<PAGE>
File Numbers 2-96990 and 811-4279
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment Number
----
Post-Effective Amendment Number 14
----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment Number 13
----
---------------------
MIMLIC Series Fund, Inc.
(Exact Name of Registrant as Specified in Charter)
400 Robert Street North
St. Paul, Minnesota 55101-2098
(Address of Principal Executive Offices)
(612) 298-3500
(Registrant's Telephone Number, Including Area Code)
----------------------
Donald F. Gruber, Esq. Copy to:
Secretary J. Sumner Jones, Esq.
MIMLIC Series Fund, Inc. Jones & Blouch L.L.P.
400 Robert Street North 1025 Thomas Jefferson Street, N.W.
St. Paul, Minnesota 55101-2098 Suite 405 West
Washington, D.C. 20007
----------------------
IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (check appropriate box)
immediately upon filing pursuant to paragraph (b)
---
on (date) pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)(1)
---
on (date) pursuant to paragraph (a)(1)
---
x 75 days after filing pursuant to paragraph (a)(2)
---
on (date) pursuant to paragraph (a)(2) of Rule 485.
---
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
this post-effective amendment designates a new effective date for a
--- previously filed post-effective amendment.
Pursuant to Regulation 270.24f-2 under the Investment Company Act of 1940,
Registrant has previously elected to register an indefinite number of its common
shares under the Securities Act of 1933. The Rule 24f-2 Notice for Registrant's
most recent fiscal year was filed on February 27, 1996.
<PAGE>
MIMLIC Series Fund, Inc.
Cross Reference Sheet for Items required by Rule 404(a)
N-1A Item of Part A Caption in Prospectus
- ------------------- ---------------------
1 Cover Page
2 Not Applicable
3 Financial Highlights, Performance Data
4 The Fund
5 The Fund and Its Management
6 The Fund and Its Management, Dividends
and Distributions
7 Purchase and Redemption of Shares
8 Purchase and Redemption of Shares
9 Not Applicable
N-1A Item of Part B Caption in Statement of Additional Information
- ------------------- ----------------------------------------------
10 Cover Page
11 Table of Contents
12 Not Applicable
13 Investment Policies, Investment Restrictions
14 Directors and Executive Officers
15 The Fund
16 Investment Advisory and Other Services
17 Portfolio Transactions and Brokerage
18 Capital Stock and Ownership of Shares
19 Purchase and Redemption of Shares, Net Asset
Value
20 Taxes
21 Purchase and Redemption of Shares
22 Performance Data
23 Financial Statements
<PAGE>
PART A. INFORMATION REQUIRED IN A PROSPECTUS
-------------------------------------
<PAGE>
Prospectus Dated
- --------------------------------------------------------------------------------
MIMLIC SERIES FUND, INC.
- ------------------------------
400 ROBERT STREET NORTH x ST. PAUL, MINNESOTA 55101 x 1-800-443-3677
- --------------------------------------------------------------------------------
-
MIMLIC Series Fund, Inc. (the "Fund"), a Minnesota corporation, is a
diversified, open-end management investment company, commonly known as a mutual
fund. The Fund provides for a range of investment objectives through fourteen
separate investment portfolios: the Growth Portfolio, the Bond Portfolio, the
Money Market Portfolio, the Asset Allocation Portfolio, the Mortgage Securities
Portfolio, the Index 500 Portfolio, the Capital Appreciation Portfolio, the
International Stock Portfolio, the Small Company Portfolio, the Value Stock
Portfolio and four Maturing Government Bond Portfolios, maturing respectively in
1998, 2002, 2006 and 2010 (herein referred to as "Portfolios"). A separate
series of the Fund's common stock is issued for each Portfolio.
Shares of the Fund are not offered directly to the public. They are sold only
to The Minnesota Mutual Life Insurance Company ("Minnesota Mutual") in
connection with its variable life insurance policies and variable annuity
contracts.
The investment objectives and certain policies and risks associated with the
Portfolios are as follows:
The Growth Portfolio seeks the long-term accumulation of capital.
Current income, while a factor in investment selection, is a secondary
objective. In pursuit of these objectives the Growth Portfolio will invest
primarily in common stocks and other equity securities. Common stocks are
more volatile than debt securities and involve greater investment risk.
The Bond Portfolio seeks as high a level of long-term total rate of
return as is consistent with prudent investment risk. A secondary objective
is to seek preservation of capital. In pursuit of these objectives the Bond
Portfolio will invest primarily in long-term, fixed-income, high-quality
debt instruments. The value of debt securities will tend to rise and fall
inversely with the rise and fall of interest rates.
The Money Market Portfolio seeks maximum current income to the extent
consistent with liquidity and the preservation of capital. In pursuit of
this objective the Money Market Portfolio will follow a policy of investing
in money market instruments and other debt securities with maturities not
exceeding one year. The return produced by these securities will reflect
fluctuations in short-term interest rates.
AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE
PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE.
The Asset Allocation Portfolio seeks as high a level of long-term total
rate of return as is consistent with prudent investment risk. In pursuit of
this objective the Asset Allocation Portfolio will invest in common stocks
and other equity securities, bonds, mortgage-related securities and money
market instruments. The Asset Allocation Portfolio involves the risks
inherent in stocks and debt securities of varying maturities, and the risk
that the Portfolio may invest too much or too little of its assets in each
type of security at any particular time.
The Mortgage Securities Portfolio seeks a high level of current income
consistent with prudent investment risk. In pursuit of this objective the
Mortgage Securities Portfolio will invest primarily in a diversified
portfolio of mortgage-related securities. Prices of mortgage-related
securities will tend to rise and fall inversely with the rise and fall of
the general level of interest rates. In addition, the rate of prepayment of
mortgages underlying mortgage-related securities tends to increase during
periods of declining interest rates, and such prepayments must be reinvested
at the then prevailing lower interest rates.
(CONTINUED ON NEXT PAGE)
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
The Index 500 Portfolio seeks to provide investment results that
correspond generally to the price and yield performance of the common stocks
included in the Standard & Poor's Corporation 500 Composite Stock Price
Index (the "Index"). All common stocks, including those in the Index,
involve greater investment risk than debt securities. The fact that a stock
has been included in the Index affords no assurance against declines in the
price or yield performance of that stock.
The Capital Appreciation Portfolio seeks growth of capital. Investments
will be made based upon their potential for capital appreciation. Therefore,
current income will be incidental to the objective of capital growth.
Because of the market risks inherent in any equity investment, the selection
of securities on the basis of their appreciation possibilities cannot ensure
against possible loss in value.
The International Stock Portfolio seeks long-term capital growth. In
pursuit of this objective the International Stock Portfolio will follow a
policy of investing in stocks issued by companies, large and small, and debt
obligations of companies and governments outside the United States. Current
income will be incidental to the objective of capital growth. The Portfolio
is designed for persons seeking international diversification. Investors
should consider carefully the substantial risks involved in investing in
securities issued by companies and governments of foreign nations, which are
in addition to the usual risks inherent in domestic investments.
The Small Company Portfolio seeks the long-term accumulation of capital.
In pursuit of this objective, the Small Company Portfolio will follow a
policy of investing primarily in common and preferred stocks issued by small
companies, defined in terms of either market capitalization or gross
revenues. Investments in small companies usually involve greater investment
risks than fixed income securities or corporate equity securities generally.
Dividend income will be incidental to the investment objective for this
Portfolio.
The Value Stock Portfolio seeks the long-term accumulation of capital.
In pursuit of this objective, the Value Stock Portfolio will follow a policy
of investing primarily in the equity securities of companies which, in the
opinion of the adviser, have market values which appear low relative to
their underlying value or future earnings and growth potential. As it is
anticipated that the Portfolio will consist in large part of dividend-paying
common stocks, the production of income will be a secondary objective of the
Portfolio.
The Maturing Government Bond Portfolios seek to provide as high an
investment return as is consistent with prudent investment risk for a
specified period of time ending on a specified liquidation date. In pursuit
of this objective each of the Maturing Government Bond Portfolios seeks to
return a reasonably assured targeted dollar amount, predictable at the time
of investment, on a specific target date in the future through investment in
a portfolio composed primarily of zero coupon securities. These are
securities that pay no cash income and are sold at a discount from their par
value at maturity. The current target dates for the maturities of these
Portfolios are 1998, 2002, 2006 and 2010, respectively.
The Small Company Value Portfolio seeks the long-term accumulation of
capital. It will follow a policy of investing primarily in the equity
securities of small companies, defined in terms of either market
capitalization or gross revenues, which appear to have market values which
are low relative to their underlying value or future earnings and growth
potential. Dividend income will be incidental to the investment objective
for this Portfolio.
The Global Bond Portfolio seeks to maximize the total return, consistent
with preservation of capital and prudent investment management. The
Portfolio will attempt to achieve its investment objective by investing
primarily in debt securities issued by issuers located anywhere in the
world.
There is no assurance that the investment objectives of any of the Fund's
Portfolios will be realized. See "Investment Objectives, Policies and Risks" on
page 20.
This Prospectus sets forth concisely the information that a prospective
investor should know before investing in the Fund, and it should be read and
kept for future reference. A Statement of Additional Information dated ,
1996, which contains further information about the Fund, has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
Prospectus. A copy of the Statement of Additional Information may be obtained
without charge by calling (612) 298-3500, or by writing the Fund at its
principal office at Minnesota Mutual Life Center, 400 Robert Street North, St.
Paul, Minnesota 55101-2098.
2
<PAGE>
- --------------------------------------------------------------------------------
x
TABLE OF
CONTENTS
- ------------
<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS...................................................... 4
PERFORMANCE DATA.......................................................... 18
THE FUND.................................................................. 19
INVESTMENT OBJECTIVES, POLICIES AND RISKS................................. 20
GROWTH PORTFOLIO...................................................... 20
BOND PORTFOLIO........................................................ 21
MONEY MARKET PORTFOLIO................................................ 23
ASSET ALLOCATION PORTFOLIO............................................ 25
MORTGAGE SECURITIES PORTFOLIO......................................... 25
INDEX 500 PORTFOLIO................................................... 29
CAPITAL APPRECIATION PORTFOLIO........................................ 30
INTERNATIONAL STOCK PORTFOLIO......................................... 30
SMALL COMPANY PORTFOLIO............................................... 33
VALUE STOCK PORTFOLIO................................................. 34
MATURING GOVERNMENT BOND PORTFOLIOS................................... 36
SMALL COMPANY VALUE PORTFOLIO......................................... 39
GLOBAL BOND PORTFOLIO................................................. 44
INVESTMENT RESTRICTIONS................................................... 46
THE FUND AND ITS MANAGEMENT............................................... 47
INVESTMENT ADVISER........................................................ 47
INVESTMENT SUB-ADVISERS................................................... 50
PURCHASE AND REDEMPTION OF SHARES......................................... 51
DIVIDENDS AND DISTRIBUTIONS............................................... 52
TAXES..................................................................... 52
CUSTODIANS................................................................ 52
APPENDIX A................................................................ 53
APPENDIX B................................................................ 55
APPENDIX C................................................................ 56
</TABLE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the offer contained in this Prospectus, and, if
given or made, such other information or representations must not be relied upon
as having been authorized by the Fund or the Investment Adviser. This Prospectus
does not constitute an offering in any state in which such offering may not
lawfully be made.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables, for each Portfolio, which show certain per share data
for a share of capital stock outstanding during the periods and selected
information for each period, have been audited by KPMG Peat Marwick LLP,
independent auditors, as set forth in their report appearing in the Statement of
Additional Information. This information should be read in conjunction with the
financial statements and related notes of MIMLIC Series Fund, Inc., included in
the Statement of Additional Information.
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
-------- -------- ------- ------- ------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year........................ $1.866 $1.912 $1.889 $1.864 $1.391 $1.406 $1.149 $1.017 $1.056 $1.073
-------- -------- ------- ------- ------- ------ ------ ------ ------ -----
Income from investment
operations:
Net investment income..... .021 .019 .020 .026 .031 .010 .028 .032 .017 .023
Net gains or losses on
securities (both
realized and
unrealized)............. .416 (.005) .063 .060 .442 (.007) .271 .129 .031 (.032)
-------- -------- ------- ------- ------- ------ ------ ------ ------ -----
Total from investment
operations......... .437 .014 .083 .086 .473 .003 .299 .161 .048 (.009)
-------- -------- ------- ------- ------- ------ ------ ------ ------ -----
Less distributions:
Dividends from net
investment income....... (.020) (.020) (.027) (.031) -- (.012) (.030) (.029) (.042) (.006)
Distributions from capital
gains................... (.073) (.040) (.033) (.030) -- (.006) (.012) -- (.045) (.002)
-------- -------- ------- ------- ------- ------ ------ ------ ------ -----
Total distributions... (.093) (.060) (.060) (.061) -- (.018) (.042) (.029) (.087) (.008)
-------- -------- ------- ------- ------- ------ ------ ------ ------ -----
Net asset value, end of
year........................ $2.210 $1.866 $1.912 $1.889 $1.864 $1.391 $1.406 $1.149 $1.017 $1.056
-------- -------- ------- ------- ------- ------ ------ ------ ------ -----
-------- -------- ------- ------- ------- ------ ------ ------ ------ -----
Total return (a).............. 24.3% .8% 4.7% 4.8% 34.1% .2% 26.0% 15.9% 4.2% (.9)%
Net assets, end of year (in
thousands).................. $201,678 $157,369 $125,745 $99,128 $75,518 $51,485 $7,809 $3,996 $2,867 $ 1,428
Ratio of expenses to average
daily net assets (b)........ .55% .56% .58% .58% .63% .65% .65% .65% .66% .75%
Ratio of net investment income
to average daily net
assets (b).................. 1.04% 1.22% 1.21% 1.72% 2.11% 2.70% 2.74% 3.05% 2.59% 2.60%
Portfolio turnover rate
(excluding short-term
securities)................. 91.9% 42.0% 51.0% 22.4% 15.7% 19.2% 32.4% 34.1% 29.3% 86.3%
<FN>
- ---------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Minnesota Mutual voluntarily absorbed $293, $6,738, $11,045, $9,202 and
$13,595 in expenses for the years ended December 31, 1990, 1989, 1988, 1987
and 1986, respectively. Had the portfolio paid all fees and expenses, the
ratio of expenses to average daily net assets would have been .65%, .76%,
.95%, 1.00% and 1.80%, respectively, and the ratio of net investment income
to average daily net assets would have been 2.70%, 2.63%, 2.75%, 2.25% and
1.55%, respectively.
</TABLE>
4
<PAGE>
BOND PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year...... $1.157 $1.300 $1.258 $1.264 $1.075 $1.080 $1.026 $1.027 $1.160 $1.063
------- ------- ------- ------- ------ ------ ------ ------ ------ -----
Income from investment operations:
Net investment income............... .074 .042 .051 .053 .078 .083 .077 .073 .076 .054
Net gains or losses on securities
(both realized and unrealized).... .147 (.100) .074 .024 .111 (.005) .053 (.001) (.054) .059
------- ------- ------- ------- ------ ------ ------ ------ ------ -----
Total from investment
operations................... .221 (.058) .125 .077 .189 .078 .130 .072 .022 .113
------- ------- ------- ------- ------ ------ ------ ------ ------ -----
Less distributions:
Dividends from net investment
income............................ (.046) (.052) (.058) (.069) -- (.083) (.076) (.073) (.134) (.016)
Distributions from capital gains.... -- (.033) (.025) (.014) -- -- -- -- (.021) --
------- ------- ------- ------- ------ ------ ------ ------ ------ -----
Total distributions............. (.046) (.085) (.083) (.083) -- (.083) (.076) (.073) (.155) (.016)
------- ------- ------- ------- ------ ------ ------ ------ ------ -----
Net asset value, end of year............ $1.332 $1.157 $1.300 $1.258 $1.264 $1.075 $1.080 $1.026 $1.027 $1.160
------- ------- ------- ------- ------ ------ ------ ------ ------ -----
------- ------- ------- ------- ------ ------ ------ ------ ------ -----
Total return (a)........................ 19.8% (4.6)% 10.3% 6.7% 17.6% 7.2% 12.7% 7.1% 1.6% 10.7%
Net assets, end of year (in
thousands)............................ $101,045 $74,679 $43,927 $24,914 $13,088 $9,325 $6,080 $3,284 $2,213 $ 2,123
Ratio of expenses to average daily net
assets (b)............................ .58% .61% .64% .65% .65% .65% .65% .65% .67% .75%
Ratio of net investment income to
average daily net assets (b).......... 6.57% 6.12% 5.57% 6.56% 7.79% 8.29% 9.15% 7.88% 7.64% 7.27%
Portfolio turnover rate (excluding
short-term securities)................ 205.4% 166.2% 166.8% 140.2% 93.8% 77.7% 117.7% 210.3% 138.5% 117.8%
<FN>
- ---------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Minnesota Mutual voluntarily absorbed $12,179, $13,182, $5,834, $6,951,
$9,621, $6,676 and $2,746 in expenses for the years ended December 31,
1992, 1991, 1990, 1989, 1988, 1987 and 1986, respectively. Had the
portfolio paid all fees and expenses, the ratio of expenses to average
daily net assets would have been .72%, .78%, .72%, .80%, .98%, .94% and
.97%, respectively, and the ratio of net investment income to average daily
net assets would have been 6.49%, 7.66%, 8.22%, 9.00%, 7.55%, 7.37% and
7.05%, respectively.
</TABLE>
5
<PAGE>
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year...... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income............... .053 .036 .027 .032 .053 .075 .082 .064 .054 .053
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from investment
operations................... .053 .036 .027 .032 .053 .075 .082 .064 .054 .053
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment
income............................ (.053) (.036) (.027) (.032) (.053) (.075) (.082) (.064) (.054) (.053)
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total distributions............. (.053) (.036) (.027) (.032) (.053) (.075) (.082) (.064) (.054) (.053)
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net asset value, end of year............ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total return (a)........................ 5.4% 4.2% 2.7% 3.2% 5.4% 7.7% 8.6% 6.6% 5.6% 5.4%
Net assets, end of year (in
thousands)............................ $30,166 $23,107 $18,423 $13,591 $12,834 $9,555 $5,838 $2,471 $1,504 $ 766
Ratio of expenses to average daily net
assets (b)............................ .64% .65% .65% .65% .65% .65% .65% .65% .66% .75%
Ratio of net investment income to
average daily net assets (b).......... 5.29% 3.71% 2.65% 3.17% 5.26% 7.46% 8.22% 6.52% 5.47% 5.17%
<FN>
- ---------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Minnesota Mutual voluntarily absorbed $13,734, $23,714, $20,913, $22,877,
$14,752, $11,987, $11,919, $10,690 and $3,973 in expenses for the years
ended December 31, 1994, 1993, 1992, 1991, 1990, 1989, 1988, 1987 and 1986,
respectively. Had the portfolio paid all fees and expenses the ratio of
expenses to average daily net assets would have been .72%, .81%, .80%,
.85%, .84%, .95%, 1.24%, 1.76% and 1.36%, respectively, and the ratio of
net investment income to average daily net assets would have been 3.64%,
2.49%, 3.02%, 5.06%, 7.27%, 7.92%, 5.93%, 4.37% and 4.56%, respectively.
</TABLE>
6
<PAGE>
ASSET ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year.......................... $1.524 $1.589 $1.574 $1.558 $1.209 $1.232 $1.101 $1.046 $1.092 $1.065
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------
Income from investment
operations:
Net investment income....... .061 .047 .030 .034 .047 .061 .066 .059 .037 .027
Net gains or losses on
securities (both realized
and unrealized)........... .308 (.069) .066 .070 .302 (.017) .156 .056 (.012) .011
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------
Total from investment
operations........... .369 (.022) .096 .104 .349 .044 .222 .115 .025 .038
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------
Less distributions:
Dividends from net
investment income......... (.049) (.033) (.037) (.041) -- (.063) (.065) (.060) (.067) (.009)
Distributions from capital
gains..................... (.018) (.010) (.044) (.047) -- (.004) (.026) -- (.004) (.002)
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------
Total distributions..... (.067) (.043) (.081) (.088) -- (.067) (.091) (.060) (.071) (.011)
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------
Net asset value, end of year.... $1.826 $1.524 $1.589 $1.574 $1.558 $1.209 $1.232 $1.101 $1.046 $1.092
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------
Total return (a)................ 25.0% (1.4)% 6.5% 7.3% 28.9% 3.6% 20.2% 11.1% 2.1% 3.6%
Net assets, end of year (in
thousands).................... $349,010 $272,629 $250,011 $150,998 $68,592 $35,455 $22,205 $15,161 $12,037 $6,307
Ratio of expenses to average
daily net assets (b).......... .55% .56% .57% .60% .62% .65% .65% .65% .66% .75%
Ratio of net investment income
to average daily net assets
(b)........................... 3.75% 3.31% 2.63% 3.68% 4.50% 5.71% 6.23% 5.75% 4.85% 4.64%
Portfolio turnover rate
(excluding short-term
securities)................... 157.0% 123.6% 85.7% 106.5% 78.6% 67.2% 93.0% 190.2% 99.5% 58.9%
<FN>
- ---------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Minnesota Mutual voluntarily absorbed $2,078, $13,305, $3,453, and $12,854
in expenses for the years ended December 31, 1989, 1988, 1987 and 1986,
respectively. Had the portfolio paid all fees and expenses, the ratio of
expenses to average daily net assets would have been .66%, .74%, .69% and
1.09%, respectively, and the ratio of net investment income to average
daily net assets would have been 6.22%, 5.66%, 4.82% and 4.30%,
respectively.
</TABLE>
7
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $1.098 $1.218 $1.185 $1.196 $1.029 $1.018 $.976 $.979
------- ------- ------- ------- ------- ------- ------ ------
Income from investment operations:
Net investment income......................... .081 .074 .054 .045 .069 .086 .084 .086
Net gains or losses on securities (both
realized and unrealized).................... .107 (.115) .052 .024 .098 .011 .047 (.002)
------- ------- ------- ------- ------- ------- ------ ------
Total from investment operations.......... .188 (.041) .106 .069 .167 .097 .131 .084
------- ------- ------- ------- ------- ------- ------ ------
Less distributions:
Dividends from net investment income.......... (.079) (.054) (.055) (.056) -- (.085) (.084) (.087)
Distributions from capital gains.............. -- (.025) (.018) (.024) -- (.001) (.005) --
------- ------- ------- ------- ------- ------- ------ ------
Total distributions....................... (.079) (.079) (.073) (.080) -- (.086) (.089) (.087)
------- ------- ------- ------- ------- ------- ------ ------
Net asset value, end of period.................... $1.207 $1.098 $1.218 $1.185 $1.196 $1.029 $1.018 $.976
------- ------- ------- ------- ------- ------- ------ ------
------- ------- ------- ------- ------- ------- ------ ------
Total return (b).................................. 18.0% (3.4)% 9.3% 6.4% 16.3% 9.4% 13.5% 8.6%
Net assets, end of period (in thousands).......... $69,746 $59,666 $63,902 $37,011 $16,520 $12,124 $8,172 $6,002
Ratio of expenses to average daily net
assets (c)...................................... .58% .60% .63% .65% .65% .65% .65% .65%
Ratio of net investment income to average daily
net assets (c).................................. 7.09% 6.55% 5.87% 6.64% 8.02% 8.80% 8.84% 8.83%
Portfolio turnover rate (excluding short-term
securities)..................................... 133.7% 197.3% 138.4% 96.2% 112.0% 5.2% 51.7% 10.1%
<CAPTION>
PERIOD FROM
APRIL 28,
1987 (A) TO
DECEMBER 31,
1987
------------
<S> <C>
Net asset value, beginning of period.............. $1.000
-----
Income from investment operations:
Net investment income......................... .050
Net gains or losses on securities (both
realized and unrealized).................... (.019)
-----
Total from investment operations.......... .031
-----
Less distributions:
Dividends from net investment income.......... (.051)
Distributions from capital gains.............. (.001)
-----
Total distributions....................... (.052)
-----
Net asset value, end of period.................... $.979
-----
-----
Total return (b).................................. 3.0%(d)
Net assets, end of period (in thousands).......... $5,112
Ratio of expenses to average daily net
assets (c)...................................... .65%(e)
Ratio of net investment income to average daily
net assets (c).................................. 8.71%(e)
Portfolio turnover rate (excluding short-term
securities)..................................... 2.2%
<FN>
- ---------
(a) The inception of the portfolio was April 28, 1987. However, operations did
not commence until May 1, 1987 when the shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Minnesota Mutual voluntarily absorbed $10,341, $16,372, $3,492, $3,393,
$6,738 and $1,757 in expenses for the years ended December 31, 1992, 1991,
1990, 1989, 1988 and the period ended December 31, 1987, respectively. Had
the portfolio paid all fees and expenses, the ratio of expenses to average
daily net assets would have been .69%, .79%, .68%, .69%, .76% and .71%,
respectively, and the ratio of net investment income to average daily net
assets would have been 6.60%, 7.88%, 8.77%, 8.80%, 8.72% and 8.65%,
respectively.
(d) Total return is presented for the period from May 1, 1987, commencement of
operations, to December 31, 1987.
(e) Adjusted to an annual basis.
</TABLE>
8
<PAGE>
INDEX 500 PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $1.518 $1.532 $1.428 $1.454 $1.120 $1.204 $.950 $.853
------- ------- ------- ------- ------- ------- ------- ------
Income from investment operations:
Net investment income......................... .031 .029 .026 .024 .034 .032 .026 .035
Net gains or losses on securities (both
realized and unrealized).................... .517 (.012) .110 .073 .300 (.080) .262 .103
------- ------- ------- ------- ------- ------- ------- ------
Total from investment operations.......... .548 .017 .136 .097 .334 (.048) .288 .138
------- ------- ------- ------- ------- ------- ------- ------
Less distributions:
Dividends from net investment income.......... (.031) (.026) (.025) (.032) -- (.035) (.024) (.036)
Distributions from capital gains.............. (.012) (.005) (.007) (.091) -- (.001) (.010) (.005)
------- ------- ------- ------- ------- ------- ------- ------
Total distributions....................... (.043) (.031) (.032) (.123) -- (.036) (.034) (.041)
------- ------- ------- ------- ------- ------- ------- ------
Net asset value, end of period.................... $2.023 $1.518 $1.532 $1.428 $1.454 $1.120 $1.204 $.950
------- ------- ------- ------- ------- ------- ------- ------
------- ------- ------- ------- ------- ------- ------- ------
Total return (b).................................. 36.8% 1.2% 9.8% 7.4% 29.8% (3.9)% 30.7% 16.0%
Net assets, end of period (in thousands).......... $123,999 $73,432 $56,209 $35,620 $20,999 $18,204 $14,002 $6,225
Ratio of expenses to average daily net
assets (c)...................................... .47% .50% .55% .55% .55% .55% .55% .55%
Ratio of net investment income to average daily
net assets (c).................................. 2.08% 2.34% 2.27% 2.42% 2.70% 3.16% 3.09% 4.06%
Portfolio turnover rate (excluding short-term
securities)..................................... 4.8% 5.9% 4.8% 6.1% 26.4% 4.3% 8.8% 8.0%
<CAPTION>
PERIOD FROM
APRIL 28,
1987 (A) TO
DECEMBER 31,
1987
------------
<S> <C>
Net asset value, beginning of period.............. $1.000
-----
Income from investment operations:
Net investment income......................... .020
Net gains or losses on securities (both
realized and unrealized).................... (.148)
-----
Total from investment operations.......... (.128)
-----
Less distributions:
Dividends from net investment income.......... (.018)
Distributions from capital gains.............. (.001)
-----
Total distributions....................... (.019)
-----
Net asset value, end of period.................... $.853
-----
-----
Total return (b).................................. (12.9)%(d)
Net assets, end of period (in thousands).......... $4,808
Ratio of expenses to average daily net
assets (c)...................................... .55%(e)
Ratio of net investment income to average daily
net assets (c).................................. 3.55%(e)
Portfolio turnover rate (excluding short-term
securities)..................................... 5.7%
<FN>
- ---------
(a) The inception of the portfolio was April 28, 1987. However, operations did
not commence until May 1, 1987 when the shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Minnesota Mutual voluntarily absorbed $7,228, $13,123, $3,284, $6,269,
$8,068 and $5,831 in expenses for the years ended December 31, 1992, 1991,
1990, 1989, 1988 and the period ended December 31, 1987, respectively. Had
the portfolio paid all fees and expenses, the ratio of expenses to average
daily net assets would have been .58%, .62%, .57%, .61%, .69% and .74%,
respectively, and the ratio of net investment income to average daily net
assets would have been 2.39%, 2.63%, 3.14%, 3.03%, 3.92% and 3.36%,
respectively.
(d) Total return is presented for the period from May 1, 1987, commencement of
operations, to December 31, 1987.
(e) Adjusted to an annual basis.
</TABLE>
9
<PAGE>
CAPITAL APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 28,
YEAR ENDED DECEMBER 31, 1987 (A) TO
------------------------------------------------------------------------ DECEMBER 31,
1995 1994 1993 1992 (B) 1991 1990 1989 1988 1987
-------- -------- ------- -------- ------- ------- ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.808 $1.797 $1.682 $1.684 $1.198 $1.265 $.954 $.899 $1.000
-------- -------- ------- -------- ------- ------- ------ ------ -----
Income from investment operations:
Net investment income............... (.003) -- .001 .004 .009 .010 .008 .006 .006
Net gains or losses on securities
(both realized and unrealized).... .406 .039 .167 .078 .488 (.035) .355 .063 (.081)
-------- -------- ------- -------- ------- ------- ------ ------ -----
Total from investment
operations................... .403 .039 .168 .082 .497 (.025) .363 .069 (.075)
-------- -------- ------- -------- ------- ------- ------ ------ -----
Less distributions:
Dividends from net investment
income............................ -- (.002) (.005) (.009) (.003) (.009) (.007) (.006) (.005)
Distributions from capital gains.... (.051) (.026) (.048) (.075) (.008) (.033) (.045) (.008) (.021)
-------- -------- ------- -------- ------- ------- ------ ------ -----
Total distributions............. (.051) (.028) (.053) (.084) (.011) (.042) (.052) (.014) (.026)
-------- -------- ------- -------- ------- ------- ------ ------ -----
Net asset value, end of period.......... $2.160 $1.808 $1.797 $1.682 $1.684 $1.198 $1.265 $.954 $.899
-------- -------- ------- -------- ------- ------- ------ ------ -----
-------- -------- ------- -------- ------- ------- ------ ------ -----
Total return (c)........................ 22.8% 2.3% 10.4% 5.0% 41.8% (2.1)% 38.2% 7.8% (7.5)%(e)
Net assets, end of period (in
thousands)............................ $163,520 $115,607 $84,840 $52,365 $23,822 $10,241 $5,386 $2,184 $1,250
Ratio of expenses to average daily net
assets (d)............................ .80% .83% .86% .90% .90% .90% .90% .90% .90%(f)
Ratio of net investment income to
average daily net assets (d).......... (.15)% (.09)% .12% .42% .92% 1.15% 1.03% .91% 1.19%(f)
Portfolio turnover rate (excluding
short-term securities)................ 51.1% 68.4% 95.9% 138.8% 70.5% 57.9% 89.1% 103.0% 121.6%
<FN>
- ---------
(a) The inception of the portfolio was April 28, 1987. However, operations did
not commence until May 1, 1987 when the shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) On October 1, 1992, the portfolio entered into a new sub-advisory agreement
with Winslow Capital Management, Inc. to perform sub-advisory services for
the portfolio. Prior to October 1, 1992, the portfolio had a sub-advisory
agreement with Alliance Capital Management L.P. for sub-advisory services.
(c) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(d) Minnesota Mutual voluntarily absorbed $16,612, $15,552, $7,786, $8,899,
$12,636 and $7,450 in expenses for the years ended December 31, 1992, 1991,
1990, 1989, 1988 and the period ended December 31, 1987, respectively. Had
the portfolio paid all fees and expenses, the ratio of expenses to average
daily net assets would have been .94%, 1.00%, 1.00%, 1.14%, 1.62% and
1.96%, respectively, and the ratio of net investment income to average
daily net assets would have been .38%, .82%, 1.05%, .79%, .19% and .13%,
respectively.
(e) Total return is presented for the period from May 1, 1987, commencement of
operations, to December 31, 1987.
(f) Adjusted to an annual basis.
</TABLE>
10
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Net asset value, beginning of period...................................................... $1.235 $1.310 $.919
-------- -------- -------
Income from investment operations:
Net investment income................................................................. .033 .011 .016
Net gains or losses on securities (both realized and unrealized)...................... .142 (.015) .389
-------- -------- -------
Total from investment operations.................................................. .175 (.004) .405
-------- -------- -------
Less distributions:
Dividends from net investment income.................................................. -- (.029) (.007)
Excess distributions of net investment income......................................... -- -- --
Tax return of capital................................................................. -- (.001) --
Distributions from capital gains...................................................... -- (.041) (.007)
Excess distributions of net realized gains............................................ -- -- --
-------- -------- -------
Total distributions............................................................... -- (.071) (.014)
-------- -------- -------
Net asset value, end of period............................................................ $1.410 $1.235 $1.310
-------- -------- -------
-------- -------- -------
Total return (b).......................................................................... 14.2% (.3)% 44.2%
Net assets, end of period (in thousands).................................................. $140,770 $107,490 $61,106
Ratio of expenses to average daily net assets (c)......................................... 1.04% 1.24% 1.55%
Ratio of net investment income to average daily net assets (c)............................ 2.69% 1.68% 1.04%
Portfolio turnover rate (excluding short-term securities)................................. 20.3% 12.9% 12.7%
<CAPTION>
PERIOD FROM
MAY 1,
1992 (A) TO
DECEMBER 31,
1992
------------
<S> <C>
Net asset value, beginning of period...................................................... $1.000
------
Income from investment operations:
Net investment income................................................................. .010
Net gains or losses on securities (both realized and unrealized)...................... (.077)
------
Total from investment operations.................................................. (.067)
------
Less distributions:
Dividends from net investment income.................................................. (.010)
Excess distributions of net investment income......................................... (.002)
Tax return of capital................................................................. --
Distributions from capital gains...................................................... --
Excess distributions of net realized gains............................................ (.002)
------
Total distributions............................................................... (.014)
------
Net asset value, end of period............................................................ $.919
------
------
Total return (b).......................................................................... (6.8)%(d)
Net assets, end of period (in thousands).................................................. $17,401
Ratio of expenses to average daily net assets (c)......................................... 2.00%(e)
Ratio of net investment income to average daily net assets (c)............................ 2.10%(e)
Portfolio turnover rate (excluding short-term securities)................................. 11.7%
<FN>
- ---------
(a) The inception of the portfolio was January 21, 1992. However, operations
did not commence until May 1, 1992 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Minnesota Mutual voluntarily absorbed $8,450 in expenses for the period
from May 1, 1992 to December 31, 1992. Had the portfolio paid all fees and
expenses the ratio of expenses to average daily net assets would have been
2.09% and the ratio of net investment income to average daily net assets
would have been 2.01%.
(d) Total return presented for the period from May 1, 1992, commencement of
operations, to December 31, 1992.
(e) Adjusted to an annual basis.
</TABLE>
11
<PAGE>
SMALL COMPANY PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, MAY 3,
1993 (A) TO
--------------------------- DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period............................................ $1.226 $1.157 $1.000
------ ------ ------
Income from investment operations:
Net investment income....................................................... .002 .002 --
Net gains or losses on securities (both realized and unrealized)............ .392 .069 .173
------ ------ ------
Total from investment operations........................................ .394 .071 .173
------ ------ ------
Less distributions:
Dividends from net investment income........................................ (.002) (.002) --
Distributions from net realized gains....................................... (.016) -- (.015)
Excess distributions of net realized gains.................................. -- -- (.001)
------ ------ ------
Total distributions..................................................... (.018) (.002) (.016)
------ ------ ------
Net asset value, end of period.................................................. $1.602 $1.226 $1.157
------ ------ ------
------ ------ ------
Total return (b)................................................................ 32.1% 6.2% 17.4%(c)
Net assets, end of period (in thousands)........................................ $ 98,895 $ 51,105 $13,043
Ratio of expenses to average daily net assets (d)............................... .84% .89% .90%(e)
Ratio of net investment income (loss) to average daily net assets (d)........... .15% .24% (.02)%(e)
Portfolio turnover rate (excluding short-term securities)....................... 61.3% 28.1% 34.9%
<FN>
- ---------
(a) The inception of the portfolio was January 26, 1993. However, operations
did not commence until May 3, 1993 when the shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return presented for the period from May 3, 1993, commencement of
operations, to December 31, 1993.
(d) Minnesota Mutual voluntarily absorbed $9,532 and $30,330 in expenses for
the year ended December 31, 1994 and the period from May 3, 1993 to
December 31, 1993. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been .92% and 1.58%,
respectively and the ratio of net investment income (loss) to average daily
net assets would have been .21% and (.70)%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
12
<PAGE>
MATURING GOVERNMENT BOND 1998 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR MAY 2,
ENDED 1994 (A) TO
DECEMBER DECEMBER 31,
31, 1995 1994
-------- ------------
<S> <C> <C>
Net asset value, beginning of
period...................... $.945 $.989
-------- ------
Income from investment
operations:
Net investment income..... .059 .043
Net gains or losses on
securities (both realized
and unrealized).......... .092 (.043)
-------- ------
Total from investment
operations........... .151 --
-------- ------
Less distributions:
Dividends from net
investment income........ (.058 ) (.044)
Distributions from capital
gains.................... -- --
-------- ------
Total distributions... (.058 ) (.044)
-------- ------
Net asset value, end of
period...................... $1.038 $.945
-------- ------
-------- ------
Total return (b).............. 16.0 % .1%(c)
Net assets, end of period (in
thousands).................. $5,057 $3,402
Ratio of expenses to average
daily net assets (d)........ .20 % .20%(e)
Ratio of net investment income
to average daily net assets
(d)......................... 6.22 % 6.45%(e)
Portfolio turnover rate
(excluding short-term
securities)................. 9.0 % --
<FN>
- ---------
(a) The inception of the portfolio was November 9, 1993. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $22,794 and $21,714 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been .72% and 1.12%,
respectively, and the ratio of net investment income to average daily net
assets would have been 5.70% and 5.53%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
13
<PAGE>
MATURING GOVERNMENT BOND 2002 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR MAY 2,
ENDED 1994 (A) TO
DECEMBER DECEMBER 31,
31, 1995 1994 (A)
-------- ------------
<S> <C> <C>
Net asset value, beginning of period.... $.932 $.977
-------- -----
Income from investment operations:
Net investment income............... .072 .047
Net gains or losses on securities
(both realized and unrealized)..... .161 (.044)
-------- -----
Total from investment
operations..................... .233 .003
-------- -----
Less distributions:
Dividends from net investment
income............................. (.072 ) (.048)
Tax return of capital............... (.002 ) --
Distributions from capital gains.... -- --
-------- -----
Total distributions............. (.074 ) (.048)
-------- -----
Net asset value, end of period.......... $1.091 $.932
-------- -----
-------- -----
Total return (b)........................ 25.0 % .3%(c)
Net assets, end of period (in
thousands)............................ $3,049 $ 2,575
Ratio of expenses to average daily net
assets (d)............................ .20 % .20%(e)
Ratio of net investment income to
average daily net assets (d).......... 6.52 % 7.18%(e)
Portfolio turnover rate (excluding
short-term securities)................ -- 11.6%
<FN>
- ---------
(a) The inception of the portfolio was November 9, 1993. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $24,709 and $23,298 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been 1.06% and 1.52%,
respectively and the ratio of net investment income to average daily net
assets would have been 5.66% and 5.86%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
14
<PAGE>
MATURING GOVERNMENT BOND 2006 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
MAY 2,
YEAR ENDED 1994 (A) TO
DECEMBER DECEMBER
31, 31,
1995 1994
----------- -----------
<S> <C> <C>
Net asset value, beginning of
period...................... $.923 $.970
----- -----
Income from investment
operations:
Net investment income..... .069 .047
Net gains or losses on
securities (both realized
and unrealized).......... .251 (.046)
----- -----
Total from investment
operations........... .320 .001
----- -----
Less distributions:
Dividends from net
investment income........ (.069) (.048)
Distributions from capital
gains.................... -- --
----- -----
Total distributions... (.069) (.048)
----- -----
Net asset value, end of
period...................... $1.174 $ .923
----- -----
----- -----
Total return (b).............. 34.7% .1%(c)
Net assets, end of period (in
thousands).................. $2,570 $1,860
Ratio of expenses to average
daily net assets (d)........ .40% .40%(e)
Ratio of net investment income
to average daily net assets
(d)......................... 6.56% 7.45%(e)
Portfolio turnover rate
(excluding short-term
securities)................. 10.0% --
<FN>
- ---------
(a) The inception of the portfolio was November 9, 1993. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $25,199 and $24,803 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been 1.56% and 2.37%,
respectively and the ratio of net investment income to average daily net
assets would have been 5.40% and 5.48%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
15
<PAGE>
MATURING GOVERNMENT BOND 2010 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
MAY 2,
YEAR ENDED 1994 (A) TO
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Net asset value, beginning of
period....................... $.910 $.962
----- ------
Income from investment
operations:
Net investment income..... .070 .049
Net gains or losses on
securities (both realized
and unrealized).......... .304 (.052)
----- ------
Total from investment
operations........... .374 (.003)
----- ------
Less distributions:
Dividends from net
investment income........ (.070) (.049)
Distributions from capital
gains.................... -- --
----- ------
Total distributions... (.070) (.049)
----- ------
Net asset value, end of
period....................... $1.214 $.910
----- ------
----- ------
Total return (b).............. 41.2% (.3)%(c)
Net assets, end of period (in
thousands)................... $1,384 $1,071
Ratio of expenses to average
daily net assets (d)......... .40% .40%(e)
Ratio of net investment income
to average daily net assets
(d).......................... 6.58% 7.79%(e)
Portfolio turnover rate
(excluding short-term
securities).................. -- 14.5%
<FN>
- ---------
(a) The inception of the portfolio was November 9, 1993. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $26,308 and $25,888 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been 2.68% and 4.01%,
respectively and the ratio of net investment income to average daily net
assets would have been 4.30% and 4.18%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
16
<PAGE>
VALUE STOCK PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
MAY 2,
YEAR ENDED 1994 (A) TO
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Net asset value, beginning of
period....................... $1.044 $1.010
----- ------
Income from investment
operations:
Net investment income..... .010 .008
Net gains or losses on
securities (both realized
and unrealized).......... .331 .038
----- ------
Total from investment
operations........... .341 .046
----- ------
Less distributions:
Dividends from net
investment income........ (.010) (.009)
Distributions from capital
gains.................... (.063) (.003)
----- ------
Total distributions... (.073) (.012)
----- ------
Net asset value, end of
period....................... $1.312 $1.044
----- ------
----- ------
Total return (b).............. 33.0% 4.6%(c)
Net assets, end of period (in
thousands)................... $31,825 $8,771
Ratio of expenses to average
daily net assets (d)......... .89% .90%(e)
Ratio of net investment income
to average daily net assets
(d).......................... 1.25% 2.07%(e)
Portfolio turnover rate
(excluding short-term
securities).................. 164.2% 49.5%
<FN>
- ---------
(a) The inception of the portfolio was January 18, 1994. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $11,610 and $22,503 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been .95% and 1.56%,
respectively, and the ratio of net investment income to average daily net
assets would have been 1.19% and 1.41%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
17
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE
DATA
- ------------------------------------
From time to time the Fund may publish advertisements
containing performance data relating to its Portfolios. In the case of the Money
Market Portfolio, the Fund will publish yield or effective yield quotations for
a seven-day or other specified period. In the case of Portfolios other than the
Money Market Portfolio, the Fund may publish yield quotations for a recent
30-day period. The Fund may also publish, for all Portfolios, cumulative total
return quotations for the period since shares of the Portfolio became available
for sale pursuant to the Fund's registration statement. All quotations of 30-day
yields and cumulative total returns will be accompanied by average annual total
return quotations for a one-year period and for the period since shares of the
Portfolio became available for sale pursuant to the Fund's registration
statement. Performance figures used by the Fund are based on historical
information of the Portfolios for specified periods, and the figures are not
intended to suggest that such performance will continue in the future. The
various performance figures used in Fund advertisements are summarized below.
More detailed information on the computations is set forth in the Statement of
Additional Information.
PERFORMANCE FIGURES OF THE FUND WILL NOT REFLECT CHARGES MADE PURSUANT TO THE
TERMS OF THE VARIABLE LIFE INSURANCE POLICIES AND VARIABLE ANNUITY CONTRACTS
FUNDED BY SEPARATE ACCOUNTS THAT INVEST IN THE FUND'S SHARES. FUND PERFORMANCE
INFORMATION WILL BE PRESENTED IN CONJUNCTION WITH PERFORMANCE INFORMATION ABOUT
THOSE POLICIES OR CONTRACTS. PURCHASERS OF VARIABLE CONTRACTS ISSUED BY
MINNESOTA MUTUAL SHOULD THEREFORE RECOGNIZE THAT THE YIELD, CUMULATIVE TOTAL
RETURN AND AVERAGE ANNUAL TOTAL RETURN ON THE SEPARATE ACCOUNT ASSETS RELATING
TO SUCH A CONTRACT WHICH ARE INVESTED IN SHARES OF ANY OF THE FUND'S PORTFOLIOS
WOULD BE LOWER THAN THE YIELD, CUMULATIVE TOTAL RETURN AND AVERAGE ANNUAL TOTAL
RETURN OF SUCH PORTFOLIO FOR THE SAME PERIOD.
MONEY MARKET PORTFOLIO YIELD. Yield quotations for the Money Market Portfolio
are based on the income generated by an investment in the portfolio over a
specified period, usually seven days. The figures are "annualized," that is, the
amount of income generated by the investment during the period is assumed to be
generated over a 52-week period and is shown as a percentage of the investment.
Effective yield quotations are calculated similarly, but when annualized the
income earned by an investment in the portfolio is assumed to be reinvested.
Effective yield quotations will be slightly higher than yield quotations because
of the compounding effect of this assumed reinvestment. The yield and effective
yield of the Money Market Portfolio for the seven-day period ended December 31,
1995 were 5.09% and 5.22%, respectively. (See also, "Performance Data" in the
Statement of Additional Information.)
YIELD QUOTATIONS FOR OTHER PORTFOLIOS. Yield figures may also be quoted for
Portfolios other than the Money Market Portfolio and the International Stock
Portfolio. Yield figures will always be based on a 30-day period and will be
determined by dividing the net investment income per share of the Portfolio
during the period by the net asset value per share on the last day of the
period. An annualized yield figure is computed on the assumption that net
investment income is earned and reinvested at a constant rate and annualized at
the end of a six-month period. For purposes of the computation, net investment
income is determined in accordance with rules prescribed by the Securities and
Exchange Commission, and it may differ from the actual net investment income
determined for the period under the Fund's accounting practices.
TOTAL RETURN FIGURES. Cumulative total return figures may also be quoted for
all Portfolios of the Fund. Cumulative total return is based on a hypothetical
$1,000 investment in the Portfolio at the beginning of the advertised period,
and is equal to the percentage change between the $1,000 net asset value of that
investment at the beginning of the period and the net asset value of that
investment at the end of the period with dividend and capital gain distributions
treated as reinvested.
All quotations of yields for Portfolios other than the Money Market Portfolio
and all quotations of cumulative total return figures will be accompanied by
average annual total return figures for one-year and five-year periods and for
the period since shares of the Portfolio became available pursuant to the Fund's
registration statement. Average annual total return figures will show for the
specified period the average annual rate of return required for an initial
investment of $1,000 to equal the redemption value of that investment at the end
of the period.
PREDICTABILITY OF RETURN. For each of the Maturing Government Bond
Portfolios, the Fund may calculate an anticipated growth rate (AGR) and an
anticipated value at maturity (AVM) on any day on which the Fund values its
securities. AGR is an estimate of the average annual total return that would be
experienced by an investment maintained in the Portfolio from the date of
initial purchase until the target maturity date, assuming no
18
<PAGE>
withdrawals or additional investments. AVM is the estimated value of such an
investment at the target maturity date. AGR and AVM, like the Portfolios'
historical total return data discussed above, do not reflect any loads or
contract charges deducted from payments or from separate account assets. Daily
calculations for each are necessary because (i) the AGR and AVM calculations
assume, among other things, an expense ratio and portfolio composition that
remains unchanged for the life of each such Portfolio to the target date at
maturity, and (ii) such calculations are therefore meaningful as a measure of
predictable return with respect to particular shares only if such shares are
held to the applicable target maturity date and only with respect to shares
purchased on the date of such calculations (the AGR and AVM applicable to shares
purchased on any other date may be materially different). Those assumptions can
only be hypothetical given that owners of shares have the option to purchase or
redeem those shares on any business day, and will receive dividend and capital
gain distributions through the receipt of additional shares. A number of factors
in addition to shareholder activity can cause a Maturing Government Bond
Portfolio's AGR and AVM to change from day to day. These include the adviser's
efforts to improve total return through market opportunities, transaction costs,
interest rate changes and other events that affect the market value of the
investments held in each Maturing Government Bond Portfolio. Despite these
factors, it is anticipated that if specific shares of a Maturing Government Bond
Portfolio are held to the applicable target maturity date, then the AGR and AVM
applicable to such shares (i.e., calculated as of the date of purchase of such
shares) will vary from the actual return experienced by such shares within a
narrow range.
ADDITIONAL PERFORMANCE INFORMATION. Further information about the performance
of the Fund is contained in the Fund's Annual Report to Shareholders, which may
be obtained without charge by writing the Fund at 400 Robert Street North, St.
Paul, Minnesota 55101-2098, or by calling (612) 298-3500.
- --------------------------------------------------------------------------------
THE FUND
- ------------------------------------
MIMLIC Series Fund, Inc., (the "Fund") is a diversified, open-end
management investment company incorporated under Minnesota law on February 21,
1985. The Minnesota Mutual Life Insurance Company ("Minnesota Mutual") has
established certain separate accounts for the purpose of issuing variable
annuity contracts and variable life insurance policies (collectively, the
"Contracts"). The Fund serves as the underlying investment medium for amounts
invested in the Contracts. The Fund may, however, be used for other purposes in
the future.
It is conceivable that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the Fund simultaneously. Although neither Minnesota Mutual nor the
Fund currently foresees any such disadvantages either to variable life insurance
policy owners or to variable annuity contract owners, the Fund's Board of
Directors intends to monitor events in order to identify any material conflicts
between such policy owners and contract owners and to determine what action, if
any, should be taken in response thereto. Such action could include the sale of
Fund shares by one or more of the separate accounts, which could have adverse
consequences. Material conflicts could result from, for example, (1) changes in
state insurance laws, (2) changes in federal income tax laws, (3) changes in the
investment management of any of the Portfolios of the Fund, or (4) differences
in voting instructions between those given by policy owners and those given by
contract owners. The costs of resolving any such material conflicts will be
borne solely by Minnesota Mutual.
The Fund is a series company, which means that it consists of several separate
Portfolios, each with its own investment objectives. Currently, there are
sixteen such Portfolios: the Growth Portfolio, the Bond Portfolio, the Money
Market Portfolio, the Asset Allocation Portfolio, the Mortgage Securities
Portfolio, the Index 500 Portfolio, the Capital Appreciation Portfolio, the
International Stock Portfolio, the Small Company Portfolio, the Value Stock
Portfolio, four Maturing Government Bond Portfolios (maturing respectively in
1998, 2002, 2006 and 2010), the Small Company Value Portfolio and the Global
Bond Portfolio. Each Portfolio issues a separate class of the Fund's common
stock. The investment adviser of the Fund is MIMLIC Asset Management Company, a
Minnesota corporation ("MIMLIC Management"). MIMLIC Management has entered into
an investment sub-advisory agreement with Winslow Capital Management, Inc.
("Winslow Management"), a Minnesota corporation with principal offices in
Minneapolis, Minnesota, under which Winslow Management serves as investment
sub-adviser to the Fund's Capital Appreciation Portfolio. MIMLIC Management has
also entered into an investment sub-advisory agreement with Templeton Investment
Counsel,
19
<PAGE>
Inc., a Florida corporation with principal offices in Fort Lauderdale
("Templeton Counsel"), under which Templeton Counsel serves as investment sub-
adviser to the Fund's International Stock Portfolio. MIMLIC Management has
entered into a sub-advisory agreement with Voyageur Fund Managers, Inc.,
("Voyageur Managers") a Minnesota corporation with primary offices in
Minneapolis, Minnesota, under which Voyageur Managers provides advisory services
to the Growth Portfolio. In addition, MIMLIC Management has entered into a
sub-advisory arrangement with Voyageur Managers where Voyageur Managers,
together with its sub-adviser, Lazard London International Investment
Management, Limited, ("Lazard London") an English investment advisory subsidiary
of Lazard Brothers & Co., Limited, located in London, England, provide advisory
services to the Global Bond Portfolio.
Currently, Fund shares may be purchased only by Minnesota Mutual to fund the
Contracts. Minnesota Mutual is a mutual life insurance company which is
domiciled in Minnesota and authorized to do business in 49 states. Fund shares
are not offered directly to and may not be purchased directly by members of the
public. Consequently, the terms "shareholder" and "shareholders" in this
Prospectus refer to Minnesota Mutual.
The value of certain benefits under the Contracts will vary with the
investment performance of the Fund's Portfolios. Because contract owners will
allocate their investments among the Portfolios of the Fund, in response to or
in anticipation of changes in market or economic conditions, prospective
purchasers should carefully consider the information about the Fund and its
Portfolios presented in this Prospectus prior to purchasing such a Contract.
- --------------------------------------------------------------------------------
INVESTMENT
OBJECTIVES,
POLICIES AND RISKS
- ------------------------------------
Each Portfolio has a stated investment objective
which it pursues through separate investment
policies. The differences in objectives and policies among the Portfolios can be
expected to affect the return of each Portfolio and the degree of market and
financial risk to which each Portfolio is subject. Financial risk refers to the
ability of an issuer of a debt security to pay principal and interest on such
security and to the earning stability and overall financial soundness of an
issuer of an equity security. Market risk refers to the volatility of the
reaction of the price of a security to changes and conditions in the securities
markets in general and, with particular reference to debt securities, changes in
the overall level of interest rates.
Some debt securities may be purchased on a when-issued or forward commitment
basis, which means that it may take as long as 45 days after the purchase before
the securities are delivered to the Fund. Payment and interest terms, however,
are fixed at the time the purchaser enters into the commitment. The Fund does
not pay for the securities or start earning interest on them until the
contractual settlement date. When-issued securities are subject to market
fluctuations and they may affect the Fund's total assets the same as owned
securities.
The investment objective, certain policies and risks associated with each
Portfolio are as described below. The investment policies of the Fund set forth
in this Prospectus and in the Statement of Additional Information may be changed
without shareholder approval except that the investment objectives of a
Portfolio as set forth in this Prospectus are fundamental and may not be changed
without the approval of a majority of the outstanding voting securities of the
Portfolio.
- --------------------------------------------------------------------------------
GROWTH -
PORTFOLIO
The investment objective of the Growth Portfolio is to seek the
long-term accumulation of capital. Current income, while a factor in investment
selection, is a secondary objective. In pursuit of these objectives the Growth
Portfolio will follow a policy of investing primarily in common stocks and other
equity securities. Such investments involve greater investment risk than fixed
income securities.
The Portfolio's growth approach is based on sound fundamental investment
analysis in which individual stock selection is critical. Thus, the Portfolio's
holdings are selected on the basis of a fundamental analysis which seeks to
identify sound companies whose stock prices, in the opinion of MIMLIC
Management, do not reflect their long-term growth potential.
Generally, the Portfolio invests in companies with strong long-term outlooks.
These quality issues are emphasized as a way to protect against downside risk
inherent in the stock market. However, the Portfolio may also seek to achieve
its objective by investing in companies which, in MIMLIC Management's judgment,
have temporarily undervalued securities, or, because of new management, products
or
20
<PAGE>
markets or other factors, show promise of substantially improved results.
The assets of the Portfolio usually will be invested in a diversified
portfolio of equity securities, mainly common stocks, across all industry
sectors. Changes in investments will be made from time to time to take into
account changes in the outlook for particular industries or companies and in the
general level of common stock prices. The purchase of common stocks may occur in
rising or declining markets.
The Portfolio will typically maintain a fully invested position, but when
economic conditions or general levels of common stock prices are such that
investments of other types may be advantageous on the basis of combined
considerations of risk, income and appreciation, the Portfolio may temporarily
take a defensive position by investing a substantial portion of its assets in
bonds, notes or other evidences of indebtedness, including United States
Government securities, or may hold its assets in cash. Those investments may, or
may not, be convertible into stock. The Portfolio may also temporarily hold its
assets in cash or money market instruments pending investment in accordance with
its policies.
The Portfolio may invest up to 10% of the value of its total assets in
securities of foreign issuers which are not publicly traded in the United
States. (Securities of foreign issuers which are publicly traded in the United
States, usually in the form of sponsored American Depositary Receipts ("ADRs"),
are not subject to this 10% limitations.) Investing in securities of foreign
issuers may result in greater risk than that incurred in investing in securities
of domestic issuers. There is the possibility of expropriation, nationalization
or confiscatory taxation, taxation of income earned in foreign nations or other
taxes imposed with respect to investments in foreign nations; foreign exchange
controls (which may include suspension of the ability to transfer currency from
a given country), default in foreign government securities, political or social
instability or diplomatic developments which could affect investments in
securities of issuers in those nations. In addition, in many countries there is
less publicly available information about issuers than is available in reports
about companies in the United States. Foreign companies are not generally
subject to uniform accounting, auditing and financial reporting standards, and
auditing practices and requirements may not be comparable to those applicable to
United States companies. Further, the Portfolio may encounter difficulties in
pursuing (or be unable to pursue) legal remedies and in obtaining judgments in
foreign courts. Commission rates in foreign countries, which are sometimes fixed
rather than subject to negotiation as in the United States, are likely to be
higher. Further, the settlement period of securities transactions in foreign
markets may be longer than in domestic markets. In many foreign countries there
is less government supervision and regulation of business and industry
practices, stock exchanges, brokers and listed companies than in the United
States. The foreign securities markets of many of the countries in which the
Portfolio may invest may also be smaller, less liquid, and subject to greater
price volatility than those in the United States. Also, some countries may
withhold portions of interest, dividends and gains at the source. There are
further risk considerations, including possible losses through the holding of
securities in domestic and foreign custodial banks and depositories.
An ADR is sponsored if the original issuing company has selected a single U.S.
bank to serve as its U.S. depositary and transfer agent. This relationship
requires a deposit agreement which defines the rights and duties of both the
issuer and depositary. Companies that sponsor ADRs must also provide their ADR
investors with English translations of company information made public in their
own domiciled country. Sponsored ADR investors also generally have the same
voting rights as ordinary shareholders, barring any unusual circumstances. ADRs
which meet these requirements can be listed on U.S. stock exchanges. Unsponsored
ADRs are created at the initiative of a broker or bank reacting to demand for a
specific foreign stock. The broker or bank purchases the underlying shares and
deposits them in a depositary. Unsponsored shares issued after 1983 are not
eligible for U.S. stock exchange listings. Furthermore, they do not generally
include voting rights.
- --------------------------------------------------------------------------------
BOND -
PORTFOLIO
The investment objective of the Bond Portfolio is to seek as high a
level of long-term total rate of return as is consistent with prudent investment
risk. A secondary objective is to seek preservation of capital. In pursuit of
these objectives, the Bond Portfolio will follow a policy of investing primarily
in long-term, fixed-income, high-quality debt instruments. The value of debt
securities will tend to rise and fall inversely with the rise and fall of
interest rates.
21
<PAGE>
The Fund anticipates that under normal circumstances at least 75% of the
Portfolio's assets, exclusive of cash items which may include commercial paper,
certificates of deposit and United States Treasury obligations not exceeding one
year in maturity, will be invested in one or more of the following types of
securities:
- - Corporate debt securities which at the time of purchase are rated within the
four highest grades assigned by Moody's, S&P or any other national rating
service. To the extent that the Portfolio invests in bonds in the lowest of
such four grades (i.e., in bonds rated BBB or Baa by S&P or Moody's,
respectively) it will be investing in bonds which may have speculative
characteristics. In addition, changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make
principal and interest payments in such bonds than is the case with higher
grade bonds. If, after acquisition, a bond is downgraded by the rating
agencies to a rating lower than BBB or Baa by S&P or Moody's, respectively,
it is the Fund's general policy to dispose of such downgraded securities.
- - Debt securities of, or guaranteed by, the United States Government, its
agencies or instrumentalities. (Purchases of United States Treasury
obligations of all maturities will be limited in accordance with the
diversification regulations issued under Section 817(h) of the Internal
Revenue Code.)
The balance of the Portfolio's assets, exclusive of cash items, may be
invested in other fixed income investments not described above including
corporate debt securities or preferred stocks which in either case may or may
not be convertible. It is not expected that the Portfolio will invest in common
stocks, rights to acquire common stocks or other equity securities, but it may
retain for reasonable periods of time up to five percent of its total assets in
common stocks acquired upon conversion of debt securities or preferred stocks or
upon exercise of warrants acquired with debt securities.
The Portfolio may purchase mortgage-backed securities issued by government
entities (some of which may be U.S. Government agency issued or guaranteed debt
securities of the types described above) and non-government entities such as
banks, mortgage lenders, or other financial institutions. A mortgage-backed
security may be an obligation of the issuer backed by a mortgage or pool of
mortgages or a direct interest in an underlying pool of mortgages. Some
mortgage-backed securities, such as collateralized mortgage obligations, make
payments of both principal and interest at a variety of intervals; others make
semiannual interest payments at a predetermined rate and repay principal at
maturity (like a typical bond). Mortgage-backed securities are based on
different types of mortgages including those on commercial real estate or
residential properties.
The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
government issues. Mortgage-backed securities are subject to prepayment risk.
Prepayment, which occurs when unscheduled or early payments are made on the
underlying mortgages, may shorten the effective maturities of these securities
and may lower their total returns.
The Portfolio may also invest in collateralized mortgage obligations ("CMOs")
of the type eligible for purchase by the Mortgage Securities Portfolio (see the
discussion of CMOs, and the risks associated therewith, under the caption
"Mortgage Securities Portfolio," below). The Bond Portfolio, however, will not
purchase "accrual" or "Z" bond types of CMOs (a CMO tranche which is not
entitled to receive cash payments until one or more other tranches have been
paid in full); inverse or reverse floating CMOs (a tranche of a CMO with a
coupon rate that moves in the reverse direction to an applicable interest rate
index); or "interest only" or "principal only" stripped mortgage-backed
securities.
The Portfolio may also purchase asset-backed securities, which usually
represent interests in pools of consumer loans (typically trade, credit card or
automobile receivables). The credit quality of most asset-backed securities
depends primarily on the credit quality of the assets underlying such
securities, how well the entity issuing the security is insulated from the
credit risk of the originator or any other affiliated entities, the quality of
the servicing of the receivables, and the amount and quality of any credit
support provided to the securities. The rate of principal payment on
asset-backed securities may depend on the rate of principal payments received on
the underlying assets which in turn may be affected by a variety of economic and
other factors. As a result, the yield on any asset-backed security may be
difficult to predict with precision and actual yield to maturity may be more or
less than the
22
<PAGE>
anticipated yield to maturity. Some asset-backed transactions are structured
with a "revolving period" during which the principal balance of the asset-backed
security is maintained at a fixed level, followed by a period of rapid
repayment. This structure is intended to insulate holders of the asset-backed
security from prepayment risk to a significant extent. Asset-backed securities
may be classified as pass-through certificates or collateralized obligations.
Pass-through certificates are asset-backed securities which represent an
undivided fractional ownership interest in an underlying pool of assets.
Pass-through certificates usually provide for payments of principal and interest
received to be passed through to their holders, usually after deduction for
certain costs and expenses incurred in administering the pool. Because
pass-through certificates represent an ownership interest in the underlying
assets, the holders thereof bear directly the risk of any defaults by the
obligors on the underlying assets not covered by any credit support.
Asset-backed securities issued in the form of debt instruments, also known as
collateralized obligations, are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt. The assets collateralizing such asset-backed securities are
pledged to a trustee or custodian for the benefit of the holders thereof. Such
issuers generally hold no assets other than those underlying the asset-backed
securities and any credit support provided. As a result, although payments on
such asset-backed securities are obligations of the issuers, in the event of
defaults on the underlying assets not covered by any credit support, the issuing
entities are unlikely to have sufficient assets to satisfy their obligations on
the related asset-backed securities.
To lessen the effect of failures by obligors on underlying assets to make
payments, such securities may contain elements of credit support. Such credit
support falls into two classes: liquidity protection and protection against
ultimate default by an obligor on the underlying assets. Liquidity protection
refers to the provision of advances, generally by the entity administering the
pool of assets, to ensure that scheduled payments on the underlying pool are
made in a timely fashion. Protection against ultimate default ensures ultimate
payment of the obligations on at least a portion of the assets in the pool. Such
protection may be provided through guarantees, insurance policies or letters of
credit obtained from third parties, through various means of structuring the
transaction or through a combination of such approaches.
The Portfolio may invest in debt securities issued by foreign governments and
companies, provided that such securities are U.S. dollar-denominated and
publicly-traded in the United States. Such securities do not present the same
currency risks as securities traded outside the United States and denominated in
a foreign currency. Investing in securities of foreign issuers may, nonetheless,
result in greater risk than that incurred in investing in securities of domestic
issuers. The obligations of foreign issuers may be affected by political or
economic instabilities. Financial information published by foreign companies may
be less reliable or complete than information disclosed by domestic companies
pursuant to United States Government securities laws, and may not have been
prepared in accordance with generally accepted account principles.
It is expected that the Bond Portfolio will invest in debt securities of
varying long-term maturities and from various industry classifications,
depending on MIMLIC Management's evaluation of current and anticipated market
conditions, as well as industry outlook and company operations. Yields on debt
securities depend upon a number of factors, including the size of a particular
offering, maturities and ratings of the obligations and general economic,
monetary and market conditions. The market value of debt instruments will vary
depending on their respective yields and, as a result, the net asset value of
the Bond Portfolio will change from time to time as the general level of
interest rates change.
When economic conditions or general levels of debt security prices are such
that investments of other types may be advantageous on the basis of combined
considerations of risk, income and appreciation, the Portfolio may invest a
substantial portion of its assets in intermediate-term or short-term debt
securities including cash and money market instruments. The Portfolio may
temporarily hold its assets in cash or money market instruments pending
investment in accordance with its policies.
The Bond Portfolio will engage in portfolio transactions when MIMLIC
Management believes that such transactions will help to achieve the Portfolio's
overall objectives. Portfolio securities may or may not be held to maturity.
- --------------------------------------------------------------------------------
MONEY MARKET -
PORTFOLIO
The investment objective of the Money Market Portfolio is to seek
maximum current income to the extent consistent with liquidity and the
preservation of capital. In pursuit of this objective
23
<PAGE>
the Money Market Portfolio will follow a policy of investing in money market
instruments and other debt securities. The return produced by these securities
will reflect fluctuations in short-term interest rates.
The Portfolio is subject to the investment restrictions of Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "1940 Act") in addition to its
other policies and restrictions discussed below. Pursuant to Rule 2a-7, the
Portfolio is required to invest exclusively in securities that mature within 397
days from the date of purchase and to maintain an average weighted maturity of
not more than 90 days. Rule 2a-7 also requires that all investments by the
Portfolio be limited to United States dollar-denominated investments that (a)
present "minimal credit risk" and (b) are at the time of acquisition "Eligible
Securities." Eligible Securities include, among others, securities that are
rated by two Nationally Recognized Statistical Rating Organizations ("NRSROs")
in one of the two highest categories for short-term debt obligations, such as
A-1 or A-2 by Standard & Poor's Corporation, or Prime-1 or Prime-2 by Moody's
Investors Service, Inc.
Rule 2a-7 also requires, among other things, that the Portfolio may not
invest, other than in United States "Government securities" (as defined in the
1940 Act), (a) more than 5% of its total assets in Second Tier Securities (i.e.,
Eligible Securities that are not rated by two NRSROs in the highest category
such as A-1 and Prime-1) and (b) more than the greater of 1% of its total assets
or $1,000,000 in Second Tier Securities of any one issuer. The Portfolio's
present practice is not to purchase any Second Tier Securities.
Subject to these limitations, the money market instruments held by the
Portfolio shall include:
- - Obligations issued or guaranteed as to principal or interest by the United
States Government, or any agency or authority controlled or supervised by and
acting as an instrumentality of the United States Government pursuant to
authority granted by Congress.
