SBL Fund
Annual Report
December 31, 1997
o Series A
(Growth Series)
o Series B
(Growth-Income Series)
o Series C
(Money Market Series)
o Series D
(Worldwide Equity Series)
o Series E
(High Grade Income Series)
o Series J
(Emerging Growth Series)
o Series K
(Global Aggressive Bond Series)
o Series M
(Specialized Asset Allocation Series)
o Series N
(Managed Asset Allocation Series)
o Series O
(Equity Income Series)
o Series P
(High Yield Series)
o Series S
(Social Awareness Series)
o Series V
(Value Series)
o Series X
(Small Cap Series)
[SECURITY ] Security Distributors, Inc.
[DISTRIBUTORS,] A Member of The Security Benefit
[INC. LOGO ] Group of Companies
<PAGE>
President's Letter
February 15, 1998
A LOOK BACK AT 1997
1997 was another incredible year for performance in the large cap sector of U.S.
equity markets. For the third consecutive year, the Dow Jones Industrial Average
generated a total return in excess of 20%. The SBL Fund with its 14 series
reflected these results, with the large cap portfolios producing the best
returns. The fixed income portfolios in the SBL Fund also turned in strong
results for the year, as interest rates moved from their highs of 7.12% in April
as measured by the 30-year Treasury bond to a low of 5.92% at year-end.
The year was also one of turmoil in international markets. Economic difficulties
in southeast Asia produced chaotic conditions in global markets during the year.
We expect this to continue to have an effect on securities markets in 1998.
Portfolio investment strategies which underweighted exposure to U.S. equities
resulted in returns substantially below the Dow Jones Industrial Average and the
S&P 500 Index. Investors should keep this in mind when comparing our Series'
returns with those indexes.
WHAT TO LOOK FOR IN 1998
This year, earnings growth rates should slow and it is our view that it is
highly unlikely that returns from common stocks in 1998 will approximate those
of the last three years. We believe that markets will return to more historic
levels of 8% to 10% for equities, with volatility continuing to be very high.
Investors should temper their expectations. The long-term outlook is still
favorable but we will experience some ups and downs in the short term.
NEW INVESTMENT OPTIONS AND
ADDITIONS TO MANAGEMENT TEAM
We added the Value Series and Small Cap Series to our offerings late in 1997.
These are additional investment options for the Variflex LS and Variflex
Signature variable annuities. The Small Cap series is sub-advised for us by
Strong Capital Management, Inc. with Ron Ognar of Strong as lead portfolio
manager.
Additions we have made to the Security Funds Investment Group have enabled us to
add expertise and strength to our SBL Fund investment team. This expertise
allows us to maximize our resources and shift management responsibilities for
some of the series.
ON THE EQUITY SIDE
Mike Petersen, another addition to our investment team, joins us as portfolio
manager for the GROWTH-INCOME SERIES. Mike brings to us ten years of experience
in managing a growth and income fund with an exemplary track record.
Jim Schier takes the helm of the EMERGING GROWTH SERIES, while maintaining
responsibility as manager for the new VALUE SERIES where he has focused on mid-
to large-cap stocks. Jim brings years of experience in managing both growth and
value oriented investments and is developing a great track record in managing
the VALUE SERIES. This change has also enabled Cindy Shields to devote her
full-time attention to our growing SOCIAL AWARENESS SERIES.
ON THE FIXED INCOME SIDE
Dave Eshnaur joined the Security Fixed Income Investment Group in 1997 bringing
15 years of high-yield bond experience to this team. He will join Steve Bowser
as co-manager for the HIGH GRADE INCOME SERIES. Steve and David will also
co-manage the domestic fixed income holdings in the SPECIALIZED ASSET ALLOCATION
SERIES which is sub-advised by Meridian Management Investment Corporation.
We are confident that these management enhancements will continue to provide you
with solid investment performance. As always, we welcome your questions and
comments at any time.
/s/ JOHN CLELAND
John Cleland, President
The Security Funds
1
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Series A (Growth Series)
February 15, 1998
The Growth Series of the SBL Fund returned a strong 28.72% in 1997, compared
with its Lipper peer group average of 25.36%.1 Although the Growth Series'
return was below the 33.35% generated by the S&P 500, it provided an excellent
investment vehicle throughout the year for its shareholders.
PERFORMANCE VERSUS THE BENCHMARK INDEX
The portfolio's total return lagged that of its benchmark, the S&P 500 Index, in
the second half of 1997 primarily because of its lack of exposure to
telecommunications and utilities stocks. These two sectors make up about 10% of
the S&P index. In addition, an underweighting in more prominent S&P names such
as General Electric Company hurt performance versus the index. Despite these
weaknesses compared with the index, the Series was well above the median when
compared with other growth funds in its peer group.
CONTRIBUTORS TO POSITIVE PERFORMANCE
An overweighting in financial companies boosted returns in a period of declining
interest rates. Issues such as insurance company Allstate Corporation and
mortgage lender Fannie Mae were outstanding performers in 1997. We avoided
multi-national banks, which were hurt by the turn of events in southeast Asia.
We chose instead regional banks and those which concentrate on fee-based
services. These include Bank of New York Company Inc. and Northern Trust
Corporation, both of which generated solid returns over the year.
An emphasis on retailers also contributed positively to total return in the
second half of the year. Investors concerned about the effects of southeast
Asian problems on U.S. stocks sought out companies with a focus on domestic
markets. Dayton Hudson Corporation was such a company, realizing strong earnings
from its Target division. Target also is among discount retailers, which as a
group realized strong sales in 1998. Payless ShoeSource Inc., a retailer
headquartered in our own Topeka, Kansas also was a standout performer as
investors looked for firms with domestic sales targets. Payless had been ignored
by analysts early in the year, and gained momentum as those analysts sought
companies to recommend after the Asian crisis erupted.
A LOOK INTO 1998
Because we believe that earnings in coming quarters will slow from the pace of
the past three years, we anticipate keeping a strong emphasis on issues that
have exhibited above-average earnings growth. Currently some of these companies
include Gillette Company, which should benefit from the product cycle of its new
razor system, and Bristol-Myers Squibb Company and Schering-Plough Corporation,
pharmaceutical companies with excellent new product outlooks.
Other companies which should perform well include those that are less sensitive
to economic downturns. Publishers such as Tribune Company and Gannett Company,
Inc. have domestic markets and have exhibited consistent growth. Tyco
International Ltd., a diversified manufacturer with a growing presence in home
security systems, has excellent prospects for outperformance as well.
Overall, we expect to increase the number of holdings in the portfolio from the
current level of about ninety to somewhere between 100 and 150. This will reduce
the impact on the portfolio of an earnings disappointment in any one name. A
volatile market climate will make careful stock selection more important than in
periods such as the last three years, where just being in the stock market was
generally profitable.
Terry Milberger
Senior Portfolio Manager
2
<PAGE>
Series A (Growth Series)
February 15, 1998
SERIES A vs. S&P 500
[LINEAR GRAPH PLOTTED FROM POINTS IN TABLE BELOW]
SBL Fund S&P
Date Series A 500
- ---------- ---------- ----------
12/31/1987 .................. $10,000.00 $10,000.00
03/31/1988 .................. 10,580.88 10,587.37
06/30/1988 .................. 11,224.31 11,285.62
09/30/1988 .................. 10,875.78 11,329.24
12/31/1988 .................. 11,015.22 11,680.93
03/31/1989 .................. 12,079.19 12,501.82
06/30/1989 .................. 13,366.69 13,601.57
09/30/1989 .................. 15,471.66 15,050.15
12/31/1989 .................. 14,859.01 15,359.35
03/31/1990 .................. 14,282.94 14,895.29
06/30/1990 .................. 15,124.18 15,832.19
09/30/1990 .................. 12,430.38 13,650.11
12/31/1990 .................. 13,396.15 14,872.05
03/31/1991 .................. 15,753.46 17,037.36
06/30/1991 .................. 15,753.46 17,002.10
09/30/1991 .................. 16,690.94 17,917.31
12/31/1991 .................. 18,233.27 19,415.38
03/31/1992 .................. 18,455.11 18,919.91
06/30/1992 .................. 18,212.14 19,291.77
09/30/1992 .................. 18,250.12 19,889.97
12/31/1992 .................. 20,261.94 20,904.58
03/31/1993 .................. 21,289.96 21,800.30
06/30/1993 .................. 21,057.83 21,912.45
09/30/1993 .................. 22,342.65 22,472.87
12/31/1993 .................. 23,040.13 22,992.91
03/31/1994 .................. 22,249.65 22,115.78
06/30/1994 .................. 21,877.66 22,206.08
09/30/1994 .................. 22,956.35 22,299.42
12/31/1994 .................. 22,659.35 22,293.50
03/31/1995 .................. 24,741.18 25,561.27
06/30/1995 .................. 27,092.08 27,986.75
09/30/1995 .................. 29,192.13 30,211.75
12/31/1995 .................. 30,989.93 32,012.14
03/31/1996 .................. 33,259.28 33,752.19
06/30/1996 .................. 34,703.41 35,275.99
09/30/1996 .................. 36,065.04 36,355.23
12/31/1996 .................. 38,019.99 39,398.68
03/31/1997 .................. 38,051.27 40,429.42
06/30/1997 .................. 44,400.97 47,501.74
09/30/1997 .................. 47,876.34 51,074.69
12/31/1997 .................. 48,704.94 52,543.03
$10,000 OVER TEN YEARS
The chart above assumes a hypothetical $10,000 investment in Series A (Growth
Series) on December 31, 1987, and reflects the fees and expenses of Series A. On
December 31, 1997, the value of the investment (assuming reinvestment of all
dividends and distributions) would have grown to $48,705. By comparison, the
same $10,000 investment would have grown to $52,543 based on the S&P 500 Index's
performance.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1997
1 Year 5 Years 10 Years
-------- --------- ---------
Series A ............... 28.7% 19.3% 17.2%
(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.
3
<PAGE>
Series B (Growth-income Series)
February 15, 1998
In 1997 the Growth-Income Series of the SBL Fund generated a rewarding 26.49%
total return, close to its Lipper peer group average of 27.21%.(1) In this, the
third year in a row of equity returns in excess of 20%, the S&P 500 Index had a
total return of 33.35%. Although these returns have been excellent for
investors, we realize that they can't continue forever. We expect that 1998 will
bring results which are much closer to the historic norms.
STOCK SELECTION HELPS PERFORMANCE
Three major factors have contributed to successful stock selection this year.
First, we have sought companies whose earnings have been growing faster than the
average S&P 500 company, and which have good prospects for continued earnings
acceleration.
Second, we looked for valuations which as measured by such standards as
price/earnings and price/book ratios were more attractive than the average S&P
stock. Valuations of this type may be seen in stocks of companies which have had
problems with their growth rates in the past, but are showing signs of
improving. If analysts haven't recognized and reported on the trend yet, there
may be an opportunity to buy the stocks cheaply.
Third, in monitoring risk in the portfolio, we sought issues with lower
volatility than the average stock in that industry. We looked at stocks' betas,
the most widely recognized measure of risk, as well as the standard deviation of
their monthly returns. We focused on consistency, avoiding those issues whose
returns fluctuate dramatically.
RISK LEVELS WILL BE MORE IMPORTANT IN 1998
We expect that the volatility in the stock markets will continue in the months
to come as equity investors sort out the implications of southeast Asia's
problems on U.S. companies. Because of this, we will concentrate on minimizing
risk as much as maximizing returns. We plan to continue the risk-monitoring
outlined above, selecting less volatile stocks with attractive valuations in
order to reduce exposure to negative earnings reports. In addition, the
portfolio's industry concentrations will be spread across a number of sectors to
help avoid shocks in any one industry. The target average beta for the portfolio
will be about .9, slightly lower than the market average 1.0.
INCOME PORTION OF THE PORTFOLIO
We plan to reduce holdings of corporate bonds in the portfolio to nearly zero,
using short to intermediate maturity government securities instead. We
anticipate that government bonds will make up 5% to 10% of the total portfolio.
We also plan to add income-generating stocks, particularly in the energy,
utility, and auto sectors. Currently some attractive names in these areas
include Mobil Corporation, Amoco Corporation, and Texaco Inc., in the energy
area, Kansas City Power and Light Company, American Electric Power Company, Inc.
and Peco Energy Company in the utility group.
LOOKING FORWARD TO 1998
We expect earnings growth rates to slow in the months to come, and to remain at
low single-digit levels perhaps for the next two years. This is a normal
adjustment after several years of double-digit growth and in light of probable
effects of the Asian crisis. We believe overall appreciation will average 10% or
below, closer to the historical norms. This is an investment climate ideally
suited for growth and income funds.
Michael A. Petersen
Senior Portfolio Manager
4
<PAGE>
Series B (Growth-income Series)
February 15, 1998
SERIES B vs. S&P 500
[LINEAR GRAPH PLOTTED FROM POINTS IN TABLE BELOW]
SBL Fund S&P
Date Series B 500
- ---------- ---------- ----------
12/31/1987 .................. $10,000.00 $10,000.00
03/31/1988 .................. 10,865.69 10,587.37
06/30/1988 .................. 11,686.82 11,285.62
09/30/1988 .................. 11,616.80 11,329.24
12/31/1988 .................. 11,927.47 11,680.93
03/31/1989 .................. 12,799.90 12,501.82
06/30/1989 .................. 13,857.01 13,601.57
09/30/1989 .................. 14,975.04 15,050.15
12/31/1989 .................. 15,316.16 15,359.35
03/31/1990 .................. 15,043.27 14,895.29
06/30/1990 .................. 15,411.67 15,832.19
09/30/1990 .................. 14,208.75 13,650.11
12/31/1990 .................. 14,636.02 14,872.05
03/31/1991 .................. 16,591.36 17,037.36
06/30/1991 .................. 16,938.97 17,002.10
09/30/1991 .................. 18,686.94 17,917.31
12/31/1991 .................. 20,158.47 19,415.38
03/31/1992 .................. 19,993.30 18,919.91
06/30/1992 .................. 19,212.49 19,291.77
09/30/1992 .................. 20,176.22 19,889.97
12/31/1992 .................. 21,426.62 20,904.58
03/31/1993 .................. 22,321.97 21,800.30
06/30/1993 .................. 22,553.52 21,912.45
09/30/1993 .................. 23,435.01 22,472.87
12/31/1993 .................. 23,482.40 22,992.91
03/31/1994 .................. 22,787.33 22,115.78
06/30/1994 .................. 21,973.78 22,206.08
09/30/1994 .................. 22,780.25 23,299.42
12/31/1994 .................. 22,780.25 23,293.50
03/31/1995 .................. 24,256.59 25,561.27
06/30/1995 .................. 26,359.52 27,986.75
09/30/1995 .................. 28,268.05 30,211.75
12/31/1995 .................. 29,629.52 32,012.14
03/31/1996 .................. 31,505.92 33,752.19
06/30/1996 .................. 32,561.93 35,275.99
09/30/1996 .................. 33,938.81 36,355.23
12/31/1996 .................. 35,037.44 39,398.68
03/31/1997 .................. 35,334.37 40,429.42
06/30/1997 .................. 40,451.42 47,501.74
09/30/1997 .................. 42,755.74 51,074.69
12/31/1997 .................. 44,321.92 52,543.03
$10,000 OVER TEN YEARS
The chart above assumes a hypothetical $10,000 investment in Series B
(Growth-Income Series) on December 31, 1987, and reflects the fees and expenses
of Series B. On December 31, 1997, the value of the investment (assuming
reinvestment of all dividends and distributions) would have grown to $44,322. By
comparison, the same $10,000 investment would have grown to $52,543 based on the
S&P 500 Index's performance.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1997
1 Year 5 Years 10 Years
-------- --------- ---------
Series B..................... 26.5% 15.6% 16.1%
(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.
5
<PAGE>
Series C (Money Market Series)
February 15, 1998
Short-term fixed income investment vehicles such as money market funds saw their
interest rates increase during 1997, unlike their longer-term counterparts which
experienced declining rates. The Money Market Series returned 5.17% for the
year, in line with its Lipper peer group average of 5.13%.(1)
RISING SHORT-TERM RATES
In March the Federal Reserve Board's policy-making arm, the Federal Open Market
Committee, raised its target rate on Federal Funds to 5.50%. The Fed Funds rate,
the rate at which banks loan overnight funds to each other, is a strong
influence on rate levels for short-term investments such as those used in money
market funds.
The purpose of this rate hike was to keep inflation in the U.S. from escalating.
Investors in long-term bonds watched interest rates decline as the inflation
specter waned. But the Federal Reserve, remaining diligent in its inflation
fight, kept short-term rates at the same level. Investors in the Money Market
Series thus experienced increased returns over those of the previous year.
MATURITY STRUCTURE OF THE PORTFOLIO
As in the past, we strive to maintain an average maturity within ten days more
or less than that of the benchmark Money Fund Report published by IBC Donoghue.
We avoid trying to outguess the markets by dramatically lengthening or
shortening the average maturity of the fund. Because of the "laddered" structure
of maturities--issues coming due at regular intervals over the life of the
portfolio--we have holdings maturing frequently and can adjust quickly should
there be a sharp change in short-term interest rates.
ASSET SECTORS REPRESENTED IN THE PORTFOLIO
At the end of 1997 the assets in SBL Fund's Money Market Series consisted of 71%
commercial paper, 11% federal agency securities, and 18% Small Business
Administration issues. As of year-end, the commercial paper in the portfolio was
entirely in the "top tier" of rating agency classifications, rated at least A1
by Standard and Poor's rating agency or P1 by Moody's Investor Services. The
federal agency holdings at year end were primarily short-term securities issued
by The Federal Home Loan Bank.
The Small Business Administration (SBA) issues are fully guaranteed by the
federal government as to timely payment of both principal and interest. These
issues, while bearing stated maturities in the twenty- to thirty-year range, are
considered to be short maturity paper because their interest rates reset
periodically (usually monthly or quarterly). This enables the issues to carry
coupons representing recent market levels, staying competitive with other
short-term investment options.
OUTLOOK FOR 1998
The interest rate outlook for short-term fixed income investments in 1998 is
uncertain. Although the U.S. economy has exhibited several signs of strength in
recent months, the Federal Reserve Open Market Committee may be reluctant to
raise interest rates because the impact of the Asian crisis on the U.S. is as
yet unknown. We will continue to monitor markets carefully, and will remain
ready to adjust portfolio holdings as economic conditions warrant.
Fixed Income Team
Series C is neither insured nor guaranteed by the U.S. Government and does not
maintain a stable net asset value of $1.00 per share.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1997
1 Year 5 Years 10 Years
-------- --------- ---------
Series C................... 5.2% 3.7% 5.9%
(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.
6
<PAGE>
Series D (Worldwide Equity Series)
February 15, 1998
[Lexington] Subadvisor, Lexington Management Corporation
[ Logo ] Portfolio Managers, Richard Saler And Alan Wapnick
The year just completed was a disappointing one for investors in global markets.
In a year in which the U.S. markets displayed returns in the 20% to 30% range,
the Morgan Stanley World Index generated 14.17%. The Worldwide Equity Series,
primarily because of its underweighting in the U.S. markets, returned 6.45% for
the year.(1)
CONTRIBUTORS TO 1997 PERFORMANCE
The Series maintained a relatively light weighting of 22% in the U.S. stock
market most of the year. The Morgan Stanley Capital International U.S. Index
appreciated 33.4% over the same period. Our portfolio held an overweight
position in European equities, which performed extremely well in local
currencies, but saw the gains muted by the strong dollar.
Financial turmoil in Asia had a particularly damaging impact on cyclical stocks,
of which the series had a high percentage. On a positive note, however, low
weightings in Japan and in the emerging markets helped avoid sharp losses in
those areas.
THE CURRENT INTERNATIONAL MARKET PICTURE
The current investment environment is quite volatile. The Asian contagion has
not been resolved and the situation remains very serious, with many economies in
the region likely to experience a depression in 1998. Compounding the problem is
a weak Japanese economy, which is bordering on slipping into a recession. China,
also very important, may see a sharp slowdown caused by its relatively strong
currency and shrinking export markets.
The risks to global markets elsewhere have increased. Emerging markets around
the world are now suffering from high real interest rates, which alone will slow
these economies. The U.S. economy is likely to slow in 1998 for several reasons.
The traded goods sector, representing over 20% of the economy, could slow due to
the decrease in demand for our exports in Asia. Conversely, lower-cost foreign
exports can be expected to flood the U.S., and may lead to greater protectionism
in the U.S. Congress. Profits here are likely to disappoint as the economy slows
and competition accelerates.
PLANS FOR THE PORTFOLIO IN 1998
The Series remains underweighted in U.S. equities as valuations are high and
earnings are likely to disappoint. Europe continues to be attractive due to
restructuring by the corporate sector, which will drive earnings even if sales
growth is weak. However, European equities will be vulnerable to any sharp fall
in U.S. stocks.
Sector selection will be especially important this year. The portfolio currently
has a low cyclical weighting, as we expect world growth to slow and lead to
profit downgrades. Favored industries are the more defensive ones such as
utilities, foods and pharmaceuticals.
The economic outlook for Asia remains poor. However, there are many cheap stocks
in Asia with large gains likely to come from this region for the next few years.
Japanese stocks with strong balance sheets and trading at steep discounts to
book value, look compelling. Therefore, weightings are likely to be increased in
Japan and the rest of Asia over the next several months.
The international arena was a difficult environment in which to invest in 1997.
Markets, however, can get oversold as well as overbought. Asia offers great
value currently because sentiment is very negative. Now may be the time to look
into this region and begin to buy.
Richard Saler
Portfolio Manager
Alan Wapnick
Portfolio Manager
7
<PAGE>
Series D (Worldwide Equity Series)
February 15, 1998
SERIES D vs. MSCI WORLD INDEX AND
LEHMAN BROTHERS HIGH YIELD INDEX
[LINEAR GRAPH PLOTTED FROM POINTS IN TABLE BELOW]
Lehman Brothers
SBL Fund MSCI World High-Yield
Date Series D Index Index
- ---------- ---------- ---------- ---------------
12/31/1987 ............... $10,000.00 $10,000.00 $ 10,000.00
03/31/1988 ............... 10,541.21 11,171.89 10,557.87
06/30/1988 ............... 10,492.00 11,077.45 10,809.61
09/30/1988 ............... 10,479.70 11,124.28 11,001.53
12/31/1988 ............... 10,492.00 12,395.08 11,252.98
03/31/1989 ............... 10,455.10 12,687.12 11,386.71
06/30/1989 ............... 10,504.31 12,525.06 11,800.91
09/30/1989 ............... 10,262.98 13,993.70 11,626.97
12/31/1989 ............... 9,560.23 14,526.22 11,346.83
03/31/1990 ............... 8,725.73 12,460.00 11,159.06
06/30/1990 ............... 8,798.93 13,484.07 11,629.88
09/30/1990 ............... 8,131.52 11,039.54 10,440.97
12/31/1990 ............... 7,387.21 12,126.27 10,258.61
03/31/1991 ............... 7,982.66 13,335.88 12,382.64
06/30/1991 ............... 7,740.76 12,902.16 13,295.77
09/30/1991 ............... 8,179.50 13,829.85 14,231.94
12/31/1991 ............... 8,328.61 14,427.43 14,996.65
03/31/1992 ............... 8,115.60 13,267.21 16,105.25
06/30/1992 ............... 8,243.41 13,525.04 16,584.50
09/30/1992 ............... 7,857.10 13,769.93 17,192.03
12/31/1992 ............... 8,116.12 13,754.40 17,358.85
03/31/1993 ............... 8,979.54 14,954.42 18,412.90
06/30/1993 ............... 9,432.84 15,881.69 19,188.79
09/30/1993 ............... 10,093.28 16,646.59 19,588.46
12/31/1993 ............... 10,676.84 16,935.64 20,329.07
03/31/1994 ............... 10,763.29 17,059.24 19,933.13
06/30/1994 ............... 10,957.80 17,592.00 19,868.89
09/30/1994 ............... 11,357.49 17,990.48 20,182.06
12/31/1994 ............... 10,968.09 17,880.95 20,123.41
03/31/1995 ............... 10,859.93 18,741.32 21,324.56
06/30/1995 ............... 11,162.79 19,565.59 22,622.32
09/30/1995 ............... 11,765.91 20,683.48 23,261.00
12/31/1995 ............... 12,159.57 21,692.56 23,981.88
03/31/1996 ............... 12,968.75 22,601.38 24,406.39
06/30/1996 ............... 13,690.45 23,282.36 24,811.08
09/30/1996 ............... 13,887.87 23,620.28 25,801.59
12/31/1996 ............... 14,283.34 24,728.66 26,703.36
03/31/1997 ............... 14,655.54 24,826.56 27,001.57
06/30/1997 ............... 16,097.84 28,592.22 28,256.36
09/30/1997 ............... 16,665.90 29,437.79 29,540.18
12/31/1997 ............... 15,204.85 28,741.41 30,113.29
$10,000 OVER TEN YEARS
The chart above assumes a hypothetical $10,000 investment in Series D (Worldwide
Equity Series) on December 31, 1987, and reflects the fees and expenses of
Series D. On December 31, 1997, the value of the investment (assuming
reinvestment of all dividends and distributions) would have been $15,205. By
comparison, the same $10,000 investment would have grown to $28,741 based on the
MSCI Index's performance.
For the period of December 31, 1985 through April 30, 1991, the investment
objective of Series D was to seek high current income by investing primarily in
higher yielding, higher risk debt securities. For this period the Lehman
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, 1997
1 Year 5 Years 10 Years
-------- --------- ---------
Series D.................... 6.5% 13.4% 4.3%
(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.
8
<PAGE>
Series E (High Grade Income Series)
February 15, 1998
The High Grade Income Series completed a successful year in 1997, generating a
total return of 10.03%, besting its Lipper peer group average of 9.16% and
ranking in the top quartile of its peers.(1) The return for the Series was
narrowly behind its benchmark, the Lehman Corporate Bond Index, which returned
10.23% for the year.
RESTRUCTURING STEPS IN 1997
After a disappointing first quarter, we took steps to restructure the portfolio
with an overall emphasis on spreading the risk by sector and by size of
individual holdings. The average quality in the high yield portion of the Series
was upgraded, and issues providing a yield premium over Treasury bonds were
sought.
During the fall months, yield spreads between Treasuries and corporate bond
issues tightened considerably, reducing the attractiveness of corporates. When
the reward for accepting a lower quality was minimal, we chose to buy Treasury
issues instead. This helped overall performance in the fourth quarter, when
Treasury bond prices increased dramatically as investors moved funds from Asian
countries in a "flight to quality."
CURRENT PORTFOLIO STRUCTURE
We were fortunate to have eliminated our Asian exposure in mid-summer, selling
such "Yankee bond" issues as Petronas, Bangkok Bank, and Malayan Bank before the
Asian markets met disaster. (Yankee bonds are issues brought by foreign
corporations, but denominated in dollars for U.S. investors.) We also sold
issues in the troubled hospital care sector. We broadened our high yield
position, emphasizing the better quality issues, in order to gain additional
yield.
At the end of 1997 the portfolio consisted of 35% investment grade corporate
bonds, 18% high yield issues, 17% Yankee bonds, 16% Treasuries, and 13%
mortgage-backed securities, with the remaining 1% in cash. At year-end, the
average duration of the Series was six years, with an overall mid-A credit
quality average. Our target is to have no more than 2% of the assets invested in
any one company, with high yield issues being 1% or less per name.
PLANS FOR THE YEAR AHEAD
We believe this formula of diversification by sector and security will serve us
well in the volatile investment climate we expect in 1998. We will continue to
look for areas in which we can upgrade credit
quality and increase yield. If interest rates begin to reverse direction and
move up, we will keep our portfolio average duration close to that of the
benchmark index in order to reduce volatility. Our sizeable position in very
liquid U.S. Treasury issues allows us to adjust quickly to changes in economic
conditions.
We will continue to use the talents of our expanded analytical team to add value
in the portfolio holdings. At this particular stage in the economic cycle, it is
important to excel in individual security selection in order to compete with our
peers.
Steven M. Bowser
Portfolio Manager
9
<PAGE>
Series E (High Grade Income Series)
February 15, 1998
SERIES E vs. LEHMAN BROTHERS
GOVERNMENT/CORPORATE INDEX
AND LEHMAN BROTHERS
CORPORATE BOND INDEX
[LINEAR GRAPH PLOTTED FROM POINTS IN TABLE BELOW]
Lehman Brothers
Government/ Lehman Brothers
SBL Fund Corporate Corporate
Date Series E Index Bond Index
- ---------- ---------- --------------- ---------------
12/31/1987 ............... $10,000.00 $10,000.00 $ 10,000.00
03/31/1988 ............... 10,257.63 10,358.37 10,444.00
06/30/1988 ............... 10,381.68 10,460.48 10,560.00
09/30/1988 ............... 10,582.06 10,656.26 10,809.00
12/31/1988 ............... 10,725.19 10,758.79 10,922.00
03/31/1989 ............... 10,801.53 10,877.45 11,053.00
06/30/1989 ............... 11,679.39 11,752.34 11,928.00
09/30/1989 ............... 11,713.00 11,862.81 12,084.00
12/31/1989 ............... 12,001.45 12,290.81 12,461.00
03/31/1990 ............... 11,877.83 12,150.31 12,352.00
06/30/1990 ............... 12,372.31 12,588.32 12,834.00
09/30/1990 ............... 12,278.25 12,663.87 12,831.00
12/31/1990 ............... 12,804.93 13,310.04 13,340.00
03/31/1991 ............... 13,232.86 13,668.52 13,909.00
06/30/1991 ............... 13,463.28 13,875.41 14,186.00
09/30/1991 ............... 14,217.22 14,673.80 15,019.00
12/31/1991 ............... 14,976.56 15,456.34 15,811.00
03/31/1992 ............... 14,789.65 15,224.10 15,695.00
06/30/1992 ............... 15,350.39 15,842.07 16,377.00
09/30/1992 ............... 15,980.11 16,615.16 17,150.00
12/31/1992 ............... 16,091.34 16,627.38 17,184.00
03/31/1993 ............... 17,042.98 17,402.21 18,052.00
06/30/1993 ............... 17,636.21 17,925.31 18,655.00
09/30/1993 ............... 18,412.44 18,519.55 19,304.00
12/31/1993 ............... 18,123.11 18,466.25 19,275.00
03/31/1994 ............... 17,294.55 17,885.44 18,596.00
06/30/1994 ............... 16,781.63 17,664.34 18,303.00
09/30/1994 ............... 16,778.47 17,752.66 18,438.00
12/31/1994 ............... 16,866.32 17,818.04 18,518.00
03/31/1995 ............... 17,671.57 18,705.96 19,615.00
06/30/1995 ............... 18,564.66 19,918.73 21,074.00
09/30/1995 ............... 18,977.35 20,299.98 21,570.00
12/31/1995 ............... 20,004.00 21,246.06 22,636.00
03/31/1996 ............... 19,304.01 20,748.81 22,052.00
06/30/1996 ............... 19,304.01 20,846.26 22,150.00
09/30/1996 ............... 19,711.74 21,215.08 22,592.00
12/31/1996 ............... 19,860.67 21,863.44 23,379.00
03/31/1997 ............... 19,645.54 21,674.61 23,143.00
06/30/1997 ............... 20,406.87 22,461.92 24,098.00
09/30/1997 ............... 21,211.06 23,249.36 25,041.00
12/31/1997 ............... 21,853.28 23,995.88 25,771.00
$10,000 OVER TEN YEARS
The chart above assumes a hypothetical $10,000 investment in Series E (High
Grade Income Series) on December 31, 1987, and reflects the fees and expenses of
Series E. On December 31, 1997, the value of the investment (assuming
reinvestment of all dividends and distributions) would have been $21,853. By
comparison, the same $10,000 investment would have grown to $23,996 based on the
Lehman Brothers Government/Corporate Index's performance, and $25,771 based on
the Lehman Brothers Corporate Bond Index.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1997
1 Year 5 Years 10 Years
-------- --------- ---------
Series E................... 10.0% 6.3% 8.1%
(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.
10
<PAGE>
Series J (Emerging Growth Series)
February 15, 1998
The Emerging Growth Series performed very well in 1997, returning 19.95%
compared with the average return of 16.95% for its Lipper peer group of
funds.(1) Although the large cap stocks were the stars of the year, midcaps made
up substantial ground in the second half of 1997 after getting off to a slow
start.
GROWTH VERSUS VALUE IN THE EARLY MONTHS
In the first quarter of 1997 the portfolio suffered from its emphasis on
consistent-growth companies. During this period, when interest rates were rising
and corporate earnings were uncertain, value stocks rather than growth companies
were the strong performers. As we moved into the second quarter of the year,
growth issues came back into favor regaining some ground that was lost earlier.
During this time holdings in the portfolio such as Dell Computer, Franklin
Resources, Inc. and State Street Research turned in strong performances.
CHANGES IN HOLDINGS LATE IN THE YEAR
As we moved through the second half of 1997 we sold some stocks which had high
relative valuations and which had experienced significant insider selling. These
included issues in the oil service industry as well as in retailing. The
proceeds from these sales were reinvested in part in technology issues, as well
as in some health care holdings. We also reduced our weighting in the finance
sector, selling some of the brokerage firm holdings.
STYLE CHANGES GOING FORWARD
With a new portfolio manager come some gradual changes in management style. We
anticipate that the size of the average company in the portfolio will decline as
smaller companies will be considered. Most holdings will have market
capitalizations within the range of $200 million to $5 billion. The number of
holdings may decline as a weighting of 1.5% to 2% in each issue will be
targeted.
While the primary emphasis in past months has been on companies with a growth
orientation, going forward we plan to put slightly more weight on relative
valuation when selecting holdings. The Series will still be a growth fund, but
the value emphasis will skew selection toward "growth at a reasonable price."
We expect that total returns for the average stock in 1998 will move toward
levels closer to historical averages, in the 8% to 10% range.
However, we believe opportunities remain more abundant in smaller to
mid-capitalization issues. In a slowing economic environment, successful stock
selection in this area of the market could produce far better returns.
James P. Schier
Portfolio Manager
11
<PAGE>
Series J (Emerging Growth Series)
February 15, 1998
SERIES J vs. S&P MIDCAP
[LINEAR GRAPH PLOTTED FROM POINTS IN TABLE BELOW]
SBL Fund S&P
Date Series J Midcap
- ---------- ---------- ----------
10/01/1992 .................. $10,000.00 $10,000.00
12/31/1992 .................. 12,470.00 11,175.00
03/31/1993 .................. 13,040.00 11,541.00
06/30/1993 .................. 12,980.00 11,810.00
09/30/1993 .................. 13,811.04 12,405.00
12/31/1993 .................. 14,171.07 12,735.00
03/31/1994 .................. 13,190.99 12,252.00
06/30/1994 .................. 12,110.91 11,806.00
09/30/1994 .................. 13,267.95 12,605.00
12/31/1994 .................. 13,448.05 12,280.00
03/31/1995 .................. 13,858.30 13,285.00
06/30/1995 .................. 14,708.81 14,444.00
09/30/1995 .................. 16,489.88 15,853.00
12/31/1995 .................. 16,069.63 16,080.00
03/31/1996 .................. 17,270.35 17,070.00
06/30/1996 .................. 18,611.15 17,561.00
09/30/1996 .................. 19,073.06 18,071.00
12/31/1996 .................. 18,969.12 19,165.00
03/31/1997 .................. 17,472.38 18,881.00
06/30/1997 .................. 20,102.07 21,655.00
09/30/1997 .................. 23,179.99 25,137.00
12/31/1997 .................. 22,753.30 25,346.00
$10,000 SINCE INCEPTION
The chart above assumes a hypothetical $10,000 investment in Series J (Emerging
Growth Series) on October 1, 1992 (date of inception), and reflects the fees and
expenses of Series J. On December 31, 1997, the value of the investment
(assuming reinvestment of all dividends and distributions) would have been
$22,753. By comparison, the same $10,000 investment would have grown to $25,346
based on the S&P Midcap Index's performance.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1997
1 Year 5 Years Since Inception
(10-1-92)
------- -------- ----------------
Series J......... 20.0% 12.8% 16.9%
(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.
12
<PAGE>
Series K (Global Aggressive Bond Series)
February 15, 1998
[Lexington] [MFR] Subadvisors, Mfr Advisors, Inc., and Lexington Management
[ Logo ] [Logo] Corporation
Portfolio Managers, Maria Fiorini Ramirez and Denis Jamison
1997 was a mixed year for global bond investors. While interest rates fell in
almost all developed countries, the Series' total return was limited by a strong
U.S. dollar and widening yield spreads on emerging market debt relative to U.S.
Treasury bonds due to the problems in southeast Asia.
PERFORMANCE OF THE GLOBAL AGGRESSIVE BOND SERIES
Despite the problems for the global bond sector, the Global Aggressive Bond
Series returned 5.37% for the year, comparing favorably with the Lipper peer
group average of 4.31%.(1) Performance was also very strong versus the benchmark
Lehman Global Bond Index return of 1.04% for all of 1997.
OUTLOOK FOR EMERGING MARKETS
We expect 1998 to be a much better year for global bonds for a number of
reasons. First, we believe that emerging market countries and companies will be
evaluated more on an individual basis than being painted
with the negative broad brush they received in 1997 due to the Asian crisis.
Sound macroeconomic research and credit skills should be well rewarded in these
markets. We continue to favor such countries as Greece, Hungary, Poland, and
Mexico, because each has a relatively stable political framework and is headed
in the right direction with fiscal and monetary policies.
Second, we believe that much of the good news that has propelled the U.S. dollar
versus its European counterparts has now been factored into its value. This is
supported by the fact that the U.S. dollar rose over 11% versus the Deutsche
mark in the first half of 1997, but only 3% during the second half. For 1998 we
forecast a further 3% to 5% rise in the U.S. dollar early in the new year,
followed by a declining dollar as European growth accelerates and U.S. growth
slows. Therefore, as opposed to 1997, we believe foreign currencies will be a
positive for the total return of the Series in 1998.
BENEFITS OF THE ASIAN CRISIS
Finally, we expect inflation to remain subdued. Despite all the questions and
uncertainties the Asian crisis has raised, one thing is fairly certain: the
damage that the currency devaluations and resulting crisis have caused to the
economies of Asia will benefit the rest of the world's inflation outlook in two
ways. First, the Asian economies will slow dramatically and so will their demand
for commodities. We are already seeing a slowing in the demand for oil from
Asia. And second, many imported goods produced in Asia will be cheaper due to
the dramatic decline in many Asian currencies. All in all, we look forward to a
rewarding year for global bond markets in 1998.
Maria Fiorini Ramirez
Portfolio Manager
Denis Jamison
Portfolio Manager
13
<PAGE>
Series K (Global Aggressive Bond Series)
February 15, 1998
SERIES K vs. LEHMAN BROTHERS
GLOBAL BOND INDEX
[LINEAR GRAPH PLOTTED FROM POINTS IN TABLE BELOW]
SBL Fund Lehman Brothers
Date Series K Global Bond Index
- ---------- ---------- -----------------
06/01/1995 .................. $10,000.00 $10,000.00
06/30/1995 .................. 9,960.00 10,069.00
09/30/1995 .................. 10,360.00 10,131.16
12/31/1995 .................. 10,761.06 10,521.00
03/31/1996 .................. 10,824.24 10,338.86
06/30/1996 .................. 11,182.24 10,428.48
09/30/1996 .................. 11,761.35 10,731.15
12/31/1996 .................. 12,234.12 11,059.48
03/31/1997 .................. 12,119.99 10,592.85
06/30/1997 .................. 12,530.84 10,885.08
09/30/1997 .................. 12,899.89 11,076.34
12/31/1997 .................. 12,890.97 11,173.42
$10,000 SINCE INCEPTION
The chart above assumes a hypothetical $10,000 investment in Series K (Global
Aggressive Bond Series) on June 1, 1995 (date of inception), and reflects the
fees and expenses of Series K. On December 31, 1997, the value of the investment
(assuming reinvestment of all dividends and distributions) would have been
$12,891. By comparison, the same $10,000 investment would have grown to $11,173
based on the Lehman Brothers Global Bond Index's performance.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1997(1)
1 Year Since Inception
(6-1-95)
--------- ----------------
Series K..................... 5.4% 10.3%
(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 Investment Manager waived its
advisory fee for the fiscal year ended December 31, 1997, and in the
absence of such waiver, the performance quoted would be reduced.
