<PAGE>
MIMLIC SERIES FUND, INC.
---------------------
S E M I - A N N U A L R E P O R T J U N E 3 0, 1 9 9 6
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GROWTH PORTFOLIO
BOND PORTFOLIO
MONEY MARKET PORTFOLIO
ASSET ALLOCATION PORTFOLIO
MORTGAGE SECURITIES PORTFOLIO
INDEX 500 PORTFOLIO
CAPITAL APPRECIATION PORTFOLIO
INTERNATIONAL STOCK PORTFOLIO
SMALL COMPANY PORTFOLIO
MATURING GOVERNMENT BOND 1998 PORTFOLIO
MATURING GOVERNMENT BOND 2002 PORTFOLIO
MATURING GOVERNMENT BOND 2006 PORTFOLIO
MATURING GOVERNMENT BOND 2010 PORTFOLIO
VALUE STOCK PORTFOLIO
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<PAGE>
TABLE OF CONTENTS
How to Use This Report.................................................... 1
Portfolio Total Return.................................................... 2
PORTFOLIO MANAGER REVIEWS
Growth Portfolio.......................................................... 4
Bond Portfolio............................................................ 6
Money Market Portfolio.................................................... 8
Asset Allocation Portfolio................................................ 10
Mortgage Securities Portfolio............................................. 12
Index 500 Portfolio....................................................... 14
Capital Appreciation Portfolio............................................ 16
International Stock Portfolio............................................. 18
Small Company Portfolio................................................... 20
Maturing Government Bond 1998 Portfolio................................... 22
Maturing Government Bond 2002 Portfolio................................... 22
Maturing Government Bond 2006 Portfolio................................... 22
Maturing Government Bond 2010 Portfolio................................... 22
Value Stock Portfolio..................................................... 26
INVESTMENTS IN SECURITIES
Growth Portfolio.......................................................... 28
Bond Portfolio............................................................ 30
Money Market Portfolio.................................................... 33
Asset Allocation Portfolio................................................ 35
Mortgage Securities Portfolio............................................. 40
Index 500 Portfolio....................................................... 43
Capital Appreciation Portfolio............................................ 48
International Stock Portfolio............................................. 49
Small Company Portfolio................................................... 53
Maturing Government Bond 1998 Portfolio................................... 55
Maturing Government Bond 2002 Portfolio................................... 56
Maturing Government Bond 2006 Portfolio................................... 57
Maturing Government Bond 2010 Portfolio................................... 58
Value Stock Portfolio..................................................... 59
FINANCIAL STATEMENTS
Statements of Assets and Liabilities...................................... 60
Statements of Operations.................................................. 62
Statements of Changes in Net Assets....................................... 64
Notes to Financial Statements............................................. 67
SHAREHOLDER VOTING RESULTS................................................ 86
<PAGE>
HOW TO USE THIS REPORT
Some of our clients prefer a brief overview of their MIMLIC Series Fund
investments while others prefer full financial statements. This report is
designed to meet both objectives.
For a quick overview of each Portfolio's performance, investment strategies
and holdings, refer to the front section of the report. Comprehensive investment
holdings, market values and financial reports begin on page 28.
Performance charts graphically compare each Portfolio's performance with
select investment indices and other benchmarks. This comparison provides you
with more information about your investments.
The charts are useful because they illustrate performance over the same time
frame and over a long period. There are limitations, however. An index may
reflect the performance of securities that the Portfolio may not hold. Also, the
index does not deduct investment advisory fees and other fund expenses--whereas
your Portfolio does. Individuals cannot buy even an unmanaged index fund without
incurring some charges and expenses.
This report is just one of several tools you can use to learn more about
your investment(s) in the MIMLIC Series Fund. Your MIMLIC Sales registered
representative, who understands your personal financial situation, can best
explain the features of your investment and how they apply to your financial
needs.
1
<PAGE>
PORTFOLIO TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Growth 10.7%
Bond -2.2%
Money Market 2.4%
Asset
Allocation 5.8%
Mortgage
Securities -0.2%
Index 500 9.7%
Capital
Appreciation 11.1%
International
Stock 8.5%
Small Company 7.9%
MGB 1998 0.3%
MGB 2002 -3.6%
MGB 2006 -7.6%
MGB 2010 -10.6%
Value Stock 13.5%
</TABLE>
Historical results are not an indication of future performance. Investment
returns on principal values will fluctuate so that shares upon redemption may be
worth more or less than their original cost. Performance figures of the Fund 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. When such charges are deducted, actual investment
performance in a variable policy or contract will be lower.
2
<PAGE>
August 15, 1996
Dear Shareholder,
The stock market's impressive strength through the second quarter of
1996--the S&P 500 was up 10.1 percent since the beginning of the year
and 4.4 percent in the quarter--follows on the heels of the market's
record 1995 performance. Rising interest rates were a growing concern,
however, which led to lackluster bond market performance throughout the
first six months of the year.
The combustible mix of strong economic growth, low unemployment and
rising interest rates has introduced greater volatility into both the
bond and stock markets. Our investment philosophy, historically
cautious, is designed to help us avoid many of the pitfalls associated
with increased volatility. We stick to sound fundamental investment
principles while remaining alert to potential opportunities created by
widely fluctuating values in many of our targeted investment sectors.
While the effects of a minimum wage increase have yet to be played
out in the market, low unemployment numbers, rising commodity prices and
continued strong economic growth are all factors which could eventually
lead to moderately higher inflation. Counterbalancing rapid economic
growth is the deceleration of government spending. While a formal budget
agreement is not on the horizon, election year politics hold the promise
of continued lower government spending levels. The duration of the
business cycle, now in its fourth year of recovery, may also become a
factor in slowing down the economy.
The Federal Reserve's moves in the coming months are critical to
keeping inflation in check and will be watched closely by the stock and
bond markets. If inflation and interest rates remain stable or trend
downward, the bond market may be positioned for a powerful rally toward
the end of the year.
Earnings for many of the S&P 500 companies remain positive. While
the market recently experienced a short term correction, valuations are
now trading in the normal range. We believe the stock market continues
to hold promise for the remainder of the year but will not realize the
significant gains made in the preceding year.
Our wide range of MIMLIC Series Fund options help capture growth
opportunities across many different market segments. The long-term
outlook for both stock and bond performance remains upbeat. Negotiating
the interim period is a job our experienced and highly dedicated
portfolio managers are well equipped to handle. The following pages will
provide more detailed information on all of our MIMLIC Series Fund
portfolios. Please review them carefully and contact your MIMLIC Sales
representative with questions.
Sincerely,
/s/ PAUL GOODING
Paul Gooding,
President
MIMLIC Series Fund, Inc.
3
<PAGE>
GROWTH PORTFOLIO
PERFORMANCE UPDATE
JEFFREY ERICKSON, CFA
PORTFOLIO MANAGER
[Photo] The Growth Portfolio seeks the long-term accumulation of capital,
with current income as a secondary objective. It invests primarily
in common stocks and other equity securities.
PERFORMANCE
Another great quarter for stocks, on top of a great first quarter! These reviews
sound like a broken record. In fact, market returns in the second quarter were
similar to returns in the first quarter. Total return for the S&P 500* was 4.4
percent in the second quarter, and 10.1 percent for the first six months of
1996. The market was propelled by strong corporate earnings that resulted from a
stronger economy. New job growth accelerated in the second quarter to an average
of 265,000 per month, which was up from 206,000 per month in the first quarter
and 144,000 per month in 1995. Increased employment fueled consumer spending,
which fueled industrial production.
There was a rotation in stock market leadership which reflected the strong
consumer spending and higher interest rates. Spending helped consumer staples
stocks and retailers to outperform other market segments. Technology regained
some of its luster during the quarter but the best performance was in the energy
sector. Healthcare stocks gave up some of their 1995 gains, while higher
interest rates caused commodity related companies, capital goods producers and
utilities to underperform.
The Growth Portfolio had a second good quarter and rose 6.0 percent.** It is
up 10.7 percent** for the first six months of 1996. Performance was helped by
positions in consumer stocks such as Newell, Gillette and Coca-Cola. Positions
in business service companies like Manpower, Equifax and First Data also
performed well, reflecting their strong earnings growth. One area that
underperformed in the quarter was healthcare, specifically the HMO and hospital
management companies.
PORTFOLIO RECAP
The objective of the Growth Portfolio is to be a core equity portfolio that
provides broad equity exposure for our clients. True to this objective, the
portfolio is well diversified among 62 companies, and among all economic
sectors. The growth orientation of the portfolio leads to investments in larger,
well established companies with strong earnings growth potential. The portfolio
yield is 1.2 percent* and the average price/ earnings ratio is 19.7 times
expected 1996 earnings.
The portfolio's sector weightings reflect its growth orientation. The
portfolio is overweighted in consumer related stocks in order to benefit from
strong job growth and consumer spending. The portfolio is also overweighted in
financial companies which should gain from continued earnings growth and low
valuation. The portfolio is underweighted in commodity related companies and
slightly underweighted in technology. In addition, the portfolio's technology
holdings are skewed toward the service providers rather than toward the more
commodity like hardware companies. Cash in the portfolio is relatively low at 4
percent.
OUTLOOK
Despite the strong stock market over the first half of this year, and in 1995,
the market valuation remains in a normal range. It is, however, at the high end
of the normal range and the fact that interest rates have risen over the last
six months makes stocks more expensive relative to bonds. Recently, the Wall
Street Journal surveyed 58 economists on their outlook for the rest of 1996. The
consensus was that the economy would slow to a moderate, non-inflationary growth
rate, and that interest rates would head back down towards the end of the year.
This scenario would be nirvana for the stock market.
The risk to the stock market of course is that this scenario does not play
out. More often than not, the consensus is wrong. Our focus will continue to be
on earnings growth on a stock by stock basis. We will continue to invest in high
quality companies with sustainable growth rates. Then, if the consensus is
wrong, and stock market nirvana evaporates, the portfolio will still own
companies with solid, underlying fundamental value.
4
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
SHARES VALUE PORTFOLIO
------- ------------ -----------
<S> <C> <C> <C>
Coca-Cola Company........................................... 172,200 $ 8,406,500 3.8%
General Electric Company.................................... 93,384 8,077,716 3.7%
Philip Morris Companies, Inc................................ 64,000 6,656,000 3.0%
Merck & Co., Inc............................................ 102,000 6,591,750 3.0%
AT&T Corporation............................................ 102,100 6,330,200 2.9%
Columbia/HCA Healthcare Corporation......................... 118,586 6,329,528 2.9%
Johnson & Johnson........................................... 117,800 5,831,100 2.7%
First Data Corporation...................................... 69,466 5,531,230 2.5%
Procter & Gamble Company.................................... 55,280 5,009,750 2.3%
Pepsico, Inc................................................ 132,836 4,699,074 2.2%
--
------------
$ 63,462,848 29.0%
--
--
------------
------------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Growth Portfolio
<S> <C>
Capital Goods 9.1%
Consumer Goods and
Services 50.0%
Credit Sensitive 14.8%
Intermediate Goods and
Services 5.3%
Technology 16.6%
Cash and Other
Assets/Liabilities 4.2%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE**
A HYPOTHETICAL $10,000 INVESTMENT IN GROWTH PORTFOLIO,
S&P 500 AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Average annual total
return:
One year 20.1%
Five years 12.4%
Ten years 11.3%
Growth
Portfolio S&P 500 CPI
6/30/86 10,000 10,000 10,000
12/31/86 9,403 9,822 10,128
12/31/87 9,798 10,335 10,576
12/31/88 11,351 12,047 11,042
12/31/89 14,304 15,860 11,545
12/31/90 14,333 15,362 12,258
12/31/91 19,215 20,040 12,623
12/31/92 20,142 21,567 12,998
12/31/93 21,085 23,743 13,355
12/31/94 21,255 24,039 13,729
12/31/95 26,415 33,034 14,077
6/30/96 27,011 36,361 14,324
</TABLE>
On the chart above you can see how the Growth Portfolio's total
return compared to the Dividend Adjusted S&P 500 and the Consumer
Price Index. The three lines represent the cumulative total return of
a hypothetical $10,000 investment made on June 30, 1986 through June
30, 1996.
*The S&P 500 is a broad, unmanaged index of 500 common stocks which
are representative of the U.S. stock market overall.
**Historical results are not an indication of future performance.
Investment returns on principal values will fluctuate so that shares
upon redemption may be worth more or less than their original cost.
Performance figures of the Fund 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. When such charges are deducted, actual investment
performance in a variable policy or contract will be lower.
5
<PAGE>
BOND PORTFOLIO
PERFORMANCE UPDATE
WAYNE SCHMIDT, CFA
PORTFOLIO MANAGER
[Photo] The Bond Portfolio seeks as high a level of long-term total rate of
return as is consistent with prudent investment risk. Preservation
of capital is a secondary objective. The Bond Portfolio invests in
long-term, fixed income, high quality debt instruments.
PERFORMANCE
The Bond Portfolio returned -2.24 percent* for the six month period ended June
30, 1996. The Lehman Brothers Government Corporate Bond Index** returned -1.88
percent over the same period.
The upward move in interest rates, which began in February, continued to
plague the bond market the remainder of the period. The interest rate on the two
year U.S. Treasury Note increased 96 basis points to yield 6.11 percent, while
the thirty year U.S. Treasury Bond increased 95 basis points to yield 6.89
percent. The fluctuation of interest rates (volatility) in the bond market
remains high. The yield range on the thirty year U.S. Treasury Bond for the
semi-annual period was 125 basis points, from a low of 5.95 percent on January 2
to a high of 7.20 percent on June 12. That move in the thirty year bond equates
to a sixteen percent decline in price.
Bond market volatility has been high because of strong U.S. economic growth,
low unemployment, substantial job creation, expanding global economies and
uncertainty regarding the future course of inflation. In this volatile higher
rate environment, cash, short maturity bonds, callable bonds and mortgage backed
securities were the best performing sectors. Non-call corporate bonds and U.S.
Treasuries underperformed because of their non-call features and longer
maturities.
PORTFOLIO RECAP
Security selection and active duration management have been the key factors
contributing to the portfolio's performance.
In the security selection process our goal is to buy bonds whose inherent
value is not fully reflected in its current market price. In the corporate and
mortgage backed sectors this means buying bonds at a wide yield pick-up to U.S.
Treasury securities and selling them after yield spreads have tightened and
prices have appreciated in value. With this in mind, we added two international
companies to the portfolio, Reliance Industries and Midland Bank PLC. We also
added bonds of Continental Cablevision (expected to be taken over by US West in
the fourth quarter), GE Capital, GMAC, Joy Technologies, Lockheed Martin, Time
Warner Inc., and Weatherford Enterra. We sold, and recognized yield spread
tightening, in our positions of Consolidated Natural Gas, Waste Management,
Royal Caribbean, Chrysler, and Fisher Scientific.
Portfolio duration is the other key performance driver. We became more
defensive in the Portfolio as the economic evidence continued to mount against
the bond market. The Portfolio duration was 5.6 years at the start of the year
and reduced to 4.6 years with 13 percent cash in early June. After the early
June back up in rates, cash was put back to work and the duration on June 30 was
5.0 years. This is equal to the duration of the Lehman Government Corporate Bond
Index.** The Portfolio is overweighted in cash and notes maturing within ten
years and underweighted in thirty year bonds when compared against the Lehman
Index.**
In keeping with the emphasis on quality, the Portfolio maintained its
average quality rating of Aa3. At end of the period, 53 percent of the portfolio
was invested in investment grade corporate bonds, 19 percent in mortgage backed
securities, 23 percent in U.S. Government securities and the remaining five
percent was invested in money market instruments.
OUTLOOK
Interest rates for the remainder of 1996 will be a function of inflation and
economic growth. Inflation has been very moderate over the past five years but
there are some storm clouds on the horizon. The key inflation driver is wages.
Wages have been very stable in the 90's, but unemployment rates are very low at
5.3 percent, putting workers in a better position to negotiate higher wages. The
passage of a minimum wage increase could have a trickle up effect on wage
inflation. Commodity prices, a secondary inflation driver, peaked in the first
quarter and are beginning to return to their year-end levels. This situation
will need to be monitored closely, but wage inflation will be the bond market's
number one concern.
Economic growth, as measured by GDP, increased 2.2 percent in the first
quarter and is forecast to show 4.5 percent growth in the second quarter. This
is well above the Federal Reserve's target growth rate of 2.5 percent. Strong
growth and the threat of higher inflation could force the Fed to tighten
monetary policy by 25 basis points at their August 20 meeting. The bond market
has already discounted this move and is now struggling with the question of
economic growth in the second half of 1996.
6
<PAGE>
We are optimistic that inflation and economic growth will be contained
within levels that the bond market can handle. With a majority of the bond
market damage already done, the next six months should bring more price
stability to fixed income investors. As the market finds its trading range, we
will look for opportunities to buy cheap bonds on market weakness and sell
overvalued securities during periods of market strength.
TEN LARGEST BOND HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF BOND
COMPANY VALUE PORTFOLIO
- --------------------------------------------------- ------------ -----------
<S> <C> <C>
U.S. Treasury Strip--5.175%, 08/15/99.............. $ 6,990,136 6.8%
U.S. Treasury Bond--8.000%, 11/15/21............... 3,839,198 3.7%
U.S. Treasury Bond--12.000%, 08/15/13.............. 3,422,281 3.3%
General Electric Capital Corporation--6.66%,
05/01/18......................................... 3,392,789 3.3%
U.S. Treasury Bond--8.125%, 08/15/19............... 3,364,683 3.3%
Joy Technologies Incorporated--10.250%, 09/01/03... 3,032,017 3.0%
Quebec Province of Canada--9.125%, 03/01/00........ 2,683,798 2.6%
U.S. Treasury Strip--5.410%, 02/15/01.............. 2,606,237 2.5%
Continental Cablevision Inc.--8.300%, 05/15/06..... 2,586,875 2.5%
Georgia Pacific Corporation--9.625%, 03/15/22...... 2,566,418 2.5%
--
------------
$ 34,484,432 33.5%
--
--
------------
------------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Bond Portfolio
<S> <C>
U.S. Treasury 20.4%
U.S. Government
Agencies 17.6%
AAA Rated 3.1%
AA Rated 8.2%
A Rated 19.8%
BBB Rated 23.0%
Not Rated 1.4%
Cash and Other
Assets/Liabilities 6.3%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN BOND PORTFOLIO,
LEHMAN BROTHERS GOVERNMENT CORPORATE BOND INDEX
AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Average annual total
return:
One Year 4.5%
Five Years 8.1%
Ten Years 7.8%
Lehman
Brothers
Government
Corporate
Bond Bond
Portfolio Index CPI
6/30/86 10,000 10,000 10,000
12/31/86 10,427 10,513 10,128
12/31/87 10,590 10,756 10,576
12/31/88 11,340 11,572 11,042
12/31/89 12,774 13,218 11,545
12/31/90 13,697 14,314 12,258
12/31/91 16,108 16,623 12,623
12/31/92 17,182 17,886 12,998
12/31/93 18,944 19,903 13,355
12/31/94 18,082 19,208 13,729
12/31/95 21,653 22,564 14,077
6/30/96 21,168 22,139 14,324
</TABLE>
On the chart above you can see how the Bond Portfolio's total
return compared to the Lehman Brothers Government Corporate Bond Index
and the Consumer Price Index. The three lines represent the cumulative
total return of a hypothetical $10,000 investment made on June 30,
1986 through June 30, 1996.
*Historical results are not an indication of future performance. Investment
returns on principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost. Performance figures of the
Fund 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. When such charges are deducted, actual
investment performance in a variable policy or contract will be lower.
**The Lehman Brothers Government Corporate Bond Index is an unmanaged benchmark
composite of the Lehman Brothers Government Bond Index which includes all
publicly issued debt of the U.S. Government and Agencies and the Lehman
Brothers Corporate Bond Index which includes all publicly issued fixed rate,
non-convertible domestic corporate debt.
7
<PAGE>
MONEY MARKET PORTFOLIO
PERFORMANCE UPDATE
WAYNE SCHMIDT, CFA
PORTFOLIO MANAGER
[Photo] The Money Market Portfolio seeks maximum current income to the
extent consistent with liquidity and the preservation of capital. It
invests in short-term money market instruments and other debt
securities that mature within 397 days.
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.
PERFORMANCE
The Money Market Portfolio's seven day compounded yield was 4.87 percent* as of
June 30, 1996. For the six month period, the Portfolio's total return was 2.40
percent.*
Money market interest rates were remarkably stable through the first half of
the year, especially when compared to the volatility of longer term interest
rates. The Federal Reserve lowered key short term interest rates by 25 basis
points early in the year and have since left rates unchanged. During the first
half of 1996, yields on the three month U.S. Treasury Bill increased 8 basis
points to yield 5.15 percent on June 30, 1996. The six month U.S. Treasury Bill
yield ended the period 21 basis points higher at 5.36 percent.
PORTFOLIO RECAP
The Federal Reserve moved the Federal Funds rate down to 5.25 percent and the
discount rate to 5.00 percent. While the Federal Reserve lowered rates,
investors had a different view and moved money market rates higher despite of
the Fed's easing of monetary policy. Investor perception of future interest
rates changed during the quarter as evidenced by the steeper yield curve in the
short end. At the beginning of the quarter, the yield advantage for owning a six
month T-Bill versus a three month T-Bill was only 8 basis points. At the end of
the quarter the yield advantage increased to 21 basis points. The steeper yield
curve reflects investor expectations of higher short term interest rates in the
future.
In the Money Market Portfolio, the goal was to shorten the portfolio's
average days to maturity making it more responsive to changes in short term
interest rates. The Portfolio's average days to maturity was 25 days on June 30,
1996, 7 days shorter than year-end 1995, and 30 days shorter than the average
money market fund.
The Money Market Portfolio invests exclusively in U.S. Treasury Bills, U.S.
agencies, and high quality commercial paper to maintain both excellent liquidity
and quality. Corporate commercial paper, because of its yield advantage, is the
primary security in which the Fund invests. It accounted for 92 percent of the
portfolio at the end of the period.
OUTLOOK
Short term interest rates are likely to move higher in the second half of 1996,
as strong economic growth will force the Federal Reserve to tighten monetary
policy. Year to date economic growth is very strong and will remain above trend
in the second half. Inflation has been held in check to date, but there are
reasons to be concerned. A strong U.S. economy coupled with low unemployment,
strong job growth, higher commodity prices, and expanding global economies could
push inflation rates higher in the months ahead. The Federal Reserve has
publicly stated that price stability is their number one goal and would not
hesitate to raise short term rates in an effort to keep economic growth and
inflation under control. With the elections on the horizon, the Federal Reserve
should move cautiously and nudge short term rates higher in the upcoming months.
Short term interest rates could gradually be pushed higher until there are
signs of slower economic growth. For money market investors this would translate
into higher yields in the months ahead.
8
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Seven-day Compounded
Yield*
<S> <C>
2-Jan-96 5.21%
9-Jan-96 5.15%
16-Jan-96 5.22%
23-Jan-96 5.19%
30-Jan-96 5.10%
6-Feb-96 5.09%
13-Feb-96 4.95%
20-Feb-96 4.91%
27-Feb-96 4.89%
5-Mar-96 4.76%
12-Mar-96 4.80%
19-Mar-96 4.79%
26-Mar-96 4.76%
2-Apr-96 4.74%
9-Apr-96 4.76%
16-Apr-96 4.79%
23-Apr-96 4.80%
30-Apr-96 4.81%
7-May-96 4.83%
14-May-96 4.87%
21-May-96 4.85%
28-May-96 4.87%
4-Jun-96 4.87%
11-Jun-96 4.87%
18-Jun-96 4.86%
25-Jun-96 4.87%
30-Jun-96 4.87%
</TABLE>
The seven-day compounded yield is computed by determining the net change in
the value of a hypothetical account having a balance of one share at the
beginning of a seven calendar day period, dividing that change by seven, adding
one to the quotient, raising the sum to the 365th power, and subtracting one
from the result.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Average Days to
Maturity
Number of
Days
<S> <C>
2-Jan-96 28
9-Jan-96 39
16-Jan-96 39
23-Jan-96 40
30-Jan-96 39
6-Feb-96 40
13-Feb-96 41
20-Feb-96 41
27-Feb-96 39
5-Mar-96 38
12-Mar-96 34
19-Mar-96 38
26-Mar-96 37
2-Apr-96 40
9-Apr-96 36
16-Apr-96 37
23-Apr-96 42
30-Apr-96 41
7-May-96 39
14-May-96 38
21-May-96 41
28-May-96 42
4-Jun-96 45
11-Jun-96 43
18-Jun-96 29
25-Jun-96 26
30-Jun-96 25
</TABLE>
*Historical results are not an indication of future performance. Investment
returns on principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost. Performance figures of the Fund
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. When such charges are deducted, actual investment
performance in a variable policy or contract will be lower.
9
<PAGE>
ASSET ALLOCATION PORTFOLIO
PERFORMANCE UPDATE
THOMAS GUNDERSON, CFA
PORTFOLIO MANAGER
[Photo] The Asset Allocation Portfolio seeks as high a level of long-term
total rate of return as is consistent with prudent investment risk.
It invests in common stocks and other equity securities, bonds and
money market instruments. The mix of investments is varied by the
portfolio's management as economic conditions indicate.
PERFORMANCE
For the first six months of 1996 the Asset Allocation Portfolio gained 5.8
percent.* The strongest gains in the financial markets came from stocks, where
the S&P 500** gained 10 percent. The Lehman Government Corporate Bond Index+ had
a -1.8 percent return, while the Merrill Lynch-Wilshire Capital Markets Index++
produced a return of 5.3 percent.
PORTFOLIO RECAP
Stocks continued to march higher during the second quarter as fixed income
investments fought to retain their value. Economic growth was higher than
expected in the first half of 1996. As a result corporate earnings growth
continued through the second quarter, driving stock prices higher. Also helping
stocks was the record level of money flowing into stock mutual funds. These
factors allowed the stock market to shrug off the normally depressing effect of
higher interest rates and set record highs during the first half of 1996.
The bond market reaction to the strong economy was more negative. Bond
yields rose throughout the first half along with the fears of higher inflation
and a possible Federal Reserve tightening move. The result was a net loss for
the bond market as a whole during the first half of 1996.
The Portfolio reduced its stock holdings form 60 percent to 50 percent
during the first five months of the year. Stock valuations moved to less
attractive levels as the stock market moved higher. As bond yields moved up,
they provided the opportunity for incrementally better returns. As a result, the
Portfolio purchased more bonds. The current asset allocation is 50 percent
stocks, 40 percent bonds, 10 percent cash.
The Portfolio's stock investments gained nearly 12 percent* in the first six
months compared to a 10 percent increase in the S&P 500 Index.** Significantly
contributing to performance were United Waste Systems, Service Corp.
International and Computer Associates. Lagging performers were Informix and Bay
Networks, two companies in the computer technology field.
The Portfolio's fixed income investments languished along with the bond
market. During the six month period the average duration of the portfolio was
reduced to mitigate the impact of the rising interest rates.
OUTLOOK
Our work indicates that the stock market is due for a modest short term
correction. Historically we have not seen many periods where the stock market
continues to move higher in the face of increasing interest rates. However, the
long term outlook continues to be very positive. If the U.S. economy can make it
through this period without a meaningful increase in inflation, then the bond
market can stage a powerful rally when economic growth slows. Along with the
lower interest rates would come higher valuations for stocks and possibly, the
beginning of the next bull market.
Our conservative asset allocation followed a disciplined approach even as
the stock market moved higher. Looking ahead, we will likely use a stock market
correction or a downward trend in interest rates as a trigger to increase our
stock investments and decrease the bond or cash levels in the portfolio.
Our objective is to meaningfully participate in strong markets, while
protecting your capital during periods of market declines. During the first six
months of 1996 the Asset Allocation Portfolio gained 5.8 percent*. We will
continue to manage the portfolio to minimize the negative impact of a short term
correction, while positioning the portfolio for long term capital gains.
10
<PAGE>
FIVE LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ -------- ------------- ----------
<S> <C> <C> <C>
General Electric Company.................................... 81,026 $ 7,008,748 3.8%
Computer Associates International........................... 94,108 6,705,193 3.7%
Service Corporation International........................... 107,400 6,175,500 3.4%
First Data Corporation...................................... 77,526 6,173,007 3.4%
Philip Morris Companies, Inc................................ 58,800 6,115,200 3.3%
--
-------------
$ 32,177,652 17.6%
--
--
-------------
-------------
</TABLE>
BOND PORTFOLIO CHARACTERISTICS--QUALITY BREAKDOWN
<TABLE>
<CAPTION>
% OF BOND
RATING PORTFOLIO
- ------------------------------------------------------------ ----------
<S> <C>
U.S. Treasury............................................... 30.3%
U.S. Government Agencies.................................... 17.4%
AA rated.................................................... 12.2%
A rated..................................................... 17.1%
BBB rated................................................... 23.0%
---
100.0%
---
---
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Asset Allocation
Portfolio
<S> <C>
Common Stocks 48.2%
Bonds 40.1%
Cash and Other
Assets/Liabilities 11.7%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN ASSET ALLOCATION PORTFOLIO,
MERRILL LYNCH-WILSHIRE CAPITAL MARKETS INDEX
AND CONSUMER PRICE INDEX.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Average annual total
return:
One Year 16.3%
Five Years 11.8%
Ten Years 10.3%
Merrill
Lynch-Wilshire
Asset Capital
Allocation Markets
Portfolio Index CPI
6/30/86 10,000 10,000 10,000
12/31/86 9,827 10,048 10,128
12/31/87 10,029 10,386 10,576
12/31/88 11,141 11,760 11,042
12/31/89 13,390 14,301 11,545
12/31/90 13,873 14,447 12,258
12/31/91 17,879 18,060 12,623
12/31/92 19,179 19,582 12,998
12/31/93 20,419 21,692 13,355
12/31/94 20,134 21,405 13,729
12/31/95 25,169 27,539 14,077
6/30/96 26,635 29,012 14,324
</TABLE>
On the chart above you can see the Asset Allocation Portfolio's
total return compared to the Merrill Lynch-Wilshire Capital Markets
Index and the Consumer Price Index. The three lines represent the
cumulative total return of a hypothetical $10,000 investment made on
June 30, 1986 through June 30, 1996.
*Historical results are not an indication of future performance.
Investment returns on principal values will fluctuate so that shares
upon redemption may be worth more or less than their original cost.
Performance figures of the Fund 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. When such charges are deducted, actual investment performance
in a variable policy or contract will be lower.
**The S&P 500 is a broad, unmanaged index of 500 common stocks which are
representative of the U.S. stock market overall.
+The Lehman Brothers Government Corporate Bond Index is an unmanaged
benchmark composite of the Lehman Brothers Government Bond Index which
includes all publicly issued debt of the U.S. Government and Agencies
and the Lehman Brothers Corporate Bond Index which includes all
publicly issued fixed rate, non-convertible domestic corporate debt.
