Investment Income (Loss) to Average Net Assets(1) 2.39% 2.41% 1.69%
Portfolio Turnover Rate 55% 38% 40%
- ---------------------------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 4.04% 3.81% 3.29%
Net Investment Income (Loss) to Average Net Assets (0.65)% (0.40)% (0.58)%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS A
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.90 $ 6.63
- ----------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.15 0.11
Net Realized and Unrealized Gain (Loss) on Investments 0.11 1.50
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations 0.26 1.61
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.15) (0.34)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.01 $ 7.90
- ----------------------------------------------------------------------------------------------------
TOTAL RETURN 3.44% 24.27%
- ----------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 2,786 $ 2,912
Ratio of Expenses to Average Net Assets(1) 1.02% 1.01%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.00% 1.00%
Ratio of Net Investment Income (Loss) to Average Net Assets(1) 2.03% 1.64%
Portfolio Turnover Rate 87% 98%
- ----------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 4.04% 3.19%
Net Investment Income (Loss) to Average Net Assets (0.98)% (0.54)%
- ----------------------------------------------------------------------------------------------------
<Caption>
CLASS B
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.67 $ 6.64 $ 8.06
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.14+ 0.14+ 0.10
Net Realized and Unrealized Gain (Loss) on Investments 2.24 (0.91) (1.32)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.38 (0.77) (1.22)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.35) (0.20) (0.20)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 7.70 $ 5.67 $ 6.64
=====================================================================================================================
TOTAL RETURN 42.42% (11.72)% (15.18)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 13 $ 399 $ 421
Ratio of Expenses to Average Net Assets(2) 1.25% 1.25% 1.27%
Ratio of Expenses to Average Net Assets Excluding Interest Expense N/A N/A 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets(2) 2.14% 2.16% 1.33%
Portfolio Turnover Rate 55% 38% 40%
- ---------------------------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 4.29% 4.06% 3.54%
Net Investment Income (Loss) to Average Net Assets (0.90)% (0.65)% (0.94)%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS B
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.93 $ 6.66
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.09 0.13
Net Realized and Unrealized Gain (Loss) on Investments 0.16 1.46
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations 0.25 1.59
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.12) (0.32)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.06 $ 7.93
====================================================================================================
TOTAL RETURN 3.29% 23.88%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 484 $ 1,372
Ratio of Expenses to Average Net Assets(2) 1.27% 1.25%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.25% 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets(2) 1.56% 1.39%
Portfolio Turnover Rate 87% 98%
- ----------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 4.20% 3.10%
Net Investment Income (Loss) to Average Net Assets (1.36)% (0.45)%
- ----------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
113
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
EMERGING MARKETS PORTFOLIO
<Table>
<Caption>
CLASS A
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.13 $ 10.81 $ 11.31
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.14+ 0.04+ 0.05
Net Realized and Unrealized Gain (Loss) on Investments 5.44 (0.71) (0.55)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 5.58 (0.67) (0.50)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.18) (0.01) --
Net Realized Gain -- -- --
Return of Capital (0.01) -- --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.19) (0.01) --
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.52 $ 10.13 $ 10.81
=====================================================================================================================
TOTAL RETURN 55.08% (6.24)% (4.42)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 1,020,353 $ 657,203 $ 748,058
Ratio of Expenses to Average Net Assets 1.64% 1.65% 1.65%
Ratio of Expenses to Average Net Assets Excluding Country Tax
Expense and Interest Expense 1.61% 1.58% N/A
Ratio of Net Investment Income (Loss) to Average Net Assets 1.15% 0.35% 0.47%
Portfolio Turnover Rate 92% 91% 93%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS A
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.27 $ 9.55
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.10) (0.03)
Net Realized and Unrealized Gain (Loss) on Investments (7.28) 9.75
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations (7.38) 9.72
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income -- --
Net Realized Gain (0.58) --
Return of Capital -- --
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.58) --
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.31 $ 19.27
====================================================================================================
TOTAL RETURN (38.43)% 101.78%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 917,091 $ 1,544,893
Ratio of Expenses to Average Net Assets 1.63% 1.64%
Ratio of Expenses to Average Net Assets Excluding Country Tax
Expense and Interest Expense N/A N/A
Ratio of Net Investment Income (Loss) to Average Net Assets (0.63)% (0.26)%
Portfolio Turnover Rate 92% 133%
- ----------------------------------------------------------------------------------------------------
<Caption>
CLASS B
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.06 $ 10.73 $ 11.26
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.11+ 0.01+ 0.03
Net Realized and Unrealized Gain (Loss) on Investments 5.35 (0.68) (0.56)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 5.46 (0.67) (0.53)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.15) -- --
Net Realized Gain -- -- --
Return of Capital (0.01) -- --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.16) -- --
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.36 $ 10.06 $ 10.73
=====================================================================================================================
TOTAL RETURN 54.31% (6.24)% (4.71)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 42,046 $ 13,208 $ 14,456
Ratio of Expenses to Average Net Assets 1.89% 1.90% 1.90%
Ratio of Expenses to Average Net Assets Excluding Country Tax
Expense and Interest Expense 1.86% 1.83% N/A
Ratio of Net Investment Income (Loss) to Average Net Assets 0.90% 0.10% 0.22%
Portfolio Turnover Rate 92% 91% 93%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS B
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.24 $ 9.56
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.11) (0.04)
Net Realized and Unrealized Gain (Loss) on Investments (7.29) 9.72
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations (7.40) 9.68
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income -- --
Net Realized Gain (0.58) --
Return of Capital -- --
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.58) --
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.26 $ 19.24
====================================================================================================
TOTAL RETURN (38.60)% 101.26%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 13,949 $ 16,999
Ratio of Expenses to Average Net Assets 1.88% 1.88%
Ratio of Expenses to Average Net Assets Excluding Country Tax
Expense and Interest Expense N/A N/A
Ratio of Net Investment Income (Loss) to Average Net Assets (0.82)% (0.51)%
Portfolio Turnover Rate 92% 133%
- ----------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
114
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
EUROPEAN REAL ESTATE PORTFOLIO
<Table>
<Caption>
CLASS A
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.93 $ 9.30 $ 10.38
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.27+ 0.37+ 0.27
Net Realized and Unrealized Gain (Loss) on Investments 4.35 1.90 (1.09)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 4.62 2.27 (0.82)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.42) (0.64) (0.26)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.13 $ 10.93 $ 9.30
=====================================================================================================================
TOTAL RETURN 42.41% 24.52% (7.85)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 22,184 $ 19,215 $ 13,826
Ratio of Expenses to Average Net Assets (1) 1.00% 1.00% 1.01%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.00% N/A 1.00%
Ratio of Net Investment Income (Loss) to Average Net Assets (1) 2.23% 3.37% 2.30%
Portfolio Turnover Rate 47% 79% 46%
- ---------------------------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.49% 1.56% 1.53%
Net Investment Income (Loss) to Average Net Assets 1.74% 2.81% 1.74%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS A
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.16 $ 9.58
- ----------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.07 (0.05)
Net Realized and Unrealized Gain (Loss) on Investments 1.30 (0.17)
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations 1.37 (0.22)
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.15) (0.20)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.38 $ 9.16
====================================================================================================
TOTAL RETURN 14.91% (2.36)%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 7,766 $ 9,931
Ratio of Expenses to Average Net Assets (1) 1.03% 1.23%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.00% 1.00%
Ratio of Net Investment Income (Loss) to Average Net Assets (1) 1.55% 2.33%
Portfolio Turnover Rate 74% 35%
- ----------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.90% 1.71%
Net Investment Income (Loss) to Average Net Assets 0.69% 1.85%
- ----------------------------------------------------------------------------------------------------
<Caption>
CLASS B
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.96 $ 9.33 $ 10.41
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.28+ 0.27+ 0.08
Net Realized and Unrealized Gain (Loss) on Investments 4.32 1.97 (0.93)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 4.60 2.24 (0.85)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.39) (0.61) (0.23)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.17 $ 10.96 $ 9.33
=====================================================================================================================
TOTAL RETURN 42.06% 24.11% (8.08)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 915 $ 953 $ 1,687
Ratio of Expenses to Average Net Assets (2) 1.25% 1.25% 1.26%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.25% N/A 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) 1.98% 3.12% 1.53%
Portfolio Turnover Rate 47% 79% 46%
- ---------------------------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.74% 1.81% 1.78%
Net Investment Income (Loss) to Average Net Assets 1.49% 2.56% 0.96%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS B
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.19 $ 9.61
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.18 0.19
Net Realized and Unrealized Gain (Loss) on Investments 1.16 (0.43)
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations 1.34 (0.24)
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.12) (0.18)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.41 $ 9.19
====================================================================================================
TOTAL RETURN 14.55% (2.61)%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 1,449 $ 1,786
Ratio of Expenses to Average Net Assets (2) 1.28% 1.47%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.25% 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) 1.50% 2.35%
Portfolio Turnover Rate 74% 35%
- ----------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 2.15% 1.96%
Net Investment Income (Loss) to Average Net Assets 0.61% 1.91%
- ----------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
115
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
EUROPEAN VALUE EQUITY PORTFOLIO
<Table>
<Caption>
CLASS A
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.19 $ 11.42 $ 14.17
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.18+ 0.18+ 0.18
Net Realized and Unrealized Gain (Loss) on Investments 2.88 (1.24) (2.08)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.06 (1.06) (1.90)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.23) (0.17) (0.36)
Net Realized Gain -- -- (0.49)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.23) (0.17) (0.85)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.02 $ 10.19 $ 11.42
=====================================================================================================================
TOTAL RETURN 30.15% (9.24)% (13.47)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 32,791 $ 29,425 $ 34,117
Ratio of Expenses to Average Net Assets (1) 1.00% 1.01% 1.07%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.00% 1.00% 1.00%
Ratio of Net Investment Income (Loss) to Average Net Assets (1) 1.70% 1.65% 1.42%
Portfolio Turnover Rate 75% 104% 59%
- ---------------------------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.51% 1.50% 1.31%
Net Investment Income (Loss) to Average Net Assets 1.19% 1.16% 1.19%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS A
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.09 $ 15.75
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.25 0.29
Net Realized and Unrealized Gain (Loss) on Investments 0.76 1.10
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations 1.01 1.39
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.21) (0.35)
Net Realized Gain (1.72) (1.70)
- ----------------------------------------------------------------------------------------------------
Total Distributions (1.93) (2.05)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.17 $ 15.09
====================================================================================================
TOTAL RETURN 7.38% 9.60%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 65,747 $ 105,030
Ratio of Expenses to Average Net Assets (1) 1.02% 1.09%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.00% 1.00%
Ratio of Net Investment Income (Loss) to Average Net Assets (1) 1.22% 1.46%
Portfolio Turnover Rate 47% 74%
- ----------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.14% 1.22%
Net Investment Income (Loss) to Average Net Assets 1.09% 1.34%
- ----------------------------------------------------------------------------------------------------
<Caption>
CLASS B
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.21 $ 11.44 $ 14.19
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.16+ 0.18+ 0.03
Net Realized and Unrealized Gain (Loss) on Investments 2.88 (1.26) (1.96)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.04 (1.08) (1.93)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.21) (0.15) (0.33)
Net Realized Gain -- -- (0.49)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.21) (0.15) (0.82)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.04 $ 10.21 $ 11.44
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 29.80% (9.48)% (13.71)%
- ---------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 1,180 $ 942 $ 1,009
Ratio of Expenses to Average Net Assets (2) 1.25% 1.26% 1.32%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.25% 1.25% 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) 1.45% 1.40% 1.05%
Portfolio Turnover Rate 75% 104% 59%
- ---------------------------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.76% 1.75% 1.56%
Net Investment Income (Loss) to Average Net Assets 0.94% 0.91% 0.81%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS B
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.11 $ 15.74
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.19 0.12
Net Realized and Unrealized Gain (Loss) on Investments 0.78 1.23
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations 0.97 1.35
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.17) (0.28)
Net Realized Gain (1.72) (1.70)
- ----------------------------------------------------------------------------------------------------
Total Distributions (1.89) (1.98)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.19 $ 15.11
====================================================================================================
TOTAL RETURN 7.08% 9.36%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 2,287 $ 2,196
Ratio of Expenses to Average Net Assets (2) 1.27% 1.34%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.25% 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) 0.96% 1.30%
Portfolio Turnover Rate 47% 74%
- ----------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.39% 1.48%
Net Investment Income (Loss) to Average Net Assets 0.83% 1.16%
- ----------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
116
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
GLOBAL FRANCHISE PORTFOLIO
<Table>
<Caption>
CLASS A
------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD FROM
----------------------------- NOVEMBER 28, 2001*
SELECTED PER SHARE DATA AND RATIOS 2003 2002 TO DECEMBER 31, 2001
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.29 $ 10.48 $ 10.00
==========================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.23+ 0.17+ 0.01
Net Realized and Unrealized Gain (Loss) on Investments 2.91 0.68 0.47
- --------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.14 0.85 0.48
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.03) -- --
Net Realized Gain (0.11) (0.04) --
- --------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.14) (0.04) --
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.29 $ 11.29 $ 10.48
==========================================================================================================================
TOTAL RETURN 27.92% 8.10% 4.80%#
==========================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 79,756 $ 48,644 $ 10,595
Ratio of Expenses to Average Net Assets (1) 1.00% 1.00% 1.00%**
Ratio of Net Investment Income (Loss) to Average Net Assets (1) 1.91% 1.41% 1.30%**
Portfolio Turnover Rate 32% 62% N/A
- --------------------------------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.23% 1.28% 16.47%**
Net Investment Income (Loss) to Average Net Assets 1.68% 1.13% (14.17)%**
- --------------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS B
------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD FROM
----------------------------- NOVEMBER 28, 2001*
SELECTED PER SHARE DATA AND RATIOS 2003 2002 TO DECEMBER 31, 2001
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.24 $ 10.46 $ 10.00
==========================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.22+ 0.11+ (0.09)
Net Realized and Unrealized Gain (Loss) on Investments 2.88 0.71 0.55
- --------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.10 0.82 0.46
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.01) -- --
Net Realized Gain (0.11) (0.04) --
- --------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.12) (0.04) --
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.22 $ 11.24 $ 10.46
==========================================================================================================================
TOTAL RETURN 27.62% 7.82% 4.60%#
==========================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 2,682 $ 1,427 $ 415
Ratio of Expenses to Average Net Assets (2) 1.25% 1.25% 1.25%**
Ratio of Net Investment Income (Loss) to Average Net Assets (2) 1.66% 1.16% (13.29)%**
Portfolio Turnover Rate 32% 62% N/A
- --------------------------------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.48% 1.53% 16.72%**
Net Investment Income (Loss) to Average Net Assets 1.43% 0.88% (21.62)%**
- --------------------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
* Commencement of Operations
** Annualized
# Not annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
117
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
GLOBAL VALUE EQUITY PORTFOLIO
<Table>
<Caption>
CLASS A
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.46 $ 15.45 $ 17.05
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.19+ 0.15+ 0.13
Net Realized and Unrealized Gain (Loss) on Investments 3.43 (2.82) (1.56)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.62 (2.67) (1.43)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.16) (0.20) (0.17)
Net Realized Gain (0.08) (0.12) --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.24) (0.32) (0.17)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.84 $ 12.46 $ 15.45
=====================================================================================================================
TOTAL RETURN 29.21% (17.34)% (8.36)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 55,545 $ 34,297 $ 34,079