- - Obligations (including certificates of deposit and bankers acceptances) of
United States banks and savings and loan associations which at the date of
the investment have total assets (as of the date of their most recent annual
financial statements) of not less than $2 billion, United States dollar
denominated obligations of Canadian chartered banks, London branches of
United States banks, and United States branches or agencies of foreign banks
if such banks meet the above-stated qualifications, and certificates of
deposit of such banks and savings and loan associations regardless of size
provided that the amount of the deposit does not exceed $100,000 for any one
bank or savings and loan association and the payment of the principal is
insured by the Federal Deposit Insurance Corporation.
- - Obligations of the International Bank for Reconstruction and Development.
- - Commercial paper (including variable amount master demand notes) issued by
United States limited partnerships, corporations or foreign corporations
directly related to the United States corporations.
- - Other corporate debt obligations that at the time of issuance were long-term
securities, but that have remaining maturities of 397 calendar days or less.
- - Repurchase agreements with respect to any of the foregoing obligations.
By limiting the maturity of its investments as described above, the Portfolio
seeks to lessen the changes in the value of its assets caused by market factors.
The Money Market Portfolio intends to maintain a constant net asset value of
$1.00 per share, but there can be no assurance it will be able to do so.
The Portfolio, consistent with its investment objective, will attempt to
maximize yield through trading. This may involve selling instruments and
purchasing different instruments to take advantage of disparities of yields in
different segments of the high grade money market or among particular
instruments within the same segment of the market. Selling securities prior to
their maturity may result in the Portfolio's realizing gains and losses.
Repurchase agreements involve the risk that the seller may fail to repurchase
the underlying security. In such event, the Portfolio would attempt to dispose
of the underlying security in the market or would hold the underlying security
until maturity. However, in the case of a repurchase agreement construed by the
courts as a collateralized loan, the Portfolio may be subject to various delays
and risks of loss in attempting to dispose of the underlying security, including
(a) possible declines in the value of the underlying security during the period
while the Portfolio seeks to enforce its rights thereto, (b) possible reduced
levels of income and lack of access to income during this period and (c) expense
involved in the enforcement of the Portfolio's rights. The Board of Directors of
the Fund has an obligation to evaluate the creditworthiness of all
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<PAGE>
entities that enter into repurchase agreements with the Fund.
Obligations of Canadian chartered banks, London branches of United States
banks, and United States branches and agencies of foreign banks may involve
somewhat greater opportunity for income than the other money market instruments
in which the Portfolio invests, but may also involve investment risks in
addition to any risks associated with direct obligations of domestic banks.
These additional risks include future political and economic developments, the
possible imposition of withholding taxes on interest income payable on such
obligations, the possible seizure or nationalization of foreign deposits, the
possible establishment of exchange controls or the adoption of other
governmental restrictions, as well as market and other factors which may affect
the market for or the liquidity of such obligations. Generally, Canadian
chartered banks, London branches of United States banks, and United States
branches and agencies of foreign banks are subject to fewer United States
regulatory restrictions than those applicable to domestic banks, and London
branches of United States banks may be subject to less stringent reserve
requirements than domestic branches. Canadian chartered banks, United States
branches and agencies of foreign banks, and London branches of United States
banks may provide less public information than, and may not be subject to the
same accounting, auditing and financial record keeping standards as, domestic
banks.
The Portfolio will not invest more than a total of 25% of its total assets in
obligations of Canadian chartered banks, London branches of United States banks,
and United States branches and agencies of foreign banks.
See Appendix A to this Prospectus for more information on certain of the
Fund's investment policies, including descriptions of money market obligations
and ratings.
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ASSET ALLOCATION -
PORTFOLIO
The investment objective of the Asset Allocation Portfolio is to seek
as high a level of long-term total rate of return as is consistent with prudent
investment risk. In pursuit of this objective the Asset Allocation Portfolio
will invest in common stocks and other equity securities, bonds, mortgage
securities and money market instruments. The Asset Allocation Portfolio involves
the risks inherent in stocks and debt securities of varying maturities, and the
risk that the Portfolio may invest too much or too little of its assets in each
type of security at any particular time.
The Asset Allocation Portfolio may invest in the following types of money
market, debt and equity securities:
- - Money market instruments and other debt securities with maturities not
exceeding one year in which the Money Market Portfolio may invest.
- - Bonds and other debt securities, including mortgage-related securities, with
maturities generally exceeding one year in which the Bond and Mortgage
Securities Portfolios may invest.
- - Common stock and other equity securities in which the Growth, Index 500,
Capital Appreciation and Small Company Portfolios may invest.
Thus, with respect to equity securities, the Portfolio will attempt to achieve
long-term accumulation of capital. With respect to mortgage-related securities
and bonds, the Portfolio will attempt to provide as high a level of long-term
total rate of return as is consistent with prudent investment risk. A secondary
objective is to seek preservation of shareholder's capital. With respect to
money market securities, the Portfolio will attempt to achieve maximum current
income to the extent consistent with liquidity and preservation of capital.
The Portfolio will continuously adjust the mix of investments among the three
market sectors to capitalize on perceived variations in return potential
produced by the interaction of changing financial market and economic
conditions. No more than 75% of the Portfolio's assets may be invested in either
the common stock sector or the bond sector. Up to 100% of the Portfolio's assets
may be invested in money market instruments. No minimum percentage has been
established for any of the sectors. Major changes in investment mix may occur
several times within a year or over several years, depending upon market and
economic conditions.
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MORTGAGE SECURITIES -
PORTFOLIO
The investment objective of the Mortgage Securities Portfolio is to
seek a high level of current income consistent with prudent investment risk. In
pursuit of this objective the Mortgage Securities Portfolio will follow a policy
of investing primarily in a diversified portfolio of mortgage-related
securities. Prices of mortgage-related securities will tend to rise and fall
inversely with the rise and fall of the general level of interest rates.
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<PAGE>
The Fund anticipates that under normal circumstances at least 65% of the
Portfolio's assets will be invested in mortgage-related securities (except when
in a temporary defensive posture) of the following types:
- - Mortgage-related securities issued by United States Government owned or
sponsored corporations (purchases of these securities will be limited in
accordance with the diversification regulations for variable insurance
contracts issued under Section 817(h) of the Internal Revenue Code).
- - Mortgage-related securities rated A or better by Moody's or S&P or rated at a
comparable level by an independent publicly-recognized rating agency, or, if
not rated, are of equivalent investment quality as determined by MIMLIC
Management.
At times the Portfolio may invest in mortgage-related securities not meeting
the foregoing investment quality standards when deemed by MIMLIC Management to
be consistent with the Portfolio's objective of high current income to the
extent consistent with prudent investment risk; however, the Portfolio will not
invest in mortgage-related securities, or debt securities not mortgage related,
rated lower than BBB or Baa by S&P or Moody's, respectively, and no such
investments (i.e., investments in securities rated BBB or Baa) will be made in
excess of 20% of the value of the Portfolio's total assets. (Investments in
mortgage-related securities rated BBB or Baa will be considered mortgage-related
securities for purposes of the policy that the Portfolio invest at least 65% of
the value of its total assets in mortgage-related securities.) To the extent
that the Portfolio invests in securities rated BBB or Baa by S&P or Moody's,
respectively, it will be investing in securities which may have speculative
characteristics. In addition, changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments in such securities than is the case with higher grade
securities. If, after acquisition, a security is downgraded by the rating
agencies to a rating lower than BBB or Baa by S&P or Moody's, respectively, it
is the Fund's general policy to dispose of such downgraded securities. MIMLIC
Management monitors continuously the ratings of securities held by the Portfolio
and the creditworthiness of their issuers.
The Portfolio may invest up to 35% of the value of its total assets in the
following types of securities: (i) securities issued or guaranteed by the United
States Government, its agencies and instrumentalities, (ii) certificates of
deposit, bankers' acceptances and interest-bearing savings deposits of banks
having total assets of more than $1 billion and which are members of the Federal
Deposit Insurance Corporation, (iii) commercial paper of prime quality rated A-1
or higher by S&P or Prime-1 or higher by Moody's or, if not rated, issued by
companies which have an outstanding debt issue rated AA or higher by S&P or Aa
or higher by Moody's, and (iv) debt securities which, although not
mortgage-related securities, are rated BBB or Baa or better by S&P or Moody's,
respectively, or, if not rated, are of equivalent investment quality as
determined by MIMLIC Management; such securities may entitle the holder to
participate in income derived from mortgaged properties or from sales thereof.
The Portfolio will not invest in debt securities rated BBB or Baa by S&P or
Moody's, respectively, (or, if not rated, are of equivalent investment quality
as determined by MIMLIC Management), including mortgage-related securities, in
excess of 20% of the value of the Portfolio's total assets. When business or
financial conditions warrant, the Portfolio may take a temporary defensive
position and invest without limit in the foregoing securities.
Although some of the mortgage-related securities held by the Portfolio are
guaranteed by governmental and government-related organizations, the
governmental and government-related guarantors do not guarantee the Portfolio's
yield or the price of its shares. The net asset value of the Portfolio
fluctuates in response to changes in the general level of interest rates. When
interest rates rise, prices of fixed income securities held by the Portfolio
tend to fall and the rate of prepayment of mortgages underlying mortgage-related
securities tends to decline (lengthening the average maturity of the Portfolio).
In periods of declining interest rates, however, the prices of such securities
tend to rise and the rate of prepayment of mortgages underlying mortgage-related
securities tends to increase, and such prepayments must be reinvested at the
then prevailing lower interest rates. In addition, the net asset value of the
Portfolio may fluctuate in response to the market's perception of the
creditworthiness of the issuers of the Portfolio's securities. The availability
of interest-sensitive mortgage-related securities, in which the Portfolio
concentrates its investments, may be limited by government regulation or tax
policy. For example, action by the Board of Governors of the Federal Reserve
System to limit the growth of the nation's money supply may cause interest rates
to rise and thereby reduce the
26
<PAGE>
volume of new residential mortgages. Although mortgage-related securities are
generally supported by some form of government or private guarantees and
insurance, the Portfolio's shares are not guaranteed and there can be no
assurance that private insurers can meet their obligations.
The mortgage-related securities in which the Portfolio principally invests
provide funds for mortgage loans made to residential home buyers. These include
securities which represent interests in pools of mortgage loans made by lenders
such as savings and loan institutions, mortgage bankers, commercial banks and
others. Pools of mortgage loans are assembled for sale to investors (such as the
Fund) by various governmental, government-related and private organizations.
Interests in pools of mortgage-related securities differ from other forms of
debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal payments at maturity or specified call dates.
Instead, these securities usually provide a monthly payment which consists of
both interest and principal payments. In effect, these payments are a
"pass-through" of the monthly payments made by the individual borrower on their
residential or commercial mortgage loans, net of any fees paid, to the servicer,
the issuer or guarantor of such securities. Additional payments are caused by
repayments of principal resulting from the sale of the underlying residential
property, refinancing, curtailments (partial prepayment) or foreclosure, net of
fees or costs which may be incurred. Some mortgage-related securities (such as
securities issued by the Government National Mortgage Association) are described
as "modified pass-through." These securities entitle the holder to receive all
interest and principal payments owed on the mortgage pool, net of certain fees,
regardless of whether or not the mortgagor actually makes the payment. For
further information about the characteristics of mortgage-related securities,
see Appendix B to this Prospectus.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential and commercial mortgage loans.
Such issuers may in addition be the originators and servicers of the underlying
mortgage loans as well as the guarantors of the mortgage-related securities.
Pools created by such nongovernmental issuers generally offer a higher rate of
interest than government and government-related pools because there are no
direct or indirect government guarantees of payments in the former pools.
However, payment of interest and principal of these pools is supported by
various forms of insurance, guarantees and credit enhancements, including
individual loan, title, pool and hazard insurance. The insurance and guarantees
are issued by government entities, private insurers, banks and other financial
institutions, and the mortgage poolers. Such insurance and guarantees and the
creditworthiness of the issuers thereof will be considered in determining
whether a mortgage-related security meets the Portfolio's investment quality
standards. There can be no assurance that the private insurers can meet their
obligations under the policies. The Portfolio may buy mortgage-related
securities without insurance or guarantees if through an examination of the loan
experience and practices of the poolers MIMLIC Management determines that the
securities meet the Portfolio's quality and liquidity standards.
The Portfolio may invest in collateralized mortgage obligations ("CMOs"), in
which several different series of bonds or certificates secured by pools of
mortgage-backed securities or mortgage loans, are issued. The series differ from
each other in terms of the priority rights which each has to receive cash flows
with the CMO from the underlying collateral. Each CMO series may also be issued
in multiple classes. Each class of a CMO series, often referred to as a
"tranche," is usually issued at a specific coupon rate and has a stated
maturity. The underlying security for the CMO may consist of mortgage-backed
securities issued or guaranteed by U.S. Government agencies or whole loans. CMOs
backed by U.S. Government agency securities retain the credit quality of such
agency securities and therefore present minimal credit risk. CMOs backed by
whole loans typically carry various forms of credit enhancements to protect
against credit losses and provide investment grade ratings. Unlike traditional
mortgage pass-through securities, which simply pass through interest and
principal on a pro rata basis as received, CMOs allocate the principal and
interest from the underlying mortgages among the several classes or tranches of
the CMO in many ways. All residential, and some commercial, mortgage-related
securities are subject to prepayment risk. A CMO does not eliminate that risk,
but, by establishing an order of priority among the various tranches for the
receipt and timing of principal payments, it can reallocate that risk among the
tranches. Therefore, the stream of payments received by a CMO bondholder may
differ dramatically from that received by an investor
27
<PAGE>
holding a traditional pass-through security backed by the same collateral.
The primary risk associated with any mortgage security is the uncertainty of
the timing of cash flows; specifically, uncertainty about the possibility of
either the receipt of unanticipated principal in falling interest rate
environments (prepayment or call risk) or the failure to receive anticipated
principal in rising interest rate environments (extension risk). In a CMO, that
uncertainty may be allocated to a greater or lesser degree to specific tranches
depending on the relative cash flow priorities of those tranches. By
establishing priority rights to receive and reallocate payments of prepaid
principal, the higher priority tranches are able to offer better call protection
and extension protection relative to the lower priority classes in the same CMO.
For example, when insufficient principal is received to make scheduled principal
payments on all tranches, the higher priority tranches receive their scheduled
premium payments first and thus bear less extension risk than lower priority
tranches. Conversely, when principal is received in excess of scheduled
principal payments on all tranches (call risk), the lower priority tranches are
required to receive such excess principal until they are retired and thus bear
greater prepayment risk than the higher priority tranches. Therefore, depending
on the type of CMO purchased, an investment may be subject to a greater or
lesser risk of prepayment, and experience a greater or lesser volatility in
average life, yield, duration and price, than other types of mortgage-related
securities. For that reason, and except as otherwise provided (see the following
paragraphs for a discussion of the Portfolio's investment policies regarding
CMOs known as "Z" bonds and inverse or reverse floating CMOs), the Portfolio
will not purchase a CMO tranche unless, at the time of purchase, such tranche is
part of a series with either the first or second highest priority within the CMO
to receive cash flows. These types of CMOs tend to provide more predictable and
stable returns, but carry lower current yields, than other more volatile CMOs
(which have a lower cash flow priority). A CMO tranche may also have a coupon
rate which resets periodically at a specified increment over an index. These
floating rate CMOs are typically issued with lifetime caps on the level to which
the floating coupon rate is allowed to rise. The Portfolio may invest in such
securities, usually subject to a cap, provided such securities satisfy the same
requirements regarding cash flow priority applicable to the Portfolio's purchase
of CMOs generally. CMOs are typically traded over the counter rather than on
centralized exchanges. Because CMOs of the type purchased by the Portfolio tend
to have relatively more predictable yields and are relatively less volatile,
they are also generally more liquid than CMOs with greater prepayment risk and
more volatile performance profiles.
The Portfolio may also purchase CMOs known as "accrual" or "Z" bonds. An
accrual or Z bond holder is not entitled to receive cash payments until one or
more other classes of the CMO have been paid in full from payments on the
mortgage loans underlying the CMO. During the period in which cash payments are
not being made on the Z tranche, interest accrues on the Z tranche at a stated
rate, and this accrued interest is added to the amount of principal which is due
to the holder of the Z tranche. After the other classes have been paid in full,
cash payments are made on the Z tranche until its principal (including
previously accrued interest which was added to principal, as described above)
and accrued interest at the stated rate have been paid in full. Generally, the
date upon which cash payments begin to be made on a Z tranche depends on the
rate at which the mortgage loans underlying the CMO are prepaid, with a faster
prepayment rate resulting in an earlier commencement of cash payments on the Z
tranche. Like a zero coupon bond, during its accrual period the Z tranche of a
CMO has the advantage of eliminating the risk of reinvesting interest payments
at lower rates during a period of declining market interest rates. At the same
time, however, and also like a zero coupon bond, the market value of a Z tranche
can be expected to fluctuate more widely with changes in market interest rates
than would the market value of a tranche which pays interest currently. Changes
in market interest rates also can be expected to influence prepayment rates on
the mortgage loans underlying the CMO of which a Z tranche is a part. As noted
above, such changes in prepayment rates will affect the date at which cash
payments begin to be made on a Z tranche, and therefore also will influence its
market value. As an operating policy, the Portfolio will not purchase a Z bond
if the Portfolio's aggregate investment in Z bonds which are then still in their
accrual periods would exceed 20% of the Portfolio's total assets (Z bonds which
have begun to receive cash payments are not included for purposes of this 20%
limitation).
The Portfolio may also invest in inverse or reverse floating CMOs. Inverse or
reverse floating CMOs constitute a tranche of a CMO with a coupon rate that
moves in the reverse direction to an applicable
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<PAGE>
index. Accordingly, the coupon rate will increase as interest rates decrease.
The Portfolio would be adversely affected, however, by the purchase of such CMOs
in the event of an increase in interest rates since the coupon rate will
decrease as interest rates increase, and, like other mortgage-related
securities, the value will decrease as interest rates increase. Inverse or
reverse floating rate CMOs are typically more volatile than fixed or floating
rate tranches of CMOs, and usually carry a lower cash flow priority. As an
operating policy, the Portfolio will treat inverse floating rate CMOs as
illiquid and, therefore, will limit its investments in such securities, together
with all other illiquid securities, to 15% of the Portfolio's net assets.
The Portfolio may purchase stripped mortgage-backed securities, which
represent undivided ownership interests in a pool of mortgages, the cash flow of
which has been separated into its interest and principal components. "IOs"
(interest only securities) receive the interest portion of the cash flow while
"POs" (principal only securities) receive the principal portion. Stripped
mortgage-backed securities may be issued by U.S. Government agencies or by
private issuers. As interest rates rise and fall, the value of IOs tends to move
in the same direction as interest rates, unlike other mortgage-backed securities
(which tend to move in the opposite direction compared to interest rates). Under
the Internal Revenue Code of 1986, as amended, POs may generate taxable income
from the current accrual of original issue discount, without a corresponding
distribution of cash to the Portfolio.
The cash flows and yields on standard IO and PO classes are extremely
sensitive to the rate of principal payments (including prepayments) on the
related underlying mortgage assets. For example, a rapid or slow rate of
principal payments may have a material adverse effect on the performance and
prices of IOs or POs, respectively. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, an investor may fail to
recoup fully its initial investment in an IO class of a stripped mortgage-backed
security, even if the IO class is rated AAA or Aaa or is derived from a full
faith and credit obligation (i.e., a GNMA). Conversely, if the underlying
mortgage assets experience slower than anticipated prepayments of principal, the
price on a PO class will be affected more severely than would be the case with a
traditional mortgage-backed security, but unlike IOs, an investor will
eventually recoup fully its initial investment provided no default of the
guarantor occurs. As an operating policy the Portfolio will treat all IOs and
POs as illiquid securities. Therefore, the Portfolio will limit its investments
in IOs and POs, together with all other illiquid securities, to 15% of the
Portfolio's net assets. See "Investment Restrictions."
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INDEX 500 -
PORTFOLIO
The investment objective of the Index 500 Portfolio is to seek
investment results that correspond generally to the price and yield performance
of the common stocks included in the Standard & Poor's Corporation 500 Composite
Stock Price Index (the "Index"). The Index is an unmanaged index of common
stocks comprised of 500 industrial, financial, utility and transportation
companies. It is designed to provide an economical and convenient means of
maintaining a broad position in the equity market as part of an overall
investment strategy. All common stocks, including those in the Index, involve
greater investment risk than debt securities. The fact that a stock has been
included in the Index affords no assurance against declines in the price or
yield performance of that stock. "Standard & Poor's-Registered Trademark-",
"S&P-Registered Trademark-", "S&P 500-Registered Trademark-", "Standard & Poor's
500-Registered Trademark-", and "500" are trademarks of McGraw-Hill, Inc. The
Index 500 Portfolio and the Contracts are not sponsored, endorsed, sold or
promoted by Standard & Poor's Corporation, nor does Standard & Poor's
Corporation make any representation regarding the advisability of investing in
the Portfolio or in the Contracts.
The Portfolio will at all times invest at least 75%, and may invest up to
100%, of its assets in common stocks included in the Index. There is no minimum
or maximum number of stocks included in the Index which the Portfolio must hold.
Under normal circumstances it is expected that the Portfolio will hold between
200-450 different stocks included in the Index.
The Portfolio uses the Index as the standard performance comparison because it
represents over 70% of the total market value of all common stocks, is well
known to investors, and in the opinion of MIMLIC Management is representative of
the performance of publicly traded common stocks. The Index is composed of 500
selected common stocks, most of which are listed on the New York Stock Exchange.
Inclusion of a stock in the Index in no way implies an opinion by Standard &
Poor's Corporation as to its attractiveness as an investment.
The method used to select investments for the Portfolio involves investing
primarily in those stocks in the Index having the highest statistical weightings
29
<PAGE>
in the Index. Stocks in the Index are ranked in accordance with their
statistical weightings from highest to lowest. The Portfolio will invest in all
of the stocks above a specified level in the ranking in approximately the same
proportion as the weightings of those stocks in the Index. However, the
Portfolio will not invest in all of the stocks below the specified level in the
ranking, but rather will invest only in those stocks, and in amounts, as MIMLIC
Management determines to be necessary or appropriate for the Portfolio to
approximate the performance of the Index. To assist in such determination MIMLIC
Management has entered into an agreement with Wilshire Associates which permits
MIMLIC Management to use Wilshire Associates' proprietary index fund statistical
sampling technique. The Portfolio's ability to duplicate the performance of the
Index will depend to some extent, however, on the size and timing of cash flows
into or out of the Portfolio. Investment changes to accommodate these cash flows
will be made to maintain the similarity of the Portfolio's holdings to the Index
to the maximum practicable extent.
MIMLIC Management monitors the tracking accuracy of the Portfolio to the Index
by comparing the weightings of securities in the Portfolio to that of the Index.
A difference between the two results in a deviation error in the Portfolio's
composition. MIMLIC Management anticipates that the deviation in each sector of
the Portfolio will not exceed .14%. The amount of the Portfolio's deviation is
reviewed at least weekly and more frequently if such a review is indicated by
significant cash balance changes, market conditions or changes in the
composition of the Index. If deviation accuracy is not maintained, the Portfolio
will rebalance its composition by selecting securities which, in the opinion of
MIMLIC Management, will provide a more representative sampling of the
capitalization of the securities in the Index as a whole or a more
representative sampling of the sector diversification in the Index. This
rebalancing may be accomplished by either a purchase or sale of securities and
is based upon an analysis of the position of the Portfolio with respect to
securities held by it, the number of securities held, the industrial sectors
represented and its current cash balance.
Economic, financial, or market analysis will not be used in selecting
investments for the Portfolio, nor will adverse financial condition of a company
necessarily result in the sale of the company's stock by the Portfolio. However,
the Portfolio reserves the right to sell a stock held if MIMLIC Management
determines that the investment has been impaired substantially by the financial
condition of or extraordinary events involving the stock's issuer.
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CAPITAL APPRECIATION -
PORTFOLIO
The investment objective of the Capital Appreciation Portfolio is to
seek growth of capital. Investments will be made based upon their potential for
capital appreciation. Therefore, current income will be incidental to the
objective of capital growth. Because of the market risks inherent in any equity
investment, the selection of securities on the basis of their appreciation
possibilities cannot ensure against possible loss in value, and there is of
course no assurance that the Portfolio's investment objective will be met.
Within this basic framework, the policy of the Portfolio is to invest in any
companies and industries and in any types of equity securities which are
believed to offer possibilities for capital appreciation. Investments may be
made in well-known and established companies, as well as in newer and relatively
unseasoned companies. Critical factors considered in the selection of securities
include the early recognition of trends in corporate profits, the values of
individual securities relative to other investment alternatives, the economic
and political outlook, and management capabilities.
It is the policy of the Portfolio to invest principally in equity securities
(common stocks, securities convertible into common stocks or rights or warrants
to subscribe for or purchase common stocks). When business or financial
conditions warrant, a more defensive position may be assumed and the Portfolio
may invest in short-term, fixed-income securities or preferred stocks or hold
its assets in cash. Investments generally will not be made on the basis of
market timing techniques, rather it is anticipated that the Portfolio will be
relatively fully invested at most times.
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INTERNATIONAL STOCK -
PORTFOLIO
The investment objective of the International Stock Portfolio is
long-term capital growth. In pursuit of this objective the International Stock
Portfolio will follow a policy of investing in stocks issued by companies, large
and small, and debt obligations of companies and governments outside the United
States. Current income will be incidental to the objective of capital growth.
In pursuit of its investment objective, the Portfolio will normally maintain
at least 65% of its assets in common and preferred stocks. There is no
limitation
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<PAGE>
on the percentage of the Portfolio's assets that may be invested in any one
country although the Portfolio will maintain an exposure to the equities markets
in at least three countries under normal circumstances.
The Portfolio has a flexible investment policy. The exercise of this flexible
policy may include decisions to purchase securities with substantial risk
characteristics and other decisions such as changing the emphasis on investments
from one nation to another and from one type of security to another. Some of
these decisions may later prove profitable and others may not. No assurance can
be given that profits, if any, will exceed losses.
Whenever, in the judgment of Templeton Counsel, market or economic conditions
warrant, the Portfolio may, for temporary defensive purposes, invest without
limit in U.S. Government securities, bank time deposits in the currency of any
major nation and commercial paper meeting the quality ratings set forth herein
and purchase from banks or broker-dealers Canadian or U.S. Government securities
with a simultaneous agreement by the seller to repurchase them within no more
than seven days at the original purchase price plus accrued interest.
The Portfolio is authorized to invest in debt securities that are rated BBB or
higher by Standard & Poor's Corporation ("S&P") and Baa or higher by Moody's
Investors Service, Inc. ("Moody's") or, if unrated, are of equivalent investment
quality as determined by Templeton Counsel.
The Portfolio may invest for defensive purposes in commercial paper of U.S.
issuers which, at the date of investment, must be rated A-1 by Standard & Poor's
Corporation ("S&P") or Prime-1 by Moody's Investors Service, Inc. ("Moody's")
or, if not rated, be issued by a company which at the date of investment has an
outstanding debt issue rated AAA or AA by S&P or Aaa or Aa by Moody's.
Contract owners should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in the Portfolio,
nor can there be any assurance that the Portfolio's investment objective will be
attained. The Portfolio is designed for investors seeking international
diversification.
The Portfolio has the right to purchase securities in any foreign country,
developed or underdeveloped. Investors should consider carefully the substantial
risks involved in investing in securities issued by companies and governments of
foreign nations, which are in addition to the usual risks inherent in domestic
investments. There is the possibility of expropriation, nationalization or
confiscatory taxation, taxation of income earned in foreign nations or other
taxes imposed with respect to investments in foreign nations; foreign exchange
controls (which may include suspension of the ability to transfer currency from
a given country), default in foreign government securities, political or social
instability or diplomatic developments which could affect investments in
securities of issuers in those nations. In addition, in many countries there is
less publicly available information about issuers than is available in reports
about companies in the United States. Foreign companies are not generally
subject to uniform accounting, auditing and financial reporting standards, and
auditing practices and requirements may not be comparable to those applicable to
United States companies. Further, the Portfolio may encounter difficulties or be
unable to pursue legal remedies and obtain judgments in foreign courts.
Commission rates in foreign countries, which are sometimes fixed rather than
subject to negotiation as in the United States, are likely to be higher.
Further, the settlement period of securities transactions in foreign markets may
be longer than in domestic markets. In many foreign countries there is less
government supervision and regulation of business and industry practices, stock
exchanges, brokers and listed companies than in the United States. The foreign
securities markets of many of the countries in which the Portfolio may invest
may also be smaller, less liquid, and subject to greater price volatility than
those in the United States. Also, some countries may withhold portions of
interest, dividends and gains at the source. There are further risk
considerations, including possible losses through the holding of securities in
domestic and foreign custodial banks and depositories. The Portfolio may invest
in Eastern European countries, which involves special risks that are described
herein.
Certain of the recent political and economic developments in Eastern Europe,
including the introduction of aspects of a market economy in certain Eastern
European countries, are related to developments in what was formerly known as
the Soviet Union. Trends in Eastern Europe that may be considered favorable for
achievement of the Portfolio's investment objectives may be adversely affected
by political or social developments in the Soviet Union. So long as the
centralist political powers continue to exercise a significant or, in some
countries, dominant role in Eastern European countries, investments in such
countries will involve risks of nationalization, expropriation and
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confiscatory taxation. The communist governments of a number of Eastern European
countries expropriated large amounts of private property in the past, in many
cases without adequate compensation, and there can be no assurance that such
expropriation will not occur in the future. In the event of such expropriation,
the Portfolio could lose a substantial portion of any investments it has made in
the affected countries. Further, no accounting standards exist in Eastern
European countries. Finally, even though certain Eastern European currencies may
be convertible into U.S. dollars, the conversion rates may be artificial to the
actual market values and may be adverse to the Portfolio's contract owners.
The Portfolio usually effects currency exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign exchange market. However,
some price spread on currency exchange will be incurred when the Portfolio
converts assets from one currency to another. Further, the Portfolio may be
affected either unfavorably or favorably by fluctuations in the relative rates
of exchange between the currencies of different nations.
The Portfolio may buy and sell index futures contracts with respect to any
non-U.S. stock index. The Portfolio may invest in index futures contracts for
hedging purposes only and not for speculation. A Portfolio may engage in such
transactions only to the extent that the total contract value of the futures
contracts do not exceed 5% of the Portfolio's total assets at the time when such
contracts are entered into. Successful use of stock index futures is subject to
the ability of Templeton Counsel to predict correctly movements in the direction
of the stock markets. No assurance can be given that Templeton Counsel's
judgment in this respect will be correct.
A stock index futures contract is a contract to buy or sell units of a stock
index at a specified future date at a price agreed upon when the contract is
made. The value of a unit is the current value of the stock index. During or in
anticipation of a period of market appreciation, the Portfolio may enter into a
"long hedge" of common stock which it proposes to add to its portfolio by
purchasing stock index futures for the purpose of reducing the effective
purchase price of such common stock. To the extent that the securities which the
Portfolio proposes to purchase increase in value in correlation with the stock
index contracts, the purchase of futures contracts on that index would result in
gains to the Portfolio which could be offset against rising prices of such
common stock. During or in anticipation of a period of market decline, the
Portfolio may "hedge" common stock in its portfolio by selling stock index
futures for the purpose of limiting the exposure of its portfolio to such
decline. To the extent that a portfolio of securities decreases in value in
relation with a given stock index, the sale of futures contracts on that index
could substantially reduce the risk to the portfolio of a market decline and, by
so doing, provide an alternative to the liquidation of securities positions in
the portfolio with resultant transaction costs.
A purchase or sale of a futures contract may result in losses in excess of the
amount invested. There can be significant differences between the securities and
futures markets that could result in an imperfect correlation between the
markets, causing a given hedge not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances such as variations in
speculative market demand for futures, including technical influences in futures
trading, and differences between the financial instruments being hedged and the
instruments underlying the standard contracts available for trading in such
respects as interest rate levels, maturities, and creditworthiness of issuers. A
decision as to whether, when, and how to hedge involves the exercise of skill
and judgment, and even a well-conceived hedge may be unsuccessful to some degree
because of market behavior or unexpected interest rate trends.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of the current trading
session. Once the daily limit has been reached in a futures contract subject to
the limit, no more trades may be made on that day at a price beyond that limit.
The daily limit governs only price movements during a particular trading day
and, therefore, does not limit potential losses because the limit may work to
prevent the liquidation of unfavorable positions. For example, futures prices
have occasionally moved to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of positions
and subjecting some holders of futures contracts to substantial losses.
There can be no assurance that a liquid market will exist at a time when the
Portfolio seeks to close out a futures position, and it would remain obligated
to meet margin requirements until the position is closed. The Portfolio intends
to purchase or sell futures only on exchanges or boards of trade where
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there appears to be an active secondary market, but there is no assurance that a
liquid secondary market will exist for any particular contract or at any
particular time. In addition, many of the futures contracts available may be
relatively new instruments without a significant trading history. As a result,
there can be no assurance that an active secondary market will develop or
continue to exist.
Use of stock index futures for hedging may involve risks because of imperfect
correlations between movements in the prices of the stock index futures on the
one hand and movements in the prices of the securities being hedged or of the
underlying stock index on the other. Successful use of stock index futures by
the Portfolio for hedging purposes also depends upon Templeton Counsel's ability
to predict correctly movements in the direction of the market, as to which no
assurance can be given.
Warrants with cash extractions are permitted and may be used as investment
alternatives to equity shares. A warrant with a cash extraction consists of one
warrant and cash with a current value that closely approximates the current
value of an equivalent number of shares that would be delivered if the warrant
were exercised. These investment instruments may (1) provide attractive cash
yields and (2) minimize capital loss risk. Alternatively, perfect replication of
underlying share price movements may be hindered by warrant premiums which occur
because shorter-term investors value the leveraging power of naked warrants.
Given these circumstances, capital gains potential of warrants with cash
extractions may be less than that of underlying shares.
The International Stock Portfolio has authority to deal in forward foreign
exchange contracts between currencies of the different countries in which the
Portfolio will invest as a hedge against possible variations in the foreign
exchange rate between these currencies. This is accomplished through contractual
agreements to purchase or sell a specified currency at a specified future date
and price set at the time of the contract. The Portfolio's dealings in forward
foreign exchange contracts will be limited to hedging involving either specific
transactions or portfolio positions. Transaction hedging is the purchase or sale
of forward foreign currency with respect to specific receivables or payables of
the Portfolio arising from the purchase and sale of portfolio securities, the
sale and redemption of shares of the Portfolio, or the payment of dividends and
distributions by the Portfolio. Position hedging is the sale of forward foreign
exchange contracts with respect to portfolio security positions denominated or
quoted in such foreign currency. The Portfolio will not engage in naked forward
foreign exchange contracts.
In addition, when Templeton Counsel believes that the currency of a particular
foreign country may suffer or enjoy a substantial movement against another
currency, it may enter into a forward contract to sell or buy the amount of the
former foreign currency, approximating the value of some or all of the
Portfolio's securities denominated in such foreign currency. The projection of
short-term currency market movement is extremely difficult, and the successful
execution of a short-term hedging strategy is highly uncertain.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of the contract. Accordingly, it may be
necessary for the Portfolio to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Portfolio is obligated
to deliver and if a decision is made to sell the security and make delivery of
the foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security if
its market value exceeds the amount of foreign currency the Portfolio is
obligated to deliver.
If the Portfolio retains the portfolio security and engages in an offsetting
transaction, the Portfolio will incur a gain or a loss to the extent that there
has been movement in forward contract prices. If the Portfolio engages in an
offsetting transaction, it may subsequently enter into a new forward contract to
sell the foreign currency. Should forward prices decline during the period
between the Portfolio entering into a forward contract for the sale of a foreign
currency and the date it enters into an offsetting contract for the purchase of
the foreign currency, the Portfolio will realize a gain to the extent the price
of the currency it has agreed to sell exceeds the price of the currency it has
agreed to purchase. Should forward prices increase, the Portfolio will suffer a
loss to the extent the price of the currency it has agreed to purchase exceeds
the price of the currency it has agreed to sell.
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SMALL COMPANY -
PORTFOLIO
The investment objective of the Small Company Portfolio is to seek
the long-term accumulation of capital. In pursuit of this objective, the Small
Company Portfolio will follow a policy of investing primarily in common and
preferred stocks issued by small companies, defined in terms of either
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market capitalization or gross revenues. Investments in small companies usually
involve greater investment risks than fixed income securities or corporate
equity securities generally. Dividend income will be incidental to the
investment objective for this Portfolio.
Under normal circumstances, at least 65% of the Small Company Portfolio's
assets will be invested in small companies. Such companies may encompass
well-known and established companies as well as newer and relatively unknown
companies. Small companies will typically have a market capitalization of less
than $1.5 billion or annual gross revenues of less than $1.5 billion.
Market capitalization is the term which refers to the total market value of a
company's outstanding shares of common stock. Application of the market
capitalization or gross revenue tests will be made only at the time that the
Portfolio's initial position in the company is taken. Thus, for purposes of the
65% test any company deemed to be a small company at the time of the Portfolio's
initial position therein will be treated as a small company, regardless of
subsequent developments, so long as the Portfolio maintains a position in the
company.
Small companies may be in a relatively early stage of development or may
produce goods and services which have favorable prospects for growth due to
increasing demand or developing markets. Frequently, such companies have a small
management group and single product or product-line expertise that may result in
an enhanced entrepreneurial spirit and greater focus which allow such firms to
be successful. Management believes that such companies may develop into
significant business enterprises and that an investment in such companies offers
a greater opportunity for capital appreciation than an investment in larger more
established entities. However, small companies frequently retain a large part of
their earnings for research, development and investment in capital assets, so
that the prospects for immediate dividend income are limited.
Investments in small companies involve greater risks than equity securities
generally due to their small size and the fact that they may have limited
product lines, less access to the financial market for additional corporate
financings or less management depth. In addition, many of the securities of
these firms trade less frequently and in lower volumes than do securities issued
by larger firms. The result is that the short-term volatility of the prices of
those securities is greater than the prices of larger, more established
companies which are more widely held in the market. The securities of small
companies may also be more sensitive to market changes generally than the
securities of large companies.
While historically securities issued by smaller capitalization companies have
produced better market results than the securities of larger issuers, there is
no assurance that they will continue to do so or that the Portfolio will invest
specifically in those companies which produce those results. Because of the
risks involved, the Small Company Portfolio is not intended as a complete
investment program.
From time to time, the Portfolio will also invest a portion of its assets in
stocks with larger market capitalization whose long-term appreciation potential
is believed by the adviser to be well above average.
The Portfolio may invest up to 10% of the value of its total assets in
securities of foreign issuers which are not publicly traded in the United
States. (Securities of foreign issuers which are publicly traded in the United
States, usually in the form of sponsored American Depositary Receipts ("ADRs"),
are not subject to this 10% limitation.) See the discussion of foreign
securities and ADRs, and the risks of investing therein, under the caption
"Growth Portfolio" above.
The Portfolio will typically maintain a fully invested position, but when
economic conditions or general levels of common stock prices are such that
investments of other types may be advantageous on the basis of combined
considerations of risk, income and appreciation, the Portfolio may temporarily
take a defensive position by investing a substantial portion of its assets in
bonds, notes or other evidences of indebtedness, including United States
Government securities, or may hold its assets in cash. Those investments may, or
may not, be convertible into stock. The Portfolio may also temporarily hold its
assets in cash or money market instruments pending investment in accordance with
its policies.
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VALUE STOCK -
PORTFOLIO
The objective of the Value Stock Portfolio is to seek the long-term
accumulation of capital. In pursuit of this objective, the Value Stock Portfolio
will follow a policy of investing primarily in the equity securities of
companies which, in the opinion of the adviser, have market values which appear
low relative to their underlying value or future earnings and growth potential.
As it is anticipated that the Portfolio will consist in large part of
dividend-paying common stocks, the
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production of income will be a secondary objective of the Portfolio.
The Portfolio will primarily purchase securities of companies that could be
described as follows: (a) companies whose securities are selling at low market
valuations of assets relative to the securities markets in general, or companies
that may currently be earning a very low return on assets but which have the
potential to earn higher returns; (b) companies whose securities MIMLIC
Management believes are undervalued in relation to their potential for growth in
earnings and book value; or (c) companies which have recently changed management
or control and have the potential to achieve sharply improved earnings. MIMLIC
Management may give emphasis on securities of companies that may be temporarily
out of favor or whose value is not yet recognized by the market.
Tests applied by the adviser to measure the value of securities will include
their price/earnings ratio, price/book ratio, price to cash flow ratio and
yield. A price/earnings ratio is the price of a share of stock divided by its
earnings per share and it is a measure of the market price of the security
relative to its earnings per share. A price/book ratio is the price of a share
of stock divided by its book value per share and it is a measure of the market
price of the security relative to its book value per share. A price to cash flow
ratio is the price of a share of stock divided by the firm's net income after
taxes, plus depreciation and other non-cash expenses, expressed on a per share
basis. Yield is the annual dividend of a share of stock divided by its market
price. Stocks will be selected by the adviser using statistical measures of
relative value. Returns on such stocks are likely to be influenced by the
recognition of their undervaluation by other investors and the market. Under
most circumstances, if MIMLIC Management determines that a stock has reached an
over-valued position, it may be sold and replaced by securities which are deemed
to be undervalued in the marketplace.
The Portfolio's investments will typically be characterized by the purchase of
securities with lower price to earnings ratios, lower price to cash flow ratios
and/or price to book value ratios relative to the equity markets in general.
This approach may be considered to differ from a growth approach which would
consider the purchase of securities with an anticipated above-average earnings
growth potential over time. This distinction between these two approaches to
equity investing is important because historically there are periods in which
either growth or value investing may be successful approaches to total return in
the equity markets.
The Portfolio may invest up to 10% of the value of its total assets in
securities of foreign issuers which are not publicly traded in the United
States. (Securities of foreign issuers which are publicly traded in the United
States, usually in the form of sponsored American Depositary Receipts ("ADRs"),
are not subject to this 10% limitation.) See the discussion of foreign
securities and ADRs, and the risks of investing therein, under the caption
"Growth Portfolio" above.
The Value Stock Portfolio will ordinarily invest at least 65% of the value of
its total assets in common stocks with the characteristics described above. The
balance of its assets may be invested in other equity securities or U.S.
Government securities or may be held in cash or cash equivalents. However, the
Portfolio may temporarily take a defensive position by investing a substantial
portion of its assets in bonds, notes or other evidences of indebtedness,
including United States Government securities, or may hold its assets in cash.
Those investments may, or may not, be convertible into stock. The Portfolio may
also temporarily hold its assets in cash or money market instruments pending
investments in accordance with its policies.
The Portfolio will invest primarily in stocks, but it also has the ability to
purchase securities, including debt obligations, convertible into common stock
and which may produce capital appreciation. Securities that meet the criteria of
the Portfolio may not be popular during certain market cycles. Securities held
by the Portfolio may experience less volatile price changes during certain
market rallies or market downturns than the fluctuations in the market generally
as evidenced by common stock indices.
The Portfolio may invest in debt or preferred equity securities convertible
into or exchangeable for equity securities. Traditionally, convertible
securities have paid dividends or interest at rates higher than common stocks
but lower than non-convertible securities. They generally participate in the
appreciation or depreciation of the underlying stock into which they are
convertible, but to a lesser degree. The total return and yield of lower quality
(high yield/high risk) convertible bonds can be expected to fluctuate more than
the total return and yield of higher quality, shorter-term bonds, but not as
much as common stocks. The Portfolio will limit its purchase of convertible debt
securities to those that, at the time of purchase, are rated at least B- by S&P
or B3 by Moody's, or if not rated by S&P or Moody's, are of equivalent
investment quality as
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determined by MIMLIC Management. Debt securities rated below the four highest
categories (i.e., below BBB) are not considered "investment grade" obligations.
These securities have speculative characteristics and present more credit risk
than investment grade obligations. Bonds rated below BBB are regarded as
predominately speculative with respect to the issuer's continuing ability to
meet principal and interest payments. As an operating policy, the Portfolio will
not purchase a non-investment grade convertible debt security if immediately
after such purchase the Portfolio would have more than 10% of its total assets
invested in such securities. See Appendix I in the Statement of Additional
Information for a description of the ratings used by S&P and Moody's.
The market value of debt securities generally varies in response to changes in
interest rates and the financial condition of each issuer. During periods of
declining interest rates, the value of debt securities generally increases.
Conversely, during periods of rising interest rates, the value of such
securities generally declines. These changes in market value will be reflected
in the Portfolio's net asset value. Although they may offer higher yields than
do higher rated securities, low rated (i.e., below BBB) and unrated debt
securities generally involve greater volatility of price and risk of principal
and income, including the possibility of default by, or bankruptcy of, the
issuers of the securities. In addition, the markets in which low rated and
unrated debt securities are traded are more limited than those in which higher
rated securities are traded. The existence of limited markets for particular
securities may diminish the Portfolio's ability to sell the securities at fair
value either to meet redemption requests or to respond to changes in the economy
or in the financial markets and could adversely affect and cause fluctuations in
the daily net asset value of the Portfolio's shares.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low rated debt
securities, especially in a thinly traded market. Analysis of the
creditworthiness of issuers of low rated debt securities may be more complex
than for issuers of higher rated securities, and the ability of the Portfolio to
achieve its investment objective may, to the extent of investment in low rated
debt securities, be more dependent upon such creditworthiness analysis than
would be the case if the Portfolio were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities.
The prices of low rated debt securities have been found to be less sensitive to
interest rate changes than higher rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. A projection of
an economic downturn or of a period of rising interest rates, for example, could
cause a decline in low rated debt securities prices because the advent of a
recession could lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If the issuer of low
rated debt securities defaults, the Portfolio may incur additional expenses to
seek recovery. The low rated bond market is relatively new, and many of the
outstanding low rated bonds have not endured a major business recession.
After purchase by the Portfolio, a debt security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Portfolio.
Neither event will require a sale of such security by the Portfolio, but MIMLIC
Management will consider such event in the determination of whether the
Portfolio should continue to hold the security.
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MATURING GOVERNMENT -
BOND PORTFOLIOS
The investment objective of each of the Maturing Government
Bond Portfolios is to provide as high an investment return as is consistent with
prudent investment risk for a specified period of time ending on a specified
liquidation date. In pursuit of this objective each of the Maturing Government
Bond Portfolios seeks to return a reasonably assured targeted dollar amount,
predictable at the time of investment, on a specific target date in the future
through investment in a portfolio composed primarily of zero coupon securities.
These are securities that pay no cash income and are sold at a discount from
their par value at maturity.
Each Maturing Government Bond Portfolio will invest in a portfolio of
securities consisting of: (a) debt obligations issued by the U.S. Treasury that
have been stripped of their unmatured interest coupons; and (b) receipts and
certificates for stripped debt obligations and stripped coupons, including U.S.
Government trust certificates (collectively "Stripped Treasury Securities").
These Stripped Treasury Securities are not anticipated to be in excess of 55% of
the assets of each Portfolio.
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Each Maturing Government Bond Portfolio will also purchase other zero coupon
securities issued by the U.S. Government and its agencies and instrumentalities,
by Trusts where the payment of principal and interest to the Trust are
guaranteed by the United States, and by "mixed-ownership government
corporations" (collectively, "Stripped Government Securities"). In addition, the
Maturing Government Bond Portfolios will also purchase zero coupon securities
issued in the United States issued by domestic corporations which consist of
corporate debt obligations without interest coupons and, if available, interest
coupons that have been stripped from corporate debt obligations, and receipts
and certificates for such stripped debt obligations and stripped coupons
(collectively, "Stripped Corporate Securities"). Stripped Treasury Securities,
Stripped Government Securities and Stripped Corporate Securities are referred to
collectively herein as "Stripped Securities."
Each Maturing Government Bond Portfolio will mature on a specified target
date. The current Target Dates, as that term is defined herein, are in September
in the years 1998, 2002, 2006 and 2010.
Under normal circumstances, each Maturing Government Bond Portfolio will
invest at least 65% of its net assets in Stripped Treasury Securities and
Stripped Government Securities. To pay expenses and to provide funds with which
to meet redemption requests, the Maturing Government Bond Portfolios may
purchase interest bearing U.S. Government securities and other money market
instruments. The Portfolios may enter into repurchase agreements with respect to
securities in which they are permitted to invest.
If the assets of a Maturing Government Bond Portfolio do not exceed $1
million, up to 100% of its net assets may be invested in short-term, interest-
paying U.S. Government obligations and repurchase agreements with respect to
such securities. To provide income for expenses, redemption payment, and cash
dividends, up to 20% of each Maturing Government Bond Portfolio assets may be
invested in interest-paying U.S. Government securities and repurchase agreements
with respect to such securities.
When held to maturity, the entire return on zero coupon securities, which
consists of the amortization of discount, comes from the difference between
their purchase price and their maturity value. This difference is known at the
time of purchase, so persons holding a portfolio composed entirely of zero
coupon securities, with no expenses until maturity, would know the amount of
their investment return at the time of their initial payment. While these
Portfolios will have additional holdings, including cash, which will affect
performance, they will describe an anticipated yield to maturity from time to
time. In order to obtain this return, contract owners electing to have payments
allocated to a Maturing Government Bond Portfolio should plan to maintain their
investment until the maturity of that Maturing Government Bond Portfolio.
While many factors may affect the yield to maturity of each of the Portfolios,
one such factor which may operate to the detriment of those contract owners
holding interests in such Portfolio until maturity, is the ability of other
contract owners to purchase or redeem shares on any business day.
Because each Maturing Government Bond Portfolio will be primarily invested in
zero coupon securities, contract owners whose purchase payments are invested in
shares held to maturity, including those obtained through reinvestment of
dividends and distributions, will experience a return consisting primarily of
the amortization of discount on the underlying securities in the Maturing
Government Bond Portfolio. However, the net asset value of the Portfolio's
shares will increase or decrease with the daily changes in the market value of
that Maturing Government Bond Portfolio's investments which will tend to vary
inversely with changes in prevailing interest rates. If shares of a Maturing
Government Bond Portfolio are redeemed prior to the maturity date of that
Maturing Government Bond Portfolio, a contract owner may experience a
significantly different investment return than was anticipated at the time of
purchase.
The Maturing Government Bond Portfolios will also seek to minimize
reinvestment risk. Reinvestment risk arises from the uncertainty as to the total
return which will be realized from conventional interest-paying bonds due to the
fact that periodic interest, received in cash, will be reinvested in the future
at interest rates unknown at the time of the original purchase. With zero coupon
securities, however, there are no cash distributions to reinvest, so an owner of
such a security would bear no reinvestment risk if a zero coupon security was
held to maturity. Since each Maturing Government Bond Portfolio will not be
invested entirely in zero coupon securities maturing on the Target Date, there
will be some reinvestment risk.
Stripped Securities investments, like other investments in debt securities,
are subject to certain risks, including credit and market risks. Credit risk is
the function of the ability of an issuer of a security to
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maintain timely interest payments and to pay the principal of a security upon
maturity. Securities purchased by the Maturing Government Bond Portfolios will
be rated at least single A or better by nationally recognized statistical rating
agencies. Securities rated single A are regarded as having an adequate capacity
to pay principal and interest, but with greater vulnerability to adverse
economic conditions and some speculative characteristics. The Maturing
Government Bond Portfolios will also attempt to minimize the impact of
individual credit risks by diversifying their portfolio investments.
Market risk is the risk of the price fluctuation of a security due primarily
to market interest rates prevailing generally in the economy. Market risk may
also include elements which take into account the underlying credit rating of an
issuer, the maturity length of a security, a security's yield, and general
economic and interest rate conditions. Stripped Securities do not make any
periodic payments of interest prior to maturity and the stripping of the
securities causes the Stripped Securities to be offered at a discount from their
face amounts. The market value of Stripped Securities and, therefore the net
asset value of the shares of the Maturing Government Bond Portfolios, will
fluctuate, perhaps markedly, with changes in interest rates and other factors
and may be subject to greater fluctuations in response to changing interest
rates than would a fund of securities consisting of debt obligations of
comparable coupon bearing maturities. The amount of fluctuation increases with
longer maturities.
Because they do not pay interest, zero coupon securities tend to be subject to
greater fluctuation of market value in response to changes in interest rates
than interest-paying securities of similar maturities. Contract owners can
expect more appreciation of the net asset value of a Maturing Government Bond
Portfolio's shares during periods of declining interest rates than from
interest-paying securities of similar maturity. Conversely, when interest rates
rise, the net asset value of a Maturing Government Bond Portfolio's shares will
normally decline more in price than interest-paying securities of a similar
maturity. Price fluctuations are expected to be greatest in the longer-maturity
Portfolios and are expected to diminish as a Maturing Government Bond Portfolio
approaches its Target Date. These fluctuations may make the Maturing Government
Bond Portfolios an inappropriate selection as a basis for variable annuity
payments. Interest rates can change suddenly and unpredictably.
When held to maturity, the return on zero coupon securities consists entirely
of the difference between the maturity value and the purchase price of
securities held in the Portfolio. While this difference allows investors to
measure initial investment return, it also must be considered in light of
changing economic conditions. Inflationary risk, that is the risk attendant to
holding fixed-rate investments during a period of generally upward changing
price levels in the economy, must be considered in selecting a Maturing
Government Bond Portfolio as an investment choice or in selecting a particular
Maturing Government Bond Portfolio.
The Fund currently offers four separate Maturing Government Bond Portfolios,
each maturing on the third Friday of September of the specific maturity year
(the "Target Date"). On each Portfolio's Target Date, the Portfolio will be
converted to cash and reinvested in another of the Fund's Portfolios at the
direction of the contract owner. If the contract owner does not complete an
instruction form directing what should be done with liquidation proceeds, the
proceeds will be automatically invested in the Money Market Portfolio and the
contract owner will be notified of that allocation.
The investment adviser of the Portfolios will attempt to maintain the average
maturity of each Maturing Government Bond Portfolio within twelve months of that
Portfolio's Target Date. A Portfolio of securities consisting entirely of zero
coupon securities maturing on the Target Date with no cash or interest bearing
securities will have a maturity and duration which are equal.
Duration is the measure of the length of an investment and its price
volatility which takes into account, through present value analysis, the timing
and amount of any interest payments as well as the amount of the principal
repayment thus measuring volatility or price fluctuation. Duration is commonly
used by professional investment managers to help identify and control
reinvestment risk. Since each Maturing Government Bond Portfolio will not be
invested entirely in zero coupon securities maturing on the Target Date, there
will be some reinvestment risk. By balancing investments with slightly longer
and shorter durations, the investment adviser believes it can, under normal
circumstances, maintain a Maturing Government Bond Portfolio's average duration
within twelve months of the Maturing Government Bond Portfolio's Target Date and
thereby reduce its reinvestment risk.
Under federal income tax laws, a portion of the difference between the
purchase price of the zero coupon securities and their face value ("original
issue discount") is considered to be income to the Maturing Government Bond
Portfolios each year,
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even though such Portfolios will not receive cash payments representing the
discount from these securities. This original issue discount will comprise a
part of the net taxable investment income of the Maturing Government Bond
Portfolios which must be "distributed" to the insurance company shareholder each
year, whether or not such distributions are paid in cash. To the extent such
distributions are paid in cash, a Maturing Government Bond Portfolio may have to
generate the required cash from interest earned on non-zero coupon securities or
possibly from the disposition of zero coupon securities.
The Maturing Government Bond Portfolios may not be appropriate for contract
owners who do not plan to have their premiums invested in shares of a Maturing
Government Bond Portfolio for a long term or until its maturity.
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SMALL COMPANY VALUE -
PORTFOLIO
The investment objective of the Small Company Value Portfolio is the
long-term accumulation of capital. In pursuit of this objective, the Small
Company Value Portfolio will follow a policy of investing primarily in the
equity securities of small companies, defined in terms of either market
capitalization or gross revenues, which, in the opinion of the Adviser, have
market values which appear low relative to their underlying value or future
earnings and growth potential. Dividend income will be incidental to the
investment objective for this Portfolio. Investments in small companies usually
involve greater investment risks than fixed income securities or corporate
equity securities generally. The investment objective may not be changed without
the approval of a majority of the outstanding shares of the Portfolio.
The Small Company Value Portfolio will primarily purchase securities which, at
the time of purchase, are issued by "small companies" and are considered by
MIMLIC Management to be "value" securities. Small companies are those which have
a market capitalization of less than $1.5 billion or annual gross revenues of
less than $1.5 billion (see "Small Companies" below). Value securities are
issued by companies which could be described as follows: (a) companies whose
securities MIMLIC Management believes are selling at low market valuations
relative to the securities markets in general, or companies that may currently
be earning a very low return on assets but which have the potential to earn
higher returns; (b) companies whose securities MIMLIC Management believes are
undervalued in relation to their potential for improved operating performance
and financial strength; or (c) companies which have recently changed management
or control and whose securities, in the judgment of MIMLIC Management, are
therefore undervalued in relation to their potential to achieve sharply improved
operating performance. Securities of companies that may be temporarily out of
favor or whose value is not yet recognized by the market may also be considered
by MIMLIC Management to be value securities (see, "Value Securities" below).
The Small Company Value Portfolio will ordinarily invest at least 65% of the
value of its total assets in common stocks with the characteristics described
above. The balance of its assets may be invested in other equity securities,
including stocks with larger market capitalization whose long-term appreciation
potential is believed by MIMLIC Management to be well above average, debt
obligations convertible into common stock and which may produce capital
appreciation, other corporate debt obligations, U.S. Government securities, cash
or cash equivalents. However, the Small Company Value Portfolio may temporarily
take a defensive position by investing a substantial portion of its assets in
bonds, notes or other evidences of indebtedness, including U.S. Government
securities and corporate debt securities, provided that such debt securities
(excluding debt securities convertible into common stock as described below) are
rated BBB or Baa or higher by Standard & Poor's Corporation ("S&P") or Moody's
Investors Services, Inc. ("Moody's"), respectively, or may hold its assets in
cash. The Small Company Value Portfolio may also temporarily hold its assets in
cash or money market instruments pending investments in accordance with its
policies.
VALUE SECURITIES. Tests applied by MIMLIC Management to measure the value of
securities will include their price/earnings ratio, price/book ratio, price to
cash flow ratio and yield. A price/earnings ratio is the price of a share of
stock divided by its earnings per share and it is a measure of the market price
of the security relative to its earnings per share. A price/book ratio is the
price of a share of stock divided by its book value per share and it is a
measure of the market price of the security relative to its book value per
share. Book value per share is generally equal to assets less liabilities
divided by the total number of outstanding shares (i.e., the "net worth" per
share). A price to cash flow ratio is the price of a share of stock divided by
the firm's net income after taxes, plus depreciation and other non-cash
expenses, expressed on a per share basis. Yield
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is the annual dividend of a share of stock divided by its market price. Stocks
will be selected by MIMLIC Management using statistical measures of relative
value. Returns on such stocks are likely to be influenced by the recognition of
their undervaluation by other investors and the market. Under most
circumstances, if MIMLIC Management determines that a stock has reached an
over-valued position, it may be sold and replaced by securities which are deemed
to be undervalued in the marketplace.
The Small Company Value Portfolio's investments in value securities will
typically be characterized by the purchase of securities with lower price to
normalized earnings ratios ("normalized earnings" are average earnings under
average business conditions), lower price to cash flow ratios and/or price to
book value ratios relative to the equity markets in general. This value approach
to investing may be considered to differ from a growth approach which would
consider the purchase of securities with an anticipated above-average earnings
growth potential over time. This distinction between these two approaches to
equity investing is important because historically there are periods in which
either growth or value investing may be successful approaches to total return in
the equity markets. Securities that meet the criteria of the Small Company Value
Portfolio may not be popular during certain market cycles.
SMALL COMPANIES. Companies characterized as "small" companies may encompass
well-known and established companies as well as newer and relatively unknown
companies, and will have, at the time of purchase, a market capitalization of
less than $1.5 billion or annual gross revenues of less than $1.5 billion.
Market capitalization is the term which refers to the total market value of a
company's outstanding shares of common stock. Application of the market
capitalization or gross revenue tests will be made only at the time that the
Portfolio's initial position in the company is taken. Thus, for purposes of the
65% test, any company deemed to be a small company at the time of the
Portfolio's initial position therein will be treated as a small company,
regardless of subsequent developments, so long as the Portfolio maintains a
position in the company.
Small companies may be in a relatively early stage of development or may
produce goods and services which have favorable prospects for growth due to
increasing demand or developing markets. Frequently, such companies have a small
management group and single product or product-line expertise that may result in
an enhanced entrepreneurial spirit and greater focus which allow such firms to
be successful. MIMLIC Management believes that such companies may develop into
significant business enterprises and that an investment in such companies offers
a greater opportunity for capital appreciation than an investment in larger more
established entities. However, small companies frequently retain a large part of
their earnings for research, development and investment in capital assets, so
that the prospects for immediate dividend income are limited.
While historically securities issued by small capitalization companies have
produced better market results than the securities of larger issuers, there is
no assurance that they will continue to do so or that the Portfolio will invest
specifically in those companies which produce those results. Because of the
risks involved, Small Company Value Portfolio is not intended as a complete
investment program. See "Risks Of Investing In The Portfolio," below, for
further information about risks associated with investments in small companies.
CONVERTIBLE SECURITIES. The Portfolio may invest in debt or preferred equity
securities convertible into or exchangeable for equity securities.
Traditionally, convertible securities have paid dividends or interest at rates
higher than common stocks but lower than non-convertible securities. They
generally participate in the appreciation or depreciation of the underlying
stock into which they are convertible, but to a lesser degree. The total return
and yield of lower quality (high yield/high risk) convertible bonds can be
expected to fluctuate more than the total return and yield of higher quality,
shorter-term bonds, but not as much as common stocks. The Portfolio will limit
its purchase of convertible debt securities to those that, at the time of
purchase, are rated at least B- by S&P or B3 by Moody's, or if not rated by S&P
or Moody's, are of equivalent investment quality as determined by the Adviser.
Debt securities rated below the four highest categories (i.e., below BBB) are
not considered "investment grade" obligations and are commonly called "junk
bonds." These securities in fact have speculative characteristics and present
more credit risk than investment grade obligations. Bonds rated below BBB are
regarded as predominately speculative with respect to the issuer's continuing
ability to meet principal and interest payments. (See "Debt Securities," below,
for a description of the risks associated with debt securities rated below
investment grade.) As an operating policy, the Portfolio will not purchase a
non-investment grade convertible debt security if
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immediately after such purchase the Portfolio would have more than 10% of its
total assets invested in such securities. See the Appendix for a description of
the ratings used by S&P and Moody's.
DEBT SECURITIES. The Portfolio may invest in non-convertible debt securities
rated BBB or Baa or higher by S&P or Moody's, respectively. In addition, the
Portfolio may invest in debt securities convertible into common stock which are
rated lower than BBB or Baa (see "Convertible Securities" above). The market
value of debt securities generally varies in response to changes in interest
rates and the financial condition of each issuer. During periods of declining
interest rates, the value of debt securities generally increases. Conversely,
during periods of rising interest rates, the value of such securities generally
declines. These changes in market value will be reflected in the Portfolio's net
asset value. Although they may offer higher yields than do higher rated
securities, low rated (i.e., below BBB) and unrated debt securities generally
involve greater volatility of price and risk of principal and income, including
the possibility of default by, or bankruptcy of, the issuers of the securities.
In addition, the markets in which low rated and unrated debt securities are
traded are more limited than those in which higher rated securities are traded.
The existence of limited markets for particular securities may diminish the
Portfolio's ability to sell the securities at fair value either to meet
redemption requests or to respond to changes in the economy or in the financial
markets and could adversely affect and cause fluctuations in the daily net asset
value of the Portfolio's shares.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low rated debt
securities, especially in a thinly traded market. Analysis of the
creditworthiness of issuers of low rated debt securities may be more complex
than for issuers of higher rated securities, and the ability of the Portfolio to
achieve its investment objective may, to the extent of investment in low rated
debt securities, be more dependent upon such creditworthiness analysis than
would be the case if the Portfolio were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities.
The prices of low rated debt securities have been found to be less sensitive to
interest rate changes than higher rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. A projection of
an economic downturn or of a period of rising interest rates, for example, could
cause a decline in low rated debt securities prices because the advent of a
recession could lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If the issuer of low
rated debt securities defaults, the Portfolio may incur additional expenses to
seek recovery. The low rated bond market is relatively new, and many of the
outstanding low rated bonds have not endured a major business recession.
After purchase by the Portfolio, a debt security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Portfolio.
Neither event will require a sale of such security by the Portfolio, but the
Adviser will consider such event in the determination of whether the Portfolio
should continue to hold the security.
OPTIONS. The Portfolio may write covered call options which are traded on
national securities exchanges with respect to common stocks in its portfolio
("covered options") in an attempt to earn additional current income on its
portfolio or to guard against an expected decline in the price of a security. By
writing a covered call option, the Portfolio gives the purchaser of the option
the right to buy the underlying security at the price specified in the option.
The Portfolio realizes income from the sale of the option, but foregoes the
opportunity to profit during the option period from an increase in the market
value of the underlying security above the exercise price. The Portfolio does
not write call options in an aggregate amount greater than 15% of its net
assets. See "Investment Restrictions," below. The Portfolio purchases call
options only to close out a position, and will neither write nor purchase put
options. The use of options contracts involves additional risk of loss to the
Portfolio, including the risk that the Portfolio may incur a loss because the
prices of the underlying securities do not move as anticipated. See the
Statement of Additional Information for a more detailed discussion of options
and the risks associated therewith.
LOANS OF PORTFOLIO SECURITIES. For the purpose of realizing additional
income, the Portfolio may make secured loans of portfolio securities amounting
to not more than 20% of its total assets. Securities loans are made to
broker-dealers or financial institutions pursuant to agreements requiring that
the loans be continuously secured by collateral at least equal at all times to
the value of the securities lent. The collateral received will consist of cash
or securities issued or guaranteed by the United States
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Government, its agencies or instrumentalities. While the securities are being
lent, the Portfolio will continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities, as well as interest on the
investment of the collateral or a fee from the borrower. The Portfolio has a
right to call each loan and obtain the securities on five business days' notice.
The Portfolio will not have the right to vote securities while they are being
lent, but it will call a loan in anticipation of any important vote. The risks
in lending portfolio securities, as with other extensions of secured credit,
consist of possible delay in receiving additional collateral or in the recovery
of the securities or possible loss of rights in the collateral should the
borrower fail financially. Loans will only be made to firms deemed by the
Portfolio's investment adviser to be of good standing and to have sufficient
financial responsibility, and will not be made unless, in the judgment of the
Portfolio's investment adviser, the consideration to be earned from such loans
would justify the risk. The creditworthiness of entities to which the Portfolio
makes loans of portfolio securities is monitored by the Portfolio's investment
adviser throughout the term of each loan.
WARRANTS. The Portfolio may invest in warrants; however, not more than 5% of
its assets (at the time of purchase) will be invested in warrants other than
warrants acquired in units or attached to other securities. Of such 5% not more
than 2% of the Portfolio assets at the time of purchase may be invested in
warrants that are not listed on the New York or American Stock Exchanges.
Warrants are pure speculation in that they have no voting rights, pay no
dividends and have no rights with respect to the assets of the corporation
issuing them. The prices of warrants do not necessarily move parallel to the
prices of the underlying securities.
ILLIQUID SECURITIES AND RULE 144A PAPER. The Portfolio is permitted to invest
up to 10% of its net assets in securities or other assets which are illiquid. An
investment is generally deemed to be "illiquid" if it cannot be disposed of
within seven days in the ordinary course of business at approximately the amount
at which the investment company is valuing the investment. "Restricted
securities" are securities which were originally sold in private placements and
which have not been registered under the Securities Act of 1933 (the "1933
Act"). Such securities generally have been considered illiquid by the staff of
the Securities and Exchange Commission (the "SEC"), since such securities may be
resold only subject to statutory restrictions and delays or if registered under
the 1933 Act.
The SEC has acknowledged, however, that a market exists for certain restricted
securities (for example, securities qualifying for resale to certain "qualified
institutional buyers" pursuant to Rule 144A under the 1933 Act). Additionally,
the Adviser and the Portfolio believe that a similar market exists for
commercial paper issued pursuant to the private placement exemption of Section
4(2) of the 1933 Act. The Portfolio may invest without limitation in these forms
of restricted securities if such securities are deemed by the Adviser to be
liquid in accordance with standards established by the Board of Directors of the
Fund. Under these guidelines, the Adviser must consider (a) the frequency of
trades and quotes for the security, (b) the number of dealers willing to
purchase or sell the security and the number of other potential purchasers, (c)
dealer undertakings to make a market in the security, and (d) the nature of the
security and the nature of the marketplace trades (for example, the time needed
to dispose of the security, the method of soliciting offers and the mechanics of
transfer). At the present time, it is not possible to predict with accuracy how
the markets for certain restricted securities will develop. Investing in such
restricted securities could have the effect of increasing the level of the
Portfolio's illiquidity to the extent that qualified purchasers of the
securities become, for a time, uninterested in purchasing these securities.
