<PAGE>
MIMLIC SERIES FUND, INC.
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A N N U A L R E P O R T D E C E M B E R 3 1, 1 9 9 6
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GROWTH PORTFOLIO
BOND PORTFOLIO
MONEY MARKET PORTFOLIO
ASSET ALLOCATION PORTFOLIO
MORTGAGE SECURITIES PORTFOLIO
INDEX 500 PORTFOLIO
CAPITAL APPRECIATION PORTFOLIO
INTERNATIONAL STOCK PORTFOLIO
SMALL COMPANY PORTFOLIO
MATURING GOVERNMENT BOND 1998 PORTFOLIO
MATURING GOVERNMENT BOND 2002 PORTFOLIO
MATURING GOVERNMENT BOND 2006 PORTFOLIO
MATURING GOVERNMENT BOND 2010 PORTFOLIO
VALUE STOCK PORTFOLIO
-------------------------
<PAGE>
TABLE OF CONTENTS
How to Use This Report.................................................... 1
Portfolio Total Return.................................................... 2
PORTFOLIO MANAGER REVIEWS
Growth Portfolio.......................................................... 4
Bond Portfolio............................................................ 6
Money Market Portfolio.................................................... 8
Asset Allocation Portfolio................................................ 10
Mortgage Securities Portfolio............................................. 12
Index 500 Portfolio....................................................... 14
Capital Appreciation Portfolio............................................ 16
International Stock Portfolio............................................. 18
Small Company Portfolio................................................... 20
Maturing Government Bond 1998 Portfolio................................... 22
Maturing Government Bond 2002 Portfolio................................... 22
Maturing Government Bond 2006 Portfolio................................... 22
Maturing Government Bond 2010 Portfolio................................... 22
Value Stock Portfolio..................................................... 26
INDEPENDENT AUDITORS' REPORT.............................................. 28
INVESTMENTS IN SECURITIES
Growth Portfolio.......................................................... 29
Bond Portfolio............................................................ 30
Money Market Portfolio.................................................... 33
Asset Allocation Portfolio................................................ 35
Mortgage Securities Portfolio............................................. 40
Index 500 Portfolio....................................................... 43
Capital Appreciation Portfolio............................................ 48
International Stock Portfolio............................................. 49
Small Company Portfolio................................................... 53
Maturing Government Bond 1998 Portfolio................................... 55
Maturing Government Bond 2002 Portfolio................................... 56
Maturing Government Bond 2006 Portfolio................................... 57
Maturing Government Bond 2010 Portfolio................................... 58
Value Stock Portfolio..................................................... 59
FINANCIAL STATEMENTS
Statements of Assets and Liabilities...................................... 60
Statements of Operations.................................................. 62
Statements of Changes in Net Assets....................................... 64
Notes to Financial Statements............................................. 68
SHAREHOLDER VOTING RESULTS................................................ 88
<PAGE>
HOW TO USE THIS REPORT
Some of our clients prefer a brief overview of their MIMLIC Series Fund
investments while others prefer full financial statements. This report is
designed to meet both objectives.
For a quick overview of each Portfolio's performance, investment strategies
and holdings, refer to the front section of the report. Comprehensive investment
holdings, market values and financial reports begin on page 29.
Performance charts graphically compare each Portfolio's performance with
select investment indices and other benchmarks. This comparison provides you
with more information about your investments.
The charts are useful because they illustrate performance over the same time
frame and over a long period. There are limitations, however. An index may
reflect the performance of securities that the Portfolio may not hold. Also, the
index does not deduct investment advisory fees and other fund expenses - whereas
your Portfolio does. Individuals cannot buy even an unmanaged index fund without
incurring some charges and expenses.
This report is just one of several tools you can use to learn more about
your investment(s) in the MIMLIC Series Fund. Your MIMLIC Sales registered
representative, who understands your personal financial situation, can best
explain the features of your investment and how they apply to your financial
needs.
1
<PAGE>
PORTFOLIO TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MIMLIC Series
Fund
<S> <C>
Bar graph
performance
Growth 17.2%
Bond 3.0%
Money Market 4.9%
Asset Allocation 12.5%
Mortgage
Securities 5.3%
Index 500 21.6%
Capital
Appreciation 17.6%
International
Stock 19.8%
Small Company 6.5%
MGB 1998 4.1%
MGB 2002 1.7%
MGB 2006 -1.2%
MGB 2010 -3.4%
Value Stock 31.0%
</TABLE>
Historical results are not an indication of future performance. Investment
returns on principal values will fluctuate so that shares upon redemption may be
worth more or less than their original cost. Performance figures of the Fund do
not reflect charges pursuant to the terms of the variable life insurance
policies and variable annuity contracts funded by separate accounts that invest
in the Fund's shares. When such charges are deducted, actual investment
performance in a variable policy or contract will be lower.
2
<PAGE>
February 14, 1997
Dear Shareholders:
For the second year in a row, the stock market exceeded all expectations and we
believe it was the best performing major asset category during 1996. Money
market returns of near 5 percent came in second place followed by the investment
grade bond market which posted low single digit returns for the year.
Fundamentals of U.S. stocks continued to be excellent, driven by continued
corporate earnings growth, low inflation and interest rates. During the year the
operating earnings of the S&P 500 grew about 9 percent, while the total return
for the S&P 500 Index was over 20 percent. The significant difference in these
numbers reflects the valuation change that occurred throughout the year. The
year started with the market valued at 15.2 times expected 1996 earnings for the
S&P 500. The year ended at 18.3 times the 1996 operating earnings.
Normally this type of valuation increase is accompanied by a reduction in
the level of interest rates. However, during 1996 interest rates began moving
higher early in the year, peaked in July, and gyrated lower during the second
half as economic growth began to cool down. The interest rate on the two-year
U.S. Treasury Note increased 72 basis points to yield 5.86 percent for 1996. The
30-year U.S. Treasury Bond closed the year yielding 6.64 percent, 69 basis
points higher on the year, yet below the 7.19 percent rate reached on July 5,
1996.
The primary driver of the 1996 bull market was a significant increase in the
demand for U.S. stocks, while the supply of stocks actually fell. Stock mutual
funds took in more than $200 billion in net new cash for 1996 according to the
Investment Company Institute--equal to over 3 percent of the total value of all
the stocks listed on U. S. stock exchanges. Meanwhile the supply of stocks,
driven by corporate buy backs and cash mergers, actually declined by $50 billion
during the first nine months of 1996.*
The bond market, on the other hand, was highly volatile. Early in the year,
fixed income investors were worried about strong economic growth, full
employment, inflation, lack of a budget deal, and the possibility that the
Federal Reserve would raise short-term interest rates. In the second half, it
became apparent the Federal Reserve was on hold and signs of slower,
non-inflationary economic growth gave the bond market a reason to repair some of
the damage done in the first half.
The long-term outlook for both the stock and bond markets remains positive
for a couple of reasons: (1) inflation has remained under control despite
several years of moderate to strong economic growth; (2) the U.S. economy
continues to benefit from productivity gains, allowing worldwide competitive
status in many industries; (3) strong demand for stocks and bonds will likely
pour more money into the financial markets as the baby-boomer generation reaches
its prime retirement savings years.
Near term, we would expect a return to more "normal" returns for the stock
market. Our work indicates that the stock market is not undervalued, but neither
is it significantly overvalued given the current level of corporate earnings and
interest rates. While a short-term correction of 5 to 10 percent can never be
ruled out, a continuation of a modest growth economy with low interest rates is
a formula for potential future growth in stock prices.
Bonds currently offer an attractive return relative to inflation, with the
10-year Treasury bond yield about 6.4 percent with inflation about 3 percent. In
the near term, the Federal Reserve will likely try to do what it takes to keep
inflation under control by raising short-term interest rates. This move will
reduce the possibility of a significant increase in the long-term--a positive
sign for bonds.
Our wide range of MIMLIC Series Fund options help capture growth
opportunities across many different market segments. The following pages provide
more detailed information on all of our MIMLIC Series Fund portfolios. Please
review them carefully and contact your MIMLIC Sales registered representative
with questions.
Sincerely
[SIGNATURE]
Paul Gooding, President
MIMLIC Series Fund, Inc.
- ------------------------
* According to Elizabeth MacKay, a stock market strategist for Bear Stearns &
Co.
3
<PAGE>
GROWTH PORTFOLIO
PERFORMANCE UPDATE
JAMES KING
EXECUTIVE VICE PRESIDENT
VOYAGEUR FUND MANAGERS, INC.
[PHOTO]
The Growth Portfolio seeks the long-term accumulation of capital, with current
income as a secondary objective. It invests primarily in common stocks and other
equity securities. While MIMLIC Asset Management acts as investment adviser for
the portfolio, Voyageur Fund Managers, Inc. provides investment advice to the
Growth Portfolio under a subadvisory agreement.
PERFORMANCE
Status-quo election results combined with a very benign inflation environment to
propel stocks to new highs in a strong fourth quarter. Total return for the S&P
500* was 8.4 percent in the fourth quarter and 23.0 percent for the year ended
December 31, 1996. The Growth Portfolio gained 2.2 percent** in the quarter and
17.2 percent** for the year. The top performing sectors this quarter were
financials and technology while commercial services and consumer cyclicals
under-performed.
The primary reasons for the strong equity market in 1996 were the continued
lack of inflation and the ability of corporate profits to repeatedly surpass
expectations. A third catalyst was the very strong cash inflows to equity mutual
funds. Each of these macro factors generally performed better than was expected
as 1996 began, leading to better than expected stock market returns.
PORTFOLIO RECAP
The objective of the Growth Portfolio is to participate in the long-term
earnings and dividend growth of very high quality companies. We select stocks
from a universe of about 250 companies which are rated A+ or A by Standard and
Poor's for their ability to generate consistent earnings and dividend growth.
These companies are typically able to generate predictable earnings because of
their broad product lines and geographic diversification which cause them to be
less reliant on the U.S. economy for their growth. Stock selections are geared
toward reducing downside risk by selling companies at the high end of their
historical valuation levels and replacing them with companies at the low end of
their historical valuation levels.
Given what seem to be high levels of both valuations and expectations, we
have become somewhat more defensive in the Growth Portfolio. We have also been
raising the quality level of the overall portfolio; two-thirds of the portfolio
now consists of companies rated A+. High quality stocks tend to perform best in
a more volatile market environment as investors seek companies with more
predictable earnings streams. This strategy should enable our portfolio to
perform better in a more challenging market environment; something I expect we
will see in 1997.
OUTLOOK
Most prognosticators are expecting a more moderate stock market advance in
1997-something in the range of 7-10 percent. If that forecast appears familiar,
it may be because it is about the same as was forecast going into 1996.
Inflation and corporate profits should again be the primary drivers. The
importance of the inflationary outlook can be ascertained by the mini
"correction" which took place in June and July. That down-draft was primarily
instigated by concerns that unusually low unemployment was beginning to cause
upward inflation to wages, and the Dow and S&P 500 fell as much as 10 percent
while the NASDAQ fell almost 20 percent based on intra day prices. In fact, some
of the market's most volatile days occurred in conjunction with the release of
government jobs reports. However, the July report alleviated most of those
concerns and the market rallied strongly over the second half of the year.
Corporate profits have been aided greatly by the ability of companies to find
cost cutting opportunities. By many measures, corporate margins are at record
highs for the past twenty years.
As 1997 dawns, the S&P 500 is trading at about 21 times trailing earnings
which is at the high end of historical valuations. The rate of corporate profit
growth should continue to decelerate from its 12-14 percent growth rate between
1993-1995, to approximately 8 percent in 1996, and about 5 percent projected for
1997. Inflation is expected to remain low as the economy continues to expand at
a near-perfect 2-2.5 percent annual rate. It seems, at this point, it will be
difficult for corporate profits to continue to beat expectations. The low
inflationary environment makes it very difficult to raise prices and I am not
certain how much more cost cutting can be done. Accordingly, it is likely we
will begin to see more stock market volatility as corporate earnings comparisons
become increasingly challenging.
4
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ---------------------------------------- -------- ----------- ----------
<S> <C> <C> <C>
UST, Inc. .............................. 299,000 9,680,125 4.4%
Gannett Company......................... 127,000 9,509,125 4.4%
Hewlett Packard Company................. 188,000 9,447,000 4.3%
Philip Morris Companies, Inc. .......... 82,000 9,235,250 4.2%
Wal-Mart Stores, Inc. .................. 397,000 9,081,375 4.2%
W W Grainger, Inc. ..................... 113,000 9,068,250 4.1%
Albertson's Incorporated................ 254,000 9,048,750 4.1%
Archer-Daniels-Midland Company.......... 410,000 9,020,000 4.1%
Sara Lee Corporation.................... 240,000 8,940,000 4.1%
Schering-Plough Corporation............. 138,000 8,935,500 4.1%
----------- ---
$91,965,375 42.0%
----------- ---
----------- ---
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE**
A HYPOTHETICAL $10,000 INVESTMENT IN GROWTH PORTFOLIO,
S&P 500 AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Average annual total
return:
<S> <C> <C> <C>
One year 17.2%
Five years 10.0%
Ten years 12.7%
Growth
Portfolio S&P 500 CPI
12/31/1986 10,000 10,000 10,000
12/31/1987 10,420 10,335 10,442
12/31/1988 12,072 12,047 10,903
12/31/1989 15,212 15,860 11,399
12/31/1990 15,244 15,362 12,103
12/31/1991 20,436 20,040 12,464
12/31/1992 21,421 21,567 12,834
12/31/1993 22,424 23,743 13,186
12/31/1994 22,605 24,039 13,556
12/31/1995 28,094 33,034 13,899
12/31/1996 32,912 40,618 14,358
</TABLE>
On the chart above you can see how the Growth Portfolio's total
return compared to the S&P 500 (as adjusted for dividend reinvestment)
and the Consumer Price Index. The three lines represent the total
return of a hypothetical $10,000 investment made on December 31, 1986
through December 31, 1996.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Growth Portfolio
<S> <C>
Data for Pie Chart
Capital Goods 5.9%
Consumer Goods and
Services 53.6%
Credit Sensitive 6.4%
Intermediate Goods and
Services 11.8%
Technology 10.4%
Cash and Other
Assets/Liabilities 11.9%
</TABLE>
*The S&P 500 is a broad, unmanaged index of 500 common stocks which
are representative of the U.S. stock market overall.
**Historical results are not an indication of future performance. Investment
returns on principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost. Performance figures of the
Fund do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate accounts
that invest in the Fund's shares. When such charges are deducted, actual
investment performance in a variable policy or contract will be lower.
5
<PAGE>
BOND PORTFOLIO
PERFORMANCE UPDATE
WAYNE SCHMIDT, CFA
PORTFOLIO MANAGER
[PHOTO]
The Bond Portfolio seeks as high a level of long-term total return as is
consistent with prudent investment risk. Preservation of capital is a secondary
objective. The Bond Portfolio invests in long-term, fixed income, high quality
debt instruments.
PERFORMANCE
The Bond Portfolio returned 2.96 percent* for the year ended December 31, 1996.
The Lehman Brothers Government Corporate Bond Index** returned 2.90 percent over
the same period. After an exceptional 1995, fixed income investors had to endure
a higher interest rate environment which lead to total returns below the
historical averages.
Interest rates began moving higher early in the year, peaked in July, and
gyrated lower during the second half as economic growth began to cool down. When
all was said and done, the interest rate on the two year U.S. Treasury Note
increased 72 basis points to yield 5.86 percent. The 30-year U.S. Treasury Bond
closed the year yielding 6.64 percent, 69 basis points higher on the year, yet
below the 7.19 percent rate reached on July 5, 1996.
Bond market volatility was high throughout the year as investor expectations
on future interest rates changed like the weather. Early in the year, fixed
income investors were worried about strong economic growth, full employment,
inflation, lack of a budget deal and the possibility that the Federal Reserve
would raise short-term interest rates. In the second half, it became apparent
the Federal Reserve was on hold and signs of slower, non-inflationary economic
growth gave the bond market a reason to repair some of the damage done in the
first half.
PORTFOLIO RECAP
Active portfolio management of both the sensitivity to interest rates (duration)
and credit risk is critical to the Portfolio's success. Below is a recap of
these two factors for the year.
As 1996 began, the Portfolio's duration was six percent longer than that of
the Lehman Brothers Government Corporate Bond Index (the Index).** This means
that the Portfolio was more sensitive to changes in interest rates than the
Index, so if interest rates moved lower the Portfolio would outperform, or
underperform if rates moved higher. The economic backdrop changed during
February and March and interest rates unexpectedly spiked 80 basis points
higher. The Portfolio's duration was quickly reduced during this time to be
three percent short of the Index by March. The remainder of the first half of
1996, the duration was kept shorter than the Index. By July rates moved another
60 basis points higher and the bond market appeared undervalued. Duration was
then extended and the Portfolio's duration ranged between 5 and 10 percent
longer than the Index for the remainder of the year. This move benefited our
second half performance as interest rates declined 70 basis points off their
July peak.
Active credit management is used to enhance performance. Our goal is to buy
bonds whose inherent value is not fully reflected in its current market price.
In corporate and mortgage-backed securities, this means buying bonds at a wide
yield pick-up to U.S. Treasury securities and selling them after yield spreads
have tightened and prices have appreciated in value. With this in mind,
securities were added in sectors that were undervalued. This included
investments in U.S. dollar-pay international names like Telekom Malaysia,
Enersis, Petronas, Total Access Communication and the Province of Quebec. We
also added to our exposure in the Real Estate Investment Trust (REIT) sector,
the banks and brokerage area. Two sectors void in the Portfolio, due to negative
credit trends and uncertainty, are the electric utility and tobacco sectors.
Throughout the year, the overall quality of the Portfolio was maintained at
AA3. At year end, 66 percent of the Portfolio's investments in securities were
invested in investment grade corporate bonds, 16 percent in mortgaged-backed
securities, 14 percent in U.S. Government bonds and the remaining 4 percent in
money market instruments.
OUTLOOK
In many respects, the new year in the bond market will be very similar to last
year. Quarterly economic growth will fluctuate between one percent and four
percent. Long-term inflation will be contained by the
6
<PAGE>
overriding forces of cheap global labor, technology and productivity
enhancements, and the demographic situation in the U.S.; but the bond market
will still worry about the monthly release of the consumer price index (CPI) and
employment cost index. This worry will translate into continued interest rate
volatility and thus the opportunity to benefit from investor overreaction.
The interest rate ranges established in 1996 seem realistic for 1997. The
30-year U.S. Treasury Bond traded in a range of 5.95 to 7.19 percent, while the
10-year U.S. Treasury Note yielded between 5.52 and 7.02 percent. In a range
bound market, with tight credit spreads, active duration management will be an
even more important component of success in 1997. We will take advantage of
opportunities to buy undervalued securities and extend duration during periods
of market weakness and reduce the Portfolio's exposure to interest rate risk
during periods of market strength.
TEN LARGEST BOND HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF BOND
COMPANY VALUE HOLDINGS
- ---------------------------------------- ----------- -------------
<S> <C> <C>
U.S. Treasury Strip -- 5.175%,
08/15/99................................ $ 4,969,144 4.3%
Bellsouth Telecommunications Inc. --
6.250%, 05/15/03........................ 4,908,140 4.2%
Joy Technologies Incorporated --
10.250%, 09/01/03....................... 4,300,080 3.7%
General Electric Capital Corp. --
6.660%, 05/01/18........................ 4,282,062 3.7%
Citicorp Capital -- 7.933%, 02/15/27.... 4,052,440 3.5%
Lehman Brothers, Inc. -- 7.360%,
12/15/03................................ 4,045,072 3.5%
Premark International, Inc. -- 10.500%,
09/15/00................................ 3,935,106 3.4%
Enersis -- 6.900%, 12/01/06............. 3,904,648 3.3%
Total Access Communications -- 8.375%,
11/04/06................................ 3,516,730 3.0%
Quebec Province of Canada -- 7.500%,
07/15/23................................ 3,493,872 3.0%
----------- ---
$41,407,294 35.6%
----------- ---
----------- ---
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN BOND PORTFOLIO,
LEHMAN BROTHERS GOVERNMENT CORPORATE BOND INDEX
AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Average annual total
return:
<S> <C> <C> <C>
One Year 3.0%
Five Years 6.7%
Ten Years 7.9%
Lehman
Brothers
Government
Corporate
Bond Bond
Portfolio Index CPI
12/31/1986 10,000 10,000 10,000
12/31/1987 10,156 10,230 10,442
12/31/1988 10,875 11,007 10,903
12/31/1989 12,250 12,573 11,399
12/31/1990 13,136 13,615 12,103
12/31/1991 15,448 15,811 12,464
12/31/1992 16,478 17,012 12,834
12/31/1993 18,168 18,931 13,186
12/31/1994 17,341 18,270 13,556
12/31/1995 20,765 21,462 13,899
12/31/1996 21,380 22,084 14,358
</TABLE>
On the chart above you can see how the Bond Portfolio's total
return compared to the Lehman Brothers Government Corporate Bond Index
and the Consumer Price Index. The three lines represent the total
return of a hypothetical $10,000 investment made on December 31, 1986
through December 31, 1996.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Bond Portfolio
<S> <C>
Data for Pie Charts
U.S. Treasury 10.8%
U.S. Government
Agencies 14.9%
AAA Rated 11.8%
AA Rated 4.5%
A Rated 28.3%
BBB Rated 22.1%
Cash and Other
Assets/Liabilities 7.6%
</TABLE>
*Historical results are not an indication of future performance. Investment
returns on principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost. Performance figures of the Fund
do not reflect charges pursuant to the terms of the variable life insurance
policies and variable annuity contracts funded by separate accounts that invest
in the Fund's shares. When such charges are deducted, actual investment
performance in a variable policy or contract will be lower.
**The Lehman Brothers Government Corporate Bond Index is an unmanaged benchmark
composite of the Lehman Brothers Government Bond Index which includes all
publicly issued debt of the U.S. Government and Agencies and The Lehman
Brothers Corporate Bond Index which includes all publicly issued fixed rate,
nonconvertible domestic corporate debt.
7
<PAGE>
MONEY MARKET PORTFOLIO
PERFORMANCE UPDATE
WAYNE SCHMIDT, CFA
PORTFOLIO MANAGER
[PHOTO]
The Money Market Portfolio seeks maximum current income to the extent consistent
with liquidity and the preservation of capital. It invests in short-term money
market instruments and other debt securities that mature within 397 days.
INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
PERFORMANCE
The Portfolio's seven day compound yield was 4.89 percent* as of December 31,
1996. For the trailing 12 months, the Portfolio returned 4.92 percent.*
Money market interest rates were remarkably stable throughout the year,
especially when compared to the volatility of longer term interest rates. The
Federal Reserve lowered the Fed Funds target rate and the discount rate by 25
basis points in January and left monetary policy unchanged for the remainder of
the year. For the year, the yield on the three month U.S. Treasury Bill
increased only 11 basis points to yield 5.19 percent at year end. The six month
U.S. Treasury Bill ended the period 15 basis points higher to yield 5.30 percent
on December 31, 1996.
PORTFOLIO RECAP
While the Federal Reserve held the line on monetary policy, fixed income
investors expected the Fed to raise short-term interest rates during the summer
months as the economy showed signs of strength. These expectations moved money
market rates temporarily higher, but the lack of Fed action eventually brought
short-term interest rates back into the low five percent area.
In the Money Market Portfolio, the average days to maturity was doubled from
25 days at mid-year to 50 days at year end. This was still 3 days shorter than
the average taxable money market fund. When it became apparent that the Fed was
on hold, we extended maturities to lock in yields in a falling rate environment.
The Portfolio's maturities are evenly distributed between 2 and 125 days, thus
minimizing any reinvestment risk.
The MIMLIC Series Fund--Money Market Portfolio invests exclusively in U.S.
Treasury Bills, U.S. agencies and high quality commercial paper to maintain both
excellent liquidity and quality. Corporate commercial paper, because of its
yield advantage, is the primary asset class used. It accounted for 92.5 percent
of the Portfolio's net assets at the end of the year.
OUTLOOK
Short-term interest rates should continue to be stable in the first half of
1997. The Federal Reserve is closely monitoring economic growth and inflation
and will ease or tighten credit depending on the economic fundamentals. The
economy will continue to grow at a moderate pace in the upcoming quarters and
inflation should remain within an acceptable range. Any evidence of wage or
commodity inflation would bring the Federal Reserve to raise short-term interest
rates. While this is the major risk, we expect the Fed to hold the line on
monetary policy for the near future. Inaction by the Federal Reserve should
translate into more of the same, money market yields in the low five percent
range.
8
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE DAYS TO
MATURITY
Seven-day Compounded
Yield*
<S> <C>
02-Jan-96 28
09-Jan-96 39
16-Jan-96 39
23-Jan-96 40
30-Jan-96 39
06-Feb-96 40
13-Feb-96 41
20-Feb-96 41
27-Feb-96 39
05-Mar-96 38
12-Mar-96 34
19-Mar-96 38
26-Mar-96 37
02-Apr-96 40
09-Apr-96 36
16-Apr-96 37
23-Apr-96 42
30-Apr-96 41
07-May-96 39
14-May-96 38
21-May-96 41
28-May-96 42
04-Jun-96 45
11-Jun-96 43
18-Jun-96 29
25-Jun-96 26
02-Jul-96 38
09-Jul-96 33
16-Jul-96 35
23-Jul-96 43
30-Jul-96 43
06-Aug-96 39
13-Aug-96 37
20-Aug-96 37
27-Aug-96 37
03-Sep-96 30
10-Sep-96 32
17-Sep-96 26
24-Sep-96 33
01-Oct-96 38
08-Oct-96 40
15-Oct-96 41
22-Oct-96 41
29-Oct-96 36
05-Nov-96 36
12-Nov-96 33
19-Nov-96 37
26-Nov-96 36
03-Dec-96 34
10-Dec-96 43
17-Dec-96 48
24-Dec-96 49
31-Dec-96 50
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SEVEN-DAY COMPOUNDED
YIELD*
<S> <C>
2-Jan-96 5.21%
9-Jan-96 5.15%
16-Jan-96 5.22%
23-Jan-96 5.19%
30-Jan-96 5.10%
6-Feb-96 5.09%
13-Feb-96 4.95%
20-Feb-96 4.91%
27-Feb-96 4.89%
5-Mar-96 4.76%
12-Mar-96 4.80%
19-Mar-96 4.79%
26-Mar-96 4.76%
2-Apr-96 4.74%
9-Apr-96 4.76%
16-Apr-96 4.79%
23-Apr-96 4.80%
30-Apr-96 4.81%
7-May-96 4.83%
14-May-96 4.87%
21-May-96 4.85%
28-May-96 4.87%
4-Jun-96 4.87%
11-Jun-96 4.87%
18-Jun-96 4.86%
25-Jun-96 4.87%
2-Jul-96 4.87%
9-Jul-96 4.91%
16-Jul-96 4.97%
23-Jul-96 4.98%
30-Jul-96 5.01%
6-Aug-96 5.02%
13-Aug-96 5.03%
20-Aug-96 5.02%
27-Aug-96 5.01%
3-Sep-96 5.01%
10-Sep-96 5.00%
17-Sep-96 5.03%
24-Sep-96 4.99%
1-Oct-96 4.99%
8-Oct-96 4.96%
15-Oct-96 4.95%
22-Oct-96 4.95%
29-Oct-96 4.81%
5-Nov-96 4.88%
12-Nov-96 5.15%
19-Nov-96 4.91%
26-Nov-96 4.92%
3-Dec-96 4.83%
10-Dec-96 4.90%
17-Dec-96 4.86%
24-Dec-96 4.89%
31-Dec-96 4.89%
</TABLE>
The seven-day compounded yield is computed by determining the net change in
the value of a hypothetical account having a balance of one share at the
beginning of a seven calendar day period, dividing that change by seven, adding
one to the quotient, raising the sum to the 365th power and subtracting one from
the result.
*Historical results are not an indication of future performance. Investment
returns on principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost. Performance figures of the Fund
do not reflect charges pursuant to the terms of the variable life insurance
policies and variable annuity contracts funded by separate accounts that invest
in the Fund's shares. When such charges are deducted, actual investment
performance in a variable policy or contract will be lower.
9
<PAGE>
ASSET ALLOCATION PORTFOLIO
PERFORMANCE UPDATE
THOMAS GUNDERSON, CFA
PORTFOLIO MANAGER
[PHOTO]
The Asset Allocation Portfolio seeks as high a level of long-term total rate of
return as is consistent with prudent investment risk. It invests in common
stocks and other equity securities, bonds and money market instruments. The mix
of investments is varied by the portfolio's management as economic conditions
indicate.
PERFORMANCE
Despite a relatively conservative asset allocation throughout 1996, the Asset
Allocation Portfolio posted an attractive 12.5 percent* return for the year
ending December 31, 1996. The stock portion of the portfolio clearly led the
way, as cash and bonds produced single digit returns.* The relatively
conservative asset allocation, with stocks a little over 50 percent of the
portfolio during 1996, contributed to the portfolio not quite matching the 13.8
percent return for the Merrill Lynch/Wilshire Capital Markets Index** for 1996.
PORTFOLIO RECAP
For the second year in a row the stock market exceeded nearly all expectations,
and we believe it was the best performing major asset category during 1996.
Money market returns of near 5 percent came in second place, with the bond
market posting low single digit returns for the year. Fundamentals for U.S.
stocks continued to be excellent, driven by what has been called a "Goldilocks"
economy - hot enough to fuel continued corporate earnings growth, but also cool
enough to contain inflation and interest rates. These ideal fundamentals,
combined with unprecedented levels of money flowing into the market, propelled
the stock market to record highs throughout 1996.
Stocks were also the best performing asset category in the Asset Allocation
Portfolio. After starting the year with 60 percent in stocks, the weight was cut
to 55 percent, then to 50 percent in early May as the market no longer provided
the most optimal potential risk/return tradeoff. During 1996 the operating
earnings of the stock market, measured by the S&P 500,+ were up approximately 9
percent, while the price of the S&P 500+ gained 23 percent. The end result is
that the market ended the year at a higher valuation than when it began, which
in part explains the relatively conservative 50 percent weight for stocks over
the last 8 months of 1996.
The stocks within the portfolio provided strong capital appreciation
throughout the year. For the year the stocks in the portfolio gained over 20
percent,* despite a sell-off of some of the large capitalization growth stocks
during the fourth quarter. Some of the best performing stocks include Parametric
Technologies (computer design software), General Electric (conglomerate), United
Waste Services (waste services) and Equifax (credit reporting services). Weaker
performing stocks came from the retail area and included Office Max (office
superstore) and Autozone (auto parts retailer).
The bond market spent the year worrying if the economy would get too hot for
its liking. As the year progressed, bond investors became less worried about the
return of inflation, allowing the bond market to stage a modest rebound in the
fourth quarter. The fourth quarter rally helped make up some of the damage from
the first quarter, but it was only good enough for the bond market to post low
single digit returns for the year.
The year ended with yields on 2-10 year U.S. Treasury securities .8 percent
higher than at the start of 1996. The high quality bonds in the Portfolio acted
much like the overall bond market and provided low single digit returns during
1996. A slightly longer duration during the fourth quarter allowed the bonds in
the fund to outperform their peers for the year.
Cash ranged from 5 percent to 15 percent of the Portfolio during 1996, with
an average weight of 11 percent. Money market yields more than 2 percent above
the inflation rate combined with a fully priced stock market made "cash" a
relatively attractive asset during 1996. We begin 1997 with the current asset
allocation of 50 percent common stocks, 35 percent bonds and 15 percent cash.