Ratio of Expenses to Average Net Assets (1) 1.00% 1.00% 1.01%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.00% N/A 1.00%
Ratio of Net Investment Income (Loss) to Average Net Assets (1) 1.44% 1.08% 0.79%
Portfolio Turnover Rate 53% 42% 51%
- ---------------------------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.20% 1.12% 1.16%
Net Investment Income (Loss) to Average Net Assets 1.24% 0.96% 0.64%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS A
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.32 $ 20.74
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.26 0.44
Net Realized and Unrealized Gain (Loss) on Investments 1.75 0.32
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations 2.01 0.76
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.62) (0.44)
Net Realized Gain (2.66) (2.74)
- ----------------------------------------------------------------------------------------------------
Total Distributions (3.28) (3.18)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.05 $ 18.32
====================================================================================================
TOTAL RETURN 11.75% 4.01%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 40,418 $ 115,646
Ratio of Expenses to Average Net Assets (1) 1.01% 1.01%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.00% 1.00%
Ratio of Net Investment Income (Loss) to Average Net Assets (1) 1.16% 1.26%
Portfolio Turnover Rate 48% 41%
- ----------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.17% 1.06%
Net Investment Income (Loss) to Average Net Assets 1.00% 1.20%
- ----------------------------------------------------------------------------------------------------
<Caption>
CLASS B
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.35 $ 15.33 $ 16.92
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.16+ 0.12+ 0.13
Net Realized and Unrealized Gain (Loss) on Investments 3.40 (2.82) (1.58)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.56 (2.70) (1.45)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.13) (0.16) (0.14)
Net Realized Gain (0.08) (0.12) --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.21) (0.28) (0.14)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.70 $ 12.35 $ 15.33
=====================================================================================================================
TOTAL RETURN 28.95% (17.63)% (8.58)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 32,761 $ 26,866 $ 30,089
Ratio of Expenses to Average Net Assets (2) 1.25% 1.25% 1.26%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.25% N/A 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) 1.19% 0.83% 0.78%
Portfolio Turnover Rate 53% 42% 51%
- ---------------------------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.45% 1.37% 1.41%
Net Investment Income (Loss) to Average Net Assets 0.99% 0.71% 0.64%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS B
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.20 $ 20.63
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.27 0.21
Net Realized and Unrealized Gain (Loss) on Investments 1.68 0.50
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations 1.95 0.71
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.57) (0.40)
Net Realized Gain (2.66) (2.74)
- ----------------------------------------------------------------------------------------------------
Total Distributions (3.23) (3.14)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 16.92 $ 18.20
====================================================================================================
TOTAL RETURN 11.52% 3.75%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 30,196 $ 28,089
Ratio of Expenses to Average Net Assets (2) 1.26% 1.26%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.25% 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) 1.14% 0.89%
Portfolio Turnover Rate 48% 41%
- ----------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.42% 1.31%
Net Investment Income (Loss) to Average Net Assets 0.97% 0.83%
- ----------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
118
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
INTERNATIONAL EQUITY PORTFOLIO
<Table>
<Caption>
CLASS A
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.60 $ 15.59 $ 17.88
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.24+ 0.19+ 0.25
Net Realized and Unrealized Gain (Loss) on Investments 4.54 (0.82) (2.00)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 4.78 (0.63) (1.75)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.32) (0.33) (0.34)
Net Realized Gain -- (0.03) (0.20)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.32) (0.36) (0.54)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 19.06 $ 14.60 $ 15.59
=====================================================================================================================
TOTAL RETURN 32.82% (4.02)% (9.74)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 5,657,941 $ 3,953,655 $ 4,004,817
Ratio of Expenses to Average Net Assets (1) 1.00% 1.00% 1.00%
Ratio of Net Investment Income (Loss) to Average Net Assets (1) 1.48% 1.24% 1.35%
Portfolio Turnover Rate 45% 51% 63%
- ---------------------------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.02% 1.00% 1.01%
Net Investment Income (Loss) to Average Net Assets 1.46% 1.24% 1.34%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS B
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.62 $ 18.25
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.25 0.24
Net Realized and Unrealized Gain (Loss) on Investments 1.44 2.80
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations 1.69 3.04
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.04) (0.18)
Net Realized Gain (3.39) (1.49)
- ----------------------------------------------------------------------------------------------------
Total Distributions (3.43) (1.67)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.88 $ 19.62
====================================================================================================
TOTAL RETURN 9.29% 16.91%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 4,810,852 $ 4,630,035
Ratio of Expenses to Average Net Assets (1) 1.00% 1.00%
Ratio of Net Investment Income (Loss) to Average Net Assets (1) 1.45% 1.28%
Portfolio Turnover Rate 53% 37%
- ----------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.00% 1.01%
Net Investment Income (Loss) to Average Net Assets 1.45% 1.27%
- ----------------------------------------------------------------------------------------------------
<Caption>
CLASS B
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.53 $ 15.53 $ 17.81
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.18+ 0.12+ 0.07
Net Realized and Unrealized Gain (Loss) on Investments 4.54 (0.78) (1.83)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 4.72 (0.66) (1.76)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.29) (0.31) (0.32)
Net Realized Gain -- (0.03) (0.20)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.29) (0.34) (0.52)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.96 $ 14.53 $ 15.53
=====================================================================================================================
TOTAL RETURN 32.46% (4.25)% (9.83)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 733,298 $ 439,422 $ 165,439
Ratio of Expenses to Average Net Assets (2) 1.25% 1.25% 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) 1.23% 0.99% 0.73%
Portfolio Turnover Rate 45% 51% 63%
- ---------------------------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.27% 1.25% 1.26%
Net Investment Income (Loss) to Average Net Assets 1.21% 0.99% 0.72%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS B
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.58 $ 18.22
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.23 0.19
Net Realized and Unrealized Gain (Loss) on Investments 1.39 2.81
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations 1.62 3.00
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income -- (0.15)
Net Realized Gain (3.39) (1.49)
- ----------------------------------------------------------------------------------------------------
Total Distributions (3.39) (1.64)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.81 $ 19.58
====================================================================================================
TOTAL RETURN 8.94% 16.68%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 59,945 $ 41,374
Ratio of Expenses to Average Net Assets (2) 1.25% 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) 1.44% 0.93%
Portfolio Turnover Rate 53% 37%
- ----------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.25% 1.26%
Net Investment Income (Loss) to Average Net Assets 1.44% 0.92%
- ----------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
119
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
INTERNATIONAL MAGNUM PORTFOLIO
<Table>
<Caption>
CLASS A
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.04 $ 9.34 $ 11.56
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.11+ 0.07+ 0.11
Net Realized and Unrealized Gain (Loss) on Investments 2.22 (1.31) (2.27)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.33 (1.24) (2.16)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.17) (0.06) (0.06)
Net Realized Gain -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.17) (0.06) (0.06)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.20 $ 8.04 $ 9.34
=====================================================================================================================
TOTAL RETURN 29.07% (13.36)% (18.71)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 91,087 $ 68,275 $ 120,753
Ratio of Expenses to Average Net Assets(1) 1.00% 1.01% 1.01%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.00% 1.00% 1.00%
Ratio of Net Investment Income (Loss) to Average Net Assets(1) 1.25% 0.81% 1.00%
Portfolio Turnover Rate 53% 59% 44%
- ---------------------------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.29% 1.30% 1.14%
Net Investment Income (Loss) to Average Net Assets 0.96% 0.52% 0.87%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS A
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.62 $ 11.57
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.11 0.19
Net Realized and Unrealized Gain (Loss) on Investments (1.52) 2.64
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations (1.41) 2.83
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.16) (0.15)
Net Realized Gain (0.49) (0.63)
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.65) (0.78)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.56 $ 13.62
====================================================================================================
TOTAL RETURN (10.50)% 24.87%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 183,566 $ 188,586
Ratio of Expenses to Average Net Assets(1) 1.01% 1.01%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.00% 1.00%
Ratio of Net Investment Income (Loss) to Average Net Assets(1) 0.84% 0.89%
Portfolio Turnover Rate 56% 59%
- ----------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.10% 1.11%
Net Investment Income (Loss) to Average Net Assets 0.75% 0.80%
- ----------------------------------------------------------------------------------------------------
<Caption>
CLASS B
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.04 $ 9.32 $ 11.52
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.10+ 0.06+ 0.01
Net Realized and Unrealized Gain (Loss) on Investments 2.18 (1.31) (2.18)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.28 (1.25) (2.17)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.14) (0.03) (0.03)
Net Realized Gain -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.14) (0.03) (0.03)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.18 $ 8.04 $ 9.32
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 28.49% (13.49)% (18.87)%
- ---------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 2,232 $ 6,644 $ 10,542
Ratio of Expenses to Average Net Assets(2) 1.25% 1.26% 1.26%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.25% 1.25% 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets(2) 1.00% 0.56% 0.75%
Portfolio Turnover Rate 53% 59% 44%
- ---------------------------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.54% 1.55% 1.39%
Net Investment Income (Loss) to Average Net Assets 0.71% 0.27% 0.62%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS B
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.58 $ 11.54
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.08 0.11
Net Realized and Unrealized Gain (Loss) on Investments (1.54) 2.68
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations (1.46) 2.79
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.12) (0.12)
Net Realized Gain (0.48) (0.63)
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.60) (0.75)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.52 $ 13.58
====================================================================================================
TOTAL RETURN (10.81)% 24.58%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 23,474 $ 30,770
Ratio of Expenses to Average Net Assets(2) 1.26% 1.25%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.25% 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets(2) 0.58% 0.87%
Portfolio Turnover Rate 56% 59%
- ----------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.35% 1.35%
Net Investment Income (Loss) to Average Net Assets 0.49% 0.54%
- ----------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
120
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
INTERNATIONAL SMALL CAP PORTFOLIO
<Table>
<Caption>
CLASS A
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.21 $ 14.82 $ 16.30
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.24+ 0.15+ 0.21
Net Realized and Unrealized Gain (Loss) on Investments ^^ 6.61 (0.59) (1.18)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 6.85 (0.44) (0.97)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.23) (0.13) (0.27)
Net Realized Gain (0.31) (0.04) (0.24)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.54) (0.17) (0.51)
- ---------------------------------------------------------------------------------------------------------------------
TRANSACTION FEES -- -- 0.00++
=====================================================================================================================
NET ASSET VALUE, END OF PERIOD $ 20.52 $ 14.21 $ 14.82
=====================================================================================================================
TOTAL RETURN 48.32% (2.99)% (5.88)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 899,996 $ 440,124 $ 376,981
Ratio of Expenses to Average Net Assets (1) 1.15% 1.15% 1.15%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.15% N/A N/A
Ratio of Net Investment Income (Loss) to Average Net Assets (1) 1.40% 1.00% 1.38%
Portfolio Turnover Rate 38% 34% 39%
- ---------------------------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.20% 1.19% 1.19%
Net Investment Income (Loss) to Average Net Assets 1.35% 0.96% 1.34%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS A
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.67 $ 15.25
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.24 0.22
Net Realized and Unrealized Gain (Loss) on Investments ^^ (0.86) 5.66
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations (0.62) 5.88
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.17) (0.29)
Net Realized Gain (2.61) (1.20)
- ----------------------------------------------------------------------------------------------------
Total Distributions (2.78) (1.49)
- ----------------------------------------------------------------------------------------------------
TRANSACTION FEES 0.03 0.03
====================================================================================================
NET ASSET VALUE, END OF PERIOD $ 16.30 $ 19.67
====================================================================================================
TOTAL RETURN (2.92)% 39.34%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 374,924 $ 357,708
Ratio of Expenses to Average Net Assets (1) 1.16% 1.15%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.15% N/A
Ratio of Net Investment Income (Loss) to Average Net Assets (1) 1.32% 1.30%
Portfolio Turnover Rate 54% 48%
- ----------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.22% 1.20%
Net Investment Income (Loss) to Average Net Assets 1.38% 1.25%
- ----------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
++ Amount is less than $0.005 per share.
^^ Includes a 1.0% transaction fee on subscriptions and redemptions of capital
shares through 1999 and 0.50% for the years ended 2000 and 2001.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
121
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
JAPANESE VALUE EQUITY PORTFOLIO
<Table>
<Caption>
CLASS A
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 4.66 $ 5.25 $ 7.62
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.00)+++ (0.01)+ (0.01)+
Net Realized and Unrealized Gain (Loss) on Investments 1.49 (0.58) (2.25)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.49 (0.59) (2.26)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income -- -- (0.11)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 6.15 $ 4.66 $ 5.25
=====================================================================================================================
TOTAL RETURN 31.97% (11.22)% (29.96)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 36,295 $ 24,159 $ 22,921
Ratio of Expenses to Average Net Assets (1) 1.03% 1.02% 1.02%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.00% 1.00% 1.00%
Ratio of Net Investment Income (Loss) to Average Net Assets (1) (0.00)%^ (0.15)% (0.21)%
Portfolio Turnover Rate 79% 45% 14%
- ---------------------------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.39% 1.29% 1.26%
Net Investment Income (Loss) to Average Net Assets (0.36)% (0.42)% (0.45)%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS A
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.12 $ 6.18
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.02) (0.02)+
Net Realized and Unrealized Gain (Loss) on Investments (2.37) 3.96
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations (2.39) 3.94
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.11) --
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 7.62 $ 10.12
====================================================================================================
TOTAL RETURN (23.69)% 63.75%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 56,306 $ 73,666
Ratio of Expenses to Average Net Assets (1) 1.03% 1.01%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.00% 1.00%
Ratio of Net Investment Income (Loss) to Average Net Assets (1) (0.29)% (0.28)%
Portfolio Turnover Rate 14% 26%
- ----------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.12% 1.14%
Net Investment Income (Loss) to Average Net Assets (0.38)% (0.41)%
- ----------------------------------------------------------------------------------------------------
<Caption>
CLASS B
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 4.59 $ 5.18 $ 7.54
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.02)+ (0.03)+ (0.03)+
Net Realized and Unrealized Gain (Loss) on Investments 1.47 (0.56) (2.22)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.45 (0.59) (2.25)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income -- -- (0.11)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 6.04 $ 4.59 $ 5.18
=====================================================================================================================
TOTAL RETURN 31.59% (11.39)% (30.15)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 451 $ 308 $ 1,057
Ratio of Expenses to Average Net Assets (2) 1.28% 1.27% 1.27%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.25% 1.25% 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) (0.25)% (0.40)% (0.50)%
Portfolio Turnover Rate 79% 45% 14%
- ---------------------------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.64% 1.54% 1.51%
Net Investment Income (Loss) to Average Net Assets (0.61)% (0.67)% (0.74)%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS B
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.02 $ 6.13
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.02 0.08+
Net Realized and Unrealized Gain (Loss) on Investments (2.41) 3.81
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations (2.39) 3.89
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.09) --
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 7.54 $ 10.02
====================================================================================================
TOTAL RETURN (23.93)% 63.46%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 3,851 $ 3,538
Ratio of Expenses to Average Net Assets (2) 1.28% 1.26%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.25% 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) (0.54)% (0.57)%
Portfolio Turnover Rate 14% 26%
- ----------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.37% 1.39%
Net Investment Income (Loss) to Average Net Assets (0.62)% (0.67)%
- ----------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
++ Amount is less than $0.005 per share.