++The Merrill Lynch-Wilshire Capital Markets Index is a market
value-weighted index measuring the total return performance of the
combined domestic taxable fixed income and equity markets. It includes
the entire domestic common stock universe for which daily pricing is
available, as well as all publicly placed domestic taxable debt issues
with at least one year remaining to maturity and at least ten million
dollars par value outstanding.
11
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
PERFORMANCE UPDATE
KENT WEBER, CFA
PORTFOLIO MANAGER
[Photo] The Mortgage Securities Portfolio seeks a high level of current
income consistent with prudent investment risk. The Mortgage
Securities Portfolio will invest primarily in mortgage-related
securities.
PERFORMANCE
The semi-annual return on your Mortgage Securities Portfolio outdistanced the
return registered by Lipper Analytical's U.S. Mortgage Fund Category* and
remained competitive with Lehman Brothers Mortgage-Backed Securities Index++.
Our return outpaced Lipper's U.S. Mortgage Category* by .6 percent as the six
month return came in at -.2 percent** verses -.8 percent, respectively.
Alternatively, the Lehman Brothers Mortgage-Backed Securities Index++ (no fees)
offered up a year-to-date return of .8 percent.
PORTFOLIO RECAP
The U.S. economy got off to a fast start in the first quarter of 1996.
Consequently, the Federal Reserve stood up and began to talk tough but
ultimately took no action. Investors on the other hand, turned defensive doing
the dirty work for the Federal Reserve by pushing intermediate and long term
interest rates higher. This swing in market sentiment ultimately left few places
to hide as all but the shortest maturity securities produced modest negative
year-to-date returns.
Relative to other sectors of the bond market, these events proved to be just
what the doctor ordered for the mortgage market. Prepayment pressures have begun
to vaporize with the summer heat. Investor appetite for high quality, higher
yielding mortgage securities remains strong. Overall, liquidity has been
restored and the fundamentals of the mortgage market are exceptional. The
combination of these events were enough to propel the year-to-date performance
of the mortgage market past the returns of both the Corporate and Treasury
markets. These are ideal conditions for the mortgage market and should
contribute to 1996 being a strong year for mortgage investors.
The mortgage market continues to mature into a kinder and gentler place. As
such, the mortgage market has grown to represent a smorgasbord of high quality
investment opportunities were straight mortgage pass through securities once
ruled. In fact, the mortgage market has come to represents one of the largest
most dynamic fixed income sectors available today. With mortgage securities in
vogue, many sectors of the mortgage market have become fairly priced and forever
more efficient. Some of the best values continue to reside in the less well
known high quality securities. While we maintain a core portfolio holding of
straight mortgage pass through securities, we continue to find some of our most
promising investment opportunities in the other mainstream sectors of the
mortgage market. These are solid securities that continue to attract the
attention of experienced investors seeking incremental income, high quality
(credit and cash flow) and solid liquidity. These off the run securities should
benefit from the refocused efforts of these long term market participants.
To this extent, we remain overweighted in seasoned ("vintage") mortgage pass
through securities and underweighted in new issue securities. These vintage
securities continue to offer attractive yields and stable prepayments. Since the
market does not produce these securities anymore, in many respects they are like
a fine bottle of wine, they just continue to improve with age. Likewise, we
continue to find it beneficial to use other sectors of the mortgage market like
commercial mortgage backed securities and other investment grade residential
mortgage securities. These securities compliment our portfolio by offering
incremental income and little prepayment risk. Moreover, many of these mortgage
securities produce monthly cash flow which we are able to reinvest at these
higher levels of interest rates. Ultimately, our efforts are designed to deliver
to you a prudently diversified, actively managed portfolio. We believe your
portfolio should be able to weather the storms the market throws at us by
seeking to preserve capital in a down market while allowing for participation in
an up market.
In the wake of renewed growth, we assumed a more defensive position late in
the first quarter. To this extent we brought the effective duration of the
account back in line with Lehman's Mortgage Index. We had been managing the
portfolio's duration modestly longer than Lehman's Mortgage Index until interest
rates began to spike higher in March. Currently, the effective duration of your
portfolio stands at approximately 4.2 years.
OUTLOOK
The economy continues to put forth solid growth and modest inflation. However,
we must keep a watchful eye on inflation as this is the key that will unlock the
future direction of interest rates. If the cyclical pickup in growth does not
moderate on the weight of higher interest rates in the near future, the Federal
Reserve could be called off the bench to raise short term rates and slow the
economy. While we believe that most of the damage to the bond market is done and
that now is a good time to scale back into the market, we can not rule out the
risk of higher interest rates in the short term. Therefore, we will continue to
favor a neutral duration stance relative to the Lehman Mortgage Index, at least
until the economic picture becomes clearer.
12
<PAGE>
Nevertheless, market conditions remain ripe for investors to continue to favor
mortgage securities. Likewise, we continue our never-ending efforts to add value
through active management while consistently adhering to our value driven
investment approach.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
High Quality Assets
<S> <C>
AAA Rated 71.9%
AA Rated 9.0%
A Rated 11.1%
BBB Rated 6.7%
Cash and Other
Assets/Liabilities 1.3%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Solid Liquidity
<S> <C>
Public Issues 81.1%
Private Placements 5.6%
Private 144A Issue 12.0%
Cash and Other
Assets/Liabilities 1.3%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Prudent Sector
Diversification
<S> <C>
FHLMC MBS 16.2%
FNMA MBS 6.3%
GNMA MBS 18.4%
VA Vendee MBS 10.6%
Asset Backed Securities 3.3%
CMOs/MRBs 35.0%
Whole Loan MBS .3%
Commercial MBS 3.2%
Corporate/Agency Bonds 5.4%
Cash and Other
Assets/Liabilities 1.3%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE**
A HYPOTHETICAL $10,000 INVESTMENT IN MORTGAGE SECURITIES PORTFOLIO,
LEHMAN BROTHERS MORTGAGE BACKED SECURITIES INDEX
AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Average annual total
return:
One year 5.5%
Five years 8.1%
Since inception
(May 1, 1987) 8.6%
Lehman
Brothers
Mortgage Mortgage
Backed
Securities Securities
Portfolio Index CPI
5/1/87 10,000 10,000 10,000
12/31/87 10,299 10,501 10,257
12/31/88 11,183 11,417 10,709
12/31/89 12,694 13,168 11,197
12/31/90 13,890 14,581 11,888
12/31/91 16,150 16,872 12,243
12/31/92 17,178 18,045 12,606
12/31/93 18,768 19,246 12,952
12/31/94 18,135 18,935 13,316
12/31/95 21,400 22,115 13,652
6/30/96 21,358 22,164 13,892
</TABLE>
On the chart above you can see the Mortgage Securities Portfolio's
total return compared to the Lehman Brothers Mortgage Backed
Securities Index and the Consumer Price Index. The three lines
represent the cumulative total return of a hypothetical $10,000
investment made on inception date of the Mortgage Securities Portfolio
(May 1, 1987) through June 30, 1996.
*Average return of 60 mortgage-backed securities funds according to
Lipper Analytical Services.
**Historical results are not an indication of future performance.
Investment returns on principal values will fluctuate so that shares
upon redemption may be worth more or less than their original cost.
Performance figures of the Fund 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. When such charges are deducted, actual investment
performance in a variable policy or contract will be lower.
++The Lehman Brothers Mortgage-Backed Securities Index is an unmanaged
benchmark composite which includes all fixed-rated securities backed
by mortgage pools of the Government National Mortgage Association
(GNMA), Federal Home Loan Mortgage Corporation (FHLMC) and Federal
National Mortgage Association (FNMA).
13
<PAGE>
INDEX 500 PORTFOLIO
PERFORMANCE UPDATE
TERI BRANDT
PORTFOLIO MANAGER
[Photo] The Index 500 Portfolio seeks investment results that correspond
generally to the price and yield performance of the common stocks
included in the Standard and Poor's Corporation 500 Composite Stock
Index (S&P 500).* 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.
PERFORMANCE
Index 500 consists of publicly traded common stocks representing leading
companies in virtually all segments of the American economy. The Portfolio is
designed to reflect the results that correspond to the investment performance of
the stock market in general. We seek to accomplish this by using a computer
model that positions the Portfolio to optimally track the behavior of the S&P
500*.
The S&P 500* returned 10.1 percent for the six month period ended June 30,
1996. The Index 500 Portfolio, by comparison, returned 9.7 percent** over the
same period.
14
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ----------------------------------------------- ----------- ---------- --------------
<S> <C> <C> <C>
General Electric Company....................... 53,000 $4,584,500 2.8%
Coca-Cola Company.............................. 79,600 3,890,450 2.4%
Exxon Corporation.............................. 40,700 3,535,813 2.2%
AT&T Corporation............................... 50,635 3,139,370 1.9%
Philip Morris Companies, Inc................... 26,500 2,756,000 1.7%
Royal Dutch Petroleum.......................... 17,100 2,629,125 1.6%
Merck & Co., Inc............................... 38,500 2,488,063 1.5%
Microsoft Corporation.......................... 18,600 2,234,325 1.4%
Johnson & Johnson.............................. 42,500 2,103,750 1.3%
Procter & Gamble Company....................... 21,834 1,978,706 1.2%
--
----------
$29,340,102 18.0%
--
--
----------
----------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Index 500 Portfolio
<S> <C>
Capital Goods 7.5%
Consumer Goods and
Services 35.6%
Credit Sensitive 24.7%
Intermediate Goods and
Services 17.5%
Technology 14.7%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE**
A HYPOTHETICAL $10,000 INVESTMENT IN INDEX 500 PORTFOLIO,
S&P 500 AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Average annual total
return:
One year 25.2%
Five years 15.2%
Since inception
(May 1, 1987) 12.5%
Index 500
Portfolio S&P 500 CPI
5/01/87 10,000 10,000 10,000
12/31/87 8,714 8,758 10,257
12/31/88 10,110 10,209 10,709
12/31/89 13,209 13,440 11,197
12/31/90 12,690 13,018 11,888
12/31/91 16,466 16,982 12,243
12/31/92 17,682 18,276 12,606
12/31/93 19,407 20,120 12,952
12/31/94 19,636 20,371 13,316
12/31/95 26,868 27,993 13,652
6/30/96 29,481 31,282 13,892
</TABLE>
On the chart above you can see the Index 500 Portfolio's total
return compared to the S&P 500 and the Consumer Price Index. The three
lines represent the cumulative total return of a hypothetical $10,000
investment made on inception date of the Index 500 Portfolio (May 1,
1987) through June 30, 1996.
*The S&P 500 is a broad, unmanaged index of 500 common stocks which are
representative of the U.S. stock market overall. The Index 500 Portfolio, as
all portfolios of the Fund, is a managed portfolio whose performance reflects
the deduction of an investment advisory fee and other expenses.
**Historical results are not an indication of future performance. Investment
returns on principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost. Performance figures of the
Fund 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. When such charges are deducted, actual
investment performance in a variable policy or contract will be lower.
15
<PAGE>
CAPITAL APPRECIATION PORTFOLIO
PERFORMANCE UPDATE
CLARK WINSLOW,
PRESIDENT
WINSLOW CAPITAL
MANAGEMENT
[Photo] The Capital Appreciation Portfolio seeks growth of capital.
Investments will be made based upon their potential for capital
appreciation. While MIMLIC Asset Management acts as investment
adviser for the portfolio, Winslow Capital Management, Inc. provides
investment advice to the Capital Appreciation Portfolio under a
subadvisory agreement.
PERFORMANCE
For the six months ending June 30, 1996 the Capital Appreciation Portfolio
gained 11.1 percent.* This compares with an increase of 12.1 percent in the
Russell 1000 Growth Index** and 10.1 percent in the S&P 500+ for the same time
period.
PORTFOLIO RECAP
In the first half of 1996 the equity market continued to provide investors with
strong investment results. We believe there are several fundamental reasons why
this has occurred. Inflation has remained remarkably stable for several quarters
and we expect it to stay around 3 percent for the remainder of 1996. The growth
of the U.S. economy, represented by GDP statistics, was surprisingly strong in
the first six months of the year. This environment of low inflation and solid
economic growth produced strong corporate profits which has benefited investors
for the past few years.
During the first six months of 1996 the Capital Appreciation Portfolio was
overweighted in technology, telecommunications and specialty retail/consumer
services. It was moderately overweighted in healthcare and underweighted in
other sectors. Our overweighting in technology and specialty retail/consumer
services was positive for the portfolio. The Portfolio's overweighting in
telecommunications and its exposure to healthcare proved to be a slight negative
relative to the market's return during the first six months of 1996.
As the third quarter of 1996 begins we are starting to see signs that a
transition is taking place in the U.S. economy. The transition is the change
from four years of historically rapid earnings growth for American companies to
an environment of more normal profit increases. This slowdown has created
volatility and opportunity in certain market sectors. The investment philosophy
implemented by Winslow Capital Management in the Capital Appreciation Portfolio
should benefit from this change. The Portfolio's investment philosophy is based
on the belief that investing in companies with strong future earnings growth
will provide superior results over the long term. Through fundamental research
of these companies we identify stocks that are attractively valued relative to
their estimated future earnings growth. We work to build a portfolio with future
earnings growth potential of 15-20 percent annually.
As the profit growth in the economy slows, the growth companies the Capital
Appreciation Portfolio invests in will become relatively more attractive. The
Portfolio is overweighted in technology, telecommunications, healthcare, and
specialty retailing. Because these industries are experiencing an above-average
rate of positive change, we have been able to invest in companies which are
creating or benefiting from this change. Some examples of these stocks are Intel
Corporation, Kohl's, and Merck. We continue to believe that these sectors are
likely to exhibit the best earnings growth.
OUTLOOK
Looking forward, we expect adequate but moderating economic growth to be
sustained by a balanced consumer and business spending scenario. Employment
growth and compensation levels remain conducive to further consumer spending
gains. Higher long-term interest rates over the past 6 months, however, could
act as a brake to the important housing category. Consumer installment debt
growth is also slowing. Business spending has been outpacing overall economic
growth for the past several quarters as high rates of profit gains have fueled
spending on plant and equipment. Capacity growth on a year over year basis in
the United States is at a high level not seen since the 1960s. This capacity
will act to hold down inflationary pressures. As profit growth slows, we expect
the rate of growth in business spending to moderate to a more normal pace. The
third major part of the Gross Domestic Product composition, government spending,
continues to exert a negative influence on the overall rate of economic
expansion as it has for the past 18 months. The pressures of slower government
spending growth combined with the effects of the huge 1993 tax increase have
reduced the federal budget deficit level to about $120 billion for 1996 from
over $200 billion four years ago. Despite the lack of a formal 7 year deficit
reduction agreement, both the legislative and executive branches are moving on a
glide path to less fiscal stimulus in 1996 and 1997. In sum, we do not see the
makings for either sustained robust growth with rising inflation and higher
interest rates or a recession with sharply slowing spending growth and falling
corporate profits.
16
<PAGE>
As always, we remain committed to searching out those opportunities in
companies with the demonstrated ability to grow their businesses at
above-average rates regardless of the near-term economic environment. Favorable
growth rates continue to exist in technology and telecommunications services and
equipment companies as the "global village" moves closer to reality. Demographic
trends and structural changes offer opportunities in Healthcare Products and
Services. Outsourcing and the streamlining of business functions such as
transaction processing and electronic data interchange are offering new
investment opportunities. Specialty retailing also provides above-average unit
growth potential. The large U.S. economy provides many opportunities to find
good growth ideas.
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ----------------------------------------------- --------- ---------- --------------
<S> <C> <C> <C>
Computer Associates International.............. 134,800 $9,604,500 5.2%
Cisco Systems, Inc............................. 162,600 9,207,225 5.0%
Home Depot Inc................................. 146,633 7,918,182 4.3%
Oracle Corporation............................. 195,050 7,692,284 4.2%
Microsoft Corporation.......................... 60,200 7,231,525 3.9%
United Health Care............................. 141,400 7,140,700 3.9%
Dollar General Corporation..................... 231,531 6,772,282 3.7%
Merck & Co., Inc............................... 97,500 6,300,938 3.4%
Parametric Technology Corporation.............. 143,800 6,237,325 3.4%
Pfizer Inc..................................... 78,400 5,595,800 3.1%
--
----------
$73,700,761 40.1%
--
--
----------
----------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Capital Appreciation
<S> <C>
Capital Goods 1.0%
Consumer Goods and
Services 41.5%
Credit Sensitive 14.3%
Technology 38.3%
Cash and Other
Assets/Liabilities 4.9%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN CAPITAL APPRECIATION PORTFOLIO,
RUSSELL 1000 GROWTH INDEX AND CONSUMER PRICE INDEX.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Average annual total
return:
One year 18.8%
Five years 15.0%
Since inception
(May 1, 1987) 13.1%
Russell
Capital 1000
Appreciation Growth
Portfolio Index CPI
5/01/87 10,000 10,000 10,000
12/31/87 9,246 8,634 10,257
12/31/88 9,965 9,607 10,709
12/31/89 13,772 13,059 11,197
12/31/90 13,489 13,026 11,888
12/31/91 19,126 18,386 12,243
12/31/92 20,091 19,306 12,606
12/31/93 22,188 19,863 12,952
12/31/94 22,687 21,530 13,316
12/31/95 27,855 29,537 13,652
6/30/96 30,944 33,102 13,892
</TABLE>
On the chart above you can see the Capital Appreciation
Portfolio's total return compared to the Russell 1000 Growth Index and
the Consumer Price Index. The three lines represent the cumulative
total return of a hypothetical $10,000 investment made on inception
date of the Capital Appreciation Portfolio (May 1, 1987) through June
30, 1996.
*Historical results are not an indication of future performance. Investment
returns on principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost. Performance figures of the
Fund 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. When such charges are deducted, actual
investment performance in a variable policy or contract will be lower.
+The S&P 500 is a broad, unmanaged index of 500 common stocks which are
representative of the U.S. stock market overall.
**The Russell 1000 Growth Index contains stock from the Russell 1000 with a
greater than average growth orientation. The Russell 1000 are the 1,000
largest companies in the Russell 3000. The Russell 3000 is an unmanaged index
of 3,000 common stocks which represents approximately 98 percent of the U.S.
stock market.
17
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
PERFORMANCE UPDATE
MARC S. JOSEPH, JD
TEMPLETON INVESTMENT
COUNSEL
[Photo] The International Stock Portfolio seeks long-term capital growth.
The Portfolio will invest primarily in common stocks of companies
and governments outside the United States. While MIMLIC Asset
Management acts as investment adviser for the portfolio, Templeton
Investment Counsel, Inc. provides investment advice to the
International Stock Portfolio under a subadvisory agreement.
PERFORMANCE
The International Stock Portfolio returned 8.5 percent* in the first six months
of 1996 compared to the unmanaged Morgan Stanley Capital International (MSCI)
EAFE Index** return of 4.7 percent.
PORTFOLIO RECAP
The first half of 1996 was generally very rewarding for investors in the world's
international stock markets. Nearly every major stock market registered positive
performance in local terms, with many markets exhibiting exceptional
performance.
The Portfolio's performance was helped by European and emerging markets
holdings. The Portfolio also benefited from a significant underweighting in the
Japanese market, which had uninspiring performance. Although Japanese stocks
have exhibited weakness, it remains difficult to identify Japanese "bargain"
stocks, as the market remains fundamentally overvalued.
The world currency markets were less favorable to the Portfolio during the
first half of 1996, as the U.S. dollar strengthened against most other major
currencies. This meant that our holdings of international stocks (denominated in
foreign currencies) were worth less in U.S. dollars at the end of the six month
period because of the weaker foreign currency values.
OUTLOOK
Overall, we remain cautiously optimistic. International stocks look attractively
valued when compared to U.S. shares, which stand at historically high
valuations. With many U.S. stocks considered fully valued, we believe that
better value can be found in other areas of the world.
Going forward, one place to start looking for value is in markets which have
performed poorly. Although most of the world's markets have done well, mediocre
performers such as New Zealand and Korea may present us with the opportunity to
find bargain stocks.
Although no one can reliably predict the direction of the markets in the
near term, we are confident that our disciplined approach to identifying
undervalued stocks will reward long-term investors.
18
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF COMMON
COMPANY SHARES VALUE STOCK PORTFOLIO
- ------------------------------------------ --------- ---------- -----------------
<S> <C> <C> <C>
Stet di Risp.............................. 1,105,000 $2,901,349 2.0%
Rhone-Poulenc............................. 105,500 2,772,708 1.9%
Telefonica De Expana...................... 150,000 2,761,076 1.9%
Iberdrola................................. 250,000 2,564,135 1.8%
International Nederlanden Group........... 84,688 2,525,281 1.7%
Banco Bilbao Vizcaya...................... 61,500 2,489,531 1.7%
Bayer AG.................................. 69,500 2,445,063 1.7%
Sony Corporation.......................... 37,000 2,432,224 1.7%
Societe National Elf Aquitaine............ 32,562 2,394,670 1.6%
Argentaria Bancaria....................... 108,000 2,376,000 1.6%
--
----------
$25,662,036 17.6%
--
--
----------
----------
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN INTERNATIONAL STOCK PORTFOLIO,
EAFE INDEX AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Average annual total
return:
One year 14.7%
Since inception
(May 2, 1992) 12.9%
International
Stock EAFE
Portfolio Index CPI
5/01/92 10,000 10,000 10,000
12/31/92 9,319 8,156 10,179
12/31/93 13,434 10,843 10,458
12/31/94 13,391 11,722 10,752
12/31/95 15,296 13,088 11,024
6/30/96 16,602 13,694 11,217
</TABLE>
On the chart above you can see how the International Stock
Portfolio's total return compared to the EAFE Index and the Consumer
Price Index. The three lines represent the cumulative total return of
a hypothetical $10,000 investment made on inception date of the
International Stock Portfolio (May 1, 1992) through June 30, 1996.
*Historical results are not an indication of future performance. Investment
returns on principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost. Performance figures of the
Fund 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. When such charges are deducted, actual
investment performance in a variable policy or contract will be lower.
**The EAFE Index is an unmanaged index of common stocks from European, Asian and
Far Eastern markets.
19
<PAGE>
SMALL COMPANY PORTFOLIO
PERFORMANCE UPDATE
JIM TATERA, CFA
CHIEF EQUITY PORTFOLIO
MANAGER
[Photo] The Small Company Portfolio seeks long-term accumulation of capital.
It invests primarily in common stocks of small companies, defined in
terms of either market capitalization or gross revenues that are
less than $1.5 billion.
Typically, at least 65 percent of the portfolio will be invested in
stocks of small companies. In addition, we will buy stocks of larger
companies that we feel are growing significantly faster than the
market overall.
PERFORMANCE
June was a difficult month for the small company segment of the market, bringing
its three and one half month period of relative outstanding performance to a
dramatic end. The indices were down significantly more than either the mid caps
or large caps, with technology being the major problem. The past two weeks of
earnings pre-announcements took their toll on the technology sector which showed
a decline of over 12 percent for the month of June. This accounted for more than
half the index's June decline.
The Small Company Portfolio had a reasonably good second quarter, returning
5.1 percent* versus the S&P Midcap Index's** return of 2.9 percent and the
Russell 2000's+ return of 4.8 percent. Over the past six months the Portfolio
has returned 7.9 percent* versus 9.2 percent for the S&P Midcap Index** and 9.7
percent for the Russell 2000 Index.+
PORTFOLIO RECAP
Since June was such a difficult month for smaller companies, it is no wonder
that only three sectors had positive returns--energy, financial services and
utilities. These relatively slow growth sectors performed best as investors went
to safety. These are typically sectors to which the portfolio has little, if
any, exposure due to their slow growth characteristics.
Positive contributors to performance in the portfolio included a diverse
group of companies ranging from the retail/apparel industry (Borders Group and
Tommy Hilfiger), to healthcare (Occusystems), to telecommunications (Adtran,
Panamsat and Cascade) and technology (Computer Associates and Gartner Group).
Many of our technology oriented companies provide leading technological
solutions needed by companies to compete more effectively in their respective
industries.
The Small Company Portfolio is historically a well diversified portfolio
among small to mid-sized companies which are growing significantly faster than
the average company. This characteristic continues today with the portfolio
having a average estimated growth in earnings for the next twelve months of
almost 30 percent. We attempt to purchase companies which show not only strong
growth today but also improving profitability through an ever increasing revenue
stream. This operational momentum in the portfolio's holdings will lead to
substantially higher valuations over time.
OUTLOOK
The market environment we have experienced recently for smaller companies
certainly removed most, if not all, of the excess valuations seen earlier in the
year. High flying stocks came back to earth and valuations on many fast growing
companies appear more reasonable today. Concern over inflation and interest
rates will continue to hold back valuations until investors see stability in
interest rates. Though this somewhat nervous market has received a lot of press
recently, we feel it is closer to a buying opportunity than anything else. With
cash levels for the portfolio in the high teens percentage, we are well
positioned to take advantage of the opportunity to buy fast growing companies on
sale!
20
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ----------------------------------------------- --------- ---------- --------------
<S> <C> <C> <C>
Tommy Hilfiger Corporation..................... 102,300 $5,485,838 5.2%
Gartner........................................ 111,800 4,094,675 3.8%
Danka Business Systems PLC..................... 123,702 3,618,283 3.4%
Kaydon Corporation............................. 73,900 3,177,700 3.0%
United Waste Systems, Inc...................... 95,542 3,081,229 2.9%
T. Rowe Price Associates....................... 99,000 3,044,250 2.9%
Panamsat Corporation........................... 100,500 2,914,500 2.7%
Idexx Laboratories Inc......................... 67,300 2,641,525 2.5%
Global Directmail Corporation.................. 63,600 2,512,200 2.4%
CUC International, Inc......................... 69,459 2,465,794 2.3%
--
----------
$33,035,994 31.1%
--
--
----------
----------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Small Company Portfolio
<S> <C>
Capital Goods 10.1%
Consumer Goods and
Services 35.9%
Credit Sensitive 9.5%
Intermediate Goods and
Services 7.0%
Technology 18.8%
Cash and Other
Assets/Liabilities 18.7%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN SMALL COMPANY PORTFOLIO,
WILSHIRE MIDCAP INDEX++ AND CONSUMER PRICE INDEX.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Average annual total
return:
One year 26.0%
Since inception
(May 3, 1993) 19.9%
Small Wilshire
Company Midcap
Portfolio Index CPI
5/03/93 10,000 10,000 10,000
12/31/93 11,733 11,295 10,132
12/31/94 12,456 11,005 10,416
12/31/95 16,449 14,631 10,680
6/30/96 16,875 15,947 10,867
</TABLE>
On the chart above you can see how the Small Company Portfolio's
total return compared to the Wilshire Midcap Index and the Consumer
Price Index. The three lines represent the cumulative total return of
a hypothetical $10,000 investment made on inception date of the Small
Company Portfolio (May 3, 1993) through June 30, 1996.
*Historical results are not an indication of future performance. Investment
returns and principal values will fluctuate so that shares upon redemption may
be worth more or less than their original value. Performance figures of the
Fund 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. When such charges are deducted, actual
investment performance in a variable policy or contract will be lower.
**The S&P Midcap Index is comprised by Standard & Poor's and contains companies
chosen for their size, as measured by market capitalization and industry.
+The Russell 2000 Index represents the bottom two thirds of the largest 3,000
publicly traded companies domiciled in the United States.
++The Wilshire Midcap Index is comprised of the bottom 750 companies of the
largest 1,250 domicile companies as measured by market capitalization.
21
<PAGE>
MATURING GOVERNMENT BOND 1998 PORTFOLIO
MATURING GOVERNMENT BOND 2002 PORTFOLIO
MATURING GOVERNMENT BOND 2006 PORTFOLIO
MATURING GOVERNMENT BOND 2010 PORTFOLIO
PERFORMANCE UPDATE
KENT WEBER, CFA
PORTFOLIO MANAGER
[Photo] The Maturing Government Bond 1998, 2002, 2006 and 2010 Portfolios
seek as high of an investment return as is consistent with prudent
investment risk. The Portfolios invest primarily in U.S. Government
and Agencies zero coupon fixed income securities which mature near
the 1998, 2002, 2006 and 2010 liquidation dates of each Portfolio.
PERFORMANCE
The six month total return performance of the portfolios are as follows:
<TABLE>
<S> <C>
Maturing Government Bond 1998 Portfolio .3 percent*
Maturing Government Bond 2002 Portfolio -3.6 percent*
Maturing Government Bond 2006 Portfolio -7.6 percent*
Maturing Government Bond 2010 Portfolio -10.6 percent*
</TABLE>
Our returns remained competitive with similar maturity Treasury Strip
Indexes prepared by Ryan Lab's Inc. The annual return of comparable Ryan Lab's
Indexes in order of their respective maturity are as follows:
<TABLE>
<S> <C>
Two Year Index** 0.0 percent
Six Year Index** -4.1 percent
Ten Year Index** -7.9 percent
Fourteen Year Index** -10.9 percent
</TABLE>
PORTFOLIO RECAP
1996 came in like a lamb and ended the second quarter like a lion. Interest
rates rose across the board as market psychology swung 180 degrees in a
relatively short time period. The Federal Reserve had just lowered short term
rates in January only to see the economy begin to show signs of renewed growth
in February. Investors quickly turned their attentions away from an environment
of slow growth and a balanced budget toward potential increases in future
inflation and faster growth.
With interest rates approximately one hundred basis points (1.0 percent)
higher in each maturity, relative performance among zero-coupon securities was a
function of one's duration level. For the same reason longer maturity (duration)
securities outperformed shorter maturity securities as rates fell throughout
1995, they underperformed as rates rose in 1996.
Nevertheless, our investment efforts continue to emphasize the use of
government guaranteed securities offering incremental yields over straight
Treasury securities. Likewise, prudent diversification through the ownership of
a diverse pool of high quality assets is essential. Ultimately, these activities
should allow us to produce a competitive yield to maturity on each fund which is
in line with its anticipated growth rate.
As of June 30, 1996, the Portfolios offered you the following effective
durations (duration measures the price sensitivity of a bond to interest rate
changes):
<TABLE>
<S> <C>
Maturing Government Bond 1998 Portfolio 2.4 years
Maturing Government Bond 2002 Portfolio 5.8 years
Maturing Government Bond 2006 Portfolio 9.7 years
Maturing Government Bond 2010 Portfolio 13.0 years
</TABLE>
OUTLOOK
In the long run fundamentals rule, but in the short run technicals dominate.
Short term, the economy does appear to be benefiting from a cyclical pick up in
economic growth. However, we are in the late innings of the business cycle with
growth and inflation not likely to reignite to dangerous levels. With the
secular trend in inflation still constructive, the nominal level of interest
rates has returned to attractive levels as measured by real rates (inflation
adjusted). Therefore, we believe that most of the damage has been done to the
bond market. While further rate hikes cannot be ruled out, we would look upon
such an event as a buying opportunity and a chance to lock in attractive yields
to maturity.
