<PAGE>
SBL FUND
ANNUAL REPORT
DECEMBER 31, 1996
- - 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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PRESIDENT'S LETTER
February 15, 1997
Dear Contractholder:
1996 was another good year for the portfolios in the SBL Fund. The equity
portfolios in particular performed well, benefiting from the second outstanding
year in a row for the stock markets. The portfolio managers will provide more
detail in the letters that follow about the relative performance of their
respective funds.
The portfolios which are managed by our outside subadvisors produced very
attractive returns as well, with particularly favorable results generated by the
global funds. Only in the domestic fixed income funds were results somewhat
disappointing, as interest rates fluctuated dramatically throughout the year.
PHENOMENAL EQUITY MARKETS
Looking back at the past two years, the equity markets by any historical measure
have been phenomenal in terms of performance. It is highly unlikely that 1997
will be a year in which results will approximate either of the last two years.
However, this is not to suggest that disaster lies around the corner, but rather
that we should lower our expectations more toward historical averages.
The equity markets will continue to be driven by expectations for the level of
interest rates and corporate earnings. If our forecast for continued moderate
inflation proves accurate, we believe interest rates will remain stable. This
will not only allow for a favorable fixed income year, but will provide a
positive backdrop for equity market performance.
Corporate earnings momentum will be dependent primarily on the overall level of
economic growth in the United States. We will watch carefully, as the jury is
still out on whether we can expect another year of slow and sustainable growth
in the 2% to 2.5% range or whether growth will slow dramatically and impede
corporate earnings.
BALANCED BUDGET A POSSIBILITY
Perhaps the most positive item on the horizon for bond investors is the
likelihood of a balanced budget becoming reality. Sentiment is strong on both
sides of the congressional aisle, and since 1997 is not an election year, the
possibility is greater than usual for bipartisan agreement. The promise of
reduced Federal spending lowers the potential for inflation.
The outlook is good for declining global interest rates as inflation drops in
many countries around the world and as the European nations work to meet
criteria for entry into the European Monetary Union. Many of the Pacific Rim
countries are experiencing rapid growth in infrastructure as well as in
corporate expansion, and should contribute positively to our global portfolios'
returns.
1997 A YEAR FOR STEADY GROWTH
All in all, we believe that although 1997 may not be as exciting as the past two
years have been, we will experience the kind of steady growth that helps all of
us to achieve our long-term investment goals. As always, we invite your comments
and questions at any time.
Sincerely,
[JOHN CLELAND]
John Cleland
President, Security Funds
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SERIES A (GROWTH SERIES)
February 15, 1997
Dear Contractholder:
In 1996, the second of two amazing years in a row for equity security holders,
the Growth Series returned an attractive 22.69%.* This closely paralleled the
22.95% return of the S&P 500 Index and outperformed its peer group average of
19.24%.
OUR PLANS EARLY IN THE YEAR
At the beginning of the year we felt that the economy would be slowing, with a
resulting slowdown in corporate profit growth. We concentrated the portfolio
assets largely in high quality companies which displayed consistent earnings
growth, believing that they would outperform in such a climate. For most of the
year the portfolio was invested about 85% in growth issues with the remaining
15% in value stocks, much as it had been in 1995.
HOW WE IMPLEMENTED THOSE PLANS
Within the growth spectrum, we had a heavy emphasis on health care firms such as
major pharmaceutical companies Merck & Company, Inc. and Bristol-Myers Squibb
Company. These companies have strong new product flows as well as good growth in
their existing products. The outlook for the health care industry in general is
for steady growth in the years to come.
We also owned a number of steady growers like Gillette Company,
Colgate-Palmolive Company, Safeway, Inc., and Microsoft Corporation. Supermarket
chains such as Safeway have little economic sensitivity, and Microsoft was one
of the year's biggest winners with high growth and successful new product
offerings.
[PICTURE OF JOHN CLELAND, TERRY MILBERGER, CHUCK LAUBER]
THE SECURITY MANAGEMENT LARGE CAP TEAM:
JOHN CLELAND, TERRY MILBERGER, CHUCK LAUBER
Throughout the year we placed a low weighting on economically sensitive stocks
in industries such as chemicals, aluminums, and autos. This turned out to be a
prudent decision, as these sectors generally underperformed market averages.
Many of the financial stocks were strong performers, but unfortunately, this was
an area where we were underweighted as well.
Performance in the fourth quarter of 1996 was weaker than the previous three in
the Growth Series. Two issues we owned, Albertson's Inc. and EDS Systems
Corporation, reported disappointing earnings, causing their stock prices to
underperform. These were isolated instances, but they caused us to realize that
it is prudent in times of uncertain earnings to carry a larger-than-normal
number of issues in the portfolio. This will reduce the impact of negative
reports by any one issuer. We currently hold about 20% more names than usual.
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SERIES A (GROWTH SERIES)
February 15, 1997
THE OUTLOOK FOR 1997
We expect the "slower earnings growth" theme to continue throughout 1997 as the
economy moderates and low inflation continues. Many companies have been able to
expand their profit margins over the last several years. In a slowing economy
they lose the ability to raise prices as competition becomes more intense, and
this in turn causes margins to shrink. We plan to continue our emphasis on
companies with histories of steady earnings growth as we move into 1997, and
monitor economic indicators for signs of change.
Sincerely,
Terry Milberger
Portfolio Manager
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1996*
1 Year 5 Years 10 Years
Series A 22.7% 15.8% 15.0%
* 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.
SERIES A VS. S&P500
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
SBL FUND SERIES A S&P 500
Dec-86 10,000.00 10,000.00
Mar-87 12,515.72 12,132.77
Jun-87 13,191.82 12,738.61
Sep-87 14,130.31 13,579.07
Dec-87 10,630.84 10,519.01
Mar-88 11,248.36 11,021.80
Jun-88 11,932.38 11,753.20
Sep-88 11,561.87 11,790.91
Dec-88 11,710.11 12,151.17
Mar-89 12,841.20 13,010.64
Jun-89 14,209.91 14,157.97
Sep-89 16,447.67 15,671.01
Dec-89 15,796.37 15,989.44
Mar-90 15,183.96 15,505.79
Jun-90 16,078.28 16,477.26
Sep-90 13,214.54 14,223.16
Dec-90 14,241.23 15,491.72
Mar-91 16,747.25 17,734.13
Jun-91 16,747.25 17,694.42
Sep-91 17,743.87 18,637.95
Dec-91 19,383.50 20,188.54
Mar-92 19,619.33 19,681.22
Jun-92 19,361.04 20,057.35
Sep-92 19,401.41 20,532.07
Dec-92 21,540.15 21,560.37
Mar-93 22,633.02 22,495.69
Jun-93 22,386.25 22,604.58
Sep-93 23,752.12 23,186.66
Dec-93 24,493.60 23,720.52
Mar-94 23,653.25 22,828.84
Jun-94 23,257.80 22,926.32
Sep-94 24,404.96 24,048.57
Dec-94 24,088.79 24,044.31
Mar-95 26,301.95 26,379.06
Jun-95 28,801.16 28,889.90
Sep-95 31,033.69 31,181.28
Dec-95 32,944.90 33,052.84
Mar-96 35,357.41 34,826.86
Jun-96 36,892.65 36,383.89
Sep-96 38,340.17 37,503.00
Dec-96 40,418.45 40,624.63
$10,000 OVER TEN YEARS
The chart above assumes a hypothetical $10,000 investment in Series A (Growth
Series) on December 31, 1986, and reflects the fees and expenses of Series A. On
December 31, 1996, the value of the investment (assuming reinvestment of all
dividends and distributions) would have been $40,418. By comparison, the same
$10,000 investment would have grown to $40,625 based on the S&P 500 Index's
performance.
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SERIES B (GROWTH-INCOME SERIES)
February 15, 1997
Dear Contractholder:
The Growth and Income Series provided an attractive 18.25% total return as the
stock markets once again turned in an excellent performance.* Throughout the
year we continued our emphasis on high quality companies with consistent growth
histories in anticipation of an economic slowdown. For most of the year the
equity portion of the portfolio was invested about 75% in growth companies and
25% in value issues.
STRONG EQUITY PERFORMERS
We continued our emphasis on health care in the equity holdings, with companies
such as Schering-Plough Corporation and Columbia/HCA Healthcare Corporation.
Schering-Plough Corporation is a high quality manufacturer of pharmaceuticals
with a favorable new product outlook and with strong growth in its existing
product lines. Columbia/HCA Healthcare owns and operates hospitals and health
care facilities and is growing through acquisitions. Columbia's earnings remain
strong as they operate in an improving environment for hospitals in general.
Another growth area in which we continue to remain active is technology. We
place our emphasis on computer services areas of the industry rather than on
hardware because we believe the services can provide consistent growth with
lower product obsolesence risk. Microsoft Corporation and Oracle Corporation
were two companies that performed well during the year, contributing favorably
to overall performance. We steered clear of some of the volatile computer
manufacturers that were experiencing earnings problems.
[PICTURE OF CHUCK LAUBER, TERY MILBERGER,
TOM SWANK, JIM SCHIER AND JOHN CLELAND]
THE SECURITY MANAGEMENT GROWTH-INCOME TEAM:
(L-R) CHUCK LAUBER, TERRY MILBERGER, TOM SWANK,
JIM SCHIER AND (SEATED) JOHN CLELAND
AREAS OF WEAKNESS
Throughout the year we intentionally avoided companies in economically sensitive
sectors such as chemicals, aluminums, and autos. These industries generally
underperformed market averages in 1996. An area in which we were underweighted
but which did perform well was financial stocks. This strong performance was
surprising given the volatility in interest rates.
The bond markets were disappointing in 1996, and consequently the approximately
20% of the portfolio invested in the fixed income markets underperformed the
equity portion. The high yield bonds provided a boost for the income stream,
however, with coupons generally in the 8.5% to 10% range.
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SERIES B (GROWTH-INCOME SERIES)
February 15, 1997
THE YEAR AHEAD
Looking ahead to 1997, we believe that the "slower earnings growth" theme will
continue throughout the year as the economy moderates. Many companies which have
been able to improve their profit margins over the past few years will find it
harder to do so in a slowing economy, as competition becomes more intense and
they lose the ability to raise prices. We plan to continue our emphasis on
companies with steady earnings growth, and to keep our growth/value ratio at
approximately 75%/25%, as it is now. Value stocks in general have lower
volatility, and should perform well with the market at its current high levels.
Sincerely,
Terry Milberger
Portfolio Manager
Tom Swank
Portfolio Manager
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1996*
1 Year 5 Years 10 Years
Series B 18.3% 11.7% 13.8%
* 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.
SERIES B VS. S&P 500
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
BLENDED INDEX OF 80% S&P 500 AND
SBL FUND 20% LEHMAN BROTHERS COMPOSITE
SERIES B S&P 500 BB HIGH YIELD BOND INDEX
Dec-86 10,000.00 10,000.00 10,000.00
Mar-87 11,684.91 12,132.77 11,835.00
Jun-87 12,147.20 12,738.61 12,297.00
Sep-87 12,783.53 13,579.07 12,912.00
Dec-87 10,367.42 10,519.01 10,608.00
Mar-88 11,264.92 11,021.80 11,211.00
Jun-88 12,116.22 11,753.20 11,866.00
Sep-88 12,043.63 11,790.91 11,965.00
Dec-88 12,365.71 12,151.17 12,331.00
Mar-89 13,270.20 13,010.64 13,033.00
Jun-89 14,366.14 14,157.97 14,068.00
Sep-89 15,525.26 15,671.01 15,330.00
Dec-89 15,878.91 15,989.44 15,602.00
Mar-90 15,595.99 15,505.79 15,253.00
Jun-90 15,977.93 16,477.26 16,144.00
Sep-90 14,730.81 14,223.16 14,177.00
Dec-90 15,173.78 15,491.72 15,228.00
Mar-91 17,200.96 17,734.13 17,302.00
Jun-91 17,561.35 17,694.42 17,455.00
Sep-91 19,373.54 18,637.95 18,342.00
Dec-91 20,899.14 20,188.54 19,741.00
Mar-92 20,727.90 19,681.22 19,544.00
Jun-92 19,918.40 20,057.35 19,902.00
Sep-92 20,917.54 20,532.07 20,559.00
Dec-92 22,213.88 21,560.37 21,436.00
Mar-93 23,142.13 22,495.69 22,382.00
Jun-93 23,382.19 22,604.58 22,660.00
Sep-93 24,296.06 23,186.66 23,274.00
Dec-93 24,345.20 23,720.52 23,832.00
Mar-94 23,624.59 22,828.84 23,004.00
Jun-94 22,781.14 22,926.32 23,050.00
Sep-94 23,617.25 24,048.57 24,059.00
Dec-94 23,617.25 24,044.31 24,072.00
Mar-95 25,147.83 26,379.06 26,255.00
Jun-95 27,328.03 28,889.90 28,618.00
Sep-95 29,306.68 31,181.28 30,593.00
Dec-95 30,718.18 33,052.84 32,225.00
Mar-96 32,663.51 34,826.86 33,642.00
Jun-96 33,758.33 36,383.89 34,916.00
Sep-96 35,185.80 37,503.00 36,020.00
Dec-96 36,324.80 40,624.63 39,962.00
$10,000 OVER TEN YEARS
The chart above assumes a hypothetical $10,000 investment in Series B
(Growth-Income Series) on December 31, 1986, and reflects the fees and expenses
of Series B. On December 31, 1996, the value of the investment (assuming
reinvestment of all dividends and distributions) would have been $36,325. By
comparison, the same $10,000 investment would have grown to $40,625 based on the
S&P 500 Index's performance. The blended index consists of 80% S&P 500 and 20%
Lehman Brothers Composite BB High Yield Bond Index. The same $10,000 investment
in the blended index would have grown to $39,962.
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SERIES C (MONEY MARKET SERIES)
February 15, 1997
Dear Contractholder:
Money market funds in 1996 became attractive alternatives for fixed-income
investors, outperforming many sectors of the bond market. The Money Market
Series returned 5.07% over the year, becoming the best performing of our fixed
income series and outperforming its Lipper peer group average of 4.81%.*
AVERAGE MATURITY TARGET RANGE
One of our objectives throughout the year was to keep the average maturity of
the portfolio holdings within ten days of that published weekly in the
IBC/Donoghue Money Fund Report. We avoid the practice of skewing the average
maturity strongly, either shorter or longer than the benchmark average, in order
to try to outguess the Federal Reserve Bank and their interest rate movements.
We believe that a more conservative approach is appropriate in our money market
funds.
SECTOR REPRESENTATION IN THE PORTFOLIO
We have been adding blocks of Small Business Administration mortgage pools with
interest rates which reset monthly or quarterly based on the prime rate. These
AAA-rated issues provide better yields than commercial paper, and they are U.S.
Government securities, so there is no additional credit risk in buying them. The
greatest risk with these instruments is that the mortgages will be prepaid at a
faster-than-anticipated rate. For this reason we choose to only buy issues
priced at par, so that no premium will be lost in the event of escalated
prepayments. Our SBA holdings now make up about 16% of the portfolio.
We have also increased our holdings of government agency issues such as Federal
Farm Credit Banks, Federal Home Loan Banks, and Federal National Mortgage
Association securities. These issues, with maturities of one year or less,
provide diversification from the larger position in commercial paper in the
portfolio. The IBC/Donoghue average portfolio position in commercial paper is
about 60%; we have reduced ours from almost 90% to the current 72% in order to
be more in line with that average.
LOOKING AHEAD TO 1997
In 1996 we established an overnight funds account with the Federal Home Loan
Bank in order to maximize our earnings on overnight monies. We continue to study
various investment alternatives for the portfolio assets in order to provide
competitive interest rates on the fund.
We expect interest rates on short-term fixed-income investments to stay within a
narrow band in 1997. When inflation is modest, as it has been for the last two
years, hints of escalating economic growth cause greater fluctuations in the
longer maturities of the bond markets than in the short ones. We continue to
strive to provide a high quality portfolio with a competitive yield for our
shareholders.
Sincerely,
Barbara Davison
Fixed Income Team
Series C is neither insured nor guaranteed by the U.S. Government and does not
maintain a stable net asset value at $1.00 per share.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1996*
1 Year 5 Years 10 Years
Series C 5.1% 3.3% 5.3%
* 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.
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SERIES D (WORLDWIDE EQUITY SERIES)
February 15, 1997
[LEXINGTON LOGO]
SUBADVISOR, LEXINGTON MANAGEMENT CORPORATION
PORTFOLIO MANAGERS, RICHARD SALER AND ALAN WAPNIK
Dear Contractholder:
The Worldwide Equity Series returned 17.47% during 1996, outperforming its
benchmark, the Morgan Stanley Capital International World index, which advanced
11.72% for the year.* Although it underperformed the strong U.S. market indexes,
the Series did very well when compared with other global portfolios.
GLOBAL AREAS OF STRENGTH
The Series benefited from an underweighting in Japan relative to the benchmark
weighting, as that country's market declined 15.5% in U.S. dollar terms during
the year. European equities as measured by the Morgan Stanley Capital
International Europe Index appreciated 21.1% in 1996, propelled by falling
interest rates and corporate restructuring. As Europe moved closer toward a
single currency, interest rates in Finland, Sweden, and Spain fell dramatically
and their markets responded with stocks rising 35% to 40%. Surprisingly, Italian
interest rates fell almost 4%, yet equities there only gained 12.6%.
THE OUTLOOK FOR EUROPEAN EQUITIES
The outlook for the European stock markets remains favorable. Growth should
continue to be muted by high unemployment levels. Interest rates, however, are
likely to stay low due to budget cutting measures and low inflation. European
companies are finally addressing shareholder concerns regarding competitiveness
and profitability. Companies which have demonstrated a commitment to enhancing
shareholder value through cost cutting, divestitures and share buybacks have
been rewarded with higher share prices. This trend should continue over the next
several years. Growth in Germany and Switzerland is likely to surprise on the
upside as their weak currencies are stimulating exports. Cyclical stocks offer
good value in these markets.
JAPANESE MARKETS IN 1996
As mentioned earlier, in dollar terms Japanese stocks lost 15.5% in 1996. Most
of the decline came in the fourth quarter as austere budget measures heightened
fears of slow growth and weak profits for 1997. Japanese stocks remain
unattractive as both the public and private sectors have been slow to
restructure. A further sharp fall in equities could provide an opportunity as
pressure would increase for restructuring to accelerate. In the Japanese sector
the Series holds primarily "Nifty Fifty" stocks such as Sony Corporation, Canon,
Inc. and Toyota Motor Corporation which are competitive globally; stocks of this
type are the primary ones which the Japanese market rewarded in 1996.
EMERGING MARKETS VARIED WIDELY IN PERFORMANCE
Emerging markets saw great divergence in 1996. Winners included Poland, up 57%,
Hungary, up 104%, and Brazil, up 38%. On the negative side, losers included
Thailand and Korea, which both fell 38%. Currently most emerging markets
7
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look very attractive as they have underperformed developed markets for the past
three years. Latin America is enjoying accelerating economic activity which
should positively impact profits. The Asian markets generally remain favorable
due to attractive valuation levels and expected declines in interest rates.
PLANS FOR INVESTING IN 1997
Global equities look appealing under current conditions. The Worldwide Equity
Series remains overweighted in emerging markets such as Malaysia, Philippines,
and Chile due to expectations of falling interest rates, strong profit growth
and relatively low stock prices. European equities are also overweighted with a
focus on value cyclicals and restructuring companies.
We continue to underweight U.S. stocks simply because risk-reward opportunities
look better elsewhere. Given a relatively anemic outlook for U.S. corporate
profits we think the upside is limited while risk remains high. Finally, the
portfolio remains underweighted in Japanese equities with positions primarily in
large world class companies. Further sharp falls could lead to opportunities in
Japanese domestic cyclicals, particularly if private and public sector
restructuring emerges from the ruins.
Sincerely,
Richard Saler
Portfolio Manager
Alan Wapnick
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.
SERIES D VS. MSCIWORLD INDEX AND LEHMAN BROTHERS HIGH YIELD INDEX
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
LEHMAN BROTHERS
SBL FUND SERIES D MSCI WORLD INDEX HIGH-YIELD INDEX
Dec-86 10,000.00 10,000.00 10,000.00
Mar-87 10,499.14 12,265.50 10,708.16
Jun-87 10,043.03 13,002.38 10,543.18
Sep-87 9,753.27 13,808.41 10,302.12
Dec-87 9,409.74 11,676.31 10,499.31
Mar-88 9,919.00 13,044.65 11,085.03
Jun-88 9,872.71 12,934.38 11,349.35
Sep-88 9,861.13 12,989.06 11,550.85
Dec-88 9,872.71 14,472.89 11,814.86
Mar-89 9,837.99 14,813.88 11,955.27
Jun-89 9,884.28 14,624.66 12,390.14
Sep-89 9,657.20 16,339.49 12,207.52
Dec-89 8,995.94 16,961.27 11,913.39
Mar-90 8,210.69 14,548.68 11,716.24
Jun-90 8,279.57 15,744.43 12,210.58
Sep-90 7,651.55 12,890.12 10,962.30
Dec-90 6,951.18 14,159.01 10,770.83
Mar-91 7,511.47 15,571.40 13,000.92
Jun-91 7,283.85 15,064.96 13,959.65
Sep-91 7,696.70 16,148.17 14,942.56
Dec-91 7,837.01 16,845.92 15,745.45
Mar-92 7,636.57 15,491.21 16,909.40
Jun-92 7,756.83 15,792.26 17,374.79
Sep-92 7,393.33 16,078.20 18,050.45
Dec-92 7,637.06 16,060.07 18,225.60
Mar-93 8,449.52 17,461.24 19,332.28
Jun-93 8,876.06 18,543.96 20,146.91
Sep-93 9,497.52 19,437.08 20,566.54
Dec-93 10,046.30 19,774.59 21,346.22
Mar-94 10,127.98 19,918.90 20,930.47
Jun-94 10,311.01 20,540.97 20,860.91
Sep-94 10,687.11 21,006.25 21,189.72
Dec-94 10,320.70 20,878.36 21,128.15
Mar-95 10,218.91 21,882.95 22,389.26
Jun-95 10,503.90 22,845.39 23,751.82
Sep-95 11,071.42 24,150.68 24,422.39
Dec-95 11,441.84 25,328.92 25,179.26
Mar-96 12,203.26 26,390.09 25,624.98
Jun-96 12,882.36 27,185.21 26,049.86
Sep-96 13,068.13 27,579.78 27,092.52
Dec-96 13,440.26 28,873.96 28,039.34
$10,000 OVER TEN YEARS
The chart above assumes a hypothetical $10,000 investment in Series D (Worldwide
Equity Series) on December 31, 1986, and reflects the fees and expenses of
Series D. On December 31, 1996, the value of the investment (assuming
reinvestment of all dividends and distributions) would have been $13,440. By
comparison, the same $10,000 investment would have grown to $28,874 based on the
MSCI Index's performance.
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
SERIES D MSCI WORLD INDEX
May-91 10,000.00 10,000.00
Jun-91 9,651.97 9,598.00
Sep-91 10,199.05 10,289.00
Dec-91 10,384.97 10,733.00
Mar-92 10,119.37 9,870.00
Jun-92 10,278.73 10,062.00
Sep-92 9,797.04 10,244.00
Dec-92 10,120.02 10,232.00
Mar-93 11,196.62 11,125.00
Jun-93 11,761.83 11,815.00
Sep-93 12,585.34 12,384.00
Dec-93 13,312.98 12,599.00
Mar-94 13,420.77 12,691.00
Jun-94 13,663.32 13,087.00
Sep-94 14,161.69 13,384.00
Dec-94 13,676.15 13,302.00
Mar-95 13,541.27 13,942.00
Jun-95 13,918.92 14,556.00
Sep-95 14,670.95 15,387.00
Dec-95 15,161.80 16,138.00
Mar-96 16,170.77 16,814.00
Jun-96 17,070.66 17,321.00
Sep-96 17,316.83 17,572.00
Dec-96 17,809.94 18,397.00
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
Brothers 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, 1996*
1 Year 5 Years 10 Years
Series D 17.5% 11.4% 3.0%
* 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.
8
<PAGE>
SERIES E (HIGH GRADE INCOME SERIES)
February 15, 1997
Dear Contractholder:
As 1996 began, the average maturity and duration of the High Grade Income Series
was longer than those of the benchmark index, as we anticipated a continuation
of the interest rate declines we had seen in 1995. Instead, the first major
economic release of the year (the January employment figures) was much stronger
than expected and startled bond investors. Fear of impending inflation drove
interest rates higher, and the thirty-year Treasury bond which started 1996 at
5.94% rose to about 7.20% by June. It subsequently settled back down to 6.64% at
the end of the year, but left negative total returns in its wake.
PORTFOLIO ADJUSTMENTS EARLY IN THE YEAR
During February we shortened the average duration of the portfolio to be
closer in line with our benchmark index and our peer group. In addition, we
received approval from the SBL Fund Board of Directors to invest in three new
asset classes, including U.S. dollar-denominated foreign bonds ("Yankee"
bonds), high yield bonds and mortgage-backed securities. Many of these
additions to the portfolio added value throughout the year as the high yield
and mortgage-backed categories both outperformed corporate bonds.
[PHOTO OF 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
The mortgage-backed securities portion of the portfolio, approximately 15% of
the holdings, added defensive value. As interest rates rise, mortgage holders
are less likely to refinance their mortgages, and prepayment risk of
mortgage-backed securities is reduced. We also added some "put bond" issues as a
defensive step. These bonds can be sold ("put") back to the issuing company at a
stated price when interest rates rise above a given level. This reduces their
downside risk and helps stabilize value in a rising interest rate environment.
Some of these bonds were issued by such well-known companies as Coca-Cola
Enterprises, Inc., and Waste Management.
HIGH YIELD HOLDINGS IN THE SECOND HALF OF THE YEAR
In the high yield sector one of our bonds, Marvel Holdings, Inc. declined
substantially in value after the company announced that they were having
earnings and liquidity problems. The volatility with this issue caused us to
revise our strategy for the high yield issues in the
9
<PAGE>
SERIES E (HIGH GRADE INCOME SERIES)
February 15, 1997
portfolio. In order to reduce the magnitude of the negative impact any one issue
can have, we will limit the block size of each high yield holding to 1% or less
of the total portfolio, down from about 1.7%. We continue to concentrate on the
higher quality BB-rated companies, and believe that including these bonds in the
portfolio will contribute favorably to performance in the future.
OUTLOOK FOR 1997
We are positive about the outlook for bonds in 1997. Economic growth should
continue at a slow but steady pace, restrained somewhat by slow consumer
spending as individuals concentrate on reducing their debt burdens. The Federal
Reserve Open Market Committee is expected to continue its vigilant stance
against inflation. Aided by falling global inflation and interest rates, we
believe U.S. bond market investors should enjoy a somewhat better year than in
1996.
Sincerely,
Greg Hamilton
Portfolio Manager
SERIES E VS. LEHMAN BROTHERS GOVERNMENT/CORPORATE INDEX
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
LEHMAN BROTHERS GOVERNMENT/
SERIES E CORPORATE INDEX
Dec-86 10,000.00 10,000.00
Mar-87 10,193.77 10,148.80
Jun-87 10,058.97 9,956.31
Sep-87 9,711.50 9,666.38
Dec-87 10,235.69 10,230.32
Mar-88 10,499.39 10,596.94
Jun-88 10,626.36 10,701.40
Sep-88 10,831.47 10,901.70
Dec-88 10,977.97 11,006.58
Mar-89 11,056.11 11,127.97
Jun-89 11,954.66 12,023.02
Sep-89 11,989.06 12,136.03
Dec-89 12,284.31 12,573.89
Mar-90 12,157.77 12,430.15
Jun-90 12,663.91 12,878.25
Sep-90 12,567.63 12,955.54
Dec-90 13,106.73 13,616.59
Mar-91 13,544.74 13,983.33
Jun-91 13,780.60 14,194.99
Sep-91 14,552.30 15,011.76
Dec-91 15,329.54 15,812.32
Mar-92 15,138.22 15,574.73
Jun-92 15,712.18 16,206.93
Sep-92 16,356.74 16,997.83
Dec-92 16,470.60 17,010.33
Mar-93 17,444.66 17,803.01
Jun-93 18,051.88 18,338.16
Sep-93 18,846.41 18,946.08
Dec-93 18,550.25 18,891.55
Mar-94 17,702.16 18,297.37
Jun-94 17,177.15 18,071.18
Sep-94 17,173.92 18,161.53
Dec-94 17,263.84 18,228.42
Mar-95 18,088.07 19,136.79
Jun-95 19,002.21 20,377.49
Sep-95 19,424.63 20,767.52
Dec-95 20,475.47 21,735.39
Mar-96 19,758.99 21,226.69
Jun-96 19,758.99 21,326.38
Sep-96 18,962.89 21,703.70
Dec-96 19,106.19 22,366.99
$10,000 OVER TEN YEARS
The chart above assumes a hypothetical $10,000 investment in Series E (High
Grade Income Series) on December 31, 1986, and reflects the fees and expenses
of Series E. On December 31, 1996, the value of the investment (assuming
reinvestment of all dividends and distributions) would have been $19,106. By
comparison, the same $10,000 investment would have grown to $22,367 based on
the Lehman Brothers Government/Corporate Index's performance.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1996*
1 Year 5 Years 10 Years
Series E -0.7% 5.8% 7.4%
* 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
<PAGE>
SERIES J (EMERGING GROWTH SERIES)
February 15, 1997
Dear Contractholder:
In another strong year for stocks, the Emerging Growth Series was up 18.04%, in
line with our benchmark S&P 400 Midcap Growth Index's return of 18.41%, and well
above our Lipper peer group average of 16.34%.* 1996 was an unusual year for
small and midcap stocks, with the largest portion of total returns coming in the
first half of the year. As speculation about the continued upward direction of
equity markets increased, investors became less willing to take the risk of
lower liquidity in the smaller issues. In addition, a growing calendar for
intitial public offerings, most of which involve small-cap companies, increased
supply and hurt performance in the small and midcap sectors.
SECTORS WHICH PERFORMED WELL
The small and midcap markets underperformed their large cap counterparts in the
second half of the year. The technology, interest sensitive, and energy sectors,
however, were especially strong in the second half of the year. We increased the
weighting in the technology issues in the third quarter, adding semiconductor
and semiconductor equipment companies to the personal computer, software, and
networking manufacturers we owned throughout the year. Among our semiconductor
holdings were Altera Corporation (a company which manufactures programmable
logic devices for computers), Linear Technology Corporation (a designer and
manufacturer of analog circuits), and KLA Instruments Corporation (a
manufacturer of products used to identify and correct problems in the
fabrication of integrated circuits).
[PHOTO OF LARRY VALENCIA, FRANK WHITSELL, CINDY SHIELDS, JOHN CLELAND]
THE SECURITY MANAGEMENT SMALL CAP TEAM:
LARRY VALENCIA, FRANK WHITSELL, CINDY SHIELDS, JOHN CLELAND
In the energy category, oil service companies performed especially well as oil
and natural gas prices increased. Among our holdings in this sector is Global
Marine Inc., an offshore drilling and oil and gas exploration contractor.
Another prominent name is Tidewater Inc., which provides marine services and
compression products to the international energy industry.
GROWTH IN SAVINGS HELPS CERTAIN FINANCIAL STOCKS
In the interest sensitive sector those companies that provide mutual funds fared
well as investors poured money into various types of funds. We owned stock in
such companies as SunAmerica, Inc., which specializes in retirement savings
products and services, and Franklin Resources, Inc. which operates the Franklin
and Templeton families of mutual funds. With consumers continuing to increase
their interest in investment savings, we believe these companies should continue
to prosper.