OUTLOOK
The long-term outlook for the financial markets remains positive for several
reasons: 1) Inflation has remained under control despite several years of
moderate to strong economic growth. Non-financial assets such as real estate or
commodities would be relatively better investments if higher levels of inflation
return. 2) The U.S. economy continues to benefit from productivity gains,
allowing worldwide competitive status in many industries. 3) Strong demand for
stocks and bonds will likely pour more money into the financial markets as the
baby-boomer generation reaches their prime retirement savings years. These three
factors are long-term positives for both stocks and bonds.
Near term we would expect a return to more "normal" returns for the stock
market. Our work indicates that the stock market is not under-valued, but
neither is it significantly over-valued given the current level of corporate
earnings and interest rates. While a short-term correction of 5 percent to 10
percent can never be ruled out, a continuation of a modest growth economy with
low interest rates is a formula for potential future growth in stock prices.
10
<PAGE>
Bonds currently offer an attractive return relative to inflation, with the
10 year Treasury bond yield at about 6.4 percent with inflation around 3
percent. In the near term there is the risk that the Federal Reserve may move to
raise short-term interest rates to repel an over-heating economy. This is
exactly the same reason why long term there is a low risk of interest rates
moving significantly higher which would hurt the bond market. The Federal
Reserve will likely do what it takes to keep inflation under control, which is a
real long-term positive for bonds.
The goals of the Asset Allocation Portfolio are to meaningfully participate
in strong financial markets, while protecting your principal during periods of
market decline. In the past year you have participated nicely in the strong
markets of 1996 with a total return of 12.5 percent.* Thank you for allowing
MIMLIC to help you meet your financial goals.
FIVE LARGEST COMMON STOCK HOLDINGS
<TABLE>
<CAPTION>
% OF
MARKET COMMON STOCK
COMPANY SHARES VALUE PORTFOLIO
- ---------------------------------------- ------- ----------- ---------------
<S> <C> <C> <C>
General Electric Company................ 81,026 $ 8,011,446 3.9%
Columbia/HCA Healthcare Corporation..... 187,509 7,640,992 3.8%
Pfizer, Incorporated.................... 84,960 7,041,060 3.5%
First Data Corporation.................. 191,252 6,980,698 3.4%
Philip Morris Companies, Incorporated... 58,800 6,622,350 3.3%
----------- ---
$36,296,546 17.9%
----------- ---
----------- ---
</TABLE>
BOND PORTFOLIO CHARACTERISTICS--QUALITY BREAKDOWN
<TABLE>
<CAPTION>
% OF BOND
RATING PORTFOLIO
- -------------------------------------------------------------------- ------------
<S> <C>
U.S. Treasury....................................................... 9.9%
U.S. Government Agencies............................................ 17.7%
AAA rated........................................................... 13.6%
AA rated............................................................ 7.6%
A rated............................................................. 31.1%
BBB rated........................................................... 20.1%
-----
100.0%
-----
-----
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN ASSET ALLOCATION PORTFOLIO,
MERRILL LYNCH - WILSHIRE CAPITAL MARKETS INDEX
AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Average annual total
return:
<S> <C> <C> <C>
One Year 12.5%
Five Years 9.6%
Ten Years 11.2%
Merrill
Lynch-Wilshire
Asset Capital
Allocation Markets
Portfolio Index CPI
12/31/86 10,000 10,000 10,000
12/31/87 10,206 10,337 10,442
12/31/88 11,338 11,704 10,903
12/31/89 13,626 14,233 11,399
12/31/90 14,118 14,378 12,103
12/31/91 18,194 17,974 12,464
12/31/92 19,517 19,489 12,834
12/31/93 20,779 21,589 13,186
12/31/94 20,488 21,303 13,556
12/31/95 25,613 27,407 13,899
12/31/96 28,815 31,187 14,358
</TABLE>
On the chart above you can see the Asset Allocation Portfolio's
total return compared to the Merrill Lynch-Wilshire Capital Markets
Index and the Consumer Price Index. The three lines represent the
total return of a hypothetical $10,000 investment made on December 31,
1986 through December 31, 1996.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Asset Allocation
Portfolio
<S> <C>
Data for Pie Chart
Bonds 34.3%
Common Stocks 48.9%
Preferred Stocks 0.6%
Cash and Other
Assets/Liabilities 16.2%
</TABLE>
*Historical results are not an indication of future performance.
Investment returns on principal values will fluctuate so that shares
upon redemption may be worth more or less than their original cost.
Performance figures of the Fund do not reflect charges pursuant to
the terms of the variable life insurance policies and variable
annuity contracts funded by separate accounts that invest in the
Fund's shares. When such charges are deducted, actual investment
performance in a variable policy or contract will be lower.
**The Merrill Lynch-Wilshire Capital Markets Index is a market value-weighted
index measuring the total return performance of the combined domestic taxable
fixed income and equity markets. It includes the entire domestic common stock
universe for which daily pricing is available, as well as all publicly placed
domestic taxable debt issues with at least one year remaining to maturity and
at least ten million dollars par value outstanding.
+The S&P 500 is a broad, unmanaged index of 500 common stocks which are
representative of the U.S. stock market overall.
11
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
PERFORMANCE UPDATE
KENT WEBER, CFA
PORTFOLIO MANAGER
[PHOTO]
The Mortgage Securities Portfolio seeks a high level of current income
consistent with prudent investment risk. The Mortgage Securities Portfolio will
invest primarily in mortgage-related securities.
PERFORMANCE
The Mortgage Securities Portfolio returned 5.3 percent** for the year ending
December 31, 1996, while our peer group of funds tracked by Lipper Analytical
Service's U.S. Mortgage Fund Category* saw its investment grow by 3.9 percent on
average. Compared with Lehman Brothers Mortgage-Backed Securities Index,+ which
crossed the finish line up 5.5 percent, our performance stands tall.
PORTFOLIO RECAP
The mortgage market put in a spectacular performance in 1996, out scoring the
returns registered by both the Treasury market and Corporate market. Even though
interest rates drifted higher in 1996, putting pressure on bond performance, the
mortgage market proved to be one of the better ways to take ownership of fixed
income securities.
These results reflect favorably on a market that has matured into a kinder
and gentler place. Having survived numerous refinancing waves, the market has
purged itself of the more prepayment sensitive securities and toxic derivatives.
Likewise, the growing acceptance of additional asset classes (like commercial
securities and collateralized mortgage obligations) into the main stream has
helped strengthen the market's fundamental outlook. With these trends solidly in
place, it's no surprise that a growing number of investors favor mortgage
securities for their incremental yield and the complimentary role they play in a
prudently diversified portfolio. The mortgage market now offers investors a
virtual smorgasboard of high quality securities tailor made to fit their
investment needs.
Throughout 1996 three main themes dominated our investment strategies and
helped propel our returns higher. All of these strategies focused on adding
value through active management and solid security selection. By conducting our
business in a disciplined manner like a "stock picker in a bond market," we were
able to offset the slow returns registered by the portfolio early in the first
quarter. Our returns initially lagged the market as a result of the dramatic
rise in interest rates and the fact that we held more duration in the portfolio
than the benchmark Index.
First, early on in the year we brought the duration of the portfolio back in
line with our benchmark, the Lehman Brothers Mortgage-Backed Securities Index.
We retained this position until late in the third quarter when we began to add a
little duration to the portfolio. Nevertheless, for most of the year we carried
a neutral interest rate position and our performance was dominated by active
management and relative security performance.
Second, we entered the year overweighted in seasoned mortgage pass-throughs.
Throughout the year, we expanded our ownership of this sector as our analysis
identified this sector as a bargain relative to new issue securities. To our
benefit, these "vintage" securities blossomed into the "blue chip" securities of
the mortgage market and outperformed their new issue cousins. Similar to "blue
chip" companies in the stock market, mortgage investors are willing to pay a
higher price for securities with predictable cash flow (prepayments). By the end
of the year, tiering of the pass-through market had become a major investment
theme and will likely continue to shape the market in 1997.
Third, with the mortgage market being second in size only to the Treasury
market, we continue to see no shortage of quality investment opportunities.
However, the traditional agency pass-through market has become more efficiently
priced, leaving fewer opportunities for incremental outperformance. As such, we
find that our most promising investment opportunities are coming from other
sectors of the mortgage market. By shopping in many sectors of the mortgage
market, we are able to stock the portfolio with more or better bargains. This
long standing approach has helped reduce the portfolio's reliance on any one
sector and has built solid diversification. Our emphasis on additional types of
mortgage securities bore fruit this year as more investors migrated to these
markets in search of higher potential returns and bid up the prices of these
securities. We are confident that this trend will continue in the year ahead and
should reflect favorably on your portfolio.
OUTLOOK
The mortgage market enters 1997 with high expectations for another year of
strong relative performance. While incremental returns on mortgage securities
relative to other fixed income sectors are not likely to be as dramatic, they
still should exist. Like 1996, the key to solid performance will center on
active
12
<PAGE>
management of securities and duration. Likewise, our experience in shopping many
mortgage markets and our ability to manage numerous types of mortgage securities
positions us well to participate in the growth and evolution of the mortgage
market.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
High Quality Assets
<S> <C>
AAA Rated 67.7%
AA Rated 8.5%
A Rated 16.0%
BBB Rated 5.9%
Cash and Other
Assets/Liabilities 1.9%
</TABLE>
HIGH QUALITY ASSETS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Mortgage Securities
Portfolio
<S> <C>
Data for Pie Charts
Prudent Sector
Diversification
FHLMC MBS 10.2%
FNMA MBS 9.4%
GNMA MBS 17.5%
VA Vendee MBS 10.0%
Asset Backed Securities 2.8%
CMOs/MRBs 26.7%
Whole Loan MBS 12.9%
Commercial MBS 7.3%
Corporate/Agency Bonds 1.3%
Cash and Other
Assets/Liabilities 1.9%
</TABLE>
PRUDENT SECTOR DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Solid Liquidity
<S> <C>
Public Issues 75.6%
Private Placements 5.1%
Private 144A Issue 17.4%
Cash and Other
Assets/Liabilities 1.9%
</TABLE>
SOLID LIQUIDITY
COMPARISON OF CHANGE IN INVESTMENT VALUE**
A HYPOTHETICAL $10,000 INVESTMENT IN MORTGAGE SECURITIES PORTFOLIO,
LEHMAN BROTHERS MORTGAGE BACKED SECURITIES INDEX
AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Average annual total
return:
<S> <C> <C> <C>
One year 5.3%
Five years 6.9%
Since inception
(May 1, 1987) 8.8%
Lehman
Brothers
Mortgage Mortgage
Backed
Securities Securities
Portfolio Index CPI
05/01/1987 10,000 10,000 10,000
12/31/1987 10,299 10,501 10,257
12/31/1988 11,183 11,417 10,709
12/31/1989 12,694 13,168 11,197
12/31/1990 13,890 14,581 11,888
12/31/1991 16,150 16,872 12,243
12/31/1992 17,178 18,045 12,606
12/31/1993 18,768 19,246 12,952
12/31/1994 18,135 18,935 13,316
12/31/1995 21,400 22,115 13,652
12/31/1996 22,525 23,267 14,104
</TABLE>
On the chart above you can see the Mortgage Securities Portfolio's total
return compared to the Lehman Brothers Mortgage Backed Securities Index and the
Consumer Price Index. The three lines represent the total return of a
hypothetical $10,000 investment made on inception date of the Mortgage
Securities Portfolio (May 1, 1987) through December 31, 1996.
*Average return of 59 mortgage-backed securities funds according to Lipper
Analytical Services.
**Historical results are not an indication of future performance. Investment
returns on principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost. Performance figures of the
Fund do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate accounts
that invest in the Fund's shares. When such charges are deducted, actual
investment performance in a variable policy or contract will be lower.
+The Lehman Brothers Mortgage-Backed Securities Index is an unmanaged benchmark
composite which includes all fixed-rated securities backed by mortgage pools of
the Government National Mortgage Association (GNMA), Federal Home Loan Mortgage
Corporation (FHLMC) and Federal National Mortgage Association (FNMA).
13
<PAGE>
INDEX 500 PORTFOLIO
PERFORMANCE UPDATE
TERI BRANDT
PORTFOLIO MANAGER
[PHOTO]
The Index 500 Portfolio seeks investment results that correspond generally to
the price and yield performance of the common stocks included in the Standard
and Poor's Corporation 500 Composite Stock Index (S&P 500).* It is designed to
provide an economical and convenient means of maintaining a broad position in
the equity market as part of an overall investment strategy.
PERFORMANCE
Index 500 Portfolio consists of publicly traded common stocks representing
leading companies in virtually all segments of the American economy. The
Portfolio is designed to reflect the results that correspond to the investment
performance of the stock market in general. We seek to accomplish this by using
a computer model that positions the Portfolio to optimally track the behavior of
the S&P 500.*
The S&P 500* returned 23.0 percent for the year ended December 31, 1996. The
Index 500 Portfolio, in comparison, returned 21.6 percent** over the same
period.
14
<PAGE>
TEN LARGEST COMMON STOCK HOLDINGS
<TABLE>
<CAPTION>
% OF
COMMON
MARKET STOCK
COMPANY SHARES VALUE PORTFOLIO
- ---------------------------------------- ------ ----------- ----------
<S> <C> <C> <C>
General Electric Company................ 57,800 $ 5,714,975 2.8%
Freeport-McMoran Copper................. 165,700 4,950,288 2.4%
Coca-Cola Company....................... 86,300 4,541,538 2.2%
Exxon Corporation....................... 42,700 4,184,600 2.1%
Intel................................... 28,500 3,731,719 1.8%
Microsoft Corporation................... 41,400 3,420,675 1.7%
Royal Dutch Petroleum................... 19,200 3,278,400 1.6%
Merck & Co., Inc........................ 41,300 3,273,025 1.6%
Philip Morris Companies, Inc............ 27,900 3,142,238 1.6%
International Business Machines
Corporation........................... 17,600 2,657,600 1.3%
----------- ---
$38,895,058 19.1%
----------- ---
----------- ---
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Index 500 Portfolio
<S> <C>
Capital Goods 6.7%
Consumer Goods and
Services 33.0%
Credit Sensitive 23.6%
Intermediate Goods and
Services 19.7%
Technology 16.4%
Cash and Other
Assets/Liabilities .6%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE**
A HYPOTHETICAL $10,000 INVESTMENT IN INDEX 500 PORTFOLIO,
S&P 500 AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Average annual total
return:
<S> <C> <C> <C>
One year 21.6%
Five years 14.7%
Since inception
(May 1, 1987) 13.1%
Index 500
Portfolio S&P 500 CPI
5/01/87 10,000 10,000 10,000
12/31/1987 8,714 8,758 10,257
12/31/1988 10,110 10,209 10,709
12/31/1989 13,209 13,440 11,197
12/31/1990 12,690 13,018 11,888
12/31/1991 16,466 16,982 12,243
12/31/1992 17,682 18,276 12,606
12/31/1993 19,407 20,120 12,952
12/31/1994 19,636 20,371 13,316
12/31/1995 26,868 27,993 13,652
12/31/1996 32,683 33,289 14,104
</TABLE>
On the chart above you can see the Index 500 Portfolio's total
return compared to the S&P 500 and the Consumer Price Index. The three
lines represent the total return of a hypothetical $10,000 investment
made on inception date of the Index 500 Portfolio (May 1, 1987)
through December 31, 1996.
*The S&P 500 is a broad, unmanaged index of 500 common stocks which are
representative of the U.S. stock market overall. The Index 500 Portfolio, as
all portfolios of the Fund, is a managed portfolio whose performance reflects
the deduction of an investment advisory fee and other expenses.
**Historical results are not an indication of future performance. Investment
returns on principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost. Performance figures of the
Fund do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate accounts
that invest in the Fund's shares. When such charges are deducted, actual
investment performance in a variable policy or contract will be lower.
15
<PAGE>
CAPITAL APPRECIATION PORTFOLIO
PERFORMANCE UPDATE
CLARK WINSLOW, CFA
WINSLOW CAPITAL MANAGEMENT
[PHOTO]
The Capital Appreciation Portfolio seeks growth of capital. Investments will be
made based upon their potential for capital appreciation. While MIMLIC Asset
Management acts as investment adviser for the portfolio, Winslow Capital
Management, Inc. provides investment advice to the Capital Appreciation
Portfolio under a subadvisory agreement.
PERFORMANCE
For the 12 months ending December 31, 1996, the Capital Appreciation Portfolio
gained 17.6 percent.* This compares with an increase of 23.1 percent in the
Russell 1000 Growth Index** and 23.0 percent in the S&P 500+ for the same time
period.
PORTFOLIO RECAP
The stock market in 1996 was a fascinating study in contrasts and disparity.
While the S&P 500+ ended the year with a sizable gain of 23 percent, exceeding
virtually everyone's hopes when the year began, only a small minority of money
managers exceeded their appropriate performance benchmarks. This second year of
strong outperformance by index funds is somewhat reminiscent of the mid-to-late
1980s when corporate downsizing, restructuring and takeovers provided a backdrop
for good relative performance of the index funds.
In retrospect, the 1996 market had three distinct phases. There was a strong
rally for the first five months which was very broad. Then a sharp correction in
July eliminated much of the earlier increase in price/earnings ratios. The third
phase was a rally, which set record highs on most indices, but was dramatically
narrow in its breadth. For example, only 5 companies of the S&P 500+ produced 25
percent of the year's gain. This narrowing was seen most dramatically in the
fourth quarter when the largest sector of the Russell 1000 Growth Index** gained
9.2 percent while the small company sector dropped -7.9 percent. Thus, after
leading the indices through the third quarter, the Capital Appreciation
Portfolio underperformed in the fourth quarter and for the year.
The Portfolio's investment philosophy is based on the belief that owning
companies with above-average earnings growth will produce greater potential
investment returns over the long term. We also are sensitive to valuation--what
you pay in price/earnings ratio for that future growth rate. The philosophy is
implemented by mixing several medium capitalization stocks with large cap growth
issues. This means that we generally will be underweighted in the very largest
companies and financial stocks because these types of companies usually cannot
achieve earnings growth in excess of 13 percent annually.
In terms of specifics in the portfolio, the sectors of emphasis in 1996
included technology, telecommunications and specialty retail/consumer services.
Our overweighting in technology and specialty retail/ consumer services was
positive for the portfolio. The Portfolio's overweighting in telecommunications
proved to be a negative relative to the market's return during 1996. Despite
diversification within the sector, all stocks were down. Although the wireless
service providers we owned generally met or exceeded subscriber and cash flow
estimates, the market was fearful of potential price cutting from newer PCS
(Personal Communication System) technology and stocks declined. We reduced
positions during the fourth quarter, but based on our fundamental analysis and
valuation maintained some holdings in the wireless industry.
As the profit growth in the economy slows in 1997, the growth companies the
Capital Appreciation Portfolio invests in will become more attractive. The
Portfolio maintains its overweighting in technology, healthcare and specialty
retailing. Because these industries are experiencing an above-average rate of
positive change, we have been able to invest in companies which are creating or
benefiting from this change. Some examples of these stocks are Intel
Corporation, Kohl's and Merck. We continue to believe that these sectors are
likely to exhibit the best earnings growth.
During the fourth quarter, the companies held by the Portfolio reported an
average increase in earnings of 31 percent compared with a year ago. This year
we believe a realistic Portfolio growth rate in earnings per share for 1997 is
26 percent. This compares with our expectation of earnings growth for the S&P
500 of 6-8 percent. The Portfolio currently sells at a moderate P/E premium to
the S&P 500, yet exhibits 3-4 times the projected earnings growth.
OUTLOOK
On an annual basis, the economy continues to grow at a steady pace. Better than
expected results from housing, construction and export sectors indicate that
1996 gross domestic product growth was about 2.5 percent, up from 2.0 percent in
1995. Most economists look for a continuation of this trendline growth for
16
<PAGE>
1997, which implies inflation will not accelerate from the 3 percent area. While
interest rates have moved up moderately, reflecting strong fourth quarter
growth, we do not believe bond yields will stray much from their current trading
range. In view of our inflation and interest rate outlook the S&P 500 Index,
selling at 17x estimated 1997 earnings, seems reasonably priced. However, in our
opinion, biggest will not be best again in 1997.
As always, we remain committed to searching out those opportunities in
companies with the demonstrated ability to grow their businesses at
above-average rates, regardless of the near-term economic environment. Favorable
growth rates continue to exist in technology and telecommunications services and
equipment companies as the "global village" moves closer to reality. Demographic
trends and structural changes offer opportunities in healthcare products and
services. Outsourcing and the streamlining of business functions, such as
transaction processing and electronic data interchange, are offering favorable
investment opportunities. Specialty retailing also provides above-average unit
growth potential. The large U.S. economy provides many opportunities to find
good growth ideas.
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ---------------------------------------- ------- ----------- ----------
<S> <C> <C> <C>
Cisco Systems, Inc. .................... 154,900 $ 9,855,513 4.8%
Dollar General Corporation.............. 250,731 8,023,392 3.9%
Intel................................... 60,700 7,947,906 3.9%
Home Depot, Inc. ....................... 154,333 7,735,942 3.8%
Computer Associates International....... 152,000 7,562,000 3.7%
Oracle Corporation...................... 175,850 7,341,738 3.6%
Merck & Co., Inc. ...................... 91,500 7,251,375 3.5%
Microsoft Corporation................... 83,900 6,932,237 3.4%
Parametric Technology Corporation....... 125,300 6,437,287 3.2%
Pfizer, Inc. ........................... 76,000 6,298,500 3.1%
----------- ---
$75,385,890 36.9%
----------- ---
----------- ---
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN CAPITAL APPRECIATION PORTFOLIO,
RUSSELL 1000 GROWTH INDEX AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Portfolio's Average annual
total return:
<S> <C> <C> <C>
One year 17.6%
Five years 11.4%
Since inception
(May 1, 1987) 13.1%
Russell
Capital 1000
Appreciation Growth
Portfolio Index CPI
5/01/87 10,000 10,000 10,000
12/31/87 9,246 8,634 10,257
12/31/88 9,965 9,607 10,709
12/31/89 13,772 13,059 11,197
12/31/90 13,489 13,026 11,888
12/31/91 19,126 18,386 12,243
12/31/92 20,091 19,306 12,606
12/31/93 22,188 19,863 12,952
12/31/94 22,687 21,530 13,316
12/31/95 27,855 29,537 13,652
12/31/96 32,761 36,366 14,104
</TABLE>
On the chart above you can see the Capital Appreciation
Portfolio's total return compared to the Russell 1000 Growth Index and
the Consumer Price Index. The three lines represent the total return
of a hypothetical $10,000 investment made on inception date of the
Capital Appreciation Portfolio (May 1, 1987) through December 31,
1996.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Capital Appreciation
Portfolio
<S> <C>
Data for Pie Chart
Capital Goods 1.8%
Consumer Goods and
Services 40.8%
Credit Sensitive 13.8%
Intermediate Goods and
Services 1.8%
Technology 37.2%
Cash and Other
Assets/Liabilities 4.6%
</TABLE>
*Historical results are not an indication of future performance. Investment
returns on principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost. Performance figures of the Fund
do not reflect charges pursuant to the terms of the variable life insurance
policies and variable annuity contracts funded by separate accounts that invest
in the Fund's shares. When such charges are deducted, actual investment
performance in a variable policy or contract will be lower.
**The Russell 1000 Growth Index contains stock from the Russell 1000 with a
greater than average growth orientation. The Russell 1000 are the 1,000
largest companies in the Russell 3000. The Russell 3000 is an unmanaged index
of 3,000 common stocks which represents approximately 98 percent of the U.S.
market.
+The S&P 500 is a broad, unmanaged index of 500 common stocks which are
representative of the U.S. stock market overall.
17
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
PERFORMANCE UPDATE
MARC S. JOSEPH, JD
TEMPLETON INVESTMENT COUNSEL
[PHOTO]
The International Stock Portfolio seeks long-term capital growth. The Portfolio
will invest primarily in common stocks of companies and governments outside the
United States. While MIMLIC Asset Management acts as investment adviser for the
portfolio, Templeton Investment Counsel, Inc. provides investment advice to the
International Stock Portfolio under a subadvisory agreement.
PERFORMANCE
We are pleased to report that the International Stock Portfolio gained 19.8
percent* for the year ending December 31, 1996, compared with the Morgan Stanley
Capital International EAFE Index** return of 6.4 percent over the same period.
PORTFOLIO RECAP
1996 was a solid year for most stock markets worldwide, with the notable
exception of Japan. In Europe, all the major stock markets moved sharply higher,
propelled by excitement over monetary union, lower interest rates, and an
anticipated general economic recovery. In Asia, Hong Kong gained better than 30
percent as worries over Chinese rule subsided and corporate profits climbed. The
Japanese market was lower in 1996 because of continued financial dislocation in
the banking system and because of equity valuations which are still high
compared to other markets.
At year end 1996, the Portfolio's largest positions by country were the
United Kingdom (11 percent), Spain (9 percent), France (8 percent), Sweden (8
percent) and Hong Kong (8 percent). The Portfolio had investments in 35
countries. The Portfolio added to its European holdings in 1996, taking
advantage of attractive valuations. The Portfolio also found opportunities in
Latin America and in certain Southeast Asian countries.
OUTLOOK
Despite exceptional worldwide market performance in 1996, we continued to find
bargain stocks throughout the year. Because we pick stocks and not markets, it
is always beyond our scope to forecast market performance. While the world
markets are not as cheap as they were a year ago, there are still many stocks
that sell at substantial discounts to comparable companies operating in the
United States.
18
<PAGE>
TEN LARGEST COMMON STOCK HOLDINGS
<TABLE>
<CAPTION>
% OF
COMMON
MARKET STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------- --------- ----------- ----------
<S> <C> <C> <C>
Rhone-Poulenc.............................. 135,325 $ 4,604,771 2.5%
Volvo...................................... 178,500 3,934,410 2.2%
Pioneer International...................... 1,315,401 3,917,863 2.2%
Deutsche Bank.............................. 82,050 3,822,695 2.1%
Stet di Risp............................... 1,105,000 3,724,515 2.0%
Iberdrola.................................. 250,000 3,536,420 2.0%
Telefonica de Espana....................... 150,000 3,476,839 1.9%
Telecomunicacoes Brasileiras ADR........... 43,600 3,335,400 1.8%
Banco Bilbao Vizcaya....................... 61,500 3,314,356 1.8%
Regie Des Usines Renault................... 153,298 3,287,861 1.8%
----------- ---
$36,955,130 20.3%
----------- ---
----------- ---
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN INTERNATIONAL STOCK PORTFOLIO,
EAFE INDEX AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Average annual
return:
<S> <C> <C> <C>
One year 19.8%
Since inception
(May 1, 1992) 13.9%
International
Stock EAFE
Portfolio Index CPI
5/01/92 10,000 10,000 10,000
12/31/92 9,319 8,156 10,179
12/31/93 13,434 10,843 10,458
12/31/94 13,391 11,722 10,752
12/31/95 15,296 13,088 11,024
12/31/96 18,324 13,916 11,388
</TABLE>
On the chart above you can see how the International Stock
Portfolio's total return compared to the EAFE Index and the Consumer
Price Index. The three lines represent the total return of a
hypothetical $10,000 investment made on inception date of the
International Stock Portfolio (May 1, 1992) through December 31, 1996.
*Historical results are not an indication of future performance. Investment
returns on principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost. Performance figures of the Fund
do not reflect charges pursuant to the terms of the variable life insurance
policies and variable annuity contracts funded by separate accounts that invest
in the Fund's shares. When such charges are deducted, actual investment
performance in a variable policy or contract will be lower.
**The MSCI EAFE Index is an unmanaged index of common stocks from European,
Asian and Far Eastern markets.
19
<PAGE>
SMALL COMPANY PORTFOLIO
PERFORMANCE UPDATE
JIM TATERA, CFA
CHIEF EQUITY PORTFOLIO MANAGER
[PHOTO]
The Small Company Portfolio seeks long-term accumulation of capital. It invests
primarily in common stocks of small companies, defined in terms of either market
capitalization or gross revenues that are less than $1.5 billion.
Typically, at least 65 percent of the portfolio will be invested in stocks of
small companies. In addition, we will buy stocks of larger companies that we
feel are growing significantly faster than the market overall.
PERFORMANCE
In a year dominated by strong performance in large cap companies, it was
difficult to keep pace in the Small Company Portfolio. This year, especially the
last six months, has been a year characterized by a focus on quality,
predominantly large capitalization companies, with reasonable valuations.
Investors have bid up these quality big cap names to levels not seen in a number
of years. By contrast, smaller capitalization stocks have lagged throughout the
year. The Russell 2000's* return of 14.8 percent is significantly less than the
S&P 500's** return of 23.0 percent for the year ending December 31, 1996. The
Small Company Portfolio returned 6.5 percent+ for the same period.
Viewed another way, only five stocks in the NASDAQ Composite are responsible
for 50 percent of that index's gain this year, while only 20 stocks in the S&P
500 Index are responsible for 50 percent of its gain! This focus on large
companies shows that investors were willing to pay a premium for liquidity and
perceived quality of growth. This year's stock market has been very strong when
you look at the broad averages, but it has been very focused on certain
companies and industries.
PORTFOLIO RECAP
While smaller companies underperformed larger ones throughout the year, a
significant divergence in performance occurred in the second half of the year
between smaller growth companies and smaller value companies. The Wilshire Small
Cap Value Index++ returned 10.3 percent over the past six months versus the
Wilshire Small Cap Growth Index+++ which gained only 1.9 percent. The
comparisons are similar in the mid cap indices, with the Wilshire Mid Cap
Value++ gaining 9.9 percent while the Wilshire Mid Cap Growth+++ gained 4.1
percent for the past six months.
The benchmark we use in evaluating the Small Company Portfolio is a
combination of a midcap index (Wilshire Mid Cap) and a small cap index (Russell
2000). As you know, our portfolio holdings are slightly larger than a strict
definition of small cap and thus we look at both small and mid sized companies.
Our approach focuses on fast growing companies in terms of revenue and
earnings growth. Through fundamental analysis, we identify companies exhibiting
strong growth trends. These companies have what we call "operating momentum."
Through continuous monitoring of our holdings, we concentrate on changing
fundamental factors, which may accelerate or decelerate the operating
performance of the companies' reported results. While going through this
analysis, we invariably find a company whose results are slowing with trends
that lead us to believe a sell is warranted.
What has frustrated us during fourth quarter 1996 in particular is the
inordinate number of companies which have reported a positive earnings surprise,
above estimated earnings, and still traded down after the report.
In the most recent quarter alone, 21 companies we held in the Portfolio
reported above estimated earnings, only to go down afterward. On average these
companies reported earnings 13 percent above consensus, yet declined in price
over 5 percent shortly after the earnings announcement. This behavior is very
unusual and shows how skeptical the market is concerning continued strong growth
trends in many of these smaller companies. We view the downward pressure on
these stocks as a reaction to overall market concerns, not specific to these
individual companies. As a group, these stocks continue to show the strong
growth characteristics we expect to see in our holdings. Therefore, we continue
to hold or add to these companies in the Portfolio, as they are even more
attractively priced today than in the recent past.
Currently, our top ten holdings all are exhibiting strong growth trends in a
variety of industries. They include companies in the waste industry (United
Waste Systems), a supplier of industrial products (MSC Industrial), a
manufacturer of specialized bearings and filtration systems (Kaydon
Corporation), a retail apparel company (Tommy Hilfiger) and a technology company
(Gartner Group).
20
<PAGE>
The lack of exposure in energy and financials, two sectors which have been
top performers this year, has hurt our Portfolio performance. These two areas
typically do not exhibit the growth characteristics we are looking for and
therefore it is not unusual for us to have little or no exposure to these
industries.