22
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Maturing Government Bond 1998
Portfolio
<S> <C>
FNMA 16.4%
FHLB 10.5%
Treasury Receipts 16.4%
U.S. Treasury Strips 19.8%
FICO 9.6%
GTC 12.0%
TVA 15.3%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Maturing Government Bond 2002
Portfolio
<S> <C>
FNMA 11.0%
Treasury Receipts 20.4%
U.S. Treasury Strips 15.6%
FICO 10.2%
GTC 20.6%
TVA 22.2%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Maturing Government Bond 2006
Portfolio
<S> <C>
FNMA 17.2%
Treasury Receipts 19.1%
U.S. Treasury Strips 16.9%
FICO 16.5%
GTC 11.6%
REFCO 18.7%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Maturing Government Bond 2010
Portfolio
<S> <C>
FNMA 11.1%
State of Israel 11.6%
U.S. Treasury Strips 38.8%
FICO 28.3%
GTC 2.9%
REFCO 7.3%
</TABLE>
*Historical results are not an indication of future performance. Investment
returns and principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost. Performance figures of the
Fund 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. When such charges are deducted, actual
investment performance in a variable policy or contract will be lower.
**Ryan Labs, Inc. Index of 2, 6, 10 and 14 year Treasury Strips consists of all
active zero-coupon Treasury issues with maturities in 1998, 2002, 2006 and
2010, respectively.
23
<PAGE>
MATURING
GOVERNMENT
BOND PORTFOLIOS
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN MATURING GOVERNMENT BOND 1998
PORTFOLIO, RYAN LABS, INC. INDEX OF 2 YEAR TREASURY STRIPS
AND CONSUMER PRICE INDEX.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Average annual total
return:
One year 5.2%
Since inception
(May 2, 1994) 7.3%
Ryan
Labs,
Inc.
Maturing Index of
Government 2 Year
Bond Treasury
1998
Portfolio Strips CPI
5/02/94 10,000 10,000 10,000
12/31/94 10,005 9,869 10,190
12/30/95 11,606 11,349 10,448
6/30/96 11,639 11,484 10,631
</TABLE>
On the chart above you can see how the Maturing Government Bond
1998 Portfolio's total return compared to the Ryan Labs, Inc. Index of
2 Year Treasury Strips and the Consumer Price Index. The three lines
represent the cumulative total return of a hypothetical $10,000
investment made on inception date of the Maturing Government Bond 1998
Portfolio (May 2, 1994) through June 30, 1996.
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN MATURING GOVERNMENT BOND 2002
PORTFOLIO, RYAN LABS, INC. INDEX OF 6 YEAR TREASURY STRIPS
AND CONSUMER PRICE INDEX.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Average annual total
return:
One year 3.6%
Since inception
(May 2, 1994) 9.2%
Ryan
Labs,
Inc.
Maturing Index of
Government 6 Year
Bond Treasury
2002
Portfolio Strips CPI
5/02/94 10,000 10,000 10,000
12/31/94 10,028 9,859 10,190
12/30/95 12,537 12,363 10,448
6/30/96 12,092 11,978 10,692
</TABLE>
On the chart above you can see how the Maturing Government Bond
2002 Portfolio's total return compared to the Ryan Labs, Inc. Index of
6 Year Treasury Strips and the Consumer Price Index. The three lines
represent the cumulative total return of a hypothetical $10,000
investment made on inception date of the Maturing Government Bond 2002
Portfolio (May 2, 1994) through June 30, 1996.
24
<PAGE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN MATURING GOVERNMENT BOND 2006
PORTFOLIO, RYAN LABS, INC. INDEX OF 10 YEAR TREASURY STRIPS
AND CONSUMER PRICE INDEX.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Average annual total
return:
One year 2.7%
Since inception
(May 2, 1994) 10.7%
Ryan
Labs,
Inc.
Maturing Index of
Government 10 Year
Bond Treasury
2006
Portfolio Strips CPI
5/02/94 10,000 10,000 10,000
12/31/94 10,013 9,883 10,190
12/30/95 13,490 13,303 10,448
6/30/96 12,460 12,366 10,631
</TABLE>
On the chart above you can see how the Maturing Government Bond
2006 Portfolio's total return compared to the Ryan Labs, Inc. Index of
10 Year Treasury Strips and the Consumer Price Index. The three lines
represent the cumulative total return of a hypothetical $10,000
investment made on inception date of the Maturing Government Bond 2006
Portfolio (May 2, 1994) through June 30, 1996.
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN MATURING GOVERNMENT BOND 2010
PORTFOLIO, RYAN LABS, INC. INDEX OF 14 YEAR TREASURY STRIPS
AND CONSUMER PRICE INDEX.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Average annual total
return:
One year 2.7%
Since inception
(May 2, 1994) 11.2%
Ryan
Labs,
Inc.
Maturing Index of
Government 14 Year
Bond Treasury
2010
Portfolio Strips CPI
5/02/94 10,000 10,000 10,000
12/31/94 9,970 9,792 10,190
12/30/95 14,080 14,042 10,448
6/30/96 12,588 12,637 10,631
</TABLE>
On the chart above you can see how the Maturing Government Bond
2010 Portfolio's total return compared to the Ryan Labs, Inc. Index of
14 Year Treasury Strips and the Consumer Price Index. The three lines
represent the cumulative total return of a hypothetical $10,000
investment made on inception date of the Maturing Government Bond 2010
Portfolio (May 2, 1994) through June 30, 1996.
*Historical results are not an indication of future performance. Investment
returns and principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost. Performance figures of the Fund
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. When such charges are deducted, actual investment
performance in a variable policy or contract will be lower.
25
<PAGE>
VALUE STOCK PORTFOLIO
PERFORMANCE UPDATE
MATTHEW FINN, CFA
PORTFOLIO MANAGER
[Photo] The Value Stock Portfolio seeks long-term accumulation of capital.
The Portfolio invests primarily in equity securities of companies
which, in the opinion of the Adviser, have market values which
appear low relative to their underlying value or future growth
potential.
PERFORMANCE
For the six months ended June 30, 1996 the Value Stock Portfolio returned 13.47
percent* versus 10.1 percent for the S&P 500** and 8.58 percent for the S&P
Barra Value Index.+ For the second quarter, the portfolio was up 4.63 percent*
versus 4.49 percent and 2.05 percent for the S&P** and Barra Value,+
respectively.
PORTFOLIO RECAP
A number of holdings contributed to the strong relative performance during the
first six months of 1996. Among the leading holdings were Federated and Melville
in the retailing industry, Reading & Bates and Tidewater in the oil field
services group, W.R. Grace and Sterling Chemicals, and Columbia Gas and El Paso
Natural Gas in the gas pipeline and distribution business. We no longer have any
representation in the oil field service sector because those holdings reached
our price objectives. New purchases in the energy area include Amerada Hess and
UNOCAL. Both companies operate in the domestic integrated oil business.
In addition, we took profits by selling W.R. Grace as earnings estimates
were revised downward. Federated, Melville, El Paso Natural Gas and Columbia Gas
continue to be among the portfolio's largest holdings.
Areas of the portfolio that hurt performance were banking and construction
related holdings. We have maintained the positions in the portfolio's bank
stocks and eliminated the holdings in construction. Higher interest rates are
expected to hurt future housing activity, thus we expect new home sales to peak.
OUTLOOK
As the U.S. economy continues to recover, at some point the Federal Reserve
Board may raise short term interest rates to fight inflation. Investors have
already begun to anticipate this likelihood. Companies in the financial services
industry tend to underperform the market in a rising interest rate environment.
As portfolio holdings in this area reach our price objectives we anticipate
reducing the portfolio's exposure to financial services companies.
The European economies have been weak and a number of companies with
operations in this area of the world have preannounced weak second quarter
earnings. This is an area where we believe some opportunities may present
themselves, as ultimately the European economy will recover.
26
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ----------------------------------------------- ----------- ---------- --------------
<S> <C> <C> <C>
El Paso Natural Gas Company.................... 84,776 $3,263,876 6.1%
Federated Department Stores.................... 80,400 2,743,650 5.1%
Melville Corporation........................... 61,700 2,498,850 4.6%
Columbia Gas System, Inc....................... 46,608 2,429,442 4.5%
Parker Hannifin Corporation.................... 49,600 2,101,800 3.9%
Central & Southwest Corporation................ 68,100 1,974,900 3.7%
Amerada Hess Corporation....................... 34,200 1,833,975 3.4%
TIG Holdings Inc............................... 63,200 1,832,800 3.4%
ITT Industries................................. 71,001 1,783,900 3.3%
ITT Hartford Group............................. 32,300 1,719,975 3.2%
--
----------
$22,183,168 41.2%
--
--
----------
----------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Value Stock Portfolio
<S> <C>
Capital Goods 11.8%
Consumer Goods and
Services 24.1%
Credit Sensitive 19.2%
Intermediate Goods and
Services 29.2%
Technology 7.5%
Cash and Other
Assets/Liabilities 8.2%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN VALUE STOCK PORTFOLIO,
S&P 500 BARRA VALUE INDEX AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Average annual total
return:
One year 30.9%
Since inception (May
2, 1994) 23.5%
Value Stock S&P 500 Barra Value
Portfolio Index CPI
5/02/94 10,000 10,000 10,000
12/31/94 10,457 10,062 10,190
12/30/95 13,904 13,784 10,448
6/30/96 15,783 14,966 10,631
</TABLE>
On the chart above you can see how the Value Stock Portfolio's
total return compared to the S&P 500 Barra Value Index and the
Consumer Price Index. The three lines represent the cumulative total
return of a hypothetical $10,000 investment made on inception date of
the Value Stock Portfolio (May 2, 1994) through June 30, 1996.
*Historical results are not an indication of future performance. Investment
returns and principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost. Performance figures of the
Fund 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. When such charges are deducted, actual
investment performance in a variable policy or contract will be lower.
**The S&P 500 is a broad, unmanaged index of 500 common stocks which are
representative of the U.S. stock market overall.
+The S&P Barra Value Index contains approximately one-half of the common stocks
from the S&P 500. The Index contains those stocks with a higher book-to-price
ratio.
27
<PAGE>
GROWTH PORTFOLIO
INVESTMENTS IN SECURITIES
JUNE 30, 1996
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
COMMON STOCKS (95.8%)
CAPITAL GOODS (9.1%)
Machinery (9.1%)
83,101 Halliburton Company......................................... $ 4,612,106
93,384 General Electric Company.................................... 8,077,715
84,100 Millipore Corporation....................................... 3,521,688
87,586 York International Corp..................................... 4,532,576
--------------
20,744,085
--------------
CONSUMER GOODS AND SERVICES (50.0%)
Consumer Goods (29.3%)
73,800 Abbott Laboratories......................................... 3,210,300
172,000 Coca-Cola Company........................................... 8,406,500
118,586 Columbia/HCA Healthcare Corporation......................... 6,329,528
39,000 Gillette Company............................................ 2,432,625
117,800 Johnson & Johnson........................................... 5,831,100
102,000 Merck & Co., Inc............................................ 6,591,750
132,836 Pepsico, Inc................................................ 4,699,074
64,000 Philip Morris Companies, Inc................................ 6,656,000
65,800 Pfizer Inc.................................................. 4,696,475
55,280 Procter & Gamble Company.................................... 5,009,750
35,800 Schering-Plough Corporation................................. 2,246,450
73,600 Service Corporation International........................... 4,232,000
84,700 Smithkline Beecham (c)...................................... 4,605,563
40,100 United Health Care.......................................... 2,025,050
--------------
66,972,165
--------------
Consumer Services (5.9%)
71,888 CUC International Inc (b)................................... 2,552,024
91,500 GTECH Holdings Corporation (b).............................. 2,710,688
33,700 HFS Incorporated (b)........................................ 2,359,000
92,791 Manpower.................................................... 3,642,046
46,500 McDonalds Corp.............................................. 2,173,875
--------------
13,437,633
--------------
Food (4.7%)
49,300 Conagra, Inc................................................ 2,236,988
28,800 CPC International........................................... 2,073,600
108,700 Kroger Company (b).......................................... 4,293,650
64,500 Sara Lee Corporation........................................ 2,088,188
--------------
10,692,426
--------------
Retail (4.5%)
86,800 Home Depot Inc.............................................. 4,687,200
72,580 Kohl's Inc. (b)............................................. 2,658,243
112,000 Wal-Mart Stores, Inc........................................ 2,842,000
--------------
10,187,443
--------------
Consumer Cyclicals (5.6%)
94,600 Autozone, Inc. (b).......................................... 3,287,350
68,000 Magna International Inc. (c)................................ 3,128,000
130,400 Newell Co................................................... 3,993,500
52,306 Omnicom Group............................................... 2,432,229
--------------
12,841,079
--------------
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
CREDIT SENSITIVE (14.8%)
Finance (11.2%)
22,030 American International Group, Inc........................... $ 2,172,709
62,600 Associates First Capital Corp. (b).......................... 2,355,325
38,170 Federal Home Loan Mortgage Corporation...................... 3,263,535
69,466 First Data Corporation...................................... 5,531,230
34,525 First Union Corporation..................................... 2,101,708
78,400 MGIC Investment Corporation................................. 4,400,200
60,900 Norwest Corporation......................................... 2,123,887
116,000 T. Rowe Price Associates.................................... 3,567,000
--------------
25,515,594
--------------
Utilities (3.6%)
102,100 AT&T Corporation............................................ 6,330,200
40,900 Nynex Corporation........................................... 1,942,750
--------------
8,272,950
--------------
INTERMEDIATE GOODS AND SERVICES (5.3%)
Materials (2.0%)
27,900 Kimberly-Clark Corporation.................................. 2,155,274
60,100 Praxair Inc................................................. 2,539,225
--------------
4,694,499
--------------
Transportation (3.3%)
55,700 Burlington Northern Santa Fe................................ 4,504,737
93,200 Fritz Companies (b)......................................... 3,005,700
--------------
7,510,437
--------------
TECHNOLOGY (16.6%)
56,600 Automatic Data Processing Inc............................... 2,186,175
28,800 Cisco Systems, Inc. (b)..................................... 1,630,800
61,576 Computer Associates International........................... 4,387,289
26,500 Computer Sciences Corporation (b)........................... 1,980,875
144,400 Danka Business Systems PLC (c).............................. 4,223,700
43,675 DSC Communications (b)...................................... 1,315,709
147,600 Equifax Incorporated........................................ 3,874,500
30,800 Hewlett-Packard Company..................................... 3,068,449
32,500 Lucent Technologies Incorporated............................ 1,230,938
26,700 Microsoft Corporation (b)................................... 3,207,338
35,500 Motorola.................................................... 2,232,063
100,425 Oracle Corporation (b)...................................... 3,960,511
83,900 Pall Corporation............................................ 2,024,088
57,700 Parametric Technology Corporation (b)....................... 2,502,738
--------------
37,825,173
--------------
Total common stocks
(cost: $172,629,833)............................................... 218,693,484
--------------
</TABLE>
See accompanying notes to investments in securities.
28
<PAGE>
GROWTH PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- --------------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (5.0%)
$6,688,647 Temporary Investment Fund, Inc.-TempFund Portfolio, current rate 5.42%...................... $ 6,688,646
1,100,000 U.S. Treasury Bill.................................................... 4.95% 07/11/96 1,098,288
1,000,000 American Home Products CP (d)......................................... 5.46% 07/16/96 997,310
1,250,000 Bell Atlantic Net CP.................................................. 5.43% 07/09/96 1,247,945
1,385,000 Philip Morris Capital CP.............................................. 5.46% 07/25/96 1,379,412
--------------
Total short-term securities (cost: $11,412,817)............................................. 11,411,601
--------------
Total investments in securities (cost: $184,042,650) (e).................................... $ 230,105,085
--------------
--------------
</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 5.2% of net assets in foreign securities at June 30,
1996.
(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 6 to the financial statements). Information concerning the
illiquid securities held at June 30, 1996, which includes aquisition date
and cost, is as follows:
ACQUISITION
SECURITY DATE COST
- -------------------------------------------------- --------- ----------
American Home Products CP......................... 06/13/96 $ 997,618
----------
----------
(e) At June 30, 1996 the cost of securities for federal income tax purposes was
$184,042,650. The aggregate unrealized appreciation and depreciation of
investments in securites based on this cost were:
Gross unrealized appreciation..................... $ 49,087,888
Gross unrealized depreciation..................... (3,025,453)
-------------
Net unrealized appreciation....................... $ 46,062,435
-------------
-------------
29
<PAGE>
BOND PORTFOLIO
INVESTMENTS IN SECURITIES
JUNE 30, 1996
(UNAUDITED)
(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%)
GOVERNMENT OBLIGATIONS (41.8%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (40.5%)
U.S. Treasury (20.4%)
$ 900,000 U.S. Treasury Bond......................................................... 6.000% 02/15/26 $ 798,188
2,425,000 U.S. Treasury Bond......................................................... 12.000% 08/15/13 3,422,281
3,000,000 U.S. Treasury Bond......................................................... 8.125% 08/15/19 3,364,683
3,450,000 U.S. Treasury Bond......................................................... 8.000% 11/15/21 3,839,198
3,500,000 U.S. Treasury Strip (c).................................................... 5.410% 02/15/01 2,606,237
750,000 U.S. Treasury Strip (c).................................................... 5.663% 02/15/04 453,134
8,500,000 U.S. Treasury Strip (c).................................................... 5.175% 08/15/99 6,990,136
1,000,000 U.S. Treasury Note......................................................... 6.125% 09/30/00 988,436
------------
22,462,293
------------
Government National Mortgage Association (9.4%)
399,767 ........................................................................... 8.500% 12/15/22 412,032
352,791 ........................................................................... 8.500% 10/15/22 363,615
369,198 ........................................................................... 7.500% 02/15/23 366,108
641,848 ........................................................................... 8.000% 09/15/24 647,912
706,096 ........................................................................... 6.500% 11/15/23 663,821
424,920 ........................................................................... 7.500% 02/15/24 418,916
496,731 ........................................................................... 7.500% 10/15/25 489,483
907,392 ........................................................................... 7.000% 11/15/23 875,896
919,579 ........................................................................... 6.500% 05/15/24 857,460
949,615 ........................................................................... 7.500% 09/15/24 936,196
1,806,701 ........................................................................... 8.000% 04/15/25 1,823,339
855,770 ........................................................................... 7.500% 10/15/25 843,283
485,359 ........................................................................... 7.000% 10/15/25 465,493
1,204,559 ........................................................................... 7.000% 11/15/24 1,155,544
------------
10,319,098
------------
Other U.S. Government Agencies (8.3%)
1,500,000 Federal Home Loan Mortgage Corporation..................................... 7.030% 04/05/04 1,475,972
1,000,000 Federal National Mortgage Association...................................... 8.590% 02/03/05 1,021,789
1,000,000 Federal Farm Credit Bank................................................... 6.960% 06/06/00 991,775
464,510 Federal Home Loan Mortgage Corporation..................................... 6.500% 12/01/23 438,529
1,980,692 Federal Home Loan Mortgage Corporation..................................... 6.500% 02/01/16 1,885,043
1,433,166 Federal National Mortgage Association...................................... 7.000% 09/01/17 1,383,235
1,008,593 Federal National Mortgage Association...................................... 6.500% 02/01/26 943,739
477,234 Federal National Mortgage Association...................................... 7.000% 02/01/26 458,402
500,597 Federal National Mortgage Association...................................... 6.500% 03/01/26 468,058
------------
9,066,542
------------
Other Government Obligations (2.4%)
2,500,000 Quebec Province of Canada (b).............................................. 9.125% 03/01/00 2,683,798
------------
STATE AND LOCAL GOVERNMENT OBLIGATIONS (1.3%)
1,428,000 Wyoming Community Development Authority.................................... 6.850% 06/01/10 1,391,408
------------
Total government obligations (cost: $47,016,810)................................................ 45,923,139
------------
CORPORATE OBLIGATIONS (51.9%)
CAPITAL GOODS (6.7%)
Machinery (2.8%)
2,750,000 Joy Technologies Incorporated.............................................. 10.250% 09/01/03 3,032,017
------------
Telecommunications (3.9%)
2,500,000 Continental Cablevision Inc................................................ 8.300% 05/15/06 2,586,875
</TABLE>
See accompanying notes to investments in securities.
30
<PAGE>
BOND PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- ------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
$1,750,000 Telekom Malaysia (b)(d).................................................... 7.125% 08/01/05 $ 1,729,781
------------
4,316,656
------------
BASIC INDUSTRIES (3.8%)
Paper and Forest Products (2.3%)
2,400,000 Georgia Pacific Corporation................................................ 9.625% 03/15/22 2,566,418
------------
Primary Metals (1.5%)
1,500,000 Reynolds Metals Company.................................................... 9.375% 06/15/99 1,602,042
------------
CONSUMER CYCLICAL (1.6%)
Textiles (1.6%)
1,750,000 Reliance Industries 144A (b)(d)............................................ 5.000% 06/24/16 1,790,880
------------
CONSUMER STAPLES (8.6%)
Drugs (1.6%)
1,750,000 American Home Products Corporation......................................... 6.500% 10/15/02 1,710,926
------------
Food (.7%)
776,786 General Mills Inc.......................................................... 6.235% 03/15/97 778,020
------------
Household Products (1.5%)
1,500,000 Premark International Inc.................................................. 10.500% 09/15/00 1,689,078
------------
Media (4.8%)
1,450,000 News America Holdings Inc.................................................. 7.750% 12/01/45 1,292,962
1,000,000 TCI Communications Inc..................................................... 8.650% 09/15/04 1,025,938
1,000,000 Time Warner Entertainment.................................................. 9.625% 05/01/02 1,099,395
1,750,000 Time Warner Incorporated................................................... 7.950% 02/01/00 1,791,867
------------
5,210,162
------------
ENERGY (3.2%)
Natural Gas Distribution (1.4%)
1,500,000 Consolidated Natural Gas Company........................................... 8.750% 06/01/99 1,587,513
------------
Oilfield Services (1.8%)
2,000,000 Weatherford Enterra Incorporated........................................... 7.250% 05/15/06 1,978,198
------------
FINANCIAL (24.2%)
Auto Finance (2.6%)
1,000,000 Ford Motor Credit.......................................................... 6.250% 12/08/05 921,830
2,000,000 Ford Motor Credit.......................................................... 5.880% 03/18/99 1,990,000
------------
2,911,830
------------
Banks/Savings and Loan (2.3%)
2,500,000 Midland Bank PLC (b)....................................................... 7.625% 06/15/06 2,525,965
------------
Commercial Finance (3.1%)
3,400,000 General Electric Capital Corp.............................................. 6.660% 05/01/18 3,392,789
------------
Consumer Finance (8.4%)
1,885,000 Associates Corp of North America........................................... 6.750% 10/15/99 1,890,372
2,215,000 Commercial Credit Company.................................................. 7.375% 03/15/02 2,262,124
2,300,000 General Motors Acceptance Corporation...................................... 9.000% 10/15/02 2,511,816
2,500,000 Lehman Brothers Holdings................................................... 7.375% 05/15/07 2,533,497
------------
9,197,809
------------
Real Estate (1.8%)
1,189,621 Green Tree Financial Corporation........................................... 6.900% 02/15/04 1,178,240
787,928 Green Tree Limited Net Interest Margin Trust............................... 7.250% 07/15/05 786,609
------------
1,964,849
------------
Real Estate Investment Trust (3.5%)
1,500,000 Security Capital Industrial................................................ 7.875% 05/15/09 1,475,988
1,000,000 Security Captial Pacific................................................... 7.500% 02/15/14 937,167
1,500,000 Franchise Finance Corporation of America................................... 7.020% 02/20/03 1,433,417
------------
3,846,572
------------
</TABLE>
See accompanying notes to investments in securities.
31
<PAGE>
BOND PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- ------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
Mortgage-Backed Securities (2.5%)
$1,759,599 Chase 94-1 B2 CMO 144A (d)................................................. 6.610% 03/28/25 $ 1,585,839
1,200,000 CSFB Finance Company Limited, Series 1995-A, Class A (d)................... 7.500% 11/15/05 1,163,625
------------
2,749,464
------------
UTILITIES (3.8%)
Electric (1.8%)
2,000,000 Korea Electric Power Company (b)........................................... 7.750% 04/01/13 1,973,848
------------
Telephones (2.0%)
1,250,000 AT&T Corporation........................................................... 8.350% 01/15/25 1,308,478
850,000 GTE North Incorporated..................................................... 8.500% 12/15/31 872,236
------------
2,180,714
------------
Total corporate obligations (cost: $58,253,646)................................................. 57,005,750
------------
Total long-term debt securities (cost: $105,270,456)............................................ 102,928,889
------------
SHORT-TERM SECURITIES (4.3%)
1,759,259 Temporary Investment Fund, Inc.--TempFund Portfolio, current rate 5.42%......................... 1,759,259
540,000 American Home Products CP (d).............................................. 5.48% 07/26/96 537,740
1,140,000 Pepsico Inc CP............................................................. 5.40% 07/01/96 1,139,488
500,000 Southwestern Bell CP (d)................................................... 5.42% 07/11/96 499,029
760,000 Toys R Us, Inc CP.......................................................... 5.40% 07/08/96 758,864
------------
Total short-term securities (cost: $4,695,289).................................................. 4,694,380
------------
Total investments in securities (cost: $109,965,745) (e)........................................ $107,623,269
------------
------------
</TABLE>
Notes to Investments in Securities
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) The portfolio held 9.7% of net assets in foreign securities at June 30,
1996.
(c) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
(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 6 to the financial statements). Information concerning the
illiquid securities held at June 30, 1996, which includes acquisition date
and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
-------------------------------------------------- ----------- -----------
<S> <C> <C>
Chase 94-1 B2 CMO 144A............................ 03/11/96 $ 1,660,142
Telekom Malaysia.................................. 01/04/96 1,840,870
American Home Products CP......................... 06/13/96 537,906
Southwestern Bell CP.............................. 06/11/96 759,105
CSFB Finance Company Limited, Series 1995-A, Class
A................................................. 05/15/96 1,163,625
Reliance Industries 144A.......................... 06/17/96 1,746,345
-----------
$ 7,707,993
-----------
-----------
</TABLE>
(e) At June 30, 1996 the cost of securities for federal income tax purposes was
$110,047,262. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C> <C>
Gross unrealized appreciation.................................. $ 542,939
Gross unrealized depreciation.................................. (2,966,932)
-----------
Net unrealized depreciation.................................... $(2,423,993)
-----------
-----------
</TABLE>
32
<PAGE>
MONEY MARKET PORTFOLIO
INVESTMENTS IN SECURITIES
JUNE 30, 1995
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ----------- -----------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATION (4.4%)
$ 1,875,000 U.S. Treasury Bill.......................................... 5.16% 07/05/96 $ 1,873,708
-----------
Total U.S. Government obligation (cost: $1,873,708)............................ 1,873,708
-----------
COMMERCIAL PAPER (91.6%)
BASIC INDUSTRIES (3.2%)
Chemicals (3.2%)
1,375,000 Dupont...................................................... 5.37% 08/05/96 1,367,795
-----------
CONSUMER STAPLES (40.8%)
Drugs (3.9%)
315,000 American Home Products (c).................................. 5.48% 07/26/96 313,778
1,360,000 Schering Corporation........................................ 5.40% 08/27/96 1,348,497
-----------
1,662,275
-----------
Entertainment (4.3%)
1,845,000 Walt Disney................................................. 5.41% 07/23/96 1,838,800
-----------
Food (14.4%)
1,580,000 Anheuser-Busch.............................................. 5.38% 07/30/96 1,573,088
1,340,000 Cargill Inc................................................. 5.37% 07/09/96 1,338,235
405,000 Coca Cola Company........................................... 5.39% 07/26/96 403,467
1,330,000 Coca Cola Company........................................... 5.37% 08/20/96 1,320,146
1,565,000 CPC International, Inc (c).................................. 5.45% 07/18/96 1,560,853
-----------
6,195,789
-----------
Household Products (6.5%)
1,130,000 Colgate-Palmolive........................................... 5.45% 07/08/96 1,128,669
355,000 Philip Morris Companies..................................... 5.42% 07/12/96 354,375
345,000 Philip Morris Companies..................................... 5.39% 07/18/96 344,094
725,000 Philip Morris Companies..................................... 5.41% 07/22/96 722,652
270,000 Philip Morris Companies..................................... 5.44% 08/01/96 268,728
-----------
2,818,518
-----------
Media (5.0%)
2,170,000 McGraw-Hill Company......................................... 5.39% 07/15/96 2,165,235
-----------
Misc (2.7%)
1,180,000 PHH Corporation............................................. 5.38% 07/17/96 1,177,063
-----------
Retail (4.0%)
870,000 Wal-Mart Stores............................................. 5.42% 07/02/96 869,745
855,000 Wal-Mart Stores............................................. 5.35% 07/08/96 854,010
-----------
1,723,755
-----------
CREDIT SENSITIVE (.6%)
Hardware and Tools (.6%)
245,000 Stanley Works............................................... 5.43% 07/23/96 244,172
-----------
FINANCIAL (47.0%)
Auto Finance (3.8%)
1,665,000 Ford Motor Credit........................................... 5.42% 08/14/96 1,654,011
-----------
Commercial Finance (13.3%)
1,500,000 Pitney-Bowes Credit......................................... 5.44% 07/19/96 1,495,796
2,170,000 Ciesco...................................................... 5.45% 07/29/96 2,160,647
2,065,000 Bell Atlantic............................................... 5.45% 07/12/96 2,061,311
-----------
5,717,754
-----------
</TABLE>
See accompanying notes to investments in securities.
33
<PAGE>
MONEY MARKET PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ----------- -----------
<C> <S> <C> <C> <C>
FINANCIAL--CONTINUED
Consumer Finance (4.5%)
$ 1,925,000 Associates Corp............................................. 5.45% 07/15/96 $ 1,920,709
-----------
Electric (13.6%)
1,740,000 Alabama Power............................................... 5.41% 07/10/96 1,737,448
165,000 Alabama Power............................................... 5.41% 08/06/96 164,105
605,000 Baltimore Gas & Electric.................................... 5.40% 07/11/96 604,030
765,000 Baltimore Gas & Electric.................................... 5.40% 07/18/96 762,980
300,000 Carolina Power & Light...................................... 5.41% 07/25/96 298,900
400,000 Midamerica Energy........................................... 5.45% 08/06/96 397,821
1,895,000 Union Electric.............................................. 5.45% 07/17/96 1,890,213
-----------
5,855,497
-----------
Telephones (11.8%)
1,570,000 AT&T Corp................................................... 5.36% 08/13/96 1,559,964
2,000,000 Bellsouth Telephone......................................... 5.47% 08/07/96 1,988,684
1,525,000 Southwestern Bell Capital Corporation (c)................... 5.40% 07/25/96 1,519,430
-----------
5,068,078
-----------
Total commercial paper (cost: $39,409,451)..................................... 39,409,451
-----------
OTHER SHORT-TERM SECURITIES (3.7%)
1,601,333 Temporary Investment Fund, Inc.--TempFund Portfolio, current rate 5.42%........ 1,601,333
-----------
Total other short-term securities (cost: $1,601,333)........................... 1,601,333
-----------
Total investments in securities (cost: $42,884,492) (b)........................ $42,884,492
-----------
-----------
</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
June 30, 1996.