^ Amount is less than 0.005%.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
122
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
LATIN AMERICAN PORTFOLIO
<Table>
<Caption>
CLASS A
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.13 $ 9.09 $ 9.36
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.17+ 0.12+ 0.23
Net Realized and Unrealized Gain (Loss) on Investments 4.06 (1.99) (0.36)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 4.23 (1.87) (0.13)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.18) (0.09) (0.14)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.18 $ 7.13 $ 9.09
=====================================================================================================================
TOTAL RETURN 59.35% (20.55)% (1.48)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 26,817 $ 18,032 $ 22,699
Ratio of Expenses to Average Net Assets (1) 1.71% 1.67% 1.80%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.70% 1.58% 1.72%
Ratio of Net Investment Income (Loss) to Average Net Assets (1) 2.02% 1.52% 2.27%
Portfolio Turnover Rate 110% 76% 58%
- ---------------------------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.79% 1.67% 1.80%
Net Investment Income (Loss) to Average Net Assets 1.94% 1.52% 2.25%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS A
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.32 $ 6.74
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.01 0.18
Net Realized and Unrealized Gain (Loss) on Investments (1.82) 4.59
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations (1.81) 4.77
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.15) (0.19)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.36 $ 11.32
====================================================================================================
TOTAL RETURN (16.21)% 71.28%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 25,403 $ 13,809
Ratio of Expenses to Average Net Assets (1) 1.84% 1.79%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.70% 1.70%
Ratio of Net Investment Income (Loss) to Average Net Assets (1) (0.03)% 1.40%
Portfolio Turnover Rate 133% 124%
- ----------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 2.06% 2.12%
Net Investment Income (Loss) to Average Net Assets (0.25)% 1.07%
- ----------------------------------------------------------------------------------------------------
<Caption>
CLASS B
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.15 $ 9.10 $ 9.37
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.16+ 0.13+ 0.25
Net Realized and Unrealized Gain (Loss) on Investments 4.05 (2.02) (0.41)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 4.21 (1.89) (0.16)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.03) (0.06) (0.11)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.33 $ 7.15 $ 9.10
=====================================================================================================================
TOTAL RETURN 58.90% (20.83)% (1.77)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 22 $ 196 $ 825
Ratio of Expenses to Average Net Assets (2) 1.96% 1.92% 2.05%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.95% 1.83% 1.97%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) 1.77% 1.27% 2.05%
Portfolio Turnover Rate 110% 76% 58%
- ---------------------------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 2.04% 1.92% 2.05%
Net Investment Income (Loss) to Average Net Assets 1.69% 1.27% 2.03%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS B
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.36 $ 6.78
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.01) 0.19
Net Realized and Unrealized Gain (Loss) on Investments (1.83) 4.58
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations (1.84) 4.77
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.15) (0.19)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.37 $ 11.36
====================================================================================================
TOTAL RETURN (16.42)% 70.85%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 1,140 $ 1,387
Ratio of Expenses to Average Net Assets (2) 2.09% 2.05%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.95% 1.95%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) 0.33% 1.04%
Portfolio Turnover Rate 133% 124%
- ----------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 2.31% 2.35%
Net Investment Income (Loss) to Average Net Assets (0.26)% 0.75%
- ----------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
123
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
EQUITY GROWTH PORTFOLIO
<Table>
<Caption>
CLASS A
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.49 $ 17.29 $ 20.51
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.05+ 0.03+ 0.01
Net Realized and Unrealized Gain (Loss) on Investments 3.25 (4.80) (3.08)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.30 (4.77) (3.07)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.05) (0.03) --
Net Realized Gain -- -- (0.15)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.05) (0.03) (0.15)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.74 $ 12.49 $ 17.29
=====================================================================================================================
TOTAL RETURN 26.41%~ (27.64)% (14.97)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 589,698 $ 432,207 $ 603,652
Ratio of Expenses to Average Net Assets (1) 0.80% 0.80% 0.80%
Ratio of Net Investment Income (Loss) to Average Net Assets (1) 0.34% 0.21% 0.05%
Portfolio Turnover Rate 131% 143% 94%
- ---------------------------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 0.82% 0.81% 0.81%
Net Investment Income (Loss) to Average Net Assets 0.32% 0.21% 0.06%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS A
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 25.04 $ 19.04
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.01) (0.02)
Net Realized and Unrealized Gain (Loss) on Investments (2.76) 7.49
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations (2.77) 7.47
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income -- (0.00)++
Net Realized Gain (1.76) (1.47)
- ----------------------------------------------------------------------------------------------------
Total Distributions (1.76) (1.47)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 20.51 $ 25.04
====================================================================================================
TOTAL RETURN (11.78)% 39.89%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 886,824 $ 977,005
Ratio of Expenses to Average Net Assets (1) 0.80% 0.80%
Ratio of Net Investment Income (Loss) to Average Net Assets (1) 0.79% (0.10)%
Portfolio Turnover Rate 71% 91%
- ----------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 0.80% 0.80%
Net Investment Income (Loss) to Average Net Assets (0.06)% (0.10)%
- ----------------------------------------------------------------------------------------------------
<Caption>
CLASS B
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.34 $ 17.08 $ 20.32
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.01+ (0.00)+++ (0.04)
Net Realized and Unrealized Gain (Loss) on Investments 3.21 (4.74) (3.05)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.22 (4.74) (3.09)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.01) -- --
Net Realized Gain -- -- (0.15)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.01) -- (0.15)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.55 $ 12.34 $ 17.08
=====================================================================================================================
TOTAL RETURN 26.13%~ (27.75)% (15.26)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 199,591 $ 156,501 $ 223,646
Ratio of Expenses to Average Net Assets (2) 1.05% 1.05% 1.05%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) 0.09% (0.04)% (0.22)%
Portfolio Turnover Rate 131% 143% 94%
- ---------------------------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.07% 1.06% 1.06%
Net Investment Income (Loss) to Average Net Assets 0.07% (0.04)% (0.22)%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS B
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 24.90 $ 18.97
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.04) (0.04)
Net Realized and Unrealized Gain (Loss) on Investments (2.78) 7.44
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations (2.82) 7.40
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income -- (0.00)++
Net Realized Gain (1.76) (1.47)
- ----------------------------------------------------------------------------------------------------
Total Distributions (1.76) (1.47)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 20.32 $ 24.90
====================================================================================================
TOTAL RETURN (12.01)% 39.61%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 350,556 $ 246,889
Ratio of Expenses to Average Net Assets (2) 1.05% 1.05%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) (1.04)% (0.34)%
Portfolio Turnover Rate 71% 91%
- ----------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.05% 1.05%
Net Investment Income (Loss) to Average Net Assets (0.30)% (0.34)%
- ----------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
++ Amount is less than $0.005 per share.
~ Performance was positively impacted by approximately 1.34%, due to the
receipt of proceeds from the settlement of class action suits involving,
primarily, one of the Portfolio's holdings. This was a one-time settlement,
and as a result, the impact on the NAV and consequently the performance
will not likely be repeated in the future. Had these settlements not
occured, the total return for Class A shares and Class B shares would have
been approximately 25.07% and 24.79%, respectively.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
124
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
FOCUS EQUITY PORTFOLIO
<Table>
<Caption>
CLASS A
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.02 $ 12.67 $ 15.31
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.02+ 0.00+++ (0.03)
Net Realized and Unrealized Gain (Loss) on Investments 2.77 (3.65) (2.28)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.79 (3.65) (2.31)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.02) -- --
Net Realized Gain -- -- (0.33)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.02) -- (0.33)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.79 $ 9.02 $ 12.67
=====================================================================================================================
TOTAL RETURN 30.99%~ (28.81)% (15.22)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 61,420 $ 51,347 $ 85,204
Ratio of Expenses to Average Net Assets (1) 1.00% 1.00% 1.01%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.00% N/A 1.00%
Ratio of Net Investment Income (Loss) to Average Net Assets (1) 0.22% 0.02% (0.21)%
Portfolio Turnover Rate 160% 173% 95%
- ---------------------------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.14% 1.09% 1.08%
Net Investment Income (Loss) to Average Net Assets 0.08% (0.07)% (0.28)%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS A
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.70 $ 17.50
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.05) (0.06)
Net Realized and Unrealized Gain (Loss) on Investments (2.05) 7.89
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations (2.10) 7.83
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income -- --
Net Realized Gain (2.29) (5.63)
- ----------------------------------------------------------------------------------------------------
Total Distributions (2.29) (5.63)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.31 $ 19.70
====================================================================================================
TOTAL RETURN (11.66)% 46.44%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 126,531 $ 136,128
Ratio of Expenses to Average Net Assets (1) 1.00% 1.01%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.00% 1.00%
Ratio of Net Investment Income (Loss) to Average Net Assets (1) (0.27)% (0.33)%
Portfolio Turnover Rate 93% 155%
- ----------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.04% 1.07%
Net Investment Income (Loss) to Average Net Assets (0.29)% (0.39)%
- ----------------------------------------------------------------------------------------------------
<Caption>
CLASS B
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.85 $ 12.45 $ 15.09
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.00)+++ (0.03)+ (0.07)
Net Realized and Unrealized Gain (Loss) on Investments 2.72 (3.57) (2.24)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.72 (3.60) (2.31)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Realized Gain -- -- (0.33)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.57 $ 8.85 $ 12.45
=====================================================================================================================
TOTAL RETURN 30.62%~ (28.92)% (15.45)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 8,156 $ 6,414 $ 13,143
Ratio of Expenses to Average Net Assets (2) 1.25% 1.25% 1.26%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.25% N/A 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) (0.03)% (0.23)% (0.45)%
Portfolio Turnover Rate 160% 173% 95%
- ---------------------------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.39% 1.34% 1.33%
Net Investment Income (Loss) to Average Net Assets (0.17)% (0.32)% (0.53)%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS B
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.50 $ 17.40
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.08) (0.08)
Net Realized and Unrealized Gain (Loss) on Investments (2.04) 7.81
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations (2.12) 7.73
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Realized Gain (2.29) (5.63)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.09 $ 19.50
====================================================================================================
TOTAL RETURN (11.89)% 46.13%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 18,876 $ 22,168
Ratio of Expenses to Average Net Assets (2) 1.25% 1.26%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.25% 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) (0.52)% (0.58)%
Portfolio Turnover Rate 93% 155%
- ----------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.29% 1.32%
Net Investment Income (Loss) to Average Net Assets (0.54)% (0.64)%
- ----------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
++ Amount is less than $0.005 per share.
~ Performance was positively impacted by approximately 5.64%, due to the
receipt of proceeds from the settlement of class action suits involving,
primarily, one of the Portfolio's holdings. This was a one-time settlement,
and as a result, the impact on the NAV and consequently the performance
will not likely be repeated in the future. Had these settlements not
occured, the total return for Class A shares and Class B shares would have
been approximately 25.35% and 24.98%, respectively.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
125
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
SMALL COMPANY GROWTH PORTFOLIO
<Table>
<Caption>
CLASS A
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.50 $ 9.65 $ 10.99
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.09)+ (0.07)+ (0.06)
Net Realized and Unrealized Gain (Loss) on Investments 3.40 (2.08) (1.28)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.31 (2.15) (1.34)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Realized Gain -- -- (0.00)++
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.81 $ 7.50 $ 9.65
=====================================================================================================================
TOTAL RETURN 44.13% (22.28)% (12.18)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 299,198 $ 74,554 $ 82,300
Ratio of Expenses to Average Net Assets (1) 1.10% 1.10% 1.10%
Ratio of Net Investment Income (Loss) to Average Net Assets (1) (0.93)% (0.82)% (0.69)%
Portfolio Turnover Rate 160% 133% 144%
- ---------------------------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.26% 1.22% 1.25%
Net Investment Income (Loss) to Average Net Assets (1.09)% (0.94)% (0.83)%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS A
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.32 $ 8.07
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.08) (0.05)
Net Realized and Unrealized Gain (Loss) on Investments (0.69) 7.40
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations (0.77) 7.35
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Realized Gain (1.56) (2.10)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.99 $ 13.32
====================================================================================================
TOTAL RETURN (6.64)% 96.45%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 89,367 $ 77,193
Ratio of Expenses to Average Net Assets (1) 1.25% 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets (1) (0.68)% (0.59)%
Portfolio Turnover Rate 129% 204%
- ----------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.30% 1.43%
Net Investment Income (Loss) to Average Net Assets (0.73)% (0.78)%
- ----------------------------------------------------------------------------------------------------
<Caption>
CLASS B
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.26 $ 9.36 $ 10.68
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.10)+ (0.09)+ (0.06)
Net Realized and Unrealized Gain (Loss) on Investments 3.27 (2.01) (1.26)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.17 (2.10) (1.32)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Realized Gain -- -- (0.00)++
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.43 $ 7.26 $ 9.36
=====================================================================================================================
TOTAL RETURN 43.80% (22.44)% (12.35)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 484,136 $ 215,899 $ 184,099
Ratio of Expenses to Average Net Assets (2) 1.35% 1.35% 1.35%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) (1.18)% (1.07)% (0.97)%
Portfolio Turnover Rate 160% 133% 144%
- ---------------------------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.51% 1.47% 1.50%
Net Investment Income (Loss) to Average Net Assets (1.34)% (1.19)% (1.12)%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS B
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.01 $ 7.93
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.10) (0.08)
Net Realized and Unrealized Gain (Loss) on Investments (0.67) 7.26
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations (0.77) 7.18
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Realized Gain (1.56) (2.10)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.68 $ 13.01
====================================================================================================
TOTAL RETURN (6.81)% 95.97%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 91,069 $ 14,775
Ratio of Expenses to Average Net Assets (2) 1.50% 1.50%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) (0.97)% (0.87)%
Portfolio Turnover Rate 129% 204%
- ----------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.55% 1.66%
Net Investment Income (Loss) to Average Net Assets (1.02)% 1.03%
- ----------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
++ Amount is less than $0.005 per share.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
126
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
TECHNOLOGY PORTFOLIO
<Table>
<Caption>
CLASS A
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.69 $ 12.76 $ 25.82
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.09)+ (0.10)+ (0.18)
Net Realized and Unrealized Gain (Loss) on Investments 3.23 (5.97) (12.00)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.14 (6.07) (12.18)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Realized Gain -- -- (0.88)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.83 $ 6.69 $ 12.76
=====================================================================================================================
TOTAL RETURN 46.94%~ (47.57)% (47.89)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 24,934 $ 20,331 $ 42,195
Ratio of Expenses to Average Net Assets(1) 1.26% 1.26% 1.26%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.25% 1.25% 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets(1) (1.07)% (1.11)% (1.09)%
Portfolio Turnover Rate 156% 122% 107%
- ---------------------------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.51% 1.46% 1.34%
Net Investment Income (Loss) to Average Net Assets (1.32)% (1.32)% (1.17)%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS A
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 38.91 $ 17.98
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.34) (0.28)+
Net Realized and Unrealized Gain (Loss) on Investments (7.69) 28.07
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations (8.03) 27.79
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Realized Gain (5.06) (6.86)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 25.82 $ 38.91
====================================================================================================
TOTAL RETURN (22.67)% 160.62%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 101,588 $ 82,190
Ratio of Expenses to Average Net Assets(1) 1.26% 1.26%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.25% 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets(1) (1.05)% (1.06)%
Portfolio Turnover Rate 150% 250%
- ----------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.29% 1.28%
Net Investment Income (Loss) to Average Net Assets (1.08)% (1.09)%
- ----------------------------------------------------------------------------------------------------
<Caption>
CLASS B
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.61 $ 12.61 $ 25.58
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.11)+ (0.12)+ (0.21)
Net Realized and Unrealized Gain (Loss) on Investments 3.19 (5.88) (11.88)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.08 (6.00) (12.09)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Realized Gain -- -- (0.88)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.69 $ 6.61 $ 12.61
=====================================================================================================================
TOTAL RETURN 46.44%~ (47.62)% (47.99)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 4,437 $ 1,872 $ 3,137
Ratio of Expenses to Average Net Assets(2) 1.51% 1.51% 1.51%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.50% 1.50% 1.50%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) (1.32)% (1.36)% (1.34)%
Portfolio Turnover Rate 156% 122% 107%
- ---------------------------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.76% 1.71% 1.59%
Net Investment Income (Loss) to Average Net Assets (1.57)% (1.57)% (1.42)%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS B
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 38.69 $ 17.92
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.41) (0.35)+
Net Realized and Unrealized Gain (Loss) on Investments (7.64) 27.98
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations (8.05) 27.63
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Realized Gain (5.06) (6.86)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 25.58 $ 38.69
====================================================================================================
TOTAL RETURN (22.86)% 160.26%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 6,251 $ 4,192
Ratio of Expenses to Average Net Assets(2) 1.51% 1.51%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 1.50% 1.50%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) (1.30)% (1.31)%
Portfolio Turnover Rate 150% 250%
- ----------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.54% 1.53%
Net Investment Income (Loss) to Average Net Assets (1.34)% (1.32)%
- ----------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
~ Performance was positively impacted by approximately 0.68%, due to the
receipt of proceeds from the settlement of class action suits involving,
primarily, one of the Portfolio's holdings. This was a one-time settlement,
and as a result, the impact on the NAV and consequently the performance
will not likely be repeated in the future. Had these settlements not
occured, the total return for Class A shares and Class B shares would have
been approximately 46.26% and 45.76%, respectively.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
127
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
U.S. REAL ESTATE PORTFOLIO
<Table>
<Caption>
CLASS A
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.55 $ 14.63 $ 14.50
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.48+ 0.52+ 0.60