FOREIGN SECURITIES. The Portfolio may also invest up to 10% of the market
value of the Portfolio's total assets in securities of foreign issuers which are
not publicly traded in the United States. (Securities of foreign issuers which
are publicly traded in the United States, usually in the form of sponsored
American Depository Receipts, are not subject to this 10% limitation.) Investing
in securities of foreign issuers may result in greater risk than that incurred
in investing in securities of domestic issuers. There is a possibility of
expropriation, nationalization or confiscatory taxation, taxation of income
earned in foreign nations or other taxes imposed with respect to investments in
foreign nations; foreign exchange controls (which may include suspension of the
ability to transfer currency from a given country), default in foreign
government securities, political or social instability or diplomatic
developments which could affect investments in securities of issuers in those
nations. In addition, in many countries there is less publicly available
information about issuers than is available in reports about companies in the
United States. Foreign companies are not generally subject to uniform
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accounting, auditing and financial reporting standards, and auditing practices
and requirements may not be comparable to those applicable to United States
companies. Further, the Portfolio may encounter difficulties or be unable to
pursue legal remedies and obtain judgments in foreign courts. Commission rates
in foreign countries, which are sometimes fixed rather than subject to
negotiation as in the United States, are likely to be higher. Further, the
settlement period of securities transactions in foreign markets may be longer
than in domestic markets. In many foreign countries there is less government
supervision and regulation of business and industry practices, stock exchanges,
brokers and listed companies than in the United States. The foreign securities
markets of many of the countries in which the Portfolio may invest may also be
smaller, less liquid, and subject to greater price volatility than those in the
United States. Also, some countries may withhold portions of interest, dividends
and gains at the source. There are further risk considerations, including
possible losses through the holding of securities in domestic and foreign
custodial banks and depositories.
An ADR is sponsored if the original issuing company has selected a single U.S.
bank to serve as its U.S. depository and transfer agent. This relationship
requires a deposit agreement which defines the rights and duties of both the
issuer and depository. Companies that sponsor ADRs must also provide their ADR
investors with English translations of company information made public in their
own domiciled country. Sponsored ADR investors also generally have the same
voting rights as ordinary shareholders, barring any unusual circumstances. ADRs
which meet these requirements can be listed on U.S. stock exchanges. Unsponsored
ADRs are created at the initiative of a broker or bank reacting to demand for a
specific foreign stock. The broker or bank purchases the underlying shares and
deposits them in a depository. Unsponsored shares issued after 1983 are not
eligible for U.S. stock exchange listings. Furthermore, they do not generally
include voting rights.
REPURCHASE AGREEMENTS. The Portfolio may also enter into repurchase
agreements. Repurchase agreements are agreements by which the Portfolio
purchases a security and obtains a simultaneous commitment from the seller (a
member bank of the Federal Reserve System or, if permitted by law or regulation
and if the Board of Directors of the Portfolio has evaluated its
creditworthiness through adoption of standards of review or otherwise, a
securities dealer) to repurchase the security at an agreed upon price and date.
The creditworthiness of entities with whom the Portfolio enters into repurchase
agreements is monitored by the Portfolio's investment adviser throughout the
term of the repurchase agreement. The resale price is in excess of the purchase
price and reflects an agreed upon market rate unrelated to the coupon rate on
the purchased security. Such transactions afford the Portfolio the opportunity
to earn a return on temporarily available cash. The Portfolio's custodian, or a
duly appointed subcustodian, holds the securities underlying any repurchase
agreement in a segregated account or such securities may be part of the Federal
Reserve Book Entry System. The market value of the collateral underlying the
repurchase agreement is determined on each business day. If at any time the
market value of the collateral falls below the repurchase price of the
repurchase agreement (including any accrued interest), the Portfolio promptly
receives additional collateral, so that the total collateral is in an amount at
least equal to the repurchase price plus accrued interest. While the underlying
security may be a bill, certificate of indebtedness, note or bond issued by an
agency, authority or instrumentality of the United States Government, the
obligation of the seller is not guaranteed by the U.S. Government. In the event
of a bankruptcy or other default of a seller of a repurchase agreement, the
Portfolio could experience both delays in liquidating the underlying security
and losses, including: (a) possible decline in the value of the underlying
security during the period while the Portfolio seeks to enforce its rights
thereto; (b) possible subnormal levels of income and lack of access to income
during this period; and (c) expenses of enforcing its rights.
Equity securities, in which the Portfolio will be primarily invested, are more
volatile than debt securities and involve greater investment risk. The Portfolio
is dependent on the Adviser's judgment as to general economic and market
policies and trends in investment yields, as well as its judgment as to the
composition of the Portfolio.
Investments in small companies, such as those made by the Small Company Value
Portfolio, involve greater risks than equity securities generally due to their
small size and the fact that they may have limited product lines, less access to
the financial market for additional corporate financings or less management
depth. In addition, many of the securities of these firms trade less frequently
and in lower volumes than do securities issued by larger firms. The result is
that the short-term volatility of
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the prices of those securities is greater than the prices of larger, more
established companies which are more widely held in the market. The securities
of small companies may also be more sensitive to market changes generally than
the securities of large companies.
Some of the investment policies which the Portfolio may employ, such as
investing in options, repurchase agreements, and illiquid and foreign
securities, involve special risks not associated with more traditional
investment instruments and policies. Loans of portfolio securities, for example,
involve risks of possible delay in receiving additional collateral or in the
recovery of the loaned securities, or possible loss of rights in the collateral
should the borrower fail financially. The use of options may, in the case of a
sale of a covered call option, result in a loss to the Portfolio as a result of
the foregone increase in value of the underlying security. The Portfolio will
purchase a covered call option only to close out an option which the Portfolio
has written and, in such circumstances, may also experience a loss if the amount
paid to purchase the call option is greater than the premium received for
writing the option being closed out. Illiquid securities include certain types
of restricted securities, which may be sold only in a privately negotiated
transaction or in a public offering for which a registration statement is in
effect under the Securities Act of 1933. Because of such restrictions, the
Portfolio may not be able to dispose of a block of restricted securities for a
substantial period of time or at prices as favorable as those prevailing in the
open market should like securities of an unrestricted class of the same issuer
be freely traded. The Portfolio may be required to bear the expenses of
registration of such restricted securities.
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GLOBAL BOND -
PORTFOLIO
The investment objective of the Global Bond Portfolio is to maximize
total return, consistent with preservation of capital and prudent investment
management. The Portfolio will attempt to achieve its investment objective by
investing primarily in debt securities issued by issuers located anywhere in the
world.
Total investment return is the combination of income and capital appreciation.
There will be an emphasis on income in selecting securities for the Portfolio,
but Voyageur Managers and Lazard London also consider the potential for changes
in value resulting from changes in currency relationships, interest rates,
individual issuers' credit standing and other factors. The Portfolio seeks to
maintain an average Portfolio duration ranging from three to eight years.
Foreign debt securities in which the Portfolio may invest include: (a)
obligations issued or guaranteed by foreign national governments, their
agencies, instrumentalities, or political subdivisions; (b) debt securities
issued or guaranteed by supranational organizations established or supported by
several national governments; (c) Brady Bonds; and (d) non-government foreign
debt securities. U.S. debt obligations in which the Portfolio may invest include
U.S. Government Securities, including mortgage-related securities, privately
issued mortgage-related securities, asset-backed securities and corporate debt
securities. The Portfolio may also invest in American Depository Receipts and
European Depository Receipts and in foreign index linked securities. The
Portfolio may also invest in Global Depository Receipts and Global Depository
Shares which are typically issued in bearer form and are designed for use in
European and other international securities markets.
The Portfolio will invest primarily in investment grade debt securities
(securities rated at least Baa by Moody's or BBB by S&P or, if unrated, of
comparable quality as determined by the responsible Sub-Adviser). Securities
rated Baa by Moody's or BBB by S&P are considered medium-grade obligations and
may have speculative characteristics. However, the Portfolio may invest up to
10% of its net asset in debt securities that are rated below investment grade
but rated B or higher by Moody's or S&P (or, if unrated, determined by the
responsible Sub-Adviser to be of comparable quality). Such securities are
sometimes referred to as "high yield" or "junk" bonds.
Lazard London will actively manage the allocation of the Portfolio's
investments among countries, geographic regions and currency denominations in an
attempt to achieve the Portfolio's objective. In allocating the Portfolio's
assets among various markets, Lazard London will consider such factors as the
relative yields and anticipated direction of interest rates in particular
markets, the level of inflation, liquidity and financial soundness of each
country or market, the general market and economic conditions existing in each
country or market, and the relationship of currencies of various countries to
the U.S. dollar and to each other. In its evaluations, Lazard London will
utilize its internal financial, economic, and credit analysis resources as well
as information obtained from other sources. The Portfolio's share price and
yield will fluctuate due to the movement of foreign currencies
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against the U.S. dollar and changes in world wide interest rates and
fixed-income markets. By actively managing the Portfolio and using currency
hedging techniques, however, Lazard London will attempt to reduce the risks.
The Global Bond Portfolio may invest in securities issued anywhere in the
world, including the United States. Under normal conditions, the Portfolio will
be invested in at least three different countries, one of which may be the
United States. Subject to the requirement that the Global Bond Portfolio may not
invest 25% or more of its total assets in obligations issued by the government
of any one country (other than the United States), there is no limit on the
amount the Portfolio may invest in any one country, or in securities denominated
in the currency of any one country, to take advantage of what Voyageur Managers
and Lazard London believe to be favorable yields, currency exchange conditions
or total investment return potential. Depending on the current opinion of Lazard
London as to the proper allocation of assets among domestic and foreign issuers,
investments in the securities of issuers located outside the United States will
normally vary between 25% and 75% of the Portfolio's assets.
The Portfolio may invest in securities denominated in the currencies of
countries that Voyageur Managers and Lazard London consider to have stable
governments and in debt securities denominated in multi-national currency units,
such as the European Currency Unit ("ECU"). The ECU is a "basket" consisting of
specified amounts of the currencies of certain of the member states of the
European Community. Securities of issuers within a given country may be
denominated in the currency of another country.
The Global Bond Portfolio may buy or sell interest rate futures contracts,
options on interest rate futures contracts and options on debt securities for
the purpose of hedging against changes in the value of securities which the
Portfolio owns or anticipates purchasing due to anticipated changes in interest
rates when those futures options are traded on a United States exchange or board
of trade. The Portfolio may invest in instruments that return principal and/or
pay interest to investors in amounts which are linked to the level of a
particular foreign index ("Foreign Index Linked Securities") only up to 10% of
its total assets. The Portfolio also may engage in foreign currency exchange
transactions by means of buying and selling foreign currency options, foreign
currency futures, and options on foreign currency futures. Foreign currency
exchange transactions may be entered into for the purpose of hedging against
foreign currency exchange risk arising from the Portfolio's investment or
anticipated investment in securities denominated in foreign currencies. The
Global Bond Portfolio also may enter into foreign currency forward contracts and
buy or sell foreign currencies or foreign currency options for purposes of
increasing exposure to a particular foreign currency or to shift exposure to
foreign currency fluctuations from one country to another. The Portfolio may
enter into swap agreements for purposes of attempting to obtain a particular
investment return at a lower cost to the Portfolio than if the Portfolio had
invested directly in an instrument that provided that desired return. The
Portfolio will not enter into a swap agreement with any single party if the net
amount owed or to be received under existing contracts with that party would
exceed 5% of the Portfolio's assets. In addition, the Portfolio may purchase and
sell securities on a when-issued or delayed-delivery basis and enter into
forward commitments to purchase securities, lend its securities to brokers,
dealers and other financial institutions to earn income, and enter into reverse
repurchase agreements as a means of borrowing money for investment purposes.
No more than 5% of the Portfolio's assets will be invested in ADRs sponsored
by persons other than the underlying issuers. Issuers of the stock of such
unsponsored ADRs are not obligated to disclose material information in the
United States and, therefore, there may not be a correlation between such
information and the market value of such ADRs. As an additional restriction, the
Portfolio will not concentrate more than 25% of the value of its assets in
securities of a single supranational organization.
Investing in foreign securities involves certain special considerations which
are not typically associated with investing in U.S. securities. For further
information regarding investing in foreign securities, hedging techniques and
the risks and characteristics of the various techniques employed in the
management of this Portfolio see Appendix C of this prospectus and the Statement
of Additional Information.
45
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT
RESTRICTIONS
- ------------------------------------
The Fund is subject to a number of restrictions in pursuing
its investment objectives and policies. The following is a brief summary of
certain restrictions. Some of these restrictions are subject to exceptions not
stated here. Those exceptions and a complete list of the investment restrictions
applicable to the individual Portfolios and to the Fund are set forth in the
Statement of Additional Information.
Except for the restrictions specifically identified as fundamental, all
investment restrictions described in this Prospectus and in the Statement of
Additional Information are not fundamental, so that the Board of Directors may
change them without shareholder approval. Fundamental policies may not be
changed without the affirmative vote of a majority of the outstanding voting
securities.
Fundamental policies applicable to all Portfolios include prohibitions on: (1)
investing more than 25% of the total assets of any Portfolio in the securities
of issuers conducting their principal business activity in the same industry
(with exceptions for United States Government securities and certain money
market instruments and, in the Mortgage Securities Portfolio, for investments in
the mortgage and mortgage-finance industry), (2) borrowing money, except for
temporary or emergency purposes and then not in excess of 10% of the value of
the total assets of the Portfolio at the time the borrowing is made (for
purposes of this restriction, "borrowing" shall not include reverse repurchase
agreements), (3) investing more than 5% of the value of a Portfolio's total
assets in the securities of any one issuer (excluding United States Government
securities and bank obligations) or investing in more than 10% of the voting
securities of any one issuer except that up to 25% of the value of each
Portfolio's total assets may be invested without regard to the restrictions of
this clause (3), (4) making short sales, except that each Portfolio may make
short sales "against the box" in amounts not in excess of 10% of such
Portfolio's total assets in certain unusual and defensive situations, and (5)
entering into reverse repurchase agreements if such investments taken together
with borrowings represented by senior securities exceed 33 1/3% of a Portfolio's
total assets less liabilities other than obligations under such borrowings and
reverse repurchase agreements. At the time the Fund enters into a reverse
repurchase agreement, cash, U.S. Government securities or other liquid high-
grade debt obligations having a value sufficient to make payments for the
securities to be repurchased will be segregated, and will be maintained
throughout the period of the obligation.
Restrictions that apply to all Portfolios and that are not fundamental include
prohibitions on: (1) knowingly investing more than 15% of the value of the net
assets of any Portfolio (except the Money Market Portfolio, in which the
limitation shall be 10%) in "illiquid" securities (including repurchase
agreements maturing in more than seven days), (2) pledging, hypothecating,
mortgaging or transferring more than 10% of the total assets of any Portfolio as
security for indebtedness, and (3) purchasing securities of other investment
companies having a value in excess of 5% of a Portfolio's total assets, other
than in connection with a merger, consolidation or reorganization or if the
purchase involves securities of closed-end investment companies and does not
result in more than 10% of the value of a Portfolio's total assets to be
invested in such securities.
Each Portfolio may lend its securities so long as such loans do not represent
in excess of 20% of a Portfolio's total assets. This is a fundamental policy.
The procedure for lending securities is for the borrower to give the lending
Portfolio collateral consisting of cash or cash equivalents. The lending
Portfolio may invest the cash collateral and earn additional income or receive
an agreed upon fee from a borrower which has delivered cash equivalent
collateral. The Fund anticipates that securities will be loaned only under the
following conditions: (1) the borrower must furnish collateral equal at all
times to the market value of the securities loaned and the borrower must agree
to increase the collateral on a daily basis if the securities increase in value,
(2) the loan will be made in accordance with New York Stock Exchange Rules,
which presently require the borrower, after notice, to redeliver the securities
within five business days, (3) any cash collateral invested by a Portfolio will
be in short-term investments which give maximum liquidity so that the collateral
may be paid back to the borrower when the securities are returned, and (4) the
Portfolio making the loan may pay reasonable service, placement, custodian or
other fees in connection with loans of securities and share a portion of the
interest from these investments with the borrower of the securities. It is the
intention of the investment adviser to structure agreements dealing with the
lending of securities so that voting rights attached to those securities will be
retained by the Fund. For the purposes of these restrictions,
46
<PAGE>
collateral arrangements with respect to options forward currency and futures
transactions will not be deemed to involve a pledge of assets.
- --------------------------------------------------------------------------------
THE FUND AND
ITS MANAGEMENT
- ------------------------------------
The Fund is a diversified, open-end, management
investment company incorporated under Minnesota law on February 21, 1985. The
Fund is a series fund, which means that it has several different Portfolios. The
business and affairs of the Fund are managed by its Board of Directors.
A separate class of the Fund's capital stock, par value of $.01 per share, is
issued for each Portfolio. A share of each class represents an undivided
interest in the assets of the Portfolio attributable to that class, and a
shareholder is entitled to a pro rata share of all dividends and distributions
arising from the net income and capital gains of each Portfolio or Portfolios in
which shares are held.
Shares of each Portfolio, including fractional shares, have equal rights with
regard to voting, redemptions, dividends, distributions and liquidations with
respect to that Portfolio. When issued, shares are fully paid and nonassessable
and do not have preemptive or conversion rights or cumulative voting rights. The
sole shareholder of the Fund and its Portfolios, Minnesota Mutual (through
certain of its separate accounts), will vote Fund shares allocated to its
separate accounts in accordance with instructions received from contract owners.
In the event no instructions are received from owners of the Contracts with
respect to shares of a Portfolio held by a sub-account of a separate account of
Minnesota Mutual, Minnesota Mutual will vote such shares in the same proportion
as shares of the Portfolio held by such sub-account for which instructions have
been received.
- --------------------------------------------------------------------------------
INVESTMENT
ADVISER
- ------------------------------------
The Fund's investment adviser is MIMLIC Asset Management
Company ("MIMLIC Management"). MIMLIC Management commenced its current business
in January, 1984, and provides investment advisory services to the Fund and
various private accounts. MIMLIC Management's wholly-owned subsidiary, Advantus
Capital Management, Inc., provides investment advisory services to nine other
mutual funds (Advantus Horizon Fund, Inc., Advantus Spectrum Fund, Inc.,
Advantus Mortgage Securities Fund, Inc., Advantus Money Market Fund, Inc.,
Advantus Bond Fund, Inc., Advantus Cornerstone Fund, Inc., Advantus Enterprise
Fund, Inc., Advantus International Balanced Fund, Inc., and MIMLIC Cash Fund,
Inc.). MIMLIC Management's personnel also have experience in managing
investments for The Minnesota Mutual Life Insurance Company ("Minnesota Mutual")
and its separate accounts. MIMLIC Management is a subsidiary of Minnesota Mutual
which was organized in 1880 and has assets of more than $9.8 billion. Minnesota
Mutual is licensed to do a life insurance business in all states of the United
States (except New York, where it is an authorized reinsurer), the District of
Columbia, Canada and Puerto Rico. The executive offices of the Fund, MIMLIC
Management, MIMLIC Sales, and Minnesota Mutual are located at the Minnesota
Mutual Life Center, 400 Robert Street North, St. Paul, Minnesota 55101-2098.
MIMLIC Management acts as an investment adviser to the Fund pursuant to the
Advisory Agreement, the Supplementary Advisory Agreement, the Second
Supplemental Investment Advisory Agreement and the Third Supplemental Investment
Advisory Agreement, the Fourth Supplemental Investment Advisory Agreement and
the Fifth Supplemental Investment Advisory Agreement. MIMLIC Management selects
and reviews the Fund's investments, and provides executive and other personnel
for the management of the Fund. The Fund's Board of Directors supervises the
affairs of the Fund as conducted by MIMLIC Management. Each Portfolio of the
Fund, except the Index 500, Capital Appreciation, International Stock, Small
Company, Value Stock, Small Company Value, Global Bond and the Maturing
Government Bond Portfolios, pays MIMLIC Management a fee equal to an annual rate
of .50% of average daily net assets. The Index 500 Portfolio pays MIMLIC
Management a fee equal to an annual rate of .40% of average daily net assets.
The Capital Appreciation, Small Company, Value Stock, Small Company Value and
Global Bond Portfolios each pay MIMLIC Management a fee equal to an annual rate
of .75% of average daily net assets. International Stock Portfolio pays MIMLIC
Management a fee equal to an annual rate of 1.00% on the first $10 million of
average daily net assets, .90% on the next $15 million, .80% on the next $25
million, .75% on the next $50 million and .65% on the next $100 million and
thereafter. The Maturing Government Bond Portfolios pay an advisory fee equal to
an annual rate of .25% of average daily net assets, however, the Portfolio which
matures in 1998 will pay a rate of .05% from its inception to April 30,
47
<PAGE>
1998 and .25% thereafter and the Portfolio which matures in 2002 will pay a rate
of .05% from its inception to April 30, 1998 and .25% thereafter of average
daily net assets.
From its advisory fee for the Capital Appreciation Portfolio, MIMLIC
Management pays Winslow Management, effective May 1, 1996, a fee equal to .375%
of all average daily net assets under its Investment Sub-Advisory Agreement.
Prior to May 1, 1996, MIMLIC Management paid Winslow Management a portion of the
advisory fee received from the Capital Appreciation Portfolio equal to .50% on
the first $75 million of average daily net assets and .45% of all net assets in
excess of $75 million for its services under its Investment Sub-Advisory
Agreement. From its advisory fee for the International Stock Portfolio, MIMLIC
Management pays Templeton Counsel a fee equal to .75% on the first $10 million
of average daily net assets, .65% on the next $15 million, .55% on the next $25
million, .50% on the next $50 million and .40% on the next $100 million and
thereafter for its services under its Investment Sub-Advisory Agreement. From
its advisory fee for the Growth Portfolio, MIMLIC Management pays Voyageur
Managers, effective October 1, 1996, a fee equal to .25% of that Portfolio's
average daily net assets under its Investment Sub-Advisory Agreement. From its
advisory fee for the Global Bond Portfolio, MIMLIC Management pays Voyageur
Managers a fee equal to .50% of that Portfolio's average daily net assets under
its Investment Sub-Advisory Agreement. In turn, Voyageur Managers will pay a fee
equal to half that amount to its sub-adviser, Lazard London.
The advisory fees paid by the Capital Appreciation, International Stock, Small
Company, Value Stock, Small Company Value and Global Bond Portfolios are not
higher than the advisory fees paid by many funds with similar investments and
investment policies, but they are higher than that paid by most funds to their
investment advisers. For these fees, MIMLIC Management acts as investment
adviser and manager for the Fund, except as those duties have been delegated
pursuant to the investment sub-advisory agreements with Winslow Management,
Templeton Counsel, Voyageur Management and Lazard London. See "Investment
Sub-Advisers," below. MIMLIC Management also provides executive and other
personnel for the management of the Fund. MIMLIC Management also furnishes the
Fund office space and all necessary office facilities and equipment and
personnel for servicing the investments of the Fund. For each of the last three
calendar years, the various Portfolios paid the following amounts as investment
advisory fees:
<TABLE>
<CAPTION>
ADVISORY FEES PAID
PORTFOLIO 1995 1994 1993
- -------------------------------------------------------------
<S> <C> <C> <C>
GROWTH $ 905,136 $ 678,415 $ 555,256
BOND 435,045 245,068 170,837
MONEY MARKET 126,630 93,032 74,779
ASSET ALLOCATION 1,538,272 1,309,477 1,010,629
MORTGAGE SECURITIES 322,465 318,510 251,176
INDEX 500 388,206 263,397 180,424
CAPITAL APPRECIATION 1,071,527 739,240 499,374
INTERNATIONAL STOCK 955,095 715,345 288,990
SMALL COMPANY 552,670 226,241 33,308
VALUE STOCK 141,207 25,425 N/A
MATURING GOVERNMENT
BOND --
1998 PORTFOLIO 2,184 1,179 N/A
2002 PORTFOLIO 1,441 879 N/A
2006 PORTFOLIO 5,450 3,149 N/A
2010 PORTFOLIO 2,888 1,791 N/A
</TABLE>
The Fund pays all its costs and expenses which are not assumed by MIMLIC
Management. These Fund expenses include, by way of example, but not by way of
limitation, all expenses incurred in the operation of the Fund including, among
others, interest, taxes, brokerage fees and commissions, fees of the directors
who are not employees of MIMLIC Management or any of its affiliates, expenses of
directors' and shareholders' meetings, including the cost of printing and
mailing proxies, expenses of insurance premiums for fidelity and other coverage,
association membership dues, charges of custodians, auditing and legal expenses.
The Fund will also pay the fees and bear the expense of registering and
maintaining the registration of the Fund and its shares with the Securities and
Exchange Commission and registering or qualifying its shares under state or
other securities laws and the expense of preparing and mailing prospectuses and
reports to shareholders. MIMLIC Management shall bear all advertising and
promotional expenses in connection with the distribution of the Fund's shares,
including paying for the printing of Prospectuses and Statements of Additional
Information for new shareholders, shareholder reports for new shareholders and
the costs of sales literature. MIMLIC Management also bears all costs under its
agreement with Wilshire Associates for the use by MIMLIC Management, in
connection with the Index 500 Portfolio, of Wilshire Associates' proprietary
index fund statistical sampling technique.
The names and titles of the portfolio managers employed by MIMLIC Management
who are primarily responsible for the day-to-day management of each of the
Fund's Portfolios, other
48
<PAGE>
than the Index 500 Portfolio, the length of time employed in that position, and
their other business experience during the past five years are set forth below:
<TABLE>
<CAPTION>
PORTFOLIO MANAGER PRIMARY PORTFOLIO
PORTFOLIO AND TITLE MANAGER SINCE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GROWTH JAMES C. KING OCTOBER 1, 1996 VICE PRESIDENT AND SENIOR EQUITY PORTFOLIO MANAGER, VOYAGEUR
SENIOR EQUITY FUND MANAGERS, INC.
PORTFOLIO MANAGER,
VOYAGEUR FUND
MANAGERS, INC.
BOND WAYNE R. SCHMIDT MAY 1, 1991 INVESTMENT OFFICER OF MIMLIC MANAGEMENT; ASSISTANT TREASURER
INVESTMENT OFFICER OF MIMLIC MANAGEMENT AND MINNESOTA MUTUAL PRIOR TO DECEMBER
AND PORTFOLIO 1989
MANAGER
MONEY MARKET WAYNE R. SCHMIDT MAY 1, 1991 INVESTMENT OFFICER OF MIMLIC MANAGEMENT; ASSISTANT TREASURER
INVESTMENT OFFICER OF MIMLIC MANAGEMENT AND MINNESOTA MUTUAL PRIOR TO DECEMBER
AND PORTFOLIO 1989
MANAGER
ASSET THOMAS A. GUNDERSON JANUARY 1, 1989 INVESTMENT OFFICER OF MIMLIC MANAGEMENT
ALLOCATION INVESTMENT OFFICER
AND PORTFOLIO
MANAGER
MORTGAGE KENT R. WEBER JANUARY 1, 1990 INVESTMENT OFFICER OF MIMLIC MANAGEMENT; ASSISTANT PORTFOLIO
SECURITIES INVESTMENT OFFICER MANAGER OF MORTGAGE SECURITIES PRIOR TO 1990
AND PORTFOLIO
MANAGER
CAPITAL CLARK WINSLOW NOVEMBER 13, 1992 PRESIDENT, PORTFOLIO MANAGER AND DIRECTOR, WINSLOW CAPITAL
APPRECIATION PRESIDENT, WINSLOW MANAGEMENT, INC.; SENIOR VICE PRESIDENT AND PORTFOLIO
CAPITAL MANAGEMENT, MANAGER, ALLIANCE CAPITAL MANAGEMENT L.P.
INC.
INTERNATIONAL MARK S. JOSEPH JUNE 20, 1996 VICE PRESIDENT, PORTFOLIO MANAGEMENT/RESEARCH, TEMPLETON
STOCK VICE PRESIDENT, INVESTMENT COUNSEL, INC., SINCE 1993; PRIOR THERETO FROM MAY
TEMPLETON INVESTMENT 1990, VICE PRESIDENT, PACIFIC FINANCIAL RESEARCH, BEVERLY
COUNSEL, INC. HILLS, CALIFORNIA
SMALL COMPANY JAMES P. TATERA APRIL 23, 1993 VICE PRESIDENT OF MIMLIC MANAGEMENT; SECOND VICE PRESIDENT
VICE PRESIDENT AND OF MINNESOTA MUTUAL
CHIEF EQUITY
PORTFOLIO MANAGER
VALUE STOCK MATTHEW D. FINN APRIL 25, 1994 INVESTMENT OFFICER OF MIMLIC MANAGEMENT; OWNER, MANAGING
INVESTMENT OFFICER DIRECTOR, UNIFIED CAPITAL MANAGEMENT, BLOOMFIELD HILLS,
AND PORTFOLIO MICHIGAN, SEPTEMBER 1993 TO APRIL 1994; VICE PRESIDENT/
MANAGER PORTFOLIO MANAGER, ACORN ASSET MANAGEMENT, BLOOMFIELD HILLS,
MICHIGAN, FEBRUARY 1990 TO SEPTEMBER 1993
MATURING KENT R. WEBER APRIL 25, 1994 INVESTMENT OFFICER OF MIMLIC MANAGEMENT; ASSISTANT PORTFOLIO
GOVERNMENT INVESTMENT OFFICER MANAGER OF MORTGAGE SECURITIES PRIOR TO 1990
BOND - 1998, AND PORTFOLIO
2002, 2006 MANAGER
AND 2010
SMALL COMPANY MATTHEW D. FINN , 1997 INVESTMENT OFFICER OF MIMLIC MANAGEMENT; OWNER, MANAGING
VALUE INVESTMENT OFFICER DIRECTOR, UNIFIED CAPITAL MANAGEMENT, BLOOMFIELD HILLS,
AND PORTFOLIO MICHIGAN, SEPTEMBER 1993 TO APRIL 1994; VICE PRESIDENT/
MANAGER PORTFOLIO MANAGER, ACORN ASSET MANAGEMENT, BLOOMFIELD HILLS,
MICHIGAN, FEBRUARY 1990 TO SEPTEMBER 1993
GLOBAL BOND JANE M. WYATT , 1997 DIRECTOR AND CHIEF INVESTMENT OFFICER OF VOYAGEUR FUND
CHIEF INVESTMENT MANAGERS, INC. SINCE 1993; DIRECTOR OF VOYAGEUR FUND
OFFICER, VOYAGEUR DISTRIBUTORS, INC. SINCE 1993; EXECUTIVE VICE PRESIDENT AND
FUND MANAGERS, INC. PORTFOLIO MANAGER OF VOYAGEUR FUND MANAGERS, INC. FROM 1992
TO 1993; VICE PRESIDENT AND PORTFOLIO MANAGER FROM 1989 TO
1992
PATRICK C. SHINE , 1997 DIRECTOR, LAZARD LONDON INTERNATIONAL INVESTMENT MANAGEMENT,
DIRECTOR, LAZARD LIMITED SINCE MARCH 1993 AND DIRECTOR, LAZARD BROTHERS ASSET
LONDON INTERNATIONAL MANAGEMENT SINCE JULY 1991
INVESTMENT
MANAGEMENT, LIMITED
</TABLE>
49
<PAGE>
Subsequent to March 6, 1987, Minnesota Mutual has voluntarily agreed to absorb
all fees and expenses that exceed .65% of average daily net assets for the
Growth, Bond, Money Market, Asset Allocation, and Mortgage Securities
Portfolios, .55% of average daily net assets for the Index 500 Portfolio, .90%
of average daily net assets for the Capital Appreciation, Small Company, Value
Stock and Small Company Value Portfolios, 1.25% of average daily net assets for
the Global Bond Portfolio and expenses that exceed 1.00% for the International
Stock Portfolio, other than the advisory fee which may not exceed 1.00%. In
addition, Minnesota Mutual has voluntarily agreed to absorb all fees and
expenses that exceed .40% of average daily net assets for each of the four
Maturing Government Bond Portfolios; however, for the Portfolios which mature in
1998 and 2002, Minnesota Mutual has voluntarily agreed to absorb such fees and
expenses which exceed .20% of average daily net assets from the Portfolio's
inception to April 30, 1998 and which exceed .40% of average daily net assets
thereafter. For each of the last three calendar years, the expenses voluntarily
absorbed by Minnesota Mutual for the various Portfolios were as follows:
<TABLE>
<CAPTION>
EXPENSES VOLUNTARILY ABSORBED
PORTFOLIO 1995 1994 1993
- ------------------------------------------------------------------
<S> <C> <C> <C>
GROWTH $ -0- $ -0- $ -0-
BOND -0- -0- -0-
MONEY MARKET -0- 13,734 23,714
ASSET ALLOCATION -0- -0- -0-
MORTGAGE SECURITIES -0- -0- -0-
INDEX 500 -0- -0- -0-
CAPITAL APPRECIATION -0- -0- -0-
INTERNATIONAL STOCK -0- -0- -0-
SMALL COMPANY -0- 9,532 30,330
VALUE STOCK 11,610 22,503 N/A
MATURING GOVERNMENT BOND --
1998 PORTFOLIO 22,794 21,714 N/A
2002 PORTFOLIO 24,709 23,298 N/A
2006 PORTFOLIO 25,199 24,803 N/A
2010 PORTFOLIO 26,308 25,888 N/A
</TABLE>
There is no specified or minimum period of time during which Minnesota Mutual
has agreed to continue its voluntary absorption of these expenses, and Minnesota
Mutual may in its discretion cease its absorption of expenses at any time.
Should Minnesota Mutual cease absorbing expenses the effect would be to increase
substantially Fund expenses and thereby reduce investment return.
Each Portfolio will bear all expenses that may be incurred with respect to its
individual operation, including but not limited to transaction expenses,
advisory fees, brokerage, interest, taxes and the charges of the custodian. The
Fund will pay all other expenses not attributable to a specific Portfolio, but
those expenses will be allocated among the Portfolios on the basis of the size
of their respective net assets unless otherwise allocated by the Board of
Directors of the Fund.
- --------------------------------------------------------------------------------
INVESTMENT
SUB-ADVISERS
- ------------------------------------
Winslow Capital Management, Inc. (hereinafter "Winslow
Management"), a Minnesota corporation with offices at 4720 IDS Tower, 80 South
Eighth Street, Minneapolis, Minnesota 55402 has been retained under an
investment sub-advisory agreement to provide investment advice and, in general,
to conduct the management and investment program of the Capital Appreciation
Portfolio, subject to the general control of the Board of Directors of the Fund.
Winslow Management is a recent entrant into the advisory business, having begun
business in June of 1992. Winslow Management is a registered investment adviser
under the Investment Advisers Act of 1940. The firm was established by its
investment principals with a focus on providing management services to growth
equity investment accounts. An additional experienced principal joined the firm
in October of 1993. Winslow Management has one other investment company client
for which it acts as the investment adviser. Other assets currently under
management are managed for corporate, endowment, foundation, retirement system
and individual clients.
Prior to October 1, 1992, investment sub-advisory services were provided to
the Capital Appreciation Portfolio by Alliance Capital Management L.P., which
had provided such services since the Portfolio's inception.
Templeton Investment Counsel, Inc. (hereinafter "Templeton Counsel"), a
Florida corporation with principal offices at 500 East Broward Boulevard, Ft.
Lauderdale, Florida 33394, has been retained under an investment sub-advisory
agreement to provide investment advice and, in general, to conduct the
management investment program of the International Stock Portfolio, subject to
the general control of the Board of Directors of the Fund. Templeton Counsel is
an indirect, wholly-owned subsidiary of Templeton Worldwide, Inc., which in turn
is a wholly-owned subsidiary of Franklin Resources, Inc.
50
<PAGE>
Voyageur Fund Managers, Inc., (hereinafter "Voyageur Managers"), a Minnesota
corporation with principal offices at 90 South Seventh Street, Suite 4400,
Minneapolis, Minnesota 55402-4115, has been retained under an investment
sub-advisory agreement to provide investment advice and, in general, to conduct
the management investment program of the Growth Portfolio, subject to the
general control of the Board of Directors of the Fund. Voyageur Managers is an
indirect, wholly-owned subsidiary of Dougherty Financial Group, Inc. ("DFG"),
which is owned approximately 49% by Michael E. Dougherty, 49% by Pohlad
Companies and less than 1% by certain retirement plans for the benefit of DFG
employees. Mr. Dougherty co-founded the predecessor DFG in 1977 and has served
as DFG's Chairman of the Board and Chief Executive Officer since inception. The
address of DFG is the same as that of Voyageur Managers. Pohlad Companies is a
holding company owned in equal parts by each of James O. Pohlad, Robert C.
Pohlad and William M. Pohlad. The address of Pohlad Companies is 3880 Dain
Bosworth Plaza, 60 South Sixth Street, Minneapolis, Minnesota 55402.
Voyageur Managers has been retained under an investment sub-advisory agreement
to provide investment advice and, in general conduct the management investment
program of the Global Bond Portfolio. Voyageur Managers has, in turn, retained
Lazard London International Investment Management, Limited ("Lazard London") to
assist it in this responsibility, under a sub-advisory agreement. Lazard London
is a wholly owned SEC-registered investment advisory subsidiary of Lazard
Brothers & Co., Limited. Founded in 1870, Lazard Brothers & Co., Limited is
based in London, England, and is one of the leading merchant banks in Europe.
The address of Lazard London is 21 Moorfields, London, England EC2P 2HT.
- --------------------------------------------------------------------------------
PURCHASE AND
REDEMPTION
OF SHARES
- ------------------------------------
The Fund currently offers its shares continuously only to
Minnesota Mutual and its separate accounts. The shares are
sold to that company directly without the use of any underwriter. It is possible
that at some later date the Fund may offer shares to other investors.
The offering price and the redemption price of Portfolio shares are equal to
the net asset value per share next determined after an order for a purchase or
redemption is received. The net asset value per share for each Portfolio is
determined by adding the current value of all securities and all other assets
held by such Portfolio, subtracting liabilities, and dividing the remainder by
the number of shares outstanding. The Money Market Portfolio values its
investments at amortized cost in accordance with Rule 2a-7 under the Investment
Company Act of 1940, as amended.
The net asset value of the shares of the Portfolios shall be computed once
daily, and, in the case of Money Market Portfolio, after the declaration of the
daily dividend, as of the primary closing time for business on the New York
Stock Exchange (as of the date hereof the primary close of trading is 3:00 p.m.
(Central Time), but this time may be changed) on each day, Monday through
Friday, except (i) days on which changes in the value of such Fund's portfolio
securities will not materially affect the current net asset value of such Fund's
shares, (ii) days during which no such Fund's shares are tendered for redemption
and no order to purchase or sell such Fund's shares is received by such Fund and
(iii) customary national business holidays on which the New York Stock Exchange
is closed for trading (as of the date hereof, New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day).
Except with respect to securities of the Money Market Portfolio and of some
securities of the International Stock Portfolio, the Fund values its securities
as follows: A security listed or traded on an exchange is valued at its last
sale price (prior to the time as of which assets are valued) on the exchange
where it is principally traded. Lacking any such sales on the day of valuation,
the security is valued at the last bid price on that exchange. All other
securities for which over-the-counter market quotations are readily available
are valued on the basis of the last current bid price. When market quotations
are not readily available, securities are valued at fair value as determined in
good faith by the Board of Directors. Debt securities may be valued on the basis
of valuations furnished by a pricing service which utilizes electronic data
processing techniques to determine valuations for normal institutional-size
trading units of debt securities, without regard to sale or bid prices, when
such valuations are believed to more accurately reflect the fair market value of
such securities. Debt securities of the International Stock Portfolio with
maturities of 60 days or less when acquired, or which subsequently are within 60
days of maturity, and all securities in the Money Market Portfolio, are valued
at amortized cost.
51
<PAGE>
- --------------------------------------------------------------------------------
DIVIDENDS AND
DISTRIBUTIONS
- ------------------------------------
It is the Fund's intention to distribute substantially all
of the net investment income, if any, of each Portfolio. For dividend purposes,
net investment income of the Growth Portfolio, the Bond Portfolio, the Asset
Allocation Portfolio, the Mortgage Securities Portfolio, the Index 500
Portfolio, the Capital Appreciation Portfolio, the International Stock
Portfolio, the Small Company Portfolio, the Value Stock Portfolio and each of
the four Maturing Government Bond Portfolios will consist of all dividends or
interest earned by the Portfolio less expenses, including the investment
advisory fee. Net investment income for dividend purposes of the Money Market
Portfolio will consist of the interest earned on investments, plus or minus
amortized purchase discount or premium, plus or minus realized gains and losses,
less expenses, including the investment advisory fee. Dividends from the net
investment income and the net realized gains, if any, for the Growth, Bond,
Asset Allocation, Mortgage Securities, Index 500, Capital Appreciation,
International Stock, Small Company, Value Stock and the four Maturing Government
Bond Portfolios will be declared at least annually and reinvested in additional
full and fractional shares of those Portfolios. Dividends from net investment
income and net realized capital gains, if any, for the Money Market Portfolio
will be declared and reinvested daily.
Starting in fiscal year 1987, as a result of changes included in the Tax
Reform Act of 1986, each Portfolio is treated as a separate entity for federal
income tax purposes.
- --------------------------------------------------------------------------------
TAXES
- ------------------------------------
The Fund qualified for the year ended December 31, 1995 and intends to
continue to qualify as a "regulated investment company" under the provisions of
Subchapter M of the Internal Revenue Code, as amended (the "Code"). If the Fund
qualifies as a regulated investment company and complies with the appropriate
provisions of the Code, the Fund will be relieved of federal income taxes on the
amounts distributed.
Since Minnesota Mutual is the sole shareholder of the Fund, no discussion is
included here as to the federal income tax consequences at the shareholder
level. For information concerning the federal tax consequences to purchasers of
the Contracts, see the attached Prospectus for those Contracts.
- --------------------------------------------------------------------------------
CUSTODIANS
- ------------------------------------
First Trust National Association, 180 East Fifth Street, St.
Paul, Minnesota 55101, acts as custodian of the securities held by the Growth,
Asset Allocation, Index 500, Capital Appreciation, Small Company, Value Stock
and Small Company Value Portfolios. Bankers Trust Company, 280 Park Avenue, New
York, New York 10017, acts as custodian of the securities held by the Bond,
Money Market, Mortgage Securities, the four Maturing Government Bond Portfolios
and Global Bond Portfolio. The custodian for the International Stock Portfolio
is Norwest Bank Minnesota, N.A., Sixth Street and Marquette Avenue, Minneapolis,
Minnesota 55479. Morgan Stanley Trust Company, One Pierrepont Plaza, Brooklyn,
New York 11201 acts as sub-custodian of the International Stock Portfolio's
assets and portfolio securities. Pursuant to Rule 17f-5 under the 1940 Act, the
Board of Directors of the Fund has also approved, in connection with the
International Stock and Global Bond Portfolios, the use of various foreign sub-
custodian banks and securities depositories to maintain foreign securities in or
near the market in which they are principally traded and to maintain cash in
amounts reasonably necessary to effect foreign securities transactions in such
locations. The Board of Directors may from time to time approve other
sub-custodian banks pursuant to Rule 17f-5.
Each custodian is authorized to use the facilities of the Depository Trust
Company and the book-entry system of the Federal Reserve Banks and may enter
into agreements with other banks for the custody by such banks of Fund
securities where direct custody by such custodian would be impracticable.
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APPENDIX A
- ------------------------------------
This Appendix to the Prospectus describes in detail those
Money Market instruments and investment techniques set forth in the Prospectus
under the heading "Investment Objectives, Policies and Risks." They may be used
extensively by the Money Market Portfolio and by the Asset Allocation Portfolio.
They may also be used by the Growth, Bond, Mortgage Securities, Index 500,
Capital Appreciation, International Stock and Small Company Portfolios to invest
otherwise idle cash or on a temporary basis or for defensive purposes.
UNITED STATES GOVERNMENT OBLIGATIONS--are bills, certificates of indebtedness,
notes and bonds issued or guaranteed as to principal or interest by the United
States Government or by agencies or authorities controlled or supervised by and
acting as instrumentalities of the United States Government established under
the authority granted by Congress, including, but not limited to, the Government
National Mortgage Association, the Export-Import Bank, the Student Loan
Marketing Association, the United States Postal Service, the Tennessee Valley
Authority, the Bank for Cooperatives, the Farmers Home Administration, the
Federal Home Loan Bank, the Federal Financing Bank, the Federal Intermediate
Credit Banks, the Federal Land Banks, the Farm Credit Banks and the Federal
National Mortgage Association. Some obligations of United States Government
agencies, authorities and other instrumentalities are supported by the full
faith and credit of the United States Treasury, such as securities of the
Government National Mortgage Association and the Student Loan Marketing
Association; others by the right of the issuer to borrow from the Treasury, such
as securities of the Federal Financing Bank and the United States Postal
Service; and others only by the credit of the issuing agency, authority or other
instrumentality, such as securities of the Federal Home Loan Bank and the
Federal National Mortgage Association.
REPURCHASE AGREEMENTS--are agreements by which the Portfolio purchases a
security and obtains a simultaneous commitment from the seller (a member bank of
the Federal Reserve System, or, if permitted by law or regulation, a securities
dealer provided the Board of Directors of the Fund has evaluated the seller's
creditworthiness through adoption of standards of review or otherwise) to
repurchase the security at an agreed upon price and date. The resale price is in
excess of the purchase price and reflects an agreed upon market rate unrelated
to the coupon rate on the purchased security. The Portfolio's custodian, or a
duly appointed subcustodian, will hold the securities underlying any repurchase
agreement in a segregated account or such securities may be part of the Federal
Reserve Book Entry System. The market value of the collateral underlying the
repurchase agreement will be determined on each day the net asset value of the
shares of each Portfolio is determined. If at any time the market value of the
collateral falls below the repurchase price of the repurchase agreement
(including any accrued interest), the Portfolio will promptly receive additional
collateral, so that the total collateral is in an amount at least equal to the
repurchase price plus accrued interest. Such transactions afford the Portfolio
the opportunity to earn a return on temporarily available cash. While the
underlying security may be a bill, certificate of indebtedness, note or bond
issued by an agency, authority or instrumentality of the United States
Government, the obligation of the seller is not guaranteed by the United States
Government.
REVERSE REPURCHASE AGREEMENTS--are the counterparts of repurchase agreements,
and are agreements by which the Portfolio sells a security and agrees to
repurchase the security from the buyer at an agreed upon price and future date.
The Portfolio will use the proceeds of the reverse repurchase agreement to
purchase other money market securities either maturing, or under an agreement to
resell, at a date simultaneous with or prior to the expiration of the reverse
repurchase agreement. Because certain of the incidents of ownership of the
security are retained by the Portfolio, reverse repurchase agreements might be
construed, for certain purposes, as a form of borrowing by the Portfolio from
the buyer, collateralized by the security. The Portfolio will enter into reverse
repurchase agreements only with banks. At the time the Fund enters into a
reverse repurchase agreement, cash, U.S. Government securities or other liquid
high-grade debt obligations having a value sufficient to make payments for the
securities to be repurchased will be segregated, and will be maintained
throughout the period of the obligation.
CERTIFICATES OF DEPOSIT--are certificates issued against funds deposited in a
bank, are for a definite period of time, earn a specified rate of return, and
are normally negotiable.
BANKERS' ACCEPTANCES--are short-term credit instruments issued by corporations
to finance the import, export, transfer or storage of goods. They are termed
"accepted" when a bank guarantees their
53
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payment at maturity. These instruments reflect the obligations of both the bank
and drawer to pay the face amount of the instrument at maturity.
COMMERCIAL PAPER--refers to promissory notes issued by corporations to finance
their short-term credit needs.
VARIABLE AMOUNT MASTER DEMAND NOTES--refer to short-term, unsecured promissory
notes issued by corporations to finance short-term needs. They allow the
investment of fluctuating amounts by the Portfolio at varying market rates of
interest pursuant to direct arrangements between the Portfolio, as lender, and
the borrower. Variable amount master demand notes permit a series of short-term
borrowings under a single note. The lender has the right to increase the amount
under the note at any time up to the full amount provided by the note agreement.
Both the lender and the borrower have the right to reduce the amount of
outstanding indebtedness at any time. Because variable amount master demand
notes are direct lending arrangements between the lender and borrower, it is not
generally contemplated that such instruments will be traded and there is no
secondary market for the notes. Typically, agreements relating to such notes
provide that the lender shall not sell or otherwise transfer the note without
the borrower's consent. Thus, variable amount master demand notes are illiquid
assets. Such notes provide that the interest rate on the amount outstanding
varies on a daily basis depending upon a stated short-term interest rate
barometer. The Fund's investment adviser, MIMLIC Management, will monitor the
creditworthiness of the borrower throughout the term of the variable amount
master demand note. The Fund will only invest in variable amount master demand
notes issued by companies which at the date of investment have an outstanding
debt issue rated AAA or AA by Standard & Poor's or Aaa or Aa by Moody's and
which MIMLIC Management has determined present minimal risk of loss to the Fund.
MIMLIC Management will look generally at the financial strength of the issuing
company as "backing" for the note and not to any security interest or
supplemental source such as a bank letter of credit. A master demand note will
be valued by MIMLIC Management each day the Fund's net asset value is
determined, which value will generally be equal to the face value of the note
plus accrued interest unless the financial position of the issuer is such that
its ability to repay the note when due is in question.
CORPORATE OBLIGATIONS--includes bonds and notes issued by corporations in
order to finance longer term credit needs.
ILLIQUID SECURITIES AND RULE 144A PAPER--the Fund may invest up to 15% of its
net assets (10% of net assets in the case of Money Market Portfolio) in
securities or other assets which are illiquid. An investment is generally
considered to be "illiquid" if it cannot be disposed of within seven days in the
ordinary course of business at approximately the amount at which the investment
company is valuing the investment. "Restricted securities" are securities which
were originally sold in private placements and which have not been registered
under the Securities Act of 1933 (the "1933 Act"). Such securities generally
have been considered illiquid by the staff of the Securities and Exchange
Commission (the "SEC"), since such securities may be sold only subject to
statutory restrictions and delays or if registered under the 1933 Act.
The SEC has acknowledged, however, that a market exists for certain restricted
securities (for example, securities qualifying for resale to certain qualified
"institutional buyers" pursuant to Rule 144A under the 1933 Act). Additionally,
MIMLIC Management and the Fund believe that a similar market exists for
commercial paper issued pursuant to the private placement exemption of Section
4(2) of the 1933 Act. The Fund may invest without limitation in these forms of
restricted securities if such securities are deemed by MIMLIC Management to be
liquid in accordance with standards established by the Fund's Board of
Directors. Under these guidelines, MIMLIC Management must consider (a) the
frequency of trades and quotes for the security, (b) the number of dealers
willing to purchase or sell the security and the number of other potential
purchasers, (c) dealer undertakings to make a market in the security, and (d)
the nature of the security and the nature of the marketplace trades (for
example, the time needed to dispose of the security, the method of soliciting
offers and the mechanics of transfer). At the preset time, it is not possible to
predict with accuracy how the markets for certain restricted securities will
develop. Investing in such restricted securities could have the effect of
increasing the level of the Fund's illiquidity to the extent that qualified
purchasers of the securities become, for a time, uninterested in purchasing
these securities.
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APPENDIX B
- ------------------------------------
Mortgage-related securities represent an ownership interest in
a pool of residential mortgage loans. These securities are designed to provide
monthly payments of interest and principal to the investor. The mortgagor's
monthly payments to his lending institution are "passed-through" to investors
such as the Fund. Most insurers or services provide guarantees of payments,
regardless of whether or not the mortgagor actually makes the payment. The
guarantees made by issuers or servicers are backed by various forms of credit,
insurance and collateral.
- --------------------------------------------------------------------------------
UNDERLYING -
MORTGAGES
Pools consist of whole mortgage loans or participations in loans.
The majority of these loans are made to purchasers of 1-4 family homes. Some of
these loans are made to purchasers of mobile homes. The terms and
characteristics of the mortgage instruments are generally uniform within a pool
but may vary among pools. For example, in addition to fixed-rate, fixed-term
mortgages, the Fund may purchase pools of variable rates mortgages, growing
equity mortgages, graduated payment mortgages and other types.
All servicers apply standards for qualification to local lending institutions
which originate mortgages for the pools. Servicers also establish credit
standards and underwriting criteria for individual mortgages included in the
pools. In addition, many mortgages included in pools are insured through private
mortgage insurance companies.
- --------------------------------------------------------------------------------
LIQUIDITY AND -
MARKETABILITY
Since the inception of the mortgage-related pass-through
security in 1970, the market for these securities has expanded considerably. The
size of the primary issuance market and active participation in the secondary
market by securities dealers and many types of investors makes government and
government-related pass-through pools highly liquid. The recently introduced
private conventional pools of mortgages (pooled by commercial banks, savings and
loans institutions and others, with no relationship with government and
government-related entities) have also achieved broad market acceptance and
consequently an active secondary market has emerged. However, the market for
conventional pools is smaller and less liquid than the market for the government
and government-related mortgage pools.
- --------------------------------------------------------------------------------
AVERAGE LIFE -
The average life of pass-through pools varies with the maturities of the
underlying mortgage instruments. In addition, a pool's term may be shortened by
unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions.
As prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. For pools of fixed-
rate 30-year mortgages, common industry practice is to assume that prepayments
will result in a 12-year average life. Pools of mortgages with other maturities
or different characteristics will have varying assumptions for average life. The
assumed average life of pools of mortgages having terms of less than 30 years is
less than 12 years, but typically not less than 5 years.
- --------------------------------------------------------------------------------
YIELD -
CALCULATIONS
Yields on pass-through securities are typically quoted by
investment dealers and vendors based on the maturity of the underlying
instruments and the associated average life assumption. In periods of falling
interest rates the rate of prepayment tends to increase, thereby shortening the
actual average life of a pool of mortgage-related securities. Conversely, in
periods of rising rates the rate of prepayment tends to decrease, thereby
lengthening the actual average life of the pool. Historically, actual average
life has been consistent with the 12-year assumption referred to above.
Actual prepayment experience may cause the yield to differ from the assumed
average life yield. Reinvestment of prepayments may occur at higher or lower
interest rates than the original investment, thus affecting the yield of the
Mortgage Securities Portfolio. The compounding effect from reinvestments of
monthly payments received by the Mortgage Securities Portfolio will increase the
yield to that Portfolio compared to bonds that pay interest semi-annually.
- --------------------------------------------------------------------------------
GOVERNMENTAL AND GOVERNMENT- -
RELATED GUARANTORS
The principal governmental (i.e., backed by the
full faith and credit of the United States Government) guarantor of
mortgage-related securities is the Government
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National Mortgage Association ("GNMA"). GNMA is a wholly-owned United States
Government corporation within the Department of Housing and Urban Development.
GNMA is authorized to guarantee, with the full faith and credit of the United
States Government, the timely payment of principal and interest on securities
issued by institutions approved by GNMA (such as savings and loan institutions,
commercial banks and mortgage bankers) and backed by pools of FHA-insured or
VA-guaranteed mortgages.
Government-related (i.e., not backed by the full faith and credit of the
United States Government) guarantors include the Federal National Mortgage
Association and the Federal Home Loan Mortgage Association. The Federal National
Mortgage Association ("FNMA") is a government-sponsored corporation owned
entirely by private stockholders. It is subject to general regulation by the
Secretary of Housing and Urban Development. FNMA purchases residential mortgages
from a list of approved seller/servicers which include state and
federally-chartered savings and loan associations, mutual savings banks,
commercial banks and credit unions and mortgage bankers. Pass-through securities
issued by FNMA are guaranteed as to timely payment of principal and interest by
FNMA but are not backed by the full faith and credit of the United States
Government.
The Federal Home Loan Mortgage Corporation ("FHLMC") is a corporate
instrumentality of the United States Government and was created by Congress in
1970 for the purpose of increasing the availability of mortgage credit for
residential housing. Its stock is owned by the twelve Federal Home Loan Banks.
FHLMC issues Participation Certificates ("PCs") which represent interests in
mortgage from FHLMC's national portfolio. FHLMC guarantees the timely payment of
interest and ultimate collection of principal but PCs are not backed by the full
faith and credit of the United States Government.
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APPENDIX C
- ------------------------------------
The different types of securities and investment techniques
used by the Global Bond Portfolio all have attendant risks of varying degrees.
For example, with respect to debt securities, including money market
instruments, there is the risk that the issuer of a security may not be able to
meet its obligation to make scheduled interest or principal payments. In
addition, the value of debt securities generally rises and falls inversely with
interest rates, and the longer the maturity or duration of the debt security,
the more volatile it may be in terms of changes in current value. Certain types
of investments and investment techniques that may be used by the Global Bond
Portfolio are described in greater detail, including the risks of each, in this
section and in the Statement of Additional Information.
- --------------------------------------------------------------------------------
U.S. GOVERNMENT -
SECURITIES
U.S. Government Securities are issued or guaranteed as to payment of
principal and interest by the U.S. Government, its agencies or
instrumentalities. The current market prices for such securities are not
guaranteed and will fluctuate as will the net asset value of the Portfolio. Some
U.S. Government Securities, such as Treasury bills, notes and bonds and
securities guaranteed by the Government National Mortgage Association ("GNMA"),
are supported by the full faith and credit of the United States; others, such as
those of the Federal Home Loan Banks, are supported by the right of the issuer
to borrow from the U.S. Treasury; others, such as those of the Federal National
Mortgage Association ("FNMA"), are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations, and still others are
supported only by the credit of the instrumentality.
U.S. Government Securities include securities that have no coupons, or have
been stripped of their unmatured interest coupons, individual interest coupons
from such securities that trade separately and evidences of receipt of such
securities. Such securities may pay no cash income and are purchased at a deep
discount from their value at maturity. Because interest on zero coupon
securities is not distributed on a current basis but is, in effect, compounded,
zero coupon securities tend to be subject to greater market risk than
interest-paying securities of similar maturities.
- --------------------------------------------------------------------------------
CORPORATE FIXED-INCOME -
SECURITIES
Corporate fixed-income securities include corporate bonds,
debentures, notes and other similar corporate debt instruments, including
convertible securities. Fixed-income securities may be acquired with warrants
attached. Corporate income-producing securities may also include forms of
preferred or preference stock. The rate of return or return of principal on some
fixed-income obligations may be linked or indexed to the level of exchange rates
between the U.S. dollar and a foreign currency or currencies. See "Foreign Index
Linked Securities," below.
The Portfolio's investments in corporate fixed-income securities may also
include zero coupon, pay-in-kind and delayed interest securities. Zero coupon
securities pay no cash income to their holders until they mature and are issued
at substantial discounts from their value at maturity. When held to maturity,
their entire return comes from the difference between their purchase price and
their maturity value. Pay-in-kind securities pay interest through the issuance
to the holders of additional securities. Delayed interest securities are
securities that remain zero coupon securities until a predetermined date at
which time the stated coupon rate becomes effective and interest becomes payable
at regular intervals. Because interest on zero coupon, pay-in-kind and delayed
interest securities is not paid on a current basis, the values of securities of
this type are subject to greater fluctuations than the values of securities that
distribute income regularly and they may be more speculative than such
securities. Accordingly, the values of these securities may be highly volatile
as interest rates rise or fall. In addition, the Portfolio's investments in zero
coupon, pay-in-kind and delayed interest securities will result in special tax
consequences. Although zero coupon securities do not make interest payments, for
tax purposes a portion of the difference between a zero coupon security's
maturity value and its purchase price is taxable income of the Portfolio each
year.
- --------------------------------------------------------------------------------
MORTGAGE-RELATED -
SECURITIES
Mortgage-related securities include mortgage pass-through securities,
adjustable rate mortgage securities ("ARMs") and derivative mortgage securities
such as collateralized mortgage obligations ("CMOs") and stripped mortgage-
backed securities. The investment characteristics of mortgage-related securities
differ from those of traditional fixed-income securities. The major differences
include the fact that interest payments and principal repayments on
mortgage-related securities are made more frequently (usually monthly), and
principal may be prepaid at any time because the underlying mortgage loans or
other assets generally may be prepaid at any time. These
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<PAGE>
differences can result in significantly greater price and yield volatility than
is the case with traditional fixed-income securities. As a result, if the
Portfolio purchases mortgage-related securities at a premium, a prepayment rate
that is faster than expected will reduce both the market value and the yield to
maturity from that which was anticipated, while a prepayment rate that is slower
than expected will have the opposite effect of increasing yield to maturity and
market value. Conversely, if the Portfolio purchases mortgage-related securities
at a discount, faster than expected prepayments will increase, while slower than
expected prepayments will reduce, yield to maturity and market value.
Adjustable rate mortgage securities ("ARMS") are pass-through mortgage
securities collateralized by mortgages with interest rates that are adjusted
from time to time. The adjustments usually are determined in accordance with a
predetermined interest rate index and may be subject to certain limits. While
values of ARMS, like other fixed-income securities, generally vary inversely
with changes in market interest rates (increasing in value during periods of
declining interest rates and decreasing in value during periods of increasing
interest rates), the values of ARMS should generally be more resistant to price
swings than other fixed-income securities because the interest rates of ARMS
move with market interest rates. The adjustable rate feature of ARMS will not,
however, eliminate fluctuations in the prices of ARMS, particularly during
periods of extreme fluctuations in interest rates. Also, since many adjustable
rate mortgages only reset on an annual basis, it can be expected that the prices
of ARMS will fluctuate to the extent that changes in prevailing interest rates
are not immediately reflected in the interest rates payable on the underlying
adjustable rate mortgages.
Mortgage pass-through securities are securities representing interests in
"pools" of mortgage loans secured by residential or commercial real property in
which payments of both interest and principal on the securities are generally
made monthly, in effect "passing through" monthly payments made by the
individual borrowers on the mortgage loans which underlie the securities (net of
fees paid to the issuer or guarantor of the securities).
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by the
full faith and credit of the U.S. Government (in the case of securities
guaranteed by GNMA); or guaranteed by agencies or instrumentalities of the U.S.
Government (in the case of securities guaranteed by FNMA or the Federal Home
Loan Mortgage Corporation ("FHLMC"), which guarantees are supported only by the
discretionary authority of the U.S. Government to purchase the agency's
obligations). Mortgage-related securities created by non-governmental issuers
(such as commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers) may be
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance and letters of credit, which may be
issued by governmental entities, private insurers or the mortgage poolers.
- --------------------------------------------------------------------------------
ASSET-BACKED -
SECURITIES
Asset-backed securities represent the application of the
securitization techniques used to develop mortgage-related securities to a broad
range of other assets. Through the use of trusts and special purpose
corporations, various types of assets, primarily automobile and credit card
receivables and home equity loans, are being securitized in pass-through
structures similar to the mortgage pass-through structures described above or in
a pay-through structure similar to the CMO structure.
In general, the collateral supporting asset-backed securities is of shorter
maturity than mortgage loans and is less likely to experience substantial
prepayments. As with mortgage-related securities, asset-backed securities are
often backed by a pool of assets representing obligations of a number of
different parties and use various credit enhancement techniques.
Generally, asset-backed securities involve many of the risks associated with
mortgage-related securities; however, asset-backed securities involve certain
risks that are not posed by mortgage-related securities, resulting mainly from
the fact that asset-backed securities do not usually contain the complete
benefit of a security interest in the related collateral. For example, credit
card receivables generally are unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, including the
bankruptcy laws, some of which may reduce the ability to obtain full payment. In
the case of automobile receivables, due to various legal and economic factors,
proceeds for repossessed collateral may not always be sufficient to support
payments on these securities.
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FOREIGN -
SECURITIES
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Investing in the securities of foreign issuers involves special risks
and considerations not typically associated with investing in U.S. companies.
These include differences in accounting, auditing and financial reporting
standards; generally higher commission rates on foreign transactions; the
possibility of nationalization, expropriation or confiscatory taxation; adverse
changes in investment or exchange control regulations (which may include
suspension of the ability to transfer currency from a country); and political
instability which could affect U.S. investments in foreign countries.
Additionally, foreign securities and dividends and interest payable on those
securities may be subject to foreign taxes, including taxes withheld from
payments on those securities. Foreign securities often trade with less frequency
and volume than domestic securities and therefore may exhibit greater price
volatility. Additional costs associated with an investment in foreign securities
may include higher custodial fees than domestic custodial arrangements and
transaction costs of foreign currency conversions. Changes in foreign exchange
rates also will affect the value of securities denominated or quoted in
currencies other than the U.S. dollar.
DEPOSITORY RECEIPTS AND DEPOSITORY SHARES. The Portfolio may invest in
American Depository Receipts ("ADRs") or other similar securities, such as
American Depository Shares, convertible into securities of foreign issuers.
These securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically issued
by a U.S. bank or trust company evidencing ownership of the underlying
securities. Generally, ADRs, in registered form, are designed for use in U.S.
securities markets. As a result of the absence of established securities markets
and publicly owned corporations in certain foreign countries as well as
restrictions on direct investment by foreign entities, the Portfolio may be able
to invest in such countries solely or primarily through ADRs or similar
securities and government approved investment vehicles. No more than 5% of the
Portfolio's assets will be invested in ADRs sponsored by persons other than the
underlying issuers. Issuers of the stock of such unsponsored ADRs are not
obligated to disclose material information in the United States and, therefore,
there may not be a correlation between such information and the market value of
such ADRs.
SUPRANATIONAL ORGANIZATIONS. Supranational organizations are entities
designated or supported by a government or government entity to promote economic
development, and include, among others, the Asian Development Bank, the European
Coal and Steel Community, the European Economic Community and the World Bank.
These organizations do not have taxing authority and are dependent upon their
members for payments of interest and principal. Each supranational entity's
lending activities are limited to a percentage of its total capital (including
"callable capital" contributed by members at the entity's call), reserves and
net income. Securities issued by supranational organizations may be denominated
in U.S. dollars or in foreign currencies. Securities issued or guaranteed by
supranational organizations are considered by the Securities and Exchange
Commission to be securities in the same industry. Therefore, the Portfolio will
not concentrate more than 25% of the value of its assets in securities of a
single supranational organization.
BRADY BONDS. Brady Bonds are created through the exchange of existing
commercial bank loans to foreign entities for new obligations in connection with
debt restructuring under a plan introduced by former U.S. Secretary of the
Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Bonds have been issued
only recently and, accordingly, do not have a long payment history. They may be
collateralized or uncollateralized and issued in various currencies (although
most are dollar-denominated) and they are actively traded in the
over-the-counter secondary market.
- --------------------------------------------------------------------------------
FOREIGN INDEX LINKED -
SECURITIES
The Portfolio may invest up to 10% of its total assets in instruments
that return principal and/or pay interest to investors in amounts which are
linked to the level of a particular foreign index ("Foreign Index Linked
Securities"). A foreign index may be based upon the exchange rate of a
particular currency or currencies or the differential between two currencies, or
the level of interest rates in a particular country or countries or the
differential in interest rates between particular countries. In the case of
Foreign Index Linked Securities linking the principal amount to a foreign index,
the amount of principal payable by the issuer at maturity will increase or
decrease in response to changes in the level of the foreign index during the
term of the Foreign Index Linked Securities. In the case of Foreign Index Linked
Securities linking the interest component to a foreign index, the amount of
interest payable will adjust periodically in response to changes in the level of
the foreign index during the term of the Foreign Index Linked Security. Foreign
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Index Linked Securities may be issued by a U.S. or foreign governmental agency
or instrumentality or by a private domestic or foreign issuer. Only Foreign
Index Linked Securities issued by foreign governmental agencies or
instrumentalities or by foreign issuers will be considered foreign securities
for purposes of the Portfolios' investment policies and restrictions.
Foreign Index Linked Securities may offer higher yields than comparable
securities linked to purely domestic indexes but also may be more volatile.
Foreign Index Linked Securities are relatively recent innovations for which the
market has not yet been fully developed and, accordingly, they typically are
less liquid than comparable securities linked to purely domestic indexes. In
addition, the value of Foreign Index Linked Securities will be affected by
fluctuations in foreign exchange rates or in foreign interest rates. If the
Adviser is incorrect in its prediction as to the movements in the direction of
particular foreign currencies or foreign interest rates, the return realized by
the Portfolio on Foreign Index Linked Securities may be lower than if the
Portfolio had invested in a similarly rated domestic security.