(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.
34
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES
JUNE 30, 1996
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
COMMON STOCKS (48.2%)
CAPITAL GOODS (5.9%)
Machinery (5.9%)
81,026 General Electric Company.................................... $ 7,008,748
66,101 Halliburton Company......................................... 3,668,606
78,300 Millipore Corporation....................................... 3,278,813
111,210 United Waste Systems, Inc. (b).............................. 3,586,523
93,621 York International Corp..................................... 4,844,887
--------------
22,387,577
--------------
CONSUMER GOODS AND SERVICES (22.7%)
Consumer Goods (12.0%)
87,293 Columbia/HCA Healthcare Corporation......................... 4,659,263
35,800 Gillette Company............................................ 2,233,025
101,200 Johnson & Johnson........................................... 5,009,400
151,206 Pepsico, Inc................................................ 5,348,912
84,960 Pfizer Inc.................................................. 6,064,020
58,800 Philip Morris Companies, Inc................................ 6,115,200
49,355 Procter & Gamble Company.................................... 4,472,797
107,400 Service Corporation International........................... 6,175,500
70,700 Smithkline Beecham (c)...................................... 3,844,313
36,500 United HealthCare........................................... 1,843,250
--------------
45,765,680
--------------
Consumer Services (3.5%)
124,672 CUC International, Inc. (b)................................. 4,425,855
44,600 Gartner Group Incorporated (b).............................. 1,633,475
76,100 GTECH Holdings Corporation (b).............................. 2,254,463
28,700 HFS Incorporated (b)........................................ 2,009,000
74,695 Manpower.................................................... 2,931,779
--------------
13,254,572
--------------
Food (1.5%)
28,000 CPC International........................................... 2,016,000
95,000 Kroger Company (b).......................................... 3,752,500
--------------
5,768,500
--------------
Retail (1.5%)
71,140 Home Depot Inc.............................................. 3,841,560
51,700 Kohl's, Inc. (b)............................................ 1,893,513
--------------
5,735,073
--------------
Consumer Cyclicals (4.2%)
91,000 Autozone, Inc. (b).......................................... 3,162,250
61,000 Magna International Inc..................................... 2,806,000
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
111,000 Newell Co................................................... $ 3,399,375
96,704 Omnicom Group............................................... 4,496,736
34,900 Tommy Hilfiger Corporation (b).............................. 1,871,513
--------------
15,735,874
--------------
CREDIT SENSITIVE (7.5%)
Finance (7.5%)
39,740 American International Group, Inc........................... 3,919,358
54,600 Associates First Capital Corp. (b).......................... 2,054,325
33,730 Federal Home Loan Mortgage Corporation...................... 2,883,915
77,526 First Data Corp............................................. 6,173,007
92,500 MGIC Investment Corporation................................. 5,191,563
108,950 Norwest Corporation......................................... 3,799,631
148,800 T. Rowe Price Associates.................................... 4,575,600
--------------
28,597,399
--------------
INTERMEDIATE GOODS AND SERVICES (3.0%)
Materials (1.4%)
40,500 Kimberly-Clark Corporation.................................. 3,128,625
54,300 Praxair Inc................................................. 2,294,175
--------------
5,422,800
--------------
Transportation (1.6%)
37,400 Burlington Northern Santa Fe................................ 3,024,725
89,000 Fritz Companies (b)......................................... 2,870,250
--------------
5,894,975
--------------
TECHNOLOGY (9.1%)
98,400 Automatic Data Processing Inc............................... 3,800,700
52,300 Cisco Systems, Inc. (b)..................................... 2,961,488
94,108 Computer Associates International........................... 6,705,193
58,300 Computer Sciences Corporation (b)........................... 4,357,925
116,600 Danka Business Systems PLC (c).............................. 3,410,550
129,000 Equifax Incorporated........................................ 3,386,250
30,900 Lucent Technologies Incorporated............................ 1,170,338
86,070 Oracle Corporation (b)...................................... 3,394,386
80,600 Parametric Technology Corporation (b)....................... 3,496,025
45,000 3 Com (b)................................................... 2,058,750
--------------
34,741,605
--------------
Total common stocks (cost: $148,609,977)............................... 183,304,055
--------------
</TABLE>
See accompanying notes to investments in securities.
35
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ------------ -------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (40.1%)
GOVERNMENT OBLIGATIONS (19.3%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (17.8%)
U.S. Treasury (10.2%)
$ 1,500,000 U.S. Treasury Bond.......................................... 6.000% 02/15/26 $ 1,330,313
4,425,000 U.S. Treasury Bond.......................................... 12.000% 08/15/13 6,244,781
8,750,000 U.S. Treasury Bond.......................................... 8.000% 11/15/21 9,737,095
3,750,000 U.S. Treasury Strip (d)..................................... 5.410% 02/15/01 2,792,396
1,750,000 U.S. Treasury Strip (d)..................................... 5.705% 02/15/04 1,057,313
14,400,000 U.S. Treasury Strip (d)..................................... 5.580% 08/15/99 11,842,113
3,700,000 U.S. Treasury Note.......................................... 6.125% 09/30/00 3,657,213
2,200,000 U.S. Treasury Note.......................................... 5.625% 10/31/97 2,190,375
-------------
38,851,599
-------------
Government National Mortgage Association (2.5%)
245,676 ............................................................ 7.500% 02/15/24 242,204
377,929 ............................................................ 6.500% 11/15/23 355,302
897,467 ............................................................ 6.500% 03/15/24 836,842
305,205 ............................................................ 6.500% 11/15/23 286,932
577,325 ............................................................ 6.500% 11/15/23 542,760
250,836 ............................................................ 6.500% 11/15/23 235,818
23,032 ............................................................ 6.500% 03/15/24 21,476
637,381 ............................................................ 7.500% 02/15/24 628,374
325,598 ............................................................ 6.500% 11/15/23 306,104
23,553 ............................................................ 6.500% 02/15/24 21,962
572,526 ............................................................ 7.500% 07/15/24 564,436
645,675 ............................................................ 7.500% 05/15/24 636,551
1,941,436 ............................................................ 7.000% 10/15/25 1,861,971
667,486 ............................................................ 7.500% 10/15/25 657,747
1,686,379 ............................................................ 7.000% 11/15/24 1,617,759
416,361 GNMA Midget II.............................................. 7.500% 06/20/02 418,055
188,399 GNMA Midget II.............................................. 7.500% 07/20/02 189,165
-------------
9,423,458
-------------
Federal National Mortgage Association (3.5%)
1,413,999 ............................................................ 7.000% 05/01/11 1,395,418
801,073 ............................................................ 6.500% 05/01/11 774,525
1,001,452 ............................................................ 6.500% 05/01/11 968,263
2,415,241 ............................................................ 6.000% 05/01/11 2,284,622
1,009,999 ............................................................ 7.000% 05/01/11 996,727
2,600,000 ............................................................ 8.590% 02/03/05 2,656,651
1,240,046 ............................................................ 6.500% 09/01/25 1,160,310
3,292,917 ............................................................ 7.000% 02/01/26 3,162,975
-------------
13,399,491
-------------
Other U.S. Government Agencies (1.6%)
2,750,000 Federal Farm Credit Bank Debentures......................... 6.960% 06/06/00 2,727,381
1,398,083 Federal Home Loan Mortgage Corporation...................... 6.500% 12/01/23 1,319,887
1,881,658 Federal Home Loan Mortgage Corporation...................... 6.500% 02/01/16 1,790,790
-------------
5,838,058
-------------
OTHER GOVERNMENT OBLIGATIONS (.6%)
2,200,000 Quebec Province of Canada (c)............................... 9.125% 03/01/00 2,361,742
-------------
STATE AND LOCAL GOVERNMENT OBLIGATIONS (.9%)
3,570,000 Wyoming Community Development Authority..................... 6.850% 06/01/10 3,478,519
-------------
Total government obligations (cost: $75,567,828)................................ 73,352,867
-------------
CORPORATE OBLIGATIONS (20.8%)
CAPITAL GOODS (3.5%)
Aerospace/Defense (.6%)
2,250,000 Lockheed Martin Corporation................................. 7.450% 06/15/04 2,279,207
-------------
</TABLE>
See accompanying notes to investments in securities.
36
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ------------ -------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
Electronics (.2%)
$ 500,000 Xerox Corporation........................................... 9.200% 07/15/99 $ 500,530
-------------
Machinery (.9%)
3,150,000 Joy Technologies Incorporated............................... 10.250% 09/01/03 3,473,039
-------------
Pollution Control (.5%)
2,000,000 WMX Technologies Inc........................................ 6.700% 05/01/01 1,986,388
-------------
Telecommunications (1.3%)
3,000,000 Continental Cablevision Inc................................. 8.300% 05/15/06 3,104,250
1,950,000 Telekom Malaysia (c)(e)..................................... 7.125% 08/01/05 1,927,470
-------------
5,031,720
-------------
BASIC INDUSTRIES (.3%)
Primary Metals (.3%)
1,000,000 Reynolds Metals Company..................................... 9.375% 06/15/99 1,068,028
-------------
CONSUMER CYCLICAL (.5%)
Textiles (.5%)
1,750,000 Reliance Industries 144A (c)(e)............................. 10.375% 06/24/16 1,790,880
-------------
CONSUMER STAPLES (5.2%)
Drugs (.6%)
2,500,000 American Home Products Corporation.......................... 6.500% 10/15/02 2,444,180
-------------
Food (.2%)
642,857 General Mills Inc........................................... 6.235% 03/15/97 643,879
-------------
Household Products (.6%)
2,200,000 Premark International Inc................................... 10.500% 09/15/00 2,477,314
-------------
Media (2.5%)
2,500,000 News America Holdings Inc................................... 7.750% 12/01/45 2,229,245
2,370,000 TCI Communications Inc...................................... 8.650% 09/15/04 2,431,473
2,400,000 Time Warner Entertainment................................... 9.625% 05/01/02 2,638,547
2,000,000 Time Warner Incorporated.................................... 7.950% 02/01/00 2,047,848
-------------
9,347,113
-------------
Misc (.5%)
2,000,000 PHH Corporation............................................. 6.500% 02/01/00 1,979,738
-------------
Retail (.8%)
600,000 Dayton Hudson Corporation................................... 9.250% 03/01/06 643,596
750,000 Dayton Hudson Corporation................................... 10.000% 12/01/00 834,233
1,500,000 Dayton Hudson Corporation................................... 6.625% 03/01/03 1,449,420
-------------
2,927,249
-------------
ENERGY (1.6%)
Natural Gas Distribution (.5%)
1,850,000 Consolidated Natural Gas Company............................ 8.750% 06/01/99 1,957,933
-------------
Oil and Gas Production (.5%)
2,000,000 Petro-Canada (c)............................................ 7.875% 06/15/26 2,021,658
-------------
Oilfield Services (.6%)
2,300,000 Weatherford Enterra Incorporated............................ 7.250% 05/15/06 2,274,928
-------------
FINANCIAL (8.5%)
Auto Finance (1.4%)
2,000,000 Ford Motor Credit........................................... 5.880% 03/18/99 1,990,000
3,400,000 Ford Motor Credit........................................... 6.250% 12/08/05 3,134,222
-------------
5,124,222
-------------
Banks/Savings and Loans (1.6%)
3,000,000 Midland Bank PLC (c)........................................ 7.625% 06/15/06 3,031,158
</TABLE>
See accompanying notes to investments in securities.
37
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ------------ -------------
<C> <S> <C> <C> <C>
FINANCIAL--CONTINUED
$ 3,000,000 Norwest Corporation......................................... 7.680% 05/10/02 $ 3,044,697
-------------
6,075,855
-------------
Commercial Finance (.9%)
3,400,000 General Electric Capital Corporation........................ 6.660% 05/01/18 3,392,789
-------------
Consumer Finance (3.7%)
1,750,000 American General Finance.................................... 5.875% 07/01/00 1,694,074
2,000,000 Associates Corp of North America............................ 6.750% 10/15/99 2,005,700
1,350,000 Commercial Credit Company................................... 5.550% 02/15/01 1,279,176
500,000 Commercial Credit Company................................... 7.375% 03/15/02 510,638
2,500,000 Franchise Finance Corp of America........................... 7.020% 02/20/03 2,389,028
2,500,000 General Motors Acceptance Corporation....................... 9.000% 10/15/02 2,730,235
3,500,000 Lehman Brothers Holdings.................................... 7.375% 05/15/07 3,546,897
-------------
14,155,748
-------------
Real Estate (.9%)
2,250,000 Security Capital Industrial................................. 7.875% 05/15/09 2,213,982
1,500,000 Security Captial Pacific.................................... 7.500% 02/15/14 1,405,751
-------------
3,619,733
-------------
UTILITIES (1.2%)
Electric (.5%)
1,600,000 Korea Electric Power Company (c)............................ 7.750% 04/01/13 1,579,078
500,000 Oklahoma Gas & Electric Co.................................. 6.375% 01/01/98 499,031
-------------
2,078,109
-------------
Telephones (.7%)
2,600,000 GTE Northwest Inc........................................... 6.125% 02/15/99 2,571,293
-------------
Total corporate obligations (cost: $80,541,309)................................. 79,221,533
-------------
Total long-term debt securities (cost: $156,109,137)............................ 152,574,400
-------------
SHORT-TERM SECURITIES (10.1%)
12,500,741 Temporary Investment Fund, Inc--TempFund Portfolio, current rate 5.42%.......... 12,500,741
3,900,000 U.S. Treasury Bill.......................................... 5.01% 07/11/96 3,893,930
1,740,000 U.S. Treasury Bill.......................................... 5.12% 08/15/96 1,728,725
1,875,000 AT&T Corporation CP......................................... 5.39% 07/02/96 1,873,877
3,085,000 Cargill Incorporated CP..................................... 5.37% 07/09/96 3,079,929
2,350,000 Walt Disney CP.............................................. 5.39% 07/12/96 2,345,083
1,200,000 Florida Power Corporation CP................................ 5.44% 07/17/96 1,196,593
2,860,000 PHH Corporation CP.......................................... 5.45% 07/22/96 2,849,742
1,066,000 Philip Morris Companies CP.................................. 5.40% 07/12/96 1,063,770
2,510,000 Philip Morris Companies CP.................................. 5.46% 07/25/96 2,499,872
3,870,000 Potomac Electric CP......................................... 5.43% 07/10/96 3,863,059
1,695,000 Toys R Us, Inc. CP.......................................... 5.47% 07/29/96 1,687,162
-------------
Total short-term securities (cost: $38,589,321)................................. 38,582,483
-------------
Total investments in securities (cost: $343,308,435) (f)........................ $ 374,460,938
-------------
-------------
</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 5.3% of net assets in foreign securities as of June 30,
1996.
(d) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
38
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
Notes to Investments in Securities--continued
(e) 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 6 to the financial statements). Information concerning the
illiquid securities held at June 30, 1996, which includes aquisition date
and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- -------------------------------------------------- ----------- ------------
<S> <C> <C>
Reliance Industries 144A.......................... 06/17/96 $ 1,746,345
Telekom Malaysia.................................. 01/04/96 2,051,256
------------
$ 3,797,601
------------
------------
</TABLE>
(f) At June 30, 1996 the cost of securities for federal income tax purposes was
$343,439,806. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation..................... $ 36,395,868
Gross unrealized depreciation..................... (5,374,736)
------------
Net unrealized appreciation....................... $ 31,021,132
------------
------------
</TABLE>
39
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
INVESTMENTS IN SECURITIES
JUNE 30, 1996
(UNAUDITED)
(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 (98.7%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (55.4%)
Federal Home Loan Mortgage Corporation (FHLMC) (16.2%)
$ 881,132 Bi-weekly............................................................. 7.000% 12/01/22 $ 851,957
2,099,402 Bi-weekly............................................................. 6.500% 12/01/23 1,981,980
1,273,477 CMO Accrual Bond (FHLMC 9.5%) (c)..................................... 5.000% 01/15/02 1,170,732
1,821,059 20 Year Gold.......................................................... 6.500% 07/01/13 1,745,520
869,557 20 Year Gold.......................................................... 6.000% 09/01/13 814,844
3,693,360 20 Year Gold.......................................................... 6.000% 10/01/13 3,460,970
973,159 20 Year Gold.......................................................... 6.500% 05/01/14 929,687
486,909 20 Year Gold.......................................................... 6.500% 09/01/14 465,158
-----------
11,420,848
-----------
Federal National Mortgage Association (FNMA) (9.5%)
1,001,755 Biweekly.............................................................. 6.000% 07/01/07 959,259
1,363,050 Biweekly.............................................................. 6.500% 03/01/17 1,295,918
475,234 Biweekly.............................................................. 6.500% 02/01/17 452,441
1,758,840 Biweekly.............................................................. 7.000% 09/01/17 1,697,562
235,541 CMO Sequential Payer, Series A, Class 1 (FNMA 11.0%).................. 5.000% 08/01/10 218,503
597,822 CMO Sequential Payer, Series C, Class 1 (FNMA 9.0%)................... 6.000% 05/01/09 573,371
282,423 CMO Sequential Payer, Series F, Class 1 (FNMA 9.0%)................... 6.500% 05/01/09 274,949
500,000 CMO Scheduled Class (GNMA 8%)......................................... 6.000% 12/25/08 474,220
744,597 PAC Accrual Bond (FNMA 10%) (c)....................................... 6.900% 06/25/19 700,054
8,943 ...................................................................... 8.000% 05/01/22 8,950
-----------
6,655,227
-----------
Government National Mortgage Association (GNMA) (18.4%)
415,475 ...................................................................... 8.000% 12/15/15 422,762
994,483 ...................................................................... 8.000% 02/15/16 1,007,810
451,162 ...................................................................... 8.000% 03/15/16 457,208
560,193 ...................................................................... 7.000% 04/15/16 543,101
364,107 ...................................................................... 7.000% 09/15/16 356,060
627,910 ...................................................................... 7.000% 08/15/16 614,033
729,707 ...................................................................... 7.500% 06/15/17 727,750
332,599 ...................................................................... 7.000% 05/15/17 325,248
529,924 ...................................................................... 7.500% 04/15/17 528,504
1,928,945 ...................................................................... 7.500% 06/15/17 1,923,773
359,835 ...................................................................... 7.000% 07/15/17 351,883
150,191 ...................................................................... 7.500% 02/15/17 149,789
186,871 ...................................................................... 7.500% 06/15/17 186,370
291,497 ...................................................................... 7.000% 03/15/17 285,055
177,672 ...................................................................... 7.500% 06/15/17 177,196
195,697 ...................................................................... 7.500% 10/15/17 195,173
305,306 ...................................................................... 7.000% 05/15/17 298,559
6,387 ...................................................................... 8.500% 03/15/22 6,583
470,017 GNMA II............................................................... 7.500% 09/20/16 467,187
78,884 GNMA II............................................................... 8.500% 10/20/16 81,691
375,261 GNMA II............................................................... 7.500% 09/20/16 373,002
685,148 GNMA II............................................................... 8.000% 02/20/17 693,507
224,607 GNMA II............................................................... 8.500% 10/20/16 231,626
899,872 GNMA II............................................................... 8.500% 07/20/17 927,993
234,192 GNMA II............................................................... 8.500% 03/20/17 241,511
298,206 GNMA II............................................................... 8.500% 08/20/17 307,525
444,499 GNMA II............................................................... 7.500% 08/20/17 441,431
430,899 GNMA II............................................................... 8.000% 07/20/17 436,156
</TABLE>
See accompanying notes to investments in securities.
40
<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
Government National Mortgage Association (GNMA)--Continued
$ 200,171 GNMA II............................................................... 8.500% 12/20/16 $ 207,295
-----------
12,965,781
-----------
Other Government Agency Obligations (11.3%)
500,000 Federal Home Loan Bank, Series GG-00, Class 1......................... 5.030% 07/28/00 493,125
1,936,020 Vendee Mortgage Trust Participation Certificate (b)................... 8.440% 05/15/24 1,995,311
725,349 Vendee Mortgage Trust Participation Certificate (b)................... 7.210% 02/15/25 699,962
2,093,750 Vendee Mortgage Trust Participation Certificate (b)................... 7.790% 02/15/25 2,086,552
2,603,459 Vendee Mortgage Trust Participation Certificate (b)................... 8.790% 06/15/25 2,709,224
-----------
7,984,174
-----------
Total U.S. government and agencies obligations (cost: $39,066,043)....................... 39,026,030
-----------
OTHER MORTGAGE-BACKED SECURITIES (38.6%)
Asset-backed Securities (3.3%)
1,784,432 Green Tree Financial.................................................. 6.900% 02/15/04 1,767,360
590,946 Green Tree Financial.................................................. 7.250% 07/15/05 589,957
-----------
2,357,317
-----------
Collateralized Mortgage Obligations/Mortgage Revenue Bonds (31.8%)
604,824 American Housing Trust CMO, Series III, Class H....................... 8.500% 07/25/97 609,051
4,000,000 Bank Mart Funding Corporation Sequential CMO (GNMA/FHLMC) (e)......... 8.250% 02/20/19 4,045,000
903,578 Chase 94-1 B2 CMO 144A Issue (d)...................................... 6.610% 03/28/25 814,350
1,188,918 Chase 94-1 B5 CMO 144A Issue (d)...................................... 6.610% 03/28/25 1,046,620
312,564 CMO Trust, Sequential Payer, Series 44, (GNMA 10.0%) Class E.......... 5.000% 07/01/18 285,058
950,000 Citicorp Mortgage Securities, Inc. Targeted Amortization Class........ 6.000% 11/25/08 908,237
2,850,000 CSFB Finance Company Limited, Series 95-A, Class A 144A Issue (d)..... 7.500% 11/15/05 2,763,609
248,214 FBS Mortgage Corporation, Series 1992-CA, Class A6.................... 3.655% 03/25/08 207,785
1,314,009 International Capital Markets Acceptance Corporation 144A Issue (d)... 8.250% 09/01/15 1,326,328
1,000,000 KPAC CMO (GNMA 9.5%).................................................. 7.450% 10/01/18 995,000
1,889,000 Pleasant Hill Revenue Bond (GNMA Multi-family)........................ 7.950% 09/20/15 1,889,000
2,500,000 Prudential Home Mortgage Securities, Series 92-A, Class 2B2 144A Issue 7.900% 04/28/22 2,465,625
(d)...................................................................
1,138,703 Santa Barbara Funding II, CMO Sequential Payer, Series A, Class 5 5.000% 03/20/18 1,035,535
(FHLMC 9.5%)..........................................................
1,612,307 Shearson Lehman Brothers.............................................. 7.500% 06/01/18 1,614,850
2,427,600 Wyoming Community Development Authority............................... 6.850% 06/01/10 2,365,393
-----------
22,371,441
-----------
Commercial Mortgage-backed Securities (3.2%)
2,295,000 KPAC Real Estate Investment Trust..................................... 7.180% 10/01/05 2,272,767
-----------
Whole Loan Mortgage-backed Securities (.3%)
155,270 Bank Of America 79-A.................................................. 8.375% 05/01/07 155,270
32,973 Bank Of America 79-B.................................................. 9.500% 01/01/09 32,973
6,170 RFC Conduit........................................................... 8.500% 04/01/02 6,145
14,413 Travelers Mortgage Service............................................ 10.000% 06/01/01 14,413
-----------
208,801
-----------
Total other mortgage-backed securities (cost: $27,244,203)............................... 27,210,326
-----------
CORPORATE DEBT SECURITIES (4.7%)
2,500,000 Franchise Finance Corp of America..................................... 7.020% 02/20/03 2,389,028
1,000,000 Security Captial Pacific.............................................. 7.500% 02/15/14 937,167
-----------
Total corporate debt securities (cost: $3,489,285)....................................... 3,326,195
-----------
Total long-term debt securities (cost: $69,799,531)...................................... 69,562,551
-----------
SHORT-TERM SECURITIES (.8%)
400,000 U.S. Treasury Bill.................................................... 5.130% 08/15/96 397,408
196,922 Temporary Investment Fund, Inc.--TempFund Portfolio, current rate 5.42%.................. 196,922
-----------
Total short-term securities (cost: $594,366)............................................. 594,330
-----------
Total investments in secrities (cost: $70,393,897) (f)................................... $70,156,881
-----------
-----------
</TABLE>
See accompanying notes to investments in securities.
41
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
Notes to Investments in Securities
(a) Securities are valued by precedures 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 June 30, 1996.
(c) Represents a debt security that pays no interest and principal during their
initial accrual periods, but accrues additional principal at specific rates.
Interest rate disclosed represents current yield based upon estimated future
cash flows.
(d) Long-term debt security sold within terms of a private placement memorandum
exempt from registration under Section 144A 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.
(e) 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 6 to the financial statements). Information concerning the
illiquid securities held at June 30, 1996 includes acquisition date and
cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- -------------------------------------------------- --------- ------------
<S> <C> <C>
Bank Mart Funding Corporation Sequential CMO
(GNMA/FHLMC)..................................... 05/27/94 $ 3,976,374
------------
------------
</TABLE>
(f) At June 30, 1996 the cost of securities for federal income tax purposes was
$70,393,897. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation..................... $ 770,453
Gross unrealized depreciation..................... (1,007,469)
------------
Net unrealized depreciation....................... $ (237,016)
------------
------------
</TABLE>
42
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES
JUNE 30, 1996
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
COMMON STOCKS (100.0%)
CAPITAL GOODS (7.5%)
Machinery (7.5%)
3,600 Alco Standard Corporation.............................. $ 162,900
8,600 Allied-Signal Inc...................................... 491,275
6,600 AMP Incorporated....................................... 264,825
4,000 Applied Materials Inc (b).............................. 122,000
8,600 Baker Hughes Incorporated.............................. 282,725
6,500 Browning-Ferris Industries, Inc........................ 188,500
3,600 Case Corporation....................................... 172,800
5,700 Caterpillar Inc........................................ 386,175
6,700 Cooper Industries...................................... 278,050
400 Dana Corporation....................................... 12,400
7,000 Deere & Company........................................ 280,000
800 Dial Corporation....................................... 22,900
5,600 Dover Corporation...................................... 258,300
3,900 Dresser Industries, Inc................................ 115,050
4,400 Eaton Corporation...................................... 257,950
6,800 Emerson Electric Co.................................... 614,550
2,600 Fluor Corporation...................................... 169,975
700 Foster Wheeler Corporation............................. 31,412
53,000 General Electric Company............................... 4,584,500
2,300 Grainger W W, Inc...................................... 178,250
4,600 Halliburton Company.................................... 255,300
3,300 Illinois Tool Works, Inc............................... 223,163
4,600 Ingersoll-Rand Company................................. 201,250
3,400 ITT Corporation (b).................................... 225,250
6,500 ITT Hartford Group..................................... 346,125
7,500 ITT Industries......................................... 188,438
13,500 Laidlaw Inc............................................ 136,687
2,950 Navistar International
Corporation (b)...................................... 29,131
600 Ogden Corporation...................................... 10,875
690 Paccar Inc............................................. 33,810
900 Rowan Companies, Inc (b)............................... 13,275
7,900 Safety-Kleen Corp...................................... 138,250
500 Teledyne, Inc.......................................... 18,063
2,400 Textron Inc............................................ 191,700
3,800 The Stanley Works...................................... 113,050
500 Trinova Corporation.................................... 16,688
3,200 Tyco International Ltd................................. 130,400
1,800 Varity Corporation (b)................................. 86,625
2,900 Western Atlas Corporation (b).......................... 168,925
10,200 Westinghouse Electric Corporation...................... 191,250
6,000 Whitman Corporation.................................... 144,750
14,800 WMX Technologies, Inc.................................. 484,700
--------------
12,222,242
--------------
CONSUMER GOODS AND SERVICES (35.6%)
Consumer Goods (19.7%)
24,200 Abbott Laboratories.................................... 1,052,700
4,600 Adolph Coors Company................................... 82,225
6,200 Alberto-Culver Company................................. 287,525
4,100 Allergan, Inc.......................................... 160,925
8,900 Alza Corporation (b)................................... 243,637
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
4,800 American Brands, Inc................................... $ 217,800
19,200 American Home Products Corporation..................... 1,154,400
8,100 Amgen Inc (b).......................................... 437,400
7,700 Anheuser-Busch Companies, Inc.......................... 577,500
2,800 Avon Products.......................................... 126,350
7,000 Baxter International Inc............................... 330,750
3,700 Becton, Dickinson and Company.......................... 296,925
3,900 Beverly Enterprises (b)................................ 46,800
1,400 Biomet Inc (b)......................................... 20,125
4,600 Boston Scientific Corporation (b)...................... 207,000
15,300 Bristol-Myers Squibb Company........................... 1,377,000
3,700 C.R. Bard, Inc......................................... 125,800
1,900 Cabletron Systems Incorporated (b)..................... 130,388
2,000 Clorox Company......................................... 177,250
79,600 Coca-Cola Company...................................... 3,890,450
3,900 Colgate-Palmolive Company.............................. 330,525
13,571 Columbia/HCA Healthcare
Corporation.......................................... 724,352
2,800 Community Psychiatric Centers (b)...................... 26,600
17,100 Eli Lilly & Company.................................... 1,111,500
13,100 Gillette Company....................................... 817,112
2,800 Harcourt General, Inc.................................. 140,000
6,200 Humana (b)............................................. 110,825
3,400 International Flavors & Fragrances, Inc................ 161,925
42,500 Johnson & Johnson...................................... 2,103,750
3,900 Mallinckrodt Group, Inc................................ 151,613
4,900 Manor Care, Inc........................................ 192,938
7,200 Medtronic Inc.......................................... 403,200
38,500 Merck & Co., Inc....................................... 2,488,063
49,000 Pepsico, Inc........................................... 1,733,375
19,300 Pfizer Inc............................................. 1,377,537
15,355 Pharmacia & Upjohn..................................... 681,378
26,500 Philip Morris Companies, Inc........................... 2,756,000
21,834 Procter & Gamble Company............................... 1,978,706
10,700 Schering-Plough Corporation............................ 671,425
11,300 Seagram Company, Ltd................................... 379,962
3,000 Service Corporation International...................... 172,500
5,700 St Jude Medical, Inc (b)............................... 190,950
9,800 Tenet Healthcare Corporation (b)....................... 209,475
2,000 Tupperware Corporation (b)............................. 84,500
4,800 Unilever N.V. (c)...................................... 696,600
4,900 United Health Care..................................... 247,450
4,700 US Healthcare, Inc..................................... 258,500
9,900 UST Inc................................................ 339,075
7,600 Warner-Lambert Company................................. 418,000
--------------
31,900,786
--------------
Consumer Services (4.8%)
4,700 CUC International, Inc (b)............................. 166,850
3,300 Deluxe Corp............................................ 117,150
3,400 RR Donnelley & Sons Company............................ 118,575
6,600 Dow Jones & Company Inc................................ 275,550
4,360 Dun & Bradstreet Corporation........................... 272,500
3,825 Eastman Chemical Company............................... 232,847
</TABLE>
See accompanying notes to investments in securities.
