<PAGE>
ADVANTUS SERIES FUND, INC.
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 7
-------------------------------------------------------------------
----------------------
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
SMALL COMPANY VALUE PORTFOLIO
INTERNATIONAL BOND PORTFOLIO
INDEX 400 MID-CAP PORTFOLIO
MACRO-CAP VALUE PORTFOLIO
MICRO-CAP GROWTH 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
Small Company Value Portfolio............................................. 28
International Bond Portfolio.............................................. 30
Index 400 Mid-Cap Portfolio............................................... 32
Macro-Cap Value Portfolio................................................. 34
Micro-Cap Growth Portfolio................................................ 36
INDEPENDENT AUDITORS' REPORT.............................................. 38
INVESTMENTS IN SECURITIES
Growth Portfolio.......................................................... 39
Bond Portfolio............................................................ 41
Money Market Portfolio.................................................... 44
Asset Allocation Portfolio................................................ 46
Mortgage Securities Portfolio............................................. 50
Index 500 Portfolio....................................................... 53
Capital Appreciation Portfolio............................................ 59
International Stock Portfolio............................................. 60
Small Company Portfolio................................................... 64
Maturing Government Bond 1998 Portfolio................................... 66
Maturing Government Bond 2002 Portfolio................................... 67
Maturing Government Bond 2006 Portfolio................................... 68
Maturing Government Bond 2010 Portfolio................................... 69
Value Stock Portfolio..................................................... 70
Small Company Value Portfolio............................................. 72
International Bond Portfolio.............................................. 74
Index 400 Mid-Cap Portfolio............................................... 76
Macro-Cap Value Portfolio................................................. 81
Micro-Cap Growth Portfolio................................................ 83
FINANCIAL STATEMENTS
Statements of Assets and Liabilities...................................... 86
Statements of Operations.................................................. 89
Statements of Changes in Net Assets....................................... 92
Notes to Financial Statements............................................. 97
<PAGE>
HOW TO USE THIS REPORT
Some of our clients prefer a narrative account of their Advantus Series Fund
investments while other clients prefer full financial statements. This report is
designed to meet both preferences.
For a narrative account of each Portfolio's performance, investment
strategies and holdings by the Portfolio Manager, refer to the front section of
the report. Comprehensive investment holdings, market values and financial
reports begin on page 39.
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 Advantus Series Fund. Your Ascend Sales
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>
Year Ended December
31,1997*
Percentage of
Return
<S> <C>
Growth 33.4%
Bond 9.4%
Money Market 5.1%
Asset Allocation 19.0%
Mortgage Securities 9.1%
Index 500 32.4%
Capital Appreciation 28.3%
International Stock 11.9%
Small Company 7.8%
MGB 1998 6.1%
MGB 2002 8.5%
MGB 2006 12.6%
MGB 2010 17.9%
Value Stock 21.2%
Small Company Value 2.3%
International Bond 0.1%
Index 400 Mid-Cap 0.1%
Macro-Cap Value -2.1%
Micro-Cap Growth -13.2%
</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.
* Performance is presented for the period from October 1, 1997 to December
31, 1997 for Small Company Value, International Bond, Index 400 Mid-Cap and
Micro-Cap Growth Portfolios and for the period from October 15, 1997 to December
31, 1997 for Macro-Cap Value Portfolio.
2
<PAGE>
LETTER FROM THE PRESIDENT
Dear Shareholders:
Investors experienced a positive financial environment with moderate economic
growth and low inflation throughout 1997. The inflation fears experienced in the
first half of the year dissipated as negative economic events in Asia unfolded
and took on global implications during the fourth quarter.
The "Asian Flu" severely affected several Far Eastern currencies and stock
markets, leaving a trail of bankruptcies, uncertainties, and fears in its wake.
In fact, a "flight to quality" poured assets into U.S. markets, particularly the
bond market, which is a popular destination for investors during periodic
flights to quality.
Broadly speaking, both equity and fixed income securities have demonstrated
notable results this reporting period. Indices, such as the S&P 500 Index,*
which increased 33.4 percent for the year; and the Lehman Brothers Government
Corporate Bond Index,** which increased 9.7 percent for the same period,
reflected the general strength of the equity and fixed income markets,
respectively, in 1997.
Within both the broad equity and fixed income markets, there are market segments
that perform differently. On the equity side, there was a disparity of results
between large cap and small cap stocks. For example, the Russell 1000 Growth
Index,+ used to benchmark our Growth Portfolio, earned 30.5 percent for the
year. The Russell 2000 Growth Index,+ used to benchmark our Small Company
Portfolio, earned 12.9 percent for the same period. This is not unusual. The
inherent differences in these portfolios allow you to diversify your investments
within one product.
You will notice that five new portfolios have been added to this Series Fund
since our last report. The portfolios are Small Company Value, Index 400
Mid-Cap, International Bond, Macro-Cap Value and Micro-Cap Growth. Commentaries
from the portfolios' managers appear in the PORTFOLIO MANAGER REVIEWS section.
The investment professionals at Advantus Capital Management continue to put
their money management expertise to work on your behalf. We appreciate your
continued participation in the Advantus Series Fund.
Sincerely,
[SIGNATURE]
Robert E. Hunstad
President
Advantus Series Fund, Inc.
- ------------------------
* The S&P 500 Index is a broad, unmanaged index of 500 common stocks which are
representative of the U.S. stock market overall.
** The Lehman Brothers Government Corporate Bond Index is an unmanaged benchmark
composite of the Lehman Brothers Government Bond Index which includes all
publicly issued debt of the U.S. Government and Agencies and The Lehman Brothers
Corporate Bond Index which includes all publicly issued fixed rate,
nonconvertible domestic corporate debt.
+ The Russell 1000 Growth Index and the Russell 2000 Growth Index contain stock
from the Russell 1000 and the Russell 2000, respectively, with a greater than
average growth orientation. The Russell 1000 and the Russell 2000 are the 1,000
and 2,000 largest companies, respectively, 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.
3
<PAGE>
GROWTH PORTFOLIO
PERFORMANCE UPDATE
THOMAS GUNDERSON, CFA
PORTFOLIO MANAGER
[PHOTO]
The Growth
Portfolio seeks
the long-term
accumulation of
capital, with current income
as a secondary objective. It
invests primarily in common
stocks and other equity
securities.
PERFORMANCE
The total return for the Growth Portfolio was 33.41 percent* for the year ended
December 31, 1997. The Portfolio exceeded its benchmark, the Russell 1000 Growth
Index,** which earned 30.48 percent for the same period.
In prior reporting periods, the S&P 500 Index+ was used as the Portfolio's
benchmark. The S&P 500, a broad market index, does not fully reflect the
Portfolio's growth investment style. The Russell 1000 Growth Index** is a widely
accepted benchmark for large capitalization portfolios, such as the Growth
Portfolio. The Portfolio's performance will be compared to the Russell 1000
Growth Index** going forward.
PERFORMANCE ANALYSIS
Driven by the lower interest rates and the continued strong earnings growth
rates, the Finance sector was the Portfolio's strongest performer, up 68
percent* for the year. Meaningfully contributing to performance were stocks such
as Norwest Corporation and Associates First Capital Corporation. Conversely, the
Materials and Service sector lagged the Portfolio, generating only a 19 percent
return.* A computer services company, First Data Corporation, reported
disappointing sales and earnings, as well as year 2000 costs that exceeded
expectations. This was the primary cause for weakness in the Materials and
Service area.
Lower inflationary pressures had little effect on the Portfolio's
performance. Additionally, the economic situation in Asia caused only a minor
slowdown during the fourth quarter, which was offset by the strength in Europe.
Responding to the situation in Asia, investors sought out more stable growth
companies consistent with the stocks in the Portfolio. Consequently, valuations
in those companies increased during the fourth quarter.
OUTLOOK
Near term, there are several events lining up to make 1998 a difficult year to
show strong corporate earnings growth. The year 2000 issues will force companies
to spend money on people to fix technology problems rather than purchasing new
systems. The Asian situation will likely slow economic growth and lead to
increased pricing pressure as Asia's cost of production has fallen dramatically.
Finally, the strong earnings of 1997 have set a tough standard for 1998.
We will continue to invest in what we believe to be the best companies. We
look for companies with superior management or product positions that can
continue through the current environment with sustainable above average
long-term earnings growth rates.
4
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
SHARES VALUE PORTFOLIO
------- -------------- ----------
<S> <C> <C> <C>
General Electric Company.......................... 200,900 $ 14,741,037 4.8%
Tyco International Ltd............................ 249,142 11,226,961 3.6%
Service Corporation International................. 275,200 10,165,200 3.3%
Bristol-Myers Squibb Company...................... 98,900 9,358,413 3.0%
USA Waste Services, Inc........................... 237,800 9,333,650 3.0%
Philip Morris Companies, Inc...................... 193,300 8,758,906 2.8%
Safeway, Inc...................................... 127,400 8,058,050 2.6%
Carnival Corporation.............................. 141,300 7,824,487 2.5%
Cendant Corporation............................... 223,200 7,672,500 2.5%
Newell Company.................................... 163,000 6,927,500 2.3%
-------------- ----------
$ 94,066,704 30.4%
-------------- ----------
-------------- ----------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Basic Materials 0.5%
Capital Goods 11.8%
Communication Services 2.3%
Consumer Cyclical 17.3%
Consumer Staples 14.8%
Energy 1.2%
Financial 15.4%
Health Care 16.4%
Technology 13.0%
Transportation 0.9%
Cash and Other
Assets/Liabilities 6.4%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN GROWTH PORTFOLIO,
S&P 500 INDEX, RUSSELL 1000 GROWTH INDEX AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Average annual total
return:
<S> <C> <C> <C> <C>
One year 33.4%
Five years 15.4%
Ten years 15.5%
Growth Russell 1000 Growth
Portfolio S&P 500 CPI Index
12/31/87 $ 10,000 $ 10,000 $ 10,000 $ 10,000
12/31/88 $ 11,585 $ 11,657 $ 10,441 $ 11,127
12/31/89 $ 14,599 $ 15,346 $ 10,916 $ 15,124
12/31/90 $ 14,629 $ 14,864 $ 11,590 $ 15,086
12/31/91 $ 19,612 $ 19,390 $ 11,936 $ 21,294
12/31/92 $ 20,558 $ 20,867 $ 12,290 $ 22,360
12/31/93 $ 21,520 $ 22,973 $ 12,627 $ 23,004
12/31/94 $ 21,694 $ 23,259 $ 12,982 $ 24,935
12/31/95 $ 26,961 $ 31,962 $ 13,310 $ 34,209
12/31/96 $ 31,585 $ 39,300 $ 13,750 $ 42,118
12/31/97 $ 42,139 $ 52,407 $ 13,993 $ 54,954
</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), the Russell 1000 Growth Index and the Consumer Price
Index. The four lines represent the total return of a hypothetical
$10,000 investment made on December 31, 1987 through December 31,
1997.
*Historical performance is 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.
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
For the year ended December 31, 1997 the Portfolio returned 9.42 percent.* The
Portfolio's benchmark, the Lehman Brothers Government Corporate Bond Index,**
returned 9.75 percent for the same period. Our net performance was .33 percent
less than the index benchmark.
PERFORMANCE ANALYSIS
The bond friendly interest rate environment was the primary force that produced
returns in the high single digits. When interest rates fall, bond prices rise,
adding a capital appreciation component to the Portfolio's total return.
Calendar year 1997 was a better-than-average year for bond investors as interest
rates fell across the yield curve. The yield on the two-year U.S. Treasury Note
decreased 23 basis points to yield 5.64 percent, while the yield on the 30-year
U.S. Treasury Bond declined 72 basis points to 5.92 percent.
Subdued inflation continues to be the theme driving interest rates lower.
Our positive outlook on inflation supported our bullish bias throughout the
year. Even though the economy experienced some strong quarterly growth, there
were no signs of inflation in the system. This lack of inflationary pressures
gave us the confidence to maintain above-average duration in the Portfolio
throughout most of the year.
Economic problems, which have been brewing in Asia for some time, came to
the forefront and have received considerable media attention in the fourth
quarter. From an interest rate and yield curve standpoint, the crisis in Asia
has had a positive impact on U.S. Treasury prices. There are two main points
here. First, the U.S. has become an importer of deflation because of the
financial problems in Southeast Asia. The goods produced in this region and
exported to the U.S. have become significantly cheaper for American consumers.
Second, the Asian crisis has removed any near-term possibility that the Federal
Reserve will raise short-term interest rates.
From a security specific standpoint, the Asian crisis has significantly
widened credit spreads on all U.S.-pay international bonds. When spreads widen,
bond prices decline. Two of the Hong Kong-based holdings in the Portfolio,
Guangdong Enterprises and Wharf International Finance, were negatively affected
as their credit spreads widened in the fourth quarter.
There are three main sectors in the fixed income market: U.S. Government
securities, corporate bonds, and mortgage-backed securities. During 1997, all
three sectors performed well, with corporate bonds finishing the year with a
slight lead because of their longer maturities. In the Portfolio we maintained
our over-emphasis on corporate bonds because of their incremental yield and
total return characteristics. This strategy worked very well the first nine
months of the year, but hurt performance in the fourth quarter as credit spreads
widened mainly due to concerns stemming from Southeast Asia.
Our investment approach to the fixed income market is to evaluate all of the
available alternatives and purchase the best possible relative value.
OUTLOOK
We anticipate that 1998 will be a very interesting year for fixed income
investors, a year where having reasonable investment return expectations will be
important. Keep in mind that a successful year in the fixed income market is
where you earn the coupon and generate some price appreciation through lower
interest rates or credit improvement. In this regard, 1997 was a successful year
for investors. Starting the year from a historically low level of interest rates
leaves less room for error. Interest rates can move lower because the
fundamentals of this market are very positive. We have low inflation, moderate
economic growth, and a financial crisis in Asia that will pressure interest
rates lower. We think 1998 will be an "earn the coupon" year with the
opportunity for some moderate price appreciation as interest rates trade in a
lower range.
Of the three fixed income sectors, U.S. Treasury notes and bonds will likely
offer excellent value in the upcoming year. With worldwide financial uncertainty
there will be a flight to quality, and the U.S. Treasury market offers a lower
risk opportunity to investors. As the U.S. budget deficits shrinks, a smaller
supply of U.S. Treasury securities will be met with higher demand. This should
be a positive for the bond market. To take advantage of this flight to quality,
the U.S. Treasury component of the Portfolio will be increased at the expense of
corporate bonds. Corporate bonds will continue to be a core holding, but to a
lesser degree. The Asian crisis will likely continue to have a negative impact
on corporate spreads, (pushing them wider) so we will cut back on out corporate
exposure in 1998.
6
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
U.S. Treasury 20.1%
U.S. Government
Agencies 13.3%
AAA Rated 14.3%
AA Rated 3.2%
A Rated 19.0%
BBB Rated 17.9%
BB Rated 2.3%
Preferred Stock 7.5%
Cash and Other
Assets/Liabilities 2.4%
</TABLE>
TEN LARGEST BOND HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF BOND
COMPANY VALUE PORTFOLIO
- ------------------------------------------------------------ ------------ -----------
<S> <C> <C>
US Treasury Note--6.375%, 09/30/01.......................... $ 10,209,370 8.1%
Lehman Brothers, Inc.--7.360%, 12/15/03..................... 5,768,312 4.6%
Federal Home Loan Bank--7.105%, 05/06/02.................... 5,739,598 4.5%
PNC Bank Corporation--6.728%, 01/25/07...................... 5,677,342 4.5%
US Treasury Note--7.750%, 02/15/01.......................... 5,290,625 4.2%
Morgan Stanley Dean Witter--6.875%, 03/01/07................ 5,110,900 4.1%
Time Warner Incorporated--6.100%, 12/30/01.................. 4,910,170 3.9%
Bellsouth Telecommunications--6.500%, 06/15/05.............. 4,788,148 3.8%
Wells Fargo Capital--7.960%, 12/15/26....................... 4,683,184 3.7%
General Electric Capital Corporation--6.660%, 05/01/18...... 4,472,856 3.5%
------------ -----------
$ 56,650,505 44.9%
------------ -----------
------------ -----------
</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 9.4%
Five years 7.3%
Ten years 8.7%
Lehman Brothers
Bond Government
Corporate Bond
(Thousands) Portfolio Index CPI
12/31/87 $ 10,000 $ 10,000 $ 10,000
12/31/88 $ 10,708 $ 10,759 $ 10,441
12/31/89 $ 12,062 $ 12,290 $ 10,916
12/31/90 $ 12,934 $ 13,309 $ 11,590
12/31/91 $ 15,211 $ 15,455 $ 11,936
12/31/92 $ 16,225 $ 16,629 $ 12,290
12/31/93 $ 17,889 $ 18,505 $ 12,627
12/31/94 $ 17,074 $ 17,859 $ 12,982
12/31/95 $ 20,446 $ 20,978 $ 13,310
12/31/96 $ 21,052 $ 21,586 $ 13,750
12/31/97 $ 23,036 $ 23,693 $ 13,993
</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, 1987
through December 31, 1997.
*Historical performance is 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 Money Market Portfolio's total return for the year ended December 31, 1997
was 5.11 percent.* The seven-day compounded yield at December 31, 1997 was 5.16
percent.* At the end of the reporting period, the yield on the three-month U.S.
Treasury Bill was 5.34 percent.
PERFORMANCE ANALYSIS
With low inflation and moderate economic growth, short-term interest rates have
been extremely stable over the past few years. For 1997, the yield on the
three-month U.S. Treasury Bill increased 15 basis points to yield 5.34 percent.
This is still below the Fed Funds rate, which is targeted at 5.50 percent. With
the Federal Reserve keeping its monetary policy unchanged, short-term interest
rates have traded in a very narrow range. In the Money Market Portfolio, the
average days to maturity was 45 days, slightly shorter than the average money
market fund.
The financial crisis in Asia has not directly impacted the quality of U.S.
commercial paper issuers, but it has had an impact on short-term U.S. interest
rates. The Asian crisis removed the immediate possibility for the Federal
Reserve to raise short-term interest rates and has actually increased the
likelihood that the Fed's next move would be to lower interest rates. The
uncertainty in Asia should lead to stable or falling short-term interest rates.
Corporate commercial paper continues to be the Portfolio's major emphasis
because of its yield advantage over U.S. Treasury Bills and Agency paper. At
year-end, 92 percent of the portfolio was invested in high quality commercial
paper (i.e. first tier or A-1/P-1 commercial paper).
OUTLOOK
Short-term interest rates will be driven by Federal Reserve action and economic
activity. With the currency problems and economic uncertainties in Asia, the
Federal Reserve Board will likely be forced to either leave short-term rates
unchanged or eventually lower them in the first half of 1998. With inflation
non-existent and economic growth slowing, look for money market rates to decline
slightly as 1998 progresses.
Our emphasis will continue to be on corporate commercial paper because it
offers greater yield potential in this market. We will also seek to extend the
average days of maturity in the Portfolio to take advantage of what we believe
to be higher short-term interest rates early in the year.
8
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Average Days to
Maturity
Number of
Days
<S> <C>
1/2/97 50
1/8/97 45
1/15/97 45
1/22/97 40
1/29/97 39
2/5/97 39
2/12/97 39
2/19/97 36
2/26/97 31
3/5/97 30
3/12/97 38
3/19/97 32
3/26/97 37
4/2/97 37
4/9/97 40
4/16/97 46
4/23/97 46
4/30/97 41
5/7/97 38
5/14/97 40
5/21/97 38
5/28/97 32
6/4/97 36
6/11/97 41
6/18/97 41
6/25/97 36
7/2/97 38
7/9/97 40
7/16/97 47
7/23/97 49
7/30/97 50
8/6/97 45
8/13/97 40
8/20/97 43
8/27/97 40
9/3/97 18
9/10/97 23
9/17/97 18
9/24/97 57
10/1/97 51
10/8/97 45
10/15/97 39
10/22/97 42
10/29/97 38
11/5/97 38
11/12/97 42
11/19/97 51
11/26/97 51
12/3/97 45
12/10/97 41
12/17/97 39
12/24/97 50
12/31/97 45
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Seven-Day Compound
Yield*
Percentage
<S> <C>
1/2/97 4.84%
1/8/97 4.86%
1/15/97 4.84%
1/22/97 4.92%
1/29/97 4.98%
2/5/97 4.64%
2/12/97 4.93%
2/19/97 4.90%
2/26/97 4.90%
3/5/97 4.88%
3/12/97 4.88%
3/19/97 4.87%
3/26/97 4.87%
4/2/97 4.90%
4/9/97 4.96%
4/16/97 5.73%
4/23/97 5.08%
4/30/97 5.08%
5/7/97 5.08%
5/14/97 5.15%
5/21/97 5.21%
5/28/97 5.16%
6/4/97 4.80%
6/11/97 5.22%
6/18/97 5.27%
6/25/97 5.21%
7/2/97 5.23%
7/9/97 5.28%
7/16/97 5.23%
7/23/97 4.82%
7/30/97 5.30%
8/6/97 5.27%
8/13/97 5.58%
8/20/97 5.29%
8/27/97 5.20%
9/3/97 5.41%
9/10/97 5.26%
9/17/97 5.17%
9/24/97 5.20%
10/1/97 5.10%
10/8/97 5.17%
10/15/97 5.23%
10/22/97 6.82%
10/29/97 4.70%
11/5/97 4.59%
11/12/97 5.00%
11/19/97 5.13%
11/26/97 5.26%
12/3/97 5.17%
12/10/97 5.19%
12/17/97 5.03%
12/24/97 5.47%
12/31/97 5.16%
</TABLE>
The seven-day compound 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 performance is 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
The Asset Allocation Portfolio earned 18.99 percent* for the year ended December
31, 1997. The Portfolio's benchmark, a blend comprised of 60 percent Russell
1000 Growth Index** and 40 percent Lehman Brothers Aggregate Bond Index+ earned
11.62 percent for the same period.
In prior reporting periods, the Merrill Lynch-Wilshire Capital Markets
Index++ was used as the Portfolio's benchmark. The Merrill Lynch-Wilshire
Capital Markets Index,++ which includes all publicly traded equity and debt
securities now assigns a disproportionate weighting to equities. A blend,
comprised of 60 percent Russell 1000 Growth Index** and 40 percent Lehman
Brothers Aggregate Bond Index+, is a more appropriate benchmark for our
conservative asset allocation approach in the Advantus Series Fund Asset
Allocation Portfolio. The Portfolio's performance will be compared to this blend
of indices (60 percent Russell 1000 Growth Index** and 40 percent Lehman
Brothers Aggregate Bond Index+) going forward.
PERFORMANCE ANALYSIS
Solid performance was demonstrated on both the stock and bond sides of the
Portfolio. Stocks in the Portfolio were bolstered with an overweighted position
in Financials, a strong performer throughout the year, and an underweighted
position in Technology, which became a falling star in the fourth quarter. We
were also underweighted in Consumer Staples, which was one of the strongest
sectors of the market.
Our economy continues to experience moderate growth and low inflation. Lower
inflationary pressures in the U.S. economy have lead to higher price to earnings
valuations in the stock market--a continuing theme over the past few years.
Lower inflation has also lead to lower bond yields. This prompted us in November
to decrease the Portfolio's bond allocation to 35 percent from 40 percent. The
currency crisis in Asia indirectly fueled the bond market rally in the U.S. and
created an opportunity to sell bonds and add stocks to the Portfolio.
Our target asset allocation, as of December 31, 1997, was 55 percent stocks,
35 percent bonds and 10 percent cash. We have been opportunistic to achieve this
asset allocation. By taking advantage of the bond rally and the trickle-down
effects of the Asian economic crisis, the rebalancing in November allows us to
manage the Portfolio consistently with its stated objective. The Portfolio's
objective charges us with seeking as high a level of long-term total rate of
return as is consistent with prudent investment risk for investors. We do this
by investing for capital appreciation in companies with superior long-term
growth potential. We also maintain positions in quality, fixed income securities
to generate income and provide stability for investors.
OUTLOOK
Near term, there are several events lining up to make 1998 a difficult year to
show strong corporate earnings growth. The year 2000 issues will force companies
to spend money on people to fix problems rather than purchasing new systems. The
Asian situation will likely slow economic growth and lead to increased pricing
pressure as Asia's cost of production has fallen dramatically. Finally, the
strong earnings of 1997 have set a tough standard to beat in 1998.
A return to more "normal" performance from the stock market is likely during
the first half of 1998. Given the historically high valuations placed on stocks,
and the slowing earnings growth rate, it is not likely that stocks will gain 20
percent like they did in the first half of 1997. With slowing economic
pressures, no signs of inflation, and a Federal Reserve that cannot really
tighten until the Asian situation is resolved, bonds look to provide moderate
yet attractive returns for the first half of 1998.
10
<PAGE>
FIVE LARGEST COMMON STOCK HOLDINGS
<TABLE>
<CAPTION>
% OF
COMMON
MARKET STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ -------- ------------- ----------
<S> <C> <C> <C>
General Electric Company.................................... 186,552 $ 13,688,253 4.6%
Tyco International Ltd...................................... 241,598 10,887,010 3.7%
Service Corporation International........................... 264,800 9,781,050 3.3%
Omnicom Group............................................... 230,008 9,746,589 3.3%
Philip Morris Companies, Inc................................ 201,200 9,116,875 3.0%
------------- ----------
$ 53,219,777 17.9%
------------- ----------
------------- ----------
</TABLE>
BOND PORTFOLIO CHARACTERISTICS--QUALITY BREAKDOWN
<TABLE>
<CAPTION>
% OF BOND
RATING PORTFOLIO
- ------------------------------------------------------------ ----------
<S> <C>
U.S. Treasury............................................... 18.2%
U.S. Government Agencies.................................... 11.3%
AAA rated................................................... 15.5%
AA rated.................................................... 5.6%
A rated..................................................... 23.1%
BBB rated................................................... 22.3%
BB rated.................................................... 4.0%
----------
100.0%
----------
----------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Bonds 32.6%
Common Stocks 58.5%
Preferred Stocks 2.3%
Cash and Other
Assets/Liabilities 6.6%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN ASSET ALLOCATION PORTFOLIO,
A BLENDED INDEX OF 60 PERCENT RUSSELL 1000 GROWTH INDEX AND
40 PERCENT LEHMAN BROTHERS AGGREGATE BOND INDEX, 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> <C>
One year 19.0%
Five year 11.9%
Ten year 12.9%
(Thousands)
Merrill
Lynch-Wilshire
Asset Capital
Allocation Markets Blended
Portfolio Index CPI Index
12/31/87 $10,000 $10,000 $10,000 $10,000
12/31/88 $11,109 $11,323 $10,634 $11,000
12/31/89 $13,351 $13,769 $11,118 $13,987
12/31/90 $13,833 $13,909 $11,805 $14,499
12/31/91 $17,828 $17,388 $12,157 $18,980
12/31/92 $19,124 $18,854 $12,518 $20,125
12/31/93 $20,360 $20,886 $12,861 $21,271
12/31/94 $20,075 $20,609 $13,222 $21,370
12/31/95 $25,097 $26,514 $13,556 $27,666
12/31/96 $28,234 $30,170 $14,004 $31,808
12/31/97 $33,595 $37,115 $14,252 $38,828
</TABLE>
On the chart above you can see the Asset Allocation Portfolio's
total return compared to the Merrill Lynch-Wilshire Capital Markets
Index, a blended index of 60 percent Russell 1000 Growth Index and 40
percent Lehman Brothers Aggregate Bond Index, and the Consumer Price
Index. The four lines represent the cumulative total return of a
hypothetical $10,000 investment made on December 31, 1987 through
December 31, 1997.
*Historical performance is 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 Lehman Brothers Aggregate Bond Index is comprised of the Lehman
Brothers Government/Coproate Index, the Lehman Brothers
Mortgage-Backed Securities Index and the Lehman Brothers
Asset-Backed Securities Index.
++The Merrill Lynch-Wilshire Capital Markets Index is a market
value-weighted index measuring the total return performance of the
combined domestic taxable fixed income and equity markets. It
includes the entire domestic common stock universe for which daily
pricing is available, as well as all publicly placed domestic
taxable debt issues with at least one year remaining to maturity and
at least ten million dollars par value outstanding.
11
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
PERFORMANCE UPDATE
KENT WEBER, CFA
PORTFOLIO MANAGER
[PHOTO]
The Mortgage
Securities
Portfolio seeks a
high level of
current income consistent
with prudent investment risk.
The Mortgage Securities
Portfolio will invest
primarily in mortgage-related
securities.
PERFORMANCE
The Mortgage Securities Portfolio returned 9.14 percent* for the year ended
December 31, 1997. The Portfolio's benchmark, the Lehman Brothers
Mortgage-Backed Securities Index,** returned 9.49 percent for the same period.
PERFORMANCE ANALYSIS
Broadly speaking, this is the second straight year that the mortgage market
outperformed duration-matched Treasuries. In 1997, the performance was about 1.2
percent on average. A relatively benign interest rate environment steadily
improved credit fundamentals and helped to propel the mortgage market forward.
Never the less, with interest rates moving lower throughout the reporting
period, the mortgage market has seen its duration shorten from 3.7 years to 2.5
years, which truly makes the mortgage market a low duration asset class.
The Portfolio's duration was held 10 to 12 percent longer than the index
throughout the reporting period. This benefited the Portfolio, as interest rates
fell by about .5 percent, thus adding some price appreciation on top of healthy
income.
We are always watchful of prepayment risk. Prepayment concerns escalated as
interest rates moved lower. Our stance grew more conservative as we moved to
protect the Portfolio by reducing our exposure to securities with higher loan
rates--the securities most likely to be refinanced.
Throughout the year, we added mortgages that we felt rewarded us for the
amount of risk we incurred. When interest rates began moving lower, the
following strategies were put in place:
- Reduced exposure to mortgages with high loan rates.
- Continued emphasis on securities that are prepayment challenged or carry
restricted rights to prepay.
- Overweight in vintage securities (i.e., well-seasoned mortgage
securities of about five to 10 years), as compared to new issues.
- Purchased AAA rated securities consisting of mortgage loans with low
balances (below $65,000) made to first time homeowners at below market
interest rates.
- Development of a more broadly diversified portfolio to avoid reliance on
any one sector of the mortgage market.
- Increased allocation of commercial mortgage-backed securities.
- Increased holdings in non-agency, investment-grade securities.
(Investment-grade securities are those rated BBB and above.)
The Asian currency situation has elicited some secondary effects in the
mortgage market. It has put downward pressure on domestic and global interest
rates and inflation, which have rekindled the topic of refinancing (and
prepayments). Fortunately, not all mortgage securities are created equally which
allows the market to treat prepayments like stock earnings with respect to
meeting--or not meeting--expectations on how the price moves.
OUTLOOK
We see the Portfolio's position as well situated. It is broadly diversified,
utilizing numerous sectors of the mortgage market. We are also ready to handle
an inherent increase in volatility that occurs due to the low interest rate
levels. We like high quality securities from both a credit and cash flow
perspective. Some predictability is comforting.
There may be opportunity for some price appreciation on top of coupon
income, which could potentially lead to mid to high single digits for 1998. We
anticipate that the market will experience slow growth and mild inflation, which
sets the stage for a fixed-income friendly year. Although we are in the late
innings of the recovery that started in 1993, we see no recession looming.
12
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
U.S. Government and
Agencies 28.0%
AAA Rated 26.5%
AA Rated 10.2%
A Rated 16.0%
BBB Rated 13.8%
Preferred Stock 2.0%
Cash and Other
Assets/Liabilities 3.5%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Public Issues 64.2%
Private Placements 6.0%
Private 144A Issue 24.3%
Preferred Stock 2.0%
Cash and Other
Assets/Liabilities 3.5%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
FHLMC MBS 3.2%
FNMA MBS 6.5%
GNMA MBS 11.7%
VA Vendee MBS 6.7%
Asset Backed Securities 8.5%
CMOs/MRBs 21.4%
Whole Loan MBS 27.5%
Commercial MBS 7.5%
Corporate/Agency Bonds 1.5%
Preferred Stock 2.0%
Cash and Other
Assets/Liabilities 3.5%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN MORTGAGE SECURITIES PORTFOLIO,
LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX
AND CONSUMER PRICE INDEX.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Average annual total
return:
<S> <C> <C> <C>
One year 9.1%
Five year 7.4%
Ten year 9.1%
Lehman
Brothers
Mortgage Mortgage-Backed
Securities Securities
Portfolio Index CPI
12/31/87 $10,000 $10,000 $10,000
12/31/88 $10,858 $10,872 $10,441
12/31/89 $12,325 $12,539 $10,916
12/31/90 $13,487 $13,885 $11,590
12/31/91 $15,681 $16,066 $11,936
12/31/92 $16,679 $17,183 $12,290
12/31/93 $18,222 $18,327 $12,627
12/31/94 $17,608 $18,031 $12,982
12/31/95 $20,778 $21,059 $13,310
12/31/96 $21,870 $22,157 $13,750
12/31/97 $23,869 $24,260 $13,993
</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 December 31, 1987 through December 31, 1997.
*Historical performance is 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
For the year ended December 31, 1997, the Index 500 Portfolio returned 32.36
percent.* The S&P 500** returned 33.34 percent for the same period.
PERFORMANCE ANALYSIS
The 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 conduct of
the S&P 500.**
The Utilities and Energy sectors lagged the market during the first three
quarters of 1997. They rebounded in the fourth quarter and achieved significant
gains. Technology's high weighting in the index detracted significantly from the
performance.
OUTLOOK
The Asian currency problems are likely to be reflected in corporate earnings
during the first half of 1998. If corporate earnings lag in 1998, the Asian
debacle will be blamed for shortfalls that occur. Low interest rates will likely
continue to provide a very important floor for stocks. We anticipate moderate
growth, as well.
14
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ------------ -----------
<S> <C> <C> <C>
General Electric Company.................................... 164,800 $ 12,092,200 3.2%
Coca-Cola Company........................................... 120,600 8,034,975 2.1%
Microsoft Corporation....................................... 60,500 7,819,625 2.1%
Exxon Corporation........................................... 122,100 7,470,994 2.0%
Merck & Co., Inc............................................ 58,700 6,236,875 1.6%
Royal Dutch Petroleum....................................... 104,300 5,651,756 1.5%
Intel....................................................... 79,400 5,577,850 1.5%
Philip Morris Companies, Inc................................ 120,000 5,437,500 1.4%
Procter & Gamble Company.................................... 65,668 5,241,127 1.4%
International Business Machine.............................. 47,800 4,998,088 1.3%
------------ -----------
$ 68,560,990 18.1%
------------ -----------
------------ -----------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Basic Materials 4.9%
Capital Goods 8.9%
Communication Services 7.1%
Consumer Cyclical 10.2%
Consumer Staples 14.6%
Energy 8.3%
Financial 17.0%
Health Care 11.0%
Technology 12.9%
Transportation 1.4%
Utilities 3.3%
Cash and Other
Assets/Liabilities .4%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE**
A HYPOTHETICAL $10,000 INVESTMENT IN INDEX 500 PORTFOLIO,
S&P 500 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 32.4%
Five year 19.6%
Ten year 17.4%
Index 500
Portfolio S&P 500 CPI
12/31/87 $10,000 $10,000 $10,000
12/31/88 $11,602 $11,657 $10,634
12/31/89 $15,159 $15,346 $11,118
12/31/90 $14,564 $14,864 $11,805
12/31/91 $18,897 $19,390 $12,157
12/31/92 $20,292 $20,867 $12,518
12/31/93 $22,272 $22,973 $12,861
12/31/94 $22,535 $23,259 $13,222
12/31/95 $30,835 $31,962 $13,556
12/31/96 $37,508 $38,009 $14,004
12/31/97 $49,647 $50,245 $14,252
</TABLE>
On the chart above you can see how the Index 500 Portfolio's total
return compared to the S&P 500 Index (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, 1987 through December 31, 1997.
+"Standard & Poor's-Registered Trademark-",
"S&P-Registered Trademark-", "S&P 500-Registered Trademark-",
"Standard & Poor's 500", and "500" are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by the Advantus
Series Fund, Inc.--Index 500 Portfolio. The Portfolio is not
sponsored, endorsed, sold or promoted by Standard & Poor's and
Standard & Poor's makes no representation regarding the advisability
of investing in the Portfolio.
*Historical results are not an indication of future performance.
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.
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 Advantus Capital
Management, Inc. 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 third consecutive year, the equity market exceeded most investors'
expectations. Total return for the Capital Appreciation Portfolio was 28.26
percent* for the year ended December 31, 1997. The Portfolio's benchmark, the
Russell 1000 Growth Index** gained 30.48 percent for the year, while the S&P 500
Index+ advanced 33.34 percent.
PERFORMANCE ANALYSIS
Although absolute returns were highly favorable in 1997 and considerably
exceeded the long-term annual equity returns of 10.8 percent, again only a small
minority of money managers outperformed their appropriate benchmarks. According
to Indata, a company that monitors investment performance, the S&P 500+ beat 87
percent of all equity mutual funds in 1997 and 90 percent of all large cap
growth funds for the last five years.
The year ended December 31, 1997, marks the fourth year in a row the largest
stocks performed best. Only 35 stocks in the Russell 1000 Growth Index** have a
market capitalization greater than $34 billion. These mega cap stocks returned
in excess of 35 percent and outperformed all other market capitalization
sectors. Over their four years of outperformance, they have experienced
annualized returns of 28 percent, nearly 10 percent higher than the broad market
results.
The investment philosophy of the Portfolio is based on the belief that
owning companies with above-average future earnings growth potential will
produce superior investment return potential 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.
The Portfolio was able to overcome the underperformance of medium
capitalization companies through strong stock selection in a variety of
different sectors. Over the last two years the Portfolio has maintained an
overweighted position in technology and specialty retail companies. Many of
these companies outperformed the market in 1997. An example includes Dollar
General Corporation (+75 percent), Home Depot, Inc. (+75 percent), Kohl's Inc.
(+73 percent), Computer Associates International (+64 percent) and Microsoft
Corporation (+59 percent).
During the fourth quarter, the companies in the Portfolio reported an
average increase in earnings of 32 percent compared with a year ago. This gives
us confidence that the companies will be able to achieve our projected growth
rate in earnings per share for 1998 of 25 percent. While the Portfolio sells at
a moderate P/E premium to S&P 500,+ it has delivered several times the expected
growth of the index. In our opinion, this is an attractive combination of
relative valuation and strong future earnings growth.
OUTLOOK
The question now is whether the largest companies will continue to outperform or
whether the broad market will exhibit better relative performance in 1998. For
two major reasons, earnings and valuation, it is our belief that the broad
market is poised to take the lead. We expect gross domestic product (GDP) growth
in the U.S. to slip from 3.5 percent in 1997 to around 2 percent in 1998. In
this environment, earnings growth is much more dependent on unit gains. We
believe the problems from the Asian turmoil will probably be somewhat worse than
expected. However, the difficulties are not significant enough to derail the
U.S. economic outlook. Corporate profits could be moderately affected, so we
expect flat to slightly up S&P 500+ earnings. With inflation declining to 1.5
percent or lower, interest rates may recede further providing support for the
current S&P 500+ price/earnings ratio of 19x. The biggest risk is that earnings
are disappointing and the stock market declines even in a falling interest rate
environment.
We remain committed to our investment discipline of searching out those
opportunities in companies with the demonstrated ability to grow their
businesses at above-average rates regardless of the near-term macro economic
environment. This commitment has allowed the Portfolio to outperform all major
market indices, including its benchmark index, the Russell 1000 Growth Index,**
for the last three quarters. On balance, we continue to believe the large and
competitive U.S. economy provides many opportunities to find good growth ideas.
16
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Basic Materials 1.8%
Capital Goods 7.4%
Communication Services 5.0%
Consumer Cyclical 20.5%
Energy 8.7%
Financial 15.0%
Health Care 11.1%
Technology 29.2%
Cash and Other
Assets/Liabilities 1.3%
</TABLE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- -------------- ----------
<S> <C> <C> <C>
Cisco Systems, Inc.......................................... 263,250 $ 14,676,188 5.0%
Computer Associates International........................... 241,600 12,774,600 4.4%
Schlumberger Limited........................................ 153,700 12,372,850 4.2%
Home Depot, Inc............................................. 208,800 12,293,071 4.2%
Federal National Mortgage Association....................... 202,600 11,560,863 4.0%
Parametric Technology Corporation........................... 232,400 11,009,950 3.8%
Warner-Lambert Company...................................... 80,800 10,019,200 3.4%
Wal-Mart Stores............................................. 247,500 9,760,781 3.4%
MGIC Investment Corporation................................. 133,900 8,904,350 3.1%
Cendant Corporation......................................... 253,500 8,714,062 3.0%
-------------- -----
$ 112,085,915 38.5%
-------------- -----
-------------- -----
</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 28.3%
Five year 15.9%
Ten year 16.4%
Russell
Capital 1000
Appreciation Growth
Portfolio Index CPI
12/31/87 $10,000 $10,000 $10,000
12/31/88 $10,778 $11,127 $10,441
12/31/89 $14,894 $15,124 $10,916
12/31/90 $14,589 $15,086 $11,590
12/31/91 $20,686 $21,294 $11,936
12/31/92 $21,729 $22,360 $12,290
12/31/93 $23,997 $23,004 $12,627
12/31/94 $24,537 $24,935 $12,982
12/31/95 $30,126 $34,209 $13,310
12/31/96 $35,432 $42,118 $13,750
12/31/97 $45,445 $54,954 $13,993
</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 December 31, 1987 through
December 31, 1997.
*Historical performance is 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
GARY CLEMONS
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 Advantus
Capital Management, Inc. acts
as investment adviser for the
portfolio, Templeton
Investment Counsel, Inc.
provides investment advice to
the International Stock
Portfolio under a subadvisory
agreement.
PERFORMANCE
The International Stock Portfolio increased 11.94 percent* for the year ended
December 31, 1997, versus the Morgan Stanley Capital EAFE Index** return of 2.03
percent for the same period. On average, the Portfolio has returned 17.09
percent per year for the five-year period ending December 31, 1997, compared to
the EAFE** average annual return of 11.70 percent over the same period.