OUTLOOK
We feel comfortable with our Portfolio holdings and their growth prospects. In
my opinion, the reason a number of our holdings have gone down in price despite
strong results, is due to their relatively high valuation (i.e. P/E ratio) in a
market concerned with consistency of those company specific growth prospects,
overall economic growth and interest rates.
Our emphasis is on identifying companies with operating momentum, with
secondary consideration given to valuation levels. This strategy has done very
well over the long term but can fluctuate in markets such as the ones we have
experienced this year. When we are late in an economic cycle, like we apparently
are today, investors favor conservative investments in larger cap stocks. As
often is the case, this year's laggards may very well become next year's
favorites.
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ---------------------------------------- ------ ----------- ----------
<S> <C> <C> <C>
United Waste Systems, Inc............... 125,842 $ 4,325,819 3.5%
Tommy Hilfiger Corporation.............. 89,400 4,291,200 3.4%
Kaydon Corporation...................... 88,800 4,184,700 3.3%
T. Rowe Price Associates................ 87,000 3,784,500 3.0%
Gartner Group Incorporated.............. 94,900 3,695,169 2.9%
MSC Industrial Direct Co................ 93,300 3,452,100 2.8%
Borders Group Incorporated.............. 84,620 3,035,743 2.4%
Advanced Lighting Technologies,
Incorporated............................ 124,893 3,028,655 2.4%
Bisys Group, Inc........................ 77,400 2,868,638 2.3%
Extended Stay America................... 133,968 2,696,106 2.2%
----------- ---
$35,362,630 28.2%
----------- ---
----------- ---
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE+
A HYPOTHETICAL $10,000 INVESTMENT IN SMALL COMPANY PORTFOLIO,
WILSHIRE MID CAP INDEX+++ AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Average annual total
return:
<S> <C> <C> <C>
One year 6.5%
Since inception
(May 3, 1993) 16.5%
Small Wilshire
Company Midcap
Portfolio Index CPI
5/03/93 10,000 10,000 10,000
12/31/93 11,733 11,295 10,132
12/31/94 12,456 11,005 10,416
12/31/95 16,449 14,631 10,680
12/31/96 17,509 17,187 11,033
</TABLE>
On the chart above you can see how the Small Company Portfolio's
total return compared to the Wilshire Mid Cap Index and the Consumer
Price Index. The three lines represent the total return of a
hypothetical $10,000 investment made on inception date of the Small
Company Portfolio (May 3, 1993) through December 31, 1996.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Small Company Portfolio
<S> <C>
Data for Pie Chart
Capital Goods 13.4%
Consumer Goods and
Services 35.8%
Credit Sensitive 8.8%
Intermediate Goods and
Services 8.2%
Technology 20.7%
Cash and Other
Assets/Liabilities 13.1%
</TABLE>
*The Russell 2000 Index represents the bottom two thirds of the largest 3,000
publicly traded companies domiciled in the United States.
**The S&P 500 is a broad, unmanaged index of 500 common stocks which are
representative of the U.S. stock market overall.
+Historical results are not an indication of future performance. Investment
returns on principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost. Performance figures of the Fund
do not reflect charges pursuant to the terms of the variable life insurance
policies and variable annuity contracts funded by separate accounts that invest
in the Fund's shares. When such charges are deducted, actual investment
performance in a variable policy or contract will be lower.
++The Wilshire Small Cap Value Index and the Wilshire Mid Cap Value Index are
comprised of the bottom 250 and 750 companies, respectively. The indices
contain companies with lower price to earnings and higher book-to-price
ratios.
+++The Wilshire Small Cap Growth Index and the Wilshire Mid Cap Growth Index are
comprised of the bottom 250 and 750 companies, respectively. The indices
contain companies with higher historical earnings and sales growth.
21
<PAGE>
MATURING GOVERNMENT BOND 1998 PORTFOLIO
MATURING GOVERNMENT BOND 2002 PORTFOLIO
MATURING GOVERNMENT BOND 2006 PORTFOLIO
MATURING GOVERNMENT BOND 2010 PORTFOLIO
PERFORMANCE UPDATE
KENT WEBER, CFA
PORTFOLIO MANAGER
[PHOTO]
The Maturing Government Bond 1998, 2002, 2006 and 2010 Portfolios seek as high
of an investment return as is consistent with prudent investment risk. The
Portfolios invest primarily in U.S. Government and Agencies zero coupon fixed
income securities that will mature near the 1998, 2002, 2006 and 2010
liquidation dates of each Portfolio.
PERFORMANCE
The twelve month total return for the period ending December 31, 1996, on the
respective Maturing Government Bond Portfolios are as follows:
Maturing Government Bond 1998 Portfolio 4.1 percent*
Maturing Government Bond 2002 Portfolio 1.7 percent*
Maturing Government Bond 2006 Portfolio -1.2 percent*
Maturing Government Bond 2010 Portfolio -3.4 percent*
Relative to their benchmark Index, each Portfolio delivered similar returns over
the same period.
Ryan Labs, Inc. September 1998 Index** 4.3 percent
Ryan Labs, Inc. September 2002 Index** 1.3 percent
Ryan Labs, Inc. September 2006 Index** -1.3 percent
Ryan Labs, Inc. September 2010 Index** -3.0 percent
PORTFOLIO RECAP
1996 came in like a lamb but quickly began to roar like a lion. The new year was
greeted with strong economic growth which caused interest rates to gap higher as
winter turned to spring. All eyes quickly turned to the Federal Reserve for
signs that it would launch a preemptive strike on the enemy of the bond market
(inflation) and raise short term rates. Nevertheless, by early fall, it was
apparent that inflation was not a threat to the bond market. In fact, by then,
the economy had begun to show signs of fatigue brought on by the burden of
higher interest rates. In fine form, investors drove interest rates down off
their summer peak but left them well above their beginning of the year levels.
With interest rates above the beginning of the year levels, total returns
among zero coupon government bond funds were greatly influenced by the amount of
duration held in the fund. Those funds with shorter maturities (duration) were
able to offer positive returns while those with longer maturities experienced
moderately negative returns.
OUTLOOK
The most probable forecast for the next twelve months is more of the same. Very
few imbalances exist in the economy and recoveries rarely die of old age.
Therefore, the Goldilocks story reads on as the economy and inflation are likely
to be neither too hot nor too cold. Nevertheless, economic growth will remain
volatile from quarter to quarter and investors will need to keep a vigilant eye
on inflation. In the end, investors will come to see that the market offers
historically attractive inflation adjusted returns.
22
<PAGE>
MATURING GOVERNMENT BOND 1998 PORTFOLIO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Maturing Government Bond 1998
Portfolio
Israel GTC 3.1%
U.S. Treasury Strips 24.8%
FICO 16.9%
GTC 7.4%
TVA 20.2%
FNMA 18.4%
FHLB 9.2%
</TABLE>
MATURING GOVERNMENT BOND 2002 PORTFOLIO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Maturing Government Bond 2002
Portfolio
Data for Pie Chart
U.S. Treasury Strips 19.0%
FICO 25.4%
GTC 18.5%
TVA 20.0%
FNMA 17.1%
</TABLE>
MATURING GOVERNMENT BOND 2006 PORTFOLIO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Maturing Government Bond 2006
Portfolio
Data for Pie Chart
U.S. Treasury Strips 27.5%
FICO 14.5%
GTC 10.0%
State of Israel 17.0%
RFC Strip 16.2%
FNMA 14.8%
</TABLE>
MATURING GOVERNMENT BOND 2010 PORTFOLIO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Maturing Government Bond 2010
Portfolio
U.S. Treasury Strips 37.4%
FICO 19.0%
GTC 1.9%
Turkey GTC 7.3%
State of Israel 22.3%
RFC Strip 4.8%
FNMA 7.3%
</TABLE>
*Historical results are not an indication of future performance. Investment
returns and principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost. Performance figures of the Fund
do not reflect charges pursuant to the terms of the variable life insurance
policies and variable annuity contracts funded by separate accounts that invest
in the Fund's shares. When such charges are deducted, actual investment
performance in a variable policy or contract will be lower.
**Ryan Labs, Inc. September 1998, 2002, 2006 and 2010 Index of Treasury Strips
consists of all active zero-coupon Treasury issues with maturities in
September 1998, 2002, 2006 and 2010, respectively.
23
<PAGE>
MATURING
GOVERNMENT
BOND PORTFOLIOS
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN MATURING GOVERNMENT BOND
1998 PORTFOLIO, RYAN LABS, INC. SEPTEMBER 1998 INDEX OF TREASURY STRIPS
AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Average annual total
return:
<S> <C> <C> <C>
One year 4.1%
Since inception (May
2, 1994)
7.4%
Ryan Labs,
Inc.
September
Maturing 1998
Government Index of
Bond Treasury
1998
Portfolio Strips CPI
5/02/94 10,000 10,000 10,000
12/31/94 10,005 10,017 10,190
12/31/95 11,606 11,588 10,448
12/31/96 12,086 12,087 10,793
</TABLE>
On the chart above you can see how the Maturing Government Bond
1998 Portfolio's total return compared to the Ryan Labs, Inc.
September 1998 Index of Treasury Strips and the Consumer Price Index.
The three lines represent the total return of a hypothetical $10,000
investment made on inception date of the Maturing Government Bond 1998
Portfolio (May 2, 1994) through December 31, 1996.
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN MATURING GOVERNMENT BOND
2002 PORTFOLIO, RYAN LABS, INC. SEPTEMBER 2002 INDEX OF TREASURY STRIPS
AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Average annual total
return:
<S> <C> <C> <C>
One year 1.7%
Since inception (May
2, 1994) 9.5%
Ryan Labs,
Inc.
September
Maturing 2002
Government Index of
Bond Treasury
2002
Portfolio Strips CPI
5/02/94 10,000 10,000 10,000
12/31/94 10,028 9,952 10,190
12/31/95 12,537 12,569 10,448
12/31/96 12,754 12,728 10,793
</TABLE>
On the chart above you can see how the Maturing Government Bond
2002 Portfolio's total return compared to the Ryan Labs, Inc.
September 2002 Index of Treasury Strips and the Consumer Price Index.
The three lines represent the total return of a hypothetical $10,000
investment made on inception date of the Maturing Government Bond 2002
Portfolio (May 2, 1994) through December 31, 1996.
24
<PAGE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN MATURING GOVERNMENT BOND
2006 PORTFOLIO, RYAN LABS, INC. SEPTEMBER 2006 INDEX OF TREASURY STRIPS
AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Average annual total
return:
<S> <C> <C> <C>
One year (1.2%)
Since inception (May
2, 1994) 11.4%
Ryan Labs,
Inc.
September
Maturing 2006
Government Index of
Bond Treasury
2006
Portfolio Strips CPI
5/02/94 10,000 10,000 10,000
12/31/94 10,013 9,988 10,190
12/31/95 13,490 13,532 10,448
12/31/96 13,327 13,351 10,793
</TABLE>
On the chart above you can see how the Maturing Government Bond
2006 Portfolio's total return compared to the Ryan Labs, Inc.
September 2006 Index of Treasury Strips and the Consumer Price Index.
The three lines represent the total return of a hypothetical $10,000
investment made on inception date of the Maturing Government Bond 2006
Portfolio (May 2, 1994) through December 31, 1996.
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN MATURING GOVERNMENT
BOND 2010 PORTFOLIO, RYAN LABS, INC. SEPTEMBER 2010 INDEX OF
TREASURY STRIPS AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Average annual
returns:
<S> <C> <C> <C>
One year (3.4%)
Since inception (May
2, 1994) 12.2%
Ryan Labs,
Inc.
September
Maturing 2010
Government Index of
Bond Treasury
2010
Portfolio Strips CPI
5/02/94 10,000 10,000 10,000
12/31/94 9,970 9,931 10,190
12/31/95 14,080 14,313 10,448
12/31/96 13,599 13,880 10,793
</TABLE>
On the chart above you can see how the Maturing Government Bond
2010 Portfolio's total return compared to the Ryan Labs, Inc.
September 2010 Index of Treasury Strips and the Consumer Price Index.
The three lines represent the total return of a hypothetical $10,000
investment made on inception date of the Maturing Government Bond 2010
Portfolio (May 2, 1994) through December 31, 1996.
*Historical results are not an indication of future performance.
Investment returns and principal values will fluctuate so that shares
upon redemption may be worth more or less than their original cost.
Performance figures of the Fund do not reflect charges pursuant to
the terms of the variable life insurance policies and variable
annuity contracts funded by separate accounts that invest in the
Fund's shares. When such charges are deducted, actual investment
performance in a variable policy or contract will be lower.
25
<PAGE>
VALUE STOCK PORTFOLIO
PERFORMANCE UPDATE
MATTHEW FINN, CFA
PORTFOLIO MANAGER
[PHOTO]
The Value Stock Portfolio seeks long-term accumulation of capital. The Portfolio
invests primarily in equity securities of companies which, in the opinion of the
Adviser, have market values which appear low relative to their underlying value
or future growth potential.
PERFORMANCE
For the year ending December 31, 1996, the Value Stock Portfolio returned 31.0
percent*, compared to the S&P 500** return of 23.0 percent and the S&P Barra
Value Index+ return of 22.0 percent over the same period.
PORTFOLIO RECAP
Portfolio positions that contributed the most to relative performance during the
year are classified in the following three industries: energy, utilities and
retail. Stand out performers in the energy and utilities group during the year
included El Paso Energy Corporation and Columbia Gas. In retail, stand out
performers were Melville, a drug store chain, (now known as CVS after a
restructuring), Kroger and Federated Department Stores, all of which are still
owned. Interestingly, the relative performance of the Portfolio was
substantially aided by the lack of representation in the Regional Bell Operating
Companies as these companies comprise 7 percent of the S&P 500 and were up as a
group just .3 percent. In terms of absolute appreciation, for the period each
was owned, the following five holdings appreciated the most during the year:
Cytec/specialty chemicals +96.1 percent
CVS/retail +70.6 percent
IBM/technology +60.0 percent
Rohr/aerospace +51.0 percent
Reading & Bates/offshore drilling +48.3 percent
An underweighting in the electronics industry hurt relative performance the
most during the year. During the fourth quarter Advanced Micro Devices shares
were purchased which gives the Portfolio representation in the electronics
industry.
OUTLOOK
The financial markets have been characterized by volatility, rapid swings in
sentiment about economic activity and violent group rotations. In our view, it
is folly to try to anticipate the next market mood swing. Our focus remains on
the shares of companies that are undervalued with improving operations.
The five largest holdings in the Portfolio are TIG Holdings, American
Stores, Everest Reinsurance, Fruit of the Loom and El Paso Energy Corporation.
Each of these companies are undervalued and, in our view, earnings estimates
will continue to rise. The Portfolio has substantial representation in the
shares of oil companies, with an emphasis on domestic oil refiners including
Unocal, Amoco, Amerada Hess, Valero, Ultramar Diamond Shamrock and USX-Marathon.
This appears to be the most attractive segment of the energy industry because
investment in domestic refining capacity has slowed and demand for refined
products continues to grow.
26
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------ ----------- ----------
<S> <C> <C> <C>
TIG Holdings, Inc. ......................................... 195,200 $ 6,612,400 7.6%
American Stores Company..................................... 119,899 4,900,872 5.6%
Everest Reinsurance Holdings, Inc. ......................... 146,559 4,213,571 4.8%
Fruit of the Loom........................................... 107,000 4,052,625 4.7%
El Paso Energy Corporation.................................. 76,276 3,851,938 4.4%
Federated Department Stores................................. 105,900 3,613,838 4.2%
Corning, Inc. .............................................. 71,100 3,288,375 3.8%
CVS Corporation............................................. 75,300 3,115,538 3.6%
Polaroid Corporation........................................ 71,100 3,092,850 3.6%
Fort Howard Corporation..................................... 110,090 3,048,117 3.5%
----------- ---
$39,790,124 45.8%
----------- ---
----------- ---
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN VALUE STOCK PORTFOLIO,
S&P BARRA VALUE INDEX AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Average annual total
return:
<S> <C> <C> <C>
One year 31.0%
Since inception (May
2, 1994) 25.2%
Value Stock S&P 500 Barra Value
Portfolio Index CPI
5/02/94 10,000 10,000 10,000
12/31/1994 10,457 10,062 10,190
12/31/1995 13,904 13,784 10,448
12/31/1996 18,207 16,816 10,793
</TABLE>
On the chart above you can see how the Value Stock Portfolio's
total return compared to the S&P 500 Barra Value Index and the
Consumer Price Index. The three lines represent the total return of a
hypothetical $10,000 investment made on inception date of the Value
Stock Portfolio (May 2, 1994) through December 31, 1996.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Value Stock Portfolio
<S> <C>
Data for Pie Chart
Capital Goods 6.2%
Consumer Goods and
Services 28.4%
Credit Sensitive 13.2%
Intermediate Goods and
Services 37.3%
Technology 4.3%
Cash and Other
Assets/Liabilities 10.6%
</TABLE>
*Historical results are not an indication of future performance.
Investment returns on principal values will fluctuate so that shares
upon redemption may be worth more or less than their original cost.
Performance figures of the Fund do not reflect charges pursuant to
the terms of the variable life insurance policies and variable
annuity contracts funded by separate accounts that invest in the
Fund's shares. When such charges are deducted, actual investment
performance in a variable policy or contract will be lower.
**The S&P 500 is a broad, unmanaged index of 500 common stocks which are
representative of the U.S. stock market overall.
+The S&P Barra Value Index contains approximately one-half of the common stocks
from the S&P 500. The Index contains those stocks with a higher book-to-price
ratio.
27
<PAGE>
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,
1996 and the related statements of operations for the year then ended, the
statements of changes in net assets for the two years then ended and the
financial highlights for the periods presented in note 8. These financial
statements and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and 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 audits 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 delivered, we request
confirmations from brokers, and where replies are not received or delivered, 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,
1996 and the results of their operations, changes in their net assets and their
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 7, 1997
28
<PAGE>
GROWTH PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1996
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
COMMON STOCKS (88.1%)
CAPITAL GOODS (5.9%)
Machinery (5.9%)
113,000 W W Grainger, Inc........................................... $ 9,068,250
54,800 Shell Transport and Trading Company (b)..................... 5,610,150
--------------
14,678,400
--------------
CONSUMER GOODS AND SERVICES (53.6%)
Consumer Goods (16.3%)
170,000 Abbott Laboratories......................................... 8,627,500
51,500 Merck & Co., Inc............................................ 4,081,375
82,000 Philip Morris Companies, Inc................................ 9,235,250
138,000 Schering-Plough Corporation................................. 8,935,500
299,000 UST, Inc.................................................... 9,680,125
--------------
40,559,750
--------------
Consumer Services (3.8%)
127,000 Gannett Company............................................. 9,509,125
--------------
Food (16.3%)
254,000 Albertson's Incorporated.................................... 9,048,750
410,000 Archer-Daniels-Midland Company.............................. 9,020,000
103,000 Conagra, Inc................................................ 5,124,250
240,000 Sara Lee Corporation........................................ 8,940,000
255,000 Sysco Corporation........................................... 8,319,375
--------------
40,452,375
--------------
Retail (10.4%)
267,000 Circuit City Stores, Inc.................................... 8,043,375
283,000 Dillard Department Stores, Inc.............................. 8,737,625
397,000 Wal-Mart Stores, Inc........................................ 9,081,375
--------------
25,862,375
--------------
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
Consumer Cyclicals (6.8%)
185,000 Bandag, Incorporated........................................ $ 8,764,375
180,000 Genuine Parts Company....................................... 8,010,000
--------------
16,774,375
--------------
CREDIT SENSITIVE (6.4%)
Finance (6.4%)
60,900 Norwest Corporation......................................... 2,649,150
240,000 Southtrust Corporation...................................... 8,370,000
99,600 Suntrust Banks, Inc......................................... 4,905,300
--------------
15,924,450
--------------
INTERMEDIATE GOODS AND SERVICES (11.8%)
Energy (3.4%)
50,000 Royal Dutch Petroleum ADR (b)............................... 8,537,500
--------------
Materials (8.4%)
209,100 Bemis Company, Inc.......................................... 7,710,563
165,000 Great Lakes Chemical Corporation............................ 7,713,750
84,900 Sigma-Aldrich............................................... 5,300,944
--------------
20,725,257
--------------
TECHNOLOGY (10.4%)
197,000 Electronic Data Systems Corporation......................... 8,520,249
188,000 Hewlett-Packard Company..................................... 9,447,000
145,000 Pitney Bowes, Inc........................................... 7,902,500
--------------
25,869,749
--------------
Total common stocks
(cost: $211,549,300)............................................... 218,893,356
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ---------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (10.1%)
$6,868,556 Temporary Investment Fund, Inc.--TempFund Portfolio, current rate 5.458%..................... 6,868,556
222,000 U.S. Treasury Bill..................................................... 5.12% 02/20/97 220,415
570,000 AT&T Corp CP........................................................... 5.29% 01/06/97 569,492
2,055,000 Ciesco LP CP........................................................... 5.47% 01/10/97 2,051,946
5,315,000 Coca Cola Co CP........................................................ 5.39% 01/31/97 5,290,514
4,330,000 Walt Disney CP......................................................... 5.43% 01/17/97 4,319,061
2,880,000 Idaho Power Co CP...................................................... 5.60% 01/09/97 2,876,148
3,000,000 Laclede Gas Co CP...................................................... 5.46% 01/14/97 2,993,758
--------------
Total short-term securities (cost: $25,190,158).............................................. 25,189,890
--------------
Total investments in securities (cost: $236,739,458) (c)..................................... $ 244,083,246
--------------
--------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) The portfolio held 5.7% of net assets in foreign securities at December 31,
1996.
(c) At December 31, 1996 the cost of securities for federal income tax purposes
was $236,739,458. The aggregate unrealized appreciation and depreciation of
investments in securites based on this cost were:
Gross unrealized appreciation............. $12,603,235
Gross unrealized depreciation............. (5,259,447)
-----------
Net unrealized appreciation............... $ 7,343,788
-----------
-----------
29
<PAGE>
BOND PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1996
(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%)
GOVERNMENT OBLIGATIONS (30.2%)
U.S. GOVERNMENT AND AGENCIES (25.7%)
U.S. Treasury (10.8%)
$3,000,000 U.S. Treasury Bond.......................................... 8.125% 08/15/19 $ 3,466,875
1,700,000 U.S. Treasury Bond.......................................... 6.500% 11/15/26 1,668,125
3,500,000 U.S. Treasury Strip (c)..................................... 5.410% 02/15/01 2,728,142
5,800,000 U.S. Treasury Strip (c)..................................... 5.175% 08/15/99 4,969,144
800,000 U.S. Treasury Note.......................................... 6.125% 09/30/00 799,500
-----------
13,631,786
-----------
Government National Mortgage Association (8.1%)
369,752 ............................................................ 8.500% 12/15/22 386,997
350,904 ............................................................ 8.500% 10/15/22 367,270
348,932 ............................................................ 7.500% 02/15/23 350,460
620,519 ............................................................ 8.000% 09/15/24 636,137
688,451 ............................................................ 6.500% 11/15/23 660,946
403,526 ............................................................ 7.500% 02/15/24 405,019
494,284 ............................................................ 7.500% 10/15/25 494,852
868,553 ............................................................ 7.000% 11/15/23 853,613
907,184 ............................................................ 6.500% 05/15/24 870,215
927,574 ............................................................ 7.500% 09/15/24 931,005
1,770,492 ............................................................ 8.000% 04/15/25 1,809,228
851,453 ............................................................ 7.500% 10/15/25 852,432
475,450 ............................................................ 7.000% 10/15/25 465,203
1,152,972 ............................................................ 7.000% 11/15/24 1,132,171
-----------
10,215,548
-----------
Other U.S. Government Agencies (6.8%)
1,500,000 Federal Home Loan Mortgage Corporation...................... 7.030% 04/05/04 1,491,695
1,000,000 Federal National Mortgage Association....................... 8.590% 02/03/05 1,024,035
500,000 Federal Farm Credit Bank.................................... 6.960% 06/06/00 500,626
433,559 Federal Home Loan Mortgage Corporation...................... 6.500% 12/01/23 417,118
1,942,372 Federal Home Loan Mortgage Corporation...................... 6.500% 02/01/16 1,885,323
1,281,634 Federal National Mortgage Association....................... 7.000% 09/01/17 1,271,380
1,002,939 Federal National Mortgage Association....................... 6.500% 02/01/26 957,826
469,196 Federal National Mortgage Association....................... 7.000% 02/01/26 459,357
497,407 Federal National Mortgage Association....................... 6.500% 03/01/26 474,750
-----------
8,482,110
-----------
OTHER GOVERNMENT OBLIGATIONS (2.8%)
3,500,000 Quebec Province of Canada (b)............................... 7.500% 07/15/23 3,493,872
-----------
STATE AND LOCAL GOVERNMENT AGENCIES (1.7%)
950,000 California Housing Finance Agency........................... 8.160% 02/01/28 977,609
1,228,000 Wyoming Community Development Authority..................... 6.850% 06/01/10 1,202,673
-----------
2,180,282
-----------
Total government obligations (cost: $37,847,845)................................ 38,003,598
-----------
CORPORATE OBLIGATIONS (62.2%)
CAPITAL GOODS (8.9%)
Machinery (3.4%)
3,925,000 Joy Technologies Incorporated............................... 10.250% 09/01/03 4,300,080
-----------
Telecommunications (5.5%)
3,250,000 Telekom Malaysia Debentures (b)(d).......................... 7.875% 08/01/25 3,368,874
3,500,000 Total Access Communications (b)(d).......................... 8.375% 11/04/06 3,516,730
-----------
6,885,604
-----------
</TABLE>
See accompanying notes to investments in securities.
30
<PAGE>
BOND PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -----------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
CONSUMER CYCLICAL (1.5%)
Textiles (1.5%)
$1,750,000 Reliance Industries (b)(d).................................. 10.375% 06/24/16 $ 1,882,956
-----------
CONSUMER STAPLES (11.2%)
Drugs (2.6%)
750,000 American Home Products Corporation.......................... 6.500% 10/15/02 744,572
2,500,000 Ciba-Geigy Corp (d)......................................... 7.240% 01/02/16 2,481,500
-----------
3,226,072
-----------
Food (.4%)
517,857 General Mills, Inc.......................................... 6.235% 03/15/97 518,396
-----------
Household Products (3.1%)
3,500,000 Premark International, Inc.................................. 10.500% 09/15/00 3,935,106
-----------
Media (2.5%)
1,600,000 News America Holdings, Inc.................................. 7.750% 12/01/45 1,502,002
1,500,000 News America Holdings, Inc.................................. 9.250% 02/01/13 1,674,164
-----------
3,176,166
-----------
Retail (2.6%)
2,000,000 Fingerhut Company (d)....................................... 7.375% 09/15/99 2,012,476
1,250,000 Heilig-Meyers Company....................................... 7.875% 08/01/03 1,255,460
-----------
3,267,936
-----------
ENERGY (4.0%)
Oil and Gas Production (4.0%)
3,000,000 Petronas (b)(d)............................................. 7.125% 10/18/06 3,021,570
2,000,000 PTT Exploration and Production Co (b)(d).................... 7.625% 10/01/06 2,051,396
-----------
5,072,966
-----------
FINANCIAL (29.6%)
Asset-Backed/Collateralized Mortgage Obligations (2.3%)
2,262,821 Celt 96-A A2................................................ 5.500% 02/15/03 2,252,819
694,612 Green Tree Financial, Net Interest Margin CMO, Series
1995-A...................................................... 7.250% 07/15/05 692,711
-----------
2,945,530
-----------
Auto Finance (2.8%)
2,000,000 Ford Motor Credit Company................................... 5.350% 03/18/99 1,985,000
1,600,000 Ford Motor Credit Company................................... 6.250% 12/08/05 1,518,354
-----------
3,503,354
-----------
Banks/Savings and Loan (7.7%)
2,500,000 Advanta National Bank....................................... 6.820% 04/09/01 2,493,273
4,000,000 Citicorp Capital............................................ 7.933% 02/15/27 4,052,440
3,000,000 Midland Bank PLC (b)........................................ 7.625% 06/15/06 3,098,480
-----------
9,644,193
-----------
Commercial Finance (3.4%)
4,250,000 General Electric Capital Corp............................... 6.660% 05/01/18 4,282,062
-----------
Consumer Finance (1.5%)
1,885,000 Associates Corp of North America............................ 6.750% 10/15/99 1,902,540
-----------
Insurance Companies (2.1%)
2,600,000 American RE Corporation 144A Issue (e)...................... 7.450% 12/15/26 2,596,880
-----------
Mortgage-Backed Securities (2.2%)
1,738,595 Chase 94-1 B2 CMO 144A (d).................................. 6.611% 03/28/25 1,622,598
1,200,000 CSFB Finance Company Limited, Series 1995-A, Class A (d).... 7.542% 11/15/05 1,195,500
-----------
2,818,098
-----------
Real Estate (.9%)
1,078,879 Green Tree Financial Corporation............................ 6.900% 02/15/04 1,075,966
-----------
</TABLE>
See accompanying notes to investments in securities.
31
<PAGE>
BOND PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -----------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
Real Estate Investment Trust (3.5%)
$3,300,000 Colonial Realty Ltd Partnership............................. 8.050% 07/15/06 $ 3,431,023
1,000,000 Security Capital Pacific Trust.............................. 7.500% 02/15/14 974,383
-----------
4,405,406
-----------
Security Brokers (3.2%)
4,000,000 Lehman Brothers, Inc........................................ 7.360% 12/15/03 4,045,072
-----------
UTILITIES (7.0%)
Electric (3.1%)
4,000,000 Enersis (b)................................................. 6.900% 12/01/06 3,904,648
-----------
Telephones (3.9%)
5,000,000 Bellsouth Telecommunications Inc............................ 6.250% 05/15/03 4,908,140
-----------
Total corporate obligations (cost: $77,972,081)................................. 78,297,171
-----------
Total long-term debt securities (cost: $115,819,926)............................ 116,300,769
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
- ----------
<C> <S> <C> <C> <C>
PREFERRED STOCKS (2.4%)
FINANCIAL (2.4%)
Real Estate Investment Trust
60,000 Security Capital Industrial, Series C--8.54%.................................... 3,025,800
-----------
Total preferred stock (cost: $3,000,000)........................................ 3,025,800
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (3.8%)
$ 620,779 Temporary Investment Fund, Inc--TempFund Portfolio, current rate 5.458%......... 620,779
1,365,000 U.S. Treasury Bill.......................................... 4.850% 02/20/97 1,355,254
1,670,000 Ciesco LP CP................................................ 5.470% 01/10/97 1,667,518
1,140,000 Coca Cola CP................................................ 5.400% 01/17/97 1,137,120
-----------
Total short-term securities (cost: $4,781,257).................................. 4,780,671
-----------
Total investments in securities (cost: $123,601,183) (f)........................ $124,107,240
-----------
-----------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) The portfolio held 19.3% of net assets in foreign securities at December 31,
1996.
(c) For zero coupon issues (strips) the interest rate disclosed is the
effective yield at the date of acquisition.