43
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
10,400 Eastman Kodak Company.................................. $ 808,600
4,300 Gannett Company........................................ 304,225
6,400 Harrah's Entertainment (b)............................. 180,800
6,800 Hasbro Inc............................................. 243,100
1,200 Hilton Hotels Corporation.............................. 135,000
600 John H. Harland Company................................ 14,775
600 King World Productions, Inc (b)........................ 21,825
3,000 Knight-Ridder, Inc..................................... 217,500
5,100 Marriott International Inc............................. 274,125
8,641 Mattel Inc............................................. 247,349
21,200 McDonalds Corp......................................... 991,100
3,600 McGraw-Hill Companies, Inc............................. 164,700
3,600 Meredith Corporation................................... 150,300
2,900 New York Times Company................................. 94,612
4,000 Polaroid Corporation................................... 182,500
10,600 Time Warner, Inc....................................... 416,050
3,600 Times Mirror Company................................... 156,600
1,500 Tribune Company........................................ 108,937
11,230 Viacom (b)............................................. 436,566
21,282 Walt Disney Company.................................... 1,338,106
6,200 Wendy's International, Inc............................. 115,475
--------------
7,785,717
--------------
Food (3.3%)
7,200 Albertson's Incorporated............................... 297,900
15,881 Archer-Daniels-Midland Company......................... 303,724
8,000 Campbell Soup Company.................................. 564,000
7,525 Conagra, Inc........................................... 341,447
4,400 CPC International...................................... 316,800
18,400 Darden Restaurants, Inc................................ 197,800
10,000 Fleming Companies, Inc................................. 143,750
4,800 General Mills, Inc..................................... 261,600
4,500 Giant Food Inc......................................... 161,437
10,600 H.J. Heinz Company..................................... 321,975
2,900 Hershey Foods Corporation.............................. 212,787
7,700 Kellogg Company........................................ 564,025
7,300 Kroger Company (b)..................................... 288,350
6,300 Quaker Oats Company.................................... 214,987
2,600 Ralston Purina Group................................... 166,725
14,700 Sara Lee Corporation................................... 475,912
6,000 Sysco Corporation...................................... 205,500
4,800 Winn-Dixie Stores, Incorporated........................ 169,800
3,600 Wm. Wrigley Jr. Company................................ 181,800
--------------
5,390,319
--------------
Retail (4.4%)
8,500 American Stores Company................................ 350,625
2,200 Circuit City Stores, Inc............................... 79,475
2,200 Dayton Hudson Corporation.............................. 226,875
3,700 Dillard Department Stores Inc.......................... 135,050
5,500 Federated Department Stores (b)........................ 187,688
12,000 Gap, Inc............................................... 385,500
14,524 Home Depot Inc......................................... 784,296
6,400 J.C. Penney Company, Inc............................... 336,000
14,200 K Mart Corporation (b)................................. 175,725
7,500 Limited, Inc........................................... 161,250
1,200 Longs Drug Stores Corp................................. 53,550
7,100 May Department Stores Company.......................... 310,625
3,100 Melville Corporation................................... 125,550
1,000 Mercantile Stores Company, Inc......................... 58,625
4,300 Nike Inc............................................... 441,825
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
3,100 Nordstrom, Inc......................................... $ 137,950
7,800 Price/Costco Corporation (b)........................... 168,675
11,000 Sears, Roebuck and Company............................. 534,875
1,000 Stride Rite Corporation................................ 8,250
3,800 Tandy Corporation...................................... 180,025
8,350 Toys R Us (b).......................................... 237,975
73,200 Wal-Mart Stores, Inc................................... 1,857,450
7,500 Walgreen Co............................................ 251,250
--------------
7,189,109
--------------
Consumer Cyclicals (3.4%)
1,100 Black & Decker Corporation............................. 42,487
12,000 Chrysler Corporation Holding Co........................ 744,000
6,900 Corning Inc............................................ 264,787
37,000 Ford Motor............................................. 1,197,875
23,200 General Motors Corporation............................. 1,215,100
3,700 Genuine Parts Company.................................. 169,275
6,300 Goodyear Tire & Rubber Company......................... 303,975
4,800 Interpublic Group Company.............................. 225,000
2,700 Johnson Controls....................................... 187,650
7,700 Liz Claiborne, Inc..................................... 266,612
4,300 Maytag Company......................................... 89,762
10,000 Newell Co.............................................. 306,250
400 Owens Corning.......................................... 17,200
3,000 Pep Boys............................................... 102,000
3,500 Snap-On Tools Corporation.............................. 165,813
2,200 V.F. Corporation....................................... 131,175
--------------
5,428,961
--------------
CREDIT SENSITIVE (24.7%)
Building (1.0%)
3,900 Armstrong World Industries, Inc........................ 224,738
8,400 Fleetwood Enterprises, Inc............................. 260,400
8,900 Lowe's Companies, Inc.................................. 321,512
6,900 Masco Corporation...................................... 208,725
7,900 PPG Industries, Incorporated........................... 385,125
3,100 Sherwin-Williams Company............................... 144,150
--------------
1,544,650
--------------
Finance (13.2%)
3,500 Aetna Life & Casualty Company.......................... 250,250
9,400 Ahmanson & Company H.F................................. 253,800
13,657 Allstate Corporation................................... 623,101
14,600 American Express Company............................... 651,525
6,400 American General Corporation........................... 232,800
14,780 American International Group, Inc...................... 1,457,677
13,777 Banc One Corporation................................... 468,418
5,200 Bank of Boston Corporation............................. 257,400
6,100 Bank of New York Co Inc................................ 312,625
11,304 BankAmerica Corporation................................ 856,278
3,400 Bankers Trust New York Corporation..................... 251,175
4,600 Barnett Banks of Florida, Inc.......................... 280,600
2,600 Beneficial Corporation................................. 145,925
5,900 H & R Block, Inc....................................... 192,488
4,500 Boatmens Bancshares Inc................................ 180,563
13,134 Chase Manhattan Corporation............................ 927,589
5,300 Chubb Corporation...................................... 264,338
2,000 Cigna Corporation...................................... 235,750
14,800 Citicorp............................................... 1,222,850
4,500 Comerica............................................... 200,812
7,000 Corestates Financial Corp.............................. 269,500
</TABLE>
See accompanying notes to investments in securities.
44
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
CREDIT SENSITIVE--CONTINUED
4,195 Dean Witter Discover & Co.............................. $ 240,164
5,700 Federal Home Loan Mortgage Corporation................. 487,350
34,800 Federal National Mortgage.............................. 1,165,800
3,400 Fifth Third Bancorp.................................... 183,600
6,000 First Bank Systems, Incorporated....................... 348,000
8,837 First Chicago Corporation.............................. 345,748
6,800 First Data Corp........................................ 541,450
9,295 First Union Corporation................................ 565,833
9,680 Fleet Financial Group, Incorporated.................... 421,080
2,400 General RE Corporation................................. 365,400
1,600 Golden West Financial Corporation...................... 89,600
8,650 Great Western Financial Corporation.................... 206,519
300 Green Tree Financial Corporation....................... 9,375
2,400 Household International, Inc........................... 182,400
5,400 J.P. Morgan & Company Incorporated..................... 456,975
7,000 Keycorp................................................ 271,250
1,800 Lincoln National Corporation........................... 83,250
2,800 Loews Corporation...................................... 220,850
2,200 Marsh & McLennen....................................... 212,300
6,750 MBNA Corporation....................................... 192,375
3,900 Mellon Bank Corporation................................ 222,300
5,300 Merrill Lynch & Co., Inc............................... 345,163
3,800 Morgan Stanley Group................................... 186,675
6,700 National City Corporation.............................. 235,337
8,756 Nationsbank Corp....................................... 723,464
10,600 Norwest Corporation.................................... 369,675
9,200 PNC Bank Corp.......................................... 273,700
5,300 Providian Corporation.................................. 227,237
2,500 Republic New York Corporation.......................... 155,625
7,000 Salomon Inc............................................ 308,000
3,400 St. Paul Companies, Inc................................ 181,900
6,800 Suntrust Banks, Inc.................................... 251,600
2,550 Torchmark Corporation.................................. 111,563
3,700 Transamerica Corporation............................... 299,700
4,100 U.S. Bancorp........................................... 148,113
1,500 UNUM Corporation....................................... 93,375
7,300 USF&G Corporation...................................... 119,537
2,400 U.S. Life Corporation.................................. 78,900
6,200 Wachovia Corporation................................... 271,250
2,866 Wells Fargo & Company.................................. 684,616
--------------
21,412,513
--------------
Insurance (.1%)
3,800 AON Corporation........................................ 192,850
--------------
Utilities (10.4%)
14,400 Airtouch Communications (b)............................ 406,800
4,100 American Electric Power Company, Inc................... 174,762
18,600 Ameritech.............................................. 1,104,375
50,635 AT&T Corporation....................................... 3,139,370
10,600 Baltimore Gas and Electric Company..................... 300,775
13,600 Bell Atlantic Corporation.............................. 867,000
30,900 BellSouth Corporation.................................. 1,309,388
6,500 Carolina Power & Light Company......................... 247,000
9,700 Central & Southwest Corporation........................ 281,300
5,932 Cinergy................................................ 189,824
5,500 Consolidated Edison Company of New York................ 160,875
3,200 Consolidated Natural Gas Company....................... 167,200
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
CREDIT SENSITIVE--CONTINUED
5,650 Dominion Resources, Inc................................ $ 226,000
5,300 DTE Energy Company..................................... 163,638
5,800 Duke Power Company..................................... 297,250
10,000 Edison International................................... 176,250
7,900 Enron Corp............................................. 322,913
6,900 Entergy Corporation.................................... 195,788
4,700 FPL Group, Inc......................................... 216,200
30,800 GTE Corporation........................................ 1,378,300
8,600 Houston Industries Incorporated........................ 211,775
5,200 Niagara Mohawk Power Corporation (b)................... 40,300
1,300 Northern States Power Company.......................... 64,187
13,100 Nynex Corporation...................................... 622,250
3,700 Ohio Edison Company.................................... 80,938
800 Oneok Inc.............................................. 20,000
5,100 Pacific Enterprises.................................... 151,088
10,300 Pacific Gas & Electric Company......................... 239,475
13,000 Pacific Telesis Group.................................. 438,750
12,500 Pacificorp............................................. 278,125
4,200 Peco Energy Company.................................... 109,200
2,000 Peoples Energy Corporation............................. 67,000
6,650 Public Service Enterprise Group Inc.................... 182,044
18,900 SBC Communications Inc................................. 930,825
21,400 Southern Company....................................... 526,975
6,900 Texas Utilities Company................................ 294,975
5,500 Unicom Corporation..................................... 153,312
6,900 Union Electric Company................................. 277,725
21,300 U.S. West Media Group.................................. 388,725
18,000 U.S. West, Inc (b)..................................... 573,750
--------------
16,976,427
--------------
INTERMEDIATE GOODS AND SERVICES (17.5%)
Energy (9.1%)
2,800 Amerada Hess Corporation............................... 150,150
15,500 Amoco Corporation...................................... 1,121,813
7,100 Ashland Incorporated................................... 281,337
4,700 Atlantic Richfield Company............................. 556,950
7,400 Burlington Resources, Inc.............................. 318,200
19,800 Chevron Corporation.................................... 1,168,200
5,600 Coastal Corporation.................................... 233,800
2,900 Columbia Gas System, Inc............................... 151,163
2,500 Enserch Corp........................................... 54,375
40,700 Exxon Corporation...................................... 3,535,813
1,600 Kerr-McGee Corporation................................. 97,400
12,300 Mobil Corporation...................................... 1,379,138
6,300 Noram Energy........................................... 68,513
7,700 Occidental Petroleum Corporation....................... 190,575
7,900 Panenergy Corporation.................................. 259,712
800 Pennzoil Company....................................... 37,000
10,100 Phillips Petroleum Company............................. 422,938
17,100 Royal Dutch Petroleum (c).............................. 2,629,125
300 Santa Fe Energy Resources , Inc........................ 3,563
7,400 Schlumberger, Ltd (c).................................. 623,450
4,000 Sonat Inc.............................................. 180,000
4,300 Tenneco Inc............................................ 219,837
8,000 Texaco, Inc............................................ 671,000
7,500 Unocal Corporation..................................... 253,125
5,900 USX--Marathon Group.................................... 118,738
--------------
14,725,915
--------------
</TABLE>
See accompanying notes to investments in securities.
45
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
INTERMEDIATE GOODS AND SERVICES--CONTINUED
Materials (6.7%)
2,300 Air Products and Chemicals, Inc........................ $ 132,825
4,575 Alcan Aluminium Limited................................ 139,537
5,400 Aluminum Company of America............................ 309,825
1,400 Asarco Incorporated.................................... 38,675
1,900 Avery Dennison Corp.................................... 104,262
10,700 Barrick Gold Corporation............................... 290,238
800 Bemis Company, Inc..................................... 28,000
2,900 Bethlehem Steel Corporation (b)........................ 34,438
566 Boise Cascade Corporation.............................. 20,730
4,300 Champion International Corporation..................... 179,525
3,400 Crown Cork & Seal Company, Inc......................... 153,000
950 Cyprus Amax Minerals Company........................... 21,494
7,900 Dow Chemical Company................................... 600,400
16,900 E.I. Du Pont De Nemours and Company.................... 1,337,213
10,487 Engelhard Corporation.................................. 241,201
1,600 FMC Corporation (b).................................... 104,400
31,900 Freeport-McMoran Copper................................ 1,016,813
2,200 Georgia-Pacific Corporation............................ 156,200
3,000 W.R. Grace & Co........................................ 212,625
2,600 Great Lakes Chemical Corporation....................... 161,850
2,700 Hercules Incorporated.................................. 149,175
3,700 Homestake Mining Company............................... 63,363
5,500 Inco Limited (c)....................................... 177,375
9,100 International Paper Company............................ 335,562
8,500 Kimberly-Clark Corporation............................. 656,625
5,600 Louisiana-Pacific Corporation.......................... 123,900
1,200 Mead Corporation....................................... 62,250
18,000 Monsanto Company....................................... 585,000
3,600 Morton International................................... 134,100
5,800 Nalco Chemical Company................................. 182,700
5,022 Newmont Mining Corporation............................. 247,961
1,500 Nucor Corporation...................................... 75,938
1,400 Phelps Dodge Corporation............................... 87,325
2,100 Pioneer Hi-Bred International, Inc..................... 111,038
5,100 Placer Dome Inc (c).................................... 121,763
600 Potlatch Corporation................................... 23,475
3,200 Praxair Inc............................................ 135,200
2,100 Reynolds Metals Company................................ 109,462
1,600 Rohm and Haas Company.................................. 100,400
3,000 Sigma-Aldrich.......................................... 160,500
3,010 Stone Container Corporation............................ 41,388
3,000 The Williams Company................................... 148,500
14,700 Travelers Inc.......................................... 670,688
5,150 Union Camp Corporation................................. 251,062
3,900 Union Carbide Corporation.............................. 155,025
5,640 USX--U.S. Steel Group Inc.............................. 160,035
6,000 Westvaco Corporation................................... 179,250
4,900 Weyerhaeuser Company................................... 208,250
2,400 Willamette Industries Incorporated..................... 142,800
3,300 Worthington Industries................................. 68,887
--------------
10,952,248
--------------
Transportation (1.7%)
2,200 AMR Corporation (b).................................... 200,200
4,573 Burlington Northern Santa Fe........................... 369,841
1,300 Caliber Systems, Incorporated.......................... 44,200
1,600 Conrail Corporation.................................... 106,200
1,100 Consolidated Freightways, Inc.......................... 23,237
7,400 CSX Corporation........................................ 357,050
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
INTERMEDIATE GOODS AND SERVICES--CONTINUED
3,800 Delta Air Lines, Inc................................... $ 315,400
1,900 Federal Express Corporation (b)........................ 155,800
4,700 Norfolk Southern Corporation........................... 398,325
5,400 Ryder System, Inc...................................... 151,875
1,500 Sante Fe Pacific Gold Corporation...................... 21,187
6,300 Union Pacific Corporation.............................. 440,213
9,100 U.S. Air Group, Inc (b)................................ 163,800
--------------
2,747,328
--------------
TECHNOLOGY (14.7%)
12,400 Advanced Micro Devices, Inc (b)........................ 168,950
5,500 Alltel Corp............................................ 169,125
1,000 Amdahl (b)............................................. 10,750
3,450 Andrew Corporation (b)................................. 185,437
8,800 Apple Computer Incorporated (b)........................ 184,800
2,200 Autodesk, Inc.......................................... 65,725
9,100 Automatic Data Processing Inc.......................... 351,487
5,100 Bay Networks Inc (b)................................... 131,325
10,200 Boeing Company......................................... 888,675
4,600 Ceridian Corporation (b)............................... 232,300
17,100 Cisco Systems, Inc (b)................................. 968,287
8,100 Compaq Computer Corporation (b)........................ 398,925
7,350 Computer Associates International...................... 523,688
2,400 Computer Sciences Corporation (b)...................... 179,400
600 Crane Co............................................... 24,600
5,600 Digital Equipment (b).................................. 252,000
5,600 DSC Communications (b)................................. 168,700
1,600 EG&G, Inc.............................................. 34,200
7,500 EMC Corporation (b).................................... 139,687
2,000 General Dynamics Corporation........................... 124,000
5,700 General Instrument Corporation (b)..................... 164,587
4,300 B.F. Goodrich Company.................................. 160,712
4,000 Harris Corporation..................................... 244,000
15,500 Hewlett-Packard Company................................ 1,544,187
4,300 Honeywell Inc.......................................... 234,350
25,500 Intel.................................................. 1,872,656
17,600 International Business Machines Corporation............ 1,742,400
6,219 Lockheed Martin Corporation............................ 522,396
5,000 LSI Logic Corporation (b).............................. 130,000
7,200 McDonnell Douglas Corporation.......................... 349,200
20,700 MCI Communications..................................... 530,438
5,800 Micron Technology Inc.................................. 150,075
18,600 Microsoft Corporation (b).............................. 2,234,325
14,000 Minnesota Mining and Manufacturing Company............. 966,000
18,000 Motorola............................................... 1,131,750
7,700 Northern Telecom Limited............................... 418,687
3,000 Northrop Grumman Corporation........................... 204,375
8,500 Novell, Inc (b)........................................ 117,938
20,850 Oracle Corporation (b)................................. 822,272
10,899 Pall Corporation....................................... 262,938
2,800 Perkin-Elmer Corporation............................... 135,100
4,600 Pitney Bowes, Inc...................................... 219,650
6,500 Raytheon Company....................................... 335,563
6,800 Rockwell International Corporation..................... 389,300
4,400 Scientific-Atlanta Inc................................. 68,200
6,600 Silicon Graphics Incorporated (b)...................... 158,400
12,900 Sprint Corporation..................................... 541,800
5,600 Sun Microsystems, Inc (b).............................. 329,700
</TABLE>
See accompanying notes to investments in securities.
46
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
TECHNOLOGY--CONTINUED
6,600 Tandem Computers Incorporated (b)...................... $ 81,675
19,900 Tele-Communications, Inc (b)........................... 360,687
2,600 Tellabs Incorporated (b)............................... 173,875
4,600 Texas Instruments Incorporated......................... 229,425
800 Thomas & Betts Corporation............................. 30,000
3,200 TRW Inc................................................ 287,600
12,400 Unisys Corporation (b)................................. 88,350
3,400 United Technologies Corporation........................ 391,000
5,700 Worldcom, Incorported (b).............................. 315,637
9,900 Xerox Corporation...................................... 529,650
4,400 3 Com (b).............................................. 201,300
--------------
23,872,259
--------------
Total common stocks (cost: $119,239,216).......................... 162,341,324
--------------
PREFERRED STOCKS (--%)
25 Teledyne............................................... 384
--------------
Total preferred stocks
(cost: $337).................................................. 384
--------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- --------------
<C> <S> <C>
SHORT-TERM SECURITIES (.7%)
$1,123,875 Temporary Investment Fund, Inc.-- TempFund Portfolio,
current rate 5.42%................................... $ 1,123,875
--------------
Total short-term securities
(cost: $1,123,875)............................................ 1,123,875
--------------
Total investments in securities (cost: $120,363,428) (d)..........
$163,465,583
--------------
--------------
</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 2.6% of net assets in foreign securities at June 30,
1996.
(d) At June 30, 1996 the cost of securities for federal income tax purposes was
$120,652,101. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation..................... $ 44,359,703
Gross unrealized depreciation..................... (1,546,221)
------------
Net unrealized appreciation....................... $ 42,813,482
------------
------------
</TABLE>
47
<PAGE>
CAPITAL APPRECIATION PORTFOLIO
INVESTMENTS IN SECURITIES
JUNE 30, 1996
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
COMMON STOCKS (95.1%)
CAPITAL GOODS (1.0%)
Machinery (1.0%)
46,125 Thermo Electron Corporation (b).......................................................... $ 1,919,953
--------------
CONSUMER GOODS AND SERVICES (41.5%)
Consumer Goods (22.4%)
99,400 Amgen Inc (b)............................................................................ 5,367,600
88,400 Coca-Cola Company........................................................................ 4,320,550
53,600 Genzyme Corporation (b).................................................................. 2,693,400
97,500 Merck & Co., Inc......................................................................... 6,300,938
89,600 Oxford Health Plan Incorporated (b)...................................................... 3,684,800
78,400 Pfizer Inc............................................................................... 5,595,800
71,500 Schering-Plough Corporation.............................................................. 4,486,625
106,750 St Jude Medical Inc (b).................................................................. 3,576,125
141,400 United Health Care....................................................................... 7,140,700
--------------
43,166,538
--------------
Consumer Services (4.8%)
112,000 Carnival Corporation (c)................................................................. 3,234,000
106,500 McDonalds Corp........................................................................... 4,978,875
30,000 Sterling Commerce Inc (b)................................................................ 1,113,750
--------------
9,326,625
--------------
Retail (12.5%)
231,531 Dollar General Corp...................................................................... 6,772,282
146,633 Home Depot Inc........................................................................... 7,918,182
108,200 Intimate Brands Inc...................................................................... 2,475,075
97,200 Kohl's Inc (b)........................................................................... 3,559,950
167,700 Office Depot, Inc (b).................................................................... 3,416,888
--------------
24,142,377
--------------
Food (1.8%)
99,600 Outback Steakhouse Incorporated (b)...................................................... 3,434,636
--------------
CREDIT SENSITIVE (14.3%)
Building (2.5%)
130,400 Lowe's Companies, Inc.................................................................... 4,710,700
--------------
Finance (9.0%)
157,500 Federal National Mortgage................................................................ 5,276,250
64,600 First Data Corp.......................................................................... 5,143,775
135,700 MBNA Corporation......................................................................... 3,867,450
54,700 MGIC Investment Corporation.............................................................. 3,070,038
--------------
17,357,513
--------------
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
CREDIT SENSITIVE--CONTINUED
Utilities (2.8%)
194,000 Airtouch Communications (b).............................................................. $ 5,480,500
--------------
TECHNOLOGY (38.3%)
73,400 Ceridian Corporation (b)................................................................. 3,706,700
162,600 Cisco Systems, Inc (b)................................................................... 9,207,225
134,800 Computer Associates International........................................................ 9,604,500
56,100 General Instrument Corporation (b)....................................................... 1,619,887
64,200 Intel.................................................................................... 4,714,687
57,400 LCI International Incorporated (b)....................................................... 1,800,925
210,500 MCI Communications....................................................................... 5,394,063
60,200 Microsoft Corporation (b)................................................................ 7,231,525
61,200 Motorola................................................................................. 3,847,950
195,050 Oracle Corporation (b)................................................................... 7,692,284
227,200 Paging Network Inc (b)................................................................... 5,452,800
143,800 Parametric Technology Corporation (b).................................................... 6,237,325
89,000 Synopsys Incorporated (b)................................................................ 3,537,750
160,000 360 Communications Company (b)........................................................... 3,840,000
--------------
73,887,621
--------------
Total common stocks
(cost: $136,531,159)............................................................................ 183,426,463
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ---------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (4.3%)
$5,115,000 U.S. Treasury Bills.............................................. 5.00%-5.05% 07/11/96 5,107,039
1,135,000 Stanley Works CP................................................. 5.43% 07/15/96 1,132,116
2,059,973 Temporary Investment Fund, Inc.-- TempFund Portfolio, current rate 5.42%................. 2,059,973
--------------
Total short-term securities
(cost $8,299,790)............................................................................... 8,299,128
--------------
Total investments in securities
(cost: $144,830,949) (d)........................................................................ $191,725,591
--------------
--------------
</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 1.7% of net assets in foreign securities at June 30,
1996.
(d) At June 30, 1996 the cost of securities for federal income tax purposes was
$144,845,372. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation..................... $ 48,678,376
Gross unrealized depreciation..................... (1,798,157)
------------
Net unrealized appreciation....................... $ 46,880,219
------------
------------
</TABLE>
48
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES
JUNE 30, 1996
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
------------ -------------
<C> <S> <C>
COMMON STOCKS (83.4%)
AUSTRALIA (4.1%)
Banking (.9%)
95,663 National Australia Bank......................................................... $ 884,680
190,087 Westpac Banking................................................................. 842,296
Building Materials and Components (1.1%)
648,423 Pioneer International........................................................... 1,888,271
Transportation (2.1%)
127,500 Brambles Industries............................................................. 1,774,176
106,890 BTR Nylex Ltd................................................................... 411,387
85,000 Qantas Airways Limited ADR 144A (d)............................................. 1,438,336
-------------
7,239,146
-------------
AUSTRIA (2.0%)
Electrical and Electronics (1.3%)
12,980 Bohler-Uddeholm 144A (d)........................................................ 1,005,702
10,850 Va Technologie 144A (d)......................................................... 1,328,863
Utilities--Gas and Electric (.7%)
8,400 Evn Energie-Versorung........................................................... 1,160,533
-------------
3,495,098
-------------
BELGIUM (1.8%)
Chemicals (1.8%)
2,650 Solvay.......................................................................... 1,626,169
20,000 Union Miniere (b)............................................................... 1,532,127
-------------
3,158,296
-------------
BRAZIL (1.3%)
Telecommunications (1.3%)
33,300 Telecomunicacoes Brasileiras ADR................................................ 2,318,513
-------------
CANADA (2.7%)
Banking (1.8%)
60,500 Canadian Imperial Bank of Commerce.............................................. 1,951,513
145,000 National Bank of Montreal....................................................... 1,210,439
Insurance (.7%)
65,000 London Insurance Group.......................................................... 1,361,287
Mining and Metals--Container (.2%)
39,000 Inmet (b)....................................................................... 284,157
-------------
4,807,396
-------------
CHILE (1.2%)
Financial Services (.4%)
32,000 Chile Fund...................................................................... 784,000
Utilities--Gas and Electric (.8%)
14,000 Telefonos De Chile ADR.......................................................... 1,373,750
-------------
2,157,750
-------------
CZECH REPUBLIC (2.8%)
Banking (.7%)
48,000 Komercni Banka 144A (d)......................................................... 1,303,445
Energy Services (1.0%)
44,810 Ceske Energeticke (b)........................................................... 1,782,301
<CAPTION>
MARKET
SHARES VALUE(A)
------------ -------------
<C> <S> <C>
CZECH REPUBLIC--CONTINUED
Telecommunications (1.1%)
15,500 SPT Telecom (b)................................................................. $ 1,891,746
-------------
4,977,492
-------------
FINLAND (1.7%)
Banking (.5%)
400,000 Merita Ltd A (b)................................................................ 835,145
Wholesale and International Trade (1.2%)
85,000 Amer Group Ltd.................................................................. 1,427,065
107,500 Metsa-Serla..................................................................... 763,576
-------------
3,025,786
-------------
FRANCE (8.0%)
Banking (1.2%)
61,300 Banque Nationale De Paris ADR 144A (d).......................................... 2,151,655
Electrical and Electronics (1.0%)
19,000 Alcatel Alsthom................................................................. 1,657,120
Energy Sources (1.4%)
32,562 Societe National Elf Aquitaine.................................................. 2,394,670
Health and Personal Care (1.6%)
105,500 Rhone-Poulenc................................................................... 2,772,708
Insurance (1.3%)
40,485 Axa............................................................................. 2,214,526
Mining and Metal (.5%)
2,000 Pechiney........................................................................ 89,315
40,214 Pechiney ADR.................................................................... 824,387
Multi-Industry (.1%)
2,107 Marine Wendel................................................................... 174,352
Transportation (.9%)
64,000 Regie Des Usines Renault........................................................ 1,652,186
-------------
13,930,919
-------------
GERMANY (2.7%)
Banking (1.3%)
48,750 Deutsche Bank................................................................... 2,309,168
Chemicals (1.4%)
69,500 Bayer........................................................................... 2,445,063
-------------
4,754,231
-------------
HONG KONG (6.2%)
Banking (1.1%)
125,714 Hong Kong and Shanghai Banking.................................................. 1,900,203
Food and Household Products (.5%)
3,201,000 Cafe de Coral................................................................... 889,108
Multi-Industry (1.8%)
221,000 Hutchison Whampoa Ltd........................................................... 1,390,439
230,739 Jardine Matheson Holdings....................................................... 1,695,932
Transportation (1.7%)
190,000 Swire Pacific Ltd............................................................... 1,626,185
448,568 Jardine Strategic Holdings...................................................... 1,435,418
Utilities (1.1%)
625,000 Hong Kong Electric Holdings..................................................... 1,905,560
-------------
10,842,845
-------------
</TABLE>
See accompanying notes to investments in securities.