PERFORMANCE ANALYSIS
International equity markets had mixed results during 1997. The European and
Latin American markets were strong, while the Asian markets suffered a material
downfall. The economic crisis in Southeast Asia that occurred late in the year
dominated economic news and sent a ripple effect throughout international equity
markets, as investors feared the effect of the crisis on global economic growth.
The Portfolio therefore benefited from large positions in strong-performing
European equities and a modest exposure to Asia.
The Portfolio's largest regional exposure is in Europe, with approximately
72.8 percent of the Portfolio's total assets invested in European equities. With
continued growth in corporate earnings, subdued inflation and success in
corporate restructuring, we continue to find value in this area. This high
exposure fared well, as some of the Portfolio's strongest contributors were
European names, including Banco Bilboa, BG PLC and Deutsche Bank, which posted
84.1 percent,* 69.3 percent* and 54.2 percent* returns for the year,
respectively.
The turbulence in Asian economies dominated global economic news and sent a
shock throughout international markets in the latter portion of 1997. Increased
worries from currency weaknesses and bad debts in Asian corporations resulted in
material contractions in stock prices throughout the region, and the majority of
Asian markets posted double-digit declines. Due to a relatively low exposure of
only 8.5 percent of total assets in the Asian markets, the Portfolio was
somewhat protected from the economic turmoil.
Latin American equity markets also performed well over 1997. This region
currently represents approximately 9.1 percent of the Portfolio's total assets.
A notable performer from the region and one of the Portfolio's largest holdings
included Telecomunicacoes Brasileiras SA, the Brazilian national telephone
company, which increased 56 percent* over the year. The Latin American markets
experienced a downturn in the latter portion of the year, however, in response
to the economic crisis in Asia. We feel that this correction has increased
investment opportunities and we continue to search for bargains in the area.
OUTLOOK
Going forward, we remain optimistic towards the international equity markets.
When compared to U.S. equities, which remain at historically high valuations,
international equities appear better able to provide value. While the Asia
crisis has warranted extra caution for investing in this area, we view the
recent downturn in the Asian markets as an opportunity to find bargains.
We will continue to use our disciplined approach to purchase undervalued
securities, while maintaining a balanced portfolio to continue to achieve strong
long-term performance for the Portfolio.
18
<PAGE>
TEN LARGEST COMMON STOCK HOLDINGS
<TABLE>
<CAPTION>
% OF COMMON
MARKET STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ --------- ----------- -----------
<S> <C> <C> <C>
BTR PLC..................................................... 2,394,400 $ 7,234,312 2.9%
AXA......................................................... 87,427 6,766,620 2.7%
BG PLC...................................................... 1,433,382 6,449,042 2.6%
YPF Sociedad Anonima ADS.................................... 176,400 6,030,675 2.4%
Deutsche Bank............................................... 82,050 5,738,847 2.3%
Rhone-Poulenc............................................... 122,325 5,480,941 2.2%
Telecom Italia SPA-RNC...................................... 1,105,000 4,875,000 1.9%
Regie Des Usines Renault.................................... 170,398 4,794,479 1.9%
Volvo....................................................... 178,500 4,790,045 1.9%
British Steel PLC........................................... 2,225,400 4,768,714 1.9%
----------- -----
$56,928,675 22.7%
----------- -----
----------- -----
</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 11.9%
Five year 17.1%
Since inception
(May 1, 1992) 13.5%
International
Stock EAFE
Portfolio Index CPI
5/01/92 $10,000 $10,000 $10,000
12/31/92 $9,319 $8,156 $10,143
12/31/93 $13,434 $10,843 $10,421
12/31/94 $13,391 $11,722 $10,713
12/31/95 $15,296 $13,088 $10,984
12/31/96 $18,324 $13,916 $11,347
12/31/97 $20,511 $14,198 $11,548
</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, 1997.
*Historical performance is 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 Morgan Stanley Capital 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
The Small Company Portfolio returned 7.75 percent* for the year ended December
31, 1997. Its benchmark, the Russell 2000 Growth Index,+ returned 12.94 percent
for the same period.
In prior reporting periods, the Wilshire MidCap Index++ was used as the
Portfolio's benchmark. The Russell 2000 Growth Index+ better reflects the size
and style bias of a small company growth portfolio than does the Wilshire MidCap
Index,++ which no longer corresponds to the market capitalization of the Small
Company Portfolio. The Portfolio's performance will be compared to the Russell
2000 Growth Index+ going forward.
PERFORMANCE ANALYSIS
The Portfolio's performance over the past year lagged its benchmark index, and
hence did not meet our expectations. Before addressing some topics specific to
the Portfolio's performance, let's briefly discuss the small company growth
"climate" as compared with other equity securities.
For the third consecutive year, domestic stocks posted strong results.
Investors' thirst for liquidity and perceived quality of larger stocks drove the
valuations of larger stocks to all-time highs. Meanwhile, small-and mid-sized
stocks lost ground, and smaller growth stocks were left in the dust.
The indices show the Russell 1000 Index+ of larger stocks returned 32.86
percent for the year, while the Russell 2000 Growth Index+ (e.g. our benchmark
index) returned 12.94 percent. These indices are very different because they
reflect distinctly different segments of the equity market. Numerous earnings
announcements, which came in below expectations, led to a significant division
between large and small stocks and also within small stocks (between those
considered growth stocks and value-oriented stocks).
Investors who put their money into small stocks selected companies where
they were comfortable with current earnings and low valuations, but forfeited
the "potential" growth expected in faster growth stocks with higher betas. (Beta
is a method of measuring the volatility of a stock in comparison with the market
as a whole. Beta values above 1.0 indicate volatility.)
For the year, the top performing sectors within the Russell 2000 Growth
Index+ of smaller companies were Consumer Staples and Utilities. Both areas had
absolute returns of more than 40 percent. However, due to their small weights in
the index, they made limited contributions to overall results. Technology was
the worst absolute performing sector, gaining only .2 percent, while Health Care
returned 8.9 percent. Technology and Health Care stocks comprised more than 35
percent of the index weight, thus holding back results significantly. The top
contributor to performance in the index was the Consumer Discretionary sector.
Strong performers in the Portfolio for the period included a number of
companies in the capital goods area. These economically sensitive stocks
continue to have strong operating performance and outlooks. Included in this
group is American Disposal Services, Inc., a solid waste company that has
demonstrated outstanding growth through internal operations and has acted as a
consolidator in its industry, opening new territories for the company. Another
strong performer, Kaydon Corporation, designs and manufactures custom-engineered
specialty products, including anti-friction bearings, bearing systems, custom
rings, and seals. These products are used in a wide variety of medical,
aerospace and industrial applications. Continued growth in their end markets and
the specialty nature of these products have led to very strong operating
performance and growth for the company.
As mentioned earlier, technology stocks were the worst performers in the
market, as well as in our portfolio. Earnings disappointments and concerns about
the impact of the Asian economic crisis have negatively impacted many of these
stocks. Stocks like Danka Business Systems (worldwide distributor of
photocopiers and other business machines) and CKS Group Incorporated (marketing
communications services) had significant earnings disappointments due to poorly
executed corporate strategies. Neither company is currently held in the
Portfolio.
Consumer cyclical stocks, which include retail and restaurants, always seem
to be a large part of our Portfolio due to the number of high growth
opportunities in this sector. The year brought mixed results in this area with
retailers, such as Borders Group Incorporated (book superstores) and Pacific
Sunwear of California (young men's and women's apparel) doing well, while
apparel manufacturers, such as Nautica Enterprises, Inc. were hurt by the
perception of slowing demand and inventory concerns. Restaurant companies, such
as Boston Chicken Incorporated and Lone Star Steakhouse & Saloon, Inc.,
performed poorly and were sold during the year.
Much of the underperformance, outside of Technology, can be pinned to a
handful of investments in companies that reported well below estimated earnings.
Prior to these announced shortfalls, the companies
20
<PAGE>
showed strong operating results with no signs of trouble. Each company was
seemingly healthy and growing well when investors were told of an unexpected
earnings shortfall. The shortfalls stemmed from a variety of reasons, and in a
few cases, the company's management was less than forthright prior to the
problem.
Small company stocks are volatile. When investing in small, fast growing
companies, there will be occasional blowups when a company's management is
unable to execute at the fast growth pace. We have made minor, yet appropriate,
changes in how we monitor our companies' results. We want to minimize the
frequency of negative surprises. To do so, we believe careful analysis of a
company's fundamentals holds the key to long-term results. Our overriding focus
remains on long-term results that benefit investors.
OUTLOOK
We remain cautiously optimistic going into 1998. The volatility seen in the
markets, though at times unsettling, is no greater than what we saw in the late
1980s and early 1990s. Given the relatively benign economic backdrop with
moderate growth, little inflation, and declining interest rates, we expect to
continue to find companies that are growing fast and are likely to be rewarded
with higher stock valuations. Notwithstanding the market's fluctuations or the
potential for further problems out of Asia, we believe rigorous analysis of
company fundamentals is the key to long-term investment success and continues to
be our focus.
Our style emphasizes individual stock selection. As such, we do not spend
much time trying to guess which sectors are most attractive. The over- and
underweights of sectors in the Portfolio are a function of the individual
opportunities we find. Certainly, with the sell-off in the energy and technology
areas, several stocks have potentially been painted with the same negative
brush, but are in fact doing exceedingly well. We are considering individual
issues within these areas that fit our investment criteria--specifically
companies with strong fundamentals and reasonable valuations.
FIVE LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ----------- ----------
<S> <C> <C> <C>
Kaydon Corporation.......................................... 219,700 $ 7,167,712 4.1%
Gartner Group Incorporated.................................. 173,900 6,477,775 3.7%
Borders Group Incorporated.................................. 175,140 5,484,071 3.2%
Eagle USA Airfreight, Inc................................... 167,100 4,762,350 2.8%
Fairfield Communities, Inc.................................. 106,200 4,686,075 2.7%
----------- -----
$28,577,983 16.5%
----------- -----
----------- -----
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN SMALL COMPANY PORTFOLIO,
RUSSELL 2000 GROWTH INDEX, WILSHIRE MIDCAP INDEX AND CONSUMER
PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Average annual total
return:
<S> <C> <C> <C> <C>
One year 7.8%
Since inception
(May 3, 1993) 14.6%
Russell
Small Wilshire 2000
Company Midcap Growth
Portfolio Index CPI Index
5/03/93 $10,000 $10,000 $10,000 $10,000
12/31/93 $11,733 $11,295 $10,118 $12,234
12/31/94 $12,456 $11,005 $10,402 $11,938
12/31/95 $16,449 $14,631 $10,665 $15,641
12/31/96 $17,509 $17,187 $11,017 $17,401
12/31/97 $18,867 $21,330 $11,212 $19,654
</TABLE>
On the chart above you can see how the Small Company Portfolio's
total return compared to the Russell 2000 Growth Index, the Wilshire
MidCap Index and the Consumer Price Index. The four 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, 1997.
*Historical performance is 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 and the Russell 2000 Growth Index contain stock
from the Russell 1000 and the Russell 2000, respectively, with a greater than
average orientation. The Russell 1000 and the Russell 2000 are the 1,000 and
2,000 largest companies, respectively, 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 Wilshire MidCap Index is comprised of the bottom 750 companies of the
largest 1,250 domicile companies as measured by capitalization.
21
<PAGE>
MATURING GOVERNMENT BOND 1998 PORTFOLIO
MATURING GOVERNMENT BOND 2002 PORTFOLIO
MATURING GOVERNMENT BOND 2006 PORTFOLIO
MATURING GOVERNMENT BOND 2010 PORTFOLIO
PERFORMANCE UPDATE
KENT WEBER, CFA
PORTFOLIO MANAGER
[PHOTO] The Maturing
Government Bond
1998, 2002, 2006
and 2010
Portfolios seek as high of an
investment return as is
consistent with prudent
investment risk. The
Portfolios invest primarily
in U.S. Government and
Agencies zero coupon fixed
income securities which
mature near the 1998, 2002,
2006 and 2010 liquidation
dates of each Portfolio.
PERFORMANCE
For the year ended December 31, 1997, the Maturing Government Bond Portfolios
generated the following returns:
<TABLE>
<S> <C>
Maturing Government Bond 1998 Portfolio................ 6.09 percent*
Maturing Government Bond 2002 Portfolio................ 8.50 percent*
Maturing Government Bond 2006 Portfolio................ 12.62 percent*
Maturing Government Bond 2010 Portfolio................ 17.87 percent*
</TABLE>
For the year ended December 31, 1997, the Ryan Lab's Treasury Strip
Indexes** of comparable maturity generated the following returns:
<TABLE>
<S> <C>
Ryan Lab's Inc. September 1998 Index................... 6.10 percent**
Ryan Lab's Inc. September 2002 Index................... 9.19 percent**
Ryan Lab's Inc. September 2006 Index................... 13.22 percent**
Ryan Lab's Inc. September 2010 Index................... 17.08 percent**
</TABLE>
PERFORMANCE ANALYSIS
Our investment activities remain focused on tracking the performance of the
respective indices. To reach these goals, we continue to use a variety of
Government Agency bonds. By selectively using Government securities in concert
with Treasury securities, the Portfolios benefit from enhanced diversification,
as well as from the receipt of additional income (over Treasury securities).
As time passes, the duration of each portfolio continues to roll forward
toward its respective maturity. The effective duration of each portfolio now is
as follows:
<TABLE>
<S> <C>
Maturing Government Bond 1998 Portfolio................ .89 years
Maturing Government Bond 2002 Portfolio................ 4.57 years
Maturing Government Bond 2006 Portfolio................ 8.41 years
Maturing Government Bond 2010 Portfolio................ 12.65 years
</TABLE>
OUTLOOK
We see the Portfolios' position as well situated. We are also ready to handle an
inherent increase in volatility that occurs due to the low interest rate levels.
We anticipate that the market will experience slow growth and mild inflation,
which sets the stage for a fixed-income friendly year.
22
<PAGE>
MATURING GOVERNMENT BOND 1998 PORTFOLIO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Israel GTC 5.7%
U.S. Treasury Strips 25.8%
FICO 17.5%
TVA 20.8%
FNMA 20.4%
FHLB 9.5%
Cash and Other
Assets/Liabilities .3%
</TABLE>
MATURING GOVERNMENT BOND 2002 PORTFOLIO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
U.S. Treasury Strips 37.2%
FICO 15.6%
Israel GTC 9.3%
TVA 20.1%
FNMA 17.1%
Cash and Other
Assets/Liabilities .7%
</TABLE>
MATURING GOVERNMENT BOND 2006 PORTFOLIO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
U.S. Treasury Strips 34.9%
FICO 13.0%
Israel GTC 8.9%
Israel State Aid Strips 15.1%
RFC Strip 14.6%
FNMA 13.2%
Cash and Other
Assets/Liabilities .3%
</TABLE>
MATURING GOVERNMENT BOND 2010 PORTFOLIO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
U.S. Treasury Strips 42.4%
FICO 12.6%
Turkey GTC 7.5%
State of Israel Aid
Strip 22.8%
Israel GTC 2.0%
RFC Strip 4.9%
FNMA 7.4%
Cash and Other
Assets/Liabilities .4%
</TABLE>
*Historical performance is 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.
**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 6.1%
Since inception (May
2, 1994) 7.0%
Ryan Labs, Inc.
Maturing September 1998
Government Index
Bond 1998 of Treasury
Portfolio Strips CPI
5/02/94 $10,000 $10,000 $10,000
12/31/94 $10,005 $10,014 $10,149
12/31/95 $11,606 $11,700 $10,405
12/31/96 $12,086 $12,294 $10,749
12/31/97 $12,822 $13,231 $10,939
</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, 1997.
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 8.5%
Since inception (May
2, 1994) 9.3%
Ryan Labs, Inc.
Maturing September 2002
Government Index
Bond 2002 of Treasury
Portfolio Strips CPI
5/02/94 $10,000 $10,000 $10,000
12/31/94 $10,028 $9,943 $10,149
12/31/95 $12,537 $12,857 $10,405
12/31/96 $12,754 $13,028 $10,749
12/31/97 $13,838 $14,612 $10,939
</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, 1997.
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
returns:
<S> <C> <C> <C>
One year 12.6%
Since inception (May
2, 1994) 11.7%
Ryan Labs, Inc.
Maturing September 2006
Government Index
Bond 2006 of Treasury
Portfolio Strips CPI
5/02/94 $10,000 $10,000 $10,000
12/31/94 $10,013 $9,967 $10,149
12/31/95 $13,490 $14,076 $10,405
12/31/96 $13,327 $13,720 $10,749
12/31/97 $15,009 $16,258 $10,939
</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, 1997.
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 17.9%
Since inception (May
2, 1994) 13.7%
Ryan Labs, Inc.
Maturing September 2010
Government Index
Bond 2010 of Treasury
Portfolio Strips CPI
5/02/94 $10,000 $10,000 $10,000
12/31/94 $9,970 $9,892 $10,149
12/31/95 $14,080 $15,112 $10,405
12/31/96 $13,599 $14,276 $10,749
12/31/97 $16,028 $17,854 $10,939
</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, 1997.
*Historical performance is 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.
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
The Value Stock Portfolio returned 21.19 percent* for the year ended December
31, 1997. In comparison, its benchmark, the S&P Barra Value Index,** earned
29.98 percent for the same period.
PERFORMANCE ANALYSIS
The economic situation in Asia that unfolded in the fourth quarter affected the
Portfolio's performance.
As the U.S. lowered its export levels to Asia, our gross domestic product
(GDP) was reduced as well. These results created a rotation away from some
economically sensitive sectors, as investors anticipated slower domestic
activity. This has hurt the Basic Materials, Capital Goods, Energy, and
Technology sectors while boosting Consumer Staples and Utilities.
The Portfolio gained relative performance in the last quarter of the year
from holdings in Financial Services and Basic Materials. The Portfolio's
Financial holdings rose more than the market, and the Portfolio's holdings in
Basic Materials fell less. The largest negative impacts on performance were
Capital Goods, Consumer Staples, and Technology.
A specific holding that impacted the Portfolio's year-end return was Lam
Research Corporation (LRCX), a technology stock that we held for much of the
reporting period. LRCX manufactures its products in the U.S. and exports them to
Asian markets. Consequently, the Far Eastern currency debacle had a negative
effect on Lam Research's earnings. In addition, LRCX stock declined in
anticipation of downward earnings revisions.
Our focus has been--and will remain--on companies that offer both low
relative valuations and expected improvements in operating performance.
OUTLOOK
During the first six months of 1998, we expect that the market and the Portfolio
will continue to be impacted by sentiment swings regarding economic activity and
Asia-related economic issues. No segments of the market stand out as offering
excellent value and rapid improvement in operating performance. The holdings in
the Portfolio represent investments in companies that are attractive, rather
than sector bets.
Within the Portfolio, we will continue to rotate out of relatively
overvalued segments, such as regional Bells and banks, as we find attractive
opportunities. We will also be watchful of buying opportunities as companies
report earnings disappointments related to their Asian operations.
26
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ----------- ----------
<S> <C> <C> <C>
Everest Reinsurance Holdings................................ 253,092 $10,440,045 5.5%
Hormel Foods Corporation.................................... 292,013 9,563,426 5.1%
American Stores Company..................................... 445,798 9,166,721 4.8%
Enron Oil & Gas............................................. 316,300 6,701,606 3.5%
Federated Department Stores................................. 151,200 6,511,050 3.4%
Valero Energy Corporation................................... 203,500 6,397,531 3.4%
Sovereign Bancorp Incorporated.............................. 307,837 6,387,618 3.4%
El Paso Natural Gas Company................................. 93,976 6,249,404 3.3%
Humana...................................................... 300,300 6,231,225 3.3%
Lam Research Corporation.................................... 208,300 6,092,775 3.2%
----------- -----
$73,741,401 38.9%
----------- -----
----------- -----
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Basic Materials 7.1%
Capital Goods 7.6%
Communication Services 4.7%
Consumer Cyclical 9.6%
Consumer Staples 11.5%
Energy 17.8%
Financial 23.4%
Health Care 3.0%
Technology 2.9%
Transportation .4%
Utilities 3.0%
Cash and Other
Assets/Liabilities 9.0%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN VALUE STOCK PORTFOLIO,
S&P 500 BARRA VALUE INDEX AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Average annual total
return:
<S> <C> <C> <C>
One year 21.2%
Since inception (May
2, 1994) 24.1%
Value Stock S&P 500 Barra Value
Portfolio Index CPI
5/02/94 $10,000 $10,000 $10,000
12/31/94 $10,457 $10,062 $10,149
12/31/95 $13,904 $13,784 $10,405
12/31/96 $18,207 $16,816 $10,749
12/31/97 $22,065 $21,859 $10,939
</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, 1997.
*Historical performance is 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 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>
SMALL COMPANY VALUE PORTFOLIO
PERFORMANCE UPDATE
MATTHEW FINN, CFA
PORTFOLIO MANAGER
[PHOTO] The Small Company
Value Portfolio
seeks the
long-term accumulation of
capital. It invests primarily
in the equity securities of
small companies, defined in
terms of market
capitalization and which
appear to have market values
which are low relative to
their underlying value or
future earnings and growth
potential.
PERFORMANCE
The Small Company Value Portfolio returned 2.29 percent* for the period from
October 1 (date of inception) to December 31, 1997. The Russell 2000 Value
Index** returned 1.68 percent for the same period.
PERFORMANCE ANALYSIS
During the fourth quarter, the economic situation in Asia played a role in the
Portfolio's performance. DuPont Photomasks Incorporated (semiconductor supplies)
had substantial business in Asia, and the stock has been sold off in
anticipation of lower earnings.
Stock selection in the Energy, Finance, Technology and Basic Materials
sectors contributed most significantly to positive relative performance versus
the Russell 2000 Value Index.** However, Consumer Cyclical and Capital Goods
stock selection hurt relative performance. The Portfolio was also negatively
impacted by Brown Group, Inc.'s (shoe manufacturing and retailing) announcement
of an earnings shortfall in their Brazilian operations.
OUTLOOK
During the first six months of 1998, we expect that the market and the Portfolio
will continue to be impacted by sentiment swings regarding economic activity and
Asia-related economic issues. No segments of the market stand out as offering
value and rapid improvement in operating performance. The holdings in the
Portfolio represent investments in companies that are attractive, rather than
sector bets.
No substantial changes are planned within the Portfolio. However, we will be
watchful of buying opportunities as companies report earnings disappointments
related to their Asian operations.
28
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ----------- ----------
<S> <C> <C> <C>
Sovereign Bancorp Incorporated.............................. 12,600 $ 261,450 5.4%
Bay View Capital Corporation................................ 6,500 235,625 4.8%
Journal Register Company.................................... 9,700 203,700 4.2%
Amerus Life Holdings........................................ 5,100 188,062 3.9%
Sierra Pacific Resources.................................... 4,800 180,000 3.7%
Learning Company, Inc....................................... 10,800 173,475 3.6%
Wicor, Inc.................................................. 3,700 171,819 3.5%
Peoples Heritage Financial Group, Inc....................... 3,700 170,200 3.5%
RLI Corporation............................................. 3,400 169,362 3.5%
A. Schulman, Inc............................................ 6,300 158,287 3.3%
----------- -----
$ 1,911,980 39.4%
----------- -----
----------- -----
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Basic Materials 6.7%
Capital Goods 9.8%
Consumer Cyclical 11.6%
Consumer Staples 7.1%
Energy 1.7%
Financial 36.4%
Technology 6.5%
Transportation 3.5%
Utilities 10.3%
Cash and Other
Assets/Liabilities 6.4%
</TABLE>
*Historical performance is 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 2000 Value Index contains stock from the Russell 2000 with low
price to book ratios. The Russell 2000 are the 2,000 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.
29
<PAGE>
INTERNATIONAL BOND PORTFOLIO
PERFORMANCE UPDATE
EDWARD C. DOVE
JULIUS BAER INVESTMENT
MANAGEMENT
[PHOTO]
The International
Bond Portfolio
seeks to maximize
current income consistent
with protection of principal.
The Portfolio pursues its
objective by investing
primarily in a managed
portfolio of non-U.S. dollar
denominated debt securities
issued by foreign
governments, companies and
supranational entities. While
Advantus Capital Management,
Inc. acts as investment
advisor for the Portfolio,
Julius Baer Investment
Management Inc. provides
investment advice to the
International Bond Portfolio
under a subadvisory
agreement.
PERFORMANCE
The International Bond Portfolio returned .08 percent* for the period from
October 1 (date of inception) to December 31, 1997. This compares to the Salomon
Brothers Index** return of -1.38 percent for the same period.
PERFORMANCE ANALYSIS
All of the major bond markets exhibited positive local currency returns during
the fourth quarter of 1997. Italy, the U.S. and the U.K. were the best
performers. Italy advanced on the back of interest rate cuts and increasing
certainty that it will be a founding member of European Economic and Monetary
Union, while U.K. gilts and U.S. Treasuries rallied on expectations of slower
growth and, especially in the case of the U.S., safe haven flows out of Asia.
Nonetheless, market returns available to dollar-based investors, as in the third
quarter, were less favorable. Weakness of the Yen and Deutschmark more than
offset the local returns in Japan and core Europe. The best U.S. dollar-based
total returns were achieved in the U.K. and Italy.
OUTLOOK
Economic developments in Asia, and the fear of deflation, will remain the key
focus in the upcoming months. The big question for investors is how much the
region's troubles will impact growth in Japan, the U.S. and Europe. In Japan,
pessimism has become entrenched; the government's fiscal package in December
1997 failed to assure both investors and consumers. The prospect of no growth
next year, though not our central forecast, remains a real threat. In Europe,
the recovery continues, but at an unimpressive rate. Only in the U.S., where
activity remains robust, are inflationary pressures close to the surface.
We believe that bond markets continue to offer value, and a neutral-to-long
exposure is warranted. However, bond market valuations are a shade expensive,
thereby limiting the room for further yield falls. In terms of the currency, the
weakness of the Japanese economy is likely to further undermine the Yen. The
dollar has been driven higher against the Yen and the Deutschmark by relatively
strong U.S. and weak Japanese and German growth. That picture is unlikely to
change radically in the near term, so the dollar should be well supported in the
coming quarter. However, as the year progresses, the Deutschmark is expected to
reassert itself, supported by relative growth and interest rates, as well as
favorable valuations.
30
<PAGE>
TEN LARGEST BOND HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF BOND
COMPANY VALUE HOLDINGS
- ------------------------------------------------------------ ----------- ----------
<S> <C> <C>
Deutschland Republic (Deutsch Mark) - 6.500%, 07/04/27...... $ 1,879,579 9.3%
British Treasury (British Sterling Pound) - 6.500%,
12/07/03.................................................. 1,478,621 7.3%
Tennesee Valley Authority (Deutsch Mark) - 6.375%,
09/18/06.................................................. 1,183,495 5.9%
Republic of Austria (Deutsch Mark) - 6.000%, 02/01/06....... 1,158,345 5.8%
Federal National Mortgage Association (Australian Dollar) -
6.375%, 08/15/07.......................................... 1,121,342 5.6%
Belgium Government (Deutsch Mark) - 6.250%, 10/01/03........ 1,116,591 5.5%
Government of Spain (Spanish Peseta) - 7.900%, 02/28/02..... 1,046,371 5.2%
BTPS (Italian Lira) - 10.500%, 04/15/98..................... 973,177 4.8%
Sweden Kingdom (Swedish Krona) - 13.000%, 06/15/01.......... 958,982 4.8%
Kingdom of Denmark (Danish Kroner) - 7.000%, 12/15/04....... 956,273 4.8%
----------- -----
$11,872,776 59.0%
----------- -----
----------- -----
</TABLE>
*Historical performance is 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 Salomon Brothers Non-U.S. Index's goal is to include all fixed-rate
institutionally traded bonds issued by Australia, Italy, Belgium, Japan,
Canada, the Netherlands, Denmark, Spain, France, Sweden, Germany and United
Kingdom whose minimum maturity is one year and outstanding balance is at least
$25 million U.S. dollars.
31
<PAGE>
INDEX 400 MID-CAP PORTFOLIO
PERFORMANCE UPDATE
TERI BRANDT
PORTFOLIO MANAGER
[PHOTO]
The Index 400
Mid-Cap Portfolio
seeks to provide
investment results generally
corresponding to the
aggregate price and dividend
performance of publicly
traded common stocks that
comprise the Standard &
Poor's 400 MidCap Index (S&P
400).+ It is designed to
provide an economical and
convenient means of
maintaining a diversified
portfolio in this equity
security area as part of an
over-all investment strategy.
PERFORMANCE
The Index 400 Mid-Cap Portfolio returned .06 percent* for the period from
October 1 (date of inception) to December 31, 1997. The S&P 400 Index** returned
.83 percent for the same period.
PERFORMANCE ANALYSIS
The Index 400 consists of 400 domestic stocks chosen for market size (median
market capitalization of about $610 million), liquidity and industry group
representation. It is a market-weighted index (stock price times shares
outstanding), with each stock affecting the index in proportion to its market
value. The index is comprised of approximately 66 percent industrials, 18
percent utilities, 15 percent financials and 1 percent transportation.
The Portfolio is designed to match closely the investment performance of the
S&P 400** segment, as described above. We seek to accomplish this by using a
computer model that positions the Portfolio to optimally track the conduct of
the S&P 400.**
Of all the midcap market segments, Financials posted the largest gain by
far, with 73.0 percent for the year. Consumer Cyclical, which posted a 31.6
percent return for the year, ranked second, and Communication Services ranked
third with a 38.6 percent gain. Sectors receiving the laggard awards were Health
Care and Basic Material, returning 5.5 percent and 17.36, respectively.
OUTLOOK
The Asian currency problems are likely to be reflected in corporate earnings
during the first half of 1998. If corporate earnings lag in 1998, the Asian
debacle will be blamed for shortfalls that occur. Low interest rates will
continue to provide a very important floor for stocks. We anticipate moderate
growth, as well.
32
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ----------- ----------
<S> <C> <C> <C>
Coca-Cola Enterprises....................................... 2,200 $ 78,237 1.6%
Franklin Resources, Inc..................................... 700 60,856 1.2%
America Online.............................................. 600 53,513 1.1%
Summit Bancorp.............................................. 1,000 53,250 1.1%
Washington Post............................................. 100 48,650 1.0%
USA Waste Services, Inc..................................... 1,200 47,100 0.9%
AES Corporation............................................. 1,000 46,625 0.9%
Mercantile Bancorporation................................... 750 46,125 0.9%
Northern Trust Corporation.................................. 600 41,850 0.8%
AFLAC, Inc.................................................. 800 40,900 0.8%
----------- -----
$ 517,106 10.3%
----------- -----
----------- -----
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Basic Materials 7.4%
Capital Goods 8.5%
Communication Services 3.3%
Consumer Cyclical 14.4%
Consumer Staples 9.0%
Energy 6.3%
Financial 19.1%
Health Care 7.0%
Technology 12.2%
Transportation 1.7%
Utilities 11.0%
Cash and Other
Assets/Liabilities .1%
</TABLE>
*Historical performance is 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.
**S&P 400 MidCap Index consists of 400 domestic stocks chosen for market size
(median market capitalization of about $610 million), liquidity and industry
group representation. It is a market-weighted index (stock price times shares
outstanding), with each stock affecting the index in proportion to its market
value. The index is comprised of approximately 66% industrials, 18% utilities,
15% financials and 1% transportation.
+"Standard & Poor's-Registered Trademark-", "S&P-Registered Trademark-",
"Standard & Poor's MidCap 400" and "S&P MidCap 400" are trademarks of the
McGraw-Hill Companies, Inc. and have been licensed for use by the Advantus
Series Fund, Inc.-Index 400 Mid-Cap Portfolio. The Portfolio is not sponsored,
endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no
representation regarding the advisability of investing in the Portfolio.
33
<PAGE>
MACRO-CAP VALUE PORTFOLIO
PERFORMANCE UPDATE
MICHAEL J. KELLY
J.P. MORGAN INVESTMENT
MANAGEMENT
[PHOTO]
The Macro-Cap
Value Portfolio
seeks to provide
high total
return. It pursues this
objective by investing in
equity securities that the
sub-adviser believes, through
the use of dividend discount
models, to be undervalued
relative to their long-term
earnings power, creating a
diversified portfolio of
equity securities which
typically will have a
price/earnings ratio and
price to book ratio that
reflects a value orientation.
While Advantus Capital
Management, Inc. acts as
investment advisor for the
Portfolio, J.P. Morgan
Investment Management Inc.
provides investment advice to
the Macro-Cap Value Portfolio
under a subadvisory
agreement.
PERFORMANCE
The Macro Cap Value Portfolio returned -2.13 percent* for the period from
October 15 (date of inception) to December 31, 1997. This compares to the S&P
500 Index** return of 2.87 percent for the period from October 1, 1997 to
December 31, 1997. Because the Portfolio's inception date was mid-month October,
we are not able to provide benchmark performance for the same period because the
information is not available. We are providing total return information for
benchmark performance from the previous month end to the end of the reporting
period.
PERFORMANCE ANALYSIS
The U.S. equity market continued to exhibit strong returns during 1997. The S&P
500** rose 2.87 percent during the fourth quarter, contributing to its 33.34
percent return for the year. However, strong returns masked the sudden and
violent increase in market volatility, particularly during the fourth quarter.
The Asian financial crisis stunned the U.S. equity market in October, with
aftershocks reverberating throughout the remainder of the period and into 1998.
Overall U.S. equity market returns continue to be dominated by the largest
capitalization stocks deemed the "Nifty Fifty," a trend which has been present
for several years. Emphasis on the largest, most liquid stocks was particularly
apparent during the fourth quarter as investors sought less turmoil in the midst
of emerging markets turmoil. In fact, during the fourth quarter, the S&P's
largest fifty stocks delivered nearly twice the return of the entire S&P 500
Index.**
This narrow market environment made it very difficult for the majority of
active managers to keep pace with the S&P 500.** As we continue to view many of
the "Nifty Fifty" stocks as extremely overvalued, we have not held them in the
Portfolio. This caused us to trail the S&P 500** over the period. However,
because the Portfolio is well diversified and fully invested in stocks, our
returns outpaced those of similar active equity managers.
Stock selection in the Portfolio's Energy, Multi-industry, and Services
sectors were particularly strong. Energy stocks such as Tosco Corporation and
Input/Output, Inc. contributed positively to overall return. The Multi-industry
sector made a significant contribution with Westpoint Stevens, Inc. and Waste
Management, Inc. In the Services sectors, Telecommunications Inc. and U.S. West
Media Group had positive impacts.
OUTLOOK
During 1998, we expect that GDP (gross domestic product) will likely grow at a
more trend-like rate of 2.7 percent and that inflation may rise to 2.25 percent
as wage pressures begin to be felt during this latter stage of a prolonged
economic expansion. We expect that corporate profits will likely remain strong,
though lower than their double-digit levels of the past few years. We will aim
to consistently add value in the Portfolio by using fundamental research to
identify individual stocks that are underpriced relative to their longer-term
earnings prospects.
34
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
% OF
MARKET STOCK
SHARES VALUE PORTFOLIO
------- ----------- ----------
<S> <C> <C> <C>
Tosco Corporation........................................... 4,300 $ 162,594 3.5%
Merck & Co.................................................. 1,300 138,125 2.9%
MCI Communications Company.................................. 3,000 128,438 2.7%
Warner Lambert Company...................................... 1,000 124,000 2.6%
Anheuser Busch Co., Inc..................................... 2,700 118,800 2.5%
Telecom-TCI Ventures........................................ 4,100 116,081 2.5%
Starwood Lodging............................................ 1,900 109,963 2.3%
United HealthCare Corporation............................... 2,200 109,313 2.3%
Cooper Industries, Inc...................................... 2,200 107,800 2.3%
First Union Corporation..................................... 2,100 107,625 2.3%
----------- -----
$ 1,222,739 25.9%
----------- -----
----------- -----
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Basic Materials .5%
Capital Goods 10.3%
Communication Services 4.3%
Consumer Cyclical 20.9%
Energy 11.8%
Financial 16.3%
Health Care 11.9%
International Cable 2.4%
Technology 10.9%
Transportation 2.7%
Utilities 4.0%
Cash and Other
Assets/Liabilities 4.0%
</TABLE>
*Historical performance is 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.
35
<PAGE>
MICRO-CAP GROWTH PORTFOLIO
PERFORMANCE UPDATE
WILLIAM JEFFREY, III
KENNETH F. MCCAIN
RICHARD S. COONS
WALL STREET ASSOCIATES
[PHOTO]
[PHOTO]
[PHOTO]
The Micro-Cap
Growth Portfolio
seeks long-term
capital
appreciation. It
pursues this
objective by
investing
primarily in
equity securities
of smaller
companies which
the sub-adviser
believes are in an early
stage or transitional point
in their development and have
demonstrated or have the
potential for above average
revenue growth. It will
invest primarily in common
stocks and stock equivalents
of micro-cap companies. While
Advantus Capital Management,
Inc. acts as investment
advisor for the Portfolio,
Wall Street Associates
provides investment advice to
the Micro-Cap Growth
Portfolio under a subadvisory
agreement.
PERFORMANCE
The Micro-Cap Growth Portfolio returned -13.20 percent* for the period from
October 1 (date of inception) to December 31, 1997. This compares to the Russell
2000 Growth Index** return of -8.19 percent for the same period. The
differential in return is almost fully described by the average-weighted market
cap of the Portfolio. At approximately $160 million, it is much smaller than the
average-weighted market cap of the Russell 2000 Growth Index,** which is $830
million.
PERFORMANCE ANALYSIS
The market for growth investors in 1997 reflected three distinct investment
climates. The liquidity driven market that began in the summer of 1996 and
continued through the end of April 1997 marked the first climate. The climate
was exacerbated by concerns of an overheated economy and Chairman Greenspan's
comments about investors' "irrational exuberance." The second climate was driven
by a surprise budget agreement and its provisions for a capital gains tax cut.
This, coupled with evidence that inflation was of little concern, drove oversold
growth stocks from the end of April through early October. The final investment
climate was driven by the precipitous drop in the Thai currency, which sent
shock waves throughout Asia. The year was characterized by significant liquidity
premiums for large stocks and swift, deep declines as one moved down the
capitalization spectrum.
The Portfolio was funded in September, 1997. This virtually coincided with
the precipitous drop in the markets resulting from the Asian crisis and was
exacerbated by the flight to quality (or the move to the larger capitalization
issues).
OUTLOOK
Going forward, we are increasingly optimistic about the outlook for smaller
capitalization growth stocks. The following factors are all positives for the
Portfolio:
- The expected slowdown in S&P earnings makes growth stocks much more
compelling.
- Valuations are attractive on both an absolute and relative basis.
- Interest rates are at 20-year lows and inflation is benign.
- Investor sentiment is negative (bullish). Not one IPO was priced above the
filing range for December 1997.
- The persistent demand for imbalance for equities continues.
36
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ----------- ----------
<S> <C> <C> <C>
Andover Bancorp, Inc........................................ 2,900 $ 116,725 2.7%
Storage Trust Realty........................................ 4,000 105,250 2.5%
Insight Enterprises, Inc.................................... 2,700 99,225 2.3%
Golf Trust of America, Inc.................................. 3,400 98,600 2.3%
Natural Microsystems Corporation............................ 2,100 97,650 2.3%
Algos Pharmaceuticals....................................... 3,100 93,000 2.2%
Pathogenesis Corporation.................................... 2,500 92,813 2.2%
Metzler Group, Inc.......................................... 2,200 88,275 2.0%
Software AG Systems, Inc.................................... 6,000 87,000 2.0%
Guilford Pharmaceuticals, Inc............................... 4,200 84,525 2.0%
----------- -----
$ 963,063 22.5%
----------- -----
----------- -----
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Capital Goods 2.9%
Communication Services 5.4%
Consumer Cyclical 18.7%
Consumer Staples 7.4%
Energy 5.3%
Financial 9.9%
Health Care 15.1%
Technology 28.3%
Transportation 0.2%
Cash and Other
Assets/Liabilities 6.8%
</TABLE>
*Historical performance is 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 2000 Growth Index contains stock from the Russell 2000 with a
greater than average growth orientation. The Russell 2000 are the 2,000
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.
37
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Advantus 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, Value Stock, Small Company Value, Index 400 Mid-Cap, International Bond,
Macro-Cap Value and Micro-Cap Growth Portfolios of Advantus Series Fund, Inc. as
of December 31, 1997 and the related statements of operations for the year then
ended (the period from September 29, 1997, commencement of operations, to
December 31, 1997 for Small Company Value and Index 400 Mid-Cap Portfolios, the
period from September 24, 1997, commencement of operations, to December 31, 1997
for International Bond Portfolio, the period from September 15, 1997,
commencement of operations, to December 31, 1997 for Micro-Cap Growth Portfolio
and the period from October 15, 1997, commencement of operations, to December
31, 1997 for Macro-Cap Value Portfolio) and the statements of changes in net
assets for the two years ended December 31, 1997 (the period from September 29,
1997, commencement of operations, to December 31, 1997 for Small Company Value
and Index 400 Mid-Cap Portfolios, the period from September 24, 1997,
commencement of operations, to December 31, 1997 for International Bond
Portfolio, the period from September 15, 1997, commencement of operations, to
December 31, 1997 for Micro-Cap Growth Portfolio and the period from October 15,
1997, commencement of operations, to December 31, 1997 for Macro-Cap Value
Portfolio) and the financial highlights for the periods presented in note 9.