Net Realized and Unrealized Gain (Loss) on Investments 4.55 (0.48) 0.71
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 5.03 0.04 1.31
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.48) (0.52) (0.57)
Net Realized Gain (0.18) (0.60) (0.61)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.66) (1.12) (1.18)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.92 $ 13.55 $ 14.63
=====================================================================================================================
TOTAL RETURN 37.61% 0.18% 9.27%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 897,551 $ 655,274 $ 696,871
Ratio of Expenses to Average Net Assets(1) 1.00% 0.99% 1.00%
Ratio of Net Investment Income (Loss) to Average Net Assets(1) 3.08% 3.49% 4.19%
Portfolio Turnover Rate 17% 47% 33%
- ---------------------------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.01% 0.99% 1.01%
Net Investment Income (Loss) to Average Net Assets 3.07% 3.49% 4.18%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS A
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.84 $ 12.71
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.51 0.81
Net Realized and Unrealized Gain (Loss) on Investments 2.94 (0.98)
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations 3.45 (0.17)
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.56) (0.66)
Net Realized Gain (0.23) (0.04)
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.79) (0.70)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.50 $ 11.84
====================================================================================================
TOTAL RETURN 29.65% (1.48)%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 584,263 $ 311,064
Ratio of Expenses to Average Net Assets(1) 1.00% 1.00%
Ratio of Net Investment Income (Loss) to Average Net Assets(1) 4.13% 6.52%
Portfolio Turnover Rate 31% 47%
- ----------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 1.01% 1.02%
Net Investment Income (Loss) to Average Net Assets 4.11% 6.51%
- ----------------------------------------------------------------------------------------------------
<Caption>
CLASS B
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.47 $ 14.55 $ 14.45
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.45+ 0.45+ 0.56
Net Realized and Unrealized Gain (Loss) on Investments 4.50 (0.45) 0.68
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 4.95 -- 1.24
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.44) (0.48) (0.53)
Net Realized Gain (0.18) (0.60) (0.61)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.62) (1.08) (1.14)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.80 $ 13.47 $ 14.55
=====================================================================================================================
TOTAL RETURN 37.23% (0.07)% 8.78%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 70,146 $ 31,584 $ 23,198
Ratio of Expenses to Average Net Assets(2) 1.25% 1.24% 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets(2) 2.83% 3.24% 3.96%
Portfolio Turnover Rate 17% 47% 33%
- ---------------------------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.26% 1.24% 1.26%
Net Investment Income (Loss) to Average Net Assets 2.82% 3.24% 3.95%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS B
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.80 $ 12.67
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.49 0.82
Net Realized and Unrealized Gain (Loss) on Investments 2.92 (1.02)
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations 3.41 (0.20)
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.53) (0.63)
Net Realized Gain (0.23) (0.04)
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.76) (0.67)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.45 $ 11.80
====================================================================================================
TOTAL RETURN 29.36% (1.73)%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 20,235 $ 13,418
Ratio of Expenses to Average Net Assets(2) 1.25% 1.25%
Ratio of Net Investment Income (Loss) to Average Net Assets(2) 3.83% 6.13%
Portfolio Turnover Rate 31% 47%
- ----------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.26% 1.27%
Net Investment Income (Loss) to Average Net Assets 3.81% 6.12%
- ----------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
128
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
VALUE EQUITY PORTFOLIO
<Table>
<Caption>
CLASS A
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.21 $ 9.68 $ 10.32
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.13+ 0.14+ 0.15+
Net Realized and Unrealized Gain (Loss) on Investments 2.09 (2.47) (0.31)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.22 (2.33) (0.16)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.13) (0.14) (0.15)
Net Realized Gain -- -- (0.33)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.13) (0.14) (0.48)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.30 $ 7.21 $ 9.68
=====================================================================================================================
TOTAL RETURN 31.05% (24.22)% (1.55)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 108,997 $ 76,452 $ 101,691
Ratio of Expenses to Average Net Assets (1) 0.70% 0.70% 0.70%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 0.70% N/A N/A
Ratio of Net Investment Income (Loss) to Average Net Assets (1) 1.62% 1.69% 1.56%
Portfolio Turnover Rate 130% 45% 50%
- ---------------------------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 0.77% 0.76% 0.79%
Net Investment Income (Loss) to Average Net Assets 1.55% 1.63% 1.47%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS A
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.63 $ 10.78
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.16 0.26
Net Realized and Unrealized Gain (Loss) on Investments 1.54 0.97
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations 1.70 1.23
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.16) (0.17)
Net Realized Gain (0.85) (2.21)
- ----------------------------------------------------------------------------------------------------
Total Distributions (1.01) (2.38)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.32 $ 9.63
====================================================================================================
TOTAL RETURN 18.08% 11.63%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 70,454 $ 46,768
Ratio of Expenses to Average Net Assets (1) 0.70% 0.73%
Ratio of Expenses to Average Net Assets Excluding Interest Expense N/A 0.70%
Ratio of Net Investment Income (Loss) to Average Net Assets (1) 1.64% 1.25%
Portfolio Turnover Rate 62% 80%
- ----------------------------------------------------------------------------------------------------
(1) Ratios before expense limitation:
Expenses to Average Net Assets 0.81% 0.86%
Net Investment Income (Loss) to Average Net Assets 1.54% 1.12%
- ----------------------------------------------------------------------------------------------------
<Caption>
CLASS B
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.21 $ 9.67 $ 10.32
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.11+ 0.12+ 0.13+
Net Realized and Unrealized Gain (Loss) on Investments 2.10 (2.46) (0.32)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.21 (2.34) (0.19)
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.11) (0.12) (0.13)
Net Realized Gain -- -- (0.33)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.11) (0.12) (0.46)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.31 $ 7.21 $ 9.67
=====================================================================================================================
TOTAL RETURN 30.86% (24.32)% (1.89)%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 72,180 $ 46,757 $ 24,597
Ratio of Expenses to Average Net Assets (2) 0.95% 0.95% 0.95%
Ratio of Expenses to Average Net Assets Excluding Interest Expense 0.95% N/A N/A
Ratio of Net Investment Income (Loss) to Average Net Assets (2) 1.37% 1.44% 1.25%
Portfolio Turnover Rate 130% 45% 50%
- ---------------------------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.02% 1.01% 1.04%
Net Investment Income (Loss) to Average Net Assets 1.30% 1.38% 1.17%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS B
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.60 $ 10.76
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.12 0.20
Net Realized and Unrealized Gain (Loss) on Investments 1.56 0.99
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations 1.68 1.19
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.11) (0.13)
Net Realized Gain (0.85) (2.22)
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.96) (2.35)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.32 $ 9.60
====================================================================================================
TOTAL RETURN 17.92% 11.22%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 891 $ 921
Ratio of Expenses to Average Net Assets (2) 0.95% 0.98%
Ratio of Expenses to Average Net Assets Excluding Interest Expense N/A 0.95%
Ratio of Net Investment Income (Loss) to Average Net Assets (2) 1.35% 1.01%
Portfolio Turnover Rate 62% 80%
- ----------------------------------------------------------------------------------------------------
(2) Ratios before expense limitation:
Expenses to Average Net Assets 1.11% 1.13%
Net Investment Income (Loss) to Average Net Assets 1.24% 0.87%
- ----------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
129
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
EMERGING MARKETS DEBT PORTFOLIO
<Table>
<Caption>
CLASS A
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 2.95 $ 2.95 $ 2.88
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.25+ 0.27+ 0.21
Net Realized and Unrealized Gain (Loss) on Investments 0.59 0.06 0.09
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.84 0.33 0.30
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.26) (0.33) (0.23)
Return of Capital -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.26) (0.33) (0.23)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 3.53 $ 2.95 $ 2.95
=====================================================================================================================
TOTAL RETURN 28.46% 11.29% 10.57%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 54,647 $ 48,769 $ 52,561
Ratio of Expenses to Average Net Assets 1.16% 1.06% 1.13%
Ratio of Expenses to Average Net Assets Excluding Country Tax
Expense and Interest Expense 1.13% N/A N/A
Ratio of Net Investment Income to Average Net Assets 7.48% 8.79% 8.22%
Portfolio Turnover Rate 216% 157% 316%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS A
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 3.00 $ 2.61
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.55 0.43+
Net Realized and Unrealized Gain (Loss) on Investments (0.17) 0.34
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations 0.38 0.77
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.50) (0.37)
Return of Capital -- (0.01)
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.50) (0.38)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 2.88 $ 3.00
====================================================================================================
TOTAL RETURN 12.81% 29.22%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 47,080 $ 52,654
Ratio of Expenses to Average Net Assets 1.15% 1.40%
Ratio of Expenses to Average Net Assets Excluding Country Tax
Expense and Interest Expense 1.10% 1.29%
Ratio of Net Investment Income to Average Net Assets 13.33% 13.12%
Portfolio Turnover Rate 375% 249%
- ----------------------------------------------------------------------------------------------------
<Caption>
CLASS B
----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 3.00 $ 3.01 $ 2.92
=====================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.25+ 0.26+ 0.30
Net Realized and Unrealized Gain (Loss) on Investments 0.60 0.05 0.02
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.85 0.31 0.32
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.25) (0.32) (0.23)
Return of Capital -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.25) (0.32) (0.23)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 3.60 $ 3.00 $ 3.01
=====================================================================================================================
TOTAL RETURN 28.34% 10.34% 10.50%
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 429 $ 343 $ 429
Ratio of Expenses to Average Net Assets 1.41% 1.31% 1.38%
Ratio of Expenses to Average Net Assets Excluding Country Tax
Expense and Interest Expense 1.38% N/A N/A
Ratio of Net Investment Income to Average Net Assets 7.23% 8.54% 7.97%
Portfolio Turnover Rate 216% 157% 316%
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
CLASS B
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
SELECTED PER SHARE DATA AND RATIOS 2000 1999
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 3.03 $ 2.66
====================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.20 0.28+
Net Realized and Unrealized Gain (Loss) on Investments 0.17 0.46
- ----------------------------------------------------------------------------------------------------
Total from Investment Operations 0.37 0.74
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.48) (0.05)
Return of Capital -- (0.32)
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.48) (0.37)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 2.92 $ 3.03
====================================================================================================
TOTAL RETURN 12.50% 28.01%
====================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 387 $ 860
Ratio of Expenses to Average Net Assets 1.40% 1.65%
Ratio of Expenses to Average Net Assets Excluding Country Tax
Expense and Interest Expense 1.35% 1.55%
Ratio of Net Investment Income to Average Net Assets 13.28% 12.85%
Portfolio Turnover Rate 375% 249%
- ----------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
130
<Page>
2003 ANNUAL REPORT
December 31, 2003
FINANCIAL HIGHLIGHTS
MONEY MARKET PORTFOLIO
<Table>
<Caption>
CLASS A
--------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
===============================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.007+ 0.013 0.038 0.060 0.047
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.007) (0.013) (0.038) (0.060) (0.047)
===============================================================================================================================
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
===============================================================================================================================
TOTAL RETURN 0.64% 1.30% 3.82% 6.06% 4.80%
===============================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 795,399 $ 1,369,935 $ 2,706,283 $ 3,026,412 $ 2,931,316
Ratio of Expenses to Average Net Assets 0.51% 0.48% 0.48% 0.48% 0.50%
Ratio of Net Investment Income to Average Net Assets 0.69% 1.32% 3.90% 6.07% 4.73%
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
MUNICIPAL MONEY MARKET PORTFOLIO
<Table>
<Caption>
CLASS A
--------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
===============================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.005+ 0.009 0.022 0.035 0.027
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.005) (0.009) (0.022) (0.035) (0.027)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
===============================================================================================================================
TOTAL RETURN 0.50% 0.90% 2.23% 3.57% 2.77%
===============================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 511,551 $ 910,426 $ 1,346,818 $ 1,476,436 $ 1,405,646
Ratio of Expenses to Average Net Assets 0.50% 0.48% 0.49% 0.48% 0.50%
Ratio of Net Investment Income to Average Net Assets 0.54% 0.90% 2.25% 3.50% 2.76%
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
131
<Page>
2003 ANNUAL REPORT
December 31, 2003
NOTES TO FINANCIAL STATEMENTS
Morgan Stanley Institutional Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The Fund is comprised of twenty-one separate, active, diversified and
non-diversified portfolios (individually referred to as a "Portfolio",
collectively as the "Portfolios"). Each Portfolio (with the exception of the
International Small Cap, Money Market and Municipal Money Market Portfolios)
offers two classes of shares - Class A and Class B. Both classes of shares have
identical voting rights (except that shareholders of a Class have exclusive
voting rights regarding any matter relating solely to that Class of shares),
dividend, liquidation and other rights.
For detailed descriptions of the investment objectives of each of the Portfolios
and other related information, please refer to the Prospectuses of the Fund.
Generally, the investment objective of the domestic and international equity
portfolios is to seek capital appreciation by investing in equity and
equity-related securities. The investment objective of the international fixed
income portfolio is primarily to seek a high total return consistent with
preservation of capital. The investment objective of the money market portfolios
is to seek current income and preserve capital. The International Equity
Portfolio is authorized to issue 500 million shares per class but is currently
closed to new accounts.
On September 26, 2003, the net assets of the Small Cap Growth Portfolio's
(formerly a Portfolio of Morgan Stanley Institutional Fund Trust) Institutional
and Adviser Class shares were merged into the Small Company Growth Portfolio's
Class A and B shares, respectively, through a tax-free exchange. In exchange for
the $100,203,000 in net assets received, including $13,556,000 in unrealized
appreciation, 10,221,445 Class A and 212,563 Class B shares of the Small Company
Growth Portfolio were issued. Prior to the combination, the net assets of the
Small Company Growth Portfolio totaled $497,416,000. Immediately after the
combination, the net assets of the Small Company Growth Portfolio totaled
$597,618,000.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with accounting principles generally accepted in the United States.
Such policies are consistently followed by the Fund in the preparation of the
financial statements. Accounting principles generally accepted in the United
States may require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange are valued
at the latest quoted sales price on the valuation date. Equity securities
listed or traded on NAS-DAQ, for which market quotations are available, are
valued at the NASDAQ Official Closing Price. Securities listed on a foreign
exchange are valued at their closing price. Unlisted securities and listed
securities not traded on the valuation date for which market quotations are
readily available are valued at the mean between the current bid and asked
prices obtained from reputable brokers. Bonds and other fixed income
securities may be valued according to the broadest and most representative
market. In addition, bonds and other fixed income securities may be valued
on the basis of prices provided by a pricing service. The prices provided by
a pricing service take into account broker dealer market price quotations
for institutional size trading in similar groups of securities, security
quality, maturity, coupon and other security characteristics as well as any
developments related to the specific securities. Debt securities purchased
with remaining maturities of 60 days or less are valued at amortized cost,
if it approximates value. Securities owned by the Money Market and Municipal
Money Market Portfolios are stated at amortized cost, which approximates
market value.
All other securities and investments for which market values are not readily
available, including restricted securities, and those securities for which
it is inappropriate to determine prices in accordance with the
aforementioned procedures, are valued at fair value as determined in good
faith under procedures adopted by the Board of Directors, although the
actual calculations may be done by others. Factors considered in making this
determination may include, but are not limited to, information obtained by
contacting the issuer, analysts, or the appropriate stock exchange (for
exchange-traded securities), analysis of the issuer's financial statements
or other available documents and, if necessary, available information
concerning other securities in similar circumstances.
Most foreign markets close before the New York Stock Exchange (NYSE).
Occasionally, developments that could affect the closing prices of
securities and other assets may occur between the times at which valuations
of such securities are determined (that is, close of the foreign market on
which the securities trade) and the close of business on the NYSE. If these
developments are expected to materially affect the value of the securities,
the valuations may be adjusted to reflect the estimated fair value as of the
close of the NYSE, as determined in good faith under procedures established
by the Board of Directors.
2. REPURCHASE AGREEMENTS: The Portfolios may enter into repurchase agreements
under which a Portfolio lends
132
<Page>
2003 ANNUAL REPORT
December 31, 2003
NOTES TO FINANCIAL STATEMENTS (CONT'D)
excess cash and takes possession of securities with an agreement that the
counterparty will repurchase such securities. In connection with
transactions in repurchase agreements, a bank as custodian for the Fund
takes possession of the underlying securities which are held as collateral,
with a market value at least equal to the amount of the repurchase
transaction, including principal and accrued interest. To the extent that
any repurchase transaction exceeds one business day, the value of the
collateral is marked-to-market on a daily basis to determine the adequacy of
the collateral. In the event of default on the obligation to repurchase, the
Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. In the event of default or bankruptcy by the
counterparty to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings. The Portfolios,
along with other affiliated investment companies, may utilize a joint
trading account for the purpose of entering into repurchase agreements.
3. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: The books and records
of the Fund are maintained in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars at the mean of the bid and asked prices of such
currencies against U.S. dollars last quoted by a major bank as follows:
- investments, other assets and liabilities-at the prevailing rates of
exchange on the valuation date;
- investment transactions, investment income and expenses-at the prevailing
rates of exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rates and market values at the close of the period, the Fund does not
isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the fluctuations arising from
changes in the market prices of the securities held at period end.
Similarly, the Fund does not isolate the effect of changes in foreign
exchange rates from the fluctuations arising from changes in the market
prices of securities sold during the period. Accordingly, realized and
unrealized foreign currency gains (losses) on investments in securities are
included in the reported net realized and unrealized gains (losses) on
investment transactions and balances. However, pursuant to U.S. Federal
income tax regulations, gains and losses from certain foreign currency
transactions and the foreign currency portion of gains and losses realized
on sales and maturities of foreign denominated debt securities are treated
as ordinary income for U.S. Federal income tax purposes.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from foreign currency exchange contracts,
disposition of foreign currencies, currency gains or losses realized between
the trade and settlement dates on securities transactions, and the
difference between the amount of investment income and foreign taxes
recorded on the Fund's books and the U.S. dollar equivalent amounts actually
received or paid. Net unrealized currency gains (losses) from valuing
foreign currency denominated assets and liabilities at period end exchange
rates are reflected as a component of unrealized appreciation (depreciation)
on the Statement of Net Assets. The change in net unrealized currency gains
(losses) for the period is reflected on the Statement of Operations.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of U.S. dollar
denominated transactions as a result of, among other factors, fluctuations
of exchange rates in relation to the U.S. dollar, the possibility of lower
levels of government supervision and regulation of foreign securities
markets and the possibility of political or economic instability.
