<PAGE>
[CLOCK PHOTOGRAPH]
SBL FUND
SEMI-ANNUAL REPORT
DECEMBER 31, 1995
* SERIES A
(GROWTH SERIES)
* SERIES B
(GROWTH-INCOME
SERIES)
* SERIES C
(MONEY MARKET SERIES)
* SERIES D
(WORLDWIDE EQUITY
SERIES)
* SERIES E
(HIGH GRADE INCOME
SERIES)
* SERIES J
(EMERGING GROWTH
SERIES)
* SERIES K
(GLOBAL AGGRESSIVE
BOND SERIES)
* SERIES M
(SPECIALIZED ASSET
ALLOCATION SERIES)
* SERIES N
(MANAGED ASSET
ALLOCATION SERIES)
* SERIES O
(EQUITY INCOME SERIES)
* SERIES S
(SOCIAL AWARENESS
SERIES)
[SDI LOGO]
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[CLOCK LOGO]
PRESIDENT'S LETTER
February 15, 1996
To Our Contractholders:
We have just completed one of the best years in history for the combined equity
and fixed income markets. The Standard and Poor's 500 Index rose an amazing
37.58%, and the bellwether thirty-year bond declined almost two full percentage
points from 7.87% to 5.94% over the course of the year. These gains are evidence
of the rewards reaped by patient investors who stood pat and even continued to
invest during the distressing markets of 1994.*
REASONS BEHIND THE OUTSTANDING PERFORMANCE IN 1995
The Federal Reserve Board deserves much of the credit for the success of the
markets during the year. The board's chairman, Alan Greenspan, has done a
commendable job of assessing the condition of the nation's economy and deftly
applying the brakes in the form of restrictive monetary policy as needed to keep
inflation in check. The resulting slow, steady economic growth and stable prices
were an unbeatable combination. Bond market investors' fears of surging
inflation dissipated, and long-term bond rates fell to levels not seen in
several years.
Technology was the year's primary equity market theme, reflective of an
increased focus on productivity in our nation's factories and offices. We have
seen extraordinary technological gains attributable to rapid development of
computer applications in every field from word processing to assembly line
production. These gains have led to more rapid decision making processes and
substitutions for labor which have in turn reduced costs, contributing to
diminished inflation pressures.
CAN THE EUPHORIA CONTINUE?
At the close of 1995, the nation's politicians were locked in combat over an
attempt to agree on a balanced budget, bringing the federal government to an
abrupt halt and creating immeasurable noise in the financial markets. Investors
must keep their eyes focused on the big picture--the economic fundamentals which
continue to augur well for the long-term outlook. Inflation remains well under
control, the economy continues to move at a slow, sustainable rate of growth,
and the Federal Reserve Open Market Committee is likely to recognize that
additional cuts in short-term interest rates are justified.
We believe that earnings comparisons for the fourth quarter of 1995 will on
balance be sufficient to support current market valuations. Earnings in 1996 are
not likely to be as robust as they were during the year; however, they should be
strong enough to sustain the markets at their present levels. There will be some
earnings disappointments, as there always are, generating daily volatility in
individual stock prices which we have come to consider routine. As we move
through the first half of 1996, the focus will be on the extended slow growth of
the economy and the ability of corporations to continue productivity improvement
in order to generate earnings gains in that slow-growth climate.
[UPPER RIGHT HAND CORNER, PHOTO OF JOHN CLELAND]
JOHN CLELAND
THE LONGER TERM GLOBAL VIEW
In the United States, we see an opportunity for the economy to benefit from the
national movement toward less government involvement in all aspects of our
lives. It is clearly possible that in the future the government will get a
smaller share of our total resources, with the greater part going toward
economic growth. The implications of this are enormously positive for financial
markets--lower interest rates due to a smaller government hand in our
pocketbook. Having a greater share of available resources dedicated to economic
growth bodes well for sustained rises in stock and bond prices.
Globally the same trends are at work. European countries are beginning to
recognize that their social welfare systems have grown beyond the capacity of
the people to support them. Growth of the free market system and the elimination
of communism as a viable political structure are strong pluses for global
economic growth. Reallocation of resources to the free market system improves
the lives of citizens and further enhances economic growth and positive
financial markets.
In the following pages our portfolio managers review the factors influencing the
performance of their respective funds in 1995. They also present their
management philosophies and outlooks for the year ahead. Our goal is to provide
you with positive investment results over time and the highest quality service
in the industry. We invite your questions and comments at any time.
Sincerely,
/s/ John D. Cleland
John D. Cleland
President - Security Funds
*Although we have just experienced a very rewarding year, investors should
remember that past performance is no guarantee of future results, and that you
may have a gain or a loss at redemption.
1
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SERIES A (GROWTH SERIES)
February 15, 1996
Dear Contractholder,
Strong financial markets in 1995 led the Growth Series of SBL Fund to a
rewarding 36.76% total return for its investors.* Signs of a slowing economy led
us to seek out higher quality companies with historically consistent growth
records through such periods. With the cyclicals' earnings expansion at its
peak, profits at these top-caliber firms looked much better on a relative basis.
Because of these holdings we enjoyed excellent returns, particularly in the
fourth quarter of the year.
EMPHASIS ON QUALITY SERVED US WELL IN 1995
The consumer nondurables sector was our main emphasis as we sought out high
quality food and health care stocks. Among these were familiar names such as
PepsiCo Inc., McDonald's Corporation, Procter & Gamble Company, Merck Company,
Inc. and Bristol-Myers Squibb Company. In an economic environment of moderate
growth and low inflation, these kinds of companies have shown an ability to
maintain consistent earnings increases.
Technology was perhaps the most newsworthy sector in 1995. We chose to invest in
the technology-related computer services area, represented by companies such as
Computer Sciences Corporation, a computer outsourcing company. We also selected
nonhardware companies such as Microsoft Corporation. We moved out of many of our
technology holdings in the fourth quarter, avoiding losses when the sector's
attractiveness diminished in the eyes of some major institutional investors.
[UPPER RIGHT HAND CORNER, PHOTO OF THE SECURITY MANAGEMENT LARGE CAP TEAM: JOHN
CLELAND, TERRY MILBERGER, CHUCK LAUBER]
THE SECURITY MANAGEMENT LARGE CAP TEAM:
JOHN CLELAND, TERRY MILBERGER, CHUCK LAUBER
A third area in which we were overweighted versus our benchmark index is the
aerospace-defense industry. Many of these corporations are reaping the benefits
of mergers and/or corporate restructurings, both of which lead to strengthened
financial position when well managed. These stocks are a good fit in the value
side of our "growth and value" mix, which is currently about 85% growth and 15%
value.
Exposure to financial company stocks has also proven rewarding this year.
Companies such as Federal National Mortgage Association profit from an
environment of declining interest rates. Lower rates not only contribute to
larger profit margins, but to increased business activity through mortgage
refinancings and new home purchases as well.
2
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SERIES A (GROWTH SERIES)
February 15, 1996
LOOKING AHEAD TO 1996
Going forward, we will continue the same game plan for the forseeable future.
The equity teams at Security Management Company expect economic conditions to
remain much the same at least through the first half of 1996, with slow but
steady growth and stable or declining interest rates. Although we expect
favorable markets, we aren't likely to see the gains that we experienced in
1995. Stock selection will be the key--the market winds will be in our faces
rather than at our backs.
Terry Milberger
Senior Portfolio Manager
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1995*
1 Year 5 Years 10 Years
Series A 36.8% 18.3% 13.4%
* Performance figures do not reflect fees and expenses associated with an
investment in variable insurance products offered by Security Benefit Life
Insurance Company. Shares of a Series of SBL Fund are available only through
the purchase of such products. The performance data quoted above represents
past performance. Past performance is not predictive of future performance.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
- --------------------------------------------------------------------------------
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
SERIES A VS. S&P 500
SBL FUND SERIES A S&P 500
----------------- -------
$10,000 $10,000
March 1986 $11,040 $11,407
June 1986 $11,651 $12,081
September 1986 $10,296 $11,240
December 1986 $10,639 $11,847
March 1987 $13,315 $14,374
June 1987 $14,034 $15,112
September 1987 $15,033 $16,113
December 1987 $11,310 $12,467
March 1988 $11,967 $13,199
June 1988 $12,694 $14,070
September 1988 $12,300 $14,124
December 1988 $12,458 $14,562
March 1989 $13,661 $15,586
June 1989 $15,117 $16,957
September 1989 $17,498 $18,763
December 1989 $16,805 $19,148
March 1990 $16,154 $18,570
June 1990 $17,105 $19,738
September 1990 $14,058 $17,017
December 1990 $15,151 $18,541
March 1991 $17,817 $21,240
June 1991 $17,817 $21,196
September 1991 $18,877 $22,337
December 1991 $20,621 $24,205
March 1992 $20,872 $23,587
June 1992 $20,597 $24,051
September 1992 $20,640 $24,796
December 1992 $22,916 $26,061
March 1993 $24,078 $27,178
June 1993 $23,816 $27,318
September 1993 $25,269 $28,016
December 1993 $26,058 $28,665
March 1994 $25,164 $27,571
June 1994 $24,743 $27,684
September 1994 $25,963 $29,047
December 1994 $25,627 $29,039
March 1995 $27,981 $31,867
June 1995 $30,640 $34,890
September 1995 $33,015 $37,664
December 1995 $35,049 $39,909
$10,000 OVER TEN YEARS
The chart above assumes a hypothetical $10,000 investment in Series A (Growth
Series) on December 31, 1985, and reflects the fees and expenses of Series A. On
December 31, 1995, the value of the investment (assuming reinvestment of all
dividends and distributions) would have been $35,049. By comparison, the same
$10,000 investment would have grown to $39,909 based on the S&P 500 Index's
performance.
3
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SERIES B (GROWTH-INCOME SERIES)
February 15, 1996
Dear Contractholder:
The Growth-Income Series of the SBL Fund provided an outstanding total return in
excess of 30% to its shareholders in 1995.* The portfolio's three-pronged
strategy of growth, value, and income amply rewarded investors with long-term
time horizons who were not frightened away by the difficult market period
experienced in 1994.
GROWTH STOCKS OUTPERFORMED VALUE IN 1995
The greater part of total return in the year just completed was provided by our
growth stock holdings. We focused on higher quality companies with historically
consistent growth records, knowing that this type of company generally
outperforms in periods of slow economic growth and declining interest rates.
Consumer service firms such as Gillette Company (The) and Procter & Gamble
Company, as well as drug and health care companies like Merck Company, Inc. and
Bristol-Myers Squibb Company, are examples of consistent earners in the growth
category.
In the Growth-lncome Series we maintain an orientation toward both growth and
value types of stocks. The value sector was represented by holdings in
aerospace-defense companies which are reaping the benefits of mergers and/or
corporate restructurings, and by issues such as Dial Corporation which we
perceived as mispriced in the markets. Because of this dual emphasis as well as
an allocation of part of the assets to bonds, we devoted a smaller percentage of
assets to the stronger-performing growth sector. This resulted in a slightly
lower total return for the year than in the Growth Series (Series A), but met
the needs of a different type of investor. Allocation during the year was
approximately 60% to growth stocks, 20% to value stocks, and 20% to bonds.
[UPPER RIGHT HAND CORNER, PHOTO OF THE SECURITY MANAGEMENT GROWTH-INCOME TEAM:
CHUCK LAUBER, TERRY MILBERGER, TOM SWANK, JOHN CLELAND]
THE SECURITY MANAGEMENT GROWTH-INCOME TEAM:
CHUCK LAUBER, TERRY MILBERGER, TOM SWANK, JOHN
CLELAND
CONTRIBUTION FROM THE BOND MARKETS IN 1995
The high yield bond portion of the Series benefited from a large decline in
interest rates and from being overweighted in defensive issues. Defensive bonds
are ones issued by higher quality companies in the high-yield universe. They
normally outperform lower rated issues when the economy is growing slowly. We
held fewer bonds in basic industries such as paper and steel, while emphasizing
financial firms and consumer noncyclicals such as hospital management companies.
4
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SERIES B (GROWTH-INCOME SERIES)
February 15, 1996
Consumer-oriented companies were represented in the portfolio by names such as
Carrol's Corporation, the largest owner of Burger King franchises, as well as by
Continental Cablevision, Inc. (the third largest cable company in the United
States), Rogers Communication (the largest media company in Canada), and Tenet
Healthcare. In the finance sector, our First Nationwide Bank preferred stock
holding was one which provided substantial gains for the portfolio.
LOOKING AHEAD TO 1996
The portfolio management teams at Security Management Company expect economic
conditions to remain about the same through at least the first half of 1996,
with slow, steady growth and stable or declining interest rates. Stock and bond
selection will be the key. Diversification throughout the portfolio will play an
important role as well. Although gains may not be as outstanding as in 1995, we
still expect 1996 to be a rewarding year for investors.
Terry Milberger
Senior Portfolio Manager
Tom Swank
Portfolio Manager--High Yield Bonds
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
SERIES B VS. S&P 500
SBL FUND SERIES B S&P 500
----------------- -------
$10,000 $10,000
March 1986 $11,381 $11,407
June 1986 $12,135 $12,081
September 1986 $11,431 $11,240
December 1986 $11,917 $11,847
March 1987 $13,925 $14,374
June 1987 $14,476 $15,112
September 1987 $15,234 $16,113
December 1987 $12,355 $12,467
March 1988 $13,425 $13,199
June 1988 $14,439 $14,070
September 1988 $14,352 $14,124
December 1988 $14,736 $14,562
March 1989 $15,814 $15,586
June 1989 $17,120 $16,957
September 1989 $18,502 $18,763
December 1989 $18,923 $19,148
March 1990 $18,586 $18,570
June 1990 $19,041 $19,738
September 1990 $17,555 $17,017
December 1990 $18,083 $18,541
March 1991 $20,499 $21,240
June 1991 $20,928 $21,196
September 1991 $23,088 $22,337
December 1991 $24,906 $24,205
March 1992 $24,702 $23,587
June 1992 $23,737 $24,051
September 1992 $24,928 $24,796
December 1992 $26,472 $26,061
March 1993 $27,579 $27,178
June 1993 $27,865 $27,318
September 1993 $28,954 $28,016
December 1993 $29,012 $28,665
March 1994 $28,154 $27,571
June 1994 $27,148 $27,684
September 1994 $28,145 $29,047
December 1994 $28,145 $29,039
March 1995 $29,969 $31,867
June 1995 $32,567 $34,890
September 1995 $34,925 $37,664
December 1995 $36,607 $39,909
$10,000 OVER TEN YEARS
The chart above assumes a hypothetical $10,000 investment in Series B
(Growth-Income Series) on December 31, 1985, and reflects the fees and expenses
of Series B. On December 31, 1995, the value of the investment (assuming
reinvestment of all dividends and distributions) would have been $36,607. By
comparison, the same $10,000 investment would have grown to $39,909 based on the
S&P 500 Index's performance.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1995*
1 Year 5 Years 10 Years
Series B 30.1% 15.1% 13.9%
* Performance figures do not reflect fees and expenses associated with an
investment in variable insurance products offered by Security Benefit Life
Insurance Company. Shares of a Series of SBL Fund are available only through
the purchase of such products. The performance data quoted above represents
past performance. Past performance is not predictive of future performance.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
- --------------------------------------------------------------------------------
5
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SERIES C (MONEY MARKET SERIES)
February 15, 1996
Dear Contractholder:
Money market funds in 1995 provided interest rates that were competitive with
those of many intermediate-term bonds. The Money Market Series of SBL Fund
returned 5.4% for the year on a high quality portfolio that invested only in
top-tier commercial paper and government agency securities.*
INFLUENCES ON SHORT-TERM FIXED INCOME MARKETS
The Federal Reserve Open Market Committee continued its fight against inflation
throughout 1995 by keeping the target rate on Federal Funds, the excess funds
banks loan each other overnight, between 5.50% and 5.75% throughout the year.
This proved to be good for the economy in general as prices remained stable in a
slow-growth atmosphere. It also kept interest rates on short-term investments
used in money market funds at very attractive levels, considering that inflation
remained around 3% throughout the year.
The Money Market Series, like other money market funds, must invest its assets
in accordance with strict regulatory requirements. These regulations require
that we invest at least 95% of the Series' assets in commercial paper that is
rated in the highest bracket by standard rating agencies. These include names
such as Coca-Cola, General Electric, Wal-Mart, McGraw Hill, and other major
corporations. Additionally we purchase short-term paper issued by agencies of
the Federal government, considered to be of the highest credit quality. As with
other money market funds, safety of principal is our utmost concern.
LOOKING AHEAD TO 1996
We expect that the Federal Reserve will see that it has accomplished its goal of
containing inflation and will begin to lower short-term interest rates in the
early part of 1996. We will continue to search out assets with competitive
yields in order to maximize returns to investors without sacrificing credit
quality.
Jane Tedder
Senior Portfolio Manager
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1995*
1 Year 5 Years 10 Years
Series C 5.4% 3.4% 5.4%
* Performance figures do not reflect fees and expenses associated with an
investment in variable insurance products offered by Security Benefit Life
Insurance Company. Shares of a Series of SBL Fund are available only through
the purchase of such products. The performance data quoted above represents
past performance. Past performance is not predictive of future performance.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
- --------------------------------------------------------------------------------
6
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SERIES D (WORLDWIDE EQUITY SERIES)
February 15, 1996
[LEXINGTON MANAGEMENT CORPORATION LOGO]
Subadvisor, Lexington Management Corporation
Portfolio Managers, Richard Sayler and Alan Wapnik
Dear Contractholder:
Worldwide Equity Series enjoyed a strong fourth quarter but still fell short of
the averages due to weak first half performance. The Morgan Stanley Capital
International (MSCI) World Index advanced 4.8% during the fourth quarter and a
strong 20.7% for all of 1995. The average global fund appreciated 1.3% during
the fourth quarter and 16.1% for 1995, according to Lipper Analytical Services,
Inc. Series D gained 3.35% during the fourth quarter and 10.86% for the year.*
GLOBAL STOCK PERFORMANCE IN 1995
The MSCI World Index has a 40% weighting in U.S. equities, which strongly
outperformed international equities in 1995. Since most global funds seek
greater diversification, they tend to underperform the MSCI World Index when U.
S. equities greatly outperform international stocks. The Worldwide Equity Series
underperformed its peers in the first half because of a light weighting in U. S.
equities, particularly in the technology sector. The European equity market,
particularly the United Kingdom, was another strong performer which was
underweighted in the portfolio.
The Series enjoyed a strong fourth quarter because of an overweighting of
Japanese stocks, an underweighting of poorly performing Scandinavian equities,
and an underweighting in certain U.S. technology stocks. We benefited as well
from declining interest rates, particularly in Europe, where a large
concentration of interest sensitive stocks performed well.
European equities had a good year in 1995, although returns could not match
those of the strong United States markets. The MSCI European Index appreciated
21.6% for the year, as European equities were stimulated by falling interest
rates. Ten year German bonds began the year yielding 7.3% and ended 1995 at
5.99%. Growth in Europe slowed throughout the year. Consumer spending remained
weak on the European continent due to structurally high unemployment, at 10% in
Germany, 12% in France, and 23% in Spain. Unemployment remained a problem due to
high labor costs which flourished under restrictive labor laws. Governments are
trying to ease these practices, but it is politically difficult. European
companies are cutting costs by closing or moving production to lower cost
countries.
Japanese stocks performed poorly in the first six months of 1995. The first half
of the year was marked by a terrible earthquake in Kobe (an important industrial
city in Japan) and by the strong yen. Sensing the urgency of a Japanese economy
facing accelerating deflation and possibly depression, Japanese authorities
finally addressed their economic problems. The Bank of Japan aggressively added
liquidity to the system and intervened in currency markets. The Ministry of
Finance announced measures to encourage investment of capital abroad, and the
Japanese government passed a $130 billion fiscal stimulative package. Japanese
equities recovered
7
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SERIES D (WORLDWIDE EQUITY SERIES)
February 15, 1996
during the second half of the year as the yen weakened back to 100 yen to the
dollar and short-term interest rates fell below 1/2%.
LOOKING AHEAD TO 1996
The outlook for 1996 is still constructive. Corporate profits in Japan are set
to surge from depressed levels if Japanese Gross Domestic Product can achieve
even a modest recovery. The Worldwide Equity Series has hedged positions on most
of its Japanese holdings to protect returns in the event of a weak yen. We
believe European equities will also perform well as economic activity remains
subdued; interest rates will help support equities as they continue downward.
U.S. equities are likely to underperform international stocks in 1996 because it
will be difficult for margins to expand further from their current lofty levels.
In our view, the outlook for emerging markets is greatly improved after two
years of negative returns. Valuation levels are reasonable and in places like
Eastern Europe are outstanding.
The Series begins 1996 with an overweight position in Japan, 80% of which is
hedged back into U. S. dollars. Japanese equities offer strong earnings
prospects, and will enjoy the monetary stimulus from the Bank of Japan. The
Series continues to hold approximately 30% in European equities, as interest
sensitive stocks will continue to perform well in a climate of falling interest
rates. Emerging markets will become a bigger focus as prospects have greatly
improved after two years of negative returns. Finally, U.S. stocks comprise 20%
of the Series. We remain underweighted in U.S. issues due to unattractive
valuations when viewed in light of single digit earnings growth forecasts for
1996.
Richard T. Saler and Alan H. Wapnick
Portfolio Managers
Investing in foreign countries may involve risks, such as currency fluctuations
and political instability, not associated with investing exclusively in the U.S.
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
SERIES D VS. MSCI WORLD INDEX AND
LEHMAN BROTHERS HIGH-YIELD INDEX
LEHMAN BROTHERS
SBL FUND SERIES D MSCI WORLD INDEX HIGH-YIELD INDEX
----------------- ---------------- ----------------
$10,000 $10,000 $10,000
March 1986 $10,511 $12,156 $10,901
June 1986 $10,817 $12,965 $11,315
September 1986 $10,664 $13,657 $11,512
December 1986 $10,448 $14,280 $11,715
March 1987 $10,970 $17,515 $12,529
June 1987 $10,493 $18,567 $12,343
September 1987 $10,191 $19,718 $12,065
December 1987 $9,832 $16,674 $12,308
March 1988 $10,364 $18,628 $12,990
June 1988 $10,315 $18,470 $13,298
September 1988 $10,303 $18,548 $13,533
December 1988 $10,315 $20,667 $13,841
March 1989 $10,279 $21,154 $14,007
June 1989 $10,327 $20,884 $14,511
September 1989 $10,090 $23,333 $14,298
December 1989 $9,399 $24,221 $13,953
March 1990 $8,579 $20,775 $13,731
June 1990 $8,651 $22,483 $14,305
September 1990 $7,995 $18,407 $12,832
December 1990 $7,263 $20,219 $12,630
March 1991 $7,848 $22,236 $15,103
June 1991 $7,610 $21,513 $16,197
September 1991 $8,042 $23,060 $17,313
December 1991 $8,188 $24,056 $18,230
March 1992 $7,979 $22,121 $19,548
June 1992 $8,105 $22,551 $20,082
September 1992 $7,725 $22,960 $20,853
December 1992 $7,979 $22,934 $21,060
March 1993 $8,828 $24,935 $22,315
June 1993 $9,274 $26,481 $23,243
September 1993 $9,923 $27,756 $23,724
December 1993 $10,497 $28,238 $24,611
March 1994 $10,582 $28,444 $24,127
June 1994 $10,773 $29,332 $24,047
September 1994 $11,166 $29,997 $24,424
December 1994 $10,783 $29,814 $24,351
March 1995 $31,249 $25,802
June 1995 $32,623 $27,384
September 1995 $34,487 $28,159
December 1995 $11,955 $36,170 $29,032
$10,000 OVER TEN YEARS
The chart above assumes a hypothetical $10,000 investment in Series D (Worldwide
Equity Series) on December 31, 1985, and reflects the fees and expenses of
Series D. On December 31, 1995, the value of the investment (assuming
reinvestment of all dividends and distributions) would have been $11,955. By
comparison, the same $10,000 investment would have grown to $36,170 based on the
MSCI Index's performance.
For the period of December 31, 1985 through April 30, 1991, the investment
objective of Series D was to seek high current income by investing primarily in
higher yielding, higher risk debt securities. For this period the Lehman Brother
High yield index was the appropriate benchmark index. Effective May 1, 1991, the
investment objective of Series D was changed to seek long-term growth of capital
primarily through investment in common stocks and equivalents of companies
domiciled in foreign countries and the United States. The appropriate benchmark
index from that date is the Morgan Stanley Capital International World Index.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1995*
1 Year 5 Years 10 Years
Series D 10.9% 10.5% 1.8%
* Performance figures do not reflect fees and expenses associated with an
investment in variable insurance products offered by Security Benefit Life
Insurance Company. Shares of a Series of SBL Fund are available only through
the purchase of such products. The performance data quoted above represents
past performance. Past performance is not predictive of future performance.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
- --------------------------------------------------------------------------------
8
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SERIES E (HIGH GRADE INCOME SERIES)
February 15, 1996
Dear Contractholder:
What a difference a year makes! In 1994 bonds took the worst beating since the
Depression years, but investors who kept their long term goals in mind rode out
the storm. By the end of May 1995, those patient investors had recouped all of
their 1994 losses and then reaped additional gains throughout the balance of the
year. The brave individuals who continued to make regular monthly purchases
through the "dark year" of 1994 can now attest to the benefits of dollar cost
averaging.* At year's end, 1995 had turned out to be an extremely rewarding year
for fixed income investors.
FACTORS DRIVING BOND PERFORMANCE IN 1995
Perhaps the single most important factor behind the 1995 bond market rally was
the realization on the part of investors that inflation was indeed under
control. The Federal Reserve's Open Market Committee remained steadfast in their
fight, holding short term interest rates at or above 5-1/2% throughout the year.
Long term bonds once again became attractive, and investor demand drove their
prices higher.
The High Grade Income Series with its long-term orientation made the most of
rising bond prices, returning 18.60% to its investors in 1995.** The assets were
invested primarily in corporate issues, which tend to outperform government
bonds in rising markets. At year end the portfolio consisted of about 25%
government and Federal agency issues, 1% in cash, and the remaining 74% in
corporates. Within the corporate sector emphasis was placed on single-A rated
issues, which generally gain more than their higher rated counterparts when the
market moves up.
[UPPER RIGHT HAND CORNER, PHOTO OF THE SECURITY MANAGEMENT FIXED-INCOME TEAM:
ELAINE MILLER, JANE TEDDER, GREG HAMILTON, JOHN CLELAND, TOM SWANK, STEVE
BOWSER]
THE SECURITY MANAGEMENT FIXED-INCOME TEAM:
ELAINE MILLER, JANE TEDDER, GREG HAMILTON, JOHN
CLELAND, TOM SWANK, STEVE BOWSER
MARKET SECTOR DETAILS
The highest-performing sector of the corporate bond market was industrials,
represented in our portfolio by such names as Eli Lilly, Lockheed Martin, and
Ralston Purina. Industrials as a group were up nearly 23% in 1995. Financial
issues were excellent as well, rising over 20% during the year. This sector of
our portfolio includes banks such as NBD Bancorp and Bank of Montreal, finance
companies like International Lease Finance and General Motors Acceptance
Corporation, and brokerage firms including Morgan Stanley Group and Lehman
Brothers.
The utility sector of the corporate bond market also did very well, increasing
over 22% in value. Our portfolio was underweighted in this area because of my
fear of the impact of changing regulatory restrictions. International issues
were strong performers in the index, but
9
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SERIES E (HIGH GRADE INCOME SERIES)
February 15, 1996
again were underrepresented in our portfolio because of prospectus limitations
which allowed us to invest outside of the United States only in Canadian issues.