These financial statements and the financial highlights are the responsibility
of the Funds' management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased and sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Growth, Bond, Money
Market, Asset Allocation, Mortgage Securities, Index 500, Capital Appreciation,
International Stock, Small Company, Maturing Government Bond 1998, Maturing
Government Bond 2002, Maturing Government Bond 2006, Maturing Government Bond
2010, Value Stock, Small Company Value, Index 400 Mid-Cap, International Bond,
Macro-Cap Value and Micro-Cap Growth Portfolios of Advantus Series Fund, Inc. as
of December 31, 1997 and the results of their operations, changes in their net
assets and the financial highlights for the periods stated in the first
paragraph above, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 6, 1998
38
<PAGE>
GROWTH PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
COMMON STOCK (93.6%)
BASIC MATERIALS (.5%)
Chemicals (.5%)
37,900 Praxair, Inc........................................................... $ 1,705,500
----------------
CAPITAL GOODS (11.8%)
Electrical Equipment (4.5%)
200,900 General Electric Company............................................... 14,741,037
----------------
Manufacturing (3.4%)
249,142 Tyco International Ltd................................................. 11,226,961
----------------
Office Equipment (1.1%)
93,700 Wallace Computer Services, Inc......................................... 3,642,587
----------------
Waste Management (2.8%)
237,800 USA Waste Services, Inc. (b)........................................... 9,333,650
----------------
COMMUNICATION SERVICES (2.3%)
Telecommunication (1.8%)
143,100 ADC Telecommunications, Inc. (b)....................................... 5,974,425
----------------
Telephone (.5%)
52,000 Cincinnati Bell Incorporated........................................... 1,612,000
----------------
CONSUMER CYCLICAL (17.3%)
Auto (2.5%)
58,000 Danaher Corporation.................................................... 3,661,250
73,500 Magna International, Inc. (c).......................................... 4,616,719
----------------
8,277,969
----------------
Houseware (.6%)
50,000 Leggett & Platt Incorporated........................................... 2,093,750
----------------
Leisure (1.0%)
105,700 GTECH Holdings Corporation (b)......................................... 3,375,794
----------------
Lodging--Hotel (2.4%)
141,300 Carnival Corporation................................................... 7,824,487
----------------
Retail (4.1%)
214,000 Family Dollar Stores................................................... 6,272,875
73,950 Home Depot, Inc........................................................ 4,353,806
76,600 Wal-Mart Stores........................................................ 3,020,912
----------------
13,647,593
----------------
Service (6.7%)
223,200 Cendant Corporation (b)................................................ 7,672,500
101,200 Omnicom Group.......................................................... 4,288,350
275,200 Service Corporation International...................................... 10,165,200
----------------
22,126,050
----------------
CONSUMER STAPLES (14.8%)
Beverage (.9%)
46,100 Coca-Cola Company...................................................... 3,071,412
----------------
Food (1.3%)
133,100 Conagra, Inc........................................................... 4,367,344
----------------
Food & Health (.7%)
51,300 Sysco Corporation...................................................... 2,337,356
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
CONSUMER STAPLES--CONTINUED
Household Product (3.1%)
163,000 Newell Company......................................................... $ 6,927,500
42,200 Procter & Gamble Company............................................... 3,368,087
----------------
10,295,587
----------------
Personal Care (1.0%)
32,300 Gillette Company....................................................... 3,244,131
----------------
Retail (3.5%)
55,800 CVS Corporation........................................................ 3,574,687
127,400 Safeway, Inc. (b)...................................................... 8,058,050
----------------
11,632,737
----------------
Service (1.6%)
82,800 Automatic Data Processing, Inc......................................... 5,081,850
----------------
Tobacco (2.7%)
193,300 Philip Morris Companies, Inc........................................... 8,758,906
----------------
ENERGY (1.2%)
Oil and Gas (1.2%)
63,400 Anadarko Petroleum Corporation......................................... 3,847,587
----------------
FINANCIAL (15.4%)
Banks (3.3%)
88,700 Banc One Corporation................................................... 4,817,519
158,900 Norwest Corporation.................................................... 6,137,512
----------------
10,955,031
----------------
Commercial Finance (1.2%)
81,200 Finova Finance Trust................................................... 4,034,625
----------------
Consumer Finance (1.6%)
75,700 Associates First Capital Corporation................................... 5,384,163
----------------
Finance--Diversified (3.0%)
80,300 Federal Home Loan Mortgage Corporation................................. 3,367,581
101,700 Southtrust Corporation................................................. 6,451,594
----------------
9,819,175
----------------
Insurance (5.4%)
43,300 American International Group........................................... 4,708,875
80,600 Hartford Life.......................................................... 3,652,188
89,300 Nationwide Financial Services.......................................... 3,225,963
147,950 Sunamerica Incorporated................................................ 6,324,863
----------------
17,911,889
----------------
Savings and Loans (.9%)
45,700 Washington Mutual Incorporated......................................... 2,916,231
----------------
HEALTH CARE (16.4%)
Drugs (5.1%)
68,600 Eli Lilly & Company.................................................... 4,776,275
33,200 Merck & Co., Inc....................................................... 3,527,500
64,500 Pfizer, Inc............................................................ 4,809,281
70,800 Smithkline Beecham (c)................................................. 3,641,775
----------------
16,754,831
----------------
</TABLE>
See accompanying notes to investments in securities.
39
<PAGE>
GROWTH PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
HEALTH CARE--CONTINUED
<C> <S> <C>
Health Care--Diversified (7.1%)
72,000 Abbott Laboratories.................................................... $ 4,720,500
98,900 Bristol-Myers Squibb Company........................................... 9,358,413
99,600 Johnson & Johnson...................................................... 6,561,150
21,400 Warner-Lambert Company................................................. 2,653,600
----------------
23,293,663
----------------
Managed Care (1.0%)
68,500 United Health Care..................................................... 3,403,594
----------------
Medical Products/Supplies (3.2%)
98,300 Medtronic, Inc......................................................... 5,142,319
118,200 Sybron International Corporation (b)................................... 5,548,013
----------------
10,690,332
----------------
TECHNOLOGY (13.0%)
71,600 Cisco Systems, Inc. (b)................................................ 3,991,700
60,400 Compaq Computer Corporation............................................ 3,408,825
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
TECHNOLOGY--CONTINUED
92,500 Computer Associates International...................................... $ 4,890,938
172,200 Equifax Incorporated................................................... 6,102,338
77,000 First Data Corporation................................................. 2,252,250
173,700 Galileo International, Inc............................................. 4,798,463
70,300 Intel.................................................................. 4,938,575
23,100 Microsoft Corporation (b).............................................. 2,985,675
112,000 Parametric Technology
Corporation (b)...................................................... 5,306,000
87,900 Paychex Incorporated................................................... 4,449,938
----------------
43,124,702
----------------
TRANSPORTATION (.9%)
Air Freight (.9%)
80,000 CNF Transportation..................................................... 3,070,000
----------------
Total common stock (cost: $274,076,031).......................................... 309,576,949
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- -----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (5.0%)
$ 695,000 AT & T Corporation CP............................ 5.998% 01/14/98 693,512
2,115,000 Bell Atlantic CP................................. 5.977% 01/12/98 2,111,078
705,000 US Treasury Bill................................. 5.085% 01/15/98 703,864
1,150,000 US Treasury Bill................................. 5.379% 03/19/98 1,137,448
Temporary Investment Fund--Temp Fund Portfolio, current rate
12,044,447 5.500%............................................................. 12,044,447
-------------
Total short-term securities (cost: $16,689,887)...................... 16,690,349
-------------
Total investments in securities (cost: $290,765,918) (d)............. $ 326,267,298
-------------
-------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The portfolio held 2.5% of net assets in foreign securities at December 31,
1997.
(d) At December 31, 1997 the cost of securities for federal income tax purposes
was $291,208,515. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $40,201,982
Gross unrealized depreciation.......... (5,143,199)
-----------
Net unrealized appreciation............ $35,058,783
-----------
-----------
</TABLE>
40
<PAGE>
BOND PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
(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 (90.1%)
GOVERNMENT OBLIGATIONS (33.4%)
Federal Home Loan Mortgage Association (3.7%)
$1,825,548 FHLMC............................................ 6.500% 02/01/16 $ 1,831,114
391,684 FHLMC............................................ 6.500% 12/01/23 390,246
1,485,000 FHLMC............................................ 7.000% 12/01/27 1,497,994
1,500,000 FHLMC............................................ 7.030% 04/05/04 1,512,954
----------------
5,232,308
----------------
Federal National Mortgage Association (2.4%)
838,660 FNMA............................................. 6.500% 02/01/26 829,226
1,088,328 FNMA............................................. 7.000% 09/01/17 1,106,643
434,915 FNMA............................................. 7.000% 02/01/26 438,942
1,000,000 FNMA............................................. 8.590% 02/03/05 1,002,035
----------------
3,376,846
----------------
Government National Mortgage Association (3.1%)
655,354 GNMA............................................. 6.500% 11/15/23 650,392
873,279 GNMA............................................. 6.500% 05/15/24 866,135
807,265 GNMA............................................. 7.000% 11/15/23 816,217
453,406 GNMA............................................. 7.000% 10/15/25 457,228
313,538 GNMA............................................. 7.500% 02/15/23 322,254
553,378 GNMA............................................. 8.000% 09/15/24 574,350
269,445 GNMA............................................. 8.500% 10/15/22 287,023
274,538 GNMA............................................. 8.500% 12/15/22 292,449
----------------
4,266,048
----------------
Other U.S. Government Agencies (4.1%)
5,650,000 Federal Home Loan Bank........................... 7.105% 05/06/02 5,739,598
----------------
U.S. Treasury (20.1%)
2,000,000 US Treasury Bond................................. 6.000% 02/15/26 1,997,500
3,050,000 US Treasury Note................................. 6.125% 11/15/27 3,133,875
3,000,000 US Treasury Bond................................. 6.625% 02/15/27 3,255,936
5,000,000 US Treasury Interest Strip (c)................... 5.999% 02/15/01 4,193,345
10,000,000 US Treasury Note................................. 6.375% 09/30/01 10,209,370
5,000,000 US Treasury Note................................. 7.750% 02/15/01 5,290,625
----------------
28,080,651
----------------
CORPORATE OBLIGATIONS (56.7%)
BASIC MATERIALS (2.0%)
Chemicals (2.0%)
2,593,105 Ciba Geigy Corporation 144A Issue (e)............ 7.240% 01/02/16 2,757,975
----------------
COMMUNICATION SERVICES (3.4%)
Telephone (3.4%)
4,700,000 Bellsouth Telecommunications..................... 6.500% 06/15/05 4,788,148
----------------
CONSUMER CYCLICAL (1.5%)
Retail (1.5%)
2,000,000 Fingerhut Company................................ 7.375% 09/15/99 2,026,872
----------------
CONSUMER STAPLES (6.5%)
Entertainment (3.5%)
5,000,000 Time Warner Incorporated 144A Issue (e).......... 6.100% 12/30/01 4,910,170
----------------
Household Product (3.0%)
3,850,000 Premark International, Inc....................... 10.500% 09/15/00 4,249,087
----------------
</TABLE>
See accompanying notes to investments in securities.
41
<PAGE>
BOND PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ----------------
CORPORATE OBLIGATIONS--CONTINUED
<C> <S> <C> <C> <C>
ENERGY (1.5%)
Oil & Gas (1.5%)
$2,000,000 Bariod Corporation............................... 8.000% 04/15/03 $ 2,157,832
----------------
FINANCIAL (38.3%)
Asset-Backed Securities (2.0%)
879,212 Green Tree Financial Corporation................. 6.900% 02/15/04 887,626
589,832 Green Tree Financial Corporation................. 7.250% 07/15/05 603,623
1,350,000 National Collegiate.............................. 7.240% 03/20/13 1,356,328
----------------
2,847,577
----------------
Auto Finance (2.9%)
4,000,000 Ford Motor Credit Company........................ 6.375% 04/03/00 4,022,760
----------------
Banks (10.0%)
5,500,000 PNC Bank Corporation............................. 6.728% 01/25/07 5,677,342
3,400,000 St. George Bank Capital Note 144A Issue (b)(e)... 8.485% 12/31/49 3,649,798
4,400,000 Wells Fargo Capital.............................. 7.960% 12/15/26 4,683,184
----------------
14,010,324
----------------
Collateralized Mortgage Obligations/Mortgage Revenue
Bonds (4.1%)
950,000 California Housing Finance Agency................ 8.160% 02/01/28 997,203
1,200,000 CFSB Finance Company 144A Issue (e).............. 7.180% 11/15/05 1,227,750
2,556,549 Prudential Home Mortgage Securities (d).......... 6.050% 04/25/24 2,463,874
975,090 Wyoming Community Development.................... 6.850% 06/01/10 975,090
----------------
5,663,917
----------------
Commercial Finance (3.2%)
4,414,000 General Electric Capital Corporation............. 6.660% 05/01/18 4,472,856
----------------
Finance--Diversified (2.3%)
3,500,000 Guangdong Enterprises 144A Issue (b)(e).......... 8.875% 05/22/07 3,217,581
----------------
Investment Bankers/Brokers (7.8%)
5,500,000 Lehman Brothers, Inc............................. 7.360% 12/15/03 5,768,312
5,000,000 Morgan Stanley Dean Witter....................... 6.875% 03/01/07 5,110,900
----------------
10,879,212
----------------
Real Estate Investment Trust (6.0%)
4,000,000 Bradley Real Estate.............................. 7.000% 11/15/04 4,018,440
1,000,000 Security Capital Pacific Trust................... 7.500% 02/15/14 1,040,520
3,750,000 Wharf International Finance (b).................. 7.625% 03/13/07 3,326,512
----------------
8,385,472
----------------
UTILITIES (3.5%)
Electric Companies (3.5%)
4,000,000 Enersis S.A. (b)................................. 6.900% 12/01/06 3,949,840
1,000,000 Wisconsin Electric Power Company................. 5.125% 09/15/98 995,236
----------------
4,945,076
----------------
Total long-term debt securities (cost: $124,340,130).................. 126,030,310
----------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
- ----------
<C> <S> <C>
PREFERRED STOCK (7.5%)
FINANCIAL (7.5%)
Real Estate Investment Trust (7.5%)
70,000 Duke Realty Investment, Inc. 7.99%............... 3,635,625
35,000 Nationwide Health Properties, Inc. 7.68%......... 3,508,750
60,000 Security Capital Industrial C-8.54%.............. 3,309,000
------------
Total preferred stock (cost: $9,955,725)......... 10,453,375
------------
</TABLE>
See accompanying notes to investments in securities.
42
<PAGE>
BOND PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ----------------
<C> <S> <C>
SHORT-TERM SECURITIES (1.4%)
$1,985,083 Temporary Investment Fund--Temp Fund Portfolio,
current rate 5.500%............................ $ 1,985,083
----------------
Total short-term securities (cost: $1,985,083)... 1,985,083
----------------
Total investments in securities (cost:
$136,280,939) (f).............................. $ 138,468,768
----------------
----------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) The portfolio held 10.1% of net assets in foreign securities at December 31,
1997.
(c) For zero coupon issues (strips) the interest rate disclosed is the
effective yield at the date of acquisition.
(d) At December 31, 1997 the total cost of investments issued on a when-issued
or forward commitment basis is $920,073.
(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, 1997, which includes acquisition
date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- --------------------------------------- ----------- ------------
<S> <C> <C>
Ciba Geigy Corporation 144A Issue...... 12/24/96 $ 2,953,105
Guangdong Enterprises 144A Issue....... various 3,612,630
St. George Bank 144A Issue............. 6/12/97 3,400,000
Time Warner Incorporated 144A Issue.... various 4,738,100
CFSB Finance Company 144A Issue........ 5/15/96 1,167,750
------------
$ 15,871,585
------------
------------
</TABLE>
(f) At December 31, 1997 the cost of securities for federal income tax purposes
was $136,288,917. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $3,059,993
Gross unrealized depreciation.......... (880,142)
----------
Net unrealized appreciation............ $2,179,851
----------
----------
</TABLE>
43
<PAGE>
MONEY MARKET PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ----------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER (92.1%)
BASIC MATERIALS (4.9%)
Agriculture Product (4.9%)
$2,640,000 Cargill Incorporated............................. 5.78% 02/02/98 $ 2,626,685
----------------
COMMUNICATION SERVICES (9.3%)
Telephone (9.3%)
2,700,000 AT&T Corporation................................. 5.80% 03/03/98 2,674,090
2,340,000 Bellsouth Telecommunications..................... 5.83% 02/10/98 2,325,133
----------------
4,999,223
----------------
CONSUMER CYCLICAL (21.1%)
Building Materials (2.8%)
1,500,000 DuPont........................................... 5.80% 02/13/98 1,489,814
----------------
Hardware and Tools (4.7%)
2,500,000 The Stanley Works................................ 5.73% 01/22/98 2,491,785
----------------
Photography/Imagery (4.8%)
2,600,000 Xerox Corporation................................ 5.75% 01/21/98 2,591,829
----------------
Publishing (8.8%)
2,150,000 Gannett Company (d).............................. 5.75% 01/20/98 2,143,579
2,600,000 Tribune Company (c).............................. 5.88% 02/09/98 2,583,773
----------------
4,727,352
----------------
CONSUMER STAPLES (11.4%)
Beverage (4.9%)
1,785,000 Anheuser-Busch Company, Inc...................... 5.69% 01/23/98 1,778,904
820,000 Coca-Cola Company................................ 5.61% 01/12/98 818,617
----------------
2,597,521
----------------
Entertainment (4.5%)
2,425,000 Walt Disney...................................... 5.80% 03/06/98 2,400,604
----------------
Food (2.0%)
1,070,000 Campbell Soup (d)................................ 5.64% 01/07/98 1,069,009
----------------
FINANCIAL (14.2%)
Commercial Finance (9.2%)
2,270,000 Ciesco LP (c).................................... 5.82% 01/28/98 2,260,272
2,700,000 GE Capital Corporation........................... 5.86% 02/25/98 2,676,349
----------------
4,936,621
----------------
Consumer Finance (5.0%)
2,700,000 American General Finance......................... 5.89% 02/18/98 2,686,811
----------------
HEALTH CARE (2.2%)
Health Care--Diversified (2.2%)
1,175,000 American Home Products (c)....................... 5.70% 01/14/98 1,172,618
----------------
UTILITIES (29.0%)
Electric Companies (24.6%)
2,700,000 Alabama Power.................................... 5.94% 01/06/98 2,697,805
1,785,000 Baltimore Gas & Electric......................... 6.08% 01/13/98 1,781,440
2,735,000 Emerson Electric Company......................... 5.87% 02/12/98 2,716,644
1,760,000 Florida Power.................................... 5.88% 02/10/98 1,748,730
755,000 Midamerican Energy............................... 5.91% 01/26/98 751,958
525,000 Midamerican Energy............................... 5.92% 01/30/98 522,545
470,000 Midamerican Energy............................... 5.90% 02/25/98 465,861
</TABLE>
See accompanying notes to investments in securities.
44
<PAGE>
MONEY MARKET PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ----------------
UTILITIES--CONTINUED
<C> <S> <C> <C> <C>
$2,500,000 Wisconsin Electric Power Company................. 5.78-5.85% 09/15/98 $ 2,488,330
----------------
13,173,313
----------------
Natural Gas (4.4%)
2,390,000 Laclede Gas Company.............................. 5.84% 01/23/98 2,381,620
----------------
Total commercial paper (cost: $49,344,805)............................. 49,344,805
----------------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES (5.6%)
U.S. Treasury (5.6%)
3,000,000 U.S. Treasury Bill................................. 5.22% 02/19/98 2,979,113
----------------
Total U.S. Government Securities (cost: $2,979,113)................... 2,979,113
----------------
OTHER SHORT-TERM SECURITIES (3.6%)
Temporary Investment Fund, Inc.--Temp Fund Portfolio, current rate
1,935,507 5.50%............................................................... 1,935,507
----------------
Total short-term securities (cost: $1,935,507)........................ 1,935,507
----------------
Total investments in securities (cost: $54,259,425) (b)............... $ 54,259,425
----------------
----------------
</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, 1997.
(c) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under Section 4(2) of the Securities Act of 1933,
as amended, and may be sold 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.
(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, 1997, which includes acquisition
date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- --------------------------------------- ----------- -----------
<S> <C> <C>
Gannett Company........................ 11/18/97 $ 2,128,855
Campbell Soup.......................... 9/9/97 1,050,526
-----------
$ 3,179,381
-----------
-----------
</TABLE>
45
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- -------------
<C> <S> <C>
COMMON STOCK (58.5%)
BASIC MATERIALS (.6%)
Chemicals (.6%)
66,493 Praxair, Inc.............................................................. $ 2,992,185
-------------
CAPITAL GOODS (7.4%)
Electrical Equipment (2.7%)
186,552 General Electric Company.................................................. 13,688,253
-------------
Manufacturing (2.1%)
241,598 Tyco International Ltd.................................................... 10,887,010
-------------
Office Equipment (.8%)
98,700 Wallace Computer Services, Inc............................................ 3,836,962
-------------
Waste Management (1.8%)
231,076 USA Waste Services, Inc. (b).............................................. 9,069,723
-------------
COMMUNICATION SERVICES (1.4%)
Telecommunication (1.1%)
131,500 ADC Telecommunications, Inc. (b).......................................... 5,490,125
-------------
Telephone (.3%)
49,300 Cincinnati Bell Incorporated.............................................. 1,528,300
-------------
CONSUMER CYCLICAL (12.2%)
Auto (1.6%)
47,800 Danaher Corporation....................................................... 3,017,375
79,300 Magna International, Inc. (c)............................................. 4,981,031
-------------
7,998,406
-------------
Houseware (.8%)
101,300 Leggett & Platt Incorporated.............................................. 4,241,937
-------------
Leisure (.7%)
105,311 GTECH Holdings Corporation (b)............................................ 3,363,370
-------------
Lodging--Hotel (1.5%)
140,400 Carnival Corporation...................................................... 7,774,650
-------------
Retail (2.4%)
194,100 Family Dollar Stores...................................................... 5,689,556
59,260 Home Depot, Inc........................................................... 3,488,932
76,700 Wal-Mart Stores........................................................... 3,024,856
-------------
12,203,344
-------------
Service (5.2%)
196,108 Cedant Corporation (b).................................................... 6,741,212
230,008 Omnicom Group............................................................. 9,746,589
264,800 Service Corporation International......................................... 9,781,050
-------------
26,268,851
-------------
CONSUMER STAPLES (9.2%)
Beverage (.6%)
44,200 Coca-Cola Company......................................................... 2,944,825
-------------
Food (.8%)
126,300 Conagra, Inc.............................................................. 4,144,219
-------------
Household Product (2.1%)
179,100 Newell Company............................................................ 7,611,750
38,010 Procter & Gamble Company.................................................. 3,033,673
-------------
10,645,423
-------------
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- -------------
<C> <S> <C>
CONSUMER STAPLES--CONTINUED
Personal Care (0.6%)
29,700 Gillette Company.......................................................... $ 2,982,994
-------------
Retail (2.2%)
46,400 CVS Corporation........................................................... 2,972,500
131,992 Safeway, Inc. (b)......................................................... 8,348,494
-------------
11,320,994
-------------
Service (1.1%)
76,600 Automatic Data Processing, Inc............................................ 4,701,325
18,887 Manpower.................................................................. 665,767
-------------
5,367,092
-------------
Tobacco (1.8%)
201,200 Philip Morris Companies, Inc.............................................. 9,116,875
-------------
ENERGY (.7%)
Oil and Gas (.7%)
58,500 Anadarko Petroleum Corporation............................................ 3,550,219
-------------
FINANCIAL (8.5%)
Banks (1.8%)
72,800 Banc One Corporation...................................................... 3,953,950
128,600 Norwest Corporation....................................................... 4,967,175
-------------
8,921,125
-------------
Commercial Finance (.8%)
78,900 Finova Finance Trust...................................................... 3,920,344
-------------
Consumer Finance (1.0%)
73,200 Associates First Capital Corporation...................................... 5,206,350
-------------
Finance--Diversified (.7%)
82,200 Federal Home Loan Mortgage Corporation.................................... 3,447,262
-------------
Insurance (3.7%)
61,609 American International Group.............................................. 6,699,979
74,600 Hartford Life............................................................. 3,380,312
82,600 Nationwide Financial Services............................................. 2,983,925
140,050 Sunamerica Incorporated................................................... 5,987,137
-------------
19,051,353
-------------
Savings and Loans (.5%)
42,100 Washington Mutual Incorporated............................................ 2,686,506
-------------
HEALTH CARE (9.9%)
Drugs (3.1%)
65,200 Eli Lilly & Company....................................................... 4,539,550
31,600 Merck & Co., Inc.......................................................... 3,357,500
61,300 Pfizer, Inc............................................................... 4,570,681
66,000 Smithkline Beecham (c).................................................... 3,394,875
-------------
15,862,606
-------------
Health Care--Diversified (4.3%)
69,400 Abbott Laboratories....................................................... 4,550,038
92,300 Bristol-Myers Squibb Company.............................................. 8,733,888
93,800 Johnson & Johnson......................................................... 6,179,075
20,300 Warner-Lambert Company.................................................... 2,517,200
-------------
21,980,201
-------------
</TABLE>
See accompanying notes to investments in securities.
46
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- -------------
HEALTH CARE--CONTINUED
<C> <S> <C>
Managed Care (.6%)
59,800 United Health Care........................................................ $ 2,971,313
-------------
Medical Products/Supplies (1.9%)
102,400 Medtronic, Inc............................................................ 5,356,800
95,600 Sybron International Corporation (b)...................................... 4,487,225
-------------
9,844,025
-------------
TECHNOLOGY (8.0%)
67,050 Cisco Systems, Inc (b).................................................... 3,738,038
56,900 Compaq Computer Corporation............................................... 3,211,294
92,343 Computer Associates International......................................... 4,882,636
156,700 Equifax Incorporated...................................................... 5,553,056
79,352 First Data Corporation.................................................... 2,321,046
152,100 Galileo International Inc................................................. 4,201,763
63,900 Intel..................................................................... 4,488,975
21,100 Microsoft Corporation (b)................................................. 2,727,175
Parametric Technology
104,500 Corporation (b)......................................................... 4,950,688
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- -------------
<C> <S> <C>
TECHNOLOGY--CONTINUED
85,850 Paychex Incorporated...................................................... $ 4,346,156
-------------
40,420,827
-------------
TRANSPORTATION (.6%)
Air Freight (.6%)
74,300 CNF Transportation........................................................ 2,851,263
-------------
Total common stock (cost $222,431,715).............................................. 296,578,932
-------------
PREFERRED STOCK (2.3%)
FINANCIAL (2.3%)
Real Estate Investment Trust (2.3%)
102,000 Duke Realty Investment, Inc. 7.99%........................................ 5,297,625
39,000 Nationwide Health Properties, Inc. 7.68%.................................. 3,909,750
Security Capital Industrial,
50,000 C-8.54%................................................................. 2,757,500
-------------
Total preferred stock (cost $11,467,385)............................................ 11,964,875
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- --------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (32.6%)
GOVERNMENT OBLIGATIONS (11.3%)
Federal Home Loan Mortgage Association (.6%)
$ 1,734,270 FHLMC........................................... 6.500% 02/01/16 1,739,558
1,178,891 FHLMC........................................... 6.500% 12/01/23 1,174,563
-------------
2,914,121
-------------
Federal National Mortgage Association (1.3%)
851,331 FNMA............................................ 6.500% 09/01/25 841,754
3,000,913 FNMA............................................ 7.000% 02/01/26 3,028,698
2,600,000 FNMA............................................ 8.590% 02/03/05 2,605,291
-------------
6,475,743
-------------
Government National Mortgage Association (1.8%)
366,247 GNMA............................................ 6.500% 11/15/23 363,475
276,159 GNMA............................................ 6.500% 11/15/23 274,069
465,424 GNMA............................................ 6.500% 11/15/23 461,900
227,845 GNMA............................................ 6.500% 11/15/23 226,120
313,329 GNMA............................................ 6.500% 11/15/23 310,957
23,050 GNMA............................................ 6.500% 02/15/24 22,862
819,203 GNMA............................................ 6.500% 03/15/24 812,501
20,076 GNMA............................................ 6.500% 03/15/24 19,912
1,467,607 GNMA............................................ 7.000% 11/15/24 1,483,030
1,813,625 GNMA............................................ 7.000% 10/15/25 1,828,912
240,671 GNMA............................................ 7.500% 06/20/02 243,895
123,724 GNMA............................................ 7.500% 07/20/02 125,382
552,553 GNMA............................................ 7.500% 05/15/24 567,272
2,471,176 GNMA............................................ 7.500% 10/15/27 2,532,508
-------------
9,272,795
-------------
State and Local Government Obligations (1.7%)
4,200,000 California Housing Finance Agency............... 6.650% 08/01/29 4,216,981
1,700,000 Nebraska Investment Housing Revenue (d)......... 6.600% 09/01/24 1,701,164
2,541,706 Wyoming Community Development................... 6.850% 06/01/10 2,541,706
-------------
8,459,851
-------------
U.S. Treasury (5.9%)
4,750,000 US Treasury Bond................................ 6.125% 11/15/27 4,880,625
1,900,000 US Treasury Bond................................ 6.625% 02/15/27 2,062,093
3,250,000 US Treasury Bond................................ 12.000% 08/15/13 4,793,750
9,850,000 US Treasury Interest Strip (e).................. 5.979% 02/15/01 8,260,890
</TABLE>
See accompanying notes to investments in securities.
47
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- -------------- -------------
GOVERNMENT OBLIGATIONS--CONTINUED
<C> <S> <C> <C> <C>
$ 9,800,000 US Treasury Note................................ 6.375% 09/30/01 $ 10,005,183
-------------
30,002,541
-------------
CORPORATE OBLIGATIONS (21.4%)
BASIC MATERIALS (.9%)
Chemicals (.9%)
4,148,968 Ciba Geigy Corporation 144A Issue (f)........... 7.240% 01/02/16 4,412,759
-------------
CAPITAL GOODS (1.2%)
Waste Management (1.2%)
6,000,000 WMX Technologies, Inc........................... 6.250% 10/15/00 5,965,218
-------------
COMMUNICATION SERVICES (.5%)
Telephone (.5%)
2,750,000 Bellsouth Telecommunications.................... 6.500% 06/15/05 2,801,576
-------------
CONSUMER CYCLICAL (1.5%)
Retail (.4%)
2,000,000 Fingerhut Company............................... 7.375% 09/15/99 2,026,872
-------------
Service (.6%)
2,900,000 PHH Corporation................................. 6.500% 02/01/00 2,925,633
-------------
Textiles (.5%)
2,750,000 Reliance Industries Ltd. 144A Issue (c)(f)...... 10.250% 01/15/97 2,756,297
-------------
CONSUMER STAPLES (3.7%)
Broadcasting (1.4%)
6,000,000 TCI Communications.............................. 8.750% 08/01/15 6,967,260
-------------
Entertainment (1.2%)
6,200,000 Time Warner Incorporated 144A Issue (f)......... 6.100% 12/30/01 6,088,611
-------------
Household Product (1.1%)
4,900,000 Premark International, Inc...................... 10.500% 09/15/00 5,407,929
-------------
ENERGY (0.4%)
Oil and Gas (.4%)
2,000,000 Baroid Corporation.............................. 8.000% 04/15/03 2,157,832
-------------
FINANCIAL (12.4%)
Asset-Backed Securities (.4%)
1,153,576 Paine Webber Mortgage Acceptance Corporation.... 6.927% 02/25/24 1,151,413
1,000,000 Prudential Home Mortgage 144A Issue (f)......... 7.900% 04/28/22 1,006,610
-------------
2,158,023
-------------
Auto Finance (.9%)
4,500,000 Ford Motor Credit Company....................... 6.375% 04/03/00 4,525,605
-------------
Banks (3.9%)
3,000,000 Norwest Corporation............................. 7.680% 05/10/02 3,027,234
7,178,000 PNC Bank Corporation............................ 6.728% 01/25/07 7,409,447
St. George Bank Capital Note 144A Issue
4,000,000 (c)(f)........................................ 8.485% 12/31/49 4,293,880
4,750,000 Wells Fargo Capital............................. 7.960% 12/15/26 5,055,710
-------------
19,786,271
-------------
Commercial Finance (1.0%)
5,000,000 General Electric Capital Corporation............ 6.660% 05/01/18 5,066,670
-------------
Consumer Finance (.7%)
3,700,000 Associates Corporation of North America......... 6.625% 05/15/01 3,745,173
-------------
Finance--Diversified (.8%)
4,300,000 Guangdong Enterprises 144A Issue (c)(f)......... 8.875% 05/22/07 3,953,029
-------------
Investment Bankers/Brokers (2.5%)
5,900,000 Lehman Brothers, Inc............................ 7.360% 12/15/03 6,187,826
6,196,000 Morgan Stanley Dean Witter...................... 6.875% 03/01/07 6,333,427
-------------
12,521,253
-------------
</TABLE>
See accompanying notes to investments in securities.
48
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- -------------- -------------
CORPORATE OBLIGATIONS--CONTINUED
<C> <S> <C> <C> <C>
Real Estate Investment Trust (2.2%)
$ 5,750,000 Bradley Real Estate............................. 7.000% 11/15/04 $ 5,776,508
1,500,000 Security Capital Pacific Trust.................. 7.500% 02/15/14 1,560,780
4,250,000 Wharf International Finance (c)................. 7.625% 03/13/07 3,770,048
-------------
11,107,336
-------------
UTILITIES (.7%)
Electric Companies (.7%)
3,750,000 Enersis S.A. (c)................................ 6.900% 12/01/06 3,702,975
-------------
Total long-term debt securities (cost: $162,810,058)............... 165,201,373
-------------
SHORT-TERM SECURITIES (6.9%)
Temporary Investment Fund--Temp Fund Portfolio, current rate
19,100,954 5.500%........................................................... 19,100,954
2,915,000 AT & T Corporation CP........................... 5.998% 01/14/98 2,908,760
1,260,000 Baltimore Gas & Electric CP..................... 5.958% 01/12/98 1,257,664
3,735,000 Bell Atlantic CP................................ 6.018% 01/13/98 3,727,536
2,430,000 General Mills, Inc. CP.......................... 5.852% 01/09/98 2,426,567
2,510,000 US Treasury Bill................................ 5.227% 02/12/98 2,495,505
3,000,000 Walt Disney CP.................................. 5.702% 01/02/98 2,999,024
-------------
Total short-term securities (cost: $34,916,551).................... 34,916,010
-------------
Total investments in securities (cost: $431,625,709) (g)........... $ 508,661,190
-------------
-------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The portfolio held 5.3% of net assets in foreign securities as of December
31, 1997.
(d) At December 31, 1997 the total cost of investments issued on a when-issued
or forward commitment basis is $1,697,705.
(e) For zero coupon issues (strips) the interest rate disclosed is the
effective yield at the date of acquisition.
(f) 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, 1997, which includes acquisition
date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- --------------------------------------- ----------- ------------
<S> <C> <C>
Ciba Geigy Corp. 144A Issue............ 12/24/96 $ 4,148,968
Guangdong Enterprises 144A Issue....... various 4,438,374
Reliance Industries 144A Issue......... various 2,964,720
Prudential Home Mortgage 144A Issue.... 7/19/96 950,313
Time Warner Incorporated 144A Issue.... various 5,908,347
St. George Bank 144A Issue............. 6/12/97 4,000,000
------------
$ 22,410,722
------------
------------
</TABLE>
(g) At December 31, 1997 the cost of securities for federal income tax purposes
was $433,043,134. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $80,849,009
Gross unrealized depreciation.......... (5,230,953)
-----------
Net unrealized appreciation............ $75,618,056
-----------
-----------
</TABLE>
49
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
(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 (94.5%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (28.1%)
Federal Home Loan Mortgage Association (3.2%)
$1,770,257 FHLMC............................................ 6.500% 12/01/23 $ 1,763,758
772,329 FHLMC............................................ 7.000% 12/01/22 785,358
672,219 FHLMC (g)........................................ 5.000% 11/15/13 660,476
-------------
3,209,592
-------------
Federal National Mortgage Association (6.5%)
803,663 FNMA............................................. 6.000% 07/01/07 797,538
352,616 FNMA............................................. 6.500% 02/01/17 351,935
1,215,661 FNMA............................................. 6.500% 03/01/17 1,212,244
1,335,641 FNMA............................................. 7.000% 09/01/17 1,358,118
7,490 FNMA............................................. 8.000% 05/01/22 7,825
1,500,000 FNMA............................................. 5.000% 05/25/22 1,401,786
1,500,000 FNMA (f)......................................... 6.000% 09/25/08 480,422
825,547 FNMA (g)......................................... 6.900% 06/25/19 832,333
-------------
6,442,201
-------------
Government National Mortgage Association (11.7%)
507,454 GNMA............................................. 7.000% 04/15/16 510,062
563,780 GNMA............................................. 7.000% 08/15/16 570,923
327,806 GNMA............................................. 7.000% 09/15/16 331,959
280,848 GNMA............................................. 7.000% 03/15/17 284,420
296,420 GNMA............................................. 7.000% 05/15/17 300,190
258,875 GNMA............................................. 7.000% 05/15/17 262,167
325,334 GNMA............................................. 7.000% 07/15/17 329,472
850,000 GNMA (c)......................................... 7.000% 11/30/27 855,977
700,000 GNMA (c)......................................... 7.500% 11/30/27 717,063
1,000,000 GNMA (c)......................................... 7.500% 11/30/27 1,007,500
401,207 GNMA............................................. 8.000% 12/15/15 419,686
318,535 GNMA............................................. 8.000% 02/15/16 333,168
309,709 GNMA............................................. 8.000% 02/15/16 323,937
273,413 GNMA............................................. 8.000% 02/15/16 285,973
435,590 GNMA............................................. 8.000% 03/15/16 455,601
1,018,269 GNMA............................................. 8.000% 10/20/17 1,060,465
40,860 GNMA............................................. 8.500% 10/20/16 43,314
218,245 GNMA............................................. 8.500% 10/20/16 231,353
158,934 GNMA............................................. 8.500% 12/20/16 168,480
189,714 GNMA............................................. 8.500% 03/20/17 201,103
327,196 GNMA............................................. 8.500% 05/20/17 346,838
812,119 GNMA............................................. 8.500% 07/20/17 860,869
289,763 GNMA............................................. 8.500% 08/20/17 307,157
3,096 GNMA............................................. 8.500% 03/15/22 3,298
105,513 GNMA............................................. 9.000% 05/20/16 113,607
492,081 GNMA............................................. 9.000% 06/20/16 529,828
174,612 GNMA............................................. 9.000% 06/20/16 188,006
314,929 GNMA............................................. 9.000% 08/20/16 339,087
178,015 GNMA............................................. 9.000% 08/20/16 191,671
-------------
11,573,174
-------------
Other U.S. Government Agencies (6.7%)
Vendee Mortgage Trust Participation Certificates
655,412 (b)............................................ 7.208% 02/15/25 676,372
Vendee Mortgage Trust Participation Certificates
1,836,917 (b)............................................ 7.793% 02/15/25 1,926,467
Vendee Mortgage Trust Participation Certificates
2,193,844 (b)............................................ 8.293% 12/15/26 2,358,920
Vendee Mortgage Trust Participation Certificates
1,570,053 (b)............................................ 8.445% 05/15/24 1,678,484
-------------
6,640,243
-------------
</TABLE>
See accompanying notes to investments in securities.
50
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- -------------
OTHER MORTGAGE-BACKED SECURITIES (64.9%)
<C> <S> <C> <C> <C>
Asset-Backed Securities (8.5%)
$1,340,802 Green Tree Financial Corporation................. 6.900% 02/15/04 $ 1,353,633
442,374 Green Tree Financial Corporation................. 7.250% 07/15/05 452,717
1,350,000 Green Tree Financial Corporation................. 7.280% 02/15/29 1,360,344
1,525,000 National Collegiate.............................. 7.240% 03/20/13 1,532,148
750,000 National Collegiate.............................. 8.250% 09/20/13 754,219
Structured Mortgage Asset Residential Trust
930,258 (e)............................................ 8.240% 03/15/01 936,805
2,000,000 Team Fleet Financing 144A Issue (d).............. 7.800% 03/15/03 2,080,000
-------------
8,469,866
-------------
Collateralized Mortgage Obligations/Mortgage Revenue Bonds
(21.4%)
1,175,968 American Housing Trust........................... 8.125% 06/25/18 1,209,013
3,085,129 Bank Mart Funding Corporation (e)................ 8.250% 02/20/19 3,126,586
2,000,000 California Housing Finance Agency................ 6.650% 08/01/29 2,008,086
3,000,000 California Housing Finance Agency................ 7.760% 08/01/25 3,087,188
1,300,000 California Housing Finance Agency................ 8.160% 02/01/28 1,364,594
1,049,822 International Capital Markets 144A Issue (e)..... 8.250% 09/01/15 1,075,084
1,000,000 Kidder Peabody Mortgage Asset Trust.............. 7.450% 10/01/18 1,015,173
1,000,000 Lehman Brothers Grantor Trust.................... 7.000% 12/01/21 1,005,625
500,000 Missouri Housing Development..................... 6.670% 03/01/29 501,345
1,000,000 Pennsylvania Housing Finance..................... 7.410% 10/01/17 1,016,250
300,000 Residential Funding Mortgage..................... 7.085% 10/25/23 301,500
612,331 Santa Barbara Funding II......................... 5.000% 03/20/18 580,226
3,389,000 Westam Mortgage Obligation....................... 5.350% 06/25/20 3,261,167
1,657,653 Wyoming Community Development.................... 6.850% 06/01/10 1,657,653
-------------
21,209,490
-------------
Commercial Mortgage-Backed Securities (7.5%)
Asset Securitization Corporation 144A Issue
5,515,540 (e)(f)......................................... 7.571% 08/13/29 984,179
555,000 City of Eden Prairie Finance Agency.............. 7.300% 03/01/19 562,441
1,872,495 Huntoon Page (e)................................. 7.000% 12/01/19 1,874,250
1,814,950 Pleasant Hill Revenue Bond....................... 7.950% 09/20/15 1,954,396
2,031,325 Rosewood Care Center............................. 7.250% 11/01/13 2,031,325
-------------
7,406,591
-------------
Whole Loan Mortgage-Backed Securities (27.5%)
1,631,368 Banco Hipotecario Nacional 144A Issue (e)(h)..... 7.916% 07/25/09 1,552,858
117,207 Bank of America.................................. 8.375% 05/01/07 117,207
1,330,661 Bear Stearns Mortgage, Inc....................... 8.000% 11/25/29 1,389,293
2,850,000 CSFB Finance Company 144A Issue (d).............. 7.180% 11/15/05 2,915,906
Chase Mortgage Finance Corporation 144A Issue
1,488,970 (d)............................................ 6.957% 08/28/24 1,468,962
1,040,012 CSFB Mortgage Securities 144A Issue (d).......... 7.771% 05/30/23 1,053,662
182,658 First Bank Systems............................... 3.178% 03/25/08 157,542
1,783,671 Lehman Structure Securities 144A Issue (d)....... 6.619% 03/28/04 1,729,046
1,736,062 Morgan Stanley Capital 144A Issue (d)............ 6.975% 03/01/26 1,726,297
2,086,568 Morgan Stanley Capital 144A Issue (d)............ 6.975% 06/29/26 2,010,930
620,656 Norwest Mortgage, Inc............................ 7.500% 12/25/26 630,668
1,031,443 Prudential Home Mortgage (c)..................... 6.050% 04/25/24 994,053
1,470,660 Prudential Home Mortgage......................... 8.000% 06/25/22 1,637,948
400,000 Prudential Home Mortgage......................... 8.000% 10/25/22 417,260
7,500,000 Prudential Home Mortgage 144A Issue (d).......... 7.900% 04/28/22 7,539,555
8,891 Travelers Mortgage Services, Inc................. 10.000% 06/25/01 8,858
1,978,717 Tryon Mortgage Funding........................... 7.750% 12/20/09 2,019,156
-------------
27,369,201
-------------
CORPORATE DEBT SECURITIES (1.5%)
425,000 PNC Bank Corporation............................. 6.446% 04/25/01 431,838
1,000,000 Security Capital Pacific Trust................... 7.500% 02/15/14 1,040,520
-------------
1,472,358
-------------
Total long-term debt securities (cost: $91,549,464)................. 93,792,716
-------------
</TABLE>
See accompanying notes to investments in securities.
