SBL FUND
Annual Report
December 31, 1998
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,
DISTRIBUTORS A Member of The Security Benefit
LOGO] Group of Companies
<PAGE>
PRESIDENT'S LETTER
February 15, 1999
[PICTURE OF JOHN CLELAND]
John Cleland
TO OUR CONTRACTHOLDERS:
In general we are quite pleased with the returns in the various series in the
SBL Funds for 1998. The total returns of +31.43% in the Social Awareness Series
and +25.41% in the Growth Series were especially favorable for investors.1 As
would be expected given the strong U.S. stock markets in 1998, the better
performances were in the equity portfolios. The fixed income group fared well
with the High Grade Income Series leading the way at +8.01%.1 Each portfolio
manager will discuss his or her respective p ortfolio performance in the letters
that follow.
WELCOME TO OUR NEWEST SUBADVISOR GROUP
We welcome OppenheimerFunds, Inc., as the new subadvisor for our Worldwide
Equity Series. OppenheimerFunds has an outstanding record in global investment
management. We look forward to a long and profitable relationship with them as
our newest subadvisor partner.
OUR 1999 STOCK MARKET OUTLOOK
We don't anticipate a major stock market selloff in 1999, but believe volatility
will remain with us and some market backups are to be expected around earnings
announcement seasons. For the year overall, we expect returns to be closer to
historical norms of 10% to 12%.
Increased productivity has been a major factor in stock market strength over the
past four years. We expect productivity to improve further as a result of
advances in computer capabilities and the massive updating of systems in
preparation for the year 2000. As global economies begin to recover we believe
they will provide a major bright spot in equity investing as well.
OUR VIEW OF THE BOND MARKET
The fixed income markets may be the weak investment sector in 1999. Although
interest rates may decline further in the early months, we expect commodity
prices to recover from their low levels and exert upward pressure on inflation
at some point during the year. We are not forecasting a sharp upswing in
inflation, but would not be surprised to see the Consumer Price Index move
toward the 2.5% range from its below 2% figures the past two years. The fear of
rising inflation is a negative for bond prices and fixed income investors may
begin requiring a higher risk premium when they invest, thus driving up bond
yields.
We thank you for your continued confidence expressed in us as represented by
your investment in the SBL Fund. We assure you we will remain ever diligent in
the stewardship of your assets. As always, we invite your questions or comments
at any time.
Sincerely,
/s/JOHN CLELAND
John Cleland, President
Security Funds
(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.
1
<PAGE>
SERIES A (GROWTH SERIES)
February 15, 1999
[PICTURE OF TERRY MILBERGER]
Terry Milberger
Senior Portfolio Manager
TO OUR CONTRACTHOLDERS:
In a year in which growth-oriented stocks were the strong performers the Growth
Series of the SBL Fund returned a favorable 25.41%, slightly higher than our
Lipper peer group average of 24.94%, but less than the benchmark Standard &
Poor's 500 Stock Index return of 28.58%.1 Performance was held back a bit by our
value-oriented investments. Throughout the year we maintained a balance that was
weighted about 85% to 90% toward growth stocks and 10% to 15% toward value
issues.
COMPUTER-ORIENTED AND HEALTH CARE STOCKS WERE WINNERS
We saw excellent results from our holdings in computer-related industries.
Microsoft Corporation, which made up about 2.3% of the portfolio at the end of
the year, outperformed the S&P 500 Index by over 80 percentage points, returning
112.5%. Our holdings in computer services company Cisco Systems, Inc., was even
better, rising over 147% over the course of the year.
The health care sector was overweighted in the portfolio compared with the
benchmark index, which was a positive for performance. Our drug company stocks
including Schering-Plough Corporation, Bristol-Myers Squibb Company, and
Medtronic, Inc., all substantially outperformed the S&P 500 Index return.
Schering-Plough was the brightest of the three, rising over 80% in 1998.
EVEN IN A STRONG YEAR NOT ALL WERE WINNERS
Our financial sector holdings, while doing well, underperformed the index return
in most cases. Regional banks as a group lagged by about 20%. Insurance
companies, an industry we had overweighted versus the index in the portfolio,
lagged the market as well. Our only financial holdings that managed to
outperform the benchmark were mortgage lenders Fannie Mae and Freddie Mac, both
benefiting from the strong housing markets.
Retailers were underperformers as well, with the exceptions of retail drugs and
food companies. We held Walgreen Company, Rite Aid Corporation, Safeway, Inc.,
and The Kroger Company in these sectors, along with general merchandise retailer
Dayton Hudson Corporation which also had a good year. We were hurt in the retail
sector by not owning Wal-Mart Stores, Inc., a component of the S&P 500 Stock
Index which rose over 100% in 1998.
"MODERATE" IS THE KEY WORD IN 1999
We expect moderate economic growth in the year ahead, accompanied by low
inflation and interest rates at reasonable levels. Because value-oriented stocks
underperformed the general markets last year, they appear to be relatively
undervalued at this time. We may increase our weighting in these types of stocks
over the coming months to take advantage of this favorable pricing. We
anticipate that the largest part of our weighting, however, will remain in the
growth stocks.
Terry Milberger
Senior Portfolio Manager
(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.
2
<PAGE>
SERIES A (GROWTH SERIES)
February 15, 1999
SERIES A VS. S&P 500
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
DATE SERIES A S&P 500
---- -------- -------
12/31/88 ...................... 10,000 10,000
12/31/89 ...................... 13,490 13,149
12/31/90 ...................... 12,161 12,732
12/31/91 ...................... 16,553 16,621
12/31/92 ...................... 18,394 17,896
12/31/93 ...................... 20,917 19,684
12/31/94 ...................... 20,571 19,941
12/31/95 ...................... 28,134 27,405
12/31/96 ...................... 34,516 33,729
12/31/97 ...................... 44,428 44,983
12/31/98 ...................... 55,718 57,839
$10,000 Over Ten Years
The chart above assumes a hypothetical $10,000 investment in Series A (Growth
Series) on December 31, 1988, and reflects the fees and expenses of Series A. On
December 31, 1998, the value of the investment (assuming reinvestment of all
dividends and distributions) would have grown to $55,718. By comparison, the
same $10,000 investment would have grown to $57,839 based on the S&P 500 Index's
performance.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1998(1)
1 Year 5 Years 10 Years
Series A 25.41% 21.65% 18.74%
(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
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SERIES B (GROWTH INCOME SERIES)
February 15, 1999
[PICTURE OF MIKE A. PETERSEN]
Mike A. Petersen
Senior Portfolio Manager
TO OUR CONTRACTHOLDERS:
The Growth-Income Series of the SBL Fund underperformed its peer group average
in 1998, returning 7.90% versus the peer average 16.54%.(1) The year just
completed was without doubt a growth-oriented year; the growth-and-income style
of management which has done well in past years disappointed in 1998. It was an
especially difficult year for traditional growth and income portfolio managers,
as many of the competitors in the peer group chose to move closer to an
index-fund style of management.
POSITIONING FOR DEFENSIVE PERFORMANCE
In early 1998 many large-cap stocks exhibited high valuations and slowing
earnings growth. Elements such as high debt and leverage levels, exemplified by
the near-failure of hedge fund Long Term Capital Management and its subsequent
rescue coordinated by the Federal Reserve Bank, led us to position the
Growth-Income Series in the traditionally more defensive value and
income-oriented names. This stance allowed us to perform in line with our peers
early in the year, then hurt performance in June and July, b ut helped
substantially during the third quarter's sharp downturn. The Growth-Income
Series with its more defensive nature outperformed its peer group in the third
quarter, falling only about three-fourths as much as the peer average.
THE FOURTH QUARTER HURT MOST
The greatest portion of the underperformance relative to the peer group occurred
in the final quarter of the year. During this period investors moved toward
high-growth sectors such as health care and technology (particularly the
speculative internet stocks), and away from traditional income-generating groups
like utilities and energy. Those high-growth areas, which as a rule have very
low dividend payouts, are not common holdings in growth and income portfolios.
LOOKING TOWARD 1999
Now, at the the beginning of 1999, we are facing many of the same conditions
that prevailed early in 1998. Valuations on many stocks are historically high,
earnings growth has been slowing, world demand for U.S. goods is still low, and
debt and leverage levels remain high. For these reasons we plan to maintain our
defensive posture in the Growth-Income Series a while longer.
We are overweighting income-oriented sectors such as utilities, energy, and
basic materials (chemicals, steel, and paper, for example). We will continue to
maintain an underweighted position in growth sectors such as technology, health
care, and financials. With energy prices at twenty-five year lows, we favor the
oil services companies and medium-sized exploration and production companies. We
believe these two industries within the energy sector will outperform the large
integrated oil companies which, be cause of their diversification, should be
less sensitive to commodity price changes and would not benefit as much when oil
prices begin to rise.
We look forward to 1999 and what we expect to be a year in which markets perform
more closely in line with historical norms. We believe our traditional style of
management for the Growth-Income Series should serve us well in such an
investment climate.
Michael A. Petersen
Senior Portfolio Manager
(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.
4
<PAGE>
SERIES B (GROWTH INCOME SERIES)
February 15, 1999
SERIES B VS. S&P 500
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
DATE SERIES B S&P 500
---- -------- -------
12/31/88 ...................... 10,000 10,000
12/31/89 ...................... 12,841 13,149
12/31/90 ...................... 12,271 12,732
12/31/91 ...................... 16,901 16,621
12/31/92 ...................... 17,964 17,896
12/31/93 ...................... 19,688 19,684
12/31/94 ...................... 19,099 19,941
12/31/95 ...................... 24,841 27,405
12/31/96 ...................... 29,375 33,729
12/31/97 ...................... 37,160 44,983
12/31/98 ...................... 40,095 57,839
$10,000 Over Ten Years
The chart above assumes a hypothetical $10,000 investment in Series B
(Growth-Income) on December 31, 1988, and reflects the fees and expenses of
Series B. On December 31, 1998, the value of the investment (assuming
reinvestment of all dividends and distributions) would have grown to $40,095. By
comparison, the same $10,000 investment would have grown to $57,839 based on the
S&P 500 Index's performance.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1998(1)
1 Year 5 Years 10 Years
Series B 7.90% 15.29% 14.90%
(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
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SERIES C (MONEY MARKET SERIES)
February 15, 1999
TO OUR CONTRACTHOLDERS:
Money market portfolios such as the Money Market Series of SBL Fund saw their
returns decline in 1998 as the Federal Reserve's policy-setting Open Market
Committee cut its short-term interest rate target three times in the last four
months of the year. Your portfolio returned 5.14% for the year, slightly ahead
of its Lipper peer group average of 5.10%.(1)
DECLINING RATES LATE IN THE YEAR
The Federal Reserve Open Market Committee instituted its first rate cut in late
September, dropping its target Fed funds rate 25 basis points to 5.25%. Federal
Reserve Chairman Alan Greenspan then surprised the markets with a
between-meetings cut October 15, lowering both the Fed funds and discount rates
another 25 basis points. The final Fed funds rate cut of 25 basis points
occurred at the regular Open Market Committee meeting November 17.
These moves were taken primarily to help stabilize global economic conditions.
The policy makers were aided in their decision-making process by the continuing
low inflation rates in the United States. As money market interest rates fell in
response to the rate decreases, we intensified our efforts to find acceptable
instruments with higher yields than the traditional commercial paper markets
offered.
FUNDING AGREEMENTS ARE INCLUDED IN PORTFOLIO ASSETS
Securities known as "funding agreements", also called guaranteed investment
contracts, were approved by the Board of Directors of SBL Fund early in the year
for inclusion in the portfolio. These agreements are contracts which are issued
by insurance companies, and are liabilities backed by the issuing company's
general account assets. The Series only purchases funding agreements whose
issues have credit ratings in the top tier as rated by major rating agencies.
At year end funding agreements made up 4.7% of portfolio assets, and at the time
of purchase yielded twelve to fifteen basis points (0.12% to 0.15%) more than
comparable commercial paper. Although this may seem like a small amount, in the
short-term securities market these differences can help keep our fund
competitive with its peers.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1998(1)
1 Year 5 Years 10 Years
Series C 5.14% 4.90% 4.94%
(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.
PORTFOLIO COMPOSITION AT YEAR END
Commercial paper remained the largest component of assets in 1998, representing
60.5% of the portfolio at year end. Small Business Administration pools were
about 10.7% of assets, and Federal agency securities approximately 25%. The
portfolio had an average maturity of 47 days, slightly less than the IBC
Donoghue Money Market Fund average of 54 days.
LOOKING TO 1999
Although we do not expect inflation to pick up dramatically in 1999 it is likely
to increase modestly from the below 2% levels experienced the past two years. If
this should happen we could see interest rates move back up somewhat. As
short-term rates change, our relatively short maturity structure will enable us
to adjust quickly to prevailing market levels.
FIXED INCOME TEAM
(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.
Series C is neither insured nor guaranteed by the U.S. Government and does
not maintain a stable net asset value at $1.00 per share.
6
<PAGE>
SERIES D (WORLDWIDE EQUITY SERIES)
February 15, 1999
[OPPENHEIMER FUNDS LOGO]
SUBADVISOR, OPPENHEIMERFUNDS, INC.
PORTFOLIO MANAGER, WILLIAM L. WILBY
[PICTURE OF WILLIAM L. WILBY]
William L. Wilby
TO OUR CONTRACTHOLDERS:
OppenheimerFunds, Inc., assumed management of the Worldwide Equity Series of SBL
Fund on November 2, 1998. We immediately employed an investment strategy aimed
toward building a diversified portfolio of good companies in good businesses at
good prices. Despite the extreme volatility that the world's stock markets
experienced over the past year, the Worldwide Equity Series returned a very
favorable 20.08% for the twelve months compared with its Lipper peer group
average of 16.19%.(1)
SPREADING GLOBAL FINANCIAL CRISIS
The stock market corrections this past summer were in response to the spread of
the financial crisis that began in Asia in late 1997. It became apparent during
the third quarter of 1998 that the crisis had spread to Russia. This prompted
investors to shift their assets from investments they perceived as risky to the
relatively safe haven of U.S. government bonds.
This "flight to quality" contributed to a scarcity of capital in many markets,
especially Latin America. In our opinion, investors pulled capital out of the
region without regard to the fundamental soundness of its business conditions.
As a result, stock prices there plummeted.
MARKETS IN DEVELOPED COUNTRIES
In the United States large well-established companies providing consistent
earnings growth continued to fuel the stock market's rise. Some U.S. companies,
however, revealed that their earnings would not meet analysts' expectations
because of reduced overseas demand and increased domestic competition. Investors
sold stocks that became too expensive relative to these revised earnings
forecasts.
Unlike the markets in the United States, the Japanese stock market has been in
decline for several years and the country's political and economic leadership
remains reluctant to take the steps necessary to pull the country out of a
persistent recession. Only recently has the Japanese government announced
programs designed to begin the restructuring and recovery process.
Europe has been the bright spot on the financial globe throughout 1998. Although
some European companies' stocks have declined in response to the crises in
emerging markets, others have continued to prosper as they restructure in
anticipation of the formation of the European Monetary Union in 1999.
LOOKING AHEAD TO 1999
Looking forward, we are cautious over the near term and optimistic over the long
term. Economic growth in much of the world is slowing, which has negative
implications for corporate earnings in some markets. However, we believe that
most stock markets have already incorporated lower earnings into stock prices.
In addition, we believe that valuations in Latin America are still extremely low
and that Europe holds good potential for further growth.
Regardless of the short-term challenges and opportunities the global stock
markets provide over the next few months, we will maintain a long-term view of
the markets that is measured in years, not weeks or fiscal quarters.
William L. Wilby
Portfolio Manager
(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.
Investing in foreign countries may involve risks, such as non-uniform
accounting practices and political instability, not associated with
investing exclusively in the U.S.
7
<PAGE>
SERIES D (WORLDWIDE EQUITY SERIES)
February 15, 1999
SERIES D VS. MCSI WORLD INDEX AND
LEHMAN BROTHERS HIGH YEILD INDEX
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
MSCI LEHMAN
WORLD BROTHERS HIGH
DATE SERIES D INDEX YIELD INDEX
---- -------- ------- -------------
12/31/88 ...................... 10,000 10,000 10,000
12/31/89 ...................... 9,112 11,722 10,083
12/31/90 ...................... 7,041 9,785 9,116
12/31/91 ...................... 7,938 11,644 13,327
12/31/92 ...................... 7,736 11,101 15,426
12/31/93 ...................... 10,176 13,670 18,065
12/31/94 ...................... 10,454 14,433 17,883
12/31/95 ...................... 11,589 17,507 21,312
12/31/96 ...................... 13,614 19,956 23,730
12/31/97 ...................... 14,492 23,195 26,760
12/31/98 ...................... 17,402 28,946 30,862
$10,000 Over Ten Years
The chart above assumes a hypothetical $10,000 investment in Series D (Worldwide
Equity Series) on December 31, 1988, and reflects the fees and expenses of
Series D. On December 31, 1998, the value of the investment (assuming
reinvestment of all dividends and distributions) would have been $17,402. By
comparison, the same $10,000 investment would have grown to $28,946 based on the
MSCI Index's performance.
For the period of December 31, 1988 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, 1998(1)
1 Year 5 Years 10 Years
Series D 20.08% 11.33% 5.70%
(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 shareholder's of Series D was held on October 28,1998.
At this meeting the following matters were voted on by the shareholders:
o A new sub-advisory contract between Security Management Company, LLC, and
OppenheimerFunds, Inc. was voted on. The total number of eligible votes were
19,562,043. The results of the vote was 16,823,356 in favor and 2,738,686
votes against and abstentions.
o A change in the fundamental policies as follows:
A. To amend the fundamental investment limitation concerning underwriting.
Votes For: 15,845,254 Votes Against: 3,716,788
B. To amend the fundamental investment limitation concerning borrowing.
Votes For: 15,062,772 Votes Against: 4,449,270
C. To amend the fundamental investment limitation concerning lending.
Votes For: 15,258,393 Votes Against: 4,303,649
D. To eliminate the fundamental investment limitation concerning margin
purchases of securities and short sales.
Votes For: 14,867,152 Votes Against: 4,694,890
E. To eliminate the fundamental investment limitation concerning investment in
other investment companies.
Votes For: 15,258,393 Votes Against: 4,303,649
F. To amend the fundamental investment limitation regarding owning, buying,
selling or otherwise dealing in commodities or commodity contracts.
Votes For: 14,867,152 Votes Against: 4,694,890
8
<PAGE>
SERIES E (HIGH GRADE INCOME SERIES)
February 15, 1999
[PICTURE OF STEVEN M. BOWSER]
Steven M. Bowser
TO OUR SHAREHOLDERS:
The High Grade Income Series of SBL Fund performed close to its peer group
average in 1998, returning 8.01% compared with the 8.07% average of its Lipper
peers.(1) The return lagged the benchmark Lehman Brothers Corporate Bond Index,
which rose 8.57% over the same time period.
THE HIGH YIELD COMPONENT HURT
Overall performance was negatively impacted by weak returns in the high yield
bond markets. Investors, fearful of eroding global economic conditions, poured
money into the U.S. Treasury bond markets where they perceived a greater degree
of safety. Lesser-quality issues in general did not benefit from these strong
cash inflows. The weakness in emerging market countries after the economic
meltdown in Russia cast a pall on high yield bonds as well. We maintained a
weighting of 15% to 20% of portfolio assets in high yield issues throughout the
year.
Within this sector we saw lower-than-average results in the gaming industry,
including our bonds issued by MGM Grand, Inc. This sector is being weakened by
perceived overcapacity as many new casinos are being built. Our investment-grade
casino operator Mirage Resorts, Inc. suffered as well.
BETTER-QUALITY BONDS WERE STRONGER PERFORMERS
Treasury and Federal agency securities in the portfolio were especially strong
performers, benefiting from the flight to quality that hurt high yield bonds.
Strong cash flows into the High Grade Income Series allowed us to increase our
holdings in these sectors as the year progressed.
Federal agencies FNMA and Freddie Mac brought several multibillion dollar issues
to market in 1998. These issues have come to trade as well as Treasury bonds
because their large size gives them a high degree of liquidity. Our holdings of
FNMA and Freddie Mac bonds appreciated in price when investors recognized this
liquidity feature and quickly pushed yields down closer to those on
comparable-maturity Treasuries.
Many of our investment grade corporate bonds performed well. Telecommunication
companies such as MCI WorldCom, Inc. and Cable & Wireless Communications PLC
gained along with their counterparts in the stock markets. Defensive industries
like supermarkets, food processors, and beverage manufacturers generally
outperform during periods of market volatility. We hold bonds of this type,
including companies such as Safeway, Inc., Archer-Daniels-Midland Company, and
Anheuser-Busch Companies, Inc., and benefited from owning them in the third
quarter when the equity markets weakened.
Industries with ties to the building industry fared well in the low interest
rate climate that prevailed in 1998. Cement producer LaFarge Corporation was
among those companies whose bonds rose in value along with their stock, as did
the securities of building supplies retailer Lowe's Companies, Inc.
LOOKING AHEAD TO 1999
Although we expect interest rates to decline a bit further in the early months
of 1999, we believe volatility will continue to be higher than average in the
fixed income markets. We plan to keep the duration of the portfolio close to
that of the benchmark index. We will continue to hold the current
mortgage-backed securities holdings in the portfolio as we enter the new year,
but don't anticipate increasing this sector any time soon. New corporate bond
issues which come to market in multi-billion sizes are important to add to the
portfolio, because they quickly become a primary component of the benchmark
indexes.
Steven M. Bowser
Portfolio Manager
(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.
9
<PAGE>
SERIES E (HIGH GRADE INCOME SERIES)
February 15, 1999
SERIES E VS. LEHMAN BROTHERS
GOVERNMENT/CORPORATE INDEX
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
LEHMAN BROTHERS LEHMAN BROTHERS
CORPORATE/ CORPORATE
DATE SERIES E GOVERNMENT INDEX BOND INDEX
---- -------- ---------------- ---------------
12/31/88 ...................... 10,000 10,000 10,000
12/31/89 ...................... 11,190 11,424 11,409
12/31/90 ...................... 11,939 12,371 12,214
12/31/91 ...................... 13,964 14,366 14,476
12/31/92 ...................... 15,003 15,455 15,734
12/31/93 ...................... 16,898 17,164 17,648
12/31/94 ...................... 15,726 16,561 16,956
12/31/95 ...................... 18,651 19,748 20,726
12/31/96 ...................... 18,518 20,321 21,406
12/31/97 ...................... 20,376 22,304 23,596
12/31/98 ...................... 22,007 24,415 25,622
$10,000 Over Ten Years
The chart above assumes a hypothetical $10,000 investment in Series E (High
Grade Income Series) on December 31, 1988, and reflects the fees and expenses of
Series E. On December 31, 1998, the value of the investment (assuming
reinvestment of all dividends and distributions) would have been $22,007. By
comparison, the same $10,000 investment would have grown to $24,415 based on the
Lehman Brothers Government/Corporate Index's performance, and $25,622 based on
the Lehman Brothers Corporate Bond Index.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1998(1)
1 Year 5 Years 10 Years
Series E 8.01% 5.43% 8.21%
(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, 1999
[PICTURE OF JAMES P. SCHIER]
James P. Schier
Portfolio Manager
TO OUR CONTRACTHOLDERS:
Although the Emerging Growth Series of the SBL Fund generated a respectable
+17.95% return in 1998, it underperformed the Lipper peer group average of
+19.30%.(1) The benchmark S&P Midcap 400 Stock Index climbed +17.68% during the
year.
A STRANGE PERFORMANCE YEAR
It was an unusual year for performance in the portfolio. The strongest positive
contributor to total return was our energy sector which, although it fell 42%
during the year, outperformed the -50% return of the benchmark index's energy
stocks. Conversely, the strongest NEGATIVE contributor to performance in the
portfolio was technology which, while it rose nearly 54%, underperformed the
benchmark technology stock sector return of 88%.
POSITIVE CONTRIBUTORS IN THE PORTFOLIO
The financial sector of the markets was generally weak in 1998 as global
economic difficulties weighed heavily on international loan portfolios of banks.
We benefited from an underweighting in this sector compared with the benchmark
index. Additionally, two of our holdings were consistently strong performers
throughout the year: insurance company AFLAC Inc., gained about 76% and bank
holding company Northern Trust Corporation rose 26%.
We were also helped by an underweighting in commodity-related companies. This
group in our portfolio declined about 9% during the year because of the weakness
in commodity prices, while the corresponding sector in the benchmark index lost
15%. Despite the overall negative sector movement we saw gains in two holdings:
flavor and fragrance producer Bush Boake Allen, Inc., gained 17%, and Engelhard
Corporation, which markets technology-based performance products for industrial
customers and operates mineral reserves throughout the world, rose 14%. Quaker
State Corporation, which produces and markets motor oils and other lubricants,
gained 41% after being purchased by Pennzoil Company.
SOME CONSUMER CYCLICALS HURT BY WEATHER
One of our weaker performing sectors was consumer cyclicals, which rose 7.6% in
the portfolio but climbed 17% in the benchmark index. Companies in the retail
apparel business saw sales decline as warm weather continued far longer than
average into the winter months. Stage Stores, Inc., an operator of apparel
stores throughout the central United States, declined 75% in price as sales were
hit first by excessive summer heat in the southern United States and then by the
unusually warm winter weather. Consolidated Stores Corporation, a retailer of
toys and closeout merchandise, saw its stock price fall 47% as shoppers enjoyed
the warm weather and delayed Christmas shopping.
The health care sector in the portfolio was also a laggard, rising only 18%
compared with the benchmark's 27% increase. Although the sector in the broad
markets performed well, two of our holdings suffered problems. Dura
Pharmaceuticals, Inc., a manufacturer of prescription drugs, lost value after
reporting weak earnings and slow drug sales. Long-term care provider Integrated
Health Services, Inc., declined along with others in the industry that receive a
large part of their income from Medicare payments after Congress began
discussions about revising the Medicare payment systems.
LOOKING TO THE YEAR AHEAD
The Emerging Growth Series is heavily weighted in the health care and technology
industries. While we believe there is still opportunity for gain in these
industries in the coming months, we may reduce the position sizes somewhat as
opportunities arise to take profits. We expect that investors will at some point
in 1999 broaden their focus from the few large-cap stocks that dominated in
1998. When this occurs, midcap and small-cap stocks should benefit as funds once
again begin to flow into those areas.
James P. Schier
Portfolio Manager
(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.
11
<PAGE>
SERIES J (EMERGING GROWTH SERIES)
February 15, 1999
SERIES J VS. S&P MIDCAP
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
DATE SERIES J S&P MIDCAP
---- -------- ----------
10/01/92 ...................... 10,000 10,000
12/31/93 ...................... 14,171 12,914
12/31/94 ...................... 13,448 12,452
12/31/95 ...................... 16,070 16,305
12/31/96 ...................... 18,969 19,434
12/31/97 ...................... 22,753 25,701
12/31/98 ...................... 26,838 30,617
$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, 1998, the value of the investment
(assuming reinvestment of all dividends and distributions) would have been
$26,838. By comparison, the same $10,000 investment would have grown to $30,617
based on the S&P Midcap Index's performance.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1998(1)
1 Year 5 Years Since
Inception
(10-1-92)
Series J 17.95% 13.62% 17.11%
(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, 1999
[PICTURE OF DAVID ESHNAUR]
David Eshnaur
Portfolio Manager
TO OUR CONTRACTHOLDERS:
1998 displayed a broad range of fixed income returns. From the +15.33% total
return of our benchmark Lehman Brothers Global Bond Index to the -14.35% total
return of the J.P. Morgan EMBI+ Index (an index of emerging market debt), the
deciding variable was the amount of credit risk in the underlying securities. In
1998 the rule seemed to be the greater the credit risk, the lower the total
return. This held true for domestic high yield securities as well as global
bonds. The continuing Asian crisis, Russia's outright default on its debt,
spectacular losses by U.S. hedge funds and President Clinton's troubles all
combined to make investors seek the relative safety of the most creditworthy
fixed income securities such as U.S. Treasuries. Our diversified approach to
higher yielding investments allowed the Global Aggressive Bond Series to rise
6.89%,* besting its Lipper peer group average of 5.15%.(1)
COUNTRY ALLOCATIONS DURING THE YEAR
Throughout 1998 we maintained a high allocation to our three favorite fixed
income opportunities: Greece, Poland and Hungary. At year end these three
countries made up about 23% of the portfolio's total assets. All three are in
the process of lowering inflation via steadily improving fiscal discipline and
tight monetary policies such as high short-term interest rates. In Greece, for
example, inflation has fallen from the double digits of a few years ago to under
4% at the end of 1998, and is expected to approach 2% in the coming year. While
Poland and Hungary are significantly behind Greece's levels of improvement,
their governmental policies are expected to eventually yield similar results.
OUR OUTLOOK FOR 1999
As we enter 1999 we hope that the "last shoe to drop" will turn out to be the
recent Brazilian currency devaluation. Investors will surely take their time
returning to high yield securities this year, and in particular the debt of
emerging markets, but we do believe that 1999 will turn out to be a very good
year for the global high yield investor. Yields on many global securities are
now the highest that they have been in a number of years. One of the greatest
benefits of investing in high yield securities is that an investor earns an
attractive income stream while waiting for the market to return to more normal
levels, as we believe it will in 1999.
We believe that our diversified and somewhat unique approach of combining
emerging market debt, domestic high yield securities and a high yielding
non-dollar denominated debt will continue to dampen overall volatility of the
portfolio's returns while providing us opportunities both for yield and capital
appreciation.
David Eshnaur
Portfolio Manager
(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.
Investing in foreign countries may involve risks, such as non-uniform
accounting practices and political instability, not associated with
investing exclusively in the U.S.
13
<PAGE>
SERIES K (GLOBAL AGGRESSIVE BOND SERIES)
February 15, 1999
SERIES K VS. LEHMAN BROTHERS
GLOBAL BOND INDEX
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
LEHMAN BROS.
GLOBAL BOND
DATE SERIES K INDEX
---- -------- ----------
6/1/95 ...................... 10,000 10,000
12/31/95 ...................... 10,761 10,669
6/30/96 ...................... 11,182 11,038
12/31/96 ...................... 12,234 11,880
6/30/97 ...................... 12,531 12,570
12/31/97 ...................... 12,891 13,397
6/30/98 ...................... 13,339 13,870
12/31/98 ...................... 13,779 15,450
$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, 1998, the value of the investment
(assuming reinvestment of all dividends and distributions) would have been
$13,779. By comparison, the same $10,000 investment would have grown to $15,450
based on the Lehman Brother's Global Bond Index's performance.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1998(1)
1 Year Since Inception
(6-1-95)
Series K 6.89% 9.35%
(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 through April 30, 1998 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.
PROSPECTUS SUPPLEMENT
Effective December 31, 1998, Lexington Management Corporation ("Lexington") will
resign as sub-advisor to Series K (Global Aggressive Bond). Beginning January 1,
1999, MFR Advisors, Inc. ("MFR") will assume Lexington's investment advisory
responsibilities. Since the Series inception (June 1, 1995), MFR has provided
economic and research services to Lexington with respect to Series K.
14
<PAGE>
SERIES M (SPECIALIZED ASSET ALLOCATION SERIES)
February 15, 1999
[MERIDIAN INVESTMENT MANAGEMENT LOGO]
MANAGED BY SECURITY MANAGEMENT COMPANY
SUBADVISOR, MERIDIAN INVESTMENT MANAGEMENT CORPORATION
[PICTURE OF PATRICK BOYLE]
Patrick Boyle
Portfolio Manager
TO OUR CONTRACTHOLDERS:
Asset allocation was an effective method of dampening market volatility in 1998.
As the year closed, domestic and international stock indices had rebounded
sharply from the third quarter's steep declines. The Specialized Asset
Allocation Series of SBL Fund appreciated 12.63%* during the year, well ahead of
its Lipper peer group average return of 10.57%.(1)
ALLOCATIONS TO STOCKS OVERWEIGHTED
Our active asset allocation strategy overweighted equity markets throughout the
year. Our positive outlook was based on our quantitative valuation methodology,
which indicated early in 1998 that many global equity markets were undervalued.
Domestically the portfolio benefited from its heavy exposure to technology
stocks. Issues within the computer networking, computer peripheral, and
equipment semiconductor industries were excellent performers. Many companies in
the leisure sector were market leaders as well. Our positions in the restaurant,
entertainment, and tobacco industries all participated in the market's advance.
THE INTERNATIONAL INVESTMENTS IN EUROPE AND ASIA
The international equities in the portfolio focused on Europe and Asia. Europe
reaped the rewards of fiscal and monetary discipline brought on by the birth of
the European Monetary Unit. The combination of steady economic growth and low
interest rates created many attractive investment opportunities as several
European stock markets outpaced the U.S. in 1998. Our current holdings in Europe
include two European Union countries, Germany and Belgium, as well as Denmark,
which has yet to join. We were early investing into Japan, but we remain
optimistic about its long term prospects.
Other asset categories turned in mixed performances in 1998. Bonds, which
accounted for approximately 20% of the portfolio for much of the year, were
strong performers. The best returns in fixed income came in the government
sector, which profited from its perceived safety in the wake of global economic
turmoil. Less traditional asset categories posted disappointing returns in 1998.
Our tactical asset allocation decisions that contributed to our above average
investment results included underweighting real estate, emerging markets, and
cash.
THE OUTLOOK FOR THE YEAR AHEAD
The Standard & Poor's 500 Stock Index, the widely recognized U.S. equity
benchmark composed primarily of large capitalization growth stocks, has posted
phenomenal returns the last four years. Many of these large cap stocks now
appear overpriced. The market as a whole, however, looks undervalued. Our
quantitative model, which includes factors for earnings, growth, risk, and
interest rates, currently indicates that the broad U.S. stock market and many
foreign markets are still undervalued. The domestic areas with the best long
term potential, based on our current valuations, include middle and small
capitalization value stocks. International investments will likely remain
targeted in Europe and Asia. We were consistent with our bullish posture during
the volatile year of 1998, and our optimism for global equities remains for
1999.
Patrick Boyle
Portfolio Manager
(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.
Investing in foreign countries may involve risks, such as non-uniform
accounting practices and political instability, not associated with
investing exclusively in the U.S.
15
<PAGE>
SERIES M (SPECIALIZED ASSET ALLOCATION SERIES)
February 15, 1999
SERIES M VS. BLENDED INDEX
AND S&P 500
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
DATE SERIES M S&P 500 BLENDED INDEX
---- -------- ---------------- ---------------
6/1/95 ...................... 10,000 10,000 10,000
12/31/95 ...................... 10,710 11,707 11,109
6/30/96 ...................... 11,450 12,848 11,694
12/31/96 ...................... 12,235 14,408 12,800
6/30/97 ...................... 13,138 16,630 13,862
12/31/97 ...................... 12,988 19,216 15,024
6/30/98 ...................... 14,413 21,737 16,362
12/31/98 ...................... 14,629 24,708 17,337
$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, 1998, the value of
the investment (assuming reinvestment of all dividends and distributions) would
have been $14,629. By comparison, the same $10,000 investment would have grown
to $24,708 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
$17,347 based on the blended index.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1998(1)
1 Year Since Inception
(6-1-95)
Series M 12.63% 11.19%
(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.
16
<PAGE>
SERIES N (MANAGED ASSET ALLOCATION SERIES)
February 15, 1999
[T. ROWE PRICE LOGO] SUBADVISOR, T. ROWE PRICE ASSOCIATES, INC.
PORTFOLIO MANAGER, NED NOTZON
[PICTURE OF EDMUND M. NOTZON]
Edmund M. Notzon
Portfolio Manager
TO OUR CONTRACTHOLDERS:
The Managed Asset Allocation Series of SBL Fund posted a solid 18.43% gain in
1998, substantially outperforming the Lipper peer group average of +14.79%.(1)
Our performance, however, was below that of our weighted average benchmark, made
up of 60% S&P 500 Stock Index and 40% Lehman Brothers Government Corporate
Index, which rose 21.35% for the year.
PORTFOLIO STRATEGY DURING THE YEAR
As usual, our strategy remained consistent throughout the year. The Series was
defensively positioned with a minor overweighting in bonds. This cautious stance
was slightly favorable in the third quarter, but hurt performance for the fourth
quarter and the year as a whole. In addition, our overweighting in international
equities-which for us represented caution with respect to the U.S. market-also
hurt performance for the year, even though foreign equities rallied strongly in
the fourth quarter. The U.S. markets' whipsaw action and general volatility in
1998 did nothing to ease our concerns about potential risks in domestic
equities. Though there are many uncertainties with respect to foreign markets
and economies, we remain modestly overweighted overseas compared with our
neutral, or baseline, allocation.
A STRONG FOURTH QUARTER FOR STOCKS
Stock markets around the world snapped back sharply in the fourth quarter after
the global rout of late summer. The S&P 500 Stock Index gained 21.30% during the
quarter, contributing to its outstanding 28.58% total advance for the year. It
was a record fourth consecutive year of returns above 20% for the index.
However, more than half of the index's returns were provided by just fifteen of
its biggest stocks, especially technology stocks like Microsoft. If the index
had been equally weighted among its 500 stocks rather than weighted by market
capitalization (stock price multiplied by shares outstanding), the S&P 500 would
have gained just 13% for the year.
Large cap growth stocks, led by technology, trounced smaller stocks for the
fifth straight year. The Russell 2000 Index of small-cap stocks, as a point of
reference, fell 2.55% in 1998. Income stocks and value issues in general posted
only modest gains, and commodity and cyclical companies especially found tough
going. Overseas, European shares kept up with Wall Street's performance. Asian
shares were mixed but mostly lower, and Latin American stocks fell 35% for the
year in dollar terms, acording to the Morgan Stanley Capital International
index.
DIFFERING BOND MARKET SECTORS PRODUCED MIXED RESULTS
The bond market was roiled by heavy crosscurrents throughout the year. A
tremendous gap opened during the third quarter between historically low Treasury
yields on one hand and rising yields on lower quality corporate debt on the
other. This phenomenon reversed somewhat in the fourth quarter as Treasury
yields rose back above 5% and high yield bonds rallied, driving their yields
lower. These credit spreads continue to favor medium and lower-quality corporate
debt, however. High grade U.S. corporate bonds p
erformed well, and top quality international bonds delivered strong gains,
especially in the second half of the year. Emerging market bonds, however, fell
sharply.