11
<PAGE>
SERIES J (EMERGING GROWTH SERIES)
February 15, 1997
Among the less rewarding sectors in 1996 was health care. Many companies saw
their share prices decline prior to the fall elections as investors worried
about what steps might be taken to curb medical costs. One of our holdings,
however, did very well. Dura Pharmaceuticals, Inc., acquires drugs from major
manufacturers which sell the drugs in small quantities and thus don't view them
as sales leaders. Dura then focuses attention and sales efforts on these
products, generating profitable sales levels.
LOOKING AHEAD TO 1997
Because of the general underperformance of the small cap and midcap market
sectors in the second half of 1996, we could be positioned to perform well in
1997 on a relative basis. Because valuations of the smaller stocks have not
risen as fast as their larger counterparts, they are now more attractive for
purchase than they were in early 1996. Cash flows into mutual funds should
continue as the growing "baby boomer" group of investors increases savings. A
wild card in the equity markets in general is the possibility of a capital gains
cut, which would be very good for small and midcap stocks in general.
Sincerely,
Cindy Shields
Portfolio Manager
SERIES J VS. S&P MIDCAP
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
SERIES J S&P MIDCAP
Oct-92 10,000.00 10,000.00
Dec-92 12,470.00 11,174.74
Mar-93 13,040.00 11,540.91
Jun-93 12,980.00 11,810.13
Sep-93 13,811.05 12,404.63
Dec-93 14,171.07 12,735.23
Mar-94 13,191.00 12,252.10
Jun-94 12,110.92 11,805.78
Sep-94 13,267.95 12,605.29
Dec-94 13,448.06 12,280.06
Mar-95 13,858.30 13,284.87
Jun-95 14,708.81 14,443.63
Sep-95 16,489.88 15,853.34
Dec-95 16,069.63 16,079.80
Mar-96 17,270.35 17,069.68
Jun-96 18,611.15 17,561.20
Sep-96 19,073.06 18,072.47
Dec-96 18,969.12 19,167.30
$10,000 SINCE INCEPTION
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, 1996, the value of the investment (assuming reinvestment of
all dividends and distributions) would have been $18,969. By comparison, the
same $10,000 investment would have grown to $19,167 based on the S&P Midcap
Index's performance.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1996*
1 Year Since Inception
(10-1-92)
Series J 18.0% 16.2%
* 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.
12
<PAGE>
SERIES K (GLOBAL AGGRESSIVE BOND SERIES)
February 15, 1997
[LEXINGTON LOGO] [MFR LOGO]
SUBADVISORS, MFR ADVISORS, INC., AND LEXINGTON MANAGEMENT CORPORATION
PORTFOLIO MANAGERS, MARIA FIORINI RAMIREZ AND DENIS JAMISON
Dear Contractholder:
1996 was a very rewarding year for our investors, particularly during the second
half. While the first six months provided a total return of 3.91%, the last six
months' strong performance brought the total return of the fund for the year up
to 13.69%.* This compares favorably with the Lehman Brothers Global Bond Index
return of 5.37% for the year, a 0.2% return for a ten-year U.S. Treasury note,
and 10.4% average for the Lipper peer group.
INTERNATIONAL STRENGTH IN THE SECOND HALF
The second half of 1996 saw an acceleration of the trends which began earlier in
the year. Yields in peripheral European countries such as Spain, Italy, and
Portugal, which had fallen approximately 1% in the first half of the year
declined a further 2% in the second half. Restrictive fiscal policies by these
governments brought about by their desire not to be left out of the European
Monetary Union process and combined with rapidly declining inflation to produce
these dramatic declines in yields. While there is still room for this trend to
continue, we believe the majority of this convergence of yields with "core"
Europe is coming to an end.
Emerging market debt also continued its good performance. With the strongest
concentration of economic growth in the world, the credit quality of many
emerging market countries and companies is increasing and should continue on
that path in 1997.
DOLLAR BLOC PERFORMANCE
One of the differences in the second half of 1996 versus the first half is that
the dollar bloc which includes Australia, Canada, New Zealand and the United
States also performed very well. Interest rates which had increased in these
countries in the first half on the back of a poor U.S. market reversed their
upward trend. While longer term rates in the U.S. managed to decline slightly,
yields in the rest of the dollar bloc fell substantially, on the order of 1% to
1.5%. Recognition of the continued trend of low inflation in these countries was
the main contributing factor to the decline in yields.
OUTLOOK FOR 1997
Looking ahead to 1997, we believe that the most rewarding investments will be
those that seek out improving credit quality situations, both on the country and
company level. In particular, the return of strong growth to Latin America
should provide fertile ground for many of these opportunities. We look forward
to the challenges of the new year.
Sincerely,
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.
13
<PAGE>
SERIES K (GLOBAL AGGRESSIVE BOND SERIES)
February 15, 1997
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1996*
1 Year Since Inception
(6-1-95)
Series K 13.7% 13.6%
* 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.
SERIES K VS. LEHMAN BROTHERS GLOBAL BOND INDEX
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
LEHMAN BROTHERS
SERIES K GLOBAL BOND INDEX
Jun-95 10,000.00 10,000.00
Jun-95 9,960.00 10,069.00
Jul-95 10,100.00 10,140.49
Aug-95 10,110.00 9,907.26
Sep-95 10,360.00 10,131.16
Oct-95 10,450.00 10,257.80
Nov-95 10,500.00 10,367.56
Dec-95 10,761.06 10,521.00
Jan-96 10,961.12 10,427.36
Feb-96 10,750.53 10,358.54
Mar-96 10,824.24 10,338.86
Apr-96 10,908.47 10,293.37
May-96 11,034.82 10,318.07
Jun-96 11,182.24 10,428.48
Jul-96 11,445.47 10,613.06
Aug-96 11,624.47 10,651.27
Sep-96 11,761.35 10,731.15
Oct-96 11,940.35 10,964.02
Nov-96 12,214.12 11,128.48
Dec-96 12,234.12 11,086.19
$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, 1996, the value of the investment (assuming
reinvestment of all dividends and distributions) would have been $12,234. By
comparison, the same $10,000 investment would have grown to $11,086 based on the
Lehman Brothers Global Bond Index's performance.
14
<PAGE>
SERIES M (SPECIALIZED ASSET ALLOCATION SERIES)
February 15, 1997
[MERIDIAN INVESTMENT MANAGEMENT LOGO]
MANAGED BY SECURITY MANAGEMENT COMPANY
RESEARCH PROVIDED BY MERIDIAN INVESTMENT MANAGEMENT CORPORATION AND
TEMPLETON/FRANKLIN INVESTMENT SERVICES, INC.
Dear Contractholder:
The Specialized Asset Allocation Series provided a total return to its
shareholders of 14.24% in 1996.* As you know, in periods of strong equity market
returns asset allocation portfolios will underperform the stock market indexes,
but through their diversity add an element of stability that should reward
shareholders in periods of declining markets. The Series performed well in line
with our internal benchmark index, a blend of 40% S&P 500 Stock Index, 25%
Financial Times World Index (excluding U.S.), 20% Lehman Brothers Aggregate Bond
Index, 10% Wilshire Real Estate Securities Index, and 5% 91-day U.S. Treasury
Bills. This blended index generated a 14.43% return for the year.
RECOMMENDED ALLOCATIONS DURING THE YEAR
At the beginning of 1996 Meridian Investment Management Corporation, the
provider of our asset allocation research services, recommended that the
portfolio be invested 40% in U.S. equities, 35% in international equities, 15%
in U.S. bonds, and 10% in real estate through real estate investment trusts.
This overweighting in foreign stocks and underweighting in bonds versus the
benchmark allocation continued until late in the year, when shifts were made to
an underweighting in U.S. stocks, with bonds moving more in line with the
benchmark. At the close of the year Meridian suggested that appropriate targets
would be 34.80% U.S. equities, 33.40% international equities, 21.75% U.S. bonds,
and 10.05% real estate. They still suggest no allocations to the remaining
available sectors, foreign bonds and gold stocks, and only fractional amounts of
cash.
INTERNATIONAL AND INDUSTRY SECTOR ALLOCATIONS
Within the international sector Meridian recommended late in December that we
increase our exposure in Japan, as that market had fallen low enough that the
valuations were as attractive as they had been in the last five years. They
commented that Japanese companies' earnings relative to their interest rates
were very favorable, and that many issues looked 30% to 40% undervalued. There
also is a very low probability that interest rates in Japan will be increasing
in the near future. Other countries currently represented in the international
sector of the portfolio are Belgium, Germany, Hong Kong, and Italy.
In the U.S. equity portion, eleven industries are represented. The largest
industry weightings are in computers, electronics, machinery, recreation, and
building materials. Other industries include automotive parts, broadcasting,
telecommunications, metals and mining, restaurants, and steel. These allocations
are made purely on a valuation basis; that is, those sectors which appear most
undervalued
15
<PAGE>
SERIES M (SPECIALIZED ASSET ALLOCATION SERIES)
February 15, 1997
according to Meridian's calculations are recommended for appropriate weightings
in the portfolio.
WHAT'S AHEAD FOR 1997
Looking ahead, the investment professionals at Meridian believe that the best
valuations can presently be found outside the United States. Although they don't
fear a dramatic selloff in the U.S. , they think that more attractive candidates
exist elsewhere. They also like the U.S. bond market since prices have fallen
there recently, and may be recommending an increase in that area as well.
Sincerely,
Jane Tedder
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.
SERIES M VS. BLENDED INDEX
AND S&P 500
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
SERIES M BLENDED INDEX S&P 500
Jun-95 10,000.00 10,000.00 10,000.00
Jun-95 10,080.00 10,083.00 10,232.00
Jul-95 10,390.00 10,391.00 10,572.00
Aug-95 10,390.00 10,348.00 10,598.00
Sep-95 10,490.00 10,607.00 11,045.00
Oct-95 10,340.00 10,520.00 11,006.00
Nov-95 10,610.00 10,829.00 11,490.00
Dec-95 10,710.00 11,109.00 11,710.00
Jan-96 10,990.00 11,320.00 12,109.00
Feb-96 11,030.00 11,348.00 12,221.00
Mar-96 11,140.00 11,445.00 12,339.00
Apr-96 11,370.00 11,599.00 12,521.00
May-96 11,540.00 11,694.00 12,844.00
Jun-96 11,450.00 11,784.00 12,893.00
Jul-96 11,040.00 11,479.00 12,323.00
Aug-96 11,240.00 11,640.00 12,583.00
Sep-96 11,605.27 12,052.00 13,292.00
Oct-96 11,635.73 12,247.00 13,658.00
Nov-96 12,194.17 12,831.00 14,691.00
Dec-96 12,234.78 12,800.00 14,400.00
$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, 1996, the value of the investment
(assuming reinvestment of all dividends and distributions) would have been
$12,235. By comparison, the same $10,000 investment would have grown to $14,400
based on the S&P 500 Index's performance. Comparison is also made to a blended
index of 40% S&P500, 25% Financial Times World Index, 20% Lehman Brothers
Aggregate Bond Index, 10% Wilshire Real Estate Securities Index and 5% 91-Day
Treasury Bill Yield. The same $10,000 investment would have grown to $12,800
based on the blended index.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1996*
1 Year Since Inception
(6-1-95)
Series M 14.2% 13.6%
* 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.
16
<PAGE>
SERIES N (MANAGED ASSET ALLOCATION SERIES)
February 15, 1997
[T. ROWE PRICE LOGO]
SUBADVISOR, T. ROWE PRICE ASSOCIATES, INC.
PORTFOLIO MANAGER, NED NOTZON
Dear Contractholder:
1996 was especially kind to stock investors and posted positive total returns
for bonds in some sectors as well. The U.S. stock market climbed to new highs
and the bond market rebounded from its intra-year lows. The Managed Asset
Allocation Series, which is well diversified, posted a solid total return of
12.80% for the year.*
A LOOK AT THE YEAR JUST COMPLETED
The domestic stock market completed another stellar year with the Standard &
Poor's 500 Stock Index, a benchmark for large-cap stocks, returning 22.95% and
smaller stocks represented by the Russell 2000 Index returning 16.55%. Equity
performance was driven by favorable economic growth, moderate inflation, and
rising corporate profits.
During the second quarter the economy registered an annualized growth rate of
4.7%, well above the level considered compatible with moderate inflation, and
long-term Treasury bond yields rose above 7%. Economic growth then slowed to
around 2% in the third quarter, and long-term interest rates ended the year at
6.6% .
Investment grade bonds, represented by the Lehman Brothers Aggregate Bond Index,
returned a modest 3.63% during the year, with corporate bonds outperforming
government and mortgage securities. High yield bonds, which sometimes act more
like stocks than like other bonds, benefited from the economic environment and
contributed strongly to performance throughout the year.
Many foreign markets also experienced interest rate declines, boosting
international bond returns. Even with the dampening effect of a strong U.S.
dollar, which reduced returns in dollar terms, international bonds in major
markets fared almost as well as their domestic counterparts over the last six
months.
PERFORMANCE AND STRATEGY REVIEW
Our investment committee meets monthly to adjust the weightings of stocks,
bonds, and money market securities within the specified ranges for the Series,
based on market conditions and economic fundamentals. The committee left the
sector weightings largely unchanged over the last six months but fine-tuned some
components within the sectors. For example, we added to foreign stock holdings,
and reduced exposure to domestic stocks. We favored growth over value stocks
since the former usually fare better in a moderate to slowing economy.
The committee maintained a minimal weighting in cash equivalents and a slight
overweighting in bonds, reducing foreign bond exposure in some areas as the U.S.
dollar strengthened. We overweighted investment-grade and high yield bonds as we
lightened up on foreign bonds.
We increased our exposure to foreign stocks to about 9.4% of total assets during
the past six months. Most overseas markets did not perform as well as the S&P
500, causing the Series to lag its benchmark for the year. Nevertheless,
absolute performance was strong, and we believe foreign equities offer very good
value at this time and provide greater diversification for the Series.
17
<PAGE>
SERIES N (MANAGED ASSET ALLOCATION SERIES)
February 15, 1997
OUTLOOK FOR 1997
We expect the year ahead to repeat 1996's economic pattern, with low
unemployment, barely rising inflation, and moderate growth overall, but varying
from quarter to quarter. Until either growth or inflation deviates from its
current path, we expect long-term Treasury yields to stay between 6% and 7%.
Prospects of a balanced budget in 1997 should increase the likelihood of subdued
inflation over the long term, providing further strength for stocks and bonds.
Although many stocks seem overvalued, we expect the domestic market to make
further progress, but returns could be more restrained than during the past two
years. Overseas, many world economies are expanding as a result of lower
interest rates and stronger corporate earnings. Accordingly, we are hopeful that
international markets can provide solid investment opportunities as well.
Sincerely,
Edmund M. Notzon
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.
SERIES N VS. S&P 500 AND LEHMAN BROTHERS AGGREGATE BOND INDEX
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
LEHMAN BROTHERS
SERIES N AGGREGATE BOND INDEX S&P 500
Jun-95 10,000.00 10,000.00 10,000.00
Jun-95 10,070.00 10,073.00 10,232.00
Jul-95 10,310.00 10,050.84 10,572.00
Aug-95 10,230.00 10,172.45 10,598.00
Sep-95 10,440.00 10,271.13 11,045.00
Oct-95 10,410.00 10,404.65 11,006.00
Nov-95 10,570.00 10,560.72 11,490.00
Dec-95 10,730.00 10,708.57 11,710.00
Jan-96 10,920.00 10,779.25 12,109.00
Feb-96 10,930.00 10,591.69 12,221.00
Mar-96 10,970.00 10,517.55 12,339.00
Apr-96 11,050.00 10,458.65 12,521.00
May-96 11,120.00 10,437.73 12,844.00
Jun-96 11,160.00 10,577.60 12,893.00
Jul-96 10,890.00 10,606.16 12,323.00
Aug-96 11,070.00 10,588.13 12,583.00
Sep-96 11,448.68 10,772.36 13,292.00
Oct-96 11,640.00 11,011.51 13,658.00
Nov-96 12,173.67 11,199.80 14,691.00
Dec-96 12103.18 11,095.65 14,400.00
$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, 1996, the value of the investment (assuming
reinvestment of all dividends and distributions) would have been $12,103. By
comparison, the same $10,000 investment would have grown to $11,096 based on the
Lehman Brothers Aggregate Bond Index's performance and $14,400 based on the S&P
500 Index's performance.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1996*
1 Year Since Inception
(6-1-95)
Series N 12.8% 12.8%
* 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.
18
<PAGE>
SERIES O (EQUITY INCOME SERIES)
February 15, 1997
[T. ROWE PRICE LOGO]
SUBADVISOR, T. ROWE PRICE ASSOCIATES, INC.
PORTFOLIO MANAGER, BRIAN C. ROGERS
Dear Contractholder:
The equity market and your portfolio performance were strong in 1996, reflecting
good corporate earnings, a generally favorable economic and interest rate
environment, and heavy investor demand. For the year as a whole equity returns
were impressive, coming as they did on the heels of considerable strength in
1995. Stocks have now provided six consecutive years of positive returns with
virtually no interim corrections.
PERFORMANCE RESULTS
The Equity Income Series performed well for the year, returning 20.04%.* This
was slightly behind the 22.95% return of the Standard & Poor's 500 Stock Index,
but ahead of the Lipper Equity Income Funds' average of 18.97%, not an uncommon
pattern in strong years like 1996.
PORTFOLIO STRATEGY
While the last twelve months were strong for the broad equity market, they were
challenging for income-oriented investors. Bond and money market returns were
generally in the low- to mid-single-digit range in 1996, with shorter-maturity
securities returning more than their longer counterparts. Two traditional high
yield sectors of the equity market, electric utilities and telephone companies,
were about flat on average for the year, due to their interest rate sensitivity
and concern about the impact of a newly deregulated environment.
Despite poor returns from many traditional yield vehicles, the Series performed
reasonably well due to the continued strength of companies in the financial
(Chase Manhattan Corporation, American Express Company), health care
(Warner-Lambert Company, Eli Lilly & Company), and energy (Exxon Corporation,
Texaco Inc.) sectors. Many of these holdings were purchased when they were out
of favor and inexpensive on a relative valuation basis. We often make investment
decisions based on the tendency of a company's fundamentals and stock price to
regress within historical ranges, and on investor perceptions about the relative
values of these stocks to improve over the intermediate term. This was clearly
the case in 1996 with respect to some of the companies mentioned above.
During the second half of the year, despite a market that had advanced sharply
we were able to find opportunities in companies with higher-than-average
dividend yields, limited risk, and attractive return potential. We recently
initiated new positions in AT&T Corporation, Alltel Corporation, International
Flavors & Fragrances, Inc., ITT Corporation, and Whirlpool Corporation, all fine
companies that have struggled recently due to negative fundamental trends
affecting their businesses, negative investor view s of their prospects, or some
combination of these factors.
19
<PAGE>
SERIES O (EQUITY INCOME SERIES)
February 15, 1997
SUMMARY AND OUTLOOK
Over the last few years stock prices have appreciated at a much faster rate than
the earnings and dividends of the underlying companies. Because of this
"delinkage," we expect more subdued equity performance in 1997. We are not at
the point of yelling fire in a crowded theater, but simply want to raise the
possibility that the year ahead may not live up to many investors' high
expectations for a continuation of recent trends. Notwithstanding this
cautionary tone, we continue to believe we will find interesting investment
opportunities during the year.
Sincerely,
Brian C. Rogers
Portfolio Manager
SERIES O VS. S&P 500
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
SERIES O S&P 500
Jun-95 10,000.00 10,000.00
Jun-95 10,060.00 10,232.00
Jul-95 10,250.00 10,572.00
Aug-95 10,400.00 10,598.00
Sep-95 10,790.00 11,045.00
Oct-95 10,910.00 11,006.00
Nov-95 11,360.00 11,490.00
Dec-95 11,700.00 11,710.00
Jan-96 12,040.00 12,109.00
Feb-96 12,080.00 12,221.00
Mar-96 12,270.00 12,339.00
Apr-96 12,340.00 12,521.00
May-96 12,550.00 12,844.00
Jun-96 12,630.00 12,893.00
Jul-96 12,270.00 12,323.00
Aug-96 12,540.00 12,583.00
Sep-96 13,082.17 13,292.00
Oct-96 13,372.89 13,658.00
Nov-96 14,154.81 14,691.00
Dec-96 14,044.54 14,400.00
$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, 1996, the value of the investment (assuming reinvestment of all
dividends and distributions) would have been $14,045. By comparison, the same
$10,000 investment would have grown to $14,400 based on the S&P 500 Index's
performance.
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1996*
1 Year Since Inception
(6-1-95)
Series O 20.0% 23.9%
* 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.
20
<PAGE>
SERIES S (SOCIAL AWARENESS SERIES)
February 15, 1997
Dear Contractholder:
The Social Awareness Series performed very well in 1996, returning 18.82%*
versus the average in its peer group of 18.71%. Because of its small and midcap
stock orientation, the portfolio underperformed its benchmark, the Domini Social
Index, which returned 23.71% for the year. It is interesting to note that the
largest 20 companies (based on market capitalization) out of the 400 listed in
the Domini index provided over 60% of its total market capitalization in 1996.
AREAS OF STRONG PERFORMANCE
For a good part of the year the portfolio was overweighted in technology-related
issues. In the software area our top holding was Microsoft Corporation, which
returned 88.3% during the year. Networking companies Cisco Systems, Inc. and
3Com Corporation and personal computer manufacturer Compaq Computer Corporation
also made substantial contributions to total return. Another "overachiever" in
this sector was Intel Corporation, which we started purchasing at a price of
about $85 in September; it closed the year at over $130 per share.
In the interest sensitive sector we held such issues as Federal National
Mortgage Association, Finova Group, Inc., and Northern Trust Corporation. This
sector performed surprisingly well, given the volatility of interest rates over
the course of the year. Although energy issues were strong performers, it is
always difficult to own oil issues in a socially-oriented portfolio. We did
participate in the sector's growth, however, by owning gas explorers and
producers such as Anadarko Petroleum Corporation and Apache Corporation.
MORE SOCIAL ISSUES RECEIVING ATTENTION
As social issues take a more prominent part in investment decisions, we like to
keep our shareholders informed about new areas of concern. We note that
according to the Social Investment Forum, at the end of 1995 one dollar out of
every ten dollars invested was directed to funds with some level of social
screening.
In the fall of 1996 the American Medical Association called upon all health care
institutions to divest their portfolios of those companies with exposure to
profits from tobacco products. This very important topic is moving to the
forefront of social investment issues.
Other topics of social importance which are receiving more press coverage are
labor-related. The first of these is the matter of working conditions for
employees of textiles and apparel manufacturing companies overseasthe
"sweatshop" issue. The second is on the domestic front, arising most recently in
the General Motors contract negotiations, having to do with outsourcing of
certain jobs and the effect it has on workers. A third topic now drawing more
interest is the increased "corporatization" of business in the U.S. by companies
such as Wal-Mart Stores, making it difficult for small "Mom and Pop" stores to
survive.
21
<PAGE>
SERIES S (SOCIAL AWARENESS SERIES)
February 15, 1997
THE OUTLOOK FOR 1997
We believe that 1997 will be an average year for stocksnot as strong as the last
two years have been, but rewarding to shareholders nonetheless. In purchasing
issues for the Social Awareness Series, we always look at financial performance
first. If a company can meet our criteria as an investment with potential value,
we then apply our social screens. Even if a company should be the best social
story in the world, we would not add it to the portfolio if we didn't think it
would make money for our shareholders.
Sincerely,
Cindy Shields
Portfolio Manager
SERIES S VS. S&P 500 AND
DOMINI SOCIAL INDEX
[LINE GRAPH WITH FOLLOWING INFORMATION CHARTED]
SERIES S DOMINI SOCIAL INDEX S&P 500
10,000.00 10,000.00 10,000.00
Jun-91 9,560.00 9,906.93 9,951.00
Sep-91 10,330.00 10,569.63 10,487.00
Dec-91 10,550.00 11,697.27 11,364.00
May-92 11,130.00 11,473.58 11,074.00
Jun-92 10,050.00 11,463.42 11,292.00
Sep-92 10,230.90 12,077.81 11,642.00
Dec-92 12,275.08 13,111.45 12,236.00
Mar-93 12,184.89 13,705.57 12,760.00
Jun-93 12,525.59 13,507.89 12,826.00
Sep-93 13,479.82 13,982.35 13,154.00
Dec-93 13,730.56 14,230.82 13,458.00
Mar-94 13,319.35 13,695.55 12,945.00
Jun-94 12,807.84 13,678.17 12,997.00
Sep-94 13,294.67 14,307.87 13,637.00
Dec-94 13,213.17 14,255.71 13,634.00
Mar-95 13,997.60 15,722.26 14,961.00
Jun-95 15,026.54 17,276.28 16,381.00
Sep-95 16,571.69 18,652.28 17,683.00
Dec-95 16,878.77 19,704.04 18,737.00
Mar-96 18,025.17 20,719.75 19,755.00
Jun-96 19,366.05 21,686.75 20,647.00
Sep-96 20,287.00 22,584.65 21,279.00
Dec-96 20,055.75 24,375.58 23,060.00
$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, 1996, the value of the investment (assuming reinvestment of
all dividends and distributions) would have been $20,056. By comparison, the
same $10,000 investment would have grown to $23,060 based on the S&P 500 Index's
performance and $24,376 based on the Domini Social Index.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1996*
1 Year 5 Year Since Inception
(5-1-91)
Series S 18.8% 13.7% 13.1%
* 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.
22
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES A (GROWTH)
NUMBER MARKET
OF SHARES COMMON STOCKS VALUE
- --------------------------------------------------------------------------------
ADVERTISING - 1.3%
200,000 Omnicom Group, Inc. ................................ $9,150,000
AEROSPACE & DEFENSE - 4.4%
101,000 Boeing Company ..................................... 10,743,874
100,000 Lockheed Martin Corporation ........................ 9,150,000
180,000 McDonnell Douglas Corporation ...................... 11,520,000
------------
31,413,874
BANKING & FINANCE - 5.1%
110,000 Banc One Corporation ............................... 4,730,000
200,000 Bank of New York Company, Inc. ..................... 6,750,000
120,000 Chase Manhattan Corporation ........................ 10,710,000
200,000 Northern Trust Corporation ......................... 7,250,000
25,000 Wells Fargo & Company .............................. 6,743,750
------------
36,183,750
CHEMICALS - BASIC - 1.8%
40,000 du Pont (E.I.) de Nemours & Company ................ 3,775,000
225,000 Monsanto Company ................................... 8,746,875
------------
12,521,875
CHEMICALS - SPECIALTY - 2.4%
200,000 Morton International, Inc. ......................... 8,150,000
200,000 Praxair, Inc. ...................................... 9,225,000
------------
17,375,000
COMMUNICATION EQUIPMENT - 1.0%
100,000 U.S. Robotics Corporation* ......................... 7,200,000
COMPUTER SERVICES - 5.5%
150,000 Ceridian Corporation* .............................. 6,075,000
100,000 Computer Sciences Corporation* ..................... 8,212,500
200,000 DST Systems, Inc.* ` ........................ 6,275,000
150,000 Electronic Data Systems Corporation ................ 6,487,500
200,000 First Data Corporation ............................. 7,300,000
140,000 Fiserv, Inc.* ...................................... 5,145,000
------------
39,495,000
COMPUTER SOFTWARE - 2.5%
70,000 HBO & Company ...................................... 4,156,250
110,000 Microsoft Corporation* ............................. 9,088,750
112,500 Oracle Corporation* ................................ 4,696,875
------------
17,941,875
CONGLOMERATE - 4.7%
160,000 AlliedSignal, Inc. ................................. 10,720,000
400,000 Canadian Pacific Ltd. .............................. 10,600,000
350,000 U.S. Industries, Inc.* ............................. 12,031,250
------------
33,351,250
CONSUMER SERVICES - 1.3%
400,000 ADT, Ltd.* ......................................... $9,150,000
ELECTRICAL MACHINERY & ELECTRONIC COMPONENTS - 3.0%
100,000 General Electric Company ........................... 9,887,500
150,000 Rockwell International Corporation ................. 9,131,250
90,500 Teradyne, Inc.* .................................... 2,205,938
------------
21,224,688
ENTERTAINMENT - 2.8%
240,000 Carnival Corporation (CI. A) ....................... 7,920,000
350,000 International Game Technology ...................... 6,387,500
80,000 The Walt Disney Company ............................ 5,570,000
------------
19,877,500
FERTILIZER - 0.9%
80,000 Potash Corporation of Saskatchewan, Inc. ........... 6,800,000
FINANCIAL SERVICES - 1.9%
45,000 Federal Home Loan Mortgage Corporation ............. 4,955,625
240,000 Federal National Mortgage Association .............. 8,940,000
------------
13,895,625
FOOD & BEVERAGES - 7.0%
170,000 Anheuser-Busch Companies, Inc. ..................... 6,800,000
120,000 CPC International, Inc. ............................ 9,300,000
180,000 ConAgra, Inc. ...................................... 8,955,000
300,000 PepsiCo, Inc. ...................................... 8,775,000
200,000 Sara Lee Corporation ............................... 7,450,000
50,000 Unilever NV ADR .................................... 8,762,500
------------
50,042,500
FURNITURE - 1.2%
250,000 Leggett & Platt, Inc. .............................. 8,656,250
HOSPITAL MANAGEMENT - 1.1%
200,000 Columbia/HCA Healthcare Corporation ................ 8,150,000
HOUSEHOLD PRODUCTS - 3.9%
75,000 Colgate-Palmolive Company .......................... 6,918,750
100,000 Gillette Company ................................... 7,775,000
75,000 Procter & Gamble Company ........................... 8,062,500
100,000 Tupperware Corporation ............................. 5,362,500
------------
28,118,750
SEE ACCOMPANYING NOTES.