LOOKING AHEAD TO 1996
The fixed income portfolio team at Security Management Company is optimistic
about bonds in the months ahead. Although we don't expect the stellar returns
achieved in 1995, we believe that there is still room for interest rates to
decline further, resulting in an increase in bond prices. At this writing, the
debate over a balanced Federal budget is unresolved, and short term interest
rates still remain at historically high levels. Once uncertainty over these two
issues is removed, we think that bonds will stage another rally that could take
long-term interest rates again below 6%. It is possible that rates could go
another 50 basis points lower to 5-1/2%. Combining this upward price movement
with a steady coupon interest stream, we feel that total returns for 1996 will
once again reward patient long-term investors.
Jane Tedder
Senior Portfolio Manager
*Dollar cost averaging does not assure a profit or protect against loss in a
declining market.
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
SERIES E VS. LEHMAN BROTHERS
GOVERNMENT/CORPORATE INDEX
SBL FUND SERIES E LEHMAN BROTHERS GOVT./CORP. INDEX
----------------- ---------------------------------
$10,000 $10,000
March 1986 $10,353 $10,853
June 1986 $10,362 $10,996
September 1986 $10,768 $11,217
December 1986 $10,962 $11,560
March 1987 $11,175 $11,732
June 1987 $11,027 $11,510
September 1987 $10,646 $11,174
December 1987 $11,221 $11,826
March 1988 $11,510 $12,250
June 1988 $11,649 $12,371
September 1988 $11,874 $12,602
December 1988 $12,034 $12,724
March 1989 $12,120 $12,864
June 1989 $13,105 $13,899
September 1989 $13,143 $14,029
December 1989 $13,466 $14,535
March 1990 $13,328 $14,369
June 1990 $13,883 $14,887
September 1990 $13,777 $14,977
December 1990 $14,368 $15,741
March 1991 $14,848 $16,165
June 1991 $15,107 $16,409
September 1991 $15,953 $17,354
December 1991 $16,805 $18,279
March 1992 $16,595 $18,004
June 1992 $17,224 $18,735
September 1992 $17,931 $19,650
December 1992 $18,056 $19,664
March 1993 $19,123 $20,580
June 1993 $19,789 $21,199
September 1993 $20,660 $21,902
December 1993 $20,335 $21,839
March 1994 $19,406 $21,152
June 1994 $18,830 $20,890
September 1994 $18,827 $20,995
December 1994 $18,925 $21,072
March 1995 $19,829 $22,122
June 1995 $20,831 $23,556
September 1995 $21,294 $24,007
December 1995 $22,446 $25,126
$10,000 OVER TEN YEARS
The chart above assumes a hypothetical $10,000 investment in Series E (High
Grade Income Series) on December 31, 1985, and reflects the fees and expenses of
Series E. On December 31, 1995, the value of the investment (assuming
reinvestment of all dividends and distributions) would have been $22,446. By
comparison, the same $10,000 investment would have grown to $25,126 based on the
Lehman Brothers Government/Corporate Index's performance.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1995**
1 Year 5 Years 10 Years
Series E 18.6% 9.3% 8.4%
**Performance figures do not reflect fees and expenses associated with an
investment in variable insurance products offered by Security Benefit Life
Insurance Company. Shares of a Series of SBL Fund are available only through
the purchase of such products. The performance data quoted above represents
past performance. Past performance is not predictive of future performance.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
- --------------------------------------------------------------------------------
10
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SERIES J (EMERGING GROWTH SERIES)
February 15, 1996
Dear Contractholder:
The Emerging Growth Series of the SBL Fund provided its investors with a
generous 19.49% return in the year just completed.* Although 1995 was a
wonderful year for the stock markets overall, the larger capitalization
companies outperformed the smaller ones in three of the four quarters. Because
this Series invests primarily in those smaller firms, it lagged the general
stock markets despite its strong performance.
FACTORS WHICH AFFECTED PERFORMANCE IN 1995
An overweighting in health care stocks during the year helped our results. In
this area we focused particularly on medical device manufacturing companies. St.
Jude Medical, a maker of items such as heart valves and pacemakers, increased
62% for the year. Guidant, a company spun off from the large drug manufacturer
Eli Lilly, has received FDA approval for its pectoral implantable defibrillator
and is now selling the product. Guidant was up an astounding 164% in 1995.
Most of the year the portfolio was intentionally underweighted in the retail
sector compared with its benchmark index. We recognized that the retail industry
had a problem of simply too many stores serving consumers--a condition known as
capacity oversupply. Consumer credit has increased to historically very high
levels, curtailing individuals' ability to spend. This, coupled with uncertainty
about job security as layoffs continued throughout the economy, kept shoppers
out of stores. Retail stocks as a group performed poorly much of the year.
[UPPER RIGHT HAND CORNER, PHOTO OF THE SECURITY MANAGEMENT SMALL CAP TEAM:
LARRY VALENCIA, FRANK WHITSELL, CINDY SHIELDS, JOHN CLELAND]
THE SECURITY MANAGEMENT SMALL CAP TEAM:
LARRY VALENCIA, FRANK WHITSELL, CINDY SHIELDS,
JOHN CLELAND
The Series was also underweighted in the technology sector during the first half
of the year, which limited our total return compared with the market in general.
As we moved into the second half of 1995, we added technology names to the
portfolio. For example, Bay Networks is the final product of a combination of
two tech firms, and is benefiting from cost-cutting measures put in place after
the consolidation. Many major corporations are in the process of installing
networking systems or upgrading those currently owned; Bay Networks manufactures
the routers and hubs needed to accomplish this.
LOOKING AHEAD TO 1996
It will be hard to match 1995's stock market performance in 1996. Although such
large returns may not be in the cards, we do think that 1996 will be a good year
for equity investors. We believe there are three factors which could lead small
capitalization stocks to outperform the general market: a cut in the
11
<PAGE>
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SERIES J (EMERGING GROWTH SERIES)
February 15, 1996
capital gains tax, a rising U.S. dollar versus foreign currencies, and an
expanding domestic economy. We will watch for these events and monitor other
conditions in order to position the portfolio to best benefit our investors.
Cindy Shields
Portfolio Manager
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1995*
1 Year Since Inception
(10-1-92)
Series J 19.5% 15.7%
* Performance figures do not reflect fees and expenses associated with an
investment in variable insurance products offered by Security Benefit Life
Insurance Company. Shares of a Series of SBL Fund are available only through
the purchase of such products. The performance data quoted above represents
past performance. Past performance is not predictive of future performance.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
- --------------------------------------------------------------------------------
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
SERIES J VS. S&P MIDCAP
AND S&P 500
SBL FUND SERIES J S&P MIDCAP S&P 500
----------------- ---------- -------
$10,000 $10,000 $10,000
December 1992 $12,470 $11,175 $10,510
March 1993 $13,040 $11,541 $10,960
June 1993 $12,980 $11,810 $11,017
September 1993 $13,811 $12,405 $11,299
December 1993 $14,171 $12,735 $11,560
March 1994 $13,191 $12,252 $11,119
June 1994 $12,111 $11,806 $11,164
September 1994 $13,268 $12,605 $11,714
December 1994 $13,448 $12,280 $11,711
March 1995 $13,858 $13,285 $12,851
June 1995 $14,709 $14,444 $14,071
September 1995 $16,490 $15,853 $15,189
December 1995 $16,070 $16,080 $16,095
$10,000 SINCE INCEPTION
This chart references a change in Series J's benchmark index. Series J's new
benchmark index is the Standard & Poor's Midcap stock index. We believe the
capitalization of the stocks in the S&P Midcap more closely reflect the
securities Series J purchases.
The chart above assumes a hypothetical $10,000 investment in Series J (Emerging
Growth Series) on October 1, 1992, and reflects the fees and expenses of Series
J. On December 31, 1995, the value of the investment (assuming reinvestment of
all dividends and distributions) would have been $16,070. By comparison, the
same $10,000 investment would have grown to $16,080 based on the S&P Midcap
Index's performance and $16,095 based on the S&P500.
12
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SERIES K (GLOBAL AGGRESSIVE BOND SERIES)
February 15, 1996
[LEXINGTON MANAGEMENT CORPORATION AND MFR ADVISORS, INC. LOGOS]
SUBADVISORS, MFR ADVISORS, INC., AND LEXINGTON MANAGEMENT
CORPORATION
PORTFOLIO MANAGERS, MARIA FIORINI RAMIREZ AND DENIS JAMISON
Dear Contractholder:
The Global Aggressive Bond Series enjoyed an excellent first seven months. The
Series boasts a 7.6% total return from June 1 through December 31, 1995.* The
Series is off to a fast start in the new year and we are optimistic about the
prospects for all of 1996.
Investors in the Series haven't seen a decline in its income despite a drop in
U.S. interest rates. Yields overseas, particularly in certain transitional
economies, are much higher than those at home. The Series ended 1995 with a
standardized yield well in excess of 9%. We believe this level will be
maintained in the quarters ahead.
THE GLOBAL VIEW
Global bond investing often requires taking some less traveled roads. Over the
years, money managers have sold global and international bond funds as a way of
diversifying investment portfolios and reducing overall risk. They reasoned that
bond price movements in one country--the United States, for example--would move
independently of those in another country, such as Germany. Unfortunately, the
ongoing globalization of the world's economies, the ease with which capital
moves, and the flow of readily accessible financial information help to ensure
greater correlation of returns among the world's developed bond markets.
Therefore, we think investors need to expand their investment parameters and
seek out markets that offer the possibility of noncorrelated returns.
Fortunately, many of these markets offer high current income and profit
potential as well. Of course, many of these markets also present additional
risks.
PORTFOLIO POSITIONING IN 1995
The Global Aggressive Bond Series currently stresses bonds in certain
transitional markets, particularly in Eastern Europe and South Africa. We think
the U. S. bond market, and by extension most of the world's developed markets,
are fully priced. Meanwhile the economies of Eastern Europe and South Africa
need to attract capital and are offering yields and investor incentives to
assure that the capital keeps flowing.
We closed 1995 with major positions in Portugal, Poland, and South Africa.
Together they totaled 26% of the Series' assets. All three economies have strong
growth potential, relatively stable currencies, and governments committed to
fiscal restraint as well as proinvestor economic policies. Moreover, their bond
markets currently provide huge income advantages over those of the traditional
developed markets.
EMPHASIS ON DIVERSIFICATION
Aside from our concentration on transitional
13
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SERIES K (GLOBAL AGGRESSIVE BOND SERIES)
February 15, 1996
economies, the Series seeks to strike a balance between developed market and LDC
(less developed country) debt. This diversification tends to mitigate
volatility. Although the past volatility of the Series is not necessarily
indicative of future volatility, over the last seven months the price volatility
of the Series has been comparable to that of ten-year U.S. Treasury Notes.
We thank our investors for their continued loyalty and support.
Maria Fiorini Ramirez
Portfolio Manager
Denis P. Jamison
Portfolio Manager
Investing in foreign countries may involve risks, such as currency fluctuations
and political instability, not associated with investing exclusively in the
U.S.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1995*
Since Inception
(6-1-95)
Series K 7.6%**
*Performance figures do not reflect fees and expenses associated with an
investment in variable insurance products offered by Security Benefit Life
Insurance Company. Shares of a Series of SBL Fund are available only through
the purchase of such products. The performance data quoted above represents
past performance. Past performance is not predictive of future performance.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
**The return has not been annualized
- --------------------------------------------------------------------------------
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
SERIES K VS. LEHMAN BROTHERS
GLOBAL BOND INDEX
SBL FUND SERIES K LEHMAN BROTHERS GLOBAL BOND INDEX
----------------- ---------------------------------
$10,000 $10,000
June 1995 $9,960 $10,069
July 1995 $10,100 $10,140
August 1995 $10,110 $9,907
September 1995 $10,360 $10,131
October 1995 $10,450 $10,245
November 1995 $10,500 $10,355
December 1995 $10,761 $10,508
$10,000 SINCE INCEPTION
The chart above assumes a hypothetical $10,000 investment in Series K (Global
Aggressive Bond Series) on June 1, 1995, and reflects the fees and expenses of
Series K. On December 31, 1995, the value of the investment (assuming
reinvestment of all dividends and distributions) would have been $10,761. By
comparison, the same $10,000 investment would have grown to $10,508 based on the
Lehman Brothers Global Bond Index's performance.
14
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SERIES M (SPECIALIZED ASSET ALLOCATION SERIES)
February 15, 1996
[MERIDIAN INVESTMENT MANAGEMENT LOGO]
MANAGED BY SECURITY MANAGEMENT COMPANY
RESEARCH PROVIDED BY MERIDIAN INVESTMENT MANAGEMENT CORPORATION
AND TEMPLETON QUANTITATIVE ADVISORS, INC.
Dear Contractholder:
The Specialized Asset Allocation Series for the period from its inception on
June 1 through December 31 returned 7.10%.* Because of the nature of this
Series, it is difficult to compare its performance to a single market index. The
U.S. stock market was the top performing market globally this year--during the
seven month period since June 1 the S&P 500 returned 17.08% including reinvested
dividends. In contrast, the Financial Times Actuarial World Index excluding the
U.S., a proxy for the performance of international markets as a group, returned
5.02% in U.S. dollars over the same time period.
SECTOR ALLOCATION DURING 1995
The Series ended the year with only slight allocation shifts from its position
at inception. At year end the allocation was 40% to U.S. stocks, 35% to
international stocks, 15% to U.S. bonds, and 10% to real estate (through real
estate investment trusts). During the third quarter 5% of the assets were
reallocated from the U. S. bond category to real estate. The portfolio currently
has no allocation to the other available asset classes (international bonds,
gold, and cash.) A small cash position (usually less than 3%) is maintained for
liquidity purposes, but a deliberately large allocation is not included unless
the portfolio is taking a defensive posture.
The benchmark asset allocation of the Series is 40% U.S. stocks, 25%
international stocks, 20% U.S. bonds, 10% real estate, and 5% cash. At year end
relative to its benchmark allocation the Series is overweighted in international
stocks, moderately underweighted in the U.S. bond market, and has no cash
position. In years such as 1995 when the U.S. stock market vastly outperforms
other sectors, total return of a portfolio diversified among broad sectors will
be less than that of a portfolio invested 100% in the outperforming sector. Over
time, however, a diversified portfolio is expected to reduce risk while
providing competitive returns.
The U.S. stock allocation is divided among thirteen sectors. Included is a
modest technology weighting with 4.3% in computer stocks such as Dell, IBM, and
Sun Microsystems. The most recent sector additions have been Telecommunications
(.9%), Recreation and Leisure (3.7%), and Metals and Mining (2.6%). Holdings in
these groups include Ameritech, GTE and Sprint in Telecommunications; Walt
Disney, Harley Davidson, and Callaway Golf in the Recreation and Entertainment
sectors; and Phelps Dodge, Alcoa, and Magma Copper in the Metals and Mining
category.
LOOKING AHEAD TO 1996
The strategists at Meridian Investment Management Corporation, the provider of
asset
15
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SERIES M (SPECIALIZED ASSET ALLOCATION SERIES)
February 15, 1996
allocation research services to the Series, believe there are still pockets of
value within the U. S. market. Several of the sectors within the U. S.
allocation underperformed in 1995. Dr. Craig Callahan, Chief Investment Officer
at Meridian, looks for these areas to play "catch-up" in 1996.
The international equity portion of the Series is currently invested in Japan,
Germany, Hong Kong, Belgium, and the United Kingdom. The Japanese market has
experienced stellar performance recently with the benchmark Nikkei 225 index
jumping from 18,000 in the early part of November to just under 20,000 at the
end of the year. The German and United Kingdom markets also reached new highs in
the fourth quarter of 1995. While these markets have been good performers
lately, they still lag the performance of the U. S. market. We look for our
international equity holdings to perform well in 1996 compared with the domestic
market.
Greg A. Hamilton
Portfolio Manager
Investing in foreign countries may involve risks, such as currency fluctuations
and political instability, not associated with investing exclusively in the U.S.
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
SERIES M VS. BLENDED INDEX
AND S&P 500
SBL FUND SERIES M BLENDED INDEX S&P 500
----------------- ------------- -------
$10,000 $10,000 $10,000
June 1995 $10,080 $10,100 $10,200
July 1995 $10,390 $10,400 $10,600
August 1995 $10,390 $10,300 $10,600
September 1995 $10,490 $10,600 $11,100
October 1995 $10,340 $10,500 $11,100
November 1995 $10,610 $10,800 $11,500
December 1995 $10,710 $11,100 $11,700
$10,000 SINCE INCEPTION
The chart above assumes a hypothetical $10,000 investment in Series M
(Specialized Asset Allocation Series) on June 1, 1995, and reflects the fees and
expenses of Series M. On December 31, 1995, the value of the investment
(assuming reinvestment of all dividends and distributions) would have been
$10,710. By comparison, the same $10,000 investment would have grown to $11,700
based on the S&P 500 Index's performance. By comparison, the same $10,000
investment would have grown to $11,100 based the blended index of 40% S&P 500,
25% Financial Times World Index, 20% Lehman Brothers Aggregate Bond Index, 10%
Wilshire Real Estate Securities Index and 5% 91-Day Treasury Bill Yield.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1995*
Since Inception
(6-1-95)
Series M 7.1%**
*Performance figures do not reflect fees and expenses associated with an
investment in variable insurance products offered by Security Benefit Life
Insurance Company. Shares of a Series of SBL Fund are available only through
the purchase of such products. The performance data quoted above represents
past performance. Past performance is not predictive of future performance.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
**The return has not been annualized.
- --------------------------------------------------------------------------------
16
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SERIES N (MANAGED ASSET ALLOCATION SERIES)
February 15, 1996
[T. ROWE PRICE LOGO]
SUBADVISOR, T. ROWE PRICE ASSOCIATES, INC.
PORTFOLIO MANAGER, NED NORTON
Dear Contractholder:
The investment committee for the Managed Asset Allocation Series meets monthly
to adjust the weightings of stocks, bonds, and money market securities within
the appropriate ranges of the portfolio, based on market conditions and economic
fundamentals. The committee has maintained a strategy of overweighting bonds
because of relatively high stock valuations, while keeping cash equivalents
close to minimum levels. Actual allocations on December 31 are shown in the
Strategy Review section of this letter.
MARKET REVIEW
The economy slowed from 1994's robust pace to an annualized rate of 1.3% in the
second quarter of 1995. Although GDP growth increased to 4.2% in the third
quarter, we view this as something of a rebound from the slow second quarter. We
expect economic growth to be closer to its historical trend between 2.0% and
2.5% in the final quarter of the year. The slowing economy along with relatively
benign inflation resulted in falling interest rates over the year.
Stocks generated exceptional returns during the year. The unmanaged Standard &
Poor's 500 Stock Index registered a total return of 17.08% from June 1 (the date
of inception of the Managed Asset Allocation Series) through the end of the
year. The NASDAQ Composite Index, which tracks smaller company stocks primarily,
posted a return of 21.24% for the same period. International stocks fared worse
overall, as most foreign markets trailed the U. S.
Bonds also enjoyed powerful returns, as the thirty-year Treasury bond fell from
6.64% at the beginning of June to 5.94% at December 31. During the same period
the Lehman Aggregate Bond Index increased 7.84%. Short-term rates declined, as
well, although not to the same extent. The U.S. dollar gained ground against
most major currencies, diminishing returns for U. S. investors in foreign bonds.
STRATEGY REVIEW
The objective of the Managed Asset Allocation Series is to provide the highest
total return consistent with an emphasis on both income and capital
appreciation. The typical asset mix is 60% stocks and 40% bonds, with 10%
variations permitted for each asset class. On December 31, the Series had 50% of
its assets in stocks and 50% in bonds.
We were overweighted in bonds since stock valuations appeared high. However,
this bond concentration held back performance as the stock market continued to
register stunning returns during the latter part of the year, extending their
earlier gains. We continued to favor growth over value stocks, since slowing
economic growth usually favors companies able to sustain earnings momentum even
during an economic slowdown.
17
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SERIES N (MANAGED ASSET ALLOCATION SERIES)
February 15, 1996
Our model's current 44% allocation to fixed income securities is broken down to
include 74% investment grade domestic bonds, 18% high yield bonds, and 8%
foreign bonds. Within our model's 56% equity exposure, we have allocated 54% to
large cap stocks, 18% to small cap issues, and 28% to foreign stocks. We
continue to overweight small cap stocks due to their undervaluations relative to
large capitalization stocks. We also feel that foreign stocks have attractive
growth opportunities.
OUTLOOK
We anticipate a relatively stable interest rate environment in the months ahead.
Should the growth of corporate earnings slow from the current pace, the stock
market could experience the correction that has been long anticipated for some
quarters. We would increase our exposure to stocks in that event. Meanwhile, any
further decline in interest rates in the months ahead will also benefit fixed
income investors. It is unlikely that the impressive returns of the past year
can be sustained indefinitely, but the present economic environment bodes well
for both stocks and bonds.
Ned Notson
Portfolio Manager
Investing in foreign countries involves risks, such as currency fluctuations and
political instability, not associated with investing exclusively in the U.S.
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
SERIES N VS. S&P 500 AND LEHMAN
BROTHERS AGGREGATE BOND INDEX
LEHMAN BROTHERS
SBL FUND SERIES N S&P 500 AGGREGATE BOND INDEX
----------------- ------- --------------------
$10,000 $10,000 $10,000
June 1995 $10,070 $10,200 $10,100
July 1995 $10,310 $10,600 $10,100
August 1995 $10,230 $10,600 $10,200
September 1995 $10,440 $11,100 $10,300
October 1995 $10,410 $11,100 $10,400
November 1995 $11,360 $11,500 $10,600
December 1995 $10,730 $11,700 $10,700
$10,000 SINCE INCEPTION
The chart above assumes a hypothetical $10,000 investment in Series N (Managed
Asset Allocation Series) on June 1, 1995, and reflects the fees and expenses of
Series N. On December 31, 1995, the value of the investment (assuming
reinvestment of all dividends and distributions) would have been $10,730. By
comparison, the same $10,000 investment would have grown to $10,700 based on the
Lehman Brothers Aggregate Bond Index's performance and $11,708 based on the S&P
500 Index's performance.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1995*
Since Inception
(6-1-95)
Series N 7.3%**
*Performance figures do not reflect fees and expenses associated with an
investment in variable insurance products offered by Security Benefit Life
Insurance Company. Shares of a Series of SBL Fund are available only through
the purchase of such products. The performance data quoted above represents
past performance. Past performance is not predictive of future performance.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
**The return has not been annualized.
- --------------------------------------------------------------------------------
18
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SERIES O (EQUITY INCOME SERIES)
February 15, 1996
[T. ROWE PRICE LOGO]
SUBADVISOR, T. ROWE PRICE ASSOCIATES, INC.
PORTFOLIO MANAGER, BRIAN ROGERS
Dear Contractholder.
The equity market performed extremely well in 1995 reflecting strong corporate
earnings, low inflation, a benign interest rate environment, and strong investor
demand. The unmanaged Standard & Poor's 500 Stock Index, which was up 37.58%,
concluded its best year since 1958 and posted one of the strongest 12-month
returns in history.
The Equity Income Series did particularly well over the seven months since its
inception June 1, 1995, with a total return of 17% versus the S&P 500's 17.08%
for the same time period.* Since our conservative investment approach sometimes
lags the broad index in unusually robust markets, we were pleased with the
year's results. Keep in mind that the generally conservative nature of your
Series' investments is also tailored to minimize loss in a declining market. Of
course investors should also remember that this is an equity investment. As
such, its share price is subject to fluctuation.
PORTFOLIO REVIEW
The strong performance of many financial stocks, the positive contribution of
our holdings in the health care sector, and gains generated by
large-capitalization consumer products stocks were among the most important
influences on 1995 results. Our investments in companies such as J.P. Morgan,
First Interstate Bank, Sallie Mae, and Travelers were particularly profitable.
Pharmaceutical stocks also performed extremely well. Some of the successful
investments we made in this sector were trimmed later in the year. After stocks
such as Eli Lilly and Schering Plough appreciated in value, our valuation
discipline encouraged us to reinvest some of the assets into more undervalued
stocks with attractive dividend yields. We also eliminated Halliburton, an oil
well services and engineering firm, following a runup in its share price.
Over the past six months, the prices of many cyclical stocks fell as investors
worried about the durability of corporate earnings in 1996. The decline in the
value of such stocks as Union Camp, Betz Laboratories, International Paper, and
DuPont rendered them exceedingly attractive, in our view.
SUMMARY AND OUTLOOK
We anticipate positive but slowing economic growth along with a more challenging
stock market environment in 1996. Instead of making more detailed economic and
market forecasts, we would like to reiterate our primary emphasis which is on
sound, conservatively based investments. This has been the hallmark of our
approach, in almost any market environment, we believe there will be intriguing
opportunities on which to capitalize profitably. As always, we appreciate your
continued confidence and support.
Brian C. Rogers
Portfolio Manager
Investing in foreign countries involves risks, such as currency fluctuations and
political instability, not associated with investing exclusively in the U.S.
19
<PAGE>
[CLOCK LOGO]
SERIES O (EQUITY INCOME SERIES)
February 15, 1996
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1995*
Since Inception
(6-1-95)
Series O 17.0%**
*Performance figures do not reflect fees and expenses associated with an
investment in variable insurance products offered by Security Benefit Life
Insurance Company. Shares of a Series of SBL Fund are available only through
the purchase of such products. The performance data quoted above represents
past performance. Past performance is not predictive of future performance.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
**The return has not been annualized.
- --------------------------------------------------------------------------------
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
SERIES O VS. S&P 500
SBL FUND SERIES O S&P 500
----------------- -------
$10,000 $10,000
June 1995 $10,060 $10,200
July 1995 $10,250 $10,600
August 1995 $10,400 $10,600
September 1995 $10,790 $11,100
October 1995 $10,910 $11,100
November 1995 $11,360 $11,500
December 1995 $11,700 $11,700
$10,000 SINCE INCEPTION
The chart above assumes a hypothetical $10,000 investment in Series O (Equity
Income Series) on June 1, 1995, and reflects the fees and expenses of Series O.
On December 31, 1995, the value of the investment (assuming reinvestment of all
dividends and distributions) would have been $11,700. By comparison, the same
$10,000 investment would have grown to $11,708 based on the S&P 500 Index's
performance.
20
<PAGE>
[CLOCK LOGO]
SERIES S (SOCIAL AWARENESS SERIES)
February 15, 1996
Dear Contractholders:
The primary goal of the Social Awareness Series is to provide competitive
returns through investment in socially responsible companies. Although many
investors select funds of this nature because of their personal convictions,
they are able to achieve attractive investment results at the same time. In 1995
the Social Awareness Series returned 27.7% to its investors.*
PERFORMANCE OF THE SOCIAL AWARENESS SERIES IN 1995
The orientation of the Social Awareness Series toward larger-capitalization
companies in the year just completed helped its performance, reflecting the
trend in the broader markets. Throughout the year we owned a number of high
quality, consistent growth firms. The portfolio was underweighted in technology
stocks during the first half of the year, which hindered results during that
period. However, we adjusted in midyear and participated in the strong
performance of that market sector. Other industries represented in the portfolio
which made strong contributions to total return were health care and financial
companies.