OUR OUTLOOK FOR 1999
We expect lower worldwide economic growth this year, but do not necessarily
foresee a recession in the U.S. Instead, we believe GDP growth is likely to fall
to 2% or a little lower. Threats of disinflation and deflation will continue to
pose challenges for policymakers and businesses in the year ahead as excess
capacity, advancing technology and consolidation are all likely to further erode
pricing power.
We expect that more Federal Reserve interest rate cuts will be forthcoming in
the first half, with January's DE FACTO currency devaluation in Brazil just one
potential catalyst. Long-term Treasury bond yields may move somewhat lower, but
given our economic outlook, we
17
<PAGE>
SERIES N (MANAGED ASSET ALLOCATION SERIES)
February 15, 1999
favor the higher yields available in the corporate sector. Economic conditions
will likely improve somewhat later this year. However, stocks in the U.S. and
Europe will not be able to count on getting the same punch from rising profits
and falling interest rates as they enjoyed last year.
We expect market volatility to remain high and stock returns to be more modest
in 1999. Growth stocks are likely to continue outperforming value stocks as
investors search for sustainable earnings. The U.S. market gains should broaden
out to include small- and mid-cap stocks, which offer much better relative
valuations, though large-caps are likely to remain leaders given the slowing
economy.
Edmund M. Notzon
Portfolio Manager
(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.
Investing in foreign countries may involve risks, such as non-uniform
accounting practices and political instability, not associated with
investing exclusively in the U.S.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1998(1)
1 Year Since Inception
(6-1-95)
Series N 18.43% 15.90%
(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.
Series N vs. S&P 500
and Blended Index
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
DATE SERIES N S&P 500 BLENDED INDEX
---- -------- ---------------- ---------------
6/1/95 ...................... 10,000 10,000 10,000
12/31/95 ...................... 10,730 11,707 11,302
6/30/96 ...................... 11,160 12,848 11,925
12/31/96 ...................... 12,103 14,408 13,001
6/30/97 ...................... 13,513 16,630 14,741
12/31/97 ...................... 14,334 19,216 16,073
6/30/98 ...................... 15,947 21,737 18,019
12/31/98 ...................... 16,975 24,708 19,445
$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, 1998, the value of the investment
(assuming reinvestment of all dividends and distributions) would have been
$16,975. By comparison, the same $10,000 investment would have grown to $24,708
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 $19,445 based on the blended index.
18
<PAGE>
SERIES O (EQUITY INCOME SERIES)
February 15, 1999
[T. ROWE PRICE LOGO] SUBADVISOR, T. ROWE PRICE ASSOCIATES, INC.
PORTFOLIO MANAGER, BRIAN C. ROGERS
[PICTURE OF BRIAN C. ROGERS]
Brian C. Rogers
Portfolio Manager
TO OUR CONTRACTHOLDERS:
Positive economic growth, a favorable interest rate environment, and substantial
stock market volatility characterized 1998. A solid first half was undermined by
a severe third quarter correction, which gave way to a near-euphoric rally in
the final months. The Standard and Poor's 500 Stock Index advanced by more than
20% for a record fourth consecutive year. However, within the context of another
strong year for equities, there were significant crosscurrents that had a major
impact on the performance of many sectors of the market.
SERIES RETURNS FOR THE YEAR
For the year the return of the Equity Income Series of SBL Fund was respectable
but somewhat disappointing, since it was the first time in a while that the
performance of the Series lagged the Lipper peer group. The total return for the
Series was +9.02%, compared with the Lipper peer group average return of
+16.75%.(1) During the broad market advances of recent years it is extremely
difficult for conservative funds like the Equity Income Series to keep up with
the S&P 500 stocks. In times such as these it is helpful for shareholders to
keep in mind that the purpose of this type of portfolio is not to generate
robust returns under all market conditions. The goal is to produce attractive
returns, including substantial dividend income, over time and also to help
cushion shareholders' investment principal when times get rough.
PORTFOLIO HIGHLIGHTS
The Equity Income Series was 95% invested in stocks at year end. Four of our
largest sales during the past six months were stocks of companies that were in
the process of being merged or acquired. In each case we were able to sell our
shares at prices higher than our original cost.
We made significant new investments in several companies, including oilfield
service company Baker Hughes Inc., aerospace/defense manufacturer The Boeing
Company, and money center bank BankAmerica Corporation. These holdings were all
bought at prices well below their highs for the year. Many of our holdings
typically trade at below-average valuation levels because for many diverse
reasons their share prices declined before we took a position in them. This
investment strategy of buying out-of-favor stocks with good long term growth
potential has served shareholders well in the past, and we believe it will
continue as a successful strategy in the future when investors focus again on
stocks with appealing market valuations.
SUMMARY AND OUTLOOK
Twelve months ago we commented on the rapid appreciation of stock prices
compared with the growth in the underlying earnings and dividends. In 1997 share
prices increased at a much faster rate than the underlying fundamentals, and
this "delinkage" between price and value grew even more pronounced in 1998.
We expect 1999 to be a more challenging year than the one just ended. In our
view, this could lead to more moderate returns than the robust and unsustainable
performance of the past four years. In this environment our investment approach
will be steady and constant, as always. We will continue to search for
attractively valued stocks with solid long-term potential.
Brian C. Rogers
Portfolio Manager
(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.
19
<PAGE>
SERIES O (EQUITY INCOME SERIES)
February 15, 1999
SERIES O VS. S&P 500
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
DATE SERIES O S&P 500
---- -------- ----------
6/1/95 ...................... 10,000 10,000
12/31/95 ...................... 11,700 11,707
6/30/96 ...................... 12,630 12,848
12/31/96 ...................... 14,045 14,408
6/30/97 ...................... 16,080 16,630
12/31/97 ...................... 18,034 19,216
6/30/98 ...................... 19,157 21,737
12/31/98 ...................... 19,660 24,708
$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, 1998, the value of the investment
(assuming reinvestment of all dividends and distributions) would have been
$19,660. By comparison, the same $10,000 investment would have grown to $24,708
based on the S&P 500 Index's performance.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1998(1)
1 Year Since Inception
(6-1-95)
Series O 9.02% 20.74%
(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 YEILD SERIES)
February 15, 1999
[PICTURE OF DAVID ESHNAUR]
David Eshnaur
Portfolio Manager
TO OUR SHAREHOLDERS:
Although the high yield bond markets in general experienced difficulties in
1998, the High Yield Series of SBL Fund was a strong performer within its Lipper
peer group, returning +5.84% compared with the peer group average of +0.10% for
the year.(1) The benchmark Lehman Brothers Corporate High Yield Index turned in
a +1.60% total return for the same period.
STRATEGIES THAT HELPED PERFORMANCE
Our continuing focus on the upper tiers of the high yield bond universe, those
issues rated in the BB and B categories by Standard & Poor's rating agency,
served us well. The BB component of the Lehman Brothers High Yield Index rose
5.13% for the year, a much better performance than the overall benchmark index.
Additionally, our limited exposure to the emerging markets countries was
beneficial in a year in which the collapse of Russia's economy painted a black
cloud over other emerging markets.
CERTAIN SECTORS WERE STRONG POSITIVES
In a year in which mortgage interest rates continued to decline, the
homebuilding industry prospered. Our bonds issued by Toll Corporation, a builder
of luxury homes in six regions of the United States, performed exceptionally
well. Among the other "stars" within the sector were single-family and
multifamily homebuilders NVR, Inc. and Hovnanian Enterprises, Inc., and
residential homebuilders MDC Holdings, Inc., and D.R. Horton, Inc.
Our media noncable company sector was overweighted in the portfolio, boosting
total return because of the industry's favorable performance. We moved our
primary emphasis within the sector midyear from television to radio broadcasting
companies, believing that television revenues could be reduced because of the
lack of campaign advertising in the coming nonelection year. We also hold
newspaper companies such as printer and distributer Hollinger International
Publishing, Inc. and Big Flower Press Holdings, Inc., a company which provides
advertising inserts, specialized direct mail products, and other advertising-
related items.
Other positives included the steel industry, where we focused on companies
including minimill operator Ameristeel Corporation and AK Steel Corporation
which produces high quality steel for use in the automotive and appliance
industries. The steel companies which focus on higher-market and niche items
outperformed those firms which produce more commodity-oriented products.
STILL A FEW NEGATIVES
The worst performing industry in the high yield bond arena in 1998 was energy.
Although we held a few issues in this sector, we benefited by holding a smaller
weighting than the benchmark index. Uncertainties regarding new Medicare
regulations held down performance in the health care industry, particularly
damaging long-term care and acute care companies we owned such as Tenet
Healthcare Corporation, Multicare Companies Inc., and Genesis Health Ventures,
Inc. One holding in particular was a strong negative in the portfolio. Golden
Books Publishing, Inc., the publisher of the well-known children's books,
defaulted on their coupon interest payment in October. The company is now going
through a restructuring process; although it will take some time to complete, we
feel that there is still value in the bonds and are willing to be patient while
the firm recovers.
OUR HIGH YIELD MARKET OUTLOOK
We believe interest rates have further room to fall in the early months of 1999.
This will continue to strengthen the bond markets in general, and the positive
effect that lower interest rates have on corporate earnings will be an
additional benefit to the high yield sector of the bond markets. We plan to
maintain our focus on the higher-quality credits within the high yield sector as
we have done the past year.
David Eshnaur
Portfolio Manager
(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. Fee waivers reduced the expenses of the
Series and in the absence of such waivers, the performance quoted would be
reduced.
21
<PAGE>
SERIES P (HIGH YEILD SERIES)
February 15, 1999
SERIES P VS. LEHMAN BROTHERS
HIGH YIELD INDEX
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
LEHMAN BROTHERS
DATE SERIES P HIGH YIELD INDEX
---- -------- ----------------
08/01/96 ...................... 10,000 10,108
12/31/96 ...................... 10,660 10,713
06/30/97 ...................... 11,320 11,336
08/31/97 ...................... 11,580 11,621
12/31/97 ...................... 12,077 12,081
06/30/98 ...................... 12,629 12,626
12/31/98 ...................... 12,782 12,579
$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, 1998, the value of the investment
(assuming reinvestment of all dividends and distributions) would have been
$12,782. By comparison, the same $10,000 investment would have grown to $12,579
based on the Lehman Brothers High Yield Index.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1998(1)
1 Year Since Inception
(8-5-96)
Series P 5.84% 10.73%
(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, 1999
[PICTURE OF CINDY L. SHIELDS]
Cindy L. Shields
Portfolio Manager
TO OUR CONTRACTHOLDERS:
The Social Awareness Series turned in a strong performance in 1998, returning
31.43% compared with a 17.81% average for its Lipper peer group and a 28.58%
gain for the Standard and Poor's 500 Stock Index.(1) The benchmark Domini Social
Index did even better, however, gaining 34.65% for the year.
LEADERSHIP IN THREE SECTORS
Three sectors led portfolio performance: technology, communications services,
and health care. The first of these, technology, was propelled by strong demand
in the U.S. and Europe. Consumer demand for personal computers, along with
businesses' replacement of equipment in large part brought about by the "Year
2000" readiness problem, drove sales throughout the year. The technology sector
in the Social Awareness portfolio was overweighted relative to the S&P 500
Index, and included such industry giants as Microsoft Corporation, Cisco
Systems, Inc., Intel Corporation, and International Business Machines
Corporation.
The second sector among the leaders was communications services, carried forward
by industry mergers and consolidation, as well as by bundling of services such
as long distance, data transmission, and cable. This sector also held up well
during the downturn in the stock markets in the third quarter because of its
defensive nature: consumers tend to keep paying their telephone bills regardless
of economic conditions. Our holdings in companies such as BellSouth Corporation,
WorldCom, Inc. (now MCI WorldCom, Inc.), and Sprint Corporation rewarded us
well.
Health care, the third sector to perform exceptionally well, was spurred along
by a continuing flow of new drugs, a speedup of the drug approval process by the
Food and Drug Administration, and the perception that an aging population will
invest more in health care. The drug industry within the health care sector is
benefiting as well from the lifting of restrictions on public advertising in
recent years. In this sector we owned names including Schering-Plough
Corporation, Merck & Company, Inc., and Johnson & Johnson.
AVOIDING CERTAIN SECTORS ALSO HELPED
Throughout most of 1998 the portfolio was underweighted versus the S&P 500 Index
in the energy, capital goods, and basic materials sectors. The earnings of many
companies within these areas were hurt by falling commodity prices which eroded
the firms' ability to raise prices on their products.
Our orientation in 1998 toward large capitalization growth stocks also allowed
us to more closely match the returns on the benchmark indexes. The small-cap and
midcap names in the portfolio made up less than 20% of holdings during the year.
The benchmark Domini Social Index is also large-cap oriented, with a large
portion in technology because of its over-5% weighting in Microsoft.
Most funds with a socially responsible orientation were able to perform well in
1998 because they generally have less exposure to the energy and basic materials
industries. Frequently companies within these sectors fail to meet environmental
screens. Returns on social portfolios in the year just completed reinforce the
fact that investing according to one's beliefs does not necessarily result in
sacrificing return on those investments.
A LOOK INTO 1999
We believe that at some point in the year ahead the more cyclical stocks and the
mid- and small-cap sectors will hold the greater potential for outperformance.
These areas have been depressed to the point that they now seem undervalued;
they were for the most part weak performers in 1998.
Many analysts' estimates for earnings in the stock markets remain quite high; as
these estimates are revised downward the markets could soften a bit, providing a
buying opportunity. We will closely monitor the performance in all sectors, and
move gradually into the mid- and small-cap arenas if it seems appropriate to do
so.
Cindy Shields
Portfolio Manager
(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.
23
<PAGE>
SERIES S (SOCIAL AWARENESS SERIES)
February 15, 1999
SERIES S VS. S&P 500 AND
DOMINI SOCIAL INDEX
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
DATE SERIES S S&P 500 DOMINI SOCIAL
---- -------- ---------------- ---------------
5/1/91 ...................... 10,000 10,000 10,000
12/31/92 ...................... 12,275 12,236 13,111
12/31/93 ...................... 13,731 13,458 14,231
12/31/94 ...................... 13,213 13,634 14,256
12/31/95 ...................... 16,879 18,737 19,704
12/31/96 ...................... 20,056 23,060 24,376
12/31/97 ...................... 24,599 30,755 33,701
12/31/98 ...................... 32,331 39,544 45,345
$10,000 Since Inception
The chart above assumes a hypothetical $10,000 investment in Series S (Equity
Income Series) on May 1, 1991 (date of inception), and reflects the fees and
expenses of Series S. On December 31, 1998, the value of the investment
(assuming reinvestment of all dividends and distributions) would have been
$32,331. By comparison, the same $10,000 investment would have grown to $39,544
based on the S&P Index's performance and $45,345 based on the Domini Social
Index.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1998(1)
1 Year 5 Years Since Inception
(5-1-91)
Series S 31.43% 18.68% 16.53%
(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, 1999
[PICTURE OF JAMES P. SCHIER]
James P. Schier
Portfolio Manager
TO OUR CONTRACTHOLDERS:
The Value Series performed well in 1998, returning 16.59% compared with a Lipper
peer group average return of 16.37%.(1) The benchmark S&P/Barra Value Index
increased 14.7% in the same time period. The value sector in general
underperformed the broader indexes, however, with the Standard & Poor's 500
Stock Index rising a strong 28.58% for the year.
EXCELLENT PERFORMANCE IN TECHNOLOGY
The technology sector had a larger representation in the portfolio than in the
benchmark index, with a 18.9% weighting on average throughout the year versus
the index's 7.7%. In addition to being overweighted in a sector which rose
sharply, we also benefited from careful stock selection. Many of the issues we
owned were strong performers. To cite a few examples, during the periods in
which they were in the portfolio in 1998 the stock of Rational Software
Corporation rose over 130%; technology consulting firm American Management
Systems, Inc. gained nearly 103%; and telecommunications systems and software
manufacture Comverse Technology, Inc., was up 82%.
AN UNDERWEIGHTING IN FINANCIALS HELPED
The financial sector in the general markets suffered as global economies
weakened and fear of loan losses in international portfolios weighed heavily on
banks. We were served well by an underweighting in this industry, with an
average 5.7% of portfolio assets invested in financials during the year compared
with 26.4% in the S&P/Barra Value Index and 11.6% in the Standard and Poor's 500
Stock Index. We saw excellent performance from two of our financial sector
holdings. Insurance company AFLAC Inc. gained 76% during the year and investment
banking firm Legg Mason, Inc., whose stocks we purchased after the market
selloff in October, increased 62% after the purchase.
A WEAKER YEAR FOR MIDCAP STOCKS
The funds represented in the Value Series' Lipper peer group are mostly large
cap oriented, while our portfolio is midcap in nature. As mentioned above, the
large cap stocks such as those in the S&P 500 Index performed much better in
1998 than the smaller companies. This was especially noticeable in the energy
sector, where midcap companies fell about 50% as a group while their large-cap
counterparts in the S&P 500 Index were unchanged on average and in the S&P/Barra
Value Index gained 5%. The larger energy companies are mostly integrated, with
several divisions such as refining, marketing, and chemicals. The midcap
companies generally have much narrower focus, and are perceived as being more
dependent on the direction of commodity prices. We were fortunately
underweighted in this industry, with an 8% representation in the portfolio
compared with about 14% in the benchmark S&P/Barra Value Index.
LOOKING TO 1999
We have maintained heavier sector weightings in technology and health care than
those in the benchmark index. Prices in these areas have climbed quite high in
recent months; we may elect to reduce our weightings to be more in line with the
index if the valuations appear to become overextended. At this point midcap and
small-cap stocks look undervalued relative to their larger-cap counterparts. For
this reason we believe it is wise to keep our emphasis on these areas in the
coming months. Investors have been centered primarily on a small number of
large-cap stocks in the past year. When this focus broadens, we believe we will
benefit as those investors move into the midcap and small cap markets.
James P. Schier
Portfolio Manager
(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. Fee waivers reduced expenses of the Series
and in the absence of such waivers, the performance quoted would be reduced.
25
<PAGE>
SERIES V (VALUE SERIES)
February 15, 1999
SERIES V VS. S&P 500 AND
BARRA VALUE INDEX
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
BARRA VALUE
DATE SERIES V S&P 500 INDEX
---- -------- ---------------- ---------------
5/1/97 ...................... 10,000 10,000 10,000
6/30/97 ...................... 11,140 11,087 10,980
12/31/97 ...................... 13,130 12,264 12,125
6/30/98 ...................... 14,980 14,437 13,596
12/31/98 ...................... 15,308 15,770 13,905
$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, 1998, the value of the investment (assuming
reinvestment of all dividends and distributions) would have been $15,308. By
comparison, the same $10,000 investment would have grown to $15,770 based on the
S&P 500, and $13,905 based on the BARRA Value Index's performance.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1998(1)
1 Year Since Inception
(5-1-97)
Series V 16.59% 29.02%
(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. Fee waivers reduced expenses of the Series
and in the absence of such waivers, 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.
26
<PAGE>
SERIES X (SMALL CAP SERIES)
February 15, 1999
[STRONG CAPITAL MANAGEMENT LOGO] SUBADVISOR, STRONG CAPITAL MANAGEMENT
PORTFOLIO MANAGER, RONALD C. OGNAR
[PICTURE OF RONALD C. OGNAR]
Ronald C. Ognar
Portfolio Manager
TO OUR CONTRACTHOLDERS:
The Small Cap Series of SBL Fund outperformed its benchmark Russell 2000 Index
by a wide margin in 1998. The Series rose 11.54% during the year, while the
benchmark index declined 2.24%.1 The Lipper peer group average rose a modest
1.48% over the same time period. Significant investments in technology
contributed most to relative outperformance, propelled by high demand for
computer software and services. Semiconductors and commercial services also made
positive contributions to returns. Strong retail sales and continued consumer
spending spurred retail holdings, which added to positive results. Poor
performance by drugs and patient care stocks caused health care holdings to
underperform, which was detrimental to relative performance for the year.
Disappointing returns also resulted from investments in cyclicals, energy, and
telecommunication services.
A REVIEW OF THE 1998 EQUITY MARKETS
The year began with a broad rally in the U.S. equity markets as large, small,
and midcap stocks all posted strong first quarter gains. The rally stalled in
mid-April amid concerns about corporate earnings weakness stemming from the
Asian financial crisis. April also marked the beginning of the market divergence
between high-growth large cap stocks and the rest of the market, which punished
small caps and value stocks for much of 1998. Large cap stocks shook off the
fears and continued to climb, resulting in another record high for the S&P 500
in mid-July.
Another wave of selling ensued in late summer, again on fears that the Asian
crisis would destabilize prices and lead to slower economic growth in the U.S.
This sparked a massive flight to Treasury bonds and a tightening of credit
conditions. By early autumn small caps and value stocks were firmly entrenched
in a bear market, and even the Teflon large caps flirted with 20% declines.
Sentiment quickly reversed when a recovery in the foreign markets and three
interest rate cuts by the Federal Reserve sparked a rapid recovery in U.S.
stocks. Large cap and technology-related issues led the resurgence as investors
scrambled to put their heavy cash positions back to work. Internet stocks and
IPOs were traded up to such high levels that traditional valuation measures
became pointless. Not even presidential impeachment could restrain the bond
market rally, which finally brought small and mid cap stocks out of hibernation.
Growth stocks continued to outperform value stocks in all market cap segments as
investors paid up for companies with visible earnings.
PORTFOLIO ADJUSTMENTS DURING THE YEAR
During the year we pared our holdings in slower growing sectors such as consumer
staples, energy, and financials and shifted to higher growth sectors including
software and semiconductors. The Series emphasized more technology issues during
the period due to the sector's high earnings visibility for the coming quarters.
Health care holdings were also increased. In summary, areas of emphasis included
technology, health care, commercial services, and retail. The portfolio had
little or no exposure to basic materials, energy, or utilities.
27
<PAGE>
SERIES X (SMALL CAP SERIES)
February 15, 1999
THE OUTLOOK FOR 1999
Looking ahead to 1999, we foresee an economy characterized by steady, moderate
growth and very low inflation. Prospects for stable or rising earnings growth
should help technology, healthcare, and consumer sectors to lead the market.
Volatility will continue to be an issue in 1999 as valuations are back to peak
levels and any uncertainty can bring sudden and sharp corrections. As long as
the economy avoids a recession, corporate earnings remain positive, and the
Federal Reserve maintains its bias toward easing, high quality growth stocks
should outperform. We also expect to see broader stock leadership, which
includes the best growing mid and small cap stocks.
Ronald C. Ognar
Portfolio Manager
(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. Fee waivers reduced expenses of the Series and in the
absence of such waivers, the performance quoted would be reduced.
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 19981
1 Year Since Inception
(10-15-97)
Series X 11.54% 5.61%
(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. Fee waivers reduced expenses of the Series
and in the absence of such waivers, 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.
SERIES X VS. RUSSELL 2000 GROWTH
FUNDS INDEX & RUSSELL 2000 INDEX
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
RUSSELL 2000
GROWTH FUNDS RUSSELL 2000
DATE SERIES X INDEX INDEX
---- -------- ---------------- ---------------
10/15/97 ...................... 10,000 10,000 10,000
12/31/97 ...................... 9,580 8,967 9,444
6/30/98 ...................... 10,405 9,456 9,887
12/31/98 ...................... 10,685 9,078 9,203
$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, 1998, the value of the investment
(assuming reinvestment of all dividends and distributions) would have been
$10,685. By comparison, the same $10,000 investment would have grown to $9,078
based on the Russell 2000 Growth Funds Index, and $9,203 based on the Russell
2000 Index.
28
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES A (GROWTH)
NUMBER MARKET
PREFERRED STOCK OF SHARES VALUE
- --------------------------------------------------------------------------------
PUBLISHING - NEWSPAPER - 0.8%
News Corporation Ltd. ADR .................... 400,000 $ 9,875,000
COMMON STOCKS
- -------------
AEROSPACE/DEFENSE - 0.6%
Lockheed Martin Corporation .................. 90,000 7,627,500
AUTOMOBILES - 0.5%
Ford Motor Company ........................... 115,000 6,749,062
AUTO PARTS & EQUIPMENT - 0.7%
Dana Corporation ............................. 230,000 9,401,250
BANKS - MAJOR REGIONAL - 3.8%
Bank of New York Company, Inc. ............... 400,000 16,100,000
BankBoston Corporation ....................... 165,000 6,424,688
Northern Trust Corporation ................... 200,000 17,462,500
Wells Fargo Company .......................... 240,000 9,585,000
--------------
49,572,188
BANKS - MONEY CENTER - 1.0%
Chase Manhattan Corporation .................. 200,000 13,612,500
BEVERAGES - SOFT DRINK - 0.9%
PepsiCo, Inc. ................................ 270,000 11,053,125
BROADCAST MEDIA - 1.0%
Chancellor Media Corporation* ................ 270,000 12,926,250
BUILDING MATERIALS - 0.5%
Masco Corporation ............................ 240,000 6,900,000
COMPUTER HARDWARE - 2.6%
Compaq Computer Corporation .................. 250,000 10,484,375
International Business Machines
Corporation .............................. 60,000 11,085,000
Sun Microsystems, Inc.* ...................... 145,000 12,415,625
--------------
33,985,000
COMPUTER SOFTWARE/SERVICES - 5.0%
BMC Software, Inc.* .......................... 280,000 12,477,500
Computer Sciences Corporation* ............... 220,000 14,176,250
HBO & Company ................................ 400,000 11,475,000
Microsoft Corporation* ....................... 200,000 27,737,500
--------------
65,866,250
COMPUTERS - NETWORKING - 1.2%
Cisco Systems, Inc.* ......................... 172,500 16,010,156
DISTRIBUTION - FOOD & HEALTH - 1.0%
Cardinal Health, Inc. ........................ 165,000 12,519,375
ELECTRICAL EQUIPMENT - 2.4%
Emerson Electric Company ..................... 180,000 $ 11,261,250
General Electric Company ..................... 200,000 20,412,500
--------------
31,673,750
ELECTRONICS - SEMICONDUCTORS - 0.9%
Intel Corporation ............................ 100,000 11,856,250
ENTERTAINMENT - 0.6%
Time Warner, Inc. ............................ 130,000 8,068,125
FINANCIAL - DIVERSE - 4.1%
American General Corporation ................. 150,000 11,700,000
Fannie Mae ................................... 240,000 17,760,000
Freddie Mac .................................. 300,000 19,331,250
SLM Holding Corporation ...................... 100,000 4,800,000
--------------
53,591,250
FOODS - 2.5%
Bestfoods .................................... 240,000 12,780,000
ConAgra, Inc. ................................ 360,000 11,340,000
Ralston-Ralston Purina Group ................. 255,000 8,255,625
--------------
32,375,625
HEALTH CARE - DIVERSE - 3.3%
American Home Products Corporation ........... 260,000 14,641,250
Bristol-Myers Squibb Company ................. 150,000 20,071,875
Johnson & Johnson ............................ 100,000 8,387,500
--------------
43,100,625
HOSPITAL MANAGEMENT - 0.6%
Columbia/HCA Healthcare Corporation .......... 300,000 7,425,000
HOUSEHOLD FURNISHINGS & APPLIANCES - 0.9%
Leggett & Platt, Inc. ........................ 520,000 11,440,000
HOUSEHOLD PRODUCTS - 5.0%
Colgate-Palmolive Company .................... 130,000 12,073,750
Dial Corporation ............................. 600,000 17,325,000
Fort James Corporation ....................... 300,000 12,000,000
Newell Company ............................... 250,000 10,312,500
Procter & Gamble Company, The ................ 150,000 13,696,875
--------------
65,408,125
INSURANCE - LIFE/HEALTH - 1.0%
UNUM Corporation ............................. 225,000 13,134,375
INSURANCE - MULTILINE - 2.8%
American International Group, Inc. ........... 168,750 16,305,469
Hartford Financial Services Group, Inc. ...... 150,000 8,231,250
Lincoln National Corporation ................. 150,000 12,271,875
--------------
36,808,594
INSURANCE - PROPERTY & CASUALTY - 0.5%
Allstate Corporation ......................... 160,000 6,180,000
29 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES A (GROWTH)(CONTINUED)
NUMBER MARKET
COMMON STOCKS (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
LEISURE TIME PRODUCTS - 0.8%
Hasbro, Inc. ................................. 300,000 $ 10,837,500
LODGING - HOTELS - 1.6%
Carnival Corporation ......................... 440,000 21,120,000
MANUFACTURING - DIVERSIFIED - 6.1%
AlliedSignal, Inc. ........................... 320,000 14,180,000
Crane Company ................................ 337,500 10,188,281
Textron, Inc. ................................ 165,000 12,529,688
Tyco International, Ltd. ..................... 300,000 22,631,250
U.S. Industries, Inc. ........................ 350,000 6,518,750
United Technologies Corporation .............. 130,000 14,137,500
--------------
80,185,469
MEDICAL PRODUCTS & SUPPLIES - 4.0%
Baxter International, Inc. ................... 200,000 12,862,500
Becton, Dickinson & Company .................. 340,000 14,513,750
Boston Scientific Corporation* ............... 370,000 9,920,625
Medtronic, Inc. .............................. 200,000 14,850,000
--------------
52,146,875
NATURAL GAS - 0.9%
Coastal Corporation .......................... 340,000 11,878,750
OIL - DOMESTIC - 0.5%
USX - Marathon Group ......................... 210,000 6,326,250
OIL - INTERNATIONAL - 3.4%
Chevron Corporation .......................... 120,000 9,952,500
Mobil Corporation ............................ 160,000 13,940,000
Royal Dutch Petroleum Company ................ 200,000 9,575,000
Texaco, Inc. ................................. 200,000 10,575,000
--------------
44,042,500
OIL & GAS - REFINING & MARKETING - 0.7%
Williams Companies, Inc., The ................ 300,000 9,356,250
PAPER & FOREST PRODUCTS - 0.6%
Bowater, Inc. ................................ 200,000 8,287,500
PHARMACEUTICALS - 5.3%
Elan Corporation PLC ADR* .................... 200,000 13,912,500
Forest Laboratories, Inc.* ................... 180,000 9,573,750
Schering-Plough Corporation .................. 350,000 19,337,500
SmithKline Beecham PLC ADR ................... 200,000 13,900,000
Watson Pharmaceuticals, Inc.* ................ 200,000 12,575,000
--------------
69,298,750
PHOTOGRAPHY/IMAGING - 1.0%
Xerox Corporation ............................ 110,000 12,980,000
PUBLISHING - 1.1%
McGraw-Hill Companies, Inc. .................. 140,000 14,262,500
PUBLISHING - NEWSPAPER - 1.8%
Gannett Company, Inc. ........................ 180,000 11,913,750
Tribune Company .............................. 170,000 11,220,000
--------------
23,133,750
RETAIL - APPAREL - 1.2%
TJX Companies, Inc. .......................... 540,000 $ 15,660,000
RETAIL - BUILDING SUPPLIES - 1.3%
Lowe's Companies, Inc. ....................... 125,000 6,398,437
Sherwin-Williams Company ..................... 350,000 10,281,250
--------------
16,679,687
RETAIL - DEPARTMENT STORES - 1.6%
Federated Department Stores, Inc.* ........... 200,000 8,712,500
Saks, Inc.* .................................. 400,000 12,625,000
--------------
21,337,500
RETAIL - DRUG STORES - 2.7%
Rite Aid Corporation ......................... 400,000 19,825,000
Walgreen Company ............................. 250,000 14,640,625
--------------
34,465,625
RETAIL - FOOD CHAINS - 2.2%
Kroger Company, The* ......................... 160,000 9,680,000
Safeway, Inc.* ............................... 320,000 19,500,000
--------------
29,180,000
RETAIL - GENERAL MERCHANDISE - 1.4%
Dayton Hudson Corporation .................... 200,000 10,850,000
Kmart Corporation* ........................... 500,000 7,656,250
--------------
18,506,250
RETAIL - SPECIALTY - 2.2%
Payless ShoeSource, Inc.* .................... 225,000 10,659,375
Staples, Inc.* ............................... 400,000 17,475,000
--------------
28,134,375
SERVICES - ADVERTISING/MARKETING - 1.4%
Omnicom Group, Inc. .......................... 320,000 18,560,000
SERVICES - COMMERCIAL & CONSUMER - 1.2%
Dun & Bradstreet Corporation ................. 130,000 4,103,125
Viad Corporation ............................. 380,000 11,542,500
--------------
15,645,625
TELECOMMUNICATIONS - 1.5%
GTE Corporation .............................. 165,000 11,127,188
SBC Communications, Inc. ..................... 170,000 9,116,250
--------------
20,243,438
TELECOMMUNICATIONS - LONG DISTANCE - 3.4%
MCI WorldCom, Inc.* .......................... 250,000 17,937,500
Sprint Corporation ........................... 175,000 14,721,875
Sprint PCS* .................................. 500,000 11,562,500
--------------
44,221,875
WASTE MANAGEMENT - 0.9%
Waste Management, Inc. ....................... 250,000 11,656,250
--------------
Total common stocks - 92.2% .............. 1,205,431,094
30 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES A (GROWTH)(CONTINUED)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
COMMERCIAL PAPER OF SHARES VALUE
- --------------------------------------------------------------------------------
ELECTRONICS - 0.0%
Emerson Electric Company,
5.375% - 2-11-99 ......................... $ 400,000 $ 397,551
ENTERTAINMENT - 0.1%
Walt Disney Company, Inc., The
5.025% - 1-14-99 ......................... $1,400,000 1,397,459