(d) Long-term debt security sold within the 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 7 to the financial statements.) Information concerning the
illiquid securities held at December 31, 1996, which includes acquisition
date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- ---------------------------------------- ---------- ----------
<S> <C> <C>
American RE Corporation 144A Issue...... 12/19/96 $2,591,865
----------
----------
</TABLE>
(f) At December 31, 1996 the cost of securities for federal income tax purposes
was $123,606,240. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation..................... $1,272,648
Gross unrealized depreciation..................... (771,648)
----------
Net unrealized appreciation....................... $ 501,000
----------
----------
</TABLE>
32
<PAGE>
MONEY MARKET PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1996
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -----------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER (92.5%)
CAPITAL GOODS (4.0%)
$2,090,000 Xerox Corporation........................................... 5.41% 01/17/97 $ 2,084,789
-----------
BASIC INDUSTRIES (8.6%)
Chemicals (5.9%)
1,645,000 Dupont...................................................... 4.60% 05/05/97 1,614,842
1,415,000 Monsanto Company (c)........................................ 4.80% 03/19/97 1,398,659
-----------
3,013,501
-----------
Paper and Forest Products (2.7%)
1,395,000 Kimberly Clark.............................................. 5.40% 02/06/97 1,387,430
-----------
CONSUMER STAPLES (21.7%)
Drugs (4.6%)
2,390,000 Schering Corporation........................................ 5.42% 03/25/97 2,360,722
-----------
Entertainment (4.8%)
2,500,000 Walt Disney................................................. 5.44% 04/18/97 2,460,550
-----------
Food (8.6%)
1,930,000 Coca Cola Company........................................... 5.34% 02/07/97 1,919,406
2,520,000 H.J. Heinz.................................................. 5.50% 02/03/97 2,507,172
-----------
4,426,578
-----------
Hospital Supplies (3.7%)
1,930,000 Abbott Labs................................................. 5.39% 01/14/97 1,926,060
-----------
CREDIT SENSITIVE (4.6%)
Building Materials (4.6%)
2,400,000 PPG Industries.............................................. 5.45% 02/10/97 2,385,431
-----------
ENERGY (5.5%)
Natural Gas Distribution (1.9%)
980,000 Northern Illinois Gas....................................... 5.39% 02/10/97 974,118
-----------
Oil and Gas Production (3.6%)
1,835,000 Atlantic Richfield.......................................... 5.42% 01/02/97 1,834,462
-----------
FINANCIAL (19.5%)
Auto Finance (6.8%)
2,075,000 Ford Motor Credit........................................... 5.49% 03/31/97 2,047,299
1,450,000 GMAC........................................................ 5.46% 02/21/97 1,438,879
-----------
3,486,178
-----------
Commercial Finance (7.9%)
1,865,000 Ciesco LP................................................... 5.48% 02/18/97 1,851,419
2,255,000 GE Capital Corporation...................................... 5.44% 02/28/97 2,235,413
-----------
4,086,832
-----------
Consumer Finance (4.8%)
2,500,000 American General Finance.................................... 5.49% 03/31/97 2,466,625
-----------
UTILITIES (28.6%)
Electric (16.4%)
2,000,000 Alabama Power............................................... 5.45% 01/07/97 1,997,939
335,000 Alabama Power............................................... 5.46% 02/20/97 332,470
1,510,000 Baltimore Gas & Electric.................................... 5.47% 01/24/97 1,504,614
2,135,000 Carolina Power & Light...................................... 5.46% 02/14/97 2,120,829
310,000 Carolina Power & Light...................................... 5.44% 03/11/97 306,811
2,180,000 Midamerica Energy........................................... 5.50% 03/06/97 2,158,942
-----------
8,421,605
-----------
</TABLE>
See accompanying notes to investments in securities.
33
<PAGE>
MONEY MARKET PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ---------- -----------
<C> <S> <C> <C> <C>
UTILITIES--CONTINUED
Telephones (12.2%)
$2,360,000 Ameritech Corporation....................................... 5.40% 02/04/97 $ 2,347,885
2,285,000 AT&T Corporation............................................ 5.37% 03/07/97 2,263,091
1,695,000 Bellsouth Telephone......................................... 5.41% 01/24/97 1,689,045
-----------
6,300,021
-----------
Total commercial paper (cost: $47,614,902).................................... 47,614,902
-----------
U.S. GOVERNMENT AGENCY OBLIGATION (.3%)
130,000 Federal Home Loan Mortgage Corporation...................... 5.51% 01/08/97 129,843
-----------
Total U.S. Government agency obligation (cost: $129,843)...................... 129,843
-----------
OTHER SHORT-TERM SECURITIES (4.8%)
2,469,423 Temporary Investment Fund, Inc.--Temp Fund Portfolio current rate 5.458%...... 2,469,423
-----------
Total other short-term securities (cost: $2,469,423).......................... 2,469,423
-----------
Total investments in securities (cost: $50,214,168) (b)....................... $50,214,168
-----------
-----------
</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, 1996.
(c) 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, 1996, which includes acquisition
date and cost, is as follows:
ACQUISITION
SECURITY DATE COST
- -------------------------------------------------- ----------- ---------
Monsanto Company.................................. 12/17/96 $1,398,659
---------
---------
34
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1996
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
COMMON STOCKS (48.9%)
CAPITAL GOODS (3.4%)
Machinery (3.4%)
81,026 General Electric Company.................................... $ 8,011,446
50,880 Millipore Corporation....................................... 2,105,160
111,210 United Waste Systems, Incorporated (b)...................... 3,822,844
--------------
13,939,450
--------------
CONSUMER GOODS AND SERVICES (25.0%)
Consumer Goods (11.8%)
187,509 Columbia/HCA Healthcare Corporation......................... 7,640,992
101,200 Johnson & Johnson........................................... 5,034,700
47,000 Medtronic, Incorporated..................................... 3,196,000
39,900 Merck & Company, Incorporated............................... 3,162,075
84,960 Pfizer, Incorporated........................................ 7,041,060
58,800 Philip Morris Companies, Incorporated....................... 6,622,350
49,355 Procter & Gamble Company.................................... 5,305,663
214,800 Service Corporation International........................... 6,014,400
70,700 Smithkline Beecham ADR (c).................................. 4,807,600
--------------
48,824,840
--------------
Consumer Services (3.5%)
187,008 CUC International, Incorporated (b)......................... 4,441,440
101,611 GTECH Holdings Corporation (b).............................. 3,251,552
97,287 Manpower.................................................... 3,161,828
105,400 Wallace Computer Services, Incorporated..................... 3,636,300
--------------
14,491,120
--------------
Food (2.1%)
89,100 Conagra, Incorporated....................................... 4,432,725
92,792 Kroger Company (b).......................................... 4,314,828
--------------
8,747,553
--------------
Retail (3.3%)
102,640 Home Depot, Incorporated.................................... 5,144,830
100,800 Kohl's, Incorporated (b).................................... 3,956,400
195,500 Officemax (b)............................................... 2,077,188
98,200 Viking Office Products,
Incorporated (b).......................................... 2,620,713
--------------
13,799,131
--------------
Consumer Cyclicals (4.3%)
170,000 Autozone, Incorporated (b).................................. 4,675,000
81,200 Magna International, Incorporated (Class A) (c)............. 4,526,900
128,700 Newell Company.............................................. 4,054,050
96,704 Omnicom Group............................................... 4,424,208
--------------
17,680,158
--------------
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
CREDIT SENSITIVE (8.2%)
Finance (7.6%)
39,740 American Internationl Group, Incorporated................... $ 4,301,855
78,300 Associates First Capital Corporation........................ 3,454,988
191,252 First Data Corporation...................................... 6,980,698
67,900 MGIC Investment Corporation................................. 5,160,400
61,650 Norwest Corporation......................................... 2,681,775
84,900 Sunamerica, Incorporated.................................... 3,767,438
118,100 T. Rowe Price Associates.................................... 5,137,350
--------------
31,484,504
--------------
Utilities (.6%)
40,500 Cincinnati Bell, Incorporated............................... 2,495,813
--------------
INTERMEDIATE GOODS AND SERVICES (2.9%)
Materials (2.0%)
40,500 Kimberly-Clark Corporation.................................. 3,857,625
92,593 Praxair, Incorporated....................................... 4,270,852
--------------
8,128,477
--------------
Transportation (.9%)
45,300 Burlington Northern Santa Fe................................ 3,912,788
--------------
TECHNOLOGY (9.4%)
86,800 Automatic Data Processing, Incorporated..................... 3,721,550
89,700 Cisco Systems, Incorporated (b)............................. 5,707,163
91,162 Computer Associates International........................... 4,535,310
58,300 Computer Sciences Corporation (b)........................... 4,787,887
91,100 Danka Business Systems PLC (c).............................. 3,222,662
129,000 Equifax, Incorporated....................................... 3,950,624
55,500 Lucent Technologies, Incorporated........................... 2,566,874
47,000 Microsoft Corporation (b)................................... 3,883,374
64,972 Oracle Corporation (b)...................................... 2,712,580
80,600 Parametric Technology
Corporation (b)........................................... 4,140,825
--------------
39,228,849
--------------
Total common stocks
(cost: $157,183,575)............................................... 202,732,683
--------------
PREFERRED STOCKS (.6%)
FINANCIAL (.6%)
50,000 Security Capital Industrial,
Series C--8.54%........................................... 2,521,500
--------------
Total preferred stocks
(cost: $2,500,000)................................................. 2,521,500
--------------
</TABLE>
See accompanying notes to investments in securities.
35
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ------------ -------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (34.3%)
GOVERNMENT OBLIGATIONS (10.7%)
U.S. Treasury (3.4%)
$ 6,200,000 U.S. Treasury Bond.......................................... 8.000% 11/15/21 $ 7,106,750
500,000 U.S. Treasury Bond.......................................... 6.500% 11/15/26 490,625
2,000,000 U.S. Treasury Strip (d)..................................... 5.410% 02/15/01 1,558,938
1,300,000 U.S. Treasury Strip (d)..................................... 5.580% 08/15/99 1,113,774
3,800,000 U.S. Treasury Note.......................................... 6.125% 09/30/00 3,797,625
-------------
14,067,712
-------------
Government National Mortgage Association (1.8%)
375,256 ............................................................ 6.500% 11/15/23 360,264
872,376 ............................................................ 6.500% 03/15/24 836,826
295,065 ............................................................ 6.500% 11/15/23 283,277
539,351 ............................................................ 6.500% 11/15/23 517,803
246,452 ............................................................ 6.500% 11/15/23 236,606
22,434 ............................................................ 6.500% 03/15/24 21,519
323,448 ............................................................ 6.500% 11/15/23 310,526
23,397 ............................................................ 6.500% 02/15/24 22,443
609,581 ............................................................ 7.500% 05/15/24 611,836
1,901,799 ............................................................ 7.000% 10/15/25 1,860,814
1,614,161 ............................................................ 7.000% 11/15/24 1,585,040
350,742 GNMA Midget II.............................................. 7.500% 06/20/02 356,224
168,046 GNMA Midget II.............................................. 7.500% 07/20/02 170,673
-------------
7,173,851
-------------
Federal National Mortgage Association (3.2%)
2,600,000 ............................................................ 8.590% 02/03/05 2,662,491
1,387,234 ............................................................ 7.000% 05/01/11 1,386,178
774,455 ............................................................ 6.500% 05/01/11 760,476
968,937 ............................................................ 6.500% 05/01/11 951,447
2,306,853 ............................................................ 6.000% 05/01/11 2,218,868
987,704 ............................................................ 7.000% 05/01/11 986,952
1,233,134 ............................................................ 6.500% 09/01/25 1,177,666
3,237,453 ............................................................ 7.000% 02/01/26 3,169,560
-------------
13,313,638
-------------
Other U.S. Government Agencies (1.1%)
1,375,000 Federal Farm Credit Bank.................................... 6.960% 06/06/00 1,376,722
1,304,928 Federal Home Loan Mortgage Corporation...................... 6.500% 12/01/23 1,255,443
230,757 Federal Home Loan Mortgage Corporation...................... 6.000% 04/01/97 230,789
1,845,253 Federal Home Loan Mortgage Corporation...................... 6.500% 02/01/16 1,791,056
-------------
4,654,010
-------------
Other Government Obligations (.5%)
2,000,000 Quebec Province of Canada (c)............................... 7.500% 07/15/23 1,996,498
-------------
State and Local Government Obligations (.7%)
3,070,000 Wyoming Community Development Authority 93-B................ 6.850% 06/01/10 3,006,681
-------------
Total government obligations (cost: $44,530,968)......................................... 44,212,390
-------------
CORPORATE OBLIGATIONS (23.6%)
CAPITAL GOODS (2.9%)
Machinery (.9%)
3,340,000 Joy Technologies, Incorporated.............................. 10.250% 09/01/03 3,659,177
-------------
Telecommunications (2.0%)
4,700,000 Telekom Malaysia 144A Issue (c)(e).......................... 7.875% 08/01/25 4,871,912
3,750,000 Total Access Communications 144A Issue (c)(e)............... 8.375% 11/04/06 3,767,925
-------------
8,639,837
-------------
</TABLE>
See accompanying notes to investments in securities.
36
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ------------ -------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
CONSUMER CYCLICAL (.4%)
Textiles (.4%)
$ 1,750,000 Reliance Industries Limited 144A Issue (c)(e)............... 10.375% 06/24/16 $ 1,882,956
-------------
CONSUMER STAPLES (4.9%)
Drugs (1.5%)
2,250,000 American Home Products Corporation.......................... 6.500% 10/15/02 2,233,717
4,000,000 Ciba-Geigy Corporation 144A Issue (e)....................... 7.240% 01/02/16 3,970,400
-------------
6,204,117
-------------
Food (.1%)
428,571 General Mills, Incorporated................................. 6.235% 03/15/97 429,017
-------------
Household Products (1.1%)
4,200,000 Premark International, Incorporated......................... 10.500% 09/15/00 4,722,127
-------------
Media (.6%)
2,250,000 News America Holdings....................................... 9.250% 02/01/13 2,511,245
-------------
Miscellaneous (.7%)
2,900,000 PHH Corporation............................................. 6.500% 02/01/00 2,903,898
-------------
Retail (.9%)
2,000,000 Fingerhut Company 144A Issue (e)............................ 7.375% 09/15/99 2,012,476
1,500,000 Heilig-Meyers Company....................................... 7.875% 08/01/03 1,506,552
-------------
3,519,028
-------------
ENERGY (1.2%)
Oil and Gas Production (1.2%)
2,750,000 Petronas 144A Issue (c)(e).................................. 7.125% 10/18/06 2,769,773
2,000,000 PTT Exploration and Production Company 144A Issue (c)(e).... 7.625% 10/01/06 2,051,396
-------------
4,821,169
-------------
FINANCIAL (10.8%)
Asset-Backed (1.1%)
4,492,118 Celt 96-A A2................................................ 5.500% 02/15/03 4,472,263
-------------
Auto Finance (.5%)
2,000,000 Ford Motor Credit Company (f)............................... 5.350% 03/18/99 1,985,000
-------------
Banks/Savings and Loan (3.8%)
3,300,000 Advanta National............................................ 6.820% 04/09/01 3,291,120
5,250,000 Citicorp Capital............................................ 7.933% 02/15/27 5,318,828
4,100,000 Midland Bank PLC (c)........................................ 7.625% 06/15/06 4,234,590
3,000,000 Norwest Corporation......................................... 7.680% 05/10/02 3,044,022
-------------
15,888,560
-------------
Consumer Finance (1.7%)
2,000,000 Associates Corporation of North America..................... 6.750% 10/15/99 2,018,610
5,000,000 General Electric Capital Corporation........................ 6.660% 05/01/18 5,037,719
-------------
7,056,329
-------------
Insurance Companies (1.4%)
2,800,000 American RE Corporation 144A Issue (e)...................... 7.450% 12/15/26 2,796,640
3,000,000 URC Holdings Corporation 144A Issue (e)..................... 7.875% 06/30/06 3,122,760
-------------
5,919,400
-------------
Real Estate (.4%)
1,500,000 Security Capital Pacific Trust.............................. 7.500% 02/15/14 1,461,575
-------------
Real Estate Investment Trust (1.0%)
4,000,000 Colonial Realty Limited Partnership......................... 8.050% 07/15/06 4,158,816
-------------
Security Brokers (.9%)
3,500,000 Lehman Brothers Incorporated................................ 7.360% 12/15/03 3,539,438
-------------
</TABLE>
See accompanying notes to investments in securities.
37
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ------------ -------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
UTILITIES (2.9%)
Electric (.9%)
$ 3,750,000 Enersis (c)................................................. 6.900% 12/01/06 $ 3,660,608
-------------
Telephones (2.0%)
6,000,000 Bellsouth Telecommunications Incorporated................... 6.250% 05/15/03 5,889,768
2,600,000 GTE Northwest Incorporated.................................. 6.125% 02/15/99 2,592,138
-------------
8,481,906
-------------
MORTGAGE-BACKED SECURITIES (.5%)
Whole Loan Mortgage-Backed Securities (.5%)
1,000,000 Prudential Home Mortgage Securities, Series 92-A, 144A Issue
(e)......................................................... 7.900% 04/28/22 995,937
1,187,304 Paine Webber Mortgage Acceptance Corp, Series 94-4 CMO...... 6.924% 02/25/24 1,117,920
-------------
2,113,857
-------------
Total corporate obligations (cost: $97,337,019).......................................... 98,030,323
-------------
Total long-term debt securities (cost: $141,867,987)..................................... 142,242,713
-------------
SHORT-TERM SECURITIES (15.2%)
14,780,160 Temporary Investment Fund, Inc.--Tempfund Portfolio, current rate 5.458%................. 14,780,160
3,980,000 U.S. Treasury Bills......................................... 5.09%-5.11% 01/16/97 3,971,156
1,135,000 U.S. Treasury Bills......................................... 4.95%-5.14% 02/20/97 1,126,896
4,204,000 Alabama Power CP............................................ 5.60% 02/13/97 4,176,511
1,510,000 AT&T Corporation CP......................................... 5.31% 01/23/97 1,504,839
2,705,000 Baltimore Gas & Electric CP................................. 5.55% 01/14/97 2,699,372
1,760,000 Bell Atlantic Network Funding Corp CP....................... 5.46% 01/24/97 1,753,723
2,065,000 Ciesco LP CP................................................ 5.48% 02/03/97 2,054,566
4,000,000 Coca Cola Company CP........................................ 5.39% 01/31/97 3,981,572
4,000,000 Consolidated National Gas CP................................ 5.71% 02/05/97 3,978,600
605,000 Walt Disney CP.............................................. 5.41% 01/14/97 603,741
2,510,000 Walt Disney CP.............................................. 5.39% 01/17/97 2,503,659
1,240,000 Florida Power CP............................................ 5.65% 01/28/97 1,234,840
2,115,000 GTE California CP........................................... 5.61% 01/29/97 2,105,885
4,090,000 GTE North CP................................................ 5.64% 01/27/97 4,073,589
3,465,000 Laclede Gas Company CP...................................... 5.54% 01/31/97 3,449,037
895,000 Pepsico, Incorporated CP.................................... 5.60% 01/21/97 892,207
4,000,000 Raytheon Company CP......................................... 5.43% 01/08/97 3,995,244
4,210,000 Xerox Corporation CP........................................ 5.39% 01/06/97 4,206,245
-------------
Total short-term securities (cost: $63,089,436).......................................... 63,091,842
-------------
Total investments in securities (cost: $364,640,998) (g)................................. $ 410,588,738
-------------
-------------
</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 9.1% of net assets in foreign securities as of December
31, 1996.
(d) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
38
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
Notes to Investments in Securities--continued
- ------------------------------
(e) Represents ownership in an illiquid security which has not been registered
with the Securities and Exchange Commission under the Securities Act of
1933. (See note 7 to the financial statements.) Information concerning the
illiquid securities held at December 31, 1996, which includes aquisition
date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISTION
SECURITY DATE COST
- -------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
Reliance Industries 144A Issue.................................................. 06/17/96 $ 1,746,374
Telekom Malaysia 144A Issue..................................................... Various 4,737,860
Total Access Communications Bond 144A Issue..................................... Various 3,798,531
Ciba-Geigy Corporation 144A Issue............................................... 12/24/96 4,000,000
Fingerhut Company 144A Issue.................................................... 10/04/96 2,014,775
Petronas Unsubordinated 144A Issue.............................................. 10/10/96 2,744,452
PTT Exploration and Production Company 144A Issue............................... 10/31/96 2,058,391
URC Holdings Corporation 144A Issue............................................. Various 3,069,662
Prudential Home Mortgage Securities 144A Issue.................................. 07/19/96 950,762
American RE Corporation 144A Issue.............................................. 12/19/96 2,791,239
------------
$ 27,912,046
------------
------------
</TABLE>
(f) Represents a debt security with a variable rate. The interest rate
disclosed is the rate in effect at December 31, 1996.
(g) At December 31, 1996 the cost of securities for federal income tax purposes
was $364,792,491. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation............. $47,843,042
Gross unrealized depreciation............. (2,046,795)
-----------
Net unrealized appreciation............... $45,796,247
-----------
-----------
39
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1996
(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 (98.1%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (47.1%)
Federal Home Loan Mortgage Corporation (FHLMC) (10.2%)
$ 864,393 Bi-weekly................................................... 7.000% 12/01/22 $ 852,991
1,959,517 Bi-weekly................................................... 6.500% 12/01/23 1,885,210
3,989,500 Relocation.................................................. 6.000% 11/01/26 3,733,051
1,305,648 CMO 1048 Y (g).............................................. 7.000% 11/15/13 1,244,165
-----------
7,715,417
-----------
Federal National Mortgage Association (FNMA) (9.4%)
955,492 Bi-weekly................................................... 6.000% 07/01/07 929,712
1,298,354 Bi-weekly................................................... 6.500% 03/01/17 1,258,701
433,740 Bi-weekly................................................... 6.500% 02/01/17 421,331
1,572,874 Bi-weekly................................................... 7.000% 09/01/17 1,560,289
8,860 30 Year Fixed............................................... 8.000% 05/01/22 9,099
210,115 CMO Series A................................................ 5.000% 08/01/10 196,195
538,507 CMO Series C................................................ 6.000% 05/01/09 524,721
261,528 CMO Series F................................................ 6.500% 05/01/09 259,137
770,658 PAC Accrual Bond (FNMA 10%) (g)............................. 7.440% 06/25/19 750,952
1,923,076 FNR 93-189 Interest-only CMO (f)............................ 8.320% 03/25/22 695,655
1,500,000 FNR 93-212 Interest-only CMO (f)............................ 7.960% 09/25/08 513,368
-----------
7,119,160
-----------
Government National Mortgage Association (GNMA) (17.5%)
411,236 ............................................................ 8.000% 12/15/15 424,149
325,854 ............................................................ 8.000% 02/15/16 336,085
316,880 ............................................................ 8.000% 02/15/16 326,830
315,572 ............................................................ 8.000% 02/15/16 325,481
446,155 ............................................................ 8.000% 03/15/16 460,164
553,233 ............................................................ 7.000% 04/15/16 548,475
697,932 ............................................................ 7.375% 11/15/11 710,523
350,090 ............................................................ 7.000% 09/15/16 349,039
578,184 ............................................................ 7.000% 08/15/16 576,450
720,476 ............................................................ 7.500% 06/15/17 730,332
319,464 ............................................................ 7.000% 05/15/17 318,505
522,035 ............................................................ 7.500% 04/15/17 529,176
1,837,909 ............................................................ 7.500% 06/15/17 1,863,050
355,490 ............................................................ 7.000% 07/15/17 354,424
147,800 ............................................................ 7.500% 02/15/17 149,822
184,884 ............................................................ 7.500% 06/15/17 187,413
288,086 ............................................................ 7.000% 03/15/17 287,222
158,748 ............................................................ 7.500% 06/15/17 160,919
174,772 ............................................................ 7.500% 10/15/17 177,163
302,135 ............................................................ 7.000% 05/15/17 301,228
5,502 ............................................................ 8.500% 03/15/22 5,703
423,793 GNMA II..................................................... 7.500% 09/20/16 426,768
41,620 GNMA II..................................................... 8.500% 10/20/16 43,555
369,605 GNMA II..................................................... 7.500% 09/20/16 372,199
613,387 GNMA II..................................................... 8.000% 02/20/17 629,733
222,561 GNMA II..................................................... 8.500% 10/20/16 232,910
874,390 GNMA II..................................................... 8.500% 07/20/17 915,049
193,786 GNMA II..................................................... 8.500% 03/20/17 202,797
295,642 GNMA II..................................................... 8.500% 08/20/17 307,267
439,081 GNMA II..................................................... 7.500% 08/20/17 441,517
424,076 GNMA II..................................................... 8.000% 07/20/17 436,799
191,775 GNMA II..................................................... 8.500% 12/20/16 200,693
-----------
13,331,440
-----------
</TABLE>
See accompanying notes to investments in securities.
40
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ----------- -----------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS--CONTINUED
Other Government Agency Obligations (10.0%)
$ 250,000 Federal Home Loan Bank, Series GG-00........................ 5.030% 07/28/00 $ 248,750
1,815,194 Vendee Mortgage Trust Participation Certificate (b)......... 8.465% 05/15/24 1,905,954
707,049 Vendee Mortgage Trust Participation Certificate (b)......... 7.206% 02/15/25 697,990
2,032,109 Vendee Mortgage Trust Participation Certificate (b)......... 7.793% 02/15/25 2,075,291
2,519,429 Vendee Mortgage Trust Participation Certificate (b)......... 8.793% 06/15/25 2,678,468
-----------
7,606,453
-----------
OTHER MORTGAGE-BACKED SECURITIES (49.7%)
Asset-backed Securities (2.8%)
1,645,294 Green Tree Financial........................................ 6.900% 02/15/04 1,640,851
520,959 Green Tree Financial........................................ 7.250% 07/15/05 519,533
-----------
2,160,384
-----------
Collateralized Mortgage Obligations/Mortgage Revenue Bonds (26.7%)
87,764 American Housing Trust, Series III.......................... 8.500% 07/25/97 88,008
1,343,196 American Housing Trust, Series I............................ 8.125% 06/25/18 1,386,850
3,801,907 Bank Mart Funding Corporation (e)........................... 8.250% 02/20/19 3,873,193
1,800,000 California Housing Agency 96-0.............................. 8.160% 02/01/28 1,852,313
1,450,000 Citicorp Mortgage Securities, Inc., Series 93-13............ 6.000% 11/25/08 1,412,416
1,040,949 CSFB Finance Company Limited, Series 96-A 144A Issue (d).... 7.771% 05/30/23 1,024,034
1,177,208 Chase 94-1 144A Issue (d)................................... 6.611% 03/28/25 1,098,667
1,174,503 Chase 94-1 144A Issue (d)................................... 6.610% 03/28/25 1,079,442
280,261 CMO Trust, Series 44........................................ 5.000% 07/01/18 261,528
International Capital Markets Acceptance Corporation 144A
1,199,030 Issue (d)................................................... 8.250% 09/01/15 1,219,264
1,000,000 Kidder Peabody Mortgage Asset Trust, Series 19.............. 7.450% 10/01/18 990,001
1,750,000 Morgan Stanley Capital 97-P1 144A Issue (c)(d).............. 6.970% 03/29/26 1,638,438
1,016,274 Santa Barbara Funding II, Series A.......................... 5.000% 03/20/18 947,604
1,390,218 Shearson Lehman Brothers, Series Q.......................... 7.500% 06/01/18 1,388,911
2,087,600 Wyoming Community Development Authority 93-B................ 6.850% 06/01/10 2,044,543
-----------
20,305,212
-----------
Commercial Mortage-Backed Securities (7.3%)
Kidder Peabody Mortgage Asset Real Estate Investment
2,295,000 Trust....................................................... 7.180% 10/01/05 2,317,233
Asset Securitization Corporation 1995-MD4 Interest-only 144A
5,515,540 Issue (d)(f)................................................ 8.700% 08/13/29 1,006,586
300,000 Massachusetts Industrial 96-B............................... 7.100% 02/01/10 300,000
1,864,950 Pleasant Hill Revenue Bond.................................. 7.950% 09/20/15 1,922,916
-----------
5,546,735
-----------
Whole Loan Mortgage-backed Securities (12.9%)
140,652 Bank of America 79-A........................................ 8.375% 05/01/07 140,652
31,094 Bank of America 79-B........................................ 9.500% 01/01/09 31,094
1,350,000 Bear Sterns Mortgage Securities Inc. 1996-6................. 8.000% 11/25/27 1,334,813
2,850,000 CSFCL 95-A A Performance Notes, 144A Issue (d).............. 7.542% 11/15/05 2,839,313
232,983 FBS Mortgage Corp 1992-CA A6................................ 3.359% 03/25/08 211,430
4,430 Resolution Funding Corporation Conduit...................... 8.500% 04/01/02 4,413
12,367 Travelers Mortgage Service.................................. 10.000% 06/01/01 12,367
3,000,000 Prudential Home Mortage Securities 92-A 144A Issue (d)...... 7.900% 04/28/22 3,011,250
1,500,000 Prudential Home Mortgage Securities 92-A 144A Issue (d)..... 7.900% 04/28/22 1,493,906
742,890 Paine Webber Mortgage Acceptance Corp 94-4.................. 6.924% 02/25/24 699,477
-----------
9,778,715
-----------
CORPORATE DEBT SECURITIES (1.3%)
1,000,000 Security Capital Pacific.................................... 7.500% 02/15/14 974,383
-----------
Total long-term debt securities (cost: $73,379,009)............................. 74,537,899
-----------
</TABLE>
See accompanying notes to investments in securities.
41
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- ----------- -----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (3.2%)
$ 2,400,805 Temporary Investment Fund, Inc.--TempFund Portfolio, current rate 5.458%........ $ 2,400,805
-----------
Total short-term securities (cost: $2,400,805).................................. 2,400,805
-----------
Total investments in securities (cost: $75,779,814) (h)......................... $76,938,704
-----------
-----------
</TABLE>
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 December 31, 1996.
(c) At December 31, 1996 the total cost of investments issued on a when-issued
or forward comittment basis is $1,641,719.
(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,
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 7 to the financial statements.) Information concerning the
illiquid securities held at December 31, 1996 which includes acquisition
date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- -------------------------------------------------- ----------- ----------
<S> <C> <C>
Bank Mart Funding Corporation..................... 05/27/94 $3,801,467
----------
----------
</TABLE>
(f) Interest-only security that entitles holders to receive only interest on
the underlying mortgages. The principal amount of the underlying pool
represents the notional amount on which current interest is calculated. The
yield to maturity of an interest-only security is sensitive to the rate of
principal payments on the underlying mortgage assets. The interest rate
disclosed represents the market yield based upon the current cost basis and
estimated timing and amount of future cash flows.
(g) Represents a debt security that pays no interest and principal during its
accrual period, but accrues additional principal at specific rates. Interest
rate disclosed represents current yield based upon estimated future cash
flows.