49
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
------------ -------------
<C> <S> <C>
INDIA (.5%)
Financial Services (.5%)
469,435 India Fund...................................................................... $ 900,820
-------------
INDONESIA (.9%)
Financial Services (.2%)
315,000 JF Indonesia Fund (b)........................................................... 396,776
Forest Products and Paper (.7%)
737,000 P.T. Japfa Comfeed.............................................................. 427,490
777,185 P.T. Pabrik Kertas Tjiwi Kimia.................................................. 793,071
-------------
1,617,337
-------------
ITALY (1.7%)
Telecommunications (1.7%)
1,105,000 Stet di Risp.................................................................... 2,901,348
-------------
JAPAN (4.2%)
Building Materials and Components (.6%)
73,000 Daito Trust Construction........................................................ 1,091,524
Electrical and Electronics (3.1%)
227,000 Hitachi Ltd..................................................................... 2,111,022
88,000 Hitachi Koki.................................................................... 866,509
37,000 Sony Corporation................................................................ 2,432,224
Utilities--Gas and Electric (.5%)
68,000 Kyudenko........................................................................ 911,366
-------------
7,412,645
-------------
KOREA (.5%)
Financial Services (.5%)
19 Korea International Trust (b)................................................... 883,500
-------------
MEXICO (.3%)
Chemicals (.3%)
252,000 Vitro........................................................................... 581,813
-------------
NETHERLANDS (3.9%)
Broadcasting, Advertising and Publishing (1.4%)
84,688 International Nederlanden Group................................................. 2,525,281
Building Materials and Components (.3%)
16,520 European Vinyls................................................................. 512,930
Insurance (1.3%)
47,454 Aegon........................................................................... 2,185,083
Merchandising (.9%)
18,591 Koninklijke Bijenkorf Beheer.................................................... 1,570,510
-------------
6,793,804
-------------
NEW ZEALAND (2.4%)
Forest Products and Paper (1.1%)
839,000 Carter Holt Harvey.............................................................. 1,913,987
Wholesale and International Trade (1.3%)
2,341,185 Brierley Investments............................................................ 2,298,423
-------------
4,212,410
-------------
NORWAY (2.4%)
Energy Sources (.8%)
98,000 Saga Petroleum.................................................................. 1,440,659
Health and Personal Care (1.0%)
77,000 Hafslund Nycomed................................................................ 551,157
77,000 Nycomed ASA A Shares (b)........................................................ 1,103,931
Mining and Metals (.6%)
78,000 Elkem........................................................................... 1,074,606
-------------
4,170,353
-------------
<CAPTION>
MARKET
SHARES VALUE(A)
------------ -------------
<C> <S> <C>
PHILIPPINES (1.1%)
Telecommunications (1.1%)
33,500 Philippine Long Distance Telephone Company ADR.................................. $ 1,947,188
-------------
PORTUGAL (1.0%)
Banking (.5%)
62,000 Banco Portugues de Investimento................................................. 785,411
Financial Services (.5%)
9,000 Capital Portugal Fund (b)....................................................... 887,393
-------------
1,672,804
-------------
SINGAPORE (.6%)
Financial Services (.1%)
18,000 Singapore Fund.................................................................. 234,000
Transportation (.5%)
78,000 Singapore International Airline................................................. 823,413
-------------
1,057,413
-------------
SPAIN (8.8%)
Banking (3.7%)
108,000 Argentaria Bancaria ADR......................................................... 2,376,000
11,450 Banco de Andalucia.............................................................. 1,589,646
61,500 Banco Bilbao Vizcaya............................................................ 2,489,531
Energy Sources (1.1%)
57,000 Repsol.......................................................................... 1,980,604
Telecommunications (1.6%)
150,000 Telefonica de Espana............................................................ 2,761,076
Utilities--Gas and Electric (2.4%)
250,000 Iberdrola....................................................................... 2,564,135
27,500 Empresa. Nacional de Electricidad............................................... 1,713,778
-------------
15,474,770
-------------
SWEDEN (6.8%)
Banking (.7%)
58,500 Stadshypotek 144A (d)........................................................... 1,304,805
Business and Public Service (1.4%)
99,500 Nackebro Fastighets............................................................. 127,009
114,500 Esselte......................................................................... 2,312,269
Food and Household Products (.2%)
97,500 Swedish Match (b)............................................................... 302,691
Forest Products and Paper (.9%)
122,000 Stora Kopparbergs............................................................... 1,608,777
Health and Personal Care (2.3%)
46,500 Astra........................................................................... 2,025,251
95,500 Svenska Handelsbanken........................................................... 1,993,339
Transportation (1.3%)
97,500 Volvo........................................................................... 2,218,756
-------------
11,892,897
-------------
SWITZERLAND (2.9%)
Electrical and Electronics (1.2%)
1,730 BBC Brown Boveri................................................................ 2,139,623
Health and Personal Care (1.3%)
1,660 Ares-Serono..................................................................... 1,458,885
370 Societe Generale................................................................ 885,358
Insurance (.4%)
2,400 Zuerich Versicherung............................................................ 653,862
-------------
5,137,728
-------------
</TABLE>
See accompanying notes to investments in securities.
50
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
------------ -------------
<C> <S> <C>
THAILAND (1.1%)
Financial Services (1.1%)
81,562 Thai Fund....................................................................... $ 1,926,901
-------------
TURKEY (.7%)
Financial Services (.7%)
89,000 Turkish Growth Fund (b)......................................................... 1,168,124
-------------
UNITED KINGDOM (8.6%)
Banking (.8%)
118,943 Barclays Bank................................................................... 1,428,610
Building Materials and Components (1.2%)
435,000 BICC.L.......................................................................... 2,095,301
Electrical and Electronics (.5%)
82,000 Waste Management International (b).............................................. 912,250
Energy Services (2.0%)
592,100 British Gas..................................................................... 1,656,010
168,500 Hyder........................................................................... 1,869,363
Food and Household Products (2.3%)
2,717,536 Albert Fisher Group............................................................. 1,984,580
732,186 Hillsdown Holdings.............................................................. 1,979,548
Merchandising (.8%)
191,600 Kwik Save Group................................................................. 1,348,619
Utilities--Gas and Electric (1.0%)
208,775 National Power.................................................................. 1,686,853
-------------
14,961,134
-------------
<CAPTION>
MARKET
SHARES VALUE(A)
------------ -------------
<C> <S> <C>
VENEZUELA (.5%)
Energy Services (.5%)
1,097,192 Electricidad Caracas............................................................ $ 912,124
-------------
Total common stocks
(cost: $124,906,919)....................................................................... 146,332,586
-------------
PREFERRED STOCKS AND OTHER (3.0%)
ARGENTINA (1.0%)
Multi-Industry (1.0%)
30,665 Compania de Inversiones en Telecommunications convertible preferred--7.0% (c)... 1,824,568
-------------
GERMANY (.8%)
Energy Services (.8%)
4,800 Veba Warrants (expiring 4/6/98) (b)............................................. 1,362,293
-------------
MEXICO (1.1%)
Financial Services (1.1%)
53,610 Nacional Financiera ADR--11.25%................................................. 1,849,545
-------------
UNITED KINGDOM (.1%)
Energy Services (.1%)
137,700 Hyder preferred................................................................. 208,075
-------------
Total preferred stocks and other
(cost: $4,024,557)......................................................................... 5,244,481
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (2.4%)
HONG KONG (.8%)
Finance (.8%)
$ 1,680,000 PIV Investment Finance.......................................... 4.50% 12/01/00 1,411,200
-------------
SWITZERLAND (1.0%)
Finance (1.0%)
1,235,000 CS Holdings Finance Convertible Bonds........................... 4.875% 11/19/02 1,790,750
-------------
UNITED STATES (.6%)
U.S. Government (.6%)
1,060,000 U.S. Treasury Note.............................................. 5.125% 04/30/98 1,088,319
-------------
Total long-term debt securities (cost: $4,160,546)................................. 4,290,269
-------------
SHORT-TERM SECURITIES (10.6%)
200,000 Federal Home Loan Bank.......................................... 5.240% 08/07/96 1,989,229
2,000,000 Federal Home Loan Mortgage Corporation.......................... 5.240% 08/16/96 1,986,609
1,560,000 Federal National Mortgage Association........................... 5.200% 08/23/96 1,548,057
4,020,000 Federal National Mortgage Association........................... 5.250% 07/15/96 4,011,793
2,000,000 Federal National Mortgage Association........................... 5.240% 08/12/96 1,987,773
1,505,000 Federal National Mortgage Association........................... 5.280% 07/18/96 1,501,248
3,785,000 Prime Value Fund, Inc.--Cash Investment Fund, current rate 5.040%.................. 5,576,000
-------------
Total short-term securities (cost: $18,600,708).................................... 18,600,708
-------------
Total investments in securities (cost: $151,692,730) (e)........................... $ 174,468,044
-------------
-------------
</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) 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.
51
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
Notes to Investments in Securities--continued
(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 6 to the financial statements). Information concerning the
illiquid securities held at June 30, 1996 includes acquisition date and
cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- -------------------------------------------------- --------- ------------
<S> <C> <C>
Qantas Airways Limited ADR 144A................... Various $ 1,350,928
Bohler-Uddeholm 144A.............................. Various 813,254
Va Technologie 144A............................... Various 1,016,589
Komercni Banka 144A............................... Various 1,270,428
Banque Nationale De Paris ADR 144A................ Various 2,720,363
Stadshypotek 144A................................. Various 531,940
------------
$ 7,703,502
------------
------------
</TABLE>
(e) At June 30, 1996 the cost of securities for federal income tax purposes was
$153,655,767. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation..................... $ 27,325,907
Gross unrealized depreciation..................... (6,513,630)
------------
Net unrealized appreciation....................... $ 20,812,877
------------
------------
</TABLE>
52
<PAGE>
SMALL COMPANY PORTFOLIO
INVESTMENTS IN SECURITIES
JUNE 30, 1996
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
COMMON STOCKS (81.3%)
CAPITAL GOODS (10.1%)
Machinery (10.1%)
50,700 AES China Generating Co Ltd (b)(c)................................................... $ 535,519
61,650 Blount International Incorporated.................................................... 1,941,975
73,900 Kaydon Corporation................................................................... 3,177,700
52,600 Millipore Corporation................................................................ 2,202,625
72,700 MSC Industrial Direct Co (b)......................................................... 2,344,575
95,542 United Waste Systems, Inc (b)........................................................ 3,081,229
--------------
13,283,623
--------------
CONSUMER GOODS AND SERVICES (35.9%)
Consumer Goods (5.5%)
67,300 Idexx Laboratories Inc (b)........................................................... 2,641,525
78,400 Medpartners (b)...................................................................... 1,636,600
43,234 Occusystems, Incorporated (b)........................................................ 1,615,871
55,833 Sunrise Assisted Living Incorporated (b)............................................. 1,339,992
--------------
7,233,988
--------------
Consumer Services (15.6%)
43,800 Boston Chicken Incorporated (b)...................................................... 1,423,500
50,600 Carmike Cinemas Inc (b).............................................................. 1,366,200
69,459 CUC International Inc (b)............................................................ 2,465,794
40,334 Extended Stay America (b)............................................................ 1,270,521
111,800 Gartner Group Incorporated (b)....................................................... 4,094,675
58,700 GTECH Holdings Corporation (b)....................................................... 1,738,987
51,700 Lone Star Steakhouse & Saloon, Inc (b)............................................... 1,951,675
44,902 Manpower............................................................................. 1,762,404
68,199 Red Roof Inns Incorporated (b)....................................................... 963,311
44,200 Sola International Inc (b)........................................................... 1,270,750
43,199 Sun International Hotels Ltd (b)..................................................... 2,095,152
--------------
20,402,969
--------------
Retail (10.3%)
104,200 Advanced Lighting Technologies, Incorporated (b)..................................... 1,823,500
8,100 Amerisource Health Corporation (b)................................................... 269,325
71,120 Borders Group Incorporated (b)....................................................... 2,293,620
111,000 Casey's General Stores Inc........................................................... 2,206,125
46,500 Eastbay Incorporated (b)............................................................. 697,500
60,200 Friedman's (b)....................................................................... 1,535,100
63,600 Global Directmail Corporation (b).................................................... 2,512,200
23,400 Kohl's Inc (b)....................................................................... 857,025
39,000 Orchard Supply Hardware (b).......................................................... 1,174,875
1,500 West Marine Incorporated (b)......................................................... 107,250
--------------
13,476,520
--------------
Consumer Cyclicals (4.5%)
29,900 Stant Corporation.................................................................... 343,850
102,300 Tommy Hilfiger Corporation (b)....................................................... 5,485,838
--------------
5,829,688
--------------
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
CREDIT SENSITIVE (9.5%)
Finance (7.3%)
72,800 Amerin (b)........................................................................... $ 1,947,400
26,500 MGIC Investment Corporation.......................................................... 1,487,313
35,900 Partnerre Ltd (c).................................................................... 1,072,512
99,000 T. Rowe Price Associates............................................................. 3,044,250
106,000 Roosevelt Financial Group, Inc....................................................... 2,040,500
--------------
9,591,975
--------------
Utilities (2.2%)
100,500 Panamsat Corporation (b)............................................................. 2,914,500
--------------
INTERMEDIATE GOODS AND SERVICES (7.0%)
Materials (3.0%)
29,126 Cambrex Corporation.................................................................. 1,489,067
111,300 Citation Corporation (b)............................................................. 1,335,600
44,370 McWhorter Technology Inc (b)......................................................... 787,567
6,000 Valspar Corporation.................................................................. 276,000
--------------
3,888,234
--------------
Transportation (4.0%)
26,500 Eagle USA Airfreight, Inc (b)........................................................ 980,500
61,900 Fritz Companies (b).................................................................. 1,996,275
77,000 Landstar System, Inc (b)............................................................. 2,233,000
--------------
5,209,775
--------------
TECHNOLOGY (18.8%)
48,300 Acxiom Corporation (b)............................................................... 1,648,238
19,300 Adtran Incorporated (b).............................................................. 1,367,888
41,075 Ansys Incorporated (b)............................................................... 539,096
48,100 Bisys Group Inc (b).................................................................. 1,815,775
24,500 C-Cube Microsystems Incorporated (b)................................................. 808,500
10,800 Cascade Communications Inc (b)....................................................... 734,400
12,600 Check Point Software Technologies Ltd (b)(c)......................................... 176,400
38,200 CKS Group Incorporated (b)........................................................... 1,231,950
97,700 Computron Software (b)............................................................... 476,287
123,702 Danka Business Systems (c)........................................................... 3,618,283
2,100 Dassault Systems (b)(c).............................................................. 48,300
109,400 Data Translation Incorporated (b).................................................... 1,791,425
20,732 Datastream Systems, Incorporated (b)................................................. 730,803
60,500 DSC Communications (b)............................................................... 1,822,563
27,680 Fore Systems Inc (b)................................................................. 999,940
38,100 Integrated Systems (b)............................................................... 1,526,381
33,200 J Ray McDermott Holdings Incorporated (b)............................................ 830,000
14,900 Macromedia Incorporated (b).......................................................... 325,937
96,800 Mercury Interactive Corp (b)......................................................... 1,331,000
17,600 Objective Systems Integrator (b)..................................................... 642,400
11,200 Sapient Corporation (b).............................................................. 473,200
37,200 Telephone and Data Systems, Inc...................................................... 1,674,000
--------------
24,612,766
--------------
Total common stocks
(cost: $86,843,287)......................................................................... 106,444,038
--------------
</TABLE>
See accompanying notes to investments in securities.
53
<PAGE>
SMALL COMPANY PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- --------------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (19.0%)
$ 935,000 U.S. Treasury Bill............................................... 5.05% 07/11/96 $ 933,545
3,280,000 U.S. Treasury Bills.............................................. 5.12%-5.13% 08/15/96 3,258,746
1,300,000 U.S. Treasury Bills.............................................. 5.19%-5.24% 09/19/96 1,284,834
2,005,000 American Home Products CP (d).................................... 5.46% 07/16/96 1,999,606
2,000,000 AT&T Corporation CP.............................................. 5.38% 07/09/96 1,996,712
2,910,000 Baltimore Gas & Electric CP...................................... 5.46% 07/24/96 2,898,693
1,000,000 Idaho Power Company CP........................................... 5.45% 07/15/96 997,459
1,755,000 Kimberly Clark CP................................................ 5.47% 07/29/96 1,746,885
2,005,000 Monsanto Company CP (d).......................................... 5.43% 07/12/96 2,000,805
3,015,000 PHH Corporation CP............................................... 5.44% 07/23/96 3,003,736
4,746,558 Temporary Investment Fund, Inc.--TempFund Portfolio, current rate 5.42%................. 4,746,558
--------------
Total short-term securities (cost: $24,872,882)......................................... 24,867,579
--------------
Total investments in securities (cost: $111,716,169) (e)................................ $ 131,311,617
--------------
--------------
</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 3.3% of net assets in foreign securities at June 30,
1996.
(d) 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." (See note 6 to the financial statements).
Information concerning the illiquid securities held at June 30, 1996, which
includes acquisition date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- -------------------------------------------------- --------- ------------
<S> <C> <C>
American Home Products............................ 06/13/96 $ 2,000,224
Monsanto Company.................................. 06/13/96 2,001,438
------------
$ 4,001,662
------------
------------
</TABLE>
(e) At June 30, 1996, the cost of securities for federal income tax purposes
was $111,735,947. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation..................... $ 22,840,543
Gross unrealized depreciation..................... (3,264,873)
------------
Net unrealized appreciation....................... $ 19,575,670
------------
------------
</TABLE>
54
<PAGE>
MATURING GOVERNMENT BOND 1998 PORTFOLIO
INVESTMENTS IN SECURITIES
JUNE 30, 1996
(UNAUDITED)
(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 (98.4%)
$ 266,000 Federal National Mortgage Association Strip (b).................. 7.065% 05/22/98 $ 236,413
356,000 Federal National Mortgage Association Strip (b).................. 7.110% 11/22/98 305,864
350,000 Federal National Mortgage Association Strip (b).................. 7.050% 05/22/99 290,409
615,000 Federal Home Loan Bank Strip (b)................................. 6.730% 08/25/98 537,528
590,000 Financial Corporation Strip (b).................................. 6.620% 05/30/99 488,732
500,000 Guaranteed Trust Certificates (b)................................ 6.570% 11/15/98 430,949
211,000 Guaranteed Trust Certificates (b)................................ 7.075% 11/15/98 181,861
900,000 Tennessee Valley Authority (b)................................... 6.720% 10/15/98 780,101
1,000,215 Treasury Receipt (b)............................................. 6.610% 05/15/99 833,758
1,045,000 U.S. Treasury Strip (b).......................................... 6.505% 11/15/98 903,464
120,000 U.S. Treasury Strip (b).......................................... 6.290% 11/15/98 103,723
----------
Total long-term debt securities (cost: $5,062,366).................................. 5,092,802
----------
SHORT-TERM SECURITIES (.8%)
40,383 Trust for Federal Securities--Federal Trust Fund, current rate 5.32%................ 40,383
----------
Total short-term securities (cost: $40,383)......................................... 40,383
----------
Total investments in securities (cost: $5,102,749) (c).............................. $5,133,185
----------
----------
</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 June 30, 1996 the cost of securities for federal income tax purposes was
$5,102,749. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation..................... $ 30,436
Gross unrealized depreciation..................... --
---------
Net unrealized appreciation....................... $ 30,436
---------
---------
</TABLE>
55
<PAGE>
MATURING GOVERNMENT BOND 2002 PORTFOLIO
INVESTMENTS IN SECURITIES
JUNE 30, 1996
(UNAUDITED)
(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 (96.0%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (96.0%)
$ 525,000 Federal National Mortgage Association Strip (b).................. 7.600% 02/01/02 $ 361,514
500,000 Financial Corporation Strip (b).................................. 7.400% 06/27/02 334,040
1,000,000 Government Trust Certificates (b)................................ 7.300% 05/15/02 676,829
1,150,000 Tennessee Valley Authority Strips (b)............................ 7.400% 04/15/03 728,041
1,003,750 Treasury Receipt (b)............................................. 7.100% 08/15/02 669,591
760,000 U.S. Treasury Strip (b).......................................... 6.970% 08/15/02 510,955
----------
Total long-term debt securities (cost: $3,211,092).................................. 3,280,970
----------
SHORT-TERM SECURITIES (2.1%)
71,808 Trust for Federal Securities--Federal Trust Fund, current rate 5.32%................ 71,807
----------
Total short-term securities (cost: $71,807)......................................... 71,807
----------
Total investments in securities (cost: $3,282,899) (c).............................. $3,352,777
----------
----------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securites 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 June 30, 1996 the cost of securities for federal income tax purposes was
$3,282,899. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation..................... $ 69,878
Gross unrealized depreciation..................... --
---------
Net unrealized appreciation....................... $ 69,878
---------
---------
</TABLE>
56
<PAGE>
MATURING GOVERNMENT BOND 2006 PORTFOLIO
INVESTMENTS IN SECURITIES
JUNE 30, 1996
(UNAUDITED)
(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 (95.3%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (95.3%)
$ 810,000 Federal National Mortgage Association Strip (b).................. 7.620% 08/01/05 $ 428,570
921,000 Financial Corporation Strip (b).................................. 7.350% 09/07/07 412,303
553,000 Government Trust Certificates (b)................................ 7.440% 11/15/05 288,876
1,000,000 Resolution Funding Corporation Strip (b)......................... 7.460% 07/15/07 465,089
1,000,020 Treasury Receipt (b)............................................. 7.460% 02/15/07 477,218
850,000 U.S. Treasury Strip (b).......................................... 7.355% 11/15/06 420,571
----------
Total long-term debt securities (cost: $2,406,349).................................. 2,492,627
----------
SHORT-TERM SECURITIES (2.5%)
66,022 Trust for Federal Securities--Federal Trust Fund, current rate 5.32%................ 66,022
----------
Total short-term securities (cost: $66,022)......................................... 66,022
----------
Total investments in securities (cost: $2,472,371) (c).............................. $2,558,649
----------
----------
</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 June 30, 1996 the cost of securities for federal income tax purposes was
$2,472,371. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation..................... $ 86,278
Gross unrealized depreciation..................... --
---------
Net unrealized appreciation....................... $ 86,278
---------
---------
</TABLE>
57
<PAGE>
MATURING GOVERNMENT BOND 2010 PORTFOLIO
INVESTMENTS IN SECURITIES
JUNE 30, 1996
(UNAUDITED)
(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 (92.4%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (92.4%)
$ 500,000 Federal National Mortgage Association Strip (b).................. 7.700% 02/12/10 $ 186,744
500,000 Financial Corporation Strip (b).................................. 7.700% 06/06/11 166,000
945,000 Financial Corporation Strip (b).................................. 7.920% 08/08/11 309,458
132,000 Guaranteed Trust Certificates (b)................................ 7.660% 05/15/10 48,886
515,000 State of Israel, Zero Coupon (b)................................. 8.265% 03/15/10 194,984
350,000 Resolution Funding Corporation (b)............................... 7.590% 04/15/11 122,661
1,075,000 U.S. Treasury Strip (b).......................................... 7.490% 08/15/11 374,249
700,000 U.S. Treasury Strip (b).......................................... 7.045% 11/15/09 276,990
----------
Total long-term debt securities (cost: $1,666,995).................................... 1,679,972
----------
SHORT-TERM SECURITIES (5.1%)
53,611 Trust for Federal Securities--Federal Trust Fund, current rate 5.32%.................. 53,611
40,000 U.S. Treasury Bill............................................... 5.190% 09/19/96 39,533
----------
Total short-term securities (cost: $93,156)........................................... 93,144
----------
Total investments in securities (cost: $1,760,151) (c)................................ $1,773,116
----------
----------
</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 June 30, 1996 the cost of securities for federal income tax purposes was
$1,760,151. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation..................... $ 63,799
Gross unrealized depreciation..................... (50,834)
---------
Net unrealized appreciation....................... $ 12,965
---------
---------
</TABLE>
58
<PAGE>
VALUE STOCK PORTFOLIO
INVESTMENTS IN SECURITIES
JUNE 30, 1996
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- -------------
<C> <S> <C>
COMMON STOCKS (91.8%)
CAPITAL GOODS (11.8%)
Machinery (11.8%)
32,300 ITT Hartford Group.................................................................... $ 1,719,975
71,001 ITT Industries........................................................................ 1,783,900
49,600 Parker Hannifin Corporation........................................................... 2,101,800
56,599 United Dominion Industries............................................................ 1,301,777
-------------
6,907,452
-------------
CONSUMER GOODS AND SERVICES (24.1%)
Consumer Goods (2.1%)
24,500 Harcourt General, Inc................................................................. 1,225,000
-------------
Consumer Services (3.7%)
50,900 Bowne & Company, Incorporated......................................................... 1,049,813
15,700 Knight-Ridder, Inc.................................................................... 1,138,250
-------------
2,188,063
-------------
Food (1.9%)
28,200 Kroger Company (b).................................................................... 1,113,900
-------------
Retail (11.8%)
40,899 American Stores Company............................................................... 1,687,084
80,400 Federated Department Stores (b)....................................................... 2,743,650
61,700 Melville Corporation.................................................................. 2,498,850
-------------
6,929,584
-------------
Consumer Cyclicals (4.6%)
44,800 Ford Motor............................................................................ 1,450,400
28,500 Owens Corning......................................................................... 1,225,500
-------------
2,675,900
-------------
CREDIT SENSITIVE ( 19.2%)
Finance (15.8%)
27,300 American Express Company.............................................................. 1,218,263
25,099 Beneficial Corporation................................................................ 1,408,681
61,768 Everest Reinsurance Holdings, Incorporated............................................ 1,598,247
40,400 First Chicago Corporation............................................................. 1,580,650
55,800 PNC Bank Corp......................................................................... 1,660,050
63,200 TIG Holdings Inc...................................................................... 1,832,800
-------------
9,298,691
-------------
Utilities (3.4%)
68,100 Central & Southwest Corporation....................................................... 1,974,900
-------------
INTERMEDIATE GOODS AND SERVICES (29.2%)
Energy (18.6%)
34,200 Amerada Hess Corporation.............................................................. 1,833,975
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- -------------
<C> <S> <C>
INTERMEDIATE GOODS AND SERVICES--CONTINUED
46,608 Columbia Gas System, Inc.............................................................. $ 2,429,442
84,776 El Paso Natural Gas Company........................................................... 3,263,876
44,600 Unocal Corporation.................................................................... 1,505,250
33,700 USX--Marathon Group................................................................... 678,213
55,700 YPF Sociedad Anonima (c).............................................................. 1,253,250
-------------
10,964,006
-------------
Materials (6.6%)
44,500 Century Aluminum Company (b).......................................................... 700,875
24,900 Citation Corporation (b).............................................................. 298,800
4,900 Cytec Industries Inc (b).............................................................. 418,950
9,335 Fort Howard Corporation (b)........................................................... 185,533
17,738 Kimberly-Clark Corporation............................................................ 1,370,260
76,999 Sterling Chemicals (b)................................................................ 895,113
-------------
3,869,531
-------------
Transportation (4.0%)
15,400 Burlington Northern Santa Fe.......................................................... 1,245,475
41,300 Teekay Shipping Corporation (c)....................................................... 1,089,287
-------------
2,334,762
-------------
TECHNOLOGY (7.5%)
15,200 International Business Machines Corporation........................................... 1,504,800
64,600 Rohr Incorporated (b)................................................................. 1,348,525
28,800 Xerox Corporation..................................................................... 1,540,800
-------------
4,394,125
-------------
Total common stocks
(cost: $48,968,687).......................................................................... 53,875,914
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ---------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (5.1%)
$1,183,322 Trust for Federal Securities--Federal Trust Fund, current rate 5.32%.................. 1,183,322
1,660,000 U.S. Treasury Bills 5.10%-5.18% 08/15/96.............................................. 1,649,243
150,000 Toys R Us, Inc. CP 5.40% 07/08/96..................................................... 149,776
-------------
Total short-term securities
(cost: $2,982,478)........................................................................... 2,982,341
-------------
Total investments in securities
(cost: $51,951,165) (d)...................................................................... $ 56,858,255
-------------
-------------
</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 4.0% of net assets in foreign securities as of June 30,
1996.
(d) At June 30, 1996 the cost of securities for federal income tax purposes was
$51,951,165. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation..................... $ 5,139,200
Gross unrealized depreciation..................... (232,110)
-----------
Net unrealized appreciation....................... $ 4,907,090
-----------
-----------
</TABLE>
59
<PAGE>
MIMLIC SERIES FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1996
(UNAUDITED)
<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: $184,042,650;
$109,965,745; $42,884,492;
$343,308,435; $70,393,897;
$120,363,428; $144,830,949;
$151,692,730; $111,716,169;
$5,102,749; $3,282,899;
$2,472,371; $1,760,151 and
$51,951,165, respectively)...... $ 230,105,085 $ 107,623,269 $ 42,884,492 $ 374,460,938
Cash in bank on demand deposit..... 4,215 -- 921 --
Receivable for Fund shares sold.... 147,721 79,759 255,713 433,732
Receivable for investment
securities sold................. 1,233,413 1,039,460 -- 6,564,624
Dividends and accrued interest
receivable...................... 307,116 1,428,719 6,718 2,137,650
Receivable for refundable foreign
income taxes withheld........... -- -- -- --
-------------- ------------- ------------- -------------
Total assets................. 231,797,550 110,171,207 43,147,844 383,596,944
-------------- ------------- ------------- -------------
LIABILITIES
Payable to Minnesota Mutual........ 100,559 46,763 21,872 168,322
Bank overdraft..................... -- 145,630 -- 281,712
Dividends payable to
shareholders.................... -- -- 11,164 --
Payable for Fund shares
repurchased..................... 58,297 46,365 111,272 88,349
Payable for investment securities
purchased....................... 3,453,402 30,420 -- 2,585,812
-------------- ------------- ------------- -------------
Total liabilities............ 3,612,258 269,178 144,308 3,124,195
-------------- ------------- ------------- -------------
Net assets applicable to
outstanding capital stock....... $ 228,185,292 $ 109,902,029 $ 43,003,536 $ 380,472,749
-------------- ------------- ------------- -------------
-------------- ------------- ------------- -------------
Represented by:
Capital stock--authorized
10,000,000,000 shares of $.01
par value; outstanding;
103,016,022; 90,192,834;
43,003,536; 216,881,681;
62,594,684; 74,694,176;
82,603,475; 121,287,078;
77,531,649; 4,978,600;
3,249,967; 2,415,027;
1,677,641 and 39,904,627
shares, respectively.......... $ 1,030,160 $ 901,928 $ 430,035 $ 2,168,817
Additional paid-in capital..... 170,168,510 107,716,432 42,573,501 320,815,256
Undistributed net investment
income (loss)................. 849,894 3,247,716 -- 5,219,574
Accumulated net realized gains
(losses) from investments and
foreign currency
transactions.................. 10,074,293 378,429 -- 21,116,599
Unrealized appreciation
(depreciation) of investments
and translation of assets and
liabilities in foreign
currencies.................... 46,062,435 (2,342,476) -- 31,152,503
-------------- ------------- ------------- -------------
Total--representing net
assets applicable to
outstanding capital stock... $ 228,185,292 $ 109,902,029 $ 43,003,536 $ 380,472,749
-------------- ------------- ------------- -------------
-------------- ------------- ------------- -------------
Net asset value per share of
outstanding capital stock....... $ 2.215 $ 1.219 $ 1.000 $ 1.754
-------------- ------------- ------------- -------------
-------------- ------------- ------------- -------------
</TABLE>
See accompanying notes to financial statements.