51
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- -------------
<C> <S> <C> <C> <C>
PREFERRED STOCK (2.0%)
FINANCIAL (2.0%)
Real Estate Investment Trust (2.0%)
39,000 Duke Realty Investment, Inc. 7.99%.................................. $ 2,025,563
-------------
Total preferred stock (cost: $1,958,360)............................ 2,025,563
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (5.4%)
$ 515,000 Ford Motor Credit Company CP...................... 6.212% 01/05/98 514,587
Temporary Investment Fund--Temp Fund Portfolio, current rate
4,859,880 5.500%............................................................ 4,859,880
-------------
Total short-term securities (cost: $5,374,530)...................... 5,374,467
-------------
Total investments in securities (cost: $98,882,354) (i)............. $ 101,192,746
-------------
-------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures 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, 1997.
(c) At December 31, 1997 the total cost of investments issued on a when-issued
or forward commitment basis is $3,587,131.
(d) Long term debt security sold within terms of a private placement memorandum
exempt from registration under Section 144A of the Securities Act of 1933,
as amended, and may be sold only to dealers in that program or other
"accredited investors." This security has been determined to be liquid under
guidelines established by the board of directors.
(e) Represents ownership in an illiquid security which has not been registered
with the Securities and Exchange Commission under the Securities Act of
1933. (See note 7 to the financial statements). Information concerning the
illiquid securities held at December 31, 1997 includes acquisition date and
cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- --------------------------------------- ----------- -----------
<S> <C> <C>
Asset Securitization Corporation 144A
Issue................................ 10/23/96 $ 993,736
Banco Hipotecario Nacional 144A
Issue................................ 4/30/97 1,631,368
International Capital Markets 144A
Issue................................ 1/9/95 993,395
Huntoon Page........................... 10/28/97 1,879,517
Structured Mortgage Asset Residential
Trust................................ 3/03/97 930,258
Bank Mart Funding...................... various 3,083,059
-----------
$ 9,511,333
-----------
-----------
</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 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 it's
accural period, but accrues additional principal at specific rates. The
interest rate disclosed represents current yield based upon estimated future
cash flows.
(h) At December 31, 1997 the Portfolio held 1.6% of net assets in foreign
securities.
(i) At December 31, 1997 the cost of securities for federal income tax purposes
was $98,890,089. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $2,502,333
Gross unrealized depreciation.......... (199,676)
----------
Net unrealized appreciation............ $2,302,657
----------
----------
</TABLE>
52
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
COMMON STOCK (99.6%)
BASIC MATERIALS (4.9%)
Agriculture Product (.3%)
9,000 Cognizant Corporation.................................................. $ 401,062
6,300 Pioneer Hi-Bred International.......................................... 675,675
----------------
1,076,737
----------------
Aluminum (.2%)
7,275 Alcan Aluminium Limited (c)............................................ 200,972
5,400 Aluminum Company of America............................................ 380,025
5,000 Reynolds Metals Company................................................ 300,000
----------------
880,997
----------------
Chemicals (2.9%)
4,100 Air Products and Chemicals, Inc........................................ 337,225
6,500 BF Goodrich Company.................................................... 269,344
10,400 Dow Chemical Company................................................... 1,055,600
55,000 Dupont................................................................. 3,303,437
3,825 Eastman Chemical Company............................................... 227,827
5,400 Ecolab, Inc............................................................ 299,362
10,487 Engelhard Corporation.................................................. 182,212
700 FMC Corporation (b).................................................... 47,119
3,900 Great Lakes Chemical Corporation....................................... 175,012
11,200 Hercules Incorporated.................................................. 560,700
14,500 International Flavors & Fragrances..................................... 746,750
26,700 Monsanto Company....................................................... 1,121,400
11,300 Morton International Inc. (b).......................................... 388,437
5,800 Nalco Chemical Company................................................. 229,462
7,900 PPG Industries, Inc.................................................... 451,287
16,100 Praxair, Inc........................................................... 724,500
3,400 Rohm and Haas Company.................................................. 325,550
6,000 Sigma-Aldrich.......................................................... 238,500
3,900 Union Carbide Corporation.............................................. 167,456
----------------
10,851,180
----------------
Iron and Steel (.2%)
17,262 Allegheny Teledyne Incorported......................................... 446,654
5,000 Nucor Corporation...................................................... 241,562
5,640 USX--U.S. Steel Group, Inc............................................. 176,250
3,300 Worthington Industries................................................. 54,450
----------------
918,916
----------------
Mining (.4%)
10,700 Barrick Gold Corporation (c)........................................... 199,287
10,100 Freeport-McMoran Copper................................................ 159,075
17,700 Homestake Mining Company............................................... 157,087
22,200 Inco Limited (c)....................................................... 377,400
16,022 Newmont Mining Corporation............................................. 470,646
4,300 Phelps Dodge Corporation............................................... 267,675
5,100 Placer Dome, Inc. (c).................................................. 64,706
----------------
1,695,876
----------------
Paper and Forest (.9%)
5,800 Bemis Company, Inc..................................................... 255,562
566 Boise Cascade Corporation.............................................. 17,121
4,300 Champion International Corporation..................................... 194,844
11,000 Fort James Corporation................................................. 420,750
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
BASIC MATERIALS--CONTINUED
7,200 Georgia-Pacific Corporation............................................ $ 437,400
13,400 International Paper Company............................................ 577,875
5,600 Louisianna-Pacific Corporation......................................... 106,400
600 Potlatch Corporation................................................... 25,800
5,400 Temple-Inland, Inc..................................................... 282,487
5,150 Union Camp Corporation................................................. 276,491
6,000 Westvaco Corporation................................................... 188,625
7,300 Weyerhaeuser Company................................................... 358,156
4,800 Willamette Industries, Inc............................................. 154,500
----------------
3,296,011
----------------
CAPITAL GOODS (8.9%)
Aerospace/Defense (1.5%)
47,130 Boeing Company......................................................... 2,306,424
6,700 General Dynamics Corporation........................................... 579,131
8,619 Lockheed Martin Corporation............................................ 848,971
6,500 Northrop Grumman Corporation........................................... 747,500
17,001 Raytheon Company (b)................................................... 858,545
6,800 Rockwell International Corporation..................................... 355,300
----------------
5,695,871
----------------
Containers--Metal/Glass (.2%)
12,600 Crown Cork & Seal Company, Inc......................................... 631,575
----------------
Electrical Equipment (4.1%)
6,600 AMP Incorporated....................................................... 277,200
36,900 CBS Corporation (b).................................................... 1,086,244
20,900 Emerson Electric Company............................................... 1,179,544
164,800 General Electric Company............................................... 12,092,200
9,000 Honeywell, Inc......................................................... 616,500
4,800 Raychem Corporation.................................................... 206,700
7,300 Thermo Electron Corporation (b)........................................ 324,850
----------------
15,783,238
----------------
Engineering/Construction (.1%)
2,600 Fluor Corporation...................................................... 97,175
700 Foster Wheeler Corporation............................................. 18,944
7,200 Harnischfeger Industries, Inc.......................................... 254,250
----------------
370,369
----------------
Machinery (.7%)
3,600 Case Corporation....................................................... 217,575
15,200 Caterpillar, Inc....................................................... 738,150
5,400 Cooper Industries...................................................... 264,600
10,300 Deere & Company........................................................ 600,619
11,200 Dover Corporation...................................................... 404,600
6,900 Ingersoll-Rand Company................................................. 279,450
----------------
2,504,994
----------------
Manufacturing (1.9%)
25,600 Allied-Signal, Inc..................................................... 996,800
5,600 Avery Dennison Corporation............................................. 250,600
6,900 Corning, Inc........................................................... 256,162
900 Crane Company.......................................................... 39,037
3,100 Eaton Corporation...................................................... 276,675
11,100 Illinois Tool Works, Inc............................................... 667,387
5,400 Johnson Controls....................................................... 257,850
</TABLE>
See accompanying notes to investments in securities.
53
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
CAPITAL GOODS--CONTINUED
<C> <S> <C>
18,500 Minnesota Mining and Manufacturing..................................... $ 1,518,156
10,899 Pall Corporation....................................................... 225,473
6,300 Parker Hannifin Corporation............................................ 289,012
13,700 Tenneco, Inc........................................................... 541,150
4,800 Textron, Inc........................................................... 300,000
22,000 Tyco International Ltd................................................. 991,375
8,400 United Technologies Corporation........................................ 611,625
----------------
7,221,302
----------------
Office Equipment (.2%)
700 Ikon Office Solutions.................................................. 19,687
9,500 Moore Corporation Limited (c).......................................... 143,687
4,800 Pitney Bowes, Inc...................................................... 431,700
----------------
595,074
----------------
Trucks and Parts ( -- )
2,950 Navistar International Corporation (b)................................. 73,197
1,380 Paccar, Inc............................................................ 72,450
----------------
145,647
----------------
Waste Management (.2%)
6,500 Browning-Ferris Industries............................................. 240,500
14,800 WMX Technologies, Inc.................................................. 407,000
----------------
647,500
----------------
COMMUNICATION SERVICES (7.1%)
Cellular (.4%)
22,400 Airtouch Communications (b)............................................ 931,000
13,900 Comcast Corporation (b)................................................ 438,719
----------------
1,369,719
----------------
Telecommunication (1.9%)
79,035 AT&T Corporation....................................................... 4,840,894
30,600 MCI Communications..................................................... 1,310,062
39,700 Worldcom, Inc. (b)..................................................... 1,200,925
----------------
7,351,881
----------------
Telephone (4.8%)
17,500 Alltel Corporation..................................................... 718,594
27,400 Ameritech.............................................................. 2,205,700
41,809 Bell Atlantic Corporation.............................................. 3,804,619
48,200 Bellsouth Corporation.................................................. 2,714,262
36,000 Frontier Corporation................................................... 866,250
53,300 GTE Corporation........................................................ 2,784,925
48,756 SBC Communications, Inc................................................ 3,571,377
45,500 US West Communications Group (b)....................................... 1,702,187
----------------
18,367,914
----------------
CONSUMER CYCLICAL (10.2%)
Auto (2.1%)
30,600 Chrysler Corporation Holding Company................................... 1,076,737
8,600 Dana Corporation....................................................... 408,500
9,600 Echlin, Inc............................................................ 347,400
58,300 Ford Motor Company..................................................... 2,838,481
33,400 General Motors Corporation............................................. 2,024,875
6,300 Goodyear Tire & Rubber Company......................................... 400,837
13,200 ITT Industries......................................................... 414,150
5,250 Snap-On Incorporated................................................... 229,031
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
CONSUMER CYCLICAL--CONTINUED
6,400 TRW, Inc............................................................... $ 341,600
----------------
8,081,611
----------------
Building Materials (.3%)
3,900 Armstrong World Industries, Inc........................................ 291,525
8,400 Fleetwood Enterprises, Inc............................................. 356,475
6,900 Masco Corporation...................................................... 351,037
400 Owens Corning.......................................................... 13,650
8,600 TJX Companies, Incorporated............................................ 295,625
----------------
1,308,312
----------------
Distribution Durables (.1%)
5,550 Genuine Parts Company.................................................. 188,353
----------------
Hardware and Tools (.1%)
1,100 Black & Decker Corporation............................................. 42,969
8,400 The Stanley Works...................................................... 396,375
----------------
439,344
----------------
Houseware (.1%)
7,800 Whirlpool Corporation.................................................. 429,000
----------------
Leisure (.2%)
7,500 Brunswick Corporation.................................................. 227,344
10,200 Hasbro, Inc............................................................ 321,300
8,641 Mattel, Inc............................................................ 321,877
----------------
870,521
----------------
Lodging--Hotel (.5%)
15,500 Hilton Hotels Corporation.............................................. 461,125
10,700 ITT Corporation (b).................................................... 886,762
5,100 Marriott International, Inc............................................ 353,175
----------------
1,701,062
----------------
Photography/Imagery (.6%)
14,600 Eastman Kodak Company.................................................. 887,862
4,000 Polaroid Corporation................................................... 194,750
14,600 Xerox Corporation...................................................... 1,077,662
----------------
2,160,274
----------------
Publishing (1.1%)
14,800 R.R. Donnelly & Sons Company........................................... 551,300
6,600 Dow Jones & Company, Inc............................................... 354,337
4,360 Dun & Bradstreet Corporation........................................... 134,887
12,800 Gannett Company........................................................ 791,200
6,000 Knight-Ridder, Inc..................................................... 312,000
11,000 McGraw-Hill Companies, Inc............................................. 814,000
7,200 Meredith Corporation................................................... 256,950
2,900 New York Times Company................................................. 191,762
3,600 Times Mirror Company................................................... 221,400
11,300 Tribune Company........................................................ 703,425
----------------
4,331,261
----------------
Retail (3.9%)
16,200 Autozone, Inc. (b)..................................................... 469,800
7,400 Circuit City Stores, Inc............................................... 263,162
7,800 Costco Companies, Inc. (b)............................................. 348,075
10,700 Datyon Hudson Corporation.............................................. 722,250
11,500 Dillards, Inc.......................................................... 405,375
17,800 Federated Department Stores (b)........................................ 766,512
18,000 Gap Incorported........................................................ 637,875
9,800 Harcourt General, Inc.................................................. 536,550
33,486 Home Depot, Inc........................................................ 1,971,488
</TABLE>
See accompanying notes to investments in securities.
54
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
CONSUMER CYCLICAL--CONTINUED
<C> <S> <C>
9,400 JC Penny Company....................................................... $ 566,937
49,400 K Mart Corporation (b)................................................. 571,187
8,900 Lowe's Companies, Inc.................................................. 424,419
7,100 May Department Stores Company.......................................... 374,081
1,000 Mercantile Stores Company, Inc......................................... 60,875
10,600 Nike, Inc.............................................................. 416,050
3,100 Nordstrom, Inc......................................................... 187,162
17,400 Sears, Roebuck & Company............................................... 787,350
6,200 Sherwin-Williams Company............................................... 172,050
7,600 Tandy Corporation...................................................... 293,075
11,800 The Limited, Inc....................................................... 300,900
8,350 Toys R Us (b).......................................................... 262,503
110,100 Wal-Mart Stores........................................................ 4,342,069
----------------
14,879,745
----------------
Service (.9%)
38,183 Cedant Corporation (b)................................................. 1,312,539
5,900 H & R Block, Inc....................................................... 264,394
6,400 Harrah's Entertainment (b)............................................. 120,800
8,700 Interpublic Group Company.............................................. 433,369
20,200 Service Corporation International...................................... 746,137
19,900 Tele-Communications, Inc. (b).......................................... 555,956
----------------
3,433,195
----------------
Textiles (.3%)
5,300 Fruit of the Loom (b).................................................. 135,812
7,700 Liz Clairborne, Inc.................................................... 321,956
15,700 V. F. Corporation...................................................... 721,219
----------------
1,178,987
----------------
CONSUMER STAPLES (14.6%)
Beverage (3.4%)
24,400 Anheuser-Busch Companies, Inc.......................................... 1,073,600
1,500 Brown-Forman, Inc. (b)................................................. 82,875
120,600 Coca-Cola Company...................................................... 8,034,975
4,600 Coors Company.......................................................... 152,950
69,300 Pepsico, Inc........................................................... 2,525,119
18,200 The Seagram Company Ltd. (c)........................................... 588,087
15,600 Whitman Corporation.................................................... 406,575
----------------
12,864,181
----------------
Entertainment (1.4%)
600 King World Productions, Inc. (b)....................................... 34,650
24,900 Time Warner, Inc....................................................... 1,543,800
11,230 Viacom (b)............................................................. 465,343
33,082 Walt Disney Company.................................................... 3,277,186
----------------
5,320,979
----------------
Food (2.7%)
17,508 Archer Daniels Midland Company......................................... 379,705
6,500 Best Foods............................................................. 700,375
21,100 Campbell Soup Company.................................................. 1,226,437
21,850 Conagra, Inc........................................................... 716,953
4,800 General Mills, Inc..................................................... 343,800
15,700 Heinz HJ Company....................................................... 797,756
5,800 Hershey Foods Corporation.............................................. 359,237
25,900 Kellogg Company........................................................ 1,285,287
6,300 Quaker Oats Company.................................................... 332,325
7,800 Ralston-Ralston Purina Group........................................... 724,912
22,600 Sara Lee Corporation................................................... 1,272,662
28,400 Unilever N.V. (c)...................................................... 1,773,225
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
CONSUMER STAPLES--CONTINUED
3,600 Wm. Wrigley Jr. Company................................................ $ 286,425
----------------
10,199,099
----------------
Food and Health (.5%)
6,300 Cardinal Health Incorporated........................................... 473,287
13,100 Super Valu, Inc........................................................ 548,562
18,900 Sysco Corporation...................................................... 861,131
----------------
1,882,980
----------------
Household Product (2.1%)
13,100 Colgate Palmolive Company.............................................. 962,850
27,300 Kimberly-Clark Corporation............................................. 1,346,231
10,000 Newell Company......................................................... 425,000
65,668 Procter & Gamble Company............................................... 5,241,127
----------------
7,975,208
----------------
Personal Care (.9%)
12,400 Alberto-Culver Company................................................. 397,575
4,500 Avon Products.......................................................... 276,188
27,600 Gillette Company....................................................... 2,772,075
----------------
3,445,838
----------------
Restaurants (.5%)
18,400 Darden Restaurants, Inc................................................ 230,000
30,700 McDonalds Corporation.................................................. 1,465,925
6,930 Tricon Global Restaurants (b).......................................... 201,403
6,200 Wendy's International, Inc............................................. 149,188
----------------
2,046,516
----------------
Retail (1.0%)
7,200 Albertson's Incorporated............................................... 341,100
17,000 American Stores Company................................................ 349,563
9,700 CVS Corporation........................................................ 621,406
4,500 Giant Food, Inc........................................................ 151,594
14,600 Kroger Company (b)..................................................... 539,288
2,400 Longs Drug Stores Corporation.......................................... 77,100
7,400 Rite Aid Corporation................................................... 434,288
24,000 Walgreen Company....................................................... 753,000
14,800 Winn-Dixie Stores, Inc................................................. 646,575
----------------
3,913,914
----------------
Service (.4%)
14,200 Automatic Data Processing, Inc......................................... 871,525
4,600 Ceridian Corporation (b)............................................... 210,738
3,300 Deluxe Corporation..................................................... 113,850
7,900 Safety-Kleen Corporation............................................... 216,756
----------------
1,412,869
----------------
Tobacco (1.7%)
17,500 Fortune Brands, Inc.................................................... 648,594
120,000 Philip Morris Companies, Inc........................................... 5,437,500
9,900 UST, Inc............................................................... 365,681
----------------
6,451,775
----------------
ENERGY (8.3%)
Oil (6.7%)
9,800 Amerada Hess Corporation............................................... 537,775
22,300 Amoco Corporation...................................................... 1,898,288
14,300 Atlantic Richfield Company............................................. 1,145,788
34,900 Chevron Corporation.................................................... 2,687,300
122,100 Exxon Corporation...................................................... 7,470,994
41,700 Mobil Corporation...................................................... 3,010,219
</TABLE>
See accompanying notes to investments in securities.
55
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
ENERGY--CONTINUED
<C> <S> <C>
12,100 Occidental Petroleum Corporation....................................... $ 354,681
4,000 Pennzoil Company....................................................... 267,250
10,100 Phillips Petroleum Company............................................. 491,113
104,300 Royal Dutch Petroleum (c).............................................. 5,651,756
24,800 Texaco, Inc............................................................ 1,348,500
7,500 Unocal Corporation..................................................... 291,094
10,600 USX--Marathon Group.................................................... 357,750
----------------
25,512,508
----------------
Oil and Gas (1.6%)
6,600 Anadarko Petroleum Corporation......................................... 400,538
7,100 Ashland, Inc........................................................... 381,181
8,600 Baker Hughes Incorporated.............................................. 375,175
12,280 Burlington Resources, Inc.............................................. 550,298
15,700 Dresser Industries, Inc................................................ 658,419
9,200 Halliburton Company.................................................... 477,825
9,200 Oryx Energy Company (b)................................................ 234,600
22,400 Schlumberger Limited................................................... 1,803,200
29,200 Union Pacific Resources Group.......................................... 708,100
8,800 Western Atlas Corporation (b).......................................... 651,200
----------------
6,240,536
----------------
FINANCIAL (17.0%)
Banks (8.4%)
25,877 Banc One Corporation................................................... 1,405,445
5,200 Bank of Boston Corporation............................................. 488,475
20,600 Bank of New York, Inc.................................................. 1,190,938
31,608 Bankamerica Corporation................................................ 2,307,384
3,400 Bankers Trust New York Corporation..................................... 382,288
9,200 Barnett Banks of Florida, Inc.......................................... 661,250
9,700 BB&T Corporation....................................................... 621,406
21,734 Chase Manhattan Corporation............................................ 2,379,873
24,300 Citicorp............................................................... 3,072,431
4,500 Comerica............................................................... 406,125
13,900 Corestates Financial Corporation....................................... 1,112,869
5,100 Fifth Third Bancorp.................................................... 416,925
17,637 First Chicago NBD Corporation.......................................... 1,472,690
31,290 First Union Corporaiton................................................ 1,603,613
9,680 Fleet Financial Group, Inc............................................. 725,395
13,900 Huntington Bancshares.................................................. 500,400
7,300 JP Morgan & Company, Inc............................................... 823,988
14,700 Keycorp................................................................ 1,040,944
17,100 Mellon Bank Corporation................................................ 1,036,688
12,600 National City Corporation.............................................. 828,450
33,012 Nationsbank Corporation................................................ 2,007,542
33,200 Norwest Corporation.................................................... 1,282,350
11,800 PNC Bank Corporation................................................... 673,338
6,100 Republic New York Corporation.......................................... 696,544
8,600 State Street Corporation............................................... 500,413
14,400 Suntrust Banks, Inc.................................................... 1,027,800
10,228 US Bancorp............................................................. 1,144,897
10,200 Wachovia Corporation................................................... 827,475
4,266 Wells Fargo & Company.................................................. 1,448,040
----------------
32,085,976
----------------
Consumer Finance (.5%)
16,200 Green Tree Financial Corporation....................................... 424,238
4,800 Household International, Inc........................................... 612,300
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
FINANCIAL--CONTINUED
24,388 MBNA Corporation....................................................... $ 666,084
----------------
1,702,622
----------------
Finance--Diversified (1.9%)
22,800 American Express Company............................................... 2,034,900
33,800 Federal Home Loan Mortgage Corporation................................. 1,417,488
49,300 Federal National Mortgage Association.................................. 2,813,181
8,200 MGIC Investment Corporation............................................ 545,300
13,500 Charles Schwab Corporation............................................. 566,156
----------------
7,377,025
----------------
Insurance (4.9%)
6,755 Aetna Incorporated..................................................... 476,650
21,157 Allstate Corporation................................................... 1,922,642
9,056 American General Corporation........................................... 489,590
34,120 American International Group........................................... 3,710,550
5,700 Aon Corporation........................................................ 334,163
5,300 Chubb Corporation...................................................... 400,813
2,800 Cigna Corporation...................................................... 484,575
3,800 Cincinnati Financial Corporation....................................... 534,850
8,200 Conseco, Inc........................................................... 372,588
3,600 General RE Corporation................................................. 763,200
6,500 ITT Hartford Group..................................................... 608,156
3,200 Jefferson-Pilot Corporation............................................ 249,200
7,000 Lincoln National Corporation........................................... 546,875
3,800 Loews Corporation...................................................... 403,275
7,400 Marsh & McLennen....................................................... 551,763
4,000 MBIA, Inc.............................................................. 267,250
4,400 Progressive Corporation................................................ 527,450
5,300 Providian Financial.................................................... 239,494
4,900 Safeco Corporation..................................................... 238,875
3,400 St. Paul Companies, Inc................................................ 279,013
12,800 Sunamerica Incorporated................................................ 547,200
16,500 Torchmark Corporation.................................................. 694,031
3,700 Transamerica Corporation............................................... 394,050
54,714 Travelers Group Incorporated........................................... 2,947,717
11,000 Unum Corporation....................................................... 598,125
7,300 USF&G Corporation...................................................... 161,056
----------------
18,743,151
----------------
Investment Bankers/Brokers (.7%)
14,700 Merrill Lynch & Co., Inc............................................... 1,072,181
26,030 Morgan Stanley Dean Witter............................................. 1,539,024
----------------
2,611,205
----------------
Public Finance (.1%)
12,400 Countrywide Credit Industries.......................................... 531,650
----------------
Savings and Loans (.5%)
9,400 H.F. Ahmanson & Company................................................ 629,213
4,700 Golden West Financial Corporation...................................... 459,719
11,290 Washington Mutual Incorporated......................................... 720,443
----------------
1,809,375
----------------
HEALTH CARE (11.0%)
Biotechnology (.2%)
11,800 Amgen, Inc. (b)........................................................ 638,675
----------------
</TABLE>
See accompanying notes to investments in securities.
56
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
HEALTH CARE--CONTINUED
<C> <S> <C>
Drugs (5.2%)
32,000 American Home Products Corporation..................................... $ 2,448,000
54,200 Eli Lilly & Company.................................................... 3,773,675
58,700 Merck & Co., Inc....................................................... 6,236,875
62,900 Pfizer, Inc............................................................ 4,689,981
18,755 Pharmacia & Upjohn..................................................... 686,902
32,600 Schering Plough Corporation............................................ 2,025,275
----------------
19,860,708
----------------
Health Care--Diversified (3.6%)
37,300 Abbott Laboratories.................................................... 2,445,481
6,100 Allergan, Inc.......................................................... 204,731
48,500 Bristol-Myers Squibb Company........................................... 4,589,313
13,600 HealthSouth Rehabilitation Company (b)................................. 377,400
64,700 Johnson & Johnson...................................................... 4,262,113
12,000 Mallinckrodt, Inc...................................................... 456,000
12,300 Warner-Lambert Company................................................. 1,525,200
----------------
13,860,238
----------------
Hospital Management (.3%)
29,706 Columbia/HCA Healthcare Corporation.................................... 880,040
9,800 Tenet Healthcare Corporation (b)....................................... 324,625
----------------
1,204,665
----------------
Managed Care (.5%)
3,900 Beverly Enterprises (b)................................................ 50,700
37,400 Humana (b)............................................................. 776,050
4,500 Manor Care, Inc........................................................ 157,500
15,600 United Health Care..................................................... 775,125
----------------
1,759,375
----------------
Medical Products/Supplies (1.1%)
8,700 Bausch & Lomb Incorporated............................................. 344,738
12,600 Baxter International, Inc.............................................. 635,513
7,400 Becton, Dickinson & Company............................................ 370,000
1,400 Biomet, Inc............................................................ 35,875
6,600 Boston Scientific Corporation (b)...................................... 302,775
3,700 C.R. Bard.............................................................. 115,856
3,000 Fresenius Medical Care (b)(c).......................................... 188
9,800 Guidant Corporation.................................................... 610,050
19,200 Medtronic, Inc......................................................... 1,004,400
17,600 St. Jude Medical, Inc. (b)............................................. 536,800
12,800 United States Surgical Corporation..................................... 375,200
----------------
4,331,395
----------------
Special Services (.1%)
11,300 Alza Corporation (b)................................................... 359,481
----------------
TECHNOLOGY (12.9%)
13,500 3 Com (b).............................................................. 471,656
9,400 Adobe Systems, Inc..................................................... 387,750
5,800 Advanced Micro Devices, Inc. (b)....................................... 104,038
8,900 Andrew Corporation (b)................................................. 213,600
8,800 Apple Computer Incorporated (b)........................................ 115,500
13,000 Applied Materials, Inc. (b)............................................ 391,625
2,200 Autodesk, Inc.......................................................... 81,400
10,200 Bay Networks, Inc. (b)................................................. 260,738
11,100 Cabletron Systems Incorporated (b)..................................... 166,500
48,900 Cisco Systems, Inc (b)................................................. 2,726,175
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
TECHNOLOGY--CONTINUED
34,802 Compaq Computer Corporation............................................ $ 1,964,138
26,587 Computer Associates International...................................... 1,405,788
7,700 Computer Sciences Corporation (b)...................................... 642,950
13,800 Dell Computer Corporation (b).......................................... 1,159,200
18,000 Digital Equipment (b).................................................. 666,000
24,000 EMC Corporation (b).................................................... 658,500
11,800 Equifax Incorporated................................................... 418,163
18,000 First Data Corporation................................................. 526,500
9,600 General Signal Corporation............................................. 405,000
7,200 W.W. Grainger, Inc..................................................... 699,750
8,000 Harris Corporation..................................................... 367,000
11,300 HBO & Company.......................................................... 542,400
48,900 Hewlett-Packard Company................................................ 3,056,250
79,400 Intel.................................................................. 5,577,850
47,800 International Business Machine......................................... 4,998,088
6,500 KLA-Tencor Corporation (b)............................................. 251,063
6,200 LSI Logic Corporation (b).............................................. 122,450
31,500 Lucent Technologies, Inc............................................... 2,516,063
20,500 Micron Technology, Inc. (b)............................................ 533,000
60,500 Microsoft Corporation (b).............................................. 7,819,625
26,500 Motorola............................................................... 1,512,156
8,700 National Semiconductor Corporation (b)................................. 225,656
8,500 Nextlevel System (b)................................................... 151,938
11,700 Northern Telecom Limited............................................... 1,041,300
8,500 Novell, Inc (b)........................................................ 63,750
47,675 Oracle Corporation (b)................................................. 1,063,748
5,800 Parametric Technology Corporation (b).................................. 274,775
2,800 Perkin-Elmer Corporation............................................... 198,975
4,400 Scientific-Atlanta, Inc................................................ 73,700
32,800 Seagate Technology, Inc. (b)........................................... 631,400
23,500 Silicon Graphics Incorporated (b)...................................... 292,281
25,900 Sprint Corportion...................................................... 1,518,388
16,800 Sun Microsystems, Inc (b).............................................. 669,900
5,200 Tellabs Incorporated (b)............................................... 274,950
17,200 Texas Instruments Incorporated......................................... 774,000
7,200 Thomas & Betts Corporation............................................. 340,200
37,800 Unisys Corporation (b)................................................. 524,475
----------------
48,880,352
----------------
TRANSPORTATION (1.4%)
Air Freight (.1%)
3,800 Federal Express Corporation (b)........................................ 232,038
----------------
Airlines (.4%)
4,100 AMR Corporation (b).................................................... 526,850
3,800 Delta Air Lines, Inc................................................... 452,200
9,100 US Air Group, Inc (b).................................................. 568,750
----------------
1,547,800
----------------
Railroads (.6%)
7,973 Burlington Northern Santa Fe........................................... 740,991
7,400 CSX Corporation........................................................ 399,600
14,100 Norfolk Southern Corporation........................................... 434,456
14,100 Union Pacific Corporation.............................................. 880,369
----------------
2,455,416
----------------
Transport Services (.2%)
43,700 Laidlaw, Inc. (c)...................................................... 595,413
----------------
</TABLE>
See accompanying notes to investments in securities.
57
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
TRANSPORTATION--CONTINUED
<C> <S> <C>
Trucking (.1%)
5,400 Ryder System, Inc...................................................... $ 176,850
----------------
UTILITIES (3.3%)
Electric Companies (2.6%)
6,000 American Electric Power Company........................................ 309,750
10,600 Baltimore Gas & Electric Company....................................... 361,063
6,500 Carloina Power & Light Company......................................... 275,844
9,700 Central & Southwest Corporation........................................ 262,506
5,932 Cinergy................................................................ 227,270
18,100 Consolidated Edison, Inc............................................... 742,100
6,750 Dominion Resources, Inc................................................ 287,297
16,900 DTE Energy Company..................................................... 586,219
14,050 Duke Energy Corporation................................................ 778,019
15,000 Edison International................................................... 407,813
22,700 Entergy Corporation.................................................... 679,581
14,800 FPL Group Incorporated................................................. 875,975
5,600 GPU Incorporated....................................................... 235,900
13,323 Houston Industries, Inc................................................ 355,549
5,200 Niagra Mohawk Power Corporation (b).................................... 54,600
1,300 Northern States Power Company.......................................... 75,725
14,200 Pacific Gas & Electric Company......................................... 432,213
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
UTILITIES--CONTINUED
12,500 Pacificorp............................................................. $ 341,406
15,900 Peco Energy Company.................................................... 385,575
9,750 Public Service Enterprise Group........................................ 308,953
33,600 Southern Company....................................................... 869,400
7,462 Texas Utilities Company................................................ 310,139
19,600 Unicom Corporation..................................................... 602,700
6,900 Union Electric Company................................................. 298,425
----------------
10,064,022
----------------
Natural Gas (.7%)
4,100 Coastal Corporation.................................................... 253,944
2,900 Columbia Gas System, Inc............................................... 227,831
3,200 Consolidated Natural Gas Company....................................... 193,600
13,800 Enron Corporation...................................................... 573,563
800 Oneok Inc.............................................................. 32,300
5,100 Pacific Enterprises.................................................... 191,888
2,000 Peoples Energy Corporation............................................. 78,750
4,000 Sonat, Inc............................................................. 183,000
29,400 The Williams Company................................................... 834,226
----------------
2,569,102
----------------
Total common stocks (cost: $249,153,358)........................................... 379,069,403
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- -----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (1.1%)
$ 4,103,644 Temporary Investment Fund--Temp Fund Portfolio current rate 5.500%...... 4,103,644
------------
Total short-term securities (cost: $4,103,644).......................... 4,103,644
------------
Total investments in securities (cost: $253,257,002) (d)................ $383,173,047
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The portfolio held 2.5% of net assets in foreign securities at December 31,
1997.
(d) At December 31, 1997 the cost of securities for federal income tax purposes
was $253,775,075. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $133,749,337
Gross unrealized depreciation.......... (4,351,365)
------------
Net unrealized appreciation............ $129,397,972
------------
------------
</TABLE>
58
<PAGE>
CAPITAL APPRECIATION PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
COMMON STOCK (98.7%)
BASIC MATERIALS (1.8%)
Agriculture Product (1.8%)
118,500 Cognizant Corporation............................................. $ 5,280,656
----------------
CAPITAL GOODS (7.4%)
Electrical Equipment (1.9%)
123,500 Thermo Electron Corporation (b)................................... 5,495,750
----------------
Manufacturing (2.8%)
182,900 Tyco International Ltd............................................ 8,241,931
----------------
Waste Management (2.7%)
202,700 USA Waste Services, Inc. (b)...................................... 7,955,975
----------------
COMMUNICATION SERVICES (5.0%)
Telecommunication (2.9%)
205,500 ADC Telecommunications, Inc. (b).................................. 8,579,625
----------------
Telephone (2.1%)
196,900 LCI International Incorporated (b)................................ 6,054,675
----------------
CONSUMER CYCLICAL (20.5%)
Lodging--Hotel (1.7%)
93,300 Carnival Corporation.............................................. 5,166,487
----------------
Retail (14.7%)
181,550 Consolidated Stores Corporations (b).............................. 7,976,853
223,342 Dollar General Corporation........................................ 8,096,145
208,800 Home Depot, Inc................................................... 12,293,071
78,000 Kohl's, Inc. (b).................................................. 5,313,750
247,500 Wal-Mart Stores................................................... 9,760,781
----------------
43,440,600
----------------
Service (3.0%)
253,500 Cendant Corporation (b)........................................... 8,714,062
----------------
Textiles (1.1%)
96,400 Tommy Hilfiger Corporation (b).................................... 3,386,050
----------------
ENERGY (8.7%)
Oil and Gas (8.7%)
144,500 Baker Hughes Incorporated......................................... 6,303,812
200,700 Falcon Drilling Company (b)....................................... 7,037,044
153,700 Schlumberger Limited.............................................. 12,372,850
----------------
25,713,706
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
FINANCIAL (15.0%)
Banks (4.5%)
87,500 Bankamerica Corporation........................................... $ 6,387,500
179,200 Norwest Corporation............................................... 6,921,600
----------------
13,309,100
----------------
Consumer Finance (3.6%)
153,100 Green Tree Financial Corporation.................................. 4,009,306
238,200 MBNA Corporation.................................................. 6,505,838
----------------
10,515,144
----------------
Finance--Diversified (6.9%)
202,600 Federal National Mortgage Association............................. 11,560,863
133,900 MGIC Investment Corporation....................................... 8,904,350
----------------
20,465,213
----------------
HEALTH CARE (11.1%)
Drugs (5.3%)
62,800 Merck & Co., Inc.................................................. 6,672,500
81,500 Pfizer, Inc....................................................... 6,076,844
46,700 Schering Plough Corporation....................................... 2,901,238
----------------
15,650,582
----------------
Health Care--Diversified (3.4%)
80,800 Warner-Lambert Company............................................ 10,019,200
----------------
Special Services (2.4%)
223,800 Omnicare Incorporated............................................. 6,937,800
----------------
TECHNOLOGY (29.2%)
263,250 Cisco Systems, Inc (b)............................................ 14,676,188
241,600 Computer Associates International................................. 12,774,600
120,000 Fiserv (b)........................................................ 5,895,000
131,600 Gartner Group Incorporated (b).................................... 4,902,100
124,000 HBO & Company..................................................... 5,952,000
70,500 Intel............................................................. 4,952,625
33,100 Microsoft Corporation (b)......................................... 4,278,175
77,900 Network Associates (b)............................................ 4,118,963
232,400 Parametric Technology Corporation (b)............................. 11,009,950
103,400 Paychex Incorporated.............................................. 5,234,625
158,800 Peoplesoft Incorporated (b)....................................... 6,193,200
156,300 Sterling Commerce, Inc. (b)....................................... 6,007,781
----------------
85,995,207
----------------
Total common stock (cost: $200,943,071)...................................... 290,921,763
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (1.2%)
Temporary Investment Fund--Temp Fund Portfolio, current rate
$2,445,250 5.500%............................................................ 2,445,250
1,010,000 US Treasury Bill................................. 5.192% 01/15/98 1,008,372
------------
Total short-term securities (cost: $3,453,243)...................... 3,453,622
------------
Total investments in securities (cost: $204,396,314) (c)............ $294,375,385
------------
------------
</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) At December 31, 1997 the cost of securities for federal income tax purposes
was $204,396,314. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $93,937,498
Gross unrealized depreciation.......... (3,958,427)
-----------
Net unrealized appreciation............ $89,979,071
-----------
-----------
</TABLE>
59
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
COMMON STOCKS (87.2%)
ARGENTINA (2.1%)
Oil and Gas Producers (2.1%)
176,400 YPF Sociedad Anonima ADS............................................... $ 6,030,675
----------------
AUSTRALIA (3.9%)
Banking (.9%)
102,304 National Australia Bank................................................ 1,428,350
190,087 Westpac Banking........................................................ 1,215,645
Building Materials and Components (1.3%)
1,315,401 Pioneer International.................................................. 3,590,807
Multi-Industry (1.1%)
573,600 Mayne Nickless, Ltd.................................................... 3,030,749
Transportation (.5%)
85,000 Qantas Airways ADR 144A (c)............................................ 1,504,203
Merchandising (.1%)
345,500 David Jones, Ltd....................................................... 389,416
----------------
11,159,170
----------------
AUSTRIA (1.2%)
Electrical and Electronics (.8%)
12,980 Bohler-Uddeholm 144A (c)............................................... 761,081
10,850 Va Technologie 144A (c)................................................ 1,647,819
Utilities--Gas and Electric (.4%)
8,400 Evn Energie-Versorgung................................................. 1,104,125
----------------
3,513,025
----------------
BELGIUM (.5%)
Chemicals (.5%)
20,000 Union Miniere NPV (b).................................................. 1,388,214
----------------
BRAZIL (1.1%)
Utilities--Gas and Electric (1.1%)
137,900 Petroleo Brasileiro.................................................... 3,225,012
----------------
CANADA (2.7%)
Banking (2.1%)
121,000 Canadian Imperial Bank of Commerce..................................... 3,777,016
145,000 National Bank of Montreal.............................................. 2,395,017
Food and Household Products (.6%)
82,800 Oshawa Group, Ltd...................................................... 1,448,768
----------------
7,620,801
----------------
CHILE (.6%)
Utilities--Gas and Electric (.6%)
59,500 Compania Telecomunicaciones ADR........................................ 1,777,563
----------------
CHINA (.3%)
Chemicals (.3%)
5,313,800 Yizheng Chemical....................................................... 960,098
----------------
CZECH REPUBLIC (.5%)
Energy Services (.5%)
44,810 Ceske Energeticke (b).................................................. 1,471,369
----------------
FINLAND (3.0%)
Banking (1.4%)
740,000 Merita, Ltd A.......................................................... 4,048,318
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
FINLAND--CONTINUED
Telecommunications (.7%)
29,700 Nokia.................................................................. $ 2,110,057
Wholesale and International Trade (.9%)
85,000 Amer Group, Ltd (b).................................................... 1,630,654
107,500 Metsa-Serla............................................................ 838,734
----------------
8,627,763
----------------
FRANCE (11.1%)
Banking (2.2%)
61,300 Banque Nationale de Paris ADR 144A (c)................................. 3,259,688
57,400 Banque Nationale de Paris ADR.......................................... 3,051,730
Electrical and Electronics (.9%)
19,365 Alcatel Alsthom........................................................ 2,462,062
Energy Sources (1.1%)
27,862 Societe National Elf Aquitaine......................................... 3,241,383
Health and Personal Care (1.9%)
122,325 Rhone-Poulenc.......................................................... 5,480,941
Insurance (2.4%)
87,427 AXA.................................................................... 6,766,620
Mining and Metal (.4%)
2,000 Pechiney Certificate of Investment (b)................................. 79,309
7,000 Pechiney............................................................... 276,417
40,894 Pechiney ADR........................................................... 787,210
Multi-Industry (.2%)
4,837 Marine Wendel.......................................................... 549,860
Transportation (1.7%)
170,398 Regie Des Usines Renault............................................... 4,794,479
2,482 Bertrand Faure......................................................... 176,508
Financial Services (.3%)
10,800 Credit Commercial de France............................................ 740,402
----------------
31,666,609
----------------
GERMANY (2.6%)
Banking (2.0%)
82,050 Deutsche Bank.......................................................... 5,738,847
Chemicals (.6%)
49,400 Bayer.................................................................. 1,833,343
----------------
7,572,190
----------------
HONG KONG (5.5%)
Food and Household Products (.2%)
3,201,000 Cafe de Coral.......................................................... 698,160
Multi-Industry (1.5%)
1,072,800 C. P. Pokphand Co., Ltd................................................ 168,912
221,000 Hutchison Whampoa, Ltd................................................. 1,386,152
509,739 Jardine Matheson....................................................... 2,599,669
Transportation (1.3%)
190,000 Swire Pacific Class A.................................................. 1,042,137
1,519,800 Swire Pacific Class B.................................................. 1,539,708
448,568 Jardine Strategic Holdings............................................. 1,184,220
Utilities (1.3%)
965,000 Hong Kong Electric Holdings............................................ 3,667,710
Electrical and Electronics (.1%)
Hong Kong Aircraft Engineering Co., Ltd................................ 357,108
141,900
</TABLE>
See accompanying notes to investments in securities.
