<PAGE>
File Numbers 2-96990 and 811-4279
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment Number
----
Post-Effective Amendment Number 13
----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment Number 13
----
---------------------
MIMLIC Series Fund, Inc.
(Exact Name of Registrant as Specified in Charter)
400 Robert Street North
St. Paul, Minnesota 55101-2098
(Address of Principal Executive Offices)
(612) 298-3500
(Registrant's Telephone Number, Including Area Code)
----------------------
Donald F. Gruber, Esq. Copy to:
Secretary J. Sumner Jones, Esq.
MIMLIC Series Fund, Inc. Jones & Blouch L.L.P.
400 Robert Street North 1025 Thomas Jefferson Street, N.W.
St. Paul, Minnesota 55101-2098 Suite 405 West
Washington, D.C. 20007
----------------------
IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (check appropriate box)
immediately upon filing pursuant to paragraph (b)
---
on (date) pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)(1)
---
X on May 1, 1996, pursuant to paragraph (a)(1)
---
75 days after filing pursuant to paragraph (a)(2)
---
on (date) pursuant to paragraph (a)(2) of Rule 485.
---
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
this post-effective amendment designates a new effective date for a
--- previously filed post-effective amendment.
Pursuant to Regulation 270.24f-2 under the Investment Company Act of 1940,
Registrant has previously elected to register an indefinite number of its common
shares under the Securities Act of 1933. The Rule 24f-2 Notice for Registrant's
most recent fiscal year will be filed on or before February 29, 1996.
<PAGE>
MIMLIC Series Fund, Inc.
Cross Reference Sheet for Items required by Rule 404(a)
N-1A Item of Part A Caption in Prospectus
- ------------------- ---------------------
1 Cover Page
2 Not Applicable
3 Financial Highlights, Performance Data
4 The Fund
5 The Fund and Its Management
6 The Fund and Its Management, Dividends
and Distributions
7 Purchase and Redemption of Shares
8 Purchase and Redemption of Shares
9 Not Applicable
N-1A Item of Part B Caption in Statement of Additional Information
- ------------------- ----------------------------------------------
10 Cover Page
11 Table of Contents
12 Not Applicable
13 Investment Policies, Investment Restrictions
14 Directors and Executive Officers
15 The Fund
16 Investment Advisory and Other Services
17 Portfolio Transactions and Brokerage
18 Capital Stock and Ownership of Shares
19 Purchase and Redemption of Shares, Net Asset
Value
20 Taxes
21 Purchase and Redemption of Shares
22 Performance Data
23 Financial Statements
<PAGE>
Prospectus Dated May 1, 1996
- --------------------------------------------------------------------------------
MIMLIC SERIES FUND, INC.
- ------------------------------
400 ROBERT STREET NORTH x ST. PAUL, MINNESOTA 55101 x 1-800-443-3677
- --------------------------------------------------------------------------------
-
MIMLIC Series Fund, Inc. (the "Fund"), a Minnesota corporation, is a
diversified, open-end management investment company, commonly known as a mutual
fund. The Fund provides for a range of investment objectives through fourteen
separate investment portfolios: the Growth Portfolio, the Bond Portfolio, the
Money Market Portfolio, the Asset Allocation Portfolio, the Mortgage Securities
Portfolio, the Index 500 Portfolio, the Capital Appreciation Portfolio, the
International Stock Portfolio, the Small Company Portfolio, the Value Stock
Portfolio and four Maturing Government Bond Portfolios, maturing respectively in
1998, 2002, 2006 and 2010 (herein referred to as "Portfolios"). A separate
series of the Fund's common stock is issued for each Portfolio.
Shares of the Fund are not offered directly to the public. They are sold only
to The Minnesota Mutual Life Insurance Company ("Minnesota Mutual") in
connection with its variable life insurance policies and variable annuity
contracts.
The investment objectives and certain policies and risks associated with the
Portfolios are as follows:
The Growth Portfolio seeks the long-term accumulation of capital.
Current income, while a factor in investment selection, is a secondary
objective. In pursuit of these objectives the Growth Portfolio will invest
primarily in common stocks and other equity securities. Common stocks are
more volatile than debt securities and involve greater investment risk.
The Bond Portfolio seeks as high a level of long-term total rate of
return as is consistent with prudent investment risk. A secondary objective
is to seek preservation of capital. In pursuit of these objectives the Bond
Portfolio will invest primarily in long-term, fixed-income, high-quality
debt instruments. The value of debt securities will tend to rise and fall
inversely with the rise and fall of interest rates.
The Money Market Portfolio seeks maximum current income to the extent
consistent with liquidity and the preservation of capital. In pursuit of
this objective the Money Market Portfolio will follow a policy of investing
in money market instruments and other debt securities with maturities not
exceeding one year. The return produced by these securities will reflect
fluctuations in short-term interest rates.
AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE
PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE.
The Asset Allocation Portfolio seeks as high a level of long-term total
rate of return as is consistent with prudent investment risk. In pursuit of
this objective the Asset Allocation Portfolio will invest in common stocks
and other equity securities, bonds, mortgage-related securities and money
market instruments. The Asset Allocation Portfolio involves the risks
inherent in stocks and debt securities of varying maturities, and the risk
that the Portfolio may invest too much or too little of its assets in each
type of security at any particular time.
The Mortgage Securities Portfolio seeks a high level of current income
consistent with prudent investment risk. In pursuit of this objective the
Mortgage Securities Portfolio will invest primarily in a diversified
portfolio of mortgage-related securities. Prices of mortgage-related
securities will tend to rise and fall inversely with the rise and fall of
the general level of interest rates. In addition, the rate of prepayment of
mortgages underlying mortgage-related securities tends to increase during
periods of declining interest rates, and such prepayments must be reinvested
at the then prevailing lower interest rates.
(CONTINUED ON NEXT PAGE)
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
The Index 500 Portfolio seeks to provide investment results that
correspond generally to the price and yield performance of the common stocks
included in the Standard & Poor's Corporation 500 Composite Stock Price
Index (the "Index"). All common stocks, including those in the Index,
involve greater investment risk than debt securities. The fact that a stock
has been included in the Index affords no assurance against declines in the
price or yield performance of that stock.
The Capital Appreciation Portfolio seeks growth of capital. Investments
will be made based upon their potential for capital appreciation. Therefore,
current income will be incidental to the objective of capital growth.
Because of the market risks inherent in any equity investment, the selection
of securities on the basis of their appreciation possibilities cannot ensure
against possible loss in value.
The International Stock Portfolio seeks long-term capital growth. In
pursuit of this objective the International Stock Portfolio will follow a
policy of investing in stocks issued by companies, large and small, and debt
obligations of companies and governments outside the United States. Current
income will be incidental to the objective of capital growth. The Portfolio
is designed for persons seeking international diversification. Investors
should consider carefully the substantial risks involved in investing in
securities issued by companies and governments of foreign nations, which are
in addition to the usual risks inherent in domestic investments.
The Small Company Portfolio seeks the long-term accumulation of capital.
In pursuit of this objective, the Small Company Portfolio will follow a
policy of investing primarily in common and preferred stocks issued by small
companies, defined in terms of either market capitalization or gross
revenues. Investments in small companies usually involve greater investment
risks than fixed income securities or corporate equity securities generally.
Dividend income will be incidental to the investment objective for this
Portfolio.
The Value Stock Portfolio seeks the long-term accumulation of capital.
In pursuit of this objective, the Value Stock Portfolio will follow a policy
of investing primarily in the equity securities of companies which, in the
opinion of the adviser, have market values which appear low relative to
their underlying value or future earnings and growth potential. As it is
anticipated that the Portfolio will consist in large part of dividend-paying
common stocks, the production of income will be a secondary objective of the
Portfolio.
The Maturing Government Bond Portfolios seek to provide as high an
investment return as is consistent with prudent investment risk for a
specified period of time ending on a specified liquidation date. In pursuit
of this objective each of the Maturing Government Bond Portfolios seeks to
return a reasonably assured targeted dollar amount, predictable at the time
of investment, on a specific target date in the future through investment in
a portfolio composed primarily of zero coupon securities. These are
securities that pay no cash income and are sold at a discount from their par
value at maturity. The current target dates for the maturities of these
Portfolios are 1998, 2002, 2006 and 2010, respectively.
There is no assurance that the investment objectives of any of the Fund's
Portfolios will be realized. See "Investment Objectives, Policies and Risks" on
page 20.
This Prospectus sets forth concisely the information that a prospective
investor should know before investing in the Fund, and it should be read and
kept for future reference. A Statement of Additional Information dated May 1,
1996, which contains further information about the Fund, has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
Prospectus. A copy of the Statement of Additional Information may be obtained
without charge by calling (612) 298-3500, or by writing the Fund at its
principal office at Minnesota Mutual Life Center, 400 Robert Street North, St.
Paul, Minnesota 55101-2098.
2
<PAGE>
- --------------------------------------------------------------------------------
x
TABLE OF
CONTENTS
- ------------
<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS...................................................... 4
PERFORMANCE DATA.......................................................... 18
THE FUND.................................................................. 19
INVESTMENT OBJECTIVES, POLICIES AND RISKS................................. 20
GROWTH PORTFOLIO...................................................... 20
BOND PORTFOLIO........................................................ 21
MONEY MARKET PORTFOLIO................................................ 23
ASSET ALLOCATION PORTFOLIO............................................ 25
MORTGAGE SECURITIES PORTFOLIO......................................... 25
INDEX 500 PORTFOLIO................................................... 29
CAPITAL APPRECIATION PORTFOLIO........................................ 30
INTERNATIONAL STOCK PORTFOLIO......................................... 30
SMALL COMPANY PORTFOLIO............................................... 33
VALUE STOCK PORTFOLIO................................................. 34
MATURING GOVERNMENT BOND PORTFOLIOS................................... 36
INVESTMENT RESTRICTIONS................................................... 38
THE FUND AND ITS MANAGEMENT............................................... 39
INVESTMENT ADVISER........................................................ 40
INVESTMENT SUB-ADVISERS................................................... 43
PURCHASE AND REDEMPTION OF SHARES......................................... 43
DIVIDENDS AND DISTRIBUTIONS............................................... 44
TAXES..................................................................... 44
CUSTODIANS................................................................ 44
APPENDIX A................................................................ 45
APPENDIX B................................................................ 47
</TABLE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the offer contained in this Prospectus, and, if
given or made, such other information or representations must not be relied upon
as having been authorized by the Fund or the Investment Adviser. This Prospectus
does not constitute an offering in any state in which such offering may not
lawfully be made.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables, for each Portfolio, which show certain per share data
for a share of capital stock outstanding during the periods and selected
information for each period, have been audited by KPMG Peat Marwick LLP,
independent auditors, as set forth in their report appearing in the Statement of
Additional Information. This information should be read in conjunction with the
financial statements and related notes of MIMLIC Series Fund, Inc., included in
the Statement of Additional Information.
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
-------- -------- ------- ------- ------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year........................ $1.866 $1.912 $1.889 $1.864 $1.391 $1.406 $1.149 $1.017 $1.056 $1.073
-------- -------- ------- ------- ------- ------ ------ ------ ------ -----
Income from investment
operations:
Net investment income..... .021 .019 .020 .026 .031 .010 .028 .032 .017 .023
Net gains or losses on
securities (both
realized and
unrealized)............. .416 (.005) .063 .060 .442 (.007) .271 .129 .031 (.032)
-------- -------- ------- ------- ------- ------ ------ ------ ------ -----
Total from investment
operations......... .437 .014 .083 .086 .473 .003 .299 .161 .048 (.009)
-------- -------- ------- ------- ------- ------ ------ ------ ------ -----
Less distributions:
Dividends from net
investment income....... (.020) (.020) (.027) (.031) -- (.012) (.030) (.029) (.042) (.006)
Distributions from capital
gains................... (.073) (.040) (.033) (.030) -- (.006) (.012) -- (.045) (.002)
-------- -------- ------- ------- ------- ------ ------ ------ ------ -----
Total distributions... (.093) (.060) (.060) (.061) -- (.018) (.042) (.029) (.087) (.008)
-------- -------- ------- ------- ------- ------ ------ ------ ------ -----
Net asset value, end of
year........................ $2.210 $1.866 $1.912 $1.889 $1.864 $1.391 $1.406 $1.149 $1.017 $1.056
-------- -------- ------- ------- ------- ------ ------ ------ ------ -----
-------- -------- ------- ------- ------- ------ ------ ------ ------ -----
Total return (a).............. 24.3% .8% 4.7% 4.8% 34.1% .2% 26.0% 15.9% 4.2% (.9)%
Net assets, end of year (in
thousands).................. $201,678 $157,369 $125,745 $99,128 $75,518 $51,485 $7,809 $3,996 $2,867 $ 1,428
Ratio of expenses to average
daily net assets (b)........ .55% .56% .58% .58% .63% .65% .65% .65% .66% .75%
Ratio of net investment income
to average daily net
assets (b).................. 1.04% 1.22% 1.21% 1.72% 2.11% 2.70% 2.74% 3.05% 2.59% 2.60%
Portfolio turnover rate
(excluding short-term
securities)................. 91.9% 42.0% 51.0% 22.4% 15.7% 19.2% 32.4% 34.1% 29.3% 86.3%
<FN>
- ---------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Minnesota Mutual voluntarily absorbed $293, $6,738, $11,045, $9,202 and
$13,595 in expenses for the years ended December 31, 1990, 1989, 1988, 1987
and 1986, respectively. Had the portfolio paid all fees and expenses, the
ratio of expenses to average daily net assets would have been .65%, .76%,
.95%, 1.00% and 1.80%, respectively, and the ratio of net investment income
to average daily net assets would have been 2.70%, 2.63%, 2.75%, 2.25% and
1.55%, respectively.
</TABLE>
4
<PAGE>
BOND PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year...... $1.157 $1.300 $1.258 $1.264 $1.075 $1.080 $1.026 $1.027 $1.160 $1.063
------- ------- ------- ------- ------ ------ ------ ------ ------ -----
Income from investment operations:
Net investment income............... .074 .042 .051 .053 .078 .083 .077 .073 .076 .054
Net gains or losses on securities
(both realized and unrealized).... .147 (.100) .074 .024 .111 (.005) .053 (.001) (.054) .059
------- ------- ------- ------- ------ ------ ------ ------ ------ -----
Total from investment
operations................... .221 (.058) .125 .077 .189 .078 .130 .072 .022 .113
------- ------- ------- ------- ------ ------ ------ ------ ------ -----
Less distributions:
Dividends from net investment
income............................ (.046) (.052) (.058) (.069) -- (.083) (.076) (.073) (.134) (.016)
Distributions from capital gains.... -- (.033) (.025) (.014) -- -- -- -- (.021) --
------- ------- ------- ------- ------ ------ ------ ------ ------ -----
Total distributions............. (.046) (.085) (.083) (.083) -- (.083) (.076) (.073) (.155) (.016)
------- ------- ------- ------- ------ ------ ------ ------ ------ -----
Net asset value, end of year............ $1.332 $1.157 $1.300 $1.258 $1.264 $1.075 $1.080 $1.026 $1.027 $1.160
------- ------- ------- ------- ------ ------ ------ ------ ------ -----
------- ------- ------- ------- ------ ------ ------ ------ ------ -----
Total return (a)........................ 19.8% (4.6)% 10.3% 6.7% 17.6% 7.2% 12.7% 7.1% 1.6% 10.7%
Net assets, end of year (in
thousands)............................ $101,045 $74,679 $43,927 $24,914 $13,088 $9,325 $6,080 $3,284 $2,213 $ 2,123
Ratio of expenses to average daily net
assets (b)............................ .58% .61% .64% .65% .65% .65% .65% .65% .67% .75%
Ratio of net investment income to
average daily net assets (b).......... 6.57% 6.12% 5.57% 6.56% 7.79% 8.29% 9.15% 7.88% 7.64% 7.27%
Portfolio turnover rate (excluding
short-term securities)................ 205.4% 166.2% 166.8% 140.2% 93.8% 77.7% 117.7% 210.3% 138.5% 117.8%
<FN>
- ---------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Minnesota Mutual voluntarily absorbed $12,179, $13,182, $5,834, $6,951,
$9,621, $6,676 and $2,746 in expenses for the years ended December 31,
1992, 1991, 1990, 1989, 1988, 1987 and 1986, respectively. Had the
portfolio paid all fees and expenses, the ratio of expenses to average
daily net assets would have been .72%, .78%, .72%, .80%, .98%, .94% and
.97%, respectively, and the ratio of net investment income to average daily
net assets would have been 6.49%, 7.66%, 8.22%, 9.00%, 7.55%, 7.37% and
7.05%, respectively.
</TABLE>
5
<PAGE>
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year...... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income............... .053 .036 .027 .032 .053 .075 .082 .064 .054 .053
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from investment
operations................... .053 .036 .027 .032 .053 .075 .082 .064 .054 .053
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment
income............................ (.053) (.036) (.027) (.032) (.053) (.075) (.082) (.064) (.054) (.053)
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total distributions............. (.053) (.036) (.027) (.032) (.053) (.075) (.082) (.064) (.054) (.053)
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net asset value, end of year............ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total return (a)........................ 5.4% 4.2% 2.7% 3.2% 5.4% 7.7% 8.6% 6.6% 5.6% 5.4%
Net assets, end of year (in
thousands)............................ $30,166 $23,107 $18,423 $13,591 $12,834 $9,555 $5,838 $2,471 $1,504 $ 766
Ratio of expenses to average daily net
assets (b)............................ .64% .65% .65% .65% .65% .65% .65% .65% .66% .75%
Ratio of net investment income to
average daily net assets (b).......... 5.29% 3.71% 2.65% 3.17% 5.26% 7.46% 8.22% 6.52% 5.47% 5.17%
<FN>
- ---------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Minnesota Mutual voluntarily absorbed $13,734, $23,714, $20,913, $22,877,
$14,752, $11,987, $11,919, $10,690 and $3,973 in expenses for the years
ended December 31, 1994, 1993, 1992, 1991, 1990, 1989, 1988, 1987 and 1986,
respectively. Had the portfolio paid all fees and expenses the ratio of
expenses to average daily net assets would have been .72%, .81%, .80%,
.85%, .84%, .95%, 1.24%, 1.76% and 1.36%, respectively, and the ratio of
net investment income to average daily net assets would have been 3.64%,
2.49%, 3.02%, 5.06%, 7.27%, 7.92%, 5.93%, 4.37% and 4.56%, respectively.
</TABLE>
6
<PAGE>
ASSET ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year.......................... $1.524 $1.589 $1.574 $1.558 $1.209 $1.232 $1.101 $1.046 $1.092 $1.065
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------
Income from investment
operations:
Net investment income....... .061 .047 .030 .034 .047 .061 .066 .059 .037 .027
Net gains or losses on
securities (both realized
and unrealized)........... .308 (.069) .066 .070 .302 (.017) .156 .056 (.012) .011
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------
Total from investment
operations........... .369 (.022) .096 .104 .349 .044 .222 .115 .025 .038
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------
Less distributions:
Dividends from net
investment income......... (.049) (.033) (.037) (.041) -- (.063) (.065) (.060) (.067) (.009)
Distributions from capital
gains..................... (.018) (.010) (.044) (.047) -- (.004) (.026) -- (.004) (.002)
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------
Total distributions..... (.067) (.043) (.081) (.088) -- (.067) (.091) (.060) (.071) (.011)
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------
Net asset value, end of year.... $1.826 $1.524 $1.589 $1.574 $1.558 $1.209 $1.232 $1.101 $1.046 $1.092
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------
Total return (a)................ 25.0% (1.4)% 6.5% 7.3% 28.9% 3.6% 20.2% 11.1% 2.1% 3.6%
Net assets, end of year (in
thousands).................... $349,010 $272,629 $250,011 $150,998 $68,592 $35,455 $22,205 $15,161 $12,037 $6,307
Ratio of expenses to average
daily net assets (b).......... .55% .56% .57% .60% .62% .65% .65% .65% .66% .75%
Ratio of net investment income
to average daily net assets
(b)........................... 3.75% 3.31% 2.63% 3.68% 4.50% 5.71% 6.23% 5.75% 4.85% 4.64%
Portfolio turnover rate
(excluding short-term
securities)................... 157.0% 123.6% 85.7% 106.5% 78.6% 67.2% 93.0% 190.2% 99.5% 58.9%
<FN>
- ---------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Minnesota Mutual voluntarily absorbed $2,078, $13,305, $3,453, and $12,854
in expenses for the years ended December 31, 1989, 1988, 1987 and 1986,
respectively. Had the portfolio paid all fees and expenses, the ratio of
expenses to average daily net assets would have been .66%, .74%, .69% and
1.09%, respectively, and the ratio of net investment income to average
daily net assets would have been 6.22%, 5.66%, 4.82% and 4.30%,
respectively.
</TABLE>
7
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $1.098 $1.218 $1.185 $1.196 $1.029 $1.018 $.976 $.979
------- ------- ------- ------- ------- ------- ------ ------
Income from investment operations:
Net investment income......................... .081 .074 .054 .045 .069 .086 .084 .086
Net gains or losses on securities (both
realized and unrealized).................... .107 (.115) .052 .024 .098 .011 .047 (.002)
------- ------- ------- ------- ------- ------- ------ ------
Total from investment operations.......... .188 (.041) .106 .069 .167 .097 .131 .084
------- ------- ------- ------- ------- ------- ------ ------
Less distributions:
Dividends from net investment income.......... (.079) (.054) (.055) (.056) -- (.085) (.084) (.087)
Distributions from capital gains.............. -- (.025) (.018) (.024) -- (.001) (.005) --
------- ------- ------- ------- ------- ------- ------ ------
Total distributions....................... (.079) (.079) (.073) (.080) -- (.086) (.089) (.087)
------- ------- ------- ------- ------- ------- ------ ------
Net asset value, end of period.................... $1.207 $1.098 $1.218 $1.185 $1.196 $1.029 $1.018 $.976
------- ------- ------- ------- ------- ------- ------ ------
------- ------- ------- ------- ------- ------- ------ ------
Total return (b).................................. 18.0% (3.4)% 9.3% 6.4% 16.3% 9.4% 13.5% 8.6%
Net assets, end of period (in thousands).......... $69,746 $59,666 $63,902 $37,011 $16,520 $12,124 $8,172 $6,002
Ratio of expenses to average daily net
assets (c)...................................... .58% .60% .63% .65% .65% .65% .65% .65%
Ratio of net investment income to average daily
net assets (c).................................. 7.09% 6.55% 5.87% 6.64% 8.02% 8.80% 8.84% 8.83%
Portfolio turnover rate (excluding short-term
securities)..................................... 133.7% 197.3% 138.4% 96.2% 112.0% 5.2% 51.7% 10.1%
<CAPTION>
PERIOD FROM
APRIL 28,
1987 (A) TO
DECEMBER 31,
1987
------------
<S> <C>
Net asset value, beginning of period.............. $1.000
-----
Income from investment operations:
Net investment income......................... .050
Net gains or losses on securities (both
realized and unrealized).................... (.019)
-----
Total from investment operations.......... .031
-----
Less distributions:
Dividends from net investment income.......... (.051)
Distributions from capital gains.............. (.001)
-----
Total distributions....................... (.052)
-----
Net asset value, end of period.................... $.979
-----
-----
Total return (b).................................. 3.0%(d)
Net assets, end of period (in thousands).......... $5,112
Ratio of expenses to average daily net
assets (c)...................................... .65%(e)
Ratio of net investment income to average daily
net assets (c).................................. 8.71%(e)
Portfolio turnover rate (excluding short-term
securities)..................................... 2.2%
<FN>
- ---------
(a) The inception of the portfolio was April 28, 1987. However, operations did
not commence until May 1, 1987 when the shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Minnesota Mutual voluntarily absorbed $10,341, $16,372, $3,492, $3,393,
$6,738 and $1,757 in expenses for the years ended December 31, 1992, 1991,
1990, 1989, 1988 and the period ended December 31, 1987, respectively. Had
the portfolio paid all fees and expenses, the ratio of expenses to average
daily net assets would have been .69%, .79%, .68%, .69%, .76% and .71%,
respectively, and the ratio of net investment income to average daily net
assets would have been 6.60%, 7.88%, 8.77%, 8.80%, 8.72% and 8.65%,
respectively.
(d) Total return is presented for the period from May 1, 1987, commencement of
operations, to December 31, 1987.
(e) Adjusted to an annual basis.
</TABLE>
8
<PAGE>
INDEX 500 PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $1.158 $1.532 $1.428 $1.454 $1.120 $1.204 $.950 $.853
------- ------- ------- ------- ------- ------- ------- ------
Income from investment operations:
Net investment income......................... .31 .029 026 .024 .034 .032 .026 .035
Net gains or losses on securities (both
realized and unrealized).................... .517 (.012) .110 .073 .300 (.080) .262 .103
------- ------- ------- ------- ------- ------- ------- ------
Total from investment operations.......... .548 .017 .136 .097 .334 (.048) .288 .138
------- ------- ------- ------- ------- ------- ------- ------
Less distributions:
Dividends from net investment income.......... (.031) (.026) (.025) (.032) -- (.035) (.024) (.036)
Distributions from capital gains.............. (.012) (.005) (.007) (.091) -- (.001) (.010) (.005)
------- ------- ------- ------- ------- ------- ------- ------
Total distributions....................... (.043) (.031) (.032) (.123) -- (.036) (.034) (.041)
------- ------- ------- ------- ------- ------- ------- ------
Net asset value, end of period.................... $2.023 $1.518 $1.532 $1.428 $1.454 $1.120 $1.204 $.950
------- ------- ------- ------- ------- ------- ------- ------
------- ------- ------- ------- ------- ------- ------- ------
Total return (b).................................. 36.8% 1.2% 9.8% 7.4% 29.8% (3.9)% 30.7% 16.0%
Net assets, end of period (in thousands).......... $123,999 $73,432 $56,209 $35,620 $20,999 $18,204 $14,002 $6,225
Ratio of expenses to average daily net
assets (c)...................................... .47% .50% .55% .55% .55% .55% .55% .55%
Ratio of net investment income to average daily
net assets (c).................................. 2.08% 2.34% 2.27% 2.42% 2.70% 3.16% 3.09% 4.06%
Portfolio turnover rate (excluding short-term
securities)..................................... 4.8% 5.9% 4.8% 6.1% 26.4% 4.3% 8.8% 8.0%
<CAPTION>
PERIOD FROM
APRIL 28,
1987 (A) TO
DECEMBER 31,
1987
------------
<S> <C>
Net asset value, beginning of period.............. $1.000
-----
Income from investment operations:
Net investment income......................... .020
Net gains or losses on securities (both
realized and unrealized).................... (.148)
-----
Total from investment operations.......... (.128)
-----
Less distributions:
Dividends from net investment income.......... (.018)
Distributions from capital gains.............. (.001)
-----
Total distributions....................... (.019)
-----
Net asset value, end of period.................... $.853
-----
-----
Total return (b).................................. (12.9)%(d)
Net assets, end of period (in thousands).......... $4,808
Ratio of expenses to average daily net
assets (c)...................................... .55%(e)
Ratio of net investment income to average daily
net assets (c).................................. 3.55%(e)
Portfolio turnover rate (excluding short-term
securities)..................................... 5.7%
<FN>
- ---------
(a) The inception of the portfolio was April 28, 1987. However, operations did
not commence until May 1, 1987 when the shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Minnesota Mutual voluntarily absorbed $7,228, $13,123, $3,284, $6,269,
$8,068 and $5,831 in expenses for the years ended December 31, 1992, 1991,
1990, 1989, 1988 and the period ended December 31, 1987, respectively. Had
the portfolio paid all fees and expenses, the ratio of expenses to average
daily net assets would have been .58%, .62%, .57%, .61%, .69% and .74%,
respectively, and the ratio of net investment income to average daily net
assets would have been 2.39%, 2.63%, 3.14%, 3.03%, 3.92% and 3.36%,
respectively.
(d) Total return is presented for the period from May 1, 1987, commencement of
operations, to December 31, 1987.
(e) Adjusted to an annual basis.
</TABLE>
9
<PAGE>
CAPITAL APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 28,
YEAR ENDED DECEMBER 31, 1987 (A) TO
------------------------------------------------------------------------ DECEMBER 31,
1995 1994 1993 1992 (B) 1991 1990 1989 1988 1987
-------- -------- ------- -------- ------- ------- ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.808 $1.797 $1.682 $1.684 $1.198 $1.265 $.954 $.899 $1.000
-------- -------- ------- -------- ------- ------- ------ ------ -----
Income from investment operations:
Net investment income............... (.003) -- .001 .004 .009 .010 .008 .006 .006
Net gains or losses on securities
(both realized and unrealized).... .406 .039 .167 .078 .488 (.035) .355 .063 (.081)
-------- -------- ------- -------- ------- ------- ------ ------ -----
Total from investment
operations................... .403 .039 .168 .082 .497 (.025) .363 .069 (.075)
-------- -------- ------- -------- ------- ------- ------ ------ -----
Less distributions:
Dividends from net investment
income............................ -- (.002) (.005) (.009) (.003) (.009) (.007) (.006) (.005)
Distributions from capital gains.... (.051) (.026) (.048) (.075) (.008) (.033) (.045) (.008) (.021)
-------- -------- ------- -------- ------- ------- ------ ------ -----
Total distributions............. (.051) (.028) (.053) (.084) (.011) (.042) (.052) (.014) (.026)
-------- -------- ------- -------- ------- ------- ------ ------ -----
Net asset value, end of period.......... $2.160 $1.808 $1.797 $1.682 $1.684 $1.198 $1.265 $.954 $.899
-------- -------- ------- -------- ------- ------- ------ ------ -----
-------- -------- ------- -------- ------- ------- ------ ------ -----
Total return (c)........................ 22.8% 2.3% 10.4% 5.0% 41.8% (2.1)% 38.2% 7.8% (7.5)%(e)
Net assets, end of period (in
thousands)............................ $163,520 $115,607 $84,840 $52,365 $23,822 $10,241 $5,386 $2,184 $1,250
Ratio of expenses to average daily net
assets (d)............................ .80% .83% .86% .90% .90% .90% .90% .90% .90%(f)
Ratio of net investment income to
average daily net assets (d).......... (.15)% (.09)% .12% .42% .92% 1.15% 1.03% .91% 1.19%(f)
Portfolio turnover rate (excluding
short-term securities)................ 51.1% 68.4% 95.9% 138.8% 70.5% 57.9% 89.1% 103.0% 121.6%
<FN>
- ---------
(a) The inception of the portfolio was April 28, 1987. However, operations did
not commence until May 1, 1987 when the shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) On October 1, 1992, the portfolio entered into a new sub-advisory agreement
with Winslow Capital Management, Inc. to perform sub-advisory services for
the portfolio. Prior to October 1, 1992, the portfolio had a sub-advisory
agreement with Alliance Capital Management L.P. for sub-advisory services.
(c) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(d) Minnesota Mutual voluntarily absorbed $16,612, $15,552, $7,786, $8,899,
$12,636 and $7,450 in expenses for the years ended December 31, 1992, 1991,
1990, 1989, 1988 and the period ended December 31, 1987, respectively. Had
the portfolio paid all fees and expenses, the ratio of expenses to average
daily net assets would have been .94%, 1.00%, 1.00%, 1.14%, 1.62% and
1.96%, respectively, and the ratio of net investment income to average
daily net assets would have been .38%, .82%, 1.05%, .79%, .19% and .13%,
respectively.
(e) Total return is presented for the period from May 1, 1987, commencement of
operations, to December 31, 1987.
(f) Adjusted to an annual basis.
</TABLE>
10
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Net asset value, beginning of period...................................................... $1.235 $1.310 $.919
-------- -------- -------
Income from investment operations:
Net investment income................................................................. .033 .011 .016
Net gains or losses on securities (both realized and unrealized)...................... .142 (.015) .389
-------- -------- -------
Total from investment operations.................................................. .175 (.004) .405
-------- -------- -------
Less distributions:
Dividends from net investment income.................................................. -- (.029) (.007)
Excess distributions of net investment income......................................... -- -- --
Tax return of capital................................................................. -- (.001) --
Distributions from capital gains...................................................... -- (.041) (.007)
Excess distributions of net realized gains............................................ -- -- --
-------- -------- -------
Total distributions............................................................... -- (.071) (.014)
-------- -------- -------
Net asset value, end of period............................................................ $1.410 $1.235 $1.310
-------- -------- -------
-------- -------- -------
Total return (b).......................................................................... 14.2% (.3)% 44.2%
Net assets, end of period (in thousands).................................................. $140,770 $107,490 $61,106
Ratio of expenses to average daily net assets (c)......................................... 1.04% 1.24% 1.55%
Ratio of net investment income to average daily net assets (c)............................ 2.69% 1.68% 1.04%
Portfolio turnover rate (excluding short-term securities)................................. 20.3% 12.9% 12.7%
<CAPTION>
PERIOD FROM
MAY 1,
1992 (A) TO
DECEMBER 31,
1992
------------
<S> <C>
Net asset value, beginning of period...................................................... $1.000
------
Income from investment operations:
Net investment income................................................................. .010
Net gains or losses on securities (both realized and unrealized)...................... (.077)
------
Total from investment operations.................................................. (.067)
------
Less distributions:
Dividends from net investment income.................................................. (.010)
Excess distributions of net investment income......................................... (.002)
Tax return of capital................................................................. --
Distributions from capital gains...................................................... --
Excess distributions of net realized gains............................................ (.002)
------
Total distributions............................................................... (.014)
------
Net asset value, end of period............................................................ $.919
------
------
Total return (b).......................................................................... (6.8)%(d)
Net assets, end of period (in thousands).................................................. $17,401
Ratio of expenses to average daily net assets (c)......................................... 2.00%(e)
Ratio of net investment income to average daily net assets (c)............................ 2.10%(e)
Portfolio turnover rate (excluding short-term securities)................................. 11.7%
<FN>
- ---------
(a) The inception of the portfolio was January 21, 1992. However, operations
did not commence until May 1, 1992 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Minnesota Mutual voluntarily absorbed $8,450 in expenses for the period
from May 1, 1992 to December 31, 1992. Had the portfolio paid all fees and
expenses the ratio of expenses to average daily net assets would have been
2.09% and the ratio of net investment income to average daily net assets
would have been 2.01%.
(d) Total return presented for the period from May 1, 1992, commencement of
operations, to December 31, 1992.
(e) Adjusted to an annual basis.
</TABLE>
11
<PAGE>
SMALL COMPANY PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, MAY 3,
1993 (A) TO
--------------------------- DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period............................................ $1.226 $1.157 $1.000
------ ------ ------
Income from investment operations:
Net investment income....................................................... .002 .002 --
Net gains or losses on securities (both realized and unrealized)............ .392 .069 .173
------ ------ ------
Total from investment operations........................................ .394 .071 .173
------ ------ ------
Less distributions:
Dividends from net investment income........................................ (.002) (.002) --
Distributions from net realized gains....................................... (.016) -- (.015)
Excess distributions of net realized gains.................................. -- -- (.001)
------ ------ ------
Total distributions..................................................... (.018) (.002) (.016)
------ ------ ------
Net asset value, end of period.................................................. $1.602 $1.226 $1.157
------ ------ ------
------ ------ ------
Total return (b)................................................................ 32.1% 6.2% 17.4%(c)
Net assets, end of period (in thousands)........................................ $ 98,895 $ 51,105 $13,043
Ratio of expenses to average daily net assets (d)............................... .84% .89% .90%(e)
Ratio of net investment income (loss) to average daily net assets (d)........... .15% .24% (.02)%(e)
Portfolio turnover rate (excluding short-term securities)....................... 61.3% 28.1% 34.9%
<FN>
- ---------
(a) The inception of the portfolio was January 26, 1993. However, operations
did not commence until May 3, 1993 when the shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return presented for the period from May 3, 1993, commencement of
operations, to December 31, 1993.
(d) Minnesota Mutual voluntarily absorbed $9,532 and $30,330 in expenses for
the year ended December 31, 1994 and the period from May 3, 1993 to
December 31, 1993. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been .92% and 1.58%,
respectively and the ratio of net investment income (loss) to average daily
net assets would have been .21% and (.70)%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
12
<PAGE>
MATURING GOVERNMENT BOND 1998 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR MAY 2,
ENDED 1994 (A) TO
DECEMBER DECEMBER 31,
31, 1995 1994
-------- ------------
<S> <C> <C>
Net asset value, beginning of
period...................... $.945 $.989
-------- ------
Income from investment
operations:
Net investment income..... .059 .043
Net gains or losses on
securities (both realized
and unrealized).......... .092 (.043)
-------- ------
Total from investment
operations........... .151 --
-------- ------
Less distributions:
Dividends from net
investment income........ (.058 ) (.044)
Distributions from capital
gains.................... -- --
-------- ------
Total distributions... (.058 ) (.044)
-------- ------
Net asset value, end of
period...................... $1.038 $.945
-------- ------
-------- ------
Total return (b).............. 16.0 % .1%(c)
Net assets, end of period (in
thousands).................. $5,057 $3,402
Ratio of expenses to average
daily net assets (d)........ .20 % .20%(e)
Ratio of net investment income
to average daily net assets
(d)......................... 6.22 % 6.45%(e)
Portfolio turnover rate
(excluding short-term
securities)................. 9.0 % --
<FN>
- ---------
(a) The inception of the portfolio was November 9, 1993. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $22,794 and $21,714 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been .72% and 1.12%,
respectively, and the ratio of net investment income to average daily net
assets would have been 5.70% and 5.53%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
13
<PAGE>
MATURING GOVERNMENT BOND 2002 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR MAY 2,
ENDED 1994 (A) TO
DECEMBER DECEMBER 31,
31, 1995 1994 (A)
-------- ------------
<S> <C> <C>
Net asset value, beginning of period.... $.932 $.977
-------- -----
Income from investment operations:
Net investment income............... .072 .047
Net gains or losses on securities
(both realized and unrealized)..... .161 (.044)
-------- -----
Total from investment
operations..................... .233 .003
-------- -----
Less distributions:
Dividends from net investment
income............................. (.072 ) (.048)
Tax return of capital............... (.002 ) --
Distributions from capital gains.... -- --
-------- -----
Total distributions............. (.074 ) (.048)
-------- -----
Net asset value, end of period.......... $1.091 $.932
-------- -----
-------- -----
Total return (b)........................ 25.0 % .3%(c)
Net assets, end of period (in
thousands)............................ $3,049 $ 2,575
Ratio of expenses to average daily net
assets (d)............................ .20 % .20%(e)
Ratio of net investment income to
average daily net assets (d).......... 6.52 % 7.18%(e)
Portfolio turnover rate (excluding
short-term securities)................ -- 11.6%
<FN>
- ---------
(a) The inception of the portfolio was November 9, 1993. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $24,709 and $23,298 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been 1.06% and 1.52%,
respectively and the ratio of net investment income to average daily net
assets would have been 5.66% and 5.86%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
14
<PAGE>
MATURING GOVERNMENT BOND 2006 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
MAY 2,
YEAR ENDED 1994 (A) TO
DECEMBER DECEMBER
31, 31,
1995 1994
----------- -----------
<S> <C> <C>
Net asset value, beginning of
period...................... $.923 $.970
----- -----
Income from investment
operations:
Net investment income..... .069 .047
Net gains or losses on
securities (both realized
and unrealized).......... .251 (.046)
----- -----
Total from investment
operations........... .320 .001
----- -----
Less distributions:
Dividends from net
investment income........ (.069) (.048)
Distributions from capital
gains.................... -- --
----- -----
Total distributions... (.069) (.048)
----- -----
Net asset value, end of
period...................... $1.174 $ .923
----- -----
----- -----
Total return (b).............. 34.7% .1%(c)
Net assets, end of period (in
thousands).................. $2,570 $1,860
Ratio of expenses to average
daily net assets (d)........ .40% .40%(e)
Ratio of net investment income
to average daily net assets
(d)......................... 6.56% 7.45%(e)
Portfolio turnover rate
(excluding short-term
securities)................. 10.0% --
<FN>
- ---------
(a) The inception of the portfolio was November 9, 1993. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $25,199 and $24,803 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been 1.56% and 2.37%,
respectively and the ratio of net investment income to average daily net
assets would have been 5.40% and 5.48%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
15
<PAGE>
MATURING GOVERNMENT BOND 2010 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
MAY 2,
YEAR ENDED 1994 (A) TO
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Net asset value, beginning of
period....................... $.910 $.962
----- ------
Income from investment
operations:
Net investment income..... .070 .049
Net gains or losses on
securities (both realized
and unrealized).......... .304 (.052)
----- ------
Total from investment
operations........... .374 (.003)
----- ------
Less distributions:
Dividends from net
investment income........ (.070) (.049)
Distributions from capital
gains.................... -- --
----- ------
Total distributions... (.070) (.049)
----- ------
Net asset value, end of
period....................... $1.214 $.910
----- ------
----- ------
Total return (b).............. 41.2% (.3)%(c)
Net assets, end of period (in
thousands)................... $1,384 $1,071
Ratio of expenses to average
daily net assets (d)......... .40% .40%(e)
Ratio of net investment income
to average daily net assets
(d).......................... 6.58% 7.79%(e)
Portfolio turnover rate
(excluding short-term
securities).................. -- 14.5%
<FN>
- ---------
(a) The inception of the portfolio was November 9, 1993. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $26,308 and $25,888 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been 2.68% and 4.01%,
respectively and the ratio of net investment income to average daily net
assets would have been 4.30% and 4.18%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
16
<PAGE>
VALUE STOCK PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
MAY 2,
YEAR ENDED 1994 (A) TO
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Net asset value, beginning of
period....................... $1.044 $1.010
----- ------
Income from investment
operations:
Net investment income..... .010 .008
Net gains or losses on
securities (both realized
and unrealized).......... .331 .038
----- ------
Total from investment
operations........... .341 .046
----- ------
Less distributions:
Dividends from net
investment income........ (.010) (.009)
Distributions from capital
gains.................... (.063) (.003)
----- ------
Total distributions... (.073) (.012)
----- ------
Net asset value, end of
period....................... $1.312 $1.044
----- ------
----- ------
Total return (b).............. 33.0% 4.6%(c)
Net assets, end of period (in
thousands)................... $31,825 $8,771
Ratio of expenses to average
daily net assets (d)......... .89% .90%(e)
Ratio of net investment income
to average daily net assets
(d).......................... 1.25% 2.07%(e)
Portfolio turnover rate
(excluding short-term
securities).................. 164.2% 49.5%
<FN>
- ---------
(a) The inception of the portfolio was January 18, 1994. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $11,610 and $22,503 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been .95% and 1.56%,
respectively, and the ratio of net investment income to average daily net
assets would have been 1.19% and 1.41%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
17
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE
DATA
- ------------------------------------
From time to time the Fund may publish advertisements
containing performance data relating to its Portfolios. In the case of the Money
Market Portfolio, the Fund will publish yield or effective yield quotations for
a seven-day or other specified period. In the case of Portfolios other than the
Money Market Portfolio, the Fund may publish yield quotations for a recent
30-day period. The Fund may also publish, for all Portfolios, cumulative total
return quotations for the period since shares of the Portfolio became available
for sale pursuant to the Fund's registration statement. All quotations of 30-day
yields and cumulative total returns will be accompanied by average annual total
return quotations for a one-year period and for the period since shares of the
Portfolio became available for sale pursuant to the Fund's registration
statement. Performance figures used by the Fund are based on historical
information of the Portfolios for specified periods, and the figures are not
intended to suggest that such performance will continue in the future. The
various performance figures used in Fund advertisements are summarized below.
More detailed information on the computations is set forth in the Statement of
Additional Information.
PERFORMANCE FIGURES OF THE FUND WILL NOT REFLECT CHARGES MADE PURSUANT TO THE
TERMS OF THE VARIABLE LIFE INSURANCE POLICIES AND VARIABLE ANNUITY CONTRACTS
FUNDED BY SEPARATE ACCOUNTS THAT INVEST IN THE FUND'S SHARES. FUND PERFORMANCE
INFORMATION WILL BE PRESENTED IN CONJUNCTION WITH PERFORMANCE INFORMATION ABOUT
THOSE POLICIES OR CONTRACTS. PURCHASERS OF VARIABLE CONTRACTS ISSUED BY
MINNESOTA MUTUAL SHOULD THEREFORE RECOGNIZE THAT THE YIELD, CUMULATIVE TOTAL
RETURN AND AVERAGE ANNUAL TOTAL RETURN ON THE SEPARATE ACCOUNT ASSETS RELATING
TO SUCH A CONTRACT WHICH ARE INVESTED IN SHARES OF ANY OF THE FUND'S PORTFOLIOS
WOULD BE LOWER THAN THE YIELD, CUMULATIVE TOTAL RETURN AND AVERAGE ANNUAL TOTAL
RETURN OF SUCH PORTFOLIO FOR THE SAME PERIOD.
MONEY MARKET PORTFOLIO YIELD. Yield quotations for the Money Market Portfolio
are based on the income generated by an investment in the portfolio over a
specified period, usually seven days. The figures are "annualized," that is, the
amount of income generated by the investment during the period is assumed to be
generated over a 52-week period and is shown as a percentage of the investment.
Effective yield quotations are calculated similarly, but when annualized the
income earned by an investment in the portfolio is assumed to be reinvested.
Effective yield quotations will be slightly higher than yield quotations because
of the compounding effect of this assumed reinvestment. The yield and effective
yield of the Money Market Portfolio for the seven-day period ended December 31,
1995 were 5.09% and 5.22%, respectively. (See also, "Performance Data" in the
Statement of Additional Information.)
YIELD QUOTATIONS FOR OTHER PORTFOLIOS. Yield figures may also be quoted for
Portfolios other than the Money Market Portfolio and the International Stock
Portfolio. Yield figures will always be based on a 30-day period and will be
determined by dividing the net investment income per share of the Portfolio
during the period by the net asset value per share on the last day of the
period. An annualized yield figure is computed on the assumption that net
investment income is earned and reinvested at a constant rate and annualized at
the end of a six-month period. For purposes of the computation, net investment
income is determined in accordance with rules prescribed by the Securities and
Exchange Commission, and it may differ from the actual net investment income
determined for the period under the Fund's accounting practices.
TOTAL RETURN FIGURES. Cumulative total return figures may also be quoted for
all Portfolios of the Fund. Cumulative total return is based on a hypothetical
$1,000 investment in the Portfolio at the beginning of the advertised period,
and is equal to the percentage change between the $1,000 net asset value of that
investment at the beginning of the period and the net asset value of that
investment at the end of the period with dividend and capital gain distributions
treated as reinvested.
All quotations of yields for Portfolios other than the Money Market Portfolio
and all quotations of cumulative total return figures will be accompanied by
average annual total return figures for one-year and five-year periods and for
the period since shares of the Portfolio became available pursuant to the Fund's
registration statement. Average annual total return figures will show for the
specified period the average annual rate of return required for an initial
investment of $1,000 to equal the redemption value of that investment at the end
of the period.
PREDICTABILITY OF RETURN. For each of the Maturing Government Bond
Portfolios, the Fund may calculate an anticipated growth rate (AGR) and an
anticipated value at maturity (AVM) on any day on which the Fund values its
securities. AGR is an estimate of the average annual total return that would be
experienced by an investment maintained in the Portfolio from the date of
initial purchase until the target maturity date, assuming no
18
<PAGE>
withdrawals or additional investments. AVM is the estimated value of such an
investment at the target maturity date. AGR and AVM, like the Portfolios'
historical total return data discussed above, do not reflect any loads or
contract charges deducted from payments or from separate account assets. Daily
calculations for each are necessary because (i) the AGR and AVM calculations
assume, among other things, an expense ratio and portfolio composition that
remains unchanged for the life of each such Portfolio to the target date at
maturity, and (ii) such calculations are therefore meaningful as a measure of
predictable return with respect to particular shares only if such shares are
held to the applicable target maturity date and only with respect to shares
purchased on the date of such calculations (the AGR and AVM applicable to shares
purchased on any other date may be materially different). Those assumptions can
only be hypothetical given that owners of shares have the option to purchase or
redeem those shares on any business day, and will receive dividend and capital
gain distributions through the receipt of additional shares. A number of factors
in addition to shareholder activity can cause a Maturing Government Bond
Portfolio's AGR and AVM to change from day to day. These include the adviser's
efforts to improve total return through market opportunities, transaction costs,
interest rate changes and other events that affect the market value of the
investments held in each Maturing Government Bond Portfolio. Despite these
factors, it is anticipated that if specific shares of a Maturing Government Bond
Portfolio are held to the applicable target maturity date, then the AGR and AVM
applicable to such shares (i.e., calculated as of the date of purchase of such
shares) will vary from the actual return experienced by such shares within a
narrow range.
ADDITIONAL PERFORMANCE INFORMATION. Further information about the performance
of the Fund is contained in the Fund's Annual Report to Shareholders, which may
be obtained without charge by writing the Fund at 400 Robert Street North, St.
Paul, Minnesota 55101-2098, or by calling (612) 298-3500.
- --------------------------------------------------------------------------------
THE FUND
- ------------------------------------
MIMLIC Series Fund, Inc., (the "Fund") is a diversified, open-end
management investment company incorporated under Minnesota law on February 21,
1985. The Minnesota Mutual Life Insurance Company ("Minnesota Mutual") has
established certain separate accounts for the purpose of issuing variable
annuity contracts and variable life insurance policies (collectively, the
"Contracts"). The Fund serves as the underlying investment medium for amounts
invested in the Contracts. The Fund may, however, be used for other purposes in
the future.
It is conceivable that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the Fund simultaneously. Although neither Minnesota Mutual nor the
Fund currently foresees any such disadvantages either to variable life insurance
policy owners or to variable annuity contract owners, the Fund's Board of
Directors intends to monitor events in order to identify any material conflicts
between such policy owners and contract owners and to determine what action, if
any, should be taken in response thereto. Such action could include the sale of
Fund shares by one or more of the separate accounts, which could have adverse
consequences. Material conflicts could result from, for example, (1) changes in
state insurance laws, (2) changes in Federal income tax laws, (3) changes in the
investment management of any of the Portfolios of the Fund, or (4) differences
in voting instructions between those given by policy owners and those given by
contract owners. The costs of resolving any such material conflicts will be
borne solely by Minnesota Mutual.
The Fund is a series company, which means that it consists of several separate
Portfolios, each with its own investment objectives. Currently, there are
fourteen such Portfolios: the Growth Portfolio, the Bond Portfolio, the Money
Market Portfolio, the Asset Allocation Portfolio, the Mortgage Securities
Portfolio, the Index 500 Portfolio, the Capital Appreciation Portfolio, the
International Stock Portfolio, the Small Company Portfolio, the Value Stock
Portfolio and four Maturing Government Bond Portfolios, maturing respectively in
1998, 2002, 2006 and 2010. Each Portfolio issues a separate class of the Fund's
common stock. The investment adviser of the Fund is MIMLIC Asset Management
Company, a Minnesota corporation ("MIMLIC Management"). MIMLIC Management has
entered into an investment sub-advisory agreement with Winslow Capital
Management, Inc. ("Winslow Management"), a Minnesota corporation with principal
offices in Minneapolis, Minnesota, under which Winslow Management serves as
investment sub-adviser to the Fund's Capital Appreciation Portfolio. MIMLIC
Management has also entered into an investment sub-advisory agreement with
Templeton Investment Counsel, Inc., a Florida corporation with principal offices
in Fort
19
<PAGE>
Lauderdale ("Templeton Counsel"), under which Templeton Counsel serves as
investment sub-adviser to the Fund's International Stock Portfolio.
Currently, Fund shares may be purchased only by Minnesota Mutual to fund the
Contracts. Minnesota Mutual is a mutual life insurance company which is
domiciled in Minnesota and authorized to do business in 49 states. Fund shares
are not offered directly to and may not be purchased directly by members of the
public. Consequently, the terms "shareholder" and "shareholders" in this
Prospectus refer to Minnesota Mutual.
The value of certain benefits under the Contracts will vary with the
investment performance of the Fund's Portfolios. Because contract owners will
allocate their investments among the Portfolios of the Fund, in response to or
in anticipation of changes in market or economic conditions, prospective
purchasers should carefully consider the information about the Fund and its
Portfolios presented in this Prospectus prior to purchasing such a Contract.
- --------------------------------------------------------------------------------
INVESTMENT
OBJECTIVES,
POLICIES AND RISKS
- ------------------------------------
Each Portfolio has a stated investment objective
which it pursues through separate investment
policies. The differences in objectives and policies among the Portfolios can be
expected to affect the return of each Portfolio and the degree of market and
financial risk to which each Portfolio is subject. Financial risk refers to the
ability of an issuer of a debt security to pay principal and interest on such
security and to the earning stability and overall financial soundness of an
issuer of an equity security. Market risk refers to the volatility of the
reaction of the price of a security to changes and conditions in the securities
markets in general and, with particular reference to debt securities, changes in
the overall level of interest rates.
Some debt securities may be purchased on a when-issued or forward commitment
basis, which means that it may take as long as 45 days after the purchase before
the securities are delivered to the Fund. Payment and interest terms, however,
are fixed at the time the purchaser enters into the commitment. The Fund does
not pay for the securities or start earning interest on them until the
contractual settlement date. When-issued securities are subject to market
fluctuations and they may affect the Fund's total assets the same as owned
securities.
The investment objective, certain policies and risks associated with each
Portfolio are as described below. The investment policies of the Fund set forth
in this Prospectus and in the Statement of Additional Information may be changed
without shareholder approval except that the investment objectives of a
Portfolio as set forth in this Prospectus are fundamental and may not be changed
without the approval of a majority of the outstanding voting securities of the
Portfolio.
- --------------------------------------------------------------------------------
GROWTH -
PORTFOLIO
The investment objective of the Growth Portfolio is to seek the
long-term accumulation of capital. Current income, while a factor in investment
selection, is a secondary objective. In pursuit of these objectives the Growth
Portfolio will follow a policy of investing primarily in common stocks and other
equity securities. Such investments involve greater investment risk than fixed
income securities.
The Portfolio's growth approach is based on sound fundamental investment
analysis in which individual stock selection is critical. Thus, the Portfolio's
holdings are selected on the basis of a fundamental analysis which seeks to
identify sound companies whose stock prices, in the opinion of MIMLIC
Management, do not reflect their long-term growth potential.
Generally, the Portfolio invests in companies with strong long-term outlooks.
These quality issues are emphasized as a way to protect against downside risk
inherent in the stock market. However, the Portfolio may also seek to achieve
its objective by investing in companies which, in MIMLIC Management's judgment,
have temporarily undervalued securities, or, because of new management, products
or markets or other factors, show promise of substantially improved results.
The assets of the Portfolio usually will be invested in a diversified
portfolio of equity securities, mainly common stocks, across all industry
sectors. Changes in investments will be made from time to time to take into
account changes in the outlook for particular industries or companies and in the
general level of common stock prices. The purchase of common stocks may occur in
rising or declining markets.
The Portfolio will typically maintain a fully invested position, but when
economic conditions or general levels of common stock prices are such that
investments of other types may be advantageous on the basis of combined
considerations of risk, income and appreciation, the Portfolio may temporarily
take
20
<PAGE>
a defensive position by investing a substantial portion of its assets in bonds,
notes or other evidences of indebtedness, including United States Government
securities, or may hold its assets in cash. Those investments may, or may not,
be convertible into stock. The Portfolio may also temporarily hold its assets in
cash or money market instruments pending investment in accordance with its
policies.