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.
14
<PAGE>
Series M (Specialized Asset Allocation Series)
February 15, 1998
[Meridian] Managed By Security Management Company
[ LOGO ] Research Provided By Meridian Investment Management Corporation
Relative to the S&P 500 most asset allocation portfolios have underperformed for
the last three years. This was highlighted in 1997 when an Asian currency
crisis, a strong dollar, and falling gold prices made the U.S. market a refuge
for worried investors. Large capitalization U.S. stocks outperformed all other
investment alternatives in 1997. Despite the turbulence in global financial
markets and the recent dominance of U.S. stocks, we believe that active asset
allocation remains a sound investment strategy. Active asset allocation offers
investors risk reduction through diversification, as well as opportunities to
access higher growth markets outside of the U.S.
PERFORMANCE IN 1997
The Specialized Asset Allocation Series returned 6.16% in 1997, relative to a
Lipper peer group average of 11.55%.(1) As some of the investments within the
Specialized Asset Allocation portfolio remain undervalued, we are very
optimistic for 1998.
In 1997 the portfolio overweighted stock markets outside of the U.S. including
Italy, Germany, Belgium, and Denmark. These four markets posted excellent local
currency returns in 1997, and we continue to favor them. The Japanese market has
also been emphasized in the Series. This market has been riddled by bad economic
and political news; however, market valuations suggest that this bad news has
now been factored into the price of stocks in Japan. Currently the Japanese
market looks extremely undervalued, and we expect it to be a strong contributor
to portfolio performance in the coming year.
THE PORTFOLIO HEDGING POLICY
The Specialized Asset Allocation Series is currently unhedged against foreign
currency movements. Our research on currencies suggests that for the long-term
investor the benefits of currency hedging are outweighed by the costs. During
shorter periods of time, however, currency movements can have an adverse effect
on a portfolio. In 1997 the returns of the Specialized Asset Allocation
portfolio were hurt by a strong dollar, which appreciated approximately 15%
versus most major currencies. As the dollar strengthens, returns earned in
foreign markets are reduced to U.S. investors. In 1997 the strong dollar
diminished the returns of the Series' portfolio by approximately 6%. Although we
are disappointed with the strong dollar's impact on the Series in the short
term, we are confident that our current strategy of not hedging foreign
currencies is the best long-term policy for our shareholders.
LOOKING FORWARD INTO 1998
With interest rates low and declining in recent months, valuations for the U.S.
market have improved. Leisure and technology stocks are currently our favorite
groups in the U.S. market. The selloff in technology stocks in the fourth
quarter of 1997 created good buying opportunities. This sector will likely be
further emphasized in the portfolio in the coming months.
Despite better valuations due to lower interest rates, we expect above average
volatility from the U.S. stock market in the coming year. Investors are
beginning to question the longevity of the current bull market. This market
volatility and associated investment environment should prove beneficial to
asset allocation portfolios.
Patrick S. Boyle
Portfolio Manager
15
<PAGE>
Series M (Specialized Asset Allocation Series)
February 15, 1998
SERIES M vs. BLENDED INDEX AND S&P 500
[LINEAR GRAPH PLOTTED FROM POINTS IN TABLE BELOW]
SBL Fund Blended
Date Series M S&P 500 Index
- ---------- ---------- ---------- ----------
06/01/1995 ............... $10,000.00 $10,000.00 $10,000.00
06/30/1995 ............... 10,080.00 10,235.00 10,083.00
09/30/1995 ............... 10,490.00 11,049.00 10,607.00
12/31/1995 ............... 10,710.00 11,707.00 11,109.00
03/31/1996 ............... 11,140.00 12,343.00 11,445.00
06/30/1996 ............... 11,450.00 12,901.00 11,784.00
09/30/1996 ............... 11,605.27 13,295.00 12,052.00
12/31/1996 ............... 12,234.78 14,408.00 12,800.00
03/31/1997 ............... 12,275.39 14,785.00 12,909.00
06/30/1997 ............... 13,138.43 17,372.00 14,391.00
09/30/1997 ............... 13,865.47 18,679.00 15,084.00
12/31/1997 ............... 12,988.31 19,216.00 15,024.00
$10,000 SINCE INCEPTION
The chart above assumes a hypothetical $10,000 investment in Series M
(Specialized Asset Allocation Series) on June 1, 1995 (date of inception), and
reflects the fees and expenses of Series M. On December 31, 1997, the value of
the investment (assuming reinvestment of all dividends and distributions) would
have been $12,988. By comparison, the same $10,000 investment would have grown
to $19,216 based on the S&P 500 Index's performance. Comparison is also made to
a blended index of 40% S&P 500, 25% Financial Times World Index, 20% Lehman
Brothers Aggregate Bond Index, 10% Wilshire Real Estate Securities Index and 5%
91-Day Treasury Bill Yield. The same $10,000 investment would have grown to
$15,024 based on the blended index.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1997
1 Year Since Inception
(6-1-95)
-------- ---------------
Series M 6.2% 10.6%
(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.
SHAREHOLDER'S MEETING
A special meeting of the shareholders of the Specialized Asset Allocation Series
of SBL Fund was held on August 1, 1997. At this meeting, shareholders voted to
approve a sub-advisory contract between SMC and Meridian Investment Management
Corporation. The total number of eligible votes were 3,607,717. The results of
the votes are as follows: 2,977,177 in favor, 514,926 against and 115,614 votes
abstained.
16
<PAGE>
Series N (Managed Asset Allocation Series)
February 15, 1998
[T.Rowe Price] Subadvisor, T. Rowe Price Associates, Inc.
[ Logo ] Portfolio Manager, Ned Notzon
The Managed Asset Allocation Series returned 18.43% for the year ended December
31, 1997, near its Lipper peer group average return of 18.43%.(1) Unfortunately,
the defensive posture of the Series earlier in the year and its foreign exposure
caused the Series to underperform its weighted benchmark. This tailored
benchmark, consisting of 60% S&P 500 Index and 40% Lehman Brothers Aggregate
Bond Index, had a twelve-month total return of 23.62%.
A REVIEW OF THE MARKETS IN 1997
The domestic stock market was off to another stellar year until the mid-October
currency crisis in Asia which affected many global markets, including the U.S.
The U.S. stock market faltered a bit in the last quarter of 1997, but not enough
to diminish a strong year overall. As measured by the S&P 500 Index, stocks
gained 33.4% in 1997.
On the international front, 1997 ended on a disappointing note. The Japanese
market suffered a loss of 23.6%, and other Asian markets declined even more
steeply. On the brighter side, however, Europe and Latin America withstood the
shock waves of the Asian crisis and enjoyed returns of 24.2% and 31.6%
respectively. When measured as a whole, international markets in general were up
a disappointing 2% as measured by the Morgan Stanley Capital International EAFE
Index.
The problems in Asia benefited the U.S. Treasury bond market, however, as
investors searched for safe, liquid investments. In general the domestic bond
market enjoyed strong returns for the year. After the federal funds lending rate
increase in March, interest rates were stable to decreasing the rest of the
year, pushing bond prices up. As measured by the Lehman Brothers Aggregate Bond
Index, the domestic bond market returned 9.7% for the year. International bonds,
however, were weakened by both the Asian crisis and the subsequent strengthening
of the U.S. dollar. The J.P. Morgan Non-U.S. Dollar World Government Bond Index
lost 3.8% for the year.
PORTFOLIO HIGHLIGHTS
The sector exposures of the Series have changed slightly from last year. We
added to our defensive posture throughout the year by decreasing the exposure to
equity markets and increasing exposure to the bond markets or cash equivalents.
We moved about 3.5% from stocks to bonds last year resulting in an allocation of
54.5% in stocks, 38% in bonds, and 7.5% in cash equivalents at year end. In the
fourth quarter of 1997 this posture benefited the Series as bonds outperformed
stocks.
Given that the equity market is at the higher end of several valuation measures,
we have expected that stocks would moderate and earnings growth would slow. We
believed the international exposure would add value to the Series since many
foreign securities were undervalued.
OUTLOOK
The U.S. economy remains healthy. Growth is slowing a bit and inflation remains
at low levels despite tight labor markets. The Federal Reserve is likely to stay
on hold for awhile, especially in the wake of the Asian crisis. Both the stock
and bond markets should fare well under these conditions. We expect the U.S.
equity market to deliver positive returns in 1998, though not at the pace of the
last few years. Overseas, however, there could be further turmoil or sharp
rebounds. The uncertainty is sure to increase the volatility of markets around
the world, including the U.S. However, the drop in international markets is also
presenting buying opportunities at lower valuations. Based on the
unpredictability of financial markets, we continue to believe that investors
should maintain a long-term, diversified strategy as offered by the Managed
Asset Allocation Series.
Edmund M. Notzon
Portfolio Manager
17
<PAGE>
Series N (Managed Asset Allocation Series)
February 15, 1998
SERIES N vs. S&P 500 INDEX AND BLENDED INDEX
[LINEAR GRAPH PLOTTED FROM POINTS IN TABLE BELOW]
SBL Fund Blended
Date Series N S&P 500 Index
- ---------- ---------- ---------- ----------
06/01/1995 ............... $10,000.00 $10,000.00 $10,000.00
06/30/1995 ............... $10,070.00 $10,235.00 $10,170.00
09/30/1995 ............... 10,440.00 11,049.00 10,734.00
12/31/1995 ............... 10,730.00 11,707.00 11,302.00
03/31/1996 ............... 10,970.00 12,343.00 11,585.00
06/30/1996 ............... 11,160.00 12,901.00 11,925.00
09/30/1996 ............... 11,448.68 13,295.00 12,238.00
12/31/1996 ............... 12,103.18 14,408.00 13,001.00
03/31/1997 ............... 12,203.87 14,785.00 13,181.00
06/30/1997 ............... 13,512.87 17,372.00 14,741.00
09/30/1997 ............... 14,117.22 18,679.00 15,612.00
12/31/1997 ............... 14,334.09 19,216.00 16,073.00
$10,000 SINCE INCEPTION
The chart above assumes a hypothetical $10,000 investment in Series N (Managed
Asset Allocation Series) on June 1, 1995 (date of inception), and reflects the
fees and expenses of Series N. On December 31, 1997, the value of the investment
(assuming reinvestment of all dividends and distributions) would have been
$14,334. By comparison, the same $10,000 investment would have grown to $19,216
based on the S&P 500 Index's performance. Comparison is also made to a blended
index of 60% S&P 500 and 40% Lehman Brothers Aggregate Bond Index. The same
$10,000 investment would have grown to $16,073 based on the blended index.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1997
1 Year Since Inception
(6-1-95)
--------- -----------------
Series N.................... 18.4% 14.9%
(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.
18
<PAGE>
Series O (Equity Income Series)
February 15, 1998
[T.Rowe Price] Subadvisor, T. Rowe Price Associates, Inc.
[ Logo ] Portfolio Manager, Brian C. Rogers
The U.S. equity markets performed well in 1997 as good corporate earnings
results, continued low inflation, and a supportive interest rate environment
provided ample fuel to feed the advance. The performance of stocks in the second
half was particularly impressive in light of the market's October jitters and
concern over the volatility of the Asian markets.
For the twelve months ended December 31, 1997, the Equity Income Series returned
28.40%, roughly in line with the 29.13% average return for its Lipper peer
group. It trailed the S&P 500, which had a total return of 33.35%.(1)
THE MARKETS IN 1997
The past year was characterized by tremendous stock market volatility. Equities
struggled in the first quarter, particularly in the small capitalization sector.
Then prices rebounded sharply in the second and third quarters. The fourth
quarter returned to a pattern of mixed results as weakness in October,
culminating with the decline of 554 points for the Dow Jones Industrial Average
on October 27, was more than offset by steady gains in November and December.
PORTFOLIO STRATEGY
In this volatile environment we tried to tune out as much short-term noise as
possible by doing what we have always done in the Equity Income Series. We
concentrate on identifying reasonably valued investment opportunities with
attractive yields and price-to-earnings ratios, good upside potential, and
limited downside risk.
No example demonstrates the fickle nature of investor behavior better than AT&T.
Through the end of 1996, the price of AT&T's stock had languished for several
years. The company's problems were analyzed in the media almost daily. Few Wall
Street brokerage firms found anything positive to say about the firm or its
shares, which in our opinion represented an attractive investment opportunity.
Today new management is in place, investor sentiment has turned positive, and
the stock price has rebounded strongly. We are naturally attracted to situations
fraught with controversy like this one. As long as investor psychology ebbs and
flows, there will be ample opportunities to uncover promising investment
selections.
We executed a number of transactions over the last several months, adding major
new holdings such as Norfolk Southern Corporation, Eastman Kodak Company, Olin
Corporation, and PPG Industries, Inc. These companies, in our opinion, possess
interesting valuation characteristics and the potential for price gains in the
year ahead. The largest sales during the second half were securities whose
prices had advanced to the point where we no longer felt comfortable with their
relative valuations. One of the largest sales was Tambrands, which was acquired
by Procter & Gamble last summer. Another acquisition related sale was ITT
Corporation, which was being bought by Starwood Lodging at a significant premium
to our cost.
Electric utility and telephone company stocks performed well in the last six
months after a lengthy period of underperformance. Strong price appreciation in
stocks such as Bell Atlantic Corporation, BellSouth Corporation, Baltimore Gas &
Electric Company, and Unicom Corporation helped the Series' total return in the
latter part of the year.
SUMMARY AND OUTLOOK
The equity market has provided investors with three unprecedented years of
prosperity, culminating with the gains of the last six months, and the
investment environment has been exceptionally conducive to good returns. As
prices have advanced, the market's valuation appeal and likely near term upside
potential have diminished.
We are mindful of how virtually impossible it is to make market predictions, and
we never try to manage your portfolio based on someone else's market forecasts.
However, we do question how long the "delinkage" between the underlying rate of
corporate earnings and dividend growth and the more rapid advance of security
prices can continue. The volatility we experienced in the ending weeks of 1997,
due in part to the turmoil in Asia, is a reminder that investing entails risks
that sometimes get in the way of positive returns. While our emphasis is solely
on uncovering interesting investment values, we believe it is prudent to have
more modest expectations for equity market performance in the year ahead.
Brian C. Rogers
Portfolio Manager
19
<PAGE>
Series O (Equity Income Series)
February 15, 1998
SERIES O vs. S&P 500
[LINEAR GRAPH PLOTTED FROM POINTS IN TABLE BELOW]
SBL Fund
Date Series O S&P 500
- ---------- ---------- ----------
06/01/1995 ............... $10,000.00 $10,000.00
06/30/1995 ............... $10,060.00 $10,235.00
09/30/1995 ............... 10,790.00 11,049.00
12/31/1995 ............... 11,700.00 11,707.00
03/31/1996 ............... 12,270.00 12,343.00
06/30/1996 ............... 12,630.00 12,901.00
09/30/1996 ............... 13,082.68 13,295.00
12/31/1996 ............... 14,044.54 14,408.00
03/31/1997 ............... 14,445.53 14,785.00
06/30/1997 ............... 16,079.54 17,372.00
09/30/1997 ............... 17,337.60 18,679.00
12/31/1997 ............... 18,033.56 19,216.00
$10,000 SINCE INCEPTION
The chart above assumes a hypothetical $10,000 investment in Series O (Equity
Income Series) on June 1, 1995 (date of inception), and reflects the fees and
expenses of Series O. On December 31, 1997, the value of the investment
(assuming reinvestment of all dividends and distributions) would have been
$18,034. By comparison, the same $10,000 investment would have grown to $19,216
based on the S&P 500 Index's performance.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1997
1 Year Since Inception
(6-1-95)
-------- ---------------
Series O................. 28.4% 25.6%
(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.
20
<PAGE>
Series P (High Yield Series)
February 15, 1998
The year just completed was an excellent one for the high yield bond markets.
Declining interest rates helped generate record inflows of cash into high yield
funds. Buyers such as pension funds, insurance companies, and other investment
grade bond buyers moved to the high yield markets in their search for greater
returns.
PORTFOLIO PERFORMANCE IN 1997
The High Yield Series of the SBL Fund produced a total return of 13.37% for the
year, outperforming the 12.76% return of the benchmark Lehman High Yield Index
and staying very close to the 13.41% average yield of its Lipper peer group.(1)
Although our emphasis on the upper tier of ratings within the high yield
universe may subtract modestly from the portfolio's overall return in periods of
strong bond market performance, we believe that the incremental reduction in
risk justifies the practice.
CONTRIBUTORS TO STRONG PERFORMANCE
Contributing positively to total return, our overweighting in media, finance,
and textile issues served us well. Our media holdings such as Cablevision
Systems Corporation, Comcast Corporation, and Adelphia Communications
Corporation turned in strong performances. Finance industry bonds including
Dollar Financial Group, Inc. and Salomon, Inc. were beneficiaries of falling
interest rates. The textile industry overall was a performance laggard, but our
holdings in Westpoint Stevens, Pillowtex Corporation, and Dyersburg Corporation
bucked the trend and contributed strongly to the portfolio's total return.
Throughout the year we had no direct investment in bonds issued by the
governments of emerging market countries nor of corporations located in those
regions. In the latter half of the year those issues declined rapidly in value
as the problems in southeast Asian countries erupted. The portfolio also was
underweighted in bonds of companies operating in the basic industry arenas such
as paper and chemicals. These sectors suffered as commodity prices fell in the
third and fourth quarters of 1997.
The cash holdings in the portfolio increased as we approached year end,
reflecting the overall market's experience of greater cash inflows. We are
putting this money to work carefully, as opportunities to select undervalued
issues arise. One area in which we have begun building a position is the
homebuilding industry, with names such as Toll Brothers, Inc. and Hovnanian
Enterprises. This industry is experiencing increasing strength as interest rates
on home mortgage loans decline.
OUTLOOK FOR 1998
Our outlook for the high yield bond market for the year ahead is positive.
Declining interest rates make the high yield bond market appealing for fixed
income investors as they search for greater yield than that provided by
investment-grade issues. The high yield bond market frequently exhibits lower
volatility than the stock markets, which may attract equity investors to the
arena as well.
Continuing economic stability in the U.S. should keep defaults in high yield
bond issues at or below their historical averages. Individual selection in this
market remains very important, however, in order to reduce risk. We have
expanded our fixed income analytical staff to aid in research in the high yield
market and will continue to use their abilities to the fullest extent to select
the more creditworthy names for the portfolio.
David Eshnaur
Portfolio Manager
Tom Swank
Portfolio Manager
21
<PAGE>
Series P (High Yield Series)
February 15, 1998
SERIES P vs. LEHMAN BROTHERS HIGH YIELD INDEX
[LINEAR GRAPH PLOTTED FROM POINTS IN TABLE BELOW]
SBL Fund
Date Series P S&P 500
- ---------- ---------- ----------
08/05/1996 ............... $10,000.00 $10,000.00
08/31/1996 ............... 10,013.33 10,108.00
09/30/1996 ............... 10,246.66 10,352.00
10/31/1996 ............... 10,320.00 10,431.00
11/30/1996 ............... 10,526.66 10,637.00
12/31/1996 ............... 10,660.00 10,713.00
01/31/1997 ............... 10,773.33 10,818.00
02/28/1997 ............... 10,960.00 10,997.00
03/31/1997 ............... 10,846.67 10,833.00
04/30/1997 ............... 10,906.67 10,947.00
05/31/1997 ............... 11,126.67 11,181.00
06/30/1997 ............... 11,320.00 11,336.00
07/31/1997 ............... 11,540.00 11,648.00
08/31/1997 ............... 11,580.00 11,621.00
09/30/1997 ............... 11,754.45 11,852.00
10/31/1997 ............... 11,816.21 11,862.00
11/30/1997 ............... 11,932.86 11,976.00
12/31/1997 ............... 12,076.72 12,081.00
$10,000 SINCE INCEPTION
The chart above assumes a hypothetical $10,000 investment in Series P (High
Yield Series) on August 5, 1996 (date of inception), and reflects the fees and
expenses of Series P. On December 31, 1997, the value of the investment
(assuming reinvestment of all dividends and distributions) would have been
$12,077. By comparison, the same $10,000 investment would have grown to $12,081
based on the Lehman Brothers High Yield Index.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1997
1 Year Since Inception
(8-5-96)
------- ---------------
Series P..................... 12.4% 14.3%
(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 Investment Manager waived its
advisory fee for the fiscal year ended December 31, 1997, and in the
absence of such waiver the performance quoted would be reduced.
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>
Series S (Social Awareness Series)
February 15, 1998
The Social Awareness Series turned in a strong performance in 1997, generating a
total return of 22.65% for its investors, just slightly below the 24.84% average
of its Lipper peer group.(1) The Series has experienced rapid growth this year
as more investors have been attracted to socially conscious investing. A study
done recently by the Social Investment Forum showed that the social market grew
from about $639 billion in 1995 to over $1.185 trillion in 1997.
A LOOK BACK AT 1997
The Social Awareness Series struggled early in the year, as performance of
large-cap stocks was much stronger than that of the mid- and small-cap issues.
The Series' overweighting in the smaller names hurt throughout the first quarter
because of this. A shift in March to larger cap names turned performance around.
Over the second half of the year the portfolio performed in line with its peer
group, nearly overcoming the damage done in the first quarter.
CONTRIBUTORS TO POSITIVE PERFORMANCE
The communications services sector was the best performing industry represented
in the portfolio in 1997. Many companies in this field had underperformed the
general market averages for the past two years, and had low relative valuations
combined with good earnings prospects. Such names as Sprint Corporation, AT&T
Corporation, and Ameritech Corporation stood out with strong upside movements in
their stock prices. For most of the year we maintained about a 2% weighting in
this sector of the market, and increased the representation to nearly 8% during
the fourth quarter.
As interest rates declined during the second half of the year, the financial
sector also made steady gains. Many companies in this industry were reaping the
benefits as well from consolidation and cost cutting efforts that had been
underway for some time. Our focus on regional banks, multi-line insurance
companies, and diversified financial companies protected us from the late-year
selloff in money center banks as the southeast Asian crisis raised questions
about their earnings prospects.
THOUGHTS ABOUT THE YEAR AHEAD
We expect 1998 to be a more difficult year in terms of total return on stocks.
The past three years have been exceptionally strong; total returns are now more
likely to fall back to historical averages in the 8% to 10% range in our view.
Corporate profits may be reduced by the impact on sales of the weak Asian
economies, the strong U.S. dollar, inventory overstocks, and excess capacity.
Because of the potential for these problems, we plan to take a more defensive
posture as we enter 1998. We will be selecting those quality larger-cap names
which have a higher degree of liquidity and which are domestically oriented in
their revenue streams. We actively seek companies with consistent earnings
records that are growing faster than the S&P 500 average. We expect that the
second half of the year will be better, once earnings estimates have been fully
adjusted for the problems mentioned above. We will monitor the markets carefully
and adjust portfolio holdings as market conditions warrant.
Cindy Shields
Portfolio Manager
23
<PAGE>
Series S (Social Awareness Series)
February 15, 1998
SERIES S vs. S&P 500 AND DOMINI SOCIAL INDEX
[LINEAR GRAPH PLOTTED FROM POINTS IN TABLE BELOW]
SBL Fund Domini Social
Date Series S Index S&P 500
- ---------- ---------- ------------- ----------
05/01/1991 ............... $10,000.00 $ 10,000.00 $10,000.00
06/30/1991 ............... 9,560.00 9,906.93 9,951.00
09/30/1991 ............... 10,330.00 10,596.63 10,487.00
12/31/1991 ............... 10,550.00 11,697.27 11,364.00
03/31/1992 ............... 11,130.00 10,473.58 11,074.00
06/30/1992 ............... 10,050.00 11,463.42 11,292.00
09/30/1992 ............... 10,230.90 12,077.81 11,642.00
12/31/1992 ............... 12,275.07 13,111.45 12,236.00
03/31/1993 ............... 12,184.89 13,705.57 12,760.00
06/30/1993 ............... 12,525.59 13,507.89 12,826.00
09/30/1993 ............... 13,479.82 13,982.35 13,154.00
12/31/1993 ............... 13,730.56 14,230.82 13,458.00
03/31/1994 ............... 13,319.35 13,695.55 12,945.00
06/30/1994 ............... 12,807.84 13,678.17 12,997.00
09/30/1994 ............... 13,294.67 14,307.87 13,637.00
12/31/1994 ............... 13,213,17 14,255.71 13,634.00
03/31/1995 ............... 13,997.60 15,722.26 14,961.00
06/30/1995 ............... 15,026.54 17,276.28 16,381.00
09/30/1995 ............... 16,571.69 18,652.28 17,683.00
12/31/1995 ............... 16,878.77 19,704.04 18,737.00
03/31/1996 ............... 18,025.17 20,719.75 19,755.00
06/30/1996 ............... 19,366.05 21,686.75 20,647.00
09/30/1996 ............... 20,287.00 22,584.65 21,279.00
12/31/1996 ............... 20,055.75 24,375.58 23,060.00
03/31/1997 ............... 19,277.90 25,206.04 23,664.00
06/30/1997 ............... 22,263.14 29,697.51 27,803.00
09/30/1997 ............... 24,001.61 32,190.95 29,895.00
12/31/1997 ............... 24,598.61 33,700.55 30,755.00
$10,000 SINCE INCEPTION
The chart above assumes a hypothetical $10,000 investment in Series S (Social
Awareness Series) on May 1, 1991 (date of inception), and reflects the fees and
expenses of Series S. On December 31, 1997, the value of the investment
(assuming reinvestment of all dividends and distributions) would have been
$24,599. By comparison, the same $10,000 investment would have grown to $30,755
based on the S&P 500 Index's performance and $33,701 based on the Domini Social
Index.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1997
1 Year 5 Year Since Inception
(5-1-91)
------ ------- ---------------
Series S..................... 22.7% 14.9% 14.4%
(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.
24
<PAGE>
Series V (Value Series)
February 15, 1998
The Value Series turned in an excellent performance in 1997 even though it
existed only for part of the year. Since its inception May 1, the Series
generated a total return of 31.3%, ranking in the top 5% of its Lipper peer
group, which in contrast achieved a 21.49% return for the full year.1 An
emphasis on small-cap and midsize companies early in its existence got the
portfolio off to a strong start.
INVESTMENT STRATEGIES THAT HELPED
We used a "barbell" approach to market sectors to help keep the Series' return
stable through changes in performance of various market-cap groups during the
year. An overweighting in technology and health, combined with an overweighting
in the utility sector, generated steady returns. Early in the life of the Series
the midcap stocks, which included many of the technology and health companies
which we owned, were the strong performers. Late in the year these industries
weakened and the utility sector became a star.
Among the technology stocks we owned were Tandem Computers, which nearly doubled
in value after being bought by Compaq Computers in mid year. Computer Sciences
Corporation had excellent performance in the second half of the year as investor
psychology shifted to favor steady growth technology names. In the health care
area Mylan Laboratories, Inc., the largest producer of generic drugs in the
U.S., overcame the markets' perception that competition in the generic
pharmaceuticals industry would erode earnings.
CHANGES LATE IN THE YEAR
The utility sector experienced a strong rally in the fourth quarter as bonds
strengthened and interest rates fell. We took advantage of the upswing in
utility stock prices to realize gains in many issues we held, and brought this
sector weighting down almost to zero. We put the proceeds from these sales
largely into the technology software industry, buying undervalued companies such
as Comverse Technology, Inc., a manufacturer of voice messaging systems. Another
purchase in this area was Rational Software Corporation, manufacturer of
programs used in the design of software tools. Rational Software had completed
several acquisitions recently, depressing its stock price. A third name we added
was Electronics For Imaging, Inc., maker of products used in communication
between computers and printers. We purchased this stock at a price of $13; at
the time of purchase the company was holding nearly $6 per share in cash.
PLANS FOR 1998
The stock selection process in the Value Series is a "bottom-up" approach; that
is, first consideration is given to the fundamentals of a company and the price
of its stock. It is becoming more difficult to find undervalued companies that
have the potential to grow at a rate that exceeds general market expectations.
This can in part be explained from a "top down" perspective. In a
disinflationary environment such as we believe will exist in 1998, corporations
will have greater difficulty increasing revenues and will be forced to rely more
extensively on cost cutting or margin expansion to meet bottom line goals.
From a "bottom-up" perspective, however, many companies--especially larger
ones--have been boosting profitability dramatically over the last ten years. It
remains to be seen how much more can be done in this endeavor as clearly those
companies that have gone a long way to exhausting easy cost reduction
opportunities may be at a severe disadvantage in the stock market for 1998.
James P. Schier
Portfolio Manager
25
<PAGE>
Series V (Value Series)
February 15, 1998
SERIES V vs. S&P 500 AND BARRA VALUE INDEX
[LINEAR GRAPH PLOTTED FROM POINTS IN TABLE BELOW]
SBL Fund BARRA Value
Date Series V Index S&P 500
- ---------- ---------- ----------- ----------
05/01/1997 ............... $10,000.00 $ 10,000.00 $10,000.00
06/30/1997 ............... 11,140.00 10,980.00 11,087.00
09/30/1997 ............... 13,030.00 11,922.00 11,922.00
12/31/1997 ............... 13,130.00 12,125.00 12,264.00
$10,000 SINCE INCEPTION
The chart above assumes a hypothetical $10,000 investment in Series V (Value
Series) on May 1, 1997 (date of inception), and reflects the fees and expenses
of Series V. On December 31, 1997, the value of the investment (assuming
reinvestment of all dividends and distributions) would have been $13,130. By
comparison, the same $10,000 investment would have grown to $12,264 based on the
S&P 500, and $12,125 based on the BARRA Value index's performance.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1997
Since Inception
(5-1-97)
---------------
Series V....................... 31.3%*
(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 Investment Manager waived its
advisory fee for the fiscal year ended December 31, 1997 and in the absence
of such waiver the performance quoted would be reduced.
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.
* Total return has not been annualized.
26
<PAGE>
Series X (Small Cap Series)
February 15, 1998
Moderate economic growth, low unemployment and inflation, and strong corporate
earnings set the stage for the market's strong gains in 1997. However, the
so-called Asian flu, which began with Thailand's devaluation of its currency
last summer and ballooned into a regionwide crisis, rattled the financial
markets here and abroad creating a wave of market volatility throughout the
fourth quarter.
PERFORMANCE OF THE SERIES SINCE INCEPTION
The performance of the Small Cap Series benefited from its holdings in sectors
oriented to the domestic economy as the stocks of U.S. media companies, regional
banks, and retailers outperformed other parts of the market. Although we reduced
our holdings in companies with southeast Asian exposure, the Series was
nonetheless negatively impacted as investor concern led to sharp selloffs in
small- and mid-cap stocks and in much of the technology and energy sectors. As a
result, as of December 31, 1997, the Small Cap Series was off -4.00% since its
inception date of October 15, 1997, as compared to the Russell 2000 Growth Funds
Index, which returned -10.34% for the same time period.(1)
1998 OUTLOOK
What do we expect in the months ahead? We anticipate that during 1998 the market
will benefit from continued economic growth, modest inflationary pressure and
stable interest rates. Concerns about market instability in Asia could create
additional volatility, particularly as currency devaluations abroad make U.S.
products and services much more expensive for Asian buyers. The degree to which
U.S. companies will be impacted is uncertain, but we may see some earnings
growth held back by reduced demand from abroad. Therefore, we have sold
companies that have risk to earnings from overseas. We have preferred to invest
in small companies that do most of their business in the U.S. and benefit from
the strong position of the U.S. consumer, which includes lower interest rates
and cheaper foreign goods.
While we are cautious for the near term, we remain bullish over the long run,
and expect to see attractive but modest gains ahead for the market. With stock
market returns returning to more "normal" ranges, savvy stock selection will
become even more important. As a result, we will continue to look carefully at
the fundamentals and valuations of all our companies.
Ronald C. Ognar
Portfolio Manager
27
<PAGE>
Series X (Small Cap Series)
February 15, 1998
SERIES X vs. RUSSELL 200 GROWTH FUNDS INDEX
AND RUSSELL 2000 INDEX
[LINEAR GRAPH PLOTTED FROM POINTS IN TABLE BELOW]
Russell 2000
SBL Fund Growth Funds Russell 2000
Date Series X Index Index
- ---------- ---------- ------------ ------------
10/15/1997 ............... $10,000.00 $ 10,000.00 $ 10,000.00
10/31/1997 ............... 9,700.00 9,180,00 9,363.00
11/30/1997 ............... 9,480.00 8,962.00 9,291.00
12/31/1997 ............... 9,580.00 8,967.00 9,444.00
$10,000 SINCE INCEPTION
The chart above assumes a hypothetical $10,000 investment in Series X (Small Cap
Series) on October 15, 1997 (date of inception), and reflects the fees and
expenses of Series X. On December 31, 1997, the value of the investment
(assuming reinvestment of all dividends and distributions) would have been
$9,580. By comparison, the same $10,000 investment would have been $8,967 based
on the Russell 2000 Growth Funds Index, and $9,444 based on the Russell 2000
Index.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1997
Since Inception
(10-15-97)
---------------
Series X...................... -4.00%*
(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 Investment Manager waived its advisory fee for the period ended
December 31, 1997 and in the absence of such waiver the performance quoted
would be reduced.
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.
* Total return has not been annualized.
28
<PAGE>
Schedule of Investments
December 31, 1997
<TABLE>
<CAPTION>
SERIES A (Growth)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Market
COMMON STOCKS of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ALUMINUM - 1.1%
Aluminum Company of America ........................................................ 150,000 $10,556,250
AUTOMOBILES - 1.1%
Chrysler Corporation ............................................................... 300,000 10,556,250
BANKS - MAJOR REGIONAL - 4.2%
Bank of New York Company, Inc. ..................................................... 200,000 11,562,500
Northern Trust Corporation ......................................................... 200,000 13,950,000
Norwest Corporation ................................................................ 240,000 9,270,000
Wells Fargo & Company .............................................................. 20,000 6,788,750
----------
41,571,250
BANKS - MONEY CENTER - 2.0%
BankAmerica Corporation ............................................................ 100,000 7,300,000
Chase Manhattan Corporation ........................................................ 120,000 13,140,000
----------
20,440,000
BEVERAGES - SOFT DRINK - 1.1%
PepsiCo, Inc. ...................................................................... 300,000 10,931,250
CHEMICALS - BASIC - 2.8%
du Pont (E.I.) de Nemours & Company ................................................ 150,000 9,009,375
Imperial Chemical Industries PLC ADR ............................................... 140,000 9,091,250
Praxair, Inc. ...................................................................... 225,000 10,125,000
----------
28,225,625
CHEMICALS - DIVERSIFED - 0.8%
B.F. Goodrich Company .............................................................. 200,000 8,287,500
COMPUTER HARDWARE - 1.3%
Compaq Computer Corporation ........................................................ 45,000 2,539,688
International Business Machines Corporation ........................................ 100,000 10,456,250
----------
12,995,938
COMPUTERS - NETWORKING - 0.8%
Cisco Systems, Inc.* ............................................................... 150,000 8,362,500
COMPUTER SOFTWARE/SERVICES - 3.1%
BMC Software, Inc.* ................................................................ 150,000 9,843,750
Computer Sciences Corporation* ..................................................... 100,000 8,350,000
Microsoft Corporation* ............................................................. 100,000 12,925,000
Wang Laboratories, Inc. Warrants ................................................... 639 4,393
----------
31,123,143
ELECTRICAL EQUIPMENT - 2.5%
Emerson Electric Company ........................................................... 180,000 10,158,750
General Electric Company ........................................................... 200,000 14,675,000
----------
24,833,750
ELECTRONICS - INSTRUMENTATION - 0.9%
Perkin-Elmer Corporation ........................................................... 120,000 8,527,500
ELECTRONICS - SEMICONDUCTORS - 0.7%
Intel Corporation .................................................................. 100,000 $7,025,000
EQUIPMENT - SEMICONDUCTORS - 0.3%
Teradyne, Inc.* .................................................................... 80,000 2,560,000
FINANCIAL - DIVERSE - 2.6%
Fannie Mae ......................................................................... 240,000 13,695,000
Federal Home Loan Mortgage Corporation ............................................. 300,000 12,581,250
----------
26,276,250
FOODS - 2.5%
ConAgra, Inc. ...................................................................... 360,000 11,812,500
CPC International, Inc. ............................................................ 120,000 12,930,000
----------
24,742,500
GAMING & LOTTERY - 0.8%
Circus Circus Enterprises, Inc.* ................................................... 400,000 8,200,000
HEALTH CARE - DIVERSE - 2.9%
American Home Production Corporation ............................................... 150,000 11,475,000
Bristol-Myers Squibb Company ....................................................... 180,000 17,032,500
----------
28,507,500
HOUSEHOLD FURNISHINGS & APPLIANCES - 1.8%
Leggett & Platt, Inc. .............................................................. 260,000 10,887,500
Sunbeam Corporation ................................................................ 160,000 6,740,000
----------
17,627,500
HOUSEHOLD PRODUCTS - 4.5%
Colgate-Palmolive Company .......................................................... 150,000 11,025,000
Dial Corporation ................................................................... 600,000 12,487,500
Fort James Corporation ............................................................. 250,000 9,562,500
Procter & Gamble Company ........................................................... 150,000 11,971,875
----------
45,046,875
INSURANCE - LIFE/HEALTH - 1.2%
Equitable Companies, Inc. .......................................................... 250,000 12,437,500
INSURANCE - MULTI-LINE - 3.3%
American International Group, Inc. ................................................. 112,500 12,234,375
Hartford Financial Services Group, Inc. ............................................ 100,000 9,356,250
Lincoln National Corporation ....................................................... 150,000 11,718,750
----------
33,309,375
INSURANCE - PROPERTY - 2.8%
Allstate Corporation ............................................................... 175,000 15,903,125
Chubb Corporation .................................................................. 160,000 12,100,000
----------
28,003,125
LODGING - HOTELS - 1.3%
Carnival Corporation (CI. A) ....................................................... 240,000 13,290,000
See accompanying notes.