23
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES A (GROWTH) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS VALUE
- --------------------------------------------------------------------------------
INSURANCE - 5.0%
175,000 Allstate Corporation ............................... $10,128,125
75,000 American International Group, Inc. ................. 8,118,750
210,000 Equitable Companies, Inc. .......................... 5,171,250
35,000 General Re Corporation ............................. 5,521,250
100,000 ITT Hartford Group, Inc. ........................... 6,750,000
------------
35,689,375
MACHINERY - 0.7%
115,000 Deere & Company .................................... 4,671,875
MANUFACTURING - 0.7%
185,000 Pall Corporation ................................... 4,717,500
MEDICAL INSTRUMENTS - 3.9%
300,000 Allegiance Corporation ............................. 8,287,500
200,000 Baxter International, Inc. ......................... 8,200,000
40,000 Becton, Dickson & Company .......................... 1,735,000
110,000 Medtronic, Inc. .................................... 7,480,000
50,000 U.S. Surgical Corporation .......................... 1,968,750
------------
27,671,250
NATURAL GAS - 1.2%
170,000 Coastal Corporation ................................ 8,308,750
OIL & GAS COMPANIES - 3.5%
140,000 Louisana Land & Exploration ........................ 7,507,500
100,000 Noble Affiliates, Inc. ............................. 4,787,500
120,000 Pennzoil Company ................................... 6,780,000
200,000 Union Pacific Resources Group ...................... 5,850,000
------------
24,925,000
OIL & GAS PIPELINES - 1.4%
300,000 MAPCO, Inc. ........................................ 10,200,000
PAINT & ALLIED PRODUCTS - 1.1%
140,000 Sherwin-Williams Company ........................... 7,840,000
PETROLEUM REFINING - 2.6%
80,000 Mobil Corporation .................................. 9,780,000
50,000 Royal Dutch Petroleum Company ADR .................. 8,537,500
------------
18,317,500
PHARMACEUTICALS - 6.6%
100,000 American Home Products Corporation ................. 5,862,500
100,000 Bristol-Myers Squibb Company ....................... 10,875,000
200,000 Elan Corporation PLC ADR* .......................... 6,650,000
120,000 Merck & Company, Inc. .............................. 9,510,000
120,000 Schering-Plough Corporation ........................ 7,770,000
100,000 SmithKline Beecham PLC ADR ......................... 6,800,000
------------
47,467,500
PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 1.1%
100,000 Eastman Kodak Company .............................. $8,025,000
PUBLISHING & PRINTING - 2.1%
100,000 Gannett Company, Inc. .............................. 7,487,500
170,000 McGraw-Hill Companies, Inc. ........................ 7,841,250
------------
15,328,750
RESTAURANTS & FOOD SERVICE - 0.9%
325,000 Wendy's International, Inc. ........................ 6,662,500
RETAIL TRADE - 5.7%
235,000 Federated Department Stores, Inc.* ................. 8,019,375
150,000 Officemax, Inc.* ................................... 1,593,750
170,000 Safeway, Inc.* ..................................... 7,267,500
175,000 TJX Companies, Inc. ................................ 8,290,625
350,000 Woolworth Corporation* ............................. 7,656,250
200,000 Walgreens Company .................................. 8,000,000
------------
40,827,500
SEMI-CONDUCTORS - 1.0%
85,000 Linear Technology Corporation ...................... 3,729,375
85,000 Xilinx, Inc.* ...................................... 3,129,063
------------
6,858,438
TELECOMMUNICATIONS - 0.2%
75,000 Frontier Corporation ............................... 1,696,875
TOYS & SPORTING GOODS - 1.0%
250,000 Mattel, Inc. ....................................... 6,937,500
TRANSPORTATION - 1.7%
70,000 Burlington Northern Santa Fe ....................... 6,046,250
100,000 Union Pacific Corporation .......................... 6,012,500
------------
12,058,750
------------
Total common stocks - Series A - 92.2% ............. 658,752,000
COMMERCIAL PAPER
-------------------------
$300,000 Interstate Power Company, 5.48%, 1-9-97 ............ 299,635
$600,000 Bay State Gas Company, 5.53%, 1-13-97 .............. 598,895
------------
Total commercial paper - Series A - 0.1% ........... 898,530
------------
Total investments - Series A - 92.3% ............... 659,650,530
Cash and other assets, less liabilities -
Series A - 7.7% .................................. 54,940,028
------------
Total net assets - Series A - 100.0% ............... $714,590,558
============
SEE ACCOMPANYING NOTES.
24
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES B (GROWTH-INCOME)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES PREFERRED STOCKS VALUE
- --------------------------------------------------------------------------------
BANKING AND CREDIT - 0.7%
60,000 First Nationwide Bank, $8.176 ...................... $6,870,000
ENTERTAINMENT - 0.4%
3,225 Time Warner, Inc. .................................. 3,502,684
PUBLISHING & PRINTING - 0.3%
30,000 K-III Communications Corporation ................... 2,835,000
RADIO & TELEVISION - 0.5%
53,344 Cablevision Systems Corporation .................... 4,654,264
------------
Total preferred stocks - Series B - 1.9% ........... 17,861,948
CORPORATE BONDS
-------------------------
AIR TRANSPORTATION - 0.5%
$4,125,000 Atlas Air, Inc., 12.25% - 2002 ..................... 4,573,594
AUTOMOTIVE - 0.4%
$3,400,000 Exide Corporation, 10.75% - 2002 ................... 3,570,000
BANKS - 0.2%
Chevy Chase Savings Bank,
$1,000,000 9.25% - 2005 ..................................... 1,020,000
$1,000,000 9.25% - 2008 ..................................... 1,012,500
------------
2,032,500
BUILDING MATERIALS - 0.3%
$2,750,000 Knoll, Inc., 10.875% - 2006 ........................ 3,038,750
CHEMICALS - 0.4%
$3,500,000 Envirodyne Industries, Inc., 12.00% - 2000 ......... 3,723,125
COMMUNICATIONS - 2.8%
$5,300,000 Allbritton Communications Company, 11.50% - 2004 ... 5,618,000
$4,000,000 Century Communications Corporation, 9.50% - 2005 ... 4,100,000
$5,500,000 Comcast Corporation, 9.125% - 2006 ................. 5,623,750
$2,000,000 Granite Broadcasting Corporation, 12.75% - 2002 .... 2,182,500
$3,250,000 Heritage Media Corporation, 8.75% - 2006 ........... 3,136,250
$4,350,000 Rogers Cablesystems, Ltd., 9.625% - 2002 ........... 4,556,625
$2,000,000 Rogers Communications, Inc., 9.125% - 2006 ......... 1,975,000
------------
27,192,125
CONSUMER GOODS & SERVICES - 0.9%
$4,775,000 Semi-Tech Corporation, 0% - 2003(1) ................ 3,139,563
$5,000,000 Westpoint Stevens, Inc., 9.375% - 2005 ............. 5,137,500
------------
8,277,063
PRINCIPAL MARKET
AMOUNT CORPORATE BONDS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
DIVERSIFIED - 0.9%
$3,500,000 Jordan Industries, Inc., 10.375% - 2003 ............ $3,456,250
5,000,000 Sequa Corporation, 9.375% - 2003 ................... 5,050,000
------------
8,506,250
ELECTRIC & GAS COMPANIES - 0.7%
4,500,000 AES Corporation, 10.25% - 2006 ..................... 4,860,000
2,000,000 Cal Energy Company, Inc., 9.50% - 2006 ............. 2,060,000
------------
6,920,000
ENTERTAINMENT - 1.4%
4,100,000 AMF Group, Inc., 10.875% - 2006 .................... 4,325,500
2,000,000 Harrah's Operating Company, Inc., 10.875% - 2002 ... 2,122,500
4,500,000 Showboat, Inc., 9.25% - 2008 ....................... 4,426,875
2,850,000 Station Casinos, Inc., 10.125% - 2006 .............. 2,857,125
------------
13,732,000
FINANCE - 0.8%
4,000,000 Dime Bancorp, Inc., 10.50% - 2005 .................. 4,390,000
1,550,000 Dollar Financial Group, Inc., 10.875% - 2006 ....... 1,596,500
5,000,000 Home Holdings, Inc., 7.75% - 1998 .................. 2,200,000
------------
8,186,500
FOOD & BEVERAGE TRADE - 1.6%
4,250,000 Cott Corporation, 9.375% - 2005 .................... 4,377,500
2,600,000 Delta Beverage Group, 9.75% - 2003 ................. 2,658,500
Southland Corporation,
4,000,000 5.00% - 2003 ..................................... 3,305,000
1,000,000 4.50% - 2004 ..................................... 763,750
4,000,000 TLC Beatrice International Holdings, Inc.,
11.50% - 2005 .................................... 4,240,000
------------
15,344,750
HOSPITAL MANAGEMENT - 1.0%
4,000,000 Regency Health Services, Inc., 9.875% - 2002 ....... 4,050,000
4,750,000 Tenet Healthcare Corporation, 10.125% - 2005 ....... 5,242,813
------------
9,292,813
SEE ACCOMPANYING NOTES.
25
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES B (GROWTH-INCOME) (CONTINUED)
PRINCIPAL MARKET
AMOUNT CORPORATE BONDS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
HOTEL & RECREATION - 0.4%
$4,000,000 Four Seasons Hotels, Inc., 9.125% - 2000 ........... $4,085,000
INDUSTRIAL PRODUCT - 0.4%
3,275,000 Shop Vac Corporation, 10.625% - 2003 ............... 3,446,938
MANUFACTURING - 0.7%
2,100,000 Pillowtex Corporation, 10.00% - 2006 ............... 2,184,000
4,000,000 Schuller International Group, Inc., 10.875% - 2004 . 4,460,000
------------
6,644,000
MEDICAL EQUIPMENT - 0.3%
2,450,000 Maxxim Medical, Inc., 10.50% - 2006 ................ 2,560,250
OIL & GAS COMPANIES - 0.5%
4,800,000 Seagull Energy Corporation, 8.625% - 2005 .......... 4,980,000
PLASTIC PRODUCTS - 0.2%
2,000,000 Plastic Containers, Inc., 10.00% - 2006 ............ 2,065,000
PUBLISHING & PRINTING - 0.7%
3,500,000 Golden Books Publishing, Inc., 7.65% - 2002 ........ 3,158,750
3,250,000 K-III Communications Corporation, 10.625% - 2002 ... 3,412,500
------------
6,571,250
REAL ESTATE - 0.3%
3,100,000 BF Saul REIT, 11.625% - 2002 ....................... 3,332,500
REFINERY - 0.4%
3,665,000 Crown Central Petroleum Corporation, 10.875% - 2005. 3,742,881
RESTAURANTS - 0.5%
4,800,000 Carrols Corporation, 11.50% - 2003 ................. 5,100,000
STEEL & METAL PRODUCTS - 0.2%
1,400,000 AK Steel Corporation, 9.125% - 2006 ................ 1,438,500
TOBACCO PRODUCTS - 0.5%
4,300,000 Dimon, Inc., 8.875% - 2006 ......................... 4,498,875
TRANSPORTATION - 0.4%
4,000,000 Teekay Shipping Corporation, 8.32% - 2008 .......... 4,000,000
------------
Total corporate bonds - Series B - 17.4% .......... 166,854,664
NUMBER MARKET
OF SHARES COMMON STOCKS VALUE
- --------------------------------------------------------------------------------
ADVERTISING - 1.3%
280,000 Omnicom Group, Inc. ................................ $12,810,000
AEROSPACE & DEFENSE - 4.1%
110,000 Boeing Company ..................................... 11,701,250
150,000 Lockheed Martin Corporation ........................ 13,725,000
220,000 McDonnell Douglas Corporation ...................... 14,080,000
------------
39,506,250
BANKING & FINANCE - 4.9%
160,000 Banc One Corporation ............................... 6,880,000
250,000 Bank of New York Company, Inc. ..................... 8,437,500
150,000 Chase Manhattan Corporation ........................ 13,387,500
225,000 Northern Trust Corporation ......................... 8,156,250
35,000 Wells Fargo & Company .............................. 9,441,250
------------
46,302,500
CHEMICALS - BASIC - 1.6%
40,000 du Pont (E.I.) de Nemours & Company ................ 3,775,000
300,000 Monsanto Company ................................... 11,662,500
------------
15,437,500
CHEMICALS - SPECIALTY - 2.4%
230,000 Morton International, Inc. ......................... 9,372,500
300,000 Praxair, Inc. ...................................... 13,837,500
------------
23,210,000
COMMUNICATION EQUIPMENT - 0.9%
120,000 U.S. Robotics Corporation* ......................... 8,640,000
COMPUTER SERVICES - 3.3%
210,000 Ceridian Corporation* .............................. 8,505,000
60,000 Computer Sciences Corporation* ..................... 4,927,500
230,000 Electronic Data Systems Corporation ................ 9,947,500
220,000 First Data Corporation ............................. 8,030,000
------------
31,410,000
COMPUTER SOFTWARE - 3.0%
100,000 HBO & Company ...................................... 5,937,500
200,000 Microsoft Corporation* ............................. 16,525,000
150,000 Oracle Corporation* ................................ 6,262,500
------------
28,725,000
CONGLOMERATE - 2.8%
200,000 AlliedSignal, Inc. ................................. 13,400,000
500,000 Canadian Pacific, Ltd. ............................. 13,250,000
------------
26,650,000
CONSUMER SERVICES - 1.2%
500,000 ADT, Ltd.* ......................................... 11,437,500
SEE ACCOMPANYING NOTES.
26
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES B (GROWTH-INCOME) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
ELECTRICAL MACHINERY & ELECTRONIC COMPONENTS - 2.4%
140,000 General Electric Company ........................... $13,842,500
150,000 Rockwell International Corporation ................. 9,131,250
------------
22,973,750
ENTERTAINMENT - 2.1%
400,000 International Game Technology ...................... 7,300,000
180,000 The Walt Disney Company ............................ 12,532,500
------------
19,832,500
FERTILIZER - 0.9%
100,000 Potash Corporation of Saskatchewan, Inc. ........... 8,500,000
FINANCIAL SERVICES - 1.8%
50,000 Federal Home Loan Mortgage Corporation ............. 5,506,250
300,000 Federal National Mortgage Association .............. 11,175,000
------------
16,681,250
FOOD & BEVERAGES - 6.8%
220,000 Anheuser-Busch Companies, Inc. ..................... 8,800,000
150,000 CPC International, Inc. ............................ 11,625,000
280,000 Coca-Cola Company .................................. 14,735,000
200,000 ConAgra, Inc. ...................................... 9,950,000
300,000 Sara Lee Corporation ............................... 11,175,000
50,000 Unilever NV ADR .................................... 8,762,500
------------
65,047,500
HOSPITAL MANAGEMENT - 1.3%
300,000 Columbia/HCA Healthcare Corporation ................ 12,225,000
HOUSEHOLD PRODUCTS - 4.0%
75,000 Colgate-Palmolive Company .......................... 6,918,75
200,000 Gillette Company ................................... 15,550,000
150,000 Procter & Gamble Company ........................... 16,125,000
------------
38,593,750
INSURANCE - 3.2%
175,000 Allstate Corporation ............................... 10,128,125
230,000 Equitable Companies, Inc. .......................... 5,663,750
40,000 General Re Corporation ............................. 6,310,000
120,000 ITT Hartford Group, Inc. ........................... 8,100,000
------------
30,201,875
MACHINERY - 0.5%
125,000 Deere & Company .................................... 5,078,125
MANUFACTURING - 0.5%
200,000 Pall Corporation ................................... 5,100,000
MEDICAL INSTRUMENTS - 2.2%
250,000 Baxter International, Inc. ......................... $10,250,000
40,000 Becton, Dickinson & Company ........................ 1,735,000
135,000 Medtronic, Inc. .................................... 9,180,000
------------
21,165,000
NATURAL GAS - 2.6%
225,000 Coastal Corporation ................................ 10,996,875
280,000 El Paso Natural Gas Company ........................ 14,140,000
------------
25,136,875
OIL & GAS COMPANIES - 1.1%
60,000 Pennzoil Company ................................... 3,390,000
250,004 Union Pacific Resources Group ...................... 7,312,617
------------
10,702,617
OIL & GAS PIPELINES - 1.2%
340,000 MAPCO, Inc. ........................................ 11,560,000
PETROLEUM REFINING - 1.3%
100,000 Mobil Corporation .................................. 12,225,000
PHARMACEUTICALS - 6.6%
150,000 American Home Products Corporation ................. 8,793,750
125,000 Bristol-Myers Squibb Company ....................... 13,593,750
200,000 Elan Corporation PLC ADR* .......................... 6,650,000
175,000 Merck & Company, Inc. .............................. 13,868,750
150,000 Schering-Plough Corporation ........................ 9,712,500
150,000 SmithKline Beecham PLC ADR ......................... 10,200,000
------------
62,818,750
PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 1.1%
125,000 Eastman Kodak Company .............................. 10,031,250
PUBLISHING & PRINTING - 1.7%
100,000 Gannett Company, Inc. .............................. 7,487,500
200,000 McGraw-Hill Companies, Inc. ........................ 9,225,000
------------
16,712,500
RESTAURANTS & FOOD SERVICE - 1.2%
40,000 McDonald's Corporation ............................. 1,810,000
450,000 Wendy's International, Inc. ........................ 9,225,000
------------
11,035,000
RETAIL TRADE - 2.6%
330,000 Federated Department Stores, Inc.* ................. 11,261,250
80,000 TJX Companies, Inc.* ............................... 3,790,000
450,000 Woolworth Corporation* ............................. 9,843,750
------------
24,895,000
TELECOMMUNICATIONS - 0.2%
90,000 Frontier Corporation ............................... 2,036,250
SEE ACCOMPANYING NOTES.
27
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES B (GROWTH-INCOME)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES PREFERRED STOCKS VALUE
- --------------------------------------------------------------------------------
TOYS & SPORTING GOODS - 1.0%
360,000 Mattel, Inc. ....................................... $9,990,000
TRANSPORTATION - 1.6%
110,000 Burlington Northern Santa Fe ....................... 9,501,250
100,000 Union Pacific Corporation .......................... 6,012,500
------------
15,513,750
------------
Total common stocks - Series B - 73.4% ............. 702,184,492
COMMERCIAL PAPER
------------------------------
$1,000,000 General Electric Capital Corporation,
5.325%, 1-06-97 .................................. 999,260
$500,000 Interstate Power Company, 5.475%, 1-08-97 .......... 499,468
$1,000,000 International Lease Finance Corporation,
5.625%, 1-06-97 .................................. 499,609
5.675%, 1-06-97 .................................. 499,606
------------
999,215
$600,000 McCormick & Company, Inc., 5.475%, 1-10-97 ......... 599,179
$1,600,000 Northern Illinois Gas Company, 5.295%, 1-16-97 ..... 1,596,470
$6,118,000 The Walt Disney Company,
5.425%, 1-24-97 .................................. 269,064
5.275%, 1-27-97 .................................. 896,571
5.285%, 1-27-97 .................................. 1,195,420
5.315%, 1-27-97 .................................. 944,361
5.325%, 1-27-97 .................................. 896,539
5.425%, 1-27-97 .................................. 1,892,556
------------
6,094,511
------------
Total commercial paper - Series B - 1.1% ........... 10,788,103
------------
Total investments - Series B - 93.8% ............... 897,689,207
Cash and other assets, less liabilities -
Series B - 6.2% .................................. 58,897,100
------------
Total net assets - Series B - 100.0% ............... $956,586,307
============
SERIES C (MONEY MARKET)
COMMERCIAL PAPER
-----------------------------------
BROKERAGE - 2.9%
$3,771,000 Merrill Lynch & Company
6.60%, 1-02-97 ................................... $199,963
5.48%, 1-07-97 ................................... 199,817
5.62%, 1-09-97 ................................... 199,750
PRINCIPAL MARKET
AMOUNT COMMERCIAL PAPER (CONTINUED) VALUE
- --------------------------------------------------------------------------------
BROKERAGE, CONTINUED
5.35%, 1-13-97 ................................... $997,800
5.67%, 1-14-97 ................................... 199,591
5.34%, 1-15-97 ................................... 120,694
5.65%, 1-17-97 ................................... 99,749
5.59%, 2-18-97 ................................... 992,090
5.34%, 2-25-97 ................................... 396,440
5.36%, 2-26-97 ................................... 346,829
------------
3,752,723
BUSINESS SERVICES - 7.0%
$3,500,000 A1 Credit Corporation, 5.30%, 1-13-97 .............. 3,492,300
5,500,000 General Electric Capital Corporation,
5.30%, 1-09-97 ................................... 1,497,720
5.38%, 1-27-97 ................................... 3,984,458
------------
8,974,478
CHEMICALS - BASIC - 5.2%
6,700,000 du Pont (E.I.) de Nemours & Company, 5.27%, 1-10-97. 6,688,676
COMPUTER SYSTEMS - 4.7%
6,000,000 International Business Machines Corporation,
5.30%, 1-23-97 ................................... 996,140
5.30%, 1-28-97 ................................... 4,976,800
------------
5,972,940
ELECTRIC UTILITIES - 14.4%
2,530,000 Carolina Power & Light Company,
5.30%, 2-14-97 ................................... 1,518,800
5.38%, 2-20-97 ................................... 991,720
3,000,000 Florida Power Corporation, 5.54%, 1-8-97 ........... 2,996,768
6,650,000 Interstate Power Company,
5.33%, 1-08-97 ................................... 5,793,989
5.43%, 1-14-97 ................................... 99,804
5.45%, 2-04-97 ................................... 746,140
331,000 Massachusetts Electric Company, 6.05%, 1-03-97 ..... 330,889
3,100,000 Progress Capital Holdings, Inc., 5.53%, 1-07-97 .... 3,097,143
3,000,000 Southern California Edison Company, 5.30%, 1-13-97 . 2,993,370
------------
18,568,623
ELECTRONICS - 5.1%
6,600,000 Avnet, Inc.,
5.42%, 1-06-97 ................................... 2,997,741
5.35%, 1-31-97 ................................... 2,289,726
5.40%, 1-31-97 ................................... 597,320
5.45%, 2-21-97 ................................... 694,092
------------
6,578,879
SEE ACCOMPANYING NOTES.
28
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES C (MONEY MARKET) (CONTINUED)
PRINCIPAL MARKET
AMOUNT COMMERCIAL PAPER (CONTINUED) VALUE
- --------------------------------------------------------------------------------
ENGINEERING - 0.2%
$300,000 Fluor Corporation, 5.37%, 1-29-97 .................. $298,747
ENTERTAINMENT - 0.9%
1,200,000 The Walt Disney Company, 5.28%, 1-27-97 ............ 1,194,660
FINANCIAL SERVICES - 1.3%
1,623,000 Toyota Motor Credit Corporation,
5.28%, 1-03-97 ................................... 999,490
5.53%, 1-03-97 ................................... 622,809
------------
1,622,299
FOOD PROCESSING - 0.6%
800,000 McCormick & Company, Inc.,
5.31%, 1-10-97 ................................... 99,830
5.47%, 1-10-97 ................................... 699,042
------------
798,872
INDUSTRIAL SERVICES - 0.8%
1,000,000 PPG Industries, Inc., 5.32%, 2-10-97 ............... 994,089
LEASING - 4.6%
6,000,000 International Lease Finance Corporation,
5.30%, 1-23-97 ................................... 5,976,840
NATURAL GAS - 5.2%
700,000 Laclede Gas Company, 5.37%, 1-07-97 ................ 699,374
6,020,000 Northern Illinois Gas Company,
5.52%, 1-03-97 ................................... 899,724
5.30%, 1-16-97 ................................... 4,089,053
5.34%, 1-29-97 ................................... 1,015,764
------------
6,703,915
POLLUTION CONTROL - 4.9%
6,380,000 Engelhard Corporation,
5.32%, 2-14-97 ................................... 5,936,226
5.55%, 2-24-97 ................................... 396,428
------------
6,332,654
RETAIL - GROCERY - 3.8%
4,900,000 Winn-Dixie Stores, Inc., 5.30%, 1-14-97 ............ 4,889,180
TELECOMMUNICATIONS - 0.8%
1,000,000 Ameritech Corporation, 5.27%, 1-17-97 .............. 997,100
TOBACCO - 3.7%
$1,000,000 B.A.T. Capital Corporation, 5.45%, 1-17-97 ......... $997,578
3,775,000 Philip Morris Companies, Inc.,
5.30%, 1-14-97 ................................... 2,992,860
5.53%, 1-14-97 ................................... 773,454
------------
4,763,892
WASTE - 5.8%
7,500,000 WMX Technologies, Inc., 5.40%, 1-24-97 ............. 7,469,850
------------
Total commercial paper - Series C - 71.9% .......... 92,578,417
U.S. GOVERNMENT AND GOVERNMENT AGENCY SECURITIES
------------------------------------------------
FEDERAL FARM CREDIT BANKS - 2.3%
3,000,000 4.95%, 3-03-97 ................................... 2,997,510
FEDERAL HOME LOAN MORTGAGE - 2.3%
3,000,000 5.63%, 12-17-97 .................................. 2,996,010
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 6.3%
8,000,000 4.97%, 3-10-97 ................................... 7,993,200
SBA POOLS - 16.0%
601,967 6.0%, 2006(3) .................................... 601,967
816,454 6.25%, 2012(3) ................................... 816,454
200,201 6.0%, 2018(3) .................................... 200,201
901,880 5.875%, 2020(3) .................................. 906,389
3,264,711 5.75%, 2021(3) ................................... 3,250,938
1,993,677 5.75%, 2021(3) ................................... 1,986,200
1,952,530 5.75%, 2021(4) ................................... 1,942,767
1,978,435 5.75%, 2021(4) ................................... 1,968,543
1,483,826 5.75%, 2021(3) ................................... 1,483,826
2,042,864 5.875%, 2021(3) .................................. 2,042,864
5,375,030 5.875%, 2021(3) .................................. 5,375,030
------------
20,575,179
------------
Total U.S. government & government agency
securities - Series C - 26.9% .................... 34,561,899
------------
Total investments - Series C - 98.8% ............... 127,140,316
Cash & other assets, liabilities - Series C - 1.2% . 1,531,797
------------
Total net assets - Series C - 100.0% ............... $128,672,113
============
SEE ACCOMPANYING NOTES.
29
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES D (WORLDWIDE EQUITY)
NUMBER MARKET
OF SHARES COMMON STOCK VALUE
- --------------------------------------------------------------------------------
AUSTRALIA - 1.2%
578,350 QBE Insurance Group, Ltd. .......................... $3,045,536
AUSTRIA - 1.2%
15,800 Wienerberger Baustoffindstrie AG ................... 3,061,016
BELGIUM - 1.0%
27,400 Credit Communal Holding/Dexia* ..................... 2,497,223
BRAZIL - 0.8%
226,200 Aracruz Celulose S.A. ADR .......................... 1,866,150
CANADA - 1.4%
89,800 Jetform Corporation* ............................... 1,627,625
273,800 Noranda Forest, Inc. ............................... 1,857,757
------------
3,485,382
CHILE - 2.2%
249,000 Antofagasta Holdings PLC ........................... 1,448,787
154,100 Banco Santander ADR ................................ 2,311,500
116,500 Maderas y Sinteticos Sociedad Anonima S.A. ADR ..... 1,631,000
------------
5,391,287
FINLAND - 1.0%
146,400 Valmet Corporation ................................. 2,553,815
FRANCE - 5.7%
32,300 Alcatel Alsthom .................................... 2,589,598
57,500 Elf Aquitaine S.A. ADR ............................. 2,601,875
59,900 Lafarge ............................................ 3,586,808
20,660 SGS-Thomson Microelectronics N.V.* ................. 1,458,473
33,460 Sidel .............................................. 2,297,716
13,860 Societe Generale de Surveillance Holding S.A. "B" .. 1,495,644
------------
14,030,114
GERMANY - 3.3%
90,400 Continental AG ..................................... 1,624,856
29,500 Daimler-Benz AG* ................................... 2,029,058
51,500 Deutsche Bank AG ................................... 2,402,718
44,500 Hoechst AG ......................................... 2,099,235
------------
8,155,867
GREECE - 1.3%
27,200 Ergo Bank S.A. ..................................... 1,378,687
109,400 Hellenic Tellecommunication Organization S.A. ...... 1,869,080
------------
3,247,767
HONG KONG - 4.1%
464,000 Citic Pacific, Ltd. ................................ $2,693,421
3,623,000 Guangdong Investments .............................. 3,489,511
2,628,000 National Mutual Asia, Ltd. ......................... 2,497,196
854,000 Peregrine Investment Holdings, Ltd. ................ 1,462,897
------------
10,143,025
HUNGARY - 0.8%
30,800 Pick Szeged Rt. .................................... 1,823,421
INDONESIA - 1.1%
415,500 PT Semen Clbinong .................................. 1,169,555
803,500 PT Tambang Timah ................................... 1,462,455
------------
2,632,010
IRELAND - 2.8%
330,400 Allied Irish Banks PLC ............................. 2,214,457
1,530,800 Jefferson Smurfit Group ............................ 4,650,664
------------
6,865,121
ITALY - 2.6%
62,500 Bulgari SpA ........................................ 1,266,031
277,200 Istituto Mobillare Italiano SpA .................... 2,359,071
591,900 Stet Societa' Finanziarla Telefonica SpA ........... 2,683,306
------------
6,308,408
JAPAN - 8.2%
39,810 Amway Japan, Ltd. .................................. 1,275,896
67,000 Canon, Inc. ........................................ 1,477,729
173,000 Citizen Watch Company, Ltd. ........................ 1,237,098
900 H.I.S. Company, Ltd. ............................... 43,422
20,500 Maruco Company, Ltd. ............................... 687,042
112,000 Matsushita Electric Industrial Company, Ltd. ....... 1,823,727
79,000 Nitto Denko Corporation ............................ 1,157,060
113,000 Nomura Securities Company, Ltd. .................... 1,693,978
73 NTT Data Communications Systems Corporation ........ 2,132,075
139,000 Sodick ............................................. 1,149,651
39,300 Sony Corporation ................................... 2,569,889
64,000 Tokyo Electron, Ltd. ............................... 1,957,439
71,000 Toyota Motor Corporation ........................... 2,036,960
119,000 Yamato Kogyo Company, Ltd. ......................... 1,097,010
------------
20,338,976
SEE ACCOMPANYING NOTES.
30
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES D (WORLDWIDE EQUITY) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCK (CONTINUED) VALUE
- --------------------------------------------------------------------------------
MALAYSIA - 4.6%
270,000 Araab Malaysian Finance Bhd ........................ $1,507,421
28,000 Berjaya Sports Toto Bhd ............................ 139,695
261,000 Hong Leong Credit Bhd .............................. 1,643,195
966,000 Magnum Corporation Bhd ............................. 1,874,238
1,026,000 MBF Capital Bhd .................................... 1,665,646
520,000 Sime Darby Bhd ..................................... 2,048,698
625,000 Tanjong PLC ........................................ 2,499,499
------------
11,378,392
MEXICO - 1.0%
150,500 Tubos De Acero De Mexico S.A. ADR* ................. 2,389,187
NETHERLANDS - 0.7%
41,140 Philips Electronics N.V. ........................... 1,664,877
NEW ZEALAND - 3.2%
1,765,300 Brierley Investments, Ltd. ......................... 1,633,893
925,900 Carter Holt Harvey, Ltd. ........................... 2,099,920
360,000 Fisher & Paykel Industries, Ltd. ................... 1,411,657
908,900 Fletcher Challenge Building ........................ 2,793,438
------------
7,938,908
NORWAY - 2.0%
352,200 Fokus Banken AS .................................... 2,415,888
145,300 Saga Petroleum AS .................................. 2,434,797
------------
4,850,685
PHILIPPINES - 1.9%
3,871,150 C & P Homes, Inc. .................................. 1,987,092
2,639,000 Filinvest Land, Inc.* .............................. 822,806
242,000 Manilla Electric Company "B" ....................... 1,978,327
------------
4,788,225
POLAND - 1.8%
48,500 Debica S.A. ........................................ 1,085,119
103,533 Elektrim Towarzystwo Handlowe S.A. ................. 941,040
42,146 Wedel S.A. ......................................... 2,077,453
8,241 Zaklady Piwowarski w Zywcu S.A. .................... 383,166
------------
4,486,778
PORTUGAL - 0.8%
30,500 Telecel-Comunicacaoes Pessoais, S.A.* .............. 1,944,927
RUSSIA - 1.0%
53,500 Lukoil Holdings of Russia ADR ...................... 2,492,030
SINGAPORE - 4.0%
216,000 City Developments, Ltd. ............................ $1,945,641
450,000 Clipsal Industries, Ltd. ........................... 1,638,000
540,000 DBS Land, Ltd. ..................................... 1,988,106
477,000 Inchape Bhd. ....................................... 1,657,269
438,000 Jardine Strategic Holdings ......................... 1,585,560
410,000 Want Want Holdings* ................................ 1,078,300
------------
9,892,876
SPAIN - 2.7%
10,800 Banco Popular Espanol S.A. ......................... 2,117,240
39,800 Banc Santander S.A. ................................ 2,542,671
54,600 Repsol S.A. ........................................ 2,090,394
------------
6,750,305
SWEDEN - 1.6%
23,100 Astra AB ........................................... 1,140,110
163,500 Skandinaviska Enskilda Banken ...................... 1,676,180
41,600 Svenska Handelsbanken .............................. 1,194,137
------------
4,010,427
SWITZERLAND - 3.9%
1,560 ABB AG ............................................. 1,934,430
2,870 Nestle S.A. ........................................ 3,071,517
372 Roche Holdings AG .................................. 2,885,469
2,950 Winterthur Schweizerische
Versicherungs - Gesellschaft ..................... 1,700,502
------------
9,591,918
THAILAND - 0.4%
95,000 BEC World Public Company, Ltd.* .................... 859,593
81,500 Property Perfect Public Company, Ltd. .............. 84,233
------------
943,826
UNITED KINGDOM - 8.1%
1,422,000 Aegis Group PLC .................................... 1,484,416
307,800 British Telecommunications PLC ..................... 2,077,982
211,900 D.F.S. Furniture Company PLC ....................... 2,188,439
678,900 Grand Metropolitan PLC ............................. 5,332,669
131,800 RTZ Corporation PLC ................................ 2,112,270
11,200 SmithKline Beecham PLC ADR ......................... 761,600
913,100 Tomkins PLC ........................................ 4,195,549
463,600 Vodafone Group PLC ................................. 1,955,629
------------
20,108,554
UNITED STATES - 18.2%
16,600 Abbott Laboratories ................................ 842,450
17,000 Ace, Ltd. .......................................... 1,022,125
13,500 AlliedSignal, Inc. ................................. 904,500
8,100 American International Group ....................... 876,825
15,100 Aon Corporation .................................... 938,087
24,800 Avery-Dennison Corporation ......................... 877,300
19,800 Becton, Dickinson & Company ........................ 858,825
10,100 Boeing Company ..................................... 1,074,387
25,300 Borders Group, Inc*. ............................... 907,638
SEE ACCOMPANYING NOTES.