The socially-aware screening requirements of the Series frequently draw us to
smaller capitalization companies as well, because many younger, smaller firms
from the outset have pursued high standards with respect to human resources
issues and the environment. In times when small-cap companies outperform the
general markets, the Series will do better also. In years such as the one just
completed, when the larger-cap stocks were leaders, we have tended to
underperform the indexes. In 1995 about one-third of the portfolio was invested
in small-cap stocks. Over time, though, we believe the mixture in the Series
will provide competitive returns for our investors.
EXAMPLES OF OUTSTANDING SOCIAL AWARENESS IN CORPORATE AMERICA
One of our holdings, Boston Market (formerly Boston Chicken), is a
rapidly-expanding restaurant chain. The company sets high quality standards for
the food it serves to customers, requiring it to be made fresh each day. In
addition, the company's policy also calls for keeping food trays in the hot and
cold cases at least half full. At the end of the day, there can be as much as 50
to 100 pounds of food remaining which other stores might discard. Boston Market
franchisers instead donate the leftovers to local food banks to be served to the
hungry.
Among our large-cap holdings, Procter & Gamble Company is an excellent example
of a company known for generous giving, diversity in employment, and finally
benefits. In 1994, P&G won the Labor Department's annual EVE award given to
federal contractors for programs that increase equal employment opportunity. In
1995, Working Mother magazine honored Procter & Gamble Company for the ninth
year in its list of 100 best workplaces for working mothers. The company donates
cash and in-kind contributions, as well as funding grants for groups such as
Special Olympics, Children's Defense Fund, National Council of Negro Women and
Students Against Drunk Driving.
21
<PAGE>
[CLOCK LOGO]
SERIES S (SOCIAL AWARENESS SERIES)
February 15, 1996
LOOKING AHEAD TO 1996
The equity portfolio managers at Security Management Company expect large-cap
stocks to outperform in the first part of the year. During this time investors
will continue to move to high quality securities until the uncertainty about the
federal budget and interest rates is resolved. If the Federal Reserve Bank
lowers short-term interest rates and politicians settle on a budget reduction
package, we believe investors will become more confident and small stocks will
rise.
Cindy Shields
Portfolio Manager
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1995*
1 Year Since Inception
(4-23-91)
Series S 27.7% 11.9%
* Performance figures do not reflect fees and expenses associated with an
investment in variable insurance products offered by Security Benefit Life
Insurance Company. Shares of a Series of SBL Fund are available only through
the purchase of such products. The performance data quoted above represents
past performance. Past performance is not predictive of future performance.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
- --------------------------------------------------------------------------------
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
SERIES S VS. S&P 500 AND
DOMINI SOCIAL INDEX
SBL FUND SERIES S S&P500 DOMINI SOCIAL INDEX
----------------- ------ -------------------
$10,000 $10,000 $10,000
June 1991 $9,560 $9,979 $9,907
September 1991 $10,330 $10,516 $10,570
December 1991 $10,550 $11,396 S11,697
March 1992 $11,130 $11,105 $11,474
June 1992 $10,050 $11,323 $11,463
September 1992 $10,231 $11,674 $12,078
December 1992 $12,275 $12,270 $13,111
March 1993 $12,185 $12,796 $13,706
June 1993 $12,526 $12,861 $13,508
September 1993 $13,480 $13,190 $13,982
December 1993 $13,731 $13,496 $14,231
March 1994 $13,319 $12,981 $13,696
June 1994 $12,808 $13,034 $13,678
September 1994 $13,295 $13,675 $14,308
December 1994 $13,213 $13,672 $14,256
March 1995 $13,998 $15,003 $15,723
June 1995 $15,027 $16,427 $17,274
September 1995 $16,572 $17,733 $18,649
December 1995 $16,879 $18,789 $19,699
$10,000 SINCE INCEPTION
The chart above assumes a hypothetical $10,000 investment in Series S (Social
Awareness Series) on May 1, 1991, and reflects the fees and expenses of Series
S. On December 31, 1995, the value of the investment (assuming reinvestment of
all dividends and distributions) would have been $16,879. By comparison, the
same $10,000 investment would have grown to $18,789 based on the S&P 500 Index's
performance and $19,699 based on the Domini Social Index.
22
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES A (GROWTH)
NUMBER MARKET
OF SHARES COMMON STOCKS VALUE
- --------------------------------------------------------------------------------
ADVERTISING - 1.4%
200,000 Omnicom Group, Inc.............. $ 7,450,000
AEROSPACE & DEFENSE - 7.6%
160,000 Allied-Signal, Inc. ............ 7,600,000
100,000 Lockheed Martin Corporation..... 7,900,000
265,000 Loral Corporation............... 9,374,375
100,000 McDonnell Douglas
Corporation................... 9,200,000
120,000 Raytheon Company................ 5,670,000
------------
39,744,375
AGRICULTURE - 0.7%
65,000 Pioneer Hi-Bred International,
Inc. ......................... 3,615,625
AMUSEMENT & RECREATIONAL
SERVICES - 2.0%
240,000 Carnival Cruise Lines, Inc. .... 5,850,000
80,000 Disney (Walt) Company........... 4,720,000
------------
10,570,000
BANKING & FINANCE - 2.6%
100,000 Bankamerica Corporation......... 6,475,000
120,000 Chemical Banking Corporation.... 7,050,000
------------
13,525,000
BROADCASTING - 1.1%
120,000 Viacom, Inc. (Cl.B)............. 5,685,000
CASINOS - 1.0%
150,000 Mirage Resorts, Inc.*........... 5,175,000
CHEMICALS - 9.7%
100,000 Cabot Corporation............... 5,387,500
110,500 Great Lakes Chemical
Corporation................... 7,956,000
120,000 Hercules, Inc. ................. 6,765,000
90,000 Minerals Technologies, Inc. .... 3,285,000
65,000 Monsanto Company................ 7,962,500
35,000 Morton International, Inc. ..... 1,255,625
200,000 Praxair, Inc. .................. 6,725,000
80,000 Sigma Aldrich Corporation....... 3,960,000
400,000 U.S. Industries, Inc.*.......... 7,350,000
------------
50,646,625
COMMUNICATIONS - 1.2%
100,000 AT & T Corporation.............. 6,475,000
COMPUTER SERVICES - 4.2%
150,000 Ceridian Corporation*........... 6,187,500
80,000 Cerner Corporation*............. 1,640,000
100,000 Computer Sciences Corporation*.. 7,025,000
130,000 General Motors Corporation
(Cl.E)........................ 6,760,000
------------
21,612,500
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 1.5%
55,000 Microsoft Corporation*.......... $ 4,826,250
75,000 Oracle Systems Corporation*..... 3,178,125
------------
8,004,375
COMPUTER SYSTEMS - 1.2%
70,000 International Business
Machines Corporation.......... 6,422,500
CONSUMER GOODS & SERVICES - 1.0%
100,000 Duracell International, Inc. ... 5,175,000
DRUG DELIVERY - 0.5%
50,000 Elan Corporation PLC ADR*....... 2,431,250
ELECTRIC MACHINERY & ELECTRONIC
COMPONENTS - 3.2%
100,000 General Electric Company........ 7,200,000
90,000 Molex, Inc. .................... 2,857,500
140,000 Varian Associates, Inc. ........ 6,685,000
------------
16,742,500
FERTILIZER - 1.1%
80,000 Potash Corporation of Saskatchewan,
Inc. ......................... 5,670,000
FINANCE - 1.0%
40,000 Federal National Mortgage
Association................... 4,965,000
FOOD & BEVERAGES - 7.6%
100,000 Anheuser-Busch Companies, Inc... 6,687,500
120,000 CPC International, Inc. ........ 8,235,000
150,000 Heinz (H.J.) Company............ 4,968,750
150,000 PepsiCo, Inc. .................. 8,381,250
200,000 Ralcorp Holdings, Inc.* ........ 4,850,000
200,000 Sara Lee Corporation............ 6,375,000
------------
39,497,500
HOSPITAL MANAGEMENT -1.7%
115,000 Columbia Healthcare
Corporation .................. 5,836,250
100,000 Vencor, Inc.*................... 3,250,000
------------
9,086,250
HOUSEHOLD PRODUCTS - 1.2%
75,000 Procter & Gamble Company........ 6,225,000
INSURANCE - 3.9%
75,000 American International Groups,
Inc........................... 6,937,500
127,500 Jefferson Pilot Corporation..... 5,928,750
100,000 MBIA, Inc....................... 7,500,000
------------
20,366,250
MACHINERY - 1.4%
210,000 Deere & Company ................ 7,402,500
See accompanying notes.
23
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES A (GROWTH) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
MANUFACTURING - 1.3%
250,000 Pall Corporation ............... $ 6,718,750
MEDICAL INSTRUMENTS & SUPPLIES - 1.2%
155,000 Baxter International, Inc. ..... 6,490,625
NATURAL GAS - 1.2%
170,000 Coastal Corporation (The) ...... 6,332,500
PAINT & ALLIED PRODUCTS - 1.1%
140,000 Sherwin-Williams Company........ 5,705,000
PERSONAL SERVICES - 0.8%
140,000 Dial Corporation (The).......... 4,147,500
PETROLEUM REFINING - 2.9%
70,000 Mobil Corporation............... 7,840,000
50,000 Royal Dutch Petroleum Company
ADR........................... 7,056,250
------------
14,896,250
PHARMACEUTICALS - 8.2%
75,000 American Home Products
Corporation................... 7,275,000
75,000 Bristol-Myers Squibb Company.... 6,440,625
130,000 Merck & Company, Inc. .......... 8,547,500
200,000 Pharmacia & Upjohn, Inc.*....... 7,750,000
130,000 Schering-Plough Corporation..... 7,117,500
100,000 Smithkline Beecham ADR PLC...... 5,550,000
------------
42,680,625
PHOTOGRAPHIC EQUIPMENT &
SUPPLIES - 2.6%
100,000 Eastman Kodak Company........... 6,700,000
50,000 Xerox Corporation............... 6,850,000
------------
13,550,000
PUBLISHING & PRINTING - 1.0%
250,000 News Corporation, Ltd. (The).... 5,343,750
RESTAURANTS & FOOD SERVICE - 2.9%
180,000 McDonald's Corporation.......... 8,122,500
325,000 Wendy's International, Inc. .... 6,906,250
------------
15,028,750
RETAIL TRADE - 6.1%
250,000 Federated Department Stores,
Inc.* ........................ 6,875,000
220,000 Leggett & Platt, Inc. .......... 5,335,000
30,000 Nike, Inc. (Cl.B)............... 2,088,750
105,000 Safeway, Inc.* ................. 5,407,500
190,000 Vons Companies, Inc.* .......... 5,367,500
220,000 Walgreen Company................ 6,572,500
------------
31,646,250
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
TOYS & SPORTING GOODS - 1.3%
175,000 Mattel, Inc. ................... $ 5,381,250
TRANSPORTATION - 3.6%
85,000 Burlington Northern, Inc. ...... 6,630,000
75,000 Conrail Corporation............. 5,250,000
100,000 Union Pacific Corporation....... 6,600,000
------------
18,480,000
UTILITIES--TELEPHONE - 2.0%
350,000 Frontier Corporation ........... 10,500,000
WHOLESALE TRADE - 0.8%
130,000 Sysco Corporation .............. 4,225,000
------------
Total common stocks- Series A
(cost $368,502,550) - 93.8% . 487,613,500
COMMERCIAL PAPER
----------------
$ 500,000 AIG Funding, Inc.,
5.82%, 1-03-96................ 499,676
$1,500,000 Alabama Power Company,
5.585%, 2-08-96............... 1,490,085
$1,500,000 Allegheny Generating Company,
5.635%, 1-16-96............... 1,496,008
$4,500,000 Bell Atlantic Network Funding,
5.65%, 1-29-96................ 4,478,812
$3,500,000 General Electric Company,
5.77%, 1-05-96................ 3,496,634
$3,400,000 GTE Northwest, Inc.,
5.74%, 1-09-96................ 3,394,579
$1,500,000 Harper Group, Inc. (The),
5.665%, 1-19-96............... 1,494,915
$5,200,000 International Lease Finance Corporation,
5.73%, 1-03-96................ 1,998,726
5.785%, 1-03-96............... 1,199,228
5.90%, 1-04-96................ 1,998,361
$7,500,000 Progress Capital Holdings, Inc.,
5.78%, 1-10-96................ 2,495,585
5.70%, 1-24-96................ 4,980,208
$1,000,000 TDK U.S.A. Corporation,
5.65%, 1-30-96................ 995,135
$1,500,000 Toyota Motor Credit Corporation,
5.725%, 1-17-96............... 1,495,706
------------
Total commercial paper - Series A -
(cost $31,514,629) - 6.1%... 31,513,658
------------
Total investments - Series A -
(cost $400,017,179) - 99.9% 519,127,158
------------
Cash and other assets, less
liabilities - Series A - 0.1% 763,942
------------
Total net assets applicable to
24,721,185 shares outstanding -
Series A - 100.0%........... $519,891,100
============
See accompanying notes.
24
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES B (GROWTH-INCOME)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES PREFERRED STOCK VALUE
- --------------------------------------------------------------------------------
BANKING & CREDIT - 0.8%
60,000 First Nationwide Bank, $8.176... $ 6,735,000
-----------
Total preferred stock -Series B
(cost $5,978,750) - 0.8% 6,735,000
CORPORATE BONDS
---------------
ALUMINUM - 0.7%
$5,000,000 Kaiser Aluminum & Chemical
Corporation, 12.75% - 2003.... 5,500,000
AMUSEMENT & RECREATION
SERVICES - 0.6%
$3,000,000 Showboat Inc., 9.25% - 2008..... 3,015,000
$2,000,000 Harrah's Entertainment,
10.875% - 2002................ 2,160,000
------------
5,175,000
COMMUNICATIONS - 3.4%
$5,300,000 Allbritton Communications Company,
11.50% - 2004................. 5,578,250
$3,000,000 Century Communications,
9.50% - 2005.................. 3,082,500
$3,500,000 Comcast Corporation,
9.125% - 2006................. 3,631,250
$4,000,000 Continental Cablevision, Inc.,
11.00% - 2007................. 4,475,000
$2,000,000 Granite Broadcasting Corporation,
12.75% - 2002................. 2,180,000
$2,100,000 Rogers Cable System,
9.625% - 2002................. 2,202,375
$6,000,000 SCI Television, Inc.,
11.00% - 2005................. 6,405,000
------------
27,554,375
CONSUMER GOODS & SERVICES - 0.8%
$3,000,000 International Semi-Tech,
0% - 2003(1).................. 1,627,500
$5,000,000 Westpoint Stevens, 9.375% -
2005.......................... 4,962,500
------------
6,590,000
DIVERSIFIED - 0.6%
$5,000,000 Sequa Corporation,
9.375% - 2003................. 4,600,000
FERTILIZER - 0.7%
$5,000,000 Sherritt Gordon Ltd.,
9.75% - 2003.................. 5,262,500
FINANCE - 1.7%
$4,000,000 Dime Bancorp, Inc.,
10.50% - 2005................. 4,435,000
$4,000,000 Home Holdings, 7.75% - 1998..... 3,600,000
$5,350,000 Keystone Group, Inc.,
9.75% - 2003.................. 5,209,563
------------
13,244,563
PRINCIPAL MARKET
AMOUNT CORPORATE BONDS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
FOOD & BEVERAGE TRADE - 1.1%
$2,500,000 Cott Corporation, 9.375% - 2005. $ 2,500,000
Southland Corporation,
4,000,000 5.00% - 2003.................. 3,345,000
1,000,000 4.50% - 2004.................. 777,500
2,250,000 TLC Beatrice, 11.50% - 2005..... 2,221,875
------------
8,844,375
GROCERY STORES - 1.3%
5,000,000 Pathmark Stores, 9.625% -2003... 4,831,250
6,000,000 Penn Traffic Company, 8.625% -
2003.......................... 5,295,000
------------
10,126,250
HOSPITAL MANAGEMENT - 0.4%
Tenet Healthcare,
1,000,000 9.625% - 2002................. 1,100,000
2,000,000 10.125% - 2005................ 2,215,000
------------
3,315,000
MANUFACTURING - 0.6%
4,000,000 Schuller International Group, Inc.,
10.875% - 2004................ 4,490,000
OIL & GAS COMPANIES - 1.4%
4,000,000 Plains Resources, 12% - 1999.... 4,185,000
6,950,000 Seagull Energy Corporation,
8.625% - 2005................. 6,672,000
------------
10,857,000
PAPER & PACKAGING - 0.3%
2,000,000 Riverwood International Corporation,
10.375% - 2004................ 2,220,000
PLASTIC PRODUCTS - 0.4%
3,000,000 Carlisle Plastics, 10.25% - 1997 3,033,750
PUBLISHING & PRINTING - 1.5%
K-III Communications Corporation,
4,500,000 10.625% - 2002................ 4,781,250
1,000,000 10.25% - 2004................. 1,081,250
5,500,000 Marvel Holdings, 0% - 1998...... 3,960,000
3,000,000 Western Publishing, 7.65% -
2002.......................... 2,122,500
------------
11,945,000
RESTAURANTS - 0.5%
4,000,000 Carrols Corporation, 11.50% -
2003.......................... 4,040,000
STEEL & METAL PRODUCTS - 0.3%
2,500,000 Weirton Steel Corporation,
11.50% - 1998................. 2,575,000
-----------
Total corporate bonds - Series B
(cost $123,843,905) - 16.3%. 129,372,813
See accompanying notes.
25
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES B (GROWTH-INCOME) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS VALUE
- --------------------------------------------------------------------------------
ADVERTISING - 1.4%
300,000 Omnicom Group................... $ 11,175,000
AEROSPACE & DEFENSE - 6.8%
200,000 Allied-Signal, Inc. ............ 9,500,000
150,000 Lockheed Martin Corporation..... 11,850,000
370,000 Loral Corporation............... 13,088,750
120,000 McDonnell Douglas Corporation... 11,040,000
180,000 Raytheon Company................ 8,505,000
------------
53,983,750
AMUSEMENT & RECREATIONAL
SERVICES - 1.3%
180,000 Disney (Walt) Company........... 10,620,000
APPAREL - 0.4%
80,000 Nine West Group, Inc.*.......... 3,000,000
BANKING - 3.0%
130,000 Bankamerica Corporation ........ 8,417,500
150,000 Chemical Banking Corporation ... 8,812,500
30,000 Wells Fargo & Company .......... 6,480,000
------------
23,710,000
BROADCASTING - 1.2%
200,000 Viacom, Inc. (Cl.B)*............ 9,475,000
CASINOS - 0.9%
200,000 Mirage Resorts, Inc.*........... 6,900,000
CHEMICALS - 4.5%
90,500 Great Lakes Chemical Corporation 6,516,000
100,000 Hercules, Inc. ................. 5,637,500
100,000 Monsanto Company................ 12,250,000
35,000 Morton International, Inc. ..... 1,255,625
300,000 Praxair, Inc. .................. 10,087,500
------------
35,746,625
COMMUNICATIONS - 1.1%
135,000 AT & T Corporation.............. 8,741,250
COMPUTER SERVICES - 2.7%
210,000 Ceridian Corporation*........... 8,662,500
250,000 General Motors Corporation
(Cl.E)........................ 13,000,000
-----------
21,662,500
COMPUTER SOFTWARE - 1.5%
100,000 Microsoft Corporation .......... 8,775,000
65,000 Oracle Systems Corporation...... 2,754,375
------------
11,529,375
COMPUTER SYSTEMS - 1.2%
100,000 International Business Machines
Corporation................... 9,175,000
CONSUMER GOODS & SERVICES - 0.8%
120,000 Duracell International, Inc. ... 6,210,000
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
DRUG DELIVERY - 0.3%
50,000 Elan Corporation PLC ADR*....... $ 2,431,250
ELECTRICAL MACHINERY & ELECTRONIC
COMPONENTS - 2.9%
100,000 Cooper Industries, Inc. ........ 3,675,000
140,000 General Electric Company........ 10,080,000
200,000 Varian Associates, Inc. ........ 9,550,000
------------
23,305,000
FERTILIZER - 0.9%
100,000 Potash Corporation of
Saskatchewan, Inc............. 7,087,500
FINANCE - 1.9%
70,000 Federal National Mortgage
Association................... 8,688,750
115,000 Household International, Inc. .. 6,799,375
------------
15,488,125
FOOD & BEVERAGES - 5.8%
130,000 Anheuser-Busch Companies,
Inc. ......................... 8,693,750
150,000 Coca Cola Company (The) ........ 11,137,500
150,000 CPC International, Inc. ........ 10,293,750
187,500 Heinz (H.J.) Company............ 6,210,938
300,000 Sara Lee Corporation............ 9,562,500
------------
45,898,438
HOSPITAL MANAGEMENT & SERVICES - 1.6%
200,000 Columbia Healthcare Corporation. 10,150,000
70,000 Vencor, Inc.* .................. 2,275,000
------------
12,425,000
HOUSEHOLD PRODUCTS - 2.9%
200,000 Gillette Company (The) ......... 10,425,000
150,000 Procter & Gamble Company........ 12,450,000
------------
22,875,000
INSURANCE - 2.0%
105,000 Jefferson Pilot Corporation .... 4,882,500
150,000 MBIA, Inc. ..................... 11,250,000
------------
16,132,500
MACHINERY - 1.5%
150,000 American Standard Companies*.... 4,200,000
225,000 Deere & Company................. 7,931,250
------------
12,131,250
MANUFACTURING - 0.8%
250,000 Pall Corporation................ 6,718,750
MEDICAL INSTRUMENTS & SUPPLIES - 1.2%
220,000 Baxter International, Inc. ..... 9,212,500
OFFICE, COMPUTING & ELECTRONIC
MACHINERY - 1.4%
130,000 Hewlett Packard Company......... 10,887,500
See accompanying notes.
26
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES B (GROWTH-INCOME) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
PERSONAL SERVICES - 0.7%
200,000 Dial Corporation (The) ......... $ 5,925,000
PETROLEUM REFINING - 2.3%
225,000 Coastal Corporation (The) ...... 8,381,250
90,000 Mobil Corporation .............. 10,080,000
------------
18,461,250
PHARMACEUTICALS - 7.2%
100,000 American Home Products
Corporation .................. 9,700,000
120,000 Bristol-Myers SquibbCompany..... 10,305,000
175,000 Merck & Company, Inc. .......... 11,506,250
230,000 Pharmacia & Upjohn, Inc.*....... 8,912,500
150,000 Schering Plough Corporation..... 8,212,500
150,000 Smithkline Beecham ADRPLC....... 8,325,000
------------
56,961,250
PHOTOGRAPHIC EQUIPMENT &
SUPPLIES - 2.1%
125,000 Eastman Kodak Company........... 8,375,000
60,000 Xerox Corporation............... 8,220,000
------------
16,595,000
PUBLISHING & PRINTING - 1.9%
400,000 News Corporation (The).......... 8,550,000
170,000 Time-Warner, Inc. .............. 6,438,750
------------
14,988,750
REAL ESTATE - 1.3%
500,000 Macerich Company................ 10,000,000
RESTAURANTS & FOOD SERVICE - 2.8%
280,000 McDonald's Corporation.......... 12,635,000
450,000 Wendy's International, Inc. .... 9,562,500
------------
22,197,500
RETAIL TRADE - 2.4%
220,000 Albertsons, Inc. ............... 7,232,500
350,000 Federated Department Stores,
Inc.*......................... 9,625,000
30,000 Nike, Inc. (Cl.B)............... 2,088,750
------------
18,946,250
TOYS & SPORTING GOODS - 0.4%
100,000 Mattel, Inc. ................... 3,075,000
TRANSPORTATION - 2.8%
125,000 Burlington Northern, Inc. ...... 9,750,000
90,000 Conrail Corporation ............ 6,300,000
100,000 Union Pacific Corporation....... 6,600,000
----------
22,650,000
UTILITIES--TELEPHONE - 1.6%
450,000 Frontier Corporation ........... 13,500,000
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
WHOLESALE TRADE - 0.5%
130,000 Sysco Corporation............... $ 4,225,000
----------
Total common stocks - Series B
(cost $466,382,415) - 76.0%... 604,046,313
COMMERCIAL PAPER
----------------
$1,500,000 Avnet, Inc., 5.685%, 1-16-96.... 1,495,973
$4,800,000 Consolidated Natural Gas Company,
5.63%, 1-08-96................ 4,793,244
$3,400,000 Duke Power Company, 5.72%,
1-12-96....................... 3,392,977
$7,500,000 GTE California, Inc.,
5.62%, 1-09-96................ 2,995,317
5.66%, 1-09-96................ 4,492,925
$3,300,000 General Electric Capital Corporation,
5.77%, 1-05-96................ 3,296,826
$4,000,000 International Business Machines
Corporation, 5.805%, 1-11-96.. 3,992,260
$6,000,000 International Lease Finance Corporation,
5.73%, 1-03-96................ 4,996,817
5.90%, 1-04-96................ 999,181
$9,500,000 P.H.H. Corporation,
5.75%, 1-11-96................ 3,998,083
5.74%, 1-16-96................ 5,485,092
$7,200,000 Progress Capital Holdings, Inc.,
5.685%, 1-24-96............... 4,183,419
5.70%, 1-24-96................ 2,988,125
$4,500,000 TDK U.S.A. Corporation,
5.65%, 1-30-96................ 4,478,106
$1,800,000 Toyota Motor Credit Corporation,
5.715%, 1-04-96............... 1,798,571
------------
Total commercial paper - Series B
(cost $53,386,916) - 6.7%..... 53,386,916
------------
Total investments - Series B
(cost $649,591,986) - 99.8% 793,541,042
Other assets, less liabilities -
Series B - 0.2%............... 1,571,660
------------
Total net assets applicable to
23,421,450 shares outstanding
- Series B - 100.0%........... $795,112,702
============
SERIES C (MONEY MARKET)
COMMERCIAL PAPER
----------------
AIR TRANSPORTATION - 3.4%
$3,600,000 Harper Group, Inc.,
5.71%, 1-19-96................ $ 797,288
5.66%, 3-14-96................ 2,765,700
------------
3,562,988
See accompanying notes.