29
<PAGE>
Schedule of Investments
December 31, 1997
SERIES A (Growth)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Market
COMMON STOCKS (Continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
MANUFACTURING - DIVERSIFIED - 8.0%
AlliedSignal, Inc. ................................................................. 320,000 $12,460,000
Cooper Industries, Inc. ............................................................ 120,000 5,880,000
Crane Company ...................................................................... 225,000 9,759,375
Textron, Inc. ...................................................................... 165,000 10,312,500
Tyco International, Ltd. ........................................................... 370,000 16,673,125
U.S. Industries, Inc. .............................................................. 525,000 15,815,625
United Technologies Corporation .................................................... 130,000 9,465,625
----------
80,366,250
MANUFACTURING - SPECIALIZED - 0.7%
U.S. Filter Corporation* ........................................................... 225,000 6,735,937
MEDICAL PRODUCTS & SUPPLIES - 3.4%
Baxter International, Inc. ......................................................... 200,000 10,087,500
Becton, Dickinson & Company ........................................................ 200,000 10,000,000
Medtronic, Inc. .................................................................... 220,000 11,508,750
Stryker Corporation ................................................................ 50,000 1,862,500
----------
33,458,750
NATURAL GAS - 1.1%
Coastal Corporation ................................................................ 170,000 10,529,375
OFFICE EQUIPMENT & SUPPLIES - 0.8%
Corporate Express, Inc.* ........................................................... 600,000 7,725,000
OIL & GAS - DRILLING & EQUIPMENT - 1.0%
Halliburton Company ................................................................ 40,000 2,077,500
Schlumberger, Ltd. ................................................................. 100,000 8,050,000
----------
10,127,500
OIL & GAS - EXPLORATION & PRODUCTION - 1.4%
Burlington Resources, Inc. ......................................................... 259,250 11,617,641
YPF Sociedad Anonima ADR ........................................................... 70,000 2,393,125
----------
14,010,766
OIL - INTERNATIONAL - 3.3%
Mobil Corporation .................................................................. 160,000 11,550,000
Royal Dutch Petroleum Company ...................................................... 200,000 10,837,500
Texaco, Inc. ....................................................................... 200,000 10,875,000
----------
33,262,500
PERSONAL CARE - 1.0%
Gillette Company ................................................................... 100,000 10,043,750
PHARMACEUTICALS - 3.9%
Elan Corporation PLC ADR* .......................................................... 200,000 10,237,500
Schering-Plough Corporation ........................................................ 240,000 14,910,000
SmithKline Beecham PLC ADR ......................................................... 200,000 10,287,500
Teva Pharmaceuticals Industries,
Ltd. ADR ........................................................................... 75,000 3,548,437
----------
38,983,437
PHOTOGRAPHY/IMAGING - 0.9%
Xerox Corporation .................................................................. 125,000 9,226,563
PUBLISHING - 1.1%
McGraw-Hill Companies, Inc. ........................................................ 150,000 $11,100,000
PUBLISHING - NEWSPAPER - 2.2%
Gannett Company, Inc. .............................................................. 180,000 11,126,250
Tribune Company .................................................................... 180,000 11,205,000
----------
22,331,250
RAILROADS - 1.1%
Canadian Pacific, Ltd. ............................................................. 400,000 10,900,000
RETAIL - APPAREL - 0.9%
TJX Companies, Inc. ................................................................ 270,000 9,281,250
RETAIL - BUILDING SUPPLIES - 1.2%
Home Depot, Inc. ................................................................... 45,000 2,649,375
Sherwin-Williams Company ........................................................... 350,000 9,712,500
----------
12,361,875
RETAIL - DEPARTMENT STORES - 2.0%
Federated Department Stores, Inc.* ................................................. 200,000 8,612,500
Proffitt's, Inc.* .................................................................. 400,000 11,375,000
----------
19,987,500
RETAIL - DRUG STORES - 2.2%
Rite Aid Corporation ............................................................... 200,000 11,737,500
Walgreen Company ................................................................... 320,000 10,040,000
----------
21,777,500
RETAIL - FOOD CHAINS - 1.1%
Safeway, Inc.* ..................................................................... 170,000 10,752,500
RETAIL - GENERAL MERCHANDISE - 0.5%
Dayton Hudson Corporation .......................................................... 80,000 5,400,000
RETAIL - SPECIALTY - 2.8%
Payless ShoeSource, Inc.* .......................................................... 225,000 15,103,125
Staples, Inc.* ..................................................................... 300,000 8,325,000
Woolworth Corporation .............................................................. 215,000 4,380,625
----------
27,808,750
SERVICES - ADVERTISING/MARKETING - 1.7%
Omnicom Group, Inc. ................................................................ 400,000 16,950,000
SERVICES - COMMERCIAL & CONSUMER - 0.3%
Viad Corporation ................................................................... 160,000 3,090,000
TELECOMMUNICATIONS - LONG DISTANCE - 1.2%
LCI International, Inc.* ........................................................... 400,000 12,300,000
WASTE MANAGEMENT - 1.0%
Republic Industries, Inc.* ......................................................... 300,000 6,993,750
U.S.A. Waste Service, Inc.* ........................................................ 80,000 3,140,000
-----------
10,133,750
-----------
Total common stocks - 91.2% ................................................................................. 912,080,784
See accompanying notes.
30
<PAGE>
Schedule Of Investments
December 31, 1997
SERIES A (Growth)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount or
Number Market
COMMERICAL PAPER of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
Bay State Gas Company, 6.025% - 1-08-98 ............................................ $ 2,000,000 $1,997,657
Central Louisiana Electric Company, Inc., 5.725% - 1-12-98 ......................... $ 760,000 758,670
Fluor Corporation,
6.125% - 1-06-98 .............................................................. $ 1,000,000 999,149
6.175% - 1-06-98 .............................................................. $ 1,000,000 999,143
Merrill Lynch & Company, Inc. 5.605% - 2-06-98 ..................................... $ 650,000 646,357
PHH Corporation, 5.875% - 1-30-98 .................................................. $ 170,000 169,195
The Walt Disney Company 6.075% - 1-02-98 ........................................... $ 500,000 499,916
Winn-Dixie Stores, Inc., 6.175% - 1-06-98 .......................................... $ 2,100,000 2,098,199
------------
Total commercial paper - 0.8% ............................................................................... 8,168,286
------------
Total investments - 92.0% ................................................................................... 920,249,070
Cash and other assets, less liabilities - 8.0% .............................................................. 79,679,897
------------
Total net assets - 100.0% .............................................................................. $999,928,967
============
SERIES B (Growth-Income)
- ------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS
- ----------------
BANKING AND CREDIT - 0.6%
California Federal Bank, 11.50% .................................................... 60,000 $6,780,000
CABLE TELEVISION - 0.2%
Cablevision Systems Corporation .................................................... 20,739 2,385,008
PUBLISHING - 0.2%
Primedia, Inc., 10.0% .............................................................. 30,000 3,157,500
----------
Total preferred stocks - 1.0% .......................................................................... 12,322,508
TRUST PREFERRED SECURITIES(8)
- -----------------------------
FINANCE - 0.3%
S I Financing, Inc. ................................................................ 134,000 3,618,000
CORPORATE BONDS
- ---------------
AEROSPACE/DEFENSE - 0.0%
Burke Industries, Inc., 10.0% - 2007 ............................................... $ 350,000 363,125
BANKS & CREDIT - 0.1%
Bay View Capital Corporation, 9.125% - 2007 ........................................ $ 750,000 770,625
BROADCAST MEDIA - 0.1%
Allbritton Communications Company, 9.75% - 2007 .................................... $ 950,000 $ 971,375
BUILDING MATERIALS - 0.3%
Sequa Corporation, 9.375% - 2003 ................................................... 3,000,000 3,127,500
BUSINESS SERVICES - 0.1%
Heritage Media Corporation, 8.75% - 2006 ........................................... 1,200,000 1,284,000
CABLE SYSTEMS - 0.2%
Rogers Cablesystems Ltd., 9.625% - 2002 ............................................ 2,000,000 2,125,000
CHEMICALS - 0.3%
Envirodyne Industries, Inc., 12.00% - 2000 ......................................... 3,500,000 3,749,375
COAL MINING - 0.1%
AEI Holding Company, 10.0% - 2007 .................................................. 1,500,000 1,537,500
COMMUNICATIONS - 0.5%
CF Cable TV, Inc., 11.625% - 2005 .................................................. 1,390,000 1,596,762
Comcast Corporation, 9.125% - 2006 ................................................. 2,750,000 2,921,875
Roger's Communications, Inc. 9.125% - 2006 ......................................... 2,000,000 2,030,000
----------
6,548,637
FINANCE - 0.3%
Dollar Financial Group, Inc., 10.875% - 2006 ....................................... 1,550,000 1,656,563
Homeside, Inc., 11.25% - 2003 ...................................................... 1,335,000 1,581,975
----------
3,238,538
FOOD & BEVERAGE TRADE - 0.4%
Cott Corporation, 9.375% - 2005 .................................................... 2,000,000 2,090,000
Delta Beverage Group, 9.75% - 2003 ................................................. 2,600,000 2,743,000
----------
4,833,000
MANUFACTURING - 0.2%
AGCO Corporation, 8.50% - 2006 ..................................................... 2,200,000 2,255,000
OIL & GAS COMPANIES - 0.4%
Seagull Energy Corporation, 8.625% - 2005 .......................................... 4,800,000 5,004,000
PUBLISHING & PRINTING - 0.5%
Golden Books Publishing, Inc., 7.65% - 2002 ........................................ 3,500,000 3,368,750
Hollinger International Publishing, Inc., 8.625% - 2005 ............................ 2,050,000 2,119,188
----------
5,487,938
See accompanying notes.
31
<PAGE>
Schedule Of Investments
December 31, 1997
SERIES B (Growth-Income)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount or
Number Market
CORPORATE BONDS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE - 0.3%
BF Saul REIT, 11.625% - 2002 ....................................................... $ 3,100,000 $3,309,250
RECREATION - 0.3%
AMF Bowling Worldwide, Inc., 10.875% - 2006 ........................................ 2,725,000 2,987,281
RESTAURANTS - 0.4%
Carrols Corporation, 11.50% - 2003 ................................................. 3,050,000 3,240,625
Foodmaker Corporation, 9.75% - 2003 ................................................ 2,000,000 2,120,000
----------
5,360,625
RETAIL - SPECIALTY - 0.1%
Southland Corporation, 4.50% -2004 ................................................. 900,000 729,000
Zale's Corporation, 8.50% - 2007 ................................................... 650,000 641,875
----------
1,370,875
STEEL & METAL PRODUCTS - 0.2%
AK Steel Corporation, 9.125% - 2006 ................................................ 1,400,000 1,438,500
Wheeling-Pittsburgh Corporation, 9.25% - 2007 ...................................... 1,000,000 980,000
----------
2,418,500
TELECOMMUNICATIONS - 0.2%
Comcast Cellular Holdings, Inc., 9.50% - 2007 ...................................... 2,025,000 2,116,125
TEXTILES - 0.1%
Delta Mills, Inc., 9.625% - 2007 ................................................... 1,000,000 1,017,500
Worldtex, Inc., 9.625% - 2007 ...................................................... 650,000 667,875
----------
1,685,375
TOBACCO PRODUCTS - 0.3%
Dimon, Inc., 8.875% - 2006 ......................................................... 2,650,000 2,862,000
Standard Commercial Tobacco Corporation, 8.875% - 2005 ............................. 350,000 352,187
----------
3,214,187
TRANSPORTATION - 0.3%
Teekay Shipping Corporation, 8.32% - 2008 .......................................... 4,000,000 4,070,000
----------
Total corporate bonds - 5.7% ........................................................................... 67,827,831
COMMON STOCKS
- -------------
AEROSPACE & DEFENSE - 0.2%
Lockheed Martin Corporation ........................................................ 30,000 $2,955,000
AGRICULTURAL PRODUCTS - 0.9%
Archer-Daniels-Midland Company ..................................................... 490,000 10,626,875
ALUMINUM - 0.9%
Aluminum Company of America ........................................................ 160,000 11,260,000
AUTO PARTS & EQUIPMENT - 0.8%
Genuine Parts Company .............................................................. 150,000 5,090,625
TRW, Inc. .......................................................................... 94,000 5,017,250
----------
10,107,875
AUTOMOBILES - 1.2%
General Motors Corporation ......................................................... 250,000 15,156,250
BANKS - MAJOR REGIONAL - 3.5%
Banc One Corporation ............................................................... 130,000 7,060,625
Bank of New York Company, Inc. ..................................................... 100,000 5,781,250
Northern Trust Corporation ......................................................... 225,000 15,693,750
Wells Fargo & Company .............................................................. 40,000 13,577,500
----------
42,113,125
BANKS - MONEY CENTER - 1.3%
Chase Manhattan Corporation ........................................................ 140,000 15,330,000
BEVERAGES - SOFT DRINK - 1.1%
Coca-Cola Company .................................................................. 200,000 13,325,000
CHEMICALS - BASIC - 1.1%
Praxair, Inc. ...................................................................... 300,000 13,500,000
CHEMICALS - DIVERSIFIED - 1.1%
Monsanto Company ................................................................... 300,000 12,600,000
COMMUNICATION EQUIPMENT - 1.6%
Harris Corporation ................................................................. 55,000 2,523,125
Motorola, Inc. ..................................................................... 300,000 17,118,750
----------
19,641,875
COMPUTER HARDWARE - 1.8%
Compaq Computer Corporation ........................................................ 180,000 10,158,750
Hewlett-Packard Company ............................................................ 60,000 3,750,000
International Business Machines Corporation ........................................ 70,000 7,319,375
----------
21,228,125
COMPUTER SOFTWARE/SERVICES - 3.5%
BMC Software, Inc.* ................................................................ 200,000 13,125,000
Computer Sciences Corporation ...................................................... 150,000 12,525,000
Microsoft Corporation* ............................................................. 130,000 16,802,500
----------
42,452,500
COMPUTERS NETWORKING - 0.5%
Cisco Systems, Inc. ................................................................ 100,000 5,575,000
CONTAINERS & PACKAGING - 0.4%
Union Camp Corporation ............................................................. 100,000 5,368,750
See accompanying notes.
32
<PAGE>
Schedule of Investments
December 31, 1997
SERIES B (Growth-Income)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Market
COMMON STOCKS (Continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC COMPANIES - 6.5%
Allegheny Energy, Inc. ............................................................. 171,000 $5,557,500
American Electric Power Company, Inc. .............................................. 201,400 10,397,275
Baltimore Gas & Electric Company ................................................... 86,200 2,936,188
Carolina Power & Light Company ..................................................... 68,000 2,885,750
Consolidated Edison Company of New York, Inc. ...................................... 67,100 2,751,100
Delmarva Power & Light Company ..................................................... 10,500 242,156
Dominion Resources, Inc. ........................................................... 64,500 2,745,281
Edison International ............................................................... 93,500 2,542,031
GPU, Inc. .......................................................................... 64,100 2,700,213
Kansas City Power & Light Company .................................................. 173,000 5,114,313
KU Energy Corporation .............................................................. 6,200 243,350
Long Island Lighting Company ....................................................... 8,100 244,012
Midamerican Energy Holdings Company ................................................ 131,600 2,895,200
New York State Electric & Gas Company .............................................. 12,300 436,650
Northern States Power Company ...................................................... 46,100 2,685,325
Peco Energy Company ................................................................ 210,000 5,092,500
Potomac Electric Power Company ..................................................... 250,000 6,453,125
Public Service Enterprise Group, Inc. .............................................. 170,000 5,386,875
Southern Company ................................................................... 310,000 8,021,250
Texas Utilities Company ............................................................ 214,500 8,915,156
----------
78,245,250
ELECTRICAL EQUIPMENT - 3.3%
AMP, Inc. .......................................................................... 250,000 10,500,000
Emerson Electric Company ........................................................... 220,000 12,416,250
General Electric Company ........................................................... 230,000 16,876,250
----------
39,792,500
ELECTRONICS - DEFENSE - 0.9%
Raytheon Company - (CI. A) ......................................................... 9,566 471,699
Raytheon Company - (CI. B) ......................................................... 200,000 10,100,000
----------
10,571,699
ELECTRONICS - INSTRUMENTATION - 0.5%
E G & G, Inc. ...................................................................... 250,000 5,203,125
Perkin-Elmer Corporation ........................................................... 9,000 639,562
----------
5,842,687
ELECTRONICS - SEMICONDUCTORS - 0.7%
Intel Corporation .................................................................. 120,000 8,430,000
ENTERTAINMENT - 1.0%
The Walt Disney Company ............................................................ 120,000 11,887,500
FINANCIAL - DIVERSE - 2.0%
Federal Home Loan Mortgage Corporation ............................................. 250,000 10,484,375
Federal National Mortgage Association .............................................. 230,000 13,124,375
----------
23,608,750
FOODS - 2.4%
CPC International, Inc.* ........................................................... 150,000 $16,162,500
ConAgra, Inc. ...................................................................... 300,000 9,843,750
Sara Lee Corporation ............................................................... 50,000 2,815,625
----------
28,821,875
GAMING & LOTTERY - 0.1%
Circus Circus Enterprises, Inc.* ................................................... 60,000 1,230,000
HEALTH CARE - DIVERSE - 2.7%
American Home Products Corporation ................................................. 200,000 15,300,000
Bristol-Myers Squibb Company ....................................................... 175,000 16,559,375
----------
31,859,375
HEALTH CARE - LONG TERM CARE - 0.1%
Integrated Health Services, Inc. ................................................... 40,000 1,247,500
HEALTH CARE - MANAGED CARE - 0.7%
Humana, Inc.* ...................................................................... 150,000 3,112,500
United Healthcare Corporation ...................................................... 100,000 4,968,750
----------
8,081,250
HOUSEHOLD FURNISHINGS & APPLIANCES - 0.2%
Leggett & Platt, Inc. .............................................................. 30,000 1,256,250
The Rival Company .................................................................. 46,000 603,750
----------
1,860,000
HOUSEHOLD PRODUCTS - 3.1%
Colgate-Palmolive Company .......................................................... 165,000 12,127,500
Fort James Corporation ............................................................. 350,000 13,387,500
Procter & Gamble Company ........................................................... 150,000 11,971,875
----------
37,486,875
INSURANCE - LIFE/HEALTH - 0.8%
Equitable Corporation .............................................................. 200,000 9,950,000
INSURANCE - MULTI-LINE - 1.9%
Hartford Financial Services
Group, Inc. ........................................................................ 120,000 11,227,500
Lincoln National Corporation ....................................................... 150,000 11,718,750
----------
22,946,250
INSURANCE - PROPERTY - 3.7%
Allstate Corporation ............................................................... 175,000 15,903,125
Chubb Corporation .................................................................. 200,000 15,125,000
St. Paul Companies, Inc. ........................................................... 155,000 12,719,687
----------
43,747,812
LEISURE TIME PRODUCTS - 0.9%
Hasbro, Inc. ....................................................................... 40,000 1,260,000
Mattel, Inc. ....................................................................... 270,000 10,057,500
----------
11,317,500
See accompanying notes.
33
<PAGE>
Schedule of Investments
December 31, 1997
SERIES B (Growth-Income)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Market
COMMON STOCKS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
LODGINGS - HOTELS - 1.1%
Carnival Corporation - (CI. A) ..................................................... 200,000 $11,075,000
La Quinta Inns, Inc. ............................................................... 90,000 1,738,125
----------
12,813,125
MACHINERY - DIVERSE - 0.1%
Cincinnati Milacron, Inc. .......................................................... 48,800 1,265,750
MANUFACTURING - DIVERSIFIED - 5.0%
AlliedSignal, Inc. ................................................................. 350,000 13,628,125
Tenneco, Inc. ...................................................................... 270,000 10,665,000
Textron, Inc. ...................................................................... 180,000 11,250,000
Tyco International, Ltd. ........................................................... 300,000 13,518,750
United Technologies Corporation .................................................... 150,000 10,921,875
----------
59,983,750
MEDICAL PRODUCTS & SUPPLIES - 2.4%
Baxter International, Inc. ......................................................... 250,000 12,609,375
Boston Scientific Corporation* ..................................................... 150,000 6,881,250
Medtronic, Inc. .................................................................... 170,000 8,893,125
----------
28,383,750
NATURAL GAS - 2.7%
Coastal Corporation ................................................................ 225,000 13,935,938
El Paso Natural Gas Company ........................................................ 280,000 18,620,000
----------
32,555,938
OFFICE EQUIPMENT & SUPPLIES - 0.1%
Corporate Express, Inc.* ........................................................... 60,000 772,500
OIL - DOMESTIC - 1.1%
Phillips Petroleum Company ......................................................... 100,000 4,862,500
Unocal Corporation ................................................................. 200,000 7,762,500
----------
12,625,000
OIL - INTERNATIONAL - 5.1%
Amoco Corporation .................................................................. 140,000 11,917,500
Chevron Corporation ................................................................ 180,000 13,860,000
Mobil Corporation .................................................................. 230,000 16,603,125
Texaco, Inc. ....................................................................... 350,000 19,031,250
----------
61,411,875
OIL & GAS DRILLING & EQUIPMENT - 1.9%
Halliburton Company ................................................................ 210,000 10,906,875
Schlumberger, Ltd. ................................................................. 150,000 12,075,000
----------
22,981,875
OIL & GAS EXPLORATION & PRODUCTION - 0.4%
Enron Oil & Gas Company ............................................................ 250,000 5,296,875
PAPER & FOREST PRODUCTS - 1.8%
Champion International Corporation ................................................. 150,000 6,796,875
International Paper Company ........................................................ 143,500 6,188,438
Louisiana-Pacific Corporation ...................................................... 300,000 5,700,000
Rayonier, Inc. ..................................................................... 56,500 2,404,781
----------
21,090,094
PERSONAL CARE - 1.7%
Gillette Company ................................................................... 200,000 $20,087,500
PHARMACEUTICALS - 4.0%
Elan Corporation PLC ADR* .......................................................... 200,000 10,237,500
Merck & Company, Inc. .............................................................. 120,000 12,750,000
Mylan Laboratories, Inc. ........................................................... 140,000 2,931,250
Schering Plough Corporation ........................................................ 100,000 6,212,500
SmithKline Beecham PLC ADR ......................................................... 300,000 15,431,250
----------
47,562,500
PHOTOGRAPHY/IMAGING - 0.9%
Xerox Corporation .................................................................. 150,000 11,071,875
PUBLISHING - 1.1%
McGraw-Hill Companies, Inc. ........................................................ 180,000 13,320,000
PUBLISHING - NEWSPAPER - 2.3%
Gannett Company, Inc. .............................................................. 150,000 9,271,875
Tribune Company .................................................................... 300,000 18,675,000
----------
27,946,875
RAILROADS - 1.1%
Canadian Pacific, Ltd. ............................................................. 500,000 13,625,000
RESTAURANTS & FOOD SERVICE - 0.8%
McDonald's Corporation ............................................................. 200,000 9,550,000
RETAIL - DEPARTMENT STORES - 1.2%
Federated Department Stores, Inc.* ................................................. 330,000 14,210,625
RETAIL - FOOD CHAINS - 0.1%
Giant Food, Inc.* .................................................................. 41,200 1,387,925
RETAIL - GENERAL MERCHANDISE - 0.6%
Dayton Hudson Corporation .......................................................... 100,000 6,750,000
RETAIL SPECIALTY - 2.4%
Staples, Inc.* ..................................................................... 300,000 8,325,000
Toys "R" Us, Inc.* ................................................................. 330,000 10,374,375
Woolworth Corporation * ............................................................ 500,000 10,187,500
----------
28,886,875
SERVICES - ADVERTISING/MARKETING - 1.1%
Omnicom Group, Inc. ................................................................ 300,000 12,712,500
SERVICES - COMMERCIAL & CONSUMER - 0.2%
Angelica Corporation ............................................................... 80,000 1,810,000
SERVICES - DATA PROCESSING - 0.2%
First Data Corporation ............................................................. 67,000 1,959,750
TELECOMMUNICATION - LONG DISTANCE - 0.8%
LCI International, Inc.* ........................................................... 300,000 9,225,000
TELEPHONE - 0.2%
U.S. West Communications Group ..................................................... 56,200 2,536,025
----------
See accompanying notes.
34
<PAGE>
Schedule of Investments
December 31, 1997
SERIES B (Growth-Income)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Market
COMMON STOCKS (continued) Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
Total common stocks - 91.8% ............................................................................. $1,099,990,180
--------------
Total investments - 98.8% ............................................................................... 1,183,758,519
Cash and other assets, less liabilities - 1.2% .......................................................... 14,543,902
--------------
Total net assets - 100.0% ............................................................................... $1,198,302,421
==============
SERIES C (Money Market)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER
- ----------------
BEVERAGES - 2.0%
Coca-Cola Company, The
5.70% - 1-13-98 ............................................................... $ 2,000,000 $1,996,200
BROKERAGE - 12.0%
Bear Stearns Companies, Inc.,
5.57% - 2-12-98 ............................................................... 5,000,000 4,967,000
Merrill Lynch & Company, Inc., ..................................................... 6,700,000
5.53% - 1-05-98 ............................................................... 2,398,776
5.57% - 1-06-98 ............................................................... 1,698,844
5.56% - 1-12-98 ............................................................... 998,300
5.62% - 1-30-98 ............................................................... 1,194,624
5.55% - 2-05-98 ............................................................... 397,824
----------
11,655,368
BUSINESS SERVICES - 3.3%
General Electric Capital Corporation, .............................................. 3,250,000
5.75% - 1-15-98 ............................................................... 498,882
5.67% - 1-30-98 ............................................................... 1,742,160
5.59% - 2-11-98 ............................................................... 993,600
----------
3,234,642
CHEMICALS - BASIC - 3.0%
du Pont (E.I.) de Nemours & Company,
5.52% - 1-29-98 ............................................................... 3,000,000 2,987,040
COMPUTER SYSTEMS - 6.1%
International Business Machines Corporation,
5.51% - 1-07-98 ............................................................... 6,000,000 5,994,840
ELECTRIC UTILITIES - 9.0%
Central Louisiana Electric Company Inc.,
5.55% - 1-12-98 ............................................................... $ 1,940,000 $1,936,683
Idaho Power Company,
6.0% - 1-20-98 ................................................................ 1,000,000 996,833
Interstate Power Company, .......................................................... 3,910,000
5.75% - 1-26-98 ............................................................... 796,807
5.85% - 1-26-98 ............................................................... 109,552
5.78% - 1-27-98 ............................................................... 2,987,477
Progress Capital Holdings, Inc., ................................................... 2,000,000
5.78% - 1-14-98 ............................................................... 1,696,372
5.91% - 1-16-98 ............................................................... 299,207
----------
8,822,931
ELECTRICAL EQUIPMENT - 5.6%
General Electric Company,
5.54% - 1-12-98 ............................................................... 5,500,000 5,490,650
ELECTRONICS - 4.8%
Avent, Inc., ....................................................................... 4,700,000
5.62% - 1-16-98 ............................................................... 1,895,402
5.63% - 1-16-98 ............................................................... 1,296,950
5.63% - 1-23-98 ............................................................... 996,520
5.85% - 2-19-98 ............................................................... 496,019
----------
4,684,891
ENGINEERING - 1.9%
Fluor Corporation,
5.71% - 1-16-98 ............................................................... 1,900,000 1,895,458
ENTERTAINMENT - 2.6%
The Walt Disney Company, ........................................................... 2,600,000
5.70% - 1-14-98 ............................................................... 1,995,883
5.63% - 3-27-98 ............................................................... 591,948
----------
2,587,831
HARDWARE & TOOLS - 5.1%
Stanley Works, ..................................................................... 5,000,000
5.59% - 1-21-98 ............................................................... 3,389,237
5.61% - 1-21-98 ............................................................... 1,595,013
----------
4,984,250
LEASING - 6.1%
International Lease Finance Corporation,
5.54% - 1-20-98 ............................................................... 1,000,000 997,020
PHH Corporation, ................................................................... 4,957,000
5.50% - 1-08-98 ............................................................... 1,155,808
5.50% - 1-09-98 ............................................................... 1,997,600
5.53% - 1-23-98 ............................................................... 1,793,736
----------
5,944,164
See accompanying notes.
35
<PAGE>
Schedule of Investments
December 31, 1997
SERIES C (Money Market)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount or
Number Market
COMMERICAL PAPER (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
NATURAL GAS - 4.2%
Bay State Gas Company, ............................................................. $ 2,175,000
5.70% - 1-15-98 ............................................................... $ 798,227
5.71% - 1-22-98 ............................................................... 498,334
6.05% - 1-29-98 ............................................................... 870,883
Questar Corporation,
5.95% - 2-03-98 ............................................................... 1,975,000 1,964,228
----------
4,131,672
RETAIL - GROCERY - 1.9%
Winn-Dixie Stores, Inc., ........................................................... 1,900,000
5.50% - 1-06-98 ............................................................... 1,399,034
5.57% - 1-13-98 ............................................................... 499,060
----------
1,898,094
TELECOMMUNICATIONS - 3.5%
AT&T Company,
5.65% - 3-30-98 ............................................................... 1,000,000 986,220
Bell Atlantic Network Funding Corporation,
5.90% - 1-08-98 ............................................................... 2,400,000 2,397,247
----------
3,383,467
----------
Total commercial paper - 71.1% .............................................................................. 69,691,498
U.S. GOVERNMENT & AGENCIES
- --------------------------
FEDERAL HOME LOAN MORTGAGES - 11.2%
5.87% - 1-30-98 ............................................................... 2,000,000 2,000,040
5.70% - 3-04-98 ............................................................... 2,000,000 2,000,360
5.885% - 3-30-98 .............................................................. 2,000,000 2,001,260
5.90% - 9-30-98 ............................................................... 3,000,000 2,997,300
5.95% - 11-12-98 .............................................................. 2,000,000 1,999,300
----------
10,998,260
SMALL BUSINESS ASSOCIATION POOLS - 17.7%
#502406, 6.25%, 2006(3) ....................................................... 414,347 414,347
#502163, 6.50%, 2012(3) ....................................................... 785,959 785,958
#502353, 6.25%, 2018(3) ....................................................... 129,289 129,289
#503176, 6.125%, 2020(3) ...................................................... 720,960 724,565
#503459, 6.00%, 2021(3) ....................................................... 1,955,361 1,948,028
#503283, 6.00%, 2021(3) ....................................................... 1,943,158 1,934,960
#503295, 6.00%, 2021(3) ....................................................... 1,484,401 1,484,401
#503303, 6.00%, 2021(4) ....................................................... 1,455,751 1,455,751
#503308, 6.00%, 2021(4) ....................................................... 1,264,372 1,264,372
#503343, 6.125%, 2021(3 ....................................................... 2,004,800 2,004,800
#503347, 6.125%, 2021(3) ...................................................... 5,178,367 5,178,367
------------
17,324,838
------------
Total U.S. government & agencies - 28.9% ............................................................... $ 28,323,098
------------
Total investments - 100.0% ............................................................................. 98,014,596
Cash and other assets, less liabilities - 0.00% ........................................................ 234
------------
Total net assets - 100.0% .............................................................................. $ 98,014,830
============
SERIES D (Worldwide Equity)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS
- -------------
AUSTRALIA - 3.3%
Foster's Brewing Group, Ltd. ....................................................... 3,302,000 $6,282,298
QBE Insurance Group, Ltd. .......................................................... 722,938 3,253,485
----------
9,535,783
AUSTRIA - 1.6%
Boehler - Uddeholm AG .............................................................. 30,900 1,808,690
Wienerberger Baustoffindustrie AG .................................................. 15,000 2,875,302
----------
4,683,992
BELGIUM - 1.6%
Electrabel S.A ..................................................................... 20,400 4,718,718
CANADA - 5.6%
Bombardier, Inc. "B" ............................................................... 112,800 2,317,452
Hudson's Bay Company ............................................................... 112,100 2,494,993
Imax Corporation ADR* .............................................................. 268,300 5,902,600
Tarragon Oil & Gas, Ltd.* .......................................................... 207,500 1,624,017
Yogen Fruz World-Wide, Inc.* ....................................................... 735,000 3,621,019
----------
15,960,081
CHILE - 0.5%
Banco Santander ADR ................................................................ 93,700 1,323,513
FRANCE - 3.9%
Alcatel Alsthom .................................................................... 21,900 2,784,888
AXA-UAP ............................................................................ 32,600 2,523,632
Elf Aquitaine S.A. ADR ............................................................. 68,100 3,992,363
Sidel S.A .......................................................................... 25,960 1,721,788
----------
11,022,671
GERMANY - 4.5%
Allianz AG ......................................................................... 21,600 5,574,062
Deutsche Bank AG ................................................................... 76,600 5,359,318
Hoechst AG ......................................................................... 26,300 911,263
Rofin-Sinar Technologies, Inc. ADR* ................................................ 95,900 1,162,788
----------
13,007,431
See accompanying notes.
36
<PAGE>
Schedule of Investments
December 31, 1997
SERIES D (Worldwide Equity)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Market
COMMON STOCKS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
GREECE - 0.0%
Hellenic Tellecommunication Organization S.A ....................................... 200 $ 4,103
HONG KONG - 0.5%
JCG Holdings, Ltd. ................................................................. 3,552,000 1,524,263
HUNGARY - 0.3%
Zalakeramia Rt ..................................................................... 16,535 767,568
INDONESIA - 1.0%
PT Hanjaya Mandala Sampoerna ....................................................... 693,000 523,391
PT Tambang Timah ................................................................... 2,072,500 2,225,315
----------
2,748,706
IRELAND - 3.4%
Allied Irish Banks PLC ............................................................. 401,500 3,891,434
Elan Corporation PLC ADR ........................................................... 88,700 4,540,331
Ryanair Holdings PLC ............................................................... 297,610 1,412,560
----------
9,844,325
ITALY - 1.0%
Telecom Italia SpA ................................................................. 434,900 2,779,627
JAPAN - 4.8%
Acom Company, Ltd. ................................................................. 38,300 2,120,887
Amway Japan, Ltd. .................................................................. 60,300 1,159,427
Doutor Coffee Company, Ltd. ........................................................ 54,800 1,411,925
Maruko Company, Ltd. ............................................................... 20,500 111,943
Mitsubishi Estate Company, Ltd. .................................................... 169,000 1,845,701
Mitsui Fudosan Company, Ltd. ....................................................... 239,000 2,316,086
Nippon Steel Corporation ........................................................... 695,000 1,031,640
Sony Corporation ................................................................... 27,600 2,462,370
Tiemco, Ltd. ....................................................................... 27,900 283,246
Yamato Kogyo Company, Ltd. ......................................................... 184,000 1,110,897
----------
13,854,122
MALAYSIA - 0.8%
Highlands and Lowlands Berhad ...................................................... 454,000 464,221
Kuala Lumpur Kepong Berhad ......................................................... 615,000 1,319,313
Magnum Corporation Berhad .......................................................... 639,000 384,152
----------
2,167,686
NETHERLANDS - 0.1%
Koninklijke Ahrend Group N.V ....................................................... 13,100 411,631
NEW ZEALAND - 1.4%
Brierley Investments, Ltd. ......................................................... 2,844,100 2,031,270
Fletcher Challenge Building ........................................................ 908,900 1,857,704
----------
3,888,974
NORWAY - 1.5%
Saga Petroleum ASA "A" ............................................................. 257,800 4,441,096
PHILIPPINES - 0.5%
C & P Homes, Inc. .................................................................. 11,450,150 $ 677,272
Ionics Circuit, Inc. ............................................................... 1,448,100 598,856
----------
1,276,128
POLAND - 0.2%
E. Wedel S.A ....................................................................... 9,050 464,706
SINGAPORE - 0.4%
Keppek Fels, Ltd. .................................................................. 398,000 1,110,188
SPAIN - 2.1%
Adolfo Dominguez S.A.* ............................................................. 57,600 1,672,272
Banco Popular Espanol S.A .......................................................... 28,400 1,984,445
Tele Pizza S.A.* ................................................................... 28,900 2,332,245
----------
5,988,962
SWEDEN - 4.7%
Castellum AB* ...................................................................... 277,200 2,759,995
Fastighets AB Hufvudstaden "A" ..................................................... 506,700 1,947,775
Industrial & Financial Systems "B"* ................................................ 370,200 2,542,851
Skandinaviska Enskilda Banken ...................................................... 116,500 1,475,638
Swedish Match AB ................................................................... 1,414,000 4,722,623
----------
13,448,882
SWITZERLAND - 5.0%
Nestle S.A ......................................................................... 1,870 2,806,506
Novartis AG ........................................................................ 3,230 5,248,430
Saurer AG .......................................................................... 4,500 3,270,370
Schweizerische Lebensversicherungs-und Rentenstalt ................................. 3,830 3,011,901
----------
14,337,207
UNITED KINGDOM - 15.6%
Aegis Group PLC .................................................................... 1,695,000 1,910,433
Beazer Group PLC ................................................................... 198,900 528,541
Capita Group PLC ................................................................... 355,500 2,158,428
D.F.S. Furniture Company PLC ....................................................... 250,700 2,128,509
George Wimpey PLC .................................................................. 1,764,100 3,076,809
Glaxo Wellcome PLC ................................................................. 205,700 4,867,037
Harvey Nichols PLC ................................................................. 196,200 621,443
Oriflame International S.A ......................................................... 105,000 768,813
PizzaExpress PLC ................................................................... 215,400 2,658,144
Polypipe PLC ....................................................................... 692,000 2,015,352
Provident Financial PLC ............................................................ 247,600 3,246,986
Regent Inns PLC .................................................................... 517,600 2,784,925
Rio Tinto PLC ...................................................................... 131,800 1,529,973
Royal Bank of Scotland Group PLC ................................................... 217,800 2,788,104
Tomkins PLC ........................................................................ 573,800 2,681,331
United Utilities PLC ............................................................... 186,200 2,405,032
Vodafone Group PLC ................................................................. 477,600 3,485,214
Whitbread PLC ...................................................................... 333,500 4,848,126
----------
44,503,200
See accompanying notes.
37
<PAGE>
Schedule of Investments
December 31, 1997
SERIES D (Worldwide Equity)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Market
COMMON STOCKS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
UNITED STATES - 22.8%
Ace Ltd. ........................................................................... 17,000 $1,640,500
AlliedSignal, Inc. ................................................................. 38,800 1,510,775
Allstate Corporation ............................................................... 22,200 2,017,425
BJ Services Company* ............................................................... 20,800 1,496,300
Borders Group, Inc.* ............................................................... 44,900 1,405,931
Bristol-Myers Squibb Company ....................................................... 16,800 1,589,700
Cardinal Health, Inc. .............................................................. 24,900 1,870,612
Computer Associates International .................................................. 25,600 1,353,600
Conseco, Inc. ...................................................................... 25,100 1,140,481
Costco Companies, Inc.* ............................................................ 41,400 1,847,475
Cymer, Inc.* ....................................................................... 37,500 562,500
Diamond Offshore Drilling, Inc. .................................................... 24,900 1,198,313
Dover Corporation .................................................................. 33,200 1,199,350
Ecolab, Inc. ....................................................................... 23,800 1,319,412
Eli Lilly & Company ................................................................ 22,900 1,594,412
EMC Corporation* ................................................................... 52,000 1,426,750
Federal National Mortgage Association .............................................. 29,900 1,706,169
Fort James Corporation ............................................................. 30,800 1,178,100
Gap, Inc. .......................................................................... 40,200 1,424,588
Global Industries, Ltd.* ........................................................... 74,600 1,268,200
Home Depot, Inc. ................................................................... 20,800 1,224,600
Ingersoll-Rand Company ............................................................. 26,550 1,075,275
Medtronic, Inc. .................................................................... 24,600 1,286,888
Mobil Corporation .................................................................. 25,600 1,848,000
NAC Re Corporation ................................................................. 32,400 1,581,525
NationsBank Corporation ............................................................ 25,100 1,526,394
Norwest Corporation ................................................................ 54,600 2,108,925
PepsiCo, Inc. ...................................................................... 32,000 1,166,000
Pfizer, Inc. ....................................................................... 17,100 1,275,019
Praxair, Inc. ...................................................................... 24,400 1,098,000
Procter & Gamble Company ........................................................... 17,200 1,372,775
Rite Aid Corporation ............................................................... 27,000 1,584,563
Safeway, Inc.* ..................................................................... 20,400 1,290,300
Sealed Air Corporation* ............................................................ 29,200 1,803,100
Sungard Data Systems, Inc.* ........................................................ 43,600 1,351,600
Texaco, Inc. ....................................................................... 20,000 1,087,500
TJX Companies, Inc. ................................................................ 27,800 955,625
Tosco Corporation .................................................................. 41,700 1,576,781
Tyco International, Ltd. ........................................................... 42,800 1,928,675
Unilever NV ........................................................................ 20,900 1,304,944
Union Planters Corporation ......................................................... 21,800 1,481,038
United Healthcare Corporation ...................................................... 20,400 1,013,625
Unum Corporation ................................................................... 38,000 2,066,250
Walt Disney Company, The ........................................................... 15,400 1,525,563
Warner-Lambert Company ............................................................. 7,400 917,600
Williams Companies, Inc., The ...................................................... 34,400 976,100
----------
65,177,258
----------
Total common stocks - 87.1% ............................................................................ 248,990,821
PREFERRED STOCKS
- ----------------
GERMANY - 0.9%
Sto Ag Vorzug ...................................................................... 6,990 $2,526,915
----------
Total investments - 88.0% .............................................................................. 251,517,736
Cash and other assets, less liabilities - 12.0% ........................................................ 34,263,925
----------
Total net assets - 100.0% .............................................................................. $285,781,661
==========
At December 31, 1997, Series D's investment concentration by industry was as follows:
Banking ................................................................................................ 8.1%
Capital Equipment ...................................................................................... 3.4%
Chemicals .............................................................................................. 0.4%
Construction & Housing ................................................................................. 0.2%
Consumer Durables ...................................................................................... 4.4%
Consumer Nondurables ................................................................................... 8.0%
Electrical and Electronics ............................................................................. 3.8%
Energy Sources ......................................................................................... 6.7%
Financial Services ..................................................................................... 10.7%
Health & Personal Care ................................................................................. 7.3%
Materials .............................................................................................. 12.2%
Merchandising .......................................................................................... 1.8%
Multi-industry ......................................................................................... 2.8%
Real Estate ............................................................................................ 3.1%
Services ............................................................................................... 8.3%
Telecommunications ..................................................................................... 3.2%
Trade .................................................................................................. 0.6%
Transportation ......................................................................................... 0.5%
Utilities .............................................................................................. 2.5%
Cash, short-term instruments and other assets, less liabilities ........................................ 12.0%
----------
Total net assets ....................................................................................... 100.0%
==========
See accompanying notes.