The Portfolio may invest up to 10% of the value of its total assets in
securities of foreign issuers which are not publicly traded in the United
States. (Securities of foreign issuers which are publicly traded in the United
States, usually in the form of sponsored American Depositary Receipts ("ADRs"),
are not subject to this 10% limitations.) Investing in securities of foreign
issuers may result in greater risk than that incurred in investing in securities
of domestic issuers. There is the possibility of expropriation, nationalization
or confiscatory taxation, taxation of income earned in foreign nations or other
taxes imposed with respect to investments in foreign nations; foreign exchange
controls (which may include suspension of the ability to transfer currency from
a given country), default in foreign government securities, political or social
instability or diplomatic developments which could affect investments in
securities of issuers in those nations. In addition, in many countries there is
less publicly available information about issuers than is available in reports
about companies in the United States. Foreign companies are not generally
subject to uniform accounting, auditing and financial reporting standards, and
auditing practices and requirements may not be comparable to those applicable to
United States companies. Further, the Portfolio may encounter difficulties in
pursuing (or be unable to pursue) legal remedies and in obtaining judgments in
foreign courts. Commission rates in foreign countries, which are sometimes fixed
rather than subject to negotiation as in the United States, are likely to be
higher. Further, the settlement period of securities transactions in foreign
markets may be longer than in domestic markets. In many foreign countries there
is less government supervision and regulation of business and industry
practices, stock exchanges, brokers and listed companies than in the United
States. The foreign securities markets of many of the countries in which the
Portfolio may invest may also be smaller, less liquid, and subject to greater
price volatility than those in the United States. Also, some countries may
withhold portions of interest, dividends and gains at the source. There are
further risk considerations, including possible losses through the holding of
securities in domestic and foreign custodial banks and depositories.
An ADR is sponsored if the original issuing company has selected a single U.S.
bank to serve as its U.S. depositary and transfer agent. This relationship
requires a deposit agreement which defines the rights and duties of both the
issuer and depositary. Companies that sponsor ADRs must also provide their ADR
investors with English translations of company information made public in their
own domiciled country. Sponsored ADR investors also generally have the same
voting rights as ordinary shareholders, barring any unusual circumstances. ADRs
which meet these requirements can be listed on U.S. stock exchanges. Unsponsored
ADRs are created at the initiative of a broker or bank reacting to demand for a
specific foreign stock. The broker or bank purchases the underlying shares and
deposits them in a depositary. Unsponsored shares issued after 1983 are not
eligible for U.S. stock exchange listings. Furthermore, they do not generally
include voting rights.
- --------------------------------------------------------------------------------
BOND -
PORTFOLIO
The investment objective of the Bond Portfolio is to seek as high a
level of long-term total rate of return as is consistent with prudent investment
risk. A secondary objective is to seek preservation of capital. In pursuit of
these objectives, the Bond Portfolio will follow a policy of investing primarily
in long-term, fixed-income, high-quality debt instruments. The value of debt
securities will tend to rise and fall inversely with the rise and fall of
interest rates.
The Fund anticipates that under normal circumstances at least 75% of the
Portfolio's assets, exclusive of cash items which may include commercial paper,
certificates of deposit and United States Treasury obligations not exceeding one
year in maturity, will be invested in one or more of the following types of
securities:
- - Corporate debt securities which at the time of purchase are rated within the
four highest grades assigned by Moody's, S&P or any other national rating
service. To the extent that the Portfolio invests in bonds in the lowest of
such four grades (i.e., in bonds rated BBB or Baa by S&P or Moody's,
respectively) it will be investing in bonds which may have speculative
characteristics. In addition, changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make
principal and interest
21
<PAGE>
payments in such bonds than is the case with higher grade bonds. If, after
acquisition, a bond is downgraded by the rating agencies to a rating lower
than BBB or Baa by S&P or Moody's, respectively, it is the Fund's general
policy to dispose of such downgraded securities.
- - Debt securities of, or guaranteed by, the United States Government, its
agencies or instrumentalities. (Purchases of United States Treasury
obligations of all maturities will be limited in accordance with the
diversification regulations issued under Section 817(h) of the Internal
Revenue Code.)
The balance of the Portfolio's assets, exclusive of cash items, may be
invested in other fixed income investments not described above including
corporate debt securities or preferred stocks which in either case may or may
not be convertible. It is not expected that the Portfolio will invest in common
stocks, rights to acquire common stocks or other equity securities, but it may
retain for reasonable periods of time up to five percent of its total assets in
common stocks acquired upon conversion of debt securities or preferred stocks or
upon exercise of warrants acquired with debt securities.
The Portfolio may purchase mortgage-backed securities issued by government
entities (some of which may be U.S. Government agency issued or guaranteed debt
securities of the types described above) and non-government entities such as
banks, mortgage lenders, or other financial institutions. A mortgage-backed
security may be an obligation of the issuer backed by a mortgage or pool of
mortgages or a direct interest in an underlying pool of mortgages. Some
mortgage-backed securities, such as collateralized mortgage obligations, make
payments of both principal and interest at a variety of intervals; others make
semiannual interest payments at a predetermined rate and repay principal at
maturity (like a typical bond). Mortgage-backed securities are based on
different types of mortgages including those on commercial real estate or
residential properties.
The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
government issues. Mortgage-backed securities are subject to prepayment risk.
Prepayment, which occurs when unscheduled or early payments are made on the
underlying mortgages, may shorten the effective maturities of these securities
and may lower their total returns.
The Portfolio may also invest in collateralized mortgage obligations ("CMOs")
of the type eligible for purchase by the Mortgage Securities Portfolio (see the
discussion of CMOs, and the risks associated therewith, under the caption
"Mortgage Securities Portfolio," below). The Bond Portfolio, however, will not
purchase "accrual" or "Z" bond types of CMOs (a CMO tranche which is not
entitled to receive cash payments until one or more other tranches have been
paid in full); inverse or reverse floating CMOs (a tranche of a CMO with a
coupon rate that moves in the reverse direction to an applicable interest rate
index); or "interest only" or "principal only" stripped mortgage-backed
securities.
The Portfolio may also purchase asset-backed securities, which usually
represent interests in pools of consumer loans (typically trade, credit card or
automobile receivables). The credit quality of most asset-backed securities
depends primarily on the credit quality of the assets underlying such
securities, how well the entity issuing the security is insulated from the
credit risk of the originator or any other affiliated entities, the quality of
the servicing of the receivables, and the amount and quality of any credit
support provided to the securities. The rate of principal payment on
asset-backed securities may depend on the rate of principal payments received on
the underlying assets which in turn may be affected by a variety of economic and
other factors. As a result, the yield on any asset-backed security may be
difficult to predict with precision and actual yield to maturity may be more or
less than the anticipated yield to maturity. Some asset-backed transactions are
structured with a "revolving period" during which the principal balance of the
asset-backed security is maintained at a fixed level, followed by a period of
rapid repayment. This structure is intended to insulate holders of the asset-
backed security from prepayment risk to a significant extent. Asset-backed
securities may be classified as pass-through certificates or collateralized
obligations.
Pass-through certificates are asset-backed securities which represent an
undivided fractional ownership interest in an underlying pool of assets.
Pass-through certificates usually provide for payments of principal and interest
received to be passed through to their holders, usually after deduction for
certain costs and expenses incurred in administering the pool. Because
pass-through
22
<PAGE>
certificates represent an ownership interest in the underlying assets, the
holders thereof bear directly the risk of any defaults by the obligors on the
underlying assets not covered by any credit support.
Asset-backed securities issued in the form of debt instruments, also known as
collateralized obligations, are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt. The assets collateralizing such asset-backed securities are
pledged to a trustee or custodian for the benefit of the holders thereof. Such
issuers generally hold no assets other than those underlying the asset-backed
securities and any credit support provided. As a result, although payments on
such asset-backed securities are obligations of the issuers, in the event of
defaults on the underlying assets not covered by any credit support, the issuing
entities are unlikely to have sufficient assets to satisfy their obligations on
the related asset-backed securities.
To lessen the effect of failures by obligors on underlying assets to make
payments, such securities may contain elements of credit support. Such credit
support falls into two classes: liquidity protection and protection against
ultimate default by an obligor on the underlying assets. Liquidity protection
refers to the provision of advances, generally by the entity administering the
pool of assets, to ensure that scheduled payments on the underlying pool are
made in a timely fashion. Protection against ultimate default ensures ultimate
payment of the obligations on at least a portion of the assets in the pool. Such
protection may be provided through guarantees, insurance policies or letters of
credit obtained from third parties, through various means of structuring the
transaction or through a combination of such approaches.
The Portfolio may invest in debt securities issued by Foreign governments and
companies, provided that such securities are U.S. dollar-denominated and
publicly-traded in the United States. Such securities do not present the same
currency risks as securities traded outside the United States and denominated in
a foreign currency. Investing in securities of foreign issuers may, nonetheless,
result in greater risk than that incurred in investing in securities of domestic
issuers. The obligations of foreign issuers may be affected by political or
economic instabilities. Financial information published by foreign companies may
be less reliable or complete than information disclosed by domestic companies
pursuant to United States Government securities laws, and may not have been
prepared in accordance with generally accepted account principles.
It is expected that the Bond Portfolio will invest in debt securities of
varying long-term maturities and from various industry classifications,
depending on MIMLIC Management's evaluation of current and anticipated market
conditions, as well as industry outlook and company operations. Yields on debt
securities depend upon a number of factors, including the size of a particular
offering, maturities and ratings of the obligations and general economic,
monetary and market conditions. The market value of debt instruments will vary
depending on their respective yields and, as a result, the net asset value of
the Bond Portfolio will change from time to time as the general level of
interest rates change.
When economic conditions or general levels of debt security prices are such
that investments of other types may be advantageous on the basis of combined
considerations of risk, income and appreciation, the Portfolio may invest a
substantial portion of its assets in intermediate-term or short-term debt
securities including cash and money market instruments. The Portfolio may
temporarily hold its assets in cash or money market instruments pending
investment in accordance with its policies.
The Bond Portfolio will engage in portfolio transactions when MIMLIC
Management believes that such transactions will help to achieve the Portfolio's
overall objectives. Portfolio securities may or may not be held to maturity.
- --------------------------------------------------------------------------------
MONEY MARKET -
PORTFOLIO
The investment objective of the Money Market Portfolio is to seek
maximum current income to the extent consistent with liquidity and the
preservation of capital. In pursuit of this objective the Money Market Portfolio
will follow a policy of investing in money market instruments and other debt
securities. The return produced by these securities will reflect fluctuations in
short-term interest rates.
The Portfolio is subject to the investment restrictions of Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "1940 Act") in addition to its
other policies and restrictions discussed below. Pursuant to Rule 2a-7, the
Portfolio is required to invest exclusively in securities that mature within 397
days from the date of purchase and to maintain an average weighted maturity of
not more than 90 days. Rule 2a-7 also requires that all investments by the
Portfolio be limited to United States dollar-denominated investments that (a)
present "minimal credit risk" and (b) are at the time of acquisition "Eligible
Securities." Eligible Securities include, among others, securities that are
23
<PAGE>
rated by two Nationally Recognized Statistical Rating Organizations ("NRSROs")
in one of the two highest categories for short-term debt obligations, such as
A-1 or A-2 by Standard & Poor's Corporation, or Prime-1 or Prime-2 by Moody's
Investors Service, Inc.
Rule 2a-7 also requires, among other things, that the Portfolio may not
invest, other than in United States "Government securities" (as defined in the
1940 Act), (a) more than 5% of its total assets in Second Tier Securities (i.e.,
Eligible Securities that are not rated by two NRSROs in the highest category
such as A-1 and Prime-1) and (b) more than the greater of 1% of its total assets
or $1,000,000 in Second Tier Securities of any one issuer. The Portfolio's
present practice is not to purchase any Second Tier Securities.
Subject to these limitations, the money market instruments held by the
Portfolio shall include:
- - Obligations issued or guaranteed as to principal or interest by the United
States Government, or any agency or authority controlled or supervised by and
acting as an instrumentality of the United States Government pursuant to
authority granted by Congress.
- - Obligations (including certificates of deposit and bankers acceptances) of
United States banks and savings and loan associations which at the date of
the investment have total assets (as of the date of their most recent annual
financial statements) of not less than $2 billion, United States dollar
denominated obligations of Canadian chartered banks, London branches of
United States banks, and United States branches or agencies of foreign banks
if such banks meet the above-stated qualifications, and certificates of
deposit of such banks and savings and loan associations regardless of size
provided that the amount of the deposit does not exceed $100,000 for any one
bank or savings and loan association and the payment of the principal is
insured by the Federal Deposit Insurance Corporation.
- - Obligations of the International Bank for Reconstruction and Development.
- - Commercial paper (including variable amount master demand notes) issued by
United States limited partnerships, corporations or foreign corporations
directly related to the United States corporations.
- - Other corporate debt obligations that at the time of issuance were long-term
securities, but that have remaining maturities of 397 calendar days or less.
- - Repurchase agreements with respect to any of the foregoing obligations.
By limiting the maturity of its investments as described above, the Portfolio
seeks to lessen the changes in the value of its assets caused by market factors.
The Money Market Portfolio intends to maintain a constant net asset value of
$1.00 per share, but there can be no assurance it will be able to do so.
The Portfolio, consistent with its investment objective, will attempt to
maximize yield through trading. This may involve selling instruments and
purchasing different instruments to take advantage of disparities of yields in
different segments of the high grade money market or among particular
instruments within the same segment of the market. Selling securities prior to
their maturity may result in the Portfolio's realizing gains and losses.
Repurchase agreements involve the risk that the seller may fail to repurchase
the underlying security. In such event, the Portfolio would attempt to dispose
of the underlying security in the market or would hold the underlying security
until maturity. However, in the case of a repurchase agreement construed by the
courts as a collateralized loan, the Portfolio may be subject to various delays
and risks of loss in attempting to dispose of the underlying security, including
(a) possible declines in the value of the underlying security during the period
while the Portfolio seeks to enforce its rights thereto, (b) possible reduced
levels of income and lack of access to income during this period and (c) expense
involved in the enforcement of the Portfolio's rights. The Board of Directors of
the Fund has an obligation to evaluate the creditworthiness of all entities that
enter into repurchase agreements with the Fund.
Obligations of Canadian chartered banks, London branches of United States
banks, and United States branches and agencies of foreign banks may involve
somewhat greater opportunity for income than the other money market instruments
in which the Portfolio invests, but may also involve investment risks in
addition to any risks associated with direct obligations of domestic banks.
These additional risks include future political and economic developments, the
possible imposition of withholding taxes on interest income payable on such
obligations, the possible seizure or nationalization of foreign deposits, the
possible establishment of exchange controls or the adoption of other
governmental restrictions, as well as market and other factors which may affect
the market for or the liquidity of such obligations. Generally, Canadian
chartered
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banks, London branches of United States banks, and United States branches and
agencies of foreign banks are subject to fewer United States regulatory
restrictions than those applicable to domestic banks, and London branches of
United States banks may be subject to less stringent reserve requirements than
domestic branches. Canadian chartered banks, United States branches and agencies
of foreign banks, and London branches of United States banks may provide less
public information than, and may not be subject to the same accounting, auditing
and financial record keeping standards as, domestic banks.
The Portfolio will not invest more than a total of 25% of its total assets in
obligations of Canadian chartered banks, London branches of United States banks,
and United States branches and agencies of foreign banks.
See Appendix A to this Prospectus for more information on certain of the
Fund's investment policies, including descriptions of money market obligations
and ratings.
- --------------------------------------------------------------------------------
ASSET ALLOCATION -
PORTFOLIO
The investment objective of the Asset Allocation Portfolio is to seek
as high a level of long-term total rate of return as is consistent with prudent
investment risk. In pursuit of this objective the Asset Allocation Portfolio
will invest in common stocks and other equity securities, bonds, mortgage
securities and money market instruments. The Asset Allocation Portfolio involves
the risks inherent in stocks and debt securities of varying maturities, and the
risk that the Portfolio may invest too much or too little of its assets in each
type of security at any particular time.
The Asset Allocation Portfolio may invest in the following types of money
market, debt and equity securities:
- - Money market instruments and other debt securities with maturities not
exceeding one year in which the Money Market Portfolio may invest.
- - Bonds and other debt securities, including mortgage-related securities, with
maturities generally exceeding one year in which the Bond and Mortgage
Securities Portfolios may invest.
- - Common stock and other equity securities in which the Growth, Index 500,
Capital Appreciation and Small Company Portfolios may invest.
Thus, with respect to equity securities, the Portfolio will attempt to achieve
long-term accumulation of capital. With respect to mortgage-related securities
and bonds, the Portfolio will attempt to provide as high a level of long-term
total rate of return as is consistent with prudent investment risk. A secondary
objective is to seek preservation of shareholder's capital. With respect to
money market securities, the Portfolio will attempt to achieve maximum current
income to the extent consistent with liquidity and preservation of capital.
The Portfolio will continuously adjust the mix of investments among the three
market sectors to capitalize on perceived variations in return potential
produced by the interaction of changing financial market and economic
conditions. No more than 75% of the Portfolio's assets may be invested in either
the common stock sector or the bond sector. Up to 100% of the Portfolio's assets
may be invested in money market instruments. No minimum percentage has been
established for any of the sectors. Major changes in investment mix may occur
several times within a year or over several years, depending upon market and
economic conditions.
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MORTGAGE SECURITIES -
PORTFOLIO
The investment objective of the Mortgage Securities Portfolio is to
seek a high level of current income consistent with prudent investment risk. In
pursuit of this objective the Mortgage Securities Portfolio will follow a policy
of investing primarily in a diversified portfolio of mortgage-related
securities. Prices of mortgage-related securities will tend to rise and fall
inversely with the rise and fall of the general level of interest rates.
The Fund anticipates that under normal circumstances at least 65% of the
Portfolio's assets will be invested in mortgage-related securities (except when
in a temporary defensive posture) of the following types:
- - Mortgage-related securities issued by United States Government owned or
sponsored corporations (purchases of these securities will be limited in
accordance with the diversification regulations for variable insurance
contracts issued under Section 817(h) of the Internal Revenue Code).
- - Mortgage-related securities rated A or better by Moody's or S&P or rated at a
comparable level by an independent publicly-recognized rating agency, or, if
not rated, are of equivalent investment quality as determined by MIMLIC
Management.
At times the Portfolio may invest in mortgage-related securities not meeting
the foregoing investment quality standards when deemed by MIMLIC Management to
be consistent with the
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Portfolio's objective of high current income to the extent consistent with
prudent investment risk; however, the Portfolio will not invest in mortgage-
related securities rated lower than BBB or Baa by S&P or Moody's, respectively,
and no such investments (i.e., investments in securities rated BBB or Baa) will
be made in excess of 20% of the value of the Portfolio's total assets. (Such
investments will be considered mortgage-related securities for purposes of the
policy that the Portfolio invest at least 65% of the value of its total assets
in mortgage-related securities.) To the extent that the Portfolio invests in
mortgage-related securities rated BBB or Baa by S&P or Moody's, respectively, it
will be investing in securities which may have speculative characteristics. In
addition, changes in economic conditions or other circumstances are more likely
to lead to a weakened capacity to make principal and interest payments in such
securities than is the case with higher grade securities. If, after acquisition,
a security is downgraded by the rating agencies to a rating lower than BBB or
Baa by S&P or Moody's, respectively, it is the Fund's general policy to dispose
of such downgraded securities. MIMLIC Management monitors continuously the
ratings of securities held by the Portfolio and the creditworthiness of their
issuers.
The Portfolio may invest up to 35% of the value of its total assets in the
following types of securities: (i) securities issued or guaranteed by the United
States Government, its agencies and instrumentalities, (ii) certificates of
deposit, bankers' acceptances and interest-bearing savings deposits of banks
having total assets of more than $1 billion and which are members of the Federal
Deposit Insurance Corporation, (iii) commercial paper of prime quality rated A-1
or higher by S&P or Prime-1 or higher by Moody's or, if not rated, issued by
companies which have an outstanding debt issue rated AA or higher by S&P or Aa
or higher by Moody's, and (iv) debt securities which, although not
mortgage-related securities, are rated A or better by Moody's or S&P or, if not
rated, are of equivalent investment quality as determined by MIMLIC Management;
such securities may entitle the holder to participate in income derived from
mortgaged properties or from sales thereof. When business or financial
conditions warrant, the Portfolio may take a temporary defensive position and
invest without limit in the foregoing securities.
Although some of the mortgage-related securities held by the Portfolio are
guaranteed by governmental and government-related organizations, the
governmental and government-related guarantors do not guarantee the Portfolio's
yield or the price of its shares. The net asset value of the Portfolio
fluctuates in response to changes in the general level of interest rates. When
interest rates rise, prices of fixed income securities held by the Portfolio
tend to fall and the rate of prepayment of mortgages underlying mortgage-related
securities tends to decline (lengthening the average maturity of the Portfolio).
In periods of declining interest rates, however, the prices of such securities
tend to rise and the rate of prepayment of mortgages underlying mortgage-related
securities tends to increase, and such prepayments must be reinvested at the
then prevailing lower interest rates. In addition, the net asset value of the
Portfolio may fluctuate in response to the market's perception of the
creditworthiness of the issuers of the Portfolio's securities. The availability
of interest-sensitive mortgage-related securities, in which the Portfolio
concentrates its investments, may be limited by government regulation or tax
policy. For example, action by the Board of Governors of the Federal Reserve
System to limit the growth of the nation's money supply may cause interest rates
to rise and thereby reduce the volume of new residential mortgages. Although
mortgage-related securities are generally supported by some form of government
or private guarantees and insurance, the Portfolio's shares are not guaranteed
and there can be no assurance that private insurers can meet their obligations.
The mortgage-related securities in which the Portfolio principally invests
provide funds for mortgage loans made to residential home buyers. These include
securities which represent interests in pools of mortgage loans made by lenders
such as savings and loan institutions, mortgage bankers, commercial banks and
others. Pools of mortgage loans are assembled for sale to investors (such as the
Fund) by various governmental, government-related and private organizations.
Interests in pools of mortgage-related securities differ from other forms of
debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal payments at maturity or specified call dates.
Instead, these securities usually provide a monthly payment which consists of
both interest and principal payments. In effect, these payments are a
"pass-through" of the monthly payments made by the individual borrower on their
residential or commercial mortgage loans, net of any fees paid, to the servicer,
the issuer or guarantor of such securities. Additional payments are caused by
repayments of principal resulting from the sale of
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<PAGE>
the underlying residential property, refinancing, curtailments (partial
prepayment) or foreclosure, net of fees or costs which may be incurred. Some
mortgage-related securities (such as securities issued by the Government
National Mortgage Association) are described as "modified pass-through." These
securities entitle the holder to receive all interest and principal payments
owed on the mortgage pool, net of certain fees, regardless of whether or not the
mortgagor actually makes the payment. For further information about the
characteristics of mortgage-related securities, see Appendix B to this
Prospectus.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential and commercial mortgage loans.
Such issuers may in addition be the originators and servicers of the underlying
mortgage loans as well as the guarantors of the mortgage-related securities.
Pools created by such nongovernmental issuers generally offer a higher rate of
interest than government and government-related pools because there are no
direct or indirect government guarantees of payments in the former pools.
However, payment of interest and principal of these pools is supported by
various forms of insurance, guarantees and credit enhancements, including
individual loan, title, pool and hazard insurance. The insurance and guarantees
are issued by government entities, private insurers, banks and other financial
institutions, and the mortgage poolers. Such insurance and guarantees and the
creditworthiness of the issuers thereof will be considered in determining
whether a mortgage-related security meets the Portfolio's investment quality
standards. There can be no assurance that the private insurers can meet their
obligations under the policies. The Portfolio may buy mortgage-related
securities without insurance or guarantees if through an examination of the loan
experience and practices of the poolers MIMLIC Management determines that the
securities meet the Portfolio's quality and liquidity standards.
The Portfolio may invest in collateralized mortgage obligations ("CMOs"), in
which several different series of bonds or certificates secured by pools of
mortgage-backed securities or mortgage loans, are issued. The series differ from
each other in terms of the priority rights which each has to receive cash flows
with the CMO from the underlying collateral. Each CMO series may also be issued
in multiple classes. Each class of a CMO series, often referred to as a
"tranche," is usually issued at a specific coupon rate and has a stated
maturity. The underlying security for the CMO may consist of mortgage-backed
securities issued or guaranteed by U.S. Government agencies or whole loans. CMOs
backed by U.S. Government agency securities retain the credit quality of such
agency securities and therefore present minimal credit risk. CMOs backed by
whole loans typically carry various forms of credit enhancements to protect
against credit losses and provide investment grade ratings. Unlike traditional
mortgage pass-through securities, which simply pass through interest and
principal on a pro rata basis as received, CMOs allocate the principal and
interest from the underlying mortgages among the several classes or tranches of
the CMO in many ways. All residential, and some commercial, mortgage-related
securities are subject to prepayment risk. A CMO does not eliminate that risk,
but, by establishing an order of priority among the various tranches for the
receipt and timing of principal payments, it can reallocate that risk among the
tranches. Therefore, the stream of payments received by a CMO bondholder may
differ dramatically from that received by an investor holding a traditional
pass-through security backed by the same collateral.
The primary risk associated with any mortgage security is the uncertainty of
the timing of cash flows; specifically, uncertainty about the possibility of
either the receipt of unanticipated principal in falling interest rate
environments (prepayment or call risk) or the failure to receive anticipated
principal in rising interest rate environments (extension risk). In a CMO, that
uncertainty may be allocated to a greater or lesser degree to specific tranches
depending on the relative cash flow priorities of those tranches. By
establishing priority rights to receive and reallocate payments of prepaid
principal, the higher priority tranches are able to offer better call protection
and extension protection relative to the lower priority classes in the same CMO.
For example, when insufficient principal is received to make scheduled principal
payments on all tranches, the higher priority tranches receive their scheduled
premium payments first and thus bear less extension risk than lower priority
tranches. Conversely, when principal is received in excess of scheduled
principal payments on all tranches (call risk), the lower priority tranches are
required to receive such excess principal until they are retired and thus bear
greater prepayment risk than the higher priority tranches. Therefore, depending
on the type of CMO purchased, an investment may be subject to a greater or
lesser risk of prepayment, and
27
<PAGE>
experience a greater or lesser volatility in average life, yield, duration and
price, than other types of mortgage-related securities. For that reason, and
except as otherwise provided (see the following paragraphs for a discussion of
the Portfolio's investment policies regarding CMOs known as "Z" bonds and
inverse or reverse floating CMOs), the Portfolio will not purchase a CMO tranche
unless, at the time of purchase, such tranche is part of a series with either
the first or second highest priority within the CMO to receive cash flows. These
types of CMOs tend to provide more predictable and stable returns, but carry
lower current yields, than other more volatile CMOs (which have a lower cash
flow priority). A CMO tranche may also have a coupon rate which resets
periodically at a specified increment over an index. These floating rate CMOs
are typically issued with lifetime caps on the level to which the floating
coupon rate is allowed to rise. The Portfolio may invest in such securities,
usually subject to a cap, provided such securities satisfy the same requirements
regarding cash flow priority applicable to the Portfolio's purchase of CMOs
generally. CMOs are typically traded over the counter rather than on centralized
exchanges. Because CMOs of the type purchased by the Portfolio tend to have
relatively more predictable yields and are relatively less volatile, they are
also generally more liquid than CMOs with greater prepayment risk and more
volatile performance profiles.
The Portfolio may also purchase CMOs known as "accrual" or "Z" bonds. An
accrual or Z bond holder is not entitled to receive cash payments until one or
more other classes of the CMO have been paid in full from payments on the
mortgage loans underlying the CMO. During the period in which cash payments are
not being made on the Z tranche, interest accrues on the Z tranche at a stated
rate, and this accrued interest is added to the amount of principal which is due
to the holder of the Z tranche. After the other classes have been paid in full,
cash payments are made on the Z tranche until its principal (including
previously accrued interest which was added to principal, as described above)
and accrued interest at the stated rate have been paid in full. Generally, the
date upon which cash payments begin to be made on a Z tranche depends on the
rate at which the mortgage loans underlying the CMO are prepaid, with a faster
prepayment rate resulting in an earlier commencement of cash payments on the Z
tranche. Like a zero coupon bond, during its accrual period the Z tranche of a
CMO has the advantage of eliminating the risk of reinvesting interest payments
at lower rates during a period of declining market interest rates. At the same
time, however, and also like a zero coupon bond, the market value of a Z tranche
can be expected to fluctuate more widely with changes in market interest rates
than would the market value of a tranche which pays interest currently. Changes
in market interest rates also can be expected to influence prepayment rates on
the mortgage loans underlying the CMO of which a Z tranche is a part. As noted
above, such changes in prepayment rates will affect the date at which cash
payments begin to be made on a Z tranche, and therefore also will influence its
market value. As an operating policy, the Portfolio will not purchase a Z bond
if the Portfolio's aggregate investment in Z bonds which are then still in their
accrual periods would exceed 20% of the Portfolio's total assets (Z bonds which
have begun to receive cash payments are not included for purposes of this 20%
limitation).
The Portfolio may also invest in inverse or reverse floating CMOs. Inverse or
reverse floating CMOs constitute a tranche of a CMO with a coupon rate that
moves in the reverse direction to an applicable index. Accordingly, the coupon
rate will increase as interest rates decrease. The Portfolio would be adversely
affected, however, by the purchase of such CMOs in the event of an increase in
interest rates since the coupon rate will decrease as interest rates increase,
and, like other mortgage-related securities, the value will decrease as interest
rates increase. Inverse or reverse floating rate CMOs are typically more
volatile than fixed or floating rate tranches of CMOs, and usually carry a lower
cash flow priority. As an operating policy, the Portfolio will treat inverse
floating rate CMOs as illiquid and, therefore, will limit its investments in
such securities, together with all other illiquid securities, to 15% of the
Portfolio's net assets.
The Portfolio may purchase stripped mortgage-backed securities, which
represent undivided ownership interests in a pool of mortgages, the cash flow of
which has been separated into its interest and principal components. "IOs"
(interest only securities) receive the interest portion of the cash flow while
"POs" (principal only securities) receive the principal portion. Stripped
mortgage-backed securities may be issued by U.S. Government agencies or by
private issuers. As interest rates rise and fall, the value of IOs tends to move
in the same direction as interest rates, unlike other mortgage-backed securities
(which tend to move in the opposite direction compared to interest rates). Under
the Internal Revenue Code of 1986, as
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<PAGE>
amended, POs may generate taxable income from the current accrual of original
issue discount, without a corresponding distribution of cash to the Portfolio.
The cash flows and yields on standard IO and PO classes are extremely
sensitive to the rate of principal payments (including prepayments) on the
related underlying mortgage assets. For example, a rapid or slow rate of
principal payments may have a material adverse effect on the performance and
prices of IOs or POs, respectively. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, an investor may fail to
recoup fully its initial investment in an IO class of a stripped mortgage-backed
security, even if the IO class is rated AAA or Aaa or is derived from a full
faith and credit obligation (i.e., a GNMA). Conversely, if the underlying
mortgage assets experience slower than anticipated prepayments of principal, the
price on a PO class will be affected more severely than would be the case with a
traditional mortgage-backed security, but unlike IOs, an investor will
eventually recoup fully its initial investment provided no default of the
guarantor occurs. As an operating policy the Portfolio will treat all IOs and
POs as illiquid securities. Therefore, the Portfolio will limit its investments
in IOs and POs, together with all other illiquid securities, to 15% of the
Portfolio's net assets. See "Investment Restrictions."
- --------------------------------------------------------------------------------
INDEX 500 -
PORTFOLIO
The investment objective of the Index 500 Portfolio is to seek
investment results that correspond generally to the price and yield performance
of the common stocks included in the Standard & Poor's Corporation 500 Composite
Stock Price Index (the "Index"). The Index is an unmanaged index of common
stocks comprised of 500 industrial, financial, utility and transportation
companies. It is designed to provide an economical and convenient means of
maintaining a broad position in the equity market as part of an overall
investment strategy. All common stocks, including those in the Index, involve
greater investment risk than debt securities. The fact that a stock has been
included in the Index affords no assurance against declines in the price or
yield performance of that stock. "Standard & Poor's-Registered Trademark-",
"S&P-Registered Trademark-", "S&P 500-Registered Trademark-", "Standard & Poor's
500-Registered Trademark-", and "500" are trademarks of McGraw-Hill, Inc. The
Index 500 Portfolio and the Contracts are not sponsored, endorsed, sold or
promoted by Standard & Poor's Corporation, nor does Standard & Poor's
Corporation make any representation regarding the advisability of investing in
the Portfolio or in the Contracts.
The Portfolio will at all times invest at least 75%, and may invest up to
100%, of its assets in common stocks included in the Index. There is no minimum
or maximum number of stocks included in the Index which the Portfolio must hold.
Under normal circumstances it is expected that the Portfolio will hold between
200-450 different stocks included in the Index.
The Portfolio uses the Index as the standard performance comparison because it
represents over 70% of the total market value of all common stocks, is well
known to investors, and in the opinion of MIMLIC Management is representative of
the performance of publicly traded common stocks. The Index is composed of 500
selected common stocks, most of which are listed on the New York Stock Exchange.
Inclusion of a stock in the Index in no way implies an opinion by Standard &
Poor's Corporation as to its attractiveness as an investment.
The method used to select investments for the Portfolio involves investing
primarily in those stocks in the Index having the highest statistical weightings
in the Index. Stocks in the Index are ranked in accordance with their
statistical weightings from highest to lowest. The Portfolio will invest in all
of the stocks above a specified level in the ranking in approximately the same
proportion as the weightings of those stocks in the Index. However, the
Portfolio will not invest in all of the stocks below the specified level in the
ranking, but rather will invest only in those stocks, and in amounts, as MIMLIC
Management determines to be necessary or appropriate for the Portfolio to
approximate the performance of the Index. To assist in such determination MIMLIC
Management has entered into an agreement with Wilshire Associates which permits
MIMLIC Management to use Wilshire Associates' proprietary index fund statistical
sampling technique. The Portfolio's ability to duplicate the performance of the
Index will depend to some extent, however, on the size and timing of cash flows
into or out of the Portfolio. Investment changes to accommodate these cash flows
will be made to maintain the similarity of the Portfolio's holdings to the Index
to the maximum practicable extent.
MIMLIC Management monitors the tracking accuracy of the Portfolio to the Index
by comparing the weightings of securities in the Portfolio to that of the Index.
A difference between the two results in a deviation error in the Portfolio's
composition. MIMLIC Management anticipates that the
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<PAGE>
deviation in each sector of the Portfolio will not exceed .14%. The amount of
the Portfolio's deviation is reviewed at least weekly and more frequently if
such a review is indicated by significant cash balance changes, market
conditions or changes in the composition of the Index. If deviation accuracy is
not maintained, the Portfolio will rebalance its composition by selecting
securities which, in the opinion of MIMLIC Management, will provide a more
representative sampling of the capitalization of the securities in the Index as
a whole or a more representative sampling of the sector diversification in the
Index. This rebalancing may be accomplished by either a purchase or sale of
securities and is based upon an analysis of the position of the Portfolio with
respect to securities held by it, the number of securities held, the industrial
sectors represented and its current cash balance.
Economic, financial, or market analysis will not be used in selecting
investments for the Portfolio, nor will adverse financial condition of a company
necessarily result in the sale of the company's stock by the Portfolio. However,
the Portfolio reserves the right to sell a stock held if MIMLIC Management
determines that the investment has been impaired substantially by the financial
condition of or extraordinary events involving the stock's issuer.
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CAPITAL APPRECIATION -
PORTFOLIO
The investment objective of the Capital Appreciation Portfolio is to
seek growth of capital. Investments will be made based upon their potential for
capital appreciation. Therefore, current income will be incidental to the
objective of capital growth. Because of the market risks inherent in any equity
investment, the selection of securities on the basis of their appreciation
possibilities cannot ensure against possible loss in value, and there is of
course no assurance that the Portfolio's investment objective will be met.
Within this basic framework, the policy of the Portfolio is to invest in any
companies and industries and in any types of equity securities which are
believed to offer possibilities for capital appreciation. Investments may be
made in well-known and established companies, as well as in newer and relatively
unseasoned companies. Critical factors considered in the selection of securities
include the early recognition of trends in corporate profits, the values of
individual securities relative to other investment alternatives, the economic
and political outlook, and management capabilities.
It is the policy of the Portfolio to invest principally in equity securities
(common stocks, securities convertible into common stocks or rights or warrants
to subscribe for or purchase common stocks). When business or financial
conditions warrant, a more defensive position may be assumed and the Portfolio
may invest in short-term, fixed-income securities or preferred stocks or hold
its assets in cash. Investments generally will not be made on the basis of
market timing techniques, rather it is anticipated that the Portfolio will be
relatively fully invested at most times.
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INTERNATIONAL STOCK -
PORTFOLIO
The investment objective of the International Stock Portfolio is
long-term capital growth. In pursuit of this objective the International Stock
Portfolio will follow a policy of investing in stocks issued by companies, large
and small, and debt obligations of companies and governments outside the United
States. Current income will be incidental to the objective of capital growth.
In pursuit of its investment objective, the Portfolio will normally maintain
at least 65% of its assets in common and preferred stocks. There is no
limitation on the percentage of the Portfolio's assets that may be invested in
any one country although the Portfolio will maintain an exposure to the equities
markets in at least three countries under normal circumstances.
The Portfolio has a flexible investment policy. The exercise of this flexible
policy may include decisions to purchase securities with substantial risk
characteristics and other decisions such as changing the emphasis on investments
from one nation to another and from one type of security to another. Some of
these decisions may later prove profitable and others may not. No assurance can
be given that profits, if any, will exceed losses.
Whenever, in the judgment of Templeton Counsel, market or economic conditions
warrant, the Portfolio may, for temporary defensive purposes, invest without
limit in U.S. Government securities, bank time deposits in the currency of any
major nation and commercial paper meeting the quality ratings set forth herein
and purchase from banks or broker-dealers Canadian or U.S. Government securities
with a simultaneous agreement by the seller to repurchase them within no more
than seven days at the original purchase price plus accrued interest.
The Portfolio is authorized to invest in debt securities that are rated BBB or
higher by Standard & Poor's Corporation ("S&P") and Baa or higher by Moody's
Investors Service, Inc.
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<PAGE>
("Moody's") or, if unrated, are of equivalent investment quality as determined
by Templeton Counsel.
The Portfolio may invest for defensive purposes in commercial paper of U.S.
issuers which, at the date of investment, must be rated A-1 by Standard & Poor's
Corporation ("S&P") or Prime-1 by Moody's Investors Service, Inc. ("Moody's")
or, if not rated, be issued by a company which at the date of investment has an
outstanding debt issue rated AAA or AA by S&P or Aaa or Aa by Moody's.
Contract owners should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in the Portfolio,
nor can there be any assurance that the Portfolio's investment objective will be
attained. The Portfolio is designed for investors seeking international
diversification.
The Portfolio has the right to purchase securities in any foreign country,
developed or underdeveloped. Investors should consider carefully the substantial
risks involved in investing in securities issued by companies and governments of
foreign nations, which are in addition to the usual risks inherent in domestic
investments. There is the possibility of expropriation, nationalization or
confiscatory taxation, taxation of income earned in foreign nations or other
taxes imposed with respect to investments in foreign nations; foreign exchange
controls (which may include suspension of the ability to transfer currency from
a given country), default in foreign government securities, political or social
instability or diplomatic developments which could affect investments in
securities of issuers in those nations. In addition, in many countries there is
less publicly available information about issuers than is available in reports
about companies in the United States. Foreign companies are not generally
subject to uniform accounting, auditing and financial reporting standards, and
auditing practices and requirements may not be comparable to those applicable to
United States companies. Further, the Portfolio may encounter difficulties or be
unable to pursue legal remedies and obtain judgments in foreign courts.
Commission rates in foreign countries, which are sometimes fixed rather than
subject to negotiation as in the United States, are likely to be higher.
Further, the settlement period of securities transactions in foreign markets may
be longer than in domestic markets. In many foreign countries there is less
government supervision and regulation of business and industry practices, stock
exchanges, brokers and listed companies than in the United States. The foreign
securities markets of many of the countries in which the Portfolio may invest
may also be smaller, less liquid, and subject to greater price volatility than
those in the United States. Also, some countries may withhold portions of
interest, dividends and gains at the source. There are further risk
considerations, including possible losses through the holding of securities in
domestic and foreign custodial banks and depositories. The Portfolio may invest
in Eastern European countries, which involves special risks that are described
herein.
Certain of the recent political and economic developments in Eastern Europe,
including the introduction of aspects of a market economy in certain Eastern
European countries, are related to developments in what was formerly known as
the Soviet Union. Trends in Eastern Europe that may be considered favorable for
achievement of the Portfolio's investment objectives may be adversely affected
by political or social developments in the Soviet Union. So long as the
centralist political powers continue to exercise a significant or, in some
countries, dominant role in Eastern European countries, investments in such
countries will involve risks of nationalization, expropriation and confiscatory
taxation. The communist governments of a number of Eastern European countries
expropriated large amounts of private property in the past, in many cases
without adequate compensation, and there can be no assurance that such
expropriation will not occur in the future. In the event of such expropriation,
the Portfolio could lose a substantial portion of any investments it has made in
the affected countries. Further, no accounting standards exist in Eastern
European countries. Finally, even though certain Eastern European currencies may
be convertible into U.S. dollars, the conversion rates may be artificial to the
actual market values and may be adverse to the Portfolio's contract owners.
The Portfolio usually effects currency exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign exchange market. However,
some price spread on currency exchange will be incurred when the Portfolio
converts assets from one currency to another. Further, the Portfolio may be
affected either unfavorably or favorably by fluctuations in the relative rates
of exchange between the currencies of different nations.
The Portfolio may buy and sell index futures contracts with respect to any
non-U.S. stock index. The Portfolio may invest in index futures contracts for
hedging purposes only and not for speculation. A Portfolio may engage in such
transactions only to the
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extent that the total contract value of the futures contracts do not exceed 5%
of the Portfolio's total assets at the time when such contracts are entered
into. Successful use of stock index futures is subject to the ability of
Templeton Counsel to predict correctly movements in the direction of the stock
markets. No assurance can be given that Templeton Counsel's judgment in this
respect will be correct.
A stock index futures contract is a contract to buy or sell units of a stock
index at a specified future date at a price agreed upon when the contract is
made. The value of a unit is the current value of the stock index. During or in
anticipation of a period of market appreciation, the Portfolio may enter into a
"long hedge" of common stock which it proposes to add to its portfolio by
purchasing stock index futures for the purpose of reducing the effective
purchase price of such common stock. To the extent that the securities which the
Portfolio proposes to purchase increase in value in correlation with the stock
index contracts, the purchase of futures contracts on that index would result in
gains to the Portfolio which could be offset against rising prices of such
common stock. During or in anticipation of a period of market decline, the
Portfolio may "hedge" common stock in its portfolio by selling stock index
futures for the purpose of limiting the exposure of its portfolio to such
decline. To the extent that a portfolio of securities decreases in value in
relation with a given stock index, the sale of futures contracts on that index
could substantially reduce the risk to the portfolio of a market decline and, by
so doing, provide an alternative to the liquidation of securities positions in
the portfolio with resultant transaction costs.
A purchase or sale of a futures contract may result in losses in excess of the
amount invested. There can be significant differences between the securities and
futures markets that could result in an imperfect correlation between the
markets, causing a given hedge not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances such as variations in
speculative market demand for futures, including technical influences in futures
trading, and differences between the financial instruments being hedged and the
instruments underlying the standard contracts available for trading in such
respects as interest rate levels, maturities, and creditworthiness of issuers. A
decision as to whether, when, and how to hedge involves the exercise of skill
and judgment, and even a well-conceived hedge may be unsuccessful to some degree
because of market behavior or unexpected interest rate trends.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of the current trading
session. Once the daily limit has been reached in a futures contract subject to
the limit, no more trades may be made on that day at a price beyond that limit.
The daily limit governs only price movements during a particular trading day
and, therefore, does not limit potential losses because the limit may work to
prevent the liquidation of unfavorable positions. For example, futures prices
have occasionally moved to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of positions
and subjecting some holders of futures contracts to substantial losses.
There can be no assurance that a liquid market will exist at a time when the
Portfolio seeks to close out a futures position, and it would remain obligated
to meet margin requirements until the position is closed. The Portfolio intends
to purchase or sell futures only on exchanges or boards of trade where there
appears to be an active secondary market, but there is no assurance that a
liquid secondary market will exist for any particular contract or at any
particular time. In addition, many of the futures contracts available may be
relatively new instruments without a significant trading history. As a result,
there can be no assurance that an active secondary market will develop or
continue to exist.
Use of stock index futures for hedging may involve risks because of imperfect
correlations between movements in the prices of the stock index futures on the
one hand and movements in the prices of the securities being hedged or of the
underlying stock index on the other. Successful use of stock index futures by
the Portfolio for hedging purposes also depends upon Templeton Counsel's ability
to predict correctly movements in the direction of the market, as to which no
assurance can be given.
Warrants with cash extractions are permitted and may be used as investment
alternatives to equity shares. A warrant with a cash extraction consists of one
warrant and cash with a current value that closely approximates the current
value of an equivalent number of shares that would be delivered if the warrant
were exercised. These investment instruments may (1) provide attractive cash
yields and (2) minimize capital loss risk. Alternatively, perfect replication of
underlying share price movements may be hindered by warrant premiums
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which occur because shorter-term investors value the leveraging power of naked
warrants. Given these circumstances, capital gains potential of warrants with
cash extractions may be less than that of underlying shares.
The International Stock Portfolio has authority to deal in forward foreign
exchange contracts between currencies of the different countries in which the
Portfolio will invest as a hedge against possible variations in the foreign
exchange rate between these currencies. This is accomplished through contractual
agreements to purchase or sell a specified currency at a specified future date
and price set at the time of the contract. The Portfolio's dealings in forward
foreign exchange contracts will be limited to hedging involving either specific
transactions or portfolio positions. Transaction hedging is the purchase or sale
of forward foreign currency with respect to specific receivables or payables of
the Portfolio arising from the purchase and sale of portfolio securities, the
sale and redemption of shares of the Portfolio, or the payment of dividends and
distributions by the Portfolio. Position hedging is the sale of forward foreign
exchange contracts with respect to portfolio security positions denominated or
quoted in such foreign currency. The Portfolio will not engage in naked forward
foreign exchange contracts.
In addition, when Templeton Counsel believes that the currency of a particular
foreign country may suffer or enjoy a substantial movement against another
currency, it may enter into a forward contract to sell or buy the amount of the
former foreign currency, approximating the value of some or all of the
Portfolio's securities denominated in such foreign currency. The projection of
short-term currency market movement is extremely difficult, and the successful
execution of a short-term hedging strategy is highly uncertain.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of the contract. Accordingly, it may be
necessary for the Portfolio to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Portfolio is obligated
to deliver and if a decision is made to sell the security and make delivery of
the foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security if
its market value exceeds the amount of foreign currency the Portfolio is
obligated to deliver.
If the Portfolio retains the portfolio security and engages in an offsetting
transaction, the Portfolio will incur a gain or a loss to the extent that there
has been movement in forward contract prices. If the Portfolio engages in an
offsetting transaction, it may subsequently enter into a new forward contract to
sell the foreign currency. Should forward prices decline during the period
between the Portfolio entering into a forward contract for the sale of a foreign
currency and the date it enters into an offsetting contract for the purchase of
the foreign currency, the Portfolio will realize a gain to the extent the price
of the currency it has agreed to sell exceeds the price of the currency it has
agreed to purchase. Should forward prices increase, the Portfolio will suffer a
loss to the extent the price of the currency it has agreed to purchase exceeds
the price of the currency it has agreed to sell.
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SMALL COMPANY -
PORTFOLIO
The investment objective of the Small Company Portfolio is to seek
the long-term accumulation of capital. In pursuit of this objective, the Small
Company Portfolio will follow a policy of investing primarily in common and
preferred stocks issued by small companies, defined in terms of either market
capitalization or gross revenues. Investments in small companies usually involve
greater investment risks than fixed income securities or corporate equity
securities generally. Dividend income will be incidental to the investment
objective for this Portfolio.
Under normal circumstances, at least 65% of the Small Company Portfolio's
assets will be invested in small companies. Such companies may encompass
well-known and established companies as well as newer and relatively unknown
companies. Small companies will typically have a market capitalization of less
than $1.5 billion or annual gross revenues of less than $1.5 billion.
Market capitalization is the term which refers to the total market value of a
company's outstanding shares of common stock. Application of the market
capitalization or gross revenue tests will be made only at the time that the
Portfolio's initial position in the company is taken. Thus, for purposes of the
65% test any company deemed to be a small company at the time of the Portfolio's
initial position therein will be treated as a small company, regardless of
subsequent developments, so long as the Portfolio maintains a position in the
company.
Small companies may be in a relatively early stage of development or may
produce goods and services which have favorable prospects for growth due to
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increasing demand or developing markets. Frequently, such companies have a small
management group and single product or product-line expertise that may result in
an enhanced entrepreneurial spirit and greater focus which allow such firms to
be successful. Management believes that such companies may develop into
significant business enterprises and that an investment in such companies offers
a greater opportunity for capital appreciation than an investment in larger more
established entities. However, small companies frequently retain a large part of
their earnings for research, development and investment in capital assets, so
that the prospects for immediate dividend income are limited.
Investments in small companies involve greater risks than equity securities
generally due to their small size and the fact that they may have limited
product lines, less access to the financial market for additional corporate
financings or less management depth. In addition, many of the securities of
these firms trade less frequently and in lower volumes than do securities issued
by larger firms. The result is that the short-term volatility of the prices of
those securities is greater than the prices of larger, more established
companies which are more widely held in the market. The securities of small
companies may also be more sensitive to market changes generally than the
securities of large companies.
While historically securities issued by smaller capitalization companies have
produced better market results than the securities of larger issuers, there is
no assurance that they will continue to do so or that the Portfolio will invest
specifically in those companies which produce those results. Because of the
risks involved, the Small Company Portfolio is not intended as a complete
investment program.
From time to time, the Portfolio will also invest a portion of its assets in
stocks with larger market capitalization whose long-term appreciation potential
is believed by the adviser to be well above average.
The Portfolio may invest up to 10% of the value of its total assets in
securities of foreign issuers which are not publicly traded in the United
States. (Securities of foreign issuers which are publicly traded in the United
States, usually in the form of sponsored American Depositary Receipts ("ADRs"),
are not subject to this 10% limitation.) See the discussion of foreign
securities and ADRs, and the risks of investing therein, under the caption
"Growth Portfolio" above.
The Portfolio will typically maintain a fully invested position, but when
economic conditions or general levels of common stock prices are such that
investments of other types may be advantageous on the basis of combined
considerations of risk, income and appreciation, the Portfolio may temporarily
take a defensive position by investing a substantial portion of its assets in
bonds, notes or other evidences of indebtedness, including United States
Government securities, or may hold its assets in cash. Those investments may, or
may not, be convertible into stock. The Portfolio may also temporarily hold its
assets in cash or money market instruments pending investment in accordance with
its policies.
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VALUE STOCK -
PORTFOLIO
The objective of the Value Stock Portfolio is to seek the long-term
accumulation of capital. In pursuit of this objective, the Value Stock Portfolio
will follow a policy of investing primarily in the equity securities of
companies which, in the opinion of the adviser, have market values which appear
low relative to their underlying value or future earnings and growth potential.
As it is anticipated that the Portfolio will consist in large part of
dividend-paying common stocks, the production of income will be a secondary
objective of the Portfolio.
The Portfolio will primarily purchase securities of companies that could be
described as follows: (a) companies whose securities are selling at low market
valuations of assets relative to the securities markets in general, or companies
that may currently be earning a very low return on assets but which have the
potential to earn higher returns; (b) companies whose securities MIMLIC
Management believes are undervalued in relation to their potential for growth in
earnings and book value; or (c) companies which have recently changed management
or control and have the potential to achieve sharply improved earnings. MIMLIC
Management may give emphasis on securities of companies that may be temporarily
out of favor or whose value is not yet recognized by the market.
Tests applied by the adviser to measure the value of securities will include
their price/earnings ratio, price/book ratio, price to cash flow ratio and
yield. A price/earnings ratio is the price of a share of stock divided by its
earnings per share and it is a measure of the market price of the security
relative to its earnings per share. A price/book ratio is the price of a share
of stock divided by its book value per share and it is a measure of the market
price of the security relative to its book value per share. A price to cash flow
ratio is the price of a share of stock divided by
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the firm's net income after taxes, plus depreciation and other non-cash
expenses, expressed on a per share basis. Yield is the annual dividend of a
share of stock divided by its market price. Stocks will be selected by the
adviser using statistical measures of relative value. Returns on such stocks are
likely to be influenced by the recognition of their undervaluation by other
investors and the market. Under most circumstances, if MIMLIC Management
determines that a stock has reached an over-valued position, it may be sold and
replaced by securities which are deemed to be undervalued in the marketplace.
The Portfolio's investments will typically be characterized by the purchase of
securities with lower price to earnings ratios, lower price to cash flow ratios
and/or price to book value ratios relative to the equity markets in general.
This approach may be considered to differ from a growth approach which would
consider the purchase of securities with an anticipated above-average earnings
growth potential over time. This distinction between these two approaches to
equity investing is important because historically there are periods in which
either growth or value investing may be successful approaches to total return in
the equity markets.
The Portfolio may invest up to 10% of the value of its total assets in
securities of foreign issuers which are not publicly traded in the United
States. (Securities of foreign issuers which are publicly traded in the United
States, usually in the form of sponsored American Depositary Receipts ("ADRs"),
are not subject to this 10% limitation.) See the discussion of foreign
securities and ADRs, and the risks of investing therein, under the caption
"Growth Portfolio" above.
The Value Stock Portfolio will ordinarily invest at least 65% of the value of
its total assets in common stocks with the characteristics described above. The
balance of its assets may be invested in other equity securities or U.S.
Government securities or may be held in cash or cash equivalents. However, the
Portfolio may temporarily take a defensive position by investing a substantial
portion of its assets in bonds, notes or other evidences of indebtedness,
including United States Government securities, or may hold its assets in cash.
Those investments may, or may not, be convertible into stock. The Portfolio may
also temporarily hold its assets in cash or money market instruments pending
investments in accordance with its policies.
The Portfolio will invest primarily in stocks, but it also has the ability to
purchase securities, including debt obligations, convertible into common stock
and which may produce capital appreciation. Securities that meet the criteria of
the Portfolio may not be popular during certain market cycles. Securities held
by the Portfolio may experience less volatile price changes during certain
market rallies or market downturns than the fluctuations in the market generally
as evidenced by common stock indices.
The Portfolio may invest in debt or preferred equity securities convertible
into or exchangeable for equity securities. Traditionally, convertible
securities have paid dividends or interest at rates higher than common stocks
but lower than non-convertible securities. They generally participate in the
appreciation or depreciation of the underlying stock into which they are
convertible, but to a lesser degree. The total return and yield of lower quality
(high yield/high risk) convertible bonds can be expected to fluctuate more than
the total return and yield of higher quality, shorter-term bonds, but not as
much as common stocks. The Portfolio will limit its purchase of convertible debt
securities to those that, at the time of purchase, are rated at least B- by S&P
or B3 by Moody's, or if not rated by S&P or Moody's, are of equivalent
investment quality as determined by MIMLIC Management. Debt securities rated
below the four highest categories (i.e., below BBB) are not considered
"investment grade" obligations. These securities have speculative
characteristics and present more credit risk than investment grade obligations.
Bonds rated below BBB are regarded as predominately speculative with respect to
the issuer's continuing ability to meet principal and interest payments. As an
operating policy, the Portfolio will not purchase a non-investment grade
convertible debt security if immediately after such purchase the Portfolio would
have more than 10% of its total assets invested in such securities. See Appendix
I in the Statement of Additional Information for a description of the ratings
used by S&P and Moody's.