(h) At December 31, 1996 the cost of securities for federal income tax purposes
was $75,786,074. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation..................... $1,385,223
Gross unrealized depreciation..................... (232,593)
----------
Net unrealized depreciation....................... $1,152,630
----------
----------
42
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1996
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
COMMON STOCKS (99.4%)
CAPITAL GOODS (6.7%)
Machinery (6.7%)
3,600 Alco Standard Corporation................................... $ 185,850
8,600 Allied-Signal, Inc.......................................... 576,200
6,600 AMP Incorporated............................................ 253,275
6,500 Applied Materials, Inc. (b)................................. 233,594
6,500 Browning-Ferris Industries, Inc............................. 170,625
3,600 Case Corporation............................................ 196,200
5,700 Caterpillar, Inc............................................ 428,925
6,700 Cooper Industries........................................... 282,238
8,600 Dana Corporation............................................ 280,575
7,000 Deere & Company............................................. 284,375
5,600 Dover Corporation........................................... 281,400
3,100 Eaton Corporation........................................... 216,225
6,800 Emerson Electric Co......................................... 657,900
2,600 Fluor Corporation........................................... 163,150
700 Foster Wheeler Corporation.................................. 25,988
57,800 General Electric Company.................................... 5,714,975
2,300 W W Grainger, Inc........................................... 184,575
3,300 Illinois Tool Works, Inc.................................... 263,588
4,600 Ingersoll-Rand Company...................................... 204,700
3,400 ITT Corporation (b)......................................... 147,475
6,500 ITT Hartford Group.......................................... 438,750
13,500 Laidlaw, Inc. (b)........................................... 155,250
2,950 Navistar International Corporation (b)...................... 26,919
690 Paccar, Inc................................................. 46,920
4,200 Parker Hannifin Corporation................................. 162,750
2,400 Raychem Corporation......................................... 192,300
7,900 Safety-Kleen Corp........................................... 129,363
2,400 Textron, Inc................................................ 226,200
5,200 Tyco International Ltd...................................... 274,950
2,900 Western Atlas Corporation (b)............................... 205,538
10,200 Westinghouse Electric Corporation........................... 202,725
17,800 Whitman Corporation......................................... 407,175
14,800 WMX Technologies, Inc....................................... 482,850
------------
13,703,523
------------
CONSUMER GOODS AND SERVICES (33.0%)
Consumer Goods (18.5%)
26,200 Abbott Laboratories......................................... 1,329,650
6,200 Alberto-Culver Company Convertible.......................... 297,600
6,100 Allergan, Inc............................................... 217,313
8,900 Alza Corporation (b)........................................ 230,288
4,800 American Brands, Inc........................................ 238,200
20,600 American Home Products Corporation.......................... 1,207,675
8,100 Amgen, Inc. (b)............................................. 440,438
15,400 Anheuser-Busch Companies, Inc............................... 616,000
4,500 Avon Products............................................... 257,063
8,800 Baxter International, Inc................................... 360,800
7,400 Becton, Dickinson and Company............................... 320,975
3,900 Beverly Enterprises (b)..................................... 49,725
1,400 Biomet, Inc................................................. 21,175
4,600 Boston Scientific Corporation (b)........................... 276,000
17,200 Bristol-Myers Squibb Company................................ 1,870,500
2,900 Brown-Forman, Inc........................................... 132,675
3,700 C.R. Bard, Inc.............................................. 103,600
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
3,800 Cabletron Systems Incorporated (b).......................... $ 126,350
2,000 Clorox Company.............................................. 200,750
86,300 Coca-Cola Company........................................... 4,541,538
4,900 Colgate-Palmolive Company................................... 452,025
22,906 Columbia/HCA Healthcare Corporation......................... 933,420
4,600 Adolph Coors Company........................................ 87,400
18,500 Eli Lilly & Company......................................... 1,350,500
14,500 Gillette Company............................................ 1,127,375
4,900 Guidant Corporation......................................... 279,300
2,800 Harcourt General, Inc....................................... 129,150
20,900 Humana (b).................................................. 399,713
4,300 International Flavors & Fragrances, Inc..................... 193,500
45,500 Johnson & Johnson........................................... 2,263,625
3,900 Mallinckrodt, Inc........................................... 172,088
4,500 Manor Care, Inc............................................. 121,500
7,200 Medtronic, Inc.............................................. 489,600
41,300 Merck & Co., Inc............................................ 3,273,025
52,700 Pepsico, Inc................................................ 1,541,475
21,900 Pfizer, Inc................................................. 1,814,963
15,355 Pharmacia & UpJohn.......................................... 608,442
27,900 Philip Morris Companies, Inc................................ 3,142,238
23,034 Procter & Gamble Company.................................... 2,476,155
12,200 Schering-Plough Corporation................................. 789,950
6,000 Service Corporation International........................... 168,000
5,700 St Jude Medical, Inc. (b)................................... 242,963
9,800 Tenet Healthcare Corporation (b)............................ 214,375
11,300 The Seagram Company Ltd (c)................................. 437,875
5,400 Unilever N.V (c)............................................ 946,350
4,900 United Health Care.......................................... 220,500
4,600 United States Surgical Corporation.......................... 181,125
9,900 UST, Inc.................................................... 320,513
9,100 Warner-Lambert Company...................................... 682,500
------------
37,897,960
------------
Consumer Services (4.6%)
1,453 A.C. Nielsen Corporation (b)................................ 21,977
7,500 Brunswick Corporation....................................... 180,000
13,900 Comcast Corporation......................................... 247,594
12,000 CUC International, Inc. (b)................................. 285,000
3,300 Deluxe Corp................................................. 108,075
22,782 Walt Disney Company......................................... 1,586,197
3,400 R. R. Donnelley & Sons Company.............................. 106,675
6,600 Dow Jones & Company, Inc.................................... 223,575
4,360 Dun & Bradstreet Corporation................................ 103,550
3,825 Eastman Chemical Company.................................... 211,331
11,600 Eastman Kodak Company....................................... 930,900
4,300 Gannett Company............................................. 321,963
6,400 Harrah's Entertainment (b).................................. 127,200
6,800 Hasbro, Inc................................................. 264,350
3,900 HFS Incorporated (b)........................................ 233,025
4,800 Hilton Hotels Corporation................................... 125,400
600 King World Productions, Inc. (b)............................ 22,125
6,000 Knight-Ridder, Inc.......................................... 229,500
5,100 Marriott International, Inc................................. 281,775
8,641 Mattel, Inc................................................. 239,788
23,000 McDonalds Corp.............................................. 1,040,750
</TABLE>
See accompanying notes to investments in securities.
43
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
3,600 McGraw-Hill Companies, Inc.................................. $ 166,050
3,600 Meredith Corporation........................................ 189,900
9,500 Moore Corporation Limited (c)............................... 193,563
2,900 New York Times Company...................................... 110,200
4,000 Polaroid Corporation........................................ 174,000
19,400 Time Warner, Inc............................................ 727,500
3,600 Times Mirror Company........................................ 179,100
1,500 Tribune Company............................................. 118,313
11,230 Viacom (b).................................................. 391,646
6,200 Wendy's International, Inc.................................. 127,100
------------
9,268,122
------------
Food (3.0%)
7,200 Albertson's Incorporated.................................... 256,500
16,675 Archer-Daniels-Midland Company.............................. 366,850
8,300 Campbell Soup Company....................................... 666,075
7,525 Conagra, Inc................................................ 374,369
4,400 CPC International........................................... 341,000
18,400 Darden Restaurants, Inc..................................... 161,000
10,000 Fleming Companies, Inc...................................... 172,500
4,800 General Mills, Inc.......................................... 304,200
4,500 Giant Food, Inc............................................. 155,250
15,700 H.J. Heinz Company.......................................... 561,275
5,800 Hershey Foods Corporation................................... 253,750
7,700 Kellogg Company............................................. 505,313
7,300 Kroger Company (b).......................................... 339,450
6,300 Quaker Oats Company......................................... 240,188
2,600 Ralston-Ralston Purina Group................................ 190,775
14,700 Sara Lee Corporation........................................ 547,575
5,800 Super Valu, Inc............................................. 164,575
6,000 Sysco Corporation........................................... 195,750
4,800 Winn-Dixie Stores, Incorporated............................. 151,800
3,600 Wm. Wrigley Jr. Company..................................... 202,500
------------
6,150,695
------------
Retail (3.8%)
8,500 American Stores Company..................................... 347,438
7,400 Circuit City Stores, Inc.................................... 222,925
3,100 CVS Corporation............................................. 128,263
6,600 Dayton Hudson Corporation................................... 259,050
11,500 Dillard Department Stores, Inc.............................. 355,063
5,500 Federated Department Stores (b)............................. 187,688
12,000 Gap, Incorported............................................ 361,500
16,124 Home Depot, Inc............................................. 808,216
14,200 K Mart Corporation (b)...................................... 147,325
1,200 Longs Drug Stores Corp...................................... 58,950
7,100 May Department Stores Company............................... 331,925
1,000 Mercantile Stores Company, Inc.............................. 49,375
8,600 Nike, Inc................................................... 513,850
3,100 Nordstrom, Inc.............................................. 109,856
6,400 J.C. Penney Company, Inc.................................... 312,000
7,800 Price/Costco Corporation (b)................................ 195,975
12,900 Sears, Roebuck and Co....................................... 595,013
3,800 Tandy Corporation........................................... 167,200
7,500 The Limited, Inc............................................ 137,813
1,000 The Stride Rite Corporation................................. 10,000
4,300 TJX Companies, Incorporated................................. 203,713
8,350 Toys R Us (b)............................................... 250,500
78,300 Wal-Mart Stores, Inc........................................ 1,791,113
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
CONSUMER GOODS AND SERVICES--CONTINUED
7,500 Walgreen Co................................................. $ 300,000
------------
7,844,751
------------
Consumer Cyclicals (3.1%)
24,000 Chrysler Corporation Holding Co............................. 792,000
6,900 Corning, Inc................................................ 319,125
40,400 Ford Motor.................................................. 1,287,750
5,300 Fruit of the Loom (b)....................................... 200,738
26,600 General Motors Corporation.................................. 1,482,950
3,700 Genuine Parts Company....................................... 164,650
6,300 Goodyear Tire & Rubber Company.............................. 323,663
5,800 Interpublic Group Company................................... 275,500
2,700 Johnson Controls............................................ 223,763
7,700 Liz Clairborne, Inc......................................... 297,413
4,300 Maytag Corporation.......................................... 84,925
10,000 Newell Co................................................... 315,000
400 Owens Corning............................................... 17,050
7,700 Rubbermaid Incorporated..................................... 175,175
5,250 Snap-On Incorporated........................................ 187,031
1,100 The Black & Decker Corporation.............................. 33,138
2,200 V.F. Corporation............................................ 148,500
------------
6,328,371
------------
CREDIT SENSITIVE (23.6%)
Building (.8%)
3,900 Armstrong World Industries, Inc............................. 271,050
8,400 Fleetwood Enterprises, Inc.................................. 231,000
8,900 Lowe's Companies, Inc....................................... 315,950
6,900 Masco Corporation........................................... 248,400
7,900 PPG Industries, Incorporated................................ 443,388
3,100 Sherwin-Williams Company.................................... 173,600
------------
1,683,388
------------
Finance (14.1%)
4,555 Aetna Incorporated.......................................... 364,400
9,400 Ahmanson & Company.......................................... 305,500
15,357 Allstate Corporation........................................ 888,786
14,600 American Express Company.................................... 824,900
6,400 American General Corporation................................ 261,600
15,780 American Internationl Group, Inc............................ 1,708,185
13,777 Banc One Corporation........................................ 592,411
5,200 Bank of Boston Corporation.................................. 334,100
12,200 Bank of New York Co, Inc.................................... 411,750
13,404 Bankamerica Corporation..................................... 1,337,049
3,400 Bankers Trust New York Corporation.......................... 293,250
9,200 Barnett Banks of Florida, Inc............................... 378,350
3,000 Beneficial Corporation...................................... 190,125
5,900 H. & R. Block, Inc.......................................... 171,100
4,500 Boatmens Bancshares, Inc.................................... 290,250
15,334 Chase Manhattan Corporation................................. 1,368,560
5,300 Chubb Corporation........................................... 284,875
2,000 Cigna Corporation........................................... 273,250
15,800 Citicorp.................................................... 1,627,400
4,500 Comerica.................................................... 235,688
7,000 Corestates Financial Corp................................... 363,125
4,195 Dean Witter Discover & Co................................... 277,919
5,700 Federal Home Loan Mortgage Corporation...................... 627,713
36,200 Federal National Mortgage Association....................... 1,348,450
3,400 Fifth Third Bancorp......................................... 213,563
6,000 First Bank Systems, Incorporated............................ 409,500
</TABLE>
See accompanying notes to investments in securities.
44
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
CREDIT SENSITIVE--CONTINUED
10,837 First Chicago Corporation................................... $ 582,489
13,600 First Data Corp............................................. 496,400
9,295 First Union Corporation..................................... 687,830
9,680 Fleet Financial Group, Incorporated......................... 482,790
2,400 General Re Corporation...................................... 378,600
5,800 Golden West Financial Corporation........................... 366,125
8,650 Great Western Financial Corporation......................... 250,850
4,400 Green Tree Financial Corporation............................ 169,950
2,400 Household International, Inc................................ 221,400
7,000 Keycorp..................................................... 353,500
7,000 Lincoln National Corporation................................ 367,500
3,800 Loews Corporation........................................... 358,150
2,200 Marsh & McLennen............................................ 228,800
6,750 MBNA Corporation............................................ 280,125
3,900 Mellon Bank Corporation..................................... 276,900
5,300 Merrill Lynch & Co., Inc.................................... 431,950
7,300 J.P. Morgan & Company Incorporated.......................... 712,663
3,800 Morgan Stanley Group........................................ 217,075
6,700 National City Corporation................................... 300,663
10,656 Nationsbank Corp............................................ 1,041,624
12,800 Norwest Corporation......................................... 556,800
11,800 PNC Bank Corp............................................... 443,975
5,300 Providian Corporation....................................... 272,288
2,500 Republic New York Corporation............................... 204,063
4,900 Safeco Corporation.......................................... 193,244
7,000 Salomon, Inc................................................ 329,875
3,400 St. Paul Companies, Inc..................................... 199,325
6,800 Suntrust Banks, Inc......................................... 334,900
2,550 Torchmark Corporation....................................... 128,775
3,700 Transamerica Corporation.................................... 292,300
10,300 U.S. Bancorp................................................ 462,856
5,500 UNUM Corporation............................................ 397,375
7,300 USF&G Corporation........................................... 152,388
2,400 U.S. Life Corporation....................................... 79,800
6,200 Wachovia Corporation........................................ 350,300
3,166 Wells Fargo & Company....................................... 854,029
------------
28,839,476
------------
Insurance (.1%)
3,800 AON Corporation............................................. 236,075
------------
Utilities (8.6%)
14,400 Airtouch Communications (b)................................. 363,600
6,000 American Electric Power Company, Inc........................ 246,750
18,600 Ameritech................................................... 1,127,625
60,435 AT&T Corporation............................................ 2,628,923
10,600 Baltimore Gas and Electric Company.......................... 283,550
13,600 Bell Atlantic Corporation................................... 880,600
34,800 Bellsouth Corporation....................................... 1,405,050
6,500 Carolina Power & Light Company.............................. 237,250
9,700 Central & Southwest Corporation............................. 248,563
5,932 Cinergy..................................................... 197,981
5,500 Consolidated Edison Company of New York..................... 160,875
3,200 Consolidated Natural Gas Company............................ 176,800
6,750 Dominion Resources, Inc..................................... 259,875
5,300 DTE Energy Company.......................................... 171,588
5,800 Duke Power Company.......................................... 268,250
15,000 Edison International........................................ 298,125
7,900 Enron Corp.................................................. 340,688
6,900 Entergy Corporation......................................... 191,475
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
CREDIT SENSITIVE--CONTINUED
4,700 FPL Group, Inc.............................................. $ 216,200
5,600 GPU Incorporated............................................ 188,300
33,000 GTE Corporation............................................. 1,501,500
8,600 Houston Industries Incorporated............................. 194,575
5,200 Niagara Mohawk Power Corporation (b)........................ 51,350
1,300 Northern States Power Company............................... 59,638
17,200 Nynex Corporation........................................... 827,750
800 Oneok Inc................................................... 24,000
5,100 Pacific Enterprises......................................... 154,913
14,200 Pacific Gas & Electric Company.............................. 298,200
13,000 Pacific Telesis Group....................................... 477,750
12,500 Pacificorp.................................................. 256,250
4,200 Peco Energy Company......................................... 106,050
2,000 Peoples Energy Corporation.................................. 67,750
6,650 Public Service Enterprise Group, Inc........................ 181,213
22,400 SBC Communications, Inc..................................... 1,159,200
23,000 Southern Company............................................ 520,375
6,900 Texas Utilities Company..................................... 281,175
5,500 Unicom Corporation.......................................... 149,188
6,900 Union Electric Company...................................... 265,650
18,000 U.S. West Communications Group.............................. 580,500
21,600 U.S. West Media Group (b)................................... 399,600
------------
17,448,695
------------
INTERMEDIATE GOODS AND SERVICES (19.7%)
Energy (9.5%)
2,800 Amerada Hess Corporation.................................... 162,050
17,000 Amoco Corporation........................................... 1,368,500
7,100 Ashland Incorporated........................................ 311,513
5,400 Atlantic Richfield Company.................................. 715,500
8,600 Baker Hughes Incorporated................................... 296,700
7,400 Burlington Resources, Inc................................... 372,775
25,400 Chevron Corporation......................................... 1,651,000
4,100 Coastal Corporation......................................... 200,388
2,900 Columbia Gas System, Inc.................................... 184,513
3,900 Dresser Industries, Inc..................................... 120,900
2,500 Enserch Corp................................................ 57,500
42,700 Exxon Corporation........................................... 4,184,600
4,600 Halliburton Company......................................... 277,150
3,200 Louisiana Land & Exploration Company........................ 171,600
13,700 Mobil Corporation........................................... 1,674,825
6,300 Noram Energy................................................ 96,863
7,700 Occidental Petroleum Corporation............................ 179,988
9,200 Oryx Energy Company (b)..................................... 227,700
7,900 Panenergy Corporation....................................... 355,500
4,000 Pennzoil Company............................................ 226,000
10,100 Phillips Petroleum Company.................................. 446,925
19,200 Royal Dutch Petroleum ADR (c)............................... 3,278,400
8,400 Schlumberger Limited (c).................................... 838,950
4,000 Sonat, Inc.................................................. 206,000
4,300 Tenneco, Inc................................................ 194,038
9,000 Texaco, Inc................................................. 883,125
9,300 Union Pacific Resources Group, Inc.......................... 272,025
7,500 Unocal Corporation.......................................... 304,688
5,900 USX--Marathon Group......................................... 140,863
------------
19,400,579
------------
Materials (8.8%)
3,800 Air Products and Chemicals, Inc............................. 262,675
7,275 Alcan Aluminium Limited (c)................................. 244,622
962 Allegheny Teledyne Incorported.............................. 22,126
</TABLE>
See accompanying notes to investments in securities.
45
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
INTERMEDIATE GOODS AND SERVICES--CONTINUED
5,400 Aluminum Company of America................................. $ 344,250
1,400 Asarco Incorporated......................................... 34,825
11,600 Avery Dennison Corp......................................... 410,350
10,700 Barrick Gold Corporation (c)................................ 307,625
5,800 Bemis Company, Inc.......................................... 213,875
566 Boise Cascade Corporation................................... 17,971
4,300 Champion International Corporation.......................... 185,975
3,400 Crown Cork & Seal Company, Inc.............................. 184,875
7,900 Dow Chemical Company........................................ 619,163
19,200 E.I. Du Pont De Nemours and Company......................... 1,812,000
5,400 Ecolab, Inc................................................. 203,175
10,487 Engelhard Corporation....................................... 200,564
1,600 FMC Corporation (b)......................................... 112,200
165,700 Freeport-McMoran Copper..................................... 4,950,288
3,000 Fresenius Medical Care ADR (b)(c)........................... 315
2,200 Georgia-Pacific Corporation................................. 158,400
3,000 W.R. Grace & Co............................................. 155,250
3,900 Great Lakes Chemical Corporation............................ 182,325
2,700 Hercules Incorporated....................................... 116,775
17,700 Homestake Mining Company.................................... 252,225
5,500 Inco Limited (c)............................................ 175,313
9,100 International Paper Company................................. 367,411
9,600 Kimberly-Clark Corporation.................................. 914,400
5,600 Louisianna-Pacific Corporation.............................. 118,300
3,900 Mead Corporation............................................ 226,688
18,000 Monsanto Company............................................ 699,750
3,600 Morton International........................................ 146,700
5,800 Nalco Chemical Company...................................... 209,525
5,022 Newmont Mining Corporation.................................. 224,735
5,000 Nucor Corporation........................................... 255,000
4,300 Phelps Dodge Corporation.................................... 290,250
2,100 Pioneer Hi-Bred International, Inc.......................... 147,000
5,100 Placer Dome, Inc............................................ 110,925
600 Potlatch Corporation........................................ 25,800
5,200 Praxair, Inc................................................ 239,850
3,400 Rohm and Haas Company....................................... 277,525
3,000 Sigma-Aldrich............................................... 187,310
4,500 The Williams Company........................................ 168,750
21,866 Travelers Group Incorporated................................ 992,170
5,150 Union Camp Corporation...................................... 245,910
3,900 Union Carbide Corporation................................... 159,410
5,640 USX--U.S. Steel Group, Inc.................................. 176,955
6,000 Westvaco Corporation........................................ 172,500
4,900 Weyerhaeuser Company........................................ 232,138
2,400 Willamette Industries Incorporated.......................... 167,100
3,300 Worthington Industries...................................... 59,810
------------
17,983,074
------------
Transportation (1.4%)
2,200 AMR Corporation (b)......................................... 193,875
4,573 Burlington Northern Santa Fe................................ 394,993
2,800 Conrail Corporation......................................... 278,950
7,400 CSX Corporation............................................. 312,650
3,800 Delta Air Lines, Inc........................................ 269,325
3,800 Federal Express Corporation (b)............................. 169,100
4,700 Norfolk Southern Corporation................................ 411,250
5,400 Ryder System, Inc........................................... 151,875
8,100 Union Pacific Corporation................................... 487,013
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
INTERMEDIATE GOODS AND SERVICES--CONTINUED
9,100 U.S. Air Group, Inc (b)..................................... $ 212,713
------------
2,881,744
------------
TECHNOLOGY (16.4%)
12,400 Advanced Micro Devices, Inc, (b)............................ 319,300
6,200 Alltel Corp................................................. 194,525
1,000 Amdahl (b).................................................. 12,125
8,800 Apple Computer Incorporated (b)............................. 183,700
2,200 Autodesk, Inc............................................... 61,600
9,100 Automatic Data Processing, Inc.............................. 390,160
10,200 Bay Networks, Inc. (b)...................................... 212,925
12,885 Boeing Company.............................................. 1,370,640
4,600 Ceridian Corporation (b).................................... 186,300
22,300 Cisco Systems, Inc. (b)..................................... 1,418,838
8,100 Compaq Computer Corporation (b)............................. 601,425
11,025 Computer Associates International........................... 548,494
2,400 Computer Sciences Corporation (b)........................... 197,100
900 Crane Co.................................................... 26,100
6,000 Dell Computer Corporation (b)............................... 318,750
5,600 Digital Equipment (b)....................................... 203,700
14,400 DSC Communications (b)...................................... 257,400
1,600 EG&G, Inc................................................... 32,200
7,500 EMC Corporation (b)......................................... 248,430
2,000 General Dynamics Corporation................................ 141,000
8,500 General Instrument Corporation (b).......................... 183,810
6,500 B.F. Goodrich Company....................................... 263,250
4,000 Harris Corporation.......................................... 274,500
35,400 Hewlett-Packard Company..................................... 1,778,850
4,300 Honeywell, Inc.............................................. 282,725
28,500 Intel....................................................... 3,731,719
17,600 International Business Machines Corporation................. 2,657,600
6,219 Lockheed Martin Corporation................................. 569,039
15,200 LSI Logic Corporation (b)................................... 406,600
22,100 Lucent Technologies Incorporated............................ 1,022,125
7,200 McDonnell Douglas Corporation............................... 460,800
20,700 MCI Communications.......................................... 676,630
5,800 Micron Technology, Inc...................................... 168,925
41,400 Microsoft Corporation (b)................................... 3,420,675
14,000 Minnesota Mining and Manufacturing Company.................. 1,160,250
19,900 Motorola.................................................... 1,221,360
8,700 National Semiconductor Corporation (b)...................... 212,060
7,700 Northern Telecom Limited.................................... 476,438
2,200 Northrop Grumman Corporation................................ 182,050
8,500 Novell, Inc (b)............................................. 80,480
23,250 Oracle Corporation (b)...................................... 970,688
10,899 Pall Corporation............................................ 277,925
2,800 Perkin-Elmer Corporation.................................... 164,850
4,600 Pitney Bowes, Inc........................................... 250,700
6,500 Raytheon Company............................................ 312,813
6,800 Rockwell International Corporation.......................... 413,950
4,400 Scientific-Atlanta, Inc..................................... 66,000
7,500 Seagate Technology Incorporated (b)......................... 296,250
6,900 Silicon Graphics Incorporated (b)........................... 175,950
17,000 Sprint Corporation.......................................... 677,875
11,200 Sun Microsystems, Inc (b)................................... 287,700
22,100 Tandem Computers Incorporated (b)........................... 303,875
19,900 Tele-Communications, Inc (b)................................ 259,940
5,200 Tellabs Incorporated (b).................................... 195,650
</TABLE>
See accompanying notes to investments in securities.
46
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
TECHNOLOGY--CONTINUED
6,400 Texas Instruments Incorporated.............................. $ 408,000
6,400 TRW, Inc.................................................... 316,800
37,800 Unisys Corporation (b)...................................... 255,150
8,400 United Technologies Corporation............................. 554,400
11,400 Worldcom, Incorported (b)................................... 297,110
9,900 Xerox Corporation........................................... 520,988
5,800 3 Com (b)................................................... 425,575
------------
33,586,787
------------
Total common stocks cost
(cost: $143,735,147)............................................. 203,253,240
------------
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
PREFERRED STOCKS (--%)
CREDIT SENSITIVE (--%)
Finance (--%)
352 Aetna Inc. Convertible...................................... $ 27,940
------------
Total preferred stocks
(cost: $13,832).................................................. 27,940
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ---------
<C> <S> <C>
SHORT-TERM SECURITIES (.9%)
$1,913,480 Temporary Investment Fund, Inc.-- Temp Fund Portfolio, current
rate 5.458%.................................................... 1,913,480
--------------
Total short-term securities
(cost: $1,913,480)...................................................... 1,913,480
--------------
Total investments in securities
(cost: $145,662,459) (d)................................................ $205,194,660
--------------
--------------
</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) The portfolio held 3.1% of net assets in foreign securities at December 31,
1996.
(d) At December 31, 1996 the cost of securities for federal income tax purposes
was $146,108,947. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation............. $61,425,305
Gross unrealized depreciation............. (2,339,592)
-----------
Net unrealized appreciation............... $59,085,713
-----------
-----------
47
<PAGE>
CAPITAL APPRECIATION PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1996
(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 (1.8%)
Machinery (1.8%)
124,300 U.S.A. Waste Services, Incorporated (b).......................... $ 3,962,063
--------------
CONSUMER GOODS AND SERVICES (40.8%)
Consumer Goods (19.3%)
99,200 Amgen, Inc. (b).................................................. 5,394,000
128,400 Genzyme Corporation (b).......................................... 2,792,700
103,600 Idexx Laboratories, Inc. (b)..................................... 3,729,600
91,500 Merck & Co., Inc................................................. 7,251,375
111,900 Omnicare, Incorporated........................................... 3,594,787
87,600 Oxford Health Plan, Incorporated (b)............................. 5,130,075
76,000 Pfizer, Inc...................................................... 6,298,500
58,600 Schering-Plough Corporation...................................... 3,794,350
77,550 St Jude Medical, Inc. (b)........................................ 3,305,569
--------------
41,290,956
--------------
Consumer Services (3.8%)
93,300 Carnival Corporation............................................. 3,078,900
144,500 Sterling Commerce, Inc. (b)...................................... 5,093,625
--------------
8,172,525
--------------
Food (1.7%)
140,000 Outback Steakhouse, Incorporated (b)............................. 3,745,000
--------------
Retail (13.7%)
250,731 Dollar General Corporation....................................... 8,023,392
154,333 Home Depot, Inc.................................................. 7,735,942
173,300 Intimate Brands, Inc............................................. 2,946,100
125,000 Kohl's, Inc. (b)................................................. 4,906,250
59,700 Nike, Inc (Class B).............................................. 3,567,075
101,700 Petsmart, Inc. (b)............................................... 2,224,687
--------------
29,403,446
--------------
Consumer Cyclicals (2.3%)
175,400 Autozone, Inc. (b)............................................... 4,823,500
--------------
CREDIT SENSITIVE (13.8%)
Building (2.7%)
162,400 Lowe's Companies, Inc............................................ 5,765,200
--------------
Finance (9.5%)
157,500 Federal National Mortgage Association............................ 5,866,875
140,200 First Data Corporation........................................... 5,117,300
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
CREDIT SENSITIVE--CONTINUED
110,000 MBNA Corporation................................................. $ 4,565,000
63,000 MGIC Investment Corporation...................................... 4,788,000
--------------
20,337,175
--------------
Utilities (1.6%)
135,600 Airtouch Communications (b)...................................... 3,423,900
--------------
INTERMEDIATE GOODS AND SERVICES (1.8%)
Materials (1.8%)
216,400 Staples, Incorporated (b)........................................ 3,908,725
--------------
TECHNOLOGY (37.2%)
111,300 Ceridian Corporation (b)......................................... 4,507,650
154,900 Cisco Systems, Inc. (b).......................................... 9,855,513
152,000 Computer Associates International................................ 7,562,000
77,100 Fore Systems, Inc. (b)........................................... 2,534,662
173,900 Glenayre Technologies, Incorporated (b).......................... 3,749,719
60,700 Intel............................................................ 7,947,906
184,900 LCI International, Incorporated (b).............................. 3,975,350
185,000 MCI Communications............................................... 6,047,188
83,900 Microsoft Corporation (b)........................................ 6,932,237
175,850 Oracle Corporation (b)........................................... 7,341,738
341,000 Paging Network, Inc. (b)......................................... 5,200,250
125,300 Parametric Technology Corporation (b)............................ 6,437,287
85,200 Synopsys, Incorporated (b)....................................... 3,940,500
160,100 360 Communications Company (b)................................... 3,702,312
--------------
79,734,312
--------------
Total common stocks
(cost: $160,694,121).................................................... 204,566,802
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ---------
<C> <S> <C>
SHORT-TERM SECURITIES (4.5%)
$3,534,285 Temporary Investment Fund, Inc.-- TempFund Portfolio, current
rate 5.458% ................................................... 3,534,285
1,585,000 U.S. Treasury Bill 5.11% 01/16/97 ............................... 1,581,478
4,585,000 AT&T Corporation 5.33% 01/24/97 . 4,568,647
--------------
Total short-term securities
(cost: $9,684,807)...................................................... 9,684,410
--------------
Total investments in securities
(cost: $170,378,928) (c)................................................ $214,251,212
--------------
--------------
</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) At December 31, 1996 the cost of securities for federal income tax purposes
was $170,325,864. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation..................... $50,854,210
Gross unrealized depreciation..................... (3,928,862)
-----------
Net unrealized appreciation....................... $46,925,348
-----------
-----------
48
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1996
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
COMMON STOCKS (85.1%)
AUSTRALIA (4.5%)
Banking (1.1%)
99,296 National Australia Bank...... $ 1,167,221
190,087 Westpac Banking.............. 1,080,999
Building Materials and Components
(1.8%)
1,315,401 Pioneer International........ 3,917,863
Transportation (1.6%)
103,900 Brambles Industries.......... 2,025,941
85,000 Qantas Airways Limited ADR
144A (d)................... 1,417,741
--------------
9,609,765
--------------
AUSTRIA (1.8%)
Electrical and Electronics (1.2%)
12,980 Bohler-Uddeholm 144A (d)..... 928,038
10,850 Va Technologie 144A (d)...... 1,701,140
Utilities--Gas and Electric (.6%)
8,400 Evn Energie-Versorung........ 1,263,154
--------------
3,892,332
--------------
BELGIUM (1.4%)
Chemicals (1.4%)
2,650 Solvay....................... 1,620,559
20,000 Union Miniere (b)............ 1,353,712
--------------
2,974,271
--------------
BRAZIL (1.6%)
Telecommunications (1.6%)
43,600 Telecomunicacoes Brasileiras
ADR........................ 3,335,400
--------------
CANADA (2.8%)
Banking (1.9%)
60,500 Canadian Imperial Bank of
Commerce................... 2,668,235
145,000 National Bank of Montreal.... 1,465,178
Insurance (.8%)
130,000 London Insurance Group....... 1,726,184
Mining and Metals--Container (.1%)
39,000 Inmet (b).................... 189,216
--------------
6,048,813
--------------
CHILE (1.0%)
Financial Services (.3%)
32,000 Chile Fund................... 668,000
Utilities--Gas and Electric (.7%)
14,000 Telefonos De Chile ADR....... 1,415,750
--------------
2,083,750
--------------
CHINA (.2%)
Chemicals (.2%)
1,569,800 Yizheng Chemical............. 381,542
--------------
CZECH REPUBLIC (2.3%)
Banking (.6%)
48,000 Komercni Banka 144A (d)...... 1,330,233
Energy Services (.8%)
44,810 Ceske Energeticke (b)........ 1,611,171
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
CZECH REPUBLIC--CONTINUED
Telecommunications (.9%)
15,500 SPT Telecom (b).............. $ 1,927,537
--------------
4,868,941
--------------
FINLAND (3.1%)
Banking (1.1%)
740,000 Merita Ltd A (b)............. 2,295,938
Telecommunications (.8%)
29,700 Nokia........................ 1,719,233
Wholesale and International Trade
(1.2%)
85,000 Amer Group Ltd............... 1,752,003
107,500 Metsa-Serla.................. 804,674
--------------
6,571,848
--------------
FRANCE (8.1%)
Banking (1.1%)
61,300 Banque Nationale De Paris ADR
144A (d)................... 2,367,694
Electrical and Electronics (.7%)
19,365 Alcatel Alsthom.............. 1,552,556
Energy Sources (1.2%)
27,862 Societe National Elf
Aquitaine.................. 2,531,235
Health and Personal Care (2.2%)
135,325 Rhone-Poulenc................ 4,604,771
Insurance (.6%)
21,027 Axa.......................... 1,334,730
Mining and Metal (.6%)
2,000 Pechiney Certificate of
Investment................. 83,289
7,000 Pechiney..................... 292,725
40,894 Pechiney ADR................. 817,880
Multi-Industry (.2%)
4,837 Marine Wendel................ 442,879
Transportation (1.5%)
153,298 Regie Des Usines Renault..... 3,287,861
--------------
17,315,620
--------------
GERMANY (2.7%)
Banking (1.8%)
82,050 Deutsche Bank................ 3,822,695
Chemicals (.9%)
49,400 Bayer........................ 2,009,838
--------------
5,832,533
--------------
HONG KONG (7.1%)
Banking (1.3%)
125,714 Hong Kong and Shanghai
Banking.................... 2,689,810
Electrical and Electronics (.1%)
94,600 Consolidated Electric Power
of Asia.................... 221,977
Food and Household Products (.4%)
3,201,000 Cafe de Coral................ 858,704
Multi-Industry (2.3%)
1,072,800 C. P. Pokphand............... 419,550
221,000 Hutchison Whampoa Ltd........ 1,735,715
434,539 Jardine Matheson Holdings.... 2,867,957
Transportation (2.0%)
190,000 Swire Pacific Class A........ 1,811,572
578,300 Swire Pacific Class B........ 874,740
</TABLE>
See accompanying notes to investments in securities.