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HEDGING -
TECHNIQUES
To the extent permitted by the investment objectives and policies,
the Portfolio may purchase and sell put and call options on securities and
securities indexes, enter into futures contracts and use options on futures
contracts as further described below and may enter into swap agreements with
respect to interest rates and securities indexes. The Portfolio may use these
techniques to hedge against changes in interest rates or securities prices, to
generate income, to facilitate allocation of the Portfolio's investments among
asset classes or otherwise as part of its overall investment strategies. The
Portfolio will maintain segregated accounts consisting of cash, U.S. Government
Securities, or other high grade liquid debt obligations (or, as permitted by
applicable regulation, enter into certain offsetting positions) to cover their
obligations under options and futures contracts to avoid leveraging of the
Portfolio.
OPTIONS. The Portfolio may purchase put options on securities to protect
holdings on an underlying or related security against a substantial decline in
market value. The Portfolio may purchase call options on securities to protect
against substantial increases in prices of securities the Portfolio intends to
purchase pending its ability to invest in such securities in an orderly manner.
The Portfolio may sell put or call options it has previously purchased, which
could result in a net gain or loss depending on whether the amount realized on
the sale is more or less than the premium and other transaction costs paid on
the put or call option which is sold. The Portfolio may write a call or put
option only if the option is "covered" by the Portfolio holding a position in
the underlying securities or by other means which would permit immediate
satisfaction of the Portfolio's obligation as writer of the option. Prior to
exercise or expiration, an option may be closed out by an offsetting purchase or
sale of an option of the same series.
The purchase and writing of options involves certain risks. During the option
period, the covered call writer has, in return for the premium on the option,
given up the opportunity to profit from a price increase above the exercise
price in the underlying securities, but, as long as its obligation as a writer
continues, has retained the risk of loss should the price of the underlying
security decline. The writer of an option has no control over the time when it
may be required to fulfill its obligation as a writer of the option. Once an
option writer has received an exercise notice, it cannot effect a closing
purchase transaction in order to terminate its obligation under the option and
must deliver the underlying securities at the exercise price. If a put or call
option purchased by the Portfolio is not sold when it has remaining value, and
if the market price of the underlying security, in the case of a put, remains
equal to or greater than the exercise price or, in the case of a call, remains
less than or equal to the exercise price, the Portfolio will lose its entire
investment in the option. Also, where a put or call option on a particular
security is purchased to hedge against price movements in a related security,
the price of the put or call option may move more or less than the price of the
related security. There can be no assurance that a liquid market will exist when
the Portfolio seeks to close out an option position. Furthermore, if trading
restrictions or suspensions are imposed on the options markets, the Portfolio
may be unable to close out a position.
The Portfolio may purchase and sell both exchange traded options and
over-the-counter options. Over-the-counter options differ from traded options in
that they are two-party contracts with price and other terms negotiated between
buyer and seller and generally do not have as much market liquidity as
exchange-traded options.
SWAP AGREEMENTS. The Portfolio may enter into interest rate and index swap
agreements for purposes of attempting to obtain a particular desired
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return at a lower cost than if such Portfolio had invested directly in an
instrument that yielded that desired return. Swap agreements are two-party
contracts entered into primarily by institutional investors for periods ranging
from a few weeks to more than one year. In a standard "swap" transaction, two
parties agree to exchange the returns (or differentials in rates of return)
earned or realized on particular predetermined investments or instruments. The
gross returns to be exchanged or "swapped" between the parties are calculated
with respect to a "notional amount," i.e., the return on or increase in value of
a particular dollar amount invested at a particular interest rate or in a
"basket" of securities representing a particular index. Commonly used swap
agreements include interest rate caps, under which, in return for a premium, one
party agrees to make payments to the other to the extent that interest rates
exceed a specified rate, or "cap;" interest rate floors, under which, in return
for a premium, one party agrees to make payments to the other to the extent that
interest rates fall below a specified level, or "floor;" and interest rate
collars, under which a party sells a cap and purchases a floor or vice versa in
an attempt to protect itself against interest rate movements exceeding given
minimum or maximum levels.
The "notional amount" of the swap agreement is only a fictive basis on which
to calculate the obligations which the parties to a swap agreement have agreed
to exchange. Most swap agreements entered into by the Portfolios would calculate
the obligations of the parties to the agreement on a "net basis." Consequently,
the Portfolio's obligations (or rights) under a swap agreement will generally be
equal only to the net amount to be paid or received under the agreement based on
the relative values of the positions held by each party to the agreement (the
"net amount"). The Portfolio's obligations under a swap agreement will be
accrued daily (offset against amounts owed to the Portfolio) and any accrued but
unpaid net amounts owed to a swap counterparty will be covered by the
maintenance of a segregated account consisting of cash, U.S. Government
Securities, or high grade debt obligations, to avoid any potential leveraging of
the Portfolio. The Portfolio will not enter into a swap agreement with any
single party if the net amount owed or to be received under existing contracts
with that party would exceed 5% of the Portfolio's assets.
Whether the Portfolio's use of swap agreements will be successful in
furthering its investment objective will depend on the Sub-Adviser's ability to
predict correctly whether certain types of investments are likely to produce
greater returns than other investments. Because they are two-party contracts and
because they may have terms of greater than seven days, swap agreements may be
considered to be illiquid. Moreover, the Portfolio bears the risk of loss of the
amount expected to be received under a swap agreement in the event of the
default or bankruptcy of a swap agreement counterparty. The Sub-Adviser will
cause the Portfolio to enter into swap agreements only with counterparties that
would be eligible for consideration as repurchase agreement counterparties under
the Portfolio's repurchase agreement guidelines. Certain restrictions imposed on
the Portfolio by the Internal Revenue Code may limit the Portfolio's ability to
use swap agreements. The swaps market is a relatively new market and is largely
unregulated. It is possible that developments in the swaps market, including
potential government regulation, could adversely affect the Portfolio's ability
to terminate existing swap agreements or to realize amounts to be received under
such agreements.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Portfolio may invest
in interest rate futures contracts, stock index futures contracts and options
thereon ("futures options") that are traded on a United States exchange or board
of trade.
There are several risks associated with the use of futures and futures options
for hedging purposes. There can be no guarantee that there will be a correlation
between price movements in the hedging vehicle and in the Portfolio securities
being hedged. An incorrect correlation could result in a loss on both the hedged
securities in the Portfolio and the hedging vehicle so that the Portfolio return
might have been greater had hedging not been attempted. There can be no
assurance that a liquid market will exist at a time when the Portfolio seeks to
close out a futures contract or a futures option position. Most futures
exchanges and boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single day; once the daily limit has been
reached on a particular contract, no trades may be made that day at a price
beyond that limit. In addition, certain of these instruments are relatively new
and without a significant trading history. As a result, there is no assurance
that an active secondary market will develop or continue to exist. Lack of a
liquid market for any reason may prevent the Portfolio from liquidating an
unfavorable position and the Portfolio would remain obligated to meet margin
requirements until the position is closed.
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The Portfolio will only enter into futures contracts or futures options which
are standardized and traded on a U.S. exchange or board of trade, or similar
entity, or quoted on an automated quotation system. The Portfolio will use
financial futures contracts and related options for "bona fide hedging"
purposes, as such term is defined in applicable regulations of the Commodity
Futures Trading Commission. With respect to positions in financial futures and
related options that do not qualify as "bona fide hedging" positions, the
Portfolio will enter such non-hedging positions only to the extent that
aggregate initial margin deposits plus premiums paid by it for open futures
option positions, less the amount by which any such positions are
"in-the-money," would not exceed 5% of the Portfolio's total assets.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY -
TRANSACTIONS
Foreign currency exchange rates may fluctuate significantly over
short periods of time. They generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries, actual or perceived changes in interest rates and other
complex factors, as seen from an international perspective. Currency exchange
rates also can be affected unpredictably by intervention by U.S. or foreign
governments or central banks or the failure to intervene, or by currency
controls or political developments in the U.S. or abroad.
The Portfolio may, in addition to buying and selling foreign currency futures
contracts and options on foreign currencies and foreign currency futures, enter
into forward foreign currency exchange contracts to reduce the risks of adverse
changes in foreign exchange rates. A forward foreign currency exchange contract
involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. By entering into a
forward foreign currency contract, the Portfolio "locks in" the exchange rate
between the currency it will deliver and the currency it will receive for the
duration of the contract. As a result, the Portfolio reduces its exposure to
changes in the value of the currency it will deliver and increases its exposure
to changes in the value of the currency it will exchange into. The effect on the
value of the Portfolio is similar to selling securities denominated in one
currency and purchasing securities denominated in another. The Portfolio may
enter into these contracts for the purpose of hedging against foreign exchange
risk arising from the Portfolio's investment or anticipated investment in
securities denominated in foreign currencies. The Portfolio may also enter into
these contracts for purposes of increasing exposure to a foreign currency or to
shift exposure to foreign currency fluctuations from one country to another.
- --------------------------------------------------------------------------------
REPURCHASE -
AGREEMENTS
For the purpose of achieving income, the Portfolio may enter into
repurchase agreements with respect to any securities which it may acquire
consistent with its investment policies and restrictions. Repurchase agreements
are transactions by which the Portfolio purchases a security and simultaneously
commits to resell that security to the seller (a bank or securities dealer) at
an agreed upon price on an agreed upon date (usually within seven days of
purchase). The resale price reflects the purchase price plus an agreed upon
market rate of interest which is unrelated to the coupon rate or date of
maturity of the purchased security. In these transactions, the securities
purchased by the Portfolio have a total value equal to or in excess of the
repurchase price and are held by the Portfolio's custodian bank until
repurchased. Such agreements permit the Portfolio to keep all its assets at work
while retaining "overnight" flexibility in pursuit of investments of a longer
term nature. If the party agreeing to repurchase should default, as a result of
bankruptcy or otherwise, the Portfolio will seek to sell the securities which it
holds, which action could involve procedural costs or delays in addition to a
loss on the securities if their value should fall below their repurchase price.
- --------------------------------------------------------------------------------
REVERSE REPURCHASE -
AGREEMENTS
The Portfolio may engage in "reverse repurchase agreements" with
banks and securities dealers. Reverse repurchase agreements will be used as a
means of borrowing for investment purposes. A reverse repurchase agreement
involves the sale of a security by the Portfolio and its agreement to repurchase
the instrument at a specified time and price. At the time the Portfolio enters
into a reverse repurchase agreement, cash, U.S. Government Securities or other
liquid high-grade debt obligations having a value sufficient to make payments
for the securities to be repurchased will be segregated, and will be maintained
throughout the period of the obligation. The use of reverse repurchase
agreements by the Portfolio creates leverage, which increases the Portfolio's
investment risk. If the income and gains on securities
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purchased with the proceeds of reverse repurchase agreements exceed the cost of
the agreements, the Portfolio's earnings or net asset value will increase faster
than otherwise would be the case; conversely, if the income and gains fail to
exceed the cost, earnings or net asset value would decline faster than otherwise
would be the case.
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WHEN-ISSUED -
SECURITIES
The Portfolio may purchase securities on a "when-issued" basis
and may purchase or sell securities on a "forward commitment" basis. When such
transactions are negotiated, the price is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a later date.
The Portfolio will not accrue income with respect to when-issued or forward
commitment securities prior to their stated delivery date. Pending delivery of
the securities, the Portfolio maintains in a segregated account cash or liquid
high-grade debt obligations in an amount sufficient to meet its purchase
commitments. The Portfolio will likewise segregate securities they sell on a
forward commitment basis.
The purchase of securities on a when-issued or forward commitment basis
exposes the Portfolio to risk because the securities may decrease in value prior
to their delivery. Purchasing securities on a when-issued or forward commitment
basis involves the additional risk that the return available in the market when
the delivery takes place will be higher than that obtained in the transaction
itself. Placing securities rather than cash in the segregated account referred
to in the previous paragraph may have a leveraging effect on the Portfolio's net
asset value per share; that is, to the extent that the Portfolio remains
substantially fully invested in securities at the same time that it has
committed to purchase securities on a when-issued or forward commitment basis,
greater fluctuations in its net asset value per share may occur than if it had
set aside cash to satisfy its purchase commitments.
63
<PAGE>
MIMLIC SERIES FUND, INC.
Statement of Additional Information
Dated: , 1997
This Statement of Additional Information is not a prospectus. Much of
the information contained in this Statement of Additional Information expands
upon subjects discussed in the Prospectus. Therefore, this Statement should
be read in conjunction with the Fund's current Prospectus, dated __________,
1997, which may be obtained by calling the Fund at (612) 298-3500, or writing
the Fund at Minnesota Mutual Life Center, 400 Robert Street North, St. Paul,
Minnesota 55101-2098.
________________________________________
Table of Contents
The Fund ............................................................ 2
Investment Restrictions ............................................. 3
Portfolio Turnover .................................................. 6
Directors and Executive Officers .................................... 7
Investment Advisory and Other Services .............................. 9
Portfolio Transactions and Allocation of Brokerage .................. 13
Purchase and Redemption of Shares ................................... 15
Fund Shares and Voting Rights ....................................... 15
Net Asset Value ..................................................... 16
Performance Data .................................................... 18
Taxes ............................................................... 22
Reports to Shareholders ............................................. 23
Independent Auditors ................................................ 23
Financial Statements ................................................ 24
Appendix I - Rating of Bonds and Commercial Paper ................... 82
<PAGE>
THE FUND
MIMLIC Series Fund, Inc. ("Fund"), a Minnesota corporation, is a
no-load, diversified, open-end management investment company. The Fund is a
series fund, which means that it has several different Portfolios. The
investment adviser of the Fund is MIMLIC Asset Management Company ("MIMLIC
Management"). MIMLIC Management has entered into investment sub-advisory
agreements under which various investment managers provide investment
services. Winslow Capital Management, Inc. ("Winslow Management") serves as
investment sub-adviser to the Fund's Capital Appreciation Portfolio;
Templeton Investment Counsel, Inc. ("Templeton Counsel") serves as investment
sub-adviser to the Fund's International Stock Portfolio; Voyageur Fund
Managers, Inc. ("Voyageur Managers") serves as investment sub-adviser to the
Growth Portfolio; and Voyageur Managers and Lazard London International
Investment Management, Limited ("Lazard London") serve as investment
sub-advisers to the Global Bond Portfolio.
Currently, the shares of the Fund are sold only to The Minnesota Mutual
Life Insurance Company ("Minnesota Mutual") through certain of its separate
accounts to fund the benefits under variable annuity contracts and variable life
insurance policies (collectively, the "Contracts") issued by Minnesota Mutual.
The separate accounts, which will be the owners of the shares of the Fund, will
invest in the shares of each Portfolio in accordance with instructions received
from the owners of the Contracts.
Minnesota Mutual, through its separate accounts which fund the Contracts,
owns 100% of the shares outstanding of each Portfolio of the Fund. Minnesota
Mutual, on October 22, 1985, provided the initial capital of the Fund by
purchasing 4,500,000 shares of the Growth Portfolio, Bond Portfolio, Money
Market Portfolio and Asset Allocation Portfolio for $4,500,000. On April 28,
1987, Minnesota Mutual provided initial capital for additional portfolios by
purchasing 11,000,000 shares of the Mortgage Securities Portfolio, Index 500
Portfolio and Capital Appreciation Portfolio for $11,000,000. Those initial
shares were not attributable to any of the Contracts and were redeemed by
Minnesota Mutual during 1991. On April 27, 1992, Minnesota Mutual provided
initial capital for the International Stock Portfolio by purchasing 10,000,000
shares of the Portfolio for $10,000,000. Those initial shares, together with
the additional shares attributable to them as a result of the reinvestment of
dividends and capital gains distributions, are not attributable to any of the
Contracts. In addition, Minnesota Mutual provided initial capital in the amount
of $3,000,000 on April 22, 1993, for the Small Company Portfolio and, as a
result, those initial shares, together with additional shares attributable to
them as a result of reinvestment of dividends and capital gains distributions,
are not attributable to any of the Contracts. On May 2, 1994, Minnesota Mutual
provided initial capital for the Value Stock Portfolio and the four Maturing
Government Bond Portfolios and those initial shares, together with the
additional shares attributable to them as the result of the reinvestment of
dividends and capital gains distributions, are not attributable to any of the
Contracts. After Minnesota Mutual's initial contribution of $3,000,000,
representing 3,000,000 shares of the Value Stock Portfolio, its contribution
of $3,400,000, representing 3,400,000 shares of the Maturing Government Bond
Portfolio - 1998, its contribution of $2,600,000, representing 2,600,000
shares of the Maturing Government Bond Portfolio - 2002, its contribution of
$1,900,000 representing 1,900,000 shares of the Maturing Government Bond
Portfolio - 2006, and its contribution of $1,100,000 representing 1,100,000
shares of the Maturing Government Bond Portfolio - 2010, those shares
represented 100% of the issued and outstanding shares for those Portfolios as
of May 2, 1994.
Contract owners should consider that the investment experience of the
Portfolio or Portfolios they select will affect the value of and the benefits
provided under the Contract. See the Prospectus for the Contracts for a
description of the relationship between increases or decreases in the net
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<PAGE>
asset value of Fund shares (and any distributions on such shares) and the
benefits provided under a Contract.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions relating to the investment
of the assets of the Portfolios.
The restrictions numbered 1 through 10 and the statement dealing with
senior securities are fundamental and may not be changed without the affirmative
vote of a majority of the outstanding voting securities of each Portfolio
affected by the change. With respect to the submission of a change in an
investment restriction to the holders of the Fund's outstanding voting
securities, such matter shall be deemed to have been effectively acted upon with
respect to a particular Portfolio if a majority of the outstanding voting
securities of such Portfolio vote for the approval of such matter,
notwithstanding (1) that such matter has not been approved by the holders of a
majority of the outstanding voting securities of any other Portfolio affected by
such matter, and (2) that such matter has not been approved by the vote of a
majority of the outstanding voting securities of the Fund. For this purpose and
under the Investment Company Act of 1940, a majority of the outstanding voting
shares of each Portfolio means the lesser of (i) 67% of the voting shares
represented at a meeting at which more than 50% of the outstanding voting shares
are represented or (ii) more than 50% of the outstanding voting shares.
Restrictions numbered 11-17 are not fundamental and may be changed by the
Fund's Board of Directors.
The Fund may not issue senior securities except to the extent that the
borrowing of money in accordance with restriction 3 or the entering into reverse
repurchase agreements as described in restriction 6 may constitute the issuance
of a senior security, and each Portfolio will not:
1. With respect to at least 75% of the value of the total assets in the
Portfolio, invest more than 5% of the value of such assets in the
securities of any one issuer (except securities issued or guaranteed by
the United States Government, its agencies or instrumentalities and bank
obligations) or invest in more than 10% of the voting securities of any
one issuer.
For additional information with respect to investment of assets in the
Money Market Portfolio, see the additional description in this Statement
of Additional Information under the heading entitled "Net Asset Value."
2. Purchase the securities of issuers conducting their principal business
activity in a single industry, if immediately after such purchase the
value of its investments in such industry would exceed 25% of the value
of the Portfolio's total assets, provided that (a) telephone, gas, and
electric public utilities are each regarded as separate industries and
(b) banking, savings and loan associations, savings banks and finance
companies as a group will not be considered a single industry for the
purpose of this limitation. There is no limitation with respect to the
concentration of investments in securities issued or guaranteed by the
United States Government, its agencies or instrumentalities, or
certificates of deposit and bankers acceptances of United States banks
and savings and loan associations and this limitation shall not apply in
the Mortgage Securities Portfolio to investments in the mortgage and
mortgage-finance industry (in which more than 25% of the value of the
Portfolio's
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<PAGE>
total assets will, except for temporary defensive positions, be
invested).
3. Borrow money, except from banks for temporary or emergency purposes,
including the meeting of redemption requests which might otherwise
require the untimely disposition of securities. Borrowing in the
aggregate by any particular Portfolio may not exceed 10% of the value of
the Portfolio's total assets at the time the borrowing is made and a
Portfolio may not make additional investments during any period that its
borrowings exceed 5% of the value of the Portfolio's total assets. For
purposes of this restriction, "borrowing" shall not include reverse
repurchase agreements.
4. Lend securities in excess of 20% of the value of its total assets. For
the purposes of this restriction, collateral arrangements with respect
to options, forward currency and futures transactions will not be deemed
to involve loans of securities.
5. Purchase securities on margin (but it may obtain such short-term credits
as may be necessary for the clearance of purchases and sales of
securities); or make short sales except where, by virtue of ownership of
other securities, it has the right to obtain, without payment of further
consideration, securities equal in kind and amount to those sold, and
only to the extent that the Portfolio's short positions will not at the
time of any short sales aggregate in total sale prices more than 10% of
its total assets. For purposes of this restriction, collateral
arrangements with respect to options, forward currency and futures
transactions will not be deemed to involve the use of margin.
6. Enter into reverse repurchase agreements if such investments, taken
together with borrowings represented by senior securities of the
Portfolio, exceed 33 1/3% of the total assets of the Portfolio less
liabilities other than obligations under such borrowings and reverse
repurchase agreements.
7. Act as an underwriter of securities, except to the extent the Fund may
be deemed to be an underwriter in connection with the disposition of
Portfolio securities.
8. Purchase or sell real estate, except that each Portfolio may invest in
securities secured by real estate or interests therein or securities
issued by companies which invest in real estate or interests therein.
9. Buy or sell oil, gas or other mineral leases, rights or royalty
contracts or commodities or commodity contracts, including futures
contracts except that the International Stock Portfolio may purchase and
sell futures contracts on financial instruments and indices and options
on such futures contracts and it may purchase and sell futures contracts
on foreign securities and options on such futures contracts. This
restriction does not prevent the Portfolios from purchasing securities
of companies investing in any of the foregoing.
10. Lend money to other persons except by the purchase of obligations in
which the Portfolio is authorized to invest and by entering into
repurchase agreements. For the purposes of this restriction, collateral
arrangements with respect to options, forward currency and future
transactions will not be deemed to involve loans of securities.
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<PAGE>
11. Knowingly invest more than 15% of the value of its net assets in
securities or other investments, including repurchase agreements
maturing in more than seven days, that are illiquid or otherwise not
readily marketable; provided, however, the Money Market Portfolio shall
not invest in excess of 10% of its net assets in such illiquid
securities.
12. Pledge, hypothecate, mortgage or transfer (except as provided in
restrictions 4 and 6) as security for indebtedness any securities held
by the Fund, except in an amount of not more than 10% of the value of
any Portfolio's total assets and then only to secure borrowings
permitted by restrictions 3 and 5. For purposes of this restriction,
collateral arrangements with respect to options, forward currency and
futures transactions will not be deemed to involve a pledge of assets.
13. Purchase foreign securities not publicly traded in the United States
except that: (i) each of the Growth Portfolio, Small Company Portfolio
and Value Stock Portfolio may invest up to 10% of the value of its total
assets in securities of foreign issuers, (ii) the Money Market Portfolio
may invest in obligations of Canadian chartered banks, London branches
of United States banks and United States branches or agencies of foreign
banks, and (iii) the Asset Allocation Portfolio may invest in such
securities subject to the restrictions applicable to those four
Portfolios. The provisions of this restriction apply to all Portfolios
other than the International Stock Portfolio.
14. Purchase securities of other investment companies with an aggregate
value in excess of 5% of the Portfolio's total assets, except in
connection with a merger, consolidation, acquisition or reorganization,
or by purchase in the open market of securities of closed-end companies
where no underwriter or dealer's commission or profit, other than
customary broker's commission, is involved, and if immediately
thereafter not more than 10% of the value of the Portfolio's total
assets would be invested in such securities.
15. Issue or acquire puts, calls, or combinations thereof.
16. Purchase securities for the purpose of exercising control or management.
17. Participate on a joint (or a joint and several) basis in any trading
account in securities (but this does not prohibit the "bunching" of
orders for the sale or purchase of Portfolio securities with the other
Portfolios or with other accounts advised by MIMLIC Management, or, in
the case of the Capital Appreciation and International Stock Portfolios,
by Winslow Management and Templeton Counsel, respectively, to reduce
brokerage commissions or otherwise to achieve best overall execution).
If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in the investment's percentage of the value of a
Portfolio's total assets resulting from a change in such values or assets will
not constitute a violation of the percentage restriction.
Several other limitations apply with respect to the investment activities
of the Portfolios. These limitations, which arise from the requirements of
various states in which the underlying contracts are offered, have been adopted
by the Fund in order to secure compliance. As a result of these further
limitations, some investment practices otherwise permitted under those
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<PAGE>
restrictions described above in paragraphs 1, 3 and 6 are no longer allowed. In
particular, the Fund has agreed that as long as the underlying contracts are
offered in such states the Fund (i) will not purchase or otherwise acquire the
voting security of any issuer if as a result of such acquisition all of the
Fund's Portfolios in the aggregate will own more than 10% of the total issued
and outstanding voting securities of such issuer, and (ii) will limit its
borrowing for any particular Portfolio to (a) 10% of the Portfolio's total
assets when borrowing for any general purpose and (b) 25% of the Portfolio's
total assets when borrowing as a temporary measure to facilitate redemptions.
For the purpose of these aggregate limitations on borrowing, reverse repurchase
agreements will be considered to be borrowings.
PORTFOLIO TURNOVER
Each Portfolio has a different expected annual rate of portfolio turnover,
which is calculated by dividing the lesser of purchases or sales of Portfolio
securities during the fiscal year by the monthly average of the value of the
Portfolio's securities (excluding from the computation all securities with
maturities at the time of acquisition of one year or less). A high rate of
turnover in a Portfolio generally involves correspondingly greater brokerage
commission expenses, which must be borne directly by the Portfolio. Turnover
rates may vary greatly from year to year and within a particular year and may
also be affected by cash requirements for redemptions of each Portfolio's shares
and by requirements which enable the Fund to receive favorable tax treatment.
The portfolio turnover rates associated with each Portfolio will, of course, be
affected by the level of purchases and redemptions of shares of each Portfolio.
However, because rate of portfolio turnover is not a limiting factor, particular
holdings may be sold at any time, if in the opinion of MIMLIC Management such a
sale is advisable.
The Money Market Portfolio, consistent with its investment objective, will
attempt to maximize yield through trading. This may involve selling instruments
and purchasing different instruments to take advantage of disparities of yields
in different segments of the high grade money market or among particular
instruments within the same segment of the market. Since the Portfolio's assets
will be invested in securities with short maturities and the Portfolio will
manage its assets as described above, the Portfolio's holdings of money market
instruments will turn over several times a year. However, this does not
generally increase the Portfolio's brokerage costs, since brokerage commissions
as such are not usually paid in connection with the purchase or sale of the
instruments in which the Portfolio invests since such securities will be
purchased on a net basis.
It is anticipated that the annual portfolio turnover rates for the
Growth, Index 500, International Stock, Small Company, Value Stock, Small
Company Value and Maturing Government Bond Portfolios will not exceed 100%,
and that the annual portfolio turnover rates for the Bond, Capital
Appreciation and Mortgage Securities Portfolios will not exceed 200%. It is
anticipated that under normal market conditions, the annual rate of portfolio
turnover will not exceed 150% for the Global Bond Portfolio. In the Asset
Allocation Portfolio, portfolio turnover rate for the common stock and other
equity securities held by it will approximate the portfolio turnover rate of
the Growth Portfolio generally. Similarly, the portfolio turnover rate of the
Asset Allocation Portfolio with respect to bonds and other debt securities
with maturities generally exceeding one year will approximate the portfolio
turnover of the Bond Portfolio. In addition, portfolio turnover will be
increased in the Asset Allocation Portfolio to the extent that emphasis in
its holdings may shift from one type of security to another. Turnover will,
therefore, be dependent as well upon economic conditions or general levels of
securities prices. For each of the last three calendar years, the portfolio
turnover rates for the various Portfolios were as follows:
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<TABLE>
<CAPTION>
Portfolio Turnover Rate
-----------------------
Portfolio 1995 1994 1993
--------- ---- ---- ----
<S> <C> <C> <C>
Growth 91.9% 42.0% 51.0%
Bond 205.4 166.2 166.8
Money Market N/A N/A N/A
Asset Allocation 157.0 123.6 85.7
Mortgage Securities 133.7 197.3 138.4
Index 500 4.8 5.9 4.8
Capital Appreciation 51.1 68.4 95.9
International Stock 20.5 12.9 12.7
Small Company 61.3 28.1 34.9
Value Stock 164.2 49.5 N/A
Maturing Government Bond -
1998 Portfolio 9.0 -0- N/A
2002 Portfolio -0- 11.6 N/A
2006 Portfolio 10.0 -0- N/A
2010 Portfolio -0- 14.5 N/A
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS
The names, addresses, principal occupations, and other affiliations of
directors and executive officers of the Fund are given below:
Position with Principal Occupation and other
Name, Age and Address the Fund Affiliations (past 5 years)
- --------------------- ------------- -----------------------------
Charles E. Arner, 74 Director Retired; Vice Chairman of
E-1218 First National The First National Bank of
Bank Building Saint Paul from November
St. Paul, Minnesota 55101 1983 through June 1984;
Chairman and Chief Executive
Officer of The First National
Bank of Saint Paul from
October 1980 through November
1983
Ellen S. Berscheid, Ph.D., 60 Director Regents' Professor of
Department of Psychology Psychology, University of
University of Minnesota Minnesota
N309 Elliott Hall
Minneapolis, Minnesota 55455
Frederick P. Feuerherm*, 50 Vice President, Second Vice President of The
The Minnesota Mutual Life Treasurer and Minnesota Mutual Life
Insurance Company Director Insurance Company; Vice
400 Robert Street North President and Assistant
St. Paul, Minnesota 55101 Secretary of MIMLIC
Asset Management Company
Ralph D. Ebbott, 69 Director Retired; Vice President and
409 Birchwood Avenue Treasurer, Minnesota Mining
White Bear Lake, and Manufacturing Company
Minnesota 55110 through June 1989
-7-
<PAGE>
Paul H. Gooding*, 56 President, Vice President and Treasurer
The Minnesota Mutual Life Treasurer and of The Minnesota Mutual Life
Insurance Company Director Insurance Company; President
400 Robert Street North and Treasurer of MIMLIC Asset
St. Paul, Minnesota 55101 Management Company
Donald F. Gruber, 52 Secretary Senior Counsel of The
The Minnesota Mutual Life Minnesota Mutual Life
Insurance Company Insurance Company
400 Robert Street North
St. Paul, Minnesota 55101
*Denotes directors of the Fund who are "interested persons" (as defined in the
Investment Company Act of 1940) of the Fund or MIMLIC Asset Management Company
("MIMLIC Management").
The Fund has an Executive Committee, elected by the Board of Directors, to
exercise the powers of the Board in the management of the business and affairs
of the Fund when the Board is not in session. The Executive Committee is
composed of Messrs. Gooding and Feuerherm.
No compensation is paid by the Fund to any of its officers or directors who
is affiliated with MIMLIC Management. Each director of the Fund who is not
affiliated with MIMLIC Management was compensated by the Fund during the fiscal
year ended December 31, 1995 in accordance with the following table:
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits Estimated from
Accrued Annual Fund and
as Part Benefits Fund Complex
Compensation of Fund Upon Paid to
Name of Director from the Fund Expenses Retirement Directors(1)
- ---------------- ------------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Charles E. Arner $7,325 n/a n/a $9,000
Ellen S. Berscheid $7,325 n/a n/a $9,000
Ralph D. Ebbott $7,325 n/a n/a $9,000
</TABLE>
(1) Each Director of the Fund who is not affiliated with MIMLIC Management is
also a director of the other nine investment companies of which MIMLIC
Management's wholly-owned subsidiary, Advantus Capital Management, Inc., is
the investment adviser (ten investment companies in total-the "Fund
Complex"). Such directors receive compensation in connection with all such
investment companies which, in the aggregate, is equal to $5,000 per year
and $1,000 per
-8-
<PAGE>
meeting attended (and reimbursement of travel expenses to attend directors'
meetings). The portion of such compensation borne by the Fund is a pro
rata portion based on the ratio that the Fund's total net assets bears to
the total net assets of the Fund Complex.
INVESTMENT ADVISORY AND OTHER SERVICES
ADVISER--GENERALLY
MIMLIC Management has been the investment adviser and manager of the
Fund since the Fund began business in 1985. It acts as such pursuant to
written agreements periodically approved by the directors or shareholders of
the Fund. The address of MIMLIC Management is that of the Fund. Winslow
Management serves as investment sub-adviser to the Fund's Capital
Appreciation Portfolio pursuant to an investment sub-advisory agreement with
MIMLIC Management. Templeton Counsel serves as investment sub-adviser to the
Fund's International Stock Portfolio pursuant to an investment sub-advisory
agreement with MIMLIC Management. Voyageur Managers serves as investment
sub-adviser to the Fund's Growth Portfolio pursuant to an investment
sub-advisory agreement with MIMLIC Management. Voyageur Managers and Lazard
London serve as investment sub-advisers to the Fund's Global Bond Portfolio
pursuant to investment sub-advisory agreements with MIMLIC Management.
CONTROL AND MANAGEMENT OF ADVISER
MIMLIC Management is a wholly-owned subsidiary of Minnesota Mutual, which
was organized in 1880, and has assets of approximately $9.8 billion. Paul H.
Gooding, President, Treasurer, and a director of MIMLIC Management is a Vice
President and Treasurer of Minnesota Mutual. Frederick P. Feuerherm, Vice
President, Assistant Secretary and a director of MIMLIC Management is a Second
Vice President of Minnesota Mutual. Messrs. Gooding and Feuerherm are also
Directors of the Fund.
INVESTMENT ADVISORY AGREEMENT
MIMLIC Management acts as investment adviser and manager of the Growth,
Bond, Money Market, Asset Allocation and Mortgage Securities Portfolios of the
Fund under an Investment Advisory Agreement dated January 30, 1986, which became
effective the same date when approved by shareholders, and which was last
approved by the Board of Directors (including a majority of the directors who
are not parties to the contract, or interested persons of any such party) on
January 17, 1996. MIMLIC Management acts as investment adviser and manager of
the Index 500 and Capital Appreciation Portfolios of the Fund under a
Supplemental Investment Advisory Agreement dated April 28, 1987, which became
effective the same date when approved by shareholders of those two Portfolios,
and which was last approved by the Board of Directors (including a majority of
the directors who are not parties to the contract, or interested persons of any
such party) on January 17, 1996. MIMLIC Management acts as investment adviser
and manager of the International Stock Portfolio under the Second Supplemental
Investment Advisory Agreement dated April 27, 1993, which was last approved by
the shareholders of that Portfolio on April 27, 1993, and which was last
approved by the Board of Directors (including a majority of the directors who
are not parties to the contract, or interested persons of any such party) on
January 17, 1996. MIMLIC Management acts as investment adviser and manager of
the Small Company Portfolio under the Third Supplemental Investment Advisory
Agreement dated April 27, 1993, which became effective the same date when
approved by the shareholders of that Portfolio, and which was last approved by
the Board of Directors (including a majority of the directors who are not
parties to the contract, or interested persons of any such party) on January 17,
1996. MIMLIC Management acts as investment adviser and manager of the Value
Stock Portfolio and the four Maturing Government Bond Portfolios of the Fund
under the Fourth Supplemental Investment Advisory Agreement dated April 19,
1994, which became effective on April 25, 1994 when approved by shareholders of
those Portfolios, and which was last approved by the Board of Directors
(including a majority of the directors who are not parties to the
-9-
<PAGE>
contract, or interested persons of any such party) on January 17, 1996.
MIMLIC Management acts as investment adviser and manager of the Small Company
Value Portfolio and the Global Bond Portfolio under the Fifth Supplemental
Investment Advisory Agreement last approved by the Board of Directors
(including a majority of the directors who are not parties to the agreement)
on July 17, 1996.
The Investment Advisory Agreement, the Supplemental Investment Advisory
Agreement, the Second, the Third, the Fourth and Fifth Supplemental
Investment Advisory Agreements (collectively, the "Agreements") will
terminate automatically in the event of assignment. In addition, the
Agreements are terminable at any time, without penalty, by the Board of
Directors of the Fund or by vote of a majority of the Fund's outstanding
voting securities on 60 days' written notice to MIMLIC Management, and by
MIMLIC Management on 60 days' written notice to the Fund. Unless sooner
terminated, the Agreements shall continue in effect for more than two years
after its execution only so long as such continuance is specifically approved
at least annually either by the Board of Directors of the Fund or by a vote
of a majority of the outstanding voting securities, provided that in either
event such continuance is also approved by the vote of a majority of the
directors who are not interested persons of any party to the Agreements, cast
in person at a meeting called for the purpose of voting on such approval.
The required shareholder approval of any continuance of the Agreements shall
be effective with respect to any Portfolio if a majority of the outstanding
voting securities of the class of capital stock of that Portfolio votes to
approve such continuance, notwithstanding that such continuance may not have
been approved by a majority of the outstanding voting securities of the Fund.
If the shareholders of a class of capital stock of any Portfolio fail to
approve any continuance of the Agreements, MIMLIC Management will continue to
act as investment adviser with respect to such Portfolio pending the required
approval of its continuance, or a new contract with MIMLIC Management or a
different adviser or other definitive action; provided, that the compensation
received by MIMLIC Management in respect of such Portfolio during such period
will be no more than its actual costs incurred in furnishing investment advisory
and management services to such Portfolio or the amount it would have received
under the Agreement in respect of such Portfolio, whichever is less.
The Agreements may be amended by the parties only if such amendment is
specifically approved by the vote of a majority of the outstanding voting
securities of the Fund and by the vote of a majority of the directors of the
Fund who are not interested persons of any party to the Agreement cast in person
at a meeting called for the purpose of voting on such approval. The required
shareholder approval shall be effective with respect to any Portfolio if a
majority of the outstanding voting securities of the class of capital stock of
that Portfolio vote to approve the amendment, notwithstanding that the amendment
may not have been approved by a majority of the outstanding voting securities of
the Fund.
SUB-ADVISER - WINSLOW MANAGEMENT
Winslow Capital Management, Inc. ("Winslow Management"), a Minnesota
corporation with principal offices at 4720 IDS Tower, 80 South Eighth Street,
Minneapolis, Minnesota 55402 has been retained under an investment sub-advisory
agreement to provide investment advice and, in general, to conduct the
management and investment program of the Capital Appreciation Portfolio, subject
to the general control of the Board of Directors of the Fund. Winslow
Management is a recent entrant into the advisory business, having begun business
in June of 1992. Winslow Management is a registered investment adviser under
the Investment Advisers Act of 1940. The firm was established by its
investment principals with a focus on providing management services to growth
equity investment accounts. An additional experienced principal joined the firm
in October of 1993. Winslow Management has one other investment company client
for which it acts as the investment adviser. Other assets currently under
management are managed for corporate, endowment, foundation, retirement system
and individual clients.
-10-
<PAGE>
Prior to October 1, 1992, investment sub-advisory services were provided to
the Capital Appreciation Portfolio by Alliance Capital Management L.P., which
had provided such services since the Portfolio's inception.
Certain clients of Winslow Management may have investment objectives and
policies similar to that of the Capital Appreciation Portfolio. Winslow
Management may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients simultaneously
with the Capital Appreciation Portfolio. If transactions on behalf of more than
one client during the same period increase the demand for securities being
purchased or the supply of securities being sold, there may be an adverse effect
on price. It is the policy of Winslow Management to allocate advisory
recommendations and the placing of orders in a manner which is deemed equitable
by Winslow Management to the accounts involved, including the Capital
Appreciation Portfolio. When two or more of the clients of Winslow Management
(including the Capital Appreciation Portfolio) are purchasing the same security
on a given day from the same broker-dealer, such transactions may be averaged as
to price.
INVESTMENT SUB-ADVISORY AGREEMENT
Winslow Management acts as investment sub-adviser to the Fund's Capital
Appreciation Portfolio under an Investment Sub-Advisory Agreement (the "Winslow
Management Agreement") with MIMLIC Management dated May 1, 1996, which became
effective the same date and was approved by shareholders of the Capital
Appreciation Portfolio on April 23, 1996. The Winslow Management Agreement was
last approved for continuance by the Board of Directors of the Fund, including a
majority of the Directors who are not a party to the Winslow Management
Agreement or interested persons of any such party, on January 17, 1996. Prior
to May 1, 1996, Winslow Management acted as investment sub-adviser to the
Capital Appreciation Portfolio under an Investment Sub-Advisory Agreement with
MIMLIC Management dated October 1, 1992, which became effective the same date
and was approved by shareholders of the Capital Appreciation Portfolio on
November 13, 1992. The Winslow Management Agreement will terminate
automatically upon the termination of the Investment Advisory and Supplemental
Investment Advisory Agreements and in the event of its assignment. In addition,
the Winslow Management Agreement is terminable at any time, without penalty, by
the Board of Directors of the Fund, by MIMLIC Management or by vote of a
majority of the Capital Appreciation Portfolio's outstanding voting securities
on 60 days' written notice to Winslow Management, and by Winslow Management on
60 days' written notice to MIMLIC Management. Unless sooner terminated, the
Winslow Management Agreement shall continue in effect from year to year if
approved at least annually either by the Board of Directors of the Fund or by a
vote of a majority of the outstanding voting securities of the Capital
Appreciation Portfolio, provided that in either event such continuance is also
approved by the vote of a majority of the Directors who are not interested
persons of any party to the Winslow Management Agreement, cast in person at a
meeting called for the purpose of voting on such approval.
Information concerning the services performed by MIMLIC Management under
the Agreement, by Winslow Management under the Winslow Management Agreement, and
the fees payable and expenses borne by the Fund are set forth in the Prospectus,
which information is incorporated herein by reference.
SUB-ADVISER - TEMPLETON COUNSEL
Templeton Investment Counsel, Inc., (hereinafter "Templeton Counsel"), a
Florida corporation with principal offices at 500 East Broward Boulevard,
Ft. Lauderdale, Florida 33394 has been retained under an investment sub-advisory
agreement to provide investment advice and, in general, to conduct the
management investment program of the International Stock Portfolio, subject to
the general control of the Board of Directors of the Fund. Templeton Counsel is
an indirect, wholly-owned subsidiary of Templeton
-11-
<PAGE>
Worldwide, Inc., Ft. Lauderdale, Florida, which in turn is a wholly-owned
subsidiary of Franklin Resources, Inc. ("Franklin").
Franklin is a large, diversified financial services organization. Through
its operating subsidiaries, Franklin provides a variety of investment products
and services to institutions and individuals throughout the United States and
abroad. One of the country's largest mutual fund organizations, Franklin's
business includes the provision of management, administrative and distribution
services to the Franklin/Templeton Group of Funds, which is distributed through
a nationwide network of banks, broker-dealers, financial planners and investment
advisers. Franklin is headquartered in San Mateo, California, and its common
stock is listed on the New York Stock Exchange under the ticker symbol BEN.
Certain clients of Templeton Counsel may have investment objectives and
policies similar to that of the International Stock Portfolio. Templeton
Counsel may, from time to time make recommendations which result in the purchase
or sale of a particular security by its other clients simultaneously with the
International Stock Portfolio. If transactions on behalf of more than one
client during the same period increase the demand for securities being purchased
or the supply of securities being sold, there may be an adverse effect on price.
It is the policy of Templeton Counsel to allocate advisory recommendations and
the placing of orders in a manner which is deemed equitable by Templeton Counsel
to the accounts involved, including the International Stock Portfolio. When two
or more of the clients of Templeton Counsel (including the International Stock
Portfolio) are purchasing the same security on a given day from the same broker-
dealer, such transactions may be averaged as to price.
INVESTMENT SUB-ADVISORY AGREEMENT - TEMPLETON COUNSEL
Templeton Counsel acts as an investment sub-adviser to the Fund's
International Stock Portfolio under an Investment Sub-Advisory Agreement (the
"Templeton Agreement") with MIMLIC Management dated November 13, 1992, which
became effective the same date it was approved by shareholders of the
International Stock Portfolio. The Templeton Agreement was last approved for
continuance by the Board of Directors of the Fund, including a majority of the
Directors who are not a party to the Templeton Agreement or interested persons
of any such party, on January 17, 1996. The Templeton Agreement will terminate
automatically upon the termination of the Investment Advisory and Supplemental
Investment Advisory Agreements and in the event of its assignment. In addition,
the Templeton Agreement is terminable at any time, without penalty, by the Board
of Directors of the Fund, by MIMLIC Management or by a vote of the majority of
the International Stock Portfolio's outstanding voting securities on 60 days'
written notice to Templeton Counsel and by Templeton Counsel on 60 days' written
notice to MIMLIC Management. Unless sooner terminated, the Templeton Agreement
shall continue in effect from year to year if approved at least annually by the
Board of Directors of the Fund or by a vote of a majority of the outstanding
voting securities of the International Stock Portfolio, provided that in either
event such continuance is also approved by the vote of a majority of the
directors who are not interested persons of any party to the Templeton
Agreement, cast in person at a meeting called for the purpose of voting on such
approval.
Information concerning the services performed by MIMLIC Management under
the agreement, by Templeton Counsel under the Templeton Agreement and the fees
payable and expenses borne by the Fund are set forth in the prospectus, which
information is incorporated herein by reference.
SUB-ADVISER - VOYAGEUR MANAGERS
Voyageur Managers, a Minnesota corporation with principal offices at 90
South Seventh Street, Suite 4400, Minneapolis, Minnesota 55042-4115, has been
retained under an investment sub-advisory agreement to provide investment advice
and, in general, to conduct the management investment program of the Growth
Portfolio, subject to the general control of MIMLIC Management and the Board of
Directors of the Fund. Voyageur Managers is a registered investment adviser
under the Investment Advisers Act of 1940. Voyageur Managers is an indirect,
wholly-owned subsidiary of Dougherty Financial Group, Inc. ("DFG"), which is
owned approximately 49% by Michael E. Dougherty, 49% by Pohlad Companies and
less than 1% by certain retirement plans for the benefit of DFG employees. Mr.
Dougherty co-founded the predecessor DFG in 1977 and has served as DFG's
Chairman of the Board and Chief Executive Officer since inception. The address
of DFG is the same as that of Voyageur Managers. Pohlad Companies is a holding
company owned in equal parts by each of James O. Pohlad, Robert C. Pohlad and
William M. Pohlad. The address of Pohlad Companies is 3880 Dain Bosworth Plaza,
60 South Sixth Street, Minneapolis, Minnesota 55402.
Voyageur Managers has also been retained under an investment sub-advisory
agreement to provide investment advice and, in general conduct the management
investment program of the Global Bond Portfolio, subject to the general control
of MIMLIC Management and the Board of Directors of the Fund.
Certain clients of Voyageur Managers may have investment objectives and
policies similar to that of the Growth or Global Bond Portfolios. Voyageur
Managers may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients simultaneously
with the Growth or Global Bond Portfolios. If transactions on behalf of more
than one client during the same period increase the demand for securities being
purchased or the supply of securities being sold, there may be an adverse effect
on price. It is the policy of Voyageur Managers to allocate advisory
recommendations and the placing of orders in a manner which is deemed equitable
by Voyageur Managers to the accounts involved, including the Growth or Global
Bond Portfolios. When two or more of the clients of Voyageur Managers
(including the Growth or Global Bond Portfolio) are purchasing the same security
on a given day from the same broker-dealer, such transactions may be averaged as
to price.
Investment Sub-Advisory Agreements - Voyageur Managers
Voyageur Managers acts as an investment sub-adviser to the Fund's Growth
Portfolio under an Investment Sub-Advisory Agreement (the "Voyageur Growth
Agreement") with MIMLIC Management dated October 1, 1996, which became effective
immediately after it was approved by shareholders of the Growth Portfolio. The
Voyageur Growth Agreement was last approved for continuance by the Board of
Directors of the Fund, including a majority of the Directors who are not a party
to the Voyageur Growth Agreement or interested persons of any such party, on
July 17, 1996, and approved thereafter at a Special Meeting of the Shareholders
of the Growth Portfolio at a meeting held on September 30, 1996.
The Voyageur Growth Agreement will terminate automatically upon the
termination of the Investment Advisory and Supplemental Investment Advisory
Agreements between the Fund and MIMLIC Management and in the event of its
assignment. In addition, the Voyageur Growth Agreement is terminable at any
time, without penalty, by the Board of Directors of the Fund, by MIMLIC
Management or by a vote of the majority of the Growth Portfolio's outstanding
voting securities on 60 days' written notice to Voyageur Managers and by
Voyageur Managers on 60 days' written notice to MIMLIC Management. Unless
sooner terminated, the Voyageur Growth Agreement shall continue in effect from
year to year if approved at least annually by the Board of Directors of the Fund
or by a vote of a majority of the outstanding voting securities of the Growth
Portfolio, provided that in either event such continuance is also approved by
the vote of a majority of the directors who are not interested persons of any
party to the Voyageur Growth Agreement, cast in person at a meeting called for
the purpose of voting on such approval.
Information concerning the services performed by MIMLIC Management under
the agreement, by Voyageur Managers under the Voyageur Growth Agreement and the
fees payable and expenses borne by the Fund are set forth in the prospectus,
which information is incorporated herein by reference.
Voyageur Managers acts as an investment sub-adviser to the Fund's Global
Bond Portfolio under an Investment Sub-Advisory Agreement (the "Voyageur Global
Bond Agreement") with MIMLIC Management. The Voyageur Global Bond Agreement was
approved by the Board of Directors of the Fund, including a majority of the
Directors who are not a party to the Voyageur Global Bond Agreement or
interested persons of any such party, on July 17, 1996.
The Voyageur Global Bond Agreement will terminate automatically upon the
termination of the Investment Advisory and Supplemental Investment Advisory
Agreements between the Fund and MIMLIC Management and in the event of its
assignment. In addition, the Voyageur Global Bond Agreement is terminable at
any time, without penalty, by the Board of Directors of the Fund, by MIMLIC
Management or by a vote of the majority of the Global Bond Portfolio's
outstanding voting securities on 60 days' written notice to Voyageur Managers
and by Voyageur Managers on 60 days' written notice to MIMLIC Management.
Unless sooner terminated, the Voyageur Growth Agreement shall continue in effect
from year to year if approved at least annually by the Board of Directors of the
Fund or by a vote of a majority of the outstanding voting securities of the
Global Bond Portfolio, provided that in either event such continuance is also
approved by the vote of a majority of the directors who are not interested
persons of any party to the Voyageur Global Bond Agreement, cast in person at a
meeting called for the purpose of voting on such approval.
Information concerning the services performed by MIMLIC Management under
the agreement, by Voyageur Managers under the Voyageur Global Bond Agreement and
the fees payable and expenses borne by the Fund are set forth in the prospectus,
which information is incorporated herein by reference.
Sub-Adviser - Lazard London
Lazard London, an English corporation, with principal offices at 21
Moorfields, London, England EC2P 2HT, has been retained by Voyageur Managers
under an investment sub-advisory agreement provide investment advice and, in
general, to conduct the management investment program of the Global Bond
Portfolio, subject to the general control of MIMLIC Management, Voyageur
Managers and the Board of Directors of the Fund. Lazard London is a registered
investment adviser under the Investment Advisers Act of 1940. Lazard London is
a wholly owned SEC-registered investment advisory subsidiary of Lazard Brothers
& Co., Limited. Founded in 1870, Lazard Brothers & Co., Limited is based in
London, England, and is one of the leading merchant banks in Europe.
Certain clients of Lazard London may have investment objectives and
policies similar to that of the Global Bond Portfolio. Lazard London may, from
time to time, make recommendations which result in the purchase or sale of a
particular security by its other clients simultaneously with the Global Bond
Portfolio. If transactions on behalf of more than one client during the same
period increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price. It is the
policy of Lazard London to allocate advisory recommendations and the placing of
orders in a manner which is deemed equitable by Voyageur Managers to the
accounts involved, including the Global Bond Portfolio. When two or more of the
clients of Voyageur Managers (including the Global Bond Portfolio) are
purchasing the same security on a given day from the same broker-dealer, such
transactions may be averaged as to price.
Investment Sub-Advisory Agreement - Lazard London
Lazard London acts as an investment sub-adviser to the Fund's Global Bond
Portfolio under an Investment Sub-Advisory Agreement (the "Lazard London Global
Bond Agreement") with MIMLIC Management and Voyageur Managers. The Lazard
London Global Bond Agreement was approved by the Board of Directors of the Fund,
including a majority of the Directors who are not a party to the Voyageur Global
Bond Agreement or interested persons of any such party, on July 17, 1996.
The Lazard London Global Bond Agreement will terminate automatically upon
the termination of the Investment Advisory and Supplemental Investment Advisory
Agreements between the Fund and MIMLIC Management and in the event of its
assignment. In addition, the Lazard London Global Bond Agreement is terminable
at any time, without penalty, by the Board of Directors of the Fund, by MIMLIC
Management, by Voyageur Managers or by a vote of the majority of the Growth
Portfolio's outstanding voting securities on 60 days' written notice to Lazard
London and by Lazard London on 60 days' written notice to MIMLIC Management.
Unless sooner terminated, the Lazard London Global Bond Agreement shall continue
in effect from year to year if approved at least annually by the Board of
Directors of the Fund or by a vote of a majority of the outstanding voting
securities of the Global Bond Portfolio, provided that in either event such
continuance is also approved by the vote of a majority of the directors who are
not interested persons of any party to the Voyageur Global Bond Agreement, cast
in person at a meeting called for the purpose of voting on such approval.
Information concerning the services performed by MIMLIC Management under
the agreement, by Lazard London under the Voyageur Global Bond Agreement and the
fees payable and expenses borne by the Fund are set forth in the prospectus,
which information is incorporated herein by reference.
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<PAGE>
ADMINISTRATIVE SERVICES
In addition, effective May 1, 1992, the Fund entered into an agreement with
Minnesota Mutual under which Minnesota Mutual provides accounting, legal and
other administrative services to the Fund. Prior to May 1, 1996, Minnesota
Mutual provided such services at a monthly cost of $1,500 per Portfolio.
Effective May 1, 1996, Minnesota Mutual provides such services at a monthly cost
of $2,400 per Portfolio.
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
ADVISER
MIMLIC Management selects and (where applicable) negotiates commissions
with the brokers who execute the transactions for all Portfolios of the Fund,
except the Capital Appreciation and International Stock Portfolios. The primary
criteria for the selection of a broker is the ability of the broker, in the
opinion of MIMLIC Management, to secure prompt execution of the transactions on
favorable terms, including the reasonableness of the commission and considering
the state of the market at the time. In selecting a broker, MIMLIC Management
considers the quality and expertise of that brokerage and any research services
(as defined in the Securities Exchange Act of 1934), and generally the Fund pays
higher than the lowest commission rates available. Such research services
include advice, both directly and in writing, as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or seller of securities, as well as
analyses and reports concerning issues, industries, securities, economic factors
and trends, portfolio strategy, and the performance of accounts. By allocating
brokerage business in order to obtain research services for MIMLIC Management,
the Fund enables MIMLIC Management to supplement its own investment research
activities and allows MIMLIC Management to obtain the views and information of
individuals and research staffs of many different securities research firms
prior to making investment decisions for the Fund. To the extent such
commissions are directed to these other brokers who furnish research services to
MIMLIC Management, MIMLIC Management receives a benefit, not capable of
evaluation in dollar amounts, without providing any direct monetary benefit to
the Fund from these commissions.
There is no formula for the allocation by MIMLIC Management of the Fund's
brokerage business to any broker-dealers for brokerage and research services.
However, MIMLIC Management will authorize the Fund to pay an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker would have charged only if MIMLIC Management
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker viewed in terms of either that particular transaction or MIMLIC
Management's overall responsibilities with respect to the accounts as to which
it exercises investment discretion.
To the extent research services are used by MIMLIC Management in rendering
investment advice to the Fund, such services would tend to reduce MIMLIC
Management's expenses. However, MIMLIC Management does not believe that an
exact dollar amount can be assigned to these services. Research services
received by MIMLIC Management from brokers or dealers executing transactions for
the Fund will be available also for the benefit of other portfolios managed by
MIMLIC Management, and conversely, research services received by MIMLIC
Management in respect of transactions for such other portfolios will be
available for the benefit of the Fund. Brokerage Commissions paid during 1995
were as follows: Growth Portfolio, $474,096; Asset Allocation Portfolio,
$412,885; Index 500 Portfolio, $32,651; Capital Appreciation Portfolio,
$201,306; International Stock Portfolio, $154,775; Small Company Portfolio,
$85,238; and Value Stock Portfolio, $136,701. Brokerage commissions paid during
1994 were as follows: Growth Portfolio, $204,757; Asset Allocation Portfolio,
$271,137; Index 500 Portfolio, $25,775; Capital Appreciation Portfolio,
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<PAGE>
$194,531; International Stock Portfolio, $158,373; Small Company Portfolio,
$55,542; and Value Stock Portfolio, $19,950. Brokerage commissions paid during
1993 were as follows: Growth Portfolio, $340,519; Asset Allocation Portfolio,
$455,365; Index 500 Portfolio, $24,614; Capital Appreciation Portfolio,
$263,702; International Stock Portfolio, $117,010; and Small Company Portfolio,
$60,497. One hundred percent of the brokerage commissions paid by the
Portfolios during 1995, 1994 and 1993 was paid to brokers to whom such
transactions were directed in exchange for research services.
Most transactions in money market instruments will be purchases from
issuers of or dealers in money market instruments acting as principal. There
usually will be no brokerage commissions paid by the Fund for such purchases
since securities will be purchased on a net price basis. Trading does, however,
involve transaction costs. Transactions with dealers serving as primary market
makers reflect the spread between the bid and asked prices of securities.
Purchases of underwritten issues may be made which will reflect a fee paid to
the underwriter.
The Fund will not execute portfolio transactions through any affiliate,
except as described below. MIMLIC Management believes that most research
services obtained by it generally benefit one or more of the investment
companies which it manages and also benefits accounts which it manages.
Normally research services obtained through managed funds and managed accounts
investing in common stocks would primarily benefit such funds and accounts;
similarly, services obtained from transactions in fixed income securities would
be of greater benefit to the managed funds and managed accounts investing in
debt securities.
In addition to providing investment management services to the Fund, MIMLIC
Management provides investment advisory services for three insurance companies,
namely Minnesota Mutual and its subsidiary life insurance companies and certain
associated separate accounts. It also provides investment advisory services to
qualified pension and profit sharing plans, corporations, partnerships,
investment companies and various private accounts. Frequently, investments
deemed advisable for the Fund are also deemed advisable for one or more of such
accounts, so that MIMLIC Management may decide to purchase or sell the same
security at or about the same time for both the Fund and one of those accounts.
In such circumstances, orders for a purchase or sale of the same security for
one or more of those accounts may be combined with an order for the Fund, in
which event the transactions will be averaged as to price and normally allocated
as nearly as practicable in proportion to the amounts desired to be purchased or
sold for each account. While in some instances combined orders could adversely
affect the price or volume of a security, it is believed that the Fund's
participation in such transactions on balance will produce better net results
for the Fund.
The Fund's acquisition during the fiscal year ended December 31, 1995, of
securities of its regular brokers or dealers or of the parent of those brokers
or dealers that derive more than 15 percent of gross revenue from securities-
related activities is presented below:
Value of Securities Owned
in the Portfolios at
Name of Issuer End of Fiscal Year
-------------- -------------------------
Lehman Bros. $875,500
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<PAGE>
SUB-ADVISERS
Winslow Management, in managing the Capital Appreciation Portfolio,
Voyageur Managers, in managing the Growth Portfolio, and Voyageur Managers
and Lazard London, in managing the Global Bond Portfolio, intend to follow
the same brokerage practices as those described above for MIMLIC Management.
SUB-ADVISER - TEMPLETON COUNSEL
Templeton Counsel, in managing the International Stock Portfolio, follows
the same basic brokerage practices as those described above for MIMLIC
Management. In addition, in selecting brokers for portfolio transactions,
Templeton Counsel takes into account its past experience as to brokers qualified
to achieve "best execution," including the ability to effect transactions at all
where a large block is involved, availability of the broker to stand ready to
execute possibly difficult transactions in the future, the financial strength
and stability of the broker, and whether the broker specializes in foreign
securities held by the International Stock Portfolio. Purchases and sales of
portfolio securities within the United States other than on a securities
exchange are executed with primary market makers acting as principal, except
where, in the judgment of Templeton Counsel, better prices and execution may be
obtained on a commission basis or from other sources.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund are currently offered continuously at prices equal to
the respective net asset values of the Portfolios, only to Minnesota Mutual and
its separate accounts. The Fund sells its shares to that company without the
use of any underwriter. It is possible that at some later date the Fund may
offer its shares to other investors and it reserves the right to do so.
Shares of the Fund are sold and redeemed at their net asset value next
computed after a purchase or redemption order is received by the Fund.
Depending upon the net asset values at that time, the amount paid upon
redemption may be more or less than the cost of the shares redeemed. Payment
for shares redeemed will generally be made within seven days after receipt of a
proper notice of redemption. The right to redeem shares or to receive payment
with respect to any redemption may only be suspended for any period during
which: (a) trading on the New York Stock Exchange is restricted as determined
by the Securities and Exchange Commission or such exchange is closed for other
than weekends and holidays; (b) an emergency exists, as determined by the
Securities and Exchange Commission, as a result of which disposal of Portfolio
securities or determination of the net asset value of a Portfolio is not
reasonably practicable; and (c) the Securities and Exchange Commission by order
permits postponement for the protection of shareholders.
FUND SHARES AND VOTING RIGHTS
The authorized capital of the Fund consists of ten billion shares of
capital stock (increased from one billion shares on April 28, 1987) with a
par value of $.01 per share; 400,000,000 shares are allocated to the Asset
Allocation Portfolio, 300,000,000 shares are allocated to the Growth
Portfolio, and 200,000,000 shares are allocated to each of the Bond, Money
Market, Mortgage Securities, Index 500, Capital Appreciation, International
Stock, Small Company, Value Stock, Small Company Value, Global Bond and the
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<PAGE>
four Maturing Government Bond Portfolios. The remaining shares may be
allocated by the Board of Directors to any new or existing Portfolios.
All shares of all Portfolios have equal voting rights, except that only
shares of a particular Portfolio are entitled to vote certain matters pertaining
only to that Portfolio. Pursuant to the Investment Company Act and the rules
and regulations thereunder, certain matters approved by a vote of all Fund
shareholders may not be binding on a Portfolio whose shareholders have not
approved such matter.
Each issued and outstanding share is entitled to one vote and to
participate equally in dividends and distributions declared by the respective
Portfolio and in net assets of such Portfolio upon liquidation or dissolution
remaining after satisfaction of outstanding liabilities. The shares of each
Portfolio, when issued, are fully paid and non-assessable, have no preemptive,
conversion, or similar rights, and are freely transferable. Fund shares do not
have cumulative voting rights, which means that the holders of more than half of
the Fund shares voting for election of directors can elect all of the directors
if they so choose. In such event, the holders of the remaining shares would not
be able to elect any directors.
The Fund will not hold periodically scheduled shareholder meetings.
Minnesota corporate law does not require an annual meeting. Instead, it
provides for the Board of Directors to convene shareholder meetings when it
deems appropriate. In addition, if a regular meeting of shareholders has not
been held during the immediately preceding fifteen months, a shareholder or
shareholders holding three percent or more of the voting shares of a Fund may
demand a regular meeting of shareholders of the Fund by written notice of demand
given to the chief executive officer or the chief financial officer of the Fund.
Within thirty days after receipt of the demand by one of those officers, the
Board of Directors shall cause a regular meeting of shareholders to be called
and held no later than ninety days after receipt of the demand, all at the
expense of the Fund. A special meeting may also be called at any time by the
chief executive officer, two or more directors, or a shareholder or shareholders
holding ten percent of the voting shares of the Fund. At a meeting called for
the purpose, shareholders may remove any director by a vote of two-thirds of the
outstanding shares. The Fund will assist shareholders seeking to call such a
meeting in communicating with other shareholders, provided they are at least ten
in number, have been shareholders for at least six months and hold in the
aggregate at least one percent of the outstanding shares or shares having a
value of at least $25,000, whichever is less. Additionally, the Investment
Company Act of 1940 requires shareholder votes for all amendments to fundamental
investment policies and restrictions, and for all investment advisory contracts
and amendments thereto.
NET ASSET VALUE
The net asset value of the shares of the Portfolios is computed once daily,
and, in the case of Money Market Portfolio, after the declaration of the daily
dividend, as of the primary closing time for business on the New York Stock
Exchange (as of the date hereof the primary close of trading is 3:00 p.m.
(Central Time), but this time may be changed) on each day, Monday through
Friday, except (i) days on which changes in the value of such Fund's portfolio
securities will not materially affect the current net asset value of such Fund's
shares, (ii) days during which no such Fund's shares are tendered for redemption
and no order to purchase or sell such Fund's shares is received by such Fund and
(iii) customary national business holidays on which the New York Stock Exchange
is closed for trading (as of the date hereof, New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day). The net asset value per share of each Portfolio is computed by
adding the sum of the value of the securities held by
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<PAGE>
that Portfolio plus any cash or other assets that it holds, subtracting all of
its liabilities, and dividing the result by the total number of shares
outstanding in that Portfolio at that time. Expenses, including the investment
advisory fee payable to MIMLIC Management, are accrued daily.
Securities held by the Growth Portfolio, the Bond Portfolio, the Asset
Allocation Portfolio, the Mortgage Securities Portfolio, the Index 500
Portfolio, the Capital Appreciation Portfolio, the International Stock
Portfolio, the Small Company Portfolio, the Value Stock Portfolio and the four
Maturing Government Bond Portfolios are valued at their market value.
Otherwise, such securities are valued at fair value as determined in good faith
by the Board of Directors, with calculations made by persons acting pursuant to
the direction of the Board. However, debt securities of the International Stock
Portfolio with maturities of 60 days or less when acquired, or which
subsequently are within 60 days of maturity, and all securities in the Money
Market Portfolio, are valued at amortized cost.
All instruments held by the Money Market Portfolio are valued on an
amortized cost basis. This involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which the value of an instrument in the Portfolio,
as determined by amortized cost, is higher or lower than the price the Portfolio
would receive if it sold the instrument. During periods of declining interest
rates, the daily yield on shares of the Portfolio computed by dividing the
annualized daily income of the Portfolio by the net asset value computed as
described above may tend to be higher than a like computation made by a
portfolio with identical investments utilizing a method of valuation based upon
market prices and estimates of market prices for all of its securities.
The Money Market Portfolio values its portfolio securities at amortized
cost in accordance with Rule 2a-7 under the Investment Company Act of 1940, as
amended. Pursuant to Rule 2a-7, the Board of Directors of the Fund has
determined, in good faith based upon a full consideration of all material
factors, that it is in the best interests of the Money Market Portfolio and its
shareholders to maintain a stable net asset value per share for such Portfolio
of a constant $1.00 per share by virtue of the amortized cost method of
valuation. The Money Market Portfolio will continue to use this method only so
long as the Board of Directors believes that it fairly reflects the market-based
net asset value per share. In accordance with Rule 2a-7, the Board of Directors
has undertaken, as a particular responsibility within the overall duty of care
owed to the Portfolio's shareholders, to establish procedures reasonably
designed, taking into account current market conditions and the Portfolio's
investment objective, to stabilize the Portfolio's net asset value per share at
a single value. These procedures include the periodic determination of any
deviation of current net asset value per share calculated using available market
quotations from the Portfolio's amortized cost price per share, the periodic
review by the Board of the amount of any such deviation and the method used to
calculate any such deviation, the maintenance of records of such determinations
and the Board's review thereof, the prompt consideration by the Board if any
such deviation exceeds 1/2 of 1%, and the taking of such remedial action by the
Board as it deems appropriate where it believes the extent of any such deviation
may result in material dilution or other unfair results to investors or existing
shareholders. Such remedial action may include reverse share splits,
redemptions in kind, selling portfolio instruments prior to maturity to realize
capital gains or losses, shortening the average portfolio maturity, withholding
dividends or utilizing a net asset value per share as determined by using
available market quotations.
-17-
<PAGE>
The Portfolio will, in further compliance with Rule 2a-7, maintain a
dollar-weighted average Portfolio maturity not exceeding 90 days and will limit
its Portfolio investments to those United States dollar-denominated instruments
which the Board determines present minimal credit risks and which are eligible
securities. The Portfolio will limit its investments in the securities of any
one issuer to no more than 5% of Portfolio assets and it will limit investment
in securities of less than the highest rated categories to 5% of Portfolio
assets. Investment in the securities of any issuer of less than the highest
rated categories will be limited to the greater of 1% of Portfolio assets or one
million dollars. In addition, the Fund will reassess promptly any security
which is in default or downgraded from its rating category to determine whether
that security then presents minimal credit risks and whether continuing to hold
the securities is in the best interests of the Portfolio in the Fund. In
addition, the Fund will record, maintain, and preserve a written copy of the
above-described procedures and a written record of the Board's considerations
and actions taken in connection with the discharge of its above-described
responsibilities.