The market value of debt securities generally varies in response to changes in
interest rates and the financial condition of each issuer. During periods of
declining interest rates, the value of debt securities generally increases.
Conversely, during periods of rising interest rates, the value of such
securities generally declines. These changes in market value will be reflected
in the Portfolio's net asset value. Although they may offer higher yields than
do higher rated securities, low rated (i.e., below BBB) and unrated debt
securities generally involve greater volatility of price and risk of principal
and income, including the possibility of default by, or bankruptcy of, the
issuers of the securities. In
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addition, the markets in which low rated and unrated debt securities are traded
are more limited than those in which higher rated securities are traded. The
existence of limited markets for particular securities may diminish the
Portfolio's ability to sell the securities at fair value either to meet
redemption requests or to respond to changes in the economy or in the financial
markets and could adversely affect and cause fluctuations in the daily net asset
value of the Portfolio's shares.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low rated debt
securities, especially in a thinly traded market. Analysis of the
creditworthiness of issuers of low rated debt securities may be more complex
than for issuers of higher rated securities, and the ability of the Portfolio to
achieve its investment objective may, to the extent of investment in low rated
debt securities, be more dependent upon such creditworthiness analysis than
would be the case if the Portfolio were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities.
The prices of low rated debt securities have been found to be less sensitive to
interest rate changes than higher rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. A projection of
an economic downturn or of a period of rising interest rates, for example, could
cause a decline in low rated debt securities prices because the advent of a
recession could lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If the issuer of low
rated debt securities defaults, the Portfolio may incur additional expenses to
seek recovery. The low rated bond market is relatively new, and many of the
outstanding low rated bonds have not endured a major business recession.
After purchase by the Portfolio, a debt security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Portfolio.
Neither event will require a sale of such security by the Portfolio, but MIMLIC
Management will consider such event in the determination of whether the
Portfolio should continue to hold the security.
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MATURING GOVERNMENT -
BOND PORTFOLIOS
The investment objective of each of the Maturing Government
Bond Portfolios is to provide as high an investment return as is consistent with
prudent investment risk for a specified period of time ending on a specified
liquidation date. In pursuit of this objective each of the Maturing Government
Bond Portfolios seeks to return a reasonably assured targeted dollar amount,
predictable at the time of investment, on a specific target date in the future
through investment in a portfolio composed primarily of zero coupon securities.
These are securities that pay no cash income and are sold at a discount from
their par value at maturity.
Each Maturing Government Bond Portfolio will invest in a portfolio of
securities consisting of: (a) debt obligations issued by the U.S. Treasury that
have been stripped of their unmatured interest coupons; and (b) receipts and
certificates for stripped debt obligations and stripped coupons, including U.S.
Government trust certificates (collectively "Stripped Treasury Securities").
These Stripped Treasury Securities are not anticipated to be in excess of 55% of
the assets of each Portfolio.
Each Maturing Government Bond Portfolio will also purchase other zero coupon
securities issued by the U.S. Government and its agencies and instrumentalities,
by Trusts where the payment of principal and interest to the Trust are
guaranteed by the United States, and by "mixed-ownership government
corporations" (collectively, "Stripped Government Securities"). In addition, the
Maturing Government Bond Portfolios will also purchase zero coupon securities
issued in the United States issued by domestic corporations which consist of
corporate debt obligations without interest coupons and, if available, interest
coupons that have been stripped from corporate debt obligations, and receipts
and certificates for such stripped debt obligations and stripped coupons
(collectively, "Stripped Corporate Securities"). Stripped Treasury Securities,
Stripped Government Securities and Stripped Corporate Securities are referred to
collectively herein as "Stripped Securities."
Each Maturing Government Bond Portfolio will mature on a specified target
date. The current Target Dates, as that term is defined herein, are in September
in the years 1998, 2002, 2006 and 2010.
Under normal circumstances, each Maturing Government Bond Portfolio will
invest at least 65%
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of its net assets in Stripped Treasury Securities and Stripped Government
Securities. To pay expenses and to provide funds with which to meet redemption
requests, the Maturing Government Bond Portfolios may purchase interest bearing
U.S. Government securities and other money market instruments. The Portfolios
may enter into repurchase agreements with respect to securities in which they
are permitted to invest.
If the assets of a Maturing Government Bond Portfolio do not exceed $1
million, up to 100% of its net assets may be invested in short-term, interest-
paying U.S. Government obligations and repurchase agreements with respect to
such securities. To provide income for expenses, redemption payment, and cash
dividends, up to 20% of each Maturing Government Bond Portfolio assets may be
invested in interest-paying U.S. Government securities and repurchase agreements
with respect to such securities.
When held to maturity, the entire return on zero coupon securities, which
consists of the amortization of discount, comes from the difference between
their purchase price and their maturity value. This difference is known at the
time of purchase, so persons holding a portfolio composed entirely of zero
coupon securities, with no expenses until maturity, would know the amount of
their investment return at the time of their initial payment. While these
Portfolios will have additional holdings, including cash, which will affect
performance, they will describe an anticipated yield to maturity from time to
time. In order to obtain this return, contract owners electing to have payments
allocated to a Maturing Government Bond Portfolio should plan to maintain their
investment until the maturity of that Maturing Government Bond Portfolio.
While many factors may affect the yield to maturity of each of the Portfolios,
one such factor which may operate to the detriment of those contract owners
holding interests in such Portfolio until maturity, is the ability of other
contract owners to purchase or redeem shares on any business day.
Because each Maturing Government Bond Portfolio will be primarily invested in
zero coupon securities, contract owners whose purchase payments are invested in
shares held to maturity, including those obtained through reinvestment of
dividends and distributions, will experience a return consisting primarily of
the amortization of discount on the underlying securities in the Maturing
Government Bond Portfolio. However, the net asset value of the Portfolio's
shares will increase or decrease with the daily changes in the market value of
that Maturing Government Bond Portfolio's investments which will tend to vary
inversely with changes in prevailing interest rates. If shares of a Maturing
Government Bond Portfolio are redeemed prior to the maturity date of that
Maturing Government Bond Portfolio, a contract owner may experience a
significantly different investment return than was anticipated at the time of
purchase.
The Maturing Government Bond Portfolios will also seek to minimize
reinvestment risk. Reinvestment risk arises from the uncertainty as to the total
return which will be realized from conventional interest-paying bonds due to the
fact that periodic interest, received in cash, will be reinvested in the future
at interest rates unknown at the time of the original purchase. With zero coupon
securities, however, there are no cash distributions to reinvest, so an owner of
such a security would bear no reinvestment risk if a zero coupon security was
held to maturity. Since each Maturing Government Bond Portfolio will not be
invested entirely in zero coupon securities maturing on the Target Date, there
will be some reinvestment risk.
Stripped Securities investments, like other investments in debt securities,
are subject to certain risks, including credit and market risks. Credit risk is
the function of the ability of an issuer of a security to maintain timely
interest payments and to pay the principal of a security upon maturity.
Securities purchased by the Maturing Government Bond Portfolios will be rated at
least single A or better by nationally recognized statistical rating agencies.
Securities rated single A are regarded as having an adequate capacity to pay
principal and interest, but with greater vulnerability to adverse economic
conditions and some speculative characteristics. The Maturing Government Bond
Portfolios will also attempt to minimize the impact of individual credit risks
by diversifying their portfolio investments.
Market risk is the risk of the price fluctuation of a security due primarily
to market interest rates prevailing generally in the economy. Market risk may
also include elements which take into account the underlying credit rating of an
issuer, the maturity length of a security, a security's yield, and general
economic and interest rate conditions. Stripped Securities do not make any
periodic payments of interest prior to maturity and the stripping of the
securities causes the Stripped Securities to be offered at a discount from their
face amounts. The market value of Stripped Securities and, therefore the net
asset value of the shares of the Maturing Government Bond Portfolios, will
fluctuate, perhaps
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markedly, with changes in interest rates and other factors and may be subject to
greater fluctuations in response to changing interest rates than would a fund of
securities consisting of debt obligations of comparable coupon bearing
maturities. The amount of fluctuation increases with longer maturities.
Because they do not pay interest, zero coupon securities tend to be subject to
greater fluctuation of market value in response to changes in interest rates
than interest-paying securities of similar maturities. Contract owners can
expect more appreciation of the net asset value of a Maturing Government Bond
Portfolio's shares during periods of declining interest rates than from
interest-paying securities of similar maturity. Conversely, when interest rates
rise, the net asset value of a Maturing Government Bond Portfolio's shares will
normally decline more in price than interest-paying securities of a similar
maturity. Price fluctuations are expected to be greatest in the longer-maturity
Portfolios and are expected to diminish as a Maturing Government Bond Portfolio
approaches its Target Date. These fluctuations may make the Maturing Government
Bond Portfolios an inappropriate selection as a basis for variable annuity
payments. Interest rates can change suddenly and unpredictably.
When held to maturity, the return on zero coupon securities consists entirely
of the difference between the maturity value and the purchase price of
securities held in the Portfolio. While this difference allows investors to
measure initial investment return, it also must be considered in light of
changing economic conditions. Inflationary risk, that is the risk attendant to
holding fixed-rate investments during a period of generally upward changing
price levels in the economy, must be considered in selecting a Maturing
Government Bond Portfolio as an investment choice or in selecting a particular
Maturing Government Bond Portfolio.
The Fund currently offers four separate Maturing Government Bond Portfolios,
each maturing on the third Friday of September of the specific maturity year
(the "Target Date"). On each Portfolio's Target Date, the Portfolio will be
converted to cash and reinvested in another of the Fund's Portfolios at the
direction of the contract owner. If the contract owner does not complete an
instruction form directing what should be done with liquidation proceeds, the
proceeds will be automatically invested in the Money Market Portfolio and the
contract owner will be notified of that allocation.
The investment adviser of the Portfolios will attempt to maintain the average
maturity of each Maturing Government Bond Portfolio within twelve months of that
Portfolio's Target Date. A Portfolio of securities consisting entirely of zero
coupon securities maturing on the Target Date with no cash or interest bearing
securities will have a maturity and duration which are equal.
Duration is the measure of the length of an investment and its price
volatility which takes into account, through present value analysis, the timing
and amount of any interest payments as well as the amount of the principal
repayment thus measuring volatility or price fluctuation. Duration is commonly
used by professional investment managers to help identify and control
reinvestment risk. Since each Maturing Government Bond Portfolio will not be
invested entirely in zero coupon securities maturing on the Target Date, there
will be some reinvestment risk. By balancing investments with slightly longer
and shorter durations, the investment adviser believes it can, under normal
circumstances, maintain a Maturing Government Bond Portfolio's average duration
within twelve months of the Maturing Government Bond Portfolio's Target Date and
thereby reduce its reinvestment risk.
Under federal income tax laws, a portion of the difference between the
purchase price of the zero coupon securities and their face value ("original
issue discount") is considered to be income to the Maturing Government Bond
Portfolios each year, even though such Portfolios will not receive cash payments
representing the discount from these securities. This original issue discount
will comprise a part of the net taxable investment income of the Maturing
Government Bond Portfolios which must be "distributed" to the insurance company
shareholder each year, whether or not such distributions are paid in cash. To
the extent such distributions are paid in cash, a Maturing Government Bond
Portfolio may have to generate the required cash from interest earned on
non-zero coupon securities or possibly from the disposition of zero coupon
securities.
The Maturing Government Bond Portfolios may not be appropriate for contract
owners who do not plan to have their premiums invested in shares of a Maturing
Government Bond Portfolio for a long term or until its maturity.
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INVESTMENT
RESTRICTIONS
- ------------------------------------
The Fund is subject to a number of restrictions in pursuing
its investment objectives and policies. The following is a brief summary of
certain restrictions. Some of these restrictions are subject to exceptions not
stated here. Those exceptions and a complete list
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of the investment restrictions applicable to the individual Portfolios and to
the Fund are set forth in the Statement of Additional Information.
Except for the restrictions specifically identified as fundamental, all
investment restrictions described in this Prospectus and in the Statement of
Additional Information are not fundamental, so that the Board of Directors may
change them without shareholder approval. Fundamental policies may not be
changed without the affirmative vote of a majority of the outstanding voting
securities.
Fundamental policies applicable to all Portfolios include prohibitions on: (1)
investing more than 25% of the total assets of any Portfolio in the securities
of issuers conducting their principal business activity in the same industry
(with exceptions for United States Government securities and certain money
market instruments and, in the Mortgage Securities Portfolio, for investments in
the mortgage and mortgage-finance industry), (2) borrowing money, except for
temporary or emergency purposes and then not in excess of 10% of the value of
the total assets of the Portfolio at the time the borrowing is made (for
purposes of this restriction, "borrowing" shall not include reverse repurchase
agreements), (3) investing more than 5% of the value of a Portfolio's total
assets in the securities of any one issuer (excluding United States Government
securities and bank obligations) or investing in more than 10% of the voting
securities of any one issuer except that up to 25% of the value of each
Portfolio's total assets may be invested without regard to the restrictions of
this clause (3), (4) making short sales, except that each Portfolio may make
short sales "against the box" in amounts not in excess of 10% of such
Portfolio's total assets in certain unusual and defensive situations, and (5)
entering into reverse repurchase agreements if such investments taken together
with borrowings represented by senior securities exceed 33 1/3% of a Portfolio's
total assets less liabilities other than obligations under such borrowings and
reverse repurchase agreements. At the time the Fund enters into a reverse
repurchase agreement, cash, U.S. Government securities or other liquid high-
grade debt obligations having a value sufficient to make payments for the
securities to be repurchased will be segregated, and will be maintained
throughout the period of the obligation.
Restrictions that apply to all Portfolios and that are not fundamental include
prohibitions on: (1) knowingly investing more than 15% of the value of the net
assets of any Portfolio (except the Money Market Portfolio, in which the
limitation shall be 10%) in "illiquid" securities (including repurchase
agreements maturing in more than seven days), (2) pledging, hypothecating,
mortgaging or transferring more than 10% of the total assets of any Portfolio as
security for indebtedness, and (3) purchasing securities of other investment
companies having a value in excess of 5% of a Portfolio's total assets, other
than in connection with a merger, consolidation or reorganization or if the
purchase involves securities of closed-end investment companies and does not
result in more than 10% of the value of a Portfolio's total assets to be
invested in such securities.
Each Portfolio may lend its securities so long as such loans do not represent
in excess of 20% of a Portfolio's total assets. This is a fundamental policy.
The procedure for lending securities is for the borrower to give the lending
Portfolio collateral consisting of cash or cash equivalents. The lending
Portfolio may invest the cash collateral and earn additional income or receive
an agreed upon fee from a borrower which has delivered cash equivalent
collateral. The Fund anticipates that securities will be loaned only under the
following conditions: (1) the borrower must furnish collateral equal at all
times to the market value of the securities loaned and the borrower must agree
to increase the collateral on a daily basis if the securities increase in value,
(2) the loan will be made in accordance with New York Stock Exchange Rules,
which presently require the borrower, after notice, to redeliver the securities
within five business days, (3) any cash collateral invested by a Portfolio will
be in short-term investments which give maximum liquidity so that the collateral
may be paid back to the borrower when the securities are returned, and (4) the
Portfolio making the loan may pay reasonable service, placement, custodian or
other fees in connection with loans of securities and share a portion of the
interest from these investments with the borrower of the securities. It is the
intention of the investment adviser to structure agreements dealing with the
lending of securities so that voting rights attached to those securities will be
retained by the Fund. For the purposes of these restrictions, collateral
arrangements with respect to options forward currency and futures transactions
will not be deemed to involve a pledge of assets.
- --------------------------------------------------------------------------------
THE FUND AND
ITS MANAGEMENT
- ------------------------------------
The Fund is a diversified, open-end, management
investment company incorporated under Minnesota law on February 21, 1985. The
39
<PAGE>
Fund is a series fund, which means that it has several different Portfolios. The
business and affairs of the Fund are managed by its Board of Directors.
A separate class of the Fund's capital stock, par value of $.01 per share, is
issued for each Portfolio. A share of each class represents an undivided
interest in the assets of the Portfolio attributable to that class, and a
shareholder is entitled to a pro rata share of all dividends and distributions
arising from the net income and capital gains of each Portfolio or Portfolios in
which shares are held.
Shares of each Portfolio, including fractional shares, have equal rights with
regard to voting, redemptions, dividends, distributions and liquidations with
respect to that Portfolio. When issued, shares are fully paid and nonassessable
and do not have preemptive or conversion rights or cumulative voting rights. The
sole shareholder of the Fund and its Portfolios, Minnesota Mutual (through
certain of its separate accounts), will vote Fund shares allocated to its
separate accounts in accordance with instructions received from contract owners.
In the event no instructions are received from owners of the Contracts with
respect to shares of a Portfolio held by a sub-account of a separate account of
Minnesota Mutual, Minnesota Mutual will vote such shares in the same proportion
as shares of the Portfolio held by such sub-account for which instructions have
been received.
- --------------------------------------------------------------------------------
INVESTMENT
ADVISER
- ------------------------------------
The Fund's investment adviser is MIMLIC Asset Management Company
("MIMLIC Management"). MIMLIC Management commenced its current business in
January, 1984, and provides investment advisory services to the Fund and various
private accounts. MIMLIC Management's wholly-owned subsidiary, Advantus Capital
Management, Inc., provides investment advisory services to nine other mutual
funds (Advantus Horizon Fund, Inc., Advantus Spectrum Fund, Inc., Advantus
Mortgage Securities Fund, Inc., Advantus Money Market Fund, Inc., Advantus Bond
Fund, Inc., Advantus Cornerstone Fund, Inc., Advantus Enterprise Fund, Inc.,
Advantus International Balanced Fund, Inc., and MIMLIC Cash Fund, Inc.). MIMLIC
Management's personnel also have experience in managing investments for The
Minnesota Mutual Life Insurance Company ("Minnesota Mutual") and its separate
accounts. MIMLIC Management is a subsidiary of Minnesota Mutual which was
organized in 1880 and has assets of more than $9.8 billion. Minnesota Mutual is
licensed to do a life insurance business in all states of the United States
(except New York, where it is an authorized reinsurer), the District of
Columbia, Canada and Puerto Rico. The executive offices of the Fund, MIMLIC
Management, MIMLIC Sales, and Minnesota Mutual are located at the Minnesota
Mutual Life Center, 400 Robert Street North, St. Paul, Minnesota 55101-2098.
MIMLIC Management acts as an investment adviser to the Fund pursuant to the
Advisory Agreement, the Supplementary Advisory Agreement, the Second
Supplemental Investment Advisory Agreement and the Third Supplemental Investment
Advisory Agreement. MIMLIC Management selects and reviews the Fund's
investments, and provides executive and other personnel for the management of
the Fund. The Fund's Board of Directors supervises the affairs of the Fund as
conducted by MIMLIC Management. Each Portfolio of the Fund, except the Index
500, Capital Appreciation, International Stock, Small Company, Value Stock and
the Maturing Government Bond Portfolios, pays MIMLIC Management a fee equal to
an annual rate of .50% of average daily net assets. The Index 500, Capital
Appreciation, Small Company and Value Stock Portfolios pay MIMLIC Management a
fee equal to an annual rate of .40%, .75%, .75% and .75%, respectively, of
average daily net assets. International Stock Portfolio pays MIMLIC Management a
fee equal to an annual rate of 1.00% on the first $10 million of average daily
net assets, .90% on the next $15 million, .80% on the next $25 million, .75% on
the next $50 million and .65% on the next $100 million and thereafter. The
Maturing Government Bond Portfolios pay an advisory fee equal to an annual rate
of .25% of average daily net assets, however, the Portfolio which matures in
1998 will pay a rate of .05% from its inception to April 30, 1998 and .25%
thereafter and the Portfolio which matures in 2002 will pay a rate of .05% from
its inception to April 30, 1998 and .25% thereafter of average daily net assets.
From its advisory fee for the Capital Appreciation Portfolio, MIMLIC
Management pays Winslow Management, effective May 1, 1996, a fee equal to .375%
of all average daily net assets under its Investment Sub-Advisory Agreement.
Prior to May 1, 1996, MIMLIC Management paid Winslow Management a portion of the
advisory fee received from the Capital Appreciation Portfolio equal to .50% on
the first $75 million of average daily net assets and .45% of all net assets in
excess of $75 million for its
40
<PAGE>
services under its Investment Sub-Advisory Agreement. From its advisory fee for
the International Stock Portfolio, MIMLIC Management pays Templeton Counsel a
fee equal to .75% on the first $10 million of average daily net assets, .65% on
the next $15 million, .55% on the next $25 million, .50% on the next $50 million
and .40% on the next $100 million and thereafter for its services under its
Investment Sub-Advisory Agreement.
The advisory fees paid by the Capital Appreciation, International Stock, Small
Company and Value Stock Portfolios are not higher than the advisory fees paid by
many funds with similar investments and investment policies, but they are higher
than that paid by most funds to their investment advisers. For these fees,
MIMLIC Management acts as investment adviser and manager for the Fund, except as
those duties have been delegated pursuant to the investment sub-advisory
agreements with Winslow Management and Templeton Counsel. See "Investment
Sub-Advisers," below. MIMLIC Management also provides executive and other
personnel for the management of the Fund. MIMLIC Management also furnishes the
Fund office space and all necessary office facilities and equipment and
personnel for servicing the investments of the Fund. For each of the last three
calendar years, the various Portfolios paid the following amounts as investment
advisory fees:
<TABLE>
<CAPTION>
ADVISORY FEES PAID
PORTFOLIO 1995 1994 1993
- -------------------------------------------------------------
<S> <C> <C> <C>
GROWTH $ 905,136 $ 678,415 $ 555,256
BOND 435,045 245,068 170,837
MONEY MARKET 126,630 93,032 74,779
ASSET ALLOCATION 1,538,272 1,309,477 1,010,629
MORTGAGE SECURITIES 322,465 318,510 251,176
INDEX 500 388,206 263,397 180,424
CAPITAL APPRECIATION 1,071,527 739,240 499,374
INTERNATIONAL STOCK 955,095 715,345 288,990
SMALL COMPANY 552,670 226,241 33,308
VALUE STOCK 141,207 25,425 N/A
MATURING GOVERNMENT
BOND --
1998 PORTFOLIO 2,184 1,179 N/A
2002 PORTFOLIO 1,441 879 N/A
2006 PORTFOLIO 5,450 3,149 N/A
2010 PORTFOLIO 2,888 1,791 N/A
</TABLE>
The Fund pays all its costs and expenses which are not assumed by MIMLIC
Management. These Fund expenses include, by way of example, but not by way of
limitation, all expenses incurred in the operation of the Fund including, among
others, interest, taxes, brokerage fees and commissions, fees of the directors
who are not employees of MIMLIC Management or any of its affiliates, expenses of
directors' and shareholders' meetings, including the cost of printing and
mailing proxies, expenses of insurance premiums for fidelity and other coverage,
association membership dues, charges of custodians, auditing and legal expenses.
The Fund will also pay the fees and bear the expense of registering and
maintaining the registration of the Fund and its shares with the Securities and
Exchange Commission and registering or qualifying its shares under state or
other securities laws and the expense of preparing and mailing prospectuses and
reports to shareholders. MIMLIC Management shall bear all advertising and
promotional expenses in connection with the distribution of the Fund's shares,
including paying for the printing of Prospectuses and Statements of Additional
Information for new shareholders, shareholder reports for new shareholders and
the costs of sales literature. MIMLIC Management also bears all costs under its
agreement with Wilshire Associates for the use by MIMLIC Management, in
connection with the Index 500 Portfolio, of Wilshire Associates' proprietary
index fund statistical sampling technique.
The names and titles of the portfolio managers employed by MIMLIC Management
who are primarily responsible for the day-to-day management of each of the
Fund's Portfolios, other than the Index 500 Portfolio, the length of time
employed in that position, and their other business experience during the past
five years are set forth below:
<TABLE>
<CAPTION>
PORTFOLIO MANAGER PRIMARY PORTFOLIO
PORTFOLIO AND TITLE MANAGER SINCE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GROWTH JEFFREY R. ERICKSON MAY 1, 1995 PORTFOLIO MANAGER, MIMLIC MANAGEMENT, JUNE 1994 TO PRESENT;
PORTFOLIO MANAGER EMERGING COUNTRY ANALYST, UNIFUND, APRIL 1994 TO MAY 1994;
NORTH AMERICAN EQUITY STRATEGIST, CREDIT SUISSE, NOVEMBER
1993 TO MARCH 1994; INVESTMENT OFFICER, MIMLIC MANAGEMENT,
JUNE 1986 TO AUGUST 1993
BOND WAYNE R. SCHMIDT MAY 1, 1991 INVESTMENT OFFICER OF MIMLIC MANAGEMENT; ASSISTANT TREASURER
INVESTMENT OFFICER OF MIMLIC MANAGEMENT AND MINNESOTA MUTUAL PRIOR TO DECEMBER
AND PORTFOLIO 1989
MANAGER
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO MANAGER PRIMARY PORTFOLIO
PORTFOLIO AND TITLE MANAGER SINCE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET WAYNE R. SCHMIDT MAY 1, 1991 INVESTMENT OFFICER OF MIMLIC MANAGEMENT; ASSISTANT TREASURER
INVESTMENT OFFICER OF MIMLIC MANAGEMENT AND MINNESOTA MUTUAL PRIOR TO DECEMBER
AND PORTFOLIO 1989
MANAGER
ASSET THOMAS A. GUNDERSON JANUARY 1, 1989 INVESTMENT OFFICER OF MIMLIC MANAGEMENT
ALLOCATION INVESTMENT OFFICER
AND PORTFOLIO
MANAGER
MORTGAGE KENT R. WEBER JANUARY 1, 1990 INVESTMENT OFFICER OF MIMLIC MANAGEMENT; ASSISTANT PORTFOLIO
SECURITIES INVESTMENT OFFICER MANAGER OF MORTGAGE SECURITIES PRIOR TO 1990
AND PORTFOLIO
MANAGER
CAPITAL CLARK WINSLOW NOVEMBER 13, 1992 PRESIDENT, PORTFOLIO MANAGER AND DIRECTOR, WINSLOW CAPITAL
APPRECIATION PRESIDENT, WINSLOW MANAGEMENT, INC.; SENIOR VICE PRESIDENT AND PORTFOLIO
CAPITAL MANAGEMENT, MANAGER, ALLIANCE CAPITAL MANAGEMENT L.P.
INC.
INTERNATIONAL JAMES E. CHANEY APRIL 28, 1992 EQUITY RESEARCH AND PORTFOLIO MANAGEMENT, TEMPLETON
STOCK VICE PRESIDENT, INVESTMENT COUNSEL, INC.
TEMPLETON INVESTMENT
COUNSEL, INC.
SMALL COMPANY JAMES P. TATERA APRIL 23, 1993 VICE PRESIDENT OF MIMLIC MANAGEMENT; SECOND VICE PRESIDENT
VICE PRESIDENT AND OF MINNESOTA MUTUAL
CHIEF EQUITY
PORTFOLIO MANAGER
VALUE STOCK MATTHEW D. FINN APRIL 25, 1994 INVESTMENT OFFICER OF MIMLIC MANAGEMENT; OWNER, MANAGING
INVESTMENT OFFICER DIRECTOR, UNIFIED CAPITAL MANAGEMENT, BLOOMFIELD HILLS,
AND PORTFOLIO MICHIGAN, SEPTEMBER 1993 TO APRIL 1994; VICE PRESIDENT/
MANAGER PORTFOLIO MANAGER, ACORN ASSET MANAGEMENT, BLOOMFIELD HILLS,
MICHIGAN, FEBRUARY 1990 TO SEPTEMBER 1993; PRIOR THERETO,
PORTFOLIO ANALYST, NATIONAL BANK, DETROIT, MICHIGAN, APRIL
1989 TO FEBRUARY 1990
MATURING KENT R. WEBER APRIL 25, 1994 INVESTMENT OFFICER OF MIMLIC MANAGEMENT; ASSISTANT PORTFOLIO
GOVERNMENT INVESTMENT OFFICER MANAGER OF MORTGAGE SECURITIES PRIOR TO 1990
BOND - 1998, AND PORTFOLIO
2002, 2006 MANAGER
AND 2010
</TABLE>
Subsequent to March 6, 1987, Minnesota Mutual has voluntarily agreed to absorb
all fees and expenses that exceed .65% of average daily net assets for the
Growth, Bond, Money Market, Asset Allocation, and Mortgage Securities
Portfolios, .55% of average daily net assets for the Index 500 Portfolio, .90%
of average daily net assets for the Capital Appreciation, Small Company and
Value Stock Portfolios and expenses that exceed 1.00% for the International
Stock Portfolio, other than the advisory fee which may not exceed 1.00%. In
addition, Minnesota Mutual has voluntarily agreed to absorb all fees and
expenses that exceed .40% of average daily net assets for each of the four
Maturing Government Bond Portfolios; however, for the Portfolios which mature in
1998 and 2002, Minnesota Mutual has voluntarily agreed to absorb such fees and
expenses which exceed .20% of average daily net assets from the Portfolio's
inception to April 30, 1998 and which exceed .40% of average daily net assets
thereafter. For each of the last three calendar years, the expenses voluntarily
absorbed by Minnesota Mutual for the various Portfolios were as follows:
<TABLE>
<CAPTION>
EXPENSES VOLUNTARILY ABSORBED
PORTFOLIO 1995 1994 1993
- ------------------------------------------------------------------
<S> <C> <C> <C>
GROWTH $ -0- $ -0- $ -0-
BOND -0- -0- -0-
MONEY MARKET -0- 13,734 23,714
ASSET ALLOCATION -0- -0- -0-
MORTGAGE SECURITIES -0- -0- -0-
INDEX 500 -0- -0- -0-
CAPITAL APPRECIATION -0- -0- -0-
INTERNATIONAL STOCK -0- -0- -0-
SMALL COMPANY -0- 9,532 30,330
VALUE STOCK 11,610 22,503 N/A
MATURING GOVERNMENT BOND --
1998 PORTFOLIO 22,794 21,714 N/A
2002 PORTFOLIO 24,709 23,298 N/A
2006 PORTFOLIO 25,199 24,803 N/A
2010 PORTFOLIO 26,308 25,888 N/A
</TABLE>
There is no specified or minimum period of time during which Minnesota Mutual
has agreed to continue its voluntary absorption of these expenses,
42
<PAGE>
and Minnesota Mutual may in its discretion cease its absorption of expenses at
any time. Should Minnesota Mutual cease absorbing expenses the effect would be
to increase substantially Fund expenses and thereby reduce investment return.
Each Portfolio will bear all expenses that may be incurred with respect to its
individual operation, including but not limited to transaction expenses,
advisory fees, brokerage, interest, taxes and the charges of the custodian. The
Fund will pay all other expenses not attributable to a specific Portfolio, but
those expenses will be allocated among the Portfolios on the basis of the size
of their respective net assets unless otherwise allocated by the Board of
Directors of the Fund.
- --------------------------------------------------------------------------------
INVESTMENT
SUB-ADVISERS
- ------------------------------------
Winslow Capital Management, Inc. (hereinafter "Winslow
Management"), a Minnesota corporation with offices at 4720 IDS Tower, 80 South
Eighth Street, Minneapolis, Minnesota 55402 has been retained under an
investment sub-advisory agreement to provide investment advice and, in general,
to conduct the management and investment program of the Capital Appreciation
Portfolio, subject to the general control of the Board of Directors of the Fund.
Winslow Management is a recent entrant into the advisory business, having begun
business in June of 1992. Winslow Management is a registered investment adviser
under the Investment Advisers Act of 1940. The firm was established by its
investment principals with a focus on providing management services to growth
equity investment accounts. An additional experienced principal joined the firm
in October of 1993. Winslow Management has one other investment company client
for which it acts as the investment adviser. Other assets currently under
management are managed for corporate, endowment, foundation, retirement system
and individual clients.
Prior to October 1, 1992, investment sub-advisory services were provided to
the Capital Appreciation Portfolio by Alliance Capital Management L.P., which
had provided such services since the Portfolio's inception.
Templeton Investment Counsel, Inc. (hereinafter "Templeton Counsel"), a
Florida corporation with principal offices at 500 East Broward Boulevard, Ft.
Lauderdale, Florida 33394, has been retained under an investment sub-advisory
agreement to provide investment advice and, in general, to conduct the
management investment program of the International Stock Portfolio, subject to
the general control of the Board of Directors of the Fund. Templeton Counsel is
an indirect, wholly-owned subsidiary of Templeton Worldwide, Inc., which in turn
is a wholly-owned subsidiary of Franklin Resources, Inc.
- --------------------------------------------------------------------------------
PURCHASE AND
REDEMPTION
OF SHARES
- ------------------------------------
The Fund currently offers its shares continuously only to
Minnesota Mutual and its separate accounts. The shares are
sold to that company directly without the use of any underwriter. It is possible
that at some later date the Fund may offer shares to other investors.
The offering price and the redemption price of Portfolio shares are equal to
the net asset value per share next determined after an order for a purchase or
redemption is received. The net asset value per share for each Portfolio is
determined by adding the current value of all securities and all other assets
held by such Portfolio, subtracting liabilities, and dividing the remainder by
the number of shares outstanding. The Money Market Portfolio values its
investments at amortized cost in accordance with Rule 2a-7 under the Investment
Company Act of 1940, as amended.
The net asset value of the shares of the Portfolios shall be computed once
daily, and, in the case of Money Market Portfolio, after the declaration of the
daily dividend, as of the primary closing time for business on the New York
Stock Exchange (as of the date hereof the primary close of trading is 3:00 p.m.
(Central Time), but this time may be changed) on each day, Monday through
Friday, except (i) days on which changes in the value of such Fund's portfolio
securities will not materially affect the current net asset value of such Fund's
shares, (ii) days during which no such Fund's shares are tendered for redemption
and no order to purchase or sell such Fund's shares is received by such Fund and
(iii) customary national business holidays on which the New York Stock Exchange
is closed for trading (as of the date hereof, New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day).
Except with respect to securities of the Money Market Portfolio and of some
securities of the International Stock Portfolio, the Fund values its securities
as follows: A security listed or traded on an exchange is valued at its last
sale price (prior to the time as of which assets are valued) on the exchange
where it is principally traded. Lacking any such sales on the day of valuation,
the security is valued at the
43
<PAGE>
last bid price on that exchange. All other securities for which over-the-counter
market quotations are readily available are valued on the basis of the last
current bid price. When market quotations are not readily available, securities
are valued at fair value as determined in good faith by the Board of Directors.
Debt securities may be valued on the basis of valuations furnished by a pricing
service which utilizes electronic data processing techniques to determine
valuations for normal institutional-size trading units of debt securities,
without regard to sale or bid prices, when such valuations are believed to more
accurately reflect the fair market value of such securities. Debt securities of
the International Stock Portfolio with maturities of 60 days or less when
acquired, or which subsequently are within 60 days of maturity, and all
securities in the Money Market Portfolio, are valued at amortized cost.
- --------------------------------------------------------------------------------
DIVIDENDS AND
DISTRIBUTIONS
- ------------------------------------
It is the Fund's intention to distribute substantially all
of the net investment income, if any, of each Portfolio. For dividend purposes,
net investment income of the Growth Portfolio, the Bond Portfolio, the Asset
Allocation Portfolio, the Mortgage Securities Portfolio, the Index 500
Portfolio, the Capital Appreciation Portfolio, the International Stock
Portfolio, the Small Company Portfolio, the Value Stock Portfolio and each of
the four Maturing Government Bond Portfolios will consist of all dividends or
interest earned by the Portfolio less expenses, including the investment
advisory fee. Net investment income for dividend purposes of the Money Market
Portfolio will consist of the interest earned on investments, plus or minus
amortized purchase discount or premium, plus or minus realized gains and losses,
less expenses, including the investment advisory fee. Dividends from the net
investment income and the net realized gains, if any, for the Growth, Bond,
Asset Allocation, Mortgage Securities, Index 500, Capital Appreciation,
International Stock, Small Company, Value Stock and the four Maturing Government
Bond Portfolios will be declared at least annually and reinvested in additional
full and fractional shares of those Portfolios. Dividends from net investment
income and net realized capital gains, if any, for the Money Market Portfolio
will be declared and reinvested daily.
Starting in fiscal year 1987, as a result of changes included in the Tax
Reform Act of 1986, each Portfolio is treated as a separate entity for federal
income tax purposes.
- --------------------------------------------------------------------------------
TAXES
- ------------------------------------
The Fund qualified for the year ended December 31, 1995 and intends to
continue to qualify as a "regulated investment company" under the provisions of
Subchapter M of the Internal Revenue Code, as amended (the "Code"). If the Fund
qualifies as a regulated investment company and complies with the appropriate
provisions of the Code, the Fund will be relieved of federal income taxes on the
amounts distributed.
Since Minnesota Mutual is the sole shareholder of the Fund, no discussion is
included here as to the federal income tax consequences at the shareholder
level. For information concerning the federal tax consequences to purchasers of
the Contracts, see the attached Prospectus for those Contracts.
- --------------------------------------------------------------------------------
CUSTODIANS
- ------------------------------------
First Trust National Association, 180 East Fifth Street, St.
Paul, Minnesota 55101, acts as custodian of the securities held by the Growth,
Asset Allocation, Index 500, Capital Appreciation, Small Company and Value Stock
Portfolios. Bankers Trust Company, 280 Park Avenue, New York, New York 10017,
acts as custodian of the securities held by the Bond, Money Market, Mortgage
Securities and the four Maturing Government Bond Portfolios. The custodian for
the International Stock Portfolio is Norwest Bank Minnesota, N.A., Sixth Street
and Marquette Avenue, Minneapolis, Minnesota 55479. Morgan Stanley Trust
Company, One Pierrepont Plaza, Brooklyn, New York 11201 acts as sub-custodian of
the International Stock Portfolio's assets and portfolio securities. Pursuant to
Rule 17f-5 under the 1940 Act, the Board of Directors of the Fund has also
approved, in connection with the International Stock Portfolio, the use of
various foreign sub-custodian banks and securities depositories to maintain
foreign securities in or near the market in which they are principally traded
and to maintain cash in amounts reasonably necessary to effect foreign
securities transactions in such locations. The Board of Directors may from time
to time approve other sub-custodian banks pursuant to Rule 17f-5.
Each custodian is authorized to use the facilities of the Depository Trust
Company and the book-entry system of the Federal Reserve Banks and may enter
into agreements with other banks for the custody by such banks of Fund
securities where direct custody by such custodian would be impracticable.
44
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A
- ------------------------------------
This Appendix to the Prospectus describes in detail those
Money Market instruments and investment techniques set forth in the Prospectus
under the heading "Investment Objectives, Policies and Risks." They may be used
extensively by the Money Market Portfolio and by the Asset Allocation Portfolio.
They may also be used by the Growth, Bond, Mortgage Securities, Index 500,
Capital Appreciation, International Stock and Small Company Portfolios to invest
otherwise idle cash or on a temporary basis or for defensive purposes.
UNITED STATES GOVERNMENT OBLIGATIONS--are bills, certificates of indebtedness,
notes and bonds issued or guaranteed as to principal or interest by the United
States Government or by agencies or authorities controlled or supervised by and
acting as instrumentalities of the United States Government established under
the authority granted by Congress, including, but not limited to, the Government
National Mortgage Association, the Export-Import Bank, the Student Loan
Marketing Association, the United States Postal Service, the Tennessee Valley
Authority, the Bank for Cooperatives, the Farmers Home Administration, the
Federal Home Loan Bank, the Federal Financing Bank, the Federal Intermediate
Credit Banks, the Federal Land Banks, the Farm Credit Banks and the Federal
National Mortgage Association. Some obligations of United States Government
agencies, authorities and other instrumentalities are supported by the full
faith and credit of the United States Treasury, such as securities of the
Government National Mortgage Association and the Student Loan Marketing
Association; others by the right of the issuer to borrow from the Treasury, such
as securities of the Federal Financing Bank and the United States Postal
Service; and others only by the credit of the issuing agency, authority or other
instrumentality, such as securities of the Federal Home Loan Bank and the
Federal National Mortgage Association.
REPURCHASE AGREEMENTS--are agreements by which the Portfolio purchases a
security and obtains a simultaneous commitment from the seller (a member bank of
the Federal Reserve System, or, if permitted by law or regulation, a securities
dealer provided the Board of Directors of the Fund has evaluated the seller's
creditworthiness through adoption of standards of review or otherwise) to
repurchase the security at an agreed upon price and date. The resale price is in
excess of the purchase price and reflects an agreed upon market rate unrelated
to the coupon rate on the purchased security. The Portfolio's custodian, or a
duly appointed subcustodian, will hold the securities underlying any repurchase
agreement in a segregated account or such securities may be part of the Federal
Reserve Book Entry System. The market value of the collateral underlying the
repurchase agreement will be determined on each day the net asset value of the
shares of each Portfolio is determined. If at any time the market value of the
collateral falls below the repurchase price of the repurchase agreement
(including any accrued interest), the Portfolio will promptly receive additional
collateral, so that the total collateral is in an amount at least equal to the
repurchase price plus accrued interest. Such transactions afford the Portfolio
the opportunity to earn a return on temporarily available cash. While the
underlying security may be a bill, certificate of indebtedness, note or bond
issued by an agency, authority or instrumentality of the United States
Government, the obligation of the seller is not guaranteed by the United States
Government.
REVERSE REPURCHASE AGREEMENTS--are the counterparts of repurchase agreements,
and are agreements by which the Portfolio sells a security and agrees to
repurchase the security from the buyer at an agreed upon price and future date.
The Portfolio will use the proceeds of the reverse repurchase agreement to
purchase other money market securities either maturing, or under an agreement to
resell, at a date simultaneous with or prior to the expiration of the reverse
repurchase agreement. Because certain of the incidents of ownership of the
security are retained by the Portfolio, reverse repurchase agreements might be
construed, for certain purposes, as a form of borrowing by the Portfolio from
the buyer, collateralized by the security. The Portfolio will enter into reverse
repurchase agreements only with banks. At the time the Fund enters into a
reverse repurchase agreement, cash, U.S. Government securities or other liquid
high-grade debt obligations having a value sufficient to make payments for the
securities to be repurchased will be segregated, and will be maintained
throughout the period of the obligation.
CERTIFICATES OF DEPOSIT--are certificates issued against funds deposited in a
bank, are for a definite period of time, earn a specified rate of return, and
are normally negotiable.
BANKERS' ACCEPTANCES--are short-term credit instruments issued by corporations
to finance the import, export, transfer or storage of goods. They are termed
"accepted" when a bank guarantees their
45
<PAGE>
payment at maturity. These instruments reflect the obligations of both the bank
and drawer to pay the face amount of the instrument at maturity.
COMMERCIAL PAPER--refers to promissory notes issued by corporations to finance
their short-term credit needs.
VARIABLE AMOUNT MASTER DEMAND NOTES--refer to short-term, unsecured promissory
notes issued by corporations to finance short-term needs. They allow the
investment of fluctuating amounts by the Portfolio at varying market rates of
interest pursuant to direct arrangements between the Portfolio, as lender, and
the borrower. Variable amount master demand notes permit a series of short-term
borrowings under a single note. The lender has the right to increase the amount
under the note at any time up to the full amount provided by the note agreement.
Both the lender and the borrower have the right to reduce the amount of
outstanding indebtedness at any time. Because variable amount master demand
notes are direct lending arrangements between the lender and borrower, it is not
generally contemplated that such instruments will be traded and there is no
secondary market for the notes. Typically, agreements relating to such notes
provide that the lender shall not sell or otherwise transfer the note without
the borrower's consent. Thus, variable amount master demand notes are illiquid
assets. Such notes provide that the interest rate on the amount outstanding
varies on a daily basis depending upon a stated short-term interest rate
barometer. The Fund's investment adviser, MIMLIC Management, will monitor the
creditworthiness of the borrower throughout the term of the variable amount
master demand note. The Fund will only invest in variable amount master demand
notes issued by companies which at the date of investment have an outstanding
debt issue rated AAA or AA by Standard & Poor's or Aaa or Aa by Moody's and
which MIMLIC Management has determined present minimal risk of loss to the Fund.
MIMLIC Management will look generally at the financial strength of the issuing
company as "backing" for the note and not to any security interest or
supplemental source such as a bank letter of credit. A master demand note will
be valued by MIMLIC Management each day the Fund's net asset value is
determined, which value will generally be equal to the face value of the note
plus accrued interest unless the financial position of the issuer is such that
its ability to repay the note when due is in question.
CORPORATE OBLIGATIONS--includes bonds and notes issued by corporations in
order to finance longer term credit needs.
ILLIQUID SECURITIES AND RULE 144A PAPER--the Fund may invest up to 15% of its
net assets (10% of net assets in the case of Money Market Portfolio) in
securities or other assets which are illiquid. An investment is generally
considered to be "illiquid" if it cannot be disposed of within seven days in the
ordinary course of business at approximately the amount at which the investment
company is valuing the investment. "Restricted securities" are securities which
were originally sold in private placements and which have not been registered
under the Securities Act of 1933 (the "1933 Act"). Such securities generally
have been considered illiquid by the staff of the Securities and Exchange
Commission (the "SEC"), since such securities may be sold only subject to
statutory restrictions and delays or if registered under the 1933 Act.
The SEC has acknowledged, however, that a market exists for certain restricted
securities (for example, securities qualifying for resale to certain qualified
"institutional buyers" pursuant to Rule 144A under the 1933 Act). Additionally,
MIMLIC Management and the Fund believe that a similar market exists for
commercial paper issued pursuant to the private placement exemption of Section
4(2) of the 1933 Act. The Fund may invest without limitation in these forms of
restricted securities if such securities are deemed by MIMLIC Management to be
liquid in accordance with standards established by the Fund's Board of
Directors. Under these guidelines, MIMLIC Management must consider (a) the
frequency of trades and quotes for the security, (b) the number of dealers
willing to purchase or sell the security and the number of other potential
purchasers, (c) dealer undertakings to make a market in the security, and (d)
the nature of the security and the nature of the marketplace trades (for
example, the time needed to dispose of the security, the method of soliciting
offers and the mechanics of transfer). At the preset time, it is not possible to
predict with accuracy how the markets for certain restricted securities will
develop. Investing in such restricted securities could have the effect of
increasing the level of the Fund's illiquidity to the extent that qualified
purchasers of the securities become, for a time, uninterested in purchasing
these securities.
46
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX B
- ------------------------------------
Mortgage-related securities represent an ownership interest in
a pool of residential mortgage loans. These securities are designed to provide
monthly payments of interest and principal to the investor. The mortgagor's
monthly payments to his lending institution are "passed-through" to investors
such as the Fund. Most insurers or services provide guarantees of payments,
regardless of whether or not the mortgagor actually makes the payment. The
guarantees made by issuers or servicers are backed by various forms of credit,
insurance and collateral.
- --------------------------------------------------------------------------------
UNDERLYING -
MORTGAGES
Pools consist of whole mortgage loans or participations in loans.
The majority of these loans are made to purchasers of 1-4 family homes. Some of
these loans are made to purchasers of mobile homes. The terms and
characteristics of the mortgage instruments are generally uniform within a pool
but may vary among pools. For example, in addition to fixed-rate, fixed-term
mortgages, the Fund may purchase pools of variable rates mortgages, growing
equity mortgages, graduated payment mortgages and other types.
All servicers apply standards for qualification to local lending institutions
which originate mortgages for the pools. Servicers also establish credit
standards and underwriting criteria for individual mortgages included in the
pools. In addition, many mortgages included in pools are insured through private
mortgage insurance companies.
- --------------------------------------------------------------------------------
LIQUIDITY AND -
MARKETABILITY
Since the inception of the mortgage-related pass-through
security in 1970, the market for these securities has expanded considerably. The
size of the primary issuance market and active participation in the secondary
market by securities dealers and many types of investors makes government and
government-related pass-through pools highly liquid. The recently introduced
private conventional pools of mortgages (pooled by commercial banks, savings and
loans institutions and others, with no relationship with government and
government-related entities) have also achieved broad market acceptance and
consequently an active secondary market has emerged. However, the market for
conventional pools is smaller and less liquid than the market for the government
and government-related mortgage pools.
- --------------------------------------------------------------------------------
AVERAGE LIFE -
The average life of pass-through pools varies with the maturities of the
underlying mortgage instruments. In addition, a pool's term may be shortened by
unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions.
As prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. For pools of fixed-
rate 30-year mortgages, common industry practice is to assume that prepayments
will result in a 12-year average life. Pools of mortgages with other maturities
or different characteristics will have varying assumptions for average life. The
assumed average life of pools of mortgages having terms of less than 30 years is
less than 12 years, but typically not less than 5 years.
- --------------------------------------------------------------------------------
YIELD -
CALCULATIONS
Yields on pass-through securities are typically quoted by
investment dealers and vendors based on the maturity of the underlying
instruments and the associated average life assumption. In periods of falling
interest rates the rate of prepayment tends to increase, thereby shortening the
actual average life of a pool of mortgage-related securities. Conversely, in
periods of rising rates the rate of prepayment tends to decrease, thereby
lengthening the actual average life of the pool. Historically, actual average
life has been consistent with the 12-year assumption referred to above.
Actual prepayment experience may cause the yield to differ from the assumed
average life yield. Reinvestment of prepayments may occur at higher or lower
interest rates than the original investment, thus affecting the yield of the
Mortgage Securities Portfolio. The compounding effect from reinvestments of
monthly payments received by the Mortgage Securities Portfolio will increase the
yield to that Portfolio compared to bonds that pay interest semi-annually.
- --------------------------------------------------------------------------------
GOVERNMENTAL AND GOVERNMENT- -
RELATED GUARANTORS
The principal governmental (i.e., backed by the
full faith and credit of the United States Government) guarantor of
mortgage-related securities is the Government
47
<PAGE>
National Mortgage Association ("GNMA"). GNMA is a wholly-owned United States
Government corporation within the Department of Housing and Urban Development.
GNMA is authorized to guarantee, with the full faith and credit of the United
States Government, the timely payment of principal and interest on securities
issued by institutions approved by GNMA (such as savings and loan institutions,
commercial banks and mortgage bankers) and backed by pools of FHA-insured or
VA-guaranteed mortgages.
Government-related (i.e., not backed by the full faith and credit of the
United States Government) guarantors include the Federal National Mortgage
Association and the Federal Home Loan Mortgage Association. The Federal National
Mortgage Association ("FNMA") is a government-sponsored corporation owned
entirely by private stockholders. It is subject to general regulation by the
Secretary of Housing and Urban Development. FNMA purchases residential mortgages
from a list of approved seller/servicers which include state and
federally-chartered savings and loan associations, mutual savings banks,
commercial banks and credit unions and mortgage bankers. Pass-through securities
issued by FNMA are guaranteed as to timely payment of principal and interest by
FNMA but are not backed by the full faith and credit of the United States
Government.
The Federal Home Loan Mortgage Corporation ("FHLMC") is a corporate
instrumentality of the United States Government and was created by Congress in
1970 for the purpose of increasing the availability of mortgage credit for
residential housing. Its stock is owned by the twelve Federal Home Loan Banks.
FHLMC issues Participation Certificates ("PCs") which represent interests in
mortgage from FHLMC's national portfolio. FHLMC guarantees the timely payment of
interest and ultimate collection of principal but PCs are not backed by the full
faith and credit of the United States Government.
48
<PAGE>
PART B. INFORMATION REQUIRED IN A STATEMENT
OF ADDITIONAL INFORMATION
<PAGE>
MIMLIC SERIES FUND, INC.
Statement of Additional Information
Dated: May 1, 1996
This Statement of Additional Information is not a prospectus. Much of the
information contained in this Statement of Additional Information expands upon
subjects discussed in the Prospectus. Therefore, this Statement should be read
in conjunction with the Fund's current Prospectus, dated May 1, 1996, which may
be obtained by calling the Fund at (612) 298-3500, or writing the Fund at
Minnesota Mutual Life Center, 400 Robert Street North, St. Paul, Minnesota
55101-2098.
________________________________________
Table of Contents
The Fund ............................................................ 2
Investment Restrictions ............................................. 3
Portfolio Turnover .................................................. 6
Directors and Executive Officers .................................... 7
Investment Advisory and Other Services .............................. 9
Portfolio Transactions and Allocation of Brokerage .................. 13
Purchase and Redemption of Shares ................................... 15
Fund Shares and Voting Rights ....................................... 15
Net Asset Value ..................................................... 16
Performance Data .................................................... 18
Taxes ............................................................... 22
Reports to Shareholders ............................................. 23
Independent Auditors ................................................ 23
Financial Statements ................................................ 24
Appendix I - Rating of Bonds and Commercial Paper ................... 82
<PAGE>
THE FUND
MIMLIC Series Fund, Inc. ("Fund"), a Minnesota corporation, is a no-load,
diversified, open-end management investment company. The Fund is a series fund,
which means that it has several different Portfolios. The investment adviser of
the Fund is MIMLIC Asset Management Company ("MIMLIC Management"). MIMLIC
Management has entered into an investment sub-advisory agreement with Winslow
Capital Management, Inc. ("Winslow Management"), under which Winslow Management
serves as investment sub-adviser to the Fund's Capital Appreciation Portfolio.
MIMLIC Management has also entered into an investment sub-advisory agreement
with Templeton Investment Counsel, Inc. ("Templeton Counsel"), under which
Templeton Counsel serves as investment sub-adviser to the Fund's International
Stock Portfolio.
Currently, the shares of the Fund are sold only to The Minnesota Mutual
Life Insurance Company ("Minnesota Mutual") through certain of its separate
accounts to fund the benefits under variable annuity contracts and variable life
insurance policies (collectively, the "Contracts") issued by Minnesota Mutual.
The separate accounts, which will be the owners of the shares of the Fund, will
invest in the shares of each Portfolio in accordance with instructions received
from the owners of the Contracts.
Minnesota Mutual, through its separate accounts which fund the Contracts,
owns 100% of the shares outstanding of each Portfolio of the Fund. Minnesota
Mutual, on October 22, 1985, provided the initial capital of the Fund by
purchasing 4,500,000 shares of the Growth Portfolio, Bond Portfolio, Money
Market Portfolio and Asset Allocation Portfolio for $4,500,000. On April 28,
1987, Minnesota Mutual provided initial capital for additional portfolios by
purchasing 11,000,000 shares of the Mortgage Securities Portfolio, Index 500
Portfolio and Capital Appreciation Portfolio for $11,000,000. Those initial
shares were not attributable to any of the Contracts and were redeemed by
Minnesota Mutual during 1991. On April 27, 1992, Minnesota Mutual provided
initial capital for the International Stock Portfolio by purchasing 10,000,000
shares of the Portfolio for $10,000,000. Those initial shares, together with
the additional shares attributable to them as a result of the reinvestment of
dividends and capital gains distributions, are not attributable to any of the
Contracts. In addition, Minnesota Mutual provided initial capital in the amount
of $3,000,000 on April 22, 1993, for the Small Company Portfolio and, as a
result, those initial shares, together with additional shares attributable to
them as a result of reinvestment of dividends and capital gains distributions,
are not attributable to any of the Contracts. On May 2, 1994, Minnesota Mutual
provided initial capital for the Value Stock Portfolio and the four Maturing
Government Bond Portfolios and those initial shares, together with the
additional shares attributable to them as the result of the reinvestment of
dividends and capital gains distributions, are not attributable to any of the
Contracts. After Minnesota Mutual's initial contribution of $3,000,000,
representing 3,000,000 shares of the Value Stock Portfolio, its contribution
of $3,400,000, representing 3,400,000 shares of the Maturing Government Bond
Portfolio - 1998, its contribution of $2,600,000, representing 2,600,000
shares of the Maturing Government Bond Portfolio - 2002, its contribution of
$1,900,000 representing 1,900,000 shares of the Maturing Government Bond
Portfolio - 2006, and its contribution of $1,100,000 representing 1,100,000
shares of the Maturing Government Bond Portfolio - 2010, those shares
represented 100% of the issued and outstanding shares for those Portfolios as
of May 2, 1994.