27
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES C (MONEY MARKET) (CONTINUED)
PRINCIPAL MARKET
AMOUNT COMMERCIAL PAPER (CONTINUED) VALUE
- --------------------------------------------------------------------------------
AUTOMOBILES - 3.8%
$4,000,000 Toyota Motor Credit Corporation,
5.65%, 1-04-96................ $ 1,998,431
5.69%, 1-12-96................ 1,995,891
------------
3,994,322
BUSINESS SERVICES - 6.1%
2,000,000 AI Credit Corporation, 5.63%,
2-02-96....................... 1,988,720
2,500,000 General Electric Capital Corporation,
5.67%, 1-26-96................ 2,488,700
2,000,000 Penney (J.C.) Funding Corporation,
5.65%, 2-15-96 ............... 1,984,853
------------
6,462,273
COMPUTERS - 5.1%
5,400,000 Hewlett Packard Company,
5.65%, 1-04-96................ 1,998,431
5.65%, 1-11-96................ 2,395,017
5.63%, 1-16-96................ 997,100
------------
5,390,548
CONSTRUCTION - 2.8%
3,000,000 Stanley Works, 5.54%, 3-11-96... 2,966,298
DRUGS & TOILETRIES - 8.0%
5,000,000 Allergan, Inc.,
5.725%, 1-17-96............... 996,978
5.67%, 2-06-96................ 3,974,840
3,500,000 Schering Corporation,
5.65%, 1-31-96................ 3,481,713
------------
8,453,531
ELECTRIC COMPANIES & SYSTEMS - 18.6%
4,000,000 Alabama Power Company,
5.62%, 2-08-96................ 993,390
5.65%, 2-13-96................ 992,580
5.57%, 2-15-96................ 1,985,456
4,800,000 Allegheny Generating Company,
5.55%, 1-31-96................ 4,776,320
3,000,000 Allegheny Power System, Inc.,
5.59%, 2-28-96................ 2,970,510
3,500,000 Georgia Power Company,
5.61%, 3-06-96................ 2,472,600
5.60%, 3-14-96................ 987,750
2,000,000 Interstate Power Company,
5.75%, 1-31-96................ 1,989,778
2,500,000 Southern California Edison Company,
5.705%, 1-19-96............... 2,474,644
------------
19,643,028
PRINCIPAL MARKET
AMOUNT COMMERCIAL PAPER (CONTINUED) VALUE
- --------------------------------------------------------------------------------
ELECTRONICS - 8.8%
$5,000,000 Avnet, Inc.,
5.70%, 1-16-96................ $ 1,495,963
5.70%, 1-17-96................ 3,489,375
4,300,000 TDK U.S.A. Corporation,
5.65%, 1-22-96................ 996,130
5.70%, 1-22-96................ 3,287,229
------------
9,268,697
GAS COMPANIES & SYSTEMS - 10.5%
2,000,000 Bay State Gas Company,
5.73%, 1-10-96................ 1,996,499
5,000,000 Michigan Consolidated Gas Company,
5.65%, 1-24-96................ 1,484,698
5.65%, 2-07-96................ 3,477,425
1,600,000 Nicor, Inc.,
5.66%, 2-09-96................ 1,589,687
2,500,000 Northern Illinois Gas Company,
5.65%, 1-12-96................ 2,494,350
------------
11,042,659
GROCERY STORES - 2.8%
3,000,000 Winn Dixie Stores, Inc.,
5.58%, 1-10-96................ 1,996,120
5.66%, 2-08-96................ 993,590
------------
2,989,710
LEASING COMPANIES - 5.7%
3,700,000 International Lease Finance Corporation,
5.67%, 1-02-96................ 2,698,245
5.64%, 2-20-96................ 991,460
2,300,000 P.H.H. Corporation,
5.69%, 1-03-96................ 1,998,380
5.745%, 1-16-96............... 299,186
------------
5,987,271
PRINTING - 3.8%
4,000,000 McGraw Hill, Inc.,
5.65%, 1-09-96................ 3,992,880
TELEPHONE & TELEGRAPH - 6.9%
5,000,000 Bell South Telecommunications,
5.50%, 2-08-96................ 993,889
5.65%, 2-12-96................ 3,972,378
2,300,000 GTE Northwest, Inc.,
5.80%, 1-18-96................ 2,292,960
------------
7,259,227
TOBACCO PRODUCTS - 2.8%
3,000,000 B.A.T. Capital Corporation,
5.68%, 1-23-96................ 2,987,910
------------
Total commercial paper - Series C
(cost $94,018,629) - 89.1%.... 94,001,342
See accompanying notes.
28
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES C (MONEY MARKET) (CONTINUED)
PRINCIPAL
AMOUNT OR
NUMBER U.S. GOVERNMENT AND MARKET
OF SHARES GOV'T AGENCY SECURITIES VALUE
- --------------------------------------------------------------------------------
FEDERAL FARM CREDIT BANKS - 9.5%
$2,000,000 5.70%, 1-02-96................ $ 2,000,000
$2,000,000 5.73%, 3-01-96................ 2,000,560
$2,000,000 5.70%, 4-01-96................ 2,001,480
$2,000,000 5.58%, 5-01-96................ 2,001,820
$2,000,000 5.52%, 6-03-96................ 2,001,680
------------
10,005,540
SBA POOL - 1.1%
$1,161,771 SBA Pool GCS #36523, 6.75%,
12-25-12(4)................... 1,161,771
------------
Total U.S. government and
government agency securities -
Series C (cost $11,161,771)
- 10.6%..................... 11,167,311
------------
Total investments - Series C
(cost $105,180,400) - 99.7% 105,168,653
------------
Cash and other assets, less
liabilities - Series C - 0.3% 267,027
------------
Total net assets applicable to
8,541,095 shares outstanding -
Series C - 100.0%........... $105,435,680
============
SERIES D (WORLDWIDE EQUITY)
PREFERRED STOCKS
----------------
GERMANY - 1.9%
18,300 Fielman AG...................... $ 942,052
8,800 SAP AG Preferred................ 1,328,417
2,140 Sto AG.......................... 1,071,861
------------
Total preferred stocks - Series D
(cost $3,422,556) - 1.9%...... 3,342,330
COMMON STOCKS
-------------
AUSTRALIA - 2.0%
401,800 QBE Insurance Group, Ltd........ 1,855,653
493,300 TABCorp Holdings, Ltd........... 1,391,846
10,900 TABCorp Holdings, Ltd. ADR*..... 307,925
------------
3,555,424
AUSTRIA - 1.6%
16,500 Bank Austria AG................. 787,036
31,300 Creditanstalt-Bankverein........ 1,731,489
2,200 Wolford AG...................... 346,165
------------
2,864,690
CANADA - 0.5%
57,100 Jetform Corporation............. 824,381
SERIES D (WORLDWIDE EQUITY) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
CHILE - 0.9%
122,500 Banco Osorno y La Union ADR..... $1,699,688
DENMARK - 1.4%
18,630 Novo-Nordisk A.S................ 2,544,259
FRANCE - 3.5%
12,074 Cetelem......................... 2,261,952
540 Grand Optical Photoservice...... 52,618
31,100 SGS-Thomson Microelectronics
N.V.*......................... 1,188,717
3,880 Sidel S.A....................... 1,206,988
12,210 Societe Generale de Paris
Holding S.A. "B".............. 1,505,871
------------
6,216,146
GERMANY - 2.2%
155,100 Continental AG.................. 2,157,913
18,800 Deutsche Bank AG................ 888,929
13,730 G.M. Pfaff AG*.................. 959,906
------------
4,006,748
HONG KONG - 1.5%
1,308,000 National Mutuals Asia, Ltd...... 1,184,170
918,000 Semi-Tech (Global), Ltd......... 1,478,156
------------
2,662,326
INDONESIA - 0.7%
731,000 PT Kawasan Industri Jababeka.... 1,184,194
IRELAND - 1.6%
263,900 Allied Irish Banks Plc.......... 1,422,833
594,300 Jefferson Smurfit Group......... 1,395,610
------------
2,818,443
ISRAEL - 1.4%
650 Africa-Israel Investments, Ltd.* 783,777
146,700 Clal Industries, Ltd............ 787,237
9,390 Koor Industries, Ltd............ 932,300
------------
2,503,314
ITALY - 1.8%
105,100 Alleanza Assicurazioni.......... 999,162
36,900 Assicurazioni Generali.......... 892,782
144,000 Bulgari Spa*.................... 1,228,649
------------
3,120,593
JAPAN - 22.6%
83,000 Amada Company, Ltd.............. 819,158
50,000 Amway Japan, Ltd................ 2,109,337
32,000 CSK Corporation................. 1,000,097
65,000 Hino Motors, Ltd................ 546,541
93,000 Joshin Denki Company, Ltd. ..... 1,214,804
571,000 Kawasaki Kisen Kaisha, Ltd.*.... 1,812,172
431,000 Kawasaki Steel Corporation...... 1,501,306
52,000 Komatsu Forklift Company, Ltd... 344,654
56,000 Makino Milling Machine Company,
Ltd. ......................... 478,994
See accompanying notes.
29
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES D (WORLDWIDE EQUITY) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
JAPAN, CONTINUED
165,000 Matsushita Electric Industrial
Company, Ltd.................. $ 2,682,148
149,000 Matsushita Refrigeration
Company, Ltd.................. 1,081,277
126,000 Matsuzakaya Company, Ltd. ...... 1,597,097
460,000 Mitsui Engineering &
Shipbuilding*................. 1,277,407
56,000 Mori Seiki Company, Ltd......... 1,262,505
75,000 National House Industrial
Corporation................... 1,371,553
187,000 Nippon Chemi-Con Corporation*... 1,244,857
67,000 Nippon Electric Glass Company,
Ltd........................... 1,270,634
443,000 Nippon Steel Corporation........ 1,517,388
2,900 Nissen Company, Ltd............. 67,905
79,000 Nitto Denko Corporation......... 1,223,029
65 NTT Data Communications Systems
Corporation................... 2,182,390
62,900 Paris Miki, Inc................. 2,257,949
17,000 Ryohin Keikaku Company, Ltd..... 1,414,611
84,000 Sharp Corporation............... 1,341,074
298,000 Shinmaywa Industries, Ltd....... 2,456,662
24,100 Sony Corporation................ 1,443,435
85,000 Sumitomo Forestry Company....... 1,315,917
314,000 Sumitomo Reality & Development
Company....................... 2,217,900
17,000 Tosoh Corporation............... 81,751
100,000 Yamato Kogyo Company, Ltd....... 967,586
------------
40,102,138
MALAYSIA - 0.4%
332,000 Land & General Holdings Bhd..... 719,322
MEXICO - 1.3%
317,600 Tubos De Acero De Mexico
S.A. ADR...................... 2,223,200
NETHERLANDS - 2.8%
67,200 ABN AMRO Holdings NV............ 3,056,827
14,200 Baan Company, N.V.*............. 642,550
91,300 Elsevier N.V.................... 1,215,818
------------
4,915,195
NEW ZEALAND - 2.2%
1,367,900 Brierley Investments, Ltd....... 1,080,819
670,200 Fisher & Paykel Industries, Ltd. 2,035,029
256,400 Independent Newspapers, Ltd..... 778,546
------------
3,894,394
NORWAY - 1.5%
258,200 Fokus Banken A.S.*.............. 1,391,102
97,700 Saga Petroleum A.S.............. 1,300,553
------------
2,691,655
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
PHILIPPINES - 2.2%
2,018,700 C & P Homes, Inc.*.............. $1,482,639
2,865,000 Filinvest Land, Inc.*........... 918,199
3,214,000 Universal Robina Corporation.... 1,594,125
------------
3,994,963
POLAND - 0.9%
50,100 Bank Rozwoju Eksportu S.A....... 762,480
61,800 Debica S.A...................... 933,019
------------
1,695,499
PORTUGAL - 0.8%
77,100 Portugal Telecom S.A. ADR*...... 1,448,842
SINGAPORE - 1.3%
823,000 Comfort Group, Ltd.............. 698,543
168,000 United Overseas Bank, Ltd....... 1,616,070
------------
2,314,613
SOUTH AFRICA - 0.3%
34,386 Rustenburg Platinum Holdings,
Ltd. ADR...................... 565,956
SPAIN - 1.5%
41,100 Repsol S.A...................... 1,343,303
99,000 Telefonica de Espana............ 1,367,538
------------
2,710,841
SWEDEN - 2.0%
33,500 Astra AB........................ 1,336,410
141,700 Atlas Copco AB.................. 2,175,799
------------
3,512,209
SWITZERLAND - 3.2%
1,060 Nestle S.A...................... 1,172,570
170 Roche Holding AG................ 1,344,820
1,560 Union Bank of Switzerland....... 1,690,507
2,020 Winterrthur Schweizerische
Versicherungs - Gesellschaft.. 1,428,973
------------
5,636,870
THAILAND - 2.2%
211,900 Bangkok Bank, Ltd............... 2,575,115
205,200 Total Access Communication
Plc*.......................... 1,333,800
------------
3,908,915
UNITED KINGDOM - 5.4%
1,316,700 Aegis Group Plc*................ 770,435
219,000 Antofagasta Holdings Plc........ 992,891
260,500 B.A.T. Industries Plc........... 2,291,423
273,000 D.F.S. Furniture Company Plc.... 1,679,906
91,300 RTZ Corporation Plc............. 1,324,580
199,200 Takare Plc...................... 552,680
459,200 Tomkins Plc..................... 2,007,163
------------
9,619,078
See accompanying notes.
30
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES D (WORLDWIDE EQUITY) (CONTINUED)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
UNITED STATES - 23.2%
21,300 Aluminum Company of America..... $ 1,126,238
13,400 American Home Products
Corporation................... 1,299,800
13,500 American International Group.... 1,248,750
25,000 Bank of New York Company, Inc. . 1,218,750
22,000 Beneficial Corporation.......... 1,025,750
66,000 Borders Group, Inc.*............ 1,221,000
24,800 Ceridian Corporation*........... 1,023,000
12,300 Chubb Corporation............... 1,190,025
48,600 Diamond Offshore Drilling, Inc. 1,640,250
29,000 Dover Corporation............... 1,069,375
42,900 Ecolab, Inc. ................... 1,287,000
25,200 Eli Lilly & Company............. 1,417,500
7,900 General Re Corporation.......... 1,224,500
26,900 Halliburton Company............. 1,361,813
21,600 Hercules, Inc. ................. 1,217,700
18,100 Hershey Foods Corporation....... 1,176,500
13,100 Hewlett-Packard Company......... 1,097,125
15,200 Johnson & Johnson............... 1,301,500
17,200 Lockheed Martin Corporation..... 1,358,800
40,500 Loral Corporation............... 1,432,688
30,500 Meredith Corporation............ 1,277,188
30,800 Millipore Corporation........... 1,266,650
11,800 Mobil Corporation............... 1,321,600
16,400 NationsBank Corporation......... 1,141,850
23,000 PepsiCo, Inc. .................. 1,285,125
23,700 Pioneer Hi-Bred International, Inc. 1,318,313
14,700 Procter & Gamble Company........ 1,220,100
29,700 Service Corporation International 1,306,800
16,400 Union Pacific Corporation....... 1,082,400
34,100 US Bancorp...................... 1,144,480
29,500 Williams Companies, Inc. ....... 1,294,313
38,600 Winn-Dixie Stores, Inc. ........ 1,423,375
8,700 Xerox Corporation............... 1,191,900
------------
41,212,158
------------
Total common stocks - Series D
(cost $156,580,657) - 92.9% 165,166,054
FOREIGN BONDS
-------------
GERMANY - 1.8%
$4,853,000 Bundesbank Deutschland Republic
Bond, 6.50%, 10-14-05......... 3,294,978
------------
Total foreign bonds - Series D
(cost $3,254,594) - 1.8% 3,294,978
------------
Total investments - Series D
(cost $163,257,807) - 96.6% 171,803,362
Cash and other assets, less
liabilities - Series D - 3.4% 5,977,737
------------
Total net assets applicable to
31,951,961 shares outstanding
- Series D - 100.0% $177,781,099
============
- --------------------------------------------------------------------------------
At December 31, 1995, Series D's investment concentration by industry was as
follows:
Banking................................ 12.2%
Capital Equipment...................... 11.3
Construction & Housing................. 1.6
Consumer Durables...................... 8.6
Consumer Nondurables................... 5.6
Electrical and Electronics............. 4.8
Energy................................. 4.7
Environmental Technology............... 0.7
Financial Services..................... 8.1
Foreign Government Issues.............. 1.8
Health Care............................ 5.5
Materials.............................. 7.0
Merchandising.......................... 6.7
Multi-Industry......................... 5.8
Real Estate............................ 2.4
Services............................... 5.9
Telecommunications..................... 2.3
Transportation......................... 1.6
Cash and other assets, less
liabilities........................ 3.4
------
Total net assets....................... 100.0%
======
SERIES E (HIGH GRADE INCOME)
PRINCIPAL GOVERNMENT AND MARKET
AMOUNT GOVERNMENT AGENCY SECURITIES VALUE
- --------------------------------------------------------------------------------
CANADIAN GOVERNMENT AGENCIES - 4.2%
$5,000,000 Ontario Province, CDA,
7.00% - 2005.................. $5,325,000
U.S. GOVERNMENT AGENCIES - 7.3%
3,000,000 Federal Home Loan Mortgage
Corporation, 8.82% - 2004..... 3,141,870
4,000,000 Federal National Mortgage Association,
5.65%, 1997................... 4,024,040
Government National Mortgage
Association,
252,095 9% - 2021..................... 266,143
389,580 9% - 2021..................... 411,432
665,800 9.50% - 2009.................. 710,600
525,105 9.50% - 2020.................. 558,058
------------
9,112,143
31
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES E (HIGH GRADE INCOME) (CONTINUED)
PRINCIPAL GOVERNMENT AND GOV'T MARKET
AMOUNT AGENCY SECURITIES (CONTINUED) VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES - 13.3%
U.S. Treasury Notes,
$5,000,000 6.125% - 1998................. $ 5,100,350
6,500,000 6.25% - 2000.................. 6,720,219
U.S. Treasury Bonds,
4,800,000 6.25% - 2023.................. 4,937,712
------------
16,758,281
------------
Total government and government
agency securities - Series E -
(cost $30,459,614 )- 24.8% 31,195,424
CORPORATE BONDS
---------------
AEROSPACE & DEFENSE - 4.5%
5,100,000 Lockheed Corporation, 7.875% -
2023.......................... 5,616,375
BANKS - 11.8%
4,000,000 Bank of Montreal, 7.80% - 2007.. 4,450,000
5,000,000 Bank of New York, 6.50% -
2003.......................... 5,106,250
5,000,000 NBD Bancorp, 7.125% - 2007...... 5,331,250
------------
14,887,500
BROKERS, DEALERS & SERVICES - 4.0%
5,000,000 Morgan Stanley Group, Inc.,
7.25% - 2023.................. 5,012,500
COMMUNICATIONS - 5.9%
5,000,000 Southern New England Telecomm.,
7.00% - 2005.................. 5,306,250
2,000,000 U.S. West Capital Funding,
6.75% - 2005.................. 2,065,000
------------
7,371,250
DRUGS - 9.0%
5,500,000 Eli Lilly & Company, 7.25% -
2025.......................... 5,898,750
5,000,000 Rite Aid Corporation, 7.625% -
2005.......................... 5,443,750
------------
11,342,500
ELECTRIC COMPANIES & SYSTEMS - 4.0%
5,000,000 Pacific Gas & Electric Company,
6.25% - 2003.................. 5,018,750
FINANCE - 12.3%
5,000,000 General Motors Acceptance Corporation,
6.625% - 2005................. 5,118,750
5,000,000 International Lease Finance Company,
7.00% - 2000.................. 5,187,500
5,000,000 Norwest Financial, Inc.,
6.75% - 2005.................. 5,200,000
------------
15,506,250
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES CORPORATE BONDS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
FOOD & BEVERAGES - 4.3%
$5,000,000 Ralston Purina Company,
7.875% - 2025................. $ 5,468,750
PAPER & LUMBER PRODUCTS - 4.5%
$5,000,000 International Paper Company,
7.875% - 2006................. 5,643,750
RAILROAD - 4.4%
$5,000,000 Union Pacific Company,
7.60% - 2005.................. 5,500,000
SANITARY SERVICES - 4.2%
$5,000,000 Waste Management,
7.00% - 2005.................. 5,325,000
TELEPHONE COMPANIES - 4.3%
$5,000,000 GTE South, Inc.,
7.25% - 2002.................. 5,350,000
UTILITY COMPANIES - 1.0%
$1,000,000 Old Dominion Electric Cooperative,
8.76% - 2022.................. 1,218,750
-----------
Total corporate bonds - Series E -
(cost $87,094,277) - 74.2% 93,261,375
------------
Total investments - Series E -
(cost $117,553,891) - 99.0% 124,456,799
Cash and other assets, less
liabilities - Series E - 1.0% 1,194,986
------------
Total net assets applicable to
9,769,468 shares outstanding -
Series E - 100.0%........... $125,651,785
============
SERIES J (EMERGING GROWTH)
COMMON STOCKS
-------------
ADVERTISING - 0.3%
6,900 Omnicom Group .................. $ 257,025
AIRLINES - 1.1%
45,500 Southwest Airlines Company ..... 1,057,875
BUILDING MATERIALS - 0.3%
5,200 Vulcan Materials ............... 299,650
BUSINESS SERVICES - 5.0%
47,500 Alternative Resources
Corporation*.................. 1,436,875
6,200 Cintas Corporation.............. 275,900
19,500 HBO & Company................... 1,494,188
28,500 Paychex......................... 1,421,438
------------
4,628,401
32
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES J (EMERGING GROWTH) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
CHEMICALS--BASIC - 4.3%
15,500 Air Products & Chemicals, Inc. . $ 817,625
13,000 Cabot Corporation............... 700,375
20,000 IMC Global, Inc. ............... 817,500
51,000 Praxair......................... 1,714,875
------------
4,050,375
CHEMICALS--SPECIALTY - 3.2%
28,500 Sigma Aldrich Corporation ...... 1,410,750
25,500 Vigoro Corporation (The)........ 1,574,625
------------
2,985,375
COMMUNICATIONS EQUIPMENT - 2.8%
37,500 General Instrument*............. 876,563
22,000 Tellabs, Inc.* ................. 814,000
10,300 U.S. Robotics Corporation*...... 903,825
------------
2,594,388
COMPUTER SOFTWARE - 11.7%
17,000 Adobe Systems, Inc. ............ 1,054,000
42,700 Aspect Telecommunications*...... 1,430,450
51,500 Bisys Group, Inc.* ............. 1,583,625
25,500 Cadence Design System, Inc.* ... 1,071,000
22,500 Cognos, Inc.*................... 1,004,063
22,960 First Data Corporation.......... 1,535,450
31,500 Informix*....................... 945,000
22,000 McAffee Associates, Inc.*....... 965,250
13,500 Parametric Technology Company*.. 897,750
18,200 Symantec Corporation*........... 423,150
------------
10,909,738
COMPUTER SYSTEMS - 8.1%
21,750 Bay Networks, Inc.*............. 894,469
14,500 Cisco Systems, Inc.*............ 1,082,063
29,000 Dell Computer Corporation* ..... 1,004,125
48,000 EMC Corporation*................ 738,000
18,500 Micro Warehouse*................ 800,125
29,500 SCI Systems, Inc.*.............. 914,500
17,000 Seagate Technology*............. 807,500
28,000 3Com Corporation*............... 1,305,500
------------
7,546,282
CONSUMER CYCLICALS - 1.9%
17,500 Flightsafety International, Inc. 879,375
20,500 Snap-On Tools Corporation....... 927,625
------------
1,807,000
CONSUMER SERVICES - 1.6%
44,250 CUC International*.............. 1,510,031
DRUG DELIVERY - 0.8%
14,500 Elan Corporation PLC ADR*....... 705,063
ELECTRONICS--INSTRUMENTS - 1.5%
18,000 Thermo Electron Corporation*.... 936,000
10,000 Varian Associates, Inc. ........ 477,500
------------
1,413,500
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
ELECTRONICS--SEMI-CONDUCTORS - 5.3%
18,500 Applied Materials, Inc.* ....... $ 728,438
34,500 Atmel Corporation*.............. 771,938
48,000 Cypress Semiconductors*......... 612,000
16,500 LSI Logic Corporation*.......... 540,375
21,000 Linear Technology Corporation... 824,250
13,000 Novellus Systems, Inc.* ........ 702,000
23,310 Vishay Intertechnology, Inc.* .. 734,265
------------
4,913,266
ENTERTAINMENT - 1.0%
27,500 Mirage Resorts, Inc.*........... 948,750
FERTILIZER - 1.2%
16,000 Potash Corporation Saskatchewan,
Inc........................... 1,134,000
FINANCIAL SERVICES - 3.8%
49,000 Credit Acceptance Corporation*.. 1,016,750
27,500 Finova Group.................... 1,326,875
26,500 First U.S.A., Inc. ............. 1,175,938
------------
3,519,563
GENERAL MERCHANDISE - 1.4%
59,000 Casey's General Stores, Inc. ... 1,290,625
HMOS - 1.0%
21,500 Foundation Health Corporation*.. 924,500
HEALTH CARE - 2.5%
25,000 Cardinal Health, Inc. .......... 1,368,750
32,500 Healthsouth Corporation*........ 946,563
------------
2,315,313
HOSPITAL MANAGEMENT - 1.3%
33,500 Community Health Systems*....... 1,193,438
HOTEL/MOTEL - 2.6%
16,000 HFS, Inc.*...................... 1,308,000
42,500 La Quinta Inns.................. 1,163,438
------------
2,471,438
HOUSEHOLD FURNISHINGS/APPLIANCES - 1.6%
63,000 Leggett & Platt, Inc. .......... 1,527,750
INSURANCE - 3.0%
30,000 Jefferson-Pilot Corporation..... 1,395,000
19,000 MBIA, Inc. ..................... 1,425,000
------------
2,820,000
MANUFACTURING - 3.2%
23,000 Illinois Tool Works, Inc........ 1,357,000
40,000 Millipore ...................... 1,645,000
------------
3,002,000
MEDICAL - 3.4%
10,000 Cordis Corporation*............. 1,005,000
27,500 Guidant Corporation............. 1,140,750
19,000 Stryker Corporation............. 997,500
------------
3,143,250
See accompanying notes.
33
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES J (EMERGING GROWTH) (CONTINUED)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 1.4%
6,900 Diebold, Inc. .................. $ 382,088
23,500 Reynolds & Reynolds (Cl.A)...... 913,563
------------
1,295,651
OIL & GAS EXPLORATION- 2.8%
20,000 Anadarko Petroleum Corporation.. 1,082,500
42,000 Sonat, Inc. .................... 1,496,250
------------
2,578,750
PHARMACEUTICALS - 5.1%
18,500 Amgen, Inc.*.................... 1,098,438
10,000 Chiron Corporation*............. 1,105,000
48,500 Dura Pharmaceuticals, Inc.*..... 1,685,375
14,500 Genzyme Corporation*............ 904,438
------------
4,793,251
PUBLISHING - 0.1%
1,600 Scholastic Corporation*......... 124,400
RAILROADS - 1.0%
24,000 Illinois Central Corporation.... 921,000
RESTAURANTS - 2.4%
41,500 Boston Chicken*................. 1,333,188
26,000 Outback Steakhouse, Inc.* ...... 932,750
------------
2,265,938
RETAIL--DRUG STORES - 0.4%
16,500 General Nutrition*.............. 379,500
RETAIL--SPECIALTY - 3.1%
53,500 Staples, Inc.* ................. 1,304,063
68,500 Sunglass Hut International, Inc.* 1,626,875
------------
2,930,938
TELECOMMUNICATIONS - 0.5%
21,500 Vanguard Cellular Systems, Inc.* 435,375
TELEPHONE - 1.0%
28,500 Century Telephone Entertainment,
Inc........................... 904,875
TEXTILES - 1.0%
22,000 Tommy Hilfiger Corporation*..... 932,250
------------
Total common stocks - Series J
(cost $74,918,788) - 92.7% 86,530,524
COMMERCIAL PAPER
----------------
$ 700,000 Allegheny Generating Company,
5.635%, 1-16-96............... 698,137
$1,000,000 Baltimore Gas & Electric Company,
5.80%, 1-04-96................ 999,195
$ 500,000 Duke Power Company,
5.72%, 1-12-96................ 498,967
$2,000,000 General Electric Capital Corporation,
5.77%, 1-05-96................ 1,998,077
PRINCIPAL MARKET
AMOUNT COMMERCIAL PAPER (CONTINUED) VALUE
- --------------------------------------------------------------------------------
$2,000,000 International Lease Finance Corporation,
5.73%, 1-03-96................ $ 999,363
5.90%, 1-04-96................ 999,181
1,200,000 P.H.H. Corporation,
5.74%, 1-16-96................ 1,196,747
1,500,000 Progress Capital Holdings, Inc.,
5.78%, 1-10-96................ 998,234
5.675%, 1-18-96............... 498,502
------------
Total commercial paper - Series J
(cost $8,886,403) - 9.5%.... 8,886,403
------------
Total investments - Series J
(cost $83,805,191) - 102.2% 95,416,927
Liabilities, less cash and other
assets - Series J - (2.2%) (2,037,486)
------------
Total net assets applicable to
5,813,574 shares outstanding -
Series J - 100.0%........... $93,379,441
============
SERIES K (GLOBAL AGGRESSIVE BOND)
GOVERNMENT OBLIGATIONS
----------------------
ARGENTINA - 3.5%
$ 350,000 Republic of Argentina,
5.00%, 2023................... $200,156
AUSTRALIA - 4.4%
300,000 Treasury Corporation of Victoria,
10.25%, 2006(3)............... 249,827
BRAZIL - 3.8%
350,000 Republic of Brazil,
7.25%, 2024................... 215,250
CANADA - 2.8%
200,000 Stelco, Inc., 10.40%, 2009(3)... 157,682
ECUADOR - 4.2%
650,000 Republic of Ecuador, 3.00%,
2025.......................... 236,437
GERMANY - 5.1%
400,000 Bendesrepublic Deutschland,
6.50%, 2005(3)................ 287,582
ITALY - 4.4%
410,000,000 Buoni Poliennali Del Tes, 8.50%,
1999(3)....................... 248,711
PHILIPPINES - 3.3%
250,000 Central Bank of Philippines, 5.75%,
2017.......................... 186,250
See accompanying notes.