60
<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: $184,042,650;
$109,965,745; $42,884,492;
$343,308,435; $70,393,897;
$120,363,428; $144,830,949;
$151,692,730; $111,716,169;
$5,102,749; $3,282,899;
$2,472,371; $1,760,151 and
$51,951,165, respectively)........ $ 70,156,881 $163,465,583 $191,725,591 $174,468,044 $131,311,617
Cash in bank on demand deposit..... -- 7,602 19,330 25,600 20,182
Receivable for Fund shares sold.... 30,283 352,828 185,069 157,742 208,735
Receivable for investment
securities sold................... 13,821 480,688 1,009,781 -- 659,244
Dividends and accrued interest
receivable........................ 586,011 242,055 94,614 821,510 57,313
Receivable for refundable foreign
income taxes withheld............. -- -- -- 205,229 --
------------- ------------ ------------- ------------- ------------
Total assets................. 70,786,996 164,548,756 193,034,385 175,678,125 132,257,091
------------- ------------ ------------- ------------- ------------
LIABILITIES
Payable to Minnesota Mutual........ 35,442 55,837 142,234 105,494 85,457
Bank overdraft..................... 213,142 -- -- -- --
Dividends payable to
shareholders...................... -- -- -- -- --
Payable for Fund shares
repurchased....................... 35,014 42,146 75,092 47,474 36,073
Payable for investment securities
purchased......................... 50,700 2,170,072 -- 2,336 1,152,601
------------- ------------ ------------- ------------- ------------
Total liabilities............ 334,298 2,268,055 217,326 155,304 1,274,131
------------- ------------ ------------- ------------- ------------
Net assets applicable to
outstanding capital stock......... $ 70,452,698 $162,280,701 $192,817,059 $175,522,821 $130,982,960
------------- ------------ ------------- ------------- ------------
------------- ------------ ------------- ------------- ------------
Represented by:
Capital stock--authorized
10,000,000,000 shares of $.01
par value; outstanding;
103,016,022; 90,192,834;
43,003,536; 216,881,681;
62,594,684; 74,694,176;
82,603,475; 121,287,078;
77,531,649; 4,978,600;
3,249,967; 2,415,027;
1,677,641 and 39,904,627
shares, respectively.......... $ 625,947 $ 746,942 $ 826,035 $ 1,212,871 $ 775,316
Additional paid-in capital..... 70,702,215 115,184,877 138,309,239 149,781,184 101,402,311
Undistributed net investment
income (loss)................. 2,403,791 1,284,213 (74,419) 2,404,361 106,773
Accumulated net realized gains
(losses) from investments and
foreign currency
transactions.................. (3,042,239) 1,962,514 6,861,562 (636,935) 9,103,112
Unrealized appreciation
(depreciation) of investments
and translation of assets and
liabilities in foreign
currencies.................... (237,016) 43,102,155 46,894,642 22,761,340 19,595,448
------------- ------------ ------------- ------------- ------------
Total--representing net
assets applicable to
outstanding capital stock... $ 70,452,698 $162,280,701 $192,817,059 $175,522,821 $130,982,960
------------- ------------ ------------- ------------- ------------
------------- ------------ ------------- ------------- ------------
Net asset value per share of
outstanding capital stock......... $ 1.126 $ 2.173 $ 2.334 $ 1.447 $ 1.689
------------- ------------ ------------- ------------- ------------
------------- ------------ ------------- ------------- ------------
<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: $184,042,650;
$109,965,745; $42,884,492;
$343,308,435; $70,393,897;
$120,363,428; $144,830,949;
$151,692,730; $111,716,169;
$5,102,749; $3,282,899;
$2,472,371; $1,760,151 and
$51,951,165, respectively)........ $5,133,185 $ 3,352,777 $ 2,558,649 $ 1,773,116 $ 56,858,255
Cash in bank on demand deposit..... 66 20,793 8,548 1,589 2,970
Receivable for Fund shares sold.... 44,832 44,994 47,753 44,707 322,618
Receivable for investment
securities sold................... -- -- -- -- 1,477,842
Dividends and accrued interest
receivable........................ 566 545 300 235 92,907
Receivable for refundable foreign
income taxes withheld............. -- -- -- -- --
----------- ------------ ------------ ------------ -------------
Total assets................. 5,178,649 3,419,109 2,615,250 1,819,647 58,754,592
----------- ------------ ------------ ------------ -------------
LIABILITIES
Payable to Minnesota Mutual........ 835 539 811 548 38,317
Bank overdraft..................... -- -- -- -- --
Dividends payable to
shareholders...................... -- -- -- -- --
Payable for Fund shares
repurchased....................... 197 159 121 79 14,935
Payable for investment securities
purchased......................... -- -- -- -- --
----------- ------------ ------------ ------------ -------------
Total liabilities............ 1,032 698 932 627 53,252
----------- ------------ ------------ ------------ -------------
Net assets applicable to
outstanding capital stock......... $5,177,617 $ 3,418,411 $ 2,614,318 $ 1,819,020 $ 58,701,340
----------- ------------ ------------ ------------ -------------
----------- ------------ ------------ ------------ -------------
Represented by:
Capital stock--authorized
10,000,000,000 shares of $.01
par value; outstanding;
103,016,022; 90,192,834;
43,003,536; 216,881,681;
62,594,684; 74,694,176;
82,603,475; 121,287,078;
77,531,649; 4,978,600;
3,249,967; 2,415,027;
1,677,641 and 39,904,627
shares, respectively.......... $ 49,786 $ 32,500 $ 24,150 $ 16,776 $ 399,046
Additional paid-in capital..... 4,940,727 3,219,015 2,433,097 1,732,727 49,746,663
Undistributed net investment
income (loss)................. 154,963 99,989 79,239 48,086 248,330
Accumulated net realized gains
(losses) from investments and
foreign currency
transactions.................. 1,705 (2,971) (8,446) 8,466 3,400,211
Unrealized appreciation
(depreciation) of investments
and translation of assets and
liabilities in foreign
currencies.................... 30,436 69,878 86,278 12,965 4,907,090
----------- ------------ ------------ ------------ -------------
Total--representing net
assets applicable to
outstanding capital stock... $5,177,617 $ 3,418,411 $ 2,614,318 $ 1,819,020 $ 58,701,340
----------- ------------ ------------ ------------ -------------
----------- ------------ ------------ ------------ -------------
Net asset value per share of
outstanding capital stock......... $ 1.040 $ 1.052 $ 1.083 $ 1.084 $ 1.471
----------- ------------ ------------ ------------ -------------
----------- ------------ ------------ ------------ -------------
</TABLE>
61
<PAGE>
MIMLIC SERIES FUND, INC.
STATEMENTS OF OPERATIONS
PERIOD FROM JANUARY 1, 1996 TO JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
MONEY ASSET
GROWTH BOND MARKET ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ---------- ------------
<S> <C> <C> <C> <C>
Investment income:
Interest....................... $ 159,918 $ 3,538,763 $1,074,696 $ 5,152,991
Dividends (net of foreign
withholding taxes of $457,195
for International
Stock Portfolio).............. 1,274,709 -- -- 1,049,409
------------ ----------- ---------- ------------
Total investment income.... 1,434,627 3,538,763 1,074,696 6,202,400
------------ ----------- ---------- ------------
Expenses (note 5):
Investment advisory fee........ 537,062 264,420 101,304 907,865
Custodian fees................. 9,222 2,039 3,095 16,673
Administrative service fee..... 10,800 10,800 10,800 10,800
Auditing and accounting
services...................... 7,875 3,525 2,375 14,625
Legal fees..................... 500 500 500 500
Registration fees.............. 9 9 9 9
Printing and shareholder
reports....................... 15,944 7,827 2,830 27,169
Directors' fees................ 1,682 851 366 2,890
Insurance...................... 1,639 1,076 515 2,294
------------ ----------- ---------- ------------
Total expenses............. 584,733 291,047 121,794 982,825
Less fees and expenses waived
or absorbed by Minnesota
Mutual........................ -- -- -- --
------------ ----------- ---------- ------------
Total net expenses......... 584,733 291,047 121,794 982,825
------------ ----------- ---------- ------------
Investment income
(loss)--net............... 849,894 3,247,716 952,902 5,219,575
------------ ----------- ---------- ------------
Realized and unrealized gains
(losses) on investments and
foreign currencies:
Net realized gains (losses)
from:
Investments (note 3)....... 10,217,228 437,303 -- 21,222,980
Foreign currency
transactions.............. -- -- -- --
Net change in unrealized
appreciation or depreciation
on:
Investments................ 10,808,875 (5,915,614) -- (5,740,973)
Translation of assets and
liabilities in foreign
currencies................ -- -- -- --
------------ ----------- ---------- ------------
Net gains (losses) on
investments............... 21,026,103 (5,478,311) -- 15,482,007
------------ ----------- ---------- ------------
Net increase (decrease) in net
assets resulting from
operations...................... $ 21,875,997 $(2,230,595) $ 952,902 $ 20,701,582
------------ ----------- ---------- ------------
------------ ----------- ---------- ------------
</TABLE>
See accompanying notes to financial statements.
62
<PAGE>
<TABLE>
<CAPTION>
MATURING
MORTGAGE CAPITAL INTERNATIONAL SMALL GOVERNMENT
SECURITIES INDEX 500 APPRECIATION STOCK COMPANY BOND 1998
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ ------------ ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest....................... $ 2,605,817 $ 26,133 $ 184,591 $ 570,593 $ 450,817 $160,019
Dividends (net of foreign
withholding taxes of $457,195
for International
Stock Portfolio).............. -- 1,573,422 476,225 2,853,533 119,065 --
----------- ------------ ------------ ------------- ----------- ----------
Total investment income.... 2,605,817 1,599,555 660,816 3,424,126 569,882 160,019
----------- ------------ ------------ ------------- ----------- ----------
Expenses (note 5):
Investment advisory fee........ 175,933 281,774 668,108 776,132 430,223 1,300
Custodian fees................. 3,529 6,622 5,089 125,891 10,384 1,746
Administrative service fee..... 10,800 10,800 10,800 10,800 10,800 10,800
Auditing and accounting
services...................... 4,125 4,525 6,125 92,673 2,375 1,875
Legal fees..................... 500 500 500 500 500 500
Registration fees.............. 9 9 71 13 9 9
Printing and shareholder
reports....................... 5,617 9,029 41,737 11,207 7,057 496
Directors' fees................ 595 977 1,420 1,227 820 64
Insurance...................... 918 1,103 1,385 1,321 941 233
----------- ------------ ------------ ------------- ----------- ----------
Total expenses............. 202,026 315,339 735,235 1,019,764 463,109 17,023
Less fees and expenses waived
or absorbed by Minnesota
Mutual........................ -- -- -- -- -- (11,967)
----------- ------------ ------------ ------------- ----------- ----------
Total net expenses......... 202,026 315,339 735,235 1,019,764 463,109 5,056
----------- ------------ ------------ ------------- ----------- ----------
Investment income
(loss)--net............... 2,403,791 1,284,216 (74,419) 2,404,362 106,773 154,963
----------- ------------ ------------ ------------- ----------- ----------
Realized and unrealized gains
(losses) on investments and
foreign currencies:
Net realized gains (losses)
from:
Investments (note 3)....... 248,260 2,135,056 6,875,499 1,378,283 9,104,860 1,705
Foreign currency
transactions.............. -- -- -- (52,205) -- --
Net change in unrealized
appreciation or depreciation
on:
Investments................ (2,790,069) 9,565,315 11,740,411 9,072,793 (787,798) (143,110)
Translation of assets and
liabilities in foreign
currencies................ -- -- -- (8,650) -- --
----------- ------------ ------------ ------------- ----------- ----------
Net gains (losses) on
investments............... (2,541,809) 11,700,371 18,615,910 10,390,221 8,317,062 (141,405)
----------- ------------ ------------ ------------- ----------- ----------
Net increase (decrease) in net
assets resulting from
operations........................ $ (138,018) $ 12,984,587 $18,541,491 $12,794,583 $ 8,423,835 $ 13,558
----------- ------------ ------------ ------------- ----------- ----------
----------- ------------ ------------ ------------- ----------- ----------
<CAPTION>
MATURING MATURING MATURING
GOVERNMENT GOVERNMENT GOVERNMENT VALUE
BOND 2002 BOND 2006 BOND 2010 STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Investment income:
Interest....................... $103,078 $ 84,212 $ 51,145 $ 79,800
Dividends (net of foreign
withholding taxes of $457,195
for International
Stock Portfolio).............. -- -- -- 355,771
---------- ---------- ---------- ----------
Total investment income.... 103,078 84,212 51,145 435,571
---------- ---------- ---------- ----------
Expenses (note 5):
Investment advisory fee........ 806 3,140 1,939 168,262
Custodian fees................. 2,337 2,051 2,596 3,099
Administrative service fee..... 10,800 10,800 10,800 10,800
Auditing and accounting
services...................... 1,875 1,875 2,375 1,875
Legal fees..................... 500 500 500 500
Registration fees.............. 9 9 9 9
Printing and shareholder
reports....................... 260 206 118 2,030
Directors' fees................ 29 23 15 259
Insurance...................... 229 183 179 407
---------- ---------- ---------- ----------
Total expenses............. 16,845 18,787 18,531 187,241
Less fees and expenses waived
or absorbed by Minnesota
Mutual........................ (13,756) (13,814) (15,472) --
---------- ---------- ---------- ----------
Total net expenses......... 3,089 4,973 3,059 187,241
---------- ---------- ---------- ----------
Investment income
(loss)--net............... 99,989 79,239 48,086 248,330
---------- ---------- ---------- ----------
Realized and unrealized gains
(losses) on investments and
foreign currencies:
Net realized gains (losses)
from:
Investments (note 3)....... -- (8,446) 23,831 3,420,946
Foreign currency
transactions.............. -- -- -- --
Net change in unrealized
appreciation or depreciation
on:
Investments................ (208,153) (270,167) (236,403) 1,729,289
Translation of assets and
liabilities in foreign
currencies................ -- -- -- --
---------- ---------- ---------- ----------
Net gains (losses) on
investments............... (208,153) (278,613) (212,572) 5,150,235
---------- ---------- ---------- ----------
Net increase (decrease) in net
assets resulting from
operations........................ $(108,164) $(199,374) $(164,486) $5,398,565
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
63
<PAGE>
MIMLIC SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
PERIOD FROM JANUARY 1, 1996 TO JUNE 30, 1996 AND YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
MONEY MARKET
GROWTH PORTFOLIO BOND PORTFOLIO PORTFOLIO
-------------------------- ------------------------- --------------------------
1996 1995 1996 1995 1996 1995
------------ ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Investment income (loss)--net.... $ 849,894 $ 1,885,333 $ 3,247,716 $ 5,666,378 $ 952,902 $ 1,340,783
Net realized gains on investments
and foreign currency
transactions.................... 10,217,228 17,645,339 437,303 3,734,900 -- --
Net change in unrealized
appreciation or depreciation of
investments and translation of
assets and liabilities in
foreign currencies.............. 10,808,875 19,185,038 (5,915,614) 5,968,239 -- --
------------ ------------ ----------- ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from
operations.................... 21,875,997 38,715,710 (2,230,595) 15,369,517 952,902 1,340,783
------------ ------------ ----------- ------------ ------------ ------------
Distributions to shareholders from:
Investment income--net........... (1,885,333) (1,650,255) (5,666,378) (2,999,724) (952,902) (1,340,783)
Net realized gains............... (17,716,504) (6,215,125) (1,021,457) -- -- --
------------ ------------ ----------- ------------ ------------ ------------
Total distributions............ (19,601,837) (7,865,380) (6,687,835) (2,999,724) (952,902) (1,340,783)
------------ ------------ ----------- ------------ ------------ ------------
Capital share transactions (note
5):
Proceeds from sales.............. 22,290,958 32,540,549 20,339,364 24,809,311 36,662,606 36,944,812
Shares issued as a result of
reinvested distributions........ 19,601,837 7,865,380 6,687,835 2,999,724 950,037 1,335,757
Payments for redemption of
shares.......................... (17,659,221) (26,947,664) (9,251,569) (13,813,438) (24,775,487) (31,221,058)
------------ ------------ ----------- ------------ ------------ ------------
Increase in net assets from capital
shares transactions............. 24,233,574 13,458,265 17,775,630 13,995,597 12,837,156 7,059,511
------------ ------------ ----------- ------------ ------------ ------------
Total increase in net assets... 26,507,734 44,308,595 8,857,200 26,365,390 12,837,156 7,059,511
Net assets at beginning of
period.......................... 201,677,558 157,368,963 101,044,829 74,679,439 30,166,380 23,106,869
------------ ------------ ----------- ------------ ------------ ------------
Net assets at end of period
(including undistributed net
investment income (loss) of
$849,894 and $1,885,333 for
Growth, $3,247,716 and
$5,666,378 for Bond, $0 and $0
for Money Market, $5,219,574 and
$11,587,244 for Asset
Allocation, $2,403,791 and
$4,531,053 for Mortgage
Securities, $1,284,213 and
$1,984,153 for Index 500,
$(74,419) and $0 for Capital
Appreciation, $2,404,361 and
$4,201,200 for International
Stock and $106,773 and $963 for
Small Company, respectively..... $228,185,292 $201,677,558 $109,902,029 $101,044,829 $ 43,003,536 $ 30,166,380
------------ ------------ ----------- ------------ ------------ ------------
------------ ------------ ----------- ------------ ------------ ------------
<CAPTION>
ASSET ALLOCATION
PORTFOLIO
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Operations:
Investment income (loss)--net.... $ 5,219,575 $ 11,587,244
Net realized gains on investments
and foreign currency
transactions.................... 21,222,980 22,040,129
Net change in unrealized
appreciation or depreciation of
investments and translation of
assets and liabilities in
foreign currencies.............. (5,740,973) 34,618,189
------------ ------------
Net increase (decrease) in net
assets resulting from
operations.................... 20,701,582 68,245,562
------------ ------------
Distributions to shareholders from:
Investment income--net........... (11,587,245) (8,662,733)
Net realized gains............... (21,215,841) (3,165,106)
------------ ------------
Total distributions............ (32,803,086) (11,827,839)
------------ ------------
Capital share transactions (note
5):
Proceeds from sales.............. 44,713,088 63,178,126
Shares issued as a result of
reinvested distributions........ 32,803,086 11,827,839
Payments for redemption of
shares.......................... (33,952,235) (55,042,670)
------------ ------------
Increase in net assets from capital
shares transactions............. 43,563,939 19,963,295
------------ ------------
Total increase in net assets... 31,462,435 76,381,018
Net assets at beginning of
period.......................... 349,010,314 272,629,296
------------ ------------
Net assets at end of period
(including undistributed net
investment income (loss) of
$849,894 and $1,885,333 for
Growth, $3,247,716 and
$5,666,378 for Bond, $0 and $0
for Money Market, $5,219,574 and
$11,587,244 for Asset
Allocation, $2,403,791 and
$4,531,053 for Mortgage
Securities, $1,284,213 and
$1,984,153 for Index 500,
$(74,419) and $0 for Capital
Appreciation, $2,404,361 and
$4,201,200 for International
Stock and $106,773 and $963 for
Small Company, respectively..... $380,472,749 $349,010,314
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
64
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE SECURITIES INDEX 500 CAPITAL APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------- ------------------------- --------------------------
1996 1995 1996 1995 1996 1995
----------- ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Investment income (loss)--net.... $ 2,403,791 $ 4,531,053 $ 1,284,216 $ 1,984,153 $ (74,419) $ (217,760)
Net realized gains on investments
and foreign currency
transactions.................... 248,260 1,181,245 2,135,056 989,818 6,875,499 6,284,588
Net change in unrealized
appreciation or depreciation of
investments and translation of
assets and liabilities in
foreign currencies.............. (2,790,069) 4,752,049 9,565,315 26,535,228 11,740,411 21,970,841
----------- ------------ ----------- ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from
operations.................... (138,018) 10,464,347 12,984,587 29,509,199 18,541,491 28,037,669
----------- ------------ ----------- ------------ ------------ ------------
Distributions to shareholders from:
Investment income--net........... (4,531,053) (4,169,579) (1,984,156) (1,540,293) -- --
Net realized gains............... -- -- (1,027,104) (609,060) (4,759,441) (3,373,884)
----------- ------------ ----------- ------------ ------------ ------------
Total distributions............ (4,531,053) (4,169,579) (3,011,260) (2,149,353) (4,759,441) (3,373,884)
----------- ------------ ----------- ------------ ------------ ------------
Capital share transactions (note
5):
Proceeds from sales.............. 10,179,637 13,052,763 38,812,533 36,939,888 28,668,122 43,468,072
Shares issued as a result of
reinvested distributions........ 4,531,053 4,169,579 3,011,260 2,149,353 4,759,441 3,373,884
Payments for redemption of
shares.......................... (9,334,894) (13,436,928) (13,515,018) (15,881,993) (17,912,334) (23,592,979)
----------- ------------ ----------- ------------ ------------ ------------
Increase in net assets from capital
shares transactions............... 5,375,796 3,785,414 28,308,775 23,207,248 15,515,229 23,248,977
----------- ------------ ----------- ------------ ------------ ------------
Total increase in net assets... 706,725 10,080,182 38,282,102 50,567,094 29,297,279 47,912,762
Net assets at beginning of
period............................ 69,745,973 59,665,791 123,998,599 73,431,505 163,519,780 115,607,018
----------- ------------ ----------- ------------ ------------ ------------
Net assets at end of period
(including undistributed net
investment income (loss) of
$849,894 and $1,885,333 for
Growth, $3,247,716 and $5,666,378
for Bond, $0 and $0 for Money
Market, $5,219,574 and $11,587,244
for Asset Allocation, $2,403,791
and $4,531,053 for Mortgage
Securities, $1,284,213 and
$1,984,153 for Index 500,
$(74,419) and $0 for Capital
Appreciation, $2,404,361 and
$4,201,200 for International Stock
and $106,773 and $963 for Small
Company, respectively............. $70,452,698 $ 69,745,973 $162,280,701 $123,998,599 $192,817,059 $163,519,780
----------- ------------ ----------- ------------ ------------ ------------
----------- ------------ ----------- ------------ ------------ ------------
<CAPTION>
INTERNATIONAL STOCK SMALL COMPANY
PORTFOLIO PORTFOLIO
-------------------------- ------------------------
1996 1995 1996 1995
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss)--net.... $ 2,404,362 $ 3,292,425 $ 106,773 $ 112,463
Net realized gains on investments
and foreign currency
transactions.................... 1,326,078 4,684,307 9,104,860 3,782,537
Net change in unrealized
appreciation or depreciation of
investments and translation of
assets and liabilities in
foreign currencies.............. 9,064,143 8,227,365 (787,798) 16,659,924
------------ ------------ ----------- -----------
Net increase (decrease) in net
assets resulting from
operations.................... 12,794,583 16,204,097 8,423,835 20,554,924
------------ ------------ ----------- -----------
Distributions to shareholders from:
Investment income--net........... (4,201,200) -- (963) (111,500)
Net realized gains............... (4,599,310) -- (2,446,329) (969,415)
------------ ------------ ----------- -----------
Total distributions............ (8,800,510) -- (2,447,292) (1,080,915)
------------ ------------ ----------- -----------
Capital share transactions (note
5):
Proceeds from sales.............. 36,862,883 45,334,046 33,255,378 38,430,026
Shares issued as a result of
reinvested distributions........ 8,800,510 -- 2,447,292 1,080,915
Payments for redemption of
shares.......................... (14,904,210) (28,258,386) (9,591,179) (11,194,748)
------------ ------------ ----------- -----------
Increase in net assets from capital
shares transactions............... 30,759,183 17,075,660 26,111,491 28,316,193
------------ ------------ ----------- -----------
Total increase in net assets... 34,753,256 33,279,757 32,088,034 47,790,202
Net assets at beginning of
period............................ 140,769,565 107,489,808 98,894,926 51,104,724
------------ ------------ ----------- -----------
Net assets at end of period
(including undistributed net
investment income (loss) of
$849,894 and $1,885,333 for
Growth, $3,247,716 and $5,666,378
for Bond, $0 and $0 for Money
Market, $5,219,574 and $11,587,244
for Asset Allocation, $2,403,791
and $4,531,053 for Mortgage
Securities, $1,284,213 and
$1,984,153 for Index 500,
$(74,419) and $0 for Capital
Appreciation, $2,404,361 and
$4,201,200 for International Stock
and $106,773 and $963 for Small
Company, respectively............. $175,522,821 $140,769,565 $130,982,960 $98,894,926
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
</TABLE>
65
<PAGE>
MIMLIC SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS--CONTINUED
PERIOD FROM JANUARY 1, 1996 TO JUNE 30, 1996 AND YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
MATURING MATURING MATURING MATURING
GOVERNMENT BOND GOVERNMENT BOND GOVERNMENT BOND GOVERNMENT BOND
1998 PORTFOLIO 2002 PORTFOLIO 2006 PORTFOLIO 2010 PORTFOLIO
---------------------- ---------------------- ---------------------- ----------------------
1996 1995 1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operations:
Investment income--net...... $ 154,963 $ 271,760 $ 99,989 $ 187,782 $ 79,239 $ 143,024 $ 48,086 $ 76,072
Net realized gains (losses)
on investments............. 1,705 1,067 -- 8,323 (8,446) 2,190 23,831 (2,181)
Net change in unrealized
appreciation or
depreciation of
investments................ (143,110) 359,251 (208,153) 446,613 (270,167) 504,542 (236,403) 334,118
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in
net assets resulting from
operations............... 13,558 632,078 (108,164) 642,718 (199,374) 649,756 (164,486) 408,009
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Distributions to shareholders
from:
Investment income--net...... (3,760) (269,178) -- (189,044) (1,524) (142,792) (1,072) (75,785)
Tax return of capital....... -- -- -- (6,040) -- -- -- --
Net realized gains.......... -- (1,067) -- -- (2,190) -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions....... (3,760) (270,245) -- (195,084) (3,714) (142,792) (1,072) (75,785)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Capital share transactions
(note 5):
Proceeds from sales......... 636,351 2,803,879 601,180 862,286 351,126 539,818 885,347 1,121,319
Shares issued as a result of
reinvested distributions... 3,760 270,245 -- 195,085 3,714 142,792 1,072 75,785
Payments for redemption of
shares..................... (529,145) (1,780,820) (124,031) (1,030,858) (106,986) (479,630) (285,447) (1,216,768)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net
assets from capital shares
transactions............... 110,966 1,293,304 477,149 26,513 247,854 202,980 600,972 (19,664)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total increase in net
assets................... 120,764 1,655,137 368,985 474,147 44,766 709,944 435,414 312,560
Net assets at beginning of
period..................... 5,056,853 3,401,716 3,049,426 2,575,279 2,569,552 1,859,608 1,383,606 1,071,046
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net assets at end of period
(including undistributed
net investment income of
$154,963 and $3,760 for
Maturing Government Bond
1998, $99,989 and $0 for
Maturing Government Bond
2002, $79,239 and $1,524
for Maturing Government
Bond 2006 $48,086 and
$1,072 for Maturing
Government Bond 2010 and
$248,330 and $3,814 for
Value Stock,
respectively............... $5,177,617 $5,056,853 $3,418,411 $3,049,426 $2,614,318 $2,569,552 $1,819,020 $1,383,606
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
VALUE STOCK
PORTFOLIO
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Operations:
Investment income--net...... $ 248,330 $ 235,814
Net realized gains (losses)
on investments............. 3,420,946 1,761,136
Net change in unrealized
appreciation or
depreciation of
investments................ 1,729,289 3,206,550
----------- -----------
Net increase (decrease) in
net assets resulting from
operations............... 5,398,565 5,203,500
----------- -----------
Distributions to shareholders
from:
Investment income--net...... (3,814) (233,111)
Tax return of capital....... -- --
Net realized gains.......... (533,610) (1,350,762)
----------- -----------
Total distributions....... (537,424) (1,583,873)
----------- -----------
Capital share transactions
(note 5):
Proceeds from sales......... 25,878,911 20,708,752
Shares issued as a result of
reinvested distributions... 537,424 1,583,873
Payments for redemption of
shares..................... (4,401,170) (2,858,057)
----------- -----------
Increase (decrease) in net
assets from capital shares
transactions............... 22,015,165 19,434,568
----------- -----------
Total increase in net
assets................... 26,876,306 23,054,195
Net assets at beginning of
period..................... 31,825,034 8,770,839
----------- -----------
Net assets at end of period
(including undistributed
net investment income of
$154,963 and $3,760 for
Maturing Government Bond
1998, $99,989 and $0 for
Maturing Government Bond
2002, $79,239 and $1,524
for Maturing Government
Bond 2006 $48,086 and
$1,072 for Maturing
Government Bond 2010 and
$248,330 and $3,814 for
Value Stock,
respectively............... $58,701,340 $31,825,034
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
66
<PAGE>
MIMLIC SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
(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.
(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 liablities 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 exchange
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.
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
67
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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. At June 30, 1996, there were no outstanding contracts.
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 June 30, 1996, which, if not offset by subsequent capital gains,
will expire December 31, 2004 through 2005. 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................................................. $3,478,000
Maturing Government Bond 2002....................................... 3,000
</TABLE>
Net investment income (loss) 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 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.
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 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.
68
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(3) INVESTMENT SECURITY TRANSACTIONS
For the period ended June 30, 1996, the cost of purchases and proceeds from
sales of investment securities aggregated $110,457,314 and $97,019,000
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 period ended June 30, 1996 were as
follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ -------------
<S> <C> <C>
Growth............................................. $ 54,846,587 $ 55,755,304
Bond............................................... 90,494,772 78,235,394
Asset Allocation................................... 225,978,251 220,576,130
Mortgage Securities................................ 26,960,340 23,483,940
Index 500.......................................... 40,820,842 13,590,614
Capital Appreciation............................... 61,669,036 57,645,660
International Stock................................ 26,479,168 4,216,777
Small Company...................................... 55,270,405 42,060,707
Maturing Government Bond 1998...................... 266,519 69,520
Maturing Government Bond 2002...................... 435,971 --
Maturing Government Bond 2006...................... 435,666 147,984
Maturing Government Bond 2010...................... 739,186 143,229
Value Stock........................................ 41,981,108 20,905,648
</TABLE>
(4) 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 this agreement, MIMLIC Management manages the Fund's assets and
furnishes related office facilities, equipment, research, and personnel.
69
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
For Capital Appreciation, MIMLIC Management has a sub-advisory agreement
with Winslow Capital Management, Inc. (Winslow). On April 23, 1996, the
shareholders of Capital Appreciation approved a new sub-advisory agreement
between MIMLIC Management and Winslow. Under the new sub-advisory agreement,
effective May 1, 1996, MIMLIC Management pays Winslow a fee equal to .375
percent of net assets of Capital Appreciation. Prior to May 1, 1996, MIMLIC
Management paid 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 period ended
June 30, 1996, Minnesota Mutual voluntarily agreed to absorb $11,967, $13,756,
$13,814, and $15,472 in expenses that were otherwise payable by Maturing
Government Bond 1998, Maturing Government Bond 2002, Maturing Government Bond
2006 and Maturing Government 2010, respectively.
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, 1996, the administrative services fee for each
portfolio was $1,500 per month. Effective May 1, 1996, the administrative
service fee for each portfolio is $2,400 per month.