Prior governmental approval for foreign investments may be required under
certain circumstances in some countries, and the extent of foreign
investments in domestic companies may be subject to limitation in other
countries. Foreign ownership limitations also may be imposed by the charters
of individual companies to prevent, among other concerns, violations of
foreign investment limitations. As a result, an additional class of shares
(identified as "Foreign" in the Statement of Net Assets) may be created and
offered for investment. The "local" and "foreign shares" market values may
differ. In the absence of trading of the foreign shares in such markets, the
Fund values the foreign shares at the closing exchange price of the local
shares. Such securities, if any, are identified as fair valued on the
Statement of Net Assets.
4. FOREIGN CURRENCY EXCHANGE CONTRACTS: Certain Portfolios may enter into
foreign currency exchange contracts generally to attempt to protect
securities and related receivables and payables against changes in future
foreign currency exchange rates and, in certain situations, to gain exposure
to foreign currencies. A foreign currency exchange contract is an agreement
between two parties to buy or sell currency at a set price on a future date.
The market value of the contract will fluctuate with changes in currency
exchange rates. The contract is marked-to-market daily and the change in
market value is recorded by the Portfolios as unrealized gain or loss. The
Portfolios record
133
<Page>
2003 ANNUAL REPORT
December 31, 2003
NOTES TO FINANCIAL STATEMENTS (CONT'D)
realized gains or losses when the contract is closed equal to the difference
between the value of the contract at the time it was opened and the value at
the time it was closed. Credit risk may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms
of their contracts and is generally limited to the amount of the unrealized
gains on the contracts, if any, at the date of default. Risks may also arise
from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar.
5. LOAN AGREEMENTS: Certain Portfolios may invest in fixed and floating rate
loans ("Loans") arranged through private negotiations between an issuer of
sovereign debt obligations and one or more financial institutions
("Lenders") deemed to be creditworthy by the investment adviser. A
Portfolio's investments in Loans may be in the form of participations in
Loans ("Participations") or assignments of all or a portion of Loans
("Assignments") from third parties. A Portfolio's investment in
Participations typically results in the Portfolio having a contractual
relationship with only the Lender and not with the borrower. The Portfolios
have the right to receive payments of principal, interest and any fees to
which it is entitled only upon receipt by the Lender of the payments from
the borrower. The Portfolios generally have no right to enforce compliance
by the borrower under the terms of the loan agreement. As a result, the
Portfolio may be subject to the credit risk of both the borrower and the
Lender that is selling the Participation and any intermediaries between the
Lender and the Portfolio. When a Portfolio purchases Assignments from
Lenders, it typically acquires direct rights against the borrower on the
Loan. Because Assignments are arranged through private negotiations between
potential assignees and potential assignors, the rights and obligations
acquired by the Portfolio as the purchaser of an Assignment may differ from,
and be more limited than, those held by the assigningLender.
6. SHORT SALES: Certain Portfolios may sell securities short. A short sale is a
transaction in which a Portfolio sells securities it may or may not own, but
has borrowed, in anticipation of a decline in the market price of the
securities. The Portfolio is obligated to replace the borrowed securities at
the market price at the time of replacement. The Portfolio may have to pay a
premium to borrow the securities as well as pay any dividends or interest
payable on the securities until they are replaced. Dividends and interest
payable on such securities sold short are included in dividend expense and
interest expense, respectively, in the Statement of Operations. A
Portfolio's obligation to replace the securities borrowed in connection with
a short sale will generally be secured by collateral deposited with the
broker that consists of cash, U.S. government securities or other liquid,
high grade debt obligations. In addition, the Portfolio will either
designate on the Portfolio's records or place in a segregated account with
its Custodian an amount of cash, U.S. government securities or other liquid
high grade debt obligations equal to the difference, if any, between (1) the
market value of the securities sold at the time they were sold short and (2)
cash, U.S. government securities or other liquid high grade debt obligations
deposited as collateral with the broker in connection with the short sale.
Short sales by the Portfolios involve certain risks and special
considerations. Possible losses from short sales differ from losses that
could be incurred from the purchase of a security, because losses from short
sales may be unlimited, whereas losses from purchases cannot exceed the
total amount invested.
8. SECURITY LENDING: Certain Portfolios may lend investment securities to
investors who borrow securities in order to complete certain transactions.
By lending investment securities, a Portfolio attempts to increase its net
investment income through the receipt of interest earned on loan collateral.
Any increase or decline in the market price of the securities loaned would
be for the account of the Portfolio. Risks of delay in recovery of the
securities or even loss of rights in the collateral may occur should the
borrower of the securities fail financially. Risks may also arise to the
extent that the value of securities loaned increases above the value of the
collateral received.
Portfolios that lend securities receive cash or securities as collateral in
the amount equal to or exceeding 100% of the current market value of the
loaned securities. Any cash received as collateral is invested by the
securities lending agent in accordance with pre-established guidelines. A
portion of the interest received on the loan collateral is retained by the
Portfolio, and the remainder is rebated to the borrower of the securities.
From the interest retained by the Portfolio, 25% of such amount is paid to
the securities lending agent for its services. The net amount of interest
earned, after the interest rebate and allocation to the securities lending
agent, is included in the Statement of Operations in interest income. The
value of the loaned securities and related collateral outstanding at
December 31, 2003 were as follows:
<Table>
<Caption>
VALUE OF
LOANED VALUE OF
SECURITIES COLLATERAL
PORTFOLIO (000) (000)
----------------------------------------------------------
Active International Allocation $ 28,550 $ 29,844
Emerging Markets 110,437 113,339
European Value Equity 1,321 1,369
International Equity 418,289 436,771
International Magnum 6,968 7,297
</Table>
134
<Page>
2003 ANNUAL REPORT
December 31, 2003
NOTES TO FINANCIAL STATEMENTS (CONT'D)
The following Portfolios had income from securities lending (after rebates
to borrowers and fee paid to securities lending agent):
<Table>
<Caption>
NET INTEREST
EARNED BY
PORTFOLIO
PORTFOLIO (000)
--------------------------------------------------
Active International Allocation $ 164
Emerging Markets 253
European Value Equity 13
International Equity 3,779
International Magnum 60
</Table>
9. STRUCTURED SECURITIES: The Emerging Markets Debt Portfolio may invest in
interests in entities organized and operated solely for the purpose of
restructuring the investment characteristics of sovereign debt obligations.
This type of restructuring involves the deposit with or purchase by an
entity of specified instruments and the issuance by that entity of one or
more classes of securities ("Structured Securities") backed by, or
representing interests in, the underlying instruments. Structured Securities
generally will expose the Portfolio to credit risks of the underlying
instruments as well as of the issuer of the structured security. Structured
securities are typically sold in private placement transactions with no
active trading market. Investments in Structured Securities may be more
volatile than their underlying instruments; however, any loss is limited to
the amount of the original investment.
10. FUTURES: Certain Portfolios may purchase and sell futures contracts. Futures
contracts provide for the sale by one party and purchase by another party of
a specified amount of a specified security, index, instrument or basket of
instruments. Futures contracts (secured by cash, government securities or
other high grade liquid investments deposited with brokers or custodians as
"initial margin") are valued based upon their quoted daily settlement
prices; changes in initial settlement value (represented by cash paid to or
received from brokers as "variation margin") are accounted for as unrealized
appreciation (depreciation). When futures contracts are closed, the
difference between the opening value at the date the contract was entered
into and the value at closing is recorded as a realized gain or loss in the
Statement of Operations. Due from (to) broker includes both initial margin
and variation margin, as stated in the Statement of Net Assets.
Certain Portfolios may use futures contracts in order to manage their
exposure to the stock and bond markets, to hedge against unfavorable changes
in the value of securities or to remain fully invested and to reduce
transaction costs. Futures contracts involve market risk in excess of the
amounts recognized in the Statement of Net Assets.
Risks arise from the possible movements in security values underlying these
instruments. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with
the change in value of hedged investments.
11. PURCHASED AND WRITTEN OPTIONS: Certain Portfolios may write covered call and
put options on portfolio securities and other financial instruments.
Premiums are received and are recorded as liabilities. The liabilities are
subsequently adjusted to reflect the current value of the options written.
Premiums received from writing options which expire are treated as realized
gains. Premiums received from writing options which are exercised or are
closed are added to or offset against the proceeds or amount paid on the
transaction to determine the net realized gain or loss. By writing a covered
call option, a Portfolio, in exchange for the premium, foregoes the
opportunity for capital appreciation above the exercise price should the
market price of the underlying security increase. By writing a put option, a
Portfolio, in exchange for the premium, accepts the risk of having to
purchase a security at an exercise price that is above the current market
price.
Certain Portfolios may purchase call and put options on their portfolio
securities or other financial instruments. Each Portfolio may purchase call
options to protect against an increase in the price of the security or
financial instrument it anticipates purchasing. Each Portfolio may purchase
put options on securities which it holds or other financial instruments to
protect against a decline in the value of the security or financial
instrument or to close out covered written put positions. Risks may arise
from an imperfect correlation between the change in market value of the
securities held by the Portfolio and the prices of options relating to the
securities purchased or sold by the Portfolio and from the possible lack of
a liquid secondary market for an option. The maximum exposure to loss for
any purchased option is limited to the premium initially paid for the
option.
12. UNFUNDED COMMITMENTS: Subject to the terms of a Subscription Agreement
between the U.S. Real Estate Portfolio and Cabot Industrial Value Fund,
Inc., the Portfolio has made a subscription commitment of $5,000,000 for
which it will receive 10,000 shares of common stock. As of December 31,
2003, Cabot Industrial Value Fund, Inc. has drawn down $237,500, which
represents 4.8% of the commitment.
Subject to the terms of a Subscription Agreement between the U.S. Real
Estate Portfolio and BRCP REIT, LLC I, the Portfolio has made a subscription
commit-
135
<Page>
2003 ANNUAL REPORT
December 31, 2003
NOTES TO FINANCIAL STATEMENTS (CONT'D)
ment of $7,000,000 for which it will receive 7,000,000 shares of common
stock. As of December 31, 2003, BRCP REIT, LLC I has drawn down $34,429,
which represents 0.5% of the commitment.
13. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Realized gains and losses on the sale of investment
securities are determined on the specific identified cost basis. Dividend
income is recorded on the ex-dividend date (except for certain foreign
dividends which may be recorded as soon as the Fund is informed of such
dividends) net of applicable withholding taxes. Interest income is
recognized on the accrual basis except where collection is in doubt.
Discounts and premiums on securities purchased are amortized according to
the effective yield method over their respective lives. Most expenses of the
Fund can be directly attributed to a particular Portfolio. Expenses which
cannot be directly attributed are apportioned among the Portfolios based
upon relative net assets. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses are allocated to each
class of shares based upon their relative net assets. Dividends to the
shareholders of the Money Market and the Municipal Money Market Portfolios
are accrued daily and are distributed on or about the 15th of each month.
Distributions for the remaining Portfolios are recorded on the
ex-distribution date.
The U.S. Real Estate Portfolio owns shares of real estate investment trusts
("REITs") which report information on the source of their distributions
annually. A portion of distributions received from REITs during the year is
estimated to be a return of capital and is recorded as a reduction of their
cost.
For certain Portfolios that invest in international securities, a 2.00%
redemption fee is imposed on shares purchased in those Portfolios and held
less than 60 days. The purpose of the redemption fees is to protect the
Portfolios and their shareholders from the effects of short-term trading in
Portfolios' shares. These fees, if any, are included in Capital Share
Redemptions on the Statement of Changes in Net Assets.
B. INVESTMENT ADVISORY FEES: Morgan Stanley Investment Management, Inc. (the
"Adviser" or "MS Investment Management"), a wholly-owned subsidiary of Morgan
Stanley, provides the Fund with investment advisory services under the terms of
an Investment Advisory and Management Agreement (the "Agreement") at the annual
rates of average daily net assets indicated below. MS Investment Management has
voluntarily agreed to reduce fees payable to it and to reimburse the Portfolios,
if necessary, if the annual operating expenses, as defined, expressed as a
percentage of average daily net assets, exceed the maximum ratios indicated as
follows:
<Table>
<Caption>
MAXIMUM
EXPENSE RATIO
ADVISORY ------------------
PORTFOLIO FEE CLASS A CLASS B
- ----------------------------------------------------------------------
Active International Allocation 0.65% 0.80% 1.05%
Asian Real Estate 0.80 1.00 1.25
Emerging Markets 1.25 1.75 2.00
European Real Estate 0.80 1.00 1.25
European Value Equity 0.80 1.00 1.25
Global Franchise 0.80 1.00 1.25
Global Value Equity 0.80 1.00 1.25
International Equity 0.80 1.00 1.25
International Magnum 0.80 1.00 1.25
International Small Cap 0.95 1.15 N/A
Japanese Value Equity 0.80 1.00 1.25
Latin American 1.10 1.70 1.95
Equity Growth 0.60 0.80 1.05
Focus Equity 0.80 1.00 1.25
Small Company Growth 1.00 1.10 1.35
Technology 1.00 1.25 1.50
U.S. Real Estate 0.80 1.00 1.25
Value Equity 0.50 0.70 0.95
Emerging Markets Debt 0.75 1.75 2.00
Money Market 0.30 0.55 N/A
Municipal Money Market 0.30 0.57 N/A
</Table>
The Adviser has entered into Sub-Advisory Agreements with Morgan Stanley
Investment Advisors Inc., Morgan Stanley Investment Management Limited, Morgan
Stanley Asset & Investment Trust Management Co., Limited and Morgan Stanley
Investment Management Company (each a "Sub-Adviser"), all wholly-owned
subsidiaries of Morgan Stanley. The Sub-Advisers, subject to the control and
supervision of the Fund, its officers, Directors and the Adviser, and in
accordance with the investment objectives, policies and restrictions of the
Portfolios, make certain day-to-day investment decisions for certain Portfolios
and place certain of the Portfolios' purchase and sales orders. The Adviser pays
the Sub-Advisers on a monthly basis a portion of the net advisory fees the
Adviser receives from the Portfolios which receive these services.
C. ADMINISTRATOR: MS Investment Management (the "Administrator") also provides
the Fund with administrative services pursuant to an administrative agreement
for a monthly fee which on an annual basis equals 0.15% of the average daily net
assets of each Portfolio, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Administrator and J.P. Morgan Investor Services Co.
("JPMIS"), a corporate affiliate of JPMorgan Chase Bank, JPMIS provides certain
administrative services to the Fund. For such services, the Administrator pays
JPMIS a portion of the fee the Administrator receives from the Fund. An employee
of JPMIS is an officer of the Fund. In addition, the
136
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2003 ANNUAL REPORT
December 31, 2003
NOTES TO FINANCIAL STATEMENTS (CONT'D)
Fund incurs local administration fees in connection with doing business in
certain emerging market countries.
D. DISTRIBUTOR: Morgan Stanley & Co., Incorporated (the "Distributor"), a
wholly-owned subsidiary of Morgan Stanley, and an affiliate of MS Investment
Management, serves as the distributor of the Fund and provides Class B
shareholders of the applicable Portfolios with distribution services pursuant to
a Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the
Investment Company Act of 1940. Under the Plan, the Distributor is entitled to
receive from each applicable Portfolio, a distribution fee, which is accrued
daily and paid quarterly, at an annual rate of 0.25% of the Class B shares'
average daily net assets. The Distributor may voluntarily waive from time to
time all or any portion of its distribution fee.
E. CUSTODIAN: JPMorgan Chase Bank serves as custodian for the Fund in
accordance with a custodian agreement.
F. PURCHASES AND SALES: During the year ended December 31, 2003, purchases and
sales of investment securities, other than long-term U.S. Government securities
and short-term investments, were:
<Table>
<Caption>
PURCHASES SALES
PORTFOLIO (000) (000)
- --------------------------------------------------------------------------------
Active International Allocation $ 145,205 $ 166,095
Asian Real Estate 1,337 1,349
Emerging Markets 708,162 715,195
European Real Estate 9,280 13,500
European Value Equity 23,587 28,477
Global Franchise 30,421 17,508
Global Value Equity 41,782 36,694
International Equity 2,629,170 2,161,239
International Magnum 41,643 39,782
International Small Cap 423,267 231,569
Japanese Value Equity 25,206 26,275
Latin American 22,649 23,483
Equity Growth 901,712 853,645
Focus Equity 102,600 101,989
Small Company Growth 1,025,075 720,552
Technology 40,328 43,656
U.S. Real Estate 157,688 134,323
Value Equity 194,304 171,046
Emerging Markets Debt 113,477 119,656
</Table>
There were no purchases and sales of U.S. Government securities for the year
ended December 31, 2003.