34
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES K (GLOBAL AGGRESSIVE BOND) (CONTINUED)
PRINCIPAL MARKET
AMOUNT GOVERNMENT OBLIGATIONS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
PORTUGAL - 9.7%
32,500,000 Obrig Do Tes Medio Prazo, 8.875%,
1997(3)....................... $ 216,912
45,000,000 Obrig Do Tes Medio Prazo, 11.875%,
2005(3)....................... 336,538
------------
553,450
SPAIN - 2.7%
20,000,000 Bonos Y Obig Del Estado, 7.40%,
1999(3)....................... 155,418
SOUTH AFRICA - 8.2%
1,000,000 Electricity Supply Commission, 11.0%,
2008(3)....................... 223,595
1,000,000 Republic of South Africa, 12.00%,
2005(3)....................... 243,682
------------
467,277
------------
Total government obligations -
Series K - (cost $2,881,468) -
52.1%....................... 2,958,040
CORPORATE BONDS
---------------
BRAZIL - 6.6%
$ 150,000 Aracruz Celulose S.A., 10.375%,
2002.......................... 143,625
250,000 Centrais Electricas Bras, 8.875%,
2002.......................... 233,750
------------
377,375
COSTA RICA - 3.2%
300,000 Banco Costa Rica, 6.25%, 2010... 183,750
CZECH REPUBLIC - 4.0%
6,000,000 CEz, a.s., 11.30%, 2005(3)...... 225,047
DENMARK - 5.3%
898,000 Nykredit, 8.00%, 2026(3)........ 156,605
950,000 Realkredit Danmark, 6.00%,
2026(3)....................... 142,201
------------
298,806
MEXICO - 2.5%
150,000 Cemex S.A., 8.875%, 1998........ 144,375
UNITED STATES - 2.8%
150,000 Chiquita Brands International, Inc.,
11.50%, 2001.................. 156,750
------------
Total corporate bonds - Series K
(cost $1,363,294) - 24.4% 1,386,103
SHORT-TERM INVESTMENTS
----------------------
GREECE - 4.6%
70,000,000 Hellenic Treasury Bills, 0%,
12-18-96(3)................... 260,000
PRINCIPAL MARKET
AMOUNT SHORT-TERM INVESTMENTS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
HUNGARY - 4.0%
40,000,000 Government of Hungary Treasury
Bills, 0%, 12-20-96(3)........ $ 226,071
MEXICO - 1.6%
712,010 Cetes, 0%, 1-25-96(3)........... 90,792
POLAND - 8.2%
600,000 Government of Poland Treasury Bill,
0%, 2-28-96(3)................ 235,043
700,000 Government of Poland Treasury Bill,
0%, 1-15-96(3)................ 234,431
------------
469,474
UNITED STATES - 1.8%
$100,000 U.S. Treasury Bill, 5.20%,
1-04-96....................... 99,957
------------
Total short-term investments -
Series K (cost $1,161,215)
- 20.2%..................... 1,146,294
------------
Total investments - Series K
(cost $5,405,977) - 96.7% 5,490,437
Cash and other assets, less
liabilities - Series K - 3.3% 187,924
------------
Total net assets applicable to
555,341 shares outstanding
- Series K - 100.0%......... $5,678,361
============
SERIES M (SPECIALIZED ASSET ALLOCATION)
CORPORATE BONDS
---------------
BANKS & CREDIT - 0.8%
$125,000 Nationsbank Corporation,
7.625%, 2005.................. $135,781
COMMUNICATIONS - 0.5%
40,000 News America Holdings,
8.625%, 2003.................. 44,750
40,000 TCI Communications, Inc.,
8.0%, 2005.................... 42,750
------------
87,500
PETROLEUM - 0.7%
110,000 Occidental Petroleum,
6.24%, 2000................... 110,825
------------
Total corporate bonds - Series M
(cost $326,983) - 2.0% 334,106
See accompanying notes.
35
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES M (SPECIALIZED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS VALUE
- --------------------------------------------------------------------------------
APPLIANCES - 2.4%
3,200 Black & Decker Corporation...... $112,800
2,700 Maytag Corporation.............. 54,675
2,500 National Presto Industries...... 99,375
3,500 Toro Company.................... 115,063
------------
381,913
AUTO PARTS & SUPPLIES - 2.8%
4,100 Dana Corporation................ 119,925
2,500 Eaton Corporation............... 134,063
3,000 Modine Manufacturing Company.... 72,000
6,100 Simpson Industries.............. 54,900
3,200 Walbro Corporation.............. 57,600
------------
438,488
BUILDING MATERIALS - 3.6%
2,200 Ameron, Inc. ................... 82,775
4,800 Apogee Enterprises, Inc. ....... 81,600
1,600 Armstrong World Industries, Inc. 99,200
2,050 Butler Manufacturing Company.... 80,463
2,700 Crane Company................... 99,562
2,200 Owens-Corning Fiberglass
Corporation*.................. 98,725
1,800 Ply Gem Industries.............. 29,250
------------
571,575
CHEMICALS (BASIC) - 2.8%
1,100 Arco Chemicals Company.......... 53,488
1,400 Dow Chemicals................... 98,525
500 Du Pont (E.I.) de Nemours
& Company..................... 34,938
3,200 Lyondell Petrochemical Company.. 73,200
1,300 Olin Corporation................ 96,524
2,300 Union Carbide Corporation....... 86,250
------------
442,925
COMPUTER SYSTEMS - 4.3%
2,700 Amdahl Corporation*............. 22,950
1,100 Apple Computer, Inc. ........... 35,062
2,400 Compaq Computer Corporation*.... 115,200
2,300 Dell Computer Corporation*...... 79,637
800 Hewlett Packard Company......... 67,000
1,100 International Business Machines
Corporation................... 100,925
1,500 Quantum Corporation*............ 24,188
2,000 SCI Systems, Inc.*.............. 62,000
2,900 Sequent Computer Systems, Inc.*. 42,050
2,600 Sun Microsystems, Inc.*......... 118,625
2,100 Tandem Computers, Inc.*......... 22,313
------------
689,950
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 1.3%
600 Baldor Electric Company......... $ 12,075
489 Cooper Cameron Corporation*..... 17,360
716 Cooper Industries, Inc. ........ 26,313
500 General Electric Company........ 36,000
1,300 General Signal Corporation...... 42,087
700 Johnson Controls, Inc........... 48,125
800 Measurex Corporation............ 22,600
------------
204,560
ELECTRONICS - 4.0%
600 AMP, Inc. ...................... 23,025
3,100 Arrow Electronics, Inc.*........ 133,688
1,200 Augat, Inc. .................... 20,550
2,500 Avnet, Inc. .................... 111,875
2,600 Core Industries, Inc............ 33,475
1,200 Fluke (John)Manufacturing
Company....................... 45,300
2,100 Harris Corporation.............. 114,712
3,150 Pioneer Standard
Electronics, Inc. ............ 41,737
900 Varian Associates, Inc.......... 42,975
2,100 Wyle Electronics................ 73,763
------------
641,100
ENTERTAINMENT - 0.3%
800 Disney (Walt) Company........... 47,200
HOUSING--HOME BUILDING - 2.8%
1,375 Clayton Homes, Inc.............. 29,391
2,300 Fleetwood Enterprises, Inc. .... 59,225
5,200 Hechinger Company............... 22,750
1,900 Hughes Supply, Inc. ............ 53,675
400 Lowes Companies, Inc. .......... 13,400
1,700 Oakwood Homes Corporation....... 65,237
1,300 PPG Industries, Inc. ........... 59,475
2,200 Pulte Corporation............... 73,975
300 Sherwin Williams Company........ 12,225
2,500 Del Webb Corporation............ 50,313
------------
439,666
MACHINERY - 4.0%
3,000 Baldwin Technology, Inc.*....... 15,188
3,000 Bearings, Inc. ................. 87,750
800 Briggs & Stratton Corporation... 34,700
2,500 Commercial Intertech
Corporation................... 45,312
2,800 Dover Corporation............... 103,250
1,900 GATX Corporation................ 92,387
2,100 Graco, Inc...................... 64,050
4,300 Parker-Hannifin Corporation..... 147,275
1,500 Trinova Corporation............. 42,938
------------
632,850
36
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES M (SPECIALIZED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
MINING & METALS - 2.6%
700 Alcan Aluminum, Ltd. ........... $ 21,787
1,400 Aluminum Company of
America....................... 74,025
1,200 Asarco, Inc. ................... 38,400
900 Ashland Coal, Inc............... 19,238
2,800 Magma Copper Company*........... 78,050
2,000 Phelps Dodge Corporation........ 124,500
900 Reynolds Metals Company......... 50,963
------------
406,963
RECREATION - 3.7%
5,200 Brunswick Corporation........... 124,800
4,200 CPI Corporation................. 67,200
5,100 Callaway Golf Company........... 115,388
4,500 Handleman Company............... 25,875
3,200 Harcourt General, Inc. ......... 134,000
900 Harley Davidson, Inc. .......... 25,874
2,700 King World Productions, Inc.*... 104,963
------------
598,100
SHOES - 2.4%
7,900 J. Baker, Inc................... 45,425
1,900 Brown Group, Inc. .............. 27,075
1,800 Nike, Inc. ..................... 125,325
3,800 Reebok International, Ltd....... 107,350
2,400 Wolverine Worldwide, Inc. ...... 75,600
------------
380,775
STEEL - 2.2%
2,700 Birmingham Steel Corporation.... 40,163
2,100 Carpenter Technology............ 86,363
1,800 Cleveland Cliffs, Inc. ......... 73,800
1,300 Commercial Metals Company....... 32,175
1,800 Lukens Steel Company............ 51,750
200 Nucor Corporation............... 11,425
2,200 Quanex Corporation.............. 42,624
2,200 Steel Technologies, Inc. ....... 18,975
------------
357,275
TELECOMMUNICATIONS - 0.9%
400 Ameritech Corporation........... 23,600
900 GTE Corporation................. 39,600
1,200 Pacific Telesis Group........... 40,350
1,100 Sprint Corporation ............. 43,862
------------
147,412
Total common stocks - Series M
(cost $6,472,338) - 40.1% 6,380,752
PRINCIPAL
AMOUNT OR
NUMBER U.S. GOVERNMENT & GOVERNMENT MARKET
OF SHARES AGENCY SECURITIES VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES - 28.0%
Federal Home Loan Mortgage Corporation,
$3,000,000 5.41%, 3-7-96(2).............. $ 2,969,460
$ 68,238 6.0%, 2006.................... 68,461
$ 250,000 7.0%, 2020.................... 254,465
$ 100,000 7.0%, 2021.................... 100,547
Financing Corporation,
$ 90,000 0%, 2010...................... 35,350
Federal National Mortgage Association,
$ 177,345 6.5%, 2008.................... 167,011
$ 140,000 6.5%, 2018.................... 139,964
$ 236,890 6.5%, 2018.................... 231,491
$ 160,000 7.5%, 2020.................... 165,366
$ 170,000 6.95%, 2020................... 171,709
$ 150,000 8.8%, 2025.................... 163,688
------------
4,467,512
U.S. GOVERNMENT SECURITIES - 6.0%
U.S. Treasury Bills,
$ 425,000 4.87%, 4-4-96................. 419,352
U.S. Treasury Notes,
$ 375,000 6.38%, 2002................... 393,577
$ 100,000 5.875%, 2005.................. 102,222
$ 50,000 6.5%, 2005.................... 53,210
------------
968,361
------------
Total U.S. government & government
agency securities - Series M
(cost $5,384,050) - 34.0%... 5,435,873
REAL ESTATE INVESTMENT TRUSTS
-----------------------------
3,500 BRE Properties, Inc. ........... 124,688
5,900 Cambridge Shopping Centres, Ltd. 51,371
5,000 Federal Realty Investment Trust. 113,750
17,400 First Union Real Estate
Investment Trust.............. 121,800
9,400 HRE Properties.................. 124,550
7,300 MGI Properties, Inc. ........... 122,275
6,600 New Plan Realty Trust........... 144,375
5,900 Pennsylvania Real Estate
Investment Trust.............. 122,425
10,000 Santa Anita Realty Enterprises,
Inc. ......................... 118,750
6,700 Security Capital Pacific Trust.. 132,325
7,900 United Realty Trust Dominion.... 118,500
9,300 Washington Real Estate
Investment Trust.............. 147,637
3,700 Weingarten Realty Investors..... 140,600
------------
Total real estate investment trusts
- Series M (cost $1,553,401) -
9.9%........................ 1,583,046
See accompanying notes.
37
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES M (SPECIALIZED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
OF SHARES FOREIGN STOCKS VALUE
- --------------------------------------------------------------------------------
BELGIUM - 6.3%
500 Fortis AG....................... $ 60,824
400 Union Miniere*.................. 26,776
50 Bekaert SA...................... 41,201
100 Cementbedrijven Cimenteries..... 40,351
1,000 Delhaize-LeLion................. 41,456
950 Electrabel...................... 225,967
750 Gevaert Photo Productions....... 46,128
350 Groupe Bruxelles Lambert........ 48,583
500 Kredietbank..................... 136,769
400 Petrofina SA.................... 122,464
250 Royale Belgium.................. 49,951
150 Solvay SA....................... 81,042
200 Tractebel Investment International 82,571
------------
1,004,083
HONG KONG - 6.6%
23,000 Bank of East Asia............... 82,547
12,000 Cathay Pacific Airways ......... 18,314
5,000 Cheung Kong Holdings............ 30,458
20,000 China Light & Power Company..... 92,086
68,000 Chinese Estates................. 44,413
10,000 Dicksons Concept International.. 9,312
10,000 Elec &Eltek International
Holdings...................... 2,018
20,000 Hong Kong & Shanghai Hotels .... 28,971
71,250 Hong Kong Telecommunications.... 127,167
35,000 Hutchinson Whampoa Limited...... 213,207
5,000 Kumagai Gumi.................... 3,621
5,000 Lai-sun Garment International... 4,850
57,000 Oriental Press Group............ 17,324
5,000 Peregrine Investments Holdings.. 6,467
20,000 Sun Hung Kai Properties......... 163,607
180,000 Tai Cheung Holdings ............ 138,516
13,000 Wing Lung Bank.................. 72,802
------------
1,055,680
------------
Total foreign stocks - Series M
(cost $2,022,862) - 12.9% 2,059,763
TEMPORARY CASH INVESTMENTS
--------------------------
431,000 Vista Federal Money Market
Fund.......................... 431,000
------------
Total temporary cash investments -
Series M (cost $431,000) - 2.7% 431,000
------------
Total investments - (cost
$16,190,634) - Series M -
101.6%...................... 16,224,540
Liabilities, less cash and other
assets - Series M - (1.6%) (248,117)
------------
Total net assets applicable to
1,491,500 shares outstanding
- Series M - 100.0%......... $15,976,423
============
SERIES N (MANAGED ASSET ALLOCATION)
PRINCIPAL MARKET
AMOUNT CORPORATE BONDS VALUE
- --------------------------------------------------------------------------------
AUTOMOBILES - 0.5%
$ 50,000 Exide Corporation, 10.00%,
2005.......................... $ 53,875
BANKS & CREDIT - 1.0%
100,000 Bankers Trust - NY, 7.25%,
2003.......................... 105,000
BROADCAST MEDIA - 1.0%
50,000 Sinclair Broadcasting, 10.00%,
2005.......................... 51,125
50,000 Young Broadcasting Corporation,
10.125%, 2005................. 52,875
------------
104,000
CHEMICALS--SPECIALTY - 1.0%
50,000 Agricultural Minerals & Chemicals,
10.75%, 2003.................. 55,000
50,000 IMC Fertilizer Group, Inc.,
9.45%, 2011................... 53,313
------------
108,313
ELECTRIC UTILITIES - 4.0%
100,000 Florida Power & Light Company,
5.7%, 1998.................... 100,500
100,000 Monongahela Power, 8.5%,
2022.......................... 106,625
50,000 Southern California Edison, 6.5%,
2001.......................... 51,125
110,000 Texas Utilities, 5.875%, 1998... 110,000
50,000 Wisconsin Electric Power,
5.875%, 1997.................. 50,313
------------
418,563
ENTERTAINMENT - 0.5%
50,000 United Artists, 9.30%, 2015..... 50,125
HEALTH CARE--SERVICES - 0.3%
35,000 Tenet Healthcare Corporation,
8.625%, 2003.................. 36,706
HOTEL/MOTEL - 0.7%
50,000 Bally Park Place Funding,
9.25%, 2004................... 50,500
30,000 Grand Casinos, 10.125%, 2003.... 31,275
------------
81,775
INDUSTRIAL SERVICES - 4.6%
50,000 Coinmach Corporation,
11.75%, 2005.................. 50,500
50,000 Consol Cigar, 10.50%, 2003...... 51,125
50,000 Gulf Canada, 9.625%, 2005....... 52,375
50,000 HMC Acquisition Properties
9.00%, 2007................... 50,500
50,000 Lenfest Communications,
8.375%, 2005.................. 50,188
See accompanying notes.
38
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES CORPORATE BONDS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
INDUSTRIAL SERVICES - (CONTINUED)
$ 25,000 Portola Packaging, Inc., 10.75%,
2005.......................... $ 25,750
$100,000 Price/Costco, Inc., 7.125%,
2005.......................... 104,375
$100,000 Raytheon Company, 6.5%,
2005.......................... 102,875
------------
487,688
MANUFACTURING - 0.5%
$ 50,000 Coltec Industries, 10.25%, 2002. 51,625
MISCELLANEOUS - 0.5%
$ 50,000 McDonald's Corporation, 6.625%,
2005.......................... 51,750
PAPER & FOREST PRODUCTS - 0.5%
$ 50,000 Repap Wisconsin, Inc., 9.25%,
2002.......................... 47,625
SUPERMARKETS - 0.3%
$ 50,000 Pathmark Stores, 0%, 2003(1).... 30,500
TEXTILES - 0.4%
$ 50,000 Dan River, Inc., 10.125%, 2003.. 46,125
------------
Total corporate bonds - Series N
(cost $1,636,881) - 15.8% 1,673,670
PREFERRED STOCKS
----------------
AUTOMOBILES - 0.1%
200 Superior Industries International 5,275
------------
Total preferred stocks - Series N
(cost $6,445) - 0.1% 5,275
COMMON STOCKS
-------------
AEROSPACE & DEFENSE - 0.4%
300 Boeing Company.................. 23,512
300 Northrop Grumman Corporation.... 19,200
------------
42,712
AUTO PARTS & SUPPLIES - 0.1%
200 TRW, Inc. ...................... 15,500
AUTOMOBILES - 1.2%
900 Echlin, Inc. ................... 32,850
300 General Motors Corporation...... 15,863
2,000 Honda Motor Company, Ltd. ADR... 83,500
------------
132,213
BANKS & TRUSTS - 2.3%
200 Baybanks, Inc. ................. 19,650
300 Chase Manhattan Corporation..... 18,188
700 Chemical Banking Corporation.... 41,125
400 Corestates Financial Corporation 15,150
400 First American Corporation...... 18,950
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
BANKS & TRUSTS, CONTINUED
400 First Union Corporation......... $ 22,250
400 J.P. Morgan & Company, Inc. .... 32,100
600 Keycorp......................... 21,750
300 Mellon Bank Corporation......... 16,125
300 Midlantic Corporation........... 19,688
300 Nationsbank Corporation......... 20,887
------------
245,863
BEVERAGES - 1.4%
600 Anheuser-Busch Company, Inc. ... 40,125
800 Coca Cola Company............... 59,400
800 PepsiCo, Inc. .................. 44,700
------------
144,225
BROADCAST MEDIA - 0.6%
300 Capital Cities/ABC, Inc. ....... 37,013
800 Comcast Corporation (Cl.A)
Special....................... 14,550
300 Infinity Broadcasting
Corporation*.................. 11,175
------------
62,738
BUILDING & REAL ESTATE - 0.1%
500 Masco Corporation............... 15,687
CHEMICALS--BASIC - 2.1%
1,300 Akzo Nobel NV-ADR............... 75,400
500 Du Pont (E.I.) De Nemours
& Company..................... 34,938
200 FMC Corporation*................ 13,525
700 Great Lakes Chemical Corporation 50,400
400 Lyondell Petrochemical Company.. 9,150
800 Morton International, Inc. ..... 28,700
200 Olin Corporation................ 14,850
------------
226,963
CHEMICALS--DIVERSIFIED - 0.2%
200 Monsanto Company................ 24,500
CHEMICALS--SPECIALITY - 0.4%
300 Minnesota Mining & Manufacturing
Company....................... 19,875
300 Rohm & Haas Company............. 19,313
300 Wellman, Inc.................... 6,825
------------
46,013
COMMUNICATION EQUIPMENT - 0.1%
200 Tellabs, Inc.*.................. 7,400
COMPUTER SOFTWARE - 0.5%
400 Aspect Telecommunications
Corporation*.................. 13,400
400 Autodesk, Inc. ................. 13,700
200 Parametric Technology*.......... 13,300
200 General Motors (Cl.E)........... 10,400
------------
50,800
See accompanying notes.
39
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
COMPUTER SYSTEMS - 1.2%
900 Compaq Computer Corporation*.... $ 43,200
400 Hewlett Packard Company......... 33,500
200 International Business Machines
Corporation................... 18,350
600 Sun Miscrosystems, Inc.*........ 27,375
------------
122,425
COSMETICS - 0.1%
400 Maybelline, Inc................. 14,500
DRUGS - 0.4%
700 Amgen, Inc.*.................... 41,563
ELECTRIC UTILITIES - 1.7%
5,200 Centerior Energy Corporation.... 46,150
300 Duke Power Company.............. 14,212
600 Empresa Nacional De Electricidad
SA Sponsored ADR.............. 34,350
600 Entergy Corporation............. 17,550
1,200 Niagara Mohawk Power
Corporation................... 11,550
600 Public Service Company of
New Mexico*................... 10,575
1,200 SCE Corporation................. 21,300
400 Texas Utilities Company......... 16,450
400 Unicom Corporation.............. 13,100
------------
185,237
ELECTRICAL EQUIPMENT - 1.7%
300 American Power Conversion
Corporation*.................. 2,850
600 Emerson Electric Company........ 49,050
1,200 General Electric Company........ 86,400
700 Hubbell Inc., (Cl.B)............ 46,025
------------
184,325
ELECTRONIC SYSTEMS - 0.2%
300 Honeywell, Inc.................. 14,587
200 Teradyne, Inc.*................. 5,000
------------
19,587
ELECTRONICS - 2.6%
900 Advanced Micro Devices, Inc.*... 14,850
300 Analog Devices, Inc.*........... 10,612
200 Arrow Electronics, Inc.*........ 8,625
1,200 Hitachi, Ltd. ADR............... 120,600
400 KLA Instruments Corporation*.... 10,425
200 LAM Research Corporation*....... 9,150
200 Motorola, Inc. ................. 11,400
2,000 Phillips Electronics N.V. ADR... 71,750
200 Varian Associates, Inc.......... 9,550
300 Xilinx, Inc.*................... 9,150
------------
276,112
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
ENTERTAINMENT - 0.8%
600 Cracker Barrel Old Country
Store, Inc. .................. $10,350
400 Disney (Walt) Company........... 23,600
400 Mirage Resorts, Inc.*........... 13,800
800 Time Warner, Inc................ 30,300
200 Viacom, Inc. (Cl.A)*............ 9,175
------------
87,225
ENVIRONMENTAL - 0.3%
1,000 WMX Technologies, Inc. ......... 29,875
FINANCIAL--BANKS, COMMERCIAL - 0.5%
300 First Bank System, Inc. ........ 14,887
1,000 Norwest Corporation............. 33,000
------------
47,887
FINANCIAL SERVICES - 1.9%
400 American Express Company........ 16,550
1,000 Banco Bilbao Viz SPADR.......... 35,750
1,100 Countrywide Credit Industries,
Inc........................... 23,925
200 Federal National Mortgage
Association................... 24,825
400 Franklin Resources, Inc......... 20,150
500 H & R Block, Inc. .............. 20,250
500 Household International, Inc. .. 29,563
2 Transport Holdings, Inc. (Cl.A)* 81
400 Travelers Group, Inc. .......... 25,150
------------
196,244
FOOD PROCESSING - 1.8%
735 Archer-Daniels-Midland Company.. 13,230
500 Conagra, Inc. .................. 20,625
1,000 Heinz (H.J.) Company............ 33,126
300 Ralston Purina Group............ 18,712
700 Sara Lee Corporation............ 22,313
500 Tyson Foods, Inc. (Cl.A)........ 13,062
800 Unilever PLC - ADR.............. 67,600
------------
188,668
FURNITURE - 0.1%
400 Helig Meyers Company............ 7,349
GENERAL MERCHANDISERS - 0.2%
700 Price/Costco, Inc.*............. 10,675
600 Wal-Mart Stores, Inc. .......... 13,425
------------
24,100
HOUSEHOLD PRODUCTS - 0.7%
500 Colgate Palmolive Company....... 35,125
500 Procter & Gamble Company........ 41,500
------------
76,625
See accompanying notes.