FINANCIAL SERVICES - 0.2%
Toyota Motor Credit Corporation, ............. $2,750,000
5.075% - 1-08-99 ......................... 949,459
5.165% - 1-08-99 ......................... 499,463
5.66% - 1-08-99 .......................... 1,298,604
--------------
2,747,526
--------------
Total commercial paper - 0.3% ............ 4,542,536
--------------
Total investments - 93.3% ................ 1,219,848,630
Cash and other assets,
less liabilities - 6.7% ................ 87,483,363
--------------
Total net assets - 100.0% ................ $1,307,331,993
==============
SERIES B (GROWTH-INCOME)
PREFERRED STOCK
- ---------------
BROADCAST MEDIA - 0.2%
Primedia, Inc. ............................... 30,000 $ 3,127,500
CORPORATE BONDS
- ---------------
BANKING - 0.2%
Homeside, Inc., 11.25% - 2003 ................ $1,335,000 1,570,294
BROKERAGE - 0.3%
S I Financing Trust, Inc.,
9.50% - 2026(1) .......................... 134,000 3,567,750
CHEMICALS - 0.0%
Envirodyne Industries, Inc.,
12.00% - 2000 ............................ $ 205,000 205,256
FOODS - 0.1%
Foodmaker Corporation,
9.75% - 2003 ............................. $1,250,000 1,312,500
MEDIA - CABLE - 0.1%
CF Cable TV, Inc., 11.625% - 2005 ............ $1,390,000 1,530,737
MEDIA - NONCABLE - 0.1%
Golden Books Publishing, Inc.,
7.65% - 2002(8)........................... $3,500,000 $ 1,102,500
METALS - 0.1%
Wheeling-Pittsburgh Corporation
9.25% - 2007 ............................. $1,000,000 927,500
TOBACCO - 0.0%
Standard Commercial Tobacco
Corporation, 8.875% - 2005 ............... $ 350,000 343,438
--------------
Total corporate bonds - 0.9% ............. 10,559,975
COMMON STOCKS
- -------------
AEROSPACE/DEFENSE - 1.0%
Boeing Company, The .......................... 384,100 12,531,262
AGRICULTURAL PRODUCTS - 0.5%
Archer-Daniels-Midland Company ............... 315,000 5,414,062
AUTO PARTS & EQUIPMENT - 1.5%
Dana Corporation ............................. 100,000 4,087,500
Genuine Parts Company ........................ 250,000 8,359,375
TRW, Inc. .................................... 94,000 5,281,625
--------------
17,728,500
AUTOMOBILES - 1.0%
General Motors Corporation ................... 163,000 11,664,687
BANKS - MAJOR REGIONAL - 2.8%
Banc One Corporation ......................... 213,000 10,876,313
Bankers Trust Corporation .................... 100,000 8,543,750
J.P. Morgan & Company, Inc. .................. 130,000 13,658,125
--------------
33,078,188
BEVERAGES - SOFT DRINK - 0.7%
PepsiCo, Inc. ................................ 200,000 8,187,500
BUILDING MATERIALS - 0.6%
Owens Corning Corporation .................... 200,000 7,087,500
CHEMICALS - BASIC - 2.1%
E.I. du Pont de Nemours & Company ............ 225,000 11,939,062
FMC Corporation* ............................. 100,000 5,600,000
Praxair, Inc. ................................ 200,000 7,050,000
--------------
24,589,062
COMMUNICATION EQUIPMENT - 0.8%
Motorola, Inc. ............................... 150,000 9,159,375
COMPUTER HARDWARE - 0.5%
Sequent Computer Systems, Inc.* .............. 500,000 6,031,250
COMPUTER SOFTWARE/SERVICES - 1.0%
Autodesk, Inc. ............................... 125,000 5,335,938
Cambridge Technology, Inc.* .................. 300,000 6,637,500
--------------
11,973,438
31 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES B (GROWTH-INCOME)(CONTINUED)
NUMBER MARKET
COMMON STOCKS (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 0.6%
Crown Cork & Seal Company, Inc. .............. 225,000 $ 6,932,812
ELECTRIC COMPANIES - 4.5%
Allegheny Energy, Inc. ....................... 171,000 5,899,500
Baltimore Gas & Electric Company ............. 250,000 7,718,750
Carolina Power & Light Company ............... 68,000 3,200,250
GPU, Inc. .................................... 76,100 3,362,669
Kansas City Power & Light Company ............ 303,200 8,982,300
LG&E Energy Corporation ...................... 100,000 2,831,250
Northern States Power Company ................ 200,000 5,550,000
Potomac Electric Power Company ............... 250,000 6,578,125
Southern Company ............................. 210,000 6,103,125
Texas Utilities Company ...................... 100,000 4,668,750
--------------
54,894,719
ELECTRICAL EQUIPMENT - 0.9%
Emerson Electric Company ..................... 70,000 4,379,375
Hubbell, Inc. (Cl.B) ......................... 180,000 6,840,000
--------------
11,219,375
ELECTRONICS - DEFENSE - 1.2%
Raytheon Company (Cl.A) ...................... 9,565 494,391
Raytheon Company (Cl.B) ...................... 260,600 13,876,950
--------------
14,371,341
ELECTRONICS - DISTRIBUTION - 0.7%
W.W. Grainger, Inc. .......................... 188,800 7,858,800
ELECTRONICS - SEMICONDUCTORS - 0.3%
National Semiconductor Corporation* .......... 300,000 4,050,000
FOODS - 2.8%
Chiquita Brands International, Inc. .......... 500,000 4,781,250
ConAgra, Inc. ................................ 200,000 6,300,000
General Mills, Inc. .......................... 162,100 12,603,275
Tyson Foods, Inc. (Cl.A) ..................... 443,900 9,432,875
--------------
33,117,400
FOOTWEAR - 0.2%
Nike, Inc. (Cl.B) ............................ 50,000 2,028,125
GAMING & LOTTERY - 0.5%
Circus Circus Enterprises, Inc.* ............. 500,000 5,718,750
GOLD & PRECIOUS METALS MINING - 1.5%
Barrick Gold Corporation ..................... 529,700 10,329,150
Newmont Mining Corporation ................... 300,000 5,418,750
Placer Dome, Inc. ............................ 170,500 1,960,750
--------------
17,708,650
HEALTH CARE - LONG TERM CARE - 1.0%
HEALTHSOUTH Corporation* ..................... 300,000 4,631,250
Integrated Health Services, Inc. ............. 500,000 7,062,500
--------------
11,693,750
HEALTH CARE - MANAGED CARE - 2.8%
Humana, Inc.* ................................ 500,000 $ 8,906,250
Oxford Health Plans, Inc.* ................... 400,000 5,950,000
United Healthcare Corporation ................ 434,500 18,710,656
--------------
33,566,906
HOSPITAL MANAGEMENT - 0.4%
Columbia/HCA Healthcare
Corporation .............................. 200,000 4,950,000
HOUSEHOLD FURNISHINGS & APPLIANCES - 0.9%
Whirlpool Corporation ........................ 200,000 11,075,000
HOUSEHOLD PRODUCTS - 1.0%
Kimberly-Clark Corporation ................... 230,000 12,535,000
INSURANCE - LIFE/HEALTH - 0.7%
Aetna, Inc. .................................. 100,000 7,862,500
INSURANCE - MULTILINE - 0.4%
Citigroup, Inc. .............................. 100,000 4,950,000
INSURANCE - PROPERTY - 2.6%
Chubb Corporation ............................ 125,000 8,109,375
Safeco Corporation ........................... 250,000 10,734,375
St. Paul Companies, Inc. ..................... 343,400 11,933,150
--------------
30,776,900
IRON & STEEL - 0.6%
USX-U.S. Steel Group, Inc. ................... 300,000 6,900,000
LEISURE TIME PRODUCTS - 0.4%
Callaway Golf Company ........................ 450,000 4,612,500
LODGING - HOTELS - 0.2%
Hilton Hotels Corporation .................... 100,000 1,912,500
MACHINERY - DIVERSE - 1.3%
Deere & Company .............................. 350,000 11,593,750
Milacron, Inc. ............................... 200,000 3,850,000
--------------
15,443,750
MANUFACTURING - DIVERSIFIED - 1.1%
Tenneco, Inc. ................................ 400,000 13,625,000
MEDICAL PRODUCTS & SUPPLIES - 2.6%
Baxter International, Inc. ................... 200,000 12,862,500
DENTSPLY International, Inc. ................. 300,000 7,725,000
St. Jude Medical, Inc.* ...................... 400,000 11,075,000
--------------
31,662,500
NATURAL GAS - 3.7%
Consolidated Natural Gas Company ............. 200,000 10,800,000
Equitable Resources, Inc. .................... 300,000 8,737,500
People's Energy Corporation .................. 350,000 13,956,250
Sonat, Inc. .................................. 400,000 10,825,000
--------------
44,318,750
32 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES B (GROWTH-INCOME)(CONTINUED)
NUMBER MARKET
COMMON STOCKS (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.2%
Corporate Express, Inc.* ..................... 560,000 $ 2,905,000
OIL - DOMESTIC - 1.6%
PennzEnergy Company .......................... 250,000 4,078,125
Pennzoil-Quaker State Company ................ 250,000 3,750,000
Unocal Corporation ........................... 400,000 11,675,000
--------------
19,503,125
OIL - INTERNATIONAL - 3.1%
Mobil Corporation ............................ 100,000 8,712,500
Royal Dutch Petroleum Company ................ 596,500 28,557,438
--------------
37,269,938
OIL & GAS DRILLING & EQUIPMENT - 4.0%
Baker Hughes, Inc. ........................... 400,000 7,075,000
Halliburton Company .......................... 514,500 15,242,063
Schlumberger, Ltd. ........................... 544,400 25,110,450
--------------
47,427,513
OIL & GAS EXPLORATION & PRODUCTION - 4.4%
Apache Corporation ........................... 200,000 5,062,500
Burlington Resources, Inc. ................... 245,000 8,774,063
Enron Oil & Gas Company ...................... 500,000 8,625,000
Forcenergy, Inc.* ............................ 350,000 918,750
Kerr-McGee Corporation ....................... 269,700 10,316,025
MCN Energy Group, Inc. ....................... 324,000 6,176,250
Phillips Petroleum Company ................... 300,000 12,787,500
--------------
52,660,088
PAPER & FOREST PRODUCTS - 2.6%
Boise Cascade Corporation .................... 200,000 6,200,000
Champion International Corporation ........... 150,000 6,075,000
International Paper Company .................. 100,000 4,481,250
Louisiana-Pacific Corporation ................ 500,000 9,156,250
Rayonier, Inc. ............................... 130,000 5,971,875
--------------
31,884,375
PERSONAL CARE - 0.0%
Alberto-Culver Company ....................... 5,400 144,112
PHARMACEUTICALS - 0.8%
Teva Pharmaceutical
Industries, Ltd. ADR ..................... 250,000 10,171,875
PHOTOGRAPHY / IMAGING - 1.2%
Eastman Kodak Company ........................ 150,000 10,800,000
Polaroid Corporation ......................... 200,000 3,737,500
--------------
14,537,500
PUBLISHING - 0.8%
Dow Jones & Company, Inc. .................... 200,000 9,625,000
RAILROADS - 1.8%
Burlington Northern Santa Fe
Corporation .............................. 270,000 $ 9,112,500
Norfolk Southern Corporation ................. 100,000 3,168,750
Union Pacific Corporation .................... 200,000 9,012,500
--------------
21,293,750
REAL ESTATE INVESTMENT TRUSTS - 3.2%
Camden Property Trust ........................ 200,000 5,200,000
Highwoods Properties, Inc. ................... 120,000 3,090,000
Hospitality Properties Trust ................. 300,000 7,237,500
HRPT Properties Trust ........................ 300,000 4,218,750
Liberty Property Trust ....................... 410,000 10,096,250
Simon Property Group, Inc. ................... 137,800 3,927,300
United Dominion Realty Trust, Inc. ........... 400,000 4,125,000
--------------
37,894,800
RESTAURANTS - 1.3%
Cracker Barrel Old Country
Store, Inc. .............................. 125,000 2,914,063
Landry's Seafood Restaurants, Inc.* .......... 560,000 4,200,000
Wendy's International, Inc. .................. 400,000 8,725,000
--------------
15,839,063
RETAIL - APPAREL - 0.4%
Nordstrom, Inc. .............................. 150,000 5,203,125
RETAIL - DEPARTMENT STORES - 2.3%
Dillard's Inc. ............................... 210,000 5,958,750
Harcourt General, Inc. ....................... 150,000 7,978,125
J.C. Penney Company, Inc. .................... 300,000 14,062,500
--------------
27,999,375
RETAIL - GENERAL MERCHANDISE - 0.5%
Consolidated Stores Corporation* ............. 300,000 6,056,250
RETAIL SPECIALTY - 0.4%
Toys "R" Us, Inc.* ........................... 250,000 4,218,750
SERVICES - COMMERCIAL & CONSUMER - 0.7%
Angelica Corporation ......................... 80,000 1,490,000
Laidlaw, Inc. ................................ 650,000 6,540,625
--------------
8,030,625
SERVICES - DATA PROCESSING - 1.9%
Electronic Data Systems Corporation .......... 200,000 10,050,000
First Data Corporation ....................... 412,400 13,067,925
--------------
23,117,925
TELECOMMUNICATIONS - 4.3%
ALLTEL Corporation ........................... 100,000 5,981,250
Bell Atlantic Corporation .................... 340,000 19,316,250
GTE Corporation .............................. 300,000 20,231,250
SBC Communications, Inc. ..................... 100,000 5,362,500
--------------
50,891,250
TELECOMMUNICATIONS - LONG DISTANCE - 2.2%
AT&T Corporation ............................. 350,000 26,337,500
33 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES B (GROWTH-INCOME)(CONTINUED)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
COMMON STOCKS (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
TEXTILES - APPAREL - 0.5%
Russell Corporation .......................... 300,000 $ 6,093,750
TOBACCO - 0.9%
UST, Inc. .................................... 300,000 10,462,500
TRUCKING - 0.4%
Werner Enterprises, Inc. ..................... 300,000 5,306,250
WASTE MANAGEMENT - 0.7%
Browning-Ferris Industries ................... 300,000 8,531,250
--------------
Total common stocks - 85.6% .............. 1,024,634,541
GOVERNMENT SECURITIES
- ---------------------
U.S. GOVERNMENT SECURITIES - 8.7%
U.S. Treasury Notes,
6.125% - 2000 ............................ $50,000,000 51,229,000
6.50% - 2001 ............................. $50,000,000 52,317,000
--------------
103,546,000
TEMPORARY CASH INVESTMENTS
- --------------------------
DISCOUNT NOTES - 3.3%
Federal Home Loan Mortgage,
4.98% - 1999 .......................... $40,000,000 39,685,200
--------------
Total investments - 98.7% ................ 1,181,553,216
Cash and other assets,
less liabilities - 1.3% ............... 15,425,559
--------------
Total net assets - 100.0% ................ $1,196,978,775
==============
SERIES C (MONEY MARKET)
PRINCIPAL MARKET
COMMERCIAL PAPER AMOUNT VALUE
- --------------------------------------------------------------------------------
BEVERAGES - 3.9%
Coca Cola Company,
5.13% - 1-11-99 .......................... $3,000,000 $ 2,995,725
Pepsi-Cola, Inc.,
5.10% - 1-13-99 .......................... $2,000,000 1,996,600
--------------
4,992,325
BROKERAGE - 6.9%
Bear Stearns, Inc.,
5.13% - 2-19-99 .......................... $5,350,000 5,316,562
Merrill Lynch & Company, Inc., ............... $3,500,000
5.10% - 2-12-99 .......................... 994,710
5.08% - 2-17-99 .......................... 994,030
5.02% - 3-22-99 .......................... 1,484,490
--------------
8,789,792
BUSINESS SERVICES - 2.3%
General Electric Capital Corporation, ........ $2,900,000
5.07% - 1-14-99 .......................... $ 1,298,206
5.13% - 1-25-99 .......................... 1,046,987
5.07% - 1-27-99 .......................... 548,273
--------------
2,893,466
COMBINATION GAS & ELECTRIC - 5.5%
Dayton Power & Light Company,
5.08% - 3-23-99 .......................... 3,850,000 3,809,690
South Carolina Electric & Gas
Company, 5.33% - 1-28-99 ................. 3,300,000 3,286,808
--------------
7,096,498
COMPUTER SYSTEMS - 1.9%
International Business Machines Corporation,
5.02% - 2-4-99 ........................... 2,500,000 2,489,375
ELECTRIC UTILITIES - 12.9%
Carolina Power & Light Company, .............. 3,650,000
5.13% - 2-3-99 ........................... 2,987,580
5.10% - 2-26-99 .......................... 645,320
CLECO Corporation, ........................... 3,100,000
5.15% - 2-9-99 ........................... 1,143,584
5.40% - 2-9-99 ........................... 1,242,688
4.55% - 2-17-99 .......................... 695,779
Duke Energy Corporation,
5.20% - 2-9-99 ........................... 1,700,000 1,690,423
Florida Power Corporation,
5.25% - 1-12-99 .......................... 1,000,000 998,396
Georgia Power Company, ....................... 2,950,000
5.33% - 1-27-99 .......................... 697,305
5.15% - 2-22-99 .......................... 2,235,015
OGE Energy Corporation,
5.95% - 1-6-99 ........................... 1,250,000 1,248,967
Progress Capital Holdings, Inc.,
5.25% - 1-21-99 .......................... 2,900,000 2,891,542
--------------
16,476,599
ELECTRICAL EQUIPMENT - 2.8%
General Electric Company,
5.01% - 1-29-99........................... 3,600,000 3,587,724
ELECTRONICS - 4.0%
Avnet, Inc., ................................. 3,700,000
5.35% - 1-15-99 .......................... 1,198,164
5.08% - 3-12-99 .......................... 2,477,275
Emerson Electric Company,
5.05% - 2-12-99 .......................... 1,500,000 1,492,065
--------------
5,167,504
ENTERTAINMENT - 2.0%
Walt Disney Company, The,
5.05% - 1-14-99 .......................... 2,600,000 2,596,386
34 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES C (MONEY MARKET)(CONTINUED)
PRINCIPAL MARKET
COMMERCIAL PAPER (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------
FINANCIAL SERVICES - 4.6%
Toyota Motor Credit Corporation, ............. $ 5,850,000
5.09% - 1-8-99 ........................... $ 3,847,806
5.06% - 2-5-99 ........................... 1,991,320
--------------
5,839,126
FOOD SERVICES - 2.6%
General Mills, ............................... 3,350,000
5.13% - 1-7-99 ........................... 2,498,925
5.12% - 1-11-99 .......................... 849,150
--------------
3,348,075
LEASING - 2.9%
International Lease Finance Corporation,
5.10% - 2-16-99 .......................... 3,750,000 3,728,138
NATURAL GAS - 2.3%
Consolidated Natural Gas Company,
5.15% - 1-25-99 .......................... 3,000,000 2,989,700
NUCLEAR - 0.2%
Bayshore Fuel Company,
5.38% - 1-14-99 .......................... 200,000 199,611
PHOTOGRAPH/IMAGING - 0.8%
Eastman Kodak Company,
5.28% - 1-13-99 .......................... 1,000,000 998,240
PUBLISHING - 1.1%
McGraw-Hill Company, Inc.,
5.15% - 2-23-99 .......................... 1,400,000 1,390,480
TELECOMMUNICATIONS - 3.8%
Bell Atlantic Network Funding Corporation,
5.23% - 1-5-99 ........................... 1,950,000 1,948,867
Bellsouth Telecommunications, Inc.,
5.05% - 2-4-99 ........................... 3,000,000 2,987,370
--------------
4,936,237
--------------
Total commercial paper - 60.5% ........... 77,519,276
U.S. GOVERNMENT & AGENCIES
- --------------------------
FEDERAL HOME BANK - 2.3%
Federal Home Loan Bank,
5.12% - 11-5-99 .......................... 3,000,000 3,000,000
FEDERAL MORTGAGE CORPORATION - 10.5%
Federal Mortgage Corporation, ................ 13,500,000
4.5625% - 1-4-99 ......................... 3,498,687
5.4367% - 1-29-99 ........................ 4,980,244
5.0795% - 2-8-99 ......................... 4,976,450
--------------
13,455,381
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 12.4%
Federal National Mortgage
Association, ............................. $16,100,000
4.62367% - 4-1-99 ........................ $ 3,459,645
4.9185% - 4-5-99 ......................... 2,568,124
4.91736% - 4-8-99 ........................ 4,937,700
4.8768% - 5-7-99 ......................... 4,919,700
--------------
15,885,169
SMALL BUSINESS ASSOCIATION POOLS - 10.8%
#502406, 5.50% - 2006(2).................. 374,096 374,096
#502163, 5.75% - 2012(2).................. 753,498 753,498
#502353, 5.50% - 2018(2).................. 97,722 97,722
#503176, 5.375% - 2020(2)................. 586,970 589,905
#503459, 5.25% - 2021(2).................. 1,647,836 1,641,656
#503283, 5.25% - 2021(2).................. 1,478,121 1,471,885
#503295, 5.75% - 2021(2).................. 1,142,717 1,144,146
#503303, 5.75% - 2021(2).................. 1,261,347 1,262,924
#503308, 5.25% - 2021(3).................. 952,410 952,410
#503343, 5.375% - 2021(2)................. 1,451,523 1,451,523
#503347, 5.375% - 2021(2)................. 4,021,476 4,021,476
--------------
13,761,241
--------------
Total U.S. government & agencies - 36.0% . 46,101,791
MISCELLANEOUS ASSETS
- --------------------
FUNDING AGREEMENTS - 4.7%
Security Life of Denver Insurance Company,
5.57656% - 2001(2)........................ 3,000,000 3,000,000
Travelers Insurance Company,
5.5666% - 2001(2)......................... 3,000,000 3,000,000
--------------
6,000,000
--------------
Total investments - 101.2% ............... 129,621,067
Liabilities, less cash and other assets -(1.2%) (1,537,661)
--------------
Total net assets - 100.0% ................ $ 128,083,406
==============
35 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES D (WORLDWIDE EQUITY)
NUMBER MARKET
COMMON STOCKS OF SHARES VALUE
- --------------------------------------------------------------------------------
CANADA - 3.5%
Bombardier, Inc. (Cl.B) ...................... 253,100 $ 3,625,130
Imax Corporation ADR* ........................ 268,300 8,484,988
--------------
12,110,118
FRANCE - 10.6%
AXA-UAP ...................................... 30,300 4,393,505
Canal Plus ................................... 48,400 13,212,918
Cap Gemini S.A ............................... 46,000 7,386,416
Carrefour S.A ................................ 4,500 3,398,643
Coflexip S.A ................................. 16,900 542,913
Societe BIC S.A .............................. 80,000 4,439,512
Vivendi ...................................... 15,421 4,002,802
--------------
37,376,709
GERMANY - 13.0%
Allianz AG ................................... 9,920 3,639,001
Fresenius AG ................................. 30,000 6,322,046
Fresenius Medical Care AG .................... 30,900 2,179,845
Porsche AG ................................... 4,850 11,152,438
ProSieben Media AG ........................... 20,000 958,213
Rhoen-Klinikum AG ............................ 43,930 4,483,729
Systeme, Anwendungen, Produkte
in der Datenverarbeitung ................... 5,000 2,387,128
Volkswagen AG ................................ 112,000 8,943,324
Wella AG ..................................... 6,500 5,463,497
--------------
45,529,221
GREECE - 1.2%
Hellenic Telecommunications
Organization S.A ......................... 154,275 4,104,084
HONG KONG - 0.2%
Television Broadcasts, Ltd. .................. 264,000 681,528
IRELAND - 1.8%
Elan Corporation PLC ADR* .................... 88,700 6,170,194
ITALY - 5.2%
Banca Populare di Spoleto .................... 154,000 2,727,082
Credito Italiano SpA* ........................ 705,000 4,187,822
Olivetti SpA* ................................ 1,550,000 5,404,981
Telecom Italia SpA ........................... 775,000 5,733,979
--------------
18,053,864
JAPAN - 2.6%
Credit Saison Company, Ltd. .................. 115,700 2,856,600
Nichiei Company, Ltd. ........................ 11,600 925,532
Nintendo Company, Ltd. ....................... 53,500 5,193,484
--------------
8,975,616
NETHERLANDS - 2.8%
Koninklijke Ahold NV ......................... 169,600 $ 6,271,775
Koninklijke (Royal) Philips
Electronics NV ........................... 38,500 2,584,856
STMicroelectronics NV* ....................... 13,100 1,022,619
--------------
9,879,250
PORTUGAL - 1.9%
Banco Espirito Santo de Comercial
de Lisboa, S.A ........................... 54,000 1,676,045
Brisa - Auto Estradas de Portugal S.A ........ 22,000 1,295,051
Sonae Investimentos - Sociedade
Gestora de Participacoes
Sociais S.A .............................. 75,000 3,646,174
--------------
6,617,270
SINGAPORE - 1.5%
Dairy Farm International
Holdings, Ltd. ........................... 2,850,000 3,277,500
Singapore Press Holdings, Ltd. ............... 198,800 2,156,679
--------------
5,434,179
SWEDEN - 1.0%
Autoliv, Inc. ................................ 50,500 1,812,961
Telefonaktiebolaget LM Ericsson .............. 79,300 1,888,142
--------------
3,701,103
SWITZERLAND - 2.9%
Adecco S.A ................................... 4,750 2,168,366
Compagnie Financiere
Richemont AG ................................ 1,550 2,191,554
UBS AG ....................................... 19,200 5,899,090
--------------
10,259,010
UNITED KINGDOM - 18.6%
British Petroleum
Company PLC ADR ............................. 15,500 1,389,187
Cable & Wireless
Communications PLC* ......................... 122,700 1,121,795
Cadbury Schweppes PLC ........................ 465,800 7,935,980
Carlton Communications PLC ................... 855,000 7,838,245
Dixons Group PLC ............................. 236,200 3,307,007
Energis PLC* ................................. 186,700 4,177,993
George Wimpey PLC ............................ 1,121,100 2,023,836
Glaxo Wellcome PLC ........................... 38,600 2,682,700
Granada Group PLC ............................ 153,500 2,723,770
Hanson PLC* .................................. 510,000 4,032,677
National Westminster Bank PLC ................ 204,000 3,930,428
Provident Financial PLC ...................... 277,798 4,011,899
Rentokil Initial PLC ......................... 786,000 5,878,322
Rolls-Royce PLC .............................. 1,150,000 4,726,024
Royal Bank of Scotland Group PLC ............. 103,100 1,658,770
Telewest Communications PLC* ................. 1,400,000 4,012,254
WPP Group PLC ................................ 635,000 3,845,707
--------------
65,296,594
36 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES D (WORLDWIDE EQUITY)(CONTINUED)
NUMBER MARKET
COMMON STOCKS (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
UNITED STATES - 30.0%
Advanced Micro Devices, Inc.* ................ 154,200 $ 4,462,163
Agouron Pharmaceuticals, Inc.* ............... 1,100 64,625
American Express Company ..................... 30,800 3,149,300
American International Group, Inc. ........... 15,000 1,449,375
Amgen, Inc.* ................................. 27,000 2,823,187
Associates First Capital Corporation ......... 61,600 2,610,300
AT&T Corporation ............................. 61,700 4,642,925
Bristol-Myers Squibb Company ................. 10,100 1,351,506
Cardinal Health, Inc. ........................ 50 3,794
Chubb Corporation, The ....................... 38,600 2,504,175
Circuit City Stores - Circuit City Group ..... 64,200 3,205,988
Cisco Systems, Inc.* ......................... 43,000 3,990,937
EMC Corporation* ............................. 1,900 161,500
Fannie Mae ................................... 61,700 4,565,800
General Instrument Corporation* .............. 154,200 5,233,162
Genzyme Corporation* ......................... 77,000 3,830,750
Gilead Sciences, Inc.* ....................... 71,100 2,919,544
Hasbro, Inc. ................................. 107,900 3,897,888
Home Depot, Inc. ............................. 41,600 2,545,400
ICICI, Ltd. .................................. 23,900 132,308
Incyte Pharmaceuticals, Inc.* ................ 13,800 515,775
International Business Machines
Corporation ................................ 27,000 4,988,250
International Flavors & Fragrances, Inc. ..... 49,300 2,178,444
International Game Technology ................ 108,900 2,647,631
Lucent Technologies, Inc. .................... 7,800 858,000
Marsh and McLennan Companies, Inc. ........... 50 2,922
McDermott International, Inc. ................ 77,100 1,903,406
MCI WorldCom, Inc.* .......................... 102,700 7,368,725
Merrill Lynch & Company, Inc. ................ 5,700 380,475
Microsoft Corporation* ....................... 21,400 2,967,913
Millennium Pharmaceuticals, Inc.* ............ 39,500 1,022,062
Morgan Stanley Dean Witter & Company ......... 5,900 418,900
National Semiconductor Corporation* .......... 300,000 4,050,000
Pfizer, Inc. ................................. 23,100 2,897,606
QUALCOMM, Inc.* .............................. 77,100 3,994,744
Quintiles Transnational Corporation* ......... 36,500 1,948,187
Scientific-Atlanta, Inc. ..................... 144,000 3,285,000
Service Corporation International ............ 60,300 2,295,169
Sun Microsystems, Inc.* ...................... 77,100 6,601,687
Transocean Offshore, Inc. .................... 38,800 1,040,325
--------------
104,909,848
--------------
Total common stocks - 96.8% .............. 339,098,588
NUMBER MARKET
PREFERRED STOCK OF SHARES VALUE
- --------------------------------------------------------------------------------
GERMANY - 0.2%
Sto Ag Vorzug ................................ 1,246 $ 306,712
--------------
Total investments - 97.0% ................ 339,405,300
Cash and other assets, less liabilities - 3.0% 10,388,925
--------------
Total net assets - 100.0% ................ $ 349,794,225
==============
At December 31, 1998, Series D's investment concentration by industry was as
follows:
Advertising ..................................................... 1.2%
Aerospace/Defense ............................................... 1.5%
Auto Parts & Supplies ........................................... 0.5%
Automobiles ..................................................... 5.7%
Banks & Credit .................................................. 5.7%
Broadcast Media ................................................. 6.5%
Building & Construction ......................................... 1.7%
Communications .................................................. 2.9%
Computer Software ............................................... 1.5%
Computer Systems ................................................ 6.6%
Cosmetics ....................................................... 1.6%
Drugs ........................................................... 3.6%
Electronics ..................................................... 2.0%
Engineering ..................................................... 0.5%
Entertainment ................................................... 4.3%
Financial Services .............................................. 6.5%
Food Wholesalers ................................................ 4.1%
Health Care ..................................................... 6.4%
Household Products .............................................. 0.6%
Industrial Services ............................................. 1.1%
Insurance ....................................................... 3.4%
Manufacturing ................................................... 1.0%
Medical ......................................................... 1.3%
Office Equipment ................................................ 2.8%
Oil ............................................................. 0.8%
Retail .......................................................... 4.5%
Semiconductors .................................................. 1.5%
Services ........................................................ 3.7%
Telecommunications .............................................. 11.0%
Tobacco ......................................................... 0.6%
Toys & Sporting Goods ........................................... 1.5%
Transportation .................................................. 0.4%
Cash & other assets, less liabilities ........................... 3.0%
-----
100.0%
=====
37 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES E (HIGH GRADE INCOME)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
CORPORATE BONDS OF SHARES VALUE
- --------------------------------------------------------------------------------
AUTOMOTIVE - 2.8%
Chrysler Corporation,
7.45% - 2027 ............................. $2,375,000 $ 2,737,188
Federal-Mogul Corporation,
7.75% - 2006 ............................. $ 250,000 250,625
7.785% - 2010 ............................ $ 250,000 246,875
Ford Motor Company,
7.25% - 2008 ............................. $1,000,000 1,105,000
--------------
4,339,688
BANKING - 2.5%
B.F. Saul REIT, 9.75% - 2008 ................. $ 250,000 229,375
Homeside, Inc., 11.25% - 2003 ................ $1,250,000 1,470,313
Washington Mutual Capital,
8.375% - 2027(1).......................... $2,000,000 2,230,000
--------------
3,929,688
BEVERAGE - 1.7%
Anheuser-Busch Companies, Inc.,
7.10% - 2007 ................................. $2,425,000 2,658,406
BROKERAGE - 1.8%
SI Financing Trust, Inc.,
9.50% - 2026(1)........................... 102,610 2,731,991
BUILDING MATERIALS - 2.3%
LaFarge Corporation, 6.375% - 2005 ........... $1,000,000 1,031,250
Martin Marietta Material,
5.875% - 2008 ............................ $1,000,000 988,750
Nortek, Inc., 8.875% - 2008 .................. $ 500,000 507,500
St. Paul Companies, Inc.,
6.38% - 2008 ............................. $1,000,000 996,250
--------------
3,523,750
CONSTRUCTION MACHINERY - 0.9%
AGCO Corporation, 8.5% - 2006 ................ $ 500,000 478,750
Columbus Mckinnon Corporation,
8.5% - 2008 .............................. $ 500,000 471,250
Titan Wheel International, Inc.,
8.75% - 2007 ............................. $ 500,000 480,000
--------------
1,430,000
CONSUMER CYCLICALS - OTHER - 0.2%
American ECO Corporation,
9.625% - 2008 ............................ $ 500,000 336,250
ENERGY - OTHER - 0.2%
P&L Coal Holdings Corporation,
8.875% - 2008 ............................ $ 300,000 306,000
ENTERTAINMENT - 0.7%
Paramount Communications,
7.5% - 2023 .............................. $1,000,000 1,018,750
FINANCIAL COMPANIES - 7.9%
American RE Capital, 8.50% - 2025(1).......... 46,000 $ 1,190,250
Associates Corporation, N.A.,
7.55% - 2006 ............................. $1,000,000 1,116,250
CB Richard Ellis Service,
8.875% - 2006 ............................ $ 500,000 488,750
Countrywide Capital Industries, Inc.,
8.00% - 2026(1)........................... $1,000,000 1,033,750
General Electric Capital Corporation,
8.625% - 2008 ............................ $1,750,000 2,150,313
Merrill Lynch & Company, Inc.,
7.375% - 2006 ............................ $2,500,000 2,750,000
Morgan Stanley Dean Witter Discover
& Company, 7.25% - 2023 .................. $2,500,000 2,587,500
PNC Funding Corporation,
7.75% - 2004 ............................. $ 800,000 880,000
--------------
12,196,813
FINANCE - OTHER - 1.3%
EOP Operating LP, REIT,
6.625% - 2005 ............................ $2,050,000 2,057,687
FOOD - 5.0%
Archer-Daniels-Midland Company,
8.875% - 2011 ............................ $2,000,000 2,500,000
Cargill Corporation, 6.15% - 2008 ............ $2,000,000 2,090,000
Chiquita Brands International, Inc.,
10.25% - 2006 ............................ $ 500,000 520,625
ConAgra, Inc., 6.70% - 2027 .................. $2,000,000 2,102,500
Nash Finch Company, 8.50% - 2008 ............. $ 500,000 475,625
--------------
7,688,750
GAMING - 2.4%
Boyd Gaming Corporation,
9.25% - 2003 ............................. $ 500,000 515,000
Circus Circus Enterprise,
9.25% - 2005 ............................. $ 250,000 255,313
MGM Grand, Inc., 6.95% - 2005 ................ $1,400,000 1,361,500
Mirage Resorts, Inc., 6.625% - 2005 .......... $1,150,000 1,127,000
Park Place Entertainment,
7.875% - 2005 ............................ $ 400,000 400,000
--------------
3,658,813
HEALTHCARE - 0.3%
Tenet Healthcare Corporation,
8.125% - 2008 ............................ $ 500,000 516,875
HOME CONSTRUCTION - 0.3%
D.R. Horton, Inc., 8.375% - 2004 ............. $ 125,000 124,063
MDC Holdings, 8.375% - 2008 .................. $ 250,000 244,375
Toll Corporation, 7.75% - 2007 ............... $ 125,000 123,750
--------------
492,188
INDEPENDENT ENERGY - 0.5%
Seagull Energy Corporation,
8.625% - 2005 ............................ $ 800,000 786,000
38 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1998
SERIES E (HIGH GRADE INCOME)(CONTINUED)
PRINCIPAL MARKET
CORPORATE BONDS (CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
LODGING - 0.3%
HMH Properties, 7.875% - 2008 ................ $ 500,000 $ 486,875
MEDIA - CABLE - 3.4%
Adelphia Communications, Inc.,
9.50% - 2004 ............................. 250,000 265,000
8.375% - 2008 ............................ 250,000 258,750
Century Communications
Corporation, 8.375% - 2007 ............... 125,000 134,375
Comcast Corporation, 9.125% - 2006 ........... 150,000 158,250
CSC Holdings, Inc., 7.875% - 2018 ............ 500,000 506,875
Jones Intercable, Inc., 7.625% - 2008 ........ 500,000 523,750
Lenfest Communications, Inc.,
10.50% - 2006 ............................ 500,000 585,000
Rogers Cablesystems, 9.625% - 2002 ........... 675,000 728,156
Rogers Communications, Inc.,
9.125% - 2006 ............................ 665,000 691,600
Time Warner Entertainment,
10.15% - 2012 ............................ 670,000 920,412
Westinghouse Electric Company,
8.375% - 2002 ............................ 500,000 533,125
--------------
5,305,293
MEDIA - NONCABLE - 1.4%
Big Flower Press Holdings, Inc.,
8.875% - 2007 ............................ 500,000 505,000
K-III Communications Corporation,
10.25% - 2004 ............................ 555,000 577,894
News American Holdings,
8.625% - 2003 ............................ 475,000 527,250
USA Networks, 6.75% - 2005 ................... 500,000 498,750
--------------
2,108,894
METALS - 0.8%
AK Steel, 10.75% - 2004 ...................... 500,000 520,000
Ameristeel Corporation, 8.75% - 2008 ......... 500,000 483,750
WHX Corporation, 10.50% - 2005 ............... 250,000 229,375
--------------
1,233,125
OIL FIELD SERVICES - 1.5%
Transocean Offshore, Inc.,
8.00% - 2027 ............................. 2,000,000 2,357,500
RETAILERS - 2.4%
Lowe's Companies, Inc.,
6.70% - 2007 ............................. 1,600,000 1,678,000
Mattel, Inc., 6.125% - 2005 .................. 700,000 717,500
Sears Roebuck & Company,
6.41% - 2001 ............................. 350,000 356,125
Specialty Retailers, Inc., 8.50% - 2005 ...... 250,000 224,375
Zale Corporation, 8.50% - 2007 ............... 750,000 727,500
--------------
3,703,500
SERVICES - 0.8%
Loewen Group International, Inc.,
8.25% - 2003 ............................. $ 850,000 $ 711,875
Protection One Alarm,