60
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
HONG KONG--CONTINUED
<C> <S> <C>
Banking (.8%)
90,614 HSBC Holdings.......................................................... $ 2,233,629
Financial Services (.3%)
1,109,000 South China Morning Post Holdings...................................... 780,028
113,000 Peregrine Investment Holdings.......................................... 80,209
----------------
15,737,642
----------------
INDIA (.2%)
Financial Services (.2%)
469,435 India Fund............................................................. 693,746
----------------
INDONESIA (.6%)
Consumer Products (.4%)
62,600 P.T. Indosat ADS....................................................... 1,208,963
Forest Products and Paper (.2%)
737,000 P.T. Japfa Comfeed..................................................... 64,829
1,692,696 P.T. Pabrik Kertas Tjiwi Kimia......................................... 423,174
----------------
1,696,966
----------------
ITALY (2.9%)
Automotive (.6%)
639,760 Fiat SPA............................................................... 1,861,745
Telecommunication (2.3%)
1,105,000 Telecom Italia SPA-RNC................................................. 4,875,000
278,000 Sirti SPA.............................................................. 1,682,466
----------------
8,419,211
----------------
JAPAN (--%)
Utilities--Gas and Electric (-%)
13,000 Kyudenko............................................................... 65,637
----------------
LUXEMBOURG (.8%)
Mining and Metals (.8%)
137,300 Minorco SA ADR......................................................... 2,299,775
----------------
MEXICO (1.1%)
Chemicals (.4%)
252,000 Vitro.................................................................. 1,107,263
Mining and Metals (.7%)
540,000 Grupo Mexico Series 'B'................................................ 1,981,160
----------------
3,088,423
----------------
NETHERLANDS (4.4%)
Broadcasting, Advertising and Publishing (1.3%)
84,687 International Nederlanden Group........................................ 3,567,263
Building Materials and Components (.1%)
16,520 European Vinyls........................................................ 366,677
Electrical and Electronics (1.1%)
54,800 Philips Electronics.................................................... 3,286,811
Insurance (1.5%)
48,104 Aegon.................................................................. 4,282,713
Merchandising (.4%)
18,591 Koninklijke Bijenkorf Beheer........................................... 1,164,574
----------------
12,668,038
----------------
NEW ZEALAND (1.8%)
Forest Products and Paper (.9%)
1,654,000 Carter Holt Harvey..................................................... 2,553,180
Wholesale and International Trade (.6%)
2,431,185 Brierley Investments................................................... 1,735,351
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
NEW ZEALAND--CONTINUED
Transportation (.3%)
481,000 Air New Zealand 'B'.................................................... $ 963,005
----------------
5,251,536
----------------
NORWAY (2.5%)
Energy Sources (.6%)
98,000 Saga Petroleum......................................................... 1,685,696
Health and Personal Care (1.5%)
35,002 Nycomed Class B (b).................................................... 1,270,507
84,057 Nycomed Class A (b).................................................... 3,153,575
Mining and Metals (.4%)
78,000 Elkem.................................................................. 1,035,309
----------------
7,145,087
----------------
PHILIPPINES (.4%)
Telecommunications (.4%)
54,000 Philippine Long Distance Telephone Company ADR......................... 1,215,000
----------------
PORTUGAL (.7%)
Banking (.7%)
85,560 Banco Portugues de Investimento........................................ 2,080,875
----------------
SINGAPORE (.2%)
Transportation (.2%)
78,000 Singapore International Airline........................................ 509,804
----------------
SOUTH AFRICA (.4%)
Mining and Metals (.4%)
78,879 Anglo American Platinum, Ltd........................................... 1,054,098
----------------
SOUTH KOREA (.1%)
Financial Services (.1%)
19 Korea International Trust (b).......................................... 135,470
----------------
SPAIN (6.8%)
Banking (2.7%)
11,450 Banco de Andalucia..................................................... 1,917,104
108,000 Argentaria Bancaria ADR................................................ 3,300,750
74,700 Banco Bilbao Vizcaya................................................... 2,418,063
Energy Sources (.8%)
57,000 Repsol................................................................. 2,432,699
Telecommunications (1.5%)
150,000 Telefonica de Espana................................................... 4,284,307
Utilities--Gas and Electric (1.8%)
250,000 Iberdrola.............................................................. 3,291,202
110,000 Endesa SA.............................................................. 1,953,710
----------------
19,597,835
----------------
SWEDEN (7.5%)
Broadcasting, Advertising and Publishing (.1%)
15,000 Marieberg Tidnings..................................................... 351,500
Business and Public Service (.8%)
400 Nackebro Fastighets.................................................... 5,821
114,500 Esselte................................................................ 2,163,807
Forest Products and Paper (.5%)
122,000 Stora Kopparbergs Bergslags............................................ 1,513,972
Health and Personal Care (1.9%)
124,000 Astra.................................................................. 2,085,570
95,500 Svenska Handelsbanken.................................................. 3,302,687
Multi-Industry (.5%)
20,900 Electrolux............................................................. 1,450,840
</TABLE>
See accompanying notes to investments in securities.
61
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
SWEDEN--CONTINUED
<C> <S> <C>
Transportation (3.3%)
35,000 Autoliv Inc............................................................ $ 1,139,857
109,600 Autoliv AB SDR......................................................... 3,599,225
178,500 Volvo.................................................................. 4,790,045
Metals and Mining (.4%)
79,800 Granges (b)............................................................ 1,251,682
----------------
21,655,006
----------------
SWITZERLAND (2.0%)
Electrical and Electronics (.8%)
1,730 BBC Brown Boveri....................................................... 2,173,307
Health and Personal Care (.2%)
370 Societe Generale....................................................... 709,249
Financial Services (1.0%)
18,525 Credit Suisse Group.................................................... 2,866,194
----------------
5,748,750
----------------
THAILAND (-%)
Building Materials and Components (-%)
101,894 Siam City Cement....................................................... 106,361
----------------
UNITED KINGDOM (19.7%)
Banking (1.1%)
118,943 Barclays Bank PLC...................................................... 3,160,095
Building Materials and Components (.9%)
620,090 BICC.L PLC............................................................. 1,751,322
257,100 Hepworth PLC........................................................... 926,658
Chemicals (4.2%)
1,150,000 Harrisons & Crosfield PLC.............................................. 2,643,678
13,000 Imperial Chemical PLC.................................................. 203,005
785,200 Courtaulds PLC......................................................... 3,835,747
164,300 Somerfield PLC......................................................... 565,203
1,775,000 Medeva PLC............................................................. 4,707,102
Electrical and Electronics (.3%)
136,900 Waste Management International PLC..................................... 395,639
82,000 Waste Management International PLC ADR (b)............................. 512,500
Energy Services (2.2%)
260,000 British Telecommunications PLC......................................... 2,042,857
114,286 Thames Water Group PLC................................................. 1,701,154
168,500 Hyder PLC.............................................................. 2,672,759
Financial Services (1.0%)
322,900 Tate & Lyle PLC........................................................ 2,661,672
Food and Household Products (1.3%)
2,949,878 Albert Fisher Group PLC................................................ 1,767,989
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
UNITED KINGDOM--CONTINUED
761,473 Hillsdown Holdings..................................................... $ 1,856,794
Merchandising (.3%)
191,600 Kwik Save Group PLC.................................................... 912,381
Metals and Mining (1.7%)
2,225,400 British Steel PLC...................................................... 4,768,714
Transportation (3.3%)
2,394,400 BTR PLC................................................................ 7,234,312
106,890 BTR Nylex.............................................................. 316,164
658,800 Thorn PLC.............................................................. 1,660,522
768,600 Thorn PLC B............................................................ 239,793
Utilities--Gas and Electric (3.4%)
208,775 National Power PLC..................................................... 2,056,897
1,433,382 BG PLC................................................................. 6,449,042
821,100 Centrica PLC (b)....................................................... 1,206,707
----------------
56,248,706
----------------
Total common stocks (cost $205,802,268)............................................. 250,430,455
----------------
</TABLE>
<TABLE>
<C> <S> <C>
PREFERRED STOCKS AND OTHER (4.0%)
ARGENTINA (.7%)
Multi-Industry (.7%)
30,665 Compania de Inversiones en Telecommunications PRIDE - 7.0% (d)......... 2,161,883
----------------
BRAZIL (1.7%)
Telecommunications (1.7%)
41,300 Telecomunicacoes Brasileiras ADR....................................... 4,808,869
----------------
INDONESIA (-%)
Forest Products and Paper (-%)
P.T. Pabrik Kertas Tjiwi Kimia Warrants................................ 13,932
235,095
----------------
MEXICO (1.0%)
Financial (1.0%)
Nacional Financiera convertible preferred - 11.25%..................... 2,760,915
53,610
----------------
RUSSIA (.5%)
Utilities--Gas and Electric (.5%)
RAO Gazprom ADR 144A (c)............................................... 1,454,738
60,300
----------------
UNITED KINGDOM (.1%)
Utilities (.1%)
137,700 Hyder PLC preferred.................................................... 270,200
----------------
Total preferred stocks and other (cost $7,248,762).................................. 11,470,537
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- -----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (.4%)
HONG KONG (.4%)
Banking (.4%)
$ 1,680,000 PIV Investment Finance Convertible............... 4.500% 12/01/00 1,253,700
------------
UNITED STATES (.4%)
U.S. Government (.4%)
1,107,000 U.S. Treasury Note............................... 5.125% 04/30/98 1,105,882
------------
Total long-term debt securities (cost $2,614,056)................... 2,359,582
------------
SHORT-TERM SECURITIES (7.7%)
1,510,000 U.S. Treasury Bill............................... 5.160% 02/05/98 1,502,052
4,020,000 U.S. Treasury Bill............................... 5.180% 01/22/98 4,007,748
14,091,000 U.S. Treasury Bill............................... 5.030% 02/12/98 14,003,479
2,623,000 Norwest Advantage Cash Investment Fund, current rate 5.613%......... 2,623,000
------------
Total short-term securities (cost: $22,138,646)..................... 22,136,279
------------
Total investments in securities (cost: $237,803,732) (e)............ $286,396,853
------------
------------
</TABLE>
See accompanying notes to investments in securities.
62
<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) 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, 1997 includes acquisition date and
cost, is as follows:
<TABLE>
<CAPTION>
ACQUISTION
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
Banque Nationale De Paris ADR 144A..... Various 2,720,363
RAO Gazprom ADR 144A................... Various 1,262,086
-----------
$ 7,185,054
-----------
-----------
</TABLE>
(d) 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 no voting
rights, are non-callable for three years and upon maturity, convert into
shares of common stock.
(e) At December 31, 1997 the cost of securities for federal income tax purposes
was $242,630,499. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $ 63,612,280
Gross unrealized depreciation.......... (19,845,926)
------------
Net unrealized appreciation............ $ 43,766,354
------------
------------
</TABLE>
See accompanying notes to investments in securities.
63
<PAGE>
SMALL COMPANY PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
COMMON STOCK (94.5%)
BASIC MATERIALS (5.1%)
Agriculture Product (.8%)
55,950 NCO Group Incorporated (b)............................................................. $ 1,440,712
----------------
Chemicals (4.3%)
72,789 Cambrex Corporation.................................................................... 3,348,294
107,477 McWhorter Technologies, Inc. (b)....................................................... 2,767,533
56,330 Valspar Corporation.................................................................... 1,795,519
----------------
7,911,346
----------------
CAPITAL GOODS (11.3%)
Electrical Equipment (2.0%)
192,493 Advanced Lighting Technologies (b)..................................................... 3,657,367
----------------
Engineering/Construction (1.3%)
124,800 United Rental, Inc. (b)................................................................ 2,410,200
----------------
Machinery (3.9%)
219,700 Kaydon Corporation..................................................................... 7,167,712
----------------
Metal Fabrication (1.4%)
107,425 Shaw Group Incorporated (b)............................................................ 2,470,775
----------------
Office Equipment (.7%)
49,100 Encad Incorporated (b)................................................................. 1,350,250
----------------
Waste Management (2.0%)
63,100 American Disposal Services, Inc. (b)................................................... 2,303,150
73,600 Newpark Resources Incorporated (b)..................................................... 1,288,000
----------------
3,591,150
----------------
COMMUNICATION SERVICES (1.3%)
Cellular (1.3%)
161,300 LCC International Incorporated (b)..................................................... 2,338,850
----------------
CONSUMER CYCLICAL (22.2%)
Building Materials (.9%)
111,000 The Maxim Group, Inc. (b).............................................................. 1,727,437
----------------
Distribution Durables (2.4%)
101,900 MSC Industrial Direct Company (b)...................................................... 4,318,013
----------------
Leisure (3.4%)
176,900 American Skiing Corporation (b)........................................................ 2,631,387
113,011 GTECH Holdings Corporation (b)......................................................... 3,609,289
----------------
6,240,676
----------------
Lodging--Hotel (.5%)
71,268 Extended Stay America (b).............................................................. 886,396
----------------
Retail (6.5%)
175,140 Borders Group Incorporated (b)......................................................... 5,484,071
14,100 Kohl's, Inc. (b)....................................................................... 960,562
69,600 Pacific Sunwear of California (b)...................................................... 2,057,550
89,000 Stage Stores, Inc. (b)................................................................. 3,326,375
----------------
11,828,558
----------------
Service (6.6%)
192,100 Acxiom Corporation (b)................................................................. 3,697,925
125,100 CKS Group Incorporated (b)............................................................. 1,767,038
104,100 Copart Incorporated (b)................................................................ 1,860,787
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
CONSUMER CYCLICAL--CONTINUED
106,200 Fairfield Communities, Inc (b)......................................................... $ 4,686,075
----------------
12,011,825
----------------
Textiles (1.9%)
92,500 Nautica Enterprises, Inc. (b).......................................................... 2,150,625
131,100 Tropical Sportswear International (b).................................................. 1,311,000
----------------
3,461,625
----------------
CONSUMER STAPLES (6.2%)
Broadcasting (1.6%)
29,525 Panamsat Corporation (b)............................................................... 1,273,266
60,500 United Video Satellite Group (b)....................................................... 1,739,375
----------------
3,012,641
----------------
Restaurants (1.3%)
71,826 Rainforest Cafe Incorporated (b)....................................................... 2,370,258
----------------
Service (2.4%)
119,600 Corrections Corporation Of America (b)................................................. 4,432,675
----------------
Tobacco (.9%)
76,225 General Cigar Holdings, Inc. (b)....................................................... 1,624,545
----------------
ENERGY (4.6%)
Oil and Gas (4.6%)
92,100 J. Ray Mcdermott Holdings, Inc. (b).................................................... 3,960,300
46,600 Petroleum Geo-Services (b)(c).......................................................... 3,017,350
51,000 Trico Marine Services, Inc. (b)........................................................ 1,498,125
----------------
8,475,775
----------------
FINANCIAL (4.9%)
Insurance (2.6%)
31,800 Life Re Corporation.................................................................... 2,072,962
55,800 Partnerre Ltd (b)...................................................................... 2,587,725
----------------
4,660,687
----------------
Investment Bankers/Brokers (2.3%)
66,400 T. Rowe Price Associates............................................................... 4,174,900
----------------
HEALTH CARE (13.4%)
Biotechnology (.6%)
37,600 Agouron Pharmaceuticals, Inc. (b)...................................................... 1,104,500
----------------
Drugs (.4%)
33,800 Cygnus, Inc. (b)....................................................................... 671,775
----------------
Hospital Management (1.9%)
80,033 Sunrise Assisted Living, Inc. (b)...................................................... 3,451,423
----------------
Managed Care (1.2%)
16,900 Ameripath, Inc. (b).................................................................... 287,300
57,884 Concentra Managed Care, Inc. (b)....................................................... 1,953,585
----------------
2,240,885
----------------
Medical Products/Supplies (8.4%)
56,800 Amerisource Health Corporation (b)..................................................... 3,308,600
15,500 BioReliance Corporation (b)............................................................ 356,500
129,700 Hanger Orthopedic Group (b)............................................................ 1,669,888
107,700 Sola International, Inc. (b)........................................................... 3,500,250
14,900 Spine-Tech, Inc. (b)................................................................... 766,419
52,200 Sybron International Corporation (b)................................................... 2,450,138
</TABLE>
See accompanying notes to investments in securities.
64
<PAGE>
SMALL COMPANY PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
HEALTH CARE--CONTINUED
<C> <S> <C>
109,666 Total Renal Care Holdings, Inc (b)..................................................... $ 3,015,821
13,400 Young Innovations, Inc. (b)............................................................ 241,200
----------------
15,308,816
----------------
Special Services (.9%)
56,900 Curative Health Services (b)........................................................... 1,728,338
----------------
TECHNOLOGY (22.4%)
35,674 Ansys Incorporated (b)................................................................. 258,637
40,900 Check Point Software Technology (b)(c)................................................. 1,666,675
69,600 Computer Products, Inc. (b)............................................................ 1,574,700
15,600 Dassault Systems (c)................................................................... 481,650
164,900 DII Group Incorporated (b)............................................................. 4,493,525
81,000 Dupont Photomasks Incorporated (b)..................................................... 2,824,875
173,900 Gartner Group Incorporated (b)......................................................... 6,477,775
49,300 HNC Software Incorporated (b).......................................................... 2,119,900
99,100 Integrated Process Equipment (b)....................................................... 1,560,825
85,375 Mastech Corporation (b)................................................................ 2,710,656
67,300 Maximus Incorporated (b)............................................................... 1,627,819
82,100 National Data Corporation.............................................................. 2,965,863
45,000 Peapod Incorporated (b)................................................................ 292,500
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
TECHNOLOGY--CONTINUED
42,400 Photronics Incorporated (b)............................................................ $ 1,028,200
17,100 Power-One, Inc. (b).................................................................... 235,125
20,400 Sapient Corporation (b)................................................................ 1,249,500
62,000 Saville Systems-ADR (b)(c)............................................................. 2,573,000
26,800 Splash Technology Holdings (b)......................................................... 603,000
92,700 The Bisys Group, Inc. (b).............................................................. 3,082,275
80,200 Xylan Corporation (b).................................................................. 1,213,025
67,800 Zebra Technologies Corporation (b)..................................................... 2,017,050
----------------
41,056,575
----------------
TRANSPORTATION (3.2%)
Air Freight (2.6%)
167,100 Eagle USA Airfrieght, Inc. (b)......................................................... 4,762,350
----------------
Airlines (.1%)
5,400 Ryanair Holdings PLC-ADR (b)(c)........................................................ 135,675
----------------
Shipping (.5%)
33,100 Checkfree Holdings Corporation (b)..................................................... 891,631
----------------
Total common stock (cost $140,598,134)............................................................. 172,916,341
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- --------------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (6.8%)
$ 8,071,719 Temporary Investment Fund--Temp Fund Portfolio, current rate 5.500%.............. 8,071,719
770,000 US Treasury Bill................................. 5.172% 02/12/98 765,553
3,680,000 US Treasury Bill................................. 5.275% 03/19/98 3,639,833
----------------
Total short-term securities (cost $12,477,066)................................... 12,477,105
----------------
Total investments in securities (cost $153,075,200) (d).......................... $ 185,393,446
----------------
----------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The Portfolio held 4.3% of net assets in foreign securities as of December
31, 1997.
(d) At December 31, 1997 the cost of securities for federal income tax purposes
was $153,245,229. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $41,042,122
Gross unrealized depreciation.......... (8,893,905)
-----------
Net unrealized appreciation............ $32,148,217
-----------
-----------
</TABLE>
65
<PAGE>
MATURING GOVERNMENT BOND 1998 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
(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 (99.7%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (99.7%)
$ 615,000 Federal Home Loan Bank........................... 6.730% 08/25/98 $ 593,007
100,000 FNMA Strip (b)................................... 5.951% 08/12/98 96,574
266,000 FNMA Strip (b)................................... 7.065% 05/22/98 260,337
356,000 FNMA Strip (b)................................... 7.110% 11/22/98 338,388
350,000 FNMA Strip (b)................................... 7.050% 05/22/99 322,913
260,000 FNMA Strip (b)................................... 5.707% 03/09/98 257,285
457,470 Tennesse Valley Authority Strip (b).............. 5.910% 11/15/98 435,076
900,000 Tennessee Valley Authority Strip (b)............. 6.720% 10/15/98 861,146
1,685,000 US Treasury Interest Strip (b)................... 6.019% 11/15/98 1,605,905
590,000 Financial Corporation Strip (b).................. 6.620% 05/30/99 543,189
600,000 Financial Corporation Strip (b).................. 6.044% 08/08/99 546,203
373,000 Israel Government Trust Certificate (b).......... 6.537% 11/15/98 355,193
----------------
Total long-term debt securities (cost: $6,176,903)................. 6,215,216
----------------
SHORT-TERM SECURITIES (.6%)
Temporary Investment Fund--Temp Fund Portfolio, current rate
37,009 5.500%........................................................... 37,009
----------------
Total short-term securities (cost: $37,009)........................ 37,009
----------------
Total investments in securities (cost: $6,213,912) (c)............. $ 6,252,225
----------------
----------------
</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, 1997 the cost of securities for federal income tax purposes
was $6,213,947. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $38,278
Gross unrealized depreciation.......... --
-------
Net unrealized appreciation............ $38,278
-------
-------
</TABLE>
66
<PAGE>
MATURING GOVERNMENT BOND 2002 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
(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 (99.3%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (99.3%)
$ 525,000 FNMA Strip (b)................................... 7.600% 02/01/02 $ 412,786
425,000 FNMA Strip (b)................................... 6.367% 08/01/03 305,124
1,150,000 Tennessee Valley Authority Strip (b)............. 7.400% 04/15/03 844,398
2,035,000 US Treasury Interest Strip (b)................... 6.468% 08/15/02 1,566,846
360,000 Financial Corporation Strip (b).................. 6.362% 09/07/02 272,707
500,000 Financial Corporation Strip (b).................. 7.040% 06/27/02 382,909
182,000 Israel Government Trust Certificates (b)......... 9.236% 05/15/02 141,161
325,000 Israel Government Trust Certificates (b)......... 6.699% 05/15/02 252,073
----------------
Total long-term debt securities (cost: $3,999,035)................. 4,178,004
----------------
SHORT-TERM SECURITIES (.4%)
Temporary Investment Fund--Temp Fund Portfolio, current rate
18,182 5.500%........................................................... 18,182
----------------
Total short-term securities (cost: $18,182)........................ 18,182
----------------
Total investments in securities (cost: $4,017,217) (c)............. $ 4,196,186
----------------
----------------
</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, 1997 the cost of securities for federal income tax purposes
was $ 4,021,516. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<CAPTION>
COST
--------
<S> <C>
Gross unrealized appreciation.......... $174,670
Gross unrealized depreciation.......... --
--------
Net unrealized appreciation............ $174,670
--------
--------
</TABLE>
67
<PAGE>
MATURING GOVERNMENT BOND 2006 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
(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 (99.7%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (99.7%)
$ 810,000 FNMA Strip (b)................................... 7.620% 08/01/05 $ 513,013
1,000,000 Israel State Aid Strips (b)...................... 6.578% 11/15/06 589,979
1,000,000 Resolution Funding Corporation Strip (b)......... 7.456% 07/15/07 569,159
2,275,000 US Treasury Interest Strip (b)................... 6.642% 11/15/06 1,359,652
921,000 Financial Corporation Strips (b)................. 7.648% 09/07/07 508,216
553,000 Israel Government Trust Certificates (b)......... 7.440% 11/15/05 346,791
----------------
Total long-term debt securities (cost: $3,540,591)................ 3,886,810
----------------
SHORT-TERM SECURITIES (.8%)
Temporary Investment Fund--Temp Fund Portfolio, current rate
32,670 5.500%.......................................................... 32,670
----------------
Total short-term securities (cost: $32,670)....................... 32,670
----------------
Total investments in securities (cost: $3,573,261) (c)............ $ 3,919,480
----------------
----------------
</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, 1997 the cost of securities for federal income tax purposes
was $3,583,774. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $335,706
Gross unrealized depreciation.......... --
--------
Net unrealized appreciation............ $335,706
--------
--------
</TABLE>
68
<PAGE>
MATURING GOVERNMENT BOND 2010 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ----------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (99.6%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (99.6%)
$ 500,000 FNMA Strip (b)................................... 7.700% 02/12/10 $ 236,449
515,000 Israel State Aid (b)............................. 8.264% 03/15/10 245,397
1,100,000 Israel State Aid (b)............................. 6.850% 08/15/11 478,257
350,000 Resolution Funding Corporation Strip (b)......... 7.590% 04/15/11 156,688
1,225,000 US Treasury Interest Strip (b)................... 6.641% 02/15/11 561,870
575,000 US Treasury Interest Strip (b)................... 6.933% 08/15/11 255,340
1,100,000 US Treasury Interest Strip (b)................... 9.129% 05/15/10 528,868
945,000 Financial Corporation Strips (b)................. 7.920% 08/08/11 401,246
132,000 Israel Government Trust Certificates (b)......... 7.660% 05/15/10 62,107
524,000 Turkey Trust (b)................................. 6.687% 11/15/10 238,849
----------------
Total long-term debt securities (cost: $2,821,545)................. 3,165,071
----------------
SHORT-TERM SECURITIES (0.8%)
Temporary Investment Fund--Temp Fund Portfolio, current rate
24,901 5.500%........................................................... 24,901
----------------
Total short-term securities (cost: $24,901)........................ 24,901
----------------
Total investments in securities (cost: $2,846,446) (c)............. $ 3,189,972
----------------
----------------
</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, 1997 the cost of securities for federal income tax purposes
was $2,855,141. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $334,831
Gross unrealized depreciation.......... --
--------
Net unrealized appreciation............ $334,831
--------
--------
</TABLE>
69
<PAGE>
VALUE STOCK PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- --------- ----------------
<C> <S> <C>
COMMON STOCK (91.0%)
BASIC MATERIALS (7.1%)
Aluminum (4.4%)
67,507 Aluminum Company of America............................................... $ 4,750,805
54,100 Century Aluminum Company.................................................. 730,350
60,500 Reynolds Metals Company................................................... 3,630,000
----------------
9,111,155
----------------
Chemicals (.8%)
30,600 Cytec Industries, Inc. (b)................................................ 1,436,287
8,887 Quest Diagnostics, Inc. (b)............................................... 149,968
----------------
1,586,255
----------------
Paper and Forest (1.9%)
102,175 Fort James Corporation.................................................... 3,908,194
----------------
CAPITAL GOODS (7.6%)
Aerospace/Defense (2.7%)
58,000 Lockheed Martin Corporation............................................... 5,713,000
----------------
Manufacturing (2.7%)
129,299 United Dominion Industries................................................ 3,272,881
111,500 Walter Industries Incorporated (b)........................................ 2,299,687
----------------
5,572,568
----------------
Waste Management (2.2%)
324,100 Philip Services Corporation (b)(c)........................................ 4,658,938
----------------
COMMUNICATION SERVICES (4.7%)
Telephone (4.7%)
53,478 Bell Atlantic Corporation................................................. 4,866,498
67,269 SBC Communications, Inc................................................... 4,927,454
----------------
9,793,952
----------------
CONSUMER CYCLICAL (9.6%)
Retail (7.9%)
151,200 Federated Department Stores (b)........................................... 6,511,050
29,500 JC Penny Company.......................................................... 1,779,219
84,100 Philips Electronics (c)................................................... 5,088,050
152,820 Woolworth Corporation (b)................................................. 3,113,708
----------------
16,492,027
----------------
Textiles (1.7%)
134,800 Fruit of the Loom (b)..................................................... 3,454,250
----------------
CONSUMER STAPLES (11.5%)
Food (4.6%)
292,013 Hormel Foods Corporation.................................................. 9,563,426
----------------
Retail (4.4%)
445,798 American Stores Company................................................... 9,166,721
----------------
Tobacco (2.5%)
137,200 RJR Nabisco Holdings Corporation.......................................... 5,145,000
----------------
ENERGY (17.8%)
Oil (10.4%)
110,400 Amerada Hess Corporation.................................................. 6,058,200
51,800 Amoco Corporation......................................................... 4,409,475
<CAPTION>
MARKET
SHARES VALUE(a)
- --------- ----------------
<C> <S> <C>
ENERGY--CONTINUED
52,400 Unocal Corporation........................................................ $ 2,033,775
131,300 USX--Marathon Group....................................................... 4,431,375
136,900 YPF Sociedad Anonima (c).................................................. 4,680,269
----------------
21,613,094
----------------
Oil and Gas (7.4%)
316,300 Enron Oil & Gas........................................................... 6,701,606
72,100 Ultramar Diamond Shamrock Corporation..................................... 2,298,188
203,500 Valero Energy Corporation................................................. 6,397,531
----------------
15,397,325
----------------
FINANCIAL (23.4%)
Banks (7.0%)
102,400 Banc One Corporation...................................................... 5,561,600
43,900 Corestates Financial Corporation.......................................... 3,514,744
90,100 Nationsbank Corporation................................................... 5,479,206
----------------
14,555,550
----------------
Finance--Diversified (4.9%)
57,000 American Express Company.................................................. 5,087,250
91,500 Federal National Mortgage Association..................................... 5,221,219
----------------
10,308,469
----------------
Insurance (5.0%)
253,092 Everest Reinsurance Holdings.............................................. 10,440,045
----------------
Real Estate Investment Trust (2.1%)
87,600 Equity Residential Properties............................................. 4,429,275
----------------
Savings and Loans (4.4%)
75,270 Golden State Bancorp (b).................................................. 2,813,216
307,837 Sovereign Bancorp Incorporated............................................ 6,387,618
----------------
9,200,834
----------------
HEALTH CARE (3.0%)
Managed Care (3.0%)
300,300 Humana (b)................................................................ 6,231,225
----------------
TECHNOLOGY (2.9%)
208,300 Lam Research Corporation (b).............................................. 6,092,775
----------------
TRANSPORTATION (.4%)
Shipping (.4%)
23,600 Teekay Shipping Corporation (c)........................................... 792,075
----------------
UTILITIES (3.0%)
Natural Gas (3.0%)
93,976 El Paso Natural Gas Company............................................... 6,249,404
----------------
Total common stock (cost: $172,201,175).............................................. 189,475,557
----------------
</TABLE>
See accompanying notes to investments in securities.
70
<PAGE>
VALUE STOCK PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
----------- ----------------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (8.8%)
$ 1,535,979 Temporary Investment Fund--Temp Fund Portfolio, current rate 5.500%..... $ 1,535,979
3,070,000 GE Capital Corporation CP........................ 5.930% 01/08/98 3,066,125
1,290,000 Monsanto CP (d).................................. 5.813% 01/05/98 1,288,967
2,355,000 Northern Illinois Gas Company CP................. 5.885% 01/07/98 2,352,386
6,705,000 Tribune Company CP (d)........................... 6.258% 01/09/98 6,695,529
3,300,000 US Treasury Bill................................. 5.216% 02/12/98 3,280,942
----------------
Total short-term securities (cost: $18,220,499)......................... 18,219,928
----------------
Total investments in securities (cost: $190,421,674) (e)................ $ 207,695,485
----------------
----------------
</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 7.3% of net assets in foreign securities as of December
31, 1997.
(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
illiquid securities held at December 31, 1997, which includes acquisition
date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- --------------------------------------- ----------- -----------
<S> <C> <C>
Monsanto CP............................ 12/10/97 $ 1,284,680
Tribune Company CP..................... 12/19/97 6,680,946
-----------
$ 7,965,626
-----------
-----------
</TABLE>
(e) At December 31, 1997 the cost of securities for federal income tax purposes
was $190,665,222. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $25,720,349
Gross unrealized depreciation.......... (8,690,086)
-----------
Net unrealized appreciation............ $17,030,263
-----------
-----------
</TABLE>
71
<PAGE>
SMALL COMPANY VALUE PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
COMMON STOCK (93.6%)
BASIC MATERIALS (6.7%)
Aluminum (1.9%)
7,400 Century Aluminum Company......................... $ 99,900
----------------
Chemicals (4.8%)
6,300 A. Schulman, Inc................................. 158,287
5,400 Quest Diagnostics, Inc. (b)...................... 91,125
----------------
249,412
----------------
CAPITAL GOODS (9.8%)
Manufacturing (4.8%)
5,000 United Dominion Industries....................... 126,562
5,800 Walter Industries Incorporated (b)............... 119,625
----------------
246,187
----------------
Metal Fabrication (5.0%)
3,000 Gibraltar Steel Corporation (b).................. 59,250
5,000 Shaw Group Incorporated (b)...................... 115,000
2,600 Triumph Group Incorporated (b)................... 86,450
----------------
260,700
----------------
CONSUMER CYCLICAL (11.6%)
Auto (2.4%)
7,200 Intermet Corporation............................. 126,000
----------------
Publishing (3.9%)
9,700 Journal Register Company (b)..................... 203,700
----------------
Retail (4.2%)
6,100 Brown Group, Inc................................. 81,206
4,700 Michaels Stores Incorporated (b)................. 137,475
----------------
218,681
----------------
Textiles (1.1%)
5,600 Tropical Sportswear International Corporation 56,000
(b)............................................
----------------
CONSUMER STAPLES (7.1%)
Food (2.2%)
2,400 Earthgrains Company.............................. 112,800
----------------
Food and Health (1.9%)
3,500 International Multifoods Corporation............. 99,094
----------------
Household Product (3.0%)
5,800 First Brands Corporation......................... 156,237
----------------
ENERGY (1.7%)
Oil and Gas (1.7%)
5,700 Tesoro Petroleum Corporation (b)................. 88,350
----------------
FINANCIAL (36.4%)
Banks (6.3%)
4,350 Commercial Federal Corporation................... 154,697
3,700 Peoples Heritage Financial Group, Inc............ 170,200
----------------
324,897
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
FINANCIAL--CONTINUED
Insurance (9.4%)
3,200 Allied Group Incorporated........................ $ 91,600
5,100 Amerus Life Holdings............................. 188,062
1,600 Frontier Insurance Group, Inc.................... 36,600
3,400 RLI Corporation.................................. 169,362
----------------
485,624
----------------
Real Estate Investment Trust (11.1%)
1,600 Apartment Investment & Management Company........ 58,800
3,800 Glenborough Realty Trust, Inc.................... 112,575
1,900 Kilroy Realty.................................... 54,625
3,000 Pacific Gulf Properties, Inc..................... 71,250
1,800 Prentiss Properties Trust........................ 50,287
4,200 Storage Trust Realty............................. 110,513
6,600 Sunstone Hotel Investors......................... 113,850
----------------
571,900
----------------
Savings and Loans (9.6%)
6,500 Bay View Capital Corporation..................... 235,625
12,600 Sovereign Bancorp Incorporated................... 261,450
----------------
497,075
----------------
TECHNOLOGY (6.5%)
1,900 DuPont Photomasks Incorporated (b)............... 66,263
10,800 Learning Company, Inc. (b)....................... 173,475
4,000 Photronics Incorporated (b)...................... 97,000
----------------
336,738
----------------
TRANSPORTATION (3.5%)
Shipping (1.2%)
1,800 Teekay Shipping Corporation (c).................. 60,413
----------------
Trucking (2.3%)
3,600 US Freightways Corporation....................... 117,000
----------------
UTILITIES (10.3%)
Electric Companies (5.2%)
4,800 Sierra Pacific Resources......................... 180,000
2,700 WPS Resources Corporation........................ 91,294
----------------
271,294
----------------
Natural Gas (5.1%)
2,600 Piedmont Natural Gas Company..................... 93,438
3,700 Wicor, Inc....................................... 171,819
----------------
265,257
----------------
Total common stock (cost: $4,659,625).......................... 4,847,259
----------------
</TABLE>
See accompanying notes to investments in securities.
72
<PAGE>
SMALL COMPANY VALUE PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ----------------
SHORT-TERM SECURITIES (3.5%)
<C> <S> <C>
$182,243 Temporary Investment Fund, Inc.--Temp Fund
Portfolio, current rate 5.500%................. $ 182,243
----------------
Total short-term securities (cost: $182,243)................... 182,243
----------------
Total investments in securities (cost: $4,841,868) (d)......... $ 5,029,502
----------------
----------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The Portfolio held 1.2% of net assets in foreign securities as of December
31, 1997.
(d) At December 31, 1997 the cost of securities for federal income tax purposes
was $4,841,868. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $380,129
Gross unrealized depreciation.......... (192,494)
--------
Net unrealized appreciation............ $187,634
--------
--------
</TABLE>
73
<PAGE>
INTERNATIONAL BOND PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL(b) VALUE(a)
- -------------------- ----------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (80.5%)
AUSTRALIA (4.1%)
Government (4.1%)
655,000 Australian Government (Australian Dollar)........ 10.000% 02/15/06 $ 534,115
655,000 Australian Government (Australian Dollar)........ 9.000% 09/15/04 498,935
----------------
1,033,050
----------------
AUSTRIA (4.6%)
Government (4.6%)
2,000,000 Republic of Austria (Deutsch Mark)............... 6.000% 02/01/06 1,158,345
----------------
BELGIUM (4.5%)
Government (4.5%)
1,900,000 Belgium Government (Deutsch Mark)................ 6.250% 10/01/03 1,116,591
----------------
DENMARK (9.1%)
Government (9.1%)
6,000,000 Kingdom of Denmark (Danish Kroner)............... 7.000% 12/15/04 956,273
4,480,000 Kingdom of Denmark (Danish Kroner)............... 7.000% 11/10/24 727,561
3,470,000 Kingdom of Denmark (Danish Kroner)............... 8.000% 03/15/06 586,632
----------------
2,270,466
----------------
GERMANY (16.8%)
Government (13.7%)
797,000 Bundesrepublic (Deutsch Mark).................... 6.250% 04/26/06 470,657
547,000 Bundesrepublic (Deutsch Mark).................... 6.000% 07/04/07 318,359
814,000 Deutschland Republic (Deutsch Mark).............. 6.000% 02/16/06 473,565
3,143,000 Deutschland Republic (Deutsch Mark).............. 6.500% 07/04/27 1,879,579
472,000 Treuhandanstalt (Deutsch Mark)................... 6.750% 05/13/04 285,458
Financial (3.1%)
1,200,000 European Investment Bank (Deutsch Mark).......... 7.750% 01/26/05 763,994
----------------
4,191,612
----------------
GREECE (1.0%)
Government (1.0%)
75,000,000 Hellenic Republic (Greek Drachma)................ 8.900% 03/21/04 240,520
----------------
ITALY (1.8%)
Government (1.8%)
715,000,000 BTPS (Italian Lira).............................. 7.750% 09/15/01 440,041
----------------
SPAIN (6.2%)
Government (6.2%)
67,200,000 Government of Spain (Spanish Peseta)............. 12.250% 03/25/00 510,390
143,700,000 Government of Spain (Spanish Peseta)............. 7.900% 02/28/02 1,046,371
----------------
1,556,761
----------------
SWEDEN (9.3%)
Government (9.3%)
6,200,000 Sweden Kingdom (Swedish Krona)................... 13.000% 06/15/01 958,982
4,500,000 Sweden Kingdom (Swedish Krona)................... 10.250% 05/05/00 628,761
5,700,000 Sweden Kingdom (Swedish Krona)................... 6.500% 10/25/06 745,712
----------------
2,333,455
----------------
UNITED KINGDOM (13.0%)
Government (5.9%)
896,000 British Treasury (British Sterling Pound)........ 6.500% 12/07/03 1,478,621
Financial (3.4%)
500,000 International Bank Reconstruction and Development
(British Sterling Pound)....................... 7.125% 07/30/07 857,143
</TABLE>
See accompanying notes to investments in securities.