Contract owners should consider that the investment experience of the
Portfolio or Portfolios they select will affect the value of and the benefits
provided under the Contract. See the Prospectus for the Contracts for a
description of the relationship between increases or decreases in the net
-2-
<PAGE>
asset value of Fund shares (and any distributions on such shares) and the
benefits provided under a Contract.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions relating to the investment
of the assets of the Portfolios.
The restrictions numbered 1 through 10 and the statement dealing with
senior securities are fundamental and may not be changed without the affirmative
vote of a majority of the outstanding voting securities of each Portfolio
affected by the change. With respect to the submission of a change in an
investment restriction to the holders of the Fund's outstanding voting
securities, such matter shall be deemed to have been effectively acted upon with
respect to a particular Portfolio if a majority of the outstanding voting
securities of such Portfolio vote for the approval of such matter,
notwithstanding (1) that such matter has not been approved by the holders of a
majority of the outstanding voting securities of any other Portfolio affected by
such matter, and (2) that such matter has not been approved by the vote of a
majority of the outstanding voting securities of the Fund. For this purpose and
under the Investment Company Act of 1940, a majority of the outstanding voting
shares of each Portfolio means the lesser of (i) 67% of the voting shares
represented at a meeting at which more than 50% of the outstanding voting shares
are represented or (ii) more than 50% of the outstanding voting shares.
Restrictions numbered 11-17 are not fundamental and may be changed by the
Fund's Board of Directors.
The Fund may not issue senior securities except to the extent that the
borrowing of money in accordance with restriction 3 or the entering into reverse
repurchase agreements as described in restriction 6 may constitute the issuance
of a senior security, and each Portfolio will not:
1. With respect to at least 75% of the value of the total assets in the
Portfolio, invest more than 5% of the value of such assets in the
securities of any one issuer (except securities issued or guaranteed by
the United States Government, its agencies or instrumentalities and bank
obligations) or invest in more than 10% of the voting securities of any
one issuer.
For additional information with respect to investment of assets in the
Money Market Portfolio, see the additional description in this Statement
of Additional Information under the heading entitled "Net Asset Value."
2. Purchase the securities of issuers conducting their principal business
activity in a single industry, if immediately after such purchase the
value of its investments in such industry would exceed 25% of the value
of the Portfolio's total assets, provided that (a) telephone, gas, and
electric public utilities are each regarded as separate industries and
(b) banking, savings and loan associations, savings banks and finance
companies as a group will not be considered a single industry for the
purpose of this limitation. There is no limitation with respect to the
concentration of investments in securities issued or guaranteed by the
United States Government, its agencies or instrumentalities, or
certificates of deposit and bankers acceptances of United States banks
and savings and loan associations and this limitation shall not apply in
the Mortgage Securities Portfolio to investments in the mortgage and
mortgage-finance industry (in which more than 25% of the value of the
Portfolio's
-3-
<PAGE>
total assets will, except for temporary defensive positions, be
invested).
3. Borrow money, except from banks for temporary or emergency purposes,
including the meeting of redemption requests which might otherwise
require the untimely disposition of securities. Borrowing in the
aggregate by any particular Portfolio may not exceed 10% of the value of
the Portfolio's total assets at the time the borrowing is made and a
Portfolio may not make additional investments during any period that its
borrowings exceed 5% of the value of the Portfolio's total assets. For
purposes of this restriction, "borrowing" shall not include reverse
repurchase agreements.
4. Lend securities in excess of 20% of the value of its total assets. For
the purposes of this restriction, collateral arrangements with respect
to options, forward currency and futures transactions will not be deemed
to involve loans of securities.
5. Purchase securities on margin (but it may obtain such short-term credits
as may be necessary for the clearance of purchases and sales of
securities); or make short sales except where, by virtue of ownership of
other securities, it has the right to obtain, without payment of further
consideration, securities equal in kind and amount to those sold, and
only to the extent that the Portfolio's short positions will not at the
time of any short sales aggregate in total sale prices more than 10% of
its total assets. For purposes of this restriction, collateral
arrangements with respect to options, forward currency and futures
transactions will not be deemed to involve the use of margin.
6. Enter into reverse repurchase agreements if such investments, taken
together with borrowings represented by senior securities of the
Portfolio, exceed 33 1/3% of the total assets of the Portfolio less
liabilities other than obligations under such borrowings and reverse
repurchase agreements.
7. Act as an underwriter of securities, except to the extent the Fund may
be deemed to be an underwriter in connection with the disposition of
Portfolio securities.
8. Purchase or sell real estate, except that each Portfolio may invest in
securities secured by real estate or interests therein or securities
issued by companies which invest in real estate or interests therein.
9. Buy or sell oil, gas or other mineral leases, rights or royalty
contracts or commodities or commodity contracts, including futures
contracts except that the International Stock Portfolio may purchase and
sell futures contracts on financial instruments and indices and options
on such futures contracts and it may purchase and sell futures contracts
on foreign securities and options on such futures contracts. This
restriction does not prevent the Portfolios from purchasing securities
of companies investing in any of the foregoing.
10. Lend money to other persons except by the purchase of obligations in
which the Portfolio is authorized to invest and by entering into
repurchase agreements. For the purposes of this restriction, collateral
arrangements with respect to options, forward currency and future
transactions will not be deemed to involve loans of securities.
-4-
<PAGE>
11. Knowingly invest more than 15% of the value of its net assets in
securities or other investments, including repurchase agreements
maturing in more than seven days, that are illiquid or otherwise not
readily marketable; provided, however, the Money Market Portfolio shall
not invest in excess of 10% of its net assets in such illiquid
securities.
12. Pledge, hypothecate, mortgage or transfer (except as provided in
restrictions 4 and 6) as security for indebtedness any securities held
by the Fund, except in an amount of not more than 10% of the value of
any Portfolio's total assets and then only to secure borrowings
permitted by restrictions 3 and 5. For purposes of this restriction,
collateral arrangements with respect to options, forward currency and
futures transactions will not be deemed to involve a pledge of assets.
13. Purchase foreign securities not publicly traded in the United States
except that: (i) each of the Growth Portfolio, Small Company Portfolio
and Value Stock Portfolio may invest up to 10% of the value of its total
assets in securities of foreign issuers, (ii) the Money Market Portfolio
may invest in obligations of Canadian chartered banks, London branches
of United States banks and United States branches or agencies of foreign
banks, and (iii) the Asset Allocation Portfolio may invest in such
securities subject to the restrictions applicable to those four
Portfolios. The provisions of this restriction apply to all Portfolios
other than the International Stock Portfolio.
14. Purchase securities of other investment companies with an aggregate
value in excess of 5% of the Portfolio's total assets, except in
connection with a merger, consolidation, acquisition or reorganization,
or by purchase in the open market of securities of closed-end companies
where no underwriter or dealer's commission or profit, other than
customary broker's commission, is involved, and if immediately
thereafter not more than 10% of the value of the Portfolio's total
assets would be invested in such securities.
15. Issue or acquire puts, calls, or combinations thereof.
16. Purchase securities for the purpose of exercising control or management.
17. Participate on a joint (or a joint and several) basis in any trading
account in securities (but this does not prohibit the "bunching" of
orders for the sale or purchase of Portfolio securities with the other
Portfolios or with other accounts advised by MIMLIC Management, or, in
the case of the Capital Appreciation and International Stock Portfolios,
by Winslow Management and Templeton Counsel, respectively, to reduce
brokerage commissions or otherwise to achieve best overall execution).
If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in the investment's percentage of the value of a
Portfolio's total assets resulting from a change in such values or assets will
not constitute a violation of the percentage restriction.
Several other limitations apply with respect to the investment activities
of the Portfolios. These limitations, which arise from the requirements of
various states in which the underlying contracts are offered, have been adopted
by the Fund in order to secure compliance. As a result of these further
limitations, some investment practices otherwise permitted under those
-5-
<PAGE>
restrictions described above in paragraphs 1, 3 and 6 are no longer allowed. In
particular, the Fund has agreed that as long as the underlying contracts are
offered in such states the Fund (i) will not purchase or otherwise acquire the
voting security of any issuer if as a result of such acquisition all of the
Fund's Portfolios in the aggregate will own more than 10% of the total issued
and outstanding voting securities of such issuer, and (ii) will limit its
borrowing for any particular Portfolio to (a) 10% of the Portfolio's total
assets when borrowing for any general purpose and (b) 25% of the Portfolio's
total assets when borrowing as a temporary measure to facilitate redemptions.
For the purpose of these aggregate limitations on borrowing, reverse repurchase
agreements will be considered to be borrowings.
PORTFOLIO TURNOVER
Each Portfolio has a different expected annual rate of portfolio turnover,
which is calculated by dividing the lesser of purchases or sales of Portfolio
securities during the fiscal year by the monthly average of the value of the
Portfolio's securities (excluding from the computation all securities with
maturities at the time of acquisition of one year or less). A high rate of
turnover in a Portfolio generally involves correspondingly greater brokerage
commission expenses, which must be borne directly by the Portfolio. Turnover
rates may vary greatly from year to year and within a particular year and may
also be affected by cash requirements for redemptions of each Portfolio's shares
and by requirements which enable the Fund to receive favorable tax treatment.
The portfolio turnover rates associated with each Portfolio will, of course, be
affected by the level of purchases and redemptions of shares of each Portfolio.
However, because rate of portfolio turnover is not a limiting factor, particular
holdings may be sold at any time, if in the opinion of MIMLIC Management such a
sale is advisable.
The Money Market Portfolio, consistent with its investment objective, will
attempt to maximize yield through trading. This may involve selling instruments
and purchasing different instruments to take advantage of disparities of yields
in different segments of the high grade money market or among particular
instruments within the same segment of the market. Since the Portfolio's assets
will be invested in securities with short maturities and the Portfolio will
manage its assets as described above, the Portfolio's holdings of money market
instruments will turn over several times a year. However, this does not
generally increase the Portfolio's brokerage costs, since brokerage commissions
as such are not usually paid in connection with the purchase or sale of the
instruments in which the Portfolio invests since such securities will be
purchased on a net basis.
It is anticipated that the annual portfolio turnover rates for the Growth,
Index 500, International Stock, Small Company, Value Stock and Maturing
Government Bond Portfolios will not exceed 100%, and that the annual portfolio
turnover rates for the Bond, Capital Appreciation and Mortgage Securities
Portfolios will not exceed 200%. In the Asset Allocation Portfolio, portfolio
turnover rate for the common stock and other equity securities held by it will
approximate the portfolio turnover rate of the Growth Portfolio generally.
Similarly, the portfolio turnover rate of the Asset Allocation Portfolio with
respect to bonds and other debt securities with maturities generally exceeding
one year will approximate the portfolio turnover of the Bond Portfolio. In
addition, portfolio turnover will be increased in the Asset Allocation Portfolio
to the extent that emphasis in its holdings may shift from one type of security
to another. Turnover will, therefore, be dependent as well upon economic
conditions or general levels of securities prices. For each of the last three
calendar years, the portfolio turnover rates for the various Portfolios were as
follows:
-6-
<PAGE>
<TABLE>
<CAPTION>
Portfolio Turnover Rate
-----------------------
Portfolio 1995 1994 1993
--------- ---- ---- ----
<S> <C> <C> <C>
Growth 91.9% 42.0% 51.0%
Bond 205.4 166.2 166.8
Money Market N/A N/A N/A
Asset Allocation 157.0 123.6 85.7
Mortgage Securities 133.7 197.3 138.4
Index 500 4.8 5.9 4.8
Capital Appreciation 51.1 68.4 95.9
International Stock 20.5 12.9 12.7
Small Company 61.3 28.1 34.9
Value Stock 164.2 49.5 N/A
Maturing Government Bond -
1998 Portfolio 9.0 -0- N/A
2002 Portfolio -0- 11.6 N/A
2006 Portfolio 10.0 -0- N/A
2010 Portfolio -0- 14.5 N/A
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS
The names, addresses, principal occupations, and other affiliations of
directors and executive officers of the Fund are given below:
Position with Principal Occupation and other
Name, Age and Address the Fund Affiliations (past 5 years)
- --------------------- ------------- -----------------------------
Charles E. Arner, 73 Director Retired; Vice Chairman of
E-1218 First National The First National Bank of
Bank Building Saint Paul from November
St. Paul, Minnesota 55101 1983 through June 1984;
Chairman and Chief Executive
Officer of The First National
Bank of Saint Paul from
October 1980 through November
1983
Ellen S. Berscheid, Ph.D., 59 Director Regents' Professor of
Department of Psychology Psychology, University of
University of Minnesota Minnesota
N309 Elliott Hall
Minneapolis, Minnesota 55455
Frederick P. Feuerherm*, 49 Vice President, Second Vice President of The
The Minnesota Mutual Life Treasurer and Minnesota Mutual Life
Insurance Company Director Insurance Company; Vice
400 Robert Street North President and Assistant
St. Paul, Minnesota 55101 Secretary of MIMLIC
Asset Management Company
Ralph D. Ebbott, 68 Director Retired; Vice President and
409 Birchwood Avenue Treasurer, Minnesota Mining
White Bear Lake, and Manufacturing Company
Minnesota 55110 through June 1989
-7-
<PAGE>
Paul H. Gooding*, 55 President, Vice President and Treasurer
The Minnesota Mutual Life Treasurer and of The Minnesota Mutual Life
Insurance Company Director Insurance Company; President
400 Robert Street North and Treasurer of MIMLIC Asset
St. Paul, Minnesota 55101 Management Company
Bardea C. Huppert, 47 Vice President President, Chief Executive
MIMLIC Sales Corporation Officer and Director, MIMLIC
400 Robert Street North Sales Corporation; Second Vice
St. Paul, Minnesota 55101 President of The Minnesota
Mutual Life Insurance Company
Donald F. Gruber, 51 Secretary Senior Counsel of The
The Minnesota Mutual Life Minnesota Mutual Life
Insurance Company Insurance Company
400 Robert Street North
St. Paul, Minnesota 55101
*Denotes directors of the Fund who are "interested persons" (as defined in the
Investment Company Act of 1940) of the Fund or MIMLIC Asset Management Company
("MIMLIC Management").
The Fund has an Executive Committee, elected by the Board of Directors, to
exercise the powers of the Board in the management of the business and affairs
of the Fund when the Board is not in session. The Executive Committee is
composed of Messrs. Gooding and Feuerherm.
No compensation is paid by the Fund to any of its officers or directors who
is affiliated with MIMLIC Management. Each director of the Fund who is not
affiliated with MIMLIC Management was compensated by the Fund during the fiscal
year ended December 31, 1995 in accordance with the following table:
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits Estimated from
Accrued Annual Fund and
as Part Benefits Fund Complex
Compensation of Fund Upon Paid to
Name of Director from the Fund Expenses Retirement Directors(1)
- ---------------- ------------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Charles E. Arner $7,325 n/a n/a $9,000
Ellen S. Berscheid $7,325 n/a n/a $9,000
Ralph D. Ebbott $7,325 n/a n/a $9,000
</TABLE>
(1) Each Director of the Fund who is not affiliated with MIMLIC Management is
also a director of the other nine investment companies of which MIMLIC
Management's wholly-owned subsidiary, Advantus Capital Management, Inc., is
the investment adviser (ten investment companies in total-the "Fund
Complex"). Such directors receive compensation in connection with all such
investment companies which, in the aggregate, is equal to $5,000 per year
and $1,000 per
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<PAGE>
meeting attended (and reimbursement of travel expenses to attend directors'
meetings). The portion of such compensation borne by the Fund is a pro
rata portion based on the ratio that the Fund's total net assets bears to
the total net assets of the Fund Complex.
INVESTMENT ADVISORY AND OTHER SERVICES
ADVISER--GENERALLY
MIMLIC Management has been the investment adviser and manager of the Fund
since the Fund began business in 1985. It acts as such pursuant to written
agreements periodically approved by the directors or shareholders of the Fund.
The address of MIMLIC Management is that of the Fund. Winslow Management serves
as investment sub-adviser to the Fund's Capital Appreciation Portfolio pursuant
to an investment sub-advisory agreement with MIMLIC Management. Templeton
Counsel serves as investment sub-adviser to the Fund's International Stock
Portfolio pursuant to an investment sub-advisory agreement with MIMLIC
Management.
CONTROL AND MANAGEMENT OF ADVISER
MIMLIC Management is a wholly-owned subsidiary of Minnesota Mutual, which
was organized in 1880, and has assets of approximately $9.8 billion. Paul H.
Gooding, President, Treasurer, and a director of MIMLIC Management is a Vice
President and Treasurer of Minnesota Mutual. Frederick P. Feuerherm, Vice
President, Assistant Secretary and a director of MIMLIC Management is a Second
Vice President of Minnesota Mutual. Messrs. Gooding and Feuerherm are also
Directors of the Fund.
INVESTMENT ADVISORY AGREEMENT
MIMLIC Management acts as investment adviser and manager of the Growth,
Bond, Money Market, Asset Allocation and Mortgage Securities Portfolios of the
Fund under an Investment Advisory Agreement dated January 30, 1986, which became
effective the same date when approved by shareholders, and which was last
approved by the Board of Directors (including a majority of the directors who
are not parties to the contract, or interested persons of any such party) on
January 17, 1996. MIMLIC Management acts as investment adviser and manager of
the Index 500 and Capital Appreciation Portfolios of the Fund under a
Supplemental Investment Advisory Agreement dated April 28, 1987, which became
effective the same date when approved by shareholders of those two Portfolios,
and which was last approved by the Board of Directors (including a majority of
the directors who are not parties to the contract, or interested persons of any
such party) on January 17, 1996. MIMLIC Management acts as investment adviser
and manager of the International Stock Portfolio under the Second Supplemental
Investment Advisory Agreement dated April 27, 1993, which was last approved by
the shareholders of that Portfolio on April 27, 1993, and which was last
approved by the Board of Directors (including a majority of the directors who
are not parties to the contract, or interested persons of any such party) on
January 17, 1996. MIMLIC Management acts as investment adviser and manager of
the Small Company Portfolio under the Third Supplemental Investment Advisory
Agreement dated April 27, 1993, which became effective the same date when
approved by the shareholders of that Portfolio, and which was last approved by
the Board of Directors (including a majority of the directors who are not
parties to the contract, or interested persons of any such party) on January 17,
1996. MIMLIC Management acts as investment adviser and manager of the Value
Stock Portfolio and the four Maturing Government Bond Portfolios of the Fund
under the Fourth Supplemental Investment Advisory Agreement dated April 19,
1994, which became effective on April 25, 1994 when approved by shareholders of
those Portfolios, and which was last approved by the Board of Directors
(including a majority of the directors who are not parties to the
-9-
<PAGE>
contract, or interested persons of any such party) on January 17, 1996.
The Investment Advisory Agreement, the Supplemental Investment Advisory
Agreement, the Second Supplemental Investment Advisory Agreement, the Third
Supplemental Investment Advisory Agreement and the Fourth Supplemental
Investment Advisory Agreement (collectively, the "Agreements") will terminate
automatically in the event of its assignment. In addition, the Agreements are
terminable at any time, without penalty, by the Board of Directors of the Fund
or by vote of a majority of the Fund's outstanding voting securities on 60 days'
written notice to MIMLIC Management, and by MIMLIC Management on 60 days'
written notice to the Fund. Unless sooner terminated, the Agreements shall
continue in effect for more than two years after its execution only so long as
such continuance is specifically approved at least annually either by the Board
of Directors of the Fund or by a vote of a majority of the outstanding voting
securities, provided that in either event such continuance is also approved by
the vote of a majority of the directors who are not interested persons of any
party to the Agreements, cast in person at a meeting called for the purpose of
voting on such approval. The required shareholder approval of any continuance
of the Agreements shall be effective with respect to any Portfolio if a majority
of the outstanding voting securities of the class of capital stock of that
Portfolio votes to approve such continuance, notwithstanding that such
continuance may not have been approved by a majority of the outstanding voting
securities of the Fund.
If the shareholders of a class of capital stock of any Portfolio fail to
approve any continuance of the Agreements, MIMLIC Management will continue to
act as investment adviser with respect to such Portfolio pending the required
approval of its continuance, or a new contract with MIMLIC Management or a
different adviser or other definitive action; provided, that the compensation
received by MIMLIC Management in respect of such Portfolio during such period
will be no more than its actual costs incurred in furnishing investment advisory
and management services to such Portfolio or the amount it would have received
under the Agreement in respect of such Portfolio, whichever is less.
The Agreements may be amended by the parties only if such amendment is
specifically approved by the vote of a majority of the outstanding voting
securities of the Fund and by the vote of a majority of the directors of the
Fund who are not interested persons of any party to the Agreement cast in person
at a meeting called for the purpose of voting on such approval. The required
shareholder approval shall be effective with respect to any Portfolio if a
majority of the outstanding voting securities of the class of capital stock of
that Portfolio vote to approve the amendment, notwithstanding that the amendment
may not have been approved by a majority of the outstanding voting securities of
the Fund.
SUB-ADVISER - WINSLOW MANAGEMENT
Winslow Capital Management, Inc. ("Winslow Management"), a Minnesota
corporation with principal offices at 4720 IDS Tower, 80 South Eighth Street,
Minneapolis, Minnesota 55402 has been retained under an investment sub-advisory
agreement to provide investment advice and, in general, to conduct the
management and investment program of the Capital Appreciation Portfolio, subject
to the general control of the Board of Directors of the Fund. Winslow
Management is a recent entrant into the advisory business, having begun business
in June of 1992. Winslow Management is a registered investment adviser under
the Investment Advisers Act of 1940. The firm was established by its
investment principals with a focus on providing management services to growth
equity investment accounts. An additional experienced principal joined the firm
in October of 1993. Winslow Management has one other investment company client
for which it acts as the investment adviser. Other assets currently under
management are managed for corporate, endowment, foundation, retirement system
and individual clients.
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<PAGE>
Prior to October 1, 1992, investment sub-advisory services were provided to
the Capital Appreciation Portfolio by Alliance Capital Management L.P., which
had provided such services since the Portfolio's inception.
Certain clients of Winslow Management may have investment objectives and
policies similar to that of the Capital Appreciation Portfolio. Winslow
Management may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients simultaneously
with the Capital Appreciation Portfolio. If transactions on behalf of more than
one client during the same period increase the demand for securities being
purchased or the supply of securities being sold, there may be an adverse effect
on price. It is the policy of Winslow Management to allocate advisory
recommendations and the placing of orders in a manner which is deemed equitable
by Winslow Management to the accounts involved, including the Capital
Appreciation Portfolio. When two or more of the clients of Winslow Management
(including the Capital Appreciation Portfolio) are purchasing the same security
on a given day from the same broker-dealer, such transactions may be averaged as
to price.
INVESTMENT SUB-ADVISORY AGREEMENT
Winslow Management acts as investment sub-adviser to the Fund's Capital
Appreciation Portfolio under an Investment Sub-Advisory Agreement (the "Winslow
Management Agreement") with MIMLIC Management dated May 1, 1996, which became
effective the same date and was approved by shareholders of the Capital
Appreciation Portfolio on April 23, 1996. The Winslow Management Agreement was
last approved for continuance by the Board of Directors of the Fund, including a
majority of the Directors who are not a party to the Winslow Management
Agreement or interested persons of any such party, on January 17, 1996. Prior
to May 1, 1996, Winslow Management acted as investment sub-adviser to the
Capital Appreciation Portfolio under an Investment Sub-Advisory Agreement with
MIMLIC Management dated October 1, 1992, which became effective the same date
and was approved by shareholders of the Capital Appreciation Portfolio on
November 13, 1992. The Winslow Management Agreement will terminate
automatically upon the termination of the Investment Advisory and Supplemental
Investment Advisory Agreements and in the event of its assignment. In addition,
the Winslow Management Agreement is terminable at any time, without penalty, by
the Board of Directors of the Fund, by MIMLIC Management or by vote of a
majority of the Capital Appreciation Portfolio's outstanding voting securities
on 60 days' written notice to Winslow Management, and by Winslow Management on
60 days' written notice to MIMLIC Management. Unless sooner terminated, the
Winslow Management Agreement shall continue in effect from year to year if
approved at least annually either by the Board of Directors of the Fund or by a
vote of a majority of the outstanding voting securities of the Capital
Appreciation Portfolio, provided that in either event such continuance is also
approved by the vote of a majority of the Directors who are not interested
persons of any party to the Winslow Management Agreement, cast in person at a
meeting called for the purpose of voting on such approval.
Information concerning the services performed by MIMLIC Management under
the Agreement, by Winslow Management under the Winslow Management Agreement, and
the fees payable and expenses borne by the Fund are set forth in the Prospectus,
which information is incorporated herein by reference.
SUB-ADVISER - TEMPLETON COUNSEL
Templeton Investment Counsel, Inc., (hereinafter "Templeton Counsel"), a
Florida corporation with principal offices at 500 East Broward Boulevard,
Ft. Lauderdale, Florida 33394 has been retained under an investment sub-advisory
agreement to provide investment advice and, in general, to conduct the
management investment program of the International Stock Portfolio, subject to
the general control of the Board of Directors of the Fund. Templeton Counsel is
an indirect, wholly-owned subsidiary of Templeton
-11-
<PAGE>
Worldwide, Inc., Ft. Lauderdale, Florida, which in turn is a wholly-owned
subsidiary of Franklin Resources, Inc. ("Franklin").
Franklin is a large, diversified financial services organization. Through
its operating subsidiaries, Franklin provides a variety of investment products
and services to institutions and individuals throughout the United States and
abroad. One of the country's largest mutual fund organizations, Franklin's
business includes the provision of management, administrative and distribution
services to the Franklin/Templeton Group of Funds, which is distributed through
a nationwide network of banks, broker-dealers, financial planners and investment
advisers. Franklin is headquartered in San Mateo, California, and its common
stock is listed on the New York Stock Exchange under the ticker symbol BEN.
Certain clients of Templeton Counsel may have investment objectives and
policies similar to that of the International Stock Portfolio. Templeton
Counsel may, from time to time make recommendations which result in the purchase
or sale of a particular security by its other clients simultaneously with the
International Stock Portfolio. If transactions on behalf of more than one
client during the same period increase the demand for securities being purchased
or the supply of securities being sold, there may be an adverse effect on price.
It is the policy of Templeton Counsel to allocate advisory recommendations and
the placing of orders in a manner which is deemed equitable by Templeton Counsel
to the accounts involved, including the International Stock Portfolio. When two
or more of the clients of Templeton Counsel (including the International Stock
Portfolio) are purchasing the same security on a given day from the same broker-
dealer, such transactions may be averaged as to price.
INVESTMENT SUB-ADVISORY AGREEMENT - TEMPLETON COUNSEL
Templeton Counsel acts as an investment sub-adviser to the Fund's
International Stock Portfolio under an Investment Sub-Advisory Agreement (the
"Templeton Agreement") with MIMLIC Management dated November 13, 1992, which
became effective the same date it was approved by shareholders of the
International Stock Portfolio. The Templeton Agreement was last approved for
continuance by the Board of Directors of the Fund, including a majority of the
Directors who are not a party to the Templeton Agreement or interested persons
of any such party, on January 17, 1996. The Templeton Agreement will terminate
automatically upon the termination of the Investment Advisory and Supplemental
Investment Advisory Agreements and in the event of its assignment. In addition,
the Templeton Agreement is terminable at any time, without penalty, by the Board
of Directors of the Fund, by MIMLIC Management or by a vote of the majority of
the International Stock Portfolio's outstanding voting securities on 60 days'
written notice to Templeton Counsel and by Templeton Counsel on 60 days' written
notice to MIMLIC Management. Unless sooner terminated, the Templeton Agreement
shall continue in effect from year to year if approved at least annually by the
Board of Directors of the Fund or by a vote of a majority of the outstanding
voting securities of the International Stock Portfolio, provided that in either
event such continuance is also approved by the vote of a majority of the
directors who are not interested persons of any party to the Templeton
Agreement, cast in person at a meeting called for the purpose of voting on such
approval.
Information concerning the services performed by MIMLIC Management under
the agreement by Templeton Counsel under the Templeton Agreement and the fees
payable and expenses borne by the Fund are set forth in the prospectus, which
information is incorporated herein by reference.
-12-
<PAGE>
ADMINISTRATIVE SERVICES
In addition, effective May 1, 1992, the Fund entered into an agreement with
Minnesota Mutual under which Minnesota Mutual provides accounting, legal and
other administrative services to the Fund. Prior to May 1, 1996, Minnesota
Mutual provided such services at a monthly cost of $1,500 per Portfolio.
Effective May 1, 1996, Minnesota Mutual provides such services at a monthly cost
of $2,400 per Portfolio.
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
ADVISER
MIMLIC Management selects and (where applicable) negotiates commissions
with the brokers who execute the transactions for all Portfolios of the Fund,
except the Capital Appreciation and International Stock Portfolios. The primary
criteria for the selection of a broker is the ability of the broker, in the
opinion of MIMLIC Management, to secure prompt execution of the transactions on
favorable terms, including the reasonableness of the commission and considering
the state of the market at the time. In selecting a broker, MIMLIC Management
considers the quality and expertise of that brokerage and any research services
(as defined in the Securities Exchange Act of 1934), and generally the Fund pays
higher than the lowest commission rates available. Such research services
include advice, both directly and in writing, as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or seller of securities, as well as
analyses and reports concerning issues, industries, securities, economic factors
and trends, portfolio strategy, and the performance of accounts. By allocating
brokerage business in order to obtain research services for MIMLIC Management,
the Fund enables MIMLIC Management to supplement its own investment research
activities and allows MIMLIC Management to obtain the views and information of
individuals and research staffs of many different securities research firms
prior to making investment decisions for the Fund. To the extent such
commissions are directed to these other brokers who furnish research services to
MIMLIC Management, MIMLIC Management receives a benefit, not capable of
evaluation in dollar amounts, without providing any direct monetary benefit to
the Fund from these commissions.
There is no formula for the allocation by MIMLIC Management of the Fund's
brokerage business to any broker-dealers for brokerage and research services.
However, MIMLIC Management will authorize the Fund to pay an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker would have charged only if MIMLIC Management
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker viewed in terms of either that particular transaction or MIMLIC
Management's overall responsibilities with respect to the accounts as to which
it exercises investment discretion.
To the extent research services are used by MIMLIC Management in rendering
investment advice to the Fund, such services would tend to reduce MIMLIC
Management's expenses. However, MIMLIC Management does not believe that an
exact dollar amount can be assigned to these services. Research services
received by MIMLIC Management from brokers or dealers executing transactions for
the Fund will be available also for the benefit of other portfolios managed by
MIMLIC Management, and conversely, research services received by MIMLIC
Management in respect of transactions for such other portfolios will be
available for the benefit of the Fund. Brokerage Commissions paid during 1995
were as follows: Growth Portfolio, $474,096; Asset Allocation Portfolio,
$412,885; Index 500 Portfolio, $32,651; Capital Appreciation Portfolio,
$201,306; International Stock Portfolio, $154,775; Small Company Portfolio,
$85,238; and Value Stock Portfolio, $136,701. Brokerage commissions paid during
1994 were as follows: Growth Portfolio, $204,757; Asset Allocation Portfolio,
$271,137; Index 500 Portfolio, $25,775; Capital Appreciation Portfolio,
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<PAGE>
$194,531; International Stock Portfolio, $158,373; Small Company Portfolio,
$55,542; and Value Stock Portfolio, $19,950. Brokerage commissions paid during
1993 were as follows: Growth Portfolio, $340,519; Asset Allocation Portfolio,
$455,365; Index 500 Portfolio, $24,614; Capital Appreciation Portfolio,
$263,702; International Stock Portfolio, $117,010; and Small Company Portfolio,
$60,497. One hundred percent of the brokerage commissions paid by the
Portfolios during 1995, 1994 and 1993 was paid to brokers to whom such
transactions were directed in exchange for research services.
Most transactions in money market instruments will be purchases from
issuers of or dealers in money market instruments acting as principal. There
usually will be no brokerage commissions paid by the Fund for such purchases
since securities will be purchased on a net price basis. Trading does, however,
involve transaction costs. Transactions with dealers serving as primary market
makers reflect the spread between the bid and asked prices of securities.
Purchases of underwritten issues may be made which will reflect a fee paid to
the underwriter.
The Fund will not execute portfolio transactions through any affiliate,
except as described below. MIMLIC Management believes that most research
services obtained by it generally benefit one or more of the investment
companies which it manages and also benefits accounts which it manages.
Normally research services obtained through managed funds and managed accounts
investing in common stocks would primarily benefit such funds and accounts;
similarly, services obtained from transactions in fixed income securities would
be of greater benefit to the managed funds and managed accounts investing in
debt securities.
In addition to providing investment management services to the Fund, MIMLIC
Management provides investment advisory services for three insurance companies,
namely Minnesota Mutual and its subsidiary life insurance companies and certain
associated separate accounts. It also provides investment advisory services to
qualified pension and profit sharing plans, corporations, partnerships,
investment companies and various private accounts. Frequently, investments
deemed advisable for the Fund are also deemed advisable for one or more of such
accounts, so that MIMLIC Management may decide to purchase or sell the same
security at or about the same time for both the Fund and one of those accounts.
In such circumstances, orders for a purchase or sale of the same security for
one or more of those accounts may be combined with an order for the Fund, in
which event the transactions will be averaged as to price and normally allocated
as nearly as practicable in proportion to the amounts desired to be purchased or
sold for each account. While in some instances combined orders could adversely
affect the price or volume of a security, it is believed that the Fund's
participation in such transactions on balance will produce better net results
for the Fund.
The Fund's acquisition during the fiscal year ended December 31, 1995, of
securities of its regular brokers or dealers or of the parent of those brokers
or dealers that derive more than 15 percent of gross revenue from securities-
related activities is presented below:
Value of Securities Owned
in the Portfolios at
Name of Issuer End of Fiscal Year
-------------- -------------------------
Lehman Bros. $875,500
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<PAGE>
SUB-ADVISER - WINSLOW MANAGEMENT
Winslow Management, in managing the Capital Appreciation Portfolio, intends
to follow the same brokerage practices as those described above for MIMLIC
Management.
SUB-ADVISER - TEMPLETON COUNSEL
Templeton Counsel, in managing the International Stock Portfolio, follows
the same basic brokerage practices as those described above for MIMLIC
Management. In addition, in selecting brokers for portfolio transactions,
Templeton Counsel takes into account its past experience as to brokers qualified
to achieve "best execution," including the ability to effect transactions at all
where a large block is involved, availability of the broker to stand ready to
execute possibly difficult transactions in the future, the financial strength
and stability of the broker, and whether the broker specializes in foreign
securities held by the International Stock Portfolio. Purchases and sales of
portfolio securities within the United States other than on a securities
exchange are executed with primary market makers acting as principal, except
where, in the judgment of Templeton Counsel, better prices and execution may be
obtained on a commission basis or from other sources.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund are currently offered continuously at prices equal to
the respective net asset values of the Portfolios, only to Minnesota Mutual and
its separate accounts. The Fund sells its shares to that company without the
use of any underwriter. It is possible that at some later date the Fund may
offer its shares to other investors and it reserves the right to do so.
Shares of the Fund are sold and redeemed at their net asset value next
computed after a purchase or redemption order is received by the Fund.
Depending upon the net asset values at that time, the amount paid upon
redemption may be more or less than the cost of the shares redeemed. Payment
for shares redeemed will generally be made within seven days after receipt of a
proper notice of redemption. The right to redeem shares or to receive payment
with respect to any redemption may only be suspended for any period during
which: (a) trading on the New York Stock Exchange is restricted as determined
by the Securities and Exchange Commission or such exchange is closed for other
than weekends and holidays; (b) an emergency exists, as determined by the
Securities and Exchange Commission, as a result of which disposal of Portfolio
securities or determination of the net asset value of a Portfolio is not
reasonably practicable; and (c) the Securities and Exchange Commission by order
permits postponement for the protection of shareholders.
FUND SHARES AND VOTING RIGHTS
The authorized capital of the Fund consists of ten billion shares of
capital stock (increased from one billion shares on April 28, 1987) with a par
value of $.01 per share; 200,000,000 shares are allocated to each of the Growth,
Bond, Money Market, Asset Allocation, Mortgage Securities, Index 500, Capital
Appreciation, International Stock, Small Company, Value Stock and the
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<PAGE>
four Maturing Government Bond Portfolios. The remaining 7,200,000,000 shares
may be allocated by the Board of Directors to any new or existing Portfolios.
All shares of all Portfolios have equal voting rights, except that only
shares of a particular Portfolio are entitled to vote certain matters pertaining
only to that Portfolio. Pursuant to the Investment Company Act and the rules
and regulations thereunder, certain matters approved by a vote of all Fund
shareholders may not be binding on a Portfolio whose shareholders have not
approved such matter.
Each issued and outstanding share is entitled to one vote and to
participate equally in dividends and distributions declared by the respective
Portfolio and in net assets of such Portfolio upon liquidation or dissolution
remaining after satisfaction of outstanding liabilities. The shares of each
Portfolio, when issued, are fully paid and non-assessable, have no preemptive,
conversion, or similar rights, and are freely transferable. Fund shares do not
have cumulative voting rights, which means that the holders of more than half of
the Fund shares voting for election of directors can elect all of the directors
if they so choose. In such event, the holders of the remaining shares would not
be able to elect any directors.
The Fund will not hold periodically scheduled shareholder meetings.
Minnesota corporate law does not require an annual meeting. Instead, it
provides for the Board of Directors to convene shareholder meetings when it
deems appropriate. In addition, if a regular meeting of shareholders has not
been held during the immediately preceding fifteen months, a shareholder or
shareholders holding three percent or more of the voting shares of a Fund may
demand a regular meeting of shareholders of the Fund by written notice of demand
given to the chief executive officer or the chief financial officer of the Fund.
Within thirty days after receipt of the demand by one of those officers, the
Board of Directors shall cause a regular meeting of shareholders to be called
and held no later than ninety days after receipt of the demand, all at the
expense of the Fund. A special meeting may also be called at any time by the
chief executive officer, two or more directors, or a shareholder or shareholders
holding ten percent of the voting shares of the Fund. At a meeting called for
the purpose, shareholders may remove any director by a vote of two-thirds of the
outstanding shares. The Fund will assist shareholders seeking to call such a
meeting in communicating with other shareholders, provided they are at least ten
in number, have been shareholders for at least six months and hold in the
aggregate at least one percent of the outstanding shares or shares having a
value of at least $25,000, whichever is less. Additionally, the Investment
Company Act of 1940 requires shareholder votes for all amendments to fundamental
investment policies and restrictions, and for all investment advisory contracts
and amendments thereto.
NET ASSET VALUE
The net asset value of the shares of the Portfolios is computed once daily,
and, in the case of Money Market Portfolio, after the declaration of the daily
dividend, as of the primary closing time for business on the New York Stock
Exchange (as of the date hereof the primary close of trading is 3:00 p.m.
(Central Time), but this time may be changed) on each day, Monday through
Friday, except (i) days on which changes in the value of such Fund's portfolio
securities will not materially affect the current net asset value of such Fund's
shares, (ii) days during which no such Fund's shares are tendered for redemption
and no order to purchase or sell such Fund's shares is received by such Fund and
(iii) customary national business holidays on which the New York Stock Exchange
is closed for trading (as of the date hereof, New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day). The net asset value per share of each Portfolio is computed by
adding the sum of the value of the securities held by
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that Portfolio plus any cash or other assets that it holds, subtracting all of
its liabilities, and dividing the result by the total number of shares
outstanding in that Portfolio at that time. Expenses, including the investment
advisory fee payable to MIMLIC Management, are accrued daily.
Securities held by the Growth Portfolio, the Bond Portfolio, the Asset
Allocation Portfolio, the Mortgage Securities Portfolio, the Index 500
Portfolio, the Capital Appreciation Portfolio, the International Stock
Portfolio, the Small Company Portfolio, the Value Stock Portfolio and the four
Maturing Government Bond Portfolios are valued at their market value.
Otherwise, such securities are valued at fair value as determined in good faith
by the Board of Directors, with calculations made by persons acting pursuant to
the direction of the Board. However, debt securities of the International Stock
Portfolio with maturities of 60 days or less when acquired, or which
subsequently are within 60 days of maturity, and all securities in the Money
Market Portfolio, are valued at amortized cost.
All instruments held by the Money Market Portfolio are valued on an
amortized cost basis. This involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which the value of an instrument in the Portfolio,
as determined by amortized cost, is higher or lower than the price the Portfolio
would receive if it sold the instrument. During periods of declining interest
rates, the daily yield on shares of the Portfolio computed by dividing the
annualized daily income of the Portfolio by the net asset value computed as
described above may tend to be higher than a like computation made by a
portfolio with identical investments utilizing a method of valuation based upon
market prices and estimates of market prices for all of its securities.
The Money Market Portfolio values its portfolio securities at amortized
cost in accordance with Rule 2a-7 under the Investment Company Act of 1940, as
amended. Pursuant to Rule 2a-7, the Board of Directors of the Fund has
determined, in good faith based upon a full consideration of all material
factors, that it is in the best interests of the Money Market Portfolio and its
shareholders to maintain a stable net asset value per share for such Portfolio
of a constant $1.00 per share by virtue of the amortized cost method of
valuation. The Money Market Portfolio will continue to use this method only so
long as the Board of Directors believes that it fairly reflects the market-based
net asset value per share. In accordance with Rule 2a-7, the Board of Directors
has undertaken, as a particular responsibility within the overall duty of care
owed to the Portfolio's shareholders, to establish procedures reasonably
designed, taking into account current market conditions and the Portfolio's
investment objective, to stabilize the Portfolio's net asset value per share at
a single value. These procedures include the periodic determination of any
deviation of current net asset value per share calculated using available market
quotations from the Portfolio's amortized cost price per share, the periodic
review by the Board of the amount of any such deviation and the method used to
calculate any such deviation, the maintenance of records of such determinations
and the Board's review thereof, the prompt consideration by the Board if any
such deviation exceeds 1/2 of 1%, and the taking of such remedial action by the
Board as it deems appropriate where it believes the extent of any such deviation
may result in material dilution or other unfair results to investors or existing
shareholders. Such remedial action may include reverse share splits,
redemptions in kind, selling portfolio instruments prior to maturity to realize
capital gains or losses, shortening the average portfolio maturity, withholding
dividends or utilizing a net asset value per share as determined by using
available market quotations.
-17-
<PAGE>
The Portfolio will, in further compliance with Rule 2a-7, maintain a
dollar-weighted average Portfolio maturity not exceeding 90 days and will limit
its Portfolio investments to those United States dollar-denominated instruments
which the Board determines present minimal credit risks and which are eligible
securities. The Portfolio will limit its investments in the securities of any
one issuer to no more than 5% of Portfolio assets and it will limit investment
in securities of less than the highest rated categories to 5% of Portfolio
assets. Investment in the securities of any issuer of less than the highest
rated categories will be limited to the greater of 1% of Portfolio assets or one
million dollars. In addition, the Fund will reassess promptly any security
which is in default or downgraded from its rating category to determine whether
that security then presents minimal credit risks and whether continuing to hold
the securities is in the best interests of the Portfolio in the Fund. In
addition, the Fund will record, maintain, and preserve a written copy of the
above-described procedures and a written record of the Board's considerations
and actions taken in connection with the discharge of its above-described
responsibilities.
PERFORMANCE DATA
CURRENT YIELD FIGURES FOR MONEY MARKET PORTFOLIO
Current annualized yield quotations for the Money Market Portfolio are
based on the Portfolio's net investment income for a seven-day or other
specified period and exclude any realized or unrealized gains or losses on
portfolio securities. Current annualized yield is computed by determining the
net change (exclusive of realized gains and losses from the sale of securities
and unrealized appreciation and depreciation) in the value of a hypothetical
account having a balance of one share at the beginning of the specified period,
dividing such net change in account value by the value of the account at the
beginning of the period, and annualizing this quotient on a 365-day basis. The
net change in account value reflects the value of any additional shares
purchased with dividends from the original share in the account during the
specified period, any dividends declared on such original share and any such
additional shares during the period, and expenses accrued during the period.
The Fund may also quote the effective yield of the Money Market Portfolio for a
seven-day or other specified period for which the current annualized yield is
computed by expressing the unannualized return on a compounded, annualized
basis. Purchasers of variable contracts issued by Minnesota Mutual should
recognize that the yield on the assets relating to such a contract which are
invested in shares of the Money Market Portfolio would be lower than the Money
Market Portfolio's yield for the same period since charges assessed against such
assets are not reflected in the Portfolio's yield. The yield and effective
yield of the Money Market Portfolio for the seven-day period ended December 31,
1995 were 5.09% and 5.22%, respectively.
CURRENT YIELD FIGURES FOR OTHER PORTFOLIOS
Yield quotations for Portfolios other than the Money Market and
International Stock Portfolios are determined by dividing the Portfolio's net
investment income per share for a 30-day period, excluding realized or
unrealized gains or losses, by the net asset value per share on the last day of
the period. In computing net investment income dividends are accrued daily
based on the stated dividend rate of each dividend-paying security, and interest
reflects an amortization of discount or premium on debt obligations (other than
installment debt obligations) based upon the market value of each
-18-
<PAGE>
obligation on the last day of the preceding 30-day period. Undeclared earned
income (net investment income which at the end of the base period has not been
declared as a dividend but is expected to be declared shortly thereafter) is
subtracted from the net asset value per share on the last day of the period. An
annualized yield figure is determined under a formula which assumes that the net
investment income is earned and reinvested at a constant rate and annualized at
the end of a six-month period. For the 30-day period ended December 31, 1995,
the yields of the Growth Portfolio, Bond Portfolio, Asset Allocation Portfolio,
Mortgage Securities Portfolio, Index 500 Portfolio, Capital Appreciation
Portfolio, Small Company Portfolio, the Value Stock Portfolio and the 1998,
2002, 2006 and 2010 Maturing Government Bond Portfolios were .97%, 5.65%, 2.91%,
5.16%, 1.86%, -.19%, .39%, .90%, 5.80%, 6.03%, 6.04% and 6.23%, respectively.
Such figures reflect the voluntary absorption of certain Fund expenses by
Minnesota Mutual described under "Investment Adviser" in the Prospectus. In the
absence of such absorption of expenses, the yield figures for such Portfolios
would have been .97%, 5.65%, 2.91%, 5.16%, 1.86%, -.19%, .39%, .90%, 5.50%,
5.44%, 5.28% and 4.67%, respectively.
TOTAL RETURN FIGURES FOR ALL PORTFOLIOS
Cumulative total return quotations for the Portfolios represent the total
return for the period since shares of the Portfolio became available for sale
pursuant to the Fund's registration statement. Cumulative total return is equal
to the percentage change between the net asset value of a hypothetical $1,000
investment at the beginning of the period and the net asset value of that same
investment at the end of the period with dividend and capital gain distributions
treated as reinvested.
The cumulative total return figures published by the Fund will reflect
Minnesota Mutual's voluntary absorption of certain Fund expenses (described
under "Investment Adviser" in the Prospectus). The cumulative total returns for
the Portfolios for the specified periods ended December 31, 1995 are shown in
the table below. The figures in parentheses show what the cumulative total
returns would have been had Minnesota Mutual not absorbed Fund expenses as
described above.
<TABLE>
<CAPTION>
From Inception Date of
to 12/31/95 Inception
----------- ---------
<S> <C> <C>
Growth Portfolio 187.3% (183.9%) 12/3/85
Bond Portfolio 142.0% (139.8%) 12/3/85
Money Market Portfolio 70.5% (65.0%) 12/3/85
Asset Allocation Portfolio 175.7% (175.0%) 12/3/85
Mortgage Securities Portfolio 114.1% (113.4%) 5/1/87
Index 500 Portfolio 169.2% (168.2%) 5/1/87
Capital Appreciation Portfolio 178.7% (174.9%) 5/1/87
International Stock Portfolio 53.0% (52.9%) 5/1/92
Small Company Portfolio 64.5% (64.5%) 5/3/93
Value Stock Portfolio 39.0% (38.6%) 5/2/94
Maturing Government Bond -
-19-
<PAGE>
1998 Portfolio 16.1% (14.8%) 5/2/94
2002 Portfolio 25.4% (23.2%) 5/2/94
2006 Portfolio 34.9% (31.8%) 5/2/94
2010 Portfolio 40.8% (34.8%) 5/2/94
</TABLE>
Yield quotations for Portfolios other than the Money Market Portfolio and all
quotations of cumulative total return figures will be accompanied by average
annual total return figures for a one-year period and for the period since
shares of the Portfolio became available pursuant to the Fund's registration
statement. Average annual total return figures are the average annual
compounded rates of return required for an account with an initial investment of
$1,000 to equal the redemption value of the account at the end of the period.
The average annual total return figures published by the Fund will reflect
Minnesota Mutual's voluntary absorption of certain Fund expenses. Prior to
January 1, 1986, the Fund incurred no expenses. During 1986 and from January 1
to March 6, 1987 Minnesota Mutual voluntarily absorbed all fees and expenses of
any portfolio that exceeded .75% of the average daily net assets of such
portfolio. For the period subsequent to March 6, 1987, Minnesota Mutual
voluntarily absorbed the fees and expenses that exceeded .65% of the average
daily net assets of the Growth, Bond, Money Market, Asset Allocation and
Mortgage Securities Portfolios, .55% of the average daily net assets of the
Index 500 Portfolio, .90% of the average daily net assets of the Capital
Appreciation, Small Company and Value Stock Portfolios and expenses that exceed
1.00% of the average daily net assets of the International Stock Portfolio
exclusive of the advisory fee. In addition, Minnesota Mutual has voluntarily
agreed to absorb all fees and expenses that exceed .40% of average daily net
assets for each of the four Maturing Government Bond Portfolios; however, for
the Portfolios which mature in 1998 and 2002, Minnesota Mutual has voluntarily
agreed to absorb such fees and expenses which exceed .20% of average daily net
assets from the Portfolio's inception to April 30, 1998 and which exceed .40% of
average daily net assets thereafter.
The average annual rates of return for the Portfolios for the specified
periods ended December 31, 1995 are shown in the table below. The figures in
parentheses show what the average annual rates of return would have been had
Minnesota Mutual not absorbed Fund expenses as described above.
<TABLE>
<CAPTION>
Year Ended Five Years Ten Years From Inception Date of
12/31/95 Ended 12/31/95 Ended 12/31/95 to 12/31/95 Inception
-------- -------------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Growth Portfolio 24.3% (24.3%) 13.0% (13.0%) 10.8% (10.7%) -- -- 12/3/85
Bond Portfolio 19.8% (18.4%) 9.6% (9.6%) 8.7% (8.6%) -- -- 12/3/85
Money Market Portfolio 5.4% (5.4%) 4.1% (4.0%) 5.4% (5.1%) -- -- 12/3/85
Asset Allocation Portfolio 25.0% (25.0%) 12.7% (12.7%) 10.3% (10.2%) -- -- 12/3/85
Mortgage Securities Portfolio 18.0% (18.0%) 9.0% (9.0%) -- -- 9.2% (9.1%) 5/1/87
Index 500 Portfolio 36.8% (36.8%) 16.2% (16.2%) -- -- 12.1% (12.0%) 5/1/87
Capital Appreciation Portfolio 22.8% (22.8%) 15.6% (15.6%) -- -- 12.5% (12.4%) 5/1/87
-20-
<PAGE>
International Stock Portfolio 14.2% (14.2%) -- -- -- -- 12.3% (12.3%) 5/1/92
Small Company Portfolio 32.1% (32.1%) -- -- -- -- 20.5% (20.5%) 5/3/93
Value Stock Portfolio 33.0% (32.9%) -- -- -- -- 21.8% (21.6%) 5/2/94
Maturing Government Bond-
1998 Portfolio 16.0% (15.5%) -- -- -- -- 9.3% (8.6%) 5/2/94
2002 Portfolio 25.0% (24.0%) -- -- -- -- 14.5% (13.3%) 5/2/94
2006 Portfolio 34.7% (33.4%) -- -- -- -- 19.7% (18.0%) 5/2/94
2010 Portfolio 41.2% (38.5%) -- -- -- -- 22.8% (19.6%) 5/2/94
</TABLE>
Purchasers of variable contracts issued by Minnesota Mutual should recognize
that the yield, cumulative total return and average annual total return on the
assets relating to such a contract which are invested in shares of any of the
above Portfolios would be lower than the yield, cumulative total return and
average annual total return of such Portfolio for the same period since charges
assessed against such assets are not reflected in the Portfolios' quotations.
PREDICTABILITY OF RETURN
ANTICIPATED VALUE AT MATURITY. The maturity values of zero-coupon bonds are
specified at the time the bonds are issued, and this feature, combined with the
ability to calculate yield to maturity, has made these instruments popular
investment vehicles for investors seeking reliable investments to meet long-term
financial goals.
Each Maturing Government Bond Portfolio consists primarily of zero-coupon bonds
but is actively managed to accommodate contract owner activity and to take
advantage of perceived market opportunities. Because of this active management
approach, each Maturing Government Bond Portfolio does not guarantee that a
certain price per share will be attained by the time a Portfolio is liquidated.
Instead, the Fund attempts to track the price behavior of a directly held zero-
coupon bond by:
(1) Maintaining a weighted average maturity within each Maturing
Government Bond Portfolio's target maturity year;
(2) Investing at least 90% of assets in securities that mature within
one year of that Portfolio's target maturity year [for example, a]
Portfolio with a maturity of ten years will be 90% composed of
securities having remaining maturities of nine, ten or eleven years
(rather than having half its securities with five-year maturities
and half with fifteen-year maturities];
(3) Investing a substantial portion of assets in Treasury STRIPS (the
most liquid Treasury zero);
(4) Under normal conditions, maintaining a nominal cash balance;
(5) Executing portfolio transactions necessary to accommodate net
contract owner purchases or redemptions on a daily basis; and
-21-
<PAGE>
(6) Whenever feasible, contacting several U.S. government securities
dealers for each intended transaction in an effort to obtain the
best price on each transaction.
These measures enable the adviser to calculate an anticipated value at maturity
(AVM) for each share of a Maturing Government Bond Portfolio, calculated as of
the date of purchase of such share, that approximates the price per share that
such share will achieve by the weighted average maturity date of its Portfolio.
The AVM calculation for each Maturing Government Bond Portfolio is as follows:
2T
AVM = P(1 + AGR/2)
where P = the Portfolio's current price per share; T = the Portfolio's weighted
average term to maturity in years; and AGR = the anticipated growth rate.
This calculation assumes that the share owner will reinvest all dividend and
capital gain distributions. It also assumes an expense ratio and a portfolio
composition that remain constant for the life of the Maturing Government Bond
Portfolio. Because expenses and composition do not remain constant, however,
the Fund may calculate an AVM for each Maturing Government Bond Portfolio on any
day on which the Fund values its securities. Such an AVM is applicable only to
shares purchased on that date.
In addition to the measures described above, which the adviser believes are
adequate to assure close correspondence between the price behavior of each
Portfolio and the price behavior of directly held zero-coupon bonds with
comparable maturities, the Fund expects that each Portfolio will invest at least
90% of its net assets in zero-coupon bonds until it is within four years of its
target maturity year and at least 80% of its net assets in zero-coupon
securities within two to four years of its target maturity year. This
expectation may be altered if the market supply of zero-coupon securities
diminishes unexpectedly.