38
<PAGE>
Schedule of Investments
December 31, 1997
SERIES E (High Grade Income)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Market
CORPORATE BONDS Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
AIR TRANSPORTATION - 3.8%
Southwest Airlines Company, 7.875% - 2007 .......................................... $ 2,550,000 $2,820,938
United Airlines, 11.21% - 2014 ..................................................... 1,825,000 2,527,625
----------
5,348,563
BANKS - 14.8%
ABN AMRO Bank NV,
7.55% - 2006 .................................................................. 1,050,000 1,123,500
7.30% - 2026 .................................................................. 1,500,000 1,524,375
Abbey National PLC, 6.69% - 2005 ................................................... 2,750,000 2,808,437
Argentaria Capital Funding, 6.375% - 2006 .......................................... 2,000,000 1,953,590
BCH Cayman Islands, 7.70% - 2006 ................................................... 2,500,000 2,650,000
Bank of New York, Inc., 6.50% - 2003 ............................................... 3,275,000 3,291,375
Den Danske Bank, 7.40% - 2010 ...................................................... 2,000,000 2,107,500
PNC Funding Corporation, 7.75% - 2004 .............................................. 2,300,000 2,463,875
Santander Financial Issuances, Ltd., 7.00% - 2006 .................................. 2,800,000 2,873,500
----------
20,796,152
BROKERS, DEALERS & SERVICES - 5.4%
Lehman Brothers, Inc., 7.25% - 2003 ................................................ 2,250,000 2,325,938
Merrill Lynch, 7.375% - 2006 ....................................................... 2,500,000 2,662,500
Morgan Stanley Group, Inc., 7.25% - 2023 ........................................... 2,500,000 2,559,374
----------
7,547,812
CABLE SYSTEMS - 0.8%
Rogers Cablesystems, Ltd., 9.625% - 2002 ........................................... 1,100,000 1,168,750
COMMUNICATIONS - 5.0%
Centennial Cellular, 8.875% - 2001 ................................................. 800,000 815,000
Comcast Corporation, 9.125% - 2006 ................................................. 1,000,000 1,062,500
New Jersey Bell, 6.625% - 2008 ..................................................... 1,000,000 1,006,250
Paramount Communications, 7.50% - 2023 ............................................. 1,000,000 947,500
Rogers Communication, Inc., 9.125% - 2006 .......................................... 900,000 913,500
Valassis Communications, 9.55% - 2003 .............................................. 2,000,000 2,247,500
----------
6,992,250
ELECTRONIC COMPANIES - 0.8%
Cal Energy Company, Inc., 9.50% - 2006 ............................................. 1,000,000 1,087,500
ENTERTAINMENT - 0.6%
Speedway Motorsports Inc., 8.50% - 2007 ............................................ $ 775,000 $ 792,438
FINANCE - 5.1%
Associates Corporation, N.A., 7.55% - 2006 ......................................... 1,000,000 1,077,500
GE Capital Corporation, 8.625% - 2008 .............................................. 1,750,000 2,058,438
Homeside, Inc., 11.25% - 2003 ...................................................... 1,250,000 1,481,250
US West Capital Funding, Inc., 7.30% - 2007 ........................................ 2,500,000 2,575,000
----------
7,192,188
FOOD & BEVERAGES - 6.0%
Anheuser-Busch Companies, Inc., 7.10% - 2007 ....................................... 2,425,000 2,518,968
Carrols Corporation, Inc., 11.50% - 2003 ........................................... 1,750,000 1,859,375
Chiquita Brands International, Inc., 10.25% - 2006 ................................. 1,750,000 1,911,875
Panamerican Beverage, Inc., 8.125% - 2003 .......................................... 2,050,000 2,139,688
----------
8,429,906
FUNERAL HOMES - 1.7%
Loewen Group International, Inc., 8.25% - 2003 ..................................... 2,275,000 2,402,968
HOSPITAL MANAGEMENT - 1.5%
Tenet Healthcare, 10.125% - 2005 ................................................... 2,000,000 2,180,000
MEDIA - 2.4%
Time Warner Entertainment, 10.15% - 2012 ........................................... 1,790,000 2,302,388
Westinghouse Electric Company, 8.375% - 2002 ....................................... 1,050,000 1,098,563
----------
3,400,951
MANUFACTURING - 0.7%
Agrium, Inc., 7.00% - 2004 ......................................................... 1,000,000 1,020,000
MOTOR VEHICLES & EQUIPMENT - 2.6%
Chrysler Corporation, 7.45% - 2027 ................................................. 2,375,000 2,559,063
Ford Motor Company, 7.25% - 2008 ................................................... 1,000,000 1,061,250
----------
3,620,313
See accompanying notes.
39
<PAGE>
Schedule of Investments
December 31, 1997
SERIES E (High Grade Income) (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Market
CORPORATE BONDS (continued) Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS COMPANIES - 5.0%
Petroleum Geo-Services, 7.50% - 2007 ............................................... $ 2,050,000 $2,167,875
Seagull Energy Corporation, 8.625% - 2005 .......................................... 1,500,000 1,563,750
Transocean Offshore, Inc., 8.00% - 2027 ............................................ 2,000,000 2,272,500
Union Pacific Resources, 7.50% - 2026 .............................................. 1,000,000 1,073,750
----------
7,077,875
PUBLISHING & PRINTING - 2.2%
K-III Communications Corporation, 10.25% - 2004 .................................... 555,000 596,625
Quebecor Printing Capital, 7.25% - 2007 ............................................ 2,350,000 2,479,250
----------
3,075,875
RETAIL TRADE - 2.4%
Sears, 6.41% - 2001 ................................................................ 2,350,000 2,361,750
Zale's Corporation, 8.50% - 2007 ................................................... 1,000,000 987,500
----------
3,349,250
STEEL & METAL PRODUCTS - 0.9%
AK Steel, 10.75% - 2004 ............................................................ 1,250,000 1,334,375
TOBACCO PRODUCTS - 1.5%
Dimon, Inc., 8.875% - 2006 ......................................................... 500,000 540,000
Phillip Morris Company, Inc., 6.80% - 2003 ......................................... 1,075,000 1,088,438
Standard Commercial Tobacco Corporation, 8.875% - 2005 ............................. 500,000 503,125
----------
2,131,563
UTILITIES - 1.3%
Tennessee Gas Pipeline, 7.50% - 2017 ............................................... 1,700,000 1,821,124
----------
Total corporate bonds - 64.5 % ......................................................................... 90,769,853
TRUST PREFERRED SECURITIES(8)
- -----------------------------
FINANCE - 4.0%
Countrywide Capital Industries, Inc., 8.00% - 2026 ................................ 1,000,000 1,053,750
Washington Mutual Capital, 8.375% - 2002 ........................................... 2,000,000 2,195,000
SI Financing, Inc., 9.50% - 2027 ................................................... 88,940 2,401,380
----------
5,650,130
INSURANCE - 1.2%
Travelers Capital Trust, 7.75% - 2036 .............................................. 1,650,000 1,740,750
----------
Total trust preferred securities - 5.2% ..................................................................... 7,390,880
MORTGAGE BACKED SECURITIES
- --------------------------
U.S. GOVERNMENT AGENCIES - 7.4%
Federal Home Loan Mortgage Corporation,
FHR 1339 C, 8.00% - 2006 ...................................................... $ 1,000,000 $1,051,495
FHR 112 H, 8.80% - 2020 ....................................................... 758,063 773,539
FHR 1311 J, 7.50% - 2021 ...................................................... 3,325,000 3,421,803
FHR 1930 AB, 7.50% - 2023 ..................................................... 2,390,671 2,437,985
Federal National Mortgage Association,
FNR 1994-79 B, 7.00% - 2019 ................................................... 1,700,000 1,717,604
FNR 1992-88 L, 8.00% - 2021 ................................................... 1,000,000 1,048,334
----------
10,450,760
U.S. GOVERNMENT SECURITIES - 4.4%
Government National Mortgage Association,
GNMA 39238, 9.50% - 2009 ...................................................... 356,395 382,911
GNR 1997-10 B, 7.5% - 2019 .................................................... 2,500,000 2,552,888
GNMA II 181907, 9.50% - 2020 .................................................. 319,068 341,172
GNMA 305617, 9.00% - 2021 ..................................................... 292,163 311,009
GNMA 301465, 9.00% - 2021 ..................................................... 223,541 237,960
GNMA II 2445, 8.00% - 2027 .................................................... 2,311,361 2,386,202
----------
6,212,142
NON-AGENCY SECURITIES - 1.1%
Chase Capital Mortgage Securities Company, 1997-1B, 7.37% - 2007 ................... 1,500,000 1,573,125
----------
Total mortgage backed securities - 12.9% ............................................................... 18,236,027
GOVERNMENT SECURITIES
- ---------------------
U.S. GOVERNMENT SECURITIES - 16.0%
U.S. Treasury Notes,
6.50% - 2006 .................................................................. 5,600,000 5,862,751
7.00% - 2006 .................................................................. 4,700,000 5,072,381
U.S. Treasury Bonds,
6.00% - 2026 .................................................................. 3,000,000 2,993,820
6.625% - 2027 ................................................................. 4,100,000 4,447,803
----------
18,376,755
Federal National Mortgage Association, 6.59% - 2007 ................................ 1,000,000 1,034,130
Private Export Funding Corporation, 7.11% - 2007 ................................... 3,000,000 3,206,250
----------
Total U.S. government securities - 16.0% ............................................................... 22,617,135
See accompanying notes.
40
<PAGE>
Schedule of Investments
December 31, 1997
SERIES E (High Grade Income)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount or
Number Market
GOVERNMENT SECURITIES (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
CANADIAN GOVERNMENT AGENCIES - 0.4%
British Columbia Province, 6.50% - 2026 ............................................ $ 500,000 $ 501,250
------------
Total government securities - 16.4% .................................................................... 23,118,385
------------
Total investments - 99.0% .............................................................................. 139,515,145
Cash and other assets, less liabilities - 1.0% ......................................................... 1,393,390
------------
Total net assets - 100.0% .............................................................................. $140,908,535
============
SERIES J (Emerging Growth)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS
- -------------
AEROSPACE/DEFENSE - 0.7%
Sundstrand Corporation ............................................................. 33,000 $1,662,375
AIR FREIGHT - 0.7%
Expeditors International of Washington, Inc. ....................................... 38,000 1,463,000
AIRLINES - 0.2%
ASA Holdings, Inc. ................................................................. 17,000 483,437
AUTO PARTS & EQUIPMENT - 1.0%
Snap-On Tools ...................................................................... 50,300 2,194,338
BANKS - MAJOR REGIONAL - 3.0%
Northern Trust Corporation ......................................................... 60,000 4,185,000
State Street Corporation ........................................................... 40,500 2,356,594
Wilmington Trust Corporation ....................................................... 4,000 249,500
----------
6,791,094
BEVERAGES - SOFT DRINK - 3.3%
Coca-Cola Enterprises, Inc. ........................................................ 210,200 7,475,238
BIOTECHNOLOGY - 1.7%
BioChem Pharma, Inc.* .............................................................. 62,500 1,304,688
Biogen, Inc.* ...................................................................... 32,800 1,193,100
Centocor, Inc.* .................................................................... 39,000 1,296,750
----------
3,794,538
CHEMICALS - BASIC - 1.9%
Praxair, Inc. ...................................................................... 55,500 2,497,500
Solutia, Inc. ...................................................................... 64,100 1,710,669
----------
4,208,169
CHEMICALS - SPECIALTY - 2.9%
Betz Dearborn, Inc. ................................................................ 16,000 977,000
Crompton, & Knowles Corporation .................................................... 40,000 1,060,000
Cytec Industries, Inc.* ............................................................ 24,000 1,126,500
M.A. Hanna Company ................................................................. 38,300 967,075
Sigma-Aldrich Corporation .......................................................... 59,000 2,345,250
----------
6,475,825
COMMUNICATIONS - EQUIPMENT - 5.0%
ADC Telecommunications, Inc.* ...................................................... 70,500 $2,943,375
Ciena Corporation* ................................................................. 21,000 1,283,625
Comverse Technology, Inc.* ......................................................... 84,000 3,276,000
Harris Corporation ................................................................. 50,000 2,293,750
Tellabs, Inc.* ..................................................................... 30,500 1,612,688
----------
11,409,438
COMPUTER SOFTWARE/SERVICES - 6.7%
America OnLine, Inc.* .............................................................. 52,500 4,682,344
BMC Software, Inc.* ................................................................ 28,000 1,837,500
Computer Sciences Corporation* ..................................................... 29,000 2,421,500
Electronics For Imaging, Inc.* ..................................................... 95,000 1,579,375
PeopleSoft, Inc.* .................................................................. 84,000 3,276,000
Rational Software Corporation* ..................................................... 110,000 1,251,250
----------
15,047,969
CONTAINERS - METAL/GLASS - 1.9%
Crown Cork & Seal Company, Inc. .................................................... 87,500 4,385,937
DISTRIBUTION - FOOD & HEALTH - 1.0%
Cardinal Health, Inc. .............................................................. 30,900 2,321,362
ELECTRIC COMPANIES - 1.6%
AES Corporation* ................................................................... 77,500 3,613,438
ELECTRICAL EQUIPMENT - 2.3%
Samnina Corporation* ............................................................... 33,000 2,235,750
SCI Systems, Inc.* ................................................................. 66,000 2,875,125
----------
5,110,875
ELECTRONICS - INSTRUMENTATION - 1.7%
EG & G, Inc. ....................................................................... 120,000 2,497,500
The Perkin-Elmer Corporation ....................................................... 18,700 1,328,869
----------
3,826,369
ELECTRONICS - SEMICONDUCTORS - 3.7%
Altera Corporation* ................................................................ 47,000 1,556,875
Analog Devices, Inc.* .............................................................. 80,500 2,228,844
Atmel Corporation* ................................................................. 53,300 989,381
Linear Technology Corporation ...................................................... 41,000 2,362,625
Xilinx, Inc.* ...................................................................... 37,000 1,297,313
----------
8,435,038
FINANCIAL - DIVERSE - 1.1%
Sunamerica, Inc. ................................................................... 59,000 2,522,250
FOODS - 2.1%
Dole Food Company, Inc. ............................................................ 33,200 1,518,900
Interstate Bakeries ................................................................ 87,000 3,251,625
----------
4,770,525
GAMING & LOTTERY - 1.5%
Circus Circus Enterprises, Inc.* ................................................... 160,000 3,280,000
See accompanying notes.
41
<PAGE>
Schedule of Investments
December 31, 1997
SERIES J (Emerging Growth)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Market
COMMON STOCKS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - LONG TERM CARE - 1.5%
Integrated Health Services, Inc. ................................................... 110,000 $3,430,625
HEALTH CARE - SPECIALIZED SERVICES - 0.7%
Quintiles Transnational Corporation* ............................................... 43,800 1,675,350
HOUSEHOLD FURNISHINGS & APPLIANCES - 1.0%
Leggett & Platt, Inc. .............................................................. 51,300 2,148,188
HOUSEHOLD PRODUCTS - 0.5%
Dial Corporation ................................................................... 50,000 1,040,625
INSURANCE - LIFE/HEALTH - 2.4%
AFLAC, Inc. ........................................................................ 105,000 5,368,125
INSURANCE - PROPERTY - 1.1%
Progressive Corporation (Ohio) ..................................................... 21,000 2,517,375
INVESTMENT BANK/BROKERAGE - 1.3%
Franklin Resources, Inc. ........................................................... 35,000 3,042,812
LEISURE TIME - 0.5%
Callaway Golf Company .............................................................. 41,200 1,176,775
LODGING - HOTELS - 0.9%
La Quinta Inns, Inc. ............................................................... 101,000 1,950,562
MANUFACTURING - DIVERSIFIED - 1.8%
Carlisle Companies, Inc. ........................................................... 16,400 701,100
Illinois Tool Works, Inc. .......................................................... 57,000 3,427,125
----------
4,128,225
MANUFACTURING - SPECIALIZED - 2.6%
Diebold, Inc. ...................................................................... 37,500 1,898,437
Sealed Air Corporation* ............................................................ 39,700 2,451,475
US Filter Corporation* ............................................................. 49,750 1,489,391
----------
5,839,303
MEDICAL PRODUCTS & SUPPLIES - 2.0%
ATL Ultrasound, Inc.* .............................................................. 53,500 2,461,000
Stryker Corporation ................................................................ 43,500 1,620,375
Sunrise Medical, Inc.* ............................................................. 30,200 466,213
----------
4,547,588
NATURAL GAS - 0.8%
Sonat, Inc. ........................................................................ 42,000 1,921,500
OFFICE EQUIPMENT & SUPPLIES - 1.6%
Corporate Express, Inc.* ........................................................... 176,000 2,266,000
Herman Miller, Inc. ................................................................ 25,000 1,364,062
----------
3,630,062
OIL & GAS - DRILLING & EQUIPMENT - 2.1%
ENSCO International, Inc. .......................................................... 77,000 2,579,500
Smith International, Inc.* ......................................................... 34,500 2,117,437
----------
4,696,937
OIL & GAS EXPLORATION & PRODUCTION - 4.4%
Anadarko Petroleum Corporation ..................................................... 32,600 $1,978,412
Apache Corporation ................................................................. 135,000 4,733,438
Forcenergy, Inc.* .................................................................. 126,000 3,299,625
----------
10,011,475
PHARMACEUTICALS - 4.8%
Dura Pharmaceuticals, Inc.* ........................................................ 77,500 3,555,313
Jones Medical Industries, Inc. ..................................................... 40,000 1,530,000
Mylan Laboratories, Inc. ........................................................... 105,400 2,206,812
Teva Pharmaceutical
Industries, Ltd. ADR ............................................................... 75,000 3,548,438
----------
10,840,563
RAILROADS - 0.5%
Illinois Central Corporation ....................................................... 33,000 1,124,063
RETAIL - COMPUTERS & ELECTRONICS - 0.6%
Comp USA, Inc.* .................................................................... 47,000 1,457,000
RETAIL - DEPARTMENT STORES - 0.4%
Family Dollar Stores, Inc. ......................................................... 31,000 908,687
RETAIL - GENERAL MERCHANDISE - 1.2%
Dollar Tree Stores, Inc.* .......................................................... 67,500 2,792,811
RETAIL - SPECIALTY - 4.7%
Bed Bath & Beyond, Inc.* ........................................................... 32,500 1,251,250
General Nutrition Companies, Inc.* ................................................. 77,000 2,618,000
Payless Shoesource, Inc.* .......................................................... 39,000 2,617,875
Staples, Inc.* ..................................................................... 119,250 3,309,187
Tiffany & Company .................................................................. 19,500 703,219
----------
10,499,531
SERVICES - ADVERTISING/MARKETING - 1.8%
Acxiom Corporation* ................................................................ 22,000 423,500
Omnicom Group, Inc. ................................................................ 85,000 3,601,875
----------
4,025,375
SERVICES - COMMERCIAL & CONSUMER - 4.7%
Angelica Corporation ............................................................... 16,500 373,312
Apollo Group, Inc.* ................................................................ 56,000 2,646,000
Cintas Corporation ................................................................. 52,000 2,028,000
Manpower, Inc. ..................................................................... 43,000 1,515,750
Robert Half International, Inc.* ................................................... 47,250 1,890,000
Stewart Enterprises, Inc. (CI. A) .................................................. 49,000 2,284,625
----------
10,737,687
SERVICES - COMPUTER SYSTEMS - 0.6%
Sungard Data Systems, Inc.* ........................................................ 45,000 1,395,000
SERVICES - DATA PROCESSING - 1.8%
Fiserv, Inc.* ...................................................................... 25,500 1,252,687
Paychex, Inc. ...................................................................... 56,100 2,840,063
----------
4,092,750
TELECOMMUNICATION - LONG DISTANCE - 1.1%
LCI International, Inc.* ........................................................... 83,200 2,558,400
See accompanying notes.
42
<PAGE>
Schedule of Investments
December 31, 1997
SERIES J (Emerging Growth)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount or
Number Market
COMMON STOCKS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
WASTE MANAGEMENT - 1.6%
U.S.A. Waste Services, Inc.* ....................................................... 92,200 $ 3,618,850
------------
Total common stocks - 93.0% ............................................................................ 210,447,459
Cash and other assets, less liabilities - 7.0% ......................................................... 15,849,981
------------
Total net assets - 100.0% .............................................................................. $226,297,440
============
SERIES K (Global Aggressive Bond)
- ------------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT OBLIGATIONS
- ----------------------
ARGENTINA - 5.0%
Republic of Argentina, 5.50% - 2023(5) ............................................. $ 1,000,000 $ 733,750
BRAZIL - 4.9%
Government of Brazil "C", 4.50% - 2014(6) .......................................... $ 912,208 716,083
COSTA RICA - 2.6%
Banco Costa Rica, 6.25% - 2010 ..................................................... $ 459,015 380,982
DOMINICAN REPUBLIC - 4.6%
Central Bank of Dominican Republic, 6.875% - 2024(7) ............................... $ 850,000 680,000
ECUADOR - 2.6%
Republic of Ecuador, 6.6875% - 2025(7) ............................................. $ 500,000 377,604
GREECE - 7.2%
Hellenic Republic, 11.00% - 2003(2) ................................................ 310,000,000 1,056,640
HUNGARY - 6.0%
Government of Hungary,
21.00% - 1999(2) .............................................................. 40,000,000 204,173
23.00% - 1999(2) .............................................................. 130,000,000 670,947
----------
875,120
MEXICO - 2.8%
United Mexican States, 6.25% - 2019 ................................................ $ 500,000 417,188
PHILIPPINES - 3.5%
Central Bank Philippines, 6.00% - 2008 ............................................. $ 600,000 521,836
POLAND - 3.0%
Government of Poland, 16.00% - 1998(2) ............................................. 1,675,000 443,541
SOUTH AFRICA - 6.3%
Electricity Supply Commission, 11.00% - 2008(2) .................................... 2,600,000 $ 450,692
Republic of South Africa, 12.00% - 2005(2) ......................................... 2,500,000 474,386
----------
925,078
UNITED KINGDOM - 4.2%
United Kingdom Treasury Bond, 7.50% - 2006(2) ...................................... 350,000 620,162
----------
Total government obligations - 52.7% ................................................................... 7,747,984
CORPORATE BONDS
- ---------------
CANADA - 7.4%
CHC Helicopter, 11.50% - 2002 ...................................................... $ 500,000 533,750
Roger's Communication, Inc., 10.50% - 2006 ......................................... $ 500,000 377,276
Stelco, Inc., 10.40% - 2009 ........................................................ $ 200,000 180,903
----------
1,091,929
CZECH REPUBLIC - 3.7%
CEZ, a.s., 11.30% - 2005(2) ........................................................ 13,000,000 325,071
Skofin, S.R.O., a.s., 11.625% - 1998(2) ............................................ 7,700,000 218,902
----------
543,973
DENMARK - 9.9%
Nykredit, 7.00% - 2026(2) .......................................................... 3,454,609 504,780
Realkredit Danmark, 7.00% - 2026(2) ................................................ 3,458,412 506,346
Unikredit Realkredit, 7.00% - 2026(2) .............................................. 2,982,500 437,321
----------
1,448,447
UNITED STATES - 15.5%
Archibald Candy Corporation, 10.25% - 2004 ......................................... $ 500,000 522,500
BA Mortgage Securities 1997-2 B4, 7.25% - 2027 ..................................... $ 499,002 356,007
Chiquita Brands International, Inc., 10.25% - 2006 ................................. $ 250,000 273,125
Citicorp Mortgage Securities, Inc., 7.25% - 2027 ................................... $ 408,448 287,270
Countrywide Home Loans, 7.50% - 2027 ............................................... $ 701,717 650,843
Residential Asset Securitization Trust, 7.50% - 2011 ............................... $ 231,709 184,453
----------
2,274,198
----------
Total corporate bonds - 36.5% .......................................................................... 5,358,547
See accompanying notes.
43
<PAGE>
Schedule of Investments
December 31, 1997
SERIES K (Global Aggresive Bond)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount or
Number Market
SHORT TERM INVESTMENTS of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
MEXICO - 2.9%
Mexican Cetes, 0% - 3-5-98(2) ...................................................... 3,600,000 $ 432,169
TURKEY - 2.7%
Government of Turkey Treasury Bill, 0% -5-27-98(2) ................................. 110,000,000,000 393,945
UNITED STATES - 0.6%
United States Treasury Bill, 0% - 01-22-98 ......................................... $ 100,000 99,717
----------
Total short-term investments - 6.2% .................................................................... 925,831
----------
Total investments - 95.4% .............................................................................. 14,032,362
WRITTEN OPTIONS
- ---------------
Call option on Government of Brazil "C" Bond, strike price
77.8125 USD - January 1998 (premium $19,300) - 0.0% ................................................... (25,186)
Cash and other assets, less liabilities - 4.6% ........................................................ 671,495
------------
Total net assets - 100% ............................................................................... $ 14,678,671
============
SERIES M (Specialized Asset Allocation)
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS
- ---------------
BANKS & CREDITS - 4.2%
Citicorp, 7.125% - 2003 ............................................................ $ 1,000,000 $1,033,750
Star Bank Cincinnati, 6.375% - 2004 ................................................ $ 1,000,000 1,000,000
----------
2,033,750
BROKERAGE - 0.6%
Merrill Lynch & Company, Inc., 8.00% - 2007 ........................................ $ 250,000 277,188
COMMUNICATIONS - 0.1%
News America Holdings, 8.625% - 2003 ............................................... $ 40,000 43,700
FINANCIAL SERVICES - 0.3%
MCN Investment Corporation, 6.32% - 2003 ........................................... $ 125,000 124,375
INDUSTRIAL SERVICES - 4.1%
Black & Decker, 7.50% - 2003 ....................................................... $ 1,000,000 1,045,000
Rite Aid Corporation, 6.70% - 2001 ................................................. $ 400,000 406,000
Xerox Corporation, 8.125% - 2002 ................................................... $ 500,000 535,000
----------
1,986,000
INSURANCE - 2.3%
Hartford Life, Inc., 7.10% - 2007 .................................................. $ 1,100,000 1,131,625
PETROLEUM - 0.2%
Occidental Petroleum Corporation, 6.24% - 2000 ..................................... $ 110,000 $ 110,137
RENTAL AUTO/EQUIPMENT - 2.3%
Hertz Corporation, 7.00% - 2004 .................................................... $ 1,100,000 1,128,875
TELECOMMUNICATIONS - 1.1%
U.S. West Capital Funding, Inc., 7.30% - 2007 ...................................... $ 500,000 515,000
TRANSPORTATION - NON-RAIL - 1.1%
Airborne Freight Corporation, 7.35% - 2005 ......................................... $ 500,000 511,250
----------
Total corporate bonds - 16.3% .......................................................................... 7,861,900
COMMON STOCKS
- -------------
BIOTECHNOLOGY - 1.5%
Amgen, Inc.* ....................................................................... 2,800 151,550
Centocor, Inc.* .................................................................... 3,300 109,725
Chiron Corporation* ................................................................ 7,400 125,800
Genome Therapeutics Corporation* ................................................... 16,800 106,050
Genzyme Corporation* ............................................................... 2,600 72,150
Intercardia, Inc.* ................................................................. 3,100 55,413
Millennium Pharmaceutical, Inc.* ................................................... 3,400 64,600
NeXstar Pharmaceuticals, Inc.* ..................................................... 5,100 58,012
----------
743,300
BROADCAST MEDIA - 1.3%
TCI Satellite Entertainment, Inc.* ................................................. 1,200 8,250
Tele-Communications, Inc.* ......................................................... 12,000 335,250
U.S. West Media Group* ............................................................. 10,000 288,750
----------
632,250
COMPUTERS - NETWORKING - 1.8%
Bay Networks, Inc.* ................................................................ 9,400 240,288
3Com Corporation* .................................................................. 6,600 230,587
Cabletron Systems, Inc.* ........................................................... 9,800 147,000
Cisco Systems, Inc.* ............................................................... 4,950 275,963
----------
893,838
COMPUTERS - PERIPHERALS - 1.9%
EMC Corporation* ................................................................... 6,000 64,625
Iomega Corporation* ................................................................ 8,600 106,963
Lexmark International Group, Inc.* ................................................. 4,900 186,200
Quantum Corporation* ............................................................... 7,000 140,437
Read-Rite Corporation* ............................................................. 4,200 66,150
Seagate Technology, Inc.* .......................................................... 2,400 46,200
Storage Technology Corporation* .................................................... 3,300 204,394
----------
914,969
See accompanying notes.
44
<PAGE>
Schedule of Investments
December 31, 1997
SERIES M (Specialized Asset Allocation)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount or
Number Market
COMMON STOCKS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER FINANCE - 1.5%
Beneficial Corporation ............................................................. 1,600 $ 133,000
Capital One Financial Corporation .................................................. 2,600 140,888
Contifinancial Corporation* ........................................................ 4,200 105,787
Greentree Financial Corporation .................................................... 2,800 73,325
Household International, Inc. ...................................................... 1,100 140,319
MBNA Corporation ................................................................... 4,500 122,906
----------
716,225
ENTERTAINMENT - 1.9%
King World Productions, Inc. ....................................................... 4,300 248,325
Time Warner, Inc. .................................................................. 5,000 310,000
Viacom, Inc.* ...................................................................... 6,000 245,250
The Walt Disney Company ............................................................ 1,200 118,875
----------
922,450
GAMING & LOTTERY - 2.2%
Circus Circus Enterprises, Inc.* ................................................... 8,900 182,450
Harrah's Entertainment, Inc.* ...................................................... 13,300 251,038
International Game Technology ...................................................... 14,400 363,600
Mirage Resorts, Inc.* .............................................................. 10,900 247,975
----------
1,045,063
GOLD COMPANIES - 5.5%
Barrick Gold Corporation ........................................................... 24,400 454,450
Battle Mountain Gold Company ....................................................... 90,000 528,750
Echo Bay Mines, Ltd.* .............................................................. 99,000 241,313
Hecla Mining Company* .............................................................. 24,500 120,969
Homestake Mining Company ........................................................... 39,000 346,125
Newmont Mining Corporation ......................................................... 14,700 431,812
Placer Dome, Inc. .................................................................. 34,400 436,450
Stillwater Mining Company* ......................................................... 6,600 110,550
----------
2,670,419
LEISURE TIME PRODUCTS - 0.7%
Brunswick Corporation .............................................................. 6,400 194,000
Callaway Golf Company .............................................................. 5,300 151,381
----------
345,381
LONG-TERM HEALTH CARE - 1.9%
Beverly Enterprises* ............................................................... 6,900 89,700
Genesis Health Ventures, Inc.* ..................................................... 6,400 168,800
Healthsouth Corporation* ........................................................... 9,675 268,481
Health Care and Retirements Corporation* ........................................... 3,100 124,775
Integrated Health Services, Inc. ................................................... 4,300 134,106
Mariner Health Group, Inc.* ........................................................ 9,000 146,250
PharMerica, Inc.* .................................................................. 1 2
----------
932,114
MANAGED HEALTH CARE - 1.2%
Express Scripts, Inc.* ............................................................. 3,100 186,000
Healthcare Compare Corporation* .................................................... 3,100 158,488
Oxford Health Plans* ............................................................... 2,100 32,681
Pacificare Health Systems, Inc.* ................................................... 1,600 83,800
United Healthcare Corporation ...................................................... 2,600 129,187
----------
590,156
RESTAURANTS - 2.1%
Applebees International, Inc. ...................................................... 3,000 $ 54,188
Brinker International, Inc.* ....................................................... 12,000 192,000
CKE Restaurants, Inc. .............................................................. 2,750 115,844
Cracker Barrel Old Country
Store, Inc. ........................................................................ 5,000 166,875
McDonald's Corporation ............................................................. 2,500 119,375
Outback Steakhouse, Inc.* .......................................................... 5,000 143,750
Ryan's Family Steak House, Inc.* ................................................... 10,000 85,625
Wendy's International, Inc. ........................................................ 5,000 120,312
----------
997,969
RETAIL - SPECIALTY - 1.4%
AutoZone, Inc.* .................................................................... 3,500 101,500
Claire's Stores .................................................................... 4,100 79,693
OfficeMax, Inc.* ................................................................... 7,200 102,600
The Pep Boys - Manny, Moe & Jack ................................................... 3,800 90,725
Staples, Inc.* ..................................................................... 3,600 99,900
Toys "R" Us, Inc.* ................................................................. 2,900 91,169
Viking Office Products, Inc.* ...................................................... 4,300 93,794
----------
659,381
TELECOMMUNICATIONS - 1.8%
Ameritech Corporation .............................................................. 2,200 177,100
Bell Atlantic Corporation .......................................................... 1,804 164,164
Bellsouth Corporation .............................................................. 2,900 163,306
GTE Corporation .................................................................... 3,100 161,975
SBC Communication, Inc. ............................................................ 2,560 187,520
----------
854,065
TRUCKING - 1.6%
Caliber System, Inc. ............................................................... 4,200 204,487
Rollins Truck Leasing Corporation .................................................. 9,500 169,813
Ryder System, Inc. ................................................................. 4,000 131,000
USFreightways Corporation .......................................................... 4,800 156,000
Werner Enterprises, Inc. ........................................................... 6,600 135,300
----------
796,600
TRUCKING PARTS & SUPPLIES - 2.1%
Cummins Engine Company, Inc. ....................................................... 3,700 218,531
Navistar International Corporation* ................................................ 18,900 468,956
PACCAR, Inc. ....................................................................... 6,200 325,500
----------
1,012,987
----------
Total common stocks - 30.4% ............................................................................ 14,727,167
U.S. GOVERNMENT AGENCIES
- ------------------------
FEDERAL HOME LOAN MORTGAGES - 0.8%
6.00% - 2006 .................................................................. $ 57,863 57,348
7.00% - 2020 .................................................................. $ 250,000 250,598
7.00% - 2021 .................................................................. $ 100,000 99,784
----------
407,730
See accompanying notes.
45
<PAGE>
Schedule of Investments
December 31, 1997
SERIES M (Specialized Asset Allocation)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount or
Number Market
U.S. GOVERNMENT AGENCIES (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 2.0%
7.17% - 2007 .................................................................. $ 500,000 $ 507,950
6.50% - 2018 .................................................................. $ 140,000 138,250
6.95% - 2020 .................................................................. $ 170,000 169,609
7.50% - 2020 .................................................................. $ 160,000 162,683
----------
978,492
U.S. TREASURY NOTE - 1.7%
6.875% - 1999 ................................................................. $ 800,000 815,016
----------
Total U.S. government & government agencies - 4.5% ..................................................... 2,201,238
REAL ESTATE INVESTMENT TRUSTS
- -----------------------------
American Health Properties, Inc. ................................................... 4,600 126,787
Avalon Properties, Inc. ............................................................ 4,000 123,750
CBL & Associates Properties Trust .................................................. 4,600 113,562
Duke Realty Investment, Inc. ....................................................... 5,700 138,225
Equity Residential Properties, Inc. ................................................ 2,300 116,294
Federal Realty Investment Trust .................................................... 4,350 112,012
General Growth Property, Inc. ...................................................... 3,550 128,244
Glimcher Realty Trust .............................................................. 5,550 125,222
Health Care Property Investors, Inc. ............................................... 3,200 121,000
Kimco Realty Corporation ........................................................... 3,600 126,900
Merry Land & Investment Company .................................................... 5,200 118,950
New Plan Realty Trust .............................................................. 5,100 130,050
Post Properties, Inc. .............................................................. 2,850 115,781
Public Storage, Inc. ............................................................... 3,800 111,625
Security Capital Pacific Trust ..................................................... 5,100 123,675
Security Capital Pacific Trust - Warrants .......................................... 268 1,407
Simon Debartolo Group, Inc. ........................................................ 3,700 120,944
Spieker Properties, Inc. ........................................................... 3,200 137,200
United Realty Trust Dominion ....................................................... 7,700 107,319
Washington Real Estate Investment Trust ............................................ 6,400 107,200
Weingarten Realty Investors ........................................................ 2,700 120,994
----------
Total real estate investment trusts - 5.0% ............................................................. 2,427,141
FOREIGN STOCKS
- --------------
BELGIUM - 5.8%
Bekaert SA ......................................................................... 50 29,757
Cementbedrijven Cimenteries ........................................................ 600 53,927
Compagnie Benelux Paribas SA (COBEPA) .............................................. 900 40,931
Delhaize - Le Lion ................................................................. 1,550 78,651
Electrabel ......................................................................... 1,900 439,488
Fortis AG .......................................................................... 1,750 365,116
Gevaert Photo Productions .......................................................... 900 41,296
Groupe Bruxelles Lambert ........................................................... 700 101,269
Kredietbank ........................................................................ 1,050 440,689
Petrofina SA ....................................................................... 1,050 $ 387,552
Royale Belgium ..................................................................... 650 185,088
Solvay SA .......................................................................... 5,000 314,441
Tractebel Investment International ................................................. 3,500 305,129
Union Miniere* ..................................................................... 500 34,683
----------
2,818,017
DENMARK - 5.6%
A/S Dampskibssellskabet Svendborg .................................................. 4 261,712
A/S Forsikringsselskabet Codan ..................................................... 514 72,440
Aktieselskabet Potagua ............................................................. 1,605 42,661
Bang & Olufsen Holding A/S ......................................................... 927 55,236
BG Bank A/S ........................................................................ 1,515 102,000
Carlsberg A/S ...................................................................... 2,240 121,163
Cheminova Holding A/S .............................................................. 2,433 57,208
D/S Norden A/S ..................................................................... 398 47,954
Danisco A/S ........................................................................ 2,768 153,616
Danske Traelast .................................................................... 616 54,878
Den Danske Bank .................................................................... 2,779 370,549
Finansierings Instituttet for Industri og Handvaerk A/S ............................ 2,146 56,414
Finansieringsselskabet Gefion A/S .................................................. 2,728 51,395
FLS Industries A/S ................................................................. 2,409 57,488
ISS International Service System A/S* .............................................. 1,682 61,903
J. Lauritzen Holding A/S* .......................................................... 1,007 84,564
Jyske Bank A/S ..................................................................... 692 84,388
Korn-OG Foderstof Kompangniet A/S .................................................. 1,736 48,171
Novo Nordisk A/S ................................................................... 2,989 427,797
Radiometer A/S ..................................................................... 1,067 43,321
Sophus Berendsen A/S ............................................................... 996 164,371
Sydbank A/S ........................................................................ 1,224 69,716
Tele Danmark A/S ................................................................... 1,073 66,600
Topdanmark A/S* .................................................................... 345 65,501
Tryg-Baltica Forsikring A/S ........................................................ 1,449 94,266
----------
2,715,312
GERMANY - 8.1%
Allianz AG ......................................................................... 2,140 552,245
BASF AG ............................................................................ 7,919 282,752
Bayer AG ........................................................................... 5,365 199,169
Bayerische Motoren Werke (BMW) AG .................................................. 300 224,411
Continental AG ..................................................................... 1,198 26,984
Daimler-Benz AG .................................................................... 2,850 201,302
Degussa AG ......................................................................... 860 42,569
Deutsche Bank AG ................................................................... 5,108 357,381
Deutsche Telekom AG ................................................................ 18,700 346,327
Dresdner Bank AG ................................................................... 4,589 208,772
Friedrich Grohe AG- Vorzugsak ...................................................... 43 10,762
Heidelberger Zement AG ............................................................. 518 36,328
Hochtief AG ........................................................................ 1,070 44,037
Linde AG ........................................................................... 86 52,182
See accompanying notes.