49
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
HONG KONG--CONTINUED
448,568 Jardine Strategic Holdings... $ 1,623,816
Utilities (1.0%)
625,000 Hong Kong Electric
Holdings................... 2,076,601
--------------
15,180,442
--------------
INDIA (.3%)
Financial Services (.3%)
469,435 India Fund (b)............... 690,876
--------------
INDONESIA (.8%)
Financial Services (.2%)
315,000 JF Indonesia Fund (b)........ 366,516
Forest Products and Paper (.6%)
737,000 P.T. Japfa Comfeed........... 467,936
940,392 P.T. Pabrik Kertas Tjiwi
Kimia...................... 935,416
--------------
1,769,868
--------------
ITALY (2.9%)
Telecommunication (2.9%)
282,000 Fiat......................... 847,762
278,000 Sirti........................ 1,682,078
1,105,000 Stet di Risp................. 3,724,515
--------------
6,254,355
--------------
JAPAN (.1%)
Utilities--Gas and Electric (.1%)
13,000 Kyudenko..................... 134,402
--------------
KOREA (.3%)
Financial Services (.3%)
19 Korea International Trust
(b)........................ 593,750
--------------
MEXICO (.4%)
Chemicals (.2%)
252,000 Vitro........................ 457,773
Mining and Metals (.2%)
118,000 Grupo Mexico (b)............. 377,743
--------------
835,516
--------------
NETHERLANDS (4.4%)
Broadcasting, Advertising and Publishing (1.5%)
84,687 International Nederlanden
Group...................... 3,045,279
Building Materials and Components
(.3%)
16,520 European Vinyls.............. 523,372
Electrical and Electronics (.6%)
33,500 Philips Electronics.......... 1,355,697
Insurance (1.4%)
48,104 Aegon........................ 3,061,882
Merchandising (.6%)
18,591 Koninklijke Bijenkorf
Beheer..................... 1,338,111
--------------
9,324,341
--------------
NEW ZEALAND (2.3%)
Forest Products and Paper (1.2%)
1,148,000 Carter Holt Harvey........... 2,603,642
Wholesale and International Trade
(1.1%)
2,431,185 Brierley Investments......... 2,250,213
--------------
4,853,855
--------------
NORWAY (2.8%)
Energy Sources (.8%)
98,000 Saga Petroleum............... 1,634,515
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
NORWAY--CONTINUED
Health and Personal Care (1.4%)
77,000 Hafslund Nycomed............. $ 566,764
53,800 Nycomed Class B (b).......... 825,699
101,000 Nycomed Class A (b).......... 1,542,195
Mining and Metals (.6%)
78,000 Elkem........................ 1,288,725
--------------
5,857,898
--------------
PHILIPPINES (.6%)
Telecommunications (.6%)
27,000 Philippine Long Distance
Telephone Company ADR...... 1,377,000
--------------
PORTUGAL (.7%)
Banking (.5%)
85,560 Banco Portugues de
Investimento............... 1,063,644
Financial Services (.2%)
3,600 Capital Portugal Fund (b).... 415,072
--------------
1,478,716
--------------
PERU (.4%)
Telecommunications (.4%)
43,800 CPT Telefonica Del Peru
ADR........................ 826,725
--------------
SINGAPORE (.3%)
Transportation (.3%)
78,000 Singapore International
Airline.................... 708,169
--------------
SOUTH AFRICA (.8%)
Forest Products and Paper (.5%)
120,000 Sappi........................ 1,077,500
Mining and Metals (.3%)
54,200 Rustenburg Platinum
Holdings................... 741,593
--------------
1,819,093
--------------
SPAIN (8.7%)
Banking (3.5%)
108,000 Argentaria Bancaria ADR...... 2,430,000
11,450 Banco de Andalucia........... 1,672,496
61,500 Banco Bilbao Vizcaya......... 3,314,356
Energy Sources (1.0%)
57,000 Repsol....................... 2,182,279
Telecommunications (1.6%)
150,000 Telefonica de Espana......... 3,476,839
Utilities--Gas and Electric (2.6%)
250,000 Iberdrola.................... 3,536,420
27,500 Empresa Nacional de
Electricidad............... 1,953,488
--------------
18,565,878
--------------
SWEDEN (7.9%)
Banking (.7%)
58,500 Stadshypotek 144A (d)........ 1,602,147
Broadcasting, Advertising and
Publishing (.2%)
15,000 Marieberg Tidnings........... 366,870
Business and Public Service (1.3%)
9,550 Nackebro Fastighets (b)...... 163,642
114,500 Esselte...................... 2,599,214
Food and Household Products (.2%)
97,500 Swedish Match (b)............ 342,705
Forest Products and Paper (.8%)
122,000 Stora Kopparbergs............ 1,661,681
Health and Personal Care (2.3%)
46,500 Astra........................ 2,240,545
95,500 Svenska Handelsbanken........ 2,741,349
Multi Industry (.6%)
20,900 Electrolux................... 1,212,122
</TABLE>
See accompanying notes to investments in securities.
50
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
SWEDEN--CONTINUED
Transportation (1.8%)
178,500 Volvo........................ $ 3,934,410
--------------
16,864,685
--------------
SWITZERLAND (1.8%)
Electrical and Electronics (1.0%)
1,730 BBC Brown Boveri............. 2,145,234
Health and Personal Care (.8%)
870 Ares-Serono.................. 827,417
370 Societe Generale............. 906,592
--------------
3,879,243
--------------
THAILAND (.6%)
Financial Services (.6%)
82,367 Thai Fund.................... 1,359,056
--------------
TURKEY (.3%)
Financial Services (.3%)
44,000 Turkish Growth Fund (b)...... 616,220
--------------
UNITED KINGDOM (11.5%)
Banking (1.0%)
118,943 Barclays Bank................ 2,036,490
Building Materials and Components
(1.1%)
514,090 BICC PLC..................... 2,436,942
Chemicals (.2%)
228,400 Harrisons & Crossfield....... 521,799
Electrical and Electronics (.3%)
82,000 Waste Management
International ADR (b)...... 645,750
Energy Services (3.9%)
821,100 British Gas.................. 3,154,559
260,000 British Telecommunications
PLC........................ 1,757,505
168,500 Hyder........................ 2,143,913
112,000 Thames Water Group........... 1,173,952
Food and Household Products (2.2%)
2,816,113 Albert Fisher Group.......... 2,024,070
761,473 Hillsdown Holdings........... 2,606,218
Merchandising (.5%)
191,600 Kwik Save Group.............. 1,052,511
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- --------------
<C> <S> <C>
UNITED KINGDOM--CONTINUED
Transportation (1.5%)
567,700 BTR PLC...................... $ 2,768,790
106,890 BTR Nylex Ltd................ 490,710
Utilities--Gas and Electric (.8%)
208,775 National Power............... 1,747,083
--------------
24,560,292
--------------
VENEZUELA (.6%)
Energy Services (.6%)
1,097,192 Electricidad Caracas......... 1,285,515
--------------
Total common stocks
(cost $145,608,086)................. 181,750,710
--------------
PREFERRED STOCKS AND OTHER (2.2%)
ARGENTINA (.8%)
Multi-industry (.8%)
30,665 Compania de Inversiones en
Telecommunications PRIDE--
7.0% (c)................... 1,709,574
--------------
GERMANY (.4%)
Energy Services (.4%)
2,600 Veba Warrants (expiring
4/6/98) (b)................ 866,957
--------------
MEXICO (.9%)
Financial Services (.9%)
29,000 Nacional Financiera ADR PRIDE
144A Issue--11.25%
(c)(d)..................... 986,000
24,610 Nacional Financiera ADR
PRIDE-- 11.25% (c)......... 836,740
--------------
1,822,740
--------------
UNITED KINGDOM (.1%)
Energy Services (.1%)
137,700 Hyder preferred stock........ 242,126
--------------
Total preferred stocks and other
(cost $3,716,118 ).............. 4,641,397
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (2.1%)
HONG KONG (.7%)
Finance (.7%)
$1,680,000 PIV Investment Finance Convertible.......................... 4.50% 12/01/00 1,486,800
------------
SWITZERLAND (.9%)
Finance (.9%)
1,235,000 CS Holdings Finance Convertible Bonds....................... 4.875% 11/19/02 1,952,844
------------
UNITED STATES (.5%)
U.S. Government (.5%)
1,107,000 U.S. Treasury Note.......................................... 5.125% 04/30/98 1,095,586
------------
Total long-term debt securities (cost $4,159,253) ............................. 4,535,230
------------
SHORT-TERM SECURITIES (10.0%)
3,551,000 U.S. Treasury Bill.......................................... 5.160% 01/09/97 3,546,999
7,113,000 U.S. Treasury Bill.......................................... 5.025% 03/06/97 7,049,457
7,623,000 U.S. Treasury Bill.......................................... 4.950% 04/10/97 7,519,861
3,312,000 Norwest Advantage Cash Investment Fund, current rate 4.9935%................... 3,312,000
------------
Total short-term securities (cost $21,428,317)................................. 21,428,317
------------
Total investments in securities (cost $174,911,774) (e)........................ $212,355,654
------------
------------
</TABLE>
See accompanying notes to investments in securities.
51
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
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) 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, 1996 which 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 824,910
Va Technologie 144A......................................... Various 1,026,767
Komercni Banka 144A......................................... Various 1,270,428
Banque Nationale De Paris ADR 144A.......................... Various 2,720,363
Nacional Financiera ADR PRIDE 144A.......................... 2/10/95 975,502
Stadshypotek 144A........................................... Various 848,445
----------
$9,017,343
----------
----------
</TABLE>
(e) At December 31, 1996 the cost of securities for federal income tax purposes
was $178,989,103. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation..................... $41,919,633
Gross unrealized depreciation..................... (8,553,082)
-----------
Net unrealized appreciation....................... $33,366,551
-----------
-----------
52
<PAGE>
SMALL COMPANY PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1996
(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 (13.4%)
Machinery (13.4%)
54,300 AES China Generating Co Ltd (b)............................. $ 692,325
66,450 Blount International, Incorporated.......................... 2,550,019
88,800 Kaydon Corporation.......................................... 4,184,700
80,000 LCC International, Incorporated (b)......................... 1,480,000
30,400 Millipore Corporation....................................... 1,257,800
93,300 MSC Industrial Direct Co (b)................................ 3,452,100
60,825 Shaw Group, Incorporated (b)................................ 1,421,784
125,842 United Waste Systems, Inc (b)............................... 4,325,819
------------
19,364,547
------------
CONSUMER GOODS AND SERVICES (35.8%)
Consumer Goods (5.5%)
68,200 Idexx Laboratories Inc (b).................................. 2,455,200
15,900 Medpartners (b)............................................. 333,900
51,934 Occusystems, Incorporated (b)............................... 1,402,218
59,833 Sunrise Assisted Living, Incorported (b).................... 1,667,845
56,700 Total Renal Care Holdings, Incorporated (b)................. 2,055,375
------------
7,914,538
------------
Consumer Services (14.5%)
32,700 Boston Chicken, Incorporated (b)............................ 1,173,112
60,600 Corrections Corporation of America (b)...................... 1,855,875
58,188 CUC International, Inc (b).................................. 1,381,965
133,968 Extended Stay America (b)................................... 2,696,106
94,900 Gartner Group Incorporated (b).............................. 3,695,169
71,011 GTECH Holdings Corporation (b).............................. 2,272,352
61,500 Lone Star Steakhouse & Saloon, Inc (b)...................... 1,645,125
7,500 NCO Group, Incorporated (b)................................. 126,563
28,926 Rainforest Cafe, Incorporated (b)........................... 679,761
73,099 Red Roof Inns, Incorporated (b)............................. 1,133,034
59,500 Sola International, Inc (b)................................. 2,261,000
57,099 Sun International Hotels Ltd (b)............................ 2,084,113
------------
21,004,175
------------
Retail (11.2%)
124,893 Advanced Lighting Technologies, Incorporated (b)............ 3,028,655
43,400 Amerisource Health Corporation (b).......................... 2,094,050
84,620 Borders Group Incorporated (b).............................. 3,035,743
49,800 Eastbay Incorporated (b).................................... 1,195,200
46,800 Global Directmail Corporation (b)........................... 2,041,650
25,100 Kohl's, Inc (b)............................................. 985,175
41,100 National Data Corporation................................... 1,787,850
69,800 West Marine, Incorporated (b)............................... 1,971,850
------------
16,140,173
------------
Consumer Cyclicals (4.6%)
54,300 Copart, Incorporated (b).................................... 712,687
102,300 Stant Corporation........................................... 1,611,225
89,400 Tommy Hilfiger Corporation (b).............................. 4,291,200
------------
6,615,112
------------
CREDIT SENSITIVE (8.8%)
Finance (6.4%)
78,000 Amerin (b).................................................. 2,008,500
<CAPTION>
MARKET
SHARES VALUE(A)
- ------- ------------
<C> <S> <C>
CREDIT SENSITIVE--CONTINUED
27,900 MGIC Investment Corporation................................. $ 2,120,400
38,500 Partnerre Ltd (c)........................................... 1,309,000
87,000 T. Rowe Price Associates.................................... 3,784,500
------------
9,222,400
------------
Real Estate (1.4%)
81,200 Fairfield Communities, Incorporated (b)..................... 2,009,700
------------
Utilities (1.0%)
53,600 Panamsat Corporation (b).................................... 1,500,800
------------
INTERMEDIATE GOODS AND SERVICES (8.2%)
Energy (2.3%)
72,000 J Ray McDermott Holdings, Incorporated (b).................. 1,584,000
6,200 Newpark Resources, Incorporated (b)......................... 230,950
37,500 Petroleum Geo-Services ADR (b)(c)........................... 1,462,500
------------
3,277,450
------------
Materials (3.1%)
46,789 Cambrex Corporation......................................... 1,532,340
80,051 McWhorter Technologies, Incorporated (b).................... 1,831,167
21,000 Valspar Corporation......................................... 1,189,125
------------
4,552,632
------------
Transportation (2.8%)
88,900 Eagle USA Airfreight, Inc (b)............................... 2,333,625
72,500 Landstar System, Inc (b).................................... 1,685,625
------------
4,019,250
------------
TECHNOLOGY (20.7%)
111,700 Acxiom Corporation (b)...................................... 2,680,800
40,600 Adtran, Incorporated (b).................................... 1,684,900
69,874 Ansys, Incorporated (b)..................................... 943,299
77,400 Bisys Group, Inc (b)........................................ 2,868,638
24,400 C-Cube Microsystems, Incorporated (b)....................... 901,275
20,400 Cascade Communications, Inc (b)............................. 1,124,550
56,300 Check Point Software Technologies Ltd (b)(c)................ 1,224,525
69,600 CKS Group Incorporated (b).................................. 1,940,100
61,900 Control Data Systems (b).................................... 1,361,800
67,802 Danka Business Systems (b)(c)............................... 2,398,496
29,700 Dassault Systems ADR (b)(c)................................. 1,373,625
14,932 Datastream Systems, Incorporated (b)........................ 268,776
93,696 Digital Systems International, Incorporated (b)............. 1,499,136
46,600 Dupont Photomasks, Incorporated (b)......................... 2,114,475
14,480 Fore Systems, Inc (b)....................................... 476,030
23,300 HNC Software, Incorporated (b).............................. 731,037
50,300 Integrated Systems (b)...................................... 1,307,800
38,575 Mastech Corporation (b)..................................... 732,925
54,800 Objective Systems Integrator (b)............................ 1,308,350
57,500 Pure Atria Corporation (b).................................. 1,423,125
21,100 Sapient Corporation (b)..................................... 888,837
18,400 Telephone and Data Systems, Inc............................. 667,000
------------
29,919,499
------------
Total common stocks
(cost: $107,270,371)............................................... 125,540,276
------------
</TABLE>
See accompanying notes to investments in securities.
53
<PAGE>
SMALL COMPANY PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(A)
- --------- --------------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (15.5%)
$6,223,154 Temporary Investment Fund, Inc.--TempFund Portfolio, current rate 5.458%............... $ 6,223,154
60,000 U.S. Treasury Bill............................................... 5.12% 01/16/97 59,867
2,770,000 U.S. Treasury Bill............................................... 4.90% 02/20/97 2,750,222
1,880,000 AT&T Corporation CP.............................................. 5.33% 01/24/97 1,873,295
820,000 Coca Cola Company CP............................................. 5.34% 01/07/97 819,147
1,250,000 Coca Cola Company CP............................................. 5.35% 01/17/97 1,246,842
1,350,000 Consolidated National Gas CP..................................... 5.71% 02/05/97 1,342,778
1,425,000 Kimberly Clark CP................................................ 5.39% 01/27/97 1,419,282
2,650,000 Madison Gas & Electric CP........................................ 5.64% 01/27/97 2,639,367
4,000,000 Pepsico, Inc CP.................................................. 5.64% 01/31/97 3,981,572
--------------
Total short-term securities (cost: $22,355,492)........................................ 22,355,526
--------------
Total investments in securities (cost: $129,625,863) (d)............................... $147,895,802
--------------
--------------
</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) The Portfolio held 5.4% of net assets in foreign securities as of December
31, 1996.
(d) At December 31, 1996 the cost of securities for federal income tax purposes
was $129,648,641. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation..................... $21,683,083
Gross unrealized depreciation..................... (3,435,922)
-----------
Net unrealized appreciation....................... $18,247,161
-----------
-----------
54
<PAGE>
MATURING GOVERNMENT BOND 1998 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1996
(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 (99.1%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (99.1%)
$ 266,000 Federal National Mortgage Association Strip (b)............. 7.065% 05/22/98 $ 245,108
350,000 Federal National Mortgage Association Strip (b)............. 7.050% 05/22/99 302,575
356,000 Federal National Mortgage Association Strip (b)............. 7.110% 11/22/98 317,876
260,000 Federal National Mortgage Association Strip (b)............. 5.720% 03/09/98 242,869
615,000 Federal Home Loan Bank Strip (b)............................ 6.730% 08/25/98 558,001
590,000 Financial Corporation Strip (b)............................. 6.620% 05/30/99 509,783
600,000 Financial Corporation Strip (b)............................. 6.050% 08/08/99 512,568
500,000 Guaranteed Trust Certificates (b)........................... 6.570% 11/15/98 447,670
211,000 Israel Government Trust Certificates (b).................... 7.075% 11/15/98 188,916
900,000 Tennessee Valley Authority Strip (b)........................ 6.720% 10/15/98 810,215
457,470 Tennessee Valley Authority Custodial Strips (b)............. 5.910% 11/15/98 409,687
300,000 U.S. Treasury Strip (b)..................................... 5.560% 08/15/98 273,426
1,245,000 U.S. Treasury Strip (b)..................................... 6.505% 11/15/98 1,117,299
120,000 U.S. Treasury Strip (b)..................................... 6.290% 11/15/98 107,613
----------
Total long-term debt securities (cost: $5,993,213)............................. 6,043,606
----------
SHORT-TERM SECURITIES (7.6%)
291,601 Trust for Federal Securities--Federal Trust Fund, current rate 5.251%.......... 291,601
175,000 Idaho Power Company CP...................................... 5.840% 01/09/97 174,766
----------
Total short-term securities (cost: $466,350)................................... 466,367
----------
Total investments in securities (cost: $6,459,563) (c)......................... $6,509,973
----------
----------
</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, 1996 the cost of securities for federal income tax purposes
was $6,459,563. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation..................... $ 53,588
Gross unrealized depreciation..................... (3,178)
--------
Net unrealized appreciation....................... $ 50,410
--------
--------
55
<PAGE>
MATURING GOVERNMENT BOND 2002 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1996
(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 (98.9%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (98.9 %)
$ 525,000 Federal National Mortgage Association Strip (b).................. 7.600 % 02/01/02 $ 380,441
425,000 Federal National Mortgage Association Strip (b).................. 6.370 % 08/01/03 279,361
500,000 Financial Corporation Strip (b).................................. 7.400 % 06/27/02 353,114
900,000 Financial Corporation Strip (b).................................. 6.365 % 09/07/02 627,624
1,000,000 Guaranteed Trust Certificates (b)................................ 7.300 % 05/15/02 713,839
1,150,000 Tennessee Valley Authority Strips (b)............................ 7.400 % 04/15/03 769,590
1,035,000 U.S. Treasury Strip (b).......................................... 7.100 % 08/15/02 733,183
------------
Total long-term debt securities (cost: $3,751,631)...................................... 3,857,152
------------
SHORT-TERM SECURITIES (5.5%)
40,004 Trust for Federal Securities--Federal Trust Fund, current rate 5.251%................... 40,004
173,000 Idaho Power Company CP........................................... 5.840 % 01/09/97 172,769
------------
Total short-term securities (cost: $212,755)............................................ 212,773
------------
Total investments in securities (cost: $3,964,386) (c).................................. $ 4,069,925
------------
------------
</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, 1996 the cost of securities for federal income tax purposes
was $3,964,386. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation..................... $110,330
Gross unrealized depreciation..................... (4,791)
--------
Net unrealized appreciation....................... $105,539
--------
--------
56
<PAGE>
MATURING GOVERNMENT BOND 2006 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1996
(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 (99.5%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (99.5%)
$ 810,000 Federal National Mortgage Association Strip (b).................. 7.620 % 08/01/05 $ 456,847
921,000 Financial Corporation Strips (b)................................. 7.735 % 09/07/07 446,417
553,000 Guaranteed Trust Certificates (b)................................ 7.440 % 11/15/05 308,800
1,000,000 Israel State Aid Strips (b)...................................... 6.580 % 11/15/06 522,210
1,000,000 Resolution Funding Corporation Strip (b)......................... 7.460 % 07/15/07 498,409
1,600,000 U.S. Treasury Strip (b).......................................... 6.495 % 11/15/06 846,270
------------
Total long-term debt securities (cost: $2,939,366)...................................... 3,078,953
------------
SHORT-TERM SECURITIES (.5%)
16,084 Trust for Federal Securities--Federal Trust Fund, current rate 5.251%................... 16,084
------------
Total short-term securities (cost: $16,084)............................................. 16,084
------------
Total investments in securities (cost: $2,955,450) (c).................................. $ 3,095,037
------------
------------
</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, 1996 the cost of securities for federal income tax purposes
was $2,965,963. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation..................... $134,710
Gross unrealized depreciation..................... (5,636)
--------
Net unrealized appreciation....................... $129,074
--------
--------
57
<PAGE>
MATURING GOVERNMENT BOND 2010 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1996
(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%)
$ 500,000 Federal National Mortgage Association Strip (b)............. 7.700% 02/12/10 $ 201,554
500,000 Financial Corporation Strip (b)............................. 7.770% 06/06/11 183,200
945,000 Financial Corporation Strip (b)............................. 7.920% 08/08/11 341,739
132,000 Guaranteed Trust Certificates (b)........................... 7.660% 05/15/10 53,234
524,000 Turkey Government Trust Certificates (b).................... 6.690% 11/15/10 203,720
1,100,000 Israel State Aid Strips (b)................................. 6.850% 08/15/11 406,021
515,000 State of Israel, Zero Coupon (b)............................ 8.265% 03/15/10 210,269
350,000 Resolution Funding Corporation Strip (b).................... 7.590% 04/15/11 132,702
1,225,000 U.S. Treasury Strip (b)..................................... 6.560% 02/15/11 478,484
1,475,000 U.S. Treasury Strip (b)..................................... 6.560% 08/15/11 555,690
----------
Total long-term debt securities (cost: $2,661,881)............................. 2,766,613
----------
SHORT-TERM SECURITIES (1.8%)
51,258 Trust for Federal Securities--Federal Trust Fund, current rate 5.251%.......... 51,258
----------
Total short-term securities (cost: $51,258).................................... 51,258
----------
Total investments in securities (cost: $2,713,139) (c)......................... $2,817,871
----------
----------
</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, 1996 the cost of securities for federal income tax purposes
was $2,715,731. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation..................... $124,805
Gross unrealized depreciation..................... (22,665)
--------
Net unrealized appreciation....................... $102,140
--------
--------
58
<PAGE>
VALUE STOCK PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1996
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- -------------
<C> <S> <C>
COMMON STOCKS (89.4%)
CAPITAL GOODS (6.2%)
Machinery (6.2%)
84,501 ITT Industries................................................... $ 2,070,274
49,600 Parker Hannifin Corporation...................................... 1,922,000
83,999 United Dominion Industries....................................... 1,973,977
-------------
5,966,251
-------------
CONSUMER GOODS AND SERVICES (28.4%)
Consumer Services (4.9%)
44,300 Knight-Ridder, Inc............................................... 1,694,475
71,100 Polaroid Corporation............................................. 3,092,850
-------------
4,787,325
-------------
Food (2.0%)
41,700 Kroger Company (b)............................................... 1,939,050
-------------
Retail (12.0%)
119,899 American Stores Company.......................................... 4,900,872
75,300 CVS Corporation.................................................. 3,115,537
105,900 Federated Department Stores (b).................................. 3,613,838
-------------
11,630,247
-------------
Consumer Cyclicals (9.5%)
71,100 Corning, Inc..................................................... 3,288,375
60,000 Ford Motor....................................................... 1,912,500
107,000 Fruit of the Loom (b)............................................ 4,052,625
-------------
9,253,500
-------------
CREDIT SENSITIVE (13.2%)
Finance (13.2%)
35,900 American Express Company......................................... 2,028,350
146,559 Everest Reinsurance Holdings, Inc................................ 4,213,571
195,200 TIG Holdings, Inc................................................ 6,612,400
-------------
12,854,321
-------------
INTERMEDIATE GOODS AND SERVICES (37.3%)
Energy (18.9%)
50,800 Amerada Hess Corporation......................................... 2,940,050
25,400 Amoco Corporation................................................ 2,044,700
76,276 El Paso Energy Corporation....................................... 3,851,938
32,600 Ultramar Diamond Shamrock Corporation............................ 1,030,975
71,000 Unocal Corporation............................................... 2,884,375
81,500 USX--Marathon Group.............................................. 1,945,812
39,100 Valero Energy Corporation........................................ 1,119,238
102,600 YPF Sociedad Anonima (c)......................................... 2,590,650
-------------
18,407,738
-------------
<CAPTION>
MARKET
SHARES VALUE(A)
- --------- -------------
<C> <S> <C>
INTERMEDIATE GOODS AND SERVICES--CONTINUED
Materials (15.0%)
30,720 Aluminum Company of America...................................... $ 1,958,400
44,500 Century Aluminum Company......................................... 767,625
14,700 Citation Corporation (b)......................................... 150,675
14,700 Cytec Industries, Inc (b)........................................ 597,187
17,000 E.I. Du Pont De Nemours and Company.............................. 1,604,375
37,400 FMC Corporation (b).............................................. 2,622,675
110,090 Fort Howard Corporation (b)...................................... 3,048,117
16,200 W R Grace & Co................................................... 838,350
53,400 Reynolds Metals Company.......................................... 3,010,425
-------------
14,597,829
-------------
Transportation (3.4%)
21,900 Burlington Northern Santa Fe..................................... 1,891,612
41,300 Teekay Shipping Corporation (c).................................. 1,352,575
-------------
3,244,187
-------------
TECHNOLOGY (4.3%)
72,600 Advanced Micro Devices, Inc (b).................................. 1,869,450
15,200 International Business Machines Corporation...................... 2,295,200
-------------
4,164,650
-------------
Total common stocks
(cost: $74,960,730)..................................................... 86,845,098
-------------
<CAPTION>
PRINCIPAL
- ---------
<C> <S> <C>
SHORT-TERM SECURITIES (10.2%)
$4,204,423 Trust for Federal Securities--Federal Trust Fund, current rate
5.251%......................................................... 4,204,423
1,300,000 U.S. Treasury Bill 5.11% 01/16/97................................ 1,297,111
380,000 U.S. Treasury Bill 4.90% 03/20/97................................ 376,010
1,000,000 Coca Cola Company CP 5.35% 01/10/97.............................. 998,514
585,000 Consolidated National Gas CP 5.71% 02/05/97...................... 581,870
560,000 Walt Disney CP 5.37% 01/06/97.................................... 559,501
1,000,000 GTE California CP 5.61% 01/29/97................................. 995,690
945,000 Pepsico, Inc CP 5.63% 01/24/97................................... 941,630
-------------
Total short-term securities
(cost: $9,954,404)...................................................... 9,954,749
-------------
Total investments in securities
(cost: $84,915,134) (d)................................................. $96,799,847
-------------
-------------
</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) The Portfolio held 4.1% of net assets in foreign securities as of December
31, 1996.