40
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
HOUSEHOLD FURNISHINGS & APPLIANCES - 0.1%
200 Leggett & Platt, Inc. .......... $ 4,850
HOUSING--HOME BUILDING - 0.1%
200 Oakwood Homes Corporation....... 7,675
INSURANCE - 2.2%
300 AMBAC, Inc. .................... 14,063
500 American General Corporation.... 17,437
900 American International Group, Inc. 83,250
300 MGIC Investment Corporation..... 16,275
200 Mutual Risk Management, Ltd..... 9,150
400 National Re Corporation......... 15,200
200 Pacificare Health System*....... 17,400
500 Torchmark Corporation........... 22,625
500 United Healthcare Corporation... 32,750
------------
228,150
INTEGRATED PETROLEUM DOMESTIC - 0.7%
400 Atlantic-Richfield Company...... 44,300
1,600 USX Marathon Group.............. 31,200
------------
75,500
INTEGRATED PETROLEUM INTERNATIONAL - 2.7%
600 Exxon Corporation............... 48,075
700 Mobil Corporation............... 78,400
800 Royal Dutch Petroleum
Company ADR................... 112,900
400 Shell Transport & Trading
Company....................... 32,550
300 Texaco, Inc. ................... 23,550
------------
295,475
MACHINERY - 0.2%
200 GATX Corporation................ 9,725
300 Watts Industries, Inc.(Cl.A).... 6,975
------------
16,700
MANUFACTURING - 0.1%
300 Allied-Signal, Inc. ............ 14,250
MEDICAL - 0.3%
600 Columbia/HCA Healthcare
Corporation................... 30,450
METAL FABRICATE/HARDWARE - 0.1%
600 Trimas Corporation.............. 11,325
MINING & METALS - 0.2%
300 Aluminum Company of
America*...................... 15,862
200 Alumas, Inc. ................... 6,125
------------
21,987
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
MISCELLANEOUS - 0.3%
600 Atlanta Gas Light Company....... $ 11,850
300 Coeur d'Alene Mines Corporation. 5,137
200 Komag, Inc.*.................... 9,225
100 York International Corporation*. 4,700
------------
30,912
MISCELLANEOUS CONSUMER SERVICES - 0.2%
400 Service Corporation
International................. 17,600
MISCELLANEOUS CONSUMER DURABLES - 0.4%
500 Corning, Inc.................... 16,000
300 Eastman Kodak Company........... 20,100
200 Tandy Corporation............... 8,300
------------
44,400
MISCELLANEOUS CONSUMER PRODUCTS - 0.5%
500 Jones Apparel Group, Inc.*...... 19,687
200 Philip Morris Companies, Inc. .. 18,100
400 Springs Industries, Inc. (Cl.A). 16,550
------------
54,337
OFFICE EQUIPMENT & SUPPLIES - 0.1%
300 Reynolds & Reynolds Company
(Cl.A)........................ 11,662
OIL - 0.9%
500 Amerada Hess Corporation........ 26,500
400 Helmerich &Payne, Inc. ......... 11,900
400 Schlunberger, Ltd. ............. 27,700
700 Smith International, Inc.*...... 16,450
600 Union Texas Petroleum Holdings,
Inc........................... 11,625
------------
94,175
PACKAGING & CONTAINERS - 0.2%
1,700 Jefferson Smurfit Corporation*.. 16,150
PAPER - 0.2%
500 International Paper Company..... 18,938
PAPER & FOREST PRODUCTS - 0.3%
300 Georgia-Pacific Corporation..... 20,588
200 Weyerhaeuser Company............ 8,650
------------
29,238
PETROLEUM - 0.1%
400 Phillips Petroleum Company...... 13,650
PHARMACEUTICALS - 2.4%
500 Abbott Laboratories............. 20,875
400 American Home Products
Corporation................... 38,800
500 Bristol Myers Squibb Company.... 42,938
600 Merck & Company, Inc. .......... 39,450
900 Perrigo Company*................ 10,687
800 Pfizer, Inc. ................... 50,400
1,100 Smithkline Beecham PLC ADR...... 61,050
------------
264,200
See accompanying notes.
41
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
PUBLISHING - 0.3%
300 Gannett Company, Inc. .......... $ 18,413
200 McGraw-Hill Companies, Inc...... 17,425
------------
35,838
RAILROADS - 0.5%
500 Burlington Northern Santa Fe
Corporation................... 39,000
200 Union Pacific Corporation....... 13,200
------------
52,200
RETAIL--APPAREL - 0.3%
700 Gap, Inc. ...................... 29,400
RETAIL--DEPARTMENT STORES - 0.2%
600 May Department Stores
Company....................... 25,350
RETAIL--FOOD CHAINS - 0.2%
400 McDonald's Corporation.......... 18,050
RETAIL--GENERAL MERCHANDISE - 0.3%
400 Dayton Hudson Corporation....... 30,000
RETAIL--GROCERY - 0.6%
1,000 Albertsons, Inc. ............... 32,875
700 Kroger Company*................. 26,250
------------
59,125
RETAIL--SPECIALTY - 0.5%
1,100 Circuit City Stores, Inc. ...... 30,387
800 Toys "R" Us, Inc.*.............. 17,400
------------
47,787
SEMI-CONDUCTORS - 0.3%
400 Cypress Semiconductor
Corporation*.................. 5,100
400 Intel Corporation............... 22,700
------------
27,800
SPECIALTY MERCHANDISERS - 0.9%
200 Eckerd Corporation*............. 8,925
2,000 LVMH Moet Hennessy Lou ADR...... 83,750
------------
92,675
STEEL - 0.2%
400 Nucor Corporation............... 22,850
TELECOMMUNICATIONS - 3.3%
1,100 AT&T Corporation................ 71,225
300 Ameritech Corporation........... 17,700
300 Bell Atlantic Corporation....... 20,063
900 Bellsouth Corporation........... 39,150
1,000 British Telecom PLC ADR......... 56,500
1,000 GTE Corporation................. 44,000
200 Glenayre Technologies, Inc.*.... 12,450
800 SBC Communications, Inc. ....... 46,000
200 Southern New England
Telecommunications............ 7,950
500 Telecom New Zealand ADR......... 34,687
------------
349,725
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
TELEPHONE - 0.2%
400 U.S. West, Inc. ................ $ 14,300
400 U.S. West Media Group*.......... 7,600
------------
21,900
TRANSPORTATION - 0.1%
200 P.H.H. Corporation.............. 9,350
------------
Total common stocks - Series N
(cost $4,323,116) - 43.8%... 4,640,010
U.S. GOVERNMENT & GOVERNMENT
----------------------------
AGENCY SECURITIES
-----------------
U.S. GOVERNMENT AGENCIES - 19.9%
$1,524,000 Federal Home Loan Mortgage
Corporation, 5.58%, 1-02-96... 1,523,767
Government National Mortgage
Association,
$ 51,873 11.50%, 2013.................. 58,123
$ 59,486 8.00%, 2025................... 61,530
$ 122,501 7.00%, 2025................... 123,993
$ 234,136 8.50%, 2025................... 245,585
$ 95,299 7.50%, 2025................... 98,378
------------
2,111,376
U.S. GOVERNMENT SECURITIES - 12.0%
$ 35,000 U.S. Treasury Bond, 6.875%,
2025.......................... 39,458
U.S. Treasury Notes,
$ 225,000 5.75%, 1997................... 227,014
$ 325,000 6.125%, 1997.................. 329,024
$ 75,000 5.625%, 2000.................. 75,699
$ 100,000 6.25%, 2000................... 103,387
$ 75,000 5.875%, 2005.................. 76,667
$ 100,000 6.5%, 2005.................... 106,419
$ 250,000 7.625%, 2025.................. 305,420
------------
1,263,088
------------
Total U.S. government & government
agenccy securities - Series N (cost
$3,331,777) - 31.9%......... 3,374,464
MISCELLANEOUS ASSETS
--------------------
ASSET-BACKED SECURITIES - 0.2%
$ 15,788 Hyundai Auto Receivable Trust,
4.30%, 1998................... 15,621
CLOSED-END FUND - 2.8%
7,000 S&P Midcap 400 Depository
Receipts...................... 304,172
------------
Total miscellaneous assets - Series
N (cost $320,623) - 3.0%.... 319,793
See accompanying notes.
42
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES FOREIGN CORPORATE BONDS VALUE
- --------------------------------------------------------------------------------
JAPAN - 0.9%
5,000,000 Interamer Development Bank,
6.00%, 2001(3)................ $ 57,803
3,000,000 KFW International Finance,
6.00%, 1999(3)................ 33,846
------------
Total foreign bonds - Series N
(cost $112,686) - 0.9% 91,649
FOREIGN GOVERNMENT ISSUES
-------------------------
CANADA - 0.4%
60,000 Government Bond, 6.50%, 2004(3). 42,512
GERMANY - 0.9%
125,000 Bundesrepub Deutschland,
7.375%, 2005(3)............... 95,439
------------
Total foreign government issues
Series N (cost $133,118) - 1.3% 137,951
FOREIGN STOCKS
--------------
FRANCE - 0.5%
500 Genril Eaux..................... 49,986
GERMANY - 1.5%
200 Bankgesellschaft Berlin......... 51,145
200 Bayer, AG....................... 53,211
200 M.A.N. AG....................... 55,475
------------
159,829
HONG KONG - 1.1%
11,000 Whampoa Limited................. 67,008
6,000 Swire Pacific Ltd............... 46,560
------------
113,568
JAPAN - 1.0%
7,000 Bridgestone Corporation......... 111,292
MALAYSIA - 0.4%
16,000 Sime Darby Berhad............... 42,537
SWITZERLAND - 1.4%
80 Union Bank of Switzerland....... 86,907
30 SIG Schweizland................. 62,834
------------
149,741
UNITED KINGDOM - 1.3%
15,000 BTR PLC......................... 76,621
22,000 Lonrho Ltd...................... 60,117
------------
136,738
------------
Total foreign stocks - Series N
(cost $755,992) - 7.2%...... 763,691
PRINCIPAL
AMOUNT OR
NUMBER TEMPORARY MARKET
OF SHARES CASH INVESTMENTS VALUE
- --------------------------------------------------------------------------------
4,347 Vista Treasury Plus International
Fund, ........................ $ 4,347
------------
Total temporary cash investments -
Series N (cost $4,347) - 0.0% 4,347
------------
Total investments - Series N
(cost $10,624,985) - 104.0% 11,010,850
------------
Liabilities, less cash and other
assets - Series N - (4.0%) (430,711)
------------
Total net assets applicable
to 985,979 shares outstanding
Series N - 100.0%........... $10,580,139
============
SERIES O (EQUITY INCOME)
CORPORATE BONDS
---------------
REAL ESTATE - 0.8%
$100,000 B.F. Saul Reit, 11.625%, 2002... $103,500
------------
Total corporate bonds - Series O
(cost $103,500) - 0.8% 103,500
CONVERTIBLE BONDS
-----------------
FINANCIAL SERVICES - 0.8%
$100,000 Liberty Property Trust, 8.00%,
2001.......................... 102,625
------------
Total convertible bonds - Series O
(cost $98,875) - 0.8% 102,625
COMMON STOCKS
-------------
AUTO PARTS & SUPPLIES - 0.9%
1,400 Eaton Corporation .............. 75,075
600 TRW, Inc. ...................... 46,500
------------
121,575
AUTOMOBILES - 0.1%
300 Genuine Parts Company........... 12,300
BANKS & TRUSTS - 8.1%
2,700 Banc One Corporation............ 101,925
1,100 Bankers Trust New York
Corporation................... 73,150
1,900 Chase Manhattan Corporation..... 115,187
1,500 Chemical Banking Corporation.... 88,125
1,100 1st Interstate Bancorp.......... 150,150
2,000 J.P. Morgan & Company, Inc. .... 160,500
3,800 Mellon Bank Corporation......... 204,250
1,700 National City Corporation....... 56,313
See accompanying notes.
43
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES O (EQUITY INCOME) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
BANKS & TRUSTS, CONTINUED
1,600 PNC Bank Corporation............ $ 51,600
2,700 S E Banken...................... 22,407
1,700 U.S. Bancorp Oregon............. 57,163
------------
1,080,770
BEVERAGES - 1.6%
2,000 Anheuser-Busch Company, Inc. ... 133,750
2,200 Brown-Forman Corporation
(Cl.B)........................ 80,300
------------
214,050
CHEMICALS (BASIC) - 1.3%
2,500 Du Pont (E.I.) de Nemours
& Company..................... 174,687
CHEMICALS (DIVERSIFIED) - 0.8%
900 Monsanto Company............... 110,250
CHEMICALS (SPECIALTY) - 2.6%
2,400 Betz Laboratories, Inc. ........ 98,400
2,400 Crompton & Knowles
Corporation................... 31,800
2,900 Lubrizol Corporation............ 80,838
2,100 Minnesota Mining & Manufacturing
Company....................... 139,125
------------
350,163
ELECTRIC UTILITIES - 6.1%
1,800 Baltimore Gas & Electric Company 51,300
8,600 Centerior Energy Corporation.... 76,325
1,100 DQE, Inc. ...................... 33,825
1,500 Dominion Res, Inc. ............. 61,875
4,000 Entergy Corporation............. 117,000
1,800 Florida Progress Corporation.... 63,675
2,000 General Public Utilities Corporation 68,000
2,300 Pacific Gas & Electric Company.. 65,263
5,300 Pacificorp...................... 112,625
3,200 SCE Corporation................. 56,800
2,200 Southern Company................ 54,175
1,800 Unicom Corporation.............. 58,950
------------
819,813
ELECTRICAL EQUIPMENT - 3.1%
1,152 Cooper Cameron Corporation*..... 40,896
1,688 Cooper Industries, Inc. ........ 62,034
3,000 General Electric Company........ 216,000
1,500 Hubbell, Inc. (Cl.B)............ 98,625
------------
417,555
ELECTRONIC SYSTEMS - 1.3%
1,000 E G & G, Inc. .................. 24,250
3,200 Honeywell, Inc. ................ 155,600
------------
179,850
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 4.5%
3,700 American Express Company........ $153,087
900 Federal National Mortgage
Association................... 111,713
1,700 H & R Block, Inc. .............. 68,850
500 Household International, Inc. .. 29,563
1,900 Student Loan Marketing New VTG.. 125,162
1,900 Travelers Group, Inc. .......... 119,463
------------
607,838
FOOD PROCESSING - 3.1%
800 CPC International, Inc.......... 54,900
1,800 General Mills................... 103,950
2,250 Heinz (H.J.) Company............ 74,531
2,300 Quaker Oats Company............. 79,350
1,900 Sara Lee Corporation............ 60,563
300 Unilever NY ADR................. 42,225
------------
415,519
FOOD WHOLESALERS - 0.1%
900 Fleming Companies, Inc. ........ 18,562
HOSPITAL SUPPLIES/HOSPITAL
MANAGEMENT - 0.4%
1,300 Bausch & Lomb, Inc. ............ 51,512
INSURANCE - 2.2%
1,000 American General Corporation.... 34,875
4,000 Allmerica Financial Corporation* 108,000
1,200 Loews Corporation............... 94,050
1,500 Provident Companies, Inc.*...... 50,812
300 Unum Corporation................ 16,500
------------
304,237
INTEGRATED PETROLEUM--DOMESTIC - 3.7%
2,300 Atlantic-Richfield Company...... 254,725
1,300 British Petroleum PLC ADR....... 132,762
500 Pennzoil Company................ 21,125
746 Sun Company, Inc. .............. 20,422
3,500 USX Marathon Group.............. 68,250
------------
497,284
INTEGRATED PETROLEUM--INTERNATIONAL - 6.2%
1,400 Chevron Corporation............. 73,500
2,600 Exxon Corporation............... 208,325
1,300 Mobil Corporation............... 145,600
1,300 Royal Dutch Petroleum Company
ADR........................... 183,463
2,900 Texaco, Inc. ................... 227,650
------------
838,538
MACHINERY - 0.6%
800 GATX Corporation................ 38,900
2,100 McDermott International, Inc. .. 46,200
------------
85,100
See accompanying notes.
44
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES O (EQUITY INCOME) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
MEDICAL SUPPLIES - 0.7%
2,400 Baxter International............ $100,500
MINING & METALS - 0.7%
2,200 Newmont Mining Corporation...... 99,550
MISCELLANEOUS CONSUMER DURABLES - 1.6%
3,100 Corning, Inc.................... 99,200
1,800 Eastman Kodak Company........... 120,600
------------
219,800
MISCELLANEOUS CONSUMER PRODUCTS - 2.7%
700 Clorox Company Del.............. 50,138
1,100 Hanson PLC Sponsored ADR........ 16,775
2,400 Philip Morris Companies, Inc.... 217,200
1,800 Tambrand, Inc. ................. 85,950
------------
370,063
OFFICE EQUIPMENT & SUPPLIES - 0.1%
300 Pitney-Bowes, Inc. ............. 14,100
PAPER - 0.9%
3,100 International Paper Company..... 117,412
PAPER & FOREST PRODUCTS - 2.4%
800 Georgia-Pacific Corporation..... 54,900
1,500 Kimberly Clark.................. 124,125
3,100 Union Camp Corporation.......... 147,638
------------
326,663
PHARMACEUTICALS - 7.4%
1,700 American Home Products
Corporation................... 164,900
2,800 Eli Lilly & Company............. 157,500
5,395 Pharmacia & Upjohn, Inc.*....... 209,056
1,100 Schering-Plough Corporation..... 60,225
4,300 Smithkline Beecham PLC-ADR...... 238,650
1,700 Warner Lambert.................. 165,113
------------
995,444
PUBLISHING - 2.6%
600 Deluxe Corporation.............. 17,400
2,300 Dun and Bradstreet.............. 148,925
1,500 Gannett Company, Inc. .......... 92,062
1,100 McGraw-Hill Companies, Inc. .... 95,838
------------
354,225
RAILROADS - 0.8%
1,600 Union Pacific Corporation....... 105,600
RETAIL--DEPARTMENT STORES - 1.8%
2,700 J C Penney...................... 128,587
1,500 May Department Stores Company... 63,375
1,300 Sears Roebuck................... 50,700
------------
242,662
RETAIL--GENERAL MERCHANDISING - 0.3%
600 Dayton Hudson Corporation....... 45,000
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
SAVINGS & LOANS - 0.2%
500 Brooklyn Bancorp, Inc.*......... $ 20,374
TELECOMMUNICATIONS - 3.9%
3,700 Alltel Corporation.............. 109,150
1,400 BCE, Inc. ...................... 48,300
900 Bell Atlantic Corporation....... 60,187
1,700 Bellsouth Corporation........... 73,950
3,700 GTE Corporation................. 162,800
1,900 Southern New England
Telecommunications............ 75,525
------------
529,912
TELEPHONE - 1.0%
700 Pacific Telesis Group........... 23,538
2,400 U.S. West, Inc. ................ 85,800
1,600 U.S. West Media Group........... 30,400
------------
139,738
TOBACCO - 2.2%
3,700 American Brands................. 165,112
800 RJR Nabisco Holdings ........... 24,700
3,100 UST, Inc. ...................... 103,463
------------
293,275
TRANSPORTATION--MISCELLANEOUS - 0.5%
800 Alexander & Baldwin, Inc. ...... 18,400
1,000 P.H.H.Corporation............... 46,750
------------
65,150
TRANSPORTATION--RAIL - 0.4%
800 Conrail, Inc. .................. 56,000
------------
Total common stocks - Series O
(cost $9,401,313) - 76.9% 10,395,071
U.S. GOVERNMENT & GOVERNMENT
----------------------------
AGENCY SECURITIES
-----------------
U.S. GOVERNMENT AGENCIES - 10.0%
$1,360,000 Federal Home Loan Mortgage
Corporation, 5.50%, 1-05-96... 1,359,169
U.S. GOVERNMENT SECURITIES - 1.5%
U.S. Treasury Notes,
$ 100,000 6.125%, 1998.................. 102,006
$ 100,000 6.25%, 2000................... 103,387
------------
205,393
------------
Total U.S. government & government
agency securities - Series O -
(cost $1,561,996) - 11.5%... 1,564,562
See accompanying notes.
45
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES O (EQUITY INCOME) (CONTINUED)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES REAL ESTATE INVESTMENT TRUSTS VALUE
- --------------------------------------------------------------------------------
4,400 DeBartolo Realty Corporation.... $ 57,200
2,200 General Growth Property, Inc. .. 45,650
4,000 Simon Property Group............ 97,500
2,200 Weingarten Realty Investors..... 83,600
------------
Total real estate investment
trusts - Series O (cost
$281,712) - 2.1%............ 283,950
FOREIGN STOCKS
--------------
UNITED KINGDOM - 0.5%
25,200 Lonrho Ltd...................... 68,861
------------
Total foreign stocks - Series O
(cost $65,051) - 0.5% 68,861
TEMPORARY CASH INVESTMENTS
--------------------------
483,127 Vista Treasury Institutional
Money Market Fund............. 483,127
------------
Total temporary cash investments
- Series O (cost $483,127) - 3.6% 483,127
COMMERCIAL PAPER
----------------
ELECTRONICS - 0.7%
$100,000 Hewlett-Packard Company,
5.65%, 1-19-96................ 99,718
FINANCIAL SERVICES - 4.4%
$600,000 Corporate Asset Funding,
5.90%, 1-02-96................ 599,902
------------
Total commercial paper - Series O
(cost $699,620) - 5.1% 699,620
------------
Total investments - Series O
(cost $12,695,194) - 101.3% 13,701,316
Liabilities, less cash and other
assets - Series O - (1.3%) (173,694)
------------
Total net assets applicable to
1,156,219 shares outstanding-
Series O - 100.0%........... $13,527,622
============
SERIES S (SOCIAL AWARENESS)
COMMON STOCKS
-------------
ADVERTISING - 1.6%
16,000 Omnicom Group................... $596,000
AIRLINES - 1.3%
20,000 Southwest Airlines Company...... 465,000
SERIES S (SOCIAL AWARENESS) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
AMUSEMENT & RECREATIONAL SERVICES - 1.3%
8,000 Disney (Walt) Company........... $ 472,000
BANKING & FINANCE - 2.9%
11,500 Boatmen's Bancshares, Inc. ..... 470,063
14,500 Comerica, Inc. ................. 581,813
------------
1,051,876
BEVERAGES - 1.5%
10,000 PepsiCo, Inc. .................. 558,750
BROADCAST MEDIA - 2.1%
17,312 Clear Channel Communications*... 763,892
BUSINESS SERVICES - 6.6%
18,400 Alternative Resources
Corporation*.................. 556,600
25,000 DeVry, Inc.*.................... 675,000
7,000 HBO & Company................... 536,375
13,500 Paychex......................... 673,313
------------
2,441,288
CHEMICALS--BASIC - 1.8%
19,500 Praxair......................... 655,688
CHEMICALS--SPECIALTY - 1.5%
11,000 Sigma Aldrich Corporation....... 544,500
COMMUNICATIONS EQUIPMENT - 0.8%
3,500 U.S. Robotics Corporation*...... 307,125
COMPUTER SOFTWARE - 6.8%
6,500 Aspect Telecommunications*...... 217,750
4,500 Automatic Data Processing, Inc. 334,125
8,500 Bisys Group, Inc.*.............. 261,375
6,000 Computer Associates International,
Inc........................... 341,250
8,722 First Data Corporation.......... 583,284
7,000 McAffee Associates, Inc.*....... 307,125
3,500 Microsoft Corporation*.......... 307,125
7,000 Symantec Corporation*........... 162,750
------------
2,514,784
COMPUTER SYSTEMS - 3.2%
12,000 Bay Networks, Inc.*............. 493,500
4,000 Sun Microsystems, Inc.* ........ 182,500
11,000 3Com Corporation*............... 512,875
------------
1,188,875
CONSUMER CYCLICALS - 1.0%
12,000 Mattel, Inc. ................... 369,000
CONSUMER SERVICES - 2.2%
14,250 CUC International, Inc.*........ 486,281
10,500 Comnet Cellular*................ 303,188
------------
789,469
COSMETICS - 1.9%
30,000 Guest Supply Company*........... 678,750
See accompanying notes.
46
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES S (SOCIAL AWARENESS)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
DRUG DELIVERY - 0.8%
6,000 Elan Corporation PLC ADR*....... $ 291,750
ELECTRONICS--SEMI-CONDUCTORS - 3.4%
6,500 Applied Materials, Inc.* ....... 255,938
13,500 Atmel Corporation*.............. 302,063
5,000 Intel Coporation*............... 283,750
13,500 Merix Corporation*.............. 405,000
------------
1,246,751
FINANCIAL SERVICES - 4.5%
5,000 Federal National Mortgage
Association................... 620,625
12,500 Finova Group.................... 603,125
9,500 First USA, Inc. ................ 421,563
------------
1,645,313
FOOD--PROCESSING - 1.4%
7,500 CPC International, Inc.......... 514,688
FOOD--WHOLESALERS - 2.6%
22,500 Richfood Holdings, Inc. ........ 601,875
11,500 Sysco Corporation............... 373,750
------------
975,625
HEALTH CARE - 2.3%
8,000 Cardinal Health, Inc. .......... 438,000
9,000 U.S. Healthcare, Inc. .......... 418,500
------------
856,500
HOSPITAL SUPPLIES/MANAGEMENT - 2.2%
13,000 Community Health Systems, Inc.*. 463,125
12,500 Healthsouth Corporation*........ 364,063
------------
827,188
HOUSEHOLD FURNISHINGS/APPLIANCES - 1.3%
19,600 Leggett & Platt, Inc. .......... 475,300
HOUSEHOLD PRODUCTS - 1.5%
6,500 Procter &Gamble Company......... 539,500
INSURANCE - 5.5%
6,000 American General Group, Inc. ... 555,000
5,500 Chubb Corporation............... 532,125
10,500 Jefferson-Pilot Corporation..... 488,250
6,000 MBIA, Inc. ..................... 450,000
------------
2,025,375
MANUFACTURING - 3.0%
8,000 Illinois Tool Works, Inc. ...... 472,000
15,000 Millipore....................... 616,875
------------
1,088,875
MEDICAL - 3.4%
4,000 Cordis Corporation*............. 402,000
10,500 Guidant Corporation............. 443,625
7,500 Stryker Corporation............. 393,750
------------
1,239,375
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
OIL & GAS EXPLORATION - 4.3%
12,000 Anadarko Petroleum.............. $ 649,500
15,500 Apache Corporation.............. 457,250
13,500 Sonat, Inc. .................... 480,938
------------
1,587,688
PHARMACEUTICALS - 2.1%
7,500 Amgen, Inc. .................... 445,313
5,500 Genzyme Corporation............. 343,063
------------
788,376
POLLUTION CONTROL - 1.4%
26,000 Osmonics, Inc.*................. 529,750
RAILROADS - 1.1%
11,000 Illinois Central Corporation.... 422,125
RESTAURANTS - 3.9%
16,500 Boston Chicken*................. 530,063
12,000 McDonald's Corporation.......... 541,500
10,500 Outback Steakhouse, Inc.*....... 376,688
------------
1,448,251
RETAIL--DRUG STORES - 2.5%
17,500 Rexall Sundown, Inc.*........... 385,000
18,000 Walgreen Company................ 537,750
------------
922,750
RETAIL--GROCERY - 0.9%
10,000 Albertsons, Inc. ............... 328,750
RETAIL--SPECIALTY - 3.1%
20,250 Staples, Inc.*.................. 493,594
28,000 Sunglass Hut International, Inc.* 665,000
------------
1,158,594
TELECOMMUNICATIONS - 2.0%
12,500 Frontier Corporation............ 375,000
9,000 Sprint Corporation.............. 358,875
------------
733,875
TELEPHONE - 1.6%
11,000 U.S. West, Inc. ................ 393,250
11,000 U.S. West Media Group*.......... 209,000
------------
602,250
TEXTILES - 1.0%
8,500 Tommy Hilfiger Corporation*..... 360,188
------------
Total common stock - Series S
(cost $26,362,256) - 92.3% 34,005,834
CERTIFICATES OF DEPOSIT
-----------------------
BANKING - 0.3%
$100,000 South Shore, 5.40%, 3-04-96..... 100,000
------------
Total certificates of deposit - Series S
(cost $100,000) - 0.3%...... 100,000
See accompanying notes.