(5) CAPITAL SHARE TRANSACTIONS
Transactions in shares of portfolios for the period ended June 30, 1996 and
the year ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
GROWTH BOND
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 10,053,518 15,942,741 16,090,016 19,917,487
Issued for reinvested distributions......................... 9,579,976 4,188,367 5,583,992 2,571,473
Redeemed.................................................... (7,889,460) (13,194,015) (7,325,589) (11,200,741)
------------ ------------ ------------ ------------
11,744,034 6,937,093 14,348,419 11,288,219
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET ASSET ALLOCATION
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 36,662,606 36,994,812 24,972,856 37,854,023
Issued for reinvested distributions......................... 950,037 1,335,757 19,792,634 7,646,551
Redeemed.................................................... (24,775,487) (31,221,058) (18,967,386) (33,295,460)
------------ ------------ ------------ ------------
12,837,156 7,059,511 25,798,104 12,205,114
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MORTGAGE SECURITIES INDEX 500
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 8,737,402 11,363,781 18,338,337 20,529,294
Issued for reinvested distributions......................... 4,096,652 3,873,396 1,471,728 1,340,030
Redeemed.................................................... (8,016,930) (11,794,395) (6,396,739) (8,948,748)
------------ ------------ ------------ ------------
4,817,124 3,442,782 13,413,326 12,920,576
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
70
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) CAPITAL SHARE TRANSACTIONS--(CONTINUED)
<TABLE>
<CAPTION>
CAPITAL APPRECIATION INTERNATIONAL STOCK
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 12,602,121 21,549,468 25,511,807 34,352,552
Issued for reinvested distributions......................... 2,186,263 1,816,119 6,279,337 --
Redeemed.................................................... (7,873,074) (11,636,441) (10,315,147) (21,587,691)
------------ ------------ ------------ ------------
6,915,310 11,729,146 21,475,993 12,764,861
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MATURING GOVERNMENT BOND
SMALL COMPANY 1998
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 20,093,440 27,268,886 613,586 2,804,374
Issue for reinvested distributions.......................... 1,522,019 681,476 3,671 261,002
Redeemed.................................................... (5,798,887) (7,902,817) (511,365) (1,791,322)
------------ ------------ ------------ ------------
15,816,572 20,047,545 105,892 1,274,054
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MATURING GOVERNMENT BOND MATURING GOVERNMENT BOND
2002 2006
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 569,956 819,908 319,725 493,557
Issue for reinvested distributions.......................... -- 179,675 3,497 122,592
Redeemed.................................................... (116,052) (966,191) (97,437) (441,900)
------------ ------------ ------------ ------------
453,904 33,392 225,785 174,249
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MATURING GOVERNMENT BOND
2010 VALUE STOCK
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 800,509 1,062,561 18,379,132 16,963,575
Issue for reinvested distributions.......................... 1,015 63,051 385,410 1,227,850
Redeemed.................................................... (263,745) (1,163,056) (3,123,487) (2,330,611)
------------ ------------ ------------ ------------
537,779 (37,444) 15,641,055 15,860,814
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
(6) 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 June
30, 1996, investments in securities of Growth, Bond, Asset Allocation, Mortgage
Securities, International Stock and Small Company include issues that are
illiquid. The aggregate values of illiquid securities held by Growth, Bond,
Asset Allocation, Mortgage Securities, International Stock and Small Company at
June 30, 1996 were $997,310, $7,306,894, $3,718,350, $4,045,000, $8,532,806 and
$4,000,411, respectively, which represent .4%, 6.7%, 1.0%, 5.7%, 4.9% and 3.1%
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.
(7) 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:
71
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS--(CONTINUED)
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, YEAR ENDED DECEMBER 31,
1996 TO --------------------------------------------------------
JUNE 30, 1996 1995 1994 1993 1992 1991
----------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $2.210 $1.866 $1.912 $1.889 $1.864 $1.391
------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income....................... .008 .021 .019 .020 .026 .031
Net gains or losses on securities (both
realized and unrealized).................. .211 .416 (.005) .063 .060 .442
------- -------- -------- -------- -------- --------
Total from investment operations........ .219 .437 .014 .083 .086 .473
------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income........ (.021) (.020) (.020) (.027) (.031) --
Distributions from capital gains............ (.193) (.073) (.040) (.033) (.030) --
------- -------- -------- -------- -------- --------
Total distributions..................... (.214) (.093) (.060) (.060) (.061) --
------- -------- -------- -------- -------- --------
Net asset value, end of period.................. $2.215 $2.210 $1.866 $1.912 $1.889 $1.864
------- -------- -------- -------- -------- --------
------- -------- -------- -------- -------- --------
Total return (a)................................ 10.7%(b) 24.3% .8% 4.7% 4.8% 34.1%
Net assets, end of period (in thousands)........ $ 228,185 $201,678 $157,369 $125,745 $ 99,128 $ 75,518
Ratio of expenses to average daily net assets... .55%(c) .55% .56% .58% .58% .63%
Ratio of net investment income to average daily
net assets.................................... .80%(c) 1.04% 1.22% 1.21% 1.72% 2.11%
Portfolio turnover rate (excluding short-term
securities)................................... 26.3% 91.9% 42.0% 51.0% 22.4% 15.7%
Average commission rate on common stock
transactions.................................. $.0842 N/A N/A N/A N/A N/A
</TABLE>
- --------------------------
(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) Total return is presented for the period from January 1, 1996 to June 30,
1996.
(c) Adjusted to an annual basis.
72
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS--(CONTINUED)
BOND PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, YEAR ENDED DECEMBER 31,
1996 TO --------------------------------------------------------
JUNE 30, 1996 1995 1994 1993 1992 1991
----------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $1.332 $1.157 $1.300 $1.258 $1.264 $1.075
------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income......................... .032 .074 .042 .051 .053 .078
Net gains or losses on securities (both
realized and unrealized).................... (.062) .147 (.100) .074 .024 .111
------- -------- -------- -------- -------- --------
Total from investment operations.......... (.030) .221 (.058) .125 .077 .189
------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income.......... (.070) (.046) (.052) (.058) (.069) --
Distributions from capital gains.............. (.013) -- (.033) (.025) (.014) --
------- -------- -------- -------- -------- --------
Total distributions....................... (.083) (.046) (.085) (.083) (.083) --
------- -------- -------- -------- -------- --------
Net asset value, end of period.................... $1.219 $1.332 $1.157 $1.300 $1.258 $1.264
------- -------- -------- -------- -------- --------
------- -------- -------- -------- -------- --------
Total return (a).................................. (2.2)%(b) 19.8% (4.6)% 10.3% 6.7% 17.6%
Net assets, end of period (in thousands).......... $ 110,026 $101,045 $ 74,679 $ 43,927 $ 24,914 $ 13,088
Ratio of expenses to average daily net assets
(c)............................................. .56%(d) .58% .61% .64% .65% .65%
Ratio of net investment income to average daily
net assets (c).................................. 6.24%(d) 6.57% 6.12% 5.57% 6.56% 7.79%
Portfolio turnover rate (excluding short-term
securities)..................................... 79.5% 205.4% 166.2% 166.8% 140.2% 93.8%
</TABLE>
- ------------------------
(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) Total return is presented for the period from January 1, 1996 to June 30,
1996.
(c) 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.
(d) Adjusted to an annual basis.
73
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS--(CONTINUED)
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, YEAR ENDED DECEMBER 31,
1996 TO --------------------------------------------------------
JUNE 30, 1996 1995 1994 1993 1992 1991
----------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income.......................... .024 .053 .036 .027 .032 .053
------ -------- -------- -------- -------- --------
Total from investment operations........... .024 .053 .036 .027 .032 .053
------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income........... (.024) (.053) (.036) (.027) (.032) (.053)
------ -------- -------- -------- -------- --------
Total distributions........................ (.024) (.053) (.036) (.027) (.032) (.053)
------ -------- -------- -------- -------- --------
Net asset value, end of period..................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ -------- -------- -------- -------- --------
------ -------- -------- -------- -------- --------
Total return (a)................................... 2.4%(b) 5.4% 4.2% 2.7% 3.2% 5.4%
Net assets, end of period (in thousands)........... $ 43,004 $ 30,166 $ 23,107 $ 18,423 $ 13,591 $ 12,834
Ratio of expenses to average daily net assets
(c).............................................. .61%(d) .64% .65% .65% .65% .65%
Ratio of net investment income to average daily net
assets (c)....................................... 4.78%(d) 5.29% 3.71% 2.65% 3.17% 5.26%
</TABLE>
- ------------------------
(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) Total return is presented for the period from January 1, 1996 to June 30,
1996.
(c) 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.
(d) Adjusted to an annual basis.
74
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS--(CONTINUED)
ASSET ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, YEAR ENDED DECEMBER 31,
1996 TO -----------------------------------------------------------------
JUNE 30, 1996 1995 1994 1993 1992 1991
-------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $1.826 $1.524 $1.589 $1.574 $1.558 $1.209
------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income.............. .023 .061 .047 .030 .034 .047
Net gains or losses on securities
(both realized and unrealized).... .074 .308 (.069) .066 .070 .302
------- --------- --------- --------- --------- ---------
Total from investment
operations.................... .097 .369 (.022) .096 .104 .349
------- --------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment
income............................ (.060) (.049) (.033) (.037) (.041) --
Distributions from capital gains... (.109) (.018) (.010) (.044) (.047) --
------- --------- --------- --------- --------- ---------
Total distributions............ (.169) (.067) (.043) (.081) (.088) --
------- --------- --------- --------- --------- ---------
Net asset value, end of period......... $1.754 $1.826 $1.524 $1.589 $1.574 $1.558
------- --------- --------- --------- --------- ---------
------- --------- --------- --------- --------- ---------
Total return (a)....................... 5.8%(b) 25.0% (1.4)% 6.5% 7.3% 28.9%
Net assets, end of period (in
thousands)........................... $ 380,473 $349,010 $272,629 $250,011 $150,998 $ 68,592
Ratio of expenses to average daily net
assets............................... .54%(c) .55% .56% .57% .60% .62%
Ratio of net investment income to
average daily net assets............. 2.89%(c) 3.75% 3.31% 2.63% 3.68% 4.50%
Portfolio turnover rate (excluding
short-term securities)............... 66.6% 157.0% 123.6% 85.7% 106.5% 78.6%
Average commission rate on common stock
transactions......................... $.0717 N/A N/A N/A N/A N/A
</TABLE>
- ------------------------
(a) Total return figures are based on a share of 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) Total return is presented for the period from January 1, 1996 to June 30,
1996.
(c) Adjusted to an annual basis.
75
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS--(CONTINUED)
MORTGAGE SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, YEAR ENDED DECEMBER 31,
1996 TO -----------------------------------------------------------------
JUNE 30, 1996 1995 1994 1993 1992 1991
-------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $1.207 $1.098 $1.218 $1.185 $1.196 $1.029
------ --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income.................. .038 .081 .074 .054 .045 .069
Net gains or losses on securities (both
realized and unrealized).............. (.042) .107 (.115) .052 .024 .098
------ --------- --------- --------- --------- ---------
Total from investment operations... (.004) .188 (.041) .106 .069 .167
------ --------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income... (.077) (.079) (.054) (.055) (.056) --
Distributions from capital gains....... -- -- (.025) (.018) (.024) --
------ --------- --------- --------- --------- ---------
Total distributions................ (.077) (.079) (.079) (.073) (.080) --
------ --------- --------- --------- --------- ---------
Net asset value, end of period............. $1.126 $1.207 $1.098 $1.218 $1.185 $1.196
------ --------- --------- --------- --------- ---------
------ --------- --------- --------- --------- ---------
Total return (a)........................... (.2)%(b) 18.0% (3.4)% 9.3% 6.4% 16.3%
Net assets, end of period (in thousands)... $ 70,453 $ 69,746 $ 59,666 $ 63,902 $ 37,011 $ 16,520
Ratio of expenses to average daily net
assets (c)............................... .58%(d) .58% .60% .63% .65% .65%
Ratio of net investment income to average
daily net assets (c)..................... 6.92%(d) 7.09% 6.55% 5.87% 6.64% 8.02%
Portfolio turnover rate (excluding
short-term securities)................... 34.8% 133.7% 197.3% 138.4% 96.2% 112.0%
</TABLE>
- ------------------------
(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) Total return is presented for the period from January 1, 1996 to June 30,
1996.
(c) 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.
(d) Adjusted to an annual basis.
76
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS--(CONTINUED)
INDEX 500 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, YEAR ENDED DECEMBER 31,
1996 TO -----------------------------------------------------------------
JUNE 31, 1996 1995 1994 1993 1992 1991
-------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $2.023 $1.518 $1.532 $1.428 $1.454 $1.120
------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income................. .014 .031 .029 .026 .024 .034
Net gains or losses on securities
(both realized and unrealized)....... .180 .517 (.012) .110 .073 .300
------- --------- --------- --------- --------- ---------
Total from investment operations.. .194 .548 .017 .136 .097 .334
------- --------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income.. (.029) (.031) (.026) (.025) (.032) --
Distributions from capital gains...... (.015) (.012) (.005) (.007) (.091) --
------- --------- --------- --------- --------- ---------
Total distributions............... (.044) (.043) (.031) (.032) (.123) --
------- --------- --------- --------- --------- ---------
Net asset value, end of period............ $2.173 $2.023 $1.518 $1.532 $1.428 $1.454
------- --------- --------- --------- --------- ---------
------- --------- --------- --------- --------- ---------
Total return (a).......................... 9.7%(b) 36.8% 1.2% 9.8% 7.4% 29.8%
Net assets, end of period (in
thousands).............................. $ 162,281 $123,999 $ 73,432 $ 56,209 $ 35,620 $ 20,999
Ratio of expenses to average daily net
assets (c).............................. .44%(d) .47% .50% .55% .55% .55%
Ratio of net investment income to average
daily net assets (c).................... 1.81%(d) 2.08% 2.34% 2.27% 2.42% 2.70%
Portfolio turnover rate (excluding
short-term securities).................. 9.5% 4.8% 5.9% 4.8% 6.1% 26.4%
Average commission rate on common stock
transaction............................. $.0394 N/A N/A N/A N/A N/A
</TABLE>
- ------------------------
(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) Total return is presented for the period from January 1, 1996 to June 30,
1996.
(c) 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.
(d) Adjusted to an annual basis.
77
<PAGE>
Notes to Financial Statements--continued
(7) Financial Highlights--(continued)
CAPITAL APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, YEAR ENDED DECEMBER 31,
1996 TO ----------------------------------------------------
JUNE 30, 1996 1995 1994 1993 1992(A) 1991
----------------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $2.160 $1.808 $1.797 $1.682 $1.684 $1.198
------- -------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss)........ (.001) (.003) -- .001 .004 .009
Net gains or losses on securities
(both realized and unrealized)..... .236 .406 .039 .167 .078 .488
------- -------- ------- ------- ------- -------
Total from investment
operations..................... .235 .403 .039 .168 .082 .497
------- -------- ------- ------- ------- -------
Less distributions:
Dividends from net investment
income............................. -- -- (.002) (.005) (.009) (.003)
Distributions from capital gains.... (.061) (.051) (.026) (.048) (.075) (.008)
------- -------- ------- ------- ------- -------
Total distributions............. (.061) (.051) (.028) (.053) (.084) (.011)
------- -------- ------- ------- ------- -------
Net asset value, end of period.......... $2.334 $2.160 $1.808 $1.797 $1.682 $1.684
------- -------- ------- ------- ------- -------
------- -------- ------- ------- ------- -------
Total return (b)........................ 11.1%(c) 22.8% 2.3% 10.4% 5.0% 41.8%
Net assets, end of period (in
thousands)............................ $ 192,817 $163,520 $115,607 $84,840 $52,365 $23,822
Ratio of expenses to average daily net
assets (d)............................ .83%(e) .80% .83% .86% .90% .90%
Ratio of net investment income (loss) to
average daily net assets (d).......... (.08)%(e) (.15)% (.09)% .12% .42% .92%
Portfolio turnover rate (excluding
short-term securities)................ 33.5% 51.1% 68.4% 95.9% 138.8% 70.5%
Average commission rate on common stock
transactions.......................... $.0627 N/A N/A N/A N/A N/A
</TABLE>
- ------------------------
(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) Total return is presented for the period from January 1, 1996 to June 30,
1996.
(d) 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 asset would have been .38% and .82%,
respectively.
(e) Adjusted to an annual basis.
78
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS--(CONTINUED)
INTERNATIONAL STOCK PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1996 YEAR ENDED DECEMBER 31, PERIOD FROM MAY 1,
TO -------------------------------- 1992 TO DECEMBER
JUNE 30, 1996 1995 1994 1993 31, 1992(A)
----------------- -------- ------- ------- ------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.410 $1.235 $1.310 $.919 $1.000
------- -------- ------- ------- ------
Income from investment operations:
Net investment income............... .016 .033 .011 .016 .010
Net gains or losses on securities
(both realized and unrealized)..... .102 .142 (.015) .389 (.077)
------- -------- ------- ------- ------
Total from investment
operations..................... .118 .175 (.004) .405 (.067)
------- -------- ------- ------- ------
Less distributions:
Dividends from net investment
income............................. (.039) -- (.029) (.007) (.010)
Excess distributions of net
investment income.................. -- -- -- -- (.002)
Tax return of capital............... -- -- (.001) -- --
Distributions from capital gains.... (.042) -- (.041) (.007) --
Excess distributions of net realized
gains.............................. -- -- -- -- (.002)
------- -------- ------- ------- ------
Total distributions............. (.081) -- (.071) (.014) (.014)
------- -------- ------- ------- ------
Net asset value, end of period.......... $1.447 $1.410 $1.235 $1.310 $.919
------- -------- ------- ------- ------
------- -------- ------- ------- ------
Total return (b)........................ 8.5%(c) 14.2% (.3)% 44.2% (6.8)%(e)
Net assets, end of period (in
thousands)............................ $ 175,523 $140,770 $107,490 $61,106 $ 17,401
Ratio of expenses to average daily net
assets (d)............................ 1.28%(f) 1.04% 1.24% 1.55% 2.00%(f)
Ratio of net investment income to
average daily net assets (d).......... 3.01%(f) 2.69% 1.68% 1.04% 2.10%(f)
Portfolio turnover rate (excluding
short-term securities)................ 2.9% 20.3% 12.9% 12.7% 11.7%
Average commission rate on common stock
transactions.......................... $.0160 N/A N/A N/A N/A
</TABLE>
- ------------------------
(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) Total return is presented for the period from January 1, 1996 to June 30,
1996.
(d) 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%.
(e) Total return presented for the period from May 1, 1992, commencement of
operations, to December 31, 1992.
(f) Adjusted to an annual basis.
79
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS--(CONTINUED)
SMALL COMPANY PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED
JANUARY 1, 1996 DECEMBER 31, PERIOD FROM MAY 3,
TO ------------------------------ 1993 TO DECEMBER
JUNE 30, 1996 1995 1994 31, 1993(A)
------------------ ------------ ------------ ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.602 $1.226 $1.157 $1.000
------- ------ ------ ------
Income from investment operations:
Net investment income............... .001 .002 .002 --
Net gains or losses on securities
(both realized and unrealized)..... .121 .392 .069 .173
------- ------ ------ ------
Total from investment
operations..................... .122 .394 .071 .173
------- ------ ------ ------
Less distributions:
Dividends from net investment
income............................. -- (.002) (.002) --
Distributions from net realized
gains.............................. (.035) (.016) -- (.015)
Excess distributions of net realized
gains.............................. -- -- -- (.001)
------- ------ ------ ------
Total distributions............. (.035) (.018) (.002) (.016)
------- ------ ------ ------
Net asset value, end of period.......... $1.689 $1.602 $1.226 $1.157
------- ------ ------ ------
------- ------ ------ ------
Total return (b)........................ 7.9%(c) 32.1% 6.2% 17.4%(d)
Net assets, end of period (in
thousands)............................ $ 130,983 $ 98,895 $ 51,105 $ 13,043
Ratio of expenses to average daily net
assets (e)............................ .81%(f) .84% .90% .90%(f)
Ratio of net investment income (loss) to
average daily net assets (e).......... .19%(f) .15% .24% (.02)%(f)
Portfolio turnover rate (excluding
short-term securities)................ 42.7% 61.3% 28.1% 34.9%
Average commission rate on common stock
transactions.......................... $.1171 N/A N/A N/A
</TABLE>
- ------------------------
(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 January 1, 1996 to June 30,
1996.
(d) Total return presented for the period from May 3, 1993, commencement of
operations, to December 31, 1993.
(e) 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.
(f) Adjusted to an annual basis.
80
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 1998 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
PERIOD FROM MAY 2, 1994
JANUARY 1, 1996 YEAR ENDED TO
TO DECEMBER 31, DECEMBER 31,
JUNE 30, 1996 1995 1994(A)
------------------ ------------------- -------------------
<S> <C> <C> <C>
Net asset value, beginning of period.... $1.038 $.945 $.989
----- ----- -----
Income from investment operations:
Net investment income............... .031 .059 .043
Net gains or losses on securities
(both realized and unrealized)..... (.028) .092 (.043)
----- ----- -----
Total from investment
operations..................... .003 .151 --
----- ----- -----
Less distributions:
Dividends from net investment
income............................. (.001) (.058) (.044)
Distributions from net realized
gains.............................. -- -- --
----- ----- -----
Total distributions............. (.001) (.058) (.044)
----- ----- -----
Net asset value, end of period.......... $1.040 $1.038 $.945
----- ----- -----
----- ----- -----
Total return (b)........................ .3%(c) 16.0% .1%(d)
Net assets, end of period (in
thousands)............................ $ 5,178 $ 5,057 $ 3,402
Ratio of expenses to average daily net
assets (e)............................ .20%(f) .20% .20%(f)
Ratio of net investment income to
average daily net assets (e).......... 6.13%(f) 6.22% 6.45%(f)
Portfolio turnover rate (excluding
short-term securities)................ 1.4% 9.0% --
</TABLE>
- ------------------------
(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 presented for the period from January 1, 1996 to June 30,
1996.
(d) Total return presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(e) Minnesota Mutual voluntarily absorbed $11,967, $22,794 and $21,714 in
expenses for the period from January 1, 1996 to June 30, 1996, 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 .67%, .72% and 1.12%, respectively, and
the ratio of net investment income to average daily net assets would have
been 5.66%, 5.70% and 5.53%, respectively.
(f) Adjusted to an annual basis.
81
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2002 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM MAY 2,
PERIOD FROM 1994
JANUARY 1, 1996 YEAR ENDED TO
TO DECEMBER 31, DECEMBER 31,
JUNE 30, 1996 1995 1994(A)
------------------ ------------------- -------------------
<S> <C> <C> <C>
Net asset value, beginning of period.... $1.091 $.932 $.977
----- ----- -----
Income from investment operations:
Net investment income............... -- .072 .047
Net gains or losses on securities
(both realized and unrealized)..... (.039) .161 (.044)
----- ----- -----
Total from investment
operations..................... (.039) .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.......... $1.052 $1.091 $.932
----- ----- -----
----- ----- -----
Total return (b)........................ (3.6)%(c) 25.0% .3%(d)
Net assets, end of period (in
thousands)............................ $ 3,418 $ 3,049 $ 2,575
Ratio of expenses to average daily net
assets (e)............................ .20%(f) .20% .20%(f)
Ratio of net investment income to
average daily net assets (e).......... 6.48%(f) 6.52% 7.18%(f)
Portfolio turnover rate (excluding
short-term securities)................ -- -- 11.6%
</TABLE>
- ------------------------
(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 presented for the period from January 1, 1996 to June 30,
1996.
(d) Total return presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(e) Minnesota Mutual voluntarily absorbed $13,756, $24,709 and $23,298 in
expenses for the period from January 1, 1996 to June 30, 1996, 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 1.09%, 1.06% and 1.52%,
respectively, and the ratio of net investment income to average daily net
assets would have been 5.59%, 5.66% and 5.86%, respectively.
(f) Adjusted to an annual basis.
82
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2006 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
PERIOD FROM MAY 2, 1994
JANUARY 1, 1996 YEAR ENDED TO
TO DECEMBER 31, DECEMBER 31,
JUNE 30, 1996 1995 1994(A)
------------------ ------------------- -------------------
<S> <C> <C> <C>
Net asset value, beginning of period.... $1.174 $.923 $.970
----- ----- -----
Income from investment operations:
Net investment income............... .033 .069 .047
Net gains or losses on securities
(both realized and unrealized)..... (.122) .251 (.046)
----- ----- -----
Total from investment
operations..................... (.089) .320 .001
----- ----- -----
Less distributions:
Dividends from net investment
income............................. (.001) (.069) (.048)
Distributions from net realized
gains.............................. (.001) -- --
----- ----- -----
Total distributions............. (.002) (.069) (.048)
----- ----- -----
Net asset value, end of period.......... $1.083 $1.174 $.923
----- ----- -----
----- ----- -----
Total return (b)........................ (7.6)%(c) 34.7% .1%(d)
Net assets, end of period (in
thousands)............................ $ 2,614 $ 2,570 $ 1,860
Ratio of expenses to average daily net
assets (e)............................ .40%(f) .40% .40%(f)
Ratio of net investment income to
average daily net assets (e).......... 6.37%(f) 6.56% 7.45%(f)
Portfolio turnover rate (excluding
short-term securities)................ 6.1% 10.0% --
</TABLE>
- ------------------------
(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 presented for the period from January 1, 1996 to June 30,
1996.
(d) Total return presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(e) Minnesota Mutual voluntarily absorbed $13,814, $25,199 and $24,803 in
expenses for the period from January 1, 1996 to June 30, 1996, 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 1.51%, 1.56% and 2.37%,
respectively, and the ratio of net investment income to average daily net
assets would have been 5.26%, 5.40% and 5.48%, respectively.
(f) Adjusted to an annual basis.
83
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2010 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM MAY 2,
PERIOD FROM 1994
JANUARY 1, 1996 YEAR ENDED TO
TO DECEMBER 31, DECEMBER 31,
JUNE 30, 1996 1995 1994(A)
------------------ ------------------- -------------------
<S> <C> <C> <C>
Net asset value, beginning of period.... $1.214 $.910 $.962
----- ----- -----
Income from investment operations:
Net investment income............... .028 .070 .049
Net gains or losses on securities
(both realized and unrealized)..... (.157) .304 (.052)
----- ----- -----
Total from investment
operations..................... (.129) .374 (.003)
----- ----- -----
Less distributions:
Dividends from net investment
income............................. (.001) (.070) (.049)
Distributions from net realized
gains.............................. -- -- --
----- ----- -----
Total distributions............. (.001) (.070) (.049)
----- ----- -----
Net asset value, end of period.......... $1.084 $1.214 $.910
----- ----- -----
----- ----- -----
Total return (b)........................ (10.6)%(c) 41.2% (.3)%(d)
Net assets, end of period (in
thousands)............................ $ 1,819 $ 1,384 $ 1,071
Ratio of expenses to average daily net
assets (e)............................ .40%(f) .40% .40%(f)
Ratio of net investment income to
average daily net assets (e).......... 6.29%(f) 6.58% 7.79%(f)
Portfolio turnover rate (excluding
short-term securities)................ 10.5% -- 14.5%
</TABLE>
- ------------------------
(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 presented for the period from January 1, 1996 to June 30,
1996.
(d) Total return presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(e) Minnesota Mutual voluntarily absorbed $15,472, $26,308 and $25,888 in
expenses for the period from January 1, 1996 to June 30, 1996, 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 2.42%, 2.68% and 4.01%,
respectively, and the ratio of net investment income to average daily net
assets would have been 4.27%, 4.30% and 4.18%, respectively.
(f) Adjusted to an annual basis.
84
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) FINANCIAL HIGHLIGHTS--(CONTINUED)
VALUE STOCK PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM MAY 2,
PERIOD FROM 1994
JANUARY 1, 1996 YEAR ENDED TO
TO DECEMBER 31, DECEMBER 31,
JUNE 30, 1996 1995 1994(A)
------------------ ------------------- -------------------
<S> <C> <C> <C>
Net asset value, beginning of period.... $1.312 $1.044 $1.010
------ ------ -----
Income from investment operations:
Net investment income............... .006 .010 .008
Net gains or losses on securities
(both realized and unrealized)..... .170 .331 .038
------ ------ -----
Total from investment
operations..................... .176 .341 .046
------ ------ -----
Less distributions:
Dividends from net investment
income............................. -- (.010) (.009)
Distributions from net realized
gains.............................. (.017) (.063) (.003)
------ ------ -----
Total distributions............. (.017) (.073) (.012)
------ ------ -----
Net asset value, end of period.......... $1.471 $1.312 $1.044
------ ------ -----
------ ------ -----
Total return (b)........................ 13.5%(c) 33.0% 4.6%(d)
Net assets, end of period (in
thousands)............................ $ 58,701 $ 31,825 $ 8,771
Ratio of expenses to average daily net
assets (e)............................ .85%(f) .89% .90%(f)
Ratio of net investment income to
average daily net assets (e).......... 1.12%(f) 1.25% 2.07%(f)
Portfolio turnover rate (excluding
short-term securities)................ 50.3% 164.2% 49.5%
Average commission rate on common stock
transactions.......................... $.0793 N/A N/A
</TABLE>
- ------------------------
(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 presented for the period from January 1, 1996 to June 30,
1996.
(d) Total return presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(e) 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.
(f) Adjusted to an annual basis.
85
<PAGE>
SHAREHOLDER VOTING RESULTS
On April 23, 1996, a special shareholder meeting of the Capital Appreciation
Portfolio was held. Shareholders of record on March 6, 1996, were entitled to
vote on the proposal described below.
<TABLE>
<CAPTION>
NUMBER OF SHARE VOTING
--------------------------------
FOR AGAINST ABSTAIN
---------- --------- ---------
<S> <C> <C> <C>
(1) To approve or disapprove a new Investment Sub-Advisor Agreement between
MIMLIC Asset Management Company and Winslow Capital Management, Inc. with
respect to investment sub-advisory services furnished on behalf of the
Capital Appreciation Portfolio........................................... 67,979,215 1,304,342 7,442,420
---------- --------- ---------
---------- --------- ---------
</TABLE>
86
<PAGE>
This offering is available through a registered representative of
MIMLIC Sales Corporation, a registered broker/dealer. MIMLIC Sales
is a subsidiary of Minnesota Mutual.
THIS REPORT MAY BE USED AS SALES LITERATURE IN CONNECTION WITH THE OFFER OR
SALE OF VARIABLE ANNUITY OR LIFE INSURANCE CONTRACTS FUNDED BY MIMLIC
SERIES FUND, INC. ("FUND") IF PRECEEDED OR ACCOMPANIED BY (A) THE
CURRENT PROSPECTUS FOR THE FUND AND SUCH CONTRACTS AND (B) THE
CURRENT VARIABLE ANNUITY PERFORMANCE REPORT, GROUP VARIABLE
ANNUITY PERFORMANCE REPORT, VARIABLE FUND D PERFORMANCE
REPORT, VARIABLE GROUP UNIVERSAL LIFE PORTFOLIO
PERFORMANCE AND HISTORICAL POLICY VALUES
REPORT AND VARIABLE ADJUSTABLE LIFE
PORTFOLIO PERFORMANCE AND HISTORICAL
POLICY VALUES REPORT.
MIMLIC
MIMLIC SALES CORPORATION
400 ROBERT STREET NORTH
ST. PAUL, MN 55101-2098
1-800-443-3677
<PAGE>
F.34490 Rev. 8/96