(d) At December 31, 1996 the cost of securities for federal income tax purposes
was $84,932,301. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
Gross unrealized appreciation..................... $12,018,416
Gross unrealized depreciation..................... (150,870)
-----------
Net unrealized appreciation....................... $11,867,546
-----------
-----------
59
<PAGE>
MIMLIC SERIES FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<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: $236,739,458;
$123,601,183; $50,214,168;
$364,640,998; $75,779,814;
$145,662,459; $170,378,928;
$174,911,774; $129,625,863;
$6,459,563; $3,964,386;
$2,955,450; $2,713,139 and
$84,915,134, respectively)...... $ 244,083,246 $124,107,240 $ 50,214,168 $410,588,738
Cash in bank on demand deposit..... 844 35,529 56,554 113,611
Receivable for Fund shares sold.... 242,171 328,043 1,234,149 382,851
Receivable for investment
securities sold................. 6,259,653 3,660 -- 2,272,550
Dividends and accrued interest
receivable...................... 557,724 1,501,492 7,165 2,151,642
Unrealized appreciation on forward
foreign currency contracts held,
at value (note 4)............... -- -- -- --
Receivable for refundable foreign
income taxes withheld........... -- -- -- --
------------- ------------ ------------ ------------
Total assets................. 251,143,638 125,975,964 51,512,036 415,509,392
------------- ------------ ------------ ------------
LIABILITIES
Bank overdraft..................... -- -- -- --
Payable for Fund shares
repurchased..................... 105,796 90,386 51,387 177,074
Dividends payable to
shareholders.................... -- -- 29 --
Payable for investment securities
purchased....................... 2,573,287 -- -- 623,174
Unrealized depreciation on forward
foreign currency contracts held,
at value (note 4)............... -- -- -- --
------------- ------------ ------------ ------------
Total liabilities............ 2,679,083 90,386 51,416 800,248
------------- ------------ ------------ ------------
Net assets applicable to
outstanding capital stock....... $ 248,464,555 $125,885,578 $ 51,460,620 $414,709,144
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
Represented by:
Capital stock--authorized
10,000,000,000 shares of $.01
par value; outstanding;
106,032,802; 98,096,538;
51,460,620; 222,375,414;
64,041,646; 84,856,791;
86,778,758; 133,736,756;
94,175,011; 5,647,876;
3,718,157; 2,829,041;
2,401,028 and 61,100,266
shares, respectively.......... 1,060,328 980,965 $ 514,606 $ 2,223,754
Additional paid-in capital..... 177,025,013 117,509,182 50,946,014 330,543,973
Undistributed net investment
income........................ 2,348,606 7,069,687 -- 11,750,366
Accumulated net realized gains
(losses) from investments and
foreign currency
transactions.................. 60,686,820 (180,313) -- 24,243,311
Unrealized appreciation of
investments and translation of
assets and liabilities in
foreign currencies............ 7,343,788 506,057 -- 45,947,740
------------- ------------ ------------ ------------
Total--representing net
assets applicable to
outstanding capital stock... $ 248,464,555 $125,885,578 $ 51,460,620 $414,709,144
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
Net asset value per share of
outstanding capital stock....... $ 2.343 $ 1.283 $ 1.000 $ 1.865
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
60
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE CAPITAL INTERNATIONAL SMALL
SECURITIES INDEX 500 APPRECIATION STOCK COMPANY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at
market value--see accompanying
schedules for detailed listing
(identified cost: $236,739,458;
$123,601,183; $50,214,168;
$364,640,998; $75,779,814;
$145,662,459; $170,378,928;
$174,911,774; $129,625,863;
$6,459,563; $3,964,386;
$2,955,450; $2,713,139 and
$84,915,134, respectively)........ $ 76,938,704 $205,194,660 $214,251,212 $212,355,654 $147,895,802
Cash in bank on demand deposit..... -- 1,282 454,667 62,152 --
Receivable for Fund shares sold.... 203,075 380,152 212,284 334,308 353,727
Receivable for investment
securities sold................... -- -- -- 454,773 1,814,616
Dividends and accrued interest
receivable........................ 604,016 342,632 86,605 506,639 68,365
Unrealized appreciation on forward
foreign currency contracts held,
at value (note 4)................. -- -- -- 377 --
Receivable for refundable foreign
income taxes withheld............. -- -- -- 209,673 --
------------ ----------- ------------ ------------ -----------
Total assets................. 77,745,795 205,918,726 215,004,768 213,923,576 150,132,510
------------ ----------- ------------ ------------ -----------
LIABILITIES
Bank overdraft..................... 8,692 -- -- -- 10,090
Payable for Fund shares
repurchased....................... 103,409 105,943 96,482 76,362 57,103
Dividends payable to
shareholders...................... -- -- -- -- --
Payable for investment securities
purchased......................... 1,641,719 1,417,365 440,000 237,159 5,521,563
Unrealized depreciation on forward
foreign currency contracts held,
at value (note 4)................. -- -- -- 2,454 --
------------ ----------- ------------ ------------ -----------
Total liabilities............ 1,753,820 1,523,308 536,482 315,975 5,588,756
------------ ----------- ------------ ------------ -----------
Net assets applicable to
outstanding capital stock......... $ 75,991,975 $204,395,418 $214,468,286 $213,607,601 $144,543,754
------------ ----------- ------------ ------------ -----------
------------ ----------- ------------ ------------ -----------
Represented by:
Capital stock--authorized
10,000,000,000 shares of $.01
par value; outstanding;
106,032,802; 98,096,538;
51,460,620; 222,375,414;
64,041,646; 84,856,791;
86,778,758; 133,736,756;
94,175,011; 5,647,876;
3,718,157; 2,829,041;
2,401,028 and 61,100,266
shares, respectively.......... $ 640,416 $ 848,568 $ 867,788 $ 1,337,368 $ 941,750
Additional paid-in capital..... 72,410,020 137,992,431 148,266,581 168,244,579 127,715,011
Undistributed net investment
income........................ 4,934,258 2,857,956 -- 7,116,929 2,423
Accumulated net realized gains
(losses) from investments and
foreign currency
transactions.................. (3,151,609) 3,164,262 21,461,633 (526,828 ) (2,385,369)
Unrealized appreciation of
investments and translation of
assets and liabilities in
foreign currencies............ 1,158,890 59,532,201 43,872,284 37,435,553 18,269,939
------------ ----------- ------------ ------------ -----------
Total--representing net
assets applicable to
outstanding capital stock... $ 75,991,975 $204,395,418 $214,468,286 $213,607,601 $144,543,754
------------ ----------- ------------ ------------ -----------
------------ ----------- ------------ ------------ -----------
Net asset value per share of
outstanding capital stock......... $ 1.187 $ 2.409 $ 2.471 $ 1.597 $ 1.535
------------ ----------- ------------ ------------ -----------
------------ ----------- ------------ ------------ -----------
<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: $236,739,458;
$123,601,183; $50,214,168;
$364,640,998; $75,779,814;
$145,662,459; $170,378,928;
$174,911,774; $129,625,863;
$6,459,563; $3,964,386;
$2,955,450; $2,713,139 and
$84,915,134, respectively)........ $6,509,973 $4,069,925 $3,095,037 $2,817,871 $ 96,799,847
Cash in bank on demand deposit..... 71 -- 405 223 11,548
Receivable for Fund shares sold.... 5 979 1,307 6 303,074
Receivable for investment
securities sold................... -- -- -- -- --
Dividends and accrued interest
receivable........................ 618 244 147 271 106,197
Unrealized appreciation on forward
foreign currency contracts held,
at value (note 4)................. -- -- -- -- --
Receivable for refundable foreign
income taxes withheld............. -- -- -- -- --
---------- ----------- ----------- ----------- ------------
Total assets................. 6,510,667 4,071,148 3,096,896 2,818,371 97,220,666
---------- ----------- ----------- ----------- ------------
LIABILITIES
Bank overdraft..................... -- 170,478 -- -- --
Payable for Fund shares
repurchased....................... 1,293 685 1,760 5,554 33,538
Dividends payable to
shareholders...................... -- -- -- -- --
Payable for investment securities
purchased......................... 410,342 -- -- -- --
Unrealized depreciation on forward
foreign currency contracts held,
at value (note 4)................. -- -- -- -- --
---------- ----------- ----------- ----------- ------------
Total liabilities............ 411,635 171,163 1,760 5,554 33,538
---------- ----------- ----------- ----------- ------------
Net assets applicable to
outstanding capital stock......... $6,099,032 $3,899,985 $3,095,136 $2,812,817 $ 97,187,128
---------- ----------- ----------- ----------- ------------
---------- ----------- ----------- ----------- ------------
Represented by:
Capital stock--authorized
10,000,000,000 shares of $.01
par value; outstanding;
106,032,802; 98,096,538;
51,460,620; 222,375,414;
64,041,646; 84,856,791;
86,778,758; 133,736,756;
94,175,011; 5,647,876;
3,718,157; 2,829,041;
2,401,028 and 61,100,266
shares, respectively.......... $ 56,479 $ 37,182 $ 28,290 $ 24,010 $ 611,003
Additional paid-in capital..... 5,651,866 3,725,019 2,891,508 2,562,837 82,826,404
Undistributed net investment
income........................ 326,014 1,875 1,812 118,592 9,682
Accumulated net realized gains
(losses) from investments and
foreign currency
transactions.................. 14,263 30,370 33,939 2,646 1,855,326
Unrealized appreciation of
investments and translation of
assets and liabilities in
foreign currencies............ 50,410 105,539 139,587 104,732 11,884,713
---------- ----------- ----------- ----------- ------------
Total--representing net
assets applicable to
outstanding capital stock... $6,099,032 $3,899,985 $3,095,136 $2,812,817 $ 97,187,128
---------- ----------- ----------- ----------- ------------
---------- ----------- ----------- ----------- ------------
Net asset value per share of
outstanding capital stock......... $ 1.080 $ 1.049 $ 1.094 $ 1.172 $ 1.591
---------- ----------- ----------- ----------- ------------
---------- ----------- ----------- ----------- ------------
</TABLE>
61
<PAGE>
MIMLIC SERIES FUND, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY ASSET
GROWTH BOND MARKET ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Investment income:
Interest....................... $ 816,336 $7,654,508 $2,389,494 $11,741,850
Dividends (net of foreign
withholding taxes of $753,166
for International Stock
Portfolio).................... 2,859,174 34,158 -- 2,069,782
--------- --------- ----------- ---------
Total investment income.... 3,675,510 7,688,666 2,389,494 13,811,632
--------- --------- ----------- ---------
Expenses (note 5):
Investment advisory fee........ 1,125,803 555,501 220,573 1,899,245
Custodian fees................. 12,097 8,237 5,907 26,036
Administrative service fee..... 25,200 25,200 25,200 25,200
Auditing and accounting
services...................... 20,579 8,779 5,849 38,779
Legal fees..................... 148 148 148 148
Registration fees.............. 143 18 18 18
Printing and shareholder
reports....................... 135,227 16,477 6,659 57,758
Directors' fees................ 3,589 1,805 703 6,125
Insurance...................... 2,741 2,084 1,254 3,856
Other.......................... 1,377 730 -- 4,101
--------- --------- ----------- ---------
Total expenses............. 1,326,904 618,979 266,311 2,061,266
Less fees and expenses waived
or absorbed by Minnesota
Mutual........................ -- -- -- --
--------- --------- ----------- ---------
Total net expenses......... 1,326,904 618,979 266,311 2,061,266
--------- --------- ----------- ---------
Investment income
(loss)--net............... 2,348,606 7,069,687 2,123,183 11,750,366
--------- --------- ----------- ---------
Realized and unrealized gains
(losses) on investments and
foreign currencies:
Net realized gains (losses)
from:
Investments (note 3)....... 60,829,755 (121,439) -- 24,349,692
Foreign currency
transactions.............. -- -- -- --
Net change in unrealized
appreciation or depreciation
on:
Investments................ (27,909,772) (3,067,081) -- 9,054,264
Translation of assets and
liabilities in foreign
currencies................ -- -- -- --
--------- --------- ----------- ---------
Net gains (losses) on
investments..................... 32,919,983 (3,188,520) -- 33,403,956
--------- --------- ----------- ---------
Net increase (decrease) in net
assets resulting from
operations...................... $35,268,589 $3,881,167 $2,123,183 $45,154,322
--------- --------- ----------- ---------
--------- --------- ----------- ---------
</TABLE>
See accompanying notes to financial statements.
62
<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....................... $ 5,349,673 $ 53,118 $ 544,387 $ 1,126,612 $ 1,061,482 $ 336,541 $ 222,503
Dividends (net of foreign
withholding taxes of $753,166
for International Stock
Portfolio).................... -- 3,530,522 897,512 5,122,534 252,623 -- --
----------- ----------- ------------ ------------- ----------- ---------- ----------
Total investment income.... 5,349,673 3,583,640 1,441,899 6,249,146 1,314,105 336,541 222,503
----------- ----------- ------------ ------------- ----------- ---------- ----------
Expenses (note 5):
Investment advisory fee........ 355,705 645,280 1,435,461 1,293,012 937,728 2,632 1,657
Custodian fees................. 10,338 17,688 9,759 333,007 20,814 3,243 3,862
Administrative service fee..... 25,200 25,200 25,200 25,200 25,200 25,200 25,200
Auditing and accounting
services...................... 10,379 11,514 15,849 152,760 6,649 5,379 5,379
Legal fees..................... 148 148 148 614 148 148 148
Registration fees.............. 18 18 143 26 18 18 18
Printing and shareholder
reports....................... 10,917 21,052 126,419 31,928 15,046 794 1,032
Directors' fees................ 1,174 2,515 3,006 2,788 1,963 86 54
Insurance...................... 1,536 2,269 2,595 2,578 2,116 482 390
Other.......................... -- -- 1,983 693 -- 55 46
----------- ----------- ------------ ------------- ----------- ---------- ----------
Total expenses............. 415,415 725,684 1,620,563 1,842,606 1,009,682 38,037 37,786
Less fees and expenses waived
or absorbed by Minnesota
Mutual........................ -- -- -- -- -- (27,510) (31,158)
----------- ----------- ------------ ------------- ----------- ---------- ----------
Total net expenses......... 415,415 725,684 1,620,563 1,842,606 1,009,682 10,527 6,628
----------- ----------- ------------ ------------- ----------- ---------- ----------
Investment income
(loss)--net............... 4,934,258 2,857,956 (178,664) 4,406,540 304,423 326,014 215,875
----------- ----------- ------------ ------------- ----------- ---------- ----------
Realized and unrealized gains
(losses) on investments and
foreign currencies:
Net realized gains (losses)
from:
Investments (note 3)....... 138,890 3,336,804 21,475,571 4,214,805 8,723,984 14,263 33,341
Foreign currency
transactions.............. -- -- -- (68,230) -- -- --
Net change in unrealized
appreciation or depreciation
on:
Investments................ (1,394,163) 25,995,361 8,718,053 23,741,359 (2,113,307) (123,136) (172,492)
Translation of assets and
liabilities in foreign
currencies................ -- -- -- (3,003) -- -- --
----------- ----------- ------------ ------------- ----------- ---------- ----------
Net gains (losses) on
investments....................... (1,255,273) 29,332,165 30,193,624 27,884,931 6,610,677 (108,873) (139,151)
----------- ----------- ------------ ------------- ----------- ---------- ----------
Net increase (decrease) in net
assets resulting from
operations........................ $ 3,678,985 $32,190,121 $30,014,960 $32,291,471 $ 6,915,100 $ 217,141 $ 76,724
----------- ----------- ------------ ------------- ----------- ---------- ----------
----------- ----------- ------------ ------------- ----------- ---------- ----------
<CAPTION>
MATURING MATURING
GOVERNMENT GOVERNMENT
BOND 2006 BOND 2010 VALUE STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- -----------
<S> <C> <C> <C>
Investment income:
Interest....................... $ 182,503 $ 126,001 $ 286,838
Dividends (net of foreign
withholding taxes of $753,166
for International Stock
Portfolio).................... -- -- 980,517
---------- ---------- -----------
Total investment income.... 182,503 126,001 1,267,355
---------- ---------- -----------
Expenses (note 5):
Investment advisory fee........ 6,682 4,631 449,978
Custodian fees................. 3,983 4,445 7,764
Administrative service fee..... 25,200 25,200 25,200
Auditing and accounting
services...................... 5,379 5,379 5,983
Legal fees..................... 148 148 148
Registration fees.............. 18 18 18
Printing and shareholder
reports....................... 405 243 6,159
Directors' fees................ 43 29 888
Insurance...................... 327 324 1,311
Other.......................... 42 34 224
---------- ---------- -----------
Total expenses............. 42,227 40,451 497,673
Less fees and expenses waived
or absorbed by Minnesota
Mutual........................ (31,536) (33,042) --
---------- ---------- -----------
Total net expenses......... 10,691 7,409 497,673
---------- ---------- -----------
Investment income
(loss)--net............... 171,812 118,592 769,682
---------- ---------- -----------
Realized and unrealized gains
(losses) on investments and
foreign currencies:
Net realized gains (losses)
from:
Investments (note 3)....... 36,005 18,011 7,197,176
Foreign currency
transactions.............. -- -- --
Net change in unrealized
appreciation or depreciation
on:
Investments................ (216,858) (144,636) 8,706,912
Translation of assets and
liabilities in foreign
currencies................ -- -- --
---------- ---------- -----------
Net gains (losses) on
investments....................... (180,853) (126,625) 15,904,088
---------- ---------- -----------
Net increase (decrease) in net
assets resulting from
operations........................ $ (9,041) $ (8,033) $16,673,770
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
63
<PAGE>
MIMLIC SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
MONEY MARKET
GROWTH PORTFOLIO BOND PORTFOLIO PORTFOLIO
-------------------------- ------------------------- --------------------------
1996 1995 1996 1995 1996 1995
------------ ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Investment income (loss)--net.... $ 2,348,606 $ 1,885,333 $ 7,069,687 $ 5,666,378 $ 2,123,183 $ 1,340,783
Net realized gains (losses) on
investments..................... 60,829,755 17,645,339 (121,439) 3,734,900 -- --
Net change in unrealized
appreciation or depreciation of
investments..................... (27,909,772) 19,185,038 (3,067,081) 5,968,239 -- --
------------ ------------ ----------- ------------ ------------ ------------
Net increase in net assets
resulting from operations..... 35,268,589 38,715,710 3,881,167 15,369,517 2,123,183 1,340,783
------------ ------------ ----------- ------------ ------------ ------------
Distributions to shareholders from:
Investment income--net........... (1,885,333) (1,650,255) (5,666,378) (2,999,724) (2,123,183) (1,340,783)
Net realized gains............... (17,716,504) (6,215,125) (1,021,457) -- -- --
------------ ------------ ----------- ------------ ------------ ------------
Total distributions............ (19,601,837) (7,865,380) (6,687,835) (2,999,724) (2,123,183) (1,340,783)
------------ ------------ ----------- ------------ ------------ ------------
Capital share transactions (note
6):
Proceeds from sales.............. 46,018,318 32,540,549 38,198,366 24,809,311 77,174,302 36,944,812
Shares issued as a result of
reinvested distributions........ 19,601,837 7,865,380 6,687,835 2,999,724 2,131,453 1,335,757
Payments for redemption of
shares.......................... (34,499,910) (26,947,664) (17,238,784) (13,813,438) (58,011,515) (31,221,058)
------------ ------------ ----------- ------------ ------------ ------------
Increase in net assets from capital
shares transactions............. 31,120,245 13,458,265 27,647,417 13,995,597 21,294,240 7,059,511
------------ ------------ ----------- ------------ ------------ ------------
Total increase in net assets... 46,786,997 44,308,595 24,840,749 26,365,390 21,294,240 7,059,511
Net assets at beginning of year.... 201,677,558 157,368,963 101,044,829 74,679,439 30,166,380 23,106,869
------------ ------------ ----------- ------------ ------------ ------------
Net assets at end of year
(including undistributed net
investment income of $2,348,606
and $1,885,333 for Growth,
$7,069,687 and $5,666,378 for
Bond, $0 and $0 for Money
Market, $11,750,366 and
$11,587,244 for Asset
Allocation, $4,934,258 and
$4,531,053 for Mortgage
Securities, $2,857,956 and
$1,984,153 for Index 500 and $0
and $0 for Capital Appreciation,
respectively.................... $248,464,555 $201,677,558 $125,885,578 $101,044,829 $ 51,460,620 $ 30,166,380
------------ ------------ ----------- ------------ ------------ ------------
------------ ------------ ----------- ------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
64
<PAGE>
<TABLE>
<CAPTION>
ASSET ALLOCATION MORTGAGE SECURITIES
PORTFOLIO PORTFOLIO INDEX 500 PORTFOLIO
------------------------- ------------------------- --------------------------
1996 1995 1996 1995 1996 1995
----------- ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Investment income (loss)--net.... $11,750,366 $ 11,587,244 $ 4,934,258 $ 4,531,053 $ 2,857,956 $ 1,984,153
Net realized gains (losses) on
investments..................... 24,349,692 22,040,129 138,890 1,181,245 3,336,804 989,818
Net change in unrealized
appreciation or depreciation of
investments..................... 9,054,264 34,618,189 (1,394,163) 4,752,049 25,995,361 26,535,228
----------- ------------ ----------- ------------ ------------ ------------
Net increase in net assets
resulting from operations..... 45,154,322 68,245,562 3,678,985 10,464,347 32,190,121 29,509,199
----------- ------------ ----------- ------------ ------------ ------------
Distributions to shareholders from:
Investment income--net........... (11,587,244) (8,662,733) (4,531,053) (4,169,579) (1,984,153) (1,540,293)
Net realized gains............... (21,215,841) (3,165,106) -- -- (1,027,104) (609,060)
----------- ------------ ----------- ------------ ------------ ------------
Total distributions............ (32,803,085) (11,827,839) (4,531,053) (4,169,579) (3,011,257) (2,149,353)
----------- ------------ ----------- ------------ ------------ ------------
Capital share transactions (note
6):
Proceeds from sales.............. 84,153,296 63,178,126 19,427,231 13,052,763 77,547,421 36,939,888
Shares issued as a result of
reinvested distributions........ 32,803,085 11,827,839 4,531,053 4,169,579 3,011,257 2,149,353
Payments for redemption of
shares.......................... (63,608,788) (55,042,670) (16,860,214) (13,436,928) (29,340,723) (15,881,993)
----------- ------------ ----------- ------------ ------------ ------------
Increase in net assets from capital
shares transactions............... 53,347,593 19,963,295 7,098,070 3,785,414 51,217,955 23,207,248
----------- ------------ ----------- ------------ ------------ ------------
Total increase in net assets... 65,698,830 76,381,018 6,246,002 10,080,182 80,396,819 50,567,094
Net assets at beginning of year.... 349,010,314 272,629,296 69,745,973 59,665,791 123,998,599 73,431,505
----------- ------------ ----------- ------------ ------------ ------------
Net assets at end of year
(including undistributed net
investment income of $2,348,606
and $1,885,333 for Growth,
$7,069,687 and $5,666,378 for
Bond, $0 and $0 for Money Market,
$11,750,366 and $11,587,244 for
Asset Allocation, $4,934,258 and
$4,531,053 for Mortgage
Securities, $2,857,956 and
$1,984,153 for Index 500 and $0
and $0 for Capital Appreciation,
respectively...................... $414,709,144 $349,010,314 $75,991,975 $ 69,745,973 $204,395,418 $123,998,599
----------- ------------ ----------- ------------ ------------ ------------
----------- ------------ ----------- ------------ ------------ ------------
<CAPTION>
CAPITAL APPRECIATION
PORTFOLIO
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Operations:
Investment income (loss)--net.... $ (178,664) $ (217,760)
Net realized gains (losses) on
investments..................... 21,475,571 6,284,588
Net change in unrealized
appreciation or depreciation of
investments..................... 8,718,053 21,970,841
------------ ------------
Net increase in net assets
resulting from operations..... 30,014,960 28,037,669
------------ ------------
Distributions to shareholders from:
Investment income--net........... -- --
Net realized gains............... (4,759,442) (3,373,884)
------------ ------------
Total distributions............ (4,759,442) (3,373,884)
------------ ------------
Capital share transactions (note
6):
Proceeds from sales.............. 55,469,252 43,468,072
Shares issued as a result of
reinvested distributions........ 4,759,442 3,373,884
Payments for redemption of
shares.......................... (34,535,706) (23,592,979)
------------ ------------
Increase in net assets from capital
shares transactions............... 25,692,988 23,248,977
------------ ------------
Total increase in net assets... 50,948,506 47,912,762
Net assets at beginning of year.... 163,519,780 115,607,018
------------ ------------
Net assets at end of year
(including undistributed net
investment income of $2,348,606
and $1,885,333 for Growth,
$7,069,687 and $5,666,378 for
Bond, $0 and $0 for Money Market,
$11,750,366 and $11,587,244 for
Asset Allocation, $4,934,258 and
$4,531,053 for Mortgage
Securities, $2,857,956 and
$1,984,153 for Index 500 and $0
and $0 for Capital Appreciation,
respectively...................... $214,468,286 $163,519,780
------------ ------------
------------ ------------
</TABLE>
65
<PAGE>
MIMLIC SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS--CONTINUED
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
MATURING GOVERNMENT
INTERNATIONAL STOCK SMALL COMPANY PORTFOLIO
PORTFOLIO BOND 1998 PORTFOLIO
-------------------------- ------------------------- -----------------------
1996 1995 1996 1995 1996 1995
------------ ------------ ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Investment income--net........... $ 4,406,540 $ 3,292,425 $ 304,423 $ 112,463 $ 326,014 $ 271,760
Net realized gains (losses) on
investments and foreign currency
transactions.................... 4,146,575 4,684,307 8,723,984 3,782,537 14,263 1,067
Net change in unrealized
appreciation or depreciation of
investments and translation of
assets and liabilities in
foreign currencies.............. 23,738,356 8,227,365 (2,113,307) 16,659,924 (123,136) 359,251
------------ ------------ ----------- ------------ ---------- -----------
Net increase (decrease) in net
assets resulting from
operations.................... 32,291,471 16,204,097 6,915,100 20,554,924 217,141 632,078
------------ ------------ ----------- ------------ ---------- -----------
Distributions to shareholders from:
Investment income--net........... (4,201,200) -- (302,963) (111,500) (3,760) (269,178)
Tax return of capital............ -- -- -- -- -- --
Net realized gains............... (4,599,310) -- (13,553,934) (969,415) -- (1,067)
------------ ------------ ----------- ------------ ---------- -----------
Total distributions............ (8,800,510) -- (13,856,897) (1,080,915) (3,760) (270,245)
------------ ------------ ----------- ------------ ---------- -----------
Capital share transactions (note
6):
Proceeds from sales.............. 69,628,923 45,334,046 62,610,535 38,430,026 1,742,631 2,803,879
Shares issued as a result of
reinvested distributions........ 8,800,510 -- 13,856,897 1,080,915 3,760 270,245
Payments for redemption of
shares.......................... (29,082,358) (28,258,386) (23,876,807) (11,194,748) (917,593) (1,780,820)
------------ ------------ ----------- ------------ ---------- -----------
Increase (decrease) in net assets
from capital shares
transactions.................... 49,347,075 17,075,660 52,590,625 28,316,193 828,798 1,293,304
------------ ------------ ----------- ------------ ---------- -----------
Total increase in net assets... 72,838,036 33,279,757 45,648,828 47,790,202 1,042,179 1,655,137
Net assets at beginning of year.... 140,769,565 107,489,808 98,894,926 51,104,724 5,056,853 3,401,716
------------ ------------ ----------- ------------ ---------- -----------
Net assets at end of year
(including undistributed net
investment income of $7,116,929
and $4,201,200 for International
Stock, $2,423 amd $963 for Small
Company, $326,014 and $3,760 for
Maturing Government Bond 1998,
$1,875 and $0 for Maturing
Government Bond 2002, $1,812 and
$1,524 for Maturing Government
Bond 2006, $118,592 and $1,072
for Maturing Government Bond
2010 and $9,682 and $3,814 for
Value Stock, respectively....... $213,607,601 $140,769,565 $144,543,754 $ 98,894,926 $6,099,032 $ 5,056,853
------------ ------------ ----------- ------------ ---------- -----------
------------ ------------ ----------- ------------ ---------- -----------
</TABLE>
See accompanying notes to financial statements.
66
<PAGE>
<TABLE>
<CAPTION>
MATURING GOVERNMENT MATURING GOVERNMENT
BOND 2002 PORTFOLIO BOND 2006 PORTFOLIO
----------------------- ----------------------
1996 1995 1996 1995
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Operations:
Investment income--net........... $ 215,875 $ 187,782 $ 171,812 $ 143,024
Net realized gains (losses) on
investments and foreign currency
transactions.................... 33,341 8,323 36,005 2,190
Net change in unrealized
appreciation or depreciation of
investments and translation of
assets and liabilities in
foreign currencies.............. (172,492) 446,613 (216,858) 504,542
---------- ----------- ---------- ----------
Net increase (decrease) in net
assets resulting from
operations.................... 76,724 642,718 (9,041) 649,756
---------- ----------- ---------- ----------
Distributions to shareholders from:
Investment income--net........... (214,000) (189,044) (171,524) (142,792)
Tax return of capital............ -- (6,040) -- --
Net realized gains............... -- -- (4,256) --
---------- ----------- ---------- ----------
Total distributions............ (214,000) (195,084) (175,780) (142,792)
---------- ----------- ---------- ----------
Capital share transactions (note
6):
Proceeds from sales.............. 1,054,826 862,287 743,284 539,818
Shares issued as a result of
reinvested distributions........ 214,000 195,084 175,780 142,792
Payments for redemption of
shares.......................... (280,991) (1,030,858) (208,659) (479,630)
---------- ----------- ---------- ----------
Increase (decrease) in net assets
from capital shares
transactions...................... 987,835 26,513 710,405 202,980
---------- ----------- ---------- ----------
Total increase in net assets... 850,559 474,147 525,584 709,944
Net assets at beginning of year.... 3,049,426 2,575,279 2,569,552 1,859,608
---------- ----------- ---------- ----------
Net assets at end of year
(including undistributed net
investment income of $7,116,929
and $4,201,200 for International
Stock, $2,423 amd $963 for Small
Company, $326,014 and $3,760 for
Maturing Government Bond 1998,
$1,875 and $0 for Maturing
Government Bond 2002, $1,812 and
$1,524 for Maturing Government
Bond 2006, $118,592 and $1,072 for
Maturing Government Bond 2010 and
$9,682 and $3,814 for Value Stock,
respectively...................... $3,899,985 $ 3,049,426 $3,095,136 $2,569,552
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
<CAPTION>
MATURING GOVERNMENT
BOND 2010 PORTFOLIO VALUE STOCK PORTFOLIO
----------------------- -------------------------
1996 1995 1996 1995
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Operations:
Investment income--net........... $ 118,592 $ 76,072 $ 769,682 $ 235,814
Net realized gains (losses) on
investments and foreign currency
transactions.................... 18,011 (2,181) 7,197,176 1,761,136
Net change in unrealized
appreciation or depreciation of
investments and translation of
assets and liabilities in
foreign currencies.............. (144,636) 334,118 8,706,912 3,206,550
---------- ----------- ------------ -----------
Net increase (decrease) in net
assets resulting from
operations.................... (8,033) 408,009 16,673,770 5,203,500
---------- ----------- ------------ -----------
Distributions to shareholders from:
Investment income--net........... (1,072) (75,785) (763,814) (233,111)
Tax return of capital............ -- -- -- --
Net realized gains............... -- -- (5,854,725) (1,350,762)
---------- ----------- ------------ -----------
Total distributions............ (1,072) (75,785) (6,618,539) (1,583,873)
---------- ----------- ------------ -----------
Capital share transactions (note
6):
Proceeds from sales.............. 1,851,191 1,121,319 59,733,886 20,708,752
Shares issued as a result of
reinvested distributions........ 1,072 75,785 6,618,539 1,583,873
Payments for redemption of
shares.......................... (413,947) (1,216,768) (11,045,562) (2,858,057)
---------- ----------- ------------ -----------
Increase (decrease) in net assets
from capital shares
transactions...................... 1,438,316 (19,664) 55,306,863 19,434,568
---------- ----------- ------------ -----------
Total increase in net assets... 1,429,211 312,560 65,362,094 23,054,195
Net assets at beginning of year.... 1,383,606 1,071,046 31,825,034 8,770,839
---------- ----------- ------------ -----------
Net assets at end of year
(including undistributed net
investment income of $7,116,929
and $4,201,200 for International
Stock, $2,423 amd $963 for Small
Company, $326,014 and $3,760 for
Maturing Government Bond 1998,
$1,875 and $0 for Maturing
Government Bond 2002, $1,812 and
$1,524 for Maturing Government
Bond 2006, $118,592 and $1,072 for
Maturing Government Bond 2010 and
$9,682 and $3,814 for Value Stock,
respectively...................... $2,812,817 $ 1,383,606 $ 97,187,128 $31,825,034
---------- ----------- ------------ -----------
---------- ----------- ------------ -----------
</TABLE>
67
<PAGE>
MIMLIC SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(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 liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
resulting 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 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.