46
<PAGE>
Schedule of Investments
December 31, 1997
SERIES M (Specialized Asset Allocation)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Market
FOREIGN STOCKS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
GERMANY (CONTINUED)
Merck KGAA ......................................................................... 1,113 $ 37,450
Muenchener Rueckversicherungs-Gesellschaft AG ...................................... 430 163,578
Preussag AG ........................................................................ 428 131,634
SAP AG ............................................................................. 728 220,864
Siemens AG ......................................................................... 7,662 462,351
Veba AG ............................................................................ 4,766 324,706
----------
3,925,804
ITALY - 7.1%
Assicurazioni Gererali ............................................................. 12,650 310,884
Banco Ambrosiano Veneto ............................................................ 9,000 34,463
Banco Commerciale Italiane ......................................................... 37,000 128,705
Benetton Group SPA ................................................................. 2,600 42,574
Credito Italiano ................................................................... 37,500 115,703
Edison SPA ......................................................................... 19,000 114,989
ENI SPA ............................................................................ 32,600 184,943
Fiat SPA ........................................................................... 77,000 224,076
Ina-Instituto Naz Assicuraz ........................................................ 115,977 235,169
Instituto Bancario San Paolo di Torino ............................................. 12,500 119,485
Instituto Mobiliare Italiano ....................................................... 11,441 135,894
Mediobanca ......................................................................... 23,000 180,696
Montedison SPA ..................................................................... 51,800 46,556
Olivetti Group* .................................................................... 27,200 16,446
Pirelli SPA ........................................................................ 85,000 227,404
Ras-Riun Adriat Di Sicurta ......................................................... 4,500 44,160
Sirti SPA .......................................................................... 4,000 24,208
Telecom Italia Mobile SPA - RNC .................................................... 27,614 78,563
Telecom Italia Mobile SPA .......................................................... 138,200 638,238
Telecom Italia SPA - RNC ........................................................... 11,625 51,287
Telecom Italia SPA ................................................................. 72,220 461,588
----------
3,416,031
JAPAN - 12.2%
All Nippon Airways Company, Ltd .................................................... 16,000 61,529
Asahi Glass Company, Ltd. .......................................................... 16,000 76,295
Bank of Tokyo-Mitsubishi, Ltd. ..................................................... 16,000 221,503
Bank of Yokohama, Ltd. ............................................................. 9,000 23,812
Bridgestone Corporation ............................................................ 4,000 87,063
Canon, Inc. ........................................................................ 4,000 93,523
Chubu Electric Power Company, Inc. ................................................. 4,800 73,465
Dai Nippon Printing Company, Ltd. .................................................. 5,000 94,215
Daiei, Inc. ........................................................................ 8,000 33,225
East Japan Railway Company ......................................................... 10 45,300
Fanuc, Ltd. ........................................................................ 900 34,194
Fuji Bank, Ltd. .................................................................... 15,000 60,913
Fuji Photo Film Company ............................................................ 2,000 76,911
Fujitsu, Ltd. ...................................................................... 9,000 96,907
Hitachi, Ltd. ...................................................................... 17,000 121,596
Honda Motor Company, Ltd. .......................................................... 5,000 184,201
Industrial Bank of Japan, Ltd. ..................................................... 13,000 92,985
Ito-Yokado Company, Ltd. ........................................................... 1,000 51,146
Japan Airlines Company, Ltd.* ...................................................... 16,000 43,685
Kansai Electric Power Company ...................................................... 5,000 $ 84,986
Kawasaki Heavy Industries .......................................................... 16,000 24,858
Kawasaki Steel Corporation ......................................................... 49,000 67,081
Kinki Nippon Railway Company, Ltd. ................................................. 20,000 107,213
Kirin Brewery Company, Ltd. ........................................................ 10,000 73,065
Komatsu, Ltd. ...................................................................... 8,000 40,301
Kyocera Corporation ................................................................ 2,000 91,062
Marubeni Corporation ............................................................... 24,000 42,270
Marui Company, Ltd. ................................................................ 3,000 46,839
Matsushita Electric Industrial Company, Ltd. ....................................... 12,000 176,279
Mitsubishi Corporation ............................................................. 21,000 166,358
Mitsubishi Estate Company, Ltd ..................................................... 8,000 87,370
Mitsubishi Heavy Industrial, Ltd. .................................................. 26,000 108,782
Mitsubishi Motors Corporation ...................................................... 17,000 57,529
Mitsui Fudosan Company, Ltd. ....................................................... 9,000 87,217
NEC Corporation .................................................................... 10,000 106,906
Nippon Oil Company, Ltd. ........................................................... 16,000 41,470
Nippon Steel Corporation ........................................................... 47,000 69,766
Nippon Telegraph & Telephone Corporation ........................................... 30 258,420
Nippondenso Company, Ltd. .......................................................... 5,000 90,370
Nissan Motor Company, Ltd. ......................................................... 16,000 66,451
Normura Securities Company, Ltd. ................................................... 12,000 160,589
Sankyo Company, Ltd. ............................................................... 3,000 68,066
Secom Company, Ltd. ................................................................ 1,000 64,143
Seibu Railway, Ltd. ................................................................ 4,000 175,356
Sekisui House, Ltd. ................................................................ 18,000 116,150
Seven-Eleven Japan Company, Ltd. ................................................... 2,000 142,131
Sharp Corporation .................................................................. 8,000 55,253
Shin-Etsu Chemical Company ......................................................... 5,000 95,754
Sony Corporation ................................................................... 1,600 142,746
Sumitomo Bank, Ltd. ................................................................ 20,000 229,194
Sumitomo Chemical Company .......................................................... 23,000 53,068
Taisho Pharmaceutical Company, Ltd. ................................................ 3,000 76,834
Takeda Chemical Industries ......................................................... 4,000 114,443
Tokai Bank, Ltd. ................................................................... 9,000 42,085
Tokio Marine & Fire Insurance Company .............................................. 10,000 113,828
Tokyo Electric Power Company ....................................................... 14,500 265,418
Tokyu Corporation .................................................................. 25,000 96,907
Toshiba Corporation ................................................................ 17,000 70,996
Toyoda Automatic Loom Works, Ltd. .................................................. 3,000 55,376
Toyota Motor Corporation ........................................................... 10,000 287,646
----------
5,893,044
----------
Total foreign stocks - 38.8% ........................................................................... 18,768,208
See accompanying notes.
47
<PAGE>
Schedule of Investments
December 31, 1997
SERIES M (Specialized Asset Allocation)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount or
Number Market
FOREIGN WARRANTS of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
Gevaert NV, Warrants - 2000 ........................................................ 900 $ 4,032
Tractebel Warrants - 1999 .......................................................... 600 1,539
----------
Total foreign warrants - 0.0% .......................................................................... 5,571
TEMPORARY CASH INVESTMENTS
- --------------------------
FEDERAL MORTGAGE CORPORATION DISCOUNT NOTE - 3.1%
5.59% - 2-20-98 ............................................................... $ 1,500,000 1,488,523
MONEY MARKET FUND - 1.6%
Vista Federal Money Market Fund .................................................... 765,000 765,000
------------
Total temporary cash investments - 4.7% ..................................................................... 2,253,523
------------
Total investments - 99.7% .............................................................................. 48,244,748
Cash and other assets, less liabilities - 0.3% ......................................................... 134,062
------------
Total net assets - 100% ................................................................................ $ 48,378,810
============
SERIES N (Managed Asset Allocation)
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS
- ---------------
ADVERTISING - 0.1%
ITT Publimedia, 9.375% - 2007 ...................................................... $ 50,000 $ 52,625
AEROSPACE/DEFENSE - 0.4%
B.E. AeroSpace, 9.875% - 2006 ...................................................... $ 35,000 36,925
Raytheon Company, 6.50% - 2005 ..................................................... $ 100,000 100,625
----------
137,550
AUTOMOBILES - 0.1%
Venture Holdings Trust, 9.50% - 2005 ............................................... $ 50,000 50,375
BANKS & CREDIT - 0.4%
B.F. Saul Reit, 11.625% - 2002 ..................................................... $ 50,000 53,375
Banker's Trust - NY, 7.25% - 2003 .................................................. $ 100,000 103,375
----------
156,750
BROADCAST MEDIA - 0.1%
American Radio Systems, 9.00% - 2006 ............................................... $ 50,000 53,375
BUILDING/CONSTRUCTION PRODUCTS - 0.1%
Synthetic Industries, 9.25% - 2007 ................................................. $ 50,000 52,875
BUILDING MATERIALS - 0.1%
Falcon Building, 9.50% - 2007 ...................................................... $ 50,000 $ 51,500
CABLE SYSTEMS - 0.8%
Comcast Cable Communications, 8.125% - 2004 ........................................ 100,000 107,625
Frontiervision, 11.00% - 2006 ...................................................... 50,000 55,625
Fundy Cable, Ltd., 11.00% - 2005 ................................................... 50,000 53,875
Marcus Cable Operating Company, 0.00% - 2004(1)..................................... 50,000 46,500
Northland Cable Television, 10.25% - 2007 .......................................... 50,000 52,688
----------
316,313
CHEMICALS - SPECIALTY - 0.3%
Agricultural Minerals & Chemicals, 10.75% - 2003 ................................... 50,000 53,625
Sterling Chemicals, Inc., 11.25% - 2007 ............................................ 50,000 52,750
----------
106,375
COAL MINING - 0.1%
AEI Holdings, 10.00% - 2007 ........................................................ 50,000 51,250
COMMERCIAL SERVICES - 0.1%
Dyncorp, Inc., 9.50% - 2007 ........................................................ 50,000 50,750
CONSUMER GOODS & SERVICES - 0.6%
Coinmach Corporation Series B, 11.75% - 2005 ....................................... 50,000 55,250
Doane Products Company, 10.625% - 2006 ............................................. 50,000 53,313
Revlon Consumer Products Company, 10.50% - 2003 .................................... 75,000 79,031
Windy Hill Pet Food Company, 9.75% - 2007 .......................................... 50,000 52,000
----------
239,594
COSMETICS - 0.3%
American Safety Razor Company, 9.875% - 2005 ....................................... 100,000 106,625
ELECTRIC UTILITIES - 1.3%
Florida Power & Light Company, 5.70% - 1998 ........................................ 100,000 100,000
Midwest Power System, 7.125% - 2003 ................................................ 140,000 145,425
Monongahela Power, 8.50% - 2022 .................................................... 100,000 105,125
Southern California Edison, 6.50% - 2001 ........................................... 50,000 50,438
Texas Utilities, 5.875% - 1998 ..................................................... 110,000 110,000
----------
510,988
See accompanying notes.
48
<PAGE>
Schedule of Investments
December 31, 1997
SERIES N (Managed Asset Allocation)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Market
CORPORATE BONDS (continued) Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRONICS - 0.5%
Celestica International, 10.50% - 2006 ............................................. $ 25,000 $ 27,062
Communications & Power Industry, 12.00% - 2005 ..................................... 50,000 55,625
Fairchild Semiconductor, 10.125% - 2007 ............................................ 50,000 52,750
Viasystems, Inc., 9.75% - 2007 ..................................................... 50,000 51,563
----------
187,000
ENTERTAINMENT - 0.8%
AMC Entertainment, Inc., 9.50% - 2009 .............................................. 50,000 51,688
Six Flags Theme Parks, 0.00% - 2005(1).............................................. 75,000 78,281
Time Warner Entertainment, 7.25% - 2008 ............................................ 100,000 104,625
United Artists Theatre, 9.30% - 2015 ............................................... 48,706 49,741
----------
284,335
ENVIRONMENTAL - 0.2%
Allied Waste North America, 10.25% - 2006 .......................................... 50,000 54,687
FINANCIAL SERVICES - 1.2%
Conseco, Inc., 8.125% - 2003 ....................................................... 100,000 105,750
Intertek Finance PLC, 10.25% - 2006 ................................................ 50,000 52,250
New York Life Insurance, 7.50% - 2023 .............................................. 100,000 103,875
Ocwen Capital Trust, 10.875% - 2027 ................................................ 100,000 108,125
Salomon, Inc., 6.75% - 2003 ........................................................ 100,000 101,125
----------
471,125
FOOD & BEVERAGES - 0.4%
Ameriserve Food Distributors, 10.125% - 2007 ....................................... 50,000 52,375
Archibald Candy Corporation, 10.25% - 2004 ......................................... 50,000 52,250
Aurora Foods, Inc., 9.875% - 2007 .................................................. 50,000 52,625
----------
157,250
FOOD WHOLESALERS - 0.3%
Price/Costco, Inc., 7.125% - 2005 .................................................. 100,000 104,500
HEALTH CARE - SERVICES - 0.1%
Vencor, Inc., 8.625% - 2007 ........................................................ 50,000 50,000
HOTEL/MOTEL - 0.6%
Courtyard by Marriott, 10.75% - 2008 ............................................... 50,000 54,938
Grand Casinos, 10.125% - 2003 ...................................................... 50,000 53,937
Host Marriott Travel Plaza, 9.50% - 2005 ........................................... 50,000 53,125
Rio Hotel & Casino, Inc.,
10.625% - 2005 ................................................................ 30,000 32,400
9.50% - 2007 .................................................................. 25,000 26,500
----------
220,900
LEASING - 0.3%
Penske Truck Leasing, 6.65% - 2000 ................................................. 100,000 101,500
MANUFACTURING - 0.2%
International Wire Group, 11.75% - 2005 ............................................ 50,000 54,625
MEDICAL - 0.2%
Owens & Minor, Inc., 10.875% - 2006 ................................................ 25,000 27,562
Quest Diagnostic, Inc., 10.75% - 2006 .............................................. 25,000 27,375
----------
54,937
METALS & MINERALS - 0.4%
Freeport McMoran Resources, 7.00% - 2008 ........................................... 50,000 50,063
Haynes International, Inc., 11.625% - 2004 ......................................... 50,000 57,625
Maxxam Group, Inc., 11.25% - 2003 .................................................. 50,000 53,000
----------
160,688
MISCELLANEOUS - 0.3%
Energy Corporation of America, 9.50% - 2007 ........................................ 50,000 50,000
McDonald's Corporation, 6.625% - 2005 .............................................. 50,000 51,000
----------
101,000
OIL - 0.3%
Kelley Oil & Gas Corporation, 10.375% - 2006 ....................................... 50,000 53,250
Pride Petroleum Services, Inc., 9.375% - 2007 ...................................... 50,000 53,750
----------
107,000
PACKAGING & CONTAINERS - 0.6%
Bway Corporation, 10.25% - 2007 .................................................... 50,000 54,063
Container Corporation of America, 10.75% - 2002 .................................... 100,000 109,000
Plastic Containers, Inc., 10.00% - 2006 ............................................ 25,000 26,312
U.S. Can Corporation, 10.125% - 2006 ............................................... 50,000 52,750
----------
242,125
See accompanying notes.
49
<PAGE>
Schedule of Investments
December 31, 1997
SERIES N (Managed Asset Allocation)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount or
Number Market
CORPORATE BONDS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
PUBLISHING - 0.1%
Sun Media Corporation, 9.50% - 2007 ................................................ $ 50,000 $ 53,625
RETAIL - SPECIALTY - 0.3%
Safelite Glass Corporation, 9.875% - 2006 .......................................... $ 49,693 54,414
Specialty Retailers, 8.50% - 2005 .................................................. $ 50,000 50,875
----------
105,289
TELECOMMUNICATIONS - 0.7%
Lucent Technologies, Inc., 6.90% - 2001 ............................................ $ 100,000 102,500
Sprint Spectrum LP, 11.00% - 2006 .................................................. $ 100,000 112,250
Telewest Communication PLC, 0.00% - 2007(1) ........................................ $ 50,000 39,000
----------
253,750
TEXTILES - 0.3%
Dan River, Inc., 10.125% - 2003 .................................................... $ 50,000 53,375
Dyersburg Corporation, 9.75% - 2007 ................................................ $ 50,000 52,375
----------
105,750
TRANSPORTATION - 0.1%
Stena AB, 8.75% - 2007 ............................................................. $ 50,000 50,625
TRANSPORTATION - MISCELLANEOUS - 0.1%
Sea Containers, Ltd., 12.50% - 2004 ................................................ $ 30,000 34,012
----------
Total corporate bonds - 12.8% .......................................................................... 4,891,668
COMMON STOCKS
- -------------
AEROSPACE/DEFENSE - 0.5%
Boeing Company ..................................................................... 2,515 123,058
Lockheed Martin Corporation ........................................................ 500 49,250
Northrop Grumman Corporation ....................................................... 200 23,000
Raytheon Company (CI. A)* .......................................................... 121 5,975
----------
201,283
AGRICULTURAL PRODUCTS - 0.1%
Archer-Daniels-Midland Company ..................................................... 1,801 39,059
AIRLINES - 0.3%
AMR Corporation* ................................................................... 400 51,400
Delta Air Lines, Inc. .............................................................. 200 23,800
KLM Royal Dutch Air Lines NV ADR ................................................... 800 30,200
----------
105,400
ALUMINUM - 0.1%
Aluminum Company of America ........................................................ 600 42,225
AUTO PARTS & EQUIPMENT - 0.2%
Eaton Corporation .................................................................. 200 $ 17,850
Genuine Parts Company .............................................................. 1,150 39,028
TRW, Inc. .......................................................................... 700 37,363
----------
94,241
AUTOMOBILES - 1.0%
Chrysler Corporation ............................................................... 700 24,631
Echlin, Inc. ....................................................................... 800 28,950
Ford Motor Company ................................................................. 3,000 146,063
General Motors Corporation ......................................................... 1,900 115,188
Honda Motor Company, Ltd. ADR ...................................................... 700 51,712
----------
366,544
BANKS - MAJOR REGIONAL - 3.6%
Banc One Corporation ............................................................... 1,600 86,900
Banco Frances Del Rio De La Plata ADR .............................................. 805 22,037
Bankamerica Corporation ............................................................ 1,800 131,400
Citicorp ........................................................................... 1,100 139,081
Corestates Financial Corporation ................................................... 900 72,056
Fifth Third Bancorp ................................................................ 750 61,313
First Chicago NBD Corporation ...................................................... 800 66,800
First Union Corporation ............................................................ 1,600 82,000
Fleet Financial Group, Inc. ........................................................ 800 59,950
Huntington Bancshares, Inc. ........................................................ 700 25,200
Keycorp ............................................................................ 700 49,569
Mellon Bank Corporation ............................................................ 900 54,563
J.P. Morgan & Company, Inc. ........................................................ 500 56,438
NationsBank Corporation ............................................................ 1,800 109,463
Norwest Corporation ................................................................ 2,000 77,250
PNC Bank Corporation ............................................................... 915 52,212
State Street Boston Corporation .................................................... 600 34,912
U.S. Bancorp ....................................................................... 777 86,975
Wells Fargo & Company .............................................................. 300 101,831
----------
1,369,950
BANKS - MONEY CENTER - 0.3%
Chase Manhattan Corporation ........................................................ 1,112 121,764
BEVERAGES - ALCOHOLIC - 0.3%
Anheuser-Busch Companies, Inc. ..................................................... 1,200 52,800
Diageo PLC ADR ..................................................................... 900 34,087
LVMH Moet Hennessy Lou ADR ......................................................... 1,000 33,125
----------
120,012
BEVERAGES - SOFT DRINK - 1.3%
Coca-Cola Company .................................................................. 5,700 379,762
PepsiCo, Inc. ...................................................................... 3,600 131,175
----------
510,937
BIOTECHNOLOGY - 0.1%
Amgen, Inc.* ....................................................................... 800 43,300
See accompanying notes.
50
<PAGE>
Schedule of Investments
December 31, 1997
SERIES N (Managed Asset Allocation)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Market
COMMON STOCKS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
BROADCAST MEDIA - 0.5%
Clear Channel Communications, Inc.* ................................................ 400 $ 31,775
Comcast Corporation (CI. A) ........................................................ 1,100 34,719
U.S. West Media Group .............................................................. 1,800 51,975
Viacom, Inc. (CI. B)* .............................................................. 1,400 58,012
----------
176,481
BUILDING MATERIALS - 0.1%
Masco Corporation .................................................................. 700 35,613
CHEMICALS - BASIC - 1.2%
Akzo Nobel NV ADR .................................................................. 1,300 112,938
Dow Chemical Company ............................................................... 700 71,050
du Pont (E.I.) de Nemours & Company ................................................ 2,800 168,175
FMC Corporation* ................................................................... 300 20,194
Great Lakes Chemical Corporation ................................................... 700 31,413
Morton International, Inc. ......................................................... 900 30,937
Solutia, Inc. ...................................................................... 280 7,472
----------
442,179
CHEMICALS - DIVERSIFIED - 0.2%
Monsanto Company ................................................................... 1,600 67,200
CHEMICALS - SPECIALTY - 0.3%
Minnesota Mining & Manufacturing Company ........................................... 1,100 90,269
Rohm & Haas Company ................................................................ 400 38,300
----------
128,569
COMMUNICATIONS EQUIPMENT - 0.9%
Lucent Technologies ................................................................ 1,486 118,694
Motorola, Inc. ..................................................................... 1,600 91,300
Oy Nokia AB Corporation ADR ........................................................ 300 21,000
Northern Telecom, Ltd. ............................................................. 800 71,200
Tellabs, Inc.* ..................................................................... 700 37,013
----------
339,207
COMPUTER HARDWARE - 1.6%
Compaq Computer Company* ........................................................... 1,800 101,588
Dell Computer Corporation* ......................................................... 1,200 100,800
Hewlett-Packard Company ............................................................ 2,300 143,750
International Business Machines Corporation ........................................ 2,100 219,581
Sun Microsystems, Inc.* ............................................................ 1,100 43,862
----------
609,581
COMPUTER SOFTWARE/SERVICES - 1.4%
Adobe Systems, Inc. ................................................................ 100 4,125
Ceridian Corporation* .............................................................. 600 27,487
Computer Associates International, Inc. ............................................ 1,500 79,313
Microsoft Corporation* ............................................................. 2,700 348,975
Novell, Inc.* ...................................................................... 3,000 22,500
Oracle Corporation* ................................................................ 2,150 47,972
Parametric Technology Company* ..................................................... 400 18,950
----------
549,322
COMPUTERS - NETWORKING - 0.3%
Bay Networks, Inc.* ................................................................ 400 $ 10,225
Cisco Systems, Inc.* ............................................................... 2,100 117,075
----------
127,300
COMPUTERS - PERIPHERALS - 0.1%
Seagate Technology* ................................................................ 1,100 21,175
CONSUMER FINANCE - 0.2%
Greentree Financial Corporation .................................................... 600 15,712
Household International, Inc. ...................................................... 400 51,025
----------
66,737
CONTAINERS & PACKAGING - 0.1%
Bemis Company, Inc. ................................................................ 500 22,031
Owens-Illinois, Inc.* .............................................................. 600 22,763
----------
44,794
ELECTRIC COMPANIES - 1.2%
Duke Energy Corporation ............................................................ 1,100 60,913
Edison International ............................................................... 1,700 46,219
Empresa Nacional Electricidad S.A. ADR ............................................. 2,400 43,650
Empresa Nacional de Electricidad Chile S.A. ADR .................................... 500 8,844
Entergy Corporation ................................................................ 1,100 32,931
FPL Group, Inc. .................................................................... 700 41,431
Niagra Mohawk Power Corporation* ................................................... 2,400 25,200
P G & E Corporation ................................................................ 1,600 48,700
Southern Company ................................................................... 2,300 59,513
Texas Utilities Company ............................................................ 1,000 41,562
Unicom Corporation ................................................................. 1,100 33,825
----------
442,788
ELECTRICAL EQUIPMENT - 1.7%
Emerson Electric Company ........................................................... 1,300 73,369
General Electric Company ........................................................... 7,500 550,312
Rockwell International Corporation ................................................. 700 36,575
----------
660,256
ELECTRONIC EQUIPMENT - 0.4%
Hitachi, Ltd. ADR .................................................................. 300 20,756
Phillips Electronics NV ADR ........................................................ 2,000 121,000
----------
141,756
ELECTRONICS - DEFENSE - 0.1%
Raytheon Company (CI. B) ........................................................... 500 25,250
ELECTRONICS - INSTRUMENTATION - 0.1%
Honeywell, Inc. .................................................................... 500 34,250
See accompanying notes.
51
<PAGE>
Schedule of Investments
December 31, 1997
SERIES N (Managed Asset Allocation)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Market
COMMON STOCKS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRONICS - SEMICONDUCTORS - 1.0%
Altera Corporation* ................................................................ 600 $ 19,875
Analog Devices, Inc.* .............................................................. 667 18,467
Applied Materials, Inc.* ........................................................... 1,300 39,163
Intel Corporation .................................................................. 3,800 266,950
Texas Instruments, Inc. ............................................................ 600 27,000
Xilinx, Inc.* ...................................................................... 400 14,025
----------
385,480
ENTERTAINMENT - 0.6%
The Walt Disney Company ............................................................ 1,614 159,887
Time Warner, Inc. .................................................................. 1,300 80,600
----------
240,487
FINANCIAL - DIVERSE - 2.0%
American Express Company ........................................................... 1,000 89,250
American General Corporation ....................................................... 800 43,250
Banco Bilbao Viz ADR ............................................................... 3,000 96,937
Fannie Mae ......................................................................... 2,700 154,069
Federal Home Loan Mortgage Corporation ............................................. 1,800 75,487
H & R Block, Inc. .................................................................. 500 22,406
Merrill Lynch & Company, Inc. ...................................................... 400 29,175
Morgan Stanley, Dean Witter, Discover and Company .................................. 1,230 72,724
Sunamerica, Inc. ................................................................... 500 21,375
Travelers Group, Inc. .............................................................. 2,947 158,770
----------
763,443
FOODS - 1.3%
CPC International, Inc. ............................................................ 500 53,875
Conagra, Inc. ...................................................................... 1,400 45,937
Earthgrains Company ................................................................ 64 3,008
General Mills ...................................................................... 700 50,138
Heinz (H.J.) Company ............................................................... 1,100 55,894
Kellogg Company .................................................................... 1,200 59,550
Ralston Purina Group ............................................................... 400 37,175
Sara Lee Corporation ............................................................... 1,300 73,206
Unilever NY ADR .................................................................... 1,600 99,900
----------
478,683
FOOTWEAR - 0.1%
Nike, Inc. (CI. B) ................................................................. 800 31,400
GAMING & LOTTERY - 0.0%
Mirage Resorts, Inc.* .............................................................. 300 6,825
GOLD COMPANIES - 0.1%
Barrick Gold Corporation ........................................................... 1,600 29,800
Placer Dome, Inc. .................................................................. 1,500 19,031
----------
48,831
HARDWARE & TOOLS - 0.1%
Black & Decker Corporation ......................................................... 500 19,531
HEALTH CARE - DIVERSE - 1.7%
Abbott Laboratories ................................................................ 1,800 $ 118,012
American Home Products Corporation ................................................. 1,700 130,050
Bristol-Myers Squibb Company ....................................................... 2,200 208,175
Johnson & Johnson .................................................................. 3,100 204,213
----------
660,450
HEALTH CARE - LONG-TERM CARE - 0.1%
HEALTHSOUTH Corporation* ........................................................... 1,400 38,850
HEALTH CARE - MANAGED CARE - 0.1%
United Healthcare Corporation ...................................................... 700 34,781
HEALTH CARE - PHARMACEUTICALS - 2.5%
Glaxo Wellcome PLC ADR ............................................................. 900 43,087
Eli Lilly & Company ................................................................ 2,600 181,025
Merck & Company, Inc. .............................................................. 2,600 276,250
Pfizer, Inc. ....................................................................... 2,800 208,775
Pharmacia & Upjohn, Inc. ........................................................... 1,600 58,600
Schering-Plough Corporation ........................................................ 1,800 111,825
Warner Lambert Company ............................................................. 700 86,800
----------
966,362
HOMEBUILDING - 0.1%
PPG Industries, Inc. ............................................................... 700 39,988
HOSPITAL MANAGEMENT - 0.2%
Columbia/HCA Healthcare Corporation ................................................ 2,000 59,250
HOUSEHOLD PRODUCTS - 1.0%
Colgate-Palmolive Company .......................................................... 900 66,150
Kimberly-Clark Corporation ......................................................... 1,600 78,900
Procter & Gamble Company ........................................................... 3,200 255,400
----------
400,450
INSURANCE - LIFE/HEALTH - 0.3%
Aetna, Inc. ........................................................................ 544 38,386
Torchmark Corporation .............................................................. 600 25,237
Unum Corporation ................................................................... 800 43,500
----------
107,123
INSURANCE - MULTI-LINE - 0.9%
American International Group, Inc. ................................................. 1,800 195,750
Cigna Corporation .................................................................. 300 51,919
General Re Corporation ............................................................. 300 63,600
Loews Corporation .................................................................. 400 42,450
----------
353,719
INSURANCE - PROPERTY - 0.6%
Allstate Corporation ............................................................... 1,200 109,050
Chubb Corporation .................................................................. 800 60,500
Progressive Corporation Ohio ....................................................... 300 35,962
Selective Insurance Group .......................................................... 800 21,600
----------
227,112
See accompanying notes.
52
<PAGE>
Schedule of Investments
December 31, 1997
SERIES N (Managed Asset Allocation)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Market
COMMON STOCKS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT BANK/BROKERAGE - 0.1%
Schwab (Charles) Corporation ....................................................... 750 $ 31,453
IRON & STEEL - 0.1%
Nucor Corporation .................................................................. 500 24,156
LEISURE TIME PRODUCTS - 0.1%
Brunswick Corporation .............................................................. 600 18,187
Mattel, Inc. ....................................................................... 600 22,350
----------
40,537
LODGING - HOTELS - 0.1%
ITT Corporation* ................................................................... 400 33,150
MACHINERY - DIVERSE - 0.2%
Caterpillar, Inc. .................................................................. 1,100 53,419
Deere & Company .................................................................... 600 34,987
----------
88,406
MANUFACTURING - DIVERSIFIED - 0.6%
AlliedSignal, Inc. ................................................................. 1,700 66,194
Corning, Inc. ...................................................................... 1,000 37,125
Illinois Tool Works, Inc. .......................................................... 600 36,075
Tyco International, Ltd. ........................................................... 800 36,050
United Technologies Corporation .................................................... 700 50,969
----------
226,413
MANUFACTURING - SPECIALIZED - 0.4%
CBS Corporation .................................................................... 900 26,494
Goodyear Tire & Rubber Company ..................................................... 300 19,087
Pall Corporation ................................................................... 1,300 26,894
Thermo Electron Corporation* ....................................................... 500 22,250
Tomkins PLC ADR .................................................................... 2,000 38,250
----------
132,975
MEDICAL PRODUCTS & SUPPLIES - 0.5%
Baxter International, Inc. ......................................................... 1,000 50,437
Becton, Dickinson & Company ........................................................ 500 25,000
Boston Scientific Corporation* ..................................................... 600 27,525
Guidant Corporation ................................................................ 600 37,350
Medtronic, Inc. .................................................................... 1,200 62,775
----------
203,087
MISCELLANEOUS BUSINESS SERVICES - 0.0%
Equifax, Inc. ...................................................................... 500 17,719
NATURAL GAS - 0.1%
Sonat, Inc. ........................................................................ 500 22,875
OFFICE EQUIPMENT & SUPPLIES - 0.1%
Ikon Office Solutions, Inc. ........................................................ 600 16,875
Pitney-Bowes, Inc. ................................................................. 400 35,975
----------
52,850
OIL - DOMESTIC - 0.1%
Atlantic-Richfield Company ......................................................... 600 48,075
OIL - INTERNATIONAL - 3.2%
Amoco Corporation .................................................................. 1,300 $ 110,663
British Petroleum PLC ADR .......................................................... 600 47,812
Chevron Corporation ................................................................ 1,600 123,200
Exxon Corporation .................................................................. 5,900 361,006
Mobil Corporation .................................................................. 1,700 122,719
Occidental Petroleum Corporation ................................................... 1,200 35,175
Royal Dutch Petroleum Company NY Shares ............................................ 6,100 330,544
Texaco, Inc. ....................................................................... 1,400 76,125
USX Marathon Group ................................................................. 800 27,000
----------
1,234,244
OIL & GAS - DRILLING & EQUIPMENT - 0.6%
B.J. Services Company* ............................................................. 700 50,356
Halliburton Company ................................................................ 800 41,550
Repsol S.A. ADR .................................................................... 400 17,025
Schlumberger, Ltd. ................................................................. 1,000 80,500
Union Pacific Resources Group, Inc. ................................................ 1,138 27,597
----------
217,028
OIL & GAS - EXPLORATION & PRODUCTION - 0.8%
Amerada Hess Corporation ........................................................... 1,000 54,875
Anadarko Petroleum Corporation ..................................................... 100 6,069
Apache Corporation ................................................................. 500 17,531
Enron Corporation .................................................................. 1,100 45,719
Ente Nazionale Idroncarburi S.p.a. ADR ............................................. 400 22,825
Helmerich & Payne, Inc. ............................................................ 200 13,575
Phillips Petroleum Company ......................................................... 800 38,900
Shell Transport & Trading Company ADR .............................................. 900 39,375
Total S.A. ADR ..................................................................... 1,000 55,500
Unocal Corporation ................................................................. 700 27,169
----------
321,538
PAPER & FOREST PRODUCTS - 0.3%
Georgia-Pacific Corporation (GP Group) ............................................. 400 24,300
Georgia-Pacific Corporation (Timber Group)* ........................................ 400 9,075
International Paper Company ........................................................ 1,100 47,437
Weyerhaeuser Company ............................................................... 400 19,625
----------
100,437
PERSONAL CARE - 0.5%
Gillette Company ................................................................... 1,500 150,656
International Flavors & Fragrances, Inc. ........................................... 500 25,750
----------
176,406
PHOTOGRAPHY/IMAGING - 0.3%
Eastman Kodak Company .............................................................. 700 42,569
Xerox Corporation .................................................................. 800 59,050
----------
101,619
See accompanying notes.
53
<PAGE>
Schedule of Investments
December 31, 1997
SERIES N (Managed Asset Allocation)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Market
COMMON STOCKS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
PUBLISHING - 0.2%
Dun & Bradstreet Corporation ....................................................... 400 $ 12,375
McGraw-Hill Companies, Inc. ........................................................ 600 44,400
----------
56,775
PUBLISHING - NEWSPAPER - 0.2%
Gannett Company, Inc. .............................................................. 1,000 61,813
RAILROADS - 0.3%
Burlington Northern Santa Fe
Corporation ........................................................................ 400 37,175
CSX Corporation .................................................................... 600 32,400
Norfolk Southern Corporation ....................................................... 600 18,487
Union Pacific Corporation .......................................................... 600 37,463
----------
125,525
RESTAURANTS - 0.3%
Brinker International, Inc.* ....................................................... 1,500 24,000
Darden Restaurants, Inc. ........................................................... 1,400 17,500
McDonald's Corporation ............................................................. 1,100 52,525
Tricon Global Restaurants* ......................................................... 340 9,881
----------
103,906
RETAIL - APPAREL - 0.1%
GAP, Inc. .......................................................................... 750 26,578
TJX Companies, Inc. ................................................................ 400 13,750
----------
40,328
RETAIL - DEPARTMENT STORES - 0.3%
Federated Department Stores, Inc.* ................................................. 800 34,450
May Department Stores Company ...................................................... 700 36,881
J.C. Penney Company, Inc. .......................................................... 800 48,250
----------
119,581
RETAIL - DRUG STORES - 0.2%
CVS Corporation .................................................................... 400 25,625
Rite Aid Corporation ............................................................... 300 17,606
Walgreen Company ................................................................... 1,600 50,200
----------
93,431
RETAIL - FOOD CHAINS - 0.2%
Albertson's, Inc. .................................................................. 900 42,638
American Stores Company* ........................................................... 600 12,337
Kroger Company* .................................................................... 1,000 36,938
----------
91,913
RETAIL - GENERAL MERCHANDISE - 0.8%
Costco Companies, Inc.* ............................................................ 1,000 44,625
Dayton Hudson Corporation .......................................................... 700 47,250
Wal-Mart Stores, Inc. .............................................................. 5,500 216,906
----------
308,781
RETAIL - SPECIALTY - 0.4%
Circuit City Stores - Circuit City Group ........................................... 400 $ 14,225
Home Depot, Inc. ................................................................... 1,500 88,313
Payless Shoesource, Inc.* .......................................................... 144 9,666
Tandy Corporation .................................................................. 600 23,137
Toys "R" Us, Inc.* ................................................................. 900 28,294
----------
163,635
SAVINGS & LOANS - 0.1%
Washington Mutual, Inc. ............................................................ 600 38,288
SERVICES - ADVERTISING/MARKETING - 0.0%
Omnicom Group, Inc. ................................................................ 400 16,950
SERVICES - COMMERCIAL & CONSUMER - 0.4%
Cendant Corporation* ............................................................... 2,592 89,095
Cognizant Corporation .............................................................. 800 35,650
Service Corporation International .................................................. 600 22,163
----------
146,908
SERVICES - COMPUTER SYSTEMS - 0.1%
Digital Equipment Corporation* ..................................................... 600 22,200
SERVICES - DATA PROCESSING - 0.2%
Automatic Data Processing .......................................................... 900 55,237
First Data Corporation ............................................................. 1,300 38,025
----------
93,262
TELECOMMUNICATIONS - 3.0%
Airtouch Communications, Inc.* ..................................................... 1,100 45,719
Ameritech Corporation .............................................................. 1,400 112,700
Bell Atlantic Corporation .......................................................... 1,837 167,167
BellSouth Corporation .............................................................. 2,300 129,519
British Telecom Plc ADR ............................................................ 400 32,125
Ericsson (L.M.) Telecom Company ADR (Cl. B) ........................................ 1,200 44,775
GTE Corporation .................................................................... 2,400 125,400
Hong Kong Telecommunications, Ltd. ADR ............................................. 800 16,500
MCI Communications Corporation ..................................................... 1,800 77,063
SBC Communications, Inc. ........................................................... 2,177 159,465
Telecom Braxileiras S.A. ADR ....................................................... 700 81,506
Telecom New Zealand ADR ............................................................ 400 15,500
Telefonica De Espana ADR ........................................................... 400 36,425
Vodafone Group PLC ADR ............................................................. 500 36,250
Worldcom, Inc.* .................................................................... 2,500 75,625
----------
1,155,739
TELECOMMUNICATIONS - LONG DISTANCE - 0.8%
AT&T Corporation ................................................................... 3,800 232,750
Sprint Corporation ................................................................. 1,100 64,488
----------
297,238
See accompanying notes.