PERFORMANCE DATA
CURRENT YIELD FIGURES FOR MONEY MARKET PORTFOLIO
Current annualized yield quotations for the Money Market Portfolio are
based on the Portfolio's net investment income for a seven-day or other
specified period and exclude any realized or unrealized gains or losses on
portfolio securities. Current annualized yield is computed by determining the
net change (exclusive of realized gains and losses from the sale of securities
and unrealized appreciation and depreciation) in the value of a hypothetical
account having a balance of one share at the beginning of the specified period,
dividing such net change in account value by the value of the account at the
beginning of the period, and annualizing this quotient on a 365-day basis. The
net change in account value reflects the value of any additional shares
purchased with dividends from the original share in the account during the
specified period, any dividends declared on such original share and any such
additional shares during the period, and expenses accrued during the period.
The Fund may also quote the effective yield of the Money Market Portfolio for a
seven-day or other specified period for which the current annualized yield is
computed by expressing the unannualized return on a compounded, annualized
basis. Purchasers of variable contracts issued by Minnesota Mutual should
recognize that the yield on the assets relating to such a contract which are
invested in shares of the Money Market Portfolio would be lower than the Money
Market Portfolio's yield for the same period since charges assessed against such
assets are not reflected in the Portfolio's yield. The yield and effective
yield of the Money Market Portfolio for the seven-day period ended December 31,
1995 were 5.09% and 5.22%, respectively.
CURRENT YIELD FIGURES FOR OTHER PORTFOLIOS
Yield quotations for Portfolios other than the Money Market and
International Stock Portfolios are determined by dividing the Portfolio's net
investment income per share for a 30-day period, excluding realized or
unrealized gains or losses, by the net asset value per share on the last day of
the period. In computing net investment income dividends are accrued daily
based on the stated dividend rate of each dividend-paying security, and interest
reflects an amortization of discount or premium on debt obligations (other than
installment debt obligations) based upon the market value of each
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<PAGE>
obligation on the last day of the preceding 30-day period. Undeclared earned
income (net investment income which at the end of the base period has not been
declared as a dividend but is expected to be declared shortly thereafter) is
subtracted from the net asset value per share on the last day of the period. An
annualized yield figure is determined under a formula which assumes that the net
investment income is earned and reinvested at a constant rate and annualized at
the end of a six-month period. For the 30-day period ended December 31, 1995,
the yields of the Growth Portfolio, Bond Portfolio, Asset Allocation Portfolio,
Mortgage Securities Portfolio, Index 500 Portfolio, Capital Appreciation
Portfolio, Small Company Portfolio, the Value Stock Portfolio and the 1998,
2002, 2006 and 2010 Maturing Government Bond Portfolios were .97%, 5.65%, 2.91%,
5.16%, 1.86%, -.19%, .39%, .90%, 5.80%, 6.03%, 6.04% and 6.23%, respectively.
Such figures reflect the voluntary absorption of certain Fund expenses by
Minnesota Mutual described under "Investment Adviser" in the Prospectus. In the
absence of such absorption of expenses, the yield figures for such Portfolios
would have been .97%, 5.65%, 2.91%, 5.16%, 1.86%, -.19%, .39%, .90%, 5.50%,
5.44%, 5.28% and 4.67%, respectively.
TOTAL RETURN FIGURES FOR ALL PORTFOLIOS
Cumulative total return quotations for the Portfolios represent the total
return for the period since shares of the Portfolio became available for sale
pursuant to the Fund's registration statement. Cumulative total return is equal
to the percentage change between the net asset value of a hypothetical $1,000
investment at the beginning of the period and the net asset value of that same
investment at the end of the period with dividend and capital gain distributions
treated as reinvested.
The cumulative total return figures published by the Fund will reflect
Minnesota Mutual's voluntary absorption of certain Fund expenses (described
under "Investment Adviser" in the Prospectus). The cumulative total returns for
the Portfolios for the specified periods ended December 31, 1995 are shown in
the table below. The figures in parentheses show what the cumulative total
returns would have been had Minnesota Mutual not absorbed Fund expenses as
described above.
<TABLE>
<CAPTION>
From Inception Date of
to 12/31/95 Inception
----------- ---------
<S> <C> <C>
Growth Portfolio 187.3% (183.9%) 12/3/85
Bond Portfolio 142.0% (139.8%) 12/3/85
Money Market Portfolio 70.5% (65.0%) 12/3/85
Asset Allocation Portfolio 175.7% (175.0%) 12/3/85
Mortgage Securities Portfolio 114.1% (113.4%) 5/1/87
Index 500 Portfolio 169.2% (168.2%) 5/1/87
Capital Appreciation Portfolio 178.7% (174.9%) 5/1/87
International Stock Portfolio 53.0% (52.9%) 5/1/92
Small Company Portfolio 64.5% (64.5%) 5/3/93
Value Stock Portfolio 39.0% (38.6%) 5/2/94
Maturing Government Bond -
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<PAGE>
1998 Portfolio 16.1% (14.8%) 5/2/94
2002 Portfolio 25.4% (23.2%) 5/2/94
2006 Portfolio 34.9% (31.8%) 5/2/94
2010 Portfolio 40.8% (34.8%) 5/2/94
</TABLE>
Yield quotations for Portfolios other than the Money Market Portfolio and all
quotations of cumulative total return figures will be accompanied by average
annual total return figures for a one-year period and for the period since
shares of the Portfolio became available pursuant to the Fund's registration
statement. Average annual total return figures are the average annual
compounded rates of return required for an account with an initial investment of
$1,000 to equal the redemption value of the account at the end of the period.
The average annual total return figures published by the Fund will reflect
Minnesota Mutual's voluntary absorption of certain Fund expenses. Prior to
January 1, 1986, the Fund incurred no expenses. During 1986 and from January 1
to March 6, 1987 Minnesota Mutual voluntarily absorbed all fees and expenses of
any portfolio that exceeded .75% of the average daily net assets of such
portfolio. For the period subsequent to March 6, 1987, Minnesota Mutual
voluntarily absorbed the fees and expenses that exceeded .65% of the average
daily net assets of the Growth, Bond, Money Market, Asset Allocation and
Mortgage Securities Portfolios, .55% of the average daily net assets of the
Index 500 Portfolio, .90% of the average daily net assets of the Capital
Appreciation, Small Company and Value Stock Portfolios and expenses that exceed
1.00% of the average daily net assets of the International Stock Portfolio
exclusive of the advisory fee. In addition, Minnesota Mutual has voluntarily
agreed to absorb all fees and expenses that exceed .40% of average daily net
assets for each of the four Maturing Government Bond Portfolios; however, for
the Portfolios which mature in 1998 and 2002, Minnesota Mutual has voluntarily
agreed to absorb such fees and expenses which exceed .20% of average daily net
assets from the Portfolio's inception to April 30, 1998 and which exceed .40% of
average daily net assets thereafter.
The average annual rates of return for the Portfolios for the specified
periods ended December 31, 1995 are shown in the table below. The figures in
parentheses show what the average annual rates of return would have been had
Minnesota Mutual not absorbed Fund expenses as described above.
<TABLE>
<CAPTION>
Year Ended Five Years Ten Years From Inception Date of
12/31/95 Ended 12/31/95 Ended 12/31/95 to 12/31/95 Inception
-------- -------------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Growth Portfolio 24.3% (24.3%) 13.0% (13.0%) 10.8% (10.7%) -- -- 12/3/85
Bond Portfolio 19.8% (18.4%) 9.6% (9.6%) 8.7% (8.6%) -- -- 12/3/85
Money Market Portfolio 5.4% (5.4%) 4.1% (4.0%) 5.4% (5.1%) -- -- 12/3/85
Asset Allocation Portfolio 25.0% (25.0%) 12.7% (12.7%) 10.3% (10.2%) -- -- 12/3/85
Mortgage Securities Portfolio 18.0% (18.0%) 9.0% (9.0%) -- -- 9.2% (9.1%) 5/1/87
Index 500 Portfolio 36.8% (36.8%) 16.2% (16.2%) -- -- 12.1% (12.0%) 5/1/87
Capital Appreciation Portfolio 22.8% (22.8%) 15.6% (15.6%) -- -- 12.5% (12.4%) 5/1/87
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<PAGE>
International Stock Portfolio 14.2% (14.2%) -- -- -- -- 12.3% (12.3%) 5/1/92
Small Company Portfolio 32.1% (32.1%) -- -- -- -- 20.5% (20.5%) 5/3/93
Value Stock Portfolio 33.0% (32.9%) -- -- -- -- 21.8% (21.6%) 5/2/94
Maturing Government Bond-
1998 Portfolio 16.0% (15.5%) -- -- -- -- 9.3% (8.6%) 5/2/94
2002 Portfolio 25.0% (24.0%) -- -- -- -- 14.5% (13.3%) 5/2/94
2006 Portfolio 34.7% (33.4%) -- -- -- -- 19.7% (18.0%) 5/2/94
2010 Portfolio 41.2% (38.5%) -- -- -- -- 22.8% (19.6%) 5/2/94
</TABLE>
Purchasers of variable contracts issued by Minnesota Mutual should recognize
that the yield, cumulative total return and average annual total return on the
assets relating to such a contract which are invested in shares of any of the
above Portfolios would be lower than the yield, cumulative total return and
average annual total return of such Portfolio for the same period since charges
assessed against such assets are not reflected in the Portfolios' quotations.
PREDICTABILITY OF RETURN
ANTICIPATED VALUE AT MATURITY. The maturity values of zero-coupon bonds are
specified at the time the bonds are issued, and this feature, combined with the
ability to calculate yield to maturity, has made these instruments popular
investment vehicles for investors seeking reliable investments to meet long-term
financial goals.
Each Maturing Government Bond Portfolio consists primarily of zero-coupon bonds
but is actively managed to accommodate contract owner activity and to take
advantage of perceived market opportunities. Because of this active management
approach, each Maturing Government Bond Portfolio does not guarantee that a
certain price per share will be attained by the time a Portfolio is liquidated.
Instead, the Fund attempts to track the price behavior of a directly held zero-
coupon bond by:
(1) Maintaining a weighted average maturity within each Maturing
Government Bond Portfolio's target maturity year;
(2) Investing at least 90% of assets in securities that mature within
one year of that Portfolio's target maturity year [for example, a]
Portfolio with a maturity of ten years will be 90% composed of
securities having remaining maturities of nine, ten or eleven years
(rather than having half its securities with five-year maturities
and half with fifteen-year maturities];
(3) Investing a substantial portion of assets in Treasury STRIPS (the
most liquid Treasury zero);
(4) Under normal conditions, maintaining a nominal cash balance;
(5) Executing portfolio transactions necessary to accommodate net
contract owner purchases or redemptions on a daily basis; and
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<PAGE>
(6) Whenever feasible, contacting several U.S. government securities
dealers for each intended transaction in an effort to obtain the
best price on each transaction.
These measures enable the adviser to calculate an anticipated value at maturity
(AVM) for each share of a Maturing Government Bond Portfolio, calculated as of
the date of purchase of such share, that approximates the price per share that
such share will achieve by the weighted average maturity date of its Portfolio.
The AVM calculation for each Maturing Government Bond Portfolio is as follows:
2T
AVM = P(1 + AGR/2)
where P = the Portfolio's current price per share; T = the Portfolio's weighted
average term to maturity in years; and AGR = the anticipated growth rate.
This calculation assumes that the share owner will reinvest all dividend and
capital gain distributions. It also assumes an expense ratio and a portfolio
composition that remain constant for the life of the Maturing Government Bond
Portfolio. Because expenses and composition do not remain constant, however,
the Fund may calculate an AVM for each Maturing Government Bond Portfolio on any
day on which the Fund values its securities. Such an AVM is applicable only to
shares purchased on that date.
In addition to the measures described above, which the adviser believes are
adequate to assure close correspondence between the price behavior of each
Portfolio and the price behavior of directly held zero-coupon bonds with
comparable maturities, the Fund expects that each Portfolio will invest at least
90% of its net assets in zero-coupon bonds until it is within four years of its
target maturity year and at least 80% of its net assets in zero-coupon
securities within two to four years of its target maturity year. This
expectation may be altered if the market supply of zero-coupon securities
diminishes unexpectedly.
ANTICIPATED GROWTH RATE. The Fund may also calculate an anticipated growth rate
(AGR) for each Maturing Government Bond Portfolio on any day on which the Fund
values its securities. AGR is a calculation of the anticipated annualized rate
of growth for a Portfolio share, calculated from the date of purchase of such
share to the Portfolio's target maturity date. As is the case with calculations
of AVM, the AGR calculation assumes that the investor will reinvest all
dividends and capital gain distributions and that each Maturing Government Bond
Portfolio expense ratio and portfolio composition will remain constant. Each
Maturing Government Bond Portfolio AGR changes from day to day (i.e., a
particular AGR calculation is applicable only to shares purchased on that date),
due primarily to changes in interest rates and, to a lesser extent, to changes
in portfolio composition and other factors that affect the value of the
Portfolio's investments.
The Fund expects that a share owner who holds specific shares until a
Portfolio's weighted average maturity date, and who reinvests all dividends and
capital gain distributions, will realize an investment return and maturity value
on those shares that do not differ substantially from the AGR and AVM calculated
on the day such shares were purchased. The AGR and AVM calculated with respect
to shares purchased on any other date, however, may be materially different.
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<PAGE>
TAXES
The Fund and each Portfolio qualified for the year ended December 31, 1995,
and intends to continue to qualify as a "regulated investment company" under the
provisions of Subchapter M of the Internal Revenue Code, as amended (the
"Code"). As a result of changes included in the Tax Reform Act of 1986, each
Portfolio of the Fund is treated as a separate entity for federal income tax
purposes. If each Portfolio of the Fund qualifies as a "regulated investment
company" and complies with the provisions of the Code relieving regulated
investment companies which distribute substantially all of their net income
(both ordinary income and capital gain) from federal income tax, each Portfolio
of the Fund will be relieved of such tax on the amounts distributed.
To qualify for treatment as a regulated investment company, each Portfolio
must, among other things, derive in each taxable year at least 90% of its gross
income from dividends, interest payments with respect to securities, and gains
(without deduction for losses) from the sale or other disposition of securities
and derive less than 30% of its gross income in each taxable year from gains
(without deduction for losses) from the sale or other disposition of securities
held for less than three months.
Each Portfolio of the Fund with outstanding shares which were purchased to
provide the Portfolio's initial capital (in an amount in excess of that
specified in the Code) and which are not attributable to any of the Contracts is
subject to a non-deductible excise tax equal to 4 percent of the excess, if any,
of the amount required to be distributed pursuant to the Code for each calendar
year over the amount actually distributed. Currently, only the International
Stock and Small Company Portfolios are subject to these distribution
requirements. In order to avoid the imposition of this excise tax, each
Portfolio generally must declare dividends by the end of a calendar year
representing 98 percent of that Portfolio's ordinary income for the calendar
year and 98 percent of its capital gain net income (both long-term and short-
term capital gains) for the twelve-month period ending October 31 of the
calendar year.
The foregoing is a general summary of applicable provisions of the Code and
Treasury Regulations now in effect and as currently interpreted by the courts
and the Internal Revenue Service. The Code and these Regulations, as well as
current interpretations thereof, may be changed at any time by legislative,
judicial or administrative action.
As the sole shareholder of the Fund will be Minnesota Mutual and the
separate accounts of Minnesota Mutual, this statement does not discuss federal
income tax consequences to the shareholder. For tax information with respect to
an owner of a contract issued in connection with the separate accounts, see the
Prospectus for those contracts.
REPORTS TO SHAREHOLDERS
Annual and semi-annual reports containing financial statements of the Fund
will be sent to shareholders.
INDEPENDENT AUDITORS
The financial statements, as of and for the year ended December 31, 1995, of
the Fund included in this Statement of Additional Information have been audited
by KPMG Peat Marwick LLP, 4200 Norwest Center, 90 South Seventh Street,
Minneapolis, Minnesota 55402, independent auditors, as indicated in their report
in this Statement of Additional Information, and are included herein in reliance
upon such report and upon the authority of such firm as experts in accounting
and auditing.
-23-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
MIMLIC Series Fund, Inc.
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments in securities, of the Growth, Bond, Money
Market, Asset Allocation, Mortgage Securities, Index 500, Capital Appreciation,
International Stock, Small Company, Maturing Government Bond 1998, Maturing
Government Bond 2002, Maturing Government Bond 2006, Maturing Government Bond
2010 and Value Stock Portfolios of MIMLIC Series Fund, Inc. as of December 31,
1995 and the related statements of operations for the year then ended and the
statements of changes in net assets for each of the years in the two-year period
then ended (the year ended December 31, 1995 and the period from May 2, 1994,
commencement of operations, to December 31, 1994 for the Maturing Government
Bond 1998, Maturing Government Bond 2002, Maturing Government Bond 2006,
Maturing Government Bond 2010 and Value Stock Portfolios) and the financial
highlights for each of the years in the five-year period then ended for the
Growth, Bond, Money Market, Asset Allocation, Mortgage Securities, Index 500 and
Capital Appreciation Portfolios, each of the years in the three-year period
ended December 31, 1995 and the period from May 1, 1992 to December 31, 1992 for
International Stock Portfolio, each of the years in the two-year period ended
December 31, 1995 and the period from May 3, 1993 to December 31, 1993 for Small
Company Portfolio and the year ended December 31, 1995 and period from May 2,
1994 to December 31, 1994 for the Maturing Government Bond 1998, Maturing
Government Bond 2002, Maturing Government Bond 2006, Maturing Government Bond
2010 and Value Stock Portfolios. These financial statements and the financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased and sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Growth, Bond, Money
Market, Asset Allocation, Mortgage Securities, Index 500, Capital Appreciation,
International Stock, Small Company, Maturing Government Bond 1998, Maturing
Government Bond 2002, Maturing Government Bond 2006, Maturing Government Bond
2010 and Value Stock Portfolios of MIMLIC Series Fund, Inc. as of December 31,
1995 and the results of their operations, changes in their net assets and the
financial highlights for the periods stated in the first paragraph above, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 2, 1996
-24-
<PAGE>
GROWTH PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
COMMON STOCKS (98.5%)
CAPITAL GOODS (8.0%)
Machinery (8.0%)
93,384 General Electric Company.................................... $ 6,723,648
45,300 Halliburton Company......................................... 2,293,313
73,700 Millipore Corporation....................................... 3,030,913
87,586 York International Corp..................................... 4,116,542
--------------
16,164,416
--------------
CONSUMER GOODS AND SERVICES (49.4%)
Consumer Goods (27.7%)
73,800 Abbott Laboratories......................................... 3,081,150
86,000 Coca-Cola Company........................................... 6,385,500
111,086 Columbia/HCA Healthcare Corporation......................... 5,637,614
45,200 Gillette Company............................................ 2,356,050
50,800 Johnson & Johnson........................................... 4,349,750
102,000 Merck & Co., Inc............................................ 6,706,500
66,418 Pepsico, Inc................................................ 3,711,106
65,800 Pfizer Inc.................................................. 4,145,400
64,000 Philip Morris Companies, Inc................................ 5,792,000
55,280 Procter & Gamble Company.................................... 4,588,240
35,800 Schering-Plough Corporation................................. 1,960,050
46,400 Service Corporation International........................... 2,041,600
52,300 Teva Pharmaceutical Industries (c).......................... 2,425,413
40,100 United Health Care.......................................... 2,626,550
--------------
55,806,923
--------------
Consumer Services (6.4%)
54,688 CUC International Inc (b)................................... 1,866,228
91,500 GTECH Holdings Corporation (b).............................. 2,379,000
109,141 Manpower.................................................... 3,069,591
46,500 McDonalds Corporation....................................... 2,098,312
85,300 Quebecor Printing Incorporated.............................. 1,439,437
33,200 Walt Disney Company......................................... 1,958,800
--------------
12,811,368
--------------
Food (3.5%)
49,300 Conagra, Inc................................................ 2,033,625
28,800 CPC International........................................... 1,976,400
30,000 Heinz Company............................................... 993,750
64,500 Sara Lee Corporation........................................ 2,055,937
--------------
7,059,712
--------------
Retail (6.5%)
122,300 Home Depot Inc.............................................. 5,855,112
2,100 Intimate Brands Inc......................................... 31,500
76,500 Kohl's Inc (b).............................................. 4,016,250
67,300 Office Depot, Inc. (b)...................................... 1,329,175
81,800 Wal-Mart Stores, Inc........................................ 1,830,275
--------------
13,062,312
--------------
Consumer Cyclical (5.3%)
60,608 Exide Corporation........................................... 2,780,392
46,200 Magna International Inc..................................... 1,998,150
130,400 Newell Co................................................... 3,374,100
47,606 Omnicom Group............................................... 1,773,323
51,700 Sunbeam Corporation......................................... 788,425
--------------
10,714,390
--------------
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
CREDIT SENSITIVE (16.3%)
Finance (10.4%)
28,518 American International Group, Inc........................... $ 2,637,915
40,970 Federal Home Loan Mortgage Corporation...................... 3,420,995
69,466 First Data Corporation...................................... 4,645,539
37,225 First Union Corporaiton..................................... 2,070,641
47,000 MGIC Investment Corporation................................. 2,549,750
86,000 Norwest Corporation......................................... 2,838,000
58,350 SunAmerica Incorporated..................................... 2,771,625
--------------
20,934,465
--------------
Utilities (5.9%)
102,100 AT&T Corporation............................................ 6,610,975
95,300 California Energy Company Incorporated (b).................. 1,858,350
47,500 GTE Corporation............................................. 2,090,000
97,500 Huaneng Power International Inc. (b)(c)..................... 1,401,562
--------------
11,960,887
--------------
INTERMEDIATE GOODS AND SERVICES (8.4%)
Energy (2.9%)
29,150 Amoco Corporation........................................... 2,095,156
16,120 Mobil Corporation........................................... 1,805,440
14,400 Royal Dutch Petroleum (c)................................... 2,032,200
--------------
5,932,796
--------------
Materials (3.5%)
94,500 Morton International........................................ 3,390,187
107,900 Praxair Inc................................................. 3,628,138
--------------
7,018,325
--------------
Transportation (2.0%)
74,200 Fritz Companies (b)......................................... 3,079,300
12,300 Norfolk Southern Corporation................................ 976,313
--------------
4,055,613
--------------
TECHNOLOGY (16.4%)
28,300 Automatic Data Processing Inc............................... 2,101,275
53,550 Bay Networks Inc. (b)....................................... 2,202,244
69,376 Computer Associates International........................... 3,945,760
29,400 Computer Sciences Corporation (b)........................... 2,065,350
73,600 DSC Communications (b)...................................... 2,714,000
147,600 Equifax Incorporated........................................ 3,154,950
45,041 Intel....................................................... 2,556,077
18,900 Microsoft Corporation (b)................................... 1,658,475
40,000 Motorola.................................................... 2,280,000
86,950 Oracle Corporation (b)...................................... 3,684,506
83,900 Pall Corporation............................................ 2,254,813
62,500 Worldcom, Incorported (b)................................... 2,203,125
16,300 Xerox Corporation........................................... 2,233,100
--------------
33,053,675
--------------
Total common stocks
(cost: $163,321,322)............................................... 198,574,882
--------------
</TABLE>
See accompanying notes to investments in securities.
-25-
<PAGE>
GROWTH PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- --------------
<C> <S> <C>
SHORT-TERM SECURITIES (1.3%)
$2,568,476 Temporary Investment Fund, Inc.--TempFund Portfolio, current rate 5.82%................. $ 2,568,476
--------------
Total short-term securities (cost: $2,568,476).......................................... 2,568,476
--------------
Total investments in securities (cost: $165,889,798) (d)................................ $ 201,143,358
--------------
--------------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The portfolio held 2.9% of net assets in foreign securities at December 31,
1995.
(d) At December 31, 1995 the cost of securities for federal income tax purposes
was $166,032,734. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation............. $36,860,654
Gross unrealized depreciation............. (1,750,030)
-----------
Net unrealized appreciation............... $35,110,624
-----------
-----------
-26-
<PAGE>
BOND PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (95.1%)
GOVERNMENT OBLIGATIONS (55.7%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (53.2%)
U.S. Treasury (34.5%)
$4,600,000 U.S. Treasury Bond.......................................... 12.000% 08/15/13 $ 7,099,806
5,000,000 U.S. Treasury Bond.......................................... 8.125% 08/15/19 6,287,500
6,850,000 U.S. Treasury Bond.......................................... 8.000% 11/15/21 8,573,193
650,000 U.S. Treasury Bond.......................................... 7.500% 11/15/24 780,812
4,050,000 U.S. Treasury Strip (c)..................................... 5.675% 02/15/01 3,083,063
6,400,000 U.S. Treasury Strip (c)..................................... 5.645% 08/15/99 5,294,138
1,750,000 U.S. Treasury Note.......................................... 6.750% 05/31/99 1,827,656
1,750,000 U.S. Treasury Note.......................................... 8.875% 11/15/98 1,915,700
-----------
34,861,868
-----------
Government National Mortgage Association (12.5%)
402,450 ............................................................ 8.500% 12/15/22 423,010
384,640 ............................................................ 8.500% 10/15/22 404,291
399,904 ............................................................ 7.500% 02/15/23 411,485
749,910 ............................................................ 8.000% 09/15/24 781,398
493,071 ............................................................ 7.000% 03/15/24 499,224
445,383 ............................................................ 7.000% 05/15/24 450,940
731,032 ............................................................ 6.500% 11/15/23 727,120
446,260 ............................................................ 7.500% 02/15/24 458,983
286,059 ............................................................ 7.000% 02/15/24 289,628
499,207 ............................................................ 7.500% 10/15/25 513,239
943,613 ............................................................ 7.000% 11/15/23 956,096
961,074 ............................................................ 6.500% 05/15/24 954,499
982,575 ............................................................ 7.500% 09/15/24 1,010,587
1,955,239 ............................................................ 8.000% 04/15/25 2,035,893
880,485 ............................................................ 7.500% 10/15/25 905,234
489,135 ............................................................ 7.000% 10/15/25 494,941
1,250,168 ............................................................ 7.000% 11/15/24 1,265,769
-----------
12,582,337
-----------
Other U.S. Government Agencies (6.2%)
1,500,000 Federal Home Loan Mortgage Corporation...................... 7.030% 04/05/04 1,539,131
1,000,000 Federal National Mortgage Association....................... 8.590% 02/03/05 1,052,579
1,000,000 Federal Farm Credit Bank.................................... 6.960% 06/06/00 1,004,703
483,225 Federal Home Loan Mortgage Corporation...................... 6.500% 12/01/23 479,040
1,475,929 Federal National Mortgage Association....................... 7.000% 09/01/17 1,487,735
750,000 Federal National Morgage Association CMO Sequential Payer
(GNMA 8%)................................................... 6.000% 04/25/19 738,269
-----------
6,301,457
-----------
OTHER GOVERNMENT OBLIGATIONS (.7%)
600,000 Quebec Province Of Canada (b)............................... 9.375% 04/01/99 661,733
-----------
STATE AND LOCAL GOVERNMENT OBLIGATIONS (1.8%)
1,848,000 Wyoming Community Development Authority..................... 6.850% 06/01/10 1,843,380
-----------
Total government obligations (cost: $53,658,017)................................ 56,250,775
-----------
CORPORATE OBLIGATIONS (39.4%)
CAPITAL GOODS (2.3%)
Machinery (2.3%)
2,100,000 Joy Technologies Incorporated............................... 10.250% 09/01/03 2,372,637
-----------
BASIC INDUSTRIES (2.0%)
Paper and Forest Products (2.0%)
2,000,000 Jefferson Smurfit Group PLC (b)............................. 6.750% 11/20/05 2,050,474
-----------
</TABLE>
See accompanying notes to investments in securities.
-27-
<PAGE>
BOND PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -----------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
CONSUMER STAPLES (8.8%)
Drugs (1.8%)
$1,750,000 American Home Products Corporation.......................... 6.500% 10/15/02 $ 1,798,781
-----------
Entertainment (1.6%)
1,500,000 Royal Caribbean Cruises Limited............................. 8.250% 04/01/05 1,618,699
-----------
Food (1.0%)
1,035,714 General Mills Inc........................................... 6.235% 03/15/97 1,042,721
-----------
Media (4.4%)
2,000,000 Fisher Scientific International............................. 7.125% 12/15/05 2,010,648
1,000,000 Time Warner Entertainment................................... 9.625% 05/01/02 1,157,564
1,250,000 Time Warner Incorporated.................................... 7.950% 02/01/00 1,320,524
-----------
4,488,736
-----------
ENERGY (1.6%)
Natural Gas Distribution (1.6%)
1,500,000 Consolidated Natural Gas Company............................ 8.750% 06/01/99 1,641,404
-----------
FINANCIAL (16.8%)
Commercial Finance (10.9%)
1,000,000 American Express Credit..................................... 6.125% 11/15/01 1,011,704
1,710,000 Associates Corporation of North America..................... 6.750% 10/15/99 1,767,863
2,300,000 Chrysler Financial Corporation.............................. 6.180% 12/15/00 2,309,129
2,000,000 Ford Motor Credit........................................... 4.810% 03/18/99 1,985,000
1,000,000 Ford Motor Credit........................................... 6.250% 12/08/05 999,583
1,500,000 Franchise Finance Corporation of America.................... 7.000% 11/30/00 1,507,624
1,500,000 General Motors Acceptance Corporation....................... 5.500% 12/15/01 1,446,430
-----------
11,027,333
-----------
Consumer Finance (1.1%)
1,000,000 American General Finance.................................... 8.500% 08/15/98 1,068,398
-----------
Real Estate (4.8%)
1,339,962 Green Tree Financial Corporation............................ 6.900% 02/15/04 1,350,427
888,860 Green Tree Finance Company Limited Net Interest Margin
Trust....................................................... 7.250% 07/15/05 901,878
1,000,000 Property Trust of America................................... 7.500% 02/15/14 1,012,023
1,500,000 Security Capital Industrial Trust........................... 7.875% 05/15/09 1,593,249
-----------
4,857,577
-----------
UTILITIES (3.7%)
Electric (1.3%)
345,000 Connecticut Light & Power Company........................... 7.625% 04/01/97 350,533
1,000,000 Korea Electric Power Global (b)............................. 6.375% 12/01/03 1,002,075
-----------
1,352,608
-----------
Telephones (2.4%)
1,250,000 AT&T Corporation............................................ 8.350% 01/15/25 1,428,005
850,000 GTE North................................................... 8.500% 12/15/31 955,045
-----------
2,383,050
-----------
TRANSPORTATION (4.2%)
Trucking (2.1%)
2,000,000 Consolidated Freightways Inc (d)............................ 7.350% 06/01/05 2,096,336
-----------
Water Transportation (2.1%)
1,000,000 Overseas Shipholding Group.................................. 8.750% 12/01/13 1,065,668
1,000,000 Overseas Shipholding Group.................................. 8.000% 12/01/03 1,031,716
-----------
2,097,384
-----------
Total corporate obligations (cost: $38,915,758)................................. 39,896,138
-----------
Total long-term debt securities (cost: $92,573,775)............................. 96,146,913
-----------
</TABLE>
See accompanying notes to investments in securities.
-28-
<PAGE>
BOND PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (2.3%)
$2,305,798 Temporary Investment Fund, Inc.--TempFund Portfolio, current rate 5.82%......... $ 2,305,798
-----------
Total short-term securities (cost: $2,305,798).................................. 2,305,798
-----------
Total investments in securities (cost: $94,879,573) (e)......................... $98,452,711
-----------
-----------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) The portfolio held 3.7% of net assets in foreign securities at December 31,
1995.
(c) For zero coupon issues (strips) the interest rate disclosed is the
effective yield at the date of acquisition.
(d) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. (See note 7 to the
financial statements). Information concerning the illiquid securities held
at December 31, 1995, which includes acquisition date and cost, is as
follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- -------- ----------- ----------
<S> <C> <C>
Consolidated Freightways Inc. .................... 9/7/95 $2,003,800
----------
----------
</TABLE>
(e) At December 31, 1995 the cost of securities for federal income tax purposes
was $94,938,447. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation............. $3,538,615
Gross unrealized depreciation............. (24,351)
----------
Net unrealized appreciation............... $3,514,264
----------
----------
-29-
<PAGE>
MONEY MARKET PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -----------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER (93.7%)
CAPITAL GOODS (3.4%)
Information Processing (3.4%)
$1,015,000 Hewlett-Packard............................................. 5.80% 01/24/96 $ 1,011,190
-----------
CONSUMER STAPLES (30.6%)
Drugs (7.2%)
1,185,000 American Home Products (c).................................. 5.85% 02/02/96 1,178,808
1,000,000 Schering Corporation........................................ 5.75% 01/17/96 997,375
-----------
2,176,183
-----------
Food (20.0%)
1,127,000 Brown Forman................................................ 5.87% 01/16/96 1,124,145
1,210,000 Cargill Inc................................................. 5.79% 02/06/96 1,202,998
1,310,000 Coca Cola Company........................................... 5.72% 02/02/96 1,303,299
1,315,000 CPC International Inc (c)................................... 5.79% 02/16/96 1,305,352
1,100,000 Pepsico Inc................................................. 5.82% 01/24/96 1,095,820
-----------
6,031,614
-----------
Media (3.4%)
900,000 McGraw-Hill................................................. 5.83% 01/26/96 896,315
145,000 McGraw-Hill................................................. 5.74% 03/19/96 143,224
-----------
1,039,539
-----------
ENERGY (6.3%)
Natural Gas Distribution (6.3%)
1,000,000 Equitable Resources Inc (c)................................. 5.90% 01/23/96 996,333
900,000 Northern Illinois Gas Company............................... 5.82% 01/12/96 898,299
-----------
1,894,632
-----------
FINANCIAL (17.3%)
Consumer Finance (17.3%)
1,000,000 American General Finance.................................... 5.73% 02/28/96 990,855
865,000 Associates Corporation...................................... 5.79% 02/20/96 858,089
1,000,000 BellSouth Capital Funding Corporation....................... 5.80% 01/05/96 999,215
1,045,000 Ford Motor Credit........................................... 5.85% 01/22/96 1,041,373
285,000 Ford Motor Credit........................................... 5.58% 03/29/96 281,174
1,065,000 GMAC........................................................ 5.86% 02/08/96 1,058,447
-----------
5,229,153
-----------
UTILITIES ( 32.3%)
Electric (20.5%)
675,000 Alabama Power............................................... 5.75% 02/08/96 670,890
900,000 Baltimore Gas & Electric.................................... 5.82% 01/11/96 898,441
850,000 Madison Gas & Electric...................................... 5.82% 01/16/96 847,854
1,000,000 MidAmerican Energy Company.................................. 5.86% 01/08/96 998,731
315,000 MidAmerican Energy Company.................................. 5.77% 02/09/96 313,023
1,075,000 Northern States Power....................................... 5.63% 02/27/96 1,065,474
730,000 Public Service Electric & Gas Company....................... 6.02% 01/19/96 727,727
150,000 Public Service Electric & Gas Company....................... 5.89% 02/23/96 148,706
495,000 Public Service Electric & Gas Company....................... 5.91% 02/23/96 490,716
-----------
6,161,562
-----------
Telephones (11.8%)
900,000 Ameritech Corporation....................................... 5.78% 03/06/96 890,842
1,070,000 AT&T Corporation............................................ 5.82% 02/09/96 1,063,319
625,000 GTE Northwest............................................... 5.78% 02/14/96 620,586
1,000,000 Southwestern Bell (c)....................................... 5.81% 01/09/96 998,575
-----------
3,573,322
-----------
</TABLE>
See accompanying notes to investments in securities.
-30-
<PAGE>
MONEY MARKET PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -----------
<C> <S> <C> <C> <C>
TECHNOLOGY (3.8%)
$1,140,000 Rockwell International Corp (c)............................. 5.82% 01/18/96 $ 1,136,763
-----------
Total commercial paper (cost: $28,253,958)........................................ 28,253,958
-----------
OTHER SHORT-TERM SECURITIES (4.0%)
1,192,220 Temporary Investment Fund, Inc.--TempFund Portfolio, current rate 5.82%........... 1,192,220
-----------
Total other short-term securities (cost: $1,192,220).............................. 1,192,220
-----------
Total investments in securities (cost: $29,446,178) (b)........................... $29,446,178
-----------
-----------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Also represents the cost of securities for federal income tax purposes at
December 31, 1995.
(c) Commercial paper sold within terms of a private placement memorandum exempt
from registration under Section 4(2) of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other
"accredited investors." This security has been determined to be liquid under
guidelines established by the board of directors.
-31-
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
COMMON STOCKS (55.5%)
CAPITAL GOODS (3.8%)
Machinery (3.8%)
87,726 General Electric Company.................................... $ 6,316,271
21,700 Millipore Corporation....................................... 892,413
51,005 United Waste Systems, Inc. (b).............................. 1,899,936
87,987 York International Corp..................................... 4,135,389
--------------
13,244,009
--------------
CONSUMER GOODS AND SERVICES (19.5%)
Consumer Goods (10.6%)
77,393 Columbia/HCA Healthcare Corporation......................... 3,927,695
36,000 Gillette Company............................................ 1,876,500
48,200 Johnson & Johnson........................................... 4,127,125
81,903 Pepsico, Inc................................................ 4,576,330
86,360 Pfizer Inc.................................................. 5,440,680
59,800 Philip Morris Companies, Inc................................ 5,411,900
53,455 Procter & Gamble Company.................................... 4,436,765
110,700 Service Corporation International........................... 4,870,800
52,900 Teva Pharmaceutical Industries (c).......................... 2,453,238
--------------
37,121,033
--------------
Consumer Services (1.9%)
98,972 CUC International, Inc. (b)................................. 3,377,420
54,800 GTECH Holdings Corporation (b).............................. 1,424,800
69,195 Manpower.................................................... 1,946,109
--------------
6,748,329
--------------
Food (1.1%)
54,800 CPC International........................................... 3,760,650
--------------
Retail (1.0%)
46,540 Home Depot, Inc............................................. 2,228,103
57,276 Office Depot, Inc (b)....................................... 1,131,201
--------------
3,359,304
--------------
Consumer Cyclicals (4.9%)
58,990 Exide Corporation........................................... 2,706,166
44,100 Magna International Inc..................................... 1,907,325
120,400 Newell Company.............................................. 3,115,350
91,604 Omnicom Group............................................... 3,412,249
85,400 Owens-Corning Fiberglas Corporation (b)..................... 3,832,325
48,300 Tommy Hilfiger Corporation (b).............................. 2,046,713
--------------
17,020,128
--------------
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
CREDIT SENSITIVE (10.0%)
Finance (10.0%)
88,100 American Express Company.................................... $ 3,645,138
49,140 American International Group, Inc........................... 4,545,450
65,930 Federal Home Loan Mortgage Corporation...................... 5,505,155
83,926 First Data Corporation...................................... 5,612,551
74,600 MBIA Inc.................................................... 5,595,000
77,200 MGIC Investment Corporation................................. 4,188,100
173,950 Norwest Corporation......................................... 5,740,349
--------------
34,831,743
--------------
INTERMEDIATE GOODS AND SERVICES (7.9%)
Energy (4.0%)
30,020 Amoco Corporation........................................... 2,157,688
102,800 Columbia Gas System, Inc. (b)............................... 4,510,350
31,230 Mobil Corporation........................................... 3,497,760
26,950 Royal Dutch Petroleum (c)................................... 3,803,319
--------------
13,969,117
--------------
Materials (1.8%)
187,700 Praxair Inc................................................. 6,311,413
--------------
Transportation (2.1%)
79,300 Fritz Companies (b)......................................... 3,290,950
76,200 Landstar System, Inc. (b)................................... 2,038,350
26,825 Norfolk Southern Corporation................................ 2,129,234
--------------
7,458,534
--------------
TECHNOLOGY (14.3%)
19,800 Adtran Inc. (b)............................................. 1,075,388
54,600 Automatic Data Processing Inc............................... 4,054,050
76,650 Bay Networks, Inc. (b)...................................... 3,152,231
116,109 Computer Associates International........................... 6,603,698
69,500 Computer Sciences Corporation (b)........................... 4,882,375
144,500 Danka Business Systems, PLC. (c)............................ 5,346,500
194,400 Equifax Incorporated........................................ 4,155,300
52,600 Fore Systems, Inc. (b)...................................... 3,129,700
138,820 Informix Corporation (b).................................... 4,164,600
67,181 Intel....................................................... 3,812,522
124,780 Oracle Corporation (b)...................................... 5,287,553
53,200 Worldcom, Inc. (b).......................................... 1,875,300
17,600 Xerox Corporation........................................... 2,411,200
--------------
49,950,417
--------------
Total common stocks
(cost: $160,635,858)............................................... 193,774,677
--------------
</TABLE>
See accompanying notes to investments in securities.
-32-
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ------------ -------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (34.8%)
GOVERNMENT OBLIGATIONS (16.6%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (15.4%)
U.S. Treasury (10.3%)
$ 6,025,000 U.S. Treasury Bond.......................................... 12.000% 08/15/13 $ 9,299,202
3,500,000 U.S. Treasury Bond.......................................... 8.125% 08/15/19 4,401,250
6,875,000 U.S. Treasury Bond.......................................... 8.000% 11/15/21 8,604,482
200,000 U.S. Treasury Bond.......................................... 7.500% 11/15/24 240,250
3,600,000 U.S. Treasury Strip (d)..................................... 5.675% 02/15/01 2,740,500
1,750,000 U.S. Treasury Strip (d)..................................... 5.705% 02/15/04 1,114,066
3,450,000 U.S. Treasury Strip (d)..................................... 5.270% 08/15/99 2,853,871
4,500,000 U.S. Treasury Strip (d)..................................... 5.772% 11/15/01 3,282,296
750,000 U.S. Treasury Note.......................................... 6.750% 05/31/99 783,281
2,400,000 U.S. Treasury Note.......................................... 8.875% 11/15/98 2,627,246
-------------
35,946,444
-------------
Government National Mortgage Association (3.9%)
854,726 ............................................................ 7.500% 02/15/24 879,093
383,979 ............................................................ 6.500% 11/15/23 381,924
911,472 ............................................................ 6.500% 03/15/24 905,237
360,819 ............................................................ 7.500% 06/15/24 371,106
402,320 ............................................................ 7.500% 06/15/24 413,790
316,405 ............................................................ 6.500% 11/15/23 314,712
581,968 ............................................................ 6.500% 11/15/23 578,854
260,744 ............................................................ 6.500% 11/15/23 259,349
25,925 ............................................................ 6.500% 03/15/24 25,747
669,390 ............................................................ 7.500% 02/15/24 688,474
327,624 ............................................................ 6.500% 11/15/23 325,871
56,485 ............................................................ 7.500% 12/15/23 58,121
24,524 ............................................................ 6.500% 02/15/24 24,356
1,428,203 ............................................................ 7.500% 07/15/24 1,468,919
252,678 ............................................................ 7.500% 06/15/24 259,881
353,099 ............................................................ 7.500% 06/15/24 363,165
703,869 ............................................................ 7.500% 05/15/24 723,936
470,245 ............................................................ 7.500% 06/15/24 483,651
1,956,542 ............................................................ 7.000% 10/15/25 1,979,764
748,893 ............................................................ 7.500% 10/15/25 769,944
1,750,234 ............................................................ 7.000% 11/15/24 1,772,075
462,533 GNMA Midget II.............................................. 7.500% 06/20/02 475,035
232,779 GNMA Midget II.............................................. 7.500% 07/20/02 239,070
-------------
13,762,074
-------------
Other U.S. Government Agencies (1.2%)
2,600,000 Federal National Mortgage Association....................... 8.590% 02/03/05 2,736,705
1,454,412 Federal Home Loan Mortgage Corporation...................... 6.500% 12/01/23 1,441,815
-------------
4,178,520
-------------
STATE AND LOCAL GOVERNMENT OBLIGATIONS (1.2%)
4,070,000 Wyoming Community Development Authority..................... 6.850% 06/01/10 4,059,824
-------------
Total government obligations (cost: $55,765,125)......................................... 57,946,862
-------------
CORPORATE OBLIGATIONS (18.2%)
CAPITAL GOODS (1.2%)
Electronics (.2%)
500,000 Xerox Corporation........................................... 9.200% 07/15/99 510,824
-------------
Machinery (1.0%)
3,124,000 Joy Technologies Incorporated............................... 10.250% 09/01/03 3,529,580
-------------
BASIC INDUSTRIES (.9%)
Paper And Forest Products (.9%)
3,000,000 Jefferson Smurfit Group PLC (c)............................. 6.750% 11/20/05 3,075,711
-------------
</TABLE>
See accompanying notes to investments in securities.
-33-
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ------------ -------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
CONSUMER STAPLES (4.5%)
Drugs (.7%)
$ 2,500,000 American Home Products Corporation.......................... 6.500% 10/15/02 $ 2,569,688
-------------
Entertainment (.5%)
1,750,000 Royal Caribbean Cruises..................................... 8.250% 04/01/05 1,888,483
-------------
Food (.3%)
857,143 General Mills Inc........................................... 6.235% 03/15/97 862,941
-------------
Media (3.0%)
3,500,000 Fisher Scientific International Inc......................... 7.125% 12/15/05 3,518,634
2,400,000 Time Warner Entertainment................................... 9.625% 05/01/02 2,778,154
600,000 Time Warner Incorporated.................................... 7.950% 02/01/00 633,851
3,500,000 News America Holdings....................................... 7.700% 10/30/25 3,581,529
-------------
10,512,168
-------------
ENERGY (1.4%)
Natural Gas Distribution (1.0%)
3,100,000 Consolidated Natural Gas Company............................ 8.750% 06/01/99 3,392,234
-------------
Natural Gas Pipelines (.4%)
1,500,000 Enron Corporation........................................... 8.500% 02/01/00 1,550,835
-------------
FINANCIAL (7.3%)
Consumer Finance (6.2%)
1,000,000 American Express Credit Company............................. 6.125% 11/15/01 1,011,704
1,400,000 American General Finance Corporation........................ 8.500% 08/15/98 1,495,757
3,000,000 Chrysler Financial Corporation.............................. 6.180% 12/15/00 3,011,907
2,750,000 Federal Farm Credit Bank.................................... 6.960% 06/06/00 2,762,933
2,000,000 Ford Motor Credit Company................................... 4.810% 03/18/99 1,985,000
3,400,000 Ford Motor Credit Company................................... 6.250% 12/08/05 3,398,582
2,000,000 Franchise Finance Corp of America........................... 7.000% 11/30/00 2,010,166
2,600,000 General Motors Acceptance Corp.............................. 5.500% 12/15/01 2,507,146
3,300,000 Associates Corporation of North America..................... 6.750% 10/15/99 3,411,665
-------------
21,594,860
-------------
Real Estate (1.1%)
1,500,000 Property Trust of America................................... 7.500% 02/15/14 1,518,035
2,250,000 Security Capital Industrial Trust........................... 7.875% 05/15/09 2,389,874
-------------
3,907,909
-------------
UTILITIES (1.3%)
Electric (.6%)
1,600,000 Korea Electric Power Global (c)............................. 6.375% 12/01/03 1,603,320
500,000 Oklahoma Gas & Electric Co.................................. 6.375% 01/01/98 500,906
-------------
2,104,226
-------------
Telephones (.7%)
2,350,000 GTE Northwest Inc........................................... 6.125% 02/15/99 2,379,455
-------------
TRANSPORTATION (1.6%)
Air Transportation (.5%)
1,500,000 Delta Air Lines Inc......................................... 9.200% 09/23/14 1,699,352
-------------
Water Transportation (1.1%)
2,250,000 Overseas Shipholders Group.................................. 8.750% 12/01/13 2,397,753
1,250,000 Overseas Shipholding Group.................................. 8.000% 12/01/03 1,289,645
-------------
3,687,398
-------------
Total corporate obligations (cost: $61,693,030).......................................... 63,265,664
-------------
Total long-term debt securities (cost: $117,458,155)..................................... 121,212,526
-------------
</TABLE>
See accompanying notes to investments in securities.
-34-
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ------------ -------------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (9.1%)
$ 6,603,871 Temporary Investment Fund, Inc.--Tempfund Portfolio, current rate 5.82%.................. $ 6,603,871
2,000,000 U.S. Treasury Bill.......................................... 5.410% 01/11/96 1,996,606
5,375,000 U.S. Treasury Bill.......................................... 5.240-5.480% 02/15/96 5,341,675
2,000,000 Lubrizol Corporation CP..................................... 5.710% 01/31/96 1,989,733
1,600,000 Public Service Energy & Gas CP.............................. 6.020% 01/19/96 1,594,839
1,470,000 Public Service Energy & Gas CP.............................. 6.010% 01/29/96 1,463,038
9,750,000 Southwest Bell Capital Corporation CP....................... 5.780% 02/13/96 9,681,478
3,000,000 Xerox Credit CP............................................. 5.850% 01/25/96 2,987,558
-------------
Total short-term securities (cost: $31,658,512).......................................... 31,658,798
-------------
Total investments in securities (cost: $309,752,525) (e)................................. $ 346,646,001
-------------
-------------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The Fund held 4.7% of net assets in foreign securites as of December 31,
1995.
(d) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
(e) At December 31, 1995 the cost of securities for federal income tax purposes
was $309,858,905. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation............. $38,178,317
Gross unrealized depreciation............. (1,391,221)
-----------
Net unrealized appreciation............... $36,787,096
-----------
-----------
-35-
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ----------- -----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (98.4%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (65.8%)
Federal Home Loan Mortgage Corporation (8.6%)
$ 919,730 Bi-weekly................................................... 7.000% 12/01/22 $ 929,488
2,183,987 Bi-weekly................................................... 6.500% 12/01/23 2,165,071
1,932,102 20 Year Gold................................................ 6.500% 07/01/13 1,924,758
988,371 20 Year Gold................................................ 6.500% 05/01/14 984,614
-----------
6,003,931
-----------
Federal National Mortgage Association (19.8%)
1,236,946 FHR 1048 Y PAC Accrual Bond (FHLMC 9.5%) (c)................ 5.000% 01/15/02 1,173,094
500,000 CMO PAC Targeted Amortization Class (GNMA 8%)............... 6.000% 12/25/08 492,500
2,600,000 CMO Sequential Payer (GNMA 8%).............................. 6.000% 04/25/19 2,559,333
719,418 PAC Accrual Bond (FNMA 10%)................................. 6.900% 06/25/19 712,460
1,070,182 Bi-weekly................................................... 6.000% 07/01/07 1,058,516
1,389,205 Bi-weekly................................................... 6.500% 03/01/17 1,376,659
480,695 Bi-weekly................................................... 6.500% 02/01/17 476,354
1,811,321 Bi-weekly................................................... 7.000% 09/01/17 1,825,809
9,029 ............................................................ 8.000% 05/01/22 9,444
953,994 ............................................................ 6.000% 11/01/13 933,597
407,158 ............................................................ 6.500% 03/01/14 405,403
1,912,962 ............................................................ 7.000% 09/01/15 1,939,512
870,199 ............................................................ 6.500% 01/01/14 867,048
-----------
13,829,729
-----------
Government National Mortgage Association (15.6%)
566,330 ............................................................ 8.000% 12/15/15 591,548
362,191 ............................................................ 8.000% 02/15/16 378,319
323,372 ............................................................ 8.000% 02/15/16 337,772
380,091 ............................................................ 8.000% 02/15/16 397,016
513,824 ............................................................ 8.000% 03/15/16 536,704
567,185 ............................................................ 7.000% 04/15/16 575,516
368,533 ............................................................ 7.000% 09/15/16 375,866
735,567 ............................................................ 7.000% 08/15/16 750,205
336,945 ............................................................ 7.000% 05/15/17 343,684
364,263 ............................................................ 7.000% 07/15/17 371,548
152,826 ............................................................ 7.500% 02/15/17 157,733
195,751 ............................................................ 7.500% 06/15/17 202,037
294,815 ............................................................ 7.000% 03/15/17 300,711
190,906 ............................................................ 7.500% 06/15/17 197,036
197,874 ............................................................ 7.500% 10/15/17 204,228
308,402 ............................................................ 7.000% 05/15/17 314,570
7,344 ............................................................ 8.500% 03/15/22 7,719
475,138 GNMA II..................................................... 7.500% 09/20/16 488,180
79,697 GNMA II..................................................... 8.500% 10/20/16 83,897
381,230 GNMA II..................................................... 7.500% 09/20/16 391,695
691,168 GNMA II..................................................... 8.000% 02/20/17 721,082
226,672 GNMA II..................................................... 8.500% 10/20/16 238,618
936,135 GNMA II..................................................... 8.500% 07/20/17 984,495
263,706 GNMA II..................................................... 8.500% 03/20/17 277,329
378,030 GNMA II..................................................... 8.500% 08/20/17 397,559
492,570 GNMA II..................................................... 7.500% 08/20/17 505,894
467,124 GNMA II..................................................... 8.000% 07/20/17 487,341
216,315 GNMA II..................................................... 8.500% 12/20/16 227,715
-----------
10,846,017
-----------
</TABLE>
See accompanying notes to investments in securities.
-36-
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ----------- -----------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS--CONTINUED
Other Government Agency Obligations (21.8%)
$ 1,912,000 Pleasant Hill Revenue Bond.................................. 7.950% 09/20/15 $ 2,020,823
2,002,206 Vendee Mortgage Trust Participation Certificate (b)......... 8.465% 05/15/24 2,143,611
736,761 Vendee Mortgage Trust Participation Certificate (b)......... 7.206% 02/15/25 752,647
2,115,611 Vendee Mortgage Trust Participation Certificate (b)......... 7.793% 02/15/25 2,231,970
2,696,133 Vendee Mortgage Trust Participation Certificate (b)......... 8.793% 06/15/25 2,926,146
2,950,000 Vendee Mortgage Trust Participation Certificate (b)......... 7.250% 07/15/14 3,043,109
2,000,000 Vendee Mortgage Trust Participation Certificate (b)......... 7.250% 07/15/16 2,058,125
-----------
15,176,431
-----------
Total U.S. government and agencies obligations (cost: $43,988,469)................. 45,856,108
-----------
OTHER MORTGAGE-BACKED SECURITIES (22.2%)
4,000,000 Bank Mart Funding Corporation CMO (FHLM 8%) (d)............. 8.250% 02/20/19 4,110,000
International Capital Markets Acceptance Corporation 144A
1,447,037 Issue (d)................................................... 8.250% 09/01/15 1,456,081
1,000,000 KPAC CMO (GNMA 9.5%)........................................ 7.450% 10/01/18 1,010,000
2,295,000 KPAC Real Estate Investment Trust........................... 7.180% 10/01/05 2,338,031
2,500,000 Franchise Finance Corp Of America Notes..................... 7.000% 11/30/00 2,512,708
950,000 Citicorp Mortgage Securities, Inc. Targeted Amortization
Class....................................................... 6.000% 11/25/08 929,584
3,141,000 Wyoming Community Development Authority..................... 6.850% 06/01/10 3,133,147
7,145 RFC Conduit................................................. 8.500% 04/01/02 7,145
17,043 Travelers Mortgage Service.................................. 10.000% 06/01/01 17,043
-----------
Total other mortgage-backed securities (cost: $14,971,810)......................... 15,513,739
-----------
CORPORATE DEBT SECURITIES (10.4%)
173,385 Bank of America............................................. 8.375% 05/01/07 173,385
36,831 Bank of America............................................. 9.500% 01/01/09 36,831
2,250,000 CSBF Senior Performance Note 95-A Mortgage Revenue.......... 7.000% 11/15/05 2,324,531
2,009,942 Green Tree Financial Corporation............................ 6.900% 02/15/04 2,025,640
666,645 Green Tree Financial Corporation............................ 7.250% 07/15/05 676,409
1,000,000 Property Trust of America Notes............................. 6.875% 02/15/08 1,009,258
1,000,000 Property Trust of America Notes............................. 7.500% 02/15/14 1,012,023
-----------
Total corporate debt securities (cost: $7,114,592)................................. 7,258,077
-----------
Total long-term debt securities (cost: $66,074,871)................................ 68,627,924
-----------
SHORT-TERM SECURITIES (1.0%)
715,624 Temporary Investment Fund, Inc.--TempFund Portfolio, current rate 5.82%............ 715,624
-----------
Total short-term securities (cost: $715,624)....................................... 715,624
-----------
Total investments in securities (cost: $66,790,495) (e)............................ $69,343,548
-----------
-----------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by prodedures described in note 2 to the financial
statements.
(b) Represents a debt security with a weighted average net pass-through rate
which varies based on the pool of underlying collateral. The rate disclosed
is the rate in effect at December 31, 1995.
(c) Represents a debt security that pays no interest and principal during their
initial accrual periods, but accrue additional principal at specific rates.
Interest rate disclosed represents current yield based upon estimated future
cash flows.
(d) Represents ownership in an illiquid security which has not been registered
with the Securities and Exchange Commission under the Securities Act of
1933. (See note 7 to the financial statements). Information concerning the
illiquid securities held at December 31, 1995, which includes aquisition
date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- -------- ----------- ----------
<S> <C> <C>
Bank Mart Funding Corporation CMO................. 5/27/94 $3,975,000
International Capital Markets Acceptance
Corporation....................................... 1/17/95 1,590,962
----------
$5,565,962
----------
----------
</TABLE>
(e) At December 31, 1995 the cost of securities for federal income tax purposes
was $66,790,495. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation..................... $2,554,202
Gross unrealized depreciation..................... (1,149)
----------
Net unrealized appreciation....................... $2,553,053
----------
----------
-37-
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
COMMON STOCKS (99.5%)
CAPITAL GOODS (7.4%)
Machinery (7.4%)
3,600 Alco Standard Corporation................................... $ 164,250
7,000 Allied-Signal, Inc.......................................... 332,499
4,600 AMP, Inc.................................................... 176,525
4,000 Applied Materials, Inc. (b)................................. 157,500
8,600 Baker Hughes, Inc........................................... 209,625
3,600 Browning-Ferris Industries, Inc............................. 106,200
4,300 Caterpillar, Inc............................................ 252,625
1,800 Cooper Industries........................................... 66,150
2,600 Cummins Engine Company, Inc................................. 96,200
6,300 Dana Corporation............................................ 184,275
7,000 Deere & Company............................................. 246,750
2,800 Dial Corporation............................................ 82,950
5,600 Dover Corporation........................................... 206,500
3,900 Dresser Industries, Inc..................................... 95,063
1,100 Eaton Corporation........................................... 58,988
5,800 Emerson Electric Co......................................... 474,149
1,400 Fluor Corporation........................................... 92,400
700 Foster Wheeler Corporation.................................. 29,750
44,500 General Electric Company.................................... 3,203,999
1,700 Grainger W W, Inc........................................... 112,625
4,600 Halliburton Company......................................... 232,875
800 Helmerich & Payne, Inc...................................... 23,800
6,500 HIG Hartford (b)............................................ 314,438
1,800 Illinois Tool Works, Inc.................................... 106,200
4,600 Ingersoll-Rand Company...................................... 161,575
3,400 ITT Corporation (b)......................................... 180,200
13,500 Laidlaw, Inc. (c)........................................... 138,375
2,000 McDermott International, Inc................................ 44,000
2,950 Navistar International Corporation (b)...................... 30,975
600 Ogden Corporation........................................... 12,825
690 Paccar, Inc................................................. 29,066
3,100 Raychem Corporation......................................... 176,313
900 Rowan Companies, Inc (b).................................... 8,888
7,900 Safety-Kleen Corp........................................... 123,438
500 Teledyne, Inc............................................... 12,813
1,200 Textron, Inc................................................ 81,000
1,900 Stanley Works............................................... 97,850
500 Trinova Corporation......................................... 14,313
3,200 Tyco International Ltd...................................... 114,000
1,800 Varity Corporation (b)...................................... 66,825
2,900 Western Atlas Corporation (b)............................... 146,450
10,200 Westinghouse Electric Corporation........................... 168,300
6,000 Whitman Corporation......................................... 139,500
12,500 WMX Technologies, Inc....................................... 373,438
------------
9,146,480
------------
CONSUMER GOODS AND SERVICES (35.7%)
Consumer Goods (19.5%)
19,900 Abbott Laboratories......................................... 830,824
4,600 Adolph Coors Company........................................ 101,775
6,200 Alberto-Culver Company...................................... 213,125
2,500 Alza Corporation (b)........................................ 61,875
4,800 American Brands, Inc........................................ 214,200
7,800 American Home Products Corporation.......................... 756,599
6,400 Amgen, Inc. (b)............................................. 380,000
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
6,100 Anheuser-Busch Companies, Inc............................... $ 407,937
1,400 Avon Products............................................... 105,525
3,700 Bausch & Lomb Incorporated.................................. 146,613
7,000 Baxter International Inc.................................... 293,125
1,200 Becton, Dickinson And Company............................... 90,000
3,900 Beverly Enterprises (b)..................................... 41,438
1,400 Biomet, Inc. (b)............................................ 25,025
4,600 Boston Scientific Corporation (b)........................... 225,400
13,000 Bristol-Myers Squibb Company................................ 1,116,374
2,400 Brown-Forman Inc............................................ 87,600
3,700 C.R. Bard, Inc.............................................. 119,325
1,900 Cabletron Systems, Inc. (b)................................. 153,900
33,500 Coca-Cola Company........................................... 2,487,374
3,900 Colgate-Palmolive Company................................... 273,975
11,971 Columbia/HCA Healthcare Corporation......................... 607,527
2,800 Community Psychiatric Centers (b)........................... 34,300
14,200 Eli Lilly & Company......................................... 798,749
11,200 Gillette Company............................................ 583,799
2,800 Harcourt General, Inc....................................... 117,250
6,200 Humana (b).................................................. 169,725
1,500 International Flavors & Fragrances Inc...................... 72,000
17,400 Johnson & Johnson........................................... 1,489,874
6,800 Mallinckrodt Group, Inc..................................... 247,350
4,900 Manor Care, Inc............................................. 171,500
7,200 Medtronic Inc............................................... 402,300
32,000 Merck & Co., Inc............................................ 2,103,999
20,000 Pepsico, Inc................................................ 1,117,499
16,200 Pfizer Inc.................................................. 1,020,599
13,055 Pharmacia & Upjohn.......................................... 505,880
23,400 Philip Morris Companies, Inc................................ 2,117,699
18,334 Procter & Gamble Company.................................... 1,521,721
9,000 Schering-Plough Corporation................................. 492,750
3,000 Service Corporation International........................... 132,000
5,700 St. Jude Medical, Inc. (b).................................. 245,100
10,300 Tenet Healthcare Corporation (b)............................ 213,725
2,000 Clorox Company.............................................. 143,250
8,100 Seagram Company, Ltd. (c)................................... 280,463
4,000 Unilever N.V. (c)........................................... 562,999
3,400 United Health Care.......................................... 222,700
3,600 United States Surgical Corporation.......................... 76,950
3,100 US Healthcare, Inc.......................................... 144,150
4,300 UST Inc..................................................... 143,513
2,800 Warner-Lambert Company...................................... 271,950
------------
24,143,330
------------
Consumer Services (5.2%)
3,700 Capital Cities/ABC, Inc..................................... 456,488
7,800 Comcast Corporation......................................... 141,863
4,700 CUC International, Inc. (b)................................. 160,388
3,300 Deluxe Corp................................................. 95,700
3,400 R R Donnelley & Sons Company................................ 133,875
2,200 Dow Jones & Company Inc..................................... 87,725
4,360 Dun & Bradstreet Corporation................................ 282,310
3,825 Eastman Chemical Company.................................... 239,541
8,000 Eastman Kodak Company....................................... 536,000
2,900 Gannett Company............................................. 177,988
1,800 Harrah's Entertainment (b).................................. 43,650
6,800 Hasbro Inc.................................................. 210,800
</TABLE>
See accompanying notes to investments in securities.
-38-
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
1,200 Hilton Hotels Corporation................................... $ 73,800
600 John H. Harland Company..................................... 12,525
2,000 Jostens, Inc................................................ 48,500
600 King World Productions, Inc. (b)............................ 23,325
3,000 Knight-Ridder, Inc.......................................... 187,500
5,100 Marriott International Inc.................................. 195,075
4,593 Mattel Inc.................................................. 141,235
17,500 McDonalds Corp.............................................. 789,688
1,800 McGraw-Hill Companies, Inc.................................. 156,825
3,600 Meredith Corporation........................................ 150,750
2,100 Moore Corporation Limited................................... 39,113
4,000 Polaroid Corporation........................................ 189,500
2,900 New York Times Company...................................... 85,913
8,400 Time Warner Inc............................................. 318,150
1,600 Times Mirror Company........................................ 54,200
1,500 Tribune Company............................................. 91,688
8,730 Viacom (b).................................................. 413,584
12,900 Walt Disney Company......................................... 761,099
6,200 Wendy's International, Inc.................................. 131,750
------------
6,430,548
------------
Food (3.3%)
4,600 Albertson's Incorporated.................................... 151,225
11,481 Archer-Daniels-Midland Company.............................. 206,658
6,700 Campbell Soup Company....................................... 402,000
5,625 Conagra, Inc................................................ 232,031
3,000 CPC International........................................... 205,875
3,300 Darden Restaurants, Inc..................................... 39,188
7,600 Fleming Companies, Inc...................................... 156,750
3,300 General Mills, Inc.......................................... 190,575
4,500 Giant Food Inc.............................................. 141,750
7,800 H.J. Heinz Company.......................................... 258,375
2,900 Hershey Foods Corporation................................... 188,500
5,100 Kellogg Company............................................. 393,975
6,300 Quaker Oats Company......................................... 217,350
2,600 Ralston Purina Group........................................ 162,175
11,700 Sara Lee Corporation........................................ 372,938
7,400 Super Valu Inc.............................................. 233,100
6,000 Sysco Corporation........................................... 195,000
2,100 The Kroger Co. (b).......................................... 78,750
4,800 Winn-Dixie Stores, Incorporated............................. 177,000
2,100 Wm. Wrigley Jr. Company..................................... 110,250
------------
4,113,465
------------
Retail (4.2%)
8,500 American Stores Company..................................... 227,375
2,200 Circuit City Stores, Inc.................................... 60,775
1,300 Dayton Hudson Corporation................................... 97,500
3,700 Dillard Department Stores, Inc.............................. 105,450
5,500 Federated Department Stores (b)............................. 151,250
12,424 Home Depot Inc.............................................. 594,798
4,500 J.C. Penney Company, Inc.................................... 214,313
7,300 K Mart Corporation (b)...................................... 52,925
1,200 Longs Drug Stores Corp...................................... 57,450
3,100 Melville Corporation........................................ 95,325
1,000 Mercantile Stores Company, Inc.............................. 46,250
3,200 Nike, Inc................................................... 222,800
3,700 Nordstrom, Inc.............................................. 149,850
11,800 Price/Costco Corporation (b)................................ 179,950
3,600 Reebok International Ltd.................................... 101,700
1,000 Rite Aid Corporation........................................ 34,250
8,800 Sears, Roebuck and Company.................................. 343,200
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
3,800 Tandy Corporation........................................... $ 157,700
6,000 Gap, Inc.................................................... 252,000
7,500 Limited, Inc................................................ 130,313
5,000 May Department Stores Company............................... 211,250
1,000 Stride Rite Corporation..................................... 7,500
5,650 Toys R Us (b)............................................... 122,888
61,500 Wal-Mart Stores, Inc........................................ 1,376,062
4,400 Walgreen Company............................................ 131,450
9,100 Woolworth Corporation (b)................................... 118,300
------------
5,242,624
------------
Consumer Cyclicals (3.5%)
8,800 Chrysler Corporation Holding Co............................. 487,300
4,500 Cooper Tire & Rubber Company................................ 110,813
3,900 Corning Inc................................................. 124,800
2,000 Echlin Inc.................................................. 73,000
27,000 Ford Motor.................................................. 783,000
19,600 General Motors Corporation.................................. 1,036,349
5,900 Genuine Parts Company....................................... 241,900
4,800 Interpublic Group Company................................... 208,200
2,700 Johnson Controls............................................ 185,625
1,600 Liz Claiborne, Inc.......................................... 44,400
4,300 Maytag Company.............................................. 87,075
3,000 Newell Co................................................... 77,625
400 Owens-Corning Fiberglas Corporation (b)..................... 17,950
3,000 Pep Boys.................................................... 76,875
2,000 Premark International Inc................................... 101,250
3,600 Rubbermaid Incorporated..................................... 91,800
1,100 Russell Corporation......................................... 30,525
3,500 Snap-On Tools Corporation................................... 158,375
1,100 The Black & Decker Corporation.............................. 38,775
2,500 The Goodyear Tire & Rubber Company.......................... 113,438
2,200 V.F. Corporation............................................ 116,050
1,600 Whirlpool Corporation....................................... 85,200
------------
4,290,325
------------
CREDIT SENSITIVE (25.3%)
Building (.6%)
1,200 Armstrong World Industries, Inc............................. 74,400
1,000 Fleetwood Enterprises, Inc.................................. 25,750
2,800 Lowe's Companies, Inc....................................... 93,800
6,900 Masco Corporation........................................... 216,488
3,800 PPG Industries, Incorporated................................ 173,850
3,100 Sherwin-Williams Company.................................... 126,325
------------
710,613
------------
Finance (13.1%)
2,100 Aetna Life & Casualty Company............................... 145,425
9,400 Ahmanson & Company H.F...................................... 249,100
2,300 Alexander & Alexander Services Inc.......................... 43,700
10,857 Allstate Corporation........................................ 446,494
12,300 American Express Company.................................... 508,912
4,100 American General Corporation................................ 142,988
11,980 American International Group, Inc........................... 1,108,149
10,252 Banc One Corporation........................................ 387,013
5,200 Bank of Boston Corporation.................................. 240,500
4,300 Bank of New York Company, Inc............................... 209,625
10,204 BankAmerica Corporation..................................... 660,709
3,400 Bankers Trust New York Corporation.......................... 226,100
4,400 Barnett Banks of Florida, Inc............................... 259,600
2,600 Beneficial Corporation...................................... 121,225
</TABLE>
See accompanying notes to investments in securities.