ANTICIPATED GROWTH RATE. The Fund may also calculate an anticipated growth rate
(AGR) for each Maturing Government Bond Portfolio on any day on which the Fund
values its securities. AGR is a calculation of the anticipated annualized rate
of growth for a Portfolio share, calculated from the date of purchase of such
share to the Portfolio's target maturity date. As is the case with calculations
of AVM, the AGR calculation assumes that the investor will reinvest all
dividends and capital gain distributions and that each Maturing Government Bond
Portfolio expense ratio and portfolio composition will remain constant. Each
Maturing Government Bond Portfolio AGR changes from day to day (i.e., a
particular AGR calculation is applicable only to shares purchased on that date),
due primarily to changes in interest rates and, to a lesser extent, to changes
in portfolio composition and other factors that affect the value of the
Portfolio's investments.
The Fund expects that a share owner who holds specific shares until a
Portfolio's weighted average maturity date, and who reinvests all dividends and
capital gain distributions, will realize an investment return and maturity value
on those shares that do not differ substantially from the AGR and AVM calculated
on the day such shares were purchased. The AGR and AVM calculated with respect
to shares purchased on any other date, however, may be materially different.
-22-
<PAGE>
TAXES
The Fund and each Portfolio qualified for the year ended December 31, 1995,
and intends to continue to qualify as a "regulated investment company" under the
provisions of Subchapter M of the Internal Revenue Code, as amended (the
"Code"). As a result of changes included in the Tax Reform Act of 1986, each
Portfolio of the Fund is treated as a separate entity for federal income tax
purposes. If each Portfolio of the Fund qualifies as a "regulated investment
company" and complies with the provisions of the Code relieving regulated
investment companies which distribute substantially all of their net income
(both ordinary income and capital gain) from federal income tax, each Portfolio
of the Fund will be relieved of such tax on the amounts distributed.
To qualify for treatment as a regulated investment company, each Portfolio
must, among other things, derive in each taxable year at least 90% of its gross
income from dividends, interest payments with respect to securities, and gains
(without deduction for losses) from the sale or other disposition of securities
and derive less than 30% of its gross income in each taxable year from gains
(without deduction for losses) from the sale or other disposition of securities
held for less than three months.
Each Portfolio of the Fund with outstanding shares which were purchased to
provide the Portfolio's initial capital (in an amount in excess of that
specified in the Code) and which are not attributable to any of the Contracts is
subject to a non-deductible excise tax equal to 4 percent of the excess, if any,
of the amount required to be distributed pursuant to the Code for each calendar
year over the amount actually distributed. Currently, only the International
Stock and Small Company Portfolios are subject to these distribution
requirements. In order to avoid the imposition of this excise tax, each
Portfolio generally must declare dividends by the end of a calendar year
representing 98 percent of that Portfolio's ordinary income for the calendar
year and 98 percent of its capital gain net income (both long-term and short-
term capital gains) for the twelve-month period ending October 31 of the
calendar year.
The foregoing is a general summary of applicable provisions of the Code and
Treasury Regulations now in effect and as currently interpreted by the courts
and the Internal Revenue Service. The Code and these Regulations, as well as
current interpretations thereof, may be changed at any time by legislative,
judicial or administrative action.
As the sole shareholder of the Fund will be Minnesota Mutual and the
separate accounts of Minnesota Mutual, this statement does not discuss federal
income tax consequences to the shareholder. For tax information with respect to
an owner of a contract issued in connection with the separate accounts, see the
Prospectus for those contracts.
REPORTS TO SHAREHOLDERS
Annual and semi-annual reports containing financial statements of the Fund
will be sent to shareholders.
INDEPENDENT AUDITORS
The financial statements, as of and for the year ended December 31, 1995, of
the Fund included in this Statement of Additional Information have been audited
by KPMG Peat Marwick LLP, 4200 Norwest Center, 90 South Seventh Street,
Minneapolis, Minnesota 55402, independent auditors, as indicated in their report
in this Statement of Additional Information, and are included herein in reliance
upon such report and upon the authority of such firm as experts in accounting
and auditing.
-23-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
MIMLIC Series Fund, Inc.
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments in securities, of the Growth, Bond, Money
Market, Asset Allocation, Mortgage Securities, Index 500, Capital Appreciation,
International Stock, Small Company, Maturing Government Bond 1998, Maturing
Government Bond 2002, Maturing Government Bond 2006, Maturing Government Bond
2010 and Value Stock Portfolios of MIMLIC Series Fund, Inc. as of December 31,
1995 and the related statements of operations for the year then ended and the
statements of changes in net assets for each of the years in the two-year period
then ended (the year ended December 31, 1995 and the period from May 2, 1994,
commencement of operations, to December 31, 1994 for the Maturing Government
Bond 1998, Maturing Government Bond 2002, Maturing Government Bond 2006,
Maturing Government Bond 2010 and Value Stock Portfolios) and the financial
highlights for each of the years in the five-year period then ended for the
Growth, Bond, Money Market, Asset Allocation, Mortgage Securities, Index 500 and
Capital Appreciation Portfolios, each of the years in the three-year period
ended December 31, 1995 and the period from May 1, 1992 to December 31, 1992 for
International Stock Portfolio, each of the years in the two-year period ended
December 31, 1995 and the period from May 3, 1993 to December 31, 1993 for Small
Company Portfolio and the year ended December 31, 1995 and period from May 2,
1994 to December 31, 1994 for the Maturing Government Bond 1998, Maturing
Government Bond 2002, Maturing Government Bond 2006, Maturing Government Bond
2010 and Value Stock Portfolios. These financial statements and the financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased and sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Growth, Bond, Money
Market, Asset Allocation, Mortgage Securities, Index 500, Capital Appreciation,
International Stock, Small Company, Maturing Government Bond 1998, Maturing
Government Bond 2002, Maturing Government Bond 2006, Maturing Government Bond
2010 and Value Stock Portfolios of MIMLIC Series Fund, Inc. as of December 31,
1995 and the results of their operations, changes in their net assets and the
financial highlights for the periods stated in the first paragraph above, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 2, 1996
-24-
<PAGE>
GROWTH PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
COMMON STOCKS (98.5%)
CAPITAL GOODS (8.0%)
Machinery (8.0%)
93,384 General Electric Company.................................... $ 6,723,648
45,300 Halliburton Company......................................... 2,293,313
73,700 Millipore Corporation....................................... 3,030,913
87,586 York International Corp..................................... 4,116,542
--------------
16,164,416
--------------
CONSUMER GOODS AND SERVICES (49.4%)
Consumer Goods (27.7%)
73,800 Abbott Laboratories......................................... 3,081,150
86,000 Coca-Cola Company........................................... 6,385,500
111,086 Columbia/HCA Healthcare Corporation......................... 5,637,614
45,200 Gillette Company............................................ 2,356,050
50,800 Johnson & Johnson........................................... 4,349,750
102,000 Merck & Co., Inc............................................ 6,706,500
66,418 Pepsico, Inc................................................ 3,711,106
65,800 Pfizer Inc.................................................. 4,145,400
64,000 Philip Morris Companies, Inc................................ 5,792,000
55,280 Procter & Gamble Company.................................... 4,588,240
35,800 Schering-Plough Corporation................................. 1,960,050
46,400 Service Corporation International........................... 2,041,600
52,300 Teva Pharmaceutical Industries (c).......................... 2,425,413
40,100 United Health Care.......................................... 2,626,550
--------------
55,806,923
--------------
Consumer Services (6.4%)
54,688 CUC International Inc (b)................................... 1,866,228
91,500 GTECH Holdings Corporation (b).............................. 2,379,000
109,141 Manpower.................................................... 3,069,591
46,500 McDonalds Corporation....................................... 2,098,312
85,300 Quebecor Printing Incorporated.............................. 1,439,437
33,200 Walt Disney Company......................................... 1,958,800
--------------
12,811,368
--------------
Food (3.5%)
49,300 Conagra, Inc................................................ 2,033,625
28,800 CPC International........................................... 1,976,400
30,000 Heinz Company............................................... 993,750
64,500 Sara Lee Corporation........................................ 2,055,937
--------------
7,059,712
--------------
Retail (6.5%)
122,300 Home Depot Inc.............................................. 5,855,112
2,100 Intimate Brands Inc......................................... 31,500
76,500 Kohl's Inc (b).............................................. 4,016,250
67,300 Office Depot, Inc. (b)...................................... 1,329,175
81,800 Wal-Mart Stores, Inc........................................ 1,830,275
--------------
13,062,312
--------------
Consumer Cyclical (5.3%)
60,608 Exide Corporation........................................... 2,780,392
46,200 Magna International Inc..................................... 1,998,150
130,400 Newell Co................................................... 3,374,100
47,606 Omnicom Group............................................... 1,773,323
51,700 Sunbeam Corporation......................................... 788,425
--------------
10,714,390
--------------
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
CREDIT SENSITIVE (16.3%)
Finance (10.4%)
28,518 American International Group, Inc........................... $ 2,637,915
40,970 Federal Home Loan Mortgage Corporation...................... 3,420,995
69,466 First Data Corporation...................................... 4,645,539
37,225 First Union Corporaiton..................................... 2,070,641
47,000 MGIC Investment Corporation................................. 2,549,750
86,000 Norwest Corporation......................................... 2,838,000
58,350 SunAmerica Incorporated..................................... 2,771,625
--------------
20,934,465
--------------
Utilities (5.9%)
102,100 AT&T Corporation............................................ 6,610,975
95,300 California Energy Company Incorporated (b).................. 1,858,350
47,500 GTE Corporation............................................. 2,090,000
97,500 Huaneng Power International Inc. (b)(c)..................... 1,401,562
--------------
11,960,887
--------------
INTERMEDIATE GOODS AND SERVICES (8.4%)
Energy (2.9%)
29,150 Amoco Corporation........................................... 2,095,156
16,120 Mobil Corporation........................................... 1,805,440
14,400 Royal Dutch Petroleum (c)................................... 2,032,200
--------------
5,932,796
--------------
Materials (3.5%)
94,500 Morton International........................................ 3,390,187
107,900 Praxair Inc................................................. 3,628,138
--------------
7,018,325
--------------
Transportation (2.0%)
74,200 Fritz Companies (b)......................................... 3,079,300
12,300 Norfolk Southern Corporation................................ 976,313
--------------
4,055,613
--------------
TECHNOLOGY (16.4%)
28,300 Automatic Data Processing Inc............................... 2,101,275
53,550 Bay Networks Inc. (b)....................................... 2,202,244
69,376 Computer Associates International........................... 3,945,760
29,400 Computer Sciences Corporation (b)........................... 2,065,350
73,600 DSC Communications (b)...................................... 2,714,000
147,600 Equifax Incorporated........................................ 3,154,950
45,041 Intel....................................................... 2,556,077
18,900 Microsoft Corporation (b)................................... 1,658,475
40,000 Motorola.................................................... 2,280,000
86,950 Oracle Corporation (b)...................................... 3,684,506
83,900 Pall Corporation............................................ 2,254,813
62,500 Worldcom, Incorported (b)................................... 2,203,125
16,300 Xerox Corporation........................................... 2,233,100
--------------
33,053,675
--------------
Total common stocks
(cost: $163,321,322)............................................... 198,574,882
--------------
</TABLE>
See accompanying notes to investments in securities.
-25-
<PAGE>
GROWTH PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- --------------
<C> <S> <C>
SHORT-TERM SECURITIES (1.3%)
$2,568,476 Temporary Investment Fund, Inc.--TempFund Portfolio, current rate 5.82%................. $ 2,568,476
--------------
Total short-term securities (cost: $2,568,476).......................................... 2,568,476
--------------
Total investments in securities (cost: $165,889,798) (d)................................ $ 201,143,358
--------------
--------------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The portfolio held 2.9% of net assets in foreign securities at December 31,
1995.
(d) At December 31, 1995 the cost of securities for federal income tax purposes
was $166,032,734. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation............. $36,860,654
Gross unrealized depreciation............. (1,750,030)
-----------
Net unrealized appreciation............... $35,110,624
-----------
-----------
-26-
<PAGE>
BOND PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (95.1%)
GOVERNMENT OBLIGATIONS (55.7%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (53.2%)
U.S. Treasury (34.5%)
$4,600,000 U.S. Treasury Bond.......................................... 12.000% 08/15/13 $ 7,099,806
5,000,000 U.S. Treasury Bond.......................................... 8.125% 08/15/19 6,287,500
6,850,000 U.S. Treasury Bond.......................................... 8.000% 11/15/21 8,573,193
650,000 U.S. Treasury Bond.......................................... 7.500% 11/15/24 780,812
4,050,000 U.S. Treasury Strip (c)..................................... 5.675% 02/15/01 3,083,063
6,400,000 U.S. Treasury Strip (c)..................................... 5.645% 08/15/99 5,294,138
1,750,000 U.S. Treasury Note.......................................... 6.750% 05/31/99 1,827,656
1,750,000 U.S. Treasury Note.......................................... 8.875% 11/15/98 1,915,700
-----------
34,861,868
-----------
Government National Mortgage Association (12.5%)
402,450 ............................................................ 8.500% 12/15/22 423,010
384,640 ............................................................ 8.500% 10/15/22 404,291
399,904 ............................................................ 7.500% 02/15/23 411,485
749,910 ............................................................ 8.000% 09/15/24 781,398
493,071 ............................................................ 7.000% 03/15/24 499,224
445,383 ............................................................ 7.000% 05/15/24 450,940
731,032 ............................................................ 6.500% 11/15/23 727,120
446,260 ............................................................ 7.500% 02/15/24 458,983
286,059 ............................................................ 7.000% 02/15/24 289,628
499,207 ............................................................ 7.500% 10/15/25 513,239
943,613 ............................................................ 7.000% 11/15/23 956,096
961,074 ............................................................ 6.500% 05/15/24 954,499
982,575 ............................................................ 7.500% 09/15/24 1,010,587
1,955,239 ............................................................ 8.000% 04/15/25 2,035,893
880,485 ............................................................ 7.500% 10/15/25 905,234
489,135 ............................................................ 7.000% 10/15/25 494,941
1,250,168 ............................................................ 7.000% 11/15/24 1,265,769
-----------
12,582,337
-----------
Other U.S. Government Agencies (6.2%)
1,500,000 Federal Home Loan Mortgage Corporation...................... 7.030% 04/05/04 1,539,131
1,000,000 Federal National Mortgage Association....................... 8.590% 02/03/05 1,052,579
1,000,000 Federal Farm Credit Bank.................................... 6.960% 06/06/00 1,004,703
483,225 Federal Home Loan Mortgage Corporation...................... 6.500% 12/01/23 479,040
1,475,929 Federal National Mortgage Association....................... 7.000% 09/01/17 1,487,735
750,000 Federal National Morgage Association CMO Sequential Payer
(GNMA 8%)................................................... 6.000% 04/25/19 738,269
-----------
6,301,457
-----------
OTHER GOVERNMENT OBLIGATIONS (.7%)
600,000 Quebec Province Of Canada (b)............................... 9.375% 04/01/99 661,733
-----------
STATE AND LOCAL GOVERNMENT OBLIGATIONS (1.8%)
1,848,000 Wyoming Community Development Authority..................... 6.850% 06/01/10 1,843,380
-----------
Total government obligations (cost: $53,658,017)................................ 56,250,775
-----------
CORPORATE OBLIGATIONS (39.4%)
CAPITAL GOODS (2.3%)
Machinery (2.3%)
2,100,000 Joy Technologies Incorporated............................... 10.250% 09/01/03 2,372,637
-----------
BASIC INDUSTRIES (2.0%)
Paper and Forest Products (2.0%)
2,000,000 Jefferson Smurfit Group PLC (b)............................. 6.750% 11/20/05 2,050,474
-----------
</TABLE>
See accompanying notes to investments in securities.
-27-
<PAGE>
BOND PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -----------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
CONSUMER STAPLES (8.8%)
Drugs (1.8%)
$1,750,000 American Home Products Corporation.......................... 6.500% 10/15/02 $ 1,798,781
-----------
Entertainment (1.6%)
1,500,000 Royal Caribbean Cruises Limited............................. 8.250% 04/01/05 1,618,699
-----------
Food (1.0%)
1,035,714 General Mills Inc........................................... 6.235% 03/15/97 1,042,721
-----------
Media (4.4%)
2,000,000 Fisher Scientific International............................. 7.125% 12/15/05 2,010,648
1,000,000 Time Warner Entertainment................................... 9.625% 05/01/02 1,157,564
1,250,000 Time Warner Incorporated.................................... 7.950% 02/01/00 1,320,524
-----------
4,488,736
-----------
ENERGY (1.6%)
Natural Gas Distribution (1.6%)
1,500,000 Consolidated Natural Gas Company............................ 8.750% 06/01/99 1,641,404
-----------
FINANCIAL (16.8%)
Commercial Finance (10.9%)
1,000,000 American Express Credit..................................... 6.125% 11/15/01 1,011,704
1,710,000 Associates Corporation of North America..................... 6.750% 10/15/99 1,767,863
2,300,000 Chrysler Financial Corporation.............................. 6.180% 12/15/00 2,309,129
2,000,000 Ford Motor Credit........................................... 4.810% 03/18/99 1,985,000
1,000,000 Ford Motor Credit........................................... 6.250% 12/08/05 999,583
1,500,000 Franchise Finance Corporation of America.................... 7.000% 11/30/00 1,507,624
1,500,000 General Motors Acceptance Corporation....................... 5.500% 12/15/01 1,446,430
-----------
11,027,333
-----------
Consumer Finance (1.1%)
1,000,000 American General Finance.................................... 8.500% 08/15/98 1,068,398
-----------
Real Estate (4.8%)
1,339,962 Green Tree Financial Corporation............................ 6.900% 02/15/04 1,350,427
888,860 Green Tree Finance Company Limited Net Interest Margin
Trust....................................................... 7.250% 07/15/05 901,878
1,000,000 Property Trust of America................................... 7.500% 02/15/14 1,012,023
1,500,000 Security Capital Industrial Trust........................... 7.875% 05/15/09 1,593,249
-----------
4,857,577
-----------
UTILITIES (3.7%)
Electric (1.3%)
345,000 Connecticut Light & Power Company........................... 7.625% 04/01/97 350,533
1,000,000 Korea Electric Power Global (b)............................. 6.375% 12/01/03 1,002,075
-----------
1,352,608
-----------
Telephones (2.4%)
1,250,000 AT&T Corporation............................................ 8.350% 01/15/25 1,428,005
850,000 GTE North................................................... 8.500% 12/15/31 955,045
-----------
2,383,050
-----------
TRANSPORTATION (4.2%)
Trucking (2.1%)
2,000,000 Consolidated Freightways Inc (d)............................ 7.350% 06/01/05 2,096,336
-----------
Water Transportation (2.1%)
1,000,000 Overseas Shipholding Group.................................. 8.750% 12/01/13 1,065,668
1,000,000 Overseas Shipholding Group.................................. 8.000% 12/01/03 1,031,716
-----------
2,097,384
-----------
Total corporate obligations (cost: $38,915,758)................................. 39,896,138
-----------
Total long-term debt securities (cost: $92,573,775)............................. 96,146,913
-----------
</TABLE>
See accompanying notes to investments in securities.
-28-
<PAGE>
BOND PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (2.3%)
$2,305,798 Temporary Investment Fund, Inc.--TempFund Portfolio, current rate 5.82%......... $ 2,305,798
-----------
Total short-term securities (cost: $2,305,798).................................. 2,305,798
-----------
Total investments in securities (cost: $94,879,573) (e)......................... $98,452,711
-----------
-----------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) The portfolio held 3.7% of net assets in foreign securities at December 31,
1995.
(c) For zero coupon issues (strips) the interest rate disclosed is the
effective yield at the date of acquisition.
(d) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. (See note 7 to the
financial statements). Information concerning the illiquid securities held
at December 31, 1995, which includes acquisition date and cost, is as
follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- -------- ----------- ----------
<S> <C> <C>
Consolidated Freightways Inc. .................... 9/7/95 $2,003,800
----------
----------
</TABLE>
(e) At December 31, 1995 the cost of securities for federal income tax purposes
was $94,938,447. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation............. $3,538,615
Gross unrealized depreciation............. (24,351)
----------
Net unrealized appreciation............... $3,514,264
----------
----------
-29-
<PAGE>
MONEY MARKET PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -----------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER (93.7%)
CAPITAL GOODS (3.4%)
Information Processing (3.4%)
$1,015,000 Hewlett-Packard............................................. 5.80% 01/24/96 $ 1,011,190
-----------
CONSUMER STAPLES (30.6%)
Drugs (7.2%)
1,185,000 American Home Products (c).................................. 5.85% 02/02/96 1,178,808
1,000,000 Schering Corporation........................................ 5.75% 01/17/96 997,375
-----------
2,176,183
-----------
Food (20.0%)
1,127,000 Brown Forman................................................ 5.87% 01/16/96 1,124,145
1,210,000 Cargill Inc................................................. 5.79% 02/06/96 1,202,998
1,310,000 Coca Cola Company........................................... 5.72% 02/02/96 1,303,299
1,315,000 CPC International Inc (c)................................... 5.79% 02/16/96 1,305,352
1,100,000 Pepsico Inc................................................. 5.82% 01/24/96 1,095,820
-----------
6,031,614
-----------
Media (3.4%)
900,000 McGraw-Hill................................................. 5.83% 01/26/96 896,315
145,000 McGraw-Hill................................................. 5.74% 03/19/96 143,224
-----------
1,039,539
-----------
ENERGY (6.3%)
Natural Gas Distribution (6.3%)
1,000,000 Equitable Resources Inc (c)................................. 5.90% 01/23/96 996,333
900,000 Northern Illinois Gas Company............................... 5.82% 01/12/96 898,299
-----------
1,894,632
-----------
FINANCIAL (17.3%)
Consumer Finance (17.3%)
1,000,000 American General Finance.................................... 5.73% 02/28/96 990,855
865,000 Associates Corporation...................................... 5.79% 02/20/96 858,089
1,000,000 BellSouth Capital Funding Corporation....................... 5.80% 01/05/96 999,215
1,045,000 Ford Motor Credit........................................... 5.85% 01/22/96 1,041,373
285,000 Ford Motor Credit........................................... 5.58% 03/29/96 281,174
1,065,000 GMAC........................................................ 5.86% 02/08/96 1,058,447
-----------
5,229,153
-----------
UTILITIES ( 32.3%)
Electric (20.5%)
675,000 Alabama Power............................................... 5.75% 02/08/96 670,890
900,000 Baltimore Gas & Electric.................................... 5.82% 01/11/96 898,441
850,000 Madison Gas & Electric...................................... 5.82% 01/16/96 847,854
1,000,000 MidAmerican Energy Company.................................. 5.86% 01/08/96 998,731
315,000 MidAmerican Energy Company.................................. 5.77% 02/09/96 313,023
1,075,000 Northern States Power....................................... 5.63% 02/27/96 1,065,474
730,000 Public Service Electric & Gas Company....................... 6.02% 01/19/96 727,727
150,000 Public Service Electric & Gas Company....................... 5.89% 02/23/96 148,706
495,000 Public Service Electric & Gas Company....................... 5.91% 02/23/96 490,716
-----------
6,161,562
-----------
Telephones (11.8%)
900,000 Ameritech Corporation....................................... 5.78% 03/06/96 890,842
1,070,000 AT&T Corporation............................................ 5.82% 02/09/96 1,063,319
625,000 GTE Northwest............................................... 5.78% 02/14/96 620,586
1,000,000 Southwestern Bell (c)....................................... 5.81% 01/09/96 998,575
-----------
3,573,322
-----------
</TABLE>
See accompanying notes to investments in securities.
-30-
<PAGE>
MONEY MARKET PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -----------
<C> <S> <C> <C> <C>
TECHNOLOGY (3.8%)
$1,140,000 Rockwell International Corp (c)............................. 5.82% 01/18/96 $ 1,136,763
-----------
Total commercial paper (cost: $28,253,958)........................................ 28,253,958
-----------
OTHER SHORT-TERM SECURITIES (4.0%)
1,192,220 Temporary Investment Fund, Inc.--TempFund Portfolio, current rate 5.82%........... 1,192,220
-----------
Total other short-term securities (cost: $1,192,220).............................. 1,192,220
-----------
Total investments in securities (cost: $29,446,178) (b)........................... $29,446,178
-----------
-----------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Also represents the cost of securities for federal income tax purposes at
December 31, 1995.
(c) Commercial paper sold within terms of a private placement memorandum exempt
from registration under Section 4(2) of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other
"accredited investors." This security has been determined to be liquid under
guidelines established by the board of directors.
-31-
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
COMMON STOCKS (55.5%)
CAPITAL GOODS (3.8%)
Machinery (3.8%)
87,726 General Electric Company.................................... $ 6,316,271
21,700 Millipore Corporation....................................... 892,413
51,005 United Waste Systems, Inc. (b).............................. 1,899,936
87,987 York International Corp..................................... 4,135,389
--------------
13,244,009
--------------
CONSUMER GOODS AND SERVICES (19.5%)
Consumer Goods (10.6%)
77,393 Columbia/HCA Healthcare Corporation......................... 3,927,695
36,000 Gillette Company............................................ 1,876,500
48,200 Johnson & Johnson........................................... 4,127,125
81,903 Pepsico, Inc................................................ 4,576,330
86,360 Pfizer Inc.................................................. 5,440,680
59,800 Philip Morris Companies, Inc................................ 5,411,900
53,455 Procter & Gamble Company.................................... 4,436,765
110,700 Service Corporation International........................... 4,870,800
52,900 Teva Pharmaceutical Industries (c).......................... 2,453,238
--------------
37,121,033
--------------
Consumer Services (1.9%)
98,972 CUC International, Inc. (b)................................. 3,377,420
54,800 GTECH Holdings Corporation (b).............................. 1,424,800
69,195 Manpower.................................................... 1,946,109
--------------
6,748,329
--------------
Food (1.1%)
54,800 CPC International........................................... 3,760,650
--------------
Retail (1.0%)
46,540 Home Depot, Inc............................................. 2,228,103
57,276 Office Depot, Inc (b)....................................... 1,131,201
--------------
3,359,304
--------------
Consumer Cyclicals (4.9%)
58,990 Exide Corporation........................................... 2,706,166
44,100 Magna International Inc..................................... 1,907,325
120,400 Newell Company.............................................. 3,115,350
91,604 Omnicom Group............................................... 3,412,249
85,400 Owens-Corning Fiberglas Corporation (b)..................... 3,832,325
48,300 Tommy Hilfiger Corporation (b).............................. 2,046,713
--------------
17,020,128
--------------
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
CREDIT SENSITIVE (10.0%)
Finance (10.0%)
88,100 American Express Company.................................... $ 3,645,138
49,140 American International Group, Inc........................... 4,545,450
65,930 Federal Home Loan Mortgage Corporation...................... 5,505,155
83,926 First Data Corporation...................................... 5,612,551
74,600 MBIA Inc.................................................... 5,595,000
77,200 MGIC Investment Corporation................................. 4,188,100
173,950 Norwest Corporation......................................... 5,740,349
--------------
34,831,743
--------------
INTERMEDIATE GOODS AND SERVICES (7.9%)
Energy (4.0%)
30,020 Amoco Corporation........................................... 2,157,688
102,800 Columbia Gas System, Inc. (b)............................... 4,510,350
31,230 Mobil Corporation........................................... 3,497,760
26,950 Royal Dutch Petroleum (c)................................... 3,803,319
--------------
13,969,117
--------------
Materials (1.8%)
187,700 Praxair Inc................................................. 6,311,413
--------------
Transportation (2.1%)
79,300 Fritz Companies (b)......................................... 3,290,950
76,200 Landstar System, Inc. (b)................................... 2,038,350
26,825 Norfolk Southern Corporation................................ 2,129,234
--------------
7,458,534
--------------
TECHNOLOGY (14.3%)
19,800 Adtran Inc. (b)............................................. 1,075,388
54,600 Automatic Data Processing Inc............................... 4,054,050
76,650 Bay Networks, Inc. (b)...................................... 3,152,231
116,109 Computer Associates International........................... 6,603,698
69,500 Computer Sciences Corporation (b)........................... 4,882,375
144,500 Danka Business Systems, PLC. (c)............................ 5,346,500
194,400 Equifax Incorporated........................................ 4,155,300
52,600 Fore Systems, Inc. (b)...................................... 3,129,700
138,820 Informix Corporation (b).................................... 4,164,600
67,181 Intel....................................................... 3,812,522
124,780 Oracle Corporation (b)...................................... 5,287,553
53,200 Worldcom, Inc. (b).......................................... 1,875,300
17,600 Xerox Corporation........................................... 2,411,200
--------------
49,950,417
--------------
Total common stocks
(cost: $160,635,858)............................................... 193,774,677
--------------
</TABLE>
See accompanying notes to investments in securities.
-32-
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ------------ -------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (34.8%)
GOVERNMENT OBLIGATIONS (16.6%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (15.4%)
U.S. Treasury (10.3%)
$ 6,025,000 U.S. Treasury Bond.......................................... 12.000% 08/15/13 $ 9,299,202
3,500,000 U.S. Treasury Bond.......................................... 8.125% 08/15/19 4,401,250
6,875,000 U.S. Treasury Bond.......................................... 8.000% 11/15/21 8,604,482
200,000 U.S. Treasury Bond.......................................... 7.500% 11/15/24 240,250
3,600,000 U.S. Treasury Strip (d)..................................... 5.675% 02/15/01 2,740,500
1,750,000 U.S. Treasury Strip (d)..................................... 5.705% 02/15/04 1,114,066
3,450,000 U.S. Treasury Strip (d)..................................... 5.270% 08/15/99 2,853,871
4,500,000 U.S. Treasury Strip (d)..................................... 5.772% 11/15/01 3,282,296
750,000 U.S. Treasury Note.......................................... 6.750% 05/31/99 783,281
2,400,000 U.S. Treasury Note.......................................... 8.875% 11/15/98 2,627,246
-------------
35,946,444
-------------
Government National Mortgage Association (3.9%)
854,726 ............................................................ 7.500% 02/15/24 879,093
383,979 ............................................................ 6.500% 11/15/23 381,924
911,472 ............................................................ 6.500% 03/15/24 905,237
360,819 ............................................................ 7.500% 06/15/24 371,106
402,320 ............................................................ 7.500% 06/15/24 413,790
316,405 ............................................................ 6.500% 11/15/23 314,712
581,968 ............................................................ 6.500% 11/15/23 578,854
260,744 ............................................................ 6.500% 11/15/23 259,349
25,925 ............................................................ 6.500% 03/15/24 25,747
669,390 ............................................................ 7.500% 02/15/24 688,474
327,624 ............................................................ 6.500% 11/15/23 325,871
56,485 ............................................................ 7.500% 12/15/23 58,121
24,524 ............................................................ 6.500% 02/15/24 24,356
1,428,203 ............................................................ 7.500% 07/15/24 1,468,919
252,678 ............................................................ 7.500% 06/15/24 259,881
353,099 ............................................................ 7.500% 06/15/24 363,165
703,869 ............................................................ 7.500% 05/15/24 723,936
470,245 ............................................................ 7.500% 06/15/24 483,651
1,956,542 ............................................................ 7.000% 10/15/25 1,979,764
748,893 ............................................................ 7.500% 10/15/25 769,944
1,750,234 ............................................................ 7.000% 11/15/24 1,772,075
462,533 GNMA Midget II.............................................. 7.500% 06/20/02 475,035
232,779 GNMA Midget II.............................................. 7.500% 07/20/02 239,070
-------------
13,762,074
-------------
Other U.S. Government Agencies (1.2%)
2,600,000 Federal National Mortgage Association....................... 8.590% 02/03/05 2,736,705
1,454,412 Federal Home Loan Mortgage Corporation...................... 6.500% 12/01/23 1,441,815
-------------
4,178,520
-------------
STATE AND LOCAL GOVERNMENT OBLIGATIONS (1.2%)
4,070,000 Wyoming Community Development Authority..................... 6.850% 06/01/10 4,059,824
-------------
Total government obligations (cost: $55,765,125)......................................... 57,946,862
-------------
CORPORATE OBLIGATIONS (18.2%)
CAPITAL GOODS (1.2%)
Electronics (.2%)
500,000 Xerox Corporation........................................... 9.200% 07/15/99 510,824
-------------
Machinery (1.0%)
3,124,000 Joy Technologies Incorporated............................... 10.250% 09/01/03 3,529,580
-------------
BASIC INDUSTRIES (.9%)
Paper And Forest Products (.9%)
3,000,000 Jefferson Smurfit Group PLC (c)............................. 6.750% 11/20/05 3,075,711
-------------
</TABLE>
See accompanying notes to investments in securities.
-33-
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ------------ -------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
CONSUMER STAPLES (4.5%)
Drugs (.7%)
$ 2,500,000 American Home Products Corporation.......................... 6.500% 10/15/02 $ 2,569,688
-------------
Entertainment (.5%)
1,750,000 Royal Caribbean Cruises..................................... 8.250% 04/01/05 1,888,483
-------------
Food (.3%)
857,143 General Mills Inc........................................... 6.235% 03/15/97 862,941
-------------
Media (3.0%)
3,500,000 Fisher Scientific International Inc......................... 7.125% 12/15/05 3,518,634
2,400,000 Time Warner Entertainment................................... 9.625% 05/01/02 2,778,154
600,000 Time Warner Incorporated.................................... 7.950% 02/01/00 633,851
3,500,000 News America Holdings....................................... 7.700% 10/30/25 3,581,529
-------------
10,512,168
-------------
ENERGY (1.4%)
Natural Gas Distribution (1.0%)
3,100,000 Consolidated Natural Gas Company............................ 8.750% 06/01/99 3,392,234
-------------
Natural Gas Pipelines (.4%)
1,500,000 Enron Corporation........................................... 8.500% 02/01/00 1,550,835
-------------
FINANCIAL (7.3%)
Consumer Finance (6.2%)
1,000,000 American Express Credit Company............................. 6.125% 11/15/01 1,011,704
1,400,000 American General Finance Corporation........................ 8.500% 08/15/98 1,495,757
3,000,000 Chrysler Financial Corporation.............................. 6.180% 12/15/00 3,011,907
2,750,000 Federal Farm Credit Bank.................................... 6.960% 06/06/00 2,762,933
2,000,000 Ford Motor Credit Company................................... 4.810% 03/18/99 1,985,000
3,400,000 Ford Motor Credit Company................................... 6.250% 12/08/05 3,398,582
2,000,000 Franchise Finance Corp of America........................... 7.000% 11/30/00 2,010,166
2,600,000 General Motors Acceptance Corp.............................. 5.500% 12/15/01 2,507,146
3,300,000 Associates Corporation of North America..................... 6.750% 10/15/99 3,411,665
-------------
21,594,860
-------------
Real Estate (1.1%)
1,500,000 Property Trust of America................................... 7.500% 02/15/14 1,518,035
2,250,000 Security Capital Industrial Trust........................... 7.875% 05/15/09 2,389,874
-------------
3,907,909
-------------
UTILITIES (1.3%)
Electric (.6%)
1,600,000 Korea Electric Power Global (c)............................. 6.375% 12/01/03 1,603,320
500,000 Oklahoma Gas & Electric Co.................................. 6.375% 01/01/98 500,906
-------------
2,104,226
-------------
Telephones (.7%)
2,350,000 GTE Northwest Inc........................................... 6.125% 02/15/99 2,379,455
-------------
TRANSPORTATION (1.6%)
Air Transportation (.5%)
1,500,000 Delta Air Lines Inc......................................... 9.200% 09/23/14 1,699,352
-------------
Water Transportation (1.1%)
2,250,000 Overseas Shipholders Group.................................. 8.750% 12/01/13 2,397,753
1,250,000 Overseas Shipholding Group.................................. 8.000% 12/01/03 1,289,645
-------------
3,687,398
-------------
Total corporate obligations (cost: $61,693,030).......................................... 63,265,664
-------------
Total long-term debt securities (cost: $117,458,155)..................................... 121,212,526
-------------
</TABLE>
See accompanying notes to investments in securities.
-34-
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ------------ -------------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (9.1%)
$ 6,603,871 Temporary Investment Fund, Inc.--Tempfund Portfolio, current rate 5.82%.................. $ 6,603,871
2,000,000 U.S. Treasury Bill.......................................... 5.410% 01/11/96 1,996,606
5,375,000 U.S. Treasury Bill.......................................... 5.240-5.480% 02/15/96 5,341,675
2,000,000 Lubrizol Corporation CP..................................... 5.710% 01/31/96 1,989,733
1,600,000 Public Service Energy & Gas CP.............................. 6.020% 01/19/96 1,594,839
1,470,000 Public Service Energy & Gas CP.............................. 6.010% 01/29/96 1,463,038
9,750,000 Southwest Bell Capital Corporation CP....................... 5.780% 02/13/96 9,681,478
3,000,000 Xerox Credit CP............................................. 5.850% 01/25/96 2,987,558
-------------
Total short-term securities (cost: $31,658,512).......................................... 31,658,798
-------------
Total investments in securities (cost: $309,752,525) (e)................................. $ 346,646,001
-------------
-------------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The Fund held 4.7% of net assets in foreign securites as of December 31,
1995.
(d) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
(e) At December 31, 1995 the cost of securities for federal income tax purposes
was $309,858,905. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation............. $38,178,317
Gross unrealized depreciation............. (1,391,221)
-----------
Net unrealized appreciation............... $36,787,096
-----------
-----------
-35-
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ----------- -----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (98.4%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (65.8%)
Federal Home Loan Mortgage Corporation (8.6%)
$ 919,730 Bi-weekly................................................... 7.000% 12/01/22 $ 929,488
2,183,987 Bi-weekly................................................... 6.500% 12/01/23 2,165,071
1,932,102 20 Year Gold................................................ 6.500% 07/01/13 1,924,758
988,371 20 Year Gold................................................ 6.500% 05/01/14 984,614
-----------
6,003,931
-----------
Federal National Mortgage Association (19.8%)
1,236,946 FHR 1048 Y PAC Accrual Bond (FHLMC 9.5%) (c)................ 5.000% 01/15/02 1,173,094
500,000 CMO PAC Targeted Amortization Class (GNMA 8%)............... 6.000% 12/25/08 492,500
2,600,000 CMO Sequential Payer (GNMA 8%).............................. 6.000% 04/25/19 2,559,333
719,418 PAC Accrual Bond (FNMA 10%)................................. 6.900% 06/25/19 712,460
1,070,182 Bi-weekly................................................... 6.000% 07/01/07 1,058,516
1,389,205 Bi-weekly................................................... 6.500% 03/01/17 1,376,659
480,695 Bi-weekly................................................... 6.500% 02/01/17 476,354
1,811,321 Bi-weekly................................................... 7.000% 09/01/17 1,825,809
9,029 ............................................................ 8.000% 05/01/22 9,444
953,994 ............................................................ 6.000% 11/01/13 933,597
407,158 ............................................................ 6.500% 03/01/14 405,403
1,912,962 ............................................................ 7.000% 09/01/15 1,939,512
870,199 ............................................................ 6.500% 01/01/14 867,048
-----------
13,829,729
-----------
Government National Mortgage Association (15.6%)
566,330 ............................................................ 8.000% 12/15/15 591,548
362,191 ............................................................ 8.000% 02/15/16 378,319
323,372 ............................................................ 8.000% 02/15/16 337,772
380,091 ............................................................ 8.000% 02/15/16 397,016
513,824 ............................................................ 8.000% 03/15/16 536,704
567,185 ............................................................ 7.000% 04/15/16 575,516
368,533 ............................................................ 7.000% 09/15/16 375,866
735,567 ............................................................ 7.000% 08/15/16 750,205
336,945 ............................................................ 7.000% 05/15/17 343,684
364,263 ............................................................ 7.000% 07/15/17 371,548
152,826 ............................................................ 7.500% 02/15/17 157,733
195,751 ............................................................ 7.500% 06/15/17 202,037
294,815 ............................................................ 7.000% 03/15/17 300,711
190,906 ............................................................ 7.500% 06/15/17 197,036
197,874 ............................................................ 7.500% 10/15/17 204,228
308,402 ............................................................ 7.000% 05/15/17 314,570
7,344 ............................................................ 8.500% 03/15/22 7,719
475,138 GNMA II..................................................... 7.500% 09/20/16 488,180
79,697 GNMA II..................................................... 8.500% 10/20/16 83,897
381,230 GNMA II..................................................... 7.500% 09/20/16 391,695
691,168 GNMA II..................................................... 8.000% 02/20/17 721,082
226,672 GNMA II..................................................... 8.500% 10/20/16 238,618
936,135 GNMA II..................................................... 8.500% 07/20/17 984,495
263,706 GNMA II..................................................... 8.500% 03/20/17 277,329
378,030 GNMA II..................................................... 8.500% 08/20/17 397,559
492,570 GNMA II..................................................... 7.500% 08/20/17 505,894
467,124 GNMA II..................................................... 8.000% 07/20/17 487,341
216,315 GNMA II..................................................... 8.500% 12/20/16 227,715
-----------
10,846,017
-----------
</TABLE>
See accompanying notes to investments in securities.
-36-
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ----------- -----------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS--CONTINUED
Other Government Agency Obligations (21.8%)
$ 1,912,000 Pleasant Hill Revenue Bond.................................. 7.950% 09/20/15 $ 2,020,823
2,002,206 Vendee Mortgage Trust Participation Certificate (b)......... 8.465% 05/15/24 2,143,611
736,761 Vendee Mortgage Trust Participation Certificate (b)......... 7.206% 02/15/25 752,647
2,115,611 Vendee Mortgage Trust Participation Certificate (b)......... 7.793% 02/15/25 2,231,970
2,696,133 Vendee Mortgage Trust Participation Certificate (b)......... 8.793% 06/15/25 2,926,146
2,950,000 Vendee Mortgage Trust Participation Certificate (b)......... 7.250% 07/15/14 3,043,109
2,000,000 Vendee Mortgage Trust Participation Certificate (b)......... 7.250% 07/15/16 2,058,125
-----------
15,176,431
-----------
Total U.S. government and agencies obligations (cost: $43,988,469)................. 45,856,108
-----------
OTHER MORTGAGE-BACKED SECURITIES (22.2%)
4,000,000 Bank Mart Funding Corporation CMO (FHLM 8%) (d)............. 8.250% 02/20/19 4,110,000
International Capital Markets Acceptance Corporation 144A
1,447,037 Issue (d)................................................... 8.250% 09/01/15 1,456,081
1,000,000 KPAC CMO (GNMA 9.5%)........................................ 7.450% 10/01/18 1,010,000
2,295,000 KPAC Real Estate Investment Trust........................... 7.180% 10/01/05 2,338,031
2,500,000 Franchise Finance Corp Of America Notes..................... 7.000% 11/30/00 2,512,708
950,000 Citicorp Mortgage Securities, Inc. Targeted Amortization
Class....................................................... 6.000% 11/25/08 929,584
3,141,000 Wyoming Community Development Authority..................... 6.850% 06/01/10 3,133,147
7,145 RFC Conduit................................................. 8.500% 04/01/02 7,145
17,043 Travelers Mortgage Service.................................. 10.000% 06/01/01 17,043
-----------
Total other mortgage-backed securities (cost: $14,971,810)......................... 15,513,739
-----------
CORPORATE DEBT SECURITIES (10.4%)
173,385 Bank of America............................................. 8.375% 05/01/07 173,385
36,831 Bank of America............................................. 9.500% 01/01/09 36,831
2,250,000 CSBF Senior Performance Note 95-A Mortgage Revenue.......... 7.000% 11/15/05 2,324,531
2,009,942 Green Tree Financial Corporation............................ 6.900% 02/15/04 2,025,640
666,645 Green Tree Financial Corporation............................ 7.250% 07/15/05 676,409
1,000,000 Property Trust of America Notes............................. 6.875% 02/15/08 1,009,258
1,000,000 Property Trust of America Notes............................. 7.500% 02/15/14 1,012,023
-----------
Total corporate debt securities (cost: $7,114,592)................................. 7,258,077
-----------
Total long-term debt securities (cost: $66,074,871)................................ 68,627,924
-----------
SHORT-TERM SECURITIES (1.0%)
715,624 Temporary Investment Fund, Inc.--TempFund Portfolio, current rate 5.82%............ 715,624
-----------
Total short-term securities (cost: $715,624)....................................... 715,624
-----------
Total investments in securities (cost: $66,790,495) (e)............................ $69,343,548
-----------
-----------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by prodedures described in note 2 to the financial
statements.
(b) Represents a debt security with a weighted average net pass-through rate
which varies based on the pool of underlying collateral. The rate disclosed
is the rate in effect at December 31, 1995.
(c) Represents a debt security that pays no interest and principal during their
initial accrual periods, but accrue additional principal at specific rates.
Interest rate disclosed represents current yield based upon estimated future
cash flows.
(d) Represents ownership in an illiquid security which has not been registered
with the Securities and Exchange Commission under the Securities Act of
1933. (See note 7 to the financial statements). Information concerning the
illiquid securities held at December 31, 1995, which includes aquisition
date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- -------- ----------- ----------
<S> <C> <C>
Bank Mart Funding Corporation CMO................. 5/27/94 $3,975,000
International Capital Markets Acceptance
Corporation....................................... 1/17/95 1,590,962
----------
$5,565,962
----------
----------
</TABLE>
(e) At December 31, 1995 the cost of securities for federal income tax purposes
was $66,790,495. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation..................... $2,554,202
Gross unrealized depreciation..................... (1,149)
----------
Net unrealized appreciation....................... $2,553,053
----------
----------
-37-
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
COMMON STOCKS (99.5%)
CAPITAL GOODS (7.4%)
Machinery (7.4%)
3,600 Alco Standard Corporation................................... $ 164,250
7,000 Allied-Signal, Inc.......................................... 332,499
4,600 AMP, Inc.................................................... 176,525
4,000 Applied Materials, Inc. (b)................................. 157,500
8,600 Baker Hughes, Inc........................................... 209,625
3,600 Browning-Ferris Industries, Inc............................. 106,200
4,300 Caterpillar, Inc............................................ 252,625
1,800 Cooper Industries........................................... 66,150
2,600 Cummins Engine Company, Inc................................. 96,200
6,300 Dana Corporation............................................ 184,275
7,000 Deere & Company............................................. 246,750
2,800 Dial Corporation............................................ 82,950
5,600 Dover Corporation........................................... 206,500
3,900 Dresser Industries, Inc..................................... 95,063
1,100 Eaton Corporation........................................... 58,988
5,800 Emerson Electric Co......................................... 474,149
1,400 Fluor Corporation........................................... 92,400
700 Foster Wheeler Corporation.................................. 29,750
44,500 General Electric Company.................................... 3,203,999
1,700 Grainger W W, Inc........................................... 112,625
4,600 Halliburton Company......................................... 232,875
800 Helmerich & Payne, Inc...................................... 23,800
6,500 HIG Hartford (b)............................................ 314,438
1,800 Illinois Tool Works, Inc.................................... 106,200
4,600 Ingersoll-Rand Company...................................... 161,575
3,400 ITT Corporation (b)......................................... 180,200
13,500 Laidlaw, Inc. (c)........................................... 138,375
2,000 McDermott International, Inc................................ 44,000
2,950 Navistar International Corporation (b)...................... 30,975
600 Ogden Corporation........................................... 12,825
690 Paccar, Inc................................................. 29,066
3,100 Raychem Corporation......................................... 176,313
900 Rowan Companies, Inc (b).................................... 8,888
7,900 Safety-Kleen Corp........................................... 123,438
500 Teledyne, Inc............................................... 12,813
1,200 Textron, Inc................................................ 81,000
1,900 Stanley Works............................................... 97,850
500 Trinova Corporation......................................... 14,313
3,200 Tyco International Ltd...................................... 114,000
1,800 Varity Corporation (b)...................................... 66,825
2,900 Western Atlas Corporation (b)............................... 146,450
10,200 Westinghouse Electric Corporation........................... 168,300
6,000 Whitman Corporation......................................... 139,500
12,500 WMX Technologies, Inc....................................... 373,438
------------
9,146,480
------------
CONSUMER GOODS AND SERVICES (35.7%)
Consumer Goods (19.5%)
19,900 Abbott Laboratories......................................... 830,824
4,600 Adolph Coors Company........................................ 101,775
6,200 Alberto-Culver Company...................................... 213,125
2,500 Alza Corporation (b)........................................ 61,875
4,800 American Brands, Inc........................................ 214,200
7,800 American Home Products Corporation.......................... 756,599
6,400 Amgen, Inc. (b)............................................. 380,000
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
6,100 Anheuser-Busch Companies, Inc............................... $ 407,937
1,400 Avon Products............................................... 105,525
3,700 Bausch & Lomb Incorporated.................................. 146,613
7,000 Baxter International Inc.................................... 293,125
1,200 Becton, Dickinson And Company............................... 90,000
3,900 Beverly Enterprises (b)..................................... 41,438
1,400 Biomet, Inc. (b)............................................ 25,025
4,600 Boston Scientific Corporation (b)........................... 225,400
13,000 Bristol-Myers Squibb Company................................ 1,116,374
2,400 Brown-Forman Inc............................................ 87,600
3,700 C.R. Bard, Inc.............................................. 119,325
1,900 Cabletron Systems, Inc. (b)................................. 153,900
33,500 Coca-Cola Company........................................... 2,487,374
3,900 Colgate-Palmolive Company................................... 273,975
11,971 Columbia/HCA Healthcare Corporation......................... 607,527
2,800 Community Psychiatric Centers (b)........................... 34,300
14,200 Eli Lilly & Company......................................... 798,749
11,200 Gillette Company............................................ 583,799
2,800 Harcourt General, Inc....................................... 117,250
6,200 Humana (b).................................................. 169,725
1,500 International Flavors & Fragrances Inc...................... 72,000
17,400 Johnson & Johnson........................................... 1,489,874
6,800 Mallinckrodt Group, Inc..................................... 247,350
4,900 Manor Care, Inc............................................. 171,500
7,200 Medtronic Inc............................................... 402,300
32,000 Merck & Co., Inc............................................ 2,103,999
20,000 Pepsico, Inc................................................ 1,117,499
16,200 Pfizer Inc.................................................. 1,020,599
13,055 Pharmacia & Upjohn.......................................... 505,880
23,400 Philip Morris Companies, Inc................................ 2,117,699
18,334 Procter & Gamble Company.................................... 1,521,721
9,000 Schering-Plough Corporation................................. 492,750
3,000 Service Corporation International........................... 132,000
5,700 St. Jude Medical, Inc. (b).................................. 245,100
10,300 Tenet Healthcare Corporation (b)............................ 213,725
2,000 Clorox Company.............................................. 143,250
8,100 Seagram Company, Ltd. (c)................................... 280,463
4,000 Unilever N.V. (c)........................................... 562,999
3,400 United Health Care.......................................... 222,700
3,600 United States Surgical Corporation.......................... 76,950
3,100 US Healthcare, Inc.......................................... 144,150
4,300 UST Inc..................................................... 143,513
2,800 Warner-Lambert Company...................................... 271,950
------------
24,143,330
------------
Consumer Services (5.2%)
3,700 Capital Cities/ABC, Inc..................................... 456,488
7,800 Comcast Corporation......................................... 141,863
4,700 CUC International, Inc. (b)................................. 160,388
3,300 Deluxe Corp................................................. 95,700
3,400 R R Donnelley & Sons Company................................ 133,875
2,200 Dow Jones & Company Inc..................................... 87,725
4,360 Dun & Bradstreet Corporation................................ 282,310
3,825 Eastman Chemical Company.................................... 239,541
8,000 Eastman Kodak Company....................................... 536,000
2,900 Gannett Company............................................. 177,988
1,800 Harrah's Entertainment (b).................................. 43,650
6,800 Hasbro Inc.................................................. 210,800
</TABLE>
See accompanying notes to investments in securities.
-38-
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
1,200 Hilton Hotels Corporation................................... $ 73,800
600 John H. Harland Company..................................... 12,525
2,000 Jostens, Inc................................................ 48,500
600 King World Productions, Inc. (b)............................ 23,325
3,000 Knight-Ridder, Inc.......................................... 187,500
5,100 Marriott International Inc.................................. 195,075
4,593 Mattel Inc.................................................. 141,235
17,500 McDonalds Corp.............................................. 789,688
1,800 McGraw-Hill Companies, Inc.................................. 156,825
3,600 Meredith Corporation........................................ 150,750
2,100 Moore Corporation Limited................................... 39,113
4,000 Polaroid Corporation........................................ 189,500
2,900 New York Times Company...................................... 85,913
8,400 Time Warner Inc............................................. 318,150
1,600 Times Mirror Company........................................ 54,200
1,500 Tribune Company............................................. 91,688
8,730 Viacom (b).................................................. 413,584
12,900 Walt Disney Company......................................... 761,099
6,200 Wendy's International, Inc.................................. 131,750
------------
6,430,548
------------
Food (3.3%)
4,600 Albertson's Incorporated.................................... 151,225
11,481 Archer-Daniels-Midland Company.............................. 206,658
6,700 Campbell Soup Company....................................... 402,000
5,625 Conagra, Inc................................................ 232,031
3,000 CPC International........................................... 205,875
3,300 Darden Restaurants, Inc..................................... 39,188
7,600 Fleming Companies, Inc...................................... 156,750
3,300 General Mills, Inc.......................................... 190,575
4,500 Giant Food Inc.............................................. 141,750
7,800 H.J. Heinz Company.......................................... 258,375
2,900 Hershey Foods Corporation................................... 188,500
5,100 Kellogg Company............................................. 393,975
6,300 Quaker Oats Company......................................... 217,350
2,600 Ralston Purina Group........................................ 162,175
11,700 Sara Lee Corporation........................................ 372,938
7,400 Super Valu Inc.............................................. 233,100
6,000 Sysco Corporation........................................... 195,000
2,100 The Kroger Co. (b).......................................... 78,750
4,800 Winn-Dixie Stores, Incorporated............................. 177,000
2,100 Wm. Wrigley Jr. Company..................................... 110,250
------------
4,113,465
------------
Retail (4.2%)
8,500 American Stores Company..................................... 227,375
2,200 Circuit City Stores, Inc.................................... 60,775
1,300 Dayton Hudson Corporation................................... 97,500
3,700 Dillard Department Stores, Inc.............................. 105,450
5,500 Federated Department Stores (b)............................. 151,250
12,424 Home Depot Inc.............................................. 594,798
4,500 J.C. Penney Company, Inc.................................... 214,313
7,300 K Mart Corporation (b)...................................... 52,925
1,200 Longs Drug Stores Corp...................................... 57,450
3,100 Melville Corporation........................................ 95,325
1,000 Mercantile Stores Company, Inc.............................. 46,250
3,200 Nike, Inc................................................... 222,800
3,700 Nordstrom, Inc.............................................. 149,850
11,800 Price/Costco Corporation (b)................................ 179,950
3,600 Reebok International Ltd.................................... 101,700
1,000 Rite Aid Corporation........................................ 34,250
8,800 Sears, Roebuck and Company.................................. 343,200
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
3,800 Tandy Corporation........................................... $ 157,700
6,000 Gap, Inc.................................................... 252,000
7,500 Limited, Inc................................................ 130,313
5,000 May Department Stores Company............................... 211,250
1,000 Stride Rite Corporation..................................... 7,500
5,650 Toys R Us (b)............................................... 122,888
61,500 Wal-Mart Stores, Inc........................................ 1,376,062
4,400 Walgreen Company............................................ 131,450
9,100 Woolworth Corporation (b)................................... 118,300
------------
5,242,624
------------
Consumer Cyclicals (3.5%)
8,800 Chrysler Corporation Holding Co............................. 487,300
4,500 Cooper Tire & Rubber Company................................ 110,813
3,900 Corning Inc................................................. 124,800
2,000 Echlin Inc.................................................. 73,000
27,000 Ford Motor.................................................. 783,000
19,600 General Motors Corporation.................................. 1,036,349
5,900 Genuine Parts Company....................................... 241,900
4,800 Interpublic Group Company................................... 208,200
2,700 Johnson Controls............................................ 185,625
1,600 Liz Claiborne, Inc.......................................... 44,400
4,300 Maytag Company.............................................. 87,075
3,000 Newell Co................................................... 77,625
400 Owens-Corning Fiberglas Corporation (b)..................... 17,950
3,000 Pep Boys.................................................... 76,875
2,000 Premark International Inc................................... 101,250
3,600 Rubbermaid Incorporated..................................... 91,800
1,100 Russell Corporation......................................... 30,525
3,500 Snap-On Tools Corporation................................... 158,375
1,100 The Black & Decker Corporation.............................. 38,775
2,500 The Goodyear Tire & Rubber Company.......................... 113,438
2,200 V.F. Corporation............................................ 116,050
1,600 Whirlpool Corporation....................................... 85,200
------------
4,290,325
------------
CREDIT SENSITIVE (25.3%)
Building (.6%)
1,200 Armstrong World Industries, Inc............................. 74,400
1,000 Fleetwood Enterprises, Inc.................................. 25,750
2,800 Lowe's Companies, Inc....................................... 93,800
6,900 Masco Corporation........................................... 216,488
3,800 PPG Industries, Incorporated................................ 173,850
3,100 Sherwin-Williams Company.................................... 126,325
------------
710,613
------------
Finance (13.1%)
2,100 Aetna Life & Casualty Company............................... 145,425
9,400 Ahmanson & Company H.F...................................... 249,100
2,300 Alexander & Alexander Services Inc.......................... 43,700
10,857 Allstate Corporation........................................ 446,494
12,300 American Express Company.................................... 508,912
4,100 American General Corporation................................ 142,988
11,980 American International Group, Inc........................... 1,108,149
10,252 Banc One Corporation........................................ 387,013
5,200 Bank of Boston Corporation.................................. 240,500
4,300 Bank of New York Company, Inc............................... 209,625
10,204 BankAmerica Corporation..................................... 660,709
3,400 Bankers Trust New York Corporation.......................... 226,100
4,400 Barnett Banks of Florida, Inc............................... 259,600
2,600 Beneficial Corporation...................................... 121,225
</TABLE>
See accompanying notes to investments in securities.