During the year ended December 31, 2003, the following Portfolios paid brokerage
commissions to Morgan Stanley & Co., an affiliated broker/dealer:
<Table>
<Caption>
BROKERAGE
COMMISSIONS
PORTFOLIO (000)
- ----------------------------------------------------
Asian Real Estate $ 1
Emerging Markets 36
Global Value Equity 5
International Magnum 1
Japanese Value Equity 3
Latin American $ 1
Equity Growth 3
Focus Equity 1
Technology 3
Value Equity 1
</Table>
Additionally, during the year ended December 31, 2003, Emerging Markets
Portfolio paid $12,000 brokerage commissions to China International Capital
Corporation, an affiliated broker/dealer.
G. FEDERAL INCOME TAXES: It is each Portfolio's intention to qualify as a
regulated investment company and distribute all of its taxable and tax-exempt
income. Accordingly, no provision for Federal income taxes is required in the
financial statements.
A Portfolio may be subject to taxes imposed by countries in which it invests.
Such taxes are generally based on income and/or capital gains earned or
repatriated. Taxes are accrued based on net investment income, net realized
gains and net unrealized appreciation as income and/or capital gains are earned.
Taxes may also be based on the movement of foreign currency and are accrued
based on the value of investments denominated in such currency.
The tax character of distributions paid may differ from the character of
distributions shown on the Statements of Changes in Net Assets due to short-term
capital gains being treated as ordinary income for tax purposes. The Municipal
Money Market Portfolio's ordinary income distributions shown below include
tax-exempt as well as taxable components. The tax character of distributions
paid during 2003 and 2002 were as follows:
<Table>
<Caption>
2003 DISTRIBUTIONS 2002 DISTRIBUTIONS
PAID FROM: PAID FROM:
------------------------ ------------------------
ORDINARY LONG-TERM ORDINARY LONG-TERM
INCOME CAPITAL GAIN INCOME CAPITAL GAIN
PORTFOLIO (000) (000) (000) (000)
- -------------------------------------------------------------------------------------
Active International
Allocation $ 6,218 $ -- $ 7,649 $ --
Asian Real Estate 164 -- 82 --
Emerging Markets 11,724 -- 324 --
European Real Estate 632 -- 1,087 --
European Value Equity 610 -- 510 --
Global Franchise 440 359 169 --
Global Value Equity 812 472 861 601
International Equity 104,424 -- 104,631 --
International Magnum 1,640 -- 465 --
International Small Cap 13,275 9,855 4,992 149
Latin American 413 -- 234 --
Equity Growth 1,970 -- 1,002 --
Focus Equity 137 -- -- --
U.S. Real Estate 27,350 7,144 30,807 27,284
Value Equity 2,028 -- 2,149 --
Emerging Markets Debt 3,765 -- 5,066 --
Money Market 7,531 -- 23,615 --
Municipal Money Market 4,229 -- 10,310 --
</Table>
137
<Page>
2003 ANNUAL REPORT
December 31, 2003
NOTES TO FINANCIAL STATEMENTS (CONT'D)
In addition to the amount shown in the table above for 2003, the Emerging
Markets Portfolio had a Return of Capital of approximately $677,000.
The amount and character of income and capital gain distributions to be paid by
the Portfolios of the Fund are determined in accordance with Federal income tax
regulations, which may differ from generally accepted accounting principles. The
book/tax differences are either considered temporary or permanent in nature.
Temporary differences are attributable to differing book and tax treatments for
the timing of the recognition of gains and losses on certain investment
transactions and the timing of the deductibility of certain expenses.
Permanent book and tax basis differences may result in reclassification among
undistributed (distributions in excess of) net investment income (or accumulated
net investment loss), accumulated net realized gain (loss) and paid-in capital.
At December 31, 2003, the components of distributable earnings on a tax basis
were as follows:
<Table>
<Caption>
UNDISTRIBUTED
UNDISTRIBUTED LONG-TERM
ORDINARY INCOME CAPITAL GAIN
PORTFOLIO (000) (000)
- --------------------------------------------------------------------------------
Active International Allocation $ 2,516 $ --
Asian Real Estate 12 --
European Real Estate 2 --
European Value Equity 18 --
Global Franchise 62 164
Global Value Equity 10 --
International Magnum 563 --
International Small Cap 851 11,169
Latin American 28 --
U.S. Real Estate 2,120 2,445
Value Equity 5 --
Money Market 352 --
Municipal Money Market 165 --
</Table>
Any Portfolios not shown above had no distributable earnings on a tax basis at
December 31, 2003. The undistributed ordinary income for the Municipal Money
Market represents tax-exempt income.
At December 31, 2003, cost, unrealized appreciation, unrealized depreciation,
and net unrealized appreciation (depreciation) for U.S. Federal income tax
purposes of the investments of each of the Portfolios (excluding foreign
currency if applicable) were:
<Table>
<Caption>
NET
APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
PORTFOLIO (000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------
Active International
Allocation $ 353,210 $ 41,946 $ (24,189) $ 17,757
Asian Real Estate 2,731 369 (78) 291
Emerging Markets 993,862 271,462 (91,582) 179,880
European Real Estate 17,221 5,543 (202) 5,341
European Value Equity $ 30,185 $ 4,119 $ (55) $ 4,064
Global Franchise 65,930 17,024 (266) 16,758
Global Value Equity 80,889 9,192 (1,963) 7,229
International Equity 5,573,695 1,099,393 (33,475) 1,065,918
International Magnum 94,292 13,136 (4,350) 8,786
International Small Cap 742,822 173,243 (18,898) 154,345
Japanese Value Equity 40,179 2,518 (5,865) (3,347)
Latin American 23,565 4,510 (1,007) 3,503
Equity Growth 707,220 81,119 (8,186) 72,933
Focus Equity 71,909 3,346 (2,382) 964
Small Company Growth 690,927 116,229 (7,227) 109,002
Technology 29,989 2,233 (2,582) (349)
U.S. Real Estate 741,462 245,168 (23,253) 221,915
Value Equity 163,099 18,534 (1,392) 17,142
Emerging Markets Debt 51,077 3,719 (977) 2,742
Money Market 796,605 -- -- --
Municipal Money Market 505,654 -- -- --
</Table>
At December 31, 2003, the following Portfolios had available capital loss
carryforwards to offset future net capital gains, to theextent provided by
regulations, through the indicated expirationdates:
<Table>
<Caption>
EXPIRATION DATE DECEMBER 31, (000)
- --------------------------------------------------------------------------------------------------------------
PORTFOLIO 2005 2006 2007 2008 2009 2010 2011 TOTAL
- --------------------------------------------------------------------------------------------------------------
Active
International
Allocation $ -- $ -- $ -- $ -- $ 20,350 $ 60,663 $ 25,496 $ 106,509
Asian Real
Estate -- 2,124 -- -- -- 68 -- 2,192
Emerging
Markets -- -- -- -- 226,877 102,772 -- 329,649
European Real
Estate -- -- 3,661 215 101 -- -- 3,977
European
Value Equity -- -- -- -- 717 1,359 82 2,158
Global Value
Equity -- -- -- -- -- -- 3,058 3,058
International
Equity* -- -- -- -- -- -- 41,510 41,510
International
Magnum -- -- -- -- 11,881 4,936 2,377 19,194
Japanese
Value
Equity 7,168 23,700 583 -- -- 3,162 -- 34,613
Latin
American -- 14,256 5,508 -- 1,705 4,597 -- 26,066
Equity
Growth -- -- -- -- 33,000 117,051 22,405 172,456
Focus Equity -- -- -- -- 10,195 21,111 -- 31,306
Small
Company
Growth -- -- -- -- -- 35,937 -- 35,937
Technology -- -- -- -- 50,529 28,302 3,366 82,197
Value Equity -- -- -- -- -- 22,807 -- 22,807
Emerging
Markets
Debt -- 76,263 9,761 -- 704 -- -- 86,728
</Table>
* Amounts based on October 31 tax year end.
138
<Page>
2003 ANNUAL REPORT
December 31, 2003
NOTES TO FINANCIAL STATEMENTS (CONT'D)
In addition to the $35,937,000 in unused capital losses attributed to the
Small Company Growth Portfolio in the table above, approximately $111,705,000
has been brought forward as a result of the Portfolio's merger with the MSIFT
Small Cap Growth Portfolio. Based on certain provisions in the Internal
Revenue Code, various limitations regarding the future utilization of these
carryforwards may apply. This acquired capital loss carryforward is expected
to expire between 2009-2010.
During the year ended December 31, 2003, the following Portfolios utilized
capital loss carryforwards for U.S. Federal income tax purposes of
approximately:
<Table>
<Caption>
CAPITAL LOSS
CARRYFORWARD
UTILIZED
PORTFOLIO (000)
- ------------------------------------------------------
Asian Real Estate $ 66
Emerging Markets 40,108
European Real Estate 2,330
International Small Cap 9,475
Japanese Value Equity 2,544
Latin American 797
Focus Equity 4,455
Small Company Growth 54,233
Value Equity 294
Emerging Markets Debt 6,752
</Table>
In addition to the $54,233,000 utilized capital loss carryfor-ward attributed to
the Small Company Growth Portfolio in the table above, approximately $8,305,000
of capital losses acquired from MSIFT Small Cap Growth Portfolio were utilized
for federal tax purposes during the year ended December 31, 2003.
To the extent that capital loss carryovers are used to offset any future capital
gains realized during the carryover period as provided by U.S. Federal income
tax regulations, no capital gains tax liability will be incurred by a Portfolio
for gains realized and not distributed. To the extent that capital gains are
offset, such gains will not be distributed to the shareholders.
Net capital, passive investment company (PFIC), and currency losses incurred
after October 31, and within the taxable year are deemed to arise on the first
day of the Portfolio's next taxable year. For the year ended December 31, 2003,
the Portfolio deferred to January 1, 2004 for U.S. Federal income tax purposes,
post-October capital, PFIC and currency losses as indicated:
<Table>
<Caption>
CAPITAL CURRENCY
LOSSES PFIC LOSSES
PORTFOLIO (000) (000) (000)
- ------------------------------------------------------------------
Active International Allocation $ 2,897 $ -- $ --
Emerging Markets -- -- 185
Global Franchise -- -- 675
Global Value Equity 179 -- --
International Small Cap -- 235 --
Latin American -- -- 1
Technology 167 -- --
Value Equity 483 -- --
</Table>
For the fiscal year ended December 31, 2003, the Global Franchise and
International Equity Portfolios realized gains from in-kind redemptions of
$584,000 and $14,820,000, respectively.
H. OTHER: The net assets of certain Portfolios include foreign denominated
securities and currency. Changes in currency exchange rates will affect the U.S.
dollar value of and investment income from such securities. Further, at times
certain of the Portfolios' investments are concentrated in a limited number of
countries and regions. This concentration may further increase the risk of the
Portfolio.
The Emerging Markets Debt Portfolio holds a significant portion of its
investments in securities which are traded by a small number of market makers
who may also be utilized by the Portfolio to provide pricing information used to
value such investments. The amounts realized upon disposition of these
securities may differ from the value reflected on the Statement of Net Assets.
Settlement and registration of foreign securities transactions may be subject to
significant risks not normally associated with investments in the United States.
In certain markets, including Russia, ownership of shares is defined according
to entries in the issuer's share register. In Russia, currently no central
registration system exists and the share registrars may not be subject to
effective state supervision. It is possible that a Portfolio could lose its
share registration through fraud, negligence or even mere oversight. In
addition, shares being delivered for sales and cash being paid for purchases may
be delivered before the exchange is complete. This may subject the Portfolio to
further risk of loss in the event of a counterparty's failure to complete the
transaction.
A portion of the securities of the Municipal Money Market Portfolio are insured
by certain companies specializing in the insurance of municipal debt
obligations. At December 31, 2003, approximately 30.2% of the net assets of the
Municipal Money Market Portfolio are covered by such insurance. The insurers and
their obligations are as follows:
<Table>
Ambac 9.3%
FSA 8.5
MBIA 6.1
FGIC 5.4
XLCA 0.9
</Table>
At December 31, 2003, certain Portfolios had otherwise unaffiliated record
owners of 10% or greater. Investment activities of these shareholders could have
a material impact on these Portfolios.
139
<Page>
2003 ANNUAL REPORT
December 31, 2003
NOTES TO FINANCIAL STATEMENTS (CONT'D)
These Portfolios and the aggregate percentage of such owners were as follows:
<Table>
<Caption>
PERCENTAGE OF OWNERSHIP
-----------------------
PORTFOLIO CLASS A CLASS B
- -------------------------------------------------------------------------------
Active International Allocation 13.3% 78.4%
Asian Real Estate -- 99.9
Emerging Markets -- 90.4
European Real Estate 70.9 84.8
European Value Equity 23.1 93.1
Global Franchise 34.4 28.3
Global Value Equity 62.9 83.3
International Equity -- 70.7
International Magnum 41.5 94.7
International Small Cap 13.4 N/A
Japanese Value Equity 24.0 85.2
Latin American 81.5 89.3
Equity Growth 38.8 81.4
Focus Equity 54.3 27.1
Small Company Growth -- 54.7
Technology 58.2 77.6
U.S. Real Estate 33.8 68.4
Value Equity 72.5 83.7
Emerging Markets Debt 75.6 89.7
Money Market 11.1 N/A
</Table>
140
<Page>
2003 ANNUAL REPORT
December 31, 2003
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
MORGAN STANLEY INSTITUTIONAL FUND, INC.
We have audited the accompanying statements of net assets of the Morgan Stanley
Institutional Fund, Inc. (comprising, respectively, the Active International
Allocation Portfolio, Asian Real Estate Portfolio, Emerging Markets Portfolio,
European Real Estate Portfolio, European Value Equity Portfolio, Global
Franchise Portfolio, Global Value Equity Portfolio, International Equity
Portfolio, International Magnum Portfolio, International Small Cap Portfolio,
Japanese Value Equity Portfolio, Latin American Portfolio, Equity Growth
Portfolio, Focus Equity Portfolio, Small Company Growth Portfolio, Technology
Portfolio, U.S. Real Estate Portfolio, Value Equity Portfolio, Emerging Markets
Debt Portfolio, Money Market Portfolio and Municipal Money Market Portfolio)
(the "Fund") as of December 31, 2003, and the related statements of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
four years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for the year ended December 31,
1999 were audited by other auditors whose report, dated February 18, 2000,
expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 2003 by correspondence with the custodian and brokers,
or by other appropriate auditing procedures where replies from brokers were not
received. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting Morgan Stanley Institutional Fund,
Inc. at December 31, 2003, the results of their operations for the year then
ended, the changes in their net assets for each of the two years in the period
then ended, and the financial highlights for each of the four years in the
period then ended, in conformity with accounting principles generally accepted
in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2004
141
<Page>
2003 ANNUAL REPORT
December 31, 2003
FEDERAL TAX INFORMATION (UNAUDITED)
For the year ended December 31, 2003, the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders for
the Global Franchise, Global Value Equity, Equity Growth, Focus Equity and Value
Equity Portfolios are 67.8%, 78.0%, 100%, 100% and 100%, respectively.
For the year ended December 31, 2003, the percentage of income earned from
direct U.S. Treasury Obligations for the Money Market Portfolio is 8.5%. For the
year ended December 31, 2003, the percentage of exempt interest dividends paid
by the Municipal Money Market Portfolios is 99.7%.
For the year ended December 31, 2003, the following Portfolios intend to pass
through foreign tax credits and have derived gross income from sources within
foreign countries amounting to:
<Table>
<Caption>
FOREIGN FOREIGN
TAX CREDIT SOURCE
PASS-THROUGH INCOME
PORTFOLIO (000) (000)
-----------------------------------------------------------------------------
Active International Allocation $ 437 $ 7,413
Asian Real Estate 4 88
Emerging Markets 1,675 23,480
European Real Estate 93 748
European Value Equity 90 921
Global Value Equity 118 966
International Equity* 11,930 135,560
International Magnum 119 1,925
International Small Cap 2,006 17,946
Latin American 23 804
</Table>
*Amounts based on October 31 tax year end.