-39-
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
CREDIT SENSITIVE--CONTINUED
5,900 H & R Block, Inc............................................ $ 238,950
4,500 Boatmens Bancshares Inc..................................... 183,938
4,100 Chase Manhattan Corporation................................. 248,563
5,970 Chemical Banking Corporation................................ 350,738
1,700 Chubb Corporation........................................... 164,475
2,000 Cigna Corporation........................................... 206,500
11,200 Citicorp.................................................... 753,199
4,500 Comerica.................................................... 180,563
2,400 Corestates Financial Corp................................... 90,900
4,195 Dean Witter Discover & Co................................... 197,165
4,700 Federal Home Loan Mortgage Corporation...................... 392,450
7,200 Federal National Mortgage................................... 893,699
3,500 First Bank Systems, Incorporated............................ 173,688
7,237 First Chicago Corporation................................... 285,862
5,600 First Data Corp............................................. 374,500
1,700 First Fidelity Bancorporation............................... 128,138
1,600 First Interstate Bancorp.................................... 218,400
3,900 First Union Corporation..................................... 216,938
9,680 Fleet Financial Group, Incorporated......................... 394,460
1,700 General RE Corporation...................................... 263,500
1,600 Golden West Financial Corporation........................... 88,400
8,650 Great Western Financial Corporation......................... 220,575
2,400 Household International, Inc................................ 141,900
4,800 Jefferson-Pilot Corporation................................. 223,200
4,200 JP Morgan & Co Incorporated................................. 337,050
4,300 Keycorp..................................................... 155,875
1,800 Lincoln National Corporation................................ 96,750
2,800 Loews Corporation........................................... 219,450
1,300 Marsh & McLennen............................................ 115,375
2,700 MBNA Corporation............................................ 99,563
3,900 Mellon Bank Corporation..................................... 209,625
3,800 Merrill Lynch & Co., Inc.................................... 193,800
1,900 Morgan Stanley Group........................................ 153,188
3,600 National City Corporation................................... 119,250
7,456 Nationsbank Corp............................................ 519,123
10,600 Norwest Corporation......................................... 349,800
5,400 PNC Bank Corp............................................... 174,150
5,300 Providian Corporation....................................... 215,975
2,500 Republic New York Corporation............................... 155,313
6,000 Safeco Corporation.......................................... 207,000
2,000 Salomon Inc................................................. 71,000
3,400 St. Paul Companies, Inc..................................... 189,125
2,200 Suntrust Banks, Inc......................................... 150,700
2,550 Torchmark Corporation....................................... 115,388
1,200 Transamerica Corporation.................................... 87,450
4,100 U.S. Bancorp................................................ 137,863
1,500 UNUM Corporation............................................ 82,500
7,300 USF&G Corporation........................................... 123,188
2,400 U.S. Life Corporation....................................... 71,700
6,200 Wachovia Corporation........................................ 283,650
1,000 Wells Fargo & Company....................................... 216,000
------------
16,230,092
------------
Utilities (11.7%)
14,400 Airtouch Communications (b)................................. 406,800
4,100 Alltel Corp................................................. 120,950
4,100 American Electric Power Company, Inc........................ 166,050
15,900 Ameritech................................................... 938,099
41,535 AT&T Corporation............................................ 2,689,390
2,800 Baltimore Gas And Electric Company.......................... 79,800
12,300 Bell Atlantic Corporation................................... 822,562
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
CREDIT SENSITIVE--CONTINUED
26,000 BellSouth Corporation....................................... $ 1,130,999
6,500 Carolina Power & Light Company.............................. 224,250
3,100 Central & Southwest Corporation............................. 86,413
5,932 Cinergy..................................................... 181,668
5,500 Consolidated Edison Company of New York..................... 176,000
3,000 Consolidated Natural Gas Company............................ 136,125
5,300 Detroit Edison Company...................................... 182,850
3,550 Dominion Resources, Inc..................................... 146,438
3,900 Duke Power Company.......................................... 184,763
5,900 Enron Corp.................................................. 224,938
3,900 Entergy Corporation......................................... 114,075
4,700 FPL Group, Inc.............................................. 217,963
24,200 GTE Corporation............................................. 1,064,799
8,600 Houston Industries Incorporated............................. 208,550
5,200 Niagara Mohawk Power Corporation............................ 50,050
2,200 Nicor, Inc.................................................. 60,500
1,300 Northern States Power Company............................... 63,863
11,400 Nynex Corporation........................................... 615,599
3,700 Ohio Edison Company......................................... 86,950
800 Oneok Inc................................................... 18,300
5,100 Pacific Enterprises......................................... 144,075
10,300 Pacific Gas & Electric Company.............................. 292,263
10,500 Pacific Telesis Group....................................... 353,063
12,500 Pacificorp.................................................. 265,625
4,200 Peco Energy Company......................................... 126,525
2,000 Peoples Energy Corporation.................................. 63,500
3,750 Public Service Enterprise Group Inc......................... 114,844
17,300 SBC Communications Inc...................................... 994,749
10,000 SCE Corporation............................................. 177,500
4,600 Texas Utilities Company..................................... 189,175
17,800 Southern Company............................................ 438,325
5,500 Unicom Corporation.......................................... 180,125
2,200 Union Electric Company...................................... 91,850
12,200 U.S. West Media Group (b)................................... 231,800
11,700 U.S. West, Inc.............................................. 418,275
------------
14,480,438
------------
INTERMEDIATE GOODS AND SERVICES (17.6%)
Energy (9.2%)
1,800 Amerada Hess Corporation.................................... 95,400
14,400 Amoco Corporation........................................... 1,034,999
7,100 Ashland Incorporated........................................ 249,388
3,800 Atlantic Richfield Company.................................. 420,850
2,100 Burlington Resources, Inc................................... 82,425
18,400 Chevron Corporation......................................... 965,999
5,600 Coastal Corporation......................................... 208,600
2,900 Columbia Gas System, Inc. (b)............................... 127,238
2,500 Enserch Corp................................................ 40,625
32,500 Exxon Corporation........................................... 2,604,062
1,600 Kerr-McGee Corporation...................................... 101,600
10,600 Mobil Corporation........................................... 1,187,199
6,300 Noram Energy................................................ 55,913
7,700 Occidental Petroleum Corporation............................ 164,588
2,500 Oryx Energy Company (b)..................................... 33,438
7,900 Panhandle Eastern Corporation............................... 220,213
800 Pennzoil Company............................................ 33,800
4,900 Phillips Petroleum Company.................................. 167,213
13,900 Royal Dutch Petroleum (c)................................... 1,961,637
300 Santa Fe Energy Resources, Inc (b).......................... 2,888
6,200 Schlumberger, Ltd. (c)...................................... 429,350
4,000 Sonat Inc................................................... 142,500
</TABLE>
See accompanying notes to investments in securities.
-40-
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
INTERMEDIATE GOODS AND SERVICES--CONTINUED
5,400 Sun Company, Inc............................................ $ 147,825
4,300 Tenneco Inc................................................. 213,388
6,900 Texaco, Inc................................................. 541,650
4,800 Unocal Corporation.......................................... 139,800
5,900 USX--Marathon Group......................................... 115,050
------------
11,487,638
------------
Materials (6.9%)
2,300 Air Products and Chemicals, Inc............................. 121,325
4,575 Alcan Aluminum Limited (c).................................. 142,397
3,800 Aluminum Company of America................................. 200,925
1,400 Asarco Incorporated......................................... 44,800
1,900 Avery Dennison Corp......................................... 95,238
7,300 Barrick Gold Corporation (c)................................ 192,538
800 Bemis Company, Inc.......................................... 20,500
2,900 Bethlehem Steel Corporation (b)............................. 40,600
566 Boise Cascade Corporation................................... 19,598
2,500 Champion International Corporation.......................... 105,000
3,400 Crown Cork & Seal Company, Inc. (b)......................... 141,950
950 Cyprus Amax Minerals Company................................ 24,819
6,700 Dow Chemical Company........................................ 471,513
14,400 E.I. Du Pont De Nemours and Company......................... 1,006,199
900 Echo Bay Mines, Ltd (c)..................................... 9,338
1,687 Engelhard Corporation....................................... 36,692
400 Federal Paper Board Company, Inc............................ 20,750
1,600 FMC Corporation (b)......................................... 108,200
11,400 Freeport-McMoran Copper..................................... 320,625
2,200 Georgia-Pacific Corporation................................. 150,975
1,900 W R Grace & Co.............................................. 112,338
3,400 Great Lakes Chemical Corporation............................ 244,800
2,700 Hercules Incorporated....................................... 152,213
11,500 Homestake Mining Company.................................... 179,688
5,500 Inco Limited (c)............................................ 182,875
4,800 International Paper Company................................. 181,800
7,100 Kimberly-Clark Corporation.................................. 587,524
5,600 Louisiana-Pacific Corporation............................... 135,800
1,200 Mead Corporation............................................ 62,700
3,100 Monsanto Company............................................ 379,750
3,600 Morton International........................................ 129,150
5,800 Nalco Chemical Company...................................... 174,725
1,622 Newmont Mining Corporation.................................. 73,396
1,500 Nucor Corporation........................................... 85,688
1,400 Phelps Dodge Corporation.................................... 87,150
2,100 Pioneer Hi-Bred International, Inc.......................... 116,813
5,100 Placer Dome, Inc. (c)....................................... 123,038
600 Potlatch Corporation........................................ 24,000
3,200 Praxair Inc................................................. 107,600
2,100 Reynolds Metals Company..................................... 118,913
1,600 Rohm And Haas Company....................................... 103,000
3,000 Sigma-Aldrich............................................... 148,500
3,010 Stone Container Corporation................................. 43,269
1,900 Temple-Inland Inc........................................... 83,838
3,000 Williams Company............................................ 131,625
8,467 Travelers Inc............................................... 532,363
1,550 Union Camp Corporation...................................... 73,819
3,900 Union Carbide Corporation................................... 146,250
5,640 USX--U.S. Steel Group Inc................................... 173,430
6,000 Westvaco Corporation........................................ 166,500
4,900 Weyerhaeuser Company........................................ 211,925
2,400 Willamette Industries Incorporated.......................... 135,000
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
INTERMEDIATE GOODS AND SERVICES--CONTINUED
3,300 Worthington Industries...................................... $ 68,681
------------
8,552,143
------------
Transportation (1.5%)
1,000 AMR Corporation (b)......................................... 74,250
3,573 Burlington Northern Santa Fe................................ 278,694
1,600 Conrail Corporation......................................... 112,000
1,100 Consolidated Freightways, Inc............................... 29,150
7,400 CSX Corporation............................................. 337,625
1,100 Delta Air Lines, Inc........................................ 81,263
900 Federal Express Corporation (b)............................. 66,488
2,600 Norfolk Southern Corporation................................ 206,375
1,300 Roadway Services, Inc....................................... 63,538
1,500 Sante Fe Pacific Gold Corporation........................... 18,188
3,300 Southwest Airlines Company.................................. 76,725
4,800 Union Pacific Corporation................................... 316,800
18,400 US Air Group, Inc. (b)...................................... 243,800
------------
1,904,896
------------
TECHNOLOGY (13.5%)
2,600 Advanced Micro Devices, Inc. (b)............................ 42,900
1,000 Amdahl (b).................................................. 8,500
2,300 Andrew Corporation (b)...................................... 87,975
2,600 Apple Computer Incorporated................................. 82,875
2,200 Autodesk, Inc............................................... 75,350
3,500 Automatic Data Processing Inc............................... 259,875
8,900 Boeing Company.............................................. 697,537
6,800 Cisco Systems, Inc. (b)..................................... 507,450
6,100 Compaq Computer Corporation (b)............................. 292,800
6,350 Computer Associates International........................... 361,156
600 Crane Co.................................................... 22,125
500 Cray Research, Inc. (b)..................................... 12,375
5,600 Digital Equipment (b)....................................... 359,100
2,400 DSC Communications (b)...................................... 88,500
1,600 EG&G, Inc................................................... 38,800
2,000 General Dynamics Corporation................................ 118,250
2,700 B F Goodrich Company........................................ 183,938
4,000 Harris Corporation.......................................... 218,500
13,800 Hewlett-Packard Company..................................... 1,155,749
4,300 Honeywell Inc............................................... 209,088
22,200 Intel....................................................... 1,259,849
15,100 International Business Machines Corporation................. 1,385,424
5,219 Lockheed Martin Corporation................................. 412,301
4,200 Loral Corporation........................................... 148,575
5,000 LSI Logic Corporation (b)................................... 163,750
3,600 McDonnell Douglas Corporation............................... 331,200
17,900 MCI Communications.......................................... 467,638
5,800 Micron Technology, Inc...................................... 229,825
15,900 Microsoft Corporation (b)................................... 1,395,224
10,900 Minnesota Mining and Manufacturing Company.................. 722,125
14,700 Motorola.................................................... 837,900
6,400 National Semiconductor Corporation (b)...................... 142,400
5,700 Northern Telecom Limited.................................... 245,100
3,000 Northrop Grumman Corporation................................ 192,000
8,500 Novell, Inc. (b)............................................ 121,125
10,400 Oracle Corporation (b)...................................... 440,700
3,499 Pall Corporation............................................ 94,036
2,800 Perkin-Elmer Corporation.................................... 105,700
2,800 Pitney Bowes, Inc........................................... 131,600
6,500 Raytheon Company............................................ 307,125
</TABLE>
See accompanying notes to investments in securities.
-41-
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
TECHNOLOGY--CONTINUED
5,400 Rockwell International Corporation.......................... $ 285,525
4,400 Scientific-Atlanta Inc...................................... 66,000
3,200 Silicon Graphics, Inc. (b).................................. 88,000
10,100 Sprint Corporation.......................................... 402,738
8,400 Sun Microsystems, Inc. (b).................................. 383,250
6,600 Tandem Computers, Inc. (b).................................. 70,125
15,500 Tele-Communications, Inc. (b)............................... 308,063
2,600 Tellabs, Inc. (b)........................................... 96,200
4,600 Texas Instruments, Inc...................................... 238,050
400 Thomas & Betts Corporation.................................. 29,500
1,000 TRW Inc..................................................... 77,500
2,500 United Technologies Corporation............................. 237,188
12,400 Unisys Corporation (b)...................................... 69,750
2,700 Xerox Corporation........................................... 369,900
------------
16,678,229
------------
Total common stocks
(cost: $89,874,004).............................................. 123,410,821
------------
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
PREFERRED STOCKS (--%)
20 Teledyne.................................................... $ 288
------------
Total preferred stocks
(cost: $265)..................................................... 288
------------
SHORT-TERM SECURITIES (.3%)
346,283 Temporary Investment Fund, Inc.-- TempFund Portfolio,
current rate 5.82%........................................ 346,283
------------
Total short-term securities
(cost: $346,283)................................................. 346,283
------------
Total investments in securities
(cost: $90,220,552) (d).......................................... $123,757,392
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The portfolio held 3.2% of net assets in foreign securities at December 31,
1995
(d) At December 31, 1995, the cost of securities for federal income tax purposes
was $90,393,093. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation............. $34,998,952
Gross unrealized depreciation............. (1,634,653)
-----------
Net unrealized appreciation............... $33,364,299
-----------
-----------
-42-
<PAGE>
CAPITAL APPRECIATION PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
COMMON STOCKS (95.4%)
CAPITAL GOODS (1.6%)
Machinery (1.6%)
51,350 Thermo Electron Corporation (b).................................. $ 2,670,200
--------------
CONSUMER GOODS AND SERVICES (40.6%)
Consumer Goods (22.4%)
81,500 Amgen, Inc. (b).................................................. 4,839,063
60,700 The Coca-Cola Company............................................ 4,506,975
81,000 Merck & Co., Inc................................................. 5,325,750
59,000 Oxford Health Plan, Inc. (b)..................................... 4,358,625
81,200 Pfizer, Inc...................................................... 5,115,600
101,650 St. Jude Medical, Inc. (b)....................................... 4,370,950
123,800 United Health Care............................................... 8,108,899
--------------
36,625,862
--------------
Consumer Services (3.5%)
85,000 Carnival Corporation (c)......................................... 2,071,875
77,939 Viacom (b)....................................................... 3,692,360
--------------
5,764,235
--------------
Retail (13.4%)
240,225 Dollar General Corporation....................................... 4,984,669
155,533 The Home Depot, Inc.............................................. 7,446,141
135,100 Intimate Brands, Inc............................................. 2,026,500
53,600 Kohl's, Inc. (b)................................................. 2,814,000
238,300 Office Depot, Inc. (b)........................................... 4,706,425
--------------
21,977,735
--------------
Food (1.2%)
54,300 Outback Steakhouse, Inc. (b)..................................... 1,948,013
--------------
CREDIT SENSITIVE (11.4%)
Building (2.8%)
139,200 Lowe's Companies, Inc............................................ 4,663,200
--------------
Finance (4.8%)
64,900 First Data Corporation........................................... 4,340,188
95,900 MBNA Corporation................................................. 3,536,313
--------------
7,876,501
--------------
Utilities (3.8%)
218,400 Airtouch Communications (b)...................................... 6,169,800
--------------
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
TECHNOLOGY (41.8%)
135,550 Computer Associates International................................ $ 7,709,405
109,000 Intel............................................................ 6,185,750
187,900 MCI Communications............................................... 4,908,888
58,100 Microsoft Corporation (b)........................................ 5,098,275
118,700 Motorola......................................................... 6,765,900
152,900 Oracle Corporation (b)........................................... 6,479,138
168,000 Paging Network, Inc. (b)......................................... 4,095,000
76,100 Parametric Technology Corporation (b)............................ 5,060,650
146,900 Silicon Graphics, Inc. (b)....................................... 4,039,750
33,100 Xerox Corporation................................................ 4,534,700
109,300 Cisco Systems, Inc. (b).......................................... 8,156,512
128,000 General Instrument Corporation (b)............................... 2,992,000
58,900 Micron Technology, Inc........................................... 2,333,913
--------------
68,359,881
--------------
Total common stocks
(cost: $120,517,608).................................................... 156,055,427
--------------
PREFERRED STOCKS (2.9%)
TECHNOLOGY (2.9%)
121,700 Nokia Corp ADR (c)............................................... 4,731,088
--------------
Total preferred stocks
(cost: $5,114,676)...................................................... 4,731,088
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ---------
<C> <S> <C>
SHORT-TERM SECURITIES (1.1%)
$1,809,123 Temporary Investments Fund, Inc.-- TempFund Portfolio, current
rate 5.82% .................................................... 1,809,123
--------------
Total short-term securities
(cost: $1,809,123)...................................................... 1,809,123
--------------
Total investments in securities
(cost: $127,441,407) (d)................................................ $162,595,638
--------------
--------------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The portfolio held 4.2% of net assets in foreign securities at December 31,
1995.
(d) At December 31, 1995, the cost of securities for federal income tax purposes
was $127,455,347. The agrgregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation..................... $40,171,628
Gross unrealized depreciation..................... (5,031,337)
-----------
Net unrealized appreciation....................... $35,140,291
-----------
-----------
-43-
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES
December 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
COMMON STOCKS (83.7%)
AUSTRALIA (4.9%)
Banking (1.0%)
66,163 National Australia Bank.......................................... $ 595,520
190,087 Westpac Banking.................................................. 842,741
Building Materials and Components (1.2%)
648,423 Pioneer International............................................ 1,673,722
Transportation (2.7%)
127,500 Brambles Industries.............................................. 1,422,646
507,000 BTR Nylex Ltd.................................................... 1,372,792
61,000 Qantas Airways Limited ADR 144A (d).............................. 1,016,418
--------------
6,923,839
--------------
AUSTRIA (2.4%)
Electrical and Electronics (1.7%)
12,980 Bohler-Uddeholm 144A (d)(b)...................................... 992,486
10,850 Va Technologie 144A (d).......................................... 1,379,109
Utilities--Gas and Electric (.7%)
7,000 Evn Energie-Versorung............................................ 962,735
--------------
3,334,330
--------------
BELGIUM (1.9%)
Chemicals (1.9%)
2,500 Solvay........................................................... 1,350,704
20,000 Union Miniere (b)................................................ 1,338,812
--------------
2,689,516
--------------
BRAZIL (.9%)
Telecommunications (.9%)
27,500 Telecomunicacoes Brasileiras ADR................................. 1,302,813
--------------
CANADA (3.2%)
Banking (2.1%)
60,500 Canadian Imperial Bank of Commerce............................... 1,802,125
135,000 National Bank of Montreal........................................ 1,101,210
Insurance (.9%)
65,000 London Insurance Group........................................... 1,316,594
Mining and Metals--Container (.2%)
39,000 Inmet............................................................ 285,957
--------------
4,505,886
--------------
CHILE (1.2%)
Financial Services (.4%)
21,000 Chile Fund Inc................................................... 546,000
Telecommunications (.8%)
14,000 Compania de Telefonos de Chile ADR............................... 1,160,250
--------------
1,706,250
--------------
CZECH REPUBLIC (1.2%)
Energy Services (.8%)
31,510 Ceske Energeticke................................................ 1,139,152
Telecommunications (.4%)
5,500 SPT Telecom...................................................... 519,780
--------------
1,658,932
--------------
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
FINLAND (1.3%)
Wholesale and International Trade (1.3%)
75,000 Amer Group Ltd................................................... 1,172,845
21,500 Metsa-Serla...................................................... $ 663,518
--------------
1,836,363
--------------
FRANCE (7.4%)
Banking (1.5%)
48,000 Banque Nationale de Paris ADR-- 144A (d)......................... 2,168,175
Electrical and Electronics (1.0%)
17,000 Alcatel Alsthom.................................................. 1,467,658
Energy Sources (1.6%)
30,262 Societe National Elf Aquitaine................................... 2,232,656
Health and Personal Care (1.6%)
102,000 Rhone-Poulenc.................................................... 2,187,929
Insurance (.5%)
10,500 Axa (b).......................................................... 708,534
Mining and Metal (.2%)
5,900 Pechiney......................................................... 223,193
Transportation (1.0%)
50,000 Regie Des Usines Renault......................................... 1,441,607
--------------
10,429,752
--------------
GERMANY (2.6%)
Banking (1.3%)
37,250 Deutsche Bank.................................................... 1,772,351
Chemicals (1.3%)
6,950 Bayer............................................................ 1,849,090
--------------
3,621,441
--------------
HONG KONG (6.3%)
Banking (1.2%)
115,714 Hong Kong and Shanghai Banking................................... 1,750,990
Food and Household Products (.5%)
2,937,000 Cafe de Coral.................................................... 668,542
Multi-Industry (2.6%)
221,000 Hutchison Whampoa Ltd............................................ 1,346,248
365,947 Jardine Strategic Holdings (b)................................... 1,119,798
175,739 Jardine Matheson Holdings........................................ 1,203,812
Transportation (1.1%)
190,000 Swire Pacific Ltd................................................ 1,474,405
Utilities (.9%)
405,000 Hong Kong Electric Holdings...................................... 1,327,837
--------------
8,891,632
--------------
INDIA (.5%)
Financial Services (.5%)
469,435 India Fund....................................................... 765,287
--------------
INDONESIA (.7%)
Financial Services (.2%)
315,000 J.F. Indonesia Fund.............................................. 350,365
Forest Products and Paper (.5%)
268,000 P.T. Japfa Comfeed............................................... 131,865
586,685 P.T. Pabrik Kertas Tjiwi Kimia................................... 538,849
--------------
1,021,079
--------------
</TABLE>
See accompanying notes to investments in securities.
-44-
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
ITALY (1.4%)
Telecommunication (1.4%)
960,000 Stet di Risp..................................................... $ 1,960,667
--------------
JAPAN (4.4%)
Building Materials and Components (.6%)
73,000 Daito Trust Construction......................................... 863,389
Electrical and Electronics (3.2%)
174,000 Hitachi Ltd...................................................... 1,754,310
80,000 Hitachi Koki..................................................... 725,921
34,000 Sony Corporation................................................. 2,040,296
Utilities--Gas and Electric (.6%)
57,000 Kyudenko......................................................... 751,515
--------------
6,135,431
--------------
KOREA (.7%)
Financial Services (.7%)
19 Korea International Trust (b).................................... 988,000
--------------
MEXICO (.3%)
Chemicals (.3%)
252,000 Vitro............................................................ 385,944
--------------
NETHERLANDS (4.2%)
Broadcasting, Advertising and Publishing (1.6%)
33,875 International Nederlanden Group.................................. 2,265,393
Building Materials and Components (.3%)
16,520 European Vinyls.................................................. 429,750
Insurance (1.5%)
46,542 Aegon............................................................ 2,061,450
Merchandising (.8%)
16,875 Koninklijke Bijenkorf Beheer..................................... 1,115,884
--------------
5,872,477
--------------
NEW ZEALAND (2.3%)
Forest Products and Paper (1.0%)
675,000 Carter Holt Harvey............................................... 1,456,236
Wholesale and International Trade (1.3%)
2,341,185 Brierley Investments............................................. 1,851,976
--------------
3,308,212
--------------
NORWAY (2.8%)
Energy Sources (.9%)
98,000 Saga Petroleum................................................... 1,310,730
Health and Personal Care (1.3%)
68,000 Hafslund Nycomed................................................. 1,774,970
Mining and Metals (.6%)
78,000 Elkem............................................................ 882,736
--------------
3,968,436
--------------
PHILIPPINES (1.0%)
Telecommunications (1.0%)
25,000 Philippine Long Distance Telephone Company ADR................... 1,353,125
--------------
PORTUGAL (.6%)
Banking (.2%)
26,600 Banco Portugues de Investimento.................................. 323,185
Financial Services (.4%)
6,000 Capital Portugal Fund............................................ 530,173
--------------
853,358
--------------
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
SINGAPORE (.7%)
Financial Services (.2%)
18,000 Singapore Fund................................................... $ 240,750
Transportation (.5%)
78,000 Singapore International Airline.................................. 727,907
--------------
968,657
--------------
SPAIN (8.8%)
Banking (3.8%)
85,000 Argentaria Bancaria ADR.......................................... 1,710,625
9,250 Banco de Andalucia............................................... 1,349,573
61,500 Banco Bilbao Vizcaya............................................. 2,215,328
Energy Sources (1.2%)
52,000 Repsol........................................................... 1,703,813
Telecommunications (1.2%)
120,000 Telefonica de Espana............................................. 1,661,774
Utilities--Gas and Electric (2.6%)
250,000 Iberdrola........................................................ 2,287,413
24,800 Empresa. Nacional de Electricidad................................ 1,404,397
--------------
12,332,923
--------------
SWEDEN (7.3%)
Banking (.8%)
58,500 Stadshypotek..................................................... 1,174,024
Business and Public Service (1.2%)
114,500 Esselte.......................................................... 1,727,727
Forest Products and Paper (1.1%)
122,000 Stora Kopparbergs................................................ 1,463,513
Health and Personal Care (2.9%)
46,500 Astra............................................................ 1,845,348
105,000 Svenska Handelsbanken............................................ 2,186,442
Transportation (1.3%)
90,000 Volvo............................................................ 1,846,932
--------------
10,243,986
--------------
SWITZERLAND (4.5%)
Electrical and Electronics (1.4%)
1,730 BBC Brown Boveri Cie............................................. 2,014,685
Health and Personal Care (2.4%)
1,660 Ares-Serono...................................................... 1,168,556
1,085 Societe Generale................................................. 2,159,343
Insurance (.7%)
3,400 Zuerich Versicherung............................................. 1,019,423
--------------
6,362,007
--------------
THAILAND (.9%)
Financial Services (.9%)
57,507 Thai Fund........................................................ 1,286,719
--------------
TURKEY (.4%)
Financial Services (.4%)
60,000 Turkish Growth Fund.............................................. 622,500
--------------
UNITED KINGDOM (8.4%)
Banking (1.0%)
118,943 Barclays Bank.................................................... 1,364,718
Building Materials and Components (1.1%)
365,000 BICC.L........................................................... 1,564,089
Electrical and Electronics (.3%)
44,500 Waste Management International ADR............................... 478,375
Energy Services (3.2%)
445,000 British Gas...................................................... 1,754,903
84,000 South Wales Electricity.......................................... 1,222,019
</TABLE>
See accompanying notes to investments in securities.
-45-
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
UNITED KINGDOM--CONTINUED
127,500 Welsh Water...................................................... $ 1,534,162
Food and Household Products (2.3%)
2,082,536 Albert Fisher Group.............................................. 1,552,005
613,891 Hillsdown Holdings............................................... 1,610,784
Merchandising (.5%)
91,600 Kwik Save Group.................................................. 716,779
--------------
11,797,834
--------------
VENEZUELA (.5%)
Energy Services (.5%)
1,012,793 Electricidad Caracas............................................. 691,951
--------------
Total common stocks
(cost $104,633,041)..................................................... 117,819,347
--------------
PREFERRED STOCKS AND OTHER (2.8%)
ARGENTINA (1.0%)
Multi-industry (1.0%)
24,565 Compania de Inversiones en Telecommunications convertible
preferred--7.0% (c)............................................ 1,424,770
--------------
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
FRANCE (--%)
Mining and Metal (--%)
5,900 Pechiney Warrants (expiring 1/8/96).............................. $ 12
--------------
GERMANY (.6%)
Energy Services (.6%)
4,800 Veba Warrants (expiring 4/6/98).................................. 766,309
--------------
HONG KONG (--%)
Multi-Industry (--%)
50,000 Jardine Strategic Holdings cumulative convertible
preferred--7.5%................................................ 54,500
--------------
MEXICO (1.0%)
Financial Services (1.0%)
44,210 Nacional Financiera ADR--11.25%.................................. 1,458,930
--------------
UNITED KINGDOM (.2%)
Energy Services (.2%)
137,700 Welsh Water...................................................... 233,034
--------------
Total preferred stocks and other
(cost $3,430,146)....................................................... 3,937,555
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (1.0%)
HONG KONG (1.0%)
Finance (1.0%)
$1,680,000 PIV Investment Finance...................................... 4.50% 12/01/00 1,394,400
------------
Total long-term debt securities (cost $1,388,161).............................. 1,394,400
------------
SHORT-TERM SECURITIES (11.6%)
5,000,000 Federal Home Loan Mortgage Corporation...................... 5.580% 02/01/96 4,975,975
4,000,000 Federal Home Loan Mortgage Corporation...................... 5.440% 02/16/96 3,971,708
2,500,000 Federal National Mortgage Association....................... 5.620% 01/05/96 2,498,439
1,060,000 U.S. Treasury Note.......................................... 8.875% 02/15/96 1,064,638
3,785,000 Prime Value Fund, Inc.--Cash Investment Fund, current rate 5.47%............... 3,785,000
------------
Total short-term securities (cost $16,293,193)................................. 16,295,760
------------
Total investments in securities (cost $125,744,541) (e)........................ $139,447,062
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securites are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) PRIDES--Preferred Redeemed Increased Dividend Equity Securities are
structured as convertible preferred securities issued by a company.
Investors receive an enhanced yield but based upon a specific formula,
potential appreciation is limited. PRIDES pay dividends, have voting rights,
are noncallable for three years and upon maturity, convert into shares of
common stock.
(d) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. (See note 7 to the
financial statements). Information concerning the illiquid securities held
at December 31, 1995, which includes acquisition date and cost, is as
follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- ------------------------------------------------------------ ----------- ----------
<S> <C> <C>
Quantas Airways Limited..................................... Various $ 942,793
Bohler-Uddeholm............................................. Various 824,910
Va Technologie.............................................. Various 1,026,767
Banque Nationale de Paris................................... Various 2,172,218
----------
$4,966,688
----------
----------
</TABLE>
(e) At December 31, 1995 the cost of securities for federal income tax purposes
was $127,707,556. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation..................... $18,036,041
Gross unrealized depreciation..................... (6,296,535)
-----------
Net unrealized appreciation....................... $11,739,506
-----------
-----------
-46-
<PAGE>
SMALL COMPANY PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
COMMON STOCKS (85.9%)
CAPITAL GOODS (8.4%)
Machinery (8.4%)
28,500 AES China Generating Co Ltd (b)(c).......................... $ 228,000
46,350 Blount International Incorporated........................... 1,216,688
68,500 Elsag Bailey Process Automation (b)(c)...................... 1,840,937
2,000 Kaydon Corporation.......................................... 60,750
18,100 Millipore Corporation....................................... 744,363
56,400 MSC Industrial Direct Co (b)................................ 1,551,000
70,705 United Waste Systems, Inc (b)............................... 2,633,761
------------
8,275,499
------------
CONSUMER GOODS AND SERVICES (37.0%)
Consumer Goods (7.8%)
40,585 Columbia/HCA Healthcare Corporation......................... 2,059,689
63,300 Idexx Laboratories Inc (b).................................. 2,975,100
19,834 Occusystems, Incorporated (b)............................... 396,680
22,500 Teva Pharmaceutical Industries (c).......................... 1,043,438
19,300 United Health Care.......................................... 1,264,150
------------
7,739,057
------------
Consumer Services (9.6%)
59,774 Big Flower Press Holdings Incorporated (b).................. 926,497
58,700 Carmike Cinemas Inc (b)..................................... 1,320,750
42,959 CUC International Inc (b)................................... 1,465,976
43,100 Gartner (b)................................................. 2,063,413
37,200 GTECH Holdings Corporation (b).............................. 967,200
21,900 Lone Star Steakhouse & Saloon, Inc (b)...................... 840,412
34,502 Manpower.................................................... 970,369
37,900 Sola International Inc (b).................................. 956,975
------------
9,511,592
------------
Retail (14.5%)
74,000 Advanced Lighting Technologies, Inc (b)..................... 740,000
7,400 Amerisource Health Corporation (b).......................... 244,200
7,400 APAC Teleservices, Incorporated (b)......................... 246,975
54,100 Barnes & Noble Inc (b)...................................... 1,568,900
67,520 Borders Group Incorporated (b).............................. 1,249,120
67,100 BT Office Products International, Inc (b)(c)................ 1,073,600
95,300 Casey's General Stores Inc.................................. 2,084,688
44,000 Eastbay Incorporated (b).................................... 869,000
51,700 Friedman's (b).............................................. 995,225
54,400 Global Directmail Corporation (b)........................... 1,496,000
25,300 Home Depot Inc.............................................. 1,211,237
2,800 Intimate Brands Inc......................................... 42,000
18,800 Kohl's Inc (b).............................................. 987,000
40,388 Office Depot, Inc (b)....................................... 797,663
33,500 Orchard Supply Hardware (b)................................. 690,937
------------
14,296,545
------------
Consumer Cyclicals (5.1%)
32,108 Exide Corporation........................................... 1,472,954
27,100 Stant Corporation........................................... 264,225
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
77,600 Tommy Hilfiger Corporation (b).............................. $ 3,288,300
------------
5,025,479
------------
CREDIT SENSITIVE (9.8%)
Finance (8.3%)
66,800 Amerin (b).................................................. 1,786,900
47,365 First Data Corporation...................................... 3,167,534
5,900 MGIC Investment Corporation................................. 320,075
57,100 Partnerre Ltd (c)........................................... 1,570,250
70,700 Roosevelt Financial Group, Inc.............................. 1,369,813
------------
8,214,572
------------
Utilities (1.5%)
66,600 Pansamsat Corporation (b)................................... 1,469,362
------------
INTERMEDIATE GOODS AND SERVICES (6.3%)
Materials (2.7%)
24,126 Cambrex Corporation......................................... 998,213
90,800 Citation Corporation (b).................................... 1,089,600
38,070 McWhorter Technology Inc (b)................................ 561,533
600 Valspar Corporation......................................... 26,775
------------
2,676,121
------------
Transportation (3.6%)
24,000 Eagle USA Airfreight, Inc (b)............................... 630,000
40,400 Fritz Companies (b)......................................... 1,676,600
48,300 Landstar System, Inc (b) ................................... 1,292,025
------------
3,598,625
------------
TECHNOLOGY (24.4%)
14,700 Acxiom Corporation (b)...................................... 402,412
14,800 Adtran Incorporated (b)..................................... 803,825
29,900 The Bisys Group Inc (b)..................................... 919,425
21,000 C-Cube Microsystems Incorporated (b)........................ 1,312,500
1,900 CKS Group Incorporated (b).................................. 74,100
30,400 Cognex Corporation (b)...................................... 1,056,400
67,507 Computer Associates International........................... 3,839,461
110,200 Computron Software (b)...................................... 1,983,600
82,302 Danka Business Systems (c).................................. 3,045,174
1,932 Datastream Systems, Incorporated (b)........................ 36,708
37,900 DSC Communications (b)...................................... 1,397,562
34,373 Fore Systems Inc (b)........................................ 2,045,194
58,700 Informix Corporation (b).................................... 1,761,000
20,100 J Ray McDermott Holdings Incorporated (b)................... 359,288
57,800 Mercury Interactive Corp (b)................................ 1,054,850
9,600 Objective Systems Integrator (b)............................ 525,600
46,100 Oracle Corporation (b)...................................... 1,953,487
25,300 Telephone and Data Systems, Inc............................. 999,350
8,500 Uunet Technologies, Incorporated (b)........................ 535,500
------------
24,105,436
------------
Total common stocks
(cost: $64,528,729)................................................ 84,912,288
------------
</TABLE>
See accompanying notes to investments in securities.
-47-
<PAGE>
SMALL COMPANY PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- --------------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (18.6%)
$4,300,000 U.S. Treasury Bill............................................... 5.39%-5.45% 01/11/96 $ 4,292,702
2,970,000 U.S. Treasury Bill............................................... 5.44%-5.48% 02/15/96 2,951,586
2,500,000 American Home Products CP (d).................................... 5.86% 01/17/96 2,492,703
2,100,000 CPC International Incorporated CP (d)............................ 5.86% 01/08/96 2,096,675
1,375,000 Public Service Electric & Gas Company CP......................... 6.09% 01/19/96 1,370,565
1,480,000 U.S. West Communications CP (d).................................. 5.84% 01/10/96 1,477,188
3,679,638 Temporary Investment Fund, Inc.--TempFund Portfolio, current rate 5.82%................. 3,679,638
--------------
Total short-term securities (cost: $18,361,370)......................................... 18,361,057
--------------
Total investments in securities (cost: $82,890,099) (e)................................. $ 103,273,345
--------------
--------------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The portfolio held 8.9% of net assets in foreign securities at December 31,
1995.
(d) Commercial paper sold within terms of a private placement memorandum exempt
from registration under Section 4(2) the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited
investors." (See note 7 to the financial statements). Information concerning
the illiquid securities held at December 31, 1995, which includes
acquisition date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- -------- ----------- ----------
<S> <C> <C>
American Home Products............................ 11/9/95 $2,472,592
CPC International Incorporated.................... 12/12/95 2,090,944
U.S. West Communications.......................... 12/7/95 1,471,991
----------
$6,035,527
----------
----------
</TABLE>
(e) At December 31, 1995 the cost of securities for federal income tax purposes
was $82,891,847. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation..................... $21,662,422
Gross unrealized depreciation..................... (1,280,924)
-----------
Net unrealized appreciation....................... $20,381,498
-----------
-----------
-48-
<PAGE>
MATURING GOVERNMENT BOND 1998 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- ----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (99.6%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (99.6%)
$ 266,000 Federal National Mortgage Association Strip (b)............. 7.065% 05/22/98 $ 233,979
356,000 Federal National Mortgage Association Strip (b)............. 7.110% 11/22/98 304,536
350,000 Federal National Mortgage Association Strip (b)............. 7.050% 05/22/99 290,913
615,000 Federal Home Loan Bank Strip (b)............................ 6.730% 08/25/98 533,586
1,000,215 Treasury Receipt (b)........................................ 6.610% 05/15/99 835,519
120,000 U. S. Treasury Strip (b).................................... 6.290% 11/15/98 103,397
1,000,000 U. S. Treasury Strip (b).................................... 6.505% 11/15/98 861,639
590,000 Financial Corporation Strip (b)............................. 6.620% 05/30/99 489,410
500,000 Guaranteed Trust Certificates (b)........................... 6.570% 11/15/98 429,155
211,000 Guaranteed Trust Certificates Collateral Trust (b).......... 7.075% 11/15/98 181,103
900,000 Tennessee Valley Authority Strip (b)........................ 6.720% 10/15/98 773,971
----------
Total long-term debt securities (cost: $4,863,662)............................. 5,037,208
----------
SHORT-TERM SECURITIES (.3%)
13,293 Trust for Federal Securities--Federal Trust Fund, current rate 5.58%........... 13,293
----------
Total short-term securities (cost: $13,293).................................... 13,293
----------
Total investment in securities (cost: $4,876,955) (c).......................... $5,050,501
----------
----------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
(c) At December 31, 1995, the cost of securities for federal income tax
purposes was $4,876,955. The aggregate unrealized appreciation and
depreciation of investments in securities based on this cost were:
Gross unrealized appreciation..................... $173,546
Gross unrealized depreciation..................... --
--------
Net unrealized appreciation....................... $173,546
--------
--------
-49-
<PAGE>
MATURING GOVERNMENT BOND 2002 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- ------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (100.1%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (100.1%)
$ 525,000 Federal National Mortgage Association Strip (b).................. 7.600 % 02/01/02 $ 372,613
500,000 Financial Corporation Strip (b).................................. 7.400 % 06/27/02 346,230
1,000,000 Guaranteed Trust Certificates (b)................................ 7.300 % 05/15/02 701,579
1,150,000 Tennessee Valley Authority Strips (b)............................ 7.400 % 04/15/03 754,732
1,003,750 Treasury Receipt (b)............................................. 7.100 % 08/15/02 696,100
260,000 U.S. Treasury Strip (b).......................................... 6.970 % 08/15/02 181,898
------------
Total long-term debt securities (cost: $2,775,121)...................................... 3,053,152
------------
SHORT-TERM SECURITIES (.3%)
8,485 Trust for Federal Securities--Federal Trust Fund, current rate 5.58%.................... 8,485
------------
Total short-term securities (cost: $8,485).............................................. 8,485
------------
Total investment in securities (cost: $2,783,606) (c)................................... $ 3,061,637
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
(c) At December 31, 1995, the cost of securities for federal income tax
purposes was $2,783,606. The aggregate unrealized appreciation and
depreciation of investments in securities based on this cost were:
Gross unrealized appreciation..................... $278,031
Gross unrealized depreciation..................... --
--------
Net unrealized appreciation....................... $278,031
--------
--------
-50-
<PAGE>
MATURING GOVERNMENT BOND 2006 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- ------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (96.7%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (96.7%)
$ 810,000 Federal National Mortgage Association Strip (b).................. 7.620 % 08/01/05 $ 457,819
921,000 Financial Corporation Strip (b).................................. 7.735 % 09/07/07 449,945
553,000 Government Trust Certificates (b)................................ 7.440 % 11/15/05 309,762
1,000,000 Resolution Funding Corporation Strip (b)......................... 7.460 % 07/15/07 506,959
1,000,020 Treasury Receipt (b)............................................. 7.460 % 02/15/07 517,590
450,000 U.S. Treasury Strip (b).......................................... 7.355 % 11/15/06 241,483
------------
Total long-term debt securities (cost: $2,127,113)...................................... 2,483,558
------------
SHORT-TERM SECURITIES (--%)
5 Trust for Federal Securities--Federal Trust Fund, current rate 5.58%.................... 5
------------
Total short-term securities (cost: $5).................................................. 5
------------
Total investment in securities (cost: $2,127,118) (c)................................... $ 2,483,563
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
(c) At December 31, 1995, the cost of securities for federal income tax
purposes was $2,127,118. The aggregate unrealized appreciation and
depreciation of investments in securities based on this cost were:
Gross unrealized appreciation..................... $356,445
Gross unrealized depreciation..................... --
--------
Net unrealized appreciation....................... $356,445
--------
--------
-51-
<PAGE>
MATURING GOVERNMENT BOND 2010 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- ----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (93.7%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (93.7%)
$500,000 Federal National Mortgage Association Strip (b)............. 7.700% 02/12/10 $ 206,929
500,000 Financial Corporation Strip (b)............................. 7.770% 06/06/11 187,164
945,000 Financial Corporation Strip (b)............................. 7.920% 08/08/11 349,470
132,000 Guaranteed Trust Certificates (b)........................... 7.660% 05/15/10 54,367
515,000 State of Israel, Zero Coupon (b)............................ 8.265% 03/15/10 216,001
350,000 Resolution Funding Corporation (b).......................... 7.590% 04/15/11 137,455
335,000 U.S. Treasury Strip (b)..................................... 7.490% 02/15/10 145,189
----------
Total long-term debt securities (cost: $1,047,207)............................. 1,296,575
----------
SHORT-TERM SECURITIES (--%)
50 Trust for Federal Securities--Federal Trust Fund, current rate 5.58%........... 50
----------
Total short-term securities (cost: $50)........................................ 50
----------
Total investment in securities (cost: $1,047,257) (c).......................... $1,296,625
----------
----------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
(c) At December 31, 1995, the cost of securities for federal income tax
purposes was $1,047,257. The aggregate unrealized appreciation and
depreciation of investments in securities based on this cost were:
Gross unrealized appreciation..................... $249,368
Gross unrealized depreciation..................... --
--------
Net unrealized appreciation....................... $249,368
--------
--------
-52-
<PAGE>
VALUE STOCK PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1995
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- -------------
<C> <S> <C>
COMMON STOCKS (86.9%)
CAPITAL GOODS (5.6%)
Machinery
8,600 HIG Hartford (b)................................................. $ 416,025
8,600 ITT Corporation (b).............................................. 455,800
8,600 ITT Industries (b)............................................... 206,400
46,575 Reading & Bates Corporation (b).................................. 698,625
-------------
1,776,850
-------------
CONSUMER GOODS AND SERVICES (18.8%)
Consumer Goods (1.9%)
12,089 Columbia/HCA Healthcare Corporation.............................. 613,517
-------------
613,517
-------------
Consumer Services (4.4%)
41,300 Bowne & Company, Incorporated.................................... 826,000
8,900 Knight-Ridder, Inc............................................... 556,250
-------------
1,382,250
-------------
Retail (5.2%)
60,100 Federated Department Stores (b).................................. 1,652,750
-------------
1,652,750
-------------
Consumer Cyclicals (7.3%)
35,200 Owens-Corning Fiberglas Corporation (b).......................... 1,579,600
25,200 USG Corporation (b).............................................. 756,000
-------------
2,335,600
-------------
CREDIT SENSITIVE (23.7%)
Finance (21.0%)
32,468 Prudential Reinsurance Holdings, Incorporated.................... 758,940
64,800 Green Point Financial Corporation................................ 1,733,400
41,200 Lehman Brothers Holdings, Inc.................................... 875,500
18,100 MBIA Inc......................................................... 1,357,500
13,125 RLI Corporation.................................................. 328,124
56,800 TIG Holdings Inc................................................. 1,618,800
-------------
6,672,264
-------------
Utilities (2.7%)
21,400 Texas Utilities Company.......................................... 880,075
-------------
880,075
-------------
INTERMEDIATE GOODS AND SERVICES (35.8%)
Energy (13.1%)
19,100 The Columbia Gas System, Inc. (b)................................ 838,013
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- -------------
<C> <S> <C>
INTERMEDIATE GOODS AND SERVICES--CONTINUED
34,800 Tenneco Inc...................................................... $ 1,726,950
42,900 USX--Marathon Group.............................................. 836,550
35,200 YPF Sociedad Anonima (c)......................................... 761,200
-------------
4,162,713
-------------
Materials (15.9%)
24,900 Citation Corporation (b)......................................... 298,800
15,100 Cytec Industries Inc (b)......................................... 941,862
32,300 Fort Howard Corporation (b)...................................... 726,750
14,500 W.R. Grace & Co.................................................. 857,313
13,338 Kimberly-Clark Corporation....................................... 1,103,720
26,100 Morton International............................................. 936,337
22,400 Sterling Chemicals (b)........................................... 182,000
-------------
5,046,782
-------------
Transportation (6.8%)
6,500 Burlington Northern Santa Fe..................................... 507,000
3,583 Canadian National Railway Company (b)(c)......................... 53,745
22,300 Teekay Shipping Corporation (c).................................. 526,838
34,500 Tidewater Incorporated........................................... 1,086,750
-------------
2,174,333
-------------
TECHNOLOGY (3.0%)
13,900 Rohr Incorporated (b)............................................ 199,813
5,500 Xerox Corporation................................................ 753,500
-------------
953,313
-------------
Total common stocks
(cost: $24,472,281)..................................................... 27,650,447
-------------
<CAPTION>
PRINCIPAL
- ---------
<C> <S> <C>
SHORT-TERM SECURITIES (12.8%)
$1,270,138 Trust for Federal Securities--Federal Trust Fund, current rate
5.58%.......................................................... 1,270,138
500,000 U.S. Treasury Bill 5.41% 01/11/96................................ 499,151
835,000 U.S. Treasury Bills 5.07%-5.48% 02/15/96......................... 829,823
1,500,000 U.S. Treasury Bills 4.89%-5.00% 03/21/96......................... 1,483,054
-------------
Total short-term securities
(cost: $4,082,531)...................................................... 4,082,166
-------------
Total investment in securities
(cost: $28,554,812) (d)................................................. $31,732,613
-------------
-------------
</TABLE>
Notes to Investments in Securities
- ----------------------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The portfolio held 4.2% of net assets in foreign securities at December 31,
1995.
(d) At December 31, 1995, the cost of securities for federal income tax purposes
was $28,575,547. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation..................... $3,221,178
Gross unrealized depreciation..................... (64,112)
----------
Net unrealized appreciation....................... $3,157,066
----------
----------
-53-
<PAGE>
MIMLIC SERIES FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MONEY ASSET
GROWTH BOND MARKET ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at
market value--see accompanying
schedules for detailed listing
(identified cost: $165,889,798;
$94,879,573; $29,446,178;
$309,752,525; $66,790,495;
$90,220,552; $127,441,407;
$125,744,541; $82,890,099;
$4,876,955; $2,783,606;
$2,127,118; $1,047,257 and
$28,554,812, respectively)...... $ 201,143,358 $ 98,452,711 $ 29,446,178 $346,646,001
Cash in bank on demand deposit..... 4,640 2,116 117,202 39,849
Receivable for Fund shares sold.... 197,511 221,017 643,901 305,801
Receivable for investment
securities sold................. 302,787 1,401,294 -- 3,065,313
Dividends and accrued interest
receivable...................... 316,197 1,183,086 5,197 1,729,243
Unrealized appreciation on forward
foreign currency contracts held,
at value (note 4)............... -- -- -- --
Receivable for foreign income taxes
withheld........................ -- -- -- --
------------- ------------ ------------ ------------
Total assets................. 201,964,493 101,260,224 30,212,478 351,786,207
------------- ------------ ------------ ------------
LIABILITIES
Payable to Minnesota Mutual........ 36 10 13 56
Dividends payable to
shareholders.................... -- -- 8,299 --
Payable for Fund shares
repurchased..................... 171,741 49,186 37,786 133,081
Payable for investment securities
purchased....................... 115,158 166,199 -- 2,642,756
Unrealized depreciation on forward
foreign currency contracts held,
at value (note 4)............... -- -- -- --
------------- ------------ ------------ ------------
Total liabilities............ 286,935 215,395 46,098 2,775,893
------------- ------------ ------------ ------------
Net assets applicable to
outstanding capital stock....... $ 201,677,558 $101,044,829 $ 30,166,380 $349,010,314
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
Represented by:
Capital stock--authorized
10,000,000,000 shares of $.01
par value; outstanding;
91,271,988; 75,844,415;
30,166,380; 191,083,577;
57,777,560; 61,280,850;
75,688,165; 99,811,081;
61,715,077; 4,872,708;
2,796,063; 2,189,242;
1,139,862 and 24,263,572
shares, respectively.......... $ 912,720 $ 758,444 $ 301,664 $ 1,910,836
Additional paid-in capital..... 146,052,376 90,084,286 29,864,716 277,509,298
Undistributed net investment
income........................ 1,885,333 5,666,378 -- 11,587,244
Accumulated net realized gains
(losses) from investments and
foreign currency
transactions.................. 17,573,569 962,583 -- 21,109,460
Unrealized appreciation of
investments and translation of
assets and liabilities in
foreign currencies............ 35,253,560 3,573,138 -- 36,893,476
------------- ------------ ------------ ------------
Total--representing net
assets applicable to
outstanding capital stock... $ 201,677,558 $101,044,829 $ 30,166,380 $349,010,314
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
Net asset value per share of
outstanding capital stock....... $ 2.210 $ 1.332 $ 1.000 $ 1.826
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
-54-
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE CAPITAL INTERNATIONAL SMALL
SECURITIES INDEX 500 APPRECIATION STOCK COMPANY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at
market value--see accompanying
schedules for detailed listing
(identified cost: $165,889,798;
$94,879,573; $29,446,178;
$309,752,525; $66,790,495;
$90,220,552; $127,441,407;
$125,744,541; $82,890,099;
$4,876,955; $2,783,606;
$2,127,118; $1,047,257 and
$28,554,812, respectively)........ $ 69,343,548 $123,757,392 $162,595,638 $139,447,062 $103,273,345
Cash in bank on demand deposit..... 1,904 22,507 87 33,549 14,120
Receivable for Fund shares sold.... 90,635 506,569 228,825 325,806 237,280
Receivable for investment
securities sold................... -- 249,492 675,489 772,712 134,127
Dividends and accrued interest
receivable........................ 616,672 230,591 111,738 474,557 33,337
Unrealized appreciation on forward
foreign currency contracts held,
at value (note 4)................. -- -- -- 70 --
Receivable for foreign income taxes
withheld.......................... -- -- -- 236,490 --
------------ ----------- ------------ ------------ -----------
Total assets................. 70,052,759 124,766,551 163,611,777 141,290,246 103,692,209
------------ ----------- ------------ ------------ -----------
LIABILITIES
Payable to Minnesota Mutual........ 2 3 -- 18 59
Dividends payable to
shareholders...................... -- -- -- -- --
Payable for Fund shares
repurchased....................... 24,288 332,102 91,997 53,962 37,428
Payable for investment securities
purchased......................... 282,496 435,847 -- 459,370 4,759,796
Unrealized depreciation on forward
foreign currency contracts held,
at value (note 4)................. -- -- -- 7,331 --
------------ ----------- ------------ ------------ -----------
Total liabilities............ 306,786 767,952 91,997 520,681 4,797,283
------------ ----------- ------------ ------------ -----------
Net assets applicable to
outstanding capital stock......... $ 69,745,973 $123,998,599 $163,519,780 $140,769,565 $98,894,926
------------ ----------- ------------ ------------ -----------
------------ ----------- ------------ ------------ -----------
Represented by:
Capital stock--authorized
10,000,000,000 shares of $.01
par value; outstanding;
91,271,988; 75,844,415;
30,166,380; 191,083,577;
57,777,560; 61,280,850;
75,688,165; 99,811,081;
61,715,077; 4,872,708;
2,796,063; 2,189,242;
1,139,862 and 24,263,572
shares, respectively.......... $ 577,776 $ 612,809 $ 756,882 $ 998,111 $ 617,151
Additional paid-in capital..... 65,374,590 87,010,235 122,863,163 119,236,761 75,448,985
Undistributed net investment
income........................ 4,531,053 1,984,153 -- 4,201,200 963
Accumulated net realized gains
(losses) from investments and
foreign currency
transactions.................. (3,290,499) 854,562 4,745,504 2,636,296 2,444,581
Unrealized appreciation of
investments and translation of
assets and liabilities in
foreign currencies............ 2,553,053 33,536,840 35,154,231 13,697,197 20,383,246
------------ ----------- ------------ ------------ -----------
Total--representing net
assets applicable to
outstanding capital stock... $ 69,745,973 $123,998,599 $163,519,780 $140,769,565 $98,894,926
------------ ----------- ------------ ------------ -----------
------------ ----------- ------------ ------------ -----------
Net asset value per share of
outstanding capital stock......... $ 1.207 $ 2.023 $ 2.160 $ 1.410 $ 1.602
------------ ----------- ------------ ------------ -----------
------------ ----------- ------------ ------------ -----------
<CAPTION>
MATURING MATURING MATURING MATURING
GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT VALUE
BOND 1998 BOND 2002 BOND 2006 BOND 2010 STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at
market value--see accompanying
schedules for detailed listing
(identified cost: $165,889,798;
$94,879,573; $29,446,178;
$309,752,525; $66,790,495;
$90,220,552; $127,441,407;
$125,744,541; $82,890,099;
$4,876,955; $2,783,606;
$2,127,118; $1,047,257 and
$28,554,812, respectively)........ $5,050,501 $3,061,637 $2,483,563 $1,296,625 $31,732,613
Cash in bank on demand deposit..... 5,178 8,284 85 8,796 35,055
Receivable for Fund shares sold.... 4 -- 85,904 285,938 189,221
Receivable for investment
securities sold................... -- -- -- -- --
Dividends and accrued interest
receivable........................ 1,361 40 -- -- 47,329
Unrealized appreciation on forward
foreign currency contracts held,
at value (note 4)................. -- -- -- -- --
Receivable for foreign income taxes
withheld.......................... -- -- -- -- --
---------- ----------- ----------- ----------- ------------
Total assets................. 5,057,044 3,069,961 2,569,552 1,591,359 32,004,218
---------- ----------- ----------- ----------- ------------
LIABILITIES
Payable to Minnesota Mutual........ -- -- -- -- --
Dividends payable to
shareholders...................... -- -- -- -- --
Payable for Fund shares
repurchased....................... 191 20,535 -- 207,763 11,536
Payable for investment securities
purchased......................... -- -- -- -- 167,648
Unrealized depreciation on forward
foreign currency contracts held,
at value (note 4)................. -- -- -- -- --
---------- ----------- ----------- ----------- ------------
Total liabilities............ 191 20,535 -- 207,763 179,184
---------- ----------- ----------- ----------- ------------
Net assets applicable to
outstanding capital stock......... $5,056,853 $3,049,426 $2,569,552 $1,383,606 $31,825,034
---------- ----------- ----------- ----------- ------------
---------- ----------- ----------- ----------- ------------
Represented by:
Capital stock--authorized
10,000,000,000 shares of $.01
par value; outstanding;
91,271,988; 75,844,415;
30,166,380; 191,083,577;
57,777,560; 61,280,850;
75,688,165; 99,811,081;
61,715,077; 4,872,708;
2,796,063; 2,189,242;
1,139,862 and 24,263,572
shares, respectively.......... $ 48,727 $ 27,961 $ 21,892 $ 11,399 $ 242,636
Additional paid-in capital..... 4,830,820 2,746,405 2,187,501 1,137,132 27,887,908
Undistributed net investment
income........................ 3,760 -- 1,524 1,072 3,814
Accumulated net realized gains
(losses) from investments and
foreign currency
transactions.................. -- (2,971 ) 2,190 (15,365 ) 512,875
Unrealized appreciation of
investments and translation of
assets and liabilities in
foreign currencies............ 173,546 278,031 356,445 249,368 3,177,801
---------- ----------- ----------- ----------- ------------
Total--representing net
assets applicable to
outstanding capital stock... $5,056,853 $3,049,426 $2,569,552 $1,383,606 $31,825,034
---------- ----------- ----------- ----------- ------------
---------- ----------- ----------- ----------- ------------
Net asset value per share of
outstanding capital stock......... $ 1.038 $ 1.091 $ 1.174 $ 1.214 $ 1.312
---------- ----------- ----------- ----------- ------------
---------- ----------- ----------- ----------- ------------
</TABLE>
-55-
<PAGE>
MIMLIC SERIES FUND, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
MONEY ASSET
GROWTH BOND MARKET ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Investment income:
Interest....................... $ 897,915 $6,164,380 $1,502,605 $11,385,019
Dividends (net of foreign
withholding taxes of $493,504
for International Stock
Portfolio).................... 1,992,607 -- -- 1,897,709
----------- ---------- --------- -----------
Total investment income.... 2,890,522 6,164,380 1,502,605 13,282,728
----------- ---------- --------- -----------
Expenses (note 5):
Investment advisory fee........ 905,136 435,045 126,630 1,538,272
Custodian fees................. 12,762 5,294 4,802 27,405
Administrative service fee..... 20,200 20,200 20,200 20,200
Auditing and accounting
services...................... 17,149 5,569 2,229 34,384
Legal fees..................... 311 311 311 311
Registration fees.............. 11,870 12,462 1,624 11,371
Printing and shareholder
reports....................... 31,218 15,478 4,595 53,292
Directors' fees................ 3,563 1,686 495 6,078
Insurance...................... 2,980 1,957 936 4,171
----------- ---------- --------- -----------
Total expenses............. 1,005,189 498,002 161,822 1,695,484
Less fees and expenses waived
or absorbed by Minnesota
Mutual........................ -- -- -- --
----------- ---------- --------- -----------
Total net expenses......... 1,005,189 498,002 161,822 1,695,484
----------- ---------- --------- -----------
Investment income
(loss)--net............... 1,885,333 5,666,378 1,340,783 11,587,244
----------- ---------- --------- -----------
Realized and unrealized gains
(losses) on investments and
foreign currencies:
Net realized gains (losses)
from:
Investments (note 3)....... 17,645,339 3,734,900 -- 22,040,129
Foreign currency
transactions.............. -- -- -- --
Net change in unrealized
appreciation or depreciation
on:
Investments................ 19,185,038 5,968,239 -- 34,618,189
Translation of assets and
liabilities in foreign
currencies................ -- -- -- --
----------- ---------- --------- -----------
Net gains on investments... 36,830,377 9,703,139 -- 56,658,318
----------- ---------- --------- -----------
Net increase in net assets
resulting from operations....... $38,715,710 $15,369,517 $1,340,783 $68,245,562
----------- ---------- --------- -----------
----------- ---------- --------- -----------
</TABLE>
See accompanying notes to financial statements.