7.375% - 2005 ............................ 500,000 516,250
--------------
1,228,125
SUPERMARKETS - 0.7%
Safeway, Inc., 6.50% - 2008 .................. 1,000,000 1,027,500
TECHNOLOGY - 0.7%
Dell Computer Corporation,
6.55% - 2008 ............................. 1,000,000 1,037,500
TELECOMMUNICATIONS - 3.7%
Cable & Wireless Communication, PLC
6.75% - 2008 ............................. 700,000 713,125
Centennial Cellular, 8.875% - 2001 ........... 800,000 839,000
Comcast Cellular Holdings, Inc.,
9.50% - 2007 ............................. 250,000 266,250
GTE Corporation, 7.51% - 2009 ................ 1,500,000 1,713,750
Mastec, Inc., 7.75% - 2008 ................... 250,000 238,125
MCI WorldCom, Inc., 6.40% - 2005 ............. 650,000 674,375
Southwestern Bell, 6.625% - 2007 ............. 1,000,000 1,076,250
--------------
5,520,875
TEXTILES - 0.2%
Westpoint Stevens, Inc.,
7.875% - 2008 ............................ 300,000 307,500
TOBACCO - 0.5%
Dimon, Inc., 8.875% - 2006 ................... 400,000 390,000
Standard Commercial Tobacco
Corporation, 8.875% - 2005 ............... 500,000 490,625
--------------
880,625
TRANSPORTATION - AIRLINES - 3.4%
Southwest Airlines Company,
7.875% - 2007 ........................ 2,475,000 2,833,875
United Airlines, 11.21% - 2014 ............... 1,825,000 2,466,031
--------------
5,299,906
TRANSPORTATION - RAILROADS - 2.6%
ROCS Series Burlington Northern
Santa Fe 1998-1, 6.50% - 2017 ........ 1,480,351 1,519,422
ROCS Series NSC 1998 - 1,
6.375% - 2017 ........................ 2,432,530 2,473,524
--------------
3,992,946
TRANSPORTATION - OTHER - 0.3%
Allied Holdings, Inc.,
8.625% - 2007 ........................ 500,000 501,250
TRANSPORTATION - SERVICES - 0.7%
ROCS Series FDX 1997 - 1,
7.00% - 2017 ......................... 975,931 1,039,696
39 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES E (HIGH GRADE INCOME)(CONTINUED)
PRINCIPAL MARKET
CORPORATE BONDS (CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
UTILITIES - ELECTRIC - 1.7%
Cal Energy Company, Inc.,
9.50% - 2006 ......................... $1,000,000 $ 1,107,500
Calpine Corporation, 8.75% - 2007 ............ 500,000 523,750
Cinergy Global Resources,
6.20% - 2008 ......................... 1,000,000 1,010,000
--------------
2,641,250
UTILITIES - NATURAL GAS - 1.2%
National Fuel Gas Company,
6.303% - 2008 ........................ 1,750,000 1,824,375
YANKEE - CORPORATE - 10.4%
ABN AMRO Bank NV,
7.30% - 2026 ......................... 1,500,000 1,554,375
Abbey National PLC, 6.69% - 2005 ............. 2,375,000 2,496,719
Argentaria Capital Funding,
6.375% - 2006 ........................ 2,000,000 2,014,872
Bank of Austria AG, 7.25% - 2017 ............. 160,000 168,200
BCH Cayman Islands, Ltd.,
7.70% - 2006 ........................ 2,500,000 2,715,625
Den Danske Bank, 7.40% - 2010 ................ 2,175,000 2,310,937
Panamerican Beverages, Inc.,
8.125% - 2003 ........................ 2,050,000 2,096,125
Petroleum Geo-Services,
7.50% - 2007 ......................... 1,200,000 1,257,000
Santander Financial Issuances, Ltd.,
7.00% - 2006 ......................... 1,400,000 1,470,000
--------------
16,083,853
YANKEE - CANADIAN - 2.3%
Agrium, Inc., 7.00% - 2004 ................... 1,000,000 1,021,250
Quebecor Printing Capital,
7.25% - 2007 ......................... 2,350,000 2,476,312
--------------
3,497,562
--------------
Total corporate bonds - 69.8% ................ 107,749,799
MORTGAGE BACKED SECURITIES
- --------------------------
U.S. GOVERNMENT AGENCIES - 14.0%
Federal Home Loan Bank,
5.19% - 2003 ......................... 1,000,000 1,004,550
Federal Home Loan Mortgage Corporation,
FHR 1339 C, 8.00% - 2006 CMO ......... 1,000,000 1,039,890
FHR 112 H, 8.80% - 2020 CMO .......... 158,804 159,101
FHR 1311 J, 7.50% - 2021 CMO ......... 3,325,000 3,407,360
FHR 1930 AB, 7.50% - 2023 CMO ........ 1,122,047 1,135,958
FHLMC, 5.125% - 2008 ................. 2,300,000 2,279,760
FHLMC, 5.75% - 2008 .................. 2,000,000 2,072,540
--------------
11,099,159
Federal National Mortgage Association,
FNMA, 5.45% - 2003 ................... $1,500,000 $ 1,523,100
FNMA, 6.00% - 2008 ................... 7,000,000 7,405,090
FNR 1994-79 B,
7.00% - 2019 CMO .................. 1,700,000 1,724,752
--------------
10,652,942
U.S. GOVERNMENT SECURITIES - 5.8%
Government National Mortgage Association,
GNMA 39238, 9.50% - 2009 ............. 284,385 304,856
GNMA 305617, 9.00% - 2021 ............ 199,438 211,769
GNMA 301465, 9.00% - 2021 ............ 152,594 162,029
GNMA 313107, 7.00% - 2022 ............ 1,418,892 1,455,798
GNMA 352022, 7.00% - 2023 ............ 1,551,569 1,586,542
GNMA 369303, 7.00% - 2023 ............ 1,637,259 1,673,917
GNMA II 181907, 9.50% - 2020 ......... 167,495 178,528
GNMA II 2445, 8.00% - 2027 ........... 1,505,791 1,557,545
GNR 1997-10B, 7.50% - 2019 ........... 1,805,179 1,818,555
--------------
8,949,539
NON-AGENCY SECURITIES - 2.1%
Chase Capital Mortgage Securities
Company, 1997-1B,
7.37% - 2007 CMO...................... 1,500,000 1,609,725
Chase Capital Mortgage
Securities Company, 1998-1B,
6.56% - 2008 CMO ..................... 1,000,000 1,027,350
Global Rated Eligible Asset Trust
7.33% - 2006 ......................... 876,225 657,169
--------------
3,294,244
--------------
Total mortgage backed securities - 21.9% 33,995,884
GOVERNMENT SECURITIES
- ---------------------
U.S. GOVERNMENT SECURITIES - 7.1%
U.S. Treasury Bonds,
6.00% - 2026 ......................... 1,750,000 1,913,240
6.625% - 2027 ........................ 2,500,000 2,950,775
U.S. Treasury Notes,
5.75% - 2003 ......................... 1,400,000 1,461,740
6.50% - 2006 ......................... 250,000 277,990
Tennessee Valley Authority,
6.00% - 2013 ......................... 1,000,000 1,046,250
U.S. Department of Housing
and Urban Development,
6.93% - 2013 ......................... 3,000,000 3,260,460
--------------
Total government securities - 7.1% ...... 10,910,455
--------------
Total investments - 98.8% ............... 152,656,138
Cash and other assets, less liabilities - 1.2% 2,066,045
--------------
Total net assets - 100.0% ............... $154,722,183
==============
40 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES J (EMERGING GROWTH)
NUMBER MARKET
COMMON STOCKS OF SHARES VALUE
- --------------------------------------------------------------------------------
AIR FREIGHT - 1.4%
Expeditors International of
Washington, Inc. ........................... 90,000 $ 3,780,000
BANKS - MAJOR REGIONAL - 4.3%
BankBoston Corporation ....................... 64,300 2,503,681
Mercantile Bancorporation, Inc. .............. 83,000 3,828,375
Northern Trust Corporation ................... 60,000 5,238,750
--------------
11,570,806
BIOTECHNOLOGY - 3.4%
Ligand Pharmaceuticals, Inc. (Cl.B)* ........ 458,000 5,324,250
Millennium Pharmaceuticals, Inc.* ............ 150,000 3,881,250
--------------
9,205,500
BROADCAST MEDIA - 1.2%
Chancellor Media Corporation* ................ 68,000 3,255,500
CHEMICALS - SPECIALTY - 1.2%
Bush Boake Allen, Inc.* ...................... 81,000 2,855,250
M.A. Hanna Company ........................... 30,000 369,375
--------------
3,224,625
COMMUNICATION EQUIPMENT - 8.5%
Comverse Technology, Inc.* ................... 245,000 17,395,000
General Instrument Corporation* .............. 135,000 4,581,563
Transcrypt International, Inc.* .............. 419,700 1,179,357
--------------
23,155,920
COMPUTER HARDWARE - 1.3%
CHS Electronics, Inc.* ....................... 214,000 3,624,625
COMPUTER SOFTWARE/SERVICES -17.4%
American Management
Systems, Inc.* ....................... 230,000 9,200,000
Cambridge Technology, Inc.* .................. 172,000 3,805,500
Computer Sciences Corporation ................ 88,000 5,670,500
DST Systems, Inc.* ........................... 40,300 2,299,619
Electronic Processing, Inc.* ................. 90,000 900,000
Electronics For Imaging, Inc.* ............... 95,000 3,817,812
Network Associates, Inc.* .................... 91,500 6,061,875
Rational Software Corporation* ............... 420,000 11,130,000
VERITAS Software Corporation* ................ 70,000 4,195,625
--------------
47,080,931
DISTRIBUTION - FOOD & HEALTH - 0.9%
Cardinal Health, Inc. ........................ 32,550 2,469,731
ELECTRICAL EQUIPMENT - 4.2%
Maxwell Technologies, Inc.* .................. 280,600 11,294,150
ELECTRONICS - INSTRUMENTATION - 4.4%
EG & G, Inc. ................................. 120,000 3,337,500
Perkin-Elmer Corporation ..................... 60,000 5,853,750
Sawtek, Inc.* ................................ 152,000 2,660,000
--------------
11,851,250
ELECTRONICS - SEMICONDUCTORS - 1.7%
S3, Inc.* .................................... 298,000 $ 2,193,094
Uniphase Corporation* ........................ 36,000 2,497,500
--------------
4,690,594
ENTERTAINMENT - 0.8%
Metromedia International Group, Inc.* ........ 420,000 2,283,750
FOODS - 1.3%
Chiquita Brands International, Inc. .......... 374,000 3,576,375
GAMING & LOTTERY - 0.5%
Circus Circus Enterprises, Inc.* ............. 125,400 1,434,262
GOLD & PRECIOUS METALS MINING - 0.8%
Newmont Mining Corporation ................... 120,000 2,167,500
HEALTH CARE - LONG TERM CARE - 0.8%
Integrated Health Services, Inc.* ............ 159,000 2,245,875
HEALTH CARE - MANAGED CARE - 1.0%
United Healthcare Corporation ................ 60,000 2,583,750
HEALTH CARE - SPECIALIZED SERVICES - 2.5%
CryoLife, Inc.* .............................. 83,000 985,625
Quintiles Transnational Corporation* ......... 43,800 2,337,825
Shire Pharmaceuticals Group, PLC* ............ 169,000 3,422,250
--------------
6,745,700
HOUSEHOLD FURNISHINGS & APPLIANCES - 0.8%
Leggett & Platt, Inc. ........................ 102,600 2,257,200
INSURANCE - LIFE/HEALTH - 3.4%
AFLAC, Inc. .................................. 210,000 9,240,000
LEISURE TIME PRODUCTS - 1.4%
Hasbro, Inc. ................................. 104,000 3,757,000
MANUFACTURING - SPECIALIZED - 1.1%
Catalytica, Inc.* ............................ 76,000 1,368,000
Ionics, Inc.* ................................ 56,000 1,676,500
--------------
3,044,500
MEDICAL PRODUCTS & SUPPLIES - 2.9%
Dentsply International, Inc. ................. 77,000 1,982,750
Stryker Corporation .......................... 58,000 3,193,625
Sunrise Medical, Inc.* ....................... 220,000 2,736,250
--------------
7,912,625
OIL - INTERNATIONAL - 0.9%
Tesoro Petroleum Corporation* ................ 206,000 2,497,750
OIL & GAS - DRILLING & EQUIPMENT - 0.4%
J. Ray McDermott, S.A.* ...................... 40,000 977,500
OIL & GAS - EXPLORATION & PRODUCTION - 2.2%
Apache Corporation ........................... 160,900 4,072,781
Forcenergy, Inc.* ............................ 107,800 282,975
MCN Energy Group, Inc. ....................... 93,000 1,772,813
--------------
6,128,569
41 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES J (EMERGING GROWTH)(CONTINUED)
NUMBER MARKET
COMMON STOCKS (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
PHARMACEUTICALS - 7.8%
Dura Pharmaceuticals, Inc.* .................. 277,000 $ 4,206,938
Mylan Laboratories, Inc. ..................... 348,700 10,984,050
Teva Pharmaceutical
Industries, Ltd. ADR ........................ 145,000 5,899,687
--------------
21,090,675
PUBLISHING - NEWSPAPER - 1.7%
E.W. Scripps Company (Cl.A) .................. 91,000 4,527,250
RESTAURANTS - 1.2%
The Cheesecake Factory* ...................... 106,500 3,158,391
RETAIL - APPAREL - 0.4%
Stage Stores, Inc.* .......................... 112,000 1,050,000
RETAIL - DEPARTMENT STORES - 0.5%
Family Dollar Stores, Inc. ................... 62,000 1,364,000
RETAIL - GENERAL MERCHANDISE - 2.3%
Consolidated Stores Corporation* ............. 95,000 1,917,813
Dollar Tree Stores, Inc.* .................... 101,250 4,423,359
--------------
6,341,172
RETAIL - SPECIALTY - 0.4%
Keystone Automotive Industries, Inc.* ........ 52,000 1,088,750
SERVICES - ADVERTISING/MARKETING - 6.0%
Acxiom Corporation* .......................... 220,000 6,820,000
CMGI, Inc.* .................................. 33,000 3,514,500
True North Communications, Inc. .............. 217,000 5,831,875
--------------
16,166,375
SERVICES - COMMERCIAL & CONSUMER - 3.7%
Angelica Corporation ......................... 56,500 1,052,313
Cerner Corporation* .......................... 58,300 1,559,525
FTI Consulting, Inc.* ........................ 143,300 483,637
Pinkerton's, Inc.* ........................... 116,000 2,472,250
USWeb Corporation* ........................... 168,000 4,431,000
--------------
9,998,725
--------------
Total common stocks - 94.7% ............... 256,841,326
Cash and other assets, less liabilities - 5.3% 14,440,022
--------------
Total net assets - 100.0% ................. $ 271,281,348
==============
SERIES K (GLOBAL AGGRESSIVE BOND)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
GOVERNMENT OBLIGATIONS OF SHARES VALUE
- --------------------------------------------------------------------------------
ARGENTINA - 4.8%
Argentina Government,
9.75% - 2027 ............................. $ 700,000 $ 621,250
BRAZIL - 2.7%
Government of Brazil C,
8.00% - 2014(5)........................... $ 588,810 353,286
DOMINICAN REPUBLIC - 4.3%
Central Bank of Dominican Republic,
6.0625% - 2024(6)......................... $ 850,000 552,500
ECUADOR - 2.0%
Republic of Ecuador,
6.625% - 2025(6).......................... $ 500,000 262,100
GREECE - 8.7%
Hellenic Republic,
13.10% - 2003(4),(6)...................... 310,000,000 1,134,065
HUNGARY - 6.2%
Government of Hungary,
21.00% - 1999(4).......................... 40,000,000 192,982
23.00% - 1999(4).......................... 130,000,000 616,503
--------------
809,485
KOREA - 3.9%
Republic of South Korea,
8.875% - 2008 ............................ $ 500,000 513,363
PHILIPPINES - 3.7%
Central Bank Philippines,
5.96% - 2008(6)........................... $ 600,000 487,500
POLAND - 4.5%
Government of Poland,
12.00% - 2003(4).............................. 2,000,000 587,963
SOUTH AFRICA - 5.3%
Electricity Supply Commission,
11.00% - 2008(4).......................... 2,600,000 329,218
Republic of South Africa,
12.00% - 2005(4).......................... 2,500,000 360,671
--------------
689,889
--------------
Total government obligations - 46.1% . 6,011,401
42 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES K (GLOBAL AGGRESSIVE BOND)(CONTINUED)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
CORPORATE BONDS OF SHARES VALUE
- --------------------------------------------------------------------------------
ARGENTINA - 1.7%
CIA Radiocomunic Moviles,
9.25% - 2008 ............................. $ 250,000 $ 226,294
CZECH REPUBLIC - 3.4%
CEZ, a.s., 11.30% - 2005(4)................... 13,000,000 445,873
DENMARK - 12.4%
Nykredit, 6.00% - 2029(4)..................... 3,100,000 478,066
Realkredit Danmark, 6.00% - 20294 ............ 3,050,000 469,876
Unikredit Realkredit, 6.00% - 20294 .......... 4,300,000 659,272
--------------
1,607,214
DOMINICAN REPUBLIC - 3.1%
Tricom SA, 11.375% - 2004 .................... $ 500,000 410,000
MEXICO - 2.2%
Cemex SA, 12.75% - 2006 ...................... $ 250,000 281,250
POLAND - 3.9%
Poland Government Bond,
12.00% - 20014 ........................... 1,750,000 504,041
UNITED STATES - 22.3%
Archibald Candy Corporation,
10.25% - 2004 ............................ $ 500,000 506,250
BA Mortgage Securities 1997-2 B4,
7.25% - 2027 ............................. $ 494,417 277,182
Chiquita Brands International, Inc.,
10.25% - 2006 ............................ $ 250,000 260,313
Citicorp Mortgage Securities, Inc.,
1997-1 B4, 7.25% - 2027 .................. $ 404,406 279,672
Clark Material Handling Company,
10.75% - 2006 ............................ $ 500,000 513,750
Countrywide Home Loans,
1997-1B3, 7.50% - 2027 ................... $ 694,871 648,619
PNC Mortgage Securities Corporation, 1998-25B5,
6.625% - 2028 ............................ $ 413,059 241,123
Residential Asset Securitization Trust,
1996-A10B5, 7.50% - 2011 ................. $ 220,477 173,212
--------------
2,900,121
--------------
Total corporate bonds - 49.0% ............. 6,374,793
--------------
Total investments - 95.1% ................. 12,386,194
Cash and other assets, less liabilities - 4.9% 641,326
--------------
Total net assets - 100.0% ................. $ 13,027,520
==============
SERIES M (SPECIALIZED ASSET ALLOCATION)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
CORPORATE BONDS OF SHARES VALUE
- --------------------------------------------------------------------------------
BANKING - 0.9%
Bank of New York, Inc.,
6.50% - 2003 ............................. $ 185,000 $ 192,400
Washington Mutual Capital,
8.375% - 2027(1).......................... $ 175,000 195,125
--------------
387,525
BROKERAGE - 1.0%
Merrill Lynch & Company, Inc.,
8.00% - 2007 ............................. $ 225,000 257,063
SI Financing Trust, Inc.,
9.50% - 2026(1)........................... 7,420 197,557
--------------
454,620
CAPITAL GOODS - 0.2%
LaFarge Corporation, 6.375% - 2005 ........... $ 100,000 103,125
CONSUMER CYCLICAL - 2.1%
Lowe's Companies, Inc.,
6.70% - 2007 ............................. $ 125,000 131,094
MGM Grand, Inc., 6.95% - 2005 ................ $ 100,000 97,250
Mirage Resorts, Inc., 6.625% - 2005 .......... $ 100,000 98,000
News American Holdings,
8.625% - 2003 ............................ $ 200,000 222,000
Rite Aid Corporation, 6.70% - 2001 ........... $ 400,000 411,500
--------------
959,844
CONSUMER NONCYCLICAL - 0.7%
Archer-Daniels-Midland Company,
8.875% - 2011 ............................ $ 175,000 218,750
Cargill, Inc., 6.15% - 2008 .................. $ 100,000 104,500
--------------
323,250
ENERGY - 0.2%
Occidental Petroleum Corporation,
6.24% - 2000 ............................. $ 110,000 110,550
INSURANCE - 0.7%
Hartford Life, Inc., 7.10% - 2007 ............ $ 200,000 215,250
Transamerica Capital II,
7.65% - 2026 ............................. $ 100,000 106,000
--------------
321,250
NATURAL GAS - 0.3%
MCN Investment Corporation,
6.32% - 2003 ............................. $ 125,000 128,438
REAL ESTATE INVESTMENT TRUST - 0.3%
EOP Operating LP, 6.625% - 2005 .............. $ 150,000 150,562
TECHNOLOGY - 0.4%
Dell Computer Corporation,
6.55% - 2008 ............................. $ 150,000 155,625
TELECOMMUNICATIONS - 1.0%
GTE Corporation, 7.51% - 2009 ................ $ 200,000 228,500
MCI Worldcom, Inc., 6.40% - 2005 ............. $ 200,000 207,500
--------------
436,000
43 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES M (SPECIALIZED ASSET ALLOCATION)(CONTINUED)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
CORPORATE BONDS(CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
TRANSPORTATION - 1.2%
Airborn Freight Corporation,
7.35% - 2005 ............................. $ 500,000 $ 536,875
YANKEE - CORPORATE - 0.7%
Abbey National PLC,
6.69% - 2005 ............................. $ 175,000 183,969
ABN Amro Bank NV,
7.55% - 2006 ............................. $ 100,000 109,375
--------------
293,344
--------------
Total corporate bonds - 9.7% ......... 4,361,008
NUMBER MARKET
COMMON STOCKS OF SHARES VALUE
- --------------------------------------------------------------------------------
BIOTECHNOLOGY - 2.9%
Amgen, Inc.* ................................. 2,400 250,950
Biogen, Inc.* ................................ 2,700 224,100
Centocor, Inc.* .............................. 4,100 185,013
Chiron Corporation* .......................... 10,900 285,444
Genzyme Corporation* ......................... 7,700 383,075
--------------
1,328,582
COMMUNICATION EQUIPMENT - 3.5%
ADC Telecommunications, Inc.* ................ 7,100 246,725
Andrew Corporation* .......................... 4,200 69,300
Lucent Technologies, Inc. .................... 2,800 308,000
Motorola, Inc. ............................... 3,700 225,931
Northern Telecom, Ltd. ....................... 6,440 322,805
QUALCOMM, Inc.* .............................. 3,400 176,163
Tellabs, Inc.* ............................... 3,600 246,825
--------------
1,595,749
COMPUTERS - NETWORKING - 3.0%
Ascend Communications, Inc.* ................. 5,300 348,475
Cabletron Systems, Inc.* ..................... 20,400 170,850
Cisco Systems, Inc.* ......................... 5,625 522,070
3Com Corporation* ............................ 7,200 322,650
--------------
1,364,045
COMPUTERS - PERIPHERALS - 3.3%
EMC Corporation* ............................. 4,500 382,500
Lexmark International Group, Inc.* ........... 4,100 412,050
Quantum Corporation* ......................... 10,700 227,375
Seagate Technology, Inc.* .................... 7,100 214,775
Storage Technology Corporation* .............. 6,600 234,713
--------------
1,471,413
DISTRIBUTION - FOOD & HEALTH - 1.8%
Bergen Brunswig Corporation (Cl.A) ........... 4,800 167,400
Cardinal Health, Inc. ........................ 2,200 166,925
McKesson Corporation ......................... 2,200 173,938
SUPERVALU, Inc. .............................. 5,700 159,600
SYSCO Corporation ............................ 5,500 150,906
--------------
818,769
ENGINEERING & CONSTRUCTION - 2.2%
Fluor Corporation ............................ 4,900 208,556
Granite Construction, Inc. ................... 6,000 201,375
Jacobs Engineering Group, Inc.* .............. 6,000 244,500
McDermott International, Inc. ................ 6,300 155,531
Morrison Knudsen Corporation* ................ 18,200 177,450
--------------
987,412
EQUIPMENT - SEMICONDUCTORS - 2.9%
Applied Materials, Inc.* ..................... 7,500 320,156
KLA-Tencor Corporation* ...................... 7,900 342,662
Novellus Systems, Inc.* ...................... 6,400 316,800
Teradyne, Inc.* .............................. 8,100 343,237
--------------
1,322,855
FOOTWEAR - 2.2%
Nike, Inc. (Cl.B.) ........................... 6,100 247,431
Nine West Group, Inc.* ....................... 18,800 292,575
Reebok International, Ltd.* .................. 14,300 212,712
Wolverine World Wide, Inc. ................... 19,000 251,750
--------------
1,004,468
GAMING & LOTTERY - 2.1%
Circus Circus Enterprises, Inc.* ............. 20,500 234,469
Harrah's Entertainment, Inc.* ................ 15,400 241,587
International Game Technology ................ 11,400 277,163
Mirage Resorts, Inc.* ........................ 14,300 213,606
--------------
966,825
GOLD COMPANIES - 2.0%
Barrick Gold Corporation ..................... 12,400 241,800
Battle Mountain Gold Company ................. 37,600 155,100
Homestake Mining Company ..................... 20,700 190,181
Newmont Mining Corporation ................... 6,800 122,825
Placer Dome, Inc. ............................ 17,500 201,250
--------------
911,156
MEDICAL PRODUCTS & SUPPLIES - 2.5%
Baxter International, Inc. ................... 3,800 244,387
Becton, Dickinson & Company .................. 5,000 213,437
Boston Scientific Corporation* ............... 5,400 144,788
Guidant Corporation .......................... 2,800 308,700
Medtronic, Inc. .............................. 3,100 230,175
--------------
1,141,487
PHARMACEUTICALS - 1.9%
ICN Pharmaceuticals, Inc. .................... 6,200 140,275
Jones Pharma, Inc. ........................... 4,500 164,250
Medlmmune, Inc.* ............................. 2,200 218,762
Mylan Laboratories, Inc. ..................... 4,500 141,750
Watson Pharmaceuticals, Inc.* ................ 2,800 176,050
--------------
841,087
44 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES M (SPECIALIZED ASSET ALLOCATION)(CONTINUED)
NUMBER MARKET
COMMON STOCKS (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
RESTAURANTS - 2.4%
CKE Restaurants, Inc. ........................ 3,328 $ 97,953
Cracker Barrel Old Country
Store, Inc. ................................. 5,000 116,563
McDonald's Corporation ....................... 2,500 191,562
Starbucks Corporation* ....................... 4,300 241,338
Tricon Global Restaurants, Inc.* ............. 4,500 225,562
Wendy's International, Inc. .................. 9,500 207,219
--------------
1,080,197
RETAIL - BUILDING SUPPLIES - 2.1%
Fastenal Company ............................. 5,700 250,800
Hughes Supply, Inc. .......................... 7,300 213,525
Lowe's Companies, Inc. ....................... 5,700 291,769
Sherwin-Williams Company ..................... 7,200 211,500
--------------
967,594
RETAIL - SPECIALTY - 3.3%
AutoZone, Inc.* .............................. 7,200 237,150
Bed Bath & Beyond, Inc.* ..................... 7,100 242,288
Home Depot, Inc. ............................. 4,500 275,344
Office Depot, Inc.* .......................... 4,300 158,831
OfficeMax, Inc.* ............................. 10,300 124,888
Staples, Inc.* ............................... 6,000 262,125
Toys "R" Us, Inc.* ........................... 9,800 165,375
--------------
1,466,001
SERVICES - ADVERTISING & MARKETING - 2.5%
ACNielsen Corporation* ....................... 7,000 197,750
Acxiom Corporation* .......................... 7,900 244,900
Interpublic Group of Companies, Inc. ......... 3,400 271,150
Omnicom Group, Inc. .......................... 4,000 232,000
True North Communications, Inc. .............. 6,800 182,750
--------------
1,128,550
TELECOMMUNICATIONS - 1.4%
Ameritech Corporation ........................ 2,000 126,750
Bell Atlantic Corporation .................... 2,008 114,080
BellSouth Corporation ........................ 3,000 149,625
GTE Corporation .............................. 1,600 107,900
SBC Communications, Inc. ..................... 2,220 119,047
--------------
617,402
TOBACCO - 2.3%
Philip Morris Companies, Inc. ................ 7,000 374,500
RJR Nabisco Holdings Corporation ............. 10,700 317,656
UST, Inc. .................................... 9,500 331,313
--------------
1,023,469
TRUCKING - 2.5%
J.B. Hunt Transport Services, Inc. ........... 11,000 253,000
Rollins Truck Leasing Corporation ............ 16,150 238,213
Ryder System, Inc. ........................... 8,100 210,600
USFreightways Corporation .................... 7,900 230,088
Werner Enterprises, Inc. ..................... 10,450 184,834
--------------
1,116,735
--------------
Total common stocks - 46.8% ............... 21,153,796
PRINCIPAL
AMOUNT OR
NUMBER MARKET
MORTGAGE BACKED SECURITIES OF SHARES VALUE
- --------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGES - 0.8%
6.00% - 2006 .............................. $ 43,390 $ 43,486
7.00% - 2020 .............................. $ 250,000 251,260
7.00% - 2021 .............................. $ 70,124 70,825
--------------
365,571
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.9%
6.50% - 2018 .............................. $ 106,285 106,252
6.95% - 2020 .............................. $ 170,000 174,801
7.50% - 2020 .............................. $ 115,949 118,493
--------------
399,546
NON-AGENCY SECURITIES - 0.2%
Chase Capital Mortgage Securities
Company, 1998-1B,
6.56% - 2008 CMO .......................... $ 100,000 102,735
--------------
Total mortgage backed securities - 1.9% 867,852
REAL ESTATE INVESTMENT TRUSTS
- -----------------------------
American Health Properties, Inc. ............. 4,600 94,875
Archstone Communities Trust .................. 5,100 103,275
Avalonbay Communities, Inc. .................. 3,073 105,250
CBL & Associates Properties, Inc. ............ 4,600 118,738
Duke Realty Investment, Inc. ................. 5,700 132,525
Equity Residential Properties, Inc. .......... 5,056 204,452
Federal Realty Investment Trust .............. 4,350 102,769
General Growth Property, Inc. ................ 3,550 134,456
Glimcher Realty Trust ........................ 5,550 87,066
Health Care Property Investors, Inc. ......... 3,200 98,400
Kimco Realty Corporation ..................... 3,600 142,875
Merry Land Properties, Inc.* ................. 260 943
New Plan Excel Realty Trust .................. 5,100 113,156
Post Properties, Inc. ........................ 2,850 109,547
Public Storage, Inc. ......................... 3,800 102,837
Simon Property Group, Inc. ................... 3,700 105,450
Spieker Properties, Inc. ..................... 3,200 110,800
United Dominion Realty Trust , Inc. .......... 7,700 79,406
Washington Real Estate Investment Trust ...... 6,400 119,200
Weingarten Realty Investors .................. 2,700 120,487
--------------
Total real estate investment trusts - 4.8% ... 2,186,507
45 See accompanying notes.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES M (SPECIALIZED ASSET ALLOCATION)(CONTINUED)
NUMBER MARKET
FOREIGN STOCKS OF SHARES VALUE
- --------------------------------------------------------------------------------
BELGIUM - 6.3%
Bekaert NV ................................... 50 $ 24,888
Cementbedrijven CBR Cimenteries .............. 600 59,382
Delhaize "Le Lion" SA ........................ 1,550 137,161
Electrabel SA ................................ 1,400 615,361
Fortis AG .................................... 850 308,045
Gevaert NV* .................................. 900 65,364
Groupe Bruxelles Lambert SA .................. 700 142,633
KBC Bancassurance Holding .................... 5,500 435,469
PetroFina SA ................................. 850 389,695
Solvay SA .................................... 3,100 233,715
Tractebel SA ................................. 2,100 407,728
Union Miniere SA ............................. 500 19,037
--------------
2,838,478
DENMARK - 5.7%
A/S Dampskibssellskabet
Svendborg (Cl. A) ........................ 20 190,117
A/S Forsikringsselskabet Codan ............... 514 59,763
Aktieselskabet Potagua ....................... 1,605 32,279
Bang & Olufsen Holding A/S ................... 927 56,513
Carlsberg A/S (Cl. A) ........................ 2,240 130,222
Cheminova Holding A/S ........................ 2,433 40,625
Danisco A/S .................................. 2,768 150,045
Danske Traelast .............................. 616 41,618
Den Danske Bank Group ........................ 2,779 373,328
D/S Norden A/S ............................... 398 18,760
Finansierings Instituttet for
Industri og Handvaerk A/S ................. 2,146 45,520
Finansieringsselskabet Gefion A/S ............ 2,728 52,657
FLS Industries A/S ........................... 2,409 49,206
ISS International Service System A/S ......... 1,682 109,411
J. Lauritzen Holdings A/S .................... 1,007 69,443
Jyske Bank A/S ............................... 692 67,110
Kapital Holding A/S .......................... 1,515 74,982
Korn-OG Foderstof Kompagniet A/S ............. 1,736 32,568
Novo Nordisk A/S ............................. 2,989 394,494
Radiometer A/S (Cl. B) ....................... 1,067 56,162
Ratin A/S .................................... 996 211,266
Sophus Berendsen A/S ......................... 996 34,585
Sydbank A/S .................................. 1,224 52,502
Tele Danmark A/S ............................. 1,073 144,820
Topdanmark A/S ............................... 345 67,759
Tryg-Baltica Forsikring A/S .................. 1,449 38,818
--------------
2,594,573
GERMANY - 10.5%
Allianz AG ................................... 2,140 785,026
BASF AG ...................................... 7,919 302,383
Bayer AG ..................................... 5,365 224,025
Bayerische Motoren Werke
(BMW) AG .................................... 300 232,889
Bayerische Motoren Werke
(BMW) AG- Bonus* ............................ 60 44,489
Continental AG ............................... 1,198 $ 33,086
DaimlerChrysler AG ........................... 2,864 282,858
Degussa AG ................................... 860 47,270
Deutsche Bank AG ............................. 5,108 300,696
Deutsche Telekom AG .......................... 18,700 615,250
Dresdner Bank AG ............................. 4,589 192,861
Friedrich Grohe AG ........................... 43 11,359
Heidelberger Zement AG ....................... 518 40,430
Hochtief AG .................................. 1,070 41,757
Linde AG ..................................... 86 52,924
Merck KGAA ................................... 1,113 50,117
Muenchener Rueckversicherungs-
Gesellschaft AG ............................. 430 208,339
Preussag AG .................................. 428 193,494
SAP AG ....................................... 728 314,697
Siemens AG ................................... 7,662 494,516
VEBA AG ...................................... 4,766 285,285
--------------
4,753,751
JAPAN - 13.2%
All Nippon Airways Company, Ltd.* ............ 16,000 54,326
Asahi Glass Company, Ltd. .................... 16,000 99,433
Bank of Tokyo-Mitsubishi, Ltd. ............... 16,000 165,957
Bank of Yokohama, Ltd. ....................... 9,000 21,622
Bridgestone Corporation ...................... 4,000 90,957
Canon, Inc. .................................. 4,000 85,638
Chubu Electric Power Company, Inc. ........... 4,800 97,021
Daiei, Inc. .................................. 8,000 21,773
Dai Nippon Printing Company, Ltd. ............ 5,000 79,876
Denso Corporation ............................ 5,000 92,642
East Japan Railway Company ................... 10 55,940
Fanuc, Ltd. .................................. 900 30,878
Fuji Bank, Ltd. .............................. 15,000 55,319
Fuji Photo Film Company ...................... 2,000 74,468
Fujitsu, Ltd. ................................ 9,000 120,080
Hitachi, Ltd. ................................ 17,000 105,496
Honda Motor Company, Ltd. .................... 5,000 164,450
Industrial Bank of Japan, Ltd. ............... 13,000 60,044
Ito-Yokado Company, Ltd. ..................... 1,000 70,035
Japan Airlines Company, Ltd.* ................ 16,000 42,270
Kansai Electric Power Company, Inc............ 5,000 109,707
Kawasaki Heavy Industries, Ltd. .............. 16,000 37,589
Kawasaki Steel Corporation ................... 49,000 73,413
Kinki Nippon Railway Company, Ltd. ........... 20,000 107,269
Kirin Brewery Company, Ltd. .................. 10,000 127,660
Komatsu, Ltd. ................................ 8,000 42,057
Kyocera Corporation .......................... 2,000 105,851
Marubeni Corporation ......................... 24,000 41,277
Marui Company, Ltd. .......................... 3,000 57,846
Matsushita Electric Industrial Company, Ltd... 12,000 212,660
46 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES M (SPECIALIZED ASSET ALLOCATION)(CONTINUED)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
FOREIGN STOCKS (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
JAPAN (CONTINUED)
Mitsubishi Corporation ....................... 21,000 $ 121,011
Mitsubishi Estate Company, Ltd. .............. 8,000 71,844
Mitsubishi Heavy Industries, Ltd. ............ 26,000 101,418
Mitsubishi Motors Corporation* ............... 17,000 48,378
Mitsui Fudosan Company, Ltd. ................. 9,000 68,218
NEC Corporation .............................. 10,000 92,199
Nippon Oil Company, Ltd. ..................... 16,000 55,887
Nippon Steel Corporation ..................... 47,000 85,417
Nippon Telegraph & Telephone Corporation...... 30 231,915
Nissan Motor Company, Ltd. ................... 16,000 49,078
Nomura Securities Company, Ltd. .............. 12,000 104,787
Sankyo Company, Ltd. ......................... 3,000 65,691
Secom Company, Ltd. .......................... 1,000 82,979
Seibu Railway Company, Ltd. .................. 4,000 126,241
Sekisui House, Ltd. .......................... 18,000 190,691
Seven-Eleven Japan Company, Ltd. ............. 2,000 161,348
Sharp Corporation ............................ 8,000 72,270
Shin-Etsu Chemical Company ................... 5,000 120,567
Sony Corporation ............................. 1,600 116,738
Sumitomo Bank, Ltd. .......................... 20,000 205,674
Sumitomo Chemical Company, Ltd. .............. 23,000 89,716
Taisho Pharmaceutical Company, Ltd. .......... 3,000 82,713
Takeda Chemical Industries ................... 4,000 154,255
Tokai Bank, Ltd. ............................. 9,000 42,606
Tokio Marine & Fire Insurance Company, Ltd.... 10,000 119,681
Tokyo Electric Power Company ................. 14,500 358,644
Tokyu Corporation ............................ 25,000 65,824
Toshiba Corporation .......................... 17,000 101,427
Toyota Motor Corporation ..................... 10,000 272,163
--------------
5,962,934
--------------
Total foreign stocks - 35.7% ......... 16,149,736
TEMPORARY CASH INVESTMENTS
- --------------------------
MONEY MARKET FUNDS - 0.2%
Vista Federal Money
Market Fund ............................... 71,300 71,300
DISCOUNT NOTES - 0.9%
Federal National Mortgage Association,
4.97% - 3-8-99 ............................ $ 400,000 396,640
--------------
Total temporary cash investments - 1.0% 467,940
--------------
Total investments - 100% ............... 45,186,839
Liabilities, less cash and other assets - 0.0% (13,170)
--------------
Total net assets - 100% ................ $45,173,669
==============
SERIES N (MANAGED ASSET ALLOCATION)
PRINCIPAL MARKET
CORPORATE BONDS AMOUNT VALUE
- --------------------------------------------------------------------------------
AUTOMOTIVE - 0.1%
Federal-Mogul Corporation,
7.75% - 2006 ............................ $ 100,000 $ 100,250
BANKING - 0.8%
Bankers Trust - NY, 7.25% - 2003 ............. 100,000 103,875
Banque Paribas - NY, 6.875% - 2009 ........... 500,000 501,250
--------------
605,125
BUILDING MATERIALS - 0.2%
ABC Supply Company (Series B)
10.625% - 2007 ........................... 50,000 47,125
Associated Materials, Inc. ...................