47
<PAGE>
STATEMENTS OF NET ASSETS
December 31, 1995
SERIES S (SOCIAL AWARENESS) (CONTINUED)
PRINCIPAL MARKET
AMOUNT COMMERCIAL PAPER VALUE
- --------------------------------------------------------------------------------
$ 500,000 AIG Funding, Inc.,
5.82%, 1-03-96................ $ 499,677
1,300,000 International Lease Finance Corporation,
5.65%, 1-02-96................ 299,805
5.82%, 1-04-96................ 999,181
------------
Total commercial paper - Series S -
(cost $1,798,712) - 4.9%.... 1,798,663
------------
Total investments - Series S
(cost $28,260,968) - 97.5%.. 35,904,497
Cash &other assets, less
liabilities - 2.5%.......... 925,761
------------
Total net assets applicable to
2,233,884 shares outstanding
- Series S - 100.0%......... $36,830,258
============
The identified cost of investments owned at December 31, 1995 was the same for
federal income tax and financial statement purposes, except for Series D for
which the identified cost of investments for federal tax purposes was
$164,082,318.
*Securities on which no cash dividend was paid during the preceding twelve
months.
ADR (American Depository Receipt)
(1) Deferred interest obligation; currently zero coupon under terms of initial
offering.
(2) For Series M, this security has been segregated with the custodian to cover
margin requirements for the following open long financial futures contracts
traded on foreign exchanges as indicated below:
Unrealized
Type Contracts Gain
------------ ----------
Financial Index - DAX (3/96) 7 $ 3,668
Financial Index - TOPIX (3/96) 9 69,219
Financial Index - FTSE (3/96) 6 3,668
----------
$76,555
==========
(3) Principal amount on foreign bond is reflected in local currency (e.g.,
Japanese yen) while market value is reflected in U.S. dollars.
(4) Variable rate security which may be reset the first of each month.
See accompanying notes.
48
<PAGE>
BALANCE SHEET
December 31, 1995
<TABLE>
<CAPTION>
SERIES C SERIES D SERIES E
SERIES A SERIES B (MONEY (WORLDWIDE (HIGH GRADE
(GROWTH) (GROWTH-INCOME) MARKET) EQUITY) INCOME)
-------- --------------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (identified cost $368,502,550,
$596,205,070, $11,161,771, $163,257,807
and $117,553,891, respectively).................. $487,613,500 $740,154,126 $ 11,167,311 $171,803,362 $124,456,799
Short-term commercial paper, at market or at
amortized cost which approximates market value
(identified cost $31,514,629, $53,386,916,
$94,018,629, $0 and $0, respectively)......... 31,513,658 53,386,916 94,001,342 -- --
Cash............................................. 211,500 -- 276,823 4,403,773 308,045
Receivables:
Fund shares sold.............................. 1,106,254 575,222 815,580 325,609 132,586
Securities sold............................... -- -- 6,106 2,170,174 --
Forward foreign exchange contracts............ -- -- -- 1,643,310 --
Interest...................................... 1,225 2,867,367 171,531 54,851 1,660,509
Dividends..................................... 750,349 1,064,615 -- 140,942 --
Miscellaneous................................. 25,331 -- -- -- --
Foreign taxes recoverable..................... -- -- -- 108,705 --
------------ ------------ ------------ ------------ ------------
Total assets.............................. $521,221,817 $798,048,246 $106,438,693 $180,650,726 $126,557,939
============ ============ ============ ============ ============
LIABILITIES AND NET ASSETS
Liabilities:
Payable for:
Securities purchased.......................... $ -- $ -- $ -- $ 2,164,057 $ --
Fund shares redeemed.......................... 978,827 2,389,758 941,362 482,066 795,822
Other liabilities:
Management fees............................... 304,141 469,690 42,574 136,947 74,331
Custodian fees................................ -- -- -- 43,300 --
Transfer and administration fees.............. 18,522 28,432 4,095 6,238 4,695
Professional fees............................. -- 24,302 6,312 3,225 11,574
Miscellaneous................................. 29,227 23,362 8,670 33,794 19,732
------------ ------------ ------------ ------------ ------------
Total liabilities......................... 1,330,717 2,935,544 1,003,013 2,869,627 906,154
Net Assets:
Paid in capital.................................. 366,060,115 543,860,283 100,593,169 156,694,497 121,146,176
Undistributed net investment income ............. 4,755,987 18,308,191 4,854,258 4,447,615 7,651,413
Accumulated undistributed net realized gain (loss)
on sale of investments, futures and foreign
currency transactions......................... 29,965,019 88,995,172 -- 6,453,920 (10,048,712)
Net unrealized appreciation (depreciation)
in value of investments, futures and translation
of assets and liabilities in foreign currency 119,109,979 143,949,056 (11,747) 10,185,067 6,902,908
------------ ------------ ------------ ------------ ------------
Net assets................................ 519,891,100 795,112,702 105,435,680 177,781,099 125,651,785
------------ ------------ ------------ ------------ ------------
Total liabilities and net assets....... $521,221,817 $798,048,246 $106,438,693 $180,650,726 $126,557,939
============ ============ ============ ============ ============
Capital shares authorized.......................... 1,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000 250,000,000
Capital shares outstanding......................... 24,721,185 23,421,450 8,541,095 31,951,961 9,769,468
Net asset value per share (net assets divided by
shares outstanding).............................. $21.03 $33.95 $12.34 $5.56 $12.86
============ ============ ============ ============ ============
</TABLE>
See accompanying notes.
49
<PAGE>
BALANCE SHEET (CONTINUED)
December 31, 1995
<TABLE>
<CAPTION>
SERIES K SERIES M SERIES N
SERIES J (GLOBAL (SPECIALIZED (MANAGED SERIES O SERIES S
(EMERGING AGGRESSIVE ASSET ASSET (EQUITY (SOCIAL
(GROWTH) BOND) ALLOCATION ALLOCATION) INCOME) AWARENESS
-------- ----- ---------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments at value (identified cost
$74,918,788, $5,405,977, $16,190,634,
$10,624,985, $11,995,574 and
$26,462,256, respectively).............. $86,530,524 $ 5,490,437 $16,224,540 $11,010,850 $13,001,696 $34,105,834
Short-term commercial paper, at market or at
amortized cost which approximates market
value (identified cost $8,886,403, $0, $0, $0,
$699,620 and $1,798,712, respectively)... 8,886,403 -- -- -- 699,620 1,798,663
Cash........................................ 199,997 56,386 899 -- -- 832,645
Receivables:
Fund shares sold......................... 185,353 21,485 120,438 32,463 184,837 119,416
Securities sold.......................... 1,080,234 1,644,862 -- -- -- --
Interest................................. 1,275 135,908 39,608 58,430 12,304 1,979
Dividends................................ 56,959 -- 7,534 9,378 23,325 40,552
Prepaid expenses......................... 4,051 -- 74 805 605 1,177
Forward foreign exchange contracts....... -- -- 412 -- -- --
Foreign taxes recoverable................ -- -- -- 36 -- --
------------ ----------- ----------- ----------- ----------- -----------
Total assets......................... $96,944,796 $7,349,078 $16,393,505 $11,111,962 $13,922,387 $36,900,266
============ =========== =========== =========== =========== ===========
LIABILITIES AND NET ASSETS
Liabilities:
Payable for
Securities purchased................... $ 3,409,853 $ 1,629,874 $ 355,533 $ 504,442 $ 356,455 $ --
Fund shares redeemed................... 94,757 27,732 20,365 2,487 18,882 45,762
Forward foreign exchange contracts..... -- -- -- 643 -- --
Other liabilities:
Management fees........................ 53,990 1,469 13,115 8,375 10,074 21,425
Custodian fees......................... -- 6,298 13,108 9,216 5,336 --
Transfer and administration fees....... 3,459 233 3,262 3,009 593 1,460
Professional fees...................... 902 920 3,800 1,644 1,565 569
Miscellaneous.......................... 2,394 4,191 2,370 2,007 1,860 792
Variation margin....................... -- -- 5,529 -- -- --
------------ ----------- ----------- ----------- ----------- -----------
Total liabilities ................. 3,565,355 1,670,717 417,082 531,823 394,765 70,008
Net Assets:
Paid in capital.......................... 76,088,638 5,594,000 15,402,483 10,063,481 12,408,974 27,851,216
Undistributed net investment income...... 218,141 -- 310,231 108,503 106,787 212,751
Accumulated undistributed net realized gain
(loss) on sale of investments, futures and
foreign currency transactions.......... 5,460,926 -- 153,135 22,671 5,739 1,122,762
Net unrealized appreciation
in value of investments, futures and
translation of assets and liabilities in
foreign currency....................... 11,611,736 84,361 110,574 385,484 1,006,122 7,643,529
------------ ----------- ----------- ----------- ----------- -----------
Net assets........................... 93,379,441 5,678,361 15,976,423 10,580,139 13,527,622 36,830,258
------------ ----------- ----------- ----------- ----------- -----------
Total liabilities and net assets... $96,944,796 $7,349,078 $16,393,505 $11,111,962 $13,922,387 $36,900,266
============ =========== =========== =========== =========== ===========
Capital shares authorized................... 250,000,000 50,000,000 50,000,000 50,000,000 50,000,000 250,000,000
Capital shares outstanding.................. 5,813,574 555,341 1,491,500 985,979 1,156,219 2,233,884
Net asset value per share (net assets
divided by shares outstanding)........... $16.06 $10.22 $10.71 $10.73 $11.70 $16.49
============ =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
50
<PAGE>
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
SERIES C SERIES D SERIES E
SERIES A SERIES B (MONEY (WORLDWIDE (HIGH GRADE
(GROWTH) (GROWTH-INCOME) MARKET) EQUITY) INCOME)
-------- --------------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ....................................... $ 6,692,953 $ 9,939,268 $ -- $ 3,386,174 $ --
Interest......................................... 1,763,958 14,521,341 5,576,937 517,713 8,776,778
------------ ------------ ------------ ------------ ------------
8,456,911 24,460,609 5,576,937 3,903,887 8,776,778
Less foreign tax expense......................... -- -- -- (293,887) --
------------ ------------ ------------ ------------ ------------
Total investment income................... 8,456,911 24,460,609 5,576,937 3,610,000 8,776,778
EXPENSES:
Management fees............................... 3,235,523 5,198,738 474,730 1,634,991 883,723
Custodian fees................................ 20,507 25,790 8,817 164,184 4,712
Transfer/maintenance fees..................... 2,713 2,549 2,482 2,214 2,214
Administration fees........................... 194,131 311,924 42,726 73,574 53,023
Directors' fees............................... 15,684 25,485 3,882 6,540 7,073
Professional fees............................. 14,697 26,097 6,198 183,555 8,105
Reports to shareholders....................... 86,494 128,918 24,749 43,422 28,513
Registration fees............................. 658 1,149 252 11,381 232
Other expenses................................ 29,070 49,787 9,656 14,653 15,520
------------ ------------ ------------ ------------ ------------
Total expenses............................ 3,599,477 5,770,437 573,492 2,134,514 1,003,115
Less earnings credits......................... (9,176) (13,593) (4,917) -- (3,318)
------------ ------------ ------------ ------------ ------------
Net expenses.................................. 3,590,301 5,756,844 568,575 2,134,514 999,797
------------ ------------ ------------ ------------ ------------
Net investment income ................. 4,866,610 18,703,765 5,008,362 1,475,486 7,776,981
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain during the period on:
Investments.................................... 30,112,684 99,034,666 -- 6,503,025 3,043,977
Foreign currency transactions.................. -- -- -- 3,695,084 --
------------ ------------ ------------ ------------ ------------
Net realized gain ........................ 30,112,684 99,034,666 -- 10,198,109 3,043,977
Net change in unrealized appreciation (depreciation)
during the period on:
Investments................................... 97,759,964 63,506,371 16,141 5,872,052 9,249,705
Translation of assets and liabilities
in foreign currencies..................... -- -- -- 1,008,002 --
------------ ------------ ------------ ------------ ------------
Net unrealized appreciation.................. 97,759,964 63,506,371 16,141 6,880,054 9,249,705
------------ ------------ ------------ ------------ ------------
Net gain.................................. 127,872,648 162,541,037 16,141 17,078,163 12,293,682
------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations...................... $132,739,258 $181,244,802 $5,024,503 $18,553,649 $20,070,663
============ ============ ============ ============ ============
</TABLE>
See accompanying notes.
51
<PAGE>
STATEMENT OF OPERATIONS (CONTINUED)
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
SERIES K SERIES M SERIES N
SERIES J (GLOBAL (SPECIALIZED (MANAGED SERIES O SERIES S
(EMERGING AGGRESSIVE ASSET ASSET (EQUITY (SOCIAL
(GROWTH) BOND)* ALLOCATION* ALLOCATION)* INCOME)* AWARENESS
-------- ------ ----------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................................ $ 460,543 $ -- $70,639 $47,815 $ 98,551 $ 276,333
Interest................................. 463,257 330,826 179,681 140,789 57,248 199,468
------------ ----------- ----------- ----------- ----------- -----------
923,800 330,826 250,320 188,604 155,799 475,801
Less foreign tax expense................. -- (2,775) -- (713) -- --
------------ ----------- ----------- ----------- ----------- -----------
Total investment income............ 923,800 328,051 250,320 187,891 155,799 475,801
EXPENSES:
Management fees.......................... 638,386 19,237 49,640 40,824 36,274 224,261
Custodian fees........................... 9,718 9,224 13,108 9,216 5,337 5,651
Transfer/maintenance fees................ 2,150 525 864 661 740 1,638
Administration fees...................... 38,303 18,585 19,734 19,337 1,632 13,456
Directors' fees.......................... 2,956 30 154 30 30 1,199
Professional fees........................ 2,496 2,033 5,203 3,046 2,579 1,092
Reports to shareholders.................. 13,425 568 1,270 996 826 5,556
Registration fees........................ 174 1,452 1,460 1,460 1,460 78
Other expenses........................... 5,650 839 2,808 150 134 2,838
Interest................................. -- -- 482 -- -- --
------------ ----------- ----------- ----------- ----------- -----------
Total expenses....................... 713,258 52,493 94,723 75,720 49,012 255,769
------------ ----------- ----------- ----------- ----------- -----------
Less:
Reimbursement of expenses.......... -- (10,260) -- -- -- --
Earnings credits................... (7,599) -- -- -- -- (4,053)
------------ ----------- ----------- ----------- ----------- -----------
Net expenses........................... 705,659 42,233 94,723 75,720 49,012 251,716
------------ ----------- ----------- ----------- ----------- -----------
Net investment income ............... 218,141 285,818 155,597 112,171 106,787 224,085
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) during the period on:
Investments............................ 11,201,462 26,652 153,135 22,671 5,739 1,728,460
Foreign currency transactions.......... -- (43,375) (6,777) (3,668) -- --
Futures contracts...................... -- -- 161,411 -- -- --
------------ ----------- ----------- ----------- ----------- -----------
Net realized gain (loss)............. 11,201,462 (16,723) 307,769 19,003 5,739 1,728,460
Net change in unrealized appreciation (depreciation)
during the period on:
Investments............................ 3,419,768 84,460 33,906 385,865 1,006,122 5,304,983
Translation of assets and liabilities
in foreign currencies................ -- (99) 113 (381) -- --
Futures contracts...................... -- -- 76,555 -- -- --
------------ ----------- ----------- ----------- ----------- -----------
Net unrealized appreciation ......... 3,419,768 84,361 110,574 385,484 1,006,122 5,304,983
------------ ----------- ----------- ----------- ----------- -----------
Net gain .......................... 14,621,230 67,638 418,343 404,487 1,011,861 7,033,443
------------ ----------- ----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations..... $14,839,371 $353,456 $573,940 $516,658 $1,118,648 $7,257,528
============ =========== =========== =========== =========== ===========
</TABLE>
*Period June 1, 1995 (inception) through December 31, 1995.
See accompanying notes.
52
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
SERIES C SERIES D SERIES E
SERIES A SERIES B (MONEY (WORLDWIDE (HIGH GRADE
(GROWTH) (GROWTH-INCOME) MARKET) EQUITY) INCOME)
-------- --------------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income ........................... $ 4,866,610 $ 18,703,765 $ 5,008,362 $ 1,475,486 $ 7,776,981
Net realized gain................................ 30,112,684 99,034,666 -- 10,198,109 3,043,977
Unrealized appreciation during the period........ 97,759,964 63,506,371 16,141 6,880,054 9,249,705
------------ ------------ ------------ ----------- -----------
Net increase in net assets resulting
from operations ......................... 132,739,258 181,244,802 5,024,503 18,553,649 20,070,663
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................ (3,560,363) (12,339,763) (4,193,295) (28,486) (7,575,652)
Net realized gain................................ (15,009,374) -- -- (1,835,762) --
------------ ------------ ------------ ----------- -----------
Total distributions to shareholders .......... (18,569,737) (12,339,763) (4,193,295) (1,864,248) (7,575,652)
CAPITAL SHARE TRANSACTIONS (A):
Proceeds from sale of shares .................... 178,841,720 149,198,824 162,965,890 81,864,579 56,773,129
Dividends reinvested ............................ 18,569,737 12,339,763 4,193,295 1,864,248 7,575,652
Shares redeemed.................................. (123,978,278) (130,485,002) (181,223,040) (69,669,706) (58,270,162)
------------ ------------ ------------ ----------- -----------
Net increase (decrease) from capital share
transactions.............................. 73,433,179 31,053,585 (14,063,855) 14,059,121 6,078,619
------------ ------------ ------------ ----------- -----------
Total increase (decrease) in net assets 187,602,700 199,958,624 (13,232,647) 30,748,522 18,573,630
NET ASSETS:
Beginning of period.............................. 332,288,400 595,154,078 118,668,327 147,032,577 107,078,155
------------ ------------ ------------ ----------- -----------
End of period.................................... $519,891,100 $795,112,702 $105,435,680 $177,781,099 $125,651,785
============ ============ ============ ============ ============
Undistributed net investment income at
end of period................................ $4,755,987 $18,308,191 $4,854,258 $4,447,615 $7,651,413
============ ============ ============ =========== ===========
(a) Shares issued and redeemed
Shares sold .............................. 9,705,386 4,927,872 13,110,725 15,967,670 4,585,694
Dividends reinvested...................... 943,105 383,461 344,843 345,872 622,486
Shares redeemed ..................... (6,692,130) (4,314,590) (14,585,481) (13,363,236) (4,736,924)
------------ ------------ ------------ ----------- -----------
Net increase (decrease)............... 3,956,361 996,743 (1,129,913) 2,950,306 471,256
============ ============ ============ =========== ===========
</TABLE>
See accompanying notes.
53
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
SERIES K SERIES M SERIES N
SERIES J (GLOBAL (SPECIALIZED (MANAGED SERIES O SERIES S
(EMERGING AGGRESSIVE ASSET ASSET (EQUITY (SOCIAL
(GROWTH) BOND)* ALLOCATION* ALLOCATION)* INCOME)* AWARENESS
-------- ------ ----------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income .................... $ 218,141 $ 285,818 $ 155,597 $ 112,171 $ 106,787 $ 224,085
Net realized gain (loss).................. 11,201,462 (16,723) 307,769 19,003 5,739 1,728,460
Unrealized appreciation during the period. 3,419,768 84,361 110,574 385,484 1,006,122 5,304,983
................................... ------------ ----------- ----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations ........ 14,839,371 353,456 573,940 516,658 1,118,648 7,257,528
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................... -- (245,889) -- -- -- (158,603)
Distribution in excess of capital gains.. -- (23,205) -- -- -- --
Tax return of capital distribution....... -- (15,693) -- -- -- --
................................... ------------ ----------- ----------- ----------- ----------- -----------
Total distribution to shareholders..... -- (284,787) -- -- -- (158,603)
CAPITAL SHARE TRANSACTIONS (A):
Proceeds from sale of shares ............ 44,371,374 8,894,552 20,292,459 10,904,285 13,390,619 10,381,340
Dividends reinvested .................... -- 284,787 -- -- -- 158,603
Shares redeemed.......................... (42,770,961) (3,569,647) (4,889,976) (840,804) (981,645) (5,347,822)
................................... ------------ ----------- ----------- ----------- ----------- -----------
Net increase from capital
share transactions................... 1,600,413 5,609,692 15,402,483 10,063,481 12,408,974 5,192,121
................................... ------------ ----------- ----------- ----------- ----------- -----------
Total increase in net assets........... 16,439,784 5,678,361 15,976,423 10,580,139 13,527,622 12,291,046
NET ASSETS:
Beginning of period...................... 76,939,657 -- -- -- -- 24,539,212
------------ ----------- ----------- ----------- ----------- -----------
End of period............................ $93,379,441 $5,678,361 $15,976,423 $10,580,139 $13,527,622 $36,830,258
============ =========== =========== =========== =========== ===========
Undistributed net investment income
at end of period........................ $218,141 $-- $310,231 $108,503 $106,787 $212,751
============ =========== =========== =========== =========== ===========
(a) Shares issued and redeemed
Shares sold ....................... 2,964,051 875,221 1,952,323 1,067,140 1,243,531 698,002
Dividends reinvested............... -- 27,920 -- -- -- 9,760
Shares redeemed ................... (2,875,387) (347,800) (460,823) (81,161) (87,312) (366,291)
------------ ----------- ----------- ----------- ----------- -----------
Net increase .................... 88,664 555,341 1,491,500 985,979 1,156,219 341,471
============ =========== =========== =========== =========== ===========
</TABLE>
*Period June 1, 1995 (inception) through December 31, 1995.
See accompanying notes.
54
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
SERIES C SERIES D
SERIES A SERIES B (MONEY (WORLDWIDE
(GROWTH) (GROWTH-INCOME) MARKET) EQUITY)
-------- --------------- ------- -------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income ............................ $ 3,594,852 $ 12,199,007 $ 4,088,336 $ 651,559
Net realized gain (loss).......................... 14,936,574 (10,039,494) -- 8,056,618
Unrealized depreciation during the year .......... (23,898,664) (19,893,458) (24,293) (6,906,319)
-------------- -------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations ........................... (5,367,238) (17,733,945) 4,064,043 1,801,858
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................. (6,345,955) (13,997,580) (2,285,848) (142,013)
Net realized gain .................................. (53,406,224) (34,582,256) -- --
-------------- -------------- ------------- -------------
Total distributions to shareholders ............ (59,752,179) (48,579,836) (2,285,848) (142,013)
CAPITAL SHARE TRANSACTIONS (A):
Proceeds from sale of shares ..................... 137,670,243 151,207,666 159,237,311 105,002,631
Dividends reinvested ............................. 59,752,179 48,579,836 2,285,848 142,013
Shares redeemed................................... (117,421,291) (121,918,064) (143,724,959) (58,023,788)
-------------- ------------- ------------- -------------
Net increase from capital share
transactions................................ 80,001,131 77,869,438 17,798,200 47,120,856
-------------- ------------- ------------- -------------
Total increase in net assets......... 14,881,714 11,555,657 19,576,395 48,780,701
NET ASSETS:
Beginning of year................................. 317,406,686 583,598,421 99,091,932 98,251,875
-------------- ------------- ------------- -------------
End of year ...................................... $332,288,400 $595,154,078 $118,668,327 $147,032,576
============== ============= ============= =============
Undistributed net investment income at end of year $3,449,740 $11,944,189 $4,039,191 $ --
============== ============= ============= =============
(a) Shares issued and redeemed
Shares sold.................................. 7,557,600 5,322,055 13,052,239 20,369,289
Dividends reinvested......................... 3,645,204 1,784,711 188,835 26,669
Shares redeemed ............................. (6,452,290) (4,309,917) (11,766,086) (11,298,899)
-------------- ------------- ------------- -------------
Net increase............................. 4,750,514 2,796,849 1,474,988 9,097,059
============== ============= ============= =============
</TABLE>
See accompanying notes.
55
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
SERIES E SERIES J SERIES S
(HIGH GRADE (EMERGING (SOCIAL
INCOME) GROWTH) AWARENESS)
------- ------- ---------
<S> <C> <C> <C>
DECREASE IN NET ASSETS FROM OPERATIONS:
Net investment income (loss) ........................... $ 7,549,504 $ (72,234) $ 168,168
Net realized loss....................................... (13,092,689) (5,682,556) (605,968)
Unrealized appreciation (depreciation) during the year.. (3,021,227) 4,040,585 (373,839)
------------ ------------- ------------
Net decrease in net assets resulting
from operations ................................. (8,564,412) (1,714,205) (811,639)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................... (6,132,050) -- (36,291)
Net realized gain on sale of investments................ (5,483,296) (38,061) (335,692)
------------ ------------- ------------
Total distribution to shareholders.................... (11,615,346) (38,061) (371,983)
CAPITAL SHARE TRANSACTIONS (A):
Proceeds from sale of shares ........................... 73,273,613 59,569,183 10,619,583
Dividends reinvested ................................... 11,615,346 38,061 371,983
Shares redeemed......................................... (70,531,168) (23,011,638) (4,758,892)
------------ ------------- -------------
Net increase from capital share transactions......... 14,357,791 36,595,606 6,232,674
------------ ------------- -------------
Total increase (decrease) in net assets............ (5,821,967) 34,843,340 5,049,052
NET ASSETS:
Beginning of year....................................... 112,900,122 42,096,317 19,490,160
------------ ------------- -------------
End of year ............................................ $107,078,155 $ 76,939,657 $24,539,912
============ ============= =============
Undistributed net investment income at end of year..... $7,450,084 $-- $147,269
============ ============= =============
(a) Shares issued and redeemed
Shares sold....................................... 5,794,969 4,497,042 801,009
Dividends reinvested.............................. 1,006,267 2,848 28,559
Shares redeemed .................................. (5,695,284) (1,746,406) (360,752)
------------ ------------- -------------
Net increase.................................... 1,105,952 2,753,484 468,816
============ ============= =============
</TABLE>
See accompanying notes.