-56-
<PAGE>
<TABLE>
<CAPTION>
MATURING MATURING
MORTGAGE CAPITAL INTERNATIONAL SMALL GOVERNMENT GOVERNMENT
SECURITIES INDEX 500 APPRECIATION STOCK COMPANY BOND 1998 BOND 2002
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ----------- ------------ ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest....................... $4,904,558 $ 33,252 $ 133,829 $ 949,212 $ 572,119 $280,494 $193,545
Dividends (net of foreign
withholding taxes of $493,504
for International Stock
Portfolio).................... -- 2,400,597 800,610 3,617,252 157,560 -- --
---------- ----------- ------------ ------------- ---------- ---------- ----------
Total investment income.... 4,904,558 2,433,849 934,439 4,566,464 729,679 280,494 193,545
---------- ----------- ------------ ------------- ---------- ---------- ----------
Expenses (note 5):
Investment advisory fee........ 322,465 388,206 1,071,527 955,095 552,670 2,184 1,441
Custodian fees................. 7,334 7,343 8,552 107,323 11,359 2,381 2,332
Administrative service fee..... 20,200 20,200 20,200 20,200 20,200 20,200 20,200
Auditing and accounting
services...................... 7,249 7,609 12,169 146,527 5,259 3,899 3,899
Legal fees..................... 311 311 311 311 311 311 311
Registration fees.............. 828 6,069 10,075 18,215 12,303 104 80
Printing and shareholder
reports....................... 12,171 16,128 24,076 21,567 12,047 1,939 1,736
Directors' fees................ 1,278 1,824 2,770 2,399 1,355 86 57
Insurance...................... 1,669 2,006 2,519 2,402 1,712 424 416
---------- ----------- ------------ ------------- ---------- ---------- ----------
Total expenses............. 373,505 449,696 1,152,199 1,274,039 617,216 31,528 30,472
Less fees and expenses waived
or absorbed by Minnesota
Mutual........................ -- -- -- -- -- (22,794) (24,709)
---------- ----------- ------------ ------------- ---------- ---------- ----------
Total net expenses......... 373,505 449,696 1,152,199 1,274,039 617,216 8,734 5,763
---------- ----------- ------------ ------------- ---------- ---------- ----------
Investment income
(loss)--net............... 4,531,053 1,984,153 (217,760) 3,292,425 112,463 271,760 187,782
---------- ----------- ------------ ------------- ---------- ---------- ----------
Realized and unrealized gains
(losses) on investments and
foreign currencies:
Net realized gains (losses)
from:
Investments (note 3)....... 1,181,245 989,818 6,284,588 4,783,539 3,782,537 1,067 8,323
Foreign currency
transactions.............. -- -- -- (99,232) -- -- --
Net change in unrealized
appreciation or depreciation
on:
Investments................ 4,752,049 26,535,228 21,970,841 8,233,684 16,659,924 359,251 446,613
Translation of assets and
liabilities in foreign
currencies................ -- -- -- (6,319) -- -- --
---------- ----------- ------------ ------------- ---------- ---------- ----------
Net gains on investments... 5,933,294 27,525,046 28,255,429 12,911,672 20,442,461 360,318 454,936
---------- ----------- ------------ ------------- ---------- ---------- ----------
Net increase in net assets
resulting from operations......... $10,464,347 $29,509,199 $28,037,669 $16,204,097 $20,554,924 $632,078 $642,718
---------- ----------- ------------ ------------- ---------- ---------- ----------
---------- ----------- ------------ ------------- ---------- ---------- ----------
<CAPTION>
MATURING MATURING
GOVERNMENT GOVERNMENT VALUE
BOND 2006 BOND 2010 STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ----------
<S> <C> <C> <C>
Investment income:
Interest....................... $151,744 $ 80,693 $ 91,932
Dividends (net of foreign
withholding taxes of $493,504
for International Stock
Portfolio).................... -- -- 312,165
---------- ---------- ----------
Total investment income.... 151,744 80,693 404,097
---------- ---------- ----------
Expenses (note 5):
Investment advisory fee........ 5,450 2,888 141,207
Custodian fees................. 2,003 1,788 9,237
Administrative service fee..... 20,200 20,200 20,200
Auditing and accounting
services...................... 3,899 3,899 3,899
Legal fees..................... 311 311 311
Registration fees.............. 58 34 251
Printing and shareholder
reports....................... 1,622 1,458 3,591
Directors' fees................ 44 25 317
Insurance...................... 332 326 880
---------- ---------- ----------
Total expenses............. 33,919 30,929 179,893
Less fees and expenses waived
or absorbed by Minnesota
Mutual........................ (25,199) (26,308) (11,610)
---------- ---------- ----------
Total net expenses......... 8,720 4,621 168,283
---------- ---------- ----------
Investment income
(loss)--net............... 143,024 76,072 235,814
---------- ---------- ----------
Realized and unrealized gains
(losses) on investments and
foreign currencies:
Net realized gains (losses)
from:
Investments (note 3)....... 2,190 (2,181) 1,761,136
Foreign currency
transactions.............. -- -- --
Net change in unrealized
appreciation or depreciation
on:
Investments................ 504,542 334,118 3,206,550
Translation of assets and
liabilities in foreign
currencies................ -- -- --
---------- ---------- ----------
Net gains on investments... 506,732 331,937 4,967,686
---------- ---------- ----------
Net increase in net assets
resulting from operations......... $649,756 $408,009 $5,203,500
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
-57-
<PAGE>
MIMLIC SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
MONEY MARKET
GROWTH PORTFOLIO BOND PORTFOLIO PORTFOLIO
-------------------------- ------------------------- --------------------------
1995 1994 1995 1994 1995 1994
------------ ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Investment income (loss)--net.... $ 1,885,333 $ 1,650,255 $ 5,666,378 $ 2,999,724 $ 1,340,783 $ 690,788
Net realized gains (losses) on
investments and foreign currency
transactions.................... 17,645,339 6,143,355 3,734,900 (2,772,317) -- --
Net change in unrealized
appreciation or depreciation of
investments and translation of
assets and liabilities in
foreign currencies.............. 19,185,038 (6,460,154) 5,968,239 (2,447,218) -- --
------------ ------------ ----------- ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from
operations.................... 38,715,710 1,333,456 15,369,517 (2,219,811) 1,340,783 690,788
------------ ------------ ----------- ------------ ------------ ------------
Distributions to shareholders from:
Investment income--net........... (1,650,255) (1,342,938) (2,999,724) (1,934,397) (1,340,783) (690,788)
Tax return of capital............ -- -- -- -- -- --
Net realized gains............... (6,215,125) (2,762,094) -- (1,207,104) -- --
------------ ------------ ----------- ------------ ------------ ------------
Total distributions............ (7,865,380) (4,105,032) (2,999,724) (3,141,501) (1,340,783) (690,788)
------------ ------------ ----------- ------------ ------------ ------------
Capital share transactions (note
6):
Proceeds from sales.............. 32,540,549 52,498,822 24,809,311 47,311,992 36,944,812 32,779,527
Shares issued as a result of
reinvested distributions........ 7,865,380 4,105,032 2,999,724 3,141,501 1,335,757 687,516
Payments for redemption of
shares.......................... (26,947,664) (22,208,175) (13,813,438) (14,339,927) (31,221,058) (28,782,856)
------------ ------------ ----------- ------------ ------------ ------------
Increase in net assets from capital
shares transactions............. 13,458,265 34,395,679 13,995,597 36,113,566 7,059,511 4,684,187
------------ ------------ ----------- ------------ ------------ ------------
Total increase (decrease) in
net assets.................... 44,308,595 31,624,103 26,365,390 30,752,254 7,059,511 4,684,187
Net assets at beginning of year.... 157,368,963 125,744,860 74,679,439 43,927,185 23,106,869 18,422,682
------------ ------------ ----------- ------------ ------------ ------------
Net assets at end of year
(including undistributed net
investment income of $1,885,333
and $1,650,255 for Growth,
$5,666,378 and $2,999,724 for
Bond, $0 and $0 for Money
Market, $11,587,244 and
$8,662,733 for Asset Allocation,
$4,531,053 and $4,169,579 for
Mortgage Securities, $1,984,153
and $1,540,293 for Index 500, $0
and $0 for Capital Appreciation,
$4,201,200 and $0 for
International Stock and $963 and
$0 for Small Company,
respectively.................... $201,677,558 $157,368,963 $101,044,829 $ 74,679,439 $ 30,166,380 $ 23,106,869
------------ ------------ ----------- ------------ ------------ ------------
------------ ------------ ----------- ------------ ------------ ------------
<CAPTION>
ASSET ALLOCATION PORTFOLIO
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Operations:
Investment income (loss)--net.... $ 11,587,244 $ 8,662,733
Net realized gains (losses) on
investments and foreign currency
transactions.................... 22,040,129 2,416,232
Net change in unrealized
appreciation or depreciation of
investments and translation of
assets and liabilities in
foreign currencies.............. 34,618,189 (14,485,429)
------------ ------------
Net increase (decrease) in net
assets resulting from
operations.................... 68,245,562 (3,406,464)
------------ ------------
Distributions to shareholders from:
Investment income--net........... (8,662,733) (5,362,473)
Tax return of capital............ -- --
Net realized gains............... (3,165,106) (1,562,683)
------------ ------------
Total distributions............ (11,827,839) (6,925,156)
------------ ------------
Capital share transactions (note
6):
Proceeds from sales.............. 63,178,126 84,259,037
Shares issued as a result of
reinvested distributions........ 11,827,839 6,925,156
Payments for redemption of
shares.......................... (55,042,670) (58,234,439)
------------ ------------
Increase in net assets from capital
shares transactions............. 19,963,295 32,949,754
------------ ------------
Total increase (decrease) in
net assets.................... 76,381,018 22,618,134
Net assets at beginning of year.... 272,629,296 250,011,162
------------ ------------
Net assets at end of year
(including undistributed net
investment income of $1,885,333
and $1,650,255 for Growth,
$5,666,378 and $2,999,724 for
Bond, $0 and $0 for Money
Market, $11,587,244 and
$8,662,733 for Asset Allocation,
$4,531,053 and $4,169,579 for
Mortgage Securities, $1,984,153
and $1,540,293 for Index 500, $0
and $0 for Capital Appreciation,
$4,201,200 and $0 for
International Stock and $963 and
$0 for Small Company,
respectively.................... $349,010,314 $272,629,296
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
-58-
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE SECURITIES CAPITAL APPRECIATION
PORTFOLIO INDEX 500 PORTFOLIO PORTFOLIO
------------------------- ------------------------- --------------------------
1995 1994 1995 1994 1995 1994
----------- ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Investment income (loss)--net.... $ 4,531,053 $ 4,169,579 $ 1,984,153 $ 1,540,293 $ (217,760) $ (86,869)
Net realized gains (losses) on
investments and foreign currency
transactions.................... 1,181,245 (4,453,200) 989,818 651,600 6,284,588 2,161,545
Net change in unrealized
appreciation or depreciation of
investments and translation of
assets and liabilities in
foreign currencies.............. 4,752,049 (1,979,210) 26,535,228 (1,311,857) 21,970,841 935,847
----------- ------------ ----------- ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from
operations.................... 10,464,347 (2,262,831) 29,509,199 880,036 28,037,669 3,010,523
----------- ------------ ----------- ------------ ------------ ------------
Distributions to shareholders from:
Investment income--net........... (4,169,579) (2,947,917) (1,540,293) (1,025,482) -- (79,598)
Tax return of capital............ -- -- -- -- -- --
Net realized gains............... -- (1,400,355) (609,060) (207,595) (3,373,884) (1,354,127)
----------- ------------ ----------- ------------ ------------ ------------
Total distributions............ (4,169,579) (4,348,272) (2,149,353) (1,233,077) (3,373,884) (1,433,725)
----------- ------------ ----------- ------------ ------------ ------------
Capital share transactions (note
6):
Proceeds from sales.............. 13,052,763 22,159,015 36,939,888 28,874,830 43,468,072 47,822,212
Shares issued as a result of
reinvested distributions........ 4,169,579 4,348,272 2,149,353 1,233,077 3,373,884 1,433,725
Payments for redemption of
shares.......................... (13,436,928) (24,132,164) (15,881,993) (12,532,430) (23,592,979) (20,065,399)
----------- ------------ ----------- ------------ ------------ ------------
Increase in net assets from capital
shares transactions............... 3,785,414 2,375,123 23,207,248 17,575,477 23,248,977 29,190,538
----------- ------------ ----------- ------------ ------------ ------------
Total increase (decrease) in
net assets.................... 10,080,182 (4,235,980) 50,567,094 17,222,436 47,912,762 30,767,336
Net assets at beginning of year.... 59,665,791 63,901,771 73,431,505 56,209,069 115,607,018 84,839,682
----------- ------------ ----------- ------------ ------------ ------------
Net assets at end of year
(including undistributed net
investment income of $1,885,333
and $1,650,255 for Growth,
$5,666,378 and $2,999,724 for
Bond, $0 and $0 for Money Market,
$11,587,244 and $8,662,733 for
Asset Allocation, $4,531,053 and
$4,169,579 for Mortgage
Securities, $1,984,153 and
$1,540,293 for Index 500, $0 and
$0 for Capital Appreciation,
$4,201,200 and $0 for
International Stock and $963 and
$0 for Small Company,
respectively...................... $69,745,973 $ 59,665,791 $123,998,599 $ 73,431,505 $163,519,780 $115,607,018
----------- ------------ ----------- ------------ ------------ ------------
----------- ------------ ----------- ------------ ------------ ------------
<CAPTION>
INTERNATIONAL STOCK SMALL COMPANY
PORTFOLIO PORTFOLIO
-------------------------- ------------------------
1995 1994 1995 1994
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss)--net.... $ 3,292,425 $ 1,469,931 $ 112,463 $ 72,362
Net realized gains (losses) on
investments and foreign currency
transactions.................... 4,684,307 2,343,090 3,782,537 (351,935)
Net change in unrealized
appreciation or depreciation of
investments and translation of
assets and liabilities in
foreign currencies.............. 8,227,365 (4,817,807) 16,659,924 2,760,825
------------ ------------ ----------- -----------
Net increase (decrease) in net
assets resulting from
operations.................... 16,204,097 (1,004,786) 20,554,924 2,481,252
------------ ------------ ----------- -----------
Distributions to shareholders from:
Investment income--net........... -- (2,161,324) (111,500) (72,362)
Tax return of capital............ -- (104,737) -- (138)
Net realized gains............... -- (3,143,805) (969,415) --
------------ ------------ ----------- -----------
Total distributions............ -- (5,409,866) (1,080,915) (72,500)
------------ ------------ ----------- -----------
Capital share transactions (note
6):
Proceeds from sales.............. 45,334,046 77,099,945 38,430,026 41,639,137
Shares issued as a result of
reinvested distributions........ -- 5,409,866 1,080,915 72,500
Payments for redemption of
shares.......................... (28,258,386) (29,711,207) (11,194,748) (6,058,704)
------------ ------------ ----------- -----------
Increase in net assets from capital
shares transactions............... 17,075,660 52,798,604 28,316,193 35,652,933
------------ ------------ ----------- -----------
Total increase (decrease) in
net assets.................... 33,279,757 46,383,952 47,790,202 38,061,685
Net assets at beginning of year.... 107,489,808 61,105,856 51,104,724 13,043,039
------------ ------------ ----------- -----------
Net assets at end of year
(including undistributed net
investment income of $1,885,333
and $1,650,255 for Growth,
$5,666,378 and $2,999,724 for
Bond, $0 and $0 for Money Market,
$11,587,244 and $8,662,733 for
Asset Allocation, $4,531,053 and
$4,169,579 for Mortgage
Securities, $1,984,153 and
$1,540,293 for Index 500, $0 and
$0 for Capital Appreciation,
$4,201,200 and $0 for
International Stock and $963 and
$0 for Small Company,
respectively...................... $140,769,565 $107,489,808 $98,894,926 $51,104,724
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
</TABLE>
-59-
<PAGE>
MIMLIC SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS--CONTINUED
YEAR ENDED DECEMBER 31, 1995 AND PERIOD FROM MAY 2, 1994
COMMENCEMENT OF OPERATIONS, TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
MATURING MATURING MATURING MATURING
GOVERNMENT BOND GOVERNMENT BOND GOVERNMENT BOND GOVERNMENT BOND
1998 PORTFOLIO 2002 PORTFOLIO 2006 PORTFOLIO 2010 PORTFOLIO
---------------------- ---------------------- ---------------------- ----------------------
1995 1994 1995 1994 1995 1994 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operations:
Investment income--net........ $ 271,760 $ 152,178 $ 187,782 $ 126,262 $ 143,024 $ 93,792 $ 76,072 $ 55,785
Net realized gains (losses)
on investments............... 1,067 -- 8,323 (11,294) 2,190 -- (2,181) (13,184)
Net change in unrealized
appreciation or depreciation
of investments............... 359,251 (185,705) 446,613 (168,582) 504,542 (148,097) 334,118 (84,750)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in
net assets resulting from
operations................. 632,078 (33,527) 642,718 (53,614) 649,756 (54,305) 408,009 (42,149)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Distributions to shareholders
from:
Investment income--net........ (269,178) (151,000) (189,044) (125,000) (142,792) (92,500) (75,785) (55,000)
Tax return of capital......... -- -- (6,040) -- -- -- -- --
Net realized gains............ (1,067) -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions......... (270,245) (151,000) (195,084) (125,000) (142,792) (92,500) (75,785) (55,000)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Capital share transactions (note
6):
Proceeds from sales........... 2,803,879 6,188,973 862,287 3,593,330 539,818 2,375,258 1,121,319 1,603,322
Shares issued as a result of
reinvested distributions..... 270,245 151,000 195,084 125,000 142,792 92,500 75,785 55,000
Payments for redemption of
shares....................... (1,780,820) (2,753,730) (1,030,858) (964,437) (479,630) (461,345) (1,216,768) (490,127)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net
assets from capital shares
transactions................. 1,293,304 3,586,243 26,513 2,753,893 202,980 2,006,413 (19,664) 1,168,195
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total increase in net
assets..................... 1,655,137 3,401,716 474,147 2,575,279 709,944 1,859,608 312,560 1,071,046
Net assets at beginning of
period....................... 3,401,716 -- 2,575,279 -- 1,859,608 -- 1,071,046 --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net assets at end of period.
(including undistributed net
investment income of $3,760
and $1,178 for Maturing
Government Bond 1998, $0 and
$1,262 for Maturing
Government Bond 2002, $1,524
and $1,292 for Maturing
Government Bond 2006, $1,072
and $785 for Maturing
Government Bond 2010 and
$3,814 and $1,111 for Value
Stock, respectively.......... $5,056,853 $3,401,716 $3,049,426 $2,575,279 $2,569,552 $1,859,608 $1,383,606 $1,071,046
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
VALUE STOCK
PORTFOLIO
-----------------------
1995 1994
----------- ----------
<S> <C> <C>
Operations:
Investment income--net........ $ 235,814 $ 70,111
Net realized gains (losses)
on investments............... 1,761,136 130,280
Net change in unrealized
appreciation or depreciation
of investments............... 3,206,550 (28,749)
----------- ----------
Net increase (decrease) in
net. assets resulting from
operations................. 5,203,500 171,642
----------- ----------
Distributions to shareholders
from:
Investment income--net........ (233,111) (69,000)
Tax return of capital......... -- --
Net realized gains............ (1,350,762) (27,779)
----------- ----------
Total distributions......... (1,583,873) (96,779)
----------- ----------
Capital share transactions (note
6):
Proceeds from sales........... 20,708,752 9,025,887
Shares issued as a result of
reinvested distributions..... 1,583,873 96,779
Payments for redemption of
shares....................... (2,858,057) (426,690)
----------- ----------
Increase (decrease) in net
assets from capital shares
transactions................. 19,434,568 8,695,976
----------- ----------
Total increase in net
assets..................... 23,054,195 8,770,839
Net assets at beginning of
period....................... 8,770,839 --
----------- ----------
Net assets at end of period.
(including undistributed net
investment income of $3,760
and $1,178 for Maturing
Government Bond 1998, $0 and
$1,262 for Maturing
Government Bond 2002, $1,524
and $1,292 for Maturing
Government Bond 2006, $1,072
and $785 for Maturing
Government Bond 2010 and
$3,814 and $1,111 for Value
Stock, respectively.......... $31,825,034 $8,770,839
----------- ----------
----------- ----------
</TABLE>
See accompanying notes to financial statements.
-60-
<PAGE>
MIMLIC SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) ORGANIZATION
MIMLIC Series Fund, Inc. (the Fund) is registered under the Investment
Company Act of 1940 (as amended) as a diversified, open-end management
investment company with a series of fourteen portfolios (Growth, Bond, Money
Market, Asset Allocation, Mortgage Securities, Index 500, Capital Appreciation,
International Stock, Small Company, Maturing Government Bond 1998, Maturing
Government Bond 2002, Maturing Government Bond 2006, Maturing Government Bond
2010 and Value Stock). The Fund accounts for the assets, liabilities and
operations of each portfolio separately. Shares of the Fund will not be offered
directly to the public, but sold only to The Minnesota Mutual Life Insurance
Company's (Minnesota Mutual) separate accounts in connection with Minnesota
Mutual variable contracts and policies.
On November 9, 1993, the Board of Directors approved the addition of the
Maturing Government Bond 1998, Maturing Government Bond 2002, Maturing
Government Bond 2006 and Maturing Government Bond 2010 Portfolios. On January
18, 1994, the Board of Directors approved the addition of the Value Stock
Portfolio. On April 25, 1994, Minnesota Mutual purchased shares of capital
stock, which represented the initial capital in these portfolios, as follows:
<TABLE>
<CAPTION>
NUMBER OF
PORTFOLIO SHARES
- --------- ----------
<S> <C>
Maturing Government Bond 1998....................................... 3,400,000
Maturing Government Bond 2002....................................... 2,600,000
Maturing Government Bond 2006....................................... 1,900,000
Maturing Government Bond 2010....................................... 1,100,000
Value Stock......................................................... 3,000,000
</TABLE>
Operations for these five portfolios did not formally commence until May 2,
1994 when the shares became effectively registered under the Securities Exchange
Act of 1933.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Fund are as follows:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from those estimates.
INVESTMENTS IN SECURITIES
Investments in securities traded on a U.S. or foreign securities exchanges
are valued at the last sales price on that exchange prior to the time when
assets are valued; securities traded in the over-the-counter market and listed
securities for which no sale was reported on that date are valued on the basis
of the last current bid price. When market quotations are not readily available,
securities are valued at fair value as determined in good faith by the Board of
Directors. Such fair values are determined using pricing services or prices
quoted by independent brokers. Short-term securities, with the exception of
Money Market and International Stock, are valued at market. For International
Stock, short-term securities with maturities of less than 60 days when acquired,
or which subsequently are within 60 days of maturity, are valued at amortized
cost which approximates market value. Pursuant to Rule 2a-7 of the Investment
Company Act of 1940 (as amended), all securities in Money Market are valued at
amortized cost, which approximates market value, in order to maintain a constant
net asset value of $1 per share.
-61-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are calculated on the
identified-cost basis. Dividend income is recognized on the ex-dividend date and
interest income, including amortization of bond premium and discount computed on
a level yield basis, is accrued daily.
FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S. dollars at the closing rate of
exchange. Foreign currency amounts related to the purchase or sale of
securities, income and expenses are translated at the exchange rate on the
transaction date. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with net realized and unrealized gains or losses from
investments.
Net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between trade and settlement dates on security transactions,
the difference between the amounts of dividends, interest and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of
the amounts actually received or paid. Net unrealized foreign exchange gains and
losses arise from changes in the value of assets and liabilities, other than
investments in securities, resulting from changes in the exchange rate.
International Stock also may enter into forward foreign currency exchange
contracts for operational purposes and to protect against adverse exchange rate
fluctuations. The net U.S. dollar value of foreign currency underlying all
contractual commitments held by International Stock and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates from an independent pricing service. International Stock is subject to the
credit risk that the other party will not complete the obligations of the
contract.
FEDERAL TAXES
The Fund's policy is to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders. Therefore, no income tax provision is required.
Each portfolio within the Fund is treated as a separate entity for federal
income tax purposes. The Fund's policy is to make the required minimum
distributions prior to December 31, in order to avoid Federal excise tax.
For federal income tax purposes, the following Portfolios had capital loss
carryovers at December 31, 1995, which, if not offset by subsequent capital
gains, will expire December 31, 2002 through 2003. It is unlikely the board of
directors will authorize a distribution of any net realized capital gains until
the available capital loss carryovers have been offset or expired:
<TABLE>
<S> <C>
Mortgage Securities................................................. $3,290,499
Maturing Government Bond 2002....................................... 2,971
Maturing Government Bond 2010....................................... 15,365
</TABLE>
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of temporary book-to-tax
differences. The character of distributions made during the year from net
investment income or realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income (loss) or realized gains (losses) were
recorded by the Fund.
-62-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, adjustments have been made to undistributed net
investment income (UNII), accumulated net realized gains and losses (ARGL) and
additional paid-in captal (APIC) in the following amounts:
<TABLE>
<CAPTION>
UNII ARGL APIC
--------- --------- ---------
<S> <C> <C> <C>
Capital Appreciation.............................................................. $ 217,760 $ -- $(217,760)
International Stock............................................................... 908,775 (908,775) --
</TABLE>
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income for Money Market
are declared and reinvested daily in additional shares of capital stock. For
portfolios other than Money Market, distributions from net investment income and
realized gains, if any, will generally be declared and reinvested in additional
shares on an annual basis.
(3) INVESTMENT SECURITY TRANSACTIONS
For the year ended December 31, 1995, the cost of purchases and proceeds
from sales of investment securities aggregated $167,341,977 and $160,481,527,
respectively, for Money Market. For the other portfolios, the cost of purchases
and proceeds from sales of investment securities, other than temporary
investments in short-term securities, for the year ended December 31, 1995 were
as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ -------------
<S> <C> <C>
Growth............................................. $169,358,960 $ 152,644,401
Bond............................................... 187,584,847 168,250,545
Asset Allocation................................... 446,709,760 453,344,030
Mortgage Securities................................ 89,547,013 83,962,031
Index 500.......................................... 27,361,565 4,621,683
Capital Appreciation............................... 92,160,508 71,791,108
International Stock................................ 42,239,714 21,701,868
Small Company...................................... 59,812,551 39,341,441
Maturing Government Bond 1998...................... 1,692,868 383,296
Maturing Government Bond 2002...................... 62,511 --
Maturing Government Bond 2006...................... 344,848 217,166
Maturing Government Bond 2010...................... -- 93,714
Value Stock........................................ 43,922,395 28,405,681
</TABLE>
-63-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) FORWARD FOREIGN CURRENCY CONTRACTS
On December 31, 1995, International Stock had entered into forward currency
contracts that obligate International Stock to deliver currencies at specified
future dates. Unrealized appreciation and depreciation on these contracts is
included in the accompanying financial statements. The terms of the open
contracts were as follows:
<TABLE>
<CAPTION>
EXCHANGE CURRENCY TO BE CURRENCY TO BE UNREALIZED UNREALIZED
DATE DELIVERED RECEIVED APPRECIATION DEPRECIATION
- -------- ------------------ ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
01/03/96 26,439 US$ 17,074 GBP $70 $ --
01/04/96 119,670 GBP 183,813 US$ -- 1,986
01/04/96 15,041 GBP 23,352 US$ -- 250
01/03/96 184,320 CHF 158,623 US$ -- 1,564
01/05/96 44,657 GBP 68,793 US$ -- 540
01/05/96 46,065 GBP 71,520 US$ -- 387
01/08/96 201,935 CHF 174,202 US$ -- 1,294
01/31/96 101,723 US$ 495,898 FRF -- 320
01/31/96 42,374 US$ 206,442 FRF -- 160
01/31/96 74,346 US$ 362,810 FRF -- 158
01/03/96 46,060 US$ 198,979 FIM -- 233
01/31/96 20,949 US$ 101,833 FRF -- 126
01/31/96 20,339 US$ 98,867 FRF -- 122
01/04/96 17,416 US$ 75,254 FIM -- 84
01/31/96 13,048 US$ 63,478 FRF -- 68
01/31/96 11,944 US$ 58,229 FRF -- 39
--
-----
$70 $7,331
-- -----
-- -----
</TABLE>
<TABLE>
<C> <S>
CHF Swiss Franc
FIM Finnish Markka
FRF French Franc
GBP British Pound Sterling
US$ United States Dollar
</TABLE>
-64-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) EXPENSES AND RELATED PARTY TRANSACTIONS
The Fund has entered into an investment advisory agreement with MIMLIC Asset
Management Company (MIMLIC Management). Each portfolio of the Fund pays MIMLIC
Management an annual fee, based on average daily net assets, in the following
amounts:
<TABLE>
<CAPTION>
PORTFOLIO ANNUAL FEE
- --------- --------------------------------
<S> <C> <C>
Growth.................................. .50%
Bond.................................... .50%
Money Market............................ .50%
Asset Allocation........................ .50%
Mortgage Securities..................... .50%
Index 500............................... .40%
Capital Appreciation.................... .75%
International Stock..................... 1.00% on the first $10
million in net
assets
.90% on the next $15
million
.80% on the next $25
million
.75% on the next $50
million
.65% thereafter
Small Company........................... .75%
Maturing Government Bond 1998........... .05% until April 30, 1998
and .25% thereafter
Maturing Government Bond 2002........... .05% until April 30, 1998
and .25% thereafter
Maturing Government Bond 2006........... .25%
Maturing Government Bond 2010........... .25%
Value Stock............................. .75%
</TABLE>
Under these agreements, MIMLIC Management manages the Fund's assets and
furnishes related office facilities, equipment, research, and personnel.
For Capital Appreciation, MIMLIC Management has a sub-advisory agreement
with Winslow Capital Management, Inc. (Winslow). From its advisory fee, MIMLIC
Management pays Winslow a fee equal to .50 percent on the first $75 million in
net assets and .45 percent of all net assets in excess of $75 million. For
International Stock, MIMLIC Management has a sub-advisory agreement with
Templeton Investment Counsel, Inc. From its advisory fee, MIMLIC Management pays
Templeton Investment Counsel, Inc. a fee equal to .75 percent on the first $10
million in net assets, .65 percent on the next $15 million, .55 percent on the
next $25 million, .50 percent on the next $50 million and .40 percent on the
next $100 million and thereafter.
The Fund bears certain other operating expenses including outside directors'
fees, federal registration fees, printing and shareholder reports, legal,
auditing, custodian fees, organizational costs and other miscellaneous expenses.
Each portfolio will pay all expenses directly related to its individual
operations. Operating expenses not attributable to a specific portfolio will be
allocated based upon the proportionate net asset size of each portfolio.
Minnesota Mutual directly incurs and pays these operating expenses relating to
the Fund and the Fund in turn reimburses Minnesota Mutual. Minnesota Mutual has
voluntarily agreed to absorb all fees and expenses for each portfolio that
exceed various percentages of average daily net assets. During the year ended
December 31, 1995, Minnesota Mutual voluntarily agreed to absorb $22,794,
$24,709, $25,199, $26,308 and $11,610 in expenses that were otherwise payable by
Maturing Government Bond 1998, Maturing Government Bond 2002, Maturing
Government Bond 2006, Maturing Government 2010 and Value Stock.
-65-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
Each portfolio pays an administrative services fee to Minnesota Mutual for
accounting, legal and other administrative services which Minnesota Mutual
provides. Prior to May 1, 1995, the administrative services fee for each
portfolio was $2,050 per month. Effective May 1, 1995, the administrative
service fee for each portfolio is $1,500 per month.
(6) CAPITAL SHARE TRANSACTIONS
Transactions in shares of portfolios for the years ended December 31, 1995
and 1994 (the year ended December 31, 1995 and the period from April 25, 1994 to
December 31, 1994 for Maturing Government Bond 1998, Maturing Government Bond
2002, Maturing Government Bond 2006, Maturing Government Bond 2010 and Value
Stock) were as follows:
<TABLE>
<CAPTION>
GROWTH BOND
-------------------------- --------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 15,942,741 28,193,814 19,917,487 40,112,788
Issued for reinvested distributions......................... 4,188,367 2,249,492 2,571,473 2,685,716
Redeemed.................................................... (13,194,015) (11,882,761) (11,200,741) (12,036,132)
----------- ----------- ----------- -----------
6,937,093 18,560,545 11,288,219 30,762,372
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
MONEY MARKET ASSET ALLOCATION
-------------------------- --------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 36,944,812 32,779,527 37,854,023 55,022,406
Issued for reinvested distributions......................... 1,335,757 687,516 7,646,551 4,591,566
Redeemed.................................................... (31,221,058) (28,782,856) (33,295,460) (38,088,984)
----------- ----------- ----------- -----------
7,059,511 4,684,187 12,205,114 21,524,988
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
MORTGAGE SECURITIES INDEX 500
-------------------------- --------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 11,363,781 19,380,092 20,529,294 19,141,178
Issued for reinvested distributions......................... 3,873,396 3,961,293 1,340,030 840,282
Redeemed.................................................... (11,794,395) (21,468,950) (8,948,748) (8,311,557)
----------- ----------- ----------- -----------
3,442,782 1,872,435 12,920,576 11,669,903
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
CAPITAL APPRECIATION INTERNATIONAL STOCK
-------------------------- --------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 21,549,468 27,348,716 34,352,552 59,024,386
Issued for reinvested distributions......................... 1,816,119 840,153 -- 4,331,175
Redeemed.................................................... (11,636,441) (11,447,247) (21,587,691) (22,945,898)
----------- ----------- ----------- -----------
11,729,146 16,741,622 12,764,861 40,409,663
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
MATURING GOVERNMENT BOND
SMALL COMPANY 1998
-------------------------- --------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 27,268,886 35,560,021 2,804,374 6,200,909
Issued for reinvested distributions......................... 681,476 59,351 261,002 159,722
Redeemed.................................................... (7,902,817) (5,225,445) (1,791,322) (2,761,977)
----------- ----------- ----------- -----------
20,047,545 30,393,927 1,274,054 3,598,654
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
-66-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(6) CAPITAL SHARE TRANSACTIONS--(CONTINUED)
<TABLE>
<CAPTION>
MATURING GOVERNMENT BOND MATURING GOVERNMENT BOND
2002 2006
-------------------------- --------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 819,908 3,615,900 493,557 2,395,168
Issued for reinvested distributions......................... 179,675 133,932 122,592 100,028
Redeemed.................................................... (966,191) (987,161) (441,900) (480,203)
----------- ----------- ----------- -----------
33,392 2,762,671 174,249 2,014,993
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
MATURING GOVERNMENT BOND
2010 VALUE STOCK
-------------------------- --------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 1,062,561 1,641,280 16,963,575 8,716,795
Issued for reinvested distributions......................... 63,051 60,229 1,227,850 93,066
Redeemed.................................................... (1,163,056) (524,203) (2,330,611) (407,103)
----------- ----------- ----------- -----------
( 37,444) 1,177,306 15,860,814 8,402,758
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
(7) ILLIQUID SECURITIES
Each portfolio of the Fund currently limits investments in illiquid
securities to 15% of net assets at the time of purchase, except for Money Market
which limits the investment in illiquid securities to 10% of net assets. At
December 31, 1995, investment in securities of Bond, Mortgage Securities,
International Stock and Small Company includes issues that are illiquid. The
aggregate value of illiquid securities held by Bond, Mortgage Securities,
International Stock and Small Company at December 31, 1995 were $2,096,336,
$5,566,081, $5,556,188 and $6,066,566, respectively, which represents 2.1%,
8.0%, 3.9% and 6.1% of net assets, respectively. Securities are valued by
procedures described in note 2. Pursuant to guidelines adopted by the Fund's
board of directors, certain unregistered securities are determined to be liquid
and are not included within the percent limitations specified above.
-67-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS
The following tables for each Portfolio show certain per share data for a
share of capital stock outstanding during the periods and selected information
for each period:
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............................. $1.866 $1.912 $1.889 $1.864 $1.391
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income...................................... .021 .019 .020 .026 .031
Net gains or losses on securities (both realized and
unrealized).............................................. .416 (.005) .063 .060 .442
--------- --------- --------- --------- ---------
Total from investment operations....................... .437 .014 .083 .086 .473
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income....................... (.020) (.020) (.027) (.031) --
Distributions from capital gains........................... (.073) (.040) (.033) (.030) --
--------- --------- --------- --------- ---------
Total distributions.................................... (.093) (.060) (.060) (.061) --
--------- --------- --------- --------- ---------
Net asset value, end of year................................... $2.210 $1.866 $1.912 $1.889 $1.864
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return (a)............................................... 24.3% .8% 4.7% 4.8% 34.1%
Net assets, end of year (in thousands)......................... $ 201,678 $ 157,369 $ 125,745 $ 99,128 $ 75,518
Ratio of expenses to average daily net assets.................. .55% .56% .58% .58% .63%
Ratio of net investment income to average daily net assets..... 1.04% 1.22% 1.21% 1.72% 2.11%
Portfolio turnover rate (excluding short-term securities)...... 91.9% 42.0% 51.0% 22.4% 15.7%
<FN>
- ----------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
</TABLE>
-68-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
BOND PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1995 1994 1993 1992 1991
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $1.157 $1.300 $1.258 $1.264 $1.075
-------- ------- ------- ------- -------
Income from investment operations:
Net investment income................................... .074 .042 .051 .053 .078
Net gains or losses on securities (both realized and
unrealized)........................................... .147 (.100) .074 .024 .111
-------- ------- ------- ------- -------
Total from investment operations.................... .221 (.058) .125 .077 .189
-------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income.................... (.046) (.052) (.058) (.069) --
Distributions from capital gains........................ -- (.033) (.025) (.014) --
-------- ------- ------- ------- -------
Total distributions................................. (.046) (.085) (.083) (.083) --
-------- ------- ------- ------- -------
Net asset value, end of year................................ $1.332 $1.157 $1.300 $1.258 $1.264
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
Total return (a)............................................ 19.8% (4.6)% 10.3% 6.7% 17.6%
Net assets, end of year (in thousands)...................... $101,045 $74,679 $43,927 $24,914 $13,088
Ratio of expenses to average daily net assets (b)........... .58% .61% .64% .65% .65%
Ratio of net investment income to average daily net assets
(b)....................................................... 6.57% 6.12% 5.57% 6.56% 7.79%
Portfolio turnover rate (excluding short-term securities)... 205.4% 166.2% 166.8% 140.2% 93.8%
<FN>
- ----------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Minnesota Mutual voluntarily absorbed $12,179 and $13,182 in expenses for
the years ended December 31, 1992 and 1991, respectively. Had the portfolio
paid all fees and expenses the ratio of expenses to average daily net
assets would have been .72% and .78%, respectively, and the ratio of net
investment income to average daily net assets would have been 6.49% and
7.66%, respectively.
</TABLE>
-69-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................................ $1.000 $1.000 $1.000 $1.000 $1.000
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income......................................... .053 .036 .027 .032 .053
--------- --------- --------- --------- ---------
Total from investment operations.......................... .053 .036 .027 .032 .053
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income.......................... (.053) (.036) (.027) (.032) (.053)
--------- --------- --------- --------- ---------
Total distributions....................................... (.053) (.036) (.027) (.032) (.053)
--------- --------- --------- --------- ---------
Net asset value, end of year...................................... $1.000 $1.000 $1.000 $1.000 $1.000
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return (a).................................................. 5.4% 4.2% 2.7% 3.2% 5.4%
Net assets, end of year (in thousands)............................ $ 30,166 $ 23,107 $ 18,423 $ 13,591 $ 12,834
Ratio of expenses to average daily net assets (b)................. .64% .65% .65% .65% .65%
Ratio of net investment income to average daily net assets (b).... 5.29% 3.71% 2.65% 3.17% 5.26%
<FN>
- ----------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Minnesota Mutual voluntarily absorbed $13,734, $23,714, $20,913 and $22,877
in expenses for the years ended December 31, 1994, 1993, 1992 and 1991,
respectively. Had the portfolio paid all fees and expenses the ratio of
expenses to average daily net assets would have been .72%, .81%, .80% and
.85%, respectively, and the ratio of net investment income to average daily
net assets would have been 3.64%, 2.49%, 3.02% and 5.06%, respectively.
</TABLE>
-70-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
ASSET ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $1.524 $1.589 $1.574 $1.558 $1.209
-------- -------- -------- -------- -------
Income from investment operations:
Net investment income................................... .061 .047 .030 .034 .047
Net gains or losses on securities (both realized and
unrealized)............................................ .308 (.069) .066 .070 .302
-------- -------- -------- -------- -------
Total from investment operations.................... .369 (.022) .096 .104 .349
-------- -------- -------- -------- -------
Less distributions:
Dividends from net investment income.................... (.049) (.033) (.037) (.041) --
Distributions from capital gains........................ (.018) (.010) (.044) (.047) --
-------- -------- -------- -------- -------
Total distributions................................. (.067) (.043) (.081) (.088) --
-------- -------- -------- -------- -------
Net asset value, end of year................................ $1.826 $1.524 $1.589 $1.574 $1.558
-------- -------- -------- -------- -------
-------- -------- -------- -------- -------
Total return (a)............................................ 25.0% (1.4)% 6.5% 7.3% 28.9%
Net assets, end of year (in thousands)...................... $349,010 $272,629 $250,011 $150,998 $68,592
Ratio of expenses to average daily net assets............... .55% .56% .57% .60% .62%
Ratio of net investment income to average daily net
assets.................................................... 3.75% 3.31% 2.63% 3.68% 4.50%
Portfolio turnover rate (excluding short-term securities)... 157.0% 123.6% 85.7% 106.5% 78.6%
<FN>
- ----------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
</TABLE>
-71-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
MORTGAGE SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $1.098 $1.218 $1.185 $1.196 $1.029
------- ------- ------- ------- -------
Income from investment operations:
Net investment income................................... .081 .074 .054 .045 .069
Net gains or losses on securities (both realized and
unrealized)............................................ .107 (.115) .052 .024 .098
------- ------- ------- ------- -------
Total from investment operations.................... .188 (.041) .106 .069 .167
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income.................... (.079) (.054) (.055) (.056) --
Distributions from capital gains........................ -- (.025) (.018) (.024) --
------- ------- ------- ------- -------
Total distributions................................. (.079) (.079) (.073) (.080) --
------- ------- ------- ------- -------
Net asset value, end of year................................ $1.207 $1.098 $1.218 $1.185 $1.196
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total return (a)............................................ 18.0% (3.4)% 9.3% 6.4% 16.3%
Net assets, end of year (in thousands)...................... $69,746 $59,666 $63,902 $37,011 $16,520
Ratio of expenses to average daily net assets (b)........... .58% .60% .63% .65% .65%
Ratio of net investment income to average daily net assets
(b)....................................................... 7.09% 6.55% 5.87% 6.64% 8.02%
Portfolio turnover rate (excluding short-term securities)... 133.7% 197.3% 138.4% 96.2% 112.0%
<FN>
- ----------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Minnesota Mutual voluntarily absorbed $10,341 and $16,372 in expenses for
the years ended December 31, 1992 and 1991, respectively. Had the portfolio
paid all fees and expenses the ratio of expenses to average daily net
assets would have been .69% and .79% , respectively, and the ratio of net
investment income to average daily net assets would have been 6.60% and
7.88%, respectively.
</TABLE>
-72-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
INDEX 500 PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............................... $1.518 $1.532 $1.428 $1.454 $1.120
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income........................................ .031 .029 .026 .024 .034
Net gains or losses on securities (both realized and
unrealized)................................................ .517 (.012) .110 .073 .300
--------- --------- --------- --------- ---------
Total from investment operations......................... .548 .017 .136 .097 .334
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income......................... (.031) (.026) (.025) (.032) --
Distributions from capital gains............................. (.012) (.005) (.007) (.091) --
--------- --------- --------- --------- ---------
Total distributions...................................... (.043) (.031) (.032) (.123) --
--------- --------- --------- --------- ---------
Net asset value, end of year..................................... $2.023 $1.518 $1.532 $1.428 $1.454
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return (a)................................................. 36.8% 1.2% 9.8% 7.4% 29.8%
Net assets, end of year (in thousands)........................... $ 123,999 $ 73,432 $ 56,209 $ 35,620 $ 20,999
Ratio of expenses to average daily net assets (b)................ .47% .50% .55% .55% .55%
Ratio of net investment income to average daily net assets (b)... 2.08% 2.34% 2.27% 2.42% 2.70%
Portfolio turnover rate (excluding short-term securities)........ 4.8% 5.9% 4.8% 6.1% 26.4%
<FN>
- ----------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Minnesota Mutual voluntarily absorbed $7,228 and $13,123 in expenses for
the years ended December 31, 1992 and 1991, respectively. Had the portfolio
paid all fees and expenses the ratio of expenses to average daily net
assets would have been .58% and .62%, respectively, and the ratio of net
investment income to average daily net assets would have been 2.39% and
2.63%, respectively.
</TABLE>
-73-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
CAPITAL APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992(A) 1991
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $1.808 $1.797 $1.682 $1.684 $1.198
-------- -------- ------- ------- -------
Income from investment operations:
Net investment income (loss)............................ (.003) -- .001 .004 .009
Net gains or losses on securities (both realized and
unrealized)........................................... .406 .039 .167 .078 .488
-------- -------- ------- ------- -------
Total from investment operations.................... .403 .039 .168 .082 .497
-------- -------- ------- ------- -------
Less distributions:
Dividends from net investment income.................... -- (.002) (.005) (.009) (.003)
Distributions from capital gains........................ (.051) (.026) (.048) (.075) (.008)
-------- -------- ------- ------- -------
Total distributions................................. (.051) (.028) (.053) (.084) (.011)
-------- -------- ------- ------- -------
Net asset value, end of year................................ $2.160 $1.808 $1.797 $1.682 $1.684
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
Total return (b)............................................ 22.8% 2.3% 10.4% 5.0% 41.8%
Net assets, end of year (in thousands)...................... $163,520 $115,607 $84,840 $52,365 $23,822
Ratio of expenses to average daily net assets (c)........... .80% .83% .86% .90% .90%
Ratio of net investment income (loss) to average daily net
assets (c)................................................ (.15)% (.09)% .12% .42% .92%
Portfolio turnover rate (excluding short-term securities)... 51.1% 68.4% 95.9% 138.8% 70.5%
<FN>
- ----------
(a) On October 1, 1992, the portfolio entered into a new sub-advisory agreement
with Winslow Capital Management, Inc. to perform sub-advisory services for
the portfolio. Prior to October 1, 1992, the portfolio had a sub-advisory
agreement with Alliance Capital Management L.P. for sub-advisory services.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Minnesota Mutual voluntarily absorbed $16,612 and $15,552 in expenses for
the years ended December 31, 1992 and 1991, respectively. Had the portfolio
paid all fees and expenses the ratio of expenses to average daily net
assets would have been .94% and 1.00%, respectively, and the ratio of net
investment income to average daily net assets would have been .38% and
.82%, respectively.
</TABLE>
-74-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
INTERNATIONAL STOCK PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, MAY 1, 1992
------------------------------- TO DECEMBER
1995 1994 1993 31, 1992(A)
-------- -------- ------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $1.235 $1.310 $.919 $1.000
-------- -------- ------- ------
Income from investment operations:
Net investment income................................... .033 .011 .016 .010
Net gains or losses on securities (both realized and
unrealized)............................................ .142 (.015) .389 (.077)
-------- -------- ------- ------
Total from investment operations.................... .175 (.004) .405 (.067)
-------- -------- ------- ------
Less distributions:
Dividends from net investment income.................... -- (.029) (.007) (.010)
Excess distributions of net investment income........... -- -- -- (.002)
Tax return of capital................................... -- (.001) -- --
Distributions from capital gains........................ -- (.041) (.007) --
Excess distributions of net realized gains.............. -- -- -- (.002)
-------- -------- ------- ------
Total distributions................................. -- (.071) (.014) (.014)
-------- -------- ------- ------
Net asset value, end of period.............................. $1.410 $1.235 $1.310 $.919
-------- -------- ------- ------
-------- -------- ------- ------
Total return (b)............................................ 14.2% (.3)% 44.2% (6.8)%(d)
Net assets, end of period (in thousands).................... $140,770 $107,490 $61,106 $17,401
Ratio of expenses to average daily net assets (c)........... 1.04% 1.24% 1.55% 2.00%(e)
Ratio of net investment income to average daily net assets
(c)....................................................... 2.69% 1.68% 1.04% 2.10%(e)
Portfolio turnover rate (excluding short-term securities)... 20.3% 12.9% 12.7% 11.7%
<FN>
- ----------
(a) The inception of the portfolio was January 21, 1992. However, operations
did not commence until May 1, 1992 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Minnesota Mutual voluntarily absorbed $8,450 in expenses for the period
from May 1, 1992 to December 31, 1992. Had the portfolio paid all fees and
expenses, the ratio of expenses to average daily net assets would have been
2.09% and the ratio of net investment income to average daily net assets
would have been 2.01%.
(d) Total return is presented for the period from May 1, 1992, commencement of
operations, to December 31, 1992.
(e) Adjusted to an annual basis.
</TABLE>
-75-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
SMALL COMPANY PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED PERIOD FROM
DECEMBER 31 MAY 3, 1993
------------------ TO DECEMBER
1995 1994 31, 1993(A)
------- ------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $1.226 $1.157 $1.000
------- ------- ------
Income from investment operations:
Net investment income................................... .002 .002 --
Net gains or losses on securities (both realized and
unrealized)............................................ .392 .069 .173
------- ------- ------
Total from investment operations.................... .394 .071 .173
------- ------- ------
Less distributions:
Dividends from net investment income.................... (.002) (.002) --
Distributions from net realized gains................... (.016) -- (.015)
Excess distributions of net realized gains.............. -- -- (.001)
------- ------- ------
Total distributions................................. (.018) (.002) (.016)
------- ------- ------
Net asset value, end of period.............................. $1.602 $1.226 $1.157
------- ------- ------
------- ------- ------
Total return (b)............................................ 32.1% 6.2% 17.4%(c)
Net assets, end of period (in thousands).................... $98,895 $51,105 $13,043
Ratio of expenses to average daily net assets (d)........... .84% .90% .90%(e)
Ratio of net investment income (loss) to average daily net
assets (d)................................................ .15% .24% (.02)%(e)
Portfolio turnover rate (excluding short-term securities)... 61.3% 28.1% 34.9%
<FN>
- ----------
(a) The inception of the portfolio was January 26, 1993. However, operations
did not commence until May 3, 1993 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 3, 1993, commencement of
operations, to December 31, 1993.
(d) Minnesota Mutual voluntarily absorbed $9,532 and $30,330 in expenses for
the year ended December 31, 1994 and the period from May 3, 1993 to
December 31, 1993. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been .92% and 1.58%,
respectively and the ratio of net investment income (loss) to average daily
net assets would have been .21% and (.70%), respectively.
(e) Adjusted to an annual basis.
</TABLE>
-76-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 1998 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED MAY 2, 1994
DECEMBER TO DECEMBER
31, 1995 31, 1994(A)
----------- ------------
<S> <C> <C>
Net asset value, beginning of period........................ $.945 $.989
----- -----
Income from investment operations:
Net investment income................................... .059 .043
Net gains or losses on securities (both realized and
unrealized)............................................ .092 (.043)
----- -----
Total from investment operations.................... .151 --
----- -----
Less distributions:
Dividends from net investment income.................... (.058) (.044)
Distributions from net realized gains................... -- --
----- -----
Total distributions................................. (.058) (.044)
----- -----
Net asset value, end of period.............................. $1.038 $.945
----- -----
----- -----
Total return (b)............................................ 16.0% .1%(c)
Net assets, end of period (in thousands).................... $5,057 $3,402
Ratio of expenses to average daily net assets (d)........... .20% .20%(e)
Ratio of net investment income to average daily net assets
(d)....................................................... 6.22% 6.45%(e)
Portfolio turnover rate (excluding short-term securities)... 9.0% --
<FN>
- ----------
(a) The inception of the portfolio was November 9, 1993. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $22,794 and $21,714 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses, the ratio
of expenses to average net assets would have been .72% and 1.12%,
respectively, and the ratio of net investment income to average daily net
assets would have been 5.70% and 5.53%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
-77-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2002 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED MAY 2, 1994
DECEMBER TO DECEMBER
31, 1995 31, 1994(A)
----------- ------------
<S> <C> <C>
Net asset value, beginning of period........................ $.932 $.977
----- -----
Income from investment operations:
Net investment income................................... .072 .047
Net gains or losses on securities (both realized and
unrealized)............................................ .161 (.044)
----- -----
Total from investment operations.................... .233 .003
----- -----
Less distributions:
Dividends from net investment income.................... (.072) (.048)
Tax return of capital................................... (.002) --
Distributions from net realized gains................... -- --
----- -----
Total distributions................................. (.074) (.048)
----- -----
Net asset value, end of period.............................. $1.091 $.932
----- -----
----- -----
Total return (b)............................................ 25.0% .3%(c)
Net assets, end of period (in thousands).................... $3,049 $2,575
Ratio of expenses to average daily net assets (d)........... .20% .20%(e)
Ratio of net investment income to average daily net assets
(d)....................................................... 6.52% 7.18%(e)
Portfolio turnover rate (excluding short-term securities)... -- 11.6%
<FN>
- ----------
(a) The inception of the portfolio was November 9, 1993. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $24,709 and $23,298 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been 1.06% and 1.52%,
respectively and the ratio of net investment income to average daily net
assets would have been 5.66% and 5.86%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
-78-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2006 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED MAY 2, 1994
DECEMBER TO DECEMBER
31, 1995 31, 1994(A)
----------- ------------
<S> <C> <C>
Net asset value, beginning of period........................ $.923 $.970
----- -----
Income from investment operations:
Net investment income................................... .069 .047
Net gains or losses on securities (both realized and
unrealized)............................................ .251 (.046)
----- -----
Total from investment operations.................... .320 .001
----- -----
Less distributions:
Dividends from net investment income.................... (.069) (.048)
Distributions from net realized gains................... -- --
----- -----
Total distributions................................. (.069) (.048)
----- -----
Net asset value, end of period.............................. $1.174 $.923
----- -----
----- -----
Total return (b)............................................ 34.7% .1%(c)
Net assets, end of period (in thousands).................... $2,570 $1,860
Ratio of expenses to average daily net assets (d)........... .40% .40%(e)
Ratio of net investment income to average daily net assets
(d)....................................................... 6.56% 7.45%(e)
Portfolio turnover rate (excluding short-term securities)... 10.0% --
<FN>
- ----------
(a) The inception of the portfolio was November 9, 1993. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $25,199 and $24,803 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been 1.56% and 2.37%,
respectively and the ratio of net investment income to average daily net
assets would have been 5.40% and 5.48%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
-79-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2010 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED MAY 2, 1994
DECEMBER TO DECEMBER
31, 1995 31, 1994(A)
----------- ------------
<S> <C> <C>
Net asset value, beginning of period........................ $.910 $.962
----- -----
Income from investment operations:
Net investment income................................... .070 .049
Net gains or losses on securities (both realized and
unrealized)............................................ .304 (.052)
----- -----
Total from investment operations.................... .374 (.003)
----- -----
Less distributions:
Dividends from net investment income.................... (.070) (.049)
Distributions from net realized gains................... -- --
----- -----
Total distributions................................. (.070) (.049)
----- -----
Net asset value, end of period.............................. $1.214 $.910
----- -----
----- -----
Total return (b)............................................ 41.2% (.3)%(c)
Net assets, end of period (in thousands).................... $1,384 $1,071
Ratio of expenses to average daily net assets (d)........... .40% .40%(e)
Ratio of net investment income to average daily net assets
(d)....................................................... 6.58% 7.79%(e)
Portfolio turnover rate (excluding short-term securities)... -- 14.5%
<FN>
- ----------
(a) The inception of the portfolio was November 9, 1993. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $26,308 and $25,888 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been 2.68% and 4.01%,
respectively and the ratio of net investment income to average daily net
assets would have been 4.30% and 4.18%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
-80-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
VALUE STOCK PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED MAY 2, 1994
DECEMBER TO DECEMBER
31, 1995 31, 1994(A)
----------- ------------
<S> <C> <C>
Net asset value, beginning of period........................ $1.044 $1.010
----------- -----
Income from investment operations:
Net investment income................................... .010 .008
Net gains or losses on securities (both realized and
unrealized)............................................ .331 .038
----------- -----
Total from investment operations.................... .341 .046
----------- -----
Less distributions:
Dividends from net investment income.................... (.010) (.009)
Distributions from net realized gains................... (.063) (.003)
----------- -----
Total distributions................................. (.073) (.012)
----------- -----
Net asset value, end of period.............................. $1.312 $1.044
----------- -----
----------- -----
Total return (b)............................................ 33.0% 4.6%(c)
Net assets, end of period (in thousands).................... $31,825 $8,771
Ratio of expenses to average daily net assets (d)........... .89% .90%(e)
Ratio of net investment income to average daily net assets
(d)....................................................... 1.25% 2.07%(e)
Portfolio turnover rate (excluding short-term securities)... 164.2% 49.5%
<FN>
- ----------
(a) The inception of the portfolio was January 18, 1994. However, operations
did not commence until May 2, 1994 when shares of the portfolio became
effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(c) Total return is presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $11,610 and $22,503 in expenses for
the year ended December 31, 1995 and the period from May 2, 1994 to
December 31, 1994. Had the portfolio paid all fees and expenses the ratio
of expenses to average daily net assets would have been .95% and 1.56%,
respectively and the ratio of net investment income to average daily net
assets would have been 1.19% and 1.41%, respectively.
(e) Adjusted to an annual basis.
</TABLE>
-81-
<PAGE>
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.
-82-
<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
-------------
-------------
-83-
<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.
-84-
<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.
-85-
<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>
-86-
<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.
-87-
<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.
-88-
<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.
-89-
<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.
-90-
<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.
-91-
<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.
-92-
<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>
-93-
<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.
-94-
<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.
-95-
<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>
-96-
<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.
-97-
<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.
-98-
<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.
-99-
<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.
-100-
<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>
-101-
<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>
-102-
<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.
-103-
<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.
-104-
<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.
-105-
<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>
-106-
<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.
-107-
<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>
-108-
<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>
-109-
<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>
-110-
<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>
-111-
<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>
-112-
<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>
-113-
<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.
-114-
<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>
-115-
<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.
-116-
<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>
-117-
<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.
-118-
<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
-119-
<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.
-120-
<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.
-121-
<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>
-122-
<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:
-123-
<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.
-124-
<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.
-125-
<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.
-126-
<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.
-127-
<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.
-128-
<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.
-129-
<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.
-130-
<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.
-131-
<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.
-132-
<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.
-133-
<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.
-134-
<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.
-135-
<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.
-136-
<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.
-137-
<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>
-138-
<PAGE>
APPENDIX I
Rating of Bonds and Commercial Paper
The rating information which follows describes how the rating services
mentioned presently rate the described securities. No reliance is made upon the
rating firms as "experts" as that term is defined for securities law purposes.
Rather, reliance on this information is on the basis that such ratings have
become generally accepted in the investment business.
Rating of Bonds
Moody's
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge". Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Moody's Investors Service, Inc. also applies numerical modifiers, 1, 2, and
3, in each of these generic rating classifications. The modifier 1 indicates
that the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issue ranks in the lower end of its generic rating category.
-139-
<PAGE>
Standard & Poor's
Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions that could lead
to inadequate capacity to meet timely interest and principal payments.
Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The "B" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BB" or "BB-"
rating.
The Standard & Poor's Corporation applies indicators "+," no character, and
"-" to the above rating categories. The indicators show relative standing
within the major rating categories.
Rating of Commercial Paper
Purchases of corporate debt securities used for short-term investment,
generally called commercial paper, will be limited to the top grades of Moody's
and Standard & Poor's rating services.
Moody's
"P-1"
The rating P-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:
1. Evaluation of the management of the issuer;
2. Economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain
areas;
3. Evaluation of the issuer's products in relation to competition and
customer acceptance;
4. Liquidity;
-140-
<PAGE>
5. Amount and quality of long-term debt;
6. Trend of earnings over a period of ten years;
7. Financial strength of a parent company and the relationships which exist
with the issuer; and
8. Recognition by the management of obligations which may be present or may
arise as a result of public interest questions and preparations to meet
such obligations.
Standard & Poor's
A Commercial paper issues assigned this highest rating are regarded as
having the greatest capacity for timely payment. Issues in this category are
delineated with the numbers 1, 2 and 3 to indicate the relative degree of
safety.
A-1 This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
A-2 Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
"A-1."
A-3 Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.
-141-
<PAGE>
PART C. OTHER INFORMATION
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) (i) Audited Financial Statements of the MIMLIC Series Fund, Inc. as
of December 31, 1995, are included in Part B of this filing and
consist of the following:
(1) Independent Auditors' Report - MIMLIC Series Fund, Inc.
(2) Investments in Securities - MIMLIC Series Fund, Inc.;
Growth Portfolio
(3) Investments in Securities - MIMLIC Series Fund, Inc.; Bond
Portfolio
(4) Investments in Securities - MIMLIC Series Fund, Inc.; Money
Market Portfolio
(5) Investments in Securities - MIMLIC Series Fund, Inc.; Asset
Allocation Portfolio
(6) Investments in Securities - MIMLIC Series Fund, Inc.;
Mortgage Securities Portfolio
(7) Investments in Securities - MIMLIC Series Fund, Inc.;
Index 500 Portfolio
(8) Investments in Securities - MIMLIC Series Fund, Inc.;
Capital Appreciation Portfolio
(9) Investments in Securities - MIMLIC Series Fund, Inc.;
International Stock Portfolio
(10) Investments in Securities - MIMLIC Series Fund, Inc.; Small
Company Portfolio
(11) Investments in Securities - MIMLIC Series Fund, Inc.;
Maturing Government Bond 1998 Portfolio
(12) Investments in Securities - MIMLIC Series Fund, Inc.;
Maturing Government Bond 2002 Portfolio
(13) Investments in Securities - MIMLIC Series Fund, Inc.;
Maturing Government Bond 2006 Portfolio
(14) Investments in Securities - MIMLIC Series Fund, Inc.;
Maturing Government Bond 2010 Portfolio
(15) Investments in Securities - MIMLIC Series Fund, Inc.;
Value Stock Portfolio
(16) Statements of Assets and Liabilities - MIMLIC Series Fund,
Inc.
(17) Statements of Operations - MIMLIC Series Fund, Inc.
(18) Statements of Changes in Net Assets - MIMLIC Series Fund,
Inc.
<PAGE>
(19) Notes to Financial Statements - MIMLIC Series Fund, Inc.
(a) (ii) Unaudited Financial Statements of the MIMLIC Series Fund, Inc. as
of June 30, 1996, are included in Part B of this filing and
consist of the following:
(1) Independent Auditors' Report - MIMLIC Series Fund, Inc.
(2) Investments in Securities - MIMLIC Series Fund, Inc.; Growth
Portfolio
(3) Investments in Securities - MIMLIC Series Fund, Inc.; Bond
Portfolio
(4) Investments in Securities - MIMLIC Series Fund, Inc.; Money
Market Portfolio
(5) Investments in Securities - MIMLIC Series Fund, Inc.; Asset
Allocation Portfolio
(6) Investments in Securities - MIMLIC Series Fund, Inc.;
Mortgage Securities Portfolio
(7) Investments in Securities - MIMLIC Series Fund, Inc.; Index
500 Portfolio
(8) Investments in Securities - MIMLIC Series Fund, Inc.;
Capital Appreciation Portfolio
(9) Investments in Securities - MIMLIC Series Fund, Inc.;
International Stock Portfolio
(10) Investments in Securities - MIMLIC Series Fund, Inc.; Small
Company Portfolio
(11) Investments in Securities - MIMLIC Series Fund, Inc.;
Maturing Government Bond 1998 Portfolio
(12) Investments in Securities - MIMLIC Series Fund, Inc.;
Maturing Government Bond 2002 Portfolio
(13) Investments in Securities - MIMLIC Series Fund, Inc.;
Maturing Government Bond 2006 Portfolio
(14) Investments in Securities - MIMLIC Series Fund, Inc.;
Maturing Government Bond 2010 Portfolio
(15) Investments in Securities - MIMLIC Series Fund, Inc.;
Value Stock Portfolio
(16) Statements of Assets and Liabilities - MIMLIC Series Fund,
Inc.
(17) Statements of Operations - MIMLIC Series Fund, Inc.
(18) Statements of Changes in Net Assets - MIMLIC Series Fund,
Inc.
(19) Notes to Financial Statements - MIMLIC Series Fund, Inc.
(b) Exhibits:
(1) (A) Articles of Incorporation - Previously filed as
Exhibit 24(b)(1)(A) to Registrant's Form N-1A,
File Number 2-96990, is hereby incorporated by
reference.
(B) Articles of Amendment dated October 22, 1985 -
Previously filed as Exhibit 24(b)(1)(B) to
Registrant's Form N-1A, File Number 2-96990,
Pre-Effective Amendment Number 1, is hereby
incorporated by reference.
(C) Articles of Amendment dated April 28, 1987 -
Previously filed as Exhibit 24(b)(1)(C) to
Registrant's Form N-1A, File Number 2-96990,
Post-Effective Amendment Number 4, is hereby
incorporated by reference.
(D) Articles of Amendment dated May 24, 1991 -
Previously filed as Exhibit 24(b)(1)(C) to
Registrant's N-1A, File Number 2-96990,
Post-Effective Amendment Number 9, is hereby
incorporated by Reference.
(2) Bylaws - Previously filed as Exhibit 24(b)(2) to
Registrant's Form N-1A, File Number 2-96990, is hereby
incorporated by reference.
<PAGE>
(5) (A) Form of Investment Advisory Agreement between
the Registrant and MIMLIC Asset Management
Company - Previously filed as Exhibit
24(b)(5)(A) to Registrant's Form N-1A, File
Number 2-96990, Post-Effective Amendment Number
1, is hereby incorporated by reference.
(B) Supplemental Investment Advisory Agreement
between the Registrant and MIMLIC Asset
Management Company - Previously filed as Exhibit
24(b)(5)(B) to Registrant's Form N-1A, File
Number 2-96990, Post-Effective Amendment Number
3, is hereby incorporated by reference.
(C) (i) Prior Investment Sub-Advisory Agreement between
MIMLIC Asset Management Company and Winslow
Capital Management, Inc. - Previously filed as
Exhibit 24(b)(5)(C) to Registrant's N-1A, File
Number 2-96990, Post-Effective Amendment Number
10, is hereby incorporated by reference.
<PAGE>
(C) (ii) Current Investment Sub-Advisory Agreement
between MIMLIC Asset Management Company and
Winslow Capital Management, Inc.
(D) Second Supplemental Investment Advisory
Agreement between the Registrant and MIMLIC
Asset Management Company - Previously filed as
Exhibit 24(b)(5)(D) to Registrant's N-1A, File
Number 2-96990, Post-Effective Amendment Number
9, is hereby incorporated by reference.
(E) Investment Sub-Advisory Agreement between
MIMLIC Asset Management Company and Templeton
Investment Counsel, Inc. - Previously filed as
Exhibit 24(b)(5)(E) to Registrant's N-1A, File
Number 2-96990, Post-Effective Amendment Number
10, is hereby incorporated by reference.
(F) Third Supplemental Investment Advisory
Agreement between the Registrant and MIMLIC
Asset Management Company - Previously filed as
Exhibit 24(b)(5)(F) to Registrant's N-1A, File
Number 2-96990, Post-Effective Amendment Number
10, is hereby incorporated by reference.
(G) Fourth Supplemental Investment Advisory
Agreement between the Registrant and MIMLIC
Asset Management Company - Previously filed as
Exhibit 24(b)(5)(G) to Registrant's Form N-1A,
File Number 2-96990, Post-Effective Amendment
Number 11, is hereby incorporated by reference.
(H) Fifth Supplemental Investment Advisory
Agreement between the Registrant and MIMLIC
Asset Management Company.
(I) Investment Sub-Advisory Agreement between
MIMLIC Asset Management Company and Voyageur
Fund Managers, Inc.
(J) Investment Sub-Advisory Agreement between
Voyageur Fund Managers, Inc. and Lazard London
International Investment Management, Limited.
(8) (A) (i) Form of Custodian Agreement between the
Registrant and First Trust National Association
- Previously filed as Exhibit 24(b)(8)(A) to
Registrant's N-1A, File Number 2-96990,
Post-Effective Amendment Number 10, is hereby
incorporated by reference.
(A) (ii) Amendment to Custodian Agreement between the
Registrant and First Trust National Association.
(B) (i) Form of Custodian Agreement between the
Registrant and Norwest Bank Minnesota, N.A. -
Previously filed as Exhibit 24(b)(8)(B) to
Registrant's N-1A, File Number 2-96990,
Post-Effective Amendment Number 10, is hereby
incorporated by reference.
(B) (ii) Amendment to the Custodian Agreement between
the Registrant and Norwest Bank Minnesota, N.A.
- Previously filed as Exhibit 24(b)(8)(B)(ii)
to Registrant's N-1A, File Number 2-96990,
Post-Effective Amendment Number 12, is hereby
incorporated by reference.
(C) Form of Custodian Agreement between the
Registrant and Bankers Trust Company -
Previously filed as Exhibit 24(b)(8)(C) to
Registrant's N-1A, File Number 2-96990,
Post-Effective Amendment Number 10, is hereby
incorporated by reference.
(9) Form of Service Agreement between MIMLIC Asset Management
Company and Wilshire Associates - Previously filed as
Exhibit 24(b)(9) to Registrant's Form N-1A, File Number
2-96990, Post-Effective Amendment Number 3, is hereby
incorporated by reference.
<PAGE>
(10) Opinion and Consents
(A) Opinion and Consent of Doherty, Rumble & Butler
P.A.-Previously filed as Exhibit 24(b)(10)(A)
to Registrant's Form N-1A, File Number 2-96990,
Pre-Effective Amendment Number 1, is hereby
incorporated by reference.
(11) Consent of KPMG Peat Marwick LLP.
(13) Form of Letter of Investment Intent - Previously filed as
Exhibit 24(b)(13) to Registrant's Form N-1A, File Number
2-96990, Pre-Effective Amendment Number 1, shall be
incorporated by reference.
(16) Schedules for Computation of Performance Quotation
(A) Growth Portfolio (formerly the "Stock"
Portfolio) Performance Calculations, previously
filed as this Exhibit to Registrant's Form
N-1A, File Number 2-96990, Post-Effective
Amendment Number 7, shall be incorporated by
reference.
(B) Bond Portfolio Performance Calculations,
previously filed as this Exhibit to
Registrant's Form N-1A, File Number 2-96990,
Post-Effective Amendment Number 7, shall be
incorporated by reference.
(C) Money Market Portfolio Performance
Calculations, previously filed as this Exhibit
to Registrant's Form N-1A, File Number 2-96990,
Post-Effective Amendment Number 7, shall be
incorporated by reference.
(D) Asset Allocation Portfolio (formerly the
"Managed" Portfolio) Performance Calculations,
previously filed as this Exhibit to
Registrant's Form N-1A, File Number 2-96990,
Post-Effective Amendment Number 7, shall be
incorporated by reference.
(E) Mortgage Securities Portfolio Performance
Calculations, previously filed as this Exhibit
to Registrant's Form N-1A, File Number 2-96990,
Post-Effective Amendment Number 7, shall be
incorporated by reference.
(F) Index 500 Portfolio (formerly the "Index"
Portfolio) Performance Calculations, previously
filed as this Exhibit to Registrant's Form
N-1A, File Number 2-96990, Post-Effective
Amendment Number 7, shall be incorporated by
reference.
(G) Capital Appreciation Portfolio (formerly the
"Aggressive Growth" Portfolio) Performance
Calculations - Previously filed as this Exhibit
to Registrant's Form N-1A, File Number 2-96990,
Post-Effective Amendment Number 7, shall be
incorporated by reference.
(H) International Stock Portfolio Performance
Calculations - Previously filed as this Exhibit
to Registrant's Form N-1A, File Number 2-96990,
Post-Effective
<PAGE>
Amendment Number 10, shall be incorporated by
reference.
(I) Small Company Portfolio Performance
Calculations - Previously filed as Exhibit
24(b)(16)(I) to Registrant's Form N-1A, File
Number 2-96990, Post-Effective Amendment Number
12, is hereby incorporated by reference.
(J) Value Stock Portfolio Performance Calculations
- Previously filed as Exhibit 24(b)(16)(J) to
Registrant's Form N-1A, File Number 2-96990,
Post-Effective Amendment Number 12, is hereby
incorporated by reference.
(K) Maturing Government Bond - 1998 Portfolio
Performance Calculations - Previously filed as
Exhibit 24(b)(16)(K) to Registrant's Form N-1A,
File Number 2-96990, Post-Effective Amendment
Number 12, is hereby incorporated by reference.
(L) Maturing Government Bond - 2002 Portfolio
Performance Calculations - Previously filed as
Exhibit 24(b)(16)(L) to Registrant's Form N-1A,
File Number 2-96990, Post-Effective Amendment
Number 12, is hereby incorporated by reference.
(M) Maturing Government Bond - 2006 Portfolio
Performance Calculations - Previously filed as
Exhibit 24(b)(16)(M) to Registrant's Form N-1A,
File Number 2-96990, Post-Effective Amendment
Number 12, is hereby incorporated by reference.
(N) Maturing Government Bond - 2010 Portfolio
Performance Calculations - Previously filed as
Exhibit 24(b)(16)(N) to Registrant's Form N-1A,
File Number 2-96990, Post-Effective Amendment
Number 12, is hereby incorporated by reference.
(17) (A) Financial Data Schedule - Growth Portfolio.
(17) (B) Financial Data Schedule - Bond Portfolio.
(17) (C) Financial Data Schedule - Money Market Portfolio.
(17) (D) Financial Data Schedule - Asset Allocation Portfolio.
(17) (E) Financial Data Schedule - Mortgage Securities
Portfolio.
(17) (F) Financial Data Schedule - Index 500 Portfolio.
(17) (G) Financial Data Schedule - Capital Appreciation
Portfolio.