74
<PAGE>
INTERNATIONAL BOND PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL(b) VALUE(a)
- -------------------- ----------------
UNITED KINGDOM--CONTINUED
<C> <S> <C> <C> <C>
Pharmaceuticals (3.7%)
500,000 Glaxo (British Sterling Pound)................... 8.750% 12/01/05 $ 915,435
----------------
3,251,199
----------------
UNITED STATES (9.2%)
Government Agencies (9.2%)
1,700,000 Federal National Mortgage Association (Australian
Dollar)........................................ 6.375% 08/15/07 1,121,342
2,000,000 Tennesee Valley Authority (Deutsch Mark)......... 6.375% 09/18/06 1,183,495
----------------
2,304,837
----------------
ZAIRE (.9%)
Government (.9%)
1,250,000 Republic of South Africa (South African Rand).... 12.000% 02/28/05 237,279
----------------
Total long-term debt securities (cost: $20,439,940)........................ 20,134,156
----------------
SHORT-TERM SECURITIES (8.0%)
1,695,000,000 BTPS (Italian Lira).............................. 10.500% 04/15/98 973,177
1,300,000,000 Italy (Italian Lira)............................. 10.500% 11/01/98 769,503
2,500,000 Mexican Cetes (Mexican Peso)..................... 19.500% 09/24/98 270,189
----------------
Total short-term securities (cost: $2,034,830)............................. 2,012,869
----------------
Total investments in securities (cost: $22,474,770) (c).................... $ 22,147,025
----------------
----------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securites are valued by procedures described in note 2 to the financial
statements.
(b) Principal amounts for foreign debt securities are denominated in the
currencies indicated.
(c) At December 31, 1997 the cost of securities for federal income tax purposes
was $22,474,770. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<CAPTION>
COST
---------
<S> <C>
Gross unrealized appreciation.......... $ 46,438
Gross unrealized depreciation.......... (374,183)
---------
Net unrealized depreciation............ $(327,745)
---------
---------
</TABLE>
75
<PAGE>
INDEX 400 MID-CAP PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- --------- ----------------
<C> <S> <C>
COMMON STOCK (99.9%)
BASIC MATERIALS (7.4%)
Agriculture Product (.5%)
900 Staples Incorporated (b)...................................................... $ 24,975
----------------
Aluminum (.2%)
300 Alumax, Inc. (b).............................................................. 10,200
----------------
Chemicals (3.6%)
300 A.Schulman, Inc............................................................... 7,537
400 Airgas (b).................................................................... 5,600
300 Albemarle Corporation......................................................... 7,162
200 Betzdearborn.................................................................. 12,212
400 Cabot......................................................................... 11,050
400 Crompton & Knowles............................................................ 10,600
300 Cytec Industries, Inc. (b).................................................... 14,081
200 Dexter........................................................................ 8,637
800 Ethyl......................................................................... 6,150
300 Ferro......................................................................... 7,294
200 Georgia Gulf.................................................................. 6,125
100 H.B. Fuller Company........................................................... 4,950
300 MA Hanna Company.............................................................. 7,575
300 Lubrizol...................................................................... 11,062
200 Mineral Technologies, Inc..................................................... 9,087
300 Olin Corporation.............................................................. 14,062
500 RPM Incorporated.............................................................. 7,625
700 Solutia, Inc.................................................................. 18,681
300 Witco Corporation............................................................. 12,244
----------------
181,734
----------------
Construction (.9%)
300 Calmat........................................................................ 8,362
300 Martin Marietta Materials..................................................... 10,969
100 Southdown..................................................................... 5,900
200 Vulcan Materials.............................................................. 20,425
----------------
45,656
----------------
Iron and Steel (.6%)
400 AK Steel Holding Corporation.................................................. 7,075
100 Carpenter Technology.......................................................... 4,806
300 Oregon Steel Mills, Inc....................................................... 6,394
300 UCAR International (b)........................................................ 11,981
----------------
30,256
----------------
Paper and Forest (1.6%)
200 Bowater Incorporated.......................................................... 8,887
300 Consolidated Paper, Inc....................................................... 16,012
500 Georgia-Pacific Corporation (b)............................................... 11,344
400 Longview Fibre Company........................................................ 6,075
300 P.H. Glatfelter Company....................................................... 5,587
200 Raynoier, Inc................................................................. 8,512
500 Sonoco Products Company....................................................... 17,344
300 Wausau Paper Mills Company.................................................... 6,037
----------------
79,798
----------------
CAPITAL GOODS (8.5%)
Aerospace/Defense (.6%)
100 Precision Castparts Corporation............................................... 6,031
300 Sundstrand Corporation........................................................ 15,112
<CAPTION>
MARKET
SHARES VALUE(a)
- --------- ----------------
<C> <S> <C>
CAPITAL GOODS--CONTINUED
100 Thiokol Corporation........................................................... $ 8,125
----------------
29,268
----------------
Electrical Equipment (2.6%)
500 American Power Conversion (b)................................................. 11,812
400 Diebold....................................................................... 20,250
400 Hubbell, Inc.................................................................. 19,725
875 Molex Incorporated............................................................ 28,109
300 SCI Systems, Inc. (b)......................................................... 13,069
700 Solectron Corporation (b)..................................................... 29,094
400 Vishay Intertechnology, Inc. (b).............................................. 9,450
----------------
131,509
----------------
Engineering/Construction (.3%)
200 Jacobs Engineering Group (b).................................................. 5,075
400 Varco International, Inc. (b)................................................. 8,575
----------------
13,650
----------------
Machinery (.7%)
400 Agco Corporation.............................................................. 11,700
200 Kaydon Corporation............................................................ 6,525
200 Kennametal Incorporated....................................................... 10,362
100 Tecumseh Products Company..................................................... 4,875
----------------
33,462
----------------
Manufacturing (1.7%)
300 Ametek, Inc................................................................... 8,100
200 Carlisle Companies, Inc....................................................... 8,550
200 Sealed Air (b)................................................................ 12,350
300 Federal Signal Corporaiton.................................................... 6,487
200 Flowserve Corporation......................................................... 5,587
100 Nordson Corporation........................................................... 4,587
200 Pentair, Inc.................................................................. 7,187
300 Stewart & Stevenson Services.................................................. 7,650
200 Teleflex, Inc................................................................. 7,550
200 Trinity Industries............................................................ 8,925
200 York International Corporation................................................ 7,912
----------------
84,885
----------------
Office Equipment (1.7%)
300 Herman Miller, Inc............................................................ 16,369
200 Hon Industries................................................................ 11,800
400 Lexmark International Group (b)............................................... 15,200
200 Standard Register............................................................. 6,950
400 Unisource World Wide, Inc..................................................... 5,700
600 US Office Products Company (b)................................................ 11,775
500 Viking Office Products, Inc (b)............................................... 10,906
200 Wallace Computer Services, Inc................................................ 7,775
----------------
86,475
----------------
Waste Management (.9%)
1,200 USA Waste Services, Inc. (b).................................................. 47,100
----------------
</TABLE>
See accompanying notes to investments in securities.
76
<PAGE>
INDEX 400 MID-CAP PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- --------- ----------------
COMMUNICATION SERVICES (3.3%)
<C> <S> <C>
Cellular (1.1%)
700 360 Communications Company (b)................................................ $ 14,131
1,500 Nextel Communications, Inc. (b)............................................... 39,000
----------------
53,131
----------------
Telecommunication (.7%)
800 ADC Telecommunications, Inc. (b).............................................. 33,400
----------------
Telephone (1.5%)
300 Aliant Communications, Inc.................................................... 9,412
300 Century Telephone Enterprise.................................................. 14,944
400 LCI International Incorporated (b)............................................ 12,300
400 Southern New England Telecommunications....................................... 20,125
300 Telephone and Data Systems, Inc............................................... 13,969
500 Vanguard Cellular Systems (b)................................................. 6,375
----------------
77,125
----------------
CONSUMER CYCLICAL (14.4%)
Auto (1.8%)
200 Arvin Industries, Inc......................................................... 6,662
100 Borg-Warner Automotive, Inc................................................... 5,200
300 Danaher Corporation........................................................... 18,937
200 Federal Mogul Corporation..................................................... 8,100
300 Harsco Corporation............................................................ 12,937
400 Mark IV Industries, Inc....................................................... 8,750
400 Meritor Automotive............................................................ 8,425
200 Modine Manufacturing Company.................................................. 6,825
200 OEA, Inc...................................................................... 5,787
300 Superior Industries International............................................. 8,044
----------------
89,667
----------------
Building Materials (.2%)
700 Clayton Homes................................................................. 12,600
----------------
Construction (.3%)
200 Lancaster Colony Corporation.................................................. 11,275
200 Stanhome, Inc................................................................. 5,137
----------------
16,412
----------------
Houseware (.4%)
500 Leggett & Platt Incorporated.................................................. 20,937
----------------
Leisure (1.2%)
400 Callaway Golf Company......................................................... 11,425
200 GTECH Holdings Corporation (b)................................................ 6,387
900 Harley-Davidson, Inc.......................................................... 24,637
700 International Game Technology................................................. 17,675
----------------
60,124
----------------
Lodging--Hotel (.4%)
477 Promus Hotel Corporation (b).................................................. 20,121
----------------
Publishing (1.6%)
400 A.H. Belo..................................................................... 22,450
300 Lee Enterprises............................................................... 8,869
100 Washington Post............................................................... 48,650
----------------
79,969
----------------
Retail (5.5%)
400 Barnes and Noble, Inc. (b).................................................... 13,350
400 Bed Bath & Beyond, Inc. (b)................................................... 15,400
300 Best Buy Company, Inc. (b).................................................... 11,062
300 Claire's Stores, Inc.......................................................... 5,831
<CAPTION>
MARKET
SHARES VALUE(a)
- --------- ----------------
<C> <S> <C>
CONSUMER CYCLICAL--CONTINUED
500 CompUSA, Inc. (b)............................................................. $ 15,500
500 Consolidated Stores Corporation (b)........................................... 21,969
700 Dollar General Corporation.................................................... 25,375
500 Family Dollar Stores.......................................................... 14,656
200 Fastenal Company.............................................................. 7,650
300 Fingerhut Company............................................................. 6,412
400 Fred Meyer, Inc. (b).......................................................... 14,550
500 General Nutrition Companies (b)............................................... 17,150
500 Heilig-Meyers Company......................................................... 6,000
400 Kohl's, Inc. (b).............................................................. 27,250
200 Mac Frugals Bargains Close-Outs, Inc. (b)..................................... 8,225
900 Office Depot, Inc. (b)........................................................ 21,544
700 Officemax (b)................................................................. 9,975
200 Payless Shoesource, Inc. (b).................................................. 13,425
200 Tiffany & Company............................................................. 7,212
500 US Filter Corporation (b)..................................................... 14,969
----------------
277,505
----------------
Service (2.0%)
600 Cintas (b).................................................................... 23,400
500 Circus Circus Enterprises, Inc. (b)........................................... 10,250
500 Omnicom Group................................................................. 21,187
200 Pittston Company.............................................................. 8,050
300 Rollins....................................................................... 6,094
400 Sotheby's Holdings............................................................ 7,400
300 Stewart Enterprises, Inc...................................................... 13,987
600 Viad.......................................................................... 11,587
----------------
101,955
----------------
Textiles (1.0%)
300 Jones Apparel Group, Inc. (b)................................................. 12,900
200 Nine West Group, Inc. (b)..................................................... 5,187
800 Shaw Industries............................................................... 9,300
400 Unified Incorporated.......................................................... 16,275
300 Warnaco Group................................................................. 9,412
----------------
53,074
----------------
CONSUMER STAPLES (9.0%)
Beverage (1.5%)
2,200 Coca-Cola Enterprises......................................................... 78,237
----------------
Broadcasting (0.4%)
300 A.C. Nielsen Corporation (b).................................................. 7,312
200 Chris-Craft Industries, Inc. (b).............................................. 10,462
----------------
17,774
----------------
Food (2.3%)
200 Dean Foods Company............................................................ 11,900
300 Dole Food Company............................................................. 13,725
200 Dreyer's Grand Ice Cream, Inc................................................. 4,825
500 Flowers Industries............................................................ 10,281
400 Hormel Foods Corporation...................................................... 13,100
500 IBP, Inc...................................................................... 10,469
400 Interstate Bakeries........................................................... 14,950
300 Lance, Inc.................................................................... 7,894
400 McCormick & Company........................................................... 11,200
300 Smucker....................................................................... 7,087
200 Universal Foods............................................................... 8,450
----------------
113,881
----------------
Food & Health (.1%)
200 JP Foodservice, Inc. (b)...................................................... 7,400
----------------
</TABLE>
See accompanying notes to investments in securities.
77
<PAGE>
INDEX 400 MID-CAP PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- --------- ----------------
CONSUMER STAPLES--CONTINUED
<C> <S> <C>
Household Product (1.0%)
600 Dial.......................................................................... $ 12,488
300 First Brands Corporation...................................................... 8,081
600 IMC Global, Inc............................................................... 19,650
400 Premark International, Inc.................................................... 11,600
----------------
51,819
----------------
Personal Care (.2%)
400 Carter Wallace, Inc........................................................... 6,750
400 Perrigo Company (b)........................................................... 5,350
----------------
12,100
----------------
Restaurants (1.0%)
400 Brinker International, Inc (b)................................................ 6,400
300 Cracker Barrel Old Country Store.............................................. 10,013
300 Lone Star Steakhouse & Saloon, (b)............................................ 5,250
300 Outback Steakhouse, Inc. (b).................................................. 8,625
500 Starbucks Corporation (b)..................................................... 19,188
----------------
49,476
----------------
Retail (.8%)
200 Hannaford Brothers............................................................ 8,688
500 Ruddick....................................................................... 8,719
1,200 Tyson Foods, Inc.............................................................. 24,600
----------------
42,007
----------------
Service (1.5%)
400 Corrections Corporation of America (b)........................................ 14,825
200 Kelly Services................................................................ 6,000
500 Manpower...................................................................... 17,625
300 Ogden Corporation............................................................. 8,456
500 Olston Corporation............................................................ 7,500
500 Robert Half International (b)................................................. 20,000
----------------
74,406
----------------
Tobacco (.2%)
200 Universal Corporation......................................................... 8,225
----------------
ENERGY (6.3%)
Oil and Gas (6.3%)
200 BJ Services (b)............................................................... 14,388
800 Ensco International........................................................... 26,800
1,000 Global Marine (b)............................................................. 24,500
500 Lyondell Petrochemical........................................................ 13,250
300 Mapco......................................................................... 13,875
200 Murphy Oil.................................................................... 10,838
600 Nabors Industries (b)......................................................... 18,863
300 Noble Affiliates, Inc......................................................... 10,575
800 Noble Drilling Corporation (b)................................................ 24,500
600 Pioneer Natural Resources..................................................... 17,363
800 Ranger Oil.................................................................... 5,500
400 Seagull Energy (b)............................................................ 8,250
200 Smith International, Inc. (b)................................................. 12,275
300 Tidewater..................................................................... 16,538
900 Tosco Corporation............................................................. 34,031
600 Transocean Offshhore, Inc..................................................... 28,913
500 Ultramar Diamond Shamrock Corporation......................................... 15,938
300 Valero Energy Corporation..................................................... 9,431
300 Weatherford, Inc. (b)......................................................... 13,125
----------------
318,953
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- --------- ----------------
<C> <S> <C>
FINANCIAL (19.1%)
Banks (10.5%)
300 Associated Banc Corporation................................................... $ 16,112
300 City National Corporation..................................................... 11,081
600 Crestar Financial Corporation................................................. 34,200
500 First of America Bank Corporation............................................. 38,563
700 First Security Corporation.................................................... 29,313
400 First Tennessee National Corporation.......................................... 26,700
300 First Virginia Banks, Inc..................................................... 15,506
800 Firstar Corporation........................................................... 33,950
700 Hibernia Corporation.......................................................... 13,169
600 Marshall & Isley Corporation.................................................. 37,275
750 Mercantile Bancorporation..................................................... 46,125
400 Mercantile Bankshares Corporation............................................. 15,650
600 Northern Trust Corporation.................................................... 41,850
400 Old Kent Financial Corporation................................................ 15,850
400 Pacific Century Financial Corporation......................................... 9,900
800 Regions Financial Corporation................................................. 33,750
1,000 Summit Bancorp................................................................ 53,250
500 TCF Financial Corporation..................................................... 16,938
400 Union Planters Corporation.................................................... 27,175
200 Wilmington Trust Corporation.................................................. 12,475
----------------
528,832
----------------
Commercial Finance (.3%)
300 Finova Finance Trust.......................................................... 14,906
----------------
Consumer Finance (.4%)
400 Capital One Financial Corporation............................................. 21,675
----------------
Finance--Diversified (1.6%)
400 AMBAC Financial Group......................................................... 18,400
400 MCN Financing................................................................. 16,150
500 Southtrust Corporation........................................................ 31,719
200 The PMI Group................................................................. 14,463
----------------
80,732
----------------
Insurance (2.3%)
800 AFLAC, Inc.................................................................... 40,900
300 American Financial Group...................................................... 12,094
500 Old Republic Corporation...................................................... 18,594
800 Provident Companies, Inc...................................................... 30,900
200 Transatlantic Holdings, Inc................................................... 14,300
----------------
116,788
----------------
Investment Bankers/Brokers (3.2%)
600 A.G. Edwards.................................................................. 23,850
700 Bear Stearns Companies........................................................ 33,250
700 Franklin Resources, Inc....................................................... 60,856
750 Paine Webber Group, Inc....................................................... 25,922
300 T. Rowe Price Associates...................................................... 18,863
----------------
162,741
----------------
Savings and Loans (.8%)
315 Charter One Financial, Inc.................................................... 19,884
700 Dime Bancorp.................................................................. 20,956
----------------
40,840
----------------
HEALTH CARE (7.0%)
Biotechnology (.8%)
400 Biogen, Inc. (b).............................................................. 14,550
400 Centocor, Inc (b)............................................................. 13,300
</TABLE>
See accompanying notes to investments in securities.
78
<PAGE>
INDEX 400 MID-CAP PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- --------- ----------------
HEALTH CARE--CONTINUED
<C> <S> <C>
400 Genzyme Corporation (b)....................................................... $ 11,100
----------------
38,950
----------------
Drugs (1.9%)
300 Bergen Brunswig Corporation................................................... 12,638
1,000 Chiron (b).................................................................... 17,000
200 Forest Laboratories (b)....................................................... 9,863
300 McKesson Corporation.......................................................... 32,456
100 R P Scherer Corporation (b)................................................... 6,100
600 Watson Pharmaceuticals (b).................................................... 19,463
----------------
97,520
----------------
Health Care--Diversified (.3%)
700 Ivax Corporation (b).......................................................... 4,725
400 Quorum Health Group (b)....................................................... 10,475
----------------
15,200
----------------
Hospital Management (.7%)
900 Health Management Association, Inc. (b)....................................... 22,725
200 Pacificare Health System, Inc. (b)............................................ 10,475
----------------
33,200
----------------
Managed Care (1.2%)
200 Concentra Managed Care, Inc. (b).............................................. 6,750
200 First Healthcare Group Corporation (b)........................................ 10,225
700 Foundation Health Systems (b)................................................. 15,663
300 Health Care and Retirement (b)................................................ 12,075
400 Novacare, Inc. (b)............................................................ 5,225
400 Vencor, Inc. (b).............................................................. 9,775
----------------
59,713
----------------
Medical Products/Supplies (1.5%)
300 Allegiance Corporation........................................................ 10,631
400 Dentsply International........................................................ 12,200
400 Hillenbrand Industries, Inc................................................... 20,475
500 Stryker Corporation........................................................... 18,625
300 Sybron International Corporations (b)......................................... 14,081
----------------
76,012
----------------
Special Services (.6%)
500 Apria Healthcare Group, Inc. (b).............................................. 6,719
300 Covance, Inc. (b)............................................................. 5,963
500 Omnicare Incorporated......................................................... 15,500
----------------
28,182
----------------
TECHNOLOGY (12.2%)
500 Altera Corporation (b)........................................................ 16,563
600 America Online (b)............................................................ 53,513
900 Analog Devices, Inc. (b)...................................................... 24,919
600 Arrow Electronic, Inc. (b).................................................... 19,463
600 Atmel Corporation (b)......................................................... 11,138
200 Avnet Incorporated............................................................ 13,200
200 Beckman Instruments, Inc...................................................... 8,000
600 BMC Software, Inc. (b)........................................................ 39,375
1,200 Cadence Design Systems, Inc. (b).............................................. 29,400
400 Comdisco, Inc................................................................. 13,375
1,000 Compuware Corporation (b)..................................................... 32,000
500 Cypress Semiconductor Corporation (b)......................................... 4,250
300 Electronic Arts, Inc (b)...................................................... 11,344
300 Fiserv (b).................................................................... 14,738
1,000 Informix Corporation (b)...................................................... 4,750
400 Linear Technology Corporation................................................. 23,050
<CAPTION>
MARKET
SHARES VALUE(a)
- --------- ----------------
<C> <S> <C>
TECHNOLOGY--CONTINUED
300 Litton Industries, Inc. (b)................................................... $ 17,250
800 Maxim Integrated Products (b)................................................. 27,600
700 Mylan Laboratories............................................................ 14,656
600 NCR Corporation (b)........................................................... 16,688
400 Network Associates (b)........................................................ 21,150
600 Paychex Incorporated.......................................................... 30,375
100 Policy Management Systems (b)................................................. 6,956
800 Quantum Corporation (b)....................................................... 16,050
500 Reynolds & Reynolds........................................................... 9,219
500 Sterling Commerce, Inc. (b)................................................... 19,219
400 Storage Technology (b)........................................................ 24,775
100 Stratus Computer (b).......................................................... 3,781
300 Structural Dynamics Research (b).............................................. 6,750
500 Sungard Data Systems (b)...................................................... 15,500
300 Symantec (b).................................................................. 6,581
200 Symbol Technologies........................................................... 7,550
400 Synopsys Incorporated (b)..................................................... 14,913
500 Teradyne Incorporated (b)..................................................... 16,000
200 Varian Associates, Inc........................................................ 10,113
400 Xilinx Incorporated (b)....................................................... 14,025
----------------
618,229
----------------
TRANSPORTATION (1.7%)
Air Freight (.3%)
100 Airborne Freight Corporation.................................................. 6,213
300 CNF Transportation............................................................ 11,513
----------------
17,726
----------------
Airlines (.2%)
200 Alaska Airgroup, Inc. (b)..................................................... 7,750
----------------
Railroads (.8%)
100 GATX Corporation.............................................................. 7,256
400 Illinois Central Corporation.................................................. 13,625
600 Kansas City Southern Industries............................................... 19,050
----------------
39,931
----------------
Shipping (.3%)
300 Alexander & Baldwin, Inc...................................................... 8,194
300 Overseas Shipholding Group.................................................... 6,544
----------------
14,738
----------------
Trucking (.1%)
300 Arnold Industries, Inc........................................................ 5,175
----------------
UTILITIES (11.0%)
Electric Companies (9.2%)
1,000 AES Corporation (b)........................................................... 46,625
700 Allegheny Energy, Inc. (b).................................................... 22,750
300 Central Louisiana Electric.................................................... 9,713
600 CMS Energy Corporation........................................................ 26,438
400 Delmarva Power & Light Company................................................ 9,225
600 Florida Progress Corporation.................................................. 23,550
200 Hawiian Electric Industries................................................... 8,175
200 Idaho Power Company........................................................... 7,525
400 Illinova Corporation.......................................................... 10,775
300 Ipalco Enterprises, Inc....................................................... 12,581
400 Kansas City Power & Light..................................................... 11,825
400 LG&E Energy Corporation....................................................... 9,900
600 Midamerican Energy Holdings................................................... 13,200
200 Minnesota Power & Light Company............................................... 8,713
300 Montana Power Company......................................................... 9,544
</TABLE>
See accompanying notes to investments in securities.
79
<PAGE>
INDEX 400 MID-CAP PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- --------- ----------------
UTILITIES--CONTINUED
<C> <S> <C>
300 Nevada Power Company.......................................................... $ 7,969
600 New Century Energies, Inc..................................................... 28,763
400 New England Electric System................................................... 17,100
400 New York State Electric & Gas................................................. 14,200
400 Nipsco Industries, Inc........................................................ 19,775
700 Northeast Utilities........................................................... 8,269
200 OGE Energy Corporation........................................................ 10,938
500 Pinnacle West Capital Corporation............................................. 21,188
700 Potomac Electric Power Company................................................ 18,069
500 Puget Sound Energy, Inc....................................................... 15,094
600 Scana Corporation............................................................. 17,963
700 Teco Energy................................................................... 19,688
300 Utilicorp United, Inc......................................................... 11,644
600 Wisconsin Energy.............................................................. 17,250
200 WPL Holdings.................................................................. 6,625
----------------
465,074
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- --------- ----------------
<C> <S> <C>
UTILITIES--CONTINUED
Natural Gas (1.3%)
400 AGL Resources................................................................. $ 8,175
300 El Paso Natural Gas Company................................................... 19,950
300 Keyspan Energy................................................................ 11,044
200 National Fuel Gas Company..................................................... 9,738
200 Questar Corporation........................................................... 8,925
300 Washington Gas Light.......................................................... 9,281
----------------
67,113
----------------
Power Products--Industrial (.2%)
400 Cal Energy Company (b)........................................................ 11,500
----------------
Water Utilities (.3%)
500 American Water Works, Inc..................................................... 13,656
----------------
Total common stock (cost: $4,994,762).................................................... 5,045,449
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES ( -- )
$ 2,311 Temporary Investment Fund--Temp Fund Portfolio, current rate 5.500%............ 2,311
------------
Total short-term securities (cost: $2,311)..................................... 2,311
------------
Total investments in securities (cost: $4,997,073) (c)......................... $ 5,047,760
------------
------------
</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) At December 31, 1997 the cost of securities for federal income tax purposes
was $4,997,073. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation..................... $ 365,101
Gross unrealized depreciation..................... (314,414)
---------
Net unrealized appreciation....................... $ 50,687
---------
---------
</TABLE>
80
<PAGE>
MACRO-CAP VALUE PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ------ ----------------
<C> <S> <C>
COMMON STOCKS (96.0%)
BASIC MATERIALS (.5%)
Iron and Steel (.5%)
900 Allegheny Teledyne, Inc................................................ $ 23,288
----------------
CAPITAL GOODS (10.3%)
Aerospace/Defense (.5%)
400 Boeing Company......................................................... 19,575
----------------
Electrical Equipment (1.7%)
900 Emerson Electric Company............................................... 50,794
600 Motorola, Inc.......................................................... 34,238
----------------
85,032
----------------
Machinery (2.2%)
2,200 Cooper Industries, Inc................................................. 107,800
----------------
Manufacturing (3.2%)
2,400 Allied Signal, Inc..................................................... 93,450
1,400 Tyco International Ltd................................................. 63,088
----------------
156,538
----------------
Manufacturing--Diversified (1.2%)
1,500 Tenneco, Inc........................................................... 59,250
----------------
Waste Disposal (1.5%)
2,800 Waste Management, Inc.................................................. 77,000
----------------
COMMUNICATION SERVICES (4.3%)
Telephone (4.3%)
1,400 Sprint Corporation..................................................... 82,075
3,000 MCI Communications Company............................................. 128,438
----------------
210,513
----------------
CONSUMER CYCLICAL (20.9%)
Auto Related (1.9%)
1,500 Goodyear Tire & Rubber................................................. 95,438
----------------
Household Products (2.1%)
1,300 Procter & Gamble Company............................................... 103,756
----------------
Consumer Products (13.0%)
2,700 Anheuser Busch Co., Inc................................................ 118,800
3,000 Fruit of the Loom (b).................................................. 76,875
1,600 Pepsico, Inc........................................................... 58,300
2,100 Philip Morris Cos., Inc................................................ 95,156
800 Ralston Purina Group................................................... 74,350
1,300 Temple Inland Company.................................................. 68,006
500 Time Warner, Inc....................................................... 31,000
2,100 US West Media Group (b)................................................ 60,638
1,200 Westpoint Stevens, Inc. (b)............................................ 56,700
----------------
639,825
----------------
Lodgings and Hotels (.6%)
400 ITT Corporation (b).................................................... 33,150
----------------
Retail (3.3%)
1,100 Circuit City Stores.................................................... 39,119
1,000 Federated Department Stores (b)........................................ 43,063
2,600 Toys R Us (b).......................................................... 81,738
----------------
163,920
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ------ ----------------
<C> <S> <C>
ENERGY (11.8%)
Oil--Energy (11.8%)
600 Atlantic Richfield Company............................................. $ 48,075
1,600 Enron Corporation...................................................... 66,500
1,100 Exxon Corporation...................................................... 67,306
3,100 Input/Output, Inc. (b)................................................. 92,031
1,300 Mobil Corporation...................................................... 93,844
1,700 Occidental Petro Corporation........................................... 49,831
4,300 Tosco Corporation...................................................... 162,594
----------------
580,181
----------------
FINANCIAL (16.3%)
Banks (6.1%)
400 Chase Manhattan........................................................ 43,800
2,100 First Union Corporation................................................ 107,625
700 Fleet Financial Group.................................................. 52,456
1,200 Nationsbank Corporation................................................ 72,975
400 Southtrust Corporation................................................. 25,375
----------------
302,231
----------------
Finance--Diversified (1.1%)
600 American Express Company............................................... 53,550
----------------
Insurance (3.2%)
1,300 Providian Financial Corporation (b).................................... 58,744
1,300 Marsh & McLennan Company............................................... 96,931
----------------
155,675
----------------
Investment Bankers/Brokers (1.2%)
1,000 Morgan Stanley Dean Witter............................................. 59,125
----------------
Real Estate Investment Trust (3.3%)
1,600 Simon Debartolo Group.................................................. 52,300
1,900 Starwood Lodging....................................................... 109,963
----------------
162,263
----------------
Savings and Loans (1.4%)
1,100 Washington Mutual, Inc................................................. 70,194
----------------
HEALTHCARE (11.9%)
Chemicals and Drugs (9.1%)
1,600 Albemarle Corporation.................................................. 38,200
100 Crescendo Pharmaceuticals Corporation (b).............................. 1,156
400 Dow Chemical Company................................................... 40,600
1,700 Humana Inc (b)......................................................... 35,275
1,300 Pfizer................................................................. 96,931
2,200 United HealthCare Corporation.......................................... 109,313
1,000 Warner Lambert Company................................................. 124,000
----------------
445,475
----------------
Health Products/Care (2.8%)
1,300 Merck & Co............................................................. 138,125
----------------
INTERNATIONAL CABLE (2.4%)
Internet & Telephone Ventures (2.4%)
4,100 Telecom-TCI Ventures (b)............................................... 116,081
----------------
TECHNOLOGY (10.9%)
1,300 Bay Networks, Inc. (b)................................................. 33,231
600 Cisco Systems, Inc. (b)................................................ 33,450
3,600 EMC Corporation (b).................................................... 98,775
</TABLE>
See accompanying notes to investments in securities.
81
<PAGE>
MACRO-CAP VALUE PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ------ ----------------
TECHNOLOGY--CONTINUED
<C> <S> <C>
2,900 First Data Corporation................................................. $ 84,825
1,000 IBM Corporation........................................................ 104,563
1,900 International Game Technology.......................................... 47,975
400 Perkin Elmer Corporation............................................... 28,425
2,400 Quantum Corporation (b)................................................ 48,150
1,500 Sun Microsystems (b)................................................... 59,813
----------------
539,207
----------------
TRANSPORTATION (2.7%)
1,500 Union Pacific Corporation.............................................. 93,656
1,600 Wisconsin Central (b).................................................. 37,400
----------------
131,056
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ------ ----------------
<C> <S> <C>
UTILITIES (4.0%)
Electric (4.0%)
900 Dominion Resources..................................................... $ 38,306
2,000 GTE Corporation........................................................ 104,500
600 New England Electric................................................... 25,650
500 Northern States Power.................................................. 29,121
----------------
197,577
----------------
Total common stocks (cost $4,804,242).......................................... 4,725,825
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (2.2%)
U.S. Treasury Bill (2.2%)
$107,000 U.S. Treasury Bill............................... 5.18% 01/22/98 106,662
-----------
Total short-term securities (cost: $106,336)......................... 106,662
-----------
Total Investment in securities (cost: $4,910,578) (c)................ $ 4,832,487
-----------
-----------
</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) At December 31, 1997 the cost of securities for federal income tax purposes
was $4,916,768. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $ 2,112,312
Gross unrealized depreciation.......... (2,196,593)
------------
Net unrealized depreciation............ $ (84,281)
------------
------------
</TABLE>
82
<PAGE>
MICRO-CAP GROWTH PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ------- ----------------
<C> <S> <C>
COMMON STOCK (93.2%)
CAPITAL GOODS (2.9%)
Electrical Equipment (1.0%)
2,400 Advanced Lighting Technologies (b).......................................... $ 45,600
----------------
Manufacturing (.7%)
3,300 Rockshox, Inc. (b).......................................................... 30,525
----------------
Waste Management (1.2%)
2,600 Eastern Environmental Services, Inc. (b).................................... 57,200
----------------
COMMUNICATION SERVICES (5.4%)
Cellular (1.9%)
4,300 Boston Communications Group (b)............................................. 46,762
2,700 LCC International Incorporated (b).......................................... 39,150
----------------
85,912
----------------
Telecommunication (1.6%)
2,800 ITC Deltacom, Inc. (b)...................................................... 46,200
1,500 Metromedia Fiber Network (b)................................................ 24,937
----------------
71,137
----------------
Telephone (1.9%)
2,400 ChiRex, Inc. (b)............................................................ 42,300
2,100 Nextlink Communications, Inc. (b)........................................... 44,756
----------------
87,056
----------------
CONSUMER CYCLICAL (18.7%)
Building Materials (1.1%)
2,500 Modtech, Inc. (b)........................................................... 48,750
----------------
Leisure (2.6%)
2,600 Family Golf Centers (b)..................................................... 81,575
2,000 SCP Pool Corporation (b).................................................... 38,500
----------------
120,075
----------------
Lodging--Hotel (1.7%)
3,200 Silverleaf Resorts, Inc. (b)................................................ 78,400
----------------
Retail (7.8%)
2,000 Children's Place Retail Stores (b).......................................... 10,250
1,900 Gadzooks, Inc. (b).......................................................... 39,900
800 Guitar Center, Inc. (b)..................................................... 18,400
2,500 Holt's Cigar Holdings, Inc. (b)............................................. 22,812
2,400 Hot Topic (b)............................................................... 54,600
2,000 Kenneth Cole Productions (b)................................................ 32,125
1,200 North Face Incorporated (b)................................................. 26,400
1,700 Paul Harris Stores (b)...................................................... 17,106
1,700 Quiksilver, Inc. (b)........................................................ 48,662
900 SED International (b)....................................................... 10,125
6,500 The Bombay Company, Inc. (b)................................................ 30,062
1,800 Track 'N Trail, Inc. (b).................................................... 15,975
2,200 Vans, Inc. (b).............................................................. 33,275
----------------
359,692
----------------
Service (4.0%)
1,300 Abacus Direct Corporation (b)............................................... 53,300
4,400 Coinstar, Inc. (b).......................................................... 40,150
2,600 Mac-Gray Corporation (b).................................................... 40,625
<CAPTION>
MARKET
SHARES VALUE(a)
- ------- ----------------
<C> <S> <C>
CONSUMER CYCLICAL--CONTINUED
3,200 Pegasus Systems, Inc. (b)................................................... $ 47,600
----------------
181,675
----------------
Textiles (1.5%)
2,400 Ashworth, Inc. (b).......................................................... 26,400
2,000 Novel Denim Holdings Ltd (b)................................................ 40,000
----------------
66,400
----------------
CONSUMER STAPLES (7.4%)
Entertainment (0.8%)
2,500 N2K, Inc. (b)............................................................... 36,562
----------------
Restaurants (1.5%)
2,000 Papa John's International, Inc. (b)......................................... 69,750
----------------
Service (5.1%)
1,000 AHL Services, Inc. (b)...................................................... 24,625
1,600 Eagle Geophysical, Inc. (b)................................................. 20,800
2,200 Metzler Group, Inc. (b)..................................................... 88,275
3,400 Seitel, Inc. (b)............................................................ 58,225
2,300 SOS Staffing Services (b)................................................... 43,412
----------------
235,337
----------------
ENERGY (5.3%)
Oil and Gas (5.3%)
1,900 Cross Timbers Oil Company................................................... 47,381
1,900 Edge Petroleum Corporation (b).............................................. 21,850
800 Evergreen Resources, Inc. (b)............................................... 12,400
2,800 HS Resources, Inc. (b)...................................................... 38,675
10,500 National Energy Group, Inc. (b)............................................. 42,656
1,300 Petroglyph Energy, Inc. (b)................................................. 10,725
7,300 Unit Corporation (b)........................................................ 70,262
----------------
243,949
----------------
FINANCIAL (9.9%)
Banks (2.5%)
2,900 Andover Bancorp, Inc........................................................ 116,725
----------------
Insurance (1.8%)
1,600 Arm Financial Group......................................................... 42,200
1,900 Healthcare Recoveries, Inc. (b)............................................. 42,275
----------------
84,475
----------------
Real Estate Investment Trust (5.6%)
2,500 Bedford Property Investors.................................................. 54,687
3,400 Golf Trust of America, Inc.................................................. 98,600
4,000 Storage Trust Realty........................................................ 105,250
----------------
258,537
----------------
HEALTH CARE (15.1%)
Biotechnology (2.0%)
2,900 Celgene Corporation (b)..................................................... 24,469
2,400 Digene Corporation (b)...................................................... 20,700
2,700 Fuisz Technologies (b)...................................................... 22,950
5,000 Lifecell Corporation (b).................................................... 23,125
----------------
91,244
----------------
</TABLE>
See accompanying notes to investments in securities.
83
<PAGE>
MICRO-CAP GROWTH PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ------- ----------------
HEALTH CARE--CONTINUED
<C> <S> <C>
Drugs (7.9%)
3,100 Algos Pharmaceuticals (b)................................................... $ 93,000
1,900 Anesta Corporation (b)...................................................... 31,113
4,200 Guilford Pharmaceuticals, Inc. (b).......................................... 84,525
1,900 Onyx Pharmaceuticals, Inc. (b).............................................. 14,725
2,500 Pathogenesis Corporation (b)................................................ 92,813
2,600 Spiros Development Corporation II (b)....................................... 44,525
----------------
360,701
----------------
Hospital Management (1.2%)
2,400 Horizon Health Corporation (b).............................................. 55,800
----------------
Medical Products/Supplies (1.3%)
2,200 Hanger Orthopedic Group (b)................................................. 28,325
1,800 Urologix Incorporated (b)................................................... 32,625
----------------
60,950
----------------
Special Services (2.7%)
2,300 Assisted Living Concepts, Inc. (b).......................................... 45,425
1,900 Dental Care Alliance, Inc. (b).............................................. 19,950
2,500 Equity Corporation (b)...................................................... 57,813
----------------
123,188
----------------
TECHNOLOGY (28.3%)
1,100 Ace Communication Corporation (b)........................................... 12,994
1,900 Advanced Energy Industries (b).............................................. 28,381
1,900 Arbor Software Corporation (b).............................................. 76,950
2,300 Aspen Technology (b)........................................................ 78,775
2,100 Aurora Biosciences Corporation (b).......................................... 27,563
1,700 Concentric Network Corporation (b).......................................... 15,088
2,000 Credit Management Solutions (b)............................................. 26,000
<CAPTION>
MARKET
SHARES VALUE(a)
- ------- ----------------
<C> <S> <C>
TECHNOLOGY--CONTINUED
2,700 Envoy Corporation (b)....................................................... $ 78,638
1,900 Information Management Association (b)...................................... 17,813
2,700 Insight Enterprises, Inc. (b)............................................... 99,225
1,100 Inspire Insurance Solutions (b)............................................. 22,963
2,100 International Manufacturing Services, Inc. (b).............................. 15,225
3,200 Intevac Incorporated (b).................................................... 31,200
2,400 JDA Software Group, Inc. (b)................................................ 84,000
2,300 Mas Technology Limited (b).................................................. 39,963
2,300 Maxwell Technologies, Inc. (b).............................................. 53,475
2,100 Natural Microsystems Corporation (b)........................................ 97,650
1,700 Oak Technology, Inc. (b).................................................... 11,050
2,400 Omtool Ltd (b).............................................................. 24,600
1,900 Peritus Software Services (b)............................................... 38,713
1,600 Photronics Incorporated (b)................................................. 38,800
2,600 Remec Incorporated (b)...................................................... 58,500
2,300 RF Micro Devices, Inc. (b).................................................. 28,319
1,800 Sawtek, Inc. (b)............................................................ 47,475
6,000 Software AG Systems, Inc. (b)............................................... 87,000
2,200 Sportsline USA, Inc. (b).................................................... 23,650
1,900 Transcrypt International, Inc. (b).......................................... 47,263
4,100 Trident Microsystems (b).................................................... 37,156
2,200 Vestcom International (b)................................................... 49,225
----------------
1,297,654
----------------
TRANSPORTATION (0.2%)
Transport Services (0.2%)
1,200 Preview Travel, Inc. (b).................................................... 9,075
----------------
Total common stock (cost: $4,734,534)................................................ 4,276,369
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (5.0%)
$231,676 Temporary Investment Fund, Inc.--Temp Fund Portfolio, current rate
5.500%................................................................... 231,676
-----------
Total short-term securities (cost: $231,676)............................... 231,676
-----------
Total investments in securities (cost: $4,966,210) (c)..................... $ 4,508,045
-----------
-----------
</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) At December 31, 1997 the cost of securities for federal income tax purposes
was $4,966,210. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $ 235,937
Gross unrealized depreciation.......... (694,102)
---------
Net unrealized depreciation............ $(458,165)
---------
---------
</TABLE>
84
<PAGE>
(This page has been left blank intentionally.)