56
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
RATIO OF
FISCAL NET ASSET NET NET GAIN DIVIDENDS DISTRIBUTIONS NET ASSET NET ASSETS RATIO OF NET INCOME
PERIOD VALUE INVESTMENT (LOSS) TOTAL FROM (FROM NET (FROM VALUE END OF EXPENSES (LOSS) PORTFOLIO
ENDED BEGINNING INCOME (REALIZED& INVESTMENT INVESTMENT CAPITAL TOTAL END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER
DEC. 31 OF PERIOD (LOSS) UNREALIZED)OPERATIONS INCOME) GAINS)DISTRIBUTIONS PERIOD RETURN(D)(THOUSANDS)NET ASSETS NET ASSETS RATE
SERIES A (GROWTH)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 $12.90 $0.29 $4.34 $4.63 $(0.27) $ --- $(0.27) $17.26 36.1% $235,115 0.87% 1.97% 95%
1992 17.26 0.23 1.615 1.845 (0.242) (0.533) (0.775) 18.33 11.1% 296,548 0.86% 1.46% 77%
1993 18.33 0.39 2.076 2.466 (0.224) (0.752) (0.976) 19.82 13.7% 317,407 0.86% 2.01% 108%
1994 19.82 0.20 (0.442) (0.242) (0.38) (3.198) (3.578) 16.00 (1.7%) 332,288 0.84% 1.13% 90%
1995(g) 16.00 0.18 5.648 5.828 (0.153) (0.645) (0.798) 21.03 36.8% 519,891 0.83% 1.13% 83%
SERIES B (GROWTH-INCOME)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 $20.21 $0.58 $6.953 $7.533 $(0.66) $(0.233) $(0.893) $26.85 37.7% $348,969 0.86% 3.39% 62%
1992 26.85 0.65 .999 1.649 (0.583) (0.156) (0.739) 27.76 6.3% 467,208 0.86% 3.22% 56%
1993 27.76 0.64 2.009 2.649 (0.679) --- (0.679) 29.73 9.6% 583,599 0.86% 2.63% 95%
1994 29.73 0.51 (1.34) (0.83) (0.680) (1.68) ( 2.36) 26.54 (3.0%) 595,154 0.84% 2.07% 43%
1995(g) 26.54 0.79 7.16 7.95 (0.540) --- (0.540) 33.95 30.1% 795,113 0.83% 2.70% 94%
SERIES C (MONEY MARKET)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991(a) $12.74 $0.69 $0.01 $0.70 $(0.92) $ --- $(0.92) $12.52 5.6% $86,610 0.61% 5.42% ---
1992 12.52 0.43 (0.03) 0.40 (0.71) --- (0.71) 12.21 3.2% 87,246 0.61% 3.19% ---
1993 12.21 0.29 0.027 0.317 (0.437) --- (0.437) 12.09 2.6% 99,092 0.61% 2.65% ---
1994 12.09 0.41 0.035 0.445 (0.265) --- (0.265) 12.27 3.7% 118,668 0.61% 3.70% ---
1995(g) 12.27 0.74 (0.085) 0.655 (0.585) --- (0.585) 12.34 5.4% 105,436 0.60% 5.27% ---
SERIES D (WORLDWIDE EQUITY)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991(a)(b) $3.97 $0.15 $0.34 $0.49 $(0.55) $ --- $(0.55) $3.91 12.7% $11,688 1.58% 3.95% 113%
1992(a) 3.91 0.02 (0.122) (0.102) (0.048) --- (0.048) 3.76 (2.6%) 25,183 1.62% 0.50% 81%
1993(a) 3.76 0.02 1.17 1.19 (0.006) --- (0.006) 4.94 31.6% 98,252 1.42% 0.38% 70%
1994(a) 4.94 0.02 0.115 0.135 (0.005) --- (0.005) 5.07 2.7% 147,033 1.34% 0.50% 82%
1995 5.07 0.05 0.4989 0.5489 (0.0009) (0.058) (0.0589) 5.56 10.9% 177,781 1.31% 0.90% 169%
SERIES E (HIGH GRADE INCOME)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 $11.67 $0.76 $1.17 $1.93 $(0.78) $ --- $(0.78) $12.82 17.0% $63,602 0.86% 8.24% 24%
1992 12.82 0.78 0.168 0.948 (0.748) --- (0.748) 13.02 7.4% 81,440 0.86% 7.41% 76%
1993 13.02 0.64 1.02 1.66 (0.79) (0.11) (0.90) 13.78 12.6% 112,900 0.86% 6.21% 151%
1994 13.78 0.76 (1.713) (0.953) (0.69) (0.617) (1.307) 11.52 (6.9%) 107,078 0.85% 6.74% 185%
1995(g) 11.52 0.74 1.36 2.10 (0.76) --- (0.76) 12.86 18.6% 125,652 0.85% 6.60% 180%
</TABLE>
57
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
NET GAIN
FISCAL NET ASSET NET (LOSS) ON DIVIDENDS DISTRIBUTIONS
PERIOD VALUE INVESTMENT SECURITIES TOTAL FROM (FROM NET (FROM
ENDED BEGINNING INCOME (REALIZED & INVESTMENT INVESTMENT CAPITAL RETURN OF
DEC. 31 OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME) GAINS) CAPITAL
SERIES J (EMERGING GROWTH)
1992(c) $10.00 $0.01 $2.46 $2.47 $ --- $ --- $ ---
1993 12.47 (0.01) 1.711 1.701 (0.001) --- ---
1994 14.17 (0.01) (0.713) (0.723) --- (0.007) ---
1995(g) 13.44 0.04 2.58 2.62 --- --- ---
<TABLE>
<CAPTION>
RATIO OF NET
FISCAL NET ASSETS RATIO OF INCOME
PERIOD NET ASSET END OF EXPENSES TO (LOSS) TO PORTFOLIO
ENDED TOTAL VALUE END OF TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER
DEC. 31 DISTRIBUTIONS PERIOD RETURN(D)(THOUSANDS) ASSETS ASSETS RATE
SERIES J (EMERGING GROWTH) (CONTINUED)
<S> <C> <C> <C> <C> <C> <C> <C>
1992(c) $ --- $12.47 24.7% $ 7,113 1.06% 0.22% 4%
1993 (0.001) 14.17 13.6% 42,096 0.91% (0.14%) 117%
1994 (0.007) 13.44 (5.1%) 76,940 0.88% (0.11%) 91%
1995(g) --- 16.06 19.5% 93,379 0.84% 0.26% 202%
</TABLE>
NET GAIN
FISCAL NET ASSET NET (LOSS) ON DIVIDENDS DISTRIBUTIONS
PERIOD VALUE INVESTMENT SECURITIES TOTAL FROM (FROM NET (FROM
ENDED BEGINNING INCOME (REALIZED & INVESTMENT INVESTMENT CAPITAL RETURN OF
DEC. 31 OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME) GAINS) CAPITAL
SERIES K (GLOBAL AGGRESSIVE)
1995(a)(e)(f)$10.00 $ 0.54 $ 0.22 $ 0.76 $(0.466) $(0.044) $(0.03)
<TABLE>
<CAPTION>
RATIO OF NET
FISCAL NET ASSETS RATIO OF INCOME
PERIOD NET ASSET END OF EXPENSES TO (LOSS) TO PORTFOLIO
ENDED TOTAL VALUE END OF TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER
DEC. 31 DISTRIBUTIONS PERIOD RETURN(D)(THOUSANDS) ASSETS ASSETS RATE
SERIES K (GLOBAL AGGRESSIVE) (CONTINUED)
<S> <C> <C> <C> <C> <C> <C> <C>
1995(a)(e)$(0.540) $ 10.22 7.6% $ 5,678 1.63% 11.03% 127%
</TABLE>
NET GAIN
FISCAL NET ASSET NET (LOSS) ON DIVIDENDS DISTRIBUTIONS
PERIOD VALUE INVESTMENT SECURITIES TOTAL FROM (FROM NET (FROM
ENDED BEGINNING INCOME (REALIZED & INVESTMENT INVESTMENT CAPITAL RETURN OF
DEC. 31 OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME) GAINS) CAPITAL
SERIES M (SPECIALIZED ASSET ALLOCATION)
1995(a)(e)$10.00 $0.169 $0.541 $0.71 $ --- $ --- $ ---
<TABLE>
<CAPTION>
RATIO OF NET
FISCAL NET ASSETS RATIO OF INCOME
PERIOD NET ASSET END OF EXPENSES TO (LOSS) TO PORTFOLIO
ENDED TOTAL VALUE END OF TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER
DEC. 31 DISTRIBUTIONS PERIOD RETURN(D)(THOUSANDS) ASSETS ASSETS RATE
SERIES M (SPECIALIZED ASSET ALLOCATION) (CONTINUED)
<S> <C> <C> <C> <C> <C> <C> <C>
1995(a)(e)$ --- $10.71 7.1% $15,976 1.94% 3.2% 181%
</TABLE>
NET GAIN
FISCAL NET ASSET NET (LOSS) ON DIVIDENDS DISTRIBUTIONS
PERIOD VALUE INVESTMENT SECURITIES TOTAL FROM (FROM NET (FROM
ENDED BEGINNING INCOME (REALIZED & INVESTMENT INVESTMENT CAPITAL RETURN OF
DEC. 31 OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME) GAINS) CAPITAL
SERIES N (MANAGED ASSET ALLOCATION)
1995(a)(e)$10.00 $0.156 $0.574 $0.73 $ --- $ --- $ ---
<TABLE>
<CAPTION>
RATIO OF NET
FISCAL NET ASSETS RATIO OF INCOME
PERIOD NET ASSET END OF EXPENSES TO (LOSS) TO PORTFOLIO
ENDED TOTAL VALUE END OF TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER
DEC. 31 DISTRIBUTIONS PERIOD RETURN(D)(THOUSANDS) ASSETS ASSETS RATE
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
<S> <C> <C> <C> <C> <C> <C> <C>
1995(a)(e)$ --- $10.73 7.3% $10,580 1.90% 2.8% 26%
</TABLE>
NET GAIN
FISCAL NET ASSET NET (LOSS) ON DIVIDENDS DISTRIBUTIONS
PERIOD VALUE INVESTMENT SECURITIES TOTAL FROM (FROM NET (FROM
ENDED BEGINNING INCOME (REALIZED & INVESTMENT INVESTMENT CAPITAL RETURN OF
DEC. 31 OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME) GAINS) CAPITAL
SERIES O (EQUITY INCOME)
1995(a)(e)$10.00 $0.166 $1.534 $1.70 $ --- $ --- $ ---
<TABLE>
<CAPTION>
RATIO OF NET
FISCAL NET ASSETS RATIO OF INCOME
PERIOD NET ASSET END OF EXPENSES TO (LOSS) TO PORTFOLIO
ENDED TOTAL VALUE END OF TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER
DEC. 31 DISTRIBUTIONS PERIOD RETURN(D)(THOUSANDS) ASSETS ASSETS RATE
SERIES O (EQUITY INCOME) (CONTINUED)
<S> <C> <C> <C> <C> <C> <C> <C>
1995(a)(e)$ --- $11.70 17.0% $13,528 1.40% 3.0% 3%
</TABLE>
NET GAIN
FISCAL NET ASSET NET (LOSS) ON DIVIDENDS DISTRIBUTIONS
PERIOD VALUE INVESTMENT SECURITIES TOTAL FROM (FROM NET (FROM
ENDED BEGINNING INCOME (REALIZED & INVESTMENT INVESTMENT CAPITAL RETURN OF
DEC. 31 OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME) GAINS) CAPITAL
SERIES S (SOCIAL AWARENESS)
1991(c) $10.00 $0.05 $0.50 $0.55 $ --- $ --- $ ---
1992(a) 10.55 0.03 1.691 1.721 (0.021) --- ---
1993 12.25 0.02 1.432 1.452 (0.012) --- ---
1994 13.69 0.08 (0.595) (0.515) (0.02) (0.185) ---
1995(g) 12.97 0.09 3.507 3.597 (0.077) --- ---
<TABLE>
<CAPTION>
RATIO OF NET
FISCAL NET ASSETS RATIO OF INCOME
PERIOD NET ASSET END OF EXPENSES TO (LOSS) TO PORTFOLIO
ENDED TOTAL VALUE END OF TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER
DEC. 31 DISTRIBUTIONS PERIOD RETURN(D)(THOUSANDS) ASSETS ASSETS RATE
SERIES S (SOCIAL AWARENESS) (CONTINUED)
<S> <C> <C> <C> <C> <C> <C> <C>
1991(c) $ --- $10.55 5.5% $ 2,711 1.00% 1.49% 162%
1992(a) (0.021) 12.25 16.4% 9,653 0.92% 0.24% 110%
1993 (0.012) 13.69 11.9% 19,490 0.90% 0.23% 105%
1994 (0.205) 12.97 (3.7%) 24,539 0.90% 0.75% 67%
1995(g) (0.077) 16.49 27.7% 36,830 0.86% 0.75% 122%
</TABLE>
(a) Net investment income per share has been calculated using the weighted
monthly average number of capital shares outstanding.
(b) Effective May 1, 1991, the investment objective of Series D was changed from
high current income to long-term capital growth through investment in common
stocks and equivalents of companies domiciled in foreign countries and the
United States.
(c) Series J and Series S were initially capitalized on October 1, 1992 and
April 23, 1991, respectively, with net asset values of $10.00 per share.
Percentage amounts for the period have been annualized, except for total
return.
(d) Total return information does not take into account any charges paid at the
time of purchase.
(e) Series K, M, N and O were initially capitalized on June 1, 1995 with net
asset values of $10.00 per share. Percentage amounts for the period have
been annualized, except for total return.
(f) Fund expenses were reduced by the Investment Manager during the period, and
expense ratios absent such reimbursement would have been 2.03% for Series K
(g) Expense ratios were calculated without the reduction for custodian fees
earnings credits. Expense ratios with such reductions would have been as
follows:
1995
----
Series A 0.83%
Series B 0.83%
Series C 0.60%
Series E 0.85%
Series J 0.83%
Series S 0.84%
58
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company of the series
type. Its shares are currently issued in eleven series with each series, in
effect, representing a separate fund. The Fund is required to account for the
assets of each series separately and to allocate general liabilities of the Fund
to each series based upon the net asset value of each series. Shares of the Fund
will be sold only to Security Benefit Life Insurance Company (SBL) separate
accounts. The following is a summary of the significant accounting policies
followed by the Fund in the preparation of its financial statements.
A. SECURITIES VALUATION--Valuations of the Fund's securities are supplied
by pricing services approved by the Board of Directors. Securities listed or
traded on a recognized securities exchange are valued on the basis of the last
sales price. If a security is traded on multiple exchanges, its value will be
based on the price from the principal exchange where it is traded. If there are
no sales on a particular day, then the securities are valued at the mean between
the bid and the asked prices. If a mean cannot be determined, the securities are
valued at the best available current bid price. All other securities for which
market quotations are available are valued on the basis of the last current bid
price. If there is no bid price or if the bid price is deemed to be
unsatisfactory by the Board of Directors or by the Fund's investment manager,
then the securities are valued in good faith by such method as the Board of
Directors determines will reflect the fair value. The Fund generally will value
short-term debt securities at prices based on market quotations for such
securities or securities of similar type, yield, quality and duration, except
that securities purchased with 60 days or less to maturity are valued at
amortized cost.
Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of the New York Stock Exchange. The
values of foreign securities are determined as of the close of such foreign
markets or the close of the New York Stock Exchange, if earlier. All investments
quoted in foreign currency are valued in U.S. dollars on the basis of the
foreign currency exchange rates prevailing at the close of business. Investment
in foreign securities may involve risks not present in domestic investments.
Since foreign securities may be denominated in a foreign currency and involve
settlement and pay interest or dividends in foreign currencies, changes in the
relationship of these foreign currencies to the U.S. dollar can significantly
affect the value of the investments and earnings of the Series. Foreign
investments may also subject Series D, K, M and N to foreign government exchange
restrictions, expropriation, taxation or other political, social or economic
developments, all of which could affect the market and/or credit risk of the
investments.
B. FOREIGN CURRENCY TRANSACTIONS - The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities initially expressed in
foreign currencies are converted into U.S. dollars at prevailing exchange rates.
Purchases and sales of investment securities, dividend and interest income, and
certain expenses are translated at the rates of exchange prevailing on the
respective dates of such transactions.
Series D does not isolate that portion of the results of operations
resulting from changes in the foreign exchange rates on investments from the
fluctutation arising from changes in the market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss on
investments. Series K isolates their portion of the results of operations
resulting in foreign exchange rates on investments from the fluctuation arising
from changes in the market prices of securities held.
Net realized foreign exchange gains or losses arise from sales of portfolio
securities, sales of foreign currencies, and the difference between asset and
liability amounts initially stated in foreign currencies and the U.S. dollar
value of the amounts actually received or paid. Net unrealized foreign exchange
gains or losses arise from changes in the value of portfolio securities and
other assets and liabilities at the end of the reporting period, resulting from
changes in the exchange rates.
C. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS - Series D, K, M and N may
enter into forward foreign exchange contracts in connection with foreign
currency risk from purchase or sale of securities denominated in foreign
currency. These Series may also enter into such contracts to manage changes in
foreign currency exchange rates on portfolio positions. These contracts are
marked to market daily, by recognizing the difference between the contract
exchange rate and the current market rate as unrealized gains or losses.
Realized gains or losses are recognized when contracts are settled and are
reflected in the Statement of Operations. These contracts involve market risk in
excess of the amount reflected in the Balance Sheet. The face or contract amount
in U.S. dollars reflects the total exposure the Series have in that particular
currency contract. Losses may arise due to changes in the value of the foreign
currency or if the counterparty does not perform under the contract.
D. FUTURES - Series M utilizes futures contracts to a limited extent, with
the objectives of maintaining full exposure to the underlying stock markets,
enhancing returns, maintaining liquidity, and minimizing transaction costs.
Series M may purchase futures contracts to immediately position incoming cash in
the market, thereby simulating a fully invested position in the underlying index
while maintaining a cash balance for liquidity. In the event of redemptions,
Series M may pay departing shareholders from cash balances and reduce futures
positions accordingly. Returns may be enhanced by purchasing futures contracts
instead of the underlying securitites when futures are believed to be priced
more attractively than the underlying securities. The primary risks associated
with the use of futures contracts are imperfect correlation between changes in
market values of stocks contained in the indices and the prices of futures
contracts, and the possibility of an illiquid market. Futures contracts are
valued based upon their quoted daily settlement prices. Upon entering into a
futures contract, the Series is required to deposit either cash or securities,
representing the initial margin, equal to a certain percentage of the contract
value. Subsequent changes in the value of the contract, or variation margin, are
recorded as unrealized gains or losses. The variation margin is paid or received
in cash daily by the Series. The Series realizes a gain or loss when the
contract is closed or expires.
59
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
E. SECURITY TRANSACTIONS AND INVESTMENT INCOME - Security transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses are reported on an identified cost basis. Dividend income less
foreign taxes withheld (if any) are recorded on the ex-dividend date. Interest
income is recognized on the accrual basis. Premium and discounts (except
original issue discounts) on debt securities are not amortized.
F. DISTRIBUTIONS TO SHAREHOLDERS - Distributions to shareholders are
recorded on the ex-dividend date. The character of distributions made during the
year from net investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes. These differences are
primarily due to differing treatments for expiration of net operating losses and
recharacterization of foreign currency gains and losses.
G. TAXES - The Fund complied with the requirements of the Internal Revenue
Code applicable to regulated investment companies and distributed all of its
taxable net income and net realized gains sufficient to relieve it from all, or
substantially all, federal income, excise and state income taxes. Therefore, no
provision for federal or state income tax is required.
H. EARNINGS CREDITS - Under the fee schedule with the custodian, the Fund
earns credits based on overnight custody cash balances. These credits are
utilized to reduce related custodial expenses. The custodian expense disclosed
in the Statement of Operations does not reflect the reduction in expense from
the related earnings credits.
2. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees are payable to Security Management Company (SMC) (the
Investment Manager) under an investment advisory contract at an annual rate of
.50% of the average daily net assets for Series C, .75% for Series A, B, E, J, K
and S and 1.00% for Series D, M, N and O. SMC pays Lexington Management
Corporation (LMC), an amount equal to .50% of the average daily net assets of
Series D and .35% of the average net assets for Series K, for management
services. The Investment Manager pays T. Rowe Price Associates, Inc. an annual
fee equal to .50% of the first $50,000,000 of average net assets of Series N and
.40% of the average net assets of Series N in excess of $50,000,000 for
management services provided to that Series. The Investment Manager pays T. Rowe
Price Associates, Inc. an annual fee equal to .50% of the first $20,000,000 of
average net assets of Series O and .40% of the average net assets in excess of
$20,000,000 for management services provided to Series O. The Investment Manager
pays Templeton Quantitative Advisors, Inc., for research provided to Series M,
an annual fee equal to .30% of the first $50,000,000 of the average net assets
of Series M invested in equity securities and .25% of the average net assets
invested in equity securities in excess of $50,000,000. The Investment Manager
also pays Meridian Investment Management Corporation, for research provided to
Series M, an annual fee equal to .20% of the average net assets of that Series.
The investment advisory contract provides that the total annual expenses of
each Series (including management fees, but excluding interest, taxes, brokerage
commissions and extraordinary expenses) will not exceed the level of expenses
which the Series is permitted to bear under the most restrictive expense
limitation imposed by any state in which shares of the Fund are then offered for
sale. For the year ended December 31, 1995, SMC agreed to limit the total
expenses for Series K, M, N and O to an annual rate of 2% of the average daily
net asset value of each respective Series. As a result, SMC reimbursed Series K
$10,260.
The Fund has entered into a contract with SMC for transfer agent services
and administrative services which SMC provides to the Fund. The charges paid by
the Fund under the contract for transfer agent services are insignificant. The
administrative services provided by SMC principally include all fund and
portfolio accounting and regulatory filings. For providing these services, SMC
receives a fee at the annual rate of .045% of the average daily net assets of
the Fund, plus the greater of .10% of the average net assets of Series D or
$60,000, and with respect to Series K, M, and N, an annual fee equal to the
greater of .10% of each Series average net assets or (i) $30,000 in the year
ending April 29, 1996, (ii) $45,000 in the year ending April 29, 1997, and (iii)
$60,000 thereafter. SMC has arranged for LMC to provide certain administrative
services relating to Series D and K, including performing certain accounting and
pricing functions. LMC is compensated directly by SMC for providing these
services.
Certain officers and directors of the Fund are also officers and/or
directors of SBL and its subsidiaries, which include Security Management
Company.
3. FEDERAL INCOME TAX MATTERS
The amounts of unrealized appreciation (depreciation) for income tax
purposes at December 31, 1995, for all securities and foreign currency holdings
(including foreign currency receivables and payables) were as follows:
SERIES B SERIES C SERIES D SERIES E
SERIES A (Growth (Money (Worldwide (High Grade
(Growth) Income) Market) Equity) Income)
-------- ------- ------- ------- -------
Aggregate
gross unrealized
appreciation...$119,999,053 $145,071,364 $5,540 $12,077,884 $6,920,235
Aggregate
gross unrealized
depreciation.. (889,074) (1,122,308) (17,287) (4,360,638) (17,327)
------------ ------------ --------- ----------- ----------
Net unrealized
appreciation
(depreciation).$119,109,979 $143,949,056 $(11,747) $7,717,246 $6,902,908
============ ============ ========= ========== ==========
SERIES M SERIES N
SERIES J SERIES K (Specialized (Managed SERIES O SERIES S
(Emerging (Global Asset Asset (Equity (Social)
Growth) Aggressive) Allocation) Allocation) Income) Awareness
------- ----------- ----------- ----------- ------- ---------
Aggregate
gross unrealized
appreciation...$14,009,058 $116,398 $535,407 $512,236 $1,013,116 $8,073,962
Aggregate
gross unrealized
depreciation...(2,397,322) (32,037) (424,833) (126,752) (6,994) (430,433)
----------- -------- --------- --------- ---------- ----------
Net unrealized
appreciation
(depreciation).$11,611,736 $84,361 $110,574 $385,484 $1,006,122 $7,643,529
=========== ======== ========= ========= ========== ==========
60
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
Realized gains and losses are determined on an identified cost basis for
federal income tax purposes. Series A and D hereby designate $14,936,574 and
$1,767,208, respectively as capital gains dividends attributable to the year
ended December 31, 1995, for the purpose of the dividends paid deduction on the
Series' federal income tax return. At December 31, 1995, Series E has a capital
loss carryforward of $10,048,772 which is available to offset future taxable
gains and expires in 2002.
4. INVESTMENT TRANSACTIONS
Investment transactions for the year ended December 31, 1995, (excluding
overnight investments and short-term debt securities) are as follows:
<TABLE>
<CAPTION>
SERIES M SERIES N
SERIES B SERIES D SERIES E SERIES J SERIES K (Specialized (Managed SERIES O SERIES S
SERIES A (Growth (Worldwide (High Grade (Emerging (Global Asset Asset (Equity (Social
(Growth) Income) Equity) Income) Growth) Aggressive)Allocation) Allocation) Income) Awareness)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Purchases$393,830,712 $628,045,592 $288,646,471 $212,141,293 $161,676,352 $6,866,260 $23,169,751 $11,547,147 $10,251,212 $37,612,078
Proceeds
from
sales $335,823,381 $606,571,375 $255,501,436 $204,716,876 $155,644,178 $2,667,810 $10,950,767 $ 2,468,781 $ 103,432 $32,358,868
</TABLE>
5. FORWARD FOREIGN EXCHANGE CONTRACTS
At December 31, 1995, Series D had the following open forward foreign
exchange contracts to sell currency (excluding foreign currency contracts used
for purchase and sale settlements):
<TABLE>
<CAPTION>
UNREALIZED GAIN
CURRENCY SETTLEMENT DATE CONTRACT AMOUNT CONTRACT RATE CURRENT RATE AT 12-31-95
-------- --------------- --------------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Deutsche Mark 05/06/96 $ 3,525,203 1.4064 1.4287 $ 55,023
Japanese Yen 01/31/96 591,547 86.1500 102.8915 96,251
Japanese Yen 02/14/96 3,168,826 90.4200 102.6844 378,478
Japanese Yen 02/20/96 3,390,166 94.2900 102.5956 274,450
Japanese Yen 02/20/96 847,587 95.3600 102.5956 59,776
Japanese Yen 02/20/96 4,129,226 95.3300 102.5956 292,423
Japanese Yen 03/06/96 10,191,843 98.3200 102.3453 400,851
Japanese Yen 06/28/96 8,468,122 99.8450 100.8701 86,058
---------- ----------
$34,312,520 $1,643,310
========== ==========
</TABLE>
6. FEDERAL TAX STATUS OF DIVIDENDS
The income dividends paid by the Funds are taxable as ordinary income on
the shareholder's tax return. The portion of ordinary income of dividends
(including net short-term capital gains) attributed to fiscal year ended
December 31, 1995, that qualified for the dividends received deduction for
corporate shareholders was 28%, 29%, 0%, 11%, 0%, 100%, 0%, 7%, 31%, 8% and
100%, of the amount taxable as ordinary income for Series A, B, C, D, E, J, K,
M, N, O and S, respectively, in accordance with the provisions of the Internal
Revenue Code.
61
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE CONTRACT OWNERS AND BOARD OF DIRECTORS
SBL FUND
We have audited the accompanying balance sheet and statement of net assets of
SBL Fund (comprised of the Series A, B, C, D, E, J, K, M, N, O and S portfolios)
(the Fund) as of December 31, 1995, and the related statements of operations for
the year then ended, 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 five
years in the period then ended of the Series A, B, C, D, E, J and S portfolios
and the related statements of operations and changes in net assets and financial
highlights for the period from June 1, 1995 (commencement of operations) to
December 31, 1995 of the Series K, M, N and O. 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.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the 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 investments owned as of
December 31, 1995, by correspondence with the custodian. As to securities
relating to uncompleted transactions, we performed other auditing procedures. 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 comprising SBL Fund at December 31, 1995, and the
results of their operations, changes in their net assets and the financial
highlights for the periods indicated above in conformity with generally accepted
accounting principles.
Kansas City, Missouri
January 26, 1996
62
<PAGE>
SECURITY FUNDS
OFFICERS AND DIRECTORS
- ----------------------
DIRECTORS
- ---------
Willis A. Anton
Donald A. Chubb, Jr.
John D. Cleland
Donald L. Hardesty
Penny A. Lumpkin
Mark L. Morris, Jr., D.V.M.
Jeffrey B. Pantages
Harold G. Worswick
OFFICERS
- --------
John D. Cleland, President
James R. Schmank, Vice President and Treasurer
Terry Milberger, Vice President
Jane A. Tedder, Vice President
Mark E. Young, Vice President
Greg A. Hamilton, Assistant Vice President
Cindy L. Shields, Assistant Vice President
Amy J. Lee, Secretary
Brenda M. Luthi, Assistant Treasurer and Assistant Secretary
This report is submitted for the general information of the shareholders of the
Funds. The report is not authorized for distribution to prospective investors in
the Funds unless preceded or accompanied by an effective prospectus which
contains details concerning the sales charges and other pertinent information.
[SDI LOGO}
700 SW Harrison St. BULK RATE
Topeka, KS 66636-0001 U.S. POSTAGE PAID
(913) 295-3112 TOPEKA, KS
(800) 888-2461 PERMIT NO. 385