54
<PAGE>
Schedule of Investments
December 31, 1997
SERIES N (Managed Asset Allocation)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount or
Number Market
COMMON STOCKS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
TELEPHONE - 0.5%
Cia De Telecomunicaciones De
Chile S.A. ADR ..................................................................... 425 $ 12,697
Telefonos De Mexico ADR ............................................................ 1,800 100,912
U.S. West Communications Group ..................................................... 1,400 63,175
----------
176,784
TEXTILES - APPAREL - 0.2%
Benetton Group S.p.a. ADR .......................................................... 2,080 67,860
Springs Industries, Inc. (CI. A) ................................................... 300 15,600
----------
83,460
TOBACCO - 0.8%
Fortune Brands, Inc. ............................................................... 500 18,531
Gallaher Group PLC ADR ............................................................. 500 10,688
Phillip Morris Companies, Inc. ..................................................... 6,000 271,875
----------
301,094
WASTE MANAGEMENT - 0.1%
Browning-Ferris Industries ......................................................... 374 13,838
Waste Management, Inc. ............................................................. 1,396 38,390
----------
52,228
----------
Total common stocks - 48.2% ................................................................................. 18,412,745
U.S. GOVERNMENT & GOVERNMENT AGENCY SECURITIES
- ----------------------------------------------
U.S. GOVERNMENT AGENCIES - 6.3%
Government National Mortgage Association,
#67365, 11.50% - 2013 ......................................................... $ 29,168 32,715
#353937, 6.00% - 2023 ......................................................... $ 300,877 292,648
#410777, 7.00% - 2025 ......................................................... $ 115,979 116,916
#780057, 7.50% - 2025 ......................................................... $ 76,401 78,520
#2102, 8.00% - 2025 ........................................................... $ 48,311 49,851
#412429, 8.50% - 2025 ......................................................... $ 166,854 174,874
#410891, 7.00% - 2026 ......................................................... $ 257,051 259,121
#426384, 7.00% - 2026 ......................................................... $ 335,741 338,451
#424476, 7.50% - 2026 ......................................................... $ 392,696 402,368
#432891, 7.50% - 2026 ......................................................... $ 97,558 99,959
#402684, 8.00% - 2026 ......................................................... $ 203,229 210,576
#427029, 8.50% - 2026 ......................................................... $ 227,535 238,853
#435589, 8.50% - 2026 ......................................................... $ 114,505 120,173
----------
2,415,025
U.S. GOVERNMENT SECURITIES - 17.2%
U.S. Treasury Bonds,
6.875% - 2025 ................................................................. $ 35,000 39,030
6.75% - 2026 .................................................................. $ 2,025,000 2,230,011
6.625% - 2027 ................................................................. $ 400,000 433,932
----------
2,702,973
U.S. Treasury Notes,
6.00% - 1999 .................................................................. $ 175,000 $ 175,887
6.375% - 1999 ................................................................. 300,000 302,799
5.625% - 2000 ................................................................. 75,000 74,826
6.25% - 2000 .................................................................. 475,000 480,776
6.25% - 2002 .................................................................. 380,000 387,494
5.875% - 2005 ................................................................. 75,000 75,391
6.50% - 2005 .................................................................. 100,000 104,198
5.625% - 2006 ................................................................. 100,000 98,873
6.50% - 2006 .................................................................. 175,000 183,211
6.125% - 2007 ................................................................. 900,000 924,687
6.25% - 2007 .................................................................. 1,000,000 1,031,530
----------
3,839,672
----------
Total U.S. government & government agency securities - 23.5% ........................................... 8,957,670
MISCELLANEOUS ASSETS
- --------------------
ASSET-BACKED SECURITIES - 0.2%
Airplanes Pass-Through Trust (CI. D), 10.875% - 2019 ............................... 50,000 56,251
FOREIGN CORPORATE BONDS
- -----------------------
JAPAN - 0.7%
European Investment Bank,
4.625% - 2003(2) .............................................................. 17,000,000 151,831
3.00% - 2006(2) ............................................................... 7,000,000 58,716
Interamer Development Bank, 6.00% - 2001(2) ........................................ 5,000,000 45,522
KFW International Finance, 6.00% - 1999(2) ......................................... 3,000,000 25,409
----------
Total foreign bonds - 0.7% ............................................................................. 281,478
FOREIGN GOVERNMENT ISSUES
- -------------------------
CANADA - 0.2%
Government Bond,
8.50% - 2002 .................................................................. 60,000 46,773
6.50% - 2004 .................................................................. 60,000 44,122
----------
90,895
FRANCE - 0.3%
O.A.T. Government Bond,
8.50% - 2002(2) ............................................................... 430,000 82,857
5.50% - 2007(2) ............................................................... 214,000 36,106
----------
118,963
See accompanying notes.
55
<PAGE>
Schedule of Investments
December 31, 1997
SERIES N (Managed Asset Allocation)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount or
Number Market
FOREIGN GOVERNMENT ISSUES (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
GERMANY - 0.5%
Bundesrepub Deutschland,
8.375% - 2001(2) .............................................................. 130,000 $ 80,687
7.375% - 2005(2) .............................................................. 125,000 78,537
Deutschland Republic Government Bond, 6.00% - 2007(2) .............................. 62,000 36,220
----------
195,444
UNITED KINGDOM - 0.2%
Treasury Bonds,
8.00% - 2003 .................................................................. 29,000 50,952
7.50% - 2006 .................................................................. 12,000 21,263
----------
72,215
----------
Total foreign government issues - 1.2% ................................................................. 477,517
FOREIGN STOCKS
- --------------
AUSTRALIA - 0.0%
Rio Tinto, Ltd. .................................................................... 1,000 11,665
BELGIUM - 0.2%
Electrabel ......................................................................... 50 11,566
Kredietbank ........................................................................ 100 41,970
Societe Generale de Belgique ....................................................... 200 18,300
----------
71,836
DENMARK - 0.2%
Danisco A/S ........................................................................ 1,000 55,497
FRANCE - 0.6%
Axa ................................................................................ 500 38,706
Eridania Beghin-Say S.A ............................................................ 200 31,284
L'Air Liquide ...................................................................... 210 32,883
Pinault-Printemps-Redoute S.A ...................................................... 100 53,376
Societe Generale de Paris .......................................................... 308 41,982
Societe Technip .................................................................... 400 42,222
----------
240,453
GERMANY - 0.9%
Altana AG .......................................................................... 300 19,805
Bank of Berlin ..................................................................... 2,000 43,937
Bayer AG ........................................................................... 2,000 74,247
Ckag Colonia Konzern AG ............................................................ 300 28,698
Deutsche Bank AG ................................................................... 500 34,983
M.A.N. AG .......................................................................... 200 57,785
Siemens AG ......................................................................... 400 24,137
Veba AG ............................................................................ 600 40,878
----------
324,470
HONG KONG - 0.4%
Cheung Kong Holdings ............................................................... 5,000 32,749
Hong Kong Electric Holdings, Ltd. .................................................. 9,000 34,208
Hutchinson Whampoa, Ltd. ........................................................... 14,000 87,813
----------
154,770
ITALY - 0.2%
Banco Commerciale Italiane ......................................................... 13,000 $ 45,221
Telecom Italia S.p.a ............................................................... 5,555 35,504
----------
80,725
JAPAN - 1.0%
Bridgestone Corporation ............................................................ 3,000 65,297
Canon, Inc. ........................................................................ 1,000 23,381
Dai Nippon Printing, Ltd. .......................................................... 2,000 37,686
Kao Corporation .................................................................... 4,000 57,837
Kuraray Company, Ltd. .............................................................. 3,000 24,919
Marui Company, Ltd. ................................................................ 2,000 31,226
Mitsubishi Electric Corporation .................................................... 4,000 10,275
Mitsubishi Heavy Industries, Ltd. .................................................. 4,000 16,736
Ricoh Corporation, Ltd. ............................................................ 4,000 49,838
Sharp Corporation .................................................................. 2,000 13,813
Takeda Chemical Industries ......................................................... 2,000 57,221
----------
388,229
MALAYSIA - 0.0%
Malayan Cement Berhad .............................................................. 12,500 8,510
Sime Darby Berhad .................................................................. 8,000 7,687
United Engineers (Malaysia), Ltd. .................................................. 3,000 2,497
----------
18,694
NETHERLANDS - 0.3%
CSM NV ............................................................................. 600 26,637
Ing Groep NV ....................................................................... 1,500 63,190
Oce NV ............................................................................. 300 32,705
----------
122,532
NEW ZEALAND - 0.1%
Lion Nathan, Ltd. .................................................................. 10,000 22,413
SINGAPORE - 0.0%
Cycle & Carriage, Ltd. ............................................................. 3,000 12,374
SOUTH AFRICA - 0.1%
Anglo American Platinum ............................................................ 2,000 26,714
SWEDEN - 0.1%
Astra AB -B ........................................................................ 3,200 53,842
SWITZERLAND - 0.8%
ABB AG-Bearer ...................................................................... 20 25,162
Nestle S.A ......................................................................... 20 30,016
Novartis AG ........................................................................ 26 42,247
Sig Schweizland .................................................................... 30 82,274
UBS-Bearer (Union Bank of Switzerland) ............................................. 80 115,841
----------
295,540
See accompanying notes.
56
<PAGE>
Schedule of Investments
December 31, 1997
SERIES N (Managed Asset Allocation)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount or
Number Market
FOREIGN STOCKS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM - 1.1%
Abbey National PLC ................................................................. 3,600 $ 62,137
BAA PLC ............................................................................ 2,300 18,449
Barclays PLC ....................................................................... 3,000 79,720
Blue Circle Industries PLC ......................................................... 3,845 22,507
GKN PLC ............................................................................ 2,000 41,036
HSBC Holdings PLC .................................................................. 3,000 77,548
Lonrho, Ltd. ....................................................................... 22,000 33,665
Tesco PLC .......................................................................... 10,000 80,624
----------
415,686
----------
Total foreign stocks - 6.0% ............................................................................ 2,295,440
TEMPORARY CASH INVESTMENTS
- --------------------------
MONEY MARKET FUND - 1.9%
Vista Treasury International Money Market Fund ..................................... 721,408 721,408
COMMERCIAL PAPER
- ----------------
FINANCIAL SERVICES - 4.6%
Ciesco L.P., 6.40% - 1-02-98 ....................................................... $ 1,744,000 1,743,690
----------
Total investments - 99.1% .............................................................................. 37,837,867
Liabilities, less cash and other assets - 0.9% ......................................................... 343,935
----------
Total net assets - 100.0% .............................................................................. $ 38,181,802
==========
SERIES O (Equity Income)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS
- -------------
AEROSPACE/DEFENSE - 0.0%
Raytheon Company (CI. A)* .......................................................... 969 $ 47,799
ALUMINUM - 0.5%
Reynolds Metals Company ............................................................ 12,500 750,000
AUTO PARTS & EQUIPMENT - 0.7%
Genuine Parts Company .............................................................. 30,100 1,021,519
AUTOMOBILES - 1.0%
Echlin, Inc. ....................................................................... 18,400 665,850
General Motors Corporation ......................................................... 15,200 921,500
----------
1,587,350
BANKS - MAJOR REGIONAL - 8.1%
Banc One Corporation ............................................................... 21,470 $1,166,089
BankBoston Corporation ............................................................. 9,400 883,013
Bankers Trust New York Corporation ................................................. 11,100 1,248,056
Fleet Financial Group, Inc. ........................................................ 14,000 1,049,125
First Union Corporation ............................................................ 16,980 870,225
Mellon Bank Corporation ............................................................ 45,400 2,752,375
Mercantile Bankshares Corporation .................................................. 17,900 700,338
J.P. Morgan & Company, Inc. ........................................................ 10,600 1,196,475
National City Corporation .......................................................... 11,600 762,700
PNC Bank Corporation ............................................................... 11,900 679,044
Wells Fargo & Company .............................................................. 2,700 916,481
----------
12,223,921
BANKS - MONEY CENTER - 0.9%
Chase Manhattan Corporation ........................................................ 12,708 1,391,526
BEVERAGES - ALCOHOLIC - 1.6%
Anheuser-Busch Companies, Inc. ..................................................... 35,700 1,570,800
Brown-Forman Corporation (CI. B) ................................................... 15,000 828,750
----------
2,399,550
BIOTECHNOLOGY - 0.3%
Amgen, Inc.* ....................................................................... 9,500 514,188
BUILDING MATERIALS - 0.4%
Armstrong World Industries, Inc. ................................................... 8,800 657,800
CHEMICALS - BASIC - 4.1%
Dow Chemical Company ............................................................... 24,000 2,436,000
du Pont (E.I.) de Nemours & Company ................................................ 23,600 1,417,475
Great Lakes Chemical Company ....................................................... 24,200 1,265,475
Olin Corporation ................................................................... 21,700 1,017,187
----------
6,136,137
CHEMICALS - SPECIALTY - 2.7%
Eastman Chemical Company ........................................................... 9,500 565,844
Imperial Chemical Industries PLC ADR ............................................... 11,500 746,781
Lubrizol Corporation ............................................................... 13,600 501,500
Minnesota Mining & Manufacturing Company ........................................... 4,800 393,900
Nalco Chemical Company ............................................................. 17,300 684,431
Witco Corporation .................................................................. 30,000 1,224,375
----------
4,116,831
See accompanying notes.
57
<PAGE>
Schedule of Investments
December 31, 1997
SERIES O (Equity Income)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Market
COMMON STOCKS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC COMPANIES - 8.3%
Baltimore Gas & Electric Company ................................................... 18,400 $ 626,750
Central & Southwest Corporation .................................................... 18,200 492,538
DQE, Inc. .......................................................................... 21,900 769,238
Dominion Resources, Inc. ........................................................... 18,000 766,125
Duke Energy Corporation ............................................................ 25,500 1,412,063
Entergy Corporation ................................................................ 18,800 562,825
FirstEnergy Corporation ............................................................ 37,658 1,092,067
GPU, Inc. .......................................................................... 9,000 379,125
Houston Industries, Inc. ........................................................... 31,200 832,650
Peco Energy Company ................................................................ 25,800 625,650
P G & E Corporation ................................................................ 13,600 413,950
Pacificorp ......................................................................... 25,200 688,275
Public Service Enterprise Group, Inc. .............................................. 14,200 449,962
Southern Company ................................................................... 42,900 1,110,038
Teco Energy, Inc. .................................................................. 21,300 599,062
Unicom Corporation ................................................................. 31,800 977,850
Western Resources, Inc. ............................................................ 15,800 679,400
----------
12,477,568
ELECTRICAL EQUIPMENT - 2.7%
Amp, Inc. .......................................................................... 24,000 1,008,000
Cooper Industries, Inc. ............................................................ 14,988 734,412
General Electric Company ........................................................... 20,800 1,526,200
Hubbell, Inc. (Cl. B) .............................................................. 15,100 744,619
----------
4,013,231
FINANCIAL - DIVERSE - 4.2%
American Express Company ........................................................... 8,300 740,775
American General Corporation ....................................................... 21,100 1,140,719
Federal National Mortgage Association .............................................. 24,500 1,398,031
H & R Block, Inc. .................................................................. 22,700 1,017,244
Transamerica Corporation ........................................................... 8,500 905,250
Travelers Group, Inc. .............................................................. 17,700 1,077,500
----------
6,279,519
FOODS - 3.8%
General Mills ...................................................................... 17,800 1,274,925
Heinz (H.J.) Company ............................................................... 18,750 952,734
McCormick & Company, Inc. (Non-Voting) ............................................. 34,600 968,800
Quaker Oats Company ................................................................ 23,400 1,234,350
Sara Lee Corporation ............................................................... 10,800 608,175
Unilever NY ADR .................................................................... 11,500 718,031
----------
5,757,015
GOLD COMPANIES - 0.5%
Newmont Mining Corporation ......................................................... 26,200 769,625
HEALTH CARE - DIVERSE - 1.9%
Abbott Laboratories ................................................................ 12,700 832,644
American Home Products Corporation ................................................. 26,300 2,011,950
----------
2,844,594
HEALTH CARE - PHARMACEUTICALS - 1.0%
Pharmacia & Upjohn, Inc. ........................................................... 41,995 $1,538,067
HOMEBUILDING - 0.5%
PPG Industries, Inc. ............................................................... 12,400 731,200
HOUSEHOLD FURNISHINGS & APPLIANCES - 0.7%
Whirlpool Corporation .............................................................. 18,300 1,006,500
HOUSEHOLD PRODUCTS - 0.7%
Colgate-Palmolive Company .......................................................... 2,900 213,150
Kimberly-Clark Corporation ......................................................... 5,400 266,287
Tupperware Corporation ............................................................. 20,800 579,800
----------
1,059,237
HOUSEWARES - 0.1%
Rubbermaid, Inc. ................................................................... 3,600 90,000
INSURANCE - BROKERS - 0.3%
Hilb, Rogal & Hamilton Company ..................................................... 2,100 40,556
Willis Corroon Group Plc ADR ....................................................... 37,100 456,794
----------
497,350
INSURANCE - MULTI-LINE - 1.4%
Lincoln National Corporation ....................................................... 9,700 757,813
Safeco Corporation ................................................................. 15,700 765,375
USF&G Corporation .................................................................. 26,200 578,037
----------
2,101,225
INSURANCE - PROPERTY - 1.5%
Exel Limited ....................................................................... 14,000 887,250
St. Paul Companies, Inc. ........................................................... 16,900 1,386,856
----------
2,274,106
IRON & STEEL - 0.4%
USX - U.S. Steel Group, Inc. ....................................................... 17,900 559,375
LODGING - HOTELS - 0.7%
Hilton Hotels Corporation .......................................................... 16,900 502,775
ITT Corporation* ................................................................... 5,800 480,675
----------
983,450
MACHINERY - DIVERSE - 0.3%
Gatx Corporation ................................................................... 5,900 428,119
MANUFACTURING - SPECIALIZED - 0.5%
Pall Corporation ................................................................... 36,200 748,888
MANUFACTURING - DIVERSIFIED - 0.3%
AlliedSignal, Inc. ................................................................. 9,100 385,481
MEDICAL PRODUCTS & SUPPLIES - 1.9%
Bard (C.R.), Inc. .................................................................. 13,000 407,062
Bausch & Lomb, Inc. ................................................................ 17,200 681,550
Baxter International, Inc. ......................................................... 12,000 605,250
United States Surgical Corporation ................................................. 39,500 1,157,844
----------
2,851,706
MINING & METALS - 0.2%
Inco, Ltd. ......................................................................... 15,400 261,800
See accompanying notes.
58
<PAGE>
Schedule of Investments
December 31, 1997
SERIES O (Equity Income)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Market
COMMON STOCKS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
OIL - DOMESTIC - 1.4%
Atlantic-Richfield Company ......................................................... 26,000 $2,083,250
OIL - INTERNATIONAL - 7.4%
Amoco Corporation .................................................................. 15,500 1,319,438
British Petroleum PLC ADR .......................................................... 12,100 964,219
Chevron Corporation ................................................................ 18,000 1,386,000
Exxon Corporation .................................................................. 27,100 1,658,181
Mobil Corporation .................................................................. 20,600 1,487,063
Occidental Petroleum Company ....................................................... 31,300 917,481
Royal Dutch Petroleum Company NY Shares ............................................ 22,300 1,208,381
Texaco, Inc. ....................................................................... 26,000 1,413,750
USX Marathon Group ................................................................. 22,700 766,125
----------
11,120,638
OIL & GAS - DRILLING & EQUIPMENT - 0.4%
Repsol S.A. ADR .................................................................... 12,800 544,800
OIL & GAS - EXPLORATION & PRODUCTION - 1.7%
Amerada Hess Corporation ........................................................... 17,700 971,287
Enron Corporation .................................................................. 17,100 860,344
Phillips Petroleum Company ......................................................... 15,400 748,825
----------
2,580,456
PAPER & FOREST PRODUCTS - 2.3%
Consolidated Papers, Inc. .......................................................... 14,600 779,275
Georgia-Pacific Corporation (GP Group) ............................................. 6,800 413,100
Georgia-Pacific Corporation (Timber Group)* ........................................ 6,800 154,275
International Paper Company ........................................................ 17,800 767,625
Union Camp Corporation ............................................................. 23,300 1,406,612
----------
3,520,887
PERSONAL CARE - 1.0%
International Flavors & Fragrances, Inc. ........................................... 28,000 1,586,200
PHOTOGRAPHY/IMAGING - 0.8%
Eastman Kodak Company .............................................................. 20,700 1,258,819
PUBLISHING - 3.9%
Deluxe Corporation ................................................................. 11,100 382,950
R.R. Donnelley & Sons Company ...................................................... 26,500 987,125
Dow Jones & Company, Inc. .......................................................... 19,000 1,020,063
Dun & Bradstreet Corporation ....................................................... 26,900 832,219
Knight-Ridder, Inc. ................................................................ 25,400 1,320,800
McGraw-Hill Companies, Inc. ........................................................ 11,100 821,400
Readers Digest Association, Inc. (CI. A) ........................................... 20,400 481,950
Readers Digest Association, Inc. (CI. B) ........................................... 1,300 31,687
----------
5,878,194
RAILROADS - 2.8%
Burlington Northern Santa Fe Corporation ........................................... 10,600 $ 985,137
Norfolk Southern Corporation ....................................................... 41,800 1,287,963
Union Pacific Corporation .......................................................... 30,600 1,910,588
----------
4,183,688
REAL ESTATE - 0.2%
Rouse Company ...................................................................... 7,800 255,450
RETAIL - DEPARTMENT STORES - 1.4%
May Department Stores Company ...................................................... 11,100 584,831
J.C. Penney Company, Inc. .......................................................... 26,100 1,574,156
----------
2,158,987
TELECOMMUNICATIONS - LONG DISTANCE - 2.3%
AT&T Corporation ................................................................... 46,600 2,854,250
Sprint Corporation ................................................................. 11,200 656,600
----------
3,510,850
TELECOMMUNICATIONS - 6.6%
Alltel Corporation ................................................................. 49,000 2,012,063
BCE, Inc. .......................................................................... 22,200 739,537
Bell Atlantic Corporation .......................................................... 15,200 1,383,200
BellSouth Corporation .............................................................. 20,500 1,154,406
Frontier Corporation ............................................................... 23,300 560,656
GTE Corporation .................................................................... 32,500 1,698,125
SBC Communications, Inc. ........................................................... 22,819 1,671,492
Southern New England Telecommunications ............................................ 13,500 679,219
----------
9,898,698
TELEPHONE - 0.4%
U.S. West Communications Group ..................................................... 12,000 541,500
TEXTILES - APPAREL - 0.1%
Unifi, Inc. ........................................................................ 2,700 109,856
TOBACCO - 3.1%
Fortune Brands, Inc. ............................................................... 19,300 715,306
Philip Morris Companies, Inc. ...................................................... 36,200 1,640,312
RJR Nabisco Holdings ............................................................... 19,800 742,500
UST, Inc. .......................................................................... 41,700 1,540,294
----------
4,638,412
TRANSPORTATION - MISCELLANEOUS (BUS/TRUCKING) - 0.2%
Alexander & Baldwin, Inc. .......................................................... 10,800 294,975
WASTE MANAGEMENT - 0.5%
Waste Management, Inc. ............................................................. 26,400 726,000
----------
Total common stocks - 88.7% ............................................................................ 133,396,337
See accompanying notes.
59
<PAGE>
Schedule of Investments
December 31, 1997
SERIES O (Equity Income)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount or
Number Market
U.S. GOVERNMENT & GOVERNMENT AGENCY SECURITIES of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES - 1.2%
U.S. Treasury Bond, 6.00% - 2026 ................................................... $ 400,000 $ 399,172
U.S. Treasury Notes,
6.125% - 1998 ................................................................. $ 100,000 100,243
5.875% - 1999 ................................................................. $ 100,000 100,349
6.25% - 2000 .................................................................. $ 100,000 101,216
6.50% - 2001 .................................................................. $ 400,000 409,396
5.75% - 2003 .................................................................. $ 400,000 400,092
5.625% - 2006 ................................................................. $ 200,000 197,746
7.00% - 2006 .................................................................. $ 100,000 107,922
----------
1,416,964
----------
Total U.S. government & government agency securities - 1.2% ............................................ 1,816,136
REAL ESTATE INVESTMENT TRUSTS
- -----------------------------
REAL ESTATE - 1.2%
Security Capital Pacific Trust ..................................................... 12,200 295,850
Simon DeBartolo Group, Inc. ........................................................ 36,336 1,187,733
Weingarten Realty Investors ........................................................ 7,000 313,688
----------
1,797,271
FOREIGN STOCKS
- --------------
UNITED KINGDOM - 1.4%
Cadbury Schweppes PLC .............................................................. 41,600 414,114
Lonrho, Ltd. ....................................................................... 145,200 222,188
Smith & Nephew PLC ................................................................. 192,100 570,527
Tomkins PLC ........................................................................ 197,400 922,437
----------
2,129,266
TEMPORARY CASH INVESTMENTS
- --------------------------
MONEY MARKET FUND - 0.9%
Vista Treasury Institutional Money Market Fund ..................................... 1,291,783 1,291,783
COMMERCIAL PAPER
- ----------------
FINANCIAL SERVICES - 3.6%
Preferred Receivables Funding, 6.05% - 1-13-98 ..................................... $ 5,375,000 5,364,160
MEDICAL - 3.6%
Merck & Company, 6.10% - 1-05-98 ................................................... $ 5,500,000 $5,496,273
----------
Total commercial paper - 7.2% .......................................................................... 10,860,433
----------
Total investments - 100.6% ............................................................................. 151,291,226
Liabilities, less cash and other assets - 0.6% ......................................................... (899,923)
----------
Total net assets - 100.0% .............................................................................. $150,391,303
==========
SERIES P (High Yield)
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS
- ---------------
AEROSPACE/DEFENSE - 1.1%
Burke Industries, Inc., 10.0% - 2007 ............................................... $ 75,000 $ 77,813
BANKS & CREDIT - 1.5%
Bay View Capital Corporation, 9.125% - 2007 ........................................ 100,000 102,750
BEVERAGES - 1.6%
Cott Corporation, 9.375% - 2005 .................................................... 50,000 52,750
Delta Beverage Group, 9.75% - 2003 ................................................. 50,000 52,250
----------
105,000
BROADCAST MEDIA - 2.6%
Allbritton Communications Company, 9.75% - 2007 .................................... 75,000 76,688
Young Broadcasting, 8.75% - 2007 ................................................... 100,000 99,000
----------
175,688
BUILDING MATERIALS - 2.1%
AAF-McQuay, Inc., 8.875% - 2003 .................................................... 50,000 49,563
Johns Manville International Group, Inc., 10.875% - 2004 ........................... 35,000 38,763
Sequa Corporation, 9.375% - 2003 ................................................... 50,000 52,125
----------
140,451
BUSINESS SERVICES - 0.8%
Heritage Media Corporation, 8.75% - 2006 ........................................... 50,000 53,500
See accompanying notes.
60
<PAGE>
Schedule of Investments
December 31, 1997
SERIES P (High Yield)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Market
CORPORATE BONDS (continued) Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
CABLE SYSTEMS - 1.8%
Adelphia Communications Corporation, 9.875 - 2007 .................................. $ 50,000 $ 52,875
Adelphia Communications Corporation, 12.50% - 2002 ................................. 13,000 13,650
Rogers Cablesystems, 9.625% - 2002 ................................................. 50,000 53,125
----------
119,650
CHEMICALS - 0.8%
Envirodyne Industries, Inc., 12.00% - 2000 ......................................... 50,000 53,563
COAL MINING - 1.5%
AEI Holdings, 10.0% - 2007 ......................................................... 100,000 102,500
COMMUNICATIONS - 1.6%
Century Communication Corporation, 8.375% - 2007 ................................... 75,000 75,000
Rogers Communications, Inc., 9.125% - 2006 ......................................... 30,000 30,450
----------
105,450
COMMUNICATION SERVICES - 5.2%
CF Cable TV, Inc., 11.625% - 2005 .................................................. 100,000 114,875
Cablevision Systems Corporation, 7.875% - 2007 ..................................... 75,000 76,594
Century Communications Corporation, 9.50% - 2005 ................................... 100,000 105,250
Comcast Corporation, 9.125% - 2006 ................................................. 50,000 53,125
----------
349,844
ELECTRIC UTILITIES - 1.9%
AES Corporation, 10.25% - 2006 ..................................................... 65,000 70,525
Cal Energy Company, Inc., 9.50% - 2006 ............................................. 50,000 54,375
----------
124,900
FINANCIAL SERVICES - 2.8%
Dollar Financial Group, Inc., 10.875% - 2006 ....................................... 50,000 53,438
Emergent Group Inc., 10.75% - 2004 ................................................. 75,000 75,000
Homeside, Inc., 11.25% - 2003 ...................................................... 50,000 59,250
----------
187,688
FOOD & BEVERAGES - 2.0%
Chiquita Brands International, Inc., 10.25% - 2006 ................................. 25,000 27,313
Pilgrims Pride Corporation, 10.875% - 2003 ......................................... 100,000 105,000
----------
132,313
GAMING - 5.4%
Boyd Gaming Corporation, 9.50% - 2007 .............................................. $ 100,000 $ 105,000
Harrahs Operating Company, Inc., 8.75% - 2000 ...................................... 50,000 51,188
Rio Hotel & Casino, Inc., 9.50% - 2007 ............................................. 100,000 106,000
Station Casinos, 9.625% - 2003 ..................................................... 100,000 103,500
----------
365,688
HEALTH CARE SERVICES - 2.2%
Genesis Eldercare Acquisitions, 9.00% - 2007 ....................................... 75,000 73,500
Tenet Healthcare Corporation, 10.125% - 2005 ....................................... 70,000 76,300
----------
149,800
MANUFACTURING - 4.2%
AGCO Corporation, 8.50% - 2006 ..................................................... 100,000 102,500
DESA International, Inc., 9.875% - 2007 ............................................ 100,000 102,500
Shop Vac Corporation, 10.625% - 2003 ............................................... 50,000 54,313
Titan Wheel International, Inc., 8.75% - 2007 ...................................... 25,000 26,188
----------
285,501
MISCELLANEOUS - 0.6%
Packard Bioscience Company, 9.375% - 2007 .......................................... 45,000 43,312
OIL - 7.1%
COHO Energy, Inc., 8.875% - 2007 ................................................... 100,000 100,250
Crown Central Petroleum, 10.875% - 2005 ............................................ 125,000 132,812
Giant Industries, 9.0% - 2007 ...................................................... 100,000 99,500
Seagull Energy Corporation, 8.625% - 2005 .......................................... 50,000 52,125
Southwest Royalties, Inc., 10.50% - 2004 ........................................... 100,000 98,750
----------
483,437
OFFICE EQUIPMENT & SUPPLIES - 1.0%
Knoll, Inc., 10.875% - 2006 ........................................................ 63,000 70,402
PACKAGING & CONTAINERS - 2.0%
Huntsman Packaging Corporation, 9.125% - 2007 ...................................... 75,000 77,250
Plastic Containers, Inc., 10.00% - 2006 ............................................ 50,000 52,625
----------
129,875
See accompanying notes.
61
<PAGE>
Schedule of Investments
December 31, 1997
SERIES P (High Yield)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount or
Number of Market
CORPORATE BONDS (continued) Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
PUBLISHING - 3.2%
Big Flower Press Holdings, 8.875% - 2007 ........................................... $ 50,000 $ 50,375
Golden Books Publishing, 7.65% - 2002 .............................................. 50,000 48,125
Hollinger International Publishing, 8.625% - 2005 .................................. 50,000 51,687
K-III Communications Corporation, 10.25% - 2004 .................................... 20,000 21,500
Valissis Communications, 9.55% - 2003 .............................................. 40,000 44,950
----------
216,637
REAL ESTATE - 1.6%
B.F. Saul REIT, 11.625% - 2002 ..................................................... 100,000 106,750
RECREATION - 3.1%
AMF Bowling Worldwide, Inc., 10.875% - 2006 ........................................ 50,000 54,812
Premier Parks, 9.75% - 2007 ........................................................ 100,000 106,250
Speedway Motorsports, Inc., 8.50% - 2007 ........................................... 50,000 51,125
----------
212,187
RESTAURANTS - 2.7%
Carrols Corporation, 11.50% - 2003 ................................................. 100,000 106,250
Friendly Ice Cream, 10.50% - 2007 .................................................. 75,000 75,375
----------
181,625
RETAIL - GROCERY - 1.1%
Marsh Supermarket, Inc., 8.875% - 2007 ............................................. 75,000 75,937
RETAIL - GENERAL MERCHANDISING - 0.4%
Cole National Group, 9.875% - 2006 ................................................. 25,000 26,687
RETAIL - SPECIALTY - 0.7%
Zale's Corporation, 8.50% - 2007 ................................................... 50,000 49,375
SERVICES - 0.8%
Iron Mountain, Inc., 10.125% - 2006 ................................................ 50,000 55,000
STEEL - 1.8%
AK Steel Corporation, 9.125% - 2006 ................................................ 25,000 25,687
Wheeling-Pittsburgh Corporation, 9.25% - 2007 ...................................... 100,000 98,000
----------
123,687
TELECOMMUNICATIONS - 6.4%
Centennial Cellular, 8.875% - 2001 ................................................. 100,000 101,875
Comcast Cellular Holdings, Inc., 9.50% - 2007 ...................................... 100,000 104,500
Intermedia Communications, 8.50% - 2008 ............................................ 125,000 125,000
RCN Corporation, 10.0% - 2007 ...................................................... 100,000 103,000
----------
434,375
TEXTILES - 7.6%
Delta Mills, Inc., 9.625% - 2007 ................................................... $ 100,000 $ 101,750
Dyersburg Corporation, 9.75% - 2007 ................................................ $ 75,000 78,562
Pillowtex Corporation, 9.00% - 2007 ................................................ $ 125,000 127,656
Westpoint Stevens, 9.375% - 2005 ................................................... $ 100,000 104,750
Worldtex, Inc., 9.625% - 2007 ...................................................... $ 100,000 102,750
----------
515,468
TOBACCO 0.8%
Dimon, Inc., 8.875% - 2006 ......................................................... $ 25,000 27,000
Standard Commercial Tobacco, 8.875% - 2005 ......................................... $ 25,000 25,156
----------
52,156
TRANSPORTATION - 2.1%
Allied Holdings, Inc., 8.625% - 2007 ............................................... $ 75,000 76,875
Teekay Shipping Corporation, 8.32% - 2008 .......................................... $ 65,000 66,137
----------
143,012
----------
Total corporate bonds - 82.1% .......................................................................... 5,552,021
TRUST PREFERRED SECURITIES(8)
- -----------------------------
FINANCE - 1.4%
SI Financing, Inc. 9.50% - 2026 .................................................... 3,500 94,500
PREFERRED STOCKS
BANKS & CREDIT - 0.8%
California Federal Bank, 11.50% .................................................... 500 56,500
COMMUNICATIONS - 1.3%
Cablevision Systems ................................................................ 784 90,185
ENTERTAINMENT - 1.8%
Time Warner, Inc., ................................................................. 108 122,306
PUBLISHING - 1.3%
PRIMEDIA, Inc., 10.0% .............................................................. 800 84,200
----------
Total preferred stocks - 5.2% .......................................................................... 353,191
----------
Total investments - 88.7% .............................................................................. 5,999,712
Cash and other assets, less liabilities - 11.3% ........................................................ 767,455
----------
Total net assets - 100.0% .............................................................................. $ 6,767,167
==========
See accompanying notes.
62
<PAGE>
Schedule of Investments
December 31, 1997
SERIES S (Social Awareness)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Market
COMMON STOCKS of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 1.3%
Snap-On Tools ...................................................................... 25,500 $1,112,437
BANKS - MAJOR REGIONAL - 5.7%
Banc One Corporation ............................................................... 20,600 1,118,838
Bank of New York Company, Inc. ..................................................... 24,600 1,422,188
Northern Trust Corporation ......................................................... 22,200 1,548,450
Wells Fargo & Company .............................................................. 3,000 1,018,313
----------
5,107,789
BANKS - MONEY CENTER - 1.1%
First Chicago NBD Corporation ...................................................... 11,000 918,500
BEVERAGES - SOFT DRINK - 4.3%
Coca-Cola Company .................................................................. 40,200 2,678,325
PepsiCo, Inc. ...................................................................... 31,900 1,162,356
----------
3,840,681
BROADCAST MEDIA - 1.0%
Comcast Corporation (CI. A) ........................................................ 14,400 454,500
Tele-Communications, Inc.* ......................................................... 15,700 438,619
----------
893,119
CHEMICALS - BASIC - 0.9%
Praxair, Inc. ...................................................................... 18,800 846,000
CHEMICALS - SPECIALTY - 1.0%
Sigma-Aldrich Corporation .......................................................... 22,200 882,450
COMMUNICATIONS EQUIPMENT - 0.8%
Tellabs, Inc.* ..................................................................... 14,300 756,113
COMPUTER HARDWARE - 2.7%
Hewlett-Packard Company ............................................................ 17,600 1,100,000
International Business Machines Corporation ........................................ 12,700 1,327,944
----------
2,427,944
COMPUTER SOFTWARE/SERVICES - 4.1%
Microsoft Corporation* ............................................................. 18,600 2,404,050
PeopleSoft, Inc.* .................................................................. 32,800 1,279,200
----------
3,683,250
DATA PROCESSING SERVICES - 1.2%
Automatic Data Processing, Inc. .................................................... 17,000 1,043,375
DISTRIBUTION - FOOD & HEALTH - 1.2%
Cardinal Health, Inc. .............................................................. 13,800 1,036,725
ELECTRONIC COMPANIES - 0.4%
New Century Energies, Inc. ......................................................... 8,300 397,881
ELECTRONICS - SEMICONDUCTORS - 3.5%
Analog Devices, Inc.* .............................................................. 33,000 913,688
Intel Corporation .................................................................. 31,200 2,191,800
----------
3,105,488
ENTERTAINMENT - 1.3%
Viacom, Inc. (CI. B)* .............................................................. 26,900 $1,114,669
FINANCIAL - DIVERSE - 5.4%
Fannie Mae ......................................................................... 22,000 1,255,375
Federal Home Loan Mortgage Corporation ............................................. 28,800 1,207,800
Finova Group, Inc. ................................................................. 24,400 1,212,375
SunAmerica, Inc. ................................................................... 27,600 1,179,900
----------
4,855,450
FOODS - 2.4%
Campbell Soup Company .............................................................. 16,000 930,000
Interstate Bakeries ................................................................ 33,400 1,248,325
----------
2,178,325
HEALTH CARE - DIVERSE - 1.8%
Johnson & Johnson .................................................................. 24,832 1,635,808
HEALTH CARE - LONG TERM CARE - 0.8%
HEALTHSOUTH Corporation* ........................................................... 25,000 693,750
HEALTH CARE - SPECIALIZED SERVICES - 0.7%
Quintiles Transnational Corporation* ............................................... 17,000 650,250
HOUSEHOLD FURNISHING & APPLIANCES - 1.3%
Leggett & Platt, Inc. .............................................................. 28,100 1,176,687
HOUSEHOLD PRODUCTS - 4.7%
Colgate-Palmolive Company .......................................................... 16,000 1,176,000
Kimberly-Clark Corporation ......................................................... 16,000 789,000
Procter & Gamble Company ........................................................... 27,400 2,186,862
----------
4,151,862
INSURANCE - MULTI-LINE - 3.4%
American International Group, Inc. ................................................. 15,450 1,680,188
Lincoln National Company ........................................................... 17,900 1,398,437
----------
3,078,625
INSURANCE - PROPERTY - 1.4%
Chubb Corporation .................................................................. 17,000 1,285,625
LEISURE TIME PRODUCTS - 1.0%
Mattel, Inc. ....................................................................... 24,000 894,000
MACHINERY - DIVERSE - 1.3%
Deere & Company .................................................................... 19,200 1,119,600
MANUFACTURING - DIVERSIFIED - 1.2%
Illinois Tool Works, Inc. .......................................................... 17,200 1,034,150
MANUFACTURING - SPECIALIZED - 1.1%
Sealed Air Corporation* ............................................................ 15,400 950,950
MEDICAL PRODUCTS & SUPPLIES - 2.2%
ATL Ultrasound, Inc.* .............................................................. 9,500 437,000
Guidant Corporation ................................................................ 24,300 1,512,675
----------
1,949,675
See accompanying notes.