85
<PAGE>
ADVANTUS SERIES FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY ASSET MORTGAGE
GROWTH BOND MARKET ALLOCATION SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at market
value--see accompanying schedules for
detailed listing*.................... $ 326,267,298 $ 138,468,768 $ 54,259,425 $ 508,661,190 $ 101,192,746
Cash in bank on demand deposit.......... 16,240 422,808 6 457,559 22,017
Receivable for Fund shares sold......... 398,866 299,700 142,677 393,061 123,452
Receivable for investment securities
sold................................. 59,857,923 34,683 -- 127,856 4,860,615
Dividends and accrued interest
receivable........................... 411,392 1,685,504 54,414 2,702,424 703,536
Receivable for refundable foreign income
taxes withheld....................... -- -- -- -- --
-------------- ------------- ------------- ------------- -------------
Total assets...................... 386,951,719 140,911,463 54,456,522 512,342,090 106,902,366
-------------- ------------- ------------- ------------- -------------
LIABILITIES
Payable to Minnesota Mutual............. -- 67,111 -- -- --
Payable for Fund shares repurchased..... 281,941 100,485 873,232 266,384 83,428
Payable for investment securities
purchased............................ 55,853,629 920,073 -- 4,855,592 7,585,838
-------------- ------------- ------------- ------------- -------------
Total liabilities................. 56,135,570 1,087,669 873,232 5,121,976 7,669,266
-------------- ------------- ------------- ------------- -------------
Net assets applicable to outstanding
capital stock........................ $ 330,816,149 $ 139,823,794 $ 53,583,290 $ 507,220,114 $ 99,233,100
-------------- ------------- ------------- ------------- -------------
-------------- ------------- ------------- ------------- -------------
Represented by:
Capital stock--authorized 10
trillion shares of $.01 par
value**............................ $ 1,378,513 $ 1,054,816 $ 535,833 $ 2,500,504 $ 819,342
Additional paid-in capital.......... 236,640,372 126,162,034 53,047,457 378,957,499 93,138,453
Undistributed net investment
income............................. 3,415,606 8,612,808 -- 14,159,977 5,857,983
Accumulated net realized gains
(losses) from investments and
foreign currency transactions...... 53,880,278 1,806,307 -- 34,566,653 (2,893,070)
Unrealized appreciation of
investments and translation of
assets and liabilities in foreign
currencies......................... 35,501,380 2,187,829 -- 77,035,481 2,310,392
-------------- ------------- ------------- ------------- -------------
Total--representing net assets
applicable to outstanding capital
stock............................ $ 330,816,149 $ 139,823,794 $ 53,583,290 $ 507,220,114 $ 99,233,100
-------------- ------------- ------------- ------------- -------------
-------------- ------------- ------------- ------------- -------------
Net asset value per share of outstanding
capital stock........................ $ 2.40 $ 1.33 $ 1.00 $ 2.03 $ 1.21
-------------- ------------- ------------- ------------- -------------
-------------- ------------- ------------- ------------- -------------
*Identified cost....................... $ 290,765,918 $ 136,280,939 $ 54,259,425 $ 431,625,709 $ 98,882,354
**Shares outstanding.................... 137,851,279 105,481,554 53,583,290 250,050,390 81,934,154
</TABLE>
See accompanying notes to financial statements.
86
<PAGE>
<TABLE>
<CAPTION>
MATURING
CAPITAL INTERNATIONAL SMALL GOVERNMENT
INDEX 500 APPRECIATION STOCK COMPANY BOND 1998
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at market
value--see accompanying schedules for
detailed listing*.................... $383,173,047 $294,375,385 $286,396,853 $185,393,446 $6,252,225
Cash in bank on demand deposit.......... 2,983 5 2,842 12,672 4
Receivable for Fund shares sold......... 562,548 317,083 393,325 331,684 211
Receivable for investment securities
sold................................. 683,336 -- -- 559,234 --
Dividends and accrued interest
receivable........................... 456,825 117,869 499,880 79,208 91
Receivable for refundable foreign income
taxes withheld....................... -- -- 208,593 -- --
------------ ------------- ------------- ------------ -----------
Total assets...................... 384,878,739 294,810,342 287,501,493 186,376,244 6,252,531
------------ ------------- ------------- ------------ -----------
LIABILITIES
Payable to Minnesota Mutual............. -- -- 6,734 37 --
Payable for Fund shares repurchased..... 281,810 145,106 324,323 137,429 16,488
Payable for investment securities
purchased............................ 3,846,210 -- -- 3,322,046 --
------------ ------------- ------------- ------------ -----------
Total liabilities................. 4,128,020 145,106 331,057 3,459,512 16,488
------------ ------------- ------------- ------------ -----------
Net assets applicable to outstanding
capital stock........................ $380,750,719 $294,665,236 $287,170,436 $182,916,732 $6,236,043
------------ ------------- ------------- ------------ -----------
------------ ------------- ------------- ------------ -----------
Represented by:
Capital stock--authorized 10
trillion shares of $.01 par
value**............................ $ 1,226,769 $ 1,033,243 $ 1,683,808 $ 1,105,539 $ 57,609
Additional paid-in capital.......... 243,805,196 186,067,577 225,509,778 152,877,122 5,755,943
Undistributed net investment
income............................. 3,885,375 -- 8,175,659 -- 382,323
Accumulated net realized gains
(losses) from investments and
foreign currency transactions...... 1,917,334 17,585,345 3,222,393 (3,384,175) 1,855
Unrealized appreciation of
investments and translation of
assets and liabilities in foreign
currencies......................... 129,916,045 89,979,071 48,578,798 32,318,246 38,313
------------ ------------- ------------- ------------ -----------
Total--representing net assets
applicable to outstanding capital
stock............................ $380,750,719 $294,665,236 $287,170,436 $182,916,732 $6,236,043
------------ ------------- ------------- ------------ -----------
------------ ------------- ------------- ------------ -----------
Net asset value per share of outstanding
capital stock........................ $ 3.10 $ 2.85 $ 1.71 $ 1.65 $ 1.08
------------ ------------- ------------- ------------ -----------
------------ ------------- ------------- ------------ -----------
*Identified cost....................... $253,257,002 $204,396,314 $237,803,732 $153,075,200 $6,213,912
**Shares outstanding.................... 122,676,901 103,324,345 168,380,763 110,553,949 5,760,905
<CAPTION>
MATURING MATURING MATURING
GOVERNMENT GOVERNMENT GOVERNMENT VALUE
BOND 2002 BOND 2006 BOND 2010 STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at market
value--see accompanying schedules for
detailed listing*.................... $ 4,196,186 $ 3,919,480 $ 3,189,972 $ 207,695,485
Cash in bank on demand deposit.......... 2 3 5 7,656
Receivable for Fund shares sold......... 25,191 69 51 499,316
Receivable for investment securities
sold................................. 215,675 -- 530 --
Dividends and accrued interest
receivable........................... 45 259 218 249,469
Receivable for refundable foreign income
taxes withheld....................... -- -- -- --
------------ ------------ ------------ -------------
Total assets...................... 4,437,099 3,919,811 3,190,776 208,451,926
------------ ------------ ------------ -------------
LIABILITIES
Payable to Minnesota Mutual............. -- -- -- --
Payable for Fund shares repurchased..... 13,071 19,624 14,393 219,092
Payable for investment securities
purchased............................ 215,586 -- -- 139,440
------------ ------------ ------------ -------------
Total liabilities................. 228,657 19,624 14,393 358,532
------------ ------------ ------------ -------------
Net assets applicable to outstanding
capital stock........................ $ 4,208,442 $ 3,900,187 $ 3,176,383 $ 208,093,394
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Represented by:
Capital stock--authorized 10
trillion shares of $.01 par
value**............................ $ 39,196 $ 33,659 $ 24,578 $ 1,201,804
Additional paid-in capital.......... 3,950,445 3,494,670 2,647,525 189,516,954
Undistributed net investment
income............................. 30,884 36,152 166,131 --
Accumulated net realized gains
(losses) from investments and
foreign currency transactions...... 8,948 (10,513) (5,377) 100,825
Unrealized appreciation of
investments and translation of
assets and liabilities in foreign
currencies......................... 178,969 346,219 343,526 17,273,811
------------ ------------ ------------ -------------
Total--representing net assets
applicable to outstanding capital
stock............................ $ 4,208,442 $ 3,900,187 $ 3,176,383 $ 208,093,394
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Net asset value per share of outstanding
capital stock........................ $ 1.07 $ 1.16 $ 1.29 $ 1.73
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
*Identified cost....................... $ 4,017,217 $ 3,573,261 $ 2,846,446 $ 190,421,674
**Shares outstanding.................... 3,919,602 3,365,936 2,457,797 120,180,377
</TABLE>
87
<PAGE>
ADVANTUS SERIES FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES--CONTINUED
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SMALL
COMPANY INTERNATIONAL INDEX 400 MACRO-CAP MICRO-CAP
VALUE BOND MID-CAP VALUE GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at market
value--see accompanying schedules for
detailed listing*.................... $ 5,029,502 $ 22,147,025 $ 5,047,760 $ 4,832,487 $ 4,508,045
Cash in bank on demand deposit.......... 111,426 14,842 9,245 -- --
Receivable for Fund shares sold......... 30,981 5,341 19,103 34,474 29,755
Receivable for investment securities
sold................................. 172 8,972,981 140,096 69,328 128,982
Dividends and accrued interest
receivable........................... 7,668 804,895 4,288 6,815 1,868
Unrealized appreciation on forward
foreign currency contracts held, at
value (note 4)....................... -- 256,614 -- -- --
------------- ------------- ------------- ------------- -------------
Total assets...................... 5,179,749 32,201,698 5,220,492 4,943,104 4,668,650
------------- ------------- ------------- ------------- -------------
LIABILITIES
Payable to Minnesota Mutual............. -- -- -- 458 --
Bank overdraft.......................... -- -- -- 1,279 50
Payable for Fund shares repurchased..... 2,444 3,661 1,740 1,719 1,912
Payable for investment securities
purchased............................ -- 7,111,990 166,862 16,224 75,763
Unrealized depreciation on forward
foreign currency contracts held at
value (note 4)....................... -- 67,327 -- -- --
------------- ------------- ------------- ------------- -------------
Total liabilities................. 2,444 7,182,978 168,602 19,680 77,725
------------- ------------- ------------- ------------- -------------
Net assets applicable to outstanding
capital stock........................ $ 5,177,305 $ 25,018,720 $ 5,051,890 $ 4,923,424 $ 4,590,925
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Represented by:
Capital stock--authorized 10
trillion shares of $.01 par
value**............................ $ 50,181 $ 254,168 $ 50,140 $ 50,531 $ 51,736
Additional paid-in capital.......... 4,978,357 25,144,115 4,967,654 5,004,332 5,109,754
Undistributed (distributions in
excess of) net investment income... 14,790 (212,717) 11,340 372 --
Accumulated net realized gains
(losses) from investments and
foreign currency transactions...... (53,657) (5,023) (27,931) (53,720) (112,400)
Unrealized appreciation of
investments and translation of
assets and liabilities in foreign
currencies......................... 187,634 (161,823) 50,687 (78,091) (458,165)
------------- ------------- ------------- ------------- -------------
Total--representing net assets
applicable to outstanding capital
stock............................ $ 5,177,305 $ 25,018,720 $ 5,051,890 $ 4,923,424 $ 4,590,925
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Net asset value per share of outstanding
capital stock........................ $ 1.03 $ .98 $ 1.01 $ .97 $ .89
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
*Identified cost....................... $ 4,841,868 $ 22,474,770 $ 4,997,073 $ 4,910,578 $ 4,966,210
**Shares outstanding.................... 5,018,137 25,416,797 5,014,014 5,053,131 5,173,592
</TABLE>
See accompanying notes to financial statements.
88
<PAGE>
ADVANTUS SERIES FUND, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY ASSET MORTGAGE
GROWTH BOND MARKET ALLOCATION SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest............................ $ 611,860 $ 8,906,707 $4,037,093 $ 14,256,880 $6,283,524
Dividends (net of foreign
withholding taxes of $819,944 for
International Stock Portfolio)..... 4,424,508 475,626 -- 2,434,595 64,697
------------ ----------- ---------- ------------ -----------
Total investment income......... 5,036,368 9,382,333 4,037,093 16,691,475 6,348,221
------------ ----------- ---------- ------------ -----------
Expenses (note 5):
Investment advisory fee............. 1,466,591 673,785 353,186 2,284,255 413,651
Custodian fees...................... 8,030 5,576 6,048 17,281 8,454
Administrative service fee.......... 29,600 29,600 29,600 29,600 29,600
Auditing and accounting services.... 17,033 7,552 4,953 31,040 8,683
Legal fees.......................... 1,862 1,862 1,862 1,862 1,862
Registration fees................... 840 465 1,467 42 7
Printing, shareholder reports and
shareholder meetings............... 88,536 44,133 16,926 144,428 25,144
Directors' fees..................... 3,782 1,752 689 5,967 1,085
Insurance........................... 3,464 2,207 1,517 3,965 1,752
Other............................... 1,023 2,593 -- 13,058 --
------------ ----------- ---------- ------------ -----------
Total expenses.................. 1,620,761 769,525 416,248 2,531,498 490,238
Less fees and expenses waived or
absorbed by Minnesota Mutual....... -- -- -- -- --
------------ ----------- ---------- ------------ -----------
Total net expenses.............. 1,620,761 769,525 416,248 2,531,498 490,238
------------ ----------- ---------- ------------ -----------
Investment income--net.......... 3,415,607 8,612,808 3,620,845 14,159,977 5,857,983
------------ ----------- ---------- ------------ -----------
Realized and unrealized gains (losses)
on investments and foreign currencies:
Net realized gains from:
Investments (note 3)............ 53,880,278 1,986,620 -- 34,718,146 258,539
Net change in unrealized
appreciation or depreciation on:
Investments..................... 28,157,592 1,681,772 -- 31,087,741 1,151,502
------------ ----------- ---------- ------------ -----------
Net gains on investments........ 82,037,870 3,668,392 -- 65,805,887 1,410,041
------------ ----------- ---------- ------------ -----------
Net increase in net assets resulting
from operations........................ $ 85,453,477 $12,281,200 $3,620,845 $ 79,965,864 $7,268,024
------------ ----------- ---------- ------------ -----------
------------ ----------- ---------- ------------ -----------
</TABLE>
89
<PAGE>
ADVANTUS SERIES FUND, INC.
STATEMENTS OF OPERATIONS--CONTINUED
PERIOD ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MATURING
CAPITAL INTERNATIONAL SMALL GOVERNMENT
INDEX 500 APPRECIATION STOCK COMPANY BOND 1998
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest............................ $ 110,465 $ 612,671 $1,429,119 $ 1,009,191 $394,903
Dividends (net of foreign
withholding taxes of $819,944 for
International Stock Portfolio)..... 5,104,373 1,105,408 7,084,054 242,779 --
------------ ------------ ------------- ----------- ----------
Total investment income......... 5,214,838 1,718,079 8,513,173 1,251,970 394,903
------------ ------------ ------------- ----------- ----------
Expenses (note 5):
Investment advisory fee............. 1,171,693 1,879,870 1,856,022 1,223,927 3,136
Custodian fees...................... 6,479 7,753 404,925 9,174 4,061
Administrative service fee.......... 29,600 29,600 29,600 29,600 29,600
Auditing and accounting services.... 9,895 13,276 164,579 5,672 5,494
Legal fees.......................... 1,862 1,862 1,862 1,862 1,862
Registration fees................... 24 22 744 862 1
Printing, shareholder reports and
shareholder meetings............... 73,542 75,563 73,235 50,797 2,017
Directors' fees..................... 3,699 3,231 3,303 2,123 83
Insurance........................... 3,376 3,200 3,264 2,492 520
S&P Licensing fee................... 29,293 -- -- -- --
Other............................... -- 2,863 -- 15,126 14
------------ ------------ ------------- ----------- ----------
Total expenses.................. 1,329,463 2,017,240 2,537,534 1,341,635 46,788
Less fees and expenses waived or
absorbed by Minnesota Mutual....... -- -- -- -- (34,208)
------------ ------------ ------------- ----------- ----------
Total net expenses.............. 1,329,463 2,017,240 2,537,534 1,341,635 12,580
------------ ------------ ------------- ----------- ----------
Investment income (loss)--net... 3,885,375 (299,161) 5,975,639 (89,665) 382,323
------------ ------------ ------------- ----------- ----------
Realized and unrealized gains (losses)
on investments and foreign currencies:
Net realized gains (losses) from:
Investments (note 3)............ 2,363,824 17,638,408 9,630,681 (998,806) 1,855
Foreign currency transactions... -- -- (139,774) -- --
Net change in unrealized
appreciation or depreciation on:
Investments..................... 70,383,844 46,106,787 11,149,241 14,048,307 (12,097)
Translation of assets and
liabilities in foreign
currencies..................... -- -- (5,997) -- --
------------ ------------ ------------- ----------- ----------
Net gains (losses) on
investments.................... 72,747,668 63,745,195 20,634,151 13,049,501 (10,242)
------------ ------------ ------------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations.............. $ 76,633,043 $63,446,034 $26,609,790 $12,959,836 $372,081
------------ ------------ ------------- ----------- ----------
------------ ------------ ------------- ----------- ----------
</TABLE>
(a) Period from September 29, 1997, commencement of operations, to December 31,
1997.
(b) Period from September 24, 1997, commencement of operations, to December 31,
1997.
(c) Period from October 15, 1997, commencement of operations, to December 31,
1997.
(d) Period from September 15, 1997, commencement of operations, to December 31,
1997.
See accompanying notes to financial statements.
90
<PAGE>
<TABLE>
<CAPTION>
MATURING MATURING MATURING SMALL
GOVERNMENT GOVERNMENT GOVERNMENT VALUE COMPANY INTERNATIONAL
BOND 2002 BOND 2006 BOND 2010 STOCK VALUE BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO(a) PORTFOLIO(b)
---------- ------------ ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest............................ $242,719 $ 224,706 $ 176,881 $ 602,751 $ 6,262 $ 360,180
Dividends (net of foreign
withholding taxes of $819,944 for
International Stock Portfolio)..... -- -- -- 2,412,764 20,147 --
---------- ------ ----------- ---------- ----------- ------------
Total investment income......... 242,719 224,706 176,881 3,015,515 26,409 360,180
---------- ------ ----------- ---------- ----------- ------------
Expenses (note 5):
Investment advisory fee............. 1,959 8,471 6,719 1,171,946 9,775 41,149
Custodian fees...................... 3,999 4,021 4,715 7,655 1,000 39,000
Administrative service fee.......... 29,600 29,600 29,600 29,600 8,750 8,750
Auditing and accounting services.... 5,490 5,489 5,488 6,649 1,500 16,500
Legal fees.......................... 1,862 1,862 1,862 1,862 150 150
Registration fees................... -- -- -- 13 -- --
Printing, shareholder reports and
shareholder meetings............... 1,263 1,052 874 30,942 1,500 1,500
Directors' fees..................... 52 44 36 1,890 14 68
Insurance........................... 435 433 417 2,445 -- 500
S&P Licensing fee................... -- -- -- -- -- --
Other............................... 8 7 6 -- 447 2,113
---------- ------ ----------- ---------- ----------- ------------
Total expenses.................. 44,668 50,979 49,717 1,253,002 23,136 109,730
Less fees and expenses waived or
absorbed by Minnesota Mutual....... (36,833) (37,425) (38,967) -- (11,517) --
---------- ------ ----------- ---------- ----------- ------------
Total net expenses.............. 7,835 13,554 10,750 1,253,002 11,619 109,730
---------- ------ ----------- ---------- ----------- ------------
Investment income (loss)--net... 234,884 211,152 166,131 1,762,513 14,790 250,450
---------- ------ ----------- ---------- ----------- ------------
Realized and unrealized gains (losses)
on investments and foreign currencies:
Net realized gains (losses) from:
Investments (note 3)............ 8,948 3,169 16,729 16,644,728 (53,657) (295,852)
Foreign currency transactions... -- -- -- -- -- 224,265
Net change in unrealized
appreciation or depreciation on:
Investments..................... 73,430 206,632 238,794 5,389,098 187,634 (327,745)
Translation of assets and
liabilities in foreign
currencies..................... -- -- -- -- -- 165,922
---------- ------ ----------- ---------- ----------- ------------
Net gains (losses) on
investments.................... 82,378 209,801 255,523 22,033,826 133,977 (233,410)
---------- ------ ----------- ---------- ----------- ------------
Net increase (decrease) in net assets
resulting from operations.............. $317,262 $ 420,953 $ 421,654 $23,796,339 $ 148,767 $ 17,040
---------- ------ ----------- ---------- ----------- ------------
---------- ------ ----------- ---------- ----------- ------------
<CAPTION>
INDEX
400 MACRO-CAP MICRO-CAP
MID-CAP VALUE GROWTH
PORTFOLIO(a) PORTFOLIO(c) PORTFOLIO(d)
------------ ------------- -----------
<S> <C> <C> <C>
Investment income:
Interest............................ $ 2,320 $ 4,929 $ 9,740
Dividends (net of foreign
withholding taxes of $819,944 for
International Stock Portfolio)..... 15,790 24,201 4,695
------ ------------- -----------
Total investment income......... 18,110 29,130 14,435
------ ------------- -----------
Expenses (note 5):
Investment advisory fee............. 5,014 7,048 15,671
Custodian fees...................... 1,000 1,000 1,000
Administrative service fee.......... 8,750 7,500 8,750
Auditing and accounting services.... 1,500 12,750 1,500
Legal fees.......................... 150 150 150
Registration fees................... -- -- --
Printing, shareholder reports and
shareholder meetings............... 1,500 1,500 1,500
Directors' fees..................... 14 14 13
Insurance........................... 100 100 100
S&P Licensing fee................... 2,500 -- --
Other............................... 912 1,436 226
------ ------------- -----------
Total expenses.................. 21,440 31,498 28,910
Less fees and expenses waived or
absorbed by Minnesota Mutual....... (14,670) (22,940) (11,102)
------ ------------- -----------
Total net expenses.............. 6,770 8,558 17,808
------ ------------- -----------
Investment income (loss)--net... 11,340 20,572 (3,373)
------ ------------- -----------
Realized and unrealized gains (losses)
on investments and foreign currencies:
Net realized gains (losses) from:
Investments (note 3)............ (27,501) (51,812) 27,129
Foreign currency transactions... -- -- --
Net change in unrealized
appreciation or depreciation on:
Investments..................... 50,687 (78,091) (458,165)
Translation of assets and
liabilities in foreign
currencies..................... -- -- --
------ ------------- -----------
Net gains (losses) on
investments.................... 23,186 (129,903) (431,036)
------ ------------- -----------
Net increase (decrease) in net assets
resulting from operations.............. $ 34,526 $ (109,331) $ (434,409)
------ ------------- -----------
------ ------------- -----------
</TABLE>
91
<PAGE>
ADVANTUS SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
GROWTH PORTFOLIO BOND PORTFOLIO
-------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss)--net......... $ 3,415,607 $ 2,348,606 $ 8,612,808 $ 7,069,687
Net realized gains (losses) on
investments and foreign currency
transactions......................... 53,880,278 60,829,755 1,986,620 (121,439)
Net change in unrealized appreciation
or depreciation of investments and
translation of assets and liabilities
in foreign currencies................ 28,157,592 (27,909,772) 1,681,772 (3,067,081)
------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations.................... 85,453,477 35,268,589 12,281,200 3,881,167
------------ ------------ ------------ ------------
Distributions to shareholders from:
Investment income--net................ (2,348,607) (1,885,333) (7,069,687) (5,666,378)
Net realized gains.................... (60,686,820) (17,716,504) -- (1,021,457)
------------ ------------ ------------ ------------
Total distributions................. (63,035,427) (19,601,837) (7,069,687) (6,687,835)
------------ ------------ ------------ ------------
Capital share transactions (note 5):
Proceeds from sales................... 65,672,298 46,018,318 42,632,087 38,198,366
Proceeds from issuance of shares as a
result of reinvested distributions... 63,035,427 19,601,837 7,069,687 6,687,835
Payments for redemption of shares..... (68,774,181) (34,499,910) (40,975,071) (17,238,784)
------------ ------------ ------------ ------------
Increase in net assets from capital
shares transactions.................. 59,933,544 31,120,245 8,726,703 27,647,417
------------ ------------ ------------ ------------
Total increase in net assets........ 82,351,594 46,786,997 13,938,216 24,840,749
Net assets at beginning of year......... 248,464,555 201,677,558 125,885,578 101,044,829
------------ ------------ ------------ ------------
Net assets at end of year (including
undistributed net investment income
of $3,415,606 and $2,348,606 for
Growth, $8,612,808 and $7,069,687 for
Bond, $0 and $0 for Money Market,
$14,159,977 and $11,750,366 for Asset
Allocation, $5,857,983 and $4,934,258
for Mortgage Securities, $3,885,375
and $2,857,956 for Index 500 and $0
and $0 for Capital Appreciation,
respectively......................... $330,816,149 $248,464,555 $139,823,794 $125,885,578
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
92
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET ASSET ALLOCATION MORTGAGE SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------- -------------------------- --------------------------
1997 1996 1997 1996 1997 1996
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Investment income (loss)--net......... $ 3,620,845 $ 2,123,183 $ 14,159,977 $ 11,750,366 $ 5,857,983 $ 4,934,258
Net realized gains (losses) on
investments and foreign currency
transactions......................... -- -- 34,718,146 24,349,692 258,539 138,890
Net change in unrealized appreciation
or depreciation of investments and
translation of assets and liabilities
in foreign currencies................ -- -- 31,087,741 9,054,264 1,151,502 (1,394,163)
----------- ------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations.................... 3,620,845 2,123,183 79,965,864 45,154,322 7,268,024 3,678,985
----------- ------------ ------------ ------------ ------------ ------------
Distributions to shareholders from:
Investment income--net................ (3,620,845) (2,123,183) (11,750,366) (11,587,244) (4,934,258) (4,531,053)
Net realized gains.................... -- -- (24,394,804) (21,215,841) -- --
----------- ------------ ------------ ------------ ------------ ------------
Total distributions................. (3,620,845) (2,123,183) (36,145,170) (32,803,085) (4,934,258) (4,531,053)
----------- ------------ ------------ ------------ ------------ ------------
Capital share transactions (note 5):
Proceeds from sales................... 225,862,015 77,174,302 84,127,999 84,153,296 35,207,120 19,427,231
Proceeds from issuance of shares as a
result of reinvested distributions... 3,620,875 2,131,453 36,145,170 32,803,085 4,934,258 4,531,053
Payments for redemption of shares..... (227,360,220) (58,011,515) (71,582,893) (63,608,788) (19,234,019) (16,860,214)
----------- ------------ ------------ ------------ ------------ ------------
Increase in net assets from capital
shares transactions.................. 2,122,670 21,294,240 48,690,276 53,347,593 20,907,359 7,098,070
----------- ------------ ------------ ------------ ------------ ------------
Total increase in net assets........ 2,122,670 21,294,240 92,510,970 65,698,830 23,241,125 6,246,002
Net assets at beginning of year......... 51,460,620 30,166,380 414,709,144 349,010,314 75,991,975 69,745,973
----------- ------------ ------------ ------------ ------------ ------------
Net assets at end of year (including
undistributed net investment income
of $3,415,606 and $2,348,606 for
Growth, $8,612,808 and $7,069,687 for
Bond, $0 and $0 for Money Market,
$14,159,977 and $11,750,366 for Asset
Allocation, $5,857,983 and $4,934,258
for Mortgage Securities, $3,885,375
and $2,857,956 for Index 500 and $0
and $0 for Capital Appreciation,
respectively......................... $53,583,290 $ 51,460,620 $507,220,114 $414,709,144 $ 99,233,100 $ 75,991,975
----------- ------------ ------------ ------------ ------------ ------------
----------- ------------ ------------ ------------ ------------ ------------
<CAPTION>
INDEX 500 CAPITAL APPRECIATION
PORTFOLIO PORTFOLIO
-------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss)--net......... $ 3,885,375 $ 2,857,956 $ (299,161) $ (178,664)
Net realized gains (losses) on
investments and foreign currency
transactions......................... 2,363,824 3,336,804 17,638,408 21,475,571
Net change in unrealized appreciation
or depreciation of investments and
translation of assets and liabilities
in foreign currencies................ 70,383,844 25,995,361 46,106,787 8,718,053
------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations.................... 76,633,043 32,190,121 63,446,034 30,014,960
------------ ------------ ------------ ------------
Distributions to shareholders from:
Investment income--net................ (2,857,956) (1,984,153) -- --
Net realized gains.................... (3,610,752) (1,027,104) (21,514,696) (4,759,442)
------------ ------------ ------------ ------------
Total distributions................. (6,468,708) (3,011,257) (21,514,696) (4,759,442)
------------ ------------ ------------ ------------
Capital share transactions (note 5):
Proceeds from sales................... 146,405,647 77,547,421 56,948,898 55,469,252
Proceeds from issuance of shares as a
result of reinvested distributions... 6,468,708 3,011,257 21,514,696 4,759,442
Payments for redemption of shares..... (46,683,389) (29,340,723) (40,197,982) (34,535,706)
------------ ------------ ------------ ------------
Increase in net assets from capital
shares transactions.................. 106,190,966 51,217,955 38,265,612 25,692,988
------------ ------------ ------------ ------------
Total increase in net assets........ 176,355,301 80,396,819 80,196,950 50,948,506
Net assets at beginning of year......... 204,395,418 123,998,599 214,468,286 163,519,780
------------ ------------ ------------ ------------
Net assets at end of year (including
undistributed net investment income
of $3,415,606 and $2,348,606 for
Growth, $8,612,808 and $7,069,687 for
Bond, $0 and $0 for Money Market,
$14,159,977 and $11,750,366 for Asset
Allocation, $5,857,983 and $4,934,258
for Mortgage Securities, $3,885,375
and $2,857,956 for Index 500 and $0
and $0 for Capital Appreciation,
respectively......................... $380,750,719 $204,395,418 $294,665,236 $214,468,286
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
93
<PAGE>
ADVANTUS SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS--CONTINUED
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
INTERNATIONAL STOCK SMALL COMPANY
PORTFOLIO PORTFOLIO
-------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss)--net......... $ 5,975,639 $ 4,406,540 $ (89,665) $ 304,423
Net realized gains (losses) on
investments.......................... 9,490,907 4,146,575 (998,806) 8,723,984
Net change in unrealized appreciation
or depreciation of investments....... 11,143,244 23,738,356 14,048,307 (2,113,307)
------------ ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from operations... 26,609,790 32,291,471 12,959,836 6,915,100
------------ ------------ ------------ ------------
Distributions to shareholders from:
Investment income--net................ (7,116,929) (4,201,200) (2,423) (302,963)
Net realized gains.................... (3,550,501) (4,599,310) -- (13,553,934)
------------ ------------ ------------ ------------
Total distributions................. (10,667,430) (8,800,510) (2,423) (13,856,897)
------------ ------------ ------------ ------------
Capital share transactions (note 5):
Proceeds from sales................... 86,689,935 69,628,923 64,976,826 62,610,535
Proceeds from issuance of shares as a
result of reinvested distributions... 10,667,430 8,800,510 2,423 13,856,897
Payments for redemption of shares..... (39,736,890) (29,082,358) (39,563,684) (23,876,807)
------------ ------------ ------------ ------------
Increase in net assets from capital
shares transactions.................. 57,620,475 49,347,075 25,415,565 52,590,625
------------ ------------ ------------ ------------
Total increase in net assets........ 73,562,835 72,838,036 38,372,978 45,648,828
Net assets at beginning of year......... 213,607,601 140,769,565 144,543,754 98,894,926
------------ ------------ ------------ ------------
Net assets at end of year (including
undistributed net investment income
of $8,175,659 and $7,116,929 for
International Stock, $0 and $2,423
for Small Company, $382,323 and
$326,014 for Maturing Government Bond
1998, $30,884 and $1,875 for Maturing
Government Bond 2002, $36,152 and
$1,812 for Maturing Government Bond
2006, $166,131 and $118,592 for
Maturing Government Bond 2010 and $0
and $9,682 for Value Stock,
respectively......................... $287,170,436 $213,607,601 $182,916,732 $144,543,754
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
94
<PAGE>
<TABLE>
<CAPTION>
MATURING GOVERNMENT MATURING GOVERNMENT MATURING GOVERNMENT
BOND 1998 PORTFOLIO BOND 2002 PORTFOLIO BOND 2006 PORTFOLIO
-------------------------- -------------------------- -------------------------
1997 1996 1997 1996 1997 1996
------------ ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Investment income (loss)--net......... $ 382,323 $ 326,014 $ 234,884 $ 215,875 $ 211,152 $ 171,812
Net realized gains (losses) on
investments.......................... 1,855 14,263 8,948 33,341 3,169 36,005
Net change in unrealized appreciation
or depreciation of investments....... (12,097) (123,136) 73,430 (172,492) 206,632 (216,858)
------------ ------------ ------------ ------------ ----------- ------------
Net increase (decrease) in net
assets resulting from operations... 372,081 217,141 317,262 76,724 420,953 (9,041)
------------ ------------ ------------ ------------ ----------- ------------
Distributions to shareholders from:
Investment income--net................ (326,014) (3,760) (205,875) (214,000) (176,812) (171,524)
Net realized gains.................... (14,263) -- (30,370) -- (47,621) (4,256)
------------ ------------ ------------ ------------ ----------- ------------
Total distributions................. (340,277) (3,760) (236,245) (214,000) (224,433) (175,780)
------------ ------------ ------------ ------------ ----------- ------------
Capital share transactions (note 5):
Proceeds from sales................... 1,064,613 1,742,631 709,005 1,054,826 743,478 743,284
Proceeds from issuance of shares as a
result of reinvested distributions... 340,277 3,760 236,245 214,000 224,433 175,780
Payments for redemption of shares..... (1,299,683) (917,593) (717,810) (280,991) (359,380) (208,659)
------------ ------------ ------------ ------------ ----------- ------------
Increase in net assets from capital
shares transactions.................. 105,207 828,798 227,440 987,835 608,531 710,405
------------ ------------ ------------ ------------ ----------- ------------
Total increase in net assets........ 137,011 1,042,179 308,457 850,559 805,051 525,584
Net assets at beginning of year......... 6,099,032 5,056,853 3,899,985 3,049,426 3,095,136 2,569,552
------------ ------------ ------------ ------------ ----------- ------------
Net assets at end of year (including
undistributed net investment income
of $8,175,659 and $7,116,929 for
International Stock, $0 and $2,423
for Small Company, $382,323 and
$326,014 for Maturing Government Bond
1998, $30,884 and $1,875 for Maturing
Government Bond 2002, $36,152 and
$1,812 for Maturing Government Bond
2006, $166,131 and $118,592 for
Maturing Government Bond 2010 and $0
and $9,682 for Value Stock,
respectively......................... $ 6,236,043 $ 6,099,032 $ 4,208,442 $ 3,899,985 $ 3,900,187 $ 3,095,136
------------ ------------ ------------ ------------ ----------- ------------
------------ ------------ ------------ ------------ ----------- ------------
<CAPTION>
MATURING GOVERNMENT
BOND 2010 PORTFOLIO VALUE STOCK PORTFOLIO
------------------------- --------------------------
1997 1996 1997 1996
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss)--net......... $ 166,131 $ 118,592 $ 1,762,513 $ 769,682
Net realized gains (losses) on
investments.......................... 16,729 18,011 16,644,728 7,197,176
Net change in unrealized appreciation
or depreciation of investments....... 238,794 (144,636) 5,389,098 8,706,912
----------- ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from operations... 421,654 (8,033) 23,796,339 16,673,770
----------- ------------ ------------ ------------
Distributions to shareholders from:
Investment income--net................ (118,592) (1,072) (2,259,682) (763,814)
Net realized gains.................... (24,752) -- (17,911,742) (5,854,725)
----------- ------------ ------------ ------------
Total distributions................. (143,344) (1,072) (20,171,424) (6,618,539)
----------- ------------ ------------ ------------
Capital share transactions (note 5):
Proceeds from sales................... 887,081 1,851,191 118,592,216 59,733,886
Proceeds from issuance of shares as a
result of reinvested distributions... 143,344 1,072 20,171,424 6,618,539
Payments for redemption of shares..... (945,169) (413,947) (31,482,289) (11,045,562)
----------- ------------ ------------ ------------
Increase in net assets from capital
shares transactions.................. 85,256 1,438,316 107,281,351 55,306,863
----------- ------------ ------------ ------------
Total increase in net assets........ 363,566 1,429,211 110,906,266 65,362,094
Net assets at beginning of year......... 2,812,817 1,383,606 97,187,128 31,825,034
----------- ------------ ------------ ------------
Net assets at end of year (including
undistributed net investment income
of $8,175,659 and $7,116,929 for
International Stock, $0 and $2,423
for Small Company, $382,323 and
$326,014 for Maturing Government Bond
1998, $30,884 and $1,875 for Maturing
Government Bond 2002, $36,152 and
$1,812 for Maturing Government Bond
2006, $166,131 and $118,592 for
Maturing Government Bond 2010 and $0
and $9,682 for Value Stock,
respectively......................... $ 3,176,383 $ 2,812,817 $208,093,394 $ 97,187,128
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
</TABLE>
95
<PAGE>
ADVANTUS SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS--CONTINUED
PERIOD ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
SMALL COMPANY INTERNATIONAL INDEX 400 MACRO-CAP MICRO-CAP
VALUE BOND MID-CAP VALUE GROWTH
PORTFOLIO(a) PORTFOLIO(b) PORTFOLIO(a) PORTFOLIO(c) PORTFOLIO(d)
------------- ------------- ------------- ------------- -------------
1997 1997 1997 1997 1997
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Operations:
Investment income (loss)--net............... $ 14,790 $ 250,450 $ 11,340 $ 20,572 $ (3,373)
Net realized gains (losses) on
investments................................ (53,657) (71,587) (27,501) (51,812) 27,129
Net change in unrealized appreciation or
depreciation of investments................ 187,634 (161,823) 50,687 (78,091) (458,165)
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations................ 148,767 17,040 34,526 (109,331) (434,409)
------------- ------------- ------------- ------------- -------------
Distributions to shareholders from:
Investment income--net...................... -- (250,450) -- (20,200) --
Excess distributions of net investment
income..................................... -- (119,550) -- -- --
Net realized gains.......................... -- (21,580) (430) (1,908) (139,529)
Excess distributions of net realized
gains...................................... -- (5,023) -- -- --
------------- ------------- ------------- ------------- -------------
Total distributions....................... -- (396,603) (430) (22,108) (139,529)
------------- ------------- ------------- ------------- -------------
Capital share transactions (note 5):
Proceeds from sales......................... 6,154,243 26,248,677 5,678,904 5,357,270 5,479,740
Proceeds from issuance of shares as a result
of reinvested distributions................ -- 396,603 430 22,108 139,529
Payments for redemption of shares........... (1,125,705) (1,246,997) (661,540) (324,515) (454,406)
------------- ------------- ------------- ------------- -------------
Increase in net assets from capital shares
transactions............................... 5,028,538 25,398,283 5,017,794 5,054,863 5,164,863
------------- ------------- ------------- ------------- -------------
Total increase in net assets.............. 5,177,305 25,018,720 5,051,890 4,923,424 4,590,925
Net assets at beginning of period............. -- -- -- -- --
------------- ------------- ------------- ------------- -------------
Net assets at end of period (including
undistributed net investment income
(distributions in excess of net investment
income) of $14,790 for Small Company Value,
$(212,717) for International Bond, $11,340
for Index 400 Mid-Cap, $372 for Macro-Cap
Value, $0 for Micro-Cap Growth,
respectively............................... $ 5,177,305 $ 25,018,720 $ 5,051,890 $ 4,923,424 $ 4,590,925
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
(a) Period from September 29, 1997, commencement of operations, to December 31,
1997.
(b) Period from September 24, 1997, commencement of operations, to December 31,
1997.
(c) Period from October 15, 1997, commencement of operations, to December 31,
1997.
(d) Period from September 15, 1997, commencement of operations, to December 31,
1997.
See accompanying notes to financial statements.
96
<PAGE>
ADVANTUS SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(1) ORGANIZATION
Advantus 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 twenty 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, Value Stock, Small Company Value, International Bond, Index 400 Mid-Cap,
Micro-Cap Value, Macro-Cap Value and Micro-Cap Growth). The investment objective
of each portfolio is as follows:
<TABLE>
<S> <C>
Growth Portfolio...................................................... Long-term accumulation of capital
Bond Portfolio........................................................ Long-term total return
Money Market Portfolio................................................ Maximize current income
Asset Allocation Portfolio............................................ Long-term total return
Mortgage Securities Portfolio......................................... Maximize current income
Index 500 Portfolio................................................... Provide investment results corresponding to the
S&P 500 Index
Capital Appreciation Portfolio........................................ Growth of capital
International Stock Portfolio......................................... Long-term capital growth
Small Company Portfolio............................................... Long-term accumulation of capital
Maturing Government Bond 1998, 2002, 2006 & 2010 Portfolios........... Maximize investment return
Value Stock Portfolio................................................. Long-term accumulation of capital
Small Company Value Portfolio......................................... Long-term accumulation of capital
International Bond Portfolio.......................................... Maximize current income
Index 400 Mid-Cap Portfolio........................................... Provide investment results corresponding the
S&P 400 Mid-Cap Index
Micro-Cap Value Portfolio............................................. Capital appreciation
Marco-Cap Value Portfolio............................................. Maximize total return
Micro-Cap Growth Portfolio............................................ Long-term capital appreciation
</TABLE>
On April 24, 1997 shareholders of the Fund approved a name change to
Advantus Series Fund, Inc. (effective May 1, 1997). Prior to May 1, 1997 the
Fund was known as MIMLIC Series Fund, Inc. The Fund accounts for the assets,
liabilities and operations of each portfolio separately. Shares of the Fund will
not be offered directly to the public, but sold only to The Minnesota Mutual
Life Insurance Company's (Minnesota Mutual) separate accounts in connection with
Minnesota Mutual variable contracts and policies.