31
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES D (WORLDWIDE EQUITY) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCK (CONTINUED) VALUE
- --------------------------------------------------------------------------------
UNITED STATES, CONTINUED
53,800 Calpine Corporation* ............................... $1,076,000
10,200 Citicorp ........................................... 1,050,600
19,500 Computer Associates International, Inc. ............ 970,125
22,600 Conseco, Inc. ...................................... 1,440,750
10,800 CPC International, Inc. ............................ 837,000
21,900 Crown Cork & Seal Company, Inc. .................... 1,190,812
33,200 Data General Corporation* .......................... 481,400
27,700 Diamond Offshore Drilling, Inc.* ................... 1,578,900
17,900 Dover Corporation .................................. 899,475
25,100 Ecolab, Inc. ....................................... 944,387
23,200 Federal National Mortgage Association .............. 864,200
26,800 Gap, Inc. .......................................... 807,350
21,600 Hasbro, Inc. ....................................... 839,700
22,200 Hershey Foods Corporation .......................... 971,250
15,700 Honeywell, Inc. .................................... 1,032,275
21,800 Ingersoll-Rand Company ............................. 970,100
18,400 Johnson & Johnson .................................. 915,400
10,500 Lockheed Martin Corporation ........................ 960,750
7,000 Mobil Corporation .................................. 855,750
27,000 Monsanto Company ................................... 1,049,625
22,300 NAC Re Corporation ................................. 755,412
10,000 NationsBank Corporation ............................ 977,500
20,500 Newmont Gold Company ............................... 896,875
21,600 Nike, Inc. ......................................... 1,290,600
21,900 Norwest Corporation ................................ 952,650
4,800 PacifiCare Health Systems, Inc.* ................... 408,600
16,500 Parker Hannifin Corporation ........................ 639,375
8,600 Procter & Gamble Company ........................... 924,500
26,900 Safeway, Inc.* ..................................... 1,149,975
9,900 Schlumberger, Ltd. ................................. 988,763
37,000 Service Corporation International .................. 1,036,000
32,000 Talbots, Inc. ...................................... 916,000
12,700 Union Pacific Corporation .......................... 763,588
31,756 Union Pacific Resources Group, Inc. ................ 928,863
12,700 United Healthcare Corporation ...................... 571,500
14,400 Warner-Lambert Company ............................. 1,080,000
40,800 Williams Companies, Inc. ........................... 1,530,000
35,600 WMX Technologies, Inc. ............................. 1,161,450
------------
45,009,637
------------
Total common stocks - Series D - 94.6% ............. 233,686,670
PRINCIPAL
AMOUNT OR
NUMBER FOREIGN GOVERNMENT MARKET
OF SHARES OBLIGATIONS VALUE
- --------------------------------------------------------------------------------
GERMANY - 1.8%
7,000,000 German Treasury Bill 3.06%, due 4-18-97 ............ $4,501,249
PREFERRED STOCKS
------------------------
AUSTRIA - 0.7%
44,100 Bank Austria AG .................................... 1,708,745
GERMANY - 1.0%
5,390 Sto AG ............................................. 2,535,674
------------
Total preferred stocks - Series D - 1.7% ........... 4,244,419
------------
Total investments - Series D - 98.1% ............... 242,432,338
Cash and other assets less liabilities - 1.9% ...... 4,593,243
------------
Total net assets - Series D - 100.0% ............... $247,025,581
============
- --------------------------------------------------------------------------------
At December 31, 1996, Series D's investment concentration by industry was as
follows:
Banking ................................ 10.9%
Capital Equipment ...................... 6.4%
Chemicals .............................. 0.4%
Construction & Housing ................. 0.8%
Consumer Durables ...................... 7.3%
Consumer Nondurables ................... 8.0%
Electrical and Electronics ............. 4.1%
Energy Sources ......................... 5.9%
Financial Services ..................... 11.8%
Health & Personal Care ................. 3.8%
Materials .............................. 14.0%
Merchandising .......................... 2.4%
Multi-industry ......................... 7.3%
Real Estate ............................ 2.0%
Services ............................... 5.4%
Telecommunications ..................... 4.3%
Trade .................................. 0.4%
Transportation ......................... 0.3%
Utilities .............................. 0.8%
Cash, short-term instruments and
other assets, less liabilities ....... 3.7%
------
Total net assets ....................... 100.0%
======
SEE ACCOMPANYING NOTES.
32
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES E (HIGH GRADE INCOME)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES PREFERRED STOCK VALUE
- --------------------------------------------------------------------------------
ELECTRIC & GAS COMPANIES - 0.3%
15,900 Georgia Power Capital Trust, $1.9375 ............... $397,500
CORPORATE BONDS
---------------------------
AIR TRANSPORTATION - 3.7%
$2,500,000 Southwest Airlines Company, 7.875% - 2007 .......... 2,646,875
$1,800,000 United Airlines, 11.21% - 2014 ..................... 2,335,500
------------
4,982,375
BANKS - 14.2%
ABN AMRO Bank NV,
$1,000,000 7.55% - 2006 ..................................... 1,036,250
$1,500,000 7.30% - 2026 ..................................... 1,428,750
$2,750,000 Abbey National PLC, 6.69% - 2005 ................... 2,698,438
$2,000,000 BCH Cayman Islands, Ltd., 7.70% - 2006 ............. 2,065,000
$3,000,000 Bank of America, 9.70% - 2000 ...................... 3,296,250
$3,500,000 Bank of New York, Inc., 6.50% - 2003 ............... 3,438,750
$2,000,000 Malayan Bank of New York, 7.125% - 2005 ............ 1,987,500
$3,150,000 Santander Financial Issuances, Ltd., 7.00% - 2006 .. 3,130,313
------------
19,081,251
BROKERS, DEALERS & SERVICES - 6.0%
$3,250,000 Lehman Brothers, Inc., 7.25% - 2003 ................ 3,266,250
$5,000,000 Morgan Stanley Group, Inc., 7.25% - 2023 ........... 4,756,250
------------
8,022,500
CABLE SYSTEMS - 5.0%
$3,100,000 Rogers Cablesystems, Ltd, 9.625% - 2002 ............ 3,247,250
$2,000,000 TCI, 7.875% - 2013 ................................. 1,825,000
$1,750,000 Viacom, Inc., 8.00% - 2006 ......................... 1,701,875
------------
6,774,125
CONSUMER GOODS & SERVICES - 5.5%
$1,500,000 Semi-Tech Corporation, 0% - 20031 .................. 986,250
$1,500,000 Nike, Inc., 6.375% - 2003 .......................... 1,471,875
$5,000,000 Sears Roebuck Acceptance Corporation, 6.41% - 2001 . 4,943,750
------------
7,401,875
ELECTRONICS - 2.5%
$3,300,000 Pioneer Standards Electronics, Inc., 8.50% - 2006 .. 3,357,750
ENTERTAINMENT - 4.2%
$2,000,000 Harrah's Operating Company, Inc. 8.75% - 2000 ...... $2,042,500
1,250,000 Showboat, Inc., 13.50% - 2003 ...................... 1,378,125
2,200,000 Station Casinos, Inc., 10.125% - 2006 .............. 2,205,500
------------
5,626,125
FINANCE - 0.7%
1,000,000 Countrywide Capital, 8.00% - 2026 .................. 987,500
FOOD & BEVERAGES - 4.4%
1,750,000 Chiquita Brands International, Inc., 10.25% - 2006 . 1,863,750
1,500,000 Coca-Cola Enterprises, Inc., 6.70% - 2036(5) ....... 1,515,000
400,000 FEMSA Fomento Economico Mexicano SA, 9.50% - 1997 .. 405,500
2,000,000 Panamerican Beverages, Inc., 8.125% - 2003 ......... 2,050,000
------------
5,834,250
FUNERAL HOMES - 1.7%
2,250,000 Loewen Group International, Inc., 8.25% - 2003 ..... 2,278,125
INSURANCE - 3.4%
1,750,000 American RE Corporation, 7.45% - 2026 .............. 1,747,813
2,700,000 Home Holdings, Inc., 7.75% - 1998 .................. 1,188,000
1,650,000 Travelers Capital Trust, 7.75% - 2036 .............. 1,600,500
------------
4,536,313
MEDIA - 1.8%
2,250,000 Time Warner, Inc., 9.125% - 2013 ................... 2,421,563
MISCELLANEOUS - 1.3%
1,750,000 Securitized Asset Sales, Inc., 7.50% - 2025 CMO .... 1,750,154
MOTOR VEHICLES & EQUIPMENT - 5.3%
4,000,000 Chrysler-Auburn Hills Trust, 12.00% - 2020 ......... 6,035,000
1,000,000 Ford Motor Company, 7.25% - 2008 ................... 1,010,000
------------
7,045,000
NATURAL GAS COMPANIES - 1.0%
1,300,000 El Paso Natural Gas Company, 6.75% - 2003 .......... 1,290,250
OIL & GAS COMPANIES - 1.2%
1,500,000 Seagull Energy Corporation, 8.625% - 2005 .......... 1,556,250
SEE ACCOMPANYING NOTES.
33
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES E (HIGH GRADE INCOME)
PRINCIPAL MARKET
AMOUNT CORPORATE BONDS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
PAPER & LUMBER PRODUCTS - 1.4%
$1,750,000 Domtar, Inc., 9.50% - 2016 ......................... $1,920,625
PUBLISHING & PRINTING - 2.5%
625,000 Golden Books Publishing, Inc. 7.65% - 2002 ......... 564,063
2,700,000 Valassis Inserts, Inc., 9.375% - 1999 .............. 2,781,000
------------
3,345,063
REAL ESTATE - 1.5%
1,000,000 Chelsea GCA Realty, Inc., 7.75% - 2001 ............. 1,021,250
1,000,000 Simon DeBartolo Group Ltd., 6.875% - 2006 .......... 972,500
------------
1,993,750
SANITARY SERVICES - 1.5%
2,000,000 Waste Management, 7.10% - 2026(5) .................. 2,060,000
STEEL & METAL PRODUCTS - 1.0%
1,250,000 AK Steel Corporation, 10.75% - 2004 ................ 1,362,500
TOBACCO PRODUCTS - 0.5%
675,000 Dimon, Inc., 8.875% - 2006 ......................... 706,219
TRANSPORTATION - 0.8%
1,000,000 Union Pacific Resources Group, Inc., 7.50% - 2026 .. 1,017,500
------------
Total corporate bonds - Series E - 71.1% ........... 95,351,063
GOVERNMENT AND GOVERNMENT AGENCY SECURITIES
-------------------------------------------
CANADIAN GOVERNMENT AGENCIES - 0.4%
500,000 British Columbia Province, 6.50% - 2026 ............ 463,750
U.S. GOVERNMENT AGENCIES - 12.0%
Federal Home Loan Mortgage Corporation,
3,000,000 8.82% - 2004(1) .................................. 3,055,350
1,000,000 8.00% - 2006 CMO ................................. 1,052,143
1,127,896 8.80% - 2020 CMO ................................. 1,152,979
3,250,000 9.00% - 2020 CMO ................................. 3,306,373
1,250,000 6.50% - 2021 CMO ................................. 1,139,582
661,027 7.00% - 2022 CMO ................................. 588,365
Federal National Mortgage Association,
1,700,000 0% - 2004(1) ..................................... 1,668,363
1,700,000 6.75% - 2021 CMO ................................. 1,677,952
1,000,000 8.00% - 2021 CMO ................................. 1,022,942
PRINCIPAL
AMOUNT OR
NUMBER GOVERNMENT AND GOVERNMENT MARKET
OF SHARES AGENCY SECURITIES (CONTINUED) VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (CONTINUED)
Government National Mortgage Association,
$444,212 9.50% - 2009 ..................................... $476,707
$379,788 9.50% - 2020 ..................................... 405,711
$556,928 9.00% - 2021 ..................................... 584,511
------------
16,130,978
U.S. GOVERNMENT SECURITIES - 7.5%
$5,000,000 U.S. Treasury Bonds, 6.50% - 2006 .................. 5,025,000
U.S. Treasury Notes,
$3,000,000 5.625% - 1998 .................................... 2,986,170
$2,000,000 5.75% - 1998 ..................................... 1,994,780
------------
10,005,950
------------
Total government and government agency securities -
Series E - 19.9% ................................. 26,600,678
------------
Total investments - Series E - 91.3% ............... 122,349,241
Cash and other assets, less liabilities -
Series E - 8.7% .................................. 11,691,870
------------
Total net assets - Series E - 100.0% ............... $134,041,111
============
SERIES J (EMERGING GROWTH)
COMMON STOCKS
--------------------------------
ADVERTISING - 1.1%
35,500 Omnicom Group, Inc. ................................ $1,624,125
BANKS & TRUSTS - 1.3%
30,000 State Street Boston Corporation .................... 1,935,000
BIOTECHNOLOGY - 2.4%
21,000 Amgen, Inc.* ....................................... 1,141,875
32,800 Biogen, Inc.* ...................................... 1,271,000
31,000 Centocor, Inc.* .................................... 1,108,250
------------
3,521,125
BROKERAGE - 2.1%
95,500 Schwab (Charles) Corporation ....................... 3,056,000
BUSINESS SERVICES - 4.5%
33,500 APAC Teleservices, Inc.* ........................... 1,285,563
22,000 Cintas Corporation ................................. 1,292,500
49,000 Concord EFS, Inc.* ................................. 1,384,250
40,625 HA-LO Industries, Inc.* ............................ 1,117,188
29,500 Paychex, Inc. ...................................... 1,517,406
------------
6,596,907
SEE ACCOMPANYING NOTES.
34
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES J (EMERGING GROWTH) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
CHEMICALS - SPECIALTY - 2.0%
34,500 Praxair, Inc. ...................................... $1,591,313
23,000 Sigma-Aldrich ...................................... 1,436,062
------------
3,027,375
COMMUNICATIONS - EQUIPMENT - 6.1%
23,000 Ascend Communications, Inc.* ....................... 1,428,875
27,200 Aspect Telecommunications* ......................... 1,727,200
31,500 Checkpoint Systems, Inc. ........................... 779,625
36,000 DSP Communications, Inc.* .......................... 697,500
61,000 Tellabs, Inc.* ..................................... 2,295,125
30,100 U.S. Robotics Corporation* ......................... 2,167,200
------------
9,095,525
COMPUTER SOFTWARE - 17.0%
47,000 BMC Software, Inc.* ................................ 1,944,625
18,000 CBT Group PLC-ADR* ................................. 976,500
36,250 Cadence Design Systems, Inc.* ...................... 1,440,938
49,000 Cambridge Technology Partners, Inc.* ............... 1,644,562
33,000 Clarify, Inc.* ..................................... 1,584,000
52,000 Cognos, Inc.* ...................................... 1,462,500
17,500 Electronics for Imaging, Inc.* ..................... 1,439,375
32,000 HBO & Company ...................................... 1,900,000
32,250 McAfee Associates* ................................. 1,419,000
42,000 Pairgain Technologies, Inc.* ....................... 1,278,375
47,000 Parametric Technology Corporation* ................. 2,414,625
42,000 Peoplesoft, Inc.* .................................. 2,013,375
34,000 Project Software & Development* .................... 1,440,750
10,000 Rational Software Corporation* ..................... 395,625
17,000 Remedy Corporation* ................................ 913,750
26,500 Veritas Software Corporation* ...................... 1,318,375
35,500 Viasoft, Inc.* ..................................... 1,677,375
------------
25,263,750
COMPUTER SYSTEMS - 2.5%
45,500 Dell Computer Corporation* ......................... 2,417,188
30,000 SCI Systems, Inc.* ................................. 1,338,750
------------
3,755,938
CONSUMER SERVICES - 1.5%
31,000 Apollo Group, Inc.* ................................ 1,036,563
35,000 Stewart Enterprises, Inc. (CL. A) .................. 1,190,000
------------
2,226,563
CONSUMER STAPLES - 1.0%
57,000 Rexall Sundown, Inc.* .............................. 1,549,688
ENTERTAINMENT - 3.1%
47,000 Circus Circus Enterprises, Inc.* ................... 1,615,625
64,000 International Game Technology ...................... 1,168,000
83,000 Mirage Resorts, Inc.* .............................. 1,794,875
------------
4,578,500
FINANCIAL SERVICES - 1.7%
37,000 Franklin Resources, Inc. ........................... $2,529,875
HEALTH CARE - HMO - 0.5%
13,400 Oxford Health Plans* ............................... 784,738
HEALTH CARE - 4.1%
43,500 Cardinal Health, Inc. .............................. 2,533,875
28,500 OccuSystems, Inc.* ................................. 769,500
49,000 Omnicare, Inc. ..................................... 1,574,125
17,500 Quintiles Transnational Corporation* ............... 1,159,375
------------
6,036,875
HOSPITAL SUPPLIES/MANAGEMENT - 1.5%
59,000 Healthsouth Corporation* ........................... 2,278,875
HOTEL/MOTEL - 1.0%
25,500 HFS, Inc.* ......................................... 1,523,625
INSURANCE - 3.6%
55,250 AFLAC, Inc. ........................................ 2,361,938
66,000 SunAmerica, Inc. ................................... 2,928,750
------------
5,290,688
MANUFACTURING - 1.3%
23,500 Illinois Tool Works ................................ 1,877,062
MEDICAL PRODUCTS - 1.8%
27,000 Guidant Corporation ................................ 1,539,000
44,500 Hologic, Inc.* ..................................... 1,101,375
------------
2,640,375
OFFICE EQUIPMENT & SUPPLIES - 0.7%
38,500 Viking Office Products, Inc.* ...................... 1,027,468
OIL & GAS DRILLING - 0.7%
23,000 Noble Affiliates, Inc. ............................. 1,101,125
OIL & GAS EQUIPMENT & SERVICES - 4.4%
33,000 Ensco International, Inc.* ......................... 1,600,500
78,500 Global Marine, Inc.* ............................... 1,619,062
18,500 Smith International, Inc.* ......................... 830,187
28,500 Tidewater, Inc. .................................... 1,289,625
13,000 Transocean Offshore, Inc. .......................... 814,125
15,000 Varco International, Inc.* ......................... 346,875
------------
6,500,374
OIL & GAS EXPLORATION - 2.4%
21,100 Anadarko Petroleum Corporation ..................... 1,366,225
42,000 Sonat, Inc. ........................................ 2,163,000
------------
3,529,225
PACKAGING & CONTAINERS - 0.6%
21,500 Sealed Air Corporation* ............................ 894,937
SEE ACCOMPANYING NOTES.
35
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES J (EMERGING GROWTH) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
PHARMACEUTICALS - 3.2%
67,000 Dura Pharmaceuticals, Inc.* ........................ $3,199,250
32,000 Jones Medical Industries, Inc. ..................... 1,172,000
9,500 Medicis Pharmaceuticals Corporation ................ 418,000
------------
4,789,250
POLLUTION CONTROL - 1.9%
49,750 United States Filter Corporation* .................. 1,579,563
36,000 United Waste Systems, Inc.* ........................ 1,237,500
------------
2,817,063
RESTAURANTS - 2.0%
50,500 Landry's Seafood Restaurants* ...................... 1,079,438
22,000 Outback Steakhouse, Inc.* .......................... 588,500
38,250 Papa John's International, Inc.* ................... 1,290,938
------------
2,958,876
RETAIL - 5.8%
32,500 Bed Bath & Beyond, Inc.* ........................... 788,125
19,500 CDW Computer Centers, Inc.* ........................ 1,156,594
30,250 Consolidated Stores Corporation .................... 971,781
37,500 Dollar General Corporation ......................... 1,200,000
42,000 Kohl's Corporation* ................................ 1,648,500
16,500 Nine West Group, Inc.* ............................. 765,187
80,250 Staples, Inc.* ..................................... 1,449,515
17,500 Tiffany & Company .................................. 640,937
------------
8,620,639
SEMI-CONDUCTORS - 7.2%
22,500 Altera Corporation* ................................ 1,635,469
57,000 Analog Devices, Inc.* .............................. 1,930,875
44,500 Atmel Corporation* ................................. 1,474,062
42,000 KLA Instruments Corporation* ....................... 1,491,000
34,000 Linear Technology Corporation ...................... 1,491,750
25,000 Novellus Systems, Inc.* ............................ 1,354,687
37,000 Xilinx, Inc.* ...................................... 1,362,062
------------
10,739,905
TELECOMMUNICATIONS - 0.7%
43,500 360 Communications Company* ........................ 1,005,938
TEXTILES - APPAREL - 1.5%
27,000 Jones Apparel Group, Inc. .......................... 1,009,125
23,500 Tommy Hilfiger Corporation* ........................ 1,128,000
------------
2,137,125
TRANSPORTATION - 0.6%
28,000 Illinois Central Corporation ....................... 896,000
------------
Total common stocks - Series J - 91.8% ............. 136,210,534
Cash and other assets, less liabilities -
Series J - 8.2% .................................. 12,210,754
------------
Total net assets - Series J - 100.0% ............... $148,421,288
============
SERIES K (GLOBAL AGGRESSIVE BOND)
PRINCIPAL MARKET
AMOUNT GOVERNMENT OBLIGATIONS VALUE
- --------------------------------------------------------------------------------
ARGENTINA - 2.5%
$500,000 Republic of Argentina, 5.25% - 2023 ................ $315,625
AUSTRALIA - 6.8%
400,000 Commonwealth of Australia, 9.00% - 2004(2) ......... 349,240
700,000 New South Wales Treasury Corporation,
6.50% - 2006(2) .................................. 514,974
------------
864,214
BRAZIL - 4.8%
$826,027 Government of Brazil C, 4.50% - 2014 ............... 610,487
COSTA RICA - 1.9%
$300,000 Banco Costa Rica, 6.25% - 2010 ..................... 238,500
DOMINICAN REPUBLIC - 3.3%
$550,000 Central Bank of Dominican Republic, 6.375% - 2024 .. 419,375
GREECE - 3.9%
120,000,000 Hellenic Republic, 14.00% - 2003(2) ................ 493,259
HUNGARY - 2.0%
40,000,000 Government of Hungary, 21.00% - 1999(2) ............ 252,496
JORDAN - 4.6%
$1,000,000 Kingdom of Jordan, 4.00% - 2023 .................... 592,500
NEW ZEALAND - 3.6%
650,000 New Zealand Government, 6.50% - 2000(2) ............ 452,679
POLAND - 4.3%
1,675,000 Government of Poland, 16.00% - 1998(2) ............. 551,889
PORTUGAL - 8.0%
Obrig Do Tes Medio Prazo,
45,000,000 11.875% - 2000(2) ................................ 337,263
80,000,000 11.875% - 2005(2) ................................ 675,533
------------
1,012,796
SOUTH AFRICA - 2.1%
600,000 Electricity Supply Commission, 11.00% - 2008(2) .... 93,913
1,000,000 Republic of South Africa, 12.00% - 2005(2) ......... 174,846
------------
268,759
SPAIN - 2.9%
40,000,000 Bonos Y Oblig Del Estado, 10.15% - 2006(2) ......... 375,322
------------
Total government obligations - Series K - 50.7% .... 6,447,901
SEE ACCOMPANYING NOTES.
36
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES K (GLOBAL AGGRESSIVE BOND) (CONTINUED)
PRINCIPAL MARKET
AMOUNT CORPORATE BONDS VALUE
- --------------------------------------------------------------------------------
CANADA - 8.3%
$500,000 CHC Helicopter, 11.50% - 2002 ...................... $512,500
500,000 Roger's Communication, Inc., 10.50% - 2006(2) ...... 380,804
200,000 Stelco, Inc., 10.40% - 2009(2) ..................... 172,465
------------
1,065,769
CZECH REPUBLIC - 4.0%
6,000,000 CEZ, a.s., 11.30% - 2005(2) ........................ 222,741
7,700,000 Skofin, S.R.O., a.s., 11.625% - 1998(2) ............ 284,211
------------
506,952
DENMARK - 8.8%
3,500,000 Nykredit, 7.00% - 2026(2) .......................... 558,620
3,500,000 Realkredit Danmark, 7.00% - 2026(2) ................ 556,128
------------
1,114,748
THAILAND - 3.1%
9,500,000 Italian-Thai Development Company, 12.50% - 2005(2) . 398,952
UNITED STATES - 3.5%
$250,000 Chiquita Brands International, Inc., 10.25% - 2006 . 267,500
$241,896 Residential Asset Securitization Trust, 7.50% - 2011 176,688
------------
444,188
------------
Total corporate bonds - Series K - 27.7% ........... 3,530,609
SHORT-TERM INVESTMENTS
---------------------------------------
GREECE - 3.0%
Hellenic Treasury Bills,
75,000,000 0%, 01-31-97(2) .................................. 301,025
25,000,000 0%, 05-31-97(2) .................................. 96,477
------------
397,502
INDONESIA - 7.2%
1,000,000,000 Asia Pulp & Paper, 0%, 04-29-972 ................ 403,193
1,200,000,000 Chase Manhattan Bank Time Deposit,
14.00%, 1-16-97(2) ............................ 507,936
------------
911,129
SLOVAKIA - 3.7%
15,000,000 European Bank for Research & Development,
12.50%, 08-19-97(2) .............................. 469,534
UNITED STATES - 3.7%
$500,000 U.S. Treasury Bills, 5.20%, 12-11-97 ............... 475,080
------------
Total short-term investments - Series K - 17.6% .... 2,253,245
------------
Total investments - Series K - 96.1% ............... $12,231,755
WRITTEN OPTIONS - (0.1%)
$826,027 Call Option on Government of Brazil C Bond, strike
price 72.75 USD - January 1997 (premium $9,147) .. (17,937)
Cash and other assets, less liabilities -
Series K - 4.0% .................................. 506,077
------------
Total net assets - Series K - 100.0% ............... $12,719,895
============
SERIES M (SPECIALIZED ASSET ALLOCATION)
CORPORATE BONDS
------------------------
AIRLINES - 0.3%
$100,000 United Airlines, Inc., 9.35% - 2016 ................. $111,869
BANKS & CREDIT - 0.6%
250,000 NationsBank Corporation, 7.25% - 2025 .............. 240,938
BROKERAGE - 0.7%
250,000 Merrill Lynch & Company, Inc., 8.00% - 2007 ........ 266,562
COMMUNICATIONS - 0.2%
40,000 News American Holdings, 8.625% - 2003 .............. 43,200
40,000 TCI Communications, Inc., 8.00% - 2005 ............. 39,100
------------
82,300
FINANCIAL SERVICES - 0.3%
125,000 MCN Investment Corporation, 6.32% - 2003 ........... 122,500
INDUSTRIAL SERVICES - 1.8%
200,000 Martin Marietta Technology, 7.375% - 2013 .......... 200,000
500,000 Sears Roebuck Acceptance, 6.70% - 2006 ............. 488,125
------------
688,125
PETROLEUM - 0.3%
110,000 Occidental Petroleum Corporation, 6.24% - 2000 ..... 108,625
TRANSPORTATION - NON RAIL - 1.3%
500,000 Airborn Freight Corporation, 7.35% - 2005 .......... 493,125
------------
Total corporate bonds - Series M - 5.5% ............ 2,114,044
SEE ACCOMPANYING NOTES.
37
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES M (SPECIALIZED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCK VALUE
- --------------------------------------------------------------------------------
AUTO PARTS & SUPPLIES - 2.8%
10,100 Arvin Industries, Inc. ............................. $249,975
6,800 Dana Corporation ................................... 221,850
3,100 Eaton Corporation .................................. 216,225
3,000 Modine Manufacturing Company ....................... 80,250
14,100 Simpson Industries ................................. 153,558
3,900 Standard Products Company .......................... 99,450
3,200 Walbro Corporation ................................. 58,400
------------
1,079,708
BROADCAST MEDIA - 2.5%
4,000 A.H. Belo Corporation .............................. 139,500
2,000 Chris-Craft Industries, Inc. ....................... 83,750
1,200 TCI Satellite Entertainment, Inc. .................. 11,850
12,000 Tele-Communications, Inc.* ......................... 156,750
5,000 Time Warner, Inc. .................................. 187,500
10,000 U.S. West Media Group* ............................. 185,000
6,000 Viacom, Inc.* ...................................... 207,000
------------
971,350
BUILDING MATERIALS - 3.6%
4,200 Ameron International Corporation ................... 216,825
500 Armstrong World Industries, Inc. ................... 34,750
3,050 Butler Manufacturing Company ....................... 123,525
8,100 Crane Company ...................................... 234,900
6,500 Jacobs Engineering Group* .......................... 153,563
16,500 Schuller Corporation ............................... 175,312
10,000 TJ International, Inc. ............................. 232,500
9,500 Thomas Industries, Inc. ............................ 198,313
------------
1,369,688
COMPUTER SYSTEMS - 4.2%
10,000 American Power Conversion Corporation* ............. 272,500
4,000 Compaq Computer Corporation* ....................... 297,000
4,200 Dell Computer Corporation* ......................... 223,125
1,800 Hewlett-Packard Company ............................ 90,450
1,200 International Business Machines Corporation ........ 181,200
1,000 Quantum Corporation* ............................... 28,625
4,300 SCI Systems, Inc.* ................................. 191,888
7,000 Sun Microsystems, Inc.* ............................ 179,812
9,100 Tandem Computers, Inc.* ............................ 125,125
------------
1,589,725
ELECTRONICS - 3.7%
5,000 Bell Industries* ................................... 106,875
9,200 CTS Corporation .................................... 393,300
8,400 Fluke (John) Manufacturing Company ................. 374,850
5,300 Harris Corporation ................................. 363,713
10,000 Zero Corporation ................................... 200,000
------------
1,438,738
MACHINERY - 4.0%
600 Applied Power, Inc. ................................ $23,775
3,000 Bearings, Inc. ..................................... 83,625
1,600 Briggs & Stratton Corporation ...................... 70,400
2,400 Donaldson Company, Inc. ............................ 80,400
3,200 Dover Corporation .................................. 160,800
4,200 Duriron Company, Inc. .............................. 113,925
4,500 GATX Corporation ................................... 218,250
3,000 Goulds Pumps, Inc. ................................. 68,813
5,650 Graco, Inc. ........................................ 138,425
2,100 Kaydon Corporation ................................. 98,962
3,200 Lindsay Manufacturing Company ...................... 149,600
4,300 Parker-Hannifin Corporation ........................ 166,625
4,700 Trinova Corporation ................................ 170,962
------------
1,544,562
MINING & METALS - 2.4%
9,500 Asarco, Inc. ....................................... 236,313
10,300 Ashland Coal, Inc. ................................. 285,825
6,800 Brush Wellman, Inc. ................................ 111,350
2,000 Handy & Harman ..................................... 35,000
3,500 Phelps Dodge Corporation ........................... 236,250
------------
904,738
RECREATION - 3.6%
12,400 Brunswick Corporation .............................. 297,600
11,300 Callaway Golf Company .............................. 324,875
5,200 Harcourt General, Inc. ............................. 239,850
4,100 Harley Davidson, Inc. .............................. 192,700
8,600 King World Productions, Inc.* ...................... 317,125
------------
1,372,150
RESTAURANTS - 2.5%
3,000 Applebees International, Inc. ...................... 82,500
3,500 CKE Restaurants, Inc. .............................. 126,000
9,000 International Dairy Queen, Inc.* ................... 180,000
8,000 Luby's Cafeterias, Inc. ............................ 159,000
10,000 Ruby Tuesday, Inc.* ................................ 185,000
20,000 Ryan's Family Steak House, Inc.* ................... 137,500
5,000 Wendy's International, Inc. ........................ 102,500
------------
972,500
STEEL - 2.2%
2,600 Carpenter Technology Corporation ................... 95,225
3,100 Cleveland Cliffs, Inc. ............................. 140,662
6,000 Commercial Metals Company .......................... 180,750
8,500 Oregon Steel Mills, Inc. ........................... 142,375
8,200 Quanex Corporation ................................. 224,475
5,200 Steel Technologies, Inc. ........................... 68,900
------------
852,387
SEE ACCOMPANYING NOTES.