9.25% - 2008 ............................. 50,000 49,500
Synthetic Industries, Inc.,
9.25% - 2007 ............................. 50,000 51,437
--------------
148,062
CAPITAL GOODS - OTHER - 0.1%
International Wire Group,
11.75% - 2005 ............................. 100,000 106,000
CHEMICALS - 0.1%
Agricultural Minerals & Chemicals,
10.75% - 2003 ........................... 50,000 50,938
Furon Company, 8.125% - 2008 ................. 50,000 49,687
--------------
100,625
CONSUMER NONCYCLICAL - OTHER - 0.1%
APCOA, Inc., 9.25% - 2008 .................... 50,000 46,875
Coinmach Corporation (Series D),
11.75% - 2005 ............................ 50,000 54,437
--------------
101,312
CONSUMER PRODUCTS - 0.6%
American Safety Razor Company,
9.875% - 2005 ............................ 100,000 100,625
Chattem, Inc., 12.75% - 2004 ................. 50,000 55,750
Doane Products Company,
9.75% - 2007 ............................. 86,000 87,935
Holmes Products Corporation,
9.875% - 2007 ............................ 50,000 44,813
Purina Mills, Inc., 9.00% - 2010 ............. 100,000 102,750
Revlon Consumer Products Company,
8.125% - 2006 ............................ 25,000 23,563
8.625% - 2008 ............................ 25,000 22,937
--------------
438,373
DEFENSE - 0.1%
Raytheon Company, 6.50% - 2005 ............... 100,000 103,125
ELECTRIC UTILITY - 1.2%
Entergy Louisiana, Inc., 6.50% - 2008 ........ 500,000 523,750
Midwest Power System,
7.125% - 2003 ............................ 140,000 148,225
Niagra Mohawk Power,
0.00% - 20107 ............................ 200,000 153,250
Southern California Edison,
6.50% - 2001 ............................. 50,000 51,375
--------------
876,600
47 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
PRINCIPAL MARKET
CORPORATE BONDS (CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
ENTERTAINMENT - 0.5%
Bally Total Fitness Holding,
9.875% - 2007 ............................ $ 75,000 $ 73,313
Cinemark USA, Inc. (Series B),
8.50% - 2008 ............................. 100,000 99,250
Six Flags Entertainment,
8.875% - 2006 ............................ 50,000 51,875
Six Flags Theme Parks,
12.25% - 2005 ............................ 75,000 82,031
Time Warner Entertainment,
7.25% - 2008 ............................. 100,000 110,000
--------------
416,469
FINANCE - 0.9%
Intertek Finance PLC, 10.25% - 2006 .......... 50,000 46,375
Lehman Brothers, Inc., 7.25% - 2003 .......... 350,000 359,188
Ocwen Capital Trust,
10.875% - 2027 ........................... 50,000 41,375
Penske Truck Leasing, 6.65% - 2000 ........... 100,000 102,750
Salomon, Inc., 6.75% - 2003 .................. 100,000 103,375
--------------
653,063
FINANCE - OTHER - 0.1%
Herff Jones, Inc. (Series B),
11.00% - 2005 ............................ 50,000 54,375
Paragon Corporate Holdings,
9.625% - 2008 ............................ 25,000 20,937
--------------
75,312
FOOD - 0.3%
Archibald Candy Corporation,
10.25% - 2004 ............................ 25,000 25,312
Aurora Foods, Inc., 9.875% - 2007 ............ 50,000 54,375
B&G Foods, Inc., 9.625% - 2007 ............... 25,000 24,500
McDonald's Corporation,
6.625% - 2005 ............................ 50,000 53,688
Price/Costco, Inc., 7.125% - 2005 ............ 100,000 107,500
--------------
265,375
GAMING - 0.2%
Grand Casinos, 10.125% - 2003 ................ 50,000 54,500
Rio Hotel & Casino, Inc.,
10.625% - 2005 ........................... 30,000 32,550
9.50% - 2007 ............................. 25,000 27,219
--------------
114,269
HEALTHCARE - 0.1%
Owens & Minor, Inc.,
10.875% - 2006 ........................... 25,000 26,563
Quest Diagnostic, Inc.,
10.75% - 2006 ............................ 25,000 27,656
--------------
54,219
INSURANCE - 0.1%
New York Life Insurance,
7.50% - 2023 ............................. $ 100,000 $ 104,125
LODGING - 0.4%
Courtyard by Marriott,
10.75% - 2008 ............................ 100,000 103,750
HMH Properties, 7.875% - 2008 ................ 100,000 97,375
Host Marriott Travel Plaza,
9.50% - 2005 ............................. 100,000 104,500
--------------
305,625
MEDIA - CABLE - 0.4%
Comcast Cable Communications,
8.125% - 2004 ............................ 100,000 110,625
Frontiervision, 11.00% - 2006 ................ 50,000 55,313
Marcus Cable Operating Company,
0.00% - 2004(7)........................... 50,000 50,000
Northland Cable Television,
10.25% - 2007 ............................ 100,000 105,250
--------------
321,188
MEDIA - NONCABLE - 0.3%
American Radio Systems,
9.00% - 2006 ............................. 50,000 54,000
Chancellor Media Corporation,
8.125% - 2007 ............................ 100,000 99,250
Mediacom LLC, 8.50% - 2008 ................... 25,000 25,531
Sun Media Corporation,
9.50% - 2007 ............................. 32,000 35,280
--------------
214,061
METALS - 0.1%
Freeport McMoran Resources,
7.00% - 2008 ............................. 50,000 52,313
NATURAL GAS - 0.1%
Energy Corporation of America,
9.50% - 2007 ............................. 100,000 91,250
OIL FIELD SERVICES - 0.1%
Pride Petroleum Services, Inc.,
9.375% - 2007 ............................ 50,000 47,125
PACKAGING - 0.3%
Bway Corporation (Series B),
10.25% - 2007 ............................ 50,000 52,500
Container Corporation of America,
10.75% - 2002 ............................ 100,000 104,125
Plastic Containers, Inc.,
10.00% - 2006 ............................ 25,000 26,219
U.S. Can Corporation,
10.125% - 2006............................ 50,000 52,562
--------------
235,406
48 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
PRINCIPAL MARKET
CORPORATE BONDS (CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
RETAILERS - 0.1%
Eye Care Center of America,
9.125% - 2008 ............................ $ 50,000 $ 48,000
Specialty Retailers, 8.50% - 2005 ............ 50,000 44,875
--------------
92,875
SERVICES - 0.2%
Dyncorp, Inc., 9.50% - 2007 .................. 50,000 49,500
Protection One Alarm,
8.125% - 2009 ............................ 100,000 100,000
--------------
149,500
SUPERMARKETS - 0.1%
Jitney-Jungle Stores,
12.00% - 2006 ............................ 100,000 111,000
TECHNOLOGY - 0.2%
Communications & Power Industry,
12.00% - 2005 ............................ 100,000 105,000
Fairchild Semiconductor,
10.125% - 2007 ........................... 25,000 24,937
--------------
129,937
TELECOMMUNICATIONS - 2.0%
Flag, Ltd., 8.25% - 2008 ..................... 25,000 24,625
Intermedia Communications
(Series B), 8.50% - 2008 ................. 50,000 47,875
Lucent Technologies, Inc.,
6.90% - 2001 ............................. 100,000 104,500
Nextel Communications,
0.00% - 2007(7) .......................... 75,000 45,656
Price Communications,
9.125% - 2006 ............................ 100,000 103,375
Qwest Communications International,
0.00% - 2007(7)........................... 50,000 38,937
7.50% - 2008 ............................. 50,000 52,188
Sprint Capital Corporation,
6.125% - 2008 ............................ 500,000 510,625
Worldcom, Inc., 7.75% - 2007 ................. 500,000 561,875
--------------
1,489,656
TEXTILES - 0.1%
Dan River, Inc., 10.125% - 2003 .............. 50,000 51,875
Westpoint Stevens, Inc.,
7.875% - 2008 ............................ 50,000 51,250
--------------
103,125
TRANSPORTATION - OTHER - 0.1%
Stena AB, 10.50% - 2005 ...................... 50,000 50,750
--------------
Total corporate bonds - 10.0% ................ 7,656,115
NUMBER MARKET
COMMON STOCKS OF SHARES VALUE
- --------------------------------------------------------------------------------
AEROSPACE/DEFENSE - 0.3%
Boeing Company, The .......................... 3,514 $ 114,644
Lockheed Martin Corporation .................. 1,000 84,750
Northrop Grumman Corporation ................. 600 43,875
--------------
243,269
AGRICULTURAL PRODUCTS - 0.1%
Archer-Daniels-Midland Company ............... 2,521 43,330
AIRLINES - 0.2%
AMR Corporation .............................. 1,000 59,375
Delta Air Lines, Inc. ........................ 800 41,600
KLM Royal Dutch Air Lines
NV ADR ..................................... 800 24,000
Southwest Airlines ........................... 1,800 40,387
--------------
165,362
ALUMINUM - 0.1%
Aluminum Company of America .................. 1,100 82,019
AMERICAN GOLD - 0.1%
Barrick Gold Corporation ..................... 2,400 46,800
Placer Dome, Inc. ............................ 2,700 31,050
--------------
77,850
AUTO PARTS & EQUIPMENT - 0.2%
Dana Corporation ............................. 1,443 58,983
Eaton Corporation ............................ 700 49,481
Genuine Parts Company ........................ 1,150 38,453
TRW, Inc. .................................... 700 39,331
--------------
186,248
AUTOMOBILES - 0.7%
Ford Motor Company ........................... 4,700 275,831
General Motors Corporation ................... 2,900 207,531
Honda Motor Company, Ltd. ADR ................ 700 46,725
--------------
530,087
BANKS - MAJOR REGIONAL - 3.3%
BB&T Corporation ............................. 1,000 40,312
Banco Frances Del Rio De
La Plata ADR ............................. 805 16,704
Bank of New York Company, Inc. ............... 2,900 116,725
Bank One Corporation ......................... 4,204 214,667
BankAmerica Corporation ...................... 6,755 406,144
BankBoston Corporation ....................... 1,200 46,725
Bankers Trust Corporation .................... 900 76,894
Comerica, Inc. ............................... 650 44,322
Fifth Third Bancorp .......................... 1,125 80,227
First Union Corporation ...................... 3,358 204,208
Firstar Corporation .......................... 700 65,275
Fleet Financial Group, Inc. .................. 3,000 134,063
Huntington Bancshares, Inc. .................. 1,970 59,223
KeyCorp ...................................... 1,800 57,600
Mellon Bank Corporation ...................... 1,100 75,625
49 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
COMMON STOCKS (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
BANKS - MAJOR REGIONAL (CONTINUED)
Mercantile Bancorporation .................... 400 $ 18,450
J.P. Morgan & Company, Inc. .................. 800 84,050
National City Corporation .................... 1,500 108,750
Northern Trust Corporation ................... 800 69,850
PNC Bank Corporation ......................... 1,115 60,349
Regions Financial Corporation ................ 800 32,250
State Street Boston .......................... 600 41,737
Suntrust Banks, Inc. ......................... 900 68,850
U.S. Bancorp ................................. 2,331 82,751
Union Planters Corporation ................... 400 18,125
Wells Fargo Company .......................... 6,700 267,581
--------------
2,491,457
BANKS - MONEY CENTER - 0.2%
Chase Manhattan Corporation .................. 2,424 164,984
Summit Bancorp ............................... 500 21,844
--------------
186,828
BEVERAGES - ALCOHOLIC - 0.3%
Anheuser-Busch Companies, Inc. ............... 1,200 78,750
Diageo PLC ADR ............................... 777 35,936
LVMH Moet Hennessy Lou ADR ................... 1,000 40,750
Seagram Company, Ltd. ........................ 1,400 53,200
--------------
208,636
BEVERAGES - SOFT DRINK - 1.2%
Coca-Cola Company ............................ 9,800 655,375
Coca-Cola Enterprises, Inc. .................. 1,700 60,775
Pepsico, Inc. ................................ 4,700 192,406
--------------
908,556
BIOTECHNOLOGY - 0.2%
Amgen, Inc.* ................................. 1,200 125,475
Biogen, Inc.* ................................ 300 24,900
--------------
150,375
BROADCAST MEDIA - 0.6%
Clear Channel Communications, Inc.* .......... 1,500 81,750
Comcast Corporation (CI. A) .................. 1,500 88,031
MediaOne Group, Inc.* ........................ 2,100 98,700
Tele-Communications, Inc.* ................... 1,900 105,094
Viacom, Inc. (CI. B)* ........................ 1,400 103,600
--------------
477,175
BUILDING MATERIALS - 0.1%
Armstrong World Industries, Inc. ............. 300 18,094
Masco Corporation ............................ 1,400 40,250
--------------
58,344
CHEMICALS - BASIC - 0.8%
Air Products and Chemicals, Inc. ............. 1,400 56,000
Akzo Nobel NV ADR ............................ 2,600 116,025
Dow Chemical Company ......................... 1,000 90,937
E.I. du Pont de Nemours & Company ............ 4,400 233,475
FMC Corporation* ............................. 600 33,600
Great Lakes Chemical Company ................. 700 28,000
Morton International, Inc. ................... 1,600 39,200
Solutia, Inc. ................................ 1,280 28,640
--------------
625,877
CHEMICALS - DIVERSIFIED - 0.1%
Monsanto Company ............................. 2,200 104,500
CHEMICALS - SPECIALTY - 0.2%
Minnesota Mining & Manufacturing Company ..... 1,500 106,688
Rohm & Haas Company .......................... 1,700 51,213
--------------
157,901
COMMUNICATIONS EQUIPMENT - 1.3%
Lucent Technologies .......................... 5,172 568,920
Motorola, Inc. ............................... 2,500 152,656
Nokia Corporation ADR ........................ 600 72,262
Northern Telecom, Ltd. ....................... 3,320 166,415
Tellabs, Inc.* ............................... 700 47,994
--------------
1,008,247
COMPUTER HARDWARE - 2.2%
Compaq Computer Company ...................... 6,656 279,136
Dell Computer Corporation* ................... 5,100 373,256
Hewlett-Packard Company ...................... 4,000 273,250
International Business Machines Corporation .. 3,100 572,725
Sun Microsystems, Inc.* ...................... 2,000 171,250
--------------
1,669,617
COMPUTER SOFTWARE/SERVICES - 2.8%
Adobe Systems, Inc. .......................... 700 32,725
America Online, Inc.* ........................ 1,200 173,700
BMC Software, Inc.* .......................... 700 31,194
Ceridian Corporation* ........................ 600 41,887
Computer Associates International, Inc........ 2,200 93,775
Computer Sciences Corporation* ............... 800 51,550
Compuware Corporation* ....................... 700 54,688
HBO & Company ................................ 2,000 57,375
Microsoft Corporation* ....................... 9,700 1,345,269
Novell, Inc.* ................................ 3,000 54,375
Oracle Corporation* .......................... 3,850 166,031
Parametric Technology Company* ............... 1,200 19,650
--------------
2,122,219
50 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
COMMON STOCKS (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
COMPUTERS - NETWORKING - 0.7%
Ascend Communications, Inc.* ................. 1,000 $ 65,750
Cisco Systems, Inc.* ......................... 4,950 459,422
3COM Corporation* ............................ 1,000 44,812
--------------
569,984
COMPUTERS - PERIPHERALS - 0.3%
EMC Corporation* ............................. 2,300 195,500
Seagate Technology* .......................... 1,100 33,275
--------------
228,775
CONSUMER FINANCE - 0.3%
Capital One Financial Corporation ............ 500 57,500
Household International, Inc. ................ 2,100 83,213
MBNA Corporation ............................. 3,000 74,812
--------------
215,525
CONTAINERS & PACKAGING - 0.1%
Bemis Company, Inc. .......................... 500 18,969
Owens-Illinois, Inc.* ........................ 1,400 42,875
--------------
61,844
DISTRIBUTION - FOOD & HEALTH - 0.1%
Cardinal Health, Inc. ........................ 1,050 79,669
Sysco Corporation ............................ 1,000 27,438
--------------
107,107
ELECTRIC COMPANIES - 1.4%
AES Corporation* ............................. 600 28,425
American Electric Power Company, Inc.......... 1,100 51,769
Baltimore Gas & Electric Company ............. 1,400 43,225
Consolidated Edison, Inc. .................... 1,500 79,313
Dominion Resources, Inc. ..................... 1,100 51,425
Duke Energy Corporation ...................... 1,900 121,719
Edison International ......................... 1,700 47,387
Empresa Nacional Electricidad
Chile S.A. ADR ............................... 500 5,687
Endesa S.A. ADR .............................. 2,400 64,800
Entergy Corporation .......................... 1,700 52,912
FPL Group, Inc. .............................. 900 55,463
FirstEnergy Corporation ...................... 800 26,050
Houston Industries, Inc. ..................... 1,000 32,125
Niagra Mohawk Power Corporation* ............. 2,400 38,700
Peco Energy Company .......................... 900 37,462
PG & E Corporation ........................... 2,100 66,150
Public Service Enterprise Group, Inc. ........ 900 36,000
Southern Company ............................. 2,900 84,281
Texas Utilities Company ...................... 1,300 60,694
Unicom Corporation ........................... 1,500 57,844
--------------
1,041,431
ELECTRICAL EQUIPMENT - 2.0%
Emerson Electric Company ..................... 1,800 112,612
General Electric Company ..................... 12,600 1,285,988
Honeywell, Inc. .............................. 900 67,781
Rockwell International Corporation ........... 900 43,706
--------------
1,510,087
ELECTRONIC EQUIPMENT - 0.2%
Hitachi, Ltd. ADR ............................ 300 $ 18,131
Philips Electronics NV ADR ................... 2,000 135,375
--------------
153,506
ELECTRONICS - DEFENSE - 0.1%
Raytheon Company (CI. A) ..................... 421 21,761
Raytheon Company (CI. B) ..................... 1,100 58,575
--------------
80,336
ELECTRONICS - SEMICONDUCTORS - 1.1%
Altera Corporation* .......................... 600 36,525
Analog Devices, Inc.* ........................ 667 20,927
Intel Corporation ............................ 5,500 652,094
Texas Instruments, Inc. ...................... 1,600 136,900
Xilinx, Inc.* ................................ 400 26,050
--------------
872,496
ENTERTAINMENT - 0.6%
The Walt Disney Company ...................... 7,142 214,260
Time Warner, Inc. ............................ 4,200 260,662
--------------
474,922
EQUIPMENT - SEMICONDUCTORS - 0.1%
Applied Materials, Inc.* ..................... 2,200 93,913
FINANCIAL - DIVERSE - 1.9%
American Express Company ..................... 1,800 184,050
American General Corporation ................. 1,000 78,000
Associates First Capital Corporation ......... 2,928 124,074
Banco Bilbao Viz ADR ......................... 9,000 144,000
Bear Stearns Companies, Inc. ................. 500 18,687
Berkshire Hathaway, Inc. (Class A)* .......... 1 98,000
H & R Block, Inc. ............................ 900 40,500
Fannie Mae ................................... 3,700 273,800
Freddie Mac .................................. 2,600 167,538
Merrill Lynch & Company, Inc. ................ 1,500 100,125
Morgan Stanley, Dean Witter and Company....... 2,230 158,330
SunAmerica, Inc. ............................. 800 64,900
--------------
1,452,004
FOODS - 1.2%
BestFoods .................................... 1,300 69,225
Campbell Soup Company ........................ 1,800 99,000
ConAgra, Inc. ................................ 2,500 78,750
Earthgrains Company .......................... 128 3,960
General Mills ................................ 1,000 77,750
Heinz (H.J.) Company ......................... 1,400 79,275
Hershey Foods Corporation .................... 700 43,531
Kellogg Company .............................. 2,100 71,663
Ralston - Ralston Purina Group ............... 1,900 61,512
Sara Lee Corporation ......................... 4,000 112,750
Unilever NY ADR .............................. 2,000 165,875
William Wrigley, Jr. Company ................. 400 35,825
--------------
899,116
51 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
COMMON STOCKS (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
FOOTWEAR - 0.1%
Nike, Inc. (CI. B) ........................... 1,100 $ 44,619
GAMING & LOTTERY - 0.0%
Mirage Resorts, Inc.* ........................ 2,400 35,850
HARDWARE & TOOLS - 0.0%
Black & Decker Corporation ................... 500 28,031
HEALTH CARE - DIVERSE - 1.9%
Abbott Laboratories .......................... 4,700 230,300
American Home Products Corporation ........... 5,200 292,825
Bristol-Myers Squibb Company ................. 3,900 521,869
Johnson & Johnson ............................ 5,200 436,150
--------------
1,481,144
HEALTH CARE - LONG TERM CARE - 0.1%
Healthsouth Corporation* ..................... 3,200 49,400
HEALTH CARE - MANAGED CARE - 0.0%
United Healthcare Corporation ................ 700 30,144
HEALTH CARE - PHARMACEUTICALS - 3.2%
Glaxo Wellcome Plc ADR ....................... 900 62,550
Eli Lilly & Company .......................... 4,300 382,162
Merck & Company, Inc. ........................ 4,600 679,363
Pfizer, Inc. ................................. 5,100 639,731
Pharmacia & Upjohn, Inc. ..................... 2,400 135,900
Schering-Plough Corporation .................. 4,800 265,200
Warner Lambert Company ....................... 3,200 240,600
--------------
2,405,506
HOMEBUILDING - 0.1%
PPG Industries, Inc. ......................... 700 40,775
HOSPITAL MANAGEMENT - 0.2%
Columbia/HCA Healthcare
Corporation ................................ 3,000 74,250
Tenet Healthcare Corporation* ................ 1,600 42,000
--------------
116,250
HOUSEHOLD PRODUCTS - 1.1%
Clorox Company ............................... 600 70,087
Colgate-Palmolive Company .................... 1,300 120,738
Fort James Corporation ....................... 1,400 56,000
Kimberly-Clark Corporation ................... 2,200 119,900
Procter & Gamble Company ..................... 5,200 474,825
--------------
841,550
INSURANCE - BROKERS - 0.2%
Conseco, Inc. ................................ 1,649 50,398
MGIC Investment Corporation .................. 600 23,887
Marsh & McLennan Companies, Inc. ............. 900 52,594
Provident Companies, Inc. .................... 600 24,900
--------------
151,779
INSURANCE - LIFE/HEALTH - 0.2%
Aetna, Inc. .................................. 744 $ 58,497
Torchmark Corporation ........................ 600 21,188
Unum Corporation ............................. 1,100 64,213
Waddell & Reed Financial (Cl.A) .............. 34 805
Waddell & Reed Financial (Cl.B)* ............. 146 3,394
--------------
148,097
INSURANCE - MULTILINE - 1.4%
American International Group, Inc. ........... 4,050 391,331
Cigna Corporation ............................ 1,200 92,775
Citigroup, Inc. .............................. 7,847 388,427
Hartford Financial Services Group, Inc........ 1,100 60,362
Lincoln National Corporation ................. 500 40,906
Loews Corporation ............................ 800 78,600
--------------
1,052,401
INSURANCE - PROPERTY & CASUALTY - 0.3%
Allstate Corporation ......................... 2,400 92,700
Chubb Corporation ............................ 1,000 64,875
Progressive Corporation Ohio ................. 400 67,750
Selective Insurance Group .................... 800 16,100
--------------
241,425
INVESTMENT BANK/BROKERAGE - 0.2%
Franklin Resources, Inc. ..................... 1,200 38,400
Schwab (Charles) Corporation ................. 2,325 130,636
--------------
169,036
IRON & STEEL - 0.1%
Nucor Corporation ............................ 900 38,925
LEISURE TIME PRODUCTS - 0.1%
Brunswick Corporation ........................ 1,700 42,075
Mattel, Inc. ................................. 1,400 31,937
--------------
74,012
LODGING - HOTELS - 0.1%
Marriott International, Inc. (Cl.A) .......... 1,500 43,500
MACHINERY - DIVERSE - 0.4%
Caterpillar, Inc. ............................ 1,600 73,600
Danaher Corporation .......................... 1,400 76,038
Deere & Company .............................. 1,300 43,063
Dover Corporation ............................ 900 32,962
Ingersoll-Rand Company ....................... 1,100 51,631
--------------
277,294
MANUFACTURING - DIVERSIFIED - 0.8%
AlliedSignal, Inc. ........................... 2,400 106,350
Corning, Inc. ................................ 1,500 67,500
Illinois Tool Works, Inc. .................... 1,200 75,750
Textron, Inc. ................................ 900 68,344
Tyco International, Ltd. ..................... 2,500 188,594
United Technologies Corporation .............. 900 97,875
--------------
604,413
52 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
COMMON STOCKS (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
MANUFACTURING - SPECIALIZED - 0.4%
CBS Corporation .............................. 2,500 $ 81,875
Goodyear Tire & Rubber Company ............... 900 45,394
Pall Corporation ............................. 1,300 32,906
Sealed Air Corporation* ...................... 700 35,744
Thermo Electron Corporation* ................. 2,100 35,569
Tomkins PLC ADR .............................. 2,000 40,000
--------------
271,488
MEDICAL PRODUCTS & SUPPLIES - 0.6%
Baxter International, Inc. ................... 1,000 64,313
Becton, Dickinson & Company .................. 1,400 59,762
Boston Scientific Corporation* ............... 2,000 53,625
Guidant Corporation .......................... 1,100 121,275
Medtronic, Inc. .............................. 1,900 141,075
--------------
440,050
MISCELLANEOUS BUSINESS SERVICES - 0.1%
Equifax, Inc. ................................ 1,200 41,025
NATURAL GAS - 0.0%
Sonat, Inc. .................................. 800 21,650
OFFICE EQUIPMENT & SUPPLIES - 0.1%
Ikon Office Solutions, Inc. .................. 1,100 9,419
Pitney-Bowes, Inc. ........................... 1,200 79,275
--------------
88,694
OIL - DOMESTIC - 0.2%
Atlantic-Richfield Company ................... 1,400 91,350
Unocal Corporation ........................... 1,100 32,106
--------------
123,456
OIL - INTERNATIONAL - 2.6%
BP Amoco PLC ADR ............................. 3,114 279,123
Chevron Corporation .......................... 2,400 199,050
Exxon Corporation ............................ 8,500 621,563
Mobil Corporation ............................ 3,000 261,375
Occidental Petroleum Corporation ............. 2,300 38,813
Royal Dutch Petroleum Company NY Shares ...... 9,600 459,600
Texaco, Inc. ................................. 2,000 105,750
USX Marathon Group ........................... 1,300 39,162
--------------
2,004,436
OIL & GAS - DRILLING & EQUIPMENT - 0.3%
B.J. Services Company* ....................... 1,400 21,875
Halliburton Company .......................... 1,700 50,363
Repsol S.A. ADR .............................. 400 21,850
Schlumberger, Ltd. ........................... 2,200 101,475
Union Pacific Resources Group, Inc. .......... 2,038 18,469
--------------
214,032
OIL & GAS - EXPLORATION & PRODUCTION - 0.5%
Amerada Hess Corporation ..................... 1,000 $ 49,750
Anadarko Petroleum Corporation ............... 600 18,525
Apache Corporation ........................... 500 12,656
Burlington Resources, Inc. ................... 1,200 42,975
Enron Corporation ............................ 1,700 97,006
Ente Nazionale Idroncarburi S.p.a. ADR ....... 400 27,100
Helmerich & Payne, Inc. ...................... 400 7,750
Phillips Petroleum Company ................... 1,500 63,938
Shell Transport & Trading Company ADR ........ 900 33,469
Total S.A. ADR ............................... 1,000 49,750
--------------
402,919
OIL & GAS - REFINING & MARKETING - 0.1%
The Williams Companies, Inc. ................. 2,200 68,613
PAPER & FOREST PRODUCTS - 0.2%
Georgia-Pacific Corporation (GP Group) ....... 400 23,425
Georgia-Pacific Corporation (Timber Group).... 1,200 28,575
International Paper Company .................. 1,400 62,737
Weyerhaeuser Company ......................... 400 20,325
--------------
135,062
PERSONAL CARE - 0.4%
Avon Products, Inc. .......................... 1,400 61,950
Gillette Company ............................. 4,500 217,406
International Flavors & Fragrances, Inc....... 1,300 57,444
--------------
336,800
PHOTOGRAPHY/IMAGING - 0.4%
Eastman Kodak Company ........................ 1,600 115,200
Xerox Corporation ............................ 1,600 188,800
--------------
304,000
PUBLISHING - 0.2%
R.R. Donnelley & Sons Company ................ 1,000 43,812
Dun & Bradstreet Corporation ................. 400 12,625
McGraw-Hill Companies, Inc. .................. 600 61,125
--------------
117,562
PUBLISHING - NEWSPAPER - 0.2%
Gannett Company, Inc. ........................ 1,300 86,044
Tribune Company .............................. 800 52,800
--------------
138,844
RAILROADS - 0.3%
Burlington Northern Santa Fe
Corporation ................................ 1,800 60,750
CSX Corporation .............................. 800 33,200
Norfolk Southern Corporation ................. 1,600 50,700
Union Pacific Corporation .................... 1,500 67,594
--------------
212,244
53 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
COMMON STOCKS (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
RESTAURANTS - 0.4%
Brinker International, Inc.* ................. 1,500 $ 43,312
Darden Restaurants, Inc. ..................... 1,400 25,200
McDonald's Corporation ....................... 2,600 199,225
Tricon Global Restaurants* ................... 1,140 57,143
--------------
324,880
RETAIL - APPAREL - 0.3%
GAP, Inc. .................................... 2,475 139,219
Nordstrom, Inc. .............................. 1,200 41,625
TJX Companies, Inc. .......................... 1,400 40,600
--------------
221,444
RETAIL - BUILDING SUPPLIES - 0.1%
Lowe's Companies, Inc. ....................... 1,500 76,781
RETAIL - DEPARTMENT STORES - 0.3%
Dollar General Corporation ................... 625 14,766
Federated Department Stores, Inc.* ........... 1,500 65,344
Kohl's Corporation* .......................... 1,000 61,437
May Department Stores Company ................ 1,100 66,412
J.C. Penney Company, Inc. .................... 1,000 46,875
--------------
254,834
RETAIL - DRUG STORES - 0.3%
CVS Corporation .............................. 1,600 88,000
Rite Aid Corporation ......................... 1,500 74,344
Walgreen Company ............................. 1,600 93,700
--------------
256,044
RETAIL - FOOD CHAINS - 0.4%
Albertson's, Inc. ............................ 1,200 76,425
American Stores Company ...................... 1,100 40,631
Kroger Company, The* ......................... 1,000 60,500
Safeway, Inc.* ............................... 1,900 115,781
--------------
293,337
RETAIL - GENERAL MERCHANDISE - 1.2%
Costco Companies, Inc.* ...................... 1,000 72,187
Dayton Hudson Corporation .................... 1,800 97,650
Fred Meyer, Inc. ............................. 500 30,125
Sears Roebuck & Company ...................... 1,900 80,750
Wal-Mart Stores, Inc. ........................ 7,800 635,213
--------------
915,925
RETAIL - SPECIALTY - 0.7%
Circuit City Stores - Circuit City Group...... 700 34,956
Home Depot, Inc. ............................. 5,700 348,769
Payless Shoesource, Inc.* .................... 644 30,510
Staples, Inc. ................................ 1,100 48,056
Tandy Corporation ............................ 600 24,712
Toys "R" Us, Inc.* ........................... 2,100 35,438
--------------
522,441
SAVINGS & LOANS - 0.2%
Golden West Financial ........................ 500 $ 45,844
Washington Mutual, Inc. ...................... 2,400 91,650
--------------
137,494
SERVICES - ADVERTISING/MARKETING - 0.1%
Omnicom Group, Inc. .......................... 700 40,600
SERVICES - COMMERCIAL & CONSUMER - 0.2%
Cendant Corporation* ......................... 2,591 49,391
IMS Health, Inc. ............................. 800 60,350
Nielsen Media Research ....................... 266 4,788
Service Corporation International ............ 1,700 64,706
Sodexho Marriott Services .................... 75 2,077
--------------
181,312
SERVICES - DATA PROCESSING - 0.4%
Automatic Data Processing .................... 1,400 112,263
Electronic Data Systems Corporation .......... 1,700 85,425
First Data Corporation ....................... 1,800 57,037
Paychex, Inc. ................................ 1,000 51,437
--------------
306,162
TELECOMMUNICATION - LONG DISTANCE - 1.6%
AT&T Corporation ............................. 6,400 481,600
MCI Worldcom, Inc.* .......................... 7,482 536,833
Sprint Corporation ........................... 1,700 143,013
Sprint PCS* .................................. 850 19,656
--------------
1,181,102
TELECOMMUNICATIONS - 2.7%
Airtouch Communications, Inc.* ............... 2,000 144,250
Alltel Corporation ........................... 1,500 89,719
Ameritech Corporation ........................ 4,300 272,512
Bell Atlantic Corporation .................... 5,074 288,267
BellSouth Corporation ........................ 6,400 319,200
British Telecom PLC ADR ...................... 400 60,675
Ericsson (L.M.) Telecom Company
ADR (Cl. B) ................................ 2,400 57,450
GTE Corporation .............................. 3,700 249,519
Hong Kong Telecommunications, Ltd. ........... 800 14,050
SBC Communications, Inc. ..................... 7,154 383,633
Telecom New Zealand ADR ...................... 400 14,275
Telefonica De Espana ADR ..................... 400 54,150
Vodafone Group PLC ADR ....................... 500 80,562
--------------
2,028,262
54 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
COMMON STOCKS (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
TELEPHONE - 0.4%
Cia de Telecomunicaciones de
Chile S.A. ADR ............................. 425 $ 8,792
Telecomunicacoes Brasilerias SA ADR .......... 700 50,881
Telefonos De Mexico ADR ...................... 1,800 87,638
US West, Inc. ................................ 2,449 158,267
--------------
305,578
TEXTILES - APPAREL - 0.1%
Benetton Group S.p.a. ADR .................... 2,080 82,680
Springs Industries, Inc. (Ci. A) ............. 300 12,431
--------------
95,111
TOBACCO - 0.7%
Fortune Brands, Inc. ......................... 900 28,462
Gallaher Group PLC ADR ....................... 500 13,594
Philip Morris Companies, Inc. ................ 9,400 502,900
--------------
544,956
WASTE MANAGEMENT - 0.2%
Browning-Ferris Industries ................... 1,474 41,917
Waste Management, Inc. ....................... 2,312 107,797
--------------
149,714
--------------
Total common stocks - 52.5% .................. 39,889,946
U.S. GOVERNMENT & GOVERNMENT AGENCY SECURITIES
- ----------------------------------------------
U.S. GOVERNMENT AGENCIES - 8.0%
Fannie Mae, 7.00% - 2022 ..................... $ 595,000 604,306
Federal Home Loan Mortgage
Corporation, 5.97% - 2001 ............ $ 600,000 600,798
Government National Mortgage Association,
#67365, 11.50% - 2013 ................ $ 21,879 24,364
#353937, 6.00% - 2023 ................ $ 275,225 273,469
#410777, 7.00% - 2025 ................ $ 104,409 106,818
#780057, 7.50% - 2025 ................ $ 59,647 61,470
#2102, 8.00% - 2025 .................. $ 30,710 31,714
#412429, 8.50% - 2025 ................ $ 30,243 31,912
#410891, 7.00% - 2026 ................ $ 218,322 223,323
#426384, 7.00% - 2026 ................ $ 314,805 322,093
#424476, 7.50% - 2026 ................ $ 337,175 347,543
#432891, 7.50% - 2026 ................ $ 71,242 73,403
#402684, 8.00% - 2026 ................ $ 137,068 142,136
#427029, 8.50% - 2026 ................ $ 137,448 145,437
#435589, 8.50% - 2026 ................ $ 66,480 70,303
TBA, 6.50% -2029 ..................... $3,000,000 3,026,719
--------------
6,085,808
U.S. GOVERNMENT SECURITIES - 15.8%
U.S. Treasury Bonds,
6.875% - 2025 ........................ $ 35,000 42,504
6.75% - 2026 ......................... $1,740,000 2,085,268
6.625% - 2027 ........................ $ 550,000 649,171
5.50% - 2028 ......................... $2,000,000 2,094,980
--------------
4,871,923
U.S. Treasury Notes,
6.00% - 1999 ......................... $ 175,000 $ 176,269
6.375% - 1999 ........................ $ 300,000 301,893
5.625% - 2000 ........................ $ 75,000 76,341
6.25% - 2000 ......................... $ 475,000 485,250
5.625% - 2001 ........................ $ 700,000 716,786
6.25% - 2002 ......................... $ 380,000 398,871
5.50% - 2003 ......................... $1,000,000 1,032,010
5.875% - 2005 ........................ $ 75,000 80,110
6.50% - 2005 ......................... $ 100,000 109,556
5.625% - 2006 ........................ $ 100,000 105,779
6.50% - 2006 ......................... $ 175,000 194,593
6.125% - 2007 ........................ $ 900,000 984,690
6.25% - 2007 ......................... $1,000,000 1,099,330
5.625% - 2008 ........................ $1,300,000 1,387,295
--------------
7,148,773
--------------
Total U.S. government & government
agency securities - 23.8% .................. 18,106,504
MISCELLANEOUS ASSETS
- --------------------
ASSET-BACKED SECURITIES - 0.2%
Advanta Home Equity Loan Trust
(Cl. A2), 5.95% - 2009 ............... $ 142,135 142,103
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Starwood Hotels & Resorts .................... 367 8,327
--------------
Total miscellaneous assets - 0.2% .... 150,430
FOREIGN CORPORATE BONDS
- -----------------------
JAPAN - 0.4%
European Investment Bank,
3.00% - 2006(4)........................... 7,000,000 67,176
European Investment Bank,
4.625% - 2003(4).......................... 17,000,000 172,374
Interamerican Development Bank,
6.00% - 2001(4)........................... 5,000,000 50,643
KFW International Finance,
6.00% - 1999(4)........................... 3,000,000 27,992
--------------
Total foreign bonds - 0.4% ........... 318,185
FOREIGN GOVERNMENT ISSUES
- -------------------------
CANADA - 0.1%
Government Bond,
8.50% - 2005 ............................. 60,000 43,337
6.50% - 2004 ............................. 60,000 42,176
--------------
85,513
55 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1998
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
NUMBER MARKET
FOREIGN GOVERNMENT ISSUES (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
FRANCE - 0.2%
O.A.T. Government Bond,
8.50% - 2002(4)............................ 430,000 $ 91,331
5.50% - 2007(4)............................ 214,000 42,599
--------------
133,930
GERMANY - 0.3%
Bundesrepub Deutschland,
8.375% - 2001(4)........................... 130,000 87,182
7.375% - 2005(4)........................... 125,000 89,975
Deutschland Republic Government
Bond, 6.00% - 2007(4)...................... 62,000 42,793
--------------
219,950
UNITED KINGDOM - 0.1%
Treasury Bond,
8.00% - 2003(4)........................... 29,000 55,039
7.50% - 2006(4)........................... 12,000 23,971
--------------
79,010
--------------
Total foreign government issues - 0.7% 518,403
FOREIGN STOCKS
- --------------
AUSTRALIA - 0.0%
Rio Tinto, Ltd. .............................. 1,000 11,872
BELGIUM - 0.1%
Electrabel ................................... 50 21,977
KBC Bancassurance Holdings ................... 1,000 79,176
--------------
101,153
DENMARK - 0.1%
Danisco A/S .................................. 1,000 54,207
FRANCE - 0.4%
Axa .......................................... 500 72,500
Eridania Beghin-Say S.A ...................... 200 34,621
L'Air Liquide ................................ 236 43,303
Pinault-Printemps-Redoute S.A ................ 500 95,593
Societe Generale De Paris .................... 308 49,898
Technip ...................................... 400 37,664
--------------
333,579
GERMANY - 0.4%
Altana AG .................................... 300 23,415
Axa Colonia Konzern AG ....................... 300 34,042
Bank of Berlin ............................... 2,000 32,421
Bayer AG ..................................... 2,000 83,513
Deutsche Bank AG ............................. 500 29,434
M.A.N. AG .................................... 200 58,838
Siemens AG ................................... 400 25,816
Veba AG ...................................... 600 35,915
--------------
323,394
HONG KONG - 0.2%
Cheung Kong Holdings ......................... 5,000 $ 35,980
Hong Kong Electric Holdings, Ltd. ............ 9,000 27,300
Hutchinson Whampoa, Ltd. ..................... 14,000 98,938
--------------
162,218
ITALY - 0.2%
Banco Commerciale Italiane ................... 13,000 89,876
Telecom Italia S.p.a ......................... 5,555 47,500
--------------
137,376
JAPAN - 0.6%
Bridgestone Corporation ...................... 3,000 68,218
Canon, Inc. .................................. 1,000 21,410
Dai Nippon Printing, Ltd. .................... 2,000 31,950
Kao Corporation .............................. 4,000 90,425
Kuraray Company, Ltd. ........................ 3,000 33,165
Marui Company, Ltd. .......................... 2,000 38,564
Mitsubishi Electric Corporation* ............. 4,000 12,589
Mitsubishi Heavy Industries, Ltd. ............ 4,000 15,603
Ricoh Corporation, Ltd. ...................... 4,000 36,950
Sharp Corporation ............................ 2,000 18,067
Takeda Chemical Industries ................... 2,000 77,128
--------------
444,069
MALAYSIA - 0.0%
Malayan Cement Berhad ........................ 7,500 1,892
NETHERLANDS - 0.2%
CSM NV ....................................... 600 34,657
Ing Groep NV ................................. 1,500 91,517
Oce NV ....................................... 1,200 43,161
--------------
169,335
NEW ZEALAND - 0.0%
Lion Nathan, Ltd. ............................ 10,000 25,517
SINGAPORE - 0.0%
Cycle & Carriage, Ltd. ....................... 3,000 10,273
SOUTH AFRICA - 0.0%
Anglo American Platinum ...................... 2,000 27,436
SWEDEN - 0.1%
Astra AB -B .................................. 3,200 65,139
SWITZERLAND - 0.4%
ABB AG-Bearer ................................ 20 23,444
Nestle S.A ................................... 20 43,538
Novartis AG .................................. 26 51,110
Sig Schweizland .............................. 120 70,768
UBS-Bearer (Union Bank of
Switzerland) ................................. 400 122,898
--------------
311,758
56 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES N (MANAGED ASSET ALLOCATION) (CONTINUED)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
FOREIGN STOCK (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
UNITED KINGDOM - 0.6%
Abbey National PLC ........................... 3,600 $ 77,087
BAA PLC ...................................... 2,300 26,711
Barclays PLC ................................. 3,000 64,539
Blue Circle Industries PLC ................... 3,845 22,199
GKN PLC ...................................... 4,000 53,474
HSBC Holdings PLC ............................ 3,000 81,709
Lonrho Africa PLC ............................ 2,500 2,308
Tesco PLC .................................... 30,000 86,102
--------------
414,129
--------------
Total foreign stocks - 3.3% .......... 2,593,347
TEMPORARY CASH INVESTMENTS
- --------------------------
Vista Treasury Institutional Money
Market Fund - 2.6% ......................... 1,942,949 1,942,949
COMMERCIAL PAPER
- ----------------
FINANCIAL SERVICES - 3.9%
Ciesco LP, 5.20% - 2-5-99 .................... $2,950,000 2,937,197
MACHINERY - 0.9%
Dover Corporation,
5.50% - 1-26-99 ........................... $ 690,000 687,364
OIL - 2.5%
Equilon Enterprises,
5.00% - 1-4-99 ............................ $ 123,000 122,949
Motiva Enterprises LLC,
5.13% - 3-11-99 ........................... $1,820,000 1,803,711
--------------
1,926,660
SEMICONDUCTORS - 2.6%
Motorola, Inc., 5.12% - 1-26-99 .............. $2,000,000 1,993,980
--------------
Total commercial paper - 9.9% ............. 7,545,201
--------------
Total investments - 103.4% ................ 78,721,080
Liabilities, less cash and other assets - (3.4%) (2,600,333)
--------------
Total net assets - 100.0% ................. $ 76,120,747
==============
SERIES O (EQUITY INCOME)
NUMBER MARKET
COMMON STOCK OF SHARES VALUE
- --------------------------------------------------------------------------------
AEROSPACE/DEFENSE - 0.5%
Boeing Company, The .......................... 29,700 $ 968,962
ALUMINUM - 0.4%
Reynolds Metals Company ...................... 15,600 821,925
AMERICAN GOLD - 0.4%
Newmont Mining Corporation ................... 43,400 783,912
AUTO PARTS & EQUIPMENT - 1.6%
Eaton Corporation ............................ 2,900 204,994
Genuine Parts Company ........................ 48,200 1,611,688
TRW, Inc. .................................... 25,400 1,427,162
--------------
3,243,844
AUTOMOBILES - 0.8%
General Motors Corporation ................... 23,800 1,703,187
BANKS - MAJOR REGIONAL - 8.0%
Banc One Corporation ......................... 30,967 1,581,252
BankAmerica Corporation ...................... 14,100 847,762
BankBoston Corporation ....................... 22,400 872,200
First Union Corporation ...................... 24,680 1,500,853
Fleet Financial Group, Inc. .................. 38,500 1,720,469
Mellon Bank Corporation ...................... 52,100 3,581,875
Mercantile Bankshares Corporation ............ 27,700 1,066,450
J.P. Morgan & Company, Inc. .................. 18,000 1,891,125
National City Corporation .................... 15,700 1,138,250
PNC Bank Corporation ......................... 14,500 784,812
Wells Fargo Company .......................... 33,000 1,317,938
--------------
16,302,986
BANKS - MONEY CENTER - 0.7%
Chase Manhattan Corporation .................. 20,816 1,416,789
Beverages - Alcoholic - 2.1%
Anheuser-Busch Companies, Inc. ............... 42,800 2,808,750
Brown-Forman Corporation (CI. B) ............. 19,000 1,438,063
--------------
4,246,813
BUILDING MATERIALS - 0.8%
Armstrong World Industries, Inc. ............. 26,900 1,622,406
Chemicals - Basic - 3.1%
Dow Chemical Company ......................... 26,700 2,428,031
E.I. du Pont de Nemours & Company ............ 32,700 1,735,144
Great Lakes Chemical Company ................. 33,700 1,348,000
Olin Corporation ............................. 31,600 894,675
--------------
6,405,850
CHEMICALS - DIVERSIFIED - 0.7%
Hercules, Inc. ............................... 51,000 1,396,125
57 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES O (EQUITY INCOME)(CONTINUED)
NUMBER MARKET
COMMON STOCK (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
CHEMICALS - SPECIALTY - 2.2%
Imperial Chemical Industries
PLC ADR .................................... 17,800 $ 621,887
Lubrizol Corporation ......................... 17,700 454,669
Minnesota Mining & Manufacturing
Company .................................... 26,000 1,849,250
Nalco Chemical Company ....................... 29,500 914,500
Witco Corporation ............................ 41,600 663,000
--------------
4,503,306
COMPUTER HARDWARE - 0.7%
Hewlett-Packard Company ...................... 22,100 1,509,706
CONTAINERS & PACKAGING - 1.0%
Union Camp Corporation ....................... 28,800 1,944,000
ELECTRIC COMPANIES - 6.4%
Baltimore Gas & Electric Company ............. 14,700 453,862
Central & Southwest Corporation .............. 14,700 403,331
DQE, Inc. .................................... 27,400 1,203,888
Dominion Resources, Inc. ..................... 14,000 654,500
Duke Energy Corporation ...................... 22,200 1,422,188
Entergy Corporation .......................... 22,100 687,863
FirstEnergy Corporation ...................... 46,757 1,522,525
GPU, Inc. .................................... 11,800 521,412
Houston Industries, Inc. ..................... 35,300 1,134,013
Peco Energy Corporation ...................... 13,400 557,775
Pacificorp ................................... 46,100 970,981
Southern Company ............................. 51,600 1,499,625
Teco Energy, Inc. ............................ 23,600 665,225
Unicom Corporation ........................... 35,700 1,376,681
--------------
13,073,869
ELECTRICAL EQUIPMENT - 2.7%
Amp, Inc. .................................... 34,367 1,789,232
Cooper Industries, Inc. ...................... 17,888 853,034
General Electric Company ..................... 22,100 2,255,581
Hubbell, Inc. (Cl. B) ........................ 18,400 699,200
--------------
5,597,047
FINANCIAL - DIVERSE - 3.4%
American General Corporation ................. 27,000 2,106,000
Fannie Mae ................................... 32,200 2,382,800
H & R Block, Inc. ............................ 28,900 1,300,500
Transamerica Corporation ..................... 9,900 1,143,450
--------------
6,932,750
FOODS - 4.3%
General Mills, Inc. .......................... 37,700 2,931,175
Heinz (H.J.) Company ......................... 24,750 1,401,469
Kellogg Company .............................. 37,800 1,289,925
McCormick & Company, Inc.