(17) (H) Financial Data Schedule - International Stock
Portfolio.
(17) (I) Financial Data Schedule - Small Company Portfolio.
(17) (J) Financial Data Schedule - Value Stock Portfolio.
(17) (K) Financial Data Schedule - Maturing Government Bond -
1998 Portfolio.
<PAGE>
(17) (L) Financial Data Schedule - Maturing Government Bond -
2002 Portfolio.
(17) (M) Financial Data Schedule - Maturing Government Bond -
2006 Portfolio.
(17) (N) Financial Data Schedule - Maturing Government Bond -
2010 Portfolio.
(17) (O) Financial Data Schedule - Unaudited - Growth Portfolio.
(17) (P) Financial Data Schedule - Unaudited - Bond Portfolio.
(17) (Q) Financial Data Schedule - Unaudited - Money Market
Portfolio.
(17) (R) Financial Data Schedule - Unaudited - Asset Allocation
Portfolio.
(17) (S) Financial Data Schedule - Unaudited - Mortgage
Securities Portfolio.
(17) (T) Financial Data Schedule - Unaudited - Index 500
Portfolio.
(17) (U) Financial Data Schedule - Unaudited - Capital
Appreciation Portfolio.
(17) (V) Financial Data Schedule - Unaudited - International
Stock Portfolio.
(17) (W) Financial Data Schedule - Unaudited - Small Company
Portfolio.
(17) (X) Financial Data Schedule - Unaudited - Value Stock
Portfolio.
(17) (Y) Financial Data Schedule - Unaudited - Maturing
Government Bond - 1998 Portfolio.
(17) (Z) Financial Data Schedule - Unaudited - Maturing
Government Bond - 2002 Portfolio.
(17) (AA) Financial Data Schedule - Unaudited - Maturing
Government Bond - 2006 Portfolio.
(17) (BB) Financial Data Schedule - Unaudited - Maturing
Government Bond - 2010 Portfolio.
(19) Power of Attorney to sign Registration Statement executed
by Directors of Registrant
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
Wholly-owned subsidiaries of The Minnesota Mutual Life Insurance Company:
MIMLIC Asset Management Company
The Ministers Life Insurance Company
MIMLIC Corporation
Minnesota Fire and Casualty Company
Northstar Life Insurance Company (New York)
Robert Street Energy, Inc.
Open-end registered investment company offering shares solely to separate
accounts of The Minnesota Mutual Life Insurance Company:
MIMLIC Series Fund, Inc.
Wholly-owned subsidiaries of MIMLIC Asset Management Company:
MIMLIC Sales Corporation
Advantus Capital Management, Inc.
Wholly-owned subsidiaries of Advantus Capital Management, Inc.:
Advantus Venture Fund, Inc.
Advantus Index 500 Fund, Inc.
Wholly-owned subsidiaries of MIMLIC Corporation:
DataPlan Securities, Inc. (Ohio)
MIMLIC Imperial Corporation
MIMLIC Funding, Inc.
MIMLIC Venture Corporation
Personal Finance Company (Delaware)
Wedgewood Valley Golf, Inc.
Ministers Life Resources, Inc.
Enterprise Holding Corporation
HomePlus Agency, Inc.
Wholly-owned subsidiaries of Enterprise Holding Corporation:
Oakleaf Service Corporation
Lafayette Litho, Inc.
Financial Ink Corporation
Concepts in Marketing Research Corporation
Concepts in Marketing Services Corporation
National Association of Religious Professionals, Inc.
Wholly-owned subsidiary of Minnesota Fire and Casualty Company:
HomePlus Insurance Company
<PAGE>
Majority-owned subsidiaries of MIMLIC Imperial Corporation:
J. H. Shoemaker Advisory Corporation
Consolidated Capital Advisors, Inc.
Majority-owned subsidiary of MIMLIC Sales Corporation:
MIMLIC Insurance Agency of Ohio, Inc.
Fifty percent-owned subsidiary of MIMLIC Imperial Corporation:
C.R.I. Securities, Inc.
Majority-owned subsidiaries of The Minnesota Mutual Life Insurance Company:
MIMLIC Life Insurance Company (Arizona)
MIMLIC Cash Fund, Inc.
Advantus Cornerstone Fund, Inc.
Advantus Enterprise Fund, Inc.
Advantus International Balanced Fund, Inc.
Less than majority owned, but greater than 25% owned, subsidiaries of The
Minnesota Mutual Life Insurance Company:
Advantus Money Market Fund, Inc.
Less than 25% owned subsidiaries of The Minnesota Mutual Life Insurance Company:
Advantus Horizon Fund, Inc.
Advantus Spectrum Fund, Inc.
Advantus Mortgage Securities Fund, Inc.
Advantus Bond Fund, Inc.
Unless indicated otherwise parenthetically, each of the above
corporations is a Minnesota corporation.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of the date of filing of this amendment to the Registration
Statement:
Number of
Title of Class Record Holders
-------------- --------------
Growth Portfolio 7
Bond Portfolio 7
Money Market Portfolio 7
Asset Allocation Portfolio 7
Mortgage Securities Portfolio 7
Index 500 Portfolio 7
Capital Appreciation Portfolio 5
International Stock Portfolio 6
Small Company Portfolio 7
Value Stock Portfolio 6
Maturing Government Bond - 1998 Portfolio 4
Maturing Government Bond - 2002 Portfolio 4
<PAGE>
Maturing Government Bond - 2006 Portfolio 4
Maturing Government Bond - 2010 Portfolio 4
ITEM 27. INDEMNIFICATION
The Articles of Incorporation and Bylaws of the Registrant provide
that the Registrant shall indemnify such persons, for such expenses and
liabilities, in such manner, under circumstances, to the full extent permitted
by Section 302A.521, Minnesota Statutes, as now enacted or hereafter amended,
provided that no such indemnification may be made if it would be in violation of
Section 17(h) of the Investment Company Act of 1940, as now enacted, or
hereafter amended. Section 302A.521 of the Minnesota Statutes, as now enacted,
provides that a corporation shall indemnify a person made or threatened to be
made a party to a proceeding by reason of the former or present official
capacity of the person against judgments, penalties, fines, settlements and
reasonable expenses, including attorneys' fees and disbursements, incurred by
the person in connection with the proceeding, if, with respect to the acts or
omissions of the person complained of in the proceeding, the person has not been
indemnified by another organization for the same judgments, penalties, fines,
settlements and reasonable expenses incurred by the person in connection with
the proceeding with respect to the same acts or omissions; acted in good faith;
received no improper personal benefit and the Minnesota Statute dealing with
directors' conflicts of interest, if applicable, has been satisfied; in the case
of a criminal proceeding, had no reasonable cause to believe the conduct was
unlawful; and reasonably believed that the conduct was in the best interests of
the corporation or, in certain circumstances, reasonably believed that the
conduct was not opposed to the best interests of the corporation.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and the Registrant will be governed by the final
adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) MIMLIC Asset Management Company
Directors and Officers Office with
of Investment Adviser Investment Adviser Other Business Connections
- ---------------------- ------------------ --------------------------
Paul H. Gooding President, Treasurer President, Secretary and
and Director Director, MIMLIC Corporation;
Director, MIMLIC Imperial
Corporation; Director, MIMLIC
Venture Corporation; Vice
President and Director, MIMLIC
Funding, Inc.; Vice President
and Director,
<PAGE>
Robert Street Energy, Inc.;
Vice President, Director,
Personal Finance Company; Vice
President and Treasurer, The
Minnesota Mutual Life Insurance
Company; President and
Director, Advantus Capital
Management, Inc.
Guy M. de Lambert Vice President, President and Director,
Secretary and MIMLIC Venture Corporation;
Director Vice President, MIMLIC Funding,
Inc.; President and Secretary,
Robert Street Energy, Inc.;
President and Director,
Wedgewood Valley Golf, Inc.;
Second Vice President, The
Minnesota Mutual Life Insurance
Company
Frederick P. Feuerherm Vice President, Vice President, MIMLIC
Assistant Secretary Funding, Inc.; Second Vice
and Director President, The Minnesota Mutual
Life Insurance Company
Alan J. Notvik Vice President and President and Director,
Assistant Secretary MIMLIC Funding, Inc.; Second
Vice President, The Minnesota
Mutual Life Insurance Company
James P. Tatera Vice President and Vice President, MIMLIC
Assistant Secretary Funding, Inc.; Second Vice
President, The Minnesota Mutual
Life Insurance Company; Senior
Vice President, Treasurer and
Director, Advantus Capital
Management, Inc.
Loren Haugland Vice President None
Lynne Mills Vice President Vice President, Robert Street
Energy, Inc.; Second Vice
President, The Minnesota Mutual
Life Insurance Company
Marilyn Froelich Vice President None
Dianne Orbison Vice President Vice President, MIMLIC
Venture Corporation; Second
Vice President, The Minnesota
Mutual Life Insurance Company
The Fund's investment adviser is MIMLIC Management. In addition to the
Fund, it manages investment advisory accounts for a number of insurance
<PAGE>
companies, namely Minnesota Mutual and its subsidiary life insurance
companies, and certain associated separate accounts. It also provides
investment advisory services to qualified pension and profit sharing plans,
corporations, partnerships, investment companies and various private
accounts.
(b) Winslow Capital Management, Inc.
Winslow Capital Management, Inc. acts as investment sub-adviser to the
Capital Appreciation Portfolio of the Registrant. The following are
Directors and officers of Winslow Capital Management, Inc., including their
other business connections which are of a substantial nature:
Position
Winslow Capital Other Business Connections
Name Management, Inc. During Last Two Years
- ---- ---------------- --------------------------
Clark J. Winslow President and President, Portfolio Manager
Director and Director, Winslow
Capital Management, Inc.
Gail M. Knappenberger Executive Vice Executive Vice President,
President and Portfolio Manager and
Director Director, Winslow Capital
Management, Inc.
Richard E. Pyle Executive Vice Executive Vice President,
President and Portfolio Manager and
Director Director, Winslow Capital
Management, Inc.
Jon R. Foust Managing Director Managing Director, Winslow
Capital Management, Inc.; Vice
President of Institutional
Marketing and Client Service,
Investment Advisers, Inc.
Lynne P. Pelos Vice President Vice President and Chief
Administrative Officer,
Winslow Capital Management,
Inc.
Gail L. Kummer Vice President Vice President and Trader,
Winslow Capital Management,
Inc.
Winslow Capital Management, Inc. has one other investment company client
for which it acts as the investment adviser. Assets currently under
management are also managed for corporate, foundation, endowment,
retirement system and individual clients.
(c) Templeton Investment Counsel, Inc.
Templeton Investment Counsel, Inc. ("TICI"), a Florida corporation with
offices at Broward Financial Centre, Suite 2100, Fort Lauderdale, Florida
33394-3091, is an indirect, wholly-owned subsidiary of Franklin Resources,
Inc. TICI acts as the investment adviser to, in addition to acting as
investment sub-adviser to the Registrant, the following U.S. registered
investment companies or series:
<PAGE>
- Templeton Global Smaller Companies Growth Fund
- Templeton Income Trust:
- Templeton Global Bond Fund
- Templeton Money Fund
- Templeton Global Income Fund, Inc.
- Templeton Variable Annuity Fund
- Templeton Variable Products Series Fund (TIP):
- Templeton Stock Fund
- Templeton Asset Allocation Fund
- Templeton Bond Fund
- Templeton Money Market Fund
- Templeton International Fund
- Templeton Global Governments Income Trust
- Templeton Global Opportunities Trust
- Templeton Global Utilities, Inc. (Subadviser)
- Templeton Institutional Funds, Inc.:
- Templeton Foreign Equity Series
- Templeton Growth Series
- Templeton Global Fixed Income Series
- Templeton Foreign Equity (South Africa Free) Series
- Templeton Capital Accumulator Fund, Inc.
- Templeton American Trust, Inc.
- Templeton Emerging Markets Income Fund, Inc.
- Templeton Global Infrastructure Fund
- Templeton Emerging Markets Appreciation Fund, Inc. (Subadviser)
- Templeton Americas Government Securities Fund
- Templeton Global Investment Trust:
- Templeton Latin America Fund
- Templeton International Growth Fund
- Templeton International Foreign Fund
- Templeton Global Strategy SICAV
- Templeton Global Utilities Fund (Subadviser)
- Templeton Global Income Fund
- Templeton Deutsche Mark Global Bond Fund
- Templeton U.S. Government Fund
- Templeton Deutsche Global Bond Fund
- Templeton U.S. Dollar Liquid Reserve Fund
- Templeton Global Balanced Fund
- Templeton Deutsche Mark Liquid Reserve Fund
- Templeton Global Convertible Fund
- Templeton Global Infrastructure and Communications Fund
- Templeton Emerging Markets Fixed Income Fund
- Templeton Haven Fund
- Templeton Russia and Eastern European Debt Fund
- Franklin Templeton International Bond Fund
- Templeton Canadian Global Bond Fund (Subadviser)
- Templeton Global Smaller Companies Fund (Subadviser)
- Templeton Canadian Bond Fund (Subadviser)
- Templeton Balanced Fund (Subadviser)
- Templeton Global Balanced Fund (Subadviser)
- Templeton International Balanced Fund (Subadviser)
- Templeton Canadian Asset Allocation Fund (Subadviser)
- Templeton Emerging Markets Appreciation Fund (Subadviser)
- Templeton Global Income Portfolio Ltd.
- Templeton Global Trust Fund (Subadviser)
- Franklin/Templeton Japan Fund
- Franklin Valuemark Funds:
- Templeton International Equity Fund (Subadviser)
- Templeton Pacific Growth Fund (Subadviser)
- Templeton Global Asset Allocation Fund (Subadviser)
- Templeton Global Income Securities Fund (Subadviser)
- Templeton International Smaller Companies Fund
- Franklin Templeton International Trust:
- Templeton Pacific Growth Fund
- Templeton Foreign Smaller Companies Fund
- Franklin Investors Securities Trust:
- Franklin Global Government Income Fund (Subadviser)
- Franklin Tax-Advantaged International Bond Fund (Subadviser)
- Franklin Strategic Series:
- Franklin Strategic Income Fund (Subadviser)
<PAGE>
- Franklin/Templeton Global Trust:
- Franklin/Templeton Global Currency Fund (Subadviser)
- Franklin/Templeton Hard Currency Fund (Subadviser)
- Franklin/Templeton High Income Currency Fund (Subadviser)
- MIMLIC Series Fund, Inc. (Subadviser):
- International Stock Portfolio
- Advantus International Balanced Fund (Subadviser)
- Pacific Select Fund (Subadviser)
- American AAdvantage Funds (Subadviser)
- American Aadvantage Mileage Funds (Subadviser)
- Marshall International Stock Fund (Subadviser)
- Northwest Mutual International Equity Fund (Subadviser)
- Maxim Series Fund, Inc. (Subadviser):
- International Equity Portfolio
The following are Directors of TICI, located at the above-referenced
address unless otherwise indicated, and their principal occupations or other
business connections which are of a substantial nature:
Name, Address and
Position with TICI Principal Occupation
------------------ --------------------
Charles E. Johnson Senior Vice President and
Chairman Director of Franklin Resources, Inc.
777 Mariners Island Blvd. Resources, Inc.; President and
San Mateo, California Director of Templeton Worldwide, Inc.
Donald F. Reed President, CEO and Director of
Director and President Templeton Management Limited
Martin L. Flanagan Senior Vice President, Chief
Director and Executive Financial Officer and
Vice President Treasurer of Franklin
777 Mariners Island Blvd. Resources, Inc.
San Mateo, California
Gregory E. McGowan Attorney - International
Director and Executive Marketing
Vice President
Gary P. Motyl Equity Research and Portfolio
Director and Executive Management
Vice President
Elizabeth M. Knoblock Attorney
Senior Vice President,
Secretary and General Counsel
(d) Voyageur Fund Managers, Inc.
Voyageur Fund Managers, Inc. ("Voyageur Managers"), is a Minnesota
corporation with offices at 90 South Seventh Street, Suite 4400,
Minneapolis, Minnesota 55402-4115. It acts as a sub-adviser to the Growth
Portfolio and to the Federal Bond Portfolio. Voyageur Managers acts as the
investment adviser to, in addition to acting as investment sub-adviser to
the Registrant, the following U.S. registered investment companies or
series:
- Voyageur High Yield Funds
- Voyageur Minnesota High Yield Municipal Bond Fund
- Voyageur Tax Free Funds
- Voyageur Arizona Tax Free Fund
- Voyageur California Tax Free Fund
- Voyageur Colorado Tax Free Fund
- Voyageur Florida Tax Free Fund
- Voyageur Idaho Tax Free Fund
- Voyageur Iowa Tax Free Fund
- Voyageur Kansas Tax Free Fund
- Voyageur Minnesota Tax Free Fund
- Voyageur National Tax Free Fund
- Voyageur New Mexico Tax Free Fund
- Voyageur North Dakota Tax Free Fund
- Voyageur Utah Tax Free Fund
- Voyageur Wisconsin Tax Free Fund
- Voyageur Insured Tax Free Funds
- Voyageur Arizona Insured Tax Free Fund
- Voyageur California Insured Tax Free Fund
- Voyageur Florida Insured Tax Free Fund
- Voyageur Minnesota Insured Tax Free Fund
- Voyageur Missouri Insured Tax Free Fund
- Voyageur National Insured Tax Free Fund
- Voyageur Oregon Insured Tax Free Fund
- Voyageur Washington Insured Tax Free Fund
- Voyageur Limited Term Funds
- Voyageur Florida Limited Term Tax Free Fund
- Voyageur Minnesota Limited Term Tax Free Fund
- Voyageur National Limited Term Tax Free Fund
- Voyageur Equity Funds
- Voyageur Aggressive Growth Fund
- Voyageur Growth and Income Fund
- Voyageur Growth Stock Fund
- Voyageur International Equity Fund
- Voyageur Income Funds
- Voyageur U.S. Government Securities Fund
- Voyageur Cash Trust Series Money Market Funds
- Voyageur California Municipal Cash Series
- Voyageur Florida Municipal Cash Series
- Voyageur Government Municipal Cash Series
- Voyageur Minnesota Municipal Cash Series
- Voyageur Municipal Cash Series
- Voyageur Ohio Municipal Cash Series
- Voyageur Prime Cash Series
- Voyageur Treasury Cash Series
The following are Directors and Officers of Voyageur Managers, including
their other business connections which are of a substantial nature:
<TABLE>
<CAPTION>
Position with
Name Voyageur Managers Other Business Connections
----- ------------------ --------------------------
<S> <C> <C>
Michael E. Dougherty Chairman Chairman of the Board,
President and Chief
Executive Officer of
Dougherty Financial Group,
Inc.; Chairman of Voyageur
Companies, Inc., Dougherty
Dawkins, Inc., Voyageur
Asset Management Group,
Inc., Voyageur Fund
Managers, Inc., Voyageur
Fund Distributors, Inc.,
Voyageur International Asset
Managers, Ltd., Segall
Bryant & Hamill, and The
Clifton Group.
John G. Taft President President (since 1991) and
Director (since 1993) of
Voyageur Fund Managers,
Inc.; Director (since 1993)
and Executive Vice President
of Voyageur Fund
Distributors, Inc.;
Management Committee member
of Voyageur Fund Managers,
Inc. from 1991 to 1993.
Jane M. Wyatt Chief Investment Director and Chief
Officer Investment Officer of
Voyageur Fund Managers, Inc.
since 1993; Director of
Voyageur Fund Distributors,
Inc. since 1993; Executive
Vice President and Portfolio
Manager of Voyageur Fund
Managers, Inc. from 1992 to
1993; Vice President and
Portfolio Manager from 1989
to 1992.
Edward J. Kohler Executive Vice Director and Executive Vice
President President of Voyageur
Fund Managers, Inc. and
Director of Voyageur Fund
Distributors, Inc. since
1995; previously President
and Director of Piper
Capital Management
Incorporated from 1985 to
1995.
Frank C. Tonnemaker Executive Vice Director of Voyageur
President Fund Managers, Inc. and
Voyageur Fund Distributors,
Inc. since 1993; Executive
Vice President of Voyageur
Fund Managers, Inc. since
1994; Vice President of
Voyageur Fund Managers, Inc.
from 1990 to 1994.
Steven B. Johansen Secretary Secretary of Dougherty
Financial Group, Inc.,
Voyageur Fund Distributors,
Inc. and Dougherty Dawkins,
Inc. since 1995;
Treasurer of Dougherty
Financial Group, Inc. and
Dougherty Dawkins, Inc. from
1990 to 1995.
Thomas J. Abood Senior Vice President; Senior Vice President (since
General Counsel 1995) and General Counsel
(since October 1994) of
Voyageur Fund Managers,
Inc., Voyageur Fund
Distributors, Inc., and
Voyageur Companies, Inc.;
Vice President of Voyageur
Fund Managers, Inc. and
Voyageur Companies, Inc.
from October 1994 to 1995;
previously associated
with the law firm of
Skadden, Arps, Slate,
Meagher & Flom, Chicago,
Illinois from September 1988
to October 1994.
Kenneth R. Larsen Treasurer Treasurer of Voyageur Fund
Managers, Inc. and Voyageur
Fund Distributors, Inc.
since 1990; Director of
Voyageur Fund Managers, Inc.
and Voyageur Fund
Distributors, Inc. from 1990
to 1993; Secretary and
Treasurer of Voyageur Fund
Managers, Inc. and Voyageur
Fund Distributors, Inc. from
1990 to 1993.
</TABLE>
(e) Lazard London International Investment Management, Limited
Lazard London International Investment Management, Limited ("Lazard
London"), is an English corporation with offices at 21 Moorfields, London,
England EC2P 2HT. Lazard London acts as investment sub-adviser to the
Global Bond Portfolio of the Registrant. The following are directors and
officers of Lazard London, located at the above-referenced address unless
otherwise indicated, including their other business connections:
<TABLE>
<CAPTION>
Position with
Name Lazard London Other Business Connections
---- ------------- --------------------------
<S> <C> <C>
Tom Cross Brown Chairman and Chief Chief Executive, Lazard
Executive Brothers Asset Management
Ltd; Managing Director,
Lazard Brothers and Co. Ltd.
Michael E. Whitehead Company Secretary Company Secretary, Lazard
Brothers Asset Management
Ltd.
Patrick Charles N. Director Director, Lazard Brothers
Shine Asset management Ltd.
Hubert H. Heibronn Director Associate Partner, Lazard
Freres Et Cie
Francois A. Voss Director Partner, MM Lazard Freres Et
Cie
Victor A. Cazalet Director Director - Head of Private
Clients, Lazard
Brothers Asset Management
Ltd.
Dino Fuschillo Director Director, Lazard Brothers
Asset Management Ltd.
Nicholas S. Parkes Director Chief Operating Officer,
Lazard Brothers Asset
Management Ltd.
Michael J. Barnes Director Director, Lazard Brothers
Asset Management Ltd.
Keith M. Jecks Director Director, Lazard Brothers
Asset Management Ltd.
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The physical possession of the accounts, books and other documents
required to be maintained by Section 31(a) of the Investment Company Act of 1940
and Rules 31a-1 to 31a-3 promulgated thereunder is maintained by Minnesota
Mutual, 400 Robert Street North, St. Paul, Minnesota 55101-2098; except that
the physical possession of certain accounts, books and other documents related
to the custody of the Registrant's securities is maintained
<PAGE>
by: (a) First Trust National Association, First Trust Center, 180 East Fifth
Street, St. Paul, Minnesota 55101, as to the Growth, Asset Allocation, Index
500, Capital Appreciation, Small Company, Value Stock and Small Company Value
Portfolios; (b) Norwest Bank Minnesota, N.A., 733 Marquette Avenue,
Minneapolis, Minnesota 55479, as to the International Stock Portfolio; and
(c) Bankers Trust Company, 280 Park Avenue, New York, New York 10017, as to
the Bond, Money Market, Mortgage Securities Portfolios, the Maturing Government
Bond Portfolios and the Global Bond Portfolio.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) The Registrant hereby undertakes to furnish, upon request and without
charge to each person to whom a prospectus is delivered, a copy of
the Registrant's latest annual report to shareholders containing the
information called for by Item 5A.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Saint Paul, and the State
of Minnesota, on the 15th day of November, 1996.
MIMLIC SERIES FUND, INC.
By _____________________________________
Paul H. Gooding, President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
_______________________ President November 15, 1996
Paul H. Gooding and Director
Frederick P. Feuerherm* Director)
- ----------------------- )
Frederick P. Feuerherm )
)
Charles E. Arner* Director)
Charles E. Arner )
) By _________________________
) Paul H. Gooding
Ellen S. Berscheid* Director) Attorney-in-Fact
Ellen S. Berscheid )
) Dated: November 15, 1996
)
Ralph D. Ebbott* Director)
Ralph D. Ebbott )
______________
*Registrant's director executing power of attorney dated January 18, 1994, a
copy of which is filed herewith.
<PAGE>
EXHIBIT INDEX
Exhibit Number Description of Exhibit
- -------------- ----------------------
5 (H) Fifth Supplemental Investment Advisory Agreement between the
Registrant and MIMLIC Asset Management Company.
5 (I) Investment Sub-Advisory Agreement between MIMLIC Asset
Management Company and Voyageur Fund Managers, Inc.
5 (J) Investment Sub-Advisory Agreement between Voyageur Fund
Managers, Inc. and Lazard London International Investment
Management, Limited.
8 (A)(ii) Amendment to Custodian Agreement between the Registrant and
First Trust National Association.
(11) Consent of KPMG Peat Marwick LLP
(17) (A) Financial Data Schedule - Growth Portfolio.
(17) (B) Financial Data Schedule - Bond Portfolio.
(17) (C) Financial Data Schedule - Money Market Portfolio.
(17) (D) Financial Data Schedule - Asset Allocation Portfolio.
(17) (E) Financial Data Schedule - Mortgage Securities Portfolio.
(17) (F) Financial Data Schedule - Index 500 Portfolio.
(17) (G) Financial Data Schedule - Capital Appreciation Portfolio.
(17) (H) Financial Data Schedule - International Stock Portfolio.
(17) (I) Financial Data Schedule - Small Company Portfolio.
(17) (J) Financial Data Schedule - Value Stock Portfolio.
(17) (K) Financial Data Schedule - Maturing Government Bond - 1998
Portfolio.
(17) (L) Financial Data Schedule - Maturing Government Bond - 2002
Portfolio.
(17) (M) Financial Data Schedule - Maturing Government Bond - 2006
Portfolio.
(17) (N) Financial Data Schedule - Maturing Government Bond - 2010
Portfolio.
(17) (O) Financial Data Schedule - Unaudited - Growth Portfolio.
(17) (P) Financial Data Schedule - Unaudited - Bond Portfolio.
(17) (Q) Financial Data Schedule - Unaudited - Money Market Portfolio.
(17) (R) Financial Data Schedule - Unaudited - Asset Allocation
Portfolio.
(17) (S) Financial Data Schedule - Unaudited - Mortgage Securities
Portfolio.
(17) (T) Financial Data Schedule - Unaudited - Index 500 Portfolio.
(17) (U) Financial Data Schedule - Unaudited - Capital Appreciation
Portfolio.
(17) (V) Financial Data Schedule - Unaudited - International Stock
Portfolio.
(17) (W) Financial Data Schedule - Unaudited - Small Company
Portfolio.
(17) (X) Financial Data Schedule - Unaudited - Value Stock Portfolio.
(17) (Y) Financial Data Schedule - Unaudited - Maturing Government
Bond - 1998 Portfolio.
(17) (Z) Financial Data Schedule - Unaudited - Maturing Government
Bond - 2002 Portfolio.
(17) (AA) Financial Data Schedule - Unaudited - Maturing Government
Bond - 2006 Portfolio.
(17) (BB) Financial Data Schedule - Unaudited - Maturing Government
Bond - 2010 Portfolio.
(19) Power of Attorney to sign Registration Statement executed by
Directors of Registrant
<PAGE>
FIFTH SUPPLEMENTAL
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, made this ____ day of ________, 1996, by and between MIMLIC
Series Fund, Inc., a Minnesota Corporation (the "Fund") and MIMLIC Asset
Management Company, a Minnesota corporation ("Management");
WITNESSETH:
WHEREAS, the Fund is engaged in business as a diversified open-end
management investment company registered as such under the Investment Company
Act of 1940 (the "Investment Company Act");
AND WHEREAS, the Adviser is engaged in rendering investment advisory
services and is registered as an investment adviser under the Investment
Advisers Act of 1940;
AND WHEREAS, the Fund is comprised of sixteen separate Portfolios, each of
which pursues its investment objectives through separate investment policies;
AND WHEREAS, Management has accepted an appointment from the Fund to act as
investment adviser to and manager of nine of the Fund's sixteen separate
Portfolios pursuant to an Investment Advisory Agreement between the Fund and
Management dated January 30, 1986 (the "Investment Advisory Agreement"); a
Supplemental Investment Advisory Agreement dated April 28, 1987 (the
"Supplemental Agreement"); a Second Supplemental Investment Advisory Agreement
dated April 27, 1992 (the "Second Supplemental Agreement"); and a Third
Supplemental Investment Advisory Agreement dated April 23, 1993 (the "Third
Supplemental Agreement");
AND WHEREAS, Management has accepted an appointment from the Fund to act as
investment adviser to and manager of four of the Fund's sixteen separate
Portfolios pursuant to a Fourth Supplemental Investment Advisory Agreement dated
April 19, 1994;
<PAGE>
AND WHEREAS, the Fund desires to appoint Management to provide investment
advisory and management services to the Fund with respect to the additional
Portfolios identified in Section 3 of this Agreement in the manner and on the
terms hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties do hereby agree as follows:
Section 1 APPOINTMENT OF ADVISER
The Fund appoints Management to act as the investment adviser to and
manager of the additional Portfolios of the Fund identified in Section 3 of this
Agreement, to manage the investment and reinvestment of the assets of those
Portfolio and to administer each Portfolio's affairs subject to the supervision
of the Board of Directors of the Fund on the terms and conditions set forth in
this Agreement. Management accepts such appointment and agrees to render the
services and to assume the obligations set forth in this Agreement.
Section 2 INCORPORATION OF ADVISORY AGREEMENTS
The Investment Advisory Agreement is incorporated herein by reference, and
this Fourth Supplemental Investment Advisory Agreement shall be subject to and
interpreted in accordance with all of the provisions set forth in the Investment
Advisory Agreement except as expressly modified herein.
Section 3 COMPENSATION FOR SERVICES
In payment for the investment advisory services to be rendered by
Management in respect of the Small Company Value Portfolio hereunder, the Fund
shall pay to Management as full compensation for all services hereunder a fee
computed separately for the Portfolio at an annual rate, as follows:
Assets Fee
------ ---
Small Company Value Portfolio .75%
In payment for the investment advisory services to be rendered by
Management in respect of the Global Bond Portfolio hereunder, the Fund shall pay
to Management as full compensation for all services hereunder a fee computed
separately for the Portfolio at an annual rate, as follows:
-2-
<PAGE>
Assets Fee
------ ---
Global Bond Portfolio .75%
The amount of the fees illustrated above will be deducted on each business
day from the value of each Portfolio of the Fund prior to determining the
Portfolio's net asset value for the day and it shall be transmitted or credited
to Management. The fee shall be based on the net asset values of all of the
issued and outstanding shares of such Portfolio of the Fund as determined as of
the close of each business day pursuant to the Articles of Incorporation, Bylaws
and currently effective Prospectus and Statement of Additional Information of
the Fund.
Section 4 USE OF SUB-ADVISER
In providing the services and assuming the obligations set forth herein and
in the Investment Advisory Agreement as incorporated herein, but only in
connection with the Global Bond Portfolio, Management may at its expense employ
one or more Sub-Advisers, or may enter into such service agreements as
Management deems appropriate in connection with the performance of its duties
and obligations hereunder. Reference herein and in the Investment Advisory
Agreement to the duties and responsibilities of Management shall include any
Sub-Adviser employed by Management to the extent Management shall delegate such
duties and responsibilities to the Sub-Adviser. Any agreement between
Management and any Sub-Adviser shall be subject to the approval of the Fund, its
Board of Directors, and Shareholders as required by the Investment Company Act,
and such Sub-Adviser shall at all times be subject to the direction of the Board
of Directors of the Fund and any duly constituted committee thereof or any
officer of the Fund acting pursuant to like authority.
Section 5 DURATION AND TERMINATION OF AMENDMENT
This Agreement shall become effective upon its approval by the Shareholders
of the class of capital stock of the Small Company Value Portfolio and the
Global Bond Portfolio of the Fund, which shall be the date of its execution
first above written. This Agreement will continue in effect for a period more
than two years from the date of its execution only so long as such continuance
is specifically approved at least annually either by the Board of Directors of
the Fund or by the
-3-
<PAGE>
vote of a majority of the outstanding voting securities of the Fund, provided
that in either event such continuance shall also be approved by the vote of a
majority of the directors of the Fund who are not interested persons (as defined
in the Investment Company Act) of any party to this Agreement cast in person at
a meeting called for the purpose of voting on such approval. The required
Shareholder approval of this Agreement or of any continuance of this Agreement
shall be effective with respect to the Portfolio to which this Agreement relates
if a majority of the outstanding voting securities of the class (as defined in
Rule 18f-2(h) under the Investment Company Act) of capital stock of that
Portfolio votes to approve the Agreement or its continuance, notwithstanding
that this Agreement or its continuance may not have been approved by a majority
of the outstanding voting securities of the Fund.
If the Shareholders of a class of capital stock of the Portfolio to which
this Agreement relates fail to approve any continuance of this Agreement,
Management will continue to act as investment adviser with respect to such
Portfolio pending the required approval of the Agreement or its continuance, of
a new contract with Management or a different adviser or other definitive
action; provided, that the compensation received by Management in respect of the
Portfolio during such period will be no more than its actual costs incurred in
furnishing investment advisory and management services to such portfolio or the
amount it would have received under the Agreement in respect of the Portfolio,
whichever is less.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Board of Directors of the Fund or by the vote of a majority of
the outstanding voting securities of the Fund or by Management, on sixty days'
written notice to the other party. This Agreement will automatically terminate
in the event of its assignment (as defined in the Investment Company Act).
Section 6 AMENDMENTS TO THE AGREEMENT
This Agreement may be amended by the parties only if such amendment is
specifically approved by the vote of a majority of the outstanding voting
securities of the Fund and by the vote of a majority of the directors of the
Fund who are not interested persons of any party to this
-4-
<PAGE>
Agreement cast in person at a meeting called for the purpose of voting on such
approval. The required Shareholder approval shall be effective with respect to
the Portfolio to which this Agreement relates if a majority of the outstanding
voting securities of the class of capital stock of that Portfolio vote to
approve the amendment, notwithstanding that the amendment may not have been
approved by a majority of the outstanding voting securities of the Fund.
IN WITNESS WHEREOF, the Fund and Management have caused this Agreement to
be executed by their duly authorized officers as of the day and year first above
written.
MIMLIC Series Fund, Inc.
By
--------------------------------------
Paul H. Gooding
President
MIMLIC Asset Management Company
By
--------------------------------------
Paul H. Gooding
President
-5-
<PAGE>
INVESTMENT SUB-ADVISORY AGREEMENT
This Agreement, made this _____ day of _______________, 1996, by and
between the MIMLIC Series Fund, Inc. ("the Fund"), a Minnesota corporation, on
behalf of the Global Bond Portfolio of such Fund, MIMLIC Asset Management
Company, the investment adviser of the Fund, a Minnesota Corporation ("MIMLIC
Asset"), and Voyageur Fund Managers, Inc., a Minnesota corporation ("Voyageur"),
WITNESSETH:
1. INVESTMENT ADVISORY SERVICES
(a) MIMLIC Asset hereby engages Voyageur on behalf of the Fund,
and Voyageur hereby agrees to act, as investment adviser for, and to manage the
investment of the assets of, the Global Bond Portfolio (the "Portfolio") of the
Fund.
(b) The investment of the assets of the Portfolio of the Fund
shall at all times be subject to the applicable provisions of the Articles of
Incorporation, the Bylaws, the Registration Statement, and the current
Prospectus and the Statement of Additional Information, if any, of the Fund and
shall conform to the policies and purposes of the Portfolio of the Fund as set
forth in such documents and as interpreted from time to time by the Board of
Directors of the Fund. Within the framework of the investment policies of the
Fund, and except as otherwise permitted by this Agreement, Voyageur shall have
the sole and exclusive responsibility for the management of the Portfolio's
investment portfolio and for making and executing all investment decisions for
the Portfolio. Voyageur shall report to the Board of Directors of the Fund
regularly at such times and in such detail as the Board may from time to time
determine appropriate, in order to permit the board to determine the adherence
of Voyageur to the investment policies of the Funds.
(c) Voyageur shall, at its own expense, furnish all office
facilities, equipment and personnel necessary to discharge its responsibilities
and duties hereunder.
(d) Voyageur hereby acknowledges that all records pertaining to
Portfolio's investments are the property of the Fund, and in the event that a
transfer of investment advisory services to someone other than Voyageur should
ever occur, Voyageur will promptly, and at its own cost, take all steps
necessary to segregate such records and deliver them to MIMLIC Asset.
(e) In providing the services and assuming the obligations set
forth herein, Voyageur may at its expense employ one or more Sub-Advisers, or
may enter into such service agreements as Voyageur deems appropriate in
connection with the performance of its duties and obligations hereunder.
Reference herein to the duties and responsibilities of Voyageur shall
<PAGE>
include any Sub-Adviser employed by Voyageur to the extent Voyageur shall
delegate such duties and responsibilities to the Sub-Adviser. Any agreement
between Voyageur and any Sub-Adviser shall be subject to the approval of MIMLIC
Asset and the Fund, its Board of Directors, and Shareholders as required by the
Investment Company Act of 1940, as amended, and such Sub-Adviser shall at all
times be subject to the direction of the Board of Directors of the Fund and any
duly constituted committee thereof or any officer of the Fund acting pursuant to
like authority.
(f) In carrying out its obligations to manage the investments
and reinvestments of the assets of the Global Bond Portfolio, Voyageur shall:
(1) obtain and evaluate pertinent economic, statistical, financial and other
information affecting the economy generally and individual companies or
industries the securities of which are included in the Global Bond Portfolio or
are under consideration for inclusion therein; (2) formulate and implement a
continuous investment program for the Global Bond Portfolio consistent with the
investment objective and related investment policies for such Portfolio as set
forth in the Fund's Registration Statement; and (3) take such steps as are
necessary to implement the aforementioned investment program by purchase and
sale of securities including the placing of orders for such purchases and sales.
(g) In connection with the purchase and sale of securities of
the Fund's Global Bond Portfolio, Voyageur shall arrange for the transmission to
MIMLIC Asset and the Custodian for the Fund on a daily basis such confirmations,
trade tickets and other documents as may be necessary to enable them to perform
their administrative responsibilities with respect to the Fund's Global Bond
Portfolio. With respect to portfolio securities to be purchased or sold through
the Depository Trust Company, the Sub-Adviser shall arrange for the automatic
transmission of the I.D. confirmation of the trade to the Custodian. Voyageur
shall render such reports to MIMLIC Asset and/or to the Fund's Board of
Directors concerning the investment activity and portfolio composition of the
Fund's Global Bond Portfolio in such form and at such intervals as MIMLIC Asset
or the Board may from time to time require.
(h) Voyageur shall, in the name of the Fund, place orders for
the execution of portfolio transactions in accordance with the policies with
respect thereto, as set forth in the Fund's Registration Statement. In
connection with the placement or orders for the execution of the Fund's Global
Bond Portfolio transactions, Voyageur shall create and maintain all necessary
brokerage records of the Fund in accordance in all material respects with the
1940 Act and the Investment Advisers Act of 1940. All records shall be the
property of the Fund and shall be available for inspection and use by the
Securities and Exchange Commission, the Fund or any person retained by the Fund.
Where applicable, such records shall be maintained by Voyageur for the period
and in the place required by Rule 31a-2 under the 1940 Act.
2. COMPENSATION FOR SERVICES
In payment for the investment advisory and management services to be
rendered by Voyageur hereunder, MIMLIC Asset shall pay to Voyageur a monthly
fee, which fee shall be paid to Voyageur not later than the fifth business day
of the month following the month in which said services were rendered. The
monthly fee payable by MIMLIC Asset shall be as set forth in EXHIBIT A hereto,
which may be updated from time to time to reflect amendments, if any to
-2-
<PAGE>
EXHIBIT A. The monthly fee payable by MIMLIC Asset shall be based on the
average of the net asset values of all of the issued and outstanding shares of
the Portfolio as determined as of the close of each business day of the month
pursuant to the Articles of Incorporation, Bylaws, and currently effective
Prospectus and Statement of Additional Information of the Fund. For purposes of
calculating the Portfolio's average daily net assets, as such term is used in
this Agreement, the Portfolio's net assets shall equal its total assets minus
(a) its total liabilities and (b) its net orders receivable from dealers.
3. ALLOCATION OF EXPENSES
The Fund shall pay all its costs and expenses which are not assumed by
Voyageur. These Fund expenses include, by way of example, but not by way of
limitation, all expenses incurred in the operation of the Fund and any public
offering of its shares, including, among others, Rule 12b-1 plan of distribution
fees (if any), interest, taxes brokerage fees and commissions, fees of its
directors who are not employees of MIMLIC Asset, Voyageur, or any other
investment adviser of the Fund, or any of their affiliates, expenses of
directors' and shareholders' meetings, including the cost of printing and
mailing proxies, expenses of insurance premiums for fidelity and other coverage,
expenses of redemption of shares, expenses of issue and sale of shares, expenses
of printing and mailing stock certificates representing shares of the fund,
association membership dues, charges of custodians, transfer agents, dividend
disbursing agents, accounting services agents, investor servicing agents, and
bookkeeping, auditing, and legal expenses. The Fund will also pay the fees and
bear the expense of registering and maintaining the registration of the Fund and
the shares of its Portfolios with the Securities and Exchange Commission and
registering or qualifying its shares under state or other securities laws and
the expense of preparing and mailing prospectuses and reports to shareholders.
4. FREEDOM TO DEAL WITH THIRD PARTIES
Voyageur shall be free to render services to others similar to those
rendered under this Agreement or of a different nature except as such services
may conflict with the services to be rendered or the duties to be assumed
hereunder.
5. REPORTS TO DIRECTORS OF THE FUND
Appropriate officers of Voyageur shall provide the directors of the
Fund with such information as is required by any plan of distribution adopted by
the Fund pursuant to Rule 12b-1 under the Act, if any.
6. BROKERAGE
Voyageur shall in good faith select the brokers and dealers that will
execute the purchases and sales of securities for the Global Bond Portfolio of
the Fund and markets on or in which such transactions will be executed for all
securities and shall place, in the name of the Global Bond Portfolio of the Fund
or its nominee, all such orders.
-3-
<PAGE>
(a) When placing such orders, Voyageur shall use its best
efforts to obtain the best available price and most favorable and efficient
execution for the Global Bond Portfolio of the Fund. Where best price and
execution may be obtained from more than one broker or dealer, Voyageur may, in
its discretion, purchase and sell securities through brokers or dealers who
provide research, statistical and other information to Voyageur. It is
understood that such services may be used by Voyageur for all of its investment
advisory accounts and accordingly, not all such services may be used by Voyageur
in connection with the Global Bond Portfolio of the Fund.
It is understood that certain other clients of Voyageur may have
investment objectives and policies similar to those of the Fund, and that
Voyageur may, from time to time, make recommendations that result in the
purchase or sale of a particular security by its other clients simultaneously
with the Fund. If transactions on behalf of more than one client during the
same period increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price or quantity. In
such event, Voyageur shall allocate advisory recommendations and the placing of
orders in a manner that is deemed equitable by Voyageur to the accounts
involved, including the Fund. When two or more of the clients of Voyageur
(including the Fund) are purchasing or selling the same security on a given day
from the same broker or dealer, such transactions may be averaged as to price.
(b) Voyageur agrees that it will not purchase or sell securities
for the Global Bond Portfolio of the Fund in any transaction in which it, the
Adviser, the Sub-Adviser, or any "affiliated person" of the Fund, MIMLIC Asset,
the Sub-Adviser, or Voyageur or any affiliated person of such "affiliated
person" is acting as principal; provided, however, that Voyageur may effect
transactions pursuant to Rule 17a-7 under the 1940 Act in compliance with the
Fund's then-effective policies concerning such transactions.
(c) Voyageur agrees that it will not execute any portfolio
transactions for the Global Bond Portfolio of the Fund with a broker or dealer
or futures commission-merchant which is an "affiliated person" of the Fund, the
MIMLIC Asset or an "affiliated person" of such an "affiliated person" without
the prior written consent of MIMLIC Asset. In effecting any such transactions
with the prior written consent of MIMLIC Asset, Voyageur shall comply with
Section 17(e)(1) of the 1940 Act, other applicable provisions of the 1940 Act,
if any, the then-effective Registration Statement of the Fund under the
Securities Act of 1933, as amended and the Fund's then-effective policies
concerning such transactions.
(d) Voyageur shall promptly communicate to any Sub-Adviser and,
if requested by MIMLIC Asset or the Sub-Adviser, to the Fund's Board of
Directors, such information relating to the transactions of the Global Bond
Portfolio as MIMLIC Asset may reasonably request. The parties understand that
the Fund shall bear all brokerage commissions in connection with the purchases
and sales of portfolio securities for the Global Bond Portfolio of the Fund and
all ordinary and reasonable transaction costs in connection with purchases of
such securities in private placements and subsequent sales thereof.
-4-
<PAGE>
7. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT
(a) The effective date of this Agreement shall be the date set
forth on EXHIBIT A hereto.
(b) Unless sooner terminated as hereinafter provided, this
Agreement shall continue in effect for a period no more than two years from the
date of its execution but only as long as such continuance is specifically
approved at least annually by (i) the Board of Directors of the Fund or by the
vote of a majority of the outstanding voting securities of the Fund, and (ii) by
the vote of a majority of the directors of the Fund who are not parties to this
Agreement or "interested persons," as defined in the Act, of the Fund, MIMLIC
Asset, Voyageur or of any other investment adviser of the Fund case in person at
a meeting called for the purpose of voting on such approval.
(c) This Agreement may be terminated at any time, without
payment of any penalty, by the Board of Directors of the fund, by MIMLIC Asset,
or by the vote of a majority of the outstanding voting securities of the
Portfolio, or by Voyageur, upon 60 days' written notice to the other party.
(d) This Agreement shall terminate automatically in the event of
its "assignment" (as defined in the Act).
(e) No amendment to this Agreement shall be effective until
approved by the vote of: (i) a majority of the directors of the Fund who are
not parties to this Agreement or "interested persons" (as defined in the Act) of
MIMLIC Asset, Voyageur, or any other investment adviser of the Fund or cast in
person at a meeting called for the purpose of voting on such approval; and (ii)
a majority of the outstanding voting securities of the Portfolio of the Fund.
(f) Wherever referred to in this Agreement, the vote or approval
of the holders of a majority of the outstanding voting securities or shares of
the Portfolio shall mean the lesser of (i) the vote of 67% or more of the voting
securities of the Portfolio present at a regular or special meeting of
shareholders duly called, if more than 50% of the Portfolio's outstanding voting
securities are present or represented by proxy, or (ii) the vote of more than
50% of the outstanding voting securities of the Portfolio.
8. NOTICES
Any notice under this Agreement shall be in writing, addressed and
delivered or mailed postage prepaid to the appropriate party at the following
address: The Adviser and the Fund at 400 Robert Street North, St. Paul,
Minnesota 55101-2098, and the Sub-Adviser at 90 South Seventh Street, Suite
4400, Minneapolis, Minnesota 55402-4115.
-5-
<PAGE>
IN WITNESS WHEREOF, the Fund, MIMLIC Asset, and Voyageur have caused
this Agreement to be executed by their duly authorized officers as of the day
and year first above written.
MIMLIC SERIES FUND, INC.
By
---------------------------
Its
--------------------------
MIMLIC ASSET MANAGEMENT, INC.
By
--------------------------
Its
--------------------------
VOYAGEUR FUND MANAGERS, INC.
By
---------------------------
Its
--------------------------
-6-
<PAGE>
EXHIBIT A
TO
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
MIMLIC SERIES FUND, INC.,
MIMLIC ASSET MANAGEMENT COMPANY
AND
VOYAGEUR FUND MANAGERS, INC.
EFFECTIVE DATE _________________, 1996
Management Fee Annual Rate
MIMLIC Series Fund of the Average Daily Net Assets
------------------ -------------------------------
Global Bond Portfolio .50%
All Portfolio Assets
<PAGE>
SUB-ADVISORY AGREEMENT
Agreement, dated 1996, by and between MIMLIC Asset
Management, Inc., a Minnesota Corporation,(hereinafter the "Adviser") Voyageur
Fund Managers, Inc. (hereinafter the "Sub-Adviser"), a Minnesota corporation,
and Lazard London International Investment Management Limited, an entity
organized under the laws of the United Kingdom, (hereinafter "Lazard London").
WHEREAS, MIMLIC Series Fund, Inc., a Minnesota corporation (the "Fund"), a
diversified management investment company of the series type, on behalf of its
Global Bond Portfolio, a separately managed series of the Fund, has appointed
the Adviser as the Fund's investment adviser pursuant to an Investment Advisory
Agreement which is dated, , 1996, as amended (the Advisory Agreement);
and
WHEREAS, pursuant to the terms of the Advisory Agreement, the Adviser has
appointed the Sub-Adviser to act as its sub-adviser for the Fund, pursuant to an
Investment Sub-Advisory Agreement which is dated ,1996, as
amended (the Sub-Advisory Agreement"); and
WHEREAS, pursuant to the terms of the Sub-Advisory Agreement, the Sub-
Adviser desires to appoint Lazard London as its sub-adviser for the Fund, and
Lazard London is willing to act in such capacity upon the terms set forth
herein; and
WHEREAS, pursuant to the terms of the Advisory Agreement, the Fund has
approved the appointment of Lazard London as the sub-adviser for the Fund.
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Adviser and Lazard London agree as follows:
1. The Sub-Adviser hereby employs Lazard London to serve as its
sub-adviser for, and to manage the investment of the assets of the Global Bond
Portfolio of the Fund as set forth herein. Lazard London hereby accepts such
employment and agrees, for the compensation herein provided, to assume all
obligations herein set forth and to bear all expenses of its performance of such
obligations (but no other expenses). Except as provided herein, Lazard London
shall not be required to pay expenses of the Fund, including, but not limited to
(a) brokerage and commission expenses; (b) federal, state, local and foreign
taxes, including issue and transfer taxes incurred by or levied on the Fund; (c)
interest charges on borrowings; (d) the Fund's organizational and offering
expenses, whether or not advanced by the Adviser; (e) the cost of other
personnel providing services to the Fund; (f) fees and expenses of registering
or otherwise qualifying the shares of the Fund under applicable state securities
laws; (g) expenses of printing and distributing reports to shareholders; (h)
costs of shareholders' meetings and proxy solicitation; (i) charges and expenses
of the Fund's custodian and registrar, transfer agent and dividend disbursing
agent; (j) compensation of the Fund's officers, directors and employees that are
not Affiliated Persons or Interested Persons (as defined in Section 2(a)(19) of
the Investment Company Act of 1940, as amended (the "1940 Act") and the rules,
regulations and releases relating thereto) of the Adviser; (k) legal and
auditing expenses; (l) costs of certificates representing common shares of the
Fund; (m) costs of stationery and supplies; (n) insurance expenses; (o)
association membership dues; (p) the fees and expenses of registering the Fund
and its shares with the Securities and Exchange Commission; (q) travel expenses
of officers and
<PAGE>
employees of Lazard London to the extent such expenses relate to the attendance
of such persons at meetings at the request of the Board of Directors of the
Fund; and (r) all other charges and costs of the Fund's operation unless
otherwise explicitly provided herein. Lazard London shall for all purposes
herein be deemed to be an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise) have no authority to act
for or on behalf of the Fund in any way or otherwise be deemed an agent of the
Fund.
2. Lazard London shall work with the Adviser and the Sub-Adviser to direct
the investments of the Global Bond Portfolio of the Fund, in accordance with
applicable law and the investment objective, policies and restrictions set forth
in the Fund's then-effective Registration Statement under the Securities Act of
1933, as amended, including the Prospectus and Statement of Additional
Information of the Fund contained therein, subject to the supervision of the
Fund, its officers and directors, the Adviser and the Sub-Adviser and in
accordance with the investment objectives, policies and restrictions from time
to time prescribed by the Board of Directors of the Fund and communicated by the
Adviser and the Sub-Adviser to Lazard London and subject to such further
limitations as the Adviser may from time to time impose by written notice to the
Sub-Adviser and Lazard London.
3. Lazard London shall formulate and implement an over-all continuing
program for managing the investment of the assets of the Global Bond Portfolio
of the Fund, and shall amend and update such program from time to time as
financial and other economic conditions warrant. Lazard London shall (i) make
all determinations with respect to managing the investment of the international
component (as described in the Prospectus) of the assets of the Global Bond
Portfolio of the Fund, (ii) determine allocation of assets of the Global Bond
Portfolio of the Fund among domestic and international components and (iii)
manage currency and foreign exchange position with respect to all components of
the assets and shall take such steps as may be necessary to implement the same
of the Global Bond Portfolio, including the placement of purchase and sale
orders on behalf of the Global Bond Portfolio of the Fund.
4. Lazard London shall furnish such reports to the Sub-Adviser as the Sub-
Adviser and Adviser may reasonably request for the Sub-Adviser's use in
discharging its obligations under the Sub-Advisory Agreement, including any
reports required pursuant to Rule 17f-5 under the 1940 Act, which reports may be
distributed by the Sub-Adviser to the Fund's Board of Directors at periodic
meetings of the Board of Directors and at such other times as may be reasonably
requested by the Board of Directors. Copies of all such reports shall be
furnished to the Sub-Adviser for examination and review within a reasonable time
prior to the presentation of such reports to the Fund's Board of Directors.
5. In connection with the purchase and sale of securities of the Fund's
Global Bond Portfolio, Lazard London shall provide and the Sub-Adviser shall
arrange for the transmission to the Adviser and the Custodian for the Fund on a
daily basis such confirmations, trade tickets and other documents as may be
necessary to enable them to perform their administrative responsibilities with
respect to the Fund's Global Bond Portfolio. The Sub-Adviser shall render such
reports to the Adviser and/or to the Fund's Board of Directors concerning the
investment activity and portfolio composition of the Fund's Global Bond
Portfolio in such form and at such intervals as the Adviser or the Board may
from time to time require.
2
<PAGE>
6. Lazard London shall in good faith select the brokers and dealers that
will execute the purchases and sales of securities for the Global Bond Portfolio
of the Fund and markets on or in which such transactions will be executed for
all securities which are purchased or sold outside of the United States of
America and shall place, in the name of the Global Bond Portfolio of the Fund or
its nominee, all such orders.
(a) When placing such orders, Lazard London shall use its best efforts to
obtain the best available price and most favorable and efficient execution for
the Global Bond Portfolio of the Fund. Where best price and execution may be
obtained from more than one broker or dealer, Lazard London may, in its
discretion, purchase and sell securities through brokers or dealers who provide
research, statistical and other information to Lazard London. It is understood
that such services may be used by Lazard London for all of its investment
advisory accounts and accordingly, not all such services may be used by Lazard
London in connection with the Global Bond Portfolio of the Fund.
It is understood that certain other clients of Lazard London may have
investment objectives and policies similar to those of the Fund, and that Lazard
London may, from time to time, make recommendations that result in the purchase
or sale of a particular security by its other clients simultaneously with the
Fund. If transactions on behalf of more than one client during the same period
increase the demand for securities being purchased or the supply of securities
being sold, there may be an adverse effect on price or quantity. In such event,
Lazard London shall allocate advisory recommendations and the placing of orders
in a manner that is deemed equitable by Lazard London to the accounts involved,
including the Fund. When two or more of the clients of Lazard London (including
the Fund) are purchasing or selling the same security on a given day from the
same broker or dealer, such transactions may be averaged as to price.
(b) Lazard London agrees that it will not purchase or sell securities for
the Global Bond Portfolio of the Fund in any transaction in which it, the
Adviser, the Sub-Adviser, or any "affiliated person" of the Fund, the Adviser,
the Sub-Adviser, or Lazard London or any affiliated person of such "affiliated
person" is acting as principal; provided, however, that Lazard London may
effect transactions pursuant to Rule 17a-7 under the 1940 Act in compliance with
the Fund's then-effective policies concerning such transactions.
(c) Lazard London agrees that it will not execute any portfolio
transactions for the Global Bond Portfolio of the Fund with a broker or dealer
or futures commission-merchant which is an "affiliated person" of the Fund, the
Adviser or the Sub-Adviser or Lazard London or an "affiliated person" of such an
"affiliated person" without the prior written consent of the Adviser. In
effecting any such transactions with the prior written consent of the Adviser,
Lazard London shall comply with Section 17(e)(1) of the 1940 Act, other
applicable provisions of the 1940 Act, if any, the then-effective Registration
Statement of the Fund under the Securities Act of 1933, as amended and the
Fund's then-effective policies concerning such transactions.
(d) Lazard London shall promptly communicate to the Sub-Adviser and, if
requested by the Adviser or the Sub-Adviser, to the Fund's Board of Directors,
such information relating to the transactions of the Global Bond Portfolio of
the as the Adviser may reasonably request. The parties understand that the Fund
shall bear all brokerage commissions in
3
<PAGE>
connection with the purchases and sales of portfolio securities for the Global
Bond Portfolio of the Fund and all ordinary and reasonable transaction costs in
connection with purchases of such securities in private placements and
subsequent sales thereof.
7. Lazard London may (at its cost except as contemplated by paragraph 5 of
this Agreement) employ, retain or otherwise avail itself of the services and
facilities of persons and entities within its own organization or any other
organization for the purpose of providing Lazard London, the Adviser, the Sub-
Adviser or the Fund with such information, advice or assistance, including but
not limited to advice regarding economic factors and trends and advice as to
transactions in specific securities, as Lazard London may deem necessary,
appropriate or convenient for the discharge of its obligations hereunder or
otherwise helpful to the Sub-Adviser or the Fund, or in the discharge of Lazard
London's overall responsibilities with respect to the other accounts for which
it serves as investment manager or investment adviser.
8. Lazard London shall cooperate with and make available to the Sub-
Adviser, the Fund and any agents engaged by the Fund, Lazard London's expertise
relating to matters affecting the Global Bond Portfolio of the Fund.
9. For the services to be rendered under this Agreement, and the
facilities to be furnished for each fiscal year of the Fund, the Sub-Adviser
shall pay to Lazard London a monthly management fee at the annual rate which
shall be equal to one-half of the amount received by the Sub-Adviser for
advisory services rendered to the Fund. This fee will be computed based on net
assets of the Global Bond Portfolio of the Fund at the beginning of each day and
will be paid to Lazard London monthly on or before the fifteenth day of the
month next succeeding the month for which the fee is paid. The fee shall be
prorated for any fraction of a fiscal year at the commencement and termination
of this Agreement.
Pursuant to the Sub-Advisory Agreement, the Adviser receives monthly
from the Fund compensation at the annual rate, shown on Exhibit A, of the
average daily net assets of the Global Bond Portfolio of the Fund. If the Sub-
Adviser has undertaken in the Fund's Registration Statement as filed under the
1940 Act or elsewhere to waive all or part of its fee under the Advisory
Agreement or to reduce such fee upon order of the Board of Directors or the vote
of a majority of the outstanding voting securities of the Fund, Lazard London's
fee payable under this Agreement will be proportionately waived in whole or
part.
10. Lazard London represents, warrants and agrees that:
(a) Lazard London is registered as an "investment adviser" under the
Investment Advisers Act of 1940 ("Advisers Act") and is currently in
compliance and shall at all times continue to comply with the requirements
imposed upon it by the Advisers Act and other applicable laws and
regulations. Lazard London agrees to (i) supply the Adviser with such
documents as the Adviser may reasonably request to document compliance with
such laws and regulations, (ii) maintain or adopt a Code of Ethics
substantially in the form of the Code of Ethics maintained by the Sub-
Adviser and (iii) immediately notify the Sub-Adviser of the occurrence of
any event which would disqualify Lazard London from serving as an
investment adviser of an investment company pursuant to any applicable law
or regulation.
4
<PAGE>
(b) Lazard London will maintain, keep current and preserve on behalf
of the Fund all records required or permitted by the 1940 Act in the manner
provided by such Act. Lazard London agrees that copies of such records are
the property of the Fund, and will be surrendered to the Fund promptly upon
request.
(c) Lazard London will complete such reports concerning purchases or
sales of securities on behalf of Lazard London as the Sub-Adviser may from
time to time require to document compliance with the 1940 Act, the Advisers
Act, the Internal Revenue Code, applicable state securities laws and other
applicable laws and regulations or regulatory and taxing authorities in
countries other than the United States.
(d) After filing with the Securities and Exchange Commission any
amendment to its Form ADV, Lazard London will promptly furnish a copy of
such amendment to the Adviser and the Sub-Adviser.
(e) Lazard London will immediately notify the Adviser and the Sub-
Adviser of the occurrence of any event which would disqualify Lazard London
from serving as an investment adviser of an investment company pursuant to
Section 9 of the 1940 Act or any other applicable statute or regulation.
11. This Agreement shall become effective as of the effective date of
the Registration Statement of the Global Bond Portfolio of the of the Fund under
the Securities Act of 1933, as amended. Wherever referred to in this Agreement,
the vote or approval of the holders of a majority of the outstanding voting
securities or shares of the Global Bond Portfolio of the Fund shall mean the
vote of 67% or more of such shares if the holders of more than 50% of such
shares are present in person or by proxy or the vote of more than 50% of such
shares, whichever is less (or such other definition as is provided for in the
1940 Act).
Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect for a period of two years from the date of its execution, and
thereafter shall continue in effect only so long as such continuance is
specifically approved at least annually (a) by the Board of Directors of the
Fund or by the vote of a majority of the outstanding voting securities of the
Global Bond Portfolio of the Fund, and (b) by the vote of a majority of the
directors who are not parties to this Agreement or Interested Persons of the
Adviser, Lazard London or the Fund, cast in person at a meeting called for the
purpose of voting on such approval.
This Agreement may be terminated at any time without the payment of any
penalty (a) by the vote of the Board of Directors of the Fund or by the vote of
the holders of a majority of the outstanding voting securities of the Global
Bond Portfolio of the Fund, upon 60 days' written notice to the Adviser and the
Sub-Adviser, or (b) by the Adviser, upon 60 days' written notice to the Sub-
Adviser; or (c) by the Sub-Adviser, upon 60 days' written notice to the Adviser.
This Agreement shall automatically terminate in the event of its assignment
5
<PAGE>
as defined in the 1940 Act and the rules thereunder, provided, however, the such
automatic termination shall be prevented in a particular case by an order of
exemption from the Securities and Exchange Commission or a no-action letter of
the staff of the Commission to the effect that such assignment does not require
termination as a statutory or regulatory matter. This Agreement shall
automatically terminate upon completion of the dissolution, liquidation or
winding up of the Fund.
12. No amendment to or modification of this Agreement shall be effective
unless and until approved by the vote of a majority of the outstanding shares of
the Global Bond Portfolio of the Fund.
13. This Agreement shall be binding upon, and inure to the benefit of, the
Adviser and Lazard London, and their respective successors.
14. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
15. (a) Lazard London will perform its duties and obligations hereunder
with due care, and use its reasonable judgment. In the absence of willful
default or negligence on the part of Lazard London, Lazard London shall not be
liable for any act or omission that occurs in the course of or in the connection
with the services rendered by it under this Agreement or for any decline in the
value of the assets of the Fund or any loss or damage that may result to the
Adviser, the Sub-Adviser or the Fund from the Sub-Adviser acting upon any
investment advice given to it by Lazard London.
(b) The Sub-Adviser agrees to indemnify Lazard London from and against any
and all liabilities, obligations, losses, damages, penalties, actions, judgment,
suits, costs, charges, demands, claims, expenses or disbursements of any kind or
nature whatsoever (other than those resulting from the negligence or willful
default on the part of Lazard London) which may be imposed on, incurred by or
asserted against Lazard London in performing its function or duties under this
Agreement.
16. To the extent that state law is not preempted by the provisions of any
law of the United States heretofore or hereafter enacted, as the same may be
amended from time to time, this Agreement shall be administered, construed and
enforced according to the laws of the State of Minnesota without reference to
the choice of laws principles of such state.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers thereunto duly authorized in multiple counterparts,
each of which shall be an original but all of which shall constitute one of the
same instrument.
6
<PAGE>
MIMLIC ASSET MANAGEMENT, INC.
By
Name:
Title:
VOYAGEUR FUND MANAGERS, INC.
By
Name:
Title:
LAZARD LONDON INTERNATIONAL
INVESTMENT MANAGEMENT
LIMITED
By
Name:
Title:
7
<PAGE>
EXHIBIT A
TO
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
MIMLIC ASSET MANAGEMENT COMPANY,
VOYAGEUR FUND MANAGERS, INC.,
AND
LAZARD LONDON INTERNATIONAL INVESTMENT MANAGEMENT, LTD.
EFFECTIVE DATE _________________, 1996
Management Fee Annual Rate
MIMLIC Series Fund of the Average Daily Net Assets
------------------ -------------------------------
Global Bond Portfolio .50%
All Portfolio Assets
8
<PAGE>
AMENDMENT NUMBER ONE
CUSTODIAL AGREEMENT
MIMLIC SERIES FUND, INC.
FIRST TRUST NATIONAL ASSOCIATION
This Amendment modifies the existing Agreement made April 21, 1994, by and
between MIMLIC Series Fund, Inc., a Minnesota corporation (hereinafter called
the "Fund"), and First Trust National Association, (hereinafter called the
"Custodian") a national banking association with its principal place of business
at St. Paul, Minnesota. This Amendment shall be effective on November 1, 1996.
I
The Agreement shall be modified so that the 3rd paragraph of Article 1.,
"Definitions," shall be amended to read as follows:
The word "Portfolio" shall mean one of the investment portfolios of
the Fund which is subject to the terms of this Agreement where its
securities and cash are held and administered by the Custodian. For
the purpose of this Agreement, the following investment portfolios of
the Fund are Portfolios subject to the Agreement: Growth Portfolio,
Asset Allocation Portfolio, Index 500 Portfolio, Capital Appreciation
Portfolio, Small Company Portfolio, Value Stock Portfolio and Small
Company Value Portfolio.
IN WITNESS WHEREOF, the Fund and the Custodian have caused this Amendment to be
executed in duplicate by their duly authorized officers.
Executed on this ___ day of _____________, 1996 in St. Paul, Minnesota.
ATTEST: MIMLIC SERIES FUND, INC.
By
- -------------------------- ---------------------------
Secretary
Its
------------------------
ATTEST: FIRST TRUST NATIONAL ASSOCIATION
By
- ----------------------------- ---------------------------
Trust Officer
Its
--------------------------
<PAGE>
KPMG Peat Marwick LLP Letterhead
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
MIMLIC Series Fund, Inc.:
We consent to the use of our report included herein and to the references to our
Firm under the headings "FINANCIAL HIGHLIGHTS" in Part A and INDEPENDENT
AUDITORS" for Part B of the Registration Statement.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 14, 1996
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<INVESTMENTS-AT-COST> 94880
<INVESTMENTS-AT-VALUE> 98453
<RECEIVABLES> 2805
<ASSETS-OTHER> 2
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<TOTAL-ASSETS> 101260
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<INTEREST-INCOME> 6164
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<EXPENSES-NET> 498
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<REALIZED-GAINS-CURRENT> 3735
<APPREC-INCREASE-CURRENT> 5968
<NET-CHANGE-FROM-OPS> 15370
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<DISTRIBUTIONS-OF-INCOME> 3000
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<SERIES>
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<PAGE>
MIMLIC SERIES FUND, INC.
POWER OF ATTORNEY
TO SIGN REGISTRATION STATEMENT
The undersigned, Directors of MIMLIC Series Fund, Inc. (the "Fund"),
appoint Paul H. Gooding and Donald F. Gruber, and each of them individually, as
attorney-in-fact for the purpose of signing in their names and on their behalf
as Directors of the Fund and filing with the Securities and Exchange Commission
Registration Statements on Form N-1A, or any amendments thereto, for the purpose
of registering shares of Common Stock of the Portfolios of the Fund for sale by
the Fund and to register the Fund under the Investment Company Act of 1940.
Dated: January 18, 1994 ________________________________________
Charles E. Arner
________________________________________
Ellen S. Berscheid
________________________________________
Ralph D. Ebbott
________________________________________
Frederick P. Feuerherm
________________________________________
Paul H. Gooding