63
<PAGE>
Schedule of Investments
December 31, 1997
Series S (Social Awareness)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Market
COMMON STOCKS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
NATURAL GAS - 1.3%
Consolidated Natural Gas ........................................................... 8,000 $ 484,000
Sonat, Inc. ........................................................................ 14,900 681,675
----------
1,165,675
NETWORKING - 1.4%
Cisco Systems, Inc.* ............................................................... 22,350 1,246,013
OFFICE EQUIPMENT & SUPPLIES - 0.6%
Corporate Express, Inc.* ........................................................... 44,500 572,937
OIL & GAS - EXPLORATION/PRODUCTION - 1.7%
Anadarko Petroleum Corporation ..................................................... 12,000 728,250
Apache Corporation ................................................................. 22,000 771,375
----------
1,499,625
PHARMACEUTICALS - 5.4%
Dura Pharmaceuticals, Inc.* ........................................................ 18,500 848,688
Merck & Company, Inc. .............................................................. 21,800 2,316,250
Schering-Plough Corporation ........................................................ 26,600 1,652,525
----------
4,817,463
RESTAURANTS - 1.6%
McDonald's Corporation ............................................................. 15,200 725,800
Starbucks Corporation* ............................................................. 18,500 709,937
----------
1,435,737
RETAIL - DEPARTMENT STORES - 3.2%
Dollar General Corporation ......................................................... 24,375 883,594
Kohl's Corporation* ................................................................ 13,500 919,687
Proffitt's, Inc.* .................................................................. 38,000 1,080,625
----------
2,883,906
RETAIL - DRUG STORES - 1.5%
Walgreen Company ................................................................... 42,600 1,336,575
RETAIL - FOOD CHAINS - 1.7%
American Stores Company ............................................................ 30,500 627,156
Kroger Company* .................................................................... 24,500 904,969
----------
1,532,125
RETAIL - GENERAL MERCHANDISE - 1.6%
Dayton Hudson Corporation .......................................................... 21,400 1,444,500
RETAIL - SPECIALTY - 1.9%
Staples, Inc.* ..................................................................... 41,075 1,139,831
Woolworth Corporation* ............................................................. 29,000 590,875
----------
1,730,706
SAVINGS & LOAN - 1.7%
Ahmanson (H.F.) & Company .......................................................... 22,200 1,486,013
SERVICES - ADVERTISING/MARKETING - 1.7%
Omnicom Group, Inc. ................................................................ 35,000 1,483,125
SERVICES - COMMERCIAL & CONSUMER - 3.4%
Apollo Group, Inc.* ................................................................ 26,000 $1,228,500
Service Corporation International .................................................. 23,800 879,112
Sylvan Learning Systems, Inc.* ..................................................... 24,500 955,500
----------
3,063,112
TELEPHONE - 5.1%
Ameritech Corporation .............................................................. 12,000 966,000
Bell Atlantic Corporation .......................................................... 10,100 919,100
Bellsouth Corporation .............................................................. 22,600 1,272,662
SBC Communications ................................................................. 19,100 1,399,075
----------
4,556,837
TELECOMMUNICATIONS - LONG DISTANCE - 3.2%
AT&T Corporation ................................................................... 28,100 1,721,125
Sprint Corporation ................................................................. 19,500 1,143,187
----------
2,864,312
----------
Total common stocks - 96.2% ............................................................................ 85,939,839
Cash and other assets, less liabilities - 3.8% ......................................................... 3,391,819
----------
Total net assets - 100.0% .............................................................................. $ 89,331,658
==========
SERIES V (VALUE)
- ------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS
- ----------------
COMPUTER SOFTWARE - 2.9%
Unisys Corporation ................................................................. 4,200 $ 189,262
COMMON STOCKS
- -------------
AEROSPACE/DEFENSE - 3.0%
Lockheed Martin Corporation ........................................................ 2,000 197,000
ALUMINUM - 0.8%
Easco, Inc. ........................................................................ 4,000 53,000
BANKS - MAJOR REGIONAL - 2.1%
Wells Fargo & Company .............................................................. 400 135,775
CHEMICALS - BASIC - 1.4%
Praxair, Inc. ...................................................................... 2,000 90,000
CHEMICALS - SPECIALTY - 0.7%
Dexter Corporation ................................................................. 1,100 47,506
COMMUNICATION EQUIPMENT - 5.1%
Antec Corporation* ................................................................. 7,500 117,188
Comverse Technology, Inc.* ......................................................... 2,400 93,600
Harris Corporation ................................................................. 2,600 119,275
----------
330,063
COMPUTER SOFTWARE/SERVICES - 7.2%
Computer Sciences Corporation* ..................................................... 2,400 200,400
DST Systems, Inc.* ................................................................. 3,000 128,063
Electronics For Imaging, Inc.* ..................................................... 6,400 106,400
Rational Software Corporation* ..................................................... 3,000 34,125
----------
468,988
See accompanying notes.
64
<PAGE>
Schedule of Investments
December 31, 1997
SERIES V (Value)(Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Market
COMMON STOCKS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
CONTAINERS - METALS/GLASS - 1.5%
Crown Cork & Seal Company, Inc. .................................................... 2,000 $ 100,250
CONTAINERS - PACKAGING - 1.1%
Sealright Company, Inc. ............................................................ 6,000 74,250
ELECTRIC COMPANIES - 2.8%
Cipsco, Inc. ....................................................................... 1,200 53,100
Empire District Electric Company ................................................... 2,500 49,062
Scana Corporation .................................................................. 2,600 77,838
----------
180,000
ELECTRONICS - INSTRUMENTATION - 3.4%
EG&G, Inc. ......................................................................... 10,500 218,531
FINANCIAL - DIVERSE - 0.8%
American Express Company ........................................................... 600 53,550
FOODS - 3.4%
Chiquita Brands International, Inc. ................................................ 5,000 81,563
Hormel Foods Corporation ........................................................... 4,200 137,550
----------
219,113
GAMING & LOTTERY - 2.2%
Circus Circus Enterprises, Inc.* ................................................... 7,000 143,500
HEALTH CARE - LONG TERM CARE - 2.9%
Integrated Health Services, Inc. ................................................... 6,000 187,125
HEALTH CARE - SPECIALIZED SERVICES - 1.3%
Allegiance Corporation ............................................................. 2,300 81,506
HOUSEHOLD FURNISHINGS & APPLIANCES - 3.6%
Meadowcraft, Inc.* ................................................................. 6,500 76,375
O'Sullivan Industries Holdings, Inc.* .............................................. 16,000 160,000
----------
236,375
HOUSEHOLD PRODUCTS - 1.4%
Kimberly-Clark Corporation ......................................................... 1,900 93,694
INSURANCE - LIFE/HEALTH - 2.4%
Aflac, Inc. ........................................................................ 3,000 153,375
INSURANCE - PROPERTY - 2.1%
Leucadia National Corporation ...................................................... 3,900 134,550
IRON & STEEL - 1.2%
Cleveland-Cliffs, Inc. ............................................................. 1,700 77,881
LEISURE TIME PRODUCTS - 1.5%
Hasbro, Inc. ....................................................................... 3,000 94,500
LODGING - HOTELS - 1.8%
La Quinta Inns, Inc. ............................................................... 6,000 115,875
MANUFACTURING - DIVERSIFIED - 1.6%
U.S. Industries, Inc. .............................................................. 3,500 105,437
MEDICAL PRODUCTS & SUPPLIES - 2.9%
ATL Ultrasound, Inc.* .............................................................. 1,700 $ 78,200
Sunrise Medical, Inc.* ............................................................. 7,000 108,063
----------
186,263
NATURAL GAS - 5.0%
Equitable Resources, Inc. .......................................................... 4,500 159,188
Peoples Energy Corporation ......................................................... 2,000 78,750
Questar Corporation ................................................................ 2,000 89,250
----------
327,188
OFFICE EQUIPMENT & SUPPLIES - 1.6%
Corporate Express, Inc.* ........................................................... 8,300 106,862
OIL & GAS - EXPLORATION & PRODUCTION - 6.1%
Apache Corporation ................................................................. 4,000 140,250
Forcenergy, Inc.* .................................................................. 4,000 104,750
YFP Sociedad Anomima ADR ........................................................... 4,500 153,844
----------
398,844
PHARMACEUTICALS - 4.6%
Mylan Laboratories, Inc. ........................................................... 5,000 104,687
R.P. Scherer Corporation* .......................................................... 1,000 61,000
Teva Pharmaceutical Industries, Ltd. ADR ........................................... 2,800 132,475
----------
298,162
PUBLISHING - NEWSPAPER - 5.2%
E.W. Scripps Company ............................................................... 4,200 203,437
News Corporation, Ltd. ADR ......................................................... 6,000 133,875
----------
337,312
RAILROADS - 1.5%
Railamerica, Inc.* ................................................................. 15,000 96,563
RESTAURANTS - 2.2%
The Cheesecake Factory* ............................................................ 4,700 143,350
RETAIL - SPECIALTY - 1.6%
Payless ShoeSource, Inc.* .......................................................... 1,500 100,687
SERVICES - COMMERCIAL & CONSUMER - 3.6%
Angelica Corporation ............................................................... 9,000 203,625
Vari-Lite International, Inc.* ..................................................... 2,500 29,844
----------
233,469
SERVICES - DATA PROCESSING - 1.8%
First Data Corporation ............................................................. 3,900 114,075
----------
Total common stocks - 91.4% ................................................... 5,934,619
----------
Total investments - 94.3% ..................................................... 6,123,881
Cash and other assets, less liabilities - 5.7% ................................ 367,116
----------
Total net assets - 100.0% ..................................................... $ 6,490,997
==========
See accompanying notes
65
<PAGE>
Schedule of Investments
December 31, 1997
SERIES X (Small Cap)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Market
COMMON STOCKS (continued) of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE - 0.4%
Orbital Sciences Corporation* ...................................................... 400 $ 11,900
AIRLINES - 3.1%
Alaska Air Group, Inc.* ............................................................ 300 11,625
America West Holdings Corporation* ................................................. 700 13,037
Midwest Express Holdings, Inc.* .................................................... 1,500 58,219
----------
82,881
BANKING - MAJOR REGIONAL - 1.6%
Friedman, Billings, Ramsey Group, Inc.* ............................................ 500 8,969
Western Bancorp .................................................................... 1,000 33,000
----------
41,969
BIOTECHNOLOGY - 1.0%
Incyte Pharmaceuticals, Inc.* ...................................................... 600 27,000
BROADCAST MEDIA - 4.6%
Cox Radio, Inc.* ................................................................... 600 24,150
Heftel Broadcasting Corporation* ................................................... 1,000 46,750
Sinclair Broadcast Group, Inc.* .................................................... 1,100 51,287
----------
122,187
BUILDING MATERIALS - 1.1%
Calmat Company ..................................................................... 1,000 27,875
COMMUNICATION EQUIPMENT - 0.4%
Anicom, Inc.* ...................................................................... 700 11,112
COMPUTER SOFTWARE/SERVICES - 9.4%
CBT Group PLC ADR* ................................................................. 300 24,637
Concord Communications, Inc.* ...................................................... 3,000 62,250
Crystal Systems Solutions* ......................................................... 600 15,300
HNC Software, Inc.* ................................................................ 600 25,800
Information Management Resources, Inc.* ............................................ 1,000 37,500
PRT Group, Inc.* ................................................................... 1,400 15,925
Sykes Enterprises, Inc.* ........................................................... 1,200 23,400
Veritas Software Corporation* ...................................................... 400 20,400
Visio Corporation* ................................................................. 600 23,025
----------
248,237
CONTAINERS & PACKAGING - 1.8%
Mail-Well, Inc.* ................................................................... 1,200 48,600
DISTRIBUTION - FOOD/HEALTH - 3.1%
Suiza Foods Corporation* ........................................................... 1,370 81,601
ELECTRONICS - SEMICONDUCTORS - 1.7%
Sipex Corporation* ................................................................. 500 15,125
Uniphase Corporation* .............................................................. 700 28,962
----------
44,087
HEALTH CARE - LONG TERM CARE - 1.3%
Atria Communities, Inc.* ........................................................... 2,000 34,250
HEALTH CARE - MANAGED CARE - 1.6%
National Surgery Centers, Inc.* .................................................... 1,600 42,000
HEALTH CARE - SPECIALIZED SERVICES - 1.8%
Advance Paradigm, Inc.* ............................................................ 800 $ 25,400
Parexel International* ............................................................. 600 22,200
----------
47,600
HOSPITAL MANAGEMENT - 1.3%
Transition Systems, Inc.* .......................................................... 1,600 35,400
INSURANCE - MULTILINE - 1.1%
ESG RE Limited* .................................................................... 1,200 28,200
INSURANCE - PROPERTY - 2.4%
Executive Risk, Inc. ............................................................... 900 62,831
LODGING - HOTELS - 4.9%
Capstar Hotel Company* ............................................................. 2,000 68,625
Wyndham Hotel Corporation* ......................................................... 1,500 60,563
----------
129,188
MEDICAL PRODUCTS & SUPPLIES - 0.8%
Respironics, Inc.* ................................................................. 1,000 22,375
OIL & GAS - DRILLING & EQUIPMENT - 1.0%
Key Energy Group, Inc.* ............................................................ 1,200 26,025
PERSONAL CARE - 0.3%
Windmere-Durable Holdings, Inc. .................................................... 400 9,025
PHARMACEUTICALS - 2.3%
Amerisource Health Corporation* .................................................... 500 29,375
Biovail Corporation International* ................................................. 500 19,531
Pathogenesis Corporation* .......................................................... 300 11,138
----------
60,044
REAL ESTATE INVESTMENT TRUST - 6.3%
Boston Properties, Inc. ............................................................ 400 13,225
CCA Prison Realty Trust, Inc. ...................................................... 800 35,700
Glenborough Realty Trust, Inc. ..................................................... 2,000 59,250
Laser Mortgage Management, Inc. .................................................... 2,500 36,250
Patriot American Hospitality, Inc. ................................................. 800 23,050
----------
167,475
RESTAURANTS - 1.0%
Landry's Seafood Restaurants, Inc.* ................................................ 400 9,600
Rainforest Cafe, Inc. .............................................................. 500 16,500
----------
26,100
RETAIL - APPAREL - 1.5%
Abercrombie & Fitch Company* ....................................................... 400 12,500
Stage Stores, Inc.* ................................................................ 700 26,163
----------
38,663
RETAIL - BUILDING SUPPLIES - 1.5%
Rental Service Corporation* ........................................................ 1,600 39,300
RETAIL - DEPARTMENT STORES - 2.4%
99 Cents Only Stores* .............................................................. 2,125 62,688
See accompanying notes.
66
<PAGE>
Schedule of Investments
December 31, 1997
SERIES X (Small Cap)(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Market
COMMON STOCKS of Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL - FOOD CHAINS - 4.1%
Dominick's Supermarkets, Inc.* ..................................................... 1,500 $ 54,750
Wild Oats Market, Inc.* ............................................................ 1,500 54,094
----------
108,844
RETAIL - GENERAL MERCHANDISE - 4.4%
Dollar Tree Stores, Inc.* .......................................................... 1,200 49,650
Linens `N Things, Inc.* ............................................................ 1,500 65,437
----------
115,087
RETAIL - SPECIALTY - 1.7%
Michaels' Stores, Inc.* ............................................................ 1,500 43,875
SAVINGS & LOANS - 3.1%
Sterling Financial Corporation* .................................................... 1,000 21,750
Webster Financial Corporation ...................................................... 900 59,850
----------
81,600
SERVICES - ADVERTISING/MARKETING - 5.2%
Acxiom Corporation* ................................................................ 700 13,475
Lamar Advertising Company* ......................................................... 2,100 83,475
Universal Outdoor Holdings, Inc.* .................................................. 800 41,600
----------
138,550
SERVICES - COMMERCIAL & CONSUMER - 8.9%
Corestaff, Inc.* ................................................................... 700 18,550
Hall, Kinion & Associates, Inc. .................................................... 1,500 32,813
International Telecommunication Data Systems, Inc.* ................................ 500 16,000
Lamalie Associates, Inc.* .......................................................... 1,300 26,000
Mac-Gray Corporation* .............................................................. 3,500 54,688
Romac International, Inc.* ......................................................... 3,000 73,312
Select Appointments Holdings Public Limited ........................................ 800 14,600
----------
235,963
SERVICES - DATA PROCESSING - 2.4%
Billing Information Concepts Corporation* .......................................... 1,300 62,400
SPECIALTY PRINTING - 1.6%
Consolidated Graphics, Inc.* ....................................................... 600 27,975
Valassis Communications, Inc.* ..................................................... 400 14,800
----------
42,775
TELECOMMUNICATION - LONG DISTANCE - 1.6%
Saville Systems Ireland PLC-ADR* ................................................... 1,000 41,500
WASTE MANAGEMENT - 2.0%
Superior Services, Inc.* ........................................................... 1,800 51,975
----------
Total common stocks - 94.7% ............................................................................ $ 2,501,182
----------
Cash and other assets, less liabilities - 5.3% ......................................................... 138,802
----------
Total net assets - 100.0% .............................................................................. $ 2,639,984
==========
</TABLE>
The identified cost of investments owned at December 31,1997 was the same for
federal income tax and financial statement purposes for Series A, B, C, K, P, S
and V. The identified cost of investments for federal income tax purposes for
Series D, E, J, M, N, O and X was $237,723,065, $135,226,629, $169,156,921,
$46,697,879, $31,029,368, $116,904,806 and $2,389,970, respectively.
* Securities on which no cash dividend was paid during the preceding twelve
months.
ADR (American Depositary Receipt)
(1) Deferred interest obligations currently zero 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) Step rate security in which rate may change over the life of the bond.
(6) Variable rate security which may be reset every two years.
(7) Floating rate security which may be reset the first of each semi-annual
payment.
(8) Trust preferred securities - Securities issued by financial institutions to
augment their Tier 1 capital base. Issued on a subordinate basis relative
to senior notes or debentures. Institutions may defer cash payments for up
to 10 pay periods.
See accompanying notes.
67
<PAGE>
BALANCE SHEETS
December 31, 1997
<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>
ASSETS
Investments, at value (identified cost $603,391,167,
$872,131,276, $28,326,675, $237,186,466 and
$135,172,724 respectively) ........................ $ 912,080,784 $1,183,758,519 $ 28,323,098 $251,517,736 $139,515,145
Short-term commercial paper, at market or at
amortized cost which approximates market
value (identified cost $8,168,286, $0, $69,691,751,
$0, $0 and $0,respectively) ........................ 8,168,286 -- 69,691,498 -- --
Cash ............................................... 92,923,438 70,198,702 523,384 31,136,775 --
Receivables:
Fund shares sold .................................. 790,904 774,375 795,552 279,609 117,395
Securities sold ................................... 239,782 16,074,375 160,709 3,081,482 --
Forward foreign exchange contracts ................ -- -- -- 869,934 --
Interest .......................................... 363,124 1,906,258 550,734 92,159 2,270,132
Dividends ......................................... 1,003,697 1,236,593 -- 241,176 --
Foreign taxes recoverable ......................... -- -- -- 199,872 --
Prepaid Expenses ................................... 9,168 13,423 251 -- 2,173
-------------- -------------- ------------ ------------ -------------
Total assets .................................... $1,015,579,183 $1,273,962,245 $100,045,226 $287,418,743 $ 141,904,845
============== ============== ============ ============ =============
LIABILITIES AND NET ASSETS
Liabilities:
Payable for:
Securities purchased ............................. $ 12,565,196 $ 71,933,442 $ -- $ 880,057 $ --
Fund shares redeemed ............................. 2,315,949 2,647,702 1,964,602 361,889 394,931
Other liabilities:
Management fees .................................. 665,832 796,934 45,265 258,653 93,937
Custodian fees ................................... 5,365 8,640 6,132 29,458 1,102
Transfer and administration fees ................. 40,707 48,529 4,767 12,290 6,217
Professional fees ................................ 21,051 33,398 5,152 41,225 7,163
Miscellaneous .................................... 36,116 191,179 4,478 53,510 9,750
Cash overdraft ..................................... -- -- -- -- 483,210
-------------- -------------- ------------ ------------ -------------
Total liabilities ............................... 15,650,216 75,659,824 2,030,396 1,637,082 996,310
Net Assets:
Paid in capital .................................... 612,155,500 737,234,131 91,896,653 247,185,030 142,031,247
Undistributed net investment income ................ 5,458,278 20,257,353 6,122,007 3,265,920 8,351,464
Accumulated undistributed net realized
gain (loss) on sale of investments
and foreign currency transactions ................ 73,625,572 129,183,694 -- 20,120,431 (13,816,597)
Net unrealized appreciation (depreciation)
in value of investments and translation of assets
and liabilities in foreign currency ............... 308,689,617 311,627,243 (3,830) 15,210,280 4,342,421
-------------- -------------- ------------ ------------ -------------
Net assets ....................................... 999,928,967 1,198,302,421 98,014,830 285,781,661 140,908,535
-------------- -------------- ------------ ------------ -------------
Total liabilities and net assets ................ $1,015,579,183 $1,273,962,245 $100,045,226 $287,418,743 $ 141,904,845
============== ============== ============ ============ =============
Capital shares authorized .......................... Indefinite Indefinite Indefinite Indefinite Indefinite
Capital shares outstanding ......................... 34,020,629 28,805,295 7,821,762 46,544,062 11,506,869
Net asset value per share (net assets
divided by shares outstanding) ................... $ 29.39 $ 41.60 $ 12.53 $ 6.14 $ 12.25
============== ============== ============ ============ =============
</TABLE>
See accompanying notes.
68
<PAGE>
BALANCE SHEETS (continued)
December 31, 1997
<TABLE>
<CAPTION>
Series K Series M Series N
Series J (Global (Specialized (Managed Series O
(Emerging Aggressive Asset Asset (Equity
Growth) Bond) Allocation) Allocation) Income)
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (identified cost $169,140,358,
$14,455,267, $46,908,630, $31,015,284
and $116,881,844, respectively) .............................. $210,447,459 $ 14,032,362 $48,244,748 $36,094,177 $140,430,793
Short-term commercial paper, at market or at
amortized cost which approximates market
value (identified cost $0, $0, $0, $1,743,690
and $10,860,433, respectively) ............................... -- -- -- 1,743,690 10,860,433
Cash .......................................................... 11,668,852 122,474 971 627 --
Receivables:
Fund shares sold ............................................. 281,060 262,899 27,368 108,696 375,537
Securities sold .............................................. 9,822,635 727,746 -- -- --
Forward foreign exchange contracts ........................... -- 16,331 -- -- --
Interest ..................................................... 57,413 314,404 162,739 269,008 35,737
Dividends .................................................... 96,488 -- 29,718 25,676 341,844
Prepaid Expenses .............................................. 3,736 420 1,166 943 1,874
Foreign taxes recoverable ..................................... -- 13,189 10,424 2,547 2,780
------------ ------------ ----------- ----------- ------------
Total assets ................................................ $232,377,643 $ 15,489,825 $48,477,134 $38,245,364 $152,048,998
============ ============ =========== =========== ============
LIABILITIES AND NET ASSETS
Liabilities:
Payable for:
Securities purchased ........................................ $ 5,825,026 $ 730,735 $-- $-- $ 794,888
Fund shares redeemed ........................................ 82,346 21,822 38,370 17,324 712,676
Written call options outstanding ............................ -- 25,186 -- -- --
Other liabilities:
Management fees ............................................. 149,785 -- 43,254 33,481 131,536
Custodian fees .............................................. 3,918 18,160 3,370 1,459 2,764
Transfer and administration fees ............................ 9,624 6,044 2,417 6,966 6,504
Professional fees ........................................... 3,716 2,455 8,004 3,016 4,472
Miscellaneous ............................................... 5,788 6,752 2,909 1,316 4,855
------------ ------------ ----------- ----------- ------------
Total liabilities .......................................... 6,080,203 811,154 98,324 63,562 1,657,695
Net Assets:
Paid in capital ............................................... 159,873,252 15,069,823 43,929,258 31,946,406 118,634,208
Undistributed net investment income ........................... 1,387,623 -- 735,292 724,004 2,386,728
Accumulated undistributed net realized
gain (loss) on sale of investments, futures, options
and foreign currency transactions ........................... 23,729,464 25,258 2,378,672 433,323 5,821,380
Net unrealized appreciation (depreciation)
in value of investments, futures, options and
translation of assets and liabilities in
foreign currency ............................................. 41,307,101 (416,410) 1,335,588 5,078,069 23,548,987
------------ ------------ ----------- ----------- ------------
Net assets .................................................. 226,297,440 14,678,671 48,378,810 38,181,802 150,391,303
------------ ------------ ----------- ----------- ------------
Total liabilities and net assets ........................... $232,377,643 $ 15,489,825 $48,477,134 $38,245,364 $152,048,998
============ ============ =========== =========== ============
Capital shares authorized ..................................... Indefinite Indefinite Indefinite Indefinite Indefinite
Capital shares outstanding .................................... 10,608,091 1,459,082 3,934,927 2,750,073 8,533,609
Net asset value per share (net assets
divided by shares outstanding) ............................... $ 21.33 $ 10.06 $ 12.29 $ 13.88 $ 17.62
============ ============ =========== =========== ============
</TABLE>
See accompanying notes.
69
<PAGE>
BALANCE SHEETS (continued)
December 31, 1997
<TABLE>
<CAPTION>
Series S
Series P (Social- Series V Series X
(High Yeild) Awareness) (Value) (Small Cap)
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value
(identified cost $5,869,673, $62,423,030,
$5,778,444, and $2,382,250, respectively) .................. $5,999,712 $85,939,839 $6,123,881 $ 2,501,182
Cash ........................................................ 619,440 4,427,439 334,639 385,353
Receivables:
Fund shares sold ........................................... 20,000 120,440 31,785 15,339
Securities sold ............................................ -- -- -- 57,249
Interest ................................................... 130,203 20,410 1,440 2,089
Dividends .................................................. -- 90,324 9,957 1,098
Prepaid Expenses ............................................ 2,386 1,718 184 180
---------- ----------- ---------- -----------
Total assets .............................................. $6,771,741 $90,600,170 $6,501,886 $ 2,962,490
========== =========== ========== ===========
LIABILITIES AND NET ASSETS
Liabilities:
Payable for:
Securities purchased ...................................... $-- $ 1,123,151 $ 7,210 $ 319,680
Fund shares redeemed ...................................... 1,864 75,725 407 9
Other liabilities:
Management fees ........................................... -- 58,866 -- --
Custodian fees ............................................ -- -- 376 --
Transfer and administration fees .......................... 377 4,071 357 270
Professional fees ......................................... 2,083 -- 2,200 2,100
Miscellaneous ............................................. 250 6,699 339 447
---------- ----------- ---------- -----------
Total liabilities ........................................ 4,574 1,268,512 10,889 322,506
Net Assets:
Paid in capital ............................................. 6,267,942 63,114,415 5,964,107 2,737,785
Undistributed net investment income ......................... 302,736 252,844 28,106 3,766
Accumulated undistributed net realized
gain (loss) on sale of investments ......................... 66,450 2,447,590 153,347 (220,499)
Net unrealized appreciation in value
of investments ............................................. 130,039 23,516,809 345,437 118,932
---------- ----------- ---------- -----------
Net assets ................................................ 6,767,167 89,331,658 6,490,997 2,639,984
---------- ----------- ---------- -----------
Total liabilities and net assets ......................... $6,771,741 $90,600,170 $6,501,886 $ 2,962,490
========== =========== ========== ===========
Capital shares authorized ................................... Indefinite Indefinite Indefinite Indefinite
Capital shares outstanding .................................. 384,425 4,014,387 494,222 275,119
Net asset value per share (net assets
divided by shares outstanding) ............................ $ 17.60 $ 22.25 $ 13.13 $ 9.60
========== =========== ========== ===========
</TABLE>
See accompanying notes.
70
<PAGE>
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1997
<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>
INVESTMENT INCOME:
Dividends ............................................... $ 10,100,325 $ 13,392,289 $ -- $ 5,278,469 $ --
Interest ................................................ 2,471,310 16,087,081 7,066,438 943,624 9,448,009
------------- ------------- ---------- ------------ ------------
12,571,635 29,479,370 7,066,438 6,222,093 9,448,009
Less foreign tax expense ................................ -- -- -- (530,606) --
------------- ------------- ---------- ------------ ------------
Total investment income ............................. 12,571,635 29,479,370 7,066,438 5,691,487 9,448,009
EXPENSES:
Management fees ......................................... 6,408,123 8,119,740 629,177 2,834,657 945,220
Custodian fees .......................................... 25,866 37,383 12,129 214,135 10,913
Transfer/maintenance fees ............................... 4,305 3,880 3,726 3,887 3,182
Administration fees ..................................... 384,487 487,184 56,626 418,521 56,713
Directors' fees ......................................... 19,332 65,999 4,219 3,892 1,759
Professional fees ....................................... 23,360 47,880 8,136 35,556 11,075
Reports to shareholders ................................. 50,340 174,999 5,493 34,929 10,452
Registration fees ....................................... 708 947 296 -- 133
Other expenses .......................................... 42,388 45,811 9,300 19,030 5,459
------------- ------------- ---------- ------------ ------------
Total expenses ...................................... 6,958,909 8,983,823 729,102 3,564,607 1,044,906
Less earnings credits ................................... (392) (1,382) -- -- --
------------- ------------- ---------- ------------ ------------
Net expenses ............................................ 6,958,517 8,982,441 729,102 3,564,607 1,044,906
------------- ------------- ---------- ------------ ------------
Net investment income ............................... 5,613,118 20,496,929 6,337,336 2,126,880 8,403,103
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) during the period on:
Investments ............................................ 74,245,595 129,262,529 -- 21,241,886 (1,539,646)
Foreign currency transactions .......................... -- -- -- 1,218,889 --
------------- ------------- ---------- ------------ ------------
Net realized gain (loss) ............................ 74,245,595 129,262,529 -- 22,460,775 (1,539,646)
Net change in unrealized appreciation
(depreciation) during the period on:
Investments ............................................ 126,638,845 101,905,973 49,687 (9,320,639) 4,991,204
Translation of assets and liabilities
in foreign currencies ............................... -- -- -- 998,330 --
------------- ------------- ---------- ------------ ------------
Net unrealized appreciation (depreciation) ....... 126,638,845 101,905,973 49,687 (8,322,309) 4,991,204
------------- ------------- ---------- ------------ ------------
Net gain ............................................ 200,884,440 231,168,502 49,687 14,138,466 3,451,558
------------- ------------- ---------- ------------ ------------
Net increase in net assets resulting
from operations .................................. $ 206,497,558 $ 251,665,431 $6,387,023 $ 16,265,346 $ 11,854,661
============= ============= ========== ============ ============
</TABLE>
See accompanying notes.
71
<PAGE>
STATEMENTS OF OPERATIONS (continued)
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Series K Series M Series N
Series J (Global (Specialized (Managed SERIES O
(Emerging Aggressive Asset Asset (EQUITY
Growth) Bond) Allocation) Allocation) INCOME)
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................ $ 581,639 $ -- $ 511,945 $ 283,810 $ 2,834,713
Interest ............................................. 786,728 1,550,616 890,830 829,324 716,095
------------ ----------- ----------- ----------- ------------
1,368,367 1,550,616 1,402,775 1,113,134 3,550,808
Less foreign tax expense ............................. -- (8,517) (36,002) (9,940) (5,812)
------------ ----------- ----------- ----------- ------------
Total investment income .......................... 1,368,367 1,542,099 1,366,773 1,103,194 3,544,996
EXPENSES:
Management fees ...................................... 1,450,833 110,691 457,703 268,813 1,038,791
Custodian fees ....................................... 11,205 20,075 24,281 18,166 31,025
Transfer/maintenance fees ............................ 3,834 2,396 2,613 2,486 3,028
Administration fees .................................. 87,050 60,360 74,533 65,972 46,871
Directors' fees ...................................... 3,188 69 1,017 698 2,523
Professional fees .................................... 10,307 6,205 6,444 5,684 3,712
Reports to shareholders .............................. 12,151 1,095 8,712 2,469 8,860
Registration fees .................................... 401 2,493 -- -- --
Other expenses ....................................... 7,920 1,455 3,582 1,050 3,844
------------ ----------- ----------- ----------- ------------
Total expenses ................................... 1,586,889 204,839 578,885 365,338 1,138,654
Less:
Reimbursement of expenses ........................... -- (110,691) -- -- --
Earnings credits .................................... (106) -- -- -- --
------------ ----------- ----------- ----------- ------------
Net expenses ......................................... 1,586,783 94,148 578,885 365,338 1,138,654
------------ ----------- ----------- ----------- ------------
Net investment income (loss) ..................... (218,416) 1,447,951 787,888 737,856 2,406,342
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) during the period on:
Investments ......................................... 25,352,614 482,704 2,382,531 438,148 5,864,127
Foreign currency transactions ....................... (386,391) 10,191 (6,359) (11,784)
------------ ----------- ----------- ----------- ------------
Net realized gain ................................ 25,352,614 96,313 2,392,722 431,789 5,852,343
Net change in unrealized appreciation
(depreciation) during the period on:
Investments ......................................... 13,543,690 (741,932) (608,635) 3,326,020 17,563,867
Translation of assets and liabilities
in foreign currencies ............................ -- 4,615 (390) 85 122
------------ ----------- ----------- ----------- ------------
Net unrealized appreciation
(depreciation) ................................ 13,543,690 (737,317) (609,025) 3,226,105 17,563,989
------------ ----------- ----------- ----------- ------------
Net gain (loss) .................................. 38,896,304 (641,004) 1,783,697 3,657,894 23,416,332
------------ ----------- ----------- ----------- ------------
Net increase in net assets resulting
from operations ............................... $ 38,677,888 $ 806,947 $ 2,571,585 $ 4,395,750 $ 25,822,674
============ =========== =========== =========== ============
</TABLE>
See accompanying notes.
72
<PAGE>
STATEMENTS OF OPERATIONS (continued)
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Series S
Series P (Social- Series V* Series X**
(High Yield) Awareness) (Value) (Small Cap)
--------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Investment Income:
Dividends .................................................... $ 10,198 $ 569,297 $ 28,785 $ 8,804
Interest ..................................................... 303,858 298,204 6,595 --
--------- ----------- --------- ---------
Total investment income .................................. 314,056 867,501 35,380 8,804
Expenses:
Management fees .............................................. 29,276 552,725 13,412 5,148
Custodian fees ............................................... 1,077 3,894 1,678 521
Transfer/maintenance fees .................................... 322 2,865 340 108
Administration fees .......................................... 1,589 33,163 815 463
Directors' fees .............................................. 13 1,007 167 52
Professional fees ............................................ 7,067 10,000 3,500 3,500
Reports to shareholders ...................................... 58 4,738 37 41
Registration fees ............................................ 69 157 -- 104
Other expenses ............................................... 701 3,596 737 249
--------- ----------- --------- ---------
Total expenses ........................................... 40,172 612,145 20,686 10,186
Less reimbursement of expenses ............................... (29,276) -- (13,412) (5,148)
--------- ----------- --------- ---------
Net expenses ................................................. 10,896 612,145 7,274 5,038
--------- ----------- --------- ---------
Net investment income .................................... 303,160 255,356 28,106 3,766
Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) during the period on investments .... 66,450 2,451,272 153,347 220,499
--------- ----------- --------- ---------
Net realized gain (loss) ................................. 66,450 2,451,272 153,347 (220,499)
Net change in unrealized appreciation
(depreciation) during the period on investments .............. 67,808 12,331,938 345,437 118,932
--------- ----------- --------- ---------
Net unrealized appreciation .............................. 67,808 12,331,938 345,437 118,932
--------- ----------- --------- ---------
Net gain (loss) .......................................... 134,258 14,783,210 498,784 (101,567)
--------- ----------- --------- ---------
Net increase (decrease) in net assets
resulting from operations ............................. $ 437,418 $15,038,566 $ 526,890 ($ 97,801)
========= =========== ========= =========
</TABLE>
* Period May 1, 1997 (inception) through December 31, 1997.
** Period October 15, 1997 (inception) through December 31, 1997.
See accompanying notes.
73
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended December 31, 1997
<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>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income ........................... $ 5,613,118 $ 20,496,929 $ 6,337,336 $ 2,126,880 $ 8,403,103
Net realized gain (loss) ........................ 74,245,595 129,262,529 -- 22,460,775 (1,539,646)
Unrealized appreciation (depreciation)
during the period .............................. 126,638,845 101,905,973 49,687 (8,322,309) 4,991,204
------------- --------------- ------------- ------------- -------------
Net increase in net assets resulting
from operations .............................. 206,497,558 251,665,431 6,387,023 16,265,346 11,854,661
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ........................... (5,518,886) (23,074,486) (6,976,237) (5,800,374) (8,745,211)
Net realized gain ............................... (51,595,242) (57,256,924) -- (12,516,597) --
------------- --------------- ------------- ------------- -------------
Total distributions to shareholders ........... (57,114,128) (80,331,410) (6,976,237) (18,316,971) (8,745,211)
CAPITAL SHARE TRANSACTIONS (a):
Proceeds from sale of shares .................... 349,498,897 206,586,968 334,627,234 104,379,832 66,408,884
Dividends reinvested ............................ 57,114,128 80,331,410 6,976,237 18,316,971 8,745,211
Shares redeemed ................................. (270,658,046) (216,536,285) (371,671,540) (81,889,098) (71,396,121)
------------- --------------- ------------- ------------- -------------
Net increase (decrease) from capital share
transactions ................................. 135,954,979 70,382,093 (30,068,069) 40,807,705 3,757,974
------------- --------------- ------------- ------------- -------------
Total increase (decrease) in net assets ..... 285,338,409 241,716,114 (30,657,283) 38,756,080 6,867,424
NET ASSETS:
Beginning of year ............................... 714,590,558 956,586,307 128,672,113 247,025,581 134,041,111
------------- --------------- ------------- ------------- -------------
End of year ..................................... $ 999,928,967 $ 1,198,302,421 $ 98,014,830 $ 285,781,661 $ 140,908,535
============= =============== ============= ============= =============
Undistributed net investment income at
end of year ................................... $ 5,458,278 $ 20,257,353 $ 6,122,007 $ 3,265,920 $ 8,351,464
============= =============== ============= ============= =============
(a) Shares issued and redeemed
Shares sold .................................. 12,677,122 5,260,534 26,333,439 16,054,895 5,467,675
Dividends reinvested ......................... 1,995,844 2,051,364 565,336 2,813,667 744,273
Shares redeemed .............................. (10,042,899) (5,527,086) (29,322,870) (12,578,379) (5,876,034)
------------- --------------- ------------- ------------- -------------
Net increase (decrease) .................. 4,630,067 1,784,812 (2,424,095) 6,290,183 335,914
============= =============== ============= ============= =============
</TABLE>
See accompanying notes.
74
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (continued)
For the Year Ended December 31,1997
<TABLE>
<CAPTION>
Series K Series M Series N
Series J (Global (Specialized (Manager Series O
(Emerging Aggressive Asset Asset (Equity
Growth) Bond) Allocation) Allocation) Income)
------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income (loss) .................... $ (218,416) $ 1,447,951 $ 787,888 $ 737,856 $ 2,406,342
Net realized gain ............................... 25,352,614 96,313 2,392,722 431,789 5,852,343
Unrealized appreciation (depreciation)
during the period .............................. 13,543,690 (737,317) (609,025) 3,226,105 17,563,989
------------- ------------ ------------ ------------ -------------
Net increase in net assets resulting
from operations .............................. 38,677,888 806,947 2,571,585 4,395,750 25,822,674
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ........................... (549,249) (1,187,593) (989,376) (463,492) (1,036,083)
Net realized gain ............................... (4,737,130) (360,640) (951,614) (302,277) (1,478,050)
------------- ------------ ------------ ------------ -------------
Total distributions to shareholders ........... (5,286,379) (1,548,233) (1,940,990) (765,769) (2,514,133)
CAPITAL SHARE TRANSACTIONS (a):
Proceeds from sale of shares .................... 133,668,974 12,401,810 20,640,318 22,521,114 89,058,294
Dividends reinvested ............................ 5,286,379 1,548,233 1,940,990 765,769 2,514,133
Shares redeemed ................................. (94,470,710) (11,249,981) (13,229,016) (12,079,640) (26,866,727)
------------- ------------ ------------ ------------ -------------
Net increase from capital share
transactions ................................. 44,484,643 2,700,062 9,352,292 11,207,243 64,705,700
------------- ------------ ------------ ------------ -------------
Total increase in net assets ................ 77,876,152 1,958,776 9,982,887 14,837,224 88,014,241
NET ASSETS:
Beginning of year ............................... 148,421,288 12,719,895 38,395,923 23,344,578 62,377,062
------------- ------------ ------------ ------------ -------------
End of year ..................................... $ 226,297,440 $ 14,678,671 $ 48,378,810 $ 38,181,802 $ 150,391,303
============= ============ ============ ============ =============
Undistributed net investment income at
End of year ................................... $ 1,387,623 $ -- $ 735,292 $ 724,004 $ 2,386,728
============= ============ ============ ============ =============
(a) Shares issued and redeemed
Shares sold .................................. 6,939,060 1,143,221 1,648,855 1,701,526 5,601,731
Dividends reinvested ......................... 248,954 153,633 154,292 57,361 151,820
Shares redeemed .............................. (4,713,562) (1,023,875) (1,055,108) (951,637) (1,670,956)
------------- ------------ ------------ ------------ -------------
Net increase .............................. 2,474,452 272,979 748,039 807,250 4,082,595
============= ============ ============ ============ =============
</TABLE>
See accompanying notes.