-39-
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
CREDIT SENSITIVE--CONTINUED
5,900 H & R Block, Inc............................................ $ 238,950
4,500 Boatmens Bancshares Inc..................................... 183,938
4,100 Chase Manhattan Corporation................................. 248,563
5,970 Chemical Banking Corporation................................ 350,738
1,700 Chubb Corporation........................................... 164,475
2,000 Cigna Corporation........................................... 206,500
11,200 Citicorp.................................................... 753,199
4,500 Comerica.................................................... 180,563
2,400 Corestates Financial Corp................................... 90,900
4,195 Dean Witter Discover & Co................................... 197,165
4,700 Federal Home Loan Mortgage Corporation...................... 392,450
7,200 Federal National Mortgage................................... 893,699
3,500 First Bank Systems, Incorporated............................ 173,688
7,237 First Chicago Corporation................................... 285,862
5,600 First Data Corp............................................. 374,500
1,700 First Fidelity Bancorporation............................... 128,138
1,600 First Interstate Bancorp.................................... 218,400
3,900 First Union Corporation..................................... 216,938
9,680 Fleet Financial Group, Incorporated......................... 394,460
1,700 General RE Corporation...................................... 263,500
1,600 Golden West Financial Corporation........................... 88,400
8,650 Great Western Financial Corporation......................... 220,575
2,400 Household International, Inc................................ 141,900
4,800 Jefferson-Pilot Corporation................................. 223,200
4,200 JP Morgan & Co Incorporated................................. 337,050
4,300 Keycorp..................................................... 155,875
1,800 Lincoln National Corporation................................ 96,750
2,800 Loews Corporation........................................... 219,450
1,300 Marsh & McLennen............................................ 115,375
2,700 MBNA Corporation............................................ 99,563
3,900 Mellon Bank Corporation..................................... 209,625
3,800 Merrill Lynch & Co., Inc.................................... 193,800
1,900 Morgan Stanley Group........................................ 153,188
3,600 National City Corporation................................... 119,250
7,456 Nationsbank Corp............................................ 519,123
10,600 Norwest Corporation......................................... 349,800
5,400 PNC Bank Corp............................................... 174,150
5,300 Providian Corporation....................................... 215,975
2,500 Republic New York Corporation............................... 155,313
6,000 Safeco Corporation.......................................... 207,000
2,000 Salomon Inc................................................. 71,000
3,400 St. Paul Companies, Inc..................................... 189,125
2,200 Suntrust Banks, Inc......................................... 150,700
2,550 Torchmark Corporation....................................... 115,388
1,200 Transamerica Corporation.................................... 87,450
4,100 U.S. Bancorp................................................ 137,863
1,500 UNUM Corporation............................................ 82,500
7,300 USF&G Corporation........................................... 123,188
2,400 U.S. Life Corporation....................................... 71,700
6,200 Wachovia Corporation........................................ 283,650
1,000 Wells Fargo & Company....................................... 216,000
------------
16,230,092
------------
Utilities (11.7%)
14,400 Airtouch Communications (b)................................. 406,800
4,100 Alltel Corp................................................. 120,950
4,100 American Electric Power Company, Inc........................ 166,050
15,900 Ameritech................................................... 938,099
41,535 AT&T Corporation............................................ 2,689,390
2,800 Baltimore Gas And Electric Company.......................... 79,800
12,300 Bell Atlantic Corporation................................... 822,562
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
CREDIT SENSITIVE--CONTINUED
26,000 BellSouth Corporation....................................... $ 1,130,999
6,500 Carolina Power & Light Company.............................. 224,250
3,100 Central & Southwest Corporation............................. 86,413
5,932 Cinergy..................................................... 181,668
5,500 Consolidated Edison Company of New York..................... 176,000
3,000 Consolidated Natural Gas Company............................ 136,125
5,300 Detroit Edison Company...................................... 182,850
3,550 Dominion Resources, Inc..................................... 146,438
3,900 Duke Power Company.......................................... 184,763
5,900 Enron Corp.................................................. 224,938
3,900 Entergy Corporation......................................... 114,075
4,700 FPL Group, Inc.............................................. 217,963
24,200 GTE Corporation............................................. 1,064,799
8,600 Houston Industries Incorporated............................. 208,550
5,200 Niagara Mohawk Power Corporation............................ 50,050
2,200 Nicor, Inc.................................................. 60,500
1,300 Northern States Power Company............................... 63,863
11,400 Nynex Corporation........................................... 615,599
3,700 Ohio Edison Company......................................... 86,950
800 Oneok Inc................................................... 18,300
5,100 Pacific Enterprises......................................... 144,075
10,300 Pacific Gas & Electric Company.............................. 292,263
10,500 Pacific Telesis Group....................................... 353,063
12,500 Pacificorp.................................................. 265,625
4,200 Peco Energy Company......................................... 126,525
2,000 Peoples Energy Corporation.................................. 63,500
3,750 Public Service Enterprise Group Inc......................... 114,844
17,300 SBC Communications Inc...................................... 994,749
10,000 SCE Corporation............................................. 177,500
4,600 Texas Utilities Company..................................... 189,175
17,800 Southern Company............................................ 438,325
5,500 Unicom Corporation.......................................... 180,125
2,200 Union Electric Company...................................... 91,850
12,200 U.S. West Media Group (b)................................... 231,800
11,700 U.S. West, Inc.............................................. 418,275
------------
14,480,438
------------
INTERMEDIATE GOODS AND SERVICES (17.6%)
Energy (9.2%)
1,800 Amerada Hess Corporation.................................... 95,400
14,400 Amoco Corporation........................................... 1,034,999
7,100 Ashland Incorporated........................................ 249,388
3,800 Atlantic Richfield Company.................................. 420,850
2,100 Burlington Resources, Inc................................... 82,425
18,400 Chevron Corporation......................................... 965,999
5,600 Coastal Corporation......................................... 208,600
2,900 Columbia Gas System, Inc. (b)............................... 127,238
2,500 Enserch Corp................................................ 40,625
32,500 Exxon Corporation........................................... 2,604,062
1,600 Kerr-McGee Corporation...................................... 101,600
10,600 Mobil Corporation........................................... 1,187,199
6,300 Noram Energy................................................ 55,913
7,700 Occidental Petroleum Corporation............................ 164,588
2,500 Oryx Energy Company (b)..................................... 33,438
7,900 Panhandle Eastern Corporation............................... 220,213
800 Pennzoil Company............................................ 33,800
4,900 Phillips Petroleum Company.................................. 167,213
13,900 Royal Dutch Petroleum (c)................................... 1,961,637
300 Santa Fe Energy Resources, Inc (b).......................... 2,888
6,200 Schlumberger, Ltd. (c)...................................... 429,350
4,000 Sonat Inc................................................... 142,500
</TABLE>
See accompanying notes to investments in securities.
-40-
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
INTERMEDIATE GOODS AND SERVICES--CONTINUED
5,400 Sun Company, Inc............................................ $ 147,825
4,300 Tenneco Inc................................................. 213,388
6,900 Texaco, Inc................................................. 541,650
4,800 Unocal Corporation.......................................... 139,800
5,900 USX--Marathon Group......................................... 115,050
------------
11,487,638
------------
Materials (6.9%)
2,300 Air Products and Chemicals, Inc............................. 121,325
4,575 Alcan Aluminum Limited (c).................................. 142,397
3,800 Aluminum Company of America................................. 200,925
1,400 Asarco Incorporated......................................... 44,800
1,900 Avery Dennison Corp......................................... 95,238
7,300 Barrick Gold Corporation (c)................................ 192,538
800 Bemis Company, Inc.......................................... 20,500
2,900 Bethlehem Steel Corporation (b)............................. 40,600
566 Boise Cascade Corporation................................... 19,598
2,500 Champion International Corporation.......................... 105,000
3,400 Crown Cork & Seal Company, Inc. (b)......................... 141,950
950 Cyprus Amax Minerals Company................................ 24,819
6,700 Dow Chemical Company........................................ 471,513
14,400 E.I. Du Pont De Nemours and Company......................... 1,006,199
900 Echo Bay Mines, Ltd (c)..................................... 9,338
1,687 Engelhard Corporation....................................... 36,692
400 Federal Paper Board Company, Inc............................ 20,750
1,600 FMC Corporation (b)......................................... 108,200
11,400 Freeport-McMoran Copper..................................... 320,625
2,200 Georgia-Pacific Corporation................................. 150,975
1,900 W R Grace & Co.............................................. 112,338
3,400 Great Lakes Chemical Corporation............................ 244,800
2,700 Hercules Incorporated....................................... 152,213
11,500 Homestake Mining Company.................................... 179,688
5,500 Inco Limited (c)............................................ 182,875
4,800 International Paper Company................................. 181,800
7,100 Kimberly-Clark Corporation.................................. 587,524
5,600 Louisiana-Pacific Corporation............................... 135,800
1,200 Mead Corporation............................................ 62,700
3,100 Monsanto Company............................................ 379,750
3,600 Morton International........................................ 129,150
5,800 Nalco Chemical Company...................................... 174,725
1,622 Newmont Mining Corporation.................................. 73,396
1,500 Nucor Corporation........................................... 85,688
1,400 Phelps Dodge Corporation.................................... 87,150
2,100 Pioneer Hi-Bred International, Inc.......................... 116,813
5,100 Placer Dome, Inc. (c)....................................... 123,038
600 Potlatch Corporation........................................ 24,000
3,200 Praxair Inc................................................. 107,600
2,100 Reynolds Metals Company..................................... 118,913
1,600 Rohm And Haas Company....................................... 103,000
3,000 Sigma-Aldrich............................................... 148,500
3,010 Stone Container Corporation................................. 43,269
1,900 Temple-Inland Inc........................................... 83,838
3,000 Williams Company............................................ 131,625
8,467 Travelers Inc............................................... 532,363
1,550 Union Camp Corporation...................................... 73,819
3,900 Union Carbide Corporation................................... 146,250
5,640 USX--U.S. Steel Group Inc................................... 173,430
6,000 Westvaco Corporation........................................ 166,500
4,900 Weyerhaeuser Company........................................ 211,925
2,400 Willamette Industries Incorporated.......................... 135,000
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
INTERMEDIATE GOODS AND SERVICES--CONTINUED
3,300 Worthington Industries...................................... $ 68,681
------------
8,552,143
------------
Transportation (1.5%)
1,000 AMR Corporation (b)......................................... 74,250
3,573 Burlington Northern Santa Fe................................ 278,694
1,600 Conrail Corporation......................................... 112,000
1,100 Consolidated Freightways, Inc............................... 29,150
7,400 CSX Corporation............................................. 337,625
1,100 Delta Air Lines, Inc........................................ 81,263
900 Federal Express Corporation (b)............................. 66,488
2,600 Norfolk Southern Corporation................................ 206,375
1,300 Roadway Services, Inc....................................... 63,538
1,500 Sante Fe Pacific Gold Corporation........................... 18,188
3,300 Southwest Airlines Company.................................. 76,725
4,800 Union Pacific Corporation................................... 316,800
18,400 US Air Group, Inc. (b)...................................... 243,800
------------
1,904,896
------------
TECHNOLOGY (13.5%)
2,600 Advanced Micro Devices, Inc. (b)............................ 42,900
1,000 Amdahl (b).................................................. 8,500
2,300 Andrew Corporation (b)...................................... 87,975
2,600 Apple Computer Incorporated................................. 82,875
2,200 Autodesk, Inc............................................... 75,350
3,500 Automatic Data Processing Inc............................... 259,875
8,900 Boeing Company.............................................. 697,537
6,800 Cisco Systems, Inc. (b)..................................... 507,450
6,100 Compaq Computer Corporation (b)............................. 292,800
6,350 Computer Associates International........................... 361,156
600 Crane Co.................................................... 22,125
500 Cray Research, Inc. (b)..................................... 12,375
5,600 Digital Equipment (b)....................................... 359,100
2,400 DSC Communications (b)...................................... 88,500
1,600 EG&G, Inc................................................... 38,800
2,000 General Dynamics Corporation................................ 118,250
2,700 B F Goodrich Company........................................ 183,938
4,000 Harris Corporation.......................................... 218,500
13,800 Hewlett-Packard Company..................................... 1,155,749
4,300 Honeywell Inc............................................... 209,088
22,200 Intel....................................................... 1,259,849
15,100 International Business Machines Corporation................. 1,385,424
5,219 Lockheed Martin Corporation................................. 412,301
4,200 Loral Corporation........................................... 148,575
5,000 LSI Logic Corporation (b)................................... 163,750
3,600 McDonnell Douglas Corporation............................... 331,200
17,900 MCI Communications.......................................... 467,638
5,800 Micron Technology, Inc...................................... 229,825
15,900 Microsoft Corporation (b)................................... 1,395,224
10,900 Minnesota Mining and Manufacturing Company.................. 722,125
14,700 Motorola.................................................... 837,900
6,400 National Semiconductor Corporation (b)...................... 142,400
5,700 Northern Telecom Limited.................................... 245,100
3,000 Northrop Grumman Corporation................................ 192,000
8,500 Novell, Inc. (b)............................................ 121,125
10,400 Oracle Corporation (b)...................................... 440,700
3,499 Pall Corporation............................................ 94,036
2,800 Perkin-Elmer Corporation.................................... 105,700
2,800 Pitney Bowes, Inc........................................... 131,600
6,500 Raytheon Company............................................ 307,125
</TABLE>
See accompanying notes to investments in securities.
-41-
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
TECHNOLOGY--CONTINUED
5,400 Rockwell International Corporation.......................... $ 285,525
4,400 Scientific-Atlanta Inc...................................... 66,000
3,200 Silicon Graphics, Inc. (b).................................. 88,000
10,100 Sprint Corporation.......................................... 402,738
8,400 Sun Microsystems, Inc. (b).................................. 383,250
6,600 Tandem Computers, Inc. (b).................................. 70,125
15,500 Tele-Communications, Inc. (b)............................... 308,063
2,600 Tellabs, Inc. (b)........................................... 96,200
4,600 Texas Instruments, Inc...................................... 238,050
400 Thomas & Betts Corporation.................................. 29,500
1,000 TRW Inc..................................................... 77,500
2,500 United Technologies Corporation............................. 237,188
12,400 Unisys Corporation (b)...................................... 69,750
2,700 Xerox Corporation........................................... 369,900
------------
16,678,229
------------
Total common stocks
(cost: $89,874,004).............................................. 123,410,821
------------
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
PREFERRED STOCKS (--%)
20 Teledyne.................................................... $ 288
------------
Total preferred stocks
(cost: $265)..................................................... 288
------------
SHORT-TERM SECURITIES (.3%)
346,283 Temporary Investment Fund, Inc.-- TempFund Portfolio,
current rate 5.82%........................................ 346,283
------------
Total short-term securities
(cost: $346,283)................................................. 346,283
------------
Total investments in securities
(cost: $90,220,552) (d).......................................... $123,757,392
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The portfolio held 3.2% of net assets in foreign securities at December 31,
1995
(d) At December 31, 1995, the cost of securities for federal income tax purposes
was $90,393,093. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation............. $34,998,952
Gross unrealized depreciation............. (1,634,653)
-----------
Net unrealized appreciation............... $33,364,299
-----------
-----------
-42-
<PAGE>
CAPITAL APPRECIATION PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
COMMON STOCKS (95.4%)
CAPITAL GOODS (1.6%)
Machinery (1.6%)
51,350 Thermo Electron Corporation (b).................................. $ 2,670,200
--------------
CONSUMER GOODS AND SERVICES (40.6%)
Consumer Goods (22.4%)
81,500 Amgen, Inc. (b).................................................. 4,839,063
60,700 The Coca-Cola Company............................................ 4,506,975
81,000 Merck & Co., Inc................................................. 5,325,750
59,000 Oxford Health Plan, Inc. (b)..................................... 4,358,625
81,200 Pfizer, Inc...................................................... 5,115,600
101,650 St. Jude Medical, Inc. (b)....................................... 4,370,950
123,800 United Health Care............................................... 8,108,899
--------------
36,625,862
--------------
Consumer Services (3.5%)
85,000 Carnival Corporation (c)......................................... 2,071,875
77,939 Viacom (b)....................................................... 3,692,360
--------------
5,764,235
--------------
Retail (13.4%)
240,225 Dollar General Corporation....................................... 4,984,669
155,533 The Home Depot, Inc.............................................. 7,446,141
135,100 Intimate Brands, Inc............................................. 2,026,500
53,600 Kohl's, Inc. (b)................................................. 2,814,000
238,300 Office Depot, Inc. (b)........................................... 4,706,425
--------------
21,977,735
--------------
Food (1.2%)
54,300 Outback Steakhouse, Inc. (b)..................................... 1,948,013
--------------
CREDIT SENSITIVE (11.4%)
Building (2.8%)
139,200 Lowe's Companies, Inc............................................ 4,663,200
--------------
Finance (4.8%)
64,900 First Data Corporation........................................... 4,340,188
95,900 MBNA Corporation................................................. 3,536,313
--------------
7,876,501
--------------
Utilities (3.8%)
218,400 Airtouch Communications (b)...................................... 6,169,800
--------------
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
TECHNOLOGY (41.8%)
135,550 Computer Associates International................................ $ 7,709,405
109,000 Intel............................................................ 6,185,750
187,900 MCI Communications............................................... 4,908,888
58,100 Microsoft Corporation (b)........................................ 5,098,275
118,700 Motorola......................................................... 6,765,900
152,900 Oracle Corporation (b)........................................... 6,479,138
168,000 Paging Network, Inc. (b)......................................... 4,095,000
76,100 Parametric Technology Corporation (b)............................ 5,060,650
146,900 Silicon Graphics, Inc. (b)....................................... 4,039,750
33,100 Xerox Corporation................................................ 4,534,700
109,300 Cisco Systems, Inc. (b).......................................... 8,156,512
128,000 General Instrument Corporation (b)............................... 2,992,000
58,900 Micron Technology, Inc........................................... 2,333,913
--------------
68,359,881
--------------
Total common stocks
(cost: $120,517,608).................................................... 156,055,427
--------------
PREFERRED STOCKS (2.9%)
TECHNOLOGY (2.9%)
121,700 Nokia Corp ADR (c)............................................... 4,731,088
--------------
Total preferred stocks
(cost: $5,114,676)...................................................... 4,731,088
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ---------
<C> <S> <C>
SHORT-TERM SECURITIES (1.1%)
$1,809,123 Temporary Investments Fund, Inc.-- TempFund Portfolio, current
rate 5.82% .................................................... 1,809,123
--------------
Total short-term securities
(cost: $1,809,123)...................................................... 1,809,123
--------------
Total investments in securities
(cost: $127,441,407) (d)................................................ $162,595,638
--------------
--------------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The portfolio held 4.2% of net assets in foreign securities at December 31,
1995.
(d) At December 31, 1995, the cost of securities for federal income tax purposes
was $127,455,347. The agrgregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation..................... $40,171,628
Gross unrealized depreciation..................... (5,031,337)
-----------
Net unrealized appreciation....................... $35,140,291
-----------
-----------
-43-
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES
December 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
COMMON STOCKS (83.7%)
AUSTRALIA (4.9%)
Banking (1.0%)
66,163 National Australia Bank.......................................... $ 595,520
190,087 Westpac Banking.................................................. 842,741
Building Materials and Components (1.2%)
648,423 Pioneer International............................................ 1,673,722
Transportation (2.7%)
127,500 Brambles Industries.............................................. 1,422,646
507,000 BTR Nylex Ltd.................................................... 1,372,792
61,000 Qantas Airways Limited ADR 144A (d).............................. 1,016,418
--------------
6,923,839
--------------
AUSTRIA (2.4%)
Electrical and Electronics (1.7%)
12,980 Bohler-Uddeholm 144A (d)(b)...................................... 992,486
10,850 Va Technologie 144A (d).......................................... 1,379,109
Utilities--Gas and Electric (.7%)
7,000 Evn Energie-Versorung............................................ 962,735
--------------
3,334,330
--------------
BELGIUM (1.9%)
Chemicals (1.9%)
2,500 Solvay........................................................... 1,350,704
20,000 Union Miniere (b)................................................ 1,338,812
--------------
2,689,516
--------------
BRAZIL (.9%)
Telecommunications (.9%)
27,500 Telecomunicacoes Brasileiras ADR................................. 1,302,813
--------------
CANADA (3.2%)
Banking (2.1%)
60,500 Canadian Imperial Bank of Commerce............................... 1,802,125
135,000 National Bank of Montreal........................................ 1,101,210
Insurance (.9%)
65,000 London Insurance Group........................................... 1,316,594
Mining and Metals--Container (.2%)
39,000 Inmet............................................................ 285,957
--------------
4,505,886
--------------
CHILE (1.2%)
Financial Services (.4%)
21,000 Chile Fund Inc................................................... 546,000
Telecommunications (.8%)
14,000 Compania de Telefonos de Chile ADR............................... 1,160,250
--------------
1,706,250
--------------
CZECH REPUBLIC (1.2%)
Energy Services (.8%)
31,510 Ceske Energeticke................................................ 1,139,152
Telecommunications (.4%)
5,500 SPT Telecom...................................................... 519,780
--------------
1,658,932
--------------
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
FINLAND (1.3%)
Wholesale and International Trade (1.3%)
75,000 Amer Group Ltd................................................... 1,172,845
21,500 Metsa-Serla...................................................... $ 663,518
--------------
1,836,363
--------------
FRANCE (7.4%)
Banking (1.5%)
48,000 Banque Nationale de Paris ADR-- 144A (d)......................... 2,168,175
Electrical and Electronics (1.0%)
17,000 Alcatel Alsthom.................................................. 1,467,658
Energy Sources (1.6%)
30,262 Societe National Elf Aquitaine................................... 2,232,656
Health and Personal Care (1.6%)
102,000 Rhone-Poulenc.................................................... 2,187,929
Insurance (.5%)
10,500 Axa (b).......................................................... 708,534
Mining and Metal (.2%)
5,900 Pechiney......................................................... 223,193
Transportation (1.0%)
50,000 Regie Des Usines Renault......................................... 1,441,607
--------------
10,429,752
--------------
GERMANY (2.6%)
Banking (1.3%)
37,250 Deutsche Bank.................................................... 1,772,351
Chemicals (1.3%)
6,950 Bayer............................................................ 1,849,090
--------------
3,621,441
--------------
HONG KONG (6.3%)
Banking (1.2%)
115,714 Hong Kong and Shanghai Banking................................... 1,750,990
Food and Household Products (.5%)
2,937,000 Cafe de Coral.................................................... 668,542
Multi-Industry (2.6%)
221,000 Hutchison Whampoa Ltd............................................ 1,346,248
365,947 Jardine Strategic Holdings (b)................................... 1,119,798
175,739 Jardine Matheson Holdings........................................ 1,203,812
Transportation (1.1%)
190,000 Swire Pacific Ltd................................................ 1,474,405
Utilities (.9%)
405,000 Hong Kong Electric Holdings...................................... 1,327,837
--------------
8,891,632
--------------
INDIA (.5%)
Financial Services (.5%)
469,435 India Fund....................................................... 765,287
--------------
INDONESIA (.7%)
Financial Services (.2%)
315,000 J.F. Indonesia Fund.............................................. 350,365
Forest Products and Paper (.5%)
268,000 P.T. Japfa Comfeed............................................... 131,865
586,685 P.T. Pabrik Kertas Tjiwi Kimia................................... 538,849
--------------
1,021,079
--------------
</TABLE>
See accompanying notes to investments in securities.
-44-
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
ITALY (1.4%)
Telecommunication (1.4%)
960,000 Stet di Risp..................................................... $ 1,960,667
--------------
JAPAN (4.4%)
Building Materials and Components (.6%)
73,000 Daito Trust Construction......................................... 863,389
Electrical and Electronics (3.2%)
174,000 Hitachi Ltd...................................................... 1,754,310
80,000 Hitachi Koki..................................................... 725,921
34,000 Sony Corporation................................................. 2,040,296
Utilities--Gas and Electric (.6%)
57,000 Kyudenko......................................................... 751,515
--------------
6,135,431
--------------
KOREA (.7%)
Financial Services (.7%)
19 Korea International Trust (b).................................... 988,000
--------------
MEXICO (.3%)
Chemicals (.3%)
252,000 Vitro............................................................ 385,944
--------------
NETHERLANDS (4.2%)
Broadcasting, Advertising and Publishing (1.6%)
33,875 International Nederlanden Group.................................. 2,265,393
Building Materials and Components (.3%)
16,520 European Vinyls.................................................. 429,750
Insurance (1.5%)
46,542 Aegon............................................................ 2,061,450
Merchandising (.8%)
16,875 Koninklijke Bijenkorf Beheer..................................... 1,115,884
--------------
5,872,477
--------------
NEW ZEALAND (2.3%)
Forest Products and Paper (1.0%)
675,000 Carter Holt Harvey............................................... 1,456,236
Wholesale and International Trade (1.3%)
2,341,185 Brierley Investments............................................. 1,851,976
--------------
3,308,212
--------------
NORWAY (2.8%)
Energy Sources (.9%)
98,000 Saga Petroleum................................................... 1,310,730
Health and Personal Care (1.3%)
68,000 Hafslund Nycomed................................................. 1,774,970
Mining and Metals (.6%)
78,000 Elkem............................................................ 882,736
--------------
3,968,436
--------------
PHILIPPINES (1.0%)
Telecommunications (1.0%)
25,000 Philippine Long Distance Telephone Company ADR................... 1,353,125
--------------
PORTUGAL (.6%)
Banking (.2%)
26,600 Banco Portugues de Investimento.................................. 323,185
Financial Services (.4%)
6,000 Capital Portugal Fund............................................ 530,173
--------------
853,358
--------------
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
SINGAPORE (.7%)
Financial Services (.2%)
18,000 Singapore Fund................................................... $ 240,750
Transportation (.5%)
78,000 Singapore International Airline.................................. 727,907
--------------
968,657
--------------
SPAIN (8.8%)
Banking (3.8%)
85,000 Argentaria Bancaria ADR.......................................... 1,710,625
9,250 Banco de Andalucia............................................... 1,349,573
61,500 Banco Bilbao Vizcaya............................................. 2,215,328
Energy Sources (1.2%)
52,000 Repsol........................................................... 1,703,813
Telecommunications (1.2%)
120,000 Telefonica de Espana............................................. 1,661,774
Utilities--Gas and Electric (2.6%)
250,000 Iberdrola........................................................ 2,287,413
24,800 Empresa. Nacional de Electricidad................................ 1,404,397
--------------
12,332,923
--------------
SWEDEN (7.3%)
Banking (.8%)
58,500 Stadshypotek..................................................... 1,174,024
Business and Public Service (1.2%)
114,500 Esselte.......................................................... 1,727,727
Forest Products and Paper (1.1%)
122,000 Stora Kopparbergs................................................ 1,463,513
Health and Personal Care (2.9%)
46,500 Astra............................................................ 1,845,348
105,000 Svenska Handelsbanken............................................ 2,186,442
Transportation (1.3%)
90,000 Volvo............................................................ 1,846,932
--------------
10,243,986
--------------
SWITZERLAND (4.5%)
Electrical and Electronics (1.4%)
1,730 BBC Brown Boveri Cie............................................. 2,014,685
Health and Personal Care (2.4%)
1,660 Ares-Serono...................................................... 1,168,556
1,085 Societe Generale................................................. 2,159,343
Insurance (.7%)
3,400 Zuerich Versicherung............................................. 1,019,423
--------------
6,362,007
--------------
THAILAND (.9%)
Financial Services (.9%)
57,507 Thai Fund........................................................ 1,286,719
--------------
TURKEY (.4%)
Financial Services (.4%)
60,000 Turkish Growth Fund.............................................. 622,500
--------------
UNITED KINGDOM (8.4%)
Banking (1.0%)
118,943 Barclays Bank.................................................... 1,364,718
Building Materials and Components (1.1%)
365,000 BICC.L........................................................... 1,564,089
Electrical and Electronics (.3%)
44,500 Waste Management International ADR............................... 478,375
Energy Services (3.2%)
445,000 British Gas...................................................... 1,754,903
84,000 South Wales Electricity.......................................... 1,222,019
</TABLE>
See accompanying notes to investments in securities.
-45-
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
UNITED KINGDOM--CONTINUED
127,500 Welsh Water...................................................... $ 1,534,162
Food and Household Products (2.3%)
2,082,536 Albert Fisher Group.............................................. 1,552,005
613,891 Hillsdown Holdings............................................... 1,610,784
Merchandising (.5%)
91,600 Kwik Save Group.................................................. 716,779
--------------
11,797,834
--------------
VENEZUELA (.5%)
Energy Services (.5%)
1,012,793 Electricidad Caracas............................................. 691,951
--------------
Total common stocks
(cost $104,633,041)..................................................... 117,819,347
--------------
PREFERRED STOCKS AND OTHER (2.8%)
ARGENTINA (1.0%)
Multi-industry (1.0%)
24,565 Compania de Inversiones en Telecommunications convertible
preferred--7.0% (c)............................................ 1,424,770
--------------
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
FRANCE (--%)
Mining and Metal (--%)
5,900 Pechiney Warrants (expiring 1/8/96).............................. $ 12
--------------
GERMANY (.6%)
Energy Services (.6%)
4,800 Veba Warrants (expiring 4/6/98).................................. 766,309
--------------
HONG KONG (--%)
Multi-Industry (--%)
50,000 Jardine Strategic Holdings cumulative convertible
preferred--7.5%................................................ 54,500
--------------
MEXICO (1.0%)
Financial Services (1.0%)
44,210 Nacional Financiera ADR--11.25%.................................. 1,458,930
--------------
UNITED KINGDOM (.2%)
Energy Services (.2%)
137,700 Welsh Water...................................................... 233,034
--------------
Total preferred stocks and other
(cost $3,430,146)....................................................... 3,937,555
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (1.0%)
HONG KONG (1.0%)
Finance (1.0%)
$1,680,000 PIV Investment Finance...................................... 4.50% 12/01/00 1,394,400
------------
Total long-term debt securities (cost $1,388,161).............................. 1,394,400
------------
SHORT-TERM SECURITIES (11.6%)
5,000,000 Federal Home Loan Mortgage Corporation...................... 5.580% 02/01/96 4,975,975
4,000,000 Federal Home Loan Mortgage Corporation...................... 5.440% 02/16/96 3,971,708
2,500,000 Federal National Mortgage Association....................... 5.620% 01/05/96 2,498,439
1,060,000 U.S. Treasury Note.......................................... 8.875% 02/15/96 1,064,638
3,785,000 Prime Value Fund, Inc.--Cash Investment Fund, current rate 5.47%............... 3,785,000
------------
Total short-term securities (cost $16,293,193)................................. 16,295,760
------------
Total investments in securities (cost $125,744,541) (e)........................ $139,447,062
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securites are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) PRIDES--Preferred Redeemed Increased Dividend Equity Securities are
structured as convertible preferred securities issued by a company.
Investors receive an enhanced yield but based upon a specific formula,
potential appreciation is limited. PRIDES pay dividends, have voting rights,
are noncallable for three years and upon maturity, convert into shares of
common stock.
(d) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. (See note 7 to the
financial statements). Information concerning the illiquid securities held
at December 31, 1995, which includes acquisition date and cost, is as
follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- ------------------------------------------------------------ ----------- ----------
<S> <C> <C>
Quantas Airways Limited..................................... Various $ 942,793
Bohler-Uddeholm............................................. Various 824,910
Va Technologie.............................................. Various 1,026,767
Banque Nationale de Paris................................... Various 2,172,218
----------
$4,966,688
----------
----------
</TABLE>
(e) At December 31, 1995 the cost of securities for federal income tax purposes
was $127,707,556. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation..................... $18,036,041
Gross unrealized depreciation..................... (6,296,535)
-----------
Net unrealized appreciation....................... $11,739,506
-----------
-----------
-46-
<PAGE>
SMALL COMPANY PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
COMMON STOCKS (85.9%)
CAPITAL GOODS (8.4%)
Machinery (8.4%)
28,500 AES China Generating Co Ltd (b)(c).......................... $ 228,000
46,350 Blount International Incorporated........................... 1,216,688
68,500 Elsag Bailey Process Automation (b)(c)...................... 1,840,937
2,000 Kaydon Corporation.......................................... 60,750
18,100 Millipore Corporation....................................... 744,363
56,400 MSC Industrial Direct Co (b)................................ 1,551,000
70,705 United Waste Systems, Inc (b)............................... 2,633,761
------------
8,275,499
------------
CONSUMER GOODS AND SERVICES (37.0%)
Consumer Goods (7.8%)
40,585 Columbia/HCA Healthcare Corporation......................... 2,059,689
63,300 Idexx Laboratories Inc (b).................................. 2,975,100
19,834 Occusystems, Incorporated (b)............................... 396,680
22,500 Teva Pharmaceutical Industries (c).......................... 1,043,438
19,300 United Health Care.......................................... 1,264,150
------------
7,739,057
------------
Consumer Services (9.6%)
59,774 Big Flower Press Holdings Incorporated (b).................. 926,497
58,700 Carmike Cinemas Inc (b)..................................... 1,320,750
42,959 CUC International Inc (b)................................... 1,465,976
43,100 Gartner (b)................................................. 2,063,413
37,200 GTECH Holdings Corporation (b).............................. 967,200
21,900 Lone Star Steakhouse & Saloon, Inc (b)...................... 840,412
34,502 Manpower.................................................... 970,369
37,900 Sola International Inc (b).................................. 956,975
------------
9,511,592
------------
Retail (14.5%)
74,000 Advanced Lighting Technologies, Inc (b)..................... 740,000
7,400 Amerisource Health Corporation (b).......................... 244,200
7,400 APAC Teleservices, Incorporated (b)......................... 246,975
54,100 Barnes & Noble Inc (b)...................................... 1,568,900
67,520 Borders Group Incorporated (b).............................. 1,249,120
67,100 BT Office Products International, Inc (b)(c)................ 1,073,600
95,300 Casey's General Stores Inc.................................. 2,084,688
44,000 Eastbay Incorporated (b).................................... 869,000
51,700 Friedman's (b).............................................. 995,225
54,400 Global Directmail Corporation (b)........................... 1,496,000
25,300 Home Depot Inc.............................................. 1,211,237
2,800 Intimate Brands Inc......................................... 42,000
18,800 Kohl's Inc (b).............................................. 987,000
40,388 Office Depot, Inc (b)....................................... 797,663
33,500 Orchard Supply Hardware (b)................................. 690,937
------------
14,296,545
------------
Consumer Cyclicals (5.1%)
32,108 Exide Corporation........................................... 1,472,954
27,100 Stant Corporation........................................... 264,225
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
77,600 Tommy Hilfiger Corporation (b).............................. $ 3,288,300
------------
5,025,479
------------
CREDIT SENSITIVE (9.8%)
Finance (8.3%)
66,800 Amerin (b).................................................. 1,786,900
47,365 First Data Corporation...................................... 3,167,534
5,900 MGIC Investment Corporation................................. 320,075
57,100 Partnerre Ltd (c)........................................... 1,570,250
70,700 Roosevelt Financial Group, Inc.............................. 1,369,813
------------
8,214,572
------------
Utilities (1.5%)
66,600 Pansamsat Corporation (b)................................... 1,469,362
------------
INTERMEDIATE GOODS AND SERVICES (6.3%)
Materials (2.7%)
24,126 Cambrex Corporation......................................... 998,213
90,800 Citation Corporation (b).................................... 1,089,600
38,070 McWhorter Technology Inc (b)................................ 561,533
600 Valspar Corporation......................................... 26,775
------------
2,676,121
------------
Transportation (3.6%)
24,000 Eagle USA Airfreight, Inc (b)............................... 630,000
40,400 Fritz Companies (b)......................................... 1,676,600
48,300 Landstar System, Inc (b) ................................... 1,292,025
------------
3,598,625
------------
TECHNOLOGY (24.4%)
14,700 Acxiom Corporation (b)...................................... 402,412
14,800 Adtran Incorporated (b)..................................... 803,825
29,900 The Bisys Group Inc (b)..................................... 919,425
21,000 C-Cube Microsystems Incorporated (b)........................ 1,312,500
1,900 CKS Group Incorporated (b).................................. 74,100
30,400 Cognex Corporation (b)...................................... 1,056,400
67,507 Computer Associates International........................... 3,839,461
110,200 Computron Software (b)...................................... 1,983,600
82,302 Danka Business Systems (c).................................. 3,045,174
1,932 Datastream Systems, Incorporated (b)........................ 36,708
37,900 DSC Communications (b)...................................... 1,397,562
34,373 Fore Systems Inc (b)........................................ 2,045,194
58,700 Informix Corporation (b).................................... 1,761,000
20,100 J Ray McDermott Holdings Incorporated (b)................... 359,288
57,800 Mercury Interactive Corp (b)................................ 1,054,850
9,600 Objective Systems Integrator (b)............................ 525,600
46,100 Oracle Corporation (b)...................................... 1,953,487
25,300 Telephone and Data Systems, Inc............................. 999,350
8,500 Uunet Technologies, Incorporated (b)........................ 535,500
------------
24,105,436
------------
Total common stocks
(cost: $64,528,729)................................................ 84,912,288
------------
</TABLE>
See accompanying notes to investments in securities.
-47-
<PAGE>
SMALL COMPANY PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- --------------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (18.6%)
$4,300,000 U.S. Treasury Bill............................................... 5.39%-5.45% 01/11/96 $ 4,292,702
2,970,000 U.S. Treasury Bill............................................... 5.44%-5.48% 02/15/96 2,951,586
2,500,000 American Home Products CP (d).................................... 5.86% 01/17/96 2,492,703
2,100,000 CPC International Incorporated CP (d)............................ 5.86% 01/08/96 2,096,675
1,375,000 Public Service Electric & Gas Company CP......................... 6.09% 01/19/96 1,370,565
1,480,000 U.S. West Communications CP (d).................................. 5.84% 01/10/96 1,477,188
3,679,638 Temporary Investment Fund, Inc.--TempFund Portfolio, current rate 5.82%................. 3,679,638
--------------
Total short-term securities (cost: $18,361,370)......................................... 18,361,057
--------------
Total investments in securities (cost: $82,890,099) (e)................................. $ 103,273,345
--------------
--------------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The portfolio held 8.9% of net assets in foreign securities at December 31,
1995.
(d) Commercial paper sold within terms of a private placement memorandum exempt
from registration under Section 4(2) the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited
investors." (See note 7 to the financial statements). Information concerning
the illiquid securities held at December 31, 1995, which includes
acquisition date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- -------- ----------- ----------
<S> <C> <C>
American Home Products............................ 11/9/95 $2,472,592
CPC International Incorporated.................... 12/12/95 2,090,944
U.S. West Communications.......................... 12/7/95 1,471,991
----------
$6,035,527
----------
----------
</TABLE>
(e) At December 31, 1995 the cost of securities for federal income tax purposes
was $82,891,847. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation..................... $21,662,422
Gross unrealized depreciation..................... (1,280,924)
-----------
Net unrealized appreciation....................... $20,381,498
-----------
-----------
-48-
<PAGE>
MATURING GOVERNMENT BOND 1998 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- ----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (99.6%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (99.6%)
$ 266,000 Federal National Mortgage Association Strip (b)............. 7.065% 05/22/98 $ 233,979
356,000 Federal National Mortgage Association Strip (b)............. 7.110% 11/22/98 304,536
350,000 Federal National Mortgage Association Strip (b)............. 7.050% 05/22/99 290,913
615,000 Federal Home Loan Bank Strip (b)............................ 6.730% 08/25/98 533,586
1,000,215 Treasury Receipt (b)........................................ 6.610% 05/15/99 835,519
120,000 U. S. Treasury Strip (b).................................... 6.290% 11/15/98 103,397
1,000,000 U. S. Treasury Strip (b).................................... 6.505% 11/15/98 861,639
590,000 Financial Corporation Strip (b)............................. 6.620% 05/30/99 489,410
500,000 Guaranteed Trust Certificates (b)........................... 6.570% 11/15/98 429,155
211,000 Guaranteed Trust Certificates Collateral Trust (b).......... 7.075% 11/15/98 181,103
900,000 Tennessee Valley Authority Strip (b)........................ 6.720% 10/15/98 773,971
----------
Total long-term debt securities (cost: $4,863,662)............................. 5,037,208
----------
SHORT-TERM SECURITIES (.3%)
13,293 Trust for Federal Securities--Federal Trust Fund, current rate 5.58%........... 13,293
----------
Total short-term securities (cost: $13,293).................................... 13,293
----------
Total investment in securities (cost: $4,876,955) (c).......................... $5,050,501
----------
----------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
(c) At December 31, 1995, the cost of securities for federal income tax
purposes was $4,876,955. The aggregate unrealized appreciation and
depreciation of investments in securities based on this cost were:
Gross unrealized appreciation..................... $173,546
Gross unrealized depreciation..................... --
--------
Net unrealized appreciation....................... $173,546
--------
--------
-49-
<PAGE>
MATURING GOVERNMENT BOND 2002 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- ------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (100.1%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (100.1%)
$ 525,000 Federal National Mortgage Association Strip (b).................. 7.600 % 02/01/02 $ 372,613
500,000 Financial Corporation Strip (b).................................. 7.400 % 06/27/02 346,230
1,000,000 Guaranteed Trust Certificates (b)................................ 7.300 % 05/15/02 701,579
1,150,000 Tennessee Valley Authority Strips (b)............................ 7.400 % 04/15/03 754,732
1,003,750 Treasury Receipt (b)............................................. 7.100 % 08/15/02 696,100
260,000 U.S. Treasury Strip (b).......................................... 6.970 % 08/15/02 181,898
------------
Total long-term debt securities (cost: $2,775,121)...................................... 3,053,152
------------
SHORT-TERM SECURITIES (.3%)
8,485 Trust for Federal Securities--Federal Trust Fund, current rate 5.58%.................... 8,485
------------
Total short-term securities (cost: $8,485).............................................. 8,485
------------
Total investment in securities (cost: $2,783,606) (c)................................... $ 3,061,637
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
(c) At December 31, 1995, the cost of securities for federal income tax
purposes was $2,783,606. The aggregate unrealized appreciation and
depreciation of investments in securities based on this cost were:
Gross unrealized appreciation..................... $278,031
Gross unrealized depreciation..................... --
--------
Net unrealized appreciation....................... $278,031
--------
--------
-50-
<PAGE>
MATURING GOVERNMENT BOND 2006 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- ------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (96.7%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (96.7%)
$ 810,000 Federal National Mortgage Association Strip (b).................. 7.620 % 08/01/05 $ 457,819
921,000 Financial Corporation Strip (b).................................. 7.735 % 09/07/07 449,945
553,000 Government Trust Certificates (b)................................ 7.440 % 11/15/05 309,762
1,000,000 Resolution Funding Corporation Strip (b)......................... 7.460 % 07/15/07 506,959
1,000,020 Treasury Receipt (b)............................................. 7.460 % 02/15/07 517,590
450,000 U.S. Treasury Strip (b).......................................... 7.355 % 11/15/06 241,483
------------
Total long-term debt securities (cost: $2,127,113)...................................... 2,483,558
------------
SHORT-TERM SECURITIES (--%)
5 Trust for Federal Securities--Federal Trust Fund, current rate 5.58%.................... 5
------------
Total short-term securities (cost: $5).................................................. 5
------------
Total investment in securities (cost: $2,127,118) (c)................................... $ 2,483,563
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
(c) At December 31, 1995, the cost of securities for federal income tax
purposes was $2,127,118. The aggregate unrealized appreciation and
depreciation of investments in securities based on this cost were:
Gross unrealized appreciation..................... $356,445
Gross unrealized depreciation..................... --
--------
Net unrealized appreciation....................... $356,445
--------
--------
-51-
<PAGE>
MATURING GOVERNMENT BOND 2010 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- ----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (93.7%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (93.7%)
$500,000 Federal National Mortgage Association Strip (b)............. 7.700% 02/12/10 $ 206,929
500,000 Financial Corporation Strip (b)............................. 7.770% 06/06/11 187,164
945,000 Financial Corporation Strip (b)............................. 7.920% 08/08/11 349,470
132,000 Guaranteed Trust Certificates (b)........................... 7.660% 05/15/10 54,367
515,000 State of Israel, Zero Coupon (b)............................ 8.265% 03/15/10 216,001
350,000 Resolution Funding Corporation (b).......................... 7.590% 04/15/11 137,455
335,000 U.S. Treasury Strip (b)..................................... 7.490% 02/15/10 145,189
----------
Total long-term debt securities (cost: $1,047,207)............................. 1,296,575
----------
SHORT-TERM SECURITIES (--%)
50 Trust for Federal Securities--Federal Trust Fund, current rate 5.58%........... 50
----------
Total short-term securities (cost: $50)........................................ 50
----------
Total investment in securities (cost: $1,047,257) (c).......................... $1,296,625
----------
----------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
(c) At December 31, 1995, the cost of securities for federal income tax
purposes was $1,047,257. The aggregate unrealized appreciation and
depreciation of investments in securities based on this cost were:
Gross unrealized appreciation..................... $249,368
Gross unrealized depreciation..................... --
--------
Net unrealized appreciation....................... $249,368
--------
--------
-52-
<PAGE>
VALUE STOCK PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- -------------
<C> <S> <C>
COMMON STOCKS (86.9%)
CAPITAL GOODS (5.6%)
Machinery
8,600 HIG Hartford (b)................................................. $ 416,025
8,600 ITT Corporation (b).............................................. 455,800
8,600 ITT Industries (b)............................................... 206,400
46,575 Reading & Bates Corporation (b).................................. 698,625
-------------
1,776,850
-------------
CONSUMER GOODS AND SERVICES (18.8%)
Consumer Goods (1.9%)
12,089 Columbia/HCA Healthcare Corporation.............................. 613,517
-------------
613,517
-------------
Consumer Services (4.4%)
41,300 Bowne & Company, Incorporated.................................... 826,000
8,900 Knight-Ridder, Inc............................................... 556,250
-------------
1,382,250
-------------
Retail (5.2%)
60,100 Federated Department Stores (b).................................. 1,652,750
-------------
1,652,750
-------------
Consumer Cyclicals (7.3%)
35,200 Owens-Corning Fiberglas Corporation (b).......................... 1,579,600
25,200 USG Corporation (b).............................................. 756,000
-------------
2,335,600
-------------
CREDIT SENSITIVE (23.7%)
Finance (21.0%)
32,468 Prudential Reinsurance Holdings, Incorporated.................... 758,940
64,800 Green Point Financial Corporation................................ 1,733,400
41,200 Lehman Brothers Holdings, Inc.................................... 875,500
18,100 MBIA Inc......................................................... 1,357,500
13,125 RLI Corporation.................................................. 328,124
56,800 TIG Holdings Inc................................................. 1,618,800
-------------
6,672,264
-------------
Utilities (2.7%)
21,400 Texas Utilities Company.......................................... 880,075
-------------
880,075
-------------
INTERMEDIATE GOODS AND SERVICES (35.8%)
Energy (13.1%)
19,100 The Columbia Gas System, Inc. (b)................................ 838,013
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- -------------
<C> <S> <C>
INTERMEDIATE GOODS AND SERVICES--CONTINUED
34,800 Tenneco Inc...................................................... $ 1,726,950
42,900 USX--Marathon Group.............................................. 836,550
35,200 YPF Sociedad Anonima (c)......................................... 761,200
-------------
4,162,713
-------------
Materials (15.9%)
24,900 Citation Corporation (b)......................................... 298,800
15,100 Cytec Industries Inc (b)......................................... 941,862
32,300 Fort Howard Corporation (b)...................................... 726,750
14,500 W.R. Grace & Co.................................................. 857,313
13,338 Kimberly-Clark Corporation....................................... 1,103,720
26,100 Morton International............................................. 936,337
22,400 Sterling Chemicals (b)........................................... 182,000
-------------
5,046,782
-------------
Transportation (6.8%)
6,500 Burlington Northern Santa Fe..................................... 507,000
3,583 Canadian National Railway Company (b)(c)......................... 53,745
22,300 Teekay Shipping Corporation (c).................................. 526,838
34,500 Tidewater Incorporated........................................... 1,086,750
-------------
2,174,333
-------------
TECHNOLOGY (3.0%)
13,900 Rohr Incorporated (b)............................................ 199,813
5,500 Xerox Corporation................................................ 753,500
-------------
953,313
-------------
Total common stocks
(cost: $24,472,281)..................................................... 27,650,447
-------------
<CAPTION>
PRINCIPAL
- ---------
<C> <S> <C>
SHORT-TERM SECURITIES (12.8%)
$1,270,138 Trust for Federal Securities--Federal Trust Fund, current rate
5.58%.......................................................... 1,270,138
500,000 U.S. Treasury Bill 5.41% 01/11/96................................ 499,151
835,000 U.S. Treasury Bills 5.07%-5.48% 02/15/96......................... 829,823
1,500,000 U.S. Treasury Bills 4.89%-5.00% 03/21/96......................... 1,483,054
-------------
Total short-term securities
(cost: $4,082,531)...................................................... 4,082,166
-------------
Total investment in securities
(cost: $28,554,812) (d)................................................. $31,732,613
-------------
-------------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The portfolio held 4.2% of net assets in foreign securities at December 31,
1995.