38
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERMEIS M (SPECIALIZED ASSET ALLOCATION) (CONTINUED)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS - 2.3%
2,400 Ameritech Corporation .............................. $145,500
2,000 Bell Atlantic Corporation .......................... 129,500
2,900 BellSouth Corporation .............................. 117,087
3,100 GTE Corporation .................................... 141,050
1,000 Nynex Corporation .................................. 48,125
1,200 Pacific Telesis Group .............................. 44,100
2,500 Southern New England Telecommunications ............ 97,187
3,400 Sprint Corporation ................................. 135,575
366 360 Communications Company* ........................ 8,464
------------
866,588
------------
Total common stocks - Series M - 33.8% ............. 12,962,134
GOVERNMENT & GOVERNMENT AGENCY SECURITIES
-----------------------------------------
U.S. GOVERNMENT AGENCIES - 11.5%
Federal Home Loan Mortgage Corporation,
$63,206 6.0% - 2006 ...................................... 61,130
$250,000 7.0% - 2020 ...................................... 246,438
$100,000 7.0% - 2021 ...................................... 97,472
Federal National Mortgage Association,
$3,000,000 5.25% - 3-21-97 .................................. 2,964,840
$189,222 6.5% - 2008 ...................................... 172,175
$392,755 6.5% - 2018 ...................................... 375,934
$170,000 6.95% - 2020 ..................................... 163,166
$160,000 7.5% - 2020 ...................................... 159,509
$150,000 8.8% - 2025 ...................................... 156,656
$90,000 Financing Corporation, 0% - 2010 ................... 33,693
------------
4,431,013
U.S. GOVERNMENT SECURITIES - 3.2%
$775,000 U.S. Treasury Bond, 6.0% - 2026 .................... 705,343
U.S. Treasury Notes,
$375,000 6.38% - 2002 ..................................... 377,622
$100,000 5.875% - 2005 .................................... 96,415
$50,000 6.5% - 2005 ...................................... 50,315
------------
1,229,695
------------
Total U.S. government & government agencies -
Series M - 14.7% ................................. 5,660,708
NUMBER REAL ESTATE MARKET
OF SHARES INVESTMENT TRUSTS VALUE
- --------------------------------------------------------------------------------
14,600 BRE Properties, Inc. ............................... $361,350
15,200 Federal Realty Investment Trust .................... 412,300
9,400 First Union Real Estate Investment Trust ........... 115,150
4,400 HRE Properties ..................................... 79,200
5,354 Homestead Village, Inc.* ........................... 97,041
3,592 Homestead Village, Inc. Warrants ................... 29,185
5,100 MGI Properties, Inc. ............................... 112,200
25,700 New Plan Realty Trust .............................. 652,138
3,900 Pennsylvania Real Estate Investment Trust .......... 95,062
5,000 Santa Anita Realty Enterprises, Inc. ............... 131,250
32,600 Security Capital Pacific Trust ..................... 745,725
26,100 United Dominion Realty Trust ....................... 404,550
14,100 Washington Real Estate Investment Trust ............ 246,750
11,800 Weingarten Realty Investors ........................ 479,375
------------
Total real estate investment trusts -
Series M - 10.3% ................................. 3,961,276
FOREIGN STOCKS
--------------------------------------
BELGIUM - 6.6%
50 Bekaert SA ......................................... 31,718
600 Cementbedrijven Cimenteries ........................ 54,495
1,550 Delhaize - Le Lion ................................. 91,982
1,900 Electrabel ......................................... 449,212
1,750 Fortis AG .......................................... 280,423
900 Gevaert Photo Productions .......................... 62,334
700 Groupe Bruxelles Lambert ........................... 90,022
1,050 Kredietbank ........................................ 343,780
1,050 Petrofina SA ....................................... 333,863
650 Royale Belgium ..................................... 134,033
500 Solvay SA .......................................... 305,766
700 Tractebel Investment International ................. 325,599
500 Union Miniere* ..................................... 33,843
------------
2,537,070
GERMANY - 6.8%
214 Allianz AG Holding ................................. 384,645
6,419 BASF AG ............................................ 245,746
4,365 Bayer AG ........................................... 176,882
1,198 Continental AG ..................................... 21,649
5,050 Daimler-Benz AG* ................................... 345,709
86 Degussa AG ......................................... 39,063
4,108 Deutsche Bank AG ................................... 191,391
7,189 Dresdner Bank AG ................................... 214,582
SEE ACCOMPANYING NOTES.
39
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES M (SPECIALIZED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
OF SHARES FOREIGN STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
GERMANY, CONTINUED
43 Friedrich Grohe AG-Vorzugsak ....................... $11,998
471 Heidelberger Zement AG ............................. 37,959
1,070 Hochtief AG ........................................ 42,005
86 Linde AG ........................................... 52,177
1,113 Merck KGAA ......................................... 39,974
43 Muenchener Rueckversicherungs-Gesellschaft AG ...... 104,214
428 Preussag AG ........................................ 96,647
728 SAP AG ............................................. 99,437
6,162 Siemens AG ......................................... 285,567
3,766 Veba AG ............................................ 216,267
------------
2,605,912
HONG KONG - 3.1%
14,000 Bank of East Asia .................................. 62,262
16,000 Cathay Pacific Airways ............................. 25,236
16,000 Cheung Kong Holdings ............................... 142,211
16,000 China Light & Power Company ........................ 71,157
36,000 Chinese Estates .................................... 40,026
3,000 Dicksons Concept International ..................... 11,248
5,000 Elec & Eltek International Holdings ................ 1,099
5,591 Evergo China Holdings Limited* ..................... 932
10,000 Hong Kong & Shanghai Hotels ........................ 18,875
74,850 Hong Kong Telecommunications ....................... 120,476
17,000 Hong Kong & China Gas .............................. 32,857
26,000 Hutchinson Whampoa Limited ......................... 204,202
4,000 Johnson Elect ...................................... 11,067
3,000 Kumagai Gumi ....................................... 3,491
3,000 Lai-Sun Garment International ...................... 4,771
500 Melco International Develop ........................ 174
27,000 Oriental Press Group ............................... 12,130
5,000 Peregrine Investments Holdings ..................... 8,565
6,000 Shon Tak Holdings .................................. 3,995
14,000 Sun Hung Kai Properties ............................ 171,493
5,000 Swire Pacific, Ltd. ................................ 47,673
105,000 Tai Cheung Holdings ................................ 99,095
11,000 Wing Lung Bank ..................................... 74,660
------------
1,167,695
ITALY - 5.8%
12,650 Assicurazioni Gererali ............................. 239,189
9,000 Banco Ambrosiano Vento ............................. 21,605
37,000 Banco Commerciale Italiane ......................... 67,162
2,500 Benetton Group SPA ................................. 31,552
37,500 Credito Italiano ................................... 41,088
19,000 Edison SPA ......................................... 119,961
70,000 Fiat SPA ........................................... 211,312
14,000 Fiat SPA-Private Preferred ......................... 23,065
115,977 Ina-Instituto Naz Assicuraz ........................ 150,720
12,500 Instituto Banc San Paolo Tori ...................... 76,455
11,441 Instituto Mobiliare Italiano ....................... 97,818
23,000 Mediobanca ......................................... 123,811
51,800 Montedison SPA* .................................... 35,226
42,500 Olivetti Group* .................................... 14,954
85,000 Pirelli PSA ........................................ 157,366
4,500 Ras-Riun Adriat Di Sicurta ......................... 41,878
4,000 Sirti SPA .......................................... 24,203
138,200 Telecom Italia Mobile SPA .......................... 348,568
27,614 Telecom Italia Mobile-DRNC ......................... 39,319
20,000 Telecom Italia-RNC ................................. 38,935
130,000 Telecom Italia-SPA ................................. 336,863
------------
2,241,050
JAPAN - 9.0%
7,000 Bank of Yokohama Limited ........................... 45,231
6,000 Daiei, Inc. ........................................ 45,748
8 East Japan Railway Company ......................... 35,909
700 Fanuc .............................................. 22,374
9,000 Fuji Bank, Ltd. .................................... 131,042
1,000 Fuji Photo Film .................................... 32,911
7,000 Fujitsu, Ltd. ...................................... 65,133
6,000 Furukawa Electric Company .......................... 28,379
8,000 Hitachi Ltd. (Hit. Seisakusho) ..................... 74,438
6,000 Hokuriku Bank ...................................... 29,362
2,000 Honda Motor Company, Ltd. .......................... 57,034
7,000 Industrial Bank of Japan ........................... 121,220
1,000 Ito-Yokado Company, Ltd. ........................... 43,422
3,000 Itoham Foods ....................................... 18,558
13,000 Japan Airlines* .................................... 68,881
6,000 Japan Energy Corporation ........................... 16,283
13,000 Kawasaki Heavy Industries .......................... 53,649
1,000 KAO Corporation .................................... 11,631
6,000 Komatsu, Ltd. ...................................... 49,108
2,000 Komori Corporation ................................. 42,388
2,000 Marui Company, Ltd. ................................ 36,013
8,000 Matsushita Electric Industrial Company, Ltd. ....... 130,266
9,000 Mitsubishi Corporation ............................. 93,047
11,000 Mitsubishi Heavy Industrial, Ltd. .................. 87,189
12,000 Mitsubishi Materials Corporation ................... 48,385
2,000 Mori Seiki ......................................... 27,570
2,000 NEC Corporation .................................... 24,123
2,000 Nippon Comsys Corporation .......................... 22,745
13,000 Nippon Oil Company, Ltd. ........................... 66,641
3,000 Nippon Shokubai K.K. Company ....................... 22,228
3,000 Nippondenso Company, Ltd. .......................... 72,112
6,000 Normura Securities Company, Ltd. ................... 89,946
13,000 NSK Limited ........................................ 78,625
2,000 Onward Kashiyama Company, Ltd. ..................... 28,086
1,100 Oyo Corporation .................................... 47,670
2,000 Sakura Bank, Ltd. .................................. 14,267
1,000 Sankyo Company, Ltd. ............................... 28,259
1,000 Secom .............................................. 60,395
SEE ACCOMPANYING NOTES.
40
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES M (SPECIALIZED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
OF SHARES FOREIGN STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
JAPAN, CONTINUED
500 Sega Enterprises ................................... $16,800
10,000 Sekisui House, Ltd. ................................ 101,663
12,000 Shimizu Corporation ................................ 89,429
4,000 Shin-Etsu Chemical Company ......................... 72,715
11,000 Sumitiomo Bank ..................................... 158,266
18,000 Sumitomo Chemical Company .......................... 71,181
7,000 Sumitomo Heavy Industries* ......................... 21,229
3,000 Sumitomo Marine & Fire ............................. 18,609
2,000 Taisho Pharmaceutical .............................. 47,041
10,000 The Bank of Tokyo-Mitsubishi ....................... 185,233
7,000 Tokai Bank ......................................... 72,973
3,000 Tokyo Dome Corporation ............................. 52,210
8,500 Tokyo Electric Power ............................... 186,008
2,000 Tokyo Style ........................................ 27,914
13,000 Tokyu Corporation .................................. 73,697
1,000 Tostem Corporation ................................. 27,570
2,000 Toyoda Automatic Loom Works ........................ 37,391
6,000 Toyota Motor Corporation ........................... 172,137
12,000 Yamaichi Securities ................................ 53,244
------------
3,455,578
------------
Total foreign stocks - Series M - 31.3% ............ 12,007,305
FOREIGN WARRANTS
---------------------------
HONG KONG - 0.0%
1,500 Hong Kong and China Gas-Warrants 9-30-97 ........... 834
1,000 Kumagai Gumi-Warrants 6-30-98 ...................... 427
5,700 Oriental Press Group-Warrants 10-02-98 ............. 405
1,000 Peregrine Investment Holdings-Warrants 5-15-98 ..... 320
------------
Total foreign warrants - Series M - 0.0% ........... 1,986
TEMPORARY CASH INVESTMENTS
-------------------------------------
353,000 Vista Federal Money Market Fund .................... 353,000
------------
Total temporary cash - Series M - 0.9% ............. 353,000
------------
Total investments - Series M - 96.5% ............... 37,060,453
Cash & other assets, less liabilities - 3.5% ....... 1,335,470
------------
Total net assets - Series M - 100.0% ............... $38,395,923
============
PRINCIPAL MARKET
AMOUNT CORPORATE BONDS VALUE
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE - 0.2%
$35,000 B.E. Aerospace, 9.875% - 2006 ...................... $36,531
AUTO PARTS & SUPPLIES - 0.2%
50,000 Speedy Muffler King, Inc., 10.875% - 2006 .......... 53,500
BANKS & CREDIT - 0.4%
100,000 Bankers Trust-NY, 7.25% - 2003 ..................... 102,000
BROADCAST MEDIA - 0.2%
50,000 Young Broadcasting Corporation, 10.125% - 2005 ..... 51,125
CHEMICALS - SPECIALTY - 0.5%
50,000 Agricultural Minerals & Chemicals, 10.75% - 2003 ... 53,312
50,000 IMC Fertilizer Group, Inc., 9.45% - 2011 ........... 58,000
------------
111,312
ELECTRIC UTILITIES - 2.6%
50,000 El Paso Electric Company, 8.90% - 2006 ............. 52,125
100,000 Florida Power & Light Company, 5.70% - 1998 ........ 99,625
140,000 Midwest Power System, 7.125% - 2003 ................ 143,325
100,000 Monongahela Power, 8.50% - 2022 .................... 106,125
50,000 Southern California Edison, 6.50% - 2001 ........... 49,625
110,000 Texas Utilities, 5.875% - 1998 ..................... 109,587
50,000 Wisconsin Electric Power, 5.875% - 1997 ............ 50,000
------------
610,412
ENTERTAINMENT - 0.3%
25,000 Six Flags Theme Parks, 0% - 2005(1) ................ 23,469
49,588 United Artists Theatre, 9.30% - 2016 ............... 46,117
------------
69,586
FINANCIAL SERVICES - 0.2%
50,000 Trump Atlantic City, 11.25% - 2006 ................. 49,375
INDUSTRIAL SERVICES - 8.1%
50,000 Allied Waste North America, 10.25% - 2006 .......... 52,625
100,000 American Safety Razor Company, 9.875% - 2005 ....... 105,875
50,000 Building Materials Corporation, 0% - 2004(1) ....... 43,250
50,000 Chancellor Broadcasting, 9.375% - 2004 ............. 50,750
SEE ACCOMPANYING NOTES.
41
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
PRINCIPAL MARKET
AMOUNT CORPORATE BONDS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
INDUSTRIAL SERVICES, CONTINUED
$50,000 Coinmach Corporation, 11.75% - 2005 ................ $53,750
80,000 Columbia/HCA Healthcare, 8.85% - 2007 .............. 90,200
50,000 Communications & Power Industry, 12.00% - 2005 ..... 55,750
50,000 Consol Cigar, 10.50% - 2003 ........................ 52,438
50,000 Doane Products Company, 10.625% - 2006 ............. 53,250
50,000 Dominion Textile USA, 9.25% - 2006 ................. 51,000
50,000 Dual Drilling Company, 9.875% - 2004 ............... 54,188
50,000 Freeport McMoran Resource Partners, LP, 7.00% - 2008 48,063
50,000 Fundy Cable Ltd., 11.00% - 2005 .................... 53,000
25,000 Gaylord Container Corporation, 12.75% - 2005 ....... 27,438
50,000 Hayes Wheels International, Inc., 11.00% - 2006 .... 54,250
50,000 Haynes International, Inc., 11.625% - 2004 ......... 52,625
50,000 Herff Jones, Inc., 11.00% - 2005 ................... 53,875
50,000 HMC Acquisition Properties, 9.00% - 2007 ........... 50,625
50,000 Host Marriott Travel Plaza, 9.50% - 2005 ........... 52,125
25,000 K & F Industries, 13.75% - 2001 .................... 26,312
50,000 Kelley Oil & Gas Corporation, 10.375% - 2006 ....... 51,875
50,000 Lenfest Communications, 8.375% - 2005 .............. 48,375
50,000 Loehmann's, Inc., 11.875% - 2003 ................... 52,375
50,000 Owens & Minor, Inc., 10.875% - 2006 ................ 53,625
50,000 Petroleum Heat & Power, 12.25% - 2005 .............. 55,750
50,000 Portola Packaging, Inc., 10.75% - 2005 ............. 52,000
100,000 Price/Costco, Inc., 7.125% - 2005 .................. 100,000
100,000 Raytheon Company, 6.5% - 2005 ...................... 97,500
30,000 Rio Hotel & Casino, Inc., 10.625% - 2005 ........... 31,350
50,000 Rowan Companies, 11.875% - 2001 .................... 53,312
30,000 Sea Containers Ltd., 12.5% - 2004 .................. 33,075
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES CORPORATE BONDS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
INDUSTRIAL SERVICES, CONTINUED
$100,000 Tele-Communications, Inc., 8.75% - 2023 ............ $95,000
$50,000 Tractor, Inc., 10.875% - 2001 ...................... 53,312
$25,000 UNC, Inc., 11.00% - 2006 ........................... 26,687
------------
1,885,625
MISCELLANEOUS - 0.2%
$50,000 McDonald's Corporation, 6.625% - 2005 .............. 49,188
PACKAGING & CONTAINERS - 0.1%
$25,000 Plastic Containers, Inc. Sr., 10.00% - 2006 ........ 25,813
PAPER & FOREST PRODUCTS - 0.4%
$100,000 Celulosa Arauco Y Constitucion SA, 7.00% - 2007 .... 96,375
REAL ESTATE - 0.2%
$50,000 B.F. Saul REIT, 11.625% - 2002 ..................... 53,750
TELECOMMUNICATIONS - 0.5%
$50,000 Lucent Technologies, Inc., 6.90% - 2001 ............ 50,500
$50,000 Teleport Communications, 9.875% - 2006 ............. 53,125
------------
103,625
TEXTILES - 0.2%
$50,000 Dan River, Inc., 10.125% - 2003 .................... 50,625
------------
Total corporate bonds - Series N - 14.3% ........... 3,348,842
COMMON STOCKS
--------------------------------------
Advertising - 0.1%
200 Omnicom Group, Inc. ................................ 9,150
AEROSPACE & DEFENSE - 0.9%
513 Boeing Company ..................................... 54,528
200 Harsco Corporation ................................. 13,700
400 Lockheed Martin Corporation ........................ 36,600
200 McDonnell Douglas Corporation ...................... 12,800
200 Northrop Grumman Corporation ....................... 16,550
300 Raytheon Company ................................... 14,438
300 Rockwell International Corporation ................. 18,263
500 Sunstrand Corporation .............................. 21,250
400 United Technologies Corporation .................... 26,400
------------
214,529
AIRLINES - 0.2%
600 Alaska Air Group, Inc.* ............................ 12,600
300 AMR Corporation* ................................... 26,438
800 KLM Royal Dutch Air Lines NV ADR ................... 22,300
------------
61,338
SEE ACCOMPANYING NOTES.
42
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
APPLIANCES - 0.1%
300 Black & Decker Corporation ......................... $9,037
100 National Presto Industries ......................... 3,738
------------
12,775
AUTOMOBILES - 0.8%
400 Echlin, Inc. ....................................... 12,650
2,100 Ford Motor Company ................................. 66,938
1,000 General Motors Corporation ......................... 55,750
300 Genuine Parts Company .............................. 13,350
700 Honda Motor Company, Ltd. ADR ..................... 39,638
------------
188,326
AUTO PARTS & SUPPLIES - 0.1%
200 Arvin Industries, Inc. ............................. 4,950
400 TRW, Inc. .......................................... 19,800
------------
24,750
BANKS & TRUSTS - 2.6%
600 Banc One Corporation ............................... 25,800
612 Chase Manhattan Corporation ........................ 54,621
800 Citicorp ........................................... 82,400
800 Corestates Financial Corporation ................... 41,500
200 Fifth Third Bancorp ................................ 12,563
500 First Chicago NBD Corporation ...................... 26,875
800 First Security Corporation ......................... 27,000
700 First Union Corporation ............................ 51,800
600 Keycorp ............................................ 30,300
300 Mellon Bank Corporation ............................ 21,300
400 J.P. Morgan & Company, Inc. ........................ 39,050
500 NationsBank Corporation ............................ 48,875
615 PNC Bank Corporation ............................... 23,140
800 Southtrust Corporation ............................. 27,900
300 State Street Boston Corporation .................... 19,350
500 U.S. Bancorp Oregon ................................ 22,469
200 Wells Fargo & Company .............................. 53,950
------------
608,893
BEVERAGES - 1.4%
1,000 Anheuser-Busch Companies, Inc. ..................... 40,000
1,400 Cadbury Schweppes PLC ADR .......................... 47,775
200 Coca-Cola Enterprises, Inc. ........................ 9,700
3,400 Coca-Cola Company .................................. 178,925
2,000 PepsiCo, Inc. ...................................... 58,500
------------
334,900
BROADCAST MEDIA - 0.5%
300 A.H. Belo Corporation (Cl. A) ...................... 10,463
300 Chris-Craft Industries, Inc.* ...................... 12,563
400 Comcast Corporation (Cl. A) ........................ 7,125
300 TCA Cable TV, Inc. ................................. 9,038
1,100 Time Warner, Inc. .................................. 41,250
900 U.S. West Media Group* ............................. 16,650
600 Viacom, Inc. (Cl. B)* .............................. 20,925
------------
118,014
BROKERAGE - 0.1%
300 Edwards (A.G.),.Inc. ............................... $10,087
300 Paine Webber Group, Inc. ........................... 8,438
500 Salomon, Inc. ...................................... 23,533
600 Schwab (Charles) Corporation ....................... 19,200
------------
61,258
BUILDING MATERIALS - 0.1%
400 Calmat Company ..................................... 7,500
100 Granite Construction, Inc. ......................... 1,900
200 Jacobs Engineering Group ........................... 4,725
------------
14,125
BUILDING & REAL ESTATE - 0.1%
500 Masco Corporation .................................. 18,000
CHEMICALS - BASIC - 1.2%
1,300 Akzo Nobel NV ADR .................................. 87,750
500 Dow Chemical Company ............................... 39,188
900 du Pont (E.I.) de Nemours & Company ................ 84,938
200 FMC Corporation* ................................... 14,025
200 Great Lakes Chemical Corporation ................... 9,350
300 IMC Global, Inc. ................................... 11,738
400 Morton International, Inc. ......................... 16,300
200 Olin Corporation ................................... 7,525
------------
270,814
CHEMICALS - DIVERSIFIED - 0.2%
400 Cabot Corporation .................................. 10,050
1,000 Monsanto Company ................................... 38,875
------------
48,925
CHEMICALS - SPECIALTY - 0.7%
800 Crompton & Knowles Corporation ..................... 15,400
300 Dexter Corporation ................................. 9,563
600 Ivax Corporation ................................... 6,150
200 Loctite Corporation ................................ 12,175
500 Lubrizol Corporation ............................... 15,500
600 Minnesota Mining & Manufacturing Company ........... 49,725
200 Rohm & Haas Company ................................ 16,325
200 Sequa Corporation (Cl. A)* ......................... 7,850
900 Witco Corporation .................................. 27,450
------------
160,138
COMMUNICATION EQUIPMENT - 0.2%
400 Tellabs, Inc.* ..................................... 15,050
400 U.S. Robotics Corporation* ......................... 28,800
------------
43,850
SEE ACCOMPANYING NOTES.
43
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 1.5%
400 America Online, Inc.* .............................. $13,300
500 Automatic Data Processing, Inc. .................... 21,438
800 BMC Software, Inc.* ................................ 33,100
300 Cadence Design Systems, Inc.* ...................... 11,925
200 Ceridian Corporation* .............................. 8,100
300 Computer Associates International, Inc. ............ 14,925
600 First Data Corporation ............................. 21,900
900 Informix Corporation* .............................. 18,338
1,800 Microsoft Corporation* ............................. 148,725
800 Oracle Corporation* ................................ 33,400
500 Parametric Technology Company* ..................... 25,688
400 Structural Dynamics Research Corporation* .......... 8,000
------------
358,839
COMPUTER SYSTEMS - 1.7%
400 Bay Networks, Inc.* ................................ 8,350
800 Cisco Systems, Inc.* ............................... 50,900
300 Comdisco, Inc. ..................................... 9,525
400 Compaq Computer Corporation* ....................... 29,700
600 Dell Computer Corporation* ......................... 31,875
200 Digital Equipment Corporation* ..................... 7,275
1,200 Hewlett-Packard Company ............................ 60,300
700 International Business Machines Corporation ........ 105,700
200 Micro Warehouse, Inc.* ............................. 2,350
800 Seagate Technology, Inc.* .......................... 31,600
200 Storage Technology Corporation* .................... 9,525
200 Stratus Computer, Inc.* ............................ 5,450
600 Sun Microsystems, Inc.* ............................ 15,413
500 3Com Corporation* .................................. 36,688
------------
404,651
COSMETICS - 0.1%
300 International Flavors & Fragrances, Inc. ........... 13,500
DISTRIBUTION CONSUMER PRODUCTS - 0.1%
200 McKesson Corporation ............................... 11,200
DRUGS - 0.5%
300 Amgen, Inc.* ....................................... 16,313
200 Centocor, Inc.* .................................... 7,150
400 Genzyme Corporation* ............................... 8,700
1,600 Johnson & Johnson .................................. 79,600
------------
111,763
ELECTRICAL EQUIPMENT - 1.3%
400 Emerson Electric Company ........................... 38,700
2,400 General Electric Company ........................... 237,300
400 Hubbell, Inc. (Cl. B) .............................. 17,300
------------
293,300
ELECTRIC UTILITIES - 2.2%
500 Allegheny Power System, Inc. ....................... $15,187
500 CMS Energy Corporation ............................. 16,812
700 Duke Power Company ................................. 32,375
1,700 Edison International ............................... 33,787
500 Empresa Nacional Electricidad Chile SA ADR ......... 7,750
1,100 Empresa Nacional De Electricidad SA ADR ............ 77,000
600 Entergy Corporation ................................ 16,650
500 FPL Group, Inc. .................................... 23,000
400 Florida Progress Corporation ....................... 12,900
700 Idaho Power Company ................................ 21,787
500 Illinova Corporation ............................... 13,750
500 Ipalco Enterprises, Inc. ........................... 13,625
800 Midamerican Energy Company ......................... 12,700
500 Nipsco Industries, Inc. ............................ 19,813
700 New York State Electric & Gas Corporation .......... 15,138
1,000 Niagara Mohawk Power Corporation* .................. 9,875
700 Pacific Gas & Electric Company ..................... 14,700
600 Portland General Corporation ....................... 25,200
400 Potomac Electric Power Company ..................... 10,300
700 Scana Corporation .................................. 18,725
900 Southern Company ................................... 20,363
500 Southwestern Public Services Company ............... 17,688
600 Teco Energy, Inc. .................................. 14,475
800 Texas Utilities Company ............................ 32,600
800 Unicom Corporation ................................. 21,700
------------
517,900
ELECTRONICS - 1.5%
1,150 Analog Devices, Inc.* .............................. 38,956
200 Arrow Electronics, Inc. ............................ 10,700
400 Hitachi Ltd. ADR ................................... 37,000
600 Molex, Inc. ........................................ 23,475
900 Motorola, Inc. ..................................... 55,238
2,000 Phillips Electronics NV ADR ........................ 80,000
200 Solectron Corporation* ............................. 10,675
200 Symbol Technologies, Inc.* ......................... 8,850
200 Teleflex, Inc. ..................................... 10,425
1,000 Thermo Electron Corporation* ....................... 41,250
200 Varian Associates, Inc. ............................ 10,175
700 Xilinx, Inc.* ...................................... 25,769
------------
352,513
ELECTRONIC SYSTEMS - 0.2%
300 Honeywell, Inc. .................................... 19,725
600 Oy Nokia AB Corporation ADR* ....................... 34,500
------------
54,225
SEE ACCOMPANYING NOTES.