Each applicable Portfolio hereby designates the following amount as long-term
capital gain dividends for the purpose of the dividend paid deduction on its
federal tax return:
<Table>
<Caption>
LONG-TERM
CAPITAL GAIN - 20%
-----------------------------------------------------------------------------
PORTFOLIO (000)
Global Franchise $ 359
Global Value Equity 472
International Small Cap 9,855
U.S. Real Estate 7,145
</Table>
For the year ended December 31, 2003, qualified dividend income for each
applicable Portfolio totaled:
<Table>
<Caption>
QUALIFYING
DIVIDEND
INCOME
PORTFOLIO (000)
-----------------------------------------------------------------------------
Active International Allocation $ 4,769
Asian Real Estate 8
Emerging Markets 14,205
European Real Estate 648
European Value Equity 681
Global Franchise 2,045
Global Value Equity 1,636
International Equity 76,688
International Magnum 1,313
International Small Cap 15,167
Latin American 768
Equity Growth 7,364
Focus Equity 749
Value Equity 3,028
</Table>
142
<Page>
2003 ANNUAL REPORT
December 31, 2003
DIRECTOR AND OFFICER INFORMATION (UNAUDITED)
INDEPENDENT DIRECTORS:
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
TERM OF FUND
OFFICE AND COMPLEX
POSITION(S) LENGTH OF OVERSEEN
NAME, AGE AND ADDRESS OF HELD WITH TIME PRINCIPAL OCCUPATION(S) BY OTHER DIRECTORSHIPS
DIRECTOR REGISTRANT SERVED* DURING PAST 5 YEARS DIRECTOR** HELD BY DIRECTOR
- --------------------------- ----------- ------------ ------------------------ -------------- -------------------------
Michael Bozic (62) Director Director Retired; Director or 208 Director of Weirton
c/o Kramer Levin Naftalis & since 2003 Trustee of the Steel Corporation.
Frankel LLP Retail Funds and the
Counsel to the Independent Institutional Funds;
Directors formerly Vice
919 Third Avenue Chairman of Kmart
New York, NY 10022 Corporation,
Chairman and Chief
Executive Officer of
Levitz Furniture
Corporation and
President and Chief
Executive Officer of
Hills Department
Stores; formerly
variously Chairman,
Chief Executive
Officer, President
and Chief Operating
Officer of the Sears
Merchandise Group of
Sears, Roebuck & Co.
Edwin J. Garn (71) Director Director Director or Trustee 208 Director of Franklin
Summit Ventures LLC since 2003 of the Retail Funds Covey (time
One Utah Center and the management systems),
201 South Main Street Institutional Funds; BMW Bank of North
Salt Lake City, UT 84111 member of the Utah America, Inc.
Regional Advisory (industrial loan
Board of Pacific corporation), United
Corp.; formerly, Space Alliance
United States (joint venture
Senator (R-Utah) and between Lockheed
Chairman, Senate Martin and The
Banking Committee, Boeing Company) and
Mayor of Salt Lake Nuskin Asia Pacific
City, Utah, (multilevel
Astronaut, Space marketing); member
Shuttle Discovery of the board of
and Vice Chairman, various civic and
Huntsman Corporation charitable
(chemical company). organizations.
Wayne E. Hedien (69) Director Director Retired; Director or 208 Director of the PMI
WEH Associates since 2003 Trustee of the Group Inc. (private
5750 Old Orchard Road Retail Funds and the mortgage insurance);
Suite 530 Institutional Funds; Trustee and Vice
Skokie, IL 60077 formerly associated Chairman of the
with the Allstate Field Museum of
Companies, most Natural History;
recently as Chairman director of various
of The Allstate other business and
Corporation and charitable
Chairman and Chief organizations.
Executive Officer of
its wholly-owned
subsidiary, Allstate
Insurance Company.
Dr. Manuel H. Johnson (54) Director Director Chairman of the 208 Director of NVR,
Johnson Smick since 2003 Audit Committee and Inc. (home
International, Inc. Director or Trustee construction);
2099 Pennsylvania Avenue, of the Retail Funds Chairman and Trustee
NW Suite 950 and the of the Financial
Washington, D.C. 20006 Institutional Funds; Accounting
Senior Partner, Foundation
Johnson Smick (oversight
International, Inc. organization of the
(consulting firm); Financial Accounting
Co-Chairman and a Standards Board);
founder of the Group Director of RBS
of Seven Council Greenwich Capital
(G7C), an Holdings (financial
international holdings company).
economic commission;
formerly, Vice
Chairman of the
Board of Governors
of the Federal
Reserve System and
Assistant Secretary
of the U.S.
Treasury.
Joseph J. Kearns (61) Director Director Deputy Chairman of 209 Director of Electro
Kearns & Associates LLC since 1994 the Audit Committee Rent Corporation
PMB754 and Director or (equipment leasing),
23852 Pacific Coast Hwy. Trustee of the The Ford Family
Malibu, CA 90265 Retail Funds and the Foundation and the
Institutional Funds; UCLA Foundation.
previously Chairman
of the Audit
Committee of the
Institutional Funds;
President, Kearns &
Associates LLC
(investment
consulting);
formerly CFO of The
J. Paul Getty Trust.
Michael Nugent (67) Director Director Chairman of the 208 Director of various
Triumph Capital, L.P. since 2001 Insurance Committee business organizations.
445 Park Avenue, 10th Floor and Director or
New York, NY 10022 Trustee of the
Retail Funds and the
Institutional Funds;
General Partner of
Triumph Capital,
L.P., (private
investment
partnership);
formerly Vice
President, Bankers
Trust Company and BT
Capital Corporation.
Fergus Reid (71) Director Director Chairman of the 209 Trustee and
Lumelite Plastics since 2001 Governance Committee Director of certain
85 Charles Coleman Blvd. and Director or investment companies
Pawling, NY 12564 Trustee of the in the JPMorgan
Retail Funds and the Funds complex
Institutional Funds; managed by JP Morgan
Chairman of Lumelite Investment
Plastics Management Inc.
Corporation.
</Table>
143
<Page>
2003 ANNUAL REPORT
December 31, 2003
DIRECTOR AND OFFICER INFORMATION (CONT'D)
INTERESTED DIRECTORS:
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
TERM OF FUND
OFFICE AND COMPLEX
POSITION(S) LENGTH OF OVERSEEN
NAME, AGE AND ADDRESS OF HELD WITH TIME PRINCIPAL OCCUPATION(S) BY OTHER DIRECTORSHIPS
DIRECTOR REGISTRANT SERVED* DURING PAST 5 YEARS DIRECTOR** HELD BY DIRECTOR
- --------------------------- ----------- ------------ ------------------------ -------------- -------------------------
Charles A. Fiumefreddo (70) Chairman Chairman Chairman and Director or 208 None
Morgan Stanley Funds and and Trustee of the Retail
Harborside Financial Center Director Director Funds and the
Plaza Two 3rd Floor since Institutional Funds;
Jersey City, NJ 07311 2003 formerly Chief Executive
Officer of the Retail
Funds.
James F. Higgins (55) Director Director Director or Trustee of 208 Director of AXA
Morgan Stanley since 2003 the Retail Funds and the Financial, Inc. and The
Harborside Financial Center Institutional Funds; Equitable Life Assurance
Plaza Two 2nd Floor Senior Advisor of Morgan Society of the United
Jersey City, NJ 07311 Stanley; Director of States (financial
Morgan Stanley services).
Distributors Inc. and
Dean Witter Realty Inc.;
previously President and
Chief Operating Officer
of the Private Client
Group of Morgan Stanley
and President and Chief
Operating Officer of
Individual Securities of
Morgan Stanley.
Philip J. Purcell (60) Director Director Director or Trustee of 208 Director of American
Morgan Stanley since 2003 the Retail Funds and the Airlines, Inc. and its
1585 Broadway 39th Floor Institutional Funds; parent company, AMR
New York, NY 10036 Chairman of the Board of Corporation.
Directors and Chief
Executive Officer of
Morgan Stanley and Morgan
Stanley DW Inc.; Director
of Morgan Stanley
Distributors Inc.;
Chairman of the Board of
Directors and Chief
Executive Officer of
Novus Credit Services
Inc.; Director and/or
officer of various Morgan
Stanley subsidiaries.
</Table>
* Each Director serves an indefinite term, until his or her successor is
elected.
** The Fund Complex includes all funds advised by Morgan Stanley Investment
Management Inc. and any funds that have an investment adviser that is an
affiliated entity of Morgan Stanley Investment Management Inc. (including,
but not limited to, Morgan Stanley Investment Advisors Inc. and Van Kampen
Asset Management Inc.).
Additional information about the Fund's Directors can be found in the Fund's
Statement of Additional Information (SAI). The SAI may be obtained without
charge upon request, by calling the Fund at 1(800) 281-2715. You may also
retrieve this information on-line at the Securities and Exchange Commission's
web site at "http://www.sec.gov". To aid you in obtaining this information
on-line, the Fund's Central Index Key (CIK) number is 836487 and the SAI is
found within form type 485BPOS.
144
<Page>
2003 ANNUAL REPORT
December 31, 2003
DIRECTOR AND OFFICER INFORMATION (CONT'D)
OFFICERS:
<Table>
<Caption>
TERM OF OFFICE
AND
POSITION(S) HELD LENGTH OF TIME
NAME, AGE AND ADDRESS OF EXECUTIVE OFFICER WITH REGISTRANT SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ------------------------------------------ ---------------- --------------- -------------------------------------------
Mitchell M. Merin (50) President President since President and Chief Operating Officer of
Morgan Stanley Investment Management Inc. 2003 Morgan Stanley Investment Management
1221 Avenue of the Americas 33rd Floor Inc.; President, Director and Chief
New York, NY 10020 Executive Officer of Morgan Stanley
Investment Advisors Inc. and Morgan
Stanley Services Company Inc.; Chairman,
Chief Executive Officer and Director of
Morgan Stanley Distributors Inc.;
Chairman and Director of Morgan Stanley
Trust; Director of various Morgan
Stanley subsidiaries; President of the
Institutional Funds and the Retail
Funds. Trustee and President of the Van
Kampen Open-End and Closed-End funds.
Ronald E. Robison (64) Executive Vice Executive Vice Chief Global Operations Officer and
Morgan Stanley Investment Management Inc. President and President and Managing Director of Morgan Stanley
1221 Avenue of the Americas 33rd Floor Principal Principal Investment Management Inc.; Managing
New York, NY 10020 Executive Executive Director of Morgan Stanley & Co.
Officer Officer since Incorporated; Managing Director of
2003 Morgan Stanley; Managing Director, Chief
Administrative Officer and Director of
Morgan Stanley Investment Advisors Inc.
and Morgan Stanley Services Company
Inc.; Chief Executive Officer and
Director of Morgan Stanley Trust;
Executive Vice President and Principal
Executive Officer of the Institutional
Funds and the Retail Funds; previously
President and Director of the
Institutional Funds.
Barry Fink (48) Vice President Vice President General Counsel and Managing Director of
Morgan Stanley Investment Management Inc. since 2003 Morgan Stanley Investment Management;
1221 Avenue of the Americas 22nd Floor Managing Director, Secretary and
New York, NY 10020 Director of Morgan Stanley Investment
Advisors Inc. and Morgan Stanley
Services Company Inc.; Assistant
Secretary of Morgan Stanley DW Inc.;
Vice President and General Counsel of
the Retail Funds; Vice President of the
Institutional Funds; Vice President and
Secretary of Morgan Stanley Distributors
Inc.; previously Secretary of the Retail
Funds; previously Vice President and
Assistant General Counsel of Morgan
Stanley Investment Advisors Inc. and
Morgan Stanley Services Company Inc.
Joseph J. McAlinden (60) Vice President Vice President Managing Director and Chief Investment
Morgan Stanley Investment Management Inc. since 2003 Officer of Morgan Stanley Investment
1221 Avenue of the Americas 33rd Floor Advisors Inc. and Morgan Stanley
New York, NY 10020 Investment Management Inc.; Director of
Morgan Stanley Trust, Chief Investment
Officer of the Van Kampen Funds; Vice
President of the Institutional Funds and
the Retail Funds.
Stefanie V. Chang (37) Vice President Vice President Executive Director of Morgan Stanley &
Morgan Stanley Investment Management Inc. since 2001 Co. Incorporated and Morgan Stanley
1221 Avenue of the Americas 22nd Floor Investment Management Inc.; Vice
New York, NY 10020 President of the Institutional Funds and
the Retail Funds; formerly practiced law
with the New York law firm of Rogers &
Wells (now Clifford Chance US LLP).
James W. Garrett (35) Treasurer and Treasurer since Executive Director of Morgan Stanley &
Morgan Stanley Investment Management Inc. Chief Financial 2002 Co. Incorporated and Morgan Stanley
1221 Avenue of the Americas 34th Floor Officer CFO since 2003 Investment Management Inc.; Treasurer
New York, NY 10020 and Chief Financial Officer of the
Institutional Funds; previously with
Price Waterhouse LLP (now
PricewaterhouseCoopers LLP).
Michael J. Leary (38) Assistant Assistant Assistant Director and Vice President of
J.P. Morgan Investor Services Co. Treasurer Treasurer since Fund Administration, J.P. Morgan
73 Tremont Street 2003 Investor Services Co. (formerly Chase
Boston, MA 02108 Global Funds Company); formerly Audit
Manager at Ernst & Young LLP.
Mary E. Mullin (36) Secretary Secretary since Executive Director of Morgan Stanley &
Morgan Stanley Investment Management Inc. 2001 Co. Incorporated and Morgan Stanley
1221 Avenue of the Americas 22nd Floor Investment Management Inc.; Secretary of
New York, NY 10020 the Institutional Funds and the Retail
Funds; formerly practiced law with the
New York law firms of McDermott, Will &
Emery and Skadden, Arps, Slate, Meagher
& Flom LLP.
</Table>
- ----------
* Each Officer serves an indefinite term, until his or her successor is
elected.
145
<Page>
2003 ANNUAL REPORT
December 31, 2003
INVESTMENT ADVISER AND ADMINISTRATOR
Morgan Stanley 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
JPMorgan Chase Bank
270 Park Avenue
New York, New York 10017
LEGAL COUNSEL
Mayer, Brown, Rowe & Maw LLP
1675 Broadway
New York, New York 10019-5820
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116-5072
This report is authorized for distribution only when preceded or accompanied by
the prospectus of The Morgan Stanley Institutional Fund, Inc. which describes in
detail each Investment Portfolio's investment policies, risks, fees and
expenses. Please read the prospectus carefully before you invest or send money.
For additional information, including information regarding the investments
comprising the Portfolio, please visit our website at www.morganstanley.com/im.
or call 1(800) 548-7786.
Additionally, a description of the Fund's proxy voting policies and procedures
is available without charge at our website at www.morganstanley.com/im/legal, at
the SEC's website at www.sec.gov or by calling 1(800) 281-2715.
146
<Page>
(This page has been left blank intentionally.)
<Page>
(This page has been left blank intentionally.)
<Page>
Printed in U.S.A.
This Report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
Morgan Stanley Investment Management Inc.
1221 Avenue of the Americas
New York, NY 10020
MSIF: (800) 548-7786
(C) 2004 Morgan Stanley
[MORGAN STANLEY LOGO] 1231-fibaleqseman-0204
<Page>
ITEM 2. CODE OF ETHICS.
(a) The Fund has adopted a code of ethics (the "Code of Ethics") that applies
to its principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the Fund or a third
party.
(b) No information need be disclosed pursuant to this paragraph.
(c) The Fund has not amended its Code of Ethics during the period covered by
the shareholder report presented in Item 1 hereto.
(d) The Fund has not granted a waiver or an implicit waiver from a provision of
its Code of Ethics.
(e) Not applicable.
(f)
(1) The Fund Code of Ethics is attached hereto as Exhibit A.
(2) Not applicable.
(3) Not applicable.
For Retail and Institutional Funds
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Fund's Board of Directors has determined that it has two "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Directors: Dr. Manuel H. Johnson and Joseph J. Kearns. Under
applicable securities laws, a person who is determined to be an audit committee
financial expert will not be deemed an "expert" for any purpose, including
without limitation for the purposes of Section 11 of the Securities Act of 1933,
as a result of being designated or identified as an audit committee financial
expert. The designation or identification of a person as an audit committee
financial expert does not impose on such person any duties, obligations, or
liabilities that are greater than the duties, obligations, and liabilities
imposed on such person as a
<Page>
member of the audit committee and Board of Directors in the absence of such
designation or identification.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2003
<Table>
<Caption>
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES $ 539,617 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES $ 0 $ 93,000(2)
TAX FEES $ 54,693(3) $ 163,414(4)
ALL OTHER FEES $ 0 $ 341,775(5)
TOTAL NON-AUDIT FEES $ 54,693 $ 598,189
TOTAL $ 594,310 $ 598,189
</Table>
2002
<Table>
<Caption>
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES $ 555,400 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES $ 0 $ 179,000(2)
TAX FEES $ 64,100(3) $ 0
ALL OTHER FEES $ 0 $ 595,150(6)
TOTAL NON-AUDIT FEES $ 64,100 $ 774,150
TOTAL $ 619,500 $ 774,150
</Table>
N/A- Not applicable, as not required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors)
and any entity controlling, controlled by or under common
control with the Adviser that provides ongoing services to the
Registrant.