(d) At December 31, 1995, the cost of securities for federal income tax purposes
was $28,575,547. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation..................... $3,221,178
Gross unrealized depreciation..................... (64,112)
----------
Net unrealized appreciation....................... $3,157,066
----------
----------
-53-
<PAGE>
MIMLIC SERIES FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MONEY ASSET
GROWTH BOND MARKET ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at
market value--see accompanying
schedules for detailed listing
(identified cost: $165,889,798;
$94,879,573; $29,446,178;
$309,752,525; $66,790,495;
$90,220,552; $127,441,407;
$125,744,541; $82,890,099;
$4,876,955; $2,783,606;
$2,127,118; $1,047,257 and
$28,554,812, respectively)...... $ 201,143,358 $ 98,452,711 $ 29,446,178 $346,646,001
Cash in bank on demand deposit..... 4,640 2,116 117,202 39,849
Receivable for Fund shares sold.... 197,511 221,017 643,901 305,801
Receivable for investment
securities sold................. 302,787 1,401,294 -- 3,065,313
Dividends and accrued interest
receivable...................... 316,197 1,183,086 5,197 1,729,243
Unrealized appreciation on forward
foreign currency contracts held,
at value (note 4)............... -- -- -- --
Receivable for foreign income taxes
withheld........................ -- -- -- --
------------- ------------ ------------ ------------
Total assets................. 201,964,493 101,260,224 30,212,478 351,786,207
------------- ------------ ------------ ------------
LIABILITIES
Payable to Minnesota Mutual........ 36 10 13 56
Dividends payable to
shareholders.................... -- -- 8,299 --
Payable for Fund shares
repurchased..................... 171,741 49,186 37,786 133,081
Payable for investment securities
purchased....................... 115,158 166,199 -- 2,642,756
Unrealized depreciation on forward
foreign currency contracts held,
at value (note 4)............... -- -- -- --
------------- ------------ ------------ ------------
Total liabilities............ 286,935 215,395 46,098 2,775,893
------------- ------------ ------------ ------------
Net assets applicable to
outstanding capital stock....... $ 201,677,558 $101,044,829 $ 30,166,380 $349,010,314
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
Represented by:
Capital stock--authorized
10,000,000,000 shares of $.01
par value; outstanding;
91,271,988; 75,844,415;
30,166,380; 191,083,577;
57,777,560; 61,280,850;
75,688,165; 99,811,081;
61,715,077; 4,872,708;
2,796,063; 2,189,242;
1,139,862 and 24,263,572
shares, respectively.......... $ 912,720 $ 758,444 $ 301,664 $ 1,910,836
Additional paid-in capital..... 146,052,376 90,084,286 29,864,716 277,509,298
Undistributed net investment
income........................ 1,885,333 5,666,378 -- 11,587,244
Accumulated net realized gains
(losses) from investments and
foreign currency
transactions.................. 17,573,569 962,583 -- 21,109,460
Unrealized appreciation of
investments and translation of
assets and liabilities in
foreign currencies............ 35,253,560 3,573,138 -- 36,893,476
------------- ------------ ------------ ------------
Total--representing net
assets applicable to
outstanding capital stock... $ 201,677,558 $101,044,829 $ 30,166,380 $349,010,314
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
Net asset value per share of
outstanding capital stock....... $ 2.210 $ 1.332 $ 1.000 $ 1.826
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
-54-
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE CAPITAL INTERNATIONAL SMALL
SECURITIES INDEX 500 APPRECIATION STOCK COMPANY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at
market value--see accompanying
schedules for detailed listing
(identified cost: $165,889,798;
$94,879,573; $29,446,178;
$309,752,525; $66,790,495;
$90,220,552; $127,441,407;
$125,744,541; $82,890,099;
$4,876,955; $2,783,606;
$2,127,118; $1,047,257 and
$28,554,812, respectively)........ $ 69,343,548 $123,757,392 $162,595,638 $139,447,062 $103,273,345
Cash in bank on demand deposit..... 1,904 22,507 87 33,549 14,120
Receivable for Fund shares sold.... 90,635 506,569 228,825 325,806 237,280
Receivable for investment
securities sold................... -- 249,492 675,489 772,712 134,127
Dividends and accrued interest
receivable........................ 616,672 230,591 111,738 474,557 33,337
Unrealized appreciation on forward
foreign currency contracts held,
at value (note 4)................. -- -- -- 70 --
Receivable for foreign income taxes
withheld.......................... -- -- -- 236,490 --
------------ ----------- ------------ ------------ -----------
Total assets................. 70,052,759 124,766,551 163,611,777 141,290,246 103,692,209
------------ ----------- ------------ ------------ -----------
LIABILITIES
Payable to Minnesota Mutual........ 2 3 -- 18 59
Dividends payable to
shareholders...................... -- -- -- -- --
Payable for Fund shares
repurchased....................... 24,288 332,102 91,997 53,962 37,428
Payable for investment securities
purchased......................... 282,496 435,847 -- 459,370 4,759,796
Unrealized depreciation on forward
foreign currency contracts held,
at value (note 4)................. -- -- -- 7,331 --
------------ ----------- ------------ ------------ -----------
Total liabilities............ 306,786 767,952 91,997 520,681 4,797,283
------------ ----------- ------------ ------------ -----------
Net assets applicable to
outstanding capital stock......... $ 69,745,973 $123,998,599 $163,519,780 $140,769,565 $98,894,926
------------ ----------- ------------ ------------ -----------
------------ ----------- ------------ ------------ -----------
Represented by:
Capital stock--authorized
10,000,000,000 shares of $.01
par value; outstanding;
91,271,988; 75,844,415;
30,166,380; 191,083,577;
57,777,560; 61,280,850;
75,688,165; 99,811,081;
61,715,077; 4,872,708;
2,796,063; 2,189,242;
1,139,862 and 24,263,572
shares, respectively.......... $ 577,776 $ 612,809 $ 756,882 $ 998,111 $ 617,151
Additional paid-in capital..... 65,374,590 87,010,235 122,863,163 119,236,761 75,448,985
Undistributed net investment
income........................ 4,531,053 1,984,153 -- 4,201,200 963
Accumulated net realized gains
(losses) from investments and
foreign currency
transactions.................. (3,290,499) 854,562 4,745,504 2,636,296 2,444,581
Unrealized appreciation of
investments and translation of
assets and liabilities in
foreign currencies............ 2,553,053 33,536,840 35,154,231 13,697,197 20,383,246
------------ ----------- ------------ ------------ -----------
Total--representing net
assets applicable to
outstanding capital stock... $ 69,745,973 $123,998,599 $163,519,780 $140,769,565 $98,894,926
------------ ----------- ------------ ------------ -----------
------------ ----------- ------------ ------------ -----------
Net asset value per share of
outstanding capital stock......... $ 1.207 $ 2.023 $ 2.160 $ 1.410 $ 1.602
------------ ----------- ------------ ------------ -----------
------------ ----------- ------------ ------------ -----------
<CAPTION>
MATURING MATURING MATURING MATURING
GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT VALUE
BOND 1998 BOND 2002 BOND 2006 BOND 2010 STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at
market value--see accompanying
schedules for detailed listing
(identified cost: $165,889,798;
$94,879,573; $29,446,178;
$309,752,525; $66,790,495;
$90,220,552; $127,441,407;
$125,744,541; $82,890,099;
$4,876,955; $2,783,606;
$2,127,118; $1,047,257 and
$28,554,812, respectively)........ $5,050,501 $3,061,637 $2,483,563 $1,296,625 $31,732,613
Cash in bank on demand deposit..... 5,178 8,284 85 8,796 35,055
Receivable for Fund shares sold.... 4 -- 85,904 285,938 189,221
Receivable for investment
securities sold................... -- -- -- -- --
Dividends and accrued interest
receivable........................ 1,361 40 -- -- 47,329
Unrealized appreciation on forward
foreign currency contracts held,
at value (note 4)................. -- -- -- -- --
Receivable for foreign income taxes
withheld.......................... -- -- -- -- --
---------- ----------- ----------- ----------- ------------
Total assets................. 5,057,044 3,069,961 2,569,552 1,591,359 32,004,218
---------- ----------- ----------- ----------- ------------
LIABILITIES
Payable to Minnesota Mutual........ -- -- -- -- --
Dividends payable to
shareholders...................... -- -- -- -- --
Payable for Fund shares
repurchased....................... 191 20,535 -- 207,763 11,536
Payable for investment securities
purchased......................... -- -- -- -- 167,648
Unrealized depreciation on forward
foreign currency contracts held,
at value (note 4)................. -- -- -- -- --
---------- ----------- ----------- ----------- ------------
Total liabilities............ 191 20,535 -- 207,763 179,184
---------- ----------- ----------- ----------- ------------
Net assets applicable to
outstanding capital stock......... $5,056,853 $3,049,426 $2,569,552 $1,383,606 $31,825,034
---------- ----------- ----------- ----------- ------------
---------- ----------- ----------- ----------- ------------
Represented by:
Capital stock--authorized
10,000,000,000 shares of $.01
par value; outstanding;
91,271,988; 75,844,415;
30,166,380; 191,083,577;
57,777,560; 61,280,850;
75,688,165; 99,811,081;
61,715,077; 4,872,708;
2,796,063; 2,189,242;
1,139,862 and 24,263,572
shares, respectively.......... $ 48,727 $ 27,961 $ 21,892 $ 11,399 $ 242,636
Additional paid-in capital..... 4,830,820 2,746,405 2,187,501 1,137,132 27,887,908
Undistributed net investment
income........................ 3,760 -- 1,524 1,072 3,814
Accumulated net realized gains
(losses) from investments and
foreign currency
transactions.................. -- (2,971 ) 2,190 (15,365 ) 512,875
Unrealized appreciation of
investments and translation of
assets and liabilities in
foreign currencies............ 173,546 278,031 356,445 249,368 3,177,801
---------- ----------- ----------- ----------- ------------
Total--representing net
assets applicable to
outstanding capital stock... $5,056,853 $3,049,426 $2,569,552 $1,383,606 $31,825,034
---------- ----------- ----------- ----------- ------------
---------- ----------- ----------- ----------- ------------
Net asset value per share of
outstanding capital stock......... $ 1.038 $ 1.091 $ 1.174 $ 1.214 $ 1.312
---------- ----------- ----------- ----------- ------------
---------- ----------- ----------- ----------- ------------
</TABLE>
-55-
<PAGE>
MIMLIC SERIES FUND, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
MONEY ASSET
GROWTH BOND MARKET ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Investment income:
Interest....................... $ 897,915 $6,164,380 $1,502,605 $11,385,019
Dividends (net of foreign
withholding taxes of $493,504
for International Stock
Portfolio).................... 1,992,607 -- -- 1,897,709
----------- ---------- --------- -----------
Total investment income.... 2,890,522 6,164,380 1,502,605 13,282,728
----------- ---------- --------- -----------
Expenses (note 5):
Investment advisory fee........ 905,136 435,045 126,630 1,538,272
Custodian fees................. 12,762 5,294 4,802 27,405
Administrative service fee..... 20,200 20,200 20,200 20,200
Auditing and accounting
services...................... 17,149 5,569 2,229 34,384
Legal fees..................... 311 311 311 311
Registration fees.............. 11,870 12,462 1,624 11,371
Printing and shareholder
reports....................... 31,218 15,478 4,595 53,292
Directors' fees................ 3,563 1,686 495 6,078
Insurance...................... 2,980 1,957 936 4,171
----------- ---------- --------- -----------
Total expenses............. 1,005,189 498,002 161,822 1,695,484
Less fees and expenses waived
or absorbed by Minnesota
Mutual........................ -- -- -- --
----------- ---------- --------- -----------
Total net expenses......... 1,005,189 498,002 161,822 1,695,484
----------- ---------- --------- -----------
Investment income
(loss)--net............... 1,885,333 5,666,378 1,340,783 11,587,244
----------- ---------- --------- -----------
Realized and unrealized gains
(losses) on investments and
foreign currencies:
Net realized gains (losses)
from:
Investments (note 3)....... 17,645,339 3,734,900 -- 22,040,129
Foreign currency
transactions.............. -- -- -- --
Net change in unrealized
appreciation or depreciation
on:
Investments................ 19,185,038 5,968,239 -- 34,618,189
Translation of assets and
liabilities in foreign
currencies................ -- -- -- --
----------- ---------- --------- -----------
Net gains on investments... 36,830,377 9,703,139 -- 56,658,318
----------- ---------- --------- -----------
Net increase in net assets
resulting from operations....... $38,715,710 $15,369,517 $1,340,783 $68,245,562
----------- ---------- --------- -----------
----------- ---------- --------- -----------
</TABLE>
See accompanying notes to financial statements.
-56-
<PAGE>
<TABLE>
<CAPTION>
MATURING MATURING
MORTGAGE CAPITAL INTERNATIONAL SMALL GOVERNMENT GOVERNMENT
SECURITIES INDEX 500 APPRECIATION STOCK COMPANY BOND 1998 BOND 2002
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ----------- ------------ ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest....................... $4,904,558 $ 33,252 $ 133,829 $ 949,212 $ 572,119 $280,494 $193,545
Dividends (net of foreign
withholding taxes of $493,504
for International Stock
Portfolio).................... -- 2,400,597 800,610 3,617,252 157,560 -- --
---------- ----------- ------------ ------------- ---------- ---------- ----------
Total investment income.... 4,904,558 2,433,849 934,439 4,566,464 729,679 280,494 193,545
---------- ----------- ------------ ------------- ---------- ---------- ----------
Expenses (note 5):
Investment advisory fee........ 322,465 388,206 1,071,527 955,095 552,670 2,184 1,441
Custodian fees................. 7,334 7,343 8,552 107,323 11,359 2,381 2,332
Administrative service fee..... 20,200 20,200 20,200 20,200 20,200 20,200 20,200
Auditing and accounting
services...................... 7,249 7,609 12,169 146,527 5,259 3,899 3,899
Legal fees..................... 311 311 311 311 311 311 311
Registration fees.............. 828 6,069 10,075 18,215 12,303 104 80
Printing and shareholder
reports....................... 12,171 16,128 24,076 21,567 12,047 1,939 1,736
Directors' fees................ 1,278 1,824 2,770 2,399 1,355 86 57
Insurance...................... 1,669 2,006 2,519 2,402 1,712 424 416
---------- ----------- ------------ ------------- ---------- ---------- ----------
Total expenses............. 373,505 449,696 1,152,199 1,274,039 617,216 31,528 30,472
Less fees and expenses waived
or absorbed by Minnesota
Mutual........................ -- -- -- -- -- (22,794) (24,709)
---------- ----------- ------------ ------------- ---------- ---------- ----------
Total net expenses......... 373,505 449,696 1,152,199 1,274,039 617,216 8,734 5,763
---------- ----------- ------------ ------------- ---------- ---------- ----------
Investment income
(loss)--net............... 4,531,053 1,984,153 (217,760) 3,292,425 112,463 271,760 187,782
---------- ----------- ------------ ------------- ---------- ---------- ----------
Realized and unrealized gains
(losses) on investments and
foreign currencies:
Net realized gains (losses)
from:
Investments (note 3)....... 1,181,245 989,818 6,284,588 4,783,539 3,782,537 1,067 8,323
Foreign currency
transactions.............. -- -- -- (99,232) -- -- --
Net change in unrealized
appreciation or depreciation
on:
Investments................ 4,752,049 26,535,228 21,970,841 8,233,684 16,659,924 359,251 446,613
Translation of assets and
liabilities in foreign
currencies................ -- -- -- (6,319) -- -- --
---------- ----------- ------------ ------------- ---------- ---------- ----------
Net gains on investments... 5,933,294 27,525,046 28,255,429 12,911,672 20,442,461 360,318 454,936
---------- ----------- ------------ ------------- ---------- ---------- ----------
Net increase in net assets
resulting from operations......... $10,464,347 $29,509,199 $28,037,669 $16,204,097 $20,554,924 $632,078 $642,718
---------- ----------- ------------ ------------- ---------- ---------- ----------
---------- ----------- ------------ ------------- ---------- ---------- ----------
<CAPTION>
MATURING MATURING
GOVERNMENT GOVERNMENT VALUE
BOND 2006 BOND 2010 STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ----------
<S> <C> <C> <C>
Investment income:
Interest....................... $151,744 $ 80,693 $ 91,932
Dividends (net of foreign
withholding taxes of $493,504
for International Stock
Portfolio).................... -- -- 312,165
---------- ---------- ----------
Total investment income.... 151,744 80,693 404,097
---------- ---------- ----------
Expenses (note 5):
Investment advisory fee........ 5,450 2,888 141,207
Custodian fees................. 2,003 1,788 9,237
Administrative service fee..... 20,200 20,200 20,200
Auditing and accounting
services...................... 3,899 3,899 3,899
Legal fees..................... 311 311 311
Registration fees.............. 58 34 251
Printing and shareholder
reports....................... 1,622 1,458 3,591
Directors' fees................ 44 25 317
Insurance...................... 332 326 880
---------- ---------- ----------
Total expenses............. 33,919 30,929 179,893
Less fees and expenses waived
or absorbed by Minnesota
Mutual........................ (25,199) (26,308) (11,610)
---------- ---------- ----------
Total net expenses......... 8,720 4,621 168,283
---------- ---------- ----------
Investment income
(loss)--net............... 143,024 76,072 235,814
---------- ---------- ----------
Realized and unrealized gains
(losses) on investments and
foreign currencies:
Net realized gains (losses)
from:
Investments (note 3)....... 2,190 (2,181) 1,761,136
Foreign currency
transactions.............. -- -- --
Net change in unrealized
appreciation or depreciation
on:
Investments................ 504,542 334,118 3,206,550
Translation of assets and
liabilities in foreign
currencies................ -- -- --
---------- ---------- ----------
Net gains on investments... 506,732 331,937 4,967,686
---------- ---------- ----------
Net increase in net assets
resulting from operations......... $649,756 $408,009 $5,203,500
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
-57-
<PAGE>
MIMLIC SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
MONEY MARKET
GROWTH PORTFOLIO BOND PORTFOLIO PORTFOLIO
-------------------------- ------------------------- --------------------------
1995 1994 1995 1994 1995 1994
------------ ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Investment income (loss)--net.... $ 1,885,333 $ 1,650,255 $ 5,666,378 $ 2,999,724 $ 1,340,783 $ 690,788
Net realized gains (losses) on
investments and foreign currency
transactions.................... 17,645,339 6,143,355 3,734,900 (2,772,317) -- --
Net change in unrealized
appreciation or depreciation of
investments and translation of
assets and liabilities in
foreign currencies.............. 19,185,038 (6,460,154) 5,968,239 (2,447,218) -- --
------------ ------------ ----------- ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from
operations.................... 38,715,710 1,333,456 15,369,517 (2,219,811) 1,340,783 690,788
------------ ------------ ----------- ------------ ------------ ------------
Distributions to shareholders from:
Investment income--net........... (1,650,255) (1,342,938) (2,999,724) (1,934,397) (1,340,783) (690,788)
Tax return of capital............ -- -- -- -- -- --
Net realized gains............... (6,215,125) (2,762,094) -- (1,207,104) -- --
------------ ------------ ----------- ------------ ------------ ------------
Total distributions............ (7,865,380) (4,105,032) (2,999,724) (3,141,501) (1,340,783) (690,788)
------------ ------------ ----------- ------------ ------------ ------------
Capital share transactions (note
6):
Proceeds from sales.............. 32,540,549 52,498,822 24,809,311 47,311,992 36,944,812 32,779,527
Shares issued as a result of
reinvested distributions........ 7,865,380 4,105,032 2,999,724 3,141,501 1,335,757 687,516
Payments for redemption of
shares.......................... (26,947,664) (22,208,175) (13,813,438) (14,339,927) (31,221,058) (28,782,856)
------------ ------------ ----------- ------------ ------------ ------------
Increase in net assets from capital
shares transactions............. 13,458,265 34,395,679 13,995,597 36,113,566 7,059,511 4,684,187
------------ ------------ ----------- ------------ ------------ ------------
Total increase (decrease) in
net assets.................... 44,308,595 31,624,103 26,365,390 30,752,254 7,059,511 4,684,187
Net assets at beginning of year.... 157,368,963 125,744,860 74,679,439 43,927,185 23,106,869 18,422,682
------------ ------------ ----------- ------------ ------------ ------------
Net assets at end of year
(including undistributed net
investment income of $1,885,333
and $1,650,255 for Growth,
$5,666,378 and $2,999,724 for
Bond, $0 and $0 for Money
Market, $11,587,244 and
$8,662,733 for Asset Allocation,
$4,531,053 and $4,169,579 for
Mortgage Securities, $1,984,153
and $1,540,293 for Index 500, $0
and $0 for Capital Appreciation,
$4,201,200 and $0 for
International Stock and $963 and
$0 for Small Company,
respectively.................... $201,677,558 $157,368,963 $101,044,829 $ 74,679,439 $ 30,166,380 $ 23,106,869
------------ ------------ ----------- ------------ ------------ ------------
------------ ------------ ----------- ------------ ------------ ------------
<CAPTION>
ASSET ALLOCATION PORTFOLIO
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Operations:
Investment income (loss)--net.... $ 11,587,244 $ 8,662,733
Net realized gains (losses) on
investments and foreign currency
transactions.................... 22,040,129 2,416,232
Net change in unrealized
appreciation or depreciation of
investments and translation of
assets and liabilities in
foreign currencies.............. 34,618,189 (14,485,429)
------------ ------------
Net increase (decrease) in net
assets resulting from
operations.................... 68,245,562 (3,406,464)
------------ ------------
Distributions to shareholders from:
Investment income--net........... (8,662,733) (5,362,473)
Tax return of capital............ -- --
Net realized gains............... (3,165,106) (1,562,683)
------------ ------------
Total distributions............ (11,827,839) (6,925,156)
------------ ------------
Capital share transactions (note
6):
Proceeds from sales.............. 63,178,126 84,259,037
Shares issued as a result of
reinvested distributions........ 11,827,839 6,925,156
Payments for redemption of
shares.......................... (55,042,670) (58,234,439)
------------ ------------
Increase in net assets from capital
shares transactions............. 19,963,295 32,949,754
------------ ------------
Total increase (decrease) in
net assets.................... 76,381,018 22,618,134
Net assets at beginning of year.... 272,629,296 250,011,162
------------ ------------
Net assets at end of year
(including undistributed net
investment income of $1,885,333
and $1,650,255 for Growth,
$5,666,378 and $2,999,724 for
Bond, $0 and $0 for Money
Market, $11,587,244 and
$8,662,733 for Asset Allocation,
$4,531,053 and $4,169,579 for
Mortgage Securities, $1,984,153
and $1,540,293 for Index 500, $0
and $0 for Capital Appreciation,
$4,201,200 and $0 for
International Stock and $963 and
$0 for Small Company,
respectively.................... $349,010,314 $272,629,296
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
-58-
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE SECURITIES CAPITAL APPRECIATION
PORTFOLIO INDEX 500 PORTFOLIO PORTFOLIO
------------------------- ------------------------- --------------------------
1995 1994 1995 1994 1995 1994
----------- ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Investment income (loss)--net.... $ 4,531,053 $ 4,169,579 $ 1,984,153 $ 1,540,293 $ (217,760) $ (86,869)
Net realized gains (losses) on
investments and foreign currency
transactions.................... 1,181,245 (4,453,200) 989,818 651,600 6,284,588 2,161,545
Net change in unrealized
appreciation or depreciation of
investments and translation of
assets and liabilities in
foreign currencies.............. 4,752,049 (1,979,210) 26,535,228 (1,311,857) 21,970,841 935,847
----------- ------------ ----------- ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from
operations.................... 10,464,347 (2,262,831) 29,509,199 880,036 28,037,669 3,010,523
----------- ------------ ----------- ------------ ------------ ------------
Distributions to shareholders from:
Investment income--net........... (4,169,579) (2,947,917) (1,540,293) (1,025,482) -- (79,598)
Tax return of capital............ -- -- -- -- -- --
Net realized gains............... -- (1,400,355) (609,060) (207,595) (3,373,884) (1,354,127)
----------- ------------ ----------- ------------ ------------ ------------
Total distributions............ (4,169,579) (4,348,272) (2,149,353) (1,233,077) (3,373,884) (1,433,725)
----------- ------------ ----------- ------------ ------------ ------------
Capital share transactions (note
6):
Proceeds from sales.............. 13,052,763 22,159,015 36,939,888 28,874,830 43,468,072 47,822,212
Shares issued as a result of
reinvested distributions........ 4,169,579 4,348,272 2,149,353 1,233,077 3,373,884 1,433,725
Payments for redemption of
shares.......................... (13,436,928) (24,132,164) (15,881,993) (12,532,430) (23,592,979) (20,065,399)
----------- ------------ ----------- ------------ ------------ ------------
Increase in net assets from capital
shares transactions............... 3,785,414 2,375,123 23,207,248 17,575,477 23,248,977 29,190,538
----------- ------------ ----------- ------------ ------------ ------------
Total increase (decrease) in
net assets.................... 10,080,182 (4,235,980) 50,567,094 17,222,436 47,912,762 30,767,336
Net assets at beginning of year.... 59,665,791 63,901,771 73,431,505 56,209,069 115,607,018 84,839,682
----------- ------------ ----------- ------------ ------------ ------------
Net assets at end of year
(including undistributed net
investment income of $1,885,333
and $1,650,255 for Growth,
$5,666,378 and $2,999,724 for
Bond, $0 and $0 for Money Market,
$11,587,244 and $8,662,733 for
Asset Allocation, $4,531,053 and
$4,169,579 for Mortgage
Securities, $1,984,153 and
$1,540,293 for Index 500, $0 and
$0 for Capital Appreciation,
$4,201,200 and $0 for
International Stock and $963 and
$0 for Small Company,
respectively...................... $69,745,973 $ 59,665,791 $123,998,599 $ 73,431,505 $163,519,780 $115,607,018
----------- ------------ ----------- ------------ ------------ ------------
----------- ------------ ----------- ------------ ------------ ------------
<CAPTION>
INTERNATIONAL STOCK SMALL COMPANY
PORTFOLIO PORTFOLIO
-------------------------- ------------------------
1995 1994 1995 1994
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss)--net.... $ 3,292,425 $ 1,469,931 $ 112,463 $ 72,362
Net realized gains (losses) on
investments and foreign currency
transactions.................... 4,684,307 2,343,090 3,782,537 (351,935)
Net change in unrealized
appreciation or depreciation of
investments and translation of
assets and liabilities in
foreign currencies.............. 8,227,365 (4,817,807) 16,659,924 2,760,825
------------ ------------ ----------- -----------
Net increase (decrease) in net
assets resulting from
operations.................... 16,204,097 (1,004,786) 20,554,924 2,481,252
------------ ------------ ----------- -----------
Distributions to shareholders from:
Investment income--net........... -- (2,161,324) (111,500) (72,362)
Tax return of capital............ -- (104,737) -- (138)
Net realized gains............... -- (3,143,805) (969,415) --
------------ ------------ ----------- -----------
Total distributions............ -- (5,409,866) (1,080,915) (72,500)
------------ ------------ ----------- -----------
Capital share transactions (note
6):
Proceeds from sales.............. 45,334,046 77,099,945 38,430,026 41,639,137
Shares issued as a result of
reinvested distributions........ -- 5,409,866 1,080,915 72,500
Payments for redemption of
shares.......................... (28,258,386) (29,711,207) (11,194,748) (6,058,704)
------------ ------------ ----------- -----------
Increase in net assets from capital
shares transactions............... 17,075,660 52,798,604 28,316,193 35,652,933
------------ ------------ ----------- -----------
Total increase (decrease) in
net assets.................... 33,279,757 46,383,952 47,790,202 38,061,685
Net assets at beginning of year.... 107,489,808 61,105,856 51,104,724 13,043,039
------------ ------------ ----------- -----------
Net assets at end of year
(including undistributed net
investment income of $1,885,333
and $1,650,255 for Growth,
$5,666,378 and $2,999,724 for
Bond, $0 and $0 for Money Market,
$11,587,244 and $8,662,733 for
Asset Allocation, $4,531,053 and
$4,169,579 for Mortgage
Securities, $1,984,153 and
$1,540,293 for Index 500, $0 and
$0 for Capital Appreciation,
$4,201,200 and $0 for
International Stock and $963 and
$0 for Small Company,
respectively...................... $140,769,565 $107,489,808 $98,894,926 $51,104,724
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
</TABLE>
-59-
<PAGE>
MIMLIC SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS--CONTINUED
YEAR ENDED DECEMBER 31, 1995 AND PERIOD FROM MAY 2, 1994
COMMENCEMENT OF OPERATIONS, TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
MATURING MATURING MATURING MATURING
GOVERNMENT BOND GOVERNMENT BOND GOVERNMENT BOND GOVERNMENT BOND
1998 PORTFOLIO 2002 PORTFOLIO 2006 PORTFOLIO 2010 PORTFOLIO
---------------------- ---------------------- ---------------------- ----------------------
1995 1994 1995 1994 1995 1994 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operations:
Investment income--net........ $ 271,760 $ 152,178 $ 187,782 $ 126,262 $ 143,024 $ 93,792 $ 76,072 $ 55,785
Net realized gains (losses)
on investments............... 1,067 -- 8,323 (11,294) 2,190 -- (2,181) (13,184)
Net change in unrealized
appreciation or depreciation
of investments............... 359,251 (185,705) 446,613 (168,582) 504,542 (148,097) 334,118 (84,750)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in
net assets resulting from
operations................. 632,078 (33,527) 642,718 (53,614) 649,756 (54,305) 408,009 (42,149)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Distributions to shareholders
from:
Investment income--net........ (269,178) (151,000) (189,044) (125,000) (142,792) (92,500) (75,785) (55,000)
Tax return of capital......... -- -- (6,040) -- -- -- -- --
Net realized gains............ (1,067) -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions......... (270,245) (151,000) (195,084) (125,000) (142,792) (92,500) (75,785) (55,000)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Capital share transactions (note
6):
Proceeds from sales........... 2,803,879 6,188,973 862,287 3,593,330 539,818 2,375,258 1,121,319 1,603,322
Shares issued as a result of
reinvested distributions..... 270,245 151,000 195,084 125,000 142,792 92,500 75,785 55,000
Payments for redemption of
shares....................... (1,780,820) (2,753,730) (1,030,858) (964,437) (479,630) (461,345) (1,216,768) (490,127)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net
assets from capital shares
transactions................. 1,293,304 3,586,243 26,513 2,753,893 202,980 2,006,413 (19,664) 1,168,195
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total increase in net
assets..................... 1,655,137 3,401,716 474,147 2,575,279 709,944 1,859,608 312,560 1,071,046
Net assets at beginning of
period....................... 3,401,716 -- 2,575,279 -- 1,859,608 -- 1,071,046 --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net assets at end of period.
(including undistributed net
investment income of $3,760
and $1,178 for Maturing
Government Bond 1998, $0 and
$1,262 for Maturing
Government Bond 2002, $1,524
and $1,292 for Maturing
Government Bond 2006, $1,072
and $785 for Maturing
Government Bond 2010 and
$3,814 and $1,111 for Value
Stock, respectively.......... $5,056,853 $3,401,716 $3,049,426 $2,575,279 $2,569,552 $1,859,608 $1,383,606 $1,071,046
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
VALUE STOCK
PORTFOLIO
-----------------------
1995 1994
----------- ----------
<S> <C> <C>
Operations:
Investment income--net........ $ 235,814 $ 70,111
Net realized gains (losses)
on investments............... 1,761,136 130,280
Net change in unrealized
appreciation or depreciation
of investments............... 3,206,550 (28,749)
----------- ----------
Net increase (decrease) in
net. assets resulting from
operations................. 5,203,500 171,642
----------- ----------
Distributions to shareholders
from:
Investment income--net........ (233,111) (69,000)
Tax return of capital......... -- --
Net realized gains............ (1,350,762) (27,779)
----------- ----------
Total distributions......... (1,583,873) (96,779)
----------- ----------
Capital share transactions (note
6):
Proceeds from sales........... 20,708,752 9,025,887
Shares issued as a result of
reinvested distributions..... 1,583,873 96,779
Payments for redemption of
shares....................... (2,858,057) (426,690)
----------- ----------
Increase (decrease) in net
assets from capital shares
transactions................. 19,434,568 8,695,976
----------- ----------
Total increase in net
assets..................... 23,054,195 8,770,839
Net assets at beginning of
period....................... 8,770,839 --
----------- ----------
Net assets at end of period.
(including undistributed net
investment income of $3,760
and $1,178 for Maturing
Government Bond 1998, $0 and
$1,262 for Maturing
Government Bond 2002, $1,524
and $1,292 for Maturing
Government Bond 2006, $1,072
and $785 for Maturing
Government Bond 2010 and
$3,814 and $1,111 for Value
Stock, respectively.......... $31,825,034 $8,770,839
----------- ----------
----------- ----------
</TABLE>
See accompanying notes to financial statements.
-60-
<PAGE>
MIMLIC SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) ORGANIZATION
MIMLIC Series Fund, Inc. (the Fund) is registered under the Investment
Company Act of 1940 (as amended) as a diversified, open-end management
investment company with a series of fourteen portfolios (Growth, Bond, Money
Market, Asset Allocation, Mortgage Securities, Index 500, Capital Appreciation,
International Stock, Small Company, Maturing Government Bond 1998, Maturing
Government Bond 2002, Maturing Government Bond 2006, Maturing Government Bond
2010 and Value Stock). The Fund accounts for the assets, liabilities and
operations of each portfolio separately. Shares of the Fund will not be offered
directly to the public, but sold only to The Minnesota Mutual Life Insurance
Company's (Minnesota Mutual) separate accounts in connection with Minnesota
Mutual variable contracts and policies.
On November 9, 1993, the Board of Directors approved the addition of the
Maturing Government Bond 1998, Maturing Government Bond 2002, Maturing
Government Bond 2006 and Maturing Government Bond 2010 Portfolios. On January
18, 1994, the Board of Directors approved the addition of the Value Stock
Portfolio. On April 25, 1994, Minnesota Mutual purchased shares of capital
stock, which represented the initial capital in these portfolios, as follows:
<TABLE>
<CAPTION>
NUMBER OF
PORTFOLIO SHARES
- --------- ----------
<S> <C>
Maturing Government Bond 1998....................................... 3,400,000
Maturing Government Bond 2002....................................... 2,600,000
Maturing Government Bond 2006....................................... 1,900,000
Maturing Government Bond 2010....................................... 1,100,000
Value Stock......................................................... 3,000,000
</TABLE>
Operations for these five portfolios did not formally commence until May 2,
1994 when the shares became effectively registered under the Securities Exchange
Act of 1933.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Fund are as follows:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles 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 increase and decrease in net assets from
operations during the period. Actual results could differ from those estimates.
INVESTMENTS IN SECURITIES
Investments in securities traded on a U.S. or foreign securities exchanges
are valued at the last sales price on that exchange prior to the time when
assets are valued; securities traded in the over-the-counter market and listed
securities for which no sale was reported on that date are valued on the basis
of the last current bid price. When market quotations are not readily available,
securities are valued at fair value as determined in good faith by the Board of
Directors. Such fair values are determined using pricing services or prices
quoted by independent brokers. Short-term securities, with the exception of
Money Market and International Stock, are valued at market. For International
Stock, short-term securities with maturities of less than 60 days when acquired,
or which subsequently are within 60 days of maturity, are valued at amortized
cost which approximates market value. Pursuant to Rule 2a-7 of the Investment
Company Act of 1940 (as amended), all securities in Money Market are valued at
amortized cost, which approximates market value, in order to maintain a constant
net asset value of $1 per share.
-61-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are calculated on the
identified-cost basis. Dividend income is recognized on the ex-dividend date and
interest income, including amortization of bond premium and discount computed on
a level yield basis, is accrued daily.
FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S. dollars at the closing rate of
exchange. Foreign currency amounts related to the purchase or sale of
securities, income and expenses are translated at the exchange rate on the
transaction date. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with net realized and unrealized gains or losses from
investments.
Net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between trade and settlement dates on security transactions,
the difference between the amounts of dividends, interest and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of
the amounts actually received or paid. Net unrealized foreign exchange gains and
losses arise from changes in the value of assets and liabilities, other than
investments in securities, resulting from changes in the exchange rate.
International Stock also may enter into forward foreign currency exchange
contracts for operational purposes and to protect against adverse exchange rate
fluctuations. The net U.S. dollar value of foreign currency underlying all
contractual commitments held by International Stock and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates from an independent pricing service. International Stock is subject to the
credit risk that the other party will not complete the obligations of the
contract.
FEDERAL TAXES
The Fund's policy is to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders. Therefore, no income tax provision is required.
Each portfolio within the Fund is treated as a separate entity for federal
income tax purposes. The Fund's policy is to make the required minimum
distributions prior to December 31, in order to avoid Federal excise tax.
For federal income tax purposes, the following Portfolios had capital loss
carryovers at December 31, 1995, which, if not offset by subsequent capital
gains, will expire December 31, 2002 through 2003. It is unlikely the board of
directors will authorize a distribution of any net realized capital gains until
the available capital loss carryovers have been offset or expired:
<TABLE>
<S> <C>
Mortgage Securities................................................. $3,290,499
Maturing Government Bond 2002....................................... 2,971
Maturing Government Bond 2010....................................... 15,365
</TABLE>
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of temporary book-to-tax
differences. The character of distributions made during the year from net
investment income or realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income (loss) or realized gains (losses) were
recorded by the Fund.
-62-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, adjustments have been made to undistributed net
investment income (UNII), accumulated net realized gains and losses (ARGL) and
additional paid-in captal (APIC) in the following amounts:
<TABLE>
<CAPTION>
UNII ARGL APIC
--------- --------- ---------
<S> <C> <C> <C>
Capital Appreciation.............................................................. $ 217,760 $ -- $(217,760)
International Stock............................................................... 908,775 (908,775) --
</TABLE>
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income for Money Market
are declared and reinvested daily in additional shares of capital stock. For
portfolios other than Money Market, distributions from net investment income and
realized gains, if any, will generally be declared and reinvested in additional
shares on an annual basis.
(3) INVESTMENT SECURITY TRANSACTIONS
For the year ended December 31, 1995, the cost of purchases and proceeds
from sales of investment securities aggregated $167,341,977 and $160,481,527,
respectively, for Money Market. For the other portfolios, the cost of purchases
and proceeds from sales of investment securities, other than temporary
investments in short-term securities, for the year ended December 31, 1995 were
as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ -------------
<S> <C> <C>
Growth............................................. $169,358,960 $ 152,644,401
Bond............................................... 187,584,847 168,250,545
Asset Allocation................................... 446,709,760 453,344,030
Mortgage Securities................................ 89,547,013 83,962,031
Index 500.......................................... 27,361,565 4,621,683
Capital Appreciation............................... 92,160,508 71,791,108
International Stock................................ 42,239,714 21,701,868
Small Company...................................... 59,812,551 39,341,441
Maturing Government Bond 1998...................... 1,692,868 383,296
Maturing Government Bond 2002...................... 62,511 --
Maturing Government Bond 2006...................... 344,848 217,166
Maturing Government Bond 2010...................... -- 93,714
Value Stock........................................ 43,922,395 28,405,681
</TABLE>
-63-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) FORWARD FOREIGN CURRENCY CONTRACTS
On December 31, 1995, International Stock had entered into forward currency
contracts that obligate International Stock to deliver currencies at specified
future dates. Unrealized appreciation and depreciation on these contracts is
included in the accompanying financial statements. The terms of the open
contracts were as follows:
<TABLE>
<CAPTION>
EXCHANGE CURRENCY TO BE CURRENCY TO BE UNREALIZED UNREALIZED
DATE DELIVERED RECEIVED APPRECIATION DEPRECIATION
- -------- ------------------ ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
01/03/96 26,439 US$ 17,074 GBP $70 $ --
01/04/96 119,670 GBP 183,813 US$ -- 1,986
01/04/96 15,041 GBP 23,352 US$ -- 250
01/03/96 184,320 CHF 158,623 US$ -- 1,564
01/05/96 44,657 GBP 68,793 US$ -- 540
01/05/96 46,065 GBP 71,520 US$ -- 387
01/08/96 201,935 CHF 174,202 US$ -- 1,294
01/31/96 101,723 US$ 495,898 FRF -- 320
01/31/96 42,374 US$ 206,442 FRF -- 160
01/31/96 74,346 US$ 362,810 FRF -- 158
01/03/96 46,060 US$ 198,979 FIM -- 233
01/31/96 20,949 US$ 101,833 FRF -- 126
01/31/96 20,339 US$ 98,867 FRF -- 122
01/04/96 17,416 US$ 75,254 FIM -- 84
01/31/96 13,048 US$ 63,478 FRF -- 68
01/31/96 11,944 US$ 58,229 FRF -- 39
--
-----
$70 $7,331
-- -----
-- -----
</TABLE>
<TABLE>
<C> <S>
CHF Swiss Franc
FIM Finnish Markka
FRF French Franc
GBP British Pound Sterling
US$ United States Dollar
</TABLE>
-64-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) EXPENSES AND RELATED PARTY TRANSACTIONS
The Fund has entered into an investment advisory agreement with MIMLIC Asset
Management Company (MIMLIC Management). Each portfolio of the Fund pays MIMLIC
Management an annual fee, based on average daily net assets, in the following
amounts:
<TABLE>
<CAPTION>
PORTFOLIO ANNUAL FEE
- --------- --------------------------------
<S> <C> <C>
Growth.................................. .50%
Bond.................................... .50%
Money Market............................ .50%
Asset Allocation........................ .50%
Mortgage Securities..................... .50%
Index 500............................... .40%
Capital Appreciation.................... .75%
International Stock..................... 1.00% on the first $10
million in net
assets
.90% on the next $15
million
.80% on the next $25
million
.75% on the next $50
million
.65% thereafter
Small Company........................... .75%
Maturing Government Bond 1998........... .05% until April 30, 1998
and .25% thereafter
Maturing Government Bond 2002........... .05% until April 30, 1998
and .25% thereafter
Maturing Government Bond 2006........... .25%
Maturing Government Bond 2010........... .25%
Value Stock............................. .75%
</TABLE>
Under these agreements, MIMLIC Management manages the Fund's assets and
furnishes related office facilities, equipment, research, and personnel.
For Capital Appreciation, MIMLIC Management has a sub-advisory agreement
with Winslow Capital Management, Inc. (Winslow). From its advisory fee, MIMLIC
Management pays Winslow a fee equal to .50 percent on the first $75 million in
net assets and .45 percent of all net assets in excess of $75 million. For
International Stock, MIMLIC Management has a sub-advisory agreement with
Templeton Investment Counsel, Inc. From its advisory fee, MIMLIC Management pays
Templeton Investment Counsel, Inc. a fee equal to .75 percent on the first $10
million in net assets, .65 percent on the next $15 million, .55 percent on the
next $25 million, .50 percent on the next $50 million and .40 percent on the
next $100 million and thereafter.
The Fund bears certain other operating expenses including outside directors'
fees, federal registration fees, printing and shareholder reports, legal,
auditing, custodian fees, organizational costs and other miscellaneous expenses.
Each portfolio will pay all expenses directly related to its individual
operations. Operating expenses not attributable to a specific portfolio will be
allocated based upon the proportionate net asset size of each portfolio.
Minnesota Mutual directly incurs and pays these operating expenses relating to
the Fund and the Fund in turn reimburses Minnesota Mutual. Minnesota Mutual has
voluntarily agreed to absorb all fees and expenses for each portfolio that
exceed various percentages of average daily net assets. During the year ended
December 31, 1995, Minnesota Mutual voluntarily agreed to absorb $22,794,
$24,709, $25,199, $26,308 and $11,610 in expenses that were otherwise payable by
Maturing Government Bond 1998, Maturing Government Bond 2002, Maturing
Government Bond 2006, Maturing Government 2010 and Value Stock.
-65-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
Each portfolio pays an administrative services fee to Minnesota Mutual for
accounting, legal and other administrative services which Minnesota Mutual
provides. Prior to May 1, 1995, the administrative services fee for each
portfolio was $2,050 per month. Effective May 1, 1995, the administrative
service fee for each portfolio is $1,500 per month.
(6) CAPITAL SHARE TRANSACTIONS
Transactions in shares of portfolios for the years ended December 31, 1995
and 1994 (the year ended December 31, 1995 and the period from April 25, 1994 to
December 31, 1994 for Maturing Government Bond 1998, Maturing Government Bond
2002, Maturing Government Bond 2006, Maturing Government Bond 2010 and Value
Stock) were as follows:
<TABLE>
<CAPTION>
GROWTH BOND
-------------------------- --------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 15,942,741 28,193,814 19,917,487 40,112,788
Issued for reinvested distributions......................... 4,188,367 2,249,492 2,571,473 2,685,716
Redeemed.................................................... (13,194,015) (11,882,761) (11,200,741) (12,036,132)
----------- ----------- ----------- -----------
6,937,093 18,560,545 11,288,219 30,762,372
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
MONEY MARKET ASSET ALLOCATION
-------------------------- --------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 36,944,812 32,779,527 37,854,023 55,022,406
Issued for reinvested distributions......................... 1,335,757 687,516 7,646,551 4,591,566
Redeemed.................................................... (31,221,058) (28,782,856) (33,295,460) (38,088,984)
----------- ----------- ----------- -----------
7,059,511 4,684,187 12,205,114 21,524,988
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
MORTGAGE SECURITIES INDEX 500
-------------------------- --------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 11,363,781 19,380,092 20,529,294 19,141,178
Issued for reinvested distributions......................... 3,873,396 3,961,293 1,340,030 840,282
Redeemed.................................................... (11,794,395) (21,468,950) (8,948,748) (8,311,557)
----------- ----------- ----------- -----------
3,442,782 1,872,435 12,920,576 11,669,903
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
CAPITAL APPRECIATION INTERNATIONAL STOCK
-------------------------- --------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 21,549,468 27,348,716 34,352,552 59,024,386
Issued for reinvested distributions......................... 1,816,119 840,153 -- 4,331,175
Redeemed.................................................... (11,636,441) (11,447,247) (21,587,691) (22,945,898)
----------- ----------- ----------- -----------
11,729,146 16,741,622 12,764,861 40,409,663
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
MATURING GOVERNMENT BOND
SMALL COMPANY 1998
-------------------------- --------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 27,268,886 35,560,021 2,804,374 6,200,909
Issued for reinvested distributions......................... 681,476 59,351 261,002 159,722
Redeemed.................................................... (7,902,817) (5,225,445) (1,791,322) (2,761,977)
----------- ----------- ----------- -----------
20,047,545 30,393,927 1,274,054 3,598,654
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
-66-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(6) CAPITAL SHARE TRANSACTIONS--(CONTINUED)
<TABLE>
<CAPTION>
MATURING GOVERNMENT BOND MATURING GOVERNMENT BOND
2002 2006
-------------------------- --------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 819,908 3,615,900 493,557 2,395,168
Issued for reinvested distributions......................... 179,675 133,932 122,592 100,028
Redeemed.................................................... (966,191) (987,161) (441,900) (480,203)
----------- ----------- ----------- -----------
33,392 2,762,671 174,249 2,014,993
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
MATURING GOVERNMENT BOND
2010 VALUE STOCK
-------------------------- --------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 1,062,561 1,641,280 16,963,575 8,716,795
Issued for reinvested distributions......................... 63,051 60,229 1,227,850 93,066
Redeemed.................................................... (1,163,056) (524,203) (2,330,611) (407,103)
----------- ----------- ----------- -----------
( 37,444) 1,177,306 15,860,814 8,402,758
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
(7) ILLIQUID SECURITIES
Each portfolio of the Fund currently limits investments in illiquid
securities to 15% of net assets at the time of purchase, except for Money Market
which limits the investment in illiquid securities to 10% of net assets. At
December 31, 1995, investment in securities of Bond, Mortgage Securities,
International Stock and Small Company includes issues that are illiquid. The
aggregate value of illiquid securities held by Bond, Mortgage Securities,
International Stock and Small Company at December 31, 1995 were $2,096,336,
$5,566,081, $5,556,188 and $6,066,566, respectively, which represents 2.1%,
8.0%, 3.9% and 6.1% of net assets, respectively. Securities are valued by
procedures described in note 2. Pursuant to guidelines adopted by the Fund's
board of directors, certain unregistered securities are determined to be liquid
and are not included within the percent limitations specified above.
-67-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS
The following tables for each Portfolio show certain per share data for a
share of capital stock outstanding during the periods and selected information
for each period:
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............................. $1.866 $1.912 $1.889 $1.864 $1.391
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income...................................... .021 .019 .020 .026 .031
Net gains or losses on securities (both realized and
unrealized).............................................. .416 (.005) .063 .060 .442
--------- --------- --------- --------- ---------
Total from investment operations....................... .437 .014 .083 .086 .473
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income....................... (.020) (.020) (.027) (.031) --
Distributions from capital gains........................... (.073) (.040) (.033) (.030) --
--------- --------- --------- --------- ---------
Total distributions.................................... (.093) (.060) (.060) (.061) --
--------- --------- --------- --------- ---------
Net asset value, end of year................................... $2.210 $1.866 $1.912 $1.889 $1.864
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return (a)............................................... 24.3% .8% 4.7% 4.8% 34.1%
Net assets, end of year (in thousands)......................... $ 201,678 $ 157,369 $ 125,745 $ 99,128 $ 75,518
Ratio of expenses to average daily net assets.................. .55% .56% .58% .58% .63%
Ratio of net investment income to average daily net assets..... 1.04% 1.22% 1.21% 1.72% 2.11%
Portfolio turnover rate (excluding short-term securities)...... 91.9% 42.0% 51.0% 22.4% 15.7%
<FN>
- ----------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
</TABLE>
-68-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
BOND PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1995 1994 1993 1992 1991
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $1.157 $1.300 $1.258 $1.264 $1.075
-------- ------- ------- ------- -------
Income from investment operations:
Net investment income................................... .074 .042 .051 .053 .078
Net gains or losses on securities (both realized and
unrealized)........................................... .147 (.100) .074 .024 .111
-------- ------- ------- ------- -------
Total from investment operations.................... .221 (.058) .125 .077 .189
-------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income.................... (.046) (.052) (.058) (.069) --
Distributions from capital gains........................ -- (.033) (.025) (.014) --
-------- ------- ------- ------- -------
Total distributions................................. (.046) (.085) (.083) (.083) --
-------- ------- ------- ------- -------
Net asset value, end of year................................ $1.332 $1.157 $1.300 $1.258 $1.264
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
Total return (a)............................................ 19.8% (4.6)% 10.3% 6.7% 17.6%
Net assets, end of year (in thousands)...................... $101,045 $74,679 $43,927 $24,914 $13,088
Ratio of expenses to average daily net assets (b)........... .58% .61% .64% .65% .65%
Ratio of net investment income to average daily net assets
(b)....................................................... 6.57% 6.12% 5.57% 6.56% 7.79%
Portfolio turnover rate (excluding short-term securities)... 205.4% 166.2% 166.8% 140.2% 93.8%
<FN>
- ----------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Minnesota Mutual voluntarily absorbed $12,179 and $13,182 in expenses for
the years ended December 31, 1992 and 1991, respectively. Had the portfolio
paid all fees and expenses the ratio of expenses to average daily net
assets would have been .72% and .78%, respectively, and the ratio of net
investment income to average daily net assets would have been 6.49% and
7.66%, respectively.
</TABLE>
-69-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................................ $1.000 $1.000 $1.000 $1.000 $1.000
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income......................................... .053 .036 .027 .032 .053
--------- --------- --------- --------- ---------
Total from investment operations.......................... .053 .036 .027 .032 .053
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income.......................... (.053) (.036) (.027) (.032) (.053)
--------- --------- --------- --------- ---------
Total distributions....................................... (.053) (.036) (.027) (.032) (.053)
--------- --------- --------- --------- ---------
Net asset value, end of year...................................... $1.000 $1.000 $1.000 $1.000 $1.000
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return (a).................................................. 5.4% 4.2% 2.7% 3.2% 5.4%
Net assets, end of year (in thousands)............................ $ 30,166 $ 23,107 $ 18,423 $ 13,591 $ 12,834
Ratio of expenses to average daily net assets (b)................. .64% .65% .65% .65% .65%
Ratio of net investment income to average daily net assets (b).... 5.29% 3.71% 2.65% 3.17% 5.26%
<FN>
- ----------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Minnesota Mutual voluntarily absorbed $13,734, $23,714, $20,913 and $22,877
in expenses for the years ended December 31, 1994, 1993, 1992 and 1991,
respectively. Had the portfolio paid all fees and expenses the ratio of
expenses to average daily net assets would have been .72%, .81%, .80% and
.85%, respectively, and the ratio of net investment income to average daily
net assets would have been 3.64%, 2.49%, 3.02% and 5.06%, respectively.
</TABLE>
-70-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
ASSET ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $1.524 $1.589 $1.574 $1.558 $1.209
-------- -------- -------- -------- -------
Income from investment operations:
Net investment income................................... .061 .047 .030 .034 .047
Net gains or losses on securities (both realized and
unrealized)............................................ .308 (.069) .066 .070 .302
-------- -------- -------- -------- -------
Total from investment operations.................... .369 (.022) .096 .104 .349
-------- -------- -------- -------- -------
Less distributions:
Dividends from net investment income.................... (.049) (.033) (.037) (.041) --
Distributions from capital gains........................ (.018) (.010) (.044) (.047) --
-------- -------- -------- -------- -------
Total distributions................................. (.067) (.043) (.081) (.088) --
-------- -------- -------- -------- -------
Net asset value, end of year................................ $1.826 $1.524 $1.589 $1.574 $1.558
-------- -------- -------- -------- -------
-------- -------- -------- -------- -------
Total return (a)............................................ 25.0% (1.4)% 6.5% 7.3% 28.9%
Net assets, end of year (in thousands)...................... $349,010 $272,629 $250,011 $150,998 $68,592
Ratio of expenses to average daily net assets............... .55% .56% .57% .60% .62%
Ratio of net investment income to average daily net
assets.................................................... 3.75% 3.31% 2.63% 3.68% 4.50%
Portfolio turnover rate (excluding short-term securities)... 157.0% 123.6% 85.7% 106.5% 78.6%
<FN>
- ----------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
</TABLE>
-71-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
MORTGAGE SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $1.098 $1.218 $1.185 $1.196 $1.029
------- ------- ------- ------- -------
Income from investment operations:
Net investment income................................... .081 .074 .054 .045 .069
Net gains or losses on securities (both realized and
unrealized)............................................ .107 (.115) .052 .024 .098
------- ------- ------- ------- -------
Total from investment operations.................... .188 (.041) .106 .069 .167
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income.................... (.079) (.054) (.055) (.056) --
Distributions from capital gains........................ -- (.025) (.018) (.024) --
------- ------- ------- ------- -------
Total distributions................................. (.079) (.079) (.073) (.080) --
------- ------- ------- ------- -------
Net asset value, end of year................................ $1.207 $1.098 $1.218 $1.185 $1.196
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total return (a)............................................ 18.0% (3.4)% 9.3% 6.4% 16.3%
Net assets, end of year (in thousands)...................... $69,746 $59,666 $63,902 $37,011 $16,520
Ratio of expenses to average daily net assets (b)........... .58% .60% .63% .65% .65%
Ratio of net investment income to average daily net assets
(b)....................................................... 7.09% 6.55% 5.87% 6.64% 8.02%
Portfolio turnover rate (excluding short-term securities)... 133.7% 197.3% 138.4% 96.2% 112.0%
<FN>
- ----------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Minnesota Mutual voluntarily absorbed $10,341 and $16,372 in expenses for
the years ended December 31, 1992 and 1991, respectively. Had the portfolio
paid all fees and expenses the ratio of expenses to average daily net
assets would have been .69% and .79% , respectively, and the ratio of net
investment income to average daily net assets would have been 6.60% and
7.88%, respectively.
</TABLE>
-72-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
INDEX 500 PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............................... $1.518 $1.532 $1.428 $1.454 $1.120
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income........................................ .031 .029 .026 .024 .034
Net gains or losses on securities (both realized and
unrealized)................................................ .517 (.012) .110 .073 .300
--------- --------- --------- --------- ---------
Total from investment operations......................... .548 .017 .136 .097 .334
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income......................... (.031) (.026) (.025) (.032) --
Distributions from capital gains............................. (.012) (.005) (.007) (.091) --
--------- --------- --------- --------- ---------
Total distributions...................................... (.043) (.031) (.032) (.123) --
--------- --------- --------- --------- ---------
Net asset value, end of year..................................... $2.023 $1.518 $1.532 $1.428 $1.454
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return (a)................................................. 36.8% 1.2% 9.8% 7.4% 29.8%
Net assets, end of year (in thousands)........................... $ 123,999 $ 73,432 $ 56,209 $ 35,620 $ 20,999
Ratio of expenses to average daily net assets (b)................ .47% .50% .55% .55% .55%
Ratio of net investment income to average daily net assets (b)... 2.08% 2.34% 2.27% 2.42% 2.70%
Portfolio turnover rate (excluding short-term securities)........ 4.8% 5.9% 4.8% 6.1% 26.4%
<FN>
- ----------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Minnesota Mutual voluntarily absorbed $7,228 and $13,123 in expenses for
the years ended December 31, 1992 and 1991, respectively. Had the portfolio
paid all fees and expenses the ratio of expenses to average daily net
assets would have been .58% and .62%, respectively, and the ratio of net
investment income to average daily net assets would have been 2.39% and
2.63%, respectively.
</TABLE>
-73-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
CAPITAL APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992(A) 1991
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $1.808 $1.797 $1.682 $1.684 $1.198
-------- -------- ------- ------- -------
Income from investment operations:
Net investment income (loss)............................ (.003) -- .001 .004 .009
Net gains or losses on securities (both realized and
unrealized)........................................... .406 .039 .167 .078 .488
-------- -------- ------- ------- -------
Total from investment operations.................... .403 .039 .168 .082 .497
-------- -------- ------- ------- -------
Less distributions:
Dividends from net investment income.................... -- (.002) (.005) (.009) (.003)
Distributions from capital gains........................ (.051) (.026) (.048) (.075) (.008)
-------- -------- ------- ------- -------
Total distributions................................. (.051) (.028) (.053) (.084) (.011)
-------- -------- ------- ------- -------
Net asset value, end of year................................ $2.160 $1.808 $1.797 $1.682 $1.684
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
Total return (b)............................................ 22.8% 2.3% 10.4% 5.0% 41.8%
Net assets, end of year (in thousands)...................... $163,520 $115,607 $84,840 $52,365 $23,822
Ratio of expenses to average daily net assets (c)........... .80% .83% .86% .90% .90%
Ratio of net investment income (loss) to average daily net
assets (c)................................................ (.15)% (.09)% .12% .42% .92%
Portfolio turnover rate (excluding short-term securities)... 51.1% 68.4% 95.9% 138.8% 70.5%
<FN>
- ----------
(a) On October 1, 1992, the portfolio entered into a new sub-advisory agreement
with Winslow Capital Management, Inc. to perform sub-advisory services for
the portfolio. Prior to October 1, 1992, the portfolio had a sub-advisory
agreement with Alliance Capital Management L.P. for sub-advisory services.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Minnesota Mutual voluntarily absorbed $16,612 and $15,552 in expenses for
the years ended December 31, 1992 and 1991, respectively. Had the portfolio
paid all fees and expenses the ratio of expenses to average daily net
assets would have been .94% and 1.00%, respectively, and the ratio of net
investment income to average daily net assets would have been .38% and
.82%, respectively.