44
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
ENERGY SERVICES - 0.1%
200 Halliburton Company ................................ $12,050
ENTERTAINMENT - 0.5%
500 Circus Circus Enterprises, Inc.* ................... 17,187
400 Cracker Barrel Old Country Store, Inc. ............. 10,150
800 Mirage Resorts, Inc.* .............................. 17,300
914 The Walt Disney Company ............................ 63,638
------------
108,275
ENVIRONMENTAL - 0.2%
400 U.S.A. Waste Services, Inc.* ....................... 12,750
700 WMX Technologies, Inc. ............................. 22,838
------------
35,588
FINANCIAL - BANKS, COMMERCIAL - 1.1%
1,500 Australia & New Zealand Banking Group Ltd. ADR ..... 46,688
805 Banco Frances Del Rio De La Plata ADR .............. 22,138
200 Bancorp Hawaii, Inc. ............................... 8,400
400 City National Corporation .......................... 8,650
300 Crestar Financial Corporation ...................... 22,313
300 First Bank Systems, Inc. ........................... 20,475
700 First Tennessee National Corporation ............... 26,250
400 Fleet Financial Group, Inc. ........................ 19,950
200 Mercantile Bancorporation .......................... 10,275
300 Mercantile Bankshares Corporation .................. 9,600
800 Northern Trust Corporation ......................... 29,000
800 Norwest Corporation ................................ 34,800
------------
258,539
FINANCIAL SERVICES - 1.4%
800 American Express Company ........................... 45,200
1,000 Banco Bilbao Viz ADR ............................... 53,375
400 Bear Stearns Companies, Inc. ....................... 11,150
300 H & R Block, Inc. .................................. 8,700
200 Dean Witter Discovery & Company .................... 13,250
27 Echelon International Corporation, Inc.* ........... 417
300 Federal Home Loan Mortgage Corporation ............. 33,038
1,300 Federal National Mortgage Association .............. 48,425
400 Franklin Resources, Inc. ........................... 27,350
200 Greentree Financial Corporation .................... 7,725
200 Household International, Inc. ...................... 18,450
200 Merrill Lynch & Company, Inc. ...................... 16,300
200 Morgan Stanley Group, Inc. ......................... 11,425
800 Travelers Group, Inc. .............................. 36,300
------------
331,105
FOOD PROCESSING - 1.2%
1,716 Archer-Daniels-Midland Company ..................... $37,752
200 CPC International, Inc. ............................ 15,500
500 ConAgra, Inc. ...................................... 24,875
300 Dole Foods, Inc. ................................... 10,163
300 General Mills ...................................... 19,013
500 Grand Metropolitan PLC ADR ......................... 15,813
700 Heinz (H.J.) Company ............................... 25,025
500 IBP, Inc. .......................................... 12,125
500 Kellogg Company .................................... 32,812
300 Ralston-Purina Group ............................... 22,013
700 Sara Lee Corporation ............................... 26,075
300 Smucker (J.M.) Company (Cl. A) ..................... 5,288
200 Unilever NY ADR .................................... 35,050
200 Universal Foods Corporation ........................ 7,050
------------
288,554
FOOD WHOLESALERS - 0.1%
32 Earthgrains Company ................................ 1,672
300 McCormick & Company, Inc. .......................... 7,069
------------
8,741
GENERAL MERCHANDISERS - 0.4%
700 Price/Costco, Inc. ................................. 17,588
3,500 Wal-Mart Stores, Inc. .............................. 80,063
------------
97,651
HEALTH CARE SERVICES - 0.2%
400 Apria Healthcare Group, Inc.* ...................... 7,500
600 Vencor, Inc.* ...................................... 18,975
------------
26,475
HOSPITAL SUPPLIES/HOSPITAL MANAGEMENT - 0.3%
200 Becton, Dickinson & Company ........................ 8,675
900 Columbia/HCA Healthcare Corporation ................ 36,675
600 Healthsouth Corporation* ........................... 23,175
100 Pacificare Health Systems, Inc. (Cl. B)* ........... 8,525
------------
77,050
HOTEL/MOTEL - 0.2%
500 HFS, Inc.* ......................................... 29,875
200 ITT Corporation* ................................... 8,675
------------
38,550
HOUSEHOLD FURNISHINGS & APPLIANCES - 0.0%
200 Leggett & Platt. Inc. .............................. 6,925
HOUSEHOLD PRODUCTS - 0.6%
400 Colgate-Palmolive Company .......................... 36,900
1,000 Procter & Gamble Company ........................... 107,500
------------
144,400
SEE ACCOMPANYING NOTES.
45
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
HOUSING - HOME BUILDING - 0.2%
700 PPG Industries, Inc. ............................... $39,288
INSURANCE - 1.6%
550 AFLAC, Inc. ........................................ 23,513
244 Aetna, Inc. ........................................ 19,520
300 American Financial Group ........................... 11,325
600 American General Corporation ....................... 24,525
800 American International Group, Inc. ................. 86,600
100 Cigna Corporation .................................. 13,663
800 Chubb Corporation .................................. 43,000
200 General Re Corporation ............................. 31,550
200 Hartford Steam Boiler Inspection & Insurance Company 9,275
200 Loews Corporation .................................. 18,850
200 Pacificare Health Systems, Inc. (Cl. A)* ........... 16,250
200 Progressive Corporation Ohio ....................... 13,475
400 SunAmerica, Inc. ................................... 17,750
300 Torchmark Corporation .............................. 15,150
100 Transatlantic Holdings, Inc. ....................... 8,050
200 Unum Corporation ................................... 14,450
300 United Healthcare Corporation ...................... 13,500
------------
380,446
INTEGRATED PETROLEUM - DOMESTIC - 0.6%
300 Atlantic-Richfield Company ......................... 39,750
300 British Petroleum PLC ADR .......................... 42,413
300 National Fuel Gas Company .......................... 12,375
500 Occidental Petroleum Corporation ................... 11,688
800 USX Marathon Group ................................. 19,100
500 Unocal Corporation ................................. 20,313
------------
145,639
INTEGRATED PETROLEUM - INTERNATIONAL - 2.8%
900 Chevron Corporation ................................ 58,500
700 Ente Nazionale Idrocarburi Spa ADR* ................ 36,138
1,700 Exxon Corporation .................................. 166,600
600 Mobil Corporation .................................. 73,350
1,200 Royal Dutch Petroleum Company ADR .................. 204,900
400 Shell Transport & Trading Company ADR .............. 40,950
400 Texaco, Inc. ....................................... 39,250
1,000 Total S.A. ADR* .................................... 40,250
------------
659,938
MACHINERY - 0.4%
300 Caterpillar, Inc. .................................. $22,575
200 Danaher Corporation ................................ 9,325
600 Deere & Company .................................... 24,375
600 Duriron Company, Inc. .............................. 16,275
300 Tecumseh Products Company .......................... 17,213
------------
89,763
MANUFACTURING - 0.6%
600 AlliedSignal, Inc. ................................. 40,200
200 Cross (A.T.) Company (Cl. A) ....................... 2,325
600 Gencorp, Inc. ...................................... 10,875
200 Illinois Tool Works, Inc. .......................... 15,975
400 Pall Corporation ................................... 10,200
3,000 Tompkins PLC ADR ................................... 55,500
------------
135,075
MEDIA & COMMUNICATIONS - 0.1%
600 Banta Corporation .................................. 13,725
MEDICAL - 0.1%
100 Guidant Corporation ................................ 5,700
800 Stryker Corporation ................................ 23,900
------------
29,600
MEDICAL SUPPLIES - 0.3%
700 Baxter International ............................... 28,700
200 Boston Scientific Corporation* ..................... 12,000
300 Medtronic, Inc. .................................... 20,400
------------
61,100
MINING & METALS - 0.4%
500 Aluminum Company of America ........................ 31,875
300 Brush Wellman, Inc. ................................ 4,912
1,300 Barrick Gold Corporation ........................... 37,375
450 Hanna (M.A.) Company ............................... 9,844
500 Placer Dome, Inc. .................................. 10,875
------------
94,881
MISCELLANEOUS - 0.0%
200 American Water Works Company, Inc. ................. 4,125
MISCELLANEOUS BUSINESS SERVICES - 0.6%
300 Browning-Ferris Industries ......................... 7,875
400 Cintas Corporation ................................. 23,500
400 Cognizant Corporation .............................. 13,200
800 Equifax, Inc. ...................................... 24,500
300 Olsten Corporation (The) ........................... 4,537
550 Paychex, Inc. ...................................... 28,291
200 Standard Register Company .......................... 6,500
800 Wallace Computer Services, Inc. .................... 27,600
------------
136,003
SEE ACCOMPANYING NOTES.
46
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
MISCELLANEOUS CONSUMER CYCLICALS - 0.1%
400 Flight Safety International, Inc. .................. $19,112
400 Mattel, Inc. ....................................... 11,100
------------
30,212
MISCELLANEOUS CONSUMER DURABLES - 0.3%
500 Corning, Inc. ...................................... 23,125
400 Eastman Kodak Company .............................. 32,100
200 Tandy Corporation .................................. 8,800
------------
64,025
MISCELLANEOUS CONSUMER PRODUCTS - 0.8%
800 Jones Apparel Group, Inc.* ......................... 29,900
1,100 Philip Morris Companies, Inc. ...................... 123,888
300 Spring Industries, Inc. (Cl. A) .................... 12,900
300 Tambrands, Inc. .................................... 12,263
200 Universal Corporation .............................. 6,425
------------
185,376
MISCELLANEOUS CONSUMER SERVICES - 0.1%
450 CUC International, Inc.* ........................... 10,688
600 Service Corporation International .................. 16,800
------------
27,488
MISCELLANEOUS HEALTH CARE - 0.1%
600 Cardinal Health, Inc. .............................. 34,950
NATURAL GAS - 0.2%
500 Enron Corporation .................................. 21,563
600 Valero Energy Corporation .......................... 17,175
------------
38,738
NATURAL GAS UTILITIES - 0.2%
500 Calenergy, Inc.* ................................... 16,812
500 MCN Corporation .................................... 14,438
500 Washington Gas Light Company ....................... 11,313
------------
42,563
OFFICE EQUIPMENT & SUPPLIES - 0.5%
600 Alco Standard Corporation .......................... 30,975
400 Diebold, Inc. ...................................... 25,150
400 Pitney-Bowes, Inc. ................................. 21,800
600 Xerox Corporation .................................. 31,575
------------
109,500
OIL - 0.8%
1,000 Amerada Hess Corporation ........................... 57,875
700 B.J. Services Company* ............................. 35,700
200 Helmerich & Payne, Inc. ............................ 10,425
200 Murphy Oil Corporation ............................. 11,125
1,100 Ranger Oil, Ltd.* .................................. 10,863
400 Schlumberger Ltd. .................................. 39,950
300 Sonat, Inc. ........................................ 15,450
200 Tosco Corporation .................................. 15,825
------------
197,213
OIL & GAS DRILLING - 0.3%
200 El Paso Natural Gas Company ........................ $10,100
600 Noble Affiliates, Inc. ............................. 28,725
400 Repsol SA ADR ...................................... 15,250
338 Union Pacific Resources Group, Inc. ................ 9,887
------------
63,962
OIL/GAS EQUIPMENT & SERVICES - 0.3%
400 Ensco International, Inc.* ......................... 19,400
800 Global Marine, Inc.* ............................... 16,500
700 Tidewater, Inc. .................................... 31,675
------------
67,575
PACKAGING & CONTAINERS - 0.2%
300 Bemis Company, Inc. ................................ 11,063
700 Sealed Air Corporation* ............................ 29,138
------------
40,201
PAPER - 0.2%
900 International Paper Company ........................ 36,338
400 Wausau Paper Mills Company ......................... 7,400
------------
43,738
PAPER & FOREST PRODUCTS - 0.3%
200 Georgia-Pacific Corporation ........................ 14,400
400 Kimberly-Clark Corporation ......................... 38,100
400 Weyerhaeuser Company ............................... 18,950
------------
71,450
PETROLEUM - 0.1%
800 Phillips Petroleum Company ......................... 35,400
PHARMACEUTICALS - 2.6%
900 Abbott Laboratories ................................ 45,675
1,200 American Home Products Corporation ................. 70,350
900 Bristol-Myers Squibb Company ....................... 97,875
800 Carter-Wallace, Inc. ............................... 12,500
900 Glaxo Wellcome PLC ADR ............................. 28,575
600 Eli Lilly & Company ................................ 43,800
1,500 Merck & Company, Inc. .............................. 118,875
600 Perrigo Company* ................................... 5,475
1,000 Pharmacia & Upjohn, Inc. ........................... 39,625
800 Pfizer, Inc. ....................................... 66,300
200 Scherer R.P. Corporation* .......................... 10,050
400 Schering-Plough Corporation ........................ 25,900
300 Warner Lambert Company ............................. 22,500
300 Watson Pharmaceuticals, Inc.* ...................... 13,481
------------
600,981
SEE ACCOMPANYING NOTES.
47
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
PUBLISHING - 0.2%
400 Dun & Bradstreet Corporation ....................... $9,500
300 Gannett Company, Inc. .............................. 22,462
500 McGraw-Hill Companies, Inc. ........................ 23,063
------------
55,025
RAILROADS - 0.4%
200 Burlington Northern Santa Fe Corporation ........... 17,275
200 CSX Corporation .................................... 8,450
400 Kansas City Southern Industries, Inc. .............. 18,000
200 Norfolk Southern Corporation ....................... 17,500
400 Union Pacific Corporation .......................... 24,050
------------
85,275
RECREATION - 0.2%
400 Brunswick Corporation .............................. 9,600
400 Callaway Golf Company .............................. 11,500
400 Harley Davidson, Inc. .............................. 18,800
------------
39,900
RESTAURANTS - 0.1%
1,500 Brinker International, Inc.* ....................... 24,000
400 Outback Steakhouse, Inc.* .......................... 10,700
------------
34,700
RETAIL - APPAREL - 0.2%
300 Ann Taylor Stores Corporation* ..................... 5,250
500 Gap, Inc. .......................................... 15,063
400 Land's End, Inc.* .................................. 10,600
200 TJX Companies, Inc. ................................ 9,475
------------
40,388
RETAIL - DEPARTMENT STORES - 0.4%
300 Federated Department Stores, Inc.* ................. 10,238
600 Kohls Corporation* ................................. 23,550
500 May Department Stores Company ...................... 23,375
300 Meyer (Fred), Inc.* ................................ 10,650
500 J.C. Penney Company, Inc. .......................... 24,375
------------
92,188
RETAIL - DRUG STORES - 0.1%
600 Revco D.S., Inc.* .................................. 22,200
400 Walgreens Company .................................. 16,000
------------
38,200
RETAIL - FOOD CHAINS - 0.2%
1,300 McDonald's Corporation ............................. 58,825
RETAIL - GENERAL MERCHANDISING - 0.1%
600 Dayton Hudson Corporation .......................... 23,550
RETAIL - GROCERY - 0.2%
600 Albertsons, Inc. ................................... $21,375
300 Kroger Company* .................................... 13,950
300 Vons Companies, Inc.* .............................. 17,963
------------
53,288
RETAIL - SPECIALTY - 0.4%
400 Bed Bath & Beyond, Inc.* ........................... 9,700
200 Circuit City Stores, Inc. .......................... 6,025
200 Fastenal Company ................................... 9,150
800 Home Depot, Inc. ................................... 40,100
600 Staples, Inc.* ..................................... 10,838
500 Toys "R" Us, Inc.* ................................. 15,000
------------
90,813
SECURITY SERVICES - 0.1%
300 Pittston Brink's Group ............................. 8,100
SEMI-CONDUCTORS - 0.8%
300 Altera Corporation* ................................ 21,806
200 Applied Materials, Inc.* ........................... 7,187
400 Atmel Corporation* ................................. 13,250
1,000 Intel Corporation .................................. 130,938
300 Linear Technology Corporation ...................... 13,163
300 Maxim Integrated Products, Inc.* ................... 12,975
------------
199,319
SHOES - 0.1%
400 Nike, Inc. ......................................... 23,900
144 Payless Shoesource, Inc.* .......................... 5,400
------------
29,300
SPECIALTY MERCHANDISERS - 0.6%
2,000 LVMH Moet Hennessylou ADR .......................... 112,000
200 Tiffany & Company .................................. 7,325
500 Viking Office Products, Inc.* ...................... 13,344
------------
132,669
STEEL - 0.2%
600 Carpenter Technology Corporation ................... 21,975
300 Nucor Corporation .................................. 15,300
------------
37,275
SEE ACCOMPANYING NOTES.
48
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS - 3.4%
600 ADC Telecommunications, Inc.* ...................... $18,675
1,500 AT&T Corporation ................................... 65,250
900 Airtouch Communications, Inc.* ..................... 22,725
800 Ameritech Corporation .............................. 48,500
800 Bell Atlantic Corporation .......................... 51,800
1,100 Bellsouth Corporation .............................. 44,412
700 British Telecom PLC ADR ............................ 48,037
100 Cia de Telecomunicaciones de Chile S.A. ADR ........ 10,112
1,200 Ericsson (L.M.) Telecom Company ADR ................ 36,225
300 Federal Signal Corporation ......................... 7,763
1,200 GTE Corporation .................................... 54,600
800 Hong Kong Telecommunications Ltd. ADR .............. 13,000
786 Lucent Technologies ................................ 36,352
1,000 MCI Communications Corporation ..................... 32,688
400 Nextel Communications, Inc., (Cl. A)* .............. 5,225
400 Northern Telecom Limited ........................... 24,750
500 Nynex Corporation .................................. 24,063
1,200 Pacific Telesis Group .............................. 44,100
500 Southern New England Telecommunications Corporation 19,438
500 Sprint Corporation ................................. 19,938
500 Telecom New Zealand ADR ............................ 40,500
700 Telecom Braxileiras SA ADR ......................... 53,550
400 Telefonica De Espana ADR ........................... 27,700
400 360 Communications Company* ........................ 9,250
800 Vodafone Group PLC ADR ............................. 33,100
400 Worldcom, Inc.* .................................... 10,425
------------
802,178
TELEPHONE - 0.7%
600 Century Telephone Enterprises 18,525
1,300 SBC Communications, Inc. 67,275
1,800 Telefonos De Mexico ADR 59,400
400 Telephone & Data Systems, Inc. 14,500
400 U.S. West Communications Group 12,900
------------
172,600
TEXTILES - 0.2%
2,000 Benetton Group SPA ADR ............................. 49,750
TIRE & RUBBER - 0.1%
300 Goodyear Tire & Rubber Company ..................... 15,413
TOBACCO - 0.1%
300 American Brands, Inc. .............................. 14,888
TRANSPORTATION - 0.1%
400 Alexander & Baldwin, Inc. .......................... $10,000
------------
Total common stocks - Series N - 48.3% ............. 11,268,178
GOVERNMENT & GOVERNMENT AGENCY SECURITIES
-----------------------------------------
U.S. GOVERNMENT AGENCIES - 10.2%
Government National Mortgage Association,
$46,584 11.50% - 2013 .................................... 52,036
$121,206 7.00% - 2025 ..................................... 118,537
$85,597 7.50% - 2025 ..................................... 85,939
$55,373 8.00% - 2025 ..................................... 56,215
$190,350 8.50% - 2025 ..................................... 196,940
$126,396 6.50% - 2026 ..................................... 120,549
$353,500 7.00% - 2026 ..................................... 345,730
$271,501 7.00% - 2026 ..................................... 265,606
$99,777 7.50% - 2026 ..................................... 99,808
$397,702 7.50% - 2026 ..................................... 397,825
$250,983 8.00% - 2026 ..................................... 256,078
$246,338 8.50% - 2026 ..................................... 255,155
$135,917 8.50% - 2026 ..................................... 140,799
------------
2,391,217
U.S. GOVERNMENT SECURITIES - 9.5%
U.S. Treasury Bonds,
$35,000 6.875% - 2025 .................................... 35,660
$250,000 7.625% - 2025 .................................... 277,548
U.S. Treasury Notes,
$225,000 5.75% - 1997 ..................................... 225,448
$325,000 6.00% - 1998 ..................................... 326,024
$300,000 6.375% - 1999 .................................... 302,616
$75,000 5.625% - 2000 .................................... 73,644
$100,000 6.25% - 2000 ..................................... 100,417
$425,000 5.625% - 2001 .................................... 416,462
$75,000 5.875% - 2005 .................................... 72,311
$100,000 6.50% - 2005 ..................................... 100,630
$100,000 5.625% - 2006 .................................... 94,571
$175,000 6.50% - 2006 ..................................... 175,875
------------
2,201,206
------------
Total U.S. government & government agency
securities - Series N - 19.7% .................... 4,592,423
MISCELLANEOUS ASSETS
----------------------------------
ASSET-BACKED SECURITIES - 0.2%
$50,000 Airplanes Pass Through Trust (Cl. D), 10.875% - 2019 55,153
SEE ACCOMPANYING NOTES.
49
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES FOREIGN CORPORATE BONDS VALUE
- --------------------------------------------------------------------------------
JAPAN - 1.1%
17,000,000 European Investment Bank, 4.625% - 2003(2) ......... $167,334
5,000,000 Interamer Development Bank, 6.00% - 2001(2) ........ 51,478
3,000,000 KFW International Finance, 6.00% - 1999(2) ......... 29,465
------------
Total foreign bonds - Series N - 1.1% .............. 248,277
FOREIGN GOVERNMENT ISSUES
--------------------------------------
CANADA - 0.3%
42,000 Government Bond, 8.50% - 2002(2) ................... 34,564
60,000 Government Bond, 6.50% - 2004(2) ................... 44,677
------------
79,241
FRANCE - 0.4%
430,000 O.A.T. Government Bond, 8.50% - 2002(2) ............ 97,311
GERMANY - 0.8%
Bundersrepub Deutschland,
130,000 8.375% - 2001(2) ................................. 96,645
125,000 7.375% - 2005(2) ................................. 90,017
------------
186,662
UNITED KINGDOM - 0.2%
29,000 Treasury Bond, 8.00% - 2003(2) ..................... 51,210
------------
Total foreign government issues - Series N - 1.7% .. 414,424
FOREIGN STOCKS
-----------------------------
AUSTRALIA - 0.1%
1,000 CRA Limited ........................................ 15,687
BELGIUM - 0.3%
50 Electrabel ......................................... 11,821
100 Kredietbank ........................................ 32,741
200 Societe Generale de Belgique ....................... 15,678
------------
60,240
DENMARK - 0.3%
1,000 Danisco A/S ........................................ 60,689
FRANCE - 0.7%
400 Axa ................................................ $25,390
200 Eridania Beghin-Say SA ............................. 32,123
111 L'Air Liquide ...................................... 17,295
100 Pinault-Printemps-Redoute SA ....................... 39,587
200 Societe Generale De Paris .......................... 21,582
300 Societe Technip .................................... 28,103
------------
164,080
GERMANY - 1.1%
2,000 Bankgesellschaft Berlin ............................ 36,337
2,000 Bayer A.G. ......................................... 81,045
300 Ckag Colonia Konzern A.G. .......................... 24,976
500 Deutsche Bank A.G. ................................. 23,295
200 M.A.N. A.G. ........................................ 48,212
400 Siemens A.G. ....................................... 18,537
600 Vega A.G. .......................................... 34,456
------------
266,858
HONG KONG - 0.8%
5,000 Cheung Kong Holdings ............................... 44,441
9,000 Hong Kong Electric Holdings Limited ................ 29,904
14,000 Hutchinson Whampoa Limited ......................... 109,955
------------
184,300
ITALY - 0.2%
13,000 Banco Commerciale Italiane ......................... 23,598
10,000 Telecom Italia SPA ................................. 25,912
------------
49,510
JAPAN - 1.8%
7,000 Bridgestone Corporation ............................ 132,679
2,000 Dia Nippon Printing, Ltd. .......................... 34,979
3,000 Kao Corp ........................................... 34,893
3,000 Kuraray Company, Ltd. .............................. 27,656
2,000 Marui Company, Ltd. ................................ 36,012
4,000 Mitsubishi Heavy Inds, Ltd. ........................ 31,705
4,000 Ricoh Corp, Ltd. ................................... 45,834
2,000 Sharp Corp ......................................... 28,431
2,000 Takeda Chemical Inds ............................... 41,871
------------
414,060
MALAYSIA - 0.5%
10,000 Malayan Cement Berhad .............................. 22,965
16,000 Sime Darby Berhad .................................. 63,037
3,000 United Engineers (Malaysia), Ltd. .................. 27,084
------------
113,086
NETHERLANDS - 0.5%
600 CSM NV ............................................. 33,300
1,500 Ing Groep NV ....................................... 53,938
300 Oce-Van Der Grinter NV ............................. 32,537
------------
119,775
SEE ACCOMPANYING NOTES.
50
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES FOREIGN CORPORATE BONDS VALUE
- --------------------------------------------------------------------------------
NEW ZEALAND - 0.1%
10,000 Lion Nathan, Ltd. .................................. $23,952
SINGAPORE - 0.6%
3,000 Cycle & Carriage, Ltd. ............................. 36,674
5,000 Development Bank of Singapore ...................... 67,557
3,000 Singapore Airlines Ltd. ............................ 27,237
------------
131,468
SWEDEN - 0.3%
1,200 Astra AB (Cl. B) ................................... 57,821
SWITZERLAND - 1.0%
20 ABB AG-Bearer ...................................... 24,800
20 Nestle S.A. ........................................ 21,404
27 Novartis* .......................................... 30,444
30 Sig Schweizland .................................... 75,742
80 Union Bank of Switzerland .......................... 69,888
------------
222,278
UNITED KINGDOM - 1.1%
3,600 Abbey National Plc ................................. 47,129
3,000 Barclays Plc ....................................... 51,365
2,000 GKN Plc ............................................ 34,260
3,000 HSBC Holdings Plc .................................. 67,049
22,000 Lonrho, Ltd. ....................................... 46,873
10,000 Tesco Plc .......................................... 60,665
------------
307,341
Total foreign stocks - Series N - 9.4% ............. 2,191,145
TEMPORARY CASH INVESTMENTS
------------------------------------------
372,017 Vista Treasury Institutional Money Market Fund ..... 372,017
------------
Total temporary cash investments - Series N - 1.6% . 372,017
COMMERCIAL PAPER
------------------------------------------
$970,000 Dillard Investment Company, 6.75%, 1-02-97 ......... 969,818
------------
Total commercial paper - Series N - 4.2% ........... 969,818
------------
Total investments - Series N - 100.5% .............. 23,460,277
Liabilities, less cash and other assets -
Series N - (0.5%) ................................ (115,699)
------------
Total net assets - Series N - 100.0% ............... $23,344,578
============
SERIES O (EQUITY INCOME)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES CORPORATE BONDS VALUE
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES - 0.3%
$200,000 El Paso Electric Company, 8.90% - 2006 ............. $208,500
REAL ESTATE - 0.2%
$100,000 B.F. Saul REIT, 11.625% - 2002 ..................... 107,500
------------
Total corporate bonds - Series O - 0.5% ............ 316,000
COMMON STOCKS
------------------------------------------
APPLIANCES - 0.6%
7,500 Whirlpool Corporation .............................. 349,688
AUTO PARTS & SUPPLIES - 0.5%
4,300 Eaton Corporation .................................. 299,925
AUTOMOBILES - 0.9%
4,100 Ford Motor Company ................................. 130,687
4,100 General Motors Corporation ......................... 228,575
5,100 Genuine Parts Company .............................. 226,950
------------
586,212
BANKS & TRUST - 7.9%
6,570 Banc One Corporation ............................... 282,510
4,000 Bankers Trust New York Corporation ................. 345,000
10,308 Chase Manhattan Corporation ........................ 919,989
12,900 Mellon Bank Corporation ............................ 915,900
6,900 J.P. Morgan & Company, Inc. ........................ 673,612
9,700 National City Corporation .......................... 435,288
9,800 PNC Bank Corporation ............................... 368,725
7,800 U.S. Bancorp Oregon ................................ 350,513
2,400 Wells Fargo & Company .............................. 647,400
------------
4,938,937
BEVERAGES - 1.5%
13,200 Anheuser-Busch Companies, Inc. ..................... 528,000
8,400 Brown-Forman Corporation (Cl. B) ................... 384,300
------------
912,300
BUILDING MATERIALS - 0.4%
3,200 Armstrong World Industries, Inc. ................... 222,400
CHEMICALS - BASIC - 3.0%
7,500 Dow Chemical Company ............................... 587,812
7,300 du Pont (E.I.) de Nemours & Company ................ 688,938
2,900 FMC Corporation* ................................... 203,363
8,800 Great Lakes Chemical Company ....................... 411,400
------------
1,891,513
SEE ACCOMPANYING NOTES.
51
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES O (EQUITY INCOME) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
CHEMICALS - SPECIALTY - 3.2%
7,600 Betzdearborn, Inc. ................................. $444,600
11,500 Lubrizol Corporation ............................... 356,500
5,000 Minnesota Mining & Manufacturing Company ........... 414,375
11,600 Nalco Chemical Company ............................. 419,050
12,600 Witco Corporation .................................. 384,300
------------
2,018,825
COSMETICS - 1.0%
14,100 International Flavors & Fragrances, Inc. .......... 634,500
ELECTRIC UTILITIES - 6.7%
6,800 Baltimore Gas & Electric Company ................... 181,900
23,600 Centerior Energy Corporation ....................... 253,700
4,700 DQE, Inc. .......................................... 136,300
9,100 Dominion Resources, Inc. ........................... 350,350
4,100 Duke Power Company ................................. 189,625
9,800 Edison International ............................... 194,775
12,600 Entergy Corporation ................................ 349,650
2,800 Florida Progress Corporation ....................... 90,300
3,100 General Public Utilities Corporation ............... 104,237
9,000 Ohio Edison Company ................................ 204,750
13,600 Pacific Gas & Electric Company ..................... 285,600
16,200 Pacificorp ......................................... 332,100
16,200 Peco Energy Corporation ............................ 409,050
10,100 Public Service Enterprise Group, Inc. .............. 275,225
9,700 Southern Company ................................... 219,462
13,500 Unicom Corporation ................................. 366,188
7,500 Western Resources, Inc. ............................ 231,563
------------
4,174,775
ELECTRICAL EQUIPMENT - 2.9%
8,988 Cooper Industries, Inc. ............................ 378,619
10,600 General Electric Company ........................... 1,048,075
9,700 Hubbell, Inc. (Cl. B) .............................. 419,525
------------
1,846,219
ELECTRONICS - 0.5%
8,500 AMP, Inc. .......................................... 326,188
ELECTRONIC SYSTEMS - 0.4%
3,600 Honeywell, Inc. .................................... 236,700
FINANCIAL - BANKS, COMMERCIAL - 2.0%
6,500 Bank of Boston Corporation ......................... 417,625
8,900 Fleet Financial Group, Inc. ........................ 443,888
4,800 Mercantile Bancshares Corporation .................. 153,600
7,900 Signet Banking Corporation ......................... 242,925
------------
1,258,038
FINANCIAL SERVICES - 3.8%
9,300 American Express Company ........................... $525,450
187 Echelon International Corporation, Inc.* ........... 2,916
11,300 Federal National Mortgage Association .............. 420,925
16,800 H & R Block, Inc. .................................. 487,200
4,700 Student Loan Marketing Association ................. 437,688
11,200 Travelers Group, Inc. .............................. 508,200
------------
2,382,379
FOOD PROCESSING - 5.1%
11,700 General Mills ...................................... 741,487
8,700 Grand Metropolitan Plc ADR ......................... 275,137
13,500 Heinz (H.J.) Company ............................... 484,413
3,400 Kellogg Company .................................... 223,125
15,500 Quaker Oats Company ................................ 590,938
7,100 Sara Lee Corporation ............................... 264,475
3,500 Unilever NY ADR .................................... 613,375
------------
3,192,950
FOOD WHOLESALERS - 0.8%
4,000 Fleming Companies, Inc. ............................ 69,000
17,400 McCormick & Company, Inc. .......................... 409,988
------------
478,988
HOSPITAL SUPPLIES/HOSPITAL MANAGEMENT - 0.5%
10,000 Bausch & Lomb, Inc. ................................ 350,000
HOTEL/MOTEL - 0.6%
9,200 ITT Corporation* ................................... 399,050
INSURANCE - 3.9%
12,600 Alexander & Alexander Services, Inc. ............... 218,925
14,200 American General Corporation ....................... 580,425
4,600 Hilb, Rogal & Hamilton Company ..................... 60,950
4,300 Lincoln National Corporation ....................... 225,750
3,200 Provident Companies, Inc. .......................... 154,800
7,100 Safeco Corporation ................................. 280,006
8,300 St. Paul Companies, Inc. ........................... 486,588
12,200 USF & G Corporation ................................ 254,675
15,300 Willis Corroon Group Plc ADR ....................... 175,950
------------
2,438,069
SEE ACCOMPANYING NOTES.