(2) Audit-Related Fees represent assurance and related services
provided that are reasonably related to the performance of the
audit of the financial statements of the Covered Entities' and
funds advised by the Adviser or its affiliates, specifically
attestation services provided in connection with a SAS 70
Report.
(3) Tax Fees represent tax advice and compliance services provided
in connection with the review of the Registrant's tax return.
(4) Tax Fees represent tax advice services provided to Covered
Entities, including research and identification of Passive
Foreign Investment Company entities.
<Page>
(5) All Other Fees represent attestation services provided in
connection with performance presentation standards.
(6) All Other Fees represent attestation services provided in
connection with performance presentation standards, general
industry education seminars provided, and a regulatory review
project performed.
(e)(1) The audit committee's pre-approval policies and procedures are as
follows:
AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
MORGAN STANLEY RETAIL AND INSTITUTIONAL FUNDS
AS ADOPTED JULY 31, 2003(1)
1. STATEMENT OF PRINCIPLES
The Audit Committee of the Board is required to review and, in its sole
discretion, pre-approve all Covered Services to be provided by the Independent
Auditors to the Fund and Covered Entities in order to assure that services
performed by the Independent Auditors do not impair the auditor's independence
from the Fund.
The SEC has issued rules specifying the types of services that an
independent auditor may not provide to its audit client, as well as the audit
committee's administration of the engagement of the independent auditor. The
SEC's rules establish two different approaches to pre-approving services, which
the SEC considers to be equally valid. Proposed services either: may be
pre-approved without consideration of specific case-by-case services by the
Audit Committee ("GENERAL PRE-APPROVAL"); or require the specific pre-approval
of the Audit Committee or its delegate ("SPECIFIC PRE-APPROVAL"). The Audit
Committee believes that the combination of these two approaches in this Policy
will result in an effective and efficient procedure to pre-approve services
performed by the Independent Auditors. As set forth in this Policy, unless a
type of service has received general pre-approval, it will require specific
pre-approval by the Audit Committee (or by any member of the Audit Committee to
which pre-approval authority has been delegated) if it is to be provided by the
Independent Auditors. Any proposed services exceeding pre-approved cost levels
or budgeted amounts will also require specific pre-approval by the Audit
Committee.
- ----------
(1) This Audit Committee Audit and Non-Audit Services Pre-Approval Policy and
Procedures (the "POLICY"), adopted as of the date above, supercedes and
replaces all prior versions that may have been adopted from time to time.
2
<Page>
For both types of pre-approval, the Audit Committee will consider whether
such services are consistent with the SEC's rules on auditor independence. The
Audit Committee will also consider whether the Independent Auditors are best
positioned to provide the most effective and efficient services, for reasons
such as its familiarity with the Fund's business, people, culture, accounting
systems, risk profile and other factors, and whether the service might enhance
the Fund's ability to manage or control risk or improve audit quality. All such
factors will be considered as a whole, and no one factor should necessarily be
determinative.
The Audit Committee is also mindful of the relationship between fees for
audit and non-audit services in deciding whether to pre-approve any such
services and may determine for each fiscal year, the appropriate ratio between
the total amount of fees for Audit, Audit-related and Tax services for the Fund
(including any Audit-related or Tax service fees for Covered Entities that were
subject to pre-approval), and the total amount of fees for certain permissible
non-audit services classified as All Other services for the Fund (including any
such services for Covered Entities subject to pre-approval).
The appendices to this Policy describe the Audit, Audit-related, Tax and
All Other services that have the general pre-approval of the Audit Committee.
The term of any general pre-approval is 12 months from the date of pre-approval,
unless the Audit Committee considers and provides a different period and states
otherwise. The Audit Committee will annually review and pre-approve the services
that may be provided by the Independent Auditors without obtaining specific
pre-approval from the Audit Committee. The Audit Committee will add to or
subtract from the list of general pre-approved services from time to time, based
on subsequent determinations.
The purpose of this Policy is to set forth the policy and procedures by
which the Audit Committee intends to fulfill its responsibilities. It does not
delegate the Audit Committee's responsibilities to pre-approve services
performed by the Independent Auditors to management.
The Fund's Independent Auditors have reviewed this Policy and believes that
implementation of the Policy will not adversely affect the Independent Auditors'
independence.
2. DELEGATION
As provided in the Act and the SEC's rules, the Audit Committee may
delegate either type of pre-approval authority to one or more of its members.
The member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee at its next
scheduled meeting.
3. AUDIT SERVICES
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The annual Audit services engagement terms and fees are subject to the
specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit and other procedures required to be performed by the
Independent Auditors to be able to form an opinion on the Fund's financial
statements. These other procedures include information systems and procedural
reviews and testing performed in order to understand and place reliance on the
systems of internal control, and consultations relating to the audit. The Audit
Committee will monitor the Audit services engagement as necessary, but no less
than on a quarterly basis, and will also approve, if necessary, any changes in
terms, conditions and fees resulting from changes in audit scope, Fund structure
or other items.
In addition to the annual Audit services engagement approved by the Audit
Committee, the Audit Committee may grant general pre-approval to other Audit
services, which are those services that only the Independent Auditors reasonably
can provide. Other Audit services may include statutory audits and services
associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4,
etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings.
The Audit Committee has pre-approved the following Audit services. All
other Audit services not listed below must be specifically pre-approved by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
has been delegated):
- Statutory audits or financial audits for the Fund
- Services associated with SEC registration statements (including new funds),
periodic reports and other documents filed with the SEC or other documents
issued in connection with securities offerings (e.g., comfort letters for
closed-end fund offerings, consents), and assistance in responding to SEC
comment letters
- Consultations by the Fund's management as to the accounting or disclosure
treatment of transactions or events and/or the actual or potential impact
of final or proposed rules, standards or interpretations by the SEC, FASB,
or other regulatory or standard setting bodies (Note: Under SEC rules, some
consultations may be "audit related" services rather than "audit" services)
4. AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Fund's
financial statements and, to the extent they are Covered Services, the Covered
Entities or that are traditionally performed by the Independent Auditors.
Because the Audit Committee believes that the provision of Audit-related
services does not impair the independence of the auditor and is consistent with
the SEC's rules on auditor independence, the Audit Committee may grant general
pre-approval to Audit-related services. Audit-related services include, among
others, accounting consultations related to accounting, financial reporting or
disclosure matters not classified as "Audit services"; assistance with
understanding and
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implementing new accounting and financial reporting guidance from rulemaking
authorities; agreed-upon or expanded audit procedures related to accounting
and/or billing records required to respond to or comply with financial,
accounting or regulatory reporting matters; and assistance with internal control
reporting requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the following Audit-related services.
All other Audit-related services not listed below must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated):
- Attest procedures not required by statute or regulation (including agreed
upon procedures related to the Closed-End Fund asset coverage tests
required by the rating agencies and/or lenders and agreed upon procedures
related to fund profitability analysis in connection with 15c management
contract renewal process
- Services associated with registration statement with Japanese regulatory
authorities, including issuance of consent and opinion for Morgan Stanley
Asia-Pacific Fund
- Due diligence services pertaining to potential fund mergers
- Issuance of SAS-70 reports on internal controls of a service provider
- Consultations by the Fund's management as to the accounting or disclosure
treatment of transactions or events and/or the actual or potential impact
of final or proposed rules, standards or interpretations by the SEC, FASB,
or other regulatory or standard-setting bodies (Note: Under SEC rules, some
consultations may be "audit" services rather than "audit-related" services)
- Information systems reviews not performed in connection with the audit
(e.g., application data center and technical reviews)
- General assistance with implementation of the requirements of SEC rules or
listing standards promulgated pursuant to the Sarbanes-Oxley Act
5. TAX SERVICES
The Audit Committee believes that the Independent Auditors can provide Tax
services to the Fund and, to the extent they are Covered Services, the Covered
Entities, such as tax compliance, tax planning and tax advice without impairing
the auditor's independence, and the SEC has stated that the Independent Auditors
may provide such services. Hence, the Audit Committee believes it may grant
general pre-approval to those Tax services that have historically been provided
by the Independent Auditors, that the Audit Committee has reviewed and believes
would not impair the independence of the Independent Auditors, and that are
consistent with the SEC's rules on auditor independence. The Audit Committee
will not permit the retention of the Independent Auditors in connection with a
transaction initially recommended by the Independent Auditors, the sole business
purpose of which may be tax avoidance and the tax treatment,
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of which may not be supported in the Internal Revenue Code and related
regulations. The Audit Committee will consult with Director of Tax or outside
counsel to determine that the tax planning and reporting positions are
consistent with this policy.
Pursuant to the preceding paragraph, the Audit Committee has pre-approved
the following Tax Services. All Tax services involving large and complex
transactions not listed below must be specifically pre-approved by the Audit
Committee (or by any member of the Audit Committee to which pre-approval has
been delegated), including tax services proposed to be provided by the
Independent Auditors to any executive officer or trustee/director/managing
general partner of the Fund, in his or her individual capacity, where such
services are paid for by the Fund (generally applicable only to internally
managed investment companies):
- U.S. federal, state and local tax planning and advice
- U.S. federal, state and local tax compliance
- International tax planning and advice
- International tax compliance
- Review/preparation of federal, state, local and international income,
franchise, and other tax returns
- Identification of Passive Foreign Investment Companies
- Preparation of local Indian Tax Returns
- Domestic and foreign tax planning, compliance, and advice
- Assistance with tax audits and appeals before the IRS and similar state,
local and foreign agencies
- Tax advice and assistance regarding statutory, regulatory or administrative
developments (e.g., excise tax reviews, evaluation of Fund's tax compliance
function)
- Review the calculations of taxable income from corporate actions including
reorganizations related to bankruptcy filings and provide guidance related
to the foregoing
6. ALL OTHER SERVICES
The Audit Committee believes, based on the SEC's rules prohibiting the
Independent Auditors from providing specific non-audit services, that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may grant general pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, would not impair the independence of the auditor and are
consistent with the SEC's rules on auditor independence.
The Audit Committee has pre-approved the following All Other services.
Permissible All Other services not listed below must be specifically
pre-approved by the
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Audit Committee (or by any member of the Audit Committee to which pre-approval
has been delegated):
- Risk management advisory services, e.g., assessment and testing of security
infrastructure controls
The following is a list of the SEC's prohibited non-audit services. The
SEC's rules and relevant guidance should be consulted to determine the precise
definitions of these services and the applicability of exceptions to certain of
the prohibitions:
- Bookkeeping or other services related to the accounting records or
financial statements of the audit client
- Financial information systems design and implementation
- Appraisal or valuation services, fairness opinions or contribution-in-kind
reports
- Actuarial services
- Internal audit outsourcing services
- Management functions
- Human resources
- Broker-dealer, investment adviser or investment banking services
- Legal services
- Expert services unrelated to the audit
7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS
Pre-approval fee levels or budgeted amounts for all services to be provided
by the Independent Auditors will be established annually by the Audit Committee.
Any proposed services exceeding these levels or amounts will require specific
pre-approval by the Audit Committee. The Audit Committee is mindful of the
overall relationship of fees for audit and non-audit services in determining
whether to pre-approve any such services. For each fiscal year, the Audit
Committee may determine the appropriate ratio between the total amount of fees
for Audit, Audit-related, and Tax services for the Fund (including any
Audit-related or Tax services fees for Covered Entities subject to
pre-approval), and the total amount of fees for certain permissible non-audit
services classified as All Other services for the Fund (including any such
services for Covered Entities subject to pre-approval).
8. PROCEDURES
All requests or applications for services to be provided by the Independent
Auditors that do not require specific approval by the Audit Committee will be
submitted to the Fund's Chief Financial Officer and must include a detailed
description of the services to be rendered. The Fund's Chief Financial Officer
will determine whether such services are included within the list of services
that have received the general pre-approval of the Audit Committee. The Audit
Committee will be informed on a timely basis of any such services rendered by
the Independent Auditors. Requests or applications to provide services that
require specific approval by the Audit Committee will be submitted to the Audit
Committee by both the Independent Auditors and the
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Fund's Chief Financial Officer, and must include a joint statement as to
whether, in their view, the request or application is consistent with the SEC's
rules on auditor independence.
The Audit Committee has designated the Fund's Chief Financial Officer to
monitor the performance of all services provided by the Independent Auditors and
to determine whether such services are in compliance with this Policy. The
Fund's Chief Financial Officer will report to the Audit Committee on a periodic
basis on the results of its monitoring. Both the Fund's Chief Financial Officer
and management will immediately report to the chairman of the Audit Committee
any breach of this Policy that comes to the attention of the Fund's Chief
Financial Officer or any member of management.
The Audit Committee will also review the internal auditor's annual internal
audit plan to determine that the plan provides for the monitoring of the
Independent Auditors' services.
9. ADDITIONAL REQUIREMENTS
The Audit Committee has determined to take additional measures on an annual
basis to meet its responsibility to oversee the work of the Independent Auditors
and to assure the auditor's independence from the Fund, such as reviewing a
formal written statement from the Independent Auditors delineating all
relationships between the Independent Auditors and the Fund, consistent with
Independence Standards Board No. 1, and discussing with the Independent Auditors
its methods and procedures for ensuring independence.
10. COVERED ENTITIES
Covered Entities include the Fund's investment adviser(s) and any entity
controlling, controlled by or under common control with the Fund's investment
adviser(s) that provides ongoing services to the Fund(s). Beginning with
non-audit service contracts entered into on or after May 6, 2003, the Fund's
audit committee must pre-approve non-audit services provided not only to the
Fund but also to the Covered Entities if the engagements relate directly to the
operations and financial reporting of the Fund. This list of Covered Entities
would include:
MORGAN STANLEY RETAIL FUNDS
Morgan Stanley Investment Advisors Inc.
Morgan Stanley & Co. Incorporated
Morgan Stanley DW Inc.
Morgan Stanley Investment Management
Morgan Stanley Investments LP
Van Kampen Asset Management Inc.
Morgan Stanley Services Company, Inc.
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Morgan Stanley Distributors Inc.
Morgan Stanley Trust FSB
MORGAN STANLEY INSTITUTIONAL FUNDS
Morgan Stanley Investment Management Inc.
Morgan Stanley Investments LP
Morgan Stanley & Co. Incorporated
Morgan Stanley Distribution, Inc.
Morgan Stanley AIP GP LP
Morgan Stanley Alternative Investment Partners LP
(e)(2) Beginning with non-audit service contracts entered into on or after May
6, 2003, the audit committee also is required to pre-approve services to Covered
Entities to the extent that the services are determined to have a direct impact
on the operations or financial reporting of the Registrant. 100% of such
services were pre-approved by the audit committee pursuant to the Audit
Committee's pre-approval policies and procedures (attached hereto).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees has considered whether the
provision of services other than audit services performed by the auditors to the
Registrant and Covered Entities is compatible with maintaining the auditors'
independence in performing audit services.
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ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED.]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED.]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The Fund's chief executive officer and chief financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient
to ensure that information required to be disclosed by the Fund in this
Form N-CSR was recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and
forms, based upon such officers' evaluation of these controls and procedures
as of a date within 90 days of the filing date of the report.
(b) There were no changes in the Fund's internal control over financial
reporting that occurred during the registrant's most recent second fiscal
half-year that has materially affected, or is reasonably likely to materially
affect, the Fund's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a) [Attach the Code of Ethics]
(b)(1) [Attach the 302 Certification of Chief Executive Officer]
(b)(2) [Attach the 302 Certification of Chief Financial Officer]
[Note: the 906 Certifications are not exhibits to the Form but are filed with
the Form.]
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Morgan Stanley Institutional Fund, Inc.
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By: /s/ Ronald E. Robison
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Name: Ronald E. Robison
Title: Principal Executive Officer
Date: 2/18/2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
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Name: Ronald E. Robison
Title: Principal Executive Officer
Date: 2/18/2004
By: /s/ James W. Garrett
-----------------------------------------------------------------------------
Name: James W. Garrett
Title: Chief Financial Officer
Date: 2/18/2004