(Non-Voting) ............................... 43,900 1,484,369
Quaker Oats Company .......................... 28,900 1,719,550
--------------
8,826,488
HARDWARE & TOOLS - 0.1%
The Stanley Works ............................ 11,800 $ 327,450
HEALTH CARE - DIVERSE - 2.1%
Abbott Laboratories .......................... 17,200 842,800
American Home Products Corporation ........... 59,400 3,344,963
--------------
4,187,763
HEALTH CARE - PHARMACEUTICALS - 1.4%
Pharmacia & Upjohn, Inc. ..................... 51,795 2,932,892
HOMEBUILDING - 0.7%
PPG Industries, Inc. ......................... 23,100 1,345,575
HOUSEHOLD FURNISHINGS & APPLIANCES - 0.6%
Whirlpool Corporation ........................ 23,600 1,306,850
HOUSEHOLD PRODUCTS - 1.3%
Kimberly-Clark Corporation ................... 39,400 2,147,300
Tupperware Corporation ....................... 27,900 458,606
--------------
2,605,906
INSURANCE - MULTILINE - 1.5%
Citigroup, Inc. .............................. 39,000 1,930,500
Lincoln National Corporation ................. 12,500 1,022,656
--------------
2,953,156
INSURANCE - PROPERTY - 2.6%
Chubb Corporation ............................ 3,700 240,038
Exel Limited ................................. 17,500 1,312,500
Safeco Corporation ........................... 40,000 1,717,500
St. Paul Companies, Inc. ..................... 57,904 2,012,164
--------------
5,282,202
IRON & STEEL - 0.3%
USX - U.S. Steel Group, Inc. ................. 23,500 540,500
LODGING - HOTELS - 0.3%
Hilton Hotels Corporation .................... 36,100 690,412
MACHINERY - DIVERSE - 0.5%
Deere & Company .............................. 11,200 371,000
GATX Corporation ............................. 15,200 575,700
--------------
946,700
MANUFACTURING - SPECIALIZED - 0.6%
Pall Corporation ............................. 50,900 1,288,406
MANUFACTURING - DIVERSIFIED - 1.5%
AlliedSignal, Inc. ........................... 28,200 1,249,613
Corning, Inc. ................................ 17,500 787,500
Tyco International, Ltd. ..................... 13,690 1,032,739
--------------
3,069,852
MEDICAL PRODUCTS & SUPPLIES - 0.6%
Bausch & Lomb, Inc. .......................... 19,300 1,158,000
METALS & MINING - 0.2%
Inco, Ltd. ................................... 43,600 460,525
58 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES O (EQUITY INCOME)(CONTINUED)
NUMBER MARKET
COMMON STOCK (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
MISCELLANEOUS - 0.5%
Phelps Dodge Corporation ..................... 19,000 $ 966,625
OIL - DOMESTIC - 1.9%
Atlantic-Richfield Company ................... 34,900 2,277,225
Unocal Corporation ........................... 53,400 1,558,613
--------------
3,835,838
OIL - INTERNATIONAL - 8.5%
BP Amoco PLC ADR ............................. 45,341 4,063,658
Chevron Corporation .......................... 28,200 2,338,838
Exxon Corporation ............................ 44,000 3,217,500
Mobil Corporation ............................ 28,100 2,448,213
Occidental Petroleum Corporation ............. 29,300 494,437
Royal Dutch Petroleum Company NY Shares....... 36,800 1,761,800
Texaco, Inc. ................................. 39,500 2,088,563
USX Marathon Group ........................... 30,200 909,775
--------------
17,322,784
OIL & GAS - DRILLING & EQUIPMENT - 0.5%
Baker Hughes, Inc. ........................... 59,600 1,054,175
OIL & GAS - EXPLORATION & PRODUCTION - 1.1%
Amerada Hess Corporation ..................... 29,300 1,457,675
Phillips Petroleum Company ................... 17,800 758,725
--------------
2,216,400
PAPER & FOREST PRODUCTS - 1.4%
Consolidated Papers, Inc. .................... 36,700 1,009,250
Georgia-Pacific Corporation
(GP Group) ................................. 16,100 942,856
International Paper Company .................. 22,100 990,356
--------------
2,942,462
PERSONAL CARE - 1.0%
International Flavors & Fragrances, Inc. ..... 47,400 2,094,487
PHOTOGRAPHY/IMAGING - 0.9%
Eastman Kodak Company ........................ 25,600 1,843,200
PUBLISHING - 2.7%
R.R. Donnelley & Sons Company ................ 25,900 1,134,744
Dow Jones & Company, Inc. .................... 18,700 899,937
Dun & Bradstreet Corporation ................. 31,500 994,219
Knight-Ridder, Inc. .......................... 31,400 1,605,325
Readers Digest Association, Inc. (CI. A) ..... 31,500 793,406
--------------
5,427,631
RAILROADS - 2.8%
Burlington Northern Santa Fe
Corporation ................................ 33,700 1,137,375
Norfolk Southern Corporation ................. 77,000 2,439,938
Union Pacific Corporation .................... 47,200 2,126,950
--------------
5,704,263
REAL ESTATE - 0.1%
Rouse Company ................................ 10,000 275,000
RETAIL - DEPARTMENT STORES - 1.0%
May Department Stores Company ................ 14,400 $ 869,400
J.C. Penney Company, Inc. .................... 25,500 1,195,313
--------------
2,064,713
RETAIL - SPECIALTY - 0.4%
Toys "R" Us, Inc.* ........................... 43,900 740,812
TELECOMMUNICATIONS - LONG DISTANCE - 1.0%
AT&T Corporation ............................. 28,100 2,114,525
TELECOMMUNICATIONS - 7.7%
Alltel Corporation ........................... 62,800 3,756,225
BCE, Inc. .................................... 30,100 1,141,919
Bell Atlantic Corporation .................... 36,000 2,045,250
BellSouth Corporation ........................ 19,400 967,575
Frontier Corporation ......................... 6,000 204,000
GTE Corporation .............................. 42,900 2,893,069
SBC Communications, Inc. ..................... 88,352 4,737,876
--------------
15,745,914
TELEPHONE - 1.1%
Telecomunicacoes Brasilerias SA ADR .......... 12,300 894,056
US WEST, Inc. ................................ 19,300 1,247,263
--------------
2,141,319
TOBACCO - 3.6%
Fortune Brands, Inc. ......................... 35,000 1,106,875
Philip Morris Companies, Inc. ................ 56,900 3,044,150
RJR Nabisco Holdings Corporation ............. 43,300 1,285,469
UST, Inc. .................................... 55,700 1,942,537
--------------
7,379,031
TRANSPORTATION - MISCELLANEOUS (BUS/TRUCKING) - 0.2%
Alexander & Baldwin, Inc. .................... 15,300 355,725
WASTE MANAGEMENT - 1.2%
Browning-Ferris Industries ................... 41,100 1,168,781
Waste Management, Inc. ....................... 29,222 1,362,476
--------------
2,531,257
--------------
Total common stocks - 91.7% .......... 187,152,315
PRINCIPAL MARKET
U.S. GOVERNMENT & GOVERNMENT AGENCY SECURITIES AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES - 0.9%
U.S. Treasury Bonds, 6.00% - 2026 ............ $ 400,000 437,312
U.S. Treasury Notes,
5.875% - 1999 ............................. $ 100,000 101,033
6.25% - 2000 .............................. $ 100,000 102,158
6.50% - 2001 .............................. $ 400,000 416,900
5.75% - 2003 .............................. $ 400,000 417,640
5.625% - 2006 ............................. $ 200,000 211,558
7.00% - 2006 .............................. $ 100,000 114,107
--------------
Total U.S. government & government
agency securities - 0.9% .................. 1,800,708
59 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES O (EQUITY INCOME)(CONTINUED)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
REAL ESTATE INVESTMENT TRUSTS OF SHARES VALUE
- --------------------------------------------------------------------------------
REAL ESTATE - 2.2%
Archstone Communities Trust .................. 18,900 $ 382,725
Crescent Real Estate
Equities Company .......................... 31,100 715,300
Simon Property Group, Inc. ................... 54,236 1,545,726
Starwood Hotels & Resorts .................... 59,549 1,351,018
Weingarten Realty Investors .................. 11,500 513,188
--------------
Total real estate investment trusts - 2.2% 4,507,957
FOREIGN STOCKS
- --------------
UNITED KINGDOM - 1.0%
Smith & Nephew PLC ........................... 241,100 744,119
Tomkins PLC .................................. 259,000 1,219,515
--------------
Total foreign stocks - 1.0% .......... 1,963,634
TEMPORARY CASH INVESTMENTS
- --------------------------
Vista Treasury Institutional
Money Market Fund - 0.5% ................... 1,097,127 1,097,127
COMMERCIAL PAPER
- ----------------
CHEMICALS - DIVERSIFIED - 0.9%
E.I. du Pont de Nemours & Company,
5.14% - 2-5-99 ........................... $1,870,000 1,861,884
FINANCIAL SERVICES - 2.9%
Ciesco LP, 5.05% - 2-11-99 ................... $1,500,000 1,492,260
International Lease Finance,
5.10% - 1-19-99 .......................... $4,480,000 4,470,771
--------------
5,963,031
--------------
Total commercial paper - 3.8% ........ 7,824,915
--------------
Total investments - 100.1% ........... 204,346,656
Liabilities, less cash
and other assets - (0.1%) ......... (276,873)
--------------
Total net assets - 100.0% ............ $ 204,069,783
==============
SERIES P (HIGH YEILD)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
CORPORATE BONDS OF SHARES VALUE
- --------------------------------------------------------------------------------
AEROSPACE/DEFENSE - 1.3%
Burke Industries, Inc.,
10.0% - 2007 ............................ $ 200,000 $ 196,500
AUTOMOTIVE - 4.0%
Federal-Mogul Corporation,
7.875% - 2010 ........................... $ 200,000 197,500
Hayes Lemmerz International, Inc.,
8.25% - 2008 ............................ $ 150,000 149,625
Mark IV Industries, Inc. .....................
7.75% - 2006 ............................ $ 200,000 194,500
7.505% - 2007 ........................... $ 50,000 47,500
--------------
589,125
BANKING - 3.3%
BF SAUL REIT, 9.75% - 2008 ................... $ 175,000 160,562
FCB/NC Capital, 8.05% - 2028 ................. $ 75,000 81,094
Golden State Holdings, Inc.,
7.125% - 2005 ........................... $ 200,000 199,250
Homeside, Inc., 11.25% - 2003 ................ $ 50,000 58,812
--------------
499,718
BEVERAGES - 0.3%
Delta Beverage Group,
9.75% - 2003 ............................ $ 50,000 52,125
BROKERAGE - 0.6%
SI Financing Trust, Inc., 9.50% - 2026 ....... 3,500 93,188
BUILDING MATERIALS - 1.7%
Knoll, Inc., 10.875% - 2006 .................. $ 63,000 69,300
Nortek, Inc., 8.875% - 2008 .................. $ 175,000 177,625
--------------
246,925
CHEMICALS - 0.1%
Envirodyne Industries, Inc.,
12.00% - 2000 ............................. $ 18,000 18,022
CONSTRUCTION MACHINERY - 4.7%
AGCO Corporation, 8.50% - 2006 ............... $ 200,000 191,500
Columbus McKinnon Corporation,
8.50% - 2008 ............................ $ 175,000 164,937
Navistar International, 8.00% - 2008 ......... $ 175,000 177,844
Titan Wheel International, Inc.,
8.75% - 2007 ............................ $ 175,000 168,000
--------------
702,281
CONSUMER CYCLICAL - OTHER - 0.9%
American ECO Corporation,
9.625% - 2008 ........................... $ 200,000 134,500
CONSUMER PRODUCTS - 1.3%
Revlon Consumer Products,
8.125% - 2006 ........................... $ 150,000 141,375
Shop Vac Corporation,
10.625% - 2003 .......................... $ 50,000 54,438
--------------
195,813
60 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES P (HIGH YEILD)(CONTINUED)
PRINCIPAL MARKET
CORPORATE BONDS (CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
ELECTRIC UTILITY - 3.9%
AES Corporation, 10.25% - 2006 ............... $ 100,000 $ 108,250
Cal Energy Company, Inc.,
9.50% - 2006 ............................ 100,000 110,750
Calpine Corporation-Utility-Electric,
8.75% - 2007 ............................ 175,000 183,313
Niagara Mohawk Power,
7.75% - 2008 ............................ 150,000 162,375
--------------
564,688
ENERGY - INDEPENDENT - 0.9%
COHO Energy, Inc.,
8.875% - 2007 ........................... 100,000 83,750
Seagull Energy Corporation,
8.625% - 2005 ........................... 50,000 49,125
--------------
132,875
ENERGY - OTHER - 0.9%
P&L Coal Holdings Corporation,
8.875% - 2008 ........................... 125,000 127,500
ENERGY - REFINING - 1.4%
Crown Central Petroleum,
10.875% - 2005 .......................... 125,000 112,188
Giant Industries, Inc., 9.0% - 2007 .......... 100,000 97,750
--------------
209,938
ENTERTAINMENT - 1.9%
Empress Entertainment, Inc.,
8.125% - 2006 ........................... 100,000 100,250
Premier Parks, 9.75% - 2007 .................. 175,000 190,531
--------------
290,781
FINANCIAL COMPANIES - 0.3%
Dollar Financial Group, Inc.,
10.875% - 2006 .......................... 50,000 50,438
FOOD - 1.1%
Chiquita Brands International, Inc.,
10.25% - 2006 ........................... 25,000 26,031
Nash Finch Company,
8.50% - 2008 ............................ 150,000 142,688
--------------
168,719
GAMING - 7.2%
Boyd Gaming Corporation,
9.50% - 2007 ............................ 225,000 223,875
Circus Circus Enterprise,
9.25% - 2005 ............................ 125,000 127,656
Harrahs Operating, Inc.,
7.875% - 2005 ........................... 250,000 250,625
MGM Grand, Inc., 6.95% - 2005 ................ 125,000 121,562
Mirage Resorts, Inc., 6.625% - 2005 .......... 150,000 147,000
Park Place Entertainment,
7.875% - 2005 ........................... 200,000 200,000
--------------
1,070,718
HEALTHCARE - 4.2%
Genesis Health Ventures, Inc.,
9.875% - 2009 ........................... $ 150,000 $ 143,625
Multicare Companies, Inc.,
9.0% - 2007 ............................ 150,000 142,125
Packard Bioscience Company,
9.375% - 2007 ........................... 75,000 70,969
Prime Medical Services,
8.75% - 2008 ............................ 100,000 96,000
Tenet Healthcare Corporation,
8.125% - 2008 ........................... 175,000 180,906
--------------
633,625
HOME CONSTRUCTION - 4.4%
D.R. Horton, Inc., 8.375% - 2004 ............. 125,000 124,063
Hovnanian Enterprise, Inc.,
9.75% - 2005 ............................ 100,000 95,000
MDC Holdings, Inc., 8.375% - 2008 ............ 100,000 97,750
NVR, Inc., 8.0% - 2005 ....................... 225,000 222,187
Toll Corporation, 7.75% - 2007 ............... 125,000 123,750
--------------
662,750
INDUSTRIAL - OTHER - 0.4%
Iron Mountain, Inc., 10.125% - 2006 .......... 50,000 53,625
INSURANCE - 0.7%
GENAMERICA Capital Inc.,
8.525% - 2027 ........................... 100,000 105,875
LODGING - 3.2%
HMH Properties,
7.875% - 2008 ........................... 225,000 219,094
8.45% - 2008 ............................ 50,000 50,062
Prime Hospitality, 9.25% - 2006 .............. 200,000 207,250
--------------
476,406
MEDIA - CABLE - 10.6%
Adelphia Communications,
9.50% - 2004 ............................ 125,000 132,500
8.375% - 2008 ........................... 100,000 103,500
Avalon Cable of Michigan,
9.375% - 2008 ........................... 250,000 254,375
Century Communications,
9.50% -2005 ............................. 125,000 139,062
8.375% - 2007 ........................... 75,000 80,625
CF Cable TV, Inc., 11.625% - 2005 ............ 100,000 110,125
CSC Holdings, Inc.,
7.875% - 2018 ........................... 25,000 25,344
7.625% - 2018 ........................... 100,000 100,375
Diamond Holdings, 9.125% - 2008 .............. 150,000 142,875
Jones Intercable, Inc.,
7.625% -2008 ............................ 200,000 209,500
Lenfest Communications,
10.50% - 2006 ........................... 175,000 204,750
Rogers Cablesystems, 9.625% - 2002 ........... 50,000 53,938
Rogers Communications, Inc.,
9.125% - 2006 .......................... 30,000 31,200
--------------
1,588,169
61 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES P (HIGH YIELD)(CONTINUED)
PRINCIPAL MARKET
CORPORATE BONDS (CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
MEDIA - NONCABLE - 6.8%
Allbritton Communications,
9.75% - 2007 ............................ $ 100,000 $ 106,000
Big Flower Press Holdings, Inc.,
8.875% - 2007 ........................... 125,000 126,250
Golden Books Publishing, Inc.,
7.65% - 2002 ............................ 50,000 15,750
Heritage Media Corporation,
8.75% - 2006 ............................ 50,000 53,750
Hollinger International Publishing, Inc.,
8.625% - 2005 ........................... 150,000 158,812
9.25% - 2006 ............................ 125,000 131,406
K-III Communications Corporation,
10.25% - 2004 ........................... 20,000 20,825
USA Networks, 6.75% - 2005 ................... 175,000 174,563
Viacom, Inc., 8.0% - 2006 .................... 225,000 234,000
--------------
1,021,356
METALS - 4.4%
AK Steel Corporation, 10.75% - 2004 .......... 150,000 156,000
Ameristeel Corporation,
8.75% - 2008 ............................ 100,000 96,750
Bulong Operations, 12.50% - 2008 ............. 175,000 175,000
Simcala, Inc., 9.625% - 2006 ................. 100,000 71,250
Wheeling Pittsburgh Corporation,
9.25% - 2007 ............................ 100,000 92,750
WHX Corporation, 10.50% - 2005 ............... 75,000 68,813
--------------
660,563
PACKAGING & CONTAINERS - 3.1%
Huntsman Packaging Corporation,
9.125% - 2007 ........................... 125,000 124,063
Indesco International, Inc.,
9.75% - 2008 ............................ 175,000 163,187
Packaged Ice, Inc., 9.75% - 2005 ............. 125,000 122,813
Plastic Containers, Inc.,
10.00% - 2006 ........................... 50,000 52,437
--------------
462,500
RETAILERS - 2.4%
Specialty Retailers, Inc., 8.50% - 2005 ...... 150,000 134,625
Zale Corporation, 8.50% - 2007 ............... 225,000 218,250
--------------
352,875
SERVICES - 2.2%
Loewen Group, Inc., 6.70% - 1999 ............. 75,000 70,687
Protection One Alarm,
7.375% - 2005 ............................ 250,000 258,125
--------------
328,812
TELECOMMUNICATIONS - 7.2%
Centennial Cellular, 8.875% - 2001 ........... $ 100,000 $ 104,875
Comcast Cellular Holdings, Inc.,
9.50% - 2007 ............................ $ 175,000 186,375
Mastec, Inc., 7.75% - 2008 ................... $ 125,000 119,062
Mcleodusa, Inc., 8.375% - 2008 ............... $ 175,000 172,375
MJD Communications, Inc.,
9.50% - 2008 ............................ $ 175,000 173,688
RCN Corporation, 10.00% - 2007 ............... $ 225,000 215,437
Satelites Mexicanos, Inc.,
10.125% - 2004 .......................... $ 125,000 99,688
--------------
1,071,500
TEXTILES - 1.3%
Delta Mills, Inc., 9.625% - 2007 ............. $ 100,000 98,250
Westpoint Stevens, 7.875% - 2008 ............. $ 100,000 102,500
--------------
200,750
TOBACCO - 0.3%
Dimon, Inc., 8.875% - 2006 ................... $ 25,000 24,375
Standard Commercial Tobacco
Corporation, 8.875% - 2005 ........... $ 25,000 24,531
--------------
48,906
TRANSPORTATION - 1.1%
Allied Holdings, Inc., 8.625% - 2007 ......... $ 100,000 100,250
Teekay Shipping Corporation,
8.32% - 2008 ............................ $ 65,000 64,594
--------------
164,844
--------------
Total corporate bonds - 88.1% ........ 13,176,410
NUMBER MARKET
PREFERRED STOCKS OF SHARES VALUE
- --------------------------------------------------------------------------------
BANKS & CREDIT - 0.2%
California Federal Bank, 9.125% .............. 1,000 25,312
MEDIA - CABLE - 0.6%
CSC Holdings, Inc., 11.125% .................. 874 96,319
MEDIA - NONCABLE - 0.6%
Primedia, Inc., 10.0% - 2008 ................. 800 83,400
--------------
Total preferred stocks - 1.4% ............ 205,031
COMMON STOCKS
- -------------
BROADCAST MEDIA - 0.5%
Infinity Broadcasting Corporation ............ 3,000 82,125
--------------
Total investments - 90.0% ................ 13,463,566
Cash and other assets, less liabilities - 10.0% 1,485,837
--------------
Total net assets - 100.0% ................ $ 14,949,403
==============
62 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES S (SOCIAL AWARENESS)
NUMBER MARKET
COMMON STOCKS OF SHARES VALUE
- --------------------------------------------------------------------------------
AIRLINES - 0.4%
AMR Corporation* ............................. 9,400 $ 558,125
AUTO PARTS & EQUIPMENT - 0.8%
Dana Corporation ............................. 7,200 294,300
Snap-On Tools ................................ 25,500 887,719
--------------
1,182,019
BANKS - MAJOR REGIONAL - 3.9%
Banc One Corporation ......................... 40,480 2,067,010
Bank of New York Company, Inc. ............... 49,200 1,980,300
Northern Trust Corporation ................... 22,200 1,938,338
--------------
5,985,648
BANKS - MONEY CENTER - 1.0%
Chase Manhattan Corporation .................. 23,600 1,606,275
BEVERAGES - SOFT DRINK - 3.0%
Coca-Cola Company ............................ 54,700 3,658,062
Whitman Corporation .......................... 39,300 997,238
--------------
4,655,300
BROADCAST MEDIA - 3.4%
Chancellor Media Corporation* ................ 15,700 751,638
Comcast Corporation (CI. A) .................. 20,600 1,208,962
Tele-Communications, Inc.* ................... 22,700 1,255,594
Viacom, Inc. (CI. B)* ........................ 26,900 1,990,600
--------------
5,206,794
CHEMICALS - BASIC - 0.4%
Praxair, Inc. ................................ 18,800 662,700
CHEMICALS - SPECIALTY - 0.6%
Fuller (H.B.) Company ........................ 7,600 365,750
Nalco Chemical Company ....................... 10,300 319,300
Sigma-Aldrich Corporation .................... 8,900 261,438
--------------
946,488
COMMUNICATION EQUIPMENT - 1.4%
ADC Telecommunications, Inc.* ................ 15,800 549,050
Comverse Technology, Inc.* ................... 12,500 887,500
Tellabs, Inc.* ............................... 10,100 692,481
--------------
2,129,031
COMPUTER HARDWARE - 4.9%
Compaq Computer Corporation .................. 34,800 1,459,425
Hewlett-Packard Company ...................... 17,600 1,202,300
International Business Machines
Corporation ................................ 22,200 4,101,450
Sun Microsystems, Inc.* ...................... 8,900 762,063
--------------
7,525,238
COMPUTER SOFTWARE/SERVICES - 6.4%
Adobe Systems, Inc. .......................... 14,800 $ 691,900
Affiliated Computer
Services, Inc. (Cl.A)* ..................... 25,900 1,165,500
American Management Systems, Inc.* ........... 37,900 1,516,000
Autodesk, Inc. ............................... 13,500 576,281
Computer Associates
International, Inc. ........................ 16,000 682,000
Microsoft Corporation* ....................... 37,200 5,159,175
--------------
9,790,856
COMPUTERS - NETWORKING - 2.2%
Ascend Communications, Inc.* ................. 4,900 322,175
Cisco Systems, Inc.* ......................... 33,525 3,111,539
--------------
3,433,714
CONTAINERS & PACKAGING - 0.1%
Crown Cork & Seal Company, Inc. .............. 5,500 169,469
DISTRIBUTION - FOOD & HEALTH - 1.0%
Cardinal Health, Inc. ........................ 20,700 1,570,613
ELECTRIC COMPANIES - 0.3%
New Century Energies, Inc. ................... 8,300 404,625
ELECTRICAL EQUIPMENT - 1.0%
Cooper Industries, Inc. ...................... 6,700 319,506
Emerson Electric Company ..................... 5,400 337,838
Hubbell, Inc. (Cl. B) ........................ 12,500 475,000
Thomas & Betts Corporation ................... 7,700 333,506
--------------
1,465,850
ELECTRONICS - DISTRIBUTION - 0.3%
W.W. Grainger, Inc. .......................... 13,000 541,125
ELECTRONICS - SEMICONDUCTORS - 4.4%
Analog Devices, Inc.* ........................ 33,000 1,035,375
Intel Corporation ............................ 38,600 4,576,512
Texas Instruments, Inc. ...................... 5,900 504,819
Xilinx, Inc.* ................................ 8,400 547,050
--------------
6,663,756
ENTERTAINMENT - 1.2%
Time Warner, Inc. ............................ 28,600 1,774,987
EQUIPMENT - SEMICONDUCTORS - 0.2%
Applied Materials, Inc.* ..................... 8,900 379,919
FINANCIAL - DIVERSE - 6.6%
American Express Company ..................... 13,400 1,370,150
American General Corporation ................. 21,100 1,645,800
Fannie Mae ................................... 22,000 1,628,000
Finova Group, Inc. ........................... 24,400 1,316,075
Freddie Mac .................................. 28,800 1,855,800
SunAmerica, Inc. ............................. 27,600 2,239,050
--------------
10,054,875
63 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES S (SOCIAL AWARENESS) (CONTINUED)
NUMBER MARKET
COMMON STOCKS (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
FOODS - 1.6%
Bestfoods .................................... 10,800 $ 575,100
General Mills, Inc. .......................... 12,500 971,875
Interstate Bakeries Corporation .............. 33,400 883,013
--------------
2,429,988
HEALTH CARE - DIVERSE - 2.1%
Johnson & Johnson ............................ 38,132 3,198,321
HEALTH CARE - LONG TERM CARE - 0.3%
Healthsouth Corporation* ..................... 25,000 385,937
HEALTH CARE - SPECIALIZED SERVICES - 0.4%
ALZA Corporation* ............................ 11,800 616,550
HOUSEHOLD FURNISHING & APPLIANCES - 0.8%
Leggett & Platt, Inc. ........................ 56,200 1,236,400
HOUSEHOLD PRODUCTS - 3.2%
Colgate-Palmolive Company .................... 16,000 1,486,000
Kimberly-Clark Corporation ................... 16,000 872,000
Procter & Gamble Company, The ................ 27,400 2,501,963
--------------
4,859,963
INSURANCE - LIFE/HEALTH - 0.9%
Unum Corporation ............................. 23,800 1,389,325
INSURANCE - MULTI-LINE - 1.5%
American International Group, Inc. ........... 23,175 2,239,284
INSURANCE - PROPERTY & CASUALTY - 0.7%
Chubb Corporation ............................ 17,000 1,102,875
INVESTMENT BANK/BROKERAGE - 0.3%
Edwards (A.G.), Inc. ......................... 11,700 435,825
LEISURE TIME PRODUCTS - 0.4%
Mattel, Inc. ................................. 24,000 547,500
MACHINERY - DIVERSE - 0.2%
Milacron, Inc. ............................... 14,300 275,275
MANUFACTURING - DIVERSIFIED - 0.7%
Illinois Tool Works, Inc. .................... 17,200 1,085,750
MANUFACTURING - SPECIALIZED - 0.2%
Avery Dennison Corporation ................... 5,900 265,869
MEDICAL PRODUCTS & SUPPLIES - 1.0%
Boston Scientific Corporation* ............... 26,400 707,850
Guidant Corporation .......................... 7,200 793,800
--------------
1,501,650
NATURAL GAS - 0.3%
Consolidated Natural Gas Company ............. 8,000 432,000
OFFICE EQUIPMENT & SUPPLIES - 0.7%
Pitney-Bowes, Inc. ........................... 15,200 1,004,150
OIL - DOMESTIC - 0.4%
Atlantic-Richfield Company ................... 9,000 587,250
OIL - INTERNATIONAL - 1.2%
BP Amoco PLC ................................. 21,041 $ 1,885,809
OIL & GAS - DRILLING & EQUIPMENT - 0.3%
B.J. Services Company* ....................... 14,800 231,250
Ensco International, Inc. .................... 9,600 102,600
Smith International, Inc.* ................... 4,800 120,900
--------------
454,750
OIL & GAS - EXPLORATION/PRODUCTION - 0.9%
Anadarko Petroleum Corporation ............... 24,000 741,000
Apache Corporation ........................... 22,000 556,875
--------------
1,297,875
PAPER & FOREST PRODUCTS - 0.3%
Mead Corporation ............................. 6,700 196,394
Westavco Corporation ......................... 8,500 227,906
--------------
424,300
PERSONAL CARE - 0.5%
Gillette Company ............................. 16,500 797,156
PHARMACEUTICALS - 4.6%
Forest Laboratories, Inc.* ................... 15,600 829,725
Merck & Company, Inc. ........................ 21,800 3,219,588
Schering-Plough Corporation .................. 53,200 2,939,300
--------------
6,988,613
PHOTOGRAPHY / IMAGING - 0.8%
Xerox Corporation ............................ 9,900 1,168,200
PUBLISHING - 0.5%
McGraw-Hill Companies, Inc. .................. 7,100 723,312
PUBLISHING - NEWSPAPER - 0.4%
New York Times Company, The .................. 19,300 669,469
RAILROADS - 0.3%
Norfolk Southern Corporation ................. 14,300 453,131
RESTAURANTS - 1.4%
McDonald's Corporation ....................... 15,200 1,164,700
Starbucks Corporation* ....................... 18,500 1,038,312
--------------
2,203,012
RETAIL - APPAREL - 0.5%
Talbots, Inc. ................................ 23,500 737,312
RETAIL - BUILDING SUPPLIES - 0.7%
Lowe's Companies, Inc. ....................... 21,900 1,121,006
RETAIL - DEPARTMENT STORES - 2.3%
Family Dollar Stores, Inc. ................... 70,000 1,540,000
Kohl's Corporation* .......................... 13,200 810,975
Saks, Inc.* .................................. 38,000 1,199,375
--------------
3,550,350
RETAIL - DRUG STORES - 1.5%
Rite Aid Corporation ......................... 45,400 2,250,137
64 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES S (SOCIAL AWARENESS)(CONTINUED)
NUMBER MARKET
COMMON STOCKS (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
RETAIL - FOOD CHAINS - 1.0%
Kroger Company, The* ......................... 24,500 $ 1,482,250
RETAIL - GENERAL MERCHANDISE - 2.1%
Consolidated Stores Corporation* ............. 17,300 349,244
Dayton Hudson Corporation .................... 42,800 2,321,900
Sears, Roebuck & Company ..................... 13,500 573,750
--------------
3,244,894
SAVINGS & LOAN - 0.4%
Washington Mutual, Inc. ...................... 15,120 577,395
SERVICES - ADVERTISING/MARKETING - 1.3%
Omnicom Group, Inc. .......................... 35,000 2,030,000
SERVICES - COMMERCIAL & CONSUMER - 0.6%
Service Corporation International ............ 23,800 905,887
SERVICES - COMPUTER SYSTEMS - 0.7%
Sungard Data Systems, Inc.* .................. 28,500 1,131,094
TELECOMMUNICATIONS - 5.8%
Ameritech Corporation ........................ 30,400 1,926,600
Bell Atlantic Corporation .................... 34,400 1,954,350
BellSouth Corporation ........................ 45,200 2,254,350
SBC Communications, Inc. ..................... 50,900 2,729,513
--------------
8,864,813
TELECOMMUNICATIONS - LONG DISTANCE - 4.8%
AT&T Corporation ............................. 37,100 2,791,775
MCI WorldCom, Inc.* .......................... 20,500 1,470,875
Scientific Atlanta, Inc. ..................... 24,400 556,625
Sprint Corporation ........................... 19,500 1,640,437
Sprint Corporation PCS* ...................... 36,150 835,969
--------------
7,295,681
TRUCKING - 0.5%
Consolidated Freightways Corporation* ........ 20,000 317,500
FDX Corporation* ............................. 4,500 400,500
--------------
23,800 718,000
TRUCKS & PARTS - 0.2%
Federal-Mogul Corporation .................... 5,800 345,100
--------------
Total common stocks - 92.8% .............. 141,620,865
Cash and other assets, less liabilities - 7.2% 11,019,677
--------------
Total net assets - 100.0% ................ $ 152,640,542
==============
SERIES V (VALUE)
NUMBER MARKET
COMMON STOCKS OF SHARES VALUE
- --------------------------------------------------------------------------------
AEROSPACE/DEFENSE - 0.9%
Lockheed Martin Corporation .................. 2,000 $ 169,500
AUTOMOBILES - 1.5%
Volvo AB ADR ................................. 12,000 279,750
AUTO PARTS & EQUIPMENT - 1.6%
Motorcar Parts & Accessories, Inc.* .......... 26,000 297,375
BANKS - MAJOR REGIONAL - 2.3%
BankBoston Corporation ....................... 4,300 167,431
Mercantile Bancorporation, Inc. .............. 5,700 262,913
BIOTECHNOLOGY - 1.4%
Ligand Pharmaceuticals, Inc. (Cl.B)* ......... 22,000 255,750
CHEMICALS - SPECIALTY - 3.6%
Buch Boake Allen, Inc.* ...................... 5,700 200,925
M.A. Hanna Company ........................... 22,000 270,875
Material Sciences Corporation* ............... 22,000 187,000
--------------
658,800
COMMUNICATION EQUIPMENT - 8.5%
ANTEC Corporation* ........................... 20,000 402,500
Comverse Technology, Inc.* ................... 13,200 937,200
Motorola, Inc. ............................... 3,100 189,294
Transcrypt International, Inc.* .............. 17,800 50,018
--------------
1,579,012
COMPUTER HARDWARE - 1.1%
CHS Electronics, Inc.* ....................... 11,600 196,475
COMPUTER SOFTWARE/SERVICES - 5.0%
American Management Systems, Inc.* ........... 5,800 232,000
Computer Sciences Corporation* ............... 4,800 309,300
DST Systems, Inc.* ........................... 3,000 171,188
Rational Software Corporation* ............... 8,000 212,000
--------------
924,488
ELECTRICAL EQUIPMENT - 7.1%
Benchmark Electronics, Inc.* ................. 14,700 538,387
Maxwell Technologies, Inc.* .................. 12,300 495,075
Rockwell International Corporation ........... 5,700 276,806
--------------
1,310,268
ELECTRONICS - INSTRUMENTATION - 1.6%
E G & G, Inc. ................................ 10,500 292,031
Electronics - Semiconductors - 0.8%
S3, Inc.* .................................... 19,300 142,036
ENTERTAINMENT - 0.6%
Metromedia International Group, Inc.* ........ 21,000 114,187
FOODS - 2.3%
Chiquita Brands International, Inc. .......... 30,000 286,875
Hormel Foods Corporation ..................... 4,200 137,550
--------------
424,425
65 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES V (VALUE)(CONTINUED)
NUMBER MARKET
COMMON STOCKS (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
GAMING & LOTTERY - 1.8%
Circus Circus Enterprises, Inc.* ............. 29,500 $ 337,406
GOLD & PRECIOUS METALS MINING - 0.7%
Homestake Mining Company ..................... 14,000 128,625
HEALTH CARE - LONG TERM CARE - 1.2%
Integrated Health Services, Inc.* ............ 16,400 231,650
HEALTH CARE - MANAGED CARE - 0.7%
United HealthCare Corporation ................ 3,000 129,188
HEALTH CARE - SPECIALIZED SERVICES - 0.9%
CryoLife, Inc.* .............................. 14,500 172,188
HOUSEHOLD FURNISHINGS & APPLIANCES - 1.5%
Meadowcraft, Inc.* ........................... 6,500 72,719
O'Sullivan Industries Holdings, Inc.* ........ 19,200 201,600
--------------
274,319
INSURANCE - LIFE/HEALTH - 3.6%
AFLAC, Inc. .................................. 6,000 264,000
UNUM Corporation ............................. 7,000 408,625
--------------
672,625
INSURANCE - PROPERTY & CASUALTY - 1.1%
Horace Mann Educators Corporation ............ 7,200 205,200
INVESTMENT BANK/BROKERAGE - 1.1%
Legg Mason, Inc. ............................. 6,600 208,312
LEISURE TIME PRODUCTS - 2.0%
Hasbro, Inc. ................................. 10,000 361,250
MANUFACTURING - DIVERSIFIED - 0.9%
AEP Industries, Inc.* ........................ 8,000 174,000
MEDICAL PRODUCTS & SUPPLIES - 4.1%
DENTSPLY International, Inc. ................. 5,300 136,475
Sunrise Medical, Inc.* ....................... 50,000 621,875
--------------
758,350
NATURAL GAS - 2.7%
Equitable Resources, Inc. .................... 17,000 495,125
OIL - INTERNATIONAL - 1.3%