52
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES O (EQUITY INCOME) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
INTEGRATED PETROLEUM - DOMESTIC - 4.1%
6,300 Amoco Corporation .................................. $507,150
7,400 Atlantic-Richfield Company ......................... 980,500
3,800 British Petroleum PLC ADR .......................... 537,225
3,646 Sun Company, Inc. .................................. 88,871
3,900 Transcanada Pipelines, Ltd. ........................ 68,250
15,700 USX Marathon Group ................................. 374,837
------------
2,556,833
INTEGRATED PETROLEUM - INTERNATIONAL - 5.5%
9,800 Chevron Corporation ................................ 637,000
9,200 Exxon Corporation .................................. 901,600
4,000 Mobil Corporation .................................. 489,000
3,500 Royal Dutch Petroleum Company ADR .................. 597,625
8,000 Texaco, Inc. ....................................... 785,000
------------
3,410,225
MACHINERY - 0.3%
1,800 GATX Corporation ................................... 87,300
4,900 McDermott International, Inc. ...................... 81,462
------------
168,762
MEDIA & COMMUNICATIONS - 0.5%
10,400 R.R. Donnelley & Sons Company ...................... 326,300
MEDICAL SUPPLIES - 0.9%
5,100 Bard (C.R.), Inc. .................................. 142,800
10,500 Baxter International ............................... 430,500
------------
573,300
MINING & METALS - 1.3%
7,400 Newmont Mining Corporation ......................... 331,150
8,000 Reynolds Metals Company ............................ 451,000
------------
782,150
MISCELLANEOUS BUSINESS SERVICES - 0.1%
2 ACNeilsen Corporation* ............................. 30
2,300 Cognizant Corporation .............................. 75,900
------------
75,930
MISCELLANEOUS CONSUMER DURABLES - 1.4%
13,700 Corning, Inc. ...................................... 633,625
2,700 Eastman Kodak Company .............................. 216,675
------------
850,300
MISCELLANEOUS CONSUMER PRODUCTS - 1.4%
3,400 Philip Morris Companies ............................ 382,925
11,700 Tambrands, Inc. .................................... 478,238
------------
861,163
MISCELLANEOUS - 0.2%
3,500 Rouse Company ...................................... 111,125
OFFICE EQUIPMENT & SUPPLIES - 0.2%
1,700 Pitney-Bowes, Inc. ................................. $92,650
OIL & GAS DRILLING - 0.5%
8,900 Repsol SA ADR ...................................... 339,322
PAPER - 0.7%
10,600 International Paper Company ........................ 427,975
PAPER & FOREST PRODUCTS - 3.1%
6,000 Consolidated Papers, Inc ........................... 294,750
8,100 Georgia-Pacific Corporation ........................ 583,200
5,600 James River Corporation of Virginia ................ 185,500
2,700 Kimberly Clark ..................................... 257,175
13,100 Union Camp Corporation ............................. 625,525
------------
1,946,150
PHARMACEUTICALS - 4.8%
9,700 Abbott Laboratories ................................ 492,275
10,600 American Home Products Corporation ................. 621,425
15,595 Pharmacia & Upjohn, Inc. ........................... 617,951
7,000 Smithkline Beecham Plc ADR ......................... 476,000
10,400 Warner-Lambert Company ............................. 780,000
------------
2,987,651
PUBLISHING - 2.9%
4,900 Deluxe Corporation ................................. 160,475
7,100 Dow Jones & Company, Inc. .......................... 240,512
10,900 Dun & Bradstreet ................................... 258,875
3,700 Gannett Company, Inc. .............................. 277,038
6,600 McGraw-Hill Companies, Inc. ........................ 304,425
12,200 Readers Digest Association, Inc., (Cl. A) .......... 491,050
1,300 Readers Digest Association, Inc., (Cl. B) .......... 47,125
------------
1,779,500
RAILROADS - 0.8%
5,800 Union Pacific Corporation .......................... 348,725
1,531 Conrail, Inc. ...................................... 152,525
------------
501,250
RETAIL - DEPARTMENT STORES - 1.4%
6,000 May Department Stores Company ...................... 280,500
12,600 J.C. Penney Company, Inc. .......................... 614,250
------------
894,750
SEE ACCOMPANYING NOTES.
53
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES O (EQUITY INCOME) (CONTINUED)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS - 6.5%
19,000 AT & T Corporation ................................. $826,500
16,100 Alltel Corporation ................................. 505,137
8,000 BCE, Inc. .......................................... 382,000
6,300 Bell Atlantic Corporation .......................... 407,925
11,700 Bellsouth Corporation .............................. 472,388
11,500 Frontier Corporation ............................... 260,187
11,000 GTE Corporation .................................... 500,500
11,100 Pacific Telesis Group .............................. 407,925
7,100 Southern New England Telecommunications Corporation 276,013
------------
4,038,575
TELEPHONE - 0.8%
5,000 SBC Communications, Inc. ........................... 258,750
7,200 U.S. West Communications Group ..................... 232,200
------------
490,950
TOBACCO - 1.8%
12,400 American Brands, Inc. .............................. 615,350
3,600 RJR Nabisco Holdings ............................... 122,400
11,400 UST, Inc. .......................................... 369,075
------------
1,106,825
TRANSPORTATION - MISCELLANEOUS - 0.2%
4,500 Alexander & Baldwin, Inc. .......................... 112,500
------------
Total common stocks - Series O - 85.6% ............. 53,371,842
U.S. GOVERNMENT & GOVERNMENT AGENCY SECURITIES
----------------------------------------------
U.S. GOVERNMENT SECURITIES - 2.6%
U.S. Treasury Notes,
$100,000 6.125% - 1998 .................................... 100,491
$100,000 6.25% - 2000 ..................................... 100,417
$400,000 6.50% - 2001 ..................................... 404,448
$400,000 5.75% - 2003 ..................................... 387,952
$200,000 5.625% - 2006 .................................... 189,142
$100,000 7.00% - 2006 ..................................... 103,876
$400,000 U.S. Treasury Bonds, 6.00% - 2026 .................. 364,048
------------
Total U.S. government & government agency
securities - Series O - 2.6% ..................... 1,650,374
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES REAL ESTATE INVESTMENT TRUSTS VALUE
- --------------------------------------------------------------------------------
2,000 Security Capital Pacific Trust ..................... $45,750
27,236 Simon Debartolo Group, Inc. ........................ 844,316
4,300 Weingarten Realty Investors ........................ 174,688
------------
Total real estate investment trusts -
Series O - 1.7% .................................. 1,064,754
WARRANTS - 0.0%
168 Homestead Village, Inc.* ........................... 1,365
FOREIGN STOCKS
------------------------------------------
SWITZERLAND - 0.8%
451 Novartis* .......................................... 515,262
UNITED KINGDOM - 0.2%
63,200 Lonrho, Ltd. ....................................... 134,652
------------
Total foreign stocks - Series O - 1.0% ............. 649,914
TEMPORARY CASH INVESTMENTS
------------------------------------------
1,029,532 Vista Treasury Institutional Money Market Fund ..... 1,029,532
------------
Total temporary cash investments - Series O - 1.7% . 1,029,532
COMMERCIAL PAPER
------------------------------------------
$765,000 Delaware Funding Corporation, 6.00%, 1-06-97 ....... 764,363
$1,000,000 Dover Corporation, 5.75%, 1-02-97 .................. 996,326
$1,000,000 Dow Jones & Company, Inc., 6.25%, 1-02-97 .......... 999,653
$1,000,000 Shell Oil Company, 6.25%, 1-24-97 .................. 999,826
$1,200,000 Warner-Lambert Company, 6.5%, 1-02-97 .............. 1,199,783
------------
Total commercial paper - Series O - 8.0% ........... 4,959,951
------------
Total investments - Series O - 101.1% .............. 63,043,732
Liabilities in excess of cash and other assets -
Series O - (1.1%) ................................ (666,670)
------------
Total net assets - Series O - 100.0% ............... $62,377,062
============
SEE ACCOMPANYING NOTES.
54
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES S (SOCIAL AWARENESS)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
ADVERTISING - 1.3%
16,000 Omnicom Group, Inc. ................................ $732,000
BANKING & FINANCE - 3.2%
15,400 Banc One Corporation ............................... 662,200
19,200 Bank of New York Company, Inc. ..................... 648,000
15,000 Northern Trust Corporation ......................... 543,750
------------
1,853,950
BEVERAGES - 2.5%
16,300 Coca-Cola Company .................................. 857,788
20,000 PepsiCo, Inc. ...................................... 585,000
------------
1,442,788
BIOTECHNOLOGY - 0.9%
9,000 Amgen, Inc.* ....................................... 489,375
BUSINESS SERVICES - 7.3%
17,000 Automatic Data Processing, Inc. .................... 728,875
17,500 Bisys Group, Inc. .................................. 648,594
10,000 Cintas Corporation ................................. 587,500
19,500 Concord EFS, Inc.* ................................. 550,875
20,625 Ha-Lo Industries, Inc.* ............................ 567,187
15,750 Paychex, Inc. ...................................... 810,141
9,000 Snap-On, Inc. ...................................... 320,625
------------
4,213,797
CHEMICALS - SPECIALTY - 2.5%
18,500 Praxair, Inc. ...................................... 853,312
9,000 Sigma - Aldrich .................................... 561,937
------------
1,415,249
COMMUNICATIONS - EQUIPMENT - 3.1%
8,500 Aspect Telecommunications* ......................... 539,750
19,000 Tellabs, Inc.* ..................................... 714,875
7,000 U.S. Robotics Corporation* ......................... 504,000
------------
1,758,625
COMPUTER SOFTWARE - 9.0%
19,500 Cognos, Inc.* ...................................... 548,437
12,000 Computer Associates ................................ 597,000
6,000 Electronics for Imaging, Inc.* ..................... 493,500
10,500 HBO & Company ...................................... 623,437
15,750 McAfee Associates* ................................. 693,000
11,000 Microsoft Corporation* ............................. 908,875
10,500 Parametric Technology Corporation* ................. 539,438
16,400 Peoplesoft, Inc.* .................................. 786,175
------------
5,189,862
COMPUTER SYSTEMS - 4.9%
14,000 Cisco Systems, Inc. ................................ 890,750
7,000 Compaq Computer Corporation* ....................... 519,750
16,000 Sun Microsystems, Inc.* ............................ 411,000
13,300 3Com Corporation* .................................. 975,888
------------
2,797,388
CONSUMER SERVICES - 3.5%
26,000 Apollo Group, Inc. (Cl. A)* ........................ $869,375
22,500 Service Corporation International .................. 630,000
18,000 Sylvan Learning Systems, Inc.* ..................... 513,000
------------
2,012,375
CONSUMER STAPLES - 1.0%
20,250 Rexall Sundown, Inc.* .............................. 550,547
FINANCIAL SERVICES - 5.0%
7,200 Federal Home Loan Mortgage Corporation ............. 792,900
22,000 Federal National Mortgage Association .............. 819,500
9,500 Finova Group, Inc. ................................. 610,375
19,000 First USA, Inc. .................................... 657,875
------------
2,880,650
HEALTH CARE - HMO - 0.9%
8,900 Oxford Health Plans* ............................... 521,206
HEALTH CARE - 2.1%
12,000 Cardinal Health, Inc. .............................. 699,000
16,000 Omnicare, Inc. ..................................... 514,000
------------
1,213,000
HOSPITAL SUPPLIES/MANAGEMENT - 0.8%
12,500 Healthsouth Corporation* ........................... 482,813
HOUSEHOLD FURNISHINGS - 1.2%
19,600 Leggett & Platt, Inc. .............................. 678,650
HOUSEHOLD PRODUCTS - 2.7%
8,000 Colgate-Palmolive Company .......................... 738,000
7,800 Procter & Gamble Company ........................... 838,500
------------
1,576,500
INSURANCE - 2.4%
6,200 American International Group, Inc. ................. 671,150
16,000 SunAmerica, Inc. ................................... 710,000
------------
1,381,150
MACHINERY - 1.1%
15,000 Deere & Company .................................... 609,375
MANUFACTURING - 1.3%
9,000 Illinois Tool Works ................................ 718,875
MEDICAL PRODUCTS - 1.0%
10,500 Guidant Corporation ................................ 598,500
MEDICAL INSTRUMENTS - 1.3%
10,900 Medtronics, Inc. ................................... 741,200
OFFICE EQUIPMENT & SUPPLIES - 0.7%
15,500 Viking Office Products, Inc.* ...................... 413,656
SEE ACCOMPANYING NOTES.
55
<PAGE>
STATEMENTS OF NET ASSETS
DECEMBER 31, 1996
SERIES S (SOCIAL AWARENESS) (CONTINUED)
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
OIL & GAS EXPLORATION - 3.6%
12,000 Anadarko Petroleum Corporation ..................... $777,000
15,500 Apache Corporation ................................. 548,313
14,900 Sonat, Inc. ........................................ 767,350
------------
2,092,663
PACKAGING & CONTAINERS - 0.5%
7,200 Sealed Air Corporation* ............................ 299,700
PHARMACEUTICALS - 5.9%
24,000 Dura Pharmaceuticals, Inc.* ........................ 1,146,000
13,032 Johnson & Johnson .................................. 648,342
10,400 Merck & Company, Inc. .............................. 824,200
11,900 Schering-Plough Corporation ........................ 770,525
------------
3,389,067
POLLUTION CONTROL - 1.2%
21,750 United States Filter Corporation* .................. 690,563
RESTAURANTS - 3.9%
26,500 Landry's Seafood Restaurants* ...................... 566,437
19,000 Papa John's International, Inc.* ................... 641,250
18,500 Starbucks Corporation* ............................. 529,562
24,000 Wendy's International, Inc. ........................ 492,000
------------
2,229,249
RETAIL - 4.9%
6,250 CDW Computer Centers, Inc.* ........................ 370,703
12,000 Dollar General Corporation ......................... 384,000
12,000 Kohl's Corporation* ................................ 471,000
5,000 Nine West Group, Inc.* ............................. 231,875
20,000 Petsmart, Inc.* .................................... 437,500
30,375 Staples, Inc.* ..................................... 548,648
10,000 Tiffany & Company .................................. 366,250
------------
2,809,976
RETAIL TRADE - 1.5%
21,300 Walgreens Company .................................. 852,000
SEMI-CONDUCTORS - 5.3%
14,500 Applied Materials, Inc.* ........................... 521,094
17,000 Atmel Corporation* ................................. 563,125
7,500 Intel Corporation .................................. 982,031
7,700 KLA Instruments Corporation* ....................... 273,350
4,800 Novellus Systems, Inc.* ............................ 260,100
13,000 Xilinx, Inc.* ...................................... 478,563
------------
3,078,263
TELECOMMUNICATIONS - 0.6%
9,000 Sprint Corporation ................................. 358,875
TEXTILES - APPAREL - 0.6%
7,500 Tommy Hilfiger Corporation* ........................ 360,000
TOYS & SPORTING GOODS - 0.9%
18,500 Mattel, Inc. ....................................... 513,375
PRINCIPAL
AMOUNT OR
NUMBER MARKET
OF SHARES COMMON STOCKS (CONTINUED) VALUE
- --------------------------------------------------------------------------------
TRANSPORTATION - 0.9%
16,500 Illinois Central Corporation ....................... $528,000
UTILITIES - 0.9%
9,500 Consolidated Natural Gas ........................... 524,875
------------
Total common stocks - Series S - 90.4% ............. 51,998,137
CERTIFICATE OF DEPOSIT
------------------------------------------
CERTIFICATE OF DEPOSIT - 0.2%
$100,000 South Shore Bank, 5%, 3-3-97 ....................... 100,000
------------
Total certificate of deposit - Series S - 0.2% ..... 100,000
------------
Total investments - Series S - 90.6% ............... 52,098,137
Cash and other assets, less liabilities -
Series S - 9.4% .................................. 5,398,578
------------
Total net assets - Series S - 100.0% ............... $57,496,715
============
The identified cost of investments owned at December 31, 1996 was the same for
federal income tax and financial statement purposes for Series A, B, C, K and S.
The identified cost of investments for federal income tax purposes for Series D,
E, J, M, N and O was $218,817,069, $123,051,930, $108,447,841, $35,178,909,
$20,642,524, and $52,128,597, respectively.
*Securities on which no cash dividend was paid during the preceding twelve
months. ADR (American Depositary Receipt) CMO (Collateralized Mortgage
Obligation)
1 Deferred interest obligation; currently zero coupon under terms of initial
offering.
2 Principal amount on foreign bond is reflected in local currency (e.g., Danish
krone) while market value is reflected in U.S. dollars.
3 Variable rate security which may be reset the first of each month.
4 Variable rate security which may be reset the first of each quarter.
5 Put bond - a type of specialty bond that gives the holder the right to redeem
to the issuer at certain specified times before maturity.
SEE ACCOMPANYING NOTES.
56
<PAGE>
BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
SERIES D SERIES E
SERIES A SERIES B SERIES C (WORLDWIDE (HIGH GRADE
(GROWTH) (GROWTH-INCOME) (MONEY MARKET) EQUITY) INCOME)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at value
(identified cost $476,701,228,
$677,179,834, $34,582,131,
$218,780,429 and $122,998,024,
respectively) .......................... $658,752,000 $886,901,104 $34,561,899 $242,432,338 $122,349,241
Short-term commercial paper, at
market value or at amortized cost
which approximates market value
(identified cost $898,530, $10,788,103,
$92,611,702, $0 and $0, respectively) .. 898,530 10,788,103 92,578,417 -- --
Cash ..................................... 54,826,926 56,456,638 7,307 7,498,782 9,930,500
Receivables:
Fund shares sold ....................... 855,610 469,673 1,927,247 208,967 134,668
Securities sold -- -- 70,445 6,474,269 46,324
Interest ............................... 158,409 4,156,776 425,620 -- 2,154,046
Dividends .............................. 865,396 1,014,175 -- 137,727 --
Foreign taxes recoverable .............. -- -- -- 134,482 --
------------- ------------- ------------- ------------- ------------
Total assets ......................... $716,356,871 $959,786,469 $129,570,935 $256,886,565 $134,614,779
============= ============= ============= ============= ============
LIABILITIES AND NET ASSETS
Liabilities:
Payable for:
Securities purchased ................. $-- $-- $-- $9,242,676 $--
Fund shares redeemed ................. 1,200,844 2,441,454 820,749 157,685 460,681
Other liabilities:
Management fees .................... 467,334 631,048 56,076 210,219 85,999
Custodian fees ..................... 8,399 7,500 4,120 47,367 2,791
Forward foreign exchange contracts . -- -- -- 114,392 --
Transfer and administration fees ... 28,357 38,160 5,334 8,698 5,419
Professional fees .................. 29,728 34,000 5,000 2,668 6,699
Miscellaneous ...................... 31,651 48,000 7,543 77,279 12,079
------------- ------------- ------------- ------------- ------------
Total liabilities ................ 1,766,313 3,200,162 898,822 9,860,984 573,668
Net Assets:
Paid in capital ...................... 476,200,521 666,852,038 121,964,722 206,377,325 138,273,273
Undistributed net investment income .. 5,364,046 22,620,615 6,760,908 5,665,264 8,629,443
Accumulated undistributed net
realized gain (loss) on sale
of investments and foreign
currency transactions ......... 50,975,219 57,392,384 -- 11,450,403 (12,212,822)
Net unrealized appreciation
(depreciation) in value of
investments and translation
of assets and liabilities in
foreign currency .............. 182,050,772 209,721,270 (53,517) 23,532,589 (648,783)
------------- ------------- ------------- ------------- ------------
Net assets .................. 714,590,558 956,586,307 128,672,113 247,025,581 134,041,111
------------- ------------- ------------- ------------- ------------
Total liabilities
and net assets .......... $716,356,871 $959,786,469 $129,570,935 $256,886,565 $134,614,779
============= ============= ============= ============= ============
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 ............... 29,390,562 27,020,483 10,245,857 40,253,879 11,170,955
Net asset value per share (net assets
divided by shares outstanding) ......... $24.31 $35.40 $12.56 $6.14 $12.00
============= ============= ============= ============= ============
</TABLE>
SEE ACCOMPANYING NOTES.
57
<PAGE>
BALANCE SHEET (CONTINUED)
DECEMBER 31, 1996
<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
$108,447,123, $11,909,824, $35,115,700,
$20,637,586, $52,098,699 and
$40,913,266, respectively) ..............$136,210,534 $12,231,755 $37,060,453 $22,490,459 $58,083,781 $52,098,137
Short-term commercial paper,
at market value or at amortized
cost which approximates market
value (identified cost $0, $0,
$0, $969,818, $4,959,951 and $0,
respectively) .......................... -- -- -- 969,818 4,959,951 --
Cash ..................................... 12,199,550 113,497 118 -- -- -- 5,323,445
Receivables:
Fund shares sold ....................... 192,455 34,639 77,760 5,924 288,647 238,200
Securities sold ........................ -- 58,394 1,208,407 -- -- --
Interest ............................... 47,348 367,069 75,428 141,909 43,522 25,656
Dividends .............................. 34,565 -- 37,491 20,213 137,723 34,438
Prepaid expenses ....................... -- -- 2,355 4,122 5,584 --
Forward foreign exchange contracts ..... -- 11,473 -- -- 69 --
Foreign taxes recoverable .............. -- -- 6,920 2,593 -- --
------------ ------------ ----------- ----------- ----------- -----------
Total assets .........................$148,684,452 $12,816,827 $38,468,932 $23,635,038 $63,519,277 $57,719,876
============ ============ =========== =========== =========== ===========
LIABILITIES AND NET ASSETS
Liabilities:
Payable for
Securities purchased ................. $-- $-- $-- $240,692 $406,681 $--
Fund shares redeemed ................. 152,493 56,841 25,218 12,565 660,061 180,312
Written call options outstanding ....... -- 17,937 -- -- -- --
Other liabilities:
Management fees ...................... 97,128 -- 32,878 19,951 53,686 37,435
Custodian fees ....................... 2,106 10,067 3,480 6,246 8,127 647
Transfer and administration fees ..... 6,101 904 1,672 4,826 2,634 2,459
Professional fees .................... 904 3,339 5,500 2,500 6,000 576
Miscellaneous ........................ 4,432 7,844 4,261 3,680 5,026 1,732
------------ ------------ ----------- ----------- ----------- -----------
Total liabilities .................. 263,164 96,932 73,009 290,460 1,142,215 223,161
Net Assets:
Paid in capital ........................ 115,388,609 12,369,761 34,576,966 20,739,163 53,928,508 42,359,859
Undistributed net investment income .... 541,285 -- 925,207 455,999 1,028,253 138,079
Accumulated undistributed net realized
gain (loss) on sale of investments and
foreign currency transactions ........ 4,727,983 29,227 949,137 297,452 1,435,303 3,813,906
Net unrealized appreciation in value of
investments and translation of assets
and liabilities in foreign currency .... 27,763,411 320,907 1,944,613 1,851,964 5,984,998 11,184,871
------------ ------------ ----------- ----------- ----------- -----------
Net assets ......................... 148,421,288 12,719,895 38,395,923 23,344,578 62,377,062 57,496,715
------------ ------------ ----------- ----------- ----------- -----------
Total liabilities and net assets $148,684,452 $12,816,827 $38,468,932 $23,635,038 $63,519,277 $57,719,876
============ ============ =========== =========== =========== ===========
Capital shares authorized ................ 250,000,000 50,000,000 50,000,000 50,000,000 50,000,000 250,000,000
Capital shares outstanding ............... 8,133,639 1,186,103 3,186,888 1,942,823 4,451,014 3,012,966
Net asset value per share (net assets
divided by shares outstanding) ........... $18.25 $10.72 $12.05 $12.02 $14.01 $19.08
============ ============ =========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
58
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
SERIES D SERIES E
SERIES A SERIES B SERIES C (WORLDWIDE (HIGH GRADE
(GROWTH) (GROWTH-INCOME) (MONEY MARKET) EQUITY) INCOME)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................ $8,963,248 $12,388,937 $-- $3,960,433 $--
Interest ............................. 1,483,422 17,764,649 7,746,574 842,315 9,721,375
------------- ------------- ------------- ------------- ------------
10,446,670 30,153,586 7,746,574 4,802,748 9,721,375
Less foreign tax expense ............. -- -- -- (428,149) --
------------- ------------- ------------- ------------- ------------
Total investment income ............ 10,446,670 30,153,586 7,746,574 4,374,599 9,721,375
EXPENSES:
Management fees ...................... 4,497,034 6,655,890 708,300 2,164,284 959,641
Custodian fees ....................... 30,331 37,924 12,429 193,610 9,821
Transfer/maintenance fees ............ 3,573 3,347 3,415 3,061 2,911
Administration fees .................. 269,822 399,353 63,747 317,824 57,578
Directors' fees ...................... 17,955 27,369 4,808 6,735 1,447
Professional fees .................... 66,130 75,033 10,296 25,036 8,755
Reports to shareholders .............. 64,555 150,384 14,062 21,331 21,361
Registration fees .................... 763 1,145 313 21,350 190
Other expenses ....................... 30,312 69,719 9,712 33,047 2,350
------------- ------------- ------------- ------------- ------------
Total expenses ..................... 4,980,475 7,420,164 827,082 2,786,278 1,064,054
Less earnings credits ................ (566) (258) (1,716) -- (7,030)
------------- ------------- ------------- ------------- ------------
Net expenses ......................... 4,979,909 7,419,906 825,366 2,786,278 1,057,024
------------- ------------- ------------- ------------- ------------
Net investment income .............. 5,466,761 22,733,680 6,921,208 1,588,321 8,664,351
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) during the year on:
Investments ........................ 51,089,074 57,472,747 -- 14,468,531 (2,164,110)
Foreign currency transactions ...... -- -- -- 3,728,221 --
------------- ------------- ------------- ------------- ------------
Net realized gain (loss) ......... 51,089,074 57,472,747 -- 18,196,752 (2,164,110)
Net change in unrealized appreciation
(depreciation) during the year on:
Investments ........................ 62,940,793 65,772,214 (41,770) 15,106,354 (7,551,691)
Translation of assets and liabilities
in foreign currencies ............ -- -- -- (1,758,832) --
------------- ------------- ------------- ------------- ------------
Net unrealized appreciation
(depreciation) ............... 62,940,793 65,772,214 (41,770) 13,347,522 (7,551,691)
Net gain (loss) ................. 114,029,867 123,244,961 (41,770) 31,544,274 (9,715,801)
------------- ------------- ------------- ------------- ------------
Net increase (decrease) in
net assets resulting from
operations .................. $119,496,628 $145,978,641 $6,879,438 $33,132,595 ($1,051,450)
============= ============= ============= ============= ============
</TABLE>
SEE ACCOMPANYING NOTES.
59
<PAGE>
STATEMENT OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
<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 ............................ $386,091 $-- $669,164 $219,880 $1,125,073 $312,204
Interest ............................. 421,213 1,085,466 519,827 507,512 359,083 225,317
------------ ------------ ----------- ----------- ----------- -----------
807,304 1,085,466 1,188,991 727,392 1,484,153 537,521
Less foreign tax expense ........... -- (12,806) (18,715) (5,474) -- --
------------ ------------ ----------- ----------- ----------- -----------
Total investment income .......... 807,304 1,072,660 1,170,276 721,918 1,484,156 537,521
EXPENSES:
Management fees ...................... 961,958 69,196 286,419 174,823 392,594 353,220
Custodian fees ....................... 12,809 15,235 18,674 17,568 21,612 3,696
Transfer/maintenance fees ............ 3,025 2,399 2,232 2,109 2,359 2,351
Administration fees .................. 57,717 43,030 51,639 46,617 17,667 21,193
Directors' fees ...................... 3,901 51 805 648 1,167 1,582
Professional fees .................... 8,755 10,967 4,182 7,069 10,680 3,316
Reports to shareholders .............. 20,517 1,433 3,114 2,254 3,920 7,931
Registration fees .................... 136 2,500 1,460 1,460 1,460 54
Other expenses ....................... 8,559 1,515 16,389 1,959 1,510 3,382
------------ ------------ ----------- ----------- ----------- -----------
Total expenses ..................... 1,077,377 146,326 384,914 254,507 452,969 396,725
Less:
Reimbursement of expenses .......... -- (69,196) -- -- -- --
Earnings credits ................... (30) -- -- -- -- (2,088)
------------ ------------ ----------- ----------- ----------- -----------
Net expenses ......................... 1,077,347 77,130 384,914 254,507 452,969 394,637
------------ ------------ ----------- ----------- ----------- -----------
Net investment income (loss) ....... (270,043) 995,530 785,362 467,411 1,031,187 142,884
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss)
during the year on:
Investments ........................ 4,744,892 218,893 950,428 297,696 1,436,802 3,818,240
Foreign currency transactions ...... -- (184,631) (13,901) (7,082) (1,154) --
Futures contracts .................. 829,934 -- 176,425 -- -- --
------------ ------------ ----------- ----------- ----------- -----------
Net realized gain ................ 5,574,826 34,262 1,112,952 290,614 1,435,648 3,818,240
Net change in unrealized appreciation
(depreciation) during the year on:
Investments .......................... 16,151,675 228,681 1,910,847 1,466,738 4,978,960 3,541,342
Translation of assets and liabilities
in foreign currencies .............. -- 7,865 (253) (258) (84) --
Futures contracts .................... -- -- (76,555) -- -- --
------------ ------------ ----------- ----------- ----------- -----------
Net unrealized appreciation ........ 16,151,675 236,546 1,834,039 1,466,480 4,978,876 3,541,342
------------ ------------ ----------- ----------- ----------- -----------
Net gain ......................... 21,726,501 270,808 2,946,991 1,757,094 6,414,524 7,359,582
------------ ------------ ----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations ..... $21,456,458 $1,266,338 $3,732,353 $2,224,505 $7,445,711 $7,502,466
============ ============ =========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
60
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
SERIES D SERIES E
SERIES A SERIES B SERIES C (WORLDWIDE (HIGH GRADE
(GROWTH) (GROWTH-INCOME) (MONEY MARKET) EQUITY) INCOME)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income ................ $5,466,761 $22,733,680 $6,921,208 $1,588,321 $8,664,351
Net realized gain (loss) ............. 51,089,074 57,472,747 -- 18,196,752 (2,164,110)
Unrealized appreciation (depreciation)
during the period .................. 62,940,793 65,772,214 (41,770) 13,347,522 (7,551,691)
------------- ------------- ------------- ------------- ------------
Net increase (decrease) in
net assets resulting from
operations ..................... 119,496,628 145,978,641 6,879,438 33,132,595 (1,051,450)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................ (4,858,702) (18,421,256) (5,014,558) (6,982,410) (7,686,321)
Net realized gain .................... (30,078,874) (89,075,535) -- (6,588,531) --
------------- ------------- ------------- ------------- ------------
Total distributions to shareholders (34,937,576) (107,496,791) (5,014,558) (13,570,941) (7,686,321)
CAPITAL SHARE TRANSACTIONS (A):
Proceeds from sale of shares ......... 272,735,836 195,756,138 300,770,030 95,984,267 71,870,139
Dividends reinvested ................. 34,937,576 107,496,791 5,014,558 13,570,941 7,686,321
Shares redeemed ...................... (197,533,006) (180,261,174) (284,413,035) (59,872,380) (62,429,363)
------------- ------------- ------------- ------------- ------------
Net increase from capital share
transactions ..................... 110,140,406 122,991,755 21,371,553 49,682,828 17,127,097
------------- ------------- ------------- ------------- ------------
Total increase in net assets ... 194,699,458 161,473,605 23,236,433 69,244,482 8,389,326
NET ASSETS:
Beginning of year .................... 519,891,100 795,112,702 105,435,680 177,781,099 125,651,785
------------- ------------- ------------- ------------- ------------
End of year .......................... $714,590,558 $956,586,307 $128,672,113 $247,025,581 $134,041,111
============= ============= ============= ============= ============
Undistributed net investment
income at end of year .............. $5,364,046 $22,620,615 $6,760,908 $5,665,264 $8,629,443
============= ============= ============= ============= ============
(a) Shares issued and redeemed
Shares sold .................... 11,815,669 5,479,920 23,991,955 15,951,967 5,820,235
Dividends reinvested ........... 1,535,718 3,174,743 405,053 2,280,830 649,731
Shares redeemed ................ (8,682,010) (5,055,630) (22,692,246) (9,930,879) (5,068,479)
------------- ------------- ------------- ------------- ------------
Net increase ................. 4,669,377 3,599,033 1,704,762 8,301,918 1,401,487
============= ============= ============= ============= ============
</TABLE>
SEE ACCOMPANYING NOTES.