68
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities which have been purchased by the Fund on
a forward commitment or when-issued basis can take place a month or more after
the transaction date. During this period, such securities are subject to market
fluctuations. As of December 31, 1996, the Mortgage Securities Portfolio had
entered into outstanding, when-issued or forward commitments of $1,641,719. The
Mortgage Securities Portfolio has segregated assets, with the Portfolio's
custodian, to cover such when-issued and forward commitment transactions.
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, 1996, which, if not offset by subsequent capital
gains, will expire December 31, 2002 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>
Bond................................................................ $ 175,256
Mortgage Securities................................................. 3,145,349
</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.
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, reclassification adjustments were made as follows:
<TABLE>
<CAPTION>
UNDISTRIBUTED
NET ACCUMULATED ADDITIONAL
INVESTMENT REALIZED PAID IN
INCOME GAINS/LOSSES CAPITAL
---------------- ------------------- -------------
<S> <C> <C> <C>
Capital Appreciation........................................ $ 178,664 $ -- $(178,664)
International Stock......................................... 2,710,389 (2,710,389) --
</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.
69
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(3) INVESTMENT SECURITY TRANSACTIONS
For the year ended December 31, 1996, the cost of purchases and proceeds
from sales of investment securities aggregated $262,858,547 and $242,090,557,
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, 1996 were
as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ -------------
<S> <C> <C>
Growth............................................. $324,085,393 $ 336,687,170
Bond............................................... 188,812,283 162,444,693
Asset Allocation................................... 410,492,113 411,384,256
Mortgage Securities................................ 55,796,529 48,631,281
Index 500.......................................... 74,914,697 24,376,791
Capital Appreciation............................... 127,869,280 114,283,014
International Stock................................ 57,913,522 18,096,218
Small Company...................................... 112,420,283 78,402,625
Maturing Government Bond 1998...................... 2,055,511 940,223
Maturing Government Bond 2002...................... 1,655,534 712,365
Maturing Government Bond 2006...................... 1,445,972 669,724
Maturing Government Bond 2010...................... 2,819,266 1,222,603
Value Stock........................................ 92,193,956 48,902,683
</TABLE>
(4) FORWARD FOREIGN CURRENCY CONTRACTS
On December 31, 1996, 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>
01/31/97 2,206,104 FRF 422,463 US$ $ -- $1,890
01/03/97 235,291 HKD 30,380 US$ -- 39
01/03/97 94,192 US$ 741,948 MXN 60 --
01/31/97 58,346 US$ 300,599 FRF -- 525
01/07/97 84,769 US$ 397,990 ZAR 317 --
--- -----
$377 $2,454
--- -----
--- -----
</TABLE>
<TABLE>
<C> <S>
FRF French Franc
HKD Hong Kong Dollar
MXN Mexican Peso
ZAR South African Rand
US$ United States Dollar
</TABLE>
70
<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). 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. (Templeton). From its advisory fee, MIMLIC
Management pays Templeton 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. On September 30, 1996, the shareholders of Growth
approved a sub-advisory agreement between MIMLIC Management and Voyageur Fund
Managers, Inc. (Voyageur). Under the sub-advisory agreement, effective October
1, 1996, MIMLIC Management pays Voyageur a fee equal to .25 percent of net
assets of Growth.
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, 1996,
71
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
Minnesota Mutual voluntarily agreed to absorb $27,510, $31,158, $31,536 and
$33,042 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.
(6) CAPITAL SHARE TRANSACTIONS
Transactions in shares of portfolios for the years ended December 31, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
GROWTH BOND
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 20,525,981 15,942,741 30,374,847 19,917,487
Issued for reinvested distributions......................... 9,579,976 4,188,367 5,583,992 2,571,473
Redeemed.................................................... (15,345,143) (13,194,015) (13,706,716) (11,200,741)
----------- ----------- ----------- -----------
14,760,814 6,937,093 22,252,123 11,288,219
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
MONEY MARKET ASSET ALLOCATION
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 77,174,302 36,944,812 46,935,708 37,854,023
Issued for reinvested distributions......................... 2,131,453 1,335,757 19,792,634 7,646,551
Redeemed.................................................... (58,011,515) (31,221,058) (35,436,505) (33,295,460)
----------- ----------- ----------- -----------
21,294,240 7,059,511 31,291,837 12,205,114
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
MORTGAGE SECURITIES INDEX 500
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 16,716,254 11,363,781 35,516,209 20,529,294
Issued for reinvested distributions......................... 4,096,652 3,873,396 1,471,728 1,340,030
Redeemed.................................................... (14,548,820) (11,794,395) (13,411,996) (8,948,748)
----------- ----------- ----------- -----------
6,264,086 3,442,782 23,575,941 12,920,576
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
CAPITAL APPRECIATION INTERNATIONAL STOCK
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 23,723,099 21,549,468 47,517,336 34,352,552
Issued for reinvested distributions......................... 2,186,263 1,816,119 6,279,337 --
Redeemed.................................................... (14,818,769) (11,636,441) (19,870,998) (21,587,691)
----------- ----------- ----------- -----------
11,090,593 11,729,146 33,925,675 12,764,861
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
MATURING GOVERNMENT
SMALL COMPANY BOND 1998
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 37,985,089 27,268,886 1,646,497 2,804,374
Issued for reinvested distributions......................... 9,010,911 681,476 3,671 261,002
Redeemed.................................................... (14,536,066) (7,902,817) (875,000) (1,791,322)
----------- ----------- ----------- -----------
32,459,934 20,047,545 775,168 1,274,054
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
72
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(6) CAPITAL SHARE TRANSACTIONS--(CONTINUED)
<TABLE>
<CAPTION>
MATURING GOVERNMENT MATURING GOVERNMENT
BOND 2002 BOND 2006
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 979,665 819,908 667,732 493,557
Issued for reinvested distributions......................... 202,767 179,675 159,037 122,592
Redeemed.................................................... (260,338) (966,191) (186,970) (441,900)
----------- ----------- ----------- -----------
922,094 33,392 639,799 174,249
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
MATURING GOVERNMENT
BOND 2010 VALUE STOCK
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................................ 1,639,014 1,062,561 40,038,292 16,963,575
Issued for reinvested distributions......................... 1,015 63,051 4,188,960 1,227,850
Redeemed.................................................... (378,863) (1,163,056) (7,390,558) (2,330,611)
----------- ----------- ----------- -----------
1,261,166 (37,444) 36,836,694 15,860,814
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</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, 1996, investments in securities of Bond, Money Market, Asset
Allocation, Mortgage Securities and International Stock include issues that are
illiquid. The aggregate values of illiquid securities held by Bond, Money
Market, Asset Allocation, Mortgage Securities and International Stock at
December 31, 1996 were $2,596,880, $1,398,659, $28,242,175, $3,873,193 and
$10,332,993, respectively, which represent 2.1%, 2.7%, 6.8%, 5.1% and 4.8% 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.
73
<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,
-----------------------------------------------------
1996(C) 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............................ $2.210 $1.866 $1.912 $1.889 $1.864
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income..................................... .022 .021 .019 .020 .026
Net gains or losses on securities (both realized and
unrealized)............................................. .325 .416 (.005) .063 .060
--------- --------- --------- --------- ---------
Total from investment operations...................... .347 .437 .014 .083 .086
--------- --------- --------- --------- ---------
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 year.................................. $2.343 $2.210 $1.866 $1.912 $1.889
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return (a).............................................. 17.2% 24.3% .8% 4.7% 4.8%
Net assets, end of year (in thousands)........................ $ 248,465 $ 201,678 $ 157,369 $ 125,745 $ 99,128
Ratio of expenses to average daily net assets................. .59% .55% .56% .58% .58%
Ratio of net investment income to average daily net assets.... 1.04% 1.04% 1.22% 1.21% 1.72%
Portfolio turnover rate (excluding short-term securities)..... 154.7% 91.9% 42.0% 51.0% 22.4%
Average commission rate on stock transactions (b)............. $ .0617 N/A N/A N/A N/A
<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) Beginning in 1996, the Portfolio is required to disclose an average
brokerage commission rate. The rate is calculated by dividing the total
brokerage commissions paid on applicable purchases and sales of stocks for
the period by the total number of related shares purchased and sold.
(c) On October 1, 1996, the Portfolio entered into a new sub-advisory agreement
with Voyageur Fund Managers, Inc. to perform sub-advisory services for the
Portfolio.
</TABLE>
74
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
BOND PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $1.332 $1.157 $1.300 $1.258 $1.264
-------- -------- ------- ------- -------
Income from investment operations:
Net investment income................................... .068 .074 .042 .051 .053
Net gains or losses on securities (both realized and
unrealized)........................................... (.034) .147 (.100) .074 .024
-------- -------- ------- ------- -------
Total from investment operations.................... .034 .221 (.058) .125 .077
-------- -------- ------- ------- -------
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 year................................ $1.283 $1.332 $1.157 $1.300 $1.258
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
Total return (a)............................................ 3.0% 19.8% (4.6)% 10.3% 6.7%
Net assets, end of year (in thousands)...................... $125,886 $101,045 $74,679 $43,927 $24,914
Ratio of expenses to average daily net assets (b)........... .56% .58% .61% .64% .65%
Ratio of net investment income to average daily net assets
(b)....................................................... 6.36% 6.57% 6.12% 5.57% 6.56%
Portfolio turnover rate (excluding short-term securities)... 154.0% 205.4% 166.2% 166.8% 140.2%
<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 in expenses for the year
ended December 31, 1992. Had the Portfolio paid all fees and expenses, the
ratio of expenses to average daily net assets would have been .72% and the
ratio of net investment income to average daily net assets would have been
6.49%.
</TABLE>
75
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<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......................................... .048 .053 .036 .027 .032
--------- --------- --------- --------- ---------
Total from investment operations.......................... .048 .053 .036 .027 .032
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income.......................... (.048) (.053) (.036) (.027) (.032)
--------- --------- --------- --------- ---------
Total distributions....................................... (.048) (.053) (.036) (.027) (.032)
--------- --------- --------- --------- ---------
Net asset value, end of year...................................... $1.000 $1.000 $1.000 $1.000 $1.000
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return (a).................................................. 4.9% 5.4% 3.7% 2.7% 3.2%
Net assets, end of year (in thousands)............................ $ 51,461 $ 30,166 $ 23,107 $ 18,423 $ 13,591
Ratio of expenses to average daily net assets (b)................. .60% .64% .65% .65% .65%
Ratio of net investment income to average daily net assets (b).... 4.81% 5.29% 3.71% 2.65% 3.17%
<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 and $20,913 in
expenses for the years ended December 31, 1994, 1993 and 1992,
respectively. Had the Portfolio paid all fees and expenses the ratio of
expenses to average daily net assets would have been .72%, .81% and .80%,
respectively, and the ratio of net investment income to average daily net
assets would have been 3.64%, 2.49% and 3.02%, respectively.
</TABLE>
76
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
ASSET ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $1.826 $1.524 $1.589 $1.574 $1.558
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income................................... .052 .061 .047 .030 .034
Net gains or losses on securities (both realized and
unrealized)............................................ .155 .308 (.069) .066 .070
-------- -------- -------- -------- --------
Total from investment operations.................... .207 .369 (.022) .096 .104
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income.................... (.059) (.049) (.033) (.037) (.041)
Distributions from capital gains........................ (.109) (.018) (.010) (.044) (.047)
-------- -------- -------- -------- --------
Total distributions................................. (.168) (.067) (.043) (.081) (.088)
-------- -------- -------- -------- --------
Net asset value, end of year................................ $1.865 $1.826 $1.524 $1.589 $1.574
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return (a)............................................ 12.5% 25.0% (1.4)% 6.5% 7.3%
Net assets, end of year (in thousands)...................... $414,709 $349,010 $272,629 $250,011 $150,998
Ratio of expenses to average daily net assets............... .54% .55% .56% .57% .60%
Ratio of net investment income to average daily net
assets.................................................... 3.09% 3.75% 3.31% 2.63% 3.68%
Portfolio turnover rate (excluding short-term securities)... 120.1% 157.0% 123.6% 85.7% 106.5%
Average commission rate on stock transactions (b)........... $ .0692 N/A N/A N/A N/A
<FN>
- ----------
(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) Beginning in 1996, the Portfolio is required to disclose an average
brokerage commission rate. The rate is calculated by dividing the total
brokerage commissions paid on applicable purchases and sales of stocks for
the period by the total number of related shares purchased and sold.
</TABLE>
77
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
MORTGAGE SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $1.207 $1.098 $1.218 $1.185 $1.196
------- ------- ------- ------- -------
Income from investment operations:
Net investment income................................... .076 .081 .074 .054 .045
Net gains or losses on securities (both realized and
unrealized)............................................ (.020) .107 (.115) .052 .024
------- ------- ------- ------- -------
Total from investment operations.................... .058 .188 (.041) .106 .069
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income.................... (.078) (.079) (.054) (.055) (.056)
Distributions from capital gains........................ -- -- (.025) (.018) (.024)
------- ------- ------- ------- -------
Total distributions................................. (.078) (.079) (.079) (.073) (.080)
------- ------- ------- ------- -------
Net asset value, end of year................................ $1.187 $1.207 $1.098 $1.218 $1.185
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total return (a)............................................ 5.3% 18.0% (3.4)% 9.3% 6.4%
Net assets, end of year (in thousands)...................... $75,992 $69,746 $59,666 $63,902 $37,011
Ratio of expenses to average daily net assets (b)........... .58% .58% .60% .63% .65%
Ratio of net investment income to average daily net assets
(b)....................................................... 6.94% 7.09% 6.55% 5.87% 6.64%
Portfolio turnover rate (excluding short-term securities)... 70.0% 133.7% 197.3% 138.4% 96.2%
<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 in expenses for the year
ended December 31, 1992. Had the Portfolio paid all fees and expenses the
ratio of expenses to average daily net assets would have been .69% and the
ratio of net investment income to average daily net assets would have been
6.60%.
</TABLE>
78
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
INDEX 500 PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.............................. $2.023 $1.518 $1.532 $1.428 $1.454
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income....................................... .031 .031 .029 .026 .024
Net gains or losses on securities (both realized and
unrealized)............................................... .400 .517 (.012) .110 .073
--------- --------- --------- --------- ---------
Total from investment operations........................ .431 .548 .017 .136 .097
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income........................ (.030) (.031) (.026) (.025) (.032)
Distributions from capital gains............................ (.015) (.012) (.005) (.007) (.091)
--------- --------- --------- --------- ---------
Total distributions..................................... (.045) (.043) (.031) (.032) (.123)
--------- --------- --------- --------- ---------
Net asset value, end of year.................................... $2.409 $2.023 $1.518 $1.532 $1.428
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return (a)................................................ 21.6% 36.8% 1.2% 9.8% 7.4%
Net assets, end of year (in thousands).......................... $ 204,395 $ 123,999 $ 73,432 $ 56,209 $ 35,620
Ratio of expenses to average daily net assets (b)............... .45% .47% .50% .55% .55%
Ratio of net investment income to average daily net assets
(b)........................................................... 1.77% 2.08% 2.34% 2.27% 2.42%
Portfolio turnover rate (excluding short-term securities)....... 15.2% 4.8% 5.9% 4.8% 6.1%
Average commission rate on stock transactions (c)............... $ .0429 N/A N/A N/A N/A
<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 in expenses for the year ended
December 31, 1992. Had the portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been .58% and the ratio
of net investment income to average daily net assets would have been 2.39%.
(c) Beginning in 1996, the Portfolio is required to disclose an average
brokerage commission rate. The rate is calculated by dividing the total
brokerage commissions paid on applicable purchases and sales of stocks for
the period by the total number of related shares purchased and sold.
</TABLE>
79
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
CAPITAL APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1996 1995 1994 1993 1992(A)
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $2.160 $1.808 $1.797 $1.682 $1.684
-------- -------- -------- ------- -------
Income from investment operations:
Net investment income (loss)............................ (.002) (.003) -- .001 .004
Net gains or losses on securities (both realized and
unrealized)........................................... .374 .406 .039 .167 .078
-------- -------- -------- ------- -------
Total from investment operations.................... .372 .403 .039 .168 .082
-------- -------- -------- ------- -------
Less distributions:
Dividends from net investment income.................... -- -- (.002) (.005) (.009)
Distributions from capital gains........................ (.061) (.051) (.026) (.048) (.075)
-------- -------- -------- ------- -------
Total distributions................................. (.061) (.051) (.028) (.053) (.084)
-------- -------- -------- ------- -------
Net asset value, end of year................................ $2.471 $2.160 $1.808 $1.797 $1.682
-------- -------- -------- ------- -------
-------- -------- -------- ------- -------
Total return (b)............................................ 17.6% 22.8% 2.3% 10.4% 5.0%
Net assets, end of year (in thousands)...................... $214,468 $163,520 $115,607 $84,840 $52,365
Ratio of expenses to average daily net assets (c)........... .85% .80% .83% .86% .90%
Ratio of net investment income (loss) to average daily net
assets (c)................................................ (.09)% (.15)% (.09)% .12% .42%
Portfolio turnover rate (excluding short-term securities)... 62.9% 51.1% 68.4% 95.9% 138.8%
Average commission rate on stock transactions (d)........... $ .0625 N/A N/A N/A N/A
<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 in expenses for the year
ended December 31, 1992. Had the Portfolio paid all fees and expenses, the
ratio of expenses to average daily net assets would have been .94% and the
ratio of net investment income to average daily net asset would have been
.38%.
(d) Beginning in 1996, the Portfolio is required to disclose an average
brokerage commission rate. The rate is calculated by dividing the total
brokerage commissions paid on applicable purchases and sales of stocks for
the period by the total number of related shares purchased and sold.
</TABLE>
80
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
INTERNATIONAL STOCK PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
FROM MAY 1,
YEAR ENDED DECEMBER 31, 1992 TO
----------------------------------------- DECEMBER 31,
1996 1995 1994 1993 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................................... .030 .033 .011 .016 .010
Net gains or losses on securities (both realized and
unrealized)........................................... .238 .142 (.015) .389 (.077)
-------- -------- -------- ------- ------
Total from investment operations.................... .268 .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.............................. $1.597 $1.410 $1.235 $1.310 $.919
-------- -------- -------- ------- ------
-------- -------- -------- ------- ------
Total return (b)............................................ 19.8% 14.2% (.3)% 44.2% (6.8)%(d)
Net assets, end of period (in thousands).................... $213,608 $140,770 $107,490 $61,106 $17,401
Ratio of expenses to average daily net assets (c)........... 1.06% 1.04% 1.24% 1.55% 2.00%(e)
Ratio of net investment income to average daily net assets
(c)....................................................... 2.53% 2.69% 1.68% 1.04% 2.10%(e)
Portfolio turnover rate (excluding short-term securities)... 11.5% 20.3% 12.9% 12.7% 11.7%
Average commission rate on stock transactions (f)........... $ .0160 N/A N/A N/A N/A
<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.
(f) Beginning in 1996, the Portfolio is required to disclose an average
brokerage commission rate. The rate is calculated by dividing the total
brokerage commissions paid on applicable purchases and sales of stocks for
the period by the total number of related shares purchased and sold. The
comparability of this information may be effected by the fact that
commission rates per share vary significantly among foreign countries.
</TABLE>
81
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
SMALL COMPANY PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
FROM MAY 3,
YEAR ENDED DECEMBER 31, 1993 TO
------------------------------ DECEMBER 31,
1996 1995 1994 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................................... .004 .002 .002 --
Net gains or losses on securities (both realized and
unrealized)............................................ .097 .392 .069 .173
-------- ------- ------- ------
Total from investment operations.................... .101 .394 .071 .173
-------- ------- ------- ------
Less distributions:
Dividends from net investment income.................... (.004) (.002) (.002) --
Distributions from net realized gains................... (.164) (.016) -- (.015)
Excess distributions of net realized gains.............. -- -- -- (.001)
-------- ------- ------- ------
Total distributions................................. (.168) (.018) (.002) (.016)
-------- ------- ------- ------
Net asset value, end of period.............................. $1.535 $1.602 $1.226 $1.157
-------- ------- ------- ------
-------- ------- ------- ------
Total return (b)............................................ 6.5% 32.1% 6.2% 17.4%(c)
Net assets, end of period (in thousands).................... $144,544 $98,895 $51,105 $13,043
Ratio of expenses to average daily net assets (d)........... .81% .84% .90% .90%(e)
Ratio of net investment income (loss) to average daily net
assets (d)................................................ .24% .15% .24% (.02)%(e)
Portfolio turnover rate (excluding short-term securities)... 74.4% 61.3% 28.1% 34.9%
Average commission rate on stock transactions (f)........... $ .1045 N/A N/A N/A
<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 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.
(f) Beginning in 1996, the Portfolio is required to disclose an average
brokerage commission rate. The rate is calculated by dividing the total
brokerage commissions paid on applicable purchases and sales of stocks for
the period by the total number of related shares purchased and sold.
</TABLE>
82
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 1998 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
YEAR ENDED DECEMBER FROM MAY 2,
31, 1994 TO
-------------------- DECEMBER 31,
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................................... .058 .059 .043
Net gains or losses on securities (both realized and
unrealized)............................................ (.015) .092 (.043 )
--------- --------- -----
Total from investment operations.................... .043 .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.............................. $1.080 $1.038 $.945
--------- --------- -----
--------- --------- -----
Total return (b)............................................ 4.1% 16.0% .1%(c)
Net assets, end of period (in thousands).................... $ 6,099 $ 5,057 $ 3,402
Ratio of expenses to average daily net assets (d)........... .20% .20% .20%(e)
Ratio of net investment income to average daily net assets
(d)....................................................... 6.19% 6.22% 6.45%(e)
Portfolio turnover rate (excluding short-term securities)... 18.1% 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 presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $27,510, $22,794 and $21,714 in
expenses for the years ended December 31, 1996 and 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%,
.72% and 1.12%, respectively, and the ratio of net investment income to
average daily net assets would have been 5.67%, 5.70% and 5.53%,
respectively.
(e) Adjusted to an annual basis.
</TABLE>
83
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2002 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
YEAR ENDED DECEMBER FROM MAY 2,
31, 1994 TO
-------------------- DECEMBER 31,
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....................................................... .061 .072 .047
Net gains or losses on securities (both realized and unrealized)............ (.042) .161 (.044 )
--------- --------- -----
Total from investment operations........................................ .019 .233 .003
--------- --------- -----
Less distributions:
Dividends from net investment income........................................ (.061) (.072) (.048 )
Tax return of capital....................................................... -- (.002) --
Distributions from net realized gains....................................... -- -- --
--------- --------- -----
Total distributions..................................................... (.061) (.074) (.048 )
--------- --------- -----
Net asset value, end of period.................................................. $1.049 $1.091 $.932
--------- --------- -----
--------- --------- -----
Total return (b)................................................................ 1.7% 25.0% .3%(c)
Net assets, end of period (in thousands)........................................ $ 3,900 $ 3,049 $ 2,575
Ratio of expenses to average daily net assets (d)............................... .20% .20% .20%(e)
Ratio of net investment income to average daily net assets (d).................. 6.52% 6.52% 7.18%(e)
Portfolio turnover rate (excluding short-term securities)....................... 21.9% -- 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 presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $31,158, $24,709 and $23,298 in
expenses for the year ended December 31, 1996 and 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
1.14%, 1.06% and 1.52%, respectively, and the ratio of net investment
income to average daily net assets would have been 5.58%, 5.66% and 5.86%,
respectively.
(e) Adjusted to an annual basis.
</TABLE>
84
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2006 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER MAY 2, 1994
31, TO
-------------------- DECEMBER 31,
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................................... .064 .069 .047
Net gains or losses on securities (both realized and
unrealized)............................................ (.078) .251 (.046)
--------- --------- -----
Total from investment operations.................... (.014) .320 .001
--------- --------- -----
Less distributions:
Dividends from net investment income.................... (.064) (.069) (.048)
Distributions from net realized gains................... (.002) -- --
--------- --------- -----
Total distributions................................. (.066) (.069) (.048)
--------- --------- -----
Net asset value, end of period.............................. $ 1.094 $ 1.174 $ .923
--------- --------- -----
--------- --------- -----
Total return (b)............................................ (1.2)% 34.7% .1%(c)
Net assets, end of period (in thousands).................... $ 3,095 $ 2,570 $ 1,860
Ratio of expenses to average daily net assets (d)........... .40% .40% .40%(e)
Ratio of net investment income to average daily net assets
(d)....................................................... 6.43% 6.56% 7.45%(e)
Portfolio turnover rate (excluding short-term securities)... 25.7% 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 presented for the period from May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $31,536, $25,199 and $24,803 in
expenses for the years ended December 31, 1996 and 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
1.58%, 1.56% and 2.37%, respectively, and the ratio of net investment
income to average daily net assets would have been 5.25%, 5.40% and 5.48%,
respectively.
(e) Adjusted to an annual basis.
</TABLE>
85
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2010 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER MAY 2, 1994
31, TO
-------------------- DECEMBER 31,
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................................... .049 .070 .049
Net gains or losses on securities (both realized and
unrealized)............................................ (.090) .304 (.052)
--------- --------- -----
Total from investment operations.................... (.041) .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.............................. $ 1.172 $ 1.214 $ .910
--------- --------- -----
--------- --------- -----
Total return (b)............................................ (3.4)% 41.2% (.3)%(c)
Net assets, end of period (in thousands).................... $ 2,813 $ 1,384 $ 1,071
Ratio of expenses to average daily net assets (d)........... .40% .40% .40%(e)
Ratio of net investment income to average daily net assets
(d)....................................................... 6.40% 6.58% 7.79%(e)
Portfolio turnover rate (excluding short-term securities)... 71.0% -- 14.5%
- ----------
(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 May 2, 1994, commencement of
operations, to December 31, 1994.
(d) Minnesota Mutual voluntarily absorbed $33,042, $26,308 and $25,888 in
expenses for the years ended December 31, 1996 and 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
2.18%, 2.68% and 4.01%, respectively, and the ratio of net investment
income to average daily net assets would have been 4.62%, 4.30% and 4.18%,
respectively.
(e) Adjusted to an annual basis.
</TABLE>
86
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(8) FINANCIAL HIGHLIGHTS--(CONTINUED)
VALUE STOCK PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER MAY 2, 1994
31, TO
-------------------- DECEMBER 31,
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................................... .013 .010 .008
Net gains or losses on securities (both realized and
unrealized)............................................ .389 .331 .038
--------- --------- -----
Total from investment operations.................... .402 .341 .046
--------- --------- -----
Less distributions:
Dividends from net investment income.................... (.013) (.010) (.009)
Distributions from net realized gains................... (.110) (.063) (.003)
--------- --------- -----
Total distributions................................. (.123) (.073) (.012)
--------- --------- -----
Net asset value, end of period.............................. $ 1.591 $ 1.312 $ 1.044
--------- --------- -----
--------- --------- -----
Total return (b)............................................ 31.0% 33.0% 4.6%(c)
Net assets, end of period (in thousands).................... $ 97,187 $ 31,825 $ 8,771
Ratio of expenses to average daily net assets (d)........... .83% .89% .90%(e)
Ratio of net investment income to average daily net assets
(d)....................................................... 1.28% 1.25% 2.07%(e)
Portfolio turnover rate (excluding short-term securities)... 88.6% 164.2% 49.5%
Average commission rate on stock transactions (f)........... $ .0672 N/A N/A
- ----------
(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 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.
(f) Beginning in 1996, the Portfolio is required to disclose an average
brokerage commission rate. The rate is calculated by dividing the total
brokerage commissions paid on applicable purchases and sales of stocks for
the period by the total number of related shares purchased and sold.
</TABLE>
87
<PAGE>
SHAREHOLDER VOTING RESULTS
On September 30, 1996, a special shareholder meeting of the Growth Portfolio
was held. Shareholders of record on August 9, 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 an Investment Sub-Advisory Agreement between
MIMLIC Asset Management Company and Voyageur Fund Managers, Inc. with
respect to investment sub-advisory services furnished on behalf of the
Growth Portfolio......................................................... 93,998,097 2,274,981 7,135,169
---------- --------- ---------
---------- --------- ---------
</TABLE>
88
<PAGE>
This offering is available through a registered representative of
MIMLIC Sales Corporation, a registered broker/dealer. MIMLIC Sales
is a subsidiary of Minnesota Mutual.
THIS REPORT MAY BE USED AS SALES LITERATURE IN CONNECTION WITH THE OFFER OR
SALE OF VARIABLE ANNUITY OR LIFE INSURANCE CONTRACTS FUNDED BY MIMLIC
SERIES FUND, INC. ("FUND") IF PRECEEDED OR ACCOMPANIED BY (A) THE
CURRENT PROSPECTUS FOR THE FUND AND SUCH CONTRACTS AND (B) THE
CURRENT VARIABLE ANNUITY PERFORMANCE REPORT, GROUP VARIABLE
ANNUITY PERFORMANCE REPORT, VARIABLE FUND D PERFORMANCE
REPORT, VARIABLE GROUP UNIVERSAL LIFE PORTFOLIO
PERFORMANCE AND HISTORICAL POLICY VALUES REPORT
AND VARIABLE ADJUSTABLE LIFE
HISTORICAL POLICY VALUES REPORT,
RESPECTIVELY.
[LOGO]
MIMLIC SALES CORPORATION
400 ROBERT STREET NORTH
ST. PAUL, MN 55101-2098
1-800-443-3677
<PAGE>
<TABLE>
<S> <C>
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
400 ROBERT STREET NORTH BULK RATE
ST. PAUL, MN 55101-2098 U.S. POSTAGE PAID
ST. PAUL, MN
PERMIT NO. 3547
FORWARDING AND RETURN POSTAGE GUARANTEED,
ADDRESS CORRECTION REQUESTED
</TABLE>
F.38897 Rev. 2/97