Tesoro Petroleum Corporation* ................ 20,000 242,500
OIL & GAS - DRILLING & EQUIPMENT - 0.4%
Tuboscope, Inc.* ............................. 8,000 65,000
OIL & GAS - EXPLORATION & PRODUCTION - 4.3%
Apache Corporation ........................... 10,000 253,125
Forcenergy, Inc.* ............................ 27,000 70,875
MCN Energy Group, Inc. ....................... 5,500 104,844
Ocean Energy, Inc.* .......................... 25,000 157,812
YFP Sociedad Anonima ADR ..................... 7,500 209,531
--------------
796,187
PHARMACEUTICALS - 4.4%
Dura Pharmaceuticals, Inc.* .................. 17,200 $ 261,225
Mylan Laboratories, Inc. ..................... 9,000 283,500
Teva Pharmaceutical Industries,
Ltd. ADR ................................... 6,800 276,675
--------------
821,400
PUBLISHING - NEWSPAPER - 1.1%
E.W. Scripps Company (Cl. A) ................. 4,200 208,950
RAILROADS - 4.0%
RailAmerica, Inc.* ........................... 88,000 748,000
RESTAURANTS - 6.8%
The Cheesecake Factory, Inc.* ................ 15,200 450,775
Morrison Health Care, Inc. ................... 16,000 305,000
Sonic Corporation* ........................... 20,000 497,500
--------------
1,253,275
RETAIL - APPAREL - 2.4%
Stage Stores, Inc.* .......................... 13,000 121,875
Talbots, Inc. ................................ 10,000 313,750
--------------
435,625
RETAIL - DEPARTMENT STORES - 0.8%
Elder-Beerman Stores Corporation* ............ 12,800 148,000
RETAIL - GENERAL MERCHANDISE - 0.5%
Consolidated Stores Corporation* ............. 5,000 100,938
RETAIL - SPECIALTY - 1.5%
Keystone Automotive Industries, Inc.* ........ 13,500 282,656
SERVICES - ADVERTISING & MARKETING - 1.5%
True North Communications, Inc. .............. 10,300 276,813
SERVICES - COMMERCIAL & CONSUMER - 6.2%
Angelica Corporation ......................... 30,000 558,750
FTI Consulting, Inc.* ........................ 15,200 51,300
Pinkerton's, Inc.* ........................... 25,000 532,812
--------------
1,142,862
TELECOMMUNICATIONS - LONG DISTANCE - 0.9%
AT&T Corporation ............................. 2,200 165,550
TEXTILES - APPAREL - 1.2%
Kellwood Company ............................. 9,000 225,000
TRUCKS & PARTS - 0.8%
Miller Industries, Inc.* ..................... 33,000 148,500
--------------
Total common stocks - 98.7% ............... 18,283,935
Cash and other assets, less liabilities - 1.3% 239,191
--------------
Total net assets - 100.0% ................. $ 18,523,126
==============
66 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES X (SMALL CAP)
NUMBER MARKET
COMMON STOCKS OF SHARES VALUE
- --------------------------------------------------------------------------------
BIOTECHNOLOGY - 2.4%
IDEXX Laboratories, Inc.* .................... 3,500 $ 94,172
Techne Corporation* .......................... 2,000 42,250
--------------
136,422
COMMUNICATION EQUIPMENT - 4.4%
Geotel Communications Corporation* ........... 3,000 111,750
L-3 Communication Holding, Inc.* ............. 2,000 93,125
Proxim, Inc.* ................................ 1,500 40,031
--------------
244,906
COMPUTER HARDWARE - 2.8%
Cybex Computer Products Corporation* ......... 1,650 48,469
Network Appliance, Inc.* ..................... 1,400 63,000
Smart Modular Technologies, Inc.* ............ 1,700 47,175
--------------
158,644
COMPUTER SOFTWARE/SERVICES - 19.8%
Advantage Learning Systems, Inc.* ............ 1,300 85,475
Aware, Inc.* ................................. 4,000 108,750
Broadvision, Inc.* ........................... 1,200 38,400
Concord Communications, Inc.* ................ 2,500 141,875
Concur Technologies, Inc.* ................... 1,500 45,750
Dendrite International, Inc.* ................ 1,600 39,950
Exchange Applications, Inc.* ................. 2,500 49,063
Infospace.com, Inc.* ......................... 700 26,688
Inktomi Corporation* ......................... 400 51,750
Legato Systems, Inc.* ........................ 800 52,750
Macromedia, Inc.* ............................ 1,300 43,794
Network Solutions, Inc.* ..................... 700 91,613
New Dimension Software, Ltd.* ................ 1,500 72,187
New Era Of Networks, Inc.* ................... 2,200 96,800
Secure Computing Corporation* ................ 1,100 20,969
Sykes Enterprises, Inc.* ..................... 2,900 88,450
VideoServer, Inc.* ........................... 1,500 27,562
Visio Corporation* ........................... 800 29,250
--------------
1,111,076
COMPUTERS - NETWORKING - 0.4%
International Network Services* .............. 300 19,950
COMPUTERS - PERIPHERALS - 0.5%
Komag, Inc.* ................................. 2,500 25,938
DISTRIBUTION - FOOD/HEALTH - 1.6%
Hain Food Group, Inc.* ....................... 1,900 47,500
Patterson Dental Company* .................... 1,000 43,500
--------------
91,000
ELECTRICAL EQUIPMENT - 0.9%
Qlogic Corporation* .......................... 400 52,350
ELECTRONICS - DISTRIBUTION - 2.0%
Power Integrations, Inc.* .................... 4,500 $ 112,781
ELECTRONICS - INSTRUMENTATION - 3.7%
Macrovision Corporation* ..................... 3,400 143,650
Veeco Instruments, Inc.* ..................... 1,200 63,750
--------------
207,400
ELECTRONICS - SEMICONDUCTORS - 8.1%
Broadcom Corporation* ........................ 600 72,450
Flextronics International, Ltd.* ............. 700 59,937
Micrel, Inc.* ................................ 1,100 60,500
MIPS Technologies, Inc.* ..................... 2,000 64,000
NeoMagic Corporation* ........................ 2,500 55,313
SIPEX Corporation* ........................... 800 28,100
TranSwitch Corporation* ...................... 3,000 116,812
--------------
457,112
EQUIPMENT - SEMICONDUCTORS - 0.6%
Galileo Technology, Ltd.* .................... 1,300 35,100
HEALTH CARE - DIVERSE - 1.8%
Priority Healthcare Corporation (Cl.B)*....... 2,000 103,750
HEALTH CARE - LONG TERM CARE - 1.8%
Hanger Orthopedic Group, Inc.* ............... 4,500 101,250
HEALTH CARE - MANAGED CARE - 1.7%
Express Scripts, Inc.* ....................... 1,400 93,975
HEALTH CARE - MEDICAL PRODUCTS & SUPPLIES - 0.5%
Cytyc Corporation* ........................... 900 23,175
EndoSonics Corporation* ...................... 700 6,956
--------------
30,131
HEALTH CARE - SPECIALIZED SERVICES - 4.8%
Clark/Bardes Holdings, Inc.* ................. 2,000 33,750
Mid Atlantic Medical Services, Inc.* ......... 3,600 35,325
Pediatrix Medical Group, Inc.* ............... 1,600 95,900
Pharmaceutical Product Development, Inc.*..... 3,000 90,187
Renal Care Group, Inc.* ...................... 600 17,288
--------------
272,450
MANUFACTURING - DIVERSIFIED - 0.5%
Dura Automotive Systems, Inc.* ............... 800 27,300
MANUFACTURING - SPECIALIZED - 2.5%
Mettler-Toledo International, Inc.* .......... 2,500 70,156
Optical Coating Laboratory, Inc.* ............ 2,100 54,600
Select Comfort Corporation* .................. 600 15,862
--------------
140,618
67 SEE ACCOMPANYING NOTES.
<PAGE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
SERIES X (SMALL CAP)(CONTINUED)
NUMBER MARKET
COMMON STOCKS (CONTINUED) OF SHARES VALUE
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES - 5.3%
MiniMed, Inc.* ............................... 1,000 $ 104,750
Perclose, Inc.* .............................. 1,700 56,313
ResMed, Inc.* ................................ 3,000 136,125
--------------
297,188
OFFICE EQUIPMENT & SUPPLIES - 1.9%
National Computer Systems, Inc. .............. 2,200 81,400
Polycom, Inc.* ............................... 1,200 26,700
--------------
108,100
PHARMACEUTICALS - 8.1%
Alpharma, Inc. ............................... 3,000 105,938
Coulter Pharmaceutical, Inc.* ................ 1,000 30,000
Inhale Therapeutic Systems* .................. 1,600 52,800
Pathogenesis Corporation* .................... 2,500 145,000
Sepracor, Inc.* .............................. 700 61,294
Serologicals Corporation* .................... 2,000 60,000
--------------
455,032
RETAIL - APPAREL - 1.9%
American Eagle Outfitters, Inc.* ............. 600 39,975
Chico's Fas, Inc.* ........................... 1,900 44,412
Tarrant Apparel Group* ....................... 500 19,875
--------------
104,262
RETAIL - DEPARTMENT STORES - 2.4%
99 Cents Only Stores* ........................ 2,800 137,550
RETAIL - GENERAL MERCHANDISE - 1.1%
Linens `N Things, Inc.* ...................... 1,500 59,437
RETAIL - SPECIALTY - 4.2%
Global Imaging Systems, Inc.* ................ 1,500 36,375
Group 1 Automotive, Inc.* .................... 300 7,800
O'Reilly Automotive, Inc.* ................... 1,400 66,150
School Specialty, Inc.* ...................... 3,800 81,225
Sonic Automotive, Inc.* ...................... 800 27,550
Tweeter Home Entertainment,
Group, Inc.* ............................... 600 17,250
--------------
236,350
SERVICES - COMMERCIAL & CONSUMER - 5.0%
Exodus Communications, Inc.* ................. 1,300 83,525
Profit Recovery Group International, Inc.*.... 1,500 56,156
Romac International, Inc.* ................... 1,700 37,825
Travel Services International, Inc.* ......... 1,900 57,950
USWeb Corporation* ........................... 1,700 44,838
--------------
280,294
SERVICES - COMPUTER SYSTEMS - 0.9%
InterVoice, Inc.* ............................ 1,500 $ 51,750
SERVICES - DATA PROCESSING - 1.8%
Lason, Inc.* ................................. 1,700 98,919
SERVICES - FACILITIES/ENVIRONMENTAL - 1.1%
Metzler Group, Inc.* ......................... 1,300 63,294
TELECOMMUNICATION - LONG DISTANCE - 1.1%
MindSpring Enterprises, Inc.* ................ 1,000 61,062
--------------
Total common stocks - 95.6% ............. 5,375,391
Cash and other assets, less liabilities - 4.4% 245,582
--------------
Total net assets - 100.0% ............... $ 5,620,973
==============
The identified cost of investments owned at December 31, 1998, was the same for
federal income tax and financial statement purposes for Series A, C, J, P, S, V
and X. The identified cost of investments for federal income tax purposes for
Series B, D, E, K, M, N and O was $1,227,015,314, $298,423,025, $148,541,136,
$13,390,344, $42,005,666, $65,354,268 and $178,540,763, respectively.
* Securities on which no cash dividend was paid during the preceding twelve
months.
ADR (American Depositary Receipt)
(1) 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.
(2) Variable rate security which may be reset the first of each month.
(3) Variable rate security which may be reset the first of each quarter.
(4) Principal amount on foreign bond is reflected in local currency (e.g.,
Danish krone) while market value is reflected in U.S. dollars.
(5) Variable rate security which may be reset every 2 years.
(6) Floating rate security which may be reset the first of each semi-annual
payment.
(7) Deferred interest obligations currently zero under terms of initial
offering.
(8) Non-income producing.
68 SEE ACCOMPANYING NOTES.
<PAGE>
BALANCE SHEETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SERIES D SERIES E
SERIES A SERIES B SERIES C (WORLDWIDE (HIGH GRADE
(GROWTH) (GROWTH-INCOME) (MONEY MARKET) EQUITY) INCOME)
-------------- --------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (identified cost
$695,132,397, $1,181,999,829, $52,089,169,
$298,322,768 and $148,441,242 respectively)...... $1,215,306,094 $ 1,141,868,016 $ 52,101,791 $339,405,300 $ 152,656,138
Short-term commercial paper and temporary cash
investments, at market or at amortized cost
which approximates market value (identified
cost $4,542,140, $39,659,100, $77,486,133, $0
and $0, respectively) ........................... 4,542,536 39,685,200 77,519,276 -- --
Cash ............................................. 89,285,418 6,593,227 23,036 11,110,402 205,936
Receivables:
Fund shares sold ................................ 1,381,666 851,200 2,216,010 352,218 172,087
Securities sold ................................. -- 17,094,820 640,850 696,689 34,571
Interest ........................................ 295,058 2,215,337 273,000 65,607 2,392,848
Dividends ....................................... 839,800 2,671,249 -- 89,312 --
Foreign taxes recoverable ....................... -- -- -- 184,004 --
Prepaid expenses ................................. 33,570 33,099 4,071 9,093 3,857
-------------- --------------- ------------ ------------ -------------
Total assets .................................. $1,311,684,142 $ 1,211,012,148 $132,778,034 $351,912,625 $ 155,465,437
============== =============== ============ ============ =============
LIABILITIES AND NET ASSETS
Liabilities:
Payable for:
Securities purchased ........................... $ -- $ 9,416,828 $ 3,459,654 $ 31,176 $ --
Fund shares redeemed ........................... 3,424,874 3,710,853 1,163,214 489,326 618,252
Forward foreign exchange contracts ............... -- -- -- 1,181,597 --
Other liabilities:
Management fees ................................ 793,894 759,294 52,180 283,428 99,966
Custodian fees ................................. 9,000 12,153 2,218 58,715 3,755
Transfer and administration fees ............... 48,082 46,000 5,139 13,134 6,336
Professional fees .............................. 25,000 35,307 8,003 46,343 5,039
Miscellaneous .................................. 51,299 52,938 4,220 14,681 9,906
-------------- --------------- ------------ ------------ -------------
Total liabilities ............................. 4,352,149 14,033,373 4,694,628 2,118,400 743,254
Net Assets:
Paid in capital .................................. 737,481,740 795,280,045 121,251,693 281,034,514 153,744,472
Undistributed net investment income .............. 6,161,057 24,610,214 6,785,948 1,148,489 8,846,810
Accumulated undistributed net realized
gain (loss) on sale of investments
and foreign currency transactions ............... 43,515,103 417,194,229 -- 27,696,376 (12,083,995)
Net unrealized appreciation (depreciation)
in value of investments, futures and translation
of assets and liabilities in foreign currency ... 520,174,093 (40,105,713) 45,765 39,914,846 4,214,896
-------------- --------------- ------------ ------------ -------------
Net assets ..................................... 1,307,331,993 1,196,978,775 128,083,406 349,794,225 154,722,183
-------------- --------------- ------------ ------------ -------------
Total liabilities and net assets .............. $1,311,684,142 $ 1,211,012,148 $132,778,034 $351,912,625 $ 155,465,437
============== =============== ============ ============ =============
Capital shares authorized ........................ Indefinite Indefinite Indefinite Indefinite Indefinite
Capital shares outstanding ....................... 38,143,524 30,069,410 10,223,711 51,887,227 12,462,306
Net asset value per share (net assets
divided by shares outstanding) ................. $ 34.27 $ 39.81 $ 12.53 $ 6.74 $ 12.42
============== =============== ============ ============ =============
</TABLE>
SEE ACCOMPANYING NOTES.
69
<PAGE>
BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1998
<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
$210,690,963, $13,388,282, $41,202,723,
$55,822,229 and $169,570,483, respectively) ........ $256,841,326 $12,386,194 $44,718,899 $ 69,232,930 $195,424,614
Short-term commercial paper and temporary cash
investments, at market or at amortized cost
which approximates market value (identified
cost $0, $0, $467,655, $9,480,749 and
$8,917,731, respectively) .......................... -- -- 467,940 9,488,150 8,922,042
Cash ................................................ 14,726,992 333,063 139 3,183 --
Receivables:
Fund shares sold ................................... 363,419 11,441 8,582 142,479 266,317
Securities sold .................................... -- 387 4,004 -- --
Interest ........................................... 22,739 358,780 68,138 392,270 34,646
Dividends .......................................... 117,824 -- 33,573 43,476 419,059
Variation margin receivable ........................ 383,400 -- -- -- --
Foreign taxes recoverable .......................... -- 9,783 8,723 2,095 3,949
Prepaid expenses .................................... 6,644 310 1,358 1,012 4,556
------------ ----------- ----------- ------------ ------------
Total assets ...................................... $272,462,344 $13,099,958 $45,311,356 $ 79,305,595 $205,075,183
============ =========== =========== ============ ============
LIABILITIES AND NET ASSETS
Liabilities:
Payable for:
Securities purchased .............................. $ -- $ -- $ -- $ 3,038,094 $ 482,634
Fund shares redeemed .............................. 989,323 50,306 86,307 72,354 334,091
Other liabilities:
Management fees ................................... 163,183 8,314 37,311 62,102 170,862
Custodian fees .................................... 3,879 2,260 1,007 35 80
Transfer and administration fees .................. 10,165 306 6,938 3,076 8,095
Professional fees ................................. 6,393 3,124 3,500 8,188 6,720
Miscellaneous ..................................... 8,053 8,128 2,624 999 2,918
------------ ----------- ----------- ------------ ------------
Total liabilities ................................ 1,180,996 72,438 137,687 3,184,848 1,005,400
Net Assets:
Paid in capital ..................................... 185,928,689 13,950,095 38,604,866 61,432,820 165,673,773
Undistributed net investment income ................. -- -- 635,203 1,302,811 3,516,121
Accumulated undistributed net realized
gain (loss) on sale of investments,
futures and foreign currency
transactions ....................................... 38,176,978 79,143 2,416,562 (33,110) 9,021,292
Net unrealized appreciation (depreciation)
in value of investments, futures and
translation of assets and liabilities
in foreign currency ................................ 47,175,681 (1,001,718) 3,517,038 13,418,226 25,858,597
------------ ----------- ----------- ------------ ------------
Net assets ........................................ 271,281,348 13,027,520 45,173,669 76,120,747 204,069,783
------------ ----------- ----------- ------------ ------------
Total liabilities and net assets ................. $272,462,344 $13,099,958 $45,311,356 $ 79,305,595 $205,075,183
============ =========== =========== ============ ============
Capital shares authorized ........................... Indefinite Indefinite Indefinite Indefinite Indefinite
Capital shares outstanding .......................... 12,052,426 1,362,822 3,510,825 4,754,037 11,123,054
Net asset value per share (net assets
divided by shares outstanding) ..................... $ 22.51 $ 9.56 $ 12.87 $ 16.01 $ 18.35
============ =========== =========== ============ ============
</TABLE>
SEE ACCOMPANYING NOTES.
70
<PAGE>
BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1998
<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 $13,674,772, $93,994,765,
$16,763,185, and $4,143,669 respectively) .................... $ 13,463,566 $141,620,865 $ 18,283,935 $ 5,375,391
Cash ......................................................... 1,117,334 13,060,010 247,512 472,505
Receivables:
Fund shares sold ............................................ 65,805 366,220 12,431 7,833
Securities sold ............................................. -- -- -- 216,174
Interest .................................................... 309,753 41,505 593 1,861
Dividends ................................................... -- 115,572 9,710 110
Prepaid expenses ............................................. 262 2,924 292 145
------------ ------------ ------------ ------------
Total assets ............................................... $ 14,956,720 $155,207,096 $ 18,554,473 $ 6,074,019
============ ============ ============ ============
LIABILITIES AND NET ASSETS
Liabilities:
Payable for:
Securities purchased ....................................... $ -- $ 1,659,098 $ -- $ 447,044
Fund shares redeemed ....................................... 589 800,160 13,516 153
Other liabilities:
Management fees ............................................ -- 91,299 11,047 --
Custodian fees ............................................. 885 1,082 913 116
Transfer and administration fees ........................... 655 5,825 759 456
Professional fees .......................................... 5,034 5,981 4,512 5,000
Miscellaneous .............................................. 154 3,109 600 277
------------ ------------ ------------ ------------
Total liabilities ......................................... 7,317 2,566,554 31,347 453,046
Net Assets:
Paid in capital .............................................. 15,134,194 97,407,596 16,588,715 5,183,359
Undistributed net investment income .......................... 26,415 519,719 -- 8,547
Accumulated undistributed net realized
gain (loss) on sale of investments, futures and
foreign currency transactions .............................. -- 7,087,127 413,661 (802,655)
Net unrealized appreciation (depreciation) in value
of investments, futures and translation of
assets and liabilities in foreign currency ................. (211,206) 47,626,100 1,520,750 1,231,722
------------ ------------ ------------ ------------
Net assets ................................................. 14,949,403 152,640,542 18,523,126 5,620,973
------------ ------------ ------------ ------------
Total liabilities and net assets .......................... $ 14,956,720 $155,207,096 $ 18,554,473 $ 6,074,019
============ ============ ============ ============
Capital shares authorized .................................... Indefinite Indefinite Indefinite Indefinite
Capital shares outstanding ................................... 889,827 5,375,603 1,249,431 526,756
Net asset value per share (net assets
divided by shares outstanding) ............................. $ 16.80 $ 28.40 $ 14.83 $ 10.67
============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES.
71
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,1998
<TABLE>
<CAPTION>
SERIES D SERIES E
SERIES A SERIES B SERIES C (WORLDWIDE (HIGH GRADE
(GROWTH) (GROWTH-INCOME) (MONEY MARKET) EQUITY) INCOME)
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ...................................... $ 11,855,669 $ 25,604,237 $ -- $ 5,150,343 $ --
Interest ....................................... 3,787,603 8,970,227 7,867,502 2,247,400 10,255,123
------------- ------------- ------------- ------------- -------------
15,643,272 34,574,464 7,867,502 7,397,743 10,255,123
Less foreign tax expense ....................... -- -- -- (437,658) --
------------- ------------- ------------- ------------- -------------
Total investment income .................... 15,643,272 34,574,464 7,867,502 6,960,085 10,255,123
EXPENSES:
Management fees ................................ 8,360,185 9,184,702 706,902 3,184,948 1,077,496
Custodian fees ................................. 33,636 41,715 4,607 291,031 17,643
Transfer/maintenance fees ...................... 5,405 5,024 5,702 4,739 4,108
Administration fees ............................ 501,611 551,082 63,621 461,818 65,555
Directors' fees ................................ 15,260 -- -- 5,685 2,387
Professional fees .............................. 37,046 51,223 10,931 21,579 8,237
Reports to shareholders ........................ 103,175 3,318 12,332 52,729 9,487
Registration fees .............................. 756 906 -- 270 107
Other expenses ................................. 15,116 3,464 2,160 776 5,821
------------- ------------- ------------- ------------- -------------
Total expenses ............................. 9,072,190 9,841,434 806,255 4,023,575 1,190,841
------------- ------------- ------------- ------------- -------------
Net investment income ................ 6,571,082 24,733,030 7,061,247 2,936,510 9,064,282
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) during the period on:
Investments ................................... 43,677,682 417,467,664 -- 32,092,599 1,732,602
Foreign currency transactions ................. -- -- -- (1,441,020) --
------------- ------------- ------------- ------------- -------------
Net realized gain .......................... 43,677,682 417,467,664 -- 30,651,579 1,732,602
Unrealized appreciation (depreciation)
during the period on:
Investments ................................... 211,484,476 (351,732,956) 49,595 26,751,262 (127,525)
Translation of assets and liabilities
in foreign currencies ...................... -- -- -- (2,046,696) --
------------- ------------- ------------- ------------- -------------
Net unrealized appreciation (depreciation) .. 211,484,476 (351,732,956) 49,595 24,704,566 (127,525)
------------- ------------- ------------- ------------- -------------
Net gain ................................... 255,162,158 65,734,708 49,595 55,356,145 1,605,077
------------- ------------- ------------- ------------- -------------
Net increase in net assets resulting
from operations ......................... $ 261,733,240 $ 90,467,738 $ 7,110,842 $ 58,292,655 $ 10,669,359
============= ============= ============= ============= =============
</TABLE>
SEE ACCOMPANYING NOTES.
72
<PAGE>
STATEMENTS OF OPERATIONS(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31,1998
<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 ......................................... $ 1,121,099 $ -- $ 533,012 $ 466,849 $ 4,857,251
Interest .......................................... 342,926 1,762,130 688,911 1,549,559 734,534
------------ ------------ ------------ ------------ ------------
1,464,025 1,762,130 1,221,923 2,016,408 5,591,785
Less foreign tax expense .......................... -- (29,971) (34,428) (5,074) (3,711)
------------ ------------ ------------ ------------ ------------
Total investment income ....................... 1,464,025 1,732,159 1,187,495 2,011,334 5,588,074
EXPENSES:
Management fees ................................... 1,777,711 103,019 460,844 541,821 1,857,531
Custodian fees .................................... 23,378 17,409 15,366 19,683 35,243
Transfer/maintenance fees ......................... 4,668 3,931 3,315 3,248 5,188
Administration fees ............................... 106,663 66,507 80,738 84,382 83,589
Directors' fees ................................... 4,125 470 371 701 2,626
Professional fees ................................. 9,789 7,860 6,034 5,531 8,973
Reports to shareholders ........................... 20,417 2,242 3,937 2,601 8,706
Registration fees ................................. 90 -- 21 -- 66
Other expenses .................................... 5,791 797 1,766 1,855 5,018
------------ ------------ ------------ ------------ ------------
Total expenses ................................ 1,952,632 202,235 572,392 659,822 2,006,940
Less reimbursement of expenses ............. -- (38,300) -- -- --
------------ ------------ ------------ ------------ ------------
Net expenses ...................................... 1,952,632 163,935 572,392 659,822 2,006,940
------------ ------------ ------------ ------------ ------------
Net investment income (loss) .................. (488,607) 1,568,224 615,103 1,351,512 3,581,134
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) during the period on:
Investments ...................................... 38,552,127 258,655 2,672,004 (25,270) 9,128,904
Foreign currency transactions .................... -- (329,848) 8,834 (2,184) (1,757)
Futures contracts ................................ 140,332 -- -- -- --
Gain from option contracts written ............... -- 27,475 -- -- --
------------ ------------ ------------ ------------ ------------
Net realized gain (loss) ................. 38,692,459 (43,718) 2,680,838 (27,454) 9,127,147
Unrealized appreciation (depreciation) during
the period on:
Investments ...................................... 4,843,262 (595,144) 2,180,343 8,339,209 2,309,494
Translation of assets and liabilities
in foreign currencies ......................... -- 9,836 1,107 948 116
Futures contracts .............................. 1,025,318 -- -- -- --
------------ ------------ ------------ ------------ ------------
Net unrealized appreciation
(depreciation) ............................. 5,868,580 (585,308) 2,181,450 8,340,157 2,309,610
------------ ------------ ------------ ------------ ------------
Net gain (loss) ............................... 44,561,039 (629,026) 4,862,288 8,312,703 11,436,757
------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations ............................ $ 44,072,432 $ 939,198 $ 5,477,391 $ 9,664,215 $ 15,017,891
============ ============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES.
73
<PAGE>
STATEMENTS OF OPERATIONS(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31,1998
<TABLE>
<CAPTION>
SERIES S
SERIES P (SOCIAL SERIES V SERIES X
(HIGH YEILD) AWARENESS) (VALUE) (SMALL CAP)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends .............................................. $ -- $ 1,110,700 $ 120,602 $ 5,261
Interest ............................................... 919,453 317,885 23,091 27,077
----------- ----------- ----------- -----------
Total investment income ............................. 919,453 1,428,585 143,693 32,338
EXPENSES:
Management fees ........................................ 82,559 832,054 95,299 37,804
Custodian fees ......................................... 6,264 4,982 3,745 10,507
Transfer/maintenance fees .............................. 1,061 4,226 1,040 835
Administration fees .................................... 4,954 49,923 5,732 3,402
Directors' fees ........................................ 260 1,892 389 16
Professional fees ...................................... 6,254 5,613 6,168 7,262
Reports to shareholders ................................ 518 7,863 892 359
Registration fees ...................................... 693 36 5 --
Other expenses ......................................... -- 2,277 -- --
----------- ----------- ----------- -----------
Total expenses ..................................... 102,563 908,866 113,270 60,185
Less reimbursement of expenses ..................... (82,559) -- (22,594) (37,804)
----------- ----------- ----------- -----------
Net expenses ........................................... 20,004 908,866 90,676 22,381
----------- ----------- ----------- -----------
Net investment income .............................. 899,449 519,719 53,017 9,957
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) during the period on
investments ........................................... 22,641 7,420,553 626,418 (582,156)
----------- ----------- ----------- -----------
Net realized gain (loss) ........................... 22,641 7,420,553 626,418 (582,156)
Unrealized appreciation (depreciation) during
the period on investments ........................... (341,245) 24,109,291 1,175,313 1,112,790
----------- ----------- ----------- -----------
Net unrealized appreciation (depreciation) ......... (341,245) 24,109,291 1,175,313 1,112,790
----------- ----------- ----------- -----------
Net gain (loss) .................................... (318,604) 31,529,844 1,801,731 530,634
----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations ........................ $ 580,845 $32,049,563 $ 1,854,748 $ 540,591
=========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
74
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
SERIES D SERIES E
SERIES A SERIES B SERIES C (WORLDWIDE (HIGH GRADE
(GROWTH) (GROWTH-INCOME) (MONEY MARKET) EQUITY) INCOME)
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income .............. $ 6,571,082 $ 24,733,030 $ 7,061,247 $ 2,936,510 $ 9,064,282
Net realized gain .................. 43,677,682 417,467,664 -- 30,651,579 1,732,602
Unrealized appreciation
(depreciation) during
the period ........................ 211,484,476 (351,732,956) 49,595 24,704,566 (127,525)
--------------- --------------- --------------- --------------- ---------------
Net increase in net assets
resulting from operations ....... 261,733,240 90,467,738 7,110,842 58,292,655 10,669,359
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .............. (5,787,007) (20,380,169) (6,397,306) (4,184,565) (8,568,936)
Net realized gain (loss) ........... (73,869,447) (129,457,129) -- (23,945,010) --
--------------- --------------- --------------- --------------- ---------------
Total distributions
to shareholders ................. (79,656,454) (149,837,298) (6,397,306) (28,129,575) (8,568,936)
CAPITAL SHARE TRANSACTIONS (a):
Proceeds from sale of shares ....... 403,874,053 221,999,609 408,017,212 132,226,186 111,833,663
Dividends reinvested ............... 79,656,454 149,837,298 6,397,306 28,129,575 8,568,936
Shares redeemed .................... (358,204,267) (313,790,993) (385,059,478) (126,506,277) (108,689,374)
--------------- --------------- --------------- --------------- ---------------
Net increase from capital
share transactions .............. 125,326,240 58,045,914 29,355,040 33,849,484 11,713,225
--------------- --------------- --------------- --------------- ---------------
Total increase (decrease)
in net assets ................. 307,403,026 (1,323,646) 30,068,576 64,012,564 13,813,648
NET ASSETS:
Beginning of year .................. 999,928,967 1,198,302,421 98,014,830 285,781,661 140,908,535
--------------- --------------- --------------- --------------- ---------------
End of period ...................... $ 1,307,331,993 $ 1,196,978,775 $ 128,083,406 $ 349,794,225 $ 154,722,183
=============== =============== =============== =============== ===============
Undistributed net investment
income at end of year ............ $ 6,161,057 $ 24,610,214 $ 6,785,948 $ 1,148,489 $ 8,846,810
=============== =============== =============== =============== ===============
(a) Shares issued and redeemed
Shares sold..................... 13,115,840 5,555,901 33,024,715 21,025,414 9,193,741
Dividends reinvested............ 2,571,222 3,659,924 530,017 4,367,946 736,163
Shares redeemed................. (11,564,167) (7,951,710) (31,152,783) (20,050,195) (8,974,467)
--------------- --------------- --------------- --------------- ---------------
Net increase ................. 4,122,895 1,264,115 2,401,949 5,343,165 955,437
=============== =============== =============== =============== ===============
</TABLE>
SEE ACCOMPANYING NOTES.