61
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
<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 (loss) ......... $(270,043) $995,530 $785,362 $467,411 $1,031,187 $142,884
Net realized gain .................... 5,574,826 34,262 1,112,952 290,614 1,435,648 3,818,240
Unrealized appreciation
during the period .................. 16,151,675 236,546 1,834,039 1,466,480 4,978,876 3,541,342
------------ ------------ ----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations ...... 21,456,458 1,266,338 3,732,353 2,224,505 7,445,711 7,502,466
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................ (236,747) (844,106) (332,910) (112,833) (108,567) (217,556)
Net realized gain .................... (5,477,835) (141,415) (154,426) (22,914) (7,238) (1,127,096)
------------ ------------ ----------- ----------- ----------- -----------
Total distribution to shareholders . (5,714,582) (985,521) (487,336) (135,747) (115,805) (1,344,652)
CAPITAL SHARE TRANSACTIONS (A):
Proceeds from sale of shares ......... 93,417,694 10,501,775 27,932,031 14,703,728 54,553,040 20,989,370
Dividends reinvested ................. 5,714,582 985,521 487,336 135,747 115,805 1,344,652
Shares redeemed ...................... (59,832,305) (4,726,579) (9,244,884) (4,163,794) (13,149,311) (7,825,379)
------------ ------------ ----------- ----------- ----------- -----------
Net increase from capital
share transactions ............... 39,299,971 6,760,717 19,174,483 10,675,681 41,519,534 14,508,643
------------ ------------ ----------- ----------- ----------- -----------
Total increase in net assets ....... 55,041,847 7,041,534 22,419,500 12,764,439 48,849,440 20,666,457
NET ASSETS:
Beginning of year .................... 93,379,441 5,678,361 15,976,423 10,580,139 13,527,622 36,830,258
------------ ------------ ----------- ----------- ----------- -----------
End of year .......................... $148,421,288 $12,719,895 $38,395,923 $23,344,578 $62,377,062 $57,496,715
============ ============ =========== =========== =========== ===========
Undistributed net investment
income at end of year .............. $541,285 $-- $925,207 $455,499 $1,028,253 $138,079
============ ============ =========== =========== =========== ===========
(a) Shares issued and redeemed
Shares sold .................. 5,392,420 968,131 2,471,114 1,317,755 4,318,273 1,144,145
Dividends reinvested ......... 316,597 91,933 42,899 12,013 8,922 70,585
Shares redeemed .............. (3,388,952) (429,302) (818,625) (372,924) (1,032,400) (435,648)
------------ ------------ ----------- ----------- ----------- -----------
Net increase ............... 2,320,065 630,762 1,695,388 956,844 3,294,795 779,082
============ ============ =========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
62
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
SERIES D SERIES E
SERIES A SERIES B SERIES C (WORLDWIDE (HIGH GRADE
(GROWTH) (GROWTH-INCOME) (MONEY 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.
63
<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.
64
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
AVERAGE
RATIO COM-
RATIO OF MISSION
NET NET DIVI- OF NET PAID
ASSET GAIN TOTAL DENDS NET EXPENSES INCOME PER
VALUE NET (LOSS) FROM (FROM DISTRI- NET ASSETS TO (LOSS) PORT- INVEST-
FISCAL BEGIN- INVEST- (REAL- INVEST- NET BUTIONS ASSET END OF AVER- TO FOLIO MENT
PERIOD NING MENT IZED & MENT INVEST- (FROM TOTAL VALUE TOTAL PERIOD AGE AVERAGE TURN- SECU-
ENDED OF INCOME UNREAL- OPERA- MENT CAPITAL DISTRI- END OF RETURN (THOU- NET NET OVER RITY
DEC.31 PERIOD (LOSS) IZED) TIONS INCOME) GAINS) BUTIONS PERIOD (c) SANDS) ASSETS ASSETS RATE TRADED
- ------------------------------------------------------------------------------------------------------------------------------------
SERIES A (Growth)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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% $N/A
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% N/A
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% N/A
1995(f) 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% N/A
1996(f) 21.03 0.18 4.495 4.675 (0.194) (1.201) (1.395) 24.31 22.7% 714,591 0.83% 0.9% 57% 0.0598
SERIES B (Growth-Income)
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% $N/A
1993 27.76 0.64 2.009 2.649 (0.679) --- (0.679) 29.73 9.6% 583,599 0.86% 2.63% 95% N/A
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% N/A
1995(f) 26.54 0.79 7.16 7.95 (0.540) --- (0.540) 33.95 30.1% 795,113 0.83% 2.70% 94% N/A
1996(f) 33.95 0.83 5.16 5.99 (0.778) (3.762) (4.54) 35.40 18.3% 956,586 0.84% 2.56% 58% 0.0602
SERIES C (Money Market)
1992 $12.52 $0.43 $(0.03) $0.40 $(0.71) $--- $(0.71) $12.21 3.2% $87,246 0.61% 3.19% --- $N/A
1993 12.21 0.29 0.027 0.317 (0.437) --- (0.437) 12.09 2.6% 99,092 0.61% 2.65% --- N/A
1994 12.09 0.41 0.035 0.445 (0.265) --- (0.265) 12.27 3.7% 118,668 0.61% 3.70% --- N/A
1995(f) 12.27 0.74 (0.085) 0.655 (0.585) --- (0.585) 12.34 5.4% 105,436 0.60% 5.27% --- N/A
1996 12.34 0.61 0.01 0.62 (0.40) --- (0.40) 12.56 5.1% 128,672 0.58% 4.89% --- N/A
(a)(f)
SERIES D (Worldwide Equity)
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% $N/A
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% N/A
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% N/A
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% N/A
1996 5.56 0.03 0.93 0.96 (0.20) (0.18) (0.38) 6.14 17.5% 247,026 1.30% 0.74% 115% 0.0276
SERIES E (High Grade Income)
1992 $12.82 $0.78 $0.168 $0.948 $(0.748) $--- $(0.748) $13.02 7.4% $81,440 0.86% 7.41% 76% $N/A
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% N/A
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% N/A
1995(f) 11.52 0.74 1.36 2.10 (0.76) --- (0.76) 12.86 18.6% 125,652 0.85% 6.60% 180% N/A
1996(f) 12.86 0.75 (0.853) (0.103) (0.757) --- (0.757) 12.00 (0.7%) 134,041 0.83% 6.77% 232% N/A
</TABLE>
65
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
AVE-
RAGE
NET RATIO COM-
GAIN RATIO OF MISSION
NET (LOSS) DIVI- OF NET PAID
ASSET ON SEC- TOTAL DENDS NET EXPENSES INCOME PER
VALUE NET URITIES FROM (FROM DISTRI- NET ASSETS TO (LOSS) PORT- INVEST-
FISCAL BEGIN- INVEST- (REAL- INVEST- NET BUTIONS RETURN ASSET END OF AVER- TO FOLIO MENT
PERIOD NING MENT IZED & MENT INVEST- (FROM OF TOTAL VALUE TOTAL PERIOD AGE AVERAGE TURN- SECU-
ENDED OF INCOME UNREAL- OPERA- MENT CAPITAL CAPI- DISTRI- END OF RETURN (THOU- NET NET OVER RITY
DEC.31 PERIOD (LOSS) IZED) TIONS INCOME) GAINS) TAL BUTIONS PERIOD (c) SANDS) ASSETS ASSETS RATE TRADED
- ------------------------------------------------------------------------------------------------------------------------------------
SERIES J (Emerging Growth)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992(b) $10.00 $0.01 $2.46 $2.47 $--- $--- $--- $--- $12.47 24.7% $7,113 1.06% 0.22% 4% N/A
1993 12.47 (0.01) 1.711 1.701 (0.001) --- --- (0.001) 14.17 13.6% 42,096 0.91% (0.14%) 117% N/A
1994 14.17 (0.01) (0.713) (0.723) --- (0.007) --- (0.007) 13.44 (5.1%) 76,940 0.88% (0.11%) 91% N/A
1995(f) 13.44 0.04 2.58 2.62 --- --- --- --- 16.06 19.5% 93,379 0.84% 0.26% 202% N/A
1996(f) 16.06 (0.04) 2.93 2.89 (0.029) (0.671) --- (0.700) 18.25 18.0% 148,421 0.84% (0.21%) 123% 0.0601
SERIES K (Global Aggressive)
1995 $10.00 $0.54 $0.22 $0.76 $(0.466) $(0.044) $(0.03) $(0.540) $10.22 7.6% $5,678 1.63% 11.03% 127% $N/A
(a)(d)(e)
1996(e) 10.22 0.90 0.50 1.40 (0.77) (0.13) --- (0.90) 10.72 13.7% 12,720 0.84% 10.79% 86% N/A
SERIES M (Specialized Asset Allocation)
1995 $10.00 $0.169 $0.541 $0.71 $--- $--- $--- $--- $10.71 7.1% $15,976 1.94% 3.2% 181% $N/A
(a)(d)
1996 10.71 0.150 1.364 1.514 (0.119) (0.055) --- (.174) 12.05 14.2% 38,396 1.34% 2.73% 40% .0266
SERIES N (Managed Asset Allocation)
1995 $10.00 $0.156 $0.574 $0.73 $--- $--- $--- $--- $10.73 7.3% $10,580 1.90% 2.8% 26% $N/A
(a)(d)
1996 10.73 0.193 1.175 1.368 (0.065) (0.013) --- (0.078) 12.02 12.8% 23,345 1.45% 2.67% 41% 0.0393
SERIES O (Equity Income)
1995 $10.00 $0.166 $1.534 $1.70 $--- $--- $--- $--- $11.70 17.0% $13,528 1.40% 3.0% 3% $N/A
(a)(d)
1996 11.70 0.169 2.173 2.342 (0.03) (0.002) --- (0.032) 14.01 20.0% 62,377 1.15% 2.62% 22% 0.0385
SERIES S (Social Awareness)
1992(a) $10.55 $0.03 $1.691 $1.721 $(0.021) $--- $--- $(0.021) $12.25 16.4% 9,653 0.92% 0.24% 110% $N/A
1993 12.25 0.02 1.432 1.452 (0.012) --- --- (0.012) 13.69 11.9% 19,490 0.90% 0.23% 105% N/A
1994 13.69 0.08 (0.595) (0.515) (0.02) (0.185) --- (0.205) 12.97 (3.7%) 24,539 0.90% 0.75% 67% N/A
1995(f) 12.97 0.09 3.507 3.597 (0.077) --- --- (0.077) 16.49 27.7% 36,830 0.86% 0.75% 122% N/A
1996(f) 16.49 0.03 3.073 3.103 (0.083) (0.43) --- (0.513) 19.08 18.8% 57,497 0.84% 0.30% 67% 0.0602
</TABLE>
(a) Net investment income per share has been calculated using the weighted
monthly average number of capital shares outstanding.
(b) Series J was initially capitalized on October 1, 1992, with a net asset
value of $10.00 per share. Percentage amounts for the period have been
annualized, except for total return.
(c) Total return does not take into account any charges paid at the time of
purchase.
(d) 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.
(e) Fund expenses for Series K were reduced by the Investment Manager during
the period, and expense ratios absent such reimbursement would have been
2.03% in 1995 and 1.59% in 1996.
(f) Expense ratios were calculated without the reduction for custodian fees
earnings credits beginning February 1, 1995. Expense ratios with such
reductions would have been as follows:
1995 1996
---- ----
Series A 0.83% 0.83%
Series B 0.83% 0.84%
Series C 0.60% 0.58%
Series E 0.85% 0.83%
Series J 0.83% 0.84%
Series S 0.84% 0.84%
66
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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. These
policies are in conformity with generally accepted accounting principles.
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 there are no sales on a particular day, then the securities are
valued at the last bid 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.
All other securities for which market quotations are available are valued on the
basis of the 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 those securities purchased with 60 days or less to maturity are
valued on the basis of amortized cost which approximates market value.
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 Fund. Foreign
investments may also subject the Fund 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, M, N and O do 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 from foreign exchange rates on investment 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, N and O
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 J and M utilize 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 J and 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. 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 liquid 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. There
were no futures contracts held by the Fund at December 31, 1996.
67
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
E. OPTIONS WRITTEN - Series K may purchase put and call options and write
such options on a covered basis on securities that are traded on recognized
securities exchanges and over-the-counter markets. Call and put options on
securities give the holder the right to purchase or sell respectively, (and the
writer the obligation to sell or purchase) a security at a specified price, on
or until a certain date. The primary risks associated with the use of options
are an imperfect correlation between the change in market value of the
securities held by the Series and the price of the option, the possibility of an
illiquid market, and the inability of the counter-party to meet the terms of the
contract.
The premium received for a written option is recorded as an asset with an
equal liability which is marked to market based on the option's quoted daily
settlement price. Fluctuations in the value of such instruments are recorded as
unrealized appreciation (depreciation) until terminated, at which time realized
gains and losses are recognized. Series K wrote covered call options during 1996
and received $26,287 in premiums.
F. 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.
G. 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.
H. 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.
I. 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 fees disclosed in
the Statement of Operations do 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, LLC (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. SMC & LMC have agreed to waive all of the management fees for Series K
through December 31, 1996. 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
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 Deccember 31, 1996, 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.
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) $45,000 in the year
ending April 29, 1997, and (ii) $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.
68
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
3. FEDERAL INCOME TAX MATTERS
The amounts of unrealized appreciation (depreciation) for income tax
purposes at December 31, 1996, for all securities and foreign currency holdings
(including foreign currency receivables and payables) were as follows:
<TABLE>
<CAPTION>
SERIES B SERIES C SERIES D SERIES E
SERIES A (GROWTH (MONEY (WORLDWIDE (HIGH GRADE
(GROWTH) INCOME) MARKET) EQUITY) INCOME)
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aggregate
gross unrealized
appreciation $185,780,737 $215,310,355 $6,416 $28,630,771 $1,320,752
Aggregate
gross unrealized
depreciation (3,729,965) (5,589,085) (59,933) (5,134,822) (2,023,441)
--------------------------------------------------------------------------
Net unrealized
appreciation
(depreciation) $182,050,772 $209,721,270 ($53,517) $23,495,949 ($702,689)
==========================================================================
</TABLE>
<TABLE>
<CAPTION>
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)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aggregate
gross unrealized
appreciation $29,624,951 $543,451 $2,821,687 $2,241,187 $6,426,024 $11,893,151
Aggregate
gross unrealized
depreciation (1,862,258) (222,544) (940,283) (394,161) (470,924) (708,280)
-------------------------------------------------------------------------------------------
Net unrealized
appreciation
(depreciation) $27,762,693 $320,907 $1,881,404 $1,847,026 $5,955,100 $11,184,871
===========================================================================================
</TABLE>
Realized gains and losses are determined on an identified cost basis for
federal income tax purposes. Series A, B, D, J, K and S hereby designate
$12,046,576, $74,040,191, $5,192,049, $5,477,835, $50,427 and $1,127,096
respectively as capital gains dividends attributable to the year ended December
31, 1996, for the purpose of the dividends paid deduction on the Series' federal
income tax return. At December 31, 1996, Series E has a capital loss
carryforward of $12,158,916 which is available to offset future taxable gains
and expires in 2002.
4. INVESTMENT TRANSACTIONS
Investment transactions for the year ended December 31, 1996, (excluding
overnight investments and short-term debt securities) are as follows:
SERIES B SERIES D SERIES E
SERIES A (GROWTH (WORLDWIDE (HIGH GRADE
(GROWTH) INCOME) EQUITY) INCOME)
--------------------------------------------------------------
Purchases $380,418,678 $504,488,729 $269,846,872 $295,216,186
Proceeds
from sales $323,094,488 $482,161,952 $228,811,067 $286,566,631
<TABLE>
<CAPTION>
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)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Purchases $171,754,324 $11,203,592 $27,994,840 $17,647,937 $47,210,686 $38,678,461
Proceeds
from sales $142,970,484 $ 6,066,612 $ 9,534,480 $ 6,775,437 $ 7,732,623 $28,044,400
</TABLE>
5. FORWARD FOREIGN EXCHANGE CONTRACTS
At December 31, 1996, Series D & Series K had the following open forward
foreign exchange contracts to sell currency (excluding foreign currency
contracts used for purchase and sale settlements):
SETTLEMENT CONTRACT CONTRACT CURRENT UNREALIZED
CURRENCY DATE AMOUNT RATE RATE GAIN (LOSS)
- --------------------------------------------------------------------------------
SERIES D
New Zealand
Dollar 4/01/97 $4,559,067 0.6859 0.70311 ($114,392)
==========
SERIES K
Canadian Dollar 1/31/97 $523,169 1.338 1.368 ($11,473)
==========
6. FEDERAL TAX STATUS OF DIVIDENDS
The income dividends paid by the Funds are taxable as ordinary income on
the shareholders' tax return. The portion of ordinary income of dividends
(including net short-term capital gains) attributed to fiscal year ended
December 31, 1996, that qualified for the dividends received deduction for
corporate shareholders in accordance with the provisions of the Internal Revenue
Code for each Series was: Series A, 14%; Series B, 28%; Series C, 0%; Series D,
4%; Series E, 0%; Series J, 69%; Series K, 0%; Series M, 33%; Series N, 19%;
Series O, 62%; and Series S, 8%.
69
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO THE CONTRACT OWNERS AND BOARD OF DIRECTORS
SBL FUND
We have audited the accompanying balance sheets including the statements of net
assets, of SBL Fund (comprising, respectively the Series A, B, C, D, E, J, K, M,
N, O and S portfolios) (the Fund) as of December 31, 1996,and the related
statements of operations, statements of changes in net assets and the financial
highlights for each of the periods indicated therein. These financial statements
and the 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 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 and financial highlights. Our procedures included confirmation of
investments owned as of December 31, 1996, 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 constituting the SBL Fund at December 31, 1996, and
the results of their operations, the changes in their net assets and their
financial highlights for the periods indicated therein in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Kansas City, Missouri
January 31, 1997
70
<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
Hugh L. Thompson, Ph.D.
OFFICERS
John D. Cleland, PRESIDENT
James R. Schmank, VICE PRESIDENT AND TREASURER
Terry A. Milberger, VICE PRESIDENT
Jane A. Tedder, VICE PRESIDENT
Mark E. Young, VICE PRESIDENT
Barbara J. Davison, ASSISTANT VICE PRESIDENT
Greg A. Hamilton, ASSISTANT VICE PRESIDENT
Cindy L. Shields, ASSISTANT VICE PRESIDENT
Thomas A. Swank, ASSISTANT VICE PRESIDENT
Amy J. Lee, SECRETARY
Christopher D. Swickard, ASSISTANT SECRETARY
Brenda M. Harwood, 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]
SECURITY DISTRIBUTORS, INC.
700 SW Harrison St.
Topeka, KS 66636-0001
(913) 295-3112
(800) 888-2461
<PAGE>
SBL FUND
ANNUAL REPORT
DECEMBER 31, 1996
- - Series P
(High Yield Series)
<PAGE>
DECEMBER 31, 1996
SBL FUND
SERIES P (HIGH YIELD)
STATEMENT OF NET ASSETS
PRINCIPAL MARKET VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS
APPAREL - 2.0%
$50,000 Tultex Corporation, 10.625% - 2005 $54,437
AUTOMOBILES - 3.1%
80,000 Exide Corporation, 10.00% - 2005 83,400
BANKS & CREDIT - 2.0%
50,000 B.F. Saul REIT, 11.625% - 2002 53,750
BEVERAGES - 3.9%
50,000 Cott Corporation, 9.375% - 2005 51,500
50,000 Delta Beverage Group, 9.75% - 2003 51,125
------------
102,625
BROADCAST MEDIA - 4.4%
65,000 Allbritton Communications Company, 11.50%, 2004 68,900
50,000 Heritage Media Corporation, 8.75% - 2006 48,250
------------
117,150
CHEMICALS - 3.2%
80,000 Envirodyne Industries Inc., 12.00% - 2000 85,100
COMMUNICATION SERVICES - 9.5%
50,000 Cablevision Systems Corporation, 10.75% - 2004 52,000
50,000 Century Communications, 9.50% - 2005 51,250
65,000 Comcast Corporation, 9.125% - 2006 66,462
80,000 Rogers Cablesystems, 9.625% - 2002 83,800
------------
253,512
CONSUMER GOODS & SERVICES - 1.2%
50,000 Semi-Tech Corporation, 0% - 2003(1) 32,875
ELECTRIC UTILITIES - 4.6%
65,000 AES Corporation, 10.25% - 2006 70,200
50,000 Cal Energy Company Inc., 9.50% - 2006 51,500
------------
121,700
ENTERTAINMENT - 4.5%
70,000 Showboat, Inc., 9.25% - 2008 68,862
50,000 Station Casinos Inc., 10.125% - 2006 50,125
------------
118,987
FINANCIAL SERVICES - 1.9%
50,000 Dollar Financial Group, 10.875% - 2006 51,500
SEE ACCOMPANYING NOTES.
<PAGE>
DECEMBER 31, 1996
STATEMENT OF NET ASSETS
PRINCIPAL MARKET VALUE
- --------------------------------------------------------------------------------
FOOD PROCESSING - 2.6%
$ 65,000 TLC Beatrice International Holdings, 11.50% - 2005 $68,900
HEALTH CARE SERVICES - 1.9%
50,000 Regency Health Services, 9.875% - 2002 50,625
INDUSTRIAL SERVICES - 2.0%
50,000 Iron Mountain Inc., 10.125% - 2006 52,812
MANUFACTURING - 3.8%
50,000 Sequa Corporation, 9.375% - 2003 50,500
50,000 Shop Vac Corporation, 10.625% - 2003 52,625
------------
103,125
MEDICAL - 2.0%
50,000 Maxxim Medical, 10.50% - 2006 52,250
MISCELLANEOUS - 1.8%
50,000 Jordan Industries, 10.375% - 2003 49,375
OIL - 2.5%
65,000 Maxus Energy, 9.50% - 2003 65,813
PACKAGING & CONTAINERS - 1.9%
50,000 Plastic Containers, Inc., 10.00% - 2006 51,625
PETROLEUM - 1.9%
50,000 Crown Central Petroleum, 10.875% - 2005 51,063
PUBLISHING - 5.5%
80,000 Golden Books Publishing, 7.65% - 2002 72,200
70,000 KIII Communications Corporation, 10.625% - 2002 73,500
------------
145,700
RECREATION - 2.0%
50,000 AMF Group, Inc., 10.875% - 2006 52,750
RESTAURANTS - 2.6%
65,000 Carrols Corporation, 11.50% - 2003 69,063
STEEL - 1.0%
25,000 AK Steel Corporation, 9.125% - 2006 25,688
TEXTILES - 4.5%
50,000 Pillowtex Corporation, 10.00% - 2006 52,000
65,000 Westpoint Stevens Inc., 9.375% - 2005 66,788
------------
118,788
SEE ACCOMPANYING NOTES.
<PAGE>
DECEMBER 31, 1996
STATEMENT OF NET ASSETS
PRINCIPAL MARKET VALUE
- --------------------------------------------------------------------------------
TOBACCO - 2.6%
$ 65,000 Dimon, Inc., 8.875% - 2006 $68,006
TRANSPORTATION - 5.5%
75,000 Atlas Air, Inc., 12.25% - 2002 83,156
65,000 Teekay Shipping Corporation, 8.32% - 2003 65,000
------------
148,156
Total corporate bonds - Series P - 84.4% $2,248,775
GOVERNMENT AGENCY SECURITIES
FEDERAL HOME LOAN BANK - 4.7%
$125,000 Federal Home Loan Mortgage
Corporation, 5.32% - 1997 124,760
Total government agency
securities - Series P - 4.7% 124,760
------------
Total investments - Series P - 89.1% 2,373,535
Cash and other assets,
less liabilities - Series P - 10.9% 291,570
------------
Total net assets - Series P - 100% $2,665,105
============
(1) Deferred interest obligation; currently zero coupon under terms of initial
offering.
The identified cost of investments owned at December 31, 1996 was the same for
federal income tax and financial statement purposes.
SEE ACCOMPANYING NOTES.
<PAGE>
BALANCE SHEET
DECEMBER 31, 1996
SERIES P
(HIGH YIELD)
ASSETS
Investments, at value (identified cost $2,311,304)........... $2,373,535
Cash......................................................... 236,877
Interest receivable.......................................... 54,798
------------
Total assets....................................... $2,665,210
============
LIABILITIES AND NET ASSETS
Liabilities:
Transfer and administration fees......................... 105
------------
Total liabilities.................................. 105
Net Assets:
Paid in capital.......................................... 2,500,000
Undistributed net investment income...................... 85,799
Accumulated undistributed net realized gain on
sale of investments................................... 17,075
Net unrealized appreciation in value of investments...... 62,231
------------
Net assets......................................... 2,665,105
------------
Total liabilities and net assets............... $2,665,210
============
Capital shares authorized.................................... Indefinite
Capital shares outstanding................................... 166,667
Net asset value per share (net assets
divided by shares outstanding).......................... $ 15.99
============
SEE ACCOMPANYING NOTES.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD AUGUST 5, 1996 THROUGH DECEMBER 31, 1996
SERIES P
(HIGH YIELD)
INVESTMENT INCOME:
Interest........................................................ $ 88,728
---------
Total investment income.................................. 88,728
EXPENSES:
Management fees................................................. 8,605
Custodian fees.................................................. 448
Transfer/maintenance fees....................................... 5
Administration fees............................................. 466
Professional fees............................................... 2,000
Registration fees............................................... 10
---------
11,534
Less management fees waived..................................... (8,605)
---------
Total expenses........................................... 11,534
---------
Net investment income................................. 85,799
NET REALIZED AND UNREALIZED GAIN:
Net realized gain during the period on investments.............. 17,075
Net change in unrealized appreciation during
the period on investments.................................. 62,231
----------
Net gain.............................................. 79,306
----------
Net increase in net assets resulting from operations $165,105
==========
SEE ACCOMPANYING NOTES.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD AUGUST 5, 1996 THROUGH DECEMBER 31, 1996
SERIES P
(HIGH YIELD)
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income........................................... $ 85,799
Net realized gain............................................... 17,075
Unrealized appreciation during the period....................... 62,231
---------
Net increase in net assets resulting from operations........ 165,105
CAPITAL SHARE TRANSACTIONS (A):
Proceeds from sale of shares.................................... 2,500,000
----------
Net increase from capital share transactions................ 2,500,000
----------
Total increase in net assets.......................... 2,665,105
NET ASSETS:
Beginning of period............................................. ----------
End of period $2,665,105
==========
Undistributed net investment income at end of period............ $ 85,799
(a)Shares issued and redeemed
Shares sold........................................... 166,667
----------
Net increase...................................... 166,667
==========
SEE ACCOMPANYING NOTES.
<PAGE>
FINANCIAL HIGHLIGHTS
(a)(b)
SERIES P
(HIGH YIELD)
FISCAL PERIOD ENDED DECEMBER 31, 1996:
Net asset value, beginning of period............................. $15.00
Net investment income ........................................... .51
Net gain (realized and unrealized)............................... .48
-----
Total from investment operations................................. .99
-----
Net asset value, end of period................................... $15.99
=====
Total return.................................................... 6.6%
Net assets end of period (thousands)............................. $2,665
Ratio of expenses to average net assets(a)....................... .28%
Ratio of net income to average net assets(a)..................... 8.24%
Portfolio turnover rate.......................................... 151%
(a) Fund expenses were reduced by the Investment Manager and the expense
ratio absent such reimbursement would have been 1.11%.
(b) Series P was initially capitalized on August 5, 1996, with a net asset
value of $15 per share. Percentage amounts for the period have been
annualized, except for total return.
SEE ACCOMPANYING NOTES.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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. Series P is one of twelve series currently issued by SBL Fund
(the 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. These
policies are in conformity with generally accepted accounting principles.
A. Security Valuation - Valuations of the Series' 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 last bid. Securities for
which market quotations are not readily available are valued by a
pricing service considering securities with similar yields, quality,
type of issue, duration, and rating. If there is no bid price or if
the bid price is deemed to be unsatisfactory by the Board of Directors
or by the Series' 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 Series 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 which approximates market value.
B. 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.
Interest income is recognized on the accrual basis. Premium and
discounts (except original issue discounts) on debt securities are not
amortized.
C. Distributions to Shareholders - Distributions to shareholders are
recorded on the ex-dividend date. The character of distributions made
during year from net investment income or net realized gains may
differ from their ultimate characterization for federal income tax
purposes.
D. Taxes - The Series 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
<PAGE>
income, excise and state income taxes. Therefore, no provision for
federal or state income tax is required.
2. Management Fees and Other Transactions With Affiliates
Management fees are payable to Security Management Company, LLC (SMC) (the
Investment Manager) under an investment advisory contract at an annual rate
of .75% of the average daily net assets for Series P. For the period August
5, 1996 through December 31, 1996, SMC waived all of its management fee.
The investment advisory contract provides that the total annual expenses of
the 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
Series are then offered for sale.
The Series has entered into a contract with SMC for transfer agent services
and administrative services which SMC provides to the Series. The charges
paid by the Series under the contract for transfer agent services were
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 Series.
Certain officers and directors of the Series are also officers and/or
directors of SBL and its subsidiaries, which include Security Management
Company, LLC.
SBL is the sole shareholder of Series P.
3. Federal Income Tax Matters
The amounts of unrealized appreciation (depreciation) as of December 31,
1996, were as follows:
Aggregate gross unrealized appreciation............. $62,481
Aggregate gross unrealized depreciation............. (250)
--------
Net unrealized appreciation ........................ $62,231
========
4. Investment Transactions
Investment transactions for the period August 5, 1996 through December 31,
1996 (excluding overnight investments and short-term debt securities) were
as follows:
Purchases.......................................... $3,400,209
Proceeds from sales................................ 1,232,338
<PAGE>
Report of Independent Auditors
To the Shareholder and Board of Directors
SBL Fund
We have audited the accompanying balance sheet and statement of net assets of
SBL Fund Series P (the Fund) as of December 31, 1996, the related statements of
operations and changes in net assets and financial highlights for the period
August 5, 1996 (commencement of operations) through December 31, 1996. These
financial statements and the 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 audit.
We conducted our audit 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, 1996,
by correspondence with the custodian. As to securities relating to uncompleted
transactions, we performed other audit 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 audit provides 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 SBL
Fund Series P at December 31, 1996, and the results of its operations, changes
in its net assets and the financial highlights for the period indicated above in
conformity with generally accepted accounting principles.
Ernst & Young LLP
Kansas City, Missouri
January 31, 1997