On July 17, 1996, the Board of Directors approved the addition of the Small
Company Value Portfolio and on January 14, 1997, the Board of Directors approved
the addition of the International Bond, Index 400 Mid-Cap, Micro-Cap Value,
Macro-Cap Value and Micro-Cap Growth Portfolios. These six additional portfolios
became effectively registered under the Securities Exchange Act of 1933 on May
1, 1997; however they were not available for sale to the public until a later
date. The Small Company Value, International Bond, Index 400 Mid-Cap, Macro-Cap
Value and Micro-Cap Growth Portfolios became available in October 1997. As of
December 31, 1997, shares of the Micro-Cap Value Portfolio are not available for
sale.
Minnesota Mutual purchased shares of capital stock, which represented the
initial capital in these portfolios, at $1.00 per share as follows:
<TABLE>
<CAPTION>
NUMBER OF
DATE PORTFOLIO SHARES
- --------------------------- -------------------- ---------------
<S> <C> <C>
September 29, 1997 Small Company Value 5,000,000
September 24, 1997 International Bond 25,000,000
September 29, 1997 Index 400 Mid-Cap 5,000,000
October 15, 1997 Macro-Cap Value 5,000,000
September 15, 1997 Micro-Cap Growth 5,000,000
</TABLE>
97
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(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, by an independent pricing service or at a price
deemed best to reflect fair value quoted by dealers who make markets in these
securities. When market quotations are not readily available, securities are
valued at fair value as determined in good faith under procedures adopted by the
Board of Directors. Short-term securities, with the exception of Money Market,
International Stock, Macro-Cap Value and International Bond, are valued at
market. For International Stock, Macro-Cap Value and International Bond,
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.
International Stock and International Bond 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 or
International Bond and the resulting unrealized appreciation or depreciation are
determined using foreign currency exchange rates from an independent pricing
service. International Stock and International Bond are 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, 1997, the Bond, Asset Allocation and Mortgage
Securities Portfolios had entered into outstanding, when-issued or forward
commitments of $920,073, $1,697,705 and $3,587,131, respectively. The Portfolios
have segregated assets, with the Portfolios' respective custodians, to cover
such when-issued and forward commitment transactions.
98
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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, 1997, which, if not offset by subsequent capital
gains, will expire December 31, 2002 through 2006 for Mortgage Securities and
December 31, 2005 through 2006 for Small Company and Small Company Value. It is
unlikely the board of directors will authorize a distribution of any net
realized capital gains until the available capital loss carryovers have been
offset or expired:
<TABLE>
<S> <C>
Mortgage Securities................................................. $2,885,335
Small Company....................................................... 3,214,146
Small Company Value................................................. 53,657
</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, a reclassification adjustment was made as follows:
<TABLE>
<CAPTION>
ACCUMULATED ADDITIONAL
UNDISTRIBUTED NET REALIZED PAID IN
INVESTMENT INCOME GAIN/LOSS CAPITAL
------------------ -------------- --------------
<S> <C> <C> <C>
Capital Appreciation............................... $ 299,161 $ -- $ (299,161)
Small Company...................................... 89,665 -- (89,665)
Micro-Cap Growth................................... 3,373 -- (3,373)
Value Stock........................................ 487,487 (487,487) --
International Stock................................ 2,200,020 (2,191,185) (8,835)
International Bond................................. (93,167) 93,167 --
</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 Money Market, distributions from net investment income and
realized gains, if any, will generally be declared and reinvested in additional
shares on an annual basis.
(3) INVESTMENT SECURITY TRANSACTIONS
For the year ended December 31, 1997, the cost of purchases and proceeds
from sales of investment securities aggregated $651,385,296 and $647,340,039,
respectively, for Money Market. For the other portfolios, the cost of purchases
and proceeds from sales of investment securities, other than temporary
investments in short-term securities, for the period ended December 31, 1997
were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ -------------
<S> <C> <C>
Growth............................................. $345,438,414 $ 336,791,961
Bond............................................... 271,501,958 258,012,649
Asset Allocation................................... 637,174,638 576,735,188
Mortgage Securities................................ 105,000,931 85,130,655
Index 500.......................................... 127,129,331 24,088,776
Capital Appreciation............................... 200,322,932 177,712,390
International Stock................................ 78,640,506 25,950,989
Small Company...................................... 126,888,570 92,562,001
</TABLE>
99
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(3) INVESTMENT SECURITY TRANSACTIONS--(CONTINUED)
<TABLE>
<CAPTION>
PURCHASES SALES
------------ -------------
<S> <C> <C>
Maturing Government Bond 1998...................... 968,288 786,453
Maturing Government Bond 2002...................... 1,433,329 1,194,873
Maturing Government Bond 2006...................... 701,422 103,366
Maturing Government Bond 2010...................... 1,037,858 894,923
Value Stock........................................ 246,808,714 166,213,997
Small Company Value................................ 5,322,084 608,801
International Bond................................. 44,402,033 23,666,241
Index 400 Mid-Cap.................................. 5,264,540 242,277
Macro-Cap Value.................................... 6,531,893 1,675,839
Micro-Cap Growth................................... 6,014,333 1,306,928
</TABLE>
(4) FORWARD FOREIGN CURRENCY CONTRACTS
On December 31, 1997, International Bond had entered into forward currency
contracts that obligate International Bond 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>
2/18/98 3,481,010 US$ 6,232,178 DEM $ -- $ 7,182
2/18/98 3,488,261 US$ 444,603,576 JPY -- 60,145
2/17/98 3,366,319 AUD 2,351,340 US$ 156,010 --
2/18/98 6,172,478 DEM 3,488,261 US$ 47,710 --
2/18/98 444,603,576 JPY 3,481,010 US$ 52,894 --
----------- -----------
$ 256,614 $ 67,327
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<S> <C>
Australia
AUD Dollar
DEM German Mark
JPY Japanese Yen
United States
US$ Dollar
</TABLE>
(5) EXPENSES AND RELATED PARTY TRANSACTIONS
On April 24, 1997 shareholders of the Fund approved a new investment
advisory agreement with Advantus Capital Management, Inc. (Advantus Capital).
Advantus Capital is a wholly-owned subsidiary of MIMLIC Asset Management Company
(MIMLIC Management) which, prior to May 1, 1997, served as investment adviser to
the Fund. MIMLIC Management is a wholly-owned subsidiary of Minnesota Mutual.
Under this agreement, Advantus Capital manages the Fund's assets and provides
research, statistical and advisory services and pays related office rental and
executive expenses and salaries.
Each portfolio of the Fund pays Advantus Capital an annual fee, based on
average 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%
</TABLE>
100
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
<TABLE>
<CAPTION>
PORTFOLIO ANNUAL FEE
- ---------------------------------------- -----------------------------------
<S> <C> <C>
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%
Small Company Value..................... .75%
International Bond...................... .60%
Index 400 Mid-Cap....................... .40%
Macro-Cap Value......................... .70%
Micro-Cap Growth........................ 1.10%
</TABLE>
The fees paid to Advantus Capital for investment advisory services are the
same as under the old agreement with MIMLIC Management.
Advantus Capital has sub-advisory agreements with the following registered
investment advisers. Under the sub-advisory agreements, Advantus Capital pays
the sub-advisers an annual fee based on average daily net assets, in the
following amounts:
<TABLE>
<CAPTION>
PORTFOLIO SUB-ADVISOR FEE
- ----------------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C>
Capital Appreciation Winslow Capital Management, Inc. .375%
International Stock Templeton Investment Counsel, Inc. .75% on the first $10 million in
net assets
.65% on the next $15 million
.55% on the next $25 million
.50% on the next $50 million
.40% thereafter
International Bond Julius Bear Investment Management, Inc. .35%
Macro-Cap Value J. P. Morgan Investment Management, Inc. .45%
Micro-Cap Growth Wall Street Associates .85%
</TABLE>
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
paid Voyageur a fee equal to .25 percent of net assets of Growth. Effective May
1, 1997 the sub-advisory agreement between MIMLIC Management and Voyageur was
terminated.
The Fund bears certain other operating expenses including outside directors'
fees, federal registration fees, printing and shareholder report expenses, legal
fees, audit fees, 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, 1997, Minnesota Mutual voluntarily agreed to absorb $34,208,
$36,833, $37,425, $38,967, $11,517, $14,670, $22,940 and $11,102 in expenses
that were otherwise payable by Maturing Government Bond 1998, Maturing
Government Bond 2002, Maturing Government Bond 2006, Maturing Government 2010,
Small Company Value, Index 400 Mid-Cap, Macro-Cap Value and Micro-Cap Growth,
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, 1997, the administrative services fee for each
portfolio was $2,400 per month. Effective May 1, 1997, the administrative
service fee for each portfolio is $2,500 per month.
101
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(6) CAPITAL SHARE TRANSACTIONS
Transactions in shares of portfolios for the years ended December 31, 1997
and 1996 (period from September 15, 1997 to December 31, 1997 for Small Company
Value, Index 400 Mid-Cap, International Bond, Macro-Cap Value and Micro-Cap
Growth) were as follows:
<TABLE>
<CAPTION>
GROWTH BOND
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 29,784,127 20,525,981 33,365,340 30,374,847
Issued for reinvested distributions......................... 32,682,993 9,579,976 5,823,498 5,583,992
Redeemed.................................................... (30,648,643) (15,345,143) (31,803,822) (13,706,716)
------------ ------------ ------------ ------------
31,818,477 14,760,814 7,385,016 22,252,123
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET ASSET ALLOCATION
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 225,862,019 77,174,302 44,618,940 46,935,708
Issued for reinvested distributions......................... 3,620,869 2,131,453 20,976,850 19,792,634
Redeemed.................................................... (227,360,218) (58,011,515) (37,920,814) (35,436,505)
------------ ------------ ------------ ------------
2,122,670 21,294,240 27,674,976 31,291,837
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MORTGAGE SECURITIES INDEX 500
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 29,866,001 16,716,254 51,876,275 35,516,209
Issued for reinvested distributions......................... 4,427,420 4,096,652 2,584,456 1,471,728
Redeemed.................................................... (16,400,913) (14,548,820) (16,640,621) (13,411,996)
------------ ------------ ------------ ------------
17,892,508 6,264,086 37,820,110 23,575,941
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
CAPITAL APPRECIATION INTERNATIONAL STOCK
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 22,411,218 23,723,099 51,182,808 47,517,336
Issued for reinvested distributions......................... 9,939,280 2,186,263 6,814,559 6,279,337
Redeemed.................................................... (15,804,911) (14,818,769) (23,353,360) (19,870,998)
------------ ------------ ------------ ------------
16,545,587 11,090,593 34,644,007 33,925,675
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MATURING GOVERNMENT
SMALL COMPANY BOND 1998
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 41,068,398 37,985,089 1,006,641 1,646,497
Issued for reinvested distributions......................... 1,733 9,010,911 330,829 3,671
Redeemed.................................................... (24,691,193) (14,536,066) (1,224,441) (875,000)
------------ ------------ ------------ ------------
16,378,938 32,459,934 113,029 775,168
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MATURING GOVERNMENT MATURING GOVERNMENT
BOND 2002 BOND 2006
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 660,746 979,665 667,008 667,732
Issued for reinvested distributions......................... 221,259 202,767 197,541 159,037
Redeemed.................................................... (680,560) (260,338) (327,654) (186,970)
------------ ------------ ------------ ------------
201,445 922,094 536,895 639,799
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MATURING GOVERNMENT
BOND 2010 VALUE STOCK
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 755,090 1,639,014 64,605,973 40,038,292
Issued for reinvested distributions......................... 133,829 1,015 11,674,522 4,188,960
Redeemed.................................................... (832,150) (378,863) (17,200,384) (7,390,558)
------------ ------------ ------------ ------------
56,769 1,261,166 59,080,111 36,836,694
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
102
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(6) CAPITAL SHARE TRANSACTIONS--(CONTINUED)
<TABLE>
<CAPTION>
SMALL COMPANY INTERNATIONAL INDEX 400 MACRO-CAP
VALUE BOND MID-CAP VALUE
--------------- ------------ ----------- ------------
1997 1997 1997 1997
--------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sold.................................................... 6,127,395 26,237,804 5,613,515 5,370,493
Issued for reinvested distributions..................... -- 402,914 429 22,690
Redeemed................................................ (1,109,258) (1,223,921) (599,930) (340,052)
--------------- ------------ ----------- ------------
5,018,137 25,416,797 5,014,014 5,053,131
--------------- ------------ ----------- ------------
--------------- ------------ ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
MICRO-CAP
GROWTH
---------------
1997
---------------
<S> <C>
Sold............................................................................................. 5,489,670
Issued for reinvested distributions.............................................................. 156,935
Redeemed......................................................................................... (473,013)
---------------
5,173,592
---------------
---------------
</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, 1997, investments in securities of Bond, Money Market, Asset
Allocation, Mortgage Securities, Value Stock and International Stock include
issues that are illiquid. The aggregate values of illiquid securities held by
Bond, Money Market, Asset Allocation, Mortgage Securities, Value Stock and
International Stock at December 31, 1997 were $15,763,274, $3,212,588,
$22,511,186, $9,549,762, $7,984,496 and $8,627,529, respectively, which
represent 11.3%, 6.0%, 4.4%, 9.6%, 3.8% and 3.0% 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.
(8) YEAR 2000
In 1995, Minnesota Mutual began addressing computer systems requirements and
applications to be Year 2000 ready. Based on a current study, Minnesota Mutual
plans to spend approximately $14 million through 1999 to modify its computer
information systems, enabling proper processing of transactions relating to the
year 2000 and beyond. The Fund will not be charged for these expenses.
103
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) 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,
--------------------------------------------------------
1997(c) 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........................... $2.34 $2.21 $1.87 $1.91 $1.89
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income.................................... .02 .02 .02 .02 .02
Net gains or losses on securities (both realized and
unrealized)............................................ .62 .32 .41 -- .06
-------- -------- -------- -------- --------
Total from investment operations..................... .64 .34 .43 .02 .08
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income..................... (.02) (.02) (.02) (.02) (.03)
Distributions from capital gains......................... (.56) (.19) (.07) (.04) (.03)
-------- -------- -------- -------- --------
Total distributions.................................. (.58) (.21) (.09) (.06) (.06)
-------- -------- -------- -------- --------
Net asset value, end of year................................. $2.40 $2.34 $2.21 $1.87 $1.91
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return (a)............................................. 33.4% 17.2% 24.3% .8% 4.7%
Net assets, end of year (in thousands)....................... $330,816 $248,465 $201,678 $157,369 $125,745
Ratio of expenses to average daily net assets................ .55% .59% .55% .56% .58%
Ratio of net investment income to average daily net assets... 1.16% 1.04% 1.04% 1.22% 1.21%
Portfolio turnover rate (excluding short-term securities).... 120.1% 154.7% 91.9% 42.0% 51.0%
Average commission rate on stock transactions (b)............ $.0400 $.0617 N/A N/A N/A
</TABLE>
- --------------------------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) 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) Effective May 1, 1997, the Portfolio entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to May 1, 1997 the
Portfolio had an investment advisory agreement with MIMLIC Asset Management
Company.
104
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
BOND PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997(b) 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............................. $1.28 $1.33 $1.16 $1.30 $1.26
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income...................................... .08 .06 .07 .04 .05
Net gains or losses on securities (both realized and
unrealized).............................................. .04 (.03) .15 (.10) .07
-------- -------- -------- -------- --------
Total from investment operations....................... .12 .03 .22 (.06) .12
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income....................... (.07) (.07) (.05) (.05) (.06)
Distributions from capital gains........................... -- (.01) -- (.03) (.02)
-------- -------- -------- -------- --------
Total distributions.................................... (.07) (.08) (.05) (.08) (.08)
-------- -------- -------- -------- --------
Net asset value, end of year................................... $1.33 $1.28 $1.33 $1.16 $1.30
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return (a)............................................... 9.4% 3.0% 19.8% (4.6)% 10.3%
Net assets, end of year (in thousands)......................... $139,824 $125,886 $101,045 $ 74,679 $ 43,927
Ratio of expenses to average daily net assets.................. .57% .56% .58% .61% .64%
Ratio of net investment income to average daily net assets..... 6.39% 6.36% 6.57% 6.12% 5.57%
Portfolio turnover rate (excluding short-term securities)...... 200.0% 154.0% 205.4% 166.2% 166.8%
</TABLE>
- --------------------------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Effective May 1, 1997, the Portfolio entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to May 1, 1997 the
Portfolio had an investment advisory agreement with MIMLIC Asset Management
Company.
105
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997(c) 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................................ $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income......................................... .05 .05 .05 .04 .03
-------- -------- -------- -------- --------
Total from investment operations.......................... .05 .05 .05 .04 .03
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income.......................... (.05) (.05) (.05) (.04) (.03)
-------- -------- -------- -------- --------
Total distributions....................................... (.05) (.05) (.05) (.04) (.03)
-------- -------- -------- -------- --------
Net asset value, end of year...................................... $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return (a).................................................. 5.1% 4.9% 5.4% 3.7% 2.7%
Net assets, end of year (in thousands)............................ $ 53,583 $ 51,461 $ 30,166 $ 23,107 $ 18,423
Ratio of expenses to average daily net assets (b)................. .59% .60% .64% .65% .65%
Ratio of net investment income to average daily net assets (b).... 5.13% 4.81% 5.29% 3.71% 2.65%
</TABLE>
- ------------------------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Minnesota Mutual voluntarily absorbed $13,734 and $23,714 in expenses for
the years ended December 31, 1994 and 1993, respectively. Had the Portfolio
paid all fees and expenses the ratio of expenses to average daily net
assets would have been .72% and .81%, respectively, and the ratio of net
investment income to average daily net assets would have been 3.64% and
2.49%, respectively.
(c) Effective May 1, 1997, the Portfolio entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to May 1, 1997 the
Portfolio had an investment advisory agreement with MIMLIC Asset Management
Company.
106
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
ASSET ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997(c) 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........................... $1.87 $1.83 $1.52 $1.59 $1.57
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income.................................... .05 .05 .06 .04 .03
Net gains or losses on securities (both realized and
unrealized)............................................ .27 .16 .31 (.07) .07
-------- -------- -------- -------- --------
Total from investment operations..................... .32 .21 .37 (.03) .10
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income..................... (.05) (.06) (.05) (.03) (.04)
Distributions from capital gains......................... (.11) (.11) (.01) (.01) (.04)
-------- -------- -------- -------- --------
Total distributions.................................. (.16) (.17) (.06) (.04) (.08)
-------- -------- -------- -------- --------
Net asset value, end of year................................. $2.03 $1.87 $1.83 $1.52 $1.59
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return (a)............................................. 19.0% 12.5% 25.0% (1.4)% 6.5%
Net assets, end of year (in thousands)....................... $507,220 $414,709 $349,010 $272,629 $250,011
Ratio of expenses to average daily net assets................ .55% .54% .55% .56% .57%
Ratio of net investment income to average daily net assets... 3.10% 3.09% 3.75% 3.31% 2.63%
Portfolio turnover rate (excluding short-term securities).... 140.2% 120.1% 157.0% 123.6% 85.7%
Average commission rate on stock transactions (b)............ $.0592 $.0692 N/A N/A N/A
</TABLE>
- ------------------------
(a) Total return figures are based on a share of outstanding throughout the
period and assumes reinvestment of distributions at net asset value. Total
return figures do not reflect charges pursuant to the terms of the variable
life insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) 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) Effective May 1, 1997, the Portfolio entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to May 1, 1997 the
Portfolio had an investment advisory agreement with MIMLIC Asset Management
Company.
107
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MORTGAGE SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1997(b) 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year...... $1.19 $1.21 $1.10 $1.22 $1.19
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income............... .07 .08 .08 .07 .06
Net gains or losses on securities
(both realized and unrealized).... .03 (.02) .11 (.11) .05
-------- -------- -------- -------- --------
Total from investment
operations................... .10 .06 .19 (.04) .11
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income............................ (.08) (.08) (.08) (.05) (.06)
Distributions from capital gains.... -- -- -- (.03) (.02)
-------- -------- -------- -------- --------
Total distributions............. (.08) (.08) (.08) (.08) (.08)
-------- -------- -------- -------- --------
Net asset value, end of year............ $1.21 $1.19 $1.21 $1.10 $1.22
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return (a)........................ 9.1% 5.3% 18.0% (3.4)% 9.3%
Net assets, end of year (in
thousands)............................ $99,233 $ 75,992 $ 69,746 $ 59,666 $ 63,902
Ratio of expenses to average daily net
assets................................ .59% .58% .58% .60% .63%
Ratio of net investment income to
average daily net assets.............. 7.08% 6.94% 7.09% 6.55% 5.87%
Portfolio turnover rate (excluding
short-term securities)................ 106.4% 70.0% 133.7% 197.3% 138.4%
</TABLE>
- ------------------------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Effective May 1, 1997, the Portfolio entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to May 1, 1997 the
Portfolio had an investment advisory agreement with MIMLIC Asset Management
Company.
108
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
INDEX 500 PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997(c) 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............................. $2.41 $2.02 $1.52 $1.53 $1.43
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income...................................... .03 .03 .03 .03 .02
Net gains or losses on securities (both realized and
unrealized).............................................. .73 .40 .51 (.01) .11
-------- -------- -------- -------- --------
Total from investment operations....................... .76 .43 .54 .02 .13
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income....................... (.03) (.03) (.03) (.02) (.02)
Distributions from capital gains........................... (.04) (.01) (.01) (.01) (.01)
-------- -------- -------- -------- --------
Total distributions.................................... (.07) (.04) (.04) (.03) (.03)
-------- -------- -------- -------- --------
Net asset value, end of year................................... $3.10 $2.41 $2.02 $1.52 $1.53
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return (a)............................................... 32.4% 21.6% 36.8% 1.2% 9.8%
Net assets, end of year (in thousands)......................... $380,751 $204,395 $123,999 $ 73,432 $ 56,209
Ratio of expenses to average daily net assets.................. .45% .45% .47% .50% .55%
Ratio of net investment income to average daily net assets..... 1.33% 1.77% 2.08% 2.34% 2.27%
Portfolio turnover rate (excluding short-term securities)...... 8.3% 15.2% 4.8% 5.9% 4.8%
Average commission rate on stock transactions (b).............. $.0200 $.0429 N/A N/A N/A
</TABLE>
- ------------------------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) 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) Effective May 1, 1997, the Portfolio entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to May 1, 1997 the
Portfolio had an investment advisory agreement with MIMLIC Asset Management
Company.
109
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
CAPITAL APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997(c) 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............................ $2.47 $2.16 $1.81 $1.80 $1.68
-------- -------- -------- -------- --------
Income from investment operations:
Net gains or losses on securities (both realized and
unrealized)............................................. .62 .37 .40 .04 .17
-------- -------- -------- -------- --------
Total from investment operations...................... .62 .37 .40 .04 .17
-------- -------- -------- -------- --------
Less distributions:
Distributions from capital gains.......................... (.24) (.06) (.05) (.03) (.05)
-------- -------- -------- -------- --------
Total distributions................................... (.24) (.06) (.05) (.03) (.05)
-------- -------- -------- -------- --------
Net asset value, end of year.................................. $2.85 $2.47 $2.16 $1.81 $1.80
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return (a).............................................. 28.3% 17.6% 22.8% 2.3% 10.4%
Net assets, end of year (in thousands)........................ $294,665 $214,468 $163,520 $115,607 $ 84,840
Ratio of expenses to average daily net assets................. .80% .85% .80% .83% .86%
Ratio of net investment income (loss) to average daily net
assets...................................................... (.12)% (.09)% (.15)% (.09)% .12%
Portfolio turnover rate (excluding short-term securities)..... 74.0% 62.9% 51.1% 68.4% 95.9%
Average commission rate on stock transactions (b)............. $.0600 $.0625 N/A N/A N/A
</TABLE>
- ------------------------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) 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) Effective May 1, 1997, the Portfolio entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to May 1, 1997 the
Portfolio had an investment advisory agreement with MIMLIC Asset Management
Company.
110
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
INTERNATIONAL STOCK PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997(c) 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............................ $1.60 $1.41 $1.24 $1.31 $.92
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income..................................... .03 .03 .03 .01 .02
Net gains or losses on securities (both realized and
unrealized)............................................. .15 .24 .14 (.01) .39
-------- -------- -------- -------- --------
Total from investment operations...................... .18 .27 .17 -- .41
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income...................... (.05) (.04) -- (.03) (.01)
Distributions from capital gains.......................... (.02) (.04) -- (.04) (.01)
-------- -------- -------- -------- --------
Total distributions................................... (.07) (.08) -- (.07) (.02)
-------- -------- -------- -------- --------
Net asset value, end of year.................................. $1.71 $1.60 $1.41 $1.24 $1.31
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return (a).............................................. 11.9% 19.8% 14.2% (.3)% 44.2%
Net assets, end of year (in thousands)........................ $287,170 $213,608 $140,770 $107,490 $ 61,106
Ratio of expenses to average daily net assets................. .97% 1.06% 1.04% 1.24% 1.55%
Ratio of net investment income to average daily net assets.... 2.29% 2.53% 2.69% 1.68% 1.04%
Portfolio turnover rate (excluding short-term securities)..... 12.5% 11.5% 20.3% 12.9% 12.7%
Average commission rate on stock transactions (b)............. $.0123 $.0160 N/A N/A N/A
</TABLE>
- ------------------------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) 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.
(c) Effective May 1, 1997, the Portfolio entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to May 1, 1997 the
Portfolio had an investment advisory agreement with MIMLIC Asset Management
Company.
111
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
SMALL COMPANY PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
FROM MAY 3,
YEAR ENDED DECEMBER 31, 1993 TO
--------------------------------------------------- DECEMBER 31,
1997(f) 1996 1995 1994 1993(a)
--------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.54 $1.60 $1.23 $1.16 $1.00
--------- --------- --------- --------- ------
Income from investment operations:
Net gains or losses on securities
(both realized and unrealized).... .11 .10 .39 .07 .17
--------- --------- --------- --------- ------
Total from investment
operations................... .11 .10 .39 .07 .17
--------- --------- --------- --------- ------
Less distributions:
Distributions from net realized
gains............................. -- (.16) (.02) -- (.01)
--------- --------- --------- --------- ------
Total distributions............. -- (.16) (.02) -- (.01)
--------- --------- --------- --------- ------
Net asset value, end of period.......... $1.65 $1.54 $1.60 $1.23 $1.16
--------- --------- --------- --------- ------
--------- --------- --------- --------- ------
Total return (b)........................ 7.8% 6.5% 32.1% 6.2% 17.4%
Net assets, end of period (in
thousands)............................ $ 182,917 $ 144,544 $ 98,895 $ 51,105 $ 13,043
Ratio of expenses to average daily net
assets (c)............................ .82% .81% .84% .90% .90%(d)
Ratio of net investment income (loss) to
average daily net assets (c).......... (.05%) .24% .15% .24% (.02)%(d)
Portfolio turnover rate (excluding
short-term securities)................ 63.8% 74.4% 61.3% 28.1% 34.9%
Average commission rate on stock
transactions (e)...................... $.0535 $.1045 N/A N/A N/A
</TABLE>
- ------------------------
(a) The inception of the Portfolio was May 3, 1993, when its shares 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. For periods less than one year,
total return presented has not been annualized.
(c) 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.
(d) Adjusted to an annual basis.
(e) 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.
(f) Effective May 1, 1997, the Portfolio entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to May 1, 1997 the
Portfolio had an investment advisory agreement with MIMLIC Asset Management
Company.
112
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 1998 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
FROM MAY 2,
YEAR ENDED DECEMBER 31, 1994 TO
------------------------------------- DECEMBER 31,
1997(e) 1996 1995 1994(a)
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.08 $1.04 $.95 $.99
--------- --------- --------- ------------
Income from investment operations:
Net investment income............... .06 .06 .06 .04
Net gains or losses on securities
(both realized and unrealized).... -- (.02) .09 (.04)
--------- --------- --------- ------------
Total from investment
operations................... .06 .04 .15 --
--------- --------- --------- ------------
Less distributions:
Dividends from net investment
income............................ (.06) -- (.06) (.04)
--------- --------- --------- ------------
Total distributions............. (.06) -- (.06) (.04)
--------- --------- --------- ------------
Net asset value, end of period.......... $1.08 $1.08 $1.04 $.95
--------- --------- --------- ------------
--------- --------- --------- ------------
Total return (b)........................ 6.1% 4.1% 16.0% .1%
Net assets, end of period (in
thousands)............................ $ 6,236 $ 6,099 $ 5,057 $ 3,402
Ratio of expenses to average daily net
assets (c)............................ .20% .20% .20% .20%(d)
Ratio of net investment income to
average daily net assets (c).......... 6.08% 6.19% 6.22% 6.45%(d)
Portfolio turnover rate (excluding
short-term securities)................ 15.5% 18.1% 9.0% --
</TABLE>
- ------------------------
(a) The inception of the Portfolio was May 2, 1994, when its shares 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. For periods less than one year,
total return presented has not been annualized.
(c) Minnesota Mutual voluntarily absorbed $34,208, $27,510, $22,794 and $21,714
in expenses for the years ending December 31, 1997, 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 .74%, .72%, .72%, and 1.12%, respectively and the ratio of net
investment income to average daily net assets would have been 5.54%, 5.67%,
5.70% and 5.53%, respectively.
(d) Adjusted to an annual basis.
(e) Effective May 1, 1997, the Portfolio entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to May 1, 1997 the
Portfolio had an investment advisory agreement with MIMLIC Asset Management
Company.
113
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2002 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
FROM MAY 2,
YEAR ENDED DECEMBER 31, 1994 TO
------------------------------------- DECEMBER 31,
1997(e) 1996 1995 1994(a)
--------- --------- --------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.05 $1.09 $.93 $.98
--------- --------- --------- -------
Income from investment operations:
Net investment income............... .06 .06 .07 .04
Net gains or losses on securities
(both realized and unrealized).... .02 (.04) .16 (.04)
--------- --------- --------- -------
Total from investment
operations................... .08 .02 .23 --
--------- --------- --------- -------
Less distributions:
Dividends from net investment
income............................ (.05) (.06) (.07) (.05)
Distributions from net realized
gains............................. (.01) -- -- --
--------- --------- --------- -------
Total distributions............. (.06) (.06) (.07) (.05)
--------- --------- --------- -------
Net asset value, end of period.......... $1.07 $1.05 $1.09 $.93
--------- --------- --------- -------
--------- --------- --------- -------
Total return (b)........................ 8.5% 1.7% 25.0% .3%
Net assets, end of period (in
thousands)............................ $ 4,208 $ 3,900 $ 3,049 $ 2,575
Ratio of expenses to average daily net
assets (c)............................ .20% .20% .20% .20%(d)
Ratio of net investment income to
average daily net assets (c).......... 5.99% 6.52% 6.52% 7.18%(d)
Portfolio turnover rate (excluding
short-term securities)................ 36.9% 21.9% -- 11.6%
</TABLE>
- ------------------------
(a) The inception of the Portfolio was May 2, 1994, when its shares 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. For periods less than one year,
total return presented has not been annualized.
(c) Minnesota Mutual voluntarily absorbed $36,833, $31,158, $24,709 and $23,298
in expenses for the years ending December 31, 1997, 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%, 1.14%, 1.06% and 1.52%, respectively, and the ratio of net
investment income to average daily net assets would have been 5.05%, 5.58%,
5.66% and 5.86%, respectively.
(d) Adjusted to an annual basis.
(e) Effective May 1, 1997, the Portfolio entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to May 1, 1997 the
Portfolio had an investment advisory agreement with MIMLIC Asset Management
Company.
114
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2006 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
FROM MAY 2,
YEAR ENDED DECEMBER 31, 1994 TO
------------------------------------- DECEMBER 31,
1997(e) 1996 1995 1994(a)
--------- --------- --------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.09 $1.17 $.92 $.97
--------- --------- --------- -------
Income from investment operations:
Net investment income............... .07 .06 .07 .05
Net gains or losses on securities
(both realized and unrealized).... .07 (.07) .25 (.05)
--------- --------- --------- -------
Total from investment
operations................... .14 (.01) .32 --
--------- --------- --------- -------
Less distributions:
Dividends from net investment
income............................ (.06) (.06) (.07) (.05)
Distributions from net realized
gains............................. (.01) (.01) -- --
--------- --------- --------- -------
Total distributions............. (.07) (.07) (.07) (.05)
--------- --------- --------- -------
Net asset value, end of period.......... $1.16 $1.09 $1.17 $.92
--------- --------- --------- -------
--------- --------- --------- -------
Total return (b)........................ 12.6% (1.2)% 34.7% .1%
Net assets, end of period (in
thousands)............................ $ 3,900 $ 3,095 $ 2,570 $ 1,860
Ratio of expenses to average daily net
assets (c)............................ .40% .40% .40% .40%(d)
Ratio of net investment income to
average daily net assets (c).......... 6.23% 6.43% 6.56% 7.45%(d)
Portfolio turnover rate (excluding
short-term securities)................ 3.1% 25.7% 10.0% --
</TABLE>
- ------------------------
(a) The inception of the Portfolio was May 2, 1994, when its shares 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. For periods less than one year,
total return presented has not been annualized.
(c) Minnesota Mutual voluntarily absorbed $37,425, $31,536, $25,199 and $24,803
in expenses for the years ending December 31, 1997, 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 1.50%, 1.58%, 1.56% and 2.37%, respectively, and the ratio of net
investment income to average daily net assets would have been 5.13%, 5.25%,
5.40% and 5.48%, respectively.
(d) Adjusted to an annual basis.
(e) Effective May 1, 1997, the Portfolio entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to May 1, 1997 the
Portfolio had an investment advisory agreement with MIMLIC Asset Management
Company.
115
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2010 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
FROM MAY 2,
YEAR ENDED DECEMBER 31, 1994 TO
------------------------------------- DECEMBER 31,
1997(e) 1996 1995 1994(a)
--------- --------- --------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.17 $1.21 $.91 $.96
--------- --------- --------- -------
Income from investment operations:
Net investment income............... .07 .05 .07 .05
Net gains or losses on securities
(both realized and unrealized).... .11 (.09) .30 (.05)
--------- --------- --------- -------
Total from investment
operations................... .18 (.04) .37 --
--------- --------- --------- -------
Less distributions:
Dividends from net investment
income............................ (.05) -- (.07) (.05)
Distributions from net realized
gains............................. (.01) -- -- --
--------- --------- --------- -------
Total distributions............. (.06) -- (.07) (.05)
--------- --------- --------- -------
Net asset value, end of period.......... $1.29 $1.17 $1.21 $.91
--------- --------- --------- -------
--------- --------- --------- -------
Total return (b)........................ 17.9% (3.4)% 41.2% (.3)%
Net assets, end of period (in
thousands)............................ $ 3,176 $ 2,813 $ 1,384 $ 1,071
Ratio of expenses to average daily net
assets (c)............................ .40% .40% .40% .40%(d)
Ratio of net investment income to
average daily net assets (c).......... 6.18% 6.40% 6.58% 7.79%(d)
Portfolio turnover rate (excluding
short-term securities)................ 39.3% 71.0% -- 14.5%
</TABLE>
- ------------------------
(a) The inception of the Portfolio was May 2, 1994, when its shares 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. For periods less than one year,
total return presented has not been annualized.
(c) Minnesota Mutual voluntarily absorbed $38,967, $33,042, $26,308 and $25,888
in expenses for the years ending December 31, 1997, 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 1.85%, 2.18%, 2.68%, and 4.01%, respectively, and the ratio of
net investment income to average daily net assets would have been 4.73%,
4.62%, 4.30% and 4.18%, respectively.
(d) Adjusted to an annual basis.
(e) Effective May 1, 1997, the Portfolio entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to May 1, 1997 the
Portfolio had an investment advisory agreement with MIMLIC Asset Management
Company.
116
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
VALUE STOCK PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
FROM MAY 2,
YEAR ENDED DECEMBER 31, 1994 TO
------------------------------------- DECEMBER 31,
1997(f) 1996 1995 1994(a)
--------- --------- --------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.59 $1.31 $1.04 $1.01
--------- --------- --------- -------
Income from investment operations:
Net investment income............... .01 .01 .01 --
Net gains or losses on securities
(both realized and unrealized).... .32 .39 .33 .04
--------- --------- --------- -------
Total from investment
operations................... .33 .40 .34 .04
--------- --------- --------- -------
Less distributions:
Dividends from net investment
income............................ (.02) (.01) (.01) (.01)
Distributions from net realized
gains............................. (.17) (.11) (.06) --
--------- --------- --------- -------
Total distributions............. (.19) (.12) (.07) (.01)
--------- --------- --------- -------
Net asset value, end of period.......... $1.73 $1.59 $1.31 $1.04
--------- --------- --------- -------
--------- --------- --------- -------
Total return (b)........................ 21.2% 31.0% 33.0% 4.6%
Net assets, end of period (in
thousands)............................ $ 208,093 $ 97,187 $ 31,825 $ 8,771
Ratio of expenses to average daily net
assets (c)............................ .80% .83% .89% .90%(d)
Ratio of net investment income to
average daily net assets (c).......... 1.13% 1.28% 1.25% 2.07%(d)
Portfolio turnover rate (excluding
short-term securities)................ 115.4% 88.6% 164.2% 49.5%
Average commission rate on stock
transactions (e)...................... $.0537 $.0672 N/A N/A
</TABLE>
- ------------------------
(a) The inception of the Portfolio was May 2, 1994, when its shares 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. For periods less than one year,
total return has not been annualized.
(c) 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.
(d) Adjusted to an annual basis.
(e) 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.
(f) Effective May 1, 1997, the Portfolio entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to May 1, 1997 the
Portfolio had an investment advisory agreement with MIMLIC Asset Management
Company.
117
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
<TABLE>
<CAPTION>
PERIOD FROM OCTOBER 1, 1997 TO DECEMBER 31, 1997
(PERIOD FROM OCTOBER 15, 1997 TO DECEMBER 31, 1997
FOR MACRO-CAP VALUE PORTFOLIO ONLY)
--------------------------------------------------------------------------------------
SMALL COMPANY INTERNATIONAL INDEX 400 MACRO-CAP MICRO-CAP
VALUE BOND MID-CAP VALUE GROWTH
PORTFOLIO(a) PORTFOLIO(a) PORTFOLIO(a) PORTFOLIO(b) PORTFOLIO(a)
------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.01 $1.00 $1.00 $1.00 $1.06
----- ------ ----- ----- -----
Income from investment operations:
Net investment loss................. -- (.02) -- -- --
Net gains or losses on securities
(both realized and unrealized).... .02 .02 .01 (.02) (.14)
----- ------ ----- ----- -----
Total from investment
operations................... .02 -- .01 (.02) (.14)
----- ------ ----- ----- -----
Less distributions:
Dividends from net investment
income............................ -- (.01) -- (.01) --
Excess distributions of net
investment income................. -- (.01) -- -- --
Distributions from net realized
gains............................. -- -- -- -- (.03)
----- ------ ----- ----- -----
Total distributions............. -- (.02) -- (.01) (.03)
----- ------ ----- ----- -----
Net asset value, end of period.......... $1.03 $.98 $1.01 $.97 $.89
----- ------ ----- ----- -----
----- ------ ----- ----- -----
Total return (c)........................ 2.3% .1% .1% (2.1)% (13.2)%
Net assets, end of period (in
thousands)............................ $ 5,177 $ 25,019 $ 5,052 $ 4,923 $ 4,591
Ratio of expenses to average daily net
assets (d)(e)......................... .90% 1.60% .55% .85% 1.25%
Ratio of net investment income to
average daily net assets (d)(e)....... 1.13% 3.66% .89% 2.04% (.24)%
Portfolio turnover rate (excluding
short-term securities)................ 13.0% 120.5% 4.94% 36.7% 28.9%
Average commission rate on stock
transactions (f)...................... $.0600 NA $.0200 $.0353 $.0514
</TABLE>
- ------------------------
(a) The shares of the Portfolio became effectively registered under the
Securities Act of 1933 on May 1, 1997, but shares were not available to the
public until October 1, 1997.
(b) The shares of the Portfolio became effectively registered under the
Securities Act of 1933 on May 1, 1997, but shares were not available to the
public until October 15, 1997.
(c) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares. For periods less than one year,
total return presented has not been annualized.
(d) Minnesota Mutual voluntarily absorbed $11,517, $14,670, $22,940 and $11,102
in expenses for the period ended December 31, 1997, for the Small Company
Value, Index 400 Mid-Cap, Macro-Cap Value and Micro-Cap Growth Portfolios,
respectively. Had the Portfolios paid all fees and expenses, the ratio of
expenses to average daily net assets would have been 1.78%, 1.70%, 3.13%
and 2.03%. respectively and the ratio of net investment income to average
daily net assets would have been .25%, (.26%), (.24%) and (1.02%),
respectively.
(e) Adjusted to an annual basis.
(f) The Small Company Value, Index 400 Mid-Cap, Macro-Cap Value and Micro-Cap
Growth Portfolios are 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.
118
<PAGE>
This offering is available through a registered representative of
Ascend Financial Services, Inc., a registered broker/dealer. Ascend Financial
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 ADVANTUS
SERIES FUND, INC. ("FUND") IF PRECEDED OR ACCOMPANIED BY (a) THE CURRENT
PROSPECTUS FOR THE FUND AND SUCH CONTRACTS AND (b) THE CURRENT VARIABLE
ANNUITY PERFORMANCE REPORT, ADJUSTABLE INCOME ANNUITY PERFORMANCE
REPORT, GROUP VARIABLE ANNUITY PERFORMANCE REPORT, VARIABLE FUND D
PERFORMANCE REPORT, VARIABLE GROUP UNIVERSAL LIFE PORTFOLIO
PERFORMANCE AND HISTORICAL POLICY VALUES REPORT AND VARIABLE
ADJUSTABLE LIFE PORTFOLIO PERFORMANCE AND HISTORICAL
POLICY VALUES REPORT, RESPECTIVELY.
[LOGO]
ASCEND FINANCIAL SERVICES, INC.,
SECURITIES DEALER, MEMBER NASD/SIPC
400 ROBERT STREET NORTH
ST. PAUL, MN 55101-2098
1-888-AFS-1838
(1-888-237-1838)
<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
ADDRESS SERVICE REQUESTED
</TABLE>
F. 38897 Rev. 2-1998