75
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31,1998
<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>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income (loss) ................. $ (488,607) $ 1,568,224 $ 615,103 $ 1,351,512 $ 3,581,134
Net realized gain (loss) ..................... 38,692,459 (43,718) 2,680,838 (27,454) 9,127,147
Unrealized appreciation (depreciation)
during the period ............................ 5,868,580 (585,308) 2,181,450 8,340,157 2,309,610
------------- ------------- ------------- ------------- -------------
Net increase in net assets resulting
from operations ............................. 44,072,432 939,198 5,477,391 9,664,215 15,017,891
DISTRIBUTIONS TO SHAREHOLDERS FROM:
In excess of net investment income ........... (1,431,865) -- -- -- --
Net investment income ....................... -- (1,241,557) (959,469) (745,652) (2,449,984)
Net realized gain ............................ (23,930,511) (229,064) (2,398,671) (466,032) (5,928,963)
------------- ------------- ------------- ------------- -------------
Total distributions to shareholders ........ (25,362,376) (1,470,621) (3,358,140) (1,211,684) (8,378,947)
CAPITAL SHARE TRANSACTIONS (A):
Proceeds from sale of shares ................. 107,368,787 8,305,713 11,022,394 42,450,822 100,221,196
Dividends reinvested ......................... 25,362,376 1,470,621 3,358,140 1,211,684 8,378,947
Shares redeemed .............................. (106,457,311) (10,896,062) (19,704,926) (14,176,092) (61,560,607)
------------- ------------- ------------- ------------- -------------
Net increase (decrease) from capital share
transactions .............................. 26,273,852 (1,119,728) (5,324,392) 29,486,414 47,039,536
------------- ------------- ------------- ------------- -------------
Total increase (decrease) in net assets . 44,983,908 (1,651,151) (3,205,141) 37,938,945 53,678,480
NET ASSETS:
Beginning of year ............................ 226,297,440 14,678,671 48,378,810 38,181,802 150,391,303
------------- ------------- ------------- ------------- -------------
End of year .................................. $ 271,281,348 $ 13,027,520 $ 45,173,669 $ 76,120,747 $ 204,069,783
============= ============= ============= ============= =============
Undistributed net investment income at
end of year ................................ $ -- $ -- $ 635,203 $ 1,302,811 $ 3,516,121
============= ============= ============= ============= =============
(a) Shares issued and redeemed
Shares sold ............................... 5,406,352 806,113 884,712 2,885,843 5,624,422
Dividends reinvested ...................... 1,204,066 153,600 268,436 82,992 458,869
Shares redeemed ........................... (5,166,083) (1,055,973) (1,577,250) (964,871) (3,493,846)
------------- ------------- ------------- ------------- -------------
Net increase (decrease) ................ 1,444,335 (96,260) (424,102) 2,003,964 2,589,445
============= ============= ============= ============= =============
</TABLE>
SEE ACCOMPANYING NOTES.
76
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31,1998
<TABLE>
<CAPTION>
SERIES S
SERIES P (SOCIAL SERIES V SERIES X
(HIGH YIELD) AWARENESS) (VALUE) (SMALL CAP)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income ................................. $ 899,449 $ 519,719 $ 53,017 $ 9,957
Net realized gain (loss) .............................. 22,641 7,420,553 626,418 (582,156)
Unrealized appreciation (depreciation)
during the period .................................. (341,245) 24,109,291 1,175,313 1,112,790
------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations ......................... 580,845 32,049,563 1,854,748 540,591
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................. (1,158,950) (252,822) (81,597) (5,176)
Net realized gain ..................................... (105,911) (2,781,038) (365,630) --
------------- ------------- ------------- -------------
Total distributions to shareholders ................. (1,264,861) (3,033,860) (447,227) (5,176)
CAPITAL SHARE TRANSACTIONS (A):
Proceeds from sale of shares .......................... 13,512,225 56,874,790 13,173,169 3,021,171
Dividends reinvested .................................. 1,264,861 3,033,860 447,227 5,176
Shares redeemed ....................................... (5,910,834) (25,615,469) (2,995,788) (580,773)
------------- ------------- ------------- -------------
Net increase from capital share
transactions ....................................... 8,866,252 34,293,181 10,624,608 2,445,574
------------- ------------- ------------- -------------
Total increase in net assets ...................... 8,182,236 63,308,884 12,032,129 2,980,989
NET ASSETS:
Beginning of year ..................................... 6,767,167 89,331,658 6,490,997 2,639,984
------------- ------------- ------------- -------------
End of year ........................................... $ 14,949,403 $ 152,640,542 $ 18,523,126 $ 5,620,973
============= ============= ============= =============
Undistributed net investment income (loss) at
end of period ....................................... $ 26,415 $ 519,719 $ -- $ 8,547
============= ============= ============= =============
(a) Shares issued and redeemed
Shares sold ........................................ 766,900 2,302,241 943,201 313,489
Dividends reinvested ............................... 74,465 125,263 30,259 489
Shares redeemed .................................... (335,963) (1,066,288) (218,251) (62,341)
------------- ------------- ------------- -------------
Net increase .................................... 505,402 1,361,216 755,209 251,637
============= ============= ============= =============
</TABLE>
SEE ACCOMPANYING NOTES.
77
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,1998
<TABLE>
<CAPTION>
SERIES D SERIES E
SERIES A SERIES B SERIES C (WORLDWIDE (HIGH GRADE
(GROWTH) (GROWTH-INCOME) (MONEY MARKET) EQUITY) INCOME)
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income .............. $ 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.
78
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31,1998
<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>
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.
79
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31,1998
<TABLE>
<CAPTION>
SERIES S
SERIES P (SOCIAL SERIES V SERIES X
(HIGH YEILD) 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.
80
<PAGE>
FINANCIAL HIGHLIGHTS
SERIES A (GROWTH)
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED DECEMBER 31
-------------------------------------------------------------------------------
1998 1997(e) 1996(e) 1995(e) 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ............ $ 29.39 $ 24.31 $ 21.03 $ 16.00 $ 19.82
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .......................... 0.17 0.16 0.18 0.18 0.20
Net Gain (Loss) on Securities
(realized and unrealized) ..................... 7.05 6.75 4.50 5.65 (0.44)
------------- ------------- ------------- ------------- -------------
Total from investment operations ............... 7.22 6.91 4.68 5.83 (0.24)
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ......... (0.17) (0.18) (0.20) (0.15) (0.38)
Distributions (from Capital Gains) ............. (2.17) (1.65) (1.20) (0.65) (3.20)
------------- ------------- ------------- ------------- -------------
Total Distributions ......................... (2.34) (1.83) (1.40) (0.80) (3.58)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE END OF PERIOD .................. $ 34.27 $ 29.39 $ 24.31 $ 21.03 $ 16.00
============= ============= ============= ============= =============
TOTAL RETURN (B) ............................... 25.4% 28.7% 22.7% 36.8% (1.7%)
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ........... $ 1,307,332 $ 999,929 $ 714,591 $ 519,891 $ 332,288
Ratio of Expenses to Average Net Assets ........ 0.81% 0.81% 0.83% 0.83% 0.84%
Ratio of Net Investment Income (Loss) to Average
Net Assets ................................... 0.59% 0.66% 0.90% 1.21% 1.13%
Portfolio Turnover Rate ........................ 39% 61% 57% 83% 90%
</TABLE>
SERIES B (GROWTH-INCOME)
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED DECEMBER 31
-------------------------------------------------------------------------------
1998 1997(e) 1996(e) 1995(e) 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ............ $ 41.60 $ 35.40 $ 33.95 $ 26.54 $ 29.73
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .......................... 0.83 0.72 0.83 0.79 0.51
Net Gain (Loss) on Securities
(realized and unrealized) ..................... 2.60 8.47 5.16 7.16 (1.34)
------------- ------------- ------------- ------------- -------------
Total from investment operations ............... 3.43 9.19 5.99 7.95 (0.83)
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ......... (0.71) (0.86) (0.78) (0.54) (0.68)
Distributions (from Capital Gains) ............. (4.51) (2.13) (3.76) -- (1.68)
------------- ------------- ------------- ------------- -------------
Total Distributions ......................... (5.22) (2.99) (4.54) (0.54) (2.36)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE END OF PERIOD .................. $ 39.81 $ 41.60 $ 35.40 $ 33.95 $ 26.54
============= ============= ============= ============= =============
TOTAL RETURN (b) ............................... 7.9% 26.5% 18.3% 30.1% (3.0%)
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ........... $ 1,196,979 $ 1,198,302 $ 956,586 $ 795,113 $ 595,154
Ratio of Expenses to Average Net Assets ........ 0.80% 0.83% 0.84% 0.83% 0.84%
Ratio of Net Investment Income (Loss) to Average
Net Assets ................................... 2.02% 1.89% 2.56% 2.70% 2.07%
Portfolio Turnover Rate ........................ 119% 62% 58% 94% 43%
</TABLE>
81
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINED)
SERIES C (MONEY MARKET)
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED DECEMBER 31
-------------------------------------------------------------------------------
1998(a) 1997(e) 1996(a)(e) 1995(e) 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ............ $ 12.53 $ 12.56 $ 12.34 $ 12.27 $ 12.09
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .......................... 0.68 0.79 0.61 0.74 0.41
Net Gain (Loss) on Securities
(realized and unrealized) ..................... (0.06) (0.15) 0.01 (0.08) 0.04
------------- ------------- ------------- ------------- -------------
Total from investment operations ............... 0.62 0.64 0.62 0.66 0.45
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ......... (0.62) (0.67) (0.40) (0.59) (0.27)
Distributions (from Capital Gains) ............. -- -- -- -- --
------------- ------------- ------------- ------------- -------------
Total Distributions ......................... (0.62) (0.67) (0.40) (0.59) (0.27)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE END OF PERIOD .................. $ 12.53 $ 12.53 $ 12.56 $ 12.34 $ 12.27
============= ============= ============= ============= =============
TOTAL RETURN (b) ............................... 5.1% 5.2% 5.1% 5.4% 3.7%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ........... $ 128,083 $ 98,015 $ 128,672 $ 105,436 $ 118,668
Ratio of Expenses to Average Net Assets ........ 0.57% 0.58% 0.58% 0.60% 0.61%
Ratio of Net Investment Income (Loss) to Average
Net Assets ................................... 4.99% 5.04% 4.89% 5.27% 3.70%
Portfolio Turnover Rate ........................ -- -- -- -- --
</TABLE>
SERIES D (WORLDWIDE EQUITY)
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED DECEMBER 31
-------------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ............ $ 6.14 $ 6.14 $ 5.56 $ 5.07 $ 4.94
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .......................... 0.03 0.04 0.03 0.05 0.02
Net Gain (Loss) on Securities
(realized and unrealized) ..................... 1.18 0.38 0.93 0.50 0.12
------------- ------------- ------------- ------------- -------------
Total from investment operations ............... 1.21 0.42 0.96 0.55 0.14
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ......... (0.09) (0.13) (0.20) -- (0.01)
Distributions (from Capital Gains) ............. (0.52) (0.29) (0.18) (0.06) --
------------- ------------- ------------- ------------- -------------
Total Distributions ......................... (0.61) (0.42) (0.38) (0.06) (0.01)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE END OF PERIOD .................. $ 6.74 $ 6.14 $ 6.14 $ 5.56 $ 5.07
============= ============= ============= ============= =============
TOTAL RETURN (b) ............................... 20.1% 6.5% 17.5% 10.9% 2.7%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ........... $ 349,794 $ 285,782 $ 247,026 $ 177,781 $ 147,033
Ratio of Expenses to Average Net Assets ........ 1.26% 1.24% 1.30% 1.31% 1.34%
Ratio of Net Investment Income (Loss) to Average
Net Assets ................................... 0.92% 0.74% 0.74% 0.90% 0.50%
Portfolio Turnover Rate ........................ 166% 129% 115% 169% 82%
</TABLE>
82
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINED)
SERIES E (HIGH GRADE INCOME)
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED DECEMBER 31
-------------------------------------------------------------------------------
1998 1997(e) 1996(e) 1995(e) 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ............ $ 12.25 $ 12.00 $ 12.86 $ 11.52 $ 13.78
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .......................... 0.74 0.86 0.75 0.74 0.76
Net Gain (Loss) on Securities
(realized and unrealized) ..................... 0.19 0.31 (0.85) 1.36 (1.71)
------------- ------------- ------------- ------------- -------------
Total from investment operations ............... 0.93 1.17 (0.10) 2.10 (0.95)
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ......... (0.76) (0.92) (0.76) (0.76) (0.69)
Distributions (from Capital Gains) ............. -- -- -- -- (0.62)
------------- ------------- ------------- ------------- -------------
Total Distributions ......................... (0.76) (0.92) (0.76) (0.76) (1.31)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE END OF PERIOD .................. $ 12.42 $ 12.25 $ 12.00 $ 12.86 $ 11.52
============= ============= ============= ============= =============
TOTAL RETURN (b) ............................... 8.0% 10.0% (0.7%) 18.6% (6.9%)
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ........... $ 154,722 $ 140,909 $ 134,041 $ 125,652 $ 107,078
Ratio of Expenses to Average Net Assets ........ 0.83% 0.83% 0.83% 0.85% 0.85%
Ratio of Net Investment Income (Loss) to Average
Net Assets ................................... 6.31% 6.67% 6.77% 6.60% 6.74%
Portfolio Turnover Rate ........................ 70% 106% 232% 180% 185%
</TABLE>
SERIES J (EMERGING GROWTH)
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED DECEMBER 31
-------------------------------------------------------------------------------
1998 1997(e) 1996(e) 1995(e) 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ............ $ 21.33 $ 18.25 $ 16.06 $ 13.44 $ 14.17
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .......................... (0.04) (0.03) (0.04) 0.04 (0.01)
Net Gain (Loss) on Securities
(realized and unrealized) ..................... 3.70 3.67 2.93 2.58 (0.71)
------------- ------------- ------------- ------------- -------------
Total from investment operations ............... 3.66 3.64 2.89 2.62 (0.72)
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ......... (0.14) (0.06) (0.03) -- --
Distributions (from Capital Gains) ............. (2.34) (0.50) (0.67) -- (0.01)
------------- ------------- ------------- ------------- -------------
Total Distributions ......................... (2.48) (0.56) (0.70) -- (0.01)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE END OF PERIOD .................. $ 22.51 $ 21.33 $ 18.25 $ 16.06 $ 13.44
============= ============= ============= ============= =============
TOTAL RETURN (b) ............................... 18.0% 20.0% 18.0% 19.5% (5.1%)
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ........... $ 271,281 $ 226,297 $ 148,421 $ 93,379 $ 76,940
Ratio of Expenses to Average Net Assets ........ 0.82% 0.82% 0.84% 0.84% 0.88%
Ratio of Net Investment Income (Loss) to Average
Net Assets ................................... (0.21%) (0.11%) (0.21%) 0.26% (0.11%)
Portfolio Turnover Rate ........................ 94% 107% 123% 202% 91%
</TABLE>
83
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINED)
SERIES K (GLOBAL AGGRESSIVE)
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED DECEMBER 31
----------------------------------------------------------
1998(d) 1997(d) 1996(d) 1995(a)(c)(d)
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ............ $ 10.06 $ 10.72 $ 10.22 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .......................... 1.02 1.12 0.90 0.54
Net Gain (Loss) on Securities
(realized and unrealized) ..................... (0.32) (0.56) 0.50 0.22
---------- ---------- ---------- -------------
Total from investment operations ............... 0.70 0.56 1.40 0.76
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ......... (1.02) (0.94) (0.77) (0.47)
Distributions (from Capital Gains) ............. (0.18) (0.28) (0.13) (0.04)
Return of Capital .............................. -- -- -- (0.03)
---------- ---------- ---------- -------------
Total Distributions ......................... (1.20) (1.22) (0.90) (0.54)
---------- ---------- ---------- -------------
NET ASSET VALUE END OF PERIOD .................. $ 9.56 $ 10.06 $ 10.72 $ 10.22
========== ========== ========== =============
TOTAL RETURN (b) ............................... 6.9% 5.4% 13.7% 7.6%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ........... $ 13,028 $ 14,679 $ 12,720 $ 5,678
Ratio of Expenses to Average Net Assets ........ 1.13% 0.64% 0.84% 1.63%
Ratio of Net Investment Income (Loss) to Average
Net Assets ................................... 10.85% 9.81% 10.79% 11.03%
Portfolio Turnover Rate ........................ 57% 85% 86% 127%
</TABLE>
SERIES M (SPECIALIZED ASSET ALLOCATION)
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED DECEMBER 31
-------------------------------------------------------
1998 1997(i) 1996 1995(a)(c)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ............ $ 12.29 $ 12.05 $ 10.71 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .......................... 0.20 0.16 0.15 0.17
Net Gain (Loss) on Securities
(realized and unrealized) ..................... 1.33 0.59 1.36 0.54
---------- ---------- ---------- ----------
Total from investment operations ............... 1.53 0.75 1.51 0.71
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ......... (0.27) (0.26) (0.12) --
Distributions (from Capital Gains) ............. (0.68) (0.25) (0.05) --
---------- ---------- ---------- ----------
Total Distributions ......................... (0.95) (0.51) (0.17) --
---------- ---------- ---------- ----------
NET ASSET VALUE END OF PERIOD .................. $ 12.87 $ 12.29 $ 12.05 $ 10.71
========== ========== ========== ==========
TOTAL RETURN (b) ............................... 12.6% 6.2% 14.2% 7.1%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ........... $ 45,174 $ 48,379 $ 38,396 $ 15,976
Ratio of Expenses to Average Net Assets ........ 1.24% 1.26% 1.34% 1.94%
Ratio of Net Investment Income (Loss) to Average
Net Assets ................................... 1.33% 1.71% 2.73% 3.20%
Portfolio Turnover Rate ........................ 49% 64% 40% 181%
</TABLE>
84
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINED)
SERIES N (MANAGED ASSET ALLOCATION)
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED DECEMBER 31
-------------------------------------------------------
1998 1997 1996 1995(a)(c)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ............ $ 13.88 $ 12.02 $ 10.73 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .......................... 0.26 0.24 0.19 0.16
Net Gain (Loss) on Securities
(realized and unrealized) ..................... 2.26 1.96 1.18 0.57
---------- ---------- ---------- ----------
Total from investment operations ............... 2.52 2.20 1.37 0.73
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ......... (0.24) (0.21) (0.07) --
Distributions (from Capital Gains) ............. (0.15) (0.13) (0.01) --
---------- ---------- ---------- ----------
Total Distributions ......................... (0.39) (0.34) (0.08) --
---------- ---------- ---------- ----------
NET ASSET VALUE END OF PERIOD .................. $ 16.01 $ 13.88 $ 12.02 $ 10.73
========== ========== ========== ==========
TOTAL RETURN (b) ............................... 18.4% 18.4% 12.8% 7.3%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ........... $ 76,121 $ 38,182 $ 23,345 $ 10,580
Ratio of Expenses to Average Net Assets ........ 1.22% 1.35% 1.45% 1.90%
Ratio of Net Investment Income (Loss) to Average
Net Assets ................................... 2.49% 2.71% 2.67% 2.80%
Portfolio Turnover Rate ........................ 10% 28% 41% 26%
</TABLE>
SERIES O (EQUITY INCOME)
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED DECEMBER 31
-------------------------------------------------------
1998 1997 1996 1995(a)(c)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ............ $ 17.62 $ 14.01 $ 11.70 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .......................... 0.29 0.19 0.17 0.17
Net Gain (Loss) on Securities
(realized and unrealized) ..................... 1.30 3.77 2.17 1.53
---------- ---------- ---------- ----------
Total from investment operations ............... 1.59 3.96 2.34 1.70
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ......... (0.25) (0.14) (0.03) --
Distributions (from Capital Gains) ............. (0.61) (0.21) -- --
---------- ---------- ---------- ----------
Total Distributions ......................... (0.86) (0.35) (0.03) --
---------- ---------- ---------- ----------
NET ASSET VALUE END OF PERIOD .................. $ 18.35 $ 17.62 $ 14.01 $ 11.70
========== ========== ========== ==========
TOTAL RETURN (b) ............................... 9.0% 28.4% 20.0% 17.0%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ........... $ 204,070 $ 150,391 $ 62,377 $ 13,528
Ratio of Expenses to Average Net Assets ........ 1.08% 1.09% 1.15% 1.40%
Ratio of Net Investment Income (Loss) to Average
Net Assets ................................... 1.93% 2.31% 2.62% 3.00%
Portfolio Turnover Rate ........................ 20% 21% 22% 3%
</TABLE>
85
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINED)
SERIES P (HIGH YIELD)
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED DECEMBER 31
----------------------------------------------
1998(d) 1997(d) 1996(d)(f)
------------ ------------ ------------
<S> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ............ $ 17.60 $ 15.99 $ 15.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .......................... 0.89 0.68 0.51
Net Gain (Loss) on Securities
(realized and unrealized) ..................... 0.12 1.43 0.48
------------ ------------ ------------
Total from investment operations ............... 1.01 2.11 0.99
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ......... (1.63) (0.42) --
Distributions (from Capital Gains) ............. (0.18) (0.08) --
------------ ------------ ------------
Total Distributions ......................... (1.81) (0.50) --
------------ ------------ ------------
NET ASSET VALUE END OF PERIOD .................. $ 16.80 $ 17.60 $ 15.99
============ ============ ============
TOTAL RETURN (b) ............................... 5.8% 13.4% 6.6%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ........... $ 14,949 $ 6,767 $ 2,665
Ratio of Expenses to Average Net Assets ........ 0.18% 0.31% 0.28%
Ratio of Net Investment Income (Loss) to Average
Net Assets ................................... 8.17% 8.58% 8.24%
Portfolio Turnover Rate ........................ 87% 77% 151%
</TABLE>
SERIES S (SOCIAL AWARENESS)
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED DECEMBER 31
-------------------------------------------------------------------------------
1998 1997(e) 1996(e) 1995(e) 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ............ $ 22.25 $ 19.08 $ 16.49 $ 12.97 $ 13.69
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .......................... 0.09 0.06 0.03 0.09 0.08
Net Gain (Loss) on Securities
(realized and unrealized) ..................... 6.78 4.21 3.07 3.51 (0.59)
------------- ------------- ------------- ------------- -------------
Total from investment operations ............... 6.87 4.27 3.10 3.60 (0.51)
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ......... (0.06) (0.04) (0.08) (0.08) (0.02)
Distributions (from Capital Gains) ............. (0.66) (1.06) (0.43) -- (0.19)
------------- ------------- ------------- ------------- -------------
Total Distributions ......................... (0.72) (1.10) (0.51) (0.08) (0.21)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE END OF PERIOD .................. $ 28.40 $ 22.25 $ 19.08 $ 16.49 $ 12.97
============= ============= ============= ============= =============
TOTAL RETURN (b) ............................... 31.4% 22.7% 18.8% 27.7% (3.7%)
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ........... $ 152,641 $ 89,332 $ 57,497 $ 36,830 $ 24,539
Ratio of Expenses to Average Net Assets ........ 0.82% 0.83% 0.84% 0.86% 0.90%
Ratio of Net Investment Income (Loss) to Average
Net Assets ................................... 0.47% 0.35% 0.30% 0.75% 0.75%
Portfolio Turnover Rate ........................ 23% 49% 67% 122% 67%
</TABLE>
86
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINED)
SERIES V (VALUE)
FISCAL PERIOD
ENDED DECEMBER 31
-------------------------
1998(d) 1997(a)(d)(g)
PER SHARE DATA ---------- ------------
NET ASSET VALUE BEGINNING OF PERIOD ............... $ 13.13 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ............................. 0.03 0.12
Net Gain (Loss) on Securities
(realized and unrealized) ........................ 2.14 3.01
---------- ------------
Total from investment operations .................. 2.17 3.13
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ............ (0.08) --
Distributions (from Capital Gains) ................ (0.39) --
---------- ------------
Total Distributions ............................ (0.47) --
---------- ------------
NET ASSET VALUE END OF PERIOD ..................... $ 14.83 $ 13.13
========== ============
TOTAL RETURN (b) .................................. 16.6% 31.3%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) .............. $ 18,523 $ 6,491
Ratio of Expenses to Average Net Assets ........... 0.71% 0.40%
Ratio of Net Investment Income (Loss) to Average
Net Assets ...................................... 0.42% 1.55%
Portfolio Turnover Rate ........................... 72% 79%
SERIES X (SMALL CAP)
FISCAL PERIOD
ENDED DECEMBER 31
-----------------------
1998(d) 1997(d)(h)
--------- ---------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ................ $ 9.60 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .............................. 0.02 0.01
Net Gain (Loss) on Securities
(realized and unrealized) ......................... 1.07 (0.41)
--------- ---------
Total from investment operations ................... 1.09 (0.40)
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ............. (0.02) --
Distributions (from Capital Gains) ................. -- --
--------- ---------
Total Distributions ............................. (0.02) --
--------- ---------
NET ASSET VALUE END OF PERIOD ...................... $ 10.67 $ 9.60
========= =========
TOTAL RETURN (b) ................................... 11.5% (4.0%)
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ............... $ 5,621 $ 2,640
Ratio of Expenses to Average Net Assets ............ 0.59% 0.98%
Ratio of Net Investment Income (Loss) to Average
Net Assets ....................................... 0.26% 0.73%
Portfolio Turnover Rate ............................ 367% 402%
- ------------------
(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 1998
---- ---- ---- ----
Series K 2.03% 1.59% 1.39% 1.66%
Series P - 1.11% 1.14% 0.93%
Series V - - 1.14% 0.89%
Series X - - 1.98% 1.59%
(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 1998
---- ---- ---- ----
Series A 0.83% 0.83% 0.81% 0.81%
Series B 0.83% 0.84% 0.83% 0.80%
Series C 0.60% 0.58% 0.58% 0.57%
Series E 0.85% 0.83% 0.83% 0.83%
Series J 0.83% 0.84% 0.82% 0.82%
Series P - - 0.31% 0.18%
Series S 0.84% 0.84% 0.83% 0.82%
(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) 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.
87
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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 i s 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 mar ket 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
du ration, 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 fluctuation
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 investments from the fluctuation arising from changes
in the market prices of securities held.
Net realized foreign exchange gains or losses arise from sales of portfolio
securities, sales of foreign currencies, and the difference between asset and
liability amounts initially stated in foreign currencies and the U.S. dollar
value of the amounts actually received or paid. Net unrealized foreign exchange
gains or losses arise from changes in the value of portfolio securities and
other assets and liabilities at the end of the reporting period, resulting from
changes in the exchange rates.
C. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS - Series D, K, M, 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 counter party 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 inst ead of the underlying securities
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 cas h 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.
88
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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.
J. USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principals requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results could
differ from those estimates.
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 .35% of the average daily net
assets for Series K, for management services. Effective December 31, 1998, LMC
resigned their position as sub-advisor for Series K. For the period January 1,
1998 to October 31, 1998, SMC paid LMC, an amount equal to .50% of the average
daily net assets of Series D, for subadvisory services. A special meeting of the
stockholders of Series D was held on October 28, 1998. At this meeting,
shareholders voted to approve a new subadvisory contract, effective November 1,
1998, which replaced Lexington with OppenheimerFunds, Inc. Under this new
agreement, SMC pays OppenheimerFunds an annual fee equal to a percentage of the
average d aily closing value of the combined net assets of Series D and another
Fund managed by SMC, Security Equity Fund, Global Series, computed on a daily
basis as follows: 0.35% of the combined average daily net assets up to $300
million, plus 0.30% of such assets over $300 million up to $750 million and
0.25% of such assets over $750 million. SMC waived all of the management fees
for Series P and X through December 31, 1998. SMC waived all of the management
fees for Series V through April 30, 1998. SMC and LMC waived all of the
management fees for Series K through April 30, 1998. The Investment Manager pays
T. Rowe Price Associates, Inc. an annual fee equal to .50% of the first
$50,000,000 of average daily net assets of Series N and .40% of the average
daily 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 daily net
assets of Series O and .40% of the average daily net assets in excess of
$20,000,000 for management services provided to Series O. The Investment Manager
pays Strong Capital Management, Inc. ("Strong") with respect to Series X, an
annual fee based on the combined average daily net assets of the Series and the
Small Company Series of Security Equity Fund. The fee is equal to .50% of the
combined average daily net assets under $150,000,000, .45% of the combined
average daily net assets at or above $150,000,000 but less than $500,000,000,
and .40% of the combined average daily net assets at or above $500,000,000.
Meridian Investment Management Corporation 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%
89
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
The investment advisory contract provides that the total annual expenses of
each Series (including management fees, but excluding interest, taxes, brokerage
commissions and extraordinary expenses) will not exceed the level of expenses
which the Series is permitted to bear under the most restrictive expense
limitation imposed by any state in which shares of the Fund are then offered for
sale. For the year ended December 31, 1998, 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.
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 daily net
assets of Series D, K, M and N, or $60,000. with respect to Series X, SMC
receives a fee at an 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, 1998, for all securities and foreign currency holdings
(including foreign currency receivables and payables) were as follows:
<TABLE>
<CAPTION>
Aggregate gross Aggregate gross Net unrealized
unrealized unrealized appreciation
appreciation depreciation (depreciation)
--------------- --------------- --------------
<S> <C> <C> <C>
SERIES A
(Growth) ................... $ 527,713,781 $ (7,539,688) $ 520,174,093
SERIES B
(Growth-Income) ............ 70,080,749 (115,542,847) (45,462,098)
SERIES C
(Money Market) ............. 45,774 (9) 45,765
SERIES D
(Worldwide Equity) ......... 44,427,014 (3,444,739) 40,982,275
SERIES E
(High Grade Income) ........ 5,350,341 (1,235,339) 4,115,002
SERIES J
(Emerging Growth) .......... 72,396,002 (25,220,321) 47,175,681
SERIES K
(Global Aggressive) ........ 262,888 (1,267,038) (1,004,150)
SERIES M
(Specialized Asset
Allocation) ............... 8,000,600 (4,819,427) 3,181,173
SERIES N
(Managed Asset
Allocation) ............... 14,371,483 (1,004,671) 13,366,812
SERIES O
(Equity Income) ............ 35,672,752 (9,886,859) 25,785,893
SERIES P
(High Yield) ............... 209,744 (420,950) (211,206)
SERIES S
(Social Awareness) ......... 50,057,579 (2,431,479) 47,626,100
SERIES V
(Value) .................... 3,291,291 (1,770,541) 1,520,750
SERIES X
(Small Cap) ................ 1,236,421 (4,699) 1,231,722
</TABLE>
4. INVESTMENT TRANSACTIONS
Investment transactions for the year ended December 31, 1998, (excluding
overnight investments and short-term debt securities) are as follows:
Proceeds
Purchases from sales
-------------- --------------
SERIES A
(Growth) ................... $ 458,367,356 $ 410,303,808
SERIES B
(Growth-Income) ............ 1,369,881,556 1,437,467,805
SERIES C
(Money Market) ............. -- --
SERIES D
(Worldwide Equity) ......... 518,896,390 490,542,622
SERIES E
(High Grade Income) ........ 108,254,286 96,698,548
SERIES J
(Emerging Growth) .......... 212,511,048 209,512,533
SERIES K
(Global Aggressive) ........ 7,537,175 7,496,216
SERIES M
(Specialized Asset
Allocation) ............... 22,078,853 28,202,330
SERIES N
(Managed Asset
Allocation) ............... 30,416,333 4,853,910
SERIES O
(Equity Income) ............ 78,847,345 33,995,828
SERIES P
(High Yield) ............... 16,637,729 8,856,328
SERIES S
(Social Awareness) ......... 48,497,103 24,333,703
SERIES V
(Value) .................... 19,257,928 8,899,605
SERIES X
(Small Cap) ................ 14,558,926 12,173,353
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, N, O, P and S hereby designate $64,678,318, $120,558,745, $0, $14,427,817,
$0, $25,362,376, $120,399, $1,297,059, $124,275, 3,674,977, $48,703, $2,781,038,
$0 and $0 respectively as capital gains dividends. At December 31, 1998, Series
E, N, and X have capital loss carryforwards of: $11,984,101 (expires in 2005 and
2006), $7,750 (expires in 2006 ) and $224,445 (expires in 2005 and 2006)
respectively.
90
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
5. FORWARD FOREIGN EXCHANGE CONTRACTS
At December 31, 1998, Series D had the following open forward foreign
exchange contracts to buy or sell currency:
<TABLE>
<CAPTION>
FOREIGN AMOUNT TO BE NET UNREALIZED
CURRENCY SETTLEMENT CURRENCY TO (RECIEVED)/PAID U.S. $ VALUE APPRECIATION
SERIES D TYPE DATE BE DELIVERED IN U.S. $ AS OF 12-31-98 (DEPRECIATION)
- -------------------- ---- ---------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
German Deutsche Mark... Sell 01/05/99 412,551 (246,771) (247,689) $ (919)
British Pound.......... Sell 01/06/99 51,397 (85,555) (85,510) 45
British Pound.......... Sell 01/11/99 56,293 (93,115) (93,645) (531)
Japanese Yen........... Sell 03/15/99 1,188,687,195 (9,100,346) (10,535,248) (1,434,902)
Japanese Yen........... Buy 03/15/99 1,188,687,195 10,280,538 10,535,248 254,710
--------------
$ (1,181,597)
==============
</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 the fiscal year ended December 31,
1998, 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, 100%; Series B, 17%; Series C, 0%; Series D, 100%;
Series E, 0%; Series J, 10%; Series K, 0 %; Series M, 27%; Series N, 30%; Series
O, 81%; Series P, 0%; Series S, 100%; Series V, 21%; and Series X, 53%.
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, 1997 ............. $19,300 912,208
Options written ........................ 42,368 3,304,521
Exercised .............................. (34,193) (2,524,416)
Expiration ............................. (27,475) (1,692,313)
---------- ----------
Balance at December 31, 1998 ............. $ -- --
========== ==========
8. OPEN FUTURES CONTRACT
At December 31, 1998, Series J had the following open futures contract:
<TABLE>
<CAPTION>
Number of Contracts Expiration Date Contract Amount Market Value Unrealized Gain
------------------- --------------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
S&P Mid-Cap Futures Contracts.. 71 3/7/99 $ 12,881,807 $ 13,907,125 $ 1,025,318
</TABLE>
At December 31, 1998, the market value of assets pledged to cover margin
requirements for open futures contracts was $13,907,125.
91
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO THE CONTRACT OWNERS AND BOARD OF DIRECTORS
SBL FUND
We have audited the accompanying balance sheets, including the schedule 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, 1998, and the related
statements of operations, changes in net assets and financial highlights for 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 statem ents 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, 1998, by corres pondence with the
custodian. As to securities relating to uncompleted transactions, we performed
other audit procedures. An audit also includes assessing the accounting
principles used and the 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, 1998, and
the results of their operations, changes in their net assets and the financial
highlights for the periods indicated therein in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Kansas City, Missouri
February 5, 1999
92
<PAGE>
SECURITY FUNDS
OFFICERS AND DIRECTORS
DIRECTORS
Donald A. Chubb, Jr.
John D. Cleland
Penny A. Lumpkin
Mark L. Morris, Jr., D.V.M.
Maynard F. Oliverius
James R. Schmank
OFFICERS
John D. Cleland, President
James R. Schmank, Vice President
Terry A. Milberger, Vice President
Jane A. Tedder, Vice President
Mark E. Young, Vice President
Cindy L. Shields, Vice President
Steven M. Bowser, Vice President
David Eshnaur, Vice President
Michael A. Petersen, Vice President
James P. Schier, Vice President
Thomas A. Swank, Vice President and Chief Investment Officer
Amy J. Lee, Secretary
Christopher D. Swickard, Assistant Secretary
Brenda M. Harwood,Treasurer
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
[LOGO] Security Distributors, Inc.
700 SW Harrison St.
Topeka, KS 66636-0001
93