</TABLE>
-74-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
INTERNATIONAL STOCK PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, MAY 1, 1992
------------------------------- TO DECEMBER
1995 1994 1993 31, 1992(A)
-------- -------- ------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $1.235 $1.310 $.919 $1.000
-------- -------- ------- ------
Income from investment operations:
Net investment income................................... .033 .011 .016 .010
Net gains or losses on securities (both realized and
unrealized)............................................ .142 (.015) .389 (.077)
-------- -------- ------- ------
Total from investment operations.................... .175 (.004) .405 (.067)
-------- -------- ------- ------
Less distributions:
Dividends from net investment income.................... -- (.029) (.007) (.010)
Excess distributions of net investment income........... -- -- -- (.002)
Tax return of capital................................... -- (.001) -- --
Distributions from capital gains........................ -- (.041) (.007) --
Excess distributions of net realized gains.............. -- -- -- (.002)
-------- -------- ------- ------
Total distributions................................. -- (.071) (.014) (.014)
-------- -------- ------- ------
Net asset value, end of period.............................. $1.410 $1.235 $1.310 $.919
-------- -------- ------- ------
-------- -------- ------- ------
Total return (b)............................................ 14.2% (.3)% 44.2% (6.8)%(d)
Net assets, end of period (in thousands).................... $140,770 $107,490 $61,106 $17,401
Ratio of expenses to average daily net assets (c)........... 1.04% 1.24% 1.55% 2.00%(e)
Ratio of net investment income to average daily net assets
(c)....................................................... 2.69% 1.68% 1.04% 2.10%(e)
Portfolio turnover rate (excluding short-term securities)... 20.3% 12.9% 12.7% 11.7%
<FN>
- ----------
(a) The inception of the portfolio was January 21, 1992. However, operations
did not commence until May 1, 1992 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Minnesota Mutual voluntarily absorbed $8,450 in expenses for the period
from May 1, 1992 to December 31, 1992. Had the portfolio paid all fees and
expenses, the ratio of expenses to average daily net assets would have been
2.09% and the ratio of net investment income to average daily net assets
would have been 2.01%.
(d) Total return is presented for the period from May 1, 1992, commencement of
operations, to December 31, 1992.
(e) Adjusted to an annual basis.
</TABLE>
-75-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
SMALL COMPANY PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED PERIOD FROM
DECEMBER 31 MAY 3, 1993
------------------ TO DECEMBER
1995 1994 31, 1993(A)
------- ------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $1.226 $1.157 $1.000
------- ------- ------
Income from investment operations:
Net investment income................................... .002 .002 --
Net gains or losses on securities (both realized and
unrealized)............................................ .392 .069 .173
------- ------- ------
Total from investment operations.................... .394 .071 .173
------- ------- ------
Less distributions:
Dividends from net investment income.................... (.002) (.002) --
Distributions from net realized gains................... (.016) -- (.015)
Excess distributions of net realized gains.............. -- -- (.001)
------- ------- ------
Total distributions................................. (.018) (.002) (.016)
------- ------- ------
Net asset value, end of period.............................. $1.602 $1.226 $1.157
------- ------- ------
------- ------- ------
Total return (b)............................................ 32.1% 6.2% 17.4%(c)
Net assets, end of period (in thousands).................... $98,895 $51,105 $13,043
Ratio of expenses to average daily net assets (d)........... .84% .90% .90%(e)
Ratio of net investment income (loss) to average daily net
assets (d)................................................ .15% .24% (.02)%(e)
Portfolio turnover rate (excluding short-term securities)... 61.3% 28.1% 34.9%
<FN>
- ----------
(a) The inception of the portfolio was January 26, 1993. However, operations
did not commence until May 3, 1993 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 3, 1993, commencement of
operations, to December 31, 1993.
(d) Minnesota Mutual voluntarily absorbed $9,532 and $30,330 in expenses for
the year ended December 31, 1994 and the period from May 3, 1993 to
December 31, 1993. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been .92% and 1.58%,
respectively and the ratio of net investment income (loss) to average daily
net assets would have been .21% and (.70%), respectively.
(e) Adjusted to an annual basis.
</TABLE>
-76-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 1998 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED MAY 2, 1994
DECEMBER TO DECEMBER
31, 1995 31, 1994(A)
----------- ------------
<S> <C> <C>
Net asset value, beginning of period........................ $.945 $.989
----- -----
Income from investment operations:
Net investment income................................... .059 .043
Net gains or losses on securities (both realized and
unrealized)............................................ .092 (.043)
----- -----
Total from investment operations.................... .151 --
----- -----
Less distributions:
Dividends from net investment income.................... (.058) (.044)
Distributions from net realized gains................... -- --
----- -----
Total distributions................................. (.058) (.044)
----- -----
Net asset value, end of period.............................. $1.038 $.945
----- -----
----- -----
Total return (b)............................................ 16.0% .1%(c)
Net assets, end of period (in thousands).................... $5,057 $3,402
Ratio of expenses to average daily net assets (d)........... .20% .20%(e)
Ratio of net investment income to average daily net assets
(d)....................................................... 6.22% 6.45%(e)
Portfolio turnover rate (excluding short-term securities)... 9.0% --
<FN>
- ----------
(a) The inception of the portfolio was November 9, 1993. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $22,794 and $21,714 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses, the ratio
of expenses to average net assets would have been .72% and 1.12%,
respectively, and the ratio of net investment income to average daily net
assets would have been 5.70% and 5.53%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
-77-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2002 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED MAY 2, 1994
DECEMBER TO DECEMBER
31, 1995 31, 1994(A)
----------- ------------
<S> <C> <C>
Net asset value, beginning of period........................ $.932 $.977
----- -----
Income from investment operations:
Net investment income................................... .072 .047
Net gains or losses on securities (both realized and
unrealized)............................................ .161 (.044)
----- -----
Total from investment operations.................... .233 .003
----- -----
Less distributions:
Dividends from net investment income.................... (.072) (.048)
Tax return of capital................................... (.002) --
Distributions from net realized gains................... -- --
----- -----
Total distributions................................. (.074) (.048)
----- -----
Net asset value, end of period.............................. $1.091 $.932
----- -----
----- -----
Total return (b)............................................ 25.0% .3%(c)
Net assets, end of period (in thousands).................... $3,049 $2,575
Ratio of expenses to average daily net assets (d)........... .20% .20%(e)
Ratio of net investment income to average daily net assets
(d)....................................................... 6.52% 7.18%(e)
Portfolio turnover rate (excluding short-term securities)... -- 11.6%
<FN>
- ----------
(a) The inception of the portfolio was November 9, 1993. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $24,709 and $23,298 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been 1.06% and 1.52%,
respectively and the ratio of net investment income to average daily net
assets would have been 5.66% and 5.86%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
-78-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2006 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED MAY 2, 1994
DECEMBER TO DECEMBER
31, 1995 31, 1994(A)
----------- ------------
<S> <C> <C>
Net asset value, beginning of period........................ $.923 $.970
----- -----
Income from investment operations:
Net investment income................................... .069 .047
Net gains or losses on securities (both realized and
unrealized)............................................ .251 (.046)
----- -----
Total from investment operations.................... .320 .001
----- -----
Less distributions:
Dividends from net investment income.................... (.069) (.048)
Distributions from net realized gains................... -- --
----- -----
Total distributions................................. (.069) (.048)
----- -----
Net asset value, end of period.............................. $1.174 $.923
----- -----
----- -----
Total return (b)............................................ 34.7% .1%(c)
Net assets, end of period (in thousands).................... $2,570 $1,860
Ratio of expenses to average daily net assets (d)........... .40% .40%(e)
Ratio of net investment income to average daily net assets
(d)....................................................... 6.56% 7.45%(e)
Portfolio turnover rate (excluding short-term securities)... 10.0% --
<FN>
- ----------
(a) The inception of the portfolio was November 9, 1993. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $25,199 and $24,803 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been 1.56% and 2.37%,
respectively and the ratio of net investment income to average daily net
assets would have been 5.40% and 5.48%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
-79-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2010 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED MAY 2, 1994
DECEMBER TO DECEMBER
31, 1995 31, 1994(A)
----------- ------------
<S> <C> <C>
Net asset value, beginning of period........................ $.910 $.962
----- -----
Income from investment operations:
Net investment income................................... .070 .049
Net gains or losses on securities (both realized and
unrealized)............................................ .304 (.052)
----- -----
Total from investment operations.................... .374 (.003)
----- -----
Less distributions:
Dividends from net investment income.................... (.070) (.049)
Distributions from net realized gains................... -- --
----- -----
Total distributions................................. (.070) (.049)
----- -----
Net asset value, end of period.............................. $1.214 $.910
----- -----
----- -----
Total return (b)............................................ 41.2% (.3)%(c)
Net assets, end of period (in thousands).................... $1,384 $1,071
Ratio of expenses to average daily net assets (d)........... .40% .40%(e)
Ratio of net investment income to average daily net assets
(d)....................................................... 6.58% 7.79%(e)
Portfolio turnover rate (excluding short-term securities)... -- 14.5%
<FN>
- ----------
(a) The inception of the portfolio was November 9, 1993. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $26,308 and $25,888 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been 2.68% and 4.01%,
respectively and the ratio of net investment income to average daily net
assets would have been 4.30% and 4.18%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
-80-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
VALUE STOCK PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED MAY 2, 1994
DECEMBER TO DECEMBER
31, 1995 31, 1994(A)
----------- ------------
<S> <C> <C>
Net asset value, beginning of period........................ $1.044 $1.010
----------- -----
Income from investment operations:
Net investment income................................... .010 .008
Net gains or losses on securities (both realized and
unrealized)............................................ .331 .038
----------- -----
Total from investment operations.................... .341 .046
----------- -----
Less distributions:
Dividends from net investment income.................... (.010) (.009)
Distributions from net realized gains................... (.063) (.003)
----------- -----
Total distributions................................. (.073) (.012)
----------- -----
Net asset value, end of period.............................. $1.312 $1.044
----------- -----
----------- -----
Total return (b)............................................ 33.0% 4.6%(c)
Net assets, end of period (in thousands).................... $31,825 $8,771
Ratio of expenses to average daily net assets (d)........... .89% .90%(e)
Ratio of net investment income to average daily net assets
(d)....................................................... 1.25% 2.07%(e)
Portfolio turnover rate (excluding short-term securities)... 164.2% 49.5%
<FN>
- ----------
(a) The inception of the portfolio was January 18, 1994. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $11,610 and $22,503 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses the ratio
of expenses to average daily net assets would have been .95% and 1.56%,
respectively and the ratio of net investment income to average daily net
assets would have been 1.19% and 1.41%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
-81-
<PAGE>
APPENDIX I
Rating of Bonds and Commercial Paper
The rating information which follows describes how the rating services
mentioned presently rate the described securities. No reliance is made upon the
rating firms as "experts" as that term is defined for securities law purposes.
Rather, reliance on this information is on the basis that such ratings have
become generally accepted in the investment business.
Rating of Bonds
Moody's
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge". Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Moody's Investors Service, Inc. also applies numerical modifiers, 1, 2, and
3, in each of these generic rating classifications. The modifier 1 indicates
that the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issue ranks in the lower end of its generic rating category.
-82-
<PAGE>
Standard & Poor's
Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions that could lead
to inadequate capacity to meet timely interest and principal payments.
Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The "B" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BB" or "BB-"
rating.
The Standard & Poor's Corporation applies indicators "+," no character, and
"-" to the above rating categories. The indicators show relative standing
within the major rating categories.
Rating of Commercial Paper
Purchases of corporate debt securities used for short-term investment,
generally called commercial paper, will be limited to the top grades of Moody's
and Standard & Poor's rating services.
Moody's
"P-1"
The rating P-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:
1. Evaluation of the management of the issuer;
2. Economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain
areas;
3. Evaluation of the issuer's products in relation to competition and
customer acceptance;
4. Liquidity;
-83-
<PAGE>
5. Amount and quality of long-term debt;
6. Trend of earnings over a period of ten years;
7. Financial strength of a parent company and the relationships which exist
with the issuer; and
8. Recognition by the management of obligations which may be present or may
arise as a result of public interest questions and preparations to meet
such obligations.
Standard & Poor's
A Commercial paper issues assigned this highest rating are regarded as
having the greatest capacity for timely payment. Issues in this category are
delineated with the numbers 1, 2 and 3 to indicate the relative degree of
safety.
A-1 This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
A-2 Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
"A-1."
A-3 Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.
-84-
<PAGE>
PART C. OTHER INFORMATION
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Audited Financial Statements of the MIMLIC Series Fund, Inc. as of
December 31, 1995, are included in Part B of this filing and consist
of the following:
(1) Independent Auditors' Report - MIMLIC Series Fund, Inc.
(2) Investments in Securities - MIMLIC Series Fund, Inc.; Growth
Portfolio
(3) Investments in Securities - MIMLIC Series Fund, Inc.; Bond
Portfolio
(4) Investments in Securities - MIMLIC Series Fund, Inc.; Money
Market Portfolio
(5) Investments in Securities - MIMLIC Series Fund, Inc.; Asset
Allocation Portfolio
(6) Investments in Securities - MIMLIC Series Fund, Inc.; Mortgage
Securities Portfolio
(7) Investments in Securities - MIMLIC Series Fund, Inc.; Index 500
Portfolio
(8) Investments in Securities - MIMLIC Series Fund, Inc.; Capital
Appreciation Portfolio
(9) Investments in Securities - MIMLIC Series Fund, Inc.;
International Stock Portfolio
(10) Investments in Securities - MIMLIC Series Fund, Inc.; Small
Company Portfolio
(11) Investments in Securities - MIMLIC Series Fund, Inc.; Maturing
Government Bond 1998 Portfolio
(12) Investments in Securities - MIMLIC Series Fund, Inc.; Maturing
Government Bond 2002 Portfolio
(13) Investments in Securities - MIMLIC Series Fund, Inc.; Maturing
Government Bond 2006 Portfolio
(14) Investments in Securities - MIMLIC Series Fund, Inc.; Maturing
Government Bond 2010 Portfolio
(15) Investments in Securities - MIMLIC Series Fund, Inc.; Value
Stock Portfolio
(16) Statements of Assets and Liabilities - MIMLIC Series Fund,
Inc.
(17) Statements of Operations - MIMLIC Series Fund, Inc.
(18) Statements of Changes in Net Assets - MIMLIC Series Fund, Inc.
<PAGE>
(19) Notes to Financial Statements - MIMLIC Series Fund, Inc.
(b) Exhibits:
(1) (A) Articles of Incorporation - Previously filed as
Exhibit 24(b)(1)(A) to Registrant's Form N-1A, File
Number 2-96990, is hereby incorporated by reference.
(B) Articles of Amendment dated October 22, 1985 -
Previously filed as Exhibit 24(b)(1)(B) to Registrant's
Form N-1A, File Number 2-96990, Pre-Effective Amendment
Number 1, is hereby incorporated by reference.
(C) Articles of Amendment dated April 28, 1987 - Previously
filed as Exhibit 24(b)(1)(C) to Registrant's Form N-1A,
File Number 2-96990, Post-Effective Amendment Number 4,
is hereby incorporated by reference.
(D) Articles of Amendment dated May 24, 1991 - Previously
filed as Exhibit 24(b)(1)(C) to Registrant's N-1A, File
Number 2-96990, Post-Effective Amendment Number 9, is
hereby incorporated by Reference.
(2) Bylaws - Previously filed as Exhibit 24(b)(2) to Registrant's
Form N-1A, File Number 2-96990, is hereby incorporated by
reference.
(4) Specimen stock certificates
(A) Growth Portfolio (formerly the "Stock" Portfolio) -
Previously filed as Exhibit 24(b)(4)(A) to Registrant's
Form N-1A, File Number 2-96990, is hereby incorporated
by reference.
(B) Bond Portfolio - Previously filed as Exhibit
24(b)(4)(B) to Registrant's Form N-1A, File Number 2-
96990, is hereby incorporated by reference.
(C) Money Market Portfolio - Previously filed as Exhibit
24(b)(4)(C) to Registrant's Form N-1A, File Number 2-
96990, is hereby incorporated by reference.
(D) Asset Allocation Portfolio (formerly the "Managed"
Portfolio) - Previously filed as Exhibit 24(b)(4)(D) to
Registrant's Form N-1A, File Number 2-96990, is hereby
incorporated by reference.
(E) Mortgage Securities Portfolio - Previously filed as
Exhibit 24(b)(4)(E) to Registrant's Form N-1A, File
Number 2-96990, Post-Effective Amendment Number 2, is
hereby incorporated by reference.
(F) Index 500 Portfolio (formerly the "Index" Portfolio) -
Previously filed as Exhibit 24(b)(4)(F) to Registrant's
Form N-1A, File Number 2-96990, Post-Effective
Amendment Number 2, is hereby incorporated by
reference.
<PAGE>
(G) Capital Appreciation Portfolio (formerly the
"Aggressive Growth" Portfolio) - Previously filed as
Exhibit 24(b)(4)(G) to Registrant's Form N-1A, File
Number 2-96990, Post-Effective Amendment Number 2, is
hereby incorporated by reference.
(H) International Stock Portfolio - Previously filed as
Exhibit 24(b)(4)(H) to Registrant's Form N-1A, File
Number 2-96990, Post-Effective Amendment Number 9, is
hereby incorporated by reference.
(I) Small Company Portfolio - Previously filed as Exhibit
24(b)(4)(I) to Registrant's Form N-1A, File Number 2-
96990, Post-Effective Amendment Number 10, is hereby
incorporated by reference.
(J) Value Stock Portfolio - Previously filed as Exhibit
24(b)(4)(J) to Registrant's Form N-1A, File Number
2-96990, Post-Effective Amendment Number 11, is hereby
incorporated by reference.
(K) Maturing Government Bond - 1998 Portfolio - Previously
filed as Exhibit 24(b)(4)(K) to Registrant's Form N-1A,
File Number 2-96990, Post-Effective Amendment Number
11, is hereby incorporated by reference.
(L) Maturing Government Bond - 2002 Portfolio - Previously
filed as Exhibit 24(b)(4)(L) to Registrant's Form N-1A,
File Number 2-96990, Post-Effective Amendment Number
11, is hereby incorporated by reference.
(M) Maturing Government Bond - 2006 Portfolio - Previously
filed as Exhibit 24(b)(4)(M) to Registrant's Form N-1A,
File Number 2-96990, Post-Effective Amendment Number
11, is hereby incorporated by reference.
(N) Maturing Government Bond - 2010 Portfolio - Previously
filed as Exhibit 24(b)(4)(N) to Registrant's Form N-1A,
File Number 2-96990, Post-Effective Amendment Number
11, is hereby incorporated by reference.
(5) (A) Form of Investment Advisory Agreement between the
Registrant and MIMLIC Asset Management Company -
Previously filed as Exhibit 24(b)(5)(A) to Registrant's
Form N-1A, File Number 2-96990, Post-Effective
Amendment Number 1, is hereby incorporated by
reference.
(B) Supplemental Investment Advisory Agreement between the
Registrant and MIMLIC Asset Management Company -
Previously filed as Exhibit 24(b)(5)(B) to Registrant's
Form N-1A, File Number 2-96990, Post-Effective
Amendment Number 3, is hereby incorporated by
reference.
(C) (i) Prior Investment Sub-Advisory Agreement between MIMLIC
Asset Management Company and Winslow Capital
Management, Inc. - Previously filed as Exhibit
24(b)(5)(C) to Registrant's N-1A, File Number 2-96990,
Post-Effective Amendment Number 10, is hereby
incorporated by reference.
<PAGE>
(C) (ii) Current Investment Sub-Advisory Agreement between
MIMLIC Asset Management Company and Winslow Capital
Management, Inc.
(D) Second Supplemental Investment Advisory Agreement
between the Registrant and MIMLIC Asset Management
Company - Previously filed as Exhibit 24(b)(5)(D) to
Registrant's N-1A, File Number 2-96990, Post-Effective
Amendment Number 9, is hereby incorporated by
reference.
(E) Investment Sub-Advisory Agreement between MIMLIC Asset
Management Company and Templeton Investment Counsel,
Inc. - Previously filed as Exhibit 24(b)(5)(E) to
Registrant's N-1A, File Number 2-96990, Post-Effective
Amendment Number 10, is hereby incorporated by
reference.
(F) Third Supplemental Investment Advisory Agreement
between the Registrant and MIMLIC Asset Management
Company - Previously filed as Exhibit 24(b)(5)(F) to
Registrant's N-1A, File Number 2-96990, Post-Effective
Amendment Number 10, is hereby incorporated by
reference.
(G) Fourth Supplemental Investment Advisory Agreement
between the Registrant and MIMLIC Asset Management
Company - Previously filed as Exhibit 24(b)(5)(G) to
Registrant's Form N-1A, File Number 2-96990, Post-
Effective Amendment Number 11, is hereby incorporated
by reference.
(8) (A) Form of Custodian Agreement between the Registrant and
First Trust National Association - Previously filed as
Exhibit 24(b)(8)(A) to Registrant's N-1A, File Number
2-96990, Post-Effective Amendment Number 10, is hereby
incorporated by reference.
(B) (i) Form of Custodian Agreement between the Registrant and
Norwest Bank Minnesota, N.A. - Previously filed as
Exhibit 24(b)(8)(B) to Registrant's N-1A, File Number
2-96990, Post-Effective Amendment Number 10, is hereby
incorporated by reference.
(B) (ii) Amendment to the Custodian Agreement between the
Registrant and Norwest Bank Minnesota, N.A.
(C) Form of Custodian Agreement between the Registrant and
Bankers Trust Company - Previously filed as Exhibit
24(b)(8)(C) to Registrant's N-1A, File Number 2-96990,
Post-Effective Amendment Number 10, is hereby
incorporated by reference.
(9) Form of Service Agreement between MIMLIC Asset Management
Company and Wilshire Associates - Previously filed as Exhibit
24(b)(9) to Registrant's Form N-1A, File Number 2-96990, Post-
Effective Amendment Number 3, is hereby incorporated by
reference.
<PAGE>
(10) Opinion and Consents
(A) Opinion and Consent of Doherty, Rumble & Butler P.A.-
Previously filed as Exhibit 24(b)(10)(A) to
Registrant's Form N-1A, File Number 2-96990, Pre-
Effective Amendment Number 1, is hereby incorporated by
reference.
(11) Consent of KPMG Peat Marwick LLP.
(13) Form of Letter of Investment Intent - Previously filed as
Exhibit 24(b)(13) to Registrant's Form N-1A, File Number 2-
96990, Pre-Effective Amendment Number 1, shall be incorporated
by reference.
(16) Schedules for Computation of Performance Quotation
(A) Growth Portfolio (formerly the "Stock" Portfolio)
Performance Calculations, previously filed as this
Exhibit to Registrant's Form N-1A, File Number 2-96990,
Post-Effective Amendment Number 7, shall be
incorporated by reference.
(B) Bond Portfolio Performance Calculations, previously
filed as this Exhibit to Registrant's Form N-1A, File
Number 2-96990, Post-Effective Amendment Number 7,
shall be incorporated by reference.
(C) Money Market Portfolio Performance Calculations,
previously filed as this Exhibit to Registrant's Form
N-1A, File Number 2-96990, Post-Effective Amendment
Number 7, shall be incorporated by reference.
(D) Asset Allocation Portfolio (formerly the "Managed"
Portfolio) Performance Calculations, previously filed
as this Exhibit to Registrant's Form N-1A, File Number
2-96990, Post-Effective Amendment Number 7, shall be
incorporated by reference.
(E) Mortgage Securities Portfolio Performance Calculations,
previously filed as this Exhibit to Registrant's Form
N-1A, File Number 2-96990, Post-Effective Amendment
Number 7, shall be incorporated by reference.
(F) Index 500 Portfolio (formerly the "Index" Portfolio)
Performance Calculations, previously filed as this
Exhibit to Registrant's Form N-1A, File Number 2-96990,
Post-Effective Amendment Number 7, shall be
incorporated by reference.
(G) Capital Appreciation Portfolio (formerly the
"Aggressive Growth" Portfolio) Performance Calculations
- Previously filed as this Exhibit to Registrant's Form
N-1A, File Number 2-96990, Post-Effective Amendment
Number 7, shall be incorporated by reference.
(H) International Stock Portfolio Performance Calculations
- Previously filed as this Exhibit to Registrant's Form
N-1A, File Number 2-96990, Post-Effective
<PAGE>
Amendment Number 10, shall be incorporated by
reference.
(I) Small Company Portfolio Performance Calculations -
Previously filed as Exhibit 24(b)(16)(I) to
Registrant's Form N-1A, File Number 2-96990, Post-
Effective Amendment Number 12, is hereby incorporated
by reference.
(J) Value Stock Portfolio Performance Calculations -
Previously filed as Exhibit 24(b)(16)(J) to
Registrant's Form N-1A, File Number 2-96990, Post-
Effective Amendment Number 12, is hereby incorporated
by reference.
(K) Maturing Government Bond - 1998 Portfolio Performance
Calculations - Previously filed as Exhibit 24(b)(16)(K)
to Registrant's Form N-1A, File Number 2-96990, Post-
Effective Amendment Number 12, is hereby incorporated
by reference.
(L) Maturing Government Bond - 2002 Portfolio Performance
Calculations - Previously filed as Exhibit 24(b)(16)(L)
to Registrant's Form N-1A, File Number 2-96990, Post-
Effective Amendment Number 12, is hereby incorporated
by reference.
(M) Maturing Government Bond - 2006 Portfolio Performance
Calculations - Previously filed as Exhibit 24(b)(16)(M)
to Registrant's Form N-1A, File Number 2-96990, Post-
Effective Amendment Number 12, is hereby incorporated
by reference.
(N) Maturing Government Bond - 2010 Portfolio Performance
Calculations - Previously filed as Exhibit 24(b)(16)(N)
to Registrant's Form N-1A, File Number 2-96990, Post-
Effective Amendment Number 12, is hereby incorporated
by reference.
(17) (A) Financial Data Schedule - Growth Portfolio.
(17) (B) Financial Data Schedule - Bond Portfolio.
(17) (C) Financial Data Schedule - Money Market Portfolio.
(17) (D) Financial Data Schedule - Asset Allocation Portfolio.
(17) (E) Financial Data Schedule - Mortgage Securities Portfolio.
(17) (F) Financial Data Schedule - Index 500 Portfolio.
(17) (G) Financial Data Schedule - Capital Appreciation Portfolio.
(17) (H) Financial Data Schedule - International Stock Portfolio.
(17) (I) Financial Data Schedule - Small Company Portfolio.
(17) (J) Financial Data Schedule - Value Stock Portfolio.
(17) (K) Financial Data Schedule - Maturing Government Bond - 1998
Portfolio.
<PAGE>
(17) (L) Financial Data Schedule - Maturing Government Bond - 2002
Portfolio.
(17) (M) Financial Data Schedule - Maturing Government Bond - 2006
Portfolio.
(17) (N) Financial Data Schedule - Maturing Government Bond - 2010
Portfolio.
(19) Power of Attorney to sign Registration Statement executed by
Directors of Registrant
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
Wholly-owned subsidiaries of The Minnesota Mutual Life Insurance Company:
MIMLIC Asset Management Company
The Ministers Life Insurance Company
MIMLIC Corporation
Minnesota Fire and Casualty Company
Northstar Life Insurance Company (New York)
Robert Street Energy, Inc.
Open-end registered investment company offering shares solely to separate
accounts of The Minnesota Mutual Life Insurance Company:
MIMLIC Series Fund, Inc.
Wholly-owned subsidiaries of MIMLIC Asset Management Company:
MIMLIC Sales Corporation
Advantus Capital Management, Inc.
Wholly-owned subsidiaries of MIMLIC Corporation:
DataPlan Securities, Inc. (Ohio)
MIMLIC Imperial Corporation
MIMLIC Funding, Inc.
MIMLIC Venture Corporation
Personal Finance Company (Delaware)
Wedgewood Valley Golf, Inc.
Ministers Life Resources, Inc.
Enterprise Holding Corporation
HomePlus Agency, Inc.
Wholly-owned subsidiaries of Enterprise Holding Corporation:
Oakleaf Service Corporation
Lafayette Litho, Inc.
Financial Ink Corporation
Concepts in Marketing Research Corporation
Concepts in Marketing Services Corporation
National Association of Religious Professionals, Inc.
Wholly-owned subsidiary of Minnesota Fire and Casualty Company:
HomePlus Insurance Company
<PAGE>
Majority-owned subsidiaries of MIMLIC Imperial Corporation:
J. H. Shoemaker Advisory Corporation
Consolidated Capital Advisors, Inc.
Majority-owned subsidiary of MIMLIC Sales Corporation:
MIMLIC Insurance Agency of Ohio, Inc.
Fifty percent-owned subsidiary of MIMLIC Imperial Corporation:
C.R.I. Securities, Inc.
Wholly-owned subsidiary of Oakleaf Service Corporation:
New West Agency, Inc. (Oregon)
Majority-owned subsidiaries of The Minnesota Mutual Life Insurance Company:
MIMLIC Life Insurance Company (Arizona)
MIMLIC Cash Fund, Inc.
Advantus Cornerstone Fund, Inc.
Advantus Enterprise Fund, Inc.
Advantus International Balanced Fund, Inc.
Less than majority owned, but greater than 25% owned, subsidiaries of The
Minnesota Mutual Life Insurance Company:
Advantus Horizon Fund, Inc.
Advantus Money Market Fund, Inc.
Less than 25% owned subsidiaries of The Minnesota Mutual Life Insurance Company:
Advantus Spectrum Fund, Inc.
Advantus Mortgage Securities Fund, Inc.
Advantus Bond Fund, Inc.
Unless indicated otherwise parenthetically, each of the above
corporations is a Minnesota corporation.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of the date of filing of this amendment to the Registration
Statement:
Number of
Title of Class Record Holders
-------------- --------------
Growth Portfolio 7
Bond Portfolio 7
Money Market Portfolio 7
Asset Allocation Portfolio 7
Mortgage Securities Portfolio 7
Index 500 Portfolio 7
Capital Appreciation Portfolio 5
International Stock Portfolio 6
Small Company Portfolio 7
Value Stock Portfolio 6
Maturing Government Bond - 1998 Portfolio 4
Maturing Government Bond - 2002 Portfolio 4
<PAGE>
Maturing Government Bond - 2006 Portfolio 4
Maturing Government Bond - 2010 Portfolio 4
ITEM 27. INDEMNIFICATION
The Articles of Incorporation and Bylaws of the Registrant provide
that the Registrant shall indemnify such persons, for such expenses and
liabilities, in such manner, under circumstances, to the full extent permitted
by Section 302A.521, Minnesota Statutes, as now enacted or hereafter amended,
provided that no such indemnification may be made if it would be in violation of
Section 17(h) of the Investment Company Act of 1940, as now enacted, or
hereafter amended. Section 302A.521 of the Minnesota Statutes, as now enacted,
provides that a corporation shall indemnify a person made or threatened to be
made a party to a proceeding by reason of the former or present official
capacity of the person against judgments, penalties, fines, settlements and
reasonable expenses, including attorneys' fees and disbursements, incurred by
the person in connection with the proceeding, if, with respect to the acts or
omissions of the person complained of in the proceeding, the person has not been
indemnified by another organization for the same judgments, penalties, fines,
settlements and reasonable expenses incurred by the person in connection with
the proceeding with respect to the same acts or omissions; acted in good faith;
received no improper personal benefit and the Minnesota Statute dealing with
directors' conflicts of interest, if applicable, has been satisfied; in the case
of a criminal proceeding, had no reasonable cause to believe the conduct was
unlawful; and reasonably believed that the conduct was in the best interests of
the corporation or, in certain circumstances, reasonably believed that the
conduct was not opposed to the best interests of the corporation.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and the Registrant will be governed by the final
adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) MIMLIC Asset Management Company
Directors and Officers Office with
of Investment Adviser Investment Adviser Other Business Connections
- ---------------------- ------------------ --------------------------
Paul H. Gooding President, Treasurer President, Secretary and
and Director Director, MIMLIC Corporation;
Director, MIMLIC Imperial
Corporation; Director, MIMLIC
Venture Corporation; Vice
President and Director, MIMLIC
Funding, Inc.; Vice President
and Director,
<PAGE>
Robert Street Energy, Inc.;
Vice President, Director,
Personal Finance Company; Vice
President and Treasurer, The
Minnesota Mutual Life Insurance
Company; President and
Director, Advantus Capital
Management, Inc.
Guy M. de Lambert Vice President, President and Director,
Secretary and MIMLIC Venture Corporation;
Director Vice President, MIMLIC Funding,
Inc.; President and Secretary,
Robert Street Energy, Inc.;
President and Director,
Wedgewood Valley Golf, Inc.;
Second Vice President, The
Minnesota Mutual Life Insurance
Company
Frederick P. Feuerherm Vice President, Vice President, MIMLIC
Assistant Secretary Funding, Inc.; Second Vice
and Director President, The Minnesota Mutual
Life Insurance Company
Alan J. Notvik Vice President and President and Director,
Assistant Secretary MIMLIC Funding, Inc.; Second
Vice President, The Minnesota
Mutual Life Insurance Company
James P. Tatera Vice President and Vice President, MIMLIC
Assistant Secretary Funding, Inc.; Second Vice
President, The Minnesota Mutual
Life Insurance Company; Senior
Vice President, Treasurer and
Director, Advantus Capital
Management, Inc.
Loren Haugland Vice President None
Lynne Mills Vice President Vice President, Robert Street
Energy, Inc.; Second Vice
President, The Minnesota Mutual
Life Insurance Company
Marilyn Froelich Vice President None
Dianne Orbison Vice President Vice President, MIMLIC
Venture Corporation; Second
Vice President, The Minnesota
Mutual Life Insurance Company
The Fund's investment adviser is MIMLIC Management. In addition to the
Fund, it manages investment advisory accounts for a number of insurance
<PAGE>
companies, namely Minnesota Mutual and its subsidiary life insurance
companies, and certain associated separate accounts. It also provides
investment advisory services to qualified pension and profit sharing plans,
corporations, partnerships, investment companies and various private
accounts.
(b) Winslow Capital Management, Inc.
Winslow Capital Management, Inc. acts as investment sub-adviser to the
Capital Appreciation Portfolio of the Registrant. The following are
Directors and officers of Winslow Capital Management, Inc., including their
other business connections which are of a substantial nature:
Position
Winslow Capital Other Business Connections
Name Management, Inc. During Last Two Years
- ---- ---------------- --------------------------
Clark J. Winslow President and President, Portfolio Manager
Director and Director, Winslow
Capital Management, Inc.
Gail M. Knappenberger Executive Vice Executive Vice President,
President and Portfolio Manager and
Director Director, Winslow Capital
Management, Inc.
Richard E. Pyle Executive Vice Executive Vice President,
President and Portfolio Manager and
Director Director, Winslow Capital
Management, Inc.
Jon R. Foust Managing Director Managing Director, Winslow
Capital Management, Inc.; Vice
President of Institutional
Marketing and Client Service,
Investment Advisers, Inc.
Lynne P. Pelos Vice President Vice President and Chief
Administrative Officer,
Winslow Capital Management,
Inc.
Gail L. Kummer Vice President Vice President and Trader,
Winslow Capital Management,
Inc.
Winslow Capital Management, Inc. has one other investment company client
for which it acts as the investment adviser. Assets currently under
management are also managed for corporate, foundation, endowment,
retirement system and individual clients.
(c) Templeton Investment Counsel, Inc.
Templeton Investment Counsel, Inc. ("TICI"), a Florida corporation with
offices at Broward Financial Centre, Suite 2100, Fort Lauderdale, Florida
33394-3091, is an indirect, wholly-owned subsidiary of Franklin Resources,
Inc. TICI acts as the investment adviser to, in addition to acting as
investment sub-adviser to the Registrant, the following U.S. registered
investment companies or series:
<PAGE>
- Templeton Smaller Companies Growth Fund
- Templeton Income Trust:
- Templeton Income Fund
- Templeton Money Fund
- Templeton Global Income Fund, Inc.
- Templeton Variable Annuity Fund
- Templeton Variable Products Series Fund (TIP):
- Templeton Stock Fund
- Templeton Asset Allocation Fund
- Templeton Bond Fund
- Templeton Money Market Fund
- Templeton International Fund
- Templeton Global Governments Income Trust
- Templeton Global Opportunities Trust
- Templeton Global Utilities, Inc. (Subadviser)
- Templeton Institutional Funds, Inc.:
- Templeton Foreign Equity Series
- Templeton Growth Series
- Templeton Global Fixed Income Series
- Templeton Foreign Equity (South Africa Free) Series
- Templeton Capital Accumulator Fund, Inc.
- Templeton American Trust, Inc.
- Templeton Emerging Markets Income Fund, Inc.
- Templeton Global Infrastructure Fund
- Templeton Emerging Markets Appreciation Fund, Inc. (Subadviser)
- Templeton Americas Government Securities Fund
- Templeton Global Strategy SICAV
- Templeton Global Utilities Fund (Subadviser)
- Templeton Pan American Fund
- Templeton Global Income Fund
- Templeton U.S. Government Fund
- Templeton Deutsche Global Bond Fund
- Templeton U.S. Dollar Liquid Reserve Fund
- Templeton Global Balanced Fund
- Templeton Deutsche Mark Liquid Reserve Fund
- Templeton Global Convertible Fund
- Templeton Global Infrastructure and Communications Fund
- Templeton Emerging Markets Fixed Income Fund
- Templeton Haven Fund
- Templeton Global Value Fund Limited
- Templeton Global Bond Fund (Subadviser)
- Templeton Global Smaller Companies Fund (Subadviser)
- Templeton Canadian Bond Fund (Subadviser)
- Templeton Balanced Fund (Subadviser)
- Templeton Global Balanced Fund (Subadviser)
- Templeton International Balanced Fund (Subadviser)
- Templeton Canadian Asset Allocation Fund (Subadviser)
- Franklin/Templeton Japan Fund
- Franklin Valuemark Funds (Subadviser):
- Templeton International Equity Fund
- Templeton Pacific Growth Fund
- Global Income Fund
- Templeton Global Asset Allocation Fund
- Franklin International Trust (Subadviser):
- Franklin International Equity Fund
- Franklin Pacific Growth Fund
- Franklin Investors Securities Trust (Subadviser):
- Franklin Global Government Income Fund
- Franklin Tax-Advantaged International Bond Fund (Subadviser)
- Franklin Strategic Series (Subadviser):
- Franklin Strategic Income Fund
<PAGE>
- Franklin/Templeton Global Trust (Subadviser):
- Franklin/Templeton German Government Bond Fund
- Franklin/Templeton Global Currency Fund
- Franklin/Templeton Hard Currency Fund
- Franklin/Templeton High Income Currency Fund
- MIMLIC Series Fund, Inc. (Subadviser):
- International Stock Portfolio
- Advantus International Balanced Fund (Subadviser)
- Pacific Select Fund (Subadviser)
- American AAdvantage Funds (Subadviser)
- American Aadvantage Mileage Funds (Subadviser)
- Marshall International Stock Fund (Subadviser)
- Northwest Mutual International Equity Fund (Subadviser)
- Maxim Series Fund, Inc. (Subadviser):
- International Equity Portfolio
The following are Directors of TICI, located at the above-referenced
address unless otherwise indicated, and their principal occupations or other
business connections which are of a substantial nature:
Name, Address and
Position with TICI Principal Occupation
------------------ --------------------
Charles E. Johnson Senior Vice President and
Chairman and Director of Franklin
777 Mariners Island Blvd. Resources, Inc.; President of
San Mateo, California Templeton Worldwide, Inc.
Donald F. Reed President, CEO and Director of
Director and President Templeton Management Limited
Martin L. Flanagan Senior Vice President, Chief
Director and Executive Financial Officer and
Vice President Treasurer of Franklin
777 Mariners Island Blvd. Resources, Inc.
San Mateo, California
Gregory E. McGowan Attorney - International
Director and Executive Marketing
Vice President
Gary P. Motyl Equity Research and Portfolio
Director and Executive Management
Vice President
Elizabeth M. Knoblock Attorney
Senior Vice President,
Secretary and General Counsel
ITEM 29. PRINCIPAL UNDERWRITERS
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The physical possession of the accounts, books and other documents
required to be maintained by Section 31(a) of the Investment Company Act of 1940
and Rules 31a-1 to 31a-3 promulgated thereunder is maintained by Minnesota
Mutual, 400 Robert Street North, St. Paul, Minnesota 55101-2098; except that
the physical possession of certain accounts, books and other documents related
to the custody of the Registrant's securities is maintained
<PAGE>
by: (a) First Trust National Association, First Trust Center, 180 East Fifth
Street, St. Paul, Minnesota 55101, as to the Growth, Asset Allocation, Index
500, Capital Appreciation, Small Company Portfolios and Value Stock; (b) Norwest
Bank Minnesota, N.A., 733 Marquette Avenue, Minneapolis, Minnesota 55479, as to
the International Stock Portfolio; and (c) Bankers Trust Company, 280 Park
Avenue, New York, New York 10017, as to the Bond, Money Market, Mortgage
Securities Portfolios, and the Maturing Government Bond Portfolios.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) The Registrant hereby undertakes to furnish, upon request and without
charge to each person to whom a prospectus is delivered, a copy of
the Registrant's latest annual report to shareholders containing the
information called for by Item 5A.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Saint Paul, and the State
of Minnesota, on the 23rd day of February, 1996.
MIMLIC SERIES FUND, INC.
By _____________________________________
Paul H. Gooding, President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
_______________________ President February 23, 1996
Paul H. Gooding and Director
Frederick P. Feuerherm* Director)
- -----------------------
Frederick P. Feuerherm )
)
Charles E. Arner* Director)
Charles E. Arner )
) By _________________________
) Paul H. Gooding
Ellen S. Berscheid* Director) Attorney-in-Fact
Ellen S. Berscheid )
) Dated: February 23, 1996
)
Ralph D. Ebbott* Director)
Ralph D. Ebbott )
______________
*Registrant's director executing power of attorney dated January 18, 1994, a
copy of which is filed herewith.
<PAGE>
EXHIBIT INDEX
Exhibit Number Description of Exhibit
- -------------- ----------------------
(5) (C) (ii) Current Investment Sub-Advisory Agreement between MIMLIC Asset
Management Company and Winslow Capital Management, Inc.
(11) Consent of KPMG Peat Marwick LLP
(17) (A) Financial Data Schedule - Growth Portfolio.
(17) (B) Financial Data Schedule - Bond Portfolio.
(17) (C) Financial Data Schedule - Money Market Portfolio.
(17) (D) Financial Data Schedule - Asset Allocation Portfolio.
(17) (E) Financial Data Schedule - Mortgage Securities Portfolio.
(17) (F) Financial Data Schedule - Index 500 Portfolio.
(17) (G) Financial Data Schedule - Capital Appreciation Portfolio.
(17) (H) Financial Data Schedule - International Stock Portfolio.
(17) (I) Financial Data Schedule - Small Company Portfolio.
(17) (J) Financial Data Schedule - Value Stock Portfolio.
(17) (K) Financial Data Schedule - Maturing Government Bond - 1998
Portfolio.
(17) (L) Financial Data Schedule - Maturing Government Bond - 2002
Portfolio.
(17) (M) Financial Data Schedule - Maturing Government Bond - 2006
Portfolio.
(17) (N) Financial Data Schedule - Maturing Government Bond - 2010
Portfolio.
(19) Power of Attorney to sign Registration Statement executed by
Directors of Registrant
<PAGE>
INVESTMENT SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made this 1st day of May, 1996, by and between MIMLIC
Asset Management Company, a Minnesota corporation registered as an Investment
Adviser under the Investment Advisers Act of 1940 (the "Adviser"), and Winslow
Capital Management, Inc., a Minnesota Corporation registered as an Investment
Adviser under the Investment Advisers Act of 1940 (the "Sub-Adviser").
WHEREAS, the Adviser is the Investment Adviser to MIMLIC Series Fund, Inc.
(the "Fund"), an open-end diversified management investment company organized as
a series fund, registered under the Investment Company Act of 1940, as amended
(the "1940 Act"); and
WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish ongoing
portfolio selection and related research and statistical services in connection
with the Adviser's investment advisory activities on behalf of the Fund's
Capital Appreciation Portfolio, and the Sub-Adviser desires to furnish such
services to the Capital Appreciation Portfolio; and
WHEREAS, the Adviser also desires to retain the Sub-Adviser to furnish the
Capital Appreciation Portfolio with investment advisory services on an interim
basis in compliance with the provisions of Rule 15a-4 under the 1940 Act;
NOW, THEREFORE, in consideration of the premises and the terms and
conditions hereinafter set forth, it is agreed as follows:
1. APPOINTMENT OF SUB-ADVISER
In accordance with and subject to the Supplemental Investment
Advisory Agreement between the Fund and the Adviser dated April 28, 1987,
and the Investment Advisory Agreement between the Fund and the Adviser
dated January 30, 1986, as incorporated therein (collectively, the
"Investment Advisory Agreement"), the Adviser hereby appoints the
Sub-Adviser to perform portfolio selection services described herein for
investment and reinvestment of the Fund's Capital Appreciation Portfolio,
subject to the control and direction of the Fund's Board of Directors,
for the period and on the terms hereinafter set
<PAGE>
forth. The Sub-Adviser accepts such appointment and agrees to furnish
the services hereinafter set forth for the compensation herein provided.
The Sub-Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or
authorized, have no authority to act for or represent the Fund or the
Adviser in any way or otherwise be deemed an agent of the Fund or the
Adviser.
2. OBLIGATIONS OF AND SERVICES TO BE PROVIDED BY THE SUB-ADVISER
(a) The Sub-Adviser shall provide the following services and assume the
following obligations with respect to the Fund's Capital
Appreciation Portfolio:
(1) The investment of the assets of the Capital Appreciation
Portfolio shall at all times be subject to the applicable
provisions of the Articles of Incorporation, the Bylaws, and
the Registration Statement of the Fund, as amended from time to
time under the Securities Act of 1933 and the 1940 Act (the
"Registration Statement"), and shall conform to the investment
objectives, policies and restrictions of the Capital
Appreciation Portfolio as set forth in such documents and as
interpreted from time to time by the Board of Directors of the
Fund and by the Adviser. Within the framework of the
investment objectives, policies and restrictions of the Capital
Appreciation Portfolio, and subject to the supervision of the
Adviser, the Sub-Adviser shall have the sole and exclusive
responsibility for the making and execution of all investment
decisions for the Capital Appreciation Portfolio.
(2) In carrying out its obligations to manage the investments and
reinvestments of the assets of the Capital Appreciation
Portfolio, the Sub-Adviser shall: (1) obtain and evaluate
pertinent economic, statistical, financial and other
information affecting the economy generally and individual
companies or industries the securities of which are included in
the Capital Appreciation Portfolio or are under consideration
for inclusion therein; (2) formulate and implement a continuous
investment program for the Capital Appreciation
-2-
<PAGE>
Portfolio consistent with the investment objective and related
investment policies for such Portfolio as set forth in the
Fund's Registration Statement; and (3) take such steps as are
necessary to implement the aforementioned investment program by
purchase and sale of securities including the placing of orders
for such purchases and sales.
(3) In connection with the purchase and sale of securities of the
Fund's Capital Appreciation Portfolio, the Sub-Adviser shall
arrange for the transmission to the Adviser on a daily basis
such confirmation, trade tickets and other documents as may be
necessary to enable it to perform its administrative
responsibilities with respect to the Fund's Capital
Appreciation Portfolio. With respect to portfolio securities
to be purchased or sold through the Depository Trust Company,
the Sub-Adviser shall arrange for the automatic transmission of
the I.D. confirmation of the trade to the Adviser. The Sub-
Adviser shall render such reports to the Adviser and/or to the
Fund's Board of Directors concerning the investment activity
and portfolio composition of the Fund's Capital Appreciation
Portfolio in such form and at such intervals as the Adviser or
the Board may from time to time require.
(4) The Sub-Adviser shall, in the name of the Fund, place orders
for the execution of portfolio transactions in accordance with
the policies with respect thereto, as set forth in the Fund's
Registration Statement. In connection with the placement of
orders for the execution of the Fund's portfolio transactions,
the Sub-Adviser shall create and maintain all necessary
brokerage records of the Fund in accordance with all applicable
law, rules and regulations, including but not limited to,
records required by Section 31(a) of the 1940 Act. All records
shall be the property of the Fund and shall be available for
inspection and use by the Securities and Exchange Commission,
the Fund or any person retained by the Fund. Where applicable,
such records shall be maintained by the Sub-
-3-
<PAGE>
Adviser for the period and in the place required by Rule 31a-2
under the 1940 Act.
(b) The Sub-Adviser shall use the same skill and care in providing
services to the Fund as it uses in providing services to fiduciary
accounts for which it has investment responsibility. The Sub-
Adviser will conform with all applicable rules and regulations of
the Securities and Exchange Commission.
3. EXPENSES
During the terms of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this
Agreement.
4. COMPENSATION
In payment for the investment sub-advisory services to be rendered
by the Sub-Adviser in respect of the Capital Appreciation Portfolio
hereunder, the Adviser shall pay to the Sub-Adviser as full compensation
for all services hereunder a fee computed at an annual rate which shall
be a percentage of the average daily value of the net assets of the
Capital Appreciation Portfolio. The fee shall be accrued daily and shall
be based on the net asset value of the Capital Appreciation Portfolio as
determined as of the close of each business day pursuant to the Articles
of Incorporation, Bylaws and currently effective Registration Statement
of the Fund. The fee shall be payable in arrears on the last day of each
calendar month.
The amount of such annual fee, which reflects the substantial
assets managed by the Sub-Adviser hereunder, and as applied to the
average daily value of the net assets of the Capital Appreciation
Portfolio, shall be as described in the schedule below:
Portfolio Assets Fee
---------------- -----
On all Portfolio Assets .375%
5. APPROVAL, RENEWAL AND TERMINATION
(a) In compliance with Rule 15a-4 under the 1940 Act, this Agreement
shall continue in effect, after its approval by the Series Fund
Board of Directors, including a majority of the Fund's Board of
Directors who are not parties to this Agreement or interested
-4-
<PAGE>
persons of parties hereto, for the period not to exceed one hundred
and twenty days, from the termination of the most recent investment
Sub-Advisory Agreement for the Capital Appreciation Portfolio until
its approval by a majority of the outstanding voting securities of
the Capital Appreciation Portfolio.
(b) If so approved, this Agreement shall continue in effect for a period
more than two years from the date of this Agreement, only so long as
such continuance is specifically approved at least annually by a
vote of the holders of the majority of the outstanding voting
securities of the Fund's Capital Appreciation Portfolio, or by a
vote of the majority of the Fund's Board of Directors. And further
provided that such continuance is also approved annually by a vote
of the majority of the Fund's Board of Directors who are not parties
to this Agreement or interested persons of parties hereto, cast in
person at a meeting called for the purpose of voting on such
approval. This Agreement may be terminated at any time without
payment of penalty: (i) by the Fund's Board of Directors or by a
vote of a majority of the outstanding voting securities of the
Fund's Capital Appreciation Portfolio on sixty days' prior written
notice, or (ii) by either party hereto upon sixty days' prior
written notice to the other. This Agreement will terminate
automatically upon any termination of the Investment Advisory
Agreement between the Fund and the Adviser or in the event of its
assignment. The terms "interested person," "assignment" and "vote
of a majority of the outstanding voting securities" shall have the
meanings set forth in the 1940 Act.
6. GENERAL PROVISIONS
(a) The Sub-Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Adviser or the Fund's
Capital Appreciation Portfolio in connection with the subject matter
of this Agreement unless such loss arises from lack of good faith,
provided that nothing herein shall be deemed to protect, or purport
to protect, the Sub-Adviser against any liability to the Fund or to
its
-5-
<PAGE>
shareholders to which the Sub-Adviser would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties hereunder, or by reason of the Sub-
Adviser's reckless disregard of its obligations and duties
hereunder.
(b) Provided that this Agreement is first approved by a vote of the
majority of the Fund's Board of Directors who are not parties to
this Agreement or interested persons of parties hereto cast in
person at a meeting called for the purpose of voting on such
approval, it shall become effective on the last day of effectiveness
of the most recent investment Sub-Advisory Agreement for the Capital
Appreciation Portfolio.
(c) The Adviser understands that the Sub-Adviser now acts, will continue
to act, or may act in the future, as investment adviser to fiduciary
and other managed accounts, including other investment companies,
and the Adviser has no objection to the Sub-Adviser so acting,
provided that the Sub-Adviser duly performs all obligations under
this Agreement.
(d) Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the right of the
Sub-Adviser, or the right of any of its officers, directors or
employees who may also be an officer, director or employee of the
Fund, or persons otherwise affiliated with the Fund (within the
meaning of the 1940 Act) to engage in any other business or to
devote time and attention to the management or other aspects of any
other business, whether of a similar or dissimilar nature, or to
render services of any kind to any other trust, corporation, firm,
individual or association.
(e) Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Minnesota.
The captions in this Agreement are included for convenience only and
in
-6-
<PAGE>
no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect.
(f) Any notice under this Agreement shall be in writing, addressed and
delivered or mailed postage pre-paid to the appropriate party at the
following address: The Adviser and the Fund at 400 North Robert
Street, St. Paul, Minnesota 55101-2098, and the Sub-Adviser at 4720
IDS Tower, 80 South Eighth Street, Minneapolis, Minnesota 55402.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first above written.
MIMLIC ASSET MANAGEMENT COMPANY
By
------------------------------------
Its President
------------------------------------
WINSLOW CAPITAL MANAGEMENT, INC.
By
------------------------------------
Its
------------------------------------
-7-
<PAGE>
KPMG Peat Marwick LLP Letterhead
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
MIMLIC Series Fund, Inc.:
We consent to the use of our report included herein and to the references to our
Firm under the headings "FINANCIAL HIGHLIGHTS" in Part A and INDEPENDENT
AUDITORS" for Part B of the Registration Statement.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 23, 1996
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<PAGE>
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<LEGEND>
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</LEGEND>
<CIK> 0000766351
<NAME> MIMLIC SERIES FUND,INC
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<NAME> MIMLIC SERIES FUND, INC.
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</LEGEND>
<CIK> 0000766351
<NAME> MIMLIC SERIES FUND, INC.
<SERIES>
<NUMBER> 1
<NAME> MONEY MARKET PORTFOLIO
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<CURRENCY> US
<S> <C>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
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</LEGEND>
<CIK> 0000766351
<NAME> MIMLIC SERIES FUND, INC.
<SERIES>
<NUMBER> 4
<NAME> ASSET ALLOCATION PORTFOLIO
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<S> <C>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
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</LEGEND>
<CIK> 0000766351
<NAME> MIMLIC SERIES FUND, INC.
<SERIES>
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<CIK> 0000766351
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<CIK> 0000766351
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<CIK> 0000766351
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<CIK> 0000766351
<NAME> MIMLIC SERIES FUND, INC.
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<CIK> 0000766351
<NAME> MIMLIC SERIES FUND, INC.
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<CIK> 0000766351
<NAME> MIMLIC SERIES FUND, INC.
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<CIK> 0000766351
<NAME> MIMLIC SERIES FUND, INC.
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<CIK> 0000766351
<NAME> MIMLIC SERIES FUND, INC.
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<PAGE>
MIMLIC SERIES FUND, INC.
POWER OF ATTORNEY
TO SIGN REGISTRATION STATEMENT
The undersigned, Directors of MIMLIC Series Fund, Inc. (the "Fund"),
appoint Paul H. Gooding and Donald F. Gruber, and each of them individually, as
attorney-in-fact for the purpose of signing in their names and on their behalf
as Directors of the Fund and filing with the Securities and Exchange Commission
Registration Statements on Form N-1A, or any amendments thereto, for the purpose
of registering shares of Common Stock of the Portfolios of the Fund for sale by
the Fund and to register the Fund under the Investment Company Act of 1940.
Dated: January 18, 1994 ________________________________________
Charles E. Arner
________________________________________
Ellen S. Berscheid
________________________________________
Ralph D. Ebbott
________________________________________
Frederick P. Feuerherm
________________________________________
Paul H. Gooding