75
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (continued)
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Series S
Series P (Social- Series V* Series X**
(High Yield) Awareness) (Value) (Small Cap)
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income .................................... $ 303,160 $ 255,356 $ 28,106 $ 3,766
Net realized gain (loss) ................................. 66,450 2,451,272 153,347 (220,499)
Unrealized appreciation during the period ................ 67,808 12,331,938 345,437 118,932
----------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations ............................. 437,418 15,038,566 526,890 (97,801)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .................................... (86,463) (140,591) -- --
Net realized gain ........................................ (16,835) (3,817,588) -- --
----------- ------------ ----------- -----------
Total distributions to shareholders .................... (103,298) (3,958,179) -- --
CAPITAL SHARE TRANSACTION (a):
Proceeds from sale of shares ............................. 5,106,583 31,437,717 6,530,970 2,739,040
Dividends reinvested ..................................... 103,298 3,958,179 -- --
Shares redeemed .......................................... (1,441,939) (14,641,340) (566,863) (1,255)
----------- ------------ ----------- -----------
Net increase from capital share
transactions .......................................... 3,767,942 20,754,556 5,964,107 2,737,785
----------- ------------ ----------- -----------
Total increase in net assets ......................... 4,102,062 31,834,943 6,490,997 2,639,984
NET ASSETS:
Beginning of period ...................................... 2,665,105 57,496,715 -- --
----------- ------------ ----------- -----------
End of period ............................................ $ 6,767,167 $ 89,331,658 $ 6,490,997 $ 2,639,984
=========== ============ =========== ===========
Undistributed net investment income at end of period ..... $ 302,736 $ 252,844 $ 28,106 $ 3,766
=========== ============ =========== ===========
(a) Shares issued and redeemed
Shares sold ........................................... 294,241 1,523,304 538,647 275,255
Dividends reinvested .................................. 6,087 186,619 -- --
Shares redeemed ....................................... (82,570) (708,502) (44,425) (136)
----------- ------------ ----------- -----------
Net increase ....................................... 217,758 1,001,421 494,222 275,119
=========== ============ =========== ===========
</TABLE>
* Period May 1, 1997 (inception) through December 31, 1997.
** Period October 15, 1997 (inception) through December 31, 1997.
See accompanying notes.
76
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Series B Series C
Series A (Growth- (Money
(Growth) Income) Market)
------------- ------------- -------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income ....................... $ 5,466,761 $ 22,733,680 $ 6,921,208
Net realized gain (loss) .................... 51,089,074 57,472,747 --
Unrealized appreciation (depreciation)
during the period ...................... 62,940,793 65,772,214 (41,770)
------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations ......... 119,496,628 145,978,641 6,879,438
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ....................... (4,858,702) (18,421,256) (5,014,558)
Net realized gain ........................... (30,078,874) (89,075,535) --
------------- ------------- -------------
Total distributions to shareholders .... (34,937,576) (107,496,791) (5,014,558)
CAPITAL SHARE TRANSACTIONS (a):
Proceeds from sale of shares ................ 272,735,836 195,756,138 300,770,030
Dividends reinvested ........................ 34,937,576 107,496,791 5,014,558
Shares redeemed ............................. (197,533,006) (180,261,174) (284,413,035)
------------- ------------- -------------
Net increase from capital share
transactions ....................... 110,140,406 122,991,755 21,371,553
------------- ------------- -------------
Total increase in net assets 194,699,458 161,473,605 23,236,433
NET ASSETS:
Beginning of year ........................... 519,891,100 795,112,702 105,435,680
------------- ------------- -------------
End of year ................................. $ 714,590,558 $ 956,586,307 $ 128,672,113
============= ============= =============
Undistributed net investment
income at end of year .................. $ 5,364,046 $ 22,620,615 $ 6,760,908
============= ============= =============
(a) Shares issued and redeemed
Shares sold ....................... 11,815,669 5,479,920 23,991,955
Dividends reinvested .............. 1,535,718 3,174,743 405,053
Shares redeemed ................... (8,682,010) (5,055,630) (22,692,246)
------------- ------------- -------------
Net increase .................. 4,669,377 3,599,033 1,704,762
============= ============= =============
SERIES D SERIES E SERIES J
(WORLDWIDE (HIGH GRADE (EMERGING
EQUITY) INCOME) GROWTH)
------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income ....................... $ 1,588,321 $ 8,664,351) $ (270,043)
Net realized gain (loss) .................... 18,196,752 (2,164,110) 5,574,826
Unrealized appreciation (depreciation)
during the period ...................... 13,347,522 (7,551,691) 16,151,675
------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations ........ 33,132,595 (1,051,450) 21,456,458
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ....................... (6,982,410) (7,686,321) (236,747)
Net realized gain ........................... (6,588,531) -- (5,477,835)
------------- ------------- -------------
Total distributions to shareholders .... (13,570,941) (7,686,321) (5,714,582)
CAPITAL SHARE TRANSACTIONS (a):
Proceeds from sale of shares ................ 95,984,267 71,870,139 93,417,694
Dividends reinvested ........................ 13,570,941 7,686,321 5,714,582
Shares redeemed ............................. (59,872,380) (62,429,363) (59,832,305)
------------- ------------- -------------
Net increase from capital share
transactions ....................... 49,682,828 17,127,097 39,299,971
------------- ------------- -------------
Total increase in net assets 69,244,482 8,389,326 55,041,847
NET ASSETS:
Beginning of year ........................... 177,781,099 125,651,785 93,379,441
------------- ------------- -------------
End of year ................................. $ 247,025,581 $ 134,041,111 $ 148,421,288
============= ============= =============
Undistributed net investment
income at end of year .................. $ 5,665,264 $ 8,629,443 $ 541,285
============= ============= =============
(a) Shares issued and redeemed
Shares sold ....................... 15,951,967 5,820,235 5,392,420
Dividends reinvested .............. 2,280,830 649,731 316,597
Shares redeemed ................... (9,930,879) (5,068,479) (3,388,952)
------------- ------------- -------------
Net increase .................. 8,301,918 1,401,487 2,320,065
============= ============= =============
</TABLE>
See accompanying notes.
77
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (continued)
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Series K Series M Series N
(Global (Specialized (Managed Series O Series P Series S
Aggressive Asset Asset (Equity (High (Social
Bond) Allocation) Allocation) Income) Yield) Awareness)
------------ ------------ ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income .................... $ 995,530 $ 785,362 $ 467,411 $ 1,031,187 $ 85,799 $ 142,884
Net realized gain ........................ 34,262 1,112,952 290,614 1,435,648 17,075 3,818,240
Unrealized appreciation
during the period ........................ 236,546 1,834,039 1,466,480 4,978,876 62,231 3,541,342
------------ ------------ ------------ ------------ ---------- ------------
Net increase in net assets
resulting from operations ........ 1,266,338 3,732,353 2,224,505 7,445,711 165,105 7,502,466
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .................... (844,106) (332,910) (112,833) (108,567) -- (217,556)
Net realized gain ........................ (141,415) (154,426) (22,914) (7,238) -- (1,127,096)
------------ ------------ ------------ ------------ ---------- ------------
Total distribution to shareholders .... (985,521) (487,336) (135,747) (115,805) -- (1,344,652)
CAPITAL SHARE TRANSACTIONS (a):
Proceeds from sale of shares ............. 10,501,775 27,932,031 14,703,728 54,553,040 2,500,000 20,989,370
Dividends reinvested ..................... 985,521 487,336 135,747 115,805 -- 1,344,652
Shares redeemed .......................... (4,726,579) (9,244,884) (4,163,794) (13,149,311) -- (7,825,379)
------------ ------------ ------------ ------------ ---------- ------------
Net increase from capital
share transactions ................... 6,760,717 19,174,483 10,675,681 41,519,534 2,500,000 14,508,643
------------ ------------ ------------ ------------ ---------- ------------
Total increase in net assets .......... 7,041,534 22,419,500 12,764,439 48,849,440 2,665,105 20,666,457
NET ASSETS:
Beginning of year ........................ 5,678,361 15,976,423 10,580,139 13,527,622 -- 36,830,258
------------ ------------ ------------ ------------ ---------- ------------
End of year .............................. $ 12,719,895 $ 38,395,923 $ 23,344,578 $ 62,377,062 $2,665,105 $ 57,496,715
============ ============ ============ ============ ========== ============
Undistributed net investment income
at end of year ......................... $ -- $ 925,207 $ 455,499 $ 1,028,253 $ 85,799 $ 138,079
============ ============ ============ ============ ========== ============
(a) Shares issued and redeemed
Shares sold ..................... 968,131 2,471,114 1,317,755 4,318,273 166,667 1,144,145
Dividends reinvested ............ 91,933 42,899 12,013 8,922 -- 70,585
Shares redeemed ................. (429,302) (818,625) (372,924) (1,032,400) -- (435,648)
------------ ------------ ------------ ------------ ---------- ------------
Net increase ................. 630,762 1,695,388 956,844 3,294,795 166,667 779,082
============ ============ ============ ============ ========== ============
</TABLE>
See accompanying notes.
78
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SERIES A (Growth) Fiscal Period Ended December 31
----------------------------------------------------------------------------
1997(e) 1996(e) 1995(e) 1994 1993
------------ ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .......... $ 24.31 $ 21.03 $ 16.00 $ 19.82 $ 18.33
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ........................ 0.16 0.18 0.18 0.20 0.39
Net Gain (Loss) on Securities
(realized and unrealized) ................... 6.75 4.50 5.65 (0.44) 2.08
------------ ------------ ------------- ------------ -----------
Total from investment operations ............. 6.91 4.68 5.83 (0.24) 2.47
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ....... (0.18) (0.20) (0.15) (0.38) (0.23)
Distributions (from Capital Gains) ........... (1.65) (1.20) (0.65) (3.20) (0.75)
------------ ------------ ------------- ------------ -----------
Total Distributions ....................... (1.83) (1.40) (0.80) (3.58) (0.98)
------------ ------------ ------------- ------------ -----------
NET ASSET VALUE END OF PERIOD ................ $ 29.39 $ 24.31 $ 21.03 $ 16.00 $ 19.82
============ ============ ============= ============ ===========
TOTAL RETURN (b) ............................. 28.7% 22.7% 36.8% (1.7% 13.7%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ......... $ 999,929 $ 714,591 $ 519,891 $ 332,288 $ 317,407
Ratio of Expenses to Average Net Assets ...... 0.81% 0.83% 0.83% 0.84% 0.86%
Ratio of Net Investment Income (Loss)
to Average Net Assets ...................... 0.66% 0.90% 1.13% 1.13% 2.01%
Portfolio Turnover Rate ...................... 61% 57% 83% 90% 108%
Average Commission Paid Per Equity
Share Traded (i) ........................... $ 0.0600 $ 0.0598 N/A N/A N/A
SERIES B (GROWTH & INCOME) FISCAL PERIOD ENDED DECEMBER 31
----------------------------------------------------------------------------
1997(e) 1996(e) 1995(e) 1994 1993
------------ ------------ ------------- ------------ -----------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .......... $ 35.40 $ 33.95 $ 26.54 $ 29.73 $ 27.76
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ........................ 0.72 0.83 0.79 0.51 0.64
Net Gain (Loss) on Securities
(realized and unrealized) ................... 8.47 5.16 7.16 (1.34) 2.01
------------ ------------ ------------- ------------ -----------
Total from investment operations ............. 9.19 5.99 7.95 (0.83) 2.65
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ....... (0.86) (0.78) (0.54) (0.68) (0.68)
Distributions (from Capital Gains) ........... (2.13) (3.76) -- (1.68) --
------------ ------------ ------------- ------------ -----------
Total Distributions ....................... (2.99) (4.54) (0.54) (2.36) (0.68)
------------ ------------ ------------- ------------ -----------
NET ASSET VALUE END OF PERIOD ................ $ 41.60 $ 35.40 $ 33.95 $ 26.54 $ 29.73
============ ============ ============= ============ ===========
TOTAL RETURN (b) ............................. 26.5% 18.3% 30.1% (3.0% 9.6%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ......... $ 1,198,302 $ 956,586 $ 795,113 $ 595,154 $ 583,599
Ratio of Expenses to Average Net Assets ...... 0.83% 0.84% 0.83% 0.84% 0.86%
Ratio of Net Investment Income (Loss)
to Average Net Assets ...................... 1.89% 2.56% 2.70% 2.07% 2.63%
Portfolio Turnover Rate ...................... 62% 58% 94% 43% 95%
Average Commission Paid Per Equity
Share Traded (i) ........................... $ 0.0600 $ 0.0602 N/A N/A N/A
</TABLE>
79
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
SERIES C (Money Market) Fiscal Period Ended December 31
----------------------------------------------------------------------
1997(e) 1996(a)(e) 1995(e) 1994 1993
----------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .................. $ 12.56 $ 12.34 $ 12.27 $ 12.09 $ 12.21
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ................................ 0.79 0.61 0.74 0.41 0.29
Net Gain (Loss) on Securities
(realized and unrealized) ........................... (0.15) 0.01 (0.08) 0.04 0.03
----------- ---------- ---------- ---------- ---------
Total from investment operations ..................... 0.64 0.62 0.66 0.45 0.32
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ............... (0.67) (0.40) (0.59) (0.27) (0.44)
Distributions (from Capital Gains) ................... -- -- -- -- --
----------- ---------- ---------- ---------- ---------
Total Distributions ............................... (0.67) (0.40) (0.59) (0.27) (0.44)
----------- ---------- ---------- ---------- ---------
NET ASSET VALUE END OF PERIOD ........................ $ 12.53 $ 12.56 $ 12.34 $ 12.27 $ 12.09
=========== ========== ========== ========== =========
TOTAL RETURN (b) ..................................... 5.2% 5.1% 5.4% 3.7% 2.6%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ................. $ 98,015 $ 128,672 $ 105,436 $ 118,668 $ 99,092
Ratio of Expenses to Average Net Assets .............. 0.58% 0.58% 0.60% 0.61% 0.61%
Ratio of Net Investment Income (Loss) to Average
Net Assets ......................................... 5.04% 4.89% 5.27% 3.70% 2.65%
Portfolio Turnover Rate .............................. -- -- -- -- --
Average Commission Paid Per Equity
Share Traded (i) ................................... N/A N/A N/A N/A N/A
SERIES D (Worldwide Equity) Fiscal Period Ended December 31
----------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ---------- ---------- ---------- ---------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .................. $ 6.14 $ 5.56 $ 5.07 $ 4.94 $ 3.76
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ................................ 0.04 0.03 0.05 0.02 0.02
Net Gain (Loss) on Securities
(realized and unrealized) ........................... 0.38 0.93 0.50 0.12 1.17
----------- ---------- ---------- ---------- ---------
Total from investment operations ..................... 0.42 0.96 0.55 0.14 1.19
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ............... (0.13) (0.20) -- (0.01) (0.01)
Distributions (from Capital Gains) ................... (0.29) (0.18) (0.06) -- --
----------- ---------- ---------- ---------- ---------
Total Distributions ............................... (0.42) (0.38) (0.06) (0.01) (0.01)
----------- ---------- ---------- ---------- ---------
NET ASSET VALUE END OF PERIOD ........................ $ 6.14 $ 6.14 $ 5.56 $ 5.07 $ 4.94
=========== ========== ========== ========== =========
TOTAL RETURN (b) ..................................... 6.5% 17.5% 10.9% 2.7% 31.6%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ................. $ 285,782 $ 247,026 $ 177,781 $ 147,033 $ 98,252
Ratio of Expenses to Average Net Assets .............. 1.24% 1.30% 1.31% 1.34% 1.42%
Ratio of Net Investment Income (Loss) to Average
Net Assets ......................................... 0.74% 0.74% 0.90% 0.50% 0.38%
Portfolio Turnover Rate .............................. 129% 115% 169% 82% 70%
Average Commission Paid Per Equity
Share Traded (i) ................................... $ 0.0163 $ 0.0276 N/A N/A N/A
</TABLE>
80
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
SERIES E (High Grade Income) Fiscal Period Ended December 31
-------------------------------------------------------------------
1997(e) 1996(e) 1995(e) 1994 1993
---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ................. $ 12.00 $ 12.86 $ 11.52 $ 13.78 $ 13.02
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ............................... 0.86 0.75 0.74 0.76 0.64
Net Gain (Loss) on Securities
(realized and unrealized) .......................... 0.31 (0.85) 1.36 (1.71) 1.02
---------- ---------- ---------- --------- ----------
Total from investment operations .................... 1.17 (0.10) 2.10 (0.95) 1.66
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) .............. (0.92) (0.76) (0.76) (0.69) (0.79)
Distributions (from Capital Gains) .................. -- -- -- (0.62) (0.11)
---------- ---------- ---------- --------- ----------
Total Distributions .............................. (0.92) (0.76) (0.76) (1.31) (0.90)
---------- ---------- ---------- --------- ----------
NET ASSET VALUE END OF PERIOD ....................... $ 12.25 $ 12.00 $ 12.86 $ 11.52 $ 13.78
========== ========== ========== ========= ==========
TOTAL RETURN (b) .................................... 10.0% (0.7%) 18.6% (6.9%) 12.6%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ................ $ 140,909 $ 134,041 $ 125,652 $ 107,078 $ 112,900
Ratio of Expenses to Average Net Assets ............. 0.83% 0.83% 0.85% 0.85% 0.86%
Ratio of Net Investment Income (Loss) to Average
Net Assets ........................................ 6.67% 6.77% 6.60% 6.74% 6.21%
Portfolio Turnover Rate ............................. 106% 232% 180% 185% 151%
Average Commission Paid Per Equity
Share Traded (i) .................................. N/A N/A N/A N/A N/A
SERIES J (Emerging Growth) Fiscal Period Ended December 31
-------------------------------------------------------------------
1997(e) 1996(e) 1995(e) 1994 1993
---------- ---------- ---------- --------- ----------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ................. $ 18.25 $ 16.06 $ 13.44 $ 14.17 $ 12.47
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ............................... (0.03) (0.04) 0.04 (0.01) (0.01)
Net Gain (Loss) on Securities
(realized and unrealized) .......................... 3.67 2.93 2.58 (0.71) 1.71
---------- ---------- ---------- --------- ----------
Total from investment operations .................... 3.64 2.89 2.62 (0.72) 1.70
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) .............. (0.06) (0.03) -- -- --
Distributions (from Capital Gains) .................. (0.50) (0.67) -- (0.01) --
---------- ---------- ---------- --------- ----------
Total Distributions .............................. (0.56) (0.70) -- (0.01) --
---------- ---------- ---------- --------- ----------
NET ASSET VALUE END OF PERIOD ....................... $ 21.33 $ 18.25 $ 16.06 $ 13.44 $ 14.17
========== ========== ========== ========= ==========
TOTAL RETURN (b) .................................... 20.0% 18.0% 19.5% (5.1%) 13.6%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ................ $ 226,297 $ 148,421 $ 93,379 $ 76,940 $ 42,096
Ratio of Expenses to Average Net Assets ............. 0.82% 0.84% 0.84% 0.88% 0.91%
Ratio of Net Investment Income (Loss) to Average
Net Assets ........................................ (0.11%) (0.21%) 0.26% (0.11%) (0.14%)
Portfolio Turnover Rate ............................. 107% 123% 202% 91% 117%
Average Commission Paid Per Equity
Share Traded (i) .................................. $ 0.0590 $ 0.0601 N/A N/A N/A
</TABLE>
81
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
SERIES K (Global Aggressive) Fiscal Period Ended December 31
----------------------------------------------------
1997(d) 1996(d) 1995(a)(c)(d)
------------ ------------ ------------
<S> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .................................... $ 10.72 $ 10.22 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .................................................. 1.12 0.90 0.54
Net Gain (Loss) on Securities (realized and unrealized) ................ (0.56) 0.50 0.22
------------ ------------ ------------
Total from investment operations ....................................... 0.56 1.40 0.76
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ................................. (.94) (0.77) (0.47)
Distributions (from Capital Gains) ..................................... (.28) (0.13) (0.04)
Return of Capital ...................................................... -- -- (0.03)
------------ ------------ ------------
Total Distributions ................................................. (1.22) (0.90) (0.54)
------------ ------------ ------------
NET ASSET VALUE END OF PERIOD .......................................... $ 10.06 $ 10.72 $ 10.22
============ ============ ============
TOTAL RETURN (b) ....................................................... 5.4% 13.7% 7.6%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ................................... $ 14,679 $ 12,720 $ 5,678
Ratio of Expenses to Average Net Assets ................................ 0.64% 0.84% 1.63%
Ratio of Net Investment Income (Loss) to Average Net Assets ............ 9.81% 10.79% 11.03%
Portfolio Turnover Rate ................................................ 85% 86% 127%
Average Commission Paid Per Equity Share Traded (i) .................... N/A N/A N/A
SERIES M (Specialized Asset Allocation) Fiscal Period Ended December 31
----------------------------------------------------
1997(j) 1996 1995(a)(c)
------------ ------------ ------------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .................................... $ 12.05 $ 10.71 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .................................................. 0.16 0.15 0.17
Net Gain (Loss) on Securities (realized and unrealized) ................ 0.59 1.36 0.54
------------ ------------ ------------
Total from investment operations ....................................... 0.75 1.51 0.71
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ................................. (0.26) (0.12) --
Distributions (from Capital Gains) ..................................... (0.25) (0.05) --
------------ ------------ ------------
Total Distributions ................................................. (0.51) (0.17) --
------------ ------------ ------------
NET ASSET VALUE END OF PERIOD .......................................... $ 12.29 $ 12.05 $ 10.71
============ ============ ============
TOTAL RETURN (b) ....................................................... 6.2% 14.2% 7.1%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ................................... $ 48,379 $ 38,396 $ 15,976
Ratio of Expenses to Average Net Assets ................................ 1.26% 1.34% 1.94%
Ratio of Net Investment Income (Loss) to Average Net Assets ............ 1.71% 2.73% 3.20%
Portfolio Turnover Rate ................................................ 64% 40% 181%
Average Commission Paid Per Equity Share Traded (i) .................... $ 0.0413 $ 0.0266 N/A
</TABLE>
82
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
SERIES N (Managed Asset Allocation) Fiscal Period Ended December 31
------------------------------------------------------
1997 1996 1995(a)(c)
------------- ------------- -------------
<S> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .................................. $ 12.02 $ 10.73 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ................................................ 0.24 0.19 0.16
Net Gain (Loss) on Securities (realized and unrealized) .............. 1.96 1.18 0.57
------------- ------------- -------------
Total from investment operations ..................................... 2.20 1.37 0.73
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ............................... (0.21) (0.07) --
Distributions (from Capital Gains) ................................... (0.13) (0.01) --
------------- ------------- -------------
Total Distributions ............................................... (0.34) (0.08) --
------------- ------------- -------------
NET ASSET VALUE END OF PERIOD ........................................ $ 13.88 $ 12.02 $ 10.73
============= ============= =============
TOTAL RETURN (b) ..................................................... 18.4% 12.8% 7.3%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ................................. $ 38,182 $ 23,345 $ 10,580
Ratio of Expenses to Average Net Assets .............................. 1.35% 1.45% 1.90%
Ratio of Net Investment Income (Loss) to Average Net Assets .......... 2.71% 2.67% 2.80%
Portfolio Turnover Rate .............................................. 28% 41% 26%
Average Commission Paid Per Equity Share Traded (i) .................. $ 0.0270 $ 0.0393 N/A
SERIES O (Equity Income) Fiscal Period Ended December 31
------------------------------------------------------
1997 1996 1995(a)(c)
------------- ------------- -------------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .................................. $ 14.01 $ 11.70 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ................................................ 0.19 0.17 0.17
Net Gain (Loss) on Securities (realized and unrealized) .............. 3.77 2.17 1.53
------------- ------------- -------------
Total from investment operations ..................................... 3.96 2.34 1.70
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ............................... (0.14) (0.03) --
Distributions (from Capital Gains) ................................... (0.21) -- --
------------- ------------- -------------
Total Distributions ............................................... (0.35) (0.03) --
------------- ------------- -------------
NET ASSET VALUE END OF PERIOD ........................................ $ 17.62 $ 14.01 $ 11.70
============= ============= =============
TOTAL RETURN (b) ..................................................... 28.4% 20.0% 17.0%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ................................. $ 150,391 $ 62,377 $ 13,528
Ratio of Expenses to Average Net Assets .............................. 1.09% 1.15% 1.40%
Ratio of Net Investment Income (Loss) to Average Net Assets .......... 2.31% 2.62% 3.00%
Portfolio Turnover Rate .............................................. 21% 22% 3%
Average Commission Paid Per Equity Share Traded (i) .................. $ 0.0341 $ 0.0385 N/A
</TABLE>
83
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
SERIES P (High Yield) Fiscal Period Ended December 31
----------------------------
1997(d) 1996(d)(f)
------------ ------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ....................... $ 15.99 $ 15.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ..................................... 0.68 0.51
Net Gain (Loss) on Securities (realized and unrealized) ... 1.43 0.48
------------ ------------
Total from investment operations .......................... 2.11 0.99
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) .................... (0.42) --
Distributions (from Capital Gains) ........................ (0.08) --
------------ ------------
Total Distributions .................................... (0.50) --
------------ ------------
NET ASSET VALUE END OF PERIOD ............................. $ 17.60 $ 15.99
============ ============
TOTAL RETURN (b) .......................................... 13.4% 6.6%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ...................... $ 6,767 $ 2,665
Ratio of Expenses to Average Net Assets ................... 0.31% 0.28%
Ratio of Net Investment Income (Loss) to Average Net Assets 8.58% 8.24%
Portfolio Turnover Rate ................................... 77% 151%
Average Commission Paid Per Equity Share Traded (i) ....... N/A N/A
SERIES S (Social Awareness) Fiscal Period Ended December 31
------------------------------------------------------------------
1997(e) 1996(e) 1995(e) 1994 1993
------------ ------------ ---------- ---------- ----------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ....................... $ 19.08 $ 16.49 $ 12.97 $ 13.69 $ 12.25
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ..................................... 0.06 0.03 0.09 0.08 0.02
Net Gain (Loss) on Securities
(realized and unrealized) ................................ 4.21 3.07 3.51 (0.59) 1.43
------------ ------------ ---------- ---------- ----------
Total from investment operations .......................... 4.27 3.10 3.60 (0.51) 1.45
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) .................... (0.04) (0.08) (0.08) (0.02) (0.01)
Distributions (from Capital Gains) ........................ (1.06) (0.43) -- (0.19) --
------------ ------------ ---------- ---------- ----------
Total Distributions .................................... (1.10) (0.51) (0.08) (0.21) (0.01)
------------ ------------ ---------- ---------- ----------
NET ASSET VALUE END OF PERIOD ............................. $ 22.25 $ 19.08 $ 16.49 $ 12.97 $ 13.69
============ ============ ========== ========== ==========
TOTAL RETURN (b) .......................................... 22.7% 18.8% 27.7% (3.7%) 11.9%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ...................... $ 89,332 $ 57,497 $ 36,830 $ 24,539 $ 19,490
Ratio of Expenses to Average Net Assets ................... 0.83% 0.84% 0.86% 0.90% 0.90%
Ratio of Net Investment Income (Loss) to Average Net Assets 0.35% 0.30% 0.75% 0.75% 0.23%
Portfolio Turnover Rate ................................... 49% 67% 122% 67% 105%
Average Commission Paid Per Equity Share Traded (i) ....... $ 0.0600 $ 0.0602 N/A N/A N/A
</TABLE>
84
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
Fiscal Period Ended
December 31
SERIES V (Value) 1997(a)(d)(g)
-----------
PER SHARE DATA
Net Asset Value Beginning of Period ........................ $ 10.00
Income from Investment Operations:
Net Investment Income ...................................... 0.12
Net Gain (Loss) on Securities (realized and unrealized) .... 3.01
-----------
Total from investment operations ........................... 3.13
Less Distributions
Dividends (from Net Investment Income) ..................... --
Distributions (from Capital Gains) ......................... --
-----------
Total Distributions ..................................... --
-----------
NET ASSET VALUE END OF PERIOD .............................. $ 13.13
===========
TOTAL RETURN (b) ........................................... 31.3%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ....................... $ 6,491
Ratio of Expenses to Average Net Assets .................... 0.40%
Ratio of Net Investment Income (Loss) to Average Net Assets 1.55%
Portfolio Turnover Rate .................................... 79%
Average Commission Paid Per Equity Share Traded (i) ........ $ 0.0602
Fiscal Period Ended
December 31
SERIES X (Small Cap) 1997(d)(h)
--------
PER SHARE DATA
Net Asset Value Beginning of Period ........................ $ 10.00
Income from Investment Operations:
Net Investment Income ...................................... 0.01
Net Gain (Loss) on Securities (realized and unrealized) .... (0.41)
-----------
Total from investment operations ........................... (0.40)
Less Distributions
Dividends (from Net Investment Income) ..................... --
Distributions (from Capital Gains) ......................... --
Total Distributions ..................................... --
-----------
NET ASSET VALUE END OF PERIOD .............................. $ 9.60
===========
TOTAL RETURN (b) ........................................... (4.0%)
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ....................... $ 2,640
Ratio of Expenses to Average Net Assets .................... 0.98%
Ratio of Net Investment Income (Loss) to Average Net Assets 0.73%
Portfolio Turnover Rate .................................... 402%
Average Commission Paid Per Equity Share Traded (i) ........ $ 0.0663
(a) Net investment income per share has been calculated using the weighted
monthly average number of capital shares outstanding.
(b) Total return does not take into account any of the 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.
(c) 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.
(d) Fund expenses for Series K, P, V and X were reduced by the Investment
Manager during the period. Expense ratios absent such reimbursement would
have been as follows:
1995 1996 1997
---- ---- ----
Series K 2.03% 1.59% 1.39%
Series P -- 1.11% 1.14%
Series V -- -- 1.14%
Series X -- -- 1.98%
(e) 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 1997
------- ------- -------
Series A 0.83% 0.83% 0.81%
Series B 0.83% 0.84% 0.83%
Series C 0.60% 0.58% 0.58%
Series E 0.85% 0.83% 0.83%
Series J 0.83% 0.84% 0.82%
Series S 0.84% 0.84% 0.83%
(f) 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.
(g) Series V was initially capitalized on May 1, 1997, with a net asset value
of $10 per share. Percentage amounts for the period have been annualized,
except for total return.
(h) Series X was initially capitalized on October 15, 1997, with a net asset
value of $10 per share. Percentage amounts for the period have been
annualized, except for total return.
(i) Brokerage commissions paid on portfolio transactions increase the cost of
securities purchased or reduce the proceeds of securities sold and are not
reflected in the Fund's statement of operations. Shares traded on a
principal basis, such as most over-the-counter and fixed-income
transactions, pay a "spread" or "mark-up" rather than a commission and are
therefore excluded from this calculation. Generally, non-U. S. commissions
are lower than U. S. commissions when expressed as cents per share but
higher when expressed as a percentage of transactions because of the lower
per-share prices of many non-U. S. securities. Prior to 1996, average
commission information was not required to be disclosed.
(j) Meridian Investment Management Corporation (Meridian) became the
sub-advisor of Series M (Specialized Asset Allocation) effective August 1,
1997. Prior to August 1, 1997 SMC paid Templeton/Franklin Investment
Services, Inc. and Meridian for research services provided to Series M.
85
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
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. Each series, in effect, represents 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 on 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.
Except for Series K, the funds which invest in foreign securities and
currencies 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 its 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, O and X
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 the effect
of 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 - The Fund may 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 on their quoted daily
settlement prices. Upon entering into a futures contract, the Series is required
to deposit 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, 1997.
86
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
E. OPTIONS WRITTEN - The Fund 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,
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.
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, except for
Series K, which does amortize premiums and discounts on debt securities.
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, P, S and V and 1.00% for Series D, M, N, O and X. 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 has agreed to waive all of the management fees for
Series P, V and X through December 31, 1997. SMC & LMC have agreed to waive all
of the management fees for Series K through December 31, 1997. 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. For the period January 1, 1997 to July 31, 1997,
the Investment Manager paid Templeton Franklin Investment Services, 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. For this same time period, the Investment Manager also paid
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 Manager pays Strong Capital Management, Inc. ("Strong") with respect
to Series X, an annual fee based on the combined average net assets of the
Series and another fund within the Security Funds to which Strong provides
advisory services. The fee is equal to .50% of the combined average net assets
under $150,000,000, .45% of the combined average net assets at or above
$150,000,000 but less than $500,000,000, and .40% of the combined average net
assets at or above $500,000,000.
Shareholders of Series M voted to approve a new subadvisory agreement,
effective August 1, 1997, with Meridian Investment Management Corporation, which
replaced all existing research agreements. Under this agreement, Meridian
furnishes investment advisory, statistical and research facilities, supervises
and arranges for the purchase and sale of securities on behalf of Series M, and
for such services receives an annual fee equal to the following schedule:
Average Daily Net Assets of the Series Annual Fees
--------------------------------------------- ------------
Less Than $100 Million ...................... .40%, plus
$100 Million but less than $200 Million ..... .35%, plus
$200 Million but less than $400 Million ..... .30%, plus
$400 Million or more ........................ .25%
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 period ended December 31, 1997, SMC agreed to limit the total
expenses for Series K, M, P, V and X to an annual rate of 2% of the average
daily net asset value of each respective Series.
87
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
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 (except Series X), plus the greater of .10% of the average net assets
of Series D, K, M and N, or $60,000. With respect to Series X, SMC receives a
fee at the annual rate of .09% of the average daily net assets of the Series.
Certain officers and directors of the Fund are also officers and/or
directors of SBL and its subsidiaries, which include SMC.
3. FEDERAL INCOME TAX MATTERS
The amounts of unrealized appreciation (depreciation) for income tax
purposes at December 31, 1997, for all securities and foreign currency holdings
(including foreign currency receivables and payables) were as follows:
Aggregate Aggregate
gross gross Net unrealized
unrealized unrealized appreciation
appreciation depreciation (depreciation)
------------ ------------ --------------
SERIES A
(Growth) .................. $317,616,093 ($ 8,926,476) $ 308,689,617
SERIES B
(Growth Income) ........... 316,277,798 (4,650,555) 311,627,243
SERIES C
(Money Market) ............ 2,854 (6,684) (3,830)
SERIES D
(Worldwide Equity) ........ 35,830,715 (21,157,034) 14,673,681
SERIES E
(High Grade Income) ....... 4,370,216 (81,701) 4,288,515
SERIES J
(Emerging Growth) ......... 44,728,222 (3,437,684) 41,290,538
SERIES K
(Global Aggressive) ....... 540,965 (957,355) (416,410)
SERIES M
(Specialized Asset
Allocation) .............. 5,089,050 (3,964,213) 1,124,837
SERIES N
(Managed Asset
Allocation) .............. 5,595,477 (531,492) 5,063,985
SERIES O
(Equity Income) ........... 24,591,700 (1,065,675) 23,526,025
SERIES P
(High Yield) .............. 144,700 (14,661) 130,039
SERIES S
(Social Awareness) ........ 24,120,018 (603,209) 23,516,809
SERIES V
(Value) ................... 504,330 (158,893) 345,437
SERIES X
(Small Cap) ............... 170,749 (59,537) 111,212
4. INVESTMENT TRANSACTIONS
Investment transactions for the period ended December 31, 1997, (excluding
overnight investments and short-term debt securities) are as follows:
Proceeds
Purchases from sales
------------ ------------
SERIES A
(Growth) .................. $543,405,349 $490,877,226
SERIES B
(Growth Income) ........... 711,536,854 633,345,960
SERIES C
(Money Market) ............ -- --
SERIES D
(Worldwide Equity) ........ 339,150,807 343,205,545
SERIES E
(High Grade Income) ....... 142,953,492 129,342,529
SERIES J
(Emerging Growth) ......... 217,260,264 181,827,078
SERIES K
(Global Aggressive) ....... 15,464,196 11,639,442
SERIES M
(Specialized Asset
Allocation) .............. 35,923,686 25,452,436
SERIES N
(Managed Asset
Allocation) .............. 16,649,560 7,051,201
SERIES O
(Equity Income) ........... 78,239,841 19,583,073
SERIES P
(High Yield) .............. 6,036,822 2,549,940
SERIES S
(Social Awareness) ........ 52,415,716 33,331,042
SERIES V
(Value) ................... 7,167,542 1,542,445
SERIES X
(Small Cap) ............... 4,476,544 1,873,795
Realized gains and losses are determined on an identified cost basis for
federal income tax purposes. For federal income tax purposes, Series A, B, D, J,
K, M and S hereby designate $35,819,321, $37,294,810, $2,136,980, $4,737,130,
$152,921, $460,633 and $3,817,583 respectively as capital gains dividends. At
December 31, 1997, Series E and X have capital loss carryforwards of $13,762,691
and $74,414, respectively which are available to offset future taxable gains and
expires beginning in 2002 and 2005 respectively.
88
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
5. FORWARD FOREIGN EXCHANGE CONTRACTS
At December 31, 1997, Series D and K had the following open forward foreign
exchange contracts to sell currency (excluding foreign currency contracts used
for purchase and sale settlements):
<TABLE>
<CAPTION>
CURRENCY TYPE SETTLEMENT DATE FOREIGN AMOUNT U. S. AMOUNT UNREALIZED GAIN (LOSS)
- --------------------------------- ------- --------------- ------------- ------------ -----------------------
<S> <C> <C> <C> <C> <C>
SERIES D
Australian Dollar ............... Sell 5/04/98 $ 10,836,356 $ 7,618,500 $ 517,793
Austrian Schilling .............. Sell 1/07/98 115,033,319 9,337,878 236,409
Austrian Schilling .............. Buy 1/07/98 115,033,319 8,969,879 131,590
Canadian Dollar ................. Sell 6/01/98 12,736,397 9,010,539 100,217
German Deutsche Mark ............ Sell 1/07/98 10,899,047 6,225,252 158,924
German Deutsche Mark ............ Buy 1/07/98 10,899,047 6,118,935 (52,606)
New Zealand Dollar .............. Sell 4/06/98 7,688,752 4,904,271 458,697
New Zealand Dollar .............. Buy 4/06/98 348,466 215,857 (14,377)
New Zealand Dollar .............. Buy 4/06/98 670,460 405,360 (17,706)
British Pound ................... Sell 4/01/98 9,775,669 15,637,649 (460,771)
British Pound ................... Buy 4/01/98 9,775,669 16,286,656 (188,236)
---------
$ 869,934
=========
SERIES K
Danish Kroner ................... Sell 1/12/98 $ 9,500,000 $ 1,406,012 $ 16,331
</TABLE>
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, 1997, 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, 64%; Series B, 45%; Series C, 0%; Series D,
7%; Series E, 0%; Series J, 42%; Series K, 0%; Series M, 12%; Series N, 21%;
Series O, 60%; Series P, 3%; Series S, 100%, Series V, 16%, and Series X, 100%.
7. TRANSACTIONS IN WRITTEN CALL OPTIONS
Transactions in written covered call options for Series K were as follows:
SERIES K
-------------------------
Number of
Premium Contracts
--------- -----------
Balance at December 31, 1996 . $ 9,147 826,027
Options written ............ 175,436 12,587,154
Excercised ................. (95,245) (7,436,057)
Expiration ................. (70,038) (5,064,916)
--------- -----------
Balance at December 31, 1997 . $ 19,300 912,208
========= ===========
89
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Contract Owners and Board of Directors SBL Fund
We have audited the accompanying balance sheets, including the schedules of
investments, of SBL Fund (comprised of Series A, B, C, D, E, J, K M, N, O, P, S,
V and X portfolios) (the Fund) as of December 31, 1997, 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, 1997, 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,
1997, 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.
/s/ ERNST & YOUNG LLP
Kansas City, Missouri
February 6, 1998
NOTICE:
In the future, you will receive only one copy per address of the prospectus,
semi-annual and annual reports. If you wish to continue receiving one for each
primary owner of record, we ask that you please send your request in writing to
Security Benefit, Attn: Pat Rippberger, 700 SW Harrison St., Topeka, KS
66636-0001
90
<PAGE>
SECURITY FUNDS OFFICERS AND DIRECTORS
DIRECTORS
- ---------
Donald A. Chubb, Jr.
John D. Cleland
Donald L. Hardesty
Penny A. Lumpkin
Mark L. Morris, Jr., D.V.M.
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
Cindy L. Shields, Assistant Vice President
Thomas A. Swank, Vice President and Chief Investment Officer
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.
- -----------------------------------
[Logo] Security Distributors, Inc.
- -----------------------------------
700 SW Harrison St.
Topeka, KS 66636-0001
(785) 431-3112
(800) 888-2461